Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
December 9, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Insolvency & Bankruptcy
FEMA
Service Tax
Central Excise
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Levy of penalty - assessee has been able to offer bona fide reasons for not disclosing the rental income - in absence of positive evidence beyond doubt regarding furnishing of inaccurate particulars of income or concealment of particulars of income towards the said rent, no penalty can be imposed 271(1)(c) - AT
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Additions u/s 69 - Gifts are arranged affairs of the assessee. The assessee failed to prove the creditworthiness of the donors and genuineness of the gifts in the matter. The additions were rightly made - AT
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Assessee has failed to justify the expenses on hotels booking at New Delhi, Chochin or Kochi against “Dermacon Conference” at Hyderabad. - the disallowance of 50% of the expenses for the sales promotion u/s 37(1) was justified. - AT
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TDS u/s 194J - when the ‘transaction charges’ paid by the assessee to the Stock exchange cannot be held as ‘fees for technical services’, no disallowance of the aforesaid amount would be called for in the hands of the assessee under Sec. 40(a)(ia). - AT
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Applications u/s 264 for revision in favor of assessee - Condonation of delay - Proviso to Sub-Section (3) of Section 264 confers a statutory power on the Commissioner to condone the delay. Therefore it was not necessary for the Commissioner to have taken recourse to Section 5 of the Limitation Act, 1963. - HC
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Taxability of amount received - Relinquishment of right to sue is neither a capital asset nor taxable u/s 28 which provides specific types of receipt to be held taxable as business income. Relinquishment of right to sue does not find any mention therein. - HC
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Transfer of case - the theory of harmonious construction cannot be applied to the facts of this case, nor sub-section (3) of Section 127 of the Act, can be construed as a non-obstante clause, but a clause providing for exclusion of certain procedure in certain contingencies - HC
Customs
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Since drawback payment is subject to finalisation of case after receipt of test report of samples, monitoring on regular basis at senior level should be undertaken so that samples are drawn only where necessary and the cases are closed in a timely manner and not later than thirty days from date of let export.
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Subject: Export Policy of Onions- Imposition of Minimum Export Price (MEP). - Trade Notice
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Mis-declaration of imported goods - undervaluation - palm acid oil, palm fatty acid distillate and palm stearin - whether there was any misdeclaration of the description of imported goods? - Revenue failed to prove its case - AT
Corporate Law
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Companies (cost records and audit) Amendment Rules, 2017 - Notification
Indian Laws
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Undoubtedly, the legal profession is the major component of the justice delivery system and has a significant role to play in upholding the rule of law. Significance of the profession is on account of its role in providing access to justice and assisting the citizens in securing their fundamental and other rights. Can justice be secured with the legal professionals failing to uphold the professional ethics? - SC
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Legal services to poor - Report of Law Commission of India - The legal profession must make its services available to the needy by developing its public sector. It was observed that like public hospitals for medical services, the public sector should have a role in providing legal services for those who cannot afford fee - SC
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Proceedings initiated against the appellant u/s 138 of the NI Act - professional misconduct on the part of advocate - If liability is disputed, the advocate has to independently prove the contract. Claim based on percentage of subject matter in litigation cannot be the basis of a complaint under Section 138 of the Act. - SC
Service Tax
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BAS - activity of arranging/providing cargo - it is evident that there is clear understanding between the transporters and appellant that the consideration is being paid to them for the volume of business arranged for the transporters - demand of service tax confirmed - AT
Central Excise
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CENVAT credit - job-work - Remission of duty - the assesse cannot be called upon to reverse the credit when there is no dispute that inputs on which credit was availed were destroyed when the work was in progress - AT
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CENVAT credit - input services - renting of immovable property - if a premises is only used for trading activities then the distribution of credit exclusively attributable to such unit will result in revenue loss to the Government. Thus, apparently there is no revenue neutrality in the instant case. - AT
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CENVAT credit - sometimes there was shortages of supply of inputs and the appellants raised debit note to the supplier - The Revenue has not produced any evidence that supplier has any refund - CENVAT credit cannot be denied - AT
Case Laws:
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Income Tax
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2017 (12) TMI 425
Applications u/s 264 for revision in favor of assessee - Condonation of delay - eligible reasons for delay - Held that:- Referring to case of Collector, Land Acquisition vs. Mst. Katiji & Others [1987 (2) TMI 61 - SUPREME Court] it was not necessary for the petitioner to have explained each and every day's delay. On the contrary, the Apex Court held that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice is to be preferred. The Apex Court also held there is no presumption that delay is intentional and deliberate, as normally a litigant does not stand to benefit by resorting to delay. As stated earlier, in the application dated 20th March, 2014 seeking invocation of the power under Section 264, the delay has been adequately explained. Perusal of the impugned order shows that the Commissioner has misdirected himself by going into the question whether the petitioners could have made the claim. The question of going into maintainability of the claim made by the petitioners could have been gone into on merits, only if the delay was condoned. Proviso to Sub-Section (3) of Section 264 confers a statutory power on the Commissioner to condone the delay. Therefore it was not necessary for the Commissioner to have taken recourse to Section 5 of the Limitation Act, 1963. We direct the Commissioner of Income Tax to decide both Revision Applications on merits as expeditiously as possible and preferably within a period of three months from the date on which an authenticated copy of this Order is produced in his office.
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2017 (12) TMI 424
Disallowance of commission paid - Held that:- In the instant case, there is no such finding recorded by the ld AO in his order. The revenue had not brought any material on record to prove that M/s R.N. Forgings Pvt. Ltd is a related concern of the assessee. The ld AO himself in the instant case had acknowledged the agreement for commission has been entered into on 18.3.2009 and the services are expected to be rendered by R.N. Forgings Pvt. ltd effective from 1.4.2009 onwards. Hence the reliance on the decision of the Apex Court by the revenue is totally misplaced and is not applicable to the facts of the instant case before us. With regard to the usage of brand name ‘Nimbus’ by NIPL as observed by the ld AO, it would be relevant to note that M/s NIPL was incorporated on 13.9.95 and whereas the assessee firm was started on 6.6.2001 and the usage of the name ‘Nimbus’ by both the parties is just a coincidence. If at all, any usage of brand name is alleged, it is actually the other way round i.e. the assessee firm had used the brand of Nimbus from NIPL and not as stated by the ld AO. AR stated that the entire payments of commission to R.N. Forgings Pvt. Ltd had suffered service tax and were made by account payee cheques after due deduction of tax at source and TDS returns were duly filed with the income tax department. These facts are not disputed by the ld DR before us. CIT-A had rightly deleted the disallowance of commission paid to R.N. Forgings Pvt. Ltd - Decided in favour of assessee. Disallowance of commission paid to three other individuals namely Mahendra Kumar Bharatia, Rajendra Kumar Bharatia - disallowance made for want of written agreements and on the count that single bill has been raised by those commission agents for the services rendered to the assessee in March 2010, whereas the assessee firm was no longer in existence from 20.1.2010 - Held that:- We find that the assessee had duly informed the assessee in writing that the commission has been paid to these parties for sales effected to certain parties which were given in its reply letter filed before the ld AO. The sales made to those parties had not been disputed by the revenue. We find that all these three commission agents had duly accounted for the commission received from the assessee in their respective income tax returns and paid taxes thereon. The business expediency of these commission payments also stands proved in as much as the assessee could achieve some reasonable turnover with the respective customers only due to the indulgence of these commission agents and services rendered by them during the year under appeal. These facts were submitted in writing before the ld AO. This goes to prove that the services of these commission agents were indispensible to the assessee during the year under appeal. No verification has been carried out by the ld AO with the AO of these commission agents to understand the nature of services rendered by these parties to the assessee and the genuinity of the claims made by the assessee. In these circumstances, we hold that the lower authorities had erred in disallowing the commission payments to these three parties. Accordingly, the grounds raised in the cross objections of the assessee are allowed. Disallowance of excess interest paid to persons covered u/s 40A(2)(b) - Held that:- It is not in dispute that these unsecured loans are brought forward from earlier years and terms and conditions of interest had been understood in those relevant years. Hence the same cannot be made comparable with the rates prevailing in this year. We find that the assessee had paid interest at the rate of 18% p.a. on unsecured loans received from persons covered u/s 40A(2)(b) of the Act which is less than interest paid even on secured loans. As long as the borrowed funds had been used for business purposes, merely because interest is paid to parties covered u/s 40A(2)(b) of the Act, the same cannot be disallowed on the ground it being excessive. In the instant case, in our opinion, the interest paid on unsecured loans at the rate of 18% per annum is not at all excessive compared to the other secured loans availed by the assessee. Hence we do not deem it fit to interfere with the order of the ld CITA in this regard. Accordingly, the Ground No. 4 raised by the revenue is dismissed. Disallowance of interest on the loans availed by the assessee - Held that:- The assessee had duly submitted the complete utilization statement of the loans availed. From the same it could be evidenced that the loans have been utilized only for business purposes by the assessee. The entire details of loan creditors were duly placed on record before the ld AO regarding their identity, creditworthiness and genuineness of the transactions. In any case, we find that no addition has been made towards the loan amounts in the assessment. Once the loan amounts have been accepted as genuine and its utilization thereon for business purposes is proved, the allowability of interest thereon u/s 36(1)(iii) is automatic. Hence we hold that the ld CITA had rightly deleted the disallowance of interest
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2017 (12) TMI 423
Addition u/s 68 - Held that:- The assessee has submitted correct PAN of all the depositors. He has also submitted confirmation from all these depositors. In the case of M.S. Jewellers, which is a proprietory concern of Satya Prakash Khandelwal, it is noticed that the amount of ₹ 50000/- were received by cheque. The assessee submitted PAN and confirmation of the depositor alongwith full address. It is also noticed from the account of the depositor that there was a opening balance of ₹ 3,54,000/-. Thus, the amount of ₹ 50,000/- received by the assessee by cheque was actually return of balance outstanding with M.S. Jewellers, proprietory concern of Satya Prakash Khandelwal, therefore, the ld. CIT(A) was not justified in sustaining the addition. Disallowance of interest paid by the assessee to the deposits - Held that:- Since the addition made U/s 68 of the Act on which, interest was paid by the assessee has been deleted. Since the depositors had been found genuine, therefore, in consequence of that the payments of interest on this deposit is also held to be genuine. Hence, this ground of assessee’s appeal is also allowed.
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2017 (12) TMI 422
Addition u/s 14A - Held that:- As decided in assessee's own case no material has been placed on record to show that the assessee has incurred some expenditure for earning tax-free income. In our opinion, although, there is no disallowance of interest expenditure for earning tax-free dividend income, however, it cannot be said that no administrative expenditure has been incurred for earning the tax-free income of ₹ 3,60,000/- on the investment of ₹ 15,00,000/-. Since the dividend income is on account of investment in Magnum Global Fund of ₹ 15,00,000/-, therefore, considering the totality of the facts of the case, disallowance of ₹ 50,000/- on ad-hoc basis under the facts and circumstances of the case appears to be on higher side. Although, the ld. counsel for the assessee submitted that no disallowance has been made in the past, however, it was not brought to our notice as to whether the disallowance was not made in scrutiny assessment or summary assessment. Considering the totality of the facts of the case, disallowance of ₹ 25,000/- under the facts and circumstances of the case, in our opinion, will meet the ends of justice Disallowance on account of capitalization of interest - assessee company on the one hand has made decapitalization of interest income of ₹ 3066.07 lacs and on the other hand has shown such interest expenses as revenue to the extent of ₹ 9539.99 lacs - Held that:- We find identical issue had come up before the Tribunal in assessee’s own case. We also find the Tribunal has accepted the alternate contention of the assessee and allowed deduction of interest expenses incurred on earning interest income on certain deposits u/s 57(iii). Respectfully following the decision of the Co-ordinate Bench of the Tribunal in assessee’s own case [2017 (6) TMI 591 - ITAT DELHI] we restore the issue to the file of the Assessing Officer with a direction to follow the order of the Tribunal and re-compute the disallowance. The ground raised by the Revenue is accordingly allowed for statistical purposes. Claim of deduction u/s 80IA - Form No.10CCB filed by the assessee is incomplete and proper balance sheet and profit and loss account are not available for each unit - Held that:- Since the Tribunal has already upheld the order of the ld. CIT(A) on this issue in the immediately preceding assessment year, therefore, following the same, we find no infirmity in the order of the ld. CIT(A) allowing the claim of deduction u/s 80IA of the I.T. Act. Accordingly, the order of the ld. CIT(A) is upheld and the ground raised by the Revenue is dismissed. Addition on account of bad debt written off - Held that:- It is held by various decisions including the decision of the Hon’ble Supreme Court in the case of T.R.F. Ltd. vs. CIT [2010 (2) TMI 211 - SUPREME COURT ] that it is sufficient compliance for the claim of bad debts if the debt is actually written off in the books of account of the assessee and he is not required to demonstrate or prove as to whether the debt has actually become bad debt. The Revenue cannot insist on demonstrative proof as to whether the debt has become bad debt and non-initiation of legal proceedings against the debtor would also not automatically lead to the inference that the assessee is not entitled to write off the amount of the bad debt. In view of the above, we find no infirmity in the order of the ld. CIT(A) deleting the disallowance Determination of the arm’s length price - TPA - upward adjustment - MAM selection - CUP v/s TNMM - Held that:- We find the Assessing Officer in the instant case has made upward adjustment of ₹ 27,521,494/- on the basis of order of the TPO. We find in appeal the ld. CIT(A) sustained an amount of ₹ 28,89,032/- and deleted the addition of ₹ 21,54,152/- and such reasons are already mentioned in the preceding paragraphs. Although, the ld. CIT(A) has sustained only an amount of ₹ 28,89,032/- and deleted the balance amount we find the Revenue has challenged the deletion for addition of ₹ 21,54,152/- and has not challenged for the balance addition. So far as the addition of ₹ 21,54,152/- is concerned, the assessee has demonstrated before the ld. CIT(A) that he has also entered into transaction on sale of J4 HRAP Coils with unrelated third parties on 14.03.2005 at the price of USD 1120 PMT. Therefore, the ld. CIT(A) was fully justified in upholding the action of the CUP method. So far as submissions of the ld. counsel for the assessee that price charged by the assessee from its AE is within +/-5% range we find from the submissions that the details are not coming out clearly which requires a re-visit to the file of the TPO for proper appreciation of the facts. We, therefore, in the interest of justice, deem it proper to restore the ground raised by the assessee relating to TP adjustment to the file of the TPO for fresh adjudication of the issue in the light of the submissions/details filed by the assessee in the Paper Book. The grounds by the assessee are accordingly allowed for statistical purposes.
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2017 (12) TMI 421
TPA - MAM Selection - comparability analysis - CUP v/s TNMM - Held that:- On a careful perusal and consideration of the TPO’s order under Section 92CA of the Act, we find that, as contended by the learned Authorised Representative, the TPO adopted CUP Method in place of TNMM adopted by the assessee without rendering any finding or reasoning as to why TNMM was rejected and CUP Method was adopted. The TPO has merely stated that TNMM is not the appropriate method and that CUP is the appropriate method. We also find that the TPO has adopted certain rates for offshore and on-site work without assigning any reasons as to how these rates are applicable to the assessee's case, which is sine quo non for applying CUP method. We also notice that the TPO has adopted TNMM as the MAM in the subsequent assessment year 2005-06 in the case on hand, as seen from the documents. This, however, cannot be the reason or basis for deciding the MAM in the year under consideration. Taking into consideration the facts and circumstances of the case as discussed from paras 4.1 to 4.8.2 of this order (supra), we deem it appropriate to set aside the orders of the authorities below and remand / restore the entire issue of TP comparability analysis to the file of the TPO/A.O. to decide the matter afresh, including the determination of the MAM and the comparable companies
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2017 (12) TMI 420
TDS u/s 194J - Disallowance u/s 40(a)(ia) - ‘transaction charges’ paid by the assessee to the Stock exchange - whether ‘transaction charges’ not to be held as ‘fees for technical services’? - Held that:- We are of the considered view that after the judgment of the Hon’ble Supreme Court in the case of CIT Vs. Kotak Securities Limited. (2016 (3) TMI 1026 - SUPREME COURT), the issue as to whether ‘transaction charges’ fall within the sweep of ‘fees for technical services’, or not, had been settled once and for all and is no more found to be res integra. We find that the Hon’ble Apex Court deliberating at length on the issue under consideration, had therein concluded that ‘transaction charges’ being in the nature of charges paid by a stock broker for facilities provided by the Stock exchange, thus, the same cannot be characterised as ‘fees for technical services’ Thus, we are of the considered view that now when the ‘transaction charges’ paid by the assessee to the Stock exchange cannot be held as ‘fees for technical services’, therefore, no disallowance of the aforesaid amount would be called for in the hands of the assessee under Sec. 40(a)(ia). No disallowance under Sec. 40(a)(ia) of the ‘transaction charges’ was called for in the hands of the assessee.- Decided in favour of assessee.
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2017 (12) TMI 419
Deduction claimed u/s. 80IB(10) - housing project in the name and style of a society M/s. Saundarya Cooperative Housing Society Ltd. - ownership of plot - Held that:- It is no more in dispute that Section 80IB(10) deduction does not envisage ownership of the plot in question relevant to a housing project. See CIT vs. Radhe Developers [2011 (12) TMI 248 - GUJARAT HIGH COURT] Assessee only has undertaken the above entrepreneurial risk / reward in developing the above housing project after having acquired dominant control thereof. It had further discharged onerous responsibility inter alia of advertising the above housing project; if required followed by booking of allottees as well as collection of consideration money whereas the owner society never performed any such liability in developing its housing projects. We therefore accept assessee’s arguments claiming itself to have developed the above housing project thereby raising Section 80IB(10) deduction claim. We accordingly delete the impugned disallowance - Decided in favour of assessee.
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2017 (12) TMI 418
Benefit of deduction in respect of license fees - proportional allowance of claim - the total claim of deduction was withdrawn earlier - Held that:- In view of the facts and circumstances of the case, the expenditure so claimed by the assessee has rightly been allowed proportionately for 10 year period u/s 35ABB of the Act and we do not find any infirmity in the order of the ld. CIT(A). Thus the ground raised by the Revenue in this appeal is dismissed.
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2017 (12) TMI 416
Unexplained investment from accumulated savings of agriculture income - Held that:- No agriculture income was shown in the return of income filed on issue of notice under section 142(1) of the Act. The assessee did not have any evidence of accumulation of past agriculture income. Merely because assessee was holding agricultural land holdings of 20 bigas would not prove that assessee earned any agricultural income or has any past savings so that to make any investment in the property. In the absence of any evidence on record, no further interference is called for in the matter. The Ld. CIT(A) has already given sufficient benefit of ₹ 55,000 to the assessee. This ground No.2 of appeal of assessee is dismissed. Addition on account of gifts received from Shri Karan Singh Tyagi and Shri Mukesh Tyagi - Held that:- there is nothing on record to show as to what was the financial capacity of the donors and the creditworthiness of the donors, what kind of relationship the donors had with the assessee, what were the source of funds gifted to the assessee and whether they had any capacity of giving such huge amount of gift to the assessee. Thus, the assessee failed to prove the basic ingredients of genuineness of gifts in the matter. It, therefore, appears that the assessee when cornered by the Revenue Department came up with an afterthought story to explain investment in property through the gifts from the relatives. Therefore, it is clear that gifts in the matter are not genuine. Gifts are arranged affairs of the assessee. The assessee failed to prove the creditworthiness of the donors and genuineness of the gifts in the matter. The additions were rightly made by the authorities below. Addition of difference on account of investment in cost of construction of banquet hall as per DVO report - Held that:- Restore this issue to the file of A.O. with a direction to apply UP PWD rates for the purpose of ascertaining the cost of construction of investment in construction of banquet hall. The A.O. shall re-decide this issue after giving reasonable, sufficient opportunity of being heard to the assessee. Ground No.4 of appeal of assessee is treated as allowed for statistical purposes.
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2017 (12) TMI 415
Penalty u/s 271(1)(c) - non-declaration of the rental income from property at Gurgaon, offering an amount of ₹ 74,789/- as rental income from the property at Ghaziabad and non-disallowance made under section 14A - Held that:- The assessee submitted that TDS certificate for Gurgaon property was issued consolidatedly for two years by the tenant and that also contributed to the offering of rental income on receipt basis. In support the assessee has filed copies of payment advices, consolidated TDS certificate showing amount after 31.03.2008, ledger of rent received for assessment years 2008-09 and 2009-10. We thus find that the assessee has been able to offer bona fide reasons for not disclosing the rental income from its property at Gurgaon and thus in absence of positive evidence beyond doubt regarding furnishing of inaccurate particulars of income or concealment of particulars of income towards the said rent, the Assessing Officer was not justified in invoking the penal provisions of section 271(1)(c). So far as rental income in respect of Kaushambhi (Ghaziabad) property is concerned, the explanation of the assessee remained that rental income for the month of March, 2008 was credited to the profit and loss account for the year ended on 31.03.2009 and was offered to tax in assessment year 2009-10. We thus find that the assessee was able to explain the non-disclosure of rental income in respect of the above property during the year and it cannot be said that it was a case of furnishing of inaccurate particulars of income in this regard especially when the assessee had paid tax on it when the Assessing Officer was not satisfied with the explanation of the assessee. Regarding the disallowance made under section 14A we are of the view that it remained a debatable issue and it cannot be said beyond doubt that non-disallowance of expenditure under section 14A by the assessee was furnishing of inaccurate particulars of income or concealment of particulars of income to attract the penal provisions of section 271(1)(c) of the Act. The Assessing Officer is thus directed to delete the penalty in this regard as well. - Decided in favour of assessee.
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2017 (12) TMI 414
Addition u/s 43B - Custom Duty paid on import of components which were used for export by the end of the year - Held that:- ITAT [2011 (8) TMI 1147 - ITAT DELHI] was correct in deleting the addition applying provisions of section 43B in respect of the Custom Duty paid on import of components which were used for export by the end of the year. - Decided in favour of assessee.
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2017 (12) TMI 413
Valuation of closing stock - methods of accounting - Held that:- Tribunal has again not committed any error in rejecting the foundation of valuation made by the assessing officer. In so far as it has noted that the total sale turnover of the residential units made by the assessee was irrelevant inasmuch as the sales of different units had been made in different years and the same could not be clubbed together to apply the gross profit rate thereto to infer the deemed cost of closing stock. Here, we find that besides the foundation being non-existent (as the Tribunal has found), even the method adopted by the assessing officer is doubtful if not plainly erroneous. In any case, valuation of closing stock being an issue of fact that has a cascading effect in different years, we find that the Tribunal has accepted the valuation of closing stock upon due appraisal of evidence inasmuch as it has found that the cost claimed by the assessee was duly verified from vouchers and the assessee's same method of accounting had found acceptance during assessment proceedings for the Assessment Years 2005-06, 2006-07 and 2007-08 in proceedings under Section 143(3) of the Act. Therefore, the same does not suffer from any infirmity. The finding recorded by the Tribunal is a pure finding of fact recorded on the basis of material and evidence on record. It does not suffer from any infirmity. Question nos. 1 and 6 are answered in the affirmative i.e. in favour of the assessee and against the revenue. Addition made under Section 68 - Held that:- Once registered sale deeds had been executed by the assessee and the cash credit entries found standing in the books of account of the assessee during the previous year relevant to the Assessment Year 2005-06 had been adjusted against the same, there remained no further doubt as to the identity of the persons who deposited the money with the assessee in the previous year relevant to Assessment Year 2005-06. The fact that such person did not receive the letter or did not appear in person during the inquiry made by the assessing officer at the original assessment stage gets overshadowed and looses its relevance in absence of any evidence to doubt the genuineness or correctness of registered sale deeds executed by the assessee. Even in respect of amount of ₹ 8,00,000/- the second remand report as extracted by the CIT (Appeals) clearly mentioned that Aashiq Ali Siddiqui had got the sale deed executed in his favour wherein an amount of ₹ 8,00,000/- had been adjusted. Thus, the finding of the Tribunal on this issue is also a concluded finding of fact recorded on the basis of material and evidence on record and warrants no interference. Questions of law are answered in favour of the assessee and against the revenue.
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2017 (12) TMI 412
Transfer of case u/s 127 - Centralization of Search and Seizure cases - violation of principles of natural justice - recording of reasons - Held that:- Sub-section (3) of Section 127 of the Act does not commence with a non-obstante clause, but rather it excludes certain procedure contemplated under sub-section (1) and sub-section (2) of Section 127 of the Act, when both the transferee and transferor officers are situated in the same city, locality or place. The provision commences by stating nothing in sub-section (1) or sub-section (2) shall be deemed to require any such opportunity to be given . Therefore, when there is a total exclusion of an opportunity, the question of communicating the reasons to the assessee cannot be insisted upon and that is not required under the statute. Therefore, the assessee cannot seek to read something into the statute, which is not found therein Sub-section (3) of Section 127 of the Act does not commence with a non-obstante clause, but rather it excludes certain procedure contemplated under sub-section (1) and sub-section (2) of Section 127 of the Act, when both the transferee and transferor officers are situated in the same city, locality or place. The provision commences by stating nothing in sub-section (1) or sub-section (2) shall be deemed to require any such opportunity to be given . Therefore, when there is a total exclusion of an opportunity, the question of communicating the reasons to the assessee cannot be insisted upon and that is not required under the statute. Therefore, the assessee cannot seek to read something into the statute, which is not found therein.As pointed out earlier, sub-section (3) of Section 127 of the Act does not commence with a non-obstante clause, but it is a clause providing for exclusion of certain procedures, which are required to be adhered to under circumstances not mentioned in sub-section (3) of Section 127 of the Act. Therefore, the theory of harmonious construction cannot be applied to the facts of this case, nor sub-section (3) of Section 127 of the Act, can be construed as a non-obstante clause, but a clause providing for exclusion of certain procedure in certain contingencies. The fact that the transferee and transferor officers are within the same city is not in dispute. This Court has found that there has been an agreement between the two Heads of Department and the petitioner cannot plead for an opportunity to be granted before an order of transfer, as there is no such statutory requirement under the Act, rather, the said procedure has been specifically excluded. Furthermore, the Court is satisfied that there are reasons recorded, as has been mentioned by referring to the chain of events. In such circumstances, the impugned notification cannot be faulted on the grounds raised by the petitioner. A contention was advanced on behalf of the petitioner that the exercise of the power of jurisdiction was a mala fide exercise based on newspaper gossips and made to appear as an innocuous order of transfer. In this regard, reference was made to the observations contained in an interim order passed on 19.02.2016, especially in paragraph 4 therein, find what has been recorded by the Court is the submission made on behalf of the petitioner and not a finding rendered by the Court. In any event, the observations contained in the order dated 19.12.2016, was an order recording reasons while granting an interim order, which can hardly have any impact when the case is heard and decided finally. Thus, for all the above reasons, the petitioner has not made out any case for interference. Accordingly, the Writ Petition fails and the same is dismissed.
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2017 (12) TMI 411
Depreciation on temporary wooden structure for interior decoration effected to the buildings and the showrooms - Held that:- In order to bring into existence the showroom of a particular brand, the assessee carried out certain specific interior works involving interiors, furniture and equipment in the premises, which was leased out to the assessee and that the interior decoration works were carried out in line with the specifications of the brand, whose products were sold by the assessee as a retailer-franchisee depending upon the terms of the agreement. After knowing the factual position, the Commissioner of Income Tax (Appeals) took into consideration the decisions referred above and came to a conclusion that for the interior decoration works done by the assessee in the leased premises, it cannot be stated that the assessee is deriving any enduring benefit nor it can be stated that any capital asset has been created in favour of the assessee. This factual finding was affirmed by the Tribunal in the impugned order.
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2017 (12) TMI 410
Addition on account of amount received by the assessee towards settlement compensation - revenue or capital receipt - Held that:- Compensation in question was meant, intended and paid for withdrawal of aforesaid litigation instituted by assessee which could have resulted in many adverse consequences for the reputation of Coca Cola/Atlantic besides entailing huge cost and efforts of litigation. Relinquishment of right to sue is neither a capital asset nor taxable u/s 28 which provides specific types of receipt to be held taxable as business income. Relinquishment of right to sue does not find any mention therein. In this eventuality we have no hesitation to hold that the impugned amount of ₹ 8,16,22,040/- is a capital receipt not liable to Income Tax. When the party has compromised and withdraw the litigation, if that compensation is received, it is always to be treated compensation. In our considered opinion, the Tribunal has not committed any error in allowing the appeal and we are in complete agreement with the view taken by the Tribunal. Decided in favour of assessee and against the Department.
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2017 (12) TMI 409
Revision u/s 263 - Held that:- The assessee seeks to raise certain points of law in this appeal which were subject matters before this Court in four appeals already decided and in all the four appeals it was found that the questions raised were not substantial questions of law. These decisions are Rajmandir Estates Private Limited Vs. Principal Commissioner of Income Tax, Kolkata-III reported in (2016 (5) TMI 801 - CALCUTTA HIGH COURT), M/s. Pragati Finance Management Private Limited Vs. CIT-II [2017 (3) TMI 1242 - CALCUTTA HIGH COURT], Success Tours and Travels Private Limited & Anr. Vs. Income Tax Officer, Ward- 9(4) Kolkata & Ors. [2017 (4) TMI 614 - CALCUTTA HIGH COURT] and M/s. AIM Fincon Pvt. Ltd. Vs. Commissioner of Income-tax, Kolkata-III [2017 (5) TMI 982 - CALCUTTA HIGH COURT] which is decided today itself.
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2017 (12) TMI 408
Addition u/s 14A - Held that:- The AO has not pointed out any defect in the computation made by the assessee company and as such, provisions contained u/s 14A read with Rule 8D are not attracted. Because sub-section (2) & (3) of section 14A with Rule 8D of the Rules has only prescribed a formula for determination of an expenditure to earn the income which does not form part of the total income under the Act, which can only be invoked if the AO is not satisfied with the claim of the assessee. Furthermore, CIT (A) erred in sustaining the disallowance of ₹ 68,433/- by restricting the same to 10% of the exempt income even despite agreeing with the assessee company that no satisfaction has been recorded by the AO that nil expenses has been incurred to earn tax free dividend income rather proceeded to sustain the addition of ₹ 68,433/- on the basis of surmises and guesswork which is not sustainable. In the given circumstances, the contentions raised by ld. DR are not sustainable. Appeal filed by the Revenue challenging to restrict the disallowance u/s 14A read with Rule 8D from ₹ 43,67,640/- to ₹ 68,433/- is dismissed being without merit.
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2017 (12) TMI 407
Denying benefit of exemption u/s. 11 - amended proviso to section 2 (15) applicability - scope of activities undertaken by assessee - Held that:- The main object of the Trust is to promote the sports and games. The authorities below have drawn adverse inference and invoked the amended provisions of section 2(15) by holding that by engaging into coaching camps and obtaining receipts therefrom, the assessee is engaging into activities of commercial nature. This proposition is not at all sustainable. It is undeniable that the object or purpose of this trust is promotion of sports and games and thus charitable. The fact that the trust collects certain charges from coaching camps meant for promotion of sports and games cannot alter the character of the institution. To repeat the proposition as expounded above, it is not necessary that the Trust should provide something for nothing or for less than it cause or for less than the ordinary Trust. - Decided in favour of assessee.
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2017 (12) TMI 406
TPA - international transaction - Held that:- Since the finding of the Hon'ble High Court for Assessment Year 2005-06 has clearly concluded that for Assessment Year 2007-08 the assessee has not carried out any research and development activity, the same cannot be taken into account for rendering services as per international transactions. Thus, the assessee company has not carried out any international transaction. As related to working capital adjustment the Hon'ble High Court decision was not available before the TPO as well as before the DRP. Therefore, the same should be verified by the TPO/A.O. Needless to say, that the assessee be given full opportunity of hearing.
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Customs
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2017 (12) TMI 405
Valuation of imported goods - glass beads of a particular kind called 'Chaton' - Department demanded higher import price - Held that: - Since the issue is a recurring one and one which requires early and pragmatic resolution so that the neither the petitioner is unduly harmed nor the interest of the Revenue is prejudiced, in view of the facts noted above, it would be in interest of both the sides, that CESTAT before which said Tax Appeal No. 11645/2016 is pending concerning this particular issue, takes up the matter on priority consideration and disposes of expeditiously - petition disposed off.
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2017 (12) TMI 404
Import of second hand photocopiers during 2004 and 2005 - whether the Commissioner (Appeals) and Appellate Tribunal are correct in holding that the second-hand photocopiers imported and meant for service sector are "Capital goods" free importable and not "Consumer goods? - Held that: - reliance placed in the case of Atul Commodities Pvt. Ltd. & Ors. Versus Commissioner of Customs, Cochin-9 [2009 (2) TMI 18 - SUPREME COURT], where it was held that Used Photocopier Machines are capital goods, hence, import of old & used photocopying machines stands covered by the concept of “second-hand capital goods” - appeal dismissed - decided against Revenue.
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2017 (12) TMI 403
Mis-declaration of imported goods - undervaluation - palm acid oil, palm fatty acid distillate and palm stearin - whether there was any misdeclaration of the description of imported goods? - Held that: - there was a cross-examination of the Chemical Examiner as well as the Joint Director. The samples of the goods were also got tested by the Revenue from Sri Ram Institute for Industrial Research, New Delhi. We find that the ld. Commissioner has correctly analysed the findings in the test report who carried the examination - With regard to the reasoning given by the ld. Commissioner that experts of CRCL has not conclusively stated whether the samples of the goods were residue and why these were not Mixed Oil. In view of the above analysis, the charge of misdeclaration against the importers is not sustainable. Valuation - Held that: - there is no direct evidence indicating that the price reflected on the invoice is not the correct transaction value, we do not find any justifiable reasons to uphold the charge of the Revenue. Appeal dismissed - decided against Revenue.
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2017 (12) TMI 402
N/N. 21/2002-Cus dated 01.03.2002 - principle of estoppel - export of aircrafts without filing any shipping bill at the port of export - illegal import of aircrafts - Department has alleged that the export of aircrafts was in contravention of Section 50 of the Customs Act, 1962 and, that their import being fresh import, the appellant violated Section 46(1) of the Customs Act, 1962 - whether after initial assessment and clearance, the subsequent taking out of the two aircrafts, out of India and bringing them back into India would amount to export and import respectively under Customs Act, 1962? Held that: - the aircrafts are not liable to confiscation under Section 111 or Section 113 of the Customs Act and also not liable to pay import duty as and when they are brought back into India after making trips abroad and duty cannot be demanded on these aircrafts. Considering the fact that the Department itself has dropped similar proceedings in relation to five other aircrafts, which were imported initially and subsequently gone out of India under sale and purchase agreements and came back under the lease agreement, we hold that the order of ld. Commissioner is not sustainable and the same is set aside - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 401
Smuggling - betel nuts - the goods found on the trucks were of foreign origin, in the light of the prevailing trend of smuggling of betel nuts of foreign origin and in view of the fact that there was no supporting documents letter,invoice, challans import documents etc, the goods were confiscated - Held that: - There is absolutely nothing on record to even remotely suggest that such goods are of foreign origin. Betel nuts is also not a commodity notified under Section 123 of the Customs Act, 1962 and hence, the onus is on the Department to prove that the goods are of foreign origin and smuggled in India. Further, there is no export or trade information from any knowledgeable person to indicate that the category or quality of the seized betel nuts are not found in India. Local movement of Betel Nuts and violation of any local laws regarding custody and movements of such goods cannot be made the basis for confiscation under Customs Act, 1962. Reliance placed in the case of Muruli Sandik, Jay Jayram Yadav, Jagarnath Yadav Versus Commissioner of Customs (Preventive) , Shillong [2016 (9) TMI 275 - CESTAT KOLKATA]. Appeal allowed - decided in favor of appellant.
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2017 (12) TMI 400
Whether the confiscation of the waste paper by the lower authorities is correct or otherwise and whether penalties imposed on the main appellant as well as on the individuals needs to be upheld or otherwise? Held that: - it is undisputed that the consignment of waste paper imported by the appellant did contain materials which was identified as of municipal waste. The said municipal waste was seggregated on the direction of Pollution Control Board is undisputed and the percentage of municipal waste in these consignments was 2.71% of total quantity of waste paper imported. The confiscation ordered by the adjudicating authority and allowed on payment of redemption fine is correct order and does not require any interference. The redemption fine ordered by the lower authorities is also proportionate and is not excessive - penalties imposed on the main appellant u/s 112(a) is correct, but the quantum of penalty seems to be excessive - the quantum of penalty reduced. Personal penalties imposed on the two individuals - Held that: - These employees being executives of the company cannot be held as liable to penalty, as the presence of municipal waste in the consignment being inevitable, it cannot be held that these individuals had any role to play in confiscation of the goods; in our considered view, the penalties imposed on the individuals are unwarranted. Appeal allowed in part.
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Insolvency & Bankruptcy
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2017 (12) TMI 399
Winding up petition - debtor Company defaulted in making payment - Held that:- Appellant had not submitted all the information other than information forming part of the records of the transferred case, as required in terms of first proviso to Rule -5 aforesaid, we hold that the Application under Sections 433, 434 and 439 of the Companies Act which was transferred to the Tribunal stood abated in view of Rule 5 aforesaid. However, in view of the Second provision to Rule-5, as quoted above, the Appellant is given liberty to file a fresh Application under Section 9 of the I & B Code in accordance with the provision of law i.e., after giving Notice of Demand under sub-Section (1) of Section 8 in requisite form 3 or 4. After such notice, if there is no dispute and the Appellant prefers application under Section 9 of the I & B Code, in such case, the Adjudicating Authority will not dismiss the case on the ground of delay there being continuing cause of action since 27th April, 2010, and it cannot be held to be barred by limitation. If there remains a defect, the Adjudicating Authority may allow the Appellant to remove the defect in terms of the proviso to Section 9 of the I&B Code.
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2017 (12) TMI 398
Corporate insolvency procedures - proof of existing debt - Held that:- From the statement made by the 'Operational Creditor' it is clear that the demand notice issued to the Corporate Debtor at its registered office and to the Director(s) were returned unserved. Notices were served only to the Company Secretary and to one ex-Director, Mr. Shyam Poddar. Though such specific statement has been made by the Operational Creditor in the application under Section 9, the Adjudicating Authority ignoring the same and without verifying the other facts admitted the case. In view of the plea taken by the appellant and the facts as narrated above, we hold that notice under sub-section(1) of Section 8 in form 3 was incomplete and the application under Section 9 was not maintainable. For the reasons aforesaid, we set aside the order dated 24th August, 2017 passed in C.P. No. (IB)- 211(ND)/2017. In effect, order(s), if any, passed by Ld. Adjudicating Authority appointing any 'Interim Resolution Professional' or freezing of account, if any, and all other order (s) passed by Adjudicating Authority pursuant to impugned order and action, if any, taken by the 'Interim Resolution Professional', including the advertisement, if any, published in the newspaper calling for applications all such orders and actions are declared illegal and are set aside
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2017 (12) TMI 397
Corporate insolvency process - existence of dispute - Held that:- There does not exist any dispute between the parties under the meaning and definition of section 5(3) of the IB Code, 2016 as the aforesaid civil suit is nowhere connected to instant petition. The instant petition pertains to insolvency proceedings whereas the civil suit filed before High Court belongs to recovery of money. Moreover, this Adjudicating Authority is of the opinion that there would have been a different situation, had the respondent initiate a case related to breach of warranty or defective goods against the petitioner. However, the respondent neither raised any demand of express warranty prior to the said reply notice nor sought for replacement of goods supplied to the respondent. In this case, the petitioner has filed a civil suit against the respondent and that too, after filing a winding up petition before the High Court. Otherwise also, the petitioner must have been aware of the well-established procedure of the winding up/insolvency process and would not have filed the civil suit before the Hon’ble High Court to self-incriminate. Further, the learned senior counsel for the petitioner has stated that the Said civil suit has been filed just to save the limitation period for recovering monies from the respondent. This also reflects the bonafide on part of the petitioner. Thus, this Adjudicating authority is satisfied that the petitioner has made out his case by establishing that this Corporate Debtor has defaulted the payment dues on various occasions to this petitioner/OC and there is no dispute between the parties. In the circumstances, am inclined to admit the instant petition. The instant petition is admitted and order the commencement of the Corporate Insolvency Resolution Process which shall ordinarily get completed within 180 days, reckoning from the day of this order is passed.
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2017 (12) TMI 392
Corporate insolvency procedures - Held that:- An application is admitted, under Section 7 of the Insolvency and Bankruptcy Code, 2016, a detailed procedure is set out in the Insolvency and Bankruptcy Code, 2016 and Rules and Regulations have framed. In the light of the decision of the Hon'ble Supreme Court, in M/s.Innoventive Industries Ltd.'s case (2017 (9) TMI 58 - SUPREME COURT OF INDIA) which has thread analysed the code, the contention that the rights of the Company and its Directors, as well as the share holders, would be stripped of the moment, an application, under Section 7 of the Code, is admitted and that therefore, the whole proceedings by NCLT, require to be stalled, cannot be accepted. Further contention of the petitioners that the action of the 2nd respondent in approaching the NCLT, would amount to forum shopping, also cannot be countenanced, for the reason, Insolvency and Bankruptcy Code, 2016, has been enacted, consolidating various enactments, such as, Sick Industrial Companies (Special Provisions) Act, 1985; the Recovery of Debts Due to the Banks and Financial Institutions Act, 1993; the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; Companies Act, 2003; Insolvency and Bankruptcy law and other laws. As per Section 238 of the Insolvency and Bankruptcy Code, 2016, provisions of the Code shall have the effect, notwithstanding anything inconsistent therewith, contained in any other law, for the time being in force or any instrument, has effect, by virtue of such power. As per Sub-Section (4) of Section 60 of the Code, the National Company Law Tribunal is vested with all the powers of the Debts Recovery Tribunal, as contemplated under Part II of the Code, for the purpose of sub-Section (2) of Section 60 of the Code and therefore, it is for the NCLT to consider, all the materials, and pass appropriate orders. Code enables a financial creditor to make an application, under Section 7 of the Code, if the adjudicating authority is satisfied that default has not occurred or the application is complete and there is no disciplinary proceedings pending against the proposed resolution professional, it may, by order, admit such application. Contention of the learned counsel that applications are mechanically admitted, cannot be accepted. Contention that approach of the 2nd respondent to NCLT, amounts to forum shopping is not tenable, as the Code enables filing of an application, notwithstanding the pendency of any proceedings, under the SARFAESI Act, 2002. When the code has not been stayed, the process envisaged in the code, has to be continued, and cannot be restrained. W.P. dismissed.
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FEMA
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2017 (12) TMI 396
Revisional jurisdiction under the FERA - Notice of contravention of Section 51 of FERA was taken by the Adjudicating officer within two years from the date of the repeal of FERA - Held that:- In the facts of the present case, the appellant is not without a remedy in the sense that a recourse can be taken to the remedies under the Constitution of India. The principle which governs Mimansa interpretation is that if a word or sentence purporting to express a subordinate idea clashes with the principal idea, the former must be adjusted to the latter or must be disregarded altogether. Where there is a conflict between the object and material, the object is to prevail the material being subordinate to the object. Learned Counsel appearing for the appellant laid emphasis on the Mimansa principles by submitting that in absence of prescribed material, a substitute can be used. We fail to understand how Mimansa principles can advance the cause of the appellant any further. In the present case, we are dealing with the revisional jurisdiction. As in case of an appeal, a revision is always creation of a Statute. There is no inherent power vesting in any appellate authority or superior authority to exercise the power of revision. Moreover, the remedy of revision is never as matter of right. Mimansa principles will not revive a nonexisting remedy of revision. Therefore, we cannot accept the submission made by the learned Counsel appearing for the appellant based on Mimansa principles. Even if we apply Mimansa principles, it is impossible to accept the submission that a remedy of revision under the repealed Act was available to the appellant. Hence, we see no merit in the appeals. Appeals and Civil Applications are dismissed.
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Service Tax
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2017 (12) TMI 390
Levy of tax - appellant had been charging some amount from the transporters for arranging/providing cargo but in the case of Ex-mill sales, the appellant were arranging for the transport of the finished goods to the buyers - business auxiliary services - extended period of limitation - Held that: - Since the appellant provide volume of business to the transporters, the lower authorities have correctly held that they are promoting business for transporters - it is evident that there is clear understanding between the transporters and appellant that the consideration is being paid to them for the volume of business arranged for the transporters. Business Auxiliary Services - case of appellant is that the BAS should be provided to a client and the transporter is not a client - Held that: - as the service has been provided by the appellant to transporter who is a service provider therefore the above contention of the appellant is not tenable - reliance placed in the case of Union of India & Ors. Versus M/s Martin Lottery Agencies Ltd. [2009 (5) TMI 1 - SUPREME COURT OF INDIA], where it was held that Service tax purports to impose tax on services on two grounds (1) service provided to a customer and (2) service provided to a service provider - the service tax has been correctly charged in the category of BAS. Extended period of limitation - Held that: - the information with regard to charging of amount of the given service and activity was never brought to the notice of the department by way of periodical returns or otherwise - Once the finding of the bonafide belief is given by the adjudicating authority, invocation of extended period of limitation would not be available to the Revenue - extended period not invokable. Matter remanded back to the original adjudicating authority for re-quantification of the demand without invoking the extended period - appeal allowed by wya of remand.
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2017 (12) TMI 389
CENVAT credit - exempted as well as dutiable services - non-maintenance of separate records - Rule 6(3)(i) of CCR Rule 2004 - non-intimation of option under 6(3A)(a) at the beginning of the year - Held that: - the issue has been settled in favor of the assessee in the case of Aster Pvt. Ltd. Vs. CCE, Hyderabad-III [2016 (6) TMI 866 - CESTAT HYDERABAD], where it was held that the argument of the Revenue that the requirement to intimate the department about the option exercised, is mandatory and that on failure, the appellant has no other option but to accept and comply Rule 6(3)(i) and make payment of 5% / 10% of sale price of exempted goods / value of exempted services is not acceptable or convincing - demand set aside - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 388
Business Auxiliary Services - respondent were involved in shipment of cargo and promoted the business of shippers - Held that: - similar issues came up for decision before the Tribunal. The Tribunal after examining the facts held that in the arrangement relating to shipment of cargo provided by the shippers, the freight element or any profit on such freight cannot be subjected to tax under BAS - reliance placed in the case of Greenwich Meridian Logistics (I) Pvt. Ltd. vs. CST, Mumbai [2016 (4) TMI 547 - CESTAT MUMBAI] - appeal dismissed - decided against Revenue.
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2017 (12) TMI 387
Levy of service tax - certain charges named as ID charges, turn over charges and transaction charges collected from their clients in the course of providing service - Revenue entertained a view that these charges are also taxable under the category of stock broker service/online data base retrieval service - Held that: - For the services rendered commission is received which is taxed - the appellant’s claim regarding reimbursable nature of all these amounts requires cross-verification with supporting documents - appeal allowed by way of remand.
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2017 (12) TMI 386
Non-payment of service tax - consideration received on mobilization advance - rendering of construction service as sub-contractor - Held that: - The mobilization advance is liable to be service tax, as the provisions of Section 67 are clear to the effect that any money received for the taxable service to be provided is to be taxed at the time of receipt itself. The appellants, though claimed to have discharged the service tax later, subject to verification of the same, the liability for the interest on the late payment will arise - matter on remand. Rendering of construction service as sub-contractor - non-payment of service tax on the belief that main contractor already paid the service tax on the whole value - Held that: - the same depends on the actual classification service during the material time. Further, the fact of payment of tax on full value by the main contractor and connected issues are required to be examined afresh after correct classification of the tax liability - matter on remand. Appeal allowed by way of remand.
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Central Excise
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2017 (12) TMI 426
CENVAT credit - input service - sales/marketing commission paid on sale of finished goods - Held that: - With regard to availment of Cenvat credit on the commission paid for sale promotion activities, the CBEC vide Circular No.943/4/2011-CX. Dated 29/04/2011 has clarified that Cenvat credit is admissible on the services of the sale of the dutiable goods on commission basis. The said circular was endorsed by the Central Government vide N/N. 2/2016-CE (NT) dated 03/02/2016 - this Tribunal in the case of Essar Steel India Ltd. [2016 (4) TMI 232 - CESTAT AHMEDABAD] has held that the said notification should be considered as declaratory in nature and effective retrospectively - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 385
CENVAT credit - sometimes there was shortages of supply of inputs and the appellants raised debit note to the supplier - Revenue sought to deny the Cenvat Credit in respect of value attributable to such debit note - Held that: - the credit can be varied only in the circumstances where the suppliers have filed refund of the excess duty paid - In the instant case, the appellants have claimed that the supplier of goods has not claimed any refund. The Revenue has not produced any evidence that supplier has any refund - CENVAT credit cannot be denied - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 384
CENVAT credit - input services - renting of immovable property - telephone service - case of Revenue is that Renting of immovable property service and telephone services can be exclusively identified as used wholly by one unit. In these circumstances, it may attract the mischief of Rule 7 (c) of the CCR - Held that: - It is an admitted fact that the respondents apart from conducting manufacturing and provisions of services are also engaged in trading activity. Thus the credit of entire duty would not be available to them in respect of the premises which are exclusively engaged in trading activity. Thus if a premises is only used for trading activities then the distribution of credit exclusively attributable to such unit will result in revenue loss to the Government. Thus, apparently there is no revenue neutrality in the instant case. In the instant case Rule 7 (c) of the Cenvat Credit Rules, 2004 is attracted in respect of renting immovable property and telephone services - also, no evidence of Revenue neutrality has been produced. Since the appellants are, inter alia engaged in the trading activity also, there is no revenue neutrality as part of the credit attributable to the trading activity is not available to the appellants. Appeal dismissed - decided against Revenue.
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2017 (12) TMI 383
Valuation - to be valued under section 4 or 4A? - Revenue found that the appellant had been packing and selling their product in 2 kg and 5 kg packings and clearing the same after putting in cardboard cartons and gunny bags - in the SCN, the allegation is that the packing of 2 kg and 5 kg was intended for bulk sale to certain buyers for their industrial use or to the panwala for use in making of pan and for selling smaller quantity to its consumers - the appellant have categorically denied that the packages are sold to the gutka manufacturers - Held that: - it is necessary for lower authorities to verify the facts afresh in the first instance to establish clear factual matrix in the case - matter is remanded back to the original adjudicating authority to clearly establish the facts from the statutory and other records and thereafter pass a fresh order - appeal allowed by way of remand.
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2017 (12) TMI 382
Clandestine removal - appellant is clearing the goods to the parental unit without payment of duty as the goods are exported by the parental unit - As the parental unit did not mention the goods cleared against ARE-1 No.19 and 20 in the shipping bills, it was alleged that the goods covered under ARE-1 have been cleared clandestinely by the appellant without payment of duty - difference of opinion - majority order. Held that: - the Revenue's allegations are that the goods in question stand clandestinely removed to the domestic market in which case the benefit of non-duty paid clearance for export cannot be extended. For making such allegations, the Revenue has not produced any evidence as to show and establish that the goods were diverted and as to how compensation for the same was received by the assessee - It is a matter of settled law that clandestine activities of any manufacturer, alleged by the Revenue, are required to be substantiated by production of tangible and positive evidences. The same cannot be made on the basis of assumptions and presumptions. Revenue, in the present case, has arrived at the above finding on the basis of surmises and conjunctures on the sole ground that ARE-1 Nos.19 & 20 were not mentioned in the shipping bills. It is seen that the appellant had produced evidences on the record to show that the said goods cleared under the said ARE-1 were duly reflected in the invoices issued by the parent Unit for export, though the same were not mentioned in the shipping bills. The order of learned Member (Technical) is indeed on the procedural technical violations and does not conclude on the basis of any evidences. Admittedly, a particular act is required to be done in a particular manner as provided under the statute but an inadvertent mistake to follow the procedural aspect cannot be adopted for arriving at the conclusions against the assessee. It has to be kept in mind that it is the Revenue which is alleging clandestine removal and as such, the onus to prove the same lies heavily upon them. Admittedly, Revenue has not been able to produce any evidences to that effect - the inadvertent mistake of non-mentioning of ARE-1 Nos. 19 & 20 in the shipping bills cannot lead to any adverse conclusion against the assessee, especially, when such exports stand established by other parallel documents. Appeal allowed - decided in favor of appellant.
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2017 (12) TMI 381
Jurisdiction - power of Additional Director General (DGCEI) to issue SCN - whether Additional Director General (DGCEI) is not the competent authority as per the ratio laid down by the Hon’ble Delhi High Court in the case of Mangali Impex Ltd. Vs. UOI [2016 (5) TMI 225 - DELHI HIGH COURT]? - Held that: - matter remanded to the original adjudicating authority to first decide the issue of jurisdiction after the availability of Hon’ble Supreme Court decision in the case of Mangali Impex Ltd. and then on merits of the case but by providing an opportunity to the assessee of being heard - appeal allowed by way of remand.
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2017 (12) TMI 380
CENVAT credit - job-work - Remission of duty - goods destroyed by fire - the intermediate goods sent to Job Worker were not returned even after stipulated period of 180 days in terms of Rule 4 (5)(a) of the CCR, and subsequently got destroyed by fire - Held that: - reliance placed in the case of COMMISSIONER OF CENTRAL EXCISE, CHENNAI-IV Versus FENNER INDIA LTD. [2014 (11) TMI 704 - MADRAS HIGH COURT], where it was held that when the inputs are destroyed in the fire accident, the assesse cannot be called upon to reverse the credit when there is no dispute that inputs on which credit was availed were destroyed when the work was in progress - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 379
CENVAT credit - job-work - case of Revenue is that the appellant/job worker have not received inputs namely Stainless Steel Patta/Patti which was claimed to have used for manufacture of utensils by the job worker on behalf of the appellant - Held that: - merely because the description mentioned in some of the invoices as SSCR coils does not prove that appellant's job worker have not received Patta/Patti for the reason that even Patta/Patti may or may not be in coil or strips form. Therefore this material cannot be conclusive evidence that the goods covered invoice was not received by the job worker. The goods are manufactured on the basis under Rule 4(5)(a) of the CCR, 2004, it is not mandatory on the part of the appellant to carry out in manufacturing activity. Hence, it is not under dispute that the appellant have discharged the Central Excise duty liability in respect of job worked goods, irrespective whether the appellant themselves carry out the manufacturing activity on such job work goods or otherwise, they are legally entitled for the CENVAT credit in respect of inputs sent to the job worker in terms of Rule 4(5)(a) of the CCR, 2004. The Adjudicating Authority as well as Commissioner (Appeals) have not considered the Octroi receipt in defence of the appellant which is very vital evidence as to conclude the present matter the same needs to be reconsidered - appeal allowed by way of remand.
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2017 (12) TMI 378
CENVAT credit - part of intermediate goods cleared outside (on payment of duty) - case of Revenue is that duty paid by the assessee on the intermediate by product is not their input therefore they were not entitle for the cenvat credit - Held that: - The appellant have undisputedly paid the excise duty while clearing the said by product on which credit was availed. Once the excise duty paid on the removal of the said by product credit availed thereon cannot be disputed - As regard the payment of duty of byproduct while retaining goods in the factory no dispute was raised by the Revenue. Once the goods is retained in the factory on which excise duty was paid the same can be treated as input and Cenvat credit can be availed - credit cannot be denied - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 377
Refund of excess excise duty paid - finalisation of provisional assessment - rejection on the ground of time bar - Held that: - It is clear that any order or finding of implication of duty liability has to be communicated to the assessee. All limitations will start from the date of knowledge of assessee by due communication by the competent authorities. The relevant date should be taken from the date of communication of the order to the appellant-assessee - the matter is remanded to the original authority to decide the issue of refund on merit, including question to undue enrichment, if any - appeal allowed by way of remand.
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2017 (12) TMI 376
Liability of duty - intermediate goods - Revenue held that PVC compound blend arising as a intermediate product is not consumed captively and thus duty liability will arise on its clearance - Held that: - the demands was made on presumption and inference without any categorical evidence to support the claim of the Revenue that the PVC compound manufactured by Unit No.2 was cleared to Unit No.1 - manufacture of footwear at Unit No.2 itself could not be discounted as no contrary evidence was brought forth by the Revenue - appeal dismissed - decided against Revenue.
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2017 (12) TMI 375
Non-sustainability of seizure and confiscation of paper sheets - case of appellant is that the paper sheets as a product not manufactured by the appellant. These are raw materials received under challan for job work and further process - Held that: - The products were neither identified by their classification or excisability, after due manufacture. The possibility of the product being semi-processed intended for further use in manufacture of final product which are excisable can be no basis to confiscation of the said goods - Since, there is no categorical finding regarding the offence with reference to impugned goods or whether they are at any stage excisable product, the impugned order cannot be sustained. Penalty on Manager of the main appellant’s unit - Held that: - As the penalty has been imposed by Original Authority under Rule 25 which was never invoked or alleged in the notice, the impugned order could not have revised or reduced the same by applying Rule 26 - penalty set aside. Appeal allowed - decided in favor of appellant.
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2017 (12) TMI 374
Classification of goods - TMQ (kind of bulk drugs) - appellants are claiming the classification of said product under sub heading 2302.00, the Department disputed the same and contended that it is correctly classifiable under heading 2941.30 - whether the product classifiable as Preparation of a kind used in animal feeding, including dog and cat food under CTH 2302 or as Tetracyclines and their derivates: Salts thereof under CTH 2941.30? - Held that: - Considering the manufacturing process and in-process nature of the material, we are convinced that the issue is covered by the judgment of the Larger Bench in the case of Tetraon Chemie (P) Ltd. Vs. CCE, Bangalore [1998 (9) TMI 390 - CEGAT, NEW DELHI], where it was held that preparation described under Heading 23.02 of CETA 1985 will be covered even if they are not obtained by processing vegetable or animal material - appeal dismissed - decided against Revenue.
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Indian Laws
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2017 (12) TMI 395
Proceedings initiated against the appellant u/s 138 of the NI Act - professional misconduct on the part of an advocate - charging fees as percentage of reward - Held that:- Mere issuance of cheque by the client may not debar him from contesting the liability. If liability is disputed, the advocate has to independently prove the contract. Claim based on percentage of subject matter in litigation cannot be the basis of a complaint under Section 138 of the Act. In view of the above, the claim of the respondent advocate being against public policy and being an act of professional misconduct, proceedings in the complaint filed by him have to be held to be abuse of the process of law and have to be quashed. After the hearing was concluded, learned counsel for Respondent No.2 mentioned the matter to the effect that Respondent No.2 wanted to withdraw the complaint. An e-mail to this effect was also handed over to Court. The same has been kept on the record. However, we did not permit this prayer. Having committed a serious professional misconduct, the respondent No.2 could not be allowed to avoid the adverse consequences which he may suffer for his professional misconduct. The issue of professional misconduct may be dealt with at appropriate forum.
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2017 (12) TMI 394
Recovery proceedings - DRT jurisdiction to entertain appeal against the order of the Recovery Officer - Held that:- Order of the Recovery Officer makes it clear that the continuance of respondent No. 1 for safeguarding the auctioned property was solely on behalf of auction purchasers and the first respondent's duty as "Court Commissioner" had ceased to exist on 13.11.2006. After 13.11.2006 or at least after 24.07.2008 (Order of DRT), for the services of respondent No. 1, if any, were availed by the auction purchasers, only the auction purchasers are liable to pay the said charges to respondent No. 1. The appellant Bank, therefore, was under no obligation to pay the charges to the first respondent in any case after 24.07.2008. The High Court has not kept in view the order of DRT dated 24.07.2008 and the order of the Recovery Officer dated 25.03.2009. The High Court was not right in saying that DRT had no jurisdiction to entertain the appeal and, therefore, the order dated 24.07.2008 would be non est. The High Court mainly seems to have proceeded with the matter as if it is a regular appeal arising out of the award passed by the MSMEDF Council and commenting upon the conduct of the Bank in not seriously pursuing the matter in challenging the award. The High Court did not consider the earlier proceedings before DRT, DRAT and before the High Court except merely referring to certain proceedings before DRT and DRAT. The High Court did not consider various orders passed by DRT and DRAT and the conduct of the parties who have been vigorously pursuing the matter before DRT, Recovery Officer and DRAT. The High Court also did not keep in view that the parties were bound by the earlier orders passed by DRT and Recovery Officer which clearly held that charges towards security services are payable only by the auction purchasers. The impugned order passed by the High Court thus suffers from serious infirmity and is liable to be set aside. Pursuant to the order dated 19.03.2013 passed by the High Court, an amount of ₹ 1,93,22,590/- was deposited by the appellant Bank. By an order dated 30.03.2016 passed by DRT, Pune, respondent No.1 has withdrawn an amount of ₹ 1,22,00,000/- (Rs.1,00,00,000/- plus accrued interest). The balance amount of ₹ 93,22,590/- is lying in deposit with the District Court, Pune. By order dated 22.04.2016, this Court has granted interim stay of the impugned order of the High Court. However, by order dated 24.10.2016, respondent No.1 was permitted to withdraw 50% of the said amount ₹ 93,22,590/- on furnishing a bank guarantee. The first respondent has not withdrawn the said 50% amount of ₹ 93,22,590/- as he has failed to furnish bank guarantee.
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2017 (12) TMI 393
Dishonour of the cheque - complaint under 138 of the Negotiable Instruments Act, 1881 - accrual of cause of action -Held that:- While interpreting word “cause of action” under section 142 of the Negotiable Instruments Act in relation to the commission of an offence or the institution of a complaint, reading of section 138 and 142 of the Negotiable Instruments Act makes it abundantly clear that the cause of action to institute a complaint comprises the three different factual prerequisites. It was further held that right of the holder to present the cheque for encashment carries with it a corresponding obligation on the part of the drawer. The omission or the failure of the holder to institute prosecution does not, therefore, give any immunity to the drawer so long as the cheque is dishonoured within its validity period and the conditions precedent for prosecution in terms of the proviso to Section 138 are satisfied. It was further held that so long as the cheque is valid and so long as it is dishonoured upon presentation to the bank, the holder’s right to prosecute the drawer for the default committed by him remains valid and exercisable. By reason of a fresh presentation of a cheque followed by a fresh notice in terms of section 138 proviso clause (b), the drawer gets an extended period to make the payment and thereby benefits in terms of further opportunity to pay to avoid prosecution. Such fresh opportunity cannot help the defaulter on any juristic principle, to get a complete absolution from prosecution.
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2017 (12) TMI 391
Dishnour of cheque - cognizance under Section 138 of NI Act - Held that:- The averments of the complaint do not disclose about any specific allegation about the role played by the respondent to project that he was also instrumental for issuance of cheque. Predominately the allegations have been attributed against the company itself alone to isolation to others. Therefore, prima facie reading of the complaint do not specify the fact that the pleadings have been made to bring the case within Section 141 of the Act, 1881 which justify the issuance of process by the JMFC to one of the accused named in company. It is not stated that who was in hold of the reins of the company to issue the cheque and whether the respondent was responsible to issue said cheque on behalf of the company or not. On the contrary, the allegations of issuance of cheque is attributed to the company alone. Thus when it is not averred in complaint that the respondent was responsible for the business of the company and has issued the cheque for and on behalf of the company the complaint against him cannot be sustained. The complaint only purports that the money was invested in the company at the instance of the respondent for return of inflated healthy sum. The complaint is silent about the role of respondent and responsibility for issuance of cheque on behalf of the company. Therefore, in case of dishonour of any cheque issued by the company the liability cannot be fastened under Section 138 of the Act, 1881 to the respondent vicariously.
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