TMI Tax Updates - e-Newsletter
February 25, 2020

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Securities / SEBI Insolvency & Bankruptcy FEMA PMLA Service Tax Central Excise Indian Laws

TMI SMS

• CENVAT Credit - leftover of packing material is not at all is manufactured good of the Appellant - Not an exempted product - No reversal

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• Refund of duty - principles of unjust enrichment - there was no end-user or customer in the instant case - refund cannot be denied - HC

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Articles

1. PROFITEERING ON SUPPLY OF RESIDENTIAL FLATS

   By: Dr. Sanjiv Agarwal

2. Eligibility Criteria And Tax Exemption For Startups In India - ADCA

   By: Dinesh Kumar

News

1. Banking Landscape in the 21st Century (Shri Shaktikanta Das, Governor, Reserve Bank of India - February 24, 2020 - at the Mint’s Annual Banking Conclave, 2020)

2. NTPC gets CCI approval to acquire 74.50% of issued and paid-up share capital of THDC India Ltd.

3. CCI approves acquisition of 100% of issued and paid-up share capital of NEEPCO by NTPC

4. MCA Secretary inaugurates SPICe+ web form

Notifications

SEBI

1. SEBI/LAD-NRO/GN/2020/04 - dated 21-2-2020 - SEBI

Securities and Exchange Board of India (Depositories and Participants) (Amendment) Regulations, 2020

Highlights / Catch Notes

GST

• Vehicle Detained for GST Violation; Owner Fails to Prove Lack of Knowledge Under GST Act 2017.

  Case-Laws - HC : Release of vehicle - the vehicle carrying goods were found to be carried in violation of GST provisions - The petitioner is the owner of the vehicle but he failed to prove that he had no knowledge about the goods carried in the vehicle so as to discharge his burden as otherwise envisaged under the Act of 2017 - HC
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• High Court refrains from intervening in copra tax rate dispute due to factual complexities under Article 227.

  Case-Laws - HC : Determination of rate of tax on dry coconut (copra) - This issues in the impugned in the present writ petition, depends upon numerous disputed questions of facts, this Court is not inclined to interfere under Article 227 of the Constitution of India. - HC
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Income Tax

• Business Fraud Loss Recognized as Irrecoverable; Eligible for Deduction in Business Expenses Under Current Tax Rules.

  Case-Laws - AT : Loss due to fraud and embezzlement - The loss that has been occurred to the assessee because of those factors which are very much irrecoverable and in the practical context, these have to be allowed since it has been incurred by the assessee for facilitating the carrying on of the business of the assessee. - AT
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• Court Confirms Tax Additions in Case of Fake LTCG from Penny Stock Sales, Backed by Evidence and Circumstances.

  Case-Laws - AT : Bogus LTCG on sale of shares - Penny stock - The statements of the persons who controlled the business of providing accommodation entry have been corroborated with the material, surrounding circumstances and preponderance of probability. - Additions confirmed - AT
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• Late Filing Fee Deleted: Section 194IA Not Applicable for TDS on Property Transfer Below Rs. 50 Lakhs.

  Case-Laws - AT : Applicability of Section 234E r.w.s. 204 - late filing fees - TDS u/s 194IA - transfer of immovable property - since the consideration paid to any transferor is less than ₹ 50 Lakhs, the provisions of Section 194IA would not apply - Late fee to that extended deleted - AT
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• Derivative Transaction Loss Exception Valid u/s 43(5)(d) of Income Tax Act: Claim Has Substantial Merit.

  Case-Laws - AT : Marked to market loss on derivatives - the derivative transaction in respect of which it has claimed mark to market loss comes within the exception as per Clause (d) of the proviso to Sec. 43(5) of the Act appears to have substantial strength, hence, needs to be accepted - AT
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• Taxable Profit on Capital Asset Conversion: Deduct Market Value at Conversion from Sale Proceeds for Tax Calculation.

  Case-Laws - HC : Shares converted into stock-in-trade - Valuation adopted for conversion of investments to stock-in-trade, opening stock and closing stock - where an assessee converts his capital assets into stock-in-trade and starts dealing with them, the taxable profit on the sale must be determined by deducting on sale proceeds and the market value at the time of their conversion into stock-in-trade - HC
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• Literal Interpretation of Tax Law: Section 36(1)(viia) Enforced Without Regard to Hardship or Assumed Intent.

  Case-Laws - HC : Language employed in Section 36(1)(viia) of the Act is clear and unambiguous. It is well established Rule of interpretation stated by LORD CAIRNS that “if the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of law the case might otherwise appear to be. It is equally well settled legal proposition that “in a taxing act once has to look merely as what is said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.” - HC
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Customs

• No Evidence Found: Customs House Agent Avoids Penalty u/s 114AA for Alleged Cosmetic Export Rule Violation.

  Case-Laws - AT : Imposition of penalty u/s 114AA of Customs Act, 1962 on appellant-CHA - apparently, there is no material evidence available on records to prove that the appellants intentionally encouraged and supported the wrong doer i.e. the importer in doing the wrongful act of attempting to export the branded cosmetic goods in violation of Cosmetic Rules, 2010. - No penalty - AT
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• Court Quashes Order for Duty Refund Due to Lack of End-User; Invalidates Deposit into Consumer Fund.

  Case-Laws - HC : Refund of duty - principles of unjust enrichment - there was no end-user or customer in the instant case - The authorities in uncanny avoidance to deal with this aspect has rendered the order vitiated and, therefore, decision of the authority qua depositing the amount into the consumer fund is required to be deprecated, quashed and set aside. - HC
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Indian Laws

• Higher Court Overturns Acquittal in Cheque Dishonor Case; Trial Court's Decision Deemed Perverse and Against Evidence.

  Case-Laws - HC : Dishonor of Cheque - acquittal of accused - The amount was advanced on the basis of personal relation, therefore, preparation of other documents was not required under the law and cheque issued by the respondent is the best document for showing liability of the respondent - the finding of the trial court is against weight of the evidence and same is perverse - HC
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PMLA

• Court Rules Provisional Property Attachment Ineffective; No Legal Proceedings on Money Laundering Notices u/ss 5(1) & 8(1.

  Case-Laws - HC : Provisional Attachment of property - money laundering - no proceeding could be initiated on the basis of the notice u/s 8(1) issued to the present petitioner, thereby rendering the notice u/s 5(1) infructuous, post facto, since the notice u/s 5(1) ultimately merged in the notice u/s 8(1) as the latter was a continuation of the process initiated by the former - HC
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• Court Denies Applicant's Request for Enlargement; Custodial Interrogation Needed for PMLA Investigation Clarity.

  Case-Laws - HC : Enlargement of applicant in the event of her arrest - The presence of the applicant is required before the investigating officer to explain various transactions came across during the investigation for the purpose of ongoing investigation under PMLA. Hence, custodial interrogation of the applicant is required - application dismissed. - HC
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SEBI

• Regulation 79 SEBI Rules: Essential Guide to Creating Pledges and Hypothecations in Securities Market Transactions.

  Act-Rules : Manner of creating pledge or hypothecation - Regulation 79 of the Securities and Exchange Board of India (Depositories and Participants) Regulations, 2018 - Meaning and scope of term "Pledge" extended.
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Service Tax

• Service Tax Dispute Over Cargo Handling Services: Interest-Free Refundable Amounts Under Scrutiny by Commissioner's Ruling.

  Case-Laws - AT : Demand of Service Tax - Cargo Handling Services - In order to establish a private siding to serve the customers, the Appellant claims to have collected interest free refundable amount from the members of the consortium. - the Commissioner was not justified in holding that the amount deposited by the members of the consortium with the Appellant had escaped assessment of service tax - AT
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• Refund Approved for Service Tax on Chartered Accountant Services for Export Goods Under Notification No. 41/2012 ST.

  Case-Laws - AT : Refund of service tax - export of goods - input services rendered by the Chartered Accountant for CA certificate - specified services or not as per N/N. 41/2012 ST - all are the services which are to be used beyond the factory or premises of production or manufacturer - refund allowed - AT
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• Service Credit Valid for Exporting Assessees with No Tax Liability on Output Services.

  Case-Laws - AT : CENVAT credit - input services received - The input service credit is not deniable for the reasons that the assessee is exporting the whole of their output services and thus, is not paying any tax. - AT
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• Service Tax Demand Overturned: Appellant's Toll Collection for Rajasthan Government Not Classified as Business Auxiliary Service.

  Case-Laws - AT : Business Auxiliary Service - surplus amount - collection of toll, royalty, on behalf of the State Government or Government Department - The appellant have provided no service to the Department of Mines & Geology, Government of Rajasthan. The appellant have entered into business on principal to principal basis - Demand set aside - AT
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Central Excise

• CENVAT Credit Approved for Security Services at Factory Headquarters and Residential Colony Owned by Factory.

  Case-Laws - AT : CENVAT Credit - Security in the headquarters building & residential colony - It is not the case of the Department that the employees/workers are living in private residential houses where security has been provided by the factory. It is an admitted fact that the residential colony is provided by the factory and it is situated within the premises owned by the Appellant and close to the mining area and offices - credit allowed - AT
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• CENVAT Credit Approved for CSR Workshop Participation as "Input Service" Under Coaching and Training Regulations.

  Case-Laws - AT : CENVAT Credit - participation of officers in workshop for Corporate Social Responsibility (CSR) - Such workshops do help the officers in better management of the business activities of the Appellant and, in fact, would be included in the “coaching and training‟ mentioned in the inclusive part of the definition of “input service‟ - Credit allowed - AT
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• Leftover Packing Material Not Exempt u/r 6(3)(1) of CENVAT Credit Rules 2004; Insufficient as Manufactured Good.

  Case-Laws - AT : CENVAT Credit - leftover of packing material - exempt goods or not - Rule 6 (3)(1) of CCR 2004 - these goods is not at all sufficient to hold the same to be called as the manufactured good of the Appellant. - AT
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• Firm Partner Admits to Secretly Removing Goods Without Paying Central Excise Duty, Recorded Only in Private Records.

  Case-Laws - AT : Clandestine removal - there had been unaccountal of clearance of winding wire, roll products without payment of Central Excise duty, which were found to be maintained in private records. All these evidences have been accepted by the Partner of the Firm in his statement before the Investigating Officer. Whatever has been accepted need not be proved. - AT
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• High Court Dismisses Petition on Agrochemical Product Classification; Interim Order Deemed Non-Prejudicial.

  Case-Laws - HC : Classification of goods - manufacture of agrochemical products - Plant Growth Regulator and falling under Chapter heading 3808 or not - As per the circulars issued by the CBEC, the product in question was required to be “compound” and not “mixture”. - CESTAT referred the matter to the Larger Bench - the order impugned is not in any manner prejudicial to the petitioner and is only an interim order - Petition dismissed - HC
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Case Laws:

• GST

• 2020 (2) TMI 1050
  Vires of Rule 117 of CGST Rules 2017 and HGST Rules 2017 - time limitation - portal for the petitioners to upload the form TRAN-01 - HELD THAT:- Today, Mr. Nimba Ram, Joint Commissioner, GST Policy Wing, CBIC and Mr. Anish Gupta, Officer on Special Duty- Legal, CBIC, Department of Revenue have appeared in the Court and informed that decision in this regard can only be taken on the recommendation of GST Council and government is, otherwise, powerless to take any decision. Benefit of decision in the case of ADFERT TECHNOLOGIES PVT. LTD. VERSUS UNION OF INDIA AND ORS. [ 2019 (11) TMI 282 - PUNJAB AND HARYANA HIGH COURT] provided, where it was held that The Respondents are directed to permit the Petitioners to file or revise where already filed incorrect TRAN-1 either electronically or manually statutory Form(s) TRAN-1 on or before 30th November 2019. The writ petitions are disposed of with the permission to the petitioners to file TRAN-0I Return, either electronically or manually, by 31.01.2020.

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• 2020 (2) TMI 1049
  Release of vehicle - the vehicle carrying goods were found to be carried in violation of GST provisions - case of respondent is that in absence of the payment, the vehicle could not be released - HELD THAT:- It is a case where a vehicle alongwith goods were seized when it was found carrying goods in violation of the Act of 2017. The petitioner alongwith owner of the goods was served with the notice before seizure of the goods. The petitioner is the owner of the vehicle but he failed to prove that he had no knowledge about the goods carried in the vehicle so as to discharge his burden as otherwise envisaged under the Act of 2017 - In absence of discharge of burden by the owner of the vehicle, an order for release of vehicle could not be passed - there are no illegality in the order. Liberty is given to the petitioner to again approach the authority with defence, as available to prove his innocence - Petition disposed off.

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• 2020 (2) TMI 1048
  Maintainability of petition - alternative remedy of appeal - Detention of gods - Section 130 of the Uttar Pradesh Goods and Services Tax Act, 2017 - HELD THAT:- The petitioner is having remedy of appeal under Section 107 of the Act of 2017 but without availing it, this writ petition has been filed. It is more so when questions of facts are involved which cannot be addressed by this Court while exercising jurisdiction under Article 226 of the Constitution of India. The writ petition is dismissed, however with a liberty to the petitioner to avail the remedy of appeal provided under Section 107 of the Act of 2017.

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• 2020 (2) TMI 1047
  Opening of portal for filing of TRAN-1 Form - transitional credit - HELD THAT:- The Writ Petition is disposed of in terms thereof directing the respondents to either open the portal to enable the petitioner to again file the Form GST TRAN-1 electronically or in the alternative, accept the Form GST TRAN-1 presented manually, on or before 31.12.2019.

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• 2020 (2) TMI 1046
  Determination of rate of tax on dry coconut (copra) - Maintainability of writ petition - appeal provided under the Integrated Good Service Tax Act read with Section 107 of the Central Goods Service Tax Act, 2017 - HELD THAT:- The petitioner failed to show as to how the order impugned is without jurisdiction, so as to call for interference in extraordinary writ jurisdiction of this Court. In view of the fact that efficacious remedy, by way of appeal, has been provided and in view of the fact that determination of rate of tax on dry coconut (copra), impugned in the present writ petition, depends upon numerous disputed questions of facts, this Court is not inclined to interfere under Article 227 of the Constitution of India. Petition dismissed.

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• Income Tax

• 2020 (2) TMI 1045
  Penalty u/s. 271(1)(c) - Defective notice - assessee s omission to offer interest income on Income Tax refund - According to CIT(A), the assessee cannot be held guilty of concealment of income warranting levy of penalty - whether an inadvertent and bona fide error and no contumacious conduct has been established by the AO? - HELD THAT:- Show cause notices issued u/s 274 of the Act r.w.s. 271 of the Act dated 29.12.2016 issued by the AO before imposing penalty does not contain the specific charge against the assessee namely as to whether the assessee was being proceeded against for having concealed particulars of income or having furnished inaccurate particulars of income . A copy of the show cause notice u/s 274 of the Act dated 29.12.2016 was filed before us and perusal of the same reveals that AO has not struck out the irrelevant portion in the show cause notice and, therefore, the show cause notice does not specify the charge against the assessee as to whether the charge is for concealment of particulars of income or furnishing of inaccurate particulars of income . M/S MANJUNATHA COTTON AND GINNING FACTORY OTHS., M/S. V.S. LAD SONS, [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] took a view that imposing of penalty u/s 271(1)(c) of the Act is bad in law and invalid for the reason that the show cause notice u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income. Imposition of penalty on defective show cause notice without specifying the charge against the assessee cannot be sustained. - Decided against revenue. Unclaimed credit balances - Relevant assessment year - HELD THAT:- CIT(A) taking note that the liability was pertaining to AY 1983-84 when the assessee/entity s income was not taxable and the liability of Rs. 1.75 cr. pertained to AY 1983-84 which was never allowed as deduction in the year in which it was debited/created so, the reversal of the same in the relevant assessment year cannot be brought to tax, which action of the Ld. CIT(A) cannot be found fault with. The judgments cited by the Ld. CIT, DR is distinguishable on the facts of this case and, therefore, we do not find any infirmity in the order of the Ld. CIT(A) and so, we confirm the same and dismiss the appeal of the revenue. Disallowing the contribution made by the assessee to Kolkata Port Trust officer s Club - HELD THAT:- We note that the assessee Port Trust has been contributing every year for more than four decades annual contribution to this Officers club for the welfare of the employees and this annual contribution has been consistently allowed by the AO in earlier assessment years after scrutiny u/s. 143(3) of the Act. Therefore, based on the principles of consistency since the facts permeating in the earlier years are the same, and there is no change in the facts and law the disallowance was not warranted and, therefore, relying on the decision of CIT Vs. Radhasoami Satsang [ 1992 (9) TMI 71 - ALLAHABAD HIGH COURT] as well as the case law referred to above, we are inclined to allow the ground of appeal raised by the assessee Disallowing the compensation claimed - AR submitted that this compensation claim has got two parts (i) unrealised portion of the compensation and (ii) realised portion - main arguments of the assessee is that the unrealised portion of the compensation of Rs. 101 cr.(approx) is capital in nature and, therefore, not taxable in the hands of the assessee - HELD THAT:- Since the receipt of the portion of the compensation of Rs. 101 cr. in question is from the properties of the assessee held unauthorised by various parties, the receipt received by the assessee whether it is called compensation, damages etc. which is towards the loss of income is a revenue receipt and cannot be termed as a capital receipt since there is no loss of source of income. Therefore, this argument of the Ld. AR of the assessee is bereft of any merit and, therefore not accepted. Then coming to the taxability in respect of the unrealised portion of compensation, we are of the opinion that the quantum of amount towards loss of income respect of the property of the assessee has not been finalised since it is lis-pendence. Therefore, the amount in question has not reached finality and, therefore, not crystallised in the year under consideration, so when it gets crystallised/finalised, then it will be treated as a revenue receipt and taxed in accordance to law. Coming to this conclusion, we also apply the real income theory which is propounded in CIT Vs. M/s. Shoorji Vallabhdas Co. [ 1962 (3) TMI 6 - SUPREME COURT] and Godhra Electricity Co. Ltd. Vs. CIT [ 1997 (4) TMI 4 - SUPREME COURT] and since no real income has arisen for the assessee in the year under consideration in respect of the sum of Rs. 101 cr. (unrealised portion of the compensation) this amount need not be taxed in this assessment year, and we order accordingly. For this, we also rely on the decision of the Hon ble Bombay High Court in the case of DSL Enterprises (P) Ltd. Vs. Mrs. N.C. Chandratre, Income-tax Officer [ 2013 (3) TMI 440 - BOMBAY HIGH COURT].

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• 2020 (2) TMI 1044
  Assessment u/s 153C - assessment beyond four years - HELD THAT:- It is not in dispute that search was conducted on 20.01.2014 in the cases of M/s Mapsa Logistics Pvt. Ltd. Ors. and satisfaction u/s 153C was recorded on 23.02.2016 that the documents pertaining to assessee have been seized during the course of search. The AO, accordingly, issued notice u/s 153C on 23.02.2016. The issue is, therefore, covered by judgment of Hon ble Delhi High Court in the case of RRJ Securities Ltd. [ 2015 (11) TMI 19 - DELHI HIGH COURT] as is considered by the CIT(A) in the impugned order. The six assessment years for which assessments/reassessments could be made u/s 153C of the Act would also have to be construed with reference to the date of handing over of the assets/documents to the AO of the assessee i.e. 23.02.2016. Therefore, the relevant assessment years for initiating proceedings u/s 153C would be assessment years 2010-11 to 2015-16. Therefore, the assessment years under appeal i.e. 2008-09 2009-10 would be beyond the period of six years. . In view of the above, assessment for current AY were outside the scope of Section 153C of the Act and the AO had no jurisdiction to make an assessment of the Assessee s income for the year in question. - Decided in favour of assessee.

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• 2020 (2) TMI 1043
  Rejection of books of accounts - NP rate determination - only reason assigned by AO for making this addition was that the assessee was non-cooperative in the assessment and recovery proceedings in the A.Yr. 2008-09 - AO applied NP of 11.03% on the gross deposits as reduced to 3.66% by CIT- A - HELD THAT:- Bank is not a trading or manufacturing concern so it was not required to maintain any Stock Register as opined by the ld. CIT (A). The Receipts and Advances as made during the banking operations are duly accounted for and are vouched and verifiable. In the circumstances, the observations of ld. CIT(A) regarding non-maintenance of Stock , Register is irrelevant in the present case. Authorities Below had failed to spell out as to how the `General. and Common observations regarding procedural lapses made in the Statutory Audit warranted rejection of the books of banking company and make addition by estimating NP rate which is generally in the case of concerned who engaged in trading and manufacturing activities. Detailed chart of Receipts Expenses as placed at PB page No.34 35, no specific discrepancy what-so-ever could be pointed out in respect of such receipts and expenses. Set aside both the orders of the lower authorities and the matter is restored back to the A.O. to examine afresh in the light of the fact that the observation of internal and statutory auditor was removed by the assessee subsequently as stated by the ld AR. A.O. should also keep in the mind that the assessee being banking company and not a trading or manufacturing concerned so as to estimate the GP or NP on its sales. The A.O. is to decide the issue afresh after giving due and effective opportunity of hearing to the assessee.

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• 2020 (2) TMI 1042
  Undisclosed income - violation of principle of natural justice - not providing opportunity to assessee of cross-examining M/s Tinka Stone, therefore the addition of INR 10 Lacs as made by AO should be deleted - HELD THAT:- Set-aside proceedings and the matter was earlier set-aside by the Tribunal with a specific direction to provide cross-examination of M/s Tinka Stones to the assessee company. Both the lower authorities having acknowledged this fact have failed to follow the specific direction and thus, it is not just a case of judicial indiscipline but also a violation of principle of natural justice where liability has been fastened on the assessee merely based on confirmation filed by a concern without providing an opportunity of cross examination. It is not a case where the whereabouts of M/s Tinka Stones was not known to the Revenue as apparent from commission of enquiry conducted through ACIT Mumbai on such entity or anything on record to suggest that there was any practical difficulty in arranging the cross-examination. On merits, we find that the assessee has already written off the said amount in its financial statements for the financial year ended 31.03.2019 and has offered the amount to tax in its return of income filed for AY 2019-20. Therefore, where the undisputed facts are that the amount of advance written off has already been offered to tax, the same amount cannot be brought to tax again. Addition so made is directed to be deleted and the sole ground taken by the assessee is allowed.

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• 2020 (2) TMI 1041
  Penalty u/s.271(1)(c) - furnishing inaccurate particulars of income by non deduction of TDS u/s.194C - HELD THAT:-Disallowance u/s.40(a)(ia) of the Act is concerned, the same has been deleted by the Coordinate Bench by holding that provisions of section 40(a)(ia) of the Act were not applicable for the year under consideration with the following observation of ITAT passed in assessee s own case for AY 2005-06 [ 2016 (10) TMI 1297 - ITAT AHMEDABAD] - No penalty to be levied - Decided against revenue

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• 2020 (2) TMI 1040
  TP Adjustment - Splitting of ESAS segment into three segments, namely, Sales, Trading and Service - whether the instant transactions of Indenting, Trading and Service can be construed as closely linked transactions ? - HELD THAT:- For providing marketing support services, MTU India is remunerated with commission which ranges from 2 to 10% on the value of sales. These rates have been prescribed under the `Sales Representative agreement . Thus it is vivid that not only risks and rewards under the Indenting activity have absolutely no relation with the activities of Trading and Service, even the kind of effort required and the nature of expenses incurred for such an activity are also miles apart. By no stretch of imagination, the Indenting activity can be considered as a closely linked transaction with the Trading and Service activities. In the FAR (Functions, assets and risks) analysis, the assessee itself analysed Import of Spares and Engines, Sale of spares and provision of warranty services together on page 10 and Commission separately on page 12 of its T.P. Study report. In view of the foregoing raison d etre , we are satisfied that the segment of Indenting (pre-sale activity) is not closed linked with Trading and Service (post-sale activities) activities and hence cannot be aggregated. Each international transaction of an assessee is to be benchmarked separately unless two or more international transactions are closely linked to each other. If the argument of the ld. AR is taken to a logical conclusion, then all the international transactions of an assessee would require aggregation in as much as they cumulatively lead to one aim of carrying on the business and earning profit. But for transaction of purchase of raw material, there can be no sale; but for acquisition of technical know-how, there can be no manufacturing; but for availing administrative, financial and marketing services, there can be no production or sale; so on and so forth. The scenario as presented by the ld. AR before us, if accepted, would lead to complete bypassing of the transfer pricing provisions because of cross-subsidizations etc., which is impermissible. As the law requires benchmarking of each transaction separately, unless closely linked, we are unable to accord our imprimatur to the contention of the ld. AR. We hold that the authorities below were justified in segregating Indenting, Trading and Service under the main ESAS segment. Most appropriate method - Whether TNMM or RPM? - resale of spare parts without any value addition carried out by the assessee - HELD THAT:- View canvassed by the TPO of accepting dissimilar companies as comparable under the TNMM and not under the RPM, does not sound logical. Selection of companies as comparables cannot differ with the method adopted. Comparables have to be selected on the basis of similarity irrespective of the method - be it the RPM or the TNMM TPO was not justified in applying the TNMM by considering functionally dissimilar companies as comparables and not accepting the RPM as the most appropriate method with correct comparables. AR stated that the assessee can provide correct comparables engaged in trading of diesel engine spare parts. In these circumstances, we direct to determine the ALP of the segment of Trading of spare parts afresh under the RPM with correct comparables. Calculation of PLI and T.P. adjustment - HELD THAT:- We find from the allocation of expenses made by the TPO that he allocated to the Trading segment 50% of Employees cost; 70% of Job work charges and Travelling expenses; 60% of Advertising; and in the turnover ratio for other expenses. Such allocation of expenses is an arbitrary exercise, which cannot be approved. It is accordingly directed that the allocation of expenses to the three segments should be done on some logical and rational basis. Expenses which can be directly linked to one or more segments, should be allocated accordingly without resorting to any ad hoc allocation key. Whether TPO carried out transfer pricing adjustment not only in respect of transactions with AE but also non-AEs in the Trading segment? - This issue is no more res integra in view of the judgment of Hon ble jurisdictional High court in CIT Vs. Phoenix Mecano (India) Pvt. Ltd. ( [ 2017 (6) TMI 1240 - BOMBAY HIGH COURT] wherein it has been held that the transfer pricing adjustment made at entity level should be restricted to the international transactions only. It is pertinent to mention that the Department s SLP against this judgment has since been dismissed by the Hon ble Supreme Court in CIT Vs. Phoenix Mecano (India) Pvt. Ltd. [ 2018 (7) TMI 798 - SC ORDER] We, therefore, direct to restrict the transfer pricing addition in the Trading segment only in respect of transactions with AEs. To sum up, we set-aside the transfer pricing addition of Rs. 8.29 crore made in the international transaction of Trading of spare parts under the ESAS business segment and remit the matter to the file of AO/TPO for a fresh determination of the ALP in terms of the discussion made supra in this order. Transfer pricing addition made in the EARC business segment - Grant of risk adjustment - HELD THAT:- Through the relevant material on record, it is observed that there is no dispute in the computation of ALP under EARC business segment except for grant of risk adjustment. Such an argument was taken up before the DRP for the first time and the TPO had no occasion to examine the assessee s claim in this regard. Under the given circumstances, we set-aside the impugned order on this issue and send the matter back to the AO/TPO for examining, if any, risk adjustment can be granted in the facts and circumstances of the instant case.

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• 2020 (2) TMI 1039
  Loss due to fraud and embezzlement - Expenditure allowable as a deduction u/s 37 - Whether trading loss on account of embezzlement and fraud is to be allowed in the year in which the amount is written off as irrecoverable? - HELD THAT:- It is an undisputed fact that the assessee has taken legal actions, filed FIR and terminated the guilty employees. These facts on record were accepted by the DR. DR could not controvert the facts stated by the Ld. AR of the assessee. DR further could not bring on record any material/ evidence/ case laws which could controvert/raise any doubt regarding the facts already on record. It is therefore, undisputed fact that there was fraud and embezzlement for which the assessee suffered loss of Rs. 52,30,000/-. In present case of the assessee and taking guidance from the decision in the case of CIT Vs. Sales Magnesite (P) Ltd. [ 1994 (11) TMI 38 - BOMBAY HIGH COURT] wherein considered the issue of commercial expediency and allowance of loss in the business. The main proposition which has been analyzed that deduction in the computation of business profits, it does not mean that the items go without any deduction at all, but the question has to be resolved on the basis of commercial prudency having regard to the accepted commercial practice and trading principles. To hold it to be expenditure allowable as a deduction under section 37, it is not essential that it should be necessary, legally or otherwise, to incur the same or that it should directly and immediately benefit the business of the assessee. Even expenditures incurred voluntarily on the ground of commercial expediency and in order indirectly to facilitate the carrying on of the business would be deductible under this section. In the present case, it is not disputed that the assessee took legal recourse by filing FIR and various legal actions before Higher Forum including termination of service of guilty employees. The loss that has been occurred to the assessee because of those factors which are very much irrecoverable and in the practical context, these have to be allowed since it has been incurred by the assessee for facilitating the carrying on of the business of the assessee. The Hon ble Supreme Court in the case of Bombay Steam Navigation Co. (1953) (P) Ltd. Vs. CIT [ 1964 (10) TMI 12 - SUPREME COURT] has categorically held that the question must be viewed in the larger context of business necessity or commercial expediency. No abstract or pedantic view can be taken in the matter. In view of the aforesaid decision and on examination of facts on record, we set aside the order of the Ld. CIT(Appeals) and grounds raised by the assessee are allowed.

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• 2020 (2) TMI 1038
  TDS u/s 194H OR 194J - disallowance u/s 40(a)(ia) on trade offers provided to distributors - HELD THAT:- It can be seen from Clause 2, 7, 8, 9, 14 and 19 of the Agreement for the Supply of Cellular Mobile Phones between HCL and the assessee that relationship between the assessee and HCL is that of principal to principal and not that of principal to agent. The discount which was offered to distributors is given for promotion of sales. This element cannot be treated as commission. There is absence of a principal-agent relationship and benefit extended to distributors cannot be treated as commission under Section 194H - As regards to applicability of Section 194J of the Act, the Assessing Officer has not given any reasoning or finding to the extent that there is payment for technical service liable for withholding under Section 194J. Marketing activities have been undertaken by HCL on its own. Merely making an addition under Section 194J without the actual basis for the same on part of the Assessing Officer is not just and proper. The Ld. DR s contention that discounts were given by way of debit notes and the same were not adjusted or mentioned in the invoice generated upon original sales made by the assessee, does not seem tenable after going through the invoice and the debit notes. In fact, there is clear mentioned about the discount for sales promotion. Thus, on both the account the addition made by the Assessing Officer does not sustain. Ground No. 2 is allowed. Disallowance on account of Trade Price Protection (TPP) extended to distributors for reduction in prices of handsets - HELD THAT:- It is market practice that if there is any change in prices of handsets by competitors, change in life of mobile model, change in market demand of particular model which affects the sales, the distributor is protected by the Trade Price Protection. This is actually a commercial expediency in modern day technological changes which are very fast and vast. Besides, Trade Price Protection is offered to distributors on handsets which have not been subject to trade offers/discounts. This is evidenced by specific clause in the Trade Schemes filed before the AO vide submission dated 10.03.2014 trade scheme. In-fact, it was pointed out during the course of hearing that in Assessment Year 2008-09, even the AO has allowed the deduction for the instant like expenditure. In Assessment Year 2008-09, the matter was remanded back to the file of the AO, who has allowed the deduction with respect to the expenditure, where confirmations have been obtained from the recipients. In any case, so far as the instant year is concerned, we have already noted in the earlier paragraph that the requisite confirmations were filed before the Assessing Officer. Thus, this expenditure is allowable as revenue expenditure under Section 37(1) since it has been incurred wholly and exclusively for business and same cannot be questioned by the Assessing Officer. Disallowance of 25% of provision for obsolescence of inventory - HELD THAT:- Only in A.Y. 2011-12, the DRP has taken a different view by deleting the said additions. In the instant year, the Assessing Officer has not given any independent reasoning for making an ad-hoc disallowance of 25% of the total expenditure. Considering the history of the dispute, the matter is remanded back to the file of the Assessing Officer to decide in the light of the precedents, and keeping in mind that the direction of DRP in Assessment Year 2011-12 has been accepted by the Department (as pointed out before us that no appeal was filed by Revenue in Assessment Year 2011-12). Needless to say, the assessee be given opportunity of hearing by following principles of natural justice in the remanded proceedings. Ground No. 4 is partly allowed for statistical purpose. Disallowance of marketing expenditure incurred on account of issuance of handsets on Free of Cost ( FOC ) basis - depreciation to be allowed if the aforesaid expenditure is held to be capital expenditure - HELD THAT:- In the present assessment year, the assessee is engaged in manufacture, import and sale of mobile handsets. The assessee has given mobile handsets to its employees, dealers, sale personnel etc. for free of cost and thus no longer owned the said handsets. Thus, the said cost was rightly taken as business expenditure by the assessee and was rightly reduced from the inventory. This issue is decided in favour of the assessee as relying on on case [ 2018 (9) TMI 877 - DELHI HIGH COURT]. Addition on account of difference in value of sales appearing in sales tax return and audited financial statements - HELD THAT:- The explanation given by the assessee was not justified through the evidences as to what extent sale reversals, debit notes received from the customer due to warranty prevented the assessee to given the financial statement which is less than the sales tax return. Denying benefit of deduction u/s 10AA on non transfer pricing additions/disallowances - HELD THAT:- The assessee failed to demonstrate the deduction claimed under Section 10A/10AA on non transfer pricing additions. There was no evidence produced before the Assessing Officer as to how the claim is tenable under Section 10A/10AA Full credit of pre-paid taxes - HELD THAT:- From the perusal of records, it can be seen that the proper credit of pre-paid taxes were not given by the Assessing Officer while calculating the total tax. Therefore, we direct the Assessing Officer to give proper credit of pre-paid taxes to the assessee after verifying the same. Needless to say the assessee be given opportunity of hearing by following principles of natural justice. Ground is partly allowed for statistical purpose.

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• 2020 (2) TMI 1037
  Assessment u/s 153C - non abated assessments - HELD THAT:- Considering the latest judgment of Hon ble High Court of Delhi in the case of Principal CIT Ors V/s Meeta Gutgutia [ 2017 (5) TMI 1224 - DELHI HIGH COURT] come to the conclusion that since the assessment orders in question were concluded and non abated assessments no addition can be made in the assessment proceedings u/s 153C of the Act unless there is any incriminating material found during the course of search. We therefore reverse the orders of Ld. CIT(A) and quash the assessment proceedings u/s 153C r.w.s. 143(3) of the Act dated 28.3.2016 being without jurisdiction and bad in law. In the result legal ground raised by the assessee in Ground No.1 stands allowed.

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• 2020 (2) TMI 1036
  Validity of reopening of assessment u/s 147 - borrowed satisfaction - reliance on CBI Report which has later been thoroughly investigated by the CBI itself and assessee has been discharged by the CBI on the basis of the CBI Court - approval granted bt ACIT in mechanical and without application of mind, HELD THAT:- AO has not investigated the matter himself and has not made any enquiry to corroborate the Report of the Investigation on which basis the case of the assessee has been reopened, meaning thereby the AO has not applied his mind and only issued notice u/s. 148 of the Act on the basis of the CBI Report which has later been thoroughly investigated by the CBI itself and assessee has been discharged by the CBI on the basis of the CBI Court decision. Since the basic Report of the CBI has remained no more and subsequent notice u/s. 148 of the Act is invalid and resultantly the reassessment is void ab initio. Thus, the AO has acted mechanically and without any independent application of mind. It is further noted that initiation of proceedings is based on non application of mind much less independent application of mind but is a case of borrowed satisfaction. Nothing is independently examined or considered by the AO which can demonstrate application of mind by him. Proceedings initiated by invoking the provisions of section 147 of the Act by the AO and upheld by the Ld. CIT(A) are nonest in law and without jurisdiction and needs to be quashed. Reasons recorded by the AO and approval granted by the Addl. CIT, Range-45, New Delhi, wherein the Addl. CIT, Range-45, New Delhi has granted the approval by mentioning that After perusing the reasons given above I am satisfied that it is a fit case for issue of notice u/s. 148 of the I. Tax Act, 1961. , which shows that Ld. Addl. CIT, Range-45, New Delhi has not recorded proper satisfaction and without application of mind gave the approval in a mechanical manner - Reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed - Decided in favour of assessee.

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• 2020 (2) TMI 1035
  Assessment u/s 153A - jurisdiction of ACIT to issue notice - scheme of amalgamation conceived - HELD THAT:- Jurisdiction over the assessee, i.e., M/s Pride Residency Pvt. Ltd. lied with the Assistant Commissioner of Income, Circle-20(1), New Delhi. CIT(A) has referred to the assessment order passed by the ACIT, Circle-20(1), New Delhi for assessment year 2014-15 on 26/07/2016. But the impugned assessment order has been passed by the ACIT, CC-13, New Delhi, who had jurisdiction over the amalgamating entity, i.e., M/s Stakar Fincap Pvt. Ltd. Thus, it is evident that the impugned assessment order in the name of M/s Pride Residency Private Limited has been passed by the ACIT, CC-13, New Delhi, without jurisdiction over the case. In view of lack of the jurisdiction, the impugned assessment order passed by the ACIT, CC-13, New Delhi, in the case of the assessee is void-ab initio and accordingly quashed. - Decided against revenue.

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• 2020 (2) TMI 1034
  Assessment u/s 153A - Deduction u/s 801B(10) rejected as claimed, for the first time, in return filed in response to notice under section 153C - HELD THAT:- CIT(A) has rejected the section 80IB(10) claim of the assessee on the short ground that it was claimed, for the first time, in return filed in response to notice under section 153C, and that there was no adjudication on the merits. This claim cannot be rejected merely on the ground that the claim has been made for the first time in 153C proceedings, and that it has to be, therefore, adjudicated on merits. In view of the above discussions, and bearing in mind the fact that there is no adjudication on merits by the Learned CIT(A), we deem it fit and proper to remit the matter to the file of the Learned CIT(A) for adjudication on merits

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• 2020 (2) TMI 1033
  Penalty u/s 271(1)(c) - assessee himself declared additional income in the ROI filed u/s 153A - HELD THAT:- Explanation 5A to section 271(1)(c) is deeming fiction which cannot be extended beyond the scope of the said provision. It is clear from the Explanation 5A that once any money, bullion, jewellery or other valuable article or thing or any income based on any entry in the books of account or other documents or transactions but the assessee has not declared the said income in the return of income filed prior to the date of search, then even if such income is declared in the return of income filed post search, the assessee would be deemed to have concealed the particulars of his income or furnished inaccurate particulars of income. Only when the conditions prescribed under Explanation 5A and particularly the income disclosed by the assessee representing the money, bullion, jewellery or other valuable article or thing or income based on any entry in any books of account or other record, the same would attract the said Explanation 5A and assessee cannot escape from the mischief of the penalty provision under section 271(1)(c) merely because the said income is declared in the return of income filed after search. In the case in hand, the AO has even not made any reference to any incriminating material so as to bring the income declared by the assessee in the return of income filed in response to notice under section 153A in the ambit of the Explanation 5A to section 271(1)(c) of the Act. Accordingly, when the AO has failed to even make any reference to any incriminating material representing the undisclosed material or the income declared by the assessee, the Explanation 5A to section 271(1)(c) would not be applied in the case of the assessee. Hence in the facts and circumstances of the case, we do not find any reason to interfere with the impugned order of the ld. CIT (A). - Decided against revenue

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• 2020 (2) TMI 1032
  Applicability of Section 234E r.w.s. 204 - late filing fees - TDS u/s 194IA - transfer of immovable property - Regulatory provision being found in section 200A for computation of fee - HELD THAT:- Legal issue raised by the Assessee has been addressed by Hon ble Gujarat High Court in favour of the Revenue and against the assessee in the case of Rajesh Kourani vs. Union of India [ 2017 (7) TMI 458 - GUJARAT HIGH COURT ] . The Hon ble Gujarat High Court held that section 234E of the Act is a charging provision creating a charge for levying fee for certain defaults in filing statements and fee prescribed under s.234E could be levied even in the absence of a regulatory provision being found in section 200A for computation of fee. In the light of aforesaid decision of the Hon ble Gujarat High Court, we decline to interfere with the action of the Revenue authorities. - Decided against assessee. TDS u/s 194IA - Held that:- the obligation under s.194IA of the Act is fastened on the transferee qua each transferor and where the consideration paid to any transferor is less than Rs. 50 Lakhs, the provisions of Section 194IA of the Act would not apply. In parity with the view already expressed on the issue, in the absence of any default under s.194IA of the Act, consequential late filing fees under s.234E to this extent is deleted. Decided partly in favor of assessee.

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• 2020 (2) TMI 1031
  Agricultural income - assessee had produced the document showing the agricultural land to the extent of 25.946 hectares - HELD THAT:- Ends of justice required that the Principle of Consistency is required to be followed in respect of per hectare yield in the previous years, which is duly supported by the certificate issued by the Horticulture Department, relied upon by the AO, which also shows the per hectare yield as Rs. 84,000/-. Examining the matter from any angle i.e., either from the angle of previous history or from the angel of the certificate issued by the Horticulture Department, the assessee was able to establish the agriculture income of Rs. 21 Lakhs. Considering the past history of the case and the facts of the case in the year under consideration, we are of the view that it is fully proved and established that the assessee is engaged in the agricultural operations. The Ld.CIT (Appeals) has erred in confirming the finding of the AO that the assessee is not engaged in large scale agricultural operation. Since the agricultural income regularly shown by the assessee in earlier years has been accepted, the same is to be considered in the year under consideration also. Addition made by the Assessing Officer, confirmed by Ld.CIT(A) is wrong and required to be partly deleted. However, considering the past history and also the certificate issued by the Horticulture Department, we restrict the agriculture income to Rs. 22,68,500/- and sustain the addition of Rs. 10 Lakhs. Thus, the appeal of assessee is partly allowed.

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• 2020 (2) TMI 1030
  Bogus LTCG on sale of shares - Penny stock - sale of shares sold on recognized stock exchange and bringing to tax as unexplained credit u/s 68 - Additions u/s 68 - According to the assessee, the case of the assessee is of cash debit and not of cash credit, hence provisions of section 68 are not attracted . - HELD THAT:- In the case, assessee has purchased shares of the three companies at a particular price and sold them at a lower price, which resulted in short-term capital loss. The list of the shares transacted by the assessee has been reproduced above. According to the assessee purchase and sale of the shares have been made on recognized stock exchange through registered brokers and payments have been made and received by way of bank account. In view of all the documents containing contract notes, de-mat account statement etc. the transaction have been carried out are in the normal course of its investment activity. On the Contra, according to the Revenue authorities the assessee has obtained the accommodation entries of short capital loss to set off the tax liability of long-term capital gain arising on sale shares of unlisted companies. The first, issue which has been raised by the assessee that it has not been confronted with the statements of various parties relied upon by the Assessing Officer. The assessee has also contended that opportunity of cross-examining those parties/persons was not provided to the assessee. According to the assessee, this resulted in the violation of the principle of natural justice and thus assessment should be held void ab intio. However, in our opinion, not providing opportunity of cross-examination may be in the nature of irregularity which is curable but not an illegality leading to annulling of the assessment. Further, the ld. CIT(A) of the impugned order has held that addition has not been made solely on the basis of the statement of those persons/parties. As provided as why the investment in the shares transacted by the assessee was not justified in view of the comparison of the other shares available. The Assessing Officer also pointed out the price fluctuation in the shares of the companies over a period, dividend history and other financial parameters to substantiate that there was no financial logic for investment in the company except for claim of bogus short-term capital loss against receipt of cash money. The Ld. Assessing Officer accordingly concluded that the addition was made on the basis of the material available on record, the surrounding circumstances, the human conduct and preponderance of probabilities. We find that in instant case addition in dispute is not solely on the basis of the statement of the persons and the Assessing Officer has relied on other materials. The statements of the persons who controlled the business of providing accommodation entry have been corroborated with the material, surrounding circumstances and preponderance of probability. We accordingly uphold the finding of the ld. CIT(A) on that issue in dispute. The relevant grounds of the appeal of the assessee are accordingly rejected. Short Term Capital Loss - HELD THAT:- It is evident that one leg of the transaction (sale transaction of the share for capital gain) is bogus and non-genuine, then in same set of circumstances; the other leg of the transaction (purchase of share for capital loss) is bound to be bogus and not genuine. Thus, the transaction of the assessee of purchase and subsequent sale leading to short term capital loss are not genuinely entered. Scrip in which the assessee has transacted, the ratio of other decisions of the Tribunal and other high courts relied upon by the assessee cannot be applied over the facts of the instant case - Short-term capital loss claimed by the assessee is not found to be genuine and deserve to be disallowed. The relevant grounds of the appeal of the assessee are accordingly dismissed. Addition could have been made under section 68 - HELD THAT:- . We agree with the contention of the asseesee that addition for short term capital loss cannot be made under section 68 of the Act, because addition has not been made for unexplained credit on sale of the shares during the year but in respect of the claim of bogus short capital loss. In the case of the assessee, correct action would be disallowance of claim of the short capital loss of the assessee. However, in our opinion, mentioning wrong section in the assessment order cannot render the entire assessment null and void. It is not the jurisdictional requirement for completing the assessment. The Assessing Officer has correctly acquired the jurisdiction over the case and only mistake is under which section the addition should be made. We reject the contention of the assessee to nullify the order due to wrong application of section by the Assessing Officer while rejecting the claim of the short term capital gain. The grounds of the appeal are accordingly dismissed.

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• 2020 (2) TMI 1029
  Assessment u/s 153C - assessee has not paid the taxes at the time of filing Return of Income and has not cured the defects identified u/s 139(9) - HELD THAT:- AO has no alternative except to treat the Return of Income as invalid to commence the assessment proceedings u/s 153C and completed assessment u/s 153C r.w.s. 144. AO has acted on the invalid Return of Income for framing assessment u/s 153(C) we are of the opinion that the Right to appeal, cannot be curtailed on the ground of non-payment of admitted tax. We found the assessee in the appellate proceedings has accepted the fact of nonpayment of taxes and prayed for some time to pay taxes which shows that the assessee is acting under bona fide obligation to pay taxes on admitted income. We are of the substantive opinion that CIT(Appeals) erred in dismissing the assessee s appeal in limine in spite of assessee prayed for some time in appellate proceedings for the payment of taxes due. Accordingly we set aside the order of CIT(Appeals) and restore the entire disputed issue to the file of the CIT(Appeals) to adjudicate afresh and grant time for payment of taxes due on the returned income and subject to payment of taxes the appeal is admitted and adjudicated on the merits. Assessee should be provided adequate opportunity of hearing and shall co-operate in submitting the information for early disposal of the appeal and the grounds of appeal of the assessee are allowed for statistical purposes.

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• 2020 (2) TMI 1022
  Revision u/s 263 - TDS u/s 194C on export freight payment - HELD THAT:- Tribunal considered the materials placed before it and found that the respondent assessee had made payment for export freight to the Indian Ocean Shipping and Logistics Services, which was an Indian Agent acting on behalf of the non-resident shipping company for collecting freight demurrage and other charges and reimburse the same to the shipping company. Relying upon the CBDT circular No.723 dated 19th September 1995, the Tribunal held that where payment is made to the shipping agents of the nonresident, ship owner or charter, the agent steps into the shoe of the Principal i.e. shipping company and according to the provisions under Section 172 of the Act, 1961 which provides for shipping business in respect of the non-residents would be applicable and the provisions of Section 194C or 195 which provides for deduction of tax at source shall not be applicable. The Tribunal, therefore, held in the facts and circumstances of the case that the PCIT failed to consider during the course of assessment proceedings that the assessee had furnished the relevant materials in respect of export freight payment and it is also not controverted by the PCIT, and therefore, on the basis of undisputable finding brought on record by the respondent assessee during the course of assessment proceedings under Section 263 of the Act, 1961, it cannot be said that the assessment order is erroneous or prejudicial to the interest of the Revenue in any manner.

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• 2020 (2) TMI 1021
  Revision u/s 263 - unexplained unsecured loans taken by assessee - ITAT held that the PCIT was not empowered and entitled to revise assessment order u/s. 263 of the Act r/w Explanation 2 - HELD THAT:- Tribunal observed that the PCIT has not mentioned in the show cause notice to invoke the Explanation 2 of Section 263 of the Act 1961. Therefore, by invocation of Explanation in the order without confronting the assessee and giving an opportunity of being heard to the assessee is not appropriate and sustainable in law. Thus, the Tribunal has considered in detail the aspect of revisional power to be exercised by the PCIT in the facts of the case and has given a finding of facts that the Assessing Officer has made inquiries in detail and after applying mind, accepted the genuineness of loans received by the respondent assessee from the aforesaid two companies and such view of the Assessing Officer is a plausible view, and therefore, the same cannot be said to be erroneous or prejudicial to the interest of the Revenue. No substantial questions of law arise.

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• 2020 (2) TMI 1020
  Deduction claimed towards bad and doubtful debts u/s 36(viia) - HELD THAT:- A conjoint reading of provision contained in Section 36(1)(viia) and explanatory note dated 30.06.1982 it is evident that deduction provided in Section 36(1)(viia) shall be allowed in respect of the matters dealt therein in computing the income. The condition precedent for claiming deduction under Section 36(1)(viia) of the Act is that a provision for bad and doubtful debt should be made in the accounts of the assessee. The aforesaid Section mentions the maximum amount for which such a provision should be made. If a provision is made in excess of the limits prescribed under the Section, the assessee would not be entitled to deduction of the excess amount. Once a provision is made and the amount of deduction is within the limit prescribed under the Act, the assessee would be entitled to deduction of the amount for which provision is made in the books of accounts. Language employed in Section 36(1)(viia) of the Act is clear and unambiguous. It is well established Rule of interpretation stated by LORD CAIRNS that if the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of law the case might otherwise appear to be. It is equally well settled legal proposition that in a taxing act once has to look merely as what is said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. [SEE: COMMISSIONER OF INCOME TAX, MADRAS VS. KASTURI AND SONS LTD.- 1999 (3) TMI 6 - SUPREME COURT and MAHIM PATRAM (P) LTD. VS. UNION OF INDIA - 2007 (2) TMI 73 - SUPREME COURT ] [See: PRINCIPLES OF STATUTORY INTERPRETATION, JUSTICE G.P. SINGH, 14TH EDITION, PAGE 879]. Therefore, the question of going into intention or object behind the provision viz., Section 36(1) (viia) of the Act does not arise. The submission that even in the absence of any provision, the assessee is entitled to deduction cannot be accepted. The assessee is entitled to deduction to the extent provision made in the accounts subject to limit mentioned in Section 36(viia) of the Act. - Decided in favour of revenue

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• 2020 (2) TMI 1018
  Shares converted into stock-in-trade - Valuation adopted for conversion of investments to stock-in-trade, opening stock and closing stock - value of the closing stock at the end of the year was required to be valued at the cost to the business at the time of conversion (i.e. the market value at the time of conversion) or cost of acquisition or net realizable value whichever is less? - HELD THAT:-The GROZ-BECKERT SABOO LIMITED [1978 (11) TMI 2 - SUPREME COURT ] has held that where an assessee converts his capital assets into stock-in-trade and starts dealing with them, the taxable profit on the sale must be determined by deducting on sale proceeds and the market value at the time of their conversion into stock-in-trade. The aforesaid principle has neither been taken into account by the AO as well as by the CIT (Appeals) and the Tribunal. It is not in dispute before us that the CIT (Appeals) and the Tribunal has not examined the aforesaid aspect of the matter. In view of preceding analysis, the substantial question of law No.1 framed by this Court is answered in favour of the assessee and against the revenue. In the result, the order passed by the Assessing Officer as well as CIT (Appeals) and the Tribunal are hereby set aide and the matter is remitted to the Assessing Officer to decide the matter afresh .

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• 2020 (2) TMI 1016
  Disallowance of marked to market loss on derivatives - nature of speculation loss - HELD THAT:- Pertinently in the statement of facts filed with the memorandum of appeal in form No. 35 before learned Commissioner (Appeals), the assessee has specifically stated that it has carried out its transactions in derivatives in future and option segments of National Stock Exchange. From the impugned order if learned Commissioner (Appeals) it is patent obvious that he has completely overlooked the aforesaid factual position while observing that the assessee has entered into over the counter derivative transaction and not in any recognized stock exchanges, while treating it as speculative loss u/s. 43(5) of the Act. Keeping in view, the factual position arising out if the material on record, the contention of the assessee that the derivative transaction in respect of which it has claimed mark to market loss comes within the exception as per Clause (d) of the proviso to Sec. 43(5) of the Act appears to have substantial strength, hence, needs to be accepted. Now, it is fairly well settled by the ratio laid down in the case of CIT Vs. Woodward Governor India Pvt Ltd [ 2009 (4) TMI 4 - SUPREME COURT ] that mark to market loss as on the balance sheet date is allowable u/s 37(1) of the Act. Further, it has been brought to our notice by learned Authorized Representative that in subsequent assessment years the Assessing Officer has consistently allowed assessee s claim of mark to market loss. In view of the aforesaid, we hold that mark to market loss is not in the nature of speculation loss, hence, has to be allowed. Disallowance u/s 14A - disallowance of interest expenditure under Rule 8(D)(2)(ii) - HELD THAT:- Financial statement available on record clearly indicate that the assessee had sufficient interest free funds available with it. That being the case, it has to be presumed that the interest free funds were utilized in investment in shares. Thus, no part of the interest expenditure can be attributed for earning of exempt income. Therefore, the only disallowance which can be made u/s 14A of the Act is the administrative expenditure as per Rule 8D(2)(iii). Here also, while computing the disallowance the Assessing Officer has to consider only those investments which have yielded exempt income during the year, as held by the Income Tax Appellate Tribunal, Delhi (Special Bench) in the case of ACIT Vs Vireet Investments (P) Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI ]. It is relevant to observe, the assessee has furnished a working of disallowance under Rule 8D(2)(iii) quantifying the disallowance. Admittedly, the aforesaid working has been furnished by the assessee for the first time before us and was not available either before the Assessing Officer or learned Commissioner (Appeals). We direct the Assessing Officer to verify the aforesaid working furnished by the assessee and thereafter compute the disallowance under Rule 8D(2)(iii) - Decided in favour of assessee partly.

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• Customs

• 2020 (2) TMI 1028
  Refund of duty - petitioner s failure in producing the documentary evidences indicating that the petitioner has not passed on the duty burden to the consumers or end-users - principles of unjust enrichment - Entitlement of interest on delayed refunds. HELD THAT:- This Court is of the considered view that the process involved in processing the refund casts serious duty upon the concerned officer to advert to the facts pleaded before the authority for coming to the conclusion that though refund is payable but the same is required to be deposited and paid in the Consumer Fund for want of any document or other evidence to indicate that the payment of refund would not result into unjust enrichment to the recipient. The order impugned unfortunately is absolutely silent qua the contention of the ONGC, which on the face of it, indicate that the machinery in question on which the duty was paid and duty was sought to be claimed as refund was not in any manner capable of being dealt with in or passing, so as to pass on the burden of duty to the consumer or end-user as there was no end-user or customer in the instant case. The authorities in uncanny avoidance to deal with this aspect has rendered the order vitiated and, therefore, decision of the authority qua depositing the amount into the consumer fund is required to be deprecated, quashed and set aside. The authority may be called upon to decide the aspect of payment of refund along with interest without further insisting upon any other material and based upon the material which has already been submitted and giving liberty to the petitioner to produce any material, if they so choose, and decide to make payment of refund with appropriate interest admissible under law within a period of 30 days from the date of receipt of writ of the Court - Petition allowed in part.

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• 2020 (2) TMI 1009
  Imposition of penalty u/s 114AA of Customs Act, 1962 on appellant-CHA - import of some unbranded goods in the name of branded goods - Drugs and cosmetics (4th Amendment) Rules, 2010 were already in existence - requirement of mandatory registration of the cosmetic goods to be imported not complied with - HELD THAT:- Section 114AA mandates imposition of penalty where any person who in relation to any goods knowingly or intentionally does any of such act as mentioned in the above provision that he shall be liable to the penalty. Thus it becomes clear that to confirm the penalty under this provision there must be ample evidence about the knowledge and intention of the person who is concerned with the import of goods. Further perusal of his findings revealed that there is no such check conducted by Commissioner (Appeals). No such evidence is otherwise apparent from the record to prove that the CHA had ulterior motive of tax evasion or to falsify his voluntary statement about simple unawareness towards the mandate of registration certificate while importing the cosmetics. Accordingly, the findings of Commissioner (Appeals) that the CHA did not make even the minimum efforts to ensure the veracity of the submissions made to the department is not sufficient to hold that the said failure was intentional and that the CHA had the mensrea to facilitate the importer in his wrong act of not obtaining the certificate as mandated under Cosmetics Rules, 2010. The allegations against the appellants are mainly concerned with failure to discharge their duties and responsibilities mandated under various Regulations for dealing with goods in legalized manner. However, apparently, there is no material evidence available on records to prove that the appellants intentionally encouraged and supported the wrong doer i.e. the importer in doing the wrongful act of attempting to export the branded cosmetic goods in violation of Cosmetic Rules, 2010. Section 114A of the Act is applicable only when there is sufficient evidence about prior knowledge of wrong doing or existence of deliberated intend (malafide). It also provides for imposition of penalty for furnishing incorrect or false declarations and that such declaration should also be intentional with prior knowledge. The appellant since was unaware of the mandatory registration while importing branded cosmetics, as required by the Cosmetic Rules, 2010 being very recent in time. The malafide intent cannot be attributed to him - Appeal allowed - decided in favor of appellant.

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• 2020 (2) TMI 1005
  Export of studded Jewellery - buyer of Diamonds studded jewellery made complaint against 11 articles (out of total 207 pieces) as not being up to the standard - allegation that benefit of N/N. 158/1995 denied - HELD THAT:- At the time of re-import of the 11 items, which have been exported by the appellant vide shipping Bill No. 6815 dated 28.10.2014, the appellants have clearly mentioned that they are re-importing goods which were previously exported in the details it has been provided that the re-import items are weighing 53.280 gms of 11 articles of jewellery which were meant for re-export and every item has a specific mention of its S.No. in previous export shipping bill and invoices. The Bill of Entry has been assessed by the concerned officer on the satisfaction that the goods being re-imported are the same which have been exported by Shipping Bill No. 6815 dated 28.10.2014 and they were part of consignment which were previously exported and covered by the relevant packing list and linvoice. Re-export after repair and resetting - HELD THAT:- The shipping bill has been assessed by the concerned Superintendent as well as Deputy Commissioner of Customs, Diggy House, Jaipur on 28.02.2015. The appellants have made a true declaration of the repairs and resetting they have undertaken which resulted into variation in the weight of gold by 3.69 gms and weight of diamond by 0.81 CTS. We find that the concerned officer after having satisfied themselves about the identity of the items have allowed re-export of the imported items which were re-imported. The appellants have not charged anything extra from the importer for re-setting and repair of the goods have been exported after repairs and reconditioning at the same price and sent back to the same buyer. The assessing officer of the export consignment have allowed the export after having satisfied themselves with the identity of export items being same as was re-import - there is no violation of condition No. 3 of S.No. 1 of the Notification No. 158/95 Cus dated 14.11.95 as it only requires the satisfaction of Assistant Commissioner of Customs as regards the identity of goods since the shipping bill for re-export of the imported items have been assessed by the Deputy Commissioner, it is apparent that he is satisfied with the fact that the goods being re-exported are the same which have been re-imported. Since in this case, the variation is only of 3.69 gms in the weight which is very minor variation and otherwise also both the import invoice and export invoice has the photograph of all the concerned 11 items of jewellery and the officer after being satisfied with the identity of goods have allowed the export of the same, there are no justification in confirming the duty on the items imported which were actually have been exported by the appellant - appeal allowed - decided in favor of appellant.

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• Corporate Laws

• 2020 (2) TMI 1003
  Liquidation of Corporate Debtor - Resolution Professional failed to complete the CIRP process within the time - HELD THAT:- The Adjudicating Authority has no jurisdiction to decide any allegations either against the Resolution Professional or the Liquidator. Though if any act of the Resolution Professional or the Liquidator, against the provisions of the I B Code , is noticed then the matter is to be referred to the Insolvency and Bankruptcy Board of India. This apart, in absence of any evidence to find that there was an undervaluation and there was a certain loss caused to the value of assets of the Corporate Debtor by not protecting or not handing over the Germ Plasm/parent seeds, the auction purchaser has been rightly directed to pay the difference amount of Rs. 31 lakhs to the Liquidation Account of the Corporate Debtor which he had agreed - The 6th Respondent- Mr. Kiran Gubba, has been rightly directed to make good the loss caused to the Corporate Debtor by dumping Germ Plasm/Parent seed by paying the value of the same. Application dismissed.

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• Securities / SEBI

• 2020 (2) TMI 1002
  Fraudulent and Unfair Trade Practices Relating to Securities Market - Creating artifice/scheme - appellant restrained from dealing in the securities market, directly or indirectly, for a period of five years from the date of the ad-interim ex-parte order - HELD THAT:- An unknown company suspended from trading for long; off-market buying of 1,050 shares of the said company which constitutes more than 2% of its share capital and which is in the name of an unknown person (Kushal Jain) on the recommendation of a person from the native place of the appellant with no prior connection etc. can be treated as only a fiction rather than normal business. Coupled with the finding that the appellant had other transactions off-market with Gromo as given in Table 2 page 13-14 of the impugned order is sufficient evidence to prove the connection between Gromo, the appellant and entities in the Kamalakshi Group, many of whom are inter connected in the matter as explained in the said table. Moreover, out of 1,050 shares of Gromo obtained off-market in an inexplicable way by the appellant more than half of it was sold in small tranches; most of the time placing sell order at far away prices than LTP. The said trading pattern and the other connections as explained above is sufficient enough to prove that the appellant was part of the group that created the artifice/scheme and therefore finding in the impugned order that the appellant has violated the stated provisions of the PFUTP Regulations cannot be faulted. Five year restraint imposed on the appellant has been in operation since February 20, 2015. However, the appellant never challenged the ex-parte interim order and filed this appeal belatedly with a delay of 101 days only on March 25, 2019 when there was hardly 1 year left to complete the restraint period. The orders relied on by the appellant are distinguishable in the facts of the present matter and in law since subsequent Judgements of the Hon ble Supreme Court in the matter of Securities and Exchange Board of India v. Kishore R. Ajmera [ 2016 (2) TMI 723 - SUPREME COURT] and SEBI v. Rakhi Trading (P.) Ltd. [ 2018 (2) TMI 580 - SUPREME COURT] whereby it has been conclusively held that preponderance of probability is sufficient in confirming violations like market manipulation as direct evidence in such matters may not be forthcoming.

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• Insolvency & Bankruptcy

• 2020 (2) TMI 1006
  Liquidation proceedings - Appellant submits that the Appellant has handed over the machinery to M/s. Sanjay Gandhi Thermal Power Project, Madhya Pradesh Power Generating Company Limited - HELD THAT:- As it is admitted that the liquidation proceeding has already been initiated, we allow the Appellant to file its claim before the Liquidator of M/s. Energo Engineering Projects Limited who is required to verify the claims under clause (a) of sub-section (1) of section 35 of the Insolvency and Bankruptcy Code, 2016 and thereafter, on consolidation of claims under section 38 of the I B Code and after verification of claims under section 39, it is the Liquidator who is empowered to admit or reject the claim under section 40. If the Appellant is aggrieved thereafter may prefer appeal under section 42 before the Adjudicating Authority. Imposition of cost or penalty or payment of interest - HELD THAT:- This is not a fit case to be decided presently. Appeal disposed off.

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• FEMA

• 2020 (2) TMI 1734
  Offence under FERA - violation of provisions of Section 9(1)(b) of FERA - seizure of currency office premises - violation of provisions of FERA solely on the basis of the statement of Ashish Jain recorded on 4.10.1995? - penalty imposed - HELD THAT:- In the present case, neither the Adjudicating Authority (Deputy Director, Enforcement Directorate) nor the appellate authority (Special Director, Appeals) had applied their minds on the question whether the statement made by Ashish Jain was voluntary in view of its retraction on the very next day. In fact, the Tribunal had proceeded on the basis that it was accepted by the Appellate Authority (Special Director, Appeals) that the statement of Ashish Jain had no evidentiary value. This Court is of the view that the statement of Sh. Ashish Jain could not be relied upon as, first of all, it was retracted on the very next day. And, secondly, the statement was very vague and bereft of any particulars, inasmuch as, it did not name or describe any person from whom funds had been received and whom the said funds had been distributed to. As noticed above, neither the adjudicating authority nor any of the appellate authorities, including the Tribunal, had applied their minds as to whether the said statement was voluntary or not. Thus, the question whether the appellant could be held guilty for violation of provisions of Section 9(1)(b) of FERA, on the sole basis of the statement of Sh. Ashish Jain, must be answered in the negative. Whether there is any material on record to establish that the appellant was guilty of violation of provisions of Section 9(1)(b) of FERA if the statement of Sh. Ashish Jain ? - Clearly, the answer to the above question must also be in the negative as there is no material whatsoever on record to establish the same. None of the orders of the authorities below, namely, the Adjudicating Authority, the Appellate Authority or the Tribunal refer to any cogent material to substantiate the allegation of the commission of an offence under Section 9(1)(b) of FERA. This Court is of the view that confiscation of the amount of Rs. 7,95,000/- from the office of the appellant is unsustainable. Consequently, the present appeal must be allowed. The order dated 17.02.2014 passed by the Adjudicating Authority (Deputy Director, Enforcement Directorate); the order dated 24.09.2014 passed by the Appellate Authority (Special Director, Appeals); and the impugned order passed by the Tribunal are unsustainable and are, accordingly, set aside. The amount seized from the premises of the appellant are liable to be returned to the appellant.

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• PMLA

• 2020 (2) TMI 1027
  Enlargement of applicant in the event of her arrest - Section 438 of the Code of Criminal Procedure, 1973 - HELD THAT:- It is revealed that the respondent investigating agency has registered the case against the applicant. In connection with the said case, summons under Section 50 of the PMLA came to be issued to the applicant thrice. It is not in dispute that applicant did not remain present before the investigating agency and thereby not cooperated with the said agency. From the material placed on record, it is further revealed that against the husband of the applicant viz. Sanjay Gupta and others, FIR being C.R.No.I3 of 2015 is registered with CID Crime, Gandhinagar. Thus, in the facts and circumstances of the present case, when the investigating agency has issued the summons under Section 50 of the PMLA to the applicant, applicant was required to remain present before the investigating agency and to cooperate with them. However, she has failed to remain present though summons were issued thrice. The presence of the applicant is required before the investigating officer to explain various transactions came across during the investigation for the purpose of ongoing investigation under PMLA. Hence, custodial interrogation of the applicant is required - application dismissed.

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• 2020 (2) TMI 1026
  Provisional Attachment of property - money laundering - proceeds of crime - reasons to believe - issuance of show cause notice under Section 8(1) of the PMLA - It is argued that the reasons to believe under Section 8(1) was a necessary pre requisite of the notice and had to be disclosed to the petitioner for the latter to effectively give a reply - HELD THAT:- Although Section 5 specifically mentions that the reason for such belief is to be recorded in writing, such requirement is absent in Section 8. Section 8 stipulates that if the AA has reason to believe that any person has committed an offence under Section 3 or is in possession of proceeds of crime, it may serve a notice of not less than thirty days on such person calling upon him to indicate the sources of his income, earning or assets, out of which or by means of which he has acquired the property attached under sub section (1) of Section 5 or seized or frozen under Section 17 or Section 18, the evidence on which he relies and other relevant information and particulars, and to show cause why all or any of such properties should not be declared to be the properties involved in moneylaundering and confiscated by the Central Government. The notice under Section 8(1) of the PMLA in the present case, was issued by the AA situated at Delhi - Although a writ petition was initially filed in the High Court at Delhi, a learned Single Judge directed that the matter ought to be filed before the Calcutta High Court, which, in essence, was affirmed by a division bench of the Delhi High Court. As such, the present writ petition has been filed before this court, despite part of the cause of action for the present writ having arisen in Delhi. Since nothing has come before the court to prove that the notice given to the petitioner under Section 8(1) of the PMLA disclosed the reasons to believe as contemplated in such section, which was a prerequisite of the notice and had to be arrived at by the AA independently, the notice itself was illegal, being bad in law - no proceeding could be initiated on the basis of the notice under Section 8(1) issued to the present petitioner, thereby rendering the notice under Section 5(1) infructuous, post facto, since the notice under Section 5(1) ultimately merged in the notice under Section 8(1) as the latter was a continuation of the process initiated by the former. Commencing with the notice under Section 5(1) and culminating in the notice under Section 8(1) and the proceedings about to be started on the basis of the latter, are vitiated for the aforesaid reasons and thus, bad in law - the Provisional Order of Attachment whereby the Adjudicating Authority directed the issuance of show cause notice to the petitioner under Section 8(1), PMLA, cannot be sustained. Petition allowed.

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• 2020 (2) TMI 1019
  Grant of Anticipatory Bail - offence under Section 4 of the Prevention of Money Laundering Act, 2002 - Money Laundering - HELD THAT:- There are sufficient materials available on the record that shows the hand of the petitioner, who in collusion with several other accused persons was involved in the money laundering of crores of rupees. The privilege of anticipatory bail cannot be to the petitioner - application dismissed.

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• 2020 (2) TMI 1017
  Money Laundering - Scheduled Offences - compliance with the provisions of Section 44(1)(c) of Prevention of Money Laundering Act, 2002 - HELD THAT:- The jurisdiction of Special Court, while dealing with the offence under the provisions of the Act, during investigation, inquiry or trial shall not be dependent upon any orders passed in respect of the scheduled offence. It is also clarified that the trial of both sets of offences by the same court shall not be construed as a joint trial. There is no illegality in the impugned order passed by the court below with the observation that the court has no jurisdiction to direct the agency to move any specific application while rejecting the application B-11 filed by the applicants with the prayer to issue necessary orders directing the Enforcement Directorate to comply the provisions of Section 44(1)(c) of the Act so as to give effect to the provisions in its true spirit. Application dismissed.

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• Service Tax

• 2020 (2) TMI 1051
  Demand of Service Tax - Cargo Handling Services - In order to establish a private siding to serve the customers, the Appellant claims to have collected interest free refundable amount from the members of the consortium. - deposits made in favour of the Appellant by the members of the consortium - difference in the rate charged by the Appellant from the members of the consortium and non-members - An agreement was also entered into between the Railways and members of the consortium containing terms and conditions. HELD THAT:- The amount deposited by the co-users of the siding was an amount to be utilised for construction of the siding or to make payment to the Railways, if the co-user defaulted, in terms of the Indemnity Bond. The liability to pay the charges to the Railways was of the co-user and the Appellant only indemnifies if there is any default by making payment from the amount deposited by the co-users and in such a situation the amount of deposit will get reduced by that much amount which the Appellant has paid. The amount is not utilised for the amount of consideration to be paid by the co-user and indeed no document has been produced by the Department to show that this amount has been utilised for the said purpose. The balance sheet also shows the amount as current liability in the books of accounts of the Appellant. What is, however, contended by the learned Authorised Representative of the Department is that the deposit was towards advance for the consideration to be paid by the co-users for Cargo Handling Service . This cannot be accepted because in that case there would be no reason for the Appellant to refund the amount to the co users or pay any amount to the Railways in a case where a co-user commits any default in making the payment. The two issues, namely, payment of consideration by the co-users of the siding to the Appellant for Cargo Handling Services and the amount of freight, demurrage or other charges paid by the co-users to the Railways cannot be mixed. These are two independent issues and whatever payment has been made by the Appellant to the Railways is for the default committed by the co-users in making payment of tollage charges to the Railways and this is met from the amount of deposit in terms of the Indemnity Bond. It is payment of this amount by the Appellant to the Railways in terms of the Indemnity Bond that has led the Commissioner to hold that the amount deposited by the co-user is an advance for payment to the Railways and is not a security. This assumption by the Commissioner is mis-conceived and against the terms of the agreement. Thus, security deposit for any length of time would not automatically became a sale proceed in the hands of the company and that there is no provision in service tax law for taxing notional interest on a security deposit - the Commissioner was not justified in holding that the amount deposited by the members of the consortium with the Appellant had escaped assessment of service tax, and therefore, the Appellant should include the amount deposited by the consortium members in the gross amount for payment of service tax. Whether the Appellant had charged lower rates for Cargo Handling from consortium members who had contributed to the deposits as compared to the rates charged from the non members of the consortium? - HELD THAT:- The Commissioner found from a scrutiny of the invoices raised by the Appellant that the Appellant had rendered Cargo Handling Service to independent customers at a higher rate than to the consortium members and, therefore, the actual price charged from the consortium members did not reflect the true consideration for Cargo Handling Service. The Commissioner, therefore, held that the price of Rs. 91 per metric ton charged from the non-consortium members should reflect the actual consideration in terms of Rule 3 and 4 of the 2006 Rules - This finding of the Commissioner is perverse, for even the comparison that has been drawn from the table does not reflect this position. The Appellant has in some cases charged lesser rate from the non-consortium members as against that charged from consortium members. A bare perusal of Rule 3 which is in regard to a case where value of consideration is not wholly or partly consisting of money or when such value is not ascertainable. The Commissioner was, therefore, not justified in holding that the Appellant had suppressed the taxable valued in the ST-3 returns - Demand cannot sustain - the imposition of penalty and interest is also not justified. Appeal allowed - decided in favor of appellant.

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• 2020 (2) TMI 1013
  Business Auxiliary Service - surplus amount - collection of toll, royalty, on behalf of the State Government or Government Department - appellant may either collect more amount than the bid amount and thereby have some profit or surplus or they may collect less amount than the bid amount and thus incur loss - it appeared to Revenue that the surplus amount collected by the appellant, is commission earned for providing the toll/ royalty collection service to the Government. HELD THAT:- There is no defined consideration, which is an essential element or pre-condition in a contract of service. Admittedly, appellant is not entitled to retain any amount by way of commission, irrespective of the total amount of royalty collected. Admittedly, the appellant incurred loss in some financial year and have got surplus in some of the financial years. Further, it is admitted fact on record that there is no defined consideration, as required under Section 65B(44) of the Finance Act. The appellant have provided no service to the Department of Mines Geology, Government of Rajasthan. The appellant have entered into business on principal to principal basis - impugned order not sustainable - appeal allowed - decided in favor of appellant.

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• 2020 (2) TMI 1012
  SEZ unit - Refund of CENVAT Credit - whether appellant is entitled to refund being in relation to cenvat credit for input services received during the quarter April, 2016 to June, 2016? - HELD THAT:- The facts in this period under dispute are similar to the facts in the earlier two preceding quarters, which have already been decided by the learned Commissioner (Appeals) - the finding of the ld. Commissioner (Appeals) in the appeal for the preceding period, is correct. Accordingly, this appeal is allowed, the impugned order is set aside to the extent of disallowance of refund, the appellant is held eligible to refund - Decided in favor of appellant.

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• 2020 (2) TMI 1011
  CENVAT credit - input services received - advertisement service - audit service - appellant providing services to Western Union as their agent in India - HELD THAT:- The basic requirement is that the assessee taking cenvat credit of input service should be engaged in providing output service, which is taxable under the provisions of the Finance Act - Admittedly, the services provided by the appellant is taxable as Business Auxiliary Services under the provisions of Finance Act, both before 1.7.2012 and after 1.7.2012. The input service credit is not deniable for the reasons that the assessee is exporting the whole of their output services and thus, is not paying any tax. The show cause notices are mis-conceived and not maintainable - Appeal allowed - decided in favor of appellant.

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• 2020 (2) TMI 1007
  Refund of service tax - export of goods - input services rendered by the Chartered Accountant - specified services or not as per N/N. 41/2012 ST dated 29.06.2012 - HELD THAT:- The bare perusal of the notification and the amendment thereof makes it clear that any service which is being received by an exporter of goods and are used for the export of goods and the service tax thereof has been paid the refund thereof can be claimed provided that the services are rendered at a place which is neither factory nor any other place or premises of production or manufacture. This perusal makes it, abundantly, clear that the question of the service being rendered pre or post export has no significance. In the present case, the Appellant is the exporter of excisable goods and is claiming refund of service tax paid on the specified services as clarifies in the C.A s certificate as mentioned above, and that the services have been used, admittedly, in and in relation to export - None of the said services appears to have been used for the purpose of production of soap stone - all are the services which are to be used beyond the factory or premises of production or manufacturer. Whereas the specified services in the impugned notification, are the services irrespective pre or post export/clearance but those which are beyond place of production or manufacture - the order is held to be a result of wrong interpretation of the relevant notification, accordingly, is hereby set aside - appeal allowed - decided in favor of appellant.

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• 2020 (2) TMI 1001
  Refund of accumulated CENVAT Credit - output services exported for the period April, 2016 to June, 2016 - Research Development Service - Garden Maintenance service - recruitment services - Rule 5 of Cenvat Credit Rules, 2004. Research Development Service - HELD THAT:- The Research Development Service performed by the Appellant is export of service in terms of Rule 3 of Rules, 2012. Earlier also for the period July, 2012 to September, 2012, October, 2012 to December, 2012 and January, 2013 to March 2013, the said services were treated as export of services by the department and no relevant material has been placed on record to treat the same differently for the period in dispute - Therefore the Scientific and Technical Consultancy Services provided by the Appellant to DITC is to be treated as export of service. Rule 5 of Cenvat Credit Rules, 2004 was amended vide Notification No. 18/2012-CE (NT) dated 17/03/2012 and after amendment the said rule provides that the refund of Cenvat credit is allowed to service provider when the output service is exported. After amendment of the said Rule, no nexus is relevant between input or input services with the output service and therefore the present refund claim which relates to the period April, 2016 to June, 2016 is correctly availed by the Appellant for the aforesaid service - refund allowed. Garden Maintenance service - HELD THAT:- The Principal Bench of the Tribunal in the matter of M/S HCL TECHNOLOGIES LTD VERSUS C.C.E. NOIDA [ 2015 (8) TMI 595 - CESTAT NEW DELHI] held that the garden service qualified as input services and therefore following the said principle, this refund claim is allowed. Recruitment service - service was rejected on the ground that there is no nexus between the recruitment service and the output service provided by the Appellant - HELD THAT:- A co-ordinate bench of the Tribunal in the matter of COMMISSIONER OF CENTRAL EXCISE PUNE-I VERSUS SAI LIFE SCIENCES LTD. [ 2016 (2) TMI 724 - CESTAT MUMBAI] has held that since the company therein has recruited the employees having vast experience in research, therefore credit is admissible - refund allowed. Appeal allowed - decided in favor of appellant.

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• 2020 (2) TMI 1000
  Revision of amount of service tax - Composition scheme - works contract - difference of opinion - matter referred to the Larger Bench/ HELD THAT:- It would be appropriate to refer the following issue to a Larger Bench: Whether in view of the provisions of Rule 3 of the Composition Scheme, a person who is liable to pay Service Tax in relation to a Works Contract Service opts to discharge his Service Tax liability under Rule 3 of Composition Scheme by opting to pay an amount equivalent to the percentage of the gross amount charged for the works contract, shall be required to pay the amount equivalent to the same percentage of the gross amount charged for the works contract till the completion of the said contract, even if the percentage is revised subsequently? The file may, therefore, be placed before the Hon ble the President for constituting a Larger Bench.

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• 2020 (2) TMI 999
  Maintainability of appeal - non-compliance with the mandatory pre-deposit in terms of Section 35F of Central Excise Act - HELD THAT:- The said deposit of Rs. 96,187/- made by the appellant was not in the regular course of their business of providing services. The same was deposited by them subsequently by way of two challans dated 31.03.2015 for an amount of Rs. 72,663/- and another challan dated 13.04.2015 depositing an amount of Rs. 23,524/- - As such, it is seen that the entire service tax deposited is to the tune of Rs. 6,81,817/- and the appellant having confirmed an amount of Rs. 96,187/- has to be held as having pre-deposited the mandatory amount of 7.5% of the amount. Matter remanded to Commissioner (Appeals) for deciding the matter on merits, after giving an opportunity to the appellant to put forth their case - appeal allowed by way of remand.

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• Central Excise

• 2020 (2) TMI 1025
  Classification of goods - manufacture of agrochemical products - Plant Growth Regulator and falling under Chapter heading 3808 or not - As per the circulars issued by the CBEC, the product in question was required to be compound and not mixture . - CESTAT referred the matter to the Larger Bench - Whether the decision rendered by the Bench in Northern Mineral (supra) could be said to be so conclusive a decision as to leave no room for further examination of this Bench? HELD THAT:- This stage that the product in question before the Delhi Bench in case of NORTHERN MINERALS PVT. LIMITED VERSUS COLLECTOR OF C. EX., DELHI [ 1996 (7) TMI 387 - CEGAT, NEW DELHI] Dhanzyme and therefore, the majority discussion in the case of Northern Mineral (supra) was based upon the ingredients characteristics and constitution of the said product. Whereas in the instant case, the product is Siapton 10L. Thus, both the products are different. The Delhi Bench in case of Northern Mineral (supra) has recorded submission of the counsel for the appellant therein. The Delhi Bench in case of Northern Mineral did refer to the dictionary meaning and various discussion on plant, growth, regulator and plant, growth promoter to cullout fine distinction between the two. But the research on this aspect incorporated in para 7.3 was bearing in mind the product Dhanzyme and its ingredients, applicability, methodology of its application and usage. In other words, it can well be said that the discussion and research was producentic viz. Dhanzyme . It is required to be noted that the decision of the Court and the tribunals are to be read not as textbook, but required to be read and applied in light of the facts prevalent thereafter. Bearing the aforesaid sentence of the tribunal occurring in the paragraph, which this Bench has found to be uncalled for, unwarranted and not appropriate. The discussion in respect of the product in question based upon the prima facie opinion of the tribunal requiring the tribunal to refer the matter to Larger Bench cannot be said to be so prejudicial to the petitioner to call for any interference - The Court hasten to add here that the Court is also of the view that the learned counsel for the respondent is not wholly unjustified in pressing into service the submission and pleadings of the respondents affidavit indicating that in such a scenario the Court should be slow in interfering with such interim order. The Court had to examine the judgment of the Delhi Bench of CESTAT in NORTHERN MINERALS PVT. LIMITED. The plain and simple reading thereof would indicate that there was a discussion, which can be said to be a product specific or producentic viz. Dhanzyme and supposing there was a case in respect of Dhanzyme or a product having all the similar ingredients that a Dhanzyme and also applicability perhaps there would have been no action or permissibility in the tribunal to make any reference as it would not be permissible at all. The Court has already deprecated the tribunal s reference to the Apex Court in highlighted sentence, but that in itself would not render entire order of the tribunal impugned in this petition vulnerable as it was a duty cast upon the petitioner to establish imminently that the product in question in this petition being Siapton 10L was almost similar to Dhanzyme in its ingredients, applicability and construction so as to make the decision of Northern Mineral binding upon the tribunal for preventing it from referring it to Larger Bench. The Court is of the view that the order impugned is not in any manner prejudicial to the petitioner and is only an interim order and making reference to the Larger Bench and pursuant thereof, the Larger Bench was constituted and met once, but in view of the pendency of this petition, deferred the hearing. Therefore, without any further elaboration, suffice it to say that the order impugned does not deserve to be interfered with in any manner and the discussion touching upon the merits made in this matter is purely for examining the challenge to the order impugned and the same shall have no bearing either for consideration by the Larger Bench or Tribunal Bench, where the matter is argued on merits - Petition disposed off.

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• 2020 (2) TMI 1024
  Maintainability of appeal - Whether the orders of the Appellate Tribunal confirming recovery of duty on the basis of Annual Production Capacity (APC) and not on the basis of actual production are correct and legal in the facts of this case? - HELD THAT:- The appeal is admitted on substantial question of law. The facts as emerging on record reveal that the question on which the appeal has been admitted does not arise either from the order passed by the Commissioner, Central Excise and Customs, Ahmedabad-II or the CESTAT as neither the Commissioner nor the CESTAT has considered the issue of recovery of duty on the basis of actual production. The question framed as a substantial question of law arising from the impugned order passed by the CESTAT is not answered - appeal dismissed.

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• 2020 (2) TMI 1015
  Clandestine removal - compliance of Rule 9D of Central Excise Act, 1944 - SSI Exemption - clubbing of the clearances affected by the manufacturing units of the appellants, namely, M/s Ganpati Allied Works (Noticee No. 2), M/s Ganpati Steels (Noticee No. 1) and other two units - HELD THAT:- There is evidence regarding pervasive control of these units by Shri Ashish Gupta only. We also find that the record regarding payment of the various units is interlinked with each other. It is on record that there had been supply by the one unit, however, the payments have been received by the other units, although subsequently, there is instances of transfer of all this amount to the respondent units. Transportation of raw material, finished goods and trading material - HELD THAT:- There is intermixing of business activities of the units and same is being controlled by Shri Ashish Gupta, on behalf of other appellant as well. Regarding the evidences which was collected from the computer of the appellants it is on record that the same was being used by various persons and was not in the control of any individual person. No certificate has required under 36 B of Excise Act is available on record, and therefore, it is concluded that same has not been obtained by the Department during the course of investigation. Therefore, reliance cannot be placed on data derived from this computer/ hard disk. But, Shri Ashish Gupta as categorically accepted these clearances in his statement and also paid Central Excise duty voluntarily. It is evident that the Department has not only relied merely upon the data derived from the computer printout but also obtained from independent sources, which has been accepted by Shri Ashish Gupta. In this regard we are also relying on some of the observations made in the adjudication order by the Adjudicating Authority regarding the huge variation in the consumption of electricity furnished by the manufacturing noticee. This variation in the electricity consumption proves the abnormal production of finished goods as recorded in the private records. This abnormal consumption of electricity would lead to the fact that there had been manufacturing of finished goods without bringing those on the recorded production. This aspect further corroborated by purchase of unaccounted coal from M/s Laxmi Agency/ Jaya Agency. The benefit under SSI exemption is not available to the units where there is mutuality of interest and pervasive control of one unit by the other is established which is established in this case. It is also observed that there had been unaccountal of clearance of winding wire, roll products without payment of Central Excise duty, which were found to be maintained in private records. All these evidences have been accepted by Shri Ashish Gupta in his statement before the Investigating Officer. Whatever has been accepted need not be proved. Appeal dismissed.

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• 2020 (2) TMI 1014
  CENVAT Credit - common input services used for providing taxable as well as non-taxable outputs - leftover of packing material - exempt goods or not - Rule 6 (3)(1) of CCR 2004 - whether the leftover of the packing material which was used by the Appellant to pack the Tires and Tubes manufactured by them is such exempted/non-excisable goods due to which Rule 6 CCR, 2004 is applicable? HELD THAT:- Apparently and admittedly, the goods as have been objected by the department are not the manufactured goods. These are merely the inputs that too in the form of the material used by the Appellant to pack their final product. This particular observation is sufficient to hold that the impugned goods i.e. plastic scrap, used empty jumbo bags, sweeping garbage, MS Iron, empty drums, MS scrap, etc. do not fall in the category of goods manufactured by the Appellant. Irrespective the leftover of the packing material is being cleared by the Appellant against the consideration, these goods is not at all sufficient to hold the same to be called as the manufactured good of the Appellant. In the case of UNION OF INDIA VERSUS DSCL SUGAR LTD. [ 2015 (10) TMI 566 - SUPREME COURT] Hon ble Apex Court while explaining the meaning of manufacture as contained in Section 2F of the Central Excise Act, 1944 has held that any waste emerging compulsorily during the procedure of manufacture cannot be called as the manufactured products. As such the Rule 6, CCR is not applicable - In view of the prior Circular of the department bearing No. 721/37/2003-CX dated 06.06.2003, it can be opined that explanation I to Rule 6 CCR, 2004 has been added to circumvent the outcome of the decision of Hon ble Apex Court in UNION OF INDIA VERSUS DSCL SUGAR LTD. [ 2015 (10) TMI 566 - SUPREME COURT] . Accordingly, the confirmation of demand of Rs. 5,72,598/- on the left over/scrap of the input used by the Appellant, since Rule 6 is not applicable, the demand is not sustainable - demand set aside. Demand of Rs. 3722/- with respect to common input services used for taxable as well as non-taxable services - HELD THAT:- Since there is no denial for the Services as that of advertising services, legal services, director s fee, business auxiliary, etc. to be the common input services used by the Appellant in or in relation to the manufacture of their final product. There are no infirmity when the adjudicating authority below has confirmed the demand under Rule 6 CCR, 2004 to that extent the order under challenge is liable to be upheld - Demand upheld. Appeal allowed in part.

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• 2020 (2) TMI 1010
  Service of notice - raw-material was received in the factory premises of M/s. Shree Om Wires Pvt. Ltd. without proper invoice/ documents, which were found issued in the name of entity other than that of the said unit - Confiscation - redemption fine - penalty - HELD THAT:- It stands clear on record that penalty against the present appellant stands already waived. Hence, there seems no reason to still be aggrieved about imposition of penalty. It is further observed that in para 7 of the Order-in Appeal, Commissioner (Appeals) has already formed an opinion that the job worked material i.e. 8839 Kgs. as per the job challan could not have been loaded in the said vehicles. Otherwise also, there was no evidence regarding the readiness of job worked material to be transported to the principal manufacturer. Hence it cannot be said that the job worked material was indeed ready to be dispatched. It is on this basis that the Order-in-Original was modified. The appellant was under bonafide understanding about no duty liability on his part on amount of subsidy by including it in the transaction value. Thus, even the order of confiscating the Truck, however, permitting redemption thereof is also not sustainable. Appeal allowed - decided in favor of appellant.

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• 2020 (2) TMI 1008
  Condonation of delay in filing appeal - Clandestine Removal - MS ingots - time limitation - limitations to file the appeal before Commissioner Appeals and the mandatory payment @ of 7.5% of the demand confirmed was also made by the Appellant that too within 60 days of receiving the order in original - HELD THAT:- Unless and until there is a statutory mandate of extending the prescribed period to a particular period/number of days that the Section 5 of Limitation Act will be applicable. Section 29 of Limitation Act reiterate the same position that even for special laws in absence of specific provision for extending the prescribed time but for a particular limit that Section 4 to 24 of the limitations Act only will be applicable. However, Section 35 of Special Act i.e. Central Excise Act limits the power of Commissioner Appeals to condone the delay in filing appeal, only to a period of 30 days after the period of 60 days from the date of receipt of the order to be challenged as is filed before him. The said observation is sufficient to hold that in case of Section 35 of Central Excise Act, the power of Commissioner (Appeals) to condone he delay in fling appeals is restricted to a particular period Section 5 29 of Limitations Act will not be applicable. Learned Apex Court in the case of Singh Enterprises [2007 (12) TMI 11 - SUPREME COURT] has held that Commissioner of Central Excise Appeals as also the Tribunal being the creatures of statute are vested with the jurisdiction to condone the delay beyond the permissible period provided under the statute. However, where the period upto which the prayer for condonation can be accepted is statutorily provided, the logic of Section 5 of Indian Lamination Act shall not be available for the condonation of delay. Commissioner (Appeals) had no option but to dismiss the appeal being time barred as the delay was more than 30 days. But keeping in view, the power of this Tribunal and that the delay is attributable to the Counsel of the appellant that the said delay is hereby condoned - Since the decision of Commissioner (Appeals) is not on the merits, the matter is remanded back to Commissioner (Appeals) to take decision on the merits of the impugned appeal - Appeal allowed by way of remand.

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• 2020 (2) TMI 1004
  CENVAT Credit - participation of officers in workshop for Corporate Social Responsibility - Security in the headquarters building residential colony and other activities like tree trimming/cutting, fabrication, repair maintenance of residential quarters, cleaning services in the project office, dismantling of old structure and others - Hiring of bus for transportation of the staff between office and residence - extended period of limitation - HELD THAT:- The Commissioner (Appeals) in paragraph 12 only dealt with reimbursement of travelling expenses to Chartered Accountants and held that the Appellant is entitled to Cenvat Credit for reimbursement of travelling expenses to them. It has, therefore, to be examined whether the Appellant would be entitled to avail credit. The expenditure on Corporate Social Responsibility is a statutory requirement under the Companies Act and is clearly in relation to the activity of manufacture as was also observed by the Joint Commissioner in the adjudication order. Such workshops do help the officers in better management of the business activities of the Appellant and, in fact, would be included in the coaching and training mentioned in the inclusive part of the definition of input service - the appellant is clearly entitled to avail Cenvat Credit on the expenditure incurred in providing this service. Security in the headquarters building residential colony and other activities like tree trimming/cutting, fabrication, repair maintenance of residential quarters, cleaning services in the project office, dismantling of old structure and others - HELD THAT:- From a bare perusal of the order of the Commissioner (Appeals), it does appear that providing security in the office area is connected with the business activity of the Appellant, but providing security to the residential colony is not in relation to the business activity of the Appellant. Credit has, however, been denied since bifurcation of the amount spent for security for office and residential colony has not been provided. At this stage, it needs to be noted that there are 338 personnel provided by the security agency, out of which only 4 security guards are deployed at the four residential colonies and 334 security staff are for the offices area. It is not the case of the Department that the employees/workers are living in private residential houses where security has been provided by the factory. It is an admitted fact that the residential colony is provided by the factory and it is situated within the premises owned by the Appellant and close to the mining area and offices. The residential colony has been built by the Appellant for the benefit of its employees/workers and has been maintained by the Appellant. It is necessary for the Appellant to maintain the residential colony close to the mines area for better business results. Therefore, the services, so provided, do have a nexus with the business undertaken by the Appellant - The Joint Commissioner had examined all these aspects and had arrived at a conclusion that such services had a nexus with the business of the Appellant, but the Commissioner (Appeals) without giving any reason, much less a cogent reason, has made an observation that providing such services has no nexus with the business of the Appellant. Hiring of bus for transportation of the staff between office and residence - HELD THAT:- In the present case, it is not in dispute that the bus is being utilized for the purpose of transporting the employees from the residence to the factory and from factory to the residence. This is in connection with the business activity of the Appellant and, therefore, there is no good reason to deny Cenvat Credit on such input service in view of the aforesaid decisions relied upon by learned Chartered Accountant for the Appellant - the demand made under this head cannot, therefore, be sustained and is, accordingly, set aside. It is not necessary to examine the contention raised by the Appellant that the extended period of limitation in regard to the first show cause notice could not have been invoked - appeal allowed - decided in favor of appellant.

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• Indian Laws

• 2020 (2) TMI 1023
  Dishonor of Cheque - acquittal of accused - rebuttal of presumption - burden to prove - Section 138 of the Negotiable Instruments Act, 1881 - HELD THAT:- In the present case, the trial court recorded finding that though the appellant deposed that the amount is shown in income tax return and account of Prabha Sales but the said income tax and account of Prabhas Sales was not produced, therefore, version of the appellant is not corroborated. In view of this court, the finding arrived at by the trial court is clearly against the legal aspect of the matter. When respondent has not denied by adducing evidence of himself that he has not borrowed money from the appellant, presumption under Section 139 of the Act, 1881 will survive and remain exist and corroboration to the statement of the appellant is not required. From the evidence of the appellant, it is clearly established that respondent had earlier taken amount of Rs. 3,14,000/- from him which was returned by him. Appellant is running business of of railway machinery and advancing sum to respondent in earlier occasions which shows that he is capable to advance money to the respondent, therefore, it is not a case where source of income of the appellant is not established. The amount was advanced on the basis of personal relation, therefore, preparation of other documents was not required under the law and cheque issued by the respondent is the best document for showing liability of the respondent. On an overall assessment, it can be said that the finding of the trial court is against weight of the evidence and same is perverse - Further, finding arrived at by the trial court is not legal and contrary to the provisions of the Act, 1881. Respondent is convicted under Section 138 of the Negotiable Instruments Act, 1881. The date of issuance of cheque is 10-7-2015. Appellant is entitled to interest @ 6% per annum on the amount advanced by him - appeal allowed.

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