TMI Tax Updates - e-Newsletter
March 25, 2019

Case Laws in this Newsletter:

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

Articles

1. AAR- Ruling on Post Sale Discounts- An analysis

   By: Balasubramanian Natarajan

2. RECENT ADVANCE RULINGS IN GST (PART-14)

   By: Dr. Sanjiv Agarwal

News

1. Meeting Schedule of the Monetary Policy Committee for 2019-20

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/IMD/DF4/CIR/P/2019/41 - dated 22-3-2019

Valuation of money market and debt securities

RBI

2. DBR.BP.BC.No.29/21.07.001/2018-19 - dated 22-3-2019

Deferral of Implementation of Indian Accounting Standards (Ind AS)

DGFT

3. 80/(2015-20) - dated 22-3-2019

Amendment in Para 2.54 of the Handbook of Procedures, 2015-2020

4. 81/(2015-20) - dated 22-3-2019

Procedure for allocation of quota for import of (i) Calcined Pet Coke (0.5 Million MT per annum) for Aluminum Industry and (ii) Raw Pet Coke (1.4 Million MT) for CPC manufacturing industry

Highlights / Catch Notes

Income Tax

• Denial of Tax Deduction: Industrial Unit Not in 'Urban Area' as Defined by Section 54G, Income Tax Act.

  Case-Laws - AT : Deduction u/s 54G - shifting of unit from urban to rural area - industrial unit was not located in a notified `urban area’ as per Explanation 2 to section 54G(1) - benefit of exemption not available.
  Visit to Get Source

  ---

• No Penalty u/s 271(1)(c) for Interest Income Exemption Claim Due to Ambiguity Before Clarification.

  Case-Laws - AT : Penalty u/s 271(1)((c) - Exemption of interest income u/s 80P(2) is not allowable due to subsequent decision - prior to this decision, the position was not clear and issue was debatable - no penalty is leviable
  Visit to Get Source

  ---

• Deemed Dividends Explained: Section 2(22)(e) of Income Tax Act and Tax Implications on Loan Repayments by Companies.

  Case-Laws - HC : Deemed dividend u/s 2(22))e) - repayment of loan or advance by the Company
  Visit to Get Source

  ---

• Assessing Officer Can Grant Stay on Tax Demands if Taxpayer Pays 20% of Disputed Amount During Stay Application.

  Case-Laws - HC : Issuance of Garnishee notices during the pendency of the stay application - AO empowerment to grant stay provided 20% of the disputed demand paid
  Visit to Get Source

  ---

• Tax Assessment Reopened u/s 147 for Alleged Bogus Purchases Made via Account Payee Cheques: Genuine or Not?

  Case-Laws - AT : Addition of bogus purchases - reopening u/s 147 - if the source of purchases are from the books and through account payee cheque, then how such purchases can be treated as un accounted.
  Visit to Get Source

  ---

• Court Allows Section 37 Exemption for Hotel Project Costs, Recognizing Expenses as Legitimate Business Expenses.

  Case-Laws - AT : Proportionate disallowance of the salary - Capitalization of cost incurred during the construction of Medanta Hotel project - business activity of the assessee company had started prior to construction - claim of exemption allowed u/s 37
  Visit to Get Source

  ---

• Court Denies Tax Benefit on Capital Gains from Inherited Books Due to Unproven Acquisition Cost.

  Case-Laws - HC : Capital gain computation - sale of old books, part of library inherited by as family members on the death Older member - Assessee failed to prove the cost of acquisition - Hence, benefit of acquisition cannot be granted.
  Visit to Get Source

  ---

Customs

• Refund Claim Denied: Duty Rate 5% Due to Missing Notification u/s 25, Customs Act 1962.

  Case-Laws - AT : Rejection of refund claim - relevant rate of duty - effect of reduction in the rate of duty - The Policy is given effect only upon the issue of corresponding notification under the enabling statute, viz., section 25 of Customs Act, 1962. On the relevant date, the duty that was to be levied was 5% and not 3%. - No refund.
  Visit to Get Source

  ---

• Natural Justice in Customs Case: Non-Participation in Cross-Examination Implies Admission, No Relief Granted.

  Case-Laws - AT : Principles of natural justice - Reliance on the statements of CHA and financier - By failure to participate in the cross-examination, there is an implicit admission of the relevancy of these statements - No relief can be granted.
  Visit to Get Source

  ---

DGFT

• Deadline Extended for Radiation Portal Monitors and Container Scanners Installation at Ports to June 30, 2019.

  Circulars : The period for installation and operationalisation of Radiation Portal Monitors and Container Scanner in the designated ports is extended up to 30.06.2019.
  Visit to Get Source

  ---

Service Tax

• Transaction Charges to NSE Excluded from Service Tax Valuation, Different from Brokerage Fees Received by Appellant.

  Case-Laws - AT : Valuation -transaction charges collected by the appellant and paid to the NSE cannot be included in the assessable value since said charges cannot be equated to brokerage received by the appellant.
  Visit to Get Source

  ---

Central Excise

• Bricks with Fly Ash, Sand, and Lime Qualify for Tariff Entry 6810; Exemption Benefit Granted.

  Case-Laws - AT : Classification of brick - fly ash being used in least quantity, essential material for impugned bricks remain is sand and lime. Thus, the impugned bricks qualify for being classified under tariff entry 6810 precisely 68109990 - Benefit of exemption allowed.
  Visit to Get Source

  ---

VAT

• Notice for Land Revenue Recovery Invalidated Due to Missing Authority Reference; Dismissal Required.

  Case-Laws - HC : Validity of notice issued for recovery as land revenue - the impugned communication is totally silent as regards the source of power under which the same has been issued. - The notice is has no legal force is, therefore, non-est and is required to be ignored
  Visit to Get Source

  ---

Case Laws:

• GST

• 2019 (3) TMI 1142
  Application for withdrawal of Advance Ruling Application - rate of GST - Fryums - Held that:- The request of the applicant to withdraw the application voluntarily and unconditionally is hereby allowed without going into the merits or detailed facts of this advance ruling application by this authority - application dismissed as withdrawn.

  ---

• Income Tax

• 2019 (3) TMI 1153
  Unabsorbed business losses to be first set off before computing deduction under Section 10A - HELD THAT:- Mere perusal of sub-section of 10A(2)(i)(c) of the Act quoted would reveal that brought forward loss of any relevant Assessment Year before 1st April 2001 is not allowed to be carried forward and set off while computing the total income for determining the deduction under Section 10A of the Act. There was no brought forward loss from the previous years upto 1st day of April 2001 and it seems that the loss said to be carried forward by the assessee to the tune of Rs. 74,17,121 pertains only to the Assessment Year 2007-2008 and not the earlier years. Therefore, we do not find any infirmity in the order passed by the learned Tribunal in allowing the said carry forward loss pertaining to the Assessment Year 2007-2008 while determining the deduction under Section 10A of the Act for the Assessment Year 2008-2009. No substantial question of law arising in this regard

  ---

• 2019 (3) TMI 1152
  Condonation the delay - negligence on the part of its staff - 27 days delay - HELD THAT:- assessee is prevented by reasonable cause in not getting the appeal filed in time before the Tribunal. Therefore, we condone the delay and proceed to dispose of the appeal on merit. Penalty u/s 271(1)((c) - Exemption of interest income u/S 80P(2) - non disclosure of interest income on deposits not yet matured - HELD THAT:- The assessee has bona fide belief and it has disclosed all complete details. It has given an explanation which was not found to be false. With regard to disallowance out of ghee, it was contended that it has shortage of 15 kgs. of ghee on account of pilferage or wastage. It became inedible, and therefore, it claimed the loss. There was a natural consequence in the working of the assessee-society. Similarly, food items might have deteriorated on account of time gap between the purchases and sales etc. There is no mala fide intention at the end of the assessee. As far as exclusion of interest income from exempt under section 80P(2) is concerned, this disallowance has been confirmed by the CIT(A) after taking into consideration decision in the case of SBI Employees Co. op. Credit & Supply Society Ltd.2016 (7) TMI 516 - GUJARAT HIGH COURT] This decision has come subsequent to the return filed by the assessee. Therefore, prior to this decision, the position was not clear and remained debatable whether interest income from FDR made with nationalised banks will qualify for exemption under section 80P(2) or not. There are certain decisions also which are in favour of the assessee. Considering all these, we are of the view that assessee does not deserve to be visited with the impugned penalty, which is hereby cancelled and ground of the appeal of the assessee is allowed.

  ---

• 2019 (3) TMI 1151
  Claim of deduction u/s 54G - shifting of unit from urban to rural area - assessee’s industrial unit was not located in a notified `urban area’ as per the provisions of section 54G - HELD THAT:- Section 54G of the I.T.Act allows exemption of capital gains on transfer of assets in case of shifting the industrial undertaking from urban area. None of the places in Kerala State have been notified as an urban area under Explanation 2 to section 54G(1) of the Central Government. Hence, the deduction claimed by the assessee u/s 54G of the I.T.Act was rightly disallowed by the A.O. and the same was confirmed by the CIT(A). Hence, we see no reason to interfere with the order of the CIT(A) and we affirm the same. - Decided against assessee.

  ---

• 2019 (3) TMI 1141
  Interest on refund of cash amount seized from of date of sizer to date of refund- cash was requisitioned and seized u/s 132/132A - petitioner sent a letter to respondent(department) for interest on the seized cash amount for the period from 6.1.2012 to 4.7.2017, but no response has been received till date - HELD THAT:- Perusing the present petition and without expressing any opinion on the merits of the case, we dispose of the present petition by directing respondent No.3 to take a decision on the letter, Annexure P-7, in accordance with law by passing a speaking order and after affording an opportunity of hearing to the petitioner within a period of two months from the date of receipt of the certified copy of the order. It is further directed that in case, the petitioner is found entitled to the payment of interest, the same be released to him within next one month, in accordance with law.

  ---

• 2019 (3) TMI 1140
  Assessment u/s 153A - addition u/s 68 - HELD THAT:- Tribunal committed an error in remanding the issue before the Assessing Officer for fresh consideration. The Assessee had placed reliance on certain decisions of this Court to contend that in absence of any incriminating material found during the search, no additions could have been made in the assessment order passed u/s 153A read with 143(3) of the Act. The Tribunal had to decide the correctness of his contention, bearing in mind the facts on record. There was no purpose in remanding the issue back to the AO. The facts necessary to decide the question were at large before the Tribunal. Whether in view of such facts, the Judgments cited by the Counsel for the Assessee were applicable or not, the Tribunal had to decide. This issue should not have been remanded to the Assessing Officer. The impugned Judgment of the Tribunal which is common for both assessment years giving rise to these Appeals, is set aside. The Appeals are restored before the Tribunal and shall be disposed of in accordance with law.

  ---

• 2019 (3) TMI 1139
  Capital gain computation - sale of old books, part of library inherited by as family members on the death of Shri. Late Muthiah, who expired on 04.06.1992 and which books were sold by them to the University of Chicago, USA.Denial of benefit of indexation of cost - absence of cost of acquisition as on 01.04.1981 - HELD THAT:- No substantial question of law arises in the present case, since the Assessees failed to adduce any evidence or material to establish the cost of acquisition of the books in question, which they simply inherited on the death of the owner, Late Mr.Muthiah, on 04.06.1992 and sold away such books to the University of Chicago, USA. In the absence of cost of acquisition as on 01.04.1981 having been established by the Assessees, the authorities were naturally unable to give the benefit of indexation of cost in the present facts. Therefore, such findings of facts on the basis of estimate nonetheless remain as findings of facts only and do not give rise to any substantial question of law requiring interference under Section 260A of the Act. Therefore, we do not find any substance in the present appeals filed by the Assessee - Questions of law framed above are answered against the Assessee and in favour of Revenue.

  ---

• 2019 (3) TMI 1138
  Issuance of Garnishee notices during the pendency of the stay application - AO empowerment to grant stay provided 20% of the disputed demand paid - - HELD THAT:- There is considerable force in the arguments advanced by the learned counsel for the revenue. That the Assessing Officer was empowered to grant an interim order of stay provided 20% of the disputed demand is paid by the assessee. However, it is not in dispute that 10% of the disputed demand is already paid by the assessee. In such circumstances, justice will be met if a direction is issued to the petitioner to deposit 10% of the balance disputed amount before the respondent within a period of two weeks. Writ petition stands disposed of directing the respondent to restore the amount if any collected from the petitioner’s bankers pursuant to the garnishee notices issued impugned herein and withdraw the garnishee notices subject to the undertaking to be given by the petitioner that 10% of the disputed demand would be deposited within a period of two weeks from today

  ---

• 2019 (3) TMI 1137
  Deemed dividend u/s 2(22))e) - repayment of loan or advance by the Company - HELD THAT:- CIT(A) and the Tribunal accepted the Assessee's contention that, the amount in question did not represent a loan or advance given to the Assessee by the Company but the same was merely in the nature of repayment of the past loan by the Assesssee to the Company. The CIT(A) in the first as well as in subsequent order after remand, has referred to the documents on record at considerable length and come to the factual finding that, upon the perusal of the accounts between the Assessee and the Company, what can be gathered is that, the sum of Rs. 4.07 Crores was repayment of the loan by the Company. Tribunal confirmed these findings and dismissed the Revenue's appeals. The entire issue is thus based on appreciation of facts on record. Therefore, no question of law arises.

  ---

• 2019 (3) TMI 1135
  Deduction u/s 10A/10AA - eligible undertakings established after A.Y. 2005-06 - HELD THAT:- The assessee is entitled to the claim of deduction under section 10A of the Act in respect of various undertakings which were established by the assessee from year to year except the new undertaking at Hyderabad. Further, the Tribunal also held that BPO unit is entitled to the claim of deduction under section 10A of the Act. So, the assessee is thus, held to be eligible to claim the deduction in respect of BPO undertaking and out of 11 undertakings in respect of 10 undertakings, the said claim is allowed. Deduction in respect of eleventh undertaking i.e. unit at Hyderabad. The Tribunal vide paras 16 and 17 held that the claim of assessee is not correct and the assessee is not entitled to the claim of deduction under section 10A of the Act. However, vide para 18, the alternate plea raised by the assessee on without prejudice was allowed that the undertaking at Hyderabad may be treated as expansion of the existing unit at Pune, from where the employees were transferred. The Tribunal thus, directed the Assessing Officer to allow the said deduction under section 10A of the Act to Hyderabad unit being expansion of Pune unit, for the remaining period as eligible to the Pune unit. New undertaking established in Gandhi Nagar - In order to avail the deduction under section 10A of the Act, requirement for the assessee was to fulfill the conditions laid down by the CBDT vis-à-vis employees transferred from existing undertaking. However, no such condition is imposed under the Act, but the CBDT had prescribed that where more than 50% employees are transferred, then it is case of splitting up or re-construction of business already in existence. During the year under consideration, the assessee had established new unit at Gandhi Nagar, wherein it made investment in the fixed assets to the tune of Rs. 4.23 crores. Further, the assessee had also filed list of employees, wherein the employees to the extent of 15% were transferred from old unit to Gandhi Nagar unit. Since it had fulfilled the conditions laid down by CBDT, then it cannot be said to be formed by splitting up or re-construction of business already in existence. Consequently, we hold that the assessee had established new undertaking at Gandhi Nagar, for which the assessee is entitled to claim the deduction under section 10A of the Act independently. - Decided in favour of assessee Entitlement to claim the benefit u/s 10A - whether TTC BPO being separate and independent undertaking, entitled to claim the benefit under section 10A? - HELD THAT:- The said issue has also been decided by the Tribunal in assessment year 2010-11 and following the same parity of reasoning, we allow the claim of assessee vis-à-vis TTC BPO unit. Disallowance made under section 14A of the Act read with Rule 8D - HELD THAT:- The requirement of section 14(2) of the Act is that the Assessing Officer is to record as to why the disallowance made by the assessee i.e. Rs. 50 lakhs under section 14A of the Act is not correct. The Assessing Officer takes note of the disallowance, considers the explanation of assessee and holds that the contention of assessee cannot be accepted. The preliminary satisfaction to be recorded by Assessing Officer, before making disallowance under section 14A of the Act read with Rule 8D of the Rules, is missing in the case; in the absence of the same, there is no merit in the disallowance made by the Assessing Officer. See GODREJ & BOYCE MANUFACTURING COMPANY LIMITED VERSUS DY. COMMISSIONER OF INCOME-TAX & ANR. [2017 (5) TMI 403 - SUPREME COURT OF INDIA] Disallowance made of ESOP cost - HELD THAT:- the assessee pointed out that the said issue has also been decided by the Tribunal in assessee’s own case and the claim has been allowed in entirety. The Tribunal had remitted the issue back to the file of Assessing Officer to follow the directions of Tribunal in assessment year 2009-10 and decide the issue accordingly. Applying the same, we remit this issue also back to the file of Assessing Officer to decide the same in line with directions of Tribunal in assessment year 2009-10. The ground of appeal No.3 raised by Revenue is thus, dismissed. Disallowance made u/s 10A(7) r.w.s. 80IA(10) - AO noted that net profit margins earned by assessee were 31.77% - HELD THAT:- in the absence of any arrangement made between the parties, there was no merit in disallowing any part of profits under section 10A(7) r.w.s. 80IA(10) of the Act. The Tribunal had already decided this issue in assessee’s own case in assessment year 2010-11 no merit in revenue appeal Disallowance on account of FBT paid in Australia - TDS liability u/s 195 - income accrued in India - HELD THAT:- Under clause (ic) of section 40(a) of the Act, it is provided that fringe benefit tax paid under Chapter XIIH is not to be allowed as deduction while computing income under the head ‘Profits & gains or profession’. In other words, FBT paid in India under the provisions of the Act is not to be allowed as deduction but there is no such embargo in respect of FBT paid in Australia. We uphold the findings of DRP in this regard that FBT paid in Australia is not covered by clause (ic) of section 40(a) of the Act. See ACIT VERSUS SHIPPING CORPORATION OF INDIA [2010 (12) TMI 1311 - ITAT MUMBAI] Disallowance u/s 40(a)(ia) in respect of overseas payments - non deduction of tds - default under section 201(1) / 201(1A) - Data link charges - HELD THAT:- Data link charges had held that the assessee was not required to deduct tax at source on payment of data link charges and hence, the assessee had not defaulted in not deducting tax at source on the payments made. In view of the issue being settled in respect of data link charges by the Tribunal in assessee’s own case [2018 (3) TMI 540 - ITAT PUNE], we find no merit in the submissions of Revenue in this regard. Scope of amendment to act - No liability to deduct tax could be fastened on the assessee to deduct tax at source on the basis of subsequent amendments made in the Act in relation to payments made to non residents - The assessee was not obliged to deduct tax out of aforesaid payments made to associated enterprises and hence, has not defaulted in not deducting tax at source. Consequently, the assessee is entitled to the said claim and no disallowance is to be made under section 40(a)(ia) of the Act.

  ---

• 2019 (3) TMI 1134
  Proportionate disallowance of the salary - Capitalization of cost incurred during the construction of Medanta Hotel project - commencement of business activity before construction of hospital - HELD THAT:- CIT (A) was incorrect in holding that 20% of the salary out of Rs. 6 crore was to be capitalized. Accordingly, we allow ground no. 1(a) of the assessee’s appeal and hold that no part of the salary out of Rs. 6 crore requires any capitalization in view of the fact that the business of the assessee company had already commenced prior to 31.10.2009. This also takes care of Revenue’s ground No. 1 and we dismiss the same by holding that no portion of the salary of Rs. 6 crores needs to be capitalized in view of the specific acceptance of the department in earlier assessment years that the business activity of the assessee company had started w.e.f. 01/06/2007. Second limb of the disallowance wherein the Ld. CIT (A) has held that the remaining salary of Rs. 3.3 crore was to be allowed in assessment year 2011-12 as the Board Resolution was passed in assessment year 2011-12, it has been submitted by the Ld. AR that the assessee accepts the finding of the Ld. CIT (A) and has only prayed that the AO may be directed to give effect to this direction. The Department is not in appeal against this direction. Accordingly, we direct the AO to give effect to the direction of the Ld. CIT (A) that the balance amount of Rs. 3.33 crores be allowed as deduction in AY 2011- Addition of outreach programme as preoperative expenditure on the ground that this amount was spent before 31.10.2009 - HELD THAT:- CIT(A) has himself accepted, while dealing with the assessee’s ground relating to remuneration to Dr. Naresh Trehan, that the assessee’s business operations had commenced prior to 31.10.2009, there remains no basis for making/confirming any disallowance on account of preoperative expenditure. We also note that the Assessing Officer, while passing assessment orders for assessment year 2008-09 and 2009-10, has also accepted that the business activities of the assessee company were being carried out through Apollo and other hospitals. Therefore, we are unable to agree with the Ld. CIT (A) and direct AO to allow the expenditure Addition under the head research and development expenditure - HELD THAT:- Fact remains that the assessee had not been able to provide any details in the year under consideration. However, since the Assessing Officer has allowed similar expenditure in assessment years 2008-09 and 2009-10, which remains undisputed, in our considered opinion, interest of justice would be served if this issue is restored to the file of the Assessing Officer to examine it afresh Recruitment expenses as preoperative expenditure - disallowance upheld by the CIT (A) on the ground that since this amount was spent before 31.10.2009, therefore, the same was preoperative in nature - HELD THAT:- CIT (A)’s categorical finding while adjudicating the assessee’s ground on remuneration paid to Dr. Naresh Trehan that the business operations of the assessee company had commenced before 31.10.2009, there is no reason for him to have upheld this disallowance. A perusal of the assessment orders for assessment years 2008-09 and 2009-10 also shows that the assessee company had been carrying on business activities through Apollo and other hospitals in earlier years also and this fact remains uncontroverted. Therefore, we are unable to concur with the findings of the Ld. CIT (A) on this issue also and while setting aside his order, we direct the Assessing Officer to allow the impugned amount Interest on terms loan - capital expenditure - HELD THAT:- AR has stated that the assessee has no objection in the treatment of the impugned amount as capital expenditure but has prayed that direction may be given that the interest pertaining to term loan on machinery which falls under the category of life saving devices attracting higher rate of depreciation should be allowed higher rate of depreciation. The Ld. Sr. DR also has no objection to this prayer of the assessee. We direct the Assessing Officer to allow depreciation at the applicable rates on life saving devices in accordance with law after affording due opportunity to the assessee. Treating the bank charges on issuance of bank gurarantee for EPCG Licence as preoperative expenses - HELD THAT:- It has again been stated by the Ld. AR that this ground is not being pressed, however, with the prayer that for the expenditure which pertains to term loan on machinery falling under the category of life saving device attracting higher rate of depreciation it may be directed that higher rate of depreciation be given on such expenditure. As the Ld. Sr. DR has no objection to the prayer of the Ld. AR, while dismissing ground no. 7, we direct the Assessing Officer to allow depreciation at the applicable rates on the life saving devices after giving proper opportunity to the assessee. Ad hoc disallowance of salary @ 20% being expenses in the nature of capital expenditure - HELD THAT:- Since this ground is identical to ground no. 1 of the assessee’s appeal which we have already decided in favour of the assessee by holding that the Ld. CIT (A) had erred in sustaining an estimated disallowance out of salary expenses of Rs. 6 crore to the tune of 20% on account of being capital expenditure in nature, on the same reasoning, we dismiss ground no. 1 of the department’s appeal. Depreciation on value of fixed assets to be disallowed. Addition on account of repairs and maintenance, installation, commissioning of IT equipment - HELD THAT:- We find no reason to interfere with the findings of the Ld. CIT (A) that only an amount was to be treated as capital expenditure and the rest was allowable as revenue expenditure being payment made towards annual maintenance contract for various medical equipments. Disallowance as being expenses pertaining to a period prior to November 2009 - HELD THAT:- DR could not substantiate with any evidence to the contrary that this categorical finding of the Ld. CIT (A) was factually incorrect and, therefore, we have no option but to dismiss the ground raised by the department in this regard and, accordingly, based on the findings of the Ld. CIT (A), which the department has not been able to controvert, we dismiss ground no. 4 raised by the department. Disallowance pertaining to recruitment expenses pertained to the year under consideration - claim allowable in this year under appeal - HELD THAT:- CIT (A) has also noted that as per the mercantile system of accounting, the income and expenses are to be booked for the period during which the relevant services were rendered. Thus, CIT (A) has given a categorical finding in this regard which the department has not been able to controvert by leading any evidence to the contrary. Apparently, it is not the case of the department that the services were not rendered in terms of the contract and the only dispute is regarding the year of allowability of expenditure. Since CIT (A) has given a categorical finding in this regard after duly referring to the recruitment services agreement, we find no reason to interfere with the order of the CIT (A) on this issue also

  ---

• 2019 (3) TMI 1133
  Addition as a result of search conducted wherein loose sheet found - Additions based upon selective scribbling in rough note de hors - HELD THAT:- Addition in this case is a result of search conducted wherein loose sheet being page no. 9 and scribbling in front of the said page is the sole basis. While analyzing the scribbling as mentioned in the order of the A.O. reproduced in para 5 above, the A.O. has considered that it reveals undisclosed sales of Rs. 5.22 crores and cash component of Rs. 4.32 crores which has been added to the income of the assessee. CIT(A) while considering the issue has noted that the scribbling in the said front side of page no. 9 show that the disclosed profit would be Rs. 4.62 crores. Hence, he was of the opinion that only Rs. 4.62 crores can be added and no further addition is justified. In this regard, we note that the A.O. in his order has noted that on the reverse side of page no. 9, the assessee has noted sales of Rs. 5.82 crores. That the assessee has recorded sales of Rs. 4 crores based on total expenses of Rs. 17 crores. However, the A.O. has rejected this notings by observing that loss of Rs. 4 crores is not actually a loss, since unsold stock has not been included in this calculation which has been done on the front page where the figure arrived is Rs. 4.62 crores. Submissions of the assessee that loose sheet scribbling are merely estimates and de hors any corroborative evidence, the additions solely based on these loose sheets scribbling cannot be made has considerable cogency. The said loose sheet was found from the residence of one of the partners. It does not mention the name of the assessee firm directly or indirectly. Moreover, the said notings are also not claimed to be recorded in the handwriting of Shri Shankarlal Virji Thakkar or any other partners of the assessee firm. In this regard, we place reliance upon the Hon'ble Apex Court decision in the case of CIT vs. P. V. Kalyanasundaram [2007 (9) TMI 25 - SUPREME COURT OF INDIA], wherein it was held that the addition solely based upon loose sheets scribbling de hors any corroborative findings, is not justified. We hold that the additions based upon selective scribbling in rough note de hors any corroborative finding, is not justified. Moreover, if the scribbling in the note is examined on the touch stone of the common law maxim of approbate and reprobate, the addition is further not justified. 20. In the result, this appeal by the Revenue is dismissed and that by the assessee stands allowed.

  ---

• 2019 (3) TMI 1132
  Disallowance of deduction u/s.80IB(10) - appellant s housing project has not fulfilled the conditions laid down in se.80IB(10)(c) i.e. area of residential units of row house were exceeds 1500sq. feet as admitted by the assessee during assessment proceedings although row houses are part of the project - entire housing project to be treated as single unit - CIT-A deleted the addition holding that the AO has in the current assessment year not brought anything new against the assessee and the claim of deduction u/s.80IB - HELD THAT:- In Vishwas Promoters Ltd. [ 2012 (11) TMI 1117 - MADRAS HIGH COURT] it was held that the s. 80IB deduction on construction of a housing project on a plot having area of one acre is available, irrespective of fact that other housing projects exist on said land. In the present case, it is not an allegation of the AO that the housing project has been build or develop on a land having area of less than one acre, but he denied the deduction on the allegation that entire housing project to be treated as single unit which is not correct and justified in view of the conclusion arrived by us in the earlier part of this order. AO disallowed the claim by taking a hyper technical approach and on his own whims and surmises which is clearly by the scheme and mandate of provision of u/s. 80IB(10) of the Act - No ambiguity, perversity or any other valid reason to interfere with the findings arrived by the CIT(A) in dismissing the allegations and contentions of the AO and in allowing deduction u/s 80IB(10) of the Act to the assessee on the amount accrued to him on sale of flats measuring less than 1500 sq.ft. per unit. Considering the totally of facts and in the light of the above decision of Tribunal in the case of the assessee itself, we find that the issue is covered by the decision of ITAT in favour of the assessee and no reason to deviate with the finding of CIT(A), accordingly same is upheld. - Decided against revenue.

  ---

• 2019 (3) TMI 1131
  Addition u/s 68 - assessee failed to produce share holders from whom share premium was received - parties did not appear before the AO or the assessee could not produce the parties in person before the AO - CIT-A deleted the addition - identity, creditworthiness and genuineness of the investor companies - case selected for scrutiny and notices u/s 143(2) and 142(1) issued - discharge of initial onus - HELD THAT:- In this case, the AO, except doubting genuineness of transaction for charging higher premium on shares, did not bring on record any other evidence to disprove the voluminous evidences filed by the assessee in respect of 5 companies to prove identity and genuineness of transactions. In fact, the assessee has filed complete set of documents for all 5 subscribers. The parties have responded to notices u/s 133(6) by filing necessary evidences. Therefore, merely for the reason that the parties did not appear before the AO or the assessee could not produce the parties in person before the AO, the whole set of documents produced to prove the identity and genuineness of transactions, cannot be disregarded when the AO does not have anything more than suspicion in his possession to doubt the transactions. Therefore, we are of the considered view that the AO was erred in bringing to tax share capital received from 5 companies u/s 68 as unexplained credit. Assessee has discharged its initial burden by filing enormous details to prove identity and genuineness of transactions. AO, having accepted the fact that identity has been proved, could not have proceeded to make addition only on the basis of charging higher premium, because charging higher premium on issue of shares is a decision between parties and the AO would not have any role to play as long as genuineness of transaction is not in doubt. - Decided against revenue

  ---

• 2019 (3) TMI 1130
  Reopening of assessment u/s 147 - Disallowance of bogus purchases - addition u/s 69 - HELD THAT:- since the books of accounts of the assessee are unreliable by rejecting the same and invoking the provisions of section 145 (2) AO completed the assessment in the manner provided u/s 144 - HELD THAT:- Assessee could not produce any material evidence of the parties/ intermediaries from whom the purchase from M/S Arihant Exports was made which could be verifiable. Under the above facts and circumstances, we find no infirmity in the order passed by the authorities below. Thus the ground raised by the assessee stands dismissed. Addition of commission expenditure in order to obtain such accommodation entries - assessment year 2014-15 - HELD THAT:- The assessee had obtained accommodation entries of Rs..75,789/- from M/s. Sun Diam, Surat for which commission was paid to the accommodation provider. Since the very nature of business of the accommodation entry provider was to earn ‘commission income’ from the beneficiaries, who had obtained accommodation entries from them, we are of the considered opinion that the Assessing Officer has reasonably estimated the commission of Rs..10,000/- for two bogus bills obtained by the assessee @ Rs..5,000/- per bill, which was rightly confirmed by the ld. CIT(A). - Decided against assessee

  ---

• 2019 (3) TMI 1129
  Addition of bogus purchases - reopening u/s 147 - return processed u/s 143 (1) - information received from CIT Central Circle II, New Delhi, enclosing letter of ACIT Central Circle -10, which contained the list of the persons to whom bogus purchases / accommodation entries were provided by three parties assessee being one of the beneficiary - proof of gross profit shown by the assessee during the year was less as compared to earlier or subsequent years - HELD THAT:- From the perusal of the bills as placed in the paper book, it is seen that assessee has shown purchase of steel scraps, aluminium scraps, brass scraps and in these bills, lorry / truck number for delivery has also been mentioned which is even evident from the scanned copy of one particular bill at page 69 in the impugned order. The purchases admittedly have been made through account payee cheque and the source of the purchases are from the books of account as it is not the case of AO that purchases from any party is outside books of account. Assessee has debited higher amount for the purchase which in fact has purchased the same material and quantity at a lesser amount, thereby suppressing the gross profit. Under these circumstances any addition at all which could be made, is by enhancing the Gross Profit on such purchases. Nowhere there is a finding or whisper either by the AO or CIT (A) that the gross profit shown by the assessee during the year was less as compared to earlier or subsequent years or there is any material to show that gross profit has been low during the year. If all the entries in the trading account including the quantitative tally of purchases, opening stock, sales and closing stock are found to be correct and no discrepancy has been found, then no addition on account of unexplained purchases can be made, because nowhere it has been found that assessee has made purchases outside the books. The entire finding of the CIT (A) hinges upon the fact that there was material indicating purchase under consideration are bogus without even appreciating that if the source of purchases are from the books and through account payee cheque, then how such purchases can be treated as un accounted. Since gross profit rate and gross profit has been accepted including the trading account then no such addition can be made - Decided in favour of assessee.

  ---

• 2019 (3) TMI 1128
  Addition of suppressed receipt - service tax component which was received in subsequent year and paid in subsequent year - HELD THAT:- Taking into consideration the facts and circumstances of the case and submissions of Ld.AR & Ld.DR, we deem it proper to remand the matter to AO for his verification whether the said amount is really a difference in tax component which was admittedly not shown by the assessee during the year under consideration. Thus, Ground Nos.1(a) & (b) raised by the assessee are allowed for statistical purposes. Disallowance of expenditure on payment of supervision charges - HELD THAT:- No objection whatsoever been raised by the AO in respect of the claim of the assessee regarding supervision charges. Ld.DR did not controvert the same by bringing on record a contrary view in past and subsequent assessment by the ITAT or Hon’ble High Court. Addition on account of non-furnishing of TDS details - non-explanation to summons u/s 133(6) - HELD THAT:- The view of AO is bad in adding the said amount on account of non-furnishing of details and non-explanation to summons u/s 133(6) of the Act. Therefore, the order of CIT(A) in confirming the same is set aside and the addition made thereon is deleted. Appeal of the assessee is allowed in part.

  ---

• Customs

• 2019 (3) TMI 1150
  Re-assessment under the EPCG scheme - rejection of refund claim - relevant rate of duty - effect of reduction in the rate of duty - N/N. 97/2004-Cus dated 17th September 2004 - Held that:- Though the present dispute is not of that genre, the denial of lower of the rates between date of shipment and date of arrival has been subjected to judicial resolution on many occasions. It is now settled in law that chargeability to duty on import crystallises on the entry of goods into the territorial waters of India and that the rate of duty that conforms to the prescription in section 15 of Customs Act, 1962 applies. There is no ambiguity that section 15 of Customs Act, 1962 prescribes that rate prevailing on the date of presentation of the bill of entry should be applied. On the facts and time-lines there is no dispute. The bills of entry for the clearance of the impugned goods were presented much before notification no. 64/2008-Cus dated 9th May, 2008 was issued. Therefore, the rate of duty applicable under the earlier notification would have to be adopted. The rate prescribed in the authorization produced by the appellant at the time of import would well have reflected the new Policy and if the Policy was to be arbiter of the rate of duty, there would be no need to take recourse to section 25 of Customs Act, 1962 which is the foundation of the claim of the appellant. The Policy is given effect only upon the issue of corresponding notification under the enabling statute, viz., section 25 of Customs Act, 1962. On the relevant date, the duty that was to be levied was 5% and not 3%. Appeal dismissed - decided against appellant.

  ---

• 2019 (3) TMI 1149
  Penalty on CHA - undervaluation by manipulation of documents - request for cross-examination denied - principles of natural justice - Held that:- The request for cross-examination was denied on the ground that such could be allowed only after examination-in-chief and that the denial of permission for cross-examination does not violate the principles of natural justice. Impliedly, it was held that such cross-examination is mandated only when reliance is placed on a departmental witness. There is no evidence on record that the appellants were aware of the quality and the value of the goods; indeed, unless any person, other than importers, are clearly brought on record as having participated in the conspiracy from the placement of the order, the charge on such person will not succeed. Mere filing of documentation that may contain wrong details, unless established as deliberate act on the part of the customs house agent, cannot be held against them - the evidence against the appellants are insufficient to establish that any act of theirs had rendered the goods liable for confiscation and, therefore, liable to penalty. Appeal allowed - decided in favor of appellant.

  ---

• 2019 (3) TMI 1148
  Principles of natural justice - case of appellant is that the impugned order is flawed in not having taken their submissions into consideration while adjudicating the notice - Held that:- The proceedings were initiated against the goods even before bills of entry were filed, i.e. before an importer could be identified with the import, and that role of the present appellant were established through various evidences. Considering the criticality of these evidences, and the lack of credibility arising from the untested status of those, the Tribunal had, on the last occasion, remanded the matter to ensure such compliance on the specific plea of the appellant. It is not open to the appellant to plead for a relief that was granted and, upon failure to avail of that relief, to claim a different ground for assailing the first order now. The original order has ceased to exist insofar as the appellant is concerned and the substituted order did not have to proceed in merit in view of the failure of the appellant to participate in the proceedings as directed in the remand order of the Tribunal to subject the evidence to test. By failure to participate in the cross-examination, there is an implicit admission of the relevancy of these statements. There is no case in favor of appellant - appeal dismissed - decided in favor of appellant.

  ---

• Service Tax

• 2019 (3) TMI 1147
  Valuation - inclusion of transaction charges collected by the appellant and paid to the NSE in assessable value - Sub-Rule (1) of Rule 5 of the Service Tax (Determination of Value) Rules, 2006 - Held that:- The demand is raised as per Sub-Rule (1) of Rule 5 of the Service Tax (Determination of Value) Rules, 2006. The said Rule has been set aside as ultra vires by the Hon’ble Apex Court in the judgement of M/s. Intercontinental Consultants and Technocrats Pvt. Ltd. [2018 (3) TMI 357 - SUPREME COURT OF INDIA] - Further, the issue whether transaction charges can be subjected to levy of service tax is covered by the decision in the case of M/s. First Securities Pvt. Ltd. [2007 (6) TMI 33 - CESTAT, BANGALORE] wherein it has been held that the said charges cannot be equated to brokerage received by the appellant and is not subject to levy of service tax - demand cannot sustain - appeal allowed - decided in favor of appellant.

  ---

• Central Excise

• 2019 (3) TMI 1146
  Valuation - inclusion of value of scrap in assessable value - Held that:- The stay application is dismissed - Issue notice, returnable in six weeks.

  ---

• 2019 (3) TMI 1145
  CENVAT Credit - capital goods - various items of iron and steel - Held that:- In the present case the period involved is prior to 07.07.2009 and the amendment carried out in Rule 2(k) vide CENVAT (Amendment) Rules, 2009 is applicable prospectively and not retrospectively - reliance placed in the case of M/S. SINGHAL ENTERPRISES PRIVATE LIMITED VERSUS THE COMMISSIONER CUSTOMS & CENTRAL EXCISE, RAIPUR [2016 (9) TMI 682 - CESTAT NEW DELHI], where it was held that Applying the “User Test” to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of ‘Capital Goods’ as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the Cenvat Credit. Credit allowed - appeal allowed - decided in favor of appellant.

  ---

• 2019 (3) TMI 1144
  CENVAT Credit - capital goods - structural items i.e. Steel Plates, TMT Bars, Angles, Beams etc. - period from January 2008 to June 2009 - Held that:- Both the authorities have wrongly relied upon the decision of Vandana Global Ltd. which has now been set aside by the Chattishgarh High Court [2018 (5) TMI 305 - CHHATTISGARH, HIGH COURT] wherein it has been held that the amendment to Rule 2(k) of CCR, 2004 are only prospective in nature - Further, the period involved in the present case is from January 2008 to June 2009 which is prior to 07.07.2009 and therefore, the amendment carried out on 07.07.2009 is not applicable in the present case. Further, the impugned steel items were used for fabrication of equipment/machinery or supporting structure of the equipment/machinery and are treatable as components/parts of such equipment and machinery and hence credit on the said material is admissible as capital goods. Credit allowed - appeal allowed - decided in favor of appellant.

  ---

• 2019 (3) TMI 1136
  Classification of brick under 68159910 or 68109990 - Denial of Exemption Notification No. 48 and that of Notification 1/2011-CE dated 01.03.2011 - Held that :- Applying rules of Interpretation to these facts we observe that Chapter 68 [Articles of stone, plastic, cement, asbestos, mica or similar material] is applicable to the impugned bricks, sand and lime being the stone/plaster. Since fly ash was added later to sand lime composition of bricks that Rule 3 (b) of the interpretation rule is most applicable. From the composition of bricks, as above, fly ash being used in least quantity, essential material for impugned bricks remain is sand and lime. Thus, the impugned bricks, to our opinion qualify for being classified under tariff entry 6810 precisely 68109990. The impugned bricks can be manufactured without fly ash, as it used to be earlier but not without sand and lime. The notification 1/2011 specifically mentions bricks of sand and lime. Hence, we are of opinion that appellants have rightly availed the benefit of exemption therein. No question of confiscation at all arises - Appeal allowed - decided in favor of the assessee.

  ---

• CST, VAT & Sales Tax

• 2019 (3) TMI 1143
  Power of tax authorities for Recovery of tax as arrears of land revenue - Restriction on movement or transfer of machinery or fixed assets - SARFAESI Act - pending dues - attachment of subject property - Auction - GVAT Act - Held that:- Section 46 of the GVAT Act makes it clear that it permits the officer concerned to recover pending tax dues arising out of an order made under that Act by exercising powers under the Bombay Land Revenue Code, 1879. In the present case, a bare perusal of the contents of the communication dated 2.6.2015, makes it evident that the same is not relatable to any power exercised under the Bombay Land Revenue Code as envisaged under section 46 of the GVAT Act. In fact, the impugned communication is totally silent as regards the source of power under which the same has been issued. It appears that merely by dint of the fact that the officer concerned is the Commercial Tax Officer, he seems to have addressed the impugned communication to the Kandla SEZ Authority, not to allow movement or transfer of machinery or fixed assets of the respondent No.4 herein. The impugned communication dated 2.6.2015 which lacks any authority of law and has no legal force is, therefore, non-est and is required to be ignored - the third respondent, Joint Development Commissioner, Kandla Special Economic Zone, Gandhidham Kutchh, is directed to not to act upon the same to restrain the petitioner in dealing with the property in question - petition allowed.

  ---