Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
February 7, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Constitutionality of section 174 of KGST Act and 101st Constitutional Amendment - power to enact section 174 of KGST Act - Indeed concurrency yields to the Doctrine of repugnancy, but simultaneous legislative power does not - Constitutional validity upheld.
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Profiteering - restaurant services - food stuff - the quantum of denial of such benefit or the profiteered amount illegally earned by the Respondent is determined as ₹ 41,42,97,635/- as per the provisions of Rule 133 (1) of the CGST Rules, 2017
Income Tax
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Revision u/s 263 - power of CIT for assessment in revision order - He may pass an order enhancing the assessment or he may modify the assessment. He is also empowered to cancel the assessment and direct a fresh assessment. CIT is fully competent to adopt any one of the three causes indicated by the said provision.
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Whether the advancement of money to the subsidiary can be said to be for the purpose of business? - Held Yes - the advancing of money to GVL for setting up of the power project was driven by commercial expediency and therefore, was for the purpose of business.
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Revision u/s 263 - Deemed dividend addition u/s 2(22)(e) - Actual liability of the company has been transferred to the assessee which increases his liability and there is no revenue loss to the department. - Though the AO did not examine this issue, the assessment cannot be held to be prejudicial to the interest of the revenue.
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Adjustment made on account of provision of wealth tax and disallowance u/s 14A could not have been made by the AO while computing the book profit u/s 115JB, since such adjustments are not permitted under Explanation–1 to section 115JB.
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Addition u/s 56 - difference amount of stamp duty value and purchase value - Whether such agriculture land falls in the definition of capital asset u/s 2(14) or whether such agriculture land is stock-in-trade of the assessee are issues which cannot be read in the definition of “any immoveable property” used in context of section 56(2)(vii)(b) and are thus not relevant.
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Addition on account of purchase of data packages on the ground that the same amounts to deferred revenue expenditure - when the incurrence of such expenses are admittedly of revenue nature, the same cannot be considered as deferred revenue expenditure.
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Addition u/s 68 - unexplained cash credit - merely, doubting or pointing out some discrepancy is not the foundation for discarding the genuineness of the deposit or share money or substance of the matter.
Customs
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IGST Export Refunds–resolution of errors
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Non functioning of Mobile scanner at Port Terminal; Revised Procedure for scanning of DPD-DPD mode containers
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Expiry of warehousing period - demand of customs duty foregone on capital goods - Mere technicalities, cannot overcome the obligations stipulated in law. The claims of the appellant are without sustenance.
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Classification of imported goods - Hard Disc Drives - The terms hard disk drive used in the notification has not been amplified either by adding “external” or “internal”. On this simple premise alone, exemption to the said item cannot be denied
DGFT
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Amendments in the ANF 3D for E commerce exports under para 3.05 of the FTP 2015-20
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Activation of ANF 3D under the E-com module for applying for MEIS for courier/postal shipments under Para 3.05 of the FTP and Para 3.02 of the HBP
SEBI
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Performance review of Public Interest Directors (PIDs)
Service Tax
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Supply of Tangible Goods Service - for transfer of right to use the goods, ownership is not mandatorily or necessarily required to be, as provided under the provisions of Income tax law. Section 65(105)(zzzzj) of the Act is clear and admits of no ambiguity - Payment of VAT is not necessary to come out of service tax net.
Central Excise
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CENVAT Credit - inputs contained in export goods - in the Cenvat Credit Rules, 2004 in respect of export goods there is no condition stipulated that against the export, the Foreign Exchange remittance should be received in order to allow the Cenvat Credit.
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When the appellants themselves had informed the department regarding the omission to pay duty, the allegation of suppression is without any factual basis.
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Process amounting to manufacture - goods installed at site - test of movability - if the curtain wall/AWs, cladding are pulled down or dismantled, it would result in scrap only - cannot be held has manufacture
Case Laws:
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GST
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2019 (2) TMI 300
Constitutionality of section 174 of KGST Act and 101st Constitutional Amendment - Jurisdiction - power to enact section 174 of KGST Act - amendment to Entry 54 of List II - the assertion mainly comes from 101st Constitutional Amendment that is the attenuated or modified Entry 54 of List-II, the State List - Does the State have the legislative competence to enact section 174 and save the past taxation events-comprising levy, and recovery-when Entry 54, List II, which is the field of legislation empowering the State, stood omitted permanently with effect from 16.09.2017? - repeal of statutes - transitional provisions. Held that:- With the Entry 54 of List II unavailable for the State to incorporate Section 174 of KSGST Act, the whole saving mechanism vis-a-vis transactions before 16-09-2017 crumbles - it is fallacy on the petitioner's part to content that the State lacks the legislative power to enact Section 174 of KSGST Act. Article 246A is the special provision on the GST. It empowers both the Union and the State, for the first time, to have simultaneous -not concurrent- powers to legislate on certain items. Indeed concurrency yields to the Doctrine of repugnancy, but simultaneous legislative power does not. That is, both the Legislatures, say one from the Union and other from the State, co-exist-operate in the same sphere subject to other constitutional safeguards. The petitioner's plea is rejected that the State lacks the vires to graft Section 174 into KSGST Act, 2017 - petition dismissed.
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2019 (2) TMI 299
Unable to upload FORM GST TRAN-1 - Transition to GST Regime - input tax credit - Held that:- There is a circular issued by the Government of India for “setting up an IT Grievance Redressal Mechanism to address the grievances of taxpayers due to technical glitches on GST Portal - the petitioner may apply to the Nodal Officer. The petitioner applying, the Nodal Officer will look into the issue and facilitate the petitioner’s uploading FORM GST TRAN-1, without reference to the time-frame - petition disposed off.
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2019 (2) TMI 298
Permission to withdraw the petition - Held that:- Petition withdrawn with liberty to the petitioners to approach the respondent- authority by filing a detailed and comprehensive representation at the first instance bringing the facts as stated in the writ petition to his notice - petition dismissed as withdrawn.
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2019 (2) TMI 297
Profiteering - Shorts - benefit of reduction in the rate of tax at the time of implementation of the GST not passed on - contravention of the provisions of Section 171 of Central Goods and Service Tax Act, 2017 - Held that:- It is clear from the perusal of the facts of the case that there was no reduction in the rate of tax on the above product w.e.f. 01.07.2017, hence the anti-profiteering provisions contained in Section 171 (1) of the CGST Act, 2017 are not attracted - there is no merit in the application filed by the Applicants - application dismissed.
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2019 (2) TMI 296
Profiteering - Little Star Dhoti 406 - benefit of reduction in the rate of ta not passed on - contravention of the provisions of Section 171 of Central Goods and Service Tax Act, 2017 - Held that:- It is clear from the perusal of the facts of the case that there was no-reduction in the rate of tax on the above product w.e.f. 01.07.2017, hence the anti-profiteering provisions contained in Section 171 (1) of the CGST Act, 2017 are not attracted - there are no merit in the application filed by the Applicants - application dismissed.
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2019 (2) TMI 295
Profiteering - restaurant services - SGB Stuffed GB (Garlic Bread) - 1 Med NHT Veg Extrava (Medium Veg Pizza) - benefit of reduction in rate of tax not passed - increase in base price of the products - denial of ITC - period between 15.11.2017 to 31.05.2018 - Section 171 of the CGST Act, 2017. Held that:- The Respondent is engaged in the business of operating quick service restaurants under the name and style of Domino s Pizza and has a pan India presence with 1,128 outlets across 31 States and Union Territories in which the Respondent is duly registered under the GST and all his outlets were maintaining consistency from taste to overall experience and the prices of all his products as shown in the menu were similar throughout his restaurants exclusive of the GST. It has also been admitted by the Respondent that the Central Govt. vide its Notification No. 46/2017-Central Tax (Rate) dated 14.11.2017 had reduced the rate of GST from 18% to 5% on restaurant services with the stipulation that no ITC would be available on the goods and service supplied under the above services, accordingly, 398 items which were being supplied by the Respondent were impacted with the reduction in the rate of tax, the benefit of which was required to be passed on by the Respondent to his customers by commensurate reduction in his prices as per the provisions of Section 171 of the CGST Act, 2017. It is revealed from the record that the Respondent had himself admitted before the DGAP, as has been mentioned in Para 4 (e) supra that the price of Type A Pizza was ₹ 440/- per unit and that of Type B was ₹ 470/- per unit respectively up to 14.11.2017, before the rate of tax was reduced and was ₹ 450/- and ₹ 485/- per unit respectively post 14.11.2017 after the rate of tax was reduced. Hence there was increase in the base price by ₹ 10/- in respect of Type A Pizza and ₹ 15/- in respect of the Type B Pizza. Perusal of Annexure23 attached by the DGAP with his Report also shows that the base prices of both these products were in fact increased by the amount shown above by the Respondent. Therefore, even if it is admitted that both the items of Pizza ordered by the above Applicant were distinct there is hardly any doubt that the Respondent had increased the base prices of both of them as per his own admission which he should not have done arbitrarily - However, the Respondent has duly admitted that he had increased the base prices in respect of the second item viz. Garlic Bread purchased by the above Applicant from him after the tax reduction. Therefore, there was sufficient ground for the Screening Committee as well as the DGAP to investigate the allegation of profiteering made against the Respondent and the objection raised by the Respondent on this ground is completely wrong and frivolous and hence the same cannot be accepted. The provisions of Section 171 are further very explicit which state that the recipient has to be given the benefits of tax reduction and the ITC on every supply commensurate with such reduction or the ITC. Hence, it was duty of the Respondent to ascertain on which of his products the rate of tax had been reduced and after taking in to account the impact of denial of ITC to what extent the prices should have been increased. The whole exercise needed no directions from this Authority as it involves simple mathematical calculation which the Respondent has been carrying on repeatedly at the time of fixing his prices. Hence, the contention of the Respondent made on this ground is unreasonable and hence it cannot be considered. The Respondent has not passed on the benefit of reduction in the rate of tax to his recipients, commensurate to the denial of ITC, during the period between 15.11.2017 to 31.05.2018 and accordingly, the quantum of denial of such benefit or the profiteered amount illegally earned by the Respondent is determined as ₹ 41,42,97,635/- as per the provisions of Rule 133 (1) of the CGST Rules, 2017 - Accordingly, the Respondent is directed to reduce his prices by way of commensurate reduction keeping in view the reduced rate of tax and the benefit of ITC denied - Respondent is also directed to refund to the Applicant No. 1 an amount of ₹ 5.65 along with interest @18% from the date of charging of the above amount from him till its refund. Penalty - Held that:- The Respondent has resorted to profiteering by charging more price than what he could have charged by issuing wrong tax invoices. He has further acted in conscious disregard of the obligation which was cast upon him by the law, by issuing incorrect invoices in which the base prices were deliberately enhanced more than what he was entitled to increase due to denial of ITC and thus he had denied the benefit of reduction in the rate of tax granted vide Notification dated 14.11.2017 to his customers. Accordingly he has committed an offence under Section 122 (1) (i) of the CGST Act, 2017. Therefore, a show cause notice be issued to the Respondent to explain why penalty under the provisions of the above Section should not be imposed on him. Application disposed off.
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2019 (2) TMI 294
Profiteering - Brief (Jockey Brief IC125 M Black) - benefit of reduction in the rate of tax not passed on - contravention of the provisions of Section 171 of Central Goods and Service Tax Act, 2017 - Held that:- There was no reduction in the rate of tax on the above product w.e.f. 01.07.2017, and hence the anti-profiteering provisions contained in Section 171 (1) of the CGST Act, 2017 are not attracted - there is no merit in the application filed by the above Applicants - application dismissed.
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2019 (2) TMI 293
Profiteering - Black Pepper - benefit of reduction in the rate of tax not passed - Section 171 of Central Goods and Service Tax Act, 2017 - Held that:- It is clear from the perusal of the facts of the case that there was no reduction in the rate of tax on the above product w.e.f. 01.07.2017 and hence there is no contravention of the anti- profiteering provisions contained in Section 171 (1) of the CGST Act, 2017 - application filed by the Applicants is not sustainable in terms of Section 171 of the CGST Act, 2017 - application dismissed.
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Income Tax
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2019 (2) TMI 292
Revision u/s 263 - power of CIT for assessment in revision order - Held that:- The only limitation on CIT's power is that he must have some material which would enable him to form a prima facie opinion that the order passed by the officer was erroneous in so far as it is prejudicial to the interests of the revenue. Once he concludes on the basis of the material that the order of the AO was erroneous and prejudicial to the interests of the revenue, the CIT is empowered to pass an order as the circumstances of the case may warrant. He may pass an order enhancing the assessment or he may modify the assessment. He is also empowered to cancel the assessment and direct a fresh assessment. CIT is fully competent to adopt any one of the three causes indicated by the said provision. CIT while coming to the conclusion that declared income is to be enhanced by ₹ 1,83,80,208/- had dealt with the matter in detail before so concluding. It is considered appropriate to direct the Registry of this Court to forward a copy of this order to the Central Board of Direct Taxes (CBDT) to issue necessary instructions to all the Assessing Officers that in cases of search and seizure or where survey operations have been carried out by the Department and surrender made or concealed income detected, to ensure proper scrutiny of such cases and discuss reasons for rejecting or accepting the books of account of the assessee and not to merely record in slipshod or cursory manner that ‘the books of account produced and test checked’ as done by the AO in the present case.
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2019 (2) TMI 291
Revision u/s 263 - exemption u/s 11 denied - utilization of corpus donations in violation of proviso to section 11(1)(d) - charitable activity - Held that:- Provisions of section 11(1)(d) in no way have been violated by the assessee. There has been excess of expenditure over income for the year under consideration and the same has been carried forward to the general fund in the balance sheet accumulated over the years whereas Corpus donations are separately appearing in balance sheet. (Page 1 to 12 of the paper book filed by the assessee). Therefore, the observations of the ld. CIT that the deficit for the year has been met out of the corpus donation, is not correct as is evident from the final accounts. Although no such adjustment has been made by the assessee, however there is no bar on such adjustment as per the provisions of section 11(1)(d) or u/s 12(1). The assessee is also entitled to carry forward the deficit for the year and set off the same in the next year(s), in the view of dictum laid down in CIT (E) Vs. Subros Educational Society [2018 (4) TMI 1622 - SUPREME COURT OF INDIA]. Therefore, when carry forward of deficit is allowed, it implies that the said excess utilization has been spent out from sources other than the voluntary contributions received during the year and should be out of Corpus only. For the aforesaid reasons and the judicial precedents cited supra, we are of the view that the CIT order passed u/s 263 of the I.T.Act is without jurisdiction and we quash the same. - Decided in favour of assessee.
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2019 (2) TMI 290
Capital gain - whether the assessee is liable for capital gain on sale of land at Olavakkode? - whether the fair market value fixed as on 01.04.1991 at 269 per cent is correct? - Held that:- The Hon’ble High Court of Kerala in assessee’s own case for assessment year 1991-1992 had held that the assessee was liable for capital gains in respect of sale of land at Olavakkode. The relevant finding of the Hon’ble High Court has been extracted at para 8 of the CIT(A)’s order, hence the same is not reiterated here. In view of the decision of the Hon’ble jurisdictional High Court rejecting the assessee’s claim that it cannot be liable for capital gains as it had acquired this property free of cost, is rejected. Fair market value as on 01.04.1981 adopted at ₹ 269 per cent of land - assessee had claimed the fair market value as on 01.04.1981 at substantially higher, which was rejected by the A.O. and by the CIT(A) - Held that:- We have heard the rival submissions and perused the material on record. The assessee has not produced any evidence / material to prove that the fair market value as on 01.04.1981 is more than ₹ 269 per cent adopted by the A.O. Hence, we confirm the fair market value as on 01.04.1981 at ₹ 269 per cent. Hence, this issue is decided against the assessee.
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2019 (2) TMI 289
Addition on account of disallowance of foreign exchange fluctuation loss - proof of commencement of business - Held that:- The fact remains that in assessment year 2009-10, the Revenue, in the order passed u/s 143(3), accepted the business loss declared by the assessee, in 2010-11, accepted the order of the CIT(A) on merits where he has given clear finding that the assessee has commenced business through its subsidiary in Mauritius for bidding up of power projects in foreign countries. After these facts, in our opinion, in assessment year 2011-12, the Assessing Officer was not justified in holding that the assessee company did not start any business either during the year or prior to the year under consideration. Whether the advancement of money to the subsidiary can be said to be for the purpose of business? - ‘commercial expediency’ - Held that:- The assessee is in the business of establishing, commissioning, setting up, operating and maintaining power projects. That its subsidiary GVL had also similar objects. The assessee tried to pursue its objects through its subsidiary GVL and submitted a bid for a power project abroad. Therefore the ratio of the above decision of Hon'ble Jurisdictional High Court in the case of Modi Entertainment Ltd. would be squarely applicable. In the case of S.A. Builders Ltd. (2006 (12) TMI 82 - SUPREME COURT) held that the expression ‘commercial expediency’ is one of wide import and includes such business expenditure as a prudent businessman incurs for the purpose of business. After considering the facts of the case, we are of the opinion that the advancing of money to GVL for setting up of the power project was driven by commercial expediency and therefore, was for the purpose of business. - Decided against revenue.
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2019 (2) TMI 288
Penalty u/s 271(1)(c) - non specification of charge - defective notice - Held that:- Notice issued by the Assessing Officer under Section 274 read with Section 271(l)(c) to be bad in law as it did not specify which limb of Section 271(l)(c) the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of COMMISSIONER OF INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013 (7) TMI 620 - KARNATAKA HIGH COURT) - Decided in favour of assessee.
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2019 (2) TMI 287
Penalty u/s 271(1)(c) - addition u/s 68 - scope of quantum proceedings - Held that:- Assessee during assessment proceedings as well as before Ld.CIT(A) had filed details/documents/evidences regarding shareholders as well as creditors which includes confirmation, identity and creditworthiness, thereby discharging initial onus cast upon assessee under section 68 Neither Ld. CIT (A) nor Assessing Officer in assessment proceedings or during remand proceedings verified any of aforestated details and summarily dismissed claim of assessee by stating that shareholders/creditors were not presented in person before authorities - quantum proceedings are different from penalty proceedings. In our considered view Assessing Officer has not disproved documents/evidences filed by assessee to be inaccurate/false in penalty proceedings. Merely because quantum addition has been confirmed by Ld. CIT (A) against which assessee has not preferred any appeal before this Tribunal, would not lead to automatic levy of penalty unless Assessing Officer establishes that documents filed by assessee were not true. - Decided in favour of assessee.
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2019 (2) TMI 286
Revision u/s 263 - Deemed dividend addition u/s 2(22)(e) - Held that:- The instant case, there is no dispute that the assessee company has not made any actual payment to the assessee as the assessee has taken over the actual liability of the company on his shoulder. No asset was distributed to the assessee relating to the company and accumulated profits were not distributed in the form of loans or advances to the assessee. Actual liability of the company has been transferred to the assessee which increases his liability and there is no revenue loss to the department. Though the AO did not examine this issue, the assessment cannot be held to be prejudicial to the interest of the revenue. Accordingly, we are unable to sustain the order of the Pr.CIT passed u/s 263 and the order of the Pr.CIT passed u/s 263 is set aside and the order of the AO is restored.- Decided in favour of assessee.
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2019 (2) TMI 285
Prior period expenditure disallowance - expenditure crystallized during the year as per the business practice followed by the assessee regularly - Held that:- No dispute that the income of each year is independent and required to be determined on year to year basis separately and the earlier years income and expenditure cannot be assessed in subsequent assessment years. We do not appreciate the procedure laid down by the assessee which delays the process in ascertaining the expenditure. The assessee has to make necessary arrangements to claim the expenditure correctly in the relevant previous year. However, if the expenditure is spilled over for the subsequent assessment year due to the circumstances beyond the control of the assessee and crystallized in the subsequent year due to the regular practice or method of accounting followed by the assessee, the same cannot be denied. From the details filed by the assessee before us in the paper book, it is observed that in certain expenses, bills were submitted during the relevant year itself but claimed in the impugned assessment year. In case of certain expenses, the bills were submitted in subsequent years. CIT(A) confirmed the addition stating that the assessee has not furnished the evidence supporting it’s claim that the expenditure was crystallized during the year under consideration. Therefore, we deem it fit to remit the case back to the file of the CIT(A) with a direction to allow the expenditure, crystallized during the year as per the business practice followed by the assessee regularly. Accordingly, the order of the CIT(A) is set aside and the appeal of the assessee is remitted back to the file of the CIT(A) to reconsider the issue afresh on merits and to allow the expenditure as and when it is crystalized as per the business practice regularly followed by the assessee. Appeal of assessee is allowed for statistical purpose.
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2019 (2) TMI 284
Reopening of assessment - long term capital gain declared by the assessee by taking indexed cost of acquisition being 98% of the sale consideration was exorbitantly excessive when considered in the light of a much lower indexed cost of acquisition shown by one Sh. Kundanmal Chunilal Khivansara, another co-owner of the same property - Held that:- The proceedings arising out of notice u/s.148 dated 30-03-2015 were dropped without going into merits. For all practical purposes, such proceedings ceased to exist on their dropping. While examining the validity or otherwise of the second notice, we cannot take cognizance of the first validly dropped proceedings without entering into the merits of the case. What we need to examine and evaluate is to test the validity of the initiation of re-assessment proceedings on the touchstone of the reasons recorded by the AO on 28-03-2016. Since the assessment order is based on the reasons as recorded pursuant to notice dated 28-03-2016, it would not be right to claim that the AO tried to take some benefit out of his own mistakes. As the notice dated 28-03-2016 was well within the stipulated time and the earlier proceedings u/s.148 had been validly dropped, we hold that there can be no case to argue that the AO initiated re-assessment proceedings in a wrong manner by taking advantage of his own mistakes. This contention is, therefore, repelled. Provisional assessment order - AO recorded that he was adopting FMV of the property as on 01-04- 1981 @ ₹ 400/- per sq.mtr as against the FMV taken by the assessee at ₹ 700/- per sq.mtr and the same was subject to the FMV as on 01-04-1981 to be determined by the DVO - Held that:- We are not convinced with the argument tendered on behalf of the assessee. There is no doubt that the AO has recorded in his order that adoption of FMV of the property as on 01-04-1981 @ ₹ 400/- per sq. mtr shall be subject to the FMV as on 01-04-1981 to be determined by the DVO, but the fact of the matter is that the assessment got concluded with the adoption of FMV of the property as on 01-04-1981 @ ₹ 400/- per sq.mtr and the income was determined accordingly. Not only that, the AO also issued demand notice u/s.156. The issuance of demand notice coupled with the passing of assessment order amply proves that it was a final assessment order in all respects. AR fairly admitted that the AO did not revise this assessment order by any other order and further there was nothing to show that any adverse report of the DVO was received or considered. This shows that the assessment order passed by the AO, based on the cost of acquisition, being, FMV as on 01-04-1981 @ ₹ 400/- pre sq.mtr, derived from the same cost of acquisition as declared by another co-seller of the same property, cannot be considered as based on any report of the DVO etc. Reference made to DVO became academic because the AO never took cognizance of any report of the DVO, if at all received at any stage, after the conclusion of the assessment order. Adoption of FMV at ₹ 400/- per sq. mtr being FMV as on 01-04-1981 of the property - Held that:- the report of registered valuer is based on no evidence as he has himself admitted that there is no comparable sale instance as on 01-04-1981. When the sole instant report of the Registered valuer is pitted against the Ready reckoner rate, the value adopted by another co-seller of the property at the same time and the value given by the Town Planning Department, there can be no prize for guessing that the value of ₹ 400 per sq.mtr. is more authentic and reliable. We thus hold that the adoption of rate of ₹ 400/-per sq.mtr by the authorities below as cost of acquisition, being, FMV as on 01-04-1981, is proper. Another argument advanced by the AR that the AO could not have validly made a reference to the DVO for determining FMV of the property as cost of acquisition as on 01-04-1981 has paled into insignificance as the AO has not gone with the report of DVO determining cost of acquisition of property as on 01-04- 1981. Rather he took the value declared by another co-seller of the same property itself, based on the Ready reckoner rate. These submissions are, therefore, rejected. Thus we are satisfied that the authorities below were justified in computing capital gains by taking cost of acquisition, being, FMV as on 01-04-1981 at ₹ 400/- per sq.mtr - Decided against assessee.
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2019 (2) TMI 283
Deduction u/s. 24 (a) - AO disallowed the rent received from Reliance Telecom by holding that if income is liable to be taxed as income from other sources and not under the head Income from House Property - Held that:- As relying on MATRU ASHISH CO-OPERATIVE HOUSING SOCIETY LTD. VERSUS INCOME-TAX OFFICER [2010 (8) TMI 1035 - ITAT MUMBAI] that income from letting out of the terrace has to be assessed under the head ‘income from house property’ subject to deduction u/s. 24 of the Act as against income from other sources as assessed by the AO. Since in the present case, the facts in dispute are identical and no difference in facts could be pointed out by the Revenue, respectfully following this order of the Tribunal, decide the issue in favour of the assessee.
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2019 (2) TMI 282
Addition u/s 68 - unsecured loan treated as unexplained fund - addition on the basis of the statement of Shri Bhanwarlal Jain Group without providing to the assessee an opportunity of cross examination - denial of natural justice - Held that:- The assessee has brought on record, PAN of the loan creditor and evidence of filing of Income Tax return. AO has also noted that notice u/s 133(6) was issued to the lender company and reply is also received. Hence, the assessee has established the identity of the loan creditor in question. In respect of creditworthiness of the said loan creditor, the assessee has brought on record, the audited balance Sheet of the said company, relevant bank statement and as per this balance sheet, the net worth of this company is ₹ 83.34 lacs and the loan amount in question is only ₹ 20 lacs. It has to be accepted that the creditworthiness of the said loan creditor is also established at least prima facie. Regarding genuineness of the transaction in question, the assessee has brought on record bank statement and loan confirmation to establish that the loan was received by account payee cheque and it was returned in the next year by account payee cheque. Hence, genuineness of the transaction in question is also established at least prima facie. AO has come to a different conclusion mainly . Hence, it is seen that except the statement of Shri Bhanwarlal Jain Group, there is no adverse material brought on record by the AO. No shortcoming is pointed out in various documents brought on record by the assessee to establish the identity and credit worthiness of the loan creditor and genuineness of the transaction as noted above. Since, the AO has not provided an opportunity of cross examination of Shri Bhanwarlal Jain Group, the adverse statements of that group cannot be used against the assessee. Case of KISHINCHAND CHELLARAM VERSUS COMMISSIONER OF INCOME-TAX, BOMBAY CITY II [1980 (9) TMI 3 - SUPREME COURT] to be followed. - Decided in favour of assessee.
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2019 (2) TMI 281
Levy of penalty u/s. 271(1)(c) - additions resulting from search and seizure action u/s. 132(1) - addition on ‘Advances from Customers’ - Held that:- In the present case as has been pointed by the assessee the amounts were duly reflected in the Balance Sheet under the head ‘Advances from Customers’ and ‘Capital Account’. This fact has not been disputed by the Revenue. Thus, it cannot be said that there was a concealment of income. The assessee purportedly offered the amount as additional income as the assessee failed to substantiate the source of amounts. Hence, is a case of ‘furnishing inaccurate particulars’ and not ‘concealment’. Assessing Officer in assessment order while recording satisfaction for initiating penalty has invoked the charge of concealment of income within the meaning of section 5A to Section 271(1)(c) and has levied penalty for the similar reasons. Since, wrong charge has been invoked for recording of satisfaction and levy of penalty, the penalty is not sustainable. It is a well settled law that penal provisions are to construed strictly and there is no margin of error when penalties are to be levied. Thus, in our considered view penalty on the addition is bad in law and deserves to be deleted. Levy of penalty u/s. 271AAA - Held that:- AR has not been able to show any perversity in the order of Commissioner of Income Tax (Appeals) in partly confirming levy of penalty u/s. 271AAA of the Act. No reason to interfere with the well reasoned order of Commissioner of Income Tax (Appeals). Accordingly, the same is upheld and the appeal of assessee is dismissed.
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2019 (2) TMI 280
Distress sale - section 50C applicability - CIT-A adopted fair market value as on the date of agreement instead of taking the value as per collector’s rate for calculation - Held that:- Originally the assessee had entered into an agreement for a small piece of land measuring 884.24 sq. mtr. and later on the area was increased to 2591.12 sq. mtrs. Therefore, it can not be said that the assessee had made the sale as a distress sale as the land area in new agreement is much more than area in original agreement and there is no dispute about the increased area as the dispute remained limited to original area of 884 sq. mtrs. Thus argument of Learned A. R., that the sale of entire property was a distress sale, do not hold force. Invoking amended proviso to section 50C(1) retrospectively and taken the fair market value as on agreement to sell i.e. on 11/10/2011 - Held that:- The amendment to section 50C by the Finance Act 2016 has to be applied retrospectively as the amendment is curative in nature therefore, collector’s rate prevalent at the time of entering agreement has to be taken as deemed consideration. Therefore, ground is dismissed. Excluding the value of land area of 844.24 sq.mtr. for stamp duty valuation as per section 50C in as much as the assessee received an advance of ₹ 10,00,000/- towards the same earlier as per Builder's Agreement - Held that:- In the original agreement dated 10/10/2005, there is mention of ₹ 10,00,000/- which was paid to the assessee but this agreement was not executed and became a matter of dispute and a fresh memorandum of understanding was entered into by the assessee whereby the entire sale consideration was refixed and there is no mention of this amount of ₹ 10,00,000/-. Querist is bound to return to the Builder the sum of ₹ 10 lacs which is stated to have been paid to the Querist by the Builder as advance as per Clause 23 of the Builders Agreement dated 10.10.2005. The said repayment may be made in installments as may be agreed by the parties but since it is the admitted case of the parties that the said amount has neither been adjusted by the Builder nor forfeited by the Querist, the same needs to be repaid by the Querist to the Builder. We further find that clause 43 of the Builder’s Agreement clearly states that the amount of ₹ 10,00,000/- is refundable. Thus the action of the AO in making addition being deemed value of ₹ 10,00,000/- is not correct and CIT(A) has rightly deleted the same holding the same to be liability of the assessee. Section 50C(1) applicability on date of agreement to sell i.e. 11.10.2011 by adopting stamp Duty Valuation as on the date of agreement or the Fair Market Value as there was no distress sale of property - Held that:- As the agreement to sell was entered on 11/10/2011. The stamp duty valuation as on this date was ₹ 4,18,52,923/-, as per the approved value report, placed at pages 142 to 148 of the paper book. The learned CIT(A) has taken ₹ 4,05,00,000/- as the value of sale consideration. However, since we have held that assessee has sold property on principal to principal basis and not as a distress sale after entering memorandum of understanding for a much more area therefore, this amount, which is the deemed value existing at the time of entering agreement, was to be taken into consideration as per the provisions of section 50C. Therefore, the Assessing Officer is directed to take the consideration of ₹ 4,18,52,923/- instead of ₹ 4,05,00,000/- and is accordingly directed to recompute the capital gains
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2019 (2) TMI 279
Reopening of assessment u/s 147/148 - receipt of accommodation entries by assessee - whether Department does not know the name of the party from whom the alleged accommodation entries were received and the reassessment was done merely on the basis of suspicion? - Held that:- In the case of a cash entry, it is necessary for the assessee to prove not only the identity of the creditor but also the capacity of the creditor and genuineness of the transactions. The onus lies on the assessee, under the facts available on record. A harmonious construction of section 106 of the evidence Act and section 68 of the Income Tax Act will be that apart from establishing the identity of the creditor, the assessee must establish the genuineness of the transaction as well as the creditworthiness of the creditors. As during hearing of these appeals, the Bench asked the Ld. DR is there any evidence of cash transaction, the DR fairly and judiciously agreed that there was no cash deposit before the issuance of cheque. Another question raised by the Bench, whether in the statement, the name of the assessee has been specifically mentioned to this also, the ld. DR fairly agreed that the name of the assessee has not been specifically mentioned. Thus, considering all the grounds decided in favour of the assessee. Addition made u/s 69C on account of commission expenses - Held that:- We note that while deliberating upon the issue in the appeal of the assessee, we have deleted the addition by an elaborate discussion, therefore, this ground of the Revenue also fails as the part addition sustained by the Ld. Commissioner of Income Tax (Appeal) has been deleted by the Tribunal. Thus, there is no merit in the impugned ground raised by the Revenue. Disallowance u/s 14A - Held that:- Commissioner of Income Tax (Appeal) fairly noted that the ld. Assessing Officer wrongly disallowed the expenditure without pointing out as to which expenditure relates to any exempt income. The interest expenditure of ₹ 3,14,431/- is the interest expenditure of the bank which was not utilized for any investment nor relates to exempt income. In view of this factual matrix, we find no infirmity in the conclusion of the CIT(Appeal) decided in favour of the assessee.
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2019 (2) TMI 278
Disallowance u/s 14A - Held that:- It is legally accepted position that the provisions of rule 8D is not applicable to the impugned assessment year. Therefore, what is necessary to examine is, whether the disallowance made @ 5% of the exempt income earned during the year is reasonable. Notably, while deciding identical issue in assessee’s own case for assessment year 1999–2000 to 2002–03, [2017 (9) TMI 723 - ITAT MUMBAI] the Tribunal has restricted the disallowance under section 14A of the Act to 1% of the exempt income earned during the year. Thus we direct the Assessing Officer to compute the disallowance under section 14A of the Act @ 1% of the exempt income earned during the previous year. This ground is partly allowed. Disallowance of expenditure incurred for issue of Foreign Currency Convertible Notes (FCCN) - Nature of expenditure - AO has disallowed assessee’s claim on the reasoning that FCCNs issued by the assessee are in the nature of convertible debentures, hence, expenditure related to issue of such debenture is capital in nature - Held that:- As decided in assessee's own case irrespective of the fact whether the debenture issued is convertible or non–convertible, it is in the nature of loan. Therefore, any expenditure incurred in relation to issuance of such debenture is allowable as expenditure. There being no material difference in facts in the impugned assessment year, the aforesaid decision of the Co–ordinate Bench clearly applies to the facts of the present appeal. Therefore, respectfully following the decision of the Co–ordinate Bench referred to above, we delete the addition made by the Assessing Officer. Disallowance of provision for warranty expenses - Held that:- We have considered rival submissions and perused material on record. Notably, no specific disallowance has been made by the Assessing Officer on this account in the final assessment order. Therefore, the issue is of mere academic nature. In view of the aforesaid, we do not intend to delve further into the issue. Accordingly, this ground is dismissed. Disallowance of write back provisions for doubtful debt - AO disallowed assessee’s claim simply on the ground that it was not made by way of a revised return of income - Held that:- in course of assessment proceedings, the assessee did make the claim by placing relevant facts to indicate that write back of provision offered to tax was inadvertently made at a higher figure instead of actual amount accruing as income to the assessee. As per the settled principle of law, real income of the assessee has to be taxed. If by mistake or inadvertence the assessee has offered more than the actual income, assessee’s claim has to be considered on the basis of facts and material brought on record. Therefore, the departmental authorities, in our view, were not justified in rejecting assessee’s claim on technical ground. Accordingly, we restore this issue to the Assessing Officer for verifying assessee’s claim. Disallowance of interest on refund u/s 244A - Held that:- t is the claim of the assessee that on the basis of intimation issued under section 143(1) of the Act the assessee has offered the amount of ₹ 44,89,065, as income instead of ₹ 24,81,284 actually granted to the assessee. We direct the Assessing Officer to verify the facts relating to the claim of the assessee and decide the issue after due opportunity of being heard to the assessee. This ground is allowed for statistical purposes. Disallowance of deduction of excise duty paid on vehicle held as stock–in–trade as on 31st March 2006 - specific claim of the assessee that since the assessee has actually paid the excise duty on vehicles lying in stock, it is allowable under section 43B - Held that:- AO has disallowed assessee’s claim simply on the reasoning that such claim was not allowed in the earlier assessment years. He has not discussed anything about the applicability of the ratio laid down in the decisions of Berger Paints (2004 (2) TMI 4 - SUPREME COURT) and Bharat Petroleum Corporation Ltd. [2001 (3) TMI 20 - BOMBAY HIGH COURT]. If as per the ratio laid down in the aforesaid decisions, assessee’s claim is allowable, it cannot be disallowed merely for the reason that such deduction was never allowed to the assessee earlier. Therefore, we direct the Assessing Officer to decide the issue following the ratio laid down in the decisions referred to above. Transfer pricing adjustment - rate at which the assessee should have charged interest on the loan advanced to its AE viz. TTUS - Held that:- Various workings furnished by the learned Authorised Representative in the written notes as well as the submissions made justifying the bench marking of the interest charged at LIBOR Plus 15 basis points requires re–consideration keeping in view the fact, whether the rate provided in the RBI Master Circular dated 1st July 2005 can at all be applicable as in case of the assessee it is a loan advanced and not loan availed. Since, the aforesaid aspects have not been properly examined and various workings furnished in the written notes have not been looked into by the departmental authorities, we are inclined to restore the issue to the Assessing Officer for fresh consideration. Adjustment made to book profit computed under section 115JB - Held that:- Any adjustment to the income of the assessee which is not in conformity with the directions of the DRP is invalid and not in strict compliance to the provisions of section 144C(13) of the Act. The very fact that section 144C(13) of the Act mandates the Assessing Officer to complete the assessment without affording any opportunity of being heard to the assessee indicates that while completing the final assessment the Assessing Officer has to implement the directions of the DRP only. If the Assessing Officer does not make any adjustment under section 115JB of the Act in the draft assessment order and only makes such adjustment in the final assessment order, the assessee is deprived of challenging such adjustment before the DRP. Therefore, the right to objection conferred on the assessee under the provisions of section 144C of the Act is taken away which cannot be the intention of the legislature. AO could not have made the adjustment to the book profit computed under section 115JB of the Act in the final assessment order. Adjustment made on account of provision of wealth tax and disallowance under section 14A of the Act could not have been made by the Assessing Officer while computing the book profit under section 115JB of the Act, since such adjustments are not permitted under Explanation–1 to section 115JB of the Act. Short grant of TDS credit - Held that:- We direct the Assessing Officer to verify the facts and grant actual credit for TDS.
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2019 (2) TMI 277
Income chargeable to tax under the head “Income from other sources” - addition u/s 56 - difference amount of stamp duty value and purchase value - Held that:- On reading of provisions of 56(2)(vii)(b), we find that it refers to any immoveable property and the same is not circumscribed or limited to any particular nature of immoveable property. It refers to any immoveable property which by its grammatical meaning would mean all and any property which is immoveable in nature, i.e, attached to or forming part of earth surface. In the instant case, the assessee has purchases three plots of agricultural land and such agricultural land is clearly an immoveable property. Whether such agriculture land falls in the definition of capital asset u/s 2(14) or whether such agriculture land is stock-in-trade of the assessee, in our considered view, are issues which cannot be read in the definition of “any immoveable property” used in context of section 56(2)(vii)(b) and are thus not relevant. In the result, we set- aside the order of the ld CIT(A) to this extent and upheld the order of the Assessing officer. In the result, ground no. 1 of the Revenue’s appeal is allowed. Unexplained investment in purchase of three properties - Held that:- The total investment in the land including stamp duty and other transfer charges comes to ₹ 32,38,600/-. Considering a reasonable household expenditure of ₹ 1 lakh, it is reasonable to infer that investment to the extent of ₹ 23,97,600/- is explained. Therefore, the balance investment of ₹ 8,41,000/- remain unexplained and liable to be taxed U/s 69 of the Act. Accordingly, the addition on this account is reduced to ₹ 8,41,000/-. Appellant’s ground of appeal on this issue is partly allowed
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2019 (2) TMI 276
Deduction u/s.80IB(10) - reopening of assessment - Computation of ‘maximum built up area’ appearing in clause(c) of section 80IB(10) - Held that:- CIT(A) has held that for the purposes of computing the ‘maximum built up area’ appearing in clause(c) of section 80IB(10), the area covered by balcony, terrace, box and projections as appearing in clause (a) of section 80IB(14) has to be excluded. After the exclusion of the areas covered by balcony, terrace, box and projections the ‘built up area’ of all the rowhouses constructed by the assessee does not exceed 1500sq.ft. in area. Hence, the assessee has fulfilled the conditions laid down for claiming deduction u/s.80IB(10) of the Act and the same was allowed by the CIT(Appeals). That even as per the legal parameters opined by the Hon'ble Karnataka High Court as on record, it is very much clear that the projections whatever was taken prior to the amendment in definition of built up area which got inserted in sub section (a) of section 80IB, which came into effect from 01.04.2005, the rigors of the amendment cannot be applied retrospectively to put the assessee in jeopardy. No infirmity in the order of CIT(Appeals) and therefore, relief granted by CIT(Appeals) to the assessee is sustained. Accordingly, grounds of appeal raised by Revenue for the assessment year 2007-08 are dismissed.
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2019 (2) TMI 275
Penalty u/s 271(1)(c) - specification of charge - unexplained money u/s. 69A - Held that:- The satisfaction recorded by the AO in the assessment proceedings, separately for ₹ 22.10 lacs and ₹ 3 lacs, toward initiating penalty proceedings u/s.271(1)(c), is categorical, i.e., for concealment of particulars of income. It is on the basis of this satisfaction that the AO derives the necessary jurisdiction to initiate penalty proceedings and issue the show cause notice u/s. 274, which only seeks to put the assessee to notice as to why penalty u/s. 271(1)(c) in the facts and circumstances of its case be not levied. How could, one may ask, the notice u/s. 274 be construed as not in terms of the said satisfaction? The limb of sec. 271(1)(c) under which the penalty may, where so, be finally levied, is determined only subsequently, i.e., upon considering the assessee’s explanation. How could then the absence of the said specification in the notice, particularly where the satisfaction of the AO in the assessment proceedings giving rise to the said notice, is not under challenge, be fatal to the proceedings? The difference between the two limbs, which signify omission and commission respectively, may in the facts of a case, or considering the explanation furnished, be very thin or even overlap (refer: A.M. Shah v. CIT [1998 (8) TMI 607 - GUJARAT HIGH COURT]. The penalty u/s. 271(1)(c), it was further explained, could in either case be levied only where there is a failure to disclose fully and truly particulars of his income by the assessee, and that there could be no straitjacket formula for ascertaining the two charges. In the instant case, in fact, both the satisfaction as well as the levy of penalty is qua concealment of particulars of income. A defective notice, even assuming so, would not defeat the proceedings. As regards the issue on merits, what all, as a bare reading of the relevant provision (s.271(1)(c)) would reveal, the assessee is to do is to render a bona fide explanation, substantiating it (Explanation 1). This explains the ambit of the penalty proceedings u/s. 271(1)(c), also exhibiting as to how these are, thus, different from the assessment proceedings. A plausible explanation, thus, saves penalty. The requirement of substantiation, it may be appreciated, is toward establishing the truth of the explanation furnished. The burden to so explain is though on the assessee, failing which the assessee is deemed by law to have concealed the particulars of his income. The penalty would stand equally attracted where the assessee fails to give any explanation, or that furnished by him is found to be false by the Revenue. It is inconceivable that an amount given, assuming so, under trust by a close relative for a specific purpose/need, presumably urgent, is, as stated, retained for years, for which there is again no explanation. Why did not the assessee state the truth? A tractor, rather, could be purchased directly by his brother-in-law, even if by taking guidance from the assessee in the matter, if that was the reason, or from a dealer known to the assessee, where that was the case. No purchase of a tractor is shown in the relevant year or even subsequently. If indeed it was for the purchase of the tractor, his co-brother would have asked back the amount for acquiring it, rather than leaving it with the assessee to use the same and return it on his whim and fancy. The return of money, as it’s giving, is without evidence. The statements of both, the assessee and Shri Harjeet Singh, are totally unconvincing, besides being contrary. Finally, the very fact that the assessee seeks a telescoping benefit, which he is allowed by the first appellate authority, again, strongly suggests of the money deposited in the account being kept out of books for being utilized for personal purposes or for rotation in his business. The assessee’s claim of the untenability of the impugned penalty as it is based on estimation, raised before the ld. CIT(A), only needs to be stated to be rejected. There is no question of any estimation, and the penalty is qua cash found deposited in the assessee’s bank account, the nature and source of which he though is unable to explain. No hesitation in confirming the levy of penalty, which though could be levied only on the addition as finally sustained by the first appellate authority in quantum. - Decided against assessee.
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2019 (2) TMI 274
Addition as deemed rental income from a vacant property - Held that:- CIT(A) has not at all considered the provisions of section 23(1)(c) when the property remained vacant throughout the year. Restore this issue to the file of the CIT(A) with a direction to pass a speaking order in the light of the provisions of section 23(1)(c). Needless to say, CIT(A) shall decide the issue as per fact and law, after giving due opportunity of being heard to the assessee. Hold and direct accordingly. The grounds raised by the assessee are allowed for statistical purposes. Allowance of entire expenses on adhoc basis - Held that:- Considering the machinery repair and office repair expenses as not being personal in nature, the CIT(A) restricted the disallowance to ₹ 3 lakh. It is the submission of the ld. counsel for the assessee that in the subsequent year, the Assessing Officer has restricted the disallowance to 20% of such expenses. Considering the totality of the case, disallowance of ₹ 3 lakhs appears to be on higher side. Therefore, restrict the disallowance to ₹ 2.5 lakh. The ground raised by the assessee is partly allowed.
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2019 (2) TMI 273
Rejection of books of accounts - N.P. determination - Addition u/s.69 - sundry creditors in spite of the facts that assessee could not establish the aforesaid credits - Held that:- CIT(Appeals) reduced the estimate of assessee’s income as made by the AO by applying the net profit rate of 25% as against the net profit rate of 30% adopted by the AO, the action of the Assessing Officer in rejecting the books of account of the assessee was upheld by him. After estimating the business income of the assessee at a substantially higher figure, AO proceeded further to make various other additions on the basis of books of account of the assessee, which were rejected by him. As decided in BANWARI LAL BANSHIDHAR and INDWELL CONSTRUCTIONS VERSUS COMMISSIONER OF INCOME-TAX [1998 (3) TMI 121 - ANDHRA PRADESH HIGH COURT] the additions made by the Assessing Officer on the basis of rejected books of account over and above the business income estimated by him by applying a net profit rate were not sustainable and the CIT(Appeals) was fully justified in deleting the same. In that view of the matter, we uphold the impugned order of the ld. CIT(Appeals) and dismiss this appeal of the Revenue.
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2019 (2) TMI 272
Disallowance in respect of Cars and Telephones used by the staff members of the assessee firm under section 38 (2) - allowable busniss expenses - adhoc disallowance of 1/6th of the expenses pertaining to car and telephone expenses rejecting the explanation of the assessee - Held that:- Assessee before the CIT(A) has specifically addressed that out of the 10 cars maintained, only two were used personally by the partners. Similarly, out of 145 telephone numbers maintained, only two telephone numbers were being used by the partners. As per the submissions extracted from the assessment order, it is seen that the assessee has submitted that details have been maintained qua each of the vehicles/mobile numbers. The issue may also be of a recurring nature. we are of the view that instead of arriving at an arbitrary estimate, it is appropriate to set aside the issue back to the file of the CIT(A) with the direction to take the past history of the assessee into consideration and confine the disallowance to be made only on the grounds of personal usage to the specific cars/mobile/phones stated to be used by the partners, in case the claim is found to be correct on record. - Appeal of the assessee is allowed for statistical purposes.
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2019 (2) TMI 271
Disallowance of interest free ICD advance - whether there was no nexus between interest bearing loan funds and ICD advanced by the assessee company from its own funds? - Held that:- CIT (A) has rightly deleted the addition on the grounds inter alia that the assessee company has already charged the interest @ 8% on ICD advance to its group company in the previous year relevant to 2011-12 including interest accrued under assessment year under consideration; that differential interest @ 4% (12% - 8%) has already been disallowed by the AO in the subsequent year 2011- 12; and that the ICD was advanced prior to the loan availed off from the bank meaning thereby the same has been advanced out of own funds by the assessee. So, in the given facts and circumstances, we find no ground to interfere with the findings returned by the ld. CIT (A) deleting the addition. Upfront charges paid for obtaining term loan from bank - whether is covered within the definition of interest given in section 2(28A) and hence allowable as revenue expenditure? - Held that:- When we examine provisions contained u/s 36(1)(iii) in the light of the definition of “interest” in section 2(28)(a) of the Act, it certainly includes any service fee or other charges in respect of money borrowed or debt incurred. Even otherwise, when AO has allowed the interest on the loan in question as Revenue expenditure then how the “upfront fee” which also form the part of the interest can be disallowed. The ld. CIT (A) by relying upon the decision rendered by Hon’ble Bombay High Court in the case of Premier Automobiles Ltd. vs. CIT [1970 (3) TMI 28 - BOMBAY HIGH COURT] and in case of CIT vs. Secure Meters Ltd. [2008 (11) TMI 66 - HIGH COURT RAJASTHAN] has rightly held that upfront charges paid by the assessee is allowable deduction being part of the “interest” already allowed by the AO as revenue expenditure. Finding no illegality or perversity in the deletion of addition on account of disallowance of upfront charges paid by the assessee for availing the loan of ₹ 200 crores for business purpose. Addition on account of purchase of data packages on the ground that the same amounts to deferred revenue expenditure - Held that:- Revenue has not disputed the incurrence of that expenses for business purposes but allowed the same as deferred expenditure over a period of five years. We are of the considered view that when the assessee was made to incur the mandatory expenses having been paid to DGH for participating in tender/bid process, no enduring benefit, as has been observed by AO, can be made out. Moreover, AO has not disputed the nature of these expenses as revenue expenses. So, when the incurrence of such expenses are admittedly of revenue nature, the same cannot be considered as deferred revenue expenditure. So, we are of the considered view that the ld. CIT (A) has rightly deleted the addition - Decided against the Revenue.
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2019 (2) TMI 270
Addition on account of disallowance of deduction claimed on payment towards membership fee to Jain Vishva Bharati - Held that:- CIT(A) held the submissions are general in nature and futile exercise in trying to build a link between the assessee and the said institution. Before us, the same submissions as contended before the CIT(A) were advanced. We find no details showing in support of its calculation that the bright or meritorious students pursued Articleship and payment of membership fee was really patronized, the services of the assessee were filed and in the absence of such details, in our opinion, the assessee is not entitled to claim the deduction in computing the total income. We agree with the findings of lower authorities that the said expenditure is not incurred for the business or profession of the assessee and submission made in support of such arguments are vague and general in nature - decided against assessee Disallowance of expenditure incurred on account of acquiring educational qualification by one of the partners of the assessee - Held that:- Factum of relationship itself will confer assurance on any scrutinizing mind that as far as possible the result of the training utilized for the benefit of the assessee. We find that Miss Parulekar was in the Editorial Department of the said company and in pursuance of resolution acquired a degree of Master of Journalism in the same field and spent three months practical training in printing and lithography itself shows that she acquired a degree in the same field and undertaken specific practical training in her own Department. Whereas in the present case as discussed above, the said Sh. Anurag Singhi acquired additional knowledge which is not relevant or directly related to business of the assessee. Therefore, the facts before the Hon’ble High Court of Bombay are different from the facts of the present case and are distinguishable - as discussed above, no evidence whatsoever brought on record to show that the assessee really pursued degree and such degree really benefited the assessee. Income from properties as income from other sources against the claim of the assessee is from house property - Held that:- It is noted from the record that the assessee has two properties, one in Delhi and one in Mumbai. According to the AO, the assessee has shown the income from both properties as income from other sources in the year 2009-10, for AY 2008-09 as business income and as house property in the year under consideration. The AO did consider the income as income from house property as it was not owned by the assessee and used for the purpose of business or profession of the assessee. The CIT(A) confirmed the view taken by the AO. We remand the file to the AO for his fresh consideration. TDS u/s 195 - Disallowance as per provisions of section 40(a)(i) on account of annual support payment and registration fee - Held that:- As decided in THE MALAYALA MANORAMA CO. LTD., KOTTAYAM [2013 (11) TMI 283 - KERALA HIGH COURT] Section 9(1)(i) of the Act does not apply to non-resident body which has not permanent establishment in India. Further, held assessee therein is only a member and by giving advertisement, membership fee or other donation, the section 195(1) of the Act does not apply in the case of payments made to non-resident body and has no permanent establishment in India. The addition made u/s 40(a)(i) is not maintainable.
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2019 (2) TMI 269
Penalty u/s 271(1)(c) - non specification of charge - defective notice - Held that:- Notice issued by the Assessing Officer under Section 274 read with Section 271(l)(c) to be bad in law as it did not specify which limb of Section 271(l)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of COMMISSIONER OF INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013 (7) TMI 620 - KARNATAKA HIGH COURT) - Decided in favour of assessee.
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2019 (2) TMI 248
Addition u/s 68 - unexplained cash credit - Held that:- There was no evidences to show that there was any cash trail in respect of the amounts received by the assessee company from the investors. We noticed that though the AO was specifically asked to furnish specific incriminating evidences, but the AO was unable to pin point the specific evidences which could clearly show that the share application money was received in lieu of cash. It is an admitted fact that the investor companies were assessed to tax and had filed their returns of income. The notices u/s 133(6) were complied with by the parties and copy of bank statement, ledger account, share application form, board resolution authorizing investments, income tax return and audited accounts of the investor companies were filed before the assessing officer and CIT(A). Sec. 69 places the burden of proof on the tax payer to explain the nature and source of any credit found in the books. But, when assessee proves or submit the basic information like identification, genuineness of transactions and creditworthiness of the creditors, onus is discharged by him and if Assessing Officer disbelieve the genuineness of the same, he has to prove otherwise, merely, doubting or pointing out some discrepancy is not the foundation for discarding the genuineness of the deposit or share money or substance of the matter, held by the Hon'ble Supreme Court in the case of CIT v. Gujarat-Heavy Chemicals Ltd. (2001 (10) TMI 89 - SUPREME COURT). Question of making any addition u/s. 68 of the Act does not arise - Decided in favour of assessee.
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Customs
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2019 (2) TMI 268
Country of origin of imported goods - It is claimed by the petitioner that the goods are of Sri Lankan Origin, whereas it is claimed by the respondent that the goods were only transshipped through Sri Lanka and not of Sri Lankan Origin itself - provisional release of goods - Held that:- Admittedly, the matter is still under the investigation stage - Therefore, at this juncture, this Court is not inclined to go into any of the supportive documents relied on by the respective parties and give any finding on those documents, since any such finding will certainly prejudice the investigation. However, this Court has to consider and decide as to whether the conditions imposed for provisional release are to be sustained or not, since the respondent has agreed to release the goods provisionally, subject to the compliance of the impugned conditions. There is no dispute to the fact that if the goods were originated from Sri Lankan country, there will not be any difficulty for the revenue to release those goods without imposing the conditions as stipulated in the impugned order, however by collecting the required duty. But the dispute is regarding the country of origin. The issue with regard to the Country of Origin of goods has to be investigated and an order of adjudication has to be finally passed in this matter. At this juncture, it is to be relevant to be stated that the above said communication dated 06.12.2018, though was not referred to in the counter affidavit filed on 18.01.2019, the file produced before me contained the said letter. In fact, a copy of the said letter is also placed before this Court by the learned senior counsel for the petitioner as well. Petition allowed subject to conditions imposed.
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2019 (2) TMI 267
Refund of SAD - rejection on the ground that condition 2(b) of N/N. 102/2007-Cus. dated 14.9.2007 has not been complied i.e., no endorsement was made on sales invoices - Held that:- The appellant has furnished the Chartered Accountant’s certificate showing that necessary endorsements were made on the sales invoices - Larger Bench of the Tribunal in the case of Chowgule & Company [2014 (8) TMI 214 - CESTAT MUMBAI (LB)] has observed that the said endorsement is not mandatory - rejection of refund not justified - appeal allowed - decided in favor of appellant.
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2019 (2) TMI 266
Expiry of warehousing period - Exemption to specified goods imported for purpose of development of software for export, denied - violation of condition no. 6 of N/N. 138/91- Cus dated 22nd October 1991 - demand of customs duty foregone on capital goods - recovery sought in terms of section 72 of Customs Act, 1962 - Held that:- It is not in dispute that the warehousing period expired in December 1998 and, if the appellant was interested in not extinguishing the privilege of exemption, application for renewal should have been filed. It would appear from the facts and circumstances that the importer appellant had, after ownership had passed on to M/s VSNL, ceased to retain interest in the continued operation of the asset under the exemption notification. The failure to retain status as warehouse for the location of the imported goods compromised this obligation with consequence of duty liability and penalties. There is no valid ground for mitigation or escapement in the appeal of the importer that requires consideration by us. Mere technicalities, cannot overcome the obligations stipulated in law. The claims of the appellant are without sustenance. Appeal dismissed.
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2019 (2) TMI 265
Refund of SAD - N/N. 102/2007-Cus. dated 14.09.2007 - Jurisdiction in which the claim is to be made - case of revenue is that the goods were imported through Tuticorin Port and cleared through Customs House, Tuticorin, the claims ought to have been filed within Customs House, Tuticorin and not before the Assistant Commissioner of Customs, Chennai - appellant contends that the refund claims ought to have forwarded to the proper jurisdictional authority - Held that:- If the power of exercising jurisdiction of a refund claim was purely within the administrative domain of the department, we fail to understand why the department did not forward the claim to the proper jurisdiction so as to facilitate the assessee - The department could have at least issued a deficiency memo to the appellants before passing an order rejecting the refund claim. As per Regulation 2 of Customs Refund Application (Forms) Regulation 1995, the proper officer has to intimate the deficiencies of the application to the claimant within 10 days of receipt of the claim. The order of rejection for want of jurisdiction was passed after more than 10 months. The Hon'ble Apex Court has held in various decisions that the procedural lapses cannot take away substantive remedy - reliance placed in the case of MANGALORE CHEMICALS & FERTILIZERS LTD. VERSUS DEPUTY COMMISSIONER [1991 (8) TMI 83 - SUPREME COURT OF INDIA] - Also, in several decisions, it has been held by various courts that the prosecution of the case before the wrong forum has to be excluded for considering the limitation. The appellant has to be given a further chance to present their claims before the correct jurisdictional authority - the matter requires to be remanded to the Customs House, Tuticorin, who is directed to process the refund claims - appeal allowed by way of remand.
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2019 (2) TMI 264
Classification of imported goods - Hard Disc Drives - benefit of concessional rate of duty under N/N. 12/2012-CE at SI. No.255 - whether classifiable under CTH 84717020 or under CTH 84717030? - Held that:- The terms hard disk drive used in the notification has not been amplified either by adding “external” or “internal”. On this simple premise alone, exemption to the said item cannot be denied. - This Tribunal in the case of M/s. Fortune Marketing Pvt, Ltd. vide Final order, dated 24.08.2017 has already decided the issue in favour of the assessee by following the decision of CESTAT, Delhi in M/s. Supertron Electronics Pvt, Ltd. [2017 (1) TMI 1529 - CESTAT NEW DELHI] The Hon'ble Apex Court has upheld the decision of the Tribunal CESTAT, Delhi [2017 (10) TMI 1281 - SUPREME COURT OF INDIA] Appeal dismissed - decided against Revenue.
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Insolvency & Bankruptcy
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2019 (2) TMI 263
Appointment of ‘Interim Resolution Professional’ - refund of amount to corporate debtor - Initiation of corporate insolvency resolution process - Held that:- Appellant has brought to our notice the different bills to show that he has incurred expense - The Adjudicating Authority has failed to notice the aforesaid fact. This apart, once it was agreed by the ‘corporate debtor’ to pay the amount of ₹ 3,80,000/- being satisfied and having paid the amount, the Adjudicating Authority was wrong in passing order to refund the amount of ₹ 1,80,000 to ‘corporate debtor’ - appeal allowed - decided in favor of appellant.
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Service Tax
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2019 (2) TMI 262
Supply of Tangible Goods Service - legal right of possession and effective control was handed over to lessess - interpretation of statute - liability of service tax - Held that:- These computers were exclusively used by schools and Department of Education, Government of Delhi and not by the appellant. In fact, appellant had no control over the manner or duration of such usage of computers by schools or Director of Education. Possession and ownership need not go together always As a matter of fact,neither the definition given under Section 65(105)(zzzzj) nor the clarification issued by CBEC vide Circular DOF no. 334/1/2008-TRU dated 29.2.2008 specifies or mandates that for not being covered under the service of Supply of Tangible Goods , the service provider must have paid VAT or Sales Tax on the amount received as consideration for hiring out and transferring the equipment such as computers - The language of Section ibid makes it abundantly clear that for transfer of right to use the goods, ownership is not mandatorily or necessarily required to be, as provided under the provisions of Income tax law. Section 65(105)(zzzzj) of the Act is clear and admits of no ambiguity. As the appeal is allowed on merits, the ground to limitation is kept open - appeal allowed.
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Central Excise
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2019 (2) TMI 261
Refund of re-credit of the amount of Education Cess and Secondary & Higher Education Cess paid from PLA - area based exemption under N/N. 39/01-CE dated 31/07/2001 availed - Held that:- The issue is covered by the Hon’ble Supreme Court Judgement in the case of SRD Nutrients Pvt. Ltd. Vs. CCE [2017 (11) TMI 655 - SUPREME COURT OF INDIA], where it was held that appellants were entitled to refund of Education Cess and Higher Education Cess which was paid along with excise duty once the excise duty itself was exempted from levy - Appeal allowed - decided in favor of appellant.
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2019 (2) TMI 260
CENVAT Credit - Transportation Cost - appellant have been including the transportation charges in the assessable value and excise duty was paid on the value included in the Transportation Cost - the said fact have not been verified - Held that:- On request of the Ld. Counsel to verify the facts the matter needs to be remanded to the adjudication authority and after verifying the facts the adjudication authority may pass a fresh order - appeal allowed by way of remand.
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2019 (2) TMI 259
CENVAT Credit - input services - Courier service - Held that:- As regard the credit on Courier service up to 01.04.2008 is not under dispute as held that the Hon’ble Gujarat High Court in the case of Ambalal Sarabhai Enterprise Ltd. [2014 (1) TMI 118 - GUJARAT HIGH COURT] - the credit up to the 31.03.2008 is admissible. Cenvat Credit on Courier service from 01.04.2008 onwards - Held that:- Since, Ld. Counsel has made submissions that lower authority has not verified whether the Courier charges is included in the assessable value, the matter needs to be re-considered only on this aspect. Thereafter, to decide the admissibility of the Cenvat Credit on Courier service post on 01.04.2008, matter is remitted. Appeal allowed by way of remand.
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2019 (2) TMI 258
CENVAT Credit - inputs contained in export goods - goods have been physically exported outside India - manufacturer Exporter could not realize Foreign Exchange due to the rejection of the export goods - Rule 6(6) of Cenvat Credit Rule, 2004 - Held that:- It is observed that the goods have been admittedly exported out of India. After receipt of the goods by the foreign buyer, goods were found rejected then same was remained in that Country. Due to the rejection the payment towards such export could not be made. As per the facts of the present case the goods have been taken out of India to a place outside of India”. Therefore, the supply of the goods by the appellant clearly qualifies as "export of goods". Once the export of goods is not under dispute, in terms of Rule 6(6) of Cenvat Credit Rules, 2004, the appellant is entitled for the Cenvat credit. Moreover in the Cenvat Credit Rules, 2004 in respect of export goods there is no condition stipulated that against the export, the Foreign Exchange remittance should be received in order to allow the Cenvat Credit. The appellant are clearly entitled for the Cenvat Credit in respect of inputs contained in export goods - appeal allowed - decided in favor of appellant.
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2019 (2) TMI 257
CENVAT Credit - inputs - welding electrodes used for repairs and maintenance of the plant and machinery - Held that:- Hon’ble Supreme Court in case of Ramala Sahkari Chini Mills Ltd., Vs. CCE., Meerut-I [2016 (2) TMI 902 - SUPREME COURT] held that the welding electrodes used for of repair and maintenance of Plant and Machinery is an input - credit allowed - appeal allowed - decided in favor of appellant.
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2019 (2) TMI 256
CENVAT Credit - Transportation Cost - appellant have been including the transportation charges in the assessable value and excise duty was paid on the value included in the Transportation Cost - the said fact have not been verified - Held that:- On request of the Ld. Counsel to verify the facts the matter needs to be remanded to the adjudication authority and after verifying the facts the adjudication authority may pass a fresh order - appeal allowed by way of remand.
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2019 (2) TMI 255
Refund of re-credit of the amount of Education Cess and Secondary & Higher Education Cess paid from PLA - area based exemption under N/N. 39/01-CE dated 31/07/2001 availed - Held that:- The issue is covered by the Hon’ble Supreme Court Judgement in the case of SRD Nutrients Pvt. Ltd. Vs. CCE [2017 (11) TMI 655 - SUPREME COURT OF INDIA], where it was held that appellants were entitled to refund of Education Cess and Higher Education Cess which was paid along with excise duty once the excise duty itself was exempted from levy - Appeal allowed - decided in favor of appellant.
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2019 (2) TMI 254
Extended period of limitation - SSI Exemption - crossing of threshold limit - SSI limit exceeded during the period 2011-12, but registration taken only on 18.01.2012 - no suppression of facts - no intent to evade - Held that:- The audit party did not find any short-payment of duty. Interestingly, the show-cause notice is issued after more than two years invoking the extended period alleging suppression of facts. When the appellants themselves had informed the department regarding the omission to pay duty, the allegation of suppression is without any factual basis - So also, when the audit party has not raised any objection after going through the accounts in 2013, it can be safely concluded that the credit was sufficient to adjust to the duty liability. Merely because the appellants could not produce certain invoices, after more than two years cannot be a found to saddle them guilt of suppression of facts. The department has failed to establish any suppression of facts on the part of the appellants with an intention to evade payment of duty. The demand raised invoking the extended period, therefore, cannot sustain - appeal allowed on the ground of limitation.
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2019 (2) TMI 253
CENVAT Credit - input services - Product Liability Insurance - not post manufacturing activity - period April 2016 to March 2017 - Held that:- The appellants have taken such insurance policies to cover their losses in case finished products are defective and the customers claim for compensation - It is brought out that the insurance does not cover cost of removal, replacing or repair of defective products or losses of use but is only for malfunctioning or manufacturing defects, which is detected in the hands of the customers. These cannot be considered as post-manufacturing activities as they are integrally connected to the manufacture of finished products - credit cannot be denied - appeal allowed - decided in favor of appellant.
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2019 (2) TMI 252
Process amounting to manufacture - goods installed at site - test of movability - clearance of aluminium frames from factory at Delhi and manufacture of USGS and AW at the project site - removal of USGS AND AW without payment of duty for installation at the site - whether the process amoung to manufacture and whether UGSG and AW are excisable goods? - Held that:- if the goods installed at site are capable of being sold or shifted as such, after removal from the base, then the goods would be considered to be movable and excisable. In the present appeal, the department has no case that the goods installed/structure erected can be shifted or disassembled without causing damage to the components/parts. Even as per the circular, the goods then would be immovable property and, therefore, not excisable to duty. The learned counsel has rightly pointed out that if the curtain wall/AWs, cladding are pulled down or dismantled, it would result in scrap only. Time Limitation - Held that:- The appellant cannot be saddled with the guilt of suppression of facts with intention to evade payment of duty. There is no evidence to establish such suppression of facts - moreover, the issue was under litigation and is an interpretational one - the demand raised invoking the extended period cannot sustain. Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2019 (2) TMI 251
Call for records leading to assessment order - Held that:- Identical issue decided in the case of The Commercial Tax Officer v. S.Najeem [2018 (8) TMI 1160 - KERALA HIGH COURT], where it was held that the action initiated by the Department after the period of limitation provided, by issuance of notices under Section 25(1) cannot be sustained - petition disposed off.
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2019 (2) TMI 250
Levy of penalty u/s 22(2) of the TNGST Act, 1959 - consequential penalty u/s 16(2) of the TNGST Act - whether there is a question of law to be decided by the Court in an appeal? - Section 38 of the TNGST Act - Held that:- The mandate under Sub-section (1) of Section 38 is very clear that the jurisdiction of the revisional court is to decide whether the appellate tribunal has either decided erroneously or failed to decide any question of law. In the instant case what was collected as incidental charges or service charges was found to recoup the sale tax liability payable by the Petitioner. The onus of proof was on the Petitioner to establish that there was no excess collection of sales tax. However, the Petitioner failed to discharge the burden cast upon them rather failed to co-operate in the assessment proceedings, which is evident from the conduct in not responding to the show cause notice dated 04.01.2006. There is no error of law nor any substantial question of law arising out of consideration - appeal dismissed.
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2019 (2) TMI 249
Maintainability of petitions - availability of an efficacious alternative remedy of appeal - Jurisdiction - order passed by the Joint Commissioner, Commercial Taxes exercising the revisional powers under the U.P. Value Added Tax Act, 2008 - applicability of time limitation - Held that:- Even if the provisions of the limitation Act, 2005 are not applicable to such appeals the principles contained in Section 14 thereof would certainly apply, meaning thereby, as the petitioner has been bonafide pursuing these writ petitions against the impugned orders on the grounds mentioned therein the period of pendency of these writ petitions before this Court would be excluded in calculating the limitation for filing the appeal against the impugned orders under the relevant statute. If such an appeal is filed within a period of 15 days the same shall be decided with expedition, say, within the next six months. These writ petitions are dismissed on the ground of availability of alternative remedy.
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