TMI Tax Updates - e-Newsletter
March 6, 2019

Case Laws in this Newsletter:

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

Articles

1. Reassessment in case of original assessment u.s. 143.1.a. Not allowed in absence of reasons recorded by AO and to make roving enquiry etc.

   By: DEVKUMAR KOTHARI

2. Right time to start preparation of GST Annual return for the financial year 2017-18

   By: Ganeshan Kalyani

News

1. Transport and Marketing Assistance (TMA) for Specified Agriculture Products Notified

2. India signs Loan Agreement with the World Bank for USD 96 Million for Additional Financing for Uttarakhand Disaster Recovery Project

3. INDIA-US Trade Issues

Notifications

GST - States

1. Order No. 4/2018-State Tax - dated 31-12-2018 - Orissa SGST

Odisha Goods and Services Tax (Fourth Removal of Difficulties) Order, 2018.

2. Order No. 3/2018-State Tax - dated 31-12-2018 - Orissa SGST

Odisha Goods and Services Tax (Third Removal of Difficulties) Order, 2018

3. Order No. 2/2018-State Tax - dated 31-12-2018 - Orissa SGST

Odisha Goods and Services Tax (Second Removal of Difficulties) Order, 2018.

4. 40974 FIN-CT1-TAX-0043/2017 - dated 31-12-2018 - Orissa SGST

Amendment in Notification No. 29890-FIN-CT1-TAX-0043/201 7/FIN, dated the 18th September, 2018

5. 40970 FIN-CT1-TAX-0043/2017 - dated 31-12-2018 - Orissa SGST

Amendment in Notification No. 29215-FIN-CT1-TAX-0043/2017, dated the 10th September, 2018

6. 40966 FIN-CT1-TAX-0043/2017 - dated 31-12-2018 - Orissa SGST

Amendment in Notification No. 25885-FIN-CT1-TAX-0043/2017/FlN, dated the 6th August, 2018

7. 40962 FIN-CT1-TAX-0043/2017 - dated 31-12-2018 - Orissa SGST

Amendment in Notification No. 19869-FIN-CT1-TAX-0022-2017, dated the 29th June, 2017

8. 40954 FIN-CT1-TAX-0043/2017 - dated 31-12-2018 - Orissa SGST

Amendment in Notification No. 19873-FIN-CT1-TAX-0022-2017, dated the 29th June, 2017

9. 40950 FIN-CT1-TAX-0043/2017 - dated 31-12-2018 - Orissa SGST

Exemption on supply of gold by nominated agency for export of jewellery

10. 40942 FIN-CT1-TAX-0043/2017 - dated 31-12-2018 - Orissa SGST

Amendment in Notification No. 19829-FIN-CT1-TAX-0022-2017, dated the 29 June, 2017

11. Order No. 1/2018-State Tax - dated 15-12-2018 - Orissa SGST

Odisha Goods and Services Tax (Removal of Difficulties) Order, 2018.

Circulars / Instructions / Orders

Customs

1. PUBLIC NOTICE NO.- 04/2019 - dated 27-2-2019

Discontinuation of printing of Advance Authorisations/Export Promotion Capital Goods (EPCG) Authorisations on security paper by DGFT for authorisations issued with EDI ports as port of registration

2. PUBLIC NOTICE NO.- 03/2019 - dated 21-2-2019

Amendments to the All Industry Rates of Duty Drawback effective from 20.02.2019

3. Public Notice No. 2/2019 - dated 12-2-2019

Clarification in relation to applicability of provision of Customs Act to Cruise Tourism

Highlights / Catch Notes

GST

• Revenue to Review GST Registration Cancellation; Decision Pending on Six-Month Installment Plan for Outstanding Dues.

  Case-Laws - HC : Cancellation of GST registration - non filing of returns of returns - Revenue directed to consider and pass orders upon the application of the petitioner wherein the petitioner seeks leave to pay pending GST dues in six (6) monthly installments
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• Detention order quashed due to incorrect lorry number and failure to specify contravention in the order.

  Case-Laws - HC : Detention of goods - mistake had crept in, in the mentioning of the lorry number as TN 19 U 7857 instead of TN 19 U 7873 - It is incumbent upon the statutory authority/the Proper Officer to have made mention of the contravention in the field provided in the impugned order for such purpose. This has not been done - The present order of detention cannot be sustained and the same is quashed.
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Income Tax

• Foreign Loan Exchange Gain Classified as Core Activity for Shipping Companies Under Chapter XII-G of Income Tax Act.

  Case-Laws - HC : Shipping income assessment - Exchange gain on account of restatement on foreign loan - it would be considered to be a part of core activity of the shipping company entitled the benefit of Chapter XII-G of the Act.
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• Prior Period Expenses Deductible This Year if Payment Obligation Arose in Previous Year.

  Case-Laws - HC : Claim of expenditure pertaining to earlier year - prior period expenses - If there was no accrual of the expenditure in the earlier year or had not become due. It became due only in this year i.e. it crystallized during the previous year relevant to the subject assessment year, deduction is duly allowable in this year.
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• Income Tax Act Sections 68, 69, 69A: Additions valid if funds' destination unclear; crucial in money laundering cases.

  Case-Laws - HC : Addition u/s 68, 69 and 69A - incremental peak credit - money launderer or hawala operator - Addition is permissible if destination of the amounts which were deposited and later withdrawn having not been disclosed or substantiated; it is not reasonable to assume that the entire amounts would have been disbursed, with only the commission appropriated. Addition sustained.
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• Advance Rent, Barred by Limitation, Should Be Treated as Business Income, Not Unexplained Credit or Investment.

  Case-Laws - HC : Advance for rent and never turned into income - Recovery barred by limitation - still remains as a liability in its account - If the recovery had been barred by limitation, necessarily, it has to be treated as an income from the business. It could not have been treated as an unexplained cash credit or as an unexplained investment, since the source was clear and there was proper explanation for the amounts as seen from the books of accounts.
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• Tax Department Can Reassess Six Prior Years Without Incriminating Evidence u/s 153A.

  Case-Laws - HC : When a notice u/s 153A is issued, it enables the department to carry out re-assessment or assessment with respect to the six immediate prior years and the year in which the search is carried out. This does not require any incriminating material recovered on search relating to those prior years.
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• High Court Affirms Tribunal's Decision on Section 80IA Deduction; No Error in Expenditure Allocation Method Found.

  Case-Laws - HC : Eligibility to deduction u/s 80IA - allocation of expenditure - In absence of any material that the methodology for allocation of expenditure followed by the CIT (A) and confirmed by the Tribunal was incorrect or perverse, High Court find no reason to interfere with the factual findings of the Tribunal.
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• Employer Contributions to Death Relief Fund Are Allowable Business Expenditures u/s 37 of Income Tax Act.

  Case-Laws - HC : Contribution made by the employer to the Death Relief Fund is also an allowable business expenditure in terms Section 37 in so far as the expenditure is incurred wholly and exclusively for the welfare of its employees and is for the purposes of the business.
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• Income from Technical Services in India Not Taxable Under India-UAE DTAA Without Permanent Establishment.

  Case-Laws - AT : Income accrued in India - FTS - No PE in India - DTAA between India and UAE - As per DTAA, there is no specific clause in respect of FTS and same has to be considered as business profit in the absence of such clause and permanent establishment in India.
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• Tribunal Must Follow Delhi High Court Precedent on Limitation Period Start u/s 271D of Income Tax Act.

  Case-Laws - AT : Penalty u/s. 271D - From which date counting of limitation start - Reference of matter by AO or notice by Joint CIT - Though the contention of the Revenue seems to be plausible. - However, being the sub-ordinate tribunal, we are bound to follow the decision of the Hon’ble Delhi High Court.
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• School's Book & Uniform Sales Qualify for Tax Benefits as Educational Activities u/s 10(23C)(iiiad) of Income Tax Act.

  Case-Laws - AT : Benefits of section 10(23C)(iiiad) - sale and purchase of books and uniform to the students of the assessee school is also a part of educational activity, There is no need to specifically mentioned about the sale of uniforms and books in the memorandum of association as it is incidental to the educational activities which is object of the assessee. Benefit allowed.
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• Section 271AAB Penalty: Applies with material evidence when additional income is disclosed during tax search operations.

  Case-Laws - AT : Penalty u/s 271AAB - additional income disclosures only during the course of search & seizure operation buy peace of mind and avoid any further litigation. - 271AAB comes into play in case of corresponding material only than automatic in case of a search.
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• Penalty u/s 271(1)(c) invalid if AO's satisfaction pertains to Section 271AAA, making action null and void.

  Case-Laws - AT : Penalty imposed u/s 271(1)(c) - satisfaction relates to Section 271AAA - satisfaction of the AO qua a wrong section for the purposes of penalty of strict nature is clearly no satisfaction in the eyes of law. The whole action of the AO carried under s. 271(1)(c) is thus vitiated and a nullity in law.
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• Roaming Charges Not 'Technical Service'; No TDS Required u/s 194J, Entity Not in Default for Non-Deduction.

  Case-Laws - AT : TDS u/s 194J - assessee in default u/s 201(1A)/201(1) - roaming charges paid by the assessee to other telecom companies are not covered under ‘fee for technical service’ and such payments are out of the purview of TDS provision of 194J of the Act.
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• CIT(A) Oversteps by Enhancing Income from New Source Not in Original Return u/s 143(3) Proceedings.

  Case-Laws - AT : Power of CIT(A) u/s 151 - enhancement of income - CIT(A) has erred in exceeding his jurisdiction by enhancing income from a fresh source that was neither part of return of income nor touched upon by the Assessing Officer in proceeding u/s. 143(3).
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• Assessee Challenges Stamp Duty Valuation; AO Failed to Refer to DVO as Required by Section 50C(2.

  Case-Laws - AT : Computation of LTCG - assessee objects Stamp Duty valuation u/s. 50C before AO and requested to reference to DVO - Based on precedent AO should have refered valuation to Departmental Valuation Officer u/s 50C(2)
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• Factors for Granting Stay in Tax Cases: Prima Facie Case, Balance of Convenience, Hardship, Payment Offer, Previous Orders.

  Case-Laws - AT : Stay of demand - Factor for granting stay - prima facie case, balance of convenience, relative hardship, offer to pay by the Assesse & the earlier orders of the Tribunal & High Court on identical issue are relevant factors for granting of stay.
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Customs

• Customs Act Provisions Updated for Cruise Tourism: Streamlined Procedures for Ship Entry, Passenger Processing, and Duty Exemptions.

  Circulars : Clarification in relation to applicability of provision of Customs Act to Cruise Tourism
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• Licensing Authority can extend export obligations by four months with 1% penalty on unfulfilled FOB value. No penalty if met prior.

  Case-Laws - HC : Imposition of penalty - delay in fulfilling export obligation - after the amendment, Licensing Authority may grant extension in fulfilling the export obligation by a period of four months against one or more consignment/sight on payment of penalty of 1% on the unfulfilled FOB value of export obligation - but the export obligations being fulfilled prior thereto - No penalty.
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• Tribunal's Analysis in Smuggling Case Acknowledges Natural Justice Principles, Despite Sketchy Details.

  Case-Laws - HC : Principles of natural justice - smuggling - Although the Tribunal's analysis of the facts and the contentions of the parties was somewhat sketchy, this is not a case of complete non-application of mind or unreasoned acceptance of the findings rendered by the authorities.
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• Shipping Bills Can Be Converted from Duty Drawback to DFIA if Benefits and Interest Are Repaid.

  Case-Laws - AT : Conversion of shipping bills from Duty Drawback Scheme to DFIA Scheme allowed subject to reversal of benefit taken under Duty Drawback Scheme is paid by the appellant alongwith interest
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• Customs Commissioner Allegedly Harasses Appellant by Not Amending Bill of Entry u/s 149 of Customs Act.

  Case-Laws - AT : It appears that the Commissioner of Customs is bent upon harassing the appellant by not accepting his request for amendment of the Bill of Entry under Section 149 of the Customs Act in spite of the fact that he has the power to amend the same.
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Service Tax

• Appellant Wins Case: Allowed to Carry Forward Unused 80% CENVAT Credit for Future Use.

  Case-Laws - AT : CENVAT credit - It is true that during the relevant period only 20% of credit could be utilized but we find force in the argument of the appellant that they were not barred from taking credit but were only barred from utilizing it. They were free to utilize remaining 80% in the immediate next financial year.
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Central Excise

• Clarifying "Natural Causes" in Excise Duty Remission: Aligning Interpretation with Legislative Intent for Loss of Goods.

  Case-Laws - AT : Remission of duty - loss of goods - The expression "Natural causes" or "Unavoidable accidents" have to be interpreted in their ordinary and natural connotation in reasonable manner to sub-serve the object of legislature in introducing the remission of duty.
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• Confusion Over Classification for CENVAT Credit: Capital Goods vs. Inputs Doesn't Disqualify Appellant's Claim.

  Case-Laws - AT : CENVAT Credit - appellant being confused about the impugned goods to be capital goods or inputs - Availing the said credit qua inputs at two different stage does not disentitle the appellant to avail the same.
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• CENVAT Credit Valid for Input Services Including Market Information, Procurement, Sales Promotion, and Quality Control.

  Case-Laws - AT : CENVAT Credit - input services - Market information services are also covered under ‘procurement of inputs’, ‘sales promotion’ and ‘quality control’ specifically mentioned under Inclusive clause - credit allowed.
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VAT

• Appeal Authority Can't Act u/s 55(5)(iii) Once Assessee Withdraws Appeal; No Commissioner Review Request Made.

  Case-Laws - HC : The appeal authority had no jurisdiction surviving in him to pass any order referable to Section 55(5)(iii) of the Act after the assessee had filed an application to withdraw his appeal and there was no request made by the Commissioner to examine the legality or propriety of the order under appeal.
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Case Laws:

• GST

• 2019 (3) TMI 269
  Cancellation of registration - non filing of returns of returns - GSTR 3B returns have been filed upto December 2017 and GSTR-1 only UPTO August 2018 - Held that:- I consciously refrain from referring to details of the circulars as neither of the learned counsels is in a position to explain with clarity what the prevailing position is with regard to the extended/applicable time limit for submission of returns. Suffice it to say that the overall impression that I get is that the authorities, both Centre and State have taken into consideration the fact that Goods and Service Tax is nascent in its application and is an evolving regime - I am inclined to direct the Principal Secretary/Commissioner of Commercial Taxes, Chennai, to consider and pass orders upon the application of the petitioner dated 18.12.2018 wherein the petitioner seeks leave to pay pending GST dues in six (6) monthly instalments - petition disposed off.

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• 2019 (3) TMI 268
  Grant of conditional stay - Held that:- In the present case only notice has been issued. The learned Government Pleader submits that when a notice is issued, then there is a commencement of recovery proceedings. We would not deal with that issue as of now, since it gives a separate cause of action to the assessee. We direct the assessee to pay the short fall which has been suffered by the Department that is 2,95,000/- to the Department directly within a period of three weeks from today. The Revenue Recovery proceedings shall be kept in abeyance then. The recovery shall stand stayed until the disposal of the first appeal on such conditions being satisfied - Appeal allowed.

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• 2019 (3) TMI 267
  Detention of goods - Validity of FORM GSTMOV-06 dated 04.02.2019 - Held that:- The detention/seizure is provided for only in cases where the Department is prima facie convinced that there is a contravention of the provisions of the Act and the Rules. The order of detention has to reflect the reasons for which the seizure of the conveyance/goods has been effected. A perusal of the impugned order reveals that none of the relevant fields have been ticked and almost all fields have been left blank. It is thus entirely unclear as to what statutory provision or Rule the petitioner has contravened. A pointed query put in this regard to the learned Additional Government Pleader appearing on behalf of the respondents also elicits no details and he is also unable to enlighten the Court on what the contraventions might be - Admittedly, in the sworn statement recorded from the lorry driver, a mistake had crept in, in the mentioning of the lorry number as TN 19 U 7857 instead of TN 19 U 7873. One assumes this to be a reason for the detention. However, detention of the conveyance and goods is an extreme step that seriously prejudices an assessee and it is incumbent upon the statutory authority/the Proper Officer arrayed as respondent No.2, to have made mention of the contravention in the field provided in the impugned order for such purpose. This has not been done. Statutory remedy of appeal cannot be provided to petitioner. The present order of detention cannot be sustained and the same is quashed - vehicle shall be released forthwith upon receipt of a copy of this order - petition allowed.

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• Income Tax

• 2019 (3) TMI 266
  Shipping income assessment - Exchange gain on account of restatement on foreign loan - whether or not covered under the tonnage tax scheme and is taxable as normal business income - categorized as 'Qualifying Company' and “Qualifying ship” - provision for computation of tonnage income - HELD THAT:- If realizing gain on account of foreign exchange fluctuations on account of purchase of ships at Sr No. 2 is to be treated as shippping income, there is so reason as to why notional gain on account of foreign exchange liabilities on account of purchase of ships at Serial No. 1 should also not been given the same treatment. Besides on account of consistency of the treatment of the variation on account of foreign exchange gain / loss arising on loan taken for acquisition of ships would be considered core activity arising out of operating ships. That is so far as gain / loss arising on variation of foreign exchange on purchase of ships is concerned. There is no reason given as to why the gain made as restatement of foreign exchange liability is not a part of shipping business under Section 115VI of the Act. Further the variation in exchange rates on account of loan taken on purchase of ships and which gives rise to profit / loss on account of foreign exchange variation of loan taken would in our view be considered to be a part of core activity of the shipping company entitled the benefit of Chapter XII-G of the Act. Tribunal was justified in deleting the addition made by AO who held that the exchange gain on account of restatement on foreign loan is not covered under the tonnage tax scheme and is taxable as normal business income - Decided against revenue

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• 2019 (3) TMI 265
  Undisclosed investment - search u/s 132 - addition on the assessee with respect to a sale agreement of a property in Menonpara at Palakkad - materialization of agreement - non disclosures in cash flow statement - HELD THAT:- The amount having not figured in the cash flow statement, we are of the opinion that necessarily, an addition has to be made as an undisclosed investment; which if the transaction has not materialised would have been returned to the assessee and would have been invested elsewhere. No reason to accept the contention of the assessee that part of the agreement being exchange of a building at Akathethara, had actually taken place. If the exchange was part of the transaction of sale of the property at Menonpara, the assessee will have to explain why the further sale and conveyance did not take place. When the exchange is said to be an inextricable part of the agreement, the assessee cannot resile from that and take a different contention. In any event, we have already found that how the transaction concluded is not material since the existence of unaccounted cash in the hands of the assessee is established. The extracted portion of the specific answer to the question put by the Officer and recorded under Section 132(4) that the assessee agreed to having paid Rs. 50 lakhs in cash. It is also an admitted fact that there were two others, Babu and Hussain, involved in the property transaction; all of whom figured in the agreement also. Hence, going by the agreement recovered and the specific admission of the assessee that he had paid Rs. 50 lakhs in cash, the same has to be made an addition. In such circumstances, we modify the order of the Tribunal to the effect that the addition has to be confined to Rs. 50 lakhs and not Rs. 78 lakhs. - Decided partly in favour of assessee

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• 2019 (3) TMI 264
  Penalty u/s 271(1)(c) - disallowance of claim u/s 80IA for violation of sub section (8) - debatable issue - HELD THAT:- Undisputedly, this is a case where the penalty levied pertains to an issue in respect of which the Hon’ble Delhi High Court, in assessee’s own case, for the relevant assessment year has framed substantial question of law. Thus, it is very much apparent that the issue is a debatable issue. Accordingly, in view of judgment of the Hon’ble Delhi High Court in the case of CIT vs. Liquid Investment & Trading Company (2010 (10) TMI 1021 - DELHI HIGH COURT), we find no reason to interfere with the act of the Ld. CIT (Appeals) in deleting the penalty. - Decided in favour of assessee.

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• 2019 (3) TMI 263
  International transaction - TP adjustment - advancement of share application money - HELD THAT:- As the assessee had entered into a transaction of purchase of share of shares of an AE, as held that The TPO could not have treated such transactions as a loan and charge interest thereon on notional basis. We set aside the order of the Assessing Officer and delete the addition. See BHARTI AIRTEL LIMITED (BHARTI CRESCENT) VERSUS ADDITIONAL COMMISSIONER OF INCOME TAX RANGE 2, NEW DELHI [2014 (3) TMI 495 - ITAT DELHI] - Decided in favour of assessee Disallowing proportionate interest cost on borrowings u/s 36(1)(iii) - borrowed funds were not used to make investment in group entities - commercial expediency - HELD THAT:- Issue is covered by the Hon’ble Delhi High Court in the case of the assessee itself for assessment year 2010-11 wherein on identical facts, disallowance of interest was deleted. Investment in subsidiaries/ joint venture companies was one of the main objects of the respondent-assessee and hence expenditure in the nature of interest incurred for the purpose of making investments cannot be disallowed under Section 36(1)(iii) - Decided in favour of assessee

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• 2019 (3) TMI 262
  Validity of the reassessment proceedings u/s 147/148 - unexplained money u/s 69A - amount paid towards admission and donation/capitation fee - HELD THAT:- Son of the assessee Dr. Sandeep Jain who appeared before the Assessing Officer had categorically stated that whatever amount has been paid towards admission and donation/capitation fee has been paid by him. He and his wife are doctors since 1996 and have sufficient source to pay this amount. Therefore, when Shri Sandeep Jain admitted before the Assessing Officer regarding the payment of such capitation fee and when Shri Sandeep Jain and his wife are both doctors which is not in dispute, therefore, in my considered opinion, addition, if any could have been made in the hands of the son of the assessee i.e., Shri Sandeep Jain and not in the hands of the assessee. No doubt Shri P. Mahalingam in his statement had accepted to have received capitation fee as unaccounted money from Shri S.K. Jain, f/o Shri Sandeep Jain and has surrendered the same for taxation as mentioned by the Assessing Officer. However, a perusal of the statement recorded of Shri Mahalingam, which has been reproduced by the CIT(A) in his order, nowhere shows he has taken the name of the assessee. - Decided in favour of assessee.

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• 2019 (3) TMI 261
  Depreciation on “network Rights” - depreciation on intangible assets - AO treated the network rights as “goodwill” - HELD THAT:- Findings of the AO that “Network Rights” is “goodwill” has not been disturbed by the CIT (A) and as held in the case of CIT vs. Smifs Securities Ltd (2012 (8) TMI 713 - SUPREME COURT), depreciation is allowable on “goodwill”. Respectfully following the judgment of the Hon'ble Apex Court, we direct the AO to allow depreciation on “network Rights”. - Decided in favour of assessee. Allowable business expenditure - technical and management fees paid to M/s. Induslnd Media & Communications Ltd Held that:- Services rendered by M/s. Induslnd Media & Communications Ltd are technical and managerial, it has not filed any evidence either before the AO or before the CIT (A) to substantiate the claim. Even before us, no evidence is filed. Assessee only reiterated the submissions made before the authorities below and prayed that the issue may be remitted to the file of the AO before whom, the assessee is willing to file all the relevant evidence. The learned DR also reiterated the findings of the authorities below - remit the issue to the file of the AO with a direction to verify whether the assessee has actually made the payment and if such payment is made, then to allow the same as it is for business purposes of the assessee. - Decided in favour of assessee for statistical purposes.

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• 2019 (3) TMI 260
  Penalty u/s.271(1)(c) - non deceleration of LTCG on sale of property - Whether Assessee is guilty of having “furnished inaccurate particulars of income” or of having “concealed particulars of such income”? - defective notice - non specification of charge - HELD THAT:- Imposing of penalty u/s 271(1)(c) of the Act is bad in law and invalid for the reason that the show cause notice u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income. SEE COMMISSIONER OF INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013 (7) TMI 620 - KARNATAKA HIGH COURT) Show cause notice issued in the present case u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. The show cause notice u/s 274 of the Act does not strike out the inappropriate words. In these circumstances, we are of the view that imposition of penalty cannot be sustained. - Decided in favour of assessee.

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• 2019 (3) TMI 259
  Agricultural income - assessee could not produce bills and vouchers for sale of agricultural produce - assessee could not establish the fact of cultivation - estimation of coconut yield - evidence available on the land to show that the assessee has cultivated as claimed - HELD THAT:- Estimation of yield in agriculture is something difficult and which needs to be appreciated by the authorities who are performing judicial function. When agricultural produce including coconuts is traded in unorganized market like Uzhavar Sandhai and other local market, expecting the assessee to produce bills and vouchers is nothing but asking the assessee to perform an impossible task. Therefore, this Tribunal finds no reason to disallow any claim of the assessee. Had the AO found that the assessee has no land or he has not cultivated as claimed, the matter might have stood in a different foot. In this case, the Assessing Officer accepted the fact that the assessee has cultivated the land. The only reason for disallowance is that the assessee could not produce bills and vouchers for sale of agricultural produce and receipts for expenses. Apart from that, the assessee has established by producing copy of adangal extract that the land in question was subject to cultivation. In those circumstances, this Tribunal is of the considered opinion that there is no reason to disallow any part of claim. - Decided in favour of assessee.

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• 2019 (3) TMI 230
  Addition u/s 68 in Revision proceedings u/s 263 - unexplained share application money - AO admittedly did not resort to make enquiries in the manner stated by the ld CIT u/s 263 of the Act inspite of the fact that all the necessary details were very much available before him - HELD THAT:- The entire transactions of share capital and share premium was the subject matter of verification in the re-assessment proceedings by the AO, wherein the shareholders had duly responded to notice u/s 133(6) of the Act by confirming the fact of making investments in the assessee company. The shareholders had also duly furnished their income tax assessment particulars. Pursuant to directions of the CIT u/s 263 AO was mandated to make direct verifications about the genuineness of the transactions and creditworthiness of the shareholders by making necessary specific enquiries as listed out supra. CIT had specifically directed the AO to make enquiries directly from the shareholders and not through the assessee. Hence non-appearance of the assessee or non-submission of details before the AO intentionally or unintentionally does not make any relevance here. AO admittedly did not resort to make enquiries in the manner stated by the CIT u/s 263 inspite of the fact that all the necessary details were very much available before him. CIT had directed the AO to investigate into multiple layers of the investment in shares made by respective shareholders and identify the ultimate person holding controlling interest including the change in shareholding, directorship etc and then take the entire matter to its logical conclusion to bring out the facts on record. We deem it fit and appropriate, in the interest of justice and fair play, to remand the matter back to the file of the AO for de novo assessment and to decide the matter as mandated by the ld CIT in section 263 order, after giving sufficient opportunity of being heard to the assessee. Grounds raised by the assessee are allowed for statistical purposes.

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• 2019 (3) TMI 229
  TDS u/s 194C OR u/s 194I - TDS deducted on amount paid / credited to Bihar State Warehousing Corporation as per certificate issued 197 - TDS deducted on rent of warehouse u/s 194I and towards contract receipt on account of handling and transportation charges and rake handling charges u/s 194C - HELD THAT:- D. R. did not bring out any facts whereby it can be shown or demonstrated that after issuance of certificate u/s 197 the Department has again cancelled it. In absence of such action, the rates prescribed in the certificate issued u/s 197 of the Act, the deductor or the person responsible for paying has to apply the rates as per that certificate as provided u/s 197 clause (2) of the Act. We further find the learned CIT(A) is absolutely silent upon the applicability of section 197 where he has not at all adjudicated on merits with regard to why in all cases of deduction only 194I will be applicable. The learned CIT(A) has summarily accepted the version of the Income Tax Officer (TDS). The assessee has deducted TDS as per the direction of the Department in form of section 197 certificate issued by the revenue authorities. It is not disputed by the Department. The relevant returns have already been filed. There is no default in paying of taxes and 6 therefore, there is no loss to the Revenue. Even the deductee has filed their returns and the tax effect clearly complied with. Reading provisions of section 197(1) and (2) together the action of the Assessing Officer is unjustified and the addition thereof acquires the nature of being arbitrary, unjudicious, perverse and bad in law therefore, liable to be deleted. We set aside the order of learned CIT(A) on these issues and allow the appeal of the assessee.

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• 2019 (3) TMI 228
  Claim of expenditure pertaining to earlier year - accrual of expenses - mercantile system of accountancy - prior period expenses - crystallized during the previous year - HELD THAT:- Assessee follows the mercantile system of accountancy, the expenditure has to be accounted for on accrual basis. For accrual of expenses to take place, it must become due. In the present case, there was no accrual of the expenditure in the earlier year had not become due. It became due only in this year i.e. it crystallized during the previous year relevant to the subject assessment year. Thus the view taken by the Tribunal cannot be found fault with. No substantial question of law.

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• 2019 (3) TMI 227
  Addition u/s 68, 69 and 69A - incremental peak credit - money launderer or hawala operator - assessee maintained a stoic silence insofar as the source of the amounts deposited in the accounts as also the destination of the said amounts - HELD THAT:- We cannot but observe that since there is no explanation offered as to the source or destination of the amounts which came into the bank account there is no illegality in making addition of the peak credit. Of course the same has to be confined to the peak credit in the respective years and not on each of the accounts. This is the only concession possible on the assertion of the Department that the deposits were for money laundering. The destination of the amounts which were deposited and later withdrawn having not been disclosed or substantiated; it is not reasonable to assume that the entire amounts would have been disbursed, with only the commission appropriated. Virtue among thieves is an adage which cannot be imported, as a principle, to statutory assessment of income to tax. Department having not filed an appeal from the order reversing it and maintaining that at incremental peak credit; we would not interfere. In the other years the Assessing Officer himself adopted the peak credit in each year, which again was modified to incremental peak credit. Despite our above observations, we find no way in the present appeal to import these principles into the assessment impugned. Nor is it warranted in an appeal u/s 260A filed by the assessee. The adoption of incremental peak credit as income to be quite a plausible view, presuming at least that, to be the income of the assessee. The assessee cannot dissociate himself from the various accounts in view of the overwhelming evidence unearthed by the Department connecting him to the various accounts maintained in the Centurion Bank, Kozhikode Branch and the depositions of the various witnesses summoned. Despite the fact that the ED had found the assessee to be a hawala operator or money launderer, we find the assessment under Section 68, 69 and 69A of the incremental peak credit of the respective years, in the subject assessment years, taken from all the accounts to be perfectly in order. There can be a reasonable assumption that the incremental credit would be the income of the assessee, the remittances being found in favour of the assessee and the disbursal not having been proved or even admitted. Addition of commission - assessee s contention shoul be based on one another agent - HELD THAT:- We cannot find any inconsistency in the AO having not adopted the commission as adopted by another officer in a different location. At the outset it cannot be pleaded that the commission adopted in a case should be adopted in the case of another without reference to the various factors regulating a hawala transaction; which perse is illegal. Evidently the other person was an agent operating in Tamil Nadu. The assessee herein belongs to the State of Kerala which has the maximum expatriates insofar as the Middle East is concerned. We do not find any patent error or inconsistency in the assessment made against the appellant herein and hence we reject the appeal finding the questions of law in favour of the revenue and against the assessee. We however notice that when incremental peak credits are taken as the income of the assessee for a particular year the said quantum shall not be treated for the purpose of 2% commission and no addition shall be made on that count. Hence the commission shall be only on the amounts deposited, other than the incremental peak credit adopted for each year

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• 2019 (3) TMI 226
  Advance for rent and never turned into income - Recovery barred by limitation - still remains as a liability in its account. - Business income or unexplained investment or an unexplained cash credit - whether the amounts can be assessed under the Income Tax Act under any other head? - HELD THAT:- AO had specifically proposed to treat the amount as the assessee company's income, as is seen from the assessment order itself. It could not have been treated as an unexplained cash credit or as an unexplained investment; since it was neither. The source was clear and there was proper explanation for the amounts as seen from the books of accounts. We are also of the opinion that under the Income tax Act, the proposal is essentially to assess a particular amount, as income, which the assessee has not reckoned as such in its return. To propose under one head of income and in scrutiny or a reassessment to finalise under another head is perfectly permissible. Whether there was any possibility of it being recovered - If the recovery had been barred by limitation, necessarily, it has to be treated as an income from the business and the same had to be assessed under the Income Tax Act as has been held in T.V. Sundaram Iyengar and Sons Ltd.[1996 (9) TMI 1 - SUPREME COURT]. Even if the deviation from the proposal is found to be improper, the assessment has to be sustained, as an income from business; which was the original proposal. If the other company had occupied the premises the amounts would definitely be shown as income from business. Limitation having not expired in the relevant previous year, it is to be noticed that the assessment itself was finalised after three years, which is the normal period of limitation for recovery of money, even calculated from the date on which the last refund was made. The assessee had also not produced any agreement and in all possibility there would have been a restrictive clause, in so far as forfeiture of the advance amounts, if the contract did not fructify. The assessment order itself was passed, after three years from the date of commencement of limitation and there was no claim made by the assessee, who participated in the assessment proceedings, as to any recovery proceedings having been commenced by the other company or a repayment having been effected. we do not approve of the treatment of the amounts as an unexplained investment or an unexplained cash credit, we are of the opinion that the assessment has to be upheld as an income from business. The questions stand answered accordingly and the appeal stands allowed, restoring the order of the Assessing Officer; but however making modification as herein, assessing the rent received in advance as income in the relevant previous year.

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• 2019 (3) TMI 225
  Validity of Notice u/s 153A for assessment of earlier years - Assessment u/s 153A permissible without incriminating material in some year - assessments for the prior years in which the due date for notice under Section 143(2) has expired - classification in so far as concluded assessments and pending assessments - HELD THAT:- When a notice under Section 153A is issued, it enables the department to carry out re-assessment or assessment with respect to the six immediate prior years and the year in which the search is carried out. This does not require any incriminating material recovered on search relating to those prior years; in which there is no time left, on the date of search, for an assessment under Section 143. The provision under Section 153A is a non obstante clause having overriding effect over Sections 139, 147, 158, 149, 151 and 153. The intention of the legislature is to enable assessment, if it has not been regularly done in any of the previous years, or to re-initiate assessment in case there is already proceedings pending or to re-assess in the case of completed assessments; if the search under Section 132 reveals material pointing to a practice of suppression of income from taxation. These materials need not necessarily be that relevant to the previous six years since a practice of suppression detected in the subject year permits a like presumption to be drawn in the earlier six years too; on best judgment with reference to the business or profession carried on by the assessee. There is no assumption possible that in any of the prior years in which assessments were not regularly completed and the time for the same has expired, there could be additions only on the basis of materials recovered relevant to those years. The returns filed in pursuance to a notice under Section 153A is also to be treated as a return filed under Section 139. Hence, we cannot agree with the Tribunal that the assessments carried out under Section 153A for the prior years in which the due date for notice under Section 143(2) has expired, can only be with reference to incriminating materials recovered on search. When a notice is issued pursuant to a search under Section 132, for assessment under Section 153A, all pending proceedings with respect to a regularly initiated assessment or re-assessment would stand abated. For the said years, the proceedings u/s 153A would be continued and the assessments concluded on that basis. When and if the said assessment proceeded with and concluded under Section 153A, is said aside by the statutory authorities or by this Court, then necessarily the original proceedings which stood abated would revive, which is the enabling provision under sub-section (2) of Section 153A. There can be no corollary inferred from the above provisions to find certain years to be of concluded assessment ; being possible of re-assessment only on incriminating material recovered in search relatable to that year. - Decided against assessee Addition of gifts or loans received from relatives and the sale of trees - HELD THAT:- With respect to 2003-04 the gift claimed by the assessee from relatives is Rs. 10,000/-. The question of law arise only in the said years, which we answer in favour of the Revenue and against the assessee. Restoring the order of the AO, confirming the additions on issues as specified herein above. With respect to the other appeals, we find that no question of law arises from the order of the Tribunal since the issues are already dealt with by the Assessing Officer in the order giving effect to the order of the Tribunal.

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• 2019 (3) TMI 224
  Eligibility to deduction u/s 80IA - income derived from the Chennai and Pondicherry manufacturing unit - inclusion of income from service centres in the claim under Section 80IA - allocation of expenditure - HELD THAT:- The inclusion of income from service centres in the claim u/s 80IA was rightly found by the assessing officer to be incorrect. As regards the financial overheads, the methodology followed by the CIT(A) was that 50% of the expenditure be apportioned directly on the basis of turnover of three (3) units and the balance of 50% be apportioned in the ratio of 1:3 between the two manufacturing units and the trading unit. As against the service centre expenses, AO had observed that the service centres provided free service under warranty for the new systems sold for two years and thereafter earns income from the Annual Maintenance Contract entered into with the customers. The centres also undertake installation of the new UPS systems and provide technical support during the period of warranty when necessary. The expenditure incurred was, according to the Assessing Officer, to be directly allocated to the manufacturing units, as warranty was a part of their sale transaction. In the absence of any material before us to indicate that the methodology for allocation of expenditure followed by the CIT (A) and confirmed by the Tribunal was incorrect or perverse, we find no reason to interfere with the factual findings of the Tribunal and the first substantial question of law is answered in the affirmative, against the revenue and in favour of the assessee. Quantum of deduction granted stands enhanced consequent upon the re-working of the claim by the CIT(A), to an amount in excess of that claimed by the assessee - HELD THAT:- Mr.Ranganathan does not raise any factual dispute regarding the details set out above. Certain limitations are placed by statute on the quantum of relief allowable in relation to deductions under Chapter VI A of the Act, in terms of Sections 80A(2) and (4), 80AB, 80AC and 80B. These include a mandate that the relief granted shall not exceed the gross total income as defined u/s 80B(5). The relief granted, as seen above, has been restricted to the gross total income computed only. In these circumstances, we do not find any reason to interfere with the order of the Tribunal. - Decided in favour of the assessee and against the revenue.

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• 2019 (3) TMI 223
  Deduction u/s 80HH on dipping plant - manufacturing or production activity - ITAT held that dipping of the fabric was only for the purposes of marketability and would not impact the position that the activity involved only a series of processes and not manufacture or production - HELD THAT:- The activity of dipping is, thus, key to stabilising and heat - setting the products. It is only after such dipping and heat stabilisation that the material would be compatible for rubber adhesion in various products requiring dimensional stability. The input used is industrial fabric or yarn and what emerges after the aforesaid activity is a commercially distinct product, different from the input used. The conclusion of the Tribunal to the effect that the activity engaged is a mere process does not appear to be justified as it is seen from the explanation provided before the authorities that a series of processes are carried out resulting in the final products. Such a series of processes in itself, in our view, amounts to the activity of manufacture . Referring to definition of the term manufacture inserted in the Act by Finance (No.2) Act 2009, with effect from 1.4.2009 any activity that would result in the transformation or change in the character of the object or article or thing, such that a new and distinct object is brought into existence would amount to manufacture . The definition statutorily enshrines one of the long settled tests of what would constitute manufacture . Thus, notwithstanding that the definition itself has been inserted only with effect from 01.04.2009, the test has itself has been consistently applied by the Courts even prior thereto in determining whether an activity would amount to manufacture or not. - Decided in favour of the assessee Allowability of payment u/s 37 - Amounts paid to the Labour Welfare Association for Death Relief Fund - Assessing Authority held not sllowble in the view of Section 40A (9) - HELD THAT:- Contribution made by the employer to the Death Relief Fund is also an allowable business expenditure in terms Section 37 in so far as the expenditure is incurred wholly and exclusively for the welfare of its employees and is for the purposes of the business. Similar contributions made by the assessee towards labour welfare have been accepted by the revenue and no distinguishing features have been brought out before us to persuade us to take a different view in the case of this contribution. We draw support in this regard from a decision of the jurisdictional Court in the case of Cheran Engineering Corporation (1998 (2) TMI 74 - MADRAS HIGH COURT). - Decided in favour of the assessee

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• 2019 (3) TMI 222
  Capital gain - transfer u/s 2(47) - Cancellation of JDA - Grant of possession of land to the developer - HELD THAT:- On perusal of the order of the CIT(A), we found there is no finding or observations of the CIT(A) on the ground of possession of the property or the plea raised in the appellate proceedings. Therefore, we are of the considered opinion that the CIT(A) did not give appropriate findings whether the possession of land was granted or not by the assessee to developer. Accordingly, in the interest of substantial justice and judicial decisions, we restore the disputed issue to the file of the CIT(A) to adjudicate on the issue of granting of possession by the assessee to the developer or not and observations of the Hon’ble Supreme Court in BALBIR SINGH MAINI, CS ATWAL [2017 (10) TMI 323 - SUPREME COURT OF INDIA] and pass a reasoned and speaking order and further the assessee shall co-operate in submitting the information for early disposal of the appeal and the grounds of appeal of assessee are allowed for statistical purposes.

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• 2019 (3) TMI 221
  Income accrued in India - consideration received from M/s.ABB India by the assessee as per the service agreement - assessee-company is a non-resident company incorporated in UAE - FTS - PE in India - Taxability of business income as per DTAA between India and UAE - HELD THAT:- As per DTAA and Tax Treaty, there is no specific clause in respect of FTS and same has to be considered as business profit in the absence of such clause and permanent establishment in India, whereas the learned AR supported his arguments on non-taxability of amount but could not establish that there is no existence of Permanent Establishment in India. Therefore, as prayed by the learned AR, the disputed matter is restored to the file of the AO for the limited purpose to examine and inquiry whether there is any permanent establishment in India. In case if it is found with supporting evidence and documentation and also the assessee proves that there is no permanent establishment in India, then the assessee be granted the benefit of non-taxability - Assessee’s appeal is allowed for statistical purposes.

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• 2019 (3) TMI 220
  Penalty u/s. 271D - From which date counting of limitation start - Reference of matter by AO or notice by Joint CIT - order passed by the authority beyond the period of limitation - HELD THAT:- Initiation of penalty u/s.271D would only commence when the officer is empowered to levy penalty applies his mind and thereafter issue the notice. But in the absence of availability of any decision contrary to the judgment in PCIT v. Mahesh Wood Products P. Ltd [2017 (5) TMI 433 - DELHI HIGH COURT] we are afraid that though the contention of the Revenue seems to be plausible. However, being the sub-ordinate tribunal, we are bound to follow the decision of the Hon’ble Delhi High Court. Since we are holding that the order passed by the authority is beyond the period of limitation, hence the orders passed by lower authorities were lacking jurisdiction, being passed beyond statutory period, null and void. therefore, we are not adjudicating any other ground on merit. - Decided in favour of assessee.

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• 2019 (3) TMI 219
  Entitlement to deduction u/s.36(1)(viia) - not written off the bad debts in its books of account - HELD THAT:- For the purposes of claiming the deduction the assessee should have actually written off the bad debts exceeding the threshold limit prescribed by the Act. In the present case the assessee has actually not written off the bad debts in its books of account and had continued to show the same on the assets side of the balance sheet. Assessee is not entitled to any deduction u/s.36(1)(viia). - Decided against assessee.

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• 2019 (3) TMI 218
  Penalty u/s 271(1)(c) - undisclosed income according to the statement of the assessee u/s 132(4) - income for specified year - Right course of action is to invoke sec. 271AAA - HELD THAT:- Where the case of the AO is that income pertains to specified year as categorically observed in the assessment year as well as in the penalty order, the right course of action available to the AO is to invoke sec. 271AAA of the Act for the purposes of imposition of penalty on undisclosed income pertaining to specified year. The penalty has been invoked in the present case u/s 271(1)(c) of the Act which is not sync with the scheme of the Act. Explanation 5A to section 271(1)(c) enables imposition of penalty for a period other than ‘specified previous year’ contemplated under s. 271AAA. Therefore the satisfaction of the AO qua a wrong section for the purposes of penalty of strict nature is clearly no satisfaction in the eyes of law. The whole action of the AO carried under s. 271(1)(c) is thus vitiated and a nullity in law. In the backdrop of these observations we do not consider it expedient to examine any other aspect of the matter. The entire proceedings is bad in law at the threshold. The penalty imposed under s. 271(1)(c) of the Act is thus no sustainable in law. - Decided in favour of assessee.

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• 2019 (3) TMI 217
  TDS u/s 194J or 194C - roaming charges paid to other telecom companies - assessee in default u/s 201(1A)/201(1) - scope of human intervention - whether process involved in the roaming connectivity does not involve the human intervention and thus the services do not fall within the ambit of “technical services”? - HELD THAT:- It is common knowledge that when one of the subscribers in the assessee’s circle travels to the jurisdiction of another circle, the calls get connected automatically without any human intervention and it is for this, the roaming charges is paid by the assessee to the visiting operator for providing this service. The interconnection charges paid by the appellant to other telecom operators are therefore, not in the nature of fees for technical services and therefore there is no liability to deduct tax thereon. CIT-vs-Vodafone South Ltd. [2016 (8) TMI 422 - KARNATAKA HIGH COURT] held that the process involved in the roaming connectivity does not involve the human intervention and thus the services do not fall within the ambit of “technical services”. CIT(A) while allowing the claim of the applicant in deleting the demand raised u/s 194J for A.Y. 2008-09 & 2009-10 respectively with the conclusion that the roaming charges paid by the appellant to other telecom companies are not covered under ‘fee for technical service’ and such payments are out of the purview of TDS provision of 194J. We find no infirmity in the order passed by the Learned CIT(A). We, therefore, do not hesitate to confirm the same. - Decided against revenue.

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• 2019 (3) TMI 216
  Exemptions u/s 11 - charitable activity - denial of exemption as widespread commercial activities in nature of business - set off of unabsorbed depreciation - Adjustment of deficit of earlier years against the income of the current year - HELD THAT:- Appellant is eligible for exemption u/s 11 of the Act following the order passed by his predecessor for A.Y. 2010-11 in assessee’s own case. Also the benefit of deficit of earlier years against the income of the current year was also correctly allowed by the Learned CIT(A) relying on the order passed by the Hon’ble Jurisdictional High Court in the case of CIT-vs-Sheth Manilal Ranchhoddas Vishram Bhavan Trust (1992 (2) TMI 51 - GUJARAT HIGH COURT). - Decided in favour of assessee.

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• 2019 (3) TMI 215
  Addition u/s. 14A r.w. Rule 8D - no satisfaction has been recorded by the CIT (A) as envisaged u/s. 14A (2) & (3) - Power of CIT(A) regrading enhancement - fresh source that has not been subject of assessment - HELD THAT:- In the instant case we observe that the Commissioner of Income Tax (Appeals) before making disallowance u/s. 14A has discussed various judicial pronouncements but has not recorded his satisfaction as to why disallowance is warranted. AR has further demonstrated from the Balance Sheet of assessee as on 31-03-2011 that own funds to the assessee are much more than the investment made. After considering the documents on record and various decisions, we are of considered view that the Commissioner of Income Tax (Appeals) has erred in exceeding his jurisdiction by enhancing income from a fresh source that was neither part of return of income nor touched upon by the Assessing Officer in proceeding u/s. 143(3) of the Act. Consequently, the impugned order is modified and enhancement made by Commissioner of Income Tax (Appeals) is set aside. - Decided in favour of assessee.

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• 2019 (3) TMI 214
  Assessment order against a company not in existence - scheme of amalgamation - curable defect u/s 292B - HELD THAT:- Assessing Officer has completed the assessment in the name of a company which has merged and is not in existence on the date the assessment order was passed. That too, even after the Assessing Officer was provided with all documentary evidences during the assessment proceedings to demonstrate that the company has been amalgamated with UTV Software Communications Ltd. That being the case, neither the aforesaid decision of SPICE ENFOTAINMENT LTD [2011 (8) TMI 544 - DELHI HIGH COURT] nor the provisions contained under section 292B of the Act would come to the rescue of the Department. - Decided in favour of assessee.

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• 2019 (3) TMI 213
  Computation of LTCG - assessee objects Stamp Duty valuation u/s. 50C before AO and requested to reference to DVO - non reference of the matter to Valuation Officer u/s 50C(2)- HELD THAT:- As relying on SHRI CHANDRA NARAIN CHAUDHRI [2013 (9) TMI 646 - ALLAHABAD HIGH COURT] and SRI SUSHIL KUMAR NATHANY VERSUS INCOME-TAX OFFICER, WARD–4 (2) , HYDERABAD [2018 (3) TMI 428 - ITAT HYDERABAD] we remand the issue to the file of Assessing Officer with a direction to refer the matter to the Departmental Valuation Officer and to re-compute the Long Term Capital Gain denovo. - Appeal of assessee is allowed for statistical purposes

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• 2019 (3) TMI 212
  Benefits of section 10(23C)(iiiad) - selling of books and uniform to the students of assessee - Not mentioned in the memorandum of association as it is incidental to the educational activities - Charitable activity - income of any university or other educational institutional - CIT(A) has held that the assessee did not work solely for educational purposes but for profit, on the basis that the assessee generated surplus - HELD THAT:- From the plain reading of section 10(23C)(iiiad) of the Act, it is apparent that any income of any university or other educational institutional existing solely for educational purposes and not for the purpose of profit is totally exempt if the aggregate annual receipts of such university or educational institution do not exceed the amount of annual receipt as may be prescribed. This means that there is no restriction on the generation of surplus u/s 10(23C)(iiiad). It can be said that any university or other educational institution can generate surplus. It is also noted that buying and selling of uniform and books to students of assessee, for educational purpose is not commercial activity. Because the assessee is engaged in providing primary and higher education to the poor students and working under the aims and objects of the society. It also engaged in sale and purchase of books and uniform to the students of the assessee school only, at cheaper rate than market prices, which is also a part of educational activity. Also, the assessee buys and sells only those books and uniforms which are related to the students only. It is entirely for the education of the students which is not beyond the aim and objective of the society. There is no need to specifically mentioned about the sale of uniforms and books in the memorandum of association as it is incidental to the educational activities which is object of the assessee. The purchase and sale of text books, stationery items and uniforms exclusively to the students studying in the school are not in the nature of commercialization since all these activities are essential requirements of the students. The sale and purchase of books and uniform to the students are not commercialized activities. It actually benefits the entire student community as it not only provides convenience but also promotes equality by ensuring that there is uniformity in the products being sold and used by the children. Therefore, it can be said that these activities are undertaken for the educational purposes only. The exemption u/s 10(23)(iiiad) of the Income Tax Act, 1961 should not be denied to the assessee as selling of books and uniform to the students of assessee is part of educational activity only. Impugned addition was made merely on the basis that surplus arises to the assessee during the year under consideration without appreciating that the surplus is merely 12% which is considered as legitimate for charitable purposes. Thus, the addition of Rs. 12,01,906/- is not tenable, hence, the same is deleted as such and accordingly the grounds raised by the assessee stand allowed. Since, quantum addition in dispute has been deleted, penalty in dispute does not survive in the eyes of law u/s. 271(1)(c) - Decided in favour of assessee

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• 2019 (3) TMI 211
  Stay petition - Factor for granting stay - prima facie case - balance of convenience - disallowance of Expenditure for non deduction of TDS u/s 195 - payments were in the nature of “Royalty” and chargeable to tax in the hands of GIL in India - profits attributable to Google Ireland - income accrue in India - international Transactions - HELD THAT:- After considering the existence of prima facie case, balance of convenience, relative hardship, the earlier orders of the Tribunal and the orders of the Hon’ble High Court of Karnataka in the case of the Assessee on identical issue of grant of stay, the offer to pay by the Assessee and the demand of the department, we are of the view that it would be just and appropriate to grant an order of stay of recovery of outstanding demand for a period of 6 months from the date of this order, or till disposal of the appeals of the Assessee, whichever is earlier.

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• 2019 (3) TMI 210
  Bogus Long Term Capital Gains on purchase and sale of the shares - addition of the entire sale proceeds of the shares as income and rejected the claim of exemption made u/s 10(38) - addition based on evidence or generalisation - “circumstantial evidence” and “human probabilities” - not confronted with any statement or material alleged to be the basis of the report of the Investigation Wing of the department - HELD THAT:- In number of cases this bench of the Tribunal and Jurisdictional Calcutta High Court has consistently held that, decision in all such cases should be based on evidence and not on generalisation, human probabilities, suspicion, conjectures and surmises. In all cases additions were deleted. In the case on hand, all evidences were produced by the assessee. The assessee has filed all necessary evidences in support of the transactions. Some of these evidences are (a) evidence of purchase of shares, (b) evidence of payment for purchase of shares made by way of account payee cheque, copy of bank statements, (c) copy of balance sheet disclosing investments, (d) copy of demat statement reflecting purchase, (e) copy of merger order passed by the High Court , (f) copy of allotment of shares on merger, (g) evidence of sale of shares through the stock exchange, (h) copy of demat statement showing the sale of shares, (i) copy of bank statement reflecting sale receipts, (j) copy of brokers ledger, (k) copy of Contract Notes etc. - Decided in favour of assessee

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• 2019 (3) TMI 209
  Penalty u/s 271AAB - additional income disclosures only during the course of search & seizure operation - undisclosed income - 'specified previous year' in terms of sub-clause (i) of clause (b) of Explanation to section 271AAA - meaning of the terms 'date of search ' - additional incomes suo motu and substantiated the manner of having derived the same from various business such as mining, civil construction, transportation and other activities followed by due payments of tax - expression 'before the date of search' in the definition of 'undisclosed income'. HELD THAT:- imposition the impugned penalty u/s 271AAB not automatic - mere issue of notice to impose penalty u/s 271(1)(c) is not sufficient - Assessing Officer had to apply u/s 271AAB Explanations clause (a) to (c). On an analysis of the expression 'before the date of search' in the definition of 'undisclosed income', it amply transpires that it refers to the date of 'initiation of the search'. Our reasoning is that part (A) in clause (i) of the Explanation (a) refers to the undisclosed income etc. which has not been recorded in the books of account before the date of search. It necessarily has to be an income which is not found to be recorded at the time of initiation of search and it cannot be an income which is not found to be recorded at the time of conclusion of search. “Specified previous year” in this case u/s. 271AAB Explanation (b)(ii) squarely applies in given facts and circumstances of the case. We wish to repeat here at the cost of brevity that impugned search is dated 20.12.2012. The assessee’s last date of filing return u/s 139(1) was upto on 30.09.2012. The ‘specified previous year” therefore has been rightly taken in the instant case to be financial year 2012-13 under the above statutory provision. We conclude in these facts that CIT(A) has rightly sustained the impugned penalty of Rs.17 lac qua the impugned cash sum declared during the course of search as undisclosed income under Explanation (c) of the Act.

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• Customs

• 2019 (3) TMI 258
  Imposition of penalty - delay in fulfilling export obligation - extension of time sought - Held that:- It is evident that the petitioners have been regular in fulfilling their export obligations. For the subject export obligation there were difficulties which they highlighted, based on which they could not fulfil the export obligations in time. Yet when they sought a clarification about the consequences of not being able to fulfil these obligations in time, they have been informed that though the licence is issued under the Foreign Trade (Development and Regulation) Act, 1992, and without prejudice to the application of any other prohibition or regulation affecting the import of the goods which may be in force at the time of their arrival, still, when the petitioners brought to the notice of the authorities and prayed that there should be an extension granted to fulfil the export obligations, on 15 12 1997 and 8 1 1998 the petitioners were informed that they must first complete the export obligation under the June, 1997 sight, as also the export obligation under the August, 1997 sight respectively and then their request will be considered. A careful perusal of para 8.19 of the Hand Book of Procedures (Vol. I), 1997 2002, as amended by the public notice, demonstrates that the Licensing Authority may grant extension in fulfilling the export obligation by a period of four months against one or more consignment/sight on payment of penalty of 1% on the unfulfilled FOB value of export obligation. Any request for extension beyond the period of four months can be considered only by a Committee headed by the Director General of Foreign Trade. Hence, implicit in the scheme of the export obligation is a power in the authorities to extend the time. Once there were amendments brought into force and the amendments being effective from 24 8 1998, but the export obligations being fulfilled prior thereto, in the peculiar facts and circumstances, the petitioners should not have been called upon to pay the fine. Petition allowed.

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• 2019 (3) TMI 257
  Principles of natural justice - smuggling - Whether the appellant is right that the order passed by the Customs, Excise and Service Tax Appellate Tribunal is contrary to law as it does not examine and discuss the contentions and issues of facts and law as raised and had arisen for consideration? - Held that:- With regard to the facts determined by the customs authorities, and affirmed by the Tribunal, we do not detect any perversity or misappreciation, which would warrant our interference. The appellant s reply to the SCN was premised upon the contention that he was at the hospital along with an employee to obtain an appointment for his mother, and happened to be present near the said vehicle only out of curiosity. He also referred to his physical disability, presumably to contend that he was not physically capable of performing the acts attributed to him. However, the appellant did not place any material on record to support his contention that he had attended the hospital to secure a medical appointment, nor did he give any explanation as to why his personal presence, along with an employee, was required for this purpose. There is no material to show that it was impossible for him to participate [along with others] in the removal of a padding from a car door. In any event, it is not just his physical participation, but his presence to oversee the operation that has been found against him. In these circumstances, coupled with the fact that he operates a jewellery business, the findings of the authorities that his presence was not merely coincidental, but that he was the intended recipient of the smuggled gold, cannot be faulted. Although the Tribunal s analysis of the facts and the contentions of the parties was somewhat sketchy, this is not a case of complete non-application of mind or unreasoned acceptance of the findings rendered by the authorities. The Tribunal being the final arbiter of facts, it is no doubt vested with the duty to consider the material on record independently and render its findings upon the same. It is settled law that no judgment, even one affirming orders of the authorities or courts below, can be unreasoned. However, there is no uniform standard to determine the level of detail required, so long as the rationale of the decision is clearly discernible. When a Court or Tribunal is faced with concurrent findings of two authorities, it is not necessary to include a detailed reappraisal of the evidence in the judgment of the second appellate forum; a brief statement of the facts which have appealed to the Court and the reasons which have led it to affirm the findings of the authorities is sufficient. The present case falls into this category and it is for this reason that the impugned order of the Tribunal is, in our view, adequate. The question of law is answered in the negative, i.e. against the appellant and in favour of the Revenue - appeal dismissed.

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• 2019 (3) TMI 256
  Rectification of mistake - Held that:- The application be adjourned sine-e-die till the appeal is finally disposed of by the Hon’ble Supreme Court. However, liberty is giving to the applicant to seek the remedy and get the application revived if it is still required.

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• 2019 (3) TMI 255
  Provisional release of seized goods for the purpose of re-export - Mis-declaration of imported goods - it is alleged that that the goods imported is not a base oil but it is in the nature of high speed diesel oil (HSD) - Held that:- The investigating agency DRI has already drawn the sample of the goods to ascertain the nature of the goods. In such situation, the department has no need of the goods for the purpose of adjudication. By keeping the goods under seizure it is nobody s gain. The discretion for provisional release of the goods is legally provided under Section 110 of Customs Act and the same should be exercised lawfully and of course with safeguard of the Revenue s interest. In the present case the sample were already drawn, thereafter, the goods are not required for adjudication. As regard the safeguard of the revenue, the adjudicating authority can impose the condition of bond and bank guarantee as deems fit in accordance with law - In the present case the appellant s prayer is for provisional release for re-export of the goods and not for home consumption. There is no reason why the re-export of the goods can be denied particularly when the same is not going to adversely affect the adjudication process of the case. The provisional release of the goods for re-export can be allowed subject to the reasonable measures for safeguarding the Revenue - appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 254
  Conversion of shipping bills under Drawback Scheme into under Duty Free Import Authorisation (DFIA) Scheme - CBEC Circular 36/2010-Cus dated 23.09.2010 - Held that:- Admittedly, at the time of export, the appellant were debarred to file their shipping bills under DFIA Scheme in terms of Paragraph 4 of the Notification No. 31/2013 dated 01.08.2013 - Admittedly, there is no mistake apparent on record, but, the same shall not take away from the right of the appellant. In this case, the conditions for export under DFIA Scheme as well as Duty Drawback Scheme are same, therefore, the appellant has satisfied the decision of the Hon’ble Madras High Court in the case of Suzlon Energy Ltd. [2013 (3) TMI 506 - MADRAS HIGH COURT], where it was held that To claim benefit under Drawback EPCG scheme and DEEC scheme, the exporter has to file DEEC declaration to the effect what are the raw materials used in the manufacture of the final product. At the time of examination of the goods materials given in the declaration will be verified. The appellant is entitled for conversion of shipping bills from Duty Drawback Scheme to DFIA Scheme subject to reversal of benefit taken under Duty Drawback Scheme is paid by the appellant alongwith interest - Appeal allowed in part.

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• 2019 (3) TMI 253
  Provisional assessment of bills of entries - Import of Coal - Bespoke Optimum Semi Soft Corex Coal - benefit of N/N. Sl No 68A of Notification No. 21/2002-Cus. - mismatch in the description of Coal - Held that:- Since the bills of entries are assessed provisionally, this matter has to be remanded back to the adjudicating authority to finalise the bills of entry. Before sending the matter back to the adjudicating authority we deem it necessary to mention herein that the 1st Appellate Authority has relied upon the analysis report of the Deputy Chief Chemist, a copy of which was not handed over to the appellant importer. The 1st Appellate Authority could not have relied upon the said document. It is also to be noted that by relying upon the Dy Chief Chemist’s report at the 1st appellate proceedings, appellant herein is deprived of his right to seek the retest of the samples, if any, in order to defend his case. Appeal allowed by way of remand.

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• 2019 (3) TMI 252
  Amendment of documents u/s 149 of the Customs Act, 1962 - non-application of mind - principles of natural justice - Held that:- From the impugned order, it appears that the Commissioner of Customs has not applied his mind and has conducted a denovo adjudication. It appears that the Commissioner of Customs is bent upon harassing the appellant by not accepting his request for amendment of the Bill of Entry under Section 149 of the Customs Act in spite of the fact that he has the power to amend the same. The impugned order is not sustainable in law at all and is set aside with a direction to the Commissioner of Customs to amend the Bill of Entry as per the request of the appellant and release the goods in order to avoid demurrage and damage to the goods - Appeal allowed - decided in favor of appellant.

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• Insolvency & Bankruptcy

• 2019 (3) TMI 251
  Corporate Insolvency Resolution Process - corporate debtor committed default in paying the debt - HELD THAT:- One of the employees of the operational creditor sent e-mail to the corporate debtor reiterating the above point in dispute. That e-mail was replied by the corporate debtor objecting the contentions raised by the operational creditor. As informed to the operational creditor mentioning that those are the issues outside terms of the contract. Such correspondences raising points against each other were going on for long 2-3 years prior to the demand notice. Lastly, the operational creditor sent demand notice dated 18.01.2018 under section 8 of I&B Code. It was replied by the corporate debtor. It is not in dispute that ultimately, the operational creditor did not complete the work of erection of firefighting system. Corporate Debtor assigned that work to other contractor and that got it done. The germane issue arises out of the controversy is that, “as to who committed the breach of the terms of the contract”. This dispute cannot be said to be spurious one or being raised as an afterthought by the corporate debtor. The dispute about the breach of terms of contract is going on since 2014-2015 onwards. In view of the rulings of Apex Court in the case of Mobilox Innovations Private Ltd.[2017 (9) TMI 1270 - SUPREME COURT OF INDIA] this authority is not expected to examine the matter of dispute in detail but only has to see whether the dispute is genuine or not. So long dispute exists, the authority has to reject the application. As found that dispute as raised by the corporate debtor about the operational debt as claimed against them by the operational creditor cannot be said to be imaginary one. It requires detailed enquiry into the matter. Hence, not inclined to admit the Corporate Debtor in Corporate Insolvency Resolution Process as there exists the dispute about the amount claimed.

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• 2019 (3) TMI 250
  Corporate Insolvency Resolution Process (CIRP) - existence of relationship as between the petitioner and respondent being that of an Operational Creditor and a Corporate Debtor as defined under the provisions of IBC, 2016 - Breach of agreement - HELD THAT:- Operational Creditor should have supplied goods or rendered any services to the Corporate Debtor. However, in the instant case, even as per the agreement which has been entered into as between the parties and which was also referred at the Bar during the course of arguments on maintainability annexed as Annexure-5, wherein, it is seen that the scope of agreement as given in Clause-I is to be effect that Krishna Phoschem Ltd. agrees to sell ‘H Acid’ and buyers agrees to purchase these products as per the quantity agreed hereunder in a month. The Krishna Phoschem Ltd. has been defined as a ‘seller’ in the sale purchase agreement and Colorant Ltd. has been defined as a ‘buyer’ under the said sale purchase agreement dated 21st day of August, 2017. The main grievances of the petitioner is that the seller of the agreement, namely, the Corporate Debtor has not abided to the terms and conditions of the agreement in the supply of ‘H Acid’ as contracted under the agreement. Under the circumstances, there is a breach of the said agreement dated 2 August, 2017 which had forced the buyers, namely, the petitioner to purchase its requirements of ‘H Acid’ from the open market at almost twice the price as agreed between the parties and the claim is also in relation to the difference in price which the petitioner was required to pay. In view of the breach of the said agreement and it is thus seen that the claim is more by way of claim for damages arising out of breach of agreement as entered into between the parties. This Tribunal is not convinced that there exists as between the petitioner and the respondent, a relationship of an Operational Creditor and Corporate Debtor and that there is an ‘Operational Debt’ of which a default has been committed. This Tribunal is constrained therefore to dismiss this petition.

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• Service Tax

• 2019 (3) TMI 249
  Maintainability of appeal - condonation of delay in filing appeal - requirement with the pre-deposit - Held that:- As far as the delay is concerned, the Tribunal will decide the issue on merits. Mandatory pre-deposit - Held that:- Because of the financial hardship the petitioner has pleaded, the petitioner will pay the amount of pre-deposit in five equal monthly instalments. If the petitioner pays the first instalments in fifteen days from today, the Tribunal will consider the petitioner s delay petition and proceed further in accordance with law. Appeal disposed off.

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• 2019 (3) TMI 248
  Business Auxiliary Service - it is alleged that laying of pipes and joining them amounts to processing of goods not amounting to manufacture - Held that:- Business Auxiliary Service introduced w.e.f. 31.03.2005 includes production or processing of goods for, or on behalf of the client - In this case, the appellant is merely laying the pipes which are already bought by their clients and they are charging a sum for laying them so. These activities are in the nature of installation of pipes - It is hard to hold that such installation of pipes which includes joining them amounts to processing of the pipes. The demand under Business Auxiliary Service from the appellant is unsustainable - appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 247
  Valuation - Works contract services - inclusion of value of goods supplied either under a different contract or as a separate part of the same contract in the value of taxable services on which service tax on works contract service is to be charged - Held that:- On an identical issue in respect of the same assessee in TATA PROJECTS LIMITED VERSUS CST, HYDERABAD ST [2019 (2) TMI 1037 - CESTAT HYDERABAD], after examining the amendment to works contract (composition scheme for payment of Service Tax) Rules, 2007 vide notification No. 23/2009-ST, dt. 07.07.2009 and the explanation of the amendment by CBEC vide D.O.F. No. 334/13/2009-TRU, dated 06.07.2009 has held that appellant is not liable to include the value of the goods as the contracts were signed/payments were made prior to 07.07.2009. No service tax is payable - the demands as confirmed by the impugned order are liable to be set aside - appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 246
  Non-payment of service tax - storage and warehousing service - charges collected by the appellant from their sister concern for storage of soya bean meal which they subsequently exported - Held that:- Once the appellant is charging a sum for storage of the goods which belongs to another legal entity, the amounts have to be considered as storage and warehousing charges and a service tax has to be paid accordingly. The appellant has clearly not paid the service tax nor have they disclosed the details of service charges to the department - Even when the department received information and inquired from them, they did not produce the required information immediately - this is a fit case to invoke extended period of limitation and invoke a demand. Wrongful utilization of CENVAT credit of input services consumed into exempted output services for payment of service tax - appellant has utilized 100% of credit taken instead only 20% as was prevalent during the relevant period in terms of Rule 6(3)(c) of CCR, 2004 - Held that:- It is true that during the relevant period only 20% of credit could be utilized but we find force in the argument of the appellant that they were not barred from taking credit but were only barred from utilizing it. They were free to utilize remaining 80% in the immediate next financial year. Therefore, the demand on this ground does not sustain. CENVAT Credit - credit of common input services - demand equal to 8% of the value of exempted services for period 01.4.2008 to 31.3.2008 under Rule 14 of CCR, 2004 - demand of Rs. 1,43,310/- at the rate of 6% of value of exempted services for the period 01.4.2009 to 06.7.2009 under Rule 6(3) read with Rule 14 of CCR - Held that:- Once the CENVAT credit on common input services has been reversed the demand under Rule 6(3) read with Rule 14 does not sustain - appellant have reversed the entire amount of credit taken on common input services and therefore these demands need to be dropped along with interest thereon - demand set aside. Penalties - Held that:- The appellant may have been under the mistaken impression that they were not liable to pay service tax on the warehousing charges and therefore, taking a lenient view and invoking provisions of Sec.80 of the Finance Act, 1994, penalties set aside. Appeal disposed off.

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• 2019 (3) TMI 245
  Taxability - amount received as rent - It is the case of the Revenue that the said amount is taxable under C&F services for which appellant is registered with the authorities - period April 2003 to May 2007 - Held that:- The appellant had constructed godowns and rented them out to various institutions/companies to stored their goods. He only received the rent from such companies and was not engaged in C&F services for such clients - the amount of tax of Rs. 7,54,153/- cannot be fixed on the appellant for simple reason that no services were rendered by the appellant and the service tax liability on renting of immovable property came into statute from 01.06.2007 - the impugned order is incorrect and liable to be set aside. Valuation - reimbursement of charges - Held that:- The agreement between the two parties indicate that they entered into contractual obligations for reimbursement of expenses which were in the form of godown rent and the decision of Apex Court in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. [2018 (3) TMI 357 - SUPREME COURT OF INDIA] will apply and any reimbursable expenses during the period in question are not includable in the value of the services rendered. Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2019 (3) TMI 244
  Validity of Corrigendum - Rectification of mistake - error apparent on the face of the records - Section 74 of the Finance Act, 1994 - Rebate claim - insufficient documents to allow he claim - Held that:- The corrigendum issued was incompetent in so far as the provisions of Section 74 are concerned. The deletion of the interest granted cannot be deemed to be a mistake apparent from the record. It was a considered decision entered into by the First Appellate Authority and the interest payable would be in accordance with law i.e., the statute. There is in fact no correction or rectification of a mistake, especially since the grant of interest on a refund is a statutory consequence. The corrigendum was issued in excess of the power conferred under Section 74 - appeal dismissed - decided against Revenue.

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• 2019 (3) TMI 243
  Remission of duty - molasses lost due to accident - Rule 49 of the Central Excise Rules - bursting of the tank and the consequent loss of molasses - Avoidable accident or not? - Held that:- There is no dispute that rise in temperature can lead to a rise in storage tank pressure which in turn lead to an explosion of the tank. It is not the case of the Revenue that the Appellants are habitually negligent, due to which such losses or destruction of this nature had also occurred in past - As per the first proviso of Rule 49 the manufacturer shall on demand pay duty leviable on any goods which are not shown to the satisfaction of the proper officer to have been lost or destroyed by natural causes or by unavoidable accidents during handling or storage. The finding of the learned Commissioner that the Appellant had been negligent in safeguarding molasses is not reasonable as the Appellant s stake in the destroyed molasses was much higher than the stake of the Revenue. Nobody would deliberately indulge in such act or exercise which may result in huge loss and therefore while interpreting Rule 49 the authorities are required to be liberal. All the accidents occurred due to lack of protections of the personnel responsible for avoiding such accidents and nobody indulges in such accidents purposely. If the observation as made by the learned Commissioner is accepted then it would make the said rule redundant. It is not the case of the Revenue that there is any malafide on the part of the Appellant to make the accident occur resulting in loss of molasses - Although in the impugned order, the learned Commissioner has mentioned that there were negligence on the part of the Appellant but on what material this finding has been given is lacking in the order. The finding recorded by the learned Commissioner in the impugned order, while rejecting the Appeal filed by the Appellant, is not sustainable. The expression Natural causes or Unavoidable accidents used in Rule 49 of the erstwhile Central Excise Rules,1944 have to be interpreted in their ordinary and natural connotation in reasonable manner to sub-serve the object of legislature in introducing the remission of duty. An unavoidable accident is an event which lies beyond the control of the assesee and which has taken place despite the exercise of due and reasonable care and protection - In view of the facts as well as the communication by the sugar institute and also in view of the statements of civil engineer, It is found that the accident which has caused the loss of the molasses to the Appellant was unavoidable. Appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 242
  CENVAT Credit - input services - erection, erection & commissioning services - construction services - insurance services - Rule 2(l) of CENVAT Credit Rules, 2004 - Held that:- With regard to erection, erection & commissioning, even after amendment w.e.f. 01/04/2011 falls under the definition of input service whereas only a civil construction has been excluded. Further, the appellant has paid the entire service tax before the issue of show-cause notice and therefore the demand of interest and imposition of penalty is not warranted. Further, after the amendment in the definition of input service, only the civil construction which is only a part of it as per the Annexure to the show-cause notice is only excluded whereas insurance, erection, erection & commissioning fall under the definition of input service and the appellant is entitled to take CENVAT credit of the same. Appeal allowed in part and part matter on remand.

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• 2019 (3) TMI 241
  CENVAT Credit - input services - Air & Rail Travel Booking Services - Held that:- When it is not under dispute that the Air Travel Agent Service was used for travelling of official staff for the Companies purpose within and outside the country the services were used in or in or in relation to overall manufacturing and business of the appellant company., credit cannot be denied - This issue has been considered in the decision of Keihin Fie Pvt. Ltd. [2017 (10) TMI 122 - CESTAT MUMBAI] wherein the credit of Air Travel Agent Booking Service were allowed - credit allowed - appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 240
  CENVAT Credit of CVD - Import of coal - N/N. 12/12-Cus dated 17.03.2012 - Held that:- The prohibition of availment of Cenvat credit on CVD paid on coal is only in respect of the duty paid under Central Excise N/N. 12/12-CE dated 17.02.2012 whereas in the present case the CVD was paid under N/N. 12/12-Cus dated 17.03.2012 on which there is no bar provided under Rule 3(1) Cenvat Credit Rules, therefore, the Cenvat Credit on the CVD paid on imported coal is admissible - credit allowed - appeal dismissed - decided against Revenue.

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• 2019 (3) TMI 239
  CENVAT Credit - capital goods - S.S. Corrugated Flexible House Pipes, Stoplik style, PTFE Gasket, Plastic Mould Articles, M.S. Reactor Kemrok Perforated Trays, G.I. Bolts, and Nuts/Zubc/washers, Ball Zinc Plated (Nut), G.I. Nut Ball, Plain washers-zinc plated, etc. - Held that:- Since, the department stand was that it is not falling under respective chapter heading specified under the capital goods, therefore, it is not capital goods but even if it does not fall under the respective chapter heading of capital goods but if the goods qualifies as an accessories then the Cenvat Credit is admissible irrespective it falls any chapter heading. However, the factual aspect of use of these items according to which it can be decided that whether these goods are accessories or otherwise has not been carried out, therefore, matter need to be remanded to the adjudicating authority only for limited aspect that whether all these goods were used as an accessory for erection of structure of plant and machinery. Appeal allowed by way of remand.

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• 2019 (3) TMI 238
  Classification of goods - Mixed Fuel Oil - whether the product is classifiable as Motor Spirit under tariff heading 2710 19 90? - Held that:- In an identical issue, in the appellant’s own case M/S GAIL (INDIA) LTD. VERSUS C.C.E & S.T. VADODARA-II (VICE-VERSA) [2019 (1) TMI 174 - CESTAT AHMEDABAD] has been decided in their favor - appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 237
  CENVAT Credit - capital goods/input - MS Angles, MS Channels, MS Beams and joists - extended period of limitation - Held that:- A manufacturer is entitled to avail cenvat credit on the articles, which may either qualify to be called as capital goods as defined under section 2 (i) of CCR, 2004 or qualify as inputs defined under Section 2 (k) of CCR, 2004 - Apparently and admittedly, the articles MS Angles etc. etc. do not qualify under any of the clauses (i) to (vii) of Rule 2 (i) of CCR, 2004 and thus have rightly denied to be the capital goods by Commissioner (Appeals). The order under challenge is however silent about the entitlement of the appellant to avail cenvat credit, if these goods qualified the definition of being called as inputs. Commissioner (Appeals) has committed an error while holding that there is no documentary evidence on record to indicate that the disputed items were, used in the manufacture of said capital goods - The total emphasis of appellant being confused about the impugned goods to be capital goods or inputs also is of no significance, because in either of the case appellant is entitled to avail the cenvat credit - Availing the said credit qua inputs at two different stage does not disentitle the appellant to avail the same. Time limitation - Held that:- The issue of availment of cenvat credit by the appellant on the impugned goods was in the notice of Department at least since 2014. The allegation of suppression, therefore, of fact cannot sustain against the appellant - The period involved in the present show cause notice is w.e.f. April 2013 to September, 2013 and the show cause notice is dated 22nd July, 2015. Apparently it is beyond the normal period of limitation - there was no ground with the Department to invoke the proviso to Section 73 of Central Excise Act, 1944 for the extended period of limitation - thus, SCN is barred by time. Appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 236
  CENVAT Credit - input services - Development of vendor network - Development of dealer network - Support for quality management - Marketing and promotion support - Assistance in statutory compliance - Assistance in collection of funds - Market information service - Business support service - Held that:- The Adjudicating Authority erred in determining the nature of services concerned herein. The Appellant in its appeal has discussed the nature of services received from HMSI in great detail. The Appellant has also enclosed evidences in form of photographs and e-mail correspondences which duly evidence the nature of services received. These services do not tantamount to sales commission agency. The Adjudicating Authority has merely relied upon the manner of determining consideration, i.e. percentage of sales, to arrive at the decision - the nature of a service depends on the activity undertaken and its intended object. The parties to contract are free to determine the consideration. If the revenue’s contention is accepted, the nature of services will be sales commission wherever consideration is determined basis the sales percentage regardless of the activity undertaken. The contention flies in face of logic. The definition of input service is contained in Credit Rules, whose overall objective is to eliminate cascading effect. The cascading effect has degenerative effect on the economy and burdens the ultimate consumer. The beneficent intent of Credit Rules calls for a liberal approach to interpretation of provisions contained therein. The Means clause is not merely restricted to processing and clearing of goods. The activity of manufacture is not possible without use of inputs, capital goods and input services. Thus, services received for procurement of inputs and capital goods will also fall within the sweep of Means clause - The Inclusive clause further extends the scope of input service to cover services used in relation to broad heads mentioned therein. These broad heads cover, legal, accounting, credit rating, share register, financing. These broad heads cover a range of services which are not theoretically essential for undertaking manufacturing activity but are important for infusing commercial feasibilities and practicalities in the business of manufacture. Development of vendor network - Held that:- HMSI identifies potential vendors and undertakes scrutiny by inspecting their premises, raw materials, quality and processes employed. The activity of manufacture is not possible without vendors supplying raw materials. Thus, the above service qualifies under Means clause and ‘procurement of inputs’ under Inclusive clause - Credit allowed. Development of dealer network - Held that:- HMSI inspects two-wheelers upon receiving a complaint. In case defect is found in any of the parts, HMSI issues an alert to Appellant for undertaking necessary measures. The Appellant may on such alert identify the stocks kept, cease procurements from certain vendors and hold dispatches. The above services form advance alert mechanism helping the Appellant ensure quality of manufactured final products supplied - these services squarely qualify under ‘quality control’ specifically mentioned under Inclusive clause - credit allowed. Support for quality management - Held that:- HMSI inspects two-wheelers upon receiving a complaint. In case defect is found in any of the parts, HMSI issues an alert to Appellant for undertaking necessary measures - The above services form advance alert mechanism helping the Appellant ensure quality of manufactured final products supplied. Thus, these services squarely qualify under ‘quality control’ specifically mentioned under Inclusive clause - credit allowed. Marketing and promotion support - Held that:- Evidently, Appellant forms the only supplier of Honda genuine parts and accessories. The above services help the Appellant in securing the sales of its final products. Accordingly, these services qualify under ‘sales promotion’ specifically mentioned under Inclusive clause - credit allowed. Assistance in statutory compliance - Held that:- HMSI assists the Appellant by following up with dealers for From-C and intimating the Appellant about status of such dealers. The above services are safely covered as services received in relation to ‘legal’ and ‘accounting’ under Inclusive clause - credit allowed. Assistance in collection of funds - Held that:- The Appellant takes recourse to field staff of HMSI for undertaking follow-ups with dealers for settlement of accounts and balance reconciliations. HMSI also intimates Appellant with respect to impending termination of dealer to ensure timely recovery of sale proceeds. It is trite that sales proceeds form a major source of internal finances - the services are squarely covered under ‘financing’ in Inclusive clause - credit allowed. Market information service - Held that:- The sustenance of a strong vendor and dealer network is vital for continuous manufacturing activity. The Appellant through such interactions can ensure that the concerns highlighted by vendors and dealers can be rectified in timely manner without having an adverse impact on manufacturing activity. The above services are part and parcel of business of manufacturing activity covered under Means clause - The above services are also covered under ‘procurement of inputs’, ‘sales promotion’ and ‘quality control’ specifically mentioned under Inclusive clause - credit allowed. Also, there is no merit in the revenue’s contention that services must be received within the factory in order to qualify as ‘input service’. Services of sales commission agent - Held that:- Since, it s already held that impugned services do not qualify as ‘sales commission agent’ and further observed that impugned services fall within the sweep of definition of ‘input services’, there is no need to examine the admissibility of credit on services of sales commission agent. Penalty - extended period of limitation - Held that:- Since the Appellant has rightly availed credit on impugned services, there is no question of imposition of penalty in the present case - Also, there is no positive activity on the part of Appellant to avail inadmissible credit or defraud the revenue. For this reason, neither any penalty is imposable nor extended period is invokable. Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2019 (3) TMI 235
  Validity of remand order - Whether the order of the Tribunal below in sustaining the remand of the matters for A.Y. 2012-13 (U.P.) by the first appellate authority despite the application dated 13.06.2017 moved by the revisionist for its withdrawal and without there being any request made by the department for enhancement of assessment is contrary to the provisions of Section 55 of the U.P. VAT Act? Held that:- The nature of the right given to the assessee was examined by this Court in the case of R.R. Brick Factory Vs. Commissioner Of Sales Tax [2004 (5) TMI 537 - ALLAHABAD HIGH COURT]. Though it is true, in that case, the Court had the occasion to consider the language of the proviso to Section 9(3)(b) of the U.P. Sales Tax Act, 1948, however, it cannot be denied that the language of proviso to Section 55(5) of the Act is pari materia in material aspect i.e. as to the effect of a proper application filed to Section 9(3)(b) of the U.P. Sales Tax Act, 1948. The first difference in the language of two provisions appears to be, under the Central Act, the person/authority who could make the 'request' and defeat the right of the assessee to withdraw his appeal was not specified. It could be made by any authority. Only requirement was it (request), had to exist for the purpose of making the enhancement of tax or penalty as the case may be whereas under the VAT Act that request may be made by the Commissioner (as defined under the Act). It includes within its meaning officers of the rank of Joint Commissioner and above - Second, the request now required to be made not with respect to enhancement but to examine the legality or propriety of the order under appeal. However, as to the effect of the application being moved in absence of such request, the two provisions are pari materia. Once the assessment had been made by the assessing authority, no power survived with him to either directly review that order or to ask any authority to be permitted him to review the same. The assessing authority did not have a right to defeat the withdrawal application filed by the assessee. The legislature appears to have been conscious of the fact that an appeal that may be filed by the assessee may be at different stages of hearing before the first appeal authority when the appellant-assessee may choose to withdraw his appeal - Therefore, the proviso to Section 55(5) of the Act clearly states, the appeal authority may allow the appeal to be dismissed as withdrawn “at any stage” of the appeal. The only rider that has been placed being while doing so, the appeal authority may have the right to make such observations as it may deem fit. Interestingly, after rejecting the assessee's application to withdraw the appeal, the appeal authority did not pass the final order with reference to his powers under Section 55(5)(a)(ii) of the Act. It has not made any enhancement to the assessed turnover of the assessee. He has not varied the turnover assessed - Therefore, even if it is assumed, there existed any power with the appeal authority to decide assessee’s appeal on merits even then, the appeal order could not be justified on that reasoning inasmuch as the eventual order passed by the appeal authority is not to enhance the assessment but to set aside the same which is referable to Section 55(5)(iii) of the Act. Once the assessee filed an application to withdraw his appeal, in view of that right having been given to him under the proviso to Section 55(5) of the Act, the assessee had validly interjected the appeal authority's inquiry and clearly signified his intent to not press any ground of challenge raised by him, in his appeal. The assessee thus successfully prevented the appeal authority from passing any order in his favour that may further allow the appeal authority to issue any directions for the purpose of conduct of a fresh inquiry for the purpose of making fresh assessment - the appeal authority had no jurisdiction surviving in him to pass any order referable to Section 55(5)(iii) of the Act after the assessee had filed an application to withdraw his appeal and there was no request made by the Commissioner to examine the legality or propriety of the order under appeal. Appeal allowed - decided in favor of assessee.

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• 2019 (3) TMI 234
  Validity of remand order - remand was only for reason of the assessment order having been passed ex parte and there was a direction to consider the issues afresh after hearing the assessee - whether in an appeal from the order dated 10.03.2010, the assessee could agitate the issues, which were considered by the Assessing Officer on remand made by the first Appellate Authority and the Tribunal; by order dated 04.02.2008? Held that:- It is clear that the direction was to make assessment and pass fresh orders in accordance with law. It was also directed that there shall be no rejection of the appellant's claim for exemption for trade discount, solely on the ground that the discount amounts were not shown in the sale invoices. The remand applied only to the trade discounts. Despite the High Court judgment having been given effect to by order dated 10.03.2010, necessarily, the Assessing Officer would have to further modify the assessment, insofar as the trade discount is concerned. The two issues, which were remanded by the first Appellate Authority and the Tribunal were finalised by the order dated 04.02.2008 (Annexure-F), which was not challenged in a statutory appeal. If there was such a challenge made, going by the Full Bench decision, the issues decided by the first Appellate Authority with respect to From 25A, could have been agitated before the Tribunal and the issue of stock transfer decided by the Tribunal and remanded for computation, could have been agitated in all its aspects before the High Court. The assessee failed to challenge the order dated 04.02.2008. The issues having been resolved finally and the order having acquired finality by sheer passage of time, an appeal from the order dated 10.03.2010 could not agitate those issues settled by that earlier order dated 04.02.2008. The order dated 04.02.2008 had acquired finality for no appeal having been preferred therefrom. The question of law framed, hence is answered in favour of the revenue - revision dismissed.

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• 2019 (3) TMI 233
  Imposition of penalty - non-production of one Invoice for 25 health monitors - GR produced contained the full quantity of goods during voluntary reporting of goods at the time of entry into State at the ICC - Held that:- It has been categorically recorded by the Tribunal that undisputedly there were 55 multipara monitors in the vehicle. The goods receipt so produced also indicated the same number of monitors. The assessee produced VAT invoice for only 30 multipara monitors when the goods were apprehended and the goods did not coordinate to the goods receipt and VAT invoice No. 00156 dated 09.07.2013 related to only 30 monitors. It has been further recorded by the Tribunal that while preparing VAT XXVIA of the Excise and Taxation Officer, Himachal Pradesh, the assessee furnished the information to the Excise and Taxation Department, Himachal Pradesh that there were only 30 monitors - It was concluded by the Tribunal that there was intention to evade the tax on the part of the assessee. With regard to penalty under Section 51(12) of the PVAT Act, it was recorded that since the transporters had disclosed the information regarding the consignor and consignee of the goods, therefore, no offence under Section 51(12) of the PVAT Act was made out. Consequently, penalty under Section 51(7)(c) of PVAT Act was imposed to the tune of Rs. 7,87,500/-. The findings of fact recorded by the authorities below have not been shown to be illegal or perverse by the learned counsel for the appellant-assessee, warranting interference by this Court. No substantial question of law arises - appeal dismissed - decided against appellant.

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• Indian Laws

• 2019 (3) TMI 232
  Maintainability of review petition - doctrine of merger - Whether review petition is maintainable before the High Court seeking review of a judgment against which the special leave petition has already been dismissed by this Court? - Held that:- Explaining the doctrine of merger, the Court held that logic behind this doctrine is that there cannot be more than one decree or operative orders governing the same subject matter at a given point of time. When a decree or order passed by an inferior Court, Tribunal or Authority is subjected to a remedy available under law before a superior forum, then, though the decree or order under challenge continues to be effective and binding, nevertheless, this finality is to put in jeopardy. Once the superior court disposes of the dispute before it in any manner, i.e. either by affirming the decree or order or by settings aside or by modifying the same, it is the decree of the superior Court, Tribunal or Authority which is the final binding and operative decree and the decree or order of the lower Court, Tribunal or authority gets merged into the order passed by the superior forum. Having noted the two judgments of ABBAI MALIGAI PARTNERSHIP FIRM ANR. VERSUS K. SANTHAKUMARAN ORS. [1998 (9) TMI 663 - SUPREME COURT OF INDIA] and KUNHAYAMMED AND OTHERS VERSUS STATE OF KERALA AND ANOTHER [2000 (7) TMI 67 - SUPREME COURT], and particularly the fact that the earlier judgment in the case of Abbai Maligai Partnership Firm is duly taken cognisance of and explained in the latter judgment, we are of the view that there is no conflict insofar as ratio of the two cases is concerned. Moreover, Abbai Maligai Partnership Firm was decided on its peculiar facts, with no discussion on any principle of law, whereas Kunhayammed is an elaborate discourse based on well accepted propositions of law which are applicable for such an issue - thus, the detailed judgment in Kunhayammed lays down the correct law and there is no need to refer the cases to larger Bench, as was contended by the counsel for the appellant. Once we hold that law laid down in Kunhayammed is to be followed, it will not make any difference whether the review petition was filed before the filing of special leave petition or was filed after the dismissal of special leave petition. The review petition was maintainable. Therefore, the High Court was empowered to entertain the same on merits. Insofar as appeal of the appellant challenging the order dated December 12, 2012 on merits is concerned, the matter shall be placed before the regular Board to decide the same.

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• 2019 (3) TMI 231
  Amendment of the plaint - trial court declined the amendment on the ground that the application is an attempt to convert the suit filed by a private individual into a suit filed by a Private Limited Company which is not permissible as it completely changes the nature of the suit - Held that:- The plaint is not properly drafted in as much as in the memo of parties, the Plaintiff is described as Varun Pahwa through Director of Siddharth Garments Pvt. Ltd. though it should have been Siddharth Garments Pvt. Ltd. through its Director Varun Pahwa. Thus, it is a case of mistake of the counsel, may be on account of lack of understanding as to how a Private Limited Company is to sue in a suit for recovery of the amount advanced. The memo of parties is thus clearly inadvertent mistake on the part of the counsel who drafted the plaint. Such inadvertent mistake cannot be refused to be corrected when the mistake is apparent from the reading of the plaint - The Court always gives leave to amend the pleadings even if a party is negligent or careless as the power to grant amendment of the pleadings is intended to serve the ends of justice and is not governed by any such narrow or technical limitations. Thus, it was an inadvertent mistake in the plaint which trial court should have allowed to be corrected so as to permit the Private Limited Company to sue as Plaintiff as the original Plaintiff has filed suit as Director of the said Private Limited Company - the order declining to correct the memo of parties cannot be said to be justified in law - appeal allowed.

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