TMI Tax Updates - e-Newsletter
March 22, 2019

Case Laws in this Newsletter:

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

TMI SMS

• The supply of medicines from the pharmacy to an out-patient is mere sale of goods and not a supply in the course of medical service.

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Articles

1. TDS credit need to be given even if TDS is not deposited by the deductor

   By: Sandeep Rawat

2. INCOME TAX CLEARANCE CERTIFICATE

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Some thoughts on Fiscal Federalism (Shri Shaktikanta Das, Governor, Reserve Bank of India - March 19, 2019 - Delivered at the launch of the book ‘Indian Fiscal Federalism’, Mumbai)

Notifications

DGFT

1. 57/2015-20 - dated 20-3-2019 - FTP

Amendments to Foreign Trade Policy 2015-2020 - Extension of Integrated Goods and Service Tax (IGST) and Compensation Cess exemption under Advance Authorisation, EPCG and EOU scheme upto 31.03.2020.

GST - States

2. 62/2018-State Tax - dated 18-1-2019 - Mizoram SGST

Seeks to amend Notification No. 34/2018 – State Tax, dated the 24th August, 2018

3. 28/2018-State Tax (Rate) - dated 18-1-2019 - Mizoram SGST

Seeks to amend Notification No. 12/2017- State Tax (Rate), dated the 7thJuly, 2017

4. 27/2018-State Tax (Rate) - dated 18-1-2019 - Mizoram SGST

Seeks to amend Notification No. 11/2017- State Tax (Rate), dated the 7th July, 2017

5. 25/2018-State Tax (Rate) - dated 18-1-2019 - Mizoram SGST

Seeks to amend Notification No. 2/2017-State Tax (Rate), dated the 7th July, 2017

6. 24/2018-State Tax (Rate) - dated 18-1-2019 - Mizoram SGST

Seeks to amend Notification No. 1/2017-State Tax (Rate), dated the 7th July, 2017

7. 77/2018-State Tax - dated 17-1-2019 - Mizoram SGST

Seeks to amend Notification No. J.21011/1/2017-TAX/Vol-III(ii), dated the 1st February, 2018

8. 76/2018-State Tax - dated 17-1-2019 - Mizoram SGST

Seeks to specify the late fee payable for delayed filing of FORM GSTR-3B and fully waive the amount of late fees leviable on account of delayed furnishing of FORM GSTR-3B for the period July, 2017 to September, 2018 in specified cases.

9. 75/2018-State Tax - dated 17-1-2019 - Mizoram SGST

Seeks to amend Notification No. 4/2018– State Tax, dated the 12th February, 2018

10. 74/2018-State Tax - dated 17-1-2019 - Mizoram SGST

Mizoram Goods and Services Tax (Fourteenth Amendment) Rules, 2018

11. 73/2018-State Tax - dated 17-1-2019 - Mizoram SGST

Seeks to amend Notification No. 50/2018- State Tax dated the 25th September, 2018

12. 71/2018-State Tax - dated 17-1-2019 - Mizoram SGST

Seeks to amend Notification No. 43/2018- State Tax, dated the 19th September, 2018

13. 70/2018-State Tax - dated 17-1-2019 - Mizoram SGST

Seeks to amend Notification No. 34/2018 – State Tax, dated the 24th August, 2018

14. 69/2018-State Tax - dated 31-12-2018 - Mizoram SGST

Seeks to amend Notification Nos. J.21011/1/2017-TAX/Vol-I/Pt, dated the 3rd October, 2017, and 16/2018 – State Tax, dated the 2nd May, 2018

15. 68/2018-State Tax - dated 31-12-2018 - Mizoram SGST

Seeks to amend Notification Nos. .J.21011/1/2017-TAX/Vol-II/Pt-II, dated the 12th September, 2017 and . J.21011/1/2017-TAX/Vol-III/Pt(i) dated the 24th November, 2017

16. 67/2018-State Tax - dated 31-12-2018 - Mizoram SGST

Seeks to amend Notification No. 31/2018-State Tax, dated the 14th August, 2018

IBC

17. G.S.R. 222(E) - dated 14-3-2019 - IBC

Insolvency and Bankruptcy (Application to Adjudicating Authority) Amendment Rules, 2019.

18. S.O. 1388(E) - dated 13-3-2019 - IBC

President hereby accepts the resignation of Ms. Suman Saxena from the post of WTM, IBBI w.e.f. 08.10.2018.

Indian Laws

19. 01/2019 - G.S.R. 225(E) - dated 19-3-2019 - Indian Law

Central Government appoints the 20th day of March, 2019, as the date on which the provisions of section 22 in the Finance Act, 2019 (7 of 2019) shall come into force

Circulars / Instructions / Orders

Customs

1. Instruction No. 01/2019 - dated 18-3-2019

Stepping up of preventive vigilance mechanism by CBIC field formations during the 17th Lok Sabha election process

Highlights / Catch Notes

GST

• Full ITC on GST for Operation and Maintenance Phase Allowed, Subject to Section 17(5) of Central GST Act 2017.

  Case-Laws - AAAR : Input Tax Credit - procurement of goods and services for construction of the project during the Construction Period - Full ITC of the GST paid on the inputs and input services used in the O&M phase is available to the subject to the provisions of Section 17(5) of the Central GST Act, 2017.
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• ICT Project Services Classified as Composite Supply, Training as Principal; GST Exemption Granted for Appellant.

  Case-Laws - AAAR : Classification of supply - services provided by the Appellant under the ICT project - artificially-bundled and composite supply - existence of principal supply or not - Merely because hardware and software is provided by the appellant, it does not mean that the training to be done is not a principal supply. - Benefit of exemption from GST allowed.
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• RGCA Must Register for GST Due to Taxable Supplies, Loses Exemption u/s 23, Per Section 22 Requirements.

  Case-Laws - AAR : Requirement of registration - RGCA is making taxable supplies and hence is not covered under the exemption from registration under Section 23. Therefore RGCA is liable for registration under Section 22 of CGST/TNGST Act.
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• Advance Ruling Denied: Supplies Made Before Application Date Not Eligible Under Authority for Advance Rulings (AAR) Guidelines.

  Case-Laws - AAAR : Scope of Advance Ruling - the application seeking advance ruling was filed on 09.05.2018 before the AAR with respect to supplies undertaken in the month of Jan.,2018. Hence the case is out of the purview of the Advance Ruling.
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• Habeas Corpus Not Applicable for Detentions Ordered by Competent Court Under Article 226; Follow Section 69 CGST Act Procedures.

  Case-Laws - HC : Detention (custody) of persons - procedure to followed - satisfaction of commissioner u/s 69 of CGST Act - writ of Habeas Corpus under Article 226 of the Constitution of India shall not be maintainable when a person is in custody on the basis of orders passed by a Court of competent jurisdiction.
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Income Tax

• Tribunal Rules on Taxation of Trust Income: Applies Sections 61 and 62(2) of Income Tax Act for Revocable Trusts.

  Case-Laws - HC : Income attribution to trust - invoking section 61 - income taxable in the hands of the beneficiaries OR trust - revocable trust or not - Tribunal was perfectly justified in invoking Section 62(2) of the Act read with Section 61(1)
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• Non-Resident Technical Service Fees in India Taxable u/s 44BB, Per DTAA with Netherlands, Australia, USA, Russia.

  Case-Laws - AT : Income accrued in India - Taxability of the receipts of non-resident in India - fees for technical services as per the provisions of the DTAA or as per the provisions of section 44BB - India and DTAA with Netherlands, Australia, USA & Russia - scope of ‘make available’ clause - To be Taxable u/s 44BB only.
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• Court Upholds 12.5% Profit Margin on Grey Market Purchases; Allows Reduction in Gross Profit Already Taxed.

  Case-Laws - AT : Bogus purchases - profit @12.5% upheld - purchases through the grey market - reduction of gross profit already shown and offered to tax from profits earned by the assessee on bogus purchase transaction @12.5% is permissible.
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• Section 153-C Proceedings Void: Invalid DVO Reference Nullifies Entire Process; Questioning Jurisdiction and Validity.

  Case-Laws - HC : Reference to the DVO - Proceedings u/s 153-C has been held without jurisdiction - whether reference to DVO in 153-C proceeding is valid - Once the very basis for referring the matter to the Departmental Valuation Officer has vanished, the entire proceedings cannot be held to be justified.
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• Court Rules 30% Business Promotion Expense Disallowance Unsustainable Due to Lack of Inquiry and Evidence.

  Case-Laws - AT : Disallowance of business promotion expenses - ad-hock disallowane @ 30% - no enquiry whatsoever from the parties to whom the said expenses were paid by the assessee - no instance to show any unverifiable element involved in the business promotion expenses - adhoc disallowance not sustainable.
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• VC Fund Granted Tax Exemption u/s 10(23FB) for Convertible Debenture Investments Despite SEBI Regulation Concerns.

  Case-Laws - AT : Exemption u/s 10(23FB) -Venture Capital Fund [VCF] - investments in Convertible Debenture application money - violation of SEBI (Venture Capital Fund) Regulations - permitted by its Trust Deed as well as by the VCF Regulations of SEBI to temporarily deploy funds in units of mutual funds as well as in Convertible Debenture application money - exemption allowable
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• Section 153A Invalid: No Incriminating Material Found During Search; Post-Search Inquiries Insufficient for Assessment.

  Case-Laws - AT : Validity of the assessment u/s 153A - addition on the basis of post search inquiry - No addition based on any incriminating material found during the course of search - completed assessment cannot be disturbed without any incriminating material found during the course of search.
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• ITAT Upholds Penalty u/s 271(1)(c), But High Court Stay Halts Prosecution Initiation Pending Legal Question Resolution.

  Case-Laws - HC : Initiation of prosecution - Penalty upheld by ITAT - substantial question of law relating to penalty u/s 271(1)(c) pending before High Court - at this stage, there would no question of launching prosecution - initiation of prosecution stayed.
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• Section 48: Property Tax Payments Not Deductible in Capital Gain Computation Under Income Tax Act.

  Case-Laws - AT : Computation of capital gain u/s 48 - Deduction of property tax - payment of Property Tax could not be said to have been incurred wholly and exclusively in connection with the transfer of the property in terms of Section 48 - not deductible.
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• Penalty u/s 271(1)(c) Not Justified for Bona Fide Error in Short-Term Capital Gains Calculation.

  Case-Laws - AT : Penalty u/s 271(1)(c) - computation of short term capital gains on sale of various office premises - WDV taken as per The Companies Act as against Income Tax Act - bonafide computational error - could not be termed as furnishing of inaccurate particulars of income which justifies imposition of penalty u/s 271(1)(c).
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• Section 14A Case: Taxpayer's Voluntary Disallowance Accepted, AO Failed to Justify Rejection of Computations, Addition Deleted.

  Case-Laws - AT : Addition u/s 14A - Expenses incurred for earning dividend income - assessee itself suo moto made the disallowance - recording proper satisfaction - The onus was on AO to reject the assessee’s computations and record a finding, having regard to accounts of the assessee, as to how those computations were not satisfactory - addition deleted
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• Unexplained Lottery Coupons Lead to Tax Additions; Highlights Need for Clear Asset Ownership Explanations to Avoid Tax Issues.

  Case-Laws - AT : Unexplained investment - lottery coupons found in possession in search - No explanation to whom it belongs - additions confirmed since there is a proximity between the coupons and investment
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Customs

• Court Allows Manufacturers to Import Raw Pet Coke Up to Specified Limits; Unutilized Quotas Can Be Utilized.

  Case-Laws - HC : Restricted import or not - Raw Pet Coke (RPC) - apportionment of unutilised quota of Raw Pet Coke (RPC) amongst various applicants including the petitioner - no reason not to permit manufacturers from importing RPC up to the aforesaid limit.
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Service Tax

• Revenue Advocate Challenges Circular, Raising Concerns About Legal Consistency and Precedent in Service Tax Cases.

  Case-Laws - HC : Monetary amount involved in the appeal - We have here a situation where the Revenue's advocate seeks to disown the Circular and seeks to brush it aside in this case. If such a tend is allowed, in future every matter filed by the Revenue will chart the same course. In every case, the Revenue proposes certain questions and terms them as substantial questions of law.
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• Late Fee Imposed for Missing ST-3 Filing Deadline u/s 70 and Rule 7(c) of Service Tax Rules, 1994.

  Case-Laws - AT : Levy of late fee - ST-3 returns have not been filed in time - Section 70 - Rule 7(c) of Service Tax Rules, 1994 is a provision making assessee to pay late fee in case the above said time limit has not been met with by the assessee - Levy of penalty confirmed.
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Central Excise

• Tribunal Error: Misclassification of Conveyors as Capital Goods for Modvat Credit Ignored Specific Language of Table No.5.

  Case-Laws - HC : Cenvat Credit / Modvata Credit - Conveyor - Excluded capital goods - without noticing the language of Table No.5, and only with the aid of this Circular, the Tribunal could not have allowed the assessee to avail the Modvat Credit.
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• ISD Can Reverse Ineligible CENVAT Credit Before Use Without Interest or Penalties Under Specific Conditions.

  Case-Laws - AT : CENVAT Credit - input service distribution - the credit if distributed by ISD if is found ineligible credit, the same can be reversed by the ISD itself. If the reversal is prior utilisation of credit, no question of interest and penalty at all arises.
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• Confiscation and penalties for unaccounted goods inside factory are improper if duty hasn't been evaded.

  Case-Laws - AT : Clandestine removal - unaccounted stock of finished goods - confiscation of the goods and imposition of penalty is bad if the goods are not cleared without payment of duty and are still inside the factory
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• Interest on Delayed Refund Under CEA Sections 11B and 11BB Allowed After Initial Denial Due to Court Sanction Timeline.

  Case-Laws - AT : Interest on delayed refund - section 11B and section 11BB of CEA - interest not granted on the ground that the refund has been sanctioned under directions of Hon’ble High Court within the time limit prescribed by High Court - Not a valid ground - Claim of interest allowed.
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VAT

• Oxygen and Nitrous Oxide Use in Hospitals Classified as Service, Not Goods Sale, Under KVAT Act.

  Case-Laws - HC : Sale or service - The administration of the oxygen and nitrous oxide is definitely in the course of treatment and it cannot be said to be a sale of goods under the KVAT Act, since it is part of the service rendered in a hospital.
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• Pharmacy Medicine Supply to Out-Patients Classified as Sale of Goods, Not Part of Medical Services.

  Case-Laws - HC : Sales or service - The supply of medicines from the pharmacy to an out-patient is mere sale of goods and not a supply in the course of medical service. It is at best a sale in pursuance of a service, ie: the consultation.
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• X-rays in hospitals are a service, not a sale; film transfer integral to care, exempt from VAT/sales tax.

  Case-Laws - HC : Sale or service - Taking of X-rays of the patient - There is no sale discernible nor can the transfer of such X-ray films in the course of para-medical services offered be separated from the composite service offered in an hospital - tax cannot be levied.
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Case Laws:

• GST

• 2019 (3) TMI 1078
  Application for withdrawal of Advance Ruling application - classification of services - services received by M/s. Robo silicon Private Limited from the state of Karnataka for which Royalty is being paid by M/s. Robo silicon Private Limited - rate of GST - Held that:- The application filed by the Applicant for advance ruling is dismissed as withdrawn.

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• 2019 (3) TMI 1077
  Application for withdrawal of Advance Ruling application - Classification of services - services received by M/s. Robo Quarries Private Limited from the state of Karnataka Tor which Royalty is being paid by M/s. Robo Quarries Private Limited - rate of GST - Held that:- The application filed by the Applicant for advance ruling is dismissed as withdrawn.

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• 2019 (3) TMI 1076
  Input Tax Credit - procurement of goods and services for construction of the project during the Construction Period - entire revenue received during the said period is subject to GST - Held that:- The works contract services by way of construction of road was exempt from service tax. However, service tax was leviable only on the service component of such works contract (40%). The material or goods component of the works contract was leviable to VAT. However, it was subject to State VAT (composition rate). Construction of roads is now subject to 12% GST. EPC contractor (Engineering, Procurement and Construction) pays 12% GST on the service of road construction to the concessionaire - In the present case, Input Tax Credit - procurement of goods and services during the O M period after reversal of ITC as per Section 17(2) of the Central Goods and Services Tax Act, 2017 read with Rule 42 of the Central Goods and Services Tax Rule, 2017 - Annuity Payment received during the said period is exempt whereas O M payments received are subject to GST - Held that:- there is a free flow of ITC from EPC Contractor to the concessionaire and thereafter to NHAI. As a result, the GST of 12%leviable on the service of road construction provided by concessionaire to NHAI would be paid partly from the ITC available with him. Also, there is no hitch in providing the benefit of the Entry No. 23A ibid to the annuity payments i.e. road construction payments received after COD (during O M phase). But this benefit does not come free. It comes with a rider that only 50% ITC of the GST paid on the Input and Input service used in the construction phase is available to the Appellant because annuity (50% of the construction payments) is not taxable and the appellant is not having any other non-business and/or exempted supply. Grant of exemption to annuity paid by NHAl/State Highways Construction Authority to concessionaires for construction of roads - Held that:- Full ITC of the tax paid on the inputs and input services used in the O M phase is available to the Appellant if they are having no other outward supply during this phase.

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• 2019 (3) TMI 1075
  Classification of supply - services provided by the Appellant under the ICT project - artificially-bundled and composite supply - existence of principal supply or not - training provided is predominant supply or not - non-fulfilment of pre-requisites of Entry No. 72 of the notification No. 12/2017- CT (Rate) - Held that:- It is seen from the documents produced by the appellant that the National Policy of ICT school was framed in the year 2012 and the aim of the policy is to transform all government and government aided schools into smart schools where each school would have a computer lab and students are provided with computer training. For the effective implementation of the project, the policy allows the State or Union Territory Governments to take on private partners and implement the ICT project by adopting the BOOT- Build, own, operate and transfer model. The project also has to be implemented based on the guidelines issued by the Central Government. The contention of the appellant in the present appeal is that it is a composite supply as the supply of computer hardware and training are supplied in conjunction and it is naturally bundled - As per Section 2(30) a supply will be a composite supply only when it is naturally bundled - We understand that what the AAR wanted to say that the supply is a composite supply of two items but is not naturally bundled. However, we do not agree with the AAR on this aspect. The Education Guide, at para 9.2.4, clarifies that whether services are naturally bundled in the ordinary course of business would depend upon the normal or frequent practices followed in the field of business to which services relate - the Government of India in its nationwide policy called the National Policy on Education, 1986, stressed the need to employ information technology to improve the quality of education. This was the old policy which included schemes like computer literacy and studies in school and educational technology. Subsequently, the HRD Ministry revised its old policy and a new nationwide ICT scheme (Information and Communication Technology in School) was introduced to replace the earlier scheme. Thereafter, in the year 2012, the Department of School Education and Literacy framed guidelines under the National Policy on ICT in school. Thus, it is a Central Government driven project and the training along with supply of computers is an inherent part of the project and the project is imagined as such. Therefore, a major pre-requisite for a supply to be a composite supply - that the said bundle should be naturally bundled is satisfied here. The supply of computers along with training is itself envisaged and conceived as such by the Ministry of Human Resources Development and therefore by its very nature, the supply can be said to be naturally bundled. Thus, the training provided by the appellant is advanced training or training aided by technology which helps in easy delivery of the contents to the student through visual mediums. The project is nothing but a training project aided by technology. Merely because hardware and software is provided by the appellant, it does not mean that the training to be done is not a principal supply. The supplies of goods and services by the appellant to the Director of Education (S HS) qualifies for exemption in term of Entry No 72 of Notification No 12/2017 -C.T (Rate).

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• 2019 (3) TMI 1074
  Requirement of registration - providing taxable and exempted services - import of services - Rajiv Gandhi Centre for Aquaculture [RGCA] is a society under Marine Products Export Development Authority, Ministry of Commerce Industry, Govt. of India - whether RGCA is required to register under GST Laws? - Purchase of material interstate by unregistered dealer. If no registration is required for RGCA, whether compulsory registration u/s 24 is required to be made against any of the provisions of Section 24? - Held that:- It is clear that all the supplies of RGCA are not exempt and some are taxable supplies. RGCA has also stated that their aggregate turnover is above Rs. 20 Lakhs and that they are also receiving consultancy services from abroad and receiving legal services, which are covered under reverse charge mechanism. In any case, RGCA is making taxable supplies and hence is not covered under the exemption from registration under Section 23. Therefore RGCA is liable for registration under Section 22 of CGST/TNGST Act. Whether separate registration is to be taken from all the states where the offices of RGCA is situated? Explain the procedure to obtain registration? - If registration is required to be made, what are the tax rates applicable to the transactions of RGCA? - Held that:- It is observed that Section 25(1) of the CGST Act, 2017 provides that every person who is liable to be registered under section 22 or section 24 shall apply for registration in every such State or Union territory in which he is so liable. Therefore, registration is required to be taken in the states or union territory from where taxable supplies are made. Since RGCA-Head office is having GST Registration (Migrated from TNVAT) at Tamil Nadu only other various project sites are located at different states but doesn t having the GST registration so far, If they want to purchase materials through interstate from Mumbai to its one of the branch at Kerala, how the purchases of the materials to be made and what are the documents to be carried for the transport of such purchased goods under GST? - Held that:- It is observed that this question is not on any of the specified issues in respect of which advance ruling may be sought in terms of Section 97 (2) of the CGST Act, 2017. Therefore, the provisions of Advance Ruling are not applicable to this question and no ruling is provided in this regard.

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• 2019 (3) TMI 1073
  Scope of Advance Ruling - Benefit of the N/N. 03/2017-Central Tax (Rate) dated 28.06.2017 - supply of Copper XLPE insulated armoured low tension cables - Whether the power cables supplied by the Appellant would be covered under the scope of Sl. No. 1 of N/N. 03/2017-CT? - Held that:- The supplies mentioned in the Certificate had been effected in the month of Jan.,2018, actual date of the transactions as per GSTR-1 is 22.01.2018 and 24.01.2018 - Since the Appellant has asked for ruling on the transactions effected prior to the date of filing of the application before AAR, the definition of Advance Ruling given under Section 95(a) of the CGST Act is perused. From the definition, it is very much clear that the scope of the Advance ruling for both i.e. AAR (Authority for Advance Ruling) and AAAR (Appellate Authority for Advance Ruling) is limited to the transactions being undertaken or proposed to be undertaken - In the instant case, as already narrated, the application seeking advance ruling was filed on 09.05.2018 before the AAR with respect to supplies undertaken in the month of Jan.,2018. Hence the case is out of the purview of the Advance Ruling. Thus, as the question posed by the Appellant is related to supplies undertaken by them prior to the date of filing of the application for advance ruling, no ruling can be given on the question.

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• 2019 (3) TMI 1072
  Detention (custody) of persons - procedure to followed - satisfaction of commissioner u/s 69 of CGST Act - case of petitioner is for issuance of writ especially in the nature of Habeas Corpus commanding the respondents to produce the detenue as he is in the illegal detention of the respondents and has been detailed illegally without following the mandatory provisions of law - Held that:- This Court is of the considered view that as per view taken by Larger Bench of Hon ble Apex Court in Tasneem Rizwan Siddiquee s case [ 2018 (9) TMI 1782 - SUPREME COURT] , writ of Habeas Corpus under Article 226 of the Constitution of India shall not be maintainable when a person is in custody on the basis of orders passed by a Court of competent jurisdiction. As regard to passing of reasoned order under Section 69 of the CGST Act, copy of the order has been placed on the file and the said order was passed by the competent authority in this case and on that ground, the present writ petition is not maintainable. Petition dismissed being not maintainable.

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• Income Tax

• 2019 (3) TMI 1079
  Bogus purchases u/s 69C - scrutiny assessment - assessee explained that only profit element can be added against the addition made by the AO - HELD THAT:- The assessee is engaged in the business of construction and development work. The case of the assessee was selected for scrutiny, therefore, notice u/s 143(2) and thereafter notice u/s 142(1) were issued to the assessee. The assessee filed the copies of audit report, profit and loss account and balance sheet etc. Admittedly, there cannot be any development work/construction work without using the material, therefore, in such type of cases, the profit element can be added. At the same time, it was the duty of the assessee to prove consumption. Thus, considering the totality of facts, we deem it appropriate to sustain the addition @ 25% (minus the GP already declared by the assessee) of such bogus purchases as against the total addition made by the ld. Assessing Officer. Thus, the appeal of the assessee is partly allowed.

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• 2019 (3) TMI 1071
  Capital gain computation - FMV determination as on 01.04.1981 - set-off of loss from shares against capital gain - as per Tribunal AO has to rework the capital gains by adopting the FMV for each cent of land as on 1.4.81 at Rs. 9,900 and if the “capital gains” as arrived at exceeds the amount of loss from purchase and sale of shares, the income from capital gains would become the main source of income and therefore, the loss from purchase and sale of shares would be allowed to be set off against such capital gains - HELD THAT:- No substantial question of law arises in the present Appeal filed by the Revenue and we hold that the findings of fact arrived at by both the Appellate Authorities below are based on relevant and cogent materials before them. Since both the sale deeds of comparable cases were produced by the Assessee before the CIT (Appeals), who had opportunity to compare the location and area of land involved in the said comparable cases, the findings of fact arrived by him on that basis cannot be said to be perverse. It cannot also be said to be perverse merely because the survey numbers are not discussed in the orders passed by the Appellate Authorities. Since the two documents were on the record of the Appellate Authority, in our opinion the said authority rightly held that the value depends upon several factors like area of the property, location and proximity of the area, comparative factors like instances of sale, guideline value etc. Since all these relevant factors were taken into account by the Appellate Authorities below, we do not find any perversity in those orders and therefore, the same does not give rise to any substantial question of law requiring our further consideration under Section 260-A - Decided against revenue.

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• 2019 (3) TMI 1070
  Rectification u/s 154 - deduction allowed under 80IA requires to be reduced from the profits and gains for the purpose of computing the deduction under Section 80HHC - HELD THAT:- Tribunal was perfectly justified in rejecting the Revenue's Appeal on the ground that a debatable issue could not have been the subject matter of proceedings u/s 154 and that the Assessing Authority by invoking Section 154 providing for the rectification of a mistake apparent on the face of the record, could not restrict the benefit of deduction under Section 80IA and 80HC of the Act. It is true that the question of law as to whether the relief under Section 80IA should be deducted from the profits and gains by the business before computing the relief under Section 80 HC or not, is a question which is still open and has been referred to a Larger Bench of this Court in the case of MM Forgings [2002 (3) TMI 10 - MADRAS HIGH COURT] and the matter is also said to be pending before the Hon'ble Supreme Court in the case of Micro Labs. [2015 (12) TMI 708 - SUPREME COURT] Since in the present case, the said benefit of deduction was restricted by invoking Section 154 of the Act, we are satisfied that no substantial question of law arises for our consideration.

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• 2019 (3) TMI 1069
  Stay petition on recoveries - additional time to deposit demand - HELD THAT:- In our order dated 28th February, 2019, we had directed the Petitioner to present revised time table for depositing amount on affidavit. Pursuant to such directions, the Petitioner has filed an affidavit dated 7th March, 2019, in which, revised time schedule for meeting with the requirements of deposit of Rs. 10 Crores. We find that the additional time as requested, can be granted, however, subject to certain conditions. We are informed that the parent company of the Petitioner has to receive a subsidy from the State of Maharashtra for Rs. 48 Crores. The subsidy is not yet received. If such an amount is received, the Petitioner should deposit the entire amount of Rs. 10 Crores minus what is already recovered by the department, as soon as subsidy is received. If the Petitioner misses any if the installments, it would be open for the department to recover the tax.

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• 2019 (3) TMI 1068
  Appropriate method of income recognition in hire purchase transaction - Internal Rate Return (IRR) OR Equated Sum (ESM) - CBDT Circular dated 13.01.1998 - SOD method for book keeping - HELD THAT:- The said questions are covered by a decision of this Court in the case of Commissioner of Income Tax Vs. Ashok Leyland Finance Ltd. [2012 (7) TMI 156 - MADRAS HIGH COURT] admittedly, the Assessee has been following the same method of E.M.I for bifurcation of its income into Principal and interest component for all these years in question. The S.O.D method gives higher finance charges (interest) for the initial years and lower finance charges (interest) for the later years, i.e, the Sum of Digits is sum total of the number of years e.g. If the Hire Purchase Agreement is for 10 years, the SOD is 55 (1+2+3+4+5+6+7+8+9+10 = 55). Therefore, total financial charges for the first year would be 10/55, for the second year 9/55, for third year 8/55 and so forth which would clearly give higher financial charges for interest taxable in the first year. This SOD method even though adopted by the Assessee in its Book of Accounts on the basis of Guidelines issued by the Institute of Chartered Accountants of India was not adopted in the Returns of Income filed by it which consistently adopted EMI method for taxability of interest income all these years. Since, for the previous assessment years, this Court has already approved such bifurcation of income and has held that interest income (Finance charges) on consistently adopted basis of E.M.I. would be taxable in the hands of the Assessee, the mere change of Accounting method in its Book of Accounts on the basis of S.O.D. does not alter the position in the tax in the hands of the assessee. Since in the case of Ashok Leyland Finance Ltd., (supra) the Coordinate Bench of this Court has upheld the taxability with regard to interest income on EMI method, which has been consistently followed, there is no reason to take a different view in the matter for the present Assessment years, in this case. - Decided in favour of assessee.

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• 2019 (3) TMI 1067
  Addition of capital gain - sale of property as taxable u/s 50C - transfer of asset u/s 2(47) - possession of property given in which year? - property purchased through agreement to sale - HELD THAT:- Assessee had purchased the property through an agreement to sell in 1987 and had sold the same again through an agreement to sell in 1991.The assessee had given possession to the buyer in the year 1987. The buyer had also confirmed the same in response to the enquiry conducted by the AO. The buyer has also filed evidences to support that she was in possession all along from the year 1991. AO has not brought any material to the contrary to rebut the evidences submitted by the assessee and by the buyer Smt. Santosh Sareen. The contention of the assessee is supported by the definition of transfer in section 2(47) clause (v) of the Act whereby ‘transfer’ in relation to capital assets includes any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act. As per section 53A of the Transfer of Property Act, as applicable in the year 1991, an agreement to sell need not be registered if the transferee has, in part performance of the contract, taken possession of the property and continues in possession of the same. In the present case, the transferee has taken possession in the year 1991 and has continued to be in possession of the property and hence, transfer was complete in the year 1991 in view of clause (v) of section 2(47) of the Income Tax Act. In the sale deed the total consideration has been stated at Rs. 4,50,000/- and the details of the cheque and mode of payment is stated in this sale deed at internal page 8 Paper Book page 24. This fact supports the case of the assessee that the assessee had sold this property way back in the year 1991. In view of these facts, the AO and the Ld. CIT (A), both, were not justified in drawing an adverse inference merely on the ground that the assessee had failed to produce the bank statement for the year 1991. From the assessment order, it is also evident that the assessing officer has made a direct inquiry from the buyer Smt. Santosh Sareen and she also has confirmed having bought this property from the assessee in the year 1991. The allegation of the assessing officer that the property has been sold in the year 2009, when the assessee has executed the sale deed also ignores the fact that the sale deed has been executed by the assessee in the capacity of General Power of Attorney holder and not as an owner. This fact is evident from the sale deed itself which is between Smt. Lilawati Kapur, the original owner as the seller and Smt. Santosh Sareen as the buyer. We hold that the sale of this property by the assessee has taken place in the year 1991 and the AO was not justified in taxing the capital gain arising on the sale of this property in the year under consideration. As regards invoking the provision of section 50Cof the Act, the same will come to be attracted only when sale has taken place during the year. As we have held that the sale by the assessee stood completed in the year 1991, there is no question of invoking the provision of section 50C. Accordingly, the addition made by the assessing officer as long term capital gains is directed to be deleted. - Decided in favour of assessee.

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• 2019 (3) TMI 1066
  Addition u/s 69 - cash deposit explained by the assessee as gift received from his father-in-law and mother-in-law - link the sale proceeds of agricultural land received by her father-in-law with the amounts given as hand loans to various persons - HELD THAT:- The assessee was unable to explain as to why the sale proceeds received on 05.04.2006 were deposited in the bank account of assessee between the period 01.04.2007 to 31.03.2008. The perusal of deposits made by the assessee shows that the amounts were deposited in bits and pieces totaling Rs. 13,88,500/-. In case the amount was available with the assessee on the sale of properties by her in-laws, then where was the need to deposit the amount in bits and pieces during the month of December, 2007 and thereafter, in March, 2008. The said tabulated details are available at page 21 of appellate order. The assessee has failed to link the sale proceeds of agricultural land received by her father-in-law with the amounts given as hand loans to various persons. The whole exercise is an afterthought by the assessee and the amount if received after the death of father-in-law should be available with the assessee in lump sum and there was no requirement to deposit the amount in bank in bits and pieces on different dates. There is no merit in the stand of assessee in this regard. Hence, the assessee has failed to explain the source of deposits and in the absence of any evidence linking its claim to the evidences available, the addition made by authorities below is upheld in the hands of assessee. - Decided against assessee.

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• 2019 (3) TMI 1065
  Addition u/s 69C - bogus non-genuine expenditure - GP rate determination - HELD THAT:- As per the chart reproduced by Ld. CIT(A) at Pg. No. 16 of the impugned order, assessee was having a turnover of Rs. 10.19 Crores in AY. 2008-09 and in that year, the assessee reported GP percentage at 5.20%. In AY. 2011-12, the turnover reported by the assessee is Rs. 21.83 Crores and assessee disclosed GP rate at 3.44% and the tribunal adopted GP rate of 3.50% in that year. Going by these facts and the basis adopted by the Tribunal in that year that when the turnover goes up, GP rate goes down slightly. Thus we feel it proper to adopt GP rate of 3.84% being average of GP rate declared by the assessee at 3.73% and GP rate of 3.95% after considering the addition made by the AO. - Decided partly in favour of assessee.

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• 2019 (3) TMI 1064
  Disallowance u/s.40A(3) - payment to a single party in a single day - payments made to the transporters in cash in excess of Rs. 20,000/- - HELD THAT:- Payment more than Rs. 20,000/- in aggregate to a single party in a single day could not be declined prior to the A.Y.2009-10. It is not in dispute that the present case is in connection with the A.Y.2005-06, therefore, undoubtedly, the provision of aggregate payment to a single party in a single day would not applied in the present assessment year of the assessee i.e.2005-06. Addition on account of payment made to transporter in excess of Rs. 20,000/- u/s.40A(3) the assessee has given the PAN Nos. of some parties to whom the payment was made. With regard to some parties whose PAN Nos. have not given. Since the claim of the assessee has not been verified on the basis of evidence given by the assessee, therefore, we are of the view that the claim of the assessee is liable to be verified in the light of evidence adduced before us in accordance with law. Accordingly, we set aside the finding of the CIT(A) on this issue and direct the Assessing Officer to examine the claim of the assessee afresh after providing an opportunity of being heard to the assessee in accordance with law. Accordingly this issue is decided in favour of the assessee. Addition as suppressed production - information was received from Commissioner of Central Excise and Customs Aurangabad that the assessee indulged in suppression of production and clandestine removal of finished products without payment of excise duty - HELD THAT:- The addition was raised on the basis of the information received from the Central Excise and Customs, Aurangabad dated 29.03.2010. The suppression of production was assessed on the basis of different criteria reported by the IIT, Kanpur in their Technical Opinion Report. The assessee challenged the addition before the Custom Excise and Service Tax Appellate Tribunal (CESTAT) who deleted the addition. The CIT(A) has also deleted the addition raised by the Assessing Officer on the basis of the decision of the Custom Excise and Service Tax Appellate Tribunal (CESTAT). We also find that this question has already came up before the Hon’ble ITAT which has been answered in favour of the assessee. See BHAGYALAXMI STEEL ALLOYS PVT. LTD. [2015 (11) TMI 14 - ITAT PUNE]and SRJ PEETY STEELS (P) LTD. VERSUS ADDL. CIT [2015 (1) TMI 1228 - ITAT PUNE] - Decided in favour of the assessee

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• 2019 (3) TMI 1063
  Reopening of assessment - receipt of accommodation entries - proof of independent application of mind by AO - as per AO assessee had not filed any return of income - information received from the Investigation Wing that the assessee was a beneficiary of accommodation entries received from certain established entry operators identified by the Investigation Wing - HELD THAT:- As decided in PR. COMMISSIONER OF INCOME TAX VERSUS RMG POLYVINYL (I) LTD. [2017 (7) TMI 371 - DELHI HIGH COURT] there was a failure of application of mind by the AO as it had proceeded on two wrong premises, one regarding non-filing of the return and second regarding the extent of accommodation entries - The court was unable to discern the link between the tangible material and the formation of the reasons to believe that income had escaped assessment. The information received from the Investigation Wing cannot be said to be tangible material per se without a further inquiry being undertaken by the Assessing Officer and in the present case, the AO had deprived himself of that opportunity by proceeding on the erroneous premise that the assessee had not filed the return when in fact it had. we uphold the findings of the Ld. CIT (A) in holding that the initiation of reassessment proceedings in the instant case was bad in law and not sustainable - Decided in favour of assessee.

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• 2019 (3) TMI 1062
  Tribunal power to extend the period of stay - Stay of recovery of outstanding demand - delay in non disposal of the appeal - HELD THAT:- The law is by now well settled that if the delay in non-disposal of the appeal is not attributable to the assessee, then the Tribunal has power to extend the period of stay even beyond the time limit laid down in third proviso to section 254(2A) of the Act. Reference may be made to the decision of Pepsi Foods (P) Ltd. v. ACIT, [2015 (5) TMI 655 - DELHI HIGH COURT] which was followed by M/s. SAP Labs (I) Pvt. Ltd. v. ACIT, [2016 (2) TMI 398 - ITAT BANGALORE]. There are no change in the facts and circumstances of the case as it existed when the tribunal granted an order of stay. In these circumstances, we are of the view that there should be an order of stay for a period of 6 months from today or till the disposal of the appeal of the assessee, whichever is earlier.

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• 2019 (3) TMI 1061
  Penalty u/s 271(1)(c) - sale proceeds of the agricultural land - capital gain tax - land sold by the assessee was a ‘capital asset’ within the meaning of section 2(14)(ii) and, therefore, the assessee was liable to capital gain tax - HELD THAT:- An identical issue had come up in the case of CIT vs. Rajeev Bhatara [2014 (2) TMI 71 - PUNJAB AND HARYANA HIGH COURT] wherein it was the assessee’s plea before the AO that no capital gain tax was imposable in his case as the property which he had sold was situated beyond 8 Kms from the municipal limits of Panipat. After collecting information regarding the distance from various authorities, the Assessing Officer came to the conclusion that the property was situated within 8 Kms of municipal limits of Panipat. Consequently, the Assessing Officer rejected the assessee’s claim and brought capital gain to tax and also levied penalty. While allowing the claim of the assessee, the ITAT noted that the assessee had furnished a certificate from the Sub Divisional Engineer wherein it was specified that the distance from the Panipat Municipal Board to the village where the impugned land was situated was 8.2 Kms. It was also noted by the Tribunal that there were various certificates wherein different distances had been mentioned. After considering the matter, the ITAT came to the conclusion that there was no intention on the part of the assessee to furnish inaccurate particulars of income. - Decided in favour of assessee.

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• 2019 (3) TMI 1060
  Disallowance u/s 14A r.w.r 8D - own funds far exceeded the investment - HELD THAT:- We find that it is undisputed fact that assessee’s own funds far exceeded the investments made by the assessee, the details of which have been placed on record. Therefore, in terms of binding decision of Hon’ble Bombay High Court rendered in CIT Vs. Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT] & CIT Vs. HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT], a presumption was to be drawn in assessee’s favor that the investments were made out of interest free funds available with the assessee unless the revenue authorities could prove the nexus of borrowed funds with the investments made by the assessee. Nothing on record suggest such nexus. Therefore, interest disallowance u/r 8D(2)(ii) could not be held to be justified additional expense disallowance - As held by ACIT Vs. Vireet Investment (P.) Ltd. [2017 (6) TMI 1124 - ITAT DELHI] wherein it has been held that only exempt income yielding investments were to be considered to arrive at the said disallowance. Therefore, the additional expense disallowance, as computed by Ld. AO could not be sustained. Therefore, we find no infirmity in the stand of Ld. first appellate authority. Provision for Mark to Market Losses [MTM] - HELD THAT:- CIT(A) correctly deleted both the additions by relying upon its own decision in assessee’s own case for AY 2011-12. Aggregate disallowance u/s 14A read with Rule 8D which comprised-off of interest disallowance u/r 8D(2)(ii) and expense disallowance u/r 8D(2)(iii) - AY 2012-13 - HELD THAT:- The assessee’s submissions as extracted in the quantum assessment order reveal that assessee’s own funds far exceeded the investment and therefore, no interest disallowance was justified in the absence of nexus of borrowed funds with the investments. So far expenses disallowance is concerned, it is undisputed fact that no exempt income has been earned by the assessee during impugned AY and therefore, no disallowance on this account

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• 2019 (3) TMI 1059
  TDS u/s 194C - payment made to Vehicle Booking Agents who have arranged vehicles for the company on a contractual basis as and when required - addition u/s 40(a)(ia) - HELD THAT:- There is no material on record to determine whether expenditure was incurred for payment to contractors, who are in the business of plying, hiring or leasing goods carriage and provisions of section 194C(6) has application. A.O. had also merely mentioned in the impugned assessment order that the payments are made to vehicle booking agents, since there is no clarify as to whether payments are made to contractors or agents, in the interest of justice and equity, we are of the view that the matter needs to be examined afresh by the AO. The assessee shall produce necessary evidences that the payment was made to contractors, who are in the business of plying of vehicles, goods carriages etc. and not to agents as alleged by the Assessing Officer - Decided in favour of revenue for statistical purposes. Disallowance being employees’ contribution to PF and ESI u/s 36(1)(va) - payment was made within the due date specified u/s 139(1) - HELD THAT:- The Hon’ble jurisdictional High Court in the case of Merchem Limited (2015 (9) TMI 560 - KERALA HIGH COURT) had categorically held that employees’ contribution to PF and ESI, if not paid within the due date mentioned in the respective statute cannot be allowed as a deduction u/s 36(1)(va) - We hold that the Assessing Officer has correctly disallowed the sum - Decided in favour of revenue

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• 2019 (3) TMI 1039
  Entitlement to deduction u/s 80HHC (1A) - Non compliance with the mandatory conditions - HELD THAT:- We have no iota of doubt that the conditions prescribed under Section 80HHC (1A) of the Act read with Section 80HHC (4A) of the Act are mandatory and cannot be held to be directory in nature and the Assessee cannot claim benefit under the said provisions as Supporting Manufacturer, in the absence of relevant Certificate from the Export House, and the Report of the Chartered Accountant, as stipulated therein. The definition of Supporting Manufacturer in Clause (d) of Explanation to the said proviso also clearly stipulates that to the Supporting Manufacturer, who is manufacturing or processing goods or merchandise and selling such merchandise to an Export House or a Trading House, for the purpose of export, the claim of deduction is given under Sub-section (1A) of Section 80HHC to support and give incentive to such Supporting Manufacturers, as indicated above. The contention raised on behalf of the assessee that these conditions can be taken as directory is, therefore, liable to be rejected and the compliance of these conditions is, therefore, held to be mandatory. Since, admittedly, the assessee, in the present case before us, in none of the Assessment Years, has complied with these conditions, he is not entitled to deduction under Section 80HHC (1A) of the Act, at all. Reopening of assessment - Reopen on the basis of CIT(A) order in subsequent year - HELD THAT:- Coming to the issue of Reassessment under Section 147/148 of the Act, we not only find that pre-amendment, the time limit for issuance of notice was up to 10 years, as pointed out by the learned Standing Counsel for the Revenue, but, we also are of the view that once we come to the conclusion that in the absence of compliance with the mandatory conditions the Assessee is not at all entitled to the said deduction under Section 80HHC (1A) of the Act, the resort to Section 147/148 of the Act by way of Reassessment for disallowing the said deduction to the assessee or in the original assessment proceedings becomes academic and on the ground of limitation alone, the law, as interpreted by us, about the mandatory compliance of the conditions cannot be allowed to be defeated for those years also, if the contention raised by the Assessee in this regard were to be accepted for Assessment Years 1992-1993 and 1993-1994. The said question also, therefore, deserves to be answered against the Assessee. No merit in these Appeals filed by the Assessee and the questions framed above deserve to be answered in favour of the Revenue and against the Assessee

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• 2019 (3) TMI 1038
  Income attribution to trust - invoking section 61 - income taxable in the hands of the beneficiaries OR trust - revocable trust or not - tribunal held that the Assessee Trust could not be taxed in its own hands in respect of the income earned by it as the aforesaid three contributors/beneficiaries which had already been taxed in respect of the said income distributed to them by the said Trust - whether income arising by virtue of a revocable transfer of assets shall be chargeable to the income of the transferor and shall be included in his total income? - section 164 applicability - HELD THAT:- Not only the 3 companies in question viz., HDFC, ICICI and IL&FS but the Government of Tamil Nadu itself contributed the funds from time to time in the said Trust Fund created in the Trust Deed. Both of them were entitled to revoke the same after a period of 3 years. The number of shares, their extent of benefits and their identity have not been found in dispute. Therefore, the question of applying Section 164 of the Act to the facts of the present case does not simply arise because will be applicable only if the share of the beneficiaries is unknown or indeterminate. Tribunal was perfectly justified in invoking Section 62(2) of the Act read with Section 61(1) of the Act which would apply only to the Revocable Transfer of the funds made for a period which is not specified and these above circumstances, it would be taxable in the hands of the Transferor/beneficiaries and not in the hands of the Trust. As a matter of fact, the findings rendered by the Tribunal are mere findings of facts and on application of relevant provisions of the Act which, in the facts of the case, does not give rise to a substantial question of law requiring our consideration under section 260A of the Act. The appeals are, thus, found devoid of merits and the same are liable to be dismissed. - Decided in favour of assessee.

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• 2019 (3) TMI 1037
  Reference to the DVO - Proceedings u/s 153-C has been held without jurisdiction - whether reference to DVO in 153-C proceeding is valid - differential value of investment shown in the construction - HELD THAT:- A survey was conducted on 17.10.2006 at the Banarasi Misthan Group of cases and thereafter, proceedings u/s 153-C were initiated on 27.09.2007, which was challenged by the respondent – assessee at the appellate stage and the CIT (Appeals), by the order dated 19.01.2010, has decided the appeal in its favour, against which, the Revenue filed an appeal before the Tribunal, which was decided in favour of the respondent – assessee. Against the order of the Tribunal, the Revenue filed Income Tax Appeal 2014 (5) TMI 158 - ALLAHABAD HIGH COURTbefore this Court and the same was dismissed by this Court. The very basis for referring the matter to Departmental Valuation Officer in the disputed years, where the proceeding has been initiated under section 153-C has been held without jurisdiction. Once the very basis for referring the matter to the Departmental Valuation Officer has vanished, the entire proceedings cannot be held to be justified. Moreover, at the time of referring the matter to the Departmental Valuation Officer, neither returns were filed, nor the books of account maintained by the respondent – assessee were rejected, nor any assessment or reassessment proceedings were pending. In view of the judgement of Sargam Cinema [2009 (10) TMI 569 - SUPREME COURT OF INDIA] and M/S. GOPI APARTMENT [2014 (5) TMI 158 - ALLAHABAD HIGH COURT] the basis for referring the matter to Departmental Valuation Officer itself vitiates and is liable to be quashed. - Decided in favour of assessee.

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• 2019 (3) TMI 1036
  Initiation of prosecution - Penalty upheld by ITAT - substantial question of law relating to penalty u/s 271(1)(c) pending before High Court - Motion moved in pending appeal - Competent Authority has issued a show cause notice to the appellant why the prosecution should not be launched pursuant to such penalty order - HELD THAT:- We are informed that the appellant has paid up the entire penalty in terms of the penalty order. Considering such fact and also considering the fact that the appeal against the penalty is admitted and the substantial question of law framed by the Court is pending for consideration, we stay the operation of the penalty order. Resultantly, at this stage, there would no question of launching prosecution. With these directions,Followed Motion is disposed of. Followed - SHRI SUPARAS D JAIN [ASSOCIATE VICE PRESIDENT (CORPORATE FINANCE) ] [FOR DEEPAK FERTILIZERS AND PETROCHEMICALS CORPORATION LIMITED VERSUS ADDL CIT, RANGE3 (1)2017 (8) TMI 1508 - BOMBAY HIGH COURT

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• 2019 (3) TMI 1035
  Unexplained cash credit u/s 68/69 - assesse is salaried employee - not maintaining books of accounts - identity, genuineness and creditworthiness of the creditors - CIT's non speaking order - ex-parte order - HELD THAT:- In our view, these sections are applicable when the books of account are maintained by the assessee and entry appears in the books. When such requirement is not there, AO’s decision in invoking the said provisions becomes unsustainable. However, on perusal of the order of the CIT(A), this angle of an argument was not taken by the assessee. As such, the assessee failed to file relevant decisions to support his argument relating to sustainable of the addition u/s 68/69 of the Act. Therefore,the matter should travel to the file of the CIT(A) for want of a speaking order after considering the above stated arguments raised by the assessee before us - Appeal of the assessee is allowed for statistical purposes.

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• 2019 (3) TMI 1034
  Deduction u/s 54 - investment in multiple flats - HELD THAT:- Interpretation of the word "a" preceding the expression "residential house" has been given wherein it has been observed that "a residential house" should not be understood to indicate a singular number. In the cited case of CIT vs. Devdas Naik [2014 (7) TMI 173 - BOMBAY HIGH COURT] observed that deduction u/s 54 would be available if the flats were used a single unit and used as one house for purpose of residence even if acquisition of flats were done independently. From the above factual matrix coupled with binding judicial precedents, it is clear that deduction u/s 54 would be available to the assessee on account of investment in multiple flats it the same were being used as a single unit. In the present case, we find that this condition has been fulfilled by the assessee. Therefore, in our considered opinion, the assessee was eligible to claim deduction on account of investment made in multiple adjoining flats. computation of capital gain u/s 48 - Deduction of property tax and other payment made to BMC - HELD THAT:- So far as the deduction of BMC Property Tax for Rs. 12 Lacs is concerned, the same could not be said to have been incurred wholly and exclusively in connection with the transfer of the property in terms of Section 48 and the deduction of the same has rightly been denied to the assessee. - decided against assessee The other amount stated to be paid by the assessee has been denied for want of requisite explanation before AO. The assessee, in support of the same, has placed on record the relevant receipts. Therefore, the issue of deduction of Rs. 21 Lacs stands remitted back to the file of AO for re-adjudication after appreciating the nature of the payment. The assessee, in turn, is directed to substantiate his claim, in this regard with supporting documents. This ground stand partly allowed for statistical purposes.

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• 2019 (3) TMI 1033
  Penalty u/s 271(1)(c) - computation of short term capital gains on sale of various office premises - WDV taken as per The Companies Act as against Income Tax Act - bonafide computational error - HELD THAT:-we find that the genesis of the impugned penalty lies in the wrong computations made by the assessee. The mistake has already been admitted during assessment proceedings. It is observed that the assessee was required to take WDV as per Income Tax Act as against The Companies Act as taken by the assessee and secondly, all the premises were to be considered as single block of assets. Nevertheless, the same could not be termed as furnishing of inaccurate particulars of income which justifies imposition of penalty u/s 271(1)(c). The computational error, at best, be termed as bona fide error on the part of the assessee and the assessee stood benefitted by the judgment in Price Waterhouse Coopers Pvt. Ltd. Vs. CIT [2012 (9) TMI 775 - SUPREME COURT] and CIT Vs. Reliance Petroproducts Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT]. Therefore, we are inclined to delete the same. - Decided in favour of assessee.

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• 2019 (3) TMI 1032
  Addition u/s 14A - Expenses incurred for earning dividend income - assessee itself suo moto made the disallowance - recording proper satisfaction - HELD THAT:- The undisputed position that emerges is that the assessee had offered suo-moto disallowance of Rs. 3 Lacs against the exempt income. AO, without recording proper satisfaction as envisaged by Section 14A read with Rule 8D, proceeded to apply Rule 8D, which was not in accordance with law. The onus was on AO to reject the assessee’s computations and record a finding, having regard to accounts of the assessee, as to how those computations were not satisfactory. The failure to do so oust the jurisdiction of AO to apply Rule 8D. Another factor to be noted is that the said disallowance, considering exempt income yielding investments works out to Rs. 3.75 Lacs, against which the assessee has already offered suo-moto disallowance of Rs. 3 Lacs. Therefore, the net additional disallowance of Rs. 5.52 Lacs could not be sustained. - Decided in favour of assessee.

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• 2019 (3) TMI 1031
  Penalty u/s. 271(1)(c) - Non striking off one of the limbs and without specifying the specific charge in the notice initiating penalty proceedings for inaccurate particulars of income in the Assessment Order - defective notice - non specification of charge - HELD THAT:- An identical situation has been considered by the Coordinate Bench in Meherjee Cassinath Holdings v. ACIT [2017 (5) TMI 904 - ITAT MUMBAI] as to whether the action of the AO in initiating penalty proceedings u/s. 271(1)(c) without striking off one of the limbs and without specifying the specific charge in the notice initiating penalty proceedings for inaccurate particulars of income in the Assessment Order and in the case of CIT v. Samson Perinchery [2017 (1) TMI 1292 - BOMBAY HIGH COURT] and also various decisions held that action of the Assessing Officer in non-striking off relevant clause in the notice shows that the charge being made against the assessee is not firm therefore proceedings suffer from non-compliance with principles of natural justice in as much as the Assessing Officer himself is not sure of the charge and the assessee is not made aware as to which of the two limbs of section 271(1)(c) he has to respond. We hold that the notice issued by the AO u/s. 274 r.w.s 271(1)(c) is on account of non-application of mind and therefore the penalty proceedings initiated are bad in law. Thus, we direct the Assessing Officer to delete the penalty levied U/s. 271(1)(c). - Decided in favour of assessee.

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• 2019 (3) TMI 1030
  Fees for technical services - assessment u/s 44BB or 115A - amounts received by the assessee from B.J Services Company (Middle East) Ltd. for rendering of Fracturing Flow Back Services in connection with extraction or production of mineral oil - order passed by the A.O under Sec. 143(3) r.w.s 144C(13)- computing the profit and gains of a non-resident engaged in the business of providing services or facilities in connection with or supplying plant and machinery on hire used, or to be used, in the prospecting for or extraction or production of mineral oils - HELD THAT:- As perused the observations of the Tribunal and find that the issue involved in the present case is squarely covered by the order passed by the Tribunal in the assesses own case for A.Y 2011- 12, A.Y 2012-13 and A.Y 2013-14. [2018 (2) TMI 1859 - ITAT MUMBAI] In the said preceding years, it was observed by the tribunal that the amount received by the assessee from M/s B.J Services Company (Middle East) Ltd. for rendering of Fracturing Flow Back Services was rightly offered by the assessee for tax as per the provisions of Sec. 44BB of the I.T Act. We thus finding ourselves to be in agreement with the view therein taken by the Tribunal, are thus of the considered view that the assessee during the year under consideration had rightly offered the amount for tax under Sec. 44BB of the I.T Act. In the backdrop of our aforesaid observations the order passed by the A.O under Sec. 143(3) r.w.s. 144C(13) is set aside. - Decided in favour of assessee.

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• 2019 (3) TMI 1029
  Disallowance of interest expenses u/s 36(1)(iii) - corresponding loans availed by the assessee were diverted for giving interest free advances to the sister concerns for non business purpose - CIT-A allowed the claim - HELD THAT:- Out of the loans and advances so given totalling to Rs. 5.37 crores, a sum of Rs. 4.75 crores was given to the two partners of the assessee firm namely Meghna Bhattar and Padma Bhattar. As further explained on behalf of the assessee, the remaining advances were given for the purpose of business. As regards the advances of Rs. 4.75 crores given to the partners, it is observed that this entire amount was withdrawn by them at the fag end of the previous year and interest calculated @ 16% on the said amount was disallowed in the assessment originally completed u/s 143(3). Moreover a sum of Rs. 2.20 crores was available in the partners Capital A/c at the relevant time which was also available with the assessee to give interest free advances. Thus we are of the view that the disallowance of interest made by the AO was not sustainable and the CIT(A) is fully justified in deleting the same. - Decided in favour of assessee Disallowance of business promotion expenses - ad-hock disallowane @ 30% - HELD THAT:- The AO however treated the business promotion expenses claimed by the assessee as unverifiable for want of supporting bills and vouchers and made a disallowance of 30% without making any enquiry whatsoever from the parties to whom the said expenses were paid by the assessee. He also did not point out even a single instance to show any unverifiable element involved in the business promotion expenses claimed by the assessee. Keeping in view all these facts and circumstances of the case, we find ourselves in agreement with the Ld. CIT(A) that the adhoc disallowance of 30% made by the AO out of business promotion expenses is not sustainable. - Decided in favour of assessee Disallowance of salary expenses - addition @8% on allegation that the entire salary expenses claimed by it were wholly and exclusively for the purpose of its business - CIT-A delete the addition - HELD THAT:-salary expenses of Rs. 9.13 crores incurred during the year under consideration were justified by the assessee by explaining the nature of its business as well as the necessity of incurring the said expenses for the purpose of such business. As rightly contended by the learned counsel for the assessee, the business expediency of the salary expenses thus was duly established by the assessee and even the reasonableness of the quantum of such expenses incurred during the year under consideration for earning insurance commission of 14.27 crores was also established by the assessee. Even the AO did not dispute the same but still made a disallowance of 8% out of salary expenses on adhoc basis on the ground that the claim of the assessee for the salary expenses was not fully justified. It is observed that no reason whatsoever was given by the AO to come to this conclusion and there was no basis whatsoever given by him to make an adhoc disallowance of 8% without disputing the business expediency of the salary expenses claimed by the assessee or the reasonableness thereof - Adhoc disallowance of 8% made by the AO out of salary expenses was not sustainable - Decided in favour of assessee

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• 2019 (3) TMI 1028
  TP adjustment - computation of the Arm’s-Length Price (ALP) - MAM selection - bench-marking - CUP method VS TNMM method - business of export and import of chemicals - assessee succeeds in providing appropriate data relevant for comparison under the CUP method - HELD THAT:- As relying on assessee's own case [2014 (3) TMI 885 - ITAT DELHI] we hold that The CUP is the most appropriate method to be applied for the international transactions of import and export of traded goods of the assessee. The assessee is required to support the international transaction by authentic documents which may also include quoted prices - the assessee may support its international transactions benchmarking analysis by the other method u/s 92C(1)(f) of the act which is held to be retrospective by the decision of the coordinate bench. In the event assessee fails to adduce and support its transactions under CUP method or under the sixth method then ld TPO and AO are entitled to resort to other method of benchmarking and comparability analysis after granting assessee a proper opportunity of hearing. Assessee is directed to produce before ld AO/ TPO quotations which it would like to rely upon, prove them to be authentic, genuine, comparable with the terms and conditions of international transaction especially with respect to quantity and geographies and adjustment with respect to FOB value. Assessee shall also produce the benchmarking methodology before the ld AO/ TPO.AO/ TPO is directed to examine the same, and if found in accordance with law, then test the benchmarking made by assessee and compute ALP. In case AO is not satisfied with the same, before doing so ld AO/ TPO will give adequate opportunity of hearing to the assessee to prove its case, Then he may decide issue on merits in accordance with law applying any other appropriate method including TNMM. Adjustment to the international transaction of ‘provision of business support services’ - comparable selection - applied the ‘Cost plus Method’ taking 5% margin - HELD THAT:- Merely based on some judicial precedents in case of some other assesses, comparables can neither be included nor excluded. It will lead to strange situations, where one comparable excluded in one case, would always be excluded universally in all other cases. Approach of decided on inclusion or exclusion of comparables based on judicial precedents, on one day will leave assessee as well as revenue with zero comparables. One day this approach will make the comparability analysis redundant and unworkable. Therefore, paramount is Functions performed by assessee to be compared with that of comparables for comparability analysis. It is apparent that without first analyzing the functions performed by the assessee for this business segment, the assessee has compared the margins/profit level indicator of those comparables with the assessee’s own PLI. This is not acceptable as it amounts to putting the cart before the horse. In view of this, we set aside the whole issue back to the file of the learned Transfer Pricing Officer to first capture the functions performed by the assessee for this business segment supported with the relevant evidences such as agreements, bills, invoices, correspondences etc of such functions performed, and carry out fresh search of the comparable as per filters adopted by the learned Transfer Pricing Officer and compare the Profit Level Indicator of such comparable with the assessee’s profit level indicator and show that IA are at arm’s length. Disallowance on account of provision for doubtful debts - AO was of the view that the above provision is not an ascertained liability and therefore the same was added to the total income of the assessee as disallowance - HELD THAT:- The complete details of such bad debts are provided wherein the details concerning 130 parties were mentioned. There are many credits which have been written back and there are many debits which have been written off , net sum of the above transaction is debited to the profit and loss account as bad debts of INR 9359406/-. Naturally, the above debit has been made to the profit and loss account. Therefore, they are written off in the books of accounts. Those details were already available before the assessing officer during the assessment proceedings. However, the learned AO did not care to verify them Even despite the specific direction of the learned Dispute Resolution Panel, the learned Assessing Officer did not look into the details submitted by the assessee. It was also not known to us whether the Assessing Officer has issued any letter to the assessee to explain the above claim. In view of this, we direct the learned Assessing Officer to examine the details submitted and test it on the grounds of allowability of bad debts according to Section 36 (2) Computation of amount of set off of brought forward losses and unabsorbed depreciation of earlier years - HELD THAT:- We direct the assessee to produce the correct details of the amount of unabsorbed depreciation and amount of brought forward losses to be set off against the income with proper evidences which may be verified by the learned assessing officer and if found correct, the assessee should be granted the benefit of the same

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• 2019 (3) TMI 1027
  Exemption u/s 10(23FB) - assessee is a Venture Capital Fund [VCF] - investments in Convertible Debenture application money - violation of SEBI (Venture Capital Fund) Regulations - dividend income earned from the units of Mutual Funds as well as on equity shares of a VCUs [Venture Capital Undertakings] - HELD THAT:- So far as VCF Regulations of SEBI are concerned, we are in agreement with the assessee that it does envisage investments in Convertible Debenture application money as being investments which can be said to be linked to investment in equity shares. Thus, on account of the aforesaid discussion, we find that the assessee fulfils the requirements of claiming exemption under Section 10(23FB) of the Act so far as it is relatable to the year under consideration. Assessee is a VCF operating in terms of a Trust Deed registered under the provisions of the Registration Act, 1908; that it has been granted a Certificate of Registration as VCF by SEBI which continues to subsist; that there is no adverse action taken or contemplated by SEBI for violation of any VCF Regulations; that the targeted investment in VCUs is within the purview of VCF Regulations of SEBI; that assessee is permitted by its Trust Deed as well as by the VCF Regulations of SEBI to temporarily deploy funds in units of mutual funds as well as in Convertible Debenture application money. Thus, in our view, assessee is entitled to exemption envisaged under Section 10(23FB) of the Act. - Decided in favour of assessee.

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• 2019 (3) TMI 1026
  Unexplained investment - lottery coupons found in possession in search - No explanation to whom it belongs - HELD THAT:- We find that 120 coupons are in possession of the assessee for which the assessee has not given any explanation. It is a fact that if anyone invests more than Rs. 5000/- in Rajasthan State small savings scheme, one coupon will be issued. Therefore, it can be safely concluded that the assessee is having with him 120 coupons and he ought to have invested Rs. 6 lakhs, otherwise the Rajasthan Government, Department of Small Savings cannot issue a single coupon without investment. We find that there is a proximity between the coupons and investment. Under these above facts and circumstances of the case, we are of the opinion that the A.O. has rightly given the conclusion that the assessee has invested Rs. 6 lakhs and received 120 coupons. - Decided against assessee Undisclosed investment - Investment in PNB & SBI mutual funds - income from undisclosed sources - Income on substantive basis in case of legal descendant of late Smt. Rozina Kumawat on protective basis - assessee relied mutual funds are purchased by mother of her husband Shri Nirmal Kumrawat in the name of Smt. Rozina Kumrawat. The same is shown in the return of income of the assessee’s mother Smt. Rozina Kumrawat - HELD THAT:- In so far as the investment in respect of PNB Principal Asset Management Fund is concerned, The assessee has failed to explain source of the investment of his mother. He has only simply said that his mother has invested in his name. The Ld. CIT(A) confirmed the order of the A,O. In this case, the assessee failed to discharge the burden cast upon him by producing the relevant material that his mother has made an investment - assessee appeal is dismissed. In so far as investment made in SBI Mutual funds in the name of Smt. Marry Rozina Kumrawat, wife of the assessee is concerned, it was submitted that the assessee’s mother has purchased the units in the name of the assessee’s wife Marry Rozina Kumrawat. Neither before the A.O. nor before the Ld. CIT(A) the assessee is able to substantiate that the his mother is having sufficient funds to purchase the units. Therefore, both the A.O. and Ld. CIT(A) disbelieved the investment made by his mother and addition is made in the hands of the assessee. Even before us, assessee failed to discharge burden cast upon him to show that investment was actually made by his mother - assessee appeal is dismissed. Cash deposits in bank account - HELD THAT:- The assessee has not placed any material to substantiate that there is a sufficient source to deposit in the bank account of Rs. 1,48,000/-. Therefore, by considering the entire facts and circumstances of the case, we find no error in the order passed by the Ld. CIT(A). This ground of the assessee is dismissed - assessee appeal is dismissed.

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• 2019 (3) TMI 1025
  Bogus purchases - CIT-A sustaining 12.5% disallowance - purchases through the grey market - reduction of gross profit already shown and offered to tax from profits earned by the assessee on these bogus purchase transaction - HELD THAT:- In the present case, the facts of the case indicate that assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee savings on account of non-payment of tax and others at the expense of the exchequer. In this regard the assessee has prayed that when only the profits earned by the assessee on these bogus purchase transaction is to be taxed, the gross profit already shown by the assessee and offered to tax should be reduced from the standard 12.5% being directed to be disallowed on account of bogus purchase. We find considerable cogency in the submission of the learned counsel of the assessee, as otherwise it will be double jeopardy to the assessee. Accordingly, we modify the order of learned CIT-A and direct that the disallowance in this case be restricted to 12.5 % of the bogus purchases as reduced by the gross profit rate already declared by the assessee on these transactions. - Decided partly in favour of assessee.

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• 2019 (3) TMI 1024
  Income accrued in India - Taxability of the receipts of non-resident in India - fees for technical services as per the provisions of the DTAA or as per the provisions of section 44BB - India and DTAA with Netherlands, Australia, USA & Russia - authorities below treated the aforesaid payments as in the nature of ‘Fee for Technical Services’ (FTS) within the meaning of section 9(1)(vii) read with section 115A of the Act and held that such payments were taxable in India - proof of existence of PE in India - scope of ‘make available’ clause Payment to vendors in Netherlands - Held that:- the services rendered by the vendors to the ONGC in this matter are onetime job performed by the vendors and their job ends with the submission of the investigation report. - the impugned payment does not satisfy the tests of, firstly, for the services which are ancillary and subsidiary to the application for enjoyment of any right, property or information under Article 12(5)(a) of the DTAA, and secondly, the ‘make available’ clause within the meaning of Article 12(5)(b) of the DTAA between India and Netherlands. We accordingly hold that the payment in question does not fall within the scope and ambit of Article 12 of the DTAA between India and Netherlands. It follows that inasmuch as there is no permanent establishment for the services rendered in India, the receipts are not taxable under Article 7 also. Payment of Australian Company - tax protected work order - hiring of export services for feasibility of jack-up/FPSO for BHN well platform. - Held that:- in view of our finding in the preceding paragraphs while dealing with the ‘make available’ clause, for the reasons which are applicable equally to this case also, we hold that for non-satisfaction of the ‘make available’ clause within the meaning of article 12(3)(g) of the DTAA between India and Australia the impugned payment does not fall within the scope and ambit of royalty/FTS under Article 12 thereof and cannot be brought to tax in India. Payment to USA company - blowout control services - Held that:- There is no denial of the fact that in assessee’s own case, while respectfully following the decision of the Hon’ble Apex Court in the case of OIL & NATURAL GAS CORPORATION LIMITED VS CIT [2015 (7) TMI 91 - SUPREME COURT], the coordinate benches of this tribunal had taken a consistent view that the impugned receipts have to be taxed only under section 44BB of the Act and not otherwise. Facts being similar, rule of consistency demands that a coordinate bench cannot take a different view from the one that was taken for the earlier years in assessee’s own case. Nature of services rendered by Russian vendors - services in connection with Underground Coal Gasification (UCG) - Held that:- services rendered by the vendors are in the nature of mining and like project and therefore, such services will not fall within the ambit and scope of ‘Fee for Technical Services’ (FTS), as contemplated in Explanation 2 of Section 9(1)(vii) of the Act and in view of the judgement of the Hon’ble Apex Court in the case of ONGC (supra), such services shall be construed to have rendered in relation to prospecting, extraction and production of mineral oil falling within the meaning of mining, The above observations of the Hon’ble Apex Court in the case in hand and while respectfully following the same we hold that the receipts of National Mining Research Centre, Russia from ONGC are taxable only under section 44BB of the Act.

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• 2019 (3) TMI 1023
  Validity of the assessment u/s 153A - addition on the basis of post search inquiry - No addition based on any incriminating material found during the course of search - unexplained expenditure u/s 69C - HELD THAT:- There is no mention of any incriminating material found during the course of search with respect to the unexplained advertisement expenses. There is also no incriminating material on which the Assessing Officer has made the other addition Therefore, it is quite clear that the addition in the instant case has been made on the basis of post search inquiry and the addition is not based on any incriminating material found during the course of search. Decision of KABUL CHAWLA [2015 (9) TMI 80 - DELHI HIGH COURT] will be clearly applicable to the facts of the present case wherein it has been held that completed assessments can be interfered with by the Assessing Officer while making assessments u/s 153A only on the basis of some incriminating material unearthed during the course of search which was not produced or not disclosed or not made known in the course of original assessments. Since the impugned assessment year is a completed assessment, therefore, the same, in our opinion, cannot be disturbed without any incriminating material found during the course of search. - decided against revenue

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• Customs

• 2019 (3) TMI 1058
  Restricted import or not - Raw Pet Coke (RPC) - apportionment of unutilised quota of Raw Pet Coke (RPC) amongst various applicants including the petitioner - Held that:- It is apparent that the manner in which the distribution of the excess quantity has been distributed, is manifestly irrational. This is so because the respondents have allocated quantities for making up the shortfall with reference to the production capacity of the applicants and not their requirements to meet their production capacity. Admittedly, the production capacity of the manufacturers of CPC is significantly lower than the input (RPC) required to exhaust the said capacity. It is also apparent that the manner in which the surrendered quantity is distributed also does not exhaust the surrendered quantity. A aggregate of 73,516.661 MT of RPC has been surrendered out of which only 2903.79 MT of RPC has been allocated to the three applicants - RPC can be freely imported but its overall import has been restricted to 1.4 Million MT per annum (0.7 Million MT for the period October, 2018 to March, 2019) by virtue of the order of the Supreme Court in the case of M.C. Mehta v. Union of India [2018 (11) TMI 1352 - SUPREME COURT] - There is, thus, no reason not to permit manufacturers from importing RPC up to the aforesaid limit. In the present case, there are only three applicants who had applied for distribution of the utilised quantity and the shortfall in their cases - Since, it is apparent that the endeavour of the respondents was to allocate the unutilised quantity on the basis of the shortfall, it would be apposite for the respondents to allocate the same on the basis of the shortfall, subject to the limit that the total allocated quantity does not exceed the half yearly input capacity. The allocation as made in the impugned minutes, is set aside and the respondents are directed to re-compute the allocation of the aforesaid basis; that is on the basis of shortfall between the quantity of RPC applied for and the quantity allocated - Petition disposed off.

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• 2019 (3) TMI 1057
  Monetary amount involved in the appeal - maintainability of appeal - Whether the Tribunal is correct in dismissing appeal filed by the department on the ground of Monetary limit issued in the circular issued by the Board, when there is no request from the department/appellant/litigant to invoke the said instructions? - Held that:- It is contended that the issue involved in the case of the assessee is a case of refund and it is also recurring in nature and therefore, in terms of sub-Clause (c) of paragraph 3 of the circular instructions dated 17.08.2011, as modified on 17.12.2015, the Revenue is entitled to pursue the appeals on merits - the Revenue cannot be foreclosed from raising such a plea before the Tribunal and if the Revenue is able to satisfy the Tribunal that the case of the respondent-assessee falls within the exceptional circumstances as mentioned in the circular instructions, then the matter is required to be dealt with on merits or otherwise, the Tribunal will be well within its jurisdiction to close the appeals on the ground of low tax effect, however, such a finding needs to be recorded by the Tribunal. We have come across cases where the assessee would contend that the Revenue's appeal is hit by the monetary limit fixed in the circular instructions. The Revenue would not have given any instructions to the Standing Counsel to not press the appeal. We will examine the facts of the case and ascertain as to whether the case would fall in one of the exceptions mentioned in the circular instructions and we find that it is not one such case, we have applied the monetary circular and closed the proceedings leaving the substantial questions of law open. Therefore, in our considered view, this would be the right approach to cases where the Revenue does not have specific instructions to withdraw an appeal either before the Tribunal or before a Court - the matter should be remanded to the Tribunal for fresh consideration. The appeals are restored to the file of the Tribunal. The Tribunal shall hear the Revenue regarding their contention that the dispute raised by the Revenue is relating to refund and recurring in nature and they are entitled to contest the appeals irrespective of the monetary limit fixed in the circular instructions dated 17.12.2015 as reiterated in the instructions dated 25.05.2018.

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• 2019 (3) TMI 1056
  Rectification of mistake - error apparent on the face of record - Held that:- In para 3 of the order dated 03.12.2018, it was wrongly stated as on the date of dictation the order was available. Hence, there is an apparent error - the error stands corrected and ROM application is allowed.

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• Service Tax

• 2019 (3) TMI 1055
  Monetary amount involved in the appeal - appeal of Revenue before the High Court - Circular of the Revenue bearing F.No.390/Misc./116-2017-JC - Held that:- A Circular issued by the Revenue binds the Revenue but, it may not bind the Court or the assessee. We have here a situation where the Revenue's advocate seeks to disown the Circular and seeks to brush it aside in this case. If such a tend is allowed, in future every matter filed by the Revenue will chart the same course. In every case, the Revenue proposes certain questions and terms them as substantial questions of law. The Revenue's Circular covers this matter - The appeal is dismissed on account of the same.

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• 2019 (3) TMI 1054
  Penalty u/s 78 of FA - non-payment of service tax on sub-contract charges - contentious issue - bonafide belief - Board Circular dated 6.6.1997 - Held that:- There was indeed considerable confusion on the issue and which had also resulted in litigation. In this circumstance, that there was reasonable cause on the part of the appellant for non-discharge of the tax liability - penalty set aside by invoking section 80 - appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 1053
  CENVAT Credit - common services used for taxable services as well as traded goods - reversal of proportionate credit - Rule 6(3A) of CENVAT Credit Rules - Held that:- Admittedly the appellant has obtained centralized registration from 27.5.2010 and they have showroom and service station at 5 locations. Further, it is found from the showroom that the appellant is not only trading the goods and spare parts and accessories but also providing taxable output service i.e., Business Auxiliary Service, Insurance Service and received commission which is subjected to tax. During the pendency of these appeals, the appellants have reversed the proportionate CENVAT credit in both the appeals by paying through challans as per the requirement of Rule 6(3A) of CENVAT Credit Rules. These payments made by the appellant needs to be verified as per Rule 6(3A) and for this purpose, both the cases are remanded back to the original authority to find out whether the appellant has reversed the proportionate credit as per Rule 6(3A) or not. Penalty u/r 15(1) - Held that:- The appellants are not liable to pay penalty under Rule 15(1) of the CENVAT Credit Rules because there is no proposal to impose penalty under Rule 15(1) and the proposal was only under Section 78 read with Rule 15(3) which the Commissioner (A) has held was not tenable in law. Appeal allowed by way of remand.

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• 2019 (3) TMI 1052
  Liability of service tax - freight paid by appellant to a ‘Goods Transport Agency’ - the said tax stands paid by the said transporter - Held that:- At this stage the invoices and the challans paid by the GTA agencies are perused. Perusal thereof shows that the invoices include the amount of Service Tax and the respective liability thereof stands paid by the transporter. These documents show that appellant has availed services from three transport companies M/s. Balaji Goods Carrier, D.S. Road Lines and Kailash Translines Pvt. Ltd. Respective invoices and challans corroborating the value of those invoices being inclusive of service tax paid by the appellant alongwith the freight are on record. In addition, there have been the certificates of three of these transporters acknowledging the liability qua the GTA services to have been discharged by them - the findings of adjudicating authority that the documents are insufficient to prove that the invoices were inclusive of service tax and liability thereof stands discharged though by the service provider are apparently false. Whether the payment made against the statutory provision of rule 2 (1) (d) of service tax Rules is still acceptable? - Held that:- The issue is no more res integra as has earlier been dealt with in the case of M/s. K.V. Enterprises vs. Commissioner of Central Excise, Allahabad [2018 (2) TMI 719 - CESTAT, ALLAHABAD] wherein it has been held that once there has been no dispute regarding the payment of service tax though by the provider of GTA service the amount of service tax stands accepted by Revenue. The same cannot be demanded from the recipient of the said GTA service - demand set aside. Extended period of limitation - penalty - Held that:- The allegation as that of suppression and misrepresentation of the facts cannot be levelled against the appellant. Resultantly, the extended period of limitation could not be invoked by the Department, nor there arises any reason for imposition of penalty. Consequently, the order confirming demand of penalty amount is liable to be set aside. Appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 1051
  Levy of late fee - ST-3 returns have not been filed in time - Scope of Rule 7C read with Section 70 - Section 68 (1) of Finance Act, 1994 - Held that:- Section 68 (1) of Finance Act, 1994 requires every person providing service to any person to pay service tax at the rate specified in Section 66 ibid in such manner and within such period as may be prescribed. Further, Rule 6 (2) of Service Tax Rules, 1994 says that the assessee shall deposit the service tax liable to be paid by him with the bank designated by Central Board of Excise and Customs for this purpose in form TR-6 or in any other manner prescribed by the Central Board of Excise and Customs - Most importantly Rule 6 of Service Tax Rules, 1994 says that the service tax shall be paid to the credit of Central Government by the 6th day of the month and if it is to be deposited electronically through internet banking, by the 5th day of the month, immediately following the calendar month in which the service deemed to be provided as per the rules framed in this regard. From the record, it is also apparent that the ST-3 returns for 6 April 2010 till March 2015, cause thereof, have not been filed in compliance of the afore-said Rule 6 of Service Tax Rules. Rather there has been the delay in filing as big as that of 1016 days and as minimum as that of 25 days - It is also apparent that ST-3 return for October 2012 to March 2013 has not been filed till date. This is a definite violation of the afore-said provisions and specifically violation of Section 70 of the Finance Act. Also Rule 7 (c) of Service Tax Rules, 1994 is a provision making assessee to pay late fee in case the above said time limit has not been met with by the assessee. There is no rebuttal on the part of the appellant to the afore-notice delay in submission of ST-3 returns. The confirmation of penalty/late fee in view of Rule 7 (c) of Service Tax Rules, 1944 readwith the Section 70 of Finance Act, 1994 - appeal dismissed.

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• 2019 (3) TMI 1050
  Business Auxiliary Services - individual and not Commercial Concern - processing of the pay role of sales executives of ICICI and to work out and timely payment of emoluments of the canvassers and to monitor monthly attendance of canvassers - period from May 2004 to December 2004 - Held that:- The appellant in the instant case is an individual - Reliance placed in the case of Krishan Murari Gupta vs. Commr. of C. Ex. & S.T., Jaipur-I [2016 (6) TMI 723 - CESTAT NEW DELHI], where it was held that the appellant was a proprietary concern and not an individual. It is trite to say that a proprietary concern rendering the said service is a commercial concern. Also, N/N. 14/04 grants exemption to individuals providing the ‘Business Auxiliary Services’. Appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 1049
  Penalty u/s 78 of FA - Service tax on distribution of pre-paid sim cards paid before issuance of SCN - bonafide belief - Held that:- The appellant have paid the major amount of service tax amount along with interest before issuance of SCN - It is a fact that various other distributors were also not paying service tax on the commission received towards sale of prepaid sim cards in Saurashtra area, this shows the bonafide of the appellant that non payment of service tax is not with intention to evade the service tax - penalties imposed under Section 78 set aside by invoking section 80 of the Finance Act 1994 - Demand of service tax and interest and penalty under 77 is maintained - appeal allowed in part.

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• 2019 (3) TMI 1048
  Classification of services - cargo handling services or not - various activities involving Coal unloading, Coal feeding and cleaning job of coal handling plant etc - Held that:- The appellant with the help of man power carrying out various activity - From the said activities, it can be seen that the majority of activities are not classifiable as a cargo handling service. A very small part of the service unloading of coal from truck forever since pre-dominantly all the activities are out of the purview of cargo handling service, i.e. the unloading is incidental to those service. Therefore, the service is not classifiable as cargo handling service. On the identical activity in the case of Pati Ram Sharma [2017 (3) TMI 656 - CESTAT NEW DELHI], the Tribunal held that the unloading portion is incidental to the other activities such as staking of coal, watering, etc. hence the same is not classifiable as cargo handling service. Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2019 (3) TMI 1047
  Cenvat Credit / Modvata Credit - Conveyor - Excluded capital goods - Whether the CESTAT was justified in holding that though the Chapter Heading 8431 is excluded in Sr.No.2 of the Table to Rule 57 Q (1) of the Central Excise Rules, 1944, parts of Conveyer is covered under Sr.No.5 of the Table? - Circular No.276/110/96-TRU dated 02.12.1996. Held that:- The Tribunal should have referred to the Rule as prevailing and after the Circular was issued. Whether that Circular covers the goods under the amended Rule should have been clearly noted by the Tribunal. The Tribunal, for the purposes of upholding the availment, referred to goods such as conveyor classifiable under 8424 and if that is covered under Sr.No.2 and particularly, the non-excluded category, then, to that extent, the Tribunal may be right. However, when it was aware that the Table at Sr.No.2 clearly read as excluding goods falling under Heading 84.29 to 84.37, then, it should have also excluded the parts, accessories of these goods from the availment of Modvat Credit. We find that the reading of the Sr.No.5 by the Tribunal was improper and correct. The Circular would not enable the assessee in this case to avail of the credit. Though the Circular may say that the scope of this entry is not restricted to the components, spares and used under Chapters 82, 84, 85 or 90 but covers all components, spares and accessories of the specified goods irrespective of their classification, then, to that extent and without noticing the language of Table No.5, and only with the aid of this Circular, the Tribunal could not have allowed the assessee to avail the Modvat Credit. The ultimate conclusion of the Tribunal should not be entirely set aside. It is set aside only to the extent pertaining to the goods covered by chapter heading 8431 and its part (parts of conveyor) - Rest of the order of the Tribunal is upheld - appeal allowed in part.

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• 2019 (3) TMI 1046
  CENVAT Credit - input service distribution - credit denied on the basis of invoices issued by input service distributor (ISD) who have been passing the credit of service tax paid on services which have no relation with the manufacture of soap - Held that:- The relevant statutory provisions are Rule 7 of CCR which prescribes the manner of dispute of credit by input service distributor and Rule 7A of CCR which talks about the recovery of cenvat credit wrongly taken or erroneously refunded. From Rule 7 and Rule 7A of CCR, it is clear that the input service distributor shall distribute the cenvat credit in respect of service tax paid on the input services to its manufacturing units provided the credit distributed does not exceed the amount of service tax paid and that the credit of service tax attributable to a particular unit shall be distributed only to that unit. The credit shall be allowed on the basis of invoice/ Bill/ challan issued by an office of premise of said provider of output service. The provisions makes it clear that the credit if distributed by ISD if is found ineligible credit, the same can be reversed by the ISD itself. If the reversal is prior utilisation of credit, no question of interest and penalty at all arises - In the present case, it is an acknowledged fact that out of the total proposed credit of Rs. 56,70,178/- the amount of Rs. 47,11,370/- has already been reversed and that all other demands have been dropped except for the demand of 1st SCN for reversal of credit of Rs. 44,33,290/-. It becomes clear that the amount reversed satisfy the demand even of SCN dated 15.01.2015 alleging the construction services to be ineligible input - thus Department was not justified for confirming the said demand. Demand of interest and penalty - Held that:- It is apparent from the record that entire credit was reversed even before the issuance of SCN. In view of Rule 14 of CCR as discussed above and even in view of Section 11AC of Central Excise Act, 1944, the question of demanding interest at the appropriate and the imposition of proportionate penalty does not also arises. Appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 1045
  Clandestine removal - unaccounted stock of finished goods - truck loaded with detergent cakes of M/s. Maharaja Soaps Industry Pvt. Ltd. present in the premises of M/s. Maharaja Industries without any duty paying documents - allegation on the basis of Mahazar dated 29.3.2011 - admissible evidence or not - Held that:- The entire case has been made by the department on the basis of Mahazar dated 29.3.2011 which is purely inadmissible evidence. Further, the Department has not recorded any statement of Mr. R. Prakash, Manager of M/s. Maharaja Industries. Further, the goods which were loaded in the truck parked inside the premises of the appellant had not been removed from the factory and in the absence of removal of goods from the factory the question of payment of duty or issue of invoice does not arise. Further, the reasons given by the appellant for not updating the daily stock account on account of the accident of Mr. Shashikumar who was maintaining the record was not verified by the Department. It is a settled law that power of confiscation does not extend to goods still inside the factory premises and not cleared without payment of duty - it has been held in various cases that confiscation of the goods and imposition of penalty is bad if the goods are not cleared without payment of duty and are still inside the factory - in the absence of any evidence of manufacture and removal of the goods from the factory of M/s. Maharaja Soaps Industries Pvt Ltd without payment of duty, the order of confiscation of goods and penalty is not sustainable. Redemption fine - penalty - Held that:- There is no evidence has been brought on record by the Revenue that the Proprietor has deliberately used the vehicle for clandestine removal of the goods. Further, there is no evidence either of the owner or driver of the vehicle having knowledge of the alleged removal of goods without payment of duty and the liability of the said goods for confiscation - In the absence of such cogent evidence, the imposition of redemption fine and penalty is not sustainable. Appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 1044
  Penalty u/s 11AC - SSI Exemption - threshold limit crossed - on the value exceeding the SSI exemption limit, duty was not discharged - Held that:- there is no dispute for the reason that SSI exemption value has been exceeded by the appellant. Accordingly, on the value exceeding the SSI exemption limit, the appellant is liable for excise duty. Quantum of penalty - Held that:- The fact about exceeding the value of exemption limit has not been disclosed by the appellant. Moreover, the duty demand was confirmed invoking proviso to Section 11A(1) - It is settled law, as the Hon'ble Supreme Court decision in the case of Dharmendra Textiles Processors [2008 (9) TMI 52 - SUPREME COURT] that penalty imposed under Section 11AC cannot be reduced being the mandatory penalty - thus only on the ground that duty was paid before issue of show cause notice, penalty imposed under Section 11AC cannot be reduced or waived. Appeal dismissed - decided against appellant.

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• 2019 (3) TMI 1043
  SSI exemption - use of brand name - use of brand name ‘Shukla’ in respect of medication equipment exported - N/N. 08/2003 - CENVAT Credit - Held that:- The appellant have denied that they have used brand name ‘Shukla’ and there is no evidence to support the Revenue’s claim that the appellants are using the brand name ‘Shukla’. It is seen the appellants are clearing waste and scrap in the domestic market and the value of waste and scrap cleared by them in the domestic area was within the limit prescribed under notification 08/2003-CE. Consequently, it is apparent that the appellants were entitled for the notification 08/2003-CE in respect of waste and scrap cleared by them - Thus, it is apparent that the Revenue has failed to make case that appellants are not entitled to any value based exemption notification and consequently, not entitled to avail 100% CENVAT Credit of duty paid on capital goods in the first year of receipt of goods. Appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 1042
  CENVAT Credit - input - HR Plates, HR Coils, SS Plates, SS Sheets, SS Coils, MS Channels, HB/MS/SS pipes, etc. - manufacturing activity carried out or not - N/N. 67/95-CE - sub section 1(A) of section 5A of CEA - principles of natural justice - Held that:- It is seen that neither OIO nor OIA examines the decisions relied upon - It is seen that the respondents had produced Chartered Engineer’s certificate dated 22/11/2016 which certify that the impugned goods were used to manufacture tank, steeping vat and machinery. It is seen that the Rule 2(k) of Cenvat Credit Rules, 2004 only excludes from its ambit cement, angles, channels, Centrally Twisted Deform bar (CTD) or Thermo Mechanically Treated bar (TMT) and other items used for construction of factory shed, building or laying of foundation or making of structures for support of capital goods - It is apparent that Rule 2(k) does not exclude HR Coils, SS Coils, SS Sheets, etc. used in manufacture of tanks, steeping vats, etc which are in the nature of machinery and not in the nature of factory shed, building or foundations or structures for capital goods. Credit allowed - Appeal dismissed - decided against Revenue.

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• 2019 (3) TMI 1041
  Interest on delayed refund - section 11B and section 11BB of CEA - interest not granted on the ground that the refund has been sanctioned under directions of Hon’ble High Court within the time limit prescribed by High Court and thus, no interest need to be sanctioned - Held that:- The appellant had filed a refund claim on 12/10/2001 - Hon’ble Apex Court in the case of Ranbaxy Laboratories Ltd. [2011 (10) TMI 16 - SUPREME COURT OF INDIA] has examined the provisions of section 11B and section 11BB along with the instruction issued by CBEC at the material time and held that the liability of the revenue to pay interest under Section 11BB of the Act commences from the date of expiry of three months from the date of receipt of application for refund under Section 11B(1) of the Act and not on the expiry of the said period from the date on which order of refund is made. The relevant date for the purpose of calculation of refund would be the date of filing of refund claim - the appellants are entitled to interest on the said amount of refund after the expiry of 3 months from the date of receipt of the application for refund - appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 1040
  SSI Exemption - removal of brass scrap by the appellants - penalty u/r 25 of CER, 2002 - Held that:- There is no illegality as they have cleared brass scrap under the cover of challans declaring it under N/N. 83/94-CE and 84/94-CE dated 11.04.1994 - The case that whether M/s. Senor Metal Pvt. Limited is eligible for SSI exemption under N/N. 8/2003-CE, the eligibility of said notification is concerned with M/s. Senor Metal Pvt. Limited alone. The removal of brass scrap under N/N. 83/94-CE and 84/94-CE was correctly availed by the appellant for the reason that their final product i.e. brass wire was covered under SSI N/N. 8/2003-CE. Therefore, there is absolutely no mistake or violation of any provision on the part of the appellant. There is no reason that why appellants are liable to penalty under Rule 25 - appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2019 (3) TMI 1022
  Revision of assessment - Section 27 of the TNVAT Act, 2006 - principles of natural justice - Held that:- It is an undisputed fact that the main reason for revision of assessment under Section 27 of the Act by the respondents is that the other end seller has not reported to the respondent the sales made to the second respondent. As seen from the assessment order and as seen from the reply, dated 26.07.2016 sent by the petitioner to the pre revision notice sent by the second respondent, it was made clear that the purchases made by the petitioner from the other end seller have been duly reported to the second respondent by the petitioner without any suppression. In the case of Assistant Commissioner (CT), Presently Thiruverkadu Assessment Circle, Kolathur, Chennai Vs. Infiniti Wholesale Limited [2016 (9) TMI 1431 - MADRAS HIGH COURT], is squarely applicable for the facts of the instant case. This Court is of the considered view that the respondents have violated the principles of natural justice by not considering the objections raised by the petitioner in the reply dated 26.07.2016 - the matter is remanded back to the second respondent for fresh consideration - petition allowed by way of remand.

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• 2019 (3) TMI 1021
  Validity of assessment order - compounded rate of tax - Section 8(1)(a) of the Tamil Nadu Value Added Tax Act, 2006 - principles of natural justice - Held that:- In the instant case, no personal hearing was granted to the petitioner, eventhough a specific request was made by the petitioner, in his reply dated 04.01.2016. It is well settled that personal hearing will have to be granted to the assessee under the Tamil Nadu Value Added Tax Act, 2006 as held by the internal circular bearing circular No.7 of 2013 of the Principal Commissioner of Commercial Tax. The Hon'ble Division Bench of this Court has held in the case of G.V.Cotton Mills (P) Limited Vs. The Assistant Commissioner (CT) [2018 (3) TMI 1617 - MADRAS HIGH COURT] has held that even though personal hearing is not sought for by the assessee, it is mandatory on the part of the respondent to grant a personal hearing. The matter is remanded back to the respondent for fresh consideration and the respondent shall pass final orders, after giving sufficient opportunity of hearing to the petitioner - petition allowed by way of remand.

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• 2019 (3) TMI 1020
  Input tax credit - denied for the reason of an inadvertent error of the supplier in issuing invoices in Form-8B - Held that:- Form-8B indicates that there can be no input tax credit available, insofar as the purchases made under the said invoice, which is deemed to be one of last sale to the consumer. In such circumstances, there is no infirmity, insofar as the Tribunal having reversed the order of the first Appellate Authority and found the input tax credit claimed to be not sustainable - decided against assessee. Levy of tax - x-ray films - Held that:- Taking of X-rays is a part of the services offered in a hospital and is an activity to diagnose the specific ailment of the patient. There is no sale discernible nor can the transfer of such X-ray films in the course of para-medical services offered be separated from the composite service offered in an hospital - tax cannot be levied - decided in favor of assessee. Decided partly in favor of assessee and partly in favor of Revenue.

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• 2019 (3) TMI 1019
  Levy of sales tax - drugs, implants and consumables used in the treatment of an inpatient in a hospital - KVAT Act - Whether hospitals, which carry out inpatient and outpatient treatments and in the course of such treatments administer drugs, carries out invasive surgeries to make implants and uses consumables in the various medical procedures, are to be registered under the KVAT Act? - Whether the sales carried out in the pharmacies to outpatients can be categorised as sale of goods liable to tax under the KVAT Act? Held that:- The minute consultation with the Doctor ends as far as an out-patient is concerned, he is free to decide whether he purchases the medicine or not. The service of medical care ceases with the consultation and the further sale made to an outpatient of any goods from the pharmacy has the connotation of sale of goods. The supply of medicines from the pharmacy to an out-patient is mere sale of goods and not a supply in the course of medical service. It is at best a sale in pursuance of a service, ie: the consultation - the hospitals with Pharmacies have to be necessarily registered under the KVAT Act and they also have to satisfy the liability to tax under the respective enactments in the various periods, on the medicines, consumables or implants supplied to an out-patient, as distinguished from an administration of drug or use of consumables or implants carried out within the hospital premises itself, subject however to the purchase having been made from a compounded dealer, who has already paid tax on the MRP. The hospitals are to be registered under the sales tax enactment, whether they have a Pharmacy catering to out-patients or not. The hospitals who transfer or supply goods in the course of treatment are exempted from the levy of sales tax for such goods; the transfer being not in the course of sale of goods exigible to tax. The sale of any drug, implant or consumable from the Pharmacy to an out-patient which is not administered, used or implanted within the premises of the hospital would be taxable as sale of goods. Insofar as oxygen and nitrous oxide are concerned, the same are administered for providing respiratory therapy and as an anaesthetic agent respectively, which is provided within the hospital itself and to inpatients as also at times outpatients. The administration of the oxygen and nitrous oxide is definitely in the course of treatment and it cannot be said to be a sale of goods under the KVAT Act, since it is part of the service rendered in a hospital. X-Rays too when taken of the inpatients and outpatients are taken within the hospital and they cannot be treated as sale of goods, since it cannot be divided into a sale and service; the dominant intention being of provision of treatment, or diagnosis of ailment of the patients. Application disposed off.

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• Indian Laws

• 2019 (3) TMI 1018
  Dishonor of Cheque - Section 138 of Negotiable Instrument Act - conviction order set aside on the ground that the complaint was not filed immediately after the first notice of default was given to the respondent - Held that:- A complainant is entitled to file a complaint under section 138 Negotiable Instruments Act, based on a second or successive default in payment of the cheque amount, even though he had not initiated prosecution based on the first default, provided that the requirements stipulated in the proviso to Section 138 are satisfied for the second or successive default based on which the prosecution is now launched. The impugned order is set aside. Sequitur to the same is that the appeal filed by the respondent before the Appellate Court shall stand restored - matter is remitted to the Appellate Court for reconsideration of the appeal on merits.

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