Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
March 28, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
Articles
News
Notifications
Customs
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15/2019-Customs (N.T./CAA/DRI) - dated
27-3-2019
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Cus (NT)
Appointment of Common Adjudicating Authority by DGRI
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14/2019-Customs (N.T./CAA/DRI) - dated
27-3-2019
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Cus (NT)
Appointment of Common Adjudicating Authority by DGRI
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13/2019-Customs (N.T./CAA/DRI) - dated
27-3-2019
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Cus (NT)
Appointment of Common Adjudicating Authority by DGRI
GST - States
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FTX56/2017/Pt-I/206 - dated
28-2-2019
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Assam SGST
Seeks to amend Notification No. FTX.56/2017/25 dated the 29th June, 2017
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FTX.56/2017/Pt-I/209 - dated
28-2-2019
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Assam SGST
Inserts the Explanation in the Notification No. FTX.56/2017/24 dated the 29th June, 2017
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FTX.56/2017/Pt-I/207 - dated
28-2-2019
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Assam SGST
Seeks to amend Notification No. FTX.56/2017/26 dated the 29th June, 2017
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FTX.56/2017 /Pt-II/147 - dated
28-2-2019
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Assam SGST
Seeks to amend Notification No. FTX.56/2017/Pt-II/53 dated the 14th December, 2017
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FTX.56/2017 /Pt-II/143 - dated
28-2-2019
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Assam SGST
Seeks to amend Notification No. FTX.56/2017/34 dated the 29th June, 2017
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FTX.56/2017 /Pt-II /131 - dated
28-2-2019
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Assam SGST
Governor of Assam, appoints the 1st day of February, 2019, as the date on which the provisions of the Assam Goods and Services Tax (Amendment) Act, 2018 except clause (1) of section 8, section 17, section 18 and clause (1) of section 20, shall come into force
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FTX.56/2017 /Pt-I/204 - dated
28-2-2019
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Assam SGST
Seeks to amend Notification No. FTX.56/2017/24 dated the 29th June, 2017
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FTX.56/2017/Pt-II/117 - dated
30-1-2019
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Assam SGST
Corrigendum - In the notification No. FTX. 56/2017/Pt.III/178 dated the 24th December, 2018.
Income Tax
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28/2019 - dated
26-3-2019
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IT
Exemption u/s 10(46) in relation to specified income of notified person - Odisha Electricity Regulatory Commission
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27/2019 - dated
20-3-2019
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IT
Central Government notifies the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992) as the regulation for the purposes of the section 9A (9)(e)of the IT Act 1961
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Release of attached petitioner's cash credit account with the Bank of Baroda - the amount paid by reversing input tax credit, the interest of the Revenue is sufficiently secured - Attachment order vacated.
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Seizure of goods alongwith vehicle - goods not accompanied by the tax invoice and the E-Way Bill - - transporter has not been assigned any role in the entire transaction which had led to the seizure of the goods except that it is alleged that the driver had left behind the documents by mistake - Vehicle directed to be released without condition.
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Profiteering - supply of “Matchless Plus TTWG Grinder” - Failure to pass the benefit of reduction in rate of tax - The Respondent has acted in contravention of the provisions of Section 171 of the CGST Act, 2017 - penalty proceedings initiated.
Income Tax
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Additional depreciation on energy meters @80% - in the first round of proceeding ITAT direct AO to allow depreciation @ 80% after verification - AO again disallow stating it as measuring instrument relying upon BIS report - non application of mind - AO failed to meet the directions of the tribunal - claim of the assessee allowed.
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Deduction of interest u/s 23(3) being let out property - Rent received from mother, co-owner of property - no evidence furnished to prove actual occupation by mother on rental basis - merely a eyewash to claim deduction u/s 23(3) - No deduction.
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Deduction u/s 80IA - Manual processing - least consumption of electricity - manufacture of a herbal product Bandruff by a manual process with the use of some chemicals and small machinery can also amount to manufacture or production of a different commercial article - deduction is allowable
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Deemed dividend u/s 2(22)(e) - trade advance - assessee are in regular course of the business of purchase and sales of the shares/currency/derivatives/commodities - trading transactions are beyond the ambit of deemed dividend
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Reopening of assessment - based on Investigation Wing report - apparently wrong facts in reasons - No primary independent enquiry - non-application of mind - notice u/s 148 is void ab-initio
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Sale of immovable property held in stock - Difference between market value and actual sale price treated by AO as unexplained income - applicability of section 50C on stock in trade - insertion of Section 43CA by the Finance Act 2013 - amendment is prospective
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Rectification of mistake u/s 154 - belated return u/s 139(4) - Subsequently revised - request of rectification based on revised return - not permissible as belated return can't be revised
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TP adjustment - Jurisdiction of TPO - TPO suo motu examined the domestic transaction and made transfer pricing adjustment - in relation to a specified domestic transaction, the TPO can under take transfer pricing study only in relation to those transactions which are referred to him under sub-section (1) of Section 92C.
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Penalty u/s 271AAA - immunity from penalty if tax and interest has been paid on undisclosed income surrendered - No time limit for payment - no penalty if tax paid before the assessment u/s 143(3) - penalty leviable on unpaid amount
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10% adhoc disallowance - CIT(A) sent the additional evidence for verification to A.O - no response from AO - bizarre order - adverse inference can be taken against the assessee is beyond comprehension - Matter restored before AO for reconsideration
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Disallowance of expenses - labour expenditure related to son & wife - It is not new that family members helping each other in doing business. If some salary is attributable to them on their working, then it should not be doubted simply for the reason that those family members are not aware about the raising of bills in their names.
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Penalty u/s. 271(c) - Interest receipt as per TDS certificate - not credited in the P & L a/c - failure to substantiate with any material that why the impugned receipt was not disclosed in its income - furnishing of inaccurate particulars - levy of penalty uphold
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Reopening of assessment u/s 147 - non disposal of the objections by the AO by passing speaking order - sufficient to quash re-assessment order
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Judicial propriety - it is judicially correct to follow the decisions of Hon’ble High Courts, which are in favour of the assessee; despite there being decisions contrary by other High Courts; when there is no decision of the jurisdictional High Court against the assessee.
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Charitable activity- proviso to section 2(15).- Bangalore Development Authority (BDA) - real estate developer - underlying motive / objective is not making and maximizing of profits, but planned development of Bangalore City - Exemption u/s 11 is allowable
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Allowability of expenses u/s 37 - asset management company - twin conditions, firstly that the tax- payer company should be registered under the Companies Act, 1956 and secondly it should be approved as such by SEBI - expenses allowable from date of approval by SEBI
FEMA
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Master Direction - External Commercial Borrowings, Trade Credits and Structured Obligations
IBC
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Approval of resolution plan - proceeding for liquidation of the company after non-compliance of approved resolution plan - Relief granted further 30 days given to make payment as per the approved resolution plan.
SEBI
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Guidelines for Business Continuity Plan (BCP) and Disaster Recovery (DR) of Market Infrastructure Institutions (MIIs)
Service Tax
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For invoking the extended period of limitation both suppression and intention to evade payment of Tax are to be separately established. In the present case since suppression could not be established, demand beyond the normal period of limitation set aside.
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Nature of activity - Sale of flat or construction service - when the appellant himself is approaching the Authorities for issuance of the completion certificate after almost more than a year of sale of the flat, how can they adopt the plea that the flats were completed at the time of sale.
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When an issue is subject matter of litigation in respect of various parties, located all over India, it cannot be held that there was malafide intention on the part of one assessee - demand is barred by limitation.
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CENVAT Credit - inputs “Spare Parts” and Input Services used in providing free of cost ‘Repair & Replacement Services’ during warranty period - credit allowed.
Central Excise
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Recovery of confirmed dues and penalties - section 35 F of Central Excise Act, 1944, read with section 35C (2A) of Central Excise Act, 1944 and with rule 41 of Customs Excise Service Tax Appellate Tribunal (Procedure) Rules, 1982 - The ambit of the decision of the Hon’ble Supreme Court is restricted to one aspect of appeals and, that too, pertaining to trial courts.
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CENVAT credit - input services - group mediclaim policy taken for dependents / family members of company’s staff and employees cannot be considered to be directly or indirectly related to manufacture and hence the assessee cannot claim CENVAT credit on the premium paid by the employees.
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Method of Valuation - clearance to their sister concern consignments of HR strips - Demand set aside on the ground of revenue neutrality since whatever duties is paid The sister concern would be eligible to avail CENVAT credit.
Case Laws:
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GST
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2019 (3) TMI 1316
Refund of the excess tax paid - entitlement under Sections 53 and 54 under the Central Goods and Services Tax Act, 2017 - Held that:- Issue notice to the respondents for final disposal of the matter returnable on 22.04.2018.
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2019 (3) TMI 1314
Seizure of goods alongwith vehicle - goods not accompanied by the tax invoice and the E-Way Bill - Section 129(3) of the U.P.G.S.T. Act, 2017 - Held that:- A perusal of the seizure order and the order passed under Section 129(3) of the Act for the release of the goods reveal that the transporter has not been assigned any role in the entire transaction which had led to the seizure of the goods except that it is alleged that the driver had left behind the documents by mistake - since the detention of the vehicle of the transporter is likely to cause irreparable loss and injury to him as his business of transport would be affected, the release of the vehicle is directed forthwith to the petitioner No.2 without any condition if the owner of the goods fails to turn upto comply with the conditions of release - petition disposed off.
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2019 (3) TMI 1313
Profiteering - supply of “Matchless Plus TTWG Grinder” - benefit of reduction in the rate of tax not passed on - contravention of the provisions of Section 171 of the Central Goods & Services Tax (CGST) Act, 2017 - Held that:- From the perusal of the tax invoices dated 28.09.2017 and 27.12.2017, issued by the Respondent it is observed that the base price of the product had increased from ₹ 4728.90, which he was charging before the rate reduction till 14.11.2017 to ₹ 4,774.59 w.e.f. 15.11.2017 i.e. it was increased by ₹ 45.69 per item. Therefore, there is no doubt that the Respondent had increased the base price of the above product w.e.f. 15.11.2017 in spite of GST rate reduction from 28% to 12%, when he was legally bound to charge the reduced prices so as to pass on the benefit of reduced tax rate to his recipients - The Respondent's claim that the base price was increased because the purchase price of the product was increased by the manufacturer and that there was no question of profiteering by him is not legally tenable because he as a dealer registered under the GST is legally bound to pass on the benefit of rate reduction. Section 171 of the CGST Act, 2017, read with the rules made under it clearly mandates that every registered person has to pass on the benefit of reduction in the rate of tax on any supply of goods and services to the recipients by way of commensurate reduction in prices. Moreover his claim that his profit margin had reduced also does not hold good as this Authority is not concerned with his profit margin or loss because Section 171 of the CGST Act, 2017, read with relevant COST Rules, 2017, is clear and unambiguous to the effect that the benefit of rate reduction has to be passed on by every registered person to his recipients. The Respondent has acted in contravention of the provisions of Section 171 of the CGST Act, 2017 and has not passed on the benefit of reduction in the rate of tax to his recipients by commensurate reduction in the prices. Accordingly, the amount of profiteering is determined as ₹ 32,926.36 as per the provisions of Rule 133 (1) of the CGST Rules, 2017. The Respondent is therefore directed to reduce the price of the above product as per the provisions of Rule 133 (3) (a) of the CGST Rules, 2017, keeping in view the reduction in the rate of tax so that the benefit is passed on to the recipients. Penalty - Held that:- It is also established from the record that the Respondent has deliberately and consciously acted in contravention of the provisions of the CGST Act, 2017 by issuing incorrect invoices which is an offence under Section 122 (1) (i) of the above Act and hence he is liable for imposition of penalty under the above Section read with Rule 133 (3) (d) of the CGST Rules, 2017 - In the interest of natural justice before imposition of penalty a notice be issued to him asking him to explain why penalty should not be imposed on him. Application disposed off.
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Income Tax
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2019 (3) TMI 1312
Admission of application before AAR - whether issue pending before any income tax Authority, or Appellate Authority or any Court - allegation of tax avoidance - taxable as AOP or as separate entity - HELD THAT:- If we read both the reports together, it is apparent that the only objection raised by the Department appears to be regarding alleged tax avoidance. We asked Ld. DR to show us any material in support the plea of tax avoidance. However, at this stage he was unable to furnish any such material. We must note that this matter has been adjourned at least on two occasions. Hence it is not possible to adjourn it any further. We must also note that Ld.FCA for the applicant has strenuously objected to the Department’s case of tax avoidance. In the circumstances, the application will have to be admitted keeping the question of alleged tax avoidance open.
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2019 (3) TMI 1311
Recovery of tax dues - Order for property for sale proclamation and put for auction - reconsideration of application u/s 220(2A) for waiver of interest - Tax amount already paid - financial crunch - delay in payment of tax demand was beyond his control - HELD THAT:- If the petitioner is a genuine person and does not have any dishonest intention of not paying the interest, despite having the means, he should not be made to suffer. The available evidence on record is not sufficient to prove his guilt. Considering all these factors, this Court is of the considered view that the petitioner must be given one more opportunity to present his case with supporting documents to establish that he is facing financial crunch and does not have the means to pay the interest as demanded by the respondents. Court is of the considered view that the petitioner must be put on terms for reconsideration of the application submitted by him under Section 220 (2A) of the Income Tax Act seeking for waiver of interest.- Directed for part payment for consideration of application
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2019 (3) TMI 1310
Reopening of assessment - During the pendency of the writ petition, the A.O. has passed fresh assessment order - tangible material forming a live link for change of opinion - change of opinion - recourse to legal remedies available - HELD THAT:- We find force in the submissions of the learned counsel for the Revenue that the petitioner, if so advised, should resort to statutory remedy. It is well settled by now that Section 147 of the Income Tax Act does not permit reassessment of an income merely because of the fact that the AO has a change of opinion. Section 147 confers the power of reassess and not the power of review. The change of opinion implies formulation of an opinion and then a change thereof. Refereeing to case of INCOME TAX OFFICER WARD NO. 16 (2) VERSUS M/S TECHSPAN INDIA PRIVATE LTD. & ANOTHER [2018 (4) TMI 1376 - SUPREME COURT] when we carefully examine the facts of the case in hand, we find that there is tangible material as pointed by the CITC in huge amount of income escaping assessment, therefore assessment was reopened. Thus there is tangible material forming a live link for change of opinion. It is not in dispute that after reopening, fresh assessment order has been passed. Thus, the reopening of assessment and the resultant assessment order dated 28.12.2018 both could be challenged more effectively in statutory remedies provided under the Income Tax Act, We, therefore, decline to exercise our extra ordinary powers conferred by article 226 of the Constitution of India. Writ petition fails and is hereby dismissed summarily. Petitioner is free to take recourse to legal remedies available to it under the law against the reopening of assessment and the fresh order of assessment and while doing so, this order shall not come in way.
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2019 (3) TMI 1309
TP adjustment - payment of creditors in demerger process - petitioner, holding a belief that this transaction was not a specified domestic transaction, had not reported in the form 3CEB - reference made to TPO in respect of reported transaction - TPO suo motu examined the transaction and made transfer pricing adjustment - Power of TPO - challenge of TPO action in writ - HELD THAT:- It is indisputable that by virtue of sub-sections (2A) and (2B) of Section 92CA, in case of an international transaction, the TPO would have an authority to examine any international transaction which comes to his notice during the proceedings, whether a reference in this respect was made by the Assessing Officer or not and whether the assessee had reported such transaction under Section 92E or not. However, in view of specific non-inclusion of the specified domestic transaction under the said subsections, in so far as the domestic transactions are concerned, the situation would be vastly different. Inescapable conclusion that we have reached is that in relation to a specified domestic transaction, the TPO can under take transfer pricing study only in relation to those transactions which are referred to him under sub-section (1) of Section 92C of the Act. Revenue is correct in pointing out that in the present case, the assessee did not report such transaction at all and therefore, the Assessing Officer had no occasion to notice such transaction as specified domestic transaction. His reference, therefore, was necessarily confined to the reported transactions. The TPO noticed this anomaly, he proceeded to determine the arm's length price after full opportunity of hearing to the petitioner. There may be number of cases where the assessee may bonafide hold a belief that certain transaction is not a specified domestic transaction and therefore, would not report the same under Section 92E of the Act. Whether bonafide or not, not making a report by the assessee of a specified domestic transaction would not leave the revenue without remedy. As clarified by CBDT in the instructions dated 20.5.2013, it is always open for the TPO who notices such transaction during the course of the proceedings before him to call for a reference by the Assessing Officer. Thus in relation to the transaction of payment to creditors in demerger process, the TPO had no jurisdiction to make any adjustments. Under these circumstances and even otherwise, we are not inclined to examine the adjustment on merits though it was argued before us by the learned counsel for the petitioner. Relying on decision of supreme court in case of Calcutta Discount Co Ltd Vs. ITO Anr. [1960 (11) TMI 8 - SUPREME COURT]court held that if we find that the action of the TPO or a part of it which can be severed from the rest was wholly without jurisdiction, we would not hesitate in striking down such order or part thereof merely because the statute provides certain appeal remedies to the aggrieved assessee. Payment of subscription fee to the related party - arm's length of the specified domestic transaction - exercising writ jurisdiction when statutory appeal remedies are available - petitioner presented data to contend that the payment of subscription fee to the related party was at arm's length - HELD THAT:- Even though the petitioner may have certain arguable points, that by itself, would not enable us to bypass the entire statutory scheme of assessment, appeal and revision. Once the TPO makes his report, the provisions are made in the statute how such report would be acted upon. The petitioner would have full innings to oppose the contents of such report and take such challenge in the appeal in case the petitioner fails at the first stage. When a statute that too, fiscal statute makes detail provisions for assessment, appeals and revisions, ordinarily the Court would not examine the issues on merits bypassing such statutory remedies All the contentions on merits raised by the learned counsel for the petitioner in relation to this adjustment require minute examination of documents and materials on record and accounts. Even the contention of breach of natural justice is not possible of summary consideration. The TPO had issued several notices during the proceedings. Whether precise query was raised in relation to the adjustment ultimately suggested would require minute and detailed examination of documents on record, an exercise we are not inclined to undertake in this petition. When the Act provides for statutory appeals and further appeal to the High Court on substantial question of law, such exercise, we would be well advised not to undertake in a writ petition.
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2019 (3) TMI 1308
Deduction u/s 80IA - Manual processing - least consumption of electricity - manufacture of a herbal product Bandruff by a manual process with the use of some chemicals and small machinery - no new industrial unit, machinery or infrastructure as claimed - Whether Tribunal was right in holding that the Assessee was entitled to the benefit of Section 80IA even if it does not do the manufacturing process on its own but gets it done by third parties? - HELD THAT:- The manufacture of a herbal product Bandruff by a manual process with the use of some chemicals and small machinery can also amount to manufacture or production of a different commercial article which is the basic requirement under Section 80IA of the Act. The purpose of the said provision is to encourage industrialisation and investment in an industry. The purchase of plant and machinery, and consumption of electricity are not mandatory requirement as was thought by the learned Assessing Authority in the present case. The learned Tribunal after describing the said manufacture / production process of the herbal product was, in our opinion, perfectly justified in holding that the same amounted to manufacture of a different commercial article and that therefore, the Assessee was entitled to the deduction under Section 80IA - decided against revenue
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2019 (3) TMI 1307
Addition to income of the amounts deposited by the franchisees who have been supplied with freezers for storing the assessee's products - deposit made is the value of the freezers - as submitted that in all the above cases the demand is less than ₹ 50 lakhs and hence the continuance of the appeals as per the present litigation policy cannot be allowed - HELD THAT:- In so far as supplying brand new freezers to the franchisees on a deposit of the price; taken from these franchisees. Every year there was a depreciation made on the value and the depreciated amounts offered as income in that particular year. If the franchisee discontinued the franchise then the balance written down value available as per the books of accounts are refunded to the franchisees. Hence, it is submitted that the income is returned in phases and there is no warrant for the addition made in the year in which the franchisee agreement is entered into, since it does not inure to the assesses as income. The learned counsel for the respondent asserts that even on merits he has a good case. However, in the circumstance of Revenue having sought for withdrawal of almost all the cases, we are of the opinion that even the two cases in which instructions have not been received are to be rejected following the litigation policy as introduced by the Central Government. There are other appeals in the batch in which the demand is far greater but all less than ₹ 50,00,000/-. We reject the appeals based on the litigation policy, leaving open the question of law raised.
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2019 (3) TMI 1306
Reopening of assessment - mandatory requirement of disposing of the objections by the AO has not been complied with by passing speaking order - HELD THAT:- AO has considered the query raised in the letter dated 10.04.2018 and the same was disposed of. But, by no stretch of imagination it can be held to be a speaking order passed by the Assessing Officer considering the objections raised by the assessee. Indeed it was a request made by the assessee to furnish the reasons recorded for initiating the proceedings under Section 147 read with Section 148. The objections raised by the petitioner on 20.12.2018 to the summary of reasons recorded provided by the AO has not been disposed of by a speaking order. However, AO proceeded to pass the reassessment order impugned herein, which clearly demonstrates that the mandatory requirement of disposing of the objections by the Assessing Officer has not been complied with and on this ground alone, the order impugned deserves to be set aside. See M/S. DEEPAK EXTRUSIONS PVT. LTD. VERSUS THE DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1 (4) , BANGALORE [2017 (3) TMI 1257 - KARNATAKA HIGH COURT] - re-assessment order passed by the Assessing Officer as well as demand notice have been set aside.
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2019 (3) TMI 1305
Penalty u/s 271AAA - appellant had made disclosure/surrender u/s 132(4) - if assessee has not paid the tax together with interest in respect of the undisclosed income, before the due date of filing of return of income but certainly before the assessment is made, would he get the immunity from penalty u/s 271 AAA or not? - time limit prescribed for getting the immunity - tax and interest has not been paid on or before the passing of the assessment order u/s 143 (3) - such tax should have been paid before at least due date of the filing of the return of income - HELD THAT:- As per information available on record it is apparent that assessee has not paid the tax together with the interest in respect of the undisclosed income before the due date of filing of the return of income except, case seized of INR 12,100,000 during the course of search. Admittedly on such cash seized which is adjusted by the AO later on under section 154 of the income tax act the assessee should get benefit of the sum at least. However with respect to the balance sum, the assessee has not paid tax before the due date of the filing of the return for that impugned assessment year i.e. on or before 30/9/2011. Admittedly such tax has not been paid before the due date of filing of return of income but only later on. Reading of the provisions of section 271AAA we also do not find that there is any time limit for payment of the tax, despite the necessary condition. It is rather surprising that the legislator has made a condition precedent for immunity from levy of the penalty of payment of taxes along with interest on undisclosed income, but has not prescribed the time limit for the payment of such tax. It is necessary that whenever there is a condition precedent from seeking immunity from penalty of payment of tax, naturally there should also be a timeline by which it should have been paid. The legislature has not put such timeline. The honourable courts have interpreted such timeline up to the date of assessment because that is the time when the taxes are computed on the undisclosed income. CIT A has held that assessee has not paid tax alongwith the return of income, however there is another provision for consequences of for non payment of self assessment tax u/s 140A (3) of the Act but not 271AAA of the act. As relying on SMT. RITU SINGAL [2018 (3) TMI 593 - DELHI HIGH COURT] we hold that when assessee has deposited complete tax before the assessment is made, the penalty u/s 271AAA to that extent cannot be levied. However, on reading the orders of the lower authorities as well as the information furnished by the AR, it is not certain about what is amount of tax paid before making the assessment u/s 143(3). Hence, we set aside the whole issue back to the file of the AO with a direction to levy penalty only on the proportionate sum for which tax and interest has not been paid on or before the passing of the assessment order u/s 143 (3) of the act. Accordingly, we reverse the order of the lower authorities and direct the learned assessing officer to recompute penalty u/s 271AAA of the act only on the tax along with interest on undisclosed sum remaining outstanding up to the date of assessment. - Appeal of the assessee is allowed for statistical purposes.
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2019 (3) TMI 1304
Rectification of mistake u/s 154 - Wrong figure mentioned in FBT return - No revised return filed - Rectification application filed requesting AO to take the figure of FBT as per profit and loss account - HELD THAT:- Assessee some error was committed by the assessee while filing the return for FBT. The assessee declared fringe benefit of ₹ 2,19,470/-. Whatever figure was given by the assessee has been accepted by the department. Therefore. there is no mistake apparent on record from the side of the Revenue Department because whatever figure was declared by the assessee has been accepted by the department. If there was any mistake in the return of income containing miscalculation of FBT, proper course is allowed under the Income Tax Act to file a revised return of income. However, the assessee did not take any steps in this regard. Therefore, no mistake is attributable to the assessing officer which should be rectified under section 154. The assessee is responsible for his own acts and as such, Learned CIT(A) correctly dismissed the appeal of assessee. The appeal of assessee is dismissed.
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2019 (3) TMI 1303
Additional depreciation on energy meters @80% - in the first round of proceeding ITAT directed the AO to allow depreciation @ 80% after verification - AO again disallow stating it as measuring instrument relying upon BIS report - non application of mind - HELD THAT:- Tribunal in BSES Rajdhani Power [2015 (11) TMI 927 - ITAT DELHI] categorically held that depreciation at 80% was available in respect of simplicitor electricity/energy measuring meters and there was no additional requirement of such meters being energy saving devices. Tribunal held that the assessee has successfully able to demonstrate that it was very much entitled to claim depreciation on energy meters @ 80%. The Tribunal has categorically given a finding on depreciation on energy meters @ 80% as only this much has to be verified by the AO as to whether it is inextricable/integral part of meters without which the meter cannot function and accordingly allow depreciation on the same. But instead of verifying these aspects, the AO has given a finding on the basis of Bureau of Indian Standards Report and relying on the same held that energy meter is merely a measuring instrument and not appliances which can be classified as energy efficient and hence was not eligible for depreciation at the higher rate of 80%. AR has given plethora of decisions including the decision in case of Union of India Vs. Kamlakshi Finance Corporation Ltd. [1991 (9) TMI 72 - SUPREME COURT OF INDIA] wherein it is held that orders of High Court/ Appellate Authorities are binding and revenue interest is no excuse for failure of lower authorities to follow those orders as the law provides appeal procedure for safeguards. The principles of judicial discipline require that the orders of the higher appellate authorities shall be followed unreservedly by the subordinate authorities. AO is duty bound to follow the directions of the Tribunal in its true spirit and should have not gone beyond what has been directed to be verified by the Tribunal to the Assessing Officer. - Decided in favour of assessee.
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2019 (3) TMI 1302
Disallowance of expenses and Penalty u/s 271(1)(c) - labour expenses - labour expenditure related to son & wife - Son is helping the father but wife is house-wife - second round of litigation upto the Tribunal - HELD THAT:- In the first round, the Tribunal has remitted this issue to the file of the ld.CIT(A) for fresh adjudication. The assessee has filed fresh material before the ld.CIT(A) which have been considered by the ld.CIT(A), but concurred with the AO. A perusal of the record would indicate that payments have been made through account payee cheques. Identity of both the persons is not in dispute. The AO was satisfied to some extent that son was helping his father. But on the basis of their statement, he harboured a belief that father of the family members of the assessee might have inflated the expenditure by debiting the same in their names. After considering details, we are of the view that possibility of helping her husband by Usha Chauhan and Shri Harish Chauhan helping his father in his business cannot be ruled out. They may not be well aware about the bills issued in their names, but they have confirmed that they are attending to the business needs and helping the assessee in his proprietorship concerns. AO ought to have appreciated this aspect keeping in mind smallness of the business, which is not in an organized sector. It is not new that family members helping each other in doing business in their proprietor-ship concerns. If some salary is attributable to them on their working, then it should not be doubted simply for the reason that those family members are not aware about the raising of bills in their names. To our mind, the AO is too theoretical instead of appreciating the reality of the business of such family proprietorship concerns. We allow the appeal of the assessee and the delete impugned addition. penalty u/s 271(1)(c)- - HELD THAT:- the quantification of the penalty is depended upon the addition made to the income of the assessee. Since we have already deleted the additions, penalty u/s 271(1)(c) does not survive - Decided in favour of assessee.
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2019 (3) TMI 1301
Addition based on 26AS & Penalty u/s 271(1)(c) - wrong grouping of expenses in return form by CA - Receipt appearing in 26AS - non verification by AO - non application of mind - Revised P/L A/C placed before AO - HELD THAT:- A perusal of the assessment order would indicate that the AO failed to apply his mind and appreciate the contention of the assessee. He simply disbelieved the contentions and rejected them. The assessee has pleaded that; I have received gross-receipts from these two concerns, on which TDS was ₹ 36,504/-, but as explained, such as raw material purchases for carrying out embroidery work. It was a mistake in the balance sheet and other details uploaded by the tax consultant. AO should have verified these documents and should have arrived at a conclusion whether there could be a profit of ₹ 32,00,791/- out of gross receipts. To our mind, it is totally illogical at the end of the Revenue authorities to draw such inference, without examining the case of the assessee and his prayer. We have extracted the finding of the AO. No reasons are discernible in para 3.5. AO did not want to go through the details. He simply observed that the assessee should have revised the return. It is to be seen that he is not taking the figure of ₹ 36,49,230/- from the return; he is taking figure from external sources. If he takes cognizance of such figures, then why not take other details. We are of the view that orders of the Revenue authorities on this aspect are not sustainable. We set aside both the orders and remit this issue to the file of the AO for investigation and re-adjudication. AO shall take into consideration revised balance sheet, profit & loss account and any other details submitted by the assessee for explaining the expenditure incurred by him qua the gross receipts received from those two concerns. AO shall re-determine income of the assessee after providing due opportunity of hearing to the assessee, and take into consideration all the details. Penalty u/s 271(1)(c) - As already set aside the quantum addition. We find that sub-clause (iii) of section 271(1)(c) provides mechanism for quantification of penalty. It contemplates that the assessee would be directed to pay a sum in addition to taxes, if any, payable him, which shall not be less than but which shall not exceed three times the amount of tax sought to be evaded by reason of concealment of income and furnishing of inaccurate particulars of income. - decided in favour of assessee.
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2019 (3) TMI 1300
Charitable purpose - Applicability of proviso to section 2(15)- Cancellation of registration u/s 12A - Bangalore Development Authority (BDA) - real estate developer - HELD THAT:- No doubt, it is a fact that one will see a lot of similarities in the activity of the assessee vis-à-vis that of a real estate developer. However, the issue to be considered is, not whether the activity of the assessee is similar to that of the private real estate developer or not, but whether the underlying purpose of the activity is the same as that of the private real estate developer, i.e., making and maximization of profit. In the case of this assessee; viz., BDA, the underlying motive / objective is not making and maximizing of profits, but planned development of Bangalore City. It is important in this context to note the fact that concerned Income Tax authorities have recognized the assessee as a public charitable organization by grant of registration under section 12A of the Act since 26.03.2003 and that the assessee’s objects clause, i.e., section 14 of the BDA Act has not undergone any change or modification since its enactment; which is what must have prompted the Income Tax Department to take the view that it was charitable in nature. In other words, the Income Tax Department considered the assessee, ‘BDA’ to be covered by the provisions of section 2(15) of the Act. It is after the introduction of the proviso to section 2(15) of the Act that the Income Tax Department took a view that the activity of ‘BDA’ was in the nature of trade, commerce or business and cancelled the registration, granted under section 12A of the Act, vide order dated 08.11.2011. The assessee’s registration under section 12A of the Act however stood restored by a decision of the Co-ordinate Bench of this Tribunal vide order in [2015 (7) TMI 198 - ITAT BANGALORE]. In this prevailing factual matrix, there is no change in the objects and the only issue which apparently prompts Revenue to take the view it has taken, i.e., that the activity of the assessee is hit by the proviso to section 2(15) of the Act; is the fact that the activity of the assessee has resulted in huge surplus or profits. In our view, the fact of surplus or shortfall is not to be reckoned as the test for applicability of the proviso to section 2(15) of the Act; but rather, whether the activity is embarked upon solely with the view to earn profit or not; which the AO and CIT(A) have not done. we find that in the case of Ahmedabad Development Authority [2017 (5) TMI 1468 - GUJARAT HIGH COURT], the Hon’ble Gujarat High Court has upheld the appeal of the assessee, by overruling therein the decision of the Ahmedabad Tribunal in that case. In the case of Lucknow Development Authority [2013 (9) TMI 570 - ALLAHABAD HIGH COURT], the Hon’ble Allahabad High Court has upheld the decision of the Lucknow Bench of ITAT which was in favour of the assessee. We find that in the above judicial pronouncements cited by the assessee, the facts are identical to that of the assessee in the case on hand; that the AOs in these cases have taken a view that the activity is in the nature of trade, commerce or business and hit by the proviso to section 2(15) of the Act and the assessees have got relief at the higher appellate forums, viz., the Hon’ble High Courts and / or Tribunals. Further, in view of the decision of the Hon’ble Apex Court in the case of CIT Vs. Vegetable Products [1973 (1) TMI 1 - SUPREME COURT], it is judicially correct to follow the decisions of Hon’ble High Courts of Gujarat and Allahabad which support the case of the assessee (supra), when the same are in favour of the assessee; despite there being decisions contrary by other High Courts; when there is no decision of the jurisdictional High Court against the assessee. In view of the factual and legal matrix of the case, as discussed above, we hold that the activities of the assessee, i.e., Bangalore Development Authority are not hit by the proviso to section 2(15) of the Act. Having held so, we direct the AO to allow the assessee the benefits of section 11 of the Act while giving effect to this order. Consequently, grounds raised by the assessee on this issue are allowed. In view of the finding rendered by us above on the applicability of the proviso to section 2(15) of the Act in the case on hand, all other grounds / issues raised by assessee in this appeal and by Revenue in its cross appeal become academic in nature and do not call for adjudication at this juncture.
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2019 (3) TMI 1299
Rectification of mistake u/s 154 - return of income filed u/s 139(4)- rectification application pointing out that the income assessed u/s 143(1) was not in conformity with that of the income returned in revised return of income filed on 11.03.2012 - Rejection of application u/s 154 - HELD THAT:- There is no dispute that the original return filed on 05.09.2013 was a belated return and hence, has to be considered u/s 139(4) of the Act. Perusal of the section 139(5) clearly shows that only those returns which have been filed u/s 139(1) of the Act can be revised and since the return of income of the assessee was filed u/s 139(4) of the Act, in our understanding of the law, the same could not have been revised and, therefore, there is no error in the findings of the Assessing Officer and since the same has been confirmed by the CIT(A), no interference is called for. - Decided against assessee.
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2019 (3) TMI 1298
Deduction u/s 80IC - manufacturing activity - AO excluded the sub-licensing fee credited to the profit and loss account of the Baddi unit but as far as the royalty payment is concerned, treated the same as expenses of the industrial undertaking - as per assessee income of the eligible undertaking has to be computed on standalone basis and any device adopted for reduction/inflation is not permissible - HELD THAT:- Technical know-how was acquired by the assessee from Mr. Ashok Chaturvedi and shared by the assessee not only for the manufacture of products in Baddi and Jammu units but also shared it with others and earned sub-licensing fee which was credited to the profit and loss account by the Assessee company. But the sub-licensing fee is not earned through manufacturing activity. There is no direct nexus between the manufacturing activity, instead it is given after acquiring rights from Mr. Ashok Chaturvedi to sub-license it with any other third party. AO, while computing the deduction u/s 80IC of the Act has excluded the sub-licensing fee credited to the profit and loss account of the Baddi unit amounting to ₹ 7.18 crore, but as far as the royalty payment is concerned, treated the same as expenses of the industrial undertaking. Thus, the Assessing Officer has rightly excluded the sub-licensing income for the purpose of computation of deduction u/s 80IC of the Act, but it cannot be on gross basis without adjusting the royalty paid and which is not as per the provision of law. The proposition of the Ld. AR that the sub-licensing fee, if any, ought to have been excluded on net basis after adjusting the royalty paid against income of sub-licensing because the sub-licensing income and royalty payment both have direct nexus with the know-how agreement, but excluding the direct nexus of sub-licensing to the manufacturing activity of the assessee. The reliance of the Tribunal decision for A.Y. 2004-05 will not be applicable in the present case as the same has not discussed the case on merit. The principle of netting though accepted in A.Y. 2004-05, it will not help the assessee company in the present assessment year as from the beginning the sub-licensing fee is not directly connected with the manufacturing activity but is independent transaction itself. Thus, we direct AO to compute the sub-licensing fee by way of excluding on net basis after adjusting the royalty paid against income of sub-licensing. The assessee must provide all the information and the clauses to bifurcate the said sub-license fee from the original royalty payment. Thus, we remand back this issue to the file of the Assessing Officer. - Additional grounds are partly allowed for statistical purpose. Depreciation of technical know-how - HELD THAT:- The technical know-how as acquired by the assessee on payment of ₹ 60 lakhs has been used for earning the sub-license fee and accordingly the depreciation has to be adjusted against the income of sub-licensing only and so the expenses also. This preposition is as per the provisions of law and therefore, the Assessing Officer as well as the CIT(A) should have allowed this claim of depreciation. Sub-licensing activities at corporate unit and should not be considered in Baddi unit - HELD THAT:- This issue needs to be verified by the Assessing Officer, therefore, we are remanding back this issue to the file of the Assessing Officer. MAT u/s 115JB - refund of excise duty is a capital receipt/subsidy or not and is not includible in the determination of total income u/s 115JB - HELD THAT:- As relying on case of MONTAGE ENTERPRISES PVT. LTD.[2018 (7) TMI 209 - ITAT DELHI] the eligibility of excise duty refund was on account of establishment of new industrial undertaking in the State of Jammu & Kashmir as an incentive to promote industrial activity in the State of Jammu & Kashmir and is in the nature of capital subsidy not liable to tax. Thus, the said excise duty refund has to be excluded from the computation of Section 115JB of the Act as well as it is a capital receipt. These two additional grounds are admitted and allowed. Allowability of office expenses - disallowance made by the appellant in the computation of income in respect to items debited in the head office should have been considered while computing the deduction u/s 80IB in Jammu unit and 80IC in Baddi unit - appellant has added back the depreciation and disallowance u/s 43B and reduced the depreciation as per Income Tax Act and deduction u/s 35D - HELD THAT:- The assessee has added back the depreciation and disallowance u/s 43B and reduced the depreciation as per Income Tax Act and deduction u/s 35D. In fact, the assessee has claimed lesser deduction by an amount of ₹ 4,71,302/- of the expenses debited in profit and loss account, which should not have been allocated to both the units i.e. Jammu and Baddi unit. After going through the order of the CIT(A) we found that the CIT(A) has rightly allowed this expenses. Miscellaneous income - Computation of deduction u/s 80IB - HELD THAT:- Asperused the computation of unit wise income furnished by the appellant and noticed that while working out the profit of Jammu unit, the appellant itself has reduced interest income for calculating profit derived from industrial at Jammu. Thus, further disallowance of this amount of interest amounts to double disallowance. Accordingly, the A.O. is directed to delete the disallowance while computing the deduction u/s 80IB. Depreciation credit - book depreciation charged to profit and loss account is not considered and only depreciation as per Income tax Act is allowed as deduction - HELD THAT:- CIT(A) has rightly allowed this claim of assessee. It is rightly held by the CIT(A) that if any depreciation is written back in the books of account, the same is required to be reduced from the income, as in earlier years depreciation was allowed as per Income tax Act only and not as per books of account. Thus, there is no need to interfere with the findings of the CIT(A).
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2019 (3) TMI 1297
Sale of immovable property held in stock - Difference between market value and actual sale price treated by AO as unexplained income - applicability of section 50C on stock in trade - insertion of Section 43CA by the Finance Act 2013 - HELD THAT:- There is no evidence on record to prove that the assessee has received any extra amount over and above the sale consideration mentioned in the sale deeds. The Assessing Officer has neither pointed out any defects in the books of account nor rejected the same. Since the property sold are not capital asset and are stock in trade, therefore, the provisions of section 50C are not applicable. Further provisions of section 43CA were inserted by the Finance Act 2013 w.e.f. 01.04.2014 and therefore, these provisions are also not applicable to the assessee since the assessment year involved is assessment year 2012-13. The two sale instances given by the AO are also distinguishable since in one case the property sold was of a three storeyed shop including land and roof rights and the other property is a partly constructed land with all rights whereas the property sold in question is first floor flat without roof rights. The various decisions relied on by the assessee also supports his case. In this view of the matter of the considered opinion that the sale consideration at ₹ 58,19,000/- adopted by the CIT(A) being stamp duty value as against actual sale consideration of ₹ 30 lacs shown by the assessee is not sustainable - assessee ground allowed. Commission paid to two related parties - applicability of section 40A(2)(b) - HELD THAT:- Despite summons issued u/s 131 they never appeared before the AO to substantiate the nature of service rendered by them for getting commission. Merely because tax has been deducted and payment has been made by account payee cheque will not absolve the assessee from the onus cast on it. It is the settled proposition of law that for any expenditure claimed to be an allowable deduction, the onus is always on the assessee to substantiate with evidence to the satisfaction of the AO regarding the incurring of such expenditure wholly and exclusively for the purpose of business. However, in the instant case the assessee could not prove the same since the two persons were never produced before the AO. As mentioned earlier apart from paying the amount through banking channel and deduction of tax from the same is not sufficient - restore this issue back to the file of the AO with a direction to give one more opportunity to the assessee to substantiate its case by producing the two persons for his verification - second ground raised by the assessee is allowed for statistical purpose.
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2019 (3) TMI 1296
Deduction of interest u/s 23(3) being let out property - Rent received from mother, co-owner of property - Shown nil annual value in return later claimed as let out and rent received in cash - AO denied claim u/s 23(3) and allowed deduction u/s 23(2) as self occupied property only - HELD THAT:- The assessee has claimed that the residential house was actually let out during the year to his mother for which he has received rent of ₹ 30,000/- from mother albeit in cash. On the basis of property being let out, the assessee seeks claim of interest deduction to full extent. The assessee has also tried to support his case of let out by an affidavit. When seen in the context, it is very difficult to believe the position taken by the assessee. Assessee, at first instance, has not declared rental income while filing the return of income duly verified under s.140 of the Act. The omission to disclose the so-called rent income derived from mother in the return of income is not explained. the income claimed to have been received and not declared in the return cannot be seen in a light hearted banner. The assessee has conveniently revised the computation to introduce the source of rental income from mother who also happens to be co-owner of the same property. The receipt has been shown to be in cash to shun any possibility of verification. Thus, no trail is available to verify the correctness of the version of the assessee in a reasonable manner. Thus, one has to rely only on the preponderance of probabilities. The version of the assessee is prima facie improbable having regard to the ground realities. The assessee neither satisfies the condition from exclusion from the ambit of Section 23(2) of the Act nor satisfies its case for inclusion under s.23(3) of the Act on facts The affidavit filed was clearly bald and a self serving document. No cross examination of the deponent of the affidavit has been offered therein. On a query from the bench about the payment of electricity bill by the licensee of the property, no evidence could be furnished to prove actual occupation by mother on rental basis. It is also difficult to comprehend such a claim of the assessee on the touch-stone of societal value prevalent and ethos in Indian society. The case of the assessee towards claim of rent from mother for occupation of his house clearly appears be eyewash to merely put the property in the bracket of Section 23(3) of the Act with a view to claim deduction of full interest costs without any restriction applicable to self-occupied house. - Decided against assessee.
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2019 (3) TMI 1295
Allowability of expenses u/s 37 - SEBI approval on 17.10.2012 - asset management company - certificate of registration for the mutual fund scheme from SEBI after end of financial year - twin conditions, firstly that the tax- payer company should be registered under the Companies Act, 1956 and secondly it should be approved as such by SEBI - HELD THAT:- Thus, we hold that the business of the assessee before us was set up and ready to commence its business on 17.10.2012 when it got approval from SEBI vide Sub-regulation (2) of Regulation 21 of the 1996 Regulation. We, therefore, hold that the assessee is entitled to a deduction of admissible business expenses incurred by it on or after 17.10.2012 when the business can be said to have been set up by the assessee. We, therefore, direct the Assessing Officer to quantify the amount of expenses in the light of our decision above and allow the same as per law after examining and verifying the genuineness of the expenses and their admissibility under the provisions of Income-tax Act which were incurred post 17.10.2012 till the end of the relevant previous year under consideration before us. The AO shall provide reasonable opportunity of being heard to the assessee while quantifying the amount of business expenses incurred by the assessee on or after 17.10.2012 till the end of the relevant previous year under consideration before us. Since, both the authorities below failed to consider this relevant and vital event of grant of SEBI approval in favour of the assessee on 17.10.2012, we direct the assessee to produce the copy of aforesaid SEBI approval before the AO for necessary verification and records - The appeal of the Revenue is partly allowed as indicated above.
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2019 (3) TMI 1294
10% adhoc disallowance - bogus expenditure - CIT(A) sent the additional evidence for verification to A.O and noted that the A.O. has not responded then he proceeded to take adverse reference against the assessee - HELD THAT:- We find that the CIT(A) has passed a bizarre order. When the A.O. has not responded to his remand, how adverse inference can be taken against the assessee is beyond comprehension. Hence, in the facts and circumstances of the case, in the interest of justice, we remit this issue to the file of the A.O. The A.O. is directed to consider the issue afresh in light of the additional evidence submitted by the assessee. - Appeal by the assessee is allowed for statistical purpose.
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2019 (3) TMI 1293
Levy of penalty u/s. 271(c) - capitalization of interest u/s. 36(1)(iii) - difference in Revenue receipt as per TDS certificate and P & L a/c - HELD THAT:- In respect of capitalization of interest, we observe that assessee has obtained loan from the State Bank of India and Nutan Nagrik Sahakari Bank Ltd. which has been utilized for the purpose of building furniture and equipment of Kaizen Hospital inaugurated on 27-11-2011. The assessee explained during the course of assessment proceedings that portion of interest paid was capitalized as there was no time difference requiring the same as to acquisition and put to use. In this regard, it is observed that the small amount of bank loan of ₹ 9,70,966/- has been used for three components i.e. building furniture and equipment at different stages therefore, the assesssee has claimed such part of expenses as revenue expenditure instead of claiming depreciation on capitalization of such expenses. In the light of the above facts, we do not find it appropriate to consider that there is a case of furnishing inaccurate particular of income. Therefore, we are of the view it is not justified to levy penalty. Revenue receipt received as per TDS certificate which was not credited in the P & L a/c, we observe that the assessee has failed to substantiate with any material that why the impugned receipt was not disclosed in its income. Therefore, we consider that the assessee has furnished inaccurate particulars of income to theis extent and we justify the action of the assessing officer of levying the penalty u/s. 271(1)(c). Accordingly, we direct the assessing officer to restrict the penalty as supra, therefore, the appeal of the assessee is partly allowed.
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2019 (3) TMI 1292
Taxability of Goodwill,share capital and accrued profit received on retirement of firm - liable for capital gains tax or not? - exemption from tax u/s 10(2A) - amount paid to a partner upon retirement after taking accounts and upon deduction of liabilities there is no involvement of an element of transfer within section 2(47) - payment made to the assessee in realisation of his share in the net value of the assets of the firm on his retirement - HELD THAT:- The issue of whether the goodwill received by the assessee on retirement is liable for capital gains tax or not has been concluded by the Hon'ble Jurisdictional High Court in the case of Prashant S. Joshi [2010 (2) TMI 271 - BOMBAY HIGH COURT] wherein it was held that when an amount paid to a partner upon retirement after taking accounts and upon deduction of liabilities there is no involvement of an element of transfer within section 2(47) of the Act. The full bench decision in the case of CIT v. Dynamic Enterprises [2013 (11) TMI 731 - KARNATAKA HIGH COURT] has taken a similar view that when retiring partner took cash towards value of his share in partnership firm, there was no distribution of capital assets among the partners and there was no transfer of capital asset and therefore no profits or gains are chargeable to tax u/s. 45(4). We observe that the decision relied on by the Assessing Officer in the case of A.N. Naik Associates [2003 (7) TMI 46 - BOMBAY HIGH COURT] is distinguishable on facts and has no application to the assessee's case. Therefore, in view of our above discussion, the share of capital along with accrued profit, goodwill and brokerage / commission which were received / receivable in terms of consent deed entered among the partners on account of retirement of the assessee from the partnership firm and the payment made to the assessee in realisation of his share in the net value of the assets of the firm on his retirement are not liable to be taxed as capital gains and also u/s. 28(v) in view of the judicial pronouncements. Thus, we direct the Assessing Officer to delete the additions made towards, goodwill, share capital and share of profit and the brokerage/commission and recompute the income for the year under consideration. Grounds raised by the assessee are allowed. Addition u/s. 68 - HELD THAT:- Assessing Officer brought to tax ₹ 9,41,63,126/- being the amount credited in capital account of M/s. D'Silva Enterprises and capital credited to assessee James P. D'Silva account as undisclosed income u/s. 68 of the Act. We see no justification at all in treating such amounts as addition u/s. 68 of the Act. We find that major part of these amounts have been received as part of settlement in terms of consent terms entered into by the assessee for withdrawing his share of capital / profits from the firm BCI. These amounts represent ₹ 4.67 Crores credited to capital account of M/s. D'Silva Enterprise and ₹ 4.79 Crores withdrawn from BCI as share of profit by the assessee as stated in Para 18 above. Therefore, these amounts cannot be taxed as undisclosed income u/s. 68 of the Act. Additions made by the AO towards goodwill, share capital and share of profit, brokerage/commission received by the assessee on retirement from BCI. Since, we have deleted the addition made by the Assessing Officer which were treated as income of the assessee and for the reasons explained above, the other grounds in the appeal of the Revenue are dismissed.
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2019 (3) TMI 1291
Reopening of assessment - Addition u/s 68 - AO based on the information issued from the Investigation Wing that the assessee has received amounts from the entry operator - HELD THAT:- AO, except preparing the table of alleged accommodation entries from the details claimed to have been received from the Investigation Wing, has not at all applied his mind. From a bare perusal of the table of the alleged accommodation entries, it is evident that the share capital shown to be received is much more than the share capital, reserves and surplus reflected as per the balance sheet. Further the payments were treated as receipts. No primary independent enquiry has been conducted by the Assessing Officer which goes to prove that this is a case of non-application of mind by the Assessing Officer. Hence keeping in view the entirety of the facts and circumstances of the case and the propounded legal propositions, we hereby confirm the order of the CIT(A). Any decision on the merits of the case would be only be academic in nature and hence not being adjudicated. - Decided against revenue.
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2019 (3) TMI 1290
Addition u/s 41(1) - advances taken against the Bottles and the Cases - liability not written off - Value of Bottle write off in earlier years - cessation of liability - HELD THAT:- Where a deduction in respect of trading liability is incurred by the assessee and subsequently during any previous year assessee obtained some benefit in respect of such trading liability by way of remission or cessation thereof, the value of such benefit shall be deemed as chargeable to income-tax as income of that previous year. The existence of business in that year of taxation is not a requirement of law. From the above provisions, it is clear that the year of obtaining some benefit in respect of such trading liability is deemed to be the taxable income for the said year. Therefore, by honouring the said law and the discussion given in paras above, we are of the opinion that the A.Y. 2007-08 is not valid year in invoking the provisions of section 41(1) for taxing the value of the benefit. On this ground also, the revenue loses. From all the angles of the (1) non-trade liabilities nature; (2) absence of act of write off, i.e., cessation of liabilities; and (3) requirement of meeting the un-uniform year of invoking the provisions of section 41(1) and year of reaping of benefits in respect of said liabilities, we are of the opinion that the order of CIT(A) is required to be reversed on this issue. - Decided in favour of assessee.
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2019 (3) TMI 1289
Deemed dividend under section 2(22)(e) - transactions between the assessee and those companies giving trade advance - HELD THAT:- Transactions in the ledger account of the assessee are in regular course of the business of purchase and sales of the shares/currency/derivatives/commodities etc. The Ld. DR could not controvert the above factual findings of the CIT(A) before us. In view of the above facts, CIT(A) is justified in holding that the transactions between the assessee and those companies are in the nature of trading transactions which are beyond the ambit of deemed dividend in view of the decisions of the Hon’ble Jurisdictional High Court in the case of CIT vs. Creative Dyeing & Printing (P.) Ltd. [2009 (9) TMI 43 - DELHI HIGH COURT]. CIT(A) has followed the above decision of the Hon’ble Delhi High Court. CIT(A) has not committed any error in following the above decision of the Hon’ble Delhi High Court. Accordingly, we uphold the same. The ground of appeal of the Revenue is dismissed.
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Customs
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2019 (3) TMI 1288
Note for Speaking to the Minutes - Rectification in order of High Court - Held that:- It appears that the submission made by the learned advocate for the petitioner is correct. Accordingly, in paragraph 50 of the judgment and order dated 04.02.2019 passed by this court in Special Civil Application No.14558 of 2018 and allied matters, the words “inserted vide” preceding the words “clause (xii)” shall stand deleted, and the word “inserted” shall be inserted after the words “Notification No.18/2015-Cus” and a comma shall be added after the date 13.10.2017 at the end of the fourth line thereof - The Note stands disposed of accordingly.
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Insolvency & Bankruptcy
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2019 (3) TMI 1287
Approval of resolution plan - proceeding for liquidation of the company after non-compliance of approved resolution plan - submission made on behalf of the ‘Liberty House Group’ that the ‘effective date’ of plan is date of approval by ‘CCI’ - Liberty House Group’ submitted that the ‘Resolution Plan’ not only contemplated corresponding obligations of the parties who were required to take necessary steps for implementation of the ‘Resolution Plan’, it also contemplated certain material assumptions on the basis of which the Appellant prepared and structured the ‘Resolution Plan’ - HELD THAT:- We find that the submissions as made on behalf of the Appellant- ‘Liberty House Group’ is an afterthought as the Appellant being ‘Resolution Applicant’ was knowing that the ‘Resolution Plan’ is to fulfil all the requirements in terms of Section 30 (2) of the ‘I&B Code’. Section 30 (2) (f) mandates that the ‘Resolution Plan’ should not be against any of the provisions of the existing law. Whether the ‘Resolution Plan’ is against Section 6(1) of the Competition Act, 2002 can be decided only by the ‘CCI’. Pursuant to the ‘Resolution Plan’ as the ‘Liberty House Group’ will acquire ‘Adhunik Metalliks Ltd.’ – (‘Corporate Debtor’) being ‘Successful Resolution Applicant’ is required to intimate the ‘CCI’ in terms of Section 6(2) of the Competition Act, 2002. Therefore, the submission made on behalf of the ‘Liberty House Group’ that the ‘effective date’ of plan is date of approval by ‘CCI’ cannot be accepted. The prayer is rejected. Case of ‘MSTC Limited’ - ‘Resolution Professional’ disputed the claim and taken plea that ‘MSTC Limited’ is a facilitator and not a vendor or owner of raw materials, ‘MSTC Limited’ procure such materials from different vendors and supplies to the buyers - According to Appellant – ‘MSTC Limited’, whatever payment made by the ‘Resolution Professional’ has been appropriated towards the old dues - HELD THAT:- Adjudicating Authority rightly held that Section 14 of the ‘I&B Code’ will override any other provisions contrary to the same. Any amount due to the ‘Operational Creditor’ prior to the date of ‘Corporate Insolvency Resolution Process’ (Admission) cannot be appropriated during the moratorium period. In view of the aforesaid findings, we hold that no case has been made out by the ‘MSTC Limited’ to treat any amount as a ‘Resolution Cost’. Having rejected the prayer, as made by both the Appellants, to give one opportunity for the purpose of compliance of this order and implementation of the plan, we allow the Appellant- ‘Liberty House Group’ another 30 days to make upfront payment in terms of the ‘Resolution Plan’. On failure, it will be open to the Adjudicating Authority, Kolkata Bench to pass appropriate order in accordance with law.
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2019 (3) TMI 1286
Liquidation under Section 33(1) of the Insolvency and Bankruptcy Code, 2016 - revised resolution plan(s) - Power to compromise or make arrangements with creditors and members - HELD THAT:- We direct the ‘Liquidator’ to proceed in accordance with law. He will verify claims of all the creditors; take into custody and control of all the assets, property, effects and actionable claims of the ‘corporate debtor’, carry on the business of the ‘corporate debtor’ for its beneficial liquidation etc. as prescribed u/s 35 of the I&B Code. The Liquidator will access information under Section 33 and will consolidate the claim under Section 38 and after verification of claim in terms of Section 39 will either admit or reject the claim, as required under Section 40. Before taking steps to sell the assets of the ‘corporate debtor(s)’ (companies herein), the Liquidator will take steps in terms of Section 230 of the Companies Act, 2013. The Adjudicating Authority, if so required, will pass appropriate order. Only on failure of revival, the Adjudicating Authority and the Liquidator will first proceed with the sale of company’s assets wholly and thereafter, if not possible to sell the company in part and in accordance with law. The ‘Liquidator’ if initiates, will complete the process under Section 230 of the Companies Act within 90 days. For the purpose of counting the period of liquidation, the pendency of the appeal(s) preferred by the ‘Eight Finance Pvt. Ltd.’ that is from 12th July, 2018 and till date should be excluded. In the circumstances, while we are not inclined to interfere with the impugned order(s) both dated 25th June, 2018 direct the Liquidator to act in accordance with law and as observe above.
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2019 (3) TMI 1285
Corporate Insolvency Resolution Process (CIRP) - existence of dispute - Whether the demand notice as required by Section 8 of the Code was duly delivered to the respondent-corporate debtor? - HELD THAT:- The respondent-corporate debtor has stated that the notice was sent at the incorrect address because the registered office of the corporate debtor was changed prior to the date of purported demand notice and the change of address updated in the portal of the Ministry of Corporate Affairs. This defence was taken without support of the documents as already discussed while narrating facts of the case. Even the resolution for change of the registered office was passed by the respondent-corporate debtor much after the delivery of the demand notice. The tracking report at page 38 of the paper book shows that the demand notice was delivered to the corporate debtor on 03.01.2018 and there was no indication in the tracking report that the addressee has left the address. There is a presumption of correctness to the report of the postal authorities and same does not stand rebutted. We are therefore of the firm view that the demand notice was duly delivered to the respondent-corporate debtor at the registered address. Petition barred by limitation - HELD THAT:- There is existence of dispute between the parties and that the amount claimed to be in default was not due. We have already held that the demand notice was duly served upon the respondent-corporate debtor on 03.01.2018 but no reply thereto was sent. The respondent-corporate debtor has rather denied the receipt of the demand notice on the plea of change of address and the said plea has not been accepted. It is not the version of the respondentcorporate debtor that any time before the institution of this petition or service of the demand notice, the respondent-corporate debtor sent any communication to the petitioner-operational creditor raising the dispute which has now been attempted in the reply. There is no communication by the respondent that the payment of ₹22,50,000/- was towards the full and final settlement of the claim against the corporate debtor. If that be the situation there was no occasion for the respondent-corporate debtor in depositing an amount of ₹2,00,000/- towards the part payment by RTGS transfer on 04.05.2015 which is much after the dates of all the aforesaid cheques. The only and the proper course for the respondent was to file its own ledger account of the petitioner-operational creditor being maintained by the respondent-corporate debtor in the regular course of business. The same was not done for obvious reasons. The company which is incorporated under the Act is supposed to maintain the books of account. We find that there is no scope for contending that there was existence of dispute between the parties with regard to the claim raised by the petitioner-operational creditor in this case. The affidavit of authorised representative of the respondent-corporate debtor as at page 28 of the petition states that the respondent has not replied to the demand notice and it has not issued any notice of dispute relating to the unpaid operational debt. Even the amount in default has not been paid. So there is compliance of Section 9(3)(b) of the Code. The fact that the petitioner-operational creditor has filed the criminal complaint against Mr. Anil Singhania and Mr. Pankaj Singhania under Section 405, 406 etc of the IPC cannot be considered as raising of a dispute because that was a complaint filed by the petitioner-operational creditor before the Court of Additional Chief Judicial Magistrate, Meerut attached as Annexure R-1. All the essential ingredients of Section 9 subsection (5)(i) is of the Code are fulfilled.In view of the above we admit this petition under Section 9 of the Code and declare the moratorium under Section 14(1) of the Code
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Service Tax
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2019 (3) TMI 1284
Classification of services - mining services or not - activity undertaken by the appellant under a contract with M/s Northern Coal Fields i.e. loading/ unloading of coal, transportation of Coal within the mining area, removal of over-burden coal within the mining area etc. - Held that:- The issue is no more res-integra. Tribunal in the case of M/s Ashirwad Equipments Pvt. Ltd. v/s Commissioner of Customs, Central Excise & Service Tax, Allahabad [2018 (9) TMI 1209 - CESTAT ALLAHABAD] has held that the said activities would not be taxable - appeal allowed - decided in favor of appellant.
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2019 (3) TMI 1283
Levy of service tax - amount collected by Nagar Nigam for allowing display of advertisement under the category of Sale of Space or Time for Advertisement Service - Held that:- The issue is covered by the precedent decision of the Tribunal holding that such activities are not taxable inasmuch as the amount is being collected towards legal fee by the Municipal Corporation and cannot be treated as consideration for providing services for 'Sale of Space or Time for Advertisement Service' - Reference can be made to the Tribunal's decisions in the case of M/s Nagar Nigam, Kanpur V/s Commissioner, Central Excise & Service Tax, Kanpur [2018 (9) TMI 1207 – CESTAT ALLAHABAD] - Appeal allowed - decided in favor of appellant.
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2019 (3) TMI 1282
CENVAT Credit - inputs “Spare Parts” and Input Services used in providing free of cost ‘Repair & Replacement Services’ during warranty period - principles of natural justice - Held that:- Revenue in their memo of appeal have not doubted the applicability of the said two decisions of the Tribunal M/S. CARRIER AIRCONDITIONING & REFRIGERATION LTD. VERSUS CCE, GURGAON [2016 (3) TMI 124 - CESTAT NEW DELHI] and M/S. IFB INDUSTRIES LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE & ST, CHANDIGARH [2018 (1) TMI 429 - CESTAT CHANDIGARH] to the facts and circumstances of the case. The only contention raised is that the said decisions have not attained finality in litigation. However, there is no reference to any appeal filed by the Revenue against the said decisions before the higher Appellate Forum or the stay of operation of the said decision. In such a scenario, the applicability of the said two decisions relied upon by Commissioner in his impugned order, cannot be faulted upon. Appeal dismissed - decided against Revenue.
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2019 (3) TMI 1281
Classification of services - cargo handling services or GTA Services? - appellant was engaged by M/s Northern Coal Fields Ltd. for movement of coal within the mine premises, in terms of the contract entered into between the two - extended period of limitation - penalty - Held that:- The matter was remanded with specific directions to find out as to whether same activity has already discharged tax liability in the hands of M/s Northern Coal Fields Ltd. in which case no duty confirmation against the appellant would arise. However, the adjudicating authority instead of following the said directions of the Tribunal went against the same and confirmed the demand by observing that tax payment by the Northern Coal Filed Ltd. by treating the same activity as GTA Services is of no relevance. We are of the view that the said findings of the Commissioner are outside the directions of the Tribunal, with which he was bound. Time limitation - Held that:- Except for the fact that appellant had not disclosed the said activity to the revenue, no evidence reflecting upon any malafide on the part of the appellant stands produced by revenue. The demand for the periods 01.04.2002 to 31.03.2007 stands raised by way of issuance of show cause notice dated 10.10.2007 and for the period 01.04.2003 to 31.03.2008 stands raised by show cause notice dated 14.10.2008 i.e. by invocation of the longer period - the disputed issue was the subject matter of various assessee’s similarly situate, who entered into contract with M/s Northern or Southern or Central Coal Fields and the identical activities were subject matter of litigation before the various levels. Infact some of the cases travelled up to Tribunal and finally it was held that said activity cannot be considered to be Cargo Handling Service and the same would get covered by GTA Services - When an issue is subject matter of litigation in respect of various parties, located all over India, it cannot be held that there was malafide intention on the part of one assessee - demand is barred by limitation. Appeal allowed - decided in favor of appellant.
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2019 (3) TMI 1280
Nature of activity - Sale of flat or construction service - Inasmuch as the completion certificate was not available with the appellant, Revenue entertained a view that the said activity of sale cannot be considered to be a sale of flat and the same is covered under the services which were taxable - Held that:- We really fail to understand that when the appellant himself is approaching the Authorities for issuance of the completion certificate after almost more than a year of sale of the flat, how can they adopt the plea that the flats were completed at the time of sale and in terms of the provisions of the Finance Act, the certificate issued by the architect should be taken as an evidence of completion - appeal dismissed - decided against appellant.
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2019 (3) TMI 1279
Time limitation - Classification of services - Business Auxiliary Service or Support Services of Business of Commerce? - difference of opinion - majority order - Held that:- For invoking the extended period of limitation both suppression and intention to evade payment of Tax are to be separately established. In the present case since suppression could not be established therefore, the views expressed by learned Member (Judicial) that the demand was barred by limitation is agreed upon. The majority decision is that the demand raised by way of invoking the extended period of limitation is required to be held as time barred by limitation - A small part of demand falling under normal period may be requantified and recovered by Assistant Commissioner alongwith applicable interest - Penalty is set aside - appeal allowed in part.
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Central Excise
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2019 (3) TMI 1278
CENVAT Credit - duty paying documents - some of the invoices which are not valid document - credit on imported coal availed for which no invoices / Bill of Entry was produced - Held that:- The denial of CENVAT credit on TMT bars is not justified because the said items were used in the factory in relation to the manufacture of final products and the Revenue has failed to bring any material on record to show that it has been used for any civil construction. Further this credit pertains to the period prior to 01/04/2011 when such credit was admissible - credit allowed. CENVAT Credit - Clean energy cess - Held that:- In view of the decision of the Tribunal in the case of Ramco Cements Ltd. [2018 (10) TMI 10 - CESTAT BANGALORE], the appellant is entitled to CENVAT credit on Clean Energy Cess which is paid as duty of excise - further, credit of BCD and Customs cess was availed only by mistake and not with intention to evade payment of duty. Therefore to that extent, the appellants are not liable for payment of penalty. Demand of Interest - Held that:- In view of the decision of Karnataka High Court in the case of Bill Forge Pvt. Ltd. [2011 (4) TMI 969 - KARNATAKA HIGH COURT], appellant is not liable to pay interest, if he has availed the credit and not utilized the same - But in the present case, the appellant has reversed the CENVAT credit irregularly availed and has also paid ₹ 5 lakhs in cash. These facts need to be verified by the original authority as to whether the appellant had got sufficient balance in their CENVAT account - matter on remand. Appeal allowed in part and part matter on remand.
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2019 (3) TMI 1277
Method of Valuation - clearance to their sister concern consignments of HR strips - case of Revenue is that the assessable value is not correct, sales to their own unit has to be treated as captive consumption - period July 2000 to June 2001 - Held that:- There is no doubt as to the fact that the Patancheru unit is functioning under the name and style of PM Telelinnks Ltd., and consuming the HR sheets in their factory premises for manufacturing of CR sheets. The findings of the lower authorities is that the valuation should be based upon the Rule 8 of Central Excise Valuation Rules 2000, is also correct to the extent that it has been cleared for captive consumption to their own factory. To that extent, the order of the First Appellate Authority as well as the adjudicating authority is correct - however, the lower authorities have not considered the fact that the HR sheets which are manufactured by the appellant are cleared to their own concern under duty paying document. Revenue neutrality - Held that:- The entire demand becomes revenue neutral as the clearances were to their own sister concern who availed the CENVAT Credit - Tribunal in the case of Kansai Nerolac Paints Ltd. [2013 (8) TMI 1022 - CESTAT AHMEDABAD] have held that There cannot be any intention to evade duty on such clearance made to their own sister concern, as the said sister concerns admittedly are discharging the duty liability on the final products manufactured by them; which would mean that the sister concerns could have availed the Cenvat credit of any duty paid by the appellant on clearance of resins to them. Appeal allowed - decided in favor of appellant.
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2019 (3) TMI 1276
CENVAT credit - input services - group insurance mediclaim / health policies - period April 2013 to March 2015 and April 2016 to March 2017 - Held that:- In the present case, the appellant has taken one consolidated mediclaim policy for its employees and their family members and have paid the premium for group mediclaim to M/s. New India Assurance Company Ltd. Further the option is given to the employees to include insurance cover for their family members on payment of some premium by them which will be deducted from their salary annually. Further, the appellants have paid the service tax on the amount recovered from the employees towards mediclaim insurance paid for their family members and the appellants have taken the CENVAT credit for the same. The facts of the decision in the case of Titan Industries Ltd. [2018 (4) TMI 966 - CESTAT CHENNAI], is squarely applicable to the facts of the present case, where the Division Bench of this Tribunal has held that group mediclaim policy taken for dependents / family members of company’s staff and employees cannot be considered to be directly or indirectly related to manufacture and hence the assessee cannot claim CENVAT credit on the premium paid by the employees. The appellants are not entitled to the CENVAT credit of service tax paid by them - Appeal dismissed - decided against appellant.
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2019 (3) TMI 1275
Recovery of confirmed dues and penalties - section 35 F of Central Excise Act, 1944, read with section 35 C (2 A) of Central Excise Act, 1944 and with rule 41 of Customs Excise Service Tax Appellate Tribunal (Procedure) Rules, 1982 - Held that:- Had the officials concerned applied their mind to the judgement as a whole, instead of selectively culling out certain expressions therein, the present problem and potential chaos could well have been avoided. It is abundantly clear from the narration of the background facts, the observations therein and the catena of decisions of the Hon ble Supreme Court which have been discussed in detail that the controversy in re Asian Resurfacing of Road Agency Pvt Ltd pertained to delay arising from challenge to the framing of charges under the Prevention of Corruption Act, 1988. It is again abundantly clear that the Hon ble Supreme Court was concerned with the impeding of continuance of trial in the original courts owing to stay granted in applications for intervention by appellate authorities in exercise of revisionary jurisdiction under the Code of Criminal Procedure, 1973 or under the inherent powers vested with the constitutional courts under Article 227 of the Constitution. The ambit of the decision of the Hon ble Supreme Court is restricted to one aspect of appeals and, that too, pertaining to trial courts. This Tribunal is not a trial court; it is an authority established to dispose off appeals at the first or second level, as the case may be. The stay ordered by Tribunal is on the recovery of amounts not covered by the pre-deposit determined then; the proceedings before the lower authorities had concluded and the jurisdiction of the Tribunal had been triggered by the filing of the appeals. After examining the amendments effected to section 35C of Central Excise Act, 1944, the power vested in the Tribunal to decide upon continuation of stay of operation of impugned order, in circumstances of the appellant being helpless in the matter of disposal of appeal, is clearly delineated there. Therefore, the proper course of action for the officials was to approach the Tribunal for vacation of the stay - In the absence of such application, the stay order will continue to operate till the appeals herein are disposed off.
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2019 (3) TMI 1274
Valuation - Revenue entertained a view that inasmuch as the Invoices in question showed the full value of the goods supplied by them, it has to be presumed that the same was inclusive of duty of Excise - demand in terms of Section 11D of the Central Excise Act, 1944 - Held that:- Where an assessee has collected duty of Excise from their customers by representing the same as duty of Excise but has not deposited the same with the Revenue, the said provisions would come into play. In the present case, there is no finding by the Authorities Below that the appellant has collected any amount of Excise duty from their customers, which does not stand deposited by them with the Exchequer. It is noticed that the entire contract was inclusive of all the Taxes required to be paid by the appellant and in such a scenario the lower Authorities have concluded that the contract price being inclusive of Central Excise duty, the appellant is presumed to have collected the duty from their customers - The said observations and findings of the Lower Authorities are not only against the spirit of Section 11D of the Central Excise Act, 1944 but are absolutely futile in nature. Admittedly, the appellant has not received any extra amount from the Police by showing the same to be duty of excise, in which case the said section would not be applicable. Appeal allowed - decided in favor of appellant.
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