Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 12, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Validity of reopening of assessment - notice against non existent entity - wrong name given in the notice was merely a clerical error which could be corrected u/s 292B of the Income Tax Act - SC
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Liability of Insurance Company to deduct income tax at source (TDS) on the interest paid on the compensation paid under Motor Vehicles Act, 1988 - the interest paid along with the compensation as a result of the order of the Tribunal or of the superior Court is not liable for TDS. - HC
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Treating a person as the Principal Officer - criminal proceedings - the petitioner was not involved in the management, administration and the day-to-day affairs of the company, therefore, the petitioner cannot be treated as Principal Officer. - HC
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Enhanced rate of TDS @20% in the absence of PAN - section 206AA of the Act does not override the provisions of section 90(2) of the Act and that in the impugned cases of payments made to non-residents, assessee correctly applied the rate of tax prescribed under the DTAAs and not as per section 206AA - AT
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Treatment of agricultural income as income from other sources - Since the second reassessment order has been annulled, the first reassessment order dated 10.06.2005 gets and attains finality. Therefore, since the assessee had earlier accepted these two additions made in the first re-assessment order, we are afraid we cannot adjudicate on the appropriateness of these two additions at this stage. - AT
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Unproved cash credits u/s 68 - A.O. rightly disallowed amounts borrowed from the loan creditors u/s 68 of the Act and the same is added in the hands of the assessee as an income from other sources. - AT
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Deemed dividend u/s 2(22(e) - advances - There remains no doubt that the transactions between assessee and DVPL is representing current account transactions. Therefore, the provision of Section 2(22)(e) of the Act cannot be attracted to such transactions. - AT
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Reopening of assessment - TDS u/s 194J on services provided for roaming charges - The issue of roaming charges was deliberated upon during the original assessment, so, without bringing something new on record the AO should not have issued the reassessment notice. - AT
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FTS - the additional amount received from AAI towards installation, commissioning and testing charges is not taxable as FTS within the meaning of Article 12(5) of the India – Netherlands DTAA. The same is not received towards training. - AT
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Where comparable is available to the assessee by way of domestic sales made by it, then the margins of same should be applied in order to benchmark the margins earned by assessee for export segment. Accordingly, we hold that internal TNMM method should be applied as most appropriate method to benchmark the international transactions of export of trucks undertaken by the assessee - AT
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Income from house property - contributions of the tenants of the property towards sinking fund cannot be assessed as rental income of the assessee. - AT
Customs
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Classification of imported goods - import of natural Rutile Ore/ Leucoxene Sand of different grades - The impugned goods being ‘Ores’ are eligible for the exemption from CVD - AT
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Warehoused goods - goods found short - theft/burglary - remission of duty - The demand of Customs duty on the warehoused goods which has been stolen cannot be demanded from the Appellant - demand set aside - AT
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Classification of imported goods - synthetic polyester fabrics - the benefit of doubt naturally has to be given to the assessee especially when the test clarified to be subjective. - AT
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Duty Drawback - Export of goods - The onus to prove over-valuation falls upon the Revenue - In the absence of positive evidence, the value of export cannot be rejected on the basis of market inquiry or on the flimsy ground. - AT
Service Tax
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Restriction of utilization of CENVAT credit - once the assessee becomes entitled to the credit, its utilization cannot be restricted on the ground that he has not utilized the same in the period for which it could have been used - AT
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Renting of Immovable Property Service - letting out the cottage/ rooms in their hotel/ resort - scope of SCN - The room/ cottages are meant for stay and not for letting out for hire for the purpose of shooting - demand of service tax set aside. - AT
Central Excise
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CENVAT credit - Bins - if according to the appellant, the item would fall under heading 8474.90, it was for the appellant to explain as to why it has not claimed cenvat credit for the same item supplied by M/s Hindustan Steel for whom it had earlier availed credit but later on reversed it when the Revenue brought it to the notice of the same. - HC
Case Laws:
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GST
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2018 (4) TMI 531
Detention of goods - Rule 140(1) of the Kerala Goods and Services Tax Rules, 2017 - Held that: - the writ petition disposed off directing the competent authority among the respondents to complete the adjudication provided for under section 129 of the statutes - petition disposed off.
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2018 (4) TMI 530
Seizure order - Section 129(1) of the U.P. G.S.T. Act, 2017 - goods seized on the ground that the goods was being transported without E-way bill-02, the GSTIN number written on the tax invoice belongs to another dealer situates at Allahabad - case of petitioner is that no opportunity of being heard has been afforded to the petitioner before passing the seizure order - principles of Natural Justice. Held that: - Since the tax invoice indicating the tax charged and the same admittedly found during the course of inspection/detention and E-way bill-02 has been downloaded much before the seizure order, we see no justification in the impugned seizure order and therefore, we have no option but to allow the present writ petition - the seizing authority though has mentioned the GSTIN number of some dealer situates at Allahabad but no details of the said dealer has been given in the impugned seizure order nor the details of the mobile number holder. Also, the vehicle has been detained and the goods/vehicle was seized by the respondent no.4 on 27.3.2018 whereas the time has been granted for submission of reply and appearance of the person concerned before the respondent no.4 on the later date. Petition allowed - seizure order quashed - decided in favor of petitioner.
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2018 (4) TMI 461
Levy of GST on the one-time lease premium - letting plots of land on lease basis - long term lease - The members of the association were allotted plots. Under the scheme, the tenderer/bidder is required to make an offer by quoting a rate per square meter on account of payment of lease premium. The plots are to be allotted on long term lease of 60 years. - It is argued that, a long term lease of 60 years tantamounts to sale of the immovable property, since the lessor is deprived of, by the allotment the right to use, enjoy and possess the property. Our attention is invited to section 105 of the Transfer of Property Act, 1882. Held that:- if one refers to Schedule II, section 7, then, Item No. 2 styled as land and building and any lease, tenancy, licence to occupy land is a supply of service. Any lease or letting out of a building, including commercial, industrial or residential complex for business, either wholly or partly is a supply of service. It is settled law that such provisions in a taxing statute would have to be read together and harmoniously in order to understand the nature of the levy, the object and purpose of its imposition. No activity of the nature mentioned in the inclusive provision can thus be left out of the net of the tax. Once this law, in terms of the substantive provisions and the Schedule, treats the activity as supply of goods or supply of services, particularly in relation to land and building and includes a lease, then, the consideration therefor as a premium/one-time premium is a measure on which the tax is levied, assessed and recovered. We cannot then probe into the legislation any further. The demand for payment of GST is in accordance with law. The said demand cannot be said to be vitiated by any error of law apparent on the face of the record. In these circumstances, we do not find any merit in the writ petition. - Decided in favor of revenue.
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Income Tax
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2018 (4) TMI 529
Validity of reopening of assessment - notice against non existent entity - eligibility of reasons to believe - notice not addressed in the correct name - Held that:- In the peculiar facts of this case, we are convinced that wrong name given in the notice was merely a clerical error which could be corrected under Section 292B of the Income Tax Act. SLP dismissed. HC Order [2018 (2) TMI 1093 - DELHI HIGH COURT] held human errors and mistakes cannot and should not nullify proceedings which are otherwise valid and no prejudice had been caused. This is the effect and mandate of Section 292B of the Act.
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2018 (4) TMI 528
Stay of demand u/s 220(6) - primary contention of the petitioner that in terms of the CBDT Circular dated 29th February, 2016, the 20% of the above demands have been paid by way of adjustment of its refund due for the other assessment years, thus warranting a stay for the balance demand - Held that:- Impugned order without considering the decision in Andrew Telecommunications India (P) Ltd. (2016 (12) TMI 1286 - BOMBAY HIGH COURT) and the other submissions warranting a stay has in breach of the parameters laid down for disposal of the stay application under Section 220(6) of the Act by this Court in KEC International Ltd. Vs. B.R. Balakrishnan [2001 (3) TMI 32 - BOMBAY High Court]. Therefore, the impugned order dated 26th March, 2018 is quashed and set aside. The petitioner's stay application dated 19th March, 2018 is restored to the file of the Commissioner of Income Tax (Exemptions) – respondent no.1 for fresh disposal in accordance with law.
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2018 (4) TMI 527
Notice u/s 226 challenged - petitioner's principal grievance that he should not be declared to be an assessee in default in the absence of AO first coming to the conclusion that the statement made on oath by the petitioner does not merit acceptance - Held that:- The impugned notices issued to the two petitioners only seeks to examine the basis of the statements made on oath and dependent upon that, to show cause why the petitioners should not be proceeded against as though the tax was due from it. The impugned notices do not warrant any interference. It would be appropriate for the petitioners to respond to the show-cause notices dated 26th March, 2018 and make all contentions available to them to impress upon the DCIT – respondent no.1 that the impugned notices need to be dropped. Therefore, we decline to entertain the petitions at this stage. As the period to respond to the impugned notices was only 2 days from the date of receipt, we deem it appropriate to extend the time for the petitioners to reply to the impugned notices dated 26th March, 2018 issued by respondent no.1 by a period of 15 days from today. The respondent no.1 would consider the petitioners' response to the show-cause notices dated 26th March, 2018 and dispose of the same in accordance with law after following the principles of natural justice.
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2018 (4) TMI 526
Liability of Insurance Company to deduct income tax at source (TDS) on the interest paid on the compensation paid under Motor Vehicles Act, 1988 - Held that:- When there is conflict between the Social Welfare Legislation and Taxation Legislation, then the Social Welfare Legislation should prevail, since, it sub-serves larger public interest. Admittedly, Motor Vehicles Act, 1988, is a Social Welfare Legislation. In case of victims, they have already been subjected to the rigors of law by taking rounds of the Courts for year or some time decades to get the compensation for the loss they have already suffered. Therefore, interest paid on account of delayed payment of compensation cannot be subjected to TDS. Considering the object of the Motor Vehicles Act, 1988, regarding grant of compensation to the victim, it will not only be unjust but cruel to ask the hapless victim to first pay the interest received along with compensation on account of delayed payment, for which he is not responsible, and then to file the income tax return and claim the refund. Thus the interest paid along with the compensation as a result of the order of the Tribunal or of the superior Court is not liable for TDS. - Decided in favour of assessee
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2018 (4) TMI 525
Penalty u/s 271D - assessee accepted loans by way of cash from seven persons - Held that:- The transactions with six parties have been considered by the Commissioner of Income Tax (Appeals). But, nowhere in the order, there is any finding to the effect that raw materials supplied by those six parties were shown as cash in the books of accounts of the assessee. Therefore, we find that the Tribunal was fully justified in holding that the CIT (Appeals) erroneously held that the transactions were trade transactions. Tribunal was also fully justified in observing as to how the purchases made by the assessee resulted in acceptance of cash from suppliers. Apart from that, the Tribunal was right in reversing the finding of the Commissioner of Income Tax (Appeals) on the ground that there was no distress situation for the assessee so as to take loan, since it is their own case that they had sufficient cash during the relevant time. - Decided against assessee.
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2018 (4) TMI 524
Stay application - AO said that application for stay would only be considered after the 20% of the penalty imposed by the order dated 16th March, 2018 is paid by the petitioner - Assessing Officer attached the petitioner's bank account with HDFC Bank Ltd. - reasons which lead the Revenue to restrict the notice period under Section 156 - Held that:- As amount of ₹ 9.88 lakhs which was withdrawn from the attached HDFC bank account have been deposited by the Assessing Officer in the attached bank account on 31st March, 2018 following consent order is passed i) The impugned order dated 26th March, 2018 passed by respondent no.1 rejecting the petitioner's stay application is set aside; (ii) The Assessing Officer shall in accordance with the decision of this Court in Firoz Tin Factory (2012 (4) TMI 191 - BOMBAY HIGH COURT ) provide the reasons which lead the Revenue to restrict the notice period under Section 156 of the Act to only 7 days instead of the normal 30 days period; (iii) The Assessing Officer will pass a fresh order on the petitioner's stay application after hearing the petitioner in accordance with law and particularly in accordance with the decisions of this Court in KEC International Ltd. (2001 (3) TMI 32 - BOMBAY High Court) and UTI Mutual Funds (2012 (3) TMI 333 - BOMBAY HIGH COURT); (iv) Mr. Mistri, learned Senior Counsel appearing on behalf of the petitioner states that attachment of the Bank Accounts makes it impossible for it to carry on its business. Therefore, on instructions of Ms. Shweta Rau, partner of the petitioner firm states that an amount of ₹ 9,88,068/which is the amount which has been attached will be available in the bank account till such time as the petitioner's stay application is disposed of by the Assessing Officer in accordance with law and for a period of two weeks thereafter. Statement accepted; (v) Needless to state that in case the order of the Assessing Officer on the petitioner's stay application is adverse to the petitioner, then for a period of two weeks thereafter no coercive proceedings for recovery will be adopted by the Revenue. This is enable the petitioner to take such steps as it is advised in law.
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2018 (4) TMI 523
Broken period interest allowability - Held that:- This issue stands concluded against the Revenue and in favour of the respondent-assessee by the decision of this Court in Principal Commissioner of Income- Tax-2 V/s. M/s. HDFC Bank Ltd. [2018 (4) TMI 455 - BOMBAY HIGH COURT]. Claim for deduction under Section 36(1)(viia) - Held that:- The impugned order rejected the Revenue's grievance by holding that, withdrawing the claim under Section 36(1)(viia) of the Act and making an additional claim of bad debt under Section 36(vii) of the Act by letter dated 13th August, 2012 had subsequently been withdrawn during the course of assessment proceedings. Thus, it held that withdrawal of the letter dated 13th August, 2012 would consequently result in the same being not taken cognizance of in assessing the respondent-assessee. Thus question proposed does not arise from the impugned order of the Tribunal.
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2018 (4) TMI 522
Maintainability of petition - jurisdiction of high court - Held that:- In the case on hand, admittedly the impugned order was served on the petitioner at his residential address at Chennai. Though the authority is at Delhi, it is clear that part of cause of action had arisen at Chennai. As per Article 226(2) of the Constitution of India, the writ petition is maintainable before a High Court within which the cause of action wholly or in part, arises for the exercise of such power, notwithstanding that the seat of such Government or authority or the residence of such person is not within those territories. That apart, though the company's registered corporate office is at Delhi and the TAN number is at Delhi assessment, the petitioner in this writ petition has not challenged the assessment order, but, has challenged only the impugned order naming him as the Principal Officer. In these circumstances, this Court has jurisdiction to entertain the writ petition. Treating a person as the Principal Officer - criminal proceedings - Held that: The main criteria treating a person as the Principal Officer is he should have been in charge of the management, administration and day-to-day affairs of the company. It was also stated by the Managing Director that the petitioner is only a Non-Executive Director in the company, who is based at Chennai and is not involved with the day-to-day management of the company and has not made any visits to the company till date as he does not draw any salary or remuneration from the company and attends the Board Meetings only in the Non-Executive capacity, for which, he does not even get any sitting fees. For the reasons stated above, it is clear that the petitioner was not involved in the management, administration and the day-to-day affairs of the company, therefore, the petitioner cannot be treated as Principal Officer.
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2018 (4) TMI 521
Assessment u/s 153A - disallowance under Section 14A - Held that:- Disallowances were made in the course of the search assessment proceedings. The relief granted by the impugned order was based upon the decision of this Court in CIT-VI v. Taikisha Engineering India Ltd.(2014 (12) TMI 482 - DELHI HIGH COURT) where it was held that unless the AO rejected the explanation or the rationale which induced the assessee to offer particular amount as expenditure with some reasoning, the mere rejection per se cannot be accepted. In this case for both years, the assessee had offered amounts as disallowance claiming them to be expenditure for tax exempt income. The Assessing Officer merely proceeded to reject such amount as expenditure and straightaway applied Rule 8D without adducing any reasons - No substantial question of law arises
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2018 (4) TMI 520
Disallowance u/s 14A - Held that:- What we find is that Authorised Representative of assessee had stated before the AO that the interest paid on the term loans debited in its P & L A/c was only towards investments made in acquiring shares of M/s.Shilpi Saranya Apparels and M/s.Home Linen Pvt Ltd. Be that as it may, the judgement of Hon’ble Apex Court in the case of M/s.Maxopp Investments Ltd. (2018 (3) TMI 805 - SUPREME COURT OF INDIA) was not available with the ld. Assessing Officer or with the Ld.CIT(A), when they were seized of the issue of disallowance u/s.14A of the Act. Thus the question regarding disallowance u/s.14A of the Act requires a re-visit by the ld. Assessing Officer. Set aside the orders of authorities below and remit the issue back to the file of AO for consideration afresh in accordance with law. - Decided in favour of assessee allowed for statistical purposes
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2018 (4) TMI 519
Disallowance u/s. 36(1)(iii) - loans for business expediency - Held that:- The company has mostly taken loan and advances from related parties. The company has to pay interest to Rasandik Engineering Industries India Ltd. for affect that this company is a public limited company and it cannot be given interest free loan / advance to Ganesha Securities Pvt. Ltd. Rasandik Auto Components Pvt. Ltd. is a subsidiary of Rasandik Engineering Industries Ltd. and therefore, the same condition as mentioned above applies in this case as well. In earlier years similar additions were made and such notional interest as was added in those years were deleted by the CIT(A) in respect of assessment years 2010-11 and 2011-12. We find considerable cogency in the contention of the Ld. AR that the fact situation remains the same as in earlier years and as a matter of fact the interest expenditure has almost halved compared to last year. These loans are not new but were made a couple of years back for business expediency out of own surplus funds (which is evident from para 4.11 of the assessment order) wherein it was stated that the funds advanced are more than the loan bearing funds. It was also pleaded that the loans that were issued afresh this year (in addition to the loans extended in earlier years) amounts to only ₹ 8 lakhs. Keeping in view of the facts and circumstances of the case and on the basis of consistency principles, the addition in dispute is deleted and accordingly, the ground raised by the Assessee stand allowed.
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2018 (4) TMI 518
Disallowance of interest u/s. 36(1)(iii) - advancement of loans - Held that:- The company has advanced a loan of Rs. ,04,05,929/- and tax of ₹ 32,70,298/- has been deducted on source. These details were available before the AO and he proceeded to make the disallowance of interest of ₹ 1,35,00,000/- brushing aside the crucial evidences placed on record. In view of all and then material on record, hence, the AO was rightly directed by the ld. CIT(A) to delete the disallowance of interest of ₹ 1,35,00,000/- made by the AO u/s. 36(1)(iii) of the Act, which does not need any interference on our part - Decided against revenue
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2018 (4) TMI 517
Disallowance being 7.5% of the total polishing charges - Held that:- All the cases the assessee has deducted tax at source on payment made to those job workers. No details submitted by the assessee are disputed. Merely because of the reason that those parties did not respond the notices u/s 133 (6) enquiry letter, it cannot be used against the assessee to disallow those expenses , when permanent account number of those persons are provided and when the assessee has also deducted tax at source on those payments. CIT has upheld disallowance 7.5 % of the total payment is on higher side and therefore to that extent unjustified. Because of the above facts, we direct the Ld. Assessing Officer to limit disallowance only to the extent of 5% of the total expenses. In view of this ground, No. 1 of the appeal of the assessee is partly allowed. Disallowance of the 50 % of the total expenses to 7.5 % of the total expenses - Held that:- we have narrated the complete facts of the case while deciding the above ground of the appeal of the assessee, where in the facts are quite better compared to the year in which 15 % disallowance was confirmed, we have reduced it to 5 % in assessee’s appeal. Hence, ground No. 1 of the appeal of the revenue is dismissed. Disallowance by reducing the WDV of the block of the asset - Held that:- Applicable rate of depreciation on electrical fittings is 10% and not 15% as claimed by the assessee as it falls under the category of ‘furniture and fittings”. The Assessee has not shown before the lower authorities that electrical fittings are falling in the classification of ‘Plant and Machineries.” to qualify as deduction at the higher rate of depreciation. . In view of this we do not find any infirmity in the order of CIT (A) . Disallowance of interest - Held that:- Hon’ble Bombay High Court in case of Reliance Utilities Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT] has held that if the assessee has more interest free funds then advances given free of interest for that case presumption is available to the assessee that amount is advance out of non interest bearing funds. In view of this disallowance of ₹ 3113654/- out of interest expenditure is not sustainable. However, there is also a statement that assessee has paid interest on Fixed capital of partners. This fact requires to be verified. In the result ground, No. 3 of the appeal is set aside to the file of AO where the assessee is directed to show that assessee has interest free funds available in the form of partner’s current account. Accordingly, this ground is allowed with above direction. Disallowance of Foreign Commission expenditure - assessee has not deducted tax at source u/s 195 - Held that:- No tax is required to be deducted as no part of the income arises in India. DR could not show that how the above income is chargeable to tax in India and tax is required to be deducted at source thereon under provision 195 of the Act. In view of above facts we find no infirmity in the order of the CIT (A) who has also giving relief to the assessee correctly .
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2018 (4) TMI 516
Short deduction of TDS and Interest - Adoption of rates of TDS when PAN is not furnished by the deductee - DTAA benefits - Held that:- It is fact that Assessee Company is a foreign company and section 206AA, which provides to decade TDS at a higher rate because non availability of PAN are no attracted here because respondent/non-resident cannot be compelled to obtain PAN no. when they are allowable to tax in India. Where the tax has been deducted on the strength of the beneficial provisions of section DTAAs, the provisions of section 206AA of the Act cannot be invoked by the Assessing Officer to insist on the tax deduction @ 20%, having regard to the overriding nature of the provisions of section 90(2) of the Act. The CIT(A), in our view, correctly inferred that section 206AA of the Act does not override the provisions of section 90(2) of the Act and that in the impugned cases of payments made to non-residents, assessee correctly applied the rate of tax prescribed under the DTAAs and not as per section 206AA of the Act because the provisions of the DTAAs was more beneficial. Thus, we hereby affirm the ultimate conclusion of the CIT(A) in deleting the tax demand relatable to difference between 20% and the actual tax rate on which tax was deducted by the assessee in terms of the relevant DTAAs. - Decided against revenue
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2018 (4) TMI 515
Interest disallowed u/s 36(l)(iii) - Held that:- We find that is undisputed that the investment has been done out of mixed source of funds. The assessee had sufficient own funds which covers more than the investment made. Moreover, the ld. Commissioner of Income Tax (Appeals) has also given a finding that the loan funds were for specific purpose and there has been no dilution of the same. Provision for mark to market loss disallowance - assessee has not filed the appeal against the disallowance but in the current assessment year it has passed a reversal entry debiting the provision and crediting the profit and loss account - Held that:- Apparently, there is some discrepancy in the claim made and the disallowance earlier done. However, in our considered opinion, this issue needs to be examined by reference to the actual books of account and the entries therein. If the facts narrated by the ld. Counsel of the assessee are to be applied, there is a reversal entry debiting the provision and crediting the profit and loss account by sum of ₹ 29,42,23,853/- which represents the disallowances made in the earlier year. In our considered onion, this issue needs to be examined by the A.O. with reference to the books of account. Hence, we remit this issue to the file of the Assessing Officer. The Assessing Officer is directed to examine this issue afresh after giving the assessee proper opportunity of being heard.
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2018 (4) TMI 514
Reopening of assessment - reasons to believe - Held that:- No fresh material or additional information on record which could lead the Assessing Officer to believe that income chargeable to tax had escaped assessment. Thus, there was no valid reason for reopening the assessment u/s 148 of the Act on a second occasion on similar ground. A perusal of the second re-assessment order shows that the Assessing Officer has not brought out any facts which would clearly indicate that the assessee had not disclosed full material facts on the earlier occasion. Therefore, on overall facts and circumstances of the case and considering the findings of the Ld. Commissioner of Income Tax (A), which could not be negated before us thus to agree with the action of the Ld. Commissioner of Income Tax (A) in quashing the reassessment proceedings - action of the Assessing Officer with regard to the reopening of the case u/s 147/148 was not justified and the re-assessment, therefore, deserved to be annulled Treatment of agricultural income as income from other sources and addition on account of alleged personal expenses - Held that:- These two additions do not pertain to the second reassessment proceedings but to first reassessment proceedings. However, as per the doctrine of merger, the earlier assessment order gets merged with the subsequent assessment order and, accordingly, the first assessment order dated 10.06.2005 merges with the second re-assessment order which has been annulled. Since the second reassessment order has been annulled, the first reassessment order dated 10.06.2005 gets and attains finality. Therefore, since the assessee had earlier accepted these two additions made in the first re-assessment order, we are afraid we cannot adjudicate on the appropriateness of these two additions at this stage.
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2018 (4) TMI 513
Reopening of assessment - bonafide or definite 'reason to believe' that certain income has escaped assessment - non genuine purchases - Held that:- AO made the addition only on relying the statement of one Shri Rajendra S. Jain. The assessee to prove the genuineness of the transactions, furnished the copies of purchase bills, sales bills, stock register and bank statements. In the instant case, the AO also issued the notice u/s 133(6) of the Act, in response the proprietors of the aforesaid firms furnished the confirmations alongwith copies of their ITR, bank statements. The assessee furnished copies of returns of the said parties, their PAN numbers, relevant bank accounts, copy of invoices, sales tax registration number etc. This fact has been admitted by the A0 - assessee made the entry of the purchases in the stock register and also furnished the copies of sales bills to the AO. The amount was received against the sales through banking channels and the payments for the purchases were also made through banking channels - when the AO had accepted the sales of the same items purchased by the assessee than there was no occasion to doubt the purchases -AO only doubted 90% of the purchases and made the addition to that extent but if the purchases were not genuine, the addition ought to have been made of the whole amount and not only of 90% and when the sales of the same items were accepted as genuine than the addition could not have been made for the purchases - additions deleted - decided in favour of assessee.
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2018 (4) TMI 512
Determination of arm's length price in relation to management service fee - selection of MAM - Held that:- Selecting a Comparable Uncontrolled Price method, the price charged or paid for property transferred or services provided in a comparable uncontrolled transaction, or a number of such transaction is to be identified. In this case, admittedly, no such companies were identified by the TPO or DRP. Therefore, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the authorities below. Moreover, the additional ground also needs to be reconsidered by the authorities below. Accordingly, the orders of all the authorities below are set aside and the entire issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall refer the matter once again to Transfer Pricing Officer. - Decided in favour of assessee for statistical purposes.
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2018 (4) TMI 511
Validity of reopening of assessment - assessment framed on a non-existent entity - Held that:- It is an established fact that assessee-company has already been dissolved and its name is struck-off from the Registrar of Companies. Therefore, it is a non-existing Company and as such, A.O. cannot pass the assessment order under section 143(3) against the assessee-company. The issue is, therefore, covered in favour of the assessee-company.
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2018 (4) TMI 510
Unproved cash credits u/s 68 - no details of the loan creditors and bank statements, particularly before the date of extending loan to the assessee - Held that:- In this case, the assessee has not proved the identity, creditworthiness of the creditors and even genuineness of the transactions. In our opinion, the assessee failed to discharge burden cast upon him by filing necessary evidence before the assessing officer. Therefore, under these facts and circumstances of the case, in view of our discussion above, the A.O. rightly disallowed amounts borrowed from the loan creditors u/s 68 of the Act and the same is added in the hands of the assessee as an income from other sources. In view of the above, we reverse the order passed by the Ld. CIT(A) and this ground of appeal raised by the revenue is allowed.
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2018 (4) TMI 509
Penalty u/s 271(1)(c) - excess claim of depreciation - capital subsidy received under the TUFS scheme - bonafide claim - Held that:- As the assessee during the year under consideration had duly disclosed the complete details in respect of the capital subsidy received under the TUFS scheme along with the calculation of the depreciation on the fixed assets, therefore, though the treatment given by the assessee to the capital subsidy received under the TUFS scheme, may not have found favour with the Assessing Officer, therein leading to a consequential reworking of the depreciation on his part, but however, in the backdrop of the fact that a complete disclosure of the facts pertaining to the capital subsidy and computation of the deprecation on the said fixed assets was furnished by the assessee as part of the enclosures forming part of its return of income, therefore, no penalty under Sec. 271(1)(c) for the said reason also was liable to be imposed on it. The issue that an excess claim of depreciation by an assessee for bonafide reasons would not justify imposition of penalty under section 271(1)(c) had also been deliberated upon by the Hon'ble High Court of Bombay in the case of CIT vs. Somany Evergreen Knits Ltd. (2013 (4) TMI 154 - BOMBAY HIGH COURT) No penalty under section 271(1)(c) in respect of excess claim of depreciation by the assessee under the aforesaid set of circumstances was liable to be imposed in its hands. We, thus, not finding any infirmity in the order passed by the CIT(A) deleting the penalty - Decided in favour of assessee.
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2018 (4) TMI 508
Disallowance u/s.14A - Held that:- We found that in the A.Y.2010-11 and 2009-10, matter was restored back to the file of the AO for deciding afresh after applying the decision of Bombay High Court in case of HDFC Bank Ltd.[2016 (3) TMI 755 - BOMBAY HIGH COURT] and also the decision of the Tribunal in the preceding years. We restore the matter back to the file of the AO for deciding afresh after considering the nature of investment having been made by the assessee in the mutual funds etc., where no much efforts are required to be undertaken. We direct accordingly. Not granting credit for TDS of ₹ 18,57,273/-, which was alleged to be short granted to the extent of ₹ 1,45,416/-. In the interest of justice, we direct the AO to verify the factual figure and for deciding afresh. MAT - Adding disallowance u/s.14A while computing book profit u/s.115JB - Held that:- This issue is squarely covered by the decision of ITAT in the case of M/s. Vireet Investment Pvt. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] and case of M/s.JSW Energy Ltd.[2015 (5) TMI 823 - BOMBAY HIGH COURT]. Respectfully following the same, we direct the AO that no addition while computing book profit u/s.115JB is to be made with regard to amount in excess of what has been debited in the P & L account with respect to such exempt income. Meaning thereby, any disallowance made by the AO in excess of what has been claimed by the assessee should not be added while working book profit u/s.115JB. We direct accordingly.
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2018 (4) TMI 507
Deemed dividend u/s 2(22(e) - receipt of advances by the shareholders from the company - maintaining the current account with DVPL - Held that:- The purpose of Section 2(22)(e) of the Act is to tax the benefit extended by private limited company to its shareholders holding shares not less than 10% as beneficial owner of shares (not being shares entitled to a fixed rate of dividend income). There is no dispute with regard to shareholding of the assessee. Now coming to the amount of advance taken by assessee, we note that assessee has not only taken loan / advance from DVPL, but also it has sometime given advance to DVPL. Thus, there was change in the balance shown by assessee. Thus, it cannot be termed as advance taken by assessee as it was fluctuating during the year There remains no doubt that the transactions between assessee and DVPL is representing current account transactions. Therefore, the provision of Section 2(22)(e) of the Act cannot be attracted to such transactions. Keeping all, we deem it fit and proper to uphold the grievance of the assessee and quash the impugned revision order as devoid of jurisdiction. - Decided in favour of assessee.
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2018 (4) TMI 506
Reopening of assessment - TDS u/s 194J on services provided for roaming charges - assessee did not deduct tax at source on the sale - eligibility of reasons to believe - Held that:- During the original assessment proceedings, the AO had made inquiries about roaming charges, that the assessee had detailed submissions in that regard, that being satisfied with the explanation of the assessee, he passed an order u/s. 143(3) of the Act, that during the original assessment he allowed the roaming charges and did not invoke the provisions of section 40(a)(ia)of the Act, that in the notice issued u/s. 148 of the Act, the basis of reopening was applicability of section 40(a)(ia)of the Act with regard to roaming charges. There was no new material before the AO for issuing the notice u/s. 148. He had changed his opinion about application of the provisions of section 40(a)(ia). Reassessing the income of the assessee on such change of opinion is not permissible under the Act. The issue of roaming charges was deliberated upon during the original assessment, so, without bringing something new on record the AO should not have issued the reassessment notice. - Decided in favour of assessee.
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2018 (4) TMI 505
Deduction u/s. 80P(2)(a) eligibility - assessee is a Credit Co-operative Society and earned interest income earned by the assessee by way of interest or dividend derived from its investments with other Co-operative Banks - Held that:- Coming to the case of assessee which is governed by sub-section 2(a) i.e. Co-operative Societies engaged in carrying on of business of banking or providing credit facilities to its members, etc. under section 80P of the Act. The investments made by the assessee with Co-operative Banks is compulsory because of dictate of the Maharashtra Co-operative Societies Act. Under the said Act, all the Credit Co-operative Societies operating in the State of Maharashtra have necessarily to deposit about 20% to 30% of its funds with Co-operative Banks / Nationalized Banks. See ITO Vs. M/s. Kundalika Nagari Sahakari Patsanstha Maryadit [ 2016 (2) TMI 879 - ITAT PUNE] The assessee is entitled to claim the deduction under section 80P(2)(a)(i) of the Act on the interest income earned from Co-operative Banks. The grounds of appeal raised by the Revenue are thus, dismissed.
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2018 (4) TMI 504
FTS under Article 12(5) of India-Netherlands DTAA - additional amount sanctioned by AAI during the year over and above the contract amount for Mumbai Airport to be treated as installation, commissioning & testing services or as amounts received towards training - assessee claimed that the additional consideration received for provision of services pertaining to installation, testing and commissioning and hence the same cannot be treated as FTS - Held that:- Bifurcation of the sums towards installation and training as per the contract has been accepted by the revenue in the past and cannot be questioned in the year under consideration. Also we find that there is absolutely no evidence brought on record by the ld AO that the subject mentioned receipt of ₹ 28,06,200/- from AAI is towards training. DR later argued that in such a case, the year of completion of training need to be looked into and accordingly prayed for setting aside of this issue to the file of ld AO. We feel that this is not required in as much as the ld AO had not adduced any reasoning to construe the subject mentioned receipt of ₹ 28,06,200/- from AAI as attributed towards training. Hence the basic premise that it is towards training fails. Accordingly knowing the year of completion of training does not have any relevance in this regard. In view of all, we hold that the additional amount received from AAI in the sum of ₹ 28,06,200/- towards installation, commissioning and testing charges is not taxable as FTS within the meaning of Article 12(5) of the India – Netherlands DTAA. The same is not received towards training as assumed by the ld AO. Accordingly the addition made by the ld AO in this regard is to be deleted - Decided in favour of assessee. Profits attributable to the Installation PE in India - whether only the onshore provision of services and onshore supply of equipments at 10% on gross basis as profits attributable to the Installation PE in India as against the action of the ld AO in taking the total receipts (i.e both offshore and onshore activities)? - Held that:- The consideration received in respect of offshore supply of equipments and services and profits attribution @ 10% on the same should not be added in the hands of the assessee construing it as ‘Installation PE’ in India. The assessee had received consideration in respect of onshore services to the tune of ₹ 3,53,42,381/- pursuant to 4 invoices raised on 13.8.2010. The assessee had also received a sum of ₹ 12,85,465/- (Euro 27842) towards onshore supply of equipment during the year under consideration. We hold that these two sums should be taken into account and profits attributable thereon at 10% should be added in the hands of the assessee treating the same as ‘Installation PE’ - even as per the Protocol clause in the Indo-Netherlands Treaty, only the profits attributable to the activities carried out in India shall be taxable and accordingly only the onshore services rendered by the assessee would have to be considered by the ld AO for taxing the onshore receipts at 10% . Tax the AMC fee received as business profits attributable to an Installation PE in terms of Article 5(3) of the India-Netherlands DTAA - virtual presence of the assessee in India through the subcontractor - Held that:- AMC services provided post completion of installation activities at the site of customer, cannot lead to carrying out installation activities for the purpose of constitution of an ‘Installation PE’ in india. Further it is held that presence of an Indian contractor to which the assessee has sub-contracted the whole AMC work on principal-to-principal basis, does not create any virtual presence of the assessee in India.- Decided in favour of assessee. Charging of interest u/s 234B and 234D - Held that:- Interest u/s 234B of the Act is not chargeable on the assessee in the instant case as interest u/s 234B of the Act cannot be levied for alleged failure to pay advance tax , where entire receipts are covered u/s 195 of the Act. See CIT, International Taxation vs ZTE Corporation [2017 (1) TMI 1338 - DELHI HIGH COURT] With regard to charging of interest u/s 234D AO erred in considering the refund figure of ₹ 37,44,400/- (as refund granted earlier to the assessee) instead of considering the correct refund figure which was actually granted to the assessee at ₹ 17,38,138/- and consequently erred in charging excess interest u/s 234D of the Act. We find that this factual aspect requires verification by the ld AO. We hold that the charging of interest u/s 234D of the Act is consequential in nature and we direct the ld AO to kindly verify the actual refund figure granted to the assessee earlier and take the same while charging interest u/s 234D
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2018 (4) TMI 503
Determination of Arm’s Length Price (ALP) for Management Support Services - assessee benchmarked the Intra Group Services transactions by using the Transactional Net Margin Method (TNMM) as the Most Appropriate Method (MAM)- Held that:- There is no change in the facts and circumstances during the year under appeal with regard to MSSA when compared to that in the earlier years and hence respectfully following the judicial precedents relied upon hereinabove, we hold that the determination of ALP for Management Support Services at Rs NIL is unwarranted and accordingly the upward adjustment made by the ld TPO in the sum of ₹ 300,40,09,360/- is deleted. - Decided in favour of assessee Expenses towards advertisement and marketing (AMP) in each of its business segments - Held that:- We find that since the assessee is a manufacturer cum distributor as accepted by the lower authorities, the decision rendered in Maruti Suzuki [2015 (12) TMI 634 - DELHI HIGH COURT] would be applicable to the assessee’s case, since the contention of the ld DR that assessee is only distributor, is not emanating from the records of the lower authorities. Respectfully following the same, the upward adjustment made by the ld TPO and upheld by the ld DRP is hereby directed to be deleted. Comparable selection criteria - Held that:- The assessee is a limited risk software service provider, thus companies functionally dissimilar with that of assessee need to be deselected from final list. Lease rental paid for motor car taken on finance lease - Held that:- We find that the issue under dispute is covered by the decision of the Hon’ble Supreme Court in the case of ICDS Ltd [2013 (1) TMI 344 - SUPREME COURT ] in favour of the assessee Depreciation on moulds - @ 30% OR 15% - Held that:- As AR stated that the moulds were owned by the assessee and used for the purpose of its business. Further, the moulds were exclusively used in the plastic factory by the job workers / co-makers to whom moulds were given by the assessee to be used in the plastic factory, under its control and supervision and prayed that depreciation @ 30% would be eligible on the said moulds. We find that this issue has been considered by this tribunal in assessee’s own case for the Asst Year 2011-12 [2017 (12) TMI 1117 - ITAT KOLKATA] we restore this matter to the file of the ld AO for fresh adjudication in accordance with law. Deduction u/s 80G - Held that:- Claim was duly granted by the ld AO in the final order passed by him u/s 143(3) read with section 144C(5) of the Act on 25.10.2017. Hence the assessee cannot be aggrieved in this regard. Short credit of tds - AO granted credit for tax deducted at source of ₹ 6,60,46,860/- as against the claim by the assessee to the tune of ₹ 7,08,61,424/- Held that:- Since the issue involves only verification of certificates / Form 26AS, as the case may be, we hereby direct the ld AO to kindly verify the necessary evidences in this regard and grant TDS credit, if eligible, to the assessee.
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2018 (4) TMI 502
TPA - Determination of arm’s length price under section 92CA(3) - Purchase of bakery shortening for trading - Held that:- The assessee’s operative margin from the trading of bakery shortening is at 1.63% whereas the TPO while determining the arm’s length price by applying the TNMM as most appropriate method and OP/Total Cost (TC) as PLI has arrived at Mean margin of 4.07%. Therefore, the price of international transaction undertaken by the assessee is within the tolerance range of (+)(-) 5% of the arm’s length price determined by the TPO. Accordingly, as per the second proviso to section 92C(2) the price of international transaction in respect of purchase of bakery shortening will be determined at arm’s length price and consequently no adjustment is called for on this account. Hence the price of international transaction is within the tolerance range as provided under the second proviso to section 92C(2), we do not go into the issue of most appropriate method applied by the assessee as well as by the TPO. Accordingly, we do not find any reason to interfere with the order of ld. CIT (A) qua this issue. Interest received from AE - There is no dispute that the assessee has advanced a loan in foreign currency to its AE and charged interest @ 10%. We find that the issue of charging interest from AE in respect of the money advanced in foreign currency, the arm’s length interest is to be considered by taking the LIBOR instead of PLR - the associate enterprise (AE) had utilized the loan in its stock and debtors, which was apparent from the balance sheet of the associate enterprise (AE). The assessee had not incurred any brokerage or processing fees in advancing the loan to the associate enterprise (AE). Appellant company had not given any loan or advances to Data Foods (P) Limited., Sri Lanka during the financial year 2006-07. Accordingly the adjustment made on account of loan given to M/S Data Houseware (P) Ltd., U.K. was not justified. Further the appellant was a secured creditor as it had sold goods to the concerned AE also. The position of the appellant company was that of a unpaid seller since the AE owed to it an amount comprising of loan as well as amount for goods purchased. Therefore the TPO had erroneously held that the position of the appellant was that of a unsecured creditor/loanee -addition deleted Disallowance on account of Miscellaneous Expenses - Held that:- Though the assessee has incurred the expenditure in cash to the extent of ₹ 7,41,322/-, however, majority of the said amount of ₹ 7,41,322/- has been incurred for tea, refreshments, cold drinks and sweets to the employees and customers. So far as the expenditure incurred towards fringe benefits to employees, the assessee has already paid the FBT and accordingly by considering this fact, we restrict the disallowance of the expenditure incurred in cash to 5% instead of 10% sustained by ld. CIT (A). Disallowance made on account of printing and stationary expenses - Held that:- CIT (A) has deleted the disallowance by considering the fact that the assessee has maintained complete bills/supporting vouchers for the expenditure incurred on account of printing and stationary. Further, the expenditure was incurred out of business expediency and in the absence of any discrepancy in the vouchers maintained by the assessee, the disallowance is uncalled for. We do not find any error or illegality in the order of ld. CIT (A) Disallowance on account of repair and maintenance expenses - Held that:- When the assessee has incurred the expenditure to the extent of ₹ 4,79,526/- in cash and only self made vouchers are produced by the assessee, then the disallowance made by ld. CIT (A) restricting the expenditure incurred in cash is just and proper. Hence we do not find any reason to interfere with the finding of the ld. CIT (A) on this issue. Addition of consumable stores and chemical expenses - Held that:- The assessee has maintained complete bills/supporting vouchers for the expenses incurred on account of chemicals and consumable stores. The AO has not conducted any enquiry or found out any discrepancy in the vouchers. Thus the adhoc disallowance made by the AO was rightly deleted by ld. CIT (A) Disallowance made on account of depreciation on Wind mill - Held that:- This issue is covered by the decision of this Tribunal in assessee’s own case for the assessment year 2004-05. Hence we do not find any merit or substance in this ground of the revenue’s appeal. Addition on account of packing material expenses - Held that:- CIT (A) has taken note of the fact that the expenditure for the year under consideration is at 4.32% of the turnover in comparison to 4.96% for the assessment year 2006-07 and 4.37% for the assessment year 2005-06. Further, the addition made by the AO in this respect for the assessment year 2005-06 was deleted by the Tribunal in assessee’s own case. The factual details given by ld. CIT (A) have not been controverted before us. Disallowance made on foreign travel expenses - Held that:- Disallowance made by the AO was deleted by the ld. CIT (A) by accepting the explanation of the assessee that the foreign tour of Managing Director was not personal but was for attending the conference of International Association of Seed Crushers in London. There is no quarrel on the point that if the foreign tour was undertaken by the MD to attend the alleged conference then the same will be considered as an expenditure incurred for the purpose of business of the assessee. However, the assessee has not produced the details of the timing of the foreign tour undertaken by the MD and specific date of the journey as well as the timing of the conference of International Association of Seed Crushers as claimed by the assessee. Therefore, if the foreign visit of the MD is matching with the conference date then the claim of the assessee cannot be doubted. Hence we direct the AO to verify this fact and then consider this issue afresh. Disallowance made under section 14 read with rule 8D - Held that:- CIT (A) has considered the availability of interest free funds of assessee being share capital, reserve and surplus which is much more than the investment in the shares. Further, when rule 8D is not applicable for the year under consideration, the disallowance on account of administrative expenses has to be made on some reasonable basis. Accordingly, in view of the above facts and circumstances of the case, when the assessee is having its own sufficient funds then no disallowance is called for on account of interest expenditure. As regards the disallowance on account of administrative expenses, we are of the view that 10% of the dividend income will be a reasonable and proper estimate for disallowance of expenditure on account of common indirect administrative expenses for earning the exempt income under section 14A. Hence this ground of the revenue’s appeal is partly allowed. Deemed dividend addition u/s 2(22)(e) - Held that:- In view of the earlier order of this Tribunal as well as the decision of Hon’ble Jurisdictional High Court in assessee’s own case wherein the transactions of outstanding have been considered as commercial transactions between the parties. Accordingly, we do not find any reason to interfere with the order of the ld. CIT (A) qua this issue.
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2018 (4) TMI 501
TPA - upward adjustment made on account of international transactions undertaken by the assessee - comparable selection criteria - MAM selection - Held that:- The assessee undoubtedly, had sold the products through its associated enterprises but the products sold by the assessee within domestic market and those exported to the markets of developing countries followed the same emission norms and had no difference in the product. The assessee in this regard has filed the evidence of emission norms applied in European Union and in Asia with special reference to Indonesia and also in South Africa, wherein emission norms are similar and consequently, cannot be said to have geographical differences. Even otherwise, geographical differences would not be relevant where the products were exported to markets similar to Indian markets, where emission norms were less stringent than as compared to Germany. Accordingly, we find no merit in the approach of DRP / TPO for rejecting the internal comparables available on geographical grounds. In the facts of present case, where there is no product dissimilarity and the geographical differences, if any, does not affect the quality of products sold by the assessee because of identical technical similarity, the issue arises is whether two transactions are comparable. Further, FAR dissimilarity, if any, warrants adjustments in the domestic segment since the assessee was selling the products through its associated enterprises on cost plus mark-up and had not to bear any risk, then the margins shown by the assessee in the export segment, need no adjustment. As pointed out in the paras hereinabove, adjustment, if any, is to be made in the domestic segment, wherein the assessee has already shown lower margins. Geographical differences do not stand as the market in which the goods were sold were comparable. Further, we have also held that it could not be said that FAR of sales in domestic segment and exports to associated enterprises were dissimilar; in addition to the same, is the input costs which are same and identical. Where comparable is available to the assessee by way of domestic sales made by it, then the margins of same should be applied in order to benchmark the margins earned by assessee for export segment. Accordingly, we hold that internal TNMM method should be applied as most appropriate method to benchmark the international transactions of export of trucks undertaken by the assessee. However, the Assessing Officer is directed to verify the stand of assessee as to the margins earned in domestic segment and in the export segment. The assessee is also directed to file segmental details in this regard before the Assessing Officer for necessary verification. Hence, we hold that aggregation approach applied by the Assessing Officer / TPO in the circumstances was not correct approach and also the method applied i.e. external TNMM on the aggregated transactions is not upheld.
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2018 (4) TMI 500
Disallowance of labour charges and purchases made form Buildwel Bricks and sand - Held that:- We found that detailed finding has been recorded by CIT(A) after verifying all the details viz job card, detailed sheet of wages working, vouchers etc asked for by AO and which were duly submitted to the AO for his verification and consideration. The detailed finding so recorded by CIT(A) at para 4.5 have not been controverted by DR by bringing any positive material on record - no reason to interfere in the finding so recorded by CIT(A) resulting into deletion of addition made on account of labour payment. AO has also made an addition on account of purchases made from M/s. Buildwel Bricks & Sand Suppliers. CIT(A) has given a finding to the effect that assessee has furnished confirmation in respect to the purchase made from Buildwel Bricks & Sand Suppliers alongwith a copy of its own bank account indicating the payment so made, copies of the bills raised by the said party alongwith supporting delivery challans which also contains truck number and such truck numbers were also found to be mentioned in the delivery challans and also match with the truck number stated in the concerned bills issued by Buildwel Bricks & Sand Suppliers. Accordingly, genuineness of the purchases is not in doubt. As during the appellate proceedings, the CIT(A) has also called the remand report and after considering the same, reached to the conclusion that M/s. Buildwel Bricks and Sand Suppliers is a proprietary concern of Lukman Mohamed Ibrahim Patel and assessee had made genuine purchase from these parties. The detailed finding so recorded by CIT(A) after considering the remand report was not controverted by learned DR by bringing any positive material on record. No reason to interfere in the order of CIT(A).
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2018 (4) TMI 499
TPA - Comparability analysis criteria - Reference to dispute resolution panel - Held that:- In view of the facts of the case, explicit provisions of section 144C we are of considered view that the Assessing Officer has erred in exceeding his jurisdiction and suo-moto adding companies in the final list of comparable companies proposed by TPO. AR stated at Bar that if four companies subsequently added by the Assessing Officer, are excluded from the list of comparables, the international transactions entered into by assessee with its AEs would fall within arm’s length and no adjustment would survive. We are of considered view that it would be appropriate to remit this issue back to the file of Assessing Officer for verification. The assessee shall demonstrate before the Assessing Officer that after exclusion of four companies as mentioned above, the international transactions of assessee would fall within the arm’s length. - Decided in favour of assessee for statistical purposes.
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2018 (4) TMI 498
Disallowance u/s. 14A r.w. Rule 8D - Held that:- Bombay High Court in the case of Godrej & Boyce Manufacturing Company Pvt. Ltd., Vs. DCIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] held that before invoking the provisions of Section 14A, AO has to record his satisfaction with regard to the correctness of the claim of assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act. Sub-section (3) of Section 14A provides that provisions of Sub-section 2 would also apply in relation to a case where assessee claims that no expenditure has been incurred by him in relation to income, which does not form part of the income under this Act. As find that in the case before us, the AO had issued a show cause notice to the assessee and after considering assessee’s written objections dt. 25-11-2011 and not being satisfied with the same, has held that the disallowance u/s. 14A r.w. Rule 8D is to be made. The Hon'ble Bombay High Court has held that Rule 8D is applicable from the AY. 2009-10. Working out disallowance u/s 8D - Held that:- Direct the AO to consider only the investments which have yielded exempt income during the relevant financial year for working out the disallowance u/s. 8D(2)(iii) of the Act.
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2018 (4) TMI 497
Loss claimed on termination of a Hire Purchase Contract with a one Zen Global Finance Ltd., after allowing as bad debts - Held that:- In the case of DIA v. Oman International Bank (2009 (2) TMI 54 - BOMBAY HIGH COURT) it has been held that after amendment to section 36(1)(vii), it is neither obligatory nor is there any burden on the assessee to prove that debt written off by him is indeed a bad debt as long as it is bonafide and is based on commercial wisdom or expediency. In the case of CIT v. Star Chemicals (Bombay) Limited (2008 (2) TMI 399 - BOMBAY HIGH COURT), it has been held that if assessee has written off debt as bad debt, that would satisfy purpose of section 36(1)(vii). We find that the assessee after receiving payment of ₹ 25 lacs, has rightly written off the balance outstanding amount of ₹ 2,21,92,554/- in the books of account in December, 2001 as loss on termination of contract. This view is supported by the ratio laid down in the decisions mentioned hereinbefore. Penalty u/s 271(1)(c) - Held that:- Order of the Ld. CIT(A) confirming disallowance of depreciation of ₹ 34,65,465/- on leased assets has been set aside and the matter has been restored to the file of the AO for a de novo order. It has been held in K. C. Builders v. ACIT (2004 (1) TMI 7 - SUPREME Court) that where the additions made in the assessment order, on the basis of which penalty for concealment was levied, are deleted, there remains no basis at all for levying the penalty for concealment and, therefore, in such a case no such penalty can survive and the same is liable to be cancelled. Similar is the position in case the order of the CIT(A) is set aside and the matter is restored to the file of the AO.
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2018 (4) TMI 496
Transfer Pricing adjustment – purchase of raw materials and components - selecting AE as the tested party and CPM as MAM - Held that:- As observed that assessee has not provided any details regarding FAR of AE to ascertain it to be less complex in nature. In fact assessee has only filed a letter dated 12/01/16 which demonstrates the total sales earned by AE with assessee during financial year relevant to the assessment year under consideration. It is observed from the submission dated 13/01/16 filed by assessee before ld.DCIT which is in response to the show cause notice dated 04/01/2016 that, assessee do not have financials of its AE as the same are not available on the public domain. Appendix B at page B- 933 is profitability details for products of Driveline Division (being AEs), having 100% external sales during the year ended 31/12/11. Further it is observed that the comparables selected are single set without having regard to the functions and geographical dissimilarities. It is further pertinent to observe that the most appropriate method used by assessee against AE as tested party is cost plus method. We fail to understand how the margins would be comparables in a Cost Plus Method, which is required for determining ALP of an international transaction. We also do not see any reason to set aside this issue to Ld.TPO, as assessee has categorically submitted before authorities below regarding non-availability of financial details of AE. Even before us Ld.AR did not submit there being a possibility of obtaining complete financial details of A.E. We therefore reject the arguments advanced by Ld.AR in respect of selecting AE as the tested party and CPM as MAM. Disallowance of provision for warranty claims - Held that:- Claim allowed as relying on assessee's own case [2017 (9) TMI 1157 - ITAT DELHI] wherein held hat the provision for warranty claim is an allowable expenditure. Disallowance of welfare expenditure under the head ‘miscellaneous expenditure’ - Held that:- The expenditure incurred by assessee is in the nature of corporate social responsibility which is considered to be an allowable expenditure subject to fulfilment of the conditions specified in section 32 to 36 of the Act. As assessee has not filed any details regarding these expenses before us, we are unable to ascertain whether necessary criteria as stipulated under section 32-36 of the Act stands fulfilled. We are therefore inclined to set aside this issue back to the file of Ld. AO for due verification. Disallowance due to difference in the stock - Held that:- The facts of the present case assessee has not been able to demonstrate exact reason of loss and measures taken in order to compensate for the loss of stock. We are therefore unable to appreciate the arguments advanced by Ld.AR. - Decied against assessee.
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2018 (4) TMI 495
Contribution receipts of sinking fund from the tenants - liable to be brought to tax as the income of the assessee under head income from house property - Held that:- As relying on case Mukesh D. Ambani vs. ACIT [2005 (4) TMI 529 - ITAT MUMBAI] contributions of the tenants of the property towards sinking fund cannot be assessed as rental income of the assessee. We thus finding no reason to take a different view, therefore, uphold the deletion of the addition on the said count by the CIT(A). - Decided against revenue. Disallowance of the claim of the assessee in respect of interest expenditure u/s 24(b) - Held that:- A.O while framing the assessment was not oblivious of the fact that the identical issue was decided by the CIT(A) in the assessee's own case for the immediately preceding year, viz. A.Y 2010-11, but however, had disallowed the claim of deduction of interest expenditure of ₹ 33,10,656/- raised by the assessee u/s 24(b), only for the reason that the revenue had not accepted the order of the CIT(A) on the issue under consideration in the preceding year, viz. A.Y 2010-11 and had assailed the same before the Tribunal. Deliberated on the facts and are unable to comprehend that now when the similar issue involving identical facts had been adjudicated by the CIT(A) in favour of the assessee, therefore, how a contrary view could have been taken by the A.O, despite remaining well convesant of the aforesaid state of affairs. As persuade ourselves to accept the view taken by the A.O for disallowing the claim of the assessee u/s 24(b), therein leading to a consequential addition of ₹ 33,10,656/- in its hands. We had deliberated on the observations of the CIT(A) and are persuaded to be in agreement with the view taken by him. Notional interest in respect of interest free refundable deposits received by the assessee from its tenants - Held that:- In the case of CIT Vs. J.K. Investors (Bom) Ltd. (2000 (6) TMI 9 - BOMBAY High Court) as observed that as the actual rent received or receivable by the assessee in respect of the aforesaid property was found to be in excess of the sum for which the property might reasonably be expected to have been let out from year to year, and the ALV had been determined under Sec. 23(1)(b), therefore, no addition in respect of the notional interest was called for in the hands of the assessee. On the observations recorded by the CIT(A) and are persuaded to be in agreement with the view taken by him. As the CIT(A) had followed the view taken by his predecessor in the assessee’s own case for the immediately preceding year, viz. A.Y 2010-11, therefore, no infirmity emerges from his order. Nothing has been placed on record or averred before us which could persuade us to conclude that the view taken by the CIT(A) in the assessee own case for A.Y 2010-11 had been set aside by the higher appellate forums and thus no more holds the ground. We thus finding ourselves to be in agreement with the view taken by the CIT(A), therefore, uphold the deletion of the addition - Decided in favour of assessee.
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2018 (4) TMI 494
Assessment of income on sale of land - plots on the agricultural land sold belongs to the HUF or assessee in his individual capacity - land inhereted by the son on the death of his father - Held that:- The share in the subject land inherited by the assessee under section 8 on the death of his father cannot be considered as HUF property in his hands. Therefore, income from disposal of such land will have to be considered as his individual income. We therefore upheld the view of the lower authorities where the income on the disposal of plots of land has been brought to tax in the hands of the assessee in his individual capacity. Treating the sale of plots of agriculture land - adventure in the nature of trade OR capital gain - Held that:- In this case, the assessee itself has developed residential plots and then sold it to individual buyers. Therefore, we affirm the findings of the AO that by such plotting of land, the agriculture land has been converted into stock-in-trade (in form of residential plots) of assessee’s business. Development of residential colony and said conversion has happened by assessee’s own admission during financial year 2009 and the intent of the assessee has thus been demonstrated through his own actions. The fair market value of the asset on the date of conversion as reduced by the cost of acquisition is required to be assessed under the head “capital gain” in the year(s) the stock-in-trade is sold/transferred. Sales realization of the stock-in-trade over such fair market value is required to be assessed as “business income”. During the year under consideration, it is an admitted position that 15 plots have been sold for a consideration of ₹ 54,93,100. Therefore, the taxability arising on conversion of agricultural land into stock-in-trade to the extent it has been sold during the year, arises during the impunged assessment year. The matter is accordingly set-aside to the file of the AO to determine the capital gains in accordance with the provisions of section 45(2) as well as business income on sale of such plots.
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Customs
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2018 (4) TMI 493
Extra Duty Deposit (EDD) - Board Circular No.4/2016 dated 9.2.2016 - Held that: - the documents are submitted before the Respondent No.4 in terms of the Board Circular Nos. 4/2016 and 5/2016. No extra EDD shall be charged from the petitioner-Company in terms of clause 2.2 of the Board Circular No.4/2016-Customs, on the petitioner-Company for the imports to be made by it from then onwards, without the specific leave of the Court. Petitioner is having the benefit of this interim order as on date and this interim order is in conformity with the Board Circular No.4/2016. The interim order granted by this Court on 27.10.2016 shall continue to operate until a decision is taken by the Respondent No.4 - petition disposed off.
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2018 (4) TMI 492
Classification of imported goods - import of natural Rutile Ore/ Leucoxene Sand of different grades - whether the imported goods are ‘ore’ or concentrate and whether eligible for availing exemption under N/N. 4/2006 – CE dt. 01.03.2006 as superseded by N/N. 12/2012 – CE dt. 17.03.2012? Held that: - the supplier M/s Iluka Resources Ltd, Australia has described the goods as Rutile/ HYTI91 Leucoxene Sand/ Leucoxene Sand in import documents whereas in Bill of Entry filed by the Appellant the goods were described as Rutile Ore/ Rutile Ore Leucoxene/ Sand in Bill of Entry - the naturally Rutile/ Leucoxene is an ore found in sea sand alongwith other raw material and out of the same after segregation of sand the imported goods were derived . The Tribunal in case of M/s Jains Mines and Minerals India Ltd. Vs. CCE, JABALPUR [2017 (10) TMI 1283 - CESTAT, Delhi], the bench after appreciation of chapter Note 2 and 4 of Chapter 26 in reference to Iron Ore held that “improvement in content of “Fe” due to process undertaken by the Appellant by itself will not make the resultant product as iron ore concentrate”. The impugned goods being ‘Ores’ are eligible for the exemption from CVD in terms of Notification No. 4/2006- CE dt. 01.03.2006 (Sr. No.4) as superseded by Notification No. 12/2012 – CE dt. 17.03.2012 (serial No.56) - the demand is not sustainable on merits. Time limitation - Held that: - the issue invloved itself has been of interpretation of activity undertaken in respect of impugned goods, HSN notes and chapter notes - non payment of CVD cannot be attributed to any malafide intention on part of Appellant - the demand is barred by limitation of time and are not sustainable. Appeal allowed - decided in favor of appellant.
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2018 (4) TMI 491
Warehoused goods - goods found short - theft/burglary - remission of duty - Held that: - No goods would be allowed to be removed from such warehouse without following the customs rules, procedures and payment of duty and there is no dispute that the Appellant scrupulously followed the said conditions. It is with the fact that that under the terms of the licence the Appellant had safeguarded the customs duty by getting issued the comprehensive insurance policy towards customs duty in favour of the Commissioner against theft and all incidents of loss. In such case when the bonded warehouse is under the control of the Customs authorities and the theft has occurred that too by the CISF and Police personal, the appellant cannot be found faulted with. The duty having been adequately safeguarded by insurance policy drawn in favour of the Commissioner. In the present case it is an admitted position that the appellant insured the warehoused goods for that part of the value representing Customs duty on the imported goods. Thus it is clear abidance of the terms and conditions of the warehousing licence issued under Section 58 of the Customs Act and the warehousing bond executed under Section 59. Having followed the terms and conditions of the licence, the appellant is thus entitled to claim the benefit under Section 23 of the Customs Act by remission of duty. The demand of Customs duty on the warehoused goods which has been stolen cannot be demanded from the Appellant - demand set aside - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 490
Classification of imported goods - synthetic polyester fabrics - goods were classified under Heading 5407.61 as woven fabrics containing 85% or more by weight of non texturised polyester filament year - classification changed based on test reports - As per the test reports of the Joint Director, New Custom House Laboratory, it was observed that the fabrics in question were containing 85% or more polyester yarn, composed of texturised filament yarn and are properly classifiable under Chapter Heading 54077200 and attracts the higher rate of duty. Held that: - Admittedly, the first report of the Textile Committee was in favor of the assessee. It is also seen that there were number of importers identically situate and the dispute arose in the case of number of them. The matter was taken up at the Association level and it was requested that a committee be formed to test the presence of texturised yarn in the fabrics. It is only thereafter a committee was formed and methodology was laid down for the purpose of testing the presence of the texturised yarn, the result of such reports went against the assessee. An identical matter came before the Tribunal in one of the other importers identically placed and was dealt with the Tribunal in the case of Shri Lakshmi Cotsyn Ltd. vs. CCE, Kanpur [2010 (9) TMI 386 - CESTAT, NEW DELHI] in the wake of identical facts and circumstances, where the first report of the Textile Committee was in favour of the assessee and the subsequent retest by the Chief Chemist was against them. It was held in that case that CRCL is in favour of the Department, initial report of Textile Committee and the report of GCTL, Kanpur were in favour of the party, the benefit of doubt naturally has to be given to the assessee especially when the test clarified to be subjective. Appeal dismissed - decided against Revenue.
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2018 (4) TMI 489
Duty Drawback - Revenue conducted some market enquiry and on that basis entertained a view that the value of the exported goods were on the higher side - Held that: - The onus to prove over-valuation falls upon the Revenue and is required to be discharged by production of evidence - In the absence of positive evidence, the value of export cannot be rejected on the basis of market enquiry or on the flimsy ground. The appellant having been able to sell the goods even at higher value to their foreign buyer and having realized the entire consideration for the export consignments, is entitled to the drawback, admissible to him under the law. Appeal allowed - decided in favor of appellant.
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2018 (4) TMI 488
Demand of SAD - stock transfer to DTA unit - benefit of N/N. 23/2003 dated 31.03.2003 (Sl. No. 2) - Held that: - the identical issue has come up before the Tribunal in the case of VVF Ltd. V, CCE [2014 (2) TMI 922 - CESTAT MUMBAI] where the transfer was made from the COU unit to its another unit of the DTA by way of stock transfer and it was held that the appellant is entitled to the benefit of exemption from levy of SAD leviable under Section 3(3) of the Customs Tariff Act 1975 in view of the specific exemption granted under N/N. 23/2003-CE, as amended - appeal allowed - decided in favor of appellant.
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Corporate Laws
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2018 (4) TMI 487
Cancelling the allotment or demanding payment of 50% of the prevailing market value - Operation of transfer - Held that:- It is not necessary to deal with the argument as to whether doctrine of proportionality is applicable in the instant case or not. It is to be borne in mind, as rightly held by the High Court, that the appellant-Corporation had withdrawn the action of cancellation of the plots. Instead, it demanded 50% of the prevailing market value in lump sum towards the cost of the plots. There is no legal basis for such a demand, more so, after the registration of the sale deeds in favour of the respondents thereby transferring the ownership in these plots in their favour.
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2018 (4) TMI 486
Sale conducted become void under provisions of Section 536 of the Companies Act, 1953 - Held that:- Learned Judge in the company court has not gone deep into the above said aspects. Question as to whether the sale itself was void ab initio by virtue of provisions contained in Section 537 (1) (b) or under Section 536 (2); or as to whether there existed any reasons to hold the sale otherwise than void, has not been seen examined. The factual aspects like, whether there was notice about the winding up proceedings, either direct or constructive, whether the sale was conducted for any reasonable price, whether the purchase was bonafide or not etc: are matters which are relevant to be considered. Appellant had pleaded for a decision on the above said aspects by this court itself, in exercise of the appellate jurisdiction, we are of the opinion that such a course may end in denying the right of appeal to any one of the parties. Hence we are of the opinion that the matter can be relegated for a fresh decision by the company court itself. The order of the company court impugned in this appeal, passed on Report No.1 is hereby set aside. The report of the Official Liquidator is remitted for fresh consideration and disposal by the company court.
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Insolvency & Bankruptcy
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2018 (4) TMI 532
Corporate insolvency procedure - appellant submits that there is no ‘debt’ in the eyes of the law as the amount was not paid to the Corporate Debtor - Held that:- As from the record we find that Mr. Atul Sharma and Mr. Nipun Sharma, two Directors of the Corporate Debtor were introduced through common friend in the year 2013. At that time, Corporate Debtor needed financial assistance for a short period, therefore, Corporate Debtor approached and requested the Financial Creditor to help them out. Thereafter, on different dates as per the table mentioned at Part IV of the application (Form I), sum of ₹ 51,750,000/- was disbursed by the Financial Creditors which include sum of ₹ 25,00,000 given by one Mr. Vinay Lakra. Therefore, the arguments advanced by the appellant that no amount be given to the Corporate Debtor cannot be accepted. Apart from the aforesaid fact we are of the view that the appeal preferred by Corporate Debtor is not maintainable in view of the decision of the Hon’ble Supreme Court in “M/s. Innoventive Industries Ltd. Vs. ICICI Bank & Anr. - 2017 (9) TMI 58 - SUPREME COURT OF INDIA”. Appeal dismissed.
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Service Tax
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2018 (4) TMI 484
Restriction of utilization of CENVAT credit - Held that: - once the assessee becomes entitled to the credit, its utilization cannot be restricted on the ground that he has not utilized the same in the period for which it could have been used - the whole issue is revenue neutral. There is no element of suppression or malafide intention as the Appellant by non utilizing the credit early did not cause any loss to the exchequer. Appeal allowed - decided in favor of appellant.
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2018 (4) TMI 483
Demand of service tax - letting out the cottage/ rooms in their hotel/ resort - scope of SCN - Held that: - the demand against the Appellant was proposed under the category of ‘Business Support Service’ but was confirmed under category of ‘Renting of Immovable Property Service’. Clearly the demand was confirmed by going beyond the scope of show cause notice. The appellant can give room on rent to other party and it is not necessary that it is only for parties who take locations on Hire for shooting. It can be used for two different parties for two different purposes. The room/ cottages are meant for stay and not for letting out for hire for the purpose of shooting - demand of service tax set aside. Appeal allowed - decided in favor of appellant.
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2018 (4) TMI 482
Refund claim - input services - whether rejection of refund claim on the ground that certain services are not admissible input service is correct or otherwise? - Held that: - If at all the adjudicating authority is of the view that certain input service is not admissible for the purpose of CENVAT credit, he should have issued a separate SCN and after carrying out the process of adjudication, order should have been passed holding that whether the said input services are admissible input services or not. Thereafter a decision on refund should have been taken. All these services in question are directly used by the service provider i.e. the appellant. In various judgments cited by the learned counsel, this Tribunal and various High Courts consistently held that all these services are input service for providing the output service - the cenvat credit is admissible. Refund allowed - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 481
Refund claim - rejection on the ground that the refund claim was beyond the time limit of one year - Section 11B of the CEA - Held that: - Larger Bench decision of the Tribunal in the case of CCE&CST, Bangalore Vs. Span Infotech (India) Pvt Ltd. [2018 (2) TMI 946 - CESTAT BANGALORE] has held that in respect of export of services, the relevant date for purposes of deciding the time limit for consideration of refund claims under Rule 5 of the CCR may be taken as the end of the quarter in which the FIRC is received, in cases where the refund claims are filed on a quarterly basis. Matter remanded to the original authority to compute the refund by following the ratio of the Larger Bench - appeal allowed by way of remand.
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2018 (4) TMI 480
Levy of service tax - security agency service - whether the security services provided by The Security Guards Board (the appellant) is liable to Service Tax or otherwise? - Held that: - though there is contradiction in the judgment given by this Tribunal in the appellant’s own case and the judgment given by the Punjab & Haryana High Court, moreover the basic issue that whether the services provided by Security Guards Board per se is taxable or otherwise, the issue is seized with the Hon'ble Supreme Court, wherein the order of the Tribunal has been stayed. There is no purpose of laying the matter pending in this Tribunal - matter remanded to the adjudicating authority for passing a fresh order - appeal allowed by way of remand.
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2018 (4) TMI 479
100% EOU - refund claim - rejection on the ground that the refund claim was beyond the time limit of one year - Section 11B of the CEA - Held that: - Larger Bench decision of the Tribunal in the case of CCE&CST, Bangalore Vs. Span Infotech (India) Pvt Ltd. [2018 (2) TMI 946 - CESTAT BANGALORE] has held that in respect of export of services, the relevant date for purposes of deciding the time limit for consideration of refund claims under Rule 5 of the CCR may be taken as the end of the quarter in which the FIRC is received, in cases where the refund claims are filed on a quarterly basis. Matter remanded to the original authority to compute the refund from the last day of the quarter in which the FIRCs are received - appeal allowed by way of remand.
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2018 (4) TMI 478
Entitlement to Interest - delayed payment of refund - Held that: - the Hon'ble Apex Court in the case of Ranbaxy Laboratories Ltd. Vs. I-JOI [2011 (10) TMI 16 - Supreme Court of India] has upheld grant of interest in case of late disbursal of refund from the expiry of three months of refund application till refund is granted and not from the date of order of refund - refund allowed - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 477
C&F agency service - Non-payment of service tax - whether the appellant had in an agreement with one M/s Sudhakar Plastics Ltd. agreed to be as a consignment agent for the goods manufactured by them, evaded service tax on services rendered by appellant during the period 2002-2003 to 2003-2004 or otherwise? - extended period of limitation. Held that: - SCN does not invoke the proviso Section 73(1) for demand of tax for the extended period, and there is no allegation of suppression of the facts, mis-statement facts; in the absence of any allegation of suppression of facts or mis-statement, the service tax demand for the normal period can only be sustainable, demand for extended period is unsustainable. The service tax demand on the C&F agency services for the normal period from the date of issuance of Show Cause Notice i.e. 26 09.2006 is maintainable along with the interest and also the consequent penalty - appeal allowed in part.
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Central Excise
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2018 (4) TMI 476
CENVAT credit - Bins - denial of credit on the ground that the said 'Bins' was wrongly classified under the heading 8474.90 whereas the correct classification would fall under the heading 7308 - Held that: - The question as to whether the subject item would fall under heading 7308 or 8474.90, is essentially a question of fact. Moreover, if according to the appellant, the item would fall under heading 8474.90, it was for the appellant to explain as to why it has not claimed cenvat credit for the same item supplied by M/s Hindustan Steel for whom it had earlier availed credit but later on reversed it when the Revenue brought it to the notice of the same. The confirmation of the demand for reversal of cenvat credit is only to the extent falling within normal time period - appeal dismissed - decided against appellant.
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2018 (4) TMI 475
Condonation of delay in filing appeal - power of Commissioner (Appeal) to condone delay - Section 35(1) of the Central Excise Act, 1944 - Held that: - the Appellate Authority can condone the delay up to 30 days at the most. Therefore, if the appeal is not filed beyond 90 days, the Appellate Authority has no jurisdiction to condone the delay - In the instant case, the petitioner has received the copy of order of appeal on 31.01.2013 and he filed appeal on 09.10.2013 it is beyond the period of 90 days and, therefore, it has rightly been dismissed by the appellate authority. The appellate authority has no jurisdiction to condone the delay beyond 30 days in filing the appeal and learned Tribunal is justified in dismissing the appeal as barred by law - petition dismissed.
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2018 (4) TMI 474
Valuation - whether the amortized cost of the said material was required to be added in the assessable value of their final product? - Held that: - appellant has produced the Chartered Engineer’s certificate to indicate that such tools and dies continued to be used by them for the subsequent period - the said certificate was not part of the proceedings before the authorities below. As the same requires examination and verification, we deem it fit to set aside the impugned order and remand the matter to the original adjudicating authority for doing the needful - appeal allowed by way of remand.
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2018 (4) TMI 473
Penalty - intent to evade duty - Held that: - the issue involved in the present case is interpretation of Rule 6 of CCR, the intent to evade payment of duty cannot be alleged - the appellant has submitted that the entire demand is barred by limitation but as per the instructions of his client, the counsel for the appellant has not challenged the demand on limitation - penalty u/s 11AC not sustainable - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 472
Refund claim - unjust enrichment - case of Revenue is that the ground of unjust enrichment having not been considered by the First Appellate Authority in it is correct prospective - Held that: - the First Appellate Authority has come to a correct conclusion as to satisfaction of unjust enrichment by the respondent herein - the Chartered Accountant has categorically stated that the respondent (assessee) has been carrying on an amount of ₹ 6,80,974/- in the balance sheet under the “excise duty receivable” - the First Appellate Authority was correct in holding that the respondent herein has satisfied the condition of there is no unjust enrichment - refund allowed - appeal dismissed - decided against Revenue.
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2018 (4) TMI 471
CENVAT credit - duty paying documents - appellant availed credit on inputs on the basis of Bill of Entry which were not addressed to the appellant - Held that: - the Division Bench of this Tribunal in the case of CCE, Bhopal Vs. SS Cropcare Ltd. [2016 (7) TMI 1140 - CESTAT NEW DELHI] has decided the identical issue and has held that the assessee is entitled to claim CENVAT credit on the basis of Bill of Entry which is endorsed in his favour by the importer / principal manufacturer so long there is no dispute with regard to duty paid character of inputs and received by the assessee and utilization of the same in the manufacture of the products. The impugned order denying the CENVAT credit only on the ground of endorsed Bill of Entry is not sustainable in law - appeal allowed - decide in favor of appellant.
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2018 (4) TMI 470
CENVAT credit - Petroleum Coke, substitute for coal as fuel - duty paying invoices - Held that: - the petcoke was sold/cleared to the assessee in this case that the address has been clearly indicated on the documents. That the route of Coastal Cargo Movement by ship was reverted to reduce the cost of transportation of petcoke - the assessee has produced a Chartered Account Certificate indicating purchases of petcoke during the period in question of certify transported from Chennai Port to their various factories. Once the receipt and use of inputs are proved, the documents get relegated to the second place. Appeal allowed - decided in favor of appellant.
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2018 (4) TMI 469
Valuation - machineries and cylinder blocks - inclusion of various costs like amortisation charges, sales tax, freight charges for transportation of castings, cost of free items supplied by M M and value of supplementary invoices of raw materials - Held that: - the adjudicating authority has clearly recorded that LML received some amount in cash for the value suppressed by them on CNC machines and has correctly included the value thereof for payment of the amounts on CNC machines. As regards the deductions claimed by the said LML Ltd from the demands raised in the show cause notice, the adjudicating authority has also given detailed reasonings as to why he is convinced that the demands needs to be re-determined after coming deductions claimed by LML and also ascertaining himself about the correctness of the claim. Time Limitation - Held that: - it is an accepted fact that there was under valuation of CNC machines and cylinder blocks by not including various costs, which stands confirmed against LML - the extended period has been correctly invoked. Penalty u/r 25 and 26 - Held that: - penalty u/r 26 cannot be imposed without bringing on record any evidence indicating that M M had any role attributable for under valuation by LML - when the penalty is not imposable under rule 26 itself, the question of imposing penalty on M M under rule 25 does not arise. Appeal dismissed - decided against Revenue.
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2018 (4) TMI 468
CENVAT credit - input/input service used for manufacture of exempted goods - non-maintenance of separate records - developer of Special Economic Zone - rule 6(3)((i) of CCR 2004 - Held that: - The continuing existence of supplies to units in Special Economic Zones and the addition of supplies to developers of Special Economic Zones under rule 6(6)(i) does not detract from the eligibility for coverage as exports. Therefore, by no stretch can such supply be deemed to be exempted - credit allowed - appeal dismissed - decided against Revenue.
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2018 (4) TMI 467
CENVAT credit - rent-a-cab service - emergency response vehicles - jurisdictional service tax authorities were of the opinion that these are ‘rent-a-cab service’ which, as per rule 2(l) of CENVAT Credit Rules, 2004 was incorporated on 1st April 2011 was ineligible for availment. Held that: - The emergency response vehicles are also not intended to carry passengers on hire and, even if the distinction between ‘hire’ and ‘renting’ is ignored, it is clear that the service availed by the appellant is not that of ‘rent-a-cab’ - disallowance of credit will not sustain - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 466
CENVAT credit - imports that were used exclusively in the research & development department of the operations of the appellant - according to Revenue, the output of the said department is not manufacture - Held that: - apart from production of excisable outputs any activity that is incidental or ancillary also constitutes manufacture. That the output of such incidental or ancillary operations may not directly result in goods that are excisable would not take it out of the ambit of manufacture - prima facie, it would appear that the fruits of research and development facility ultimately finds its way, in form and in costs, to the excisable product. In the absence of any allegation that research and development is not concerned with manufacture of the appellant, the disallowance of CENVAT credit does not find favor - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 465
Conclusion of proceedings - proviso to section 11A(2) of Central Excise Act, 1944 - shortage of interest - contention of the appellant is that they had discharged the duty liability on 20th June 2014, along with applicable interest and 25% of the mandatory penalty, in consequence of which the proceedings against them should have concluded - Held that: - The notification enhancing the rate of interest superseded the existing rate which was allowed to continue only for the limited purpose of ‘as respects things done or omitted to be done before such supersession’ implying that the erstwhile rate would apply only in relation to proceedings initiated before the enhanced rate came into effect. The interest liability discharged by the appellant falls short and renders them ineligible for the privilege of conclusion of proceedings - appeal dismissed - decided against appellant.
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2018 (4) TMI 464
CENVAT credit - goods claimed to have been procured for export - case of Revenue is that there is no manufacture as defined in section 2(f) of Central Excise Act, 1944 - Held that: - Though the original authority has rendered an elaborate analysis of the law and the reason for not accepting the contention of the noticee, the manner in which the first appellate authority has set that finding aside, leaves room for doubt about the extent of scrutiny of the rival claims that was undertaken. It is proper that the impugned order, in the absence of adequate justification, be set aside and remanded back to the first appellate authority - appeal allowed by way of remand.
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2018 (4) TMI 463
CENVAT credit - reversal of credit - input services attributable to manufacture - Held that: - no evidence appears of any clearances having been effected other than of manufactured goods or of inputs as such - There is no evidence that any of these input services were utilized exclusively for the purpose of clearing inputs as such and, hence, the availment of credit is well within the provisions of rule 3 of CCR 2004 - appeal dismissed - decided against Revenue.
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CST, VAT & Sales Tax
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2018 (4) TMI 462
Reassessment - occurrence of mismatch - Held that: - identical issue decided in the case of M/s. JKM Graphics Solutions Private Limited Versus The Commercial Tax Officer [2017 (3) TMI 536 - MADRAS HIGH COURT], where The Court has directed the Assessing Officer to evaluate a centralised mechanism exclusively to deal with the cases of mismatch and to do some exercise, before issuing a notice. The matter is remitted back to the Assessing Officer to re-do the assessment commencing from the stage of issuing notice of proposal - petition allowed by way of remand.
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Indian Laws
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2018 (4) TMI 485
Validity of FIR - main contention of the Petitioners is that, this being a transaction which is purely civil in nature, the Respondent No.2 could not have lodged the FIR. In the FIR, there is no mention of any of the pending proceedings. Held that: - the present FIR does not pertain to a purely civil transaction. The false representation and inducement is very clear from the email sent to the Respondent No.2 for placing the purchase order for trial. Though it was clearly mentioned in the email that the Petitioner No.1 was the Managing Director of M/s. Sharp Industries Ltd., the Petitioner No.1 had already resigned from the Directorship of the said company. Placing the first purchase order on the trial basis was clearly a ploy to induce the Respondent No.2's firm to enter into bigger transaction. The subsequent conduct of the Petitioners shows that they had no intention of making the full payment. Thus, the inducement is apparent right from the inception of the business relationship between the parties. The email contained false information and therefore, the offence of forgery with cheating is also made out. The subsequent conduct of surreptitiously changing the office and avoiding to meet the Respondent No.2, shows the dishonest intention on the part of the Petitioners. In any case, it cannot be said that no cognizable offence is made out from the allegations in the FIR. Right from the inception, the Petitioners had induced the Respondent No.2 in parting with huge quantity of Chromo Paper. The Petitioners' conduct right from the beginning till their default in the payment and till executing the Consent Terms shows that they never intended to make the full payment. Looking at the allegations in the FIR, we are unable to hold that no cognizable offence is made out against the Petitioners. Petition dismissed.
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