TMI Tax Updates - e-Newsletter
March 14, 2019

Case Laws in this Newsletter:

GST Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

TMI SMS

• Naturally bundled Service - maintenance contract - supply of goods is incidental to the supply of services - the principal supply is service

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• Capital gain - real gain V/S presumptive gain - Assessee cannot be denied an opportunity against FMV u/s 50C(1) or Report of DVO u/s 50C(2)

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Articles

1. TOP FAQS ABOUT THE PROPOSED GST RETURN SYSTEM

   By: Ramandeep Bhatia

2. GST - e-Cash Ledger Vs GST Returns... Is Interest Payable due to non-filing of the GST Returns though the amount lying with e-Cash ledger?

   By: NarendraKumar Thotamsetty

News

1. MCA releases national guidelines on responsible business conduct

2. Cabinet approves proposal for accession of India to (a) The Nice Agreement on the International classification of goods and services for the purposes of registration of marks

Notifications

Customs

1. 09/2019-Customs (N.T./CAA/DRI) - dated 12-3-2019 - Cus (NT)

Seeks to amend Notification No. 6/2017-Customs (N.T./CAA/DRI) dated 31.07.2017

2. 08/2019-Customs (N.T./CAA/DRI) - dated 12-3-2019 - Cus (NT)

Seeks to amend Notification No. 1/2016-Customs (N.T./CAA/DRI) dated 22.08.2016

GST - States

3. 38/1/2017-Fin(R&C)(97) - dated 8-3-2019 - Goa SGST

Supersede Notification No. 38/1/2017-Fin(R&C)(5)/2550, dated 28th June, 2017

4. 38/1/2017-Fin(R&C)(95) - dated 8-3-2019 - Goa SGST

Exemption from registration for any person engaged in exclusive supply of goods and whose aggregate turnover in the financial year does not exceed ₹ 40 lakhs

5. 38/1/2017-Fin(R&C)(31/2018-Rate) (Corri.)/2529 - dated 8-3-2019 - Goa SGST

Corrigendum - Notification No. 38/1/2017-Fin(R&C)(31/2018-Rate), dated 31st January, 2019

6. 38/1/2017-Fin(R&C)(2/2019-Rate)/2527 - dated 8-3-2019 - Goa SGST

Composition scheme for supplier of services with a tax rate of 6% having annual turn over in preceding year upto ₹ 50 lakhs

7. CCT/26-2/2018-19/45/4397 - dated 6-3-2019 - Goa SGST

Prescribe the due dates for furnishing of FORM GSTR-3B for the months of April, May and June, 2019 under the GGST Act, 2017

8. CCT/26-2/2018-19/44/4396 - dated 6-3-2019 - Goa SGST

Prescribe the due dates for furnishing of FORM GSTR-1 for those taxpayers with aggregate turnover of more than ₹ 1.5 crores for the months of April, May and June, 2019

9. 7/5/2019-LA - dated 26-2-2019 - Goa SGST

Goa Goods and Services Tax (Amendment) Act, 2019.

10. EXN-F(10)-5/2019 - dated 7-3-2019 - Himachal Pradesh SGST

Exemption from registration for any person engaged in exclusive supply of goods and whose aggregate turnover in the financial year does not exceed ₹ 40 lakhs

11. 2/2019-STATE TAX (RATE) - dated 7-3-2019 - Himachal Pradesh SGST

Notification to give composition scheme for supplier of services with a tax rate of 6% having annual turn over in preceding year upto ₹ 50 lakhs under the HPGST Act, 2017

12. Order No. 3/2019-State Tax - dated 8-3-2019 - West Bengal SGST

West Bengal Goods and Services Tax (Third Removal of Difficulties) Order, 2019

13. 380-F.T. - 14/2019-State Tax - dated 7-3-2019 - West Bengal SGST

Seeks to supersede notification No. 1142-F.T. dated 28/06/2017 in order to extend the limit of threshold of aggregate turnover for availing Composition Scheme u/s 10 of the CGST Act, 2017 to ₹ 1.5 crores

14. 379-F.T. - 11/2019-State Tax - dated 7-3-2019 - West Bengal SGST

Seeks to prescribe the due dates for furnishing of FORM GSTR-1 for those taxpayers with aggregate turnover upto ₹ 1.5 crores for the months of April, May and June, 2019.

15. 378-F.T. - 10/2019-State Tax - dated 7-3-2019 - West Bengal SGST

To give exemption from registration for any person engaged in exclusive supply of goods and whose aggregate turnover in the financial year does not exceed ₹ 40 lakhs.

16. 377-F.T. - 2/2019-State Tax (Rate) - dated 7-3-2019 - West Bengal SGST

To give composition scheme for supplier of services with a tax rate of 6% having annual turnover in preceding year upto ₹ 50 lakhs

17. 05/2019–C.T./GST - 13/2019 – State Tax - dated 7-3-2019 - West Bengal SGST

Seeks to prescribe the due dates for furnishing of FORM GSTR-3B for the months of April, May and June, 2019

18. 04/2019–C.T./GST - 12/2019 – State Tax - dated 7-3-2019 - West Bengal SGST

Seeks to prescribe the due dates for furnishing of FORM GSTR-1 for those taxpayers with aggregate turnover of more than ₹ 1.5 crores for the months of April, May and June, 2019

19. 03/2019–C.T./GST - 09/2019 – State Tax - dated 20-2-2019 - West Bengal SGST

Extension of date of filing return in GSTR-3B for the month of January, 2019 till 22.02.2019

Highlights / Catch Notes

GST

• GST Liability in Maintenance Contracts: Goods Incidental to Services, Classifying as Composite Supply of Service.

  Case-Laws - AAR : Liability of GST - maintenance contracts - the supply of services/goods in the present case is naturally bundled, with the supply of goods being incidental to the supply of services and therefore such contract are to be considered as a composite supply of service where the principal supply is service.
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• Individual Granted Bail for Alleged GST Fraud Using Bogus Bills; Conditions Set to Ensure Legal Compliance.

  Case-Laws - HC : Grant of regular bail - issue bogus Bills under GST - setting up of firms in the name of economically backward persons - role of the employees of the co-accused - conditional bail granted.
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Income Tax

• Assessing Officer Apologizes for Oversight; Reopened Assessment Sent Back for Further Review.

  Case-Laws - HC : Reopening the assessment - The AO has filed an affidavit apologizing for such lapse of which we take note. - Matter restored before AO
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• Petitioner denied carry forward of losses under IT Act Section 74 due to no prior tax return filing.

  Case-Laws - HC : Entitlement to carry forward accumulated loses u/s 74 - Advance Ruling - admittedly the petitioner had not filed any return of income, claiming loses for the earlier Assessment Year under the Act and it was not an Assessee under the Act - AAR rightly answered the question in negative.
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• Taxpayers Can Object to Presumptive Fair Market Value u/ss 50C(1) and 50C(2) of the Income Tax Act.

  Case-Laws - HC : Computation of capital gain - 'real' capital gains V/S presumptive capital gains - Assessee cannot be denied an opportunity to raise his objections even against the presumptive Fair Market Value u/s 50C(1) or Report of DVO u/s 50C(2)
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• Section 56(2)(v) IT Act: Revenue accepts assessee's explanation of transaction as a loan, no income additions made.

  Case-Laws - AT : Addition u/s 56(2)(v) - transaction is in the nature of gift or loan - assessee has explained the position about the amount being loan which has not been controverted by the Revenue - No additions.
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• Local Body Tax Deductible u/s 43B Despite Being Related to a Prior Period.

  Case-Laws - AT : Local Body Tax (LBT) - claimed as deductible u/s 43B - said amount was paid during the year under consideration, though it related to prior period - Merely because no provision was made in the earlier years deduction cannot be denied u/s 43B
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• Transfer of Capital Assets Ineligible for Section 54G Exemption; Must Relocate from Urban to Non-Urban Area for Tax Benefit.

  Case-Laws - AT : Deduction claimed u/s 54G - LTCG - shifting of industrial undertaking - the transfer of capital asset used for purpose of business undertaking is from a non-urban area to another non-urban area which does not fulfill the primary condition for eligibility of the exemption u/s 54G.
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• Lease Rent from Industrial Undertaking Not Eligible for Section 80IB Deduction; Not Considered Business Income.

  Case-Laws - AT : Deduction u/s 80IB - Lease rent received by the assessee by letting out the industrial undertaking is not having any direct connection with the manufacture or production of an article or thing by the assessee and the same cannot be considered as business income eligible for deduction u/s. 80IB
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• Capital Gains on Land Transfer to Partnership Firm: Section 50C Applies Without Substitution u/s 45(3.

  Case-Laws - AT : Computation of capital gains on transfer of land to partnership firm - invoking the provisions of section 50C - Once the price recorded in the joint venture’s books is treated as full value of consideration, the provisions do not permit substitution of any value so as to make the addition u/s 45(3).
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• Assessment Reopening Justified When Accommodation Entries Suspected Despite Document Submissions by Assessee.

  Case-Laws - AT : Reopening of assessment - reasons to believe - accommodation entries - mere submission of documents like income returns, copy of PAN cards, copy of bank statements, confirmation from the share applicants etc by itself would not amount to proper disclosure by the assessee
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• Income Tax Ruling: "On-Money" Additions Limited to 25% Due to Unaccounted Expenses in Tax Cases.

  Case-Laws - AT : Addition for gross amount of ‘On-Money’ received - Undoubtedly against unaccounted ‘On- Money’ there is also an element of unaccounted expenditure which cannot be brushed aside - addition should be sustained, only to the extent of 25% of the alleged ‘On-Money’.
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• No Penalty Imposed for Delay in Audit: Section 271B Breach Deemed Technical with No Exchequer Loss.

  Case-Laws - AT : Levy of penalty u/s. 271B - delay in getting the accounts audited - The assessee had only committed technical venial breach which does not create any loss to the exchequer as the audit report was available to the Assessing Officer before the completion of the assessment proceedings. - No penalty.
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• Penalty u/s 271(1)(c) Not Imposed Due to Full Disclosure in Tax Returns.

  Case-Laws - AT : Penalty u/s 271(1)(c) - all information was duly disclosed in the notes to computation annexed along with the original return of income and in the revised return of income - No penalty.
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Customs

• Court Allows Release of Used Digital Machines Upon Bond and Security; Importer Complies with Foreign Trade Policy.

  Case-Laws - HC : Release of consignments - import of several units of old, used Digital Multifunction Print & Copying Machines - importer not having challenged the Foreign Trade Policy itself, goods allowed to be released on furnishing of furnishing a bond for 90% of the enhanced valuation of the goods, and security for the remaining 10%
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• Alleged Violation of Post-Import Conditions in Indian Railways Project; Compliance Issues in Non-Road Construction Projects.

  Case-Laws - AT : Import of Construction equipment - violation of post-importation conditions - execution of project contracted by Indian Railways, or any agency of the Government of Bihar, is not violative of the continuing obligation undertaken by appellants or mandated by the notification except where the project did not involve construction of roads.
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Indian Laws

• Arbitration Clause Requiring 10% Pre-Deposit Hinders Access to Alternative Dispute Resolution, Contradicts Court Burden Reduction Goals.

  Case-Laws - SC : Arbitration agreement - Deterring a party to an arbitration from invoking this alternative dispute resolution process by a pre-deposit of 10% would discourage arbitration, contrary to the object of de-clogging the Court system, and would render the arbitral process ineffective and expensive.
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Service Tax

• International Inbound Roaming Services Classified as Export of Services, Affecting Service Tax and Place of Provision of Services.

  Case-Laws - AT : Export of services or not - International Inbound Roaming Services - Place of Provision of Services - for the entire period of dispute, since the service recipient is outside India, the same amounts to export of services.
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• Appellant Not Liable for Storage Services Due to Lack of Control and Responsibility Over Goods' Security.

  Case-Laws - AT : As the appellant is not having any control over the goods and they are not responsible for the security of the goods, the appellant is not covered under the category of Storage and Warehousing Services
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Central Excise

• CENVAT Credit Not Demandable for Trading Activities Outside Central Excise Jurisdiction and Finance Act, 1994 Scope.

  Case-Laws - AT : CENVAT Credit - High Seas Sales - common input service used for trading activity and manufacturing activity - When the alleged trading activity has occurred outside the jurisdiction of Central Excise authorities as well as Finance Act, 1994, the demand cannot sustain
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• Imported Thermal Paper for ATM Rolls Classified Under Chapter 48 Per Case Laws and Central Excise Guidelines.

  Case-Laws - AT : Classification of goods - imported thermal paper - printing of the name of the bank and coding to read the end of statement transacted, is cut and slit and placed in ATMs in rolls - correctly classifiable under Chapter 48
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• Value of Customer-Supplied Containers u/r 6: Not Additional Consideration Without Appellant Ownership Evidence.

  Case-Laws - AT : Valuation - inclusion of value of the durable containers supplied by customers - rule 6 implies that the ownership, whether in physical form or monetised form, should vest with the appellant for it to be construed as additional consideration. No such case has been made out in the records.
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• Case Examines Liability for Excess Excise Duty Collected as 'Additional Consideration' and Stresses Regulatory Compliance.

  Case-Laws - AT : Liability of excise duty - the excess amount collected from customers, on one or both counts, is hit by the impropriety of inclusion of such amount as ‘additional consideration’ envisaged in the said Rules
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Case Laws:

• GST

• 2019 (3) TMI 656
  Liability of GST - principal supply of the composite supply qua maintenance contracts executed between the customer and the Applicant - Held that:- The main purpose behind executing the contract is to keep the engines unimpaired and operative at all times for which a fixed price has been decided for the AMC. In order to provide immediate services to the customer and to keep the minimum downtime of the engines, the Applicant has engaged dealers who inter-alia provide maintenance services to the customers on behalf of the Applicant - The goods, material, spare parts, etc. are required to be supplied only when necessary i.e. when, during the course of maintenance services it is found by the skilled personnel that there is a need for such parts which will effectively keep the runtime of the DG Sets at maximum acceptable time. A composite supply means that there is a supply of two or more goods or services together and such goods or services are provided together in the normal course of business - In the present case, a perusal of the agreements reveal that there is definitely is a supply of two or more goods or services together and such goods or services are provided together in the normal course of business and therefore there is no doubt that there is a composite supply by the Applicant in this case As both the conditions as prescribed under Section 2(30) of CGST Act have been fulfilled, the underlying transaction constitute as a composite supply . In the subject case it is seen that even though the AMC covers both, supply of goods and service, the predominant intention is to provide maintenance services for the proper upkeep of the machines belonging to their clients and, supply of goods follows as a consequent to the supply of maintenance service. Hence supply of maintenance service is the dominant intention of the contracts and can be considered as the principal supply - the principal supply in the transaction before us is supply of service, then the place of supply is required to be determine. The place of supply would be determined in terms of the default Section 12(2) of the IGST Act which states that the location of the recipient would be the place of supply. Since the supply of maintenance service in the present case is for a single price with supply of spare parts/goods as and when required, the supply of both, goods and services are made in conjunction with each other in the ordinary course of business and therefore considering the provisions of the GST Laws, the supply of services/goods in the present case is naturally bundled, with the supply of goods being incidental to the supply of services and therefore such contract are to be considered as a composite supply of service where the principal supply is service and the supply of goods is incidental to such supply of service. Thus, the principal supply in the present case between the applicant and the customer is one of supply of services.

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• 2019 (3) TMI 655
  Grant of regular bail - issue bogus Bills under GST - setting up of firms in the name of economically backward persons - role of the employees of the co-accused - Section 439 of the Code of Criminal Procedure, 1973 - offence punishable under Sections 69(1) of the Gujarat Goods and Services Tax Act, 2017 and Central Goods and Services Tax Act, 2017 - Held that:- In the facts and circumstances of the case and considering the nature of the allegations made against the applicant in the First Information Report, without discussing the evidence in detail, prima facie, this Court is of the opinion that this is a fit case to exercise the discretion and enlarge the applicant on regular bail. The applicant is ordered to be released on regular bail subject to conditions imposed - application allowed.

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• 2019 (3) TMI 654
  Filing of Form GST TRAN 1 electronically - input tax credit - transition to GST Regime - Held that:- The position that a large number of assessees are facing difficulties in accessing the GST website and/or uploading the required Forms is not in dispute - the technical difficulties faced by the petitioner in uploading GST TRAN I be rectified within a period of two (2) weeks from the date of receipt of a copy of the order - petition disposed off.

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• Income Tax

• 2019 (3) TMI 653
  Reopening of assessment - notice has been issued beyond a period of four years from the end of relevant assessment year - treatment given by the assessee to subsidy was that such amount was directly credited to Capital Reserve account by the assessee which resulted into non consideration of such amount for computation of assessee's book profit - Assessee had treated the Government grants as promoter's contribution and credited to Capital Reserve account and treated as part of shareholders' funds - HELD THAT:- Special Leave Petition dismissed. Question of law is left open.

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• 2019 (3) TMI 652
  Deduction u/s 80HH - Tribunal holding that the deduction under section 80HH would be available out of income as computed under the Income-tax Act, and not out of the profits and gains of the industrial undertaking without deducting therefrom depreciation and investment allowance - "Whether, Tribunal was right in law in holding that for the purposes of allowing deduction under section 80HH the profits and gains of an industrial undertaking should be computed by taking into consideration unabsorbed depreciation, current depreciation and investment allowance?" – HELD THAT:- Delay condoned. Leave granted. The appeals are allowed in terms of the signed reportable Judgment. Pending applications, if any, stand disposed of.

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• 2019 (3) TMI 651
  Reopening the assessment - bogus accommodation entries - AO had received information from the investigation wing of the department - Assessing Officer does not accept the objections so filed by assessee - as per assessee reasons proceeded on entirely erroneous footing - HELD THAT:- The action of the Assessing Officer to pass the final order of assessment even before the period of four weeks as envisaged by the decision of this Court in the case of Asian Paints Ltd [2007 (1) TMI 159 - BOMBAY HIGH COURT] had expired, cannot be approved. The Assessing Officer has filed an affidavit apologizing for such lapse of which we take note. The order of assessment, therefore, shall have to be set aside. While doing so, in view of the peculiar facts of the case, we permit the petitioner to file further objections to the notice of reopening of assessment. This recourse we adopt for the reason that the assessee had raised the ground of the reasons proceeding on incorrect factual premise, but the pointed objection as is elaborated before us now was not taken.

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• 2019 (3) TMI 650
  Stay petition - condition of depositing 20% of the disputed tax demand is reasonable one - HELD THAT:- Petitioners' appeals are at advance stage of hearing before the Appellate Commissioner. However, in view of the clarification of the learned counsel for the petitioners that in case of the company, the Appellate Commissioner may have to call for remand report, the final outcome of such appeals, may not be available for at least a few months from now. We shall, therefore, have to provide for an interim formula subject to which the further recoveries of disputed tax would be stayed pending appeals. In this context, we take note of the contention of the learned counsel for the petitioners that the Assessing Officer has made major additions on the ground that the receipts in the hands of the individual assessee upon sale of shares was a business income. The question of correctness of Assessing Officer's additions on the head of 'sale of shares' would have to be examined at length which obviously in these proceedings, we are not inclined to do. All the petitioners between them shall deposit a further sum of Rs. Two crores with the department latest by 25.3.2019.The attachment of the bank accounts of all the petitioners shall stand revoked forthwith.

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• 2019 (3) TMI 649
  Entitlement to carry forward accumulated loses u/s 74 - Advance Ruling - status of an entity as incorporated abroad - Change in status from Trust to LLC - non filing of return of income AND is not allotted any PA - HELD THAT:- Petitioner No.1 both as a trust and as LLC in terms of the law of Delaware, USA, continues to be the same person. This position is accepted in India. Therefore, gain and loss earned by it in its earlier avtar would in law, not be denied only because of change in status from Trust to LLC. Ruling of the AAR on the question as proposed would necessarily depend upon context, in which, the question has been raised. In this case, the Petitioner No.1 was seeking to carry forward accumulated loses under Section 74 of the Act when admittedly it had not filed any return of income, claiming loses for the earlier Assessment Year under the Act and it was not an Assessee under the Act. Thus, no fault can be found with the impugned order of the AAR, answering the question as posed for its consideration by the Petitioner No.1 in the negative. This decision will not impact the case of the three series (funds) to claim the benefit of carrying forward losses under Section 74 of the Act, if they are otherwise entitlement to it in law. Neither the AAR nor we had any occasion in the present proceedings to decide whether or not, the three series (funds), for whom the Petitioner is claiming benefit in its hands, are entitled to the benefit of carry forward loses under Section 74 of the Act or not.

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• 2019 (3) TMI 648
  Computation of capital gain - real capital gains V/S presumptive capital gains - CIT (A) held that the Guidance Value as per Section 50C as determined by the State Government, could be adopted as the Fair Market Value for sale consideration for imposition of Capital Gains Tax - Why Guidance Value u/s 50C (1) should not be taken as a Gospel Truth and why Section 50C (2) provided for reference to DVO in case an objection is raised by Assessee? - Exemption u/s 54F on account of reinvestment of the sale consideration in acquisition of the new property HELD THAT:- The presumptive value u/s 50C giving rise to the additions to the extent of Rs. 2,61,05,992/- to the declared sale value, as disclosed by the assessee, was adopted by the Appellate Authorities, without meeting the objections of the assessee at all. The presumption under Section 50C (1) even though rebuttable in law, was never allowed to be rebutted by the Assessee at all. The so called careful consideration of objections by CIT (A) or by DVO himself is not borne out at all on record and, therefore, nothing can be said about that. But, in any case, the consideration of objections of the Assessee by the Assessing/Appellate Authorities was a must to be undertaken exercise. But, that was not done. The Departmental authorities failed to meet the objections of the Assessee, which were raised before CIT (A) for the first time at the appeal stage, but were never overruled by a speaking order and the Guidance Valuation as per Section 50C (1) was taken as a Gospel Truth against the disclosed and declared value of the sale by the Assessee. This was not permitted in law. The Guidance Value fixed for stamp duty purposes is fixed by the authority concerned, taking into account the location, current market price of property in particular area etc., as a standard measure to iron out the differences of personal factors, such as, sale in distress for meeting financial emergency, sale to related parties and a host of such other factors. But, in Income Tax Act, the concept of levy of tax on real income exists. Therefore, Capital Gains Tax can also be levied on real capital gains and not on the presumptive capital gains. The need to determine a Fair Market Value upon a fact finding exercise is a sine qua non. But, such fact finding exercise by the Departmental authorities, be that Assessing Authority or even the Appellate Authority, was not really undertaken in the present case and that is where, failure and miscarriage of justice has occurred. It would be an insult to the honest tax payer to adopt an assumed higher market value to impose Capital Gains Tax without allowing him or her an opportunity to rebut even the legal presumption under Section 50C (1) even though law itself provides for a further fact finding exercise to be undertaken by reference to DVO under Section 50C (2) and thereupon meeting the objections of the Assessee and allowing him full opportunity to prove that the value declared in the sale deeds is the true and fair Market Value of the Capital Asset and the actual consideration received by him and, therefore, Capital Gains Tax can be imposed only on that basis. A bare reading of Scheme of Section 50C would show that Assessee can object to presumptive value as per Section 50C (1) and, therefore, it is only after hearing the objections of the Assessee, the Fair Market Value of the Capital Asset as per Guidance Value can be determined by the authorities. The Assessee cannot be denied an opportunity to raise his objections even against the presumptive Fair Market Value under Section 50C (1) or Report of DVO under Section 50C (2) and the Assessing Authority or the Appellate Authorities, whose powers are co-extensive with those of the Assessing Authority, cannot refuse to meet those objections point by point. The Fair Assessment Procedure under the scheme of assessment in the Income Tax Act has it at the root the principles of natural justice and the same has not been denied by presumptive provisions, such as Section 50C of the Act and several other provisions in the scheme of the Act. In the present facts we are of the opinion that CIT (A), where, for the first time, the Report of DVO came up, could either deal with the objections of Assessee himself or remit the matter back to the Assessing Authority for dealing with the said objections in an appropriate and detailed manner. But, such an exercise does not seem to have been undertaken by him in the present case. Therefore, we are constrained to remit the matter back to the Assessing Authority even at this stage, even though belatedly, and allow the Appeal of the Assessee for the said purpose. We, accordingly, allow this Appeal and set aside the orders passed by the learned CIT (A) and also the learned Tribunal and remit the matter back to the Assessing Authority to decide both the questions about the valuation of the property to be taken while dealing with the objections of the assessee against the Report of Departmental Valuation Officer as well as the presumptive value under Section 50C of the Act and then compute Fair Market Value under Section 48 and the relief under Section 54F - Decided in favour of the Assessee and against the Revenue.

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• 2019 (3) TMI 647
  Bogus long term capital gains - unexplained income under Section 68 - exemption under Section 10(38) denied - notice served upon the Assessee was returned unserved - HELD THAT:- While it was for the Assessee to appear and adduce the relevant evidence for the genuineness of the transaction of sale of the shares, the Assessee was not vigilant and co-operative enough and did not produce the relevant evidence before the authorities below and did not even appear before the appellate authorities concerned to contradict the case against her, as set up by the Revenue during the course of assessment proceedings. This has resulted in the impugned findings of facts against the Assessee about the nature of the transactions of sale of shares of a shell company as sham and the same being taxed as 'undisclosed income' under Section 68. Thus these findings of facts, cannot be said to be perverse in any manner and therefore we do not find any substantial question of law to be arising under Section 260-A - Decided against assessee.

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• 2019 (3) TMI 646
  Unexplained cash credit u/s.68 - assessee’s contentions that it had submitted cash flow before the CIT (Appeals) and which was also sent to AO asking for his report but no comments have been offered by the Assessing Officer on such cash flow - HELD THAT:- A perusal of cash flow that is prepared by assessee and which is placed in the paper book reveals that there are certain deposits from the Karta aggregate to Rs. 8.5 lakhs which have not been considered while working out the negative cash balance. If those receipts are considered while working out the cash flow there would be no negative cash balance. In such situation we find force in the arguments of assessee and in the absence of any contrary facts placed by Revenue, we allow this ground of appeal of assessee. Addition u/s 56(2)(v) - transaction is in the nature of gift or loan - donor is not a member of HUF - HELD THAT:- We find that the confirmation and affidavit were furnished before the Commissioner of Income Tax (Appeals) and on the same comments of AO was asked for but Assessing Officer has not made any adverse comments. Further, there is no material on record to demonstrate that the contents of the affidavit filed by the lender is false. Considering the totality of aforesaid facts, we are of view that assessee has explained the position about the amount being loan which has not been controverted by the Revenue. Under such circumstances no addition is called for. - Decided in favour of assessee

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• 2019 (3) TMI 645
  Disallowance of expenses for purchase of materials and labour expenses - HELD THAT:- With respect to the purchase of materials, we find that the AO in the order has accepted that the material purchased was essential requirement for development of land and building and in view of the discrepancies noted he made an adhoc disallowance of 20% which was reduced to 10% by CIT(Appeals). AR has placed the summary of material purchased which reveals that it contains the details of suppliers, bill number, material amount and quantity. Payments have been made by cheques. Revenue has not pointed any evidence to show that the payments have not been made by cheque but have only proceeded on the basis of presumption. In the present case no disallowance of expenses on account of material is called for. We, therefore, direct to delete the disallowance on account of material purchased of Rs. 11,13,403/-. As far as the disallowance of labour charges is concerned before us the AR has not pointed out any fallacy in the findings of CIT (Appeals) and therefore to the extent of disallowance of labour expenses, we find no reason to interfere with the order of Commissioner of Income Tax. - Appeal of assessee is partly allowed.

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• 2019 (3) TMI 644
  Penalty u/s 158BFA(2) - addition made on account of hundies found - search was conducted at the residential premises of the assessee - HELD THAT:- Assessee failed to rebut the findings of fact by Ld. CIT(A) and only gave general submission that as the broker Shri Shyamlal Arya is absconding after search and remains untraceable the assessee could not provide evidence before any of the appellate authorities that these hundies were kept as a guarantee from the broker Shri Shyamlal Arya. In the given facts and circumstances of the case there remains no disputes that Rs. 1,50,000/- was an un accounted and undisclosed investment of the assessee and therefore penalty has been rightly levied on the alleged addition of Rs. 1,50,000/-. We therefore confirm the penalty levied by the Ld. A.O u/s 158BFA(2). Ground No.1 of the assessee stands dismissed.

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• 2019 (3) TMI 643
  Local Body Tax (LBT) - claimed as deductible u/s 43B - said amount was paid during the year under consideration, though it related to prior period - no provision was made in the earlier years - HELD THAT:- Where the assessee is following a particular method of accounting and any amount was incurred for carrying out the business in any of the years, then the same if covered under the provisions of section 43B of the Act is to be allowed in the year of payment. In the facts of present case, where the assessee was following mercantile system of accounting, then LBT which is 10% of purchase cost was chargeable to the Profit and Loss Account in the preceding year. No such charge was created by the assessee in the previous year since the amount was not paid by the assessee in the said year. Only on payment of said amount, the assessee debited the same to the Profit and Loss Account. It is undisputed that LBT is to be allowed as expenditure. We find no merit in the orders of authorities below in denying the same to the assessee on the ground that the amount was not shown as payable in the preceding year. The express provisions of section 43B of the Act provides that irrespective of previous year in which the liability to pay such sum was incurred by the assessee, according to the method of accounting regularly employed by him, the said sum would be allowed only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him. Accordingly, we hold that the assessee is entitled to the aforesaid claim under section 43B - Decided in favour of assessee.

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• 2019 (3) TMI 642
  Stay petition - recovery proceedings - HELD THAT:- Assessee has a prima facie case for grant of stay till disposal of the appeal, subject to certain conditions. We, accordingly, stay the outstanding demand for a period of six months or disposal of the appeal whichever expire earlier, subject to payment of Rs. 15 lakhs to be paid by the assessee to the Revenue within 10 days from the date of the Order. Appeal of the assessee be fixed for early hearing on 09.05.2019. Assessee shall not seek any unnecessary adjournments in the matter. Paper book, if any, be filed as per Rules. With the above directions, stay application of the assessee is allowed. In the result, stay application of the assessee allowed.

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• 2019 (3) TMI 641
  Penalty u/s 271(1)(b) - mandation of compliance with notice u/s 142(1) - proof of failure of the assessee to comply with the notice under section 142(1) - HELD THAT:- The contention of the assessee is found to be correct. Assessee’s paper book with the copy of assessee’s reply dated 19/10/2016 to the notice dated 07/10/2016 issued to the assessee under section 142(1) of the Act, a scanned copy whereof is reproduced herein below, bears the stamp of the Assessing Officer and signatures thereon. Assessing Officer has noted that again notice u/s 142(1) was issued on 31/10/2016 and date was fixed for compliance on 07/11/2016 but assessee did not file any reply or adjournment application by 08/11/2016. AO has further noted that show cause notice was issued on 08/11/2016 and date of compliance was fixed for 16/11/2016 and assessee filed explanation on 16/11/2016. In this respect we find that assessee had filed reply on 09/11/2016 instead of 07/11/2016 and again assessee had furnished explanation on 16/11/2016 which Assessing Officer himself has admitted. Therefore, it cannot be said that the assessee did not comply with the various notices issued under section 142(1). Since the assessee has duly complied with the notice, penalty under consideration is entire uncalled for. It is, accordingly, cancelled.- decided in favour of assessee.

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• 2019 (3) TMI 640
  Penalty u/s 271(l)(c) - non specification of charge - whether it is for concealment of income or for furnishing of inaccurate particulars of income? - HELD THAT:- From a perusal of show cause notice, it is crystal clear that the charge for which penalty is proposed to be levied under section 271(1)(c) of the Act, whether for concealment of income, or for furnishing of inaccurate particulars of income, is not specific. The law mandates that the authority who is proposing to impose penalty shall be certain as to the basis on which the penalty is being levied and the notice must reflect that specific reason, so that the assessee, to whom such notice is given, can prepare himself regarding the defence which he would like to take to support his case. This is even enshrined in the principles of natural justice and as has been upheld by Hon'ble Apex Court and other High Courts. - Penalty deleted - decided in favour of assessee.

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• 2019 (3) TMI 639
  Deduction claimed u/s 54G - Exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from urban area - the transfer of capital asset used for purpose of business undertaking is from a non-urban area to another non-urban area which does not fulfill the primary condition for eligibility of the exemption u/s 54G - HELD THAT:- In the case of the assessee in the year under consideration, the transfer of capital asset used for purpose of business undertaking is from a non-urban area to another non-urban area which does not fulfill the primary condition for eligibility of the exemption u/s 54G. The contention of Learned A. R. that shifting of premises was a continuous process which ended with the sale of land received as sale consideration has no force as the assessee had already availed exemption u/s 54G in the earlier year treating the land received as part of consideration as the investment in non-urban area and in the year under consideration the capital gain has arisen from sale of land in non-urban area. The learned CIT(A) has very categorically held that in the year under consideration the transfer of land was from a non-urban area to a non-urban area and therefore, section 54G was not applicable. The findings of learned CIT(A) are quite relevant - Decided against assessee.

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• 2019 (3) TMI 638
  Deduction u/s 80IB on receipt of subsidies - HELD THAT:- We are of the view that a similar issue was considered by the Supreme Court in the case of Meghalaya Steels Ltd. [2016 (3) TMI 375 - SUPREME COURT] wherein it was held that when income from cash assistance received against export schemes are included as income under the head profits and gains of business or profession, it is obvious that subsidies which go to reimbursement of cost in the production of goods of a particular business would also have to be included under the head profits and gains of business or profession and not under the head income from other sources. Therefore, the assessee is entitled to deduction u/s. 80IB. Bogus purchases - addition u/s 69C - differentials between the amounts being expenses debited in the books of accounts and the amounts substantively supported by invoices, which amounts relate to the transactions carried out with its sister concerns being unexplained - HELD THAT:- The lower authorities had not given an opportunity to the assessee to reconcile the difference between the actual purchases made as per the invoices produced by the assessee and actual entries shown in the books of account of the assessee. Being so, we are of the opinion that it is appropriate to opportunity to the assessee to reconcile the same before the AO. Hence, this issue is remitted to the file of the AO with a direction to the AO to give opportunity to the assessee to reconcile the same and decide thereof. Denial of deduction of lease rent u/s. 80IB - whether receipt of lease of commercial asset is business income or income from other sources? - HELD THAT:- Deduction u/s. 80IB is available only in respect of such profits and gains which have direct proximity and nexus with the activities of manufacturing or production of an article or thing. Profits and gains attributable to the business of the industrial undertaking would not be entitled for deduction u/s. 80IB. The profits and gains accrue to the assessee only in the course of business of manufacturing or production of an article or thing. Viewed from this angle, the lease rent earned by the assessee by letting out the industrial undertaking to other parties cannot be equated with the profits and gains derived from the industrial undertaking. Lease rent received by the assessee by letting out the industrial undertaking is not having any direct connection with the manufacture or production of an article or thing by the assessee and the same cannot be considered as business income eligible for deduction u/s. 80IB of the Act. This ground of appeal of the assessee is dismissed.

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• 2019 (3) TMI 637
  Addition u/s 68 - Penny Stocks involving the shares of “Mishika Finance” - addition as documentation is self-serving - HELD THAT:- Matter should be remanded to the file of the CIT(A) for examining the facts of the said cases and consider the submission of the ld. AR for the assessee. There is need for finding of fact on (i) the nature of the shares transactions; (ii) make-believe nature of paper work; (iii) Camouflage the bogus nature; and, (iv) the relevance of human probabilities etc. Thus, ld. AR mentioned that all the judgements are distinguishable on facts. The CIT(A) needs to compare the facts of all these cases under consideration and others, if any. Hence, the issue is required to be remanded to the file of the CIT(A). With these directions, the CIT(A) is directed to pass a speaking order after granting a reasonable opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes.

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• 2019 (3) TMI 636
  Computation of capital gains on transfer of land to partnership firm - invoking the provisions of section 50C and applying DM circle rates - HELD THAT:- The assessee made the entire payment including stamp duty charges and recorded the same in the books under the head 'Land'. A portion of the said land was subsequently sold to SICC on which long-term capital gain was offered by the assessee, adopting fair market value as on 1-4-1981 as the cost of acquisition. The revenue, however, disputed this and adopted nil value as cost of acquisition on the ground that the assessee had shown nil value in the books. Later, the assessee entered into a partnership with SICC and 'A' as partner and contributed a large portion of its remaining land to the partnership as its capital contribution, and its value was recorded in the books of the partnership. In the partnership firm, the assessee was given 5 per cent shares whereas SICC and 'A' were given 90 per cent and 5 per cent shares respectively. For the purpose of computing capital gains on transfer of land to partnership firm, the Assessing Officer by invoking the provisions of section 50C and applying DM circle rates, computed the total consideration for the transfer and calculated long-term capital gains. AO while applying the provisions of section 50C mentioned that considering the terms and conditions of the partnership, transfer of land to the firm was only a sale, and that section 50C would be applicable even in a situation covered by section 45(3) In Chiraayu Estate & Dev. Pvt. Ltd. [2011 (8) TMI 1316 - ITAT MUMBAI] has held that the profits or gains would arise only when the transfer has been made at a price which is more than the cost price and the difference between the cost price and amount at which the transfer has taken place can be charged u/s 45(3). It further held that as per provisions of section 45(3), price of land recorded in the books of joint venture is required to be considered as receipt of full value of consideration received or accrued as a result of transfer of capital assets. Once the price recorded in the joint venture’s books is treated as full value of consideration, the provisions do not permit substitution of any value so as to make the addition u/s 45(3). Claim u/s 54F disallowed observing that he had more than one house property - HELD THAT:- Referring Hon’ble Madras High Court in Dr. Smt. P.K.Vasanthi Rangarajan v. CIT [2012 (7) TMI 563 - MADRAS HIGH COURT] wherein it is held that joint ownership of a property could not be held to stand in assessee’s way of claiming exemption u/s 54F, dismissed the appeal filed by the revenue. Disallowance of 15% of expenses - HELD THAT:- Disallowance has been made on ad-hoc basis without any specific finding. Such being the case, we delete the disallowance made by the AO. Thus the 2nd ground of appeal is allowed.

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• 2019 (3) TMI 635
  Levy of penalty u/s 271F and u/s 271(1)(b) - noncompliance of a notice u/s 153A - HELD THAT:- The non-obstante clause contained in section 153A of the Act, applies to the provisions of section 153A of the Act only. It does not extend to the provisions of section 271F of the Act. No matter that noncompliance of a notice u/s 153A of the Act has not been subjected to penalty under any specific provision of the Act. Section 271F of the Act provides for penalty in cases where no return is filed as per the requirements of section 139(1) of the Act or the provisos thereto. Penalty u/s 271F of the Act pertains only to infringement of section 139(1) and its provisos, and not to that of a notice u/s 153A of the Act. So far as, the penalty concerning u/s 271(1)(b) it is held that the assessment was completed as a regular assessment u/s 143(3) of the Act therefore, the default, if any, was not considered to be willful on the part of the assessee. - Decided in favour of assessee.

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• 2019 (3) TMI 634
  Reopening of assessment - reasons to believe - failure on the part of the assessee to disclose fully and truly all material facts - HELD THAT:- AO has recorded a clear finding in the “reasons recorded” that there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment within the meaning of section 147 of the Act. It has been contended by the Ld. AR that the AO has simply stated that there was a failure on the part of the assessee to fully and truly disclose all the material particulars and the AO has not stated as to which material the assessee had failed to disclose and, therefore, the re-opening was bad in law. However, the contention of the Ld. AR regarding full and true disclosure has to be rejected in terms of explanation 1 to Section 147. The explanation supports the case of the Revenue that mere submission of documents like income returns, copy of PAN cards, copy of bank statements, confirmation from the share applicants etc by itself would not amount to proper disclosure by the assessee as the very material fact that the impugned transaction/s related to accommodation entries was not disclosed by the assessee. Accordingly, we uphold the validity of the re-assessment proceedings - Decided against assessee.

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• 2019 (3) TMI 633
  Expenditure incurred as repairs - Deduction while computing income from business under the head ‘current repairs’ - assessee had carried out major replacement and by doing so had derived an enduring benefit and the expenditure was capital in nature - whether an expenditure is revenue or capital? - HELD THAT:- What would constitute the repairs as ‘current repairs’ and whether replacement of parts of a machine can be said to be current repairs are questions which will depend on facts and circumstances of each case. We have already set out the nature and description of the item that was used on SMG Feintool Germany. Similarly for other items of machinery, the description is contained in assessee’s PB. Without a reference to the nature of expenses, it is not possible to decide the question whether the expenditure in question is current repairs or capital expenditure or revenue expenditure. In our view, it will be just and proper to set aside the order of revenue authorities on this issue and remand the question for fresh consideration by the AO in the light of principles laid down in the case of Super Spinning Mills [2013 (9) TMI 88 - MADRAS HIGH COURT] in the decision cited supra. AO will afford opportunity of being heard to the assessee, before deciding the issue. The relevant grounds of appeal are decided accordingly. TDS u/s 194C - payment to transporters - benefit of section 194C(6) / 194C(7) - payment in question was a payment for carrying out of works for which assessee ought to have deducted tax at source on such payment - addition u/s. 40(a)(ia) - HELD THAT:- We find that identical issue had come up for consideration before the Calcutta Bench of the Tribunal in the case of Soma Rani Ghosh v. DCIT [2016 (10) TMI 55 - ITAT KOLKATA] as held authorities below are not justified in treating the expense incurred by the assessee for Carriage inward and carriage outward as disallowable under section 40(a)(ia) of the Act, and adding back claimed expense towards Carriage Inward and expense towards Carriage Outward, and such additions shall stand deleted. - Decided in favour of assessee.

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• 2019 (3) TMI 632
  Bogus claim of long term capital gains - addition u/s 68 - non providing an opportunity to cross examine the witness - Held that:- The transactions claimed by the assessee whether real or sham, requires a revisit by the ld. Assessing Officer. Similar directions as given in the cases of Vimalchand Gulabchand, Praveen Chand, Gatraj Jain & Sons (HUF) and Mahendra Kumar Bhandari (supra), read alongwith the directions given in the case of Heerachand Kanunga [2018 (4) TMI 701 - ITAT CHENNAI]are given herealso. Useful reference may be made to the law laid down by Hon’ble Apex Court in the case of CIT vs. Sunita Dhadda, [2018 (3) TMI 1610 - SUPREME COURT OF INDIA] where the importance of providing an opportunity to cross examine the witness has been stressed. Their lordship held that this was an important constituent of natural justice. Only after all the steps required under law is complete, it can be ascertained whether claim of capital gains was bogus or not.- Appeal of the assessee is allowed for statistical purposes.

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• 2019 (3) TMI 631
  Addition for gross amount of ‘On-Money’ received from the projects run by the assessee - HELD THAT:- Addition only for the profit element in ‘On-Money’. Respectfully following the case of M/S. PRIME DEVELOPERS [2016 (7) TMI 967 - BOMBAY HIGH COURT] and examining facts of the instances case we find that the ‘On-Money’ has been received by the assessee company from its business activity of developing various projects. Undoubtedly against unaccounted ‘On- Money’ there is also an element of unaccounted expenditure which cannot be brushed aside and further looking to the fact that in the very same Group concern addition confirmed by the ITSC is @ 25% of “On-Money”. We are therefore inclined to hold that in the instant three appeals, addition should be sustained, only to the extent of 25% of the alleged ‘On-Money’. Addition u/s 69 has been made for unaccounted payment for purchase of land - HELD THAT:- Our view of giving set off of ‘On-Money’ payment against the ‘On money’ received found support from the above judgment of Hon'ble Gujarat High Court in TIRUPATI CONSTRUCTION COMPANY [2014 (11) TMI 806 - GUJARAT HIGH COURT] and thus in the given facts and circumstances of the case, we are of the considered view that there was no justification in making addition for unaccounted payment of Rs. 1,30,53,000/- paid to the Thakur Family towards ‘On- Money’ for land development project when ‘On-Money’ received from sale of plots have been subjected to tax at net profit rate of 25%. Disallowance u/s 40A(3) - assessee has incurred cash expenses over and above Rs. 20,000/- - HELD THAT:- Looking to the request of Ld. counsel for the assessee for setting aside the issue which goes opposed by the revenue authorities. We direct the Ld. AO to examine this issue of disallowance u/s 40A(3) of the Act for various expenses incurred in cash afresh after providing necessary opportunity to the assessee for filing documents and evidence in support of its claim that no disallowance is called for. Accordingly this issue for disallowance u/s 40A(3) of the Act is allowed for statistical purposes.

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• 2019 (3) TMI 630
  Levy of penalty u/s. 271B - delay in getting the accounts audited - failure to comply with the provisions of section 44AB of the Act subject to provisions of section 273B i.e. reasonable cause for the delay - contention of the AR was that the delay in filing the return of income was due to damage to computer system due to virus infection - HELD THAT:- The assessee got his books of accounts audited on 28/03/2014 which was made available to the Assessing Officer and no prejudice has been caused to the Revenue. The assessee had only committed technical venial breach which does not create any loss to the exchequer as the audit report was available to the Assessing Officer before the completion of the assessment proceedings. The Madras High Court in the case of CIT vs. A.N. Arunachalam (1994 (1) TMI 65 - MADRAS HIGH COURT) in the context of filing of audit report for claiming deduction u/s. 80J of the Act, observed that once audit report has been made available before the Ld. Assessing Officer before the completion of assessment proceedings, the assessee should be granted deduction u/s. 80J of the Act. We observe that this judgment was rendered in the context of adjudication of quantum of deduction claimed by the assessee. Thus assessee had committed only technical venial breach for which he cannot be penalized. Penalty to be deleted - Decided in favour of assessee.

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• 2019 (3) TMI 629
  Reopening of assessment - buying agency commission received by the assessee - HELD THAT:- As decided in assessee own case [2013 (1) TMI 106 - ITAT DELHI] the services rendered by the assessee in this case were purely in the nature of procurement services and cannot be characterized as ‘managerial’ ‘technical’ or ‘consultancy’ services. Accordingly, the consideration received by the assessee was appropriately classified as ‘commission’ as against ‘fees for technical. - Decided against revenue Addition on account of difference of cost allocation - HELD THAT:- The matter is of factual verification only. The assessee in the return of income filed has offered marketing expenses reimbursement of Rs. 8,17,970/-and taxes borne by AIMPL amounting to Rs. 2,06,976/-and grossed up the amount to Rs. 10,24,946/-. Whereas the Assessing Officer considered the figure of Rs. 9,93,395/- reported as marketing expenses reimbursement in form No. 3 CEB and made addition for the difference amount (9,93,395 – 8,17,970) = Rs. 1,75,425/-. The assessee explained the amount of marketing expenses reimbursement and tax component borne by the Indian entity and offered both the amount for tax. In view of the above factual finding, which has not been controverted by the DR, we do not find any error in the order of the CIT(A) on the issue in dispute, accordingly, we uphold the same and dismiss the ground No. 2 of the appeal of the Revenue. Form of appeal and memorandum of cross-objections to Appellate Tribunal - authorised signatory of the company - HELD THAT:- Company being non-resident entity, the cross objection might have been verified by person holding a valid power of attorney from such company and said power of attorney was required to be attached with the said cross objection. But on the perusal of the cross objection, it is found that it has been filed by authorised signatory without enclosing a valid power of attorney, and thus the cross objection is not maintainable, accordingly, it is dismissed in limine. Penalty u/s 271(1)(c) - CIT(A) has deleted the penalty mainly on the ground that all information in relation to reimbursement of costs incurred on behalf of the Indian entity ‘AIMPL’ was duly disclosed in the notes to computation annexed along with the original return of income and in the revised return of income, the assessee already offered the said reimbursement to tax - On the issue of marketing support service fee, also the Ld. CIT(A) observed that same was offered in the revised return of income, before an enquiry/discussion by the AO on that issue - HELD THAT:- CIT(A) followed the decision of the Hon’ble Supreme Court in the case of Reliance Petro Product Limited [2010 (3) TMI 80 - SUPREME COURT] wherein it is held that if a claim made by the appellant is not found sustainable by the Assessing Officer during assessment proceeding, it does not automatically lead to concealment of income. We are also of the opinion that the Explanation by the assessee in respect of the additions made are bonafide and thus no penalty invoking Explanation -1 to section 271(1)(c) of the Act could have been levied in the case of the assessee. In view of the aforesaid discussion, we do not find any error in the order of the Ld. CIT(A) on the issue in dispute and accordingly, we uphold the same. The grounds of the appeal of the Revenue are dismissed.

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• 2019 (3) TMI 628
  Initiation of proceedings u/s 153C - proof of incriminating document found in search to substantiate the additions - HELD THAT:- The only material on the basis of which proceedings u/s 153C were initiated was the audited balance sheet and financial statements of the assessee for the year ended on 31st March, 2009. Document must be incriminating and it must relate to the assessment year whose assessments are sought to be reopened. In this case, admittedly, the document was relating to assessment year 2009-10 while the assessment reopened is for 2010-11. Therefore, the requirement that the document should relate to the assessment year sought to be reopened is not fulfilled. Moreover, how the audited balance sheet and financial statements of the assessee are incriminating material has also not been proved. In view of the above, we are of the opinion that on the facts of the assessee’s case, the case of INDEX SECURITIES PRIVATE LIMITED, VIDYA SHANKAR INVESTMENT PRIVATE LIMITED [2017 (9) TMI 585 - DELHI HIGH COURT] would be squarely applicable. Respectfully following the same, we quash the initiation of proceedings u/s 153C - Decided in favour of assessee.

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• 2019 (3) TMI 627
  Disallowance on account of diversion of the fund - interest expenses - HELD THAT:- M/s Goyal & Co was having a similar contract with M/s Anshul associates. In the case of M/s Anshul associates the ITAT was pleased to delete the addition made by the AO. As the facts of the case on hand are identical to the facts of the case as discussed above, we respectfully following the same reverse the order of authorities below. Thus we set aside the order of CIT(A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. Disallowance of wooden material expenses - HELD THAT:- There remains no ambiguity that there was any evasion of taxes. Therefore in our considered view, the disallowance cannot be made under the provision of Rule 40(A)(2)(b) of the Act. The genuineness and the business connection of wooden expenses have not been doubted by the authorities below. Therefore we can safely hold that the expenses were incurred in connection with the business of the assessee. In view of the above, we set aside the order of the Ld. CIT(A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. Addition of the other material expenses - HELD THAT:- The assessee incurred the expenses in the earlier assessment year which were carried forward to the year under consideration. We note that there was no such disallowance made by the authorities below in the immediately preceding assessment Year. Therefore we are of the view the opening balances which have been carried forward from the earlier Years cannot be disturbed in the year under consideration. We also note that genuineness and the business connections of the expenses have not been doubted. The only reason for the disallowance is that these expenses are not in pursuance to the joint development agreement. Thus such expenses were either to be allowed to the assessee or Goyal & Co. and both the companies are paying the tax at the same rate. Therefore, respectfully following the reasoning as given in the preceding ground no. 2 Para 14 of this order, we reverese the order of the authorities below. Thus we set aside the order of the ld. CIT(A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. Disallowance of miscellaneous work expenses - HELD THAT:- The expenses were incurred in the immediately preceding assessment year cannot be ignored. It is because the expenses were accepted by the Revenue in the earlier assessment year which was brought to the under consideration as the opening balance. It is established law that the closing balance of one year becomes the opening balance of the next year. Therefore the opening balance brought forward from the earlier year cannot be disturbed in the year under consideration. Accordingly, we are not inclined to uphold the finding of the authorities below. Thus we set aside the order of the Ld. CIT(A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed.

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• 2019 (3) TMI 626
  Deduction u/s 80IB and 80IC - taxpayer had not submitted its form 10CCB auditor’s report in respect of the corresponding revised claim - HELD THAT:- Honourable apex court’s decision in CIT vs. G. M Knitting Industries Pvt. Ltd. and Another [2015 (11) TMI 397 - SUPREME COURT] has already settled the law that an assessee is entitled for Section 80IB deduction even if it files its form 10CCB audit report not with the return but before completion of assessment. This is not the Revenue’s case that the assessee’s audit report has escaped the Assessing Officer consideration during assessment . There is no distinction on facts or law involvement in the two assessment years. We thus decline the Revenue’s instant substantive ground Deduction u/s 80IB/ 80IC deduction - decline claim as interest income for the reason that the same has not been derived from the eligible business as per decision in CIT vs. Sterling Products [1999 (4) TMI 1 - SUPREME COURT] - HELD THAT:- Learned senior counsel fairly concedes that the honourable jurisdictional High Court decision in assessee’s own case [2018 (4) TMI 1129 - ITAT KOLKATA] has already upheld Revenue’s very stand. We confirm the impugned Section 80IB/80IC deduction disallowance on this court alone. Disallowing provision of marketing services - whether it is in the nature of a contingent liability only than an ascertained one? - DR vehemently contends that the assessee has failed to prove the three basic ingredients of its impugned provisions i.e. an obligation arising as a result of past events, outflow of resources required for the very obligation followed by a reliable estimation; respectively - HELD THAT:- The assessee inter alia takes us to assessment year wise details of the marketing services from assessment year 2004-05 onwards, notes pertaining to its media activity, creation of marketing provision and reversal thereof, sample estimation, TV estimate and schedule as well as other similar details for its advertisements/marketing expenses for the impugned assessment order amounting to Rs. 156.94 crores. Both the lower authorities have been very fair in not pinpointing any distinction on facts and law in the instant case in all these assessment years. We adopt the above extracted reasoning mutatis mutandis qua the impugned assessment order to delete the disallowance of marketing services’ provision. Disallowance u/s 14A - HELD THAT:- CIT(A) has followed the findings on the very issue in earlier assessment years to estimate the impugned disallowance @ 1% of exempt income; coming to Rs. 23,660/- Mr. Khaitan states very fairly that this Tribunal has already affirmed the said estimated disallowance @1%. We thus reject the assessee’s instant substantive ground. Allocating residual cost between eligible and non-eligible elements in ratio of sales u/s 80IB/80IC - treating scrap sales to be eligible for the said deduction relief - HELD THAT:- no merit in Revenue’s instant grievance. There is no dispute even as per assessment order about the assessee having allocated 32 out of its 115 employees / executives to manufacturing segment. The assessee has been running both eligible as well as non-eligible units. Its allocation formula was number of 32 employees divided by total number of employees multiplied by eligible units sales further divided by total sales; to allocate the impugned expenditure. The same very formula had been applied in assessment year 2005-06 as well wherein the co-ordinate bench (supra) accepted the same in its order. We make it very clear that the Assessing Officer has himself accepted the assessee to have been engaged in trading of other segments. We therefore conclude in these facts and circumstances that the CIT(A) has rightly followed his findings of assessment year 2005-06 as applicable mutatis mutandis in the impugned assessment year as well. Scrap sales, both parties are ad idem that the CIT(A) has followed preceding assessment order findings in treating the same to be entitled for section 80IB deduction Disallowance u/s 40a(ia) - TDS was deducted and deposited to the government treasury during the relevant previous year - HELD THAT:- The assessee’s case at best is that it had filed the impugned relevant facts in its written submission dated 16.01.2014 before the CIT(A) for the first time. The lower appellate order on the other hand makes it evident that the last hearing before the CIT(A) took place on 13.01.2014 finally culminating in the order under challenge dated 16.01.2014. The assessee’s written submission of the same date where prove that they had been actually received before passing of the final order in the lower appellate proceedings. We do not see any valid reason in assessee’s instant third and last substantive ground, on this ground alone.

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• 2019 (3) TMI 599
  Penalty u/s 271(1)(c) - non specification of charge - non specifying in which limb of Section 271(1)(c) the penalty proceedings has been initiated as to whether it was for concealment of income or for furnishing inaccurate particulars of income - defective notice - assessee in return filed u/s 153A declared capital gain on the basis of consideration received as specified in registered sale deed - HELD THAT:- the notice issued under section 274, read with Section 271 (1) (c) of the Income Tax Act, 1961, should specify under which limb of Section 271 (1) (c) of the Act, the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars of income. In the absence of which no penalty should be levied on the assessee as determination of such limb is sine qua non for imposition of penalty under section 271 (1) (c) of the Act. There can be no doubt that penalty u/s. 271(1)(c) is levied for concealing particulars of income or for furnishing inaccurate particulars of such Income, which are the two limbs of this provision. The intent and purpose of this notice is to inform the assessee as to the specific charge for which he has been show caused so that he could furnish his reply without any confusion and to the point. In the present case, neither the assessee nor anyone else could make out as to whether the notice u/s. 274 r.w.S. 271 of the Act was issued for concealing the particulars of income or for furnishing inaccurate particulars of such income disabling it to meet with the case of the Assessing Officer. There are a catena of judgments highlighting the necessity for identifying the charge for which the assessee is being visited and in all those decisions, Hon'ble Courts have repeatedly held that where the jurisdictional notice is vague, similar to the one in the present case, the consequent levy cannot be sustained. As decided in SHEVETA CONSTRUCTION CO. PVT. LTD., THROUGH ITS MANAGING DIRECTOR DINESH KR. CHOUDHARY VERSUS ITO, WARD 3 (4) , JAIPUR [2016 (12) TMI 1603 - RAJASTHAN HIGH COURT] A.O. has to give a notice as to whether he proposes to levy penalty for concealment of income or furnishing inaccurate particulars. He cannot have both the conditions and if it is so he has to say so in the notice and record a finding in the penalty order. - decided in favour of assessee.

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• 2019 (3) TMI 598
  Addition on account of “Prior year expenses” - HELD THAT:- Disallowance being, payment of Provident Fund. CIT(A) recorded that the deduction of provident fund was admissible on payment basis in terms of section 43B. He, therefore, directed the AO to delete the same after ascertaining if the assessee actually made the payment during the year. There is no fallacy in the reasoning given by the ld. first appellate authority. The impugned order is upheld on this score. Disallowance on account of “Export obligation payment” - HELD THAT:- CIT(A) recorded that it was actually a payment towards property tax payable to Talegaon Municipality on the properties owned by the assessee. Such taxes were paid in two instalments of Rs. 5 lakhs each on 31-01-2006 and 01-03-2006. CIT(A), therefore, held that these taxes were allowable expenses on payment basis u/s.43B. Nothing has been argued to controvert the correctness of the finding given in the first appeal. We do not find any reason to deviate from such a finding. Disallowance is payment of rent - CIT(A) after considering the remand report from the AO, that the assessee entered into an agreement on 26-11-1008 with M/s Atma Hatcheries for running their hatcheries plant - HELD THAT:- A Civil suit was filed by M/s Atma Hatcheries against the assessee company and the Hon’ble Civil Judge directed the assessee company to pay a sum of Rs. 16,59,740/-. An out of Court settlement for Rs. 9,82,000/- was made by M/s Shirdi Estate, a sister concern of the assessee, who paid this sum vide Demand Draft dated 28-03-2006. Since the settlement took place in the year relevant to the assessment year under consideration and the amount was actually paid, we hold that the CIT(A) was justified in treating this expenditure as not a prior period expenses and hence, eligible for deduction. Disallowance of interest - sister concern of the assessee, paid this sum to Bank of Maharashtra on 23-05- 2006 on behalf of the assessee - CIT(A) to hold that the amount was to be allowed as deduction on payment basis u/s.43B - HELD THAT:- Again, we are unable to find any infirmity in the impugned order on this score. The same is, therefore, countenanced. Disallowance on account of interest charges -- HELD THAT:- CIT(A) allowed deduction which was paid by the assessee’s sister concern during the year on entering into a MOU with M/s. M.J. Construction company and 3 other entities for settlement of their dues including interest. Since the interest was paid in the year under consideration, we hold that the view taken by the CIT(A) in deleting the addition to this extent is unexceptionable. Disallowance u/s.43B - assessee company debited as “Interest and bank charges” - AO made disallowance for the same as it was not paid - HELD THAT:- On perusal of the remand report from the AO, the CIT(A) noticed that payment of interest and bank charges totaling to Rs. 28.88 lakh was made by the assessee’s sister concern within the previous year relevant to the assessment year under consideration. CIT(A) was right in deleting the disallowance as it was a case of payment of interest by the sister concern for and on behalf of the assessee during the year in question. Disallowance of outstanding liabilities - cessation of trading liability - AO observed that there was outstanding liability mainly to creditors and customers etc., which was shown as outstanding since 31-03-2006 - HELD THAT:- AO has himself stated that the amount was outstanding since 31-03-2006. We fail to appreciate as to which event has happened in the year under consideration resulting into the “cessation of liability”. Further, since the assessee has himself admittedly offered this amount for taxation in its return for the A.Y. 2009-10, as was contended before the AO as well, we hold that the ld. CIT(A) was justified in deleting the addition.

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• Customs

• 2019 (3) TMI 625
  Release of consignments - import of several units of old, used Digital Multifunction Print Copying Machines - stand of the revenue is that the clearance of the consignment would be contingent upon the fulfilment of all conditions as laid down in the amended Foreign Trade Policy - section 110A of Customs Act - Held that:- Supreme Court in the matter of Commissioner of Customs Vs. Athul Automations Private Limited [2019 (1) TMI 1324 - SUPREME COURT OF INDIA]. The Full Bench of the Supreme Court was concerned with a challenge to an order of the Customs Excise and Service Tax Appellate Tribunal that had been in favor of the importer, such importer not having challenged the Foreign Trade Policy itself. The authorities are also at liberty to initiate proceedings for assessment and adjudication of the consignments in question, in terms of the applicable statutory provisions and in accordance with law. The goods are permitted to be released by imposing certain conditions - petition disposed off.

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• 2019 (3) TMI 624
  Rectification of mistake - Extended period of limitation not invoked in SCN - Held that:- The substituting mechanics in the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 notwithstanding, and which are not the substance of the dispute here, the mandate of certain inclusions are also embodied therein. It was, therefore, the responsibility of the importer to include these, and by having failed so to do, rendered the goods liable to confiscation. In these circumstances, the order of the Tribunal has not erred in failing to modify or set aside the penalty - rectification application disposed off.

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• 2019 (3) TMI 623
  Restoration of appeal - matter disposed off ex-parte - principles of natural justice - Held that:- The matter was, indeed, disposed of ex parte by the Tribunal albeit with elaborate findings. There is also no doubt that notice had been issued. Learned Counsel, while submitting that the applicant had changed their address, does not contest that they had failed to inform so to the Registry and that the appellant had opted to be without legal representation for a quite a while - In the various decisions cited, the substantive issue, as pointed out by Learned Authorised Representative, was the dismissal of appeals without going into the merit of the grounds. That is not so here and such is not the plea of the Learned Counsel. Effectively, what is pleaded for by Learned Counsel now is not the right to be heard but the right to be represented by proper counsel. Principles of natural justice cannot be stretched that far. Appeal dismissed.

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• 2019 (3) TMI 622
  Jurisdiction of officers of DRI - Exemption of additional duties - Misdeclaration - it is alleged that 'packaged software’ had been wrongly declared as ‘customized software’ - undervaluation - non-inclusion of the royalty paid to the foreign supplier of motion pictures - N/N. 6/2006-CE dated 1st March 2006 - Held that:- The principle of finality of litigation may have the effect of sanctifying illegal proceedings if, ignoring the issue of jurisdiction, merit alone is considered before competence is decided by the Hon’ble Supreme Court. The inequity of a recovery upheld now with jurisdiction being nullified later is not particularly appealing to a judicial institution. Should it be held otherwise, there is no detriment to Revenue as the proceedings would then be reinstated. Considering the criticality of competence to issue show cause notice, the ends of justice will be appropriately met if the impugned order is set aside and the matter remanded back to the adjudicating authority to be decided afresh after the question of jurisdiction of officers of Directorate of Revenue Intelligence to issue notice for recovery of duty is settled - appeal allowed by way of remand.

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• 2019 (3) TMI 621
  Import of Construction equipment - violation of post-importation conditions - Benefit of N/N. 21/2002-Cus dated 1st March 2002 denied - import of rotary piling rig R-625 serial no. 2553 and its accessories - Held that:- It is apparent that the sheer scale of investment involved in undertaking road connectivity projects through participation of the private sector did warrant, and prompted, public contribution through exemption from duties of customs on import of equipment that is intended to be deployed. The only construction of intent that can be inferred from the structure of the exemption notification is that pre-importation condition entitles the importer to availment of the exemption while the post-importation condition mandates performance; these are mutually exclusive conditions. It is seen from the record that the appellant was prevented from executing the project at Panipat for want of the project site being made available to them. In these circumstances, the pre-importation condition, which is neither included in the undertaking for continuing obligation under the notification nor mandated to be so in the notification, cannot be held to have been deniable after the eligibility was determined at the threshold. Consequently, there is no breach leading to invokability of section 28 of the Customs Act, 1962 and/or section 111 of the Customs Act, 1962. Utilization of the imported equipment - Held that:- It is not in dispute that the equipment was deployed on contracts for construction of rail over bridges. The post-importation deployment does not necessarily have to relate to contracts that confer eligibility at the threshold. Hence, execution of project contracted by Indian Railways, or any agency of the Government of Bihar, is not violative of the continuing obligation undertaken by appellants or mandated by the notification except where the project did not involve construction of roads. Appeal allowed - decided in favor of appellant.

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• Corporate Laws

• 2019 (3) TMI 620
  Maintainability of winding up petition - bonafide dispute or not - reliance by the respondent on the communication dated 03.04.2014 - Held that:- The reliance on communication appears to be an afterthought. This is also apparent from the fact that this communication was written by Mr. I.C. Kalra, Vice President (Technical) who had himself signed the final running bill. The same person is now turning around and giving a completely different story - The respondents are clearly taking contrary stands regarding the authority of Mr.I.C.Kalra to take decisions on behalf of the respondent company. Communication dated 07.06.2011 written to Sehrawat Marbles - Held that:- The learned counsel for the petitioner in court on instructions had clarified that the petitioner does not deal in Kotha Stones. Clearly, this communication/the alleged order relied upon by the respondents is make belief and cannot be relied upon. The settled legal position is that where the respondent company raises a bona fide dispute then no winding up petition would lie - in the facts of the above case the respondent company has failed to show any bona fide dispute. Present petition is admitted - List on 27th May, 2019.

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• 2019 (3) TMI 619
  Compounding of offences - imposition of fines on Ishwarlal Jariwala who died after the Impugned Order was passed - Held that:- We are of the view that delays in compliance of the provisions of Companies Act regarding submission of Returns and Forms are source of mischiefs in various instances. These lapses need to be viewed seriously. Even if on facts in a given case, leniency may be shown, it cannot be so much that fear of law gets taken away. There is no illegality in the Impugned Order - We do not think that for the misconduct, as noticed in the present Appeals, further leniency is required to be shown - appeal dismissed.

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• Insolvency & Bankruptcy

• 2019 (3) TMI 618
  Initiation of Corporate Insolvency Resolution Process - corporate debtor - credit facilities availed - default in repayment of the outstanding huge debt to the applicant financial creditor - main objection raised by the respondent corporate debtor is that despite several request the applicant financial creditor failed to provide no objection Certificate (NOC) in favour of buyers of the corporate debtor for registration of the ownership of the commercial space in respect of the buyers. Respondent company has also raised objection of forum shopping and submitted that applicant has already initiated action under the provisions of SARFAESI Act and also has filed original application for adjudication of the claim before DRT which is still sub judice - Held that:- Insolvency and Bankruptcy Code, 2016 being a complete Code and Union Law, will prevail over other later laws like the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and SARFAESI Act, 2002. As per Section 238 of the Code, the provisions of the Code are to be given effect to notwithstanding anything contrary contained in any other later laws - the objection in this regard will not sustain as initiation and pendency of proceedings in different forums is no bar for initiation of Corporate Insolvency Resolution Process under Section 7 of the Code in view of the overriding effect given to the provisions of Section 238 of the Code. Respondent has raised another objection that the present application is not maintainable as applicant bank can only act through its authorized representative - Held that:- In the present case Applicant bank has filed specific power of attorney in favour of Shri Rajesh Kumar dated 11th August, 2017 stating that pursuant to board resolution dated 27th July, 2017 passed by board of directors of applicant bank the specific power of attorney dated 27th August, 2017 has been executed in favour of Shri Rajesh Kumar. Admittedly Shri Rajesh Kumar is working in a senior post in Scale-V as Asst. General Manager of the applicant bank and has preferred the present application on behalf of the applicant bank. In the facts there is no doubt that Shri Rajesh Kumar not only has been authorized but is also competent to file the present application on behalf of the applicant bank. Respondents have also taken a stand that the Corporate Debtor has valuable asset for future earnings and shall meet the default - Held that:- Such contention has no force when respondent company has committed default and has failed to repay the dues as per the loan agreement. Mere contention that the corporate debtor will clear the dues in future would not help the corporate debtor as admittedly default continues. Once there is a default in repayment of debt the applicant has a right to press for initiation of Corporate Insolvency resolution Process under the Code. The procedure in relation to the Initiation of Corporate Insolvency Resolution Process by the “Financial Creditor” is delineated under Section 7 of the Code, wherein only “Financial Creditor”/”Financial Creditors” can file an application. As per Section 7(1) of the Code an application could be maintained by a Financial Creditor either by itself or jointly with other Financial Creditors. The expressions “Financial Creditor” and “Financial debt” have been defined in Section 5 (7) and 5 (8) of the Code and precisely “Financial debt” is a debt along with interest, if any, which is disbursed against the consideration for time value of money - In the present case applicant bank had sanctioned and disbursed loan amounts recoverable with applicable interest by entering in to loan agreements with the corporate debtor. The corporate debtor had borrowed the credit facilities against payment of interest as agreed between the parties. The loan was disbursed against the consideration of time value of money with a clear commercial effect of borrowing. Moreover the debt claimed in the present application includes both the component of outstanding principal and interest. In that view of the matter not only the present claim will come within the purview of ‘Financial Debt but also the applicant bank can clearly be termed as ‘Financial Creditor’ so as to prefer the present application under Section 7 of the Code. In the case on hand, it is seen that respondent corporate debtor has committed default in repayment of the outstanding financial debt. On a bare perusal of Form - I filed under Section 7 of the Code read with Rule 4 of the Rules shows that the form is complete and there is no infirmity in the same. Accordingly, it is seen that the application of the financial creditor is complete and there is no disciplinary proceeding pending against the proposed IRP. We are satisfied that the present application is complete and the applicant financial creditor is entitled to claim its outstanding financial debt from the corporate debtor and that there has been a default in payment of the financial debt - thus in terms of Section 7(5)(a) of the Code, the present application is admitted. Application allowed - public announcement shall be made by the Interim Resolution Professional immediately (3 days as prescribed by the IBBI Regulations) - moratorium in terms of Section 14 of the Code declared.

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• Service Tax

• 2019 (3) TMI 617
  Levy of service tax - export of services or not - International Inbound Roaming Services provided by VCL to Foreign Telecommunication Operator Companies (FTOs), for which consideration is paid by the FTOs to the appellant in convertible foreign exchange - POPOS Rules - Held that:- The department has proceeded with the view that the actual beneficiary of the service is the inbound roamers and the appellant being a service provider for such international roaming facility, the service would fall within the levy of service tax. In fact, even though the actual beneficiary of the service is inbound roamer, there is no agreement by the appellant to provide service to the actual inbound roamer. The agreement to provide service is between the appellant and the foreign telecommunication company. Thus, for the appellant, the service recipient can only be the foreign telecommunication company and not the international inbound roamer. Since the service recipient is located outside India, as per Rule 3(iii) of Export of Service Rules, the said services would amount to export of service for the period prior to 1.7.2012. For the period after 1.7.2012, the Place of Provision of Services Rules, 2012 came to be introduced and as per Rule 3 of such Rules, the location of the service recipient has to be taken into account for deciding as to where the services have been provided. So for the entire period of dispute, since the service recipient is outside India, the same amounts to export of services. It is clear from the order of Revisionary authority that when the appellant had paid service tax and filed refund claims on the very same services, the department has granted refund holding the services as export of services. The department has granted refund upto the period 31.3.2011. The department therefore cannot contend that the services are not export of services for the period from 1.4.2011 to 30.6.2012 and 1.10.2013 to 30.9.2014 which is the disputed periods in these appeals. The services are not exigible to service tax being export of service - Appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 616
  Time Limitation - intent to evade or not - Management, Maintenance or Repair Service - appellant providing work of reconditioning to Railways from June 2005 on agreements entered with Railways - non-payment of service tax - wrongful availment of abatement - applicability of proviso to sub-section (1) of Section 73 of FA - Held that:- In the present case, the department has not been able to establish any positive act on the part of the appellant to show that there was suppression of facts with intent to evade payment of duty. In the decisions relied by the ld. counsel for the appellant, it has been held that mere non-filing of returns or not taking registration would not amount to suppression of facts with intent to payment of service tax - Further in a slew of decisions, various Courts have held that the department has to establish some positive act of suppression or mis-statement in order to invoke the extended period. Thus, there are no ingredients in the present case for invocation of extended period - SCN is time barred - appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 615
  Rectification of mistake - patent error or not - Business Auxiliary services - overriding commission received by the appellants - CENVAT Credit - input services - Held that:- The errors are patent errors which require rectification. Since the facts have been recorded wrongly in the impugned Final Order, it is better to recall the Final Order and re-hear the appeal so that the errors can be rectified in toto - ROM Application disposed off.

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• 2019 (3) TMI 614
  Liability of service tax - storage and warehousing charges or not - lease rentals charged and collected by appellants on monthly basis for supply and installation of storage tanks called as “bullets” in the premises of the buyer to store LPGs supplied - Held that:- The issue has been decided in appellant own case M/S. TOTAL OIL INDIA LTD. VERSUS CCE, SALEM [2018 (6) TMI 198 - CESTAT CHENNAI] where it was held that as the appellant is not having any control over the goods and they are not responsible for the security of the goods, the appellant is not covered under the category of Storage and Warehousing Services - appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 613
  Refund of excess tax paid - time limitation - such refund application was filed even after surrender of licence in 2012 - Section 11B of the Central Excise Act, 1944 - period January, 2009 to March, 2009 - Held that:- As has been held by Hon ble Supreme Court in the case of Mafatlal Industries Ltd. cited [1996 (12) TMI 50 - SUPREME COURT OF INDIA] all claims of refund, except those which arise as a result of declaration of unconstitutionality of provision where under the levy was created, have to be preferred and adjudicated only under the provision of respective enactment, which in the instant case is Section 11B of the Central Excise Act and Salt Act. Section 11B provides a stipulation of one year to claim refund - refund cannot be allowed - appeal dismissed - decided against appellant.

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• 2019 (3) TMI 612
  Principles of natural justice - alleged non-payment of service tax - Broadcasting agency service - case of Revenue is that in the impugned order, the adjudicating authority has mis-understood and mis-construed the remand direction by this Tribunal and reduced the demand without proper verification of the relevant records, invoices, etc. - Held that:- During the relevant period, the appellant has provided taxable service under the category of ‘broadcasting agency service’. Also in the first round of litigation the liability to service tax under the said taxable category has attained finality on merit. However, for computation of the demand, the matter was remanded to the adjudicating authority - On a careful reading of the order of this Tribunal it is clear that the figures entered in the charts referred to in the said order needs verification and the Learned adjudicating authority was at liberty to call for further evidences to ascertain whether these expenses were incurred on behalf of the clients so as to be eligible as reimbursable expenses for deduction while computing the taxable value - All other issues including the plea of time-bar are left open for denovo decision - appeal allowed by way of remand.

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• Central Excise

• 2019 (3) TMI 611
  100% EOU - Use of duty-free imported raw materials in the manufacture of finished goods, namely, granite slabs - denial of the duty-free benefit of Sl. No. 3A of Notification No. 23/2003 - subsequent SCN - extended period of limitation - Held that:- There are merits in the plea on limitation taken by the appellant. Evidently, the Show Cause Notice is a periodical one and, as conceded by the adjudicating authority in paragraph 19, the very identical issue in another set of proceedings for an earlier period from March 2004 to November 2008 had been adjudicated vide Order dated 30.03.2012. This being so, the subsequent Show Cause Notices cannot invoke the extended period of limitation. In the circumstances, the impugned Order affirming the demand for the period from 01.12.2008 to 31.10.2011, initiated by the Show Cause Notice dated 19.07.2012, can be sustained only for the normal period of limitation, to be calculated backwards from the date of issue of the Notice. For this, the demand for the remaining portion will consequentially be set aside - For the limited purpose of re-calculating the duty liability for the normal period of limitation, the matter is remanded to the adjudicating authority. Appeal allowed by way of remand.

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• 2019 (3) TMI 610
  Clandestine removal - steel ingots - demand based on electricity consumption - Held that:- In the absence of any finding of un-accounted expenditure on manufacture or of any evidence of illicit removal, it would appear that there is a fundamental flaw in the findings of the original authority. The adjudication order has relied upon power consumption to allege that there has been an additional production and has applied the per unit rate to this additional production without taking into consideration the indisputability of the total cost of production. In the absence of an attack on the total cost of production, the duty liability discharged on the said value for the entire period of two years is not susceptible to challenge as that which has not been paid as duties of Central Excise - In the absence of any logic for calculation of additional duties, there is no justification for sustaining this impugned order. Appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 609
  CENVAT Credit - common input service used for trading activity and manufacturing activity - High Seas Sales - Rule 6(3) of CCR, 2004 - Held that:- The high-sea sales has taken place outside the jurisdiction of Central Excise authorities. The Tribunal in the case of M/s. Rajpetro Specialities Pvt. Ltd., [2019 (2) TMI 7 - CESTAT CHENNAI] had occasioned to analyse the very same issue, where it was held that when High Sea Sales take place outside the territorial waters, it cannot be understood how such sales can be considered as an exempted service (trading) so as to fall within the ambit of Rule 2(e) of the CENVAT Credit Rules, 2004. When the alleged trading activity has occurred outside the jurisdiction of Central Excise authorities as well as Finance Act, 1994, the demand cannot sustain - appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 608
  Classification of goods - imported thermal paper - classified under chapter 48 or 49 of CEA - printing of the name of the bank and coding to read the end of statement transacted, is cut and slit and placed in ATMs in rolls. - Held that:- with respect to the impugned goods viz., the thermal rolls, made to a pre-defined shape for being used in ATMs, there may well be some printing of the name of the bank, logo, etc., but that is merely incidental to the final use of the product, which is, spewing out in printed form the details of the transaction entered into by the bank customer. Printing on such ATM rolls is thus only a pre-printing for identification of the bank ATM concerned and is evidently incidental to their primary use. The decision in the case of M/s. ITC Ltd. Vs. Collector of Central Excise, Madras [1997 (12) TMI 115 - SUPREME COURT OF INDIA] relied upon by the Ld. AR is fully applicable to the facts of this case. In the said judgement, the Hon ble Apex Court has held that paper/paper board articles for packaging of cigarettes, printed, the primary use of such articles being in connection with packaging of cigarettes and printing thereon being merely incidental to their primary use, are correctly classifiable under Chapter 48 - appeal allowed - decided in favor of Revenue.

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• 2019 (3) TMI 607
  Method of valuation - supplies to institutional buyers - section 4 and 4A of CEA - time limitation - Held that:- Identical issue decided in the case of M/S ACME CERAMICS AND OTHERS VERSUS CCE RAJKOT [2014 (3) TMI 164 - CESTAT AHMEDABAD], where it was held that prior to 01.03.2008, in the absence of any provisions for re-determining the RSP, in the form of prescribed rules, the Revenue authorities cannot re-determine the RSP under any of the provisions available to them. It has to be noted that there is no contrary view which has been taken by the Tribunal. In consequence of the absence of machinery provision during the period of dispute the assessable value for the purpose of computation of duty, even though not found to be affixed on the product, would have to be accepted as the ‘retail selling price.’ - appeal allowed.

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• 2019 (3) TMI 606
  SSI Exemption - alleged clearances in excess of the ceiling permitted for exemption from duties - the entire amount in dispute has been remitted with interest along with 25% of penalty too has been deposited - Held that:- The appellant had failed to intimate the commencement of production in September 2007. Though it is claimed that they had not effected any manufacture prior to that, mere submission to that effect does not suffice to support this claim. It is, doubtlessly, impossible for any entity to establish a non-event but, considering the capability of machining and finishing parts of automobiles in the factory of manufacture, such a claim cannot be accepted without other evidence. This is more so as the appellant had sought for and obtained registration under Central Excise Rules, 2000 only after investigation was undertaken by central excise authorities - The link between the dropping of proceedings initiated against one of the suppliers of castings to the appellant and the claim for excluding that portion from the total clearance allegedly effected without payment of duty by appellant cannot overcome the test of logic and reason. Reduced benefit of penalty - Held that:- It is on record that the duty liability has been discharged along with interest and that the lower authorities had not extended the privilege of reduced payment of penalty under section 11AC(1)(d) of Central Excise Act, 1944. Appeal allowed in part.

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• 2019 (3) TMI 605
  Valuation - inclusion of value of the durable containers supplied by customers in assessable value - rule 6 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - period from 1st April 2008 to 30th June 2011 - Held that:- The provisions of the valuation rules are, under section 4(1)(b) of Central Excise Act, 1944, to be resorted to when the framework articulated in section 4(1)(a) is not applicable for one or the other reason. In assessment, if all circumstances specified in section 4(1)(a) are complied with except that of price being the sole consideration for sale, recourse is to be had to rule 6 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 for addition to the transaction value. The rules for valuation are intended to provide the guiderails for determination of value when the transaction value is not acceptable for having deviated from some or all the circumstances that together sanctify such value. The necessary implication, in the context of present dispute, is that it must be established that the value of clearances effected by the appellant in containers procured by them differs from the value of clearances of goods in containers supplied by their customers. Only then can there be any disquiet about the non-inclusion of the value of the durable containers so supplied by the customers and for inclusion thereof of the difference in price if attributable to the value of durable containers supplied by the customer free of cost. Moreover, rule 6 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 implies that the ownership, whether in physical form or monetised form, should vest with the appellant for it to be construed as additional consideration. No such case has been made out in the records. As the provisions of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 are not to be applied sequentially but as separate with mutually exclusive application, in the absence of any other rule being invoked, and owing to the inappropriateness of rule 6, the demand does not sustain. Appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 604
  Liability of excise duty - excess freight recovered from customers - Held that:- The issue has been settled by the Tribunal in Mercedes Benz India Pvt Ltd v. Commissioner of Central Excise, Pune – I [2010 (8) TMI 790 - CESTAT MUMBAI] wherein it has been held that The excess freight collected from the dealers was only a profit on transportation and not an “additional consideration” within the meaning of this expression used in Rule 6, nor an “additional amount” within the meaning of the definition of “transaction value” under Section 4(3)(d) of the Act. Thus, the excess amount collected from customers, on one or both counts, is hit by the impropriety of inclusion of such amount as ‘additional consideration’ envisaged in the said Rules - appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 603
  Process amounting to manufacture - activity of labelling - excisability of goods before cleared for home consumption - Held that:- The definition of ‘imported goods’ under section 2(25) of Customs Act, 1962 makes it amply clear that the goods do not transform from that status till cleared for home consumption. It is not in dispute that the present activity was carried out while the goods were yet categorized as ‘imported’ and would not, therefore, fall within the purview of Central Excise Act, 1944 - appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2019 (3) TMI 602
  Condonation of delay of 503 days in filing appeal - time limitation - Section 5 of Limitation Act, 1963 - scope of 'sufficient cause' - Held that:- The Supreme Court in Oriental Aroma Chemical Industries Ltd. v. Gujarat Industrial Development Corporation and another, [2010 (2) TMI 1121 - SUPREME COURT OF INDIA] laying down the broad principles for adjudicating the issue of condonation of delay, has held that Although, no hard and fast rule can be laid down in dealing with the applications for condonation of delay, this Court has justifiably advocated adoption of a liberal approach in condoning the delay of short duration and a stricter approach where the delay is inordinate. The law of limitation has been enacted which is based on public policy so as to prescribe time limit for availing legal remedy for redressal of the injury caused. The purpose behind enacting law of limitation is not to destroy the rights of the parties but to see that the uncertainty should not prevail for unlimited period - Under Section 5 of the 1963 Act, the courts are empowered to condone the delay where a party approaching the court belatedly shows sufficient cause for not availing the remedy within the prescribed period. The meaning to be assigned to the expression “sufficient cause” occurring in Section 5 of the 1963 Act should be such so as to do substantial justice between the parties. The existence of sufficient cause depends upon facts of each case and no hard and fast rule can be applied in deciding such cases. In the present case after appreciating the matter it cannot be said that there was sufficient cause for condonation of delay. However, the appeal was required to be filed within the stipulated period of limitation of 60 days. But the appellant filed the present appeal on 28.11.2018, after a delay of 503 days. The plea of the appellant as mentioned above would not satisfy the test of sufficient cause. The explanation of the appellant is bereft of justification for the delay caused in filing the appeal keeping in view the totality of facts and circumstances of the present case. Delay cannot be condoned - Application for condonation of delay is dismissed.

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• Indian Laws

• 2019 (3) TMI 601
  Award of industrial Tribunal - whether the appellant (workman) was in continuous service of respondent No.1(Employer) for one year as provided under Section 6N of the U.P. Industrial Disputes Act? - Held that:- A finding on such question being a finding of fact, this Court cannot examine such question de novo by appreciating the whole evidence adduced by the parties again in these appeals. In our view, the High Court examined the matter in detail and the finding of the High Court on this question being a finding of fact is binding on this Court. This question, we cannot now again examine de novo in our appellate jurisdiction under Article 136 of the Constitution. It is more so when we find that the finding on this question is neither against any evidence adduced by the parties nor against any provision of law and nor it is perverse - Indeed, this Court has held that the proceedings under Section 17B of ID Act are independent proceedings in nature and are not dependent upon the final order passed in the main proceedings. Appeal dismissed.

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• 2019 (3) TMI 600
  Arbitration agreement - Whether the Sub-clause (7) of Clause 25-A of the agreement can be said to be arbitrary or discriminatory and violative of Article 14 of the Constitution of India? Whether the 10% “deposit-atcall” of the amount claimed is in order to avoid frivolous claims by the party invoking arbitration? - Held that:- It is well settled that a frivolous claim can be dismissed with exemplary costs - It is therefore always open to the party who has succeeded before the arbitrator to invoke this principle and it is open to the arbitrator to dismiss a claim as frivolous on imposition of exemplary costs. The important principle established by this case is that unless it is first found that the litigation that has been embarked upon is frivolous, exemplary costs or punitive damages do not follow. Clearly, therefore, a “deposit-at-call” of 10% of the amount claimed, which can amount to large sums of money, is obviously without any direct nexus to the filing of frivolous claims, as it applies to all claims (frivolous or otherwise) made at the very threshold. A 10% deposit has to be made before any determination that a claim made by the party invoking arbitration is frivolous. This is also one important aspect of the matter to be kept in mind in deciding that such a clause would be arbitrary in the sense of being something which would be unfair and unjust and which no reasonable man would agree to. Further, it is also settled law that arbitration is an important alternative dispute resolution process which is to be encouraged because of high pendency of cases in courts and cost of litigation. Any requirement as to deposit would certainly amount to a clog on this process. Also, it is easy to visualize that often a deposit of 10% of a huge claim would be even greater than court fees that may be charged for filing a suit in a civil court. Deterring a party to an arbitration from invoking this alternative dispute resolution process by a pre-deposit of 10% would discourage arbitration, contrary to the object of de-clogging the Court system, and would render the arbitral process ineffective and expensive. Clause 25(viii) of the notice inviting tender is striked off - appeal allowed.

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