TMI Tax Updates - e-Newsletter
March 21, 2018

Case Laws in this Newsletter:

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

Articles

1. Time to re-think in changed times: Business head for activity of letting out properties to tax real income is most appropriate.

   By: DEVKUMAR KOTHARI

2. GST India - TRAN-2

   By: Altamush Zafar

3. GST Software Provider: The Taxation Glitches need to be Ironed Out

   By: Priya Sharma

News

1. India and Hong Kong sign Double Taxation Avoidance Agreement(DTAA)

2. RBI Reference Rate for US $

3. 52 Countries Begin Deliberation at Informal World Trade Organisation Ministerial Meeting in New Delhi Today

Notifications

Customs

1. 09/2018 - dated 19-3-2018 - ADD

Seeks to rescind notification No. 48/2012-Customs (ADD) dated the 8th October, 2012

GST - States

2. 24/2017-State Tax - dated 31-1-2018 - Kerala SGST

Extends the time limit for furnishing the return by an Input Service Distributor in FORM GSTR-6

3. 23/2017-State Tax - dated 31-1-2018 - Kerala SGST

Extends the time limit for furnishing the details of outward supplies in FORM GSTR-1.

4. FA-3-08/2018-1-V-(33) - dated 7-3-2018 - Madhya Pradesh SGST

The Madhya Pradesh Goods and Service Tax (Amendment) Rules, 2017

5. FA-3-05/2018-1-V-(32) - dated 7-3-2018 - Madhya Pradesh SGST

Rescinds the notification No. F.A-3-05-2018-1-V-(6) dated the 23rd January 2018.

6. FA-3-78/2017-1-V-(31) - dated 16-2-2018 - Madhya Pradesh SGST

Constituted the Madhya Pradesh Authority for Advance Ruling.

7. FA-3-92/2017-1-V-(30) - dated 15-2-2018 - Madhya Pradesh SGST

Amendment in the Notification No. F A-3-92-2017-1-V-(164), dated 30th December 2017.

8. FA-3-57/2017-1-V-(28) - dated 8-2-2018 - Madhya Pradesh SGST

Rescission, this Department's Notification No. FA-3-57-2017-1-V (26), dated the 30th January, 2018.

9. FA-3-33/2018-1-V-(29) - dated 8-2-2018 - Madhya Pradesh SGST

Corrigendum department’s notification No. F-A 3-33-2017-l-V-(15) dated 25th January, 2018.

10. FA-3-57/2017-1-V-(26) - dated 30-1-2018 - Madhya Pradesh SGST

Appoints the 1st day of February, 2018, as the date from which the provisions of serial numbers 9 and 10 of this department's notification No. F.A-3- 57-2017-1-V-(100) dated the 7th September 2017, shall come into force.

11. FA-3-57/2017-1-V-(26) - dated 30-1-2018 - Madhya Pradesh SGST

Notifies all goods in respect of intra-district movement as well as intra-State movement for which no E-way bill is required.

12. FA-3-23/2017-1-V-(19) - dated 27-1-2018 - Madhya Pradesh SGST

The Madhya Pradesh Goods and Services Tax Rules, 2017

13. FA-3-81/2017-1-V-(18) - dated 25-1-2018 - Madhya Pradesh SGST

Amendments in this department's notification No. F A-3-81/2017/1/V(144), dated the 14th November, 2017.

14. FA-3-47/2018-1-V-(12) - dated 25-1-2018 - Madhya Pradesh SGST

Amendments in this department's Notification No. FA-3-47/2017/1/V(59) dated the 30th June, 2017

15. FA-3-42/2017-1-V-(11) - dated 25-1-2018 - Madhya Pradesh SGST

Amendments in this department's Notification No. FA-3-42/2017/1/V(53), dated the 30th June, 2017.

16. FA-3-35/2017-1-V-(16) - dated 25-1-2018 - Madhya Pradesh SGST

Amendments in this department's notification No. FA-3-35/2017/1/V(63), dated the 30th June, 2017.

17. FA-3-33/2017-1-V-(15) - dated 25-1-2018 - Madhya Pradesh SGST

Amendments in the Notification No. FA-3-33/2017/1/V-(42) dated 29th June 2017.

18. FA-3-32/2017-1-V-(10) - dated 25-1-2018 - Madhya Pradesh SGST

Amendments in this department's Notification No. FA-3-32/2017/1/V(41), dated the 29th June, 2017.

19. FA-3-11/2018-1-V-(17) - dated 25-1-2018 - Madhya Pradesh SGST

Exempts the state tax on intra-state supplies of goods Old and used, petrol Liquefied petroleum gases (LPG) or compressed natural gas (CNG) driven motor vehicles.

20. FA-3-10/2018-1-V-(14) - dated 25-1-2018 - Madhya Pradesh SGST

Central Government's share of profit petroleum Services by way of grant of license or lease to explore or mine petroleum crude or natural gas or both.

21. FA-3-09/2018-1-V-(13) - dated 25-1-2018 - Madhya Pradesh SGST

Notifies the following classes of registered persons who supply development rights to a developer, builder, construction company or any other registered person against consideration, wholly or partly, in the form of construction service of complex, building or civil structure.

22. FA-3-08/2018-1-V-(09) - dated 23-1-2018 - Madhya Pradesh SGST

The Madhya Pradesh Goods and Service Tax Rules, 2017

23. FA-3-07/2018-1-V-(08) - dated 23-1-2018 - Madhya Pradesh SGST

Common Goods and Services Tax Electronic Portal.

24. FA-3-06/2018-1-V-(07) - dated 23-1-2018 - Madhya Pradesh SGST

Waives the amount of late fee the return in FORM GSTR-6.

25. FA-3-05/2018-1-V-(06) - dated 23-1-2018 - Madhya Pradesh SGST

Waives the amount of late fee the return in FORM GSTR-5A.

26. FA-3-04/2018-1-V-(05) - dated 23-1-2018 - Madhya Pradesh SGST

Waives the amount of late fee payable the return in FORM GSTR-5.

27. FA-3-03/2018-1-V-(04) - dated 23-1-2018 - Madhya Pradesh SGST

Waives the amount of late fee furnish the details of outward supplies for any month/quarter in FORM GSTR-1.

28. ERTS(T) 65/2017/Pt/256 - dated 2-2-2018 - Meghalaya SGST

Corrigendum - Various Notifications. 29-12-2017.

29. ERTS(T) 65/2017/Pt/255-011/2018 - dated 2-2-2018 - Meghalaya SGST

Rescission, the notification of the Government of Meghalaya, Excise, Registration, Taxation & Stamps Department & No. ERTS(T)65/2017/Pt/160, dated the 29th December, 2017.

30. ERTS(T) 79/2017/Pt/50-009/2018 - dated 24-1-2018 - Meghalaya SGST

Notifies the Common Portal.

31. ERTS(T) 79/2017/Pt/49-008/2018 - dated 24-1-2018 - Meghalaya SGST

Extends the time limit for furnishing the return by an Input Service Distributor in FORM GSTR-6.

32. ERTS(T) 79/2017/Pt/48-007/2018 - dated 24-1-2018 - Meghalaya SGST

Waives the amount of late fee payable the return in FORM GSTR-6.

33. ERTS(T) 79/2017/Pt/47-006/2018 - dated 24-1-2018 - Meghalaya SGST

Waives the amount of late fee payable the return in FORM GSTR-5A.

34. ERTS(T) 79/2017/Pt/46-005/2018 - dated 24-1-2018 - Meghalaya SGST

Waives the amount of late fee payable the return in FORM GSTR-5.

35. ERTS(T) 79/2017/Pt/45-004/2018 - dated 24-1-2018 - Meghalaya SGST

Waives the amount of late fee payable the details of outward supplies for any month/quarter in FORM GSTR-1.

36. ERTS(T) 79/2017/Pt/44-003/2018 - dated 24-1-2018 - Meghalaya SGST

The Meghalaya Goods and Services Tax (Amendment) Rules, 2018.

37. ERTS(T) 79/2017/Pt/43-002/2018 - dated 24-1-2018 - Meghalaya SGST

Amendment in the Notification No. ERTS(T) 65/2017/Pt./28, dated the 1st November, 2017.

38. ERTS(T) 65/2017/Pt/162 - dated 29-12-2017 - Meghalaya SGST

Amendments in the notification of the Government of Meghalaya in the Taxation Department, Notification No. ERTS(T)65/2017/22, dated 29.06.2017.

Circulars / Instructions / Orders

GST - States

1. ERTS(T) 65/2017/342 - dated 13-2-2018

Specifies conditions and safeguards for furnishing a Letter of Undertaking in place of a Bond by a registered person who intends to supply goods or services for export without payment of integrated tax.

Highlights / Catch Notes

GST

• High Court Allows Appeal on IGST Classification of Artemia Brine Shrimp Eggs; Petitioner Seeks 0% Duty Rate.

  Case-Laws - HC : Classification of imported goods - GSL ARTEMIA BRINE SHRIMP EGGS - petitioner sought to avail concessional duty (preferential rate of 0% IGST as against 5% IGST) by relying upon Notification No.002/2017-Cus dated 28.06.2017 in Sl.No.33 - petitioner allowed to file an appeal before Commissioner of Customs (Appeals) - HC
  Visit to Get Source

  ---

Income Tax

• Reassessment Proceedings Focus on Section 80RR Deduction, Not DTAA Benefits; Revision u/s 263 Upheld.

  Case-Laws - AT : Revision u/s 263 - claim of the assessee under section 80RR - availability of the benefit of DTAA - the reassessment proceedings were initiated for the purpose of working out the deduction under section 80RR of the Income Tax Act and not about the claim of benefit of the DTAA to the assessee - reassessment proceedings sustained - AT
  Visit to Get Source

  ---

• Tax Return Extension Denied: Illness of Auditor Not Justified, Section 119; Benefit u/s 80IB Unavailable.

  Case-Laws - HC : Extension of time for filing of the income tax return rejected u/s 119 - delay in filing of the return was on account of illness of the CA i.e., the statutory auditor - The assertions made to justify extension of time have to be proved and established - Assessee failed to prove - benefit u/s 80IB cannot be claimed so - HC
  Visit to Get Source

  ---

• High Court Questions Finality of Settlement Orders u/s 245D(4) if Minority View Prevails, Undermining Conclusive Outcomes.

  Case-Laws - HC : Review of settlement to order passed u/s 245D(4) - If the view taken by the minority member of the Commission is accepted, we fear, that then there would be no finality reached to an order passed by the Commission under Section 245D(4). - HC
  Visit to Get Source

  ---

• Cricket Association Granted Tax Exemption u/s 11; Objectives Align with Charitable Purpose in Section 2(15.

  Case-Laws - AT : Exemption u/s 11 eligibility - cricket association - taking into consideration the object of the institution which fits into the definition of charitable purpose defined u/s 2(15) and subsequent substitution of the Section itself with effect from 1st April, 2009 - exemption allowed - AT
  Visit to Get Source

  ---

• Transfer pricing adjustments not needed if AE segment margins within +/- 5% of comparable mean margins, says TPO.

  Case-Laws - AT : Transfer pricing adjustment - in case the segmental profitability of AE segment is applied, then the margins shown by the assessee are within +/- 5% range of mean margins of comparables as worked out by the TPO and no adjustment needs to be made on account of international transactions undertaken by the assessee - AT
  Visit to Get Source

  ---

• Income Recorded in Business Documents Not Considered Undisclosed u/s 271AAB.

  Case-Laws - AT : Penalty - Since the income under question was in fact entered in the “other documents” maintained in the normal course, which document was retrieved during search, hence, the amount offered by the assessee does not fall in the ken of “undisclosed income” defined in Sec. 271AAB - AT
  Visit to Get Source

  ---

• Focus on Aim and Object to Determine if Expenditure is Capital or Revenue, Not Its Amount or Book Entries.

  Case-Laws - AT : To solve the knotty issue of capital/revenue expenditure the aim and object of the expenditure is to be considered not the quantum. - entries made in the books of accounts do not decide the true nature of expenditure. - AT
  Visit to Get Source

  ---

• Penalty Imposed u/s 271AAA for Failing to Substantiate Manner of Undisclosed Income Derivation.

  Case-Laws - AT : Penalty u/s.271AAA - undisclosed income addition - the assessee's responsibility to substantiate the manner of deriving such income did not commence. - When the base requirement itself fails, the question of denying the benefit of no penalty would not arise. - AT
  Visit to Get Source

  ---

• Order Set Aside Due to Non-Compliance with Section 179(1); Assessing Officer to Reissue After Proper Notice.

  Case-Laws - HC : Non compliance with condition precedent u/s 179(1) - recovery of dues of the company from the directors - Order set aside - AO is at liberty to pass a fresh order after issuing an appropriate notice to the Petitioner. - HC
  Visit to Get Source

  ---

• Court Clarifies Interest Calculation on Reassessed Tax Liability u/s 234B of Income Tax Act.

  Case-Laws - HC : Computation of interest u/s 234B - there is definite increase of tax liability from the regular assessment at the time of re-assessment - Tax paid u/s 140A was already refunded with interest - provisions of section 234B(2) was applied wrongly by the tribunal - the differential tax on reassessment had to be levied interest at the rate provided u/s 234B(3) - HC
  Visit to Get Source

  ---

Customs

• High Court Finds Tribunal Misused Discretion in Appeal Case Involving Penalties u/s 129A, Sub-section 1, Proviso (iii.

  Case-Laws - HC : Power of tribunal to refuse to entertain an appeal where fine or penalty does not exceed ₹ 2 lakhs - Tribunal has not correctly exercised the discretion under the proviso (iii) to sub-section 1 of Section 129A of the Act - HC
  Visit to Get Source

  ---

Indian Laws

• High Court Misclassified Land as Agricultural Based on Revenue Entries, Ignoring Pending Conversion Application; Creditor Rights Affected.

  Case-Laws - SC : Right of secured creditor - agriculture property - The High Court mis-directed itself in holding that the land was an agricultural land merely because it stood as such in the revenue entries, even though the application made for such conversation lies pending till date - SC
  Visit to Get Source

  ---

Service Tax

• Court Denies Delay Condonation in VCES 2013; Petitioners Held Accountable for Non-Compliance with Scheme's Terms.

  Case-Laws - HC : Condonation of delay in making payment of tax - VCES 2013 - The petitioners have to blame themselves and they cannot take advantage of their own wrong and force the respondents to accept the further sums in full and final settlement contrary to the stipulations and provisions in the scheme. - HC
  Visit to Get Source

  ---

• Reverse Charge Applies to Import of Certification Services u/r 3(ii), Not Partially Performed in India.

  Case-Laws - AT : Import of service - Technical Inspection & Certification Services - reverse charge - merely because appellant receiving service in India does not mean service was partly performed in India and therefore, service was covered under Rule 3(ii) of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 - AT
  Visit to Get Source

  ---

• Service Tax on Coal Transport and Loading Ruled Unsustainable Under "Mining of Mineral, Oil or Gas Services" Category.

  Case-Laws - AT : Classification of services - transportation of coal and manual breaking and loading of coal - The demand under “Mining of Mineral, Oil or Gas Services” raised through the said SCN is not sustainable - AT
  Visit to Get Source

  ---

• Appellant Not Liable for Service Tax on GTA Services Due to Absence of Freight Charges Under Reverse Charge Mechanism.

  Case-Laws - AT : Levy of service tax - GTA - reverse charge - It is undisputed fact that appellant has not paid freight charges. Therefore, they were not liable to pay service tax in the present proceedings - AT
  Visit to Get Source

  ---

Central Excise

• CENVAT Credit Approved for Pandal Shamiana Services Used in Vishwakarma Pooja, Deemed Essential for Manufacturing Operations.

  Case-Laws - AT : CENVAT credit - input services - Pandal Shamiana - the appellant is entitled to avail cenvat credit on the services of Pandal Shaminana used for Vishwkarma Pooja - the said activity is directly related to the manufacturing activity of the appellant - AT
  Visit to Get Source

  ---

• Authority Uses Chemical Examiner's Report to Classify Goods Under Central Excise Tariff, Ensuring Compliance with Legal Provisions.

  Case-Laws - AT : Delegation of power of adjudication to the chemical examiner - It is the responsibility of the Adjudicating Authority to take chemical examiner’s report and apply it to the facts and provisions of law and the entries in the Central Excise Tariff and decide classification of the goods - AT
  Visit to Get Source

  ---

• Goods Classified as Organic Composite Solvents, Not Motor Spirit, Under CETH 38140010 Per Central Excise Guidelines.

  Case-Laws - AT : Classification of goods - Organic Composite Solvents - no grounds to classify the said goods manufactured by respondent as Motor Spirit - goods to be classified under CETH 38140010 - AT
  Visit to Get Source

  ---

Case Laws:

• GST

• 2018 (3) TMI 972
  Release of the goods detained - Section 129 of the Central Goods and Services Tax Act - Held that: - An identical matter has been disposed of by a Division Bench of this Court in the case of The Commercial Tax Officer And The Intelligence Inspector Versus Madhu. M.B. [ 2017 (9) TMI 1044 - KERALA HIGH COURT] , directing expeditious completion of the adjudication of the matter and permitting release of the goods detained pending adjudication, in terms of Rule 140(1) of the Kerala Goods and Services Tax Rules, 2017. The writ petition is disposed of directing the competent authority to complete the adjudication provided for under Section 129 of the statutes referred to above, within a week from the date of production of a copy of the judgment.

  ---

• 2018 (3) TMI 971
  Classification of imported goods - GSL ARTEMIA BRINE SHRIMP EGGS - Seeking to avail concessional duty (preferential rate of 0% IGST as against 5% IGST) by relying upon Notification No.002/2017-Cus dated 28.06.2017 in Sl.No.33 - respondent opined that the item imported by the petitioner should be classified under IGST Notification No.001/2017 Sl.No.I-21 - Held that: - Prima facie this Court is of the view that the respondent could not invoke Section 111(m) of the Customs Act as there appears to be no allegation that the goods do not correspond in respect of the value or in any other particular with the entry made under the Act. In the impugned order, the respondent has accepted that there is no dispute in the classification of the goods. The petitioner is granted liberty to file an appeal before the Commissioner of Customs (Appeals), Chennai within a period of thirty days from the date of receipt of a copy of this order - petition disposed off.

  ---

• 2018 (3) TMI 970
  Detention of goods - inter-state transport - detention was for the reason that the notice issued is that of the Value Added Tax period and also of undervaluation - Held that: - With respect to an inter-State transport, there are no documents prescribed by the Central Government - In the circumstance of the Central Government having still not prescribed any document, prima facie there can be no detention of goods on that count. However, the adjudication proceedings would be continued and in the meanwhile the goods shall be released to the petitioner on execution of simple bond without sureties - petition disposed off.

  ---

• 2018 (3) TMI 969
  Detention of goods (M.S scrap) with vehicle - Non-production of proper documents - insistence of the respondent that the petitioner must pay the security deposit demanded in the detention notice as a condition for release of the goods and vehicle - Held that: - The learned counsel for the petitioner faced with a situation where detention is inevitable till such time as the adjudication is completed undertakes to furnish a bank guarantee for the amount demanded in Ext.P3 notice - the respondent directed to release the goods and the vehicle covered by the detention notice, to the petitioner, on the petitioner furnishing a bank guarantee for the amount demanded in Ext.P3 notice, before the respondent - petition disposed off.

  ---

• 2018 (3) TMI 968
  Consideration of representations submitted by the petitioner - Levy of GST - Works Contract, on which VAT was imposed previously - petitioner/association made representations on 05.07.2017, 10.07.2017, 11.07.2017 and 11.09.2017 to the respondents stating that the contract works for which the agreements were executed prior to 01.07.2017 GST cannot be imposed and 2% VAT alone is applicable. Held that: - Since the petitioner s representations are pending, it is appropriate for the respondent to respond to the same by giving them a reply. The appropriate person who would be in a position to give reply is that the Commissioner of Commercial Taxes shall give a reply. Because all other authorities are the department of Highways and National Highways etc., who would not be in a position to specifically address the issue pointed out by the petitioner. There will be a direction to the Commissioner of Commercial Taxes to consider the representation given by the petitioner/ association and pass orders on merits and in accordance with law, within a period of four weeks from the date of receipt of a copy of this order.

  ---

• Income Tax

• 2018 (3) TMI 967
  Addition u/s 69 - unexplained cash - benefit of re-deposit of cash - Held that:- Tribunal re-appreciated the evidence and concluded that though the authorities below have given the benefit of Rs. 3 lakh of re-deposit of cash but have not considered that during the previous years, the appellant would have accumulated funds, for which a further benefit of Rs. 5 lakh was given. The Tribunal came to the conclusion that there was no specific evidence to support the opening balance of Rs. 8,86,639/- as on 01.04.2010. The evidence was not there to explain the cash deposits made to the tune of Rs. 23,39,420/- There was nothing on record to support the fact that the amounts withdrawn from the salary account were re-deposited. The FDRs of the appellant indicated that he was intelligently investing the amount with the bank. The benefit of re-deposits and of accumulated funds for the previous year has already been given. The question raised is a question of fact, as the issue is only regarding appreciation of evidence. No interference is called for in the findings recorded by the Tribunal affirming the addition Addition for cash deposited in joint bank account - Held that:- The question raised is one of fact. Addition made was on appreciation of facts. The appellant kept on denying that he had any joint account with his grand-father. His claim that his name was added in the account only for helping his old maternal grand-father for operating the account is belied by the fact that the ration card produced showed that Shri Om Parkash was staying with his two sons who could have helped him for operating the account. Shri Om Parkash had his own PAN number, yet PAN number of the appellant was mentioned in the bank account. The explanation furnished by the appellant that Shri Om Parkash was partner in M/s Om Parkash Sunder Lal B.K.O was of no help, as no income tax returns of the B.K.O were placed on record. There was no evidence to show that the said capital was ever received by Shri Om Parkash. Reliance was placed on a self serving capital account prepared but the appellant failed to establish that Shri Om Parkash had any other source of income, except the rental income of Rs. 3,630/- per month. No question of law. Rejecting additional evidence having substantive effect - Held that:- No such application was moved before the Tribunal for permitting production of additional evidence. Even otherwise, the capital account of Shri Om Parkash was a self serving document prepared without any basis. The said capital account showed opening balance of Rs. 8,50,528/-, for which there was no source or basis. The appellant failed to give any reason as to why these documents could not be produced earlier. - Decided against assessee

  ---

• 2018 (3) TMI 966
  Review of settlement to order passed u/s 245D(4) - application for rectification of the typographical errors under Section 245D(6B) - Held that:- Once an order has been passed under Section 245D(4) of the Act, it is a final order settling the dispute between the parties. The provisions of the rectification of the order passed u/s 245D(4) is permissible u/s 245D(6B) only to rectify mistakes apparent from the record. Any issue which is debatable or which would requires re­consideration of an issue which has already been decided, would fall out side the scope of a rectification application under Section 245D(6B). In the present case, the minority view, in fact, has upheld the review of order dated 27th June, 2016 passed under Section 245 D(4) of the Act by the order dated 27th July, 2016. This even without considering the scope of an application filed under Section 245D(6B). If the view taken by the minority member of the Commission is accepted, we fear, that then there would be no finality reached to an order passed by the Commission under Section 245D(4). This for the reason that application for rectification would be made under Section 245D(6B) to correct a final order passed under Section 245D(4) of the Act even though it is outside the scope of rectification. This would defeat the entire object and purpose of Chapter XIX­A of the Act viz: expeditious settlement of dispute between the assessee and State so as to reduce litigation and collect taxes at the earliest. In case, any party is aggrieved by an order passed under Section 245D(4) and the same is bad because it is contrary to the Act or in breach of principal of natural justice or suffer from a flaw in the decision making process, only then it is open to the party concerned to challenge the same before the High Court under Article 226 of the Constitution of India (see Jyotendrasinhji v/s. S. I. Tripathi (1993 (4) TMI 1 - SUPREME Court). Rectification application under Section 245D(6B) of the Act is not a remedy to correct a final order by reviewing it. The jurisdiction under Section 245D(6B) of the Act can only be exercised if the order contains an error which is apparent from the record. In these facts, we see no merit in the Petition.

  ---

• 2018 (3) TMI 965
  Extension of time for filing of the income tax return rejected u/s 119 - delay in filing of the return was on account of illness of the Chartered Accountant, i.e., the statutory auditor and consequently the return due on 31st October, 2006 was filed on 30th March, 2007 - reasonable ground for extension of time - Statutory time limits fixed have to be adhered to as it ensures timely completion of assessments. Discipline on time limits regarding filing of returns have to be complied and respected, unless compelling and good reasons are shown and established for grant of extension of time. Extension of time cannot be claimed as a vested right on mere asking and on the basis of vague assertions without proof. Statutory audits it is a common knowledge are not undertaken by one person but by a team consisting of auditor(s), article clerks and others. In the present case, we do not know the nature of illness or medical emergency suffered by the auditor and how long the auditor was incapacitated and could not work. The assertions made to justify extension of time have to be proved and established. Any indulgence on the pretext that the petitioner has been denied benefit under Section 80IB, which on merits would have been allowed, would be contrary to law, if it is held that there was no reasonable ground or reason for extension of time in filing of the return. - Decided against assessee

  ---

• 2018 (3) TMI 964
  Scope of order of rectification - review v/s rectification - Held that:- The rectification application of the Revenue calls upon the Court to re-appreciate its understanding of the order passed by the Tribunal in the case of its sister concern for Assessment Years 1996-97 to 2000-01. This on the ground that the earlier orders did not correctly understand/ interpret the order passed by the Tribunal in respect of Assessment Year 1995-96 in the case of Petitioner's sister concern. This, itself would in effect amount to Review. Therefore, outside the scope of rectification. Besides, it seeks to sit in appeal our order passed by its Coordinate Bench for Assessment Years 1996-97 to 2000-01. This is not permissible. Moreover, the Revenue has filed appeals in the sister concern case for the Assessment Years 1996-97 to 2000-01 under Section 260A of the Act to this Court. The question raised therein is on the issue of appropriate classification of the rent/ compensation under the head 'income from the other sources' or under the head 'income from the house property'. The aforesaid appeals have been admitted and are awaiting consideration for final disposal. Therefore, even if the Revenue seek to contend to the contrary it would be a debatable issue. This cannot be a subject matter of rectification. - Decided against revenue

  ---

• 2018 (3) TMI 963
  Addition on account of discrepancy in stock statements - Held that:- All the three authorities have come to a finding of fact that the claim of closing stock made by the appellant on the basis of the figures indicated in the Balance Sheet is not supported by the evidence on record. In these circumstance, the question as proposed does not give rise to any substantial question of law as it is an essentially finding of fact which is not shown to be perverse is any manner. - Decided against assessee. Appeal admitted on the substantial question of law at no.3 - Whether in the facts and circumstances of the case, and in law, the Tribunal is justified in sustaining the dis-allowance of interest under Section 40A(2)(b) of the Act ?”

  ---

• 2018 (3) TMI 962
  Computation of interest u/s 234B & 234C - interest liability of the assessee u/s 234B(3) - demand on reassessment - claim of interest from the date of payment of tax under Section 140A - Held that:- Admittedly, there was a demand raised as per the re-assessment. The flaw committed by the Tribunal was insofar as assuming that the tax paid under Section 140A remained with the Department. Even before the regular assessment, the same was returned with interest on 27.3.1998. Hence, the Department did not have any benefit of the amounts and whatever was paid under Section 140A stood refunded with interest to the assessee. The tax paid by the assessee under Section 140A also did not include any interest. Hence, there was no question of applying sub-Section (2) of Section 234B. On re-assessment after the re-computation of the total income, the tax demand was raised after giving credit of tax paid under Section 140A and also adding on the refund with interest. There again was a demand raised after adjustments. As we have noticed, there is definite increase of tax liability from the regular assessment at the time of re-assessment. There is no dispute that the advance tax payable at 90% of the liability to tax, had not been satisfied. The interest payable under sub-Section (1) of Section 234B was levied in the regular assessment. On re-assessment, the liability for advance tax also stood increased and in that circumstances, the differential tax on reassessment had to be levied interest at the rate provided under sub-Section (3) of Section 234B. Set aside the order of the Tribunal and restore that of the Assessing Officer under Section 154 as confirmed in first appeal. - Decided in favour of the Revenue and against the assessee.

  ---

• 2018 (3) TMI 961
  Revision u/s 263 - Setting-off of unabsorbed depreciation against income other than the profits and gains arising out of business or profession i.e. interest income from deposits in Banks - Held that:- Claim of set-off as against the income from other sources was available for that year, and for the subsequent 8 years, it could be claimed only as against profits and gains arising from business or profession. As amended on 01.04.1997, the provision enabled any unabsorbed depreciation carried over from the previous years to be first adjusted against the profits and gains from business or profession, then against income from other sources (for that year alone) and any amounts remaining still, to be adjusted against the profits and gains arising from the business or profession for a further period of 8 years. Hence, for the assessment year 1997-98, the claim for set-off of unabsorbed depreciation is allowable against the income from other sources. The amended provision was not in consonance with the Budget Speech or the Bill introduced; and neither of these provide any help in interpreting the amended provision. See Peerless General Finance and Investment Company Limited v. Commissioner of Income Tax, Kolkata- I [2016 (5) TMI 109 - SUPREME COURT OF INDIA] We answer the question for the assessment year 1997-98 in favour of the assessee and against the Revenue and that framed for the assessment year 1998-99 in favour of the Revenue and against the assessee

  ---

• 2018 (3) TMI 960
  Minimum Alternate Tax (MAT) determination payable u/s 115J and 115JA - whether book profits, the provision for bad and doubtful debts has to be added on to determine MAT payable under Sections 115J and 115JA applicable in the respective assessment years? - Held that:- The provision for bad and doubtful debts is not a provision for liability. There was no provision available in the statute to add on the provision for bad and doubtful debts, which results in diminution of assets, to the book profits as computed under Sections 115J and 115JA. The lacuna noticed by the Honourable Supreme Court was supplied by the Union Parliament by way of amendment which has retrospective effect. This is a permissible legislative exercise and hence there can be no claim raised based on the Honourable Supreme Court’s decision for the year 1998- 99 in Commissioner of Income Tax v. HCL Comnet Systems and Services Ltd.[2008 (9) TMI 18 - SUPREME COURT ]. The legal infirmity noticed has been now removed and it is possible for adding back the provision for bad and doubtful debts, which as per the Honourable Supreme Court’s decision results only in diminution of assets. We, hence, answer the question for the assessment year 1998-99 with respect to Section 115JA in favour of the Revenue and against the assessee. If the remand order has been complied with, then necessarily, the same shall be revised in accordance with the findings in this Income Tax Appeal.

  ---

• 2018 (3) TMI 959
  Non compliance with condition precedent u/s 179(1) - recovery of dues of the company from the directors - revision application u/s 264 rejected - Held that:- It is an agreed position between the parties that in view of the decision of this Court in Madhavi Kerker v. Assistant Commissioner of Income Tax [2018 (1) TMI 749 - BOMBAY HIGH COURT], the jurisdiction to proceed against the directors of the Company under Section 179(1) of the Act can only be exercised when the Revenue is unable to recover tax dues from the private limited company. This requirement of the Revenue having failed to recover its dues from the defaulting private limited company before proceeding against its Directors has been held to be a condition precedent for exercise of jurisdiction under Section 179(1) of the Act. The jurisdictional requirement must be intimated to the directors of the delinquent private limited company indicating the tax dues, the steps taken to recover the tax dues from the delinquent company and its failure. In the present facts it is undisputed position that the show cause notice to the Petitioner did not indicate the steps taken to recover the tax dues form delinquent private limited company and its failure to collect the same. Order set aside - AO is at liberty to pass a fresh order after issuing an appropriate notice to the Petitioner.

  ---

• 2018 (3) TMI 958
  Reopening of assessment u/s 147 - change of opinion - entitlement of the deduction under Section 80 HHC - eligibility of reasons to believe - Held that:- It cannot be said that the re-assessment was merely based on a change of opinion. The appellate authority had for the other years affirmed the findings of the Assessing Officer that a deduction under Section 80 HHC could be claimed successfully only if there were produced certificate of the export house. Admittedly, no certificates were produced by the assessee and inadvertently the Assessing Officer had allowed the deduction for the two years which are before us. On receipt of information by way of the appellate order, the Assessing Officer realised the escapement of assessment in the assessment years 1987-88 and 1988-89. The appellate order has already been held to be coming within the ambit of information as contemplated under Section 147. Hence there could be no vitiating factor found in the re-assessment having been carried out. - Decided in favour of revenue

  ---

• 2018 (3) TMI 957
  Addition u/s 153A - proof of incriminating material found in search - Held that:- DR was fair enough to accept that no incriminating material, whatsoever, was found during the course of the search. The addition/s have been made on the basis of the subsequent information received by the AO. Such information, had it been related to the incriminating material found during the course of the search, the AO could well have been within its jurisdiction to take into consideration such information and make additions relating to the search material found during the search. In absence of any incriminating material being found during the course of the search AO will be without jurisdiction in making such additions. It is the incriminating material found during search which gives jurisdiction to the AO to make additions in the assessment proceedings under Section 153A of the Act in respect of assessments which have not abated. In the absence of incriminating material in such cases, as held in the case of Kabul Chawla in Para 37 (v) [2015 (9) TMI 80 - DELHI HIGH COURT ] the completed assessment is not to be disturbed. - Decided in favour of assessee

  ---

• 2018 (3) TMI 956
  Reassessment order passed u/s.147 - validity of reasons to believe - independent application of mind by AO - Held that:- Assessing Officer has initiated reassessment proceedings on the same facts which were available before him at the time of making assessment u/s.143(3) of the Act and no new tangible material has come on the basis of which it could be said that the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment on account of failure on the part of the assessee to disclose truly and fully material of facts in the assessment. Assessing Officer has not brought on record any new tangible material to initiate reassessment proceedings but relied only on tax audit report and financial statements, which were already filed before the Assessing Officer in the scrutiny proceedings. Thus we are inclined to set aside the order of the CIT(A) on this ground and quash the reassessment order. - Decided in favour of assessee

  ---

• 2018 (3) TMI 955
  Denial/ Disallowance of claim of deduction u/s. 80P - whether the assessee is a co-operative Bank or Society and consequently whether the deduction u/s.80P is available to the assessee? - Held that:- The assessee is a Regional Rural Bank ,which is deemed to be a co-operative society as per the provisions of RRB Act and for the purpose of Income Tax Act and since the main function of the assessee is involved in the banking business and, therefore, not entitled for deduction u/s. 80P of the Act. CIT(A) has correctly followed the decision in the case of Vidisha Bhopal Kshetriya Gramin Bank vs ACIT [2012 (8) TMI 119 - ITAT INDORE] for the assessment year 2007-08 and 2008-09, wherein, it has been held that the RRBs are not entitled to deduction u/s.80P of the Act from the assessment year 2007-08. Whereas the assessment year involved in the present case is 2012-13. - Decided against assessee.

  ---

• 2018 (3) TMI 954
  TPA - ALP determination - addition on account of ‘royalty’ paid to Johnson Matthey UK, AE - not accepting TNMM as the most appropriate method considering the business model and transaction of the assessee - Held that:- The transaction of payment of ‘royalty’ is flowing from a separate agreement and has to be paid to JM-UK irrespective of any services or goods received and is entirely a separate transaction having no remote connection with the other transactions; and therefore, bundled approach for aggregation to transfer all the transaction under TNMM would not be desirable on the facts of the present case. Accordingly, we reject the contention of the Ld. Counsel before us that payment of ‘royalty’ should be aggregated with the other transactions and needs to be benchmarked under TNMM. The payment of royalty cannot be determined at ‘NIL’. The parties negotiate the rates depending upon the complexity existing in particular industry, nature of technical knowhow and keeping other relevant economic factors. The rates given by the RBI, which are quite often fluctuating, cannot constitute a comparable data for external CUP, as it merely gives the range of the royalty rate for the money which can be remitted to a Foreign Entity. Thus, we are of the opinion that rate prescribed by RBI under FEMA regulation cannot be reckoned as an external CUP for the purpose of benchmarking. Here in this case neither the assessee nor the AO has searched for any external CUP; and therefore, we deem fit that the issue of benchmarking of ‘royalty’ payment should be remanded back to the file of the AO/TPO to benchmark ‘royalty’ payment separately by using external CUP. The data from “Royalty Stat” available for automotive industry can be used for search of external comparables and the payment of ‘royalty’ paid for use of technical knowhow for manufacturing of automotive components can be used for the purpose of benchmarking. The onus would be on the assessee to carry out the fresh search process and after selecting external comparables and carrying out comparability analysis may present the same to the TPO, who shall analyse the external comparables and benchmark the royalty payment of the assessee. With this direction the issue of royalty payment is set aside to the file of the AO/TPO and the TPO who shall give appropriate opportunity of hearing to the assessee to substantiate the ALP of the said transaction. For “intra group services” under the arm’s length principle in this case the “intra group services” like server charges, SAP maintenance charges and cost sharing charges is an operating cost for overall manufacturing activities carried out by the assessee, because these expenses are quite essential for any independent enterprise and also for efficiency for the business activities. Regarding cost sharing charges, we will endeavour to examine the nature of various “intra group services”, as to whether actually such services at all has been rendered which can said to be part of the operating cost and whether assessee has derived some benefit while carrying out its manufacturing / business activities or not. Under the arms length scenario no independent enterprise will pay to a third party in a foreign country where it has not been able to show that any sale has been made to the customers or any such services has rendered for the customers in that foreign country. For benchmarking such a payment one has to see, whether any independent Indian party would pay to a foreign entity when neither it has it any customers nor has it been established that any such services have been rendered by the foreign entity which can have some commercial expediency benefitting the Indian company. Thus, under arms length conditions also such a payment does not stand the test of ALP; and accordingly, we confirm the order of the TPO that the payment of ‘sales commission’ to AE is not meant either for business purpose or under the arms length conditions such a payment is justified. Accordingly, the amount of Rs. 1,08,48,310/- is confirmed. So far as ‘SAP maintenance charges’ his payment being a part of the operating cost has to be aggregated under the TNMM. Here in this case it is not in dispute that, assessee’s profit margin vis-à-vis the comparables under TNMM is higher and therefore, no separate adjustment is required on this expense. For the ‘cost sharing charge’ Such cost sharing arrangements has to be treated as part of the operating cost of the assessee company and therefore, under TNMM no separate benchmark should be done for this service as it can be factored in arriving at net profit margin. Accordingly, we hold that no separate addition should be made on ‘cost sharing charges’. Thus, in view of our finding given above, TPO is directed to give effect and determine the arm’s length price accordingly. In the result appeal of the assessee as well as of the department for assessment year 2007- 08 is partly allowed for statistical purposes. Server charges is definitely inextricably linked with the business activities and is an operating cost of the assessee, therefore, no separate benchmarking is required as the same will be aggregated under TNMM. Accordingly, no separate addition or adjustment is warranted. Thus, appeal for the assessment year 2008-09 and 2009- 10 are treated as partly allowed. Sales tax subsidy to be treated as capital receipt not chargeable to tax.

  ---

• 2018 (3) TMI 953
  Interest allowance as revenue expenditure related to the business purpose - AO disallowed the interest payment on unsecured loan on the ground that the assessee diverted Rs. 36.76 cr. for non business purposes out of the borrowed funds - Held that:- It is necessary to determine the actual fact whether lending of monies and the investments in subsidiaries, associate companies, partnership firm as tabulated in page 6 of the assessment order and page 9 of CIT(A)’s order are part and parcel of business activity of the assessee. This factual finding would be necessary to determine the fact of utilisation of borrowed funds for the business purposes which will in turn be essential to determine the allowability of interest u/s. 36(1)(iii). Hence, in the fitness of things we deem it appropriate to remand this issue to the file of the AO to address this issue in the light of directions given above. Accordingly, revenue’s ground of appeal is allowed for statistical purposes. Disallowance u/s. 14A applying rule 8D(2)(iii) of the Rules taking the average investment as Rs. 2.485 cr. - Held that:- Assessee had made investment and issued debentures to the tune of Rs. 8.41 cr., the return of which would be in the form of interest which is taxable. Hence, we are inclined to accept the argument of the Ld. AR that the same should be excluded while calculating disallowance u/s. 14A read with Rule 8D of the Rules. Similarly, in respect of investment made in the capital of a partnership firm, the assessee has earned taxable interest of Rs. 41,16,090/- and accordingly, the said investment also would be outside the purview of sec. 14A read with Rule 8D of the Rules and therefore, we direct both these amounts should be excluded while 8D(2)(iii) investment is computed. Coming back to computation of Rule 8D(2)(iii) of the Rules. This Tribunal has consistently followed the dictum of law laid down in REI Agro Ltd. Vs. DCIT [2013 (9) TMI 156 - ITAT KOLKATA ] in which the Tribunal held that only investment which has given rise to the exempted income should be taken into consideration while computing disallowance u/s. 14A read with Rule 8D. This order has been upheld by the Hon’ble High Court vide judgment [2013 (12) TMI 1517 - CALCUTTA HIGH COURT]. Respectfully following the same, we direct the AO to re-compute the disallowance as above mentioned.

  ---

• 2018 (3) TMI 952
  Short granting of deduction u/s. 35DDA - Held that:- In view of the fact that the similar issue is pending before the Ld.CIT(A) for the Assessment Year 2006-07 for adjudication, we restore this issue to the file of the Ld.CIT(A) who shall consider the issue and decide afresh in accordance with law. Erroneous directions given by the Ld.CIT(A) in respect of the payment made to employees on individual negotiations under separate scheme not forming part of Voluntary Retirement Scheme [“VRS”] - Reopening of assessment - Held that:- Assessment Order passed on 24.03.2014 u/s.143(3) r.w.s. 147 of the Act for the Assessment Year 2004-05, the Assessing Officer disallowed Rs..32,95,324/- being 1/5th of expenses of Rs..1,69,10,939/- claimed as deduction u/s. 35DDA of the Act and these expenses represent the payments made to the employees on their separation from the company and not forming part of VRS. Therefore, since the Assessing Officer had already disallowed expenses by reopening the assessment for Assessment Year 2004-05, there is no need for reopening and examining the issues again hence to that extent we reverse the findings of the Ld.CIT(A). Disallowance of depreciation on fixed assets - Held that:- The basic documents like Bills, vouchers in respect of the fixed assets were not produced either before the Assessing Officer or before the Ld.CIT(A) to prove that the assessee had in fact acquired assets. In the absence of such documentary evidence, the depreciation cannot be allowed Additional depreciation u/s.32(1)(iia) - as contended that additional deprecation was claimed by the assessee while preparing and filing its return for the year - appeal not made in original return -Held that:- The submissions of the assessee were not appreciated by the Ld.CIT(A) and not entertained the claim observing that this issue does not arise from Assessment Order. In the case of CIT v. Pruthvi Brokers and Shareholders (P.) Ltd. (2012 (7) TMI 158 - BOMBAY HIGH COURT) the Hon'ble Jurisdictional High Court held that assessee is entitled to raise not merely additional legal submissions before the Appellate Authorities but is also entitled to raise additional claims before them. Since the assessee made this claim for additional depreciation before the Ld.CIT(A), he should have entertained or rejected the claim of the assessee. In the circumstances, we restore this issue to the file of the Ld.CIT(A) reexamine it Set-off of brought forward business losses - Held that:- We find that this ground is only a consequential in nature and the Assessing Officer shall pass appropriate orders based on the issues decided in the Assessment Years 2006-07 and 2007-08. If the assessee is eligible to carry forward the losses from the Assessment Year 2006-07 and 2007-08 the same may be considered and appropriate order may be passed in accordance with law for the Assessment Year 2008-09.

  ---

• 2018 (3) TMI 951
  Allowability of Production Registration Expenses (PRE) - nature of expenditure - revenue or capital - Held that:- To solve the knotty issue of capital/revenue expenditure the aim and object of the expenditure is to be considered not the quantum. As far as entries in the books of accounts and claiming depreciation in the earlier years is concerned, it is suffice to say that entries made in the books of accounts do not decide the true nature of expenditure. The issue of capital versus revenue expenditure has to be seen from the angle of an assessee rather than an AO. We find that in the cases of Panacea Biotech Ltd. (2012 (2) TMI 15 - DELHI HIGH COURT )and Cadila Healthcare Ltd (2013 (3) TMI 539 - GUJARAT HIGH COURT) has clearly held that PRE had to be allowed as revenue expenditure. - Decided in favour of assessee

  ---

• 2018 (3) TMI 950
  Penalty u/s.271AAA - undisclosed income addition - assessee’s failure in specifying the manner of having derived the above undisclosed income as well as substantiation thereof during the course of search as well as assessment proceedings - CIT-A deleted the addition - Held that:- fails to rebut the CIT(A)’s clinching finding that no such query of manner of deriving the impugned undisclosed income had been put to the assessee by the authorized officer whilst recording the search statement in question. We notice in this backdrop that in recent judgment in PCIT vs. Mukeshbhai Ramanlal Prajapati [2017 (7) TMI 966 - GUJARAT HIGH COURT] holds that it is incumbent for the authorized officer to question the assessee about the relevant manner of having derived the undisclosed income in question and then only the onus shifts on the tax payer to substantiate the same. The field even in the context of sub-section (2) of section 271AAA of the Act. It is only when the officer of the raiding party recording the statement of the assessee under section 132(4) of the Act elicits a response from the assessee's this requirement, the assessee's responsibility to substantiate the manner of deriving such income would commence. When the base requirement itself fails, the question of denying the benefit of no penalty would not arise. - Decided against revenue

  ---

• 2018 (3) TMI 949
  Disallowance u/s 14A r.w.s. 8D(2)(iii) - no expenditure was incurred for earning exempt income - Held that:- We find that the AO is supposed to record satisfaction in an objective manner with cogent reasons having regard to the accounts of the assessee in order to refute the claim made by the assessee that no expenditure was incurred for earning exempt income. This is the mandate provided in section 14A(2) of the Act read with Rule 8D(1) of the Rules. Respectfully following the same we direct the ld. AO not to make any disallowance u/s 14A of the Act in the instant case. Accordingly, ground no. 1 raised by the assessee is allowed and ground no. 1 raised by the Revenue is dismissed. Disallowance of provision for leave encashment by applying the provision of 43B(f) - Held that:- We find that though the Hon’ble Calcutta High Court in the case of Exide Industries Ltd vs Union of India [2007 (6) TMI 175 - CALCUTTA High Court] struck down the provisions of section 43B(f) of the Act as unconstitutional, the revenue had carried the matter further to the Hon’ble Supreme Court [2008 (9) TMI 921 - SUPREME COURT] which had not stayed the judgment of the Calcutta High Court during Leave proceedings. But the Hon’ble Supreme Court had only passed an interim order on the impugned issue. Hence we deem it fit and appropriate , in the interest of justice and fair play, to set aside this issue to the file of the ld AO to pass orders based on the outcome of the main appeal on merits by the Hon’ble Supreme Court as stated supra. Accordingly Ground No. 2 raised by the assessee is allowed for statistical purposes.

  ---

• 2018 (3) TMI 948
  Rejection of books of accounts - profit estimation - Held that:- There is no dispute with regard to the rejection of books of accounts. There is no change in the facts and circumstances as compared to last assessment year as observed from the assessment order of earlier year(s). However, we note that AO has not elaborated the reasons for adopting the higher profit as compare to the earlier year(s). AO estimated the profit @ 6.50% of the gross turnover which was reduced by the ld. CIT(A) to 6% of the gross turnover. It was observed that the profit of the assessee was estimated by the AO @5.77% of the gross turnover in the immediate preceding AY 2011-12 which was not challenged by the assessee before the ld. CIT(A). As all other facts of the assessee are same as of the immediate preceding year, therefore in our considered opinion, it would serve the end of justice to the assessee if the estimate is scaled down to the profit @ 5.77% of the gross turnover. The grievance of the assessee is, as such, partly allowed.

  ---

• 2018 (3) TMI 947
  Penalty u/s 271(1)(c)/271AAB - admission of income u/s 132(4) - undisclosed income in respect of the deposits in the name of the employees of the assessee - Held that:- In the assessee’s case, the assessee had admitted the undisclosed income in respect of the deposits of the employees, exemployees in their bank accounts. The assessee admitted the peak deposit in the accounts of employees as his undisclosed income amounting to Rs. 56,74,868/-. At the time of search, the assessee has submitted before the A.O. that the bank accounts are not belonged to the assessee and they were belonged to the employees who opened the accounts and operating the same. However, the assessee had admitted peak deposits u/s 132(4) - A.O. did not make any further enquiries and accepted the admission given by the assessee. Though peak deposits were admitted by the assessee as additional income u/s 132(4) of the Act, the A.O. has not established that the impugned bank accounts were belonged to the assessee, therefore, we hold that there is no undisclosed income in respect of the deposits in the name of the employees of the assessee. - Decided in favour of assessee Unexplained source of acquisition of gold and jewellery - Held that:- On the day of the search and subsequently, the assessee has categorically explained the source of acquisition of gold and jewellery stating that the said gold and jewellery was said to be belonging to his brother’s daughter Miss S. Chandrika and also to his brother’s wife. Though he has admitted the income, the above gold and jewellery required to be examined in the hands of Miss S. Chandrika and Mrs. Sita wife of his brother and his wife for levy of penalty u/s 271AAB. The A.O. stopped his enquiries once the disclosure has been made by the assessee and did not make any further enquiry, therefore, the A.O. has not established that gold and jewellery was acquired from the sources of undisclosed income. As per the provisions of section 271AAB of the Act, the penalty is leviable only on undisclosed income. Thus no case for imposing penalty u/s 271AAB - Decided in favour of assessee

  ---

• 2018 (3) TMI 946
  Penalty u/s 271AAB - disallowance u/s 40(a)(ia) - provisions of section 271AAB as parimateria with that of section 158BFA of the Act relating to block assessment - Held that:- The cost of construction in the projections projected at Rs. 2177/- which is in synch with the statement given by the assessee. The AO was happy with the disclosure given by the assessee and did not verify the factual position with the books of accounts and projections and bring the evidence to unearth the undisclosed income. Neither the A.O. nor the investigation wing linked the cost of profit or cost of asset to the entries in the books of accounts or to the sales conducted by the assessee to the sale deeds. Therefore, we are unable to accept the contention of the revenue that the loose sheet found during the course of search indicates any undisclosed income or asset or inflation of expenditure. The Hon’ble ITAT Delhi Bench in the case of Ajay Sharma Vs. DCIT ( 2012 (5) TMI 785 - ITAT DELHI) held that with respect to the addition on account of alleged receivables as per seized paper, there is no direct material which leads and establishes that any income received by the assessee has not been declared by the assessee. An addition has been made on the basis of loose document, which did not closely prove any concealment or furnishing of inaccurate particulars by the assessee. Hence penalty u/s 158BFA (2) of the Act is not leviable. The facts of the assessee’s case shows that there was no undisclosed income found during the course of search and no incriminating material was found, hence we hold that there is no case for imposing penalty u/s 271AAB of the Act, accordingly, we set aside the order of the lower authorities and cancel the penalty u/s 271AAB of the Act. - Decided in favour of assessee

  ---

• 2018 (3) TMI 945
  Penalty u/s 271(1)(c) - absence of any specific show cause notice having been issued - non specification - Held that:- AO has initiated the penalty for concealment of particulars of income or furnishing of inaccurate particulars, which is contrary to the provisions of law. Notice issued by the AO u/s. 271(1)(c) r.w.s. 274 is bad in law as it does not specify which limb of section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars. The penalty in dispute is not sustainable in the eyes of law. - Decided in favour of assessee.

  ---

• 2018 (3) TMI 944
  Revision u/s 263 - addition u/s 41 - Held that:- As per order of the Dy. Commissioner, Customs, the assessee is not entitled for refund, hence, the refund received in pursuance of the order of the CESTAT even if be treated as income u/s 41(1) still the net income would be zero since the liability lies to the assessee with the consumer welfare fund subsisted till the Hon’ble Supreme court settled the issue [2002 (9) TMI 4 - SUPREME Court]. Hence, the assessee requires to transfer this amount to consumer welfare fund but not to the income account of the assessee. Therefore, receipt held by the assessee is in fiduciary capacity till such time the issue is finally settled at the level of Hon’ble Supreme Court and he cannot be held to be owner of the asset. Therefore, we hold that in view of the peculiar circumstances exist in the assessee’s case by virtue of the order for the Dy. Commissioner of Customs and Central Excise with regard to the entitlement of the Central Excise refund the same is crystalised in the year of final settlement by Hon’ble Supreme Court, accordingly we hold that the assessee has rightly offered the central excise refund as income for the assessment year 2013-14 and the order of the Commissioner of Income Tax is unsustainable. Accordingly, we set aside the order of the Principal Commissioner of Income Tax passed u/s 263 of the act and allow the appeal of the assessee.

  ---

• 2018 (3) TMI 943
  Penalty imposed u/s. 271AAB - entire undisclosed income can only be treated as arising out of documents/transactions/evidence found in the course of search u/s. 132 of the Act and the same was not entered in the books of account - Held that:- We find that the issue involved herein is squarely covered in favour of the assessee [2018 (2) TMI 972 - ITAT KOLKATA]as held since the assessee is not engaged in business or profession, he does not require to maintain the books of account as per sec. 44AA or sec. 44AA(2) of the Act, therefore, the assessee’s case falls in the second limb i.e. “or other documents” as stipulated u/s. 271AAB Explanation (c). Since the income under question was in fact entered in the “other documents” maintained in the normal course relating to the AY 2013-14, which document was retrieved during search, hence, the amount offered by the assessee does not fall in the ken of “undisclosed income” defined in Sec. 271AAB of the Act. No penalty can be levied against the assessee - Decided against revenue.

  ---

• 2018 (3) TMI 942
  Payment made to expatriate technicians in India - Non deduction of tds - revision u/s 263 - considering the residential status u/s 6 - DTAA between India and Japan - reference to Section 9(1)(ii) - assessee in default - revision u/s 263 - Held that:- It is not in dispute that in the original assessment order dated 3.5.2005, AO did not advert to the applicability of the provisions u/s 9(1)(ii) or the provisions of the DTAA between India and Japan but considered the case only u/s 6 of the Act in respect of the residential status of the employee. In view of the later decision of the Tribunal dated 21st October 2005 to the effect that the payment made to the expatriate technicians in India is taxable in India irrespective of their stay, CIT correctly held that the original assessment order passed by the AO is erroneous in so far as the provisions of Section 9(1)(ii) of the Act and the DTAA between India and Japan have not been taken into account is pre judicial to the interest of the revenue. AO did not consider the applicability of the provisions u/s 9(1)(ii) of the Act and the DTAA to the facts of this case, while respectfully following the decision of the Hon’ble Apex Court in the case of Malabar Industrial Co. Ltd. vs CIT (2000 (2) TMI 10 - SUPREME Court) - not open for the assessee to challenge the same on the ground that such an exercise amounts only to change of opinion. Coming to the merits of the case, as rightly held by the learned CIT in his order, the deduction of tax on the payments made to all the four employees requires consideration and for that purpose all the employees stand on the same footing. Since the case of two employees, namely, Mr. Masao Koga and Mr. Kiyonori Yana has already been decided by this Tribunal as being covered by the decision in the case of Pradeep J. Mehta vs CIT [2008 (4) TMI 6 - Supreme Court], we do not think it necessary to take a different view in respect of these two employees, viz. Mr. Takashi Suzuki and Mr.Tetsuo Mitera. Admittedly, the matter relating to the employees covered by the original assessment order is set aside to the file of the learned AO, we, therefore, set aside this matter also to the file of the AO for considering the case afresh in the light of the established principles after affording an opportunity to the assessee - Decided in favour of assessee for statistical purposes.

  ---

• 2018 (3) TMI 941
  Disallowance/restriction of raw material consumed to 1% of the value of raw material consumed on estimate basis - closing stock valuation - according to AO, in the assessment year under consideration there is abnormal increase in the consumption of raw material by 25% than compared with the increase in production of finished goods by 10% - Held that:- On perusal of Schedule 14 (Materials) of the audited accounts (page no. 20) reveals that closing stock of work-in-progress (WIP) as on 31.03.2004 is Rs. 38,192/- and on 31.03.2005 is Rs. 52,907/-. Thus, there is an increase of 39% in the closing stock of WIP. We also note that the value of closing stock of finished goods and WIP has also increased by 29%, therefore, in the light of the aforesaid facts emerging from the audited accounts of the assessee, the factual inference of the AO is incorrect and the basis for estimation itself fails. We also note that the books of account of the assessee has not been rejected by the AO, therefore, the estimation was not warranted. CIT(A) erred in restricting the disallowance to 1% of raw material consumed. Therefore, in the interest of justice and fair play for both the parties, we set aside the order of Ld. CIT(A) and remand the matter back to the file of AO for de novo adjudication - Decided in favour of assessee for statistical purposes Disallowance of site expenses-Maintenance and site expense u/s. 40(a)(ia) to the extent of labour charges and office rent - Non deduction of tds - Held that:- We note that out of the details of site expenses of Rs. 4,04,51,275/- the AO asked only the details of TDS of site expenses of Rs. 1,50,22,618/- pursuant to which assessee gave the details of this information sought. However, the AO disallowed site expenses and maintenance of Rs. 43,44,654/- and site expenses and others of Rs. 84,81,271/- which aggregates to Rs. 1,28,25, 925/- u/s. 40(a)(ia) and (ib) of the Act without providing proper opportunity to the assessee. The Ld. CIT(A) gave partial relief after taking note of the details submitted before him. The AO ought to have done the assessment by providing sufficient opportunity to the assessee and since no opportunity was given to the assessee at the time of assessment proceedings on the addition/disallowance made, the proper course to be taken is that the matter needs to be remanded back to the AO. Disallowance of advertising expenses - as per AO assessee neither submitted the name and address of the respective parties nor the confirmation of bills and hence, the said amount is liable for disallowance u/s. 40(a)(ia) read with sec. 194C - Held that:- We note that out of Rs. 41,40,940/- AO disallowed Rs. 2,17,760/- on the plea that details of the disbursal was not provided to him, so he made disallowance. CIT(A) has given partial relief by holding as supra. However, we do not understand in what context the CIT(A) has given relief to the assessee. The main grievance of the revenue is that details in respect to this issue for amount disallowed by AO were not provided before the AO. Direct the AO to verify the claim of the assessee afresh. So, we set aside the order of CIT(A) on this issue and restore the matter back to the file of AO for fresh consideration Disallowance on account of prior period expenses - Held that:- As submitted by the assessee that in the assessment year under consideration, the auditor has reported prior period expenses of Rs. 13,127/- in clause 22(b) of the tax audit report which according to the assessee was duly offered to tax in the computation of total income. However, without assigning any reason the authorities below have made the addition which renders the order bad in law for non-application of mind, therefore, in the interest of justice relying on the order of Hon’ble Supreme Court in the case of Tin Box Company (2001 (2) TMI 13 - SUPREME Court), we remand this issue to the file of AO for de nove adjudication. Addition on gifts given - Held that:- We note that assessee has given calendar, diary, bags etc. which are regularly presented to customers, dealers, employees during festival occasion to carry the business smoothly and needs to be considered as business expenditure u/s. 37(1) of the Act. Allowability of foreign travel expenses - Held that:- We note that in earlier assessment years there has been no disallowance on foreign travel and taking into consideration the rule of consistency and since the AO has made ad hoc disallowance which is an arbitrary exercise of power, we do not subscribe this action of the AO and, therefore, we uphold the order of Ld. CIT(A) and dismiss this ground of appeal of revenue. Allowability of hotel expenses - Held that:- Director and foreign employees as well as other employees/auditors of the assessee company have been staying in hotels and bills have been annexed with the paper book. So, the contention of the AO cannot be accepted. We have already upheld the order of the Ld. CIT(A) in respect to travelling expenses because it is for the purpose of business. When they travelled they have to stay in various places/countries for which expenses are for the purpose of business of the assessee, therefore, we uphold the order of the Ld. CIT(A) who was pleased to delete the ad hoc disallowance made by the AO. Allowability of professional fees paid - payment of tds - Held that:- Professional fees paid to Advent processing in the earlier years and subsequent assessment years has not been disallowed and for the first time the AO has resorted to disallow the same. We take note that the TDS of the payment has been deducted and the assessee has submitted the detailed break up of payment along with the copies of the bills before the AO. However, on a specious plea that the nature of drawing and design and its relevance to the business carried out by the assessee could not be understood from the invoice prompted the AO to make the disallowance, which the Ld. CIT(A) taking note of the evidence furnished and the TDS deducted and also taking into consideration that the professional fees for Advent Processing has never been disallowed in the earlier years as well as the subsequent assessment years allowed the claim which does not call for any interference

  ---

• 2018 (3) TMI 940
  Transfer pricing adjustment - TPO rejected the approach adopted by assessee i.e. segmental profitability of AE segment and benchmarked the international transactions by considering the entity level profitability of assessee - assessee had applied man-hour basis for preparing segmental details of AE segment - Held that:- The assessee has filed on record the copies of orders of TPO / Assessing Officer in this regard. In the totality of the above said facts and circumstances, we hold that while benchmarking international transactions of provision of services to Tieto Group companies by the assessee, the segmental details of AE segment need to be applied and not the results at entity level are to be applied. The assessee had applied a systematic manner of allocating the expenses to the AE segment i.e. on the basis of man-hour which is accepted method of allocation of cost. The same has also been applied under APA agreement signed by the assessee. Further, the assessee has also explained in detail the allocation of other costs either on actual basis or turnover basis and the same cannot be rejected. Accordingly, we reverse the order of Assessing Officer / TPO in applying the margins at entity level and direct to accept margins shown in segmental profitability of AE segment by the assessee. The case of assessee is that in case the segmental profitability of AE segment is applied, then the margins shown by the assessee are within +/- 5% range of mean margins of comparables as worked out by the TPO and no adjustment needs to be made on account of international transactions undertaken by the assessee. Accordingly, we hold so. Comparability analysis - Rejection of concern on turnover basis - Held that:- Though the ground of appeal raised by the Revenue is vague in this regard but the perusal of order of DRP shows that it had directed exclusion of Infosys Technologies Ltd. on turnover basis. We find that the issue is covered by the ratio laid down by the Hon’ble Bombay High Court in CIT Vs. Pentair Water India Pvt. Ltd. (2016 (5) TMI 137 - BOMBAY HIGH COURT ), wherein it has been held that the concern Infosys Technologies Ltd. having high turnover and having intangibles is not comparable to the concern providing software services to its associated enterprises. Applying the said ratio to the facts of present case, we uphold the order of DRP in excluding Infosys Technologies Ltd. from final set of comparables.

  ---

• 2018 (3) TMI 939
  Exemption u/s 11 eligibility - cricket association - applicability of proviso to Section 2(15) - assessee association was not considered a charitable organization - Held that:- As decided in Tamil Nadu Cricket Association [2013 (12) TMI 833 - MADRAS HIGH COURT] after considering the proviso to Section 2(15) of the Act for assessment year 2010-11, held that the benefit of Section 11 of the Act cannot be denied. Hon’ble High Court has considered the proviso to Section 2(15) of the Act taking into consideration the object of the institution which fits into the definition of charitable purpose defined under Section 2(15) and subsequent substitution of the Section itself with effect from 1st April, 2009. Although the decision of Hon’ble Madras High Court is in respect of grant of registration u/s 12AA but the relevant observations reproduced above are very much relevant to the issue before us - Decided in favour of assessee.

  ---

• 2018 (3) TMI 938
  Transfer pricing adjustment - Rejection of comparables under technical services segment - Held that:- The assessee an Indian company is involved in providing services of information dissemination, maintaining customer relationship and market development to its overseas Associated Enterprise (A.E) ExxonMobil Chemical Co., USA. It also provides application research and technical services as well as back office support services to its A.E. Thus companies functionally dissimilar with that of assessee need to be deselected from final list. Working capital adjustment & risk adjustment - Held that:- Transfer Pricing Officer has wrongly computed the margin of the comparable companies under both the segments. In this context, he drew our attention to the working of the correct margin as submitted in two separate charts. We direct the Assessing Officer to examine the aforesaid aspect and compute the arm's length price under both the segments by correctly computing the margin of the comparables. Disallowance of entertainment expenditure - Held that:- Only because the disallowance of similar nature was made in assessment year 2006–07 either for lack of evidence or some other reasons and the assessee accepted it, disallowance cannot be made in subsequent assessment years. If the assessee through proper documentary evidence is able to prove the genuineness of the expenses, there is no reason to disallow the same. In the facts of the present case, it appears that in the course of assessment proceedings, the assessee did produce sufficient documentary evidences to prove the genuineness of the expenses. Without properly examining the evidence brought on record, the Assessing Officer has disallowed part of expenditure that too on ad–hoc basis. DRP has also simply relying upon the fact that similar disallowance was made in assessment year 2006–07 has upheld the disallowance. There being no basis for disallowance of part of the expenses, we delete the disallowance made by the Assessing Officer. This ground is allowed. Disallowance u/s 40(a)(i) - fee for technical services - TDS u/s 195 - income accrued in India - Held that:- It has not been established on record that while rendering the services, EMCAP has made available technical knowledge, knowhow, skill, etc., to the assessee in a manner to enable him to apply them independently or on its own. The payment made by the assessee cannot be considered as fees for technical services as defined under Article 12(4)(b) of the India–Singapore tax treaty and for this reason also we do not have to examine taxability of the same under section 9(1)(vii) - the payment of global support service fee was made under the agreement which has continued from the year 2003. It is a matter of record that in the preceding assessment years though the assessee has paid global support service fees to EMCAP without deducting tax at source, no disallowance under section 40(a)(i) was ever made. Therefore, there being no difference in facts in the impugned assessment year, considering that the payment was made under the same contract, even, applying the rule of consistency, no disallowance under section 40(a)(i) can be made in the impugned assessment year. - Decided in favour of assessee.

  ---

• 2018 (3) TMI 937
  Revision u/s 263 - claim of the assessee under section 80RR - availability of the benefit of DTAA - Held that:- CIT has correctly assumed jurisdiction under section 263 of the Income Tax Act on the observation of the ld. Assessing officer, with respect to the claim of the assessee under Double Taxation Avoidance Agreement. Though identical issue arose in the case of the assessee for earlier assessment year wherein while deciding the issue under section 263 of the Income Tax Act, it was held by the coordinate bench that this issue is academic in nature and therefore the issue was decided for non-prosecution as assesses did not advance any argument. Before us substantial arguments were advanced by both the patties, therefore, we uphold the action of the ld. CIT as the observation made by the ld. Assessing Officer are erroneous. With respect to the issue of deduction under section 80-G ld. CIT(A) has already allowed the claim of the assessee in appeal wherein the addition was made by the ld. Assessing Officer in passing an assessment order passed u/s 143(3) read with section 148 read with section 263 of the Income Tax Act. The above deletion of the addition has not been challenged by the revenue further and hence, it is apparent that there is no error in the order of the ld. Assessing Officer in allowing the claim under section 80-G of the Income Tax Act. In view of this, the order of the ld. CIT is not sustainable so for as it relates to the deduction under section 80-G of the Income Tax Act claimed by the assessee on this point. With respect to the capital loss suffered by the assesses on sale of the property and source of the funds for acquisition of the new property, no addition has been made by the ld. Assessing Officer while passing an order under section 143(3). pursuant to the order under section 263 of the Act. hence, it cannot be said that there was an error in the order of the Ld assessing officer. In view of this, the assumption of jurisdiction by the ld. CIT for revision under section 263 is not sustainable on these points. AO passed u/s. 143 (3) read with section 148 of The Income Tax Act read with section 263 of the Act, in the return of income filed originally, the assessee has not claimed any benefit of Double Taxation Avoidance Agreement. Further the return in response to notice under section 148 also does not show any such claim made by the assessee. The action u/s 147 was taken for the purpose of verification of the claim of the assessee under section 80RR and not for the claim of benefit under Double Taxation Avoidance Agreement. Therefore, it is apparent that in reopened assessment proceedings, the assessee has made a fresh claim. As held in CIT v. Sun Engg. Works (P.) Ltd. [1992 (9) TMI 1 - SUPREME Court] a matter not agitated in the concluded original assessment proceedings also cannot be permitted to be agitated in the reassessment proceedings unless relatable to the item sought to be taxed as ‘escaped income’. Therefore, we do not find any merit in the cross objection filed by the assessee for this year because of the reason that the reassessment proceedings were initiated for the purpose of working out the deduction under section 80RR of the Income Tax Act and not about the claim of benefit of the DTAA to the assessee. In the result cross objection filed by the assessee is dismissed. Benefit of Double Taxation Avoidance Agreement is not available to the assessee for assessment year 2004-05 and income earned by the assessee from stage shows performed outside India shall be included in the total income chargeable to tax in India. In accordance with ‘he provisions of the Income-tax Act, 1961 and relief shall be granted to the assessee in accordance with the method for elimination or avoidance of double taxation provided in those agreements. In view of above, the cross objection filed by the assessee is set aside to the file of the ld. Assessing Officer to consider the income of the assessee earned from foreign stage and grant necessary relief in accordance with the method for elimination or avoidance of double taxation provided in those agreements.

  ---

• 2018 (3) TMI 936
  Reopening of assessment - AO's jurisdiction over the matter - Disallowing deduction u/s 54B - Held that:- ACIT- 1 Agra, who recorded the reasons to believe escapement of income and issued the notice u/s 148 of the Act admittedly did not exercise jurisdiction over the matter. In fact, evidently, this was the reason why the matter was transferred from the ACIT- 1, Agra to the ITO 4(2) Agra. Therefore, the formation of the reasons to believe escapement of income is in direct violation of the provisions of section 147 of the Act. Since the reasons to believe escapement of income in this case were recorded by the AO who did not exercise the relevant jurisdiction, i.e., jurisdiction over the matter, such reasons are non-est, being in flagrant violation of the express provisions of section 147 read with those of section 2(7A) of the Act. - Decided in favour of assessee.

  ---

• Customs

• 2018 (3) TMI 935
  Maintainability of appeal - Power of tribunal to refuse to entertain an appeal where fine or penalty does not exceed Rs. 2 lakhs - Section 129A of Customs Act, 1952 - Whether the Customs, Excise and Service Tax Appellate Tribunal was right in exercising discretion and in refusing to admit the appeal preferred by the appellant in exercise of discretion vested under proviso (iii) to sub-section (1) of Section 129A of Customs Act, 1952? Held that: - Existence of power would not be a good justification and reason for the Tribunal not to exercise discretion in favor of the appellant when on similar and identical facts they have allowed the appeal preferred by another appellant for using the same script - Counsel for the respondent is correct when he asserts that the penalty imposed in the case of M/s. Singh World is more than Rs. 2.0 lakhs, therefore, their appeal could not have been dismissed under the proviso. The argument fails to notice and give due regard to the difference between existence of discretion and wrong and erroneous exercise of power conferred i.e. exercise of discretion. Tribunal has not correctly exercised the discretion under the proviso (iii) to sub-section 1 of Section 129A of the Act - matter is remanded to the Tribunal to hear the appeal on merits - appeal allowed by way of remand.

  ---

• 2018 (3) TMI 934
  Misdeclaration of imported goods - attempt to import counterfeit goods - It appeared to Revenue that the said goods were counterfeit and they had contravened Intellectual Property Rights and were prohibited goods - Held that: - the counsel for the appellant could not give any justifiable reasons as to why we should interfere with the impugned Order-in-Original - demand upheld - appeal dismissed - decided against appellant.

  ---

• 2018 (3) TMI 933
  Export of Indian Brown Basmati Rice Par-boiled - misdeclaration of goods - DGFT N/N. 55 (RE-2008)/2004-2009 dated 05.11.2008 - prohibited goods - Held that: - the parameters laid down under the said DGFT-Notification dated 05.11.2008 read with N/N. 57/2009-2014 dated 17.08.2010 have been met with as discussed by the learned Commissioner - there are no merit in the impugned order in confiscating the goods in question which have already been exported and imposing penalty on the appellant and its proprietor, based on the negative report received from laboratory in the light of Basmati Rice (Export) Grading and Marketing Rule, 1979, especially when the said report was challenged and request for retesting the samples by some other laboratory was made which was rejected without any plausible reasons - appeal allowed - decided in favor of appellant.

  ---

• Service Tax

• 2018 (3) TMI 973
  Principles of natural justice - CENVAT credit - Rule 6(3) of CENVAT Credit Rules, 2004 - Held that: - the defense taken by the appellant in respect to the SCN needs to be considered in its correct perspective - both the lower authorities have not recorded any findings on the various submissions made by the appellant before them - matter remanded back to the adjudicating authority to reconsider the issue afresh after following the principles of natural justice - appeal allowed by way of remand.

  ---

• 2018 (3) TMI 931
  Condonation of delay in making payment of tax - Voluntary Compliance Encouragement Scheme, 2013 (VCES) - It is claimed in this affidavit that the petitioners cannot insist on the delay being condoned, because the scheme is not open ended - Held that: - a proviso was provided to sub-section (4) of section 107 and which enables the person, who fails to pay said tax dues or part thereof on or before the said date, namely, 30th June, 2014, to pay the same on or before 31st day of December, 2014 along with interest thereon at such rate as is fixed under section 75 or, as the case may be, section 73B of the Chapter for the period of delay starting from the 1st day of July, 2014. Thus, this was a concession or relaxation given, but not without condition. There was a condition, namely, to pay interest and within the outer time limit. This is not an open ended scheme. The benefits thereunder cannot be derived dehors the scheme or after its life or duration has come to an end. The relaxation or concession, which can be granted in terms of the scheme have been outlined in the scheme itself and particularly by sub-section (4) of section 107. It is not the intent that the tax dues for the period 1st October, 2007 and ending on 31st December, 2012 and the liability in that behalf can be discharged in the manner chosen by the assessee or as per his whims and fancies. Equally, the Revenue and its department cannot, by its whims and fancies, allow any defaulter to pay the taxes after the due date is over long time back. The plain duty of the departmental officials is to assess the tax payable and within the period prescribed by the statute. Any such scheme would not enable the authorities to extend the period of compliance stipulated by law and defer the tax liability indefinitely. It is not expected of them to show undue favour dehors the statute. The petitioners have to blame themselves and they cannot take advantage of their own wrong and force the respondents to accept the further sums in full and final settlement contrary to the stipulations and provisions in the scheme. Petition dismissed - decided against petitioner.

  ---

• 2018 (3) TMI 930
  Works contract - notice was issued by the first respondent dated 19.09.2017 calling upon the petitioner to produce certain documents on the alleged ground that the petitioner was providing taxable services to various customers - case of petitioner is that that he is an exclusive defence contractor and all contracts performed by him are exempt from service tax - Held that: - It is seen that the petitioner has given a representation to the first respondent on 24.11.2017 and the same is pending - while declining to grant the prayer sought for, there will be a direction to the petitioner to appear before the first respondent with all the records and the first respondent shall enquire into the matter and ascertain the nature of work done by the petitioner and proceed in accordance with law - petition disposed off.

  ---

• 2018 (3) TMI 929
  Levy of service tax - GTA - reverse charge - cost of transportation incurred for transportation of goods from Nepal to their factory - Held that: - in all the SCN said Rule 2(1)(d)(v) of Service Tax Rules was invoked and said Rules required such persons to pay service tax who has paid transportation charges. It is undisputed fact that appellant has not paid freight charges. Therefore, they were not liable to pay service tax in the present proceedings - appeal allowed - decided in favor of appellant.

  ---

• 2018 (3) TMI 928
  CENVAT credit - denial on the ground of inadequacy of invoices issued by the service providers - Held that: - there is a dispute with regard to whether the appellant has actually made the payment which he has claimed to have made and if so, as to when he made the payment to the service provider - matter remanded back to the original authority to consider the submissions of the appellant afresh - appeal allowed by way of remand.

  ---

• 2018 (3) TMI 927
  Classification of services - transportation of coal in contractor s tipping trucks from Bina to Kakri Wharfwall (MGR-Anpara), including manual breaking of coal to (-) 200mm size and loading of coal into contractor s tipping trucks and MGR wagons both with the help of contractor s payloaders -whether classified under Mining of Mineral, Oil or Gas Services or otherwise? Held that: - Central Board of Excise Customs C.B.E.C. Circular F. No. 232/2/2006-CX.4 dated 12/11/2007 has clarified that handling and transportation of coal/mineral from pithead to a specified location within the mine/factory or for transportation outside the mine are post-mining activities and could be chargeable to Service Tax under the relevant taxable services, i.e., Cargo Handling Service and Goods Transport by Road . The demand under Mining of Mineral, Oil or Gas Services raised through the said SCN is not sustainable - appeal allowed - decided in favor of appellant.

  ---

• 2018 (3) TMI 926
  Import of service - Technical Inspection & Certification Services - reverse charge mechanism - services used in the manufacture of goods exported - On receipt of Certificate of Testing, Manufacturer used to affix Certification Mark on the goods manufactured and exported by them - Held that: - it is an undisputed fact that the Services received by the Manufacturer are classified as “Technical Inspection & Certification Services” by Revenue and the same are covered under Section 65(105) (zzi) of the Finance Act, 1994 - in the case of M/s Roha Dyechem Pvt. Ltd. [2017 (8) TMI 1231 - CESTAT MUMBAI], the issue involved was about the Testing & Certification under “Technical Inspection & Certification Services” performed in U.S.A. and certificate being used in India and it was held by this Tribunal that merely because appellant receiving service in India does not mean service was partly performed in India and therefore, service was covered under Rule 3(ii) of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 and hence, were not taxable under Section 66A of the Finance Act, 1994. Manufacturer was not required to pay Service Tax demanded - appeal dismissed - decided against Revenue.

  ---

• Central Excise

• 2018 (3) TMI 925
  Penalty u/r 26 of CER, 2002 - Valuation - pattern/dies used captively - N/N. 67/1995 - Held that: - in the case of M/s DCM Engineering Pvt. Ltd. [2017 (11) TMI 1165 - CESTAT CHANDIGARH], this Tribunal held that in this case on the co-noticee/buyers, penalty u/r 26 of the CER 2002 is not imposable - the penalty imposed on the appellant is set aside - appeal allowed - decided in favor of appellant.

  ---

• 2018 (3) TMI 924
  CENVAT credit - input services - Pandal Shamiana - denial on the premise that Pandal Shamiana used for Vishwkarma Pooja for organizing Olympiad competition and Deepotsav is not related to their manufacturing activity in terms of Rule 2 (l) of the CCR 2004 - Held that: - the appellant is entitled to avail cenvat credit on the services of Pandal Shaminana used for Vishwkarma Pooja - the said activity is directly related to the manufacturing activity of the appellant and on the said activity, the appellant is entitled to avail cenvat credit. For Deepotsava, the said Deepotsav have no nexus with the activity of manufacturing. In fact, without Deepotsav also manufacturing can take place, therefore, on the said activity, the appellant is not entitled to avail cenvat credit as the same has no nexus directly or indirectly with the manufacturing activity. For Olympiad organised by the appellant, the said Olympiad function organised by outside agency and no participations of the appellant shows that there is no nexus with manufacturing activity of the appellant - the appellant is not entitled to avail cenvat credit on the said service. No penalty is imposable on the appellant - appeal allowed in part.

  ---

• 2018 (3) TMI 923
  Valuation - proceedings were initiated against the appellant u/r 10A of the Central Excise valuation Rules, whereas, the appellant has required to pay duty of whole of the body built and inclusive of the valuation of chassis in the goods cleared by SML - Held that: - in the appellant own case M/s. Sita Singh & Sons Pvt. Limited (Unit-I) Versus Commissioner of Central Excise & ST, Delhi IV [2017 (10) TMI 1298 - CESTAT CHANDIGARH], this Tribunal has held that the assessee is liable to pay duty in terms of Rule 10A of the Rules i.e. on the value at which the principal manufacturer cleared the goods on payment of duty, therefore, the differential duty is confirmed along with interest - appeal disposed off.

  ---

• 2018 (3) TMI 922
  CENVAT credit - capital goods - input services - case of the department in the show cause notice is that M/s Sparkon did not have independent existence and merely prepared invoices for the purpose of enabling the appellant to avail credit of the duty/service tax paid. Held that: - it appears that M/s Sparkon Eengineering- proprietor PR Sajan was properly set up in the year 2005. They had separate registration under Central excise, has separate premises, had the own plant and machinery and had fabricated and cleared plant and machinery to SIL- EOU. The only fact that the proprietor Mr Sajan was also an employee of SIL, the Financial assistance and management assistance, particularly financial affairs do not lead to the inevitable conclusion that Sparkon was a dummy organisation - the ld Commissioner have rightly held that the dispute of credit on capital goods in question, the same were manufactured in the factory premises of the SIL - EOU or DTA, that there is no question of payment of any tax in view of N/N. 67/1995-CE - appellant SIL EOU is entitled to Cenvat credit attributable to inputs and input services. CENVAT credit on input services - Held that: - Mr Sajan was under the whole time employment of the appellants, further he was found to be unaware regarding such invoices raised, reveals that the work was done under the relation of employer and employee and not services provided by a separate entity - credit rightly denied - demand of interest upheld. Penalties - Held that: - it is evident that the appellant have made the payment for the invoices disputed for input service and then taken credit. That sparkon was duly registered with the service tax Department - As the appellant had paid the tax and then taken credit, in the interest of Justice, penalties set aside. Appeal allowed in part.

  ---

• 2018 (3) TMI 921
  SSI Exemption - use of brand name of others - N/N. 08/2003-CE dated 01/03/2003, as amended - retraction of statements - Held that: - the owner of brand “LEVANCHO”, have categorically stated that they are the owners of the brand “LEVANCHO” and Mr. Deepak Poptani has got no concern or interest in the same. Further Mr. Deepak Poptani have admitted the sale of goods in cash and receipt of sale proceeds in cash. The facts are supported by documentary evidence and as such the so called retraction is of no help to the appellant. Further these retractions are by way of afterthought as no person of ordinary prudence while retracting his statement recorded under Section 14 of the Central Excise Act, be negligent in despatching the same other than by recorded delivery/by speed post or registered post. Appeal dismissed - decided against appellant.

  ---

• 2018 (3) TMI 920
  Clandestine removal - shortage of finished goods - Held that: - actual weighment of finished goods was not carried out by the officers and shortage was estimated on the basis of approximation. On the basis of such approximation charges of shortage of finished goods cannot be leveled - The burden was on Revenue to prove that there was shortage in the finished goods. Further there was also burden on Revenue to prove that the alleged goods were manufactured and cleared without payment of duty by conducting appropriate investigation. No such investigation was carried out - appeal allowed - decided in favor of appellant.

  ---

• 2018 (3) TMI 919
  CENVAT credit - It appeared to Revenue that in terms of Sub-rule (3) of Rule 11 of CCR 2004, appellants were required to reverse CENVAT credit of Rs. 6,07,186/- which was contained in closing balance of 65.219 MT finished goods - Held that: - it is very clear that 365.219 M.T. of finished goods containing such inputs which were procured before 17/12/2012. It is clear that under Sub-rule (2) of Rule 11 of CCR 2004, CENVAT credit contained in inputs which were lying in stock as on 17/12/2012 was reversed - CENVAT credit contained in inputs which have procured from 17/12/2012 and which have gone into manufacture of finished goods lying in the stock as on 31/03/2013 was required to be recovered under Sub-rule (3) of Rule 11 of CCR 2004 - appeal dismissed - decided against appellant.

  ---

• 2018 (3) TMI 918
  CENVAT credit - input services - Revenue entertained a view that input services were going into the manufacture of dutiable products i.e. Sugar & Molasses and exempted product Bagasse - Held that: - the issue involved in both the present appeals is covered by the ruling of Hon’ble Supreme Court of India in the case of Union of India Versus DSCL Sugar Ltd. [2015 (10) TMI 566 - SUPREME COURT] wherein it has been held that the Bagasse is an agriculture waste and residue Bagasse is not generated as a result of any process of manufacture - Bagasse is not excisable goods - appeal allowed - decided in favor of appellant.

  ---

• 2018 (3) TMI 917
  Classification of goods - whether the goods manufactured and cleared by the appellant viz. Tent can be divided into various parts packed separately and sold together, can be classified under different headings? - Held that: - identical issue decided in the case of Commissioner of Central Excise, Lucknow. Versus M/s A.R. Polymers Pvt. Ltd., Fatehpur [2017 (3) TMI 415 - CESTAT ALLAHABAD], where it was held that the description of the goods covered by the said SCN matches with the entry in the said notification stating to be “cotton, not containing any other textile material" - appeal allowed - decided in favor of appellant.

  ---

• 2018 (3) TMI 916
  Classification of goods - Organic Composite Solvents - It appeared to Revenue that since Naphtha was used as input the final product emerged should be classified as Motor Spirit under Tariff Item No. 27101111 - to be classified under CETH 38140010 or under CETH 27101111? - Held that: - Learned Commissioner (Appeals) held that there were no grounds to classify the said goods manufactured by respondent as Motor Spirit - There is no ground which has contested finding by the Learned Commissioner (Appeals) - goods to be classified under CETH 38140010 - appeal dismissed - decided against Revenue.

  ---

• 2018 (3) TMI 915
  Classification of goods - refined oils - benefit of N/N. 89/95-CE dated 18.05.1995 - whether the respondents are entitled to avail benefit of exemption N/N. 89/95-CE dated 18.05.1995 or not for the goods/products emerges during the process of manufacture of refined oil by the respondent or not? - Held that: - The said issue has been settled by the Larger Bench of this Tribunal in the case of Ricela Health Food Ltd. & Others [2018 (2) TMI 1395 - CESTAT NEW DELHI] wherein it has been held that for the product emerges during the course of manufacture of refined oil are not excisable goods, and the respondent are entitled to avail the benefit of exemption N/N. 89/95-CE dated 18.05.1995 - the respondents are entitled to avail the benefit of exemption N/N. 89/95-CE dated 18.05.1995 - appeal dismissed - decided against Revenue.

  ---

• 2018 (3) TMI 914
  CENVAT credit - HR coils, MS Channels, Nickel Chromium Austenitic - these items were used for fabrication and erection of structural items - Held that: - both the authorities have consistently held that the assessee is entitled to cenvat credit relying upon various decisions of the Tribunal including the decision of the Karnataka High Court in the case of CCE, Bangalore Vs. SLR Steels Ltd. [2012 (9) TMI 169 - KARNATAKA HIGH COURT], where it was held that Once a storage tank and pollution control equipment constitutes capital goods and any raw material purchased for construction of those goods, the duty paid could be utilized as a CENVAT credit by the assessee notwithstanding the fact that the storage tank is an immovable property - appeal dismissed - decided against Revenue.

  ---

• 2018 (3) TMI 913
  Operation of machinery - manufacture of Pan Masala and Gutkha - whether installation of machinery can be treated as that the machine is operational? - Held that: - there are no reason to appreciate the argument of Revenue that once a machine is installed, it shall be treated as operational machine even if the machine was sealed in such a manner that it became un-operative - appeal dismissed - decided against Revenue.

  ---

• 2018 (3) TMI 912
  Delegation of power of adjudication to the chemical examiner - scope of Central Excise Act, 1944 - Held that: - Revenue wants to delegate the power of adjudication to the chemical examiner which is beyond the scope of CEA 1944 - It is the responsibility of the Adjudicating Authority to take chemical examiner’s report and apply it to the facts and provisions of law and the entries in the Central Excise Tariff and decide classification of the goods - appeal dismissed - decided against Revenue.

  ---

• 2018 (3) TMI 911
  Clandestine removal - entry into gate register - entries in respect of the said goods was not mentioned in the statutory record - Held that: - issue is covered by the Litigation Policy of CBEC communicated through letter dated 17.08.2011 as amended - just because the entries not made into Gate register, it cannot be said that there is clandestine removal - appeal dismissed - decided against Revenue.

  ---

• 2018 (3) TMI 910
  Area based exemption - N/N. 50/2003-CE dated 10.06.2003 - rejection on the ground that the Divisional Assistant Commissioner did not receive copy of declaration, required to be filed under the said Notification by a unit availing the benefit of such Notification - Held that: - Commissioner had acknowledged a receipt of declaration on 20.10.2009 by the respondent through the said letter dated 05.12.2011. This fact was stated by the learned Commissioner (Appeals) in his order - appeal filed by Revenue did not contest the said fact - appeal dismissed - decided against Revenue.

  ---

• 2018 (3) TMI 909
  SSI Exemption - House mark - benefit of N/N. 175/86 dated 01.03.1986 - It appeared to Revenue that said symbol was brand name as per Para-7 of the said Notification and that due to the said reasons the respondents were not entitled to the benefit of said N/N. 175/86 - Held that: - learned Commissioner (Appeals) has distinguished between Brand Name and the House Mark and held that symbol indicating BC on the goods manufactured by respondent was the House Mark and also held that the use of House Mark did not violate the condition of said Notification - BC was the House Mark and House Mark did not violate the condition of said N/N. 175/86 - appeal dismissed - decided against Revenue.

  ---

• CST, VAT & Sales Tax

• 2018 (3) TMI 908
  Compounding of offences - section 74 of the Kerala Value Added Tax Act, 2003 - Petitioner challenges the assessment order inter alia contending that it was based on a compounding order which is patently illegal - Held that: - when an assessee exercises the option u/s 74 (1) of the Act, he virtually agrees to the turnover suppression and the irregularity in maintaining true and correct accounts - even without going into the so called conflict of opinion, in the facts of the present case, we do not think that we will be justified in interfering with the judgment of the learned Single Judge - appeal dismissed.

  ---

• 2018 (3) TMI 907
  Suo motu power of revision to the Deputy Commissioner - transfer of goods otherwise than by way of sale - sub-section (2) of Section 9 of the CST Act - Held that: - the suo motu power conferred on the Deputy Commissioner under Section 35 of the KGST Act could be availed in respect of assessments made under the CST Act in the light of subsection (2) of Section 9 of the CST Act - petition dismissed - decided against petitioner.

  ---

• 2018 (3) TMI 906
  Jurisdiction of Tribunal - Whether the Hon’ble Sales Tax Appellate Authority, committed an error of law in not entertaining the appeal filed by the petitioners under Section 58 of the TNVAT Act, 2006 and wrongly applying the Third Proviso to Section 58(1) which would apply only when the remand made by the first appellate authority was for fresh assessment and not when the remand was coupled with directions and adverse findings? Whether the Hon’ble Sales Tax Appellate Tribunal committed an error of law in failing to note that the embargo contained in the Third Proviso to Section 58(1) of TNVAT Act, 2006, was intended to reduce multiplicity of proceedings and therefore by its very nature could not apply when the remand made by the first appellate authority contained adverse directions and findings? Held that: - The impugned order having been passed by the Appellate Deputy Commissioner (CT) under Section 51(3) is an appealable order - In terms of third proviso under Section 58(1), no appeal shall be admitted against an order passed by the Appellate Deputy Commissioner under Section 51 or by the appellate Joint Commissioner under Section 52 as the case may be setting aside the assessment and directing the assessing authority to make a fresh assessment. Therefore, the embargo placed under the said proviso would operate when the appellate authority exercising power either under Section 51 or 52 sets aside the assessment order and remands the matter for fresh assessment. Tax cases allowed in favor of assessee.

  ---

• 2018 (3) TMI 905
  Filing of returns - Section 3(4) of the TNVAT Act 2006 - according to the department, the assessee is not eligible to file returns in Form-K under Section 3(4) of the TNVAT Act 2006 - Held that: - in the case on hand, when the total and taxable turnover, has exceeded Rs. 50 Lakhs, the dealer ought to have filed the returns in Form-I, instead of Form K. Factum of inadvertently reporting the turnover, exceeding Rs. 50 Lakhs, has been considered both by the appellate authority and tribunal. Concurrent finding of fact, has not been assailed by the appellant herein. Therefore, when the turnover is below Rs. 50 lakhs, submission of returns in Form K, cannot be said to be erroneous. Department has not alleged any purchase or sales suppression. Taking note of Section 27 of the TNVAT Act, 2006, the appellate authority has rightly held that revision of assessments, cannot be made. Revision dismissed.

  ---

• 2018 (3) TMI 904
  Maintainability of petition - reversal of input tax credit - principles of natural justice - instant writ appeal has been filed on the grounds that the writ court has ignored the settled law that the inter-state and import purchases are not taxable under the Act, which is also not disputed by the respondent - Circular No.7/2014 dated 03.02.2014. Held that: - reliance placed in the decision in the case of SRC Projects Private Limited Versus Commissioner of Commercial Taxes, Chennai and another [2008 (9) TMI 914 - MADRAS HIGH COURT], where it was held that The impugned order by way of revision of assessment should not have been passed without giving the assessee an opportunity of personal hearing. But since the same has been denied, the impugned order is hereby quashed. Matter is remitted back to the Assessing Officer, to consider afresh, provide opportunity to the appellant, and pass order in accordance with law - petition allowed by way of remand.

  ---

• Indian Laws

• 2018 (3) TMI 932
  Right of secured creditor - default in the repayment of the outstanding amount - agriculture property - right of creditor after Public Auction and sale of property - right to transfer the property in favor of auction purchaser instead of taking the physical possession first - whether the Parliament intended for a total invalidity to result from the failure to reply and give reasons for the non-acceptance of the borrower s representation - whether sub-section (3A) of Section 13 is mandatory or directory in nature? Held that: - In any event, having regard to the character of the land and the purpose for which it is set apart, we are of the view that the land in question is not an agricultural land. The High Court mis-directed itself in holding that the land was an agricultural land merely because it stood as such in the revenue entries, even though the application made for such conversation lies pending till date. There is no doubt that if a reply with reasons is an integral and indispensable part of the statutory scheme, the Courts would not excuse a departure from it. But, on the other hand, if the reply is merely a direction and not of substance to the scheme, the non-compliance may be excused - the failure to furnish a reply to the representation is not of much significance since we are satisfied that the creditor has undoubtedly considered the representation and the proposal for repayment made therein and has in fact granted sufficient opportunity and time to the debtor to repay the debt without any avail. Therefore, in the fact and circumstances of this case, we are of the view that the debtor is not entitled to the discretionary relief under Article 226 of the Constitution which is indeed an equitable relief. The mere introduction of the words without prejudice have no significance and the debtor clearly acknowledged the debt even after action was initiated under the Act and even after payment of a smaller sum, the debtor has consistently refused to pay up. Since Section 14 provides that an application for taking possession may be made by a secured creditor, and the creditor having ceased to be a secured creditor after the confirmation of sale in favour of the auction purchaser, was not entitled to maintain the application. Consequently, therefore, the order of the District Magistrate directing delivery of possession is a void order. This submission found favour with the High Court that held that the creditor having transferred the secured assets to the auction purchaser ceased to be a secured creditor and could not apply for possession. The High Court held that the Act does not contemplate taking over of symbolic possession and therefore the creditor could not have transferred the secured assets to the auction purchaser. In any case, since ITC Ltd. was the purchaser of such property, it could only take recourse to the ordinary law for recovering physical possession. Whether the creditor could maintain an application of possession under Section 14 of the Act; even though it had taken over only symbolic possession before the sale of the property to the auction purchaser, depends on whether it remained a secured creditor after having done so? - Held that: - the creditor did not have actual possession of the secured asset but only a constructive or symbolic possession. The transfer of the secured asset by the creditor therefore cannot be construed to be a complete transfer as contemplated by Section 8 of the Transfer of Property Act. The creditor nevertheless had a right to take actual possession of the secured assets and must therefore be held to be a secured creditor even after the limited transfer to the auction purchaser under the agreement - Thus, the entire interest in the property not having been passed on to the creditor in the first place, the creditor in turn could not pass on the entire interest to the auction purchaser and thus remained a secured creditor in the Act. Non-compliance of sub-section (3A) of Section 13 cannot be of any avail to the debtor whose conduct has been merely to seek time and not repay the loan as promised on several occasions - the debtor is not entitled for the discretionary equitable relief under Articles 226 and 136 of the Constitution of India in the present case. Appeal allowed - decided in favor of appellant.

  ---