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Newsletter: Where Service Meets Reader Approval. TMI Tax Updates - e-Newsletter March 9, 2020 Case Laws in this Newsletter: GST Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax Indian Laws TMI SMS Deduction u/s 80IA - Partnership firm was converted into a company - since the conditions u/ss (4)(i)(b) are fulfilled, benefit allowed - SC News 1. DGGI (Hqrs.) registered a case for fraudulently claiming IGST refunds on export of goods Summary: DGGI registered a case against a company and others on March 6, 2020, for fraudulently claiming IGST refunds exceeding Rs. 61 crores on goods exports. The company availed ineligible ITC using invoices from non-existent or non-functional firms involved in circular trading without actual goods supplies. These supplier companies, managed by a few individuals, also claimed suspect IGST refunds. On March 7, 2020, two directors were arrested under the CGST Act for related offenses. The investigation into the roles of suppliers and associated individuals is ongoing. 2. Yes Bank Ltd.: RBI announces Scheme of Reconstruction Summary: The Reserve Bank of India (RBI) has released a draft scheme for the reconstruction of Yes Bank Ltd. and is seeking feedback from the public, including shareholders, depositors, and creditors. The draft has also been shared with Yes Bank Ltd. and State Bank of India for their input. Feedback will be accepted until March 9, 2020, after which the RBI will make a final decision. Yes Bank Ltd. was placed under a moratorium on March 5, 2020, which is effective until April 3, 2020. Notifications Companies Law 1. F. No. Legal-35/3/2020 - dated 6-3-2020 - Co. Law Constitution of High Level Committee for preparation of Investigation manual for Serious Fraud Investigation Office (SFIO) Summary: The Government of India has established a High-Level Committee to develop an investigation manual for the Serious Fraud Investigation Office (SFIO). The committee comprises various members from the Ministry of Corporate Affairs, legal experts, and representatives from law enforcement and academic institutions. Its mandate includes creating comprehensive guidelines for investigations, assessing current procedures, and recommending improvements. The committee will analyze practices from other agencies, address past case learnings, and establish standard operating procedures. The Institute of Company Secretaries of India and SFIO will provide support, with a report due within 45 days of the initial meeting. Customs 2. 05/2020 - dated 7-3-2020 - ADD Seeks to impose anti-dumping duty on imports of 'Chlorinated Polyvinyl Chloride (CPVC) Resin- whether or not further processed into compound' originating in or exported from China PR and Korea RP. Summary: The Government of India, through the Ministry of Finance, has imposed definitive anti-dumping duties on imports of Chlorinated Polyvinyl Chloride (CPVC) Resin, whether processed into a compound or not, originating from China and Korea. This decision follows findings that these imports were priced below normal value, causing harm to the domestic industry. The duties, effective for five years from August 26, 2019, aim to counteract this dumping by imposing charges based on the difference between the landed value and specified amounts. The duties will be calculated in Indian currency, with specific exchange rates determined by the Customs Act, 1962. Income Tax 3. 15/2020 - dated 5-3-2020 - IT Income-tax (7th Amendment) Rules, 2020 Summary: The Income-tax (7th Amendment) Rules, 2020, effective from its publication date, amends the Income-tax Rules, 1962. The amendment introduces a new clause to rule 17C, allowing investments by entities authorized under the Payment and Settlement Systems Act, 2007, in equity share capital, bonds, or debentures of companies engaged in retail or digital payment systems. These companies must be approved by the Reserve Bank of India and have at least 51% of their equity shares held by the National Payments Corporation of India. Highlights / Catch Notes GST Court Stays Order, Petitioner Must Deposit 10% of Assessed Profiteering Amount with Registrar General. Case-Laws - HC : Profiteering - stay the operation of the impugned order granted subject to the petitioner depositing in this Court, in the name of Registrar General, 10% of the amount of profiteering assessed by the NAA - HC Visit to Get Source Petitioner permitted to submit revised FORM GST TRAN-1 and TRAN-2 manually or electronically by February 28, 2020. Case-Laws - HC : Manual filing of revised FORM GST TRAN-1 and the resultant FORM GST TRAN-2 - The review petitioner shall be permitted either to manually or electronically upload the revised form GST Tran-1 and Tran-2, expeditiously and without all delay, at any rate, on any day on or before 28.2.2020. - HC Visit to Get Source Income Tax Rule 17C: Guidelines for Charitable Trusts' Investments to Comply with Tax Regulations in Income-tax Rules, 1962. Act-Rules : Forms or modes of investment or deposits by a charitable or religious trust or institution - Rule 17C of the Income-tax Rules, 1962 as amended Visit to Get Source High Court Affirms Section 153C Compliance: Seized Documents Belong to Assessee, Not Searched Individual. Case-Laws - SC : Assessment u/s 153C - The satisfaction note by the Assessing Officer clearly states that the documents so seized belonged to the other person – the assessee and not the searched person. Thus, the High Court is justified in observing that the requirement of Section 153C has been fulfilled. - SC Visit to Get Source Supreme Court Grants Tax Deduction to Company for Infrastructure Development u/s 80IA, Meeting Key Eligibility Conditions. Case-Laws - SC : Deduction u/s 80IA - whether assessee fulfilled the condition of sub-Section (4)(i)(b) of Section 80IA? - partnership firm was converted into a company - For the assessment year under consideration, the activity undertaken by the assessee is only maintaining and operating or developing, maintaining and operating the infrastructure facility, inasmuch as, the construction of the road was completed on 27.3.2000 and the same was inaugurated on 1.4.2000, where after toll tax was being collected by the assessee-Company. - benefit of exemption u/s 80IA available to assessee company - SC Visit to Get Source Education Cess and Higher Education Cess Not Deductible u/s 40(a)(ii) of the Income Tax Act. Case-Laws - HC : Addition u/s 40(a)(ii) - Allowable deduction in the year of its payment - Education Cess and Higher and Secondary Education Cess - Even, though, “cess” may be collected as a part of income tax, that does not render such “cess”, either rate or tax, which cannot be deducted in terms of the provisions in Section 40(a)(ii). The mode of collection, is really not determinative in such matters. - HC Visit to Get Source Department Authorized to Act Against Temple Trustees for Mismanagement u/s 10 (23C) (v) Allegations. Case-Laws - HC : Exemption u/s 10 (23C) (v) - liberty is given to the Department to proceed against the trustees and committee members dealing with administration and the monies of the temple for the mismanagement and misappropriation leading to loss of public monies and the Government revenue, if any. - HC Visit to Get Source High Court Clarifies: Bad Debt Deduction Doesn't Need to Arise from Income in Same Category for Inter-Corporate Debt. Case-Laws - HC : Allowance of bad debts on account of inter corporate debt and advances - it is not necessary, rather there is no requirement under the Act that the bad debt has to accrue out of income under the same head i.e 'income from business or profession' to be eligible for deduction. This is not a requirement of law. - HC Visit to Get Source Court Rules Assessee Need Not Prove Lender's Fund Source u/s 68 of Income Tax Act; Burden on Revenue Authorities. Case-Laws - HC : Addition u/s 68 - whether an assessee who has taken a loan is bound to produce the source of source? - Held No - The appellant having proved the identity and credit worthiness of the party as well as the genuineness of the transaction had discharged its burden and it was for the revenue to conduct an enquiry and to prove that the transaction in question was not genuine and the identity of the creditor was not established and it had no credit worthiness. - HC Visit to Get Source Section 68 Addition Overruled: Assessee Proves Genuine Share Application Money with Documentary Evidence, AO's Claim Dismissed. Case-Laws - AT : Addition u/s 68 - allegation that bogus share application money received from various paper companies - Addition made by the AO based on the statement of alleged entry provider which was recorded by the Investigation Wing, Mumbai was not found sustainable when the assessee produced all the documentary evidences to discharge its onus to prove the transaction - AT Visit to Get Source Taxpayer Wins Deduction Claim u/s 80IB(10), Despite Unexplained Discrepancies in Financial Documents and Audit Reports. Case-Laws - AT : Claim of deduction u/s 80IB(10) - CIT(A) granted relief to the assessee appreciating the assessee‟s explanation relating to some glitches in the software. The said para of CIT(A)‟s order does not have reasons for accepting patent discrepancies appeared in the Profit and Loss Accounts and statement of accounts, dates in the audit reports, etc. No reason is given for the anti-dated Form No.10CCB. - AT Visit to Get Source Patent Registration Fees: Revenue, Not Capital Expenditure, Says Evaluation on Income Tax Implications. Case-Laws - AT : Disallowance of the professional fees on patent - revenue or capital expenditure - The fact that a trade mark after registration could be separately assigned, and not as a part of the good will of the business only, does not also make the expenditure for registration a capital expenditure. That is only an additional and incidental facility given to the owner of the trade mark. It adds nothing to the trade mark itself - AT Visit to Get Source Disallowed Expenditures Must Be Excluded from Operating Expenses in Arm's Length Price Calculations for Transfer Pricing Adjustments. Case-Laws - AT : TP Adjustment - Determination of Arms Length Price (ALP) - Once a particular expenditure itself is disallowed, there can be no question of including it in the Operating expenses for calculating the profit margin in the process of determination of the ALP. - AT Visit to Get Source Pr. CIT Revises Assessment Under Sec 263 Due to Undisclosed Receipts and Revenue Understatement by Company. Case-Laws - AT : Revision u/s 263 - undisclosed receipts - The vital discrepancies were not pointed out by the Assessing Officer at the time of assessment proceedings. Pr. CIT after making proper enquiry pointed out that that the assessee company had understated its revenue from operations - assessment order was erroneous in so far as it was prejudicial to the interests of revenue. - AT Visit to Get Source Accounting Standard AS 7: Assessee Must Account for Future Contract Expenses, Even if Not Yet Liabilities. Case-Laws - AT : Disallowance on account of provision for future loss being unascertained liability - in fixed price contracts, the assessee having credited all its revenue, as per the contract, has to provide for all the foreseeable expenses which it is bound to incur as per the contract. Accounting Stand ard AS 7 provides for such an eventuality. - Order of CIT(A) allowing the claim confirmed. - AT Visit to Get Source Majority Stakeholder's R&D Expenses Approved Due to Lack of Dispute from Revenue Authorities in Business Interest Case. Case-Laws - AT : R&D expenses incurred for partnership firm - Since the assessee is holding 97.5% of share in the partnership firm, SPI it becomes the duty of the assessee to promote the business of the partnership firm in the capacity of the majority stake holders. Incidentally, the revenue authorities have not brought anything on record which could suggest that the expenditures have not been incurred for the purposes of business. Be it assessee's business or the business of the partnership firm where the assessee is a majority stake holder. In our understanding of the law an expenditure is allowable if it is incurred for the purposes of the business of the assessee - claim of expenditure allowed - AT Visit to Get Source Customs Petitioners Must Respond to Department's Letters to Address SEZ Unit Goods Supply Issue in Gujarat. Case-Laws - HC : Whether the petitioners have supplied goods to the SEZ Unit, Gujarat or not, can only be looked into after petitioners file a reply to the Department in respect of the letters issued to the petitioners. It is purely question of fact and can be looked into by the competent authority - HC Visit to Get Source Sponsorship Costs Excluded from Import Valuation u/r 10(1)(e): No Extra Charges for Indian Company. Case-Laws - AT : Valuation of goods imported by adidas India - inclusion of sponsorship and endorsement expenses - The show cause notice has only made reference to rule 10(1)(e) of the 2007 Rules for adding the payments made for promotion and expenditure to the price actually paid for determining the transaction value. It has been found that the conditions provided for in rule 10(1)(e) are not satisfied and, therefore, no addition could have been made to the price actually paid by adidas India to adidas Germany for determination of the transaction value of the goods that were imported. - AT Visit to Get Source Dispute Over Classification of Scodix S 75 Printers: Authorities Challenge Tariff Heading 84433250 Despite HSN Guidelines. Case-Laws - AT : Classification of imported goods - Scodix S 75 Digital Inkjet Printer - large format printers which satisfy the conditions of connectability as given in HSN Explanatory Notes are to be classified under tariff heading 84433250 as “Inkjet Printers”. So the conclusion arrived by the authorities below that the goods are not Digital Inkjet Printers or that the goods are not capable of being connected to ADP or net work and therefore is not classifiable under 84433250 is against the clarification given by the Board. - AT Visit to Get Source Indian Laws Petitioner dismissed from ICICI Bank; must pursue contractual remedies, not writ jurisdiction, as it's a private entity. Case-Laws - HC : Termination of Chanda Deepak Kochhar from the Bank - ICICI is a private body. It is not an instrumentality of the State. It receives no public funding. Service conditions of the Petitioner are not governed by any statute. The dispute raised in this Petition arises from a contract of personal service. The termination of the Petitioner is in the realm of contractual relationship. - For the contractual remedies, the Petitioner will have to approach the appropriate forum and not writ jurisdiction. - HC Visit to Get Source Service Tax Rule 14 CCR, 2014: "Wrongly" Defined for Interest and Penalty on CENVAT; Focus on Incorrect Availment, Not Utilization. Case-Laws - AT : Scope of the term "Wrongly" - Rule 14 of CCR, 2014 - Demand of Interest and penalty - availment of CENVAT and utilization thereof - it is unusual for ‘utilization’ to be qualified with ‘ineligibility’ on its own as ‘utilization’ is solely for the purpose of discharge of tax/duty liability which, even if not warranted, does not, by any stretch of usage, behove description as ‘wrongly.’ Such transfer of epithet, borne out of drafting frailty, can only reasonably mean ‘utilization’ after having been wrongly taken and, therefore, ineligible. - AT Visit to Get Source Debate on Service Tax Recovery for Railway Siding Construction Hinges on "Railways" Definition in Section 65(105) of Finance Act 1994. Case-Laws - AT : Recovery of service tax - construction of a railway siding track works - scope of the term railways - The ‘constructions’ excluded from taxability under both the entries in section 65(105) of Finance Act, 1994 are, plainly, unqualified. The legislative intent, therefore, cannot be circumscribed by encroachment, or restrictive interpretation, ventured upon by tax authority. - AT Visit to Get Source Assessee's Refund Claim Approved for Erroneous Service Tax Payment; Self-Assessment Not Equivalent to Official Assessment u/s 73. Case-Laws - AT : Refund of erroneously paid service tax - during the relevant period, the activity was not subject to service tax - the assessee was justified in filing the refund claim as the self-assessment cannot be considered as an assessment made by an officer under Section 73 against which an appeal or challenge lies. - AT Visit to Get Source Central Excise High Court Confirms Intentional Distinction in Cenvat Credit Rule 11(3) Clauses for Exemption Options. Case-Laws - HC : Reversing of lapsed cenvat credit - Rule 11(3) of CCR, 2004 - stipulation of lapsing is included in Clause (ii) and not in Clause (i). These two clauses are separated by hyphen and use of the word ‘or’. Secondly in the Rule 11(3) (i) it is the option given to the manufacturer or producer for obtaining exemption. In category (ii) there is no such option but a reference is made for final product which has been exempted absolutely under Section 5A of the Act. Therefore, these two categories being distinct, the placement of stipulation cannot be considered as a mere draftsman error. - HC Visit to Get Source Goods Valuation on Principal-to-Principal Basis Not Job Work, Despite Branding: Department's Claim Rejected. Case-Laws - AT : Valuation - goods supplied on principal to principal basis - job-work or not - erely because the goods manufactured by M/s. Inova bear the brand name of M/s. Roca, the Department has viewed the transaction as a manufacture done by a job worker on behalf of the principal manufacturer. - hen the transaction is on principal to principal basis, the allegation that the assessee is manufacturing as a job worker for the principal manufacturer cannot sustain. - AT Visit to Get Source Co-applicant can seek settlement; not barred by prior penalty as they're not the main SCN recipient. Case-Laws - Commission : Maintainability of Application for Settlement application - co-applicant - Since he is not the main applicant in the present case, he will not be debarred from approaching the Settlement Commission. Had he been the main applicant in this case to whom a duty demand has been issued in the form of a SCN, he would have been barred from approaching the Commission as he was penalised earlier in the settlement of another case relating to him where a SCN was issued to him demanding duty - Commission Visit to Get Source VAT Appellate Authority Must Use Discretion Wisely on Pre-Deposit in VAT Appeals; Strong Cases May Waive Requirement. Case-Laws - HC : Maintainability of appeal - Failure to make pre-deposit - in appropriate cases, the First Appellate Authority is expected to exercise its discretion judiciously and it should not insist for pre-deposit, if otherwise the appellant is able to make out a strong prima facie case in his favour. - HC Visit to Get Source Court Supports Withholding Form C Until Petitioners Resume Payments; Respondents' Argument Shows Preliminary Merit. Case-Laws - HC : Refusal to issue Form C - Respondents have sought to withhold furnishing of Form-C till the Petitioners resumes payment of installments as undertaken. Prima facie, we find merit in the contention of the Respondents that in such circumstances inherent powers exist in the authority upon noticing an abuse to prevent further abuse. - HC Visit to Get Source Case Laws: GST 2020 (3) TMI 358 Filing of Form GST TRAN-1 - time-limit for uploading of TRAN-1 - transitional credit - transition to GST regime - HELD THAT:- The request of the petitioners before the authorities along with the averments made in the writ petitions to the effect that they faced technical glitches are sufficient - The assessees transitioning into a new procedure set out under the GST regime are bound to face complications and in some cases may be completely unable to carry out the new procedure. The issue involved in these writ petitions has been considered by the Gujarat High Court in Siddharth Enterprises vs. Nodal Officer [ 2019 (9) TMI 319 - GUJARAT HIGH COURT ] wherein the question was whether the claim for transition of credit is only a procedural requirement or a mandatory one. Thus, a procedural law should not take away the vested rights of persons that are provided to them by statute. Needless to mention, this vested right is subject to scrutiny by the Department. Therefore, the petitioners should be allowed to upload the TRAN-1/revised TRAN-1 so that their claim of transfer of available credit may be considered by the authorities in accordance with law - the GSTN authorities (Authority that manages the portal) are directed to open the portal for the petitioners till March 31, 2020. This order shall not create any equity in favour of any of the petitioners in so far as their claim is concerned and the same shall be subject to scrutiny by the concerned authority. Petition disposed off. 2020 (3) TMI 357 Detention of goods alongwith vehicle - Section 129(3) of the Central Goods and Services Tax Act, 2017 - detention on the premise that the consignment was not accompanied by invoice - compliance with the provisions of Rule 138(A) of the Central Goods and Services Tax Act, 2017 - requirement with the furnishing of Bank Guarantee - HELD THAT:- Petitioner is not willing to pay the security in the form of bank guarantee equivalent to the amount of applicable tax, interest and penalty, without expressing any opinion on the merits as to strict applicability of Rule 138(A) or Rule 55 read with Section 129 or Rule 140. In my view, it is in the domain of the adjudicating authority. Since the goods are already lying seized with effect from 27.02.2020, the goods can be released on furnishing of Bank guarantee for the full amount as per provision of Section 129 of CGST Act, 2017 - the writ petition with a direction to the adjudicating authority to adjudicate the matter with regard to the goods being in compliance with the provisions of the Act or otherwise as expeditiously as possible. 2020 (3) TMI 356 Profiteering - stay on operation of the petitioner - HELD THAT:- We are inclined to stay the operation of the impugned order subject to the petitioner depositing in this Court, in the name of Registrar General, 10% of the amount of profiteering assessed by the NAA i.e. Rs. 9,96,18,637/- within four weeks from today - The amount once deposited shall be immediately placed in a Fixed Deposit by the Registrar General. 2020 (3) TMI 355 Levy of Interest on ITC - petitioner submits that, firstly, interest on ITC could not be levied since the amount of ITC already stands credited to the account of respondents - he further submits that interest on cash has also been incorrectly levied, in as much as the petitioner had deposited the cash element with the tax in due course - HELD THAT:- The petitioner had tendered in Court a print out of the electronic cash ledger for the period 01.07.2017 to 31.03.2019 in support of his submission that the cash element of tax has also been paid in due course. Copy of the same will be provided to counsel for the respondents. She seeks time to take instructions in this regard. List on 04.03.2020. 2020 (3) TMI 354 Lifting of freezed Bank Accounts - outstanding GST liability - HELD THAT:- The petitioner has tendered in Court the details of the GST liability outstanding and pending for payment through cash ledger in petitioner s case, according to which the outstanding liability, between August, 2019 and January, 2020, is Rs. 16,18,18,715/-. List on 03.03.2020. 2020 (3) TMI 353 Validity of of Section 171 of the CGST Act read with Rule 126 of the CGST Rules - vires of Rule 133(3)(b) of the CGST Rules - HELD THAT:- Issue notice confined to prayer (a) of the writ petition. Learned counsel for respondent No. 1, learned counsel for respondent Nos. 2 3 and learned counsel for respondent No. 4 accept notice. They pray for and are permitted to file counter affidavit within four weeks. The petitioner is directed to deposit 50% of the principal profiteered amount. The said amount shall be deposited in two equal monthly instalments. The amount deposited by the petitioner shall be kept in interest bearing Fixed Deposit Receipts by the Registry. List on 21st April, 2020. 2020 (3) TMI 352 Release of seized goods alongwith vehicle - section 129 and 130 of CGST Act - HELD THAT:- The writ applicant availed the benefit of the interm-order passed by this Court and got the vehicle, along with the goods released on payment of the tax amount. The proceedings, as on date, are at the stage of show cause notice, under Section 130 of the Central Goods and Services Act, 2017. The proceedings shall go ahead in accordance with law. It is now for the applicant to make good his case that the show cause notice, issued in GSTMOV-10, deserves to be discharged. Application disposed off. 2020 (3) TMI 351 Remission of GST - Works Contract - petitioner s main contention appears to be that going by the terms and conditions of Ext.P2 works contract agreement that the petitioner is only the subject provider, who is not liable to pay GST in respect of 20 items of services mentioned in Ext.P2 as per the terms of the contract therein and that as per the said terms and conditions of Ext.P2, the 3rd respondent being the service recipient is legally obliged to remit GST in respect of the said 20 services in compliance with the terms and conditions of Ext.P2 works contract. HELD THAT:- This Court is of the view that there is no necessity for this Court to adjudicate the abovesaid contentions raised by the petitioner regarding the merits of the matter. As rightly pointed out by the learned Government Pleader, the petitioner has not so far responded to the impugned notice as per Exts.P3 and P4 and it is for the petitioner to immediately respond to the same by giving his written submissions/written objections in the matter without any delay, at any rate, within a period of 2 weeks from the date of production of the certified copy of this judgment. It is also ordered that the 5th respondent will have to issue notices to the petitioner as well as to R3 (M/s. Hindustan Newsprint Ltd.) and R4 (who is stated to be the liquidator of R3 Company) and the 5th respondent in its notice may direct the 4th respondent to give a report regarding the factual aspects raised by the petitioner on the basis of Ext. P2 and also the constitutional contentions raised by the petitioner - Thereafter, respondent No.5 will afford reasonable opportunity of being heard to the petitioner, R3 and R4 and after adverting to and considering the various contentions of the petitioner as noted and contentions and submissions, if any of the other parties concerned, may render a considerable decision on the matters raised in the impugned Exts. P3 and P4 notices, without much delay. Application disposed off. 2020 (3) TMI 350 Manual filing of revised FORM GST TRAN-1 and the resultant FORM GST TRAN-2 - direction for quashing Rule 120A of the CGST Rules to the extent it denies a registered person the right to revise the return under From GST TRAN-1 more than once - direction for quashing Exhibit P11 notification to the extent it denies registered persons who are affected but not identified, the benefit of the extended date for submitting FORM GST TRAN-1 and FORM GST TRAN-2 - HELD THAT:- It is ordered that in the light of the procedure recommendation made by the Commissioner of State GST Council, it is ordered that the review petitioner shall be permitted either to manually or electronically upload the revised form GST Tran-1 and Tran-2, expeditiously and without all delay, at any rate, on any day on or before 28.2.2020. Petition disposed off. Income Tax 2020 (3) TMI 362 Stay petition - recovery proceedings - seeking a restraint order against the Tax Recovery Officer, Range 1, Kalyan - Respondent No.4 for enforcing the attachment made under the Income Tax Act, 1961for recovery of the dues - HELD THAT:- According to Rule 16(2), if an attachment has been made under Schedule II to the Act, any private transfer or delivery of the property shall be void as against all claims enforceable under the attachment. The property in dispute was mortgaged by BPIL to the Union Bank of India in 2000 and the DRT passed an order of recovery against the BPIL in 2002. The recovery certificate was issued immediately, pursuant to which an attachment order was passed prior to the date on which notice was issued by the Tax Recovery Officer- Respondent No.4 under Rule 2 of Schedule II to the Act. It is true that the sale was conducted after the issuance of the notice as well as the attachment order passed by Respondent No.4 in 2003, but the fact remains that a charge over the property was created much prior to the notice issued by Respondent No.4 on 16.11.2003. The High Court held that Rule 16(2) is applicable to this case on the ground that the actual sale took place after the order of attachment was passed by Respondent No.4. The High Court failed to take into account the fact that the sale of the property was pursuant to the order passed by the DRT with regard to the property over which a charge was already created prior to the issuance of notice on 11.02.2003. As the charge over the property was created much prior to the issuance of notice under Rule 2 of Schedule II to the Act by Respondent No.4, we find force in the submissions made on behalf of the Appellant. The judgment of the High Court is set aside and the Appeal is allowed. The MIDC is directed to issue a No Objection certificate to the Appellant. Respondent No.4 is restrained from enforcing the attachment order dated 17.06.2003. 2020 (3) TMI 361 Assessment u/s 153C - mandation of satisfaction note recorded by the AO as required u/s 153C - cash receipts on sale of shop/offices at M/s Super Mall - HELD THAT:- From satisfaction note, it emerges that the Assessing Officer is satisfied that the documents containing the details of the cash receipts on sale of shop/offices at M/s Super Mall, Karnal belonged to the other person assessee M/s Super Mall. He is also satisfied that the documents/pen drive are seized from the searched person. He is also satisfied that the documents so seized from the residence of the searched person/Ved Prakash Bharti belonged to the assessee the other person. Therefore, the Assessing Officer was satisfied and it is specifically mentioned that the documents so seized belonged to the assessee the other person. Therefore, it cannot be said that the mandatory requirements of Section 153C of the Act, in the facts and circumstances of the case, have not been complied with. The satisfaction note by the Assessing Officer clearly states that the documents so seized belonged to the other person the assessee and not the searched person. Thus, the High Court is justified in observing that the requirement of Section 153C has been fulfilled. On facts, we are in complete agreement with the view taken by the High Court on the requirement of Section 153C of the Act being fulfilled by the Assessing Officer before initiating the proceedings under Section 153C - Decided against assessee. 2020 (3) TMI 360 Deduction u/s 80IA - whether assessee fulfilled the condition of sub-Section (4)(i)(b) of Section 80IA? - partnership firm was converted into a company on 28.3.2000 under Part IX of the Companies Act - HELD THAT:- For the purpose of considering compliance of clause (a) of Section 80IA ( 4)(i), the assessee must be an enterprise carrying on business of (i) developing, (ii) maintaining and operating or (iii) developing, maintaining and operating any infrastructure facility, which enterprise is owned by a company registered in India. That stipulation is fulfilled in the present case, as the registered firm was converted into a company under Part IX of the Companies Act on 28.3.2000, which is before the commencement of Assessment Year 2002-2003. For the assessment year under consideration, the activity undertaken by the assessee is only maintaining and operating or developing, maintaining and operating the infrastructure facility, inasmuch as, the construction of the road was completed on 27.3.2000 and the same was inaugurated on 1.4.2000, where after toll tax was being collected by the assessee-Company. In the present case, the agreement was initially executed between the erstwhile partnership firm and the State Government, but with clear understanding that as and when the partnership firm is converted into a company, the name of the company in the agreement so executed be recorded recognising the change. Notably, the agreement itself mentions that M/s. Chetak Enterprises as party to the agreement was meant to include its successors and assignee. Further, the State Government had granted sanction to the company and the original agreement entered into with the firm automatically stood converted in favour of the assessee-Company, which came into existence on 28.3.2000 being the successor of the erstwhile partnership firm. Thus understood, even the stipulation in clause (b) of Section 80IA( 4)(i) is fulfilled by the assessee-Company. Since these are the only two issues which weighed with the assessing officer to deny deduction to the assessee-Company as claimed under Section 80IA the first appellate authority was justified in reversing the view taken by the assessing officer. For the same reason, the ITAT, as well as, the High Court have justly affirmed the view taken by the first appellate authority, holding that the assessee-Company qualified for the deduction under Section 80IA being an enterprise carrying on the stated business pertaining to infrastructure facility and owned by a Company registered in India on the basis of the agreement executed with the State Government to which the respondent/assessee-Company has succeeded in law after conversion of the partnership firm into a company. 2020 (3) TMI 349 Trial of offence u/s 276 CC against the petitioner in abeyance during pendency of the writ petition - application for compounding - HELD THAT:- The conviction of the petitioner was set aside by the learned ASJ on 03.12.2018. Even before that, on 23.10.2018 the petitioner moved an application to seek review of the rejection of earlier application for compounding. The respondents have rejected the said review application by the impugned order dated 29.01.2020 on the ground that the petitioner has not been acquitted and merely his conviction has been set aside on a technical ground. Petitioner has pointed out that the limitation for filing the application for compounding has since been done away with vide circular No.25/2019 dated 09.09.2019. He further submits that the respondents have adopted a wrong yardstick for rejection of the review application by stating that the petitioner has not been acquitted. He submits that if the petitioner were to be acquitted, there would be no question of his seeking compounding. As on date it cannot be said that the petitioner stands convicted since his conviction has been set aside by the learned ASJ. The matter has been remanded back for leading of further evidence. We direct that the learned ACMM, dealing with the petitioner s prosecution shall adjourn the proceedings to a date after the hearing of this petition. 2020 (3) TMI 348 Exemption u/s 11 - application of income for any purpose other than the object of the Trust - HELD THAT:- As decided in CIT Vs. Matunga Gymkhana [2020 (1) TMI 1149 - BOMBAY HIGH COURT] object of the assessee is undoubtedly promotion of sports, games and providing recreation facilities to the public at large and to the members in particular and therefore receipts on account of compensation from decorator against gymkhana function, miscellaneous income and compensation from caterer (restaurant) cannot be construed as activities in the nature of trade, commerce or business for the purpose of the proviso to Section 2(15) - Also Depreciation to assessee trust did ot lead to double deduction - Decided in favour of assessee 2020 (3) TMI 347 Addition u/s 40(a)(ii) - Allowable deduction in the year of its payment - Education Cess and Higher and Secondary Education Cess - whether the expression any rate or tax levied as it appears in Section 40(a)(ii) includes cess ? - HELD THAT:- In the Income Tax Act, 1922, Section 10(4) had banned allowance of any sum paid on account of any cess, rate or tax levied on the profits or gains of any business or profession . In the corresponding Section 40(a)(ii) the expression cess is quite conspicuous by its absence. In fact, legislative history bears out that this expression was in fact to be found in the Income Tax Bill, 1961 which was introduced in the Parliament. However, the Select Committee recommended the omission of expression cess and consequently, this expression finds no place in the final text of the provision in Section 40(a)(ii) . The effect of such omission is that the provision in Section 40(a)(ii) does not include, cess and consequently, cess whenever paid in relation to business, is allowable as deductable expenditure. There is no scope for such implications, when construing a taxing statute. Even, though, cess may be collected as a part of income tax, that does not render such cess , either rate or tax, which cannot be deducted in terms of the provisions in Section 40(a)(ii). The mode of collection, is really not determinative in such matters. In the present case, though the claim for deduction was not raised in the original return or by filing revised return, the Appellant Assessee had indeed addressed a letter claiming such deduction before the assessment could be completed. However, even if we proceed on the basis that there was no obligation on the Assessing Officer to consider the claim for deduction in such letter, the Commissioner (Appeals) or the ITAT, before whom such deduction was specifically claimed was duty bound to consider such claim. - Decided in favour of assessee. 2020 (3) TMI 346 TDS u/s 195 - payment of commission to foreign agents where TDS was not deducted u/s. 40(a)(ia) - HELD THAT:- The matter is entirely covered by the decision of the Hon ble Apex Court in the case of GE India Technology Centre (P) Vs. CIT, [ 2010 (9) TMI 7 - SUPREME COURT ] In this decision, the Hon ble Apex Court has held that the duty to deduct tax at source arises only when remittance to non-residents contain wholly or partly taxable income, i.e. income chargeable under Section 195 of the Income Tax Act, 1961. The view taken in GE India Technology (P) Limited (supra) was once again reiterated in another decision of the Hon ble Apex Court in the case of C.I.T. Vs. Toshoku Ltd. [ 1980 (8) TMI 2 - SUPREME COURT ]. Also see assesee s own case [ 2017 (9) TMI 248 - BOMBAY HIGH COURT ] 2020 (3) TMI 345 Disallowance of R D expenditure - HELD THAT:- Expenditure was incurred by the assessee for and on behalf of the partnership firm and therefore it was not for the purpose of assessee s business. The second objection was with respect to correlation of such expenditure for setting up in-house R D facilities. The Commissioner agreed with the first contention in part and granted only pro-rata relief in terms of the proportionate exports of the assessee. Weighted deduction u/s 35(2AB) of clinical trial expenses incurred outside the approved facility - HELD THAT:- Often times in the field of research and invention, the efforts undertaken may or may not yield fruitful results. What is to be ascertained is whether any scientific research was undertaken and not whether such scientific research resulted into the ultimate aim for which such research was undertaken. It can be easily envisaged that the scientific research undertaken often times would completely fail to achieve desired results. That by itself does not mean that no scientific research was undertaken. What the Legislature desired to encourage by granting deduction under section 35(1) of the Act was a scientific research and not necessarily only the successful scientific research undertaken by an assessee. Tribunal committed no error. Merely because the prescribed authority segregated the expenditure into two parts, namely, those incurred within the in-house facility and those can were incurred outside, in our opinion, by itself would not be sufficient to deny the benefit to the assessee under section35(2AB) of the Act. It is not as if that the said authority was addressing the issue for deduction under section 35(2AB) of the Act in relation to the question on hand. The certificate issued was only for the purpose of listing the total expenditure under the Rules. See Commissioner of Income-tax I vs. Cadila Healthcare Ltd [ 2013 (3) TMI 539 - GUJARAT HIGH COURT] 2020 (3) TMI 344 Exemption envisaged u/s 10 (23C) (v) - The respondent being aware of this did not apply for approval under Section 10 (23C) (v) for the Assessment Year 2015- 2016 by September 2015 as required under Section 10 (23C). The respondent filed an application for exemption later in the year 2016. - ITAT allowed the benefit of exemption for the AY 20105-16 also - HELD THAT:- There is no question of law arising for consideration as the appeal is devoid of merits. However, liberty is given to the Department to proceed against the trustees and committee members dealing with administration and the monies of the temple for the mismanagement and misappropriation leading to loss of public monies and the Government revenue, if any. 2020 (3) TMI 343 Allowance of bad debts on account of inter corporate debt and advances u/s 36(1)(vii) read with Section 36(2) - assessee company is not a banking company or engaged in the business of money lending? - HELD THAT:- Comparing the provision of Section 36(1)(vii), pre 1.4.1989 and post 1.4.1989, Supreme Court held that the position in law has become well settled. After 1.4.1989, it is not necessary for the assessee to establish that the debt in fact has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. This Court in CIT Vs. Shreyas S. Morakhia [ 2012 (3) TMI 103 - BOMBAY HIGH COURT ] also considered a claim of share broker assessee to deduction by way of bad debts under Section 36(1)(vii). This Court referred to the decision of the Supreme Court in T.R.F. Ltd (supra) and held that under Section 36(1)(vii) of the Act, the amount of any bad debt or any part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year is to be allowed as deduction in computing income under Section 28 of the Act. Thus, it is a settled position in law that after 1.4.1989, it is not necessary for the assessee to establish or prove that the debt has in fact become irrecoverable but it would be sufficient if the bad debt is written off as irrecoverable in the accounts of the assessee. This is because, as held by this Court, decision to treat a debt as a bad debt is a commercial or business decision of the assessee. Recording of a debt as a bad debt in his books of accounts by the assessee prima facie establishes that it is a bad debt. If the Assessing Officer disputes that the onus would be on him to prove otherwise. Tribunal recorded from the materials on record that admittedly, the debt in question had been written off as irrecoverable in the accounts of the assessee. If that be the position, then there is compliance to the requirement of Section 36(1)(vii) of the Act and the amount covered by the bad debts would be entitled to be deducted vide computing income under Section 28 of the Act. Further, it is not necessary, rather there is no requirement under the Act that the bad debt has to accrue out of income under the same head i.e income from business or profession to be eligible for deduction. This is not a requirement of law. All that is required is that the debt in question must be written off by the assessee in its books of accounts as irrecoverable. - Decided against revenue 2020 (3) TMI 342 Penalty u/s 271(1)(c) - As submitted that regarding penalty as per the records, no such penalty existed against the applicants firm and there were no records available in the office of the Pr. Commissioner of Income Tax, Meerut to show that any such penalty exists against the applicants firm as is evident from page 103 of the application - HELD THAT:- Opposite party no.2 opposed the contentions made by the learned counsel for the applicants and submitted that the report regarding penalty for the assessment year 1983-84, which is annexed at page 103 is with respect to the Proprietor, Anand Kumar Jain and not with respect to the applicants firm. It has further been submitted that in pursuance of the order dated 16.04.1999, a detailed application was moved by the applicants but various ground regarding whether any penalty existed against the applicants firm have not been dealt with. It is directed that the applicant may file a proper application before the concerned Magistrate, who will after considering all the facts and circumstances of the case, pass a reasoned order, expeditiously, preferably within a period of two months from today, if there is no other legal impediment. For a period of two months from today or till the disposal of the applicants application, whichever is earlier, no coercive action shall be taken against the applicants. 2020 (3) TMI 341 Exemption u/s 11 - applicability of Section 13 of the Act - lease agreement between the assessee and the lessor whether a transaction is not at arm s length and is between interested parties - HELD THAT:- First appellate authority considered the lease agreement and the fact that the deposit was made pursuant to the same for user of premises and other assets, such as, building, building ground etc. for carrying out educational activities / charity. First appellate authority came to the conclusion that respondent assessee had proved that the premises and the assets envisaged in the lease agreement were actually used by the respondent assessee for its educational activities / charitable purposes. In such circumstances, the first appellate authority held that there was no case of any benefit given / derived by specified person. Holding that denial of exemption was unjustified being not based on facts, the first appellate authority directed the Assessing Officer to delete the additions and to allow the exemption. Tribunal reiterated as a finding of fact that deposit of Rs. 6,68,00,000.00 was in pursuant of a valid lease agreement for user of the premises and various other facilities. Respondent - assessee had used the premises and other leased assets for carrying out educational activities / charitable purposes. Tribunal further held that departmental representative of the revenue could not controvert the findings of fact returned by the appellate authority. - Decided in favour of assessee 2020 (3) TMI 340 Addition u/s 68 - whether an assessee who has taken a loan is bound to produce the source of source? - HELD THAT:- In the instant case, the assessee in support of identity, genuineness of transaction and credit worthiness of M/s Bhuwania Bros. Pvt. Ltd. had supplied a copy of the balance sheet and profit and loss account to the Assessing Officer. The appellant had also filed the copy of the return of income of M/s. Bhuwania Bros Pvt. Ltd. as well as copy of information letter. The appellant having proved the identity and credit worthiness of the party as well as the genuineness of the transaction had discharged its burden and it was for the revenue to conduct an enquiry and to prove that the transaction in question was not genuine and the identity of the creditor was not established and it had no credit worthiness. In the instant case, the revenue has not conducted any enquiry and has failed to discharge its burden. We answer the substantial question of law in favour of the assessee and against the revenue. 2020 (3) TMI 339 Addition u/s 68 - bogus share application money received from various paper companies for which specific information as received from the Investigation Wing - information received from the investigation wing that these are paper companies leads to the conclusion / destination, as the information called for u/s 133(6) of the I.T. Act, 1961 at the known addresses of these companies returned back unserved with remarks Not Known - HELD THAT:- The information filed by the assessee as required by the AO is incompliance of the said letter/notice. Moreover, the AO has not given the finding about the genuineness of these documents filed by the assessee which means that the AO has not found any defect in the documents filed by the assessee. The assessee has clearly filed all the documents which include share application money, Resolution of share applicant companies whereby the directors were authorized to make investment in the shares of the assessee company, bank statements showing payment through banking channel and return of income filed by those companies. Once these documents were filed then the identity of the share applicant companies stand proved. The assessee also produced the bank statements and the AO has not even pointed out that the funds transferred from the bank account of these companies are actual money of the assessee routed through these companies. Therefore, the creditworthiness and genuineness of the transactions is also proved by producing all these documentary evidences. Further out of 06 companies to whom the shares were issued at a premium of Rs. 490/- per share, the AO has accepted the transaction of receipt of share premium from remaining 03 companies which itself demolishes the case of the AO that the assessee company does not carry the worth of such a premium of Rs. 490/- per share. Once the assessee has discharged its primary onus by filing the documentary evidences, proving the identity and creditworthiness of these companies as well as transactions then the burden is shifted on the AO to bring the material on record to controvert the documentary evidences filed by the assessee Documentary evidences filed by the assessee clearly discharges the onus casted on the assessee company and therefore, in the absence of any contrary material or findings to point out any defect in these documentary evidences, the addition made by the AO is not justified. Addition made by the AO based on the statement of alleged entry provider which was recorded by the Investigation Wing, Mumbai was not found sustainable when the assessee produced all the documentary evidences to discharge its onus to prove the transaction. - Decided against revenue 2020 (3) TMI 338 TP Adjustment - comparable selection - HELD THAT:- Assessee company is carrying out all IT enabled services and no marketing is done by the assessee, no sale of IT products are done by the assessee - assessee is performing only development services relating to software, thus companies functionally dissimilar with that of assessee need to be deselected from final list. Bigger sized company is in the position to undertake more risks in the business as compared to the smaller size companies - Companies with huge difference of turnover with the assessee need to be deselected. Telecommunication Expenses u/s.10A 10AA - HELD THAT:- Any amount reduced from Export turnover should also be reduced from the amount of Total turnover in the computation of deduction u/s.10A of the Act. Following the same, we allow the assessee s ground and dismiss that of the Revenue. Exclusion of expenditure on providing technical services abroad from the turnover while computing deduction u/s.10A/10AA - HELD THAT:- AR fairly agreed that the full amount of foreign currency expenses has been rightly held to be excludible from the amount of Export turnover . It was, however, prayed that the same amount may also be excluded from the amount of Total turnover - we hold that the amount of Foreign currency expenses to the tune of Rs. 107.63 crore be excluded from the Export turnover as well as Total turnover . Disallowance u/s.14A r.w.r.8D - HELD THAT:- When interest free funds in the form of share capitaland reserves etc. are more than the amount of investment, then no disallowance of interest can be made u/s 14A. Respectfully following the precedents, we order to delete the disallowance under Rule 8D(2)(ii) whereas, in respect of disallowance u/s.8D(2)(iii) hat only those investments should be considered for computing average value of investments which yield exempt income during the year. In view of the afore referred precedents, we set aside the impugned order to this extent and remit the matterto the file of Assessing Officer for re-computing the disallowance under Rule 8D(2)(iii) by considering only such investments in calculating the average value of investments, which have yielded exempt income during the year. The assessee will be allowed hearing opportunity in the fresh proceedings. Deputation of Technical Manpower (DTP) - HELD THAT:- In assessee s own case for assessment year 2007-08 decided that there is no gainsaying that `profits of the business of the undertaking are not only the profits derived from the export of computer software but also those which are attributable to the business of undertaking. So long as there exists a direct link between the eligible undertaking and some income, the same is profit of the business of undertaking, even if may not be derived from the export of computer software etc. Without accepting, even if we presume the contention of the ld. DR as correct that income from DTM and onsite software services rendered abroad cannot be considered as derived from the export of computer software, it, in any case, will have to be regarded as `profits of the business of the undertaking . In view of the foregoing discussion, we uphold the impugned order on this score. Foreign exchange fluctuation gain directly credited to the reserves - HELD THAT:- As given considerable thought to the findings of the First Appellate Authority wherein at the very outset, the Ld. CIT(Appeals) observed that Assessing Officer has not examined as to how much fluctuation gain is on the capital account and how much is on the revenue account. Therefore, in the interest of justice, we set aside the order of the Ld. CIT(Appeals) and restore the matter to the file of the AO/TPO for proper verification and adjudication after complying with the principles of natural justice. Thus, Ground of the assessee s appeal is allowed for statistical purposes. 2020 (3) TMI 337 Claim of deduction u/s 80IB(10) - assessee is engaged in the business of promoters and builders executing various construction schemes for commercial / residential complex - This is the third year of the project and project is close to completion (around 80%) - the assessee did not offer any income on account of this project in the earlier assessment years and never claimed the deduction till this year. The assessee followed the project completion method till last year - CIT-A allowed the claim - HELD THAT:- CIT(A) granted relief to the assessee appreciating the assessee s explanation relating to some glitches in the software. The said para of CIT(A) s order does not have reasons for accepting patent discrepancies appeared in the Profit and Loss Accounts and statement of accounts, dates in the audit reports, etc. No reason is given for the anti-dated Form No.10CCB. Further, no details are given for justifying the differences in the sales figure, no reasons are given for accepting change in method of accounting. In our opinion, such an order of CIT(A) is not in tune with the provisions of section 250(6) of the Act and therefore, should be unacceptable. Therefore, we are of the opinion the matter should be remanded to the file of CIT(A) for re-adjudication of the issues and direct the CIT(A) to pass a speaking order attending to the aforesaid discrepancies with reference to the claim of deduction u/s 80IB(10) of the Act, on one side and requirement of filing the return on the other side or change in accounting method, as the case may be. The CIT(A) shall give reasonable opportunity of hearing to the assessee while re-adjudicating the aforesaid issues. Thus, the grounds raised by Revenue are allowed for statistical purposes. 2020 (3) TMI 336 Non-deduction of TDS u/s 194C on payments made to the Transporters - assessee had complied with requirements under Section 194C(7) of I.T. Act and further, that the relevant particulars were on the records of CIT(A) and the AO; is contrary to the observation of the CIT(A) in paragraph 4 and 5 of the impugned consolidated appellate order dated 30.05.2016 - HELD THAT:- As the appellant has not complied with the requirement of sub section 7 of section 194C it is not entitled to the benefit of sub-section 6 though in the case of lawful compliance of sub section 7 it would have been entitled for the same. . In view of the foregoing, it will be in fitness of things to remit the matter to the file of the AO for fresh order after due verification at the end of the AO whether the requirements under Section 194C(7) have been complied with by the assessee. We set aside the impugned consolidated appellate order dated 30.05.2016 of the Ld. CIT(A) and the aforesaid consolidated order dated 23.03.2015 of the AO and restore the issue in dispute to the file of the AO for fresh order in accordance with law after due verification at his end whether the requirements under Section 194C(7) of I.T. Act have been duly complied with by the assessee. Needless to say, the AO will provide reasonable opportunity to the assessee before passing fresh order, in order to substantiate the claim that requirements under Section 194C(7) of I.T. Act have been duly complied with by the assessee. Appeals are partly allowed for statistical purposes. 2020 (3) TMI 335 Transfer pricing adjustment - MAM selection - TNMM or CUP - HELD THAT:- DRP rejected the assessee-company s contentions without assigning reasons whatsoever. The assessee also contends that the TPO as well as DRP had not assigned any reason as to why CUP method is not most appropriate method in the nature of transactions assessee company had with its AE. It was also submitted that TPO has not considered the alternative submissions of the assessee company that in case TNMM is adopted as the most appropriate method, same should be applied based on internal comparables rather than external comparables. Now, law is quite settled that internal comparables are more preferable to external comparables. Finally, learned authorised representative of the assessee submitted that the TPO had not considered the submissions of the assessee-company for adjustment towards unutilized capacity. AO also not followed directions of the DRP while passing final assessment order. In the circumstances, it was prayed that the matter may be restored back to the file of the AG for de novo consideration. CIT(DR) had no serious objections for restoring the matter back to the file of the AO/TPO for fresh analysis of TP study. In the circumstances, we remit the matter back to the AO to consider the above submissions de novo after affording due opportunity of being heard to the assessee company. Deduction u/s 10A - HELD THAT:- Ground raised by the revenue is covered against the revenue by the decision rendered by Hon ble jurisdictional Karnataka High Court in the case of Tata Elixi Ltd [ 2011 (8) TMI 782 - KARNATAKA HIGH COURT] . Requirement of considering the issue of deduction of foreign expenses from both export turnover and total turnover shall arise only if the additional ground urged by the assessee is decided against the assessee, i.e., if the additional ground is decided in favour of the assessee by holding that there is no requirement of deducting foreign expenses from the export turnover, then the ground urged by the revenue shall become infructuous. AO has actually allowed deduction u/s 10B of the Act. The Ld DRP has referred to both sec.10B and 10A in its directions. The grounds urged by both the parties refer to sec.10A only. Thus, there is confusion about the section under which the deduction was claimed by the assessee. Disallowance of Provision for doubtful debts claimed by the assessee u/s 36(1)(vii) - HELD THAT:-Since the impugned claim has not been examined by the AO in terms of 36(1)(vii) of the Act, we restore this issue to his file for examining the same afresh. Provision for Gratuity is an ascertained liability eligible to be deducted from the Net profit for the purpose of computing book profit u/s 115JB - HELD THAT:- Provision for gratuity is an ascertained liability eligible to be deducted from net profit for the purpose of computing book profit u/s 115JB 2020 (3) TMI 334 Penalty u/s 271AAA - income declared which was offered by the assessee in his return of income - HELD THAT:- A careful perusal of the order u/s 271AAA of the Act would show that the Assessing Officer has considered the amount of Rs. 2.44 crores, over and above the surrendered amount, and has computed the penalty accordingly. Since the issue relating to the sum of Rs. 2.44 crores is now well settled in favour of the assessee, in our considered opinion, the AO should now consider the amount of Rs. 4 crores which was offered u/s 132(4) of the Act and honoured in the return of income for levy of penalty u/s 271AAA. We, accordingly, restore this issue to the file of the Assessing Officer. AO is directed to consider the levy of penalty u/s 271AAA on the sum of Rs. 4 crores as per the provisions of law keeping in mind that the said sum was offered for taxation in the statement made u/s 132(4) of the Act and honoured in the return of income. Needless to mention, the Assessing Officer shall give reasonable and sufficient opportunity of being heard to the assessee. Appeal of the assessee is treated as allowed for statistical purposes. 2020 (3) TMI 333 Deduction claimed u/s. 35(2AB) - AO had disallowed claim as the assessee had carried out certain expenditures outside the in-house R D center - HELD THAT:- CIT(A) correctly allowed relief to the assessee keeping in view the judgment of Hon ble Gujarat High Court in the case of Cadila Healthcare Ltd. [ 2013 (3) TMI 539 - GUJARAT HIGH COURT] where the Hon ble Court had held that clinical trials conducted outside approved facility were eligible for exemption under s.35(2AB) of the Act. - Decided against revenue Disallowance on account of depreciation on electric installations - AO had restricted the depreciation to 15% instead of 25% by holding that electrical fittings are eligible for depreciation at a particular rate prescribed under the Rules - HELD THAT:- As before the learned CIT(A), the assessee demonstrated that electrical installations were connected to plant and machinery and were parts of plant and machinery itself. It was also submitted to learned CIT(A) that similar disallowance was made in the case of assessee in AY 2009-10 [ 2010 (7) TMI 1096 - ITAT AHMEDABAD] which the learned CIT(A) had deleted. The learned CIT(A) has also allowed relief to the assessee by following the order of Hon ble ITAT in the case of assessee itself for AYs. 2005-06 2009-10. - Decided against revenue Disallowance on account of prior period expenses - HELD THAT:- CIT-A after noting down the break up of expenses which were classified by the assessee as per prior period expenses and the year of their crystallization rightly deleted the addition by holding that it is clear from the details given by the appellant that the appellant had proper explanation with supporting evidence to prove that the liability is crystallized only in the previous year - AO is directed to allow prior period expenses - Decided against revenue TDS u/s 195 - disallowance on account of foreign commission expenses for non deduction of TDS - HELD THAT:- This issue is also covered in favour of the assessee vide order of Hon ble ITAT for AY 2009-10 [ 2010 (7) TMI 1096 - ITAT AHMEDABAD] in the case of assessee itself where the Hon ble Tribunal after discussing the entire fact and after noting down the provisions of Section 9(1)(vii) and Section 195 of the Act has held that the provisions of Section 195 and Section 9 were not applicable to the assessee and therefore has held that assessee was not liable to deduct TDS and therefore no disallowance was warranted under s.40(a)(ia) Disallowance on account of product registration fees - Allowable revenue expenses - HELD THAT:- This issue is now covered, in favour of the assessee, by Hon ble jurisdictional High Court s judgments in the cases of CIT v. Torrent Pharmaceutical Ltd. [ 2013 (4) TMI 570 - GUJARAT HIGH COURT] and CIT v. Cadila Healthcare Ltd. [ 2013 (3) TMI 539 - GUJARAT HIGH COURT] wherein Their Lordships have, inter alia, held that the product registration expenses is eligible for deduction as revenue expenditure. Disallowance of the professional fees on patent - revenue or capital expenditure - HELD THAT:- Where a sum of money is laid out for the acquisition or the improvement of a fixed capital asset it is attributable to capital but of no alteration is made in the fixed capital asset by the payment, then it is properly attributable to revenue, being in substance a matter of maintenance, the maintenance of the capital structure or the capital asset of the company. In our opinion, the advantage derived by the owner of the trade mark by registration falls within this class of expenditure The fact that a trade mark after registration could be separately assigned, and not as a part of the good will of the business only, does not also make the expenditure for registration a capital expenditure. That is only an additional and incidental facility given to the owner of the trade mark. It adds nothing to the trade mark itself. The observation of the AO and the submission of the appellant is considered carefully. As the facts of the case on this point are similar to the facts dealt with by the Hon ble High Court of Gujarat in case of Cadila Healthcare Ltd. [ 2013 (3) TMI 539 - GUJARAT HIGH COURT] respectfully following the decision, the AO is directed to allow the professional fees - Decided in favour of assessee 2020 (3) TMI 332 Rejection of books of accounts - estimation of income - Computation on presumptive basis of 10% U/s.44BBB(1) or alternately @10.98% under normal provisions of the Act - HELD THAT:- As decided in own case [ 2017 (9) TMI 1164 - GUJARAT HIGH COURT] it is held that the action of Ld AO in rejecting books of accounts of the Appellant and estimating income is not sustainable. Further hold that the Appellant has rightly and legitimately offered income u/s 44BBB(2) of the Act. I further reject the action of Ld AO in making alternative addition u/s 44BBB(1) of the Act. Addition made by the AO by rejecting the books of accounts and estimating the income u/s 44BBB(1) of the Act as well as on the basis of comparable companies are hereby deleted. TPA - most appropriate method for determining the arm s length price and as to whether the transaction between APL and JPL and Shandong Head Office is a comparable uncontrolled transaction - HELD THAT:- From the concurrent findings of fact recorded by the Tribunal and the Commissioner (Appeals) based on the material on record, it is apparent that the terms of functions performed, assets employed, risk undertaken, the price charged in comparable uncontrolled transactions entered into by virtue of the contract between APL and JPL and Shandong HO vis- -vis the contract awarded to Shandong PO by Shandong HO, are identical. It is based upon such concurrent findings of fact recorded by it after appreciating the material on record that the Tribunal has arrived at the conclusion that the arm s length price of the transaction in question is required to be computed by adopting the CUP method. Therefore, unless there is any perversity in the findings of fact recorded by the Tribunal upon appreciation of the evidence on record, no question of law can be said to arise from the impugned order. The learned senior standing counsel for the appellant is not in a position to point out any perversity in the concurrent findings of fact recorded by the Tribunal after appreciating the evidence on record. It is not the case of the revenue that any irrelevant material has been taken into consideration by the Tribunal or that any relevant material has been ignored, nor has any material to the contrary been pointed out to the court to dislodge the findings of fact recorded by the Tribunal. Moreover, a perusal of the proposed questions shows that the impugned order has not been challenged on the ground of perversity. In the light of the above discussion, the conclusion arrived at by the Tribunal being based upon findings of fact recorded after appreciating the material on record, in the absence of any perversity being pointed out in the findings of fact recorded by the Tribunal. - Decided against revenue 2020 (3) TMI 331 TP Adjustment - ALP of a `specified domestic transaction - AO made a reference for determination of the ALP of `specified domestic transaction whereas the TPO determined ALP of the `international transaction - HELD THAT:- The case of the assessee is founded on the premise that the correct value of the SDT to be reported in Column no. 9 of Form No. 3CEB was Rs. 2,60,04,296/-, which was wrongly reported in Column no. 8 and vice versa . We do not understand any raison d etre for the assessee in reporting, at all, the correct value of the transactions of the nature prescribed in section 92BA in the first instance, when it did not cross the threshold of Rs. 5.00 crore, so as to become SDT. The fact that such transactions did not become SDT and required no reporting in Form No. 3CEB coupled with the fact that the assessee still reported it and that too, in a wrong column, gives some strength to the view point canvassed by the ld. DR that the assessee wanted to mislead the Revenue by resorting to the tactic with the ulterior motive. In the ultimate analysis, we hold that no infirmity can be found in the TPO s action in determining the ALP of the `international transaction of Rs. 7.07 crore. Treatment of foreign exchange (forex) gain/loss given by the authorities as an item of non-operating nature in the computation of the ALP of the assessee as well as comparables - Notes forming part of the Accounts of the assessee for the year under consideration that one of the transactions involving fluctuation in foreign currency is in the capital field, which is, `Purchase of capital goods worth Rs. 13,85,590/-. Forex gain/loss in respect of such a transaction cannot be considered as a part of operating expense/income. The ld. AR candidly admitted that the TPO considered forex gain/loss as non-operating not only for the assessee but also for the comparables. In view of the foregoing discussion, we are of the considered opinion that the amount of foreign exchange gain/loss arising out of revenue transactions is required to be considered as an item of operating revenue/cost, both for the assessee as well as the comparables. Comparability of companies - HELD THAT:- Refracting to functions carried out by the assessee as that of providing Software Development and Support services in the areas of embedded multimedia, multimedia applications and communication systems as per the requirements of its AEs companies functionally dissimilar with that of assessee need to be deselected from final list. One needs to examine the comparability position on year to year basis independently. For one year, a company may be comparable and for the next year, it may cease to be so for a variety of reasons. Turnover filter - Upper turnover filter is fixed at Rs. 250 crores and lower turnover filter is fixed at Rs. 2.50 crore - Companies which do not pass turnover filter approved by the DRP need to be excluded. Computation of OP/OC of comparable company - treatment given by the authorities below to the Provision for bad and doubtful debts as non-operating - The provision for doubtful debts has a direct relation with the sales made by a company. In the same way in which the amount of sales is an item of operating revenue, the amount of provision for doubtful debts, having direct link with the sales, is also an item of operating expense. In our considered opinion, Provision for doubtful debts cannot be treated as a non-operating expense. We, therefore, direct to include the amount of Provision for doubtful debts in the expense side of this company for calculating the profit margin. Direct to include Reserve for doubtful debts as an item of operating expenses in calculating the operating profit margin of the company. Operating expenses exclusion for calculating the profit margin in the process of determination of the ALP - Once a particular expenditure itself is disallowed, there can be no question of including it in the Operating expenses for calculating the profit margin in the process of determination of the ALP.While upholding the disallowance, we direct to exclude Rs. 5.00 lakh from the Operating expenses of the assessee for the purpose of calculation of its ALP. 2020 (3) TMI 330 Exemption u/s 80P - assessee is a MSEB Employees Co-operative Credit Society Ltd. registered under the Maharashtra State Co-operative Act formed for the mutual benefit of employees working with Maharashtra State Electricity Board (MSEB) in the adjoining districts of Chandrapur and Gadchiroli - HELD THAT:- The earnings out of investments in PDCC, Credit Co-operative Banks and others, are exempt u/s 80P of the Act. See SARRODAY GRAMIN BIGARSHETI SAHAKARI PATH [ 2019 (9) TMI 1333 - ITAT PUNE] 2020 (3) TMI 329 Revision u/s 263 - undisclosed receipts and value the opening stock and closing stock of iron ore and dump workings - HELD THAT:- Unanimous view that the Income-tax Officer is not only an adjudicator but also an investigator. It is his duty to ascertain the truth of the facts stated in the return. When the circumstances of the case are such so as to provoke an enquiry, it is his duty to make proper enquiry. Failure to make enquiry in such circumstances would make the assessment order erroneous. Assessee has neither disputed the correctness of the above decision nor brought to our knowledge any contrary decision on this point, but he claimed that the A.O. made proper enquiry. Whether the A.O. has made the requisite enquiries ? - It is undisputed that during the accounting year relevant to assessment year under consideration, the assessee has credited Rs. 167,58,34,770/- under the head revenue from operations (gross) i.e. (gross sale of Rs. 196,76,82,602 less royalty of Rs. 29,18,47,831). Pr. CIT gathered from Form H1 prescribed to Indian Bureau of Mines that the assessee had effected total sale of 940,788.270 (MT) of iron ore for a sum of Rs. 202,42,11,422/- and as such gross revenue from operation has been worked out to Rs. 173,23, 63,591 i.e. (gross sale of Rs. 202,42,11,422 less royalty of Rs. 29,18,47,831). The above discrepancies were not pointed out by the Assessing Officer at the time of assessment proceedings. Pr. CIT after making proper enquiry pointed out that that the assessee company had understated its revenue from operations to the extent of Rs. 5,65,28,821 (Rs. 173,23,63,591 Rs. 167,58,34,770/-. We, therefore, are in agreement with the learned Pr. Commissioner of Income tax that the assessment order was erroneous in so far as it was prejudicial to the interests of revenue. Accordingly, we decline to interfere with the order of learned Commissioner passed under section 263 of the Act. - Decided against assessee. 2020 (3) TMI 328 Bogus expenses - material collected by the Assessing Officer under section 142(1) - HELD THAT:- No information has been received against the assessee and nowhere the name of the assessee-com pany was mentioned. Even the assessee-company was not aware that their sub-contractor has further sub-contracted the impugned work. Further, no such material or evidence was obtained by the Assessing Officer from Silicon Real Estate Pvt. Ltd. from which it can be ascertained that M/s. Sintex Infra Projects Ltd. had sub-contracted projects of the assessee-company to them. Hence, this statement cannot be considered as basis for disallowing the expenses of Rs. 5.42 crores. Moreover, it is also a matter of fact that both the aforesaid statements of the third party were recorded at the back of the assessee and therefore these statements could not be the basis for making the addition. The assessee vide submission dated October 31, 2016 submitted on November 2, 2016 requested the learned Assessing Officer to afford an opportunity of cross-examination of both the parties so as to enable the assessee to rebut the contentions raised by the Assessing Officer on the basis of their statements. Copy of the submission is enclosed at pages 108-115 of the paper book. However, the learned Assessing Officer did not provide opportunity for cross-examination which had lead to violation of the principles of natural justice. Payments have been made through banking channels after deduction of TDS and the Assessing Officer has failed to bring any cogent evidence on record to demonstrate that these documents/evidence are false. Therefore, addition made by the Assessing Officer needs to be deleted The mandate of law to conduct enquiry by the Assessing Officer on due information coming to him to verify authenticity of information was not done as per section 142 of the Act. Therefore, mere receipt of unsubstantiated statement recorded by some other officer in some other proceedings more particularly having no bearing on the transaction with the assessee does not create any material evidence against the assessee. This is because section 142(2) mandates any such material adverse to the facts of the assessee collected by the Assessing Officer under section 142(1) has to be necessarily put to the assessee under section 142(3) before utilising the same for assessment so as to constitute as reliable material evidence through the process of assessment under section 143(3) of the Act. Admittedly as discussed above, it is evident that the assessee had nothing to do with M/s. Silicon Real Estate Pvt. Ltd. The fact of contract between M/s. Sintex Infra Projects Ltd. and M/s. Silicon Real Estate Pvt. Ltd. is not a matter of record nor any such material was provided by the Assessing Officer to the assessee. Therefore, there was nothing to suggest that any wrong doing between Sintex Infra Projects Ltd. and Silicon Real Estate Pvt. Ltd. infringe upon the transaction at hand or can operate as reliable evidence against the assessee. - Decided in favour of assessee Disallowance on account of provision for future loss being unascertained liability - provision for losses expected to be incurred on contracts in accordance with Accounting Standard 7 - AO disallowed the same observing that losses are in respect of some contract which was cancelled by one of the clients and in respect of which termi nation proceedings are pending before the Supreme Court - HELD THAT:- As per Accounting Standard 7 which is mandatory in nature, the assessee is required to estimate its total contract costs, (i. e., sum of costs incurred and expected future costs) and recognise the expected losses, (i. e., difference between the contract revenue and total contract costs). We note that in the case of Dredging International N. V. v. Asst. DIT (I.T.) [ 2011 (9) TMI 666 - ITAT MUMBAI] held that any provision for losses recognised in accordance with Accounting Standard 7 is allowable under the Act We note that in fixed price contracts, the assessee having credited all its revenue, as per the contract, has to provide for all the foreseeable expenses which it is bound to incur as per the contract. Accounting Stand ard AS 7 provides for such an eventuality. Having gone through the order of the learned Commissioner of Income-tax (Appeals), we note that there is no infirmity in the order of the learned Commissioner of Income-tax (Appeals). That being so, we decline to interfere in the order passed by the learned Commissioner of Income-tax (Appeals), his order on this issue is hereby accepted and the grounds of appeal raised by the Revenue is dismissed. Deduction under section 80-IA - assessee-company is simply a contractor who merely executed work contract on the basis of quoted tender funded by the Government/semi-Government organisation and hence not entitled to deduction under section 80-IA - HELD THAT:- Assessee was not a works contractor simpliciter and was a developer and hence Explanation to section 80IA(13) does not apply to the assessee. Further, in addition to developing the infrastructure facility, the assessee was even operating and maintaining the same. Thus, clearly the assessee is eligible for deduction under section 80-IA. As the issue is squarely covered in favour of the assessee by the decision of the co-ordinate Bench, in the assessee s own case in CIT (Dy.) v. SPML Infra Ltd. [ 2016 (11) TMI 75 - ITAT KOLKATA] for the assessment years 2006-07 and 2009-10 and there is no change in facts and law and the Revenue is unable to produce any material to controvert the aforesaid findings of the Division Bench (supra). - Decided against revenue Addition u/s 36(1) - payment for employees contribution to provident fund/ESI which were paid before due date of filing of return - HELD THAT:- We note that the payments were made before the due date of filing of return under section 139(1) of the Act as apparent from the tax audit report. We note that various High Courts and now conclusively decided by the hon ble Supreme Court, in the case of Pr. CIT v. Rajasthan State Beverages Corporation Ltd. [ 2017 (7) TMI 1087 - SC ORDER] wherein it was held that the contributions received from the employees, being deposited to the Government account before the due date of filing Registrar of Companies, could not be disallowed under section 43B or under section 36(1)(va) of the Act. Respectfully following the judgment of the hon ble Supreme Court, we dismiss the ground raised by the Revenue. Disallowance u/s 14A made for the purpose of computing book profit under section 115JB - HELD THAT:-Section 14A clearly says for the purpose of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act . Whereas the computation of total income under section 115JB falls under Chapter XII-B of the Income-tax Act, 1961. Therefore, it is very clear that the disallowance/computation for section 14A read with rule 8D will not be applicable for the purpose of calculation of income under section 115JB of the Income-tax Act, 1961. Hence, the disallowance under section 14A relatable to exempt income cannot be added for computation of book profit under section 115JB. For that we rely on the decision of the hon ble Bombay High Court in the case of CIT v. Bengal Finance and Investments Pvt. Ltd. [ 2015 (2) TMI 1263 - BOMBAY HIGH COURT] - thus disallowance under section 14A cannot be made for the purpose of computing the book profit under section 115JB of the Income-tax Act, l961, hence we dismiss the ground raised by the Revenue. 2020 (3) TMI 327 Unexplained cash deposits - unexplained expenditure on construction - receipt from unexplained sources - Unexplained investment in purchase of flat. - HELD THAT:- When before both the authorities below the assessee explained that the amount has been received from A and B, now, the question arises as to why the AO has not invoked the provisions of section 131 of the Act available to the income tax authorities for the personal presence of the depositor. CIT(A) has gone through the confirmations of the above two persons along with other documents filed by the assessee. Merely because the assessee has not filed an application for additional evidence, the claim of the assessee cannot be rejected. If the CIT(A) found that the assessee has furnished evidence which short of only an application for admission of additional evidences, it was always open for the CIT(A) to direct the assessee to file the additional evidences along with application for admission of the same and after accepting the same, he could have called for remand report or place the issue back before the AO for passing an appropriate order. We also find that the documents filed on record claimed to have been produced before the authorities below. Even DR could not controvert the documents filed by the assessee before us by bringing any positive material on record. Accordingly, we are not inclined to support the order of the authorities below on this count also. Considering the above scenario and the factual aspect of the matter, we are of the opinion that the addition made by the AO and confirmed by the CIT(A) in this regard deserves to be deleted and accordingly, we direct the AO to delete the same. Ground No.2 of the assessee is allowed. Unexplained deposit in State Bank of India bank account - HELD THAT:- We find that no material was brought on record either by the Assessing Officer or by the CIT(A) after examining the details and documents filed by the assessee before lower authorities to show that the assessee did not have the amount available with it out of earlier withdrawals made front different banks for making the same as deposit in the bank account as claimed by the assessee. In absence of any such material being brought on record, we find that the lower authorities were not justified in making the addition in the hands of the assessee as unexplained deposit in bank account. Therefore, we set aside the orders of lower authorities and delete the addition and allow this ground of appeal of the assessee. No deposit into the HDFC bank account, the assessee has sufficient amount which was his earlier withdrawals as discussed above and as per the above observations of the Tribunal in assessee s own case for A.Y.2010-2011 in Pabitra Mohan Samal (supra) addition made by the AO and confirmed by the CIT(A) is not justified. Accordingly, we direct the AO to delete the same. Ground No.5 is allowed. Unexplained investment in purchase of flat. - AR submitted that a flat was booked by Shri Anup Hans, who under mutual consent surrendered the same in favour of the assessee and taken bank his booking amount. The assessee paid to him on 02.12.2010 out of his withdrawal from time to time - HELD THAT:- No credible evidence has been brought on record by the ld. AR of the assessee in respect of the contention that Shri Anup Hans has paid Rs. 1,00,000/- on behalf of the assessee as a booking amount for purchase of flat. Therefore, in absence of the same, we find no good reason to interfere with the order of CIT(A) in this regard. Accordingly, we dismiss the ground No.6 of appeal of the assessee. 2020 (3) TMI 298 Claim of loss by the assessee company in the revised return when the same was not claimed in original return - loss allowed to be carried forward and set off against income of subsequent years - whether once, original return of income was filed within the due date specified u/s 139(1), then any loss claimed by filing revised return within the due date specified u/s 139(5) can be allowed to be carried forward and set off against income of subsequent years? - HELD THAT:- In the present case, the original return was filed on 24/09/2009, which is before the due date of filing return u/s 139(1) of the Act. Similarly, the assessee has filed revised return on 26/03/2011, which is before the due date of filing revised return i.e 31/03/2011. From the plain reading of section 139(3) r.w.s. 80 of the Act, it is clear that if assesee incurred a loss, which it claims to be carried forward, then it has to file its return of income within the time stipulated in section 139(1) of the Act, otherwise, the loss will not be carried forward. Since, the assessee has filed original return within the due date prescribed u/s 139(1), then any revised return filed, subsequently within the due date prescribed u/s 139(5) partaks, the nature of original return filed u/s 139(1) and consequently, the conditions prescribed u/s 139(3) of the Act, is fulfilled and accordingly, loss claimed shall be allowed to be carried forward under the relevant provision of the Act. Therefore, we are of the considered view that the Ld. AO was incorrect in invoking the provisions of section 80 of the I.T.Act, 1961 to allow loss as per original return filed u/s 139(1) of the Act. The Ld. CIT(A) after considering the relevant facts has rightly allowed set off of loss as per revised return filed for that year and rightly held that provision of section 80 of the Act, cannot be invoked in the present case. - Decided against revenue. Customs 2020 (3) TMI 359 Principles of Natural Justice - request for cross-examination denied - classification of imported goods - Polyester Woven Fabrics - goods were mis-declared as Polyester Bed Cover/Quilt Cover - classifiable under CTH 5407 or otherwise? - Maintainability of appeal - HELD THAT:- In the present case, entire show-cause notice rests on documents, namely, test report of ATIRA and Textile Committee, Bombay. There are no other relied upon documents in the show-cause notice. Both these reports disputed the classification and description of the imported goods claimed by the assessee. Under these circumstances, we are of the opinion that there would be grave injustice if the appellant is not allowed to cross-examination the author of two test reports. Any adjudication order passed by denying such cross-examination is unlikely to stand the test of legal scrutiny - It is also found on the other hand, that the appellant has been careless in not even filing a written reply to the show-cause notice, but only seeking cross-examination - it is hoped that the appellant files a detailed written reply to the show-cause notice before the Commissioner without delay. Maintainability of appeal - HELD THAT:- We have also examined the maintainability of this appeal, which is not against the adjudication order, but only against a letter of lower authority communicating the decision of the adjudicating authority to deny the cross-examination - In the facts and circumstances of the present case, since the entire show-cause notice is based only on the reports of ATIRA and Textile Committee, Bombay, we are of the opinion that this letter issued by Deputy Commissioner, communicating the decision of the adjudicating authority to deny the cross-objection, is a significant decision which falls within the ambit of Section, 129A of the Customs Act, 1962 as a decision by the adjudicating authority - thus the present appeal is maintainable. The denial of cross-examination communicated through the impugned order needs to be set aside - The Commissioner shall allow cross-examination of the officer, whose test reports are relied upon for issue of show-cause notice - appeal allowed - decided in favor of appellant. 2020 (3) TMI 326 Maintainability of petition - alternative statutory remedy of appeal under Section 128 of the Customs Act, 1962 - HELD THAT:- From the perusal of Section 128 of the Customs Act, 1962 , the position which emerged out is that when a person who is aggrieved by any order passed under the Customs Act, 1962 then he has an efficacious remedy available by way of filing an appeal before the appellate authority. In view of the abovesaid facts, if the petitioner is aggrieved by the impugned order dated 18.02.2020 passed by Additional Customs Officer, Lucknow thereby rejecting the petitioner s application for provisional release of the vehicle then he has got alternative efficacious remedy available under the Act by filing an appeal under Section 128 of the Customs Act, 1962 - the writ petition is disposed of with a direction that the petitioner shall file an appeal under Section 128 of the Customs Act, 1962 before the appellate authority. 2020 (3) TMI 325 Advance Authorization Scheme - rejection of application for condonation of the procedural lapse of non-generation and filing of Bills of Export against the supply of goods to SEZ Unit - HELD THAT:- In the present case, the facts reveal that the petitioners have received purchase order from M/s DIC Fine Chemical Private Limited, a SEZ Unit situated in Gujrat and based upon the purchase order, the petitioner applied to the Director General of Foreign Trade for issuance of Advance Licences / Authorizations. Advance Authorizations were issued by the Officer of Joint Director General of Foreign Trade, Bhopal in the year 2012 13 and the petitioners, as stated by them, imported the specified goods / raw material permitted under the Advance Authorization required for manufacture of said Soya Long Oil Alkyd Regin to be supplied to SEZ Unit. The Aayat Niryat Form provides for submission of proofs by furnishing Bill of Export . The petitioners were required to submit proof of export to SEZ Unit and the proof of export is mentioned in Form 98-VI of the Custom Manual - Not only this, as per Section 30 (3) of the SEZ Rules, Bill of Export is a mandatory requirement and no claim can be accepted in absence of proper authorization. Undisputedly, the petitioners have failed to comply with the aforesaid requirement and for the reasons best known to the petitioners, the petitioners have not impleaded the SEZ Unit, Dahej as respondent, which is a necessary party. Whether the goods were received at SEZ Unit, Dahej or not, could have been answered by the SEZ Unit, Dahej only. The petitioner have also not complied various statutory provisions by not furnishing Bill of Exports. In the present case, the petitioners have opted not to implead SEZ as a respondent, and therefore, as there is no verification on the part of the Officer of the SEZ, the petitioners are not entitled for any relief of whatsoever kind on basis of the judgment delivered in the case of Larsen Toubro [2017 (10) TMI 40 - BOMBAY HIGH COURT]. The petitioners stand is that the petitioners have exported the goods manufactured through M/s DIC Fine Chemical Limited, a SEZ Unit at Dahej, and therefore, they are not liable to pay any duty keeping in view the Foreign Trade Policy, 2004 2009. The proof required for the purpose is Bill of Export and the petitioners have not been able to submit the Bill of Export. Whether the petitioners have supplied goods to the SEZ Unit, Gujarat or not, can only be looked into after petitioners file a reply to the Department in respect of the letters issued to the petitioners. It is purely question of fact and can be looked into by the competent authority - In the considered opinion of this Court, the question of interference, at this stage in the peculiar facts and circumstances of the case, does not arise. Petition dismissed. 2020 (3) TMI 324 Valuation of goods imported by adidas India - inclusion of sponsorship and endorsement expenses paid by adidas India to various athletes and players in India in assessable value - rule 10(1)(e) of the Customs Valuation (Determination of Value of Imported Goods) Rules 2007 - HELD THAT:- It clearly emerges from a bare perusal of rule 10(1)(e) that it contemplates two situations when all other payments actually made or to be made can be added to the price actually paid for determination of the transaction value. The first is a situation when all other payments made by the buyer to the seller as a condition of sale of the imported goods to satisfy an obligation of the seller to the extent that such payments are not included in the price actually paid have to be added. The second is a situation when all other payments made by the buyer to a third party as a condition of sale of the imported goods to satisfy an obligation of the seller to the extent that such payments have not been included in the price have to be added. In the present Appeal, the dispute is with regard to the payment made by the buyer to the third party which would be payments made by adidas India to various sports personalities and associations for marketing and promotional activities of the products - it has been held in various decisions that the costs incurred on advertisement and promotion, even if such advertisement and promotion is carried out under an agreement between the buyer and seller, can be added to the amount paid by the buyer for import of goods only when there is a right with the seller to enforce such a condition on the buyer to incur such expenditure. In Commissioner of Central Excise, Surat vs Surat Textile Mills Ltd [ 2004 (4) TMI 81 - SUPREME COURT ] , the Supreme Court emphasized that advertisement expenditure incurred by a customer of the manufacturer can be added to the sale price for determining the assessable value only if the manufacturer has an enforceable legal right against the customer to insist on the incurring of such advertisement expenses by the customers. There is nothing on the record in the present case that may indicate and nor is it a charge in the show cause notice that the payment that was made by adidas India to a third party for promotion and advertisement of the products was because adidas Germany had a pre-existing obligation to pay to such third party the said amount and adidas India was only discharging this obligation of adidas Germany towards the third party. It may be that the promotion and advertisement of the products by adidas India benefit adidas Germany also, but this would not in any manner mean that the payments made for promotion and advertisement satisfy any pre-existing obligation of adidas Germany towards the parties to whom payment is made for such promotion or advertisement. The amount that is paid by adidas India for promotion and advertisement of the products is an amount incurred by adidas India on its own account and not for discharging any obligation of adidas Germany - the requirement of rule 10(1)(e) that payments should be made by the buyer to a third party to satisfy an obligation of the seller is also not satisfied. The show cause notice has only made reference to rule 10(1)(e) of the 2007 Rules for adding the payments made for promotion and expenditure to the price actually paid for determining the transaction value. It has been found that the conditions provided for in rule 10(1)(e) are not satisfied and, therefore, no addition could have been made to the price actually paid by adidas India to adidas Germany for determination of the transaction value of the goods that were imported. Appeal dismissed - decided against Revenue. 2020 (3) TMI 323 Classification of imported goods - Scodix S 75 Digital Inkjet Printer - whether classified under CTH 8443 32 50 or under CTH 84433910 of CTA - main contention of the department that the goods cannot be described as Inkjet printer and cannot be classified under 84433250 is that it cannot be connected to an automatic data processing machine or net work - HELD THAT:- The catalogue of the goods furnished by the appellant along with the appeal in page 34 states that the item can be connected to net work by LAN TCP/ IP Cat. 5E and that cable is to be supplied by the customer. The term connectable to an ADP Machine or to a net work for the purpose of sub headings 8443.31 and 8443.32 has been explained in the Explanatory notes. The Board s Circular No.11/2008-Cus., dt. 1.7.2008 has also clarified the same. It is stated in the circular that large format printers which satisfy the conditions of connectability as given in HSN Explanatory Notes are to be classified under tariff heading 84433250 as Inkjet Printers . So the conclusion arrived by the authorities below that the goods are not Digital Inkjet Printers or that the goods are not capable of being connected to ADP or net work and therefore is not classifiable under 84433250 is against the clarification given by the Board. After examining the HSN Explanatory Notes and the Boar s circular, it is held that goods are correctly classifiable under CTH 84433250. The order passed reclassifying 84433910 is erroneous and requires to be set aside - appeal allowed - decided in favor of appellant. 2020 (3) TMI 322 Valuation of imported goods - aluminium scrap - enhancement of value based on NIDB data - HELD THAT:- The Tribunal in the case of M/S SANJIVANI NON FERROUS TRADING PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, NOIDA [ 2017 (3) TMI 359 - CESTAT ALLAHABAD ] has set aside such enhancement of the value of the imported scrap - In fact the present respondent M/s Century Metal was also one of the appellant in the said final order. It is further noted that the said final order was upheld by Hon ble Supreme Court in COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, NOIDA VERSUS M/S. SANJIVANI NON-FERROUS TRADING PVT. LTD. [ 2018 (12) TMI 738 - SUPREME COURT ]. Appeal dismissed - decided against Revenue. Service Tax 2020 (3) TMI 321 Construction of Commercial or Industrial Complex Service - Construction of Residential Complex Service - after due process of law, demand was confirmed by the Original Authority - HELD THAT:- On perusal of records it is seen that the appellant has not contested the demand confirmed on the disputed services on merits. Therefore, the order passed by the Adjudicating Authority with regard to the confirmation of demand on merits has attained finality and we do not consider to apply the decision of the Tribunal in REAL VALUE PROMOTERS PVT. LTD., CEEBROS PROPERTY DEVELOPMENT, PRIME DEVELOPERS VERSUS COMMISSIONER OF GST CENTRAL EXCISE, CHENNAI [ 2018 (9) TMI 1149 - CESTAT CHENNAI ] in the instant case. However, taking note of the fact that the issue presently stands covered in favour of the appellant and also that the appellant has paid up major portion of the Service Tax liability before issuance of the Show Cause Notice and later paid up the balance amount, we are of the considered opinion that the benefit of Section 80 of the Finance Act, 1994 can be extended to the appellant - The penalties imposed under Sections 77 and 78 ibid are therefore set aside, without disturbing confirmation of Service Tax demand or interest thereon. Appeal allowed - decided in favor of appellant. 2020 (3) TMI 320 Demand of Interest and penalty - availment of CENVAT credit that stood, either adjusted or reversed, before completion of the adjudication process - proper consideration of issues not made - HELD THAT:- It appears from the submissions, and from a perusal of the impugned order, that the contentions of the appellant have not been examined by the adjudicating authority. This is grievous remiss that can be rectified only in fresh proceedings. In the dispute before us, the reversal of credit before issue of show cause notice renders the taking of credit to have been erased ab initio. There is not even a whiff of allegation that the credit reversed had been utilized, or could have been utilized, to the detriment of the exchequer. The renunciation of jurisdiction to adjudicate upon the claim for exclusion from interest liability does not appear to have been sanctioned by the decision of the Hon ble Supreme Court. From a perusal of rule 14 of CENVAT Credit Rules, 2004 and, in particular, of the disjunctive collation of taken , utilized and erroneously refunded with the expression wrongly qualifying, not all three but only two of these, it would appear that the assumption of credit and a refund of credit, if wrong, would have to pay the price in the form of interest. However, it is unusual for utilization to be qualified with ineligibility on its own as utilization is solely for the purpose of discharge of tax/duty liability which, even if not warranted, does not, by any stretch of usage, behove description as wrongly. Such transfer of epithet, borne out of drafting frailty, can only reasonably mean utilization after having been wrongly taken and, therefore, ineligible. The appeal is allowed by way of remand to determine the interest liability, as well as the penal consequences, in the light of the submissions that were not considered by the adjudicating authority in the impugned order. 2020 (3) TMI 319 Recovery of service tax - construction of a railway siding track works - scope of the term railways - non-consideration of their claim of exclusion from taxability as provider of works contract service and commercial and industrial construction service - period from 2009-10 to 2012-13 - HELD THAT:- We cannot concur with the Learned Authorised Representative as the conclusion of the adjudicating authority lacks legal soundness. We are unable to comprehend the resort to Railways Act, 1989 for a broader understanding of expression railways in the absence of permissible referral in section 65(105)(zzzza) or (zzp), or, for that matter, anywhere in section 65, of Finance Act, 1994. In the absence of such authority, it is the common parlance understanding that should have been adopted. Even if a conscientious disposal of the allegations did prompt such recourse, it should have been appreciated by the adjudicating authority that statutes are framed with distinct objectives and that the definitions contained therein cannot have application de hors the operative provisions of such statutes. The constructions excluded from taxability under both the entries in section 65(105) of Finance Act, 1994 are, plainly, unqualified. The legislative intent, therefore, cannot be circumscribed by encroachment, or restrictive interpretation, ventured upon by tax authority. Appeal allowed - decided in favor of appellant. 2020 (3) TMI 318 Refund of CENVAT Credit - Rejection of refund on some services on the ground that some of the services have not been actually gone into consumption for provision of output services and on the ground that the documents/invoices submitted did not mention the description properly or no nexus - HELD THAT:- In innumerable decisions of the Tribunal it has been held that Event Management Service which is procured for the purpose of business development meetings and events to plan strategy for the future development etc. is qualify as input service and therefore eligible for credit. These kind of events are essential to keep the employees motivated, committed and to foster relationships. Thus these services are actually procured in relation to the business which helps them in improving interpersonal skills, rejuvenate, increase efficiency and to improve their performance in the business. Similarly the short term accommodation was required by the Appellants for its employees official visits to other locations for business operations/ meetings and therefore this service is also eligible for credit. The other services viz. storage and packing, Management, Maintenance Repair, Business Auxiliary Service and Business Support Services were rejected on the ground of either no nexus or description not properly mentioned on the invoices. In the instant matter no serious discrepancy has been noticed or pointed out by the learned Commissioner while rejecting the claim. Incomplete name or description of services appearing in invoices is clerical error and that does not mean that the appellant have not received and used the services and for this reason Cenvat credit/refund cannot be denied. It has also been established by the Appellants that none of the above services were used by the Appellants for the personal use of its employees. Therefore in my view the aforesaid service very well fall within the inclusive definition of input service as defined in Rule 2(l) of the Cenvat Credit Rules, 2004. Appeal allowed - decided in favor of appellant. 2020 (3) TMI 317 Valuation - inclusion of reimbursable expenses in the assessable value - expenses incurred by them on EDI charges, Stamp paper charges, Miscellaneous charges, Crane charges, CFS storage charges, Liner Detention Charges etc., while providing the Cargo Handling Service, reimbursed - HELD THAT:- The issue is settled by the Hon ble Apex Court in the decision of Intercontinental Consultants and Technocrats Pvt. Ltd. [ 2018 (3) TMI 357 - SUPREME COURT ]. Following the same, the demand cannot sustain and requires to be set aside - demand set aside. Business Auxiliary services - Amounts collected by the appellant in regard to cargo space provided to their clients - Demand of service tax - HELD THAT:- The said activity is nothing but purchase and sale of cargo space and does not amount providing service - the demand under Business Auxiliary Service on such markup value collected in regard to cargo space in airlines/shipping line cannot sustain - demand set aside. Appeal allowed - decided in favor of appellant. 2020 (3) TMI 316 Refund of erroneously paid service tax - Mining services - With the introduction of separate services under the category of Mining Service w.e.f. 01.06.2007, the Respondent/assessee were of the view that their service would fall under the new category and the Service Tax paid by them was not statutorily require to be paid - HELD THAT:- The issue is no more res integra in view of the decision of the Tribunal in the case of CCE, Hyderabad Vs Vijay Leasing Company [ 2010 (12) TMI 782 - CESTAT, BANGALORE ] where it was held that When the respondents came to know that the activity undertaken by them under these contracts would fall under the mining activity-which came into service tax net from 01/06/2007, the assessee was justified in filing the refund claim as the self-assessment cannot be considered as an assessment made by an officer under Section 73 against which an appeal or challenge lies. Appeal dismissed - decided against Revenue. 2020 (3) TMI 315 Classification of services - agreement with M/s. WTI Advanced Technology Ltd. by which it was agreed that the appellants would offer the services of its selected employees to work on the projects identified and allocated by M/s. WTI to carry out such functions and project related activities as allocated by M/s. WTI from time to time - whether the activity would fall within the definition of Manpower Recruitment and Supply Agency Service ? - HELD THAT:- The nature of the contract is for supply of manpower. The consideration is paid on the basis of man-hours. It can also be seen that the work is executed as per the guidance of M/s. WTI. Thus, for carrying out the development, maintenance, etc., of software, the persons so deployed by the appellant to M/s. WTI are under the control of M/s. WTI and they work under the guidance and supervision of M/s. WTI. Learned Counsel for the appellant has made much effort to contend that the services are Information Technology Software Services and not Manpower Recruitment and Supply Agency Services . However, from the agreement entered by the appellant with M/s. WTI it is very much clear that activity falls within the four corners of Manpower Recruitment and Supply Agency Service. The demand is legal and proper - appeal dismissed - decided against appellant. 2020 (3) TMI 314 Maintainability of appeal - compliance with the pre-deposit or not - appeal was rejected for the reason that the appellant did not deposit 7.5% of the service tax involved as was required under Section 35F of the Central Excise Act, 1944 - HELD THAT:- It was imperative for the appellant to have deposited 7.5% for the service tax involved. This was not done. On the other hand, an application for waiver of pre-deposit was moved. The deposit of this statutory amount could not have been waived in view of the statutory provision. However one opportunity was required to be given to the appellant to make the deposit. In the interest of justice, it is considered appropriate that the matter be remanded to the Commissioner (Appeals) to hear the appeal filed by the appellant on merits by treating the amount of 10% deposited by the appellant before the Tribunal at the time of filing of the appeal towards the pre-deposit - appeal allowed by way of remand. 2020 (3) TMI 313 Validity of SCN - demand under different head - appellant has submitted that the proposal in the show cause notice was for confirmation of demand under Commercial or Industrial Construction Service whereas the demand was confirmed under Works Contract Service and Manpower Supply Agency Service - HELD THAT:- On perusal of this Tribunal s decision in the case of M/s Marubeni India Pvt. Ltd., [ 2016 (8) TMI 676 - CESTAT NEW DELHI ], it is noted that it was stated that the demand was raised under Commercial and Industrial Construction Service whereas the same was confirmed under various services other than Industrial Construction Services. In the case of M/s Marubeni India Pvt. Ltd., it was held that as per declaration of law in various cases stated therein allegations are required to be made by revenue very clear in the show cause notice and adoption of classification of service under the heading different than the one proposed in the show cause notice amounts to passing the order beyond the scope of show cause notice. It is very clear that if the confirmation of service tax is under a different category than the one which was proposed in the show cause notice then such confirmation of demand is not sustainable - Appeal allowed - decided in favor of appellant. Central Excise 2020 (3) TMI 312 Reversing of lapsed cenvat credit - Rule 11(3) of CCR, 2004 - Benefit of Notification dated 9 July 2004 availed and balance of CENVAT Credit reversed - Appellant put the Respondent to the notice in respect of their failure to reverse the CENVAT Credit of Rs. 2,86,83,157/- in terms of Rule 11(3). The contention of the Appellant is that Rule 11(3) of the Cenvat Credit Rules, 2004 envisaged lapsing of remaining CENVAT Credit and that being the position it could not have been utilized by the Respondent and their action of doing so has resulted on a tax liability which is rightly to be enforced through the show cause notice. HELD THAT:- The bare perusal of Sub Rule (3) of Rule 11 shows that stipulation of lapsing is included in Clause (ii) and not in Clause (i). These two clauses are separated by hyphen and use of the word or . Secondly in the Rule 11(3) (i) it is the option given to the manufacturer or producer for obtaining exemption. In category (ii) there is no such option but a reference is made for final product which has been exempted absolutely under Section 5A of the Act. Therefore, these two categories being distinct, the placement of stipulation cannot be considered as a mere draftsman error. The questions as proposed do not give rise to any substantial question of law - Appeal dismissed. 2020 (3) TMI 311 Maintainability of appeal - appeal was dismissed for the reason that the Appellant had not made the pre-deposit - Appellant sought for extension of the time for making the pre-deposit from the High Court - Demand of duty alongwith penalties - HELD THAT:- On the same investigation and on the same set of facts, a common show cause notice was issued to M/s Uma Synthetics Pvt Ltd, M/s Priya Textiles Ltd and present Appellant, which was decided by a common Order-in-Original - The Appeals of co-noticees namely M/s Uma Synthetics Pvt Ltd and M/s Priya Textiles Ltd have been already allowed. Nothing new has been got on record to challenge the findings recorded by the Tribunal in the order in respect of appreciation of evidences or the interpretation of law. Appeal allowed - decided in favor of appellant. 2020 (3) TMI 310 Imposition of penalty u/r 26 of CER - cenvat credit availed on inputs without physically receiving the goods - penalty has been imposed on the basis of third party evidence i.e. the statement of transporter and none of the transporter was called for examination in chief and no cross examination was granted to the appellant. Penalty imposed on Neeraj Thakur - HELD THAT:- The penalty has been imposed being Director of M/s VKM Electricals Limited. It is a fact on record that the appellant was mere Director of that company but was not looking after the business affairs of that company. It has been revealed from the facts of the case as Shri V. K. Madan in his statement admitted that he was looking after affairs of the company - Admittedly, no efforts has been made by the Revenue to find out the role of the appellant for availing fraudulent cenvat credit by M/s UEL - the penalty on Neeraj Thakur is not imposable. Penalties imposed on Lalit Thakuria, Ajay Goel and Anant Bomb - HELD THAT:- The appellants are C F agents to clear the goods to UEL of different suppliers. It has been alleged that goods have not delivered to UEL on the basis of the statement of the transporters recorded during the course of investigation. No physical verification was conducted at the premises of the appellants. Moreover, the statement of the transporters have been relied upon who have never called for examination in chief. Therefore, penalties have been imposed on the appellants on the basis of the statement of the transporter and records recovered from the premises of UEL are not sustainable - penalties set aside. Further, no other corroborative evidence has been brought on record that the appellant have not supplied the goods to UEL. The impugned order qua imposition of penalty on all the appellants is set aside - Appeal allowed - decided in favor of appellant. 2020 (3) TMI 309 Clandestine removal - branded mineral water - allegation that appellant had not declared the same to the Department and did not raise Central Excise invoices - extended period of limitation - HELD THAT:- It is very clear from the ruling of the Hon ble Supreme Court in COLLECTOR OF CENTRAL EXCISE VERSUS CHEMPHAR DRUGS LINIMENTS [ 1989 (2) TMI 116 - SUPREME COURT] that something positive other than mere inaction or failure on the part of the manufacturer, conscious or deliberate withholding of information when the manufacturer knew otherwise is required before he is saddled with any liability. In the present case, Revenue has alleged that there was suppression on the part of the appellant due to non-registering themselves with the Department. The said reason is not sufficient to invoke extended period of limitation. When Revenue came to know about the manufacture of packaged drinking water by the appellant in the month of May 2009, then they should have issued Show Cause Notice raising the demand to the appellant within a period of one year from May 2009. Since the demand was raised after May 2010, i.e. on 03.11.2010, therefore the same is hit by limitation. Appeal allowed - decided in favor of appellant. 2020 (3) TMI 308 Valuation - goods supplied on principal to principal basis - job-work or not - Department observed that M/s. Inova was only acting as a job worker for M/s. Roca and that the goods were not ordinarily sold at the factory gate of M/s. Inova and hence, the price adopted for payment of duty by M/s. Inova was not the sole consideration for sale as per Section 4 (1) (a) of the Central Excise Act, 1944 - HELD THAT:- It is an admitted fact, as seen from the Show Cause Notice as well as the impugned order, that M/s. Inova has procured the urinal casings from M/s. Roca by transaction of purchase and sale. Merely because the goods manufactured by M/s. Inova bear the brand name of M/s. Roca, the Department has viewed the transaction as a manufacture done by a job worker on behalf of the principal manufacturer. The very same issue decided in the case of SUJHAN INSTRUMENTS VERSUS COMMISSIONER OF CENTRAL EXCISE, CHENNAI-II, HONEYWELL ELECTRICAL DEVICES AND SYSTEMS INDIA LTD. VERSUS PRINCIPAL COMMISSIONER OF CENTRAL EXCISE, CHENNAI-I AND COMMISSIONER OF GST CENTRAL EXCISE, CHENNAI VERSUS SUJHAN INSTRUMENTS [ 2018 (7) TMI 420 - CESTAT CHENNAI ] where it was held that when the transaction is on principal to principal basis, the allegation that the assessee is manufacturing as a job worker for the principal manufacturer cannot sustain. The demand do not sustain - penalty also do not sustain - appeal allowed - decided in favor of appellant. 2020 (3) TMI 307 CENVAT Credit - inputs or input services attributable to both exempted goods/exempted services and dutiable goods and taxable services - whether the total credit that should be taken for calculation in terms of Cenvat Credit Rule 6 (3A) should be restricted to only common inputs or common input services only? HELD THAT:- The appellant s case is covered by the decision of the Ahmedabad Tribunal in the case of Commissioner of Central Excise ST, Rajkot Vs. Reliance Industries Ltd. [ 2019 (3) TMI 784 - CESTAT AHMEDABAD ] wherein it had been held that nowhere in Rule 6 it is provided that the input or input service used in dutiable goods shall not be allowed. The Revenue is only interpreting the term total Cenvat credit provided under the formula. If the whole Rule 6(1)(2)(3) is read harmoniously and conjointly, it is clear that Total Cenvat Credit for the purpose of formula under Rule 6(3A) is only total Cenvat credit of common input service and will not include the Cenvat credit on input/ input service exclusively used for the manufacture of dutiable goods. If the interpretation of the Revenue is accepted, then the Cenvat credit of part of input service even though used in the manufacture of dutiable goods, shall stand disallowed, which is not provided under any of the Rule of Cenvat Credit Rules, 2004. Revenue was unable to distinguish the order/decision relied on by the Ld. Advocate and nor did he file any contrary order/decision in his support - appeal allowed - decided in favor of appellant. 2020 (3) TMI 306 Maintainability of Application for Settlement application - bar under Section 32-O of the Act - co-applicant earlier approached Customs, Central Excise Service Tax Settlement Commission, Additional Bench, Kolkata and was subsequently penalized Rs. 50,000/- - HELD THAT:- The debarring provision under Section 32-O(1)(i) refers to the case of the assessee to whom a SCN demanding duty has been issued and if during the process of settlement, the assessee has been imposed with certain amount of penalty, then such assessee cannot approach the Commission once again in a second .case where a demand has been issued to him. The co-applicant is a person other than the assessee and no demand for payment of any duty or tax has been issued to him. It is only because he has been implicated in the SCN demanding duty to the assessee with a proposal of penal action, he has approached the Settlement Commission to settle his issue. He therefore cannot be barred from approaching the Settlement Commission, if he is penalised earlier, as a main applicant or a co-applicant because he is not the main applicant. In the present case, M/s. Royal Touch Fablon Private Limited (Unit-1), the Co-applicant No. 1, has been proposed penalty in the SCN. This SCN was issued to M/s. Royal Touch Fablon Private Limited (Unit-IV). The case of M/s. Royal Touch Fablon Private Limited (Unit-IV) has already been settled by the Commission where he has applied as main applicant. Here, the co-applicant, M/s. Royal Touch Fablon Private Limited (Unit-I), has approached the Settlement Commission under Section 32E(5) to decide the issue of imposition of penalty. He has been penalised earlier in a case relating to him where he was an assessee and the main applicant. Since he is not the main applicant in the present case, he will not be debarred from approaching the Settlement Commission. Had he been the main applicant in this case to whom a duty demand has been issued in the form of a SCN, he would have been barred from approaching the Commission as he was penalised earlier in the settlement of another case relating to him where a SCN was issued to him demanding duty - the Commission is of the opinion that M/s. Royal Touch Fablon Private Limited (Unit-I), the Co-applicant No. 1, is not debarred from approaching the Settlement Commission and thus the Commission is admitting his case to decide the issue of penalty and prosecution. The Bench settles the case on the following terms and conditions :- (a) The Bench imposes penalty of Rs. 10,000/- (Rupees ten thousand only) on M/s. Royal Touch Fablon Private Limited (Unit-I) (Co-applicant No. 1), under the provisions invoked in the show cause notice and grants waiver in excess of the penalty indicated herein. (b) The Bench granted full immunity from penalty to Shri Vikas Kandoi (Co-applicant No. 2), Shri Raj Kr. Jaisansaria (Co-applicant No. 3) and Shri Pawan Sharma (Co-applicant No. 4). (c) Subject to the payment of the amounts ordered above by the Co-applicant No. 1 within 30 days of receipt of the order, the Co-applicant No. 1 is granted immunity from prosecution under the Central Excise Act, 1944 and Customs Act, 1962. (d) Shri Vikas Kandoi (Co-applicant No. 2), Shri Raj Kr. Jaisansaria (Co-applicant No. 3) and Shri Pawan Sharma (Co-applicant No. 4) are granted immunity from prosecution under the Central Excise Act, 1944 and Customs Act, 1962. CST, VAT & Sales Tax 2020 (3) TMI 305 Maintainability of appeal - appeal was dismissed for non-payment of pre-deposit - HELD THAT:- The Tribunal could not have ordered to pay an amount of pre-deposit on the basis of the turnover. The amount of pre-deposit is to corelate with the amount of tax demand and not with the amount of turnover of the assessee. We modify the order passed by the Tribunal and substitute the amount of pre-deposit being 5% of the tax demand, as condition precedent of entertaining the appeal, under Section 73(4) of the VAT Act. Petition allowed. 2020 (3) TMI 304 Maintainability of appeal - Failure in complying with the requirement of pre-deposit - It is the case of the writ-applicant that the GSPC used to receive the total consideration of the sales made from the Hazira block, and the tax liability under the Act, 1969, as well as the VAT Act, used to be discharged by the GSPC on the total sale consideration - whether the order of pre-deposit to the tune of Rs. 10 lakh is reasonable or sustainable in law? - HELD THAT:- Section 73(4) of the VAT Act, 2003 would make it clear that no appeal against an order of assessment shall ordinarily be entertained by an Appellate Authority if such an appeal is not accompanied by satisfactory proof of the payment of tax in respect of which an appeal is preferred. However, the proviso to clause 4 makes the picture further clear. It confers discretion upon the Appellate Authority in appropriate cases to entertain the appeal without the payment of tax with penalty or in an appropriate cases on proof of the payment of the smaller sum as the Appellate Authority may consider reasonable. It is very much necessary to clarify that, before the Appellate Authority or the Tribunal passes an order of pre-deposit, it is obliged to consider a prima facie case, which the appellant may be in a position to highlight. If a strong prima facie case is made out, then in such circumstances, there should not be any difficulty in entertaining the appeal even without insisting for the payment of tax with penalty or even a smaller sum. In the case on hand, we do not find any discussion as regards the prima facie case which has been put up by the writ-applicant. Straightway the order is passed for the purpose of pre-deposit. Such an approach may lead to injustice if a meritorious appeal is dismissed only on the ground of non-payment of the pre-deposit amount. Therefore, in appropriate cases, the First Appellate Authority is expected to exercise its discretion judiciously and it should not insist for pre-deposit, if otherwise the appellant is able to make out a strong prima facie case in his favour. The issue of granting stay pending appeal is governed principally by the two circulars issued by the CBDT. The first circular was issued way back on 2nd February 1993 being instructions no.1914. The circular contained guidelines for staying the demand pending appeal. It was stated that the demand would be stayed if there are valid reasons for doing so and mere filing of appeal against the order of assessment would not be sufficient reason to stay the recovery of demand. The instructions issued under the office memorandum dated 29th February 2016 are not in supersession of the instructions no.1914 dated 2nd February 1993 but are in partial modification thereof - This circular thus lays down 15% of the disputed demand to be deposited for stay, by way of a general condition. The circular does not prohibit or envisage that there can be no deviation from this standard formula. In other words, it is inbuilt in the circular itself to either decrease or even increase the percentage of the disputed tax demand to be deposited for an assessee to enjoy stay pending appeal. The circular provides the guidelines to enable the Assessing Officers and Commissioners to exercise such discretionary powers more uniformly. Application allowed. 2020 (3) TMI 303 Refusal to issue Form C - imposition of penalty under section 8 of the Central Sales Tax Act, 1956 - HELD THAT:- Rule 5 of the Daman Rules, 1973 specifies the authority from whom declaration Form-C may be obtained. Rule 5(1) provides that the dealer shall obtain a declaration Form-C in a manner prescribed subject to the conditions specified in the notification. The Taxation Officer can grant a such number of blank forms as may be reasonable. Rule 4 of the Bombay Rules, 1957 specifies the Authority from which and conditions subject to which Declaration Forms may be obtained. Rule 4(1A)(b) states that if any applicant has at the time of making the application, or during the time his application is pending, defaulted in furnishing any return or returns or in payment of any tax (including any penalty) due from him under any provisions of the Act, the Sales Tax Officer may withhold the issue of such forms to him, until such time as he furnishes. Absent this condition in the Daman Rules, 1973; the Petitioners contend that Form-C cannot be withheld. In the present case, the proceedings have been initiated against the Petitioners for misuse of Form-C. In these proceedings, the Petitioners had sought to pay the penalty by way installments and accepted the order and have not paid the amount. According to the Respondents, the Petitioners have already misused Form-C and penalty is levied thereon. In this context, the Respondents have sought to withhold furnishing of Form-C till the Petitioners resumes payment of installments as undertaken. Prima facie, we find merit in the contention of the Respondents that in such circumstances inherent powers exist in the authority upon noticing an abuse to prevent further abuse. It is, however, not necessary for us to conclude this issue finally for two reasons. Firstly, that we are not inclined to exercise our equity jurisdiction and, secondly, in a pending appeal the Petitioners can take up the contentions as may be available in law - The appeal of the Petitioners in respect of penalty is pending before the Tribunal. If the Petitioner requests the Tribunal to pass an order regarding issuance of Form-C, the Tribunal shall consider the said request on its own merits as per law. Petition dismissed. Indian Laws 2020 (3) TMI 302 Appointment of a sole arbitrator - Section 9 of the Arbitration and Conciliation Act - in view of Clause 17.2 of the MoU whether the parties have agreed that the seat of arbitration is at Hong Kong and whether this Court lacks jurisdiction to entertain the present petition filed under Section 11 of the Arbitration and Conciliation Act, 1996? HELD THAT:- It is well-settled that seat of arbitration and venue of arbitration cannot be used inter-changeably. It has also been established that mere expression place of arbitration cannot be the basis to determine the intention of the parties that they have intended that place as the seat of arbitration. The intention of the parties as to the seat should be determined from other clauses in the agreement and the conduct of the parties. In the present case, the arbitration agreement entered into between the parties provides Hong Kong as the place of arbitration. The agreement between the parties choosing Hong Kong as the place of arbitration by itself will not lead to the conclusion that parties have chosen Hong Kong as the seat of arbitration - On a plain reading of the arbitration agreement, it is clear that the reference to Hong Kong as place of arbitration is not a simple reference as the venue for the arbitral proceedings; but a reference to Hong Kong is for final resolution by arbitration administered in Hong Kong. The agreement between the parties that the dispute shall be referred to and finally resolved by arbitration administered in Hong Kong clearly suggests that the parties have agreed that the arbitration be seated at Hong Kong and that laws of Hong Kong shall govern the arbitration proceedings as well as have power of judicial review over the arbitration award. The words in Clause 17.1 without regard to its conflicts of laws provisions and courts at New Delhi shall have the jurisdiction do not take away or dilute the intention of the parties in Clause 17.2 that the arbitration be administered in Hong Kong. The words in Clause 17.1 do not suggest that the seat of arbitration is in New Delhi. Since Part-I is not applicable to International Commercial Arbitrations , in order to enable the parties to avail the interim relief, Clause 17.3 appears to have been added - The words without regard to its conflicts of laws provisions and courts at New Delhi shall have the jurisdiction in Clause 17.1 is to be read in conjunction with Clause 17.3. Since the arbitration is seated at Hong Kong, the petition filed by the petitioner under Section 11(6) of the Act is not maintainable and the petition is liable to be dismissed. Arbitration Petition filed by the petitioner seeking appointment of an arbitrator under Section 11(6) of the Act is dismissed. 2020 (3) TMI 301 Termination of petitioner - Petitioner sought to refrain ICICI from recovering and/or cancelling the benefits granted to the Petitioner for early retirement. Petitioner sought a declaration to exercise the benefits of stock options - whether the Section 35B(1)(b) of the Act can be said to govern the service conditions of the Petitioner so as to impose a statutory duty on the ICICI bank and whether the petitioner can challenge exercise under writ jurisdiction? HELD THAT:- When employments in a private entity is regulated by contracts, the courts do not to exercise the writ jurisdiction. Courts exercise writ jurisdiction when a public law element involved, if the services are governed by a statute. For that purpose the nature of the concerned enactment and its purpose and scope has to be ascertained - The Banking Regulation Act is enacted to supervise and regulate commercial banking. The Act empowers the Reserve Bank to issue directions to the banks, regulate the shareholding and the operations of banks in the interest of banking policy. Part II of the Act deals with banking companies. The Reserve Bank, constituted under the Reserve Bank of India Act, is a Central Bank exercising supervisory and regulatory powers. The Reserve Bank, exercises power under the Act to grant approvals. It issues directions to the banks under the Act in furtherance of economic and banking policy. It is invested with various powers in the interest of depositors, efficient use of deposits and banking resources. The predominant object of conferment of power on the Reserve Bank is the interest of banking policy. Banking companies such as ICICI have the freedom to conduct their affairs; however, Reserve bank ensures that their activities will not affect the economy in general. Section 35B(1)(b) is also enacted with the same object, that is to ensure that the actions of a bank does not have an adverse impact on the banking. Various situations may arise under Section 35B(1)(b) of the Act. For instance, an order returning the proposal of the employer as not being in the interest of the banking system. In this petition, in the context of public law element we are only concerned with fact situation of approval for termination and therefore our discussion on this provision is in this context. When a proposal for termination of employee is received from the employer bank, the Reserve Bank looks at it from the perspective of its impact on general banking - Reserve Bank would be obliged to enter into the factual disputes, examine and construe the contract terms, and comment on the rights and obligations of the employer and employee, their breach and justifications. All this is not clearly not contemplated under by the legislature. Section 35B(1)(b) enacted to examine the situation post termination, that is, its impact on the larger banking interest. The focus of scrutiny under this provision is not the rights of the employee. Section 35B(1)(b) is not a provision enacted to regulate the service conditions between the employer and employee. ICICI is a private body. It is not an instrumentality of the State. It receives no public funding. Service conditions of the Petitioner are not governed by any statute. The dispute raised in this Petition arises from a contract of personal service. The termination of the Petitioner is in the realm of contractual relationship. Since Section 35B(1)(b) does not regulate service conditions , approval for termination under it does not adjudicate the rights of the Petitioner as an employee. Though Section 35B(1)(b) postulates that the termination would not come into effect if there is no prior approval of the Reserve Bank, the cause of action for the Petitioner is the termination by ICICI - merely because the approval under section 35B(1)(b) is questioned, that cannot infuse a public law element in this dispute, which remains a contractual dispute. For the contractual remedies, the Petitioner will have to approach the appropriate forum and not writ jurisdiction. The Writ Petition is dismissed as not maintainable. 2020 (3) TMI 300 Dishonor of cheque - section 138 of NI Act - Jurisdiction of the case - HELD THAT:- It is not in dispute that complaint was initially received on 8.6.2018 and FIR in question was registered on 25.6.2018 at Police Station Shakarpur - It is also not in dispute that petitioner appeared before IO at Police Station Shakarpur on 17.10.2018 and he also appeared twice before Economic Offence Wing during inquiry. Charge-sheet has already been filed. Therefore, judicial interrogation of petitioner is no more required. Moreover, he is in judicial custody since 29.7.2019 - the present case is fit for bail. The petitioner shall be released on bail on his furnishing a personal bond in the sum of Rs.50,000/- with two sureties of the like amount to satisfaction of Trial Court - petition disposed off. 2020 (3) TMI 299 Grant of leave to file appeal - Dishonor of Cheque - Section 138 of Negotiable Instruments Act, 1881 - Appeal was dismissed for non-appearance of appellant - HELD THAT:- This Court finds that non-appearance of appellant before the learned trial court on 3rd October, 2017 and 13th December, 2017 was neither deliberate nor intentional but because of wrong noting of date and for this lapse, appellant should not be made to suffer. Moreover, this Court is of the opinion that it is in the interest of justice if the cases are heard and decided on merit rather than dismissing the same for non appearance. In view of the aforesaid, the appeal is allowed. The impugned order dated 13th December, 2017 passed by the learned trial court dismissing appellant s complaints under Section 138 of Negotiable Instruments Act, 1881 for non appearance, is set aside and the complaints are restored to their original position.
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H: Section 54F Deduction Denied: Timing of House Purchase and Constructio...

H: Tax Relief: Exchange of Old Flat for New in Redevelopment Not Taxable ...

H: Interest on Rupee-Denominated CCDs Must Be Benchmarked Against Domesti...

H: Assessee in Power Business Denied Enhanced 35% Depreciation Under Sect...

H: Taxpayer's Appeal Succeeds as Cash from Selling Deceased Wife's Jewelr...

H: Quantitative Restrictions on LAM Coke Imports Valid Under Section 9A o...

H: Courier Company Penalized for CIER Violations Despite KYC Compliance C...

H: Penalty Under Section 112(b) of Customs Act Reduced for Imported Motor...

H: Customs Act Section 149: Shipping Bill Amendments Require Contemporane...

H: Customs Duty Payment Under DGFT Amnesty Scheme Shields Importers From ...

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Newsletter: Where Service Meets Reader Approval.

TMI Tax Updates - e-Newsletter March 9, 2020

TMI SMS

News

1. DGGI (Hqrs.) registered a case for fraudulently claiming IGST refunds on export of goods

2. Yes Bank Ltd.: RBI announces Scheme of Reconstruction

Notifications

1. F. No. Legal-35/3/2020 - dated 6-3-2020 - Co. Law

2. 05/2020 - dated 7-3-2020 - ADD

3. 15/2020 - dated 5-3-2020 - IT

Highlights / Catch Notes

GST

Court Stays Order, Petitioner Must Deposit 10% of Assessed Profiteering Amount with Registrar General.

Petitioner permitted to submit revised FORM GST TRAN-1 and TRAN-2 manually or electronically by February 28, 2020.

Income Tax

Rule 17C: Guidelines for Charitable Trusts' Investments to Comply with Tax Regulations in Income-tax Rules, 1962.

High Court Affirms Section 153C Compliance: Seized Documents Belong to Assessee, Not Searched Individual.

Supreme Court Grants Tax Deduction to Company for Infrastructure Development u/s 80IA, Meeting Key Eligibility Conditions.

Education Cess and Higher Education Cess Not Deductible u/s 40(a)(ii) of the Income Tax Act.

Department Authorized to Act Against Temple Trustees for Mismanagement u/s 10 (23C) (v) Allegations.

High Court Clarifies: Bad Debt Deduction Doesn't Need to Arise from Income in Same Category for Inter-Corporate Debt.

Court Rules Assessee Need Not Prove Lender's Fund Source u/s 68 of Income Tax Act; Burden on Revenue Authorities.

Section 68 Addition Overruled: Assessee Proves Genuine Share Application Money with Documentary Evidence, AO's Claim Dismissed.

Taxpayer Wins Deduction Claim u/s 80IB(10), Despite Unexplained Discrepancies in Financial Documents and Audit Reports.

Patent Registration Fees: Revenue, Not Capital Expenditure, Says Evaluation on Income Tax Implications.

Disallowed Expenditures Must Be Excluded from Operating Expenses in Arm's Length Price Calculations for Transfer Pricing Adjustments.

Pr. CIT Revises Assessment Under Sec 263 Due to Undisclosed Receipts and Revenue Understatement by Company.

Accounting Standard AS 7: Assessee Must Account for Future Contract Expenses, Even if Not Yet Liabilities.

Majority Stakeholder's R&D Expenses Approved Due to Lack of Dispute from Revenue Authorities in Business Interest Case.

Customs

Petitioners Must Respond to Department's Letters to Address SEZ Unit Goods Supply Issue in Gujarat.

Sponsorship Costs Excluded from Import Valuation u/r 10(1)(e): No Extra Charges for Indian Company.

Dispute Over Classification of Scodix S 75 Printers: Authorities Challenge Tariff Heading 84433250 Despite HSN Guidelines.

Indian Laws

Petitioner dismissed from ICICI Bank; must pursue contractual remedies, not writ jurisdiction, as it's a private entity.

Service Tax

Rule 14 CCR, 2014: "Wrongly" Defined for Interest and Penalty on CENVAT; Focus on Incorrect Availment, Not Utilization.

Debate on Service Tax Recovery for Railway Siding Construction Hinges on "Railways" Definition in Section 65(105) of Finance Act 1994.

Assessee's Refund Claim Approved for Erroneous Service Tax Payment; Self-Assessment Not Equivalent to Official Assessment u/s 73.

Central Excise

High Court Confirms Intentional Distinction in Cenvat Credit Rule 11(3) Clauses for Exemption Options.

Goods Valuation on Principal-to-Principal Basis Not Job Work, Despite Branding: Department's Claim Rejected.

Co-applicant can seek settlement; not barred by prior penalty as they're not the main SCN recipient.

VAT

Appellate Authority Must Use Discretion Wisely on Pre-Deposit in VAT Appeals; Strong Cases May Waive Requirement.

Court Supports Withholding Form C Until Petitioners Resume Payments; Respondents' Argument Shows Preliminary Merit.

Case Laws:

GST

Income Tax

Customs

Service Tax

Central Excise

CST, VAT & Sales Tax

Indian Laws

Quick Updates:

TMI Tax Updates - e-Newsletter
March 9, 2020