TMI Tax Updates - e-Newsletter
March 16, 2019

Case Laws in this Newsletter:

GST Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax

Articles

1. Manner of Utilization of ITC under GST

   By: viral shah

2. Anti Profiteering Part I

   By: CA Akash Phophalia

News

1. National Guidelines on Responsible Business Conduct

2. India’s Foreign Trade: February 2019

3. Signing of Bilateral Agreement for Exchange of Country-by-Country (CbC) Reports between India and the USA

4. First Workshop on India Energy Modelling Forum Held

Notifications

Customs

1. 13/2019 - dated 14-3-2019 - ADD

Seeks to prescribe provisional assessment for 'Saturated Fatty Alcohols' when originating in or exported from subject countries by M/s PT. Energi Sejahtera Mas (producer) Indonesia through M/s Sinarmas Cespa Pte Ltd (exporter/trader) Singapore and imported into India.

GST - States

2. S. R. O. No. 953/2018 - dated 31-12-2018 - Kerala SGST

Insert the proviso in Notification No. S.R.O. No. 680/2018 dated 28th September, 2018

3. S. R. O. No. 951/2018 - dated 31-12-2018 - Kerala SGST

Seeks to insert an explanation in S.R.O.No. 370/2017 dated 30th June, 2017

4. S. R. O. No. 950/2018 - dated 31-12-2018 - Kerala SGST

Seeks to amend Notification No. S.R.O. No. 372/2017 dated 30th June, 2017

5. S. R. O. No. 949/2018 - dated 31-12-2018 - Kerala SGST

Seeks to amend notification No S.R.O.No. 371/2017 dated 30th June, 2017

6. S. R. O. No. 948/2018 - dated 31-12-2018 - Kerala SGST

Seeks to amend Notification No. S.R.O. No. 370/2017 dated 30th June, 2017

7. S. R. O. No. 934/2018 - dated 27-12-2018 - Kerala SGST

Kerala Goods and Services Tax (Seventh Amendment) Rules, 2018

Income Tax

8. 22/2019 - dated 14-3-2019 - IT

U/s 10(46) of the Income-tax Act, 1961 Central Government notifies ‘Prayagraj Mela Pradhikaran, Prayagraj’, an authority constituted by the State Government of Uttar Pradesh, in respect of the specified income arising to that authority

9. 21/2019 - dated 13-3-2019 - IT

Section 118 of the Income-tax Act, 1961 - Central Board of Direct Taxes directs that the Commissioner of Income-tax (e-Verification) shall be subordinate to the Principal Director General of Income-tax (Systems)

10. 20/2019 - dated 13-3-2019 - IT

U/s 120(1) and (2) of the Income-Tax Act, 1961 - Central Board of Direct Taxes directs that the Principal Director General of Income-tax (Systems), Delhi, shall exercise the powers and perform the functions in respect of such territorial area or such persons or class of persons or such incomes or class of incomes or such cases or class of cases, in respect of which the Commissioner of Income-tax (e-Verification) has jurisdiction vested in him

11. 19/2019 - dated 13-3-2019 - IT

U/s 120(1) and (2) of the Income-Tax Act, 1961 - Jurisdiction of Income tax Authorities

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/CFD/DCR2/CIR/P/2019/35 - dated 13-3-2019

SEBI (Delisting of Equity Shares) Regulations, 2015 – “Timelines for Counter Offer Process”

2. IMD/FPIC/CIR/P/2019/37 - dated 12-3-2019

Review of Investment by Foreign Portfolio Investors (FPI) in Debt Securities

3. SEBI/HO/CFD/CMD1/CIR/P/2019/36 - dated 12-3-2019

Modification of circular dated December 7, 2018 on ‘Disclosure of significant beneficial ownership in the shareholding pattern’

DGFT

4. Trade Notice No. 49/2015 -2020 - dated 15-3-2019

Online facility for obtaining import license for 'Restricted' items from 18th March, 2019 (Para 2.50 of Handbook of Procedures, 2015-2020)

5. 79/2015-20 - dated 15-3-2019

New Online facility for obtaining import license for 'Restricted' items from 18th March, 2019 (Para 2.50 of Handbook of Procedure, 2015-2020)

Highlights / Catch Notes

GST

• Computers and Laptops Not Qualified as Inputs for Transitional ITC u/s 140(3) KSGST Act; VAT ITC Denied.

  Case-Laws - AAAR : Input Tax Credit (ITC) - Transitional credit - Whether computers, laptops etc., used by the applicant for providing output service would qualify as inputs for the purpose of availing transitional ITC under Section 140(3) of KSGST Act? - If the goods are physically available as closing stock as on 30th June, 2017, can the applicant avail ITC for the VAT paid? - Held NO
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• Hospital Pharmacy Supplies to Outpatients Deemed Taxable Under GST as Composite Supply.

  Case-Laws - AAAR : Classification of supply - composite supply or not - The supply of medicines and allied items to the outpatients through the pharmacy attached to the hospital run by the appellant is taxable under GST
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• Transporter Liable Under GST: Section 129 Rejects Claim of No Involvement in Goods Sale or Purchase.

  Case-Laws - HC : Liability of transporter / GTA under GST - Section 129 of GST - the contention of the petitioner that he is not doing any business in respect of sale or purchase of the goods or is not concerned with the goods as he is a mere transporter and is only providing vehicles for transporting and therefore the impugned notice is bad and without any substance and is rejected.
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Income Tax

• House Property Income Not Accrued Due to Pending Approvals for Compensation or Lease Amounts.

  Case-Laws - AT : House property income - accrual of income - compensation amount or lease amount has not accrued to the assessee during the year under consideration, since the accrual of the same would depend upon the receipt of approvals which has not yet received.
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• Penalty Avoided: Income Declared Before Filing Deadline Accepted, No Concealment or Inaccuracy u/s 271(1)(c.

  Case-Laws - AT : Penalty u/s 271(1)(c) - additional income was declared in survey u/s 133A - date of filing of return u/s 139(1) had not expired - The fact of “concealment of income” and “furnishing of inaccurate particulars of income” can be established only with reference to the income declared in the return of income - If income declared is accepted, no penalty levied u/s 271(1)(c).
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• Section 10B Exemption: Certificate from Competent Authority Valid Without Board Approval for Tax Benefit.

  Case-Laws - HC : Disallowance of exemption u/s. 10B - once the assessee is having the certificate issued by the competent authority, in that case, non-production of the approval letter by the Board cannot be a ground to deny the benefit under Section 10B.
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• Reassessment u/s 147 Invalid if Original Assessment u/s 143(3) Had Full Disclosure. No Second Chances.

  Case-Laws - SC : Reopening of assessment u/s 147 - Original assessment u/s 143(3) - full and material disclosure - so called fresh material is nothing but what existed on the record and was a subject matter of query by the AO - Second chance to revenue is not permissible based on same material.
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• Interest on Compensation Under Land Acquisition Act is Part of Compensation, Taxable as Capital Gain or Exempt.

  Case-Laws - AT : Interest received on compensation or enhanced compensation amount u/s 28 of the Land Acquisition Act - Such interest are part of compensation and either taxable as capital gain or exempt from capital gain u/s 10(37) but not taxable as Income from other sources.
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• Product Design Development Costs for Existing Products Deemed Revenue Expenditure, Not Capital Expenditure.

  Case-Laws - AT : Product Design Development expenditure - revenue or capital expenditure - not incurred for development of a new product or new line of business - The expenditure incurred by assessee to improve the existing products is revenue expenditure.
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• Unserved Notices Confirm Bogus Purchases Additions at 12.5% due to Accommodation Entries without Goods Delivery u/s 133(6).

  Case-Laws - AT : Bogus purchases - addition @ 12.5% of the bogus purchases - accommodation entries - no actual delivery of goods - notices issued u/s 133(6) were returned back unserved by the postal authorities - additions confirmed.
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• Penalty Deleted: No Capital Gains Tax on Land Sale Due to Good Faith Belief u/s 271(1)(c).

  Case-Laws - AT : Penalty u/s 271(1)(c) - bonafide belief - Taxability of capital gain arises on sale of land - in absence of any monetary consideration assessee was under a bonafide belief that no capital gain arises on sale of land, is acceptable and benefit of doubt can be given to the assessee - penalty deleted
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• Tribunal Sets Clear Guidelines: No Discretion for Transfer Pricing Officer on Customs Duty, Air Freight, and Forex Adjustments.

  Case-Laws - HC : TP adjustment - Direction in remand proceeding - Customs Duty Adjustment, Air Freight Adjustment and Foreign Exchange Adjustment - If the Tribunal has fixed how such adjustments have to be made or not to be made. This hardly leaves any discretion to deal with these issues afresh with the TPO.
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• Taxpayer's Bona Fide Belief Validates 100% Deduction Claim u/s 80IC; No Penalty u/s 271(1)(c.

  Case-Laws - AT : Penalty u/s 271(1)(c) - bonafide belief - restriction of claim of deduction u/s 80IC to 25% from 100% claimed on account of substantial expansion - differing orders passed by the revenue authorities, appellate authorities, the High Court and Supreme Court on this issue lend credence to the fact that the belief of the assessee was a bonafide belief to claim the deduction - No penalty leviable.
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• Section 80-IA Deduction Applies to Captive Electricity Consumption, Affects Book Profit Calculation u/s 115JA.

  Case-Laws - AT : Deduction u/s 80-IA - book profit computation u/s 115JA - profit and gain from captive consumption of electricity supplied from generator set and which cannot be sold to any third person will qualify for deduction under Section 80-IA.
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• Rectification Denied: Assessee Cannot Use Miscellaneous Petition to Amend Appeal on Interest Delay u/ss 254(2) & 201(1A.

  Case-Laws - AT : Rectification of mistake u/s 254(2) - improvement of case through Misc. Petition - question in appeal relates interest for delay u/s 201(1A) - In MA claim made that remittances made towards purchase hence no TDS u/s 195 - It is not open to assessee to improve its case through Misc. Petition.
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• Penalty Not Justified u/s 271(1)(c) If Taxpayer Fully Disclosed Facts and Did Not Appeal Assessment Addition.

  Case-Laws - AT : Penalty u/s 271(1)(c) - Disclosure of relevant facts - 1/5th ROC expenditure allowable u/s 35D - if all necessary details were made available by the assessee, the mere fact that the addition made in the course of assessment proceedings in the peculiar facts was not challenged in appeal by itself is neither here nor there is not sufficient to levy of penalty.
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Customs

• Court Questions Authenticity of Certificates of Origin; Conflicting Claims on Goods' Sri Lankan Origin in Writ Proceedings.

  Case-Laws - HC : Provisional release of goods - genuineness of the certificates of origin produced by the petitioner - it is prima facie clear that there has been a communication from the Nodal officer at Sri Lanka that the containers were transshipped and the goods are not of Sri Lankan origin. However, another authority namely, the Director of Export states that this is an inadvertent error. The correctness of the respective stand cannot be tested by us in a Writ proceedings.
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• Adjudicating Authority Lacked Jurisdiction to Recompute Figures Excluding Unit Proceeds after Development Commissioner's Order Affirmed NFEP.

  Case-Laws - AT : 10% EOU - Jurisdiction - the adjudicating authority could not have re-computed the same after excluding the proceeds from one of the unit, this is especially so when development commissioner expressly considered its earlier order while holding that appellant has achieved net positive NFEP.
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• Promissory Estoppel Inapplicable: Appellant Failed to Meet Export Obligation Under EPCG Scheme Notification.

  Case-Laws - AT : Doctrine of Promissory Estoppel - EPCG Scheme - The Doctrine of Promissory Estoppel is not applicable in the facts and circumstances of this case because the appellant have admittedly failed to discharge the export obligation as required under the said Notification.
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• Re-export under bond confirmed; rejection of shipping bill conversion request deemed unjustifiable.

  Case-Laws - AT : Conversion of shipping bills - at the relevant time, the bond had not been cancelled by the Department. The fact of re-export under bond is established. - The rejection of the request for conversion is not tenable
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• Consignment Value Rejection Deemed Improper for Not Following Prescribed Rules; Order Ruled Illegal and Arbitrary.

  Case-Laws - AT : Import of consignment of mixed article - rejection of transaction value - Without following the rules in the prescribed manner, the market survey is not sustainable - Further the market inquiry report regarding the price of imported goods has not been provided to the appellant and also there is no mention thereof in the order - he order is patently illegal and arbitrary.
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Service Tax

• Loader Service Classification: Hourly Basis as Hire, Per Metric Ton as Cargo Handling Service.

  Case-Laws - AT : Classification of service - when the loader is provided on per hour basis it would amount to supply of loader on hire, whereas when the charges are made on per metric ton basis, these are the charges for the cargo handling.
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• No service tax on unpaid repair services or spare parts value in maintenance cases.

  Case-Laws - AT : Repair and maintenance services - In the absence of consideration for the service rendered it cannot be argued that the Appellants are liable to pay service tax on such services provided by them. - Service tax cannot be charged on the value of the spare parts used for such repair or maintenance.
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Central Excise

• No Cash Refund for CENVAT Credit on Closure of Manufacturing if Legal Right Not Established.

  Case-Laws - AT : Cash Refund of accumulated CENVAT Credit - closure of manufacturing activity - When right to refund does not accrue under law, claim thereof is inconceivable - refund cannot be granted.
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VAT

• Airguns and Air Pistols Classified as Arms for Taxation, Not Toys; Subject to Arms and Ammunitions Tax Rate.

  Case-Laws - HC : Classification of goods - rate of tax - airgun and airpistol - to be taxed as as “toy excluding electronic toys” or has to be taxed “arms and ammunitions” - the airgun/ airpistol is an arm and to be taxed accordingly.
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Case Laws:

• GST

• 2019 (3) TMI 758
  Input Tax Credit (ITC) - Transitional credit - Whether computers, laptops etc., used by the applicant for providing output service would qualify as inputs for the purpose of availing transitional ITC under Section 140(3) of KSGST Act? - If the goods are physically available as closing stock as on 30th June, 2017, can the applicant avail ITC for the VAT paid? Held that:- In the GST period, the input tax credit of Tax paid on Computers, Laptops etc., can only be claimed as Capital Goods but not as Inputs. - As per Clause (ii) of Section 140(3) of the KSGST Act, 2017, a registered person is eligible for Input Tax credit, if he is also eligible under the KSGST Act, 2017 to claim thc Input Tax credit on such Inputs. Since, the Computers, laptops etc., fail to qualify as Inputs under KSGST Act, 2017 and thereby fail to satisfr the condition set under Clause (ii) of Section 140(3) of the KSGST Act, 2017, hence they are not eligible to claim Input Tax credit under transitional provisions of the VAT paid during the pre-GST period on the computers and laptops etc., physically available on 30th June, 2017 - the Computers, Laptops etc., which were lying in stock as on 30,06.2017 were declared as capital assets prior to GST and used by the appellant for providing output services. Thereby they had no tax liability under the erstwhilc KVAT law. Further, they squarely fall under the definition of Capital Goods under Section 2(19) of the KSGST Act, 2017 and not under Section 2(59) of the KSGST Act, 2017. Hence the relevant transitional provision applicable in the instant case is Section 140(2) of the KSGST Act, 2017 and Section 140(3) Of the KSGST Act cannot be invoked. As per section 140(2) of the KSGST Act 2017, a registered person, other than a person opting to pay under Section 10, shall be entitled to take, in his electronic credit ledger, credit Of un-availed input tax credit in respect Of capital goods, not carried forward in a return, furnished under the existing law by him, for the period ending with the day immediately preceding the appointed day in such manner as may be prescribed. Proviso to the said sub-section of the Kerala SGST Act stipulates that the registered person shall not be allowed to take credit unless such credit was admissible as input tax credit under the existing law and is also admissible as input tax credit under the Act. The appellant being a service provider, had no tax liability under the erstwhile KVAT Act, and thereby was not eligible to avail input tax credit on computers and laptops held during the transition period. Hence the transitional input tax credit claim of the Taxpayer in respect of capital goods is not admissible as per the transitional provisions of the KSGST Act, 2017.

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• 2019 (3) TMI 757
  Classification of supply - Composite supply or not - supply of medicines and allied items provided by the hospital through the pharmacy to the in-patients - medicines and allied items provided by the hospital through the pharmacy to the out-patients - taxability. Supply of medicines and allied items provided by the hospital through the pharmacy to the in-patients - Held that:- On analyzing the case sheet and invoices raised in case of an inpatient, it can be seen that during the period of admission in the hospital, the patient is under continuous monitoring of the doctors and nursing staff and administration and dosage of medication is all under the control of the doctor and the nursing staff. The entire treatment protocol is documented and recorded. The invoice/bill raised for the treatment as an inpatient is a single bill Charging for all the facilities/ services utilized for the treatment in the hospital including room rent, nursing care charges, laboratory, consumables, medicines, equipment charges, doctor s fee, etc. Thus, it is clear that in case of an inpatients the hospital has provided a bundle of supplies which is classifiable under h care services. Supply of medicines and allied items provided by the hospital through the pharmacy to the out-patients - Held that:- On analysis of the case sheet and the invoices raised in respect of an outpatient, it can be seen that even though the invoice is named as OP SERVICES-CASH , the invoice is raised only for supply of medicines and no consultation charges are seen raised in the invoice. Thus, in case of outpatient. the doctor s consultation and supply of medicines are not bundled together - In case of outpatients, it is the choice of the patient whether to follow the medical advice given by the doctor or not. Neither the hospital nor the consulting doctors can coerce the patient to follow the medical advice given by the doctor. Thus, in certainty, it can be established that the medical care other than the doctor s consultation is outside the control of the hospital. Neither the consulting doctor nor the hospital has any control on the patienes medical care. In case of outpatients, the health care service provided by the hospital is restricted to the consultation of the doctor. These are not naturally bundled together to be considered as composite supply. Even if the outpatients decide to buy the medicines from the pharmacy run by the hospital, the charges for supply of medicines is billed separately and cannot be considered as composite supply to extend the exemption and hence supply of medicines and allied items to outpatients is liable to GST being a taxable supply. The supply of medicines and allied items to the outpatients through the pharmacy attached to the hospital run by the appellant is taxable under GST.

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• 2019 (3) TMI 756
  Release of confiscated goods with vehicle - liability of transporter / GTA - section 130 of the U.P. Goods and Services Tax Act, 2017 - case of the petitioner is that he is only the owner of the vehicle which he gives to various transporters as per request made by them for transporting their goods and the petitioner himself is not doing any business with respect to the sale and purchase of goods - Held that:- Section 129 and 130 of CA shows that it relates to any person who transports any goods or stores any goods while they are in transit in contravention of the provisions of this Act or Rules made thereunder, all such goods and conveyance used as a means of transport for carrying the said goods and documents relating to such goods and conveyance shall be liable to detention or seizure and after detention or seizure shall be released on conditions as laid down in sub clauses (a), (b) and (c) of Sub Section (1) of Section 129 of Act, 2017 - What is, therefore, noticed is that for the application of Sections 129 and 130 of the Act, 2017 it is immaterial that the person proceeded against is not a registered person or a supplier or a taxable person or is not doing any business as provided in any of the sub sections of Section 2 of the Act, 2017. It is enough that he is a transporter of goods and that the goods are being transported and have been seized in transit and if the charge is made out against the transporter, the respondents can proceed to seize such goods including the conveyance. In the present case what we find is that a show cause notice has been issued to the petitioner on 17.12.2018 and it is always open for the petitioner to file a reply to the same. Therefore, the contention of the petitioner that he is not doing any business in respect of sale or purchase of the goods or is not concerned with the goods as he is a mere transporter and is only providing vehicles for transporting and therefore the impugned notice is bad and without any substance and is rejected. Petition dismissed.

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• 2019 (3) TMI 755
  Extension of time period for filing of GST Tran-1 - transitional credit - transition to GST Regime - Held that:- The respondents are directed to open the portal before 31st of March 2019. In the event they do not do so, they will entertain the GST TRAN-1 of the petitioner manually and pass orders on it after due verification of the credits as claimed by the petitioner. They will also ensure that the petitioner is allowed to pay its taxes on the regular electronic system also which is being maintained for use of the credit likely to be considered for the petitioner - List this matter on 16.04.2019.

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• 2019 (3) TMI 754
  Refund of excess input tax credit - case of petitioner is that they had moved online applications dated 3.9.2018 and 12.9.2018 (Annexures P-5 to P-7, respectively) for the months of July, August and September, 2017, but no action has so far been taken thereon - Held that:- The present petition is disposed off by directing respondent No.4 to take a decision on the applications dated 3.9.2018 and 12.9.2018 (Annexures P-5 to P-7, respectively), moved by the petitioner, in accordance with law by passing a speaking order and after affording an opportunity of hearing to the petitioner within a period of one month from the date of receipt of certified copy of the order.

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• 2019 (3) TMI 753
  Profiteering - supply of Little Stars Dhoti (5-6) - benefit of reduction in the rate of tax at the time of implementation of GST not passed on - contravention of the provisions of Section 171 of CGST Act, 2017 - Held that:- It is apparent from the perusal of the facts of the case that there was no reduction in the rate of tax on the above product w.e.f. 01-07-2017 and that the rate of tax in the Post-GST era has also been increased from CST @ 2% to IGST @ 5%, therefore, the allegation of profiteering is not sustainable in terms of Section 171 of the CGST Act, 2017 as there has been no reduction in the rate of tax. Application dismissed - decided against petitioner.

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• 2019 (3) TMI 752
  Profiteering - supply of Ceramics Glazed Wal Tiles, Printex Crema, PRM MM HSN Code 69072300 - benefit of reduction in the rate of tax not passed on - contravention of the provisions of Section 171 of the CGST Act, 2017 - Held that:- It is apparent from the perusal of the facts of the case that there has been reduction in the rate of tax on the above product from 28% to 18% w.e.f. 15.11.2017 as per the Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017. It is also revealed from the record that the Respondent had not increased the discounted per M2 price of the above product which had remained Rs. 374.74/- before and after the tax reduction, as was evident from both the invoices issued by him before and after the tax reduction and therefore, the benefit of tax reduction has duly been passed on to the customers by the Respondent. The allegation of profiteering is not established against the Respondent in terms of Section 171 of the CGST Act, 2017 as there has been no change in the base price of the product after reduction in the GST rate w.e.f. 15.11.2017 - application dismissed - decided against petitioner.

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• 2019 (3) TMI 751
  Profiteering - supply of Paint (AP Woodtech Wood Stain Walnut 500ml) - reduction in he rate of tax or not - the benefit of reduction in the rate of tax not passed on - contravention of Section 171 of the CGST Act, 2017 - Held that:- The Respondent had maintained the same base price post reduction in the rate of tax w.e.f. 15.11.2017, resulting in reduction in the cum-tax price from Rs. 175.40/- to Rs. 161.70/-. Since the benefit of tax reduction has been passed on by the Respondent by commensurate reduction in his price, therefore, the Respondent cannot be held guilty under Section 171 of the above Act. The Respondent has not contravened the provisions of Section 171 of the CGST Act, 2017 and hence there is no merit in the application filed by the above Applicants and the same is accordingly dismissed - decided against petitioner.

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• Income Tax

• 2019 (3) TMI 750
  Disallowance of exemption u/s. 10B - assessee has not submitted the approval letter for its 100% Export Oriented Undertaking from the “Board” appointed in this behalf by the Central Government in exercise of powers conferred by Section 14 of the Industries (Development and Regulations) Act, 1951 and the Rules made under that Act - HELD THAT:- Special leave petition is dismissed due to low tax effect leaving the question of law open.

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• 2019 (3) TMI 749
  Assessment u/s 153A - no material found in the course of proceedings under Section 132(1) - Held that:- SLP dismissed due to low tax effect.

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• 2019 (3) TMI 748
  Disallowance u/s 80IA(4) - infrastructure development projects for and on behalf of the Government or local authorities - assessee undertaken road development project, for which, it had entered into an agreement with Gujarat State Road Development Corporation which was incorporated by the Government for the special purpose - HELD THAT:- SLP dismissed.

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• 2019 (3) TMI 747
  Deduction u/s 80I - deduction given on profit without reducing the deduction u/s. 80HH - Assessee is entitled to the simultaneous benefit of Section 80I and Section 80HH of the Act. - HELD THAT:- Delay condoned. Leave granted.

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• 2019 (3) TMI 746
  Deemed dividend addition u/s 2(22)(e) - nature of the transaction for refund of the advance amounts received by the assessee from the vendee company of which, he was a director - CIT(A) was satisfied with the explanation and held that the amounts could not be brought to tax under Section 2(22)(e) - ITAT agreed with the view of the AO and set aside the CIT(A) orders HELD THAT:- ITAT elaborately noted the sequence of events as well as the nature of the documents presented during the course of proceedings. It also noticed that according to the prevailing law, the general approach of the Revenue is to exclude a genuine commercial transaction. from the purview of Section 2(22)(e). Having regard to the overall circumstances of the case the ITAT disbelieved the assessee’s explanation concluded it is apparent that Agreement to Sell dated 8/6/2009 and cancellation of such deed by Agreement dated 1/8/2009 for the purchase of property is merely cover up and a camouflage for giving loan to the assessee by the above Company to avoid contravention of the provision of Section 2(22)(e). Assessee also failed to give the adequate evidence and cogent, reliable, and credible evidences about the transaction. CIT(A) has completely brushed aside finding of the A.O. in remand report and the statement of the assessee and further has not applied his mind to find out the true nature of the transaction. This Court is of the opinion that the ITAT’s decision is based upon an independent analysis of the facts. No doubt it differed from the CIT(A)’s view. At the same time all its findings are based upon appreciation of material facts. Its conclusion are a possible view that can be taken by the Tribunal based upon the circumstances. - Decided against assessee.

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• 2019 (3) TMI 745
  “Mark to Market” loss arising on revaluation of forward exchange contract on the closing date of the previous year - whether not a notional loss and therefore allowable? - HELD THAT:- Revenue in support of the Appeal has stated that this issue stands concluded against the Appellant-Revenue and in favour of the Assessee by the decision of this Court in the matter of Commissioner of Income Tax-16 Mumbai v/s. M/s. D Chetan & Co. [2016 (10) TMI 629 - BOMBAY HIGH COURT] and Pr. Commissioner of Income Tax 19 v/s. M/s. Polar Star [2018 (12) TMI 1621 - BOMBAY HIGH COURT]. The question that is raised before us does not give rise to any substantial question of law as the issue sought to be raised here is already concluded. Hence not entertained. Question arising from the order of the Tribunal - Non taking cognizance of non-uniformity of rates of revaluation adopted for various debtors and also not following the AS-11 categorical guidance on adopting closing rate of currency - HELD THAT:- It is an undisputed position that this question does not arise from the order of the Tribunal. The impugned order of the Tribunal does not make any mention of any submission being made on behalf of the Appellant – Revenue with regard to the issue sought to be raised here. Hence not entertained. No substantial question of law.

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• 2019 (3) TMI 744
  Levy of penalty u/s. 271(1)(c) - addition on account of difference in sale consideration - substratum for levy of penalty eroded - HELD THAT:- AO had levied penalty u/s. 271(1)(c) in respect of addition on account of difference in sale consideration. In First Appeal against the said addition, the CIT (Appeals) deleted the addition on merits and allowed the appeal of assessee. Since, the substratum for levy of penalty has eroded, the penalty does not survive. In any case the Commissioner of Income Tax (Appeals) had dismissed the appeal of assessee for want of prosecution in limine, the impugned order is unsustainable in eye of law. Thus, impugned order is liable to be quashed on both the counts. - Decided in favour of assessee.

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• 2019 (3) TMI 743
  Proceeding in case of non-operational/ dissolved / struck off company - Appeal filed by Department before High Court- - HELD THAT:- The appeal is allowed in terms of the signed Reportable judgment.

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• 2019 (3) TMI 742
  Notice issued for consideration of following substantial question of law : “Whether the Hon’ble High Court and the ITAT under the facts and circumstances of the case have erred in holding that the education cess is disallowable expenditure u/s 40(a)(ii)?"

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• 2019 (3) TMI 741
  Reopening of assessment u/s 147 - Original assessment u/s 143(3) - full and material disclosure - so called fresh material is nothing but what existed on the record and was a subject matter of query by the AO - Second chance to revenue is not permissible based on same material - deemed dividend addition - HELD THAT:- SLP dismissed.

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• 2019 (3) TMI 740
  Interest on non-performing assets - Accrual of income - real income theory - taxable on accrual basis looking to the guidelines of the Reserve Bank of India - appellant is a non-banking institution engaged in providing financial assistance to its customers - HELD THAT:- The appellant-assessee acting under the directives of the Reserve Bank of India with regard to prudential norms set out, taxing interest on NPA, therefore, cannot be justified on the real income theory. Followed decision in the case of Shri Mahila Sewa Sahakari Bank Ltd [2016 (8) TMI 377 - GUJARAT HIGH COURT] The substantial question of law is answered in favour of the appellant-assessee.

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• 2019 (3) TMI 739
  Condonation of delay - reasons for delay - Assessee, urged before us that on account of floods in Chennai and non-availability of Finance Manager concerned and also as records and documents of the appellant company could not be traced easily, a delay of 87 days had occurred in filing the appeal before the Tribunal due to a bonafide and reasonable cause and, as such, the learned Tribunal ought to have decided the appeal on merits - different bench of the Tribunal remitted the matter back to the A) for AY 2014-2015 for consideration in similar circumstances - HELD THAT - Since the matter already stands remitted back to the Assessing Officer for Assessment Year 2014-2015, we are inclined to restore the matter back to the learned Assessing Officer for the present Assessment Year 2012-2013 as well, so that the Assessee can be heard before the Assessing Authority on merits de novo with regard to both Assessment Years and parity.

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• 2019 (3) TMI 738
  TP adjustment - Direction in remand proceeding - Customs Duty Adjustment, Air Freight Adjustment and Foreign Exchange Adjustment considered for determining the Arms Length Price (ALP) - remand for enquiry by TPO - HELD THAT:- though the issue relating to Customs Duty Adjustment, Air Freight Adjustment and Foreign Exchange Adjustment were directed to be reconsidered by the Transfer Pricing Officer for determining the Arms Length Price (ALP) in the case of the Assessee, the Tribunal has, in fact, fixed how such adjustments have to be made or not to be made. This hardly leaves any discretion to deal with these issues afresh with the Transfer Pricing Officer, since the Transfer Pricing Officer, being the lower Authority, would be bound by the observations and findings of the Tribunal. This, in our opinion, frustrates the very purpose of remand for enquiry by the Transfer Pricing Officer into these three issues by the Transfer Pricing Officer, as directed by the Tribunal itself. Therefore, we allow the present appeal of the Revenue and while upholding the remand order passed by the Tribunal, we observe that the Transfer Pricing Officer will pass such fresh order in pursuance of the remand directions, uninfluenced by the observations of the Tribunal, on the merits of the case.

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• 2019 (3) TMI 737
  House property income - accrual of income - compensation amount payable to the assessee till the ‘Rent commencement date’ - assessee had entered into a lease agreement - DR argued that the compensation shall take the character of rental income - “rent commencement date”, which is determined as the next date to the day when the approval from Ministry of Environment & Forests (MOEF) and Occupancy Certificate (OC) from Municipal Corporation of Greater Mumbai (MCGM) are received - HELD THAT:- The compensation amount so paid shall be kept as ‘advance’ towards the compensation until the procurement of the said OC by the Lessor. These aspects were made clear further in clause 5.6 of the Supplementary Agreement, wherein it is stated that the payments made towards compensation as advance shall be treated and appropriated by the lessor as compensation from lessee for occupation of the property only upon procurement of the OC from MCGM. The assessee has not received approval from MOEF and OC from MCGM during the year under consideration. Further, during the year under consideration, the assessee has also not received any payment towards the compensation also. Hence we are of the view that the compensation amount or lease amount has not accrued to the assessee during the year under consideration, since the accrual of the same would depend upon the receipt of approvals referred above. Hence the ratio of the order passed by the Co-ordinate Bench in AY. 2013-14 in the assessee’s own case [2019 (1) TMI 197 - ITAT MUMBAI] shall continue to apply during the year under consideration also. Accordingly, we are of the view that the order passed by the Ld. CIT(A) does not call for any interference. - Decided against revenue.

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• 2019 (3) TMI 736
  Penalty u/s 271(1)(c) - disallowance of payment made to employees under voluntary separation scheme (VSS) - only 1/5th of such expenditure is allowable in current year - existence of two views - AO is not sure whether the penalty is levied for concealment of income or furnishing of the inaccurate particulars of income - HELD THAT:- There are 2 views on the allowability of the above sum on which penalty has been levied. We also noted that the AO is also not sure whether the penalty is levied for furnishing of inaccurate particulars of income or concealment of income. In view of the appreciation of the complete facts, order of the coordinate bench in case of the assessee for earlier years on the quantum proceedings as well as on the penalty proceedings [2015 (10) TMI 2239 - ITAT DELHI]& [2013 (12) TMI 297 - ITAT DELHI], we are of the opinion that on the above disallowance penalty cannot be levied as there are conceivably 2 opinions on the same set of facts. CIT appeal has deleted the penalty primarily on this reason. On reading the penalty order itself it is found that the AO is not sure whether the penalty is levied for concealment of income or furnishing of the inaccurate particulars of income. Therefore, on this ground also the penalty is not sustainable. Accordingly we confirm the order of the learned CIT – A deleting the penalty on account of payment made to employees under voluntary separation scheme - Decided in favour of assessee.

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• 2019 (3) TMI 735
  MAT computation - enhancement of book profit related to depreciation on revalued assets u/s 115JA - HELD THAT:- Issue of revaluation reserve for purpose of section 115JA of act raised in these grounds of appeal is not arising out of order of learned assessing officer or learned CIT – A and thus this ground of appeal has wrongly been taken by learned assessing officer. On careful perusal of assessment order it is apparent that AO has himself accepted that revaluation reserve being credited to profit and loss account does not warrant any further adjustments. It is also noted that amount as mentioned in ground of appeal number 1 relates to amalgamation adjustment reserve that has been dealt with in ground number 7 of appeal of learned assessing officer. The ld DR also did not show us how this ground is arising from order of lower authorities. Therefore, it is apparent that this ground has been taken under some misunderstanding or erroneously. Deduction u/s 80-IA - book profit computation u/s 115JA - profit derived from industrial undertaking engaged in business of generation of distribution of power - generated power used for internal consumption of its existing unit and not distributed for purposes of business - net profit shown in profit and loss account distribution - HELD THAT:- The first ground of rejection of claim of assessee is that diesel-generating sets are imported where invoices show that these were imported for home consumption. The learned assessing officer has noted that the marking show that goods are not used for purpose of business. There is a clear misunderstanding on part of learned AO in holding that when custom authorities have marked for home consumption means that they are not to be used for purpose of business. The only meaning of that particular Mark is that goods are to be used for consumption in Indian Territory. Therefore, allegation of learned assessing officer that Gen sets imported for home consumption and therefore deduction under section 80 IA of income tax act is not allowable on it is devoid of any merit. Further, with respect to power generation unit not being a separate unit and further power is not supplied to public but it is for captive consumption and therefore no deduction under section 80 IA of income tax act is allowable is also now judicially settled by decision of honourable Delhi High Court in case of CIT vs. Orient Abrasives Ltd [2014 (8) TMI 558 - DELHI HIGH COURT] wherein honourable Delhi High Court has held that “profit and gain” from captive consumption of electricity supplied from generator set and which cannot be sold to any third person will qualify for deduction under Section 80-IA. Transfer from revaluation reserve while computing book profit under section 115JA - sum represented difference between net asset received on amalgamation of company and consideration in form of equity shares issued to equity share holders of another company, therefore above difference in amount was directly credited to amalgamation reserve in terms of „purchase method of accounting prescribed under accounting standard 14 issued by ICAI - HELD THAT:- According to explanation to section 115JA,(b) amount carried to any reserve by whatever name is required to be added to profit shown in profit and loss account. Here assessee has not carried to any reserve from sum credited in profit and loss account. The above sum has been credited in accordance with accounting standard issued by Inst of chartered accountants of India, which conforms to profit and loss prepared by assessee according to schedule VI of companies act. Therefore, we do not find any infirmity in order of learned CIT – A in directing learned assessing officer to not to increase book profit by amalgamation reserve credited by assessee directly to balance sheet of assessee company. Interest on borrowed capital utilized in expansion and modification projects as per explanation 8 to section 43 (1) - HELD THAT:- Issue decided in favour of assessee for assessment year 98-99 wherein on identical circumstances, in facts, order of learned CIT – A deleting above addition/disallowance was upheld. Issue squarely covered in favour of assessee by decision in case of Deputy Commissioner Of Income Tax Vs Core Healthcare Limited [2008 (2) TMI 8 - SUPREME COURT OF INDIA], CIT vs. Arvind Polycot limited [2008 (2) TMI 9 - SUPREME COURT OF INDIA] and CIT vs. Sri Rama multi Tech Ltd. [2017 (4) TMI 669 - SUPREME COURT]. Nature of expenditure - installation of software system - revenue or capital expenditure - HELD THAT:- In present case, it is apparent that assessee has been granted license for a particular period of enterprise resource planning software. In view of this, there is no outright purchase in case of assessee. As decided in assessee's own case for assessment year 98 – 99 CIT – A upheld holding that above expenditure on software system is revenue in nature. Characterization of interest income - correct head of income - business income or income from other sources - HELD THAT:- The interest income earned by assessee is on bank interest as well as on interoperates deposits. The interest was also received on income tax refund. Looking to nature of interest income shown by assessee, no reason to sustain order of learned CIT appeal. In several decisions cited before us DR, it is apparent that earning of interest income is not business of assessee, and also above income is also not inextricably linked with business of assessee but is altogether a different source of income which should be taxed under income from other sources only. In view of this with respect to interest income, we hold that it is chargeable to tax as income from other sources and not as business income. ground revenue is allowed. Service charges received by assessee - HELD THAT:- As relying on assessee's own case it is business income as it is inextricably linked with business of assessee. Disallowance of books and periodical expenses - allowable revenue expenditure or not - HELD THAT:- identical issue has been decided in case of assessee for assessment year 98 – 99 in assessee s own case wherein it has been held that expenditure incurred by assessee on purchase of books and journals cannot be held to be a capital expenditure. There is no change in facts and circumstances of case, nature of expenditure is also same, no contrary judicial precedent cited, therefore, following decision of coordinate bench, and hence, we dismiss ground of appeal of revenue. Disallowance of contribution to provident fund - Due date for payment of provident fund contribution - HELD THAT:- Salary for a calendar month is paid by 10th of succeeding months and due date for payment of provident fund contribution would therefore be 15th of month following. The assessee has stated that it has made all payments within due dates prescribed as per provident fund laws including grace period provided therein. DR did not controvert above facts. On verification of dates mentioned in assessment order also, we also found that assessee has disposed of its liability within due date prescribed under provident fund laws as well as grace period. Accordingly, all provident fund dues have been deposited in time allowed, CIT (A) correctly deleted disallowance. Prior period expenses allowability - CIT- A allowed claim of assessee holding that it is not a prior period expenditure as it has been crystallized during year - HELD THAT:- There has to be a categorical answer from assessee that disclosure made by it under companies act is erroneous and it is to be demonstrated by reliable evidences. Further, we also do not accept argument of assessee that auditors have certified prior period expenditure. This is devoid of any merit as balance sheet and notes on accounts according to companies act are prepared by assessee , auditor merely expresses an opinion on that. Therefore assessee itself has classified same is a prior period expenditure while preparing its balance sheet and now it is taking a different stand for purpose of computation of its income under income tax act. In view of this, whole issue is set aside back to file of learned assessing officer with a direction to assessee to show that above expenditure is not a prior period expenditure and has been crystallized during year only. If assessee demonstrates that, addition is required to be deleted. Disallowance u/s 35 - AO has himself held that expenditure incurred u/s 35 was an allowable expenditure, but inadvertently same was not reduced from assessed income - HELD THAT:- Assessee is eligible for deduction of INR 8 184685 u/s 35 of income tax act. Even otherwise learned CIT – A has directed assessing officer to rectify mistake. Therefore, revenue cannot be said to be aggrieved by order of learned CIT – A if above mistake stated by assessee as well as by learned CIT appeal is correct. Employees contribution and employers contribution respectively towards provident fund allegedly not paid within stipulated period - HELD THAT:- The fact shows that salary for a calendar month is paid by 10th of succeeding month. The due date for payment of PF contributions would, therefore, be 15th of month following. In that view of matter, payments which have been disallowed by AO have been made within due dates (including grace period) and therefore, disallowance under section 43B and/or section 2(24)(x) read with section 36(v)(a) of Act has rightly been deleted by CIT(A). In any case, payment of employers' and employees' contribution was made before due date of filing of return. In that view of matter, there should be no disallowance under section 43B . Disallowance on account of proportionate interest on interest free advances given to sister concerns - HELD THAT:- CIT A in deleting above disallowance where assessee has excess of non-interest-bearing funds in form of share capital and free reserve then amount advanced allegedly without charging interest, then presumption arises in favour of assessee that above advances been given out of interest free funds and not interest-bearing funds, unless learned assessing officer prove contrary. Such view is also supported by plethora of judicial precedents. Where an assessee maintains a composite account where all receipts of business are banked and all outgoings are debited, interest free advances / non-business expenses should be presumed to have come out of profits, where profit for year exceeds interest free advances / non-business expenses. Interest paid on loans utilized in expansion and modernization of existing business - HELD THAT:- Proviso inserted in section 36(1)(iii) of Act by Finance Act, 2003 would apply with effect from 1-4-2004. As held that section 36(1)(iii) is a code by itself and hence it is attracted when assessee borrows capital for purpose of his business. It does not matter whether capital is borrowed in order to acquire a revenue asset or a capital asset since transaction of borrowing is not same as transaction of investment into a revenue or capital asset. As in assessee's own case for assessment year 2000-01 vide ground of AO's appeal, following decision of coordinate bench in assessee's own case for assessment year 1998-99, we also allow claim of assessee and confirmed order of learned CIT – A. Nature of expenditure - consultancy fees paid - revenue or capital expenditure - HELD THAT:- The above expenditure is not capital expenditure but revenue expenditure as it helps assessee in maintaining its corporate image to outside world. The corporate image of assessee is created by product of assessee and these products are to be demonstrated to outside world in a proper manner by whole organization. Therefore, identity or image of assessee is not distorted to various stakeholders. In view of this, we do not find that these expenditure are creating any benefit of enduring nature to assessee. In fact, they are standard operating procedure of communicating with outside world. Accordingly we hold that these are revenue expenditure. Upfront fees for loans swaps and interest arbitrage expenses - revenue or capital expenditure - HELD THAT:- As in case of CIT vs. Meenakshi Mills Ltd. [2006 (9) TMI 139 - MADRAS HIGH COURT] held that upfront fees paid by assessee to bank while availing loan cannot be construed as a capital expenditure and allowed same as revenue expenditure. In view of this, we do not find any infirmity in order of learned CIT – A in allowing claim of assessee as revenue expenditure. MAT computation - how to calculate profit u/s 80 HHC while computing book profit? - HELD THAT:- Hon ble Supreme Court in case of CIT vs. Punjab Stainless Steel Industries [2014 (5) TMI 238 - SUPREME COURT] wherein in context of section 80HHC of Act, it was held that “ sale proceeds of scrap cannot be included in the term 'turnover' for reason that respondent-unit is engaged primarily in manufacturing and selling of steel utensils and not scrap of steel.”- Applying this analogy to facts of present case, miscellaneous receipts should not be added to total turnover. In view of above judicial precedent it is held that assessee is directed to submit computation of income under section 80 HHC which is required to be reduced from book profit to be computed under section 115JB of Income Tax Act before learned Assessing Officer. The learned AO after examination, in view of above judicial precedents, allow claim of assessee, if it is found in accordance with law. Club expenses are also PO of business expenditure - club expenses are in nature of business expenditure and therefore allowable to appellant See CIT VERSUS UNITED GLASS MFG CO. LTD. [2012 (9) TMI 914 - SUPREME COURT] Disallowance of notional interest on refundable deposits made to club - HELD THAT:- As noted that assessee has sufficient own non-interest bearing funds of Rs. 122 crores and therefore it cannot be held that such interest expenses can be disallowed. Even otherwise when we have held that club expenditure are expenditure incurred by assessee only an extra relief for purpose of business natural corollary will also states that deposit made by assessee with club is also for purposes of business. Claim u/s 35D - HELD THAT:- On careful analysis of provisions of section 35D of income tax act, it is apparent that such expenditure are allowed in case of commencement of business of assessee in connection with extension of his undertaking or in connection of setting up of a unit. There is no provision that expenses are allowable in case of amalgamation. Argument of assessee that in earlier years if same has been allowed it should be allowed in this year too, it needs to be rejected. To perpetuate an error is no heroism, to rectify it is the compulsion of judicial conscience. Treatment given to long-term capital gain arising on relinquishment of rights in residential flat as income from other sources - HELD THAT:- right to obtain the conveyance of 65 flats was not identified to any property and therefore when the original property does not exist, how does the right to obtain the possession of that property can be said to be a capital asset. Accordingly ground of the appeal is dismissed. claims received from insurance companies in respect of raw materials, stocks, finished goods, fixed assets, vehicles and from Railways - HELD THAT:- Insurance companies have surveyors whose primary work is to review claims made and assess losses. Surveyors in insurance industry are domain experts for particular area- be it fire, loss in transit or loss due to any other natural calamity. The Ld. AO does not have any mechanism to estimate it. Receipt of sums from insurance companies is sufficient proof of having incurred losses. Nevertheless, claims received from insurance companies because of raw materials, stocks, unfinished goods, fixed assets, vehicles and from railways was credited to P s addition is based on mere suspicion and surmises therefore have no legal or factual basis. Therefore, we upheld the order of the ld CIT A. Quantum of claim of deduction u/s 80 HHC - claim restricted being 90% of impugned export incentives from profits and gains of business - HELD THAT:- Issue is squarely covered in favour of assessee by decision of honourable Supreme Court in Avani exports [2015 (4) TMI 193 - SUPREME COURT]. In view of above facts, we direct assessee to file revised computation of deduction allowable to it before learned AO, who after verification allow claim of assessee, if found in accordance with law. Accordingly, ground of appeal of assessee is allowed. Disallowance of expenditure u/s 14A - claim of assessee is that assessee has sufficient own funds for investment in exempt income generating investments - HELD THAT:- On careful examination of the disallowance made by the learned assessing officer it was found that the learned AO has not recorded the satisfaction on examination of the books of accounts of the assessee that assessee has incurred expenditure for earning of exempt income and the explanation given by the assessee is incorrect. Such is the mandate of the decision of MAXOPP INVESTMENT LTD [2018 (3) TMI 805 - SUPREME COURT OF INDIA]. In view of this, the disallowance made by the learned assessing officer cannot be sustained. Nature of receipt - receivable towards breach of contract for setting up of the plant - revenue or capital receipt - Ranbaxy did not place orders for manufacturing of the minimum quantities and therefore assessee reached on a settlement agreement according to which it was to receive INR 72173000 from that company - HELD THAT:- assessing officer has correctly not entertained the claim of the assessee as assessee neither filed the revised return nor made the claim in the original return of income. He followed the mandate of the honourable Supreme Court. However, such mandate did not apply to the first appellate authority. Therefore the learned CIT – A should have entertained claim of the assessee and examined the same on the merits of the case. The learned CIT – A has not examined such claim. Therefore, in the interest of justice, the ground is set aside to the file of the learned CIT – A to examine the claim of the assessee and to adjudicate whether the above receipt is revenue receipt or capital receipt.

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• 2019 (3) TMI 734
  Penalty u/s 271(1)(c) - additional income was declared in survey u/s 133A - assessee had disclosed additional income on the basis of alleged receipts which were not reflected in the books of accounts - date of filing of return u/s 139(1) had not expired - proof of “concealment of income” and “furnishing of inaccurate particulars of income” - HELD THAT:- Additional income was offered by the assessee in his return of income and the same has been accepted by the AO in the assessment framed u/s 143(3) of the Act. CIT(A) while deleting the penalty has noted that on the date of survey, the date of filing of return u/s 139(1) had not expired and assessee had also not filed his return of income upto the date of survey. The fact of “concealment of income” and “furnishing of inaccurate particulars of income” can be established only with reference to the income declared in the return of income. In the present case, since the income declared by the assessee in the return of income has been accepted, there cannot be the case of “concealing the particulars of income” or “furnishing the inaccurate particulars of income”. The case of Dr. Ranjana, the wife of assessee, penalty levied u/s 271(1)(c) on the additional income declared out of the same survey was deleted by the Co-ordinate Bench of the Tribunal [2019 (2) TMI 352 - ITAT PUNE]. - Decided against revenue.

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• 2019 (3) TMI 733
  Penalty u/s 271(1)(c) - disallowance depreciation on building let out - Assessee accepted its mistake and agreed for the disallowance depreciation - revised subsequent year return also - bonafide mistake - HELD THAT:- Undisputedly, the assessee has wrongly claimed depreciation on the building let out by it. The facts on record reveal that similar claim was made by the assessee in preceding assessment years as well. Further, it is seen from the materials placed before us, the return of income filed by the assessee for assessment year 2014–15 claiming depreciation was subsequently revised disallowing the depreciation. Further, in the return of income filed for the assessment year 2015–16, the assessee has not claimed any depreciation. Keeping in view the aforesaid facts, assessee’s explanation that depreciation claimed in the impugned assessment year was due to an inadvertent and bonafide mistake is acceptable. That being the case, we are inclined to delete the penalty imposed under section 271(1)(c) - Decided in favour of assessee.

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• 2019 (3) TMI 732
  Stay of demand - recovery proceeding - Assessee referring to the cash flow for the next three month and six months submitted that the net cash flow from operations will be at meagre and therefore the assessee is really in short of funds for making full payment of outstanding demand - HELD THAT:- Considering the submissions of both the parties and taking the financial conditions and the issue in appeal into consideration, we grant stay of outstanding demand for the A.Y. 2014-15 for a period of 180 days or till the disposal of appeal whichever is earlier subject to payment of 15% of the outstanding demand on or before 31st March 2019. Registry is directed to fix the appeal for hearing on 09th April, 2019 along with the appeals for the A.Y. 2012-13 and A.Y. 2013-14. We make it clear that the stay granted by this order gets vacated in the event of the assessee seeking adjournment without just and reasonable cause.

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• 2019 (3) TMI 731
  Interest received on compensation or enhanced compensation amount u/s 28 of the Land Acquisition Act - Income from other sources or Capital gain as exempt u/s 10(37) - Characterization of income - method of accounting followed by the assessee - refund of tds - HELD THAT:- In the case of Ghanshyam [2009 (7) TMI 12 - SUPREME COURT] in unequivocal terms that the additional amount u/s 23(1A), solatium under section 23(2) and interest on excess compensation u/s 28 of the Land Acquisition Act form part of enhanced compensation u/s 45(5)(b) and, therefore, is subject to tax u/s 45(5) in the year of receipt. No contrary view is taken by the Supreme Court in the subsequent judgments and as on the date, law is fairly settled that the amount of interest received u/s 28 of the land Acquisition Act is in the nature of capital gain. In the case of Hari Singh [2017 (11) TMI 923 - SUPREME COURT] while dealing with the similar question under identical set of facts while setting aside the matter to the file of the AO to examine the facts of the case and to apply the law as contained in the Income-tax Act, Hon’ble Supreme Court specifically directs that in case the learned AO finds that the compensation was received in respect of the agricultural land, the tax deposited with the Income-tax Department shall be refunded to the assessee. It does not admit of any doubt as to the nature of amount by way of interest u/s 28 of the Land Acquisition Act in the hands of the assessee or the applicability of the Income-tax Act to sch amount. We, therefore, do not have any doubt in our mind as to the law in this aspect and while respectfully following the ratio laid down by the Hon’ble Supreme Court in the case of Ghanshyam (supra) and Hari Singh (supra) above, direct the ld. AO to refund the TDS amount that was deducted on account of the enhanced compensation. With these directions, we allow the appeal of the assessee. - Decided in favour of assessee.

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• 2019 (3) TMI 730
  Condonation of delay - appeal filled u/s 147/143(3) and 271(1))(c) before the CIT(A) with the delay - reasonable cause for delay - HELD THAT:- As regards the delay of 7 months and 13 days in filing the appeal against the order of the AO u/s 147/143(3), an application seeking condonation of the said delay was filed by the assessee stating that he was ill for a prolonged period due to sudden demise of his mother which made him confused and hopeless. This reason given by the assessee was duly supported by a medical certificate indicating that the assessee was disturbed by the death of his mother which had caused distress. It is well settled that the term “sufficient causes” is to be construed liberally in order to advance the cause of substantial justice and not strictly to defeat the purpose. When the reason of prolonged illness given by the assessee for the delay of 7 months and 13 days in filing his appeal before the Ld. CIT(A) was duly supported by medical certificate indicating the disturbance caused to the assessee by the death of his mother as well as his distress, we are of the view that it constituted a sufficient cause and the Ld. CIT(A) ought to have condoned the said delay. In that view of the matter, we set aside the impugned order of the Ld. CIT(A) dated 29.06.2016 and remit the matter back to him for disposing of the appeal of the assessee against the order passed by the AO u/s 147/143(3) on merit after giving the assessee proper and sufficient opportunity of being heard. Rectification order of the AO u/s 154 - no proper and sufficient opportunity was given to assessee - HELD THAT:- The issue involved therein relating to charging of interest is consequential to the issue involved in the appeal of the assessee filed against the order of the AO u/s 147/143(3). The main grievance of the assessee on this issue is that no proper and sufficient opportunity was given to him either by the AO or by the CIT(A) before making the rectification on the issue of interest. We, therefore, set aside the impugned order passed by the Ld. CIT(A) on 21.06.2016 and remit the matter back to him for disposing of the appeal of the assessee afresh after giving proper and sufficient opportunity of being heard.

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• 2019 (3) TMI 729
  Penalty u/s 271(1)(c) - bonafide belief - Taxability of capital gain arises on sale of land - claim of deduction u/s 54F against the capital gain - HELD THAT:- As not in dispute that on sale of land to the developer, the assessee has not received any monetary consideration. Rather, as per agreement with the developer, the assessee was to receive constructed area in lieu of the land sold. Therefore, the explanation of the assessee that in absence of any monetary consideration she was under a bonafide belief that no capital gain arises on sale of land, is acceptable and benefit of doubt can be given to the assessee. Also in Gumanmal Jain [2017 (3) TMI 394 - MADRAS HIGH COURT] held that if under a development agreement the assessee receives several flats constructed on the same piece of land, the assessee would be eligible to avail deduction under section 54F of the Act. Thus, as per the ratio laid down in the aforesaid decision, the assessee would have been eligible to claim deduction under section 54F of the Act against the capital gain. Therefore, merely because the assessee agreed for the addition of capital gain, the provisions of section 271(1)(c) of the Act do not get attracted automatically. - decided in favour of assessee

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• 2019 (3) TMI 728
  Penalty u/s 271(1)(c) - Disclosure of relevant facts - 1/5th ROC expenditure allowable u/s 35D - notice not scored off the specific charge - HELD THAT:- A proportional deduction has been given a statutory recognition. The preliminary expenses permissible for amortization contemplated by the statute are for expenditure in connection with preparation of feasibility report; preparation of project report; conducting Mark market survey etc; legal charges for drafting any agreement; and in case the assessee is a company then the charges for drafting the Memorandum and Articles of Association of the company; printing of the Memorandum and Articles of Association; fees for registering the company and the provisions of the companies act 1956 (now companies act 2013) and expenditure in connection with the issue for public subscription etc are also permissible for claiming amortization in terms of the statutory limit. Admittedly in the facts the present case all necessary details were made available by the assessee the mere fact that the addition made in the course of assessment proceedings in the peculiar facts of the present case was not challenged in appeal by itself is neither here nor there. Satisfied by the explanation filed after giving our due consideration to the material available on record and the statutory provisions relying upon the proposition of law as laid down by the Apex court in the case of Reliance Petro products private limited [2010 (3) TMI 80 - SUPREME COURT] the impugned order is set aside and the penalty is directed to be quashed - Decided in favour of assessee.

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• 2019 (3) TMI 727
  Bogus purchases - Hawala transactions - addition @ 20% or 15% - proof of genuineness of the transactions by providing identity of the parties, PAN details, return of income as well as other detail - assessee submitted that addition to the extent 20% of bogus purchases should be made in conformity with the previous years - HELD THAT:- We find that various scenarios of bogus purchase issue was adjudicated in series of decisions by the Pune Benches of Tribunal with lead order in M/s. Chhabi Electricals Pvt. Ltd. Vs. DCIT [2017 (6) TMI 514 - ITAT PUNE] as upheld the addition of 10% of the bogus purchases over and above the GP shown by assessee. Thus we direct 10% of the bogus purchases over and above GP percentage shown by the assessee to be added as bogus purchases. Hence, grounds raised by the assessee are partly allowed.

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• 2019 (3) TMI 726
  Accrual of income - accrued interest on NPA's as per section 43D r.w.r 6EA - addition of interest on NPA when the said interest has accrued to the bank as per the mercantile system of accounting followed by it - method of accounting - HELD THAT:- We have perused the case record and heard the submissions of the Ld. DR . We find that the decision of the Ld. CIT(Appeals) in this case is founded on the basis of assessee’s own case for assessment years 2009-10 and 2010- 11 which has been decided in favour of the assessee by Co-ordinate Bench of the Tribunal, Pune relying upon the decision of M/s. Deogiri Nagari Sahakari Bank [2015 (1) TMI 1218 - BOMBAY HIGH COURT]. Accordingly, we do not find any infirmity in the findings of the Ld.CIT(Appeals) which is, therefore, upheld. Hence, grounds raised by the Revenue are dismissed.

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• 2019 (3) TMI 725
  Penalty u/s 271(1)(c) - bonafide belief - addition made by restricting its claim of deduction u/s 80IC to 25% of the eligible profits as against 100% claimed on account of substantial expansion - HELD THAT:- Levy of penalty on account of restriction of claim of deduction u/s 80IC to 25% of the eligible profit is as against 100% claimed by the assessee beyond a period of five years, claimed on account of substantial expansion carried out, has been decided in favour of the assessee in the case of Hycron Electronics [2015 (10) TMI 2752 - ITAT CHANDIGARH) and M/s Quixotic Healthcare [2019 (1) TMI 1055 - ITAT CHANDIGARH] holding that this claim of the assessee was based on a bonafide belief. The I.T.A.T. held that differing orders passed by the revenue authorities, appellate authorities, the High Court and Supreme Court on this issue lend credence to the fact that the belief of the assessee was a bonafide belief. Since the issue involved in the present case is identical, the decision rendered by the I.T.A.T. in the aforesaid cases is squarely applied to the present case, also following which we delete the penalty levied u/s 271(1)(c). We, therefore, uphold the order of the CIT(A) in deleting the penalty levied.- Decided against revenue

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• 2019 (3) TMI 724
  Nature of expenditure - Product Design Development expenditure - revenue or capital expenditure - whether expenditure definitely resulted in enduring benefit to the assessee? - HELD THAT:- The undisputed fact that emerges from the record is that assessee had incurred expenditure towards product development. The assessee is engaged in manufacturing of components for Automobile industry that is highly competitive for which continuous research and development is imperative. It is not the case of Revenue that assessee has incurred expenditure for development of a new product or new line of business. The expenditure has been incurred by assessee to improve the existing products. As relying on BEHR INDIA LIMITED case [2017 (4) TMI 1261 - ITAT PUNE] no infirmity in the decision of CIT(A) in holding the expenditure on product development on revenue account. - decided against revenue.

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• 2019 (3) TMI 723
  Disallowance u/s.14A - restricting claim proportionate to exempt income as Rule 8D has no such provision for proportionate disallowance - HELD THAT:- CIT(Appeals) was of the view that the total expenditure debited to profit and loss account is incurred by the assessee in relation to exempt income and also taxable income as well. Therefore, it is more appropriate to restrict the disallowance u/s.14A of the Act proportionate to the exempt income. Thus, disallowance on this account would be the expenditure already disallowed by the assessee in the return of income which is directly relatable to the exempt income and the disallowance out of the balance expenditure in proportion of the exempt income to the total income. The Assessing Officer was directed to work out the disallowance accordingly. This issue needs further verification and therefore, we set aside the order of Ld.CIT(Appeals) and restore this issue back to his file to adjudicate this issue afresh Disallowance u/s.80G - renewal application unanswered - Ahwini Rural Cancer Research & Relief Society had received its earlier recognitions u/s.80G from time to time and the last recognition granted was for the period 01.04.2006 to 31.03.2009 - HELD THAT:- We find that in the assessment order dated 03.03.2014 passed u/s.143(3) of the Act in the case of the Trust i.e. Ashwani Rural Cancer Research & Relief Society, it is clearly stated that the trust is registered u/s.12A of the Act and also have obtained its exemption u/s.80G of the Act. In view of the aforesaid facts and circumstances, relief granted to the assessee by the Ld. CIT(Appeals) is sustained

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• 2019 (3) TMI 722
  Bogus purchases - addition @ 12.5% of the bogus purchases - bogus bills - accommodation entries - no actual delivery of goods - notices issued u/s 133(6) were returned back unserved by the postal authorities - ex-parte order - HELD THAT:- Assessing Officer gathered information from the Investigation Wing that certain Hawala Operators were issuing bogus bills and were giving accommodation entries without actual affecting the delivery of goods. The assessee entered into purchase transactions with respect to nine parties mentioned in the assessment order. The notices issued u/s 133(6) of the Act, to the nine parties from whom the assessee claim to have made purchases, were returned back unserved by the postal authorities. The Sales Tax Department also informed that the impugned parties are bogus billers without effecting the delivery of goods. The assessee was asked to produce the necessary evidence for the purchases made from these parties. It was found that the impugned parties are issuing bogus bills. Thus, the Ld.Assessing Officer made the addition. It is further noted that before the Ld. Assessing Officer, the assessee agreed for addition @12.5% which resulted into the addition. Assessing Officer made independent enquiries and thus the genuineness of the transaction could not be established by the assessee, consequently, we find no infirmity in the order of the Ld. Commissioner of Income Tax (Appeals). It is affirmed. - Decided against assessee.

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• 2019 (3) TMI 721
  Rectification of mistake u/s 254(2) - improvement of case through Misc. Petition - question in appeal relates that no taxes being payable to the Government, the question of delay in recovery of taxes and interest for delay u/s 201(1A) does not arise - In MA claim made that remittances made towards purchase of goods and equipment from Panduit Corporation being supply of goods hence no TDS u/s 195 - assessee in default u/s 201 - HELD THAT:- The plea with regard to the payment in question being for purchase of tools and consequently there would be liability to deduct tax at source on payment made is a plea which is taken by the assessee for the first time in this misc. petition. The only plea taken by the assessee in the proceeding u/s 201(1A) was that Panduit International Corporation suffered losses and they had included the receipts from the assessee in the return of income and, therefore, no disallowance can be made u/s 40(a)(ia) because ultimately no tax are payable and there is no loss to the Revenue. This is clear from the assessee’s submission made before the CIT(A) which is extracted in paragraph 4B of CIT’s common order dated 29/4/2016. It is not open to assessee to improve its case through Misc. Petition. Apart from the above, we are of the view that the averments put forth in the Misc. Petition do not give raise to mistake apparent on the face of the orders of the Tribunal. These are debatable issue on which two views are possible, therefore, the same cannot constitute a mistake apparent on the face of the record.

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• Customs

• 2019 (3) TMI 720
  Release of seized consignments - issuance of ‘Detention Certificate’ for waiver of Demurrage and Container Detention Charges' - Regulation 6(1)(l) of Handling of Cargo in Customs Areas Regulations 2009 - relevant date for the reckoning the date of the imports would be the date of Bill of Lading or Bill of Entry? - Held that:- An identical issue decided in the case of M/S. ROYAL IMPEX VERSUS THE COMMISSIONER OF CUSTOMS, THE ASSISTANT/DEPUTY COMMISSIONER OF CUSTOMS, GROUP -1 [2019 (3) TMI 312 - MADRAS HIGH COURT], where it was held that the Regulation 9.11 of the Foreign Trade Policy specifically states that for the purpose of reckoning the date of import, the relevant date would be the date of Bill of Lading only. The petitioners will remit the entire duty component of the consignments imported by them in cases were such duty is leviable as per paragraph 15(iii) above along with a bank guarantee for the 10% of the invoice value. In cases where the duty impact is neutral, the petitioners shall furnish a bank guarantee for the 10% of the invoice value. Upon satisfaction of the aforesaid conditions, the consignments shall be released forthwith. Waiver of demurrage charges incurred in respect of the detained consignments - Held that:- In the light of Rule 6(l) of the Handling of Cargo in Customs Areas Regulations, 2009, which provides that the Customs Cargo Provider shall not, subject to any other law for the time being in force, charge any rent or demurrage on the goods seized or detained or confiscated by the Superintendent of Customs or Appraiser or Inspector of Customs or Preventive officer or examining officer, as the case may be, there shall be a waiver of demurrage charges. Petition disposed off.

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• 2019 (3) TMI 719
  Provisional release of goods - genuineness of the certificates of origin produced by the petitioner - Held that:- The power under Section 110A of the Customs Act is a discretionary power vested with the adjudicating authority. The petitioner approached this Court challenging the seizure mahazar contending that the same is illegal. In the said Writ Petition, interim direction was issued by giving liberty to the petitioner to approach the authorities under Section 110A of the Act requesting for provisional release of the goods. In terms of Section 110A of the Act, any goods/documents/things seized under Section 110A, may, pending the order of the adjudicating authority be released to the owner on taking a bond from him in the proper form with such security and conditions as the adjudicating authority may require. The scope of judicial review on the exercise of such discretionary power is undoubtedly limited. This Court, in several decisions, have granted orders directing provisional release of the cargo subject to certain conditions. However, there can be no universal rule as to what would be the appropriate directions to be issued while granting provisional release bearing in mind the interest of the stake holders, namely, the importer/exporter and the revenue. Therefore, we have to examine each case on its own merits and come to a correct conclusion - In the instant case, the task of establishing that the petitioner is entitled to clearance of the goods on furnishing of a simple bond is an uphill task. This is so because the petitioner claims the benefit of an exemption notification, whereby the benefit of treaties entered into between the Government of Sri Lanka and the Government of India is pressed into service. If such benefit is extended to the petitioner, then the petitioner would be entitled to clear the goods at concessional/NIL rate of duty. In the case on hand, the petitioner has produced certificates of origin stating that the goods imported are of Sri Lankan origin. However, investigation has commenced on the authenticity of the certificates of origin not at the instance of the DRI or the Customs Department, Chennai, but at the instance of Revenue Intelligence Unit in Sri Lanka. As explained by the Deputy Director, DRI in the affidavit dated 12.02.2019, the communications, which was sent by DRI were only addressed to the competent officer/nodal officer, as notified by the Sri Lankan Authorities. These communications are letters dated 31.10.2018 30.11.2018. However, a reply was sent by the Director of Export, Sri Lankan Customs, dated 06.12.2018 referring to letters of the DRI, dated 31.10.2018 30.11.2018, addressed to the Nodal Officer in Sri Lanka. This according to the DRI is a suo motu communication by the Director of Export, Sri Lankan Customs and it is not in response to a communication sent by DRI to Sri Lankan Customs. It is interesting to note that in the letter dated 06.12.2018, the Director of Exports, Sri Lankan Customs states that the word transshipment used in the earlier e-mail was in inadvertent error - Thus, it is prima facie clear that there has been a communication from the Nodal officer at Sri Lanka that the containers were transshipped and the goods are not of Sri Lankan origin. However, another authority namely, the Director of Export states that this is an inadvertent error. The correctness of the respective stand cannot be tested by us in a Writ proceedings and it is for the investigating authorities to take forward the matter. With regard to the plea raised by the petitioner that they are not in a position to produce the export document from their Sri Lankan Exporter stating that they are not parties to the document is a stand which is not convincing. Admittedly, the transaction runs to several crores of rupees and any prudent businessman, if he is of the firm view that the actions done by him are genuine, he will leave no stone unturned to vindicate his cause. The conditions imposed in the order of the provisional release dated 01.01.2019, under Section 110A does not call for any interference - the petitioner has not been able to make out case of any procedural irregularity or any perversity in the decision. Thus, the condition imposed is not liable to be interfered. Appeal disposed off.

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• 2019 (3) TMI 718
  Rebate claim - DEPB Claim - contention of the respondents was that this amount has been considered as amount deposited during the investigation in the Show Cause Notice at various places and also been considered amount by the Assistant Commissioner (Refund) for appropriating the liability of Customs duty vide his Order dated 29-04-2016, hence they are eligible to get the refund of the said amount. Held that:- The amount of Rs. 1,24,37,308/- has been considered as the amount deposited during investigation by the department in the Show Cause Notice dated 11.11.2004. It is also undisputed that the Assistant Commissioner (Refund) vide his Order dated 29.04.2016 has appropriated the duty amount of Rs. 59,23,397/- out of the said amount of Rs. 1,24,37,308/-. Thus, there is no hesitation in holding that the amount of Rs. 1,24,37,308/- surrendered by the respondents by way of DEPB/Rebate claim has been considered as an amount deposited during investigation by the department itself and there is no dispute over this fact. Also, refund claim cannot be denied merely on the ground that there is no provision under law. Once it is accepted that the benefits surrendered by the respondents are in the nature of amount deposited during investigations, then the refund of the excess amount has to be paid/refunded. Appeal dismissed - decided against Revenue.

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• 2019 (3) TMI 717
  10% EOU - Jurisdiction - whether the adjudicating authority has jurisdiction to examine as to whether appellant has fulfilled export obligation by achieving minimum positive NFE or not under Notification No. 53/97-Cus and 01/95-CE or otherwise? - Held that:- On perusal of N/N. 53/97-Cus. dated 03-Jun-1997, in its entirety, we find that the Central Government grants exemption from customs duty to goods imported into India for the purpose of manufacture of articles for export out of India, or for being used in connection with the production, packing or job work for export of goods or services out of India by 100% an EOU, as notified by the Board under Ministry of Industry, Department of Industrial Policy and promotion, subject to the conditions specified therein. It can be seen from the reproduced final Exit Order, the Development Commissioner has specifically held that appellant has achieved positive NFEP and fulfilled its export obligations as per the prescribed norms. This finding has not been challenged and attained finality. Though the Customs Authorities do not have jurisdiction to decide whether an assessee has fulfilled the export obligation, the Development Commissioner considered the provisions of the policy as applicable during the relevant period as it arrived at a definitive conclusion that the appellant has achieved positive NFEP and fulfilled its export obligations - thus it cannot be held that appellant has violated any of the conditions of the notifications. In any case, the re-computation of the NFEP by the Adjudication Authority is without any jurisdiction, especially when the Development Commissioner has found that minimum NFEP and minimum export obligations met. Even otherwise, minimum NFEP calculated by the Adjudicating Authority after the exports at Gopalapuram Mandal have exculded. We find that the Development Commissioner in final order has considered the proceeds from both the units, the adjudicating authority could not have re-computed the same after excluding the proceeds from one of the unit, this is especially so when development commissioner expressly considered its earlier order dated 03.05.2002 while holding that appellant has achieved net positive NFEP. In the present case, the appellant vide a specific application dated 15.04.2003 has sought exit from EOU scheme stating that it had achieved positive NFEP and minimum export performance as stipulated under the EXIM policy as on date. The Development Commissioner has examined the same and found that the appellant had achieved net positive NFEP and fulfilled the export obligations under the EXIM policy read with the handbook of procedures. Thus the findings of the Development Commissioner that appellant has achieved minimum NFEP and minimum export obligation, is in exercise of his powers under the EXIM Policy and as to be accepted by the authorities. Limitation - Held that:- There could not have been any suppression or mis-statement of facts when it is held that there was no evidence of suppression or mis-statement in the orders dated 12.10.1999 - The Department was in appeal challenging the above order, before the Tribunal. The Tribunal finally upheld the order dated 12.10.1999 dismissed the appeal on 19.01.2004, in such conditions neither the show cause notice nor the Order-in-Original in question shown any different circumstances that demonstrate that the appellant had suppressed any information with a view to evade taxes - The allegation of suppressions with intention to evade duty cannot be upheld in the given facts and circumstances of this case. Appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 716
  Doctrine of Promissory Estoppel - EPCG Scheme - non-fulfillment of export obligation - concessional rate of duty as per N/N. 97/2004 dated 17.9.2004 - Held that:- Admittedly appellants have imported the capital goods at concessional rate of duty under EPCG license as per N/N. 97/2004 Cus. and saved the duty amount of Rs. 4,90,185/-. Further, as per the said Notification, appellant was required to discharge the export obligation but they have failed to comply with the conditions of the Notification as a result of which both the authorities have confirmed the demand and short-levy amounting to Rs. 4,14,274/- along with applicable interest. The Doctrine of Promissory Estoppel is not applicable in the facts and circumstances of this case because the appellant have admittedly failed to discharge the export obligation as required under the said Notification. In the absence of not discharging the export obligation, the Commissioner (A) has rightly confirmed the demand - Appeal dismissed - decided against appellant.

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• 2019 (3) TMI 715
  Transferred Duty Free Import Authorization (DFIA) Scheme - import of plastic granules of various grades - 40/2006-Cus. dt. 1.5.2006 - N/N. Amendment by way of N/N. 17/2009-Cus. dt.1.9.2009 - Held that:- Discernably, the periods of dispute in the appeals are clearly before the amendment caused w.e.f. 19.02.2009 vide Notification No.17/2009-Cus. dt. 19.02.2009. The retrospective application of that amendment, sought to be brought about by the Government by Section 93 (1) of the Finance Act, 2009 w.e.f. 1.5.2006 has been set aside by the Hon’ble High Court. The dispute subsequent to the cut off date of 19.02.2009 will have to be necessarily debated by both sides on merits since same will not be covered by the High Court - impugned order do not sustain - appeal allowed.

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• 2019 (3) TMI 714
  Conversion of shipping bills - whether the Commissioner of Customs is justified by the impugned order-in-original, in denying the request of conversion of Free Shipping Bill to Drawback Shipping Bill? - Held that:- The reasons given by the ld. Commissioner for rejection of conversion of Free Shipping Bill to Drawback Shipping Bill are not tenable as the appellant had re-exported the goods under bond, which was, at the relevant time, alive and has not been examined by the Customs. Further, the appellant has mentioned in body of the shipping bill, wherein under the Col. description , the appellant mentioned Tractor Parts OCKSHAFT Assembly MC 750 CC SI + REMOTE /Re-Export against BOE No.7683830 dt.22/12/2014. Thus, the appellant has disclosed in the shipping bill that they have re-exported the goods, and all the information was on the record of the Customs Department, as is evident from the facts on record. Further, at the relevant time, the bond had not been cancelled by the Department. The fact of re-export under bond is established. The rejection of the request for conversion is not tenable - appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 713
  Smuggling - Indian Currency - Assorted Foreign Currency - baggage rules - admissibility of evidence - Section 108 of Customs Act, 1962 - Held that:- If it was a movie or a drama and theatrics and rhetoric of appellant could be considered as evidence of his innocence, appellant would have succeeded long back in establishing that he has been falsely implicated in the case of seizure of Indian Currency and Foreign Currency totaling to Rs. 21,98,349/-. However the case proceedings are not part of any movie or drama but are based on facts and evidences recovered as part of the proceedings leading to recovery, seizure and confiscation of Indian and Foreign Currency. The appellant was arrested after recovery of the said Indian and Foreign Currency and was produced before the Magistrate at Esplande Court on 16/08/2001. Magistrate after taking the cognizance of the offence committed remanded him to judicial custody and was bailed out only after two weeks. During the proceedings before the Magistrate appellant could have contested the said recovery which he didn t. From the panchnama drawn for verification of the Currency recovered and seized as per panchnama dated 15.08.2001 the fact about availability of both the Indian and Foreign currency is verified in presence of Special Metropolitan Magistrate. Panchnama dated 15.08.2001 and the Sealed Packets bearing P O Seal No 131 were also verified and the packets opened and the Currency also verified. This document is enough to establish the authenticity of the panchnama drawn on 15.08.2001 - To verify the facts disputed by the appellants during the course of hearing to the effect that no Indian Currency was recovered and seized from him, and no such currency is available, Commissioner Customs, Airport Mumbai was asked to cause an verification and file an affidavit testifying the facts about availability and deposit of the said currency. In compliance Commissioner has filed duly notarized affidavit dated 5th December 2018. From the affidavit filed by the Commissioner, it is quite evident that both Indian and Foreign Currency were duly inventorized at the time of seizure and after verification of the same by Special Metropolitan Magistrate; the same was disposed of by way of depositing the same with State Bank of India. In view of the said evidences, there are no merits in the submissions made by the appellant in this respect. Since appellant is himself not claiming the Indian Currency and has in appeal and during the course of hearing before CESTAT the same, the order of Commissioner, absolutely confiscating the Indian Currency is not in challenge in this appeal and is upheld. Foreign currency seized and confiscated - Held that:- There are no merits in the claim made by the appellants, as it is contrary to his statement recorded on 15.08.2001 wherein he has deposed that the foreign currency was brought from abroad on his earlier trip from Switzerland which is less than US$ 5000/- and therefore he has not declared it to Customs - From the face of order it is evident that Commissioner has issued the re-adjudication order on 02.01.2018 and Certificate of Harmit Brothers is dated 12th January 2018. Production of such a certificate after the adjudication of the case in remand proceedings is nothing but an after-thought. Secondly I do not find any merits in the statement made in the certificate - The said certificate do not specify as to what was the business relationship between the Harmit Brothers and Appellant, which had prompted them to give sum of US$ 5000/- to the Appellants. Further the date and document evidencing the payment of said amount of US$ 5000/- by Harmit Brothers to appellant is not stated and enclosed with the Certificate. The certificate do not inspire any confidence vis a vis the transaction mentioned therein and hence cannot be accepted or allowed at this stage of proceedings. Penalties - Held that:- Since appellant is a habitual offender and has been involved in the case of smuggling of Indian and Foreign currency more than once, there is no hesitation in upholding the penalties imposed under section 114(i) of the Customs Act, 1962. Principles of natural justice - Held that:- Appellant cannot plead violation of principles of natural justice In the present case because he had been offered the opportunity of personal hearing and cross examination of panchas by the Commissioner which he deliberately refused and asked for the order on merits. Apart from making an attempt to show that he was not carrying Indian Currency recovered and seized from him contrary to the evidences and records available, appellant has not stated anything except accusing the authorities including Metropolitan Magistrate for framing and falsely implicating him in the case of smuggling of Indian Currency. Since all the evidences are contrary to the submissions and rhetorics of the appellant I am not in agreement with any of submissions made. Appeal dismissed - decided against appellant.

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• 2019 (3) TMI 712
  Provisional release of the seized goods - Import of consignment of mixed article - rejection of transaction value - contemporaneous import prices of identical or similar goods being imported not followed - Held that:- The appellant has imported the consignment of mixed article and filed the Bill of Entry for the clearance thereof after payment of assessed duty. However, the same was reported to be undervalued as per the DRI and, accordingly, the same proposed to be rejected - the Adjudicating Authority has not followed the contemporaneous import prices of identical or similar goods being imported during the relevant time, following Section 14 of the Customs Act and the Valuation Rules and also by not adopting the sequential application thereof the market survey was conducted for the price of the goods under assessment without exhausting the various other alternatives. The transaction value is proposed to be rejected under Rule 12 of the Customs Valuation Rules, and therefore, the Adjudicating Authority has to follow the procedure as prescribed under various Rules starting from Rule 3, 4, 5 and only thereafter to resort to Rule 7 of the Customs Valuation Rules. This is incorrect and illegal. The market survey is, therefore, not sustainable - Further the market inquiry report regarding the price of imported goods has not been provided to the appellant and also there is no mention thereof in the order of the Adjudicating Authority and in the impugned order. In view of above, the order is patently illegal and arbitrary. The provisional release of the seized goods ordered on the execution of bond to the extent of value proposed by the Department but with bank guarantee to the extent of 25 % declared value of the consignment by the appellant - appeal allowed - decided in favor of appellant.

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• Service Tax

• 2019 (3) TMI 768
  Penalty u/s 77 and 78 of FA - Applicability of judgment of Hon’ble Apex Court in the case of T Barai Vs. Henry AH Hoe and another [1982 (12) TMI 186 - SUPREME COURT OF INDIA] - case of Revenue is that the judgment of Hon’ble Apex Court was in the context of criminal law and the ratio would not apply to the present case - whether the ratio of the judgment with respect to criminal laws also applies to taxation statutes? - Held that:- Whenever any taxation law is made or amended, such law call or amendment comes into force from the date when the law is enacted or the amendment is made. It does not apply in the cases which were of prior to this date. The ratio of this judgment has been consistently followed by this Bench in deciding the matters relating to taxation and exemptions etc. Even where an explanation has been inserted in the section or rule, unless there is a contrary pronouncement of a higher judicial forum, such explanations have always been considered to have prospective application and not retrospective application. Constitutional Bench of Hon’ble Apex Court in the case of Dilip Kumar [2015 (12) TMI 247 - SUPREME COURT], held that taxation statutes should be strictly interpreted in the way they are drafted and there is no scope for any intendment in it. It does not matter whether any hardship is caused to any one or a person goes tax free because of the language of the statute. The ratio of the above two judgments of Hon’ble Apex Court which prevail over any other decisions leaving me with no choice but to uphold that section 77 applies to the case of appellant as it stood during the relevant period because there is no contrary intention indicated in the amended statute - appeal dismissed - decided against appellant.

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• 2019 (3) TMI 767
  Cargo handling service - extended period Of limitation - demand of service tax - Held that:- The appellant were undertaking the certain services. They have not denied that part of the services were cargo handling service. The appellant had not filed ST-3 return nor had they taken service tax registration. In these circumstances, it is apparent that the appellant had suppressed vital information from revenue - It is seen that in the instant case, revenue has clearly pointed out that the appellant had not filed ST-3 Returns and not taking service tax registration and thus, in the instant case, the extended period of limitation has rightly been invoked. Export of consignment or not - Held that:- On perusal of the proceeding before lower authority, it is seen that no such claim was made by the appellant. First time this issue has been raised in Tribunal. Even in the appeal before Tribunal, there is no assertion to the effect that they are ready to produce any documents. It is seen that the appellant are not denied that the part of the service provided by them are not related to export - In the instant case, the evidence of having provided service in respect of export is solely available with the appellant, thus the onus of establish, the fact is on the appellant. Since they have not done, so no benefit on this count can be allowed to the appellant. Demand of service tax - income earned from the hire charges of loader - Held that:- It is seen that when the loader is provided on per hour basis it would amount to supply of loader on hire, whereas when the charges are made on per metric ton basis, these are the charges for the cargo handling. Consequently, the demand in respect of supply of terex loader and the provision of cargo handling service thereby needs to be revised so as to exclude the demand raised in respect of supply of terex loader on per hour basis treating the same as hiring of terex loader - matter on remand. Appeal allowed in part and part matter on remand.

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• 2019 (3) TMI 766
  Repair and maintenance services - repairs are usually carried out at the factory of the Appellant - demand of service tax with interest and penalty - Held that:- The Appellants are discharging the duty of Central excise on the spares/ parts used in repair and refurbishing on going through sample invoices it appears that the contention of the Appellant is correct. Though the service is rendered no remuneration for such repair and maintenance service is charged/ received by the Appellants. In the absence of consideration for the service rendered it cannot be argued that the Appellants are liable to pay service tax on such services provided by them. In the absence of any consideration service tax cannot be charged obviously service tax cannot be charged on the value of the spare parts used for such repair or maintenance. It is not the department’s case that the Appellants have not discharged applicable Central Excise duty on the spare parts used by the Appellant in discharge of the service. The department has not produced any evidence to the effect that the Appellants have received remuneration for such repair or maintenance service in the absence of the same no service tax is payable by the Appellants in the result no demands survive - appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 711
  Maintenance and Repair services - benefit of abatement - demand of differential service tax - period April, 2004 to December, 2009 - Held that:- The invoices raised by the appellant indicate that service tax liability is discharged on 30% of the value of the invoice as services rendered by them - the repairs undertaken by the appellant would get classified under works contract for both the reasons i.e. that the appellant has paid State Government VAT on the materials on 70% of the value and service tax is paid on balance amount evaluated @ 30% of value charged. Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2019 (3) TMI 765
  Extended period of limitation - suppression with intention to evade payment of duty or not - Held that:- The appellant having paid the duty liability and the interest there of on being pointed out by the auditors and clarified to the department by a letter dated 07.02.2006 that it was due to bonafide impression they did not pay the duty on the clearances of returned finished goods was unnecessary and a show-cause notice dated 18.06.2008 was issued by invoking extended period - the allegation of suppression can not stand the scrutiny of the law, as appellant has been stating from the beginning that the goods were cleared prior to October 1999 and received back during the period October 1999 to November 2004 and subsequently cleared in November 2004 without payment of duty. This stand of the appellant needs to be considered for deciding the issue and appellant has made out a case that they had no malafide intention in removal of the goods in November 2004 - appeal allowed by way of remand.

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• 2019 (3) TMI 764
  Clandestine removal - SSI Exemption benefit - penalty - Held that:- The Appellate Authority has simplicitorily observed that there was an intention on the part of the assessee to remove the goods in question without payment of duty. He has neither referred to any evidence on record nor has established such an intention on the part of the assessee. He has also not denied that the appellants were working under the small scale exemption Notification - the confirmation of demand of duty or confiscation of the goods and imposition of penalties was neither justified nor warranted. The appellants are duty bound to enter such goods in their record to show their clearances on the basis of documents issued by them - appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 763
  CENVAT Credit - capital goods - Joists, MS plates, MS angles, Channels, Beams, HR coils, HR plates, HR sheets, Chequered plates etc., used as structurals in construction of plant - Held that:- It has been held in a slew of judgments by various High Courts, that MS structural that support plant and machinery or which went in erecting foundations to hold plant and machinery were integral part of capital goods - In Thiru Arooran Sugars [2017 (7) TMI 524 - MADRAS HIGH COURT], the Hon’ble High Court has held that whether user test is applied or the test that they are integral part of capital goods is applied, such items are eligible to get Cenvat benefit as they fall within the scope and ambit of Rule 2 (a) (A) as well as 2 (k) of CCR, 2004. Credit allowed - appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 762
  CENVAT Credit - input service or not - service tax paid towards rent / licence fees / rental fee / maintenance charges for accommodation of retail outlets situated elsewhere than the factory of manufacture in Delhi, Kolkata etc. - Held that:- The period of dispute namely December 2008 to November 2009 is well before the amendment caused to the definition of input service in Rule 2(l of the Cenvat Credit Rules, 2004 w.e.f. 1.4.2011 - the definition of input service before 1.4.2011 was very broad in its scope and included not just services utilized within the factory of manufacture, but also activities relating to business, such as accounting, auditing, services used in office relating to such factory or premises or sales promotion etc. It is not in dispute that the premises for which rent / licence fee / rental fees, maintenance charges etc. had been incurred by the assessee were all retail outlets of the assessee themselves. As such, they were not outlets of dealers appointed by the company but were run by the company themselves. The rent etc. incurred for these outlets are surely incurred for activities relating to business. In the circumstances, the impugned renting etc. are very much eligible input services and within the ambit of definition of Rule 2 (l) ibid - credit allowed - appeal dismissed - decided against Revenue.

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• 2019 (3) TMI 761
  CENVAT Credit - denied on the ground that, the owners of the vehicles denied transportation of the goods from the suppliers/manufacturers/dealers to the appellants - Held that:- No statements of driver of vehicles have been recorded. it is not brought on record if the material have not been received by the appellant in question, from where they bought the raw materials to manufacture final products which have been cleared on payment of duty. Therefore, in the absence of any cogent evidence corroborating with the statement of owners of vehicles, the credit cannot be denied. CENVAT Credit - denied on the ground that the owners of vehicles were not found at the addresses given in the record of DTO - Held that:- No investigation has been conducted with record of transportation of goods. Merely on the ground that if the owners of the vehicle are not located at the addresses where the vehicle is registered cannot be the reason for denial of credit in the absence of any cogent evidence, therefore, the credit of Rs. 13,46,684/- is allowed. CENVAT Credit - denied on the ground that the vehicles were reported to be non-transport vehicles during the impugned period - Held that:- There was newspaper report wherein police complaints have been made that the fake registration are used by the transporters and the said issue has been examined by this Tribunal in the case of Setlco Strips Ltd. [2017 (5) TMI 282 - CESTAT CHANDIGARH] - credit cannot be denied. CENVAT Credit - denied on the ground that the record of vehicle in the DTO office has been destroyed - Held that:- Merely the record of vehicle in the DTO office has been destroyed cannot be reason for denial of credit in the absence of positive evidence or non receipt of the goods by the appellant. CENVAT Credit - credit was denied without verification - Held that:- No investigation has been conducted by the investigating officer. Without investigation, it cannot be concluded that the appellant has not received the goods. Therefore, the credit cannot be denied to the appellant. CENVAT credit - denied on the ground that after 1.10.1999, the manufacturer/suppliers/dealers has vacated the godown for storage of goods - Held that:- Merely the supplier has vacated the space of storage of the goods in question cannot be reason for denial of credit in the absence of any positive evidence that the dealers have not supplied the goods to the appellant. In fact, the dealer has categorically stated that they have supplied the goods, therefore, the credit is allowed to the appellant. CENVAT Credit - denied on the basis of statement of Shri Baldev Raj Ram Murti, who was called for cross examination during adjudication and stated that they have supplied the goods to the appellant and the statement in cross examination has not been relied upon by the adjudicating authority - Held that:- The adjudicating authority has not followed the principles of natural justice to admit the statement made by the witnesses during the course of cross examination and no evidence has been produced by the Revenue to deny the credit. Therefore, the credit cannot be denied. Appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 760
  Utilization of CENVAT Credit - utilization of credit during the default period of monthly payment of duty in terms of Rule 8(3A) of Central Excise Rules, 2002 - matter sub-judice before Supreme Court - penalty - redemption fine - Held that:- The issue that whether the appellant is entitled to utilize the cenvat credit during the default period of monthly payment of duty, the case is pending before Hon’ble Supreme Court and the judgment of Indsur Global Ltd. [2014 (12) TMI 585 - GUJARAT HIGH COURT] is though in favour of assessee but Hon’ble Supreme Court decision is awaited - In these circumstances, deciding the matter before deciding by Hon’ble Supreme Court, will be pre-mature - matter remanded to the adjudicating authority who shall pass a fresh order after the outcome of the case of Indsur Global Ltd. Penalty u/r 25 - Held that:- The issue involved is of strict interpretation of Rule 8(3A) on which different views were interpreted at different court, therefore, there is no malafide intention on the part of appellant. Accordingly, the penalty imposed under Rule 25 is set aside. Redemption fine - Held that:- Since the goods were not available, no redemption fine could have been imposed as held by Larger Bench of this Tribunal in the case of Shivkrupa Ispat Pvt. Ltd Vs. CCE & Custom-Nasik [2009 (1) TMI 124 - CESTAT MUMBAI], accordingly, the redemption fine is also set aside. Appeal allowed by way of remand.

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• 2019 (3) TMI 759
  Cash Refund of accumulated CENVAT Credit - closure of manufacturing activity - Held that:- The issue decided in the case of STEEL STRIPS VERSUS COMMISSIONER OF CENTRAL EXCISE, LUDHIANA [2011 (5) TMI 111 - CESTAT, NEW DELHI], where it was held that Law has only recognized the event of export of goods for refund of Modvat credit, as has been rightly pleaded by revenue and present reference is neither the case of "otherwise due" of the refund nor the case of exported goods. Similarly, absence of express grant in statute does not imply ipso facto entitlement to refund. So also absence of express grant is an implied bar for refund. When right to refund does not accrue under law, claim thereof is inconceivable - refund cannot be granted - appeal dismissed - decided against appellant.

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• CST, VAT & Sales Tax

• 2019 (3) TMI 710
  Levy of tax - X Ray films purchased and used in diagnostic service and use of consumables purchased in the Hospital for upkeep of the hospital can be treated as sale at all - Held that:- The question is answered in favour of the assessee and against the revenue, looking at the declaration of the Full Bench in Sanjose Parish Hospital v. Commercial Tax Officer [2019 (3) TMI 438 - KERALA HIGH COURT]. Whether on the facts and in the circumstances of the case and in law input tax credit can be denied merely for the reason of an inadvertent error of the supplier in issuing invoice in Form 8B, when the returns and books reveal the same goods having suffered output tax and remittance of the same is not disputed and are not the order of the Tribunal reversing the orders of the 1st Appellate authority passed without application of mind and mechanically? - Held that:- The question is answered against the asseessee and in favour of the revenue, since, Form-8B is the invoice issued on last sale and it is specified in the form itself that there can be no input tax credit claimed on such purchases. Whether on the facts and in the circumstances of the case and in law, on the impost of tax on capital goods the Tribunal ought to have afforded opportunity to explain and establish from the books the nature of the goods itself if doubted and ought not the matter have been remanded to the 1st Appellate authority to consider the same when the 1st Appellate authority has not considered the issue at all? - Held that:- It is only proper that the Assessing Officer re-consider the issue on production of the bills. The assessee shall within a period of one month from the date of receipt of a copy of this judgment produce the bills along with written submissions, if any. The Assessing Officer shall then afford a hearing and consider the issue of those invoices. The invoices in which purchase of capital goods were made, shall be avoided from estimation of sales - matter on remand. Revision allowed in part.

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• 2019 (3) TMI 709
  Classification of goods - rate of tax - whether airgun and airpistol are to be taxed under entry 124 Part A of Schedule II as toy excluding electronic toys or has to be taxed arms and ammunitions vide entry 2 of Schedule IV? - Held that:- The airguns or airpistols are not simple toys or a pure sports equipment. These guns though are not firearm but are capable of causing bodily injuries and those in certain circumstances can be fatal too. These guns/pistols are also frequently used for hunting purposes. Looking to the mechanism used in these equipments, Experts have advised cautious use of these articles. In popular sense too, the airguns are not understood as sports equipment but as a gun frequently used for hunting birds and other small animals. True it is, there is no need to have license to possess an airgun but merely, on that count, it cannot be brought out from the term arms . There may be several other articles too which are deadly weapon and falls within the definition of arms but there is no need to have license to possess those. It would also be appropriate to state that several Experts have also opined to make it mandatory to have a license for keeping airgun/ pistol. The Kerala High Court in Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes) Versus K. Mohammed [1989 (1) TMI 335 - KERALA HIGH COURT] did not examine complete mechanism of the airgun and just on basis of its capable use in popular sense held that though airgun can cause injury but would not be an item covered under the entry arms and ammunition . Being not a toy and being an equipment that can be used to cause a lethal injury, which is also in use for causing bodily injuries and also being required to be used with all necessary caution and also being advised to be used under supervision of Expert and also being having absolute resembles that of firearm and also having a mechanism of spreading the projectiles with force that may cause hurt, the airgun/ airpistol is an arm and, therefore, it is required to be considered as an item under entry 2 Schedule IV appended with the Act, 2008. Revision dismissed.

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• 2019 (3) TMI 708
  Imposition of penalty - whether there could be a penalty imposed under Section 45A of the Kerala General Sales Tax Act, 1963, for reason of not responding to the summons issued by the Department? - Held that:- The proposal for penalty was not for reason of non-registration of the hospital as is the defect under clause (a) of Section 45A. The failure to comply with the terms of notices or summons issued to a dealer could be a cause for imposition of penalty only in the context of a person who is covered under the enactment; which the respondent claimed it was not liable. The Assessing Officer did not pass any order holding the respondent to be so liable. Hence, there could also be no violation found of Section 45A(e). The said reasoning applies to clause (g) also. For finding of contravention of the provisions of the Act or the Rules made thereunder, first it has to be decided as to whether hospitals are to be registered under the sales tax enactment or not. Issuance of summons to a dealer, who has not registered, for production of books of accounts and a failure to respond to the same, cannot lead to a penalty proceedings under Section 45A. If notice or summons has not been responded to, then, the Assessing Officer could decide the issue of registration as also failure to comply with the provisions of the Act in a proceeding in which best judgment assessment could also be made for estimation of the tax liability of a dealer, who is not so registered under the Act but is liable for registration. The question of law answered in favor of the assessee and against the Revenue.

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• 2019 (3) TMI 707
  Whether the point of taxation can be shifted to the respondent/assessee? - Held that:- This aspect of the matter was considered by the First Appellate Authority by thoroughly examining the factual position. This factual finding was affirmed by the Tribunal. The Tribunal noted that the respondent/assessee has given the name of the selling dealer of the import license and import licence cannot be issued to any party and the authority who is issuing the import licence does so only after due verification and the address of the selling dealer has been furnished by the respondent/assessee and only the selling dealer has to be taxed as a first seller and the point of taxation cannot be shifted to the second seller namely respondent/assessee - there is no question of law arising for consideration in this Tax case - the Tax Case is dismissed.

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• 2019 (3) TMI 706
  Requirement of pre-deposit - whether the first appellate authority and the Tribunal were justified in directing the petitioners to make pre-deposit in terms of the orders passed by them? - Held that:- Having regard to the fact that at the time when the assessment order was made, the petitioners did not have the copies of the assessment orders made in the case of the vendors, the petitioners did not have any opportunity to prove the genuineness of such transactions - the sub-section (7A) of section 11 of the GVAT Act envisages disallowance of tax credit in excess of the amount of tax paid in respect of the same goods. Therefore, to disallow tax credit on any purchase, it has to be established that it is in respect of the very goods purchased by a dealer that the tax has not been paid. Input tax credit cannot be disallowed by working out the percentage of purchases made from a dealer whose registration is cancelled, without first establishing that in respect of the goods purchased by the dealer, the vendor had not paid tax. The court is of the view that the petitioners have made out a strong prima-facie case in their favor - Thus the Tribunal and the first appellate authority were not justified in directing payment of huge amount of pre-deposit for the purpose of admitting the appeal and staying recovery - petition allowed.

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