TMI Tax Updates - e-Newsletter
February 1, 2018

Case Laws in this Newsletter:

GST Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax Wealth tax Indian Laws

Articles

1. Depreciation - Reduction of higher rates of 100, 80, 60 and 50% to 40% in a single stroke –amendment is not justified

   By: DEVKUMAR KOTHARI

2. Read S. 68 of IT Act with NI Act: Provisions relating to cheque in the Negotiable Instruments Act, 1881 need to be considered in context of S.68 of Income-tax Act, 1961 – a reading again and reconsideration of some judgments allowing invocation of S. 68 for receipts by cheque is desirable

   By: DEVKUMAR KOTHARI

News

1. First Revised Estimates of National Income, Consumption Expenditure, Saving and Capital Formation, 2016-17

2. Index of Eight Core Industries (Base: 2011-12=100) December, 2017

3. RBI Reference Rate for US $

4. GeM 3.0 launched

5. The ​Government of India and World Bank sign $100 Million Project to Boost Rural Economy of Tamil Nadu

6. The Government of India and Asian Development Bank (ADB) sign $250 Million Loan to Improve Rural Connectivity in the 5 States of Assam, Chhattisgarh, Madhya Pradesh, Odisha and West Bengal under PMGSY

Notifications

Customs

1. 10/2018 - dated 31-1-2018 - Cus (NT)

Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Sliver- Reg

DGFT

2. 47/2015-2020 - dated 31-1-2018 - FTP

Notification of 'Indian Trade Classification (Harmonised System) of Export Items, 2018' [Schedule 2, Export Policy of ITC(HS), 2018]

GST - States

3. 47/2017-State Tax (Rate) - dated 14-11-2017 - Manipur SGST

Seeks to amend notification No 12/2017- State Tax (Rate) dated 28.06.2017.

4. 46/2011-State Tax (Rate) - dated 14-11-2017 - Manipur SGST

Seeks to amend notification No. 11/2017- State Tax (Rate) dated 28.06.2017.

5. 45/2017-State Tax (Rate) - dated 14-11-2017 - Manipur SGST

Seeks to prescribe 2.5% concessional CGST rates on certain goods supplies to specific public funded research institute and subject to specific condition.

6. 44/2017-State Tax (Rate) - dated 14-11-2017 - Manipur SGST

Seeks to amend notification No 5/2017- State Tax (Rate) dated 28.06.2017, so as to block refund of ITC on certain goods.

7. 43/2017-State Tax (Rate) - dated 14-11-2017 - Manipur SGST

Seeks to amend notification No 4/2017- State Tax (Rate) dated 28.06.2017, so as to include cotton under reverse charge under section 9(3) of the Manipur GST Act, 2017.

8. ERTS(T) 79/2017/474 - dated 29-12-2017 - Meghalaya SGST

The Meghalaya Goods and Services Tax (Sixth Amendment) Rules, 2017.

9. ERTS(T) 79/2017/473 - dated 29-12-2017 - Meghalaya SGST

The Meghalaya Goods and Services Tax (Fifth Amendment) Rules, 2017.

10. ERTS(T) 79/2017/472 - dated 29-12-2017 - Meghalaya SGST

The Meghalaya Goods and Services Tax (Fourth Amendment) Rules, 2017.

11. ERTS(T) 79/2017/471 - dated 29-12-2017 - Meghalaya SGST

The Meghalaya Goods and Services Tax (Third Amendment) Rules, 2017.

12. ERTS(T) 79/2017/470 - dated 29-12-2017 - Meghalaya SGST

The Meghalaya Goods and Services Tax (Second Amendment) Rules, 2017.

13. ERTS(T) 79/2017/469 - dated 29-12-2017 - Meghalaya SGST

The Meghalaya Goods and Services Tax (Amendment) Rules, 2017.

14. ERTS(T) 79/2017/468 - dated 29-12-2017 - Meghalaya SGST

The Meghalaya Goods and Services Tax Rules, 2017.

15. 60-F.T. - dated 10-1-2018 - West Bengal SGST

West Bengal Authority for Advance Ruling Regulations, 2018

Circulars / Instructions / Orders

Customs

1. 18/2018 - dated 30-1-2018

Sub: Closure of submission of Bills of Entry at the ICES 1.5 on account of Union Budget, 2018-19 – reg.

2. 15/2018 - dated 25-1-2018

SUB : Amendments to All Industry Rates of Duty Drawback effective from 25.01.2018.

3. 16/2018 - dated 25-1-2018

Subject: Authorized Economic Operator (AEO) programme, various advantages- reg.

4. 17/2018 - dated 25-1-2018

Subject: Amendment in the Authorized Economic Operator (AEO) Programme Circular No. 33/2016 dated 22/7/2016- reg.

Highlights / Catch Notes

GST

• Goods Cannot Be Detained u/s 129 for Procedural Infractions Like Rules 55 and 138 in GST Acts.

  Case-Laws - HC : Detention of goods u/s 129 of the CGST and SGST Acts - mere infraction of the procedural Rules like Rules 55 and 138 of the State GST Rules cannot result in detention of goods, though they may result in imposition of penalty. - HC
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Income Tax

• Taxpayer Wins Deduction: Investment in New House on Mother's Land Qualifies u/s 54F.

  Case-Laws - AT : Disallowing claim u/s 54F - if the assessee has constructed a new on the plot of land which is owned by the mother of the assessee then, the investment made by the assessee in construction of new house is eligible for deduction u/s 54F - AT
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• Penalty Imposed for Non-Maintenance of Books u/s 44AA; Bank Account Not Considered as Books of Accounts.

  Case-Laws - AT : Penalty u/s 271A - violation of provisions of section 44AA - non-maintenance of books of accounts - Though the total income of the assessee was assessed by the AO as per the transaction recorded in the bank account however, the bank account of the assessee cannot be accepted or regarded as books of accounts - levy of penalty is justified - AT
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• Assessing Officer's Initial Acceptance Overturned; Additions to Account Deleted After Reconciliation Statement Rejection.

  Case-Laws - AT : Addition made on account of sundry creditors - AO of the assessee had accepted the statement of account of that supplier as sacrosanct and proceeded to make addition in the hands of the assessee by disbelieving the reconciliation statement and explanation given by the assessee - additions deleted - AT
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• Entity's Status as "Assessee" Under Income Tax Act Challenged; Lacks Evidence for Bogus NBFC Claim.

  Case-Laws - AT : Non recognition of assessee as an “assessee” under the Income Tax Act - bogus entity or not - Since in the earlier assessment years and subsequent assessment year the assessee’s return of income has been accepted and even “refunds” have been allowed, treating the assessee an NBFC company as bogus need to be supported by material/evidence which the AO has not spelt out. - AT
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• Interest Applies to Total Income Including Reassessment and Revisional Orders u/ss 234B and 263.

  Case-Laws - AT : Interest u/s.234B - The concerned interest shall be on the consolidated amount of income i.e. both determined in re-assessment order and income determined in consequent to revisional order passed u/s. 263, when the reassessment order was subject to revision u/s.263 - AT
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Customs

• Bills of Entry Submission Halted Temporarily in ICES 1.5 System Due to 2018-19 Union Budget Changes.

  Circulars : Sub: Closure of submission of Bills of Entry at the ICES 1.5 on account of Union Budget, 2018-19 – reg. - Trade Notice
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• Electric Multiple Units (EMUs) and components like Train Coaches and Driving Motor Cars to be classified under CTH 86.03.

  Case-Laws - AT : Classification of imported goods - EMUs are treated together and are to be classified under CTH 86.03 - TCs as well as DMCs which are integrally forming part to make a functional EMU are to be treated together for the purpose of classification assessment. - AT
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Central Excise

• Central Excise Duty Applies to Devices with Built-In Software, Not Separate Software for Client Computers.

  Case-Laws - AT : Valuation - a devise should suffer Central Excise duty along with essential operating software which is part and parcel of the same - However, the software which is supplied separately for loading in the computer of the client linked to the devise for retrieval and monitoring of data cannot be considered as part and parcel of he said access control device. - AT
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• Appellant Accused of Evading Duty on Wire and Cable Manufacturing; Confirmed Allegations Lead to Duty Demand and Penalty.

  Case-Laws - AT : Clandestine removal - the allegation that the appellant has procured raw materials, manufactured wires and cables and cleared the same clandestinely without payment of duty stands established - demand of duty with penalty confirmed - AT
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VAT

• Tax Exemption Valid Despite Non-Compliance with Land Acquisition Procedures; Land Possession Still Mandatory Requirement.

  Case-Laws - HC : Benefit of exemption from payment of tax - Possessing of land for establishment of new unit although constitutes the mandatory or substantive part of exemption notification but mode of acquisition of land is wholly directory, and its non-compliance would not affect the essence or substance of the notification in question, granting exemption - HC
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Case Laws:

• GST

• 2018 (1) TMI 1313
  Confiscation of goods - detention under Section 129 of the CGST and SGST Acts - case of petitioner is that the documents that accompanied the goods was absence of Form KER-1 declaration and that since Form KER-1 declaration was uploaded and made available to the first respondent immediately on receipt of notice, there is no justification for the continued detention of the goods - Held that: - A combined reading of Sections 129 and 130, especially the provision contained in sub section (6) of Section 129 indicates that the detention of the goods is contemplated under the statutes only when it is suspected that the goods are liable to confiscation. This aspect is seen clarified by the Central Board of Excise and Customs in the FAQs published by them on 31.3.2017 also. Section 130 dealing with the confiscation of goods indicates beyond doubt that the confiscation of goods is contemplated under the statutes only when a taxable supply is made otherwise than in accordance with the provisions contained in the statutes and the Rules made there under with the intent to evade payment of tax. If that be so, mere infraction of the procedural Rules like Rules 55 and 138 of the State GST Rules cannot result in detention of goods, though they may result in imposition of penalty. The detention of goods merely for infraction of the procedural Rules in transactions which do not amount to taxable supply, is without jurisdiction. Petition allowed.

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• Income Tax

• 2018 (1) TMI 1312
  Reopening of assessment - ‘reasons to believe’ - Held that:- Issue notice on the application for condonation of delay as well as on the special leave petition. There shall be stay of operation of the impugned judgment [2017 (1) TMI 1528 - DELHI HIGH COURT].

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• 2018 (1) TMI 1311
  Penalty levied u/s 271(1)(c) - claim of deduction u/s 10B - Held that:- Commissioner (Appeals) has categorically found that there was no concealment of facts by the assessee, to which the Tribunal has concurred. The assessee made a bonafide claim which was not accepted by the revenue. Therefore, in the absence of any concealment, merely because the assessee had made a claim under section 10B of the Act, the same would not attract penalty under section 271(1) (c) of the Act. Therefore, no infirmity can be found in the impugned order passed by the Tribunal in upholding the deletion of penalty under section 271(1)(c) of the Act. - Decided in favour of assessee

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• 2018 (1) TMI 1310
  Penalty u/s 271(1)(c) - immunity under section 271AAA - Held that:- In the present case, the assessee has admitted the undisclosed income in the statement given under subsection (4) of section 132. AO made the assessment on the basis of disclosure made by the partners of the assessee firm in their statements under section 132(4) and no further addition has been made in the assessment order. He has also provided all the details to that effect, and has offered an income of 3 crores. It was clearly explained in the statement dated 31.03.2011. No specific question was asked as regards the manner of earning the undisclosed income or substantiation thereof by the Assessing Officer. The assessee has also paid taxes as well as interest. Thus, the contention of the revenue that the assessee has not substantiated the manner in which the undisclosed income is derived, does not merit acceptance. No evidence was found which would suggest that the assessee had earned the undisclosed income from any other source instead of projects Conditions mentioned in section 271AAA(2) of the Act for granting immunity from the penalty are satisfied in the present case as the assessee in his statement under section 132(4) of the Act has made a disclosure of unaccounted income; the manner in which the same was earned was also clearly stated and the taxes were also paid. It is pertinent to note that the revenue did not raise any ground before the Tribunal challenging correctness of the Commissioner (Appeals') order converting the penalty from section 271(1)(c) to section 271AAA of the Act. - Decided against revenue

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• 2018 (1) TMI 1309
  Addition made on account of capitalization of revenue expenses - ITAT deleted the addition - Held that:- Both the Tribunal and the Commissioner (Appeals) have recorded concurrent findings of facts to the effect that the dies and tools as well as the machinery spares were consumable in nature and have accordingly held the expenditure to be revenue in nature. The fact that in earlier years such expenditure had been treated as revenue expenditure by the revenue has also been taken into consideration. Having regard to the concurrent finding of facts recorded by the Commissioner (Appeals) and the Tribunal, it cannot be said that the conclusion arrived at by the Tribunal that the expenditure incurred on dies and tools and machinery spares was revenue in nature, suffers from any legal infirmity so as to give rise to any question of law, much less, a substantial question of law warranting interference.

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• 2018 (1) TMI 1308
  Disallowance of Bad Debts - treatment as business loss - Held that:- The assessee had initially received an amount of 70,00,000/from M/s. Maharishi Traders, which was duly reflected in the books of account. Subsequently, in view of the verdict of the court the assessee was required to pay an amount of 70,00,000/to M/s. Maharishi Traders. Thus, the assessee was required to pay such amount to M/s. Maharishi Traders in relation to a business dispute. The assessee had regular transactions with the said party. Moreover, it is not disputed that the assessee had shown 81,49,803/as part of the gross revenue for assessment year 2004-05. The Commissioner (Appeals) was, therefore, wholly justified in holding that since the assessee was required to pay such amount in relation to a business transaction pursuant to the court order, the same was required to be treated as business loss and business expenditure and required to be allowed.

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• 2018 (1) TMI 1307
  Computation of capital gain - Tribunal accepting the cost Inflation Index taken by the assessee of the year in which the father of the assessee became the owner - property in question was transferred in favour of assessee after the death of his father through inheritance - Cost with reference to certain modes of acquisition - Held that:- The provisions of subsection (1) of section 49 of the Act would be squarely attracted and the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it. The material on record reveals that the property in question was acquired by the father of the assessee in the year 1945. In view of the provisions of subsection (1) of section 49 of the Act read with the Explanation thereto, since the capital asset has become the property of the assessee under a will, the cost of acquisition is deemed to be the cost for which the previous owner, namely the assessee’s father, acquired it. The record of the case shows that the property was acquired by the father of the assessee in the year 1945. Therefore, in view of the provisions of clause (iii) to the Explanation to section 48 of the Act, the indexed cost of acquisition is required to be computed by considering the cost of acquisition for the year beginning on the 1st day of April, 1981. In the light of the above discussion, it is amply clear that the view adopted by the Tribunal is in consonance with the above statutory provisions.

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• 2018 (1) TMI 1306
  Reopening of assessment - Held that:- The findings recorded by the Commissioner (Appeals) indicate that during the course of the original assessment, the Assessing Officer had examined the same issue in respect of which assessment is sought to be reopened and after hearing the assessee, had not made any addition. Under the circumstances, it is apparent that the Assessing Officer, at the relevant time, during the course of scrutiny assessment had formed an opinion in respect of the ground on which the assessment is sought to be reopened. The reopening of assessment, therefore, is clearly based upon a mere change of opinion, which is not permissible in law. Tribunal did not commit any error in upholding the order passed by the Commissioner (Appeals) in setting aside the reopening of the assessment.

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• 2018 (1) TMI 1305
  Depreciation claim of assessee trust - double deduction - Held that:- Supreme Court in Commissioner of Income Tax Vs. Rajasthan and Gujarati Charitable Foundation Poona [2017 (12) TMI 1067 - SUPREME COURT] has upheld the decision of this Court in Institute of Banking Personnel Selection [2003 (7) TMI 52 - BOMBAY High Court] and negatived the contention of the Revenue that by granting benefit of depreciation, the assessee would be availing double benefit for the period prior to Assessment Year 2015-16. - Decided in favour of assessee.

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• 2018 (1) TMI 1304
  Eligibility for deduction u/s 10A - income directly related to the export business of the assessee - Held that:- The assessee was liable to receive the benefit of deduction under Section 10A of the Income Tax Act. The Tribunal has recorded clear findings that no part of the income was used in the local area and that the jewellery made from the wastage was also exported ultimately. Such being the facts and circumstances of the case, we are of the view that the Tribunal has committed no error in granting the benefit of exemption under Section 10A of the Act to the assessee. We uphold the order of the Tribunal.

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• 2018 (1) TMI 1303
  Disallowing claim u/s 54F - the property on which the assessee claimed to have constructed house is owned by the mother of the assessee and not by the assessee - Held that:- As regards the property is owned by the mother of the assessee we are of the view that if the assessee has constructed a new on the plot of land which is owned by the mother of the assessee then, the investment made by the assessee in construction of new house is eligible for deduction u/s 54F. A residential house is not a personal effects but it is meant for residential purpose of the family. Therefore, the investment made by the assessee for purchase or construction of house even in the name of the mother is eligible for deduction u/s 54F as held in case of CIT vs. Kamal Wahal (2013 (1) TMI 401 - DELHI HIGH COURT). Thus merely because the new house is constructed on a plot of land owned by the mother of the assessee will not disentitle the assesee for claim of deduction u/s 54F Whether it is a construction of new house after demolition of the existing house or it is only a renovation work carried out by the assessee ? - Held that:- To ascertain whether the assessee has constructed a new house or only renovated the existing house a proper investigation and enquiry is required to be conducted by physical verification of the property as well as the experts opinion may also be taken in this respect because the alleged demolition and reconstruction is without any permission from the Municipal Corporation.In the absence of sanctioned site plan or completion certificate the evidence produce by the assessee cannot be considered as conclusive proof to establish the nature of construction carried out by the assessee at the property in question. According, in the facts and circumstances of the case, we set aside this issue to the record of the Assessing officer for proper verification and investigation - Decided partly in favour of assessee.

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• 2018 (1) TMI 1302
  Arm’s length price adjustment - applicability of transfer pricing provisions - termination of call options under the Framework Agreement 2007 - Held that:- The conditions precedent for invoking section 92B(1) are satisfied inasmuch as, with legally enforceable rights or not, foreign AEs, namely VIH-BV and HTIL-M are part of the arrangements and action in concert, and the transaction has a bearing on the profits of the assessee. The present transaction before us is that of not only termination of options, but also, as we have seen in our analysis earlier, transfer of the shareholdings in SMMS Investments to of an Indian subsidiary of VIH-BV at a fraction of its market worth, and this arrangement involves an agreement between not only between Indian entities but also foreign AEs of the assessee, i.e. HTIL-M and VIH-BV. It is really strange that an assessee, which makes these submissions before Hon’ble Bombay High Court, now contends that the arrangements for framework agreement donot involve the foreign AEs. The fact and evidence about the terms of arrangements of this transaction being decided, in substance, by the foreign AEs is something which is in exclusive knowledge domain of the assessee and its group entities and when the assessee decide not to share it and the circumstances are such that the terms of the transactions are established to not at all justified by the known commercial considerations of the assessee, the assessee cannot blame the revenue authorities for not brining on record the evidence of the terms of arrangement being decided by the foreign AE. In these peculiar facts, which are very unsusal facts by any standards, even in the absence of such an evidence, the terms of arrangements being decided by the foreign AE can be reasonably accepted. In view of these discussions, the arrangement, understanding and action in concert, with respect to framework agreement and termination thereof, is an international transaction under section 92B(2) as well. In other words, while foreign AE and parent company of the assessee is not only a party to the agreement but the terms of the agreement, in substance, are being decided by the foreign AE. The arguments of the assessee proceed on the basis that there is a need of clearly conclusive evidence to the effect that the assessee and the AEs has acted in concert, but, as is the well settled legal position- discussed earlier in this order, it is not required to be established, with conclusive evidence, that the assessee and the foreign AE has acted in concert; all that is necessary is that the circumstances are such that human experience tells us that it can safely be taken that they must be acting together. In view of these discussions, as also bearing in mind entirety of the case, we see no legally sustainable merits in the aforesaid stand of the assessee. Even if a transaction does not report or show any income but application of arm’s length prices are to result in an income, the conditions of Section 92(1) will be satisfied. Learned counsel, however, is interpreting the press release as a statute and is seeking a literal implementation of the words in the press release. Such a pedantic and literalistic approach cannot meet our approval. The words used in the press release are not the words of the statute; these are the words of the laymen which are required to be given contextual meaning. In any case, we are unable to read the press release as implying that when there is no income chargeable to tax is reported, the arm’s length standards can not be applied. As long as an income, within the meanings of section 2(24), can arise from an international transaction, the arm’s length standards are to be applied in computation of an income. We, therefore, see no legally sustainable merits in this plea as well. Capital asset - right to nominate an assignee under framework options - Held that:- The right to nominate an assignee under framework options meets the tests laid down in Explanation to Section 2(14).6. In case we are to accept the contentions of the learned counsel, Explanation to Section 2(14) will have to be treated as otiose because if the an asset meets the description of ‘property’ without taking into the impact of Explanation to Section 2(14), there is obviously no need to look at the Explanation. In our humble understanding, Explanation to Section 2(14) should be read as enlarging the scope of expression ‘property’ in the main definition clause, and, when such is the position, whether or not the asset in question is a ‘property’ as per meanings in main provision of Section 2(14), as long as it meets the test laid down in Explanation to Section 2(14), it is to be treated as a ‘Capital Asset’ nevertheless. Thus the right to nominate the assignee of the option rights, which was exercised by the assessee during the relevant previous year, was a capital asset. Whether there was any transfer of capital asset in the relevant previous year? - Held that:- As the assessee had exercised the right of nomination, which could have been done only once, the right of nomination came to end, and was thus, in terms of Explanation 2 to Section 2(47), this was covered by the definition of ‘transfer’. Whether, even if there is a capital asset and it was transferred, such a capital asset had any cost of acquisition? - Held that:- Cost of acquisition in this case is clearly identifiable and, therefore, the provisions for computations of capital gain are workable. The law laid down by Hon’ble Supreme Court in the case of B C Srinivas Shetty (1981 (2) TMI 1 - SUPREME Court) does not come to the rescue of the assessee. Whether there is no consideration for the transfer and, for this reason, the computation of capital gains in not possible? - Held that:- while the income is question is indeed of the nature which can may, in certain circumstances, can be taxable under the head ‘profits and gains from business and profession’, given the facts and circumstances of the present case, it is required to be taxed as capital gains. Error in attributing 3.15% stake of SMMS indirectly held in VIL, through Omega, overlooking that CGP held 79.98% stake in SMMS, through TII, and, as a corollary held 2.52% in VIL, through TII via SMMS/Omega, with the balance controlled by Analjit Singh Group, which again, in an error that DRP failed to rectify - Held that:- The question that is relevant for finding out the ALP of consideration is as to what is really transferred, and undisputedly that is 100% equity shares in SMMS Investment which entitles the assignee to control 3.15% shareholding in VEL. What the assignee actually does with what he gets does not affect the consideration. In any event, sufficient specific details and complete facts were not placed on record at any stage, and even before us. In the absence of specific details in support of this plea and in view of the fact that the nomination was in respect of entire equity in SMMS Investments, we reject this plea as well. Accepting the assignment of cashless options to Vodafone as a comparable case since this event took place more than three years ago, and, since, going by the stand of the revenue, it was an intra AE transaction anyway - Held that:- how liberal an adjustment is made for indirect holding, in any event, the ALP of nomination to buy the entire equity of SMMS Investments, which held 3.15% shareholding in VEL, for a consideration of 2 crores plus interest, this ALP will be far more than 1,588.85 crores. Since this Tribunal has no powers of enhancement, even if we discard the comparable as adopted (i.e. assignment of rights by IDFC to acquires 0.1234% shareholding in VEL for 50 crores), the assessee does not derive any advantage. The plea raised by the assessee is thus wholly academic and does not deserve any adjudication by us at this stage. As for issues raised by the learned counsel with respect to dissimilarities between the nomination rights exercised by the assessee and the transactions compared with, all we can say is that even if the comparable transaction is not a mirror image of the international transaction in question, it does not cease to be relevant in determination of ALP as long as, in substance, and in effect, things are comparable- though, depending upon the facts of the case, adjustments will be justified. - Decided against assessee Denying depreciation on goodwill on account of its amortization - Held that:- Goodwill in question forms an intangible asset u/s.32(1)(ii) of the Act or not to be entitled for depreciation relief is no more res integra as hon’ble apex court’s land mark judgment in Smiffs Securities Ltd. case [2012 (8) TMI 713 - SUPREME COURT]. We see no substance in the instant argument since there is no change so far as all facts pertinent to this issue vis-a-vis those involved in preceding assessment years are concerned. The authorities below have already adopted the very reasoning as in said earlier years to reject assessee’s instant claim. It is not clear as to what is the fate of these assessment years before this Tribunal. Learned counsel at this stage submits that assessee’s appeal for the said earlier assessment year 2011-12 is pending but the position of the earlier years is not clear. In any event, there is no independent adjudication on this issue by the Assessing Officer. In view of these discussions, in our considered view, the matter is required to be remitted to the file of the Assessing Officer for adjudication de novo Invoking Section 14A r.w. Rule 8D disallowance - Held that:- The lower authorities fail to dispel assessee’s basic plea of having not derived any exempt income in the impugned assessment year. Hon’ble jurisdictional high court’s recent judgment in CIT Vs Corrtech Energy (P) Ltd. [2014 (3) TMI 856 - GUJARAT HIGH COURT] holds that such a disallowance under section 14(A) is not sustainable in absence of any exempt income having been derived in the relevant previous year Disallowing club membership expenditure - Held that:- We find from assessment order that the assessee itself had clarified to have paid subscription fee regarding Puna Club for seven years in the nature of entrance fee etc. This has made the Assessing Officer to accept its case qua the corresponding 1/7th extent coming to 3,97,080/- only thereby disallowing the remaining amount of 23,82,480/-. Learned counsel fails to dispute that the assessee had not filed the relevant details qua a similar time duration relating to latter Karnavati Club. We therefore reject assessee’s arguments qua former club payment issue after concluding that the authorities below have rightly followed matching concept in accepting the impugned expenditure pertaining to the relevant assessment year. Coming to latter club, we direct the AO to verify the relevant facts as to whether the impugned membership expenditure has been incurred for the relevant previous year in entirety or not

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• 2018 (1) TMI 1301
  Brought forward business loss to be set off with the income of current year - power of the Income Tax Appellate Tribunal u/s 254 - Held that:- As from the assessment order for the assessment year 2009-10 framed in the hands of the assessee u/s 143(3) of the Act dated 22.12.2011 wherein the Ld. AO categorically had mentioned the business loss as being eligible to be carried forward for future adjustment. Hence, it is very clear that the assessee has got assessed business loss of assessment year 2009-10 which is eligible to be set off against future business income in accordance with provision of section 72 of the Act. Even though the assessee has not made this claim either in its original return of income or in the revised return of income, it is incumbent on the part of the Ld. CIT(A) to direct the Ld. AO to consider the legitimate claim of set off of brought forward business loss so as to determine the true and correct income of the assessee. The appellate authority could entertain fresh claim made by the assessee even though the same had not been made by way of a valid return. Accordingly, we hold that the Ld. CIT(A) ought to have considered the legitimate claim of set off of brought forward loss of assessment year 2009-10

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• 2018 (1) TMI 1300
  Reopening of assessment - treating the LTCG as bogus - Held that:- As we have already seen that the assessment was reopened for the reason that the jewellery purchased by the Assessee was from undisclosed sources and the purchases were bogus. That addition has not been sustained now. The Assessing Officer however, proceeded to make an addition on account of Long Term Capital Gain (LTCG) on sale of shares. This was clearly beyond the scope of the proceedings under section 148 of the Act. The Assessing Officer, therefore, could not have proceeded to make the impugned addition of bogus LTCG. See CIT vs. Jet Airways India Ltd [2010 (4) TMI 431 - HIGH COURT OF BOMBAY]

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• 2018 (1) TMI 1299
  Addition u/s. 14A r.w.r. 8D - Held that:- We find that while invoking the provisions of Rule 8D(2)(iii)the AO had not considered the details of the expenses, that he had not established nexus between the exempt income and the expenditure incurred for earning the said income. After considering the details of Schedule 19, we are of the opinion that the expenditure incurred by the assessee during the year was not related to earning of tax free income. Provisions of section 14A can be invoked only when some expenditure is claimed against the exempt income. As in the case under consideration the AO /FAA had not specified the items of expensed incurred for earning exempt income, so, we are able to persuade ourselves to endorse the views of the FAA - Decided in favour of assessee.

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• 2018 (1) TMI 1298
  Remission of principal amount of loan obtained from financial institutions and banks - whether constitutes a benefit or perquisite arising from business and would fall within the ambit of Section 28(iv)? - Held that:- Even otherwise the loan which was taken was capital investment and always treated in the capital account as liability and if it is so, it will naturally go as wiping out the capital liability. See Modern Denim Limited Vs. Asstt. Commissioner of IT Jaipur [2017 (4) TMI 1287 - RAJASTHAN HIGH COURT] In that view of the matter, the contention taken by the appellant is required to be accepted. The view taken by the CIT(A) is required to be restored and that of the tribunal is required to be reversed.In view of the above, the issue is answered in favour of the assessee and against the department.

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• 2018 (1) TMI 1297
  Addition treating income of the assessee received from Vodafone Essar South Ltd. - Held that:- The full address of the retailers had been furnished before the AO. In the given circumstances we are of the view that there was no basis for the CIT(A) to conclude that the assessee has not explained as to how the sum in question is payable to the retainers. It is clear from material on record that the sum as reflected in the TDS certificate given by Vodafone was not the assessee’s income or money on which the assessee had any title except to the extent of 94,381/- which was reimbursement of van charges. The sum reflected in the TDS certificate cannot therefore be treated as assessee’s income. The fact that the money payable to the retailers and runners is outstanding in the balance sheet cannot be a ground to hold that the sum reflected in the TDS certificate is income of the assessee. On the question of credit for TDS the assessee has reflected a sum of 94,381/- in the total income declared for the relevant assessment year and to this extent is entitled to credit. As far as the remaining sum is concerned since the sum in question is not the income of the assessee and further it has not been offered to tax in the relevant assessment year the assessee cannot claim credit for TDS. To this extent the action of the revenue authorities have to be held as proper. Therefore delete the addition

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• 2018 (1) TMI 1296
  Disallowance u/s. 43B(d) on account of payment to LIC - Held that:- We find that the Tribunal had directed the assessee to file details of interest payment to decide the issue. But till the passing of this order, the assessee has not filed any detail that could prove that the stand taken by the AO was factually incorrect. We do not know how the FAA arrived at the conclusion, that the payment made by the assessee under the head interest expenditure was relatable to loans and not about the restructured loans. We agree with the argument of DR that the order of the FAA was non-speaking and very cryptic. We are unaware of the reasons as to why the assessee did not file details of interest payments to prove his case. Therefore, in our opinion the matter should be investigated and verified further.

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• 2018 (1) TMI 1295
  Revision u/s 263 - Correctness in passing the order under section 143(3)- assessee not deducted TDS u/s 194A on the payments made to the eight payees on account of filing of Forms No. 15G/15H before the ld. Pr. Commissioner on 07/04/2012 - Held that:- Once, assessee has filed Forms No. 15H/15G from the payees before the Pr.Commissioner and the Assessing Officer by considering the same, assessment is completed, therefore, in our opinion, the order passed by AO is neither erroneous nor prejudicial to the interest of the revenue. It is not a fit case to exercise powers under section 263 of the Act. - Decided in favour of assessee.

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• 2018 (1) TMI 1294
  Penalty u/s 271D - violation of conditions of section 269SS - taking unsecured loan in cash - Held that:- As rightly observed by the CIT(A), that during the appellate proceedings, the assessee filed copies of the drafts by which the payments were made. These drafts were available with the Assessing Officer and Additional Commissioner, the total amount paid through draft was at 26 lakhs. Regarding the balance amount of 3 lakhs, the assessee had shown them to be payments through two cheques with Nos. 390102 drawn against lndian Overseas bank for 1. 50 lakh and 390102 drawn on lndian Overseas Bank for an amount of 1. 50 lakh both dated 1. 6. 2006 in the name of Khairun Begum and Narmada Devi respectively. As regards, the other cheques payments, the assessee produced the relevant bank accounts. We find that there is nothing on record to show that any cash payments were actually made by any of the payers. The assessee has also filed the sale deeds in which the names of the sellers have been reflected. These transactions relate to before incorporation of the assessee company therefore the assessee company is not liable based on the factual position narrated above. There does not seem to be any reason for invoking the provisions of section 269SS either on the fact of the mode of such conveyance or on the legality of holding the assessee company responsible for acts committed before its incorporation. We quash the penalty order u/s 271D - Decided in favour of assessee.

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• 2018 (1) TMI 1293
  Disallowance u/s 40(a)(ia) - non deduction of tds on interest paid to Non–Banking Financial Companies (NBFC) towards loans availed from them - Held that:- A careful reading of the second proviso to Section 40(a)(ia) would make it clear that it will apply if the assessee is not deemed to be an assessee in default in terms of first proviso of section 201(1) of the Act. As per the conditions of Section 201(1) of the Act, the onus is on the assessee to demonstrate through documentary evidence that the recipients have offered the amount paid to them, without deducting tax at source, as income in the return of income filed for the relevant assessment year. Since the aforesaid claim of the assessee requires factual verification and the assessee has to bring proper evidence on record to prove its claim, we restore the issue to the file of the Assessing Officer for fresh adjudication after due opportunity of being heard to the assessee. In case assessee’s claim that the recipients have offered the interest paid to them as income in the relevant assessment year is found to be correct, no disallowance under section.40(a)(ia) should be made. With the aforesaid observations, the ground is allowed for statistical purposes. Addition on account of bogus purchases - quantum of disallowance to be made out of bogus purchases - Held that:- It is a fact that the assessee is engaged in the business of builder and developer (Civil Construction Work). Therefore, it cannot be expected to earn profit of 20%. Further, in similar types of cases, the tribunal is consistently upholding disallowance at 12.5% of the alleged bogus purchase. In tune with the aforesaid consistent view of the Tribunal, we restrict the disallowance to 12.5% of the alleged bogus purchases.

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• 2018 (1) TMI 1292
  Penalty u/s 271A - violation of provisions of section 44AA - non-maintenance of books of accounts - Held that:- Assessee has clearly violated the provisions of section 44AA when the turnover of the assessee is exceeding minimum limit provided under the said provisions. Though the total income of the assessee was assessed by the AO as per the transaction recorded in the bank account however, the bank account of the assessee cannot be accepted or regarded as books of accounts and therefore, the bank account will not substitute the books of accounts to be maintained by the assessee. It is a clear case of non compliance of the provisions of section 44AA of the Act. Therefore, in the absence of bonafide explanation the penalty levied u/s 271A is justified - Decided against assessee.

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• 2018 (1) TMI 1291
  Disallowance made u/s 40a(ia) - short deduction of tax at source - CIT-A restricted the addition - Held that:- It is not in dispute that the sum of 11,86,890/- represents amounts of expenditures for which short deduction of tax at source has been made by the assessee. It is well settled by the Hon’ble Jurisdictional High Court in the case of CIT vs. S.K. Tekriwal [2012 (12) TMI 873 - CALCUTTA HIGH COURT] wherein it has been held that disallowance u/s 40a(ia) of the Act cannot be invoked in respect of short deduction of tax at source. Hence, respectfully following the said decision we hold that no disallowance u/s 40a(ia) could not be made Disallowance of bad debts - Held that:- We find lot of force in the argument of the Ld. AR that these balances were reflected under the head sundry debtors in the balance sheet of the assessee and from the very fact that the same are shown under sundry debtors itself goes to prove that they had emanated out of sales of the assessee and hence, the income relatable thereon in the form of sales and services had been duly offered to tax in the earlier years in accordance with Section 36(2) of the Act. Respectfully following the decision of the Hon’ble Supreme Court in the case of TRF Limited (2010 (2) TMI 211 - SUPREME COURT) and in view of the fact that the assessee had duly written off this trade debts by crediting the concerned sundry debtors accounts in its books of accounts, we direct the Ld. AO to delete the disallowance made towards bad debts. Addition made on account of sundry creditors - Held that:- This is a case wherein the other party M/s Anvil Cables Pvt. Ltd. having made sales to the assessee and having sent all the requisite documents through bank pursuant to L/C limits, had not recorded the sales in its books of accounts. Instead of passing on of this information to the Ld. AO of the supplier M/s Anvil Cables Pvt. Ltd for necessary action to be taken in accordance to law in the hands of the said supplier, the Ld.AO of the assessee had accepted the statement of account of that supplier as sacrosanct and proceeded to make addition in the hands of the assessee by disbelieving the reconciliation statement and explanation given by the assessee. Hence, in these circumstances, we have no hesitation in directing the Ld. AO to delete the addition made on account of sundry creditors. Non-granting of rebate of tax paid u/s 90/91 - Held that:- CIT(A) had not adjudicated this ground at all in his order even though, this ground is also reproduced in his order. Hence, we deem it fit and appropriate to remand this issue to the file of the Ld. Ld. CIT(A) for adjudication of the same on merits and based on the evidences filed by the assessee and dispose off this ground in accordance with law. Accordingly, ground raised by the assessee is allowed for statistical purposes.

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• 2018 (1) TMI 1290
  Disallowance of bogus purchases - estimation of profit - Held that:- Ld. Commissioner of Income Tax (Appeal) has not mentioned any reasoning to restrict the disallowance. Even if, the benefit of already declared GP of 2.46% is granted to the assessee still there is no infirmity in the assessment order in making the disallowance at 10% of the bogus purchases, therefore, considering the factual matrix and the decisions mentioned in earlier paras of this order, we reverse the order of the Ld. Commissioner of Income Tax (Appeal) and affirmed the disallowance made by the Ld. Assessing Officer. Thus, this ground of the Revenue is allowed. Addition u/s 68 - genuineness and authenticity of the transaction besides the identity and creditworthiness of the said party - Held that:- Assessee was maintaining two ledger accounts with Tube India one for purchase and other for receipt of payments. It is seen from the closing balance of 24,133/- that after accounting the purchases during the year again the payments were made and there is one more ledger account which shows receipt of 78,60,000/-, the total of which comes to 78,84,133/-, which is the exact figure appearing as sundry creditor in the balance-sheet. The assessee also produced the confirmation from Tube India before the Assessing Officer, therefore, we are in agreement with the finding of the Ld. Commissioner of Income Tax (Appeal) that the addition was not justifiably made. So far as, the identity of M/s Tube India is concerned, which is not in doubt and it is not an unknown party. - Decided against revenue

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• 2018 (1) TMI 1289
  Non recognition of assessee as an “assessee” under the Income Tax Act - bogus entity or not - main grievance of the assessee is that the assessee is a NBFC - doctrine of consistency - Held that:- From a perusal of the above chart it is evident that the AO has accepted the return of income filed by the assessee A.Y.2011-12 to A.Y.2016-17; and that assessee even received refund of 10,22,110/- for A.Y.2014-15 and 75,92,120/- for A.Y.2016-17.We find force in the said arguments of the ld. AR, when the fact remains same, unless the facts and law applicable in this relevant A.Y. is different, the AO’s action for earlier years and subsequent years must be the same in line with the doctrine of consistency. Since in the earlier assessment years and subsequent assessment year the assessee’s return of income has been accepted and even “refunds” have been allowed, treating the assessee an NBFC company as bogus need to be supported by material/evidence which the AO has not spelt out. The ld. CIT(A) has categorically held that there is no material on the basis of which it can be concluded that the assessee is fake and bogus. In the light of such a finding of ld. CIT(A), and the subsequent action of the AO accepting the return of income of the assessee up to A.Y.2016-17 and in the light of Rule of consistency we therefore are inclined to set aside the order of ld. CIT(A) and remand the matter back to the file of the AO for denovo adjudication. - Decided in favour of revenue for statistical purposes

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• 2018 (1) TMI 1288
  Sale of immovable property as Short Term Capital Gain (STCG) instead of Long Term Capital Gain (LTCG) - period of holding - Held that:- CIT(A) was right in disregarding the effect of such discredited possession letter. Thus, the period of holding, in our view, cannot be reckoned either from the date of allotment letter or the date of purported possession as claimed In the similar vain, we do not find any merit in the plea of the assessee for affirmation of possession having regard to rental income shown to be generated on such property. The property was under construction and thus not habitable. Rent was claimed to be received in cash from an unidentifiable user. The entire action of the assessee defies legitimacy of any sort and is clearly devoid of any strength whatsoever. Thus, the period of holding of the asset/property cannot be reckoned from the date of allotment letter or possession letter as claimed. In this view of the matter, we decline to interfere with the conclusion of the CIT(A) that the asset under sale was short term capital asset and consequently profit is liable to be taxed as Short Term Capital Gains only. Unexplained cash credit - Held that:- The whole narrative of receipt of disproportionate cash of such large amount out of the estate of late brother is highly improbable and a sad spectacle of a make believe story devoid of any credence. The cross-examination of legal heirs or otherwise is inconsequential for understanding the legal effect of a void in the absence of WILL or other tangible document. Incidentally, it is also not known as to when the socalled cash was given to the assessee and by whom and before its transfer, it was lying in whose custody. The facts towards credits are not clear at all. Circumstances do not stand to reasons and indicates otherwise to take the transaction out of ambit of section 68. The hawkish narrative given by the assessee was rightly denounced by the revenue authorities. In the absence of any documentary evidences and in view of totally improbable and unsubstantiated circumstances, we are unable to affirmatively appreciate the stand of the assessee on this score. Therefore, we decline to interfere with the orders of the authorities below

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• 2018 (1) TMI 1287
  Disallowance u/s 14A r/w rule 8D - specific plea of the assessee is that the assessee has not earned any exempt income - Held that:- On careful reading of the assessment order as well as first appellate authority’s order, we are of the view that disallowance under section 14A r/w rule 8D has been made fundamentally on the basis that the assessee has made investment in shares of companies which would give rise to exempt income. There is nothing in the order of the Departmental Authorities to suggest that in the relevant previous year, the assessee had earned any exempt income. Therefore, prima–facie, the assessee’s claim that it has not earned any exempt income in the relevant previous year appears to be correct. - Decided in favour of assessee Addition made on account of alleged bogus purchase - addition relying upon the information obtained from the Sales Tax Department - Held that:- AO has not made any independent enquiry or investigation to find out the existence of the concerned parties or the genuineness of purchases. It is also a fact on record that the Assessing Officer has not doubted the sales effected by the assessee in the relevant previous year. Moreover, on identical facts and circumstances, addition made on account of bogus purchase in assessee’s own case for assessment year 2011–12 was reduced to 12.5% of the bogus purchase. Respectfully following the same, we direct AO to disallow 12.5% of the alleged bogus purchase Disallowance of deduction claimed on account of payment made towards employee’s contribution to PF/ESIC - Held that:- As could be seen from the facts on record, employee’s contribution to PF/ESIC were paid by the assessee much before the due date of filing of return of income as provided under section 139(1) of the Act. That being the case, as per ratio laid down by the Hon'ble Jurisdictional High Court in CIT v/s Hindustan Chemicals Organics Ltd.(2014 (7) TMI 477 - BOMBAY HIGH COURT), no disallowance can be made keeping in view the amendment brought to section 43B

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• 2018 (1) TMI 1286
  Validity of order u/s 263 - addition towards undisclosed sales - Held that:- We find that assessee has supplied detailed information to the assessing authority relating to issue of stock difference given to bank vis-à-vis books of account. After considering this detailed reply of the assessee dated 26/11/2009 the AO has framed the assessment order on 16/12/2009 and completed the assessment proceedings after making addition towards undisclosed sales. Therefore, are satisfied to the extent that against the specific query raised by the Assessing Officer relating to stock statement given to bank and after going through this reply, assessment has been completed taking one of the possible views thereby accepting that assessee had a bonafide reason for such difference of value of stock within the range of 10%. It has been consistently held in various judgments that it is not mandatory for the Assessing Authority to mention each and every information recorded or details received during the course of assessment proceedings in the body of assessment order. This even applies in the instant appeal also where even though details were specifically filed replying to the Assessing Officer’s query, it did not find any mention in the body of the order because of the satisfaction of the Assessing Authority on the issue. The assessment order passed u/s 143(3) of the Act dated 16/12/2009 is neither erroneous nor prejudicial to the interest of Revenue and therefore, CIT erred in passing order u/s 263 - Decided in favour of assessee.

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• 2018 (1) TMI 1285
  Apportioning the cost of construction equally in all assessment years and treated the same as unexplained investment - Held that:- A.R was unable to place any evidence to show the relevant cost of construction incurred by the assessee in respective assessment years so as to determine the unexplained investment towards cost of construction in proportion to the cost of construction incurred by the assessee in relevant to assessment years. Being so, we are not in a position to give any direction to the AO on the basis of argument of assessee’s counsel. In view of lack of evidence on the cost of construction incurred by the assessee in each assessment year, this ground raised in all the assessment years stands dismissed. Interest u/s.234B - whether interest charged from the first day of assessment year till the completion of original assessment i.e 31.12.2009 and not the till the date of order passed u/s.143(3) r.w.s.147 of the Act r.w.s.263 of the Act i.e.20.03.2013? - Held that:- In our opinion, the assessee’s case falls under purview of Sec.234B(1) r.w.s.234B(4) only and not u/s.234B(3) and it would be even encountered that no interest is chargeable for that portion of the income forming part of the total income as determined by the ld.CIT in his order u/s.263, which was not earlier part of the income determined by the ld. Assessing Officer. The interest charged in terms of Sec.234B become payable on the income already disclosed in the return filed, together with the income determined by the AO in consequent to the order passed u/s.263 of the Act. The concerned interest shall be on the consolidated amount of income i.e. both determined in re-assessment order and income determined in consequent to revisional order passed u/s.263, when the reassessment order was subject to revision u/s.263 of the Act. Accordingly, we hold that the interest u/s.234B of the Act to be charged in these cases from the first day of each assessment year to relevant to assessment year till the date of the completion of assessment made i.e. 20.03.2013 and not to the date, the reassessment order was passed i.e.31.12.2009. - Decided against assessee.

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• 2018 (1) TMI 1284
  Reopening of assessment - eligible reasons to believe - allowability of deduction on account of diminishing in value of investments - Held that:- While concluding the original assessment proceedings the AO raised queries on issues which were recorded by the AO in the reasons for initiation of re-assessment proceedings. The AO while completing the original assessment proceedings did not make any reference or give any reasons for accepting the answer of the assessee to the issue but did not make any addition. In the given circumstances the AO may be held to have applied his mind on this issue and thereafter allowed the claim of the assessee. It cannot therefore be said in the present case that the AO while completing the original assessment did not consider the issue with regard to the allowability of deduction on account of diminishing in value of investments. The arguments of the ld. DR in this regard is therefore not accepted. The conditions to be satisfied for validity of reassessment proceedings by the first proviso to section 147 of the Act are not satisfied in the present case. In conclusion we hold that there is no merit in this appeal by the revenue and the order of CIT(A) does not suffer from infirmity. Order of CIT(A) is therefore confirmed and the appeal of the revenue is dismissed.

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• Customs

• 2018 (1) TMI 1283
  Stay of recovery of redemption fine - maintainability of petition - Held that: - We do not think that we should engage ourself in such a controversy for now there is a pronouncement of a Division Bench of this court that the miscellaneous application filed by the petitioner before the tribunal could not have been dismissed on the ground of maintainability - the miscellaneous application restored to the tribunal's file for being decided afresh and in accordance with law - petition disposed off.

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• 2018 (1) TMI 1282
  Smuggling - Betel Nuts - notified goods u/s 11A(d) of the Customs Act, 1962 - Held that: - On this very aspect of the matter irrespective of the alternative remedy available for filing appeal, this court has entertained several writ petitions as ex facie the Customs Authorities have no power to seize betel-nuts - we do not consider it proper to relegate the petitioner to the remedy of appeal and call upon the respondents to file counter-affidavit within a period of one month. An interim mandamus is issued to the respondents to release the seized goods of the petitioner on furnishing security other than cash and bank guarantee in respect of the total amount of the value of the goods and the penalty imposed if any - decided partly in favor of petitioner.

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• 2018 (1) TMI 1281
  Permission for interrogation u/s 108 of the Customs Act, 1962 in the presence of his Advocate - Held that: - similar issue decided in the case of Vijay Sajnani & Anr. Versus Union of India & Anr. [2012 (4) TMI 706 - SUPREME COURT OF INDIA], where it is directed that the petitioners' advocate should be allowed to be present during the interrogation of the petitioners. He/they should be made to sit at a distance beyond hearing range, but within visible distance and the lawyer must be prepared to be present whenever the petitioners are called upon to attend such interrogation. The respondent is directed that as and when the petitioner is called upon under Section 108 of the Customs Act, 1962 by the Customs Authorities, he shall be interrogated in the presence of his Advocate who shall be available at a visible distance but beyond the hearing range - petition allowed.

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• 2018 (1) TMI 1280
  Time Limitation - Whether when the Commissioner disagrees with the enquiry report which is in favor of the broker, does the time limit of 90 days from the date of such report for passing a final order under the Regulation 20(7) of CBLR, apply? Held that: - Regulation 20(7) of the CBLR does not make any distinction between an enquiry report in favour of a broker and that which is against him. In either event, a copy of the report is to be made available to him. If it is adverse to the broker, he can make a representation - The impugned order is against the broker. If the report also had been against the broker, then such consequential order cancelling the license would again have to be passed under Regulation 20(7) - the Commissioner should have adhered to the 90 days’ limit as specified in Regulation 20(7) of the CBLR. Appeal dismissed - decided against appellant.

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• 2018 (1) TMI 1279
  Classification of imported goods - Electrical Multiple Unit (EMU) consisting of 2 EL S-PR RAILWAY COACH-DMC (Locomotive) (Drive motors cars DMC) and 1 EL S-PR RAILWAY COACH TC (Locomotive) (Trailer cars-TC) - Revenue held a view that these TCs are not self-propelled railway or tramway coaches and they are more appropriately to be classified under CTH 8605 0000 as railway or passenger coaches not self-propelled - whether TCs can at all be to put into operation without integrating with DMCs? Held that: - Admittedly, there is no dispute that EMU is a set of DMCs and TCs and whole propulsion of EMU is integrated with different components located in DMCs as well as TCs. The TC contains pantograph, transformers which are essential to draw power from overhead lines and convert the same to required capacity for use in the motors situated in DMCs - It is clear that the very same goods were examined by the Committee which gave a categorical ruling that EMUs are treated together and are to be classified under CTH 86.03. In fact, it is recorded that the T-cars could not be treated separately. Similar view has been taken by the US Customs authorities in advance ruling referred above. TCs as well as DMCs which are integrally forming part to make a functional EMU are to be treated together for the purpose of classification assessment. The concession available, extended by the Revenue to DMCs are to be extended to the EMUs as EMU is an integrated unit consisting DMUs and TCs. Neither DMC nor TC can be self-propelled on their own. Appeal allowed.

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• 2018 (1) TMI 1278
  Refund of SAD - N/N. 102/2007-Cus. dated 14.9.2007 - denial on the ground that whereas the goods stand described in the Bills of Entry as various types of plastic granules such as LLDPE, HDPE, polypropylene, PVC of various grades, the same stand described in the sales invoice as plastic granules only - Held that: - it is not Revenue’s case that the goods imported by the appellant were not ultimately sold and VAT was not paid by the appellant. In the absence of any evidence to that effect, denial of refund on the basis of minor differences in the description cannot be adopted for holding against the assessee - Appeal allowed - decided in favor of appellant.

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• Service Tax

• 2018 (1) TMI 1276
  Penalty - Renting of immovable property service - non-payment of service tax - intent to evade duty - Held that: - Assessee had paid service tax of 23,34,424/-, and total interest paid was 9.95,980/-, which means, major portion of the service tax has already been paid, even before the introduction of the Finance Act. Therefore, it cannot be said that there was any intention on the part of the respondent/assessee to evade payment of service tax - penalty rightly set aside - appeal dismissed - decided against Revenue.

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• 2018 (1) TMI 1275
  Extended period of Limitation - Section 73 of the FA 1994 - Held that: - the findings is sufficient enough to demonstrate that the ratio of Nizam’s case [2006 (4) TMI 127 - SUPREME COURT OF INDIA] has been applied apparently without appreciating the relevance of that decision to the facts of the case in hand. Decided in favor of Revenue.

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• 2018 (1) TMI 1274
  Renting of Immovable Property Services - Revenue felt that the appellants are providing Club or Association services for the period before 01.07.2012 and was not covered under the term public library for the period after 01.07.2012 - whether the activity engaged by the appellants falls in the category of club or association service during the period upto 31.06.2012 and whether the activities is classifiable as taxable service w.e.f 01.07.2012? Held that: - Admittedly, The Browser is open to general public and accessible to all, who pay subscription amount. Further, the fact that it has no reading room or no newspaper or periodicals does not take away from the fact that public at large has right to though it is regulated by way of the prescribed fees - the library being run by the appellants is in the nature of a public library. The activity of lending and return of books is the fee based activity for which they charge subscription fees. The services are being provided not to the share holders of the company but to third parties. As per the definition under Section 65(25)(a) club or association is a body of persons which provides services to its members. Subsequently, w.e.f. .01.05.2011, the definition was changed and Section 65(25)(a) was replaced by Section 65(25)(aa) to add the word Primarily to its members. The services in question are being provided not to its share holders, who are the members of the company but to other persons who are third parties - for the period after 01.05.2011 upto 30.06.2012, the show cause notice has not made any allegation invoking Rule 65(25)(aa), which had come into effect after that date - For the period after 01.07.2012, in the negative list of services on which service tax is exempted, the services of public libraries are exempted under N/N. 25/2012-ST dated 20.06.2012. Appeal allowed - decided in favor of appellant.

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• 2018 (1) TMI 1273
  Rectification of mistake - time limitation - maintainability of appeal - Held that: - It is correct that Section 74 prescribes two years time for filing rectification of mistake - Taking into consideration that the appeal has been filed within the prescribed period, after rejection of the ROM application, the appeal is not time-barred. The statute provides for filing such an application for rectification of mistake. Therefore, Commissioner (Appeals) ought to have considered the appeal to have been filed within the time. The rejection of the appeal on the ground of time-bar is unjustified - matter is remanded to the Commissioner (Appeals) who is directed to consider the appeal on merits - appeal allowed by way of remand.

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• 2018 (1) TMI 1272
  Penalty u/s 78 - tax paid before issuance of SCN - suppression of facts - Held that: - it is brought out that respondents have paid the service tax before issue of SCN - also, it is recorded by the Commissioner (Appeals) that the services would not attract levy of tax. In such circumstances, the respondents cannot be held guilty of suppression of facts so as to impose penalty u/s 78 - appeal dismissed.

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• 2018 (1) TMI 1271
  Penalty u/s 78 - Interior decorator services - non-payment of service tax - suppression of facts - extended period of limitation - Held that: - the department has not been able to establish any positive act on the part of the appellant to establish willful suppression of facts - Further, the appellant has paid substantial amount of service tax prior to issuance of SCN - penalty u/s 78 set aside - demand of tax with interest upheld - appeal allowed in part.

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• 2018 (1) TMI 1270
  Rectification of error - The matter was heard by Tribunal in the absence of the appellant / counsel and ex-parte order was passed - also, it was pointed that the appellant has paid the disputed amount of service tax after issuance of Show Cause Notice which is factually wrong - Held that: - the appellant had filed an intimation seeking adjournment dt. 22.11.2016. The appeal was taken up for hearing on 29.11.2016 and ex-parte order was passed. It appears that the intimation was not placed before the Bench - The Order-in-Original reflects that disputed amount of service tax has been paid by the appellant much before the issuance of SCN and the same has been appropriated by the adjudicating authority - there is an error apparent on the face of record which needs to be rectified - ROA application allowed.

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• Central Excise

• 2018 (1) TMI 1315
  Valuation - whether certain software separately supplied, to be loaded in the computer of the customer, who procured the electronic circuit and safety equipment from the appellants? - Held that: - the lower authorities have inter-mixed the embedded software with the customized software supplied latter for monitoring and data retrieval from the device - it is clear that a devise should suffer Central Excise duty along with essential operating software which is part and parcel of the same. However, the software which is supplied separately for loading in the computer of the client linked to the devise for retrieval and monitoring of data cannot be considered as part and parcel of he said access control device. Appeal allowed.

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• 2018 (1) TMI 1314
  Clandestine removal - case of the Revenue is that the appellant has manufactured electric wires and cables and cleared the same clandestinely during the period 2008-09 to 2011-12 (upto 08.08.2011) without payment of Central Excise duty - Held that: - in the light of the evidences placed on record by the Revenue in the form of documents as well as various inculpatory statements, the allegation that the appellant has procured raw materials, manufactured wires and cables and cleared the same clandestinely without payment of duty stands established - the demand of duty as well as the penalties imposed in the impugned order is upheld - appeal dismissed - decided against appellant.

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• 2018 (1) TMI 1269
  Penalty - suppression of facts - Rule 15(2) of the Cenvat Credit Rules, 2004 - Held that: - Once the finding was that the short payment was for reasons of fraud, collusion or any mis-statement or suppression of facts particularly suppression which is apparent in this case then the Tribunal did not allow the appellant to canvass an argument that Rule 15(2) of the CCR 2004 is inapplicable. We see no perversity or error of law apparent on the face of the record in the reasoning of the Tribunal - imposition of equivalent or commensurate penalty cannot be said to be illegal or perverse - appeal dismissed.

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• 2018 (1) TMI 1268
  Maintainability of appeal - rectification of mistake application - Whether respondent no. 2 i.e. the tribunal has erred in rejecting the appeal at the stage of final disposal of appeal without taking into consideration the fact that the appeal has already been admitted after compliance of part payment of duty amounting to 25,544/- as per the stay order no. S/56/12/SMB/C-IV dated 1st May, 2012? - Held that: - In the present case, the assessee pointed out that the appeal was already admitted. The proviso could not have been invoked in this case post admission. Therefore, the appeal could not have been dismissed on the ground on which it has been dismissed, namely, without adjudication on merits - Once the appeal was admitted in this case and kept pending, then, no useful purpose is served by dismissing it at the final hearing on the ground of maintainability. Ultimately, it is a discretion vesting in the tribunal, which it must exercise judiciously and not capriciously. The order under appeal, which would include the order on rectification of mistake application set aside - appeal is restored to the tribunal's file for adjudication on merits in accordance with law.

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• 2018 (1) TMI 1267
  Whether the decision of the learned Tribunal is perverse for the reason of not considering the point of limitation taken in the ground of appeal before it? Held that: - the decision of the Tribunal is invalidated on the ground that the limitation question was not addressed to, we do not think any part of that order can be permitted to survive even though a part of the order might have had gone in favour of the appellant - the decision of the Tribunal delivered on 7th March, 2017 in Ex.Appeal No.248/09 is set aside and matter remanded to the Tribunal for consideration afresh. Appeal allowed by way of remand.

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• 2018 (1) TMI 1266
  CENVAT credit - imported inputs/components which were found faulty during testing process - Whether the Tribunal is right in law in allowing Cenvat Credit of the duty paid in respect of imported inputs/components which were found faulty during testing process prior to the issuance of the same into the manufacturing process of final product and the same inputs were re-exported to the overseas supplier without reversing the Cenvat Credit availed earlier? - Rule 3(5) of the Cenvat Credit Rules, 2004. Held that: - these components have to be treated as having been used for the intended purpose and hence the duty demand of 1,71,07,253/- would not be sustainable and has to be set aside. In the appellant’s own case decided by the Tribunal M/s. Ericsson India Private Limited Versus CCE 23,15,901/- 94,29,117/- have to be upheld. Duty Drawback - Held that: - Since the components in respect of which the duty demand of 94,29,117/- has been confirmed have been re-exported, the customs authorities have to consider the appellants’ claim for duty drawback - penalty not sustainable. Appeal dismissed - decided in favor of respondent-assessee.

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• 2018 (1) TMI 1265
  Principles of Natural Justice - application to Settlement Commission - Section 32F of the Central Excise Act, 1944 - Held that: - it appears that the petitioners did not avail the opportunity before the Commission and therefore, the Commission opined that the petitioner is adopting dilatory tactics and rejected the petition - Considering the fact that the writ petition is pending from the year 2006 onwards and there is an order of interim stay, this Court is inclined to remand the matter back to Settlement Commission for fresh consideration - petition allowed by way of remand.

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• 2018 (1) TMI 1264
  Clandestine removal - excesses of stock - Held that: - In the impugned order dated 5th August, 2016 it was held by the CESTAT that since in the proceedings initiated by the Revenue separately to establish clandestine clearance and demand of duty stood set aside already by the CESTAT, the seizure of the goods which lead to the SCN in the present case was also held to be not sustainable and set aside. The proceedings for imposition of personal penalties on the concerned persons and various traders was also set aside - appeal dismissed.

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• 2018 (1) TMI 1263
  Rectification of mistake - whether the CESTAT was justified in rejecting the application for correction of the mistake even when the mistake was on part of the tribunal and was not attributable to the assessee? - Held that: - Where the correction is not attributable to the party, there may not be any necessity for moving an application and the same can be rectified by the court/tribunal as soon as it comes to its notice. Therefore, when a mistake in the order which was mere clerical in nature had come to the knowledge of court/tribunal and it was not attributable to the party but was on part of the court/tribunal, it was incumbent upon such court/tribunal to suo motu rectify the same and the period of limitation may not be hurdle in such exercise of power. The tribunal was not justified in rejecting the application for rectification of mistake in the facts and circumstances of the present case on the ground of limitation and the same could have been corrected in exercise of its inherent suo motu powers. The matter is remitted to the CESTAT for deciding the rectification application - appeal allowed by way of remand.

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• 2018 (1) TMI 1262
  CENVAT credit - electricity sold outside the factory - Rule 6(1), 6(2) and 6(3) of the Cenvat Credit Rules, 2004 - maintenance of separate accounts - Held that: - the electricity is not an item for which any particular rate of duty is fixed in the Tariff Act, none can be criticized for not having raised the issue of maintaining separate accounts either before the first appellate authority. The original order and its preceding notice of proposal including as to penalty, were not dealt with, or based on any issue relating to non-maintenance of separate accounts - The fact of the matter remains that maintaining of separate accounts as was sought to be raised did not impress the CESTAT, having regard to the quality of the findings it rendered on the facts articularly when the quantification of the electricity sold out by the respondent was an admitted situation as far as the authority which generated the original order and the first appellate authority are concerned - appeal dismissed.

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• 2018 (1) TMI 1261
  Clandestine removal - shortage of inputs - evidences - Held that: - apart from the shortages there is no other evidence on record to show that the appellant had cleared their final product or cenvatable inputs in a clandestine manner. The entire case of the Revenue is based upon the shortages detected by the appellant himself and reflected in their audit report. The appellant have already explained that such shortages are only to the tune of around 0.29%, in which case the value of the shortages of the inputs, keeping in view the voluminous operations of the assesee, cannot be of much importance - appeal allowed - decided in favor of appellant.

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• 2018 (1) TMI 1260
  Penalty on employees u/r 26 of CER - penalty imposed on the ground of aiding and abetting the main manufacturer M/s. Pioneer Alloys Castings Ltd. in their activities of clandestine nature - Held that: - admittedly the appellants were the salaried employees of the manufacturing unit M/s. Pioneer Alloys Castings Ltd. The Tribunal in the case of Tejas Net Works India Ltd. Vs. Commissioner of Central Excise, Pondicherry [2013 (11) TMI 1415 - CESTAT CHENNAI], has set aside the penalties imposed upon the two employees on the ground that the penalty already stand imposed upon the company, thus, not justifying imposition of separate penalties on the employees - penalty on both employees set aside - appeal allowed.

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• 2018 (1) TMI 1259
  Jurisdiction - disallowance of recredit along with interest and imposition of penalties - rejection of the assessee’s appeal by Commissioner (Appeals) on the ground that they were not within the jurisdiction to make suo moto entry of the wrongly paid duty - Held that: - in the ordinary course, the appellant should have taken the permission of the jurisdictional Assistant Commissioner before reversing the entry or should have filed a refund claim, but appreciating that the said duty was admittedly wrongly paid and there is no dispute about the same, the recredit of the debit amounts to correction of the entries only. Inasmuch as the issue relates only to correcting the entries in RG23A Part II, the technical objection raised by the Revenue that they should have filed a refund claim would not sustain in the absence of any finding that such debit entry was otherwise not required to be made by the appellant. Appeal allowed.

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• 2018 (1) TMI 1258
  Extended period of limitation - Section 11A (1) of CEA - Investigations conducted by the Revenue revealed that they were collecting much more amounts from their customers than the amounts printed on the paints and thinners by way of raising separate commercial invoices - Held that: - The fact that differential consideration of the goods cleared by the appellant was being collected by them in their commercial invoices so raised, does not stand denied by the appellant. Further, the fact of such collection was never reflected by them in any of the statutory records filed before the department and was never brought to the notice of the Revenue. If that be so, the factum of collection of differential consideration, without its disclosure to the authorities, would lead to only one inevitable conclusion that there was malafide on the part of the assessee so as to evade payment of duty - extended period rightly invoked - appeal dismissed - decided against appellant.

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• 2018 (1) TMI 1257
  Penalty u/r 173Q of Central Excise Rules 1944 - inclusion of the amortization cost of moulds, tools in the assessable value of the assessee’s final product - Held that: - admittedly, during the relevant period, the issue was not free from doubt and there were decisions of the Tribunal holding in favour of the assessees - In such a scenario, the appellant cannot be held guilt of any wrong doing by not including amortization cost of the moulds/tools in the assessable value of their final product - penalty set aside - decided in favor of assessee.

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• 2018 (1) TMI 1256
  Penalty u/r 25 and 27 of CER - the duty could not be deposited within the prescribed period. The same was deposited subsequently with a delay of ranging from one to three months, along with deposit of interest leviable thereon - Held that: - The Tribunal in the case of Saurashtra Cement Ltd. [2010 (9) TMI 422 - GUJARAT HIGH COURT] discussed various provisions of Rule 25 as also of Rule 27 and has observed that in case of belated payments in terms of Rule 8, penalty under Rule 27 is imposable - the penalties imposed u/r 25 set aside and the penalties of 5,000/- imposed in each of the appeals, in terms of the provisions of Rule 27 of CER upheld - appeal allowed in part.

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• 2018 (1) TMI 1255
  Valuation - Physician samples made for free distribution - SSI Exemption - Held that: - the physician samples cleared during the exemption limit period would not attract any duty at all and it was not fair on the part of the Revenue to calculate the duty on all the clearances of physician samples - matter remanded to the original adjudicating authority for recalculation of the duties - matter remanded for re-quantification.

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• 2018 (1) TMI 1254
  Valuation - demand of duty on the ground that the raw materials were not supplied under job work challans, either under Notification No.214/86 or under Rule 4(5) of Cenvat Credit Rules, 2002 - suppression of facts - Held that: - It is not the allegation or case of the department that the job-worked goods have been summarily removed from the job worker without discharge of duty liability thereon. On the other hand, in the show-cause notice and even in the orders of the lower authorities, it is conceded that the job-worked goods have been returned to the raw material supplier. Obviously, the onus of discharge of duty liability will be on the raw material supplier, on which aspect the show-cause notice is silent - the demand of duty liability from the job worker would be an overkill - appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2018 (1) TMI 1253
  Benefit of exemption from payment of tax - Section 4-A of the U.P. Trade Tax Act - The only reason assigned to non-suit the revisionist is that the condition in the notification that unit is allotted land for the factory is not fulfilled - whether the conditions imposed in the notification is directory or mandatory? - Held that: - The provision makes it clear that where in the opinion of the State Government, it is necessary for increasing the production of any goods or for promoting the development of any industry in the State, or any district or part of district in particular, it may exempt the turnover of sales in respect of such goods from payment of tax in the manner contemplated. Conditions for grant of such exemption is to be specified in the notification itself. It has to be examined as to whether condition of allotment of land for the unit is a mandatory condition or is it directory. The object underlying Section 4-A of the Act and the exemption notification is to promote development of any industry in the State generally or in any district or part of it. The idea is to encourage setting up of new units for the purpose in the specified areas. So far as establishment of new unit is concerned, it would have to be shown that the unit has land available with it for the purpose. Possessing of land is thus a mandatory or substantive condition in the exemption notification. The manner and mode of such acquisition has been specified from time to time. A notification dated 31st March, 1995 has been brought on record, issued for similar purposes, which was to apply in respect of production starting between the period 1.4.1995 and 31.3.2000. It was the notification dated 31st March, 1995, which was followed by the notification in question dated 15.1.2000. The condition of allotment of land specified in the notification dated 15.1.2000 has been substituted vide subsequent notification of 22.12.2001, as per which land could be obtained from any source. Possessing of land has a direct nexus with establishment of new unit, inasmuch as the new unit itself cannot come up in its absence. It has a direct nexus with the object sought to be achieved i.e. increase in production or development of industry in State. However, its mode of acquisition neither has any such nexus nor can it be attached the same importance. Section 4-A otherwise does not limit the grant of exemption to a unit depending upon the mode of acquiring land for it. Possessing of land for establishment of new unit although constitutes the mandatory or substantive part of exemption notification but mode of acquisition of land is wholly directory, and its non-compliance would not affect the essence or substance of the notification in question, granting exemption - revision allowed - decided in favor of revisionist/assessee.

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• 2018 (1) TMI 1252
  Classification of entries - computer consumables including DAT tapes, print ribbon, printer cartridge taps and computer cleaning ink - whether eligible for exemption from resale tax, as per G.O.Ms.No.82 dated 01.07.2002? - Held that: - issue squarely covered by the decision in the case of Canon India Private Limited, New Delhi Vs. The State of Tamil Nadu Through Secretory, Ministry of Education and Commercial Taxes, Commercial Taxes Department, Secretariat, Chennai and others [2013 (8) TMI 569 - MADRAS HIGH COURT], where it was held that ink jet cartridges and toner cartridges are parts and accessories of printer which is a peripheral to a computer system and would be covered under Entry Nos.22 & 24 of serial No.68, Part B of First Schedule to the Tamil Nadu Value Added Tax Act, 2006 - revision allowed - decided in favor of assessee.

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• 2018 (1) TMI 1251
  Exemption on consignment sale - Rosin - Pine oil - turpentine - dis-allowance of the exemption granted on the strength of Form C and proposed to assess turnover at 12.6% - duplicate forms - Held that: - Having regard to the Forms (Original, duplicate or counter foil) and placing reliance on the decision rendered in Manganese Ore (India) Ltd Vs. Commissioner of Sales, Tax, Madhya Pradesh, [1989 (1) TMI 351 - MADHYA PRADESH HIGH COURT], the Appellate Deputy Commissioner (CT)-I, has passed the orders, stating that, there is nothing wrong in filing duplicate forms, for availing concessional rate. The Tamil Nadu Sales Tax Appellate Tribunal (Additional Bench), Chennai, has referred to the Rules and accordingly, concurred with the views of the appellate Authority. Merely because the assessee had not made any submission, before the Assessing Officer that he had lost the original, it cannot be contended that he cannot made such submission, before the Appellate Authority, which is also a fact finding authority. In State of Himachal Pradesh and others Vs. Gujarat Ambuja Cement Ltd., and another [2005 (7) TMI 353 - SUPREME COURT OF INDIA], while dealing with the belated filing of statutory forms, the Hon'ble Supreme Court held that the provisions requiring filing of declaration forms along with the return is a directory provision and not a mandatory provision. Appeal dismissed - decided against appellant-Revenue.

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• Wealth tax

• 2018 (1) TMI 1250
  Correct fair market value of the property as on the relevant valuation date - value declared by assessee - Held that:- As decided in CIT Vs. Akshay Textiles and Agencies Pvt. Ltd. [2007 (10) TMI 251 - BOMBAY HIGH COURT] annual letting value has to be determined on basis of annual rent received by the assessee and not what has been received by its tenants from the ultimate users. The emphasis placed upon expression “rent received or receivables” in explanation (2) to Rule 5 ought not to be given wide interpretation as is sought to be urged. For these reasons, the first question of law framed is answered against the Revenue and in favour of the assessee. Valuation of the Mercedes Benz Car - whether value of the Mercedes Benz Car could not be included in the net wealth of the Assessee? - Held that:- As held on facts that though the Mercedes Car was held by the assessee in his name, it was in fact funded and maintained by his Foreign Principal, on whose behalf it was held by him. The foreign principal did not have any office or branch in India. The ITAT had taken note of all these facts and vide it its order dated 5.11.2011 for a previous year deleted a similar inclusion of the value of the car. This reasoning persuaded the ITAT in the facts of the present case for the current Assessment Year to direct the deletion of such value. Being concurrent findings of facts and having regard to the circumstances that the car was funded by the assessee’s foreign principal and apparently also maintained on its behalf, the question of law is answered in favour of the assessee

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• Indian Laws

• 2018 (1) TMI 1277
  Regularization in the post of Inspector made by the appellant in pursuance of the merger of the cadres which took place on 19-1-2003 under the Inspector Examiner Recruitment Rules, 2002 - Held that: - it was directed that appellant’s services should be regularised on the basis of seniority determined in accordance with Clause 12 of the Rules - petition dismissed.

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