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TMI Tax Updates - e-Newsletter
March 1, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Provision for doubtful overdue installments under hire purchase finance agreements - the party to be given an opportunity to establish its claim - adjustment by way of disallowing deduction by intimation u/s 143(1)(a) is not proper - HC
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Capital gains - Transfer of Property - selection of assessment year - capital gains would be taxable in the year in which such transactions were entered into, even if the transfer of the immovable property was not effective or complete for want of registration under the general law. - AT
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Deemed income u/s 56(2) - consideration for issue of shares that exceeds the face value of such shares - redeemable non-cumulative preference shares (RNCPS) - RNCPS cannot be excluded from the ambit of Section 56(2)(viib) of the Act.
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Deemed income u/s 56(2) - consideration for issue of shares that exceeds the face value of such shares - determination of fair market value - tax has to be factored while determining the net rate of return on investments. - AT
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Exemption u/s 11 and 12 - Educational institution - charging fees from the students - as per CIT(A), since sources of income are students, therefore, students cannot be reckoned as ‘property held under the trust’ and activity of imparting education also cannot be reckoned as property. - order of CIT(A) is not legal - exemption allowed - AT
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TDS u/s 194C OR 194J - tds on the services of testing and commissioning received from the BHEL - Section 194J is not a residuary clause. In other words, it is not that if a contract does not fall within the ambit of Section 194C, it must be deemed to fall within the ambit of Section 194J. - AT
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Deemed rental income - the unsold flats which are stock in trade when they were sold they are assessable under the head ‘income from business’ when they are sold and therefore the AO is not correct in bringing to tax notional annual letting value in respect of those unsold flats under the head ‘income from house property’. - AT
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Penalty u/s. 271(1)(c) - AO has charged the assessee for twin defaults - the assessee has concealed the income arose out of transfer of capital asset and failed to disclose the capital gain in its return of income that tantamount of furnishing of inaccurate particulars of income - Penalty proceedings sustained - AT
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Set off of derivative loss against derivative profit - speculative loss or not - the derivative transaction is not supported or backed by deliverable commodity - The nature of activity is carried throughout the year by the assessee is one and only one to trade in derivatives on various exchanges and earned profit or income which includes loss - assessee is eligible for set off of this loss against the profit. - AT
Service Tax
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Business Support Services - testing and analysis of newly developed drugs on human participants - The claims of the appellant are that these are clinical trial operations, exempted from service tax - demand set aside - AT
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Business Auxiliary Services - consideration received as a percentage of commission for the services rendered to ICICI Bank - the appellants are in fact engaged in promotion and marketing activity of the financial products of the client bank - demand confirmed for normal period of limitation - AT
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Levy of service tax - Debit entries made in the books for deployment of Officers - SNC, Canada cannot be categorized as a manpower recruitment or supply agency while involving deputing their own staff to execute their own contract in India - AT
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CENVAT credit - service tax paid on installation and commissioning services provided by various service providers at the site on installation of their DG sets - they are eligible to take cenvat credit of the service tax paid on the input service provided by the sub-contractors - AT
Central Excise
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Restoration of appeal - Condonation of delay - Courts of Law are not set up for mere disposal of cases. Courts of Law are established for adjudication of cases, particularly appeals so as to render justice to parties in accordance with law. - HC
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Reversal of cenvat credit - Sale of Carbon Di Oxide (Co2) without payment of duty - unintended byproduct, which emerge during the course of manufacture of the final product, would not call for payment of any particular percentage of the value of the same - AT
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Whether the appellant is required to pay penalty for wrong availment of Cenvat credit which was later reversed by them before being pointed out by the department? - Held No - AT
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CENVAT credit - there is no provision under the CENVAT Credit Rules, 2004 for denial of availment of credit merely on the ground that the assessee has admittedly deployed inputs in excess of the ideal for achieving desired output level - AT
VAT
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Issuance of C-form - failure to discharge tax liability - in taxing statute, there is no equity. If tax has not paid as declared, within the time provided there for, consequences would follow - assessee, cannot be permitted to avail the facility of on-line generation of Form C declaration. - HC
Case Laws:
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GST
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2018 (2) TMI 1717
Application for registration - CGST Act - Kerala State Goods and Services Tax Act - rejection for the reason that the petitioner did not submit the explanation sought as regards the discrepancies in the documents submitted by him - Held that: - respondent submitted that if the petitioner submits a fresh application with the requisite documents, the competent authority would certainly consider the same - If the petitioner prefers a fresh application, the same shall be considered and appropriate decision shall be taken thereon.
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Income Tax
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2018 (2) TMI 1716
Provision for doubtful overdue installments under hire purchase finance agreements - adjustment u/s 143(1)(a) relating to disallowance of the claim for bad debts under Section 36(1)(viii) - Held that:- While mere making of provision for bad debts will not by itself (on application of amended law) entitle the party to deduction, yet it would be a matter where the assessee should be given an opportunity to establish its claim. This by producing its evidence of the manner in which it treated the provision of bad debts written off in accounts as well as in its Balance Sheet. The disallowance cannot be made by intimation under section 143(1)(a) as it requires that a party be given an opportunity to establish its claim before disallowing it. It would have been a completely different matter if the Apex Court had ruled that in no case can provision for bad debts be allowed as a bad debt under section 36(1)(vii). The allowance of the claim of provision for bad debt is entirely dependent upon how it is reflected in the Balance Sheet and its accounts. Therefore, for the above purpose it is necessary that the party to be given an opportunity to establish its claim. Therefore, in the present facts, adjustment by way of disallowing deduction by intimation under section 143(1)(a) of the Act is not proper. - Decided in favour of assessee.
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2018 (2) TMI 1715
Petitions for revisions u/s 264 rejected - Held that:- This Court is satisfied that the impugned orders under Section 264 of the I.T.Act do not deserve any interference by this Court under Article 226 of the Constitution of India. The said impugned orders rightly reject the prayer of the petitioners on the ground of non- chargeability of the capital gain tax for A.Y.2006-07. Moreover, it cannot be presumed that the petitioners- assessees being ignorant of relevant provisions of the Act, could not prefer the regular appeals before the appellate authorities namely, before the CIT (Appeals) or before the ITAT in due time. The fact that the revision petitions under Section 264 was filed by them within a year of passing of the impugned assessment order on 21.03.2014 namely, on 09.03.2015 and 17.03.2015, shows that the petitioners-assessees were very well guided about the relevant provisions of the Income Tax Act and for the reasons best known to them, they avoided the appellate remedies provided in the Act. Even otherwise, the ignorance of law is no excuse and no such presumption as prayed for, can be drawn in favour of the petitioners-assessees. Therefore, the fact that the assessee - petitioners preferred these Revision petitions under Section 264 of the Act just before the expiry of one year of the impugned assessment orders passed by the Assessing Authority, on the contrary reflects that the petitioners-assessees were very conscious and aware of the legal provision and deliberately avoided the availing of the regular remedy by way of an appeal and at the nick time of the expiry of the time period, preferred the present revision petition under Section 264 of the Act, which for good reasons, came to be dismissed by the learned Prl.Commissioner of Income Tax.
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2018 (2) TMI 1714
Taxation on disputed amounts credited as project receipts to the profit and loss account - Held that:- We find that the impugned order of the Tribunal has restored the issues raised herein to the Assessing Officer for a fresh consideration. Mr. Pinto, learned Counsel appearing for the Revenue states that consequent to the restoration, the Assessing Officer has already passed an order dated 2nd March, 2015 in favour of the Revenue. No substantial question of law. Allowability of prior years expenditure - Method of accounting - Held that:- The respondent assessee is following the completed contract method. Therefore, the respondent assessee claims that his contract was completed in the subject assessment year and income was offered to tax after deduction of expenditure incurred over the entire period of the contract. It is not disputed by the Revenue before us that the respondent assessee has followed the completed contract method of accounting. Tribunal has correctly allowed the expenditure which was incurred and revenues earned in the earlier years during the progress of the contract as they are taken into account in the subject assessment year to determine its profits. Also this manner / method of determining profits stands concluded by the decision of the Supreme Court in Commissioner of Income Tax Vs. Bilahari Investment P. Ltd. [2008 (2) TMI 23 - SUPREME COURT] as held as under the completed contract method, the revenue is not recognised until the contract is complete. Under the said method, costs are accumulated during the course of the contract. The profit and loss is established in the last accounting period and transferred to the profit and loss account. The said method determines results only when the contract is completed. No substantial question of law.
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2018 (2) TMI 1713
Expeditious disposal of the appeal and the stay application filed - Held that:- Such authorities even without any specific direction from the Constitutional Courts are expected to decide the appeal expeditiously and if that is not practically possible, at least, to decide the stay applications filed for interim relief as expeditiously as possible, so that no unnecessary prejudice is cause d to the appellants. The appellant-assessee in the present case is said to have filed the separate stay petition also before the Commissioner of Income Tax (Appeals) which is not yet decided. The present writ petition is therefore considered as premature and the same is disposed of with a liberty and direction to the petitioner to appear before both the concerned Respondents-authorities, namely, the Commissioner of Income Tax (Appeals) and the Assessing Authority and pursue for disposal of its stay application before the Commissioner of Income Tax (Appeals) and application under Section 220(6) of the Act before the concerned Income Tax Officer.
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2018 (2) TMI 1712
Reopening of assessment - Carry forward loss under Section 79 denied - reopening beyond the period of four years - non independent application of mind by A0 - Held that:- The reasons in support of the impugned notice itself records the fact that the issue of shareholding pattern of the company was discussed by the Assessing Officer in his Assessment order passed in the regular assessment proceedings. The only basis of reopening is that the Assessing Officer in the regular assessment did not apply provisions of Section 79 of the Act, to determine the taxable income. This non-application of mind by the AO while carrying out assessment cannot lead to the conclusion that there has been any failure on the part of the Assessee to truly and fully disclose all material facts necessary for Assessment. The impugned order of the Tribunal correctly placed reliance upon the decision of the Supreme Court in Calcutta Discount Company Ltd (1960 (11) TMI 8 - SUPREME Court) to hold that not pointing out the inference to be drawn from facts will not amount to failure to disclose truly and fully all material facts, necessary for assessment. - Decided in favour of assessee.
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2018 (2) TMI 1711
Penalty under Section 271 (1)(c) - Non accounting for interest receivable as well as interest payable in respect of the amalgamating companies - Held that:- Respondent-Assessee had bona fide taken policy decision of not accounting for interest receivable as well as interest payable in respect of the amalgamating companies. This claim of not accounting for interest, was made on full disclosure and on the basis of policy decision. This also resulted in the Respondent-Assesssee not taking the benefit interest expenditure, thus, resulting in higher taxable income. Moreover, non-acceptance of the claim of the Assessee, by the Revenue would not by itself lead to penalty as held by the Apex Court in CIT v/s. Reliance Petrochemicals Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT] - Decided in favour of assessee.
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2018 (2) TMI 1710
Addition on account of sundry creditors - no compliance of the notice u/s 133(6) - Held that:- No exercise has been done so as to virtually see what is the outcome of notice issued under section 133(6) nor any enquiry or possible efforts were made by the Assessing Officer regarding the same. The disallowance was made only for the reason that there was no compliance of the said notice under section 133(6) of the Act by M/s Larsen & Toubro Limited. We have also to understand the practical position of the fact that M/s Larsen & Toubro Limited doing huge business in India will always as expected to keep their books of account proper and transactions perfect. It is seen that all the transactions are made through banking channel. The Department has not doubted the genuinity of the transactions, therefore, we are of the considered view that as for the facts discussed hereinabove, there is no infirmity with the findings of the ld. CIT(A) in deleting the addition Disallowances of expenses claimed by the assessee under various heads - CIT-A restricted part disallownace - Held that:- Since the assessee is a proprietorship concern, the element of personal use of telephone and vehicle cannot be ruled out. But we find that the disallowances made by the Assessing Officer are on higher side and the disallowance restricted by the ld. CIT(A) to the extent mentioned above are quite reasonable and, therefore, we find no infirmity in the order of the ld. CIT(A) in restricting the disallowances to the extent mentioned. Revenue appeal dismissed.
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2018 (2) TMI 1709
Disallowing assessee’s claim of set off of derivative loss against derivative profit treating the same as speculative loss - AO applied the provisions of sections 43(5)(d) of the Act and bifurcated the earnings for the recognized stock exchanges and non-recognized stock exchanges - Held that:- We are of the view that the derivative trading in commodity is to be considered as one business and the net income from the same should be assessed as business income of speculation business, since section 43(5) does not exclude commodity trading during the year. The assessee is member of MCX and he has to carry out transaction on another exchange because on MCX there was no volume in commodity like Coper, Crude Oil, Silver etc. and also there was difference in lot size of the commodity in Lead, Gold etc. Further in MCX exchange, some time, the trading limit exhausted and hence he has to approach other brokers of other exchange to continue the activity. The assessee on ICEX exchange earned profit in Lead and Gold commodity and incurred loss in Iron Ore. Thus, the observations of the AO that the transactions carried out in the last two months of the year has no relevance to the business activity of derivative trading is of no substance. The commodity transactions are not covered by section 43(5)(d) of the Act. From the above definition it is clear that commodity derivative trading is not covered by Securities Control (Regulation) Act, 1956 and therefore the provision applied by the AO is against the facts of the case. The assessee is exclusively carrying on business of derivative trading on various exchanges and the transaction entered into derivative on various exchanges is his business activity whether considered as speculative or non speculative transaction as per section 43(5), the derivative transactions are not speculative transaction, in view of the fact that the derivative transaction is not supported or backed by deliverable commodity. The assessee is not claiming any special deduction under section 43(5)(d) for treating the profit as business profit. The nature of activity is carried throughout the year by the assessee is one and only one to trade in derivatives on various exchanges and earned profit or income which includes loss. In such facts, we are of the opinion that the assessee is eligible for set off of this loss against the profit. We reverse the orders of the lower authorities and allow the claim of the assessee. - Decided in favour of Assessee.
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2018 (2) TMI 1708
Penalty proceedings u/s. 271(1)(c) - validity of notice issued u/s 274 - addition of the capital gain arising from the transfer of the capital asset - contention of the assessee is that the transaction was not detected by the revenue, it was volunteer disclosure of the assessee during the assessment proceedings - Held that:- AO has charged the assessee for twin defaults. Under the facts of the present case, same is rightly done as the assessee has concealed the income arose out of transfer of capital asset and failed to disclose the capital gain in its return of income that tantamount of furnishing of inaccurate particulars of income. We, therefore, do not see any infirmity into the order of the authorities below. - Decided against assessee
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2018 (2) TMI 1707
Deemed rental income - Addition of notional annual letting value of unsold flats held as stock in trade - Income from house property - Held that:- In the case on hand before us it is an undisputed fact that both assessees have treated the unsold flats as stock in trade in the books of account and the flats sold by them were assessed under the head ‘income from business’. Thus we hold that the unsold flats which are stock in trade when they were sold they are assessable under the head ‘income from business’ when they are sold and therefore the AO is not correct in bringing to tax notional annual letting value in respect of those unsold flats under the head ‘income from house property’. Thus, we direct the AO to delete the addition made under Section 23 of the Act as income from house property. - Decided in favour of assessee.
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2018 (2) TMI 1706
Disallowance of various administrative expenses on the ground that no business activity was carried on by assessee - expenses incurred in connection with the rental income - Held that:- In the absence of the information provided we are of the view that all the expenses incurred by the assessee cannot be treated as business expenses. Justice shall be served if the disallowance made by the AO is restricted to the reasonable extent. We restrict the disallowance to the extent of 10% of the expenditure as discussed above. Thus the ground of appeal of assessee is partly allowed. Addition on account of capital gains - applicability of provision of Sec. 2(47) r.w.s. Sec. 53A of Transfer of Property Act - selection of assessment year - Held that:- Any transaction entered into in any manner which has the effect of transferring or enabling the enjoyment of any immovable property amounts to transfer under section 2(47) of the Act. Accordingly capital gains would be taxable in the year in which such transactions are entered into, even if the transfer of the immovable property is not effective or complete by way of registration under the general law. Under section 2(47)(v ) any transaction involving allowing of possession to be taken over or retained in part performance of a contract of the nature referred to in section 53A of the 1882 Act would come within the ambit of section 2(47)(v). In order to attract section 53A, therefore, there should be an agreement for consideration; it should be in writing; it should be signed by the transferor, it should pertain to transfer of immovable property; the transferee should have taken possession of the property and the transferee should be ready and willing to perform his part of contract. Therefore, capital gains would be taxable in the year in which such transactions were entered into, even if the transfer of the immovable property was not effective or complete for want of registration under the general law. Therefore, the taxability of capital gains at the hands of the assessee did not fall in the assessment year 2012-2013. Thus the ground of appeal raised by the assessee is allowed.
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2018 (2) TMI 1705
Bogus purchases - rejection of books of accounts - notice u/s 133(6) - addition equivalent to 25% of the purchases - profit determination - Held that:- Once the AO has rejected the books of accounts by invoking the provisions of section 145(3) the income of the assessee was required to be assessed on the basis of a reasonable and proper estimates. We set aside the matter to the record of the Assessing Officer for determination of the income of the assessee on the basis of the proper and reasonable estimates as well as best judgment by applying GP or NP rate. We may clarified that even after rejection of books of accounts it may not necessarily resulting a trading addition if the GP rate declared by the assessee is found to be more than the Bench Mark to be applied by the AO. Hence, the AO is directed to apply the proper GP rate on the basis of past history of the assessee.
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2018 (2) TMI 1704
Eligibility to deduction u/s 80IB - Vishesh Krishi Upaj Yojana and Drawback Duty - Held that:- In the case in hand, the assessee was not denied the eligibility of deduction u/s 80IB but only a particular receipts/income has been held as not eligible for deduction u/s 80IB on the ground that it is not an income derived by the industrial undertaking. A particular receipt which is found to be not income/profit derived from the business of the eligible undertaking has to be excluded for the purpose of computing the deduction u/s 80IB. The case of the assessee does not fall in the category where the AO has accepted the business of the assessee undertaking as eligible for deduction u/s 80IB in the initial year but has taken a difference stands in the subsequent years. A year before us is not the first year in which the claim of the assessee u/s 80IB in respect of Vishesh Krishi Upaj Yojana and Drawback Duty has been denied but this was denied in the earlier years and for the Assessment Year 2008-09, the matter has been carried to the Hon’ble Jurisdictional High Court but the assessee could not succeed. - Decided against assessee.
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2018 (2) TMI 1703
Deduction u/s 80 IA(5) - eligibility criteria - profit from eligible busniss - Held that:- In this case, the assessee is into two segment of business i.e. construction business which is non eligible and power generation business which is eligible business u/s 80IA of the Act. Admittedly, the assessee has set up 5 wind mills out of which two wind mills are set up in the financial year relevant A.Ys. 2005-06 and 2006-07 and remaining 3 wind mills have been set up during the financial year relevant to A.Y. 2011-12. All 5 wind mills are situated at different locations and commenced production at different point of time. All 5 wind mills are eligible units for deduction u/s 80IA. The assessee has derived profit from 2 wind mills and incurred losses from 3 wind mills. The assessee has claimed deduction u/s 80IA in respect of profit of 2 wind mills without set off of losses of 3 wind mills, considering each wind mill as a separate unit eligible for deduction u/s 80IA of the Act. We are of the considered view that the assessee s claim of deduction u/s 80IA is in accordance with the provisions of section 80IA(5). Hence, we direct the AO to allow deduction claimed u/s 80IA. - Decided in favour of assessee Allowability of depreciation on wind mill against income from construction business - Held that:- Income from each source of business shall be computed separately after allowing all expenses including depreciation, for the purpose of determination of total income from business or profession, unabsorbed depreciation of other source of business can be set off against income of another source of business within the same financial year. Even otherwise, depreciation loss of one source can be set off against profit of other source within the same head of income. Therefore, we are of the considered view that the AO was erred in disallowing the depreciation of wind mills against income from construction business. - Decided in favour of assessee Addition towards provision for outstanding expenses - Held that:- Admittedly, the project on which the liability relates is completed and revenue from the project has been recognized, accordingly the assessee needs to provide all related expenses in respect of the project. Further, the said liability cannot be considered as contingent liability as the liability has been ascertained and crystallized, the moment the competent authority passed order for payment of ULC charges. The writ petition filed before the Hon ble High Court of Bombay is not relevant to decide whether the said liability is ascertained liability or contingent in nature and what is relevant is the order of the competent authority which is demanding ULC charges. If the assessee gets favourable order from the Hon ble High Court of Bombay, and liability is no longer payable then the said provision can be reversed and liable to tax u/s 41(1) in the year in which such reversal has been made. Therefore, we are of the considered view that the AO was erred in disallowing the outstanding expenses in respect of ULC charges. The CIT(A) without appreciating the facts simply upheld the findings of the AO.- Decided in favour of assessee
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2018 (2) TMI 1702
Addition u/s 68 - unsecured loans received by assessee from various persons - Held that:- AO has not made proper inquiries in respect of loan creditors other than Mohit Gaur and Kanishk Sharma. In fact Ld.CIT(A) himself records that in the accounts of other loan creditors there were corresponding cash entries. Thus the credit worthiness & genuineness of transactions with remaining creditors have not been established by assessee as required u/s 68. Thus, in our view, Ld.CIT(A) was wrong in deleting the entire addition. Therefore we confirm the addition to the extent of credit entries other than of Sh.Mohit Gaur and Sh.Kanishk Sharma. - Decided partly in favour of assessee. Deemed dividend u/s 2(22)(e) - Held that:- It is not disputed that assessee had advanced loans to the company during the year under consideration and company has returned back this money to assessee. Here assessee being a share holder has advanced loans to the company, which do not fall within the ambit of provisions of s.2(22)(e) of the Act - Decided in favour of assessee
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2018 (2) TMI 1701
Disallowance of lease rent - Held that:- CIT has allowed the assessee a deduction of ₹ 2,40,000/- per annum for both the years under consideration and has disallowed the remaining amount i.e. ₹ 12.60 lakh. During the course of proceedings before us, the Ld. AR has only relied on the findings of the ITAT in assessee’s own case for earlier years as aforementioned and he has not brought out any new fact or evidence in support of his contention for allowance of an amount exceeding ₹ 2,40,000/- per annum. Accordingly, we hold that as the Ld. CIT (A) has already allowed a deduction of ₹ 2,40,000/- per annum to the assessee for both the years under consideration, no further relief needs to be extended to the assessee in this regard. - Decided against assessee Disallowance of business expenditure - addition on the ground that the same was personal in nature - Held that:- The impugned expenditure has been incurred on buying car accessories for a vehicle which is not owned by the assessee company but by the employee of the company. Accordingly, we uphold the sustenance of disallowance by the Ld. CIT (A) in both the years under consideration - Decided against assessee Disallowance of amount incurred on repair and maintenance of computers - Held that:- We agree with the averments of the Ld. AR that these expenses were incurred to keep the assets of the assessee-company in a running condition and they were essentially in the nature of routine repair and maintenance expenditure. The department has also not brought on record any finding of fact that a new asset had been created by spending these amounts. Therefore, we allow ground of the assessee’s appeals Assessment of income earned by the assessee by providing services under the head income from business - Held that:- This issue is covered in favour of the assessee by the order of the ITAT in assessee’s own case for assessment years 2002-03, 2003- 04 and 2006-07 as noted that the assessee had been offering income from consultancy etc. as a business income and the same had been duly accepted by the department since 1988-89. ITAT has further noted that the Assessing Officer, without assigning any valid reason, concluded that it was income from other sources. The ITAT has also noted that the assessee, right from assessment year 1988-89 had been providing various types of services to its franchisees in India and also to its Associated Enterprises. Thereafter, the ITAT upheld the adjudication of the Ld. CIT (A) in holding that the services income received was chargeable as business income. - Decided against revenue Addition on account of royalty expenses - Held that:- in the approval, Secretariat of Industrial Assistance (SIA), Govt. of India has used the expression ‘royalty’ as well as ‘Fee for technical services’ loosely and interchangeably. It was also noted by the ITAT that these payments were directly related to the business and were incurred wholly and exclusively for running the franchisees within India. This adjudication by the ITAT in assessee’s own case also for assessment years 2004-05, 2005-06, 2007-08 and was also upheld by the Hon’ble Delhi High Court. During the course of proceedings before us, department could not point out any legal or factual error in the adjudication so reached by the Ld. CIT (A).- Decided against revenue Claim of depreciation on transferred assets - Held that:- The facts surrounding this issue are that during the previous year 1988-89 relevant to assessment year 1989-90, some restaurants in Delhi were sold by the assessee on an itemized sale basis wherein all the fixed assets pertaining to these outlets stood transferred to the buyer. The consideration received was appropriated against the security deposit and advance rentals of the restaurants and all fixed assets were transferred at nil consideration. Since no separate sale consideration was received in respect of fixed assets, no reduction was made on account of the same in the block assets and the block of assets continued to exist and, therefore, depreciation was claimed in respect of block of assets. This issue is also covered in favour of the assessee by the order of the ITAT for assessment years 2002-03, 2003-04 and 2006-07 in assessee’s own case - Decided against revenue Addition on account of prior period expenses - Held that:- As it is the assessee’s contention that these expenses were claimed during the year under consideration because the invoices relating to these expenses were received by the assessee during the year under consideration and, therefore, the liability to pay the amounts crystallized only when the invoices were received, CIT (A), while allowing the claim of the assessee in both the years, has followed his orders for earlier assessment years wherein in similar circumstances, he had allowed identical expenses of earlier years. The department could not bring on record any evidence to distinguish the facts in these two years from the facts in earlier years - Decided against revenue Disallowance of 50% of administrative expenses - Held that:- The assessee had entered into a tripartite agreement with its franchisee and the subsidiary company wherein it was provided in the tripartite agreement that the franchisee was to pay advertisement and promotional contribution and the assessee company may not pay a separate contribution. The coordinate bench of the ITAT went on to note that the subsidiary was to carry out on no-profit/no-loss basis. The Coordinate Bench of the ITAT held that AO had disallowed the expenses attributable to the subsidiary but the disallowance was not correct as ultimately it was the assessee who had to contribute all the sums as the assessee can either bear the cost of expenses incurred by the subsidiary or separately remit the amount to the subsidiary and, thus, it was the assessee who had to essentially contribute the amounts. - Decided against revenue Addition made on account of Supply Chain Management and reimbursement of expenses received from M/s Pizza Fast Food Pvt. Ltd. - Held that:- ITAT’s order for assessment year 2002-03 went on to hold that it would create unnecessary complications by excluding these receipts from assessment year 2002-03 and include them in assessment year 2001-02. Thus, it is evident that the ITAT has held that the impugned receipts on account of Supply Chain Management as well as reimbursement of general and administrative expenses were to be taxed in assessment year 2002-03. Once these have been taxed in assessment year 2002- 03, there is no question of bringing them to tax in assessment year 2001-02.
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2018 (2) TMI 1700
TDS u/s 194C OR 194J - tds on the services of testing and commissioning received from the BHEL - Held that:- Identical issue has been decided by the Hon’ble Punjab and Haryana High Court in Pr. CIT Vs. Bharat Heavy Electricals Ltd [2016 (12) TMI 955 - PUNJAB AND HARYANA HIGH COURT] as held that the contract entered into between the respondent and each of the contractors, therefore, did not involve the supply of professional or technical services at least within the meaning of Section 194J. The consideration paid under the contracts, therefore, was not for the professional or technical services rendered by the contractors to the respondent. Section 194J is, therefore, not applicable to the present case. Section 194J is not a residuary clause. In other words, it is not that if a contract does not fall within the ambit of Section 194C, it must be deemed to fall within the ambit of Section 194J. As the respondent has accepted that it falls within Section 194C and has complied with its obligations thereunder, we refrain from deciding the issue as to whether it falls within Section 194C. Departmental Representative could not point out that how the services are different from the nature of services considered before the Hon’ble High Court. No other contrary decision was also pointed out before us. - Decided in favour of assessee.
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2018 (2) TMI 1699
Disallowance u/s 36 (l) (iii) - Penalty proceedings u/s.271(l)(c) - Held that:- Interest expenditure of ₹ 19,92,128/- is disallowed in view of the provisions of Sec.36(l)(iii) of the Act and added back to the total income of the assessee company. Penalty proceedings u/s.271(l)(c) of the Act are initiated for furnishing inaccurate particulars of income and thereby concealment of income. It is pertinent to clarify that, the assessee company has paid interest of ₹ 4,80,110/- to Lily Enclave Pvt. Ltd. In this regard on verification of the record of the assessee company for the A.Y.2009-10, it is noticed that, the unsecured loan received from Lily Enclave Pvt. Ltd. has been treated as unexplained cash credit u/s.68 of the Act vide order u/s.153C / 153A r.w.s. 143(3) of the Act dated 30/12/2011. The said unexplained cash credit has been confirmed by the Ld.CIT(A)-III, Ahmedabad. Therefore, interest expenditure to the extent of ₹ 4,80,110/- is not allowed. However, no separate addition is made since the entire interest expenditure has been disallowed, as discussed above. Disallowance u/s 35D - Held that:- As we can see from the memorandum and articles of association of Taxworld Fashions Private Limited company main business is not a rental business. Appellant shows that as per balance sheet of the appellant company, it is shown that it is plea of CEPT plant to be under consideration. Further, the nature of business of the appellant is manufacturing and trading of cloth, but appellant had made statement before the lower authorities that rental income of ₹ 72,00,000/- earned during the year was its business income. After going through the record, we can see that appellant yet to start its business. So in our considered opinion, we are not convinced with the argument of the ld. AO but direct the AO to capitalize ₹ 72,00,000/- and allow depreciation. So far as disallowance u/s.35D of the Act is concerned appellant had not started its business activity and even the plant and building are still under construction. The appellant has merely stated in its submission that it had not business activity of plant and machinery under construction. But this fact is not correct because no business activity has been shown by the appellant and no supportive documents have been filed by the appellant during the year under consideration. In audit to get deduction u/s.35D of the Act must against the manufacturing our business activities. So in our considered opinion, this ground cannot be allowed.
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2018 (2) TMI 1698
Addition of closing stock valuation - Held that:- The assessee’s impugned closing stock valuation is very much bonafide one in tune with accounting standard no.2 adopting for the first time in the current assessment year. Hon’ble jurisdictional high court’s judgment in CIT vs. Atul Products Ltd. [2001 (2) TMI 28 - GUJARAT High Court] holds that such an addition of sum difference reducing taxable income in case of change in stock valuation method is not sustainable as a resultant effect. DR next refers to assessee’s survey statement. This latter plea is not found germane to the instant issue since the CIT(A) has already concluded in his operative part that the preceding round of assessment had already dealt with this survey statement aspect. We therefore see no reason to interfere with the CIT(A)’s findings extracted hereinabove deleting the impugned addition. - Decided in favour of assessee
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2018 (2) TMI 1697
Addition towards difference in contractual receipt reported in the return with that reflected in Form 26AS - Held that:- It is not in dispute that L&T had carried out rectifications in the account of the assessee and had accordingly updated its TDS returns which consequently had resulted in lesser contract receipts in the updated Form 26AS. The reliance placed on the updated Form 26AS by the assessee and filed before the ld CIT-A cannot be considered as an additional evidence filed before ld CITA as it is the document within the domain of the income tax department. Moreover, the ld CIT-A had only directed the ld AO to verify the said transactions with updated Form 26AS, which in our considered opinion, is fair and reasonable. The revenue cannot ask for any more opportunity than this. The interest of the revenue had been properly taken care by the ld CIT-A while directing the ld AO as above - Decided against revenue Receipt in the nature of contractual receipt OR rental income - Held that:- We find that the assessee had actually shown the machinery hire charges from L&T Ltd in the sum of ₹ 7,88,104/- and included the same in the gross contract receipts and hence there is no scope of making any separate addition towards the same as rental income. This has been rightly considered by the ld CITA and accordingly we do not find any infirmity in his order.- Decided against revenue Addition of the Principal amount from which the interest was earned - Held that:- We find that the ld AO had merely back worked the interest amount and assumed an interest rate of 8% p.a. and arrived at the principal portion at ₹ 4,00,000/- . This is absolutely without any basis. We find that the entire addition has been made only based on surmise and conjecture which has been rightly deleted by the ld CIT-A.- Decided against revenue Disallowance of wages - AO treated the expenditure of January 2011 on wages account for TISCO site at Jamshedpur as expenditure not recorded in the books of account - Held that:- CITA observed that this submission of the assessee was not supported by any evidences and hence upheld the disallowance of the ld AO. We find that the ld CIT-A had rightly upheld the disallowance in the facts and circumstances of the case and does not deem it necessary to interfere with the said order in this regard. Disallowance u/s 40(a)(ia) - TDS u/s 194C - Held that:- no evidences were submitted by the assessee to prove that the provisions of section 194C of the Act are not applicable to him in the instant case. Accordingly, we hold that the disallowance was rightly made by the ld AO u/s 40(a)(ia) of the Act. With regard to the other claim of the assessee that the amounts were duly paid before the end of the previous year and accordingly, the provisions of section 40(a)(ia) of the Act would be applicable only for amounts payable at the end of the year is concerned, we find that the said issue is now settled in the case of Palam Gas Service vs CIT (2017 (5) TMI 242 - SUPREME COURT) wherein it was held that section 40(a)(ia) covers even the amounts paid before the end of the previous year. - Decided against assessee.
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2018 (2) TMI 1696
Late fee charged under section 234E for belated filing of TDS returns - Held that:- Fee under section 234E could be levied in the relevant financial year in question even in the absence of a regulatory provision i.e. section 200A of the Act. It was thus open to the Revenue to charge the fee stipulated in section 234E of the Act even prior to the amendment brought under section 200A of the Act w.e.f. 01.06.2015. With the amendment, the adjustment has been brought within the fold of section 200A of the Act. Hence, as held, the amendment is clarificatory in nature. We note from the decision of the Hon’ble Gujarat High Court that section 200A is not a source of substantive power. Substantive power to levy fee could be traced to section 234E of the Act. See RAJESH KOURANI Versus UNION OF INDIA [2017 (7) TMI 458 - GUJARAT HIGH COURT] We decline to interfere with the action of the Revenue towards invoking section 234E of the Act for levy of late filing fee appealed against. - Decided against assessee.
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2018 (2) TMI 1695
Reopening of assessment - Unexplained investments addition made u/s 69 - Held that:- In the present case investments of jewellery is duly reflected in the books of accounts of the assesses. Therefore there is no scope of applying the provision of section 69. Apart from the above source of funds is evidenced by the payments from disclosed bank accounts. Therefore the source of investments is also properly and satisfactorily explained by the assesses. The additions made by the AO and confirmed by CIT(A) cannot be sustained and the same is directed to be deleted. - Decided in favour of assessee.
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2018 (2) TMI 1694
Revision u/s 263 - as during assessment proceedings AO did enquire about the disallowance u/s 14A - Held that:- Order passed by Ld. CIT is not sustainable in view of the fact that AO has already examined this aspect and has already made a disallowance. The provisions of section 263 are not applicable in a case where the AO had examined a particular issue and had taken a plausible view. Moreover, we find that it is an admitted fact that assessee had not received any exempt income during the year. The Hon'ble Delhi High Court in the case of CIT Vs. DLF Ltd. [2012 (9) TMI 626 - DELHI HIGH COURT] while deciding the appeal filed by revenue against the Tribunal order, quashing the order u/s 263 has again held that where there is no exempt income, no disallowance can be made u/s 14A of the Act. In this case, the assessee had even received some exempt income also even then the Hon'ble Court held that the disallowance u/s 14A was a debatable issue and therefore the view taken by the Assessing Officer was sustainable one and therefore section 263 was not applicable - Decided in favour of assessee.
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2018 (2) TMI 1693
Deemed income u/s 56(2) - consideration for issue of shares that exceeds the face value of such shares - redeemable non-cumulative preference shares (RNCPS) - fair market value - Liquidity crunch leading to default in contractual obligation by the assessee in the future years - Held that:- The argument of the assessee that RNCPS is a quasi-debt and that it was not the intention of the legislature to bring such instruments within the ambit of this Section, is devoid of merit. - RNCPS cannot be excluded from the ambit of Section 56(2)(viib) of the Act. When the assessee’s outflow by way of dividend is 0.1 per cent on RNCPS, the requirement of having huge cash inflows does not arise specifically when the assessee is an investment company. The contention of the assessee that the current market value of its investments in equity shares of M/s.Manga Fincorp Ltd. is ₹ 595.76 Crores and that he can, any day sell these investment and redeem the preference shares amounting to ₹ 41 Crores only, has force and the conclusion of the Assessing Officer on the issue of liquidity, possible cash crunch resulting in reduction of credit rating etc. is wrong on facts and hence devoid of merit. Thus this finding of the Assessing Officer and arguments of the ld. DR, is rejected. AO has taken contradictory stand on this issue. On the one hand he held that the assessee is a possible defaulter and on the other hand determined the premium chargeable on RCPS at ₹ 1,270/- per share of ₹ 10/-. There is no gain saying that a defaulter cannot command a premium on its shares. In fact from an investors perspective, no investment would be made in such cases. In this case an unrelated 3rd partly also invested. It can be assumed that such investments are done after due diligence. Hence this contention of the assessee is accepted. Whether while determining the rate of return Income Tax payable has to be factored or not? - Investor, when he has to make a choice as to whether he should invest in a debt instrument or in equity shares, the tax factor is necessarily considered, as what is crucial is the take home return on investment. Growth in value of investments, safety and other factors are also the basis of decision making. Dividend on equity shares does not attract any tax and whereas interest on debt instruments and even interest on fixed deposits, do attract Income Tax. Thus, the arguments that Income Tax should not be factored while considering the rate of return from debt instruments while comparing the same with the rate of return on equity instruments is devoid of merit. In our view, tax has to be factored while determining the net rate of return on investments. Whether home loan interest rate has to be taken for the purpose of bench marking, we are of the view that it would not be correct to do so on the facts of this case. Home loans can be given by Banks and other NBFCs which are in the business of giving loans and advances and which have taken regulatory approvals to do so. Home loans are generally secured loans. A choice of investment can be a fixed deposit or bonds issued by the Government or the Reserve Bank of India or debentures issued by various companies, when the investor seeks to invest in debt instruments. In equity shares or preference shares etc. in case he chooses to invest in equity. Thus taking home loan interest rates for the purpose of bench marking, in our view is highly erroneous as the investor has no choice or possibility of advancing housing loan. Rate of return that has to be bench marked in this case - the discount factor arrived at by the Assessing Officer, in our view is not based on relevant material. The objections of the Assessing Officer to valuers report are devoid of merit as pointed out by us in the earlier paragraphs of this order. The ld. CIT(A)’s view is an ad-hoc view and has to be necessarily rejected. We also give weightage to the fact that an unrelated independent investor has invested in these RNCPS on the terms and conditions, at this Fair Market Value of ₹ 2,000/- per share. Thus this rate of ₹ 2,000/- per share is the Arms’ Length Price, on the facts of this case. Hence, we have to hold that these RNCPS, were issued at a fair market value. Hence we uphold the fair market value determined by the valuer and vacate the valuation arrived at by the Assessing Officer as well as the ld. CIT(A). Thus the addition made u/s 56(2)(viib). Disallowance u/s 14A - Held that:- AO has recorded a specific finding that he is not satisfied with the correctness of the claim of the assessee on the disallowance u/s 14A of the Act. Thus, this argument of the assessee that no satisfaction is recorded by the Assessing Officer in not factually correct. Hence this argument of the ld. Counsel for the assessee is rejected. We find that the ld. CIT(A) has set aside the issue of qualification of disallowance u/s 14A to the Assessing Officer, with certain directions. The Ld. CIT(A) has no power to set aside any issue or the appeal itself after the amendment to Section 251 of the Act, w.e.f. 01/06/2001. In any event, the issue has to be considered afresh by the Assessing Officer as all relevant factors have not been considered as pointed out by the ld. CIT(A). No expenditure was allowed against earning of interest income.
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2018 (2) TMI 1692
Eligibility for exemption u/s 11 and 12 - Educational institution - charging fees from the students - CIT(A) observed that assessee is not eligible for exemption u/ss.11 and 12, once the provision of Section 10(23C)(iv) and (v) are applicable - According to CIT(A), since sources of income are students, therefore, students cannot be reckoned as ‘property held under the trust’ and activity of imparting education also cannot be reckoned as property. - Held that:- Legislature did not intend to Rule out Section 11 when exemption was claimable under specific provision of Section 10. See CIT vs. Bar Council of Maharashtra, (1981 (4) TMI 8 - SUPREME Court). Section 11(1)(d) refers to voluntary contribution received by the charitable trust which forms part of the corpus which legislature has considered to be capital receipt not chargeable to tax. Section 11 refers to voluntary contribution other than the ones falling u/s. 11(1)(d) thereby treating it as property held under the trust. Further, Section 11 envisages that revenue consideration shall be deemed to be income derived from property held under the Trust. CIT (A) was incorrect in law in holding that contribution received by way of fees from the beneficiaries is not an income from the property held under the trust. The assessee school has been charging fees only from its students and there is no capitation fee at all. Such fees have been charged from the students for the running of the school and has been applied for its dominant purpose/object of carrying out educational activity. In this case one of the main objection raised on behalf of the department was that said Board was not entitled for the benefit of Section 11 as it was not a trust under the ‘Public Trust Act’ and therefore, it was not entitled to claim registration u/s. 12A. Since it was not held under the trust therefore, it is not entitled for exemption u/s. 11(1)(a). The assessee society which has been registered under ‘Registration of Societies Act, 1860’ with the sole object of providing education and has a legal obligation for applying its income for such charitable purpose, then for the purpose of Section 11 it has to be treated as trust and income derived from carrying out such obligation has to be reckoned as income derived from property under the trust and therefore, on the ground also as raked by the CIT (A), exemption u/s.11 cannot be denied. Accordingly, we hold that none of the observations and the finding of the CIT(A) are sustainable and the grounds taken and the reasoning given by him to deny the benefit/exemption u/s.11 to the assessee cannot be upheld either in law or on facts. Accordingly the entire receipts which has been taxed under the head ‘income from other sources’ is set aside and we direct the AO to grant exemption u/s.11 as per the income and expenditure account submitted by the assessee. - Decided in favour of assessee.
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2018 (2) TMI 1691
Additions made in pursuance of Sec. 153A - Held that:- Since there is no incriminating material unearthed during search in respect of the concluded assessments, no addition/disallowance could be made by the AO for AYs 2009-10, 2010-11, 2011-12 and 2013-14. Therefore, the addition/disallowance made in impugned assessments for the AYs 2009-10, 2010-11, 2011-12 and 2013-14 are ordered to be deleted. Also as assessee has already made claims arising from BIFR order in the regular appeals before Ld.CITA) from the completed original assessment already made before search, because BIFR order dated 04.09.2012 was received later on i.e. after the original assessment was completed u/s 143(3) of the Act in certain years. The appellate proceedings before the Ld. CIT(A) from original assessments is a continuation of the assessment proceeding itself and the assessee can make a fresh claim before the Tribunal/Ld.CIT(A). Thus direct deletion of additions made in pursuance of Sec. 153A proceedings in these assessment years. Consequently, pending assessment proceedings before AO on the date of search, got abated and sec. 153A proceedings against the assessee is valid in respect of AYs. 2012-13 and 2014-15 and scrutiny assessment for AY 2015-16 u/s. 143(3) of the Act is valid Aggregation of WDV of block of assets - Held that:- Since the assets of M/s.MSL after amalgamation have become assets of assessee company by operation of Law it falls in to the “Block of assets” of the assessee company from 01.04.2009 and though such assets, non-functional, yet they cannot be segregated and depreciation has to be allowed taking the first year as AY 2010-11 onwards and WDV to be calculated for AY 2012-13 as discussed above and we order the AO to calculate the WDV accordingly and allow the same in accordance to law. Grounds 6, 7 and 8 for AY 2012-13 are therefore stands allowed. Disallowing the claim of assessee in respect to brought forward loss and claim of allowance of unabsorbed depreciation in the light of BIFR sanctioned scheme - Held that:- So far as former objection is concerned, the same is factual and AO is directed to allow the claim after considering the availability of losses for the instant year subject to the claims made in the preceding year in the light of the observations and decision given in the preceding paras. However as regards the latter is concerned, the fact that losses claimed and allowed in the instant year may or may not result in taxable income in succeeding years does not change the legal effect of a claim in the instant year. Since we have already held that the claim in the instant year is maintainable, the issue of taxability of said claim in any subsequent year doesn’t arise. We therefore reject the contention of the Revenue in not allowing the losses fully and also the taxability of the sum in subsequent year. We therefore, also reject the aforesaid objection of the AO.
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2018 (2) TMI 1690
Assessment on the basis of the voluntary statement - Surrender u/s 132(4) - retraction of statement - Held that:- Surrender made by the assessee is not supported by any incriminating material or evidence unearthed during the course of search or has been found during the course of the assessment proceedings. Accordingly the revenue’s appeal is dismissed. Jewellery found from the residence and was found from the locker - addition to income - Held that:- A document was found from the possession of the assessee which clearly shows a receipt of sum of ₹ 5 lacs in cash towards the purchase of the property. The assessee’s submission is that the property dealer had given a proposal to the assessee for the purchase of said plot and the signed receipt in cash by the purchaser was given as a matter of practice. Since assessee did not like the location, therefore, he declined to purchase the same. Such an explanation is neither corroborated by any evidence nor any confirmation by the said broker. Once a document has been found from the possession of the assessee then there is a presumption u/s 292C r.w.s. 132(4A) that it belongs to the assessee and onus is very heavy upon the assessee to show that the income/ expenditure mentioned in such document does not pertain to the assessee. Here in this case there is a clear cut receipt of payment of cash of ₹ 5 lacs which assessee has failed to rebut by adducing any proper evidence and therefore, finding given by the Ld. CIT (A) is confirmed. - Decided against assessee.
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Customs
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2018 (2) TMI 1689
Provisional release of vessel - Sagar Fortune - whether condition imposed by the Ld. Commissioner i.e. bank guarantee of 30% of the estimated value is reasonable or harsh? - Held that: - bank guarantee should cover entire differential duty, redemption fine and penalties - In the present case, value of the goods estimated by the customs authority is ₹ 41.45 crore, accordingly differential duty amount (after payment of duty on the declared value) come to ₹ 3.62 crores. By taking this differential duty, the total amount as per the guidelines given in para 2.2 of Circular dated 16-8-2017 should be approximately not more than ₹ 10 Crores. Appeal disposed off.
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2018 (2) TMI 1688
Rectification of mistake - the main ground for rectification of the order raised by the Ld. Counsel is that the case is mainly based on the panchnama drawn at the premises of Shri Bhumish Shah and the documents recovered thereunder - Held that: - The present case in on valuation and tribunal passed order not only on the basis of panchnama alone but relying on various other materials such as statements of various persons and other facts, therefore merely on the basis of Commissioner’s order dated 28.04.2005 that too in different case of Shri Bhumish Shah, the order passed by this tribunal will not become incorrect. There is no error apparent on record, in the order dated 13.2.2015 passed by this Tribunal - ROM application dismissed.
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2018 (2) TMI 1687
Penalties u/s 112 of CA, 1962 - case of Revenue is that the appellants were involved in sale of liquor to the domestic passengers, the conditions of licence have been violated - Held that: - Since the department has not specifically brought on any evidence against the appellants for improper importation of the goods or violation of the conditions of licence issued to M/s. Alpha, the penalties imposed against them u/s 112 of the Act cannot be sustained for judicial scrutiny - penalty set aside - appeal allowed - decided in favor of appellant.
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2018 (2) TMI 1686
Penalty u/s 112(a) of the CA - allegation against the appellant is that they had colluded/ connived with the shipper in bringing Arecanut Betelnut Splits to India - Held that: - Since both the authorities below had categorically recorded a finding that the appellant had neither connived nor colluded with the shipper or the importer in getting the cargo imported, therefore, imposition of penalty u/s 112(a) of the CA 1962 is unwarranted - appeal allowed - decided in favor of appellant.
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2018 (2) TMI 1685
Valuation of export goods - It appeared to revenue that the market value of the consignment was inflated by the exporter - Held that: - the market enquiry of the value of goods was conducted in India whereas the goods were consigned for Dubai and the value said goods would fetch in Dubai was not enquired - since the export proceeds have been realized the declared value is found to be correct - appeal allowed - decided in favor of appellant.
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Corporate Laws
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2018 (2) TMI 1684
Scheme of merger - commencing of meetings - discretion to the NCLT with regard to calling of meetings - Held that:- When it is a question of merger and the provisions require and give discretion to the NCLT with regard to calling of meetings, it is a discretion to be exercised judiciously by NCLT. NCLT is duty bound to follow procedure laid down by law. The NCLT recorded reasons why it finds that calling of the meetings is necessary and we do not find that the reasons recorded are arbitrary. The Law provides and the NCLT has exercised discretion that the meetings are required to be called. We do not wish to substitute our discretion over the discretion exercised by the NCLT. We do not find any substance in the appeal. The appeal is rejected.
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2018 (2) TMI 1683
Oppression and mismanagement - Whether the Petitioners are entitled to file this Company petition? - Petitioners contention that no notice of EGM was served on them for passing special resolution relating to the business items mentioned supra and the allotment of shares - Held that:- Sending of notice of EGM by ordinary post is a proper compliance of section 53(1) of the Companies Act, 1956 and the Petitioners’ contention that there is no proper service of notice to them cannot hold water and there is no irregularity in the conduct of the EGM. Further it is to be noted that P2 is holding only 4.88% of the shareholding and it is a foregone conclusion that even if he has attended the meeting the resolutions would have been through despite his presence in view of his 4.88% shareholding. The company has raised funds for the purpose of this expansion plans only and the further issue of capital, issue of debentures etc. are justified and the contention of the Petitioner that the company is creating some false and fictitious expansion and diversification plan to entice R22 which is a subsidiary of a public sector enterprise is totally unfounded and misconceived. The Petitioners stated that in the Balance Sheet of the company for the year ended 31-3-2010, there are violation of Sections 217(l)(b), 217(l)(c), 217(2A), 211(3A), 211 and 211(1) for which the Respondents suitably explained that none of the Section have been violated by the Company. However, violation of certain sections of the Companies Act, 1956 cannot become a ground to convert such violation in an act of oppression and mismanagement under sections 397-398 of the Companies Act against these Petitioners, hence this allegation also falls to the ground. Further for invoking the equitable jurisdiction of this Tribunal under sections 397-398, the Petitioners have not made out a case that the company’s affairs are being conducted in a manner prejudicial to public interest or in a manner oppressive to the Petitioners, and there being no ground for commanding it for winding up of the company, there could not be any occasion to look into as to whether wind up of the company would unfairly prejudice such member or members but that otherwise the facts would justify winding up of the Company. In the facts and circumstances of this case, the allegation of oppression and mismanagement by the Petitioners fails.
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Insolvency & Bankruptcy
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2018 (2) TMI 1718
Corporate Insolvency Resolution Process - Held that:- This petition is admitted. Mr. Vijay Kumar V Iyer who is duly registered with the Insolvency and Bankruptcy Board of India is appointed as an Interim Resolution Professional. He has also filed his certificate of registration with the IBBI along with his written communication dated 29.06.2017. The disclosure has also been made in the letter dated 29.06.2017. We have also found his latest registration number from the IBBI website and the same has already been quoted in the preceding paras. In pursuance of Section 13 (2) of IBC we direct that public announcement shall be immediately made by the Interim Resolution Professional with regard to admission of this application under Section 7 of IBC. We also declare moratorium in terms of Section 14 of IBC. A necessary consequence of the moratorium flows from the provisions of Section 14 (1) (a), (b), (c) & (d).
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FEMA
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2018 (2) TMI 1682
Order of seizure in terms of provisions of Section 37A(1) of FEMA - foreign exchange worth USD 352258.25 suspected to be held outside India in contravention of Section 4 of FEMA - Held that:- The petitioner filed an additional affidavit dated 08.01.2018 placing certain factual details regarding the amount, which was lying in the foreign Bank account in 2002. Along with the additional affidavit, the petitioner has enclosed copy of the letters of HSBC dated 07.03.2016, 25.11.2014, enclosing the information regarding transfer of the petitioner s banking operation etc. In the light of the material, which has been placed before this Court, it would be necessary for the competent authority to consider the same as it may impact the proceedings by going to the root of the matter. However, I do not wish to express anything on the merits of the matter except to state that the petitioner should be afforded one more opportunity and place their objections to the confirmation of the order of seizure before the competent authority. So far as the order of seizure is concerned, the petitioner cannot be stated to be aggrieved by such an order of seizure, as no amount has been withdrawn from the petitioner s Bank account. Since the order of seizure has already been confirmed by the order passed by the first respondent, the question of interfering with the same at this juncture does not arise. Writ Petition is allowed and the impugned order passed by the competent authority is set aside and the matter is remanded to the competent authority for fresh consideration
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Service Tax
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2018 (2) TMI 1681
Business Support Services - testing and analysis of newly developed drugs on human participants - The claims of the appellant are that these are clinical trial operations, exempted from service tax in terms of N/N. 11/2007-ST dated 01/03/2007 - Held that: - the appellant are directly engaged in the activities of conducting clinical trial studies. They did obtain no objection approval from the concerned drug authorities in India. These services are in fact provided in terms of agreement with M/s Merck, USA who paid the consideration in convertible foreign exchange. The beneficiary of service as per the terms of the agreement is M/s Merck, USA - it is clear that these services are for delivery and consumption of an entity located outside India. Appeal allowed - decided in favor of appellant.
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2018 (2) TMI 1680
Business Auxiliary Services - consideration received as a percentage of commission for the services rendered to ICICI Bank - Revenue entertained a view that the appellants provided taxable service under the category of Business Auxiliary Service during the period 01/07/2003 to 31/03/2005 - Held that: - we have no doubt that the appellant did market the services provided by the client bank. It will not be correct to state that the appellant only provided operational assistance in such marketing. No such words were used in the terms of the agreement and in fact the agreement directly refers to the appellant as a service provider to mark its products (ICICI Bank) - the appellants are in fact engaged in promotion and marketing activity of the financial products of the client bank. Time limitation - penalty - Held that: - due to non-payment of tax and non-filing of returns, the Original Authority held against the appellant both on limitation and penalties - time limitation not invocable. Appeal allowed in part.
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2018 (2) TMI 1679
Levy of service tax - Debit entries made in the books for deployment of Officers - Revenue entertained a view that the appellant is liable to Service Tax on such consideration, on reverse charge basis in terms of Section 66A of the Finance Act, 1994 under the category of ‘manpower recruitment or supply agency service’ - Held that: - the appellant has not received any service to be taxed in the present situation. The debit entries are for maintaining complete financial transaction on behalf of SNC, Canada - it is clear that SNC, Canada cannot be categorized as a manpower recruitment or supply agency while involving deputing their own staff to execute their own contract in India - liability set aside - appeal allowed - decided in favor of appellant.
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2018 (2) TMI 1678
CENVAT credit - service tax paid on installation and commissioning services provided by various service providers at the site on installation of their DG sets - Held that: - in appellant's own case the Division Bench of the Ahmedabad Tribunal in M/s. Veena Industries Limited Versus Commissioner of Central Excise & S.T., Vapi [2016 (1) TMI 161 - CESTAT AHMEDABAD] has taken the view that the appellant is entitled to avail credit of service tax paid by their sub-contractor treating the same as input service. In the instant case, it is undisputed that the appellant is a provider of taxable service and have provided the same. They are utilising the input service provided by sub-contractors, while providing their output service. Therefore, it is abundantly clear that they are eligible to take cenvat credit of the service tax paid on the input service provided by the sub-contractors - credit allowed. Appeal allowed - decided in favor of appellant.
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2018 (2) TMI 1677
Refund claim - Section 102(2) of FA 2016 - denial on the ground that refund would result in double benefit to the appellant - Held that: - it is difficult to appreciate how double benefit of the refund allowed u/s 102(2) of Finance Act, 2016 would accrue to the appellant once the amount paid by utilizing CENVAT credit if now refunded to their CENVAT credit account only - appeal allowed - decided in favor of appellant.
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2018 (2) TMI 1676
CENVAT credit - whether the appellant as a service provider, is required to discharge duty/ revers the Cenvat credit on the used capital goods cleared as scrap, during the period 2009-2010 to 2013-2014? - Held that: - appellant had undisputedly cleared scrap of the capital goods used in providing output service during the period 2009-2010 to 2013-2014. Admittedly, the relevant Rule 3(5A) of CCR-2004 has been amended in 2012 and 2013. Prior to amendment to the said Rule effective from 01.4.2012, no liability could be fastened on the scrap of used capital goods by a manufacture or output service provider and after 27.9.2013 when the used capital goods were cleared as scrap, the liability to discharge duty was restricted to manufacturer and not service provider. However during the intervening period i.e. from March to 27.9.2013, the output appellant-service provider was required to pay duty on the transaction value of the scrap of used capital goods - the Appellant is not required to discharge duty on the scrap of capital goods except for the period from March to 27.09.2013. Penalty - Held that: - appellant being a PSU and frequent changes in law resulted in to non-payment of duty during the relevant period which was later paid before issuance of notice, in my opinion, imposition of penalty is unjustified. Appeal allowed in part.
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Central Excise
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2018 (2) TMI 1675
Restoration of appeal - Condonation of delay - Held that: - Before you doubt the bonafides of a litigant and term the version as insufficient for condoning the delay, a Court of law like a Tribunal must find out from its own record atleast any contrary version of the Revenue. If there is no version of the Revenue contravening this factual position, or is any conduct attributable as negligent can be culled out during the course of the proceedings otherwise, then, the Tribunal in its over enthusiasm, and possibly obsessed by disposal mania, decide appeals pending before it in this casual and light hearted manner. Courts of Law are not set up for mere disposal of cases. Courts of Law are established for adjudication of cases, particularly appeals so as to render justice to parties in accordance with law. Appeal restored to its file for adjudication - petition allowed.
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2018 (2) TMI 1674
Condonation of delay in filing appeal - Whether Appellate Tribunal was justified in not condoning the delay in filing the Appeal before the Appellate Tribunal without appreciating that reason given by the Appellant was justified and there was no mala fide reasons or dilatory tactics involved in causing the delay? Held that: - the Tribunal could not have faulted the assesses. The assesses acted bonafide and under legal advise. There was nothing intentional about the act attributed to the appellants-assesses. Thus there was no gross negligence, utter callousness or malafides and the delay in filing the appeal was properly explained. In these circumstances the liberal principles should have been applied to condone the delay. Delay is condoned - the appeal shall stands restored to the file of the Tribunal and to be decided on merits.
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2018 (2) TMI 1673
Reversal of cenvat credit - Sale of Carbon Di Oxide (Co2) without payment of duty - case of appellant is that they are not engaged in the manufacture of Carbon Di Oxide (Co2) inasmuch as the same came into existence as a byproduct during the course of manufacture of Denatured Spirit - Held that: - Hon’ble Supreme Court decision in the case of Union of India Vs. Hindustan Zinc Ltd. [2014 (5) TMI 253 - SUPREME COURT], laying down that unintended byproduct, which emerge during the course of manufacture of the final product, would not call for payment of any particular percentage of the value of the same in terms of erstwhile Rule 57CC - the present provision of Rule 6(3) are pari metere to Rule 57CC of erstwhile Central Excise Rule and as such, ratio of law declared in the said decisions would fully apply - appeal allowed - decided in favor of appellant.
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2018 (2) TMI 1672
CENVAT credit - Construction Service - Held that: - on perusal of which it is noticed they are for repair of plant and building. It cannot be said that the repairs of the plant are ineligible for Cenvat Credit as definition as Input Service excludes availment of Cenvat Credit in respect of the construction of new factory premises - Appeal allowed - decided in favor of appellant.
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2018 (2) TMI 1671
Whether the appellant is required to pay penalty of ₹ 1,70,000/- and interest of ₹ 97,736/- for wrong availment of Cenvat credit of ₹ 17,97,052/- which was later reversed by them voluntarily before being pointed out by the department? Held that: - admittedly the appellant had initially availed Cenvat credit twice on the same input invoice which they later reversed voluntarily before being pointed out by the department. Also, they have paid the interest of ₹ 97,736/- being pointed out by the audit department. When the entire amount of credit was reversed by the appellant before being pointed out by the department alongwith interest, therefore, imposition of penalty equal to the credit availed is untenable in law - appeal allowed in part.
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2018 (2) TMI 1670
Refund claim - price variation clause - unjust enrichment - verification of report from Railways is required on the credit notes submitted by the appellant - Held that: - this exercise is to be carried out by the adjudicating authority for sanction of refund after ascertaining the fact whether the incidence of duty has been passed on or otherwise. Therefore, no purpose will be served to keep the matter pending with this Tribunal - matter remanded to the adjudicating authority with a direction that the adjudicating authority shall ascertain the fact - appeal allowed by way of remand.
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2018 (2) TMI 1669
Refund of CENVAT credit and penalty paid during the course of adjudication/appellate proceedings - denial on the ground of Time Limitation - Section 11B of CEA, 1944 - Held that: - the order of the Tribunal was passed on 11.05.2012 and communicated to the appellant on 14.06.2012. The appellant thereafter wrote a letter to the department to re-credit/refund of the amount deposited during the course of proceedings before various forums. Undisputedly in response to the said claim, the department directed the appellant to file it under the proper proforma - the contention that the claim filed second time in proper proforma which was initially returned by the department, would be barred by limitation, is not tenable - appeal allowed - decided in favor of appellant.
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2018 (2) TMI 1668
Refund of CENVAT credit and penalty paid during the course of adjudication/appellate proceedings - denial on the ground of Time Limitation - Section 11B of CEA, 1944 - Held that: - the order of the Tribunal was passed on 01.06.2012 and communicated to the appellant on 14.06.2012. The appellant thereafter wrote a letter to the department to re-credit/refund of the amount deposited during the course of proceedings before various forums. Undisputedly in response to the said claim, the department directed the appellant to file it under the proper proforma - the contention that the claim filed second time in proper proforma which was initially returned by the department, would be barred by limitation, is not tenable - appeal allowed - decided in favor of appellant.
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2018 (2) TMI 1667
Destruction of goods by fire - raw material completely destroyed - time limitation - whether the demand dropped by the learned Commissioner (Appeals) on limitation is correct and legal or otherwise? - Held that: - the respondent have given the details for damages, this communication was sufficient for the Revenue to investigate if they deemed fit to find out whether there is some more damages of inputs or other goods. However the Revenue has not taken any step to make any enquiry - Merely on the basis of statement given by one of the employee of the respondent to the police the same cannot be taken as gospel truth regarding the actual quantum of damage. The show-cause notice was issued almost after 5 years therefore there is no suppression of fact on the part of the respondent - appeal dismissed - decided against Revenue.
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2018 (2) TMI 1666
CENVAT credit - correction of wrong forwarding of closing balance of CENVAT account was corrected by passing journal voucher, but no document was produced - Held that: - Inadvertently while transferring the closing balance as opening balance on 01.04.2010 the short amount of balance was transferred that too in the accounting records. However, in ER-1 return there is no discrepancy as correct closing balance of CENVAT as on 31.03.2010 was correctly shown as the same amount in the opening balance of April, 2010 in the ER- 1 return of April 2010 - there is only a clerical error while recording the opening balance in the Month of April, 2010. As such this is not a case of wrong availment of credit or excess availment of credit, therefore there is no question of any demand - appeal dismissed - decided against Revenue.
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2018 (2) TMI 1665
Clandestine removal - Ceramics Tiles - whether the appellant had clandestinely manufactured and cleared 44614 boxes of ceramic tiles involving a total duty of ₹ 4,54,929/-? - Held that: - Undisputedly, the allegation of removal of 44614 boxes of ceramic tiles during the period from 05.04.2011 to 16.11.2011, arrived at on the basis of information furnished by the director on the production capacity of the Tiles per day as 6500 boxes. The total quantity of ceramic tiles @ 6500 boxes per day was multiplied to the number of days, to arrive at the total production, during the said period from 05.04.2011 to 16.11.2011. The quantity mentioned in the RG-I Register was compared so as to arrive at the clearance of 44614 boxes being the difference between the recorded figure in RG-I register and the optimum production of 6500 boxes per day - The other evidence that was relied upon in the notice is the statement of Shri Javed Suleman Chania, who alleged to have purchased the ceramic tiles from the appellant manufactured and cleared without payment of duty. The said statement could not stand to the scrutiny of cross examination. In absence of other corroborative evidences solely on the basis of the director’s statement of production capacity, the allegation of clandestine removal based on theoretical calculation cannot be sustained as held in a series of cases. Appeal allowed - decided in favor of appellant.
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2018 (2) TMI 1664
100% EOU - Refund of unutilized CENVAT credit - Rule 5 of CCR 2004 - Held that: - an identical issue has come up before the Tribunal in the case of Infosys Technologies Ltd. v. CCE [2016 (9) TMI 142 - CESTAT MUMBAI], where it was held that The criteria for refund are existence of accumulated credit, insufficient opportunity for utilization thereof and limiting the extent of refund to the proportion that export turnover bears to total turnover - appeal allowed - decided in favor of appellant.
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2018 (2) TMI 1663
Whether the appellant is required to pay penalty for wrong availment of Cenvat credit which was later reversed by them before being pointed out by the department? Held that: - admittedly the appellant had initially availed Cenvat credit twice on the same input invoice which they later reversed voluntarily before being pointed out by the department. Also, they have paid the interest of ₹ 1,12,796/- being pointed out by the audit department. When the entire amount of credit was reversed by the appellant before being pointed out by the department alongwith interest, therefore, imposition of penalty equal to the credit availed is untenable in law - appeal allowed in part.
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2018 (2) TMI 1662
Entitlement to interest on interest - case of appellant is that the interest does not remain as interest but it is appropriated towards the outstanding dues. Therefore, the contention of the Department that interest amount ₹ 11,73,799/-, earlier allowed would not again attract interest, is unsustainable in law - whether the Appellant is entitled to interest on ₹ 11,73,799/- appropriated earlier against the confirmed demand? Held that: - The Department even though refunded the said amount of ₹ 11,73,799/-, but declined to pay interest on the same holding that the said amount was earlier sanctioned/allowed to the Appellant as interest to the pre-deposit amount of ₹ 17,43,384/-, hence cannot be considered as principal amount and continues to be interest only - It cannot be denied that had the amount not appropriated, the Appellant would have received the interest amount of ₹ 11,73,799/- along with the principal amount of ₹ 17,43,384/- way back in 1995. Thus, on appropriation the interest is merged with the principle amount. In the result, the Appellant is entitled to interest on the amount of ₹ 11,73,799/-. Appeal allowed - decided in favor of appellant.
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2018 (2) TMI 1661
CENVAT credit - inputs - material usage variance not used in manufacture of goods - Held that: - there is no provision under the CENVAT Credit Rules, 2004 for denial of availment of credit merely on the ground that the assessee has admittedly deployed inputs in excess of the ideal for achieving desired output level The demand for recovery of the credit held to be ineligible by the lower authorities does not have the sanction of law - the tax element here is manufacture and the inefficiency attributed to excessive usage of materials is perforce reflected in an enhanced assessable value on which appropriate duty liability has been discharged - appeal allowed - decided in favor of appellant.
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2018 (2) TMI 1660
CENVAT credit - mobile networking service - security agency service - Held that: - It is seen that mobile phone service is a permitted input used in relation to manufacturing activities. The appellant has elaborately demonstrated the nature of mobile networking as a communication system that is essential for monitoring production activities. No flaw can be found in this submission and the availment of credit cannot be denied. In Castrol India Ltd v. Commissioner of Central Excise, Vapi [2013 (9) TMI 709 - CESTAT AHMEDABAD], the Tribunal has held that ‘security agency service’ cannot be alienated from the production process if used in a factory. No evidence to the contrary has been produced by Revenue. The availment of credit of tax paid on procurement of this service cannot be faulted. Credit allowed - appeal allowed - decided in favor of appellant.
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2018 (2) TMI 1659
Disposal of pending cases - matter in question is pending before the High Court - Transition of Indirect Tax to GST - Held that: - it would be appropriate and prudent to close the files for the purpose of statistics - the appeals along with stay order / interim orders, if any, will continue before the Tribunal and the matters are closed only for the purpose of statistics - appeal disposed off.
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CST, VAT & Sales Tax
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2018 (2) TMI 1658
Validity of Notification dated 31.03.2003 (Annexure P/1) read into Haryana Value Added Tax Act, 2003 - jurisdiction acquired by the State - Whether the notification dated 31.03.2003 is legal and valid in the light of the fact that the VAT Act came into force on 1.4.2003 and that was the “appointed day” as per provisions of Section 1(c) of the VAT Act? Held that: - The object of issuing the notification on 31.3.2003 is manifestly clear that the State Government wanted to appoint the authorities and to put the complete mechanism in order so as to effectively enforce the VAT Act w.e.f. 1.4.2003. There cannot be any bar on the State's power to do the ground-work for enforcement of a Statute, especially the tax statute where complete mechanism would be required to give effect to the provisions of the Statute for recovery of tax. The State of Haryana had issued notification on 31.3.2003 for appointment of Deputy Excise & Taxation Commissioner (ST) as Revisional Authority. But at any rate, the revisional authority had not exercised any power before the 'appointed day'. Rather, challenge to the order passed by the revisional authority in the present case is dated 30.8.2011 and that is relating to the assessment year 2005-2006 i.e., much after the 'appointed day'. The impugned notification was issued on 31.3.2003 notifying the appointment of revisional authority after the VAT Act had obtained the assent of Governor of Haryana on 26.3.2003 and it stood notified on 28.3.2003. The State was thus well within its power to issue such notification in respect of appointment of an authority to give effect to the provisions of the VAT Act and in the present case also, the power was actually exercised by the revisional authority on 30.8.2011 i.e., much beyond the appointed day. There is no illegality in issuing such notification so as to create the mechanism for effective enforcement of the tax Statue especially when the revisional authority, i.e., Deputy Excise & Taxation Commissioner (ST) had not assumed or exercised any authority or passed any order before the 'appointed day' - petition dismissed - decided against petitioner.
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2018 (2) TMI 1657
Principles of natural justice - It is the case of the petitioner that the returns filed by the petitioner for the years 2014-15 and 2015-16 had been accepted by the respondent and an order was passed under section 22 of the TNVAT Act - Held that: - considering the fact that the Assessing Officer has to re-do the assessment, the matters are remitted back to the Assessing Officer to re-do the assessment commencing from the stage of issuing notice of proposal, after following guidelines/procedures issued by this Court - petition allowed by way of remand.
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2018 (2) TMI 1656
Whether the Tribunal could have decided the second appeal in the manner it has done, cursorily, without considering the grounds of the second appeal and the questions raised before it, by merely reiterating and affirming the order of the First Appellate Court without giving any reasons for non acceptance of the pleas raised before it by the revisionist-appellant? Held that: - the second appeal of the revisionist is required to be re-considered by the Tribunal keeping in mind the issues involved on merits as noticed hereinabove, as it has not done so as per the requirements of law - the question is decided in favor of revisionist. Revision allowed.
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2018 (2) TMI 1655
Issuance of C-form - case of respondent is that they had admitted their liability and submitted that it was not their intention not to pay tax. But due to unexpected situation and stringent financial crisis, they were unable to pay tax. Held that: - The settled principles of interpretation are that the court must proceed on the assumption that the legislature did not make a mistake and that it did what it intended to do. The court must, as far as possible, adopt a construction which will carry out the obvious intention of the legislature. Undoubtedly if there is a defect or an omission in the words used by the legislature, the court would not go to its aid to correct or make up the deficiency. The court could not add words to a statute or read words into it which are not there, especially when the literal reading produces an intelligible result. The court cannot aid the legislature s defective phrasing of an Act, or add and mend, and, by construction, make up deficiencies which are there. Courts have consistently held in taxing statute, there is no equity. If tax has not paid as declared, within the time provided there for, consequences would follow. When the dealer had collected tax from the buyer, tax should be paid to the Government, within time. Retention of the same would amount to unjust enrichment. The respondent/assessee, cannot be permitted to avail the facility of on-line generation of Form C declaration. Appeal allowed - decided in favor of Revenue.
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