TMI Tax Updates - e-Newsletter
March 2, 2020

Case Laws in this Newsletter:

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

Articles

1. “Educational institution” means: institutions providing services by way of education as a part of curriculum for obtaining a qualification recognised by any law for the time being in force.

   By: Biju Jacob

2. THE LANGUAGE OF THE DIVINE IS SILENCE

   By: Jayaprakash Gopinathan

3. STANDARD OPERATING PROCEDURE FOR TAKING ACTION AGAINST REGISTERED PERSONS FAILED TO FILE GST RETURNS

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Monthly Review of Accounts of Union Government of India upto the month of January 2020 for the Financial Year 2019-20.

2. Shri Piyush Goyal meets leaders of Bhutan in Thimphu;

3. Sovereign Gold Bond Scheme 2019-20 (Series X) – Issue Price

Notifications

Companies Law

1. G.S.R. 145 (E) - dated 28-2-2020 - Co. Law

Companies (Appointment and Qualification of Directors) Amendment Rules, 2020

GST - States

2. 1/2020 — State Tax (Rate) - dated 20-2-2020 - Chhattisgarh SGST

Seeks to amend Notification No. 1/2017-State Tax (Rate), No. F-10-43/2017/CT/V(69) dated the 28th June, 2017

3. 04/2020 - State Tax - dated 15-1-2020 - Chhattisgarh SGST

Seeks to amend Notification No. 04/2018-State Tax, No. F-10-2/201 8/CT/V(3), dated the 24th January, 2018

4. CCT/26-2/2017-18/14/3028 - dated 19-2-2020 - Goa SGST

Extension of time limit for submitting the declaration in FORM GST TRAN-1 under Rule 117(1A) of the Goa Goods and Service Tax Rules, 2017 in certain cases.

5. 205/2020/4(120)/XXVII(8)/2019/CT-02 - dated 19-2-2020 - Uttarakhand SGST

Uttarakhand Goods and Services Tax (Amendment) Rules, 2020

6. 204/2020/4(120)/XXVII(8)/2019/CT-01 - dated 19-2-2020 - Uttarakhand SGST

Section 4 to 7 and 9,10,12,13,22,23 of SGST Act coming to force w.e.f 01-1-2020

7. 203/2020/4(120)/XXVII(8)/2019/CTR-29 - dated 19-2-2020 - Uttarakhand SGST

Seeks to amend Notification No. 526/2017/9(120)/XXVII(8)/2017 dated 29th June, 2017

8. 202/2020/4(120)/XXVII(8)/2019/CTR-28 - dated 19-2-2020 - Uttarakhand SGST

Seeks to amend Notification No. 530/2017/9(120)/ XXVII(8)/2017, dated 29th June, 2017

9. 201/2020/4(120)/XXVII(8)/2019/CTR-27 - dated 19-2-2020 - Uttarakhand SGST

Seeks to amend Notification No. 514/2017/9(120)/XXVII(8)/2017, dated 29th June, 2017

10. 7513 /CSTUK/GST-Vidhi Section/2019-20/ON-1 - dated 14-2-2020 - Uttarakhand SGST

Extension of time limit for submitting the declaration in FORM GST TRAN-1 under rule 117(1A) of the Uttarakhand Goods and Service Tax Rules, 2017 in certain cases

SEBI

11. S.O. 911(E) - dated 28-2-2020 - SEBI

Central Government extends the term of appointment of Shri Ajay Tyagi as Chairman of the Securities and Exchange Board of India for a period of six months beyond 29.02.2020

Circulars / Instructions / Orders

Customs

1. 15/2020 - dated 28-2-2020

Implementation of automated clearance on All-India basis

Highlights / Catch Notes

GST

• Court Denies Bail for Involvement in Fake Invoice Scheme Evading GST; Highlights Serious Financial Impact on State.

  Case-Laws - HC : Grant of regular bail - bogus firms - intent to evade GST - fake invoices issued for input tax credit (ITC) - bogus transaction of sale of yarn - The complicity of the kingpin is clearly evident - Keeping in view the enormity of the scam and the colossal loss caused to the State exchequer, which has lost GST, this Court does not find any ground for grant of bail. - HC
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• High Court Overturns CBIC Circular: Milk Chilling and Packing Services Qualify for GST Exemption as Chilled Milk is Still Raw Milk.

  Case-Laws - HC : Claim of exemption from GST - milk chilling and packing services - In the circular CBIC says the activity is not eligible for exemption - Milk cannot be stored without chilling as otherwise it would get spoiled. Therefore, storage of milk would include chilling of milk. Chilling of milk does not alter any of its essential characteristics and it still remains raw milk, and it is this raw milk which is thereafter packed. - The circular quashed - Benefit of exemption allowed - HC
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• Court Grants Anticipatory Bail in Fake Invoice GST Case; Applicant Claims Coercion, Court Disagrees on Likelihood.

  Case-Laws - DSC : Grant of anticipatory bail - issuing fake invoices for the purpose of having input credit. - The ground raised on behalf of the applicant is that he was coerced to give the statement. However, it is to be seen that the applicant was given time to join investigation. He was given protection by the court and therefore, without commenting on the merits of the statement or contentions of the applicant that it was taken under coercion, I find that at this stage, it is highly improbable that a person who had court protection could be threatened orally and be made to give such inculpatory statement. - DSC
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Income Tax

• Trust Must Prove Genuine Activities for Section 12AA Registration; Deviations Can Impact Eligibility.

  Case-Laws - SC : Exemption u/s 11 - entitled for registration u/s 12AA - the Commissioner would be bound to record the finding that an activity or activities actually carried on by the Trust are not genuine being not in accordance with the objects of the Trust. Similarly, the situation would be different where the trust has before applying for registration found to have undertaken activities contrary to the objects of the Trust. - SC
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• Court Decides if "Approval" in Income Tax Act Section 10(17A) Requires Explicit or Implied Consent for Exemptions.

  Case-Laws - HC : Exemption to "Reward" as as approved by the government in Public Interest - whether the reference to ‘approval’ in Section 10(17A) will include an implied approval or whether such approval has to be express? - Specifically for his role in nabbing Veerapan, he was awarded the President’s Police Medal for Gallantry on the eve of Independence Day, 2005. What more! If this does not constitute recognition by the Centre of service in public interest, for the same purposes for which the State Government has rewarded him, I fail to understand what is. - HC
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• Authority Validly Includes Interest u/s 220(2) in Kar Vivad Samadhan Scheme Calculations, Even if Unquantified.

  Case-Laws - HC : Processing application under the Kar Vivad Samadhan Scheme, 1998 - determination of the amount payable under the scheme - Designated authority is within his powers in adding up interest under Section 220(2) of the Act though not quantified at earlier point while processing application under the Kar Vivad Samadhan Scheme, 1998. - HC
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• Tools and Dies Costs Classified as Recurring Revenue Expense, Not Capital Asset Due to Lack of Enduring Benefits.

  Case-Laws - HC : Disallowance being tools and dies written off - The expenditure incurred on dies and tools is a recurring revenue expenditure and no capital asset of enduring benefit comes into existence more so because the dies need to be replaced often. - HC
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• High Court Rules Commission for Export Order Booking Deductible u/s 37(1) of Income Tax Act.

  Case-Laws - HC : Commission paid to Indian resident for booking orders for export - deduction of expenditure u/s 37 (1) - From reading of the agreement it is clear that no order can be processed by assessee without services the agent and if that is so, the assessee was bound to pay commission on any sale which was taken place in the territory of an agent (subject to condition 7 supra). In these circumstances, we hold that Clause (4) of the said agreement has wrongly been interpreted by the Tribunal in the facts and circumstances of the case. - HC
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• High Court Condemns Tax Dept for Withholding Refunds u/s 241A Based on Previous Year's Positive Income.

  Case-Laws - HC : Withholding of the refund in terms of Section 241A - Merely because in the immediately preceding assessment year 2016-17, the assessee had declared a positive income as against substantial loss declared in the present assessment year, that by itself, cannot be a ground to doubt the contents of the return or the claim of the assessee with respect to the loss suffered - We must deprecate the practice of the department in sending such auto-generated response to the assessees for withholding the refunds.- HC
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• Assessment Invalid: AO Missed Deadline u/s 144C(13), Finalized After Statutory Period, Deemed Ultra Vires.

  Case-Laws - AT : Validity of assessment u/s. 144C(13) - Going by the mandate of sub-section (3) of section 144C(3)/144C(4), the AO was supposed to complete the assessment on the basis of the draft order by February, 2019. As against this, the AO actually completed the assessment u/s. 144C(13) on 24.10.2019. Such a completion of assessment not only under the wrong provision but also beyond the limitation period is ultra vires and hence cannot stand. - AT
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• Payment for Technical Services Classified as Business Profits Under DTAA Article 7; Not Taxable in India Without PE.

  Case-Laws - AT : Receipt of Fees for Technical Services (FTS) - there is no dispute that the payment made was in the nature of FTS and there is no article in DTAA for taxing the FTS separately. Therefore, the payment made to the non resident required to be taxed under article 7 under the head ‘business profits’. - There is no PE in India to non resident. - Therefore, the payment made to non resident are not to be taxed in India as business profits - AT
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• Profit from Land Sale as Business Income: Agricultural to Non-Agricultural Conversion Treated as Trade Adventure.

  Case-Laws - AT : Characterization of income - profit from sale of land - conversion of agricultural land into non-agricultural land - same land was plotted and entered into agreement with REHWS - the activity carried by the assessee is ‘adventure in the nature of trade’ - AT
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• Tax Court Rules Land Sale Income as Trade; Affects Taxation of Converted Agricultural Land Under Real Estate Agreement.

  Case-Laws - AT : Characterization of income - profit from sale of land - conversion of agricultural land into non-agricultural land - same land was plotted and entered into agreement with REHWS - the activity carried by the assessee is ‘adventure in the nature of trade’ - AT
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• Ramnavami Nayakhata Advances Recorded as Sales Not Subject to Double Taxation u/s 68 of Income Tax Act.

  Case-Laws - AT : Addition u/s 68 - advances received from customers on the occasion of Ramnavami Nayakhata - these advances have subsequently been recorded as sales of the assessee firm - When a receipt is accounted for as income, no separate addition of the same amount as income of the assessee under any other Section of the Act can be made as it would be a double addition. - AT
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• Use of "Seems" in Show Cause Notice Suggests Uncertainty, Section 263 Order Set Aside for Lack of Conviction.

  Case-Laws - AT : Revision u/s 263 - Use of word "seems" by the CIT while recording reasons - It seems that, Assessment order passed by the A.O. in this case is erroneous and prejudicial to the interests of the Revenue.” The Ld. Pr. CIT has referred the word “seems” twice in para 6 of the above show cause notice. It would, therefore, show that even he was not sure whether it is a fit case of invoking jurisdiction u/s 263 - order set aside - AT
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• Deduction u/s 80IC allowed for turnkey software and services agreement with ZTE, including installation and support.

  Case-Laws - AT : Benefit of deduction u/s. 80IC - the agreement with ZTE is very clear that the supply of software and hardware necessary to support the software supply, installation & commissioning as well as rendering support services were to be done on a turnkey basis. Though the services agreement is separately entered into by the assessee, it has a direct nexus and connection with the agreement for supply of software. - deduction allowed - AT
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• Wealth tax liability excluded from book profit adjustments u/s 115JB of Income Tax Act; considered ascertained, not unascertained.

  Case-Laws - AT : MAT u/s 115JB - adjustments to Book profit - wealth tax liability does not come within the purview of Explanation–1(a) to section 115JB(2) - Wealth tax payable is certainly an ascertained liability, hence, cannot be treated as unascertained liability. Therefore, it is not covered under Explanation–1(c) to section 115JB(2) - AT
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• Revenue Denies Assessee's Rent Expense Claim, Overlooks Business Exigencies Crucial for Justification.

  Case-Laws - AT : Addition of rent expenses - some of group concerns were situated in the same premises - While denying the claim of the assessee, Revenue has not factored in the business exigencies as explained by the assessee - AT
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• Challenge to Reopening of Assessment Under Sec 147 & Addition Under Sec 68 Due to Vague Recorded Reasons Lacks Validity.

  Case-Laws - AT : Reopening of assessment u/s 147 - Addition u/s 68 - The reasons recorded are vague, highly non specific and reflect complete non-application of mind. It is also noted that there is no live link or direct nexus between alleged material - AT
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Customs

• High Court Permits Correction of Shipping Bill Error, Allowing Petitioner to Claim MEIS Benefits After Mistaken "No" Selection.

  Case-Laws - HC : Amendment in shipping bills - Benefit under Merchandise Exports from India Scheme (MEIS) - petitioner inadvertently opted for “No” instead of “Yes” in the shipping bills - Corrections of inadvertent error allowed - HC
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• Cocoa Powder Not Equivalent to Flour for DFIA; Import Allowed Only Prospectively Under DGFT Notification No. 93 (RE-2010.

  Case-Laws - AT : Duty Free Import Authorisation (DFIA) scheme - export of Biscuits - ‘Cocoa Powder’ cannot be equated with Flour/Atta/Maida and thus cannot be imported against the DFIAs issued against export of Biscuits before the issuance of Notification, No 93 (RE-2010)/2009-14 by DGFT, permitting import of 09gm of ‘Cocoa Powder’ as additive/ingredient against export of 1kg of Biscuits - the Notification is prospective only. - AT
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• Appellant Held Accountable for Subordinate's Actions in Exporting Prohibited Items Under Customs Act Sections 114(i) and 114AA.

  Case-Laws - AT : Imposition of penalty u/s 114(i) and 114AA of the Customs Act, 1962 - export of prohibited items - The defense does not inspire confidence. It is not convincing that the Marketing Manager has exported the prohibited goods without the knowledge of the appellant under whom the Marketing Manager is working.- AT
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• Penalty and Fine Levied for Enhanced Value of Imports; Section 114AA Inapplicable, No Fraud Alleged in Documents.

  Case-Laws - AT : Levy of penalty and redemption fine - Acceptance of enhanced value then declared value of imported goods - The concurrence obtained from the shipping agent in India has nothing to do with assessment under Section 17 or Section 18 of Customs Act, 1962. There is no allegation that the amendment to the line’ in the Import General Manifest has been obtained by submission of any fraudulent documents; indeed, there is no dispute on the propriety of filing a bill of entry by the appellant-firm. There is, thus, no scope for invoking Section 114AA of Customs Act, 1962. - AT
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Indian Laws

• Cheque Dishonor: No Extra Proof Needed if Presumption Stands; Personal Loans Don't Require Formal Documents; Cheque Shows Liability.

  Case-Laws - HC : Dishonor of Cheque - insufficiency of funds - rebuttal of presumptions - When legal presumption is not rebutted no corroboration is required. When the amount was advanced on the basis of personal relation, preparation of document is not required and cheque issued by the respondent shows the liability of the respondent - HC
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IBC

• Exploring Corporate Insolvency: Understanding Section 43 on Preferential Transactions and Duties of Resolution Professionals u/s 25.

  Case-Laws - SC : Initiation of CIRP - Scope of IBC - Preferential transaction u/s 43 - Looking to the legal fictions created by Section 43 and looking to the duties and responsibilities per Section 25, in our view, for the purpose of application of Section 43 of the Code in any insolvency resolution process, what a resolution professional is ordinarily required to do could be illustrated. (See para 28.1) - SC
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PMLA

• Provisional Attachment Under PMLA Valid if Crime Proceeds Disguised; Burden on Accused to Prove Legitimacy.

  Case-Laws - HC : Provisional attachment - Prevention of Money Laundering - PMLA - When an attempt is made to project proceeds of crime as untainted money and also when the burden of proof is on the accused to show that the property has not been purchased out of the proceeds of crime, it cannot be said that the mandate given by the Act and the Rules to evict the person in whose name the property stands from the property is manifestly arbitrary - Mere order of attachment cannot be said to be violative of Article 300 A of the Constitution of India. - HC
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Service Tax

• Who Can Claim Service Tax Refund in Mergers: Merged Company or Amalgamated Entity? Clarifying Eligibility Rules.

  Case-Laws - AT : Refund of service tax - merger arrangement / scheme of amalgamation - who is eligible to claim refund - merged company or amalgamated / resulted company - appointed date and merger date is 01.04.2014 upon the scheme becoming effective - it is not effective from the date with certified copy of HC order filed with the ROC - AT
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• Coca Cola India Concentrate Purchase Confirmed as Sale, Not Service, Despite Usage Restrictions Imposed by Seller.

  Case-Laws - AT : BAS - sale or service - purchase of concentrate from the Coca Cola India - The imposition of restrictions or conditions in respect of the usage and consumption of the concentrate, by the seller cannot alter that position. Hence there are no merit in the submission of the Authorized Representative that this transaction was not a truncation of sale but only “transfer to use”. - AT
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• Reversal of CENVAT Credit for Capital Goods Removed as Scrap Not Required, Per CENVAT Credit Rules, 2004.

  Case-Laws - AT : Reversal of CENVAT Credit - capital goods - removal of equipment as waste / scrap - It is not contemplated, either in Finance Act, 1994 or in general commercial usage, that capital goods should be in perpetual operation. The absence of such condition in CENVAT Credit Rules, 2004 reflects this common understanding that capital goods are dutiable on procurement and that, unlike the availment of credit of duties suffered on inputs, credit thereof is permitted at certain specified stages and, that too, only twice. - AT
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Central Excise

• Revenue's Argument on Sulphur Duty Dismissed; Central Excise Duty Applies to Phosphoric Acid Production.

  Case-Laws - AT : Demand of duty on Sulphur - There are no merit in the Revenue’s arguments that benefit of Notification No. 12/2012-CE can be denied on the ground that during manufacture of Phosphoric Acid which in turn used in the manufacture of fertilizer and Phospho-gypsum is manufactured - However, we find that liability for Central Excise duty would arise nonetheless in respect of Sulphur used in the manufacture of Phosphoric Acid which was cleared on payment of duty. - AT
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VAT

• Court Remands Case on DTH Set-Top Box Activation and Installation Charges for Further Examination on Service Tax Payment.

  Case-Laws - HC : Demand of Differential Tax - transfer of right to use - activation and installation charges of DTH Set-Top Box (STB) called Digicomp collected by the petitioner at the time of installation of DTH set-top box - There is no clear discussion as to whether the petitioner has paid service tax on the activation installation charges on the whole or part of the amount - matter remanded back - HC
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• Tablet Computers with Calling Features Not Classified as Telephones Under Sub-heading 8525 50, Notification Dated April 1, 2011.

  Case-Laws - HC : Classification of tablet computers with calling feature - tablet computer is not comparable with any of the three devices which came to be deleted from sub-heading 8525 50 vide notification dated 1st April, 2011, inasmuch as, it is neither a car telephone nor a transportable telephone nor a cellular telephone. Thus, the functions mentioned and relatable to calling functions, etc. are merely incidental and the same do not alter the basic feature of the goods in question namely, tablet computers - HC
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Case Laws:

• GST

• 2020 (2) TMI 1300
  Detention order - goods alongwith vehicle - SCN duly served under section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017, upon the driver of the vehicle on the same date, i.e. 11th September, 2019 - HELD THAT:- In the said show cause notice, the date fixed for filing of the reply was 18th September, 2019. In spite of a specific date fixed for filing of reply, no reply was forthcoming from the petitioner. As such, an order under section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017, was passed determining the amount of tax and penalty for release of the goods and vehicle. This order was passed on 29th September, 2019. In the said order a total amount of Rs. 28,53,563.64p (Rupees twenty eight lakhs fifty three thousand five hundred and sixty three and paise sixty four only) was demanded as amount of tax and penalty for release of goods and vehicle. This order was sent by a letter dated 30th September, 2019 by Registered Post. Till date, this order has not been complied with - As such, the discretionary jurisdiction of this Court cannot be exercised under Article 226 of the Constitution of India in order to grant such reliefs to the petitioner as prayed for, considering the facts of the present case. Petition dismissed.

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• 2020 (2) TMI 1299
  Confiscation of goods - Section 130 of the Central/Gujarat Goods and Services Tax Act, 2017 - It is the case of the writ-applicant that the goods and the conveyance came to be detained and seized by the GST Authorities on the premise that the goods were being transported in contravention of the Act and Rules - HELD THAT:- As the matter is at the stage of GST-MOV-10, we would not like to enter into the merits of the matter. The first concern for the writ-applicant should be to get the goods released - Since the matter is at the stage of GST-MOV-10, the application preferred by the writ-applicant [Annexure-I, Page No.44 of the paper-book] shall be treated as one in terms of Section 67(6) of the Act. This writ-application with a direction to the State Tax Officer, Morbi Squad, Enforcement, Division-9, Bhavnagar to immediately look into the application, preferred by the writ-applicant and pass appropriate order, in accordance with law - Let this exercise be undertaken and complied within a period of one week from the date of receipt of the writ of this order.

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• 2020 (2) TMI 1298
  Confiscation of goods or conveyance - levy of penalty under Section 130 of the GST Act - Principles of natural justice - HELD THAT:- This is a case in which the final order in Form GST-MOV-11 has been passed. In such circumstances, we relegate the writ-applicant to prefer an appeal, against such order, under Section 107 of the Act - Application disposed off.

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• 2020 (2) TMI 1297
  Grant of regular bail - bogus firms - intent to evade GST - fake invoices issued for input tax credit (ITC) - bogus transaction of sale of yarn - allegation is that Petitioners make bogus firms and by transacting with bigger firms, they are getting huge amounts of money deposited in the account numbers of the said fake bogus firms so as to save GST and are thus causing huge loss to the State Exchequer on account of loss of revenue - HELD THAT:- Rajesh Mittal has played an pivotal role in the entire scam for the purpose of incorporating 18 different firms wherein in a majority of the firms, his e-mail ID or phone number had been used. During the course of investigation, the police has been able to collect evidence to the effect that bank transactions of withdrawal of Rs. 1,21,17,230/- was made in the account of M/s Ansh Hospitality between 23.1.2019 and 30.6.2019 and an amount of Rs. 1,21,21,881/- was deposited and for which the learned counsel representing Manish, owner of the said firm, could not furnish any justification as to on what count the said huge payments had been received and as to what articles had been supplied by him against the said payment. Similarly, during investigation, it was found that bank transactions of huge amount had been effected in the account of M/s Shree Bala Ji Wooltax. The learned counsel for the petitioner-Inder Partap Singh, owner of M/s Shree Bala Ji Wooltax, could not furnish any justifiable explanation as to on what count the said payment has been received, as the said firm was not found to be actually into business. The complicity of the kingpin Rajesh Mittal and also of Manish, owner of M/s Ansh Hospitality and of petitioner Inder Partap Singh, owner of M/s Shree Bala Ji Wooltax, is clearly evident - Keeping in view the enormity of the scam and the colossal loss caused to the State exchequer, which has lost GST, this Court does not find any ground for grant of bail. Bail cannot be granted - petition dismissed - decided against petitioner.

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• 2020 (2) TMI 1296
  Mode of Petitioner s application for advance ruling - Mr. Bansal further submits that the issue with regard to filing of the online application for advance ruling has been resolved qua OIDAR services and it is possible for anyone to move the application online. Mr. Bansal submits that functionality of advance ruling is now available on GST portal wherein the normal tax payer after choosing both CGST and SGST Acts can pay the specified fee under the respective heads and similarly an OIDAR tax payer registered under IGST Act will pay the specified fee of Rs. 5,000/- under IGST as fee for application for advance ruling. HELD THAT:- List on 16.03.2020.

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• 2020 (2) TMI 1295
  Claim of exemption - milk chilling and packing services - support services to agriculture - In the circular CBIC says the activity is not eligible for exemption - whether exempt by virtue of serial No.24 of the table to Notification No.11/2017 Central Tax (Rate) dated 28.6.2017? - refund of amount recovered and collected from the petitioners through their contractors as GST on milk chilling and packing services. It is the case of the petitioners that the Central Government has granted exemption to milk chilling, storage and packing service by virtue of serial No.24 of Notification No.11/2017 dated 28.6.2017, but this exemption is now denied to the petitioners by virtue of the Circular F. No.354/292/2018- TRU dated 9.8.2018 issued by the TRU. HELD THAT:- It is not in dispute that milk is an agricultural produce, it being a produce out of rearing of life forms of animals and for food. The present case relates to raw and unprocessed milk. What is brought to the centres is raw milk in which no further processing has been done and therefore, such milk is an agricultural produce - The chilling and packing services provided by the contractors to the petitioners are in respect of raw milk. As farmers involved in rearing animals for the purpose of milk cannot directly connect to each of the consumers of the supply of milk, such farmers join hands to form a village co-operative society and supply milk to the member unions. Vide Notification No.11/2017 dated 28th June, 2017, services falling under Heading 9986 were exempted from payment of tax under Central Goods and Services Tax Act, 2017, State Goods and Services Tax Acts, 2017, Union Territory Goods and Services Tax Act, 2017 and the Integrated Goods and Services Tax Act, 2017. The services falling under clause (i) of the Heading 9986 are support services to agriculture, forestry, fishing, animal husbandry - the above notification was brought into force from 1.7.2017. On a perusal of paragraph 3 of the impugned circular, it is evident that the same is based on sub-clause (c) of clause (i) of the Explanation to clause (i) under Heading 9986, inasmuch as, according to the respondents the process of chilling and packing of milk is not usually done by the cultivator or producer and are not carried out at an agricultural farm - In the present case, the agricultural produce in respect of which support services are availed is raw unprocessed milk. It cannot be disputed that for storage of milk it would have to be chilled. Milk cannot be stored without chilling as otherwise it would get spoiled. Therefore, storage of milk would include chilling of milk. Chilling of milk does not alter any of its essential characteristics and it still remains raw milk, and it is this raw milk which is thereafter packed. Therefore, chilling and storage of raw milk and packing it would clearly fall under sub-clause (e) of clause (i) of the Explanation. Consequently, if the raw milk is only stored and packed, the support services would fall under Heading 9986 of the Table to Notification No.11/2017 Central Tax (Rate). In the impugned circular, it is the case of the respondents that chilled and packed milk for retail sale is not covered by the definition of agricultural produce. While saying so, what is lost sight of is that support services are not provided to chilled and packed milk, but support services of storage and packing are provide to raw milk which is an agricultural produce. Therefore, the very basic premise on which the respondents have proceeded is fallacious and based on a factually incorrect premise - Another ground stated is that such processes are not carried out at an agricultural farm. This ground is based on a misconception of the nature of services being provided, inasmuch as, it is sub-clause (c) of clause (i) of the Explanation which requires processes to be carried out at an agricultural farm; whereas, sub-clause (e) does not contain any such prescription. In the impugned circular, it is also stated that chilling and packing is not exempt from GST inasmuch as services by way of job work in relation to all food and food products falling under Chapters 1 to 22 attract levy of GST @ 5% and therefore, the activity of chilling and packaging of milk provided by way of job work attracts levy of GST @ 5%. In this regard, this court is of the view that the levy of 5% GST on job work on food and food products falling under Chapters 1 to 22 would be attracted if the services provided are not support services as contemplated under clause (i) of Heading 9986 at Serial No.24 of the Table to Notification No.11/2017 dated 28.6.2017. The court is of the view that the interpretation given by the respondents to the activities of chilling and packing of milk as contained in the impugned letter/circular dated 9.8.2018 is not in consonance with the provisions contained in Serial No.24 of the Table to Notification No.11/2017 dated 28.6.2017 and, therefore, the impugned letter/circular cannot be sustained - The impugned letter/circular F No.354/292/2018-TRU dated 9.8.2018 (Annexure-F to the petition) issued by the Government of India, through the Tax Research Unit, New Delhi, is hereby quashed - It is hereby held that milk chilling and packing service provided by the contractors to the petitioners are exempted by virtue of Serial No.24 of the table to Notification No.11/2017 Central Tax (Rate) dated 28.6.2017 (Annexure-D to the petition). Petition allowed.

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• 2020 (2) TMI 1294
  Grant of anticipatory bail - issuing fake invoices for the purpose of having input credit - Validity of summons issued - Statements given under coercion or not - bail sought on the ground that official of the Superintendent, Anti-evaion, Central Tax, Delhi, had gone at the premises of wife of the applicant to serve the summons u/s. 70 of CGST Act, 2017 whereas in fact, the applicant is living separately and had gone for some personal work at that time - HELD THAT:- The statement given by the applicant to the department u/s 70 of GST Act and further evidence in the form of statement of accountant Vibhav Rai and the books of account, which have also been admitted by the applicant, are reflecting the existence of a deep rooted systematic conspiracy to cheat the exchequer. The ground raised on behalf of the applicant is that he was coerced to give the statement. However, it is to be seen that the applicant was given time to join investigation. He was given protection by the court and therefore, without commenting on the merits of the statement or contentions of the applicant that it was taken under coercion, I find that at this stage, it is highly improbable that a person who had court protection could be threatened orally and be made to give such inculpatory statement. This is not a fit case for grant of anticipatory bail - bail application dismissed.

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• Income Tax

• 2020 (2) TMI 1293
  Exemption u/s 11 - entitled for registration under section 12AA - Charitable activity u/s 2(15) - HELD THAT:- The purpose of section 12AA of the Act is to enable registration only of such trust or institution whose objects and activities are genuine. In other words, the Commissioner is bound to satisfy himself that the object of the Trust are genuine and that its activities are in furtherance of the objects of the Trust, that is equally genuine. Since section 12AA pertains to the registration of the Trust and not to assess of what a trust has actually done, we are of the view that the term activities in the provision includes proposed activities . That is to say, a Commissioner is bound to consider whether the objects of the Trust are genuinely charitable in nature and whether the activities which the Trust proposed to carry on are genuine in the sense that they are in line with the objects of the Trust. In contrast, the position would be different where the Commissioner proposes to cancel the registration of a Trust under sub-section (3) of section 12AA of the Act. There the Commissioner would be bound to record the finding that an activity or activities actually carried on by the Trust are not genuine being not in accordance with the objects of the Trust. Similarly, the situation would be different where the trust has before applying for registration found to have undertaken activities contrary to the objects of the Trust. We therefore find that the in view FOUNDATION OF OPHTHALMIC OPTOMETRY RESEARCH EDUCATION CENTRE [ 2012 (8) TMI 777 - DELHI HIGH COURT] that a newly registered Trust is entitled for registration under section 12AA on the basis of its objects, without any activity having been undertaken is correct and liable to be upheld. Registration u/s 12AA - found not to have spent any part of its income on charitable activities - object of the provision in question is to ensure that the activities undertaken by the Trust are not contrary to its objects and that a Commissioner is entitled to refuse registration if the activities are found contrary to the objects of the Trust. In the present case, what has been found is that the Trust had not spent any amount of its income for charitable purposes. This is a case of not carrying out the objects of the Trust and not carrying on activities contrary to its object. These circumstances may arise for many reasons including not finding suitable circumstances for carrying on activities. Undoubtedly the inaction in carrying out charitable purposes might also become actionable depending on other circumstances; but we are not concerned with such a case here. In these circumstances, we leave it upon the Commissioner of Income Tax to consider the issue by exercising his powers under sub-section (3) of section 12AA, if the facts justify such actions.

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• 2020 (2) TMI 1292
  Exemption to Reward as as approved by the government in Public Interest - whether the reference to approval in Section 10(17A) will include an implied approval or whether such approval has to be express? - HELD THAT:- The object of Section 10(17A) is to reward an individual who has been recognized by the Centre or the State for rendition of services in public interest. While clause (i) is concerned with an award whether in cash or in kind, instituted in public interest by the Central or any State Government or instituted by any other body and approved by the Central Government in this behalf, clause (ii) refers to a reward by the Central or a State Government for such purposes as may be approved by the Central Government in this behalf in public interest. No specification or prescription has been set out in terms of how the approval is to be styled or even as to whether a formal written approval is required. Nowhere in the Rules/Forms is there reference to a format of approval to be issued in this regard. That apart, one should, in my view, interpret the provision and its application in a purposive manner bearing in mind the spirit and object for which it has been enacted. It is clear that the object of such a reward is by way of recognition by the State of an individual s efforts in protecting public interest and serving society in a significant manner. Thus, in my considered view, the reference to approval in Section 10(17A) does not only connote a paper conveying approval and bearing the stamp and seal of the Central Government but any material available in public domain indicating recognition for such services, rendered in public interest. The petitioner has been recognized by the Central Government on several occasions for meritorious and distinguished services and from the information available in public domain, it is seen that he was awarded the Jammu Kashmir Medal, Counter Insurgency Medal, Police Medal for Meritorius Service (1993) and the President s Police Medal for Distinguished Service (1999). Specifically for his role in nabbing Veerapan, he was awarded the President s Police Medal for Gallantry on the eve of Independence Day, 2005. What more! If this does not constitute recognition by the Centre of service in public interest, for the same purposes for which the State Government has rewarded him, I fail to understand what is. The reward under Section 10(17A)(ii) is specific to certain purposes as may be approved by the Central Government in public interest and the purpose of the reward by the State Government has been echoed and reiterated by the Centre with the presentation of the Gallantry Award to the petitioner in 2005. This aspect of the matter is also validated by the Supreme Court in Abdul Karim [ 2000 (11) TMI 1257 - SUPREME COURT ] as can be seen from the judgment extracted earlier, where the Bench makes observations on the notoriety of Veerapan and the threat that he posed to the Country, as a whole. Seen in the context of the recognition by the Centre of the petitioners gallantry as well as the observations of the Supreme Court in Abdul Karim [ 2000 (11) TMI 1257 - SUPREME COURT ] and ratio of the decision in J.G.Gopinath [ 1979 (6) TMI 1 - MADRAS HIGH COURT ], the approval of the Centre in this case, is rendered a fait accompli.

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• 2020 (2) TMI 1291
  Disallowance u/s 40(a)(iib) - VAT remittances effected by the petitioner - Scope of specific restrictions on deduction u/s 40(a)(iib) - HELD THAT:- The State had originally imposed a privilege fee for the exclusive retail vending of IMFL that had been granted to TASMAC under the Tamil Nadu Prohibition Act. The appropriation of surplus of special privilege fee attracted the provisions of Section 40(a)(iib) after its amendment with effect from 01.04.2017. For this reason, according to the officer, the levy of special privilege fee had been withdrawn, only to be replaced by the levy of VAT. The timing of the withdrawal of privilege fee and introduction of VAT is no doubt curiously aligned to the amendment to Section 40(a)(iib) of the Act. This modus operandi, the Officer states, is nothing but a sham to escape the levy of tax. Lauding the wisdom of the Legislature that had anticipated such innovative methods for appropriating surplus, the officer notes that the provision included any other fee or charge by whatever name called which is levied exclusively on or which is appropriated directly or indirectly from a State Government undertaking by the State Government which encompasses the levy of VAT as well. Petitioner was called upon to file a reply to the SCN on or before 24.12.2019. Some time was sought by the petitioner and a detailed reply came to be filed on 27.12.2019. This has culminated in the impugned order of assessment, wherein the Officer confirms the proposal in the SCN, albeit by way of a short order. The length of an order is hardly a parameter to indicate application of mind or otherwise by an Assessing Authority. In the present case, the impugned order insofar as it relates to this issue is seen to be a mere repetition of the entire show cause notice and the legal arguments raised by the petitioner in reply dated 27.12.2019 and case-law referred to, have not been adverted to at all. An addition of a sum of Rs. 14,574.74 crores, in my considered view, does merit some amount of detailed discussion on the legal aspects involved, particularly in the light of the allegation regarding collusion between the State and TASMAC. In effect, the argument of the Officer is that the identity of TASMAC and the State are one and the same and the levy of VAT being within the control of the State has been used as a convenient/colourable device to get over the amendment to Section 40(a)(iib). These issues should have been addressed in some detail by the Officer after examining the contentions of the petitioner as well but have been dealt with in haste, perhaps since the issue was itself crystallized only under show cause notice dated 21.12.2019 issued at the eleventh hour. SCN soliciting a response could well have been issued in a timely manner particularly when the contentious issue had been identified as early as on 23.08.2019 and 13.09.2019 when queries had been put to the petitioner and its responses solicited. Valuable time has elapsed between 13.09.2019 and 21.12.2019 when the SCN was issued which could have been put to good use had the notice been issued well in advance on this issue at least. After all it is not necessary that all issues arising from the return are fully assimilated and crystallized for a comprehensive show cause notice to be issued. Specific issues, as and when identified, may be put to the assessee then and there to ensure timely and proper response and finalisation. Assessment insofar as it relates to disallowance in terms of Section 40(a)(iib) is set aside. The petitioner will appear before the Assessing Officer with its replies already filed as well as any other information that it has in its possession to defend the stand of the revenue, on Thursday, the 5th March, 2020 at 10.30 a.m. without expecting any further notice in this regard.

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• 2020 (2) TMI 1290
  Stay of demand on the recovery - HELD THAT:- According to us, the ITO, was required to consider the petitioner s application dated 22.01.2020 which is in fact, an application seeking for stay on the recovery of the entire demanded amount before issuing the impugned notice dated 12.02.2020. On this short ground, we are inclined to defer the execution of the impugned notice dated 12.02.2020. This is more so because Mr. Panandiker, the learned counsel for the petitioner on instructions, makes a statement that despite the impugned notice dated 12.02.2020 as yet, his bankers, have not remitted this amount to the Income Tax Department. If the petitioner s bankers have till date, not acted on the impugned notice dated 12.02.2020, then, they need not act upon the same until they receive further orders from the ITO. The ITO, to hear the petitioner assessee and dispose of the application dated 22.01.2020 seeking, in effect, a stay on the recoveries as expeditiously as possible and in any case within a period of six weeks from today. Until the petitioner s application dated 22.01.2020 is disposed of, the ITO to not insist upon compliance with the impugned notice dated 12.02.2020. The petitioner assessee to appear before the ITO on 04.03.2020 at 10.30 a.m. and file an authenticated copy of this order. Further, the petitioner, to cooperate with the ITO in the matter of disposal of the application or the request in the application dated 22.01.2020. The petitioner is also authorized to communicate the authenticated copy of this order to the Ratnakar bank Ltd., so that, the bank, need not act upon the impugned notice dated 12.02.2020 until it receives further orders from the ITO in this regard.

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• 2020 (2) TMI 1289
  Correct head of income - characterization of income - proceeds from sale of the properties vide sale deed - business income or capital gain - HELD THAT:- Business of the appellant-assessee is buying and selling properties situated in various places in Goa either wholly or in plots. Mr. Rivonkar s contention that the business of the appellant-assessee is only to purchase properties, develop them into plots or construct buildings upon them and thereafter to sell them cannot be accepted, looking to the aforesaid provisions in the Deed of Partnership by which the appellant-assessee came to be constituted. The business of the appellant-assessee very specifically includes buying and selling properties situated in various places in Goa either wholly or in plots. Considering the wide phraseology employed, it is obvious that the business of the appellant-assessee includes buying and selling even agricultural properties. Accordingly, we are unable to accept that the sale of the properties by the appellant-assessee vide sale deed dated 13.07.2006 has no nexus with the business of the appellant-assessee. Both the Assessing Officer as well as the CIT (Appeals) have noted that by sale deed dated 13.07.2006, the appellant-assessee sold not merely the agricultural property but also another property ad-measuring 2,525 sq.mtrs. to Headway Resort Line Pvt. Ltd. Therefore, this is not a case of sale of a solitary property, by way of a one off transaction. The appellant-assessee, in terms of Clause 2 of the Partnership Deed is clearly involved in buying and selling properties situated in various places in Goa either wholly or in plots. By sale deed dated 13.07.2006, the appellant-assessee has indeed sold the properties purchased by it for a considerable profit. This material, according to us, is more than sufficient to sustain the findings recorded by the AO and the ITAT. The finding of fact cannot be regarded as perverse, so as to give rise to any substantial question of law or so as to warrant interference. - Decided in favour of revenue.

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• 2020 (2) TMI 1288
  Addition u/s 68 - Unexplained cash credit - HELD THAT:- Investor company, namely, M/s. Epic Developers Pvt. Ltd. was one of the group entities of Benda Amtek Ltd. and Amtek Auto Ltd. and both had substantial returned income in the year in question of Rs. 1,28,24,076/- and Rs. 10,93,50,350/-. Therefore, there was no reason to doubt either the credit worthiness of the investor or the genuineness of the transaction. The aforesaid findings are purely factual in nature and do not raise any substantial question of law for consideration of this Court.

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• 2020 (2) TMI 1287
  Settlement Commission order in terms of Section 245D(2C) - whether the contract is divisible or indivisible is a matter laid before the Commission for consideration? - Commissioner has done in his report is only to reiterate the stand of the Department that the contr acts are, in fact, and in his opinion, indivisible - SC in considering the validity or otherwise of the application proceeds to delve into the merits of the matter even at that stage, concluding that the contract was composite and indivisible and hence the applicant, i.e,. the petitioner herein, had failed to make a full and true disclosure of income. HELD THAT:- Certainly, if the Commission decides adverse to the petitioner in final hearing, holding that the contract and transactions were composite and indivisible, there would be an additional tax liability upon the petitioner. This demand however can be raised only once a decision has been rendered in terms of Section 245D(4) by the Commission on the issues posed before it, the first of which is, whether at all the income from offshore supply is liable to tax in India. The question of full and true disclosure and the discharge of tax liability at all stages prior to final hearing, should be seen only in the context of the issues offered for settlement and the remittances of additional tax thereupon. Issues decided by the Commission and liability arising therefrom, will be payable only at the stage of such determination, which, in my considered view, is the stage of final hearing under Section 245D(4). Thus a final order passed by the SC will provide for the terms of settlement that can include any demand by way of tax, penalty or interest as well. Evidently, this demand raised after final settlement, can only refer to such issues as has been decided by the Commission over and above the additional income disclosed and tax paid by the assessee at the time of filing of application. This been envisaged and provided for in the statutory scheme of settlement under the Act. The scheme of Chapter XIX A is to provide a wholistic resolution of issues that arise from an assessment in the case of an assessee that has approached the Commission. Once an assessee has approached the Settlement Commission at the appropriate stage (in the case of this petitioner, there is no dispute on this score) all issues in relation to the assessment for that assessment year are at large before the SC. This is evidently to ensure that a single forum, a high powered one at that, will take into account the submissions of both parties and arrive at a decosopm on all issues that arise from such case/proceeding, in a comprehensive manner. The impugned order of the Settlement Commission is beyond the scope of Section 245D(2C) having been passed on the merits of the issue raised and set aside the same. This Writ Petition is allowed. No costs. Connected Miscellaneous Petitions are closed.

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• 2020 (2) TMI 1286
  Processing application under the Kar Vivad Samadhan Scheme, 1998 - determination of the amount payable under the scheme - inclusion of interest u/s 220(2) - petitioner seek direction to respondent No. 1 to issue a fresh certificate re-determining the amount payable under the Kar Vivad Samadhan Scheme, 1998 without taking into consideration the interest amount computed under Section 220(2) of the Income Tax Act, 1961 - HELD THAT:- Section 156 of the Act which deals with notice of demand and thereafter Rule 15 of the Income Tax Rules, 1962 which says that notice of demand under Section 156 shall be in Form No. VII. Clause (3) of Form VII provides that the notice of demand under Section 156 of the Act shall contain a provision informing the concerned assessee that if he did not pay the amount within the period specified, he would be liable to pay simple interest at one and one-half percent for every month or part of a month from the date commencing after end of the period in accordance with Section 220(2) of the Act. Designated authority is within his powers in adding up interest under Section 220(2) of the Act though not quantified at earlier point while processing application under the Kar Vivad Samadhan Scheme, 1998.

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• 2020 (2) TMI 1285
  Nature of expenditure - expenditure on the replacement of plant and machinery - revenue or capital expenditure - HELD THAT:- As relying on Desai Brothers [1974 (9) TMI 9 - GUJARAT HIGH COURT ] we have no hesitation in coming to the conclusion that the Tribunal committed an error in holding that the expenditure incurred on replacement of plant and machinery is a capital expenditure. In such circumstances, we answer the first substantial question of law in favour of the assessee and against the Revenue. Disallowance being tools and dies written off - HELD THAT:- We take notice of the fact that while disturbing the finding of fact recorded by the CIT(A), the Tribunal has not assigned any good reason. The Tribunal straightway proceeded to disturb such finding. The expenditure incurred on dies and tools is a recurring revenue expenditure and no capital asset of enduring benefit comes into existence more so because the dies need to be replaced often. Second substantial question of law stands squarely covered by the decision in the case of Banco ( [2018 (1) TMI 1309 - GUJARAT HIGH COURT ) and Sunbeam ( 2012 (6) TMI 59 - DELHI HIGH COURT ) and we propose to follow the ratio of both the decisions. - Decided in favour of assessee.

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• 2020 (2) TMI 1284
  Commission paid to Indian resident for booking orders for export - deduction of expenditure u/s 37 (1) - Conclusion of the Tribunal is that to justify the payment of commission the assessee had to prove in every case that the order had been obtained from the agent - Contention of the assessee was that as per the agreement, the assessee was to pay commission on whatever sale was generated within the territory of the agent. The crucial clause in this regard is Clause 4 (supra). The Tribunal held that this clause would not supersede Clauses 1 to 3 and 5. HELD THAT:- In our opinion, the interpretation of the Tribunal is incorrect. Those clauses nowhere stipulates that the assessee is not bound to report to the agent any enquiry which may have received directly or indirectly. From reading of the agreement it is clear that no order can be processed by assessee without services the agent and if that is so, the assessee was bound to pay commission on any sale which was taken place in the territory of an agent (subject to condition 7 supra). In these circumstances, we hold that Clause (4) of the said agreement has wrongly been interpreted by the Tribunal in the facts and circumstances of the case.

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• 2020 (2) TMI 1283
  Adjustment under Section 145-A - Variation in excise duty paid by procuring raw materials and discharge of excise duty liability on non-finished goods - HELD THAT:- Respondent followed the above accounting method while accounting for its excise duty paid on raw materials and final products. Respondent had explained which was accepted by the first appellate authority that ICAI mandates usage of exclusive method as per which the amount of excise duty actually paid on inputs cannot be debited to the profit and loss account. But this was an expenditure which had actually been incurred and thus, adjustment under Section 145-A should be allowed to the respondent and deducted from the profits subject to tax in India. Following its earlier decision in the case of the respondent itself for the assessment year 2009-10 [ 2017 (2) TMI 39 - ITAT MUMBAI] the first appellate authority took the view that deduction on account of adjustment under Section 145-A should be allowed. Irrespective of the fact that Revenue s appeal for the assessment year 2009-10 was dismissed on withdrawal on the ground that the tax effect was below the prescribed limit, we have independently applied our mind to the said order which has been followed by the Tribunal for the present assessment year and we find that the view taken by the first appellate authority as affirmed by the Tribunal is correct and no interference is called for. The first appellate authority had rightly deleted the addition, which has been affirmed by the Tribunal. On thorough consideration, we do not find any merit in this appeal as no substantial question of law arises out of the order of the Tribunal.

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• 2020 (2) TMI 1282
  Withholding of the refund in terms of Section 241A - Withholding of refund in certain cases - exercise of powers under Section 241A - HELD THAT:- Auto-generated communication dated 24.3.2019 which contained the note of withholding of the refund in terms of Section 241A of the Act, does not satisfy any of the legal tests for passing said order. Firstly, it is not passed by the Assessing Officer who is competent to do so. Secondly, it is not even an order, it is a mere auto-generated communication. Thirdly, it does not contain any reasons recorded in writing and lastly it is not passed with the prior approval of the Principal Commissioner or Commissioner. When Section 241A confers the Assessing Officer with wide discretionary powers and at the same time, puts conditions for exercise of such powers, such exercise under no circumstances can be taken over by computerized system. The very essence of passing of the order under Section 241A is application of mind by the Assessing Officer to the issues which are germane for withholding the refund on the basis of statutory prescription contained in the said Section. We must, therefore, deprecate the practice of the department in sending such auto-generated response to the assessees for withholding the returns. Merely because in the immediately preceding assessment year 2016-17, the assessee had declared a positive income as against substantial loss declared in the present assessment year, that by itself, cannot be a ground to doubt the contents of the return or the claim of the assessee with respect to the loss suffered. The reference to the several issues which are common in the present assessment year and which are pending before the Tribunal, also in facts of the case would not be a ground to withhold the refund. This is so for the following reasons. We are prepared to proceed on the basis that the Assessing Officer in relation to such issues, in case of the assessee for the earlier assessment years, has already taken a view adverse to the assessee. However, such issues are pending before the Tribunal at the hands of the assessee. We do not find that the exercise of powers by the Assessing Officer fulfills requirement of Section 241A of the Act. We have, no doubt, about the existence of the powers. We find that the exercise of the powers would not be justified in facts of the case. In the result, the orders impugned in both the petitions are set aside. Resultantly, the respondents shall release refund of the petitioner arising out of the return filed for the assessment year 2017-18 and the process thereof under Section 143(1) of the Act by the Assessing Officer. This shall be done along with statutory interest within a period of three weeks from the date of receipt of copy of this order.

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• 2020 (2) TMI 1281
  Unexplained investment u/s 69 - assessee has purchased old tenanted properties situated in slum areas, filed copies of sale deeds of properties in the similar vicinity - HELD THAT:- AO in the instant case has conducted independent enquiry by recording the statement of the seller of both the properties wherein he has categorically admitted by stating the reasons for selling the property at price below the prevalent circle rates. Further nothing has been brought on record to prove that the assessee has paid anything extra over and above the value of agreement in any other form of consideration. Nothing has been brought on record that money has emanated from the assesee s coffers. The sole reliance in the instant case is the basis of estimates made by the DVO in the valuation report. It has been held in various decisions that additions cannot be made on the basis of surmises and conjectures in the absence of any tangible material on record. Since in the instant case assessee has purchased old tenanted properties situated in slum areas, filed copies of sale deeds of properties in the similar vicinity at about the same time which were sold at price below the circle rate, also filed valuation report of registered valuer and the seller of the properties has appeared before the AO and has confirmed to have sold the property at the price mentioned in the sale deed only and there is no material available before the revenue authorities that assessee has paid anything more than what is mentioned in the sale deed, therefore, we are of the considered opinion that no addition is warranted in the instant case by invoking the provisions of section 69. We, therefore, set aside the order of the CIT(A) and direct the AO to delete the addition. The grounds raised by the assessee are accordingly allowed.

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• 2020 (2) TMI 1280
  Reopening of assessment u/s 148 - explained cash deposits - HELD THAT:- Source for cash deposits were not explained with the cogent evidences. The assessee has tried to explain the sources of cash deposits before us through cash/bank book filed before us by way of withdrawals from banks, rent , partner remuneration from firm etc. which need verifictaion. Also at the same time observed that no specific deficiencies were pointed out by authorities below in the cash/bank books while generalized adverse comments were made by authorities below. To be fair and reasonable to both the parties and to render justice, in our considered view, there is a need for verification of cash/bank book entries vis- -vis cash deposits and co-relation with income declared by assessee before Revenue in the return of income filed and consequently due taxes paid to revenue on such income claimed to be sources of deposits. Thus for this limited verification ,we are restoring the matter back to the file of the AO for both the years as similar issues are involved. The AO is directed to go through records produced by assesses and to point out specific defects /escarpment of income leading to culmination of income which had escaped assessment and which needed to be brought to tax in the hands of the assessee instead of making generalized comments - Appeals filed by assessee are allowed for statistical purposes.

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• 2020 (2) TMI 1279
  TP Adjustment - Arm s Length Price (ALP) test as provided u/s.92 - upward revision and adjustment made to the price at which international transaction was carried out by the Assessee with its AE in respect of Software development Services(SWD services) - HELD THAT:- Companies functionally dissimilar with that of assessee need to be deselected engaged in providing software development services (SWD services) to its Associated Enterprises (AE) from final list. Companies having turnover more than 200 crores upto 500 crores has to be regarded as one category and those companies cannot be regarded as comparables with companies having turnover of less than 200 crores

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• 2020 (2) TMI 1278
  Reopening of assessment u/s 147 - assessment order not issued any notice u/s 143(2) with regard to the revised return filed by the assessee - service of Notice u/s 143(2) after the filing of the revised return of income u/s 139(5) - HELD THAT:- Originally the assessee filed the return of income on 30.09.2012 declaring total income. Consequent to this, the A.O. issued notice u/s 143(2) of the Act on 14.08.2013. Later, the assessee filed revised return of income on 17.03.2014 by admitting the same income. AO computed the income by stating as follows:- Income as per revised return of income Rs. 7,05,85,430. The revised return filed by the assessee is within the stipulated time provided u/s 139(5) of the Act. Though the A.O. considered the revised return of income, which is stated in the assessment order as above, he has not issued any notice u/s 143(2) of the Act with regard to the revised return filed by the assessee. In our opinion, it was the duty of the Assessing Officer to issue notice u/s 143(2) of the Act, when he has taken the consequence of the revised return and pass assessment order. His failure to issue notice u/s 143(2) of the Act while framing the assessment on the basis of revised return, is bad in law and it cannot be sustained. Accordingly, we quash the assessment order. Appeal filed by the assessee is allowed.

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• 2020 (2) TMI 1277
  Validity of assessment u/s. 144C(13) - Whether objections filed by the assessee were time barred and hence no cognizance could have been taken of them? - HELD THAT:- If the objections are invalid as time barred having not been filed within the time prescribed under sub-section (2) of section 144C, the AO will have to act in terms of Section 144C(3)(b) and complete the assessment within the time prescribed u/s 144C(4)(b) of the Act, namely, within one month from the end of the month in which the period of filing of objections under sub-section (2) expires. Adverting to the facts of the instant case, it is found that, the period of 30 days for filing objections within sub-section (2) of section 144C expired on 23.01.2019. Going by the mandate of sub-section (3) of section 144C(3)/144C(4), the AO was supposed to complete the assessment on the basis of the draft order by February, 2019. As against this, the AO actually completed the assessment u/s. 144C(13) on 24.10.2019. Such a completion of assessment not only under the wrong provision but also beyond the limitation period is ultra vires and hence cannot stand. We declare the assessment order to be time barred and ex consequenti null and void, with the effect that the returned income will automatically get accepted as finally assessed income. Appeal allowed.

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• 2020 (2) TMI 1276
  Receipt of Fees for Technical Services (FTS) under the provisions of section 9(1)(vii) - Assessee is a foreign company having expertise in the mining activity - HELD THAT:- As in ABB FZ-LLC Vs. Income Tax Officer [2016 (11) TMI 368 - ITAT BANGALORE] held that in the absence of provision of DTAA to tax fee for technical services, the same would be taxed as per article 7 of DTAA as business profits and in the absence of PE in India, the said income is not chargeable to tax in India. The coordinate Bench in the case of M/s ABB FZ-LLC Vs. Income Tax Officer [2016 (11) TMI 368 - ITAT BANGALORE] held that once the income chargeable to tax as per the DTAA are categorized by excluding the Fees for Technical Services then the scope of taxing the said income cannot be expended by importing the said provision from the Income Tax Act. Payment made on account of FTS required to be taxed under Article 7 and in the absence of permanent establishment, the business receipts are not chargeable to tax in India In the instant case, there is no dispute that the payment made was in the nature of FTS and there is no article in DTAA for taxing the FTS separately. Therefore, the payment made to the non resident required to be taxed under article 7 under the head business profits . There is no PE in India to non resident. The AO has not made out a case of having PE to non resident in India. Therefore, the payment made to non resident are not to be taxed in India as business profits. Though the department has tried to distinguish the case laws, the fact remains that in the case laws referred above, the payment was made in the nature of Fee for Technical Services and the department has also accepted that the payment made to the non resident was in the nature of FTS. We hold that the lower authorities have erred in taxing the FTS separately u/s 9(1)(vii) of the Act. Accordingly orders of the lower authorities are set aside and the appeals of the assessee are allowed.

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• 2020 (2) TMI 1275
  Characterization of income - profit from sale of land - conversion of agricultural land into non-agricultural land - same land was plotted and entered into agreement with REHWS on 13/08/2012 and sold the same - HELD THAT:- Intention of the assessee is to make profit out of the transaction, therefore entire activity carried by the assessee i.e. purchasing the agricultural land converting into non-agriculture and plotted the same and sold the plots to the REHWS is the activity adventure in the nature of trade , therefore it has to be treated as business income and not capital gains. The ld. CIT(A) by following the judgment of the Hon ble Supreme Court in the case of G.Venkataswamy Naidu Co. Vs. CIT [ 1958 (11) TMI 5 - SUPREME COURT] came to a conclusion that what is the intention of the assessee has to be seen to decide whether transaction is adventure in the nature of trade or not. The ld. CIT(A) by considering the principles laid down by the Hon ble Supreme Court in the above referred to judgment, in my opinion, he came to a correct conclusion that the activity carried by the assessee in the present case is adventure in the nature of trade for the reason that from the beginning assessee s intention is to make profit out of the sale transaction and not to hold it. Assessee s intention is only to make profit out of the transaction, therefore in my opinion, ld. CIT(A) correctly decided that the activity carried by the assessee is adventure in the nature of trade , therefore find no reason to interfere with the order passed by the ld. CIT(A). So far as the development undertaken by the REHWS is concerned, it is not a material fact. The material fact in this case is only intention of the assessee, therefore, find no force in the argument of the ld.AR, therefore same is rejected. Thus, this appeal filed by the assessee is dismissed.

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• 2020 (2) TMI 1274
  Addition u/s 68 - advances received from customers on the occasion of Ramnavami Nayakhata - HELD THAT:- Claim of the AO is that, the assessee has conveniently and very cleverly filed his reply before few days, when the case is going to be time barred and hence the documents filed cannot be verified is factually incorrect. Just because there are problems of time and manpower to conduct verification and detailed examination of the claims of the assessee, an addition cannot be made by rejecting the claim of the assessee. In the normal course, we would have restored the issue to the file of the AO for fresh verification of the claim of the assessee that it had received advances from customers on the occasion of Ramnavami Nayakhata. In other words, we would have given the AO more time to conduct enquiries and investigation. In this case we find that these advances have subsequently been recorded as sales of the assessee firm and that these sales have been accepted as income by the AO during the year. He has not disturbed the sales of the assessee. When a receipt is accounted for as income, no separate addition of the same amount as income of the assessee under any other Section of the Act can be made as it would be a double addition. In the result, we delete the addition made and allow its claim of the assessee. Appeal of the assessee is allowed.

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• 2020 (2) TMI 1273
  Revision u/s 263 - Use of word seems by the CIT while recording reasons - Limited scrutiny with reason Large Agricultural Income - profit on sale of agricultural land - HELD THAT:- In the present case the Ld. Pr. CIT did not hold any enquiry into the matter and merely rejected the explanation of assessee without arriving at a definite finding that the assessment order is erroneous insofar as prejudicial to the interests of Revenue. The Hon ble Delhi High Court in the case of Director of Income Tax vs., Jyoti Foundation [ 2013 (7) TMI 483 - DELHI HIGH COURT] held that Revisional Authority feeling a case of inadequate enquiry, must make enquiry to make out a case under section 263 of Income Tax Act. The assessee in the paper book has also filed an affidavit of Shri Satbir, in which he has confirmed that property was purchased in his name, but, he has not spent any consideration. The property was registered in his name by the Company now known as Limited Liability Partnership Firm and entire sale consideration have been received by the Assessee-Firm being the owner. This would also strengthen the case of the assessee that it was owner of the property in question. The assessee also produced sufficient evidence before A.O. to show that it has earned agricultural income out of the sale of agricultural land and agricultural produce. Since the case was selected for limited scrutiny only on these points and assessee furnished adequate explanation and evidences before the A.O, which have been examined by the A.O, therefore, it is not a case of even inadequate enquiry. In the show cause notice issued by the Ld. Pr. CIT, Dated 21.12.2018, at the end of Para No.6, after considering the facts of the case noted that it seems that the A.O. has not properly examined the documents filed and merely accepted the explanation of the assessee without even asking further queries on the above emanated issues. It seems that, Assessment order passed by the A.O. in this case is erroneous and prejudicial to the interests of the Revenue. The Ld. Pr. CIT has referred the word seems twice in para 6 of the above show cause notice. It would, therefore, show that even he was not sure whether it is a fit case of invoking jurisdiction under section 263 of the Income Tax Act, 1961. Therefore, it is not the case of no enquiry by the A.O. Therefore, Explanation-2 to Section 263 of the Income Tax Act, 1961, would also not be attracted in the case of the assessee. Since the A.O. examined this issue in detail on account of limited scrutiny assessment on exactly on the point in issue and decided the case accordingly, therefore, there was no justification for the Ld. Pr. CIT to invoke the jurisdiction under section 263. In this view of the matter, we set aside the impugned order of the Ld. Pr. CIT passed under section 263 of the Income Tax Act, 1961 and restore the assessment order. - Decided in favour of assessee.

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• 2020 (2) TMI 1272
  Benefit of deduction u/s. 80IC - assessee is a company engaged in telecommunication software development and trading in telecommunication hardware required mainly to run their software that are being supplied to the prospective consumers - HELD THAT:- Conclusive to hold that there were two segments or verticals and is contrary to the Agreements under which the Assessee had to perform certain obligations to BSNL in the form of supply of software, hardware, installation and maintenance thereof. As we have already seen, the agreement with ZTE is very clear that the supply of software and hardware necessary to support the software supply, installation commissioning as well as rendering support services were to be done on a turnkey basis. Though the services agreement is separately entered into by the assessee, it has a direct nexus and connection with the agreement for supply of software. In these circumstances, the decisions cited by the ld. counsel for assessee, clearly supports the case of the assessee. We are therefore of the view that the claim made by the assessee for deduction u/s. 80IC of the Act ought to have been allowed by the AO/CIT(A) and they fell into an error in not allowing the said claim. We therefore hold that the assessee is entitled to claim deduction u/s. 80IC of the Act on service charges Deduction u/s 36(1)(viii) on account of bad debts written off - HELD THAT:- Claim of assessee for deduction ought to have been allowed by the revenue authorities. It is clear from the order of AO that AO never doubted that the sum written off as bad debts was already included as income of assessee in the earlier previous years. There is no condition laid down in section 36(1)(vii) that the sum which is written off as bad debts should have suffered tax and if that income is claimed as exempt or deduction is claimed, then deduction on account of bad debts written off should not be allowed. We are also satisfied that the assessee has established that the sum written off as bad debts was in fact offered to tax in the earlier previous years as income and included while computing total income. The requirement of establishing that the debt has become bad and irrecoverable is no longer necessary after the decision of the Hon ble Supreme Court in the case of TRF Ltd. [ 2010 (2) TMI 211 - SUPREME COURT] . We are therefore of the view that none of the reasons assigned by the revenue authorities to deny the benefit of deduction on account of bad debts written off are sustainable. - Decided in favour of assessee

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• 2020 (2) TMI 1271
  Outstanding liability of gift vouchers disallowed - Method of Accounting adopted by the Appellant to determine its liability on account of gift vouchers - HELD THAT:- Disallowance of the outstanding liability of gift vouchers in the case of the assessee was supposed to be restricted only to the extent the same were found to be more than 3 years old. Accordingly, we direct the A.O to restrict the disallowance in respect of the gift vouchers on the same basis as had been adopted by the Tribunal while disposing off the appeal of the assessee for A.Y. 2008-09. Although, the ld. A.R in the course of the hearing of the appeal had furnished a chart therein working out the value of the gift vouchers outstanding for more than 3 years, however, in the absence of any supporting documentary evidence the same cannot be summarily accepted on the very face of it. Assessee is directed to furnish the working of the details of the gift vouchers which are outstanding for more than 3 years on the basis of supporting documentary evidence in the course of the set aside proceedings before the A.O. As such, the matter is restored to the file of the A.O for the limited purpose of giving effect to our aforesaid observations. Needless to say, the A.O shall in the course of the set aside proceedings afford a reasonable opportunity of being heard to the assessee. Accordingly, the order passed by the CIT(A) is set aside in terms of our aforesaid observations. The Ground of appeal No. 1 to 3 are allowed for statistical purposes.

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• 2020 (2) TMI 1270
  Deduction u/s 80IC denied - whether certain items of income, such as, claims received, misc. income, sundry balance written back, etc., can be considered as part of the profits of the eligible unit for computing deduction under section 80IC ? - HELD THAT:- Notably, identical issue came up for consideration before the Tribunal in assessee s own case for the assessment year 2009 10. While deciding the issue in [ 2016 (4) TMI 1163 - ITAT MUMBAI ] the Tribunal has restored the issue to the Assessing Officer with certain directions. Disallowance under section 14A r/w rule 8D - HELD THAT:- We have held that in case no exempt income is earned by the assessee during the year, no disallowance under section 14A of the Act can be made. That being the case, the ground raised by the Revenue has become redundant. Suffice to say, if the assessee had sufficient interest free fund available with it to take care of the investment, disallowance of interest expenditure cannot be made. For this reason also, no disallowance under section 14A r/w rule 8D(2)(ii) can be made. In view of the aforesaid, we dismiss the ground raised by the Revenue. MAT u/s 115JB - not to add back provisions for wealth tax while calculating book profit under section 115JB of the Act - HELD THAT:- On a reading of Explanation 1(a) to section 115JB(2) of the Act, it becomes clear that it only speaks about income tax paid or payable or any provisions made for income tax. There is no reference to wealth tax liability under Explanation 1(a) to section 115JB(2) of the Act. Even otherwise also, the issue is covered in favour of the assessee by the decision in CIT v/s Echjay Forgings Pvt. Ltd. [ 2001 (2) TMI 56 - BOMBAY HIGH COURT ] wherein while considering pari materia provisions contained under section 115J(IA) of the Act, the Hon ble High Court has held that wealth tax is not contemplated in income tax paid or payable. In view of the aforesaid, we have no hesitation in holding that wealth tax liability does not come within the purview of Explanation 1(a) to section 115JB(2). Insofar as learned Departmental Representative s contention that wealth tax is an unascertained liability, hence, covered under Explanation 1(c) to section 115JB(2) of the Act, we are unable to accept the same. Wealth tax payable is certainly an ascertained liability, hence, cannot be treated as unascertained liability. Therefore, it is not covered under Explanation 1(c) to section 115JB(2) Disallowance u/s 14A r/w rule 8D both under the normal provisions as well as while computing book profit under section 115JB - specific contention of assessee before us that during the year under consideration, the assessee has not earned any exempt income whatsoever and the dividend income referred to by the Assessing Officer was earned from a foreign company and offered to tax in India - HELD THAT:- If in the year under consideration the assessee has not earned any exempt income, no disallowance under section 14A r/w rule 8D can be made. Therefore, the Assessing Officer is directed to delete the disallowance after verifying assessee s claim. Even otherwise also, it is now fairly well settled that while computing book profit, the Assessing Officer cannot make any adjustment by invoking the provisions of section 14A of the Act. The only adjustment which the Assessing Officer can make is as per Explanation 1(f) to section 115JB of the Act. Therefore, if there is no exempt income earned during the year, then there is no question of making any disallowance under section 14A of the Act. International transaction u/s 92B - corporate guarantee - assessee has challenged the quantification of arm s length rate of corporate guarantee commission @ 2.5% per annum - HELD THAT:- As decided in own case [ 2016 (4) TMI 1163 - ITAT MUMBAI ] Tribunal has held that the provision of corporate guarantee to the AE comes within the purview of international transaction as defined under section 92B of the Act. However, noticing that in assessee s own case the Revenue has accepted the arm s length price of corporate guarantee commission @ 0.5% in assessment year 2006 07 and 2007 08, the Tribunal has held that arm s length price of the corporate guarantee commission should be fixed @ 0.5%. The same view was reiterated by the Tribunal while deciding identical issue in assessee s own case for the assessment year 2010 11. Facts being identical, respectfully following the aforesaid decisions of the Co ordinate Bench in assessee s own case, though, we hold that the provision of corporate guarantee to the AEs is an international transaction within the meaning of section 92B of the Act, however, we are of the view that guarantee commission charged by the assessee @ 0.5% is at arm s length requiring no further adjustment. Therefore, we delete the adjustment made by the Transfer Pricing Officer and confirmed by learned DRP. Add back provisions for wealth tax while calculating book profit under section 115JB - HELD THAT:- Adjustment made on account of interest on loan advanced to the AE - HELD THAT:- On a reading of Explanation 1(a) to section 115JB(2) of the Act, it becomes clear that it only speaks about income tax paid or payable or any provisions made for income tax. There is no reference to wealth tax liability under Explanation 1(a) to section 115JB(2) of the Act. Even otherwise also, the issue is covered in favour of the assessee by the decision of CIT v/s Echjay Forgings Pvt. Ltd. [ 2001 (2) TMI 56 - BOMBAY HIGH COURT ] wherein while considering pari materia provisions contained under section 115J(IA) of the Act, the Hon ble High Court has held that wealth tax is not contemplated in income tax paid or payable. In view of the aforesaid, we have no hesitation in holding that wealth tax liability does not come within the purview of Explanation 1(a) to section 115JB(2) of the Act. Insofar as learned Departmental Representative s contention that wealth tax is an unascertained liability, hence, covered under Explanation 1(c) to section 115JB(2) of the Act, we are unable to accept the same. Wealth tax payable is certainly an ascertained liability, hence, cannot be treated as unascertained liability. Therefore, it is not covered under Explanation 1(c) to section 115JB(2) of the Act. In view of the aforesaid, we uphold the direction of learned DRP on the issue. Ground raised by the Revenue is dismissed.

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• 2020 (2) TMI 1269
  Disallowance u/s 14A r.w.r. 8D - HELD THAT:- Section 14A (2) provides that the AO while determining the amount of expenditure incurred in relation to the exempt income, first of all, should examine the claim of the assessee having regard to the accounts maintained by the assessee and then he has to satisfy himself with the correctness of the claim of the assessee in respect of expenditure incurred in relation to the exempt income. If the assessee having regard to the accounts and nature of expenses debited points out that these expenditures are not connected or attributable to earning of exempt income, then same cannot be roped in for the purpose of disallowance under this section unless Assessing Officer finds something contrary. When the assessee has given a very detailed working, then without pointing out any defect, the AO in a very general manner has held that there is direct and proximate nexus between the expenditure and the exempt income. The satisfaction of the AO should not be mechanical but should prima facie indicate his application of mind on the accounts maintained by the assessee and the nature of expenditure debited vis- -vis its co-relation with the earning of the exempt income. It is a well settled proposition in GODREJ BOYCE MANUFACTURING COMPANY [ 2017 (5) TMI 403 - SUPREME COURT] that satisfaction of the AO is mandatory before resorting to disallowance. Here in this case, as pointed out earlier there is no requisite satisfaction by the AO and he has mechanically applied rule 8D. Manner in which disallowance under Rule 8D(iii) has been made by the Assessing Officer is not called for and, accordingly, the disallowance made by the AO over and above the suo moto disallowance made by the assessee is deleted. Appeal of the assessee is allowed.

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• 2020 (2) TMI 1268
  Addition of rent expenses - lower authorities have denied the claim of the assessee on the ground that some of group concerns were situated in the same premises, and therefore, the claim of the assessee was bogus, and accordingly rejected - HELD THAT:- We find that lower authorities have not disputed the quantum of rent paid by the assessee nor business requirement of the assessee. Addition made by the Department on the assumption that some of the group of concerns of the assessee also situated in that premises, and therefore, it was a diversion of funds and as such a bogus claim. Before both the authorities, the assessee has explained the business exigency for hiring such premises and payment of rent. Today s competitive business environment easy accessability is one of the prime factors required for attracting customers, and therefore, reasoning given by the assessee for incurring such rental incomes cannot be simply brushed aside. While denying the claim of the assessee, Revenue has not factored in the business exigencies as explained by the assessee. We are not convinced with narrow consideration of the Revenue authorities in rejecting claim of the assessee. Therefore, we delete the impugned addition incurred by the assessee towards rental expenses, and allow claim of the assessee. Unexplained cash credit - HELD THAT:- Reasons assigned by the ld.CIT(A) are not justifiable. Once assessee has demonstrated genuineness of the transaction, credit-worthiness of the creditors and identified creditors for substantial amount of Rs. 66 lakhs, then to disbelieve Rs. 28,000/- on ground that equal amount was found to be deposited in the account of creditors in cash is a very erroneous reasoning. Therefore, we are of the view that the ld.CIT(A) was not justified to partially confirm the cash credit from the alleged creditors. We allow this ground of appeal, and delete addition of Rs. 59,000/-. - Appeal of the assessee is allowed.

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• 2020 (2) TMI 1267
  Reopening of assessment u/s 147 - Addition u/s 68 - HELD THAT:- AO has not even specified as to what is the amount of alleged income escaping assessment, which shows that AO has merely recorded certain unsubstantiated allegations on the basis of some information received, which is against the principle laid down by the Hon ble Delhi High Court in the case of CIT vs SFIL Stock Broking Ltd. [ 2010 (4) TMI 102 - DELHI HIGH COURT] wherein it was observed that reassessment proceedings were initiated on the basis of information received from investigation wing regarding alleged accommodation entries and it has been held by jurisdictional Delhi High Court that mere information received from DDIT(Inv) cannot constitute valid reasons for initiating reassessment proceedings in the absence of anything to show that A.O. had independently applied his mind to arrive at a belief that the income had escaped assessment. Thus, the AO has acted mechanically and without any independent application of mind. The reasons recorded are therefore vague, highly non specific and reflect complete non-application of mind. It is also noted that there is no live link or direct nexus between alleged material and, inference. It is further noted that initiation of proceedings is also based on non application of mind much less independent application of mind but is a case of borrowed satisfaction. Nothing is independently examined or considered by the AO which can demonstrate non-application of mind by him. There is nothing to show that the cash is paid from coffers of the assessee. Reasons do not indicate as to who AO reached to the conclusion that the assessee received accommodation entry and escaped assessment. Proceedings initiated by invoking the provisions of section 147 of the Act by the AO and upheld by the Ld. CIT(A) are nonest in law and without jurisdiction, hence, the assessment is quashed and ground no. 1 is allowed.

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• Customs

• 2020 (2) TMI 1266
  Amendment in shipping bills - Benefit under Merchandise Exports from India Scheme (MEIS) - petitioner inadvertently opted for No instead of Yes in the shipping bills - Corrections to be made is denied - HELD THAT:- This very issue as to whether the inadvertent error of not claiming benefit under the MEIS was fatal to the claim itself has come to be considered by learned single Judges of this Court in M/S. PASHA INTERNATIONAL VERSUS THE COMMISSIONER OF CUSTOMS, THE ASSISTANT/DEPUTY COMMISSIONER OF CUSTOMS (EXPORTS) , THE JOINT DIRECTOR GENERAL OF FOREIGN TRADE [ 2019 (2) TMI 1187 - MADRAS HIGH COURT] where reliance was placed in the case of in the case of SAINT GOBAIN INDIA PVT. LTD. VERSUS UNION OF INDIA [2018 (11) TMI 536 - KERALA HIGH COURT], to hold that petitioner shall produce the said NOC before the 4th respondent and seek the benefits from the 4th respondent. The error in not stating YES to availment of the Scheme, such error, admittedly being inadvertent and Mr.Rajinish Pathiyil fairly does not dispute, this should not stand in the way of the consideration of entitlement on merits - the benefit of the Scheme would be available to the petitioner conditional upon verification and acceptance of such claim by the DGFT. The impugned order rejecting the request for amendment is quashed - Petition allowed.

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• 2020 (2) TMI 1265
  Provisional release of goods - refund of IGST - lifting and removal of seizure - HELD THAT:- Although, it is evident that investigation is under process, the provisions of section 110 of the Customs Act, 1962, requires such investigation to be completed within a certain time frame. In case it relates to seizure of goods, documents and things, this time frame is initially for a period of six months which can be extended for a further period, not exceeding six months. As such, it is incumbent upon the concerned authorities to complete the investigation within the time frame as specified under section 110 of the Customs Act, 1962, in the facts and circumstances of the instant case. The writ petition is disposed off with a direction upon the concerned respondent authorities to complete the investigation at an early date and ensure that the adjudicatory process is completed within a reasonable period of time, preferably within a period of six months from the date of communication of a photostat certified copy of this order.

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• 2020 (2) TMI 1264
  Admissibility of application - issuance of show cause-cum-demand notice under Section 28 of the Customs Act, 1962 - guilty of suppression of material facts - case of the transferee is that they are not liable on the show cause notice - HELD THAT:- The tribunal in its impugned order dated 22nd December, 2015 ought to have followed that decision and rules in favour of the appellant but did not do so - This appeal under Section 130 of the Customs Act, 1962 is formally admitted. Application disposed off.

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• 2020 (2) TMI 1263
  Condonation of delay of 764 days in filing the appeal - imposition of penalty for violation of Regulation 11(a) and (n) of CBLR, 2013 - HELD THAT:- It is settled position of law that merely because a decision which is in favour come to the notice, it cannot be a ground to seek condonation of delay. The appellant has failed to promptly avail the appeal remedy. Though law of limitation is not meant to destroy the right of parties, it cannot favour those who are sleeping. In the present case, the appellant has deliberately opted not to file appeal initially. Thereafter, this appeal is filed only on the advice given that the penalty can be set aside - there is no evidence to show that the livelihood of appellant is affected or his intention to expand business is interrupted. The appellant has not been able to put forward sufficient cause to condone the delay. Further, the delay is more than two years - the application for condonation of delay is without merits - Appeal dismissed.

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• 2020 (2) TMI 1262
  Duty Free Import Authorisation (DFIA) scheme - seeking clearance of Cocoa Powder as against Maida, Atta and Flour - export of Biscuits - whether entries in SION or Exim Policy are to be understood in common man s understanding/trade parlance or on the basis of Technical literature? - right to reopen the issue once the same was settled by the Apex Court - applicability of principles of ejusdem generis or Noscitur a socciis - extended period of limitation. HELD THAT:- If Flour is placed along with Maida/Atta it cannot be taken to include Cocoa Powder for the reason that Cocoa Powder is a technically a Flour of beans. The issue is not so complicated and isolated that one requires to refer to Technical Literature to understand the terms. Technical Literature, being in its place, is no alternative to common sense and common man s understanding or for that matter Trade parlance. It s not the case of the importers that a common man on the street understands that Cocoa Powder and Atta/ Maida/Flour to be one and the same. No common man would go to a Flour mill to purchase Cocoa Powder . Therefore, no amount of painful elaboration based on too technical literature would replace common man s understanding particularly when the issue concerns very mundane thing like Atta/ Maida/Flour and certainly not Rocket Science. Whether the principles of ejusdem generis or Noscitur a socciis are applicable? - HELD THAT:- The word Flour has been used in conjunction with Atta/Maida and therefore, it would take the meaning of the words used along with it. One need not stretch the imagination and mental faculties to adduce the meaning of Flour to Cocoa powder . In view of the same and going by common man s understanding as enunciated by the various judgments of Higher Courts, we are inclined to accept the contention of the Revenue in this regard. We reject the contention of the importers that Cocoa Powder can be imported as a replacement for Atta/ Maida/Flour . DGFT, vide Public Notice No. 93 (RE-2010)/2009-14 dated 1/2/2012, permitted duty free import of 09gm of Cocoa Powder as additive/ingredient against export of 1kg of Biscuits. This means that, prior to 1/12/2012, import of Cocoa Powder as an input item was not permissible against export of Biscuits under DFIAs. In the present case, the Department has obtained required clarification from DGFT authorities who clarified that the importers are not allowed to import Cocoa Powder under the DFIAs issued against the item description Maida/Atta/Flour . Reopening of assessments - HELD THAT:- The appellants have argued that in most of the cases, department has assessed the import consignments on the basis of Tribunal s decision in the case of S. Kushalchand Co and therefore, it is not open for the customs to reopen the assessments. There is no estoppel in taxation matters and Revenue can set right a wrong that has crept in to the system in the past. The benefit of Notifications No 40/2006-Cus dated 1/5/2006 and No 98/2009-Cus dated 11/9/2009is not automatic. It is subject to fulfilment of various conditions. Both notifications prescribe that the description, value and quantity of materials imported are covered by the said authorisation and the said authorisation is produced before the proper officers of customs at the time of clearance for debit . Therefore, the Customs Officers who are administering the exemption are within their right to revise the practice despite a precedent. Cocoa Powder cannot be equated with Flour/Atta/Maida and thus cannot be imported against the DFIAs issued against export of Biscuits before the issuance of Notification, No 93 (RE-2010)/2009-14 dated 1/2/2012 by DGFT, permitting import of 09gm of Cocoa Powder as additive/ingredient against export of 1kg of Biscuits - the Notification is prospective only. Extended period of limitation - HELD THAT:- No elements of suppression of fact, misstatement, misrepresentation etc which necessitate invocation of extended period are present in the circumstances of the cases on the part of various importers. Therefore, though it was open to the department to revise the assessments, the same should have been done in the normal period. It is not free for the department to invoke extended period - the appeals made by Revenue survive, though survive on merits, demands being hit by limitation; appeals are liable to be rejected on the issue of limitation. Thus, the importers are not eligible to import Cocoa Powder against the items Flour/ Atta/Maida . However, Revenue appeals are liable to be rejected on the grounds of limitation - appeal dismissed - decided against Revenue.

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• 2020 (2) TMI 1261
  Imposition of penalty u/s 114(i) and 114AA of the Customs Act, 1962 - export of prohibited items - case of appellant is that appellant was virtually ignorant of the said activities of the Marketing Manager and the appellant had not given any instruction to the marketing staff to export the prohibited items - HELD THAT:- In this case prohibited items are being exported but the same was intercepted. The only defense of the appellant was that export was done by the Marketing Manager without his knowledge and consent and he had not given any instruction to his Marketing staff to export the prohibited items. This defense does not inspire confidence. It is not convincing that the Marketing Manager has exported the prohibited goods without the knowledge of the appellant under whom the Marketing Manager is working. The penalty imposed is also not very exorbitant - Appeal dismissed - decided against appellant.

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• 2020 (2) TMI 1260
  Levy of penalty and redemption fine - Acceptance of enhanced value then declared value of imported goods - crystal melamine - enhancement of value - confiscation - redemption fine - penalties - HELD THAT:- No evidence has been placed on record by the appellants herein that the value adopted does not represent that which the supplier offered goods for sale to India including to the original importer. The sole counter of Learned Counsel is that the negotiated price at which the goods were offered to the appellant is the sole consideration. The decision of the Hon ble Supreme Court in M/S CHAUDHARY SHIP BREAKERS VERSUS COMMISSIONER OF CUSTOMS, AHMEDABAD [ 2010 (10) TMI 18 - SUPREME COURT] was rendered in the context of the agreement between the shipper and the importer being conditional upon the damage to the vessel before landing and, hence, cannot be disassociated from its acceptability as being at the time and place of importation. There is no evidence on record that the negotiated price has been contrived to evade duties of customs. In the circumstances of being close to a distress sale, the absence of willing buyers for goods under investigation and there being no evidence of additional consideration, the finding of misdeclaration cannot be sustained. The reason for confiscation under Section 111(d), to be invoked for importer prohibited goods, has not been disclosed by either of the lower authorities and, on the basis of our findings supra, there is no scope for confiscation under Section 111(m) of Customs Act, 1962. Consequently, the imposition of redemption fine set aside and penalty under Section 112 of Customs Act, 1962 fails. The concurrence obtained from the shipping agent in India has nothing to do with assessment under Section 17 or Section 18 of Customs Act, 1962. There is no allegation that the amendment to the line in the Import General Manifest has been obtained by submission of any fraudulent documents; indeed, there is no dispute on the propriety of filing a bill of entry by the appellant-firm. There is, thus, no scope for invoking Section 114AA of Customs Act, 1962. The impugned order only to the extent of enhancement of value upheld - other part set aside - appeal allowed in part.

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• Insolvency & Bankruptcy

• 2020 (2) TMI 1259
  Initiation of CIRP - Scope of IBC - Preferential transaction u/s 43 - JIL had committed a default in repayment of its dues - who is the financial creditors of the corporate debtor - mortgage created by the corporate debtor as collateral security of the debt of its holding company JAL - whether the transactions in question deserve to be avoided as being preferential, undervalued and fraudulent, in terms of Sections 43, 45 and 66 of the Code? - HELD THAT:- Looking to the legal fictions created by Section 43 and looking to the duties and responsibilities per Section 25, in our view, for the purpose of application of Section 43 of the Code in any insolvency resolution process, what a resolution professional is ordinarily required to do could be illustrated. (See para 28.1) On a motion made by the resolution professional after and in terms of the exercise aforesaid, the Adjudicating Authority, in its turn, shall have to examine if the referred transaction answers to all the descriptions noted above (para 28.1) and shall then decide as to what order is required to be passed, for avoidance of the impugned transaction or otherwise. Having found that the transactions in question cannot be countenanced, for being of preference during a relevant time to a related party; and having approved the order passed by NCLT in that regard, we do not consider it necessary to deal with the other length of arguments advanced by the learned counsel for parties on the questions as to whether the transactions are undervalued and/or fraudulent too. In the totality of circumstances, we would prefer leaving the said questions at that only, while also leaving all the related questions of law open; to be examined in an appropriate case. WHETHER LENDERS OF JAL COULD BE CATEGORISED AS FINANCIAL CREDITORS OF JIL - Held that:- A person having only security interest over the assets of corporate debtor (like the instant third party securities), even if falling within the description of secured creditor by virtue of collateral security extended by the corporate debtor, would nevertheless stand outside the sect of financial creditors as per the definitions contained in subsections (7) and (8) of Section 5 of the Code. Differently put, if a corporate debtor has given its property in mortgage to secure the debts of a third party, it may lead to a mortgage debt and, therefore, it may fall within the definition of debt under Section 3(10) of the Code. However, it would remain a debt alone and cannot partake the character of a financial debt within the meaning of Section 5(8) of the Code - The respondent mortgagees are not the financial creditors of corporate debtor JIL. Indisputably, the debts in question are in the form of third party security; said to have been given by the corporate debtor JIL so as to secure the loans/advances/facilities obtained by JAL from the respondent-lenders. Such a debt is not and cannot be a financial debt within the meaning of Section 5(8) of the Code; and hence, the respondent-lenders, the mortgagees, are not the financial creditors of the corporate debtor JIL. Though several decisions have been cited on behalf of the respondent-lenders to contend that they do fall within the definition of financial creditor but for what has been discussed hereinabove, it does not appear necessary to dilate upon all of them. However, it would be appropriate to take note of the relevant decisions strongly relied upon by the respondents as infra - Much emphasis is laid on behalf of the respondents on the observations occurring in another three-Judge Bench decision of this Court in the case of Essar Steel [ 2019 (11) TMI 731 - SUPREME COURT ] and predominantly on the observation therein, that secured creditors as a class are subsumed in the class of financial creditors . Again, the decisions of the Court are required to be understood with reference to the context. In the case of Essar Steel, the questions before the Court related to the roles of resolution applicant, resolution professional and Committee of Creditors constituted under the Code and the jurisdiction of Adjudicating Authority as also the Appellate Tribunal in questioning the resolution plans. The constitutional validity of the Insolvency and Bankruptcy (Amendment) Act, 2019 was also under challenge. The problem arose essentially with the decision of NCLAT holding that in a resolution plan, there could be no difference amongst the creditors in that, a financial creditor and operational creditor deserve equal treatment under a resolution plan. It was in the setup of such background that in Essar Steel, this Court made the observations relied upon by the respondents. Whether the respondents (lender of JAL) could be recognized as financial creditors of the corporate debtor JIL on the strength of the mortgage created by the corporate debtor, as collateral security of the debt of its holding company JAL? - HELD THAT:- Such lenders of JAL, on the strength of the mortgages in question, may fall in the category of secured creditors, but such mortgages being neither towards any loan, facility or advance to the corporate debtor nor towards protecting any facility or security of the corporate debtor, it cannot be said that the corporate debtor owes them any financial debt within the meaning of Section 5(8) of the Code; and hence, such lenders of JAL do not fall in the category of the financial creditors of the corporate debtor JIL. The impugned order dated 01.08.2019 as passed by NCLAT in the batch of appeals is reversed and is set aside.

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• PMLA

• 2020 (2) TMI 1258
  Provisional attachment of confiscated proceeds of crime - Validity of provisions of Section 8 (4) of the Prevention of Money Laundering Act, 2002 - vires of of Article 14 of the Constitution of India - offence of money laundering - HELD THAT:- The Act was brought in to ensure that proceeds of crime are attached and offenders who participate and assist in the commission of crime do not enjoy the benefits of the property which is relatable to the proceeds of the crime. The Prevention of Money Laundering Act, indicates to make Money Laundering an offence under Section 3 and proceeds for punishment which extends to imprisonment. The Act envisages attachment of all properties involved in the offence of Money Laundering and the proceeds of such crime falls within the scope of the Act. It is well known that perpetrators of crime try to conceal the proceeds of crime and the purpose of the Act is to trace these properties and deprive the perpetrators who are involved in crime or assist in committing of the crime or assist in concealing the proceeds of the crime from enjoying the property. The Prevention of Money Laundering Act is a complete code in itself which defines the offence, the scheme of attachment of properties which are involved in the offence of Money Laundering and the hierarchy of authorities before which the matters can be taken - A perusal of the scheme of the Act would show that attachment under Section 8 of the Act does not automatically per se extinguish all rights. Subject to the outcome of trial, it can be restored. The property is only taken away to ensure that properties are not disposed of. The question is whether eviction of the occupant of the property provided under the Rules is violative of Article 14 of the Constitution of India and does it amount to depriving a person of his property rights guaranteed under Article 300 A of the Constitution of India. Section 24 imposes the burden on the accused to prove that the property is not acquired by the tainted money and in this regard, therefore, the accused has to either show that the property has been acquired by legitimate source of funds - In view of this presumption, which is contained in Section 24 of the Act, it cannot be said that Rule 4 and 5 of the Prevention of Money Laundering (Taking Possession of Attached or Frozen Properties confirmed by Adjudicating Authority) Rules, 2013, which has been framed for achieving the directions issued under Section 8 (4) of the Act is manifestly arbitrary - When an attempt is made to project proceeds of crime as untainted money and also when the burden of proof is on the accused to show that the property has not been purchased out of the proceeds of crime, it cannot be said that the mandate given by the Act and the Rules to evict the person in whose name the property stands from the property is manifestly arbitrary. The Hon ble Supreme Court in SHAYARA BANO VERSUS AAFREEN REHMAN, GULSHAN PARVEEN, ISHRAT JAHAN, ATIYA SABRI VERSUS UNION OF INDIA AND OTHERS IN RE: MUSLIM WOMEN S QUEST FOR EQUALITY VERSUS JAMIAT ULMA-I-HIND [ 2017 (9) TMI 1302 - SUPREME COURT] has held that test of manifest arbitrariness to invalidate legislation under Article 14 of the Constitution of India must be something done by the legislature capriciously, irrationally and/or without adequate determining principle and also when something is done which his excessive and disproportionate, such legislation would be manifestly arbitrary. It cannot be said that Section 8 (4) r/w. Rule 5 of the said Rules which provides for attachment of property purchase out of proceeds of crime or from an offence under Section 3 of the Money Laundering Act, cannot be said to be manifestly arbitrary. The purpose is to deprive the purporter of the crime or any person involved in an offence of Money Laundering from enjoying the property. Such being the object, challenge to Section as being manifestly arbitrary, cannot be sustained. The provisional attachment is under Section 5 (1) of the Act. The Adjudicating Authority while exercising its powers under Section 8 confirms the attachment after hearing all the parties. The order confirming the attachment is appealable to the Tribunal under Section 26 of the Act and a further appeal lies to the High Court. The property is confiscated only after the criminal Court finds that the offence under Section 3 of the Act has been committed. Mere order of attachment cannot be said to be violative of Article 300 A of the Constitution of India. The challenge on this score cannot be accepted. Petition dismissed.

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• 2020 (2) TMI 1257
  Grant of anticipatory bail - Money Laundering - allegation against the petitioners for being in possession of disproportionate assets to the known sources of his income - Section 45(1) of the PMLA - HELD THAT:- Both the parties have tried to argue the case on merits, which in considered opinion of this Court is not necessary for deciding the bail, lest it may prejudice the case of any of the parties. Evidently, the investigation started in the complaint w.e.f. 18.02.2016. For more than 2 years, the petitioners were never sought to be arrested, rather they were allowed to join the investigation by means of recording their statements and provisional attachment of their properties was also done. Petitioners could have been arrested under Section 19 of the PMLA, but the same was not done by the respondent- Department - Interim protection was granted to the petitioners by this Court after filing of the complaint. The complaint came to be filed only 31.08.2018 and thereafter order of summoning was passed on 02.11.2018. Statements of the petitioners have already been recorded and they have shown their readiness to join the proceedings as and when called upon to do so by the Investigating Agency. Interim orders are made absolute - petition disposed off.

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• Service Tax

• 2020 (2) TMI 1256
  Refund of service tax - merger arrangement / scheme of amalgamation - who is eligible to claim refund - merged company or amalgamated / resulted company - effective date of amalgamation / merger - HELD THAT:- The appellant is engaged in the business of health care services and the another company M/s. Manipal Health System Private Limited is also involved in the business of establishing, promoting or otherwise carrying on the business of running of nursing homes and hospitals. In the normal course of business, appellant availed taxable services from MHSPL on which service tax was paid up to March 2016. Thereafter both the companies entering into the Scheme of Arrangement approved by their respective Board and thereafter filed a petitions before the Hon ble High Court and the Hon ble High Court of Karnataka vide their order dated 04.12.2015 approved the Scheme of Arrangement without making any such changes to the appointed date specified therein. The perusal of the various clauses of the Scheme of Arrangement clearly shows that all the present assets or receivables of the demerged undertaking on or after the appointed date shall be the assets and receivables of the resultant company and the treatment of the taxes, levies, cess etc., paid by the demerged company with regard to the demerged undertaking shall, after appointed date but prior to the effective date i.e., 11.03.2016 be treated and deemed as the tax paid by the resultant company - Further, the conduct of the business with effect from the appointed date until the effective date by demerged company will be in trust for the resultant company. The Hon ble Apex Court has observed in the case of MARSHALL SONS AND COMPANY (INDIA) LIMITED VERSUS INCOME-TAX OFFICER [ 1996 (11) TMI 6 - SUPREME COURT] that it is the date of Amalgamation as presented in the scheme which has to be taken as the transfer date in as much as the Courts approval may be given later. Further the Hon ble Supreme Court has observed that the scheme of amalgamation would not take effect from the date of order sanctioning the scheme but would laid back to the transfer date as presented in the amalgamation scheme. The business carried out by the subsidiary company shall be deemed to have been carried on the business and for and on behalf of the transferee company as such by taking into account the other facts and circumstances of the case, the Court observed that subsequent to the sanction of the scheme, formalities of filling the certified copies of the order before the Registrar of the company, allotment of shares etc may take some time but the date of amalgamation would be the date as presented in the scheme. Appeal allowed - decided in favor of appellant.

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• 2020 (2) TMI 1255
  Business Auxiliary Services - sale or service - promotion or marketing of goods produced or provided by or belonging to the client - demand of service tax alongwith interest and penalty - HELD THAT:- Undisputedly the appellants purchase the concentrate from the Coca Cola India. Learned Authorized Representative after referring to various terms of agreement argues stating that all these conditions reflect that concentrate is only transferred for use and not sold to the bottler. The fallacy in the arguments advanced is self evident if we refer to the definition of sale and purchase as per Section 2(h) of the Central Excise Act, 1944 as it existed then. The said definition has been made applicable to Chapter V of Finance Act, 1994 as per Section 65 (121) ibid - in terms of Section 2(h) of Central Excise act, 1944 the transfer of possession for a consideration in normal course of trade would signify the sale. By stating that the goods namely concentrate was transferred for use by M/s Coca Cola India Pvt Ltd to the Appellant for consideration, a fact not in dispute, the sale of the goods in term of Central Excise Act, 1944 has occurred. The imposition of restrictions or conditions in respect of the usage and consumption of the concentrate, by the seller cannot alter that position. Hence there are no merit in the submission of the Authorized Representative that this transaction was not a truncation of sale but only transfer to use . There are no merits in the impugned order - appeal allowed - decided in favor of appellant. The issue involved in the present appeal is squarely covered by the decisions of the tribunal in case of Superior Drinks Pvt Ltd [ 2019 (6) TMI 272 - CESTAT MUMBAI ]. This decision in turn follows the decisions rendered by the Delhi Bench in case of Narmada Drinks (P) Ltd reported at [ 2017 (3) TMI 1106 - CESTAT NEW DELHI ] and also in case of Narmada Drinks (P) Ltd reported at [ 2018 (6) TMI 899 - CESTAT NEW DELHI ]. Similar view has been expressed by the Allahabad Bench in case of Brindavan Bottlers Ltd [ 2019 (3) TMI 1428 - CESTAT ALLAHABAD ] and Mumbai Bench in case of SMV Beverages Pvt Ltd [ 2017 (3) TMI 942 - CESTAT MUMBAI ]. It was held in these decisions that

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• 2020 (2) TMI 1254
  Reversal of CENVAT Credit - capital goods - removal of equipment from the premises of the provider - treatment of waste and scrap on reversal - place of removal - rule 3(5) of CENVAT Credit Rules, 2004 - HELD THAT:- The appellant is a provider of taxable services and the expression removal , as utilized in Central Excise Act, 1944, is germane only for determination of valuation with intent to subject manufactured goods to assessment which does not logically lend itself for applicability to a provider of output service. Moreover, the said expressions are neither qualified with grammatical variations and cognate expressions nor amenable for adoption within CENVAT Credit Rules, 2004. Instead, it would be appropriate for us to lay emphasis on the scheme of CENVAT Credit Rules, 2004 which was reframed to cover input services procured by manufacturers and providers of output services as well as inputs procured by manufacturers and providers of output services. In the present dispute, we are concerned with capital goods alone. Capital goods , by their very nature, are not absorbed into the final product let alone finding inclusion in intangible output service . It is not contemplated, either in Finance Act, 1994 or in general commercial usage, that capital goods should be in perpetual operation. The absence of such condition in CENVAT Credit Rules, 2004 reflects this common understanding that capital goods are dutiable on procurement and that, unlike the availment of credit of duties suffered on inputs, credit thereof is permitted at certain specified stages and, that too, only twice. Dis-connection of service is preceded by usage, even for a time, of the capital goods which suffice to continue the eligibility owing to existence as such even after service has been rendered. This is clear from the provisions of rule 3(5) of CENVAT Credit Rules, 2004 in accordance with which the manufacturer is required to reverse the credit in full when cleared as such and, under rule 3(5)(a), to reverse in proportion to remenant value after being put to use and at the appropriate rate of duty in the event of transformation as waste and scrap - it is only upon the transfer of possession to another manufacturer/provider of output service that credit originally availed can be curtailed and for the facilitation of availment by the successor manufacturer/provider of output services. In the absence of any specific statutory provision requiring such reversal along with absence of further availment of credit by any other assessee, it is held that the impugned order is erroneous in its presumption and in application of law - Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2020 (2) TMI 1253
  Demand of duty on Sulphur purchased - N/N. 12/2012-CE dated 17 March 2012 - use of Sulphur for manufacture of Sulphuric Acid/Oleum which in turn is used in the Urea Plant for manufacture of Molten Urea - Revenue s objection is that the some quantity of Molten Urea is used as input for the manufacture of Malamine and therefore, the appellants are not entitled to benefit of notification. HELD THAT:- Molten Urea which comes into existence is itself a chemical fertilizer, as held by Hon ble Apex Court in the appellant s own case GUJARAT STATE FERTILIZERS CO. VERSUS COLLECTOR OF CENTRAL EXCISE [ 1997 (2) TMI 105 - SUPREME COURT] - there are no merit in the Revenue s case in so far as the use of Sulphur in manufacture of Urea is concerned - Exemption in respect of Sulphur used in manufacture of Urea is allowed. Use of Sulphur in the manufacture of Sulphuric Acid/Oleum which in turn used in Caprolactam Plant - HELD THAT:- Caprolactam is manufactured along with Ammonium Sulphate, which is undisputedly a chemical fertilizer, and therefore, the appellant would be entitled to avail benefit of Notification No. 12/2012-CE in respect of use of Sulphur which in turn used in the manufacture of Ammonium Sulphate - The impugned order seeks to distinguish this decision on the ground that Ammonium Sulphate produced by the appellant in this stream is only a bye-product and Caprolactam is main product. Revenue neutrality - HELD THAT:- A small quantity of Hydrozylamine Sulphate (HX/HAS) sold by the appellant and they have admitted their liability in respect of duty free Hydroxylamine Sulphate sold by them in the open market on payment of duty and their argument is only Revenue neutrality - in so far as demand of duty on Sulphur used in the quantity of Hydroxylamine Sulphate sold by them in the open market needs to be confirmed. Use of Sulphuric Acid in maintaining PH balance in cooling towers - HELD THAT:- Issue decided in INDO GULF FERTILIZERS CHEMICALS VERSUS COMMISSIONER OF C. EX., ALLAHABAD [ 1999 (6) TMI 80 - CEGAT, NEW DELHI] where it was held that the benefit of Notification 81/75-C.E. in respect of sulphuric acid used in the cooling tower in appellants unit. Use of Sulphuric Acid in the manufacture of Phosphoric Acid (and Phospho Gypsum) which in turn used to produce Ammonium Phosphate - benefit denied on the ground that bye-product Phospho Gypsum is also manufactured and sold in the open market on payment of duty - HELD THAT:- It is not in dispute that Ammonium Sulphate is fertilizer. In this regard, the arguments in respect of Sulphuric Acid used in the manufacture of Urea would equally apply that Sulphuric Acid was in turn used for production of Ammonium Sulphate - reliance placed in the case of COMMISSIONER OF CENTRAL EXCISE, MUMBAI VERSUS M/S NATIONAL ORGANIC CHEMICAL INDUSTRIES LIMITED [ 2008 (11) TMI 6 - SUPREME COURT] where it was held that inevitable and automatic emergence of ethane and methane can t be a ground for denying the exemption - benefit of exemption cannot be denied. There are no merit in the Revenue s arguments that benefit of Notification No. 12/2012-CE dated 17 March 2012 can be denied on the ground that during manufacture of Phosphoric Acid which in turn used in the manufacture of fertilizer and Phospho-gypsum is manufactured. Penalty u/s 11AC - HELD THAT:- No penalty can be imposed under Section 11AC, as there is no apparent malafide intention and the issue relates to interpretation. However, we find that liability for Central Excise duty would arise nonetheless in respect of Sulphur used in the manufacture of Phosphoric Acid which was cleared on payment of duty. The demand except for the demand within limitation on the quantity of Sulphur used in the manufacture of Hydroxylamine Sulphate (HX/HAS) and Phosphoric Acid sold by them on payment of duty. In these circumstances the benefit of limitation is also extended - Appeal allowed in part.

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• 2020 (2) TMI 1252
  Violation of condition of N/N. 5/99 CE dt. 28.02.99, 6/2000 CE dt. 01.03.2000 - concessional duty on clearances of sheets and pipes subject to the condition that the products should have contained not less than 25% by weight of fly ash or phosphorous Gypsum or both by usage, is denied - denial on the ground that actual weight mixtures report seized from the factory and production shown in the actual wet mixture, the goods contain fly ash less than 25%. HELD THAT:- The exemption notification in question i.e 5/99 CE dt. 28.02.99, 6/2000 CE dt. 01.03.2000 and other analogues notification during the material time provided exemption to the goods falling under chapter 68 of the CETA of Description Goods, in which not less than 25% by weight of fly-ash or phosphor-gypsum or both have been used subject to condition of maintenance of proper accounts. The undisputed position emerging from actual production and consumption based upon actual wet mixture reports the use of Fly ash in Sheets were above 25%. The CBEC vide Circular No. 6/92 dt. 21.10.92 clarified to maintain shift wise register for ascertaining the percentage of fly ash in final product. Vide Circular No. 477/43/99 CX.4 dt. 10.08.99, the Board clarified that the percentage by weight of fly ash has to be calculated taking into account the weight of fly ash used with reference to the weight of the finished product in dry condition. It is an accepted position of revenue that weight of fly ash used should be with reference to the weight of the finished product in dry condition and thus the percentage of fly ash has to be determined with respect to weight of finished goods without moisture content. In case of ETERNIT EVEREST LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, INDORE [ 1999 (8) TMI 888 - CEGAT, NEW DELHI] , the percentage use of raw material was Asbestos fibre 5% to 9%; Pulp 1.5% to 2%, Cement 50% to 55%, Fly ash 35 to 36%; H.G. waste 1.5% to 2%. The tribunal held that the weight of goods with respect to which the percentage has to be arrived at should be determined as if no water is contained in these goods - In the present case the raw material for use in production i.e fly ash, cement, pulp and asbestos fibre are bone dry. The water used in process has to be ignored for computing the ash percentage and weight of finished goods. Since the fly ash used in production is more than 25% as is apparent from the wet mixture content report, therefore it has to be considered that the goods fulfil the condition of the Exemption notification. The fly ash content in sheet is more than 25% and the Appellant are eligible for the exemption on Asbestos Sheet. However in respect of some quantity of Asbestos Sheet it was admitted by the appellant that fly ash quantity is less than 25% on which duty liability comes to Rs. 2,80,000/- which is liable to be upheld - Accordingly duty demand of Rs. 21,31,29,778/- in respect of Asbestos Cement Sheet and corresponding, Interest and penalty are set aside. Asbestos pipes - HELD THAT:- The Appellant could not establish that the contents of fly ash in asbestos pipe are more than 25%. Unlike in sheet, the use of fly ash in pipe is much lower than 25% even after excluding the water content. The appellant also not pressed much upon the issue related to pipe - the duty demand on the Asbestos Pipe shall be re-quantified after allowing the benefit of cum duty price and modvat credit. Confiscation of Asbestos Cement pipe and sheets - HELD THAT:- The appellant in the various correspondences informed the department regarding the stage of making entries in RG-1. It is also observed that the appellant, apart from RG-1 register have been maintaining various other records such as Wet Mixture Reports, Daily Production Reports/Register, Physical Lab Register, General shift furnishing report, Stock register,RG-1 register. Maintenance of these records were not in dispute, as some of these records were relied upon in show cause notice raising the demand, therefore, it cannot be said the stock of goods not entered in RG-1 register is with intent to clear the goods without payment of duty - the adjudicating authority has erred in confiscating the goods on the pretext of non accountal of the same in RG-1 register - Confiscation alongwith redemption fine set aside. Personal penalty imposed upon various persons related to the appellant company - HELD THAT:- The penalty was imposed commensurate to the quantum of total duty and in view of gravity of offence. The duty demand has been reduced substantially and the issue involved is of interpretation of notification, therefore the personal penalty also need to be reduced - quantum of penalty reduced. Appeal allowed in part.

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• 2020 (2) TMI 1251
  CENVAT Credit - input/capital goods - M.S. Angles, M.S. Beams, M.S. Plate, M.S. Round Bar, H.R. Sheet, S.S. Plate (Cut Plate), Forged Sheet Bar, M.S. Channels used for repair/maintenance of foundation frame of Return Bagasse Carrier (RBC) - HELD THAT:- It is clear from the case records that the steel items in dispute were consumed by the appellants only for repair/maintenance of foundation frame i.e. the component of the RBC and not for laying down the foundation for RBC. They were used only for the repairing of the frame of RBC. The frame is essential part of the machine and no machinery can be installed without its frame. They can also be said to be essential accessory in a plant/factory. The repair of the said frame is also equally important alongwith the machine. In COMMISSIONER OF CENTRAL EXCISE, RAIPUR VERSUS M/S JINDAL STEELS AND POWER LTD. [ 2016 (1) TMI 59 - CESTAT NEW DELHI] it has been held that the definition of Capital Goods includes components, spares and accessories of such capital goods and applying the User Test , the structural items used in the fabrication of support structures would fall within the ambit of Capital Goods as contemplated under Rule 2(a) hence will be entitled to the Cenvat Credit. The eligibility of various iron and steel items for Cenvat credit, when used in the fabrication of capital goods, technological structures associated with capital goods, have been subject matter of various decisions by the Tribunal. User Test is found to be the appropriate test to see whether the items used in the repair/fabrication of support structures would fall within the ambit of Capital Goods as contemplated under Rule 2(a) ibid. The steel material in question is not used for laying down the foundation of RBC but is used for the repair of its foundation frame, which by any stretch of imagination cannot be said to be part of that foundation which has been excluded from the purview of the definition of input in Rule 2(k). The appellants are therefore eligible for Cenvat Credits on those items which were rejected by the learned Commissioner. Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2020 (2) TMI 1250
  Maintainability of remand assessment order - applicability of time limitation in passing order - according to the petitioner s case, no hearing was given to the petitioner on that date and the order was passed beyond the period of two years, but has been ante-dated as 16.02.2015, in order to bring it within the period of limitation of two years - sale of excavators, cranes and its spare parts which are the earth moving machineries, which are claimed to be capital goods - rate of tax on the impugned goods was in dispute - Section 42(2) of the JVAT Act. HELD THAT:- Section 42(2) of the JVAT Act clearly shows that when the matter was remanded to the Assessing Authority by order dated 19.02.2013, as contained in Annexure-7 to the writ application, the re-assessment order had to be passed on or before 19.02.2015 - In the present case, the re-assessment order has been shown to have been passed on 16.02.2015. There are force in the claim of the petitioner Company, inasmuch as, if by order dated 27.01.2015 the matter was fixed for 14.02.2015, there was no occasion for showing the next date of hearing as 14.02.2015/16.02.2015. This could have been done only in the event that 14.02.2015 was a non-working day for some reason, and thereafter the first working day was 16.02.2015, which is not the case here and neither stated in the order-sheet. If the matter was heard on 14.02.2015, there is nothing on record to show that it had been heard on that date, and if it was actually heard on 16.02.2015, there is nothing on record to show that the matter was ever fixed for hearing on 16.02.2015 - we cannot, but accept the plea of the learned counsel for the petitioner that this is an ante-dated order to cover up the period of limitation, which fact has not been specifically denied even in the counter-affidavit filed on behalf of the State, though specifically averred in paragraphs 37 to 55 of the writ application. The contention of the learned counsel for the State that the goods in question were not the capital goods prior to 06.03.2007, is not prima facie acceptable to us. After 06.03.2007, there is specific entry in Schedule-II, Part-B, Entry-25 to the Act, which gives the description of the capital goods liable to tax @ 4% and this includes Such as Excavator Hydraulic Excavators clampshell, Drojline, Rock Breakers, Mini Excavators, Crawler, Cranes, Wheeled Cranes, Wheel-loaders, Front end loaders, Shovels, Breakhoc Articulated Cranes and all other similar implements and machineries in this category - A plain reading of definition of Capital Goods shows that capital goods includes, machinery, equipment, apparatus, tools, appliances, also used for mining purposes, and prima facie it appears that the goods in question in the present case, i.e., excavators, cranes and its spare parts which are the earth moving machineries, would come within the expression machinery, equipment, apparatus, tools and appliances, used for the mining purposes. The impugned order dated 16.02.2015 passed by the Assessing Authority cannot be sustained in the eyes of law being void ab initio. Consequently, the revisional order dated 04.10.2018 passed by the Revisional Authority also, cannot be sustained in the eyes of law - Application allowed.

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• 2020 (2) TMI 1249
  Demand of Differential Tax - activation and installation charges of DTH Set-Top Box (STB) called Digicomp collected by the petitioner at the time of installation of DTH set-top box - denial of input tax credit availed on the goods which were sold by the petitioner - It is the contention of the petitioner that it was paying service tax on installation and activation charges and therefore the petitioner cannot be made liable to pay VAT on such activation and installation charges under the provisions of the TN VAT Act, 2006. HELD THAT:- It is noted that the petitioner was not only providing DTH service to its subscribers on which it was paying service tax, it was also collecting activation and installation charges at the time installation and activation of the DTH services - During the assessment year 2013-14, the petitioner claims to have stopped selling DTH Set-Top Box and started offering it as part of DTH service. However, in the impugned order for the said assessment are also the clauses in the agreements for the previous period have been relied upon. It is further noticed that there may have been transfer of right to use of the dish net antenna, cable and accessories and later set top box as well. It is not clear from the impugned order and the notices issued by this order to the petitioner whether any proposal was made to collect VAT from the petitioner under section 4 of the TN VAT Act, 2006 as the petitioner had primafacie, transferred the right to use in favour of the subscribers. There is also no clarity on the issue relating to denial of credit. There is also no clear discussion in the impugned orders as to whether the petitioner has paid service tax on the activation installation charges on the whole or part of the amount. Case remitted back to the respondent to pass fresh order on merits within a period of 3 months from date of receipt of a copy of this order - petition allowed by way of remand.

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• 2020 (2) TMI 1248
  Levy of tax at reduced rate - value addition in respect of the sales of used cars by the petitioner - Notification G.O.,Ms.No.78, CT R (B-2, dated 11.07.2011 No.II(1)/CT R/12(R-20)/2011 - HELD THAT:- It is already held that the benefit of Notification Number in G.O.M.S.No.79/CT R/B2 at Serial No.1, dated 23.03.2007 and Notification Number in G.O.M.S.No.78/CT R/B2 at Serial No.2, dated 11.07.2011, operate and apply to different kinds of dealers and therefore they are not to be taxed. In the light of the clarification dated 25.10.2016 of the Authority for Clarification and Advance Ruling issued under Section 48 A of the Tamil Nadu VAT Act, 2006, the issue relating to availability of benefit of G.O.Ms.No.79 CT R (B2) Dept. dated 23.3.2007 as amended by the of G.O.Ms.No.78 CT R (B2) Dept. dated 11.7.2011 would require reconsideration by the respondent. The issue relating valuation is answered in favour of the Petitioner. Thus, the demand of tax on Trade Discount in the impugned orders are quashed to that extent - As far as the issue relating to rate of tax is concerned, the same is remitted back to the respondent to pass fresh order in the light of the clarification issued by the Authority for Clarification and Advance Ruling vide its order dated 25.10.2016. Petition disposed off.

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• 2020 (2) TMI 1247
  Classification of goods - tablet computers with calling feature - Imposition of additional tax - CBEC Circular No.20/13-Customs dated 14.5.2013 - Whether classifiable under sub-heading No.8471 30 of the notification dated 1.8.2009 issued under Entry 45 of Schedule II to the GVAT Act? - HELD THAT:- When the excise tariff has been incorporated into the notification dated 1st August, 2009 issued in exercise of powers conferred by Entry 45 of Schedule II to the GVAT Act, then the interpretation of CBEC of such excise tariff is binding even on the authorities under the GVAT Act inasmuch as any other interpretation would defeat the very purpose of incorporation of the excise tariff in the notification issued under the GVAT Act - Apart from the Circular dated 14th May, 2013 issued by the CBEC, on facts it may be noted that till the notification dated 1.4 2011 came to be issued, the classification of the product, namely, tablet computers, under entry 8471 30 was accepted by the respondent authorities. According to the respondents, tablet computers with calling facility are required to be classified under sub-heading 8525 50 at serial No.20 of the notification dated 1st August, 2009. On a perusal of the products falling under sub-heading 8525 50 at serial No.20, it is evident that such devices are in the nature of transmission apparatus which also have a reception apparatus, the principal function whereof is transmission of sound. Moreover, even according to the respondents, the product in question is a portable automatic data processing machine. Their only contention is that it also has a calling feature and can therefore be used as a mobile phone. Reference may be made to the decision of the Supreme Court in the case of Mauri Yeast India (P) Ltd. v. State of U.P., [2008 (4) TMI 101 - SUPREME COURT], on which reliance has been placed on behalf of the petitioner for the proposition that it is now a well-settled principle of law that in interpreting different entries, attempts shall be made to find out as to whether the same answers the description of the contents of the basic entry and only in the event it is not possible to do so, recourse to the residuary entry should be taken by way of last resort. Applying the above decision to the facts of the present case, there is a specific entry viz. subheading 8471 30 which relates to portable digital automatic data processing machine. It is an admitted position that the product in question, namely, tablet computer is a portable digital automatic data processing machine. Merely because cellular phones have been deleted from sub-heading 8525 50 at serial No.20 of the notification dated 1st August, 2009 and are no longer classified as IT products, it does not mean that the a tablet computer which contains additional function of calling feature and its principal function is that of automatic data processing machine ceases to be an IT product. As held by the Supreme Court in Mauri Yeast, when the product answers the description of the contents of the basic entry, recourse to the residuary entry cannot be made. Moreover, there is a specific entry in the notification for automatic data processing machines, whereas there is no specific entry for cellular phones. This court is of the considered opinion that tablet computer is not comparable with any of the three devices which came to be deleted from sub-heading 8525 50 vide notification dated 1st April, 2011, inasmuch as, it is neither a car telephone nor a transportable telephone nor a cellular telephone. Thus, the functions mentioned and relatable to calling functions, etc. are merely incidental and the same do not alter the basic feature of the goods in question namely, tablet computers, which even according to the respondents, are portable automatic data processing machines - the respondent assessing authority is not justified in holding that the product in question, namely, tablet computers would fall under Entry 87 of Schedule II to the GVAT Act, namely, the residuary entry. The impugned rectified assessment order dated 23.2.2019 is hereby quashed and set aside - The matter is restored to the file of the assessing authority, who shall pass a fresh assessment order classifying the product in question viz. tablet computers with calling facility, under sub-heading 8471 30 under Entry 4 of the Notification dated 1st August, 2009 issued under Entry 45 of Schedule II to the GVAT Act - petition allowed by way of remand.

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• Indian Laws

• 2020 (2) TMI 1246
  Legality of Award of Tender - case of High Court is that the tender of the writ petitioner should have been treated as the lowest tender and the loss caused to the Government is roughly about 63 lakhs - HELD THAT:- At this stage, we are only dealing with the issue of interim relief. We are not going into the merits of the case which will require detailed hearing. We, however, cannot lose sight of the fact that the tender in question was floated in the year 2018. The High Court has cancelled the tender and ordered retender - The tender has not been awarded in favour of M/s. Almighty Techserv. Fresh tendering may lead to long delay in procuring all these videoscopes which are urgently required by customs authority to scan the imported goods. If a fresh tender for supply of videoscopes is floated we are not even sure whether the Government will gain or lose in monetary terms. The public interest requires that the Government be permitted to procure the videoscopes from M/s. ASVA Power Systems India Pvt. Ltd. and the Department is permitted to do so. Interim Relief granted.

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• 2020 (2) TMI 1245
  Dishonor of Cheque - insufficiency of funds - rebuttal of presumptions - whether cheque for Rs. 2 lakh was drawn by the respondent in favour of the appellant for discharge of debt, whether the cheque deposited in the bank for clearance was returned unpaid on account of insufficiency of fund in the account of the respondent and whether after legal notice the respondent has not returned the amount of cheque to the appellant? HELD THAT:- As per Section 139 of the Negotiable Instruments Act,1881, it shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section 138 for the discharge, in whole or in part, of any debt or other liability - Presumption is rebuttable, but there is nothing on record to rebut the presumption. It is not a case where the respondent has not signed the cheque. A meaningful reading of the provisions of the Act, 1881 makes it ample clear that the person signed the cheque over to a payee remains liable and he may adduce any evidence to rebut presumption. Presumption will live, exist and survive and shall end only when contrary is proved by the accused/respondent. Finding of the trial Court is clearly against the provisions of Section 139 of the Act, 1881. When legal presumption is not rebutted no corroboration is required. When the amount was advanced on the basis of personal relation, preparation of document is not required and cheque issued by the respondent shows the liability of the respondent - On an overall assessment, it can be said that the finding of the trial Court is against the weight of the evidence and the same is not legal and contrary to the provisions of the Act, 1881. therefore, argument advanced on behalf of the respondent is not sustainable. The act of the respondent falls within mischief of Section 138 of the Act, 1881. The respondent is convicted under Section 138 of the Act, 1881. The date of issuance of cheque is 20.9.2015. The appellant is entitled to interest 6% to the amount advanced by him - appeal allowed - decided in favor of appellant.

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• 2020 (2) TMI 1244
  Dishonor of Cheque - Section 138 of NI Act - Submission of the learned counsel for the applicant is that complaint has been filed without making party to the company though complainant case is that cheque in question had been issued by the applicant in capacity of the director of Ravi Organics Limited. - HELD THAT:- It is evident that the notice as well as the complaint was filed against the applicant in his individual capacity. Company was not arrayed as a party neither in the notice nor in the complaint - Hon ble Apex Court in the case of ANEETA HADA VERSUS GODFATHER TRAVELS TOURS (P.) LTD. [2012 (5) TMI 83 - SUPREME COURT] has held that for maintaining the prosecution under Section 141 of the Act, arraigning of a company as an accused is imperative. Application allowed.

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• 2020 (2) TMI 1243
  Dishonor of Cheque - applicability of time limitation in making complaint as per Section 142(b) of Act, 1881 - date of cause of action - dishonoured cheques were returned to complainant on 24.08.2000, notice was issued on 06.09.2000 which was received back unclaimed on 14.09.2000 but complaint was filed on 31.10.2000 - HELD THAT:- Section 138, proviso, Clause (a) of Act, 1881 is apparently satisfied. Cheques were presented to Union Bank within valid period for its collection. Notice required to be issued for demand vide proviso Clause (b) of Section 138 of Act, 1881 within 15 days of receipt of information from Bank regarding return of cheques as unpaid was also given. The date of notice is 06.09.2000. Thus, aforesaid requirement is also satisfied and notice was issued within the period prescribed in Clause (b), proviso to Section 138 of Act, 1881. Now, Clause (c) proviso to Section 138 of Act, 1881 gives 15 days time from the date of receipt of notice by addressee to make payment - In the present case, notice returned unclaimed and received by complainant on 14.09.2000. If this date is taken to be due service of notice by accused-applicant then 15 days time would expire on 29.09.2000. In K. Bhaskaran Vs. Sankaran Vaidhyan Balan and Others [ 1999 (9) TMI 941 - SUPREME COURT ], it was held that if a notice is returned by sender as unclaimed, such date would be commencing date in reckoning the period of 15 days contemplated in Clause (c) to proviso of Section 138 of Act, 1881 - In the present case, since payment could have been made upto 29.09.2000 but when it is not made, cause of action arose on 30.09.2000. Since complaint in the present case, was filed within one month i.e. October, 2000, after excluding 30.09.2000, the day when cause of action arose, it cannot be said that complaint is exfacie barred by time provided in Section 142(b) of Act, 1881 - Applications dismissed.

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