Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 29, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Refund of GST paid under RCM on ocean freight - Since the Notification has been struck down as ultra vires, as a consequence of the same, the writ applicant seeks refund of the amount paid towards the IGST. However, for this purpose, the writ applicant will have to prefer an appropriate application addressed to the competent authority. - HC
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Jurisdiction - Central GST authority or State GST authority - Validity of investigation initiated by the respondents and the summons issued in connection with the said investigation - Section 6(2)(1)(b) - Since the offences reflected from the transactions were made in more than one State, the respondents had all the powers for initiating a proceeding under the provisions of Section 132 of the CGST Act, 2017. - HC
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Carry forward of CENVAT credit - migration to GST regime - GST TRAN-1 - when the co-ordinate Bench had already declared clause (iv) of sub-section (3) of Section 140 as unconstitutional, we do not have any hesitation to declare Rule 117 of the CGST Rules, 2017 for the purpose of claiming transitional credit as procedural in nature and should not be construed as mandatory provision. - HC
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Profiteering - the DGAP has reported that the Respondent had neither benefited from additional ITC nor had there been a reduction in the tax rate in the post-GST period and therefore it does not qualify to be a case of profiteering - there are no reason to differ from the Report of DGAP - NAPA
Income Tax
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Penalty u/s 271AAB(1)(a) - once the assessee has explained the way in which he derived income and also the purpose for which it is utilized, it is not necessary for the assessee being an educational society to substantiate further with the source of the income received in view of section 115BBC(2) & (3) - penalty at 10% is leviable - AT
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Royalty receipt or not - production work undertaken is a live coverage of event - Section 9(i)(vi) and Article 13 of the DTAA - the receipts in question cannot be treated as “royalty” - AT
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Addition u/s 68 - addition on account of share capital - the investor companies have withdrawn money from companies where funds were invested earlier and they invested money in the assessee company in the shape of preference shares and, therefore, this prudent financial planning should not be viewed adversely and, rather, it supports the case of the assessee that there was source of funds invested by the investor company in the shares of the assessee company. - AT
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Nature of expenditure - claim of guarantee fees - The guarantee fees is directed to be allowed as revenue expenditure, subject to verification by the AO of the certificate filed during the appellate proceedings i.e. there was no capital work-in-progress in respect of loans on which guarantee fees was paid. - AT
Customs
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Refund of Additional Duty of Customs paid - to allow the limitation period to start from the date of payment of duty as prescribed under the amended notification, would allow commencement of a limitation period for refund even before the right to claim refund actually accrued. The Delhi High Court, therefore, held that neither section 27 of the Customs Act nor the amended notification dated 1 August, 2008 can impose a limitation period on the right of an importer to claim refund of Additional Duty and in any case such limitation can only be introduced by legislation. - AT
Service Tax
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Taxability - sale of ‘canned software’ - In the absence of facts that establish otherwise or of any evidence that such was the transaction between the appellant and the customers, it was not appropriate for the adjudicating authority to conclude that sale of banking software to a bank is ‘commercial exploitation’ merely because the bank deploys the software in its normal business activities. - AT
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Levy of service tax - rent received for use of bullock carts with tyres without any bullocks or driver for transporting the sugarcane to the sugar factories - Tyre Bullock Carts without bullocks and driver, provided by the appellant on rent for the purposes relating to agriculture/agricultural produce without having any right of possession or effective control of the Appellants over them, falls under negative list - AT
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BAS - selling space on ships - this is not a case of agreement on a principal to principal basis but the appellant is appointed as an agent by the shipping lines for rendering the service of selling their space on their ships. This, clearly falls under the category of “Business Auxillary Service” - AT
Central Excise
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Process amounting to manufacture or not - repacking - The goods are sold at the same MRP to the consumer. It is nobody’s case that the goods are sold above the MRP to the consumer. The goods received by the vendor are already in a prepacked form and bears necessary declaration including MRP as prescribed under the statutory provisions and they have already been subjected to Excise Duty earlier. - HC
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Imposition of penalty u/r 15 of Cenvat Credit Rules, 2004 - Bogus invoices- the appellant has neither taken the credit, nor utilized the credit, whereas he has only issued a Cenvatable invoice to some other company - Therefore, the Rule 15 is not applicable in the present case. - Levy of penalty under Rule 15 is illegal and incorrect - AT
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Method of Valuation - Transaction Value u/s 4 or MRP based u/s 4A of CEA - Since the goods manufactured by the appellant are meant for use by other manufacturers also, such manufactured goods cannot be subjected to levy of central excise duty under Section 4A of the Central Excise Act, 1944. - AT
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Valuation - inclusion of cost of advertisement incurred by the dealers in assessable value - cost of advertisement and sales promotion activity carried out by the dealers, after sale of the motor cars - cannot be added to the transaction value - AT
VAT
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The two appellate authorities have concurrently failed to appreciate not only the fact that the Assessee was entitled to file the 'C' declaration forms even at the appellate stage, which was nothing but continuation of the assessment proceedings, but also, they being the fact finding authority, were entitled to peruse the facts as the assessment authority- HC
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Reversal of input tax credit - inputs utilised in the manufacture of internal combustion engine - clearance to SEZ unit - The restrictions in Section 19(5)(a) of the TNVAT Act, 2006, will apply only to such inputs which are bought and sold as such and not to inputs used in the manufacture of goods. 19(5)(b) is not relevant for the present case. - HC
Case Laws:
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GST
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2020 (2) TMI 1242
Refund of GST paid under RCM on ocean freight - Constitutional validity of Entry No.10 of Notification No.10/2017-IGST(Rate) dated 28.6.2017 - vires of Section 5(3) of the IGST Act as well as Article 14 of the Constitution of India - HELD THAT:- This Court vide judgement and order passed in the case of Mohit Minerals Pvt Ltd vs. Union of India [ 2020 (1) TMI 974 - GUJARAT HIGH COURT ] declared the Entry No.10 of the Notification No.10/2017-Integrated Tax (Rate) dated 28th June 2017 as ultra vires Section 5(3) of the Integrated Goods and Services Tax Act, 2017 as well as Article 14 of the Constitution of India. Since the Notification has been struck down as ultra vires, as a consequence of the same, the writ applicant seeks refund of the amount paid towards the IGST. However, for this purpose, the writ applicant will have to prefer an appropriate application addressed to the competent authority. Application disposed off.
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2020 (2) TMI 1241
Jurisdiction - Central GST authority or State GST authority - Validity of investigation initiated by the respondents and the summons issued in connection with the said investigation - primary challenge to the investigation and the summons issued was a specific bar under the GST Act, 2017 - Input Tax Credit on the GST paid on the goods and service purchased - primary contention of the counsel for the petitioner was that once when a show cause notice proceeding initiated by the respondents dated 14.11.2019 is pending before the concerned authorities under the CGSGST, the respondents could not have issued or initiated another investigation or proceeding in-respect of the same subject matter, which otherwise is not permissible under the provisions of Section 6(2)(1)(b). HELD THAT:- This Court does not find any substance in the arguments of the petitioner, when they say that the investigation and the proceedings now initiated is one, which hit by Section 6(2)(1)(b) of the CGST Act of 2017. What has also to be appreciated is the fact that there is a clear distinction between a proceeding drawn for the demand of tax evaded by the petitioner-establishment and the investigation be conducted by the Department of the DG, GST Intelligence Wings in respect of an offence committed by an establishment by way of using bogus and fake invoices and illegally availing ITCs, which the petitioner-establishment otherwise was ineligible. Petition dismissed.
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2020 (2) TMI 1240
Constitutional validity of Rule 117 of the CGST Rules - time limitation - carry forward of CENVAT credit - migration to GST regime - HELD THAT:- This Court has not declared the said Rule 117 of the CGST Rules, 2017 neither this Court has ordered the respondents to carry forward CENVAT credit beyond the time limit, but in the case on hand, the respondents herein had tried to upload form GST TRAN-1, but it could not be filed on account of technical glitches in terms of poor network connectivity and other technical difficulties at common portal. Under the circumstances, this Court has gone into the question that in such circumstances what would be the remedy if a person who tries to follow Rule 117 of the CGST Rules, 2017 but, without there being any fault on his side he could not upload the form due to technical glitches. This Court has followed the judgement in the case of FILCO TRADE CENTRE PVT. LTD. VERSUS UNION OF INDIA [ 2018 (9) TMI 885 - GUJARAT HIGH COURT] , wherein, after relying on number of judgements of the Apex Court, the coordinate Bench of this Court had followed the consistent findings of the Apex Court and held that the right accrued to the assessee on the date when the paid tax on the raw materials or the inputs and that right would continue by way of CENVAT credit. The CENVAT credit is therefore indefeasible. This Court had directed the applicants herein original respondents to permit the respondents herein original petitioners to allow filing declaration form in GST TRAN-1 and GST TRAN-2, so as to enable them to claim transitional credit of the eligible duties in respect of the inputs held in stock on the appointed day in terms of Section 140(3) of the GST Act. When the co-ordinate Bench had already declared clause (iv) of sub-section (3) of Section 140 as unconstitutional, we do not have any hesitation to declare Rule 117 of the CGST Rules, 2017 for the purpose of claiming transitional credit as procedural in nature and should not be construed as mandatory provision. The present applications deserve to be dismissed and are hereby dismissed.
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2020 (2) TMI 1239
Permission to re-export the seized goods - demand of furnishing Bank Guarantee of 25% - Petitioner submitted that there is no provision for levy of IGST either on the imported goods or the exported goods under the provision of Integrated Goods and Services Tax Act, 2017. He therefore submitted that the insistence on the part of the respondent no.3 to furnish the bank guarantee of 25% on the amount of IGST is without any basis - HELD THAT:- As this Court has directed the respondent no.2 to permit the petitioner to re-export the goods on furnishing the 25% of the customs duty leviable on re determined value of goods, then the respondent no.2 is not entitled to ask for bank guarantee on the amount of IGST on redetermined value of goods. The impugned communication dated 07th September, 2018 is hereby quashed and set aside. It is declared that the petitioner is not liable to furnish the bank guarantee of ₹ 15,20,183/ for releasing the goods for re- export, as asked by the respondent no.3 - Petition allowed.
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2020 (2) TMI 1238
Principles of natural justice - order passed beyond jurisdiction in terms of Section 39, 46, 47 and 50 of the Bihar Goods and Service Tax Act, 2017 - notice in form GSTR-3A not issued - liability of interest under Section 50 of the Act - HELD THAT:- It is found that the order to be not assigning any reasons whatsoever - Also, prior to passing of the impugned order, no opportunity of hearing was ever afforded to the writ-petitioner. As such, there was gross violation of principles of natural justice in passing of the impugned order, which is hereby quashed with the certain directions - Petitioner shall appear before the appropriate authority on 28.01.2020, whereafter the proceedings shall commence afresh, affording opportunity of proper hearing to the petitioner, also enabe to place on record additional material, if so required/desired and only thereafter the officer shall pass a fresh order assigning reason, in accordance with law.
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2020 (2) TMI 1237
Profiteering - supply of construction services related to the purchase of Flat - benefit of Input Tax Credit (ITC) by way of commensurate reduction in the price of the apartment purchased by him, not passed on - contravention of section 171 of CGST Act - HELD THAT:- It is clear from the plain reading of Section 171(1) mentioned above that it deals with two situations one relating to the passing on the benefit of reduction in the rate of tax and the second pertaining to the passing on the benefit of the ITC. On the issue of reduction in the tax rate, it is apparent from the DGAP s Report that there has been no reduction in the rate of tax in the post GST period. The only issue to be examined is as to whether there was any net benefit of ITC with the introduction of GST. On this issue, the DGAP in his Report, has stated that ITC as a percentage of the turnover which was available to the Respondent during the pre-GST period (April 2016 to June-2017) was 0.94% and during the post-GST period (July-2017 to March-2019), it was 0.39%. On this basis, the DGAP has reported that the Respondent had neither benefited from additional ITC nor had there been a reduction in the tax rate in the post-GST period and therefore it does not qualify to be a case of profiteering - there are no reason to differ from the Report of DGAP and we therefore agree with his findings that the the provisions of Section 171 of the CGST Act 2017 have not been contravened in this case. The instant case does not fall under the ambit of Anti-Profiteering provisions of Section 171 of the CGST Act, 2017. Therefore, the allegation that the Respondent has not passed on the benefit of ITC in this case is not found sustainable. Accordingly, the application filed by Applicant No. 1, requesting action against the Respondent for alleged violation of the provisions of Section 171 of the CGST Act, is dismissed as not maintainable.
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2020 (2) TMI 1206
Failure to file Form GST TRAN-1 - carry forward of Input Tax Credit - technical glitches - whether the respondents can be directed to either open the portal to enable the petitioner to now file FORM GST TRAN-1 electronically or to permit the petitioner to submit manually, the typed Form GST TRAN-1 for acceptance by the respondents? HELD THAT:- Issue notice.
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Income Tax
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2020 (2) TMI 1236
Addition in relation to reduction in sales consideration - whether the Tribunal ought to have remanded the matter to the Assessing Officer to consider the issue a fresh denovo with regard to reduction in sales consideration? - HELD THAT:-Tribunal has allowed the ground No.2 of the assesse s appeal so far as it relates to reduction in sales consideration subject to the directions issued in the same paragraph for necessary verification or examination of the claim of the assessee. Thus, Tribunal has remanded the matter back to the Assessing Officer, directing him to consider in detail and verify the claim of the assessee. In view of such facts, there is no infirmity in the impugned order passed by the Tribunal which calls for any interference by this Court. None of the question of law proposed by the revenue can be termed as substantial question of law. Hence, this appeal fails.
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2020 (2) TMI 1235
Claim of deduction u/s 35D - amortization of certain preliminary expenses - HELD THAT:- CIT (A) as well as the Tribunal both relied upon the fact that once the Assessing Officer has allowed the claim under Section 35D of the Act in the first year of allowance, it could not have been cured and therefore, in view of the doctrine of consistency, the claim made by the assessee is required to be allowed for the year under consideration. Tribunal therefore followed the decision taken by in assessee s own case [ 2013 (9) TMI 363 - ITAT AHMEDABAD ] and dismissed the appeal of the Revenue. In view of the aforesaid facts and more particularly, as the Tribunal has not given any independent finding for the year under appeal and followed its earlier decision in assessee s own case which has attained finality, the appeal requires to be dismissed only on that ground. Disallowance of payment of rent and taxes - non commencement of business - HELD THAT:- CIT(A) as well as the Tribunal have arrived at concurrent finding of the fact that the payment of rent and taxes, paid by the assessee, is not capital expenses but is only revenue expenses paid out to fulfill the statutory requirement for the purpose of continuing the ownership of the land. - Revenue appeal dismissed.
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2020 (2) TMI 1234
Deduction u/s 10-A / 10-B - income of the Assessee u/s 41 could be treated as 'export income' of the Assessee and was therefore entitled to deduction under Section 10-A/10-B - Assessee Company had offered stock option scheme to its employees and Assessee Company had offered stock option scheme to its employees in the preceding assessment years and following the SEBI guidelines and standard accounting practices, the said amount was debited to the Profit and Loss Account of the Assessee Company - HELD THAT:- As relying on HEWLETT PACKARD GLOBAL SOFT LTD. [ 2017 (11) TMI 205 - KARNATAKA HIGH COURT] and M/S. CAMICERIA APPARELS INDIA P. [ 2019 (3) TMI 73 - MADRAS HIGH COURT] we are inclined to take a view that the income brought to tax under Section 41 of the Act by reversal of the entry with regard to the stock option given to the employees is also in the nature of 'export income' and therefore, the Assessee is entitled to exemption / deduction under Section 10-A / 10-B of the Act and the view taken by the learned Tribunal is not sustainable. - Decided in favour of assessee.
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2020 (2) TMI 1233
Rectification u/s 254 - Revenue appeal dismissed on low tax effect - HELD THAT:- Appeal of Revenue was dismissed by the Tribunal on account of low tax effect in view of the CBDT Circular No. 03 of 2018 dated 11.7.2018. Thereafter, the application for rectification was filed which was dismissed vide impugned order holding that this was outside the scope of rectification. Today, learned counsel has argued that the case was wrongly dismissed on account of low tax effect whereas it was covered by exceptions in Circular. When we go through the circular, the only item which could be possibly related is para No. 10 of the circular which is quoted herein below 10. Adverse judgments relating to the following issues should be contested on merits notwithstanding that the tax effect entailed is less than the monetary limits specified in para 3 above or there is no tax effect : (a) Where the Constitutional validity of the provisions of an Act or Rule is under challenge, or (b) Where Board's order, Notification, Instruction or Circular has been held to be illegal or ultra vires, or (c) Where Revenue Audit objection in the case has been accepted by the Department, or (d) Where the addition relates to undisclosed foreign assets/band account. The only point to which this argument can be relatable is Clause 10 (b). We asked the learned counsel where any Notification, Order, Instruction or Circular has been held to be illegal or ultra vires. Her argument is that though no Order, Notification, Instructions or Circular has been held to be legal or ultra vires but effect of the said Circular has not been correctly understood. In our considered view, that is beyond the exception clause count down by the circular. No substantial question of law proposed arises.
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2020 (2) TMI 1232
Dividend income of assessee as exempt u/s 10(34) - whether dividend income is considered as part of income of Life Insurance Business and is included as an income by the actuary? - whether dividend income of assessee as exempt u/s 10(34) of the I.T. Act, 1961, ignoring the fact that dividend income is considered as part of income of Life Insurance Business and is included as an income by the actuary? - HELD THAT:- As substantial question of law (a) and (c) are concerned they were part of the question of law urged in ICICI PRUDENTIAL LIFE INSURANCE CO. LTD. [ 2018 (7) TMI 2092 - BOMBAY HIGH COURT] and have not been entertained. Hence they do not arise for consideration in this Appeal. Loss from pension business - Whether income includes loss and that the income from pension fund does not form part of the total income of the assessee under section 10(23AAB) ? - HELD THAT:- As regards question of law (d) is concerned the Tribunal has followed the decision of this Court LIFE INSURANCE CORPORATION OF INDIA LTD. [ 2011 (8) TMI 47 - BOMBAY HIGH COURT] - Hence, this question of law does not arise for consideration. Appeal is admitted on the following substantial question of law :- Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that provisions of section 14A of the Act did not apply to insurance business, even when the assessee has claimed exempted income u/s 10 of the Act?
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2020 (2) TMI 1231
Penalty u/s 271AAB(1)(a) - assessee has admitted the undisclosed income u/sec. 132(4) - Whether assessee has filed the return of income within the specified date and admitted income and was offered for taxation? - HELD THAT:- We find that the assessee had filed the return of income on 31/10/2013 for the A.Y. 2013-14 which is placed in paper book at page No. 41, therefore the Assessing Officer is not correct in rejecting the plea of the assessee on the ground that the assessee has not filed the return of income as per specified date. Insofar as application of section 271AAB(1)(a) is concerned, we find that during the course of assessment proceedings as well as penalty proceedings, the assessee has explained before the Assessing Officer that the society had received anonymous donations from various persons for upliftment of the activities of the society. It is also submitted that the said donations received for the betterment of the activities of the society and the persons who have contributed such donations were not anonymously disclosed their names/identify and submitted that due to this reason the society was handicapped in recording their names and identity. DR has pointed out that the assessee has failed to substantiate the manner in which the undisclosed income is derived. So far as this aspect is concerned, as per section 115BBC, any trust or institution received anonymous donations, is not necessary to mention identity/address and other particulars in the books. Therefore, once the assessee has explained the way in which he derived income and also the purpose for which it is utilized, it is not necessary for the assessee being an educational society to substantiate further with the source of the income received in view of section 115BBC(2) (3) of the Act. Therefore, in view of the facts and circumstances of the case, we find that the assessee has fulfilled all the conditions laid down in section 271AAB(1)(a), therefore penalty at 10% is leviable in this case. No infirmity in the order passed by the ld. CIT(A). Thus, this appeal filed by the Revenue is dismissed. A.Y. 2014-15 - the due date of filing of the return is 30/09/2014. The assessee filed the return of income on 29/11/2014 which was beyond the specified date and confirmed the order of the Assessing Officer by rejecting the plea of the assessee and in levying penalty at 10%. We find no reason to interfere with the order passed by the ld.CIT(A). Thus, this appeal filed by the assessee is dismissed.
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2020 (2) TMI 1230
Addition u/s 37(1) under the Head Salary Expenses - HELD THAT:- The Assessee Corporation is receiving grants on annual basis and the said grants have been used by the Corporation in accordance with the directions of the Government. In preceding assessment year, A.O. has accepted the same claim of the assessee without any objection. Therefore, when same policy have been followed by the assessee and accepted by the A.O, he should not have taken a different stand. Further assessee has made it very specifically clear that salary is paid to all old employees who worked for the assessee and expenses are genuine. All TDS have been deducted on the salary and paid to the Government. All the employees have worked for assessee. It is, therefore, clear that assessee incurred the salary expenses which are exclusively for the purpose of business activities. No case is made out by the A.O. by making salary payment, if the same is offence or which is prohibited by Law. Therefore, Explanation-1 to Section 37 would not be attracted in the case of assessee, which is contended in the grounds of appeals by the Revenue. There is, thus, no justification to interfere with the Orders of the Ld. CIT(A). We confirm his finding and dismissed the appeal of the Revenue.
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2020 (2) TMI 1229
Revision u/s 263 - CIT Jurisdiction to invoke revision - Penalty u/s 271E imposed - HELD THAT:- So long as the twin conditions as envisaged by Sec.263 are fulfilled by conducting minimal enquiry, the jurisdiction would certainly be valid notwithstanding the fact that the same were triggered at the behest of Ld.AO. Therefore, the revisional jurisdiction could not be termed as bad in law simply because the same was triggered at the instance of another officer. We do not find any substance in the same and reject the said plea. Computation of capital gain on slump sale - business of the assessee was transferred to another entity vide Business Transfer Agreement dated 02/08/2013 on slump sale basis without individual values being assigned to the assets and liabilities, was well appreciated by Ld. AO since the body of assessment order passed u/s 143(3) record this fact. Therefore, to say that the said fact was omitted to be considered by Ld. AO, would not be correct. In fact, the assessee had duly disclosed the facts of transfer of business in Schedule-N of its financial statements. The computation of capital gain on slump sale was placed on record. The assessee had bifurcated the Balance Sheet reflecting financial position before transfer of business and subsequent to transfer of business. The copy of Business Transfer Agreement was also submitted to Ld. AO vide submissions dated 21/12/2016. Upon perusal of the same, we find that all the issues connected with transfer of business were under due consideration of Ld.AO during regular assessment proceedings. Another aspect to be noted is that as per the provisions of Sec. 271E, no satisfaction is required to be recorded in the quantum assessment order before levying penalty u/s 271E. Therefore, we are unable to accept the validity of revisional jurisdiction on this point. Claim of interest on TDS and customs penalty - AR asserted that the case of the assessee was selected under limited scrutiny which was never converted into full scrutiny. The issue of TDS and custom penalty were none of the reasons for which the case was selected for limited scrutiny assessment. The Ld. AR drew attention to the CBDT Instruction No.7/2014 dated 26/09/2014 which provide that in case of scrutiny cases selected under CASS, the scope of inquiry should be limited to verification of particular aspects only. We have duly considered the same. The perusal of documents on record would reveal that this issue was never raised by Ld.AO and therefore, there could be no occasion for the assessee to make any submissions in this regard. This being the case, prima facie, this issue was raised by Ld. revisional authority without conducting any minimal inquiry that the said expenditure was not admissible under law. The conclusion was drawn on mere allegation that the said expenditure was inadmissible expenditure. It is settled legal position that the revision jurisdiction could not be exercised to make fishing or roving inquiry without establishing the fact that the order was erroneous as well as prejudicial to the interest of the revenue. Therefore, we are not convinced with exercise of revision jurisdictions on this issue. Applicability of Sec. 94(7) / 94(8) - assessee, vide submissions dated 29/03/2019, had submitted that the dividend was not earned on the units of Sundaram Mutual Fund and in support of the same, ledger extract of dividend income as well as statement of respective mutual funds which gave rise to dividend income was furnished which clearly established that no dividend was earned on Sundaram Mutual Fund . In the said background, it was submitted that the provisions of Sec. 94(7) were not applicable. Similarly, the units of Sundaram Mutual Fund were stated to be purchased on 05/09/2013 whereas record dated was 23/12/2013 when the bonus units were allotted to the assessee. Therefore, there was a gap of more than 3 months between the purchase of units and record date and therefore, the provisions of Sec. 94(8) were stated to be not applicable. The supporting documents, to substantiate the said fact, were also furnished. However, we find the Ld. Pr.CIT-32 did not consider assessee s submissions and termed the order as erroneous and prejudicial without conducting any minimal inquiry. Therefore, the action, on this issue, could not be upheld. No directions have been issued with respect to last issue i.e. non-filing of Form 3CEA and therefore, the same need not be delved into - Revisional jurisdiction as exercised by Ld. Pr. CIT-32 could not be upheld in the eyes of law. - Decided in favour of assessee.
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2020 (2) TMI 1228
Gross profit estimation - absence of production of supporting details/books of accounts by the assessee company - CIT-A reducing the estimated gross profit of the assessee company from 10.73% to 8.75% - HELD THAT:- Since the books of account were in the possession of the Official Liquidator and the same were not received by the assessee at the time of handing over of the possession, therefore, the allegation of the AO that the assessee failed to produce the books of account are contrary to the facts as the assessee cannot be expected to do an impossible task. Further, had the profit percentage of the assessee been higher, then, the assessee company would not have gone into financial trouble. The observation of the ld.CIT(A) that due to change in the technology and use of plastic material/poly plastic/can the turnover as well as the margin of the assessee company started declining and the company ran into financial trouble in 1997 and, subsequently, gone into liquidation also could not be controverted by the ld. DR. In view of the detailed reasoning given by the CIT(A) while reducing the GP rate to 8.75% as against 10.73% taken by the AO, we do not find any infirmity in the same. Accordingly, the order of the CIT(A) on this issue is upheld and the ground raised by the Revenue is dismissed. Addition on account of Gross Profit ratio @ 10.35% - amalgamation of M/s Asian Closures Ltd. into the assessee company in the absence of production of supporting details/books of accounts - CIT-A deleted the addition - HELD THAT:- We do not find any infirmity in the order of the CIT(A). He has given a finding that due to change in technology and due to substantial fall in sales during the year as compared to preceding years, the turnover and GP rate has gone down. Nothing contrary was brought to our notice to controvert the above finding given by the CIT(A). In view of the above and in view of the detailed reasoning given by the ld. CIT(A) on this issue, the ground raised by the Revenue is dismissed. Deduction u/s 80HH and deduction u/s 80I - assessee company has not furnished evidence to justify the claims and also in the absence of production of supporting details/books of accounts - HELD THAT:- From the various details furnished by the assessee in the paper book, which were filed before the AO and the CIT(A), we find substantial details were filed before the lower authorities to prove that manufacturing activity of the assessee company were situated in the backward area and, for that, the assessee has filed the Notification filed by the Central Government. He has also filed documents substantiating Sales-tax exemption of Haryana Government for setting up industry in backward area. The manufacturing of flexible packaging laminates, open top sanitary cans and general line metal cans is also not in dispute. The certificate from the auditor was also furnished before the AO. The assessee has substantiated that it has employed more than ten employees during the year and has retrenched 79 employees out of 131 employees and permission granted for retrenchment of the workers by the competent authority. Thus, in our opinion, the assessee has substantiated with evidence regarding the manufacturing activity undertaken by him in the backward area and fulfillment of all conditions for claim of deduction u/s 80HH and 80I. In the order for A.Y. 1991-92, the Tribunal had given the observation that the assessee company is entitled to deduction u/s 80HH and 80I. However, it was not claimed because it was a case of loss. In this view of the matter and in view of the detailed reasoning given by the CIT(A) on this issue, we find no infirmity in his order on this issue. Accordingly the same is upheld and the ground raised by the Revenue is dismissed.
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2020 (2) TMI 1227
Difference in total income as against the returned income - no income has been declared on account of the other receipts shown in the 26 AS - difference in the income shown by the assessee and the income reflected as per 26 AS available with the income tax department - HELD THAT:- Addition on account of various amounts received by the assessee from M/s. Plug Power Energy India Private Limited through RTGS and not properly explained by the assessee before him. Apart from the above the AO also made addition u/s. 68 being the unexplained cash deposit in the bank account, made addition on account of interest on savings bank account and on IT refund and denied the claim of exemption u/s. 54 made by the assessee by filing a letter during the course of assessment proceedings. We find in appeal the Ld. CIT(A) dismissed the appeal filed by the assessee, the reasons of which have already been reproduced in the preceding paragraphs. A perusal of the AO s order shows that there was very little compliance or no compliance before the AO to explain the various discrepancies. Even before the CIT(A) the assessee could not furnish any evidence to support the discrepancies of ₹ 2,72,484/- being the receipts on account salary/ professional receipts. We find the summon issued by the AO to the company was returned back unserved with the remark company left . Similarly the assessee also could not establish the nature, source and genuineness of the cash deposits in the bank account amounting to ₹ 8,43,000/-. The mere statement that he was running an imprest account for his employer and withdrawing money from this account to meet the required expenses and re-depositing the same as and when required for the business purposes was not substantiated with supporting details. Assessee also could not substantiate the non disclosure of such interest on savings bank account and interest on income tax refund. So far as the addition on account of long term capital gain and considering submission that despite enquiry conducted by the AO and obtaining confirmation from the society that assessee has sold a flat through registered sale deed dated 04.05.2011 to Mrs. Suvida Singh for consideration of ₹ 35 lacs, the AO wrongly determined the long term capital gain in the interest of justice we deem it proper to restore the issue to the file of the AO with a direction to grant one final opportunity to the assessee to file the relevant details with supporting evidence to the satisfaction of the AO to substantiate the discrepancies in the return filed vis a viz, the amount reflected in the 26 AS statement and the nature and source of various deposits both cheque/ cash / RTGS in the bank account of the assessee. The assessee is also hereby directed to substantiate the non disclosure of interest income on IT refund and SB account and the claim of deduction u/s. 54. The AO shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds raised by the assessee are allowed for statistical purposes.
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2020 (2) TMI 1226
Disallowance of expenditure incurred towards life tax and registration charges - revenue or capital expenditure - HELD THAT:- We do not agree to the view of the Ld. AO and partially agree to the view of the Ld. CIT (A). Motor Vehicle Tax for a stipulated period (normally for a period of 10 years or as the case may be) is collected in advance at the time of the sale of the new vehicle. Therefore, it is revenue expenditure which is pre-paid in nature. In such circumstances, the pre-paid expenditure is to be proportionally treated as revenue expenditure over the period of the validity of Motor Vehicle Tax collected in advance. i.e., if the Motor Vehicle Tax is collected for a period of 10 years, the pre-paid amount has to be allowed as deduction for the period of 10 years in equal instalments. It is pertinent to mentioned that as held by the Ld. CIT (A), the pre-paid Motor Vehicle Tax may also be treated as expenditure which goes to add the cost of the vehicle because predominantly the life of the vehicle is considered to be the same as the period for which the Motor Vehicle Tax is collected in advance. In such case, the assessee will be entitled for the benefit of depreciation towards the cost of the vehicle and the pre-paid Motor Vehicle Tax paid in advance as held by the ld. CIT (A). In this circumstance, we hereby direct the ld. AO to either allow depreciation as explained by us hereinabove or the pre-paid expenditure in instalment as illustrated hereinabove whichever is more beneficial to the assessee. With respect to Registration Charges paid at the time of acquiring the new vehicle, no doubt it is attributable to the cost of the vehicle as held by the Ld. CIT (A) for which the assessee is entitled to the benefit of depreciation. Inflated expenditure on Granite processing and dressing charges u/s. 37(1) - Sustaining 50% of the addition - HELD THAT:- Revenue Authorities has not looked into the scope, volume and nature of work carried out by the proprietorship firm. Further, it is evident that the Ld. CIT (A) has accepted that certain work was carried out for processing the granites otherwise the granite slabs could not be exported. From this, it is evident that the entire disallowance made by the Ld. AO and partly sustained by the Ld. CIT (A) is based on surmises and conjectures and without examining the quantum of work performed by the proprietorship firms. Moreover, when the proprietorship concerns were no required to maintain books of accounts as per Section 44AD of the Act, Revenue cannot take any adverse inference for those proprietorship concerns in not maintaining the books of accounts. It is a settled legal position that additions made on the basis of presumption is not sustainable in law. Therefore, we do not find any merit in the disallowance made by the ld. AO which was partly sustained by the Ld. CIT (A). Hence, we hereby direct the Ld. AO to delete the additions made and sustained in the hands of the assessee on this issue. Accordingly, this ground raised by the assessee is decided in its favour. Unaccounted expenditure - HELD THAT:- The cheque payment made by the assessee cannot be verified and the same cannot be brushed aside by stating that the cheque payment cannot be reconciled. In this situation, we do not find any merit in the order of the ld. AO for making addition in the hands of the assessee. However, in the interest of justice, we remit the matter back to the file of the Ld. AO in order to verify whether the payment of ₹ 8 lakh is made by cheque, the expenditures incurred aggregating to ₹ 4,20,845 are entered in the books of account of the assessee and the amount of ₹ 17 lakh is treated as unexplained investment in the hands of M/s. Reliance Granite Pvt ltd., for the AY 2003-04 and if found so, delete the addition and if found otherwise, decide the matter in accordance with law and merits by passing a speaking order. It is ordered accordingly. Levy of interest U/s. 234A - default in furnishing the return of income - AR submitted that the due date of filing of the income tax return for the AY 2003-04 was extended up to 30.11.2003 as per section 119 of the Act and the assessee had filed the return of income within such due date on 27/11/2003 - HELD THAT:- Since these facts are not verified by the Ld. AO as well as not addressed by the ld. CIT (A), we remit back the matter to the file of the Ld. AO for fresh consideration. Needless to mention that if there is no default in furnishing the return of income by the assessee then, interest cannot be levied U/s. 234A. Unexplained cash receipts u/s 68 - HELD THAT:- Finding of the Ld. CIT (A) is that the same income was assessed in the hands of another assessee and therefore, it cannot be taxed one again in the hands of the assessee-company as it would amounts to double taxation. Hence, the ld. CIT (A) deleted the addition which is appropriate. Since, the Revenue has not come out with any other material or argument to negate the finding of the ld. CIT (A) we do not find it necessary to interfere with his order. Unaccounted investment - CIT-A directing the Ld. AO to verify the source for acquiring land - HELD THAT:- When the assessee had made such detailed submission before the ld. Revenue Authorities and since the payments were made by Demand Draft by M/s. Nova Granite (India) Pvt Ltd., on behalf of the assesseecompany which are all verifiable facts from the books of account of the assessee and from the bank statements, it appears that the ld. Revenue Authorities has not fulfilled their obligations and to make their task easy made additions in the hands of the assessee by surmises and conjectures which is not appreciable. In this situation, in order to avoid hardship to the assessee and keeping in view of the failure on the part of the Revenue to verify the particulars submitted by the assessee, in the interest of justice, we are of the considered view that the addition of ₹ 20 lakhs in the hands of the assessee on this issue cannot be sustained. Therefore, we hereby direct the ld. AO to delete the addition made for ₹ 20 lakhs in the hands of the assessee on this issue. Addition towards difference in sale - HELD THAT:- CIT (A) granted relief to that extent and sustained the balanced amount of ₹ 75,285/-. Since the assessee could not reconcile the difference amount of ₹ 75,285/- before the Ld. Revenue Authorities and before us, at this stage, we do not have any other option but to sustain the addition of ₹ 75,285/-. Accordingly, we do not find it necessary to interfere with the order of the Ld. CIT (A) on this issue. Penalty paid to Central Excise Department - HELD THAT:- We find merit in the submission of the ld. AR. Explanation-1 to section 37 prohibits any expenditure incurred by the assessee which is related to an offence or any expense prohibited by law. In the case of the assessee it appears that the expenditure incurred by the assessee with respect to payment made to Central Excise is in regard to noncompliance of the provisions of the Act which is only penal in nature and it is not an act which is prohibited by law or with respect to any offence. Hence, we hereby direct the ld. AO to delete the addition. Addition made towards interest paid for delayed remittance of tax deducted at source - HELD THAT:- We find merit in the submission of the ld. AR. Explanation-1 to section 37 prohibits any expenditure incurred by the assessee which is related to an offence or any expense prohibited by law. In the case of the assessee it appears that the expenditure incurred by the assessee with respect to payment made to the Revenue is in regard to interest paid on the delayed remittance of TDS which is compensatory in nature and is not expense which is prohibited by law or with respect to any offence. Hence, we hereby direct the ld. AO to delete the addition. Additional depreciation U/s. 32(1)(iia) of the Act on plant and machinery, mining equipment etc. - HELD THAT:- Referring to Circular No.729 dated 1/11/1995 issued by the CBDT ctivity of the assessee being cutting, polishing and sizing of the granites, the ld. CIT (A) held that it amounts to manufacturing activity / production of goods as envisaged under the Act. Accordingly, the Ld. CIT (A) granted relief to the assessee by allowing the claim of additional depreciation. We do not find any infirmity in the order of the Ld. CIT (A) as he has only relied on the Circular of the CBDT and the fact that the assessee s activity was cutting, polishing and sizing of granite is not in dispute. Therefore, the order of the ld. CIT (A) does not call for any interference. Hence, the appeal of the Revenue on this issue is devoid of merit. Addition on account of sale of scrap - AO added the same to the income of the assessee only for the reason that during the survey proceedings assessee had admitted it as not recorded in the books of accounts - HELD THAT:- When the matter cropped up before the Ld. CIT (A), the assessee explained that the amount was recorded in the books of accounts and also included in VAT return. Since the assessee did not produce the books of accounts before the ld. AO, the Ld. CIT (A) remanded the matter back to the file of the Ld. AO for verification. We do not find any infirmity in the order of the ld. CIT (A) on this issue and accordingly we hereby direct the Ld. AO to examine the issue afresh providing proper opportunity to the assessee of being heard.
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2020 (2) TMI 1225
Royalty receipt - production work undertaken is a live coverage of event - Whether production work undertaken by the appellant qualify as Royalty under the provisions of Section 9(i)(vi) of the Act as well as Article 13 of the DTAA - HELD THAT:- A plain reading of the order passed by the Dispute Resolution Panel shows that the issue in appeal is squarely covered by a decision of the coordinate bench, in assessee s own case for the assessment year 2010-11 [ 2019 (2) TMI 1803 - BOMBAY HIGH COURT] in favour of the assessee. The only reason, on account of which the DRP has declined relief to the assessee, is to keep the matter alive for the SLP, if any, before the Hon ble Supreme Court. We, therefore, uphold the plea of the assessee and hold that the receipts in question cannot be treated as royalty . The assessee succeeds on the issue. Fees for Technical Services - There is a difference between the technology involved in the production of live coverage feed of cricket matches and the technology required to broadcast the same in the required quality. Hence, in order to ensure and maintain quality of live coverage feed, it becomes necessary on the part of the assessee to specify or oversee the technology available with the broadcasters so that the same does not compromise on the quality and compatibility. The specification of the technical requirements does not mean that the assessee has supplied the technology involved in the production of live coverage feed to the broad casters. If that be the case, the broadcasters should be in a position to use the technology in order to produce the live feed on their own. We notice that the revenue has not established that the broadcasters (who are acting on behalf of the BCCI) or the BCCI itself has acquired the technical expertise from the assessee which would enable them to produce the live coverage feeds on their own after the conclusion of IPL 2008 and IPL 2009 cricket matches. In that case the essential condition of make available clause fails and hence the amount received by the assessee cannot be considered as Fee for technical services in terms of Article 13(4)(c) of the DTAA entered between India and UK. DRP observation that the live coverage of cricket matches involve instant and continuous production and broadcasting of live matches. The existing program would keep merging with the new work. Further, the broadcasters are able to split the program content in order to insert advertisements not bring the payment under the category of Fee for technical services . It only shows the technical expertise of the assessee to produce a flexible program content to give enhanced quality of viewing the live matches. - Decided in favour of assessee
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2020 (2) TMI 1224
Addition u/s 68 - addition on account of share capital - No query to the directors of the investor companies - HELD THAT:- When the redeemable preferential shares have been redeemed to the investor companies in subsequent years which is much prior to the search, therefore, these investments are genuine. We further find from the various pages of the paper book that in response to the notice issued u/s 133(6) to the investor companies, the directors of the respective investor companies appeared before the AO whose statements were recorded u/s 131 and they have confirmed to have invested in the shares of the assessee company. Not a single question was put to any of the directors of these investor companies as to why they have invested crores of rupees in a non-listed company without any return. We, therefore, find merit in the argument of assessee that without discharging the onus cast on the AO by not putting a single query to the directors of the investor companies who appeared before him in response to notice u/s 133(6) and whose statements were recorded u/s 131 on oath, the AO cannot make an allegation in the assessment order as to why they have invested in such non-descript company. So far as the allegation of the AO that the bank account show back to back entries is concerned, we find merit in the argument of the ld. Counsel that the investor companies have withdrawn money from companies where funds were invested earlier and they invested money in the assessee company in the shape of preference shares and, therefore, this prudent financial planning should not be viewed adversely and, rather, it supports the case of the assessee that there was source of funds invested by the investor company in the shares of the assessee company. We further find the various inferences/statements/materials which were the basis for the addition by the AO were never confronted to the assessee before being used by the AO against the assessee. From the various details furnished by the assessee, we find the assessee, in the instant case, has discharged the onus cast on it by producing the directors of the investor companies whose statements were recorded and who have admitted to have invested in the assessee company. The directors have explained the source of such investment by producing relevant details such as bank statements, copy of the income-tax returns, audited accounts of the investor companies, etc. to substantiate the identity and credit worthiness of the loan creditor and genuineness of the loan transaction. Further, the amounts have subsequently been refunded to the investor companies during F.Y. 2014-15 which is much prior to the date of search. We find, under somewhat identical circumstances, the Kolkata Bench of the Tribunal in the case of M/s Baba Bhootnath Trade Commerce Ltd. [ 2019 (4) TMI 1297 - ITAT KOLKATA] has deleted the addition made by the AO In the instant case, when the assessee has substantiated the three ingredients of section 68 of the IT Act and moreover, such amount has been refunded to the investor companies in subsequent years which is much prior to the date of search. We are of the considered opinion that the addition made by the AO and sustained by the CIT(A) is not justified. Accordingly, we direct the AO to delete the addition made by him u/s 68 of the Act for both the years. - Decided in favour of assessee.
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2020 (2) TMI 1223
Nature of expenditure - claim of guarantee fees paid to Government of Gujarat - revenue or capital - HELD THAT:- As decided in own case [ 2015 (6) TMI 1096 - ITAT AHMEDABAD] the assessee has certified that no new project was started or commissioned during the year for which above guarantee was paid, and the guarantee fees was in respect of loans for acquisition of capital assets, which were already put-to-use prior to 1.4.2007. The guarantee fees is directed to be allowed as revenue expenditure, subject to verification by the AO of the certificate filed during the appellate proceedings i.e. there was no capital work-in-progress in respect of loans on which guarantee fees was paid. Disallowance of claim of cost of raising finance for specialized job as revenue expenditure - expenditure incurred for securing the use of money for a certain period was revenue expenditure. In the instant case, the assessee has secured the loan by creating a charge (hypothecation of its assets). Hence the ratio of the above mentioned two cases would squarely apply. Accordingly, it is held that the AO was not justified in making the disallowance - Decided against revenue.
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2020 (2) TMI 1222
TP Adjustment - Selection of tested party - comparable selection - HELD THAT:- TPO has also stated that subsidiaries act primarily as marketing arm of the assessee and perform administrative services. It is the assessee which is entrusted with the task of performing the non-administrative, core and essential services. Therefore, the ld TPO has himself accepted that assessee is more complex entity and foreign AEs are least complex entity. Considering the factual position narrated above, it is abundantly clear that foreign AEs are least complex entity therefore foreign AEs should be treated as tested parties. That being so, we decline to interfere with the order of Id. C.I T.(A) in treating foreign AEs as tested party. His order on this issue is, therefore, upheld and the grounds of appeal of the Revenue are dismissed. Selection of MAM - CIT(A) justification in accepting the Cost Plus Method (CPM) as the most appropriate method for establishing arm s length price in the services rendered by BAT, Pyxis and SNPL? - When the assessee has chosen a MAM and substantiated the choice in its transfer pricing study report, in my considered view of the matter it is for the ld. TPO to record and substantiate the reasons as to why the assessee s MAM is incorrect and why some other TP method needs to be the MAM; that said in the instant case, see no determinative substance in any of the ld. TPO s arguments for rejection of assessee s internal CPM and adoption of external TNMM. Based on the above reasoning, I hold that CPM as adopted by the assessee, be adopted as the MAM for the export of software services by the assessee. Accepting segmented accounts for AE for establishing arm s length price - We note the assessee explained before ld TPO in thread bare detail of functional analysis of the transactions and the Ld. TPO has failed to give due cognizance to the essence of the respective transaction. All the transactions are independent in terms of activities, purpose and legally through binding agreement. The cost of rendering/ receipt of services are also captured separately in the accounting system. In support of the same, the assessee has provided the segmental data of I2A and I2B for transactions with the assessee, the margin of which was benchmarked from arm's length perspective.We have gone through the findings of ld CIT(A) and do not find any infirmity. That being so, we decline to interfere with the order of Id. C.I T.(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue are dismissed. Nature of expenses - software expenses - revenue or capital expenditure - HELD THAT:- Expenditure incurred on the purchase of the application softwares used exclusively for the purpose of the business of the assessee company amounting to ₹ 55,16,940/- has been charged as revenue expenditure and debited to the Profit and loss account. These application softwares have not resulted in any enduring benefit to the company. Hence the expenditure is not classified as capital expenditure. These were approximately treated as revenue expenditures and were claimed accordingly for the purpose of Income Tax too. These application software, have had limited useful life and are used as tools of business like any other component or consumable item used for the purpose of earning revenue. The assessee company has incurred these application software expenses to fine tune its business operations thereby, enabling the running of its business more effectively, efficiently and profitably. We note that while disallowing the expenditure incurred on purchase of application softwares the Assessing Officer ignored the fact that Application softwares are used by the assessee for the efficient conduct of its business and do not extend any enduring benefit to the assessee company. After doing critical analysis, the ld CIT(A) noticed that software expenses is enduring nature and therefore classified them as capital assets - Decided against revenue Education cess should be allowed as an expense - AO is directed to allow the claim of education cess in computing total income of the assessee company. These grounds raised by the assessee are allowed
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2020 (2) TMI 1221
Penalty u/s. 271D/271E - contravention of provisions of section 269SS/269T - Penalty barred by limitation provided in clause (c) of section 275(1) - assessee recorded journal entries in its books of accounts accepting and repaying loans/deposits otherwise than account payee cheque or draft more than ₹.20,000/- from various group concerns of the assessee - whether there is a reasonable cause within the meaning of the provisions of section 273B of the Act on the loans/deposits taken and repaid through journal entries by the assessee within its group concerns? - HELD THAT:- We hold that there is a reasonable cause within the meaning of the provisions of section 273B of the Act in passing the journal entries for the loans/deposits taken and repaid by the assessee, as all these entries were made prior to 12.06.2012 and the ratio of the decision of the Hon'ble Bombay High Court in the case of CIT v. Ajinath Hitech Builders Private Ltd and Others [ 2018 (2) TMI 603 - BOMBAY HIGH COURT] is squarely applicable. Thus, we do not see any infirmity in the order passed by the Ld.CIT(A) in deleting the penalty. In so far as the request of the Ld. Senior Standing counsel to refer the matter to the Special Bench is concerned, this Bench is of the view that, since the issue in all these appeals is decided by the Hon'ble Jurisdictional High Court and SLPs were also dismissed by the Hon'ble Supreme Court no purpose would be served even if the issue is referred for Special Bench, as we are bound by the decision of the Hon'ble Jurisdictional High Court particularly when the issue was decided in assessee s own case by the Hon'ble Jurisdictional High Court. Thus, the request made by the Ld. Senior standing counsel for referring the matter to the Special Bench has no merit and accordingly rejected. Whether the order u/s. 271D/271E of the Act was illegal and bad in law as it was passed beyond the period of limitation provided in clause(c) of section 275(1)? - We observed that the tribunal in assessee s own case and group cases after considering various decisions on the issue held that the discussion by the Assessing Officer in the Assessment Order and making referral to the Addl. CIT for imposition of penalty constitutes initiation for action for imposition of the penalty and that is the date which should be reckoned for the purpose of limitation as specified in clause(c) of section 275(1) of the Act. Assessing Officer in the course of the assessment proceedings made reference in the Assessment Order to the loans accepted and repaid other than by way of Account Payee Cheque/Drafts. We also observed that the assessee was asked to explain why the loans were accepted other than by Account Payee Cheque and in response to the query raised by the Assessing Officer in the course of assessment assessee submitted its reply. The Assessing Officer records a finding that the contentions of the assessee are not accepted as it is not falling under any exemption categories where loan/deposit can be accepted other than by Account Payee Cheque/draft. Therefore, the Assessing Officer concluded that the assessee by not accepting the loan/deposit by Account Payee Cheque or bank drafts violated the provisions of section 269SS/269T of the Act and accordingly reference for initiation of penalty proceedings u/s. 271D/271E of the Act was made to Addl. CIT, Circle-6, Mumbai in the Assessment Order. After completion of assessments the Assessing Officer by letters dated 11.12.2012 and 26.06.2013 made a reference to the Addl. CIT for initiation of penalty proceedings. Therefore we hold that, as the Assessing Officer in the course of the assessment proceedings called for explanation of the assessee in respect of loans accepted and repaid otherwise than by way of Account payee cheque/drafts, considered the reply of the Assessee and rejected the reply by the Assessing Officer holding that the assessee has violated the provisions of section 269SS/269T and also made a reference to the Addl. CIT for initiation of penalty proceedings in the assessment order, these preliminary acts constitute action for imposition of the penalty as contemplated in the provisions of section clause (c) of section 275(1) of the Act. Thus, the penalty orders passed u/s. 271D/271E of the Act by the Addl. CIT beyond a period of six months from the initiation of penalty proceedings from the date of Assessment Order and the date of reference mad to Addl. CIT in these cases, are barred by limitation and accordingly the said penalty orders are quashed. - Decided in favour of assessee
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2020 (2) TMI 1220
Addition of reversal of excise duty u/s 43B - HELD THAT:- The amount of the provision for the excise duty reversed in the year under consideration has already been suffered to tax in the immediate preceding assessment year. The assessee has been following this practice consistently and the same was allowed by the Ld. CIT (A) in the immediate preceding assessment year. This fact can be verified from the order of the Ld. CIT-A for the assessment year 2009-10 which is placed on page no. 131 of the paper book. In view of the above, we hold that the assessee is entitled for the deduction of the impugned excise duty reversed in the year under consideration. Accordingly we set aside the finding of the Ld. CIT-A and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed.
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2020 (2) TMI 1219
Payment of royalty - High Court vide impugned judgment answered the question formulated against the assessee relying on the decision in Commissioner of Income Tax and Anr. Vs. Samsung Electronics Co. Ltd. [ 2009 (9) TMI 526 - KARNATAKA HIGH COURT] - HELD THAT:- It is not in dispute that the said decision has been considered in the subsequent decision in G.E. India Technology Centre Pvt. Ltd. Vs. Commissioner of Income Tax and Anr. . [ 2010 (9) TMI 7 - SUPREME COURT] and the court held that the question of payment of royalty ought to be determined by the High Court on merits and for that reason, it relegated the parties before the High Court. The same reasons would apply to the present case, as the High Court has not answered the question of payment of royalty on merits. Accordingly, we set aside the impugned judgment and order and relegate the parties before the High Court by restoring the concerned appeal to its original number, to be decided expeditiously on its own merits and in accordance with law.
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2020 (2) TMI 1218
Assessment u/s 153C - petitioner has submitted no documents or material belonging to the petitioner were found, despite which, the Assessing Officer wishes to assess the petitioner on the basis of the material collected during such search relying on the amendment in section 153C of the Act with effect from 1.6.2015 - HELD THAT:- Delay condoned. Issue notice.
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2020 (2) TMI 1217
Penalty levied u/s 271(1)(c) - return of income filed in response to the notice under section 153C - assessee admitted the additional income as received on sale of residential property in Jaipur and the cash component was paid towards purchase of five residential properties in Bangalore - HELD THAT:- Explanation 5A is not applicable in the present case. As the case of assessee was not covered by search action, rather a survey action was carried out. We have noted that though the assessee has not challenged the issuance of notice under section 153C. On our specific question to the assessee since the return of income filed in response to the notice under section 153C was accepted without any variance and due to the ignorance the assessee has not challenged the validity of notice under section 153C. In our considered view, the assessee is not precluded from raising objection against the validity of notice under section 153C, if the same was not valid and warranted on the facts of the case. Present proceeding are related to the validity of penalty levied under section 271(1)(c). As noted above, the additional income offered by assessee in his return of income has been accepted by Assessing Officer. The fact of concealment of income and furnishing inaccurate particulars of income can be established with reference to the income declared in the return of income. In the present case, the income declared in the return of income has been accepted; therefore, it cannot be the case of concealment or furnishing inaccurate particulars of income. In our view there is no occasion for the assessee to evade the tax as the assessee offered the additional income declared during the survey action while filing the return in response to the notice under section 153C. When the income declared in the return of income was accepted without any variance. The assessee has neither concealed the income nor furnished any inaccurate particulars of income while filing return of income - Appeal of the assessee is allowed.
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2020 (2) TMI 1216
Disallowance u/s 14A - availability of interest free funds as more than the investments - HELD THAT:- We find that Hon ble Bombay High Court in the case of HDFC Vs. DCIT [ 2016 (3) TMI 755 - BOMBAY HIGH COURT] has held that when interest free funds available with the assessee are in excess of investments and then the investments are presumed to be out of interest free funds. Before us, Revenue has not placed any contrary binding decision in its support. In view of all these facts and following the decision of Hon ble Bombay High Court in the case of HDFC Vs. DCIT (supra), we are of the view that no disallowance of interest under Rule 8D(2)(ii) is called for. Thus, the ground of the assessee is allowed. Deemed dividend u/s 2(22)(e) - HELD THAT:- Working of the deemed dividend u/s 2(22)(e) of the Act is to be worked out on the basis of the opening balance of the accumulated reserves of the lender company. Further, it is assessee s contention that the higher amount of deemed dividend has been offered by the assessee due to mis-interpretation of the legal position. The aforesaid contention of the assessee has not been controverted by the Revenue. It is a settled proposition of law that no tax can be levied or recovered without authority of law for which reference can be made to the decision of Hon ble Apex Court in the case of CIT Vs. Shelly Products [ 2003 (5) TMI 4 - SUPREME COURT] and Vijay Gupta Vs. CIT and another [ 2016 (3) TMI 977 - DELHI HIGH COURT] wherein it was observed that if an assessee by mistake or inadvertence or on account of ignorance included in his income any amount which is exempted from payment of income tax or is not income within the contemplation of law, the assessee may bring the same to the notice of the assessing authority which if satisfied may grant the assessee necessary relief and refund the tax paid in excess, if any. Considering the totality of the facts and in view of the aforesaid decisions, we are of the view that the deemed dividend u/s 2(22)(e) of the Act be worked out on the basis of the opening balance of KIPL as on 01.04.2012. We thus direct accordingly. Thus, the grounds of the assessee are allowed.
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2020 (2) TMI 1215
Unexplained cash credit being share application money u/s. 68 - case of the assessee was taken up for scrutiny through CASS - HELD THAT:- In this case on hand, the assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants, thereafter the onus shifted to AO to disprove the documents furnished by assessee cannot be brushed aside by the AO to draw adverse view cannot be countenanced. In the absence of any investigation, much less gathering of evidence by the AO, we hold that an addition cannot be sustained merely based on inferences drawn by circumstance. Applying the propositions laid down in these case laws to the facts of this case, we are inclined to allow the appeal of the assessee. Section 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source shall be assessed as its undisclosed income. In the facts of the present case, both the nature source of the share application received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO's record. Accordingly all the three conditions as required u/s. 68 of the Act i.e. the identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO is based on conjectures and surmises cannot be justified. In the facts and circumstances of the case as discussed above, no addition was warranted under Section 68 - Decided in favour of assessee.
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Customs
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2020 (2) TMI 1214
Application to the High Court, any question of law arising from order of the Tribunal - HELD THAT:- There is nothing in the text of Section 130A which implies that the High Court is mandatorily required to call for a statement from the Tribunal in every case, where a reference is made. This is so because of the language of Sub-Section 4 which opens with an if . A reading of Section 130A (1) (4) would make it clear that if the Commissioner of Customs or other party within the prescribed period of limitation applies in the prescribed form to the High Court to direct the Appellate Tribunal to refer to the High Court any question of law arising from such order of the Tribunal, the High Court may do so. What is clear on a reading of sub-section (4) is that the High Court has a discretion on the facts of each case either to do so or not to do so. This becomes absolutely plain from the first word in sub-section (4), namely, if - There is nothing in the language of Section 130A which first mandatorily obliges the High Court to call for a statement from the Tribunal before deciding any such application. Appeal disposed off.
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2020 (2) TMI 1213
Levy of Anti-dumping duty on imports of Naphthalene - Validity of Notification No.14/35/2015-DGAD dated 01.06.2016 - allegation that the notification is without authority of law, contrary to the Act and the Rules and based on assumptions and presumptions, without any basis and without examination of preconditions of initiation of a valid investigation - imposition of ADD in respect of imports of Crude and Refined Naphthalene. The petitioners have essentially challenged the Notification dated 01.06.2016, whereunder the respondent no.2 at the behest of respondent no.3 initiated investigation in respect of product called Naphthalene in both its forms namely Crude and Refined Naphthalene being imported from the countries mentioned in the Notification. The respondent no.3 did not fulfill the requisite criterion for being characterized the domestic industries so as to be eligible to seek initiation of investigation in respect of product in question. HELD THAT:- Two important grounds urged on behalf of the petitioners are that the respondent no.3 does not classified to be a domestic industry on account of various reasons especially with the fact that they have alleged to have themselves being importer of the goods in question. This has sought to be countered by the respondent no.3 by indicating that the respondent no.3 is not a regular importer so as to oust the same from the purview of being domestic industry and the counting etc. of the percentage for classifying to be a domestic industry being subject matter of investigation, initiation itself cannot be subject matter of challenge under Article 226 of the Constitution of India. The respondent nos.1 and 2 have also contended that the initiation is not subject matter of any scrutiny as the same is based upon the satisfaction of the authority and there is availability of appeal under Section 9-C of the Customs Tariff Act, 1975. This Court is of the view that the domestic industry for classifying to be a domestic industry has to fulfill the requirement of Rule 2(b) of the Rules and has also to satisfy requirement of Rule 5(3) for seeking initiation. It cannot be disputed that the two supporters who have been named as supporters by the respondent no.3 had subsequently withdrawn their support, but a fine question which is arising for consideration is whether the mere initiation of the investigation can be said to be in any manner prejudicial to the petitioner. If the same is not prejudicial to the petitioner, then the same cannot be interfered with under Article 226 of the Constitution of India. The Court is of the view that the contention qua availability of the appeal for ousting the jurisdiction raised on behalf of the respondents may not be available in a given case and especially in this case also as the provision of 9-C of the Act if read closely would indicate that the same is available against the determination only and not against the investigation. But the Court need not loose sight of the fact that mere initiation can be said to be a prejudicial in a given facts of case where the petitioner also participated initially and put-up its elaborate submissions and when the respondents have clearly contended before this Court with due emphasis that the petitioner's participation has to be viewed appropriately, as the petitioner did put up his submission, the same also is required to be considered for its appropriate light and prospective. The Court is of the view that the petition is filed when challenging the only initiation and when the authority has not concluded, as could be seen from the notification impugned before this Court, the Court would be slow in interfering therewith, as it would rather require embarking upon further probing which may not be appropriate at this stage under the provisions of Article 226 of the Constitution of India - The Court is also of the view that the Court's power under Article 226 are not curtail on account of the existence of remedy of notice, even if one exists. However, the fine principles of law laid down time and again by the Apex Court and reiterated in many judgments needs to be borne in mind while examining the challenge to merely initiation. The Court is of the view that had there been a jurisdictional deficiency going into the root of the initiation, perhaps the matter would have require to be examined differently, but in the instant case the perusal of notification impugned when clearly indicate that the authority has considered the facts which were required to be taken into consideration, the sub-abrasion in the form of withdrawal of submission of those supporters in itself would not be an omission warranting interference by the Court under Article 226 of the Constitution of India. When the notification impugned is not in any manner causing any prejudice to the petitioners, as the petitioners has not pleaded any special prejudice, the Court need not interfere therewith. It goes without saying that the detail observations made hereinabove are only for the purpose of examining the challenge to the notification and the same shall have no bearing upon investigation, if any. Petition dismissed - decided against petitioner.
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2020 (2) TMI 1212
Refund of Additional Duty of Customs paid - respondent had claimed refund of this Additional Duty in view of the notification dated 14 September, 2007 by notification - time limitation for filing refund claim - requirement of filing claim before the expiry of one year from the date of payment of Additional Duty - HELD THAT:- The exemption granted under notification dated 14 September, 2007 requires fulfillment of certain conditions. The importer has to pay on the sale of the goods appropriate sales tax or value added tax and has to provide copies of documents with the refund claim evidencing payment of said Additional Duty, invoices of sale of the imported goods in respect of which refund of the said Additional Duty is claimed and documents evidencing payment of appropriate sales tax by the importer on the sale of such imported goods. These conditions were examined by the Delhi High Court in Sony India [] while arriving at a conclusion that the limitation provided in the notification dated 1 August, 2018 that the refund has to be made within a period of one year from the date of payment of Additional Duty, has to be read down. The decision of the Delhi High Court in Sony India was binding on the Tribunal but it has been distinguished for a reason that is not borne out from a plain reading of the conditions set out in the notification. Learned Authorized Representative of the Department has also submitted that the judgment of the Delhi High Court in Sony India would not be applicable for the reason that the refund in that case was filed at a time when the amended notification dated 1 August, 2008 had not been issued - This submission cannot be accepted for the simple reason that the Delhi High Court has not allowed the refund claims for the said reason. It has allowed the refund claims as the limitation of one year provided for in the amended notification dated 1 August, 2008 has to be read down in as much as the right to claim refund could accrue to an importer only when the subsequent sale is completed and given the vagaries of the market, the importer has limited control over when the sale would be complete. It is for this reason that the Delhi High Court held that to allow the limitation period to start from the date of payment of duty as prescribed under the amended notification, would allow commencement of a limitation period for refund even before the right to claim refund actually accrued. The Delhi High Court, therefore, held that neither section 27 of the Customs Act nor the amended notification dated 1 August, 2008 can impose a limitation period on the right of an importer to claim refund of Additional Duty and in any case such limitation can only be introduced by legislation. In view of the decision of the Delhi High Court in Sony India, the Commissioner (Appeals) was justified in allowing the claim for refund of Additional Duty, even if the claim was filed beyond a period of one year from the date of payment of Additional Duty. Appeal dismissed - decided against appellant.
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2020 (2) TMI 1211
Import of prohibited/banned goods or not - Beauty Make-up preparations - It appeared to Revenue that ICD, Dadri was not the port authorized for import of the said goods - absolute confiscation - penalty - HELD THAT:- Revenue has no where established that the said goods were banned for import into India. It is not examined whether the subject goods were authorized to be cleared at ICD Dadri because the appellant has opted to transship the goods at their cost to ICD Tughlakabad or ICD Patparganj. It is noted that, Customs Act has provided for trans-shipment of imported goods to the ports where import of such goods were allowed. Thus, the goods imported by appellants were not banned goods and therefore, the confiscation is set aside. Once the confiscation is set aside, question of redemption fine and penalty does not arise. Appeal allowed - decided in favor of appellant.
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2020 (2) TMI 1210
Smuggling - betel Nuts - Confiscation on the ground that there is nothing on record to show that the same were not purchased from the local market and were of foreign origin - non-notified items or not - Section 123 of the Customs Act - Onus to prove smuggled nature of goods - validity of report given by Arecanut Research Development Foundation, Mangalore, where it was held that the goods were of Burma origin cannot be relied upon inasmuch as under an RTI quarry, the Director of the said Arecanut Research Development Foundation, Mangalore has informed that it is not possible to determine the place of origin of betel nuts through a test in the lab. HELD THAT:- Reliance can be placed in the cases of Commissioner of Customs (Prev.), Lucknow V/s M/s Bramhaputra Cargo Carriers Private Ltd. [2019 (6) TMI 1442 - CESTAT ALLAHABAD] , Commissioner of Customs (Prev.), Lucknow V/s Harship Garg, Prop. Harshit Enterprises [2019 (9) TMI 129 - CESTAT ALLAHABAD] where identical report of M/s Arecanut Research Development Foundation, Mangalore was considered and it was held as not applicable. It was further held that in the absence of any evidence of smuggling of goods their confiscation cannot be appreciated. There are no merits in the Revenue's case - appeal dismissed - decided against Revenue.
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Corporate Laws
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2020 (2) TMI 1209
Oppression and Mismanagement - transfer of shares - prosecuting or recommending for prosecution white collar crimes/frauds - investigation under Section 235 to 237 of the Companies Act carried out - HELD THAT:- It is not in dispute that the Hon ble High Court of Andhra Pradesh vide its order dated 07.07.2011(Page 155 of the appeal) directed the Central Government to investigate into the affairs of the company. The investigation was done and the report stated that right from the incorporation the affairs of the company were not running as enshrined in the provisions of the Companies Act but was running like a fiefdom of the promoter directors. No record is maintained, including the books of accounts, to comply with the regulatory and legal requirements and most the of transactions were being carried out in cash and the Inspectors were helpless in verifying such transactions in absence of any cash book, accounting legers etc. - as per Section 223 Companies Act, 2013 the report submitted by any inspector appointed by the Central Government, shall be admissible in any legal proceeding as evidence in relation to any matter contained in the report. Admittedly since inception, Respondent No.1 has been the Managing Director of the Company and no return has been filed till 2001. No records were maintained for AGM, Board Meeting, financial statement etc and lot of transactions has been taking place in cash only. Therefore, he cannot escape his responsibility for not running the company as per requirements of law - The annual returns filed by the appellant subsequently after they had been in control has been rejected in the impugned order. The consequence is that there is no annual return/financial statements since inception. This compliance needs to be ensured within three months from the date of this order. Inspite of present orders, ROC will be free to take any steps punitive or otherwise under the Companies Act, 2013 for non-filing of statutory returns/documents against the company and directors. Appeal dismissed - decided against appellant.
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Service Tax
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2020 (2) TMI 1208
Maintainability of appeal - monetary amount involved in the appeal - HELD THAT:- In the present case, there is no challenge to the constitutional validity of any particular Provision, Act or Rule nor there is any challenge to the legality, validity of any Notification/Instruction/Order or Circular. In such circumstances, the Instruction dated 17th August 2011 referred to in Paragraph-4 of the Instruction dated 22nd August 2019 will have no application. In view of the monetary limit prescribed by the Ministry of Finance, Department of Revenue, this appeal is disposed of accordingly.
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2020 (2) TMI 1207
Taxability - sale of canned software produced by third parties and their own software deployed in the banking industry - taxable service or not - information technology service or not - HELD THAT:- It is an admitted fact that the appellant is in the business of perpetual licensing and software licence, sale of third-party software, customization of software as per requirement of customers and implementation and maintenance of software. The taxability of information technology software service has had its own share of teething problems with various clarifications having been issued pursuant to representation from the trade. The software that is sold on physical media comprises the inherent contents therein along with right to use and the incorporation of the above activity in the enumeration of taxable service appears to have been intended to levy tax on the intellectual property right component as is evident from the two notifications, issued under Central Excise Act, 1944 and Customs Act, 1962, to provide for abatement to the extent of taxability under Finance Act, 1994 on certain portion of the consideration - It is the claim of the appellant that they are not in the business of customizing software and that their developed software is directly utilized by the banking industry which may or may not make adjustments for their own use. There is no doubt that the appellant is in the business of developing software and that such software is used by the banking industry. There are no evidence of such software being designed according to the requirements of, or standards prescribed by, customers. There is no doubt that the licence, provided along with the media containing the software, represents the right to use; however, this is a general industry wide practice that is not alien to canned software . In the absence of facts that establish otherwise or of any evidence that such was the transaction between the appellant and the customers, it was not appropriate for the adjudicating authority to conclude that sale of banking software to a bank is commercial exploitation merely because the bank deploys the software in its normal business activities. The specific connotation of right to use and the intellectual property rights enshrined within it mandates commercial exploitation to be ascertained in an entirely different context, viz., that of reproduction or distribution. Appeal allowed - decided in favor of appellant.
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2020 (2) TMI 1205
Levy of service tax - rent received for allowing the harvesting contractors to use the Appellant s bullock carts with tyres without any bullocks or driver for transporting the sugarcane to the sugar factories - period involved is 21.1.2015 to 31.3.2016 i.e. post negative list - HELD THAT:- Undoubtedly the Appellants have supplied the Tyre Bullock Carts without bullocks or driver to the recipient of service i.e. farmers. The farmers have to engage their own bullocks and drivers for utilising the bullock carts. If the bullocks are of the farms and the drivers are also appointed by them then the right of possession and effective control cannot be said to be rest with the Appellants. Merely because in the agreement some route has been suggested by the Appellants which the farmers have to follow or that if during the temporary stoppage of work in the sugar factory, the employee or the labourer of the contractor/farmer are not permitted to engage in any other work or are not paid remuneration for that day, does not make them under the effective control of the Appellants. The remuneration to them, in any case, has to be paid by their contractor/farmer only and they cannot claim it from the appellants - Therefore from the facts on record it is clear that the appellant has delivered the effective possession and control of the Tyre Bullock carts to the farmers/contractors. Tyre Bullock Carts without bullocks and driver, provided by the appellant on rent for the purposes relating to agriculture/agricultural produce without having any right of possession or effective control of the Appellants over them, falls under negative list as discussed above and is not liable to Service Tax under the category of Supply of Tangible Goods Service. Appeal allowed - decided in favor of appellant.
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2020 (2) TMI 1204
Utilization of CENVAT Credit - reverse charge mechanism - Whether the Appellant i.e. the service recipient could utilize Cenvat credit of Central Excise duty paid on inputs, for payment of service tax on services viz. Management, Maintenance or Repair, Copyright and Advertising, received by them from abroad, under reverse charge mechanism? HELD THAT:- It is settled that once the assessee in terms of Rule 2(q) r/w Rule 2(1)(d)(iv) ibid, is liable to pay service tax then he also becomes a provider of taxable service under Rule 2(r) and consequently becomes a provider of output service under Rule 2(p) ibid and becomes entitle to utilize the Cenvat credit for payment of service tax on reverse charge basis. Rule 5 of the Taxation of Service (Provided from Outside India and Received in India) Rules, 2006 prohibits only for availing of Cenvat credit and not for utilizing the Cenvat credit to discharge its service tax obligation on reverse charge basis. The period involved in this Appeal is from April, 2008 to March,2011 whereas the prohibition as per the notification dated 20.6.2012 regarding the utilization of the Cenvat credit by way of amendment in Rule 3(4) ibid, is effected from 1.7.2012 only, therefore during the period in issue the Appellants i.e. the service recipient were very well within their rights to discharge the service tax liability on reverse charge basis by utilizing the Cenvat Credit. The issues of limitation or penalty, need not be looked into, since on merits appeal is allowed. Appeal allowed - decided in favor of appellant.
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2020 (2) TMI 1203
Tour Operator Service - taxability of the said service with effective date - demand of duty along with applicable interest and equivalent penalty - HELD THAT:- It is very much clear that appellant had even paid its other service tax liability for extending services to one NSICT. Both the show cause notice as well as adjudication orders clearly indicate that appellant had not collected the required service tax from the customers. Therefore, its submission that it had not availed the benefits of cum duty u/s 67 of FA 1994 to which it was entitled has its force. This coupled with discharge of service tax liability against services extended to other service receivers for which no duty demand was made by the respondent department, it can be affirmatively stated that there was no intention traceable, in the entire proceeding concerning suppression of fact for the purpose of non-discharge of service tax. Interest - penalty - extended period of limitation - HELD THAT:- The appellant disputes the bifurcation made by the Commissioner (Appeals) on payment of ₹ 1,24,867/- by showing payment towards interest charged at ₹ 9,541/- in para 5 of his order, which appellant states to have paid under the interest code and furnished documentary proof too, besides the fact that with recalculation on the basis of cum duty benefit ₹ 8,88,790/- was stated to be refundable to the appellant, which it had never sought for. Be that as it may a bare reading of Section 73 78 of FA would clearly indicate that interest component is not structured in service tax liability to invoke section 78 and thereby justify extended period. Appeal allowed - decided in favor of appellant.
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2020 (2) TMI 1202
Refund of service tax - service tax was paid on exempt services which was not required to be paid - reverse charge mechanism - applicability of time limitation u/s 11B of the Central Excise Act, 1944 - HELD THAT:- The appellant was not liable to pay service tax on transportation of rice as same was exempt from payment of service tax as per Notification No. 25/2012-ST dated 20 June 2012 in terms of Section 66 (4) of Finance Act, 1994. Reliance placed in the case of M/S HITACHI METALS (INDIA) PVT. LTD. VERSUS CCE ST- GURGAON-I, GURGAON [ 2019 (6) TMI 1320 - CESTAT CHANDIGARH] where on identical issue, it was held that the time-limit prescribed under Section 11B of the Central Excise Act, 1944 for filing the refund claim is not applicable to the facts of this case. The time limit prescribed under Section 11B of the Central Excise Act, 1944 is not applicable to the facts of this case and the refund claim is filed in time - appeal allowed - decided in favor of appellant.
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2020 (2) TMI 1201
Business Auxiliary Service - selling space on ships - amounts received for acting as an agent of the principal as they have been assisting the principal in their business - Penalties - HELD THAT:- A plain reading of the agreement which the appellant had entered into with the shipping line shows that this is not a case of agreement on a principal to principal basis but the appellant is appointed as an agent by the shipping lines for rendering the service of selling their space on their ships. This, clearly falls under the category of Business Auxillary Service - the appellant is liable to pay service tax on Business Auxiliary Services. Penalties - HELD THAT:- The penalties imposed by the lower authority have been set aside by the First Appellate Authority and the Revenue is not in appeal against such setting aside of the penalties. Appeal dismissed - decided against assessee.
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Central Excise
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2020 (2) TMI 1200
Process amounting to manufacture or not - repacking of various excisable goods - goods were received in bulk and they were packed in individual bottles with hologram and barcodes - value addition taking place or not - HELD THAT:- Facts of the case makes it very clear that the assessee / respondent before this Court were engaged in trading and telemarketing of various goods and also in selling medicines manufactured by M/s. Davo Laboratories and Balchem Laboratories through VPP. They were also giving advertisement on television and other media. The most important aspect of the case is that the assessee/ respondent before this Court received the medicines duly duty paid from the manufacturers in a packed form mentioning therein the retail price. The undisputed facts also reveal that after receiving bottles of medicines in the packets, the assessee has just fixed the hologram and the barcode to avoid duplicity and an outercover was placed to ensure safe transportation. It certainly does not amount to the process of manufacture. It is the process which is being carried out by the Companies like Flipkart, Amazon, etc,. The circular issued by the Board which has been referred by the Appellate Tribunal dated 08/12/2011 is very much applicable in the present case - Keeping in view the circular, there is admittedly no value addition. The goods are sold at the same MRP to the consumer. It is nobody s case that the goods are sold above the MRP to the consumer. The goods received by the vendor are already in a prepacked form and bears necessary declaration including MRP as prescribed under the statutory provisions and they have already been subjected to Excise Duty earlier. In the present case the respondent assessee, neither replaces nor alters the retail packet or the declaration affixed therein and, therefore, the Tribunal was justified in allowing the appeal preferred by the assessee - Decided in favor of assessee.
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2020 (2) TMI 1199
Imposition of penalty u/r 15 of Cenvat Credit Rules, 2004 and Rule 26 of Central Excise Rules, 2002 - CENVAT credit - bogus invoices - case of the department is that the appellant has issued bogus invoice and no goods were sold under those invoices to M/s Kothi Steel Ltd. - HELD THAT:- The penalty under Rule 15 can be imposed only on that person who takes or utilizes the Cenvat credit. If in any case, any manufacturer who is liable to pay duty on final product wrongly avails and utilizes the credit in respect of inputs, he is liable for penalty under Rule 15 - In the present case, the appellant has neither taken the credit, nor utilized the credit, whereas he has only issued a Cenvatable invoice to some other company M/s Kothi Steel Ltd. Therefore, the Rule 15 is not applicable in the present case. Hence, penalty imposed under Rule 15 of Cenvat Credit Rule, 2004 by the lower authorities is illegal and incorrect. Penalty imposed under Rule 26 of Central Excise Rules, 2002 - HELD THAT:- The same issue has been considered by the Hon ble High Court of Punjab Haryana in the case of M/S VEE KAY ENTERPRISES, FARIDABAD VERSUS COMMISSIONER OF CENTRAL EXCISE [ 2011 (3) TMI 133 - PUNJAB AND HARYANA HIGH COURT] which was followed by this Tribunal in the case of COMMISSIONER OF CENTRAL EXCISE AHMEDABAD VERSUS SHRI NAVNEET AGARWAL [ 2011 (8) TMI 250 - CESTAT, AHMEDABAD] wherein it was held that penalty under Rule 26 (2) is imposable on the person who has issued the invoices without supply of goods. The penalty under Rule 26 was rightly imposed on the appellant. Hence, the same is upheld - Penalty u/r 15 set aside - appeal allowed in part.
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2020 (2) TMI 1198
Imposition of penalty u/r 26 of the Central Excise Rules, 2002 - no opportunity was given to cross-examine Riyaz Siddiqui despite the fact that mainly by relying upon his statement only, show cause notice was issued to them - principles of natural justice - HELD THAT:- The learned Commissioner has not recorded any finding that either of the Appellants had the knowledge or had a reason to believe that the goods were liable to be confiscated which is sine qua non for imposing penalty under Rule 26. Rule 26 pre-supposes the existence of knowledge or reason to believe that the goods are liable to be confiscated under the Central Excise Act or the Rules therein. As there is no finding in the impugned order to that effect, hence the imposition of penalty on the Appellants under Rule 26 is illegal and improper. Therefore, the impugned order did not bring out the existence of required ingredients attracting the provisions of the said rule. Penalty on Suhel Roadlines - Suhel Roadlines has been penalized mainly on the basis of the statement of its proprietor Riyaz Siddiqui - HELD THAT:- Due to the non-cooperation of the said Riyaz Siddiqui the proceedings before the lower authority gets delayed. Before the Tribunal also the conduct of the said Riyaz Siddiqui is not appreciable. Although appeal has been filed on behalf of his proprietorship concern Suhel Roalines but nobody appeared to assist at the time of hearing. The plea of cross-examination of Riyaz Siddiqui, which is available to other Appellants and due to which the matter was earlier remanded by the Tribunal on 13.4.2012, is not available to M/s. Suhel Roadlines as the said Riyaz Siddiqui is its proprietor - thus, no case has been made out by Suhel Roadlines- Appellant. Appeal allowed - decided in favor of appellant.
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2020 (2) TMI 1197
CENVAT Credit - common input services for taxable as well as exempt goods - pressmud (a waste) - whether after the amendment to Rule 6(1) of Cenvat Credit Rules, 2004 vide notification dated 1.3.2015, pressmud (a waste) generated during the manufacturing of sugar, falls within the ambit of Rule 6 ibid and any amount is recoverable from the Appellant on clearing the said pressmud for consideration as the Appellant is not maintaining separate accounts? HELD THAT:- Hon ble Supreme Court in the matter of UOI vs. D.S.C.L. Sugar Ltd. [ 2015 (10) TMI 566 - SUPREME COURT ] has laid down that that pressmud is agricultural waste of sugarcane and the waste and residue of agricultural product, during the process of manufacture of goods cannot be said to be result of any process. There is no manufacturing process involved in pressmud s production. Bagasse, pressmud and composed fertilizer is not goods but merely a waste or byproduct therefore Rule 6 of the Cenvat Rules shall have no application in the present case and they are bound to come into existence during the crushing of the sugarcane and are an unavoidable agricultural waste. The amendment dated 1.3.2015 in Rule 6 CCR has wrongly been relied upon by the authorities below in coming to the conclusion that the assessee is liable to reverse the Cenvat Credit availed by them. As per Rule 6(1) ibid read with Explanation-1, non-excisable goods which are manufactured by the manufacturer in his factory will get covered under Rule 6(1) and those goods which were not manufactured, like pressmud in these appeals, will not be covered under Rule 6 despite being non-excisable goods because pressmud is not being manufactured in the factory but it emerged as agricultural waste or residue. It is seen that Rule 6(1) was amended in order to include the inputs used in relation to the manufacture of exempted goods. As such it can be seen that the same relates to the manufacture and it can safely be concluded that there has to be a manufacturing activity for invoking the aforesaid Rule. The Hon ble Supreme Court in the matter of D.S.C.L. Sugar Ltd. has laid down that bagasse being an agricultural waste or residue, there could be no manufacturing activity. If that is so and if pressmud is also not manufactured, the same cannot be held to be excisable, in which case the amendment which has been relied upon by the authorities below as well as by the Revenue, would not apply. In all the decisions of the Tribunal which were cited by the learned counsel, a consistent view has been taken that bagasse/pressmud which emerges as a waste/by-product, falls outside the scope of Rule 6 ibid. Even after amendment to Rule 6 ibid, pressmud which emerges as a waste/ by-product, falls outside the scope of the said Rule - Appeal allowed - decided in favor of appellant.
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2020 (2) TMI 1196
Method of Valuation - Transaction Value u/s 4 or MRP based u/s 4A of CEA - manufacture of Butyl rubber inner tubes - Notification No. 2/2006-CE(NT), dated 01.03.2006 - HELD THAT:- The N/N. 2/2006-CE(NT), dated 01.03.2006 was amended by N/N. 11/2006-CE(NT), dated 29.05.2006, by inserting a new entry at S.No. 97, which reads as parts, components and assemblies of automobiles . It is an admitted fact on record that the appellant is engaged in the manufacture of Butyl rubber inner tubes and such product by itself is separately identifiable and is a distinct Marketable product. It cannot be said that the product manufactured by the appellant is exclusively meant for the automobile industries for use as parts and components and are not capable for use in other purposes - Since the goods manufactured by the appellant are meant for use by other manufacturers also, such manufactured goods cannot be subjected to levy of central excise duty under Section 4A of the Central Excise Act, 1944. Reliance can be placed upon the decision of this Tribunal in the case of J.K. TYRE INDUSTRIES LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, INDORE [ 2018 (2) TMI 611 - CESTAT NEW DELHI] , to state that no differential duty liability can be fastened on to the appellants in terms of Section 4A of Central Excise Act, 1944. Thus, the duty liability cannot be fastened under Section 4A of the Act - appeal allowed - decided in favor of appellant.
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2020 (2) TMI 1195
CENVAT Credit - input services - various insurance policies - Money Insurance, Public Liability Insurance, Product Liability Insurance, Loss of Profit for Unit and Fidelity Guarantee Policy - Group Personal Accident policy - HELD THAT:- The Money Insurance, Public Liability Insurance, Product Liability Insurance, Loss of Profit for Unit and Fidelity Guarantee Policy are availed in or in relation to the manufacturing activity as has been discussed by the various decisions relied by the ld. counsel for the appellant - reliance can be placed in the case of JSW STEEL (SALAV) LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, RAIGAD [ 2017 (2) TMI 318 - CESTAT MUMBAI] and M/S. WHEELS INDIA LTD. VERSUS COMMISSIONER OF GST CENTRAL TAX, CHENNAI NORTH COMMISSIONERATE [ 2019 (7) TMI 150 - CESTAT CHENNAI] - the disallowance of credit in respect of these insurance policies is unjustified and requires to be set aside - credit allowed. Group Personal Accident policy - penalty - HELD THAT:- The appellant has to establish that the personal accident policy is intended only for the employee and that separate premium is not collected for each dependent. Even though the matter was adjourned to this date, directing the appellant to produce copy of the policy or any other evidence to establish that separate premium has not been collected for each dependent, the appellant has failed to do so - Since the appellant has not furnished sufficient evidence, the rejection of credit in respect of Group Personal Accident policy is legal and proper - credit disallowed - taking note of the fact that the issue is interpretational one, the penalty imposed is unwarranted and requires to be set aside. Appeal allowed in part.
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2020 (2) TMI 1194
Valuation - inclusion of cost of advertisement incurred by the dealers in assessable value - Circular No. 643/34/2002-CX dated 1.7.2002 and Circular No. 681/72/2002-CX dated 12.12.2002 - HELD THAT:- The learned Commissioner after analyzing the Letter of Intent/dealership agreement came to the conclusion that it does not contain any enforcing provision by which it could be construed that such advertisement cost is includible in the assessable value of the motor vehicles sold to the dealers much earlier in view of the principles laid down by the PHILIPS INDIA LTD. VERSUS COLLECTOR OF CENTRAL EXCISE, PUNE [ 1997 (2) TMI 120 - SUPREME COURT] . On perusal of the Letter of Intent/agreement placed on record by the respondent it is found that a plain reading of the various clauses of the said agreement does not lead to an inference that the same provides an enforceable right to the respondent in relation to advertisement and sales promotion by the dealers. Further, the Hon'ble Supreme Court in COMMISSIONER OF CENTRAL EXCISE, MYSORE VERSUS M/S TVS MOTORS COMPANY LTD. [ 2015 (12) TMI 874 - SUPREME COURT] while considering the includibility of pre-delivery inspection charges and after sales service charges interpreting the expression any amount that buyer is liable to pay to , by reason of or in connection with the sale mentioned in the definition of transaction value , observed that such charges cannot be includible in the transaction value of the goods. Applying the principles laid down in the aforesaid judgments to the present issue of includibility of the cost of advertisement and sales promotion activity carried out by the dealers, after sale of the motor cars, this Tribunal in FORD INDIA PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, CHENNAI-III [ 2017 (5) TMI 1388 - CESTAT CHENNAI] , reached at the conclusion that the cost of the advertisement incurred by the dealers cannot be added to the transaction value - No contrary judgment has been placed by the Revenue. Appeal dismissed - decided against Revenue.
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2020 (2) TMI 1193
CENVAT Credit - time limitation - credit denied to the appellant on the findings that the same has been availed after a period of six months from the date of issuance of the said invoices - N/N. 21/2014-CE(NT) dated 11.7.2014 - HELD THAT:- The issue is no more res integra, Tribunal in the cases of BHARAT ALUMINIUM COMPANY LIMITED VERSUS JOINT COMMISSIONER OF CENTRAL TAX, GOODS SERVICE TAX [ 2019 (7) TMI 1084 - CESTAT NEW DELHI] , M/S INDIAN POTASH LTD. VERSUS COMMISSIONER OF CENTRAL GST, MEERUT [ 2018 (10) TMI 1367 - CESTAT ALLAHABAD] , and M/S KELTECH ENERGIES LTD VERSUS C.E,S. T-COMMISSIONER OF CENTRAL EXCISE CENTRAL TAX, MANGALORE [ 2019 (11) TMI 8 - CESTAT BANGALORE] has held that the notification in question introducing the bar of limitation is applicable only prospectively and shall have no effect on the invoices issued prior to the said notification. The impugned order of Commissioner (Appeals) is not sustainable - Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2020 (2) TMI 1192
Sale of agricultural and municipal waste conversion device - Exemption under entry 46 of Part B of III schedule of the Tamil Nadu General Sales Tax Act - denial of exemption on the ground that the commodity in question purchased by Assessee only a boiler - HELD THAT:- The Revenue authorities below have unnecessarily taken a narrow and pedantic view of the matter. What was purchased by the Assessee as an exempt item from Trichy dealer was clearly shown to be agricultural and municipal waste conversion device and the detailed description of the goods was also given in the Invoice produced before the authorities below and quoted by us above. Merely because the word 'Boiler' is also used in the said description of goods ignoring the very user of the said commodity as for conversion of Agrowaste like coconut shells etc. to manufacture fuel, it cannot be said that the said commodity loses its character as 'agricultural and municipal waste conversion device'. There is no reason to restrict the said meaning only for those devices which are used for treating the municipal waste like sewage etc. as contended by the learned counsel for the Revenue. The Agrowaste is also a waste which can be converted into fuel and if it is so used, then, it would fall within the ambit and scope of entry 46 of Part B of III schedule of the Act - There is no scope for treating as a simple Boiler, the word adopted by the Revenue authorities for reasons best known to them so as to take it out from the ambit and scope of entry 46. There is no dispute that the assessment of the Trichy dealer who sold the said goods as exempted goods to the Assessee in present case was never questioned on that ground and therefore, there are no justification for authorities below to take a view against the Assessee and deny the exemption to the said Assessee in the present case - petition allowed - decided in favor of petitioner.
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2020 (2) TMI 1191
Principles of Natural Justice - proper investigations not carried out - Benefit of Concessional rate of tax - belated filing of the declaration in Form 'C' without sufficient reasons - also such declaration forms could not be furnished by the Assessee at the appellate stage - HELD THAT:- In the present case, the two appellate authorities have concurrently failed to appreciate not only the fact that the Assessee was entitled to file the 'C' declaration forms even at the appellate stage, which was nothing but continuation of the assessment proceedings, but also, they being the fact finding authority, were entitled to peruse the facts as the assessment authority. Also, without assigning any valid reason, the appellate authorities have just rejected the declaration forms, causing unnecessary further litigation. The only exercise they could have undertaken was to see the genuineness of the declaration forms and in normal circumstances, the same should have been accepted by the appellate authority in the first instance. Matter remanded back to the Assessment Authority for checking the declaration forms, which were produced before the first appellate authority on record and allow suitable concessional rate of tax in accordance with law - petition allowed by way of remand.
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2020 (2) TMI 1190
100% EOU - benefit of concessional rate of tax as per Notification in G.O.No.528 dated 21.11.1997 - cotton purchased by it in the declaration in Form No.17 - benefit denied for the reason that the explanatory note attached to the said Notification issued by the State is not part of the Notification - denial of benefit also on the ground that the export sale made by the Assessee of the fabric made out of the cotton purchased by it did not amount to a sale and therefore the condition of making a sale within the State was not satisfied by the Assessee. HELD THAT:- Issue decided in the case of USR. TYRES AND TUBES PVT. LIMITED VERSUS COMMERCIAL TAX OFFICER, TIRUVERUMBUR ASSESSMENT CIRCLE, TRICHY [ 2011 (4) TMI 1245 - MADRAS HIGH COURT ], in which the learned Single Judge of this Court decided the issue with regard to G.O.Ms.No.528, CT RE dated 21.11.1997 where it was held that petitioners are entitled to exemption being an Export Oriented Unit. It is not necessary that the petitioners should involve in the sale of raw material to another Export Oriented Unit to claim the benefit of exemption. They are entitled to exemption at the last purchase, being the manufacturer. The other issue raised by the learned counsel for the petitioner has been decided by the Division Bench of this Court in TUBE INVESTMENTS OF INDIA LTD. (FORMERLY KNOWN AS M/S. TI DIAMOND CHAIN LTD.) VERSUS THE STATE OF TAMIL NADU, REPRESENTED BY THE COMMERCIAL TAX OFFICER [ 2010 (10) TMI 938 - MADRAS HIGH COURT ] in which the Division Bench of this Court held that even 'exports sale satisfy the definition of 'Sale' under Section 2(n) read with Explanation to Section 3(a), 3(3) and (4) of the Central Sales Tax Act, and therefore the conditions of the Notification should be deemed to have been satisfied. The order passed by the learned Tribunal is unsustainable and the writ petition deserves to be allowed - decided in favor of petitioner.
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2020 (2) TMI 1189
Reversal of input tax credit - inputs utilised in the manufacture of internal combustion engine - clearance to SEZ unit - petitioner had effected sale to units located in Special Economic Zones outside the State of Tamil Nadu and therefore the 1st respondent has taken a stand that the petitioner was not entitled to proportionate input tax credit on the inputs used in the manufacture of ICE cleared to such units - Section 19(1) of the TNVAT Act, 2006. HELD THAT:- From section 19, it is clear that if goods are used for manufacturing or processing of goods in the state, a registered dealer would be entitled to avail credit on the tax paid by the seller - it is evident that input tax credit could be denied only Section 19(5)(a),(b) (c) of the TNVAT Act, 2006 on inputs. The restrictions in Section 19(5)(a) of the TNVAT Act, 2006, will apply only to such inputs which are bought and sold as such and not to inputs used in the manufacture of goods. 19(5)(b) is not relevant for the present case. Under Section 19(5)(c) of the TNVAT Act, 2006, no input tax credit can be allowed on the purchase of goods sold as such or used in the manufacture of other goods and sold in the course of inter-State trade or commerce falling under sub-Section (2) of Section 8 of the Central Sales Tax Act, 1956 - Thus, the sale effected under an exemption in terms of Section 8(6) is not covered by the exception in 19(5)(c ) of the TN VAT Act, 2006. If the sale in question does not fall under Section 8(2) of the CST Act, 1956, but under Section 8(6) of the CST Act, 1956, the credit cannot be denied - The sale of Internal Combustion Engine by the petitioner to units located in Special Economic Zones, outside the State of Tamil Nadu was not an exempted sale within the meaning of Section 15 of the TNVAT Act, 2006 - Such sale is neither exempted under 4th Schedule of the TNVAT Act, 2006 nor exempted under a Notification of the State Government as the expression of Government in Section 15 can only mean the State Government has defined Section 2(22) of the said Act. If Section 19(5) of the TNVAT Act, 2006 is applied plainly to the facts of the case, it is evident, credit cannot be denied on inputs merely because inputs were used in the manufacture of goods and such manufactured goods were sold to a buyer without payment of tax under Section 8(6) of the CST Act, 1956. Unless, there is a specific restriction imposed under the Act, credit cannot be denied. As there is no provision for denying credit under the circumstances, the demand proposed in the impugned notices may not be correct - this writ petitions is partly allowed by relegating the petitioner to file a reply to the impugned notices within a period of thirty days from date of receipt of a copy of this order - Petition allowed in part.
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