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TMI Tax Updates - e-Newsletter February 15, 2019 Case Laws in this Newsletter: GST Income Tax Customs Service Tax Central Excise Indian Laws Articles RECENT AMENDMENTS IN GST LAWS CLASSIFICATION OF ‘GUDAKHU’ UNDER GST News GST Act violation: HC dismisses advance bail pleas Finance Commission meets Department of School Education and Literacy, Ministry of Human Resource Development Index Numbers of Wholesale Price in India (Base: 2011-12=100) Review for the month of January, 2019 Aadhaar-PAN linking is mandatory now which has to be completed till 31.3.2019 by the PAN holders requiring filing of Income Tax Return Cabinet approves partial modification of CCEA’s earlier decision for allowing all eligible Central Public Sector Enterprises and private sector entities to participate in the bidding for the Strategic Disinvestment of Engineering Projects (India) Limited Cabinet approves signing of Memorandum of Understanding between India and Saudi Arabia on establishing a mechanism for Investment Infrastructure in India Cabinet approves Memorandum of Understanding between India and Saudi Arabia on cooperation and Mutual Assistance in Customs matters Notifications GST - States (GHN-16)/GSTR-2019/(38)-TH - dated 6-2-2019 - Gujarat SGST Corrigendum – Notification No. 3/2019-State Tax dated 29th January, 2019 GHN-12)GST-2019/S.11(1)(41)-TH - dated 31-1-2019 - Gujarat SGST Corrigendum - Notification No. 26/2018-State Tax (Rate), dated 31/12/2018 5/2019-State Tax - dated 29-1-2019 - Gujarat SGST Amendment in Notification No.8/2017- State Tax dated 23/06/2017 1/2019-State Tax (Rate) - dated 29-1-2019 - Gujarat SGST Rescinding Notification No 082017-State Tax Rate dated 28062017 regarding RCM 06/2019-State Tax - dated 29-1-2019 - Gujarat SGST Amendment in Notification No. 65/2017-State Tax dated 15/11/2017 03/2019-State Tax - dated 29-1-2019 - Gujarat SGST Gujarat Goods and Services Tax (Amendment) Rules, 2019 02/2019-State Tax - dated 29-1-2019 - Gujarat SGST Seeks to bring into force the GGST Amendment Act 2018 1/2019-State Tax - dated 15-1-2019 - Gujarat SGST Amendment in Notification No. 48/2017-State Tax dated 18/10/2017 70/2018-State Tax - dated 1-1-2019 - Gujarat SGST Extension for GSTR-3B in respect of Migrated tax payers for July-2018 to March-2019 69/2018-State Tax - dated 1-1-2019 - Gujarat SGST Amendment in Notification Nos. 35/2017 - State Tax, dated the 15th September, 2017 and Notification No. 16/2018 - State Tax, dated the 23rd March, 2018 68/2018-State Tax - dated 1-1-2019 - Gujarat SGST Amendment in Notification Nos. 21/2017-State Tax, dated the 8th August, 2017 and Notification No. 56/2017- State Tax, dated the 15th November, 2017 22/GST-2 - dated 6-2-2019 - Haryana SGST Corrigendum - Notification No. 105/GST-2, dated the 31st December, 2018 21/GST-2 - dated 6-2-2019 - Haryana SGST Haryana Goods and Services Tax (Removal of Difficulties) Order, 2019 20/GST-2 - dated 31-1-2019 - Haryana SGST Notification to rescind Notification No.42/ST-2, dated 30.06.2017 in view of bringing into effect the amendments in the HGST Act, 2017 (regarding RCM on supplies by unregistered person) under HGST Act, 2017 Money Laundering F. No. P.12011/24/2017-ES Cell-DoR - G.S.R. 108(E) - dated 13-2-2019 - PMLA Prevention of Money-laundering (Maintenance of Records) Amendment Rules, 2019 Circulars / Instructions / Orders DGFT 73/2015-2020 - dated 14-2-2019 Amendment in Standard Input - Output Norms (SION) at S. No. E-92 for export product "Groundnut Kernels" Highlights / Catch Notes Income Tax Undisclosed investment u/s 69 - it is not open to the Assessing Officer to draw inferences from the document by interpreting the words “Sh” to mean cash payment and “Q” to mean cheque payment without any evidence on record. Visit to Get Source TPA - Application of the proviso to Section 92C(2) - ALP determination - option available to an assessee in the fixation of the arms length price [ALP for brevity] under Chapter X - benefit of relief granted circular dated 23.8.2001 - provisions amended vide Finance Act, 2002 w.e.f. 1.4.2002 - the issue decided against the assessee. Visit to Get Source Transfer pricing adjustment - most appropriate method - CUP method was not correct method - AO directed to apply TNMM method to benchmark the international transactions of assessee and compare the margins shown by assessee with the mean margins of comparables which are functionally comparable. Visit to Get Source Treating the appellant as ‘Pacca Arthatia’ instead of ‘Kachha Arahtia’ as shown and claimed by the appellant - Income from the business as trader or commission agent - The privity of contract and underlying transaction documentation are critical for the purposes of present analysis. Visit to Get Source PE in India - Grouting activities - he establishment of PE in India is in respect of each assessment year only. Moreover, there is no bar in carrying on the activities year after year. The determination of existence of PE in India is to be made by reference to provision in DTAA. - There is no PE Visit to Get Source Assessment u/s 153A - addition made of share application received u/s 68 - None of the material gathered by the Assessing Officer can be categorized as incriminating material found during the course of search or found during the course of any other operation under the Act. Visit to Get Source Penalty u/s 271AAA - Revenue failed to question the assessee while recording his statement u/s 132 (4) as regards the manner of deriving such income, the Revenue cannot jump to the consequential or later requirement of substantiating the manner of deriving the income. - No penalty. Visit to Get Source Customs Import of Prohibited goods or not - DGFT lays down the policy as to whether import of a certain item is free or prohibited. This obviously cannot be decided after the goods land in India. In the very nature of things, there must be certainty in these transactions. Therefore, the position that prevails on the date of raising of invoice alone will be the basis for determination. Visit to Get Source Refund of duty - Principles of unjust enrichment - appellant has not included customs duty element (CVD and SAD) on the goods imported in the cost of their manufacture and has only accounted for them as amounts receivable in their books of accounts - appellant has not passed on the burden of customs duty - refund allowed. Visit to Get Source Import of machinery - Electronic Sensor Paver Vogele – the machines in question are capable of laying bituminous pavement from 3 meters to 6 meters i.e. less than 7 meters. - Importer is not eligible for benefit of exemption. Visit to Get Source DGFT Amendment in Standard Input - Output Norms (SION) at S. No. E-92 for export product "Groundnut Kernels" Visit to Get Source PMLA Prevention of Money-laundering (Maintenance of Records) Amendment Rules, 2019 Visit to Get Source Service Tax CENVAT Credit - exempt service or not - as the activity of managing investments suffers service tax liability under life insurance services, the same cannot be said to be an exempted service, warranting reversal of CENVAT Credit under Rule 6 of CENVAT Credit Rules 2004. Visit to Get Source Refund of accumulated CENVAT Credit - export of services - appellant has a huge credit which is now lying with the Revenue; the appellant has surrendered its Service Tax Registration - refund allowed. Visit to Get Source Adjustment of excess paid service tax against future liability - the matter remanded back to prove their claim that excess service tax was paid by them during the relevant period and the adjustment was admissible to them since not against written off bad debts. Visit to Get Source Merely entering the figures under the wrong heading in their returns with no revenue implication whatsoever and no intention to evade payment of taking duty or taking excess credit does not render the appellant liable to penalties as proposed. Visit to Get Source Classification of services - IATA agent - The difference between sale price and the purchase price of the cargo slot is sought to be brought within the ambit of commission by the department - this transaction does not fall under BAS - demand do not sustain. Visit to Get Source Classification of services - the activity undertaken i.e. transportation of coal from pit–heads to the railway sidings within the mining areas is more appropriately classifiable u/s 65(105) (zzp) i.e. GTA service and it is not involved in the service in relation to the “mining of mineral”, oil or gas”. Visit to Get Source Central Excise CENVAT Credit - the benefit of doubt goes in favour of the appellant and moreover non recording of manufacturing of dies in RG-23A Part-1 register and ER-1 returns is only procedural lapse for which the appellant can be penalized but the credit cannot be denied to the appellant - credit allowed. Visit to Get Source Determination of rate of duty - relevance of the expression ‘place of removal’ in determination of duty liability on 'ropes of plastic' - The 'place of removal' is relevant only for determination of the value to be utilised for assessment of duty. Visit to Get Source Case Laws: GST 2019 (2) TMI 742 Exports or not - goods exported out of India directly by the manufacturer mentioning the applicant as Third Party Exporter for the purpose of Foreign Trade Policy - zero rated supply or not? - scope of Section 97 of the CGST Act, 2017. Held that:- In the present case on the basis of the arguments made by them and scrutiny of records submitted by the applicant and the arguments put forth by them, it is found that their main question is whether the transaction effected in the present case can be considered as exports made by them or the manufacturer exporter Sai Fertilizers - On proper and detailed examination of full facts as put by the applicant at the time of the final hearing, it is found that this question is not covered under the purview of Section 97 of the CGST Act, 2017. The subject application is not maintainable and cannot be entertained and therefore no opinion is given since the matter is beyond the purview of this Authority. 2019 (2) TMI 741 Validity of provisional attachment - section 83 of the Central Goods and Services Tax Act, 2017 - various hardships were caused to the petitioner - Held that:- Section 83 of the CGST Act provides for provisional attachment to protect revenue in certain cases and inter-alia, provides that where during the pendency of any proceeding under section 67, the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue, it is necessary so to do, he may, by order in writing, attach provisionally any property, including bank account belonging to the taxable person in such manner as may be prescribed. Thus, the object of the provision is to protect the interest of the Government revenue. In the facts of the present case, attachment of the bank accounts of the petitioner has resulted into various hardships to the petitioner which would adversely affect its business and which may result in loss of revenue to the Government, instead if the petitioner provides for some security towards its outstanding dues, the interest of the petitioner as well as the revenue can be protected. The court is of the view that the interest of justice would be served if the petitioner is permitted to pay the amount of ₹ 55,00,000/- outstanding towards excise dues by way of equal monthly installments within a period of eight months, subject to the petitioner furnishing a bank guarantee for an equal amount towards security of such amount within a period of one month from today - petition allowed in part. 2019 (2) TMI 740 Grant of Regular Bail - Section 69 of CGST Act, 2017 - bogus billing - incriminating documents found indicating evasion of CGST duty - Held that:- In view of the fact there were justifiable grounds to arrest the petitioners under Section 69 of the CGST Act and further in view of the fact that case involves evasion of more than ₹ 80 crores of tax under the CGST and offence is punishable with imprisonment for a period of five years and complaint is stated to have already been filed, there are no ground to grant benefit of regular bail to the petitioners - petition dismissed. 2019 (2) TMI 739 Profiteering - supply of Socks - benefit of reduction in the rate of tax not passed on - contravention of the provisions of Section 171 of Central Goods and Service Tax Act, 2017 - Held that:- There was no reduction in the rate of tax on the above product w.e.f. 01.07.2017 and hence the anti-profiteering provisions contained in Section 171 (1) of the CGST Act, 2017 are not attracted - application dismissed. 2019 (2) TMI 738 Profiteering - supply of Shirts - benefit of reduction in the rate of tax not passed on - contravention of the provisions of Section 171 of Central Goods and Service Tax Act, 2017 - Held that:- The product was exempted from the Central Excise Duty, vide Notification No. 30/2004- CE dated 09.07.2004 and only attracted VAT @ 5%. After implementation of the GST w.e.f. 01.07.2017, the tax rate of the above product was fixed @ 5%. Therefore, there was no reduction in the rate of tax and hence provisions of provisions of section 171 are not attracted in this case. As far as the submission of the Applicant No. I regarding deduction of an amount of ₹ 9.5 on account of CST from the pre-GST price is concerned the same does not appear to be correct as the Kerala State Screening Committee has failed to explain under which provisions of the Kerala CST Act, 2017 it can be deducted. Moreover, there has been increase in the rate of inter-state tax as the CST was increased from 2% to 5% of IGST in respect of such sales. Therefore, the claim made by the Applicant No. I is misplaced and hence it cannot be accepted. There was no reduction in the rate of tax on the above product w.e.f. 01.07.2017, hence the anti- profiteering provisions contained in Section 171 (1) of the CGST Act, 2017 are not attracted - application dismissed. 2019 (2) TMI 737 Profiteering - supply of Trousers - benefit of reduction in the rate of tax not passed on - contravention of the provisions of Section 171 of CGST Act, 2017 - Held that:- There was no reduction in the rate of tax on the above product w.e.f. 01.07.2017 and hence the anti-profiteering provisions contained in Section 171 (1) of the CGST Act, 2017 are not attracted - Also, there is no increase in the per unit base price (excluding tax) of the above product and therefore the allegation of profiteering is not sustainable in terms of Section 171 of the CGST Act, 2017 - Application dismissed. Income Tax 2019 (2) TMI 736 Penalty u/s 271AAA - recording the statement of the assessee under section 132(4) - Held that:- Revenue failed to question the assessee while recording his statement under section 132 (4) as regards the manner of deriving such income, the Revenue cannot jump to the consequential or later requirement of substantiating the manner of deriving the income. In the context of the requirement of the assessee specifying the manner of deriving the income the decision of this Court in case of CIT vs. Mahendra C.Shah (2008 (2) TMI 32 - GUJARAT HIGH COURT) would hold the field even in the context of subsection (2) of section 271AAA. It is only when the officer of the raiding party recording the statement of the assessee under section 132(4) of the Act elicits a response from the assessee's this requirement, the assessee's responsibility to substantiate the manner of deriving such income would commence. When the base requirement itself fails, the question of denying the benefit of no penalty would not arise. 2019 (2) TMI 735 Reopening of assessment - addition of capital gain - Held that:- On the basis of the agreement-to-sell produced by the assessee, the A.O. came to the conclusion that the assessee had divested herself of all rights in the property. The assessee had received full sale consideration. The assessee had handed over the possession of the property to the proposed purchasers. It was the purchasers who would be responsible for any defects in the title. The purchasers would deal with the pending litigations. A.O., therefore, taxed the entire consideration in the hands of the assessee as her 'capital gain'. The assessee did not challenge this order and the order of the A.O. thus became final. Any action on the part of the A.O. to tax the 'capital gain' in the hands of the assessee for the A.Y. 2014-15, on the strength of the subsequent sale-deed, would amount to shifting his stand from transfer of property being complete upon execution of the agreement to sale to transfer of property taking place only now upon execution of the sale-deed. It is not the case of the revenue that at the time of execution of the sale-deed the Petitioner received any further sale consideration. Under these circumstances, the impugned notice is set aside. - Decided in favour of assessee. 2019 (2) TMI 734 Nature of receipt - Transfer of business as a going concern for consideration - as per AO non-compete clause in the agreement, the receipt could be the assessee's income in terms of Section 28(va) - capital receipt OR business income - Held that:- No perversity is pointed out in this approach of the Commissioner of Income Tax (Appeals). What however, the Revenue argued is that the entire amount was attributable to the non-compete agreement which is clearly an incorrect proposition. The assessee which was engaged in highly specialized business, transferred the entire business for valuable consideration. Non-compete clause in such agreement was merely a part of the understanding between the parties. What purchaser received under such agreement was entire business of the assessee along with non-compete assurance. We notice that Clause (va) of Section 28 pertains to any sum whether received or receivable, in cash or kind, under an agreement, inter alia for not carrying out any activity in relation to any business or profession. A non-compete agreement would therefore fall in this clause. Proviso to said clause (va), however, provides that the said clause would not apply, to any sum whether received or receivable, in cash or kind, on account of transfer of right to manufacture, produce or process any article or thing or right to carry on any business or profession which is chargeable under the head “Capital Gains”. The assessee's receipt attributable to the transfer of business was correctly taxed by the CIT (Appeals) as confirmed by the Tribunal as giving rise to capital gain. It was only residual element of receipt relatable to the non-compete agreement which was brought within fold of Clause (va) of Section 28 of the Act.- Decided against revenue. 2019 (2) TMI 733 Reopening of assessment - addition on the basis of notings found in the books of third person - Held that:- COMMON CAUSE (A REGISTERED SOCIETY) AND OTHERS VERSUS UNION OF INDIA AND OTHERS [2017 (1) TMI 1164 - SUPREME COURT] incriminating materials in form of random sheets, loose papers, computer prints, hard disk and pen drive etc. and has held that they are inadmissible in evidence, as they are in the form of loose papers. In the present case also entries found during search and seizure which are on loose papers are being made the basis to add income of this respondent. Resultantly, in light of the Supreme Court judgments, referred above, no case for interference is made out with the order passed by the Tribunal. 2019 (2) TMI 732 Nature of receipt - taxable as profession receipt or business income or security deposit - amount received by the assessee during the year was an advance and the actual remuneration was to be quantified at the completion of the project - whether payment received by the assessee is not in the form of professional fees covered u/s 194J the assessee is acting as a consultant and getting the fees for work? - Held that:- The assessee had earned income out of its engagement, claimed to be as a consultant in development of housing project. AO was of the opinion that the income was assessee's business income. The assessee carried the matter in appeal before the CIT (Appeals), who held that the assessee was acting merely as a consultant and accordingly reversed the decision of the Assessing Officer. The Revenue carried the matter in appeal before the Tribunal. A perusal of the material on record would show that the CIT(A) and the Tribunal on the basis of evidence on record came to the conclusion that the assessee had not engaged in the business of developing real estate. The assessee had engaged itself, may be, as a consultant out of which activity, the assessee would earn commission at predecided rate. The amounts received by the assessee before completion of the project were in the nature of deposits to be adjusted towards alternate payment to be made upon completion of the project. - Decided in favour of assessee. 2019 (2) TMI 731 Disallowance u/s 14A - assessee's income exempt from tax is not NIL but has earned exempt income - Held that:- In the present case, Counsel for the Revenue however, points out that this is not a case where the assessee had earned no income which was exempt from tax. However, in our opinion, the ratio of the above noted decisions in the cases of Cheminvest Ltd [2015 (9) TMI 238 - DELHI HIGH COURT] and Holcim India (P) Ltd. [2014 (9) TMI 434 - DELHI HIGH COURT] would include a facet where the assessee's income exempt from tax is not NIL but has earned exempt income which is larger than the expenditure incurred by the assessee in order to earn such income. In such a situation that disallowance cannot exceed the exempt income so earned by the assessee during the year under consideration. No error in the view of the Tribunal. We record that the assessee had offered voluntary disallowance of expenditure of ₹ 1.30 crores, which is not been disturbed by the Tribunal. - Decided against revenue. 2019 (2) TMI 730 Incurring business loss on account of guarantee extended in the ordinary course of business - revenue's contention was that the loss was not suffered in the course of assessee's ordinary business activity and therefore, cannot be claimed as a business loss - Held that:- After one round of remand, the Tribunal examined the material on record and in particular Memorandum and Articles of Association of the assessee company to come to the conclusion that the said Articles of Association permitted the assessee company to engage in activity of providing corporate guarantees in favour of other persons and entities. It was pursuant to this Article of Association that the assessee had engaged itself in such activity, providing corporate guarantee for credit facilities sanctioned by Vysya Bank to one Geekay Exim (India) Pvt. Ltd.& Ors. In the process, the assessee had incurred loss. The assessee had also taken reasonable steps for making recoveries by filing civil suits. Thus, on facts, the Tribunal hold in favour of the assessee on both counts namely; that the loss was genuine and that it arose out of the assessee's normal business activities. No error in view taken by the Tribunal. 2019 (2) TMI 729 Reopening of assessment - bogus purchases - Revenue relied upon the survey proceedings under Section 133 as well as the statements made under Section 133A - CIT set aside the final reassessment order which had disallowed the expenditure also confirmed by ITAT - Held that:- This Court is of the opinion that the assessee did not rely merely upon the deposit of the amount but rather movement of the goods, which is borne out by the VAT authorities’ stamp on transit challan i.e. chungi, at the border. Other evidence such as the stock register, factory certifying the receipt of the goods as and when they were moved into the premises; clearly recorded in the statutory central excise registers RG-1 etc., were sufficient proof to show that the purchases were not bogus. Moreover, the CIT(A) re-apprised all the evidence, unlike the AO, who was largely influenced by the so-called credit entry providers. This Court is of the opinion that having regard to the detailed analysis of the CIT(A), with which the ITAT’s finding concurred, no question of law arises. - Decided against revenue 2019 (2) TMI 728 Undisclosed investment u/s 69 - loose papers were found which related to the sale transactions of flats - Tribunal deleted the addition - Held that:- Loose papers does not have any signature of any person nor did it contain name of the respondent. We note that the loose document is a dumb document as it does not give any particulars of the persons involved in the alleged transaction. Thus, it is not open to the Assessing Officer to draw inferences from the document by interpreting the words “Sh” to mean cash payment and “Q” to mean cheque payment without any evidence on record. The CIT(A) as well as the Tribunal have concurrently rendered a finding of fact, which is not shown to be perverse in any manner. No substantial question of law. 2019 (2) TMI 727 Addition u/s 68 - amounts received towards share transactions was that AOP was not an income tax payee - Held that:- This Court notices, at the outset, that the assessee never claimed that the AOP was a firm or income tax payee. By all accounts, it appears to have been formed only by way of a venture for only one transaction, i.e. securing of shares, which was the subject matter of business venture. In these circumstances, the concurrent finding of fact on this account is sound and does not call for interference. - Decided against revenue 2019 (2) TMI 726 Reopening of assessment - validity of notice - Held that:- After scrutiny that the AO passed the order of assessment in which he made no additions on this ground. In absence of any new or additional material available with him, any attempt on the part of the AO to disturb such assessment would be based on mere change of opinion and clearly impermissible in law. The second ground sought to be raised by the AO in the reasons is possible of summary disposal. The record would show that out of expenditure in question, the assessee had disallowed 50% voluntarily. The remaining 50% was disallowed by the AO. This was subject matter of the appeal before the Commissioner. On the ground of merger, this issue could not have been raised by the Assessing Officer for reopening the assessment. Even otherwise, where the Assessing Officer himself had disallowed the expenditure in its entirety, we do not understand how he can seek to reassess the expenditure which in the original assessment he disallowed in its entirety. The impugned notice is quashed. 2019 (2) TMI 725 Reopening of assessment - Held that:- Where the Petitioner is already before the Court and the order of the assessment was passed thereafter may stand on entirely different footing. Further in the present case by the self imposed restriction, we have refused to entertain the petition since by not following the procedure set out by the Supreme Court in the case of GKN Driveshafts (India) Ltd. (2002 (11) TMI 7 - SUPREME COURT), the petitioner has brought about a situation where the Assessing Officer was left with short time to dispose of the objections and complete the assessment. This element is clearly absent in the judgments cited before us by the counsel for the petitioner. This petition is not entertained, leaving it open to the petitioner to challenge the assessment order before the Appellate Authority. If in the process, there has been some delay, we are sure that the Appellate Authority shall consider the same in view of the fact that the Petitioner was bona fide pursuing its remedies before this Court. All contentions of the Petitioner are kept open. 2019 (2) TMI 724 Additional depreciation on acquisition and installation of machines to be made after 31st March, 2002 - as per Tribunal additional depreciation was wrongly allowed by AO as the assessee although purchased the assets before 1.4.2002 but the assets were admittedly installed after 1.4.2002 - Held that:- The reasons sought to be advanced by the tribunal, regrettably show absolute non-application of mind. Where evidence is cited in support of proof of a fact the exact materials on which such inference is being drawn have to be specified. After all, the tribunal is the final fact finding authority. Saying “all the documents will be found in the paper book” amounts to dealing with the matter very cursorily. The factum of sale/acquisition of the machines has to be proved legally in terms of payment of consideration, date of delivery, passing of property, the terms and conditions of contract etc. The installation of the assets has also to be established in a like manner. In our opinion, such absence of reasons on a factual issue in the order of the tribunal which is the final authority on facts is itself a substantial question of law from which an appeal lies to the High Court under Section 260A of the Income Tax Act. Otherwise, a party would be deprived of remedy. That part of the order of the tribunal dealing with additional depreciation is set aside. The tribunal is directed to re-hear the parties on the above issues and pronounce a fresh order within 6 months from the date of communication of this order. 2019 (2) TMI 723 Addition u/s 68 - identity of the investor/ creditor, its credit worthiness and genuineness of the transactions - Held that:- In this case, the assessee had provided the details of the investor; a survey enquiry pursuant to Section 133(6) was carried out. That the investor M/s Mekastar Finlease Pvt. Ltd. was genuine stood established; it had resources to the tune of ₹300 crores. The only ground on which the genuineness of the transactions was doubted was that the M/s Mekastar Finlease Pvt. Ltd. also received some amounts from dubious sources. It is now established that the investor’s duty is to satisfy the Revenue about the trinity of tests indicated in the said judgment, which itself is an authority for the proposition that the assessee is not under a duty to enquire or satisfy the Revenue about the source of the source. On a fair application of that decision of this Court, as affirmed by the Supreme Court, this Court is satisfied that no case is made out for interference. No substantial question of law arises 2019 (2) TMI 722 TPA - Application of the proviso to Section 92C(2) - ALP determination - option available to an assessee in the fixation of the arms length price [ALP for brevity] under Chapter X - benefit of relief granted circular dated 23.8.2001 - provisions amended vide Finance Act, 2002 w.e.f. 1.4.2002 - Held that:- In the present case, there is only one ALP determined by the TPO in accordance with one of the appropriate methods, being 'comparable uncontrolled price method' as seen from clause (a) of Section 92C(1). The proviso, according to us, would enable an option only in the context of there being a determination of more than one price by the most appropriate method. In that context it does not offer an option to compare the ALP determined with reference to the invoiced price, being the price at which the transaction is undertaken. When there are more than one price determined then the average has to be taken and the assessee has an option to adopt one of the prices determined by the A.O or the TPO; which does not vary by an amount in excess of 5% from the arithmetical mean and not from the invoiced price. There is absolutely no reference to the invoiced price insofar as the option made available to the assessee by the proviso as it existed from 01.04.2002, introduced by Finance Act, 2002 relevant to the subject assessment year. Subsequently sub-section (2A) was was brought into Section 92C by Finance Act, 2012, and contention of the assessee that the amendments in 2009 are clarificatory in nature rejected. Hence, the statute, for the relevant year, did not at all provide an acceptance of the invoiced price on any count and not at all on the ground that the difference between the invoiced price and the ALP determined not exceeding 5%. The mitigation provided by the CBDT is on the proviso introduced by the Finance Act, 2001. The same cannot be applied to the proviso introduced by way of substitution, by the Finance Act, 2002. The substituted proviso, which applied from 01.04.2002 erased the earlier proviso from the statute totally. It granted an option to the assessee; but only insofar as adopting one of the prices from which the average price is determined; that too in cases of more than one price being determined under the most appropriate method. In such circumstances, we answer the question of law framed in favour of the Revenue and against the assessee. 2019 (2) TMI 721 Expenditure incurred wholly and exclusively for the purpose of the business - allowable business expenditure - A.O. declined the claim of business expenditure on the premise that it had no connection with the business of the assessee and was not incidental to its business - principle of commercial expediency - Held that:- This Court agreed with the Tribunal's view that it was sufficient to show that the expenditure was one made voluntarily and on grounds of commercial expediency, in order to facilitate the carrying on of the business and there was no need to establish a necessity or an immediate, direct benefit. There the assessee was a collaborator of the foreign supplier and Coromandal was expected to be the assessee's customer. In the instant case, may be, PEIPL was a sister concern, or an associate concern of the assessee, but the assessee did not have any privy to Annexure D agreement, which was between M/s Cargill India Pvt.Ltd. and PEIPL. It cannot therefore be said that the expenditure was incurred by the assessee for the purpose of their business. The authorities were justified in disallowing the expenditure and we find no reason to interfere with the concurrent finding of the appellate authorities. The questions of law are answered in favour of the Revenue. 2019 (2) TMI 720 Addition being the profits of the Company on account of the large scale client code modifications - transfer the profits of the company to other clients for the purposes of adjustment of their incomes to evade payment of tax - motive of the client code modification was to indulge in circular trading to enable the generation of either profits or losses as required by clients at the end of the financial year - Held that:- Tribunal accepted the assessee's explanation and discarded the Revenue's theory that profit of the assessee's company were passed on to the clients. It was also noticed that the Revenue has not contended that the client code modification facility is often misused by the assessee to pass on losses to the investors, who may have sizable profit arising out of commodity trading against which such losses can be set off. The Revenue normally points out number of such instances of client code modifications as well as nature of errors in filling of the client code. At any rate, what can be taxed in the hands of the present assessee is the income escaping assessment. Even if the Revenue's theory of the assessee having enabled the clients to claim contrived losses, the Revenue had to bring on record some evidence of the income earned by the assessee in the process, be it in the nature of commission or otherwise. In the present case, the Assessing Officer has added the entire amount of doubtful transactions by way of assessee's additional income, which is wholly impermissible. - Decided against revenue. 2019 (2) TMI 719 Suppression of closing stock - AO has made addition on account of non-disclosure of closing stock as it was not shown in column 4 of Part A, P&L in the income tax return - Held that:- AO observed that excess of assets in the shape of closing stock is his profit, which is not declared as income by the assessee. The assessee’s claim that he should get benefit of provision of deduction u/s. 80JJA of the Act is not tenable because the addition has been made on account of undisclosed closing stock of Hindustan Sanitary Plaza, and this concern dealing in sanitary items. As this income is not derived from the activity of manufacturing which is covered u/s. 80JJA, no deduction is allowable. Hence, the addition was rightly confirmed by the Ld. CIT(A), which does not need any interference Disallowance of 25% of expenses claimed under the heads consumables, power/ fuel, packing, freight, miscellaneous, telephone, conveyance, travelling etc. - no vouchers were produced for expenditure claimed - Held that:- AO has not made disallowance on adhoc basis but after giving full opportunity to the assessee who could only submit evidence of expenditure of about ₹ 8 lacs out of his claim of ₹ 54.92 lacs. In view of the facts of the case, the disallowance made by the AO was upheld. However, it was restricted to 1/10th of the expenditure not substantiated by the assessee i.e. ₹ 4,70,000/- which was disallowed and therefore, the AO was directed to compute the income accordingly, which does not need any interference on my part, therefore, uphold the order of the Ld. CIT(A) on this issue and reject the ground raised by the Assessee. - Decided against assessee. 2019 (2) TMI 718 Addition u/s. 68 - unexplained cash credit as the assessee failed to prove the identity, creditworthiness and genuineness of the said loan - Held that:- It is clear that the assessee has discharged its onus. From the balance sheet of the lender, it is noted that it has substantial sources including turnover of ₹ 182 crores. The lender has also deducted TDS on the loan amount given. Furthermore, all the transactions are through banking channel. In these circumstances, the case law of M/S. RUSHAB ENTERPRISES VERSUS ASSTT. COMMISSIONER OF INCOME TAX 24(3), MUMBAI AND OTHERS [2015 (5) TMI 81 - BOMBAY HIGH COURT] referred by the ld.CIT(A) in his order as reproduced above is fully applicable. The loan in this case satisfies the criteria of loan taken in the regular course of business and the Revenue has not brought on record any cogent evidence to treat the same as bogus. In these circumstances, we do not find any infirmity in the order of the ld. CIT(A). - Decided against revenue 2019 (2) TMI 717 Deduction u/s. 54F - CIT(A) has accepted the claim of assessee in respect to only the property purchased at Kolkata with the aforesaid rider - Held that:- Allowing the deduction u/s. 54F in the assessment proceedings, we are of the opinion that the assessee should have been given the deduction u/s. 54F of the Act and, moreover even if the title is imperfect, it’s legal consequences if any in-respect to flat is the look out of assessee and any defect if any in the mode of transfer of property cannot defeat the claim of assessee in this assessment year, because it is not the case of CIT(A) that it is a bogus claim, when the fact of possession of flat by assessee and sale consideration passed to the vendor and genuineness of the transaction having been accepted by AO and this fact not even been questioned by CIT(A), the claim ought not to have been disallowed by CIT(A), therefore, we allow the claim of the assessee for the purchase of flat in Delhi u/s. 54F of the Act. - Decided in favour of assessee partly. 2019 (2) TMI 716 Unexplained investment u/s 69 - non acceptance of explanation furnished by assessee in respect of certain loans taken by him - Held that:- The investments are recorded in the bank account and secondly, the assessee has explained the source of said deposit i.e. out of loan received from his two sisters, who had sufficient agricultural landholding and had also carried on agricultural activity on the said land. The assessee produced the receipts of sale of pulses and onions during the year. The plea of assessee was rejected on the ground that it was difficult to link the agricultural receipts to actual demand draft purchased. There is no merit in the observations of CIT(A) in this regard and reversing the same, we delete the addition made in the hands of assessee, where the assessee has explained the nature of entries completely. - Decided in favour of assessee. 2019 (2) TMI 715 Addition on account of loss on valuation of securities - Held that:- In the absence of any clarity on the computation of amount of loss arising due to change in the valuation of securities under the new method of “cost or market price, whichever is less”, we set-aside the impugned order and remit the matter to the file of AO for determining the amount of loss arising by the application of method “cost of market price, whichever is less” to the securities held by the assessee bank as stock in trade. It is only after determining such a loss on valuation of securities that the ultimate figure of loss will be determined. AO will give a reasonable opportunity of hearing to the assessee. Before parting with the matter, we would like to clarify on an issue concerned with the change in the method of valuation of securities. On a specific query, AR submitted that the assessee was earlier valuing such securities as per a method prescribed by the RBI, resulting into some loss to be amortized over certain number of coming years. Once we have held that the new method of valuation has to be followed, which would account for loss on decline in the market value of securities in the concerned year itself, there can be no rationale in continuing to allow losses in subsequent years under the old method of valuation of securities as per RBI, which admittedly resulted into amortization of loss in some subsequent years. The AO is directed to examine this aspect also, which is connected with the determination of loss on valuation of securities under the new method of Cost or market price, whichever is less. It should be ensured that the assessee does not get double deduction. Factual matrix for the A.Y. 2012-13 is mutatis mutandis similar to that of the preceding year except for the amount of disallowance of ₹ 5,35,47,228/- made by the AO and sustained in the first appeal. Following the view taken hereinabove, we set-aside the impugned order and direct the AO to determine the issue as ordered supra. Both the appeals are allowed for statistical purposes. 2019 (2) TMI 714 Transfer pricing adjustment - most appropriate method to be applied while bench marking international transactions of assessee - MAM selection - TNMM or CUP - availability of compare transaction - Held that:- difference in functions performed, assets employed and risk assumed by the assessee under the activity of sale of manufactured items to the associated enterprise and non associated enterprise. - there were geographical differences in markets, wherein the assessee was exporting components to associated enterprises located in France, whereas the components sold in non associated enterprises were in India. - two transactions undertaken by the assessee were not comparable. Where the assessee was acting as contract manufacturer in respect of export of components to associated enterprises then, CUP method was not correct method to be applied to benchmark international transactions of the assessee. Following the ratio laid in Pr.CIT Vs. M/s. Amphenol Interconnect India P. Ltd. (2018 (3) TMI 536 - BOMBAY HIGH COURT), we hold that TNMM method is to be applied in this regard. The assessee has earned margins of 7.76%. The assessee had also furnished details and had selected certain comparables as functionally comparable whose mean margins worked out to 7.12%. TPO has not considered the said plea of assessee. So, in all fairness, we direct the AO / TPO to apply TNMM method to benchmark the international transactions of assessee and compare the margins shown by assessee with the mean margins of comparables which are functionally comparable. In this regard, the matter is being set aside to the file of AO / TPO for limited purpose to verify the stand of assessee and to determine arm's length price of international transactions. The grounds of appeal raised by assessee are thus, allowed. 2019 (2) TMI 713 Levy of penalty u/s 271(1)(c) - non specification of charge - defective notice - Held that:- A.O. issued show cause notice which is also mentioned in the penalty order in which A.O. has put the column blank which did not specify under which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing inaccurate particulars of income. Even in the assessment order A.O. did not mention as to under which limb of Section 271(1)(c) of the Act, the penalty have been initiated against the assessee as noted above. Therefore, the show cause notice for levy of the penalty itself is invalid and bad in law and as such the resultant proceedings have been vitiated. Once the assessee challenged the assumption of jurisdiction of the A.O. it would include the validity of the show cause notice which is mandatory before levy of the penalty. Since the notice itself is not legal, therefore, no penalty could be levied against the assessee - Decided in favour of assessee. 2019 (2) TMI 712 Application for approval u/s 80G(5)(vi) rejected - registration u/s 12AA - Held that:- We are of the view that Order under section 80G(5) denying approval to the assessee cannot be sustained in Law. It is not in dispute that assessee has been granted registration under section 12AA of the I.T. Act, 1961, by DIT (E) vide Order Dated 29.09.2018. CIT(E) was satisfied with the objects and activities of the assessee that it is meant for charitable purposes, therefore, different view cannot be taken while refusing the grant of approval under section 80G(5). CIT(E) did not doubt the objects of the assessee and did not mention anything if assessee has violated any of the conditions of Section 80G(5). Considering we are of the view that assessee is entitled for approval under section 80G(5) of the I.T. Act, 1961, from the date of application. We, accordingly, set aside the impugned Order and direct the Ld. CIT(E), Chandigarh, to grant approval to the assessee under section 80G(5)(vi) of the Income Tax Act, 1961, from the date of application. - Decided in favour of assessee. 2019 (2) TMI 711 Depreciation on an LED panel acquired by the assessee from its sister concern - depreciation @60% - whether the LED panel could be considered as equivalent to a computer for allowing deprecation at the rate of 60%? - Held that:- There can be no case for the Revenue that the acquisition of the LED panel from M/s. Tricom Vision by the assessee was for reduction of tax liability by claiming excess depreciation. In our opinion CIT(A) was justified in holding that cost to the assessee for the purpose claiming depreciation was cost incurred by it for acquiring the LED panel from M/s. Tricom Vision. As to the question whether the LED panel is equivalent to a computer for availing depreciation at the rate of 60% for computers in New Appendix I of Income Tax Rules, 1962, term "computer" has not been defined in the Act. Characteristic of the LED Panel acquired by the assessee has been given in the registered valuer’s report which more or less fits to the definition of computer as given in Information Technology Act, 2000. It had memory function, ability for processing and could also perform logical action by synchronizing the inputs to display. Thus in our opinion, the LED panel purchased by the assessee was eligible for claiming depreciation at the rate of 60%. - decided against revenue 2019 (2) TMI 710 TPA - upward adjustment - adjustment to arm's length price of international transactions - Held that:- The mean margins of comparables worked out to 14.92% as against assessee’s margins on cost of 8.53% and hence, in the final assessment order, the Assessing Officer made an upward adjustment of ₹ 90,07,200/-. The assessee is in appeal against the said adjustment to arm's length price of international transactions. Acropetal Technologies Limited as a comparable - company is functionally different, owns significant intangible assets and has earned supernormal profits and/or has exceptional year of performance - Held that:- Where the concern Acropetal Technologies Ltd. was engaged in similar line of business as in the preceding year and following the same parity of reasoning as held in assessee’s own case for assessment year 2010-11, we hold that the said concern is functionally not comparable to the assessee and hence, cannot be included in the final set of comparables. Further, the said concern also owns significant intangible assets comprised of 49% of its total fixed assets and also was incurring significant R&D expenditure. Hence, the concern could not be held to be comparable to the assessee. Accordingly, we direct the AO / TPO to exclude the concern Acropetal Technologies Ltd. from final set of comparables. The ground of appeal No.8 raised by assessee is thus, allowed. E-Infochips Limited as a comparable without appreciating that the company is functionally different and has earned supernormal profits and / or has exceptional year of performance - Held that:- On perusal of financial statement of E-Infochips Ltd., it is apparent that the said concern was engaged in various activities and was also having income from sale of products. The segmental details of said business activity undertaken by the said concern were not available. In view thereof, where the concern is engaged in diversified activities and was also a product company, then the margins of said concern cannot be applied to the margins of assessee, who was only providing software development services to its associated enterprises and was not a product company. In the absence of segmental details, E-Infochips Ltd. cannot be adopted as comparable to benchmark the international transactions undertaken by the assessee - we direct the Assessing Officer to exclude E-Infochips Ltd. from the final set of comparables. Maveric Systems Limited on the basis that they failed the export earnings filter of 75% of revenues i.e. their export turnover were less than 75% of respective revenues - Held that:- We find that as against total turnover of ₹ 56.90 crores, the export turnover was ₹ 43.17 crores and in such regard, the export sales to total sales ratio worked out to 75.87%. Without going into merits of applying export filter of 75%, we hold that since the said concern fulfills the export turnover filter, then the said concern is to be included in the final set of comparables for benchmarking the international transactions. Accordingly, we hold so. The ground of appeal No.7 part is thus, allowed. Allowance of working capital adjustment - the assessee pointed out that similar issue was decided by the Tribunal in assessee’s own case for assessment year 2010-11 and the Tribunal has allowed the claim of assessee. Following the same parity of reasoning, we direct the Assessing Officer to allow working capital adjustment and re-compute the margins of comparables. Allowance of risk adjustment is decided against the assessee. Hence, we dismiss the ground of appeal of assessee. The assessee pointed out that in case two concerns are excluded and one concern is included and working capital adjustment is allowed, then the margins shown by the assessee were within +/- 5% of mean margins of comparables and there is no need to adjudicate any other issue. Even the issues raised in the Revenue appeal would become academic. 2019 (2) TMI 709 Penalty u/s. 271(1)(c) - non specification of charge - whether the assessee was guilty of having concealed particulars of income or having furnished inaccurate particulars of income? - Held that:- As decided in PRINCIPAL COMMISSIONER OF INCOME TAX-19, KOLKATA VERSUS DR. MURARI MOHAN KOLEY [2018 (9) TMI 1 - CALCUTTA HIGH COURT] no specific charge against the assessee in the notice. Revenue has missed out their opportunity to subject the assessee to the penalty proceeding by not issuing a proper notice. No specific case has been made out by the Revenue as to why the matter should be remanded except that the assessee had not participated properly in the assessment proceedings but for that reason best judgment assessment has been made and the income, which had escaped assessment has been added to the income of the assessee. It was incumbent upon the Revenue to make out a specific case for imposition of penalty, on which count the Revenue has failed. - decided against revenue 2019 (2) TMI 708 Addition made on protective basis - proceedings arising from the substantive assessment - Held that:- CIT(Appeals) did not await the outcome of the proceedings arising from the substantive assessment and since the said information was not forthcoming even after a considerable period from the concerned AO, he proceeded to dispose of the appeals arising from the protective assessments by his impugned orders and deleted the addition made on protective basis without awaiting the final outcome of the proceedings arising from the substantive assessment. Keeping in view the decision of CIT –vs.- Surendra Gulab Chand Modi [1981 (3) TMI 21 - GUJARAT HIGH COURT], we hold that the CIT(Appeals) was not justified in deleting the additions made by the Assessing Officer on protective basis in all the three years under consideration without awaiting for the final outcome of the proceedings arising from this substantive assessment. We, therefore, set aside the impugned orders of the CIT(Appeals) on this issue and remit the matter back to him for keeping it alive and pending till the outcome of the proceedings arising from the substantive assessment. Additions made on account of commission income allegedly received by the assessee for giving accommodation entries - Held that:- We find that this issue is consequential to the issue relating to the addition made on protective basis on account of accommodation entries allegedly given by the assessee-company to the Mumbai based companies. Since the said issue is remitted back by us to the ld. CIT(Appeals), we also remit the consequential issue relating to addition on account of commission income back to the CIT(Appeals) for deciding the same afresh. Grounds No. 1 & 2 of the Revenue’s appeals for all the three years under consideration are accordingly treated as allowed for statistical purposes. Addition made on account of unexplained cash deposits found to be made in the Bank account of the assessee, which is involved in A.Y. 2005-06 and 2006-07 - Held that:- We find that the impugned cash deposits were claimed to be made by the assessee out of cash balances available in the cash book on the respective dates as well as the sale proceeds of shares and in his remand report submitted to the ld. CIT(Appeals), this claim of the assessee was accepted by the Assessing Officer himself by stating that the cash deposits in the bank account were verifiable from the cash book which was produced before him and even the sale proceeds of shares reflected in the cash book were duly supported by sales invoices which were also produced before him. Keeping in view this remand report submitted by the AO accepting the claim of the assessee regarding the availability of cash for deposits made in the Bank account after verification, the ld. CIT(Appeals) deleted the addition made by the Assessing Officer on account of the alleged unexplained cash deposits found to be made in the Bank account of the assessee and we do not find any infirmity in the impugned orders of the CIT(Appeals) giving relief to the assessee on this issue for A.Y. 2005-06 and 2006-07. Even the D.R. has not raised any material contention in this regard. We accordingly uphold the impugned order of the CIT(Appeals) on this issue and dismiss Ground No. 3 of the Revenue’s appeals for A.Y. 2005-06 and 2006-07. 2019 (2) TMI 707 Exemption u/s.54B - whether the land transferred by the assessee was non-agricultural land, there can be no grant of exemption u/s.54B of the Act - whether or not the land transferred by the assessee was an agricultural land? - Held that:- On a cumulative consideration of all the relevant factors prevailing in the instant case, both for and against the treatment of land transferred by the assessee as agricultural land, we have no hesitation in holding that the assessee transferred 'agricultural land’ to Mr. Dhanraj Malchand Rati. It is so for the reason that the land was classified as “agricultural land” in land revenue records; subjected to land revenue; was being cultivated on which “Jowar crop” was grown. Reliance placed by the ld. DR on a Tribunal order dated 27.5.2015 passed in the case of Abhijit Subhash Gaikwad [2015 (5) TMI 971 - ITAT PUNE] is misplaced in as much as the Tribunal returned a categorical finding in that case that the concerned Talathi had stated : “that the land was never used for agricultural activity”. This position is contrary to the extant case. Here the concerned Talathi of the land transferred by the assessee has certified in the 7/12 extract that the “Jowar Crop” was grown on the land in last four years in line. It is, therefore, held that the land transferred by the assessee was an “agricultural land” and the capital gain arising from such land is eligible for exemption u/s.54B. We, therefore, overturn the impugned order on this issue and uphold the assessee’s point of view. Treatment of agricultural income as “income from other sources” - Held that:- We have held in earlier paras of this order that the land transferred by the assessee was an agricultural land on which jowar crop was raised. However, in order to claim exemption for a particular sum as an agricultural income, it is sine qua non for the assessee to prove the quantum of agricultural income claimed with relevant evidence. Existence and quantum of agricultural income are two separate things. AR fairly conceded that no formal sale of crop receipts were available as the “Jowar crop” was sold directly without routing it through commission agents. In view of the foregoing and in the absence of direct evidence of quantum of income, we estimate the existence of agricultural income in the peculiar facts of this case at half of the amount declared at ₹ 56,000/- and the remaining half is held to be “Income from other sources”. 2019 (2) TMI 706 Unexplained u/s 68 - non-genuine transactions - Held that:- The assessment order and the order of CIT(A) and noted that the AO noticed from the Bank Account submitted by the assessee that these are non-genuine transactions. The entire basis of the AO was on the investigation done by the office of DGIT Investigation, Mumbai. From the above assessment order, it is clear that the AO has not made any enquiry or investigation and no evidence to controvert the factual details submitted by the assessee was brought on record by the AO. The statement of Shri Pravin Kumar was supplied and no cross-examination was provided. There nothing on record about the result of investigation having done by the DGIT(Investigation), Mumbai. The papers filed by the assessee clearly demonstrate that the identity, creditworthiness and genuineness of the transaction is proved. The assessee has prima-facie discharged its onus and AO has not carried out any inquiry. We confirm the order of CIT(A) and this issue of Revenue’ s appeal is dismissed. 2019 (2) TMI 705 Nature of receipt - Income recognition - Consumer Security Deposit and Service Line deposits - whether the amount received from the customers for service line is revenue in nature as the same is part of the selling of electricity during normal business operation and does not qualify to be capital receipt? - Held that:- As decided in assessee's own case we find substance in the submission of the assessee as there is no dispute on the facts of the case. Discussing these submissions of the assessee and meeting out the observations of the Assessing Officer, we are of the view that the Learned CIT(Appeals) following the ratios laid down in the cited decisions has rightly come to the conclusion that the amounts received for installation of service lines are to be treated as capital receipts in the hands of the assessee. In result, the Learned CIT(Appeals) was justified in deleting the addition made on account of service line deposits from customers. The same is upheld - The issue is covered against the revenue in Hoshiarpur Electric Supply Co. vs. CIT [1960 (12) TMI 6 - SUPREME COURT]. Allowability of legal claims - deduction of expenditure u/s 37 - Held that:- As decided in assessee's own case e find that the Learned CIT(Appeals) has deleted the addition made on account of disallowance of legal claim on the basis that the Assessing Officer has not highlighted a single instance that the charges were of penal nature. We find that the Assessing Officer has made the disallowance on estimate basis at 25% of the expenditure claimed. No basis has been assigned for making such ad hoc disallowance. Noting these material aspects, we are of the view that the Learned CIT(Appeals) has rightly deleted the disallowance in absence of any instance that there was any penalty which would fall under the Explanation to Sec. 37 of the Income-tax Act, 1961 - Assessee appeal allowed. 2019 (2) TMI 704 Addition u/s 68 - Long-Term Capital Gain on sale of shares holding it to be a bogus transaction - Held that:- In this case, the shares have been directly allotted by the company and the payment has been made through account payee cheque duly disclosed by the assessee in the earlier year and said purchase of shares is evidenced not only from the bank statement but also by the allotment of shares. Thus, possession of the shares is not in doubt at all because same is also reflected in Demat account maintained with NSDL. Not only that, the sale of shares is also evidenced from transaction undertaken through registered stock at a specific trade time in BSE and after the sale of shares, the net receipts have been credited to the assessee’s bank account. The nature of the transaction is clearly purchase and sale of shares and the source of the credit, from the material facts on record are quite evident that it is from the sale of shares. Once, no material information has been brought on record to convert these transactions then it is very difficult to treat the sale proceeds of the shares as unexplained cash credit to be added under deeming provisions of section 68. There is no finding or any whisper in the impugned orders that some unaccounted money has been routed through some accommodation entry provider for getting the bogus long-term capital gain. When there is a concurrent finding on similar set of facts in the case of assessee’s husband, then as a matter of precedent same needs to be followed. In any case, independently also in view of the material facts on record no reason to sustain the action of the AO without any contrary material brought on record by the AO to hold that the said transaction is not genuine. AO u/s 68 is directed to be deleted and assessee’s claim for exemption u/s 10(38) on long term capital gain is allowed. - Decided in favour of assessee. 2019 (2) TMI 703 Treating the appellant as ‘Pacca Arthatia’ instead of ‘Kachha Arahtia’ as shown and claimed by the appellant - Income from the business as trader or commission agent - Held that:- In the instant case, we find that the assessee has been functioning as ‘Kachha Arahtia’ for last number of years and during this period, the modus operandi of the assessee and the nature of its business operations as ‘Kachha Arahtia’ had been examined and accepted by the Department, we therefore donot find a justifiable basis to depart from the settled position. We find that there are no clear findings which have been recorded by the Assessing officer to depart from the settled position to hold that the assessee firm is not a ‘Kachha Arahtia’ but a ‘Pacca Arahtia’. What is relevant to examine is whether the assessee was carrying out the transactions of purchase and sale on its own behalf or on behalf of a third party. The privity of contract and underlying transaction documentation are thus critical for the purposes of present analysis. Once the transaction documents are examined, thereafter, their treatment and reflection in the books of accounts to be examined. In absence of transaction documents, merely looking at the nomeclature of certain ledger accounts, it cannot be held conclusively in terms of nature of transaction individually or hold conclusively that the assessee is acting as a ‘Pacca Arahtia’ and not as ‘Kachha Arahtia’. In view of the same, in absence of any clear findings so recorded by the lower authorities, we are unable to accede to the position so adopted by the Revenue where it proceeded to depart from the past settled position wherein the assessee has been held as ‘Kachha Arahtia’. - decided in favour of assessee. 2019 (2) TMI 702 Computation of long term capital gains - transfer of a capital asset - part performance of the contract - whether land in question stands within the definition of the term ‘transfer’ as envisaged in the provisions of section 2(47)? - possession of the property was under dispute and the assessee had obtained injunction from the Civil Court to stop any further transfer of the disputed property by the purchaser - Held that:- As per sale deed, sale consideration was to be paid as per Schedule A to the said agreement, for which postdated cheques were issued, which were to be encashed as per the conditions mentioned for encashment of cheques. As per clause 8 of the sale deed, the purchasers had given postdated cheques to sellers and it was their responsibility to see that the postdated cheques get cleared for payment. In view of the said cheques being stopped for payment and the dispute arising between the parties and even the dispute being who is in possession of the said property, reflects that even part performance of the contract has not been settled. In such circumstances, we find guidance from the ratio laid down by the Apex Court in CIT Vs. Balbir Singh Maini [2017 (10) TMI 323 - SUPREME COURT OF INDIA] that where the transaction has not materialized, then no profit or gain which arises from the alleged transfer of capital asset could be brought to tax under section 45 r.w.s. 48 of the Act. The grounds of appeal raised by assessee are thus, allowed. 2019 (2) TMI 701 Penalty u/s. 271(1)(c) - Addition made of unsecured creditors as unexplained - Held that:- Though it is incumbent upon the authorities below while dealing the issue in a quasi Judicial proceeding, the same has not been performed by the AO nor by the First Appellate Authority. The documents so placed before us though were available before the Learned CIT(A) was not taken into consideration in its proper prospective. If those documents were really insufficient to reach the level of satisfaction to assess the bonafide of the assessee the CIT(A) could have called for details from the assessee in the penalty appeal proceeding, instead of doing so, simply on the basis of the finding of the Assessing Officer, the CIT(A) confirmed the penalty which in our considered view is arbitrary, erroneous and of course not in accordance with law. We, therefore, respectfully relying upon the judgment passed by the Jurisdictional High Court decide the issue against the Revenue. We find that the order imposing penalty as made by the Learned AO, confirmed by the Learned CIT(A) is without any firm basis and/or independent enquiry which failed to have been conducted by the Authorities below. Such finding culminating into the order of the imposition of penalty is bad and liable to the quashed. We, thus, allow the appeal filed by the assessee. 2019 (2) TMI 700 PE in India - Grouting activities - Income accrued in India - applicability of section 44BB of the Act to Grouting activities - appellant company is engaged in providing grouting and precast solutions for subsea off-shore construction industry - DTAA - Held that:- It is the settled principle of interpretation in view of Vienna Convention of 1969, that DTAA needs to be interpreted “uberrimae fidei” which means ‘with utmost good faith’. It means that the Assessing Officer/DRP are rewriting DTAA. The contention of the ld. DR that the assessee deliberately manipulated length of projects to always keep it under 270 days is an ill-placed allegation only. The observation by the Assessing Officer/DRP that grouting is not a simple masonry work and involves complex aspects does not take it out of the construction activities as mentioned in article 5(2)(h) of the India UAE DTAA because there is no bifurcation of simple and complex masonry/construction work under Article 5(2)(h) and any further classification [as done by the Revenue] would amount to rewriting DTAA. When there is no option in a given case, the general Article 5(1) would get attracted which means that when there is an option [like in the present case], specific article will prevail. The establishment of PE in India is in respect of each assessment year only. Moreover, there is no bar in carrying on the activities year after year. The determination of existence of PE in India is to be made by reference to provision in DTAA. In our considered opinion, the ld. DR was trying to set up a new case which is not permissible by the decision of the Special Bench of the Tribunal in the case of Mahindra & Mahindra Vs. DCIT [2009 (4) TMI 207 - ITAT BOMBAY-H]. DR also contended that the matter should be sent back to the Assessing Officer for redetermination of the period of stay in India. Multiple opportunities are not permissible to any authority to experiment in setting up case as held in the case of Rajesh Babubhai Damania [2000 (6) TMI 5 - GUJARAT HIGH COURT]. Considering the facts of the case in totality, in the light of India UAE DTAA, we are of the considered opinion that there is no PE in India for the year under consideration. First grievance is accordingly, allowed. The alternative plea in respect of applicability of section 44BB of the Act becomes otiose. 2019 (2) TMI 699 Assessment u/s 153A - addition made of share application received u/s 68 and addition of commission paid allegedly for the share application money and finally a disallowance u/s 14A - denial of cross-examination a witness - Held that:- No incriminating material has been found during the course of search. The alleged statements recorded from entry operators have admittedly been retracted and the Assessing Officer has not based the additions on these statements. Even otherwise, when copies of the alleged statements recorded by the revenue officials have not been given to the assessee, no addition can be made based on such evidence which is not confronted to the assessee. The contents of the statements are also not brought out in detail in the assessment order. Only a general reference is made that there were certain statements recorded from various entry operators by the investigation wing. No addition can be made on such general observations. We also find that the assessee has not been given an opportunity to cross-examine any of these persons, based on whose statements, the revenue claims to have made these additions. The Hon’ble Supreme Court in the case of Kishinchand Chellaram vs. CIT [1980 (9) TMI 3 - SUPREME COURT] had held that opportunity of cross-examination must be provided to the assessee As a matter of fact, the right to cross-examination a witness adverse to the assessee is an indispensable right and the opportunity of such cross-examination is one of the cornerstones of natural justice. Even otherwise, it is not clear as to which of these statements were recorded during the course of search operation or whether the statements were recorded during the course of survey operations. It is well settled that a statement recorded during the course of survey operation cannot be used as an evidence under the Act. Coming to the alleged cash trail, none of the material gathered by the Assessing Officer by way of bank account copies of various companies supposed to be a chain was given/confronted to the assessee. The alleged statements were supposedly recorded from directors of these companies which formed this alleged chain are also not brought on record. Only a general statement has been made that the investigation wing had recorded some statements. There is no evidence whatsoever that cash has been routed from the assessee company or that any cash was deposited by the assessee company. There is no material whatsoever brought on record to demonstrate that the alleged cash deposit made in the bank account of a third party was from the assessee company. No opportunity to cross-examine any these parties was provided to the assessee None of the material gathered by the Assessing Officer can be categorized as incriminating material found during the course of search or found during the course of any other operation under the Act. - Decided in favour of assessee. 2019 (2) TMI 698 Bogus purchases - addition u/s 69C - addition made @12.5% of the alleged bogus purchases - profit estimation - Held that:- there cannot be any sale without purchases, therefore, only option available with us to estimate the profit. Taking a shelter from the aforementioned judicial pronouncements, and since, the assessee has already declared gross profit more than 9% in both the Assessment Years, therefore, we deem it appropriate to estimate the profit @ 11% in place of 12.5% estimated by the Ld. Commissioner of Income Tax (Appeal). Thus, both the appeals of the assessee are partly allowed. 2019 (2) TMI 697 Disallowance of preoperative expenses - expenses treated as capital in books of account, but claimed as revenue in statement of total income u/s 37(1) - Held that:- AO was erred in disallowing deduction claimed towards pre-operative expenses in statement of total income u/s 37(1) of the Income-tax Act, 1961 even though the said expenditure has been treated as capital expenditure in books of account. CIT(A), after considering relevant facts has rightly deleted addition made by the AO. Therefore, we are of the considered view that there is no error in the findings of the Ld.CIT(A) and hence, we are inclined to uphold the findings of the Ld.CIT(A) and dismiss appeal filed by the revenue. Exemption u/s 14A r.w.r. 8D - Held that:- We find that although the AO has accepted the fact that the assessee has made suo moto disallowance of ₹ 2,75,214, without verifying whether disallowance made by the assessee are direct expenses or other expenses which falls under the provisions of Rule 8D(2)(iii), made further disallowance of ₹ 2,69,162 by applying 0.5% of average value of investments. The assessee has filed details of expenses disallowed as per which, the expenses disallowed by the assessee are coming under the purview of rule 8D(2)(iii). Therefore, we are of the considered view that further disallowance of expenses by applying rule 8D(2)(iii) @0.5% amounts to double disallowance which is not permissible under the law. Therefore, we direct the AO to delete addition made u/s 14A r.w.r. 8D(2)(iii) of I.T. Rules, 1962. Disallowance of ROC charges paid for increase in authorised capital - AO has disallowed on the ground that fees paid for increase in authorised capital is capital in nature which cannot be allowed as deduction u/s 37(1) - Held that:- The assessee has filed necessary details to prove that it has paid ROC fees for increase in authorised capital for issuance of bonus shares. But, we are not aware whether the said particulars are part of assessment proceedings before the AO or not. Therefore, we are of the considered view that the issue needs to be re-examined by the AO in the light of the decision in the case of CIT vs General Insurance Corporation Ltd [2006 (9) TMI 116 - SUPREME COURT]. Hence, we set aside the issue to the file of the AO and direct him to consider the issue on the basis of working furnished by the assessee. 2019 (2) TMI 696 Revision u/s 263 - Unrealized Mark to Market losses - Held that:- For invoking the provisions of section 263 of the Act, the twin tests of the order being both ‘erroneous’ and ‘prejudicial to the interests of Revenue’ have to be satisfied. If we examine the issues raised by the CIT in the impugned order u/s 263 of the Act and the reasoning given therein, in our view, it is fairly clear that the above two tests are not satisfied in these cases. As regards the issues related to ‘Forex Loss due to Mark to Market Losses’ and ‘Prior Period Expenditure’ are concerned, the grievance of the CIT is that these are not disallowed while computing ‘Book Profits’ u/s 115JB of the Act. Since there is no provision u/s 115JB for addition of “Forex Losses” OR “Prior Period Expenditure”, such disallowances/additions are not tenable under the law and the CIT cannot issue directions to make additions/disallowances which are not allowed under the law. In our considered view, as the twin conditions of an erroneous order and prejudicial to the interest of Revenue are not satisfied on both disallowances in respect of “Forex Losses” and “Prior Period Expenditure”, therefore the impugned order of the CIT was wrong. ‘Non-deduction of tax at source on payments for purchase of software’, the fact that this issue has been taken up before the AAR and the application has been admitted is borne out by the details on record. As per the provisions of section 245RR of the Act, no Income Tax authority or Appellate Tribunal can proceed to decide any issue in respect of which an application has been made before the AAR u/s 245Q (1) of the Act. This applies to and includes, inter alia, both AO and the CIT. This being the case, in our considered view, the CIT’s action in directing the AO to decide the issue in a particular manner is not in accordance with law. As regards the issue of verification of “provision for doubtful debts and advances” and the quantum of bad debts written off, evidently, the details thereof are on record and reflected in the financial statements and computation of income. CIT has not made out a case to demonstrate that the AO has not conducted any enquiry and as the details were available on the face of the return of income, the conclusion can be that the AO has examined the issue and accepted the details filed by the assessee. It is settled legal principle that the assessee can write off its debts in any year of its choice, provided that the said amounts were offered to tax earlier and if such amounts or part thereof are recovered at a subsequent date, it shall be offered to tax in that year. We also observe that the AO in order u/s 143(3) r.w.s. 263 of the Act dated 19.12.2016, giving effect to the directions issued by the CIT in the impugned order for computing the book profits u/s 115JB of the Act, has examined the issue again and allowed the deductions claimed by the assessee. In that view of the matter, the twin conditions precedent; of the order being erroneous and prejudicial to interests of Revenue have not been satisfied. The issues on which the CIT has invoked the revisionary jurisdiction u/s 263 of the Act is untenable in the eyes of law as in our view no case has been made out that the order of assessment passed u/s 143(3) of the Act dated 26.03.2014 for Assessment Year 2010-11 is erroneous and prejudicial to the interest of Revenue on any of the issues raised by the CIT in the impugned order. In this view of the matter, we hold that the action of the CIT in invoking the provisions of section 263 of the Act to be untenable and therefore cancel the impugned order of the CIT passed u/s 263 of the Act on 30.03.2016 for Assessment Year 2010-11.- Decided in favour of assessee. 2019 (2) TMI 695 Disallowance u/s 14A r.w.r. 8D - sufficiency of own funds - Held that:- As decided in THE A.C.I.T., PANCHKULA CIRCLE, PANCHKULA VERSUS M/S JANAK GLOBAL RESOURCES PVT. LTD. [2018 (12) TMI 902 - ITAT CHANDIGARH] wherein deleting the disallowance of interest made on finding that it had sufficient own interest free funds for making the investment, which fact has not been controverted by the Revenue, we see no reason to interfere in the order of the Ld. CIT(Appeals) and the ground raised by the Revenue, therefore, is dismissed. - Decided in favour of assessee 2019 (2) TMI 661 Charitable activity - Grant of approval u/s 80G rejected - assessee has been granted registration under section 12AA - Held that:- Order u/s 80G(5) denying approval to the assessee cannot be sustained in Law. It is not in dispute that assessee has been granted registration under section 12AA by DIT (E) vide Order Dated 29.09.2018. CIT(E) was satisfied with the objects and activities of the assessee that it is meant for charitable purposes, therefore, different view cannot be taken while refusing the grant of approval under section 80G(5) - CIT(E) did not doubt the objects of the assessee and did not mention anything if assessee has violated any of the conditions of Section 80G(5). Considering the totality of the facts and circumstances of the case in the light of above decisions relied upon by the Learned Counsel for the Assessee, we are of the view that assessee is entitled for approval under section 80G(5) from the date of application. We, accordingly, set aside the impugned Order and direct the CIT(E), Chandigarh, to grant approval to the assessee under section 80G(5)(vi) - Decided in favour of assessee. 2019 (2) TMI 660 Levy of penalty u/s 271(1)(c) - non specification of charge - Held that:- In the present case, the A.O. issued show cause notice dated 29.12.2009 which is also mentioned in the penalty order in which A.O. has put the column blank which did not specify under which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing inaccurate particulars of income. Even in the assessment order A.O. did not mention as to under which limb of Section 271(1)(c) of the Act, the penalty have been initiated against the assessee as noted above. Therefore, the show cause notice for levy of the penalty itself is invalid and bad in law and as such the resultant proceedings have been vitiated. Once the assessee challenged the assumption of jurisdiction of the A.O. it would include the validity of the show cause notice which is mandatory before levy of the penalty. Since the notice itself is not legal, therefore, no penalty could be levied against the assessee - decided in favour of assessee. Customs 2019 (2) TMI 694 Import of Prohibited goods or not - basis of determination - Import of Black Pepper - N/N. 53/2015-2020 dated 21.03.2018 - prayer to release the goods - Held that:- N/N. 53/2015-2020 dated 21.03.2018 issued by the DGFT lays down the policy as to whether import of a certain item is free or prohibited. This obviously cannot be decided after the goods land in India. In the very nature of things, there must be certainty in these transactions. Therefore, the position that prevails on the date of raising of invoice alone will be the basis for determination. The issue as to whether import is free or prohibited will have to be necessarily decided based on the situation prevailing on the date of placing of the order or raising of invoice. Due to exchange rate fluctuation, CIF value had fallen below to ₹ 500/- per kg in this case. But, in invoice, CIF was above ₹ 500/- per kg - therefore, the import must be considered as free in this case. The respondents are directed to assess the Bill of Entry and allow the release of goods in question, after following the usual formalities - petition allowed - decided in favor of petitioner. 2019 (2) TMI 693 Principles of unjust enrichment - Refund of duty credited to Consumer Welfare fund - goods captively consumed - it was alleged that appellants have not proved that the burden of duty was not passed on to customers - Held that:- It is true that the concept of unjust enrichment extends not only to the goods which are traded but also to goods which are captively consumed by the claimant in the manufacture of products. The duty element can be indirectly passed on to the customers by including their duty in cost of production. In the facts of the present case, on the basis of the CA certificate produced by the counsel for the appellant before the bench backed by the balance sheet and other documents, it is clear that appellant has not included customs duty element (CVD and SAD) on the goods imported in the cost of their manufacture and has only accounted for them as amounts receivable in their books of accounts - thus, the appellant has not passed on the burden of customs duty claimed and therefore they are entitled to refund of the same. The impugned order is modified to the effect that the refund amount shall instead of being credited to the Consumer Welfare Fund be paid to the appellant - appeal allowed - decided in favor of appellant. 2019 (2) TMI 692 Jurisdiction - power of DRI to issue SCN - section 28 of Customs Act, 1962 - Held that:- The constitutionality of retrospective validation of competence to issue notice was challenged in different High Courts and, in the light of the decision of the Hon’ble High Court of Delhi in Mangali Impex v. Union of India [2016 (5) TMI 225 - DELHI HIGH COURT], stayed subsequently by the Hon’ble Supreme Court, and noting the diverging decisions of various High Courts the Hyderabad bench of this Tribunal, while disposing off the appeal in Alumeco India Extrusion Ltd v. Commissioner of Central Excise, Customs & Service Tax, Hyderabad-I [2009 (5) TMI 402 - CESTAT, BANGALORE] has considered it appropriate not to dispose of matters in which this has been agitated. The principle of finality of litigation may have the effect of sanctifying illegal proceedings if, ignoring the issue of jurisdiction, merit alone is considered before competence is decided by the Hon’ble Supreme Court. The inequity of a recovery upheld now with jurisdiction being nullified later is not particularly appealing to a judicial institution. Should it be held otherwise, there is no detriment to Revenue as the proceedings would then be reinstated. The ends of justice will be appropriately met if the impugned order is set aside and the matter remanded back to the adjudicating authority to be decided afresh after the question of jurisdiction of officers of Directorate of Revenue Intelligence to issue notice for recovery of duty is settled - appeal allowed by way of remand. 2019 (2) TMI 691 Import of machinery - Electronic Sensor Paver Vogele – Model Super 1800-2 with AB 600-2 TV screen for laying bituminous pavement upto 9 meter width - benefit of N/N. 21/2002-Cus. dated 1.3.2002 (serial No.230) denied on the ground that the imported machine having minimum pavement width of 3 meters, whereas the minimum width of pavement required 7 meters to qualify for the benefit of Notification - Held that:- There is no dispute of the fact that the goods imported by the respondent has been described in the Bill of Entry as “Electronic Sensor Paver Vogele – Model Super 1800-2 with AB 600-2 TV screen for laying bituminous pavement upto 9 meter width”, whereas on examination, the same was found to be that the machine is capable of laying bituminous pavement of 3 meters only. It is also not in dispute that only with addition of bolt-in extensions, i.e. with accessories, the machine could be capable of laying bituminous pavement of 7 meters and above. Reliance placed in the case of COMMISSIONER OF CUSTOMS (IMPORT), MUMBAI VERSUS RAMKY INFRASTRUCTURE LTD AND OTHERS [2014 (6) TMI 615 - CESTAT MUMBAI (LB)], where it was held that the mere import of the accessories with the machine cannot change the basic character of the machine. - the machines in question are capable of laying bituminous pavement from 3 meters to 6 meters i.e. less than 7 meters. - Importer is not eligible for benefit of exemption. The learned Commissioner (Appeals) has erred in extending the benefit of Notification No.21/2002-Cus. dated 1.3.2002 (serial No.230) - decided in favor revenue. Service Tax 2019 (2) TMI 690 Construction of complex service - construction of residential units for Tamil Nadu Police by the appellants - period 1.4.2006 to 31.3.2009 - Held that:- In a very recent decision of CESTAT Chennai in the case of Bismi Engineering Contractors & Others Vs CGST & Central Excise, Madurai [2013 (8) TMI 293 - CESTAT CHENNAI] involving the very same issue, it has been categorically held that construction of such quarters for police personnel will fall under exclusion category and would not be exigible to service tax - demand do not sustain - appeal allowed - decided in favor of appellant. 2019 (2) TMI 689 Non-payment of service tax on 40% value - abatement under notification availed - restaurant service - restriction imposed by provisions of Sub-rule (7) of Rule 4 of Cenvat Credit Rules, 2004 - Held that:- The issue covered by the decision in the case of COLLECTOR OF C. EX., ALLAHABAD VERSUS RAM SWARUP ELECTRICALS LTD. [2007 (5) TMI 116 - HIGH COURT , ALLAHABAD], where it was held that in respect of the availment of modvat credit there is no restriction during the impugned period - Since during the period from 01.07.2012 to 31.03.2013 there was no such restriction to avail Cenvat credit within 6 months from the date of receipt of services, by following the ruling of Hon’ble High Court, the appellant were eligible for Cenvat credit of ₹ 4,06,292/- - credit allowed - appeal allowed - decided in favor of appellant. 2019 (2) TMI 688 CENVAT Credit - exempt service or not - investment in securities - whether the activity comes under the scope of Trading of goods or not - Rule 6 of CENVAT Credit Rules - Held that:- Undisputedly, the appellant assessee is an Indian Insurance Company licensed by Insurance Regulatory Development Authority of India (IRDAI) to carry only on life insurance policies - the activity undertaken by the appellant assessee of issuing any unit linked insurance policy or scrips or any instrument is covered under life insurance business. The Insurance Act, 1938, in Section 27 thereof also mandates that it is obligatory on the part of the insurance company to have investments which are not less than the sum of its current and expected future liabilities towards policy holders. The Act also stipulates that not less than 25% of the sum should be in Government securities and the balance in approved investments, as specified in IRDA (Investment) Regulations 2000. It is not in dispute that w.e.f. 01.05.2011, not only the risk cover in the life insurance but also the amounts attributable to managing the investment of the policy holder are liable to be taxed under taxable head in the life insurance services, as specified in Section 65(105)(zx) of the Finance Act, 1994 - Indian Insurance Company like the assessee could only be undertaking life insurance business, it is also clear that investment in securities is an obligation that the insurer has to fulfil in order to render the life insurance services. Any insurance company which does not comply the requirements under the Insurance Act to undertake specified investments, could be disqualified from undertaking right insurance business. It is also clear from the amendment to the definition of taxable service under the head “Life Insurance Service” under the Finance Act, 1994, w.e.f. 01.05.2011, the premium attributable to the risk in life as also managing to investment was taxable. The investment activity undertaken by the appellant assessee is an integral part of life insurance service and cannot be divested from the same. As the service being rendered by the appellant is that of life insurance, which is a taxable service, it cannot be said that appellant is rendering any exempted service - even otherwise Rule 6 of CENVAT Credit Rules 2004, applies in a case where credit on inputs and input services i.e. common to rendition on taxable and exempted services has been availed of, in the instant case the only service that the appellant is rendering is life insurance service, which is taxable entirely - Thus, it cannot be said that appellant has availed any credit on input and input services which is common or attributable to rendition of any exempted services. In the case in hand, as the activity of managing investments suffers service tax liability under life insurance services, the same cannot be said to be an exempted service, warranting reversal of CENVAT Credit under Rule 6 of CENVAT Credit Rules 2004. Appeal allowed - decided in favor of appellant. 2019 (2) TMI 687 Erection and commissioning or installation services - works contract services - composite electrical contracts such as supply, construction, erection, testing and commissioning of substations, switch station, transmission lines, distribution lines, distribution transformers etc to APTRANSCO, electrical companies such as APSPDCL, APEPDCL in the state of Andhra Pradesh - N/N. 45/2010 dated 20.07.2010 - Held that:- The said notification was considered by this Bench in the case of Unitech Power Transmission Ltd [2018 (5) TMI 1130 - CESTAT HYDERABAD] and Hyderabad Power Installations Pvt Ltd [2016 (7) TMI 1151 - CESTAT HYDERABAD] and relief was granted to the assessee/appellant therein - the service tax liability on the appellant for the services rendered relating to transmission and distribution of electricity is unsustainable. Appeal allowed - decided in favor of appellant. 2019 (2) TMI 686 Valuation - includibility - inclusion of reimbursable expenses in the taxable value in assessable value - Held that:- The Hon’ble Apex Court in the decision cited by the Ld. Advocate in the case of Intercontinental Consultants and Technocrats Pvt. Ltd. [2018 (3) TMI 357 - SUPREME COURT OF INDIA] has categorically held that the reimbursable expenses are not includable in the taxable value - demand do not sustain. Outdoor catering service - abatement under N/N. 1/2006 denied - Held that:- The appellant has availed the credit on input services which makes them ineligible for availing the benefit of abatement however, it is brought out by the Ld. Counsel that they have reversed the credit. Taking note of this, if the credit has been reversed the appellant would be eligible for the benefit of abatement - for the limited purpose of verifying that the appellant has been reversed the credit, the matter is required to be sent back to the adjudicating authority - matter on remand. Appeal allowed in part and part matter on remand. 2019 (2) TMI 685 Refund of accumulated CENVAT Credit - surrender of service tax registration - export of services - Rule 5 of Cenvat Credit Rules, 2004 read with Section 11B of Central Excise Act, 1944 - Held that:- The term “Total turnover” used in the above formula includes the sum total value of all excisable goods cleared during the relevant period. It doesn’t restrict the inclusion of value of the excisable goods exported, per se. Sub-rule (2) deals with a situation where duty drawback is allowed and further lays down that in such a situation, credit could not be refunded. Therefore, it is clear from the above that Rule 5 facilitates the refund of Cenvat credit not merely of the excisable goods exported and therefore to say that Rule 5 provides for refund of un-utilized Cenvat only in the cases of export of service is incorrect. Accepting this interpretation of the Commissioner (Appeals) would lead to serious anomaly, which cannot be the intention of the legislation. Admittedly, the appellant has a huge credit which is now lying with the Revenue; the appellant has surrendered its Service Tax Registration and they have also paid the service tax liability as on the last date of their business. The law cannot, therefore, lead to a situation where a bonafide tax payer’s amount could be denied and withheld, for no fault of his. Further, in such a situation a bonafide assessee cannot be left remediless with his/its money in the form of credit struck with the Government. Refund allowed - appeal allowed - decided in favor of appellant. 2019 (2) TMI 684 Levy of service tax - amounts received by them for syma stalls rent collected and stall registered if collected - period 2005-2006 to 2007-2008 - Held that:- Similar issue came up before the Tribunal in the case of M/s Karnataka Exhibition Authority [2018 (7) TMI 1672 - CESTAT BANGALORE], where it was held that there is no service rendered by the appellants to the exhibitor, in fact, the successful tenderer will give it to individual shops, the service receiver as well as the appellants are concerned, is the tenderer but not the individual exhibitors of the shops - demand set aside - appeal allowed - decided n favor of appellant. 2019 (2) TMI 683 Adjustment of excess paid service tax against future liability - Rule 6(3) of the Service Tax Rules, 1994 - Held that:- There are no merits in the contention of the learned C.A. for the appellant on going through the relevant credit note No.007/2014-15 dated 23.9.2014, invoice No.009/2013-14 dated 29.3.2014 and the agreements between the appellant the service recipient - To provide an opportunity to the appellant, the matter is remanded to the adjudicating authority so as to enable them to place all the relevant documents in support of their claim that excess service tax was paid by them during the relevant period and the adjustment was admissible to them since not against written off bad debts. Appeal allowed by way of remand. 2019 (2) TMI 682 Imposition of penalty - service tax with interest paid on being pointed out - no malafide intent - section 80 of FA - Held that:- Although the appellant initially disputed the service tax liability on the ground that they had not yet received the amounts from their clients, that they paid the full amount of service tax as demanded and interest - the appellant is a retired Hawaldar of CISF and it would not be unreasonable to expect that he may not be fully aware of the provisions of service tax Act. The service tax was not due immediately on providing service because they had not yet received the payments while the income tax and balance sheets were on accrual basis. The appellant had paid the service tax as demanded along with interest - penalty waived by invoking section 80 - appeal allowed - decided in favor of appellant. 2019 (2) TMI 681 Penalty u/s 77 and 78 of FA - irregular availment of CENVAT credit - additional amount of service tax which they have paid - Rule 6(3) of Service Tax Rules, 1994 - Held that:- Admittedly, the appellant made a mistake in taking credit of excess service tax paid in CENVAT account instead of taking it under Rule 6(3) of the Service Tax Rules. This mistake was pointed out by the audit specifically directing them to make the changes. They did so and filed revised returns. Under these circumstances, there are no ground whatsoever to impose any penalty upon the appellant. Merely entering the figures under the wrong heading in their returns with no revenue implication whatsoever and no intention to evade payment of taking duty or taking excess credit does not render the appellant liable to penalties as proposed. The entire action by the appellant was a genuine mistake which they corrected on the direction of the audit. Appeal allowed - decided in favor of appellant. 2019 (2) TMI 680 Valuation - renting of immovable property - case of appellant is that the authorities have not taken into consideration the property tax paid by the appellant while arriving at the total taxable value - Held that:- Indeed, if taxes are paid by the appellant, the same has to be considered while arriving at the total taxable value - They have raised contention about the advance deposit received from tenants. The appellant has submitted that they are willing to produce necessary documents - it is proper to remand the matter to the adjudicating authority for requantifying the tax liability after giving the appellant the benefit of the property tax paid by them as well as the rent received in advance from tenants if any - matter on remand. Penalty - Held that:- Undisputedly, during the relevant period, the issue whether Renting of Immovable Property Service is subject to levy of service tax was highly contentious. There were litigations pending before various High Courts - Being an interpretational issue, it can be said that the appellant has put forward reasonable cause for invoking section 80 of the Finance Act - penalty set aside. Appeal allowed in part and part matter on remand. 2019 (2) TMI 679 Classification of services - Works contract service or not - activity of construction of drinking water bore well and tank, for Public Health Department for Govt. of Rajasthan, on turnkey basis - Held that:- Admittedly, the appellant have done the work not in the nature of commerce or industry and is exempt from the levy of service tax both under CICS and under works contract service as held by Larger Bench of this Tribunal in Lanco Infratech Ltd. Vs. CC, CE ST, Hyderabad [2015 (5) TMI 37 - CESTAT BANGALORE (LB)] - demand set aside. Classification of services - management maintenance and repair service or not - activity of operation and maintenance of Electro Chlorinator plant of PHED, Govt. of Rajasthan - Held that:- The primary activity between the parties is of operation of chlorination plant. The maintenance of the said plant is incidental and linked to the main activity of operation of chlorination plant - the said activity of maintenance cannot be classified under the head maintenance management and repair service as defined under clause 65(64) of the Finance Act. The said activity also cannot be classified under the BAS, as the same is not related to business activity or commerce - demand set aside. Appeal allowed - decided in favor of appellant. 2019 (2) TMI 678 Classification of services - IATA agent - Business Auxiliary Services or not - appellant has countered the allegations in the show cause notice stating that they are engaged not only as general sales agent but also receive income in the form of trading of cargo space - Held that:- Malaysian Airlines and the appellant have entered into an agreement whereby appellant is appointed as a General Sales Agent of Malaysian Airlines. Clause 9(1) of the said agreement is crucial for analyzing the issue under consideration - As per clause 9, it is seen that the Malaysian Airlines and the appellant has some arrangement with regard to the rates of the cargo slots which can be sold by the appellant. For slots, for which there is specific rate arrangement between the parties, the appellant is not entitled to any commission. Thus, the appellant purchases the cargo slots and thereafter sells the same to customer / exporters. The difference between sale price and the purchase price of the cargo slot is sought to be brought within the ambit of commission by the department. In such transaction, it is specifically stated in clause 9 that the appellant is not entitled to commission. In fact, for transactions as a General Sales Agent, the appellant is entitled to commission as per IATA regulations. In other transaction of sale of cargo space of specific agreed rates, it is not specified that appellant is eligible for any consideration. Only when the appellant is acting or selling the cargo space on behalf of Malaysian Airlines, he acts as general sales agent and receives commission. At the cost of repetition, it is stated that the appellant has discharged service tax on such commission received by them and the demand is confined to the difference between sale price and purchase price of cargo slot only. The transaction sought to be brought within the net of service tax levy in the present proceedings does not fall under BAS - demand do not sustain - appeal allowed - decided in favor of appellant. 2019 (2) TMI 677 CENVAT Credit - GTA Services for transportation of transmission line materials manufactured by them to their purchasers - period April 2008 to September 2009 - Held that:- The issue involved in this appeal is identical to the issue involved in the appeals of the assessee in CC, CE & ST, HYDERABAD –IV VERSUS VIJAY ELECTRICALS LTD. (VICE-VERSA) [2018 (10) TMI 1559 - CESTAT HYDERABAD], where it was held that Apex Court in various decisions has categorically held that CENVAT credit of the service tax paid on goods transport agency which are eligible to till 01.04.2008 and not for the subsequent period. Thus, appellant is not eligible to avail CENVAT Credit of the service tax paid on Goods Transport Agency Services, post 01.04.2008 and the demand was correctly confirmed along with interest - penalties are set aside - Appeal allowed in part. 2019 (2) TMI 676 Taxability - GTA service - amounts paid by the appellant to various transport authority/individual owners of truck for transferring of styrene monomer from port to appellant premises - period January, 2005 to July, 2006 and August, 2006 to June, 2007 - Held that:- The issue decided in the case of M/S LG POLYMERS INDIA PVT. LTD. VERSUS COMMISSIONER OF CUSTOMS, CENTRAL EXCISE & SERVICE TAX, VISAKHAPATNAM - I [2018 (10) TMI 553 - CESTAT HYDERABAD], where the abatement of 75% on the value of the freight is extended. The benefit of abatement of 75% on the freight value is eligible to the appellant, this 75% of the abatement of the freight value of the appellant needs to be extended. Penalties - Held that:- Since, the issue involved in this case was being agitated in various courts, the penalty imposed by the lower authorities are unwarranted and are set aside. Appeal allowed - decided in favor of appellant. 2019 (2) TMI 675 Classification of services - Mining service or GTA Service - activity of mining and transportation of goods - whether the appellants were engaged in the activity of mining and transportation of goods, under the fact that the appellant have paid tax under the category of “Mining Service for the Mining Activity” and have paid tax on the transportation activity under the GTA? - extended period of limitation. Held that:- The appellant have got separate registration for both the categories of service that is mining service and GTA service along with other services. Further in the agreement, separate rates were mentioned for the mining activity and for the transportation activity. Further, it is admitted fact that the appellants have also transported the mineral mined by other entities also - The Hon’ble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, RAIPUR VERSUS SINGH TRANSPORTERS [2017 (7) TMI 494 - SUPREME COURT] opined that the activity undertaken by Singh Transporters i.e. transportation of coal from pit –heads to the railway sidings within the mining areas is more appropriately classifiable under Section 65(105) (zzp) i.e. GTA service and it is not involved in the service in relation to the “mining of mineral”, oil or gas” as provided by Section 65(105) (zzzy) of the Act. Appeal allowed - decided in favor of appellant. 2019 (2) TMI 674 Classification of services - Business Auxiliary Services or not - appellant has been engaged in marketing support services for M/s TFL Ledertechnik, GmBH Co Germany and has been receiving a commission of 7% on the sale proceeds in foreign exchange - export of services or not - Held that:- A plain reading of the nature of services rendered by the appellant makes it clear that they are meant for promoting the business of their client M/s TFL Ledertechnik, GmBH Co Germany and the services clearly fall under the definition of Business Auxiliary Services - Such services fall under the category III of the Export of Service Rules 2005 and since they are provided in relation to the business or commerce of the service recipient located outside India, they amount to export of services. No service tax is chargeable on the services rendered by the appellant as per Rule 4 of Export of Services Rules. Consequently no interest is leviable and no penalty is imposable on the appellant - appeal allowed - decided in favor of appellant. 2019 (2) TMI 673 Port services - Levy of service tax - service to railways in Port area - whether exempted as public utility work or not - the appellant had raised the contention that the railway lines on which they work extended beyond Port area - Held that:- If the services are rendered outside Port area, they cannot be charged under the head of Port Services - the adjudicating authority needs to verify this fact and accordingly give a finding on this issue and re-determine the amount of service tax, if any, payable - appeal disposed off by way of remand. 2019 (2) TMI 672 Business Auxiliary service - commission received - appellant had received commission from the union on which the income tax was deducted at source for which even a TDS certificate in Form-16A was issued - Held that:- The substance or the true relationship between the milk union and the appellant is what is to be looked into and not the way it appears. Reliance placed in the judgement of Hon’ble Supreme Court in the case of The Bhopal Sugar Industries Ltd. Vs. Sales Tax Officer, Bhopal [1977 (4) TMI 151 - SUPREME COURT OF INDIA], wherein, the Hon’ble Supreme Court while interpreting the terms of the agreement therein has held that what is to be looked into is the substance and not the form of it. The matter is remanded back to the file of the adjudicating authority, who shall pass a denovo order in accordance with law - appeal allowed by way of remand. Central Excise 2019 (2) TMI 671 Clandestine manufacture and removal - maintenance of authentic records - corroborative evidences - reliance placed in private records - Held that:- The entire show cause notice has been based on bilties/GRs claimed to have been recovered from M/s Vinod Forwarding Agency, Kanpur. It further reveals that the goods transported by M/s Vinod Forwarding Agency, name of the manufacturer, have not been stated on the alleged GRs and its brand name and it was only presumed by the Revenue that wherever no names/brands were mention of Rajshree ( Brand name, M/s K.P. Pan Flavours) is established, the said bilties/GRs should be treated as if the said goods were booked by the respondent-assessee - The record further reveals that the statements of various persons were recorded under duress and all the submissions made therein were retracted by the witnesses and during the cross examination they had also stated that the statements were recorded under pressure by the officers. The Tribunal after perusal of the records and materials available has recorded findings of fact that the Revenue were using GRs repeatedly for framing charges against various assessees of manufacturers of Gutkha without connecting the GRs with the goods manufactured by the particular assessee on the basis of particulars of goods stated in the GRs. It was also noticed by the Tribunal in the impugned order that there was no investigation conducted about procurement of raw material of allegedly clandestinely cleared goods - The Tribunal has also come to the conclusion that there is no question of clandestine removal of goods without payment of duty. Moreover the bilties/GRs which were recovered from the transporter, M/s Vinod Forwarding Agency and were lying with the Revenue were being used for issuing show cause notice without conducting any investigation. There is no infirmity in the impugned order - appeal dismissed - decided against appellant. 2019 (2) TMI 670 Reconstitution of the firm - re-opening of the Bar - time for making deposit - Held that:- Considering the fact the licence expires on 31.03.2019, we cannot grant the time sought for by the appellant. We direct that 50% of the balance amounts be paid on or before 07.03.2019 failing which the license would stand cancelled on 08.03.2019. If such amounts are paid within the time stipulated, then, the appellant can be allowed to continue operating the Bar till 21.03.2019, by which time, the appellant will pay 50% of what is remaining to be paid after the remittance on 07.03.2019. Writ appeal is disposed of with limited interference to the order of the learned Single Judge. 2019 (2) TMI 669 Time limitation - Condonation of delay in filing appeal - demand of duty on Aluminium Dross which is a by product emerging during the course of manufacturing process - Held that:- There is no direction to dispose the appeal on the merits of the case. When the commissioner (Appeals) has rejected the appeal on the ground of being time-barred, this Tribunal cannot go into the merits of the matter. There are no flaws in the rejection of the appeal by Commissioner (Appeals) - appeal dismissed - decided against appellant. 2019 (2) TMI 668 CENVAT Credit - denial on the ground that description of the goods in the invoices of dealer did not match with the description given by the manufacturers of the goods - Held that:- If it is the case of the Revenue that the appellant has not received the goods then the Revenue failed to prove from where the appellant received the goods. Moreover, the Revenue has investigated the manufacturer of the goods who have explained the description in the invoices. Merely on the basis of statement, the case has been made out which is not admissible evidence to deny credit to the appellant - receipt of input is not disputed - credit allowed. Denial also on the ground that there is difference in figures of certain inputs from their balance sheet and the RG-23A Part-1 register as they have shown higher figures in the quantity of purchases and utilization thereof by the appellant - Held that:- The appellant has not explained certain inputs received by them were cleared as such and on payment of duty. This fact has been recorded by the Commissioner (Appeals) but inputs have been cleared as such are not the inputs received by the appellant then from where the inputs received by the appellant which have been cleared on payment of duty. This has not been explained by the Revenue - the explanation given by the appellant is acceptable - credit cannot be denied. Rejection of credit on inputs also on the ground that they were shown as purchases by the appellant but did not reflect in the records how they were consumed and how they were disposed of - Held that:- It is fact on record that the appellant has manufactured dies from inputs received by them. If these dies are not manufactured by the appellant from the inputs in question then the Revenue has failed to explain from where the appellant got inputs to manufacture to dies - the benefit of doubt goes in favour of the appellant and moreover non recording of manufacturing of dies in RG-23A Part-1 register and ER-1 returns is only procedural lapse for which the appellant can be penalized but the credit cannot be denied to the appellant - credit allowed. Penalty - Held that:- For procedural lapse, a penalty of ₹ 5,000/- is imposed on the appellant M/s. Hariom Forgings Pvt. Ltd. and no penalty is imposable on Shri H.M. Dagar, Director. Appeal allowed in part. 2019 (2) TMI 667 CENVAT Credit - fake invoices - credit denied on the ground that only invoices has been traveled and no goods has been accompanied of the invoice - cross-examination of statements - principles of natural justice - Held that:- Shri Amit Gupta and Shri Sanjeev Maggu of Leo transporter was allowed and cross-examination of one Shri Sunil was allowed who did not appear for cross-examination, therefore, the statement of Shri Sunil cannot be relied upon. Moreover, the cross-examination of other transporter was not allowed, therefore, there is a gross violation of principle of natural justice as to adjudicate the matter, the crucial point is be decided in the matter is that how the goods were transported to the appellant. The statement of transporter is a crucial evidence which is required to be examined in terms of Section 9D of the Central Excise Act, 1944 and the same has not been done so - the matter is remanded back to the adjudicating authority to follow the provisions laid down under Section 9D of the Central Excise Act, 1944 - appeal allowed by way of remand. 2019 (2) TMI 666 Liability of Interest and penalty - irregularly availed CENVAT credit but not utilized - Held that:- Reliance placed in the judgment of the Hon’ble Karnataka High Court in the case of Bill Forge Ltd. [2011 (4) TMI 969 - KARNATAKA HIGH COURT] wherein the Hon’ble High Court has held that assessee is not liable to pay interest if the assessee has reversed CENVAT credit before utilization of the same - Further the issue of the appellant is covered by the Larger Bench decision of the Tribunal in the case of J.K. Tyre & Industries Ltd. Vs. AC of Central Excise, Mysore [2016 (11) TMI 911 - CESTAT BANGALORE]. The impugned order demanding penalty and interest is not sustainable in law - appeal allowed - decided in favor of appellant. 2019 (2) TMI 665 Determination of rate of duty - Interpretation of statute - relevance of the expression ‘place of removal’ in determination of duty liability on 'ropes of plastic' - Held that:- The 'place of removal' is relevant only for determination of the value to be utilised for assessment of duty. No allegation is on record of any change or any alteration arising from the value adopted for the purposes of discharge of duty liability at the time of removal from the factory. On a plain reading of rule 5 of Central Excise Rules, 2002, it can be concluded that the order impugned before us is patently beyond the scope of law - appeal allowed - decided in favor of appellant. 2019 (2) TMI 664 Refund of EC and SHEC - N/N. 56/2002-CE dated 14.11.2002 - amendment being brought out by N/N. 19/2008 dated 27.3.2008 and 34/2008-CE dated 10.6.2008 - Held that:- This issue is covered in favour of the appellant by the decision of Hon’ble High Court of J&K in case of Reckitt Benckiser Vs. Union of India [2010 (12) TMI 237 - JAMMU AND KASHMIR HIGH COURT], wherein the Hon’ble High Court quashed the notifications in question. Therefore, in terms of Notification No. 56/2002-CE dated 14.11.2002, the appellants are entitled to claim refund/ self-credit of duty paid through PLA - credit allowed - appeal allowed - decided in favor of appellant. Indian Laws 2019 (2) TMI 663 Whether writ petitioner was liable to pay unearned increase in value of the property to the DDA? - Held that:- The present is not a case where lessee is making any transfer or seeking any permission from the lessor to give his consent. In the present case, the appropriate authority has exercised its power under Section 269UD of the Income Tax Act for the purchase of the property by the Central Government. It is by exercise of statutory power that rights of lessee were purchased by Central Government. Central Government issued auction notice for auction of property in question. All bids in auction of a property are given normally to match the market price of the property. When the petitioner gave highest bid and became the successful auction purchaser, the auction purchase has to be treated on the basis of market value of the property. Clause (4)(a) of Perpetual Lease as noted above provided for payment of unearned increase to cover up the difference between premium paid and the market value - High Court has rightly held that DDA was not entitled to raise any demand of unearned increase from the writ petitioner - petition dismissed. Whether writ petitioner was entitled to get refund of conversion charges deposited by it? - Held that:- In sub-section (1) of Section 269UE in place of words “free from all encumbrances” the words “in terms of the agreement for transfer referred to in sub-section (1) of Section 269UC” have been inserted. When the Sale Deed was executed in favour of the auction-purchaser above amendment in Section 269UE sub-section (1) had already been inserted. The vesting of property in Central Government when is in terms of agreement for transfer referred to in subsection (1) of Section 269UE at the time of execution of Sale Deed, the statutory mandate has been reflected in Clause 3 - Clause 3 of the Sale Deed cannot be ignored nor can it be held that said Clause has to give way to Clauses 1 and 2 of Sale Deed. While finding out the tenor of grant as reflected in Sale Deed, the provisions of sub-section (1) of Section 269UE as amended by Finance Act has also to be taken note of. Thus, on true construction of Sale Deed, it is clear that all rights, titles and interests were not conveyed to the petitioner in the leasehold residential plot, when we read Clauses 1, 2 and 3 together. Present being a case of a Government grant by virtue of the Section 2 of the Government Grants Act, 1895, nothing in the Transfer of Property Act, 1882, shall apply or be deemed ever to have applied to any grant or other transfer. The principles contained in the Transfer of Property Act have been applied while construing the Government grants as has been noticed above. But herein issue being Government grant, the principle of merger may not be of much relevance. More so, we having construed the Sale Deed as not having conveyed all rights and interests in the leasehold property, the principle of merger does not in any manner advance the claim of the writ petitioner. The writ petitioner is not entitled for refund of conversion charges, the DDA is not directed to process the writ petitioner’s application for conversion of the leasehold rights into freehold rights. Appeal dismissed decided against appellant. 2019 (2) TMI 662 Dishonor of Cheque - insufficient funds - the petitioner’s contention in the complaint is that the respondent failed to deposit the amount of ₹ 20,25,000/- that was collected from the borrowers but has failed to examine any such borrower to prove that they made the payment to the respondent for the repayment of loan - section 138 of NI. Held that:- The petitioner company failed to explain why the stamp papers for the loan agreement were purchased almost three years prior to the execution of loan documents. Moreover, the loan agreement is a void contract for want of consideration. It is evident that the consent of the respondent was obtained through misrepresentation thus making the loan agreement between the petitioner and respondent void under Section 19 of the Indian Contract Act. As per the loan agreement dated 8th January 2013 the loan amount was for ₹ 20,25,000/- whereas the cheque in question for an amount of ₹ 26,63,037/- was presented on 16th May 2013. The petitioner company has failed to explain how the liability increased from ₹ 20,25,000/- to ₹ 26,63,037/- within a period of five months. Therefore, the legal demand notice was not a valid notice as it was a demand for more than the actual loan amount and would not fasten any criminal liability on the respondent - Findings of the learned Metropolitan Magistrate acquitting the respondent, based on the facts cannot be said to be perverse warranting interference by this Court. Leave to appeal petition is dismissed.
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