TMI Tax Updates - e-Newsletter
April 12, 2017

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws PMLA Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

TMI SMS

• All assesses who are already registered under existing central laws - What will happen when turnover is not exceeding Rs. 20 Lakhs - GST

  ---

• Authorized money changers and money transfer agents - AO directed to decide the case on merit ignoring the circular 180/06/2014-ST - HC

  ---

• The classification of dealers based on value addition / area criteria for the purpose of tax levy cannot be held to be discriminatory - HC

  ---

Articles

1. All assesses / dealers who are already registered under existing central excise/service tax/ vat laws - What will happen when turnover is not exceeding ₹ 20 Lakhs (or ₹ 10 Lakhs in Hill areas) - Complications and Problems

   By: Surender Gupta

2. Issue of share capital at premium – recent judgment of Bombay High Court- pre amendment S.68

   By: DEVKUMAR KOTHARI

3. LOCAL PUBLIC WORKS DEPARTMENT (LPWD) RATES FOR ESTIMATION OF CONSTRUCTION COST IS SETTLED POSITION

   By: DEVKUMAR KOTHARI

News

1. GST network free from cyber-attack and data theft

2. Introduction of GST

3. Virtual Currencies

4. Extending Benefits under DBT

5. Opening of new branches by PSUs

6. Premium collected by health insurance companies

7. Special Investigation Team

8. Charges on digital transactions

9. Committee on Digital Payments

10. Benami Transactions (Prohibition) Amendment Act, 2016

11. Tax on NPS

12. Revenue Secretary, Dr. Hasmukh Adhia to leave on a four day visit to North East to review the preparedness of the North Eastern Region for GST

13. Bharatiya Mahila Bank (BMB)

14. Use of CSR Fund on Health and Education

15. Joint Feasibility Study on the Free Trade Agreement between India and Georgia

16. RBI Reference Rate for US $

17. Timelines for Closure of financial accounts under Rule 114H (8) of the Income-tax Rules, 1962 under alternative procedure of FATCA

18. CBDT issues PAN and TAN within 1 day to improve Ease of Doing Business

19. Auction for Sale (Re-issue) of Government Stocks

20. PRESS RELEASE ON INDIRECT TAX COLLECTIONS DURING THE FINANCIAL YEAR 2016-17

Notifications

Customs

1. 13/2017-Customs - dated 11-4-2017 - ADD

Seeks to levy definitive anti-dumping duty on import of âFlexible Slabstock Polyolâ originating in or exported from Thailand for a period of five years (unless revoked, superseded or amended earlier).

2. 12/2017-Customs - dated 11-4-2017 - ADD

Seeks to levy anti-dumping duty on the imports of aLinear Alkyl Benzeneâ originating in or exported from Iran, Qatar and Peopleas Republic of China for a period of five years (unless revoked, superseded or amended earlier).

Highlights / Catch Notes

GST

• Dealers under excise, service tax, or VAT must assess GST registration needs if turnover is below Rs. 20 lakhs.

  Articles : All assesses / dealers who are already registered under existing central excise/service tax/ vat laws - What will happen when turnover is not exceeding ₹ 20 Lakhs (or ₹ 10 Lakhs in Hill areas) - GST
  Visit to Get Source

  ---

Income Tax

• Re-assessment Void if No Finding on Taxpayer's Failure to Disclose Material Facts u/s 148 Notice.

  Case-Laws - AT : Initiation of the re-assessment proceedings by issuance of notice u/s 148, without recording a finding that the escapement of income is due to the failure of the assessee to disclose fully and truly all material facts, is void ab initio. - AT
  Visit to Get Source

  ---

• Incentives as subsidies aren't payments for asset costs, excluded from Explanation 10, Section 43(1), Income Tax Act.

  Case-Laws - AT : Incentive in the form of subsidy cannot be considered as a payment directly or indirectly to meet any portion of the actual cost and thus it falls outside the ambit of Explanation 10 to Section 43(1) of the Act - For the purpose of computing depreciation allowable to the assessee, the subsidy amount cannot be reduced from the cost of the capital asset - AT
  Visit to Get Source

  ---

• Interest on Delayed Receivables Not an International Transaction; Incidental to Sale with Associated Enterprises.

  Case-Laws - AT : TPA - Addition in respect of ALP in respect of receivables due from AEs - Early or late realization of sale proceeds is only incidental to transaction of sale, but not a "separate transaction in nature. The impugned transaction of interest on delayed realization of sale proceeds is not international transaction - AT
  Visit to Get Source

  ---

Customs

• Coal Import Dispute: Absence of CASCO Certificate Requires Testing for Ash Content Under Notification No. 21/2002-Cus.

  Case-Laws - AT : Benefit of N/N. 21/2002-Cus - import of coal - In absence of the certificate of CASCO regarding the ash content, it was necessary to get the sample tested in view of the claim of notification by the appellant - AT
  Visit to Get Source

  ---

• Eligibility for Export Incentives Differs from Duty Levy Assessment; Not Subject to Same Legal Procedures.

  Case-Laws - AT : Valuation - A re-determination for the purpose of establishing eligibility of export incentive does not stand on the same footing as an assessment which is a statutory pre-requisite for levy of duties.- AT
  Visit to Get Source

  ---

• Exporting Copyright-Infringing Books Not Prohibited by Customs Law or Indian Copyright Act; No Confiscation Required.

  Case-Laws - AT : The export of infringed copyright books has not been prohibited either under the Customs Law or under the Indian Copyright Act. Therefore, in the absence of any prohibition on the export of the said goods, the goods are not liable for confiscation - AT
  Visit to Get Source

  ---

• Customs Can't Confiscate Goods as Prohibited Without License After Import, Section 111(d) Misapplied.

  Case-Laws - AT : If it is permissible to issue a licence at a later date after the import of the goods, the custom authorities cannot take any action holding that the goods are prohibited for want of licence - the confiscation held u/s 111 (d) of the CA is not correct and legal. - AT
  Visit to Get Source

  ---

• Amendment Request for 2006 Shipping Bills Rejected Due to Non-Compliance with 2004 Circular Conditions.

  Case-Laws - AT : Amendment in shipping bill - the shipping bills have been filed between 26.10.2006 and 12.12.2006 and the request for amendment was made on 15.09.2007. Hence, the Commissioner correctly relied upon the Circular of 2004 and rejected the request for non-fulfillment of condition of that circular. - AT
  Visit to Get Source

  ---

PMLA

• Individuals Can Be Charged with Money Laundering for Assisting or Participating Under PMLA's Broad Scope.

  Case-Laws - HC : Offence under money laundering - PMLA - The proceeds of crime may be acquired by another person who commits one of the scheduled offences, and the person charged with money laundering may have only, directly or indirectly, assisted or knowingly become a party, or may be actually involved in the process or activity of, inter alia, concealing, possessing, acquiring or using and projecting or claiming the said proceeds of crime as untainted property - HC
  Visit to Get Source

  ---

Service Tax

• Court to Assess Validity of Service Tax on Money Changers and Transfer Agents Under Circular No.180/06/2014-ST.

  Case-Laws - HC : Constitutional validity of circular No.180/06/2014-ST - authorized money changers and money transfer agents - The essential argument is that the services rendered by the petitioners associate through its members do not attract the service tax - assessing officer directed to decide the case on merit - HC
  Visit to Get Source

  ---

• Assessee Avoids Penalty by Paying Full Service Tax and Interest Before Show Cause Notice Issued.

  Case-Laws - HC : Levy of penalty - assessee had discharged the entire liability of payment of service tax and interest thereon before the issuance of show cause notice - No penalty - HC
  Visit to Get Source

  ---

• Service Tax on Business Auxiliary Service: Exemption Debate under Notification No. 12/2003-S.T. Remanded for Further Review.

  Case-Laws - AT : Business Auxiliary Service - procurement of goods - appellant argued that in the instant case, the value on which service tax has been demanded is the same value at which the goods have been sold. Therefore, the entire value is exempt in terms of Notification No. 12/2003-S.T. - matter remanded back - AT
  Visit to Get Source

  ---

• Cenvat Credit Cannot Be Denied Based on Service Provider's Classification Choice, Rules Court.

  Case-Laws - AT : Cenvat credit - credit availed by an assessee cannot be denied or varied on the ground that the classification of service should have been made in a different category by the provider of service. - AT
  Visit to Get Source

  ---

Central Excise

• LPG Bullets' Installation Exempt from Excise Duty Due to Immovable Status, Not Considered Manufacturing Activity Under Central Excise Rules.

  Case-Laws - AT : Valuation - includibility - bought out items and other manufacturing activity carried out at the site - The said activity of erection and installation, is not amount to manufacture - if at all any activity by any imagination is amount to manufacture, by virtue of immovability of LPG Bullets, the activities at site cannot be charged to excise duty - AT
  Visit to Get Source

  ---

• Court Rules Duty Assessment Based on Overall Combipack Value, Not Separate for Free Items; MRP Considered.

  Case-Laws - AT : Valuation - repellent bottle supplied for free along with the machine - assessment is to be being on the basis of assessment of the combipack and the LVD supplied free in the multipack need not be separately assessed to duty, and MRP printed on the combipack should considered - demand set aside - AT
  Visit to Get Source

  ---

• Blending Additives with Fuel for Premium Sales Is Not Manufacturing, Demand Set Aside.

  Case-Laws - AT : Manufacture - blending of MS/HSD with MFA to make branded MS/HSD which sell at a premium only improves the quality of the product, and this process, would not amount to manufacture - demand set aside - AT
  Visit to Get Source

  ---

• Refund Claim on Bank Guarantee Encashment Treated as Excise Duty Subject to Unjust Enrichment u/s 11B.

  Case-Laws - AT : Refund claim - unjust enrichment - encashed amount of bank guarantee which is nothing else than the excise duty is clearly governed by the provisions of unjust enrichment provided under Section 11B, therefore, unjust enrichment is clearly applicable - AT
  Visit to Get Source

  ---

• Refund Claim Not Time-Barred: Duty Paid Under Protest Entitles Respondent to Refund Without Time Limit Imposed by Revenue Authority.

  Case-Laws - AT : Refund claim - duty paid under protest - revenue cannot create a particular period in case where duty is paid under protest - refund filed by the respondent is not time bar therefore they are legally entitle for the refund - AT
  Visit to Get Source

  ---

• CENVAT Credit Approved for Housekeeping, Gardening, and Creche Services Including Nurses and Ayahs.

  Case-Laws - AT : CENVAT credit - whether the Cenvat Credit in respect of input service viz. (i) house keeping and gardening (ii) Nurses & Ayaa Services engaged in creche used by the appellant company is admissible or otherwise? - Held Yes - AT
  Visit to Get Source

  ---

VAT

• High Court Upholds Tax Classification by Value Addition, Dismisses Discrimination Claims Against Dealers Based on Geographic Exemptions.

  Case-Laws - HC : The classification of dealers based on value addition criteria for the purpose of tax levy and exempting the dealers based on area criteria cannot be held to be discriminatory - HC
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2017 (4) TMI 474
  Reopening of assessment - large scale allotment of shares to bogus entities - failure to produce share application form details of shares allotted to the so called share holders and proof of attendance of Annual General Board Meeting of the said so called share holders - Supreme Court dismissed the SLP as withdrawn against the decision of High Court [2016 (6) TMI 899 - GUJARAT HIGH COURT]

  ---

• 2017 (4) TMI 473
  Addition being foreign currency found at time of search action - Held that:- This issue has to be examined and verified by the Assessing Officer with reference to the submissions made by the assessee that the foreign currency is belongs to the company and it has been accounted for in company’s books as on 31.03.2011. The learned counsel for the assessee further submits that as per the RBI Rules and Regulations assessee can retained the foreign exchange for 180 days. Thus we restore this issue to the file of the Assessing Officer who shall examine the issue afresh in accordance with law. The assessee shall provide necessary details to the Assessing Officer to substantiate his claim. Deemed dividend addition u/s.2(22)(e) - Held that:- As the assessee submits that the assessee’s only plea is that the deemed dividend is to be restricted to the accumulated profits of the company. The DR has no serious objection in restricting the deemed dividend to the accumulated profits of the company. On hearing both sides in principle we hold that the CIT(A) is justified in sustaining the addition made u/s.2(22)(e) of the Act. However, such addition should be restricted only to the accumulated profits of the company as specified in the provisions of section 2(22)(e) of the Act. Therefore, for the limited purpose on verification and quantification of deemed dividend we restore this issue to the file of the Assessing Officer who shall quantify the disallowance u/s.2(22)(e) of the Act restricting to the accumulated profits of the company. Addition of Jewellery - Held that:- CIT(Appeals) considering the submission of the assessee and applying CBDT Instruction No.1916 dated 11.05.1994 and looking into the social status of the family, agreed with the assessee’s submission and partly allowed the ground of appeal. The CIT(A) restricted the addition to 15,44,780/- accepting the alternate contention that if at all it is to be treated as unexplained income it is only 15,44,780/- as per the working submitted in the course of appellate proceedings before the CIT(A). The assessee could not substantiate its claim that the jewellery was purchased in earlier years and its source. Therefore we do not see any good reason to hold that the assessee explained the sources for the jewellery found worth 15,44,780/-. Hence the CIT(A) order is sustained and ground raised by the assessee is rejected.

  ---

• 2017 (4) TMI 472
  Condonation of delay - Held that:- It can be seen from the said order of the Hon' ITAT that the assessee company's grievance about the quantum of deduction under chapter VIA in respect of 80HH, 80I & 80IA continues and had remained to be addressed. We found that the assessee company was prevented by a sufficient and reasonable cause for the delay on account of pursuit of the alternative remedy up to the date of receipt of the Hon'ble ITAT's order on 08.02.2012 involving the adjudication of the same issue that was under dispute and was under a bonafide belief that it had not to file a separate appeal against order dt. 27.03.2003 for giving effect to appellate order. If delay is not condoned, the assessee company will have no other option to seek remedy under law and would be deprived of natural justice. Even if appeal is admitted the same would be decided on the merits of the case and therefore admission of the same would not prejudice the interest of the revenue department.

  ---

• 2017 (4) TMI 471
  Validity of reopening of assessment - assessment u/s 153A - Held that:- The original return of income was filed on 6.11.2007 whereas the search had taken place on 11.09.2007. Therefore, the search had taken place prior to the assessee’s filing of the original return of income on 6.11.2007 and therefore, the assessment completed u/s 153A of the Act is a regular assessment and the AO had an opportunity to verify and complete the assessment u/s 153A r.w.s. 143(3) of the Act and the AO is therefore, required to record reasons for reopening of the assessment and further record the finding that there is an escapement of income due to the failure of the assessee to disclose fully and truly all material facts for computation of assessee’s income is also the condition precedent to be fulfilled. Initiation of the re-assessment proceedings by issuance of notice u/s 148, without recording a finding that the escapement of income is due to the failure of the assessee to disclose fully and truly all material facts, is void ab initio. In view of these findings on the validity of the assessment and the assessment being held to be void ab initio, we see no reason to adjudicate the appeal on merit. - Decided in favour of assessee.

  ---

• 2017 (4) TMI 470
  Assumption of jurisdiction u/s 153C - proof of incriminating material found during the search and seizure operation - Held that:- AO has completed the assessment u/s. 153C of the I.T. Act, 1961 and made the addition in dispute without any incriminating material found during the search and seizure operation and the addition in this case was purely based on the material already available on record, which is not sustainable in the eyes of law, hence, needs to be deleted. Also on the perusal of the assessment order undisputedly indicates that no reference whatsoever has been made to any material found/ seized during the course of search. Thus we delete the addition in dispute and allow the appeal of the Assessee because AO has completed the assessment and made the addition in dispute without any incriminating material found during the search and seizure operation and the addition in this case was purely based on the material already available on record, which is not sustainable in the eyes of law. - Decided in favour of assessee

  ---

• 2017 (4) TMI 469
  Disallowance of assessee’s claim on depreciation on assets acquired on demerger - Held that:- Tribunal has upheld the order of the departmental authorities in disallowing assessee’s claim of depreciation on assets acquired on demerger in earlier AYs. Addition u/s 14A - Held that:- As regard being had to subsection (2) of section 14A, the provision does not empower the AO to apply Rule 8D straightaway without considering the correctness of assessee’s claim in respect of expenditure incurred in relation to exempt income. If one applies the aforesaid legal principle to the facts of the present case, it emerges that though the assessee along with return of income has furnished a computation of inadmissible expenditure u/s. 14A, the AO has neither examined such claim of the assessee nor has recorded any satisfaction with regard to the correctness or otherwise of assessee’s claim with reference to the books of account. That being the case, the disallowance made by applying Rule 8D is not only against the statutory mandate but contrary to legal principles laid down in the judicial precedents referred to above. In the aforesaid view of the matter, the disallowance made by the AO and partly sustained by the CIT(A) would have no leg to stand. Accordingly, the addition made deserves to be deleted. However, the disallowance made u/s. 14A by the assessee itself is also required to be disallowed while computing the book profit u/s. 115JB in view of the decision of the Tribunal in assessee’s own case for A.Ys. 2005-06 to 2010-11 as referred to above. While deciding the additional ground raised by the assessee in the earlier part of the order, we have deleted the disallowance made by the AO u/s. 14A read with Rule 8D for the reasons discussed therein. That being the case, the issue raised by the department in the present appeal would no more survive. Suffice to say the CIT(A) has deleted the addition made on account of interest expenditure for the reason that the assessee had sufficient interest free surplus fund to make the investment. In fact, the AO himself in assessment order has stated that the assessee had substantial surplus fund available with it. That being the case, the interest expenditure under no circumstances can be disallowed u/s. 14A read with Rule 8D(2)(ii). The ground raised by the department is therefore dismissed.

  ---

• 2017 (4) TMI 468
  Penalty u/s 271(1)(c) - defective notice - Held that:- Notice issued under section 274 r.w.s. 271 of the Act did not mention or specify the charge for which the penalty notice was issued, i.e. whether the initiation of penalty proceedings was for concealment of income or for furnishing of inaccurate particulars of income The notice dated 27.12.2010 issued under section 274 r.w.s. 271 of the Act dated 27.12.2010 for initiating penalty proceedings under section 271(1)(c) of the Act for A.Y. 2008-09 is defective and issued without application of mind and is therefore invalid and bad in law. Consequently, the order dated 26.03.2014 levying penalty under section 271(1)(c) of the Act for A.Y. 2008- 09 is also invalid, bad in law and liable to be cancelled. See THE COMMISSIONER OF INCOME TAX & OTHS. Versus M/s MANJUNATHA COTTON AND GINNING FACTORY & OTHS.[2013 (7) TMI 620 - KARNATAKA HIGH COURT] - Decided in favour of assessee

  ---

• 2017 (4) TMI 467
  Treatment to cash credit A/c with Commercial Co-operative bank Ltd. - belonging to Mr. H.K. Mistry (Individual) OR H.K. Mistry(HUF) - Held that:- We have gone through the impugned order, paper book under rule 18(6) and heard rival submission. In support of the contention an affidavit was also filed by the H.K. Mistry (HUF) and he further stated that before the prefix “M/s.” was never attached to the account. In is only in case of HUF or Firm such profit is attached to the account. In the bank the Karta had given his PAN Number to open the account as the HUF had no Permanent Account Number at that time. At the time of opening of HUF account appellant obtained cash credit facility in the name of M/s. H.K. Mistry and copy of certificate from bank dtd. 30/06/2014 sanctioning cash credit loan Account No. 118 belonging M/s. H.K. Mistry has stated by the Bank. So far as Ground related to total cash of 1,85,800/- is concerned. It was submitted by the learned AR. Assessee had explained the source of nature of credit entries/deposits made in the bank account. It was submitted that the amounts were received by way of cheques and cash from Darshan Traders, Prop. Alka Mistry. Further stated that the cheques and cash amounts received from Darshan Traders in the Assessment Year 2010-11 have been partly accepted as genuine amounts. Therefore there was no reason for the authorities below. Darshan Traders ought to have been accepted by the genuine source of deposit in this A.Y. - Decided in favour of assessee

  ---

• 2017 (4) TMI 466
  Levy of fee u/s. 234E in order u/s.200A - scope of permissible adjustments - whether appellant has filed TDS statement u/s. 200(3) beyond the prescribed due date? - Held that:- The adjustment in respect of levy of fees under section 234E was indeed beyond the scope of permissible adjustments contemplated under section 200A. This intimation is an appealable order under section 246A(a), and, therefore, the CIT(A) ought to have examined legality of the adjustment made under this intimation in the light of the scope of the section 200A. The issue is whether such a levy could be effected in the course of intimation under section 200A. The answer is clearly in negative. No other provision enabling a demand in respect of this levy has been pointed out to us and it is thus an admitted position that in the absence of the enabling provision under section 200A, no such levy could be effected. As intimation under section 200A, raising a demand or directing a refund to the tax deductor, can only be passed within one year from the end of the financial year within which the related TDS statement is filed, and as the related TDS statement was filed on 19th February 2014, such a levy could only have been made at best within 31st March 2015. That time has already elapsed and the defect is thus not curable even at this stage. In view of these discussions, as also bearing in mind entirety of the case, the impugned levy of fees under section 234 E is unsustainable in law. We, therefore, uphold the grievance of the assessee and delete the impugned levy of fee under section 234E of the Act. See Tanish Industries Pvt. Ltd. & I rfan Iqbalbhai Ajmerwala Versus The Dy. CIT [2015 (11) TMI 1507 - ITAT AHMEDABAD] - Decided in favour of assessee

  ---

• 2017 (4) TMI 465
  Addition of debt written off - Held that:- The debt was taken into account in the income of the assessee for the AYs 2000-01 and 2001-02 when the interest income accruing thereon was taxed in the hands of the assessee. The nature of the income indicated the transactions from which it emerged. The transaction was the debt and the debt was taken into account in computing the income of the assessee of the relevant previous year. The principal amount which has been written off attracts clause (i) of sub-section (2) of section 36 of the Act and, therefore, the conditions specified in section 36(1)(vii) of the Act and requirement of clause (i) of sub-section (2) of sec. 36 of the Act have been fulfilled and, therefore, the Ld. CIT(A) has rightly deleted the addition and allowed the claim of the assessee. Disallowance under Rule 8D(2)(ii) - CIT(A) held that if net of interest received and interest paid is positive figure, no part of interest can be disallowed under rule 8D(2)(ii) as attributable to earning tax free dividend - Held that:- We note from the P 58,23,756/-. Rule 8D(2)(ii) cannot be applied when there is no net interest expenditure upon setting up of interest credited to the P&L Account and, therefore, no part of interest debited can be disallowed as attributable to earning tax free dividend. The Ld. DR could not controvert this fact and, therefore, the AO erred in computing disallowance under Rule 8D(2)(ii) and, therefore, the Ld. CIT(A) has correctly allowed relief to the assessee and we do not find any infirmity in the order passed by the Ld. CIT(A) on this issue and, therefore, we uphold the impugned order of Ld. CIT(A) and dismiss this ground of appeal of revenue.

  ---

• 2017 (4) TMI 464
  Addition on share application money - proof of credit worthiness and genuineness - Held that:- Assessee has received share application money from two Pvt. Ltd. Companies amounting to 1,95,00000/- A.O. has examined the directors of these companies. From the said examination reproduced in the assessment order it is clear that these directors were totally unaware of the transactions of the company. From their statements the A.O. has brought on record that they could not corroborate the identity of this transactions the genuineness, credit worthiness. We find that just because these share applicant are companies and the money has been received through banking channel it doesn’t mean that the identity credit worthiness and genuineness and the transactions are disclosed. The A.O. has made elaborate enquiry and has examined the directors of these companies which has clearly brought on record that these are accommodation entries. In such circumstances in our considered opinion the order of Ld. CIT-A is not at all sustainable. Accordingly as regards the issue of addition on share application money we set aside order of Ld. CIT-A and restored the A.O’s order. Unsecured loan - AO has brought on record the statement of the directors and proprietors of the loan givers and on that basis he has come to the conclusion that the unsecured loans were actually accommodation entries. Ld. CIT-A has deleted the addition on the ground that some of the assessee’s are assessed to tax in the same range. Hence their identities is not in doubt. That the balance sheet are on record hence this transactions are proved. We find that Ld. CIT-A here again has ignored the evidences and the statements obtain by the A.O. It is also not the case that Ld. CIT-A has examined the parties or the accounts himself. Hence the conclusion regarding the genuineness of these loans drawn by the Ld. CIT-A is also not at all sustainable. Thus we find that the deletion of addition unsecured loan by the Ld. CIT-A is not based upon any cogent finding. Only with regard to M/s. Nisha Enterprises where Ld. CIT-a has given a finding that a sum of the 25,50000/- was and opening balance which was already added u/s. 68 in the assessment year 2006-07. Hence except deletion of 25,50,000/- of this account we set aside the order by the CIT-A on the issue of deletion of unsecured loan. Hence, the addition by the AO in this regard is confirmed except for a sum of 25,50,000/- as deleted above. - Decided partly in favour of revenue

  ---

• 2017 (4) TMI 463
  Addition in respect of apportionment of interest on working capital, factory overhead and director’s remuneration to 10B unit - CIT(A) deleted addition on the ground that the assesseecompany had maintained separate books of account in respect of 10B unit and non-10B unit and without pointing any discrepancies in the books of account maintained, the AO was not justified in apportioning the above expenditure to 10B unit - Held that:- AO had not found any defects in the books of account nor had he rejected the books of account. It is neither the case of the AO that any of the expenses was not properly allocated to 10B units nor was the case of the AO that the expenditure, which is incurred exclusively for 10B unit was not claimed as a deduction. The AO merely proceeded on surmises and conjecture to make addition which is not permissible under law and therefore, we do not find any reason to interfere with the finding of the CIT(A). Hence, the appeal of the revenue is dismissed. Addition in respect of apportionment of salary expenditure to 10B unit - Held that:- AO has a strong basis to infer that there has been overlapping of functions of the employees between the two units. Thus we see no reason to interfere in his action in reallocating expenses within the meaning of section 145(3) of the Act. - Decided against assessee Addition in respect of ALP in respect of receivables due from AEs - Held that:- TPO made adjustment on account of notional interest for non-realization of its dues. There is no dispute that the transaction in question is not an independent transaction. It is an integral part of transaction of sale made to AE and therefore, it has to be considered along with main transaction. It is only w.e.f. assessment year 2012-13 amendment to section 92A was brought in the statute book. Since amendment is not applicable to the assessment year under consideration, law laid down by several co-ordinate benches like Goldstar Jewellery Ltd. vs. JCIT (2015 (2) TMI 58 - ITAT MUMBAI) is applicable wherein held that there can be no separate international transaction of 'interest' in the international transaction of sale. Early or late realization of sale proceeds is only incidental to transaction of sale, but not a "separate transaction in nature. The impugned transaction of interest on delayed realization of sale proceeds is not international transaction. - Decided in favour of assessee

  ---

• 2017 (4) TMI 462
  Addition on upward adjustment on international transactions - addition on Interest on loans to AEs - Held that:- To hold that cost of funds raised should have been higher because the returns from funds employed by the enterprise is higher is putting cart before the horse. In the commercial world, interest does not represent any participation of profits, and it does not vary because of the profits made by the borrower from monies so raised. In any event, while determining arm’s length price of a transaction, it is immaterial as to what ‘benefit’ an AE subsequently derives from such a transaction. What is to be determined is the consideration of a transaction in a hypothetical situation, in which AEs are independent of each other, and not the benefit that AEs derive from such transactions. It is not even the case of the authorities below that in the event of hypothetically dealing with an independent enterprise, no independent enterprise would not have given him an interest free loans even if there was an option, coupled with such a deal, to subscribe to the capital of the AE on the terms as offered by the AE to the assessee. Unless that happens, there is not even a prima facie case made out for an ALP adjustment. Whenever the assessee’s right to exercise the option of converting the loan into equity comes to an end, the assessee is entitled to interest on the commercial rates. It is not even the case of the authorities below that the interest so charged by the assessee, in a situation in which the right to exercise the option has come to an end, is not an arm’s length price. Keeping in mind all these factors, as also entirety of the case, we deem it fit and proper to delete the arm’s length price adjustment in respect of interest which, according to the revenue authorities, should have charged on the optionally convertible loan granted to the AEs. - Decided in favour of assessee Corporate guarantee charges - Held that:- We uphold the grievance of the assessee, and direct the Assessing Officer to delete the ALP adjustment taking note of the insertion of Explanation to Section 92B of the Act, that the issuance of corporate guarantees is covered by the residuary clause of the definition under section 92B of the Act but since such issuance of corporate guarantees, on the facts of the present case, did not have "bearing on profits, income, losses or assets", it did not constitute an international transaction, under section 92B, in respect of which an arm's length price adjustment can be made. In this view of the matter,we have to delete the impugned ALP adjustment. Liaison services - Held that:- We have noticed that what has been held to be arm’s length price in this case is the price at which transaction has taken place between the assessee and its AE, to the extent it has been accepted to be at an arm’s length price in the assessment year 2006-07. In effect, thus the basis of determining ALP of this transaction is another intra AE transaction at an earlier point of time. That is not acceptable. The approach adopted by the TPO is devoid of legally sustainable merits. A comparable, by definition, has to be in respect of an uncontrolled transaction. That is what the law states so unambiguously. What decides the ALP of a transaction is answer to the question that if that the tested party was to be enter into the same transaction with an independent enterprises, i.e. rank outsider, what would have been consideration for the same. Profit is not a reward for risk alone, it is also a reward for the functions performed as also the assets employed in rendition of service. The TPO has examined only the risk factor, in FAR analysis, and ignored the functions and assets. That approach cannot be approved. However, as the matter regarding appropriate comparables has not been discussed in reasonable detail and as the discussions in the orders of the authorities below have been somewhat at superficial level, we deem it fit and proper to remit the matter to the stage of the DRP for fresh adjudication on this issue, in accordance with the law, in the light of our observations above after giving a reasonable opportunity of hearing to the assessee, and by way of a speaking order TDS u/s 195 - payments to non residents without any tax deduction at source - Held that:- The assessee has made elaborate arguments, on merits, in respect of these payments. The total payments made by the assessee were as many as 1,193 payments, out of which a large number of payments have been disallowed under section 40(a)(ia). Much as learned counsel urges us to examine these payments individually, and decide the disallowance under section 40(a)(i) on merits, we donot think that will be appropriate on the facts of this case. DRP has not examined the matter on merits at all. The discussions by the Assessing Officer in respect of these payments have also been inadequate, superficial and without sufficient application of mind, and a reasonable case has not been made out for invoking the disallowance under section 40(a)(i) by meeting the arguments of the assessee and demonstrating that the income embedded in these payments is indeed taxable in India. It is equally true that the Assessing Officer cannot decide taxability of income embedded in these payments on the basis of sweeping generalizations either. Essentially, therefore, the DRP also must decide the matter on the same parameters and in the same manner. While doing so, the DRP may also call for, and take into account, specific case by case comments of the Assessing Officer on each of, or each set of- as may be appropriate, the payment. The DRP may also take into account decisions of the coordinate benches, on the taxability of income embedded in such payments, in assessee’s own case as indeed in other similarly situated cases, as also other binding judicial precedents. Thus we deem it fit and proper to remit the matter to the file of the DRP for adjudication de novo on merits Disallowance as per Rule 8D r.w.s, 14A - Held that:- As pointed out that rectification petition under section 154 is pending in respect of these adjustments, and that he will be content by our direction to the Assessing Officer to look into these two issues. We see merits in the plea. It is beyond controversy that dividends from companies abroad do not enjoy the tax exempt status, and, as a corollary thereto, the related investments must therefore be kept out of investments yielding tax exempt income for the purpose of rule 8D. As for the correct figure of interest paid, it is purely a factual issue and the Assessing Officer is, therefore, directed to look into the contention of the assessee by way of a speaking order after giving an opportunity of hearing to the assessee. To the extent, disallowance under section 14A r.w.r. 8D stands reduced as a result of the above, the assessee will get relief. The balance addition stands confirmed as no grievance is raised in respect of that portion of disallowance. With these directions, the matter stands restored to the file of the Assessing Officer. Availability of the amount of Carried Forward MAT Credit u/s. 115JAA - Held that:- As in the view of Hon’ble Supreme Court’s judgment in the case of CIT Vs Manmohan Das [1965 (11) TMI 33 - SUPREME Court ], in the year of carry forward only quantification of a set off claim is to be seen. The question as to its entitlement for being set off is to be examined in the year in which set off is claimed. Grievance of the assessee is premature and is dismissed as such. eligible for deduction u/s 80IC on the entire profit allowed. Deduction of share of profit from firm (Zydus Healthcare Sikkim) u/s. 10(2A)- double taxation - Held that:- The scheme of taxation of firm, as evident from the above circular, supports our preceding analysis about true connotations of the expression ‘total income’ appearing in section 10(2A). As is quite clear from the CBDT circular above, the point of taxation in the case of partnership firm is assessment of income of the firm, and once that exercise is carried out, that is the end of the matter so far as taxation of income of the firm is concerned. It cannot once again be brought to tax in the hands of the partners. As a corollary to this undisputed position, when an income is found to be not taxable in the hands of the partnership firm, it cannot be brought to tax in the hands of the partners on the ground that it was not actually taxed in the hands of the partnership firm. If it is found to be not taxable in the hands of the partnership firm, it is not taxable at all, because so far as income of the partnership firm is concerned, that is the only point when such an income, if at all and to whatever extent, can be taxed. We have also noted that in the subsequent assessment year the Assessing Officer himself has not made such additions in the course of assessment proceedings, and the above interpretation, as such, stands accepted by the field authorities. Yet, ironically, when DRP grants this relief on the same point, the Assessing Officer is in appeal before us. This fact shows how frivolous is this appeal. In view of the above discussions, in our considered view, the DRP was quite justified in granting the impugned relief. Trademark Registration and Patent fee considered as revenue expenses Expenses incurred outside the approved R&D facility is also eligible for weighted deduction in contravention of section 35(2AB) Depreciation on Hummer car - Held that:- Once it is not in dispute that the vehicle was owned, in substance, by the assessee and the vehicle was used for the purposes of its business, there cannot be any legally sustainable reasons for declining the depreciation. Learned Departmental Representative could not bring on record any material to dislodge the findings of the DRP. Foreign exchange derivative loss allowance - Held that:- The expression "expenditure" as used in s. 37 may, in the circumstances of a particular case, cover an amount which is really a "loss" even though the said amount has not gone out from the pocket of the assessee.To this extent, the Assessing Officer was clearly in error in treating the loss on foreign exchange as a notional loss not deductible in computation of business income, as long as the related transaction is on revenue account- as aspect which is not in dispute. The relief granted by the DRP was thus justified. In any case, learned Departmental Representative has not pointed out any reasons or arguments for not confirming the action of the DRP. In view of these discussions, as also bearing in mind entirety of the case, we approve the conclusions arrived at on the facts of this case. DRP is right in deleting the addition to Book Profit being addition u/s 14A. Carry forward only quantification of a set off claim is to be seen. The question as to its entitlement for being set off is to be examined in the year in which set off is claimed. Grievance of the assessee is premature and is dismissed as such. TDS liability Addition u/s. 40(a)(i) - commission on export, legal and professional fees and clinical trial and analytical and testing charges - Held that:- We find that so far as the taxability of commission payments made to non residents agents is concerned, the same stands concluded, in favour of the assessee, by a coordinate bench decision in the case of DCIT Vs Welspun Corporation Ltd [2017 (1) TMI 1084 - ITAT AHMEDABAD ]. Respectfully following the said decision, we confirm findings of the CIT(A) on that point As regards the payments to professional law firms and consultancy fees, there is no dispute that these professionals did not have any fixed base available to them in India, as is the condition precedent for taxing fees for independent personal services in India under the respective treaty provisions. As regards the clinical and analytical testing charges, the issue stands covered in favour of the assessee in assessee’s own case as also in the case of Reddy Laboratories(2013 (11) TMI 304 - ITAT HYDERABAD). Learned Departmental Representative has not pointed out any distinguishing features or disputed this position. Thus we approve the conclusions arrived at by the DRP and decline to interfere in the matter. As we do so we may also add that, for the sake of brevity, we are not adding reproductions from the orders relied upon by us and these orders will be deemed to be attached and forming part of this order.

  ---

• 2017 (4) TMI 461
  Disallowance of depreciation - reducing the incentives received from Maharashtra State Government from the cost of the building and plant and machinery and further by enhancing the income by holding that subsidiary receipt from Maharashtra Government for putting a mega project in backward area is Revenue receipt liable to tax - Held that:- The assessee has set up a manufacturing unit in notified low human development district Jalana. The assessee has been granted eligibility certificate under PSI-227 No. DI/PSI-2007/Mega Project/Ec08/2009/B-401 dated 03-01-2009 on specific criteria that the assessee shall employ 250 employees and at least 75% of same should be local persons. Accordingly, the assessee on complying all conditions of scheme, has received Industrial promotion Subsidy (Capital Incentive) from Govt. of Maharashtra under PSI-2007 Scheme. The same was claimed to be capital receipt and credited to capital reserve account by the assessee. We find that in the present case, the cost of the asset is incurred and paid by the assessee and not met by the Government in form of subsidy. The method of quantification i.e. the maximum subsidy limit is the only linked with cost of fixed assets. This quantification is for putting cap on maximum amount of subsidy eligibility. This method of quantification does not mean, in any way, that subsidy is given to offset cost of asset. It is very clear from PSI scheme as well as Eligibility certificate that subsidy is given to generate local employment in low human index district and receipt is in not for meeting or subsidizing cost of asset by Govt. It is only where subsidy is given specifically to offset the cost of an asset, such payment would fall within the expression ‘met’, whereas the subsidy received merely to accelerate the industrial development of the state cannot be considered as payments made specifically to meet a portion of the cost of the asset. Therefore, incentive in the form of subsidy cannot be considered as a payment directly or indirectly to meet any portion of the actual cost and thus it falls outside the ambit of Explanation 10 to Section 43(1) of the Act. In the light of the above discussion, for the purpose of computing depreciation allowable to the assessee, the subsidy amount cannot be reduced from the cost of the capital asset. Accordingly, on both the issues we are of the view that the subsidy received by the assessee is capital in nature and it cannot be reduced from the cost of the fixed assets for computing depreciation. Accordingly, this inter-connected issue of assessee’s appeal is allowed. Disallowing advertising and sales promotion expenses on adhoc basis - Held that:- In view of the above details given by the assessee and the fact that the AO has estimated the disallowance on adhoc basis, we are of the view that a reasonable disallowance of 5 lakhs will meet the end of justice, to which the learned Counsel for the assessee is also agreed. Accordingly, we allow this issue of assessee partly.

  ---

• 2017 (4) TMI 460
  Depreciation on computer software - Held that:- It is brought to our notice that in AY 2004-05, Ld. CIT (A) has granted depreciation @ 60% on these items. The order of Ld. CIT (A) has been accepted by the Revenue. Therefore, as a matter of consistency we direct the AO to grant the depreciation @ 60% in AY 2005-06. With these directions these grounds are allowed. Disallowance u/s 14A - Held that:- We restore this issue back to file of the AO with the same directions as have been given in AY 2009-10. The AO is directed to follow order for AY 2009-10 while adjudicating this ground. Adequate opportunity of hearing shall be granted to the assessee while deciding this ground.

  ---

• 2017 (4) TMI 459
  TDS u/s 195 - fee for Technical services(FTS) - non deduction of tax at source - Indo-Thailand DTAA - PE situated in India - assessee in default - Held that:- The remittances in question are in the nature of fees for technical services in the hands of Thai entities, the income embedded in these remittances is not taxable in India in the hands of these entities, in terms of the provisions of Indo Thai tax treaty. The plea of the Assessing Officer, for invoking the domestic law provisions in respect of fees for technical services, as the Indo Thai tax treaty does not specifically deal with the same, already stands negated in the case of Bangkok Glass Industries (2015 (4) TMI 503 - MADRAS HIGH COURT ), in the context of Indo Thai tax treaty itself. It is only elementary that under article 90(2) where the Government has entered into a tax treaty with any tax jurisdiction, in relation to the assessee to whom such treaty applies, “the provisions of this (i.e. Income Tax) Act shall apply to the extent they are more beneficial to that assessee”. While on this issue, we may also take note of the landmark Special Bench decision in the case of Motorola Inc. vs. Dy. CIT [2005 (6) TMI 226 - ITAT DELHI-A] wherein the Tribunal had, inter alia, observed that "DTAA is only an alternate tax regime and not an exemption regime" and, therefore, "the burden is first on the Revenue to show that the assessee has a taxable income under the DTAA, and then the burden is on the assessee to show that that its income is exempt under DTAA". Quite clearly, when there is no taxability under the respective treaty provisions, there cannot be any taxability under the provisions of the Income Tax Act either. - Decided in favour of assessee. TDS liability on reimbursement of expenses under the cost sharing arrangement for regular preventive maintenance - taxable as fees for technical services under section 9(1)(vii) - Satisfy the requirements of ‘make available’ clause - Held that:- As we have noted earlier, it is not even the case of the Assessing Officer that the assessee, i.e. recipient of services, was enabled to use these services in future without recourse to the service providers. The tests laid down by Hon’ble Court in DIT Vs Guy Carpenter & Co Ltd [ 2012 (5) TMI 31 - DELHI HIGH COURT ] were clearly not satisfied. For this short reason alone, the amounts in question were not taxable as fees for technical services under the provisions of the respective tax treaties. The law is well settled, we may add at the cost of repetition, that under article 90(2) where the Government has entered into a tax treaty with any tax jurisdiction, in relation to the assessee to whom such treaty applies, “the provisions of this (i.e. Income Tax) Act shall apply to the extent they are more beneficial to that assessee”. When the amounts are not taxable under the provisions of the respective tax treaties, there cannot be any occasion to deal with the provisions of the Income Tax Act. We, therefore, approve the conclusions arrived at by the CIT(A) on this issue as well, and decline to interfere in the matter.- Decided in favour of assessee.

  ---

• Customs

• 2017 (4) TMI 486
  Benefit of N/N. 21/2002-Cus - import of coal - notification provides that exemption should be granted to coal subject to the condition that the ash content in the said coal was less than 12% - The test report indicated that the sample contained 13.1% ash content and therefore the benefit of Notification was denied - certain aspects of the IS 436 could not have been followed in the instant case in as much as the appellant had not filed the bill of entry claiming the said examination until 30 days after the unloading of the material - Held that: - from the cross examination of the inspector it is clear that the samples were drawn in the presence of the representative of importer and CHA, from the different lots. It is also seen from the cross examination of the inspector that samples 25 Kg. of each were drawn 7 to 8 lots. The total quantity of importer is 8000 MT and in terms of IS 436 in such cases upto 6 lots of samples need to be drawn. Thus it is apparent that the provision of IS 436 were followed to the extent possible, given the fact that the importer had declared the intention to avail exemption 30 days after unloading. In absence of the certificate of CASCO regarding the ash content, it was necessary to get the sample tested in view of the claim of notification by the appellant. Appeal dismissed - decided against appellant.

  ---

• 2017 (4) TMI 485
  Provisional release of seized cargo - change in route - The change in route was attributed to bad weather the ship experienced in Karachi - the appellants were the charterers and shipping agents of the vessel - Held that: - It is the apparent that by the action of coming forward and taking responsibility of the impugned goods and seeking provisional release of the said goods, the appellant have stepped into the shows of the importer - appellant had admitted in the bond that the goods belong to the obligators. It is apparent that from the language of the said the appellant have claimed that the goods belong to them and therefore they have come forward to get the provisional release of the same. Thus, the appellants are clearly importers in terms of the definition appearing in the Customs Act. The SCN also alleges that the goods cleared at Mumbai were not the same is the goods which were seized by the customs. The impugned order fails to deal with the issue and to categorical state if the goods were later on imported into India or not. The impugned order is silent on that aspect. In view of above, the demand of duty is set-aside and the matter is remanded for decision on facts regarding the re-import of goods and the duty liability of the appellant. Penalty - Held that: - The SCN does not even alleged any convenience or knowledge about the misdeclaration on the part of said shipping agent. In absence of the knowledge the penalty of 5,00,000/- appears excessive - penalty reduced to 5,000/- only. Part matter on remand - part matter decided in favor of assessee.

  ---

• 2017 (4) TMI 484
  100% EOU - Extension of warehouse period - permission to re-export the goods - The grievance of the appellant is that such decision was communicated to them without giving any reasons thereof and without giving opportunity to be heard in person or through written representation - whether present appeal is maintainable in terms of Section 129A of the CA, 1962? - Held that: - This Tribunal is a creature of statute and has therefore to act clearly within its bounds. Hence an appeal against the impugned letter that is not recognized vide the provisions of Section 129A ibid cannot be entertained by this Tribunal - appeal dismissed being not maintainable.

  ---

• 2017 (4) TMI 483
  Imposition of penalty u/s 112(a) and Section 114AA of the CA, 1962 - Held that: - it is but obvious that the adjudicating authority has been unjudicious and peremptory in imposition of the impugned penalty u/s 114AA, since, unless it is proved that the person to be penalized, has knowingly or intentionally implicated himself in use of false and incorrect materials, there can be no justification for penalty under that section. This requirement has not been satisfactorily met either in the notice or in the impugned order and hence I do not have any hesitation in setting aside the same. Coming to penalty u/s 112 (a) ibid, notwithstanding the many protestations of the appellant, in an exercise involving import spanning 20 consignments, appellant as CHA cannot claim that they had no inkling of what was going on. No proof is adduced anywhere that he actively involved in the fabrication of false material, nonetheless the very fact that he was connected with the main player involved will definitely indicate some level of knowledge of the modus operandi, even though it may be to a smaller extent. In the event, penalty u/s 112 (a) is therefore imposable in this case. Appeal allowed - decided partly in favor of appellant.

  ---

• 2017 (4) TMI 482
  Valuation - attempt to export sub-standard fabric which were claimed to be processed man-made fabric - It was alleged in the SCN that the goods were highly overvalued, that the quantity was mis-declared in the export documents and that the intent had been to claim undue credit under the DEPB scheme - invocation of section 113 (d) of CA, 1962 justified or not? - Held that: - there is ample evidence that the quantity stated to have been exported is a misrepresentation. Investigations have also revealed that ARE-1s submitted to the customs authorities were not authentic. An attempt has been made to portray the agent as the villain of the piece; this fails to impress as there is no conceivable motive for the agent to indulge in such misdemeanour when the appellant-exporter, admittedly, would derive the benefit of higher credit entitlement. The submission of the ARE-1s could well have lulled the customs authorities at load port into accepting the declarations on the shipping bills without a detailed scrutiny. We are conscious that this inference may well be of speculative nature but, in the circumstances, is not a factor that is easily disregarded - A re-determination for the purpose of establishing eligibility of export incentive does not stand on the same footing as an assessment which is a statutory pre-requisite for levy of duties. Therefore, the findings of the adjudicating authority are not in any way compromised. The appellants have not been able to furnish adequate justification for their appeal to sustain - appeal dismissed - decided against appellant.

  ---

• 2017 (4) TMI 481
  Export of prohibited goods - infringed copyright books - confiscation u/s 113 (d) of CA - Held that: - there is a prohibition for the sale and trading of the infringed copyright books and also a prohibition on import into India. However, there is no prohibition provided in respect of export of the same goods. Therefore, the export of infringed copyright books has not been prohibited either under the Customs Law or under the Indian Copyright Act. Therefore, in the absence of any prohibition on the export of the said goods, the goods are not liable for confiscation. Consequently, the appellants are not liable for any penalty - appeal allowed - decided in favor of appellant.

  ---

• 2017 (4) TMI 480
  Classification of imported goods - Diakin Air Heat Pumps - importer claimed assessment under heading 8418.69 of the Customs Tariff read with N/N. 30/88 as amended - Revenue claimed the goods to to be air conditioning machines and not heat pumps as declared, classified under heading 8514 - the confiscation which related to licence issued by the licensing authority after the clearance of the imported goods - fine - penalty - Held that: - Once the licence was validly issued and the same is in force the goods covered under the said licence is not liable for confiscation for want of licence. The Customs authority cannot raise any question on the valid licence issued by a licensing authority. Import without licence is a contravention to the terms of the foreign trade policy. If a licensing authority under foreign trade department issues a licence, then customs has no authority to raise any objection. If it is permissible to issue a licence at a later date after the import of the goods, the custom authorities cannot take any action holding that the goods are prohibited for want of licence - the confiscation held u/s 111 (d) of the CA is not correct and legal. Since the goods were not liable for confiscation u/s 111 (d) the redemption fine and penalty imposed by the adjudicating authority is on very higher side, which is required to be reduced - The redemption fine reduced from 30 lakhs to 15 lakhs - Penalty is reduced from 5 lakhs to 2 lakhs. Appeal allowed - decided partly in favor of appellant.

  ---

• 2017 (4) TMI 479
  Amendment in shipping bill - DFIA scheme to DEPB scheme - rejection of application for amendment of shipping bill on the ground that there was no dispute with the DGFT and hence the request does not get covered under the Board Circular No. 4/2004-Cus. dated 16.01.2004 - Held that: - the Circular of 2010 is not applicable in the present case as it has been made clear in para 6 of the said circular. The Circular of 2004 is applicable in the present case. It is undisputed that the shipping bills have been filed between 26.10.2006 and 12.12.2006 and the request for amendment was made on 15.09.2007. Hence, the Commissioner correctly relied upon the Circular of 2004 and rejected the request for non-fulfillment of condition of that circular. Not only there was no dispute leading to denial of benefit, but the request for conversion has not also been filed within the one month of such denial - there is no infirmity in the order of Commissioner and the same is sustained - appeal dismissed - decided against appellant.

  ---

• Corporate Laws

• 2017 (4) TMI 478
  NCLT President power to decide which Bench will hear the matter - Held that:- The President of the NCLT has not been empowered to decide which Bench will hear the matter, if a petition under section 388-B of Act 1856 is filed. Even if it is presumed, though not accepted that the Notification issued by the President under Regulation 4 of Company Law Board Regulations 1991 deemed to be continuing, it cannot override the Notification dated 1st June 2016 issued by Central Government in exercise of power conferred by sub-section (1) of Section 419 of the Companies Act, 2013. The circular issued by Company Law Board, under Regulation 4 also cannot override Rule-64 of NCLT Rules, 2016.Sub-section (1) of Section 434 mandates transfer of proceedings pending before the Company Law Board to respective Tribunal having territorial jurisdiction. The circular issued under Regulation 4 of 1991 Regulation cannot be given effect in view of the aforesaid mandate under the Act. Section 434(a) read with sub-section (1) of Section 419 of Companies Act, 2013 and Notification dated 1st June 2016 issued by Central Government under sub-section (1) of Section 419 and the Rule 64 of NCLT Rule it is clear the Benches, including Principal Bench have territorial jurisdiction on the Companies exclusively on the basis of location of the registered office of such company. In fact, this law is also being followed by the Principal Bench of NCLT, New Delhi for placing all the petitioners before one or other Bench and that Section 488-B of Act 1956, cannot be exception of the same. For the reasons aforesaid we set aside the impugned order dated 6th December 2016 passed by the "Principal Bench" of NCLT, New Delhi in C.P. No. 01/2015 with the direction to the Registry of the Principal Bench, NCLT, New Delhi to transfer the C.P. No. 01/2015 to the NCLT Bench at Chennai, where registered office of the appellant company is situated.

  ---

• 2017 (4) TMI 477
  Oppression and Mismanagement by Directors - change in shareholding pattern - maintainability of appeal - Held that:- A shareholder/member or group of shareholder/members without and notice or information cannot visualize or presume that his/their share(s) will be brought down to their disadvantage, which amounts to oppression and mismanagement. On such anticipation or presumption no petition under Sections 397 or 398 of the Companies Act, 1956 can be filed. Such aggrieved shareholder(s)/member(s) can file the petition under Sections 397 & 398 of the Companies Act, 1956 only after cause of action has taken place. If that be so, the day on which a petition under Sections 397 and 398 is filed by a shareholder/member, whose shareholding has been brought down below the requirement of having an aggregate of 10% out of the total shareholding, will be deprived to avail remedy under Section 397 and Section 398, without their fault. For the reasons recorded above, we hold that in the cases where an applicant alleges that his shareholding has been brought down by way of oppression and mismanagement below 1/10th of the total shareholding without notice and knowledge then it is the duty of the Tribunal to determine whether the applicant had 1/10th of the shareholding prior to the date of alleged oppression and mismanagement. Such petition cannot be dismissed on the ground that the applicants shareholding is below 1/10th of the total shareholding of the Company on the actual date of presentation of the Company Petition. It is a different question whether the shareholding was actually brought down by oppression and mismanagement which is to be decided by the Tribunal on the basis of evidence on record. In the present case, the Tribunal failed to apply the aforesaid principle and erred in holding that the Company Petition preferred by the appellants under Sections 397 and 398 of the Companies Act, 1956 was not maintainable on the date of presentation of the Company Petition. The question of oppression and mismanagement and maintainability in the present case is a mixed question of facts and law. As the petition was filed on the ground that the shareholding of the applicant(s) has been brought down below 1/10th of the total shareholding of a Company by oppression and mismanagement, Tribunal was required to decide the question of maintainability at the time of final hearing of the Petition. Both the merit and question of maintainability were required to be decided together. On hearing the parties, in case the Tribunal forms opinion that there was no oppression and mismanagement on the date of cause of action as alleged by the applicant then in such case it was open to the Tribunal to dismiss the petition as not maintainable in view of Section 399 of the Companies Act, 1956. We set aside the impugned order and judgement passed by the National Company Law Tribunal, Kolkata and remit the case to the Tribunal for determination of question of maintainability and merit.

  ---

• PMLA

• 2017 (4) TMI 475
  Offence under money laundering - Offences to be cognizable and non-bailable - person accused of the commission of the offence - Held that:- We cannot agree with the submission of the petitioner that for the purpose of Sections 3 and 4 of the PMLA, the person accused of the commission of the offence under the PMLA should have committed the scheduled offence and acquired the proceeds of crime. The proceeds of crime may be acquired by another person who commits one of the scheduled offences, and the person charged with money laundering may have only, directly or indirectly, assisted or knowingly become a party, or may be actually involved in the process or activity of, inter alia, concealing, possessing, acquiring or using and projecting or claiming the said proceeds of crime as untainted property. The purpose of scheduling the offences under the PMLA appears to be to enlist the various crimes through which the proceeds of crime may be generated. Thus, the submission of the petitioner that he cannot be charged under the PMLA, does not appear to have any merit. The learned Special Judge has opined that it cannot be said that there are reasonable grounds for believing that the petitioner is not guilty of the scheduled offence. This prima-facie finding of the learned Special Judge on a reading of the allegations made against the petitioner herein in the FIR/ RC registered by the CBI, as well as on a perusal of the complaint preferred under the PMLA, appears to be justified and there is no reason to take a different view of the matter at this stage.

  ---

• Service Tax

• 2017 (4) TMI 510
  Franchisee service - Invocation of extended period of limitation - whether the appellant gave to the distributors representational right to sell its products i.e. products identified with it - Supreme Court dismissed the appeal against the decision of tribunal [2015 (5) TMI 705 - CESTAT NEW DELHI]

  ---

• 2017 (4) TMI 509
  Demand of service tax - Transportation of goods by air - whether the service tax payable on excess baggage charges paid by the passengers at the time of boarding the aircraft - Extended period of limitation - Supreme Court dismissed the revenue appeal against the decision of tribunal [2015 (11) TMI 54 - CESTAT MUMBAI (LB)]

  ---

• 2017 (4) TMI 508
  Condonation of delay - Whether there was sufficient cause for condonation of delay in filing the appeal - Demand of Service tax alongwith interest and penalty - Supreme Court dismissed the appeal against the decision of High Court [2016 (5) TMI 567 - PUNJAB AND HARYANA HIGH COURT]

  ---

• 2017 (4) TMI 505
  Constitutional validity of circular No.180/06/2014-ST dated 14.10.2014 - authorized money changers and money transfer agents - The essential argument is that the services rendered by the petitioners associate through its members do not attract the service tax. - Held that:- assessing officer should not be influenced by any directions and contents of the office memorandum. He should not go by the subsequent circular dated 14th October, 2014 which supersedes the earlier circular of 10th July, 2012. He must allow the assessee to raise all contentions and consider them in accordance with law. Presently, we do not see any reason to clarify other issues because that would be purely academic.

  ---

• 2017 (4) TMI 504
  Dispute between the contracting parties related to Service tax - invocation of unconditional bank guarantee - The petitioner contends in view of the nature of the dispute and clear assertion of the petitioner that service tax is not payable and the opinion of the Government on the basis of which the respondent invoked the bank guarantee is untenable in law. Held that:- The parties have agreed to the appointment of an Arbitrator by this Court. Accordingly, Mr. J.P. Khaitan, Senior Advocate is appointed as Arbitrator to adjudicate the dispute between the parties within four months from the date of entering reference.- There shall be an unconditional order of injunction restraining the respondent to realise the amount from IDBI Limited for a period of seven days from date.

  ---

• 2017 (4) TMI 503
  Levy of penalty - assessee had discharged the entire liability of payment of service tax and interest thereon before the issuance of show cause notice - Held that:- when an assessee had paid the service tax in full together with interest, the proceedings against the assessee would be concluded including the proceedings under Section 73(3) of the Finance Act, 1994. - Decided in favor of assessee.

  ---

• 2017 (4) TMI 502
  Pre-deposit u/s 35F - Having regard to the fact that the petitioner had offered to remit 7.5% of the amount as stated above, it would only be appropriate to give one more opportunity to the petitioner to remit the said amount. - On receipt of the said amount, the appellate authority shall restore the appeal on file and hear and dispose of the matter in accordance with law, as expeditiously as possible.

  ---

• 2017 (4) TMI 501
  Business Auxiliary Service - procurement of goods - appellants are purchasing the spares from the various sources. The appellants are also clearing the said spares to their clients on payment of VAT of the entire value of the goods - Scope of Notification No. 12/2003-ST - Held that:- The said notification provides that if during the provision of the services any goods are sold the value of such sales is excluded from the value of the services. Ld. Counsel has argued that in the instant case, the value on which service tax has been demanded is the same value at which the goods have been sold. Therefore, the entire value is exempt in terms of Notification No. 12/2003-S.T. In respect of transactions where contracts create an obligation on the appellants to provide spares, we set-aside the impugned order and remand the case to Commissioner (Appeals) to answer the question regarding availability of Notification No. 12/2003-ST or otherwise. In respect of transactions where there is no such obligation in the contract, the demand is set-aside. - Matter remanded back.

  ---

• 2017 (4) TMI 500
  Denial of Cenvat credit of service tax - Non submission of the supporting documents - Held that: - The only dispute in the present appeal relates to non-availability of invoices, which according to the appellant stand destroyed in a fire, which broke out in the premises on 7-8-2009. The fact of fire stands established by the fire report produced by the appellant as also by the FIR. The appellate authority in his order has clearly observed that he has scrutinised the invoices, etc. This fact along with the fact that the details of the credit taken were reflected in ST3 returns filed for the period in question read with undisputed fact of fire, which led to destruction of invoices, according to me should not be adopted as a reason for denial of refund as a reason - Appeal allowed.

  ---

• 2017 (4) TMI 499
  Cenvat credit - Inputs, capital goods and input services in terms of CCR, 2004 - classification of the service should be under “supply of tangible goods” - Held that: - We find the present plea taken by the Revenue is entirely on different ground not agitated before the lower authority. Further, it is well settled position of law that the credit availed by an assessee cannot be denied or varied on the ground that the classification of service should have been made in a different category by the provider of service. Variation in the classification or consequent rate of payment of Service Tax is not possible at the end of the recipient of service. There is nothing on record to state that the category of service or payment of Service Tax has been varied during the material time by the provider of service - Appeal dismissed - Decided against the Revenue.

  ---

• Central Excise

• 2017 (4) TMI 498
  Valuation - includibility - bought out items and other manufacturing activity carried out at the site - The department's contention is that all the bought out items and other activity carried out at the site should be added in the assessable value of the manufactured goods - execution of the composite project for manufacture and supply of LPG Bullets and erection and installation of the same at the site - Held that: - all these elements such as bought out items are undisputedly supplied from the supplier to the site. It is not taking part in the manufacture of LPG Bullets but are used only for erection and installation of LPG Bullets at site. The said activity of erection and installation, is not amount to manufacture - if at all any activity by any imagination is amount to manufacture, by virtue of immovability of LPG Bullets, the activities at site cannot be charged to excise duty - demand set aside - appeal allowed - decided in favor of assessee.

  ---

• 2017 (4) TMI 497
  Valuation - The appellant cleared the manufactured goods to the Central Distribution Centre (CDC), which belongs to the appellant company and the goods were sold from the said CDC by adding a value of 40% on the clearance value from the factory - Department's case is that CDC is a related person of the appellant, the prices at which the goods are sold from CDC shall be the assessable value and duty should be chargeable on the said value at the time of clearance of the goods from the factory - Held that: - the CDC is like a depot owned by M/s. National Textile Corporation (Maharashtra North) Ltd. and the appellant is a unit of said company. Therefore, all the three i.e., National Textile Corporation (Maharashtra North) Ltd., the appellant and CDC, are under one single entity, i.e. the company, M/s. National Textiles Corporation (Maharashtra North) Ltd. Therefore, among three there are no different persons involved. Accordingly, there is no related person exist in the entire transaction - Since the SCN is based only on the point of related person, even though some other valuation provision may or may not apply, we cannot address to the same. Otherwise, we have to travel beyond the scope of SCN, which is not permissible in the law - appeal allowed - decided in favor of appellant.

  ---

• 2017 (4) TMI 496
  N/N. 64/95-CE - denial on the ground that the HSD was cleared to M/s.Indian Oil Corporation and not to Indian Navy/Coast Guard - Held that: - the issue on merits is no longer res integra as the same has been decided against the appellants in their own case M/s HINDUSTAN PETROLEUM CORPORATION LTD Versus COMMISSIONER OF CENTRAL EXCISE [2014 (2) TMI 324 - CESTAT MUMBAI]. Accordingly, N/N. 64/95-CE is not available to the appellants. The matter needs to be remanded only for re-quantification on the basis of the evidence to be produced by the appellant before the adjudicating authority - As regards the penalty, the issue involved is purely on interpretation of N/N. 64/95-CE, thus, the penalty set aside. Appeal allowed in part and part matter on remand.

  ---

• 2017 (4) TMI 495
  Sub-contract - Offloading of the work - Manufacture at site - Fixed vs. Movable furniture - Held that: - The said issues have been settled by the order of Commissioner and Tribunal’s order dated 12.02.2013 - the impugned order is set aside and the matter is remanded to the original adjudicating authority to decide afresh in view of the Tribunal’s order dated 12.02.2013 read with Order-in-Original no. Belapur/43/Bel-I/R-1/Commr/SLM/10-11 dated 01.03.2011 - matter on remand.

  ---

• 2017 (4) TMI 494
  Valuation - repellent bottle supplied for free along with the machine - The appellant was discharging excise duty on combipack on the MRP declared on the said combipack after abatement - the department was of the view that the appellant has not included the value of the refill and has discharged the excise duty on only the MRP of the machine itself - Held that: - the appellant had paid duty on MRP thereon and machine is also be in combipack and price of the combipack is written on the packages of the combipack - the decision of M/s Icon Household Products Pvt. Ltd.[2007 (7) TMI 24 - CESTAT, CHENNAI] is squarely applicable to the facts of this case, where the Tribunal observes that assessment is to be being on the basis of assessment of the combipack and the LVD supplied free in the multipack need not be separately assessed to duty, and MRP printed on the combipack should considered - demand set aside - appeal allowed - decided in favor of assessee.

  ---

• 2017 (4) TMI 493
  Manufacture - whether preparing branded MS and branded HSD by blending ordinary MS and HSD with MFA amounts to manufacture and whether the branded MS and branded HSD would be liable to duty once again under sub-headings 2710.11 and 2710.19 respectively? Held that: - the identical issue came up before this Tribunal in the appellant's own case HINDUSTAN PETROLEUM CORPN. LTD. Versus COMMR. OF C. EX, DELHI & ROHTAK [2008 (9) TMI 154 - CESTAT, NEW DELHI], where it was held that blending of MS/HSD with MFA to make branded MS/HSD which sell at a premium only improves the quality of the product, and this process, would not amount to manufacture - demand set aside - appeal allowed - decided in favor of assessee.

  ---

• 2017 (4) TMI 492
  SSI Exemption - It was alleged that the appellant had violated the condition laid down in para 2(i) and (iii) of N/N. 8/2003-CE dated 01.03.2003, by clearing the goods having brand names of others, and assessee is not entitle to avail CENVAT credit and SSI exemption - Held that: - the issue is squarely covered by the decision of this Tribunal in the case of League Laboratories Ltd. [2016 (9) TMI 483 - CESTAT CHANDIGARH], where following the decision of Hon'ble Apex Court in the case of Nabulae Health Care Ltd. [2015 (11) TMI 95 - SUPREME COURT] wherein the Hon’ble Apex Court has held that the assessee is entitled to benefit of exemption N/N. 8/2003-CE dated 01.03.2003, the impugned order is set aside - the appellant is entitled for SSI exemption under N/N. 8/2003-CE dated 01.03.2003 - appeal allowed - decided in favor of appellant.

  ---

• 2017 (4) TMI 491
  Refund claim - unjust enrichment - the amount of duty encashed under bank guarantee stood refundable to the appellant - Section 11B - Held that: - the appellant at any stage did not submit any evidence to show that the amount for which they are seeking refund claim has not been passed on to any other person. Therefore the appellant have not discharged the burden of proof that the incidence of duty have not been passed on - amount of bank guarantee was encashed by the department towards recovery of the duty, once the bank guarantee amount has been encashed towards excise duty liability, amount has taken the characteristic of excise duty therefore encashed amount of bank guarantee which is nothing else than the excise duty is clearly governed by the provisions of unjust enrichment provided under Section 11B, therefore, unjust enrichment is clearly applicable - appeal dismissed - decided against appellant.

  ---

• 2017 (4) TMI 490
  Benefit of N/N. 64/95-CE dated 16/1/1995 - goods supplied at stores for consumption onboard Navy vessel or coast guard - Held that: - demand of duty, except to the extent of the demand in respect of goods claimed to have been cleared under CT-2/AR3A certificate, is confirmed alongwith interest. Appellants are directed to pay the same forthwith - In respect of amount pertaining to demand against goods claimed to have been cleared under CT-2/AR3A certificate, the matter is remanded to the original adjudicating authority for verification and fresh orders - penalties set aside - matter on remand.

  ---

• 2017 (4) TMI 489
  Refund claim - duty paid under protest - time limitation - Held that: - whatever duty was paid under protest for any reason the period of limitation of one year for filing refund provided under Section 11B does not apply. The section does not stipulate any other period in case of duty paid under protest, therefore revenue cannot create a particular period in case where duty is paid under protest - identical issue decided in the case of MADURA COATS PVT. LTD. Versus COMMISSIONER OF CENTRAL EXCISE, MADURAI [2010 (8) TMI 502 - CESTAT, CHENNAI], where even though the Commissioner(Appeals) dropped demand vide order dated 12-5-1998 refund claim was filed on 26-3-2002. Tribunal finally decided Revenue's appeal on 30-5-2003 therefore only because of the Ld. Commissioner(Appeals) had dropped the demand, the assesee filed refund even after four years of dropping of the demand, refund was held not to be time bar - The identical facts is involved in the present case also therefore ratio of the above judgment squarely applicable in the present case - refund filed by the respondent is not time bar therefore they are legally entitle for the refund - appeal dismissed - decided against Revenue.

  ---

• 2017 (4) TMI 488
  Benefit of exemption from AED(TTA) and AED(GSI) - N/N. 55/91-CE and N/N. 127/84-CE - Held that: - during the currency of these notifications assessee are entitle to exemption from AED(GSI) and AED(TTA). We find that the said notifications have been rescinded by the N/N. 24/03-CE dated 31-3-2003 - In so far as manner of calculation of duty is concerned the Commissioner(Appeals) remanded the matter to the original adjudicating authority to re-determined duty in terms of decision of this Tribunal in case of Indoworth India Ltd [2004 (6) TMI 57 - CESTAT, NEW DELHI] - appeal allowed - decided partly in favor of appellant and part matter on remand.

  ---

• 2017 (4) TMI 487
  CENVAT credit - whether the Cenvat Credit in respect of input service viz. (i) house keeping and gardening (ii) Nurses & Ayaa Services engaged in creche used by the appellant company is admissible or otherwise? Held that: - all the services such as gardening, house keeping, maintaining creche for which nurses and ayaas are required are mandatory. It is statutory requirement to run factory therefore it is used for running factory, hence it is used in or in relation to the manufacture of final product therefore credit is admissible - credit allowed - appeal allowed - decided in favor of assessee.

  ---

• CST, VAT & Sales Tax

• 2017 (4) TMI 507
  Classification of liquor dealers - imposition of different rates of tax on different dealers - violative of Article 14 and 19 of the Constitution - Held that:- There is no longer any scope for the petitioners to contend that the State Legislature had no competence to provide for the levy of additional sales tax. The nature and identity of the additional sales tax imposed by the 1970 Act have not been in any way altered by the impugned Act. As already pointed out what has been done by the impugned Act is only to provide for a different mode of computation of the additional sales tax by linking the rate of levy to the taxable turnover instead of to the amount of tax assessed under the Act of 1959. The constitutional validity of the levy of additional tax is not in any manner affected by the said change brought about in the mode of levy and computation as a result of the amendments effected by the impugned Act. The Legislature with the sole intention of capturing substantial value addition taking place on liquor consumed in the premises of a Boarding House and Lodge, has brought this class of dealer under the net of tax, but Bar and Restaurants located in rural area which do not have the advantage of catering to the class of customers of economic superiority are exempted. Thus, the impugned notification dated 28.02.2014 which exempts liquor sold by dealers holding licence in Form No.CL-9 operating in rural areas in comparison with liquor sold by a person operating a Boarding House and Lodge in a rural area holding licence in Form No.CL-7 would form separate class of dealers. The State Legislature in its economic wisdom of taxation having chosen to provide for levy of tax on liquor sold by certain licence holders, considering the potential for tax collection on the huge value addition while exempting others whose sale price is regulated by the MRP indicated on the label of the container cannot be construed as discriminatory. The classification of dealers based on value addition criteria for the purpose of tax levy and exempting the dealers based on area criteria cannot be held to be discriminatory. - Decided against the petitioners.

  ---

• 2017 (4) TMI 506
  Release of detained truck and goods - The amount of tax on the goods imported is already deposited/paid by the common petitioner - GVAT - Held that:- The truck and goods detained shall be released on furnishing the bank guarantee of 1,04,000/- . However, the aforesaid arrangement shall be without prejudice to the rights and contentions of the parties in appeal that may be filed under Section 68 [5] of the Act.

  ---

• Indian Laws

• 2017 (4) TMI 476
  Pre-deposit by Third party who is not a borrower within the meaning of Section 2 (f) of the Securitization Act as a pre-condition for having his appeal heard - whether the appellants before the Debt Recovery Appellate Tribunal, Delhi, who are neither borrowers, nor guarantors and have not pledged or mortgaged any property to the Respondent Bank can be called upon to deposit a percentage of the loan amount claimed and/or adjudicated against the borrower as the condition precedent for entertaining their appeal under Section 18 of the Securitization Act? Held that:- Section 18 makes it absolutely clear that an appeal may be filed by any person aggrieved, whether or not, he is a borrower within the meaning of Section 2 (1) (f). This is evident from the first proviso to Section 18 (1), which provides that different fees may be prescribed for appeals by the borrower or by the person other than the borrower. The Second proviso reads that no appeal is to be entertained unless the borrower has deposited with the Appellate Tribunal 50% of the amount of debt due from him, as claimed by the secured creditors or as determined by the Debts Recovery Tribunal, whichever is less. The second proviso relates to the appeal of a borrower, for a third party, who has not obtained any finance from a Bank or a financial institution is under no obligation to pay. The second proviso reads that no appeal is to be entertained, unless the borrower has deposited with Appellate Tribunal 50% of the debt due from him. If the proviso is to be read literally to mean that no appeal, be it of a borrower or a third person, is to be entertained unless the borrower has deposited 50% of the amount of debt due from him, appeals by third persons would in effect and substance, be rendered nugatory for a third person, who would never be able to get his appeal entertained. Significantly, in this case each of the appellants have been directed to pay 50%, which means that the total deposit would far exceed the amount due and payable by Ajay Kumar Gupta.The writ petition is allowed. The impugned order is set aside to the extent that each of the appellants have all been required to pay 50% of the amount due from Ajay Kumar Gupta.

  ---