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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter February 20, 2019 Case Laws in this Newsletter: GST Income Tax Customs Corporate Laws Securities / SEBI Insolvency & Bankruptcy FEMA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws TMI SMS Merger of Proprietor firm with a Pvt Ltd company - not taxable since excluded from the scope of supply - un-utilized ITC can be transferred Articles Interim Union Budget 2019 Summary Time limit to claim Input Tax Credit on invoices pertaining to F.Y.2017-18 News Commerce Minister launches ‘SWAYATT’ on GeM SURESH PRABHU CLEARS PROPOSAL TO ENCOURAGE INVESTMENTS IN START-UPS Suresh Prabhu addresses first stakeholder consultation on Draft Logistics Policy Notifications Companies Law G.S.R. 125(E) - dated 18-2-2019 - Co. Law National Financial Reporting Authority (Manner of Appointment and other Terms and Conditions of Service of Chairperson and Members) Amendment Rules, 2019 DGFT 56/2015-2020 - dated 18-2-2019 - FTP Export Policy of Red Sanders wood exclusively sourced from cultivation origin obtained from private land (including Pattaland) GST - States Order No. 02/2019-State Tax - dated 11-2-2019 - Goa SGST Goa Goods and Services Tax (Second Removal of Difficulties) Order, 2019 Order No. 01/2019-State Tax - dated 11-2-2019 - Goa SGST Goa Goods and Services Tax (Removal of Difficulties) Order, 2019 38/1/2017-Fin(R&C)(26/2018-Rate)(Corri.)/2252 - dated 11-2-2019 - Goa SGST Corrigendum - Notification No. Government notification No. 38/1//2017-Fin(R&C)(26/2018-Rate), dated 31st December, 2018 CCT/26-2/2018-19/15/4012 - dated 7-2-2019 - Goa SGST Registration of e-Commerce Operators as TCS S.O. No. 9 - 66/2018 – State Tax - dated 24-1-2019 - Jharkhand SGST Extension of the due date for filing of FORM GSTR – 7 for the months of October, 2018 to December, 2018 till 31/01/2019 S.O. No. 8 - 30/2018 – State Tax (Rate) - dated 24-1-2019 - Jharkhand SGST Insert the Explanation in the Notification No. 11/2017- State Tax (Rate), dated the 29th June, 2017 S.O. No. 7 - 29/2018 – State Tax (Rate) - dated 24-1-2019 - Jharkhand SGST Amendment in Notification No. 13/2017- State Tax (Rate), dated the 29th June, 2017 S.O. No. 6 - 28/2018 – State Tax(Rate) - dated 24-1-2019 - Jharkhand SGST Amendment in Notification No. 12/2017- State Tax (Rate), dated the 29th June, 2017 S.O. No. 5 - 27/2018 – State Tax (Rate) - dated 24-1-2019 - Jharkhand SGST Amendment in Notification No. 11/2017- State Tax (Rate), dated the 29th June, 2017 S.O. No. 4 - 26/2018 – State Tax (Rate) - dated 24-1-2019 - Jharkhand SGST Exemption on supply of gold by nominated agency for export of jewellery S.O. No. 3 - 25/2018 – State Tax (Rate) - dated 24-1-2019 - Jharkhand SGST Amendment in Notification No. 2/2017-State Tax (Rate), dated the 29th June, 2017 S.O. No. 19 - 77/2018 – State Tax - dated 24-1-2019 - Jharkhand SGST Amendment in Notification No. S.O. No. 3 – State Tax, dated the 3rd January, 2018 S.O. No. 18 - 76/2018 – State Tax - dated 24-1-2019 - Jharkhand SGST Waived for return in FORM GSTR-3B for the months of July, 2017 to September, 2018 S.O. No. 17 - 75/2018 – State Tax - dated 24-1-2019 - Jharkhand SGST Amendment in Notification No. 4/2018– State Tax, dated the 20th February, 2018 S.O. No. 16 - 74/2018 – State Tax - dated 24-1-2019 - Jharkhand SGST Jharkhand Goods and Services Tax (Fourteenth Amendment) Rules, 2018 S.O. No. 15 - 73/2018 – State Tax - dated 24-1-2019 - Jharkhand SGST Amendment in Notification No. 50/2018-State Tax dated the 26th September, 2018 S.O. No. 14 - 71/2018 – State Tax - dated 24-1-2019 - Jharkhand SGST Amendment in Notification No. 43/2018- State Tax, dated the 04th October, 2018 S.O. No. 13 - 70/2018 – State Tax - dated 24-1-2019 - Jharkhand SGST Amendment in Notification No. 34/2018 – State Tax, dated the 21st August, 2018 S.O. No. 12 - 69/2018 – State Tax - dated 24-1-2019 - Jharkhand SGST Amendment in Notification Nos. S.O. No. 87 – State Tax, dated the 05th October, 2017 and 16/2018 – State Tax, dated the 30th March, 2018 S.O. No. 11 - 68/2018 – State Tax - dated 24-1-2019 - Jharkhand SGST Amendment in Notification Nos. S.O. No. 61 – State Tax, dated the 18th August, 2017 and S.O. No. 131 – State Tax, dated the 14th November, 2017 S.O. No. 10 - 67/2018 – State Tax - dated 24-1-2019 - Jharkhand SGST Amendment in Notification No. 31/2018-State Tax, dated the 21st August, 2018 Indian Laws G.S.R. 127(E) - dated 19-2-2019 - Indian Law Eligibility criteria for an entity to be considered as Startup w.e.f 19-2-2019 G.S.R. 34(E) - dated 16-1-2019 - Indian Law Modification Notification No. G.S.R. 364 (E)dated April 11, 2018 Circulars / Instructions / Orders DGFT 74/2015-20 - dated 18-2-2019 Export Policy of Red Sanders wood exclusively sourced from cultivation origin obtained from private land (including Pattaland) — Procedure to obtain export license Highlights / Catch Notes GST Input tax credit - time of supply vis-å-vis raising the tax invoice - when the credit will be available - input tax credit on goods so received shall be available to the applicant, only when applicant has received the goods. Visit to Get Source Input tax credit - GST charged by the Contractor for hiring of buses for transportation of employees - GST charged by the Contractor for hiring of cars for transportation of employees - ITC cannot be claimed on the impugned input service. Visit to Get Source Levy of CGST/SGST Act - merger of entities - merger of his proprietorship firm as a going concern with a private limited company - the same stands excluded from the scope of supply of goods - un-utilized input tax credit can be transferred in case of merger. Visit to Get Source Income Tax TP adjustment - without factoring in the difference in FAR, the comparison done by the TPO is not sustainable - there is no proper reason to apply CUP method, instead of that consistently applied earlier method of TNMM, as the most appropriate method (MAM). Visit to Get Source Nature of expenditure - forfeiture of advance of ₹ 7 crores - against purchase of property - once the parties to the transaction have accepted the forfeiture and the assessee has not made any claim or the amount was otherwise not paid to the assessee then there is no reason to treat the forfeiture as non-genuine - Allowed as business expenditure u/s 37(1) Visit to Get Source Chargeability to income-tax of incentives by way of refund of Excise Duty and Exemption of Sales Tax - nature of receipt - not taxable - Since the same is as capital receipt. Visit to Get Source Computation of capital gain on sale of a property - holding period - Even the provisions of sec.2(47)(v) & (vi) of the Act which defines what is “transfer” for the purpose of the Act, considers possessory rights as akin to legal title Visit to Get Source Disallowance u/s 40A(3) - substantial amount towards expenditure (purchase of land) has been paid to various persons in cash - once the genuineness of the transaction is accepted and the payees are identified, then the intention of inserting the provisions of section 40A(3) is fulfilled. Visit to Get Source DGFT Export Policy of Red Sanders wood exclusively sourced from cultivation origin obtained from private land (including Pattaland) — Procedure to obtain export license Visit to Get Source IBC The resolution plan of the concerned corporate debtor(s) has not been approved by requisite percent of voting share of the financial creditors; and in absence of any alternative resolution plan presented within the statutory period of 270 days, the inevitable sequel is to initiate liquidation process under Section 33 of the Code. Visit to Get Source Central Excise Method of valuation - requirement to print MRP - Once the goods are specified by the Central Government in the Notification issued under Sub-Section (1) of Section 4A of Central Excise Act, 1944, the provisions of Section 4 of Central Excise Act, 1944 are not operational in respect of such goods Visit to Get Source VAT Validity of Higher Rate of tax on Rectified Spirit - It cannot be said that the differential rate of tax made by the State is perverse. Specific reasons have been assigned as to why the tax on rectified spirit is at much higher rate than that of ethyl alcohol. Visit to Get Source Rate of tax - Tendu leaves - There is serious error of interpretation has been committed by the learned Single Judge by treating the Tendu leaves as a minor forest produce to allow benefit of reduced rate of tax at 5% when the said Schedule in VAT Act still stands and the incidence of tax shown therein is 25% Visit to Get Source Case Laws: GST 2019 (2) TMI 1083 Jurisdiction of SCN issued under section 73 of the Finance Act, 1994 - provisions relating to service tax contained in the Finance Act, 1994 repealed by section 173 of the Central Goods and Service Tax Act, 2017 - Held that:- Issue Notice returnable on 20th February, 2019. 2019 (2) TMI 1082 Input tax credit - when the credit will be available - time of supply vis- -vis raising the tax invoice to actual supply of goods. Input tax credit - sale invoices which are raised in the end of month by the seller; but the material arrives at the end of the purchaser in the next month - applicant submitted that in the view of the given facts, co-read with the provisions discussed above, the applicant will be entitled the claim the Input Tax Credit in the same month in which the invoice is raised tax is deemed to be paid by the supplier who has delivered the goods to the transporter for transporting the same to the recipient's destination - Held that:- In case of invoices being raised by supplier in previous month and goods being received in the succeeding month, input tax credit on goods so received shall be available to the applicant, only when applicant has received the goods. Input tax credit - applicant, in the month end; to meet the monthly sale targets (high volume) raises the invoice/s to the end customer/s, deposit the due tax on the raised invoices BUT before receiving the physical delivery of goods from its supplier since the goods are in transit (as discussed above) and makes the delivery of goods only after receiving the same in the next month - applicant submitted that the applicant will be under liability to pay the tax in the same month in which the invoice is raised and tax is collected by him even though he is not in physical possession of goods to be delivered under invoice delivery/supply of goods is to take place at later stage to end customer - Held that:- The liability to pay tax shall arise on the basis of time of supply, which in case of supply of goods is earlier of the following dates: (a) the date of issue of invoice by the supplier or the last date on which he is required, under sub-section (1) of section 31, to issue the invoice with respect to the supply; or (b) the date on which the supplier receives the payment with respect to the supply. 2019 (2) TMI 1081 Input tax credit - GST charged by the Contractor for hiring of buses for transportation of employees - GST charged by the Contractor for hiring of cars for transportation of employees - restriction on Rent a Cab service specified in Section 17(5)(b)(iii) - Held that:- The phrase rent-a-cab has not been defined in the CGST/HGST Act, 2017. In situations where statutory meaning of any term/phrase has not been provided words, entries and items in taxing statutes must be construed in terms of their commercial or trade understanding, or according to their popular meaning. Resort to rigid interpretation in terms of scientific and technical meanings should be avoided in such circumstances. Where any commercial vehicle is hired for transportation of passengers, it would be squarely covered by the phrase rent-a-cab In other words, any person who provides motor vehicle designed to carry passengers , on rent, would be included. This also implies that it includes renting of motor cars, motor cabs, maxi cabs, mini buses, buses and all other motor vehicles which are designed to carry passengers, irrespective of their capacity to carry passengers. The contentions of the applicant that hiring of buses which can carry large number of passengers would not qualify under rent-a-cab is found to be untenable and the activitiy of the contractor in the instant case, providing buses or cars on hire to the applicant, is specifically covered under the meaning of rent-a-cab , which makes the impugned supply as ineligible for ITC in terms of Section 17(5) of the CGST/HGST Act, 2017. It clearly stands established that the services of the Contractor for hiring of buses/cars for transportation of employees qualify as rent-a-cab services. Further, it is also observed that nothing has been brought on record to suggest that the impugned service is not a service which is obligatory for an employer to provide to its employees under any law for the time being in force; or that such inward supply of services is being is used by the applicant for making an outward taxable supply of the same category of services or as part of a taxable composite or mixed supply. The applicant is not eligible for input tax credit of GST charged by the Contractor for hiring of buses/cars for transportation of employees. 2019 (2) TMI 1080 Levy of CGST/SGST Act - merger of entities - merger of his proprietorship firm as a going concern with a private limited company on the fixed assets and currents assets including stocks of raw material, semi-finished and finished goods - transfer of input tax credit available in the credit ledger account or cash ledger account of proprietorship firm to the respective credit ledger and cash ledger account of the private limited company, consequent upon merger - Section 18 (3) of the CGST/HGST Act, 2017. Held that:- It is evidently clear that there are provisions in the law, where in case of merger, a registered person, by filing Form GST ITC-02, electronically on common portal, can transfer un-utilized input tax credit lying in his electronic credit ledger to the transferee. Here it is to be noted that these provisions pertain to transfer of unutilized input tax credit. These provisions are not applicable to un-utilized balance lying in electronic cash ledger - It is further observed that Section 7 of the CGST/HGST Act, 2017, defines the scope of supply, which includes sale, transfer, barter, exchange made for a consideration in the course of or for furtherance of business and also provides vide clause (d) to sub-section (1) that the activities to be treated as supply of goods or services as referred to in Schedule ll. As per Para 4(c) of Schedule II to the CGST/HGST Act, 2017, transfer of business as a going concern is not treated as supply and thus, the same stands excluded from the scope of supply of goods - it emerges that the applicant can transfer un-utilized input tax credit, under the provisions of Section 18(3) of the CGST/HGST Act, 2017 and Rule 41 of the CGST/HGST Rules, 2017, in case of merger. Income Tax 2019 (2) TMI 1079 Reopening of assessment - “reasons to believe" - change of opinion - What is the “tangible material” which compelled the AO, in all these four cases, to issue the impugned reassessment notices? - Held that:- In view of order passed in Deputy Commissioner of Income Tax vs. S.C. Johnson Products Pvt. Ltd.[ [2019 (2) TMI 925 - SUPREME COURT]] & other connected matter, we see no reason to interfere in the matter. The special leave petition is dismissed. 2019 (2) TMI 1078 Reopening of an assessment - Reopening after four years from the end of the relevant Assessment Year - taxability of the expenditure - HELD THAT:- It is not the case of the Assessing Officer that after completion of the original scrutiny assessment, he came upon some additional or alien material which had an effect on taxability of the expenditure in question. AO in his reply has admitted that the assessee had filed Form 3 CEB, in which, the expenditure in question was duly reflected. In fact, as pointed out by the Counsel for the Petitioner, such expenditure also came up for scrutiny during the enquiry in relation to the transfer pricing. In absence of lack of full and true disclosure on the part of the assessee, AO could not have reopened the assessment by issuing impugned notice, which was done after four years from the end of the relevant Assessment Year. It is not necessary to examine the Petitioner's second contention of no income chargeable to tax, having escaped assessment, which would require us to take into account various contentions such as whether the order of Commissioner (Appeals) has achieved finality and whether after notionally adding the expenditure referred to in the reasons recorded, the Petitioner-Company would still continue to be governed by the MAT provisions. We do not accept the third and forth contentions of the Counsel for the Petitioner. Firstly, admittedly, the present issue was not examined by the Assessing Officer during original scrutiny assessment and, therefore, he had not formed any opinion at this stage. Secondly, the communication of reasons contained in paragraph 7 refers to the sanction order of the Principal Commissioner which was granted on 9th March, 2018. This communication is dated 16th March, 2018 which does not mean that the reasons were recorded on 16th March, 2018. - Decided in favour of assessee. 2019 (2) TMI 1077 Deduction u/s 35(1)(iv) as well as the deduction in machinery and Food Division - Held that:- The appellant in support of its claim has not only produced relevant purchase and sale vouchers/bills but has also submitted a survey report and certificate issued by the Commercial Tax Department. On 14.1.2008, the survey was conducted at the business premises of the appellant and it was noticed that the plant and machinery were established. In the said survey a statement was made that the production was likely to be started in the month of March or April, 2008. The appellant has also filed its annual return as prescribed under the U.P. VAT Act, 1998 and in pursuance of the said return so submitted, an assessment order under Section 28(2) of the U.P. VAT Act was also framed. While passing the assessment order under the U.P. VAT Act the Assessing Authority has observed that on the sale of cooking food the rate of tax is 12% but appellant has accepted tax and deposit the same only at the rate of 4%. A bare perusal for the record, more precisely the assessment order and survey report dated 14.1.2008 filed by the assessee shows that the production was started in March, 2008 and the sale was also made. Tribunal, being a last court of fact, was not justified in brushing aside the certificate, survey report and the assessment order passed by one Government Department, i.e., Commercial Tax Department of U.P. The view taken by the Tribunal in brushing aside the assessment order relevant for the year under consideration is not correct. The impugned order of the Tribunal dated 14.12.2011, is set aside and matter is remanded back to the Tribunal for reconsideration in accordance with law. 2019 (2) TMI 1076 Reopening of assessment - HELD THAT:- We find that the disputed questions of fact have been sought to be raised in the writ petition. Further, the petitioner has an alternative efficacious remedy of appeal against the impugned order(s). The Apex Court in Commissioner of Income Tax and others vs. Chhabil Dass Agarwal, (2013 (8) TMI 458 - SUPREME COURT) elaborately considered the question of entertaining writ petition where alternative statutory remedy was available. 2019 (2) TMI 1075 Depreciation on UPS - Tribunal holding that UPS is the part of computer and entitled for depreciation at 60% - Held that:- As relying on COMMISSIONER OF INCOME TAX, CHENNAI VERSUS M/S. ROYAL SUNDARAM ALLIANCE INSURANCE COMPANY LIMITED [2019 (2) TMI 923 - MADRAS HIGH COURT] issue has been decided by us against the revenue MAT/115JB applicability On Insurance Companies - Held that:- Question to be decided in favour of the assessee and against the Revenue by holding that Section 115JB of the Act does not apply to insurance companies. See ORIENTAL INSURANCE CO. LTD. VERSUS DEPUTY COMMISSIONER OF INCOME TAX, COMMISSIONER OF INCOME TAX (LTU) [2017 (9) TMI 172 - DELHI HIGH COURT] 2019 (2) TMI 1074 Penalty levied u/s 271D & 271E - Cash transactions exceeding permissible limit - HELD THAT:- None of the assessee’s cash transactions in both receiving as well as repaying loan exceeds ₹20,000/- statutory limit prescribed u/s.269SS and u/s 269T of the Act. The assessee had obtained its cash loan from relatives of its partners. Hon'ble Rajasthan high court’s decision in CIT vs. Raj Kumar Sharma [2007 (4) TMI 218 - RAJASTHAN HIGH COURT] holds that the impugned penalt(ies) are not sustainable in case the transactions in question do not exceed the specified limit of ₹20,000/-. The assessee therein had taken aggregate loan(s) of ₹90,000/- in the relevant previous forming subject-matter of adjudication. We therefore conclude in the instant case as well that both the lower authorities have erred in imposing sec. 271D and whilst 271E penalty in issue. The same are directed to be deleted. - Decided in favour of assessee. 2019 (2) TMI 1073 Penalty u/s 271(1)(c) - non specification of charge - defective notice - non strike of the inappropriate words - HELD THAT:- Notice issued by the Assessing Officer under Section 274 read with Section 271(l)(c) to be bad in law as it did not specify which limb of Section 271(l)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of COMMISSIONER OF INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013 (7) TMI 620 - KARNATAKA HIGH COURT) - Decided in favour of assessee. 2019 (2) TMI 1072 Disallowance u/s. 14A - no exempt income during the relevant assessment year - Held that:- We find that this issue is covered in favour of assessee. The Hon'ble Delhi High Court in the case of Cheminvest Ltd. in (2015 (9) TMI 238 - DELHI HIGH COURT) and Redington (India)Ltd., Vs. Addl. CIT [2017 (1) TMI 318 - MADRAS HIGH COURT] have held that the disallowance u/s. 14A cannot be made where there is no exempt income during the relevant assessment year. Therefore, we set aside the order of CIT(A) and direct the AO to delete the addition made by him. Since there is no dividend in come earned from the investments, no disallowance u/s.14A is called for. Therefore, the disallowance u/s. 14A r.w.Rule 8D(iii) is deleted. - Decided in favour of assessee. 2019 (2) TMI 1071 Assessment u/s 153A - unaccounted credits in the bank account and unaccounted cash deposits - assessee has challenged the additions being not based on any incriminating material found during the course of search - Held that:- A.O was not justified in making the additions for Assessment Year 2007-08 to 2011-12 in absence of any incriminating material found during the course of search and the impugned additions are based on the details of documents called from the assessee during the course of assessment proceedings which were regularly disclosed in the return of income. Unaccounted investment u/s 69 - addition made by the A.O on the strength of documents seized during the course of search in the shape of sale deeds which were purchased by different persons - Held that:- it is undisputed that the purchase consideration in the alleged immovable properties have been paid by the respective persons in whose name the property has been registered and their source of income is not doubted as Mr. G.P. Sinha is a retired person who paid the amount out of the accumulated savings and Mr. Shailendra Kumar Sinha has paid amount out of the disclosed source of income earned from outside India. Therefore the allegation of the revenue authorities that the investment of ₹ 46 lakh in the properties in the name of Shri G.P. Sinha and Shri Shailendra Kumar Sinha is unaccounted investment of the assessee seems baseless as all the evidences are on record which clearly prove that the owners of the properties have paid consideration for acquiring deed and there is no evidence to show that the alleged investment in the properties has been made by the assessee. Therefore addition for unaccounted investment u/s 69 of the Act stands deleted. As far as the property of Smt. Vinita Parashar is concerned it is true that the original sale deed was seized from the residence of the appellant but in response to the summon issued to Smt. Vinita Parashar, her father namely Shri Shriram Choudhary appeared and stated that he is an employee of State Government and has sold one plot admeasuring 2400 sq.ft at Kolar road and receipt from sale of the plot was invested in the property in the name of daughter. The document related to this purchase was duly executed but was pending for registration and the document seized was a normal business document found at the Directors residence. No other connection was established between the assessee and Smt. Vinita Parashar. Shri Shriram Choudhary has categorically accepted that the investment has been made by him in the name of his daughter from his own fund received from sale of plot at Kolar Road. Therefore when all the details of the purchaser were with the A.O and these persons appeared before A.O there was no estoppels on his part to make necessary verification as well as investigation if any required from Shri Shriram Choudhary. There is no iota of evidence which could prove that investment of ₹ 17,50,000/- in the property in the name of Smt. Vinita Parashar is an unaccounted investment by the assessee and thus deserves to be deleted. Addition for the alleged unaccounted transactions in the hands of the assessee as the seized document was found at the residence of third party i.e. Mr. Rajeev Sharma and no particular of the transaction with date was mentioned nor there was any direct connection with the assessee, therefore such addition seems to be made merely on suspicion and devoid of any corroborative evidence which could prove the alleged additions of the A.O. Undisclosed perquisite as undisclosed receipts u/s 17(2)(iii) - Held that:- The transaction have been carried out at fair market value as lower rates for the properties were charged to the other customers in comparison to those charged to the Director or the relatives and thus the purchase consideration paid by the plot owners was accepted and the addition was deleted. We also held that the provisions of Section 50C of the Act are not applicable on the sale of stock in trade for the transactions entered during the year under appeal. In view of our above decision, we are inclined to hold that no addition was called for in the hands of the assessee as undisclosed perquisite. Deemed dividend u/s 2(22)(e) - Held that:- The assessee and also after going through the records placed before us and statements of Ld. Departmental Representative we find that entitlement of total salary as on 31.3.2012 is ₹ 1,90,720/- and the alleged amount of ₹ 1,73,352/- is received against the outstanding receivable amount. Further total salary due on 31.3.2013 is ₹ 23,368/- (Rs.1,90,720 (-) ₹ 1,73,352/-). Therefore there remains no basis for the addition of ₹ 1,73,352/- on account of deemed dividend u/s 2(22)(e). Unaccounted credits in the bank - Held that:- The bank statement of Shri R.P. Sinha is filed. Ld. CIT(A) did not delete the addition for the alleged amount and confirmed it. It is also noticed that Shri R.P. Sinha was available during the course of search as well as during the course of assessment. In these given facts the claim of the assessee that ₹ 3,00,000/- has been received from Shri R.P. Sinha could be verified by the Ld.A.O in order to satisfy about the source of the credit entry in the bank account which is claimed to have been received from the bank account of Shri R.P. Sinha for necessary verification with the assistance of the assessee, after providing him necessary opportunity of being heard. Ground No. 5 of the assessee is allowed for statistical purpose. 2019 (2) TMI 1070 Addition u/s 68 - Bogus LTCG - sale proceeds of shares of Kailash Auto Finance Limited (KAFL) treating the same as income from undisclosed sources after rejecting the assessee’s claim of Long Term Capital Gains (LTCG) on sale of those shares - HELD THAT:- Sale of shares of M/s. KAFL which was dematerlized in Demat account has taken place through recognised stock exchange and assessee received money through banking channel. So, assessee has explained the nature and source of the money with supporting documents and thus has discharged the onus casted upon him by producing the relevant documents, accordingly, the question of treating the said gain as unexplained cash credit under section 68 cannot arise unless the AO is able to find fault/infirmity with the same. The source of the receipt of the amount has been explained and the transaction in respect of which the said amount has been received by assessee has not been cancelled by the stock exchange/SEBI. So, it is difficult to countenance the action of AO/Ld. CIT(A) in the aforesaid facts and circumstances explained above. Even assuming that the brokers may have done some manipulation then also the assessee cannot be held liable for the illegal action of the brokers when the entire transactions have been carried out through banking channels duly recorded in the Demat accounts with a Government depository and traded on the stock exchange unless specific evidence emerges that the assessee was in hand in gloves with the broker for committing the unscrupulous activity to launder his own money in the guise of LTCG. There is also nothing on record which could suggest that the assessee gave his own cash and got cheque from the alleged brokers/buyers. The assessment is based upon some third party statements recorded behind the back of the assessee and the assessee has not been allowed to cross examine those persons by the assessee, so the statements even if adverse against the assessee cannot be relied upon by the AO to draw adverse inference against the assessee in the light of the documents to substantiate the claim of LTCG, which has not been found fault with by the AO. - Decided in favour of assessee. Disallowance of expenditure u/s. 69C - HELD THAT:- As already adjudged that the transaction of shares of M/s KAFL which assessee claimed to have received LTCG is genuine, the notional commission payment does not arise and therefore, directed to be deleted.- Decided in favour of assessee. 2019 (2) TMI 1069 Disallowance u/s 14A - Held that:- Disallowance against average investments which have actually yielded exempt income during the impugned AY works out to ₹ 0.84 Lacs which is less than suo-moto disallowance as offered by the assessee. It is further noted that the assessee has debited various expenditure aggregating to ₹ 59.53 Lacs in the profit & loss account. The expenditure under the head commission & depreciation aggregate to ₹ 54.24 Lacs whereas the balance expenditure under other heads aggregate to ₹ 5.29 Lacs. The commission and depreciation have no nexus with earning of exempt income whereas out of balance expenditure of ₹ 5.29 Lacs, the assessee has already offered suo-moto expenditure of ₹ 2.34 Lacs. The same, in our opinion, was more than sufficient to cover up the requisite disallowance. Therefore, on the facts and circumstances of the case, the additional disallowance of ₹ 8.95 Lacs as made by Ld. AO could not be sustained. By deleting the same, we allow the appeal. 2019 (2) TMI 1068 Condonation of delay - bonafide mistake at the end of the chief accountant - delay in filing the appeal before the Commissioner - Held that:- Sub-section 5 of Section 253 of the Act contemplates that the Tribunal may admit an appeal or permit filing of memorandum of cross-objections after expiry of relevant period, if it is satisfied that there was a sufficient cause for not presenting it within that period. This expression “sufficient cause” employed in the section has also been used identically in sub-section 3 of section 249 of Income Tax Act, which provides powers to the ld. Commissioner to condone the delay in filing the appeal before the Commissioner. Similarly, it has been used in section 5 of Indian Limitation Act, 1963. Chief accountant of the company was ill and failed to hand over assessment order to the tax consultant for filing appeal. To our mind, there is no mala fide in this explanation. The delay had occurred on account of bonafide mistake at the end of the chief accountant. By making delay in filing appeal before the CIT(A) the assessee would not achieve anything. Thus, it cannot be adopted as a strategy. It could only be a result out of bonafide mistake. We condone the delay, and set aside the order of the CIT(A). We remit all other issues to the file of the CIT(A) for adjudication on merit. 2019 (2) TMI 1067 Addition u/s 41(1) - cessation of liability towards payment of sundry creditors - Held that:- Addition u/s 41(1) of the Act has been made by the AO without any cogent reason. No case has been made out that the AO has made any enquiry and found that these creditors are not payable. Just because the creditors are outstanding for more than three years, there is no universal rule that the balance has to date back under section 41(1) of the Act. We further note that similar addition in earlier was deleted by the ITAT. Accordingly we do not find any infirmity in the order of the CIT(A). Disallowance u/s 14A r.w. Rule 8D - Consequential effect u/s 115JB is also prayed - Held that:- As regards the first plea of the ld. Counsel of the assessee that in prior years, disallowance was restricted to 10%, hence, the same can be accepted. We note that this plea is not sustainable. In view of the applicability of Rule 8D, the applicability of which for the current assessment year is upheld in the case of Godrej & Boyce vs. CIT [2010 (8) TMI 77 - BOMBAY HIGH COURT]. As regards contention of the assessee that no disallowance should be made for interest, as the assessee has sufficient interest free funds, we note that the submission of the assessee has considerable cogency in view of the Hon’ble Jurisdictional High Court decision relied upon. Hence, we remit this issue to the file of the A.O. to examine the veracity of the submission and thereafter decide as per the decision of the Hon’ble Jurisdictional High Court as above. As regards the submission of the assessee that disallowance u/s. 14A should be restricted to the amount of the exempt income during the year, is also acceptable in view of the case laws relied herein above. The A.O. is directed to follow the proposition as above. As regards the other contention of the ld. Counsel of the assessee that for the purpose of disallowance u/s.14A, for the purpose of computing the average value of investment, only those investment should be computed on which exempt income is earned, is sustainable in view of the Special Bench decision in the case of ACIT v. Vireet Investments Private Limited [2017 (6) TMI 1124 - ITAT DELHI] as above. The A.O. is directed to follow the same. Disallowance for earning exempt income u/s.115JB, we note that the Special Bench of the ITAT in the above case law has expounded that the disallowance cannot be made u/s. 14A. The disallowance should be made by the A.O. in accordance with the provision of clause (f) of section 115JB of the Act. The A.O. is directed accordingly. TP adjustment made by TPO to the extent of 3% of the amount of guarantee given by the assessee on behalf of AE's - Held that:- As relying on assessee's own case for previous years disallowance of 0.53% for guarantee commission on all the guarantee given serves the purpose. MAM selection - TPO applying CUP method instead of TNMM used by the assessee - Held that:- assessee is correct in placing reliance upon the Hon’ble Jurisdictional High Court decision in the case of Pr. CIT vs. Amphenol Interconnect India P. Ltd. [2018 (3) TMI 536 - BOMBAY HIGH COURT] that geographical difference, volume difference are also to be considered in making the comparison in similar cases. The TPO is totally wrong in holding that these matters are of academic interest only. Hence, without factoring in the difference in FAR, the comparison done by the TPO is not sustainable. In the background of the aforesaid discussion and precedent, we uphold the order of the ld. CIT(A) that there is no proper reason to apply CUP method, instead of that consistently applied earlier method of TNMM, as the most appropriate method (MAM). Addition being R & D expenses allocated to Baddi & Solan Unit of the assessee - Held that:- We find that the ITAT in assessee's own case for A.Y. 2009-20 has restored identical issue to the file of the AO to give finding as to the utilization of R & D expenditure with respect to these units. In this view of the matter, in our considered opinion, the doctrine of stare decisis mandates that we follow the ITAT’s order of earlier year. Accordingly, following the same finding of the ITAT in the earlier year we remit the issue to the file of the AO with direction to the AO to decide the issue after granting reasonable opportunity of hearing to the assessee. Addition being interest expenditure allocated to Baddi & Solan units on the basis of sales turnover ratio, while computing deduction u/s 80IC - Held that:- Upon careful consideration, we find that the factual details submitted corroborate that the baddi unit had huge accumulated profit. In fact, its operational cash flow is being used by the head office. In the balance sheet, the debit balance of Head Office account is ₹ 2,470,281,148/- as on 31.03.2010. There is no borrowing secured or unsecured for this unit. In fact, the balance sheet shows that the unit has huge reserve and surplus amounting to ₹ 3,920,730,627/- covering the entire assets of the unit. Thus when no loan is there for baddi unit and the unit is generating huge profits, the case law relied by the ld. Counsel of the assessee duly support the proposition that only the interest expenses which have direct nexus in earning the income of the tax exempt unit should be considered. Since the documentary evidence duly support the plea that there is no direct nexus between the expenses allocated by the A.O. to the unit, we do not find any infirmity in the order of the ld. CIT(A) in this regard. - Appeal filed by the Revenue stands partly allowed for statistical purpose. 2019 (2) TMI 1066 Disallowance u/s 14A - Held that:- The assessee did not claim any expenses to earn the exempt income and the income of the assessee is based upon the principle of mutuality. CIT(A) has wrongly confirmed the additions raised by the AO in view of the Section 14A read with Rule 8D of the Act, therefore, we delete the addition raised in view of the provision of section 14A read with Rule 8D of the Act and allowed the claim of the assessee. - Decided in favour of assessee. 2019 (2) TMI 1064 Reopening of assessment - absence of service of notice issued u/s 148 - Held that:- In absence of service of notice issued u/s 148 on the assessee, the reassessment proceedings completed u/s 147 r/w 144 ex-parte qua the assessee deserved to be quashed and are thus set-aside. - Decided in favour of assessee. 2019 (2) TMI 1063 Permitting withdrawal of the appeal - power of Commissioner (Appeals) - HELD THAT:- While dismissing assessee s appeal in limine without deciding on merit, learned Commissioner (Appeals) has not exercised his power in consonance with the provisions of section 251(1)(a) of the Act. Accordingly, inclined to set aside the impugned order of the Commissioner (Appeals). Since, the issues raised in the said appeal have not been decided on merit restore all the issues raised in the present appeal to the learned Commissioner (Appeals) for de novo adjudication. Consequently, the appeal filed by the assessee before the learned Commissioner (Appeals) is restored back to its original position. It is open for the assessee to raise all such issues before the first appellate authority for contesting the assessment order passed by the Assessing Officer. Needless to mention, the learned Commissioner (Appeals) must afford reasonable opportunity of being heard to the assessee before deciding the appeal. With the aforesaid observations, the grounds raised are allowed for statistical purposes. - Appeal is allowed for statistical purposes. 2019 (2) TMI 1062 Nature of expenditure - loss on forfeiture of advance to be treated as capital expenditure - AO has doubted the genuineness of forfeiture - AO has rejected the claim of the assessee on the ground that the assessee has not made any effort to recover the forfeitured advance and no documents have been filed to show that the assessee sought extension of time or recovery of the advance - allowable claim U/s 37 - Held that:- Forfeiture amount was either to be reduced from the cost of the asset/property or to be assessed as income as per the provisions of Section 56(2)(ix) of the Act. Since the provisions of Section 56(2)(ix) of the Act are not applicable for the year under consideration, therefore, the only option was to reduce the said amount from the cost of acquisition of the property in the hand of the seller and consequently the profit earning on the sale of the said property would be enhanced by the said amount. The provisions of Section 51 of the Act is a safeguard against the loss of revenue on account of such forfeiture. Therefore, the said claim of forfeiture of ₹ 7.00 crores is not a revenue affecting transaction but it will be taken into consideration at the time of sale of the property by the seller. Hence, it is only a matter of different assessment year when finally the properties in question are to be sold by the seller. The Assessing Officer has not brought any material or fact that the seller has circumvented the provisions of Section 51 of the Act. Further the payment of ₹ 7.00 crores by the assessee to the seller is not in dispute and this is a real transaction but the Assessing Officer has disallowed the claim on the ground that the forfeiture of the amount is not genuine. It is pertinent to note that once the parties to the transaction have accepted the forfeiture and the assessee has not made any claim or the amount was otherwise not paid to the assessee then there is no reason to treat the forfeiture as non-genuine. Accordingly, when the AO has duly examined all the relevant facts as well as the seller during the course of remand proceedings and nothing adverse was either found or brought on record to contradict the claim of the assessee then the claim of forfeiture of the amount in question is an allowable claim U/s 37 as it is a business loss occurred during the course of business activity of the assessee being business of real estate. The Assessing Officer has not disputed the business activity and the income offered by the assessee from the business of real estate, therefore, in the facts and circumstances of the case, we do not find any error or illegality in the impugned order of the ld. CIT(A) and the same is hereby upheld. - decided against revenue 2019 (2) TMI 1061 Chargeability to income-tax of incentives by way of refund of Excise Duty and Exemption of Sales Tax - nature of receipt - revenue or capital receipt - Held that:- Following the ratio of decision of co-ordinate Benches of the tribunal in the case of Welspun Steel Ltd [2015 (12) TMI 1783 - ITAT MUMBAI] we hold that Central Excise benefit and Sales Tax incentive received by the assessee during the impugned assessment year under consideration, are capital receipts not exigible to income-tax and further we hold that the same shall not be deducted from cost of assets for computing depreciation. The ground number 1 and 2 raised by the Revenue in its memo of appeal filed with the tribunal are dismissed. Disallowance made u/s. 14A - Held that:- We are guided by the decision of CIT v. Reliance Utilities and Power Limited [2009 (1) TMI 4 - BOMBAY HIGH COURT] and HDFC Bank Limited v. DCIT [2016 (3) TMI 755 - BOMBAY HIGH COURT] to hold that there will be presumption in favour of the assessee. The Revenue is not able to rebut the aforesaid presumption in favour of the assessee even before us. Thus this disallowance as was made by the AO by invoking Section 14A of the 1961 Act read with Rule 8D(2)(ii) of the 1962 Rule is directed to be deleted. Strategic investments made with group/associated companies etc cannot be excluded while computing disallowance u/s 14A - Secondly that the disallowance cannot exceed exempt income and thirdly that only those investments which actually yielded an exempt income be only considered while computing disallowance u/s 14A of the 1961 Act read with Rule 8D(2)(iii) of the 1962 Rule. With these directions, we are restoring this issue back to the file of the AO for fresh/denovo adjudication of the issue on merits in accordance with law keeping in view our above directions. Needless to say that the AO shall provide necessary opportunity of being heard to the assessee in denovo proceedings in accordance with principles of natural justice in accordance with law. Additions u/s 14A which was added while computing book profits u/s 115JB - Held that:- The issue is consequential to our decision in the case of disallowance of expenditure incurred in relation to earning of an exempt income u/s 14 A in the preceding para’s of this order. We are of the view that this issue is required to be set aside and restored to the file of the AO to be adjudicated afresh/denovo on merits in accordance with law in the light of Special Bench decision of ITAT, Delhi in the case of Vireet Investment Private Limited [2017 (6) TMI 1124 - ITAT DELHI]. AO shall provide proper and necessary opportunity of being heard in accordance with principles of natural justice. Additions on account of gains on premature redemption of debentures - AO made additions to the income of the assessee by way of gain on premature redemption of debentures - CIT(A) deleted the said additions relying on judgment CIT v. Industrial Credit and Development Syndicate Limited [2006 (3) TMI 90 - KARNATAKA HIGH COURT]] - Held that:- This issue needs to be restored to the file of the AO to decide the issue afresh after considering the factual matrix of the case in the light of judicial decisions and applicable law. After hearing both the parties , we are also of the considered view that this issue need to be restored to the file of the AO for fresh/denovo adjudication of the issue on merits in accordance with law after considering the entire factual matrix of the case surrounding issue of debenture by the assessee, purpose/object for which said debenture were raised by the assessee and then applying ratio of the judicial precedents and applicable laws to those identified factual matrix of the case. Additions made to the book profit - brought forward book loss available to the assessee - Held that:- No doubt it is true that learned CIT(A) has no power to set aside and remand the matter to the AO keeping in view provisions of Section 251(1)(a) of the 1961 Act and learned CIT(A) ought to have adjudicated the issue on merits in accordance with law. The power of learned CIT(A) are co-terminus with powers of learned AO. This issue requires investigation of facts as to scheme of merger and accumulated losses of the said merged entity and application of law to those facts for which we at this stage are of the considered view that the matter need to be restored to the file of AO for verification of facts surrounding brought forward losses/unabsorbed depreciation and their set off to compute book profits u/s 115JB, on merits in accordance with law. AO shall provide proper and necessary opportunity of being heard to the assessee in accordance with principles of natural justice Penalties levied on the assessee under Gujarat Sales Tax Act as well FERA/FEMA authorities - allowable bussiness expenditure - Held that:- This issue is to be restored to the file of the AO for fresh/denovo adjudication of the issue afresh on merits in accordance with law. The assessee is directed to produce all the surrounding facts concerning levy of penalty under FERA/FEMA and Gujarat Sales Tax Act including orders of the authorities levying the said penalty before the AO. The AO to analyse all the relevant facts to ascertain whether such penalties are penal or compensatory in nature to arrive at the decision whether these penalties are hit by explanation 1 to Section 37(1) of the 1961 Act and thereafter to pass well reasoned order in accordance with law on merits. Bogus purchases of mobile handsets - addition made by the assessee from Shivamani Traders Pvt. Ltd., wherein the AO got the information from Maharashtra VAT authorities that the said concern is engaged in providing hawala entries by issuing bogus accommodation bills with out supplying any material which led to the additions being made to the income of the assessee by the AO - Held that:- The primary onus is on the assessee to prove that the purchases are genuine. Keeping in view interest of justice and factual matrix of the case , we are setting aside and restoring the matter to the file of AO for denovo determination of the issue on merits in accordance with law. Needless to say that the AO shall provide proper and necessary opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law. The evidences/explanations produced by the assessee in its support shall be admitted by the AO in the interest of justice in accordance with law. This ground of appeal bearing number 6 raised by the Revenue in its memo of appeal filed with the tribunal is allowed for statistical purposes. 2019 (2) TMI 1060 Disallowance of additional depreciation on new plant & machinery - disallowance of normal depreciation - Held that:- If the AO doubted the installation, he could have obtained the information from the suppliers, details of which were available with him. CIT(A), therefore, held that no evidence has been brought on record to prove that the machines were not installed and put to use. The Order of the A.O. was accordingly set aside and depreciation and additional depreciation was allowed as per Law. No merit in these grounds of departmental appeal. By nature of the assets mentioned above, it clearly shows that these are of such a nature that these can be used even after the purchase. There is no need to get a certification of installation from third party particularly when Plant Manager of the assessee certified that installation have been done of the above assets in manufacturing plant. It, therefore, appears that A.O. without any justification denied depreciation and additional depreciation to the assessee. CIT(A), therefore, rightly allowed the same in favour of the assessee. Disallowance of applying the provisions of Section 40A(2)(a) - charging of interest on the unsecured loans taken from the specified persons u/s 40A(2)(b) - Held that:- No merit in this ground of appeal of Revenue. There is difference between loan taken from Banks and unsecured loans taken from the relatives. In the case of unsecured loans from the relatives, no formalities and bank guarantee shall have to be given. 15% interest paid is highly reasonable. CIT(A) rightly appreciated that the Tribunal in other cases have allowed even much higher rate of interest paid to the relatives. This ground of appeal of Revenue has no merit and the same is accordingly dismissed. Addition on account of payments in violation of provisions of Section 40A(3) - Held that:- Expenses which have been disallowed by the A.O. under section 40A(3). It was found that except two payments others were not in violation of Section 40A(3). The details clearly shows that the amount paid on various accounts were less than limit provided under section 40A(3). CIT(A), therefore, correctly deleted the addition. In the absence of any material contrary to the findings of the CIT(A) on record, no interference is required in the matter. This ground of appeal of Revenue is dismissed. 2019 (2) TMI 1059 Computation of capital gain on sale of a property - holding period - whether the gain on sale of the RR Property which was obtained originally on 22.03.2001 on lease from the society which was subsequently conveyed absolutely by the society to the Assessee by a registered sale deed dated 31.08.2014 can be said to be a LTCG? - Held that:- It is not in dispute that the Assessee paid cost of the site as early as 22.3.2001 and was in possession of the property as lessee cum Agreement holder with right to obtain conveyance of absolute interest over the land that was leased. The expression “held by the Assessee” in the context of Sec.2(42A) of the Act, is rather ambiguous, in the sense that it does not speak of the date of vesting of legal title to the property. Even the provisions of sec.2(47)(v) & (vi) of the Act which defines what is “transfer” for the purpose of the Act, considers possessory rights as akin to legal title. It is therefore necessary to look into the policy and object of the provisions giving exemption from levy of tax on capital gain. In the present case, as we have already seen, the Assessee had paid the entire consideration for the site originally allotted as early as in the year 2001. The Assessee had performed its part of the contract with the society. Therefore the claim of the Assessee that it held the property from 22.3.2001 has to be accepted, keeping in mind the policy and object of the provisions giving exemption from levy of tax on capital gain. We are of the view that the capital gain in question in the present case has to be treated as LTCG as claimed by the Assessee Computation of capital gain and deduction u/s. 54F in respect of another property sold by the assessee during the relevant previous year - Held that:- A person may construct a residential house in such a manner that he may use the ground floor for his own residence and let out the first floor having an independent entry so that his income is augmented. It is quite common to find such arrangements, particularly post-retirement. One may build a house consisting of four bedrooms (all in the same or different floors) in such a manner that an independent residential unit consisting of two or three bedrooms may be carved out with an independent entrance so that it can be let out. He may even arrange for his children and family to stay there, so that they are nearby, an arrangement which can be mutually supportive. He may construct his residence in such a manner that in case of a future need he may be able to dispose of a part thereof as an independent house. There may be several such considerations for a person while constructing a residential house. The physical structuring of the new residential house, whether it is lateral or vertical, cannot come in the way of considering the building as a residential house. The fact that the residential house consists of several independent units cannot be permitted to act as an impediment to the allowance of the deduction u/s 54/54F. It is neither expressly nor by necessary implication prohibited. We are therefore of the view that the Assessee was entitled to claim deduction u/s.54F. Whether the deduction u/s.54F has to be restricted to only 1/3rd of the cost of acquisition of the new asset for the reason that the Assessee purchased the property along with the name of his wife and son shown as purchaser in the document under which the property was purchased? - Held that:- As decided in DIRECTOR OF INCOME-TAX. INTERNATIONAL TAXATION. BANGALORE VERSUS MRS. JENNIFER BHIDE [2011 (9) TMI 161 - KARNATAKA HIGH COURT] entire consideration had flow from Assessee and no consideration had flown from her husband. Merely because the husband’s name is also mentioned in the purchase document, the Assessee could not be denied the benefit of deduction. AO allowed deduction u/s.54EC only to the extent of 50% on the reasoning that deduction will be allowed only to the extent of investment made in the name of the Assessee - the entire consideration had flow from Assessee and no consideration had flown from her husband. Merely because the husband’s name is also mentioned in the purchase document, the Assessee could not be denied the benefit of deduction. Assessee should be entitled to the benefit of deduction u/s.54F of the Act, to the whole extent of investment in purchase of new asset, even though the property has been purchased in the joint names of Assessee, his wife and son - Decided in favour of assessee. 2019 (2) TMI 1058 TPA - International taxation of provisions of corporate guarantee loan taken by AE’s - Held that:- We find that this issue is squarely covered by Tribunals decision in assessee own case for immediately preceding years and hence, respectfully following the Tribunals view and the decision of Hon’ble Bombay High Court in the case of Everest Kanto Cylinder Limited [2015 (5) TMI 395 - BOMBAY HIGH COURT] we direct the AO to restrict the adjustment at 0.5% of the loan amount advanced by the bank to its AE. We direct the AO accordingly. This issue of assessee’s appeal is partly allowed. Disallowance of expenses relatable to exempt income by invoking the provisions of section 14A of the Act read with Rule 8D - Held that:- We are of the view that the assessee has interest free funds available, which are sufficient to meet its investment and at the same time, the assessee has interest bearing funds, in the absence of nexus proved by the AO, it can safely be presumed that investment were made from interest free funds in view of the decision of Hon’ble Bombay High Court in the case of CIT vs. HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT]. In view of the decision of Hon’ble Bombay High Court, we are of the view that the interest expenses disallowed by AO/ TPO/ DRP is without any basis and in view of presumption held by Hon’ble Bombay High court in HDFC Bank Ltd (supra), we delete the disallowance. In view of the decision of Special Bench of ITAT Delhi in the case of Vireet Investments (P.) Ltd. [2017 (6) TMI 1124 - ITAT DELHI], we direct the AO to consider those investments only for computing the disallowance which related to exempt income during the year. We direct the AO accordingly. This issue of assessee’s appeal is set aside and allowed for statistical purposes. Disallowance in respect of difference in tour sales as per Annual Information Report (AIR) Reconciliation submitted by assessee - Held that:- The assessee before us could not filed any reconciliation qua the difference of ₹ 25,86,068/- except making verbal submissions. At last, the assessee contended that the addition should be restricted to the profit margin of sales at the rate of 11.47% on un accounted sales of ₹ 25,86,068/-. We are of the view that there are no matching unaccounted purchases which has been sold by assessee. Hence, we are of the view that the lower authorities have rightly added the non-reconciled tour sales amounting to ₹ 25,86,068/- in respect of these 21 parties. Hence, we find no infirmity in the orders of the lower authorities and this issue of assessee’s appeal is dismissed. Disallowance of Travel Book engine expense considering the same as capital work-in-progress in the books of accounts and claimed by assessee as Revenue in the return of income - assessee before us contended that this expenditure is normal revenue expenditure and eligible for deduction under section 37(1) - Held that:- The expenses incurred by assessee on account of salary on development of travel booking engine and SAP software cannot be considered as adding a new line of business for its customers, infact, upon successfully development of the same, the existing business of the assessee for providing tours and travel services can be carried out more effectively and efficiently. Thus, incurring of these expenses for travel booking engine, the assessee is expanding its existing line of business. Further, it is also a fact that the expenses incurred for travel booking engine and SAP software was only for the purpose of technology upgradation to the existing business of the assessee and by incurring the same the assessee has not created any new line of business or asset which can be given enduring benefit to the assessee. Thus, according to us, in view of the above factual and legal submission, the salary and profession expenses incurred and disallowed by AO amounting to ₹ 1,20,24,914 over the development of travelling booking engine and SAP software is to be allowed as Revenue expenses under section 37(1) 2019 (2) TMI 1057 Reopening of assessment - unexplained share application money - completed assessment has been reopened after four years - Held that:- A perusal of the reasons recorded as mentioned elsewhere clearly shows that there is no allegation in the reasons recorded that there is failure on the part of the assessee to disclose fully and truly of material facts necessary for assessment u/s 147 of the Act, the notice issued u/s 148 of the Act after a period of four years from end of assessment year in case where assessment has been framed u/s 147/143 (3) of the Act is illegal and invalid and the notice u/s 148 of the Act deserves to be set aside. Our view is fortified by the decision of the Hon’ble Delhi High Court in the case of CIT Vs. Viniyas Finance and Investment (P) Ltd.[2013 (3) TMI 35 - DELHI HIGH COURT] We find that during the course of the original assessment proceedings the assessee was specifically asked to discharge its onus u/s 68 of the Act for any fresh loans taken during the year and share application money received. We further find that the FFA has also called for a remand report from the Assessing Officer to submit copies of the reply of the assessee filed during the course of the original assessment proceedings and related documents submitted by the assessee. Thus during the course of original assessment proceedings the Assessing Officer had made elaborate enquiry to examine the share application money in the light of section 68 of the Act and after satisfying himself he accepted the same as genuine. Therefore, in our considered opinion in the light of the proviso to section 147 of the Act there is no failure on the part of the assessee to disclosed fully and truly all material facts relating to the assessment - assessment framed u/s 147 of the Act has been rightly quashed by the CIT(A). - Decided in favour of assessee. 2019 (2) TMI 1056 Levy of penalty u/s. 271(1)(c) - concealment or inaccurate particulars of income - HELD THAT:- We find that the assessment in this case has been completed on the returned income. Hence, when the return of income and the assessed income are same, the machinery provision for levy of penalty u/s. 271(1)(c) fails, as the penalty u/s. 271(1)(c) is levied with reference to the tax sought to be evaded, which is the difference between the income returned and that assessed by the A.O. In this case, since the assessed income and the returned income are the same, the machinery provision of penalty u/s. 271(1)(c) fails. In this regard, we draw support in the case of CIT vs. SAS Pharmaceuticals [2011 (4) TMI 888 - DELHI HIGH COURT] as expounded that penalty u/s. 271(1)(c) can only be levied if in the course of proceedings, the A.O. is satisfied that there is an concealment or furnishing of inaccurate particulars. The words "in the course of any proceedings under this Act mean the assessment proceedings". However, the question ‘whether there is concealment or inaccurate particulars’ has to be determined with reference to the returned income. Delete the levy of penalty. - Decided in favour of assessee. 2019 (2) TMI 1055 Capital gain computation - Additional compensation received from CIDCO in form of re-allotment of land under 12.5% scheme is taxable under the head ‘capital gain’ - inclusion of cost of acquisition - Held that:- Cost of land when it was subsequently transferred shall be determined as on the date of receipt of additional compensation. The stamp duty authorities have fixed the market value as on the date of re-allotment of land to the assessee is at ₹ 9,14,40,000. Since the authorities fixed the cost of land as on the date of allotment is ₹ 9,14,40,000, obviously cost of acquisition for the assessee, when the land has been subsequently sold, will have to be taken at ₹ 9,14,40,000. AO is incorrect in not allowing the cost of acquisition to the assessee while computing long term capital gain on transfer of leasehold rights in land. We direct the AO to re-compute long term capital gain. However, such long term capital gain computed by the AO shall not go below long term capital gain computed by the assessee in her return of income, because the assessed income cannot go below the returned income. Payment of consideration to M/s Perfect Associates, it is irrelevant for the purpose of computation of long term capital gain, because the assessee has failed to prove the testimony of the documents including agreements entered into between M/s Perfect Associates so as to show that it is genuine document and also the said consideration had been paid for rendering services in connection with transfer of property. Further, when total enhanced compensation is exempt, related expenses need to be ignored for computation. Accordingly, we set aside the issue to the file of the AO for the purpose of re-computation of long term capital gain in terms of our discussions given in the preceding paragraphs hereinabove - Appeal filed by the assessee is allowed, for statistical purpose. 2019 (2) TMI 1054 Disallowance u/s 14A - investments made by the assessee in its subsidiary / group companies - Held that:- The issue under dispute is squarely covered in favour of the Revenue by the recent decision of the Hon’ble Supreme Court in the case of Maxopp investment Ltd. Vs. CIT [2018 (3) TMI 805 - SUPREME COURT OF INDIA] wherein the Hon’ble Supreme Court rejected the ‘dominant purpose theory’ for which investments in shares were made in group companies or subsidiary companies. The Hon’ble Supreme Court further held that the provisions of section 14A of the Act are applicable irrespective of the fact whether the investments were made in order to gain control or held as stock-in-trade - Decided in favour of revenue. 2019 (2) TMI 1053 Assessment u/s 153A - HELD THAT:- We have no hesitation to hold that the assessment framed u/s 153A of the Act is bad in law and deserves to be quashed.Since we have set aside the assessment itself, we do not find it necessary to dwell into the merits of the case. Before closing, we have to point out that the DR has placed reliance on the decision of the Supreme Court in the case of Mukundray K. Shah [2007 (4) TMI 201 - SUPREME COURT]. We find that the facts of this case are clearly distinguishable from the facts of the case in hand in as much as in that case, the Revenue came to know about the transaction, triggering the provisions of section 222e of the Act from the diary found during the search proceedings. Whereas in the case in hand, the sale deeds found at the time of search were same sale deeds which were considered by the Assessing Officer at the time of assessment proceedings u/s 143(3) of the Act. Disallowance u/s 40A(3) - amount of ₹ 1.05 crores towards purchase of land has been paid to various persons in cash - HELD THAT:- The primary object of enacting section 40A(3) of the Act was two-fold – firstly, putting a check on trading transactions with a mind to evade the liability of tax on income earned out of such transaction, and secondly, to inculcate the banking habits amongst the business community. In our understanding, this provision was directly related to curb evasion of tax and inculcating banking habits. Therefore, once the genuineness of the transaction is accepted and the payees are identified, then the intention of inserting the provisions of section 40A(3) is fulfilled. Considering, we do not find any merit in the additions made by the Assessing Officer. We, accordingly, direct the AO to delete the addition. - Decided in favour of assessee. 2019 (2) TMI 1010 Assessment u/s 153A - proof of incriminating material found during the course of search at the assessee’s premises - Held that:- As during the course of search various documents were seized/impounded which contained various transactions which were not reflected in the regular books of accounts. It also included LPS-6 showing various unaccounted transactions, LPS-28 contained the names of the persons with the amount in which such amount were not reflected in the ledger accounts of the persons mentioned therein, LPS 25 Page-7 showing various hand written amounts. Thus it is crystal clear that various incriminating material were found during the course of search which related to all the seven assessment years from 2007-08 to 2013-14. We therefore in the facts and circumstances of the case found no merit in common Ground No.2 raised by the assessee and the same deserves to be dismissed as there were incriminating material found during the course of search for all the seven assessment years. Suppression of gross receipts - Held that:- The very basis adopted by Ld. A.O for making the addition for suppressed receipts is fatal, incorrect and has no justification because the document i.e. page-7 of LPS-25 relied on by the Ld. A.O for completing the suppressed receipts has not been examined properly and thus gravely erred in rejecting books of accounts by invoking provision of Section 145(3) of the Act. On our perusal and examination of this document we find that the figures mentioned in the seized document i.e. Page7 of LPS 25 were almost tallying to the figures mentioned in regular books of accounts with a minor difference of the gross receipts which itself cannot lead to be a basis for the additions on account of suppression of receipts @49%. We therefore set aside the findings of both the lower authorities and delete the addition Addition made on undue benefit to Directors - assessee company has constructed commercial complex at city centre and sold some shops to Directors of the company and their family members - assessee company has transferred the said properties at below collector rates prevailing in that area, in order to (a) Provide benefit to directors (b) Suppress the income of Assessee Company - no evidence of "on money" was received thus difference between the stamp duty value and registered sale value was added as income of Assessee Company - Held that:- The undisputed facts emerging out of the record are that the alleged transactions were duly recorded in the books. There was no iota of evidence in the form of incriminating documents to show that any ‘on money’ or underhand dealing took place in the case of the impugned transactions. The properties sold in question were commercial properties which apart from the Directors were also sold to the other unrelated parties. There is no observation of both the lower authorities which could show that the assessee had a different set of rule for the unrelated parties and another for the related parties which means that properties sold to the Directors/relatives/family members were at the fair market price. Neither the provision of Section 43CA of the Act nor the provisions of Section 50C of the Act are applicable on the impugned transactions of sale of commercial shops held by the assessee as stock in trade to its Directors/family members and further as the sale considerations received by the assessee company are at fair market value, therefore no such addition was called for providing undue benefits to the Directors. We accordingly set aside the finding of both the lower authorities and delete the addition and accordingly allow this common issue raised by the assessee. Unaccounted transactions with Fortune Group - incriminating material found during the course of search at the assessee’s premises - not providing cross examination by AO - Held that:- The transactions mentioned in one of the page of the diary shows the name of the assessee but those transactions have been denied by the assessee to have taken place with M/s. Fortune Group - the other transactions of cash/cheque with Patidar family and other documents for purchase of land have no bearing with the assessee as the name of the assessee is not mentioned therein. No incriminating material relating to Fortune Group was found during the course of search at the assessee’s premises. Both the lower authorities were unable to bring any material on record which could prove that the alleged transactions appearing in the diary found at the business premises of Fortune Group has any connection with the business as well as books of accounts regularly maintained by the assessee. A.O has not granted the opportunity of cross examination to the assessee with the author of the alleged diary as well as concerned person of M/s. Fortune Group and thus the action of the Ld. A.O of not providing cross examination turns out to be a clear violation of principle of natural justice and therefore the additions made by the Ld. A.O for the unaccounted transactions with M/s. Fortune Group has no foundation to stand for and same needs to be deleted. Addition of unaccounted transactions - Held that:- addition of ₹ 46,86,348/- needs to be set aside to the file of Ld. A.O so as to verify the documents in the shape of confirmation filed by the assessee to his/her satisfaction and decide accordingly as to whether the amount appearing in the seized document are merely estimates or prospective amount to be received or “On-money”. In case Ld. A.O concludes that the alleged amount is “On-money” then the addition for the “net profit” element embedded therein should be added to the income of the assessee which is consistently declared. Needless to mention that proper opportunity is to be provided to the assessee For addition of ₹ 10,00,000/- is concerned which is based on seized document The copy of ledger account and purchase deed are available at paper book at page 567 to 573. Revenue is unable to controvert this document. Moreover on the alleged document seized by the department there is mention of the date or the name or the purpose for which the amount of ₹ 10,00,000/- is mentioned and therefore in these given facts and circumstances of the case explanation given by Ld. Counsel for the assessee needs to be accepted that the impugned amount was paid to Shri Hira Choudhary for purchase of land. We therefore set aside the findings of both the lower authorities and delete the addition Addition of sum allegedly paid to CREDAI - Held that:- CREDAI being association of builders at Bhopal having details of amount collected from various builders the onus was on the assessee to prove whether he had made any payment by cheque or cash of ₹ 2 lacs to CREDAI. No such details have been filed before both the lower authorities and before us. It seems that assessee has no explanation to give for such expenditure and the same has been rightly added to the income of the assessee as an unexplained expenditure. We accordingly confirm the addition and dismiss Ground of the assessee for Assessment Year 2012- 13. Addition in respect of unaccounted transaction and unaccounted expenditure - Held that:- We find that cash payment of ₹ 3,00,000/- was given to M/s Ganga Bricks on 17.08.2012. The contention of the assessee is that this deal pertains to Fortune Soumya Housing has no basis to stand for because the document at page-179 of BS-1 seized from FS- 4 was found at the business premises of the assessee and the assessee being in the business of builder and developer, there is a direct connection of the business with this cash payment to Ganga Bricks which also bears the date of payment. Therefore we find no merit in the contention of Ld. Counsel for the assessee and are inclined to confirm the finding of Ld. CIT(A). Deduction u/s 80IB(10) - Held that:- The assessee is eligible for deduction u/s 80IB for Soumya Estate Project as held by the Tribunal that all the pre conditions have been fulfilled by the assessee which inter-alia includes the approval from the local bodies on 26.3.2007 for the housing project in the name of Soumya Estate and the completion certificate obtained on 29.10.2005 from the Municipal Corporation, Bhopal. We therefore find no reason to interfere in the finding of Ld. CIT(A) allowing the deduction u/s 80IB(10) of the Act for Assessment Year 2009-10, 2010-11 and 2011-12 Customs 2019 (2) TMI 1052 Penalty - the appellants were not aware of the export restrictions and further they have not chosen to redeem the goods of value of ₹ 51,60,400/- - technical violation of wrong declaration of the products sought to be exported - Held that:- They provided the bills in the name of M/s.Raj Oil Traders and have shipped 250 MTs of Industrial salt chemical grade to Malaysia till date. Further, in the reply to the show cause notice also, the appellant had pointed out that they never contested the allegations of the Department about the non-existence of the companies, which are said to have supplied the goods. Even at the time of examination also, it was not disputed about the technical nature of the classification and till such time, the appellant was not of the concrete opinion that it was only industrial salt. Furthermore, the appellant pointed out that as per the Fertilizer Control Order, 1985, the Test Report by the customs was not an authenticated one and the test was not conducted properly as per the specification under the said control order. The Tribunal took note of the fact that the appellant has not redeemed the goods which are valued nearly at ₹ 52,00,000/-, thus, the penalty can be reduced - the penalty imposed on the appellant at ₹ 7,00,000/- is reduced to ₹ 2,00,000/- - Appeal allowed in part. 2019 (2) TMI 1051 Duty Drawback - all industry rate - petitioner filed only free shipping bills - export made during the period from July 2017 to March 2018, when GST regime was just introduced - Rule 13(1)(a) of the Customs and Central Excise Duties Drawback Rules 2017 - Held that:- This Court directs the first respondent to pass appropriate order on the petitioner's application made in this regard. The first respondent will of course bear in mind that during the relevant time, the GST Regime had just then been introduced. Therefore, the case of the writ petitioner may have to receive a liberal approach. This Court directs the first respondent to pass order in accordance with law within a period of four weeks from the date of receipt of a copy of this order - petition disposed off. Corporate Laws 2019 (2) TMI 1050 Winding up petition - Power of Bank to file winding up petition - Whether feasible scheme for revival available, the power under Section 45-MC could be exercised for winding up? - HELD THAT:- An appeal will lie only if it is so provided in the statue. Its scope and procedure shall be as is provided there. The power, to grant or not to grant an interim order or the extent to which an interim order can be granted or an automatic stay of the impugned order, would be governed by the language of the Statute. In sub-section 7 there is nothing, which provides for an automatic stay of the impugned order, on filing of an appeal before central government. Sub-section 7 only provides that the order of RBI shall be final, in case an appeal is filed against the same, on the appeal being finally decided. But, that is a case with any appeal, whether such a line is there or not in the statue. If an appeal is filed against an order, the impugned order becomes final only on final disposal of the appeal. But the same would not mean that such an order will not be given effect during the pendency of appeal, unless stayed by the appellate court. If this interpretation, as submitted by Sri Mathur, is accepted, than no stay order would be required in any appeal, as the order under appeal will become final only on final disposal of the appeal and, thus, a stay order will have to be presumed. Such can not be the interpretation of sub section 7. Thus this submission of Sri Mathur is also rejected. The order of RBI remains operative, as there is no stay order passed in the appeal of SIFCL, till now. As per first proviso to Section 434 (1)(c), only such winding up proceedings are to be transferred which are covered by the Transfer Rules, 2016 and since, the present winding up proceedings, as already found, are not covered by the aforesaid rules, the same are saved from being transferred. From the above, it is clearly indicated that the SIFCL is repeatedly using dilatory tactics to somehow scuttle the hearing of the case. Therefore, satisfied that a mere warning would not suffice to send a strong message. Thus, looking into the conduct of SIFCL, impose a cost of ₹ 5 Lakhs upon the Directors of SIFCL collectively, which they shall deposit within 30 days from today with the State Legal Services Authority of this Court at Lucknow and produce a receipt of its payment to the Senior Registrar of this Court within the aforesaid period of 30 days. In case of failure on their part to deposit the said cost, it shall be open for the Senior Registrar of this Court to proceed against them and recover the costs as arrears of land revenue. For the reasons and findings already given above, as satisfied that a case on all the four grounds of Section 45MC-1 of the RBI Act is made out against SIFCL. A case for advertising the petition in accordance with Rule 24 of the Companies (Court) Rules, 1959 is made out. Hence, petitioner RBI is directed to advertise the petition in accordance with Rule 24 of the Companies (Court) Rules, 1959. The notice of the petition be advertised as per rules in two newspapers namely 'Hindustan Times' in English and in "Hindustan' in Hindi in their Lucknow editions. The petition shall also be published in the official gazette of the State fixing 02.04.2019 as the next date of hearing of the petition. The petitioner shall also file an affidavit of service in compliance of the aforesaid directions by the next date fixed. To preserve the assets of the company, the Official Liquidator attached to this Court is appointed Liquidator provisionally of Sahara India Financial Corporation Limited (SIFCL) together with all its assets, papers, books of accounts, documents and files etc. He is directed to proceed forthwith and take charge of all properties and effects of the company and its management. SIFCL and officers of SIFCL/all persons concerned are restrained from operating any bank account of SIFCL and its funds without leave of this Court till Official Liquidator takes charge. SIFCL is directed to fully co-operate with the Official Liquidator in smooth and immediate handover, as directed above. 2019 (2) TMI 1049 NCLT territorial jurisdiction over the Winding up petition - No formal notice issued on the respondent that petition has to be transferred to NCLT - HELD THAT:- As per the orders of this court no formal notice was issued on the respondent to show cause as the respondent entered appearance on the first date itself and submitted that it was ready and willing to abide by all the terms of the agreement. In fact, on the first date when the matter was taken up for hearing, namely, 15.07.2015 this court after noting the contentions of the petitioner and the respondent noted as follows:- “It is made clear that in view of the peculiar circumstances of this case, no notice to show cause as to why the respondent-company be not wound up is issued to the respondent at this stage.” None of the subsequent orders have issued notice to the respondent. The respondent has also not been asked to file counter affidavit to the main petition to oppose its admission. Hence, no notice under Rule 26 of the Companies(Court) Rules, 1959 was served on the respondent. The Supreme Court in Forech India Ltd. vs. Edelweiss Assets Reconstruction Co.Ltd. (2019 (1) TMI 1442 - SUPREME COURT) has held that where no notice under Rule 26 of the Companies (Court) Rules is issued the petition has to be transferred to NCLT. This court would have no jurisdiction to retain the present matter in view section 434 read with Rule 5 of the Companies(Transfer of Pending Proceedings) Rules, 2016. It is directed accordingly. The Registry may transfer the present petition to NCLT. 2019 (2) TMI 1048 Restoration of the name of the Petitioner Company in the Register of Companies - Section 248 of Companies Act - Held that:- The Impugned Order noted the rival claims and although the scheme was also pointed out to the NCLT, the final part of the Impugned Order simply recorded that the Appellant had on 13.12.2016 itself resolved that application in prescribed form to strike off the name of the Company needs to be filed and observed that it was clear from the report of ROC that the Company was not carrying on business or any operations when the name was struck off and thus, NCLT held that there was no just ground to order restoration of the name of the Company. We find that the NCLT did not consider as to what would be the effect, if the Order remains one of the basis of Section 248(1) and what would be the effect, if it were to be on the basis of Section 248(2). When the scheme was still available, the NCLT could have permitted steps. The declarations given by the Appellant take care of the requirements of Sub-Section (2) of Section 248 that Company may after extinguishing all its liabilities, by a special Resolution, file an application in the prescribed manner to the Registrar for removing the name of the Company from the Register of Companies. Material for satisfaction under Sub-Section (6) of Section 248 was also available to ROC. When the Appellant filed the Resolution with the Registrar of Companies on 8th February, 2017, if the Form STK 2 was not available to the public, the Appellant cannot be held responsible and in the circumstances, it would not be appropriate for the Respondent to stand on technicalities and resist efforts of the Appellant to take benefit of the provisions under Section 248(2) and even the Scheme of 2018. There is no reason why the Respondent should not have approached the matter more sympathetically. In the present matter, we already have the compliances in place and the fees are stated to have been paid by demand drafts. The special Resolution is already there. The filings and application are stated to have been filed. In such situation, it would be appropriate to order the striking off, of the Company to be on the basis of Sub-Section 248(2) instead of Section 248(1) - appeal allowed. 2019 (2) TMI 1047 Oppression and mismanagement - Board of Directors power to appoint Additional Director - option to purchase the shares given to the existing management - HELD THAT:- As perused the impugned order dated 7th December, 2017 and noted that no new arguments or facts have been brought to our notice which have not been dealt with by the NCLT. As per Article 23 of the Articles of the Association of the Company, Board of Directors has the power to appoint Additional Director in accordance with Section 260 of the Companies Act, 1956 and the director so appointed shall hold office only upto the date of the next Annual General Meeting following such appointment. The appointment of Directors is regulated under Article 28 of the Articles of Association of the Company. NCLT has discussed this issue in its para 33 of the impugned order. NCLT has made observations on the basis of these articles and the law quoted therein. Therefore, we do not have any alternative but to endorse the observations made by the NCLT on this issue. We are of the considered opinion that where the option to purchase the shares is given to the existing management to avoid prejudice to the interest of the respondent (original petitioners) for various reasons such as diversion of funds/siphoning of funds etc then valuation is done on the date of filing of the company petition. On the other hand, where the first option to purchase the shares is given to who were not in management and who have been oppressed to avoid prejudice to either of the parties the date of valuation should be the date of decision of the company petition. Even the appellant has asked that the valuation should be the date of decision of the company petition. In this case the appellants have been in the management of the company who have been found by the Tribunal to have oppressed the respondent (petitioners), therefore, valuation of shares to be done on the date of decision of the company petition. In view of the above observations and discussions we direct that:- In last un-numbered paragraph of the operative order in para 34 of the impugned order dated 7.12.2017 for words:- “shall determine true and fair value of the shares of 1st respondent company by taking into consideration three financial years w.e.f. 2011 onwards” shall be deleted and in their place the following words are substituted:- “shall determine the true and fair value of the shares of 1st respondent company, as on the date of this decision, i.e. 7.12.2017”. Except for modifications as above in the impugned order, the impugned order is maintained. The appeal is disposed accordingly. Interim order passed, if any, shall stand vacated. 2019 (2) TMI 1046 Waiver application - Proviso to Sub-section (1) of Section 244 of the Companies Act, 2013 - Held that:- In the present case we do not want to go into the merit of the claim and counter claim of the parties in view of the decision of this Appellate Tribunal in ‘Cyrus Investment Pvt. Ltd. & Anr. Versus Tata Sons Ltd. & Ors., 2017 SCC OnLine NCLAT 261. In the said case this Appellate Tribunal held that while considering the application for waiver under Proviso to Sub-section (1) of Section 244 of the Companies Act, 2013, the Tribunal may look into the proposed petition under Section 241 and 242 but cannot take into consideration the merit of the said petition to decide the application for waiver. It is only in application where cases of exceptional circumstances is made out by one of the member having less than 10% of shareholding, the Tribunal may allow petition for waiver. All the shareholders have less than 10% of the total shareholding of the company. Their case being covered by this Appellate Tribunal’s decision in ‘Cyrus Investment Pvt. Ltd. & Anr. Versus Tata Sons Ltd. & Ors.’ [2018 (7) TMI 1397 - NATIONAL COMPANY LAW TRIBUNAL, MUMBAI], we are not inclined to interfere with the impugned order, where the Tribunal on factual matrix and evidence allowed application under Section 241-242 of the Companies Act. Appeal dismissed. 2019 (2) TMI 1045 Oppression and mismanagement - Counsel submitted that involvement of Respondent No.7 in the affairs was pleaded in detail in the Company Petition - Held that:- The e-mail addresses which are from same domain name “@DELOITTE.com”. The domain name appears to have been taken from Data Naming Server Authority by person/persons having commonality of interest. What appears is that different employees are putting their names using same domain name to do correspondence. This is not a matter where at present stage itself of the Petition, the Reply of Respondent No.7 should have been hurriedly accepted that Respondent No.7 had nothing to do with regard to services provided to Respondent No.1 Company. We find that at the stage of pleadings, it was material to see the averments in the Company Petition. The Petitioner made averments against Respondent No.7 on its own risk and consequences. Merely because Respondent comes and makes statement that I have nothing to do, is not enough to immediately delete the concerned Respondent from the array of parties. Appeal allowed - name of Respondent No.7 is restored to the array of parties in the Company Petition. Securities / SEBI 2019 (2) TMI 1044 Determination of offer price in accordance with Regulation 8 (2) (c) of SAST Regulations, 2011 - Appeal to the Securities Appellate Tribunal - Offer Price of ₹ 61.73 per share, as being offered by the LIC - Held that:- In the present case, the shares of the target company i.e. IDBI are listed on Bombay Stock Exchange Ltd. (BSE) and National Exchange of India Ltd. (NSC). Union of India is presently in the control of the target company. LIC was holding 67,36,20,000 shares in the target company, representing 14.90% of the voting rights in the target company, as a public shareholder of the target Company. The Board of Directors of the target company in their meeting held on 4.10.2018, authorized the issuance and allotment of equity shares aggregating upto 51% of the fully diluted voting share capital to LIC by way of a preferential issue. Therefore, an open offer was required to be made in terms of Regulation 3 (1) and (4) of the SAST Regulations, 2011. The LIC has issued an announcement of an open offer on 4.10.2018 in terms of Regulations 13 (2) (g) of the SAST Regulations, 2011. As needed in terms of Regulation 16 of SAST Regulations, 2011, LIC through its Merchant Banker i.e. ICICI Securities Limited, filed a draft letter of offer with SEBI on which SEBI issued its observation letter on 7.12.2018 in terms of Regulations 16 (4) of the SAST Regulations. Thus, the price to be paid to the shareholders of the target company for acquisition of their shares in the open offer made by the LIC, has been determined in terms of Regulation 8 of the SAST Regulation, 2011. It appears that the case of the petitioner proceed on the premise that in terms of the provisions of LIC Act, 1956 and resultant disclosure made by the LIC in clause 4.5 of the letter of offer, to the effect that LIC is wholly owned by the Central Government, therefore, the Central Government is the 'person acting in concert' with LIC within the meaning of Regulation 2 (q) of the SAST Regulations, 2011, for the purpose of present acquisition of control of the target company by the LIC. On this assumption, the petitioner is of the view that since on 25.5.2018, the Government of India acquired 1,09,73,26,649 number of shares of the target company at the price of ₹ 71.82/- per share, thus, the said price of ₹ 71.82/- per share paid by the Government of India being 'person acting in concert' of LIC will fall within Regulation 8 (2) (c). The petitioner is of the view that price of ₹ 71.82/- per share, being highest amongst all parameters laid down in Regulation 8 (2) (a) to (f) should be the price of open offer. Examining the term “persons acting in concert” DAIICHI SANKYO CO. LTD. VERSUS JAYARAM CHIGURUPATI [2010 (7) TMI 289 - SUPREME COURT OF INDIA] has observed that the deeming provision does not provide that the mere existence of a holding-subsidiary relationship is sufficient to create this relationship. The deeming provision does not dispense with the requirement that the parties must have cooperated for the common objective or purpose of substantial acquisition of shares, and held further that this must be established as a matter of fact, on an analysis of the conduct of the parties. In addition, the Apex Court found the relationship of “persons acting in concert” must exist not at the time of the public announcement, but at the time of acquisition, for the purposes of Regulation 20(4)(b) of SAST Regulations, 2011. On applying the aforesaid ratio to the facts of the present case, it can easily be inferred that Union of India cannot be term as 'person acting in concert' with LIC and consequently, Regulations 8 (2) (c) of the SAST Regulations, 2011 has been applied correctly in the present case and the Offer Price of ₹ 61.73 per share, as being offered by the LIC is correct as per the justification given at para 6.1.5 and 6.1.6 of the Letter of Offer, the said price has already been affirmed by a judicial verdict. Insolvency & Bankruptcy 2019 (2) TMI 1043 Rejection of the resolution plan - resolution plan of the concerned corporate debtor(s) has not been approved by requisite percent of voting share of the financial creditors - initiation of liquidation process under Chapter III of Part II of the I B Code - qualifying standard for approval of a resolution plan - HELD THAT:- In the present case, the amendment under consideration pertaining to Section 30(4), is to modify the voting share threshold for decisions of the CoC and cannot be treated as clarificatory in nature. It changes the qualifying standards for reckoning the decision of the CoC concerning the process of approval of a resolution plan. The rights/obligations crystallized between the parties and, in particular, the dissenting financial creditors in October 2017, in terms of the governing provisions can be divested or undone only by a law made in that behalf by the legislature. In the present case, we are concerned with the provisions of I B Code dealing with the resolution process. The dispensation provided in the I B Code is entirely different - non-recording of reasons would not per se vitiate the collective decision of the financial creditors. The legislature has not envisaged challenge to the commercial/business decision of the financial creditors taken collectively or for that matter their individual opinion, as the case may be, on this count. As contended that NCLAT committed manifest error in not calling upon the dissenting financial creditors to respond to the applications filed in the concerned appeals pending before it, including with a prayer to allow the resolution applicant to revise the resolution plan. We find no merits in this submission. The reliefs claimed in the stated application filed before the NCLAT would not take the matter any further. For, it is enough for the dissenting financial creditors to disapprove the proposed resolution plan by voting as per its voting share, based on commercial decision. Indeed, if the opposition of the dissenting financial creditors is in regard to matter(s) within the jurisdiction of the Tribunal ascribable to Sections 30(2) or 61(3), then the situation may be somewhat different. But that is not in issue in these cases. As regards the application by the resolution applicant for taking his revised resolution plan on record, the same is also devoid of merits inasmuch as it is not open to the Adjudicating Authority to entertain a revised resolution plan after the expiry of the statutory period of 270 days. Accordingly, no fault can be found with the NCLAT for not entertaining such application. The counsel appearing for the resolution applicant and the stakeholders supporting the resolution plan were at pains to persuade us to exercise powers under Article 142 of the Constitution of India. Inasmuch as, in both the cases, the vote of approval exceeded more than 66% of the voting share of the financial creditors and yet the benefit of the amended provision could not be availed, as it came only during the pendency of the appeal before the NCLAT. The submission is that this Court may set aside the order passed by the Tribunal and relegate the parties in both the cases, before the NCLT for considering the proceedings afresh in light of the amended provision reducing the threshold requirement of percent of voting share of financial creditors to 66%. We are afraid, it is not possible for us to exercise powers under Article 142 of the Constitution which will result in issuing directions in the teeth of the provisions as applicable to the cases on hand. We, therefore, decline to accede to this request. Having answered the core issues and to avoid prolixity, we do not wish to dilate on the exposition in other reported decisions relied upon by the counsel. As a result, we hold that the NCLAT has justly concluded in the impugned decision that the resolution plan of the concerned corporate debtor(s) has not been approved by requisite percent of voting share of the financial creditors; and in absence of any alternative resolution plan presented within the statutory period of 270 days, the inevitable sequel is to initiate liquidation process under Section 33 of the Code. That view is unexceptional. Resultantly, the appeals must fail. 2019 (2) TMI 1042 Resolution Plan consideration - period of pendency of this appeal - delay emanating from process document or any other document internally circulated by the RP or the COC - main plea taken by the Appellant is that the Adjudicating Authority cannot provide the numerous opportunities at the belated stage - HELD THAT:- From the ‘Process Document, it is clear that the ‘Committee of Creditors’ have absolute discretion but without being under any obligation to do so, update, amend or supplement the information, assessment or assumptions and right to change, update, amend, supplement, modify, add to, delay or otherwise annul or cease the ‘Resolution Process’ at any point in time. Thus, the ‘Resolution Plan’ can be modified as per dates or other terms and conditions set out in the ‘Process Document’. As per Clause 1.3.6, the ‘Committee of Creditors’ have right to negotiate better terms with the ‘Compliant Resolution Applicant(s)’. In terms of Clause 1.14.13, the ‘Resolution Professional’ in consultation with the ‘Committee of Creditors’ can extend the timelines at its sole discretion if expedient for obtaining the best ‘Resolution Plan’ for the Company. Therefore, granting more opportunity to all the eligible ‘Resolution Applicants’ to revise its ‘financial offers’, even by giving more opportunity, is permissible in the Law. However, all such process should complete within the time frame. Similar provisions were noticed by this Appellate Tribunal in “Binani Industries Limited” [2018 (11) TMI 803 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] and held that the ‘Committee of Creditors’ in its sole discretion can ask the ‘Resolution Professional’ to negotiate better terms with the ‘Compliant Resolution Applicant(s)’. However, such negotiation to be made and completed within the timeframe i.e. within 180 days’ subject to extension if granted by the Adjudicating Authority which should not be extended beyond 270 days. In this background, while we hold that this appeal preferred by ‘Tata Steel Limited’ is premature, uncalled for, in absence of any final decision taken by the Adjudicating Authority under Section 31, this appeal is also not maintainable. Though we have held that the appeal at the instance of the ‘Tata Steel Limited’ is premature and not maintainable but we are of the view that the observations made by the Adjudicating Authority against the ‘Resolution Professional’ was uncalled for. We have opened the sealed cover submitted by the ‘Committee of Creditors’ enclosing the copy of the ‘Resolution Plan’ approved by it. We find that the ‘Resolution Plan’ submitted by ‘JSW Steel’ has been approved by the ‘Committee of Creditors’ with 97.12% voting shares and voters having 2.88% voting shares remained absent. If some members of the ‘Committee of Creditors’ having 2.88% voting shares remained absent, it cannot be held that they have considered the feasibility and viability and other requirements as specified by the Board, therefore, their shares should not have been counted for the purpose of counting the voting shares of the ‘Committee of Creditors’. In fact, 97.12% voting shares of members being present in the meeting of the ‘Committee of Creditors’ and all of them have casted vote in favour of ‘JSW Steel’, we hold that the ‘Resolution Plan’ submitted by ‘JSW Steel’ has been approved with 100% voting shares. For the reasons aforesaid, while we are not inclined to interfere with the substantive part of the impugned order dated 23rd April, 2018, set aside part of the order whereby adverse observation has been made against Mr. Mahender Kumar Khandelwal (‘Resolution Professional’). The case is remitted to the Adjudicating Authority (National Company Law Tribunal), Principal Bench, New Delhi, for passing appropriate order under Section 31. The ‘Resolution Professional’ will immediately place the ‘approved Resolution Plan’ before the Adjudicating Authority for its order. In case, the Adjudicating Authority is of the opinion that the discrimination has been made between the ‘Financial Creditors’ and the ‘Operational Creditors’, it may give opportunity to the ‘JSW Steel’ to improve its plan and thereby, by substituting the approved ‘Resolution Plan’ with such improvement. Let the period of pendency of this appeal i.e. from 7th May, 2018 till date be excluded for the purpose of counting of the period of 270 days. 2019 (2) TMI 1041 Corporate Insolvency Resolution Process - default in repayment of financial debt - Held that:- As a sequel to the aforesaid discussion and the material placed on record shows that applicant-financial creditor had disbursed the money to the respondent corporate debtor as consideration for purchase of a residential Apartment. Though a considerable long period has lapsed even the principal amount disbursed has not been repaid by the respondent corporate debtor. It is accordingly held that respondent corporate debtor has committed default in repayment of the outstanding financial debt which exceeds the statutory limit of rupees one Lakh. Thus, the application warrant admission as it is complete in all respects. Accordingly, in terms of Section 7(5)(a) of the Code, the present application is admitted. 2019 (2) TMI 1040 Initiation of Corporate Insolvency Resolution Process - proof of outstanding financial Debt - HELD THAT:- Applicants are not strangers to the Corporate Debtor and they have participated in the management of the Company since incorporation. When this much material is staring at us from the Corporate Debtor side proving that no debt was in existence as on the date of filing winding up petition, this case could not be considered as financial debt. If at all any claim is left payable, it could be share application money pending with the Company not any financial debt as stated by the Applicant. In view of these reasons, no financial debt is in existence between the parties as on the date of filing this case. If any disbursement was made to the firm, the corporate debtor having set out all that was paid and adjusted towards share application money, burden lies upon the applicant to prove no such payments has come to their account, that the applicant has not done. The corporate debtor, in any event, having not only established that no debt payable to the Applicants is in existence as on the date of filing this Company Petition, but also established that this debt is time barred, therefore this Company Petition is hereby dismissed as misconceived. FEMA 2019 (2) TMI 1039 Offence under FEMA - Penalty imposed in exercise of the powers conferred u/s 13(1) of the Foreign Exchange Management Act, 1999 - HELD THAT:- The term “bona fide” would be used in contradistinction with “mala fide”; i.e., where an activity is not “mala fide”, it would be “bona fide”. A business activity would be “mala fide” if the business activity itself is “fraudulent” and conducted with a fraudulent intent as in the present case, RLL was engaged in bona fide business activity for exploring opportunities in steel and other specified sectors globally including India. The appellants have made out a strong prima-facie case. There are many issues which have not been decided strictly as per law and facts of the matter in the impugned order. The appellants have raised many important legal issues which have to be gone into. The balance of convenience is also in favour of the appellants. The issue of penalty (being totally disproportionate) as raised by the appellant i.e. grossly arbitrary has also resulted in causing irreparable harm loss and injury to the appellants are to be considered at the time of hearing the appeal on merit. The appeals are pending for the last more than 4 years so as the stay applications. The same have been adjourned one on reason or the other. The appeals could not be decided on merit as the respondent was insisting that before deciding the appeals, the pending application under the provisions of section be decided at the first in stance. Even otherwise the earlier tribunal is merged with the present tribunal in July, 2017 and many files were not transferred on time. In order to strike out the balance between the parties at this stage, direct that without prejudice, the appellants shall deposit ₹ 2 Crores lump-sum with the respondent within eight weeks from today. The hearing of the appeal is expediated. The appeals are listed on 1st July, 2019. All pending applications are disposed of accordingly. Service Tax 2019 (2) TMI 1038 Maintainability of appeal - alternative remedy of appeal - the order was passed prior to the enforcement of Central Goods and Service Tax Act, 2017, which came in to effect on 01.07.2017 - section 85 of FA - Held that:- We are persuaded to uphold the preliminary objection raised by Mr. Verma on the plea of alternative remedy of appeal available to the petitioner under section 85 of the Finance Act, 1994 - petitioner is given liberty to approach the appellate authority under section 85 of the Finance Act, 1994 - petition disposed off. 2019 (2) TMI 1037 Valuation - works contract - whether the value of onshore and offshore supplies by the appellants need to be included in the value of services rendered by them under the works contract scheme? - Held that:- It is not in dispute that the material in question was supplied by the appellant with respect to this particular contract and after the supply was completed, the goods which were supplied were given by APPDCL back to appellant for execution of the contract. A plain reading of CBEC circular D.O.F. No. 334/13/2009-TRU, dated 06.07.2009 explains that such values became includible in the value of the works contract as per the amendment made vide notification NO. 23/2009-ST, dt. 07.07.2009. By inserting an explanation, it was also clarified by CBEC themselves that the inclusion of the values would not apply to such contracts where either the execution of works contract has already started or any payment (whether in part or in full) has been made on or before 07.07.2009. In this particular case, the payments in respect of all the three contracts were made prior to 07.07.2009. Needless to say that there is no separate payment under the umbrella contract because it was only a combination of the other three contracts - There are indeed three different contracts and for which three different payments were to be made and were made. The umbrella agreement only combines all these three agreements so as to give a complete perspective of the scope of the contract. In fact, there is no payment whatsoever under the umbrella agreement. Further, the advances in respect of the three contracts were received prior to 07.07.2009 and hence the amended provisions do not apply. In view of the above, the value of the material supplied under off-shore and on-shore contracts cannot be included in the value of the works contract service as the advance payment in respect of all the three contracts are received prior to 07.07.2009. Appeal allowed - decided in favor of appellant. 2019 (2) TMI 1036 Short payment of service tax - wrong availment of abatement of 67% under N/N. 01/2006-ST dated 01.03.2006 - Construction services in respect of Commercial or industrial buildings and civil structure - CENVAT credit reversed - time limitation - Held that:- Admittedly the show cause notice stands issued after the normal period of limitation. The fact of availment of credit as also the exemption Notification was being reflected by the assessee in their statutory records and returns, in which case no mala fide can be attributed to them - Otherwise also, the appellant had reversed the Cenvat credit so availed, thus making him entitled to the benefit of Notification. Appeal dismissed - decided against Revenue. 2019 (2) TMI 1035 CENVAT Credit - Input services - service tax paid by them on the commission charged by the commission agents as the service of commission agent does not have a direct link in providing the output services, or in the manufacture of their finished goods - Held that:- The matter is no longer res integra as the issue has already been decided in the appellants own case M/S GENUS POWER INFRASTRUCTURE LTD. VERSUS CST, JAIPUR - I [2016 (10) TMI 578 - CESTAT NEW DELHI] where it was held that overseas commission agents used for procuring orders would be covered under input service - credit allowed - appeal allowed - decided in favor of appellant. 2019 (2) TMI 1034 CENVAT Credit - input services - appellant have leased their wagons to Indian Railways on rental basis - supply of tangible goods service - February, 2013 to December, 2013 - Held that:- The bare perusal makes it clear that for being taxable under the alleged category of supply of tangible goods, two conditions have necessarily to be fulfilled at the time when goods are supplied: (1) Right of possession being delivered should not have been transferred; and (2) The effective control should not have been handed over. Also that the transfer of right to use the goods, delivery or supply of any goods, which is deemed to be sale within the meaning of clause 29 A of Article 366 of the Constitution of India shall not amount to be a service. Since appellant was using railways for most of the clearances of its final product i.e. cement and clinker, the appellant opted for the said scheme introduced by Railway in the year 1992 i.e. “Own Your Wagon Scheme”. In accordance of the scheme, irrespective the ownership of wagons could vest in the producers, but wagons were to be placed at the disposal of Railways. Not only this, those were to be merged in general pool of Railways. Also responsibility of day-to-day operation and maintenance would be that of Railways - not only the right of possession but the effective control upon railway wagons was meant to be transferred from the appellant to the Railways. Resultantly, the transaction herein comes out of the ambit of the supply of tangible goods service. The order under challenge has absolutely been silent qua this aspect. Commissioner has jumped-over upon clause 29 A of Article 366 of the Constitution denying the impugned transaction to be a deemed sale and has confirmed the liability under the supply of tangible goods service. The observation of Commissioner is held to have been restricted to the definition of service only without applying the definition of specific service under which the demand has been confirmed. Appeal allowed - decided in favor of appellant. 2019 (2) TMI 1033 CENVAT Credit - capital goods - Rule 4(2a) of Cenvat Credit Rules, 2004 - time limitation - Held that:- It is also the admitted fact that the moment this inadvertence in the books of accounts of the appellant was brought to their notice that they reversed the amount in excess from their credit balance in the month of March 2010 itself. It therefore becomes the revenue neutral situation as far as the books of accounts of the appellant are concerned and since the stage of taking or utilising the credit had not yet come, there is no occasion for revenue to suffer any loss on this account. The Order of appropriation of the reverse amount as passed by the Commissioner has no practical meaning in view of this discussion. Imposition of penalty - Held that:- Since the wrongly availed cenvat credit stands reversed way back in March 2010 and since the appellant immediately has acknowledged the said wrong availment as inadvertent mistake that too in books of account only, there remains no question of any wilful intention to evade duty or to have the unjust enrichment on the part of the appellant. The question of imposition of penalty does not at all arises. Time limitation - Held that:- The fact of inadvertent mistake and the reversal of wrongly availed cenvat credit in March 2010, i.e., much prior to the issuance of the impugned SCN of the year 2013 was very much in the knowledge of the Department. Seeing from any angle SCN is held barred by time. Appeal allowed - decided in favor of appellant. 2019 (2) TMI 1032 Construction services - commercial and industrial construction services - composite contract involving both labour and material - non-payment of service tax - N/N. 01/2006 dated 01.03.2006 - Held that:- The appellant had executed a composite work contract during the financial year 2006-2007 which was inclusive of both material and labour cost and therefore, prima facie the appellant was entitled for abatement as per the provisions of notification No. 01/2006 dated 01.03.2006. It also appears that after the provision of abatement, the required amount of service tax has already been discharged by the appellant much before the issuance of show cause notice. The matter remanded for denovo adjudication to the original adjudicating authority to verify the claims of the appellant and if same are found in order, necessary abatement as per their entitlement under N/N. 01/2006 dated 01.03.2006 should be allowed to them - appeal allowed by way of remand. 2019 (2) TMI 1031 Valuation - commercial training and coaching services - inclusion of amount of scholarship / discount concession provided by them to the students at the time of seeking admission to its Coaching Institute in assessable value - Held that:- The issue decided in appellant own case M/S. CARRIER POINT INFOSYSTEMS LTD. VERSUS C.C.E., JAIPUR-I [2017 (4) TMI 1338 - CESTAT NEW DELHI], where it was held that Offering of discount/rebate by the coaching institutes is an accepted trade practice. Thus, the tuition fees actually charged by the appellant, after providing eligible discount/rebate, will only be considered as the gross value for payment of service tax - demand set aside - appeal allowed - decided in favor of appellant. 2019 (2) TMI 1030 Rent-a-cab service - Mis-declaration of value - It was alleged by the department that the appellant had not declared the correct taxable value of rent a cab service as they had been providing cab on higher basis to West Central Railway Zone as well as Indian Army and the value of services provided to these organizations were not included in the taxable value by the appellant for the period 2001-2002 to 2004-2005 - Held that:- The appellant has failed to prove that the receipts in the balance sheet and profit and loss account are accountable for activity of rent a cab service. We find that the appellant has been changing its stand before various authorities in an attempt to get out of the service tax liability. At one stage they argued that they did not own the required number of vehicles for providing rent a cab service and were providing cars only on commission basis. The appellant has in fact received the payment in lieu of providing the rent a cab service in the form of Indian currency. Payment has been received in convertible foreign exchange by the main service provider namely, Ess Dee Travel Express Pvt. Ltd. and not by the appellant - the benefit of Notification 21/2003-ST dated 20 November 2003 cannot be extended to the appellant as a plain reading of the notification indicate that exemption will be available to persons who receive payment in the convertible foreign exchange. This apart, the benefit of the notification may have been availed of by M/s Ess Dee Travels Express Pvt. Ltd. Demand upheld - appeal dismissed - decided against appellant. Central Excise 2019 (2) TMI 1029 Compliance with the pre-deposit - Section 35-F of the Central Excise Act, 1944 - Article 14 and 19(1)(g) of the Constitution of India - petitioner desires to have an adjudication on merits without complying with this condition - Held that:- Once the Tribunal found that the condition is not complied with, then, it was not open to it to adjudicate the matter on merits. In the instant case, the writ petition only contains the grounds on merits. We are not concerned with the merits of the appeal. For that to be entertained, there is a condition prescribed by the Statute. That condition was not complied with. Once that condition was not complied with, the appeal was not entertainable. If the petitioner/original appellant complies with the statutory condition of pre-deposit within four months from the date of receipt of a copy of this order and reports compliance to the Tribunal, the Tribunal shall restore the appeal of the petitioner/original appellant for adjudication on merits. 2019 (2) TMI 1028 CENVAT Credit - service tax paid by the service provider - duty paying documents - Supplementary invoices issued - Held that:- A similar issue has come up before the Tribunal in the case of M/s. Diamond Cements -Vs-Commissioner of Central Excise, Bhopal [2016 (11) TMI 859 - CESTAT NEW DELHI], where it was held that it is not correct to deny the service tax credit on the basis of the above mentioned supplementary invoices, just because at the time of receipt of the input services, the input service providers were not registered and had not mentioned Service tax registration no. in the invoices - credit allowed - appeal allowed - decided in favor of appellant. 2019 (2) TMI 1027 CENVAT Credit - rails, locomotives, railway material etc. - denial of credit on account of nexus - period from April, 2007 to Feb, 2008 - Held that:- The similar issue has been decided by the Hon’ble Supreme Court in the case of Jayaswal Neco [2015 (4) TMI 569 - SUPREME COURT] wherein while considering the admissibility of the railway material used for handling raw material and process goods the Apex Court has held The uses of railway tracks inside the plant not only form the process of manufacturing, but it is inseparable and integral part of the said process inasmuch as without the aforesaid activity for which railway tracks are used, there cannot be manufacturing of pig iron, and allowed the credit. Credit allowed - appeal allowed - decided in favor of appellant. 2019 (2) TMI 1026 N/N. 04/97-CE dated 01.03.1997 and subsequent N/N. 12/2012-CE dated 17.03.2012 - ‘Ready Mix Concrete’ (RMC) prepared at site of construction and consumed captively - extended period of limitation - Held that:- The issue stands decided against the assessee on merits by the Hon’ble Supreme Court decision in the case of M/s Larsen & Toubro Ltd. [2015 (10) TMI 612 - SUPREME COURT] but we note that Para 23 of the said judgement of Hon’ble Supreme Court has itself observed that there was doubt in the field and following the said decision, Tribunal in the case of M/s Shapoorji Pallonji & Co. Ltd. [2016 (9) TMI 92 - CESTAT MUMBAI] has extended the benefit of limitation to the assessee - also, the extended period is not available to the Revenue. The demand for the period falling outside the normal period, is set aside along with setting aside of penalty upon the appellant - However, the demand falling within the limitation period is required to be upheld - appeal allowed in part. 2019 (2) TMI 1025 Method of valuation - Goods supplied to Defence, CRPF and BSF - requirement to print MRP - Section 4A of Central Excise Act, 1944 or Section 4 of Central Excise Act, 1944 - Held that:- Once the goods are specified by the Central Government in the Notification issued under Sub-Section (1) of Section 4A of Central Excise Act, 1944, the provisions of Section 4 of Central Excise Act, 1944 are not operational in respect of such goods - the differential duty is worked out in respect of such goods which are notified under Section 4A ibid by adopting the provisions of Section 4 of Central Excise Act, 1944. Sub-section (2) of Section 4A does not allow such adoption of value for the purpose of assessment of duty. Therefore, there was no differential duty payable by the appellant. There were no allegations in the show cause notice taking into consideration the provisions of Section 4A of Central Excise Act, 1944 that there was any differential duty payable - appeal allowed - decided in favor of appellant. 2019 (2) TMI 1024 Valuation - stock transfer - clearance of goods to the own sister units - Rule 11 read with Rules 5,8 & 9 of Central Excise Valuation (Determination of Value of Excisable Goods) Rules, 2000 - demand for differential duty - Held that:- Since no sale is involved in such transfer, valuation is required to be done in terms of the Central Excise Valuation Rules, 2000. The Department, during Audit, formed an opinion that the valuation has not been done in terms of the above Rule and in terms of CAS-4 Standard prescribed in this regard - there is no legal basis for addition of this freight amount. The goods are required to be valued at the time of clearance from the appellant’s unit and freight upto the recipient unit is not required to be added - there is no justification for adding such amount for arriving at the differential duty. Valuation - PVC Waste - Rule 8 of Valuation Rules - Held that:- There is no infirmity in this stand since as per the decision of the Larger Bench of the Tribunal in the Ispat Industries [2007 (2) TMI 5 - CESTAT, MUMBAI], the valuation of the goods as per sale to independent buyer, may be adopted even in respect of clearance to sister unit. Revenue neutrality - Held that:- This is a case for revenue neutrality inasmuch as any differential duty paid by Diamond Harbour Unit will be available as cenvat credit by receiving unit. On the ground of revenue neutrality also, there is no basis for demand of differential duty and imposition of penalty. The demand restricted for differential duty to ₹ 46,44,174/-, which has been admitted and paid by the appellant - there is no justification for imposition of penalty - appeal allowed in part. 2019 (2) TMI 1023 CENVAT Credit - input services - Customs House Agent (CHA) - Port Services - Steamer Agent Services - services at the Port of shipment for export of its finished goods on F.O.B. basis - period Feb 2011 to May 2014 - Held that:- Admittedly, such services have been utilized by the appellant in carrying out the export of the goods manufactured in their factory - There is no dispute about the fact that the goods have been exported. In such cases the place of removal is the port where the export of goods is loaded on to the vessel. Hon’ble High Court of Gujarat in the case of inductotherm India Pvt. Ltd. [2014 (3) TMI 921 - GUJARAT HIGH COURT] has granted the credit of CENVAT Credit for Cargo Handling Services used for clearance of final product from the port for export - Even though, the Hon’ble High Court has held that with regard to ‘Cargo Handling service’, the same ratio will be applicable to all three services which are in dispute before us since, all of them have been rendered in the port for export of goods. Credit allowed - appeal allowed - decided in favor of appellant. 2019 (2) TMI 1022 CENVAT Credit - duty paying invoices - invoices where serial number was hand-written - period from June, 2009 to November, 2009 - Held that:- The present issue is squarely covered by the decision of the co-ordinate Bench of the Tribunal in the case of A.A.Trailers [2018 (2) TMI 124 - CESTAT MUMBAI], where it was held that in the absence of any statutory provision, the credit cannot be denied on this count. Also, there is no dispute regarding receipt of the inputs in the factory of manufacture and there is also no dispute of Central Excise duty, which has been paid on the inputs - credit cannot be denied - appeal allowed - decided in favor of appellant. 2019 (2) TMI 1021 Utilization of CENVAT Credit for payment of service tax in respect of services received - reverse charge - Held that:- The utilization of Cenvat credit for payment of service tax is correct - If that be so, then the appellant has correctly made the payment of service tax and the same is available as Cenvat credit to them. Appeal allowed - decided in favor of appellant. 2019 (2) TMI 1020 Short payment of duty - confirmation of the demand of duty short paid by invoking proviso to Section 11A(1) of the Central Excise Act, 1944 - demand of interest and penalty as well - intent to evade present or not - revenue neutrality - extended period of limitation - collecting the duty from their customers but not depositing the same with the revenue by the due date. Held that:- There appears to be no dispute that Appellants have not paid the duty demanded at the relevant time and hence short paid the duty to that extent. In case of non/ short payment of duty, Section 11A of the Central Excise Act, 1944 automatically comes into picture and demand is made in terms of that section, to recover the duty so short paid. In case the duty is paid after the relevant date the same gets adjusted by application of the section. In the present case the period of demand is from April 2003 to November 2005 (Unit-1) and April 2003 to March 2006 (Unit-2). The argument about system glitch in SAP-ERP system of the Appellants for such a long period do not appear to be justified. The appellants were issuing the invoices and collecting the duty from their customers but not depositing the same with the revenue by the due date. This itself shows the malafide intention of the appellants. Benefit of reduced penalty - Held that:- Since in the present case the order is dated 18.08. 2010 and has been received by the Appellants on 27.08.2010 and appellants have deposited the 25% of penalty before filing of the appeal on 18.08.2010. Adjudicating authority should have extended the benefit of payment of penalty of 25% of duty demanded in his order as per the first proviso to section 11AC. Since the appellant has made payments as per the proviso to the section 11AC the benefit of proviso should have been allowed to them. Appeal allowed in part. 2019 (2) TMI 1019 Extended period of limitation - no suppression of facts - Valuation - clearance of goods to their own units - applicability of Rule 8 of the Valuation Rules, 2000 - Held that:- There is no element of any suppression of facts nor there is any contumacious conduct on the part of the appellant-assessee - Further the issue is wholly Revenue neutral, as whatever additional duty appellant would have paid, as demanded by Revenue, the same was available as Cenvat Credit to the sister units, which cleared output on payment of duty. The extended period of limitation is not available to Revenue and thus the show cause notice is not maintainable - appeal allowed - decided in favor of appellant. CST, VAT & Sales Tax 2019 (2) TMI 1018 Deduction of taxable turnover referring to Sections 3, 4 and 5 of the Central Sales Tax Act - the opposite party dealer is neither agent nor middleman of Ex-U.P. Vendor but has himself purchased the goods from outside State of U.P. in his own account and has used in execution of work contract - exemption against the provision of Section 3(3) of U.P. Value Added Tax Act, 2008 read with Rule 9(10(e) of the U.P. Value Added Tax Rues - Held that:- Issue stands decided in the case of M/S COMFORT SYSTEMS VERSUS COMMISSIONER COMMERCIAL TAX, U.P. [2019 (2) TMI 924 - ALLAHABAD HIGH COURT], where it was held that Since in the present case, the Tribunal recorded a specific finding that there pre-existed works contracts between the assessee and the contractees and further the assessee had purchased the goods from outside the State of U.P., only to execute those pre-existing works contracts, in absence of any further finding that such goods had been sourced from before or that they were not applied to the works contract or that there arose two sales, the assessee was clearly entitled to the benefit of deduction contemplated under Rule 9(1)(e) of the Rules. The questions of law framed in the present revision is answered in affirmative i.e., in favour of the assessee and against the revenue - revision dismissed. 2019 (2) TMI 1017 Deduction of taxable turnover referring to Sections 3, 4 and 5 of the Central Sales Tax Act - the opposite party dealer is neither agent nor middleman of Ex-U.P. Vendor but has himself purchased the goods from outside State of U.P. in his own account and has used in execution of work contract - exemption against the provision of Section 3(3) of U.P. Value Added Tax Act, 2008 read with Rule 9(10(e) of the U.P. Value Added Tax Rues - Held that:- Issue stands decided in the case of M/S COMFORT SYSTEMS VERSUS COMMISSIONER COMMERCIAL TAX, U.P. [2019 (2) TMI 924 - ALLAHABAD HIGH COURT], where it was held that Since in the present case, the Tribunal recorded a specific finding that there pre-existed works contracts between the assessee and the contractees and further the assessee had purchased the goods from outside the State of U.P., only to execute those pre-existing works contracts, in absence of any further finding that such goods had been sourced from before or that they were not applied to the works contract or that there arose two sales, the assessee was clearly entitled to the benefit of deduction contemplated under Rule 9(1)(e) of the Rules. The questions of law framed in the present revision is answered in affirmative i.e., in favor of the assessee and against the revenue - revision dismissed. 2019 (2) TMI 1016 Time limitation - cancellation of eligibility certificate dated 26.10.2002 which was valid from 30.03.2000 to 29.03.2008 - Section 4-A(3) of erstwhile U.P. Trade Tax Act, 1948 - Held that:- Undisputedly, the survey giving rise to the proceedings was conducted on 28.01.2004 whereas the proceedings were drawn up for the first time on 10.04.2017, i.e. 13 years after the revenue allegedly came into possession of information and material that the assessee may have committed breach of the terms and conditions of the eligibility certificate - No explanation was offered for the delay of 13 years. Merely because certain assessment proceedings may have remained pending, it could never be cited as a reason to justify the delay. Assuming, the delay of 11 years in the conclusion of assessment proceedings for A.Y. 2003-04 was attributable solely to the conduct of the assessee yet, it was wholly irrelevant for the purpose of initiation of proceedings under Section 4A(3) of the Act. While the assessment order was to be made by the assessing authority, the proceedings under Section 4A(3) of the Act were to be initiated by the Commissioner, Trade Tax. No legal or factual impediment has been shown to exist as may have prevented the Commissioner from initiating those proceedings. Scope and conduct of the two proceedings being completely independent of each other, mere pendency of the assessment proceedings could never be relevant for the purpose of initiation of proceedings under Section 4A(3) of the Act. The period of limitation prescribed under Section 21 of the Act is relevant. Though the initiation, conduct and scope of the two proceedings is independent of the other, the cancellation of eligibility certificate would directly impact the assessment proceedings and consequently on the penalty proceedings as well though the opposite may not be true. Normally, the assessing authority could not have made an assessment beyond a period of six years from the close of the assessment year in which the exemption came to an end. Therefore, normally, cancellation of the exemption certificate beyond that period would be a futile exercise. Thus, the proceedings under section 4A(3) of the Act were initiated outside reasonable period of time - even if the allegation of breach of terms and conditions of exemption made against the assessee were to be treated at par with fraud, in view of the law discussed above, the principle of limitation would still apply - The proceedings having been initiated belatedly, after the expiry of reasonable time, again as discussed above, the same were barred by limitation. The question of law is answered in the affirmative and against the revenue - revision allowed. 2019 (2) TMI 1015 Validity of Higher Rate of tax on Rectified Spirit - authority to collect the tax amount at 20% on rectified spirit - the rectified spirit and ethyl alcohol are one and the same - Held that:- Rectified spirit is ultimately used in alcoholic beverages for human consumption. Therefore, this commodity is mentioned in Entry 12(ii) of Part “S” of the II Schedule and attracts tax at the rate of 20%. Therefore, it is contended that when rectified spirit is ultimately used to create two different commodities which is fit for human consumption therefore 20% tax is levied - On the other hand, ethyl alcohol is used as an intermediate material in the manufacture of other commodities and therefore attracts a lower rate of tax at 10%. This we find to be acceptable. It cannot be said that the differential rate of tax made by the State is perverse. Specific reasons have been assigned as to why the tax on rectified spirit is at much higher rate than that of ethyl alcohol. The reasons have been substantiated through their affidavit. The reasons assigned for the different rate of tax is completely justified by the respondent-State - Appeal dismissed - decided against appellant. 2019 (2) TMI 1014 Grant of time for production of statutory declaration forms which are in possession of the appellant - Held that:- This Court in Prestolite of India's case [1987 (12) TMI 315 - PUNJAB AND HARYANA HIGH COURT] has held that the assessee can file declaration forms at any stage of the proceedings including during pendency of the appeal and the object of production of such statutory declaration forms is only levy of tax at concessional rate. The benefit would be available to an assessee only if the genuineness of the statutory declaration forms issued by the seller of goods is verified by the Department. Hence, there cannot be any question of fabrication of any documents at this stage. One opportunity deserves to be granted to the appellant to produce the statutory declaration forms before the Assessing Authority. For that purpose, the appellant may appear before the concerned Assessing Authority on 27.2.2019 or any other date fixed by the Assessing Authority - appeal allowed. 2019 (2) TMI 1013 Rate of tax - Tendu leaves - whether tax on minor forest produce has been reduced to 5% will also be applicable to Tendu leaves by treating the Tendu leaves also as a minor forest produce despite the Tendu leaves having been separately shown as a taxable item in Part III of Schedule II? - Section 15-B of the Chhattisgarh Value Added Tax Act, 2005 - error of interpretation. Held that:- An exemption notification is not like a blackhole that it will suck out all entries given in the taxing statutes even though those goods and items are specifically notified and stand as they are without being altered or modified or indicated in the exemption notification. When they are specific taxable goods which are stand alone entries and are identifiable as such of commercial value, then unless the exemption notification specifically touches upon such entries for the benefit of exemption or concession, the Courts will not rush in to bring all such items which can fit into the general notification even though those items may come within a broad definition - thus, while interpreting different entries, attempts shall be made to find out whether the same answers the descriptions of the contents of the basic entry and only if it is not possible to do so, that recourse to residuary entry should be taken as a last resort. Since the notification extending benefit of 5% VAT has been issued by the State only for minor forest produce and the entry 'Tendu leaves' stands untouched as an item of highest incidence of tax and has been clubbed with some such goods like diesel, petrol, aviation fuel, etc., entries in Part III of Schedule II cannot be pulled out and read into a general notification with the object of extending benefit of the said notification. There is serious error of interpretation has been committed by the learned Single Judge by treating the Tendu leaves as a minor forest produce to allow benefit of reduced rate of tax at 5% when the said Schedule in VAT Act still stands and the incidence of tax shown therein is 25% - appeal allowed - decided in favor of appellant. Indian Laws 2019 (2) TMI 1012 Dishonor of Cheque twice - recovery of loan amount - Section 138 of the Negotiable Instruments Act, 1881 - entitlement of the respondent/plaintiff to recover the suit amount - Section 92 of the Indian Evidence Act, 1872 - Held that:- As regards the issue of repayment, the trial court has held that since the respondent/plaintiff in his cross-examination admitted to receiving a sum of ₹ 1,30,000/-, this amount has to be deducted from the principal loan of ₹ 6,00,000/-, and therefore the respondent/plaintiff is only entitled to the amount of ₹ 4,70,000/- as the balance principal amount. The trial court has rejected the defence of the appellant/defendant no.1 of making a payment of ₹ 18,500/- in cash because no evidence has been led with respect to proof of this payment of ₹ 18,500/- - Further, the trial court has held that the payment given for the settlement of the case pertaining to the Negotiable Instruments Act was for the settlement of the cheque issued by the brother of the appellant/defendant no.1 for his liability to the respondent/plaintiff, and not for and by the appellant/defendant no.1, and therefore the payment made for settlement of the Negotiable Instruments Act case under Section 138 filed against the brother of the appellant/defendant no. 1 cannot be taken as discharge of liability of the appellant/defendant no. 1 towards the subject and different loan of ₹ 6,00,000/- - The trial court has therefore rightly held against the appellant/defendant no.1. The trial court has rightly held that the loan amount was of ₹ 6,00,000/-, and that the appellant/defendant no.1 had only repaid a sum of ₹ 1,30,000/- and that the appellant/defendant no.1 did not pay any other amount as was contended by him. The Suit therefore has been rightly decreed for a sum of ₹ 4,70,000/- alongwith interest @ 12% per annum simple - appeal dismissed. 2019 (2) TMI 1011 Dishonor of Cheque - the payment in respect of the cheques was stopped as the said paddy has not been passed by the Quality Control Department - Section 138 of Negotiable Instruments Act, 1881 - Held that:- The embargo put by National Company Law Board vide its order of 16th February, 2016 and of the Appellate Tribunal is for the proper functioning of the accused-company and cannot be taken to be a bar to proceed under Section 138 of Negotiable Instruments Act, 1881 in these cases, as the restraint from making withdrawal or transfer of funds is conditional one - prior permission of the National Company Law Board/Tribunal is to be obtained before the assets of the accused-company are to be diverted or transferred. The aforesaid embargo cannot be considered to be a bar to proceed under Section 138 of Negotiable Instruments Act, 1881 against petitioner - this Court is not inclined to quash the complaints or the impugned order in question - Petition disposed off.
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