TMI Tax Updates - e-Newsletter
April 15, 2019

Case Laws in this Newsletter:

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

Articles

1. Second article on “S.68 NRA iron and Steel P. Ltd. (SC) - A fit case for recall and reconsideration by the Supreme Court to avoid miscarriage of justice and in- justice in future”.

   By: DEVKUMAR KOTHARI

2. ANTI-PROFITEERING IN GST: ASSERTIONS FROM HINDUSTAN UNILEVER CASE

   By: Dr. Sanjiv Agarwal

3. GST Taxpayers to start with new Invoice Series w.e.f 01.04.2019

   By: Ganeshan Kalyani

News

1. Global Risks and Policy Challenges facing Emerging Market Economies - Shri Shaktikanta Das, Governor, Reserve Bank of India - April 12, 2019 - Delivered at the event “Governor Talks” on the sidelines of the Fund-Bank Spring Meetings, 2019, Washington DC

2. Auction for Sale (Re-Issue) of Government Stocks

Notifications

GST - States

1. S.O. 87 - dated 9-4-2019 - Bihar SGST

Corrigendum – Notification No. 7/2019-State Tax (Rate), dated the 29th March, 2019

2. S.O. 86 - dated 9-4-2019 - Bihar SGST

Corrigendum – Notification No. 6/2019-State Tax (Rate), dated the 29th March, 2019

3. S.O. 85 - dated 9-4-2019 - Bihar SGST

Corrigendum – Notification No. 3/2019 - State Tax (Rate), dated the 29th March, 2019

4. Rc.17/2019/ Taxation/A1-No.2/2019-TNGST - dated 7-3-2019 - Tamil Nadu SGST

Seeks to prescribe the due dates for furnishing of FORM GSTR-3B for the months of April, May and June, 2019.

5. Rc.17/2019 / Taxation/A1-No.1/2019-TNGST - dated 7-3-2019 - Tamil Nadu SGST

Seeks to prescribe the due dates for furnishing of FORM GSTR-1 for those taxpayers with aggregate turnover of more than ₹ 1.5 crores for the months of April, May and June, 2019.

6. G.O. Ms. No. 24 - dated 7-2-2019 - Tamil Nadu SGST

Corregendum - Notification No. SRO A-2(b)/2019 dated the 29th January, 2019

7. G.O.Ms.No. 22 - dated 1-2-2019 - Tamil Nadu SGST

Tamil Nadu Goods and Services Tax (Second Removal of Difficulties) Order, 2019

8. G.O.Ms.No. 20 - dated 1-2-2019 - Tamil Nadu SGST

Tamil Nadu Goods and Services Tax (Removal of Difficulties) Order, 2019

9. G.O.Ms.No. 19 - dated 1-2-2019 - Tamil Nadu SGST

Corrigendum - Notification No. II(2)/CTR/1099(e-5)/2018 dated the 31st December, 2018

10. 18/2019 – State Tax - dated 10-4-2019 - West Bengal SGST

Seeks to extend the due date for furnishing FORM GSTR-7 for the month of March, 2019 from 10.04.2019 to 12.04.2019

11. 17/2019 – State Tax - dated 10-4-2019 - West Bengal SGST

Seeks to extend the due date for furnishing FORM GSTR-1 for taxpayers having aggregate turnover more than ₹ 1.5 crores for the month of March, 2019 from 11.04.2019 to 13.04.2019

SEZ

12. S.O. 1584(E) - dated 9-4-2019 - SEZ

Central Government de-notifies an area of 13.286 hectares, thereby making resultant area as 133.635 hectares at SIPCOT Industrial Area, Sriperumbudur in the State of Tamil Nadu

Circulars / Instructions / Orders

DGFT

1. Trade Notice No. 04/2015-20 - dated 12-4-2019

Applications for Recognition as Pre-Shipment Inspection Agencies

Highlights / Catch Notes

GST

• Ice cream sales from retail to customers are taxable goods under CGST Act, Schedule II, Entry I(a).

  Case-Laws - AAR : Supply of goods or services - ice-cream - retail outlets - there is a transfer of title in ice creams from the applicant to their customers and therefore as per entry no. I(a) of the Schedule II of the CGST Act, the subject transaction is nothing but a supply of goods.
  Visit to Get Source

  ---

• Advance Ruling Application Requires Rs. 5000 Fee Under SGST and CGST Acts as per Section 97(1) and Rule 104.

  Case-Laws - AAR : Advance Ruling Application - deposit of fees - it is mandatory as per section 97(1) read with Rule 104 of the CGST/ MGST Act to pay applicable fee of ₹ 5000/- each under SGST and CGST Act to be deposited in the manner as provided under Section 49 of the Act.
  Visit to Get Source

  ---

• Advance Ruling Application Dismissed: Applicant Can't Supply Goods/Services After Tender Awarded to Different Consortium.

  Case-Laws - AAR : Maintainability of Advance Ruling application - the tender contract is awarded to a consortium other than the applicant and as such the possibility of supply of goods or services or both by the applicant pertaining to the said tender contract is no more available - ARA application is infructuous.
  Visit to Get Source

  ---

• GST Exemption: Interest-Free Security Deposits Not Taxable as They're Fully Refundable and Not Considered Service Payment.

  Case-Laws - AAR : Levy of GST - interest free security deposit - Since the entire amount is to be returned back to their lessee, such deposits cannot be considered as consideration for such supply of services as mentioned by them and hence will not be liable to tax.
  Visit to Get Source

  ---

Income Tax

• Jurisdiction Challenge Must Be Made Timely u/s 120(4)(b) and 124(3) to Proceed in Tribunal.

  Case-Laws - AT : Challenge of jurisdiction u/s.120(4)(b) - If challenge to the jurisdiction has not been made within the prescribed time u/s.124(3) to the authority, whose jurisdiction is being challenged then the issue of the challenge of the jurisdiction no more survives before Tribunal
  Visit to Get Source

  ---

• IT Support Services Not Classified as Fees for Technical Services Under DTAA with Belgium Due to Lack of Knowledge Transfer.

  Case-Laws - AT : IT support Services - DTAA with Belgium - payment of consideration would be regarded as FTS only if the twin test of rendering services and making technical knowledge available is satisfied - IT support services is in the nature of routine services and no manner has given any benefit of technical knowledge, skill or expertise to apply it in future to perform the functions independently - Not a FTS
  Visit to Get Source

  ---

• Dual Resident of India & USA Deemed US Resident Under DTAA; Eligible for Income Treaty Exemption Per Article 4(2).

  Case-Laws - AT : Salary earned in USA - dual resident India & USA - Article 4(2) of DTAA with USA - if on the basis test of tiebreaker rule for ‘Centre of Vital Interests’ it is found Assessee’s centre of vital interest was closure to US and he is a Resident of US under the DTAA - treaty exemption is available to the Assessee
  Visit to Get Source

  ---

• Trust Income Must Reflect Actual Expenses, Not 30% Standard Deduction; Aligns with Section 11 of Income Tax Act.

  Case-Laws - AT : Exemption u/s 11 - renal income - standard deduction @30% vs actual expenditure - once income of a trust/institution is computed u/s 11, whatever income derived from the property held under trust is to be taken into account and against which actual expenditure is allowable not the standard deduction @30% u/s 24(a)
  Visit to Get Source

  ---

• PDBI Must Collect Tax at Source for Toll Operations u/s 206C(1C) of Income Tax Act.

  Case-Laws - AT : TCS u/s 206C - Board (PDBI) falls under the definition of Licensor and has acted as a Grantor of the licensee /contract for toll plaza operation / Toll roads - liable to collect tax at source u/s 206C(1C).
  Visit to Get Source

  ---

• Section 153A Assessment: Unexplained Cash Deposits and Loans Additions Contested, No Incriminating Evidence Found, No Additions Made.

  Case-Laws - AT : Assessment u/s 153A - addition u/s 68 - unexplained cash deposited and unexplained loan - addition was not based on any incriminating material found during search - No nexus has been shown from Investment & cash deposited - no addition
  Visit to Get Source

  ---

• Court Rules AO Cannot Reopen Assessment u/s 147 if Issues Were Concluded in Original Section 143(3) Assessment.

  Case-Laws - AT : Reopening u/s 147 - original assessment u/s 143(3) - notice issued within 4 year - specific queries were raised in original assessment proceedings, which were duly explained / documented by the assessee - AO, after due application of mind, accepted the claim - AO could not be clothed with second inning to review the already concluded issues in original assessment
  Visit to Get Source

  ---

• Penalty Upheld for Continuous Default in Filing u/s 139(1); No Bona Fide Mistake Found in Real Estate Income Disclosure.

  Case-Laws - AT : Penalty u/s 271(1)(c) under Explanation 5A - no return u/s 139(1) - return filed u/s 153A disclosing Capital Gain which was accepted - it is neither a case of bonafide mistake nor a case of bonafide belief but it is a continues default on the part of the assessee for not filing even return of income despite the activity in the real estate and earning the income therefrom - penalty upheld
  Visit to Get Source

  ---

• Unexplained Cash Credit Linked to Trade Advance Not Taxable, Section 68 Addition Not Warranted, Invoices Justify Sales Adjustment.

  Case-Laws - AT : Unexplained cash credit - trade advance for purchase of goods - copies of invoice raised by the assessee show that the assessee has squared up by adjusting the sales of the goods for the amount which it has received as advance - no addition u/s. 68 is warranted
  Visit to Get Source

  ---

• Notice u/s 148 Issued to Deceased Invalid; Legal Reps Did Not Waive Valid Notice Requirement.

  Case-Laws - HC : Notice u/s 148 - validity of notice against dead person - first point of time petitioner objected to the issuance of notice u/s 148 and has not participated or filed any return pursuant to notice - legal representatives not having waived requirement of notice u/s 148 and not having submitted to the jurisdiction of the AO pursuant to impugned notice - provisions of section 292B is not applicable
  Visit to Get Source

  ---

• Notice u/s 148 Invalid Due to Issuance Against Deceased Person, Despite Prior Notification to Tax Department.

  Case-Laws - HC : Notice u/s 148 - even prior to issuance of notice, department was aware about the death of the petitioner's father in response to the summons issued u/s 131(1A) intimated about the death of his father - no valid notice can be issued against a dead person
  Visit to Get Source

  ---

• Tax Collection at Source u/s 206C is Constitutional, Does Not Violate Rights or Prejudice Petitioners.

  Case-Laws - HC : Constitutional validity of Tax Collection at Source (TCS) u/s 206C - statute does not breaches any constitutional provision - petitioners, when they are buying timber to pay tax in advance and when selling to collect tax from the buyer - Provisions are neither arbitrary nor any prejudice to petitioners.
  Visit to Get Source

  ---

• Reassessment Invalid as Officer Overlooked Taxpayer's Objections in Section 147 Case.

  Case-Laws - AT : Reopening u/s 147 - non disposing objections by AO before proceeding with the assessment by passing a speaking order - The re-assessment cannot be sustained
  Visit to Get Source

  ---

• Board under State Control Deemed "State" per Article 12, Granted Tax Immunity by Indian Constitution.

  Case-Laws - AT : Liability to tax being as State - board was set up by State Government by enacting law - Board is under complete superintendence, and control of the State Government financially as well as administratively falls under the definition of “State” as per Article 12 of the Constitution of India - entitled for immunity from the taxation
  Visit to Get Source

  ---

• Salaries, training, and IRSE assessment costs are revenue expenses, even if capitalized under AS-26 in financial records.

  Case-Laws - AT : Nature of expenditure - The expenditure incurred in the form of salaries / training of employees and IRSE assessment cost, which are purely in the Revenue field is revenue expenditure - irrespective of the facts the same was capitalized in books due to application of Accounting Standards (AS-26)
  Visit to Get Source

  ---

• Capital Gains on Agricultural Land: Legal Procedures Required for Land Use Change to Affect Tax Obligations.

  Case-Laws - AT : Taxability of Capital gain - agricultural land - no explanation as to how the mutation could have taken place in the Revenue record if the land was put to commercial use as on the date of sale - unless and until a competent Government issues a notification or the conversion of the use of land takes place, it cannot be said to be a non agricultural land
  Visit to Get Source

  ---

• Income Tax Act Section 12AA: Delay by Commissioner Results in Deemed Registration Grant for Applicant.

  Case-Laws - HC : Registration u/s 12AA - not passing order by CIT(E) within limitation provided for deciding the application u/s 12AA - it would result in deemed grant of registration.
  Visit to Get Source

  ---

Indian Laws

• State Act Section 37(A) Prevails Over Transfer of Property Act Section 58(c) Due to Article 254(2.

  Case-Laws - SC : Money lending falls as entry (30) in the State List. Transfer of Property other than agricultural land falls in Entry 6 in the concurrent list. - there is an inconsistency between Section 58(c) of the Transfer of Property Act and Section 37(A) of the State Act, in view of the assent given by the President, the matter falls under Article 254(2). Therefore, despite the inconsistency, Section 37(A) of the State Act will prevail in the State.
  Visit to Get Source

  ---

• NRI Status Doesn't Exempt Individual from Accountability in Cheque Dishonor Case; Responsible for Company's Daily Operations.

  Case-Laws - HC : Dishonor of Cheque - Merely because the petitioner has been accepted as an NRI by the income tax authorities does not mean that there would be no occasion for him to participate in or being responsible for the day-to-day affairs of the company accused.
  Visit to Get Source

  ---

IBC

• Loan Disbursement Confirms 'Financial Debt' Status; Applicant Recognized as 'Financial Creditor' Under Insolvency Laws.

  Case-Laws - Tri : The loan was disbursed against the consideration for time value of money with a clear commercial effect of borrowing - not only the present claim comes within the purview of ‘Financial Debt’ but also the applicant can clearly be termed as ‘Financial Creditor’
  Visit to Get Source

  ---

SEBI

• Court Finds Lack of Evidence for Prima Facie Case; Restraint Order on Appellants Deemed Harsh and Unjustified.

  Case-Laws - AT : There should be some shred of evidence to come to a prima-facie conclusion that the appellants are indulging in unfair trade practices in cornering the market with a manipulative intent to manipulate the price. Passing a restraint order which virtually puts a stoppage on the appellants right to trade based on a needle of suspicion, in our opinion, is harsh and unwarranted.
  Visit to Get Source

  ---

Central Excise

• Revenue Authority Bound by Initial Credit Reversal Decision Unless New Evidence Emerges in Central Excise Cases.

  Case-Laws - AT : Reversal of credit - once accepted, the revenue cannot turn around and dispute the manner of reversal without bringing any additional evidence or point of law, not considered earlier
  Visit to Get Source

  ---

VAT

• Empty Formality Defense Valid in Service Law, Not in Revenue Cases Where All Materials Matter.

  Case-Laws - HC : Generally the theory of empty formality is a valid defence to an allegation of violation of principles of natural justice in the Service Jurisprudence. But, insofar as Revenue Laws are concerned, every material on which a decision is taken, may be relevant.
  Visit to Get Source

  ---

Case Laws:

• GST

• 2019 (4) TMI 808
  Classification of supply - supply of goods or services - composite supply/principal supply - supply of ice-cream by the applicant from its retail outlets - Notification No. 46/2017-Central Tax (Rate) (serial no. (i) entry no. 7) - entry 6(b) of the Schedule II of the CGST act, 2017 - Held that:- In case of scoop, the flavor of choice is sold as per the customer preference i.e. in cup or cone. In either of the cases, the ice-cream received by the applicant from the franchisor is supplied as it is to the customer and is sold at agreed rates, as mentioned on menu cards. No extra money is charged from the customers who are free to consume the ice-creams inside or outside the outlet. No facility of serving/ dining is provided by the applicant. Only a few outlets of the applicant offer seating facility. However as informed by the applicant, same is predominantly made for the convenience of old persons or persons with disability, ladies and children and not for rendering any service of a kid like a restaurant, eating house, joint, etc. We find that the dominant object even in the case of ice cream in scoops as in the subject case, is a sale of goods. This transaction of selling ice cream received in bulk and selling them in scoops is akin to sales made by grocery shops in the case of sale of edible oil wherein the grocer sells such oil in various lesser quantities after receiving the same in bulk quantity of 20 litres, etc in tins/cans. Here the ice creams are sold in the same form as received by them and at agreed rates not exceeding the MRP and in most of the case the said ice creams appear to be consumed outside the premises of the applicant. Even if we consider the said transaction as a composite supply as per Section 2(30) of the CGST Act we find that the principal supply in the subject case is a sale of goods i.e. ice creams, being the predominant element of the transaction. In the subject case there is a transfer of title in ice creams from the applicant to their customers and therefore as per entry no. I(a) of the Schedule II of the CGST Act, the subject transaction is nothing but a supply of goods. Even the jurisdictional officer has agreed that in the subject case there is a sale of goods. In the instant case the transaction is to be considered as a sale/ supply of goods.

  ---

• 2019 (4) TMI 807
  Maintainability of Advance Ruling Application - deposit of fees - Liability of the applicant for obtaining registration - Section 22 of the GST Act - Held that:- Applicant is an un-registered person under the provisions of GST Act. After the receipt of application, applicant was called on for preliminary hearing to examine the correctness of the application and to give interim decision on acceptance or rejection of the application as provided u/s 98 of the GST Act. For an applicant, it is mandatory as per section 97(1) read with Rule 104 of the CGST/ MGST Act to pay applicable fee of Rs. 5000/- each under SGST and CGST Act to be deposited in the manner as provided under Section 49 of the Act. If not, the application would be treated as an incomplete application liable for rejection - Details regarding the payment of fee for the filing an application for advance ruling has been clarified vide Circular No. 25/25/2017-GST by GOI, Ministry of finance, Department of Revenue, Central Board of Excise and Customs, GST Policy Wing, New Delhi dated 21st December, 2017 wherein, at point no. 4 it is clarified that the applicant can make the payment of the fee of Rs. 5000/- each under CGST Act and SGST Act. In the instant case, the applicant has only deposited an amount of Rs. 5000/- towards fees and not the full amount of Rs. 10000/-. The opportunity so far granted to the applicant in our opinion constitute sufficient opportunity to cure the defect which applicant has failed to avail. As such application is incomplete and is liable for rejection. The Application for advance ruling is rejected as being not maintainable.

  ---

• 2019 (4) TMI 806
  Maintainability of Advance Ruling application - Works Contract Service - applicable rate of tax - transaction proposed to be executed in relation to tenders issued by the Oil and Natural Gas Corporation of India Ltd. (ONGC) for executing erection, commissioning and installation work on turnkey basis for petroleum operations Held that:- From a perusal of the provisions relating to Advance Ruling, it is seen that Advance Ruling means a decision provided by this authority to an applicant on specified questions and matters in relation to the supply of goods or services or both or being undertaken or proposed to be undertaken by the applicant. An Advance Ruling, thus helps the applicant in determining the liability to pay GST. It also brings certainty in determining the tax liability with no litigation as the ruling is binding on the Government authorities the applicant. On the contrary, in the present case, it is found that the tender contract is awarded to a consortium other than the applicant and as such the possibility of supply of goods or services or both by the applicant pertaining to the said tender contract is no more available. ARA application filed by the applicant is infructuous and hence the questions raised in the application are not answered.

  ---

• 2019 (4) TMI 805
  Levy of GST - interest free security deposit - notional interest - whether the security deposit taken from lessee on account of security against damages, if any, caused to the furniture, equipment s, fittings supplied along with the premises or any damage constitute consideration is vis a vis any supply under the provisions of GST Act? Held that:- The definition of consideration is inclusive and the consideration may be in cash or kind. The payment received will not be treated as consideration, if there is no direct link between the payment and supply. From the close scrutiny of above definition it is clear that there should be a close nexus between the payment and supply and thus any payment/exchange/barter etc would be treated as consideration for supply and liable to GST. Prima facie a conclusion can be drawn without much difficulty that a deposit given in respect of the supply shall not be considered as payment made for such supply unless the supplier appropriates such deposit as consideration for the said supply. The security deposit taken by the applicant is to secure or to act as a guarantee as per the terms of agreement against damages to the properties. Further, admittedly applicant has taken security deposit against the damages caused to the furniture, equipment s, fittings supplied along with the premises or damage done to the properties. The undisputed fact is that the amount of deposit taken by the applicant is Rupees Fifty Seven Crore for the period of 18 years - in the subject case, the deposit received by the applicant cannot be treated as consideration for the supply made by the applicant and therefore they will not be liable to pay GST on such deposit amount received by them. The applicant, for leasing of commercial property has, in addition to rent, also collected interest free deposit from their lessee which is returnable on the completion of the tenure of the lease. Since the entire amount is to be returned back to their lessee, such deposits cannot be considered as consideration for such supply of services as mentioned by them and hence will not be liable to tax.

  ---

• 2019 (4) TMI 804
  Constitutional validity of Section 174 of the KSGST Act - the learned Single Judge had failed to advert to the other contentions raised in the writ petition, based on the question of limitation and other aspects - Held that:- The fact is not disputed by learned Government Pleader appearing for the respondents, and it is conceded that the correctness of the decision in M/S. SHEEN GOLDEN JEWELS (INDIA) PVT. LTD. VERSUS THE STATE TAX OFFICER (IB) -1, AND OTHERS [ 2019 (2) TMI 300 - KERALA HIGH COURT] is now pending consideration in other writ appeals. A remittance of the writ petition for a fresh consideration and disposal based on the grounds raised other than the validity of Section 174 of the KSGST Act, is necessary. The writ petition is restored on the files of this court for fresh consideration and disposal by the Single Judge.

  ---

• Income Tax

• 2019 (4) TMI 790
  Registration u/s 12A with retrospective effect - re-assessment orders - HELD THAT:- Since the High Court [2015 (2) TMI 802 - KERALA HIGH COURT] disposed of the appeals against the orders of re-assessment merely on the basis of its decision on the issue of registration under Section 12A of the Act, the appeals will have to be restored to the file of the High Court. The submission has to be accepted.

  ---

• 2019 (4) TMI 789
  Income-Tax Settlement Commission order been passed u/s 245(D)(4) - condonation of delay - Petitioner has placed reliance on the observations in Ajmera Housing Corporation and Anr. Vs. Commissioner of Income Tax [2010 (8) TMI 35 - SUPREME COURT OF INDIA]. HELD THAT:- In the present case, it has been submitted that the assessee had initially disclosed an additional income of Rs. 64.19 crores which was subsequently enhanced by an additional amount of Rs. 10.18 crores. Issue notice on the application for condonation of delay and on the Special Leave Petition, returnable in eight weeks.

  ---

• 2019 (4) TMI 788
  N.P. determination - net profit rate of 15% while estimating the income of the new business unit confirmed - no substantial question of law - HELD THAT:- SLP dismissed.

  ---

• 2019 (4) TMI 787
  Accumulation of income u/s 11(1)(a) - depreciation on the assets the cost of which has been fully allowed as application of income under section 11 in the past years - HELD THAT:- SLP dismissed.

  ---

• 2019 (4) TMI 786
  Notice u/s 148 served by affixation - Notice u/s 148 issued by hand but due to holiday, security guard refused to accept - Notice send through registered post was also un-complied with - no proper service of notice on the assessee, re-sessment proceedings, are bad in law - HELD THAT:- In view of Circular No. 3 of 2018 dated 11th July, 2018, and since the tax effect is low, we are not inclined to entertain this appeal. The appeal is dismissed on this ground alone. However, question of law is kept open.

  ---

• 2019 (4) TMI 785
  Constitutional validity of Section 206C - explanation of “buyer” as per Section 206C - statute does not breaches any constitutional provision - neither arbitrary nor any prejudice to petitioners - HELD THAT:- The petitioners are involved in the business of trading in timber. As a trader, the petitioners partakes two characters. At a given point of time, the petitioners buy timber. As a buyer, it is obliged to pay tax to the seller of the timber. When the petitioners sell timber to a buyer, it is obliged to collect tax from the buyer. The petitioners come within the explanation of “buyer” as obtaining in Section 206C of the Act of 1961. What, when, whom and how much to tax is the domain of the legislature. A writ Court need not interfere therein unless it is substantiated that the statute breaches any constitutional provision. In the present case, Section 206C of the Act of 1961 obliges the petitioners, when they are buying timber to pay tax in advance and when selling to collect tax from the buyer. These, payments and collections are subject to the relevant assessment. None of the petitioners stand prejudiced in any manner. Requiring an assessee to collect tax on an incidence of taxation subject to final assessment cannot be said to be arbitrary. Circulars of Central Board for Direct Taxes will no doubt loose force on the statute undergoing subsequent amendments. The words used in Section 206C are clear. Therefore, there is no need to look into the legislative history or the marginal notes to interpret or understand Section 206C of the Act of 1961. K.P. Varghese (1981 (9) TMI 1 - SUPREME COURT) has no manner of application in the facts of the present case. It cannot be said that, it is beyond the legislative competence of the legislature to legislate amendments to Section 206C so as to widen its area of applicability or modulate its applicability to suit the emerging needs of the society.

  ---

• 2019 (4) TMI 784
  Reopening of assessment u/s 148 - validity of notice against dead person - father of the petitioner expired on 12.6.2016 and impugned notice was issued on 28.3.2018 - notice in the name of legal representative - Held that:- In the present case, the assessee has at first point of time objected to the issuance of notice u/s 148 and has not participated or filed any return pursuant to notice. Therefore, legal representatives not having waived requirement of notice u/s 148 and not having submitted to the jurisdiction of the AO pursuant to impugned notice, provisions of section 292A also would not be attracted and hence notice u/s 148 has to be treated as invalid. The facts in the present case are identical to the case of Chandreshbhai Jayantibhai Patel [2019 (1) TMI 353 - GUJARAT HIGH COURT] as in the facts of the present case also father of the petitioner expired on 12.6.2016 and impugned notice was issued on 28.3.2018. In facts of the present case, even prior to issuance of notice, department was aware about the death of the petitioner s father since on 13.3.2018 in response to the summons issued u/s 131(1A) the petitioner had intimated to the department about the death of his father. Therefore, it cannot be said that the respondent was not aware about the death of the father of the petitioner and he could have belatedly issued notice under section 159 of the Act upon the legal representatives of late Shri Kanubhai Nagjibhai Rajpara. The contention advanced that since Permanent Account Number of late Shri Kanubhai Nagjibhai Rajpara was active, it can be presumed that tax payer was alive, cannot be sustained in view of the fact that only because Permanent Account Number is active, petitioner or any assessee is not liable to file the return of income and on that basis it cannot be presumed that the assessee is alive, more particularly, when the department is made to know about the death of the assessee prior to issuance of the impugned notice. In view of the aforesaid settled legal proposition that no valid notice can be issued against a dead person, the impugned notice is required to be quashed and set aside. - Decided in favour of assessee.

  ---

• 2019 (4) TMI 783
  Interest on interest u/s 244A - delay in payment of refund - Tribunal relying upon the earlier decision of Sandvik Asia Ltd., Vs. CIT [2006 (1) TMI 55 - SUPREME COURT] dismissed the Revenue's Appeals - HELD THAT:- The earlier Judgement of the SANDVIK ASIA LIMITED VERSUS COMMISSIONER OF INCOME-TAX AND OTHERS [2006 (1) TMI 55 - SUPREME COURT] having been taken away by the later decision of Hon'ble Supreme Court in the case of CIT Vs. Gujarat Fluoro Chemicals [2013 (10) TMI 117 - SUPREME COURT] we remit the matter back to the learned Tribunal to decide the Appeals again in accordance with law, in view of the later decision of the Hon'ble Supreme Court and the amendment of law.

  ---

• 2019 (4) TMI 782
  Deemed grant of registration u/s 12AA - limitation prescribed under Section 12AA expired - tribunal remanded the matter back to the CIT(E) on the premise that it had not communicated the assessing officer s report to the assessee - After remand of the matter CIT (E) passed fresh order and rejected application of the assessee holding that the assessee was running the hospital for the benefit of family members of Shri B.L. Ranwa and there was no charity in it - nature of object and genuineness of activities - HELD THAT:- Once the matter was remanded back to the CIT(E) then the limitation for passing the order/decision cannot be more than the limitation provided for deciding the application under Section 12AA of the Act. There is no dispute that as per the provisions of Section 12AA(2) of the Act, limitation for granting or refusing the registration is prescribed as before expiry of six months from the end of the month in which the application was received. Relying on the judgment of the Supreme Court in Commissioner of Income Tax, Kanpur Others Vs. Society for the Promn. Of Edn. Allahabad [2016 (2) TMI 672 - SUPREME COURT] which upheld the judgment of CIT Vs. Sahitya Sadawart Samiti (2017 (8) TMI 374 - RAJASTHAN HIGH COURT) held that once the limitation prescribed under Section 12AA expired and the consequential default on the part of the CIT(E) in deciding the application would result deemed grant of registration is a settled proposition. Therefore, it has been held by the Tribunal that the judgment of the CIT(E) is reversed on merits and registration would stand granted to the assessee by prescription of law made in Section 12AA(2) of the Act. The Tribunal in this behalf relied on the judgment of Lucknow Bench of the Tribunal in Harshit Foundation Vs. CIT (2014 (6) TMI 298 - ITAT LUCKNOW) in which case it was held that where the Commissioner does not pass any order even after six months from receipt of Tribunal s order remitting the matter to him, the registration will be deemed to have been granted. This is subject to exercise of Commissioner s power under Section 12AA(3) of the Act in appropriate cases.

  ---

• 2019 (4) TMI 781
  TDS u/s 194H - Addition u/s 40(a)(ia) - assessee is only a distributor and an intermediary between the service provider and the retailer - deduction of TDS in respect of incentive/commission/discount to the retailers of re-charge vouchers/coupon - HELD THAT:- The assessee made payment to that M/s. Adeeco Flexion. Considering the judicial decisions as cited above, we set aside the impugned order of CIT(A) and remand the issue back to AO and the AO is directed to verify the fact regarding the payment of the tax by the recipient and if the AO finds that the recipient has included the amount in the total income in its return of income and paid taxes thereon, then the disallowance made by the AO by invoking the provisions of section 40(a)(ia) be deleted. We confirm the order of CIT(A) and dismiss this ground of appeal of revenue. Disallowance u/s 40(a)(ia) on contractual payment - HELD THAT:- The assessee made payment to that M/s. Adeeco Flexion. Considering the judicial decisions as cited above COMMISSIONER OF INCOME TAX-1 VERSUS ANSAL LAND MARK TOWNSHIP (P) LTD. [2015 (9) TMI 79 - DELHI HIGH COURT], we set aside the impugned order of Ld CIT(A) and remand the issue back to AO and the AO is directed to verify the fact regarding the payment of the tax by the recipient and if the AO finds that the recipient has included the amount in the total income in its return of income and paid taxes thereon, then the disallowance made by the AO by invoking the provisions of section 40(a)(ia) of the Act be deleted. Unexplained cash credit - advance money for purchase of goods - HELD THAT:- Advance made by the payer in this relevant assessment year as well as the fact that the goods for the amount in question has been sold by the assessee and the entire amount was adjusted in the next assessment year has not been found to be false even though brought to the notice of the department the assessee has discharged the onus casted upon it u/s. 68 of the Act. The facts narrated above has been corroborated by the assessee by placing these documents before us by producing the ledger account of M/s. Trisita Cellular which has been found placed and ledger account of M/s. Trisita Cellular for AY 2013-14 along with copies of invoice raised by the assessee found placed which goes on to show that the assessee has squared up by adjusting the sales of the goods for the amount which it has received as advance, therefore, no addition u/s. 68 is warranted and the same is directed to be deleted. - Decided in favour of assessee.

  ---

• 2019 (4) TMI 780
  Disallowance u/s. 14A to the book profit ignoring the section 115JB - expenses relatable to earning of exempt income - whether depreciation claimed by the assessee u/s. 32 can be considered for the purpose of computing disallowance u/s. 14A? - HELD THAT:- Assessee is assessed under the normal computational provision and not under book profit under MAT. So, in that view of the matter, the disallowance u/s. 14A added back u/s. 115JB which was deleted by CIT(A) and now urged in appeal by the revenue has no tax effect for the simple reason that the assessee company was finally assessed under the normal computational provision by the AO himself and the computation of book profit was only of academic interest having no bearing on the tax liability of the assessee, therefore, this ground of appeal of revenue is also to be dismissed. So, overall, we note that the tax effect in both the grounds of appeal below the threshold limit prescribed by the CBDT Circular No. 3/2018 dated 11.07.2018 and, therefore, the appeal of the revenue is dismissed. Disallowance on account of depreciation claim u/s. 14A read with rule 8D(2)(ii) - HELD THAT:- SHRI VISHNU ANANT MAHAJAN VERSUS ACIT BARODA [2012 (6) TMI 297 - ITAT, AHMEDABAD] section 14A uses the words “expenditure incurred by the assessee in relation to income”. A statutory allowance under section 32 is not an expenditure. Nector Beverages Pvt. Ltd. Vs. DCIT [2009 (7) TMI 5 - SUPREME COURT]

  ---

• 2019 (4) TMI 779
  Penalty u/s 271(1)(c) under Explanation 5A - assessee is engaged in the business of real estate activities but not filed return u/s 139(1) - notice u/s 153A - return filed u/s 153A disclosing Capital Gain which was accepted - bonafide belief or inadvertent mistake - HELD THAT:- A persistent default on the part of the assessee for not filing the return of income rules out the possibility of any bonafide or inadvertent mistake or belief as claimed by the assessee. The Explanation 5A to section 271(1)(c) creates a deeming fiction regarding concealment of particulars of income or furnishing inaccurate particulars of income irrespective of the fact that the assessee has declared in the return of income after search. Therefore, all the conditions as stipulated under Explanation 5A to section 271(1)(c) are satisfied in the case of the assessee and consequently the said Explanation is applicable in respect of the income which was disclosed only after search and seizure action and based on seized material. When the assessee’s case is covered by the said Explanation 5A, then the decision relied upon by the assessee will not help the case of the assessee as it is neither a case of bonafide mistake nor a case of bonafide belief but it is a continues default on the part of the assessee for not filing even return of income despite the activity in the real estate and earning the income therefrom. Accordingly, we do not find any error or illegality in the impugned order of the CIT(A) - Decided against assessee.

  ---

• 2019 (4) TMI 778
  Admission of additional evidences - no justification for non submission of details before AO - HELD THAT:- Ld. CIT(A) directed the AO to examine the evidences and submit his comments and accordingly, the AO has submitted its Report vide letter dated 28.7.2017 has submitted that the assessee has failed to specify any of the circumstances mentioned in Rule 46A of the I.T. Rules from Clauses (a) to (d). Further the assessee has not given justification before the Ld. CIT(A) as to why it failed to submit the evidences before the AO which he intends to submit before the Ld. CIT(A), therefore, in the absence of any such justification, Ld. CIT(A) has rightly dismissed the request of the assessee for admitting the additional evidences, which does not need any interference on my part, hence, I uphold the action of the Ld. CIT(A) on the issue of dispute and reject the ground (A) raised by the assessee. Disallowance of expenses - HELD THAT:- Details and vouchers have not been linked to verify the genuineness and quantum and the bills and vouchers are a few only. Hence, CIT(A) has rightly held that expenses as made by the AP appears to be reasonable and appropriate and therefore, the addition was correctly confirmed by CIT(A), which does not need any interference on my part, hence, uphold the action of the CIT(A) on the issue of dispute and reject the ground raised by the assessee. Addition on account of share capital and share premium - Addition u/s 68 - HELD THAT:- In the appellate proceedings, the assessee has also filed additional evidences in the form of share valuation report dated 20.3.2014 alongwith confirmation from the share holder namely Mr. Subhash Chander Randeva but with no confirmation from the creditors, hence, the additional evidences have not been admitted, as aforesaid. CIT(A) has rightly held that in the absence of any explanation to the nature and source of the credits and genuineness of transaction, he confirmed the addition of Rs. 22,00,000/-, which does not need any interference on my part, hence, uphold the action of the CIT(A) on the issue of dispute and reject the ground (D) raised by the assessee. Appeal of the Assessee is dismissed.

  ---

• 2019 (4) TMI 777
  Reopening of assessment u/s 148 - review v/s reopening - original assessment was completed u/s 143(3) - Addition u/s 68 as unexplained cash credit - HELD THAT:- The undisputed position that emerges is that AY under appeal is AY 2009-10 and the original assessment was completed u/s 143(3). The reassessment proceedings have been initiated vide issuance of notice u/s 148 dated 27/03/2014 which shows that the reassessment have been triggered within a period of four years from the end of the relevant assessment year and therefore, the rigors of first proviso to Section 147 viz. failure on the part of the assessee to fully and truly disclose all material facts necessary for the assessment, were not applicable to the fact of the present case. The only requirement to be fulfilled in such a case was that AO had reasons to believe that certain income escaped assessment in the hands of the assessee. At the same time, AO is not empowered to review the already concluded issues u/s 143(3) and review in the garb of reassessment was not permissible under the law. Further, mere reasons to suspect could not substitute reasons to believe. - Decided in favour of assessee.

  ---

• 2019 (4) TMI 776
  Taxability of Capital gain - land sold was agricultural land and fall under capital asset? - agricultural income from land accepted - AO treating the land as urban land and bring the long term capital gains to tax - HELD THAT:- Khasra revealed that there was standing crop of wheat and jwar on the land at the time of transfer. AO in the order u/s 143(3)/148 had accepted the agricultural income of the assessee - there is no explanation as to how the mutation could have taken place in the Revenue record if the land was put to commercial use as on the date of sale. Merely because the land was near the area said to be developed as industrial by 2021, without any notification from the competent authority, it cannot be said that the land in question loses its character and status of being an agricultural land. It is not the case of the Revenue that any competent government had issued any notice changing the nature of land from rural agricultural land in order to apply the provisions u/s 54B of the Act. Having accepted the agricultural income of the assessee and having possession of the record at the time of passing the order u/s 147/143(3) of the Act, it seems that the learned AO failed to appreciate the fact that unless and until a competent Government issues a notification or the conversion of the use of land takes place, land with standing crop whose mutation had taken place in the Revenue record, cannot be said to be a non agricultural land. - Decided against revenue

  ---

• 2019 (4) TMI 775
  Penalty u/s 271(1)(c) - defective notice - inappropriate words are not deleted - non specifying whether the assessee has concealed "particulars of income" or assessee has furnished "inaccurate particulars of income" so as to provide adequate opportunity to the assessee to explain the show cause notice - HELD THAT:- The penalty provisions of section 27l(1)(c) are attracted where the assessee has concealed the particulars of income or furnished inaccurate particulars of such income. It is also a well-accepted proposition that the aforesaid two limbs of section 271(1)(c) of the Act carry different meanings. Therefore, it was imperative for the Assessing Officer to strike- off the irrelevant limb so as to make the assessee aware as to what is the charge made against him so that he can respond accordingly. The Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] observed that the levy of penalty has to be clear as to the limb under which it is being levied. Also see DILIP N. SHROFF VERSUS JOINT COMMISSIONER OF INCOME-TAX AND ANOTHER [2007 (5) TMI 198 - SUPREME COURT] - Decided in favour of assessee.

  ---

• 2019 (4) TMI 774
  Nature of expenditure - salaries and training cost of employees - capitalized in the assessee’s books of accounts as “intangible assets” - AS-26 relating to the accounting treatment of intangible asset - revenue or capital expenditure - HELD THAT:- in the Notes on Accounts, it has been mentioned that the unamortized amount on account of intellectual property in the form of employee knowledge enhancement developed through various programmes and supported by employees agreements, are to be amortized equally over in the next three years as the utilization of resources in the current year is nominal. Therefore, it is stated clearly that the “intangible assets” has arisen only out of employee cost and training and that there is an enduring benefit out of the same, which is being spread over three years. It is also seen that for such types of training costs, whose benefit can be enduring and spread over a few years, AS-26 will apply, as mentioned in para 3 of AS-26. This supports the contention of the assessee that it was constrained to capitalize the expenses due to application of Accounting Standards (AS) and amortize it over a period of time, even though the nature of those expenses is Revenue in nature. Further, as was held in Kedarnath Jute Manufacturing Co. Ltd., Vs. CIT [1971 (8) TMI 10 - SUPREME COURT], relied upon by the CIT(A), the entitlement of the assessee to a particular deduction will depend upon the provisions of the Income Tax Act, 1961 and not on the entries in the Books of Account. The expenditure in question, is incurred in the form of salaries / training of employees and IRSE assessment cost, which are purely in the Revenue field. There is also no dispute that the said expenditure has been expended wholly and exclusively for the purposes of the assessee’s business. There is nothing on record to controvert the contention that these expenses are incurred for imparting skill to employees to enhance their knowledge. The findings rendered by the CIT(A) in this regard have not been controverted before us. The only contention raised by Revenue in the grounds of appeal is that the assessee itself has capitalized these expenses; which, in our view, cannot be the reason for denial of deduction.- Decided in favour of assessee.

  ---

• 2019 (4) TMI 773
  Penalty u/s 271(1)(c) - non specification of exact charge - whether the show cause is issued to the assessee for concealment of particulars of income or for furnishing inaccurate particulars of income? - HELD THAT:- Bare perusal of the notice issued u/s 27I(1)(c) apparently goes to prove that the Assessing Officer initiated the penalty proceedings by issuing the notice u/s 274/271(1)(c) without specifying whether the assessee has concealed "particulars of income" or assessee has furnished "inaccurate particulars of income", so as to provide adequate opportunity to the assessee to explain the show cause notice. Rather notice in this case has been issued in a stereotyped manner without applying any mind which is bad in law, hence is not a valid notice sufficient to impose penalty u/s 271(1)(c) of the Act. The penalty provisions of section 27l(1)(c) are attracted where the assessee has concealed the particulars of income or furnished inaccurate particulars of such income. It is also a well-accepted proposition that the aforesaid two limbs of section 271(1)(c) of the Act carry different meanings. Therefore, it was imperative for the Assessing Officer to strike- off the irrelevant limb so as to make the assessee aware as to what is the charge made against him so that he can respond accordingly. See COMMISSIONER OF INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013 (7) TMI 620 - KARNATAKA HIGH COURT) - Decided in favour of assessee

  ---

• 2019 (4) TMI 772
  Rectification of mistake - Correction of a mistake crept in the computation statement of income - assessee by an inadvertent mistake state the cost of acquisition as Rs. 2 lakh in place of Rs. 20 lakhs - HELD THAT:- In the present case, the assessee is not claiming any new/additional deduction. The prayer is to adopt the correct amount of Capital Gains, the particulars of which have already been furnished to and available with the Assessing Authority. Therefore, the decision rendered in the case of Goetze (India) Ltd. Vs. CIT [2006 (3) TMI 75 - SUPREME COURT] does not apply. CBDT Circular No. 14(XL35) dated 1110411955 provides for responsible assessment that the Assessing Authority to have reasonable approach in completing an assessment, to grant lawful and eligible deduction to the assessee, even if it was not claimed by the assessee. Assessing Authority has to see that the Income of the assessee has been determined after allowing all the lawful outgoings and statutory deductions. The recent judgment in the case of Raghavan Nair v. ACIT [2018 (1) TMI 863 - KERALA HIGH COURT] had held that it is the duty of the Assessing Officer to refrain from assessing an non-taxable income returned by the assessee on mistaken understanding. We are of the view that the assessee is entitled to the relief sought for in this appeal. - Decided in favour of assessee.

  ---

• 2019 (4) TMI 771
  Levy of penalty u/s 271(1)(c) - non specification of exact charge viz., whether the charge is that the Assessee has "furnished inaccurate particulars of income" or "concealed particulars of income" by striking out the irrelevant portion of printed show cause notice - HELD THAT:- Bare perusal of the notice issued u/s 27I(1)(c) apparently goes to prove that the Assessing Officer initiated the penalty proceedings by issuing the notice u/s 274/271(1)(c) without specifying whether the assessee has concealed ''particulars of income" or assessee has furnished "inaccurate particulars of income", so as to provide adequate opportunity to the assessee to explain the show cause notice. Rather notice in this case has been issued in a stereotyped manner without applying any mind which is bad in law, hence is not a valid notice sufficient to impose penalty u/s 271(1)(c) of the Act. The penalty provisions of section 27l(1)(c) are attracted where the assessee has concealed the particulars of income or furnished inaccurate particulars of such income. It is also a well-accepted proposition that the aforesaid two limbs of section 271(1)(c) carry different meanings. Therefore, it was imperative for the Assessing Officer to strike-off the irrelevant limb so as to make the assessee aware as to what is the charge made against him so that he can respond accordingly. The Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory (2013 (7) TMI 620 - KARNATAKA HIGH COURT) observed that the levy of penalty has to be clear as to the limb under which it is being levied. - Decided in favour of assessee.

  ---

• 2019 (4) TMI 770
  Reopening of assessment u/s 148 - validity of reasons to believe - reimbursement of claim of LTC was not offered for tax by the assessee - HELD THAT:- Provisions of sec. 147 r.w.s. 148 are not applicable since the reasons recorded for reopening the assessment are not valid as per law. On this issue we have perused the material on record and it is noticed that AO has reopened the case of the assessee on the ground that while availing LTC the assessee has also performed journey to foreign destination and such kind of LTC is not exempt u/s. 10(5) of the Act. The reimbursement of such claim of LTC was not offered for tax by the assessee. No merit on this ground of appeal of the assessee that provision of sec. 147 r.w.r. 148 are not applicable in the case of the assessee . The assessee has also failed to substantiate how the reason recorded for reopening assessment were not valid. Therefore, we do not find any merit in this ground of appeal of the assessee. Accordingly, this ground of appeal of the assessee stand dismissed. Addition on account of Leave Travel Concession claim by the assessee by virtue of sec. 10(5) - HELD THAT:- We find that as per provision of sec. 10(5) of the Act only that reimbursement of travel concession or assistance to an employee is exempted which was incurred for travel of the individual employee or his family members to any place in India and nowhere in this clause it had been stated that even if the employee travel to foreign countries, exemption would be limited to the expenditure incurred to the last destination in India. On identical facts and similar issue in proceedings under section 201(1) &201(IA) of the act the relevant part of the decision of the ITAT Lucknow in the case of the State Bank of India Vs. DCIT(TDS) [2016 (3) TMI 282 - ITAT LUCKNOW] of the view that the said sub-section provides that where an individual had received travel concession or assistance from his employer for proceeding on leave to any place in India, both for himself and his family, then such concession received by the employee is not taxable in the hands of the employee. Similar exemption is allowed to an employee proceeding to any place in India after retirement of service or after the termination of his service. The provisions of the Act are in relation to the travel concession/assistance given for proceeding on leave to any place in India and the said concession is thus exempt only where the employee has utilized the travel concession for travel with in India. In view of the above facts and provision of law we do not find any infirmity in the decision of Ld. CIT(A) therefore, the appeal of the assessee is dismissed.

  ---

• 2019 (4) TMI 769
  Benefit of sections 11 and 12 - Charitable activity or not? - disallowance of capital expenditure and addition made on account of disallowance of ECP contribution expenses by applying provisions of section 2(15) - HELD THAT:- The assessee trust is engaged in the activity of preservation of environment by treating and controlling pollution of environment i.e. land and water. As a part of its activities, trust is running a common effluent treatment plant for treatment of effluent and wastewater generated and discharged by the Industrial units situated in and around Nandesari Industrial Units, who are members of the assessee trust. This is in accordance with the requirement of Environment Protect Act and various notifications and guidelines issues by the Central, State Governments, and Pollution Control Boards. Assessee is charging fees from members for meeting operating costs. This factual position has not been disputed by the AO. According to the AO provision of section 2(15) is applicable to the assessee-trust, because the predominant object of the assessee is in the nature of trade, business or commercial activities and to make profit, and therefore, there is no exclusive usage of income or profit for the charitable purpose as defined in section 2(15) and therefore, the assessee is not entitled for benefit under section 11. CIT(A) has considered both the issues in detail and observed that the activities of the assessee trust clearly falls within the ambit of the clause of preservation of environment and the assessee is eligible for all the benefits under sections 11 and 12 and all the capital expenditure incurred by the assessee has to be considered as application of income. By holding so, CIT(A) has also treated ECP contribution as part of application of income, and accordingly disallowance to this extent also deleted. As decided in assessee's own case Asstt.Year 2010-11 the assessee and conclude that it was indeed not a fit case for invoking proviso to section 2(15) merely because the assessee was charging the fee for the services rendered to the industrial unit. - Decided against revenue.

  ---

• 2019 (4) TMI 768
  Addition u/s 14A r.w.r. 8D - HELD THAT:- AO will invoke Rule 8D only when he records that he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. In the case under appeal, we do not find any proper satisfaction having been recorded by the Assessing Officer in the light of Section 14A(2). It is also stated by the AR that in the preceding as well as subsequent years, the disallowance made by the assessee was accepted by the Assessing Officer himself and no further disallowance has been made by invoking Rule 8D. In view of the above, we deem it appropriate to delete the additional disallowance made by the Assessing Officer. TDS u/s 194J - Disallowance u/s 40(a)(ia) - non-deduction of tax on payment of transmission charges - HELD THAT:- The issue is squarely covered in favour of the assessee by the decision of the Tribunal in assessee’s own case for the Assessment Year 2012-13 [2018 (3) TMI 1080 - ITAT DELHI] on identical facts stating AO has completely failed to bring relevant materials, whatsoever, on record to prove the existence of human interface/element in the present case. The Tribunal deleted the disallowance made by the Assessing Officer u/s 40(a) (ia) for non deduction of tax at source on transmission charges. Besides that no tax is required to be deducted at source from the amount of Rs. 6,55,09,814 out of the total expenditure on transmission and wheeling charges of Rs. 18,41,83,032 incurred by the assessee during the year under consideration, being reimbursement of cost.The Ld. DR could not controvert this factual aspect. It is just and proper not to withheld tax from transmission charges - Decided in favour of assessee.

  ---

• 2019 (4) TMI 767
  Preoperative expenditure allowability - Allowable expenditure u/s 37 - HELD THAT:- Since the expenditure has been capitalized in the books of accounts and claimed only in the computation of income, no deduction thereof including depreciation, in any manner, would be allowable to assessee against the same in any assessment year. The consequential depreciation of 15% as allowed by AO shall stand reversed. AO is directed to allow deduction of the impugned expenditure subject to verification of the fact that depreciation against the stated expenditure has not been allowed to the assessee in the computation of income either in impugned AY or in subsequent years. Disallowance u/s 36(1)(iii) - loan granted by the assessee to its subsidiary company - HELD THAT:- Where the funds were diverted for non-business purposes i.e. either to make investments or to advance interest free loans. Therefore, the lower authorities were not justified in disallowing the same particularly in view of the fact that fresh loans granted by the assessee to the said entity during impugned AY was only to the tune of Rs. 88.78 Lacs. Another factor is to be noted that the loan has been granted by the assessee to its subsidiary company and AO has rejected the stand of the assessee on the ground that the business of the subsidiary could not be considered in law as the business of the assessee without controverting the fact that the aforesaid subsidiary was also engaged in the business of running the restaurants and without appreciating the fact that the assessee would derive business benefits out of the same. In such a scenario, the ratio of decision of Hon’ble Apex Court rendered in S.A. Builders Vs. CIT [2006 (12) TMI 82 - SUPREME COURT] would also become applicable to the facts of the case. Therefore, viewed from any angle, the impugned disallowance, in our opinion, could not be sustained - Decided in favour of assessee.

  ---

• 2019 (4) TMI 766
  Levy of penalty u/s 271(1)(c) - non specification of charge - addition of unexplained investment in Firm and on the addition of agricultural income as income from other sources - HELD THAT:- Admittedly, as noticed from the assessment order, find that no such satisfaction as contemplated u/s.271(1)(c) have been recorded by the Assessing Officer while completing the assessment that in which limbs, the issue is following. The Assessing Officer has simply mentioned that “penalty proceedings u/s.271(1)(c) are initiated separately”, Case of VV PROJECTS AND INVESTMENT P. LTD. VERSUS DEPUTY CIT [2007 (12) TMI 97 - ANDHRA PRADESH HIGH COURT] followed - Decided against revenue

  ---

• 2019 (4) TMI 765
  Disallowance of Foreign Exchange Fluctuation loss - treating the same as capital in nature - HELD THAT:- The assessee offered the interest earned on loan given to RIDO to income tax. The entire loan was repaid by RIDO during the assessment year under consideration as can be seen from Schedule 9 of the Notes to Accounts. As per AS-11, treatment of foreign exchange loss arising out of foreign currency fluctuations in respect of fixed assets acquired through loan in foreign currency shall required to be given in profit and loss account and the same should be allowed as revenue expenditure. The Hon’ble Apex Court in Woodward Governor India (P) Ltd (2009 (4) TMI 4 - SUPREME COURT) had followed treatment of exchange loss or gain as per AS-11 (1994). In view of revision made in AS-11 in 2003, exchange gain or loss on foreign currency fluctuations in respect of foreign currency loan acquired for acquisition of fixed asset should be allowed as revenue expenditure. In the present case, the CIT(A) as well as the AO has not taken into account the decision of the Apex Court in case of Indian Cements Ltd. [1965 (12) TMI 22 - SUPREME COURT] wherein it was held that the nature of expenditure being capital or revenue does not depend on the purpose for which foreign currency loan was obtained or on nature of ultimate utilization of loan amount - as per the accounting policy AS-11 (2003), the assessee is entitled to claim such foreign currency fluctuation loan as an allowable expenditure u/s 37 (1) - CIT(A) was incorrect in disallowing the foreign exchange fluctuation loss of by treating it as capital in nature. - Decided in favour of assessee Disallowance of claim of Leave Encashment on provision basis - Addition u/s 43B - HELD THAT:- Leave Encashment under no circumstance can be called as a statutory liability/payment so as to invoke the provision of Section 43B as it is for the benefit of employees which accrues in lieu of the un-availed leave during the tenure of one’s service in the organization. The ratio set out in case of Exide Industries Ltd. [2007 (6) TMI 175 - CALCUTTA HIGH COURT] is applicable in the present case as in that decision it was held that leave encashment not being a statutory liability or a contingent liability, enactment of Sec. 43B(f) is not consistent with the original provision of Sec. 43B, and the legislature having disclosed no reasons while inserting the said clause, Sec. 43B(f) is struck down being arbitrary and unconscionable. Ground No. 2 of the assessee’s appeal is allowed. Disallowance of loss on account of foreign exchange fluctuation in computing book profit u/s 115JB - HELD THAT:- Section 115JB is an overriding section, as it is specifically mentioned in that section that the other provisions of this act is not applicable while computing book profit u/s 115JB of the Act is correct as per the Income Tax Act, 1961. In the absence of any provision in Explanation 1 to Sec. 115JB to make addition on account of expenditure towards foreign exchange fluctuation loss, the addition made by the AO is erroneous.Assessing Officer while computing the book profits of a company u/s 115J has only the power of examining whether the books of accounts are certified by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. Sub-section (1A) of section 115J does not empower the Assessing Officer to embark upon a fresh enquiry in regard to the entries made in the books of accounts of the company. Ground No. 3 of the assessee’s appeal is allowed. Depreciation at 15% on Oilers Gas - higher rate of depreciation - @15% OR 60% - HELD THAT:- In the instant case of the assessee, both the conditions are duly satisfied since the oil rigs being plant of 'specific category' are owned by the assessee and further it is used in drilling operations for the purpose of exploration & extraction of mineral oil in the field of mineral oil concerns. The assessee claimed depreciation @ 60% on Oil rigs which has been used for drilling operations in the oil field of mineral oil concerns as per entry at Part A-III-(8) (xii) of New Appendix I, applicable from Assessment Year 2006-07 onwards. The same is evident from Annexure B to the Tax Audit Report for relevant assessment year. See M/S. HLS INDIA LTD. [2012 (2) TMI 669 - SUPREME COURT OF INDIA]].

  ---

• 2019 (4) TMI 764
  Assessment u/s 153A - addition u/s 68 - assessment for the impugned year had not abated - HELD THAT:- The Ld.DR has not substantiated his contention that the Investment was from undisclosed cash credit, with any cogent evidence. No nexus has been shown to us by the DR between the unexplained cash deposited in bank and the investment made for purchase of land, documents pertaining to which were found during search. In the absence of any link having been established by the DR between the unexplained cash deposits and the investments found to have been by the assessee during search, we see no reason to view the two documents together to hold that the documents pertaining to the cash credits were incriminating documents found during search for the purpose of making addition u/s 153A of the Act, as argued by the DR. We therefore dismiss the contention of the Ld.DR. We hold that the addition u/s 68 on account of unexplained cash deposit in Bank & unexplained loan taken of was not based on any incriminating material found during search and could not be made u/s 153A. The addition so made is therefore directed to be deleted. - Decided in favour of assessee.

  ---

• 2019 (4) TMI 763
  Assessee in default u/s 206C - PIDB had received certain amounts from the contractor in awarding / entering into Concession Agreement for toll plaza operation / Toll based operation and maintenance concession for certain segments of roads - PIDB is just a nodal agency of the Punjab Government or acting as it own capacity - HELD THAT:- The actual activity performed by the assessee Board and other surrounding circumstances, it is apparent and clear that the Board has acted as a grantor of the concession on its own account on a principle to principle basis with the ‘concessionaire’ and has been performing all the functions actually and practically of the granter of the concession agreement. The irrespective of the wordings of the concession agreement or the confusion and ambiguity coming out of the provisions of the PI (D&R) Act 2002, the fact relevant for determination of the present tax dispute is that the assessee Board had collected the toll fee or to say Concession fee in its own capacity as an independent body corporate and had used the funds for its own purposes and activities, and as such, the assessee Board (PDBI) falls under the definition of Licensor and has acted as a Grantor of the licensee /contract in the Toll Plaza to the concessionaire and has received from the licensee / concessionaire the consideration for the award of said contract and, as such, it was liable to collect tax at source as per the provisions of section 206C (1C). The contention of the assessee that it was not merely grant of usage of toll plaza, rather, the concessionaire was responsible for the overall operation and maintenance of the project facility, is concerned, the assessee could not establish from the evidence or documents on record that as to why these agreement be not treated as agreement for grant of license / toll rights as per the provisions of section 206 C(1C). A perusal of the License /concession agreements relating to these appeals, considering the nature, scope and ambit of the agreement and also considering the actual activity carried on by the assessee PIDB, we are of the firm view that the provisions of section 206C(1C) are squarely applicable to the case in hand. Being held so, the assessee ‘PIDB'. As per the law laid down in M/S PUNJAB INFRASTRUCTURE DEV. BOARD, CHANDIGARH [2016 (12) TMI 1534 - PUNJAB AND HARYANA HIGH COURT] is held to be liable to pay interest as per the provisions of section 206C(7) and penalty under the provisions of section 271CA of the Act. In view of the above, the issue restored by the Hon'ble High Court to the Tribunal, is decided against the assessee and in favour of the Revenue.

  ---

• 2019 (4) TMI 762
  Exemption & application u/s 11 - Deductability of standard deduction u/s 24(a) against rental income in case of a trust/institution - standard deduction @30% vs actual expenditure - HELD THAT:- It is the settled position of law that once income of a trust / institution is computed under the provisions of section 11, whatever income derived from the property held under trust is to be taken into account and against which actual expenditure incurred for the objects of the trust has to be considered as application of income. Therefore, while arriving at income u/s 11, the AO needs to allow deduction towards actual repairs and maintenance expenses incurred for Rs. 13,00,635. Therefore, we direct the AO to allow deduction towards actual repairs and maintenance expenditure incurred before arriving at income available for accumulation u/s 11(2) / taxable income of the trust / institution. Computation of capital gain u/s 11(1)(a) in case of trust - deduction towards re-purchase of mutual funds purchased - HELD THAT:- The issue raised by the assessee in respect of deduction towards re-purchase of mutual funds purchased out of sale consideration received from sale of investments u/s 11(1)(a) is either not discussed by the AO in his assessment order nor emanating from the records furnished by the assessee before the lower authorities. Although, the assessee has disclosed profit on sale of investments in the P&L Account, other facts with regard to the re-investment on sale consideration for purchase of mutual funds is not clear. The assessee neither made any claim in the return of income filed for the year nor sought to include such claim by way of revised return or revised statement of total income before the AO. When there is no claim with regard to deduction towards re-investment u/s 11(1)(a), before the AO and also the facts with regard to the issue is not placed at the time of assessment proceedings, the Ld.CIT(A) had no option but to proceed on the basis of materials brought out by the AO during assessment proceedings. Accordingly, we find no infirmity in the finding recorded by the CIT(A) in dismissing ground taken by the assessee regarding deduction towards capital gain income derived from sale of investments u/s 11(1)(a). Accumulation of income u/s 11(2) - AO has allowed accumulation of income u/s 11(2) as per the details filed by the assessee alongwith form 10 - Revised accumulation - HELD THAT:- In this case, the facts with regard to the availability of funds for making investments are under dispute. The assessee failed to file any details with regard to the availability of funds for making investments in the modes specified u/s 11(5). Therefore, we are of the considered view that there is no merit in the argument of the assessee that it has accumulated income u/s 11(2) of the Act, for the purpose of object of the trust in compliance with provisions of section 11(5). Therefore, we reject the ground taken by the assessee. - Decided against assessee.

  ---

• 2019 (4) TMI 761
  Bogus purchases - additions to the tune of 12.5% - HELD THAT:- Hon’ble Supreme Court in the case of Kanchwala Gems v. JCIT [2006 (12) TMI 83 - SUPREME COURT] has held that in best judgment assessment an honest and fair estimate of income is to be made. We at this stage do not want assessee to be relegated to pains of another round of litigation based on material on record. In our considered view based on facts and circumstances of the case, we find that estimation of profit by CIT(A) to the tune of 12.5% of the alleged bogus purchases as income of the assessee over & above what was declared by the assessee in his return of income, is considered to be a reasonable and fair estimate , which we confirm/affirm. In the result, the appeal of the revenue on this ground stood dismissed. Set-off of carried forward depreciation against the income of the current year - HELD THAT:- AO has observed that assessee has already sought set off of this un-absorbed deprecation against the income of years prior to the impugned assessment year which was not allowed by the AO for those years. However, since the claim of the assessee is now allowed by the tribunal as above, the AO is directed to make necessary verification while allowing set off of un-absorbed deprecation for AY 1998-99, 1999-00 and 2000-01 against income of the impugned assessment to ensure that the same was not allowed for earlier years to avoid duplications. CIT(A) has also given similar directions to the AO for verifications to avoid duplication of the same claim. We donot find any infirmity in the order of learned CIT(A) granting relief to the assessee for the impugned assessment year. The Revenue fails.

  ---

• 2019 (4) TMI 760
  Additions u/s 68 - unexplained credit - HELD THAT:- There was an outstanding credit balance in the name of M/s Noble Cashew Industries as on 31.03.2011 in the books of the assessee. On verification of the books of accounts of the creditor, it is found that there was no balance outstanding against the assessee, which indicates that the credit balance shown in the books of the assessee is bogus. During the appeal hearing, the AR could not place any evidence to prove the genuineness of the outstanding either before the CIT(A) or before the Tribunal. Therefore we do not find any reason to interfere with the order of the CIT(A) and the same is upheld. The appeal of the assessee on this ground is dismissed. Bogus expenditure - HELD THAT:- The assessee failed to provide any evidence or ledger extracts to prove the identity of the creditor and the genuineness of the outstanding. Though non-furnishing of account copies does not lead to addition, it is incumbent upon the assessee to prove the genuineness of the outstanding creditors. Since the assessee failed to furnish any primary evidence with regard to the identity, genuineness and the existence of the said creditor, we uphold the order of the CIT(A). Accordingly, the appeals of the revenue as well as of the assessee on this issue are dismissed. Addition of un-reconciled balances in the accounts of four sundry creditors - HELD THAT:- There were differences in outstanding balance of the creditors accounts vis-à-vis the assessee. The assessee has furnished the reconciliation and the CIT(A) has verified the accounts and satisfied with regard to the correctness of the balances. Since the CIT(A) has satisfied with regard to the correctness of the out standings and the differences were duly reconciled, we do not see any reason to interfere with the order of the CIT(A) and the same is upheld. Accordingly, Ground of the Revenue are dismissed. Addition on account of credit balance in the name of Rajkumar Impex Pvt. Ltd - HELD THAT:- Having accepted the purchases and the payments were made through cheques, there is no reason to suspect the purchases. The AO without reconciling the account, made the addition. Further in case of trade creditors, if there is a bogus purchase, the AO is required to make addition u/s 37(1), but not u/s 68 of the Act. Similarly, if the AO suspects that the payments are made outside the books of accounts, the AO is free to make the addition, but no such evidence was brought on record by the AO. In the instant case, Rajkumar Impex Pvt. Ltd. is a trade creditor and the AO has accepted all the purchases and the payments which were made through cheques and no evidence was brought on record that the assessee has made the payment outside the books of accounts. Hence, there is no reason to make the addition, accordingly, the appeal of the CIT(A) is upheld and the appeal of the revenue is dismissed.

  ---

• 2019 (4) TMI 759
  Salary earned in USA - Global income - Income accrued in India - On becoming a dual resident India & USA, the question arises as to which country has the right to tax his income - entire global income is liable to tax in India - Article 4(2) of DTAA with USA - tiebreaker rule for ‘Centre of Vital Interests’ - HELD THAT:- It is no doubt true that the Tax Residency Certificate [“TRC”] was filed by the assessee only before the CIT (A), but we are of the view that the CIT(A) has made only a passing reference to the TRC and has not based his conclusion that the assessee is a tax resident of USA for the period between 11.08.2012 to March, 2013 on the basis of the same. CIT(A) has applied the test of closer personal and economic relations (centre of vital interest) as he found that the assessee had a permanent home in India as well as US. His conclusions on the basis of the facts presented by the assessee that supporting evidence cannot be faulted with. We are therefore of the view that there is no merit in ground raised by the revenue.

  ---

• 2019 (4) TMI 758
  Determination of Long term capital asserts - Deduction u/s 54EC - AO observed that the land was purchased by assessee on 03.05.2008, therefore, the capital gain treated as a short term capital gain - HELD THAT:- The acquisition of the land is liable to be considered on the earlier date of execution of agreement i.e.23.07.1996. To arrive at this conclusion, we also find the support of law settled in M/S RAJASTHAN AGENCIES PVT. LTD. VERSUS THE ITO, WARD-3 (2) , JAIPUR [2018 (2) TMI 257 - ITAT JAIPUR]. The assessee acquired the property in question by virtue of agreement dated 23.07.1996 and thereafter, sold the same on 23.07.2008 and subsequently invested in the bonds in sum of Rs. 30,00,000/-. The consideration received by the assessee is liable to be assessed as long term capital gain and accordingly the claim of the assessee is also liable to be considered in view of the provision u/s 54EC in connection with the investment in bonds in sum of Rs. 30,00,000/-. - Decided in favour of assessee.

  ---

• 2019 (4) TMI 757
  Bogus purchases - non-service of notice u/s 133(6) to the suppliers - HELD THAT:- CIT(A) after considering all these facts has recorded categorically finding of the fact that no contrary evidence has been brought on record by the AO to prove that purchases from above two parties are non-genuine except non-service of notice u/s 133(6). On the other hand, the assessee has filed complete details along with stock register execise audit report and transportation documents to prove that these purchases are genuine. Therefore, there is no error in the findings recorded by the Ld. CIT(A) in deleting the additions towards 25% of unverifiable purchases. Hence, we reject the ground taken by the Revenue. Unexplained cash credit u/s 68 - none of the parties were responded in response to summons issued u/s 131 - HELD THAT:- Where the assessee has taken loans from genuine parties which were verified in the previous financial year, but for changed circumstances, the AO has taken different view to make additions u/s 68 then no additions could be made when the credit has been brought out from previous financial year. In this case, it is undoubtedly proved that those companies are hawala operators involved in providing accommodation entries. When facts gathered during the course of assessment proceedings clearly proves that these are accommodation entry providers, the ratio laid down by Hon’ble Delhi High Court USHA STUD AGRICULTURAL FARM LTD. [2008 (3) TMI 91 - DELHI HIGH COURT] cannot be applied to delete additions. Accordingly, we are of the considered view that Ld. CIT(A) was erred in deleting additions made towards loans from M/s Chandimata Management Pvt. Ltd. and M/s Max Worth Project Pvt. Ltd. Hence, we reverse findings of the CIT(A) and sustained additions made towards loan taken from above two companies. DR failed to controvert the findings recorded by the CIT(A) in light of evidences filed by the assessee in respect of parties. On the other hand, AR for the assessee has also failed to file further evidence in respect of three parties, where the CIT(A) has confirmed addition to justify loans taken from the above parties. Therefore, we are of the considered view, there is no error in the findings recorded by the CIT(A) in respect of unsecured loans taken from these parties and accordingly we are inclined to upheld the findings of the CIT(A) and rejected ground taken by the Revenue as well as the assessee. Adhoc disallowance of certain expenses - HELD THAT:- CIT(A) has recorded categorical finding that the assessee neither submitted bills and other evidences nor address of person to whom such payments were made. Further, the assessee failed to prove above expenses are incurred wholly exclusively for the purpose of business of the assessee. Before us no change in facts. The assessee has failed to provide any evidence to prove that findings of facts recorded by the Ld. CIT(A) are incorrect. CIT(A) was right in confirming additions made by AO towards ad-hoc disallowance of expenses. Hence, we are inclined to uphold findings of the CIT(A) and reject ground taken by the assessee.

  ---

• 2019 (4) TMI 756
  Reference u/s. 55A to DVO - capital gain u/s. 50 to be arrived at with reference to the ‘full value of the consideration’ - FMV determination of depreciable assets - HELD THAT:- The matter, accordingly, vacating the findings by the assessing and the first appellate authority, is set aside to the file of the AO for adjudication of this issue afresh in light of the foregoing per a speaking order, issuing definite findings of fact. The assessee claiming non-grant of opportunity by the VO, shall be allowed reasonable opportunity of hearing before him, i.e., where his report becomes relevant. This is even otherwise necessary as valuation is a technical matter. It may though be clarified that a failure to explain the transaction value may invite adverse inference – the adoption of fmv, or any other value, should only be a clear inferential finding of that being the actual consideration. It is for this reason that it stands clarified that the matter should be closed where no tax advantage is found. In K. P. Verghese v. ITO [1981 (9) TMI 1 - SUPREME COURT] read down section 52(2) (since omitted) deeming the fmv as the full value of the consideration on the shortfall in the latter exceeding 15% by holding that the same shall not impinge on a honest and bona fide transaction. The parties in that case were related, and the asset, personal. In the instant case, though the parties are related, the assets are business assets. Also firms are separate persons under the Act, so that there could be no question of the emotions having influenced the transaction, which is commercial in nature. The said decision should, in my view, be regarded as final arbiter in the matter. That is, only on the bonafides being impugned, as where there is a tax avoidance coupled with no reasonable explanation with regard to the stated consideration, that the same could be disturbed. And, further, only consistent with the irresistible inferential findings - assessee’s and the Revenue’s appeal is allowed for statistical purposes

  ---

• 2019 (4) TMI 755
  Liability to tax being as State under Article 289 of the Constitution of India and engaged in public utility services - immunity from the taxation - assessee board was set up by State Government by enacting law - CBDT notification dated 29.03.2016 exempting specified income u/s 10(46) - artificial juridical person as defined in section 2(31) - AO after re-opening of the assessment completed the assessment u/s 144 - AO took the view that assessee is a “Body Corporate” having perpetual successor and a common seal - HELD THAT:- The assessee is not rendering any services in the nature of trade, commerce or business for a fees or any other consideration, rather, the assessee engaged in regulation of educational activities as per the statutory obligation conferred on the assessee Board. Even otherwise as we have noted earlier every activities of the assessee Board is subject to superintendence, instruction and control of the State Government. In our view, the assessee Board is completely controlled financially as well as administratively by the Government, thus, falls under the definition of “State” as per Article 12 of the Constitution of India. The exemption in the CBDT notification dated 29.03.2016 is valid for Financial Year 2015-16 to 2018-19. Admittedly no return of income was filed by the assessee for the assessment year under consideration. The ld. AR initially argued that under bonafide mistaken belief that the assessee is being instrument of state is exempted from filing return of income, the assessee has not file return of income for the assessment year under consideration. Considering the facts that the assessee Board is under complete superintendence, and control of the State Government financially as well as administratively falls under the definition of “State” as per Article 12 of the Constitution of India. And in our view is entitled for immunity from the taxation of its income under the provisions of Income-tax Act. our view is further got the support that CBDT vide its notification date 29.03.2016 has granted exemption of taxation to the assessee board. - Decided in favour of assessee.

  ---

• 2019 (4) TMI 754
  Reopening of assessment u/s 147 - AO non disposing objections before proceeding with the assessment by passing a speaking order - HELD THAT:- The re-assessment cannot be sustained. As observed herein above though the preliminary objection was raised against reopening of the assessment, the AO did not dispose of the same till the conclusion of re-assessment proceedings and passed order under section 147 of the Act and even on the directions of the Tribunal, the Ld. CIT(A) who had the coterminus powers with the AO has not adjudicated the same. AO is under a mandate to dispose of such objections before proceeding with the assessment by passing a speaking order and even the Ld. CIT(A) has co-terminus with the powers of AO, which have not been exercised by them, therefore, the reassessment under section 147 cannot be sustained - Decided in favour of assessee.

  ---

• 2019 (4) TMI 753
  TP adjustment - AMP expenditure treated as an international transaction u/s 92B(1) read with clause (v) of section 92F - Taking a leaf out of Bright Line Test [BLT] - HELD THAT:- Nowhere the DRP has brought on record or referred to any tangible material which could suggest that there are expenses of international transaction in so far as AMP spend is concerned. The DRP was well aware with the decision of the Hon'ble Delhi High Court in the case of Maruti Suzuki [2015 (12) TMI 634 - DELHI HIGH COURT], yet neither the DRP itself brought on record any material to suggest that the AMP spend is an international nor it directed the TPO to do the same. Therefore, we see no reason to remit the matter to the file of the TPO as is prayed for by the ld. DR. Remand to the assessment stage cannot be a matter of routine. It has to be so done only when there is anything in the facts and circumstances to so warrant or justify - no new facts have emerged and all the facts brought on record during the course of scrutiny assessment proceedings do not indicate legally sustainable basis for remitting the matter to the file of the TPO. Revenue has failed to demonstrate by bringing any tangible material evidence on record to show that international transaction does exist so far as AMP expenditure is concerned. Therefore, we hold that the incurring of expenditure in question does not give rise to any international transaction as per judicial discussion hereinabove. - Decided in favour of assessee Adjustment to transaction pertaining to receipt of Information Technology Support Services - Arm’s Length principle satisfaction - HELD THAT:- We find that a similar quarrel arose in A.Y 2010-11 and the matter travelled upto the Tribunal and hold that the international transaction of `Receipt of I.T. Support Services' is required to be separately benchmarked, distinct from the international transactions of purchase etc. Since the view of the TPO as regards the receipt of no services etc. has been set aside by us, we remit the matter to the AO/TPO for determining the ALP of this international transaction afresh as per law after allowing a reasonable opportunity of being heard to the assessee Allowable revenue expenses - proof of payment in relation to the services received from M/s Bhumi Consultants - HELD THAT:- There is no dispute that the impugned transaction took place in F.Y. 2010-11. The Inspector carried out his inspection in the month of March 2015. There is every possibility that M/s Bhumi Consultants must have moved away from the given address. Be that as it may, the assessee should have filed documentary evidences to prove that the assessee did receive services from M/s Bhumi Consultants. Before us also, no such evidence has been brought on record. Whatever evidences the assessee has furnished only establishes the identity of M/s Bhumi Consultants and that the payments have been made through banking channel after deducting tax at source. But not a single evidence has been place on record which could conclusively prove that the assessee did receive services from M/s Bhumi Consultants in lieu of which payments were made. We are of the considered view that unless such evidences are brought on record, the expenses cannot be considered as allowable expenditure. We, therefore, remit this issue to the file of the Assessing Officer.

  ---

• 2019 (4) TMI 742
  Disallowance of interest expenditure u/s 57(iii) - borrowed funds invested in the company for the purpose of business - commercial expediency - Assessee has claimed the interest expenditure under the head income from other sources which resulted into loss and same was claimed as set off against the income from capital gains and the business income - HELD THAT:- There is no dispute that the assessee has borrowed the funds and made the investments in the business. The Assessing Officer did not make out a case that the assessee has diverted the funds for non-business purpose. Business consideration is the decision of the assessee, but not the Assessing Officer. The Hon ble Supreme Court in the case of S.A. Builders Ltd. Vs. CIT [2006 (12) TMI 82 - SUPREME COURT] held that the expression of commercial expediency is an express of wide import and includes such expenditure as a prudent businessman incurs for the purpose of business. The assessee has made the investments for the purpose of business and paid the interest. The income under the head income from other sources resulted into loss which was claimed for set off under section 71 of the Act. Intra head loses are allowable to be set off against other sources of income in the same assessment year. Since the Assessing Officer did not make out a case that the assessee has diverted the funds for non-business purposes, we do not see any reason to interfere with the order of the ld. CIT(A) and the same is upheld. Appeal of the Revenue on this ground is dismissed. Disallowance u/s 14A r.w.r. 8D - interest on borrowed funds for investment in M/s. Vishnu Priya Hotels Pvt. Ltd.which yield dividend income which is exempt from the total income - diverting of funds for non-business purposes - HELD THAT:- Assessing Officer has invoked section 14A r.w.r. 8D incorrectly and made the disallowance without having earned the dividend income. On an identical issue, in the case of M/s. Redington (India) Ltd. [2017 (1) TMI 318 - MADRAS HIGH COURT] has taken a view that no disallowance is called for under section 14A in the absence of dividend income. Also see P. Venkateswara Rao Vs. ACIT [2018 (12) TMI 514 - ITAT VISAKHAPATNAM] Addition based on Loose sheets found in search - Black money receipt - on money consideration for sale of the flat - HELD THAT:- In the instant case a loose sheet was found evidencing the on money consideration for sale of the flat. The said loose sheet was not in the handwriting of the assessee or of any of the family members. No statement was recorded from the author of the loose sheet regarding the contents and enquiries were conducted with the buyer of the flat. The assessee has never agreed or accepted that he has received the sale consideration over and above the amount recorded in the registered document and no evidence was found with regard to receipt of cash. Therefore, we are unable to sustain the order of the CIT(A)) and the same is set aside and the appeal of the assessee is allowed. Cash found at the time of search - HELD THAT:- Assessee filed the wealth tax returns in response to the notice issued by the Assessing Officer under section 17 of the Wealth Tax Act and the assessments were accepted by the department taking the cash balance as per wealth tax returns and no defects were found. Therefore, we are unable to discard the cash flow statement. Neither the Assessing Officer nor the ld. CIT(A) find any defect in the cash flow statement submitted by the assessee during the wealth tax proceedings also Therefore, we hold that the cash balance available as on the date of search is treated as explained and no addition is warranted. Accordingly, we set aside the order of the ld. CIT(A) and delete the addition made by the Assessing Officer. The appeal of the assessee on this issue is allowed. Addition on account of jewellery found during the course of search - AO even categorically found that the explanation of the assessee is found to be reasonable, however, the Assessing Officer made the addition in the absence of any evidence in form of wealth tax returns - HELD THAT:- Once the explanation found to be reasonable, there is no case for making the addition in the hands of the assessee. Merely because of non-furnishing of wealth tax returns, the Assessing Officer cannot make the addition in the hands of the assessee when it was explained to the Assessing Officer that the jewellery belonged to his wife and mother. If at all the addition is required to be made it should be made in the right person duly initiating the proceedings. In the absence of wealth tax returns, if the gold and jewellery is to be taxed, the same is required to be brought to in the hands of the assessee s wife mother, but not in the hands of the assessee. Apart from the above, the assessee filed wealth tax returns for the Assessment Years 2009-10 2010-11, which was accepted by the department without making any addition. Therefore we hold that there is no case for making the addition on account of gold and jewellery found during the course of search in the hands of the assessee.

  ---

• Customs

• 2019 (4) TMI 803
  Release of consignments - issuance of “Detention Certificate” for waiver of Demurrage and Container Detention Charges in terms of Regulation 6(1)(1) of Handling of Cargo in Customs Areas Regulations 2008 - Held that:- The petitioner will remit the entire duty component of the consignments imported by him in case were such duty is leviable as per paragraph 15(iii) above along with a bank guarantee for the 10% of the invoice value. In cases where the duty impact is neutral, the petitioner shall furnish a bank guarantee for the 10% of the invoice value. Upon satisfaction of the aforesaid conditions, the consignment shall be released forthwith. Waiver of Demurrage and Container Detention Charges - Held that:- In the light of Rule 6(l) of the Handling of Cargo in Customs Areas Regulations, 2009, which provides that the Customs Cargo Provider shall not, subject to any other law for the time being in force, charge any rent or demurrage on the goods seized or detained or confiscated by the Superintendent of Customs or Appraiser or Inspector of Customs or Preventive officer or examining officer, as the case may be, there shall be a waiver of demurrage charges. Petition disposed off.

  ---

• 2019 (4) TMI 802
  Monetary limit of amount involved in the appeal - condonation of delay in filing appeal - Held that:- The amount involved in this case is below the monetary limit of Rs. 20 lakhs which has been notified vide instruction being F. No. 390/Misc./116/2017-JC dated 11/07/2018 - The present case falls under exclusion Clause 3 (C) of the National Litigation Policy introduced vide Board’s Instruction dated 17.12.2015 which has been deleted vide Instruction F. No. 390/Misc./116/2017-JC dated 04.04.2018. The appeals are dismissed under litigation policy.

  ---

• Corporate Laws

• 2019 (4) TMI 801
  Service of petition - format of the notice of the petition - Rule 26 read with Rule 27 of the Companies (Court) Rules 1959 - Held that:- Pursuant to the Insolvency and Bankruptcy Code, 2016, (IBC), the Companies Act, 2013 was amended in the manner specified in the 11th Schedule to the IBC. Section 434 of the Companies Act, 2013 was substituted to provide that the proceedings relating to the winding up of the companies shall be transferred to the NCLT that are at a stage that may be prescribed by the Central Government . A further amendment took place to Section 434 with effect from 17th August, 2018 providing for filing of an application for transfer of the proceedings. Pursuant to the above amendments brought about by the IBC, the 2016 Rules, were made. Rule 5 thereof provided for transfer of pending proceedings of winding up on the ground of inability to pay the debts . Rule 5 (1) provided that a petition seeking winding up under Section 433 (e) of the Companies Act, would stand transferred to the NCLT where the petition has not been served on the Respondent as required under Rule 26 of the Companies (Court) Rules, 1959 . A careful reading of Rule 26 shows that it is mandatory to serve a copy of the petition along with the notice of the petition with the exception being an order of the Court to the contrary - In the present case, it is an admitted position that no notice was actually issued in the winding up petition to the Respondent. There was no occasion, therefore, for service of notice in Form-6 on the Respondent. The Appellant s contention that several hearings did take place before the learned Company Judge and therefore that in itself would tantamount to notice to the Respondent does not answer the mandatory requirement of Rule 26 read with Rule 27 viz., that there a formal notice has to be issued (even if it is called a pre-admission notice ) on the Respondent and such notice has to be served upon the Respondent in Form-6. Appeal dismissed - decided against appellant.

  ---

• Securities / SEBI

• 2019 (4) TMI 800
  Validity of Ex-parte interim order - restraining the appellants and other entities from buying, selling or dealing in the securities market either directly or indirectly or being associated with the securities market, in any manner, whatsoever, pending investigation - HELD THAT:- On the basis of the enquiry, the rationale for taking urgent preventive actions is based on the fact that appellant, NEFM had accumulated/cornered stocks of Mentha Oil through entities in Group A and Group B by misusing the exchange platform. Such large accumulation of Mentha Oil was with the intention of acquiring a dominant position in the market in order to manipulate the future price of Mentha Oil during the lean season on the strength of the physical stock of Mentha Oil it held on the exchange platform. In our opinion, the impugned order is harsh and unwarranted. There was no real urgency at this late stage in passing an ex-parte restraint order which virtually amounts to passing a final order. The period of trades is 2017-2018. At the time when the impugned order was passed the future contracts had been executed. The lean season was over. There is nothing on record to indicate that the sales made by the appellants was on a higher side indicating manipulation in the price nor there is any prima-facie, finding that by accumulating large stocks of Mentha Oil, the appellant had dominated the market without making any comparison with the total volume of trades in the physical market. In our opinion, the basis of urgency was purely on account of presumption and was not based on any piece of evidence. There should be some shred of evidence to come to a prima-facie conclusion that the appellants are indulging in unfair trade practices in cornering the market with a manipulative intent to manipulate the price. Passing a restraint order which virtually puts a stoppage on the appellants right to trade based on a needle of suspicion, in our opinion, is harsh and unwarranted. In the absence of in depth analysis based on evidence, it was not such an urgent case where the WTM should have exercised its powers. We are, thus, of the opinion that the impugned order is not sustainable in the eyes of law as it has been passed in gross violation of the principles of natural justice as embodied in Article 14 of the Constitution of India. Accordingly, the appellants are entitled to the reliefs claimed. The impugned order cannot be sustained and is quashed in so far as it relates to the appellants. The appellants will file their objections before the WTM on or before March 25, 2019.

  ---

• Insolvency & Bankruptcy

• 2019 (4) TMI 799
  Initiation of Corporate Resolution Insolvency Process - Section 7 of Insolvency and Bankruptcy Code - mortgage of properties - scope of 'Financial Debt' and 'Financial Creditor' - Held that:- In the present case, SBI had sanctioned and disbursed the loan amount recoverable with applicable interest by entering into loan agreements with the corporate debtor. The corporate debtor had borrowed the credit facility against payment of interest as agreed between the parties. The loan was disbursed against the consideration for time value of money with a clear commercial effect of borrowing. The outstanding debts have since been assigned in favour of the applicant. Moreover, the debt claimed in the present application includes both the component of outstanding principal and interest - In that view of the matter not only the present claim comes within the purview of 'Financial Debt' but also the applicant being the assignee can clearly be termed as 'Financial Creditor' so as to prefer the present application under Section 7 of the Code. An application of financial creditor under Section 7 of the Code is acceptable so long as the debt is proved to be due and there has been occurrence of existence of default. It is reiterated that the material on record clearly goes to show that respondent had availed the loan facilities and has committed default in repayment of the huge outstanding financial debt. Thus, in terms of Section 7(5)(a) of the Code, the present application is admitted - moratorium in terms of Section 14 of the Code declared.

  ---

• 2019 (4) TMI 798
  Initiation of Corporate Insolvency Resolution Process - Corporate debtor - sub-section (1) of Section 60 of the Code - repayment of loan - scope of Financial Debt and Financial Creditor - Held that:- The Code requires the Adjudicating authority to only ascertain and record satisfaction in a summary adjudication as to the occurrence of default before admitting the application. The material on record clearly goes to show that respondent had availed the loan facilities which was duly disbursed and has committed default in repayment of the outstanding loan amount. The procedure in relation to the Initiation of Corporate Insolvency Resolution Process by the “Financial Creditor” is delineated under Section 7 of the Code, wherein only “Financial Creditor” / “Financial Creditors” can file an application. As per Section 7(1) of the Code an application could be maintained by a Financial Creditor either by itself or jointly with other Financial Creditors - The expressions “Financial Creditor” and “Financial debt” have been defined in Section 5 (7) and 5 (8) of the Code and precisely “Financial debt” is a debt along with interest, if any, which is disbursed against the consideration for time value of money. In the present case the applicant bank had sanctioned and disbursed the loan amount recoverable with applicable interest by entering into loan agreements with the corporate debtor. The corporate debtor had borrowed the credit facility against payment of interest as agreed between the parties. The loan was disbursed against the consideration for time value of money with a clear commercial effect of borrowing. Moreover the debt claimed in the present application includes both the component of outstanding principal and interest. In that view of the matter not only the present claim comes within the purview of ‘Financial Debt’ but also the applicant can clearly be termed as ‘Financial Creditor’ so as to prefer the present application under Section 7 of the Code. An application of financial creditor under Section 7 of the Code is acceptable so long as the debt is proved to be due and there has been occurrence of existence of default. It is reiterated that the material on record clearly goes to show that respondent had availed the loan facilities and has committed default in repayment of the huge outstanding loan amount. In terms of Section 7 (5) (a) of the Code, the present application is admitted - moratorium in terms of Section 14 of the Code also declared.

  ---

• Service Tax

• 2019 (4) TMI 752
  Business Auxiliary Service (BAS) - export of services - appellant had rendered Market Promotion Services to end user customers of its foreign principal in India - Held that:- The provision of service by virtue of the Distributor Agreement to a foreign entity is not disputed. Further, on a perusal of SCN and OIO, there is no whisper about any understanding as to the provision of service between the assessee and the end user. Similar issue decided by CESTAT in the case of Mitsubishi Heavy Industries India Pvt. Ltd. [2017 (9) TMI 358 - CESTAT NEW DELHI] to hold that if the service recipient transfers money from his account in convertible foreign currency which is then remitted to the service provider, the same is sufficient compliance with Export of Service Rules. Appeal dismissed - decided against Revenue.

  ---

• Central Excise

• 2019 (4) TMI 751
  Condonation of delay of 431 days in filing appeal - filing o appeal before the tribunal after dismissal of writ by the HC - Tribunal refused to condone the delay on technicalities - Held that:- It is well settled principle of law that, in dispensation of justice the judicial authorities should consider and dispose of the causes on merits to the extent possible, rather than dismissing them on technicalities. It is always left open to the judicial authorities to consider the question regarding the condonation of delay with a liberal attitude. Power is also left with such authorities to impose reasonable costs for condoning the delay, in order to compensate the prejudices and hardships which will be caused to the opposite parties. The Tribunal ought to have considered the prima facie merits of the appeal and ought to have considered the question of condonation of delay even on the basis of imposing costs - Having been failed in taking such an approach, there occurred a miscarriage justice in dismissing the appeal consequent to dismissal of the delay condonation application, which need to be rectified. The delay condonation petition filed before the Tribunal will stand allowed subject to condition of the appellant depositing 15% of the existing demand in addition to the amounts already deposited before the authority concerned, within a period of one month from today - appeal allowed.

  ---

• 2019 (4) TMI 750
  Rectification of mistake - Jurisdiction - power on the Appellate Tribunal to rectify any mistake apparent from the record - Section 35 C (2) of the Central Excise Act, 1944 - error apparent from the record - Held that:- A bare perusal of the aforesaid sub-section (2) of Section 35C(2) of the Act indicates that the Appellate Tribunal may, with a view to rectify any mistake apparent from the record, amend any order passed by it under sub-section (1). Sub-section (1) provides that the Appellate Tribunal may, after giving the parties to the appeal, an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or annulling the decision or order appealed against or may refer the case back to the authority which passed such decision for a fresh adjudication. What is, therefore, necessary for a mistake to be rectified is that it must be apparent from the record. Both mistake and apparent have been explained by the Supreme Court in Deva Metal Powders (P) Ltd. vs Commissioner, Trade Tax (UP), [2007 (12) TMI 221 - SUPREME COURT OF INDIA]. The Supreme Court pointed out that mistake means to take or understand wrongly or inaccurately or to make an error in interpreting and apparent means visible; capable of being seen; obvious; plain. It has, therefore, been observed by the Supreme Court that a mistake which can be rectified is one which is patent, which is obvious and whose discovery is not dependent on argument or elaboration. Whether non-consideration of a judgment relevant to the issue for determination which was also placed before Bench of the Tribunal, can be said to be a mistake apparent from the record so as to be rectified under Section 35C(2) of the Act? - Held that:- This issue was examined by the Supreme Court in Asstt. Commr., Income Tax, Rajkot vs Saurashtra Kutch Stock Exchange Ltd., [2008 (9) TMI 11 - SUPREME COURT]. The Supreme Court held that non-consideration of a decision of a High Court or the Supreme Court can be said to be a mistake apparent from the record , which mistake can be rectified. It was pointed out that the error apparent from the record should be so manifest and clear that no Court would permit it to remain on record. It should be pertinent and self-evident and not require any elaborate discussion of evidence or argument. It was also observed that rectification of an order stems from the fundamental principle that justice is above all and it is to be exercised to remove the error and to disturb the finality. Thus, the mistake that had crept in the Final Order by granting benefit of the Exemption of the Notification from 6 September, 1995 instead of from 1 March, 1994 needs to be rectified - ROM application allowed.

  ---

• 2019 (4) TMI 749
  SSI Exemption - use of Brand name of others - goods manufactured and cleared bearing the brand name Varuna - appellant has claimed that the owner of the brand name has authorized the appellant to use such brand name in the goods to be manufactured - Held that:- The SSI notification carries a condition that the benefit of the notification was not to apply to the specified goods bearing a brand name or trade name of another person. Certain exceptions have been carved out in the notification itself which are not relevant for the present discussion. Extended period of limitation - suppression of facts or not - Held that:- There are conflicting decisions of various Tribunals, High Courts and even Supreme Court on the subject of entitlement of SSI benefit in respect of goods cleared with brand name - the appellant will be entitled to the bonafide belief that the goods cleared with Varuna brand will also be entitled to the benefit. Consequently, the Revenue will not be entitled to invoking the suppression clause in Section 11A of the Central Excise Act for alleging suppression. On merit, the appellant will not be entitled to the benefit of SSI notification but the show cause notice for demand of duty has been issued on 15/07/2009 for covering the demands for the period upto 29/01/2008. Consequently no demand will survive within the normal time limit. Appeal allowed in part.

  ---

• 2019 (4) TMI 748
  Valuation - claim of Refund of excess duty paid - recovery of sales tax amount/ VAT amount and to retain with themselves as an incentive - duty on additional consideration of sales-tax collected from the buyers - Section 4 (3) (d) of Central Excise Act, 1944 - Held that:- The appellant herein had opted for remission of tax scheme under which a portion of the VAT paid was remitted back to the appellant. It becomes clear that when the sales tax/ VAT is payable at the time of removal, in that case, in terms of Section 4D of Central Excise Act, the same is not includable in transaction value. Tribunal Mumbai in the case of CCE, Mumbai Vs. M/s Welspun Corporation Ltd. [2017 (5) TMI 177 - CESTAT MUMBAI] has held that once the Sales Tax Department has assessed the sales tax as paid, the Central Excise Department cannot contend that since the State Government has remitted the amount back to the appellants as incentive, sales tax was not paid by them. After the assessment by the Sales Tax Department for sales tax to have been paid, condition of Section 4(3)(d) of Central Excise Act, 1944 stands fulfilled. There is a difference between remission and exemption. As while in case of exemption, the levy itself is statutorily exhausted and no sales tax is paid or payable by the assessee whereas in case of remission, the sales tax is payable as there is no exemption from levy and /or payment of sales tax at the time of clearance and the same has to be statutorily discharged - In the present case, the remission is in the nature of subsidy which the appellant was receiving from the State Government in the form of VAT 37B Challans and not from the buyers of the appellant. The said remission was not only as good as cash but can also not be considered as an additional consideration. The transaction value includes all the payments made by the buyer to the assessee. However, in the instant case, the subsidy has been paid to it by the State Government. Only the mode of payment is by way of crediting the sales tax head under VAT challan in favour of the appellant. Thus, it could not be said that the amount is in the nature of additional consideration. Time Limitation - Held that:- The evidence about any positive act except the allegation of using the VAT Challans for discharging the VAT liability for subsequent period could not be produced on record. The discharge of liability by way of VAT 37B Challans has already been held as legally sustainable methodology of discharging tax liability for subsequent period. It is held that Department was not entitled to invoke the extended period of limitation. The demand could be confined only to the normal period of one year - the demand as such is not sustainable. Appeal allowed - decided in favor of appellant.

  ---

• 2019 (4) TMI 747
  Valuation - inclusion of subsidy in assessable value - Revenue was of the view that the VAT liability discharged by utilizing the investment subsidy granted in form 37B, cannot be considered as VAT actually paid, for the purpose of Section 4 of the Central Excise Act, 1944 - Held that:- The issue herein is squarely covered by the precedent decision of the Tribunal in the case of SHREE CEMENT LTD. SHREE JAIPUR CEMENT LTD. VERSUS CCE, ALWAR [2018 (1) TMI 915 - CESTAT NEW DELHI], where it was held that there is no justification for inclusion in the assessable value, the VAT amounts paid by the assessee using VAT 37B Challans. Appeal allowed - decided in favor of appellant.

  ---

• 2019 (4) TMI 746
  CENVAT credit - input services - Terminal Handling Charges - Ground rent - place of removal - services received beyond factory gate - Held that:- The appellant remains the owner of the goods till the goods are handed over to buyer at buyer’s premises, the place of removal in the present case is port, ICD or CFS as the case may be - in the present case appellant were entitled for Cenvat Credit claimed by them on Terminal Handling Charges and Ground rent - appeal allowed - decided in favor of appellant.

  ---

• 2019 (4) TMI 745
  100% EOU - CENVAT Credit - common inputs used for exempted and dutiable goods - non-maintenance of separate records - Rule 6 of CENVAT Credit Rules, 2004 - Held that:- It is undisputed that the said bulk drug is eligible for exemption if cleared in DTA; also undisputed that appellant has been utilising common inputs for manufacturing of this bulk drug; has availed CENVAT Credit on the common inputs so used, but has not maintained separate accounts as required under Rule 6(2) of CCR 2004 - Both the lower authorities were correct in confirming the demands raised. Having not disputed that there is consumption of common inputs for manufacturing of bulk drug cleared, while clearing to DTA claiming exemption and not maintaining separate accounts, the confirmation of the demands under Rule 6(3) of CCR 2004 for an amount equivalent to 5% of the value of the exempted goods is correct and legal - Appeal dismissed - decided against appellant.

  ---

• 2019 (4) TMI 744
  SSI Exemption - crossing over of threshold limit - payment of service tax on the installation charges - nature of activity in confusion - case of Revenue is that the payment of service tax on the installation charges does not mean that no excise duty is payable on goods manufactured and that no evidence about payment of service tax has been produced on record - Manufacture taking place or not? Whether excise duty can be imposed upon the impugned electronic interlocking signalling, railway signalling system for the purpose Section 3 of Central Excise Act, which is the charging provision for the authorities to levy and collection of duties of excise on all excisable goods which are produced or manufactured in India at the rates mentioned in the Schedule to the Tariff Act? Manufacture taking place or not? - Held that:- The several components which have respective marketability were purchased by the appellant against appropriate Sales Tax and then taken to the railway’s site to be so assembled, installed or commissioned they remain interconnected and simultaneously remain fastened to the racks embedded in the floor. Thus, it becomes clear that except assembling the modules required for the purpose along with other requisites as that of wires and switches and transporting them to the railways site and finally installing by interconnecting all the goods purchased on the payment of excise duty, there is no such process done by the appellant which may be called as manufacture - Definition of manufacture under Section 2(d) of CEA is sufficient to distinguish the activity/service of assembling from the activity of manufacture. Whether there is the emergence of new marketable commodity with a distinctive name? - Held that:- All the articles used while assembling the electronic signalling system were initially purchased from the various suppliers and were finally installed into the shape of EIS in the premises of railways. To our opinion nothing more than the service of installation and commissioning that has been rendered by the appellant as above. Above all, there has been a Board’s Circular No. 58/1/2002-CX dated 15.1.2002 regarding the excisability of plant and machinery assembled at the site after considering the several decisions of Hon’ble Apex Court, as quoted in the said circular - from the department circular also, it stands clear that the EIS herein do not qualify any of the criteria i.e. either of manufacture or marketability to the leviable to excise. Time limitation - Held that:- There remains no question of any evasion of duty, question of mala fide intent to evade the same does not at all arises. Hence, proviso to Section 73(3) of the Finance Act, 1994 could not have been invoked by the department nor there is any reason for the imposition of penalty upon the appellant. The show cause notice is therefore definitely barred by time. Appeal allowed - decided in favor of appellant.

  ---

• 2019 (4) TMI 743
  CENVAT Credit - impugned waste, cleared by the Appellant, post the insertion of Explanation, in March 2015 - Rule 6 of CCR - Held that:- Rule 6 of the Credit Rules restricts cenvat credit attributable to manufactured exempted goods, cleared from a factory premises. The definition of ‘exempted goods’ and ‘final products’ were amended by insertion of an Explanation vide Notification No. 6/2015-CE (NT) dated March 1, 2015. In terms of the Explanation, non-excisable goods were specifically included within the sweep of exempted goods and final products. Accordingly, their clearance was exigible to Rule 6. The CBEC (Now CBIC) has issued Circular No. 1027/15/2016-CX dated April 25, 2016 wherein it clarified that post insertion of Explanation on March 1, 2015, credit upon clearance of waste, such as aluminium dross etc. needs to be reversed. In case, the revenue had any objection with respect to manner of reversal of cenvat credit, it should have pointed out then and there. Its acceptance implies that revenue completely agreed with the manner of computing reversal. Thus revenue cannot turn around and dispute the manner of reversal without bringing any additional evidence or point of law, not considered earlier - these submissions were duly made before the Appellate Authority which it has failed to take into account. In the absence of sustenance of duty demand, the demand of interest and penalty is also not sustainable - appeal allowed - decided in favor of appellant.

  ---

• CST, VAT & Sales Tax

• 2019 (4) TMI 797
  Constitutional validity of Section 174 of the KSGST Act - the learned Single Judge had failed to advert to the other contentions raised in the writ petition, based on the question of limitation and other aspects - Held that:- The fact is not disputed by learned Government Pleader appearing for the respondents, and it is conceded that the correctness of the decision in M/S. SHEEN GOLDEN JEWELS (INDIA) PVT. LTD. VERSUS THE STATE TAX OFFICER (IB) -1, AND OTHERS [2019 (2) TMI 300 - KERALA HIGH COURT] is now pending consideration in other writ appeals. A remittance of the writ petition for a fresh consideration and disposal based on the grounds raised other than the validity of Section 174 of the KSGST Act, is necessary. The writ petition is restored on the files of this court for fresh consideration and disposal by the Single Judge.

  ---

• 2019 (4) TMI 796
  Levy of Entry Tax - whether the respondents can collect the entry tax based on the value of invoice which also includes the VAT? - Held that:- The import value means the value of goods specified in the Schedule as ascertained from the original invoice and includes the charges as specified therein i.e. insurance, excise duty, freight charges paid or payable. Thereafter it states that, and all other charges incidentally levied on the purchase of such goods which would also mean paid or payable. The question is as to whether the VAT which is included in the invoice though not taken as the invoice value as contained in the first part of the provision, would fall under the other charges incidentally levied on the purchase of such goods. The fact that the petitioner is liable to pay VAT on the crude oil purchase cannot be in dispute. If that be so, the issue is as to which of the points should be considered as the entry point when the purchase is made in the local area of Numaligarh. In the instant case, the fact of the entry of goods into the local area is not in dispute but the question is as to whether the entry point could be created at the point marked ‘A’ as per the diagram only to avoid the entry tax being levied including the VAT as indicated in the invoice when crude oil continues to pass through the pipeline without any check being made at point ‘A’. The point of delivery in the local area will have to be considered as the entry of goods to the local area. If that be the position, even if the contention that the processing is to be done at the refinery and only thereafter VAT would be payable is taken note of, the same is also incidental to the purchase, irrespective of the fact as to whether the same is included in the invoice or not it would get attracted. The value of the VAT also would, therefore, get included in the import value for the purpose of processing the entry tax as it would fall under “other charges incidentally levied on the purchase of such goods” which is paid or payable. Revision petition dismissed.

  ---

• 2019 (4) TMI 795
  Validity of assessment order - Telangana VAT - Classification of goods - poultry meal - non supply of laboratory test report - extended period of limitation - invocation of theory of empty formality - Held that:- The furnishing of the copy of the report, according to the learned Special Standing Counsel would not have altered the position. - But, generally the theory of empty formality is a valid defence to an allegation of violation of principles of natural justice in the Service Jurisprudence. But, insofar as Revenue Laws are concerned, every material on which a decision is taken, may be relevant. Therefore, we are unable to accept the said contention. The matter can be remanded back on a short ground, leaving it open to the petitioner to raise even the issue of limitation - petition allowed by way of remand.

  ---

• 2019 (4) TMI 794
  Revision of original assessment - Telangana Value Added Tax Act, 2005 - Held that:- The fact remains that if both these aspects had been pointed out, the revisional authority would have been in a better position to take a holistic view. Therefore, the petitioner deserves one opportunity. The matter is remanded back to the revisional authority - petition allowed by way of remand.

  ---

• Indian Laws

• 2019 (4) TMI 793
  Mortgage by way of Conditional Sale - condition of agreement to sell - Section 58(c) of the Transfer of Property Act - Held that:- Keeping Section 58(c) side by side with Section 37(a) of the State Act, the conclusion is inevitable that the State legislature has intended to override the effect of proviso to Section 58(c) of the Transfer of Property Act by enacting Section 37(a) in the State Act. Section 37(a) was incorporated by way of an amendment in the State Act. Reading of Section 37(a) brings out the Legislative intent with unambiguous clarity and therefore the High court was right in relying upon Section 37(a) of the State Act to find that though it was by agreement dated 07.12.1959 which is a separate document that condition to make it a mortgage was incorporated it would not make any difference. Reliability on Section 37A of the Bengal Money-Lenders Act, 1940 - contention is that suit filed by Bhattacharya was not under the State Act - Held that:- A Suit for redemption is mentioned as suit to which Section 36 applies. Section 38 undoubtedly enables the borrowers to seek a direction for taking accounts - there is no reason to non-suit, the Bhattacharyas on this ground which is taken for the reasons which we have given. Last contention of appellant is that Section 37(A) contained under the State Act is repugnant to Central Law namely Section 58(c) of the Transfer of Property Act - Held that:- Money lending falls as entry (30) in the State List. Transfer of Property other than agricultural land falls in Entry 6 in the concurrent list. The State legislature in enacting Section 37(a) of the State Act, a law relating to money lending has made a law which is inconsistent and therefore, repugnant to the law made by the Parliament in Section 58(c) of the Transfer of Property Act - In this case proceeding on the basis that there is an inconsistency between Section 58(c) of the Transfer of Property Act and Section 37(A) of the State Act, in view of the assent given by the President, the matter falls under Article 254(2). Therefore, despite the inconsistency, Section 37(A) of the State Act will prevail in the State. Appeal dismissed.

  ---

• 2019 (4) TMI 792
  Maintainability of petition - existence of alternative remedy of appeal - Proceedings u/s 45-IA of RBI Act - NBFC - requirement of having Net Owned Fund (NOF) - condonation of delay in filing appeal - Principles of natural justice - Held that:- In the present case, the petitioners claim that the impugned order is vitiated by breach of principles of natural justice. When a writ petitioner alleges violation of the principles of natural justice in the decision making process vitiating the decision itself, then such a writ petition cannot be said to be not maintainable. The allegation of breach of principles of natural justice can be gone into by the writ Court. The present writ petition therefore cannot be said to be non maintainable merely because a statutory alternative remedy of appeal exists. The second proviso to Section 45-IA(6) of the Act of 1934 requires a reasonable opportunity to be granted before any order of cancellation of Certificate of Registration being passed - In the facts of the present case, it cannot be said that, the impugned order is non-speaking with regard to the aspect of non consideration of the prayer for condonation made as by the first petitioner or that the impugned order suffers from the breach of principles of natural justice. Petition dismissed.

  ---

• 2019 (4) TMI 791
  Dishonor of Cheque - section 138 of the Negotiable Instruments Act, 1881 - acts of commission or omission - vicarious liability under Section 141 of the Negotiable Instruments Act, 1881 - Held that:- Petitioner was also unable to clarify as to whether there has been a cessation in the responsibility of the petitioner in the capacity of Chairman-cum-Managing Director at any point of time over the period and, if so, from what specific date. The averments of the petitioner in these matters are indeed vague and nonspecific. Merely because the petitioner has been accepted as an NRI by the income tax authorities does not mean that there would be no occasion for him to participate in or being responsible for the day-to-day affairs of the company accused, particularly around the period to which the issuance of cheques, their dishonor and failure to pay pursuant to the demand notices relates. The petitioner, at best, raises question of facts which cannot be effectively addressed or determined in the jurisdiction under Section 482 of the Code of Criminal Procedure, 1973. His contentions raise defences which will have to be considered on the basis of evidence led before the trial court. Phese petitions are dismissed with costs of Rs. 20,000/- each.

  ---