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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter March 1, 2019 Case Laws in this Newsletter: GST Income Tax Customs Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Indian Laws TMI SMS Developing seeds of new varieties/ hybrids - entire activity is done in India, report is send to overseas client - Held as export of service Input tax credit (ITC) under VAT regime cannot be allowed for the input procured prior to the date of grant of registration. Articles 1. FORM NO.INC-22A-Active Company Tagging Identities and Verification By: CSHithakar Chouta Summary: Companies incorporated on or before December 31, 2017, must file e-Form ACTIVE (Active Company Tagging Identities and Verification) by April 25, 2019, detailing company particulars and registered office. Filing is restricted if financial statements, annual returns, and key appointments are not filed. A zero-fee applies before April 25, 2019, and a 10,000 fee thereafter. Exemptions include companies under management disputes, struck off, under liquidation, or amalgamation. Non-compliance results in "ACTIVE - NON COMPLIANT" status and restrictions on certain e-form registrations. Required documents include a photograph of the registered office and digital signatures from directors or key personnel. 2. GST : SUPPLY OF GOODS IN UNIT CONTAINERS By: Dr. Sanjiv Agarwal Summary: In a case involving the supply of frozen sheep/goat carcasses to the Army, the issue was whether these goods, packed in LDPE and HDPE bags, qualified as being in 'unit containers' under GST regulations. Initially, the Authority for Advance Ruling (AAR) ruled that the packaging met the 'unit container' criteria. However, the Appellate Authority for Advance Ruling (AAAR) overturned this decision, stating the packaging did not hold a predetermined quantity as required by the Central Goods and Services Tax (CGST) Act. The carcasses lacked a fixed weight or number, thus not meeting the 'unit container' definition. News 1. India-Korea Startup Hub Launched Summary: The India-Korea Startup Hub was launched during the India Korea Business Symposium in Seoul, organized by Invest India and the Korean Chamber of Commerce and Industry. Attended by over 400 Korean business leaders, including major corporate groups, the event aimed to strengthen bilateral ties between India and South Korea. The Hub, hosted on the Startup India platform, facilitates market entry and innovation exchange. The Startup Grand Challenge will encourage collaboration between Indian and Korean startups, focusing on areas like credit rating, predictive analytics, and cybersecurity. The State Bank of India and Mahindra Group will provide mentorship and financial support for winning projects. 2. India and Brunei sign Agreement for the Exchange of Information and Assistance in Collection with respect to Taxes (TIEA) Summary: India and Brunei have signed an Agreement for the Exchange of Information and Assistance in Collection with respect to Taxes (TIEA) in New Delhi. This agreement facilitates the exchange of tax-related information, including banking and ownership details, between the two nations, adhering to international tax transparency standards. It allows for both requested and automatic information sharing and provides mutual assistance in tax revenue collection. The agreement aims to enhance cooperation between India and Brunei, providing a framework to curb tax evasion and avoidance. 3. Public Sector Banks are lifeline of Indian economy, says theUnion Finance Minister, Shri Arun Jaitley Summary: The Union Finance Minister emphasized the critical role of Public Sector Banks (PSBs) in India's economy, highlighting their necessity for economic health and liquidity. Recent reforms, including the Insolvency Bankruptcy Code (IBC), have strengthened the banking system, recovering significant amounts and reducing Non-Performing Assets (NPAs). The government is committed to supporting PSBs, which now operate under competitive conditions with a focus on ethical practices. The EASE Reforms Index, developed in collaboration with the Boston Consulting Group, measures PSB performance across various parameters. The conference also acknowledged top-performing PSBs, underscoring the sector's ongoing transformation. 4. 43rd Civil Accounts Day on March 1, 2019; On the occasion, the Finance Minister, Shri Arun Jaitley to make a Statement on the implementation of PM -KISAN Yojana through PFMS and to release the Compendium on GST Refunds compiled by the Office of Pr. CCA (CBIC) among others Summary: The 43rd Civil Accounts Day on March 1, 2019, will highlight the Indian Civil Accounts Service's role in public finance management, showcasing the Public Financial Management System (PFMS) and its integration with GST refund processing via the ARPIT application. The Finance Minister will address the implementation of the PM-KISAN Yojana through PFMS, which aims to benefit 12-13 crore individuals. The event will also launch new PFMS functionalities, including a mobile app for bank performance monitoring and a dashboard for real-time expenditure tracking. Additionally, the GRIP application for internal audit and the Operational Manual for Risk-Based Internal Audit will be introduced. 5. Dr. Krishnamurthy Subramanian, Chief Economic Advisor to deliver the Key Note Address at the 4th National Conference on Economics of Competition Law Summary: The Competition Commission of India is hosting its 4th National Conference on Economics of Competition Law in New Delhi on March 1, 2019. This annual event, initiated in 2016, aims to foster interest in competition law economics and nurture future antitrust economists. The conference gathers scholars, practitioners, and experts to discuss economic perspectives and enforcement of competition law. Key objectives include stimulating research and debate on contemporary issues, enhancing understanding of competition issues in India, and drawing inferences for law enforcement. The Chief Economic Advisor of India will deliver the keynote address. 6. Sale of Electoral Bonds at Authorised Branches of State Bank of India (SBI) Summary: The Government of India has implemented the Electoral Bond Scheme 2018, allowing Indian citizens and entities to purchase electoral bonds from the State Bank of India (SBI). These bonds can be bought singly or jointly and are available at 29 authorized SBI branches across India during specified periods in March, April, and May 2019. Only political parties registered under the Representation of the People Act, 1951, and receiving at least one percent of votes in the last general election are eligible to encash these bonds through their bank accounts. The bonds are valid for 15 days from the date of issue. 7. Agreement for Bilateral Swap Arrangement (BSA) between India and Japan and provides for India to access 75 billion in US dollars. Summary: The Reserve Bank of India and the Bank of Japan have finalized a Bilateral Swap Arrangement (BSA), allowing India to access $75 billion in US dollars. This agreement, effective from February 28, 2019, was initially discussed during a visit by India's Prime Minister to Tokyo in October 2018 and approved by India's Union Cabinet in January 2019. The BSA aims to support India's balance of payments and short-term liquidity needs, enhancing economic ties between the two nations. India currently holds a comfortable level of foreign exchange reserves but appreciates the flexibility and strategic partnership offered by this arrangement with Japan. 8. Income Tax Department hits at terror financing activities in J&K Region Summary: The Income Tax Department conducted a search operation targeting the head of a prominent organization and his associates involved in anti-national activities in the Jammu and Kashmir region. Searches were carried out at four locations in the Valley and three in the national capital, uncovering significant undisclosed financial transactions in businesses such as quarrying and hotels. Evidence of substantial unaccounted cash expenditures for residential remodeling was also found. Despite extensive financial dealings, the individuals involved have never filed income tax returns. Three hard disks were seized, expected to provide further evidence of tax evasion and illegal funding of separatist activities. Notifications Customs 1. 18/2019 - dated 28-2-2019 - Cus (NT) Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Sliver Summary: The Government of India, through the Central Board of Indirect Taxes and Customs, issued Notification No. 18/2019-CUSTOMS (N.T.) on February 28, 2019, revising the tariff values for certain goods under the Customs Act, 1962. The notification updates tariff values for various products including crude palm oil, RBD palm oil, crude palmolein, RBD palmolein, crude soybean oil, brass scrap, poppy seeds, gold, silver, and areca nuts. The revised values are specified in US dollars per metric tonne or per unit, depending on the product. This amendment replaces previous tables in Notification No. 36/2001-Customs (N.T.). 2. 17/2019 - dated 27-2-2019 - Cus (NT) Sea Cargo Manifest and Transhipment (Amendment) Regulations, 2019 Summary: The Sea Cargo Manifest and Transhipment (Amendment) Regulations, 2019, issued by the Central Board of Indirect Taxes and Customs, amends the Sea Cargo Manifest and Transhipment Regulations, 2018. This amendment changes the effective date from March 1, 2019, to August 1, 2019. These regulations were enacted under the authority granted by specific sections of the Customs Act, 1962, and will take effect upon their publication in the Official Gazette. The original regulations were published on May 11, 2018, and previously amended on October 30, 2018. 3. 16/2019 - dated 27-2-2019 - Cus (NT) Courier Imports and Exports (Clearance), Amendment, Regulations, 2019 Summary: The Government of India, through the Central Board of Indirect Taxes and Customs, issued Notification No. 16/2019-Customs (N.T.) amending the Courier Imports and Exports (Clearance) Regulations, 1998. Effective from its publication date, the amendment replaces "Form Courier Shipping Bill-V" with a new format. The form includes sections for details such as the courier's name and address, customs station, shipping bill number, and export details like invoice value, consignee information, and GST-related data. The amendment requires a declaration from the authorized courier, confirming their role as an agent for the shipment's clearance and export. 4. 15/2019 - dated 27-2-2019 - Cus (NT) Courier Imports and Exports (Electronic Declaration and Processing), Amendment, Regulations, 2019 Summary: The Government of India, through the Central Board of Indirect Taxes and Customs, has issued amendments to the Courier Imports and Exports (Electronic Declaration and Processing) Regulations, 2010. Effective from the date of publication, the amendments introduce revised forms for electronic filing related to courier imports and exports. The new forms, Form-C, Form-H, and Form-HA, detail the requirements for courier bill entries and shipping bills, including courier registration, consignment details, and declarations for clearance. The amendments ensure compliance with customs regulations and facilitate the electronic processing of courier shipments. FEMA 5. FEMA 10(R)(2)/2019-RB - G.S.R. 160(E) - dated 27-2-2019 - FEMA Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) (Amendment) Regulations, 2019 Summary: The Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) (Amendment) Regulations, 2019, issued by the Reserve Bank of India, amends the 2015 regulations under the Foreign Exchange Management Act, 1999. Effective from its publication date, the amendment allows authorized dealers to permit ship-manning and crew managing agencies, as well as re-insurance and composite insurance brokers registered with the IRDA, to open and maintain non-interest bearing foreign currency accounts in India for conducting business transactions. Circulars / Instructions / Orders FEMA 1. 20 - dated 27-2-2019 Establishment of Branch Office (BO) / Liaison Office (LO) / Project Office (PO) or any other place of business in India by foreign entities Summary: The circular addresses the establishment of Branch Offices, Liaison Offices, Project Offices, or any business place in India by foreign entities. It highlights that applications from foreign NGOs, non-profits, or government bodies for such establishments require prior approval from the Reserve Bank of India (RBI) in consultation with the Government of India. Entities engaged in activities under the Foreign Contribution (Regulation) Act, 2010 must obtain registration under the Act and cannot seek permission under FEMA 22(R). The Form FNC has been updated to include a declaration regarding compliance with FCRA. Other provisions remain unchanged, and banks are instructed to inform their clients. Customs 2. 09/2019 - dated 28-2-2019 Turant Customs-Next generation reform for Ease of Doing Business Summary: The circular from the Ministry of Finance outlines the introduction of the Turant Customs reform, aimed at improving India's ranking in the World Bank's Ease of Doing Business Index. This reform focuses on enhancing the efficiency of customs processes through measures like electronic integrated declarations and paperless processing. Importers can now register goods online via the ICEGATE portal, facilitating faster clearance. The Customs Compliance Verification (CCV) process allows for verification before duty payment, streamlining clearance upon payment. The system automates clearance processes, reducing interaction with customs officers and improving efficiency. Additional changes in ICES 1.5 support these initiatives, with further guidance to be provided. 3. 08/2019 - dated 26-2-2019 Issues related to carriage of coastal cargo from one Indian port to another port in foreign going vessels/coastal vessels through foreign territory Summary: The Central Board of Indirect Taxes and Customs (CBIC) has addressed issues related to the movement of coastal cargo between Indian ports through foreign territories, such as Sri Lanka and Bangladesh. The procedures for such transit have been harmonized, including documentation and marking requirements for containerized and non-containerized goods. Additionally, the use of imported containers for domestic cargo is permitted to reduce logistics costs, and local containers can be used for EXIM cargo, with procedural clarifications provided for customs duty exemptions. These measures aim to streamline coastal shipping operations and support the sector's growth. Highlights / Catch Notes GST Accurate Bag Classification Under GST: Refer to General Rules When Fabric Material is Unspecified in Customs Tariff. Case-Laws - AAR : Classification of goods - Bags/Sacks - in the absence of any definite material mentioned for the fabric, the General Rules for the Interpretation of the First Schedule of the Customs Tariff, which has been adopted by GST have to be referred to. Visit to Get Source Lodging and food services for students under MoU with schools are taxable at 18% GST; no exemption. Case-Laws - AAR : Classification of supply - service to the students for lodging along with food under MOU with the school / college - Applicant is not an educational institution - Benefit of exemption not available - Taxable @18 of GST Visit to Get Source Ambulance Input Tax Credit Denied for Employee Benefits Under GST Act Section 17(5)(b)(iii)(A); Not Covered by Exceptions. Case-Laws - AAR : Input tax Credit - ambulances purchased for the benefit of the employees under legal requirement of the Factories Act, 1948 - Not falling within the exception carved out u/s 17(5)(b)(iii)(A) of the GST Act - credit not allowed. Visit to Get Source GST Applies to School Project Supply Under BOOT Model, Says Authority for Advance Rulings; No Exemption Granted. Case-Laws - AAAR : Classification of supply - setting up a project in the school under BOOT model basis - supply of goods and services including training - challenge to AAR Decision - Activity is liable to GST - No exemption is available. Visit to Get Source Income Tax Supreme Court Rules Conversion of Unpaid Interest into Funded Loan Cannot Be Treated as Payment u/s 43B. Case-Laws - SC : Addition u/s 43B - conversion of unpaid interest into a funded interest loan treating the same as interest payment - The Appellate Authority, ITAT and the High Court erred in reversing the said disallowance. Visit to Get Source Investment Income Absence Doesn't Invalidate Interest Expenditure as Legitimate Business Expense. Case-Laws - HC : The mere fact that the respondent did not earn any income on its investment made, the interest expenditure would not cease to be an expenditure incurred for business. Visit to Get Source Denial of Section 10(22) exemption due to property bought under individual names, implying misuse of institutional profits. Case-Laws - HC : Refusal of exemption u/s 10(22) - the acquisition of property in the name of individuals is indicative of the fact that the profits of the institution was being used for self aggrandizement; which is the explicit motive. The explanation that the property was inadvertently purchased in the name of individuals by an innocuous mistake, can only be taken with a pinch of salt. Visit to Get Source Court Rules Against Tax on Hypothetical Income from Unsold Property Units Held as Stock in Trade. Case-Laws - AT : Income from house property - annual letting value (ALV) of the unsold units of properties lying as stock in trade - taxing hypothetical income - there is no rationale in charging it to tax. - additions to be deleted. Visit to Get Source Tax Set-Off Claim Allowed: Section 72A Relaxation by CBDT Supports Amalgamation Scheme, CIT(A) Admits Additional Evidence, Correcting Initial Decision. Case-Laws - AT : Claim of set off of brought forward losses - Conditions prescribed u/s 72A - Relaxation of the conditions from the CBDT - scheme of amalgamation - CIT(A) corrected allowed the claim by admitting additional evidence. Visit to Get Source CSR Expenses Non-Deductible: Explanation 2 Added to Income Tax Act Section 37(1) from April 1, 2015. Case-Laws - AT : Disallowance of Corporate Social Responsibility (CSR) - Explanation 2 inserted in the section 37 (1) w.e.f. 01/04/15 and is prospective in nature. Visit to Get Source Valuer Assigns Separate Valuations for Unit Parts; Slump Sale as Going Concern Still Applies. Case-Laws - HC : Valuer assigned separate valuation to different parts of unit for arriving at a proper valuation for transfer of the entire unit in the valuation report of the unit would not take away concept of slum sale of entire unit as a going concern Visit to Get Source High Court Rules ITSC to Handle Case; AO's Assessment Orders Declared Void, Appeals Against Them Also Void. Case-Laws - AT : Once High court directed to settlement commission (ITSC) to proceed with the matter, the assessment orders passed by the AO become infructuous and now the jurisdiction stands vested in the ITSC - all these appeals against the infructuous orders are also infructuous and need not be continued Visit to Get Source Security Deposit in Lease Retains Capital Status Even if Forfeited in Dispute; Not Reclassified as Revenue Expenditure. Case-Laws - HC : Security deposit for lease - The character of the amount once shown as a capital nature will remained so even same was forgone due to dispute - cannot be treated as revenue expenditure. Visit to Get Source Composite Scheme of Arrangement and Amalgamation Reserves Not a Benefit u/s 28(iv) of Income Tax Act. Case-Laws - AT : Increase of general reserve due to Composite Scheme of Arrangement and Amalgamation of the assessee-company is neither a benefit nor a perquisite nor it is arisen out of carrying on of the business or profession by the assessee. Hence, provisions of Section 28(iv) is not applicable. Visit to Get Source Section 47(vii) Income Tax Act Applied Retrospectively; Section 56(2)(viia) Excluded for Certain Transfers. Case-Laws - AT : Section 47(vii) as amended by Finance Act 2012 is retrospective in nature - Section 56(2)(viia) cannot be applied in respect of transaction where the transfer in the case falls u/s 47(vii) of the Income-Tax Act. Visit to Get Source Professional Legal Defense Costs for Employee's Personal Criminal Case Non-Deductible u/s 37 of Income Tax Act. Case-Laws - AT : Professional charges paid for defending criminal case against an employee committed as a person in personal capacity is not allowable as deduction u/s 37 Visit to Get Source Non-deduction of TDS: Relief for Assessee if Deductee Offered Amount to Tax u/s 40(a)(ia) Proviso. Case-Laws - AT : Disallowance of expenditure for non-deduction of TDS - According to second proviso to section 40(a)(ia), if amount which is in dispute has already been offered to tax by the deductee, assessee could not be deemed to be assessee in default - said proviso is curative and retrospective in nature Visit to Get Source Foreign exchange gains on long-term loans and advances are capital accretions, not taxable income. Case-Laws - AT : Foreign exchange gain on “Long Term Loan and Advance” be a capital accretion, should not be considered as taxable income. Visit to Get Source Delivery-Based Derivative Transactions Eligible for Bad Debt Write-Offs Under Income Tax Act Section 36(1)(vii) & 36(2. Case-Laws - AT : If derivative transactions on the spot market are delivery based and not speculative in nature, claim of bad debt written off u/s 36(1)(vii) are allowable subject to condition mentioned in 36(2). Visit to Get Source Assessment Order u/s 153C Void Without Joint Commissioner Approval as Mandated by Section 153D. Case-Laws - AT : Assessment order u/s 153C in without approval of Joint Commissioner u/s 153D is null and void and is liable to be quashed. Visit to Get Source Customs Sea Cargo Manifest and Transhipment Regulations 2019 Delayed Again, Now Effective from August 1, 2021. Notifications : Sea Cargo Manifest and Transhipment Regulations, 2019 - Further Postponed till 1-8-20219 Visit to Get Source Amendments to Courier Imports/Exports Regulations 2019 Streamline Customs, Update Shipping Bill Form, Enhance Efficiency and Compliance. Notifications : Courier Imports and Exports (Clearance), Amendment, Regulations, 2019 - Form Courier Shipping Bill –V Visit to Get Source New Amendment Introduces Form C for Electronic Declaration of Courier Samples and Gifts, Streamlining Customs Process. Notifications : Courier Imports and Exports (Electronic Declaration and Processing), Amendment, Regulations, 2019 - Form C for Courier Bill of Entry – XII (CBE-XII) for Samples and Gifts - (Electronic Filing) Visit to Get Source Turant Customs Initiative Simplifies Trade: Faster Clearance, Transparent Processes, Tech-Driven Solutions for Business Efficiency and Economic Growth. Circulars : Turant Customs-Next generation reform for Ease of Doing Business Visit to Get Source Regulatory Challenges in Coastal Cargo Transport Between Indian Ports Using Foreign Vessels: Compliance with Maritime Laws and Customs. Circulars : Issues related to carriage of coastal cargo from one Indian port to another port in foreign going vessels/coastal vessels through foreign territory Visit to Get Source Bill of Exports Crucial for SEZ Supplies: Verifies Receipt and Ensures Deemed Export Benefits Are Granted. Case-Laws - HC : Supplies to a Special Economic Zone (SEZ) unit - Filing of Bill of Exports is not a mere formality but serves as a valuable check for ensuring that the goods deemed to have been exported are in fact received by the SEZ Unit and are accounted as Deemed Exports - Benefit cannot be allowed in the absence of Bill of export. Visit to Get Source Demand for Duty on Past Consignments Deemed Unsustainable Due to Non-Provisional, Uncontested Assessment. Case-Laws - AT : Mis-declaration the consignment imported - demand of duty of past consignments (import) with the live consignment - since the assessment was not provisional and not challenged, the demand pertaining to past period is not sustainable. Visit to Get Source FEMA Amendments to Foreign Currency Account Rules for Indian Residents Under FEMA 2019: Compliance and Operational Updates. Notifications : Foreign Exchange Management (Foreign Currency Accounts by a person resident in India) (Amendment) Regulations, 2019 Visit to Get Source Foreign entities must meet FEMA regulations to set up Branch, Liaison, or Project Offices in India, per RBI guidelines. Circulars : Establishment of Branch Office (BO) / Liaison Office (LO) / Project Office (PO) or any other place of business in India by foreign entities Visit to Get Source IBC Corporate Debtor's Non-Compliance with Section 8(2)(a) of Insolvency Code Risks Process Obstruction. Case-Laws - Tri : Initiation of corporate insolvency resolution process - lapses on the part of CD in not complying with the direction in section 8(2)(a) of the Code of 2016 cannot be allowed to grow beyond its size so as to come in the way of accepting the prayer of the CD made in the counter affidavit. Visit to Get Source Service Tax Service of Developing New Seed Varieties in India Deemed Export When Report Sent to Germany Client. Case-Laws - AT : Place of supply of service - export or not - developing seeds of new varieties and hybrids - entire activity is done in India, report is send to overseas client - The service is complete only when the reports are also sent to their client as per the agreement in Germany. Until the report is delivered the service is not complete and the appellant is not entitled to the consideration for the service - Held as export of service. Visit to Get Source Service Tax Demand Requires Detailed Review of Financial Records, Not Just Form 26AS, to Establish Transaction Nature. Case-Laws - AT : Demand of service tax cannot be confirmed merely on the basis of Form 26AS (TDS statement) - Without looking into the books of accounts, nature of such transactions cannot be established. Visit to Get Source Central Excise Department Can't Use Section 11 to Recover Excise Dues from New Property Buyer Misclassified as Business Purchase. Case-Laws - HC : Recovery of excise dues - it was not open to the department to invoke provision of Section11 to rope in the subsequent purchaser of the property by misconceiving it to be a purchase of business Visit to Get Source Free Replacement Goods for Damaged or Expired Items Must Include Duty Payment. Case-Laws - AT : The supply of goods as free replacement in respect of the damaged or expired goods has to be on payment of duty. Visit to Get Source Appellants Misused Scheme as Discount, Evaded Duties with Deception, Exploiting Excise Valuation Limitation Period. Case-Laws - AT : Valuation - Extended period of limitation - appellants willfully misdeclared the scheme as that of quantity discount, without passing on the benefit of said quantity discount to distributors, but to benefit itself in respect of free replacements made for damaged/ expired goods - Such colorable devices and instruments used for evasion of duty. Visit to Get Source VAT Dealers Cannot Claim Input Tax Credit for Activities Before Registration is Granted Mid-Year. Case-Laws - HC : Input tax credit - Whether the dealer who applied for registration in the midst of the year could claim input tax credit for the business carried on previous to such grant of registration - Held No Visit to Get Source Case Laws: GST 2019 (2) TMI 1606 Classification of goods - Bags/Sacks (both with without Handle) made of (i) Laminated P.P. Non-woven Fabric, (ii) B.O.P.P. Pasted P.P. Non-woven Fabric and (iii) Woven Fabric Pasted with Non-woven Fabric - Held that:- HS Code 3923 covers articles of the conveyance or packing of goods, of plastics; etc. Sub-Heading 39232990 is applicable for sacks and bags of plastics which are neither polymers of ethylene nor of poly-vinyl chloride and are subject to 18% GST - Regarding Bags/Sacks made of Woven Fabric Pasted with Non-woven Fabric the Applicant has not stated the constituting materials of the fabric and hence, in the absence of any definite material mentioned for the fabric, the General Rules for the Interpretation of the First Schedule of the Customs Tariff, which has been adopted by GST have to be referred to. 2019 (2) TMI 1605 Classification of supply - Composite supply or mixed supply - service to the students for lodging along with food under MOU with the school / college - exemption under Sl. No. 14 of Notification No. 12/2017 CT (Rate) dated 28/06/2017 - rate of tax - Held that:- The Applicant is offering several individual services in two different combinations to the recipients, depending upon their need for lodging facility. Each of the recipients, however, is charged a consolidated amount for the combination of services he wants to enjoy. The combination of services is, therefore, offered as a mixed supply within the meaning of Section 2(74). In accordance with Section 8(b) of the GST Act it is stated that, a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax - each of the combinations includes services taxable at 18% rate, which is the highest rate applicable to the services being offered vide Section 8(b) of the GST Act. Being mixed supply, value of the entire combination of services offered is taxable at 18% rate. Sl. No. 66 of the Exemption Notification is applicable to the services provided by or to an educational institution, as defined under clause 2(y) of the said notification. The Applicant is not an educational institution within the meaning of the above clause. Although the services are provided in terms of an MOU with St Michael s School, the Applicant charges the consideration on the individual students. Being liable to pay the consideration, such students are, therefore recipients of the Applicant s services and not the educational institution. Sl. No. 66 of the Exemption Notification is, therefore, not applicable. 2019 (2) TMI 1604 Input tax Credit - ambulances purchased for the benefit of the employees under legal requirement of the Factories Act, 1948 - Second Proviso to Section 17(5)(b) of the GST Act - Held that:- Input tax credit on inward supply of ambulance, being a motor vehicle, is not admissible under Section 17(5)(a) of the GST Act. The exception carved out under Section 17(5)(b)(iii)(A) of the GST Act for services which are obligatory for an employer to provide to its employees under any law for the time being in force is limited only to rent-a-cab, life insurance and health insurance - Credit not available. 2019 (2) TMI 1603 Classification of supply - setting up a project in the school - supply of goods and services including training - challenge to AAR Decision - Applicability of Entry No. 72 of Notification No. 12/2017-Central Tax(Rate), dated 28.06.2017, read with Entry No. 72 of Notification bearing SRO No. 306/2017-Finance Department - services provided under the category of Information and Communication Technology (ICT) @ School Project Held that:- The Appellant themselves have contended that the activities undertaken by the Appellant are under BOOT model basis and therefore, the ownership in the infrastructure developed by them would be transferred after the expiry of the contract period (i.e 5 years) This is also clearly provided in the agreement that the ownership of the entire hardware software, other equipment, etc. will be transferred at zero value at the end of the contract period Therefore, the stand taken by the Appellant is self-contradictory in as much as on one hand, they claim that the provision of service as operation or maintenance of self-owned equipment does not amount to supply of services to third party. But on the other hand, they claim that the ownership in the infrastructure developed by it would be transferred after the expiry of the contract period (i e 5 years). The said transfer of ownership is also unconditional. Moreover, under Schedule-II (1)(c) of the CGST Act, 2017/SGST it is clearly defined that any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed, is a supply of goods. It is also observed that the Appellant at para-13.3 of their Appeal, have clearly admitted that the funds for implementation of project are being provided by OMSM to OKCL, for further release to the Appellant. The Appellant has cited the agreement copy of OMSM and OKCL, where it is provided that if OKCL fails to discharge the obligation under the agreement, OMSM would discharge all the responsibilities. The agreement cited between OMSM and OKCL is not relevant to the present issue. The Appellant themselves have admitted that OKCL will release the money for the supplies made by the Appellant. The contention/pleading of the Appellant that they merely act as an implementing agency on behalf of OMSM, is factually not correct. The Advance Ruling passed by the Authority for Advance Ruling, Odisha, made under Section 98 of the Goods and Services Act, 2017 in RE: M/S. IL FS EDUCATION AND TECHNOLOGY SERVICES LTD. [ 2018 (7) TMI 755 - AUTHORITY FOR ADVANCE RULING - ODISHA] upheld. 2019 (2) TMI 1602 Imposition of IGST - appealable order under Section 107 of Punjab General Goods and Service Tax Act, 2017 - Held that:- We dispose of the present petition by permitting the petitioner to file an appeal assailing the order dated 25.07.2018 (Annexure R-2) before the Appellate Authority. It is however, clarified that in case any appeal is filed by the petitioner, the same shall be decided by the Appellate Authority expeditiously after affording an opportunity of hearing to the petitioner in accordance with law. Income Tax 2019 (2) TMI 1601 Reopening of assessment - reopening relying on audit objection - audit objection merely is an information - Held that:- SLP dismissed. 2019 (2) TMI 1600 Undue delay in granting the refund - Credit to the refund due to the petitioner and the interest u/s 244A (1) and 244 (1A) - additional compensation due to the petitioner - Held that:- We are not inclined to entertain this petition under Article 136 of the Constitution of India. Special Leave Petition dismissed. 2019 (2) TMI 1599 Addition u/s 43B - conversion of unpaid interest into a funded interest loan treating the same as interest payment - HELD THAT:- The provision of Section 43B covers a host of different situations. The statutory Explanation 3C inserted by the Finance Act, 2006 is squarely applicable in the facts of the present case. It appears that the attention of the High Court was not invited to Explanation 3C, we are, thus, of the view that the Assessing Officer has rightly disallowed the deduction as claimed by the assessee. The Appellate Authority, ITAT and the High Court erred in reversing the said disallowance. - Decided against assessee. 2019 (2) TMI 1598 Revision u/s 263 pursuant to search operations carried out in terms of Section 153A - Extension of limitation period - limitation given in Section 153(2A) application to cases of fresh assessment made pursuant to orders passed u/s 263 - non-obstinate clause for limitation given in case of search and seizure i.e. 153B and 153C - scope of Revisionary powers of CIT-A - as argued there is non-obstinate clause for limitation given in case of search and seizure i.e. 153B and 153C of the Income Tax Act, the final limitation cannot be extended - HELD THAT:- SLP dismissed. 2019 (2) TMI 1597 Penalty u/s 271(1) (c) - search and seizure operation - issuance of notice u/s 153A - Advances for booking of flats as income - disclosure of additional income to buy peace - HELD THAT:- As perused the appeal memo of the appeal before the Commissioner which nowhere explains the assessee’s stand that the amount in question did not represent the income or the reasons for the same. As noted, the assessee confined the appeal to a single ground namely that the Assessing Officer had committed an error in leaving the penalty. The main thrust of the assessee’s contention in the appeal was that the disclosures were made to buy peace and on condition that the penalty proceedings would not be instituted. Both grounds not found favour with the Supreme Court in case of MAK DATA P Ltd Vs. CIT [2013 (11) TMI 14 - SUPREME COURT]. The assessee has not built up any case for arguing that the receipt in question was not in the nature of income. Merely by stating so and relying on the judgment of this Court in the case of CIT, Nagpur Vs. Karda Constructions Pvt Ltd. [2013 (2) TMI 740 - BOMBAY HIGH COURT] the assessee cannot hope to establish the same. The assessee had made disclosure of additional income. To dislodge his own declaration that the disclosures did not relate to income the assessee had to lay down a foundation which in the present case is totally missing. Section 271(1) as is well known refers to a penalty that may be imposed on an assessee under specified circumstances. Explanation 5A added to the said sub-section by Finance Act 2009 w.e.f. 1.6.2007 covers a situation where the assessee post search files a return of income disclosing additional income claiming immunity from penalty. The explanation provides that notwithstanding declaration of such income in the return filed after the date of search, the same would be deemed to be a case of concealing particulars of income or the case of furnishing of inaccurate particulars of income. The case of the assessee would squarely fall within this explanation and the Tribunal correctly reinstated the order of the Assessing Officer. 2019 (2) TMI 1596 Recovery proceedings - Auction sale of immovable property - unpaid tax dues of the Income Tax Department - non eviction of occupants from the auctioned property to give peaceful possession to highest bidder - Respondent No. 5 one Ajit More had unpaid tax dues of the Income Tax Department - Held that:- Petitioner who is a successful bidder of the property in question, has become the owner of the property upon confirmation of sale and issuance of sale certificate by the Income Tax Authorities. The petitioner has paid a sum of Rs. 50 Lacs sometime by 13.3.2008. Till date, the petitioner is not put in possession of the property as the Income Tax Department could not evict the occupants thereof. Respondent No. 5 has not actively participated in the present proceedings. His wife who has appeared through lawyer contends that she does not have cordial relations with her husband and that she had nothing to do with the dues of her husband towards Income Tax Department. The property in question belongs to her and not to her husband. Initially, the Income Tax Department accepted her request for not evicting for a period of six months in view of the ensuring HSC examination of her daughter. Further, the City Civil Court protected her against eviction by granting injunction. Such injunction also stood vacated on 3.5.2014. Respondent No. 4 cannot take shelter of merely having filed the appeal before the High Court against the judgment of the City Civil Court, that too, for a period of close to six years. For nearly six years after filing the appeal and vacation of interim relief by the City Civil Court, she is without any protection from any Court. Mere filing of the appeal would not automatically operate as a stay. For over 5 and 1/2 years, as no interim relief is granted to the appellant, the petitioner cannot be asked to wait indefinitely to be put in possession of the property in question. We do not find fault with the Department in being cautious in view of the fact that the appeal was pending before the High Court. However, in our view, sufficiently long time has passed since respondent No. 4 filed appeal before the High Court. A successful bidder and auction purchaser cannot be asked to wait indefinitely for the legal proceedings to be completed. Under the circumstances, we direct the Income Tax Authorities to proceed further in accordance with law to give vacant and peaceful possession of the property in question to the petitioner. 2019 (2) TMI 1595 Interest income determination - Correct head of income - business income OR income from other sources - also disallowance of claim of interest expenditure - HELD THAT:- Interest income earned has to be termed as business income in the present facts. This as its activity of lending money was a separate activity of business besides construction We find both the CIT(A) and the Tribunal on examination of records found that the respondent was engaged in construction activities as well as in the activity of lending money. The mere fact that the respondent did not earn any income on its investment made, the interest expenditure would not cease to be an expenditure incurred for business. The concurrent finding of fact by the CIT (A) and the Tribunal cannot be found fault with. Accordingly, the question as proposed does not give rise to any substantial question of law. Thus, the two questions are not entertained. Disallowance u/s 14A r.w.r.8D - HELD THAT:- Where no exempt income is earned in the subject assessment year, occasion to disallow any expenditure under Section 14A could not arise. - Decided against revenue 2019 (2) TMI 1594 Auction sale - attachment of immovable properties of the petitioner's grandparents - Petitioner is daughter of Jagdish Hendre, the son of the late couple who had predeceased his parents - Petitioner's grandparents [grandparents had died intestate] are the assessee in default - proposed sale is hit by the limitation period prescribed under Rule 68B of the second schedule of the Income Tax Act - There is no clarity about the total dues of the department from the petitioner's grandparents - HELD THAT:- We had heard learned Advocates for the parties on the question of interim relief. Having thus heard the Advocates, it would prima facie appear that the auction proceedings are being conducted after several years of the department ordering assessment of the properties. Dues of the deceased assessees' had arisen in relation upto the assessment year 1999-2000. A serious question of the action of the department being within the period of limitation under Rule 68B would arise. Prima facie we do not think that the departmental authorities are correct in contending that such period would commence only after the computation of interest and order asking the assessees to pay such interest is passed. In that view of the matter, we would not permit the conduct of the auction. In the result, the petition my be adjourned for further hearing on 7th March, 2019. By way of adinterim relief, the auction of the properties in question is stayed. Petitioner shall ensure service of this order on private respondents. 2019 (2) TMI 1593 Unexplained income - search u/s 132 - addition based on document containing the details as seized during the course of search - presumptions envisaged in the provisions of Section 132(4A) as well as provision of Section 292C - HELD THAT:- Mere letter from the bank would not established a relation between the payable amount and the assessee, particularly when the draft was in favour of a limited Company. As recorded, documents were not seized from the possession of the Assessee but during the raid from a third party. No question of law, therefore arises. Addition of unexplained expenditure - HELD THAT:- Tribunal considered the material on record and reduced these additions made by the Assessing Officer under this head. The entire issue is factual. Revenue appeal dismissed. 2019 (2) TMI 1592 Application for rectification u/s 254(2) - non consideration of the additional evidence - additional evidences produced before the CIT (Appeals) being rejected without any justification - HELD THAT:- The above grievance of the petitioner of non-consideration of the ground of rectification is evident from reading of the impugned order dated 10th August, 2017. This is even not disputed by the Revenue. Thus, there is flaw in the decision making process leading to the impugned order dated 10th august, 2017. Tribunal ought to have dealt with the above issue (urged as ground No.5) in the Miscellaneous Application for rectification and taken a view on it. Therefore, we direct the Tribunal to decide above issue urged as ground No.5 by the petitioner in its rectification application dated 30th November, 2016 and pass an order on the same after following the principles of natural justice. 2019 (2) TMI 1591 Rectification of mistake u/s 154 - mistake being apparent from the record as per provisions of section 71 (2) - according to the A.O, during the period relevant to the A.Y. in question, the assessee had declared low tax capital gain - HELD THAT:- In the case of Commissioner of Income Tax Vs British Insulated Calender's Ltd. Reported [1993 (1) TMI 43 - BOMBAY HIGH COURT] in which it was held that under sub-section (1) of Section 71 of the Act the assessee has no option in setting off the business loss against the heads of other income as long as there was no capital gain during the year under consideration. The case of the assessee does not fall under sub-section (1) of Section 71 of the Act since the assessee had declared capital gain. Such a situation would be covered by subsection (2) of Section 71 Provision of Sub-Section 2 of Section 71 was somewhat different and the expression “or, if the assessee so desires, shall be set off only against his income, if any, assessable under any head of income other than 'capital gains' has since been deleted. Nevertheless, the question that would arise is, whether even in the unamended form sub-section (2) of Section 71 of the Act mandates the assessee to set off its business loss against the capital gains of the same year when this provision used an expression “may” as compared to the expression “shall” used in subsection (1). In the present case, we are not called upon to judge the correctness of interpretation of either the revenue or the assessee. Sufficient for us to come to the conclusion that the question was far from being clear. It was clearly debatable. In this position, the A.O., as per the settled law, could not have exercised the rectification powers. 2019 (2) TMI 1590 Penalty u/s 271(1)(c) - assessee had computed tax at the concessional rate - lower computation of payable tax on capital gain - revised return filed - HELD THAT:- The issue pertains to penalty imposed by the AO u/s 271(1)(c). Such penalty was deleted by the Tribunal. The Tribunal noticed that the assessee had made full disclosure of the storm term capital gain, however, had computed the tax at lower rate which the assessee did not qualify since the said shares did not offer security transaction tax. Upon such error being pointed out, the assessee without any opposition promptly revised the return. Tribunal viewed the lower computation of payable tax as arising from a bonafide error. Additionally, as noted that the Tribunal found that upon said error being pointed, the assessee offered the income to tax through revised return. No question of law - Decided against Revenue 2019 (2) TMI 1589 Eligibility to Interest u/s. 244A - self assessment tax refunded to the assessee - Self assessment tax as voluntarily paid by the assessee and not pursuant to a notice of demand issued u/s. 156 - HELD THAT:- The impugned order of the Tribunal has held that the Assessee is entitled to interest u/s 244A on the refund of the excess self assessment tax paid by it. This by following the decision of this Court in Stock Holding Corporation of India Ltd., v/s. N. C. Tewari, Commissioner of Income Tax & Others [2014 (11) TMI 899 - BOMBAY HIGH COURT] - No substantial question of law. Interest u/s 244A allowed on the self assessment tax refunded to the assessee - grievance of the Revenue that order of the Tribunal erred in ignoring the decision of CIT v/s. Engineers India Ltd., [2015 (3) TMI 110 - DELHI HIGH COURT] while allowing the appeal of the Assessee - HELD THAT:- The grievance of the Revenue is unsustainable in law. This is so, as the Tribunal is bound by the decision of the jurisdictional High Court as held in East India Commercial v/s. Collector of Customs [1962 (5) TMI 23 - SUPREME COURT OF INDIA] and in CIT v/s. Thane Electricity Supply Co. Ltd. [1993 (4) TMI 37 - BOMBAY HIGH COURT] - No fault can be found with the impugned order of the Tribunal in allowing the Assessee's appeal by following the decision of this Court in Stock Holding Corporation [2014 (11) TMI 899 - BOMBAY HIGH COURT]. It may also be pointed out in passing, that the decision of the Delhi High Court in Engineering India Ltd. has been set aside by the Apex Court in Engineers India Ltd., v/s. CIT [2017 (7) TMI 873 - SUPREME COURT] - Decided against revenue 2019 (2) TMI 1588 Refusal of exemption u/s 10(22) - Charitable activities - assessee, a charitable institution registered under the Travancore-Cochin Literary, Scientific and Charitable Societies Registration Act, 1955 and running an educational institution - denial of claim as school has not got CBSE recognition and that the property purchased in 1997 is in the name of the Secretary and the Manager of the Trust Satheesh Kumar and his wife, Pushpavally, a teacher in that school respectively - HELD THAT:- Even though it is true that the assessee is running an educational institution, it cannot be said that the society exists solely for educational purposes and not for profit. The Tribunal rightly concluded that the acquisition of property in the name of individuals is indicative of the fact that the profits of the institution was being used for self aggrandizement; which is the explicit motive. The explanation that the property was inadvertently purchased in the name of individuals by an innocuous mistake, can only be taken with a pinch of salt. Also the assessee is a society, formed with many objectives, one of which is imparting education. Hence, the assessee cannot be found to be an institution established and existing solely for educational purposes. The assessee also has declared income from cultural activities, which again reinforces the finding that the object is not solely education. - Decided against the assessee. 2019 (2) TMI 1587 Income from house property - annual letting value (ALV) of the unsold units of properties lying as stock in trade - taxing hypothetical income - source of income - deemed income - AO computed deemed rental income u/s.23 and added it to the assessee’s total income - levy of income tax in respect of properties held by the assessee as an owner even if the same have been held as stock in trade - HELD THAT:- It is no doubt true that section 23 deems the determination of income from house property, which is not let out, but it is equally trite that a deeming provision cannot be extended beyond its ambit, so as to cover the heads of income or the sections, to which it does not operate. No attention has not been drawn by the DR towards any specific provision under Chapter IV-D of the Act which deems rental income on the properties held as stock in trade, waiting for sale and not actually let out, as chargeable to tax under the head “Profit and gains of business or profession”. As the assessee admittedly did not earn any rental income from letting out of these two units, which position has also not been disputed by the AO, taxing any hypothetical income, which is otherwise not sanctioned by any provision under Chapter IV-D, cannot be permitted. Even otherwise, section 5 of the Act clearly stipulates that a person who is a resident can be subjected to tax in respect of income from whatever source which is received or is deemed to be received in India or accrues or arises or deemed to accrue or arise to him in or outside India during such year. As the instant imaginary income charged to tax by the AO is neither a deemed income under the head ‘Business income’ nor is received or deemed to be received or accruing or arising or deemed to accrue or arise, not falling in any of the categories given in clauses (a) to (c) of section 5(1) - there is no rationale in charging it to tax. - additions to be deleted - decided in favour of assessee. 2019 (2) TMI 1586 Reopening of assessment - undisclosed bank account - burden of proof - HELD THAT:- Assessee has failed to produce material in support of his contention that he has never opened a bank account with Dena Bank is wrong. When the assessee submits that he has never opened the said bank accounts and files a suit in the court against M/s Dena Bank alleging fraud, he cannot be asked to produce documents in support of his claim that he has not opened a bank account. The negative cannot be proved. The burden of proof cannot be placed on the assessee. It is for the revenue which is making the allegation, to investigate and obtain material to disprove the claim of the assessee that he has not opened any of these accounts in this Dena Bank branch. As the revenue has not gathered any evidence, despite the assessee denying opening of these accounts and the assessee filing a Civil Suit in the court of law on this issue, hold that the additions, in question, have been unjustly made in the hands of the assessee in all the three assessment years. Such additions cannot be sustained. - Decided in favour of assessee. 2019 (2) TMI 1585 Addition u/s 41(1) - outstanding share application money - cessation of liability - HELD THAT:- In the case on hand, there is no instance of allowance or deduction made in any assessment in respect of loss, expenditure or trading liability incurred by the assessee. This was a case of share application money received which is a capital receipt. Hence, the addition u/s 41(1) of the Act, has been wrongly resorted to by the AO. - Decided against the revenue. 2019 (2) TMI 1584 Penalty imposed u/s 158BFA - absence of search warrant against the assessee - jurisdiction of the AO to complete assessment u/s 158BC - HELD THAT:- Promain Ltd. Vs. DCIT (2005 (6) TMI 224 - ITAT DELHI) we hold that in the absence of search warrant against the assessee, initiation of search was beyond jurisdiction of the Assessing Officer to complete the assessment under section 158BC We note that the assessment under section 158BC itself has been quashed, thus, the penalty levied in respect of the income assessed under said assessment order cannot survive. Accordingly, we set aside the order of the lower authorities and cancel the penalty levied under section 158BFA(2) of the Act. All the grounds of the appeal are accordingly allowed. 2019 (2) TMI 1583 Non-prosecution of appeal by assessee - HELD THAT:- The assessee is not interested in prosecuting its appeals. It has been held in the case of B.N. Bhttachargee & Anr. [1979 (5) TMI 4 - SUPREME COURT] that appeal does not mean only filing of memo of appeal but also pursuing it effectively. In cases where the assessee does not want to pursue the appeal, Court/Tribunal have inherent power to dismiss the appeal for non-prosecution as held in the case of M/s Chemipol Vs. Union of India [2009 (9) TMI 177 - BOMBAY HIGH COURT]. Respectfully following the decision of the Tribunal in the case of Multiplan (India) Ltd.. [1991 (5) TMI 120 - ITAT DELHI-D] and in Late Tukojirao Holkar [1996 (3) TMI 92 - MADHYA PRADESH HIGH COURT] we dismiss these appeals of the assessee for want of prosecution. Scrutiny assessment - additions towards estimation of income on work in progress, unexplained creditors and disallowance u/s 40(a)(ia) - HELD THAT:- CIT-A deleted the additions towards estimation of income on work in progress and addition u/s 40(a)(ia). With reference to the addition of unexplained creditors CIT(A) directed the AO to examine the contention of the assessee with reference to unexplained income from three creditors and after ensuring that the confirmation letters from the creditors were filed and allow accordingly. AO gave consequential effect to CIT(A)’s order on 18/02/2015 and recomputed the income at Rs. 2,39,62,500/- when the assessee failed to substantiate his claim by way submitting the confirmation letters from creditors. When the assessee preferred appeal before the CIT(A), the CIT(A) confirmed the consequential order of AO vide order dated 09/03/2018, on the ground that the assessee has not discharged its onus by submitting the confirmation letters from the creditors - there is no Representation from the assessee and the findings of the CIT(A) are uncontroverted - Decided against assessee. 2019 (2) TMI 1582 Unexplained source of repayment of loan - reopening of assessment - HELD THAT:- Assessee received a sum of Rs. 5 lakhs by way of small gifts from his friends and relatives. All of such persons, except, Shri Prakash B. Patil, were produced before the AO. They accepted the fact of having given gifts to the assessee - AO doubted their genuineness on certain frivolous issues. Shri Prakash B. Patil, could not appear in person before the AO, but furnished a confirmation letter on 13-12-2010 accepting the making of gift and a copy of his bank account to support the withdrawal of cash and giving of gift. In considered opinion, the assessee cannot be said to have not successfully discharged the burden cast upon him to prove the genuineness of the credits. Therefore, order to delete the addition Addition of sum received on sale of plot of land - HELD THAT:- The assessee categorically stated before the AO that he sold a plot of land for Rs. 1,30,000/-. A copy of Profit and loss account of the assessee for the year under consideration also depicts the sale of plot amounting to Rs. 1,30,000/-. Once the income from sale of plot has been accepted by the AO, he could not have rejected the explanation of the assessee towards receipt of Rs. 1,30,000/- for repayment of loan without any valid reason. Therefore, overturn the impugned order on this score. - Decided in favour of assessee. 2019 (2) TMI 1581 Adjournment petition - assessee’s counsel is not in good medical condition and alternate person who was supposed to appear in the place of the authorized representative did not appeared - assessee filed an affidavit stating that one Chartered Accountant had suffered cardiac arrest and on account of which he failed to appear before the Tribunal - HELD THAT:- The conduct of the assessee has not been found to be deliberate or wilful nor the assessee found to be guilty of unnecessarily prolonging the matter before the Tribunal by repeatedly filing affidavit for adjournment. Very often before us, both the assessee and the revenue seeking adjournment on more than three occasions citing various personal reasons by the respective counsels and the Hon'ble Division Bench have entertained such request unless it is found that one of the party in purposely dragging on the matter. Therefore, we are of the considered view that liberal approach can be adopted in the instant case. Accordingly, petition allowed - order passed by the Tribunal stands recalled and the appeal stands restored to the file of the Tribunal to be heard and decide afresh. 2019 (2) TMI 1580 Reopening of assessment - Assessment order passed u/s 143(3)- tangible material - audit objection - amount claimed on account of forex gain not allowable expenditure being revenue in nature - HELD THAT:- Following Kelvinator (2010 (1) TMI 11 - SUPREME COURT OF INDIA) decided by the Supreme Court held that change of opinion is impermissible. Revenue clearly barred by provisions of Section 147/148 of the Act. In view of the above discussion, the impugned re-assessment notice dated 30.03.2017, cannot be sustained. It is hereby quashed; all consequential proceedings issued and conducted pursuant to the said re-assessment notice are also hereby quashed. - Decided in favour of assessee. 2019 (2) TMI 1579 Penalty u/s 271(1)(c) - excessive deduction claimed u/s 10B - Addition of excess stock - findings of facts - HELD THAT:- Tribunal has reiterated the findings of facts that both the additions made to the income of the Assessee having been set aside following the decision of the High Court in the case of Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT]as far as issue of Section 10B is concerned and on the issue of excess stock being tax neutral, such cogent and reasonable findings of facts returned by the learned Tribunal and consequentially setting aside the penalty under Section 271[1][c] of the Act, does not give rise to any substantial question of law requiring the consideration by this Court under Section 260-A of the Act. - Decided against revenue. 2019 (2) TMI 1578 Penalty levied u/s 271(1)(c) - non recording of proper satisfaction - HELD THAT:- The assessee’s case is clearly covered under Explanation 1 to sub-section (1) of section 271 and AO held the assessee to have furnished inaccurate particulars of its income. In view of non recording of proper satisfaction by the Assessing Officer while initiating penalty proceedings u/s 271(1)(c) of the Act, wherein penalty was initiated for both the limbs i.e. concealment of income and furnishing of inaccurate particulars of income and thereafter also while levying penalty for concealing the income and furnishing inaccurate particulars of income; we find that in the absence of proper satisfaction being recorded and show cause being given to the assessee as to non fulfillment of either of the limbs of section, there is no merit in levy of aforesaid penalty under section 271(1)(c) of the Act. We find support from the ratio laid down in CIT Vs. Shri Samson Perinchery (2017 (1) TMI 1292 - BOMBAY HIGH COURT), wherein it was held that where there is no proper satisfaction for initiating penalty proceedings and in the absence of proper show cause notice to the assessee, there is no merit in levy of penalty. Accordingly, we delete the penalty levied under section 271(1)(c) - Decided in favour of assessee. 2019 (2) TMI 1577 Disallowance of loss under the head “capital gains” - chargeability of the capital gains - sale of shares of SQL Star International Limited, being long-term capital asset - addition on the ground that the transaction of sale of such shares is not genuine - HELD THAT:- As already concluded that the sale took place in the impugned AY itself, the impugned transaction, in terms of charging Section 48, were chargeable to tax in impugned AY only irrespective of the fact that sale consideration was actually received by the assessee or merely accrued to the assessee in impugned AY. The chargeability of the capital gains, in our opinion, was not dependent upon factum of actual receipt of sale consideration by the assessee and therefore, the stand of lower authorities, in this regard, could not be sustained. So far as the valuation of shares is concerned, it is notable that the SQL was a listed entity whose trading was suspended from BSE during the month of December, 2013 when the last traded price of the Share was Rs. 1.08 per share - the said entity was loss making entity and there was no ready buyer of its share upon its suspension from trading on stock exchange. The price of listed shares, in our opinion, are governed more by demand-supply factors and therefore, the sale consideration could not be rejected by revenue merely by suspecting the same without bringing on record any material to corroborate the fact that the price of the shares at relevant time was on the higher side. We are of the considered opinion that the stand of first appellate authority in rejecting the assessee’s Long Term Capital Loss could not be sustained. - Decided in favour of assessee. 2019 (2) TMI 1543 Disallowance u/s.14A - assessee made suo moto disallowance on an estimated basis for the purpose of computation of book profits u/s 115JB - MAT computation - HELD THAT:- Disallowance u/s.14A r.w.r. 8D(2)(iii) of the rules under normal provisions of the Act, we find that the Special Bench of the Delhi Tribunal in the case of ACIT vs. Vireet Investment Pvt. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] had held that only those investments that had yielded exempt income are to be considered while working out the disallowance under Rule 8D of Rules. Respectfully following the said Special Bench decision, we do not find any infirmity in the order of the CIT(A) with regard to disallowance u/s.14A under normal provisions of the Act. Accordingly Ground No.(i) raised by the revenue is dismissed. Disallowance u/s.14A is to be made in terms of Clause(f) of Explanation-1 of Section 115JB. Hence, we direct the AO to look into the expenses debited in the profit and loss account and identify each and every expenditure and ascertain the quantum of expenditure incurred for the purpose of earning exempt income and make disallowance under Clause(f) of Explanation 1 to Section 115JB of the Act. Accordingly, Ground raised by the Revenue is allowed for statistical purposes subject to directions contained hereinabove. Disallowance u/s.14A in respect of investment in shares which were made to obtain controlling interest in companies. We find that this issue had been settled in favour of the Revenue by the decision of Hon’ble Supreme Court in the case of Maxoop Investments Ltd., vs. CIT [2018 (3) TMI 805 - SUPREME COURT OF INDIA] accordingly Ground raised by the Revenue is allowed. 2019 (2) TMI 1542 Slump sale - Section 2(42C) - valuation entire unit - valuer assigned separate valuation to different parts of the unit - HELD THAT:- The sale in question was correctly held to be a slump sale as defined in section 2(42C). Merely because for the purpose of arriving at a proper valuation for transfer of the entire unit in the valuation report obtained by the purchaser, the valuer assigned separate valuation to different parts of the unit would not take away the fact that what was sold by the assessee was entire unit as a going concern. No question of law, therefore, arises. Effective date of sale of this unit - CRM division stood sold from the effective date - Date of transfer - Date of agreement - HELD THAT:- The agreement in question referred to the effective date of transfer as 31st May 2007. Tribunal records that written agreement which was executed a couple of months later and was registered some time thereafter, would not make any difference. The issue can be looked from slightly different angle. The date assessee stopped claiming income arising out of conducting charges of the said unit after 31st May 2007, surely the purchaser JSW would also have stopped claiming expenditure towards such charges. If both sides have accordingly acted in terms of clear understanding, the revenue authority had no reason or even power to shift such date. That too, in case of only one party i.e. the recipient of the income. Disallowance of expenditure made in terms of section 14A - HELD THAT:- We notice that before the A.O. the assessee has not raised such contention. We are informed that before CIT (Appeal) such a contention was raised. The same was not dealt with. Tribunal has merely made one line declaration that the assessee had not earned any exempt income. No reasons for for refraction of the Tribunal’s examination on the accounts of the assessee before coming to such a conclusion. We would request the Tribunal to re-examine this question and give a fresh finding with brief reasons. We are not disputing the Tribunal’s conclusion that if the assessee had not earned any exempt income disallowance u/s 14A read with Rule 8D could not have been done. This is what this Court in a judgement in case of The Pr. Commissioner of Income Tax Vs. Huntsman International (India) Pvt. Ltd. [2019 (2) TMI 1457 - BOMBAY HIGH COURT] has held. 2019 (2) TMI 1541 Characterization of income - security deposit paid in lieu of lease agreement - in B/S shown as assets, as receivables - concurrent nature of the findings - unforeseen circumstances as sealing of the premises on account of non-conforming user by directions of the Supreme Court through the Monitoring Committee, the premises could not be used - lessee/assessee agreed not to claim the security deposit and as a result sought to claim the amount as deduction which was denied by revenue - denial of treatment as revenue expenditure merely because it was paid in the course of a dispute - assessee urges that the ruling in Triveni Engineering [2010 (9) TMI 26 - DELHI HIGH COURT] is inapplicable because of peculiar facts of that case as relied upon to deny claim of deduction HELD THAT:- The distinctions sought to be made by the assessee/appellant that Triveni Engineering (supra), was decided in peculiar circumstances of the case, since the amalgamated company s books were assessed as it were in the hands of the transferee company [Triveni Engineering], in the opinion of this Court, is an insubstantial aspect which is not sufficient to distinguish the ruling. The reasoning in Triveni Engineering (supra) is not limited to such a fact situation. Furthermore, this Court notices that the decision in Madras Auto Services (P.) Ltd. apart from other judgments were also noticed by this Court in Triveni Engineering (supra). This Court is also un-persuaded with the argument that the amount of Rs. 5.8 crores, could be treated as a revenue expenditure merely because it was paid in the course of a dispute. Clearly, the character of the amount was of a capital nature and remained so; all that the assessee did was to agree that it would not claim a refund out of Rs. 10.58 crores, agreeing to forgo Rs. 5.8 crores. As a result, the Court is of the opinion that given the concurrent nature of the findings, no question of law arises - Decided against assessee. 2019 (2) TMI 1540 Special audit u/s 142 - modified terms of reference made under Section 142(2a) to be followed - HELD THAT:- In line with the previous orders made in all the said writ petitions, simultaneous special audit for all years will create difficulties and also result in overlapping of some issues that may arise during examination in all different years. The Assessing Officer and the Special Auditor may examine these aspects also. It is open to the petitioner/assessee to approach the AO and the special auditor on the basis of audit and the assessment order passed in the earlier years. In the event it is necessary to resolve any such incidental issue, the parties are at liberty to approach this court. 2019 (2) TMI 1539 Penalty u/s 271(1)(c) - Quantum addition deleted in appeal - HELD THAT:- When undisputedly addition on the basis of which penalty proceedings have been initiated is no more in existence having been deleted by the Tribunal, penalty levied by AO and confirmed by the CIT(A) is not sustainable in the eyes of law, hence ordered to be deleted in view of the judgment rendered in the case of K.C. Builders & Anr vs. ACIT [2004 (1) TMI 7 - SUPREME COURT] wherein it is held that, “when the addition made in the assessment order on the basis of which penalty for concealment is levied have been deleted there remains no basis at all for levying the penalty for concealment and in such case, no penalty can survive and the penalty is liable to be cancelled.” So, in view of the matter, penalty levied by the ld. CIT (A) is ordered to be deleted - Decided in favour of assessee. 2019 (2) TMI 1538 Disallowance of Corporate Social Responsibility (CSR) - allowable business expenditure - HELD THAT:- Explanation 2 has been inserted in the section 37 (1) w.e.f. 01/04/15 and is prospective in nature. In our considered opinion amendment by way of Explanation 2 to Sec.37(1) cannot be construed as disadvantage to the assessee in the period prior to the amendment. It is a disabling provision, as set out in Explanation 2 to Sec.37(1), and refers to such Corporate Social Responsibility expenses u/s 135 of Companies Act, 2013 and as such cannot have application for period not covered by this Statutory Provision which itself came into existence in 2013. We draw our support from the decision in case of CIT vs. Vatika Townships Pvt. Ltd. [2014 (9) TMI 576 - SUPREME COURT]. Amendment would not affect allowability of such expenses for the year under consideration, being assessment year 2012-13. It is observed that authorities below rejected claim of assessee only on the ground that Explanation 2 to Sec.37(1) is applicable to year under consideration. Allow grounds raised by assessee. As we have already allowed the said expenses under section 37 (1) for the year under consideration, the alternate claim raised by assessee under section 35AC and 80 G of the Act becomes academic in nature. - Decided in favour of assessee. 2019 (2) TMI 1537 Addition u/s 68 - genuineness of loan creditors - HELD THAT:- As find force in the submission of the assessee that both the loan creditors have expired in the meanwhile and therefore it is not possible on the part of the assessee to produce above two parties. The assessee before the AO had filed the copy of the account of Mrs. Prem Lata for financial year 2001-02 with M/s. R. L. Traders to whom loan was given and such loan was returned to her in February 2002 and thereafter Smt. Prem Lata had extended the loan of Rs. 5 lacs on 27.04.2002 and therefore, the source of Ms. Prem Lata is established. So far as loan from Sh. Shyam Goyal is concerned, the three storey building at New Delhi which was subsequently sold shows that he is a person of means to advance a loan. It is also to be noted that the matter is very old and the lenders are already dead. It is also not in dispute that the loan obtain during the financial year 2002-03 from M/s. Shyam Goyal was returned to him in the year 2003-04 and amount of Rs. 5 lacs obtained from Smt. Prem Lata has been returned to her during financial year 2004-05. In this view of the matter we are of the considered opinion that addition u/s 68 is not justified - decided in favour of assessee. 2019 (2) TMI 1536 Penalty u/s 271(1)(c) - defective notice - non-striking off the inappropriate words in the notice - HELD THAT:- As relying on YUM! RESTAURANTS (INDIA) PVT. LTD. VERSUS INCOME-TAX OFFICER [2017 (9) TMI 102 - ITAT DELHI] we cancel the penalty so levied by the Assessing Officer and upheld by the CIT(A) due to non-striking off the inappropriate words in the notice. The grounds raised by the assessee are allowed. 2019 (2) TMI 1535 Addition on account of foreign exchange gain - Foreign Exchange Monetary Item Translation - foreign exchange gain on “Long Term Loan and Advance” - Accounting Standard-11 - Foreign Exchange Monetary Item Translation Difference account under the Head “Reserves and Surplus” - HELD THAT:- The loan given to AVML is a capital asset which helps in earning incidental interest income, which is also offered for taxation. Since the loan advanced was its long term asset i.e., on account of capital asset and not as part of circulating capital, therefore, foreign fluctuation gain on account of alteration in the rates of exchange would be a capital accretion. The loan is shown as asset under the Head “Long Term Loan and Advance” in accounts. The assessee, thus, rightly followed Accounting Standard-11 as explained above. Hence, the loan given by the assessee being a capital asset of the assessee, any loss/gain on account of forex was to be added/subtracted to the loan - no justification for the authorities below to make the addition. Disallowance u/s 14A - Strategic investments - commercial expediency - HELD THAT:- The assessee made investments in subsidiary for commercial expediency. It was also explained by assessee that no borrowings were specifically made for the purpose of making investments. Therefore, there is no question of disallowing any expenditure. Considering the above discussion and considering the fact that assessee did not earn any exempt income in assessment year under appeal, therefore, no disallowance under section 14A of the I.T. Act can be made against the assessee. We, accordingly, set aside the Orders of the authorities below and delete the addition. Disallowance of interest considered for demerged entity - HELD THAT:- The assessee explained that loan was taken for the purpose of business and it is later on only when some business have been transferred to SPVs of the assessee, the aforesaid issue have been raised for disallowance of interest - the entire amount of loan have been taken for the business purpose of the assessee and the liabilities vests in the books of account of the assessee. Therefore, assessee were liable to pay interest on the same loan. The assessee also explained that all the infrastructure cost was lying with the assessee and that the assessee remain in the business of real estate and for that, the borrowed loan shown in the financials of the assessee has to be first utilised against the cost of the infrastructure. These facts, therefore, clearly prove that assessee utilised the borrowed funds in question for the purpose of business. Therefore, interest paid thereon are allowable deduction in the hands of the assessee u/s 36(1)(iii). Addition on account of interest - LIBOR - TPO raised a query as to why SBI Base Rate + 300 bps should not be applied while calculating interest on the said loan funds - HELD THAT:- TPO has accepted the CUP method for bench-marking the international transactions, there was no reason for the authorities below to took a different view and apply interest rate of SBI for the purpose of making the addition against the assessee. The assessee also explained that in an unrelated party case, the LIBOR+ 285 bps was considered, details of which were mentioned in the T.P. study, which would show that the interest rate applied in the case of assessee LIBOR + 300 bps is more than sufficient and as such no adjustment on account of ALP is required. The rule of consistency should have been followed by the authorities below while considering the similar transaction in assessment year under appeal. The SBI rate is a local rate and LIBOR is a foreign rate, therefore, LIBOR rate should be preferred as against the SBI local rate of interest. Thus, there were enough explanation given by assessee to show that international transactions of assessee for it’s A.E was at arm’s length and as such, no further adjustment is required in the matter. We, accordingly, set aside the Orders of the authorities below and delete the addition. Reversal of various provisions considered as income - No deduction was claimed in earlier years - HELD THAT:- We are of the view that the matter requires reconsideration at the level of the AO/TPO. The assessee has given the justification for making the provisions to general reserve. The assessee also claimed that the same provision have not been debited to the P & L A/c, therefore, it has no impact on the taxability of the income of the assessee. - Set aside the Orders of the authorities below and restore this issue to the file of AO/TPO with a direction to verify the facts and in case the provisions are not debited to the P & L A/c, addition shall be deleted because assessee has not claimed deduction of the expenditure as per the above explanation. Entry passed in books of account June Allocation - Different accounting year - HELD THAT:- The assessee explained that the June Allocation expenses in the financial statement was carried-out because of the fact that accounting year followed by the assessee-company was from July to June but for Income-tax purposes previous year is for the period April to March. Learned Counsel for the Assessee submitted that details were filed before the authorities below and no double deduction have been claimed by assessee. Assessee, rightly contended that this fact may be verified by the AO/TPO. It may also be noted here that except for the month of April to June, 2011, AO has allowed the claim of assessee of the similar expenditure. Therefore, the matter requires reconsideration at the level of the AO/TPO. We, accordingly, set aside the Orders of the authorities below and restore this issue to the file of AO/TPO for verification of the facts and passing the Order afresh. Disallowance on account of consultancy charges paid to Siva Ventures Limited - HELD THAT:- The assessee received the maintenance charges fees from SPVs to manage their infrastructure. In this regard, agreement was executed with the SVL. Thus, it is clear that assessee obtained the large amount as income from the construction business and when assessee has obtained consultancy charges for the entire project and was also receiving maintenance charges fees from SPVs, it would show that entire expenditure should have been allowed as deduction in the hands of the assessee. Since the proportionate disallowance have been made by the authorities below, therefore, it is not a case that assessee did not file all the documentary evidences before the authorities below. Considering the totality of the facts and circumstances of the case in the light of explanation of assessee, we are of the view that entire consultancy charges should be allowed in the hands of assessee-company. We, accordingly, set aside the Orders of the authorities below and allow the entire deduction. Addition from advance from customer - HELD THAT:- The assessee explained that the amounts in question are the advances received from the parties and in some of the cases, registration of the properties were done in subsequent year. Therefore, the amounts have been offered for taxation in subsequent year. In some cases, construction was not completed. Therefore, amount was treated as advance. These facts are available on record of the Department in subsequent year as well for offering the same amount for taxation. According to the Learned Counsel for the Assessee, all details were submitted before authorities below, therefore, matter requires reconsideration. Further, the assessee did not file any appeal against the addition of Rs. 31,23,109/- on account of Sundry Parties. Therefore, addition to that extent is maintained and for the rest of the amount, issue is restored to the file of AO/TPO for fresh adjudication. Capital expenditure debited to P & L A/c - AO has proposed disallowance of the above amount on account of capital expenditure debited to the P & L A/c during the assessment year under appeal - HELD THAT:- The assessee has explained that work-in- progress was written-off because it was not found physically at the site and that land was written-off because it was provided to Forest Department as compensation to utilize Forest Land in Lonavala. This is certified by the Auditor and for the rest of the amount incurred on repair and maintenance, according to explanation of assessee, show cause notice was given for part amount, but addition was made on substantial amount, without giving opportunity of being heard to the assessee. These facts, therefore, show that explanation of assessee requires reconsideration. We accordingly, set aside the Orders of the authorities below and restore this issue to the file of AO/TPO for fresh adjudication. T.D.S credit - HELD THAT:- Since part of the interest income is assessable in the hands of assessee-company, therefore, assessee-company would get credit of the TDS certificate to that extent only. The DRP, therefore, rightly directed the AO to allow credit as per Rule 37BA(3) of the I.T. Rules. Since the SPVs have declared part of the interest income in their return of income, therefore, Learned Counsel for the Assessee rightly contended in the alternative contention that they will be given credit of the TDS which was in the name of the assessee-company. Since the entire amount of the tax is lying with the Income Tax Department and the TDS certificate was in the name of the assessee-company, therefore, the authorities below are directed to grant TDS credit on the part amount of the interest which is available for tax by the SPVs. The credit of the TDS shall be allowed in the names of the companies who have offered it as income in their respective return of income. Sundry balances written off - Business loss - HELD THAT:- The matter could be remanded to the AO/TPO for fresh adjudication of the matter. The explanation of assessee clearly suggest that it may be a case of business loss because whatever amounts were given during the course of business activities could not be recovered by the assessee. The entries to that effect have been made in the paper book. Since it is a case of Special Audit and explanation of assessee was before authorities below, therefore, one more chance could be given to assessee to produce the documentary evidences before AO/TPO for final adjudication of the matter. We, accordingly, set aside the Orders of the authorities below and restore this issue to the file of AO/TPO. Non-deduction of TDS - disallowance of expenditure for non-deduction of TDS - HELD THAT:- According to second proviso to section 40(a)(ia), if amount which is in dispute has already been offered to tax by the deductee, assessee could not be deemed to be assessee in default. The assessee relied upon decision of Hon’ble High Court in the case of CIT vs. Ansal Landmark Township (P) Ltd. [2015 (9) TMI 79 - DELHI HIGH COURT] in which it was held that the “said proviso is curative and retrospective in nature. Payee filing return of income tax and offering the same received for taxation, therefore, no disallowance was made.” Merely because SLP of the department is pending, is no ground for not following the decision of the jurisdictional High Court. In this view of the matter, we set aside the Orders of the authorities below and restore this matter in issue to the file of AO/TPO with a direction to re-examine this issue. Cash expenditure though agent disallowance u/s 40A(3) - Rule 6DD - HELD THAT:- Part payment disallwance as not covered by Rule 6DD - For purchase of land assessee explained that the said party M/s. Aishwarya Enterprises has made further payment to the farmers, partly in cash and partly through cheque. Therefore, these were independent agreements between Assessee and M/s. Aishwarya Enterprises and further between M/s. Aishwarya Enterprises and Farmers (sellers). Therefore, there is no violation in the case of assessee as no cash payment have been made by the assessee. Even in case, it may presume that payment is made on behalf of assessee partly in cash through M/s. Aishwarya Enterprises, Rule 6DD(k) (supra) would allow because where the payment is made by any person to his Agent who is required to make payment in cash for goods or services on behalf of such person, then, there would be no violation of provisions of Section 40A(3). The genuineness of the payment to M/s. Aishwarya Enterprises have not been doubted by the authorities below, therefore, in such circumstances, there would be no violation of Section 40A(3). Notional interest on advance - Surplus fund - No interest charged on loan - HELD THAT:- The assessee produced copies of the MOU through which advance was given for the purpose of business to M/s. Charita City Homes Jaunpur Pvt. Ltd. There is no provision under the Income-tax Act to make addition on account of charging of notional interest. The assessee also explained that it has availability of sufficient funds, therefore, when amount of advance have been given out of the capital and reserves available with the assessee, there is no question of charging notional interest on the advance. Complete details are available on record which have not been rebutted through any evidence or material on record, therefore, there were no justification to make the above addition. Notional interest on Long outstanding imprest - AO proposed to make the impugned addition on account of notional interest @ 12% on the advance - HELD THAT:- Since assessee has sufficient funds available with it and if advance given out of the same, then, no addition on account of charging of notional interest could be made. We, accordingly, set aside the orders of the authorities below and delete the addition. Diversion of interest bearing funds - HELD THAT:- The assessee also explained that prior to it assessee had received interest free funds from SICCL. The balance left over with the assessee was parked in the FDs. Against this FD, OD was obtained from the Bank. Since the source of the advance money to SASL was interest free fund received from SICCL, therefore, there is no question of disallowance of interest against the assessee. Further, assessee has sufficient funds as noted in the Ground No.20, therefore, it would prove that assessee make advances even out of the free funds available with it. The totality of the facts and circumstances of the case and explanation of assessee clearly show that assessee made investments in group company for business purposes, therefore, addition is wholly unjustified. Disallowance of development charges as excessive - wholly and exclusively for the purpose of business - HELD THAT:- Responsibility as explained in the MOU upon the said party was with reference to procurement of the land with clear title. It has no connection with the development work which has assigned to the party separately. As per the invoices issued by M/s. Aishwarya Enterprises for payment of business expenditure, the amount was spent by them with regard to leveling, fencing, construction of compound wall, bush cutting etc. These terms are nowhere mentioned in the MOU. Therefore, addition was made on wrong premise against the assessee. It may also be noted here that the authorities below have allowed 50% of the expenditure and as such genuineness of the same incurring of the expenditure have not been doubted - the amount on development work have been incurred by the assessee was wholly and exclusively for the purpose of business which is different from the details mentioned in the MOU. Additions delted Disallowance of business and administrative expenditure - HELD THAT:- the matter requires reconsideration at the level of the AO/TPO. Learned Counsel for the Assessee submitted that complete details were filed before AO and is also noted by the DRP in the order. He has, therefore, suggested that matter may be remanded to the AO/TPO for fresh adjudication which is also not disputed by the Ld. CIT-D.R. Disallowance of Commission and brokerage expenses - AO observed that assessee has failed to justify the claim of the expenditure - HELD THAT:- We are of the view that the matter requires reconsideration at the level of the AO/TPO. PB-524 is invoice dated 12.01.2012 though in the name of Aamby Valley City, but it was with respect to commission for Aamby Valley Limited. Further, details with regard to brokerage paid to Colliers International (India) Property Services Ltd., the assessee explained that this property was obtained on rent and it was used for the purpose of business. Therefore, commission and brokerage was paid for the same. The details have not been examined by the authorities below. We are, therefore, of the view that the matter requires reconsideration at the level of the AO/TPO. Disallowance of advertisement and sales promotion and business promotion expenses - AO proposed the above disallowance on account of advertisement and sales promotion and business promotion expenses - HELD THAT:- The assessee-company has sponsored the events of “Indian Bridal Week” and “Vivah Home Exhibition”. The assessee explained that these events were meant for promotion of its Brand “Aamby Valley”. The assessee also explained that its turnover have increased due to this programmes and as such the amount was incurred wholly and exclusively for the purpose of its business. It is well settled Law even if third party has got benefit out of the expenditure incurred, the deduction under section 37(1) cannot be denied to the assessee - restore this ground of appeal to the file of AO/TPO for fresh adjudication Disallowance of prior period expenses - liability crystallized during the assessment year under appeal - HELD THAT:- We are of the view that the matter requires reconsideration. The assessee claimed that it has not made any claim of expenditure in earlier year and that appeal is filed for deduction of the aforesaid amount only. The assessee claimed that the amount was crystallized during the assessment year under appeal. Therefore, it is an allowable deduction. No findings have been given by the AO on this issue despite directions given by the DRP to verify the claim of the assessee and in case expenses have crystallized in assessment year under appeal, then issue may be allowed in favour of the assessee. Addition on account of property tax paid by the assessee, but bill not in its name - HELD THAT:- Now the property tax has been paid of the same property by the assessee. Therefore, this fact could be verified by the AO/TPO and thereafter pass a reasoned order on the same. We, accordingly, set aside the Orders of the authorities below and restore this issue to the file of AO/TPO with a direction to re-adjudicate the issue Addition of business and administrative expenditure - Verification of bills & documentary evidences - Assessee submitted that complete details were filed before the authorities below which have not been considered and that complete details are mentioned even in the order of the DRP - HELD THAT:- We set aside the Orders of the authorities below and restore this issue to the file of AO/TPO with a direction to re-decide this issue as per Law by verifying the facts from record by giving reasonable, sufficient opportunity of being heard to the assessee. Disallowance of interest on delayed payment of indirect tax - HELD THAT:- We are of the view that the interest paid in respect of delay in payment of indirect tax i.e., Service Tax and VAT is not penal in nature. Addition to be deleted Disallowance of consultancy charges paid - AO observed that the expenditure was not relatable to assessee’s business as the expenditure relates to aviation activity which have been transferred to business SPVs - HELD THAT:- This fact may be verified and in case this expenditure is connected with business SPVs, same could not be allowed in the case of assessee. However, the same is allowable in the hands of SPVs. AO shall pass Order accordingly, by giving reasonable, sufficient opportunity of being heard to the assessee. Ground No.23(i) of the appeal of Assessee is allowed for statistical purposes. Disallowance of professional charges - Charges paid for defending criminal case against an employee of the assessee - AO observed that expenses related to defending criminal case against an employee filed by a guest who visited assessee’s place can not be said to be business expenditure - HELD THAT:- The crime is always committed by a person and in the present case, offence of rape is committed by an employee in his personal capacity, therefore, it could not be treated that the amount paid to a criminal lawyer to defend an employee was incurred for business purpose. The authorities below, therefore, correctly denied the deduction of the same. Increase in general reserve due to Composite Scheme of Arrangement and Amalgamation taxable u/s 28(iv) -condition for amalgamation - HELD THAT:- In our view, the net increase in the general reserve of the assessee-company is neither a benefit nor a perquisite nor it is arisen out of carrying on of the business or profession by the assessee. The transaction of Composite Scheme of Arrangement and Amalgamation cannot be regarded to be the one carried into during the course of carrying on the business. We, therefore, hold that provisions of Section 28(iv) is not applicable to the facts and circumstances of the case. - Issue decided in favour of assessee. Investment received on Composite Scheme of Arrangement and Amalgamation considered as income u/s 56(2)(viia) - - condition for amalgamation - Section 47(vii) as amended by Finance Act 2012 is retrospective in nature - HELD THAT:- in view of the para-II of the Composite Scheme of Arrangement and Amalgamation, various undertakings will first vest in various SVPs, but, subsequently due to the applicability of Para-III of the Scheme, the holding Company of all the SVPs i.e., AVVPL got amalgamated into the assessee-company and all the assets and liabilities of the amalgamating company, immediately before the amalgamation becomes the property and liability of the assessee-company by virtue of the amalgamation and due to the simultaneously retrospective amendment to Section 47(vii) and in Section 2(1B) which defines the amalgamation. The condition of amalgamation is, therefore, stands complied with in this case since the merging of AVVPL into the assessee-company, in our view, complied with all the three conditions as stipulated in the definition of the amalgamation, it cannot be said that it is not a case of amalgamation. No bonus shares have been issued out of general reserve. We, therefore, hold that provisions of Section 56(2)(viia) cannot be applied in respect of this transaction as it is a case where the transfer in the case of assessee falls under section 47(vii) of the Income-Tax Act. - Issue decided in favour of assessee. Balance sheet as on 31st March 2011 has to be considered as per the rules. The valuation date has been defined to be the date on which property has been received by the assessee. As per the Composite Scheme, the assessee has received the property as on 31st March 2011, therefore, the balance sheet as on 31st March 2011 has to be considered. The “appointed date” as fixed by the Honourable High Court is also the “closing hours of the business on 31st March 2011”, therefore, in our view, the balance sheet as on 31st March 2011 has to be considered for the purpose of determining the value of the property under Rule-11UA of the I.T. Rules. MAT computation - HELD THAT:- Honorable Supreme Court in the case of Apollo Tyres Limited [2002 (5) TMI 5 - SUPREME COURT], held that “once accounts including profit and loss account are certified by the authorities under the Companies Act, it is not open to the Assessing Officer to contend that profit and loss account has not been prepared in accordance with the provisions of the Companies Act and dismiss the departmental appeal.” The decisions relied upon by the Ld. D.R. would not support the case of the Revenue. Honorable Bombay High Court in the case of CIT vs. Bisleri Sales Limited [2015 (11) TMI 388 - BOMBAY HIGH COURT] had taken the same view. These decisions are applicable to the facts of this case as in the case of the assessee also, the DRP while making the addition under section 115JB of the I.T. Act, 1961, took the view that the assessee should have routed the increase in the general reserve through profit and loss account, but, in this case also similar arguments have been rejected by the Honorable Bombay High Court. In view of the above, we delete the addition made under section 115JB 2019 (2) TMI 1534 TP adjustment - comparable selection - exclusion and inclusion of the comparables - functional profile along with FAR analysis - HELD THAT:- As regards Revenue’s appeal is concerned all the comparables contested by the revenue are already excluded in case of Adidas Technical services (P.) Ltd. vs. DCIT [2016 (2) TMI 916 - ITAT DELHI] and the Tribunal in assessee’s own case for A.Y. 2010-11 directed the TPO to decide the issue in controversy in the light of the decision of the coordinate Bench of the Tribunal in case of Adidas Technical services (P.) Ltd. and allowed the appeal of the assessee for statistical purpose. The assessee company’s profile in the present year also remains the same to that of earlier A.Y. 2010-11. AR pointed out for each of the comparables and its functional profile along with FAR analysis from the records. After going through the records, it can be seen that the DRP has rightly excluded these comparables. Thus, there is no need to interfere with the directions of the DRP. Hence, Ground No. 2 of the Revenue’s appeal is dismissed. Development of website and towards legal and professional fees allowability - HELD THAT:- DRP has rightly directed the Assessing Officer to verify the submission of the assessee in respect of the nature of the expenses and in case the professional expenses referred to by the assessee are not covered under Section 35DD, then allow the charges paid for development of website and towards legal and professional fees as revenue expenditure. There is no need to interfere with the said directions of the DRP. Thus, Ground Nos. 3 and 4 are dismissed. Exclusion of Global Procurement Consultants Limited and the issue of inclusion of BVG India Limited and Office Care Services Limited, both these aspect has to be looked into by the TPO as the functional profile set out by the assessee before us, it will be appropriate to remand back this issue to the file of the TPO/AO to verify in the light og decision of Tribunal in A.Y. 2010-11. Thus, matter is remanded back to the file of the TPO/AO. 2019 (2) TMI 1533 Claim of set off of brought forward losses - Conditions prescribed u/s 72A - Relaxation of the conditions from the CBDT - scheme of amalgamation - HELD THAT:- Condition specified in Rule 9C is that the amalgamated company should achieve at least 50% of the installed production capacity of the amalgamating undertaking before the end of four years from the date of amalgamation and continue to maintain the said minimum level of production till the end of five years from the date of amalgamation. The proviso appended to Rule 9C (a) says that the Central Government, on application made by the amalgamated company, may relax the condition of achieving the level of production and the period during which the same is to be achieved or both in suitable cases having regard to the genuine efforts made by the amalgamated company to attain the prescribed level of production and circumstances preventing such efforts from achieving the same- Followed earlier year order - ADM AGRO INDUSTRIES DHARWAD P. LTD.[2018 (11) TMI 1590 - ITAT DELHI] We hold that the CIT (Appeals) was correct in allowing the benefit of set off of brought forward losses. We also add that the department’s contention that the CIT (Appeals) has contravened provisions of Rule 46A of the Rules by admitting additional evidence is also not substantiated by facts on record and, therefore, this plea is also dismissed. - Decided against revenue. 2019 (2) TMI 1532 Allowability of claim of bad debt u/s 36(1)(vii) - Conditions specified u/s 36(2) - Bad debt has been written off as irrecoverable in its books of accounts - loss on derivative transaction on the spot market - provisions of Section 45V of RBI Act - Whether derivative transactions and loss arising therefrom is in the nature of speculative loss which cannot be allowed set off against normal business income - HELD THAT:- conceptually, the derivative transactions are not delivery based but are based on future prices, however the transaction on the spot market are delivery based having certainty of their values. However, question that arises for consideration is whether in the instant case, the transaction of purchase and sell of commodities are delivery based or not and a related issue of whether they are speculative transaction or not. Both the issues are closely linked and connected, and needs to be examined thoroughly to determine the exact nature of the transaction and treatment thereof for tax purposes. Once it is decided that the transactions are delivery based and thus not speculative in nature, the question of allowability of claim of bad debt under section 36(1)(vii) will arise for consideration. Merely stating that the VAT charges have been levied as per contract notes would not make the transaction as that of sale and delivery unless the transaction is demonstrated by actual stock of commodity and transfer through delivery. Once it is determined that there was actual stock of requisite quantity which has been contracted to be purchased and sold and the delivery thereof has happened, the transaction would be considered as delivery based transaction and not a speculative transaction. The allowability of claim under section 36(1)(vii) will arise for consideration and need to be reconsidered by the AO in light of legal proposition so laid down by the various Courts, so relied upon by the AR, wherein it has been held that when the assessee treats the debt as a bad debt in his books, the decision has to be a business or commercial decision and not whimsical or fanciful. The decision must be based on material that the debt is not recoverable and the decision must be bona fide. The assessee company has to show that bad debt has been written off as irrecoverable in its books of accounts and conditions specified u/s 36(2) have been satisfied. The allowability of claim u/s 36(1)(vii) will need to be reconsidered by the AO including on the point of satisfaction of conditions specified u/s 36(2). We are setting aside the matter to the file of the AO to examine the matter afresh in light of above directions after providing reasonable opportunity to the assessee. - Remanded back - Decided in favour of revenue for statistical purposes. Disallowance u/s 14A - HELD THAT:- The investments in subsidiary companies have been made out of fresh capital raised during the year and further, there has been no dividend income in respect of investment in subsidiary during the year and hence, the said investment will not form part of disallowance under section 14A read with Rule 8D. In respect of fresh investments under PTC amounting to Rs. 17.07 Crores during the year, the assessee company has sufficient interest free funds and it has been stated that tax has already been paid by the assessee company. In light of the same, following the order of the Coordinate Benches in the earlier year, the AO was not justified in making disallowance u/s 14A of the Act r.w. Rule 8D - Decided against revenue. 2019 (2) TMI 1531 Addition on account of alleged "Closing Work-in-Progress" - method of accounting followed - HELD THAT:- The material on record suggest that the assessee was providing high end visual effects VFX & Animation services and therefore, salary expenditure was a period cost for the assessee and therefore, there could not no occasion for the assessee to work out the work-in-progress in the financial statements. The assessee was consistently following completed service contract method in terms of Accounting Standard-9 to recognize the revenue in the books of accounts. Nothing on record suggest that there was any change in the consistent method of accounting while drawing up the financial statements. Therefore, the adhoc addition of 20% against total expenses, in our opinion, could not be sustained at all. advances received from customers - HELD THAT:- there could be no occasion to bring them to tax in the impugned AY when the same were mere advances and the services against the same remained to be rendered by the assessee. This is further fortified by the fact that that the amount of advances, in subsequent years, have been adjusted in invoices raised by the assessee in those years and the revenue has been recognized in those years. This being the case, the addition stand deleted. Adhoc disallowance of marketing and sales promotion expenses - Disallowed on the basis that some payments have been made by the assessee through credit cards in the hotels and an amount of Rs. 0.41 Lacs has been spent on the gifts - HELD THAT:- Most of the payments have been made through cheques after deduction of TDS. The payments by way of cash vouchers and credit card amounts to Rs. 4,21,577/- only, the details of which has already been given on page- 11 of the impugned order. This being the case, the disallowance of 50% is on a very higher side. We restrict the same to 20% of Rs. 4,21,577/- which comes to Rs. 84,315/-. The balance disallowance stands deleted. Sales commission expenses - Form 15CA / CB - HELD THAT:- commission mainly paid to Alan Dinoble, a US citizen & ADLD LLC for providing sales and marketing services to assessee outside India. In terms of the agreement, the consultant was to be paid @5% of work generated by them subject to a minimum payment of USD 10000 per month irrespective of sales orders procured. The documents on record demonstrate that it is undisputed fact that the payments have been made by the assessee pursuant to consultancy agreement entered into by the assessee with these two entities. The invoices issued by both the entities are placed on record which suggest that the payment has been made for the period from August, 2011 to December, 2011. The remittances are duly supported by Form 15CA / CB. Therefore, the expenditure, in our opinion, fulfilled the conditions envisaged by Section 37(1) and therefore, was an allowable expenditure. The balance payment of Rs. 1.89 Lacs represent payment to 24 parties as commission for referrals. Most of these payments are petty payments and made through cheques. The complete details of the same have been placed on record. This being the case, the addition on this account could also not be sustained. Addition of royalty payment - use of Trademark and logo Anibrain - allowable business expense - HELD THAT:- The payment has been made pursuant to memorandum of understanding dated 22/03/2008 towards use of certain trademarks owned by the director. The copies of the trademarks certificates have been placed on record. We find that this payment is recurring in nature and paid pursuant to contractual understanding. Nothing more was required from assessee, in this regard, to ascertain the admissibility thereof u/s 37(1). Therefore, the same was allowable to the assessee. 2019 (2) TMI 1530 Assessment u/s 153A - absence of incriminating material found - HELD THAT:- We consider it expedient to remit the matter back to the file of the CIT(A) for examination of the legal objection so raised on behalf of the assessee on sustainability of additions/disallowances in proceedings under s.153A/153C of the Act in the alleged absence of incriminating material in the light of legal proposition set out by the Jurisdictional High Court in SAUMYA CONSTRUCTION PVT. LTD. [2016 (7) TMI 911 - GUJARAT HIGH COURT]where no assessment is stated to be pending. In the absence of assessment records and material found in the course of search, we are not in a position to opine on the issue either way. The legal issue is thus restored to the file of the CIT(A) for determination thereof in accordance with law - Appeals of the assessee are allowed for statistical purposes. 2019 (2) TMI 1529 Assessment u/s 153C - absence of satisfaction note - approval of Joint Commissioner u/s 153D - non-compliance of mandatory requirements - HELD THAT:- In the facts of the present case, A perusal of the letter written by the Assessing Officer show that the satisfaction note required u/s 153C of the Act and also the approval required u/s 153D of the Act are not available in the case of records of the assessee. Further, the Assessing Officer has also made enquires with the office of Additional CIT and they have also informed that they are not able to trace the satisfaction note and approval granted u/s 153D of the Act. In view of the legal position the impugned assessment order passed by the AO without obtaining prior approval from the Joint Commissioner of Income Tax is null and void and is liable to be quashed. Sunrise Finlease (P.) Ltd. [2017 (12) TMI 674 - GUJARAT HIGH COURT] followed.- Decided in favour of assessee. 2019 (2) TMI 1528 Validity of Assessment orders u/s 153A - High Court quashed the order passed by the ITSC u/s 245D(2C) rejecting the applications of the assessee for settlement of their case for the relevant assessment years - HELD THAT:- We have to keep in mind that such orders were passed pursuant to the observations of the Hon’ble High Court by way of interim directions on 21.5.2013 that the assessment proceedings may continue and orders may be passed. No doubt so long as the ITSC holds the jurisdiction such an action of the AO was not permissible but when the ITSC has rejected the settlement application of the assessee, it cannot be said that the AO does not have jurisdiction to proceed with the assessment and to pass the orders. Such a course was permitted by the Hon’ble High Court in the writ preferred by the assessee. Therefore, it cannot be said that the assessment orders in these years are without jurisdiction or bad under law ab initio. Subsequently, the Hon’ble High Court quashed the order dated 3.4.2013 passed by the ITSC and directed the ITSC to proceed with the matter and consider the applications filed by the assessee on merits, In view of this the impugned assessment orders have become infructuous and now the jurisdiction stands vested in the ITSC. We, therefore, are of the considered opinion that all these appeals against the infructuous orders are also infructuous - Decided in favour of assessee. Customs 2019 (2) TMI 1576 Supplies to a Special Economic Zone (SEZ) unit - discharge of export discharge obligation - the respondents have rejected the same on the ground that it has failed to file the necessary documents to evidence fulfillment of its export obligations - Held that:- It is apparent that Holoflexwas required to submit the statement of export within three months of the expiry of the block year duly certified by a Chartered Accountant and concerned Bank. Holoflex was also required to submit yearly performance of export in electronics format. Admittedly, Holoflex had failed to do so - Further, it was also necessary that Holoflex s name and the EPCG license be indicated on the shipping bills/Bills of Export. It is seen in the present case that the petitioner had not provided the documents as required - It is also relevant to note that in terms of Rule 30 of the Special Economic Zone Rules, 2006, the goods supplied to an SEZ Unit are required to be inspected prior to the issue of Bill of Exports. Filing of Bill of Exports is not a mere formality but serves as a valuable check for ensuring that the goods deemed to have been exported are in fact received by the SEZ Unit and are accounted as Deemed Exports. In the present case, the petitioner had merely filed only Form I which was issued for the purposes of Central Sales Tax Act. Thus, no relief can be granted to the petitioner - petition dismissed. 2019 (2) TMI 1575 Detention of imported goods - PCBA Module F250Y, Keypad, Front Camera, Back Camera and other allied goods - goods detained on the ground that the goods were mis-declared - benefit of Notification No.57/2018 dated 02.04.2018 - Held that:- Provisional release of goods in question are liable to be granted upon the assesee providing sufficient security to the Department. The dispute raised in the present case relates to mis-declaration of goods. According to the petitioner, the goods imported are exempt from the levy of BCD of 10% whereas, according to the revenue, the goods imported do not attract the benefit of Notification No.57 of 2017 and are thus not eligible to Duty exemption. The revenue impact is thus contained to 10% of the Duty along with such interest and penalty as the authorities may see fit to levy/impose, after adjudication. Learned counsel for the petitioner also points out that no dispute has been raised by the authorities with respect to earlier Bills of Entry and two earlier consignments identical to the one in question and accompanied by identical declarations as in the present case were permitted to be cleared by the respondents in December 2018. Upon insistence of the authorities, the petitioner was constrained, under cover of letter dated 10.01.2019, to accept the re-classification of the earlier consignments along the lines of the classification determined by the authorities and has also paid the differential duty in respect of the aforesaid consignments. The petitioner is directed to remit 50% of the differential duty which shall be quantified by the respondent and communicated forthwith to the petitioner - The petitioner shall also furnish a personal bond in respect of the balance of the duty. Upon receipt of proof of remittance of the 50% of duty and execution of Personal Bond for the balance 50% of Duty, the goods shall be released forthwith. Petition disposed off. 2019 (2) TMI 1574 Export of Cow Crunch Upper Finished Leather - Appraising Officer felt that the leather may not satisfy the norms for prescribed finished leather vide DGFT Public Notice No. 3-ETC (PN)/92-97 dated 27.5.92 - Confiscation - redemption fine - penalty - Held that:- The samples of the leather are required to be sent to the CLRI as per the requirement of DGFT Public Notice dated 27.5.1992. We find that this is a detail Public Notice running into around 28 pages. The Public Notice has given description of types of leathers, manufacturing norms, conditions and the requirements to be tested - The ld. counsel was at pains to argue that the said Public Notice discussed is outdated. Be that as it may, when that is the only method of ascertaining the correctness of the type of leathers declared, that too by a recognized institute of national importance, have to be accepted. Interestingly, we find that in the appeal filed by the appellant, the appellants have enclosed a subsequent copy of Public Notice No.21/2004 dated 1.12.2009 also issued by DGFT concerning the latest leather norms. It is therefore obvious that the concerned authorities have been also seized of the matter and have issued revised norms as per the said notification. The exports in the present case are before the Public Notice No. 21/2004 came to be introduced. The appellant has filed Miscellaneous Application requesting to send the samples for retesting - After a lapse of more than a decade we do not think that such testing would serve any purpose. The remnant samples may well have been disposed of by CLRI after a prescribed time limit Even if the samples are still available, the passage of time, namely of almost nine years would surely have caused at least some perceptible, if not irreversible changes in the physical or other characteristics of the samples. For these reasons, the miscellaneous application for retesting is dismissed. There is no infirmity in the orders passed by the authorities below, for which reason, the impugned order is sustained - appeal dismissed. 2019 (2) TMI 1573 Penalties on the firm and partner u/s 112(a), Section 114 (iii) & Section 114AA of the Customs Act, 1962 - EPCG License - it is alleged that the appellant had lent his shipping bills so as to enable M/s. POP, Mangalore to count such exports towards export obligation fulfillment under EPCG License of the main noticee i.e. M/s. POP, Mangalore under ‘third party exporter category. Penalty on Sh. Ashok P Muniyar - Held that:- Since the appellant, Sh. Ashok P Muniyar has died during the pendency of the appeal, therefore penalty proceedings against the deceased stand abated. Penalty on the appellant, M/s. Riddhi Enterprises and its partner, Sh. Kamal Kishore Parekh - Held that:- The main notice who has mis-used the EPCG License on the basis of the exports made by the appellant and has also obtained EODC certificate from the DGFT. They have gone to the Settlement Commission and have settled the matter before the Settlement Commission and have paid the liability along with interest - further, the Original Authority has not considered that once the settlement is permitted by the Settlement Commission by the main notice then can penalties be imposed on the co-noticee who bona fidely believe that the export made by them were covered under ‘third party exports’ and counted towards export obligation fulfillment of the EPCG License holder - further, the Original Authority has imposed the penalty on the partner as well as Partnership firm on the same very transaction which is not permitted under law as the Partnership is not a separate legal entity and all the partners collectively known as firm and therefore, the imposition of penalty on the partner as well as Partnership firm is not legally sustainable. Further, the Original Authority has not discussed about the role, acts and omission on the part of the appellant in the SCN which necessitated the imposition of penalties under Section 112(a), Section 114(iii) & Section 114AA all under the Customs Act, 1962 and the requirement to be fulfilled for imposition of penalty. The said sections have also not been brought out specifically in the impugned order. -In view of all these infirmities, this case needs to be remanded back to the Original Authority to pass a denovo order after considering the various submissions made by the appellant and also consider the various decisions which may be relied upon by the appellant in support of their submissions. Appeal allowed by way of remand. 2019 (2) TMI 1572 Seizure and adjudication of the live consignment imported - mis-declaration the consignment imported - demand of duty of past consignments (import) also - Section 17 of the Customs Act - extended period u/s 28 of CA - Held that:- It is not disputed that the Custom officer was in the process of examination of the container on 04.05.2013, after opening the container. Thereafter on receipt of the information that the DRI would be examining the consignment the container was sealed again. We find that for sealing of the container, there is no record. Ld. Advocate strenuously argued that the sealing of the consignment without punchnama was improper this ground itself is a sufficient to hold that there is a complete disregard to Customs Act and the Rules made thereunder. This in itself is a sufficient ground to treat the process of examination to be illegal and not permissible under Customs Act. The appellant has declared the description of the imported goods and their classification based on the documents supplied by the overseas supplier. The CHA, who was authorised to effect Customs clearance made available those documents, and was asked by the appellant to classify imported goods as per the aforesaid documents considering the nature and description of the goods. Therefore, if cannot be held that there was a deliberate attempt on their behalf to mis-declare the imported consignment. In fact, in past the Customs itself has cleared similar consignments as per the declaration given by the appellant at the strength of the export invoice as per the description of the goods therein. Revenue has not been able to prove that the appellant has paid any extra amount to the overseas buyer other than whatever is mentioned in the export invoice through banking channel. Regarding the consignment which has been imported by the appellant in past, it was argued that those imports have been under section 17 of the Customs Act without resorting to any provisional assessment. The Department has also not challenged the assessment order, and which had become final under Section 17 of the Act during the relevant period. The demand pertaining to past period is not sustainable. Also, the demand for the past clearance is proposed to be made against finally assessed bills of entry, which is not permissible. The invocation of Section 28 of Customs Act is not attracted as mis-declaration is not proved in these cases. Demand pertaining to live consignment - Held that:- As far as demand pertaining to live consignment is concerned, the same has been accepted, we without going into further details uphold the same but without any penalty as there is no deliberate mis-declaration as part of the appellant. Penalty on Director of the Company - Held that:- There is no deliberate attempt of mis-declaration on part of Director of the Company and the penalty imposed on them is set aside. The impugned order is set aside but for the demand relating to live consignment (B/E No. 2293952 Dated 31.05.2012) for differential value on account of change in classification of products - Interest and penalty imposed on the two appellants are also set aside - appeal disposed off. Insolvency & Bankruptcy 2019 (2) TMI 1571 Corporate Insolvency Resolution Process - existing dispute - HELD THAT:- Admittedly, the entire principal amount has been paid by the Corporate Debtor to the Operational Creditor during the pendency of the present petition. The Operational Creditor vehemently argued that the statutory interest provided for by the MSME Act on the delayed payments is still pending and the present petition should be admitted. The interest arising from the MSME Act has been disputed by the Corporate Debtor. The Corporate Debtor vehemently argued that the Operational Creditor has not produced any document to show that it is registered under the MSME Act. As argued, that the only document relied upon by the Operational Creditor is a Form/ Memorandum downloaded by it from the website of the Directorate under the MSME Act, which does not establish the registration. As argued that such a dispute can only be adjudicated by the dispute resolution mechanism provided under the MSME Act. In this case undisputedly the principal amount has been paid off during the pendency of the petition. Dispute that has been raised is relating to the interest amount which is being claimed on the basis of the MSME Act. The contention of the Operational Creditor is based on the fact that as per the statutory provision of the MSME Act, Petitioner is entitled for interest even without any prior agreement. The Corporate Debtor has raised the dispute regarding the registration of the Operational Creditor as a MSME unit. There is a plausible contention in the argument raised by the Corporate Debtor which requires further investigation and it appears that the dispute raised by the Corporate Debtor is not a patently feeble legal argument or an assertion of fact unsupported by evidence. Hon’le Supreme Court in Mobilox Innovations (P) Ltd. (2017 (9) TMI 1270 - SUPREME COURT OF INDIA), in case of an existing dispute, the application under Section 9, IBC is to be dismissed. The Adjudicating Authority does not have powers of a civil court to adjudicate upon the entitlement of the Operational Creditor to the benefits accruing from the MSME Act. The petition does not deserve to be admitted. In this scenario, the objections raised by the Corporate Debtor regarding the eligibility of Mr. Sanjay Kumar Ruia to initiate and maintain the present application and the question of appointment of the proposed Interim Resolution Professional, who has later on recused from the assignment have no significance. This Petition is dismissed. 2019 (2) TMI 1570 Initiation of corporate insolvency resolution process - existence of dispute - HELD THAT:- As rightly been pointed out from the side of CD that the documents, annexed with the application, clearly evince that there exists a dispute between the OC and CD in respect of the debt in question and such dispute came into being as early as 2012-2013. Such revelations, in my firm view, show that the lapses on the part of CD in not complying with the direction in section 8(2)(a) of the Code of 2016 cannot be allowed to grow beyond its size so as to come in the way of accepting the prayer of the CD made in the counter affidavit. On considering the pleadings of the parties in their totality having regard to the submissions, advanced by learned legal representative appearing for OC as well as learned senior advocate appearing for the CD, as found reason to conclude that the CD could establish that there is a dispute between the parties hereto regarding the debt in question which is not spurious, hypothetical or illusory and such dispute was there since long before the initiation of present proceeding. Resultantly, this proceeding is dismissed for the reasons aforementioned. Service Tax 2019 (2) TMI 1569 Demand of service tax - denial of CENVAT Credit - demand of Service Tax in respect of advances received mostly by cheque and the Service Tax totally amounting thereon Rs. Rs. 1,01,25,528/- - It is the case of the Appellant that they in general paid Service Tax as and when advance was received for providing construction services. However, in cases where the Appellant had shown such amount as other creditors account / refund account since bookings were cancelled, and no service was effectively provided, and no tax was paid to such extent. The revenue authorities have raised demand of Service Tax on such count - Held that:- As regards any amount initially received, however, later on returned to the customers, no Service Tax can be demanded and/or retained by revenue authorities thereon, since it cannot be said that service was actually provided to such persons. In fact, there is a specific provision under Rule 6(3) of the Service Tax Rules, 1994 for this purpose - to the extent of any amount which is considered as loans and advances and which was eventually even returned back, no Service Tax thereon can be demanded from the Appellant - matter remanded back to the original authority, to re-examine this issue and then determine actual taxable component on such transaction, after taking into consideration amounts already returned to customers as well as Service Tax already paid, though belatedly, by the Appellant. Demand of Service Tax of Rs.Rs.2,64,357/- raised on presumed receipt of money to the extent of Rs. 82,70,000/- presumably received by the Appellant as per certain scribbling made by the Accountant noticed at the premises of the appellant - Held that:- It is trite law that the onus is on revenue to prove their case beyond mere scribbling. In absence of any proof regarding receipt of such consideration, demand on this count also must fail. Demand of Service Tax of Rs. 67,10,232/- on certain Cash income, purportedly received by the Appellant and not taken in books of accounts - Held that:- We agree with the Appellant that no independent corroborative evidence, except some loose entries in the computer of the Accountant has been adduced by the revenue authorities to substantiate such serious charge. No statement of any buyer is also recorded to corroborate such facts. Affidavits filed by Shri. Mehul Pandya, being Affidavit dated 28.03.2014 and dated 28.03.2014 as well as Shri. Minesh Patel, being affidavit dated 20.02.2014 to the effect that actually no such cash was received is also placed on record by the Appellant. Demand of Service Tax of Rs. 12,71,428/-, on the presumption that the Appellant had collected but not paid Service Tax - it is the case of the Appellant that the overall Tax liability eventually found payable, as compared to the tax already paid by the Appellant, will result in a situation where such tax is not payable anymore - Held that:- Since we have already remanded portion of the issue qua Service Tax liability on Loans, even this issue may be re-examined by Original authority whether appropriate Service Tax on actual income stands discharged by the Appellant or otherwise. CENVAT Credit of Rs. 40,33,832/- - denied on the ground that the Appellant had paid Service Tax under Works Contract (Composition Scheme), 2007 upto 30.06.2012 - Held that:- We find merit in the contention of the Appellant that if the revenue authorities feel that correct rate of tax is under Notification 01/2006-ST and the Appellant did not fulfil conditions therefore (by availing credit on input services), the correct manner to deal with the issue is to “demand differential Service Tax under Section 73” whereas the revenue authorities instead seek to “recover Cenvat Credit availed” which is legally not correct - For the period after 01.07.2012, the Revenue Authorities have considered Service Tax with appropriate abatement (25% of value tax – 75% abated) by including the land value in the value of taxable service and then granted abatement. Whereas the Appellant chose to exclude land value and on the balance works contract value service tax paid at appropriate abated rate (40%) under Rule 2A of Service Tax valuation rules. That the Rule 2A of the Service Tax Valuation Rules, 2006 was not clear and properly drafted insofar as the aspect of including value of the land therein is concerned. - Issue on hand is squarely covered vide decision in the case of M/s Alliance Franchaise DE Delhi [2012 (8) TMI 1075 - CESTAT NEW DELHI] - The demand on this count therefore also must be dropped. Credit of Rs. 2,793/- Held that:- The Appellant during the course of the hearing conceded to the same considering smallness of the amount - The said demand is therefore confirmed. Cenvat Credit of Rs. 6,18,478/-, - sought to be denied on the ground that it pertained to cancellation of certain bookings where tax was also refunded to prospective customers. At the same time, the revenue authorities allege that since tax was not paid originally, there is no question of allowing credit thereof (under Rule 6(3) of the STR, 1994) to the Appellant - Held that:- That inasmuch as the SCN at ANNEXURE A, B & C has already demanded Service Tax on whole of bookings, denying credit simultaneously on the ground that while upon cancellation refunds were made to customers, but Tax was not paid earlier, is not proper. That since such tax is demanded with interest, there is no need to deny credit simultaneously on cancelled bookings. In the given set of facts and circumstances, penalty on Director is also uncalled for and we set aside the same. As regards the plea that since the Appellant was under financial distress and hence there was delay in payment of Service Tax and reliance on the decision in the case of Onward E-Services Ltd [2018 (5) TMI 323 - CESTAT MUMBAI], we direct the original authority to consider the same in the course of re-adjudication of the specific issues stated above. Appeal allowed by way of remand. 2019 (2) TMI 1568 Commercial training and coaching service - Vocational training institute - animation coaching - Exemption from payment of service tax - N/N. 24/2004-ST dated 10.9.2004 - whether the animation coaching provided by the appellant should be treated as computer training in terms of the aforesaid notification or otherwise? - time limitation - Held that:- The appellant s coaching is not computer animation and not any computer software or hardware. When a student passes out the course he will not become either a computer hardware or a software professional but he becomes professional in using the computer software to produce animation and animation films. This is similar to CAD software or TALLY software used by professionals in their work. In our view, the test to decide whether or not the training in question is a training related to computer hardware or software is what the trainee does at the end of his training - In this case, the trainee will not become specialist in computer software or hardware and he will also not be equipped to develop new computer animation software. All he is trained is in using the software to develop animations. Therefore, the appellant is clearly not covered by the mischief of the proviso and the explanation to the notification 24/2004-ST. The appellant is not liable to pay service tax on the computer animation software training which they have provided as they are entitled to the benefit of exemption notification 24/2004 as amended vide notification 19/2005-ST dated 7.6.2005. Video tape production service - Held that:- The appellant produced animation movie and sold it for a consideration. Video tape production services as per Sec. 65(119) of the Finance Act, 1994 is any professional videography or a commercial concern engaged in the business of rendering service related to video production. Video tape production means the process of recording any programme, event or function on a magnetic tape or on any other media or device and includes editing thereof in any manner. The animation film produced by the appellant clearly does not appear to be covered by this definition and therefore, we find appellant is not liable to pay service tax on this service as well. Since, we have decided in favour of the appellant on merits, we do not find it necessary to examine the question on limitation - appeal allowed - decided in favor of appellant. 2019 (2) TMI 1567 Classification of service - place of supply of service - export or not - Scientific and technical consultancy service or works contract activity - developing seeds of new varieties and hybrids - process of multiplication of the hybrid seed or the variety - entire activity is done in India - Report is sent to overseas client - Held that:- The activities undertaken by the appellant form the heart and soul of the entire plant breeding programme which results in development of new varieties such seeds are the essence of modern agriculture and green revolution. These activities start from testing germplasm to cross pollination to developing varieties and testing them in agro climatic zones continuously for a period of 7 to 9 years to ascertain their performance in Indian conditions. The activity undertaken by the overseas client is accepting those reports and filing for necessary patents. He also provides guidance to the appellant on conducting the research. Under these circumstances, it is found that the appellant is only rendering scientific and technical consultancy services - there is also no force in the argument of the appellant that they are not a scientific or technical research institution or an organisation. The service is complete only when the reports are also sent to their client as per the agreement in Germany. Until the report is delivered the service is not complete and the appellant is not entitled to the consideration for the service. Therefore, in this particular case that the service by the appellant is rendered partly outside India and partly in India although the part rendered outside India is very small. In terms of Rule 3(1) of the Export of Services Rules such services should be treated as export of services - the services in question are delivered partly outside India and partly within India and the payment for the services is received in foreign exchange and hence these services should be treated as export of services and therefore they are not liable to service tax on these services. Amounts which the appellant collected from the farmers for providing such technical guidance under the head scientific and technical consultancy service - Held that:- The appellant is providing guidance to farmers in cultivating crops to multiply the seeds of the variety so developed. The appellant himself buys the seeds so multiplied by the farmers and pays a price for that. In order to help the farmers multiply these seeds effectively the appellant provides guidance. Such guidance, in the field of agriculture is known as extension-education which is a branch of agricultural science which deals with transferring the knowhow to farmers. This does not involve any scientific or technical research but only in passing on know-how to the farmers about the agronomic practices to be followed and guiding them from time to time if there are any pest infestations, diseases etc. These services cannot be termed as scientific or technical consultancy services - demand set aside. The appellant is not liable to pay service tax on both the services rendered by them and the demands, interest as well as the penalties are liable to be set aside - appeal allowed - decided in favor of appellant. 2019 (2) TMI 1566 Penalty u/s 76 and 78 of FA - the respondent has discharged the entire service tax liability along with interest before issuance of the SCN - Held that:- As per sub-section (3) of Section 73 when the assessee has paid up the service tax along with interest on its own ascertainment or being point out by the officers, no penalties are required to be imposed. In the present case, show cause notice was issued even though the appellant had paid up the entire service tax along with interest immediately on being point out by audit. The adjudicating authority has imposed penalty under section 76. The penalties under sections 76 and 78 are mutually exclusive. When the adjudicating authority has considered and imposed penalty under section 76, the same cannot be set aside by the Tribunal in an appeal filed by department requesting to impose penalty under Section 78. There is no ground stated in this appeal contending that penalty imposed under Section 76 is erroneous. The Hon’ble High Court of Gujarat in Commissioner of CGST & Central Excise Vs. Sai Consulting Engineering Ltd. [2018 (5) TMI 1425 - GUJARAT HIGH COURT] has held that simultaneous penalties under Section 76 as well as 78 of the Finance Act cannot be imposed. The simultaneous penalty under section 76 and 78 cannot be imposed under law - when there is a penalty under section 76, the simultaneous penalty under section 78 cannot be imposed under law - the respondent has paid up the entire demand along with interest before issuance of show cause notice, hence further penalty under section 78 is unwarranted. Appeal dismissed - decided against Revenue. 2019 (2) TMI 1565 Liability of service tax - membership fees collected for the period from 16.06.2005 to 31.03.2006 - Held that:- High Court of Gujarat in M/s. Sports Club of Gujarat Ltd. Vs. Union of India [2013 (7) TMI 510 - GUJARAT HIGH COURT], has held that there would be no service tax liability on the subscription amounts collected by a Club or Association from its members - appeal allowed - decided in favor of appellant. 2019 (2) TMI 1564 Valuation - inclusion of reimbursable expenses in assessable value - Held that:- The appellant has to furnish necessary documents to establish that reimbursable expenses have been included in the taxable value. For this limited purpose, the matter requires to be remanded to the adjudicating authority who shall consider whether any reimbursable expenses are to be excluded from the taxable value that has been arrived by the adjudicating authority. Penalties - Held that:- The appellants were under bonafide belief that the said activity did not fall under BAS. From the litigations taken up by the appellant, the said contention requires to be considered - penalties not warranted and is set aside. Appeal allowed by way of remand. 2019 (2) TMI 1563 Short payment of service tax - Demand of service tax - Demand Confirmed on the basis of Form 26 AS of the appellant - Held that:- There were no other record of the appellant which were taken into consideration for entertaining a prima-facie view that appellant was required to pay short paid service tax of around Rs. 8 crores for the said period than the information that was available in returns in the form 26AS - Tribunal had an occasion to examine sustainability of demand raised only on the basis of form 26AS. It was held by this Tribunal in the case of Sharma Fabricators Pvt. Ltd. Vs Commissioner of Central Excise, Allahabad [2017 (7) TMI 168 - CESTAT ALLAHABAD] that The charges in the Show Cause Notice have to be on the basis of books of account and records maintained by the assessee and other admissible evidence. The books of account maintained by M/s Sharma were not looked into for issue of above stated two Show Cause Notices. Therefore, the transactions recorded in the books of account cannot be held to be contrary to the facts. From the record it is very clear that none of the records of appellant were taken into consideration for framing of charges that appellant had short paid service tax to the tune of around Rs. 8 crores and the said charges were framed only on the basis of information in the form 26AS - Revenue could have investigated into the nature of such transactions & should have established that the said transactions were in respect of provision of said service. Then alone the charges of short payment of Service Tax would have sustained. Appeal allowed - decided in favor of appellant. 2019 (2) TMI 1562 CENVAT Credit - utilization of credit in excess of said 20% of service tax payable - appellant were providing two stream of services, one taxable and other covered by Rule 2(e) of Cenvat Credit Rules, 2004 related to Interconnect Usage Charges - Interconnected Usage Charges were not chargeable to service tax and such charges were collected by the appellant - Rule 6(3)(c) of Cenvat Credit Rules, 2004 - extended period of limitation - Held that:- The issue is squarely covered by this Tribunal’s decision in the case of Idea Cellular Ltd. (supra), we note that the period covered in the show cause notice in respect of Interconnected Usages Charges is upto May, 2007 and in respect of demand of service tax on account of error of accounting the period involved is April, 2007 to September, 2007 and the show cause notice was issued on 20.10.2008 by extending the larger period. In view of precedent decision of this Tribunal under similar circumstances extended period of limitation is not invokable - appeal allowed - decided in favor of appellant. 2019 (2) TMI 1561 Condonation of delay in filing appeal - power of Ld. Commissioner (A) to condone the delay - Held that:- Tthe Ld. Commissioner (Appeals) dismissed the appeal as he is not vested with the power to condone the delay beyond three months in addition to the statutory period of three months in fling the appeal before him - appeal dismissed. 2019 (2) TMI 1560 Exemption to power transmission related services - Exemption rescinded by Notification No.34/2012-ST dated 20.06.2012 - Work Contract service provided to M/s U P Power Transmission Corporation Ltd. - Held that:- The services in respect of transmission or distribution of electricity have been exempted through Clause (k) to Section 66 D of Finance Act, 1994 w.e.f. 01.07.2012. For earlier period the same exemption was provided through Notification No. 11/2010-ST dated 27.02.2010. After going through the wordings and phrases used we do not find any change in the provision of law. We note that whatever was exempted through a notification earlier was subsequently exempted through provision of law in the Finance Act. The allegations in the show cause notice were not sustainable - Appeal dismissed - decided against Revenue. Central Excise 2019 (2) TMI 1559 Recovery of excise dues - attempt and coercive action on the part of the respondents in seeking recovery of the excise dues of one M/s. Shri Ganesh Mahadev Dyeing Mills, a partnership firm, erstwhile owner of the property - case of petitioner is that the petitioner was perceived to be successor of the erstwhile owner of the property, which as per the petitioner was wholly incorrect, illconceived and deserve to be quashed and set aside. Held that:- Unfortunately, in affidavitinreply, it is no where pleaded that there was any fraudulent transfer of business for avoiding the payment of dues by the erstwhile owner of the property. The unfortunate invoking of the general and common clause in the Sale Deed qua liabilities of Government dues on the property deserve to be appreciated in a proper perspective. The excise dues were not liable to be recovered from the property in question in the hands of the petitioner as still the property s change hands there was no attachment or restrictions or charge placed by the department and the property was in fact free from such kind of charge from excise department and therefore, it was not open to the department to invoke provision of Section11 to rope in the subsequent purchaser of the property by misconceiving it to be a purchase of business so as to attribute the petitioner successor only for the purpose of invoking Section11, which unfortunately has not been established by the petitioner in the present petition. The Court is of the view that the petitioner can not be held liable to pay any dues of the erstwhile owner of the property in absence of any specific covenant qua the same - petition allowed. 2019 (2) TMI 1558 Jurisdiction - power of Additional Director General of Central Excise Intelligence, Calcutta to issue SCN - Held that:- Whether the Additional Director General of Central Excise Intelligence, Calcutta had the power to issue the subject show cause notice is pending before the Supreme Court? - there is no justification in remanding the matter to the original adjudicating authority. The matter restored before the Tribunal, which is directed to hear and dispose of the matter by passing a reasoned order. 2019 (2) TMI 1557 CENVAT Credit - goods on which CENVAT credit had been availed was deployed for the manufacture of excisable goods, viz., ‘gypsum board’, ‘jointing compound’ and ‘gypboard moisture resistant ultra’ which was, inter alia, being cleared to developers of Special Economic Zone - rule 6(3) of CENVAT Credit Rules, 2004 - Held that:- The requirement of neutralisation of ineligible CENVAT credit is waived for certain categories of clearances including exports and clearances to units in special economic zones without, admittedly, covering developers of special economic zones. With the coming into force of Special Economic Zones Act, 2005, effective from 10th February 2006, exemption of duties on goods cleared from the domestic tariff area for use of developers or units in special economic zone is accorded by that special statute which does not distinguish between a unit and a developer - The gap in operationalising of the exemptions between two different arms of the Central Government, i.e., Ministry of Finance and Ministry of Commerce, should not have created an artificial, and uncontemplated, distinction between such clearances effected to special economic zones. Section 2(m) of the Special Economic Zones Act, 2005 includes supply from domestic tariff area to a unit or developer in the definition of ‘export’ and section 51 of Special Economic Zones Act, 2005 mandates that this statute would prevail over any other in the event of a conflict. Therefore, notwithstanding a subsequent amendment in rule 6(6) to the CENVAT Credit Rules, 2004, to include developer of special economic zones within the escapement covered of rule 6 of the said Rules, the categorization as exports would itself suffice to exclude the applicability of the liability prescribed therein. The impugned order has erred in upholding the liability of the appellant - appeal allowed - decided in favor of appellant. 2019 (2) TMI 1556 Demand of interest and penalty - Irregular availment of CENVAT Credit - Held that:- Hon’ble Karnataka High Court in the case of Vilax Industries Fabric [2018 (7) TMI 1369 - KARNATAKA HIGH COURT] has upheld the decision of the Tribunal and dismissed the appeal of the Revenue by holding that if the CENVAT credit is reversed without utilization then no interest and penalty is payable. The imposition of penalty of Rs. 9,910/- under Section 78 with regard to the “Man Power Supply Agency Service” is also not sustainable because the appellant has paid the Service Tax along with interest before the issuance of SCN as far as this Service Tax is concerned. The demand of interest and imposition of penalty is bad in law - appeal allowed - decided in favor of appellant. 2019 (2) TMI 1555 Demand of short paid duty alongwith Interest and penalty - extended period of limitation - Held that:- The liability to duty, of the additional consideration received on sale from the terminal is admittedly, not in dispute. It would appear that it was this peculiar circumstance that prompted the original authority to withhold scrutinising the contention of the appellant that extended period could be invoked only in the prescribed circumstances which applies to imposition of penalty also. The failure of the first appellate authority to do so does not appear to be reasonable. The show-cause notice, save for a passing reference to suppression, does not evidence any deliberate intent on the part of the assessee. The appellant, too appears to have been more concerned with pleading of revenue neutrality, implied in the discharge of the duty liability without demur, as more critical - in the absence of any finding that the evidence on record warranted the imposition of penalty, we set aside the impugned order to the extent that it has upheld the invoking of section 11AC of Central Excise Act 1944. Appeal allowed in part. 2019 (2) TMI 1554 Restoration of appeal - order was disposed off, though not without consideration of the grounds of appeal, but without the applicant having been placed on notice that the adjourned hearing was scheduled for 22nd January 2018 - Held that:- Tribunal had passed the order on merits despite the absence of any representation of the appellant. These are not merits that should go into. However, it is also on record that no notice was issued for the hearing and that the present deponent is employee of the appellant who, admittedly, was present in court on the scheduled dates in November 2017 and December 2017. In the docket sheet, we find that the adjournment has been recorded on a rubber stamp template with blanks that have been filled in. It is a convention that dates of the next hearing in appeals, that are called out in seriatum and adjourned, are ordered by the bench in their own hand and also by their own pen which is lacking in the present instance implying that these were noted owing to, and after conclusion of time of sitting - it is not possible for us to firmly conclude that the direction not to issue notice was an order of the bench and that the adjournment was publicly ordered in court. In a situation such as this, fraught with even an iota of doubt, it is our bounden obligation to the presiding deity of this and every court, that invisible, but undoubtedly abiding, venerable lady in a blind fold and armed with a sword in her left hand, that the balance of the scales in her right hand should never be allowed to teeter. It would again, therefore, be in the interest of justice for the matter not be placed before a bench comprising either of us, severally or jointly, and lest there be any whisper that this entire exercise is mere lip service, we also direct that erstwhile order of the Tribunal be placed in a sealed cover in this file by Registry before it is placed before the appropriate bench, with due notice, for fresh hearing and disposal - application for restoration of appeal allowed. 2019 (2) TMI 1553 Goods manufactured in the factory belonging to state government and intended to use by any department of the government - benefit of N/N. 74/1993-CE dated 28.02.1993 - poles manufactured by the appellant are supplied to the distribution division of Uttar Pradesh State Electricity Board (UPSEB) for use in the electrification of the Government scheme - benefit was denied on the ground that appellant cannot be called to be a state government - time limitation - Held that:- Though the appellant have contested the demand by submitting that they are state government but we are of the view that the appeal can be disposed of on the point of limitation. The demand is for the period July, 2012 to December, 2014 whereas the show cause notice stand issued on 05.06.2015 i.e. by invoking the larger period of limitation. The appellants have strongly contended that when the issue stands decided in their own case extending the benefit of the notification to them no mala-fide can be attributed so as to justifiably invoke the longer period of limitation. We find favor with the above contention of the learned advocate - Otherwise also it is well settled law that when the issue stand referred to Larger Bench on the ground of doubting the correctness of the earlier orders, no mala-filed can be attributed to the assessee. The longer period is not available to the Revenue. However, a part of the demand may fall within the limitation period for which the matter is being remanded for requantification - appeal disposed off. 2019 (2) TMI 1552 CENVAT Credit - inputs - structures and angles used for lying foundation of capital goods - Held that:- Considering the fact that the items used by the appellant for fabrication of capital goods, in that circumstances, the items in question do qualify inputs in terms of Rule 2(a) of CCR, 2004 as accessories to the capital goods. Therefore, the appellant is entitled to avail cenvat credit on the items in question - credit allowed - appeal allowed - decided in favor of appellant. 2019 (2) TMI 1551 Valuation - inclusion of element of discount in the assessable value - Provisional assessment or not? - Whether in case of clearance of goods from the depot, the assessment have to be treated as provisional even if the procedure as prescribe by Rules is not followed? - Held that:- In the present case assessments were made by the appellants in the scheme of self assessment without following the procedure laid down for making provisional assessments. The fact that clearance were being done from the depot would not make the assessments provisional in absence of the procedure as prescribed under of Central Excise Rules, 2002. Whether the scheme of quantity discount as followed by the appellants is admissible deduction? - Held that:- In the present case the goods are cleared by the appellants to their depot after claiming quantity discount as per their scheme of discount the goods are from depot cleared to various distributors across the country. The quantity discount as claimed at the time of clearance of goods from the factory to depot is not passed on to the distributors - In similar circumstances in case of Commander Water Tech Pvt Ltd [2017 (2) TMI 938 - CESTAT MUMBAI], it was held that Quantity discount is an admissible discount provided the same is known prior to clearance or removal and if it is passed on to the buyers in terms of Section 4 of the Central Excise Act, 1944 and the discount have been passed on - quantity discount as claimed by the appellants in the present case for clearance made to the depot is not an admissible deduction. Whether duty free replacements in respect of damaged/ expired goods permissible under the Scheme of Central Excise Act, 1944? - Held that:- Issue in respect of Damage Discounts is not resintegra - In case of MRF {1995 (5) TMI 28 - SUPREME COURT OF INDIA] three Member Bench of Hon’ble Supreme Court has held that The nature and character of the amount so being refunded is certainly not a trade discount contemplated by Section 4(4)(d)(ii), whether the claim is honoured by paying cash or by deducting it from the price of the new tyre - thus, the supply of goods as free replacement in respect of the damaged or expired goods has to be on payment of duty. Whether the demand is barred by limitation in the present case? - Held that:- In fact the scheme of clearance of goods by claiming quantity discount in respect of clearances made to depot was nothing but an instrument to claim the inadmissible damage discounts. Such scheme was adopted by the appellants with intention to evade payment of duty in respect of goods supplied as replacement for the damaged/ expired goods. None of the decisions relied upon by the appellants lay down the law that in such case were appellants willfully misdeclared the scheme as that of quantity discount, without passing on the benefit of said quantity discount to distributors, but to benefit itself in respect of free replacements made for damaged/ expired goods - Such colorable devices and instruments used for evasion of Central Excise duty would definitely bring the case within the proviso to Section 11A(1) of Central Excise Act, 1944. Penalty u/s 11AC - Held that:- Since it is held that extended period of limitation is applicable in present case, so is Section 11AC. Demand of Interest u/s 11AB of Central Excise Act, 1944 - Held that:- Interest is payable as statutory liability in case of short payment of service tax by the due date. Thus Demand for interest under Section 11AB of Central Excise Act, 1944 is also upheld in view of the Apex Court decision in case of Kerala State Electricity Board [2007 (12) TMI 2 - SUPREME COURT OF INDIA]. Appeal dismissed. 2019 (2) TMI 1550 Valuation - enhancement of declared value - certain finished goods which were not found accounted for - the Appellant Company (Appellant), is making supplies to plywood manufacturers by under invoicing the value of goods - appellant claims that the case of revenue in the present case is based on certain documents which have never been supplied to them - Held that:- From the facts as available it is quite evident that certain relied upon documents which formed the basis of the show cause notice, have not been served upon the appellants and are also not available with the revenue now. Even at the time of adjudication in the remand proceedings these documents were not made available to the appellants. Since the starting point of investigation is the pay-in slips recovered from the premises of appellant during search conducted, it cannot be said that in absence of the said documents department has proved the case within pre-ponderence of probability. In absence of the said documents either in original or in form of any certified copy demand cannot be said to be based on the available evidence for scrutiny. Also, Show cause notice is only narration of search operations and evidences recorded in form of statements of various person. Commissioner has in his order recorded that the persons making the statement have not testified their statements as correct and voluntary. Thus these statements in absence of other evidences cannot be called as reliable evidence in proceedings relating to evasion of duty. Further another fact that needs consideration is that the amount which have been said to be received clandestinely against the duty evaded by way of undervaluation of goods is determined by way of deposits made in the bank accounts of the managing Director. How a person receiving the money in cash against such undervalued goods leave a trail by depositing the said amounts in his accounts has not been considered and answered by the revenue in these proceedings. Appeal allowed. 2019 (2) TMI 1549 100% EOU - Exemption from SAD - clearance of goods into DTA - demand of duty alongwith interest and penalty - period 01.03.2006 to 31.01.2008 - Clearance of bulk drugs to its sister units - stock transfer basis - N/N. 23/2003-CE dated 13.03.2003 - Held that:- Revenue has not disputed the payment of VAT at the time of sale of goods by the respondent from its depot - In this context, the Tribunal in the case of Micro Inks v. Commr of C.Ex. & Service Tax, Daman [2014 (2) TMI 207 - CESTAT AHMEDABAD] has allowed the appeal on the identical situation - appeal dismissed - decided against Revenue. CST, VAT & Sales Tax 2019 (2) TMI 1548 Input tax credit - grant of registration - Whether the dealer who applied for registration in the midst of the year could claim input tax credit for the business carried on previous to such grant of registration and input tax credit claimed for the purchases made prior to registration; especially in the context of the dealer having imports from the commencement of the business? - Held that:- The said benefits are only available to specific instances of the dealer being a presumptive dealer or paying tax under the compounded scheme. The same cannot be imported into a regular assessment carried out under Section 6 of the KVAT Act. We, hence answer the first question of law also against the dealer and in favour of the State. Whether the Tribunal could have imported equitable principles in a statutory appeal? - Held that:- We first answer the first question in the negative, since we are definite that the Tribunal could not have imported equitable principles into an appeal provided under the statute, especially when the Tribunal itself is a creature of the statute. The revision stands allowed setting aside the order of the Tribunal to that extent and restoring the order of the Assessing Officer. 2019 (2) TMI 1547 Imposition of penalty - classification of goods - principles of natural justice - Held that:- It goes without saying that the issue of misclassification belongs to the realm of merits. About the violation of natural justice, indeed the petitioner approached this court earlier and invited the judgment dated 16.01.2017 in WP(C) No. 1395/2017. The petitioner did raise-thus I must conclude in the absence of any contradiction from the petitioner-that the authorities should revisit the site for measuring the machinery once again. This Court has, however, felt it sufficient for the authorities to give one more opportunity to the petitioner to put forward its defense. The authorities, as seen from Ext.P11, did put the petitioner on notice twice, received its defense and then ruled on it eventually. Because of this Court's disinclination in the earlier writ petition to grant what the petitioner then sought-and now reiterates-seeks, the issue stands barred by constructive resjudicata. The petitioner may exhaust, if advised, the statutory appellate remedy available for it - Petition disposed off. 2019 (2) TMI 1546 Whether the Tribunal could have interfered with its own orders in a rectification petition? Held that:- There is any cause for interference to the orders of the Tribunal since the major issues were remanded finding that there were substantiating documents available in the records as produced before the First Appellate Authority. The Assessing Officer did not have the opportunity to look into it. Tribunal was of the opinion that it should be looked into first by the original authority. We do not find any reason to interfere with the same. The other issue was with respect to rate of tax which was in tandem with the amendment brought in retrospectively, valid in the subject assessment year too - there is no question of law arises in the revision and the same would stand rejected. 2019 (2) TMI 1545 Review application - case of the petitioners is that on 16.04.2018 when the matter came up for consideration before this Court, it appears that the same was sought to be withdrawn but the fact is that the petitioners company had no knowledge about listing of the appeal on 16.04.2018 - precedent order by the Division Bench - Held that:- We are afraid any leniency in accepting the plea of the petitioner company would not only amount to diluting the view of the earlier Division Bench of this Court, it is also likely to set a bad precedent as any litigant may approach this Court through a new set of lawyer for review of the order making a vague statements that he had not instructed to his Advocate(s) to withdraw the appeal. The sanctity of Court’s order is to be preserved. We are not satisfied with the averments made in the review application and those are the very basis of seeking condonation of delay - review application dismissed. Indian Laws 2019 (2) TMI 1544 Liability to pay 50% of the unearned increase for mutation/transfer of the property - whether a change in shareholding of a company amounts to transfer of the property? - Held that:- The issue whether a change in the shareholding warrants imposition of unearned increase was considered by the Coordinate Bench of this Court in M/s K.G. Electronics Pvt. Ltd. v. DSIIDC Ltd [2013 (12) TMI 1683 - DELHI HIGH COURT], wherein it was held that the guidelines in question do not provide for the payment of unearned increase in case of transfer of shares in a company and, therefore, the respondents are not entitled to claim unearned increase. It is relevant to note that in that case, the original promoters had divested 42.36% of the total outstanding share capital, out of which a substantial part was towards their respective spouses. The Court noted that 28.248% of the shares transferred by the promoters were held by non-family members. Indisputably, the petitioner’s case is on a better footing as only 10.23% of the shareholding is held by persons other than the original promoters. The demand for unearned increase by the respondent is unsustainable, as there is no transfer of the property in question - impugned communication is, accordingly, set aside - petition allowed - decided in favor of appellant.
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Newsletter: Where Service Meets Reader Approval.

TMI Tax Updates - e-Newsletter March 1, 2019

TMI SMS

Articles

1. FORM NO.INC-22A-Active Company Tagging Identities and Verification

2. GST : SUPPLY OF GOODS IN UNIT CONTAINERS

News

1. India-Korea Startup Hub Launched

2. India and Brunei sign Agreement for the Exchange of Information and Assistance in Collection with respect to Taxes (TIEA)

3. Public Sector Banks are lifeline of Indian economy, says theUnion Finance Minister, Shri Arun Jaitley

4. 43rd Civil Accounts Day on March 1, 2019; On the occasion, the Finance Minister, Shri Arun Jaitley to make a Statement on the implementation of PM -KISAN Yojana through PFMS and to release the Compendium on GST Refunds compiled by the Office of Pr. CCA (CBIC) among others

5. Dr. Krishnamurthy Subramanian, Chief Economic Advisor to deliver the Key Note Address at the 4th National Conference on Economics of Competition Law

6. Sale of Electoral Bonds at Authorised Branches of State Bank of India (SBI)

7. Agreement for Bilateral Swap Arrangement (BSA) between India and Japan and provides for India to access 75 billion in US dollars.

8. Income Tax Department hits at terror financing activities in J&K Region

Notifications

1. 18/2019 - dated 28-2-2019 - Cus (NT)

2. 17/2019 - dated 27-2-2019 - Cus (NT)

3. 16/2019 - dated 27-2-2019 - Cus (NT)

4. 15/2019 - dated 27-2-2019 - Cus (NT)

5. FEMA 10(R)(2)/2019-RB - G.S.R. 160(E) - dated 27-2-2019 - FEMA

Circulars / Instructions / Orders

1. 20 - dated 27-2-2019

2. 09/2019 - dated 28-2-2019

3. 08/2019 - dated 26-2-2019

Highlights / Catch Notes

GST

Accurate Bag Classification Under GST: Refer to General Rules When Fabric Material is Unspecified in Customs Tariff.

Lodging and food services for students under MoU with schools are taxable at 18% GST; no exemption.

Ambulance Input Tax Credit Denied for Employee Benefits Under GST Act Section 17(5)(b)(iii)(A); Not Covered by Exceptions.

GST Applies to School Project Supply Under BOOT Model, Says Authority for Advance Rulings; No Exemption Granted.

Income Tax

Supreme Court Rules Conversion of Unpaid Interest into Funded Loan Cannot Be Treated as Payment u/s 43B.

Investment Income Absence Doesn't Invalidate Interest Expenditure as Legitimate Business Expense.

Denial of Section 10(22) exemption due to property bought under individual names, implying misuse of institutional profits.

Court Rules Against Tax on Hypothetical Income from Unsold Property Units Held as Stock in Trade.

Tax Set-Off Claim Allowed: Section 72A Relaxation by CBDT Supports Amalgamation Scheme, CIT(A) Admits Additional Evidence, Correcting Initial Decision.

CSR Expenses Non-Deductible: Explanation 2 Added to Income Tax Act Section 37(1) from April 1, 2015.

Valuer Assigns Separate Valuations for Unit Parts; Slump Sale as Going Concern Still Applies.

High Court Rules ITSC to Handle Case; AO's Assessment Orders Declared Void, Appeals Against Them Also Void.

Security Deposit in Lease Retains Capital Status Even if Forfeited in Dispute; Not Reclassified as Revenue Expenditure.

Composite Scheme of Arrangement and Amalgamation Reserves Not a Benefit u/s 28(iv) of Income Tax Act.

Section 47(vii) Income Tax Act Applied Retrospectively; Section 56(2)(viia) Excluded for Certain Transfers.

Professional Legal Defense Costs for Employee's Personal Criminal Case Non-Deductible u/s 37 of Income Tax Act.

Non-deduction of TDS: Relief for Assessee if Deductee Offered Amount to Tax u/s 40(a)(ia) Proviso.

Foreign exchange gains on long-term loans and advances are capital accretions, not taxable income.

Delivery-Based Derivative Transactions Eligible for Bad Debt Write-Offs Under Income Tax Act Section 36(1)(vii) & 36(2.

Assessment Order u/s 153C Void Without Joint Commissioner Approval as Mandated by Section 153D.

Customs

Sea Cargo Manifest and Transhipment Regulations 2019 Delayed Again, Now Effective from August 1, 2021.

Amendments to Courier Imports/Exports Regulations 2019 Streamline Customs, Update Shipping Bill Form, Enhance Efficiency and Compliance.

New Amendment Introduces Form C for Electronic Declaration of Courier Samples and Gifts, Streamlining Customs Process.

Turant Customs Initiative Simplifies Trade: Faster Clearance, Transparent Processes, Tech-Driven Solutions for Business Efficiency and Economic Growth.

Regulatory Challenges in Coastal Cargo Transport Between Indian Ports Using Foreign Vessels: Compliance with Maritime Laws and Customs.

Bill of Exports Crucial for SEZ Supplies: Verifies Receipt and Ensures Deemed Export Benefits Are Granted.

Demand for Duty on Past Consignments Deemed Unsustainable Due to Non-Provisional, Uncontested Assessment.

FEMA

Amendments to Foreign Currency Account Rules for Indian Residents Under FEMA 2019: Compliance and Operational Updates.

Foreign entities must meet FEMA regulations to set up Branch, Liaison, or Project Offices in India, per RBI guidelines.

IBC

Corporate Debtor's Non-Compliance with Section 8(2)(a) of Insolvency Code Risks Process Obstruction.

Service Tax

Service of Developing New Seed Varieties in India Deemed Export When Report Sent to Germany Client.

Service Tax Demand Requires Detailed Review of Financial Records, Not Just Form 26AS, to Establish Transaction Nature.

Central Excise

Department Can't Use Section 11 to Recover Excise Dues from New Property Buyer Misclassified as Business Purchase.

Free Replacement Goods for Damaged or Expired Items Must Include Duty Payment.

Appellants Misused Scheme as Discount, Evaded Duties with Deception, Exploiting Excise Valuation Limitation Period.

VAT

Dealers Cannot Claim Input Tax Credit for Activities Before Registration is Granted Mid-Year.

Case Laws:

GST

Income Tax

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TMI Tax Updates - e-Newsletter
March 1, 2019