TMI Tax Updates - e-Newsletter
March 7, 2019

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Wealth tax Indian Laws

TMI SMS

• Addition u/s 37 & 40A - Distribution of profit in the guise of excessive price paid against purchase of sugarcane - AO directed to so paid

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Articles

1. CONTAINER FREIGHT STATIONS

   By: DR.MARIAPPAN GOVINDARAJAN

2. LLP Registration Online

   By: kanika khare

News

1. NABL launches Quality Assurance Scheme for Basic Composite Medical Laboratories

2. NITI Aayog to hold Conference on implementing SDGs in Aspirational Districts

3. India Signs Loan Agreement with the World Bank for USD 25.2 Million for Chhattisgarh Public Financial Management and Accountability Program

4. Government of India and World Bank Sign $250 Million Agreement for the National Rural Economic Transformation Project (NRETP) to boost Rural Incomes across 13 States in India

5. FM: Process of Reforms to continue; Focus on lower tax rate and wider tax base; Government committed to keep the Growth Momentum High and Inclusive to ensure that the benefits of growth reaches to all sections of the society including the vulnerable and weaker sections

Notifications

Income Tax

1. 13/2019 - dated 5-3-2019 - IT

Provision of section 56(2)(viib) of IT Act 1961, shall not apply to consideration received by a company for issue of shares that exceeds the face value of such shares in the case of Startup.

SEZ

2. S.O. 1109 (E) - dated 28-2-2019 - SEZ

Central Government rescinds Notification No. Notification Number S.O. 2132(E) dated 28th August, 2008

3. S.O. 1108 (E) - dated 28-2-2019 - SEZ

Central Government rescinds Notification No. S.O. 663(E) dated 12th March, 2009

4. S.O. 1106 (E) - dated 28-2-2019 - SEZ

Central Government notifies the 10.96 hectares area at Plot No. 1, Industrial Park, Kurubarapalli Village, Krishnagiri District, Tamil Nadu and constitutes an Approval Committee

5. S.O. 1102 (E) - dated 28-2-2019 - SEZ

Central Government rescinds Notification No. S.O. 2254(E) dated 3rd September, 2009

6. S.O. 1101 (E) - dated 28-2-2019 - SEZ

Central Government rescinds Notification No. S.O. 1237(E) dated 27th May, 2008

7. S.O. 1100 (E) - dated 28-2-2019 - SEZ

Central Government rescinds Notification No. S.O. 1116(E) dated 8th May, 2008

Circulars / Instructions / Orders

Income Tax

1. F. No. 225/363/2017-ITA.II - dated 5-3-2019

SOP for handling of cases related to substantial cash deposit during the demonetisation period in which notice under section 142(1) of the Income-tax Act, 1961 has not been complied

Central Excise

2. F.No.276/206/2018-CX.8A - dated 5-3-2019

Writ Petitions on Safeguard Duty on “Solar cells whether or not assembled in modules or panels”

Highlights / Catch Notes

Income Tax

• SOP for Handling Non-Compliance in Demonetization Cash Deposit Cases u/s 142(1) of Income-tax Act, 1961.

  Circulars : SOP for handling of cases related to substantial cash deposit during the demonetisation period in which notice under section 142(1) of the Income-tax Act, 1961 has not been complied
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• Income Tax Act: Section 56(2)(viib) Exemption for Startups Issuing Shares Above Face Value.

  Notifications : Provision of section 56(2)(viib) of IT Act 1961, shall not apply to consideration received by a company for issue of shares that exceeds the face value of such shares in the case of Startup.
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• Examining if profit components in State Advised Price u/ss 37 and 40A are legitimate expenses or profit distribution.

  Case-Laws - SC : Addition u/s 37 and 40A - distribution of profit in the guise of excessive price paid to the members against purchase of sugarcane - to the extent of the component of profit which will be a part of the final determination of SAP and/or the final price/additional purchase price fixed under Clause 5A would certainly be and/or said to be an appropriation of profit.
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• Seven-Year Delay in Filing Revision Petition u/s 264 Deemed Unjustifiable Due to Non-Communication of Intimation.

  Case-Laws - HC : Revision petition u/s 264 - the revision application was filed seven years later. By no stretch of imagination, such long period can be ignored. The petitioner simply, cannot take shelter of non-communication of the intimation or acceptance u/s 143(1).
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• No Penalty Imposed Despite Dispute Over Income Classification u/s 271(1)(c) of Income Tax Act.

  Case-Laws - AT : Penalty u/s. 271(1)(c) - Difference of opinion between the AO and the assessee about head of income under which ‘Particular Item’ is to be ‘assessed’ was and would remain a bone of contention between the AO and the assessee. - No penalty.
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• Tax Officer's Presumption u/s 292C Challenged; Court Rules Evidence Rebuttable, Deletes Undisclosed Income Addition.

  Case-Laws - AT : Undisclosed interest income - search & seizure u/s 132 - dump documents relied upon - AO has invoked the provisions u/s 292C that there is a presumption that the contents of the documents are true - assessee apparently goes to prove that the document is unnamed, unsigned, vague & ambiguous one and it is not proved on record also that if the same is in the handwriting of the assessee - the presumption arises u/s 292C is rebuttable one. Addition deleted.
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• Section 271(1)(c) Penalty Removed: Assessee's Deduction Allowed u/s 54F, No Inaccurate Income Reporting Found.

  Case-Laws - AT : Penalty u/s 271(1)(c) - not entitled for the deduction U/s 54 - claim deduction allowed U/s 54F - once, the assessee has explained the reasons for making a wrong claim and the facts explained by the assessee are duly established from the record and found to be true then even if the addition was made by the AO due to the claim made under wrong provisions of the Act. It will not amount to furnishing inaccurate particulars of income or concealment of particulars of income. Penalty deleted.
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• Section 153A: No Additions to Unabated Assessments Without Incriminating Material Found in Section 132 Search.

  Case-Laws - AT : Assessment u/s 153A - additions in unabated assessments - additions in unabated assessments without any incriminating material found during the course of search u/s 132 - no addition/disallowance was called in assessment year in which no incriminating material was found during the course of search at the premises of the assessee if the time limit of issuance of notice u/s 143(2) stood expired before the date of conducting search u/s 132.
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• Hotel Repairs and Renovations Costs Classified as Revenue Expenditure, Not Capital; No New Asset or Enduring Advantage Found.

  Case-Laws - HC : Nature of expenditure - revenue or capital expenditure - expenditures towards repairs and renovations of Assessee's hotel properties - Once CIT(A) as well as ITAT, on facts, have held that no new asset was brought into existence or new advantage of enduring nature was obtained. Expenditure should be allowed as revenue expenditure. No substantial question of law arise.
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• Bonuses to Directors Disallowed u/s 36(1)(ii) of Income Tax Act Due to Lack of Extra Services.

  Case-Laws - AT : Addition of bonus paid to the directors - disallowance u/s 36(1)(ii) - No extra services have been rendered for payment of commission - Two shareholders director were holding 50% each. Payment of bonus or commission is not allowable as deduction u/s 36(1)(ii) in the hands of the assessee company.
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• Taxation of Excess Share Premium: Section 56(2)(viib) Valuation Differences Between Preference and Equity Shares.

  Case-Laws - AT : Taxation of excess share premium received u/s 56(2)(viib) - basis of valuation - preference share versus equity shares - First it is to be decided that, which clause of Rule 11UA (1) is applicable for determination of share premium for preference shares specially in case when preference shareholders have voting rights or share will be converted in equity share.
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• TDS Not Required on Bank or Credit Card Charges for Ticket Sales u/s 194H, Court Rules in Favor of Assessee.

  Case-Laws - AT : TDS u/s 194H - commission or brokerage - amount retained by Banks/ Credit Card Agencies - assessee was not required to deduct TDS on charges retained by Bank / credit card agencies out of the sale consideration of tickets booked through credit / debit cards - Decided in favour of assessee.
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• Court Upholds Approved Valuer's Report for Asset Valuation Over DVO's in Capital Gain Case.

  Case-Laws - AT : Capital gain computation - cost of acquisition of the asset as on 01.04.1981 - valuation report of the DVO Vs. Registered valuer Report - Approved Valuer’s report taking into consideration various factors applicable for the area of Vasant Vihar, then same does not loses his credence to DVO’s report. It has to be given a credible importance and it cannot be said that the DVO’s report should supersede the Approved Valuer’s report.
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• Court Grants Conditional Relief in 100 Crore Tax Case, Citing Natural Justice Violation Under Income Tax Act Section 220(6.

  Case-Laws - HC : Stay of demand u/s 220(6) - recovery proceedings - Writ for stay without filing appeal - violation of principles of natural justice - more than 100 crores addition on account of Unaccounted sales of unaccounted production of dairy products - Conditional relief granted on such facts.
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• Assessee Proves Identity and Genuineness of Transaction; Revenue Fails to Link Undisclosed Income to Share Capital u/s 68.

  Case-Laws - AT : Addition u/s 68 - assessee has discharged the initial onus cast on it in terms of identity, creditworthiness and genuineness of the transaction - Genuineness accepted in investor company u/s 143(3) - no linkage which can be said to have been established by the Revenue between the assessee’s undisclosed income which is routed back in form of share capital - addition not sustainable.
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• Assessment Reopening u/s 147 Needs Further Investigation for Validity; Jurisdiction Without It Is Unfounded.

  Case-Laws - AT : Reopening of assessment u/s 147 - - reopening based on report of the Investigation Wing - Assessing officer can rely on the report of DIT, Investigation Wing but at the same time, where he is assuming jurisdiction u/s 147, he is required to carry out further examination and analysis in order to establish the nexus between the material and formation of belief that income has escaped assessment and in absence thereof, the assumption of jurisdiction u/s 147 has no legal basis and resultant reassessment proceedings deserve to be set-aside
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• Assessee's Proof of Share Applicants Shifts Burden to AO u/s 68: PAN, Bank Statements, and More Key.

  Case-Laws - AT : Addition u/s 68 - If assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants by placing PAN details, bank account statements, audited financial statements and Income Tax acknowledgments then the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO will not sustain.
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• Tribunal to Reassess Charitable Registration Eligibility u/s 12AA Following Commissioner's Dissatisfaction; ITAT to Review Case.

  Case-Laws - HC : Charitable activity - eligibility for registration u/s 12AA - commissioner considering all the factual aspects recorded his dis-satisfaction u/s 12AA(1). Tribunal requires to pass speaking order to give a factual finding as to how the Commissioner erred in appreciating the materials placed before him - Matter restored before ITAT
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Customs

• Date of Bill of Lading Crucial for Peas Consignment Import Under Foreign Trade Policy (FTP.

  Case-Laws - HC : Relevant date of imports for the purpose of FTP - the relevant date for reckoning the import of the consignments of peas is the date of Bill of Lading.
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• Adjudicating Show Cause Notices with pending settlement applications contradicts statutory framework, undermining settlement provisions.

  Case-Laws - HC : The adjudication of Show Cause Notice in respect of which a settlement application has been made (and allowed to be proceeded with) is not just contrary to the statutory scheme, but also defeats the very purpose of the settlement provisions.
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• Court Rules Director Not Personally Liable for Company Dues Under Customs Act; Demand Notice Quashed.

  Case-Laws - HC : Liability of Director for dues of the company under Customs Act - Piercing of veil - dues of the company cannot be recovered from the petitioner personally. The demand notice to that extent is quashed and set aside.
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Indian Laws

• Company Mislabels Wages as Allowances to Avoid Deductions for Employee Provident Fund Contributions.

  Case-Laws - SC : Scope of basic wages - the allowances in question were essentially a part of the basic wage camouflaged as part of an allowance so as to avoid deduction and contribution accordingly to the provident fund account of the employees.
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• High Court Mistake: Company Charged for Cheque Dishonor Without Demand Notice as per Section 138 Proviso.

  Case-Laws - SC : Dishonor of Cheque - in the absence of a notice of demand being served on the company and without compliance with the proviso to Section 138, the High Court was in error in holding that the company could now be arraigned as an accused.
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IBC

• Insolvency Professional Barred for 10 Years by Disciplinary Committee for Default Under Insolvency and Bankruptcy Code 2016.

  Case-Laws - Board : Default by insolvency professional (IP) - Disciplinary Committee debars her from seeking fresh registration as an insolvency professional or providing any service under the Insolvency and Bankruptcy Code, 2016 for ten years.
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Central Excise

• Court Reviews Safeguard Duty on Solar Cells: Impact on Imports and Pricing Under Judicial Scrutiny.

  Circulars : Writ Petitions on Safeguard Duty on “Solar cells whether or not assembled in modules or panels”
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• Goods Classification Must Preserve "Motor Spirit" Entry's Purpose Under Central Excise Law; Avoid Interpretations That Nullify Specific Entries.

  Case-Laws - AT : Classification of goods - Any interpretation that makes the specific entry, ‘motor spirit’ and its definition appearing in supplementary notes, otiose, cannot be the correct interpretation.
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VAT

• Clarification: "Holding of stock" in statute refers to running stock, not turnover, affecting VAT and Sales Tax rules.

  Case-Laws - HC : Interpretation of statute - holding of stock - scope of the word “held” - the holding of stock, as found in the provision, can only be running stock and not the turnover in any event.
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• Assessee's Claim Rejected Under TNVAT Act Section 27(4)(1) for Being Time-Barred; No Penalty Imposed Due to No Wrongdoing.

  Case-Laws - HC : Penalty u/s 27(4)(1) of TNVAT Act - the claim made by the assessee was outrightly rejected by the Assessing Officer as time barred and therefore, there is no allegation that the assessee had wrongly availed input tax credit - No penalty
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Case Laws:

• Income Tax

• 2019 (3) TMI 321
  Addition u/s 37 and 40A - distribution of profit in the guise of excessive price paid to the members against purchase of sugarcane - excessive and unreasonable cane purchase price paid to the members of the sugarcane Co-operative Society - amount paid by the society to its members/non-members above the SMP price/price determined under Clauses 3 & 5A of the Control Order, 1966 - excess cane price paid to the cane growers over the SMP - purchase price paid is excessive and unreasonable - sharing of profit/appropriation of profit V/S allowable as expenditure - HELD THAT:- to the extent of the component of profit which will be a part of the final determination of SAP and/or the final price/additional purchase price fixed under Clause 5A would certainly be and/or said to be an appropriation of profit. However, at the same time, the entire/whole amount of difference between the SMP and the SAP per se cannot be said to be an appropriation of profit. Only that part/component of profit, while determining the final price worked out/SAP/additional purchase price would be and/or can be said to be an appropriation of profit and for that an exercise is to be done by the assessing officer by calling upon the assessee to produce the statement of accounts, balance sheet and the material supplied to the State Government for the purpose of deciding/fixing the final price/additional purchase price/SAP under Clause 5A of the Control Order, 1966. Merely because the higher price is paid to both, members and non-members, qua the members, still the question would remain with respect to the distribution of profit/sharing of the profit. AO will have to take into account the manner in which the business works, the modalities and manner in which SAP/additional purchase price/final price are decided and to determine what amount would form part of the profit and after undertaking such an exercise whatever is the profit component is to be considered as sharing of profit/distribution of profit and the rest of the amount is to be considered as deductible as expenditure. The question of law is answered accordingly, partly in favour of the department and partly in favour of the assessee. The impugned orders passed by the High Court, ITAT, CIT(A) as well as the assessing officers are hereby quashed and set aside and the matters are remitted to the respective assessing officers to undertake the exercise as stated hereinabove and after giving an opportunity to the respective assessee's.

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• 2019 (3) TMI 320
  Reopening of assessment - notice issued beyond the period of four years from the end of the relevant Assessment year - deemed dividend addition u/s 2(22)(e) - scrutiny assessment initiated - HELD THAT:- We find that the AO's reasons for reopening the assessment are based entirely on one ground, namely that the assessee had received a sum of Rs. 3.09 crores (rounded off) of a loan from one Rupani Spinning Mills Pvt. Ltd and looking to the share structure of the two companies, such transaction would fall within the fold of section 2 (22) (e), and had to be treated as deemed dividend in hands of the assessee. AO in the reasons recorded, has proceeded entirely on the material already brought on record, during original assessment. No additional material available with the Assessing Officer, on the basis of which, he could have formed a belief that income chargeable to tax has escaped assessment. There was no failure on the part of the assessee to disclose true and full material facts. AO in the reasons recorded, has not demonstrated in any manner, how this important requirement of section 147 was satisfied. In the reasons, he agrees that the assessee had produced Books of Accounts, Annual Reports and Audited Profit and Loss Accounts and Balance Sheets and other documents. One more ground on which the impugned notice cannot sustain is that, during scrutiny assessment, the Assessing Officer had raised various queries which, were duly answered by the assessee. In a communication dated 8.10.2014, replying to the queries of the Assessing Officer, the petitioner besides other information, had provided shareholding pattern of the companies from and to whom, loans and advances were obtained or given. Along with his communication, the petitioner had annexed Annexures, one of them contained details of secured and unsecured loans, taken from various lenders, and one of which was Rupani Spinning Mills Pvt. Ltd from whom during the period, relevant to the Assessment year, in question, a loan of Rs. 3.09 crores was shown to have been received. Petitioner had given detailed reasons why such loan cannot be treated as deemed dividend under section 2 (22) (e) . It was after such detailed scrutiny of the issues at hand, that the Assessing Officer in the order of assessment made no addition. Under the above circumstances, it was not open for the Assessing Officer to rely upon this ground to reopen assessment- Decided in favour of assessee

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• 2019 (3) TMI 319
  Reopening of assessment - assessee as beneficiary of bogus accommodation entries - receipts in question related to which assessment year? - non disposal of assessee's objections - HELD THAT:- While disposing of the objections, the Assessing Officer did not clearly meet with this opposition of the petitioner. He instead, gave a rather general disposal to this ground. The petitioner has also produced with this petition, correspondence entered into by the petitioner with the Assessing Officer during the assessment for the assessment year 2010-11, in which the petitioner had supplied full details of the said receipts from the said two entities. Clearly therefore, the petitioner has built up a strong case to establish that the receipts in question never related to the present assessment year. The Assessing Officer simply cannot take shelter under the ground that all these aspects can be examined under the reassessment proceedings. When the very foundation of the reassessment is missing, it would be impermissible for the Assessing Officer to carry on the reassessment based on such notice. - Decided in favour of assessee.

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• 2019 (3) TMI 318
  Revision petition u/s 264 - period of limitation of one year for filing a revision application - HELD THAT:- It is not disputed that once the petitioner filed the return of income, the scrutiny assessment thereof, would become time-barred upon expiry of the period prescribed under the statute. This would happen sometime in the year 2010. The knowledge that the department does not propose to take the return of income for scrutiny assessment, can be attributed to the petitioner. If the petitioner had any dispute with the department accepting his return as per declaration made in it, the petitioner had to file an appropriate revision application before the Commissioner of Income Tax, within a period of one year thereafter, and at any rate, explaining the delay caused in filing such a revision application beyond the said period. In the present case, the revision application was filed seven years later. By no stretch of imagination, such long period can be ignored. The petitioner simply, cannot take shelter of non-communication of the intimation or acceptance u/s 143 (1). If, the petitioner wanted to dispute his own declaration in the return, he had to take appropriate steps before the Commissioner of Income Tax within the period of limitation prescribed which in the present case, is not done.

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• 2019 (3) TMI 317
  Penalty u/s. 271(1)(c) - change of head of income - assessee claimed the transactions relating to mutual fund constituted part of his business and loss to be treated as its business loss - AO treated the loss as ‘Short Term Capital Loss’ - HELD THAT:- Mere change of head of income should not result in automatic levy of penalty. The details about the ‘business loss’ or ‘Short Term Capital Loss’ were available on the record. Therefore, it cannot be said that assessee had filed ‘Inaccurate Particulars of Income’. Even if a unsubstantiated claim is made in the return of income, it cannot be held that the assessee is liable for levy of penalty u/s. 271(1)(c). Difference of opinion between the AO and the assessee about head of income under which ‘Particular Item’ is to be ‘assessed’ was and would remain a bone of contention between the AO and the assessee. But such differences should not and cannot result in invoking the penal provisions of chapter XXI of the Act. Therefore, we delete the penalty and allowed these grounds raised by the assessee.

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• 2019 (3) TMI 316
  Bogus purchases - information received from the Investigation Wing - assessee company was one of the beneficiaries of Hawala transactions routed through the hawala dealers as informed by the Sales Tax (VAT) Department, State of Maharashtra - HELD THAT:- The facts of the case indicate that assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee savings on account of non-payment of tax and others at the expense of the exchequer. In such situation on the facts and circumstances of the case, 12.5 % disallowance out of the bogus purchases meets the end of justice. However, in this regard the learned counsel of the assessee has prayed that when only the profits earned by the assessee on these bogus purchase transaction is to be taxed the gross profit already shown by the assessee and offered to tax should be reduced from the standard 12.5% being directed to be disallowed on account of bogus purchase.

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• 2019 (3) TMI 315
  Capital gain computation - reference to DVO - adoption of full value consideration as per the stamp duty valuation u/s 50C - AO referred to the value to the DVO who determined the fair market value at Rs. 15,33,800/- of each ½ share - assessee has objected to the adoption of full value consideration U/s 50C and submitted that the registered valuer has given the specific reasons for lesser value of the property in question - HELD THAT:- We find that the DVO has determined the fair market value of the property at Rs. 15,33,800/- whereas the registered valuer has determined the fair market value of the property at Rs. 13,22,227/- for each ½ share of the assessee. Thus, it is clear that the determination of fair market value is subjective to the individual decision and therefore, to adopt a fair and proper value average of two fair market value determined one by the DVO and another by the registered valuer can be adopted as fair market value U/s 50C which comes to Rs. 14,28,013/-. Accordingly, the AO directed to adopt fair market value of the ½ each share of the property at 14,28,013/-. Disallowance of cost of renovation and brokerage charges - Each of the joint owner has claimed renovation expenses - HELD THAT:- Once the shop was used after the renovation for business purpose and the nature of expenditure is not any addition to the shop but it is an ordinary and repair work therefore, the current repair charges cannot be allowed as cost of acquisition. As regards the brokerage charges of Rs. 81,000/- we find that the assessee has produced a receipt from the broker however, the charges of Rs. 81,000/- each are very high in comparison to the prevailing rate of brokerage in the real estate transaction. Accordingly, we allow 2% of the sale consideration declared in the sale deed as brokerage charges which comes to Rs. 26,000/- each for both the assesseess. Accordingly, the brokerage charges are allowed partially to the extent of 2% of the sale consideration declared by the assessee. Appeals of the assessees are partly allowed.

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• 2019 (3) TMI 314
  Penalty u/s 271(1)(c) - disallowance claimed by the assessee under the head “professional and legal charges” by treating the same as capital expenditure - HELD THAT:- When there is two views if the expenditure claimed are capital or revenue in nature, again there is no question of attracting provisions contained under section 271(1)(c). AO himself is not satisfied since the time of framing assessment as to under which limb of section 271(1)(c) penalty is to be levied, he cannot be permitted under law to wash of his hands by taking recourse to Explanation 1 to section 271(1)(c) by placing the entire onus on the assessee to prove that there is no concealment of income/furnishing of inaccurate particulars of income. Penalty order further make it clear that at no point of time right from the passing of the assessment order till passing the penalty order, AO has not made himself satisfied or clear enough if the assessee has furnished inaccurate particulars of income or has concealed the particulars of income. The case of Sundaram Finance Ltd.[2018 (10) TMI 1451 - SUPREME COURT] as relied upon by ld. DR for the Revenue is not applicable to the facts and circumstances of the case. Decision rendered in CIT vs. SSA’s Emerala Meadows [2016 (8) TMI 1145 - SUPREME COURT] and CIT vs. Manjunatha Cotton and Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] are squarely applicable to the facts and circumstances of the case as the AO has miserably failed to specify in the notice issued under section 274 read with 271(l)(c), "as to whether the assessee has concealed the particulars of his income or has furnished inaccurate particulars of such income”, so in these circumstances, penalty levied by the AO and confirmed by CIT (A) is not sustainable in the eyes of law. Consequently, the appeal filed by the assessee is allowed.

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• 2019 (3) TMI 313
  Adhoc disallowance being 10% of sale promotion expenses - allowable business expenses - HELD THAT:- We find that though assessee has given the list of the item distributed to various customers, however, nowhere it is borne out from the records as to whether distribution of gold and diamond ring and chains were part of the sales promotion activities. Neither any pamphlet of any scheme of sales promotion has been filed nor has any business purpose been shown specifically when the items distributed are more of a personalized in nature. In absence of any proper evidence to demonstrate that these items were actually used for business purpose, AO was far more reasonable in disallowing only 10% of the said expenditure. Accordingly, ground raised by the assessee on this score is dismissed. Disallowance being exhibition expenses incurred on the ground that these did not pertain to impugned Assessment Year - allowable business expenditure - HELD THAT:- When the payment of participation for exhibition purpose has been made in this year then ostensibly such a payment is revenue in nature incurred for the purpose of business, then the same has to be allowed in the year in which it has been incurred, because for participating in the exhibition it was essential that payment has to be made in advance even if such an exhibition of international trade fair was to be held in the next Assessment Year. Hence, the expenditure incurred cannot be disallowed on this ground. The exhibition expenses paid by the assessee in this year has to be allowed as business expenditure and thus, the ground raised by the assessee on this score is allowed.

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• 2019 (3) TMI 291
  Reopening of assessment - addition u/s 68 - HELD THAT:- So far as receipt from Prakruti Infrastructure P. Ltd. is concerned the CIT(A) has rightly observed that since this is a case of repayment of loan given by the assessee, there is no requirement on the part of the assessee to prove the source of funds in the hands of Prakruti Infrastructure P. Ltd. There cannot be any dispute on the above reasoning. We are supported by the decision in Veedhata Tower Pvt. Ltd. (2018 (4) TMI 1004 - BOMBAY HIGH COURT) and M/s SDB Estate Pvt. Ltd. (2018 (3) TMI 1592 - BOMBAY HIGH COURT). In so far as, the receipt of Rs. 50,00,000/- from Shri Dharmendra Bhanushali and Rs. 20,00,000/- from Ms. Tulsiben Bhanushali is concerned. The Ld. CIT(A) has directed the assessee to file the copies of confirmation and cheques before the AO as delineated at para 4.1 hereinbefore. Thus we uphold the order of the Ld. CIT(A). - Decided against revenue

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• 2019 (3) TMI 290
  Recovery proceedings - provisional attachment u/s 281B - directing the petitioner to remit some portion of the disputed dues to sufficiently protect the interests of the revenue - HELD THAT:- As per the Schedule, the impugned provisional attachment covers the property situated at No.1, City Link Road, Adambakkam, Chennai, under the name and style of ‘Shantiniketan Altair’ comprising 414 apartments. 362 apartments have been sold and 52 remained unsold. As against the number of apartments remaining unsold, the petitioner has, as on date, confirmed the sales of nine (9) apartments that are pending registration. The following directions are issued: (i) The petitioner will deposit a sum of Rs. 50,00,000/- (Rupees fifty lakhs only) to the department. (ii) Upon receipt of the sum of Rs. 50,00,000/- as above, the Department will restrict the present attachment under section 281 B to the flats in S.Nos.1 to 20 of the tabulation set out in paragraph 12 above along with the undivided share of land in relation thereto. Upon satisfaction of the above conditions, there shall be no further proceedings for recovery undertaken by the income tax department till the disposal of the petitioners’ first appeal.

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• 2019 (3) TMI 289
  Stay of demand u/s 220(6) - recovery proceedings - Writ for stay without filing appeal - violation of principles of natural justice - more than 100 crores addition on account of Unaccounted sales of unaccounted production of dairy products - Disallowance u/s 35(2AB) - deduction for expenditure incurred on scientific research and development - All bank account attached - HELD THAT:- At least nine hearings have been granted to the assessee prior to framing of the order of assessment thus not inclined to accept the submissions advanced by the petitioner in relation to the violation of principles of natural justice. An application for stay of demand in terms of section 220(6) states that an Assessing Officer may, at his discretion, consider a petition for stay only upon the assessee presenting an appeal to the first appellate authority under Section 246 of the Act. In the present case, admittedly, an appeal is yet to be filed. Learned counsel for the petitioner however, states on instructions that the petitioner proposes to challenge the impugned order of assessment forthwith and has not done so till date only on account of the pendency of this writ petition. This Court has proposed a via media as far as recovery is concerned, bearing in mind the interests of both parties. As suggested that the petitioner remit a sum of Rs. 5,00,00,000/- to the Income tax Department upon receipt of which the assessing officer will lift the attachments on three bank accounts of the petitioner namely, the accounts in the ICICI, HDFC and SBI. The petitioner is permitted to file an appeal within one week from today and if the lime limit as imposed is complied with, the Commissioner of Income Tax (Appeals) will take the appeal on file without reference to limitation. Further orders in regard to stay or otherwise, of recovery of the disputed demand, will be considered by the assessing officer upon proof that the appeal has been filed and the amount of Rs. 5,00,00,000/- remitted.

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• 2019 (3) TMI 288
  Charitable activity - registration under Section 12AA eligibility - Commissioner not satisfied in terms of Section 12AA(1)(a) - proof of objects of the trust are bona fide - non-speaking order - Lack of factual finding in Tribunal order - only the objects as stated in the trust deed and other matters should be examined only at the time of making regular assessment - HELD THAT:- If Tribunal was of the view that the order passed by the Commissioner needs to be reversed, then the Tribunal requires to give a factual finding as to how the Commissioner erred in appreciating the materials placed before him and how the Commissioner erred while recording his satisfaction in terms of Section 12AA(1)(a) of the Act. Burden is heavily on the assessee to prove that the objects of the trust are bona fide and there is bona fide charitable activity being done. It is true that the definition of “charitable purpose” as defined under Section 2(15) is an inclusive definition to qualify for a registration under Section 12AA of the Act. The Commissioner should be satisfied about the genuineness of the activities of the trust or the institution, and is entitled to make such an enquiry, as he deems necessary in this behalf. In the opinion of the Commissioner, the assessee did not satisfy the requirements. The proviso to Section 2(15) of the Act provides that advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity. Therefore, in our considered view, the Tribunal failed to properly examine the contentions advanced by the Revenue and by a non-speaking order, allowed the appeal filed by the assessee. Therefore, we are of the considered view that the matter requires to be re-considered by the Tribunal. - Appeal filed by the Revenue is allowed, the impugned order passed by the Tribunal is set aside, and the matter is remanded to the Tribunal to decide the same afresh

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• 2019 (3) TMI 287
  Nature of expenditure - revenue or capital expenditure - expenditures towards repairs and renovations of Assessee's hotel properties - HELD THAT:- Here it cannot be said that the expenditure incurred was for the purpose of bringing into existence a new asset or obtaining a new advantage. This was as simple case where the existing assets were repaired, or to some extent renovated. The CIT Appeals, as well as the ITAT, on facts, have held that this was not a case where some new asset was brought into existence or new advantage of enduring nature was obtained. Such concurrent findings of fact do not suffer from any perversity, so as to give rise to any substantial question of law. Depreciation on UPS - @60% OR 15% - UPS is the component/ equipment connected with the computers - HELD THAT:- Both, the CIT Appeals, as well as the ITAT have relied upon the decisions in the case of CIT vs. BSES Yamuna Powers Ltd [2010 (8) TMI 58 - DELHI HIGH COURT], Pentair Water India (P) Ltd. vs. ACIT [2014 (5) TMI 1068 - ITAT PANAJI] and Macawber Engineering System (I) P. Ltd. vs. ACIT (2013 (11) TMI 131 - ITAT MUMBAI) in which it is clearly held that the UPS is the component/ equipment connected with the computers and is, therefore, entitled for the depreciation @ 60%. Again, the contention, as raised, does not give rise to any substantial question of law.

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• 2019 (3) TMI 286
  Disallowance u/s 14A - Investments yielding dividend income - HELD THAT:- Direct the AO to consider the investments which are giving exempt income for the purpose of computing disallowance under Rule 8D(2)(iii). Accordingly, all these appeals are partly allowed for statistical purposes in view of the above directions. See ACIT vs. Vireet Investments [2017 (6) TMI 1124 - ITAT DELHI]

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• 2019 (3) TMI 285
  Deduction u/s. 80P(2)(a)(i) - assessee is primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969 - HELD THAT:- Admittedly, the assessee is primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969. In the case of Chirakkal Service Co-op Bank Ltd. (2016 (4) TMI 826 - KERALA HIGH COURT) had held that a primary agricultural credit society, registered under the Kerala Cooperative Societies Act, 1969 is entitled to the benefit of deduction u/s. 80P(2). - Decided in favour of assessee

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• 2019 (3) TMI 284
  Deduction u/s. 80P(2)(a)(i) - denying the claim was that the assessee were primarily engaged in the business of banking - provisions of section 80P(4) which was inserted with effect from 01.04.2007, the assessee were not entitled to deduction u/s. 80P - HELD THAT:- Admittedly, the assessee is primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969. In the case of Chirakkal Service Co-op Bank Ltd. (2016 (4) TMI 826 - KERALA HIGH COURT) had held that a primary agricultural credit society, registered under the Kerala Cooperative Societies Act, 1969 is entitled to the benefit of deduction u/s. 80P(2). - Decided in favour of assessee

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• 2019 (3) TMI 283
  Penalty u/s 271(1)(c) - not entitled for the deduction U/s 54 - after denial of deduction U/s 54 assessee made the claim deduction U/s 54F - claim made under wrong provisions - bonafide mistake - due to the difference of computation of the deduction under two provisions i.e. 54 54F claim reduced, the AO made an addition - HELD THAT:- This is a clear case of the claim made under wrong provisions of Section 54 instead of U/s 54F of the Act. The assessee has also produced the copy of the family ration card, Voter ID Card, Electricity Bill, gas connection receipts and saving bank account to establish the fact that the assessee was using the property in question for their residential purpose. These facts clearly make out a case that it was a bana-fide and inadvertent mistake and omission on the part of the assessee to claim deduction U/s 54 instead of section 54F of the Act. Therefore, we find that once, the assessee has explained the reasons for making a wrong claim and the facts explained by the assessee are duly established from the record and found to be true then even if the addition was made by the AO due to the claim made under wrong provisions of the Act. It will not amount to furnishing inaccurate particulars of income or concealment of particulars of income. In view of the provisions of Section 273B once the assessee has proved that there was a reasonable cause for making the claim of section 54 instead of section 54F of the Act then the penalty U/s 271(1)(c) of the Act cannot be imposed. Accordingly we delete the penalty levied by the AO U/s 271(1)(c) - Decided in favour of assessee.

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• 2019 (3) TMI 282
  Assessment proceedings u/s 153A - additions in unabated assessments - denial of deduction u/s 80IB(10) - additions in unabated assessments without any incriminating material found during the course of search u/s 132 - time limit for issuance of notices u/s 143(2) stood expired in relation to the assessment year 2008-09 to 2010-11 much before the date of conducting the search - HELD THAT:- As in the case of PCIT Vs. Desai Construction (2016 (7) TMI 1211 - GUJARAT HIGH COURT) confirmed the view taken by the Tribunal upholding the contention of the assessee that as no incriminating material was found during the course of search which could have enabled the Assessing Officer to re-examine its claim for deduction u/s 80IB which was part of the assessment prior to the search and such assessment unabated. Similarly Hon ble High Court of Bombay in the case of Continental Warehousing Corporation and All Cargo Global Logistics Ltd (2015 (5) TMI 656 - BOMBAY HIGH COURT) dismissing the revenue s appeal holding that there was no incriminating material found during the course of search, the Tribunal was right in holding the power conferred u/s 153A being not expected to be exercised routinely, should be exercised if the search revealed any incriminating material. If that was not found then in relation to the second phase of three years, there was no warrant for making an order within the meaning of this provision . Thus no addition/disallowance was called for Assessment Year 2008-09 to 2010-11 as no incriminating material was found during the course of search at the premises of the assessee as the time limit of issuance of notice u/s 143(2) of the Act stood expired much before the date of conducting search u/s 132 - decided in favour of assessee.

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• 2019 (3) TMI 281
  Short term capital gain on sale of land - nature of land sold - CIT-A deleting the addition treating the land as agricultural land - fair market value of the property - invoking provisions of section 50C - HELD THAT:- Sub divisional magistrate has held that the plot sold by the assessee are agricultural land. According to us, this fact has not relevance. What is relevant is what is the fair market value of the property that has been sold by the assessee as per the circle rate. CIT appeal has not at all considered it and proceeded to delete the addition on altogether irrelevant considerations. We set aside the whole issue back to the file of the learned assessing officer with a direction to the assessee to show what is the fair market value of the property sold by the assessee as per the circle rate. Such circle rate is required to be adopted as the net sale consideration and resultant computation of capital gain is required to be made. The learned AO may also enquire the same to the registering authority. Revenue Appeal allowed for statistical purposes. Treatment of agricultural income shown by the assessee as income from other sources - CIT-A has deleted the whole addition as AADHAR card or Voter identification has been given by those persons - HELD THAT:- There is no concrete finding about the difference between the agricultural produce. He also did not examine the facts that how the persons of such a small mean could have given the rent in advance to the assessee. He also did not gave any finding that the amount of rent paid by the other person is out of borrowings and what could have been the sources of borrowing by that person to pay such a huge rent to the assessee. He merely believed the written submission of the assessee for deleting the addition. Therefore, we do not find that on the facts stated by the learned assessing officer the addition deserves to be deleted. We further fully agree with DR that the learned assessing officer should have made the addition as unexplained credit u/s 68 but the learned assessing officer under the mistake has made the addition as income from other sources. We are not concerned with it and now we cannot correct it also. No infirmity in the order of AO in treating the above income as income from other sources and certainly not as an agricultural income. We confirm the action of the AO in holding that agricultural income shown by the assessee is income from other sources. We reverse the order of the CIT appeal and restore the order of the learned assessing officer; consequently, ground number 2 of the appeal of the revenue is allowed.

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• 2019 (3) TMI 280
  Addition u/s 69A - search & seizure operation - Not able to reconcile with books of accounts - In statement recorded u/s 132(4) submitted that the amount kept in the locker was past savings of the assessee and his wife for the purpose of performing his daughter’s marriage - CIT held that person would go, operate the locker and keep - cash there from time to time, whereas depositing cash in the bank or making a FDR is a better and easier option HELD THAT:- CIT(A) simply rejected the explanation given by the assessee without giving any proper reasons. When the assessee has filed returns of income, same are accepted. His wife has also filed returns of income and the same are also accepted and the assessee has submitted that out of savings the amounts are kept in the locker. Assessee has fully explained the sources and he has discharged the burden casted upon him. The A.O. without giving any basis, rejected the explanation of the assessee. In our opinion, the A.O. is not correct. CIT(A) is concerned, he is of the opinion that instead of keeping money in the locker, it is better to deposit in the bank so that the assessee may earn the interest. In our opinion, the assessee is the person who has to decide himself whether to keep the money in the locker or deposit in the bank. In this case, the assessee has decided to keep money in the locker to perform his daughter’s marriage and explained the sources. We find that the order passed by Ld. CIT(A) has to be reversed. - Decided in favour of assessee.

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• 2019 (3) TMI 279
  Disallowance of Repair & Maintenance Expenses - assessee is claiming 30% deduction on income from house property, the AO disallowed the expenses claimed by the assessee on account of repair and maintenance - HELD THAT:- Since the assessee in the instant case admittedly had not furnished the bills and vouchers before the CIT(A) or before the AO, therefore, following the order of the Tribunal in the assessee’s own case for Assessment Year 2011-12 we restore the issue to the file of the AO with a direction to give one more opportunity to the assessee to substantiate its case and decide the issue as per fact and law. Disallowance on account of Other expenses - adhoc 25% disallowance of expenses by observing that the revenue from the business was much less than the expenses incurred - HELD THAT:- AO disallowed 25% of other expenses on adhoc basis in absence of any explanation by the assessee as to how these expenses are relatable to the business of the assessee. We find identical issue had come up before the Tribunal in assessee’s own case in the preceding year following the order in assessee’s own case for Assessment Year 2010- 11 had allowed the claim of the assessee as held not disputed the factum of the assessee having actually incurred these expenses for the purpose of its business. Simply because the business receipts are less, cannot be a reason to disallow the expenditure incurred otherwise for the purpose of business Depreciation being 50% of depreciation on plant and machinery, vehicles and other items - Depreciation claim against the income from Fun & Fair - HELD THAT:- Once there are assets including Plant and machinery, vehicles, computers, etc. which I are being used for the purpose of business from earlier years, the A.O. cannot disallow depreciation on such assets simply by presuming that such assets must not have been used for the purpose of business - unable to appreciate as to how his business under the given circumstances can be carried on without the plant and machinery, vehicle, computers, etc., all of which are necessary items for carrying on the business activity. Since the learned CIT(A) upheld action of the AO by following the order of his predecessor for Assessment Year 2011-12 and since the Tribunal has allowed the claim of the assessee for Assessment Year 2011-12, therefore, respectfully following the decision of the Tribunal in assessee’s own case for the two preceding years, we set aside the order of the learned CIT(A) and direct the AO to delete the disallowance

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• 2019 (3) TMI 278
  TDS u/s 194J - payment of Passenger Service Fee (PSF) to the Airport Operators - considering the nature of PSF - income u/s 2(24) - HELD THAT:- As is clear from the findings recorded in case of Jet Airways (2017 (1) TMI 899 - BOMBAY HIGH COURT) PSF cannot be considered to be a payment made by the assessee airline. PSF is a payment made by the passenger which is only routed through the assessee airline. As undisputed that the amount handed over by the assessee airline to the Airport Operators has also not been claimed as expenditure by the assessee in its books of account. PSF is a statutory levy and the assessee airline is only acting as a conduit between the embarking passengers and the Central Government Agency. Clearly therefore, even the provisions of section 194J of the Act would not apply. Respectfully following decision of Jet Airways (supra) it is held that assessee was not required to deduct TDS u/s 194J on payment of PSF. DR has relied on the CBDT Office Memorandum dated 30th June, 2008. CBDT in its office Memorandum has opined that PSF is an income which is chargeable to tax in the hands of relevant Airport Authority. Tribunal in the case of Mumbai International Airport Pvt. Ltd.[2017 (2) TMI 640 - ITAT MUMBAI] held that PSF is not an income u/s 2(24) in hands of the relevant Airport Operator. The Coordinate Bench has further held that the CBDT Office Memorandum is not binding on the Tribunal and the same cannot override the provisions of the Act. - Decided in favour of assessee TDS u/s 194H - commissioner or brokerage - amount retained by Banks/ Credit Card Agencies out of Sale consideration of the tickets booked through credit / debit cards - AO held that there is an implied agency relationship between the assessee airline and the banks - HELD THAT:- We find that the issue in dispute stands fully covered by the decision in the case of JDS Apparel [2014 (11) TMI 732 - DELHI HIGH COURT] it is held that the assessee was not required to deduct TDS on charges retained by Bank / credit card agencies out of the sale consideration of tickets booked through credit / debit cards. It is held that provision of section 194H are not attracted. - Decided in favour of assessee.

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• 2019 (3) TMI 277
  Non deduction of u/s 195 - Disallowance of Aircraft Maintenance Charges - income accrued in India - payment for the fitness tour replacement of parts are made within India the assessee - supply part of maintenance - HELD THAT:- As far as the supply part of maintenance is concerned payment on account of supply of goods which are related to purchase and supply of parts from overseas. The assessee has deducted tax at source on fitment charges and produce the necessary challan is for payment of the tax. On verification of the invoices for supply, he held that no tax is deductible on such payment under section 195 - DR could not point out that whether tax is deductible or not when the goods have been supplied from outside India where nothing is shown that income is chargeable to tax in India. - Decided against revenue Disallowance of catering services due to non dedction of TDS- as per assessee catering charges are for supply of food to the aircraft at the airport on which VAT has been charged and TDS provisions are not applicable, as the food is not served to the passengers by the supplier but by the in-flight crew. HELD THAT:- The payment is made only for the supply of foods but not for service of the food. Nevertheless, the learned CIT appeal has allowed the claim of the assessee in view of the fact that PE has filed income tax returns and paid the due taxes on receipt. CIT-A following the decision of CIT vs Ansal landmark township private limited [2015 (9) TMI 79 - DELHI HIGH COURT] set aside the whole issue to the file of the learned assessing officer with a direction to not to make any disallowance on payment made to the payee’s who have duly accounted the receipt in question and have paid tax accordingly. DR failed to show that how the learned AO is aggrieved with the direction of the learned CIT – A. CIT – A has confirmed the fact that the assessee should have deducted tax at source thereon. In view of this ground number 2 of the appeal of the revenue is dismissed. Disallowance of vehicle maintenance due to non dedction of TDS - HELD THAT:- CIT-A noted that that cars were sent for repair and replacement of the parts the invoices carries two-person 14 parts on which VAT has been charged and the Garage has levied other for services on which service tax. The learned CIT – A also verified the bills of sale and services and found that where there is a services the amount of payment of services as below the required threshold for deduction of tax at source. The learned CIT – A also noted that on sale of the parts no tax is required to be deducted. The learned departmental representative also could not point out any infirmity in the finding of the learned CIT – A. It was also not shown to us that whether tax is required to be deducted at source even if there is a supply of goods where the VAT has been charged. - Decided against revenue Nature of expenditure - disallowance of expenses of capitalize nature on account of repair and replacement of aircraft parts - revenue or capital expenditure - HELD THAT:- CIT-A has clearly noted that by replacement of these parts the amount of expenditure is current repairs, no new asset has come into existence, and therefore the expenditure are revenue in nature. However, we are aware that not all replacement become revenue expenditure automatically. Example as replacement of engineering aircraft. However looking to the nature and the amount of expenditure It is apparent that assessee has not made any major replacement to the aircraft, which can fall into the category of capital expenditure. DR also did not show us anything that replacement is of such a nature, which can be said to be of capital in nature. Therefore on the facts and circumstances of the case we do not find any infirmity in the order of the learned CIT – A. Purchase of inverter battery - nature of expenditure - Revenue or capital expenditure - HELD THAT:- AO has clearly erred in holding that replacement of battery in inverter is a capital expenditure. It is not the purchase of the inverter but one of the parts of the inverter has been replaced. The learned senior DR also could not show us any reason to support the order of the learned assessing officer. In view of this, we do not find any infirmity in the order of the learned CIT – A in holding that replacement of battery in any inverter is revenue expenditure and not a capital expenditure as held by the AO. Disallowance of prior period expenses - HELD THAT:- Assessee has received the bills during the year and the same has been admitted and approved by the assessee during the year. Even otherwise, these are the expenditure pertaining to the annual maintenance contract of the computers. The assessee has incurred this expenditure as and when the bill has been approved in the liability has been assumed by the assessee. In view of this we do not find any infirmity in the order of the learned CIT-A. Disallowance of interest paid on unsecured loan - HELD THAT:- As perused the reasons given by the learned CIT-A for deleting the addition and the reasons recorded by the learned assessing officer for making the disallowance. The interest expenditure is to be allowed if the same is used for the purposes of the business. Interest expenditure paid to the related parties in case of the company can be disallowed if the same was found to be excessive or unreasonable with respect to the market rates. Relevant finding to the disallowance of interest expenditure that they are not incurred for the purposes of the business is missing in the assessment order. Further, the learned assessing officer has also not held that what is the market rate of the interest expenditure and how it is less than the amount of interest paid by the assessee to its directors and related parties. No infirmity in the order of the learned CIT-A deleting the above disallowance on account of interest expenditure. Renovation of rented premises belonging to the airport authority of India - revenue or capital expenditure - HELD THAT:- We set aside the whole issue back to the file of the learned assessing officer with a direction to the assessee to submit the complete details of such expenditure. If the expenditure have been incurred by the assessee on the he expenditure was towards false ceiling, fixing tiles, replacing glasses, wooden partitions, replacement of electric wiring, earthing etc same is allowable as revenue expenditure and other expenditure incurred on acquisition of furniture or plant and machinery such a security system same are capital expenditure. Disallowance towards the lock, seat cover spent for security of the car treating it as a capital expenditure - HELD THAT:- Assessee has incurred the expenditure while purchasing a new car in the form of music system, gear lock and seat covers et cetera. Naturally, the assessee has incurred the above expenditure at the time of purchase of the new car and therefore it adds to the value of the vehicle purchased by the assessee. Accordingly we find no infirmity in the order of the learned CIT – A in confirming the action of the learned assessing officer. Addition of bonus paid to the directors - disallowance u/s 36 (1) (ii) - HELD THAT:- Two shareholders were holding 50% each and directors of the company have been paid the commission of Rs. 1 crore each. Had this sum been not paid to those shareholders , then the profit of the company would have been higher by INR 20,000,000 and both of the directors would have been entitled to 50% profit or dividend there from.Therefore in the present case , the payment of bonus or commission is not allowable as deduction under section 36 (1) (ii) of the act in the hands of the assessee company. Only condition is that the payment is not in lieu of dividend. In case extra services have been rendered for payment of commission, it will be one of the relevant factors to consider while deciding whether the case is covered by exception provided in Section 36(1)(ii) i.e., whether the payment of commission is in lieu of dividend. According to us, both the directors would have got the above amount of dividend had there not been any payment of such bonus or commission by the assessee company. Further the claim of the assessee that the issue has been squarely covered by the decision of the coordinate bench in assessee’s own case for the assessment year 2007 – 08 is also of no consequence as noted by the learned CIT appeal that the disallowance was under section 40A (2) in that year. Similarly for assessment year 2012 – 13 the learned CIT – A has allowed the claim of the assessee in his appeal order is also of no consequence as because the learned CIT – A has relied upon the decision of the honourable Delhi High Court in case of CIT vs carrier launch a private limited,[2012 (4) TMI 440 - DELHI HIGH COURT] the facts of that case were quite distinct and different as we have already pointed out. Therefore, we confirm the order of the lower authorities.

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• 2019 (3) TMI 276
  Undisclosed interest income - search & seizure operation conducted u/s 132 - dump documents relied upon - addition made on the basis of unsigned, unnamed & dumb document showing hypothetical figure for 13 years - AO has invoked the provisions u/s 292C that there is a presumption that the contents of the documents are true - HELD THAT:- No money, bullion or investment was found during the search and seizure operation to corroborate the document in question. Date and amount has been jotted down in the seized document with one year gap but it is beyond imagination as to how the amount written has been attributed to the assessee having been given as loan to someone because there is neither name of the assessee nor the name of the loanee. The entire findings have been arrived at on the basis of presumptions and assumption that the amount of Rs. 12,00,000/- attracts the interest @ 18% because when we examine para 5.4, the AO has tabulated the presumptive figure of interest calculated @ 18% on the principal amount of Rs. 12,00,000/- but after 31.03.2007 till 31.10.2013 interest figures continued the same i.e. Rs. 5,31,217/-. The coordinate Bench of the Tribunal in assessee’s own case in AY 2008-09 [2018 (3) TMI 1406 - ITAT DELHI] has deleted the addition for AY 2008-09 made on the basis of same seized document A-1 on the ground that alleged interest income cannot be attributed to the assessee on the basis of dumb document. Addition made on the basis of unnamed, unsigned, undated, vague and ambiguous document without any further corroboration is not sustainable in the eyes of law - Decided in favour of assessee.

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• 2019 (3) TMI 275
  Capital gain computation - cost of acquisition of the asset as on 01.04.1981 - valuation report of the DVO Vs. Registered valuer Report - entire basis of the DVO is based on the value given in the Nabhi’s guide and thereafter, he has made certain adjustment - FMV ascertainment - deduction u/s.54 claimed - HELD THAT:- Nabhi’s rates are nothing but merely compilation of DDA’s auction rate based on reasonable estimation and if he is applying the auction rate of Safdarjung area during the year 1981 which cannot be held to be applicable for the locality of Vasant Vihar which is far more developed area. If the authorities while fixing the circle rate for a particular area has categorized any area to be a A-category, then it cannot be compared with the area categorized as B-category having a lower circle rate. Thus, this factor alone vitiates the DVO’s report and the basis adopted by him. If assessee has filed Approved Valuer’s report taking into consideration various factors applicable for the area of Vasant Vihar, then same does not loses his credence to DVO’s report. It has to be given a credible importance and it cannot be said that the DVO’s report should supersede the Approved Valuer’s report. Even, the comments of the DVO on the registered valuer report is not adverting to the point, as to why Safdarjung rate has been applied at Vasant Vihar. Looking to the fact that Approved Valuer have given a report on the basis of which assessee has estimated a fair market value of the property as on 1.4.1981, is to be accepted. We hold that the value of the property as on 1-4-2018 has to be taken at Rs. 69,26,000/- as determined by the registered valuer, and therefore, the addition made by the Assessing Officer is directed to be deleted - Decided in favour of assessee.

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• 2019 (3) TMI 274
  Disallowance u/s 14A r.w.r. 8D - disallowance towards interest on borrowed funds - onus to prove - primary responsibility of the assessee to submit evidence to support its claim - HELD THAT:- AO has computed the aforesaid disallowance towards interest on borrowed funds without even verifying the details and without determining whether there is any nexus between the borrowed funds and the earning of exempt income. The assessee has also not produced any details to support its claim that the borrowed funds were not utilised to make the investments that earned the exempt income. The assessee has only provided the year end balances of the borrowed funds and not the details of investments made in order to establish that borrowed funds were not used for investments in instruments which earned the assessee exempt income The orders of the authorities below on this issue be set aside and this issue be remanded to the file of the AO for fresh determination considering the propositions that the disallowance u/s 14A of the Act cannot exceed the exempt income and the judicial pronouncement cited in this regard. The assessee is directed to furnish the details of investment made and also establish with evidence that the investments in instruments generating exempt income to the assessee were not made out of borrowed funds; which shall be considered by the AO while deciding the issue. Nature of expenditure - Disallowance of Professional Fees as capital expenditure - revenue expenditure allowability - genuineness of the payment - HELD THAT:- AO should have first examined the genuineness of the payment claimed to have been made; the purpose of the payments and then decide as to whether the payment of professional fees to ‘Keynote’ is allowable as deduction u/s 37 of the Act. As the facts related to the payments and surrounding circumstances have not been examined, we deem it appropriate to set aside the orders of the authorities below and restore the matter back to the file of the AO for fresh examination and determination of the allowability of the professional fees paid to ‘Keynote’ as deduction u/s 37 of the Act. Addition on account of Carbon Credit - accrual of income - Difference in carbon credit outstanding as on 31.03.2011, and as on 31.03.2012 shown at NIL - HELD THAT:- Addition made by the AO on account of nonexistent income from carbon credits in the year under consideration is not at all acceptable. AO has not even rendered a finding that the income from carbon credits has actually been received by or accrued to the assessee. Adopting the figure of carbon credits of the earlier year and assuming / presuming the same as the assessee’s income in the year under consideration as income from carbon credit is absolutely baseless, untenable, unacceptable and is contrary to all cannons of taxation. This issue, as discussed above, we have no hesitation in holding that the addition made as income from carbon credits is factually unsustainable and untenable - Decided in favour of assessee.

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• 2019 (3) TMI 273
  Reopening of assessment u/s 147 - assessee as beneficiaries of accommodation entries of share capital/share premium provide by Shri Surendra Kumar Jain and Shri Virendra Kumar Jain - reopening based on report of the Investigation Wing - non independent application of mind by AO - non examination of statements so recorded during the course of search and the seized material - HELD THAT:- There is nothing in the reasons so recorded that the Assessing officer has gone through the statements so recorded during the course of search and the seized material to show prima facie linkage of assessee’s undisclosed income being routed back in form of share capital. This shows that the Assessing officer has merely gone by the report of the DIT, Investigation Wing and the said report even didn’t have the statements of these persons which either find mention in the report or as enclosures when the same was forwarded to the Assessing officer. Therefore, it transpires that there is no further examination which has been carried out by the Assessing officer. It is true that the Assessing officer can rely on the report of DIT, Investigation Wing but at the same time, where he is assuming jurisdiction u/s 147, he is required to carry out further examination and analysis in order to establish the nexus between the material and formation of belief that income has escaped assessment and in absence thereof, the assumption of jurisdiction u/s 147 has no legal basis and resultant reassessment proceedings deserve to be set-aside. The fact that the assessee has filed its return of income u/s 139(1) was very much in the knowledge of the Assessing officer and the latter could have verified the transactions with the reported transactions in the financial statements and could have asked for more information to establish the necessary nexus, however nothing of that sort has been done by the Assessing officer and he has merely gone by the report of DIT, Investigation Wing. On merits of the addition as find assessee has discharged the initial onus cast on it in terms of identity, creditworthiness and genuineness of the transaction. The assessment proceedings u/s 143(3) have been completed in case of the investor company M/s Pelicon Finance & lease for A.Y 2006-07 wherein investment in the assessee’s company has been accepted by the Revenue. There cannot be a situation where the same transaction is held to be genuine in hands of Investor Company and disputed in the hands of the Investee company. Further, M/s Pelicon Finance & lease has responded to notice u/s 133(6) and has confirmed the amount invested by way of share capital in the assessee company. Besides, necessary documentation in terms of Board resolution, share application form, bank statements of the investor company, annual financial statements, etc has been submitted by the assessee company before the Assessing officer. There is no mention of either the assessee company or the investor company in the statements so recorded of Surendra Kumar Jain and Virendra Kumar Jain. The statement of the so called mediator P C Agarwal is also not on record who is claimed by the Revenue to have facilitated the transaction. Therefore, no linkage which can be said to have been established by the Revenue between the assessee’s undisclosed income which is routed back in form of share capital - merely relying on the report of the Investigation Wing without any further examination or investigation or disputing the documentation submitted by the assessee company, the addition cannot be sustained in the hands of the assessee company - Decided in favour of assessee.

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• 2019 (3) TMI 272
  Taxation of excess share premium received as income from other sources u/s 56(2)(viib) - basis of valuation - difference in the rights of a holder of an equity share and preference share - Rule 11UA (1) sub clause (c) of sub rule (c) applicability - estimation for future cash flow - HELD THAT:- From offer letter, the holder of a preference share is provided with voting righjt also and therefore, can it be said that the nature of the share issued in the present case is actually that of an equity share and not preference shares but this evidence is brought on record as an additional evidence and there is no comment of any of the authorities below on it. This aspect of the matter should be decided first as to which Rule/Sub Rule/ sub clause is applicable in the facts of the present case and thereafter, the matter should be decided as per the applicable Rule/Sub Rule/ sub clause. All the terms of the issue of preference shares have to be looked into for this purpose to find out whether the present receipt of share premium is for issue of preference shares or for issue of equity shares because even if it is found that because of limited voting right only, the said shares are not equal to equity shares, then also, this is important to note that ultimately, these preference shares are to be converted into equity shares after a fixed time at a fixed rate and hence, this is important to find out as to whether the premium received is for equity shares to be issued later or for preference shares issued now since ultimately, these preference shares are compulsorily to be converted in to equity shares. If it is found that the premium received is mainly for conversion of preference shares into equity shares at an agreed price after an agreed time than there may be a case of non applicability of sub clause (c) of sub rule (c ) of Rule 11UA (1). These details are not available in the paper book and even if some things are available, the same are in the form of additional evidence without any comment of the lower authorities and explanation of the assessee and hence restore the matter to the CIT (A) for a fresh decision on this issue after deciding this aspect first that in the facts of the present case, which Rule/Sub Rule/ sub clause of Rule 11UA is applicable in the light of above discussion. Estimation is to be made of future cash flow and hence, the assessee has to establish that estimation made by the management and given to the Chartered Accountant for certifying DCF is estimated by the management on a scientific basis and therefore, the said estimate is made with reasonable certainty. If such estimation with reasonable certainty is not found possible than this method cannot be adopted on the basis of those data which are not estimated with reasonable certainty. In that situation, other methods have to be adopted. - Decided in favour of assessee for statistical purposes.

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• 2019 (3) TMI 271
  Addition u/s 68 - assessee received share capital and share premium from individuals & corporate entities - creditworthiness of the share subscribers could not be proved - identity, creditworthiness and genuineness of the share applicants - HELD THAT:- Section 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source shall be assessed as its undisclosed income. Assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants, thereafter the onus shifted to AO to disprove the documents furnished by assessee cannot be brushed aside by the AO to draw adverse view cannot be countenanced. In the absence of any investigation, much less gathering of evidence by the Assessing Officer, we hold that an addition cannot be sustained merely based on inferences drawn by circumstance. In the facts of the present case, both the nature & source of the share application received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO's record. Accordingly all the three conditions as required u/s. 68 of the Act i.e. the identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO is based on conjectures and surmises cannot be justified - Decided against revenue

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• 2019 (3) TMI 270
  Unexplained cash credit u/s. 68 - this amount is not appearing as debit in the balance sheet of the sister company M/s Opera Global Pvt. Ltd. - HELD THAT:- Assessing Officer was not justified in drawing adverse inference against the assessee. The assessee has led sufficient evidences which are supported by bank statement of Opera Global Pvt. Ltd. and its balance sheet read with the schedules attached thereto. Hence, the CIT(A) was correct in deleting the addition. Addition in respect of the opening balance of sister company M/s Opera Global Pvt. Ltd. - HELD THAT:- In ground No.1, we have held that the balance in the two accounts between assessee and Opera Global Pvt. Ltd. matches on examination of the balance sheet with a schedules attached thereto of Opera Global Pvt. Ltd. Further, we are in agreement with the contention of the Ld. AR, addition under section 68 can be made only with respect to any credit during the year. From the facts it is evident that this amount was not the credit of the year under consideration. On this reasoning also this addition is found not tenable in the eye of law. Disallowance of sundry creditors u/s. 41(1) - AO held that creditors are not being paid since long and as such the same has become income of the assessee under section 41(1) of the Act and added all the creditors as income of the assessee - DR for invoking provision of section 28(iv) - differentiation of scope of section 28(iv) and section 41(1) - HELD THAT:- From the assessment order, it is evident that the assessee company has filed an application under section 15(1) of the Sick Industrial companies (special provision) Act, 1985. The assessee company on being questioned by the AO had given the reasoning as to why these creditors have not been paid so far. It was explained that the company has become sick and it has approached BIFR for restructuring of its liabilities. This, in our opinion, was plausible reason for delay in payment of the creditors. Section 41(1) is applicable when the trade creditors are written off as not payable. In the present case, it is not the case of the assessee that these trade creditors are not payable. It is also not the case of the AO that these creditors have been written off by the assessee. These creditors continue to be payable in the books of accounts of the assessee. The assessee has also explained the reason for the delay in making payment to these creditors. The assumptions by the AO that these creditors had become income of the assessee cannot be sustained. On the contrary, circumstances do explain the delay in payment of these creditors. In these facts, provisions of section 41(1) cannot be invoked. Similarly, the contention of the DR for invoking provision of section 28(iv) is misplaced as section 28(iv) is regarding value of any benefit or perquisite arising from business is chargeable to tax. These trade creditors are payable and by no stretch of imagination it can be said that assessee has received any benefit or perquisite. - Decided in favour of assessee.

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• Customs

• 2019 (3) TMI 312
  Relevant date of imports for the purpose of FTP - Whether the relevant date for the reckoning the date of the imports would be the date of Bill of Lading or Bill of Entry? - Held that:- Regulation 9.11 of the Foreign Trade Policy specifically states that for the purpose of reckoning the date of import, the relevant date would be the date of Bill of Lading only. In the light of the aforesaid the Foreign Trade Policy being a complete code by itself, reference by the learned counsels for the Revenue to section 15 of the Customs Act, which fixes the date for determination of rate of duty and tariff for the purpose of valuation of imported goods as the date of Bill of Entry, may not be relevant - the relevant date for reckoning the import of the consignments of peas is the date of Bill of Lading. The grant of stay of operation of the relevant Notifications and the pendency of the said stay as on the date of import is admitted. Thus, and in conclusion, on the basis of the admitted position on facts as recorded by me in paragraph 15 of this order and bearing in mind the balance of convenience in the present case, the consignments in question are liable to be released, though conditionally - The petitioners will remit the entire duty component of the consignments imported by them in cases were such duty is leviable as per paragraph 15(iii) above along with a bank guarantee for the 10% of the invoice value. In cases where the duty impact is neutral, the petitioners shall furnish a bank guarantee for the 10% of the invoice value. Upon satisfaction of the aforesaid conditions, the consignments shall be released forthwith. The authorities are at liberty to initiate proceedings in respect of the transactions in question - petition disposed off.

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• 2019 (3) TMI 311
  Adjudication of show cause notice while the settlement application was pending - it was alleged that petitioner had inflated the value of readymade garments being exported in order to claim inflated amounts by way of drawback - Section 127B of the Customs Act, 1962 - Held that:- Section 127C(1) provides for two distinct steps to be taken by the Commission when an application under Section 127B is made to it. First, the Commission must issue a notice within 7 days requiring the applicant to explain in writing as to why the application be allowed to be proceeded with. Second, after the explanation is provided by the applicant, and within 14 days from the date of the initial notice, the Commission is required to pass an order either allowing the application to be proceeded with or rejecting it - The proviso to the said sub-section provides for the consequences of a failure on the part of the Commission to complete either of these steps within the time permitted. In either case, the application is deemed to have been allowed to be proceeded with - In either case, the application is deemed to have been allowed to be proceeded with. In the present case, it is clear that the petitioner s application had been acknowledged by the communication of the Settlement Commission dated 29.08.2018. Although the said communication contemplated an admission hearing on a date to be notified, no such hearing took place. In such circumstances, the proviso to Section 127C (1) would apply and the petitioner s application must be deemed to have been allowed to be proceeded with. By virtue of Section 127F (2) of the Act, during the pendency of the application, the adjudication of the Show Cause Notice by the customs authorities was clearly premature. The said provision denudes the customs authorities of their powers in relation to a matter pending before the Settlement Commission, and vests jurisdiction in respect of those matters in the Commission itself. The adjudication of Show Cause Notice in respect of which a settlement application has been made (and allowed to be proceeded with) is not just contrary to the statutory scheme, but also defeats the very purpose of the settlement provisions. The impugned order dated 27.09.2018 passed by the Additional Commissioner of Customs (ICD), Export, Tughlakabad, New Delhi is hereby quashed. It is open to the parties to proceed with the petitioner s pending application before the Settlement Commission in accordance with law - petition allowed.

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• 2019 (3) TMI 310
  Liability of petitioner/ Director for dues of the company - recovery of defaults of company - Section 142(1)(c)(ii) of The Customs Act, 1962 r/w Rule 4 of The Customs (Attachment of Property of Defaulters for Recovery of Government Dues) Rules, 1995 - case of petitioner is that the dues of the company cannot be recovered from the petitioner even if it is outstanding. Held that:- On perusal of section 142 of CA, it is indicated that it enables recovery of sums due to Government. Now, where any sum payable by any person would mean a sum due and payable to the Government even by an artificial person such as a company in this case. It is stated in the legal provision, that where any sum payable by the person is not paid, the proper officer may deduct or may require any other officer of Customs to deduct the amount so payable from any money owing to such person which may be under the control of the officer or such other officer of Customs. Thus, the provision enables deduction of money owing and payable by the Government to such person. That, therefore, means that appropriation and adjustment is possible as against the monies owed by the Government to such person. It is only because that person has not paid the sum payable to the Government that this power is conferred. The other way or manner of recovery is that, the Assistant Commissioner of Customs or the Deputy Commissioner of Customs may recover or may require any other officer of Customs to recover the amount payable by detaining and selling any goods belonging to such person, or if the amount cannot be recovered from such person in the manner provided in Clause (a) or Clause (b) of Section 142, then, the Assistant Commissioner or the Deputy Commissioner can prepare a certificate signed by him specifying the amount due from such person and send it to the Collector of the District in which such person owns any property or resides or carries on his business and the said Collector, on receipt of such certificate, shall proceed to recover from such person the amount specified thereunder as if it were arrears of land revenue. Then there are other miscellaneous Rules but what we find is that Section 142 r/w these Rules proceeds on the footing that dues can be recovered by terming even a company as defaulter. The word person therefore includes both a natural and artificial person. The question is not only this, inasmuch as this aspect is clear by the provision itself and we have no doubt in our mind that a defaulter can be a company or any artificial person, as well - The law requires a specific provision to be enacted in that behalf. Piercing of veil - separate corporate legal entity - Held that:- In the present case, according to Mr. Jetly, the piercing of veil has been done and that is why notices have been issued. We are sorry we cannot accept his contention and for more than one reason. This conclusion must be clearly discernible from the orders in the adjudication proceedings, in the sense the show cause notices must be directed to the Director personally and in addition to the corporate entity. Secondly, such corporate entity together with the Director must be heard and the Director must be granted an opportunity to satisfy the Adjudicating Authority that insofar as the company and its business is concerned, the Director may, as a part and parcel of the Board, lay down broad policies and take decisions in relation thereto but the day-to-day business is not discharged by him - Something more than this and proof of involvement not only in the day-to-day activities but all affairs will also have to be placed on record to establish the piercing of veil. The argument now built, only on the basis of this principle and referred in the affidavit in reply is thus of no avail to Mr. Jetly. On that basis, we cannot hold that the petitioner is also liable for the dues of the company. Dues of the company cannot be recovered from the petitioner personally. The demand notice to that extent is quashed and set aside. - Petition allowed.

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• 2019 (3) TMI 293
  Jurisdiction - authority of Director General of Foreign Trade (DGFT) to exercise powers u/s 3 of the Act - converting certain items from free to restricted - delegation of power - Held that:- SLP is dismissed.

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• Corporate Laws

• 2019 (3) TMI 292
  Disbursement of subsidy - Requisite capital investment for grant of subsidy - Special Incentive Package - refuse disbursement of subsidy on the ground that the petitioner’s viability in question - HELD THAT:- The learned counsel appearing for the applicant seeks to withdraw the present application. The application is dismissed as withdrawn.

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• Insolvency & Bankruptcy

• 2019 (3) TMI 309
  Corporate insolvency process - existence of dispute in relation to quality - HELD THAT:- Dispute can also relate to the quality of goods as supplied by the Operational Creditor to the Corporate Debtor and going by the correspondence as exchanged referred to above, being prior to the notice of demand issued under Section 8 by the Operational Creditor, from the Corporate Debtor clearly shows that an issue of quality has been raised in view of the differing test reports. By virtue of the notice of dispute as required to be sent under the provisions of Section 8 of IBC, 2016, under Section 8(2)(a) the existence of dispute in relation to quality has also been brought forth by the Corporate Debtor to the Operational Creditor. Further going by Section 9(5)(2) of IBC, 2016, it is seen that under sub-clause (d) of clause 2 of sub-section 5 of Section 9 of IBC, 2016, an onus is placed on this Tribunal in view of the notice of dispute sent, if the dispute raised is not otherwise sham of illusory, to dismiss the petition. In view of the reach of the above said provisions and as rightly contended by learned counsel for the Corporate Debtor delineated and as held by the Hon'ble Supreme Court in Mobilox Innovations (P.) Ltd. case (2017 (9) TMI 1270 - SUPREME COURT OF INDIA) this petition is liable to be rejected

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• 2019 (3) TMI 308
  Corporate insolvency process - outstanding workmen Debt - HELD THAT:- Admitted position about the amount of workmen Debt is that their percentage is much less than 10% of the total Debt. As per the figures the Financial Creditors have lodged claim of Rs. 4264 Crore and Operational Creditors claim is approximately Rs. 6.6 Crore, however as against that, the employees/workmen claim is only Rs. 5.56 crores. As a consequence, since the claim of workmen is less than 10% of the total Debt therefore it was not necessary to issue Notice intimating the meeting of the Committee of Creditors to this Applicant. The Resolution Professional was not under obligation u/s 24 (3) (c) to give Notice of meetings of CoC. Since the statute itself do not subscribe issuance of Notice under a specific condition (i.e. 10% threshold) therefore now at this stage allowing hearing to this Applicant representing workmen may tantamount to infringement of the provisions of the Insolvency Code. It is true that Civil Rights are to be protected and natural justice ought to be granted, but while dealing Tax matters or Financial matters it sometimes happen that the Law of Equity is not bestowed upon uniformly. This Bench is aware about the judicial function while dispensing justice that opportunity of hearing must be granted to all who are going to be affected by a judgement and that the fundamental rights, such as Civil rights be protected. Therefore, in the process of Insolvency we have taken due cognizance of the problem of the labourers/ workmen, which shall be dealt with at the time of approval of the Resolution Plan pending for consideration. This Bench shall examine the financial capacity of the Resolution Applicant and also consider the proposed settlement with other Claimants and only thereafter shall decide a fair and reasonable amount be disbursed to the members of this Labour Union.

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• 2019 (3) TMI 307
  Default by insolvency professional(IP) - Disciplinary proceedings - HELD THAT:- IP continued to indulge in similar conduct even after 22nd November, 2017 for several CIRPs, as if there is no law in the land and in utter disregard of the strictures of the Hon’ble Adjudicating Authority. She continued on a consent spree with objectionable terms in at least seven CIRPs (at Sl. Nos. 1, 2, 4, 6, 12, 13 and 14 in table under Para 2.2 above) after 22nd November, 2017. DC notes, as rightly stated by Ms. Ruia, that her registration as an insolvency professional was suspended vide order dated 3rd May, 2018 for contravention in CIRP of Madhucon Projects Ltd. She has repeated the same contravention in CIRPs of 15 CDs covered in the SCN in conspiracy with her husband and has seriously compromised her independence, impartiality and integrity. She consented to take up 15 assignment simultaneously, much beyond her capacity, putting the life of 15 CDs at risk. She has, therefore, contravened provisions of sections 17, 20, 23 and 208(2)(a) and (e) of the Code, regulations 7(2)(a), (b) and (h) of the IBBI (Insolvency Professionals) Regulations, 2016 and clauses 1, 2, 3, 5, 9, 10, 11, 12, 14, 22, 25, and 27 of the Code of Conduct specified thereunder. The DC finds that, by her deliberate and collusive conduct, Ms. Ruia has rendered herself a person not a fit and proper person to continue as an IP. In view of the above, the Disciplinary Committee, in exercise of the powers conferred under section 220 (2) of the Code read with sub-regulations (7) and (8) of regulation 11 of the IBBI (Insolvency Professionals) Regulations, 2016, hereby cancels registration of Ms. Bhavna Sanjay Ruia, Insolvency Professional [Registration No. IBBI/IPA-002/IP-N00371/2017-2018/11065] and debars her from seeking fresh registration as an insolvency professional or providing any service under the Insolvency and Bankruptcy Code, 2016 for ten years. This Order shall come into force on expiry of 30 days from the date of its issue.

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• Service Tax

• 2019 (3) TMI 306
  Refund of service tax paid - time limitation - Revenue entertained a view that the said refund claim stands filed by them after the prescribed period of one year, was hit by limitation and as such was not to be sanctioned - Section 11B of the Central Excise Act, 1994 - Held that:- The Commissioner (Appeals) has referred to various decisions of the Hon’ble Supreme Court laying down that the Authorities working under the Act are bound by the provisions of the Act and cannot go beyond the same. The law on the issue is well settled. Each and every refund claim of tax/duty, whether paid erroneously or not, is required to be governed by the provisions of the Act. In fact, every refund claim arises on account of the fact that the same was not required to be paid. As such, if the refunds are to be allowed on the ground that they were not required to be paid, without adhering to the limitation provisions, then each and every refund claim would become payable and the limitation provisions, as enacted in terms of the provisions of Section 11B of the Central Excise Act, 1944 would become redundant and infructuous. Admittedly, in the present case the refund claims stands filed after a period of one year from the relevant date, in which case the same has been rightly rejected by the Lower Authorities as barred by limitation - Appeal dismissed - decided against appellant.

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• 2019 (3) TMI 305
  Appealable Order or not? - communication dated 17.07.2018 - Section 86(1) of the erstwhile Finance Act, 1994 - Held that:- Circular dated 28.02.2015 of Central Board of Excise Customs clarified that the Recovery Officer do have power to add, to amend, to vary or review any Garnishee Notice issued. However, the interest of Revenue has to be suitably safeguarded. It is stated in the said Circular that the facility to pay the arrears in installments shall generally be granted to a reasonable case of payment of arrears in installments as the company being under temporary financial distress. The Ld. Commissioner may cancel the permission in case of default in the payment of installments or when the company is becoming financial unviable and there is livelihood of winding up of business. The appellant by letters dated 17.01.2017 and 04.01.2018 requested the Ld. Commissioner for payment of arrears in installments, which is backed by the Board Circular dated 28.02.2015 being No. 996/3/2015-CX. In the said Circular, the Ld. Commissioner had allowed the payment of the outstanding dues in 21 installments as communicated by letter dated 10th April 2018. In the present case, the appellant failed to pay only one installment for the month of June 2018 within the stipulated period. In fact, the installment for the month of June was paid in the next month on 13.07.2018 alongwith the installment of July 2018. Therefore, the impugned Order dated 17.07.2018 was issued. It seems that the payment of installments of June and July 2018 as communicated by the appellant by letter dated 13.07.2018 may not be noticed while passing the order dated 17.08.2018. Appeal allowed - decided in favor of appellant.

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• Central Excise

• 2019 (3) TMI 304
  Classification of goods - mixture of pentane, hexane and small quantities of heavier hydrocarbons like pentane, hexane, heptane, etc. - Revenue is seeking to classify the pentane recovered during this process under sub heading 2710 11 13 as against the classification 2711 19 00 claimed by the Gail (India) Ltd. - Held that:- If the General Explanatory Note is interpreted in the manner in which Revenue seeks to interpret, - - - entry Motor Spirit would become otiose. Similarly the definition of Motor Spirit appearing in clause (a) of supplementary Note to Chapter 27 would also become otiose. Moreover, it is seen that prior to 01.03.2005 the Special Boiling Point Spirits were a - - entry immediately preceded by a - entry related to Motor Spirit . So prior to 1.3.2005 the SBPS were a sub classification of motor spirits even by revenue s interpretation. Thus the interpretation of revenue would result in no item falling under under the category of motor spirit and the definition of the term motor spirit , and the - - - entry relating to it, would become otiose for the period after 1.3.2005. Any interpretation that makes the specific entry, motor spirit and its definition appearing in supplementary notes, otiose, cannot be the correct interpretation. In above circumstances, it is apparent that even after 01.03.2005, the Special Boiling Point would have to answer to the description of Motor Spirit just the way it was prior to 1.3.2005. Appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 303
  Process amounting to manufacture or not - applicability of Section 11D of the Central Excise Act, 1944 read with Rule 4 of the Central Excise Rules, 2002 - the CESTAT has proceeded on the basis that the assessee in the present case had not collected any duty over and above the duty liable to be paid - Held that:- The CESTAT has failed to even advert to, much less consider the statement of Shri Subbaraj as reflected in the order in original dated 31st August, 2007. In para 5.1.1., it is recorded that Shri Subbaraj, the representative of the assessee, on being asked stated that the assessee had recovered the Central Excise duty from their customers on the additional quantity generated because of blending of ethanol which was sold by the assessee at the same rates as that of the motor spirit ( MS). It is further recorded that Shri Subbaraj stated that since there was no advise from the head office, the central excise duty so collected from their customers was not paid to the credit of the Central Government. No doubt, as contended by Mr. Srivastava, Shri Subbaraj s statement has to be read in its entirety including the portions reflected in paras 5.1.2., 5.1.3., 5.1.4 as well as other material on record - In the present case, all that is observed is that there is no consideration of whatsoever of the statement made by Shri Subbaraj whether in isolation or in the entirety. Non consideration of relevant material on record is a ground for interference. This is not a case of re-appreciation or revaluation of material on record but this is a case where the material which both the parties regard as material, has not been adverted to, much less considered by the CESTAT. From the impugned order, it is apparent that there is no consideration of even the assessee s contention that the assessee was not at all liable for payment of any excise duty since the assessee is not at all involved in any manufacturing. Mr. Srivastava is right that the other evidence adduced even by the assessee is not considered in the impugned order. Since several aspects have also not been considered by the CESTAT or in any case the impugned order does not reflect that such aspects have been considered, thus matter requires reconsideration. Appeal is allowed by way of remand.

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• 2019 (3) TMI 302
  Valuation - composite contracts - services rendered through separate contracts - composite contracts in which separate amounts have been indicated for supply of goods as well as services - demand of Excise Duty on the composite price of the contract - Held that:- An identical dispute with reference to the appellant’s factory situated at Vishakhapatnam was decided by the Bangalore Bench of Tribunal in Visuvius India Vs. Commissioner of Central Excise, Visakhapatnam [2007 (6) TMI 92 - CESTAT, BANGALORE] in which the Tribunal held that the application charges collected separately in service contracts, not includable in the assessable value - appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 301
  Credit of duty on goods brought to the factory - Rule 16 of Central Excise Rule 2002 - activity amounting to manufacture or not? - Held that:- There is no dispute of the facts that the appellant have purchased layflat tubing, shrink caps and waste packing bags on payment of Excise duty and certain activities have been carried out after such activities they have cleared the goods on payment of duty. This transaction is squarely covered under Rule 16 of Central Excise Rule 2002 - an assessee is permitted to bring the bought out goods and avail CENVAT credit on it and after any process can clear on payment of duty. In case the activity amounts to manufacture the assessee is required to pay duty on its transaction value and if the activity does not amount to manufacture, the excise duty so payable should be equal to the CENVAT credit on the bought out goods. This provision clearly makes it clear that even if the activity does not amount to manufacture, the CENVAT credit is admissible. There is no case of the department that the appellant have paid duty less than the CENVAT Credit - in terms of Rule 16, of Central Excise Rules, 2002 CENVAT credit is admissible. Appeal allowed - decided in favor of appellant.

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• 2019 (3) TMI 300
  CENVAT Credit - input services - Management, Maintenance and Repair of AC - service for Maintenance of Garden within the factory premises - GTA services used for outward transportation of gold sold on FOR basis - Held that:- The issue regarding admissibility of credit on maintenance of AC installed in factory premises is covered by the decision in the case of Tema India Limited [2019 (1) TMI 1498 - CESTAT AHMEDABAD]. Cenvat credit on Garden Maintenance services - Held that:- The issue is covered by the decision of Hon'ble Madras High Court in the case of Rane TRW Steering Systems Limited [2015 (4) TMI 704 - MADRAS HIGH COURT] the Cenvat credit for maintenance, management and repair of AC and maintenance of Garden are allowed. CENVAT credit for GTA services for outward transportation - Held that:- In the case of Sharda Exports [2016 (7) TMI 1357 - CESTAT NEW DELHI], the issue is remanded to the Adjudicating Authority for redetermination the issue. Appeal allowed in part and part matter on remand.

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• CST, VAT & Sales Tax

• 2019 (3) TMI 299
  Interpretation of statute - holding of stock - scope of the word “held” - Section 8(f)(ii) of the Kerala Value Added Tax Act 2003 - Held that:- The Tribunal found favor with the assessee's argument that the holding of stock, as found in the provision, can only be running stock and not the turnover in any event. The Tribunal, while taking note of the argument did not feel fit to remand the matter for consideration of the issue. The finding of the Tribunal is correct, but however, the question has to be dealt with as interpreted by the Tribunal. The Assessing Officer will have to necessarily look at the running stock of the business which should have to be compared with the previous year and if the same is double the running stock of the previous year, necessarily the cancellation would be proper - revision allowed by way of remand.

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• 2019 (3) TMI 298
  Remand of the case - Refund of input tax credit - opening stock as on 01.04.2005, which was purchased during the previous year when the Kerala General Sales Tax Act was in force - Refund of input tax credit on the close of the year, ie:31.03.2006 - Held that:- Admittedly, the Tribunal affirmed the order of the first Appellate Authority. Now, we are informed that the Assessing Officer on the question of input tax credit on the opening stock, has held against the assessee by an order giving effect to the first appellate authorities order - On the question of refund of excess input tax credit on the close of the year also the Assessing Officer verified the documents and held against the assessee. The said order has been upheld in first appeal and is said to be now pending before the Tribunal. We are dismayed that the Assessing Officer, despite an order of the first Appellate Authority confirmed by the Appellate Tribunal, has thought it fit to decline the claim of input tax credit on the opening stock on a verification of the documents. We see from the order of the first Appellate Authority that the documents were verified and the same found to be available in the records at specific pages as mentioned therein and then directed that the refund order would be restored. There is no scope for further verification by the Assessing Authority and the issue stands finalised in first appeal. There can be no remand on that particular issue and the Assessing Officer ought not to have looked into that. The Assessing Officer ought to have issued a modified order maintaining the order of refund on that issue atleast - there is no reason to interfere with the order of the first Appellate Authority as confirmed by the Tribunal on the question of input tax credit on the opening stock maintained as on 01.04.2005. Refund of excess input tax as on 31.03.2006 - Held that:- Admittedly, there was an open remand and the Assessing Officer has dealt with the issue to find against the assessee, on which a second appeal is also said to be pending. Hence, we do not think that there can be any interference on the open remand made too. Revision dismissed.

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• 2019 (3) TMI 297
  Penalty u/s 27(4)(1) of TNVAT Act - AO levied penalty u/s.27(3) of the Act - no findings have been given by the officer on wilful suppression of turnover - Penalty u/s 16(2) of the TNGST Act - assessment was done at lower rate of tax @ 2% - Held that:- The Assessing Officer by order dated 25.05.2009 rejected the claim under Section 19(11) of the TNVAT Act as the assessee had filed the claim beyond the time limit prescribed. The Assessing Officer went one step further and levied penalty under Section 27(3) of the TNVAT Act. On reading of the assessment order dated 25.05.2009, it is seen that there is no discussion as to how the penalty is leviable under Section 27(3) of the TNVAT Act. In the grounds of appeal, the revenue sought to sustain the penalty levied under Section 27(3) of the TNVAT Act. The Tribunal heard the appeal and came to the conclusion that the Assessing Officer wrongly invoked Section 27(3) of the TNVAT Act instead of Section 27(4) of the TNVAT Act and Section 27(4) of the TNVAT Act being a machinery provision, it would operate automatically and the assessee is liable to pay penalty at 50% on the wrong claim of input tax credit in terms of Section 27(4)(i) of the TNVAT Act. After coming to such a conclusion, the Tribunal remanded the matter to the Assessing Officer with a direction to discuss under which section he proposes penalty either under Section 27(3) or Section 27(4) of the TNVAT Act or both and to what percentage penalty is leviable - the Tribunal committed serious error in holding that Section 27(4) of the TNVAT Act would stand attracted. The Tribunal ought to have considered the vital fact that for Section 27(4) of the TNVAT Act to stand attracted the assessee s case revision brought under Section 27(2) of the TNVAT Act. In otherwords, the Tribunal should record a finding that there has been wrongful availment of ITC or the assessee has produced false bills, vouchers, declaration certificate or any other document with a view to support his claim of input tax credit. Furthermore, the claim made by the assessee was outrightly rejected by the Assessing Officer as time barred and therefore, there is no allegation that the assessee had wrongly availed input tax credit . Thus, both the contingencies contemplated under sub-section (2) of Section 27 of the TNVAT Act do not stand attracted in the assessee s case - In such circumstances, sub-section (4) of Section 27 of the TNVAT Act can never be applied since the said section would apply only if an order has been passed under Section 27(2) of the TNVAT Act holding that either the assessee has wrongly availed input tax credit or he has produced false documents to support his claim of input tax credit. Thus, the Tribunal erred in passing the impugned order and more particularly going beyond the grounds raised by the revenue before it. The tax case revision is allowed and the substantial questions of law are answered in favor of the assessee.

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• Wealth tax

• 2019 (3) TMI 296
  Maintainability of appeal - monetary limit - existence of substantial question of law - whether the appeal has to be considered on merits without being hindered by the monetary limits if it involves a substantial question of law of importance and such question arises repeatedly? - HELD THAT:- the question of law has now been settled by the Honourable Supreme Court [2016 (1) TMI 826 - SUPREME COURT OF INDIA]. Repeated instances of such question of law arising does not arise at all, since the Wealth Tax Act is no more in force. The extant litigation policy which restrains the Department from taking up any appeal under Section 260A; if the demand is less than Rupees Fifty Lakhs. Considering the overall circumstances of the assessee having expired in the year 2010, the refund orders as per the order of the Tribunal having been issued, and also that the monetary limit is less than that prescribed under Annexure-D circular, we are of the opinion that though the question of law has to be answered in favour of the Revenue and against the assessee, there need be no recovery steps taken for reason of the appeals being below the monetary limit at the time of filing of the appeals itself. These appeals are hence closed with the above observations

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• Indian Laws

• 2019 (3) TMI 295
  Interpretation of statute - special allowances paid by an establishment to its employees - scope of basic wages - whether the special allowances paid by an establishment to its employees would fall within the expression “basic wages” under Section 2(b)(ii) read with Section 6 of the Act for computation of deduction towards Provident Fund? - Held that:- Basic wage, under the Act, has been defined as all emoluments paid in cash to an employee in accordance with the terms of his contract of employment. But it carves out certain exceptions which would not fall within the definition of basic wage and which includes dearness allowance apart from other allowances mentioned therein. But this exclusion of dearness allowance finds inclusion in Section 6. The test adopted to determine if any payment was to be excluded from basic wage is that the payment under the scheme must have a direct access and linkage to the payment of such special allowance as not being common to all. The crucial test is one of universality. The employer, under the Act, has a statutory obligation to deduct the specified percentage of the contribution from the employee’s salary and make matching contribution. The entire amount is then required to be deposited in the fund within 15 days from the date of such collection. In the present case, no material has been placed by the establishments to demonstrate that the allowances in question being paid to its employees were either variable or were linked to any incentive for production resulting in greater output by an employee and that the allowances in question were not paid across the board to all employees in a particular category or were being paid especially to those who avail the opportunity. In order that the amount goes beyond the basic wages, it has to be shown that the workman concerned had become eligible to get this extra amount beyond the normal work which he was otherwise required to put in. There is no data available on record to show what were the norms of work prescribed for those workmen during the relevant period. It is therefore not possible to ascertain whether extra amounts paid to the workmen were in fact paid for the extra work which had exceeded the normal output prescribed for the workmen. The wage structure and the components of salary have been examined on facts, both by the authority and the appellate authority under the Act, who have arrived at a factual conclusion that the allowances in question were essentially a part of the basic wage camouflaged as part of an allowance so as to avoid deduction and contribution accordingly to the provident fund account of the employees. There is no occasion to interfere with the concurrent conclusions of facts - The appeals by the establishments therefore merit no interference - appeal allowed - decided in favor of Revenue.

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• 2019 (3) TMI 294
  Dishonor of Cheque - insufficiency of funds - repayment of borrowed amount - Section 138 of the Negotiable Instruments Act, 1881 - In the present case, the record before the Court indicates that the cheque was drawn by the appellant for Lakshmi Cement and Ceramics Industries Ltd., as its Director - A notice of demand was served only on the appellant. The complaint was lodged only against the appellant without arraigning the company as an accused - Held that:- The provisions of Section 141 postulate that if the person committing an offence under Section 138 is a company, every person, who at the time when the offence was committed was in charge of or was responsible to the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished. In the absence of the company being arraigned as an accused, a complaint against the appellant was therefore not maintainable. The appellant had signed the cheque as a Director of the company and for and on its behalf. Moreover, in the absence of a notice of demand being served on the company and without compliance with the proviso to Section 138, the High Court was in error in holding that the company could now be arraigned as an accused. The High Court was in error in rejecting the petition under Section 482 of the CrPC - appeal allowed.

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