Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 16, 2018
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
FEMA
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Procedure for interception of conveyances for inspection of goods in movement, and detention, release and confiscation of such goods and conveyances - CGST - Circular
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Clarification regarding procedure for recovery of arrears under the existing law and reversal of inadmissible input tax credit - CGST - Circular
Income Tax
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Validity of Section 35AC(7) of the Income Tax, 1961 inserted w.e.f. 1st April, 2017 - it is claimed that, post amendment, no donors are coming forward to donate the amount which is required for construction of the specified hospital etc. - SC granted interim relief subject to final decision.
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Disallowance of the interest claimed by way of set of - income from other sources - establishment of nexus - interest income with interest expenses - to claim of set off u/s 70(1) against interest income, there has to be a loss under the head income from other sources or any other head of income except capital gain which is not the case of the assessee - AT
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Deduction u/s. 80IB(10) - no benefit could be allowed to projects approved prior to 01st April 2004, the said error/mistake cannot be allowed to be perpetuated as there is no heroism in perpetuating the mistake is a cardinal principle of jurisprudence. - AT
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Receipt for relinquishment of right to sue the party - to be treated and taxed as business income OR capital receipts - the impugned compensation amount is not liable to be treated as income u/s.2(24) of the Act nor the same is taxable as capital gain for business income being in the nature of a capital receipt. - AT
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Nature of income from ‘Dilli Haat.’ - income of ₹ 1.82 crore earned by the assessee from use of craft stalls on 15 days basis is ‘Business income’ and has been erroneously considered by the authorities below as ‘Income from house property’. - AT
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Set off of loss brought forward losses - conditions of 51% shareholding - the assessee is not seeking carry forward of losses to be set off but the assessee is seeking to set off the brought forward losses of the earlier years to be set off in the current assessment year and therefore provisions of section 79 may not be applicable - AT
Indian Laws
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Arbitration award - waiver of the right of de novo trial by conduct - there is no doubt that the conduct of the appellant-Company amounts to waiver and the application filled on 29.01.2000 is nothing but trying a last armory to turn the case around. The Umpire was right in dismissing the said application. - SC
IBC
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Corporate insolvency process - the order passed by the Adjudicating Authority will not come in the way of Appellant to issue notice under sub-section (1) of Section 8 of the ‘I&B Code’ to the ‘Corporate Debtor’, and to file an application under Section 9 of the ‘I&B Code’, if there is a debt and default by the ‘Corporate Debtor’. - AT
Service Tax
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The pipelines were laid for Maharashtra Government and the contract as awarded by Vidharbha Irrigation Development Corporation, Nagpur for irrigation purpose. Thus the contract has no relation with industry or commerce - the activity of the Respondent is not liable for any service tax - AT
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Commercial Training and Coaching Center - case of Revenue is that the certificate of marks is issued by the Board of Intermediate Education (BIE) and not by appellant; as appellants are not issuing any certificates to the students and cannot claim exempt - It is settled law that if the plain meaning of the exemption notification covers the assessee, the benefit should be allowed - AT
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Scientific Technical Consultancy Service - Reverse Charge Mechanism - transfer of trade name and formulae transferred for a consideration cannot be services which would fall under "Scientific or Technical Consultancy Service". - AT
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Liability of input service distributor (ISD) - the Input Service Distributor registration is only for the purpose of distribution of credit. He can be held accountable only in case of improper distribution of credit which is not the issue in the present case. - AT
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Refund claim - SEZ - The refund of service tax sought by Appellant cannot be rejected on the ground that the services were wholly consumed in SEZ and the Appellants are eligible for the refund. - AT
Central Excise
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Excisability - the pipe is manufactured which is movable, hence marketable and subsequent to the manufacture, it is taken to the site where the pipe has to be laid down and that the laying process is carried out - the respondent has carried out the manufacturing of pipe which is excisable. - AT
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Penalty u/r 15(2) of CCR 2004 read with Section 11AC of the CEA 1944 - wrong availment of CENVAT credit - Case relates to reversal of amount under Rule 6(3)(b) of the cenvat Credit Rule 2004 thus section 11AC is not applicable - penalty set aside - AT
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Refund of CENVAT credit - time limitation - export of goods - Rule 5 of the CCR 2004 read with N/N. 227/12 dated 18.6.2012 - the limitation would start from the end of the quarter, during which exports have taken place - AT
VAT
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Valuation - includibility in purchase turnover - the transport subsidy formed part of the consideration for the purchase of the sugarcane by the appellant from the sugarcane growers - HC
Case Laws:
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Income Tax
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2018 (4) TMI 716
Validity of Section 35AC(7) of the Income Tax, 1961 inserted w.e.f. 1st April, 2017 - it is claimed that, post amendment, no donors are coming forward to donate the amount which is required for construction of the specified hospital etc. - interim relief - Held that:- On the basis of undertaking given by the petitioner, SC directed that the donors who want to donate some money to the petitioner for construction of the specified hospital by the petitioner may claim exemption under Section 35AC of the Income Tax Act. However, in case the petitioner does not succeed here, the petitioner will be liable to pay the amount of tax and applicable interest so claimed by the donors as per the undertaking given by Shri Arvind Datar, learned senior counsel on behalf of the petitioner. HC ref case [2017 (9) TMI 1237 - GUJARAT HIGH COURT]
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2018 (4) TMI 715
Deduction u/s 80HHC disallowed in respect of the interest, rent and miscellaneous income earned out of business operations - Held that:- This question is to be answered in favour of the Revenue and against the assessee in the light of the decision, in the case of Commissioner of Income Tax Vs. K.Ravindranathan Nair reported in (2007 (11) TMI 10 - Supreme Court of India) Whether Tribunal was right in law in holding that 90% of the gross receipts should be excluded from the profits of the business under clause (baa) of Explanation to section 80HHC of the Act? - Held that:- This issue has been decided by the Hon'ble Supreme Court in the case of ACG Associated Capsules (P) Ltd. Vs. Commissioner of Income Tax [2012 (2) TMI 101 - SUPREME COURT OF INDIA]asheld Ninety per cent of the net interest or net rent which has been included in the profits of the assessee as computed under the head profits and gains of business or profession and not the gross rent, is to be deducted under c;.(1) of Expln. (baa) to Section 80HHC for determining the profits of the business. - thus the matter should be remanded back to the Assessing Officer to take note of the legal position and redo the assessment under the said head.
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2018 (4) TMI 714
Claim for exemption under section 10(23C)(vi) - Assessee’s activities including charging a franchisee fee could not be regarded as a charitable activity within the meaning of section 2(15) - Held that:- The assessee fulfilled the requirements under section 10(23C)(vi) of the Act to qualify for exemption; DPS Society is maintaining its eleven schools and the 120 satellite schools in furtherance of the education joint venture agreements with an educational purpose that also qualifies as a “charitable purpose” within the meaning of section 2(15) of the Act and is not in contravention of section 11(4A) of the Act. This court feels compelled to observe that Section 10(23C)(vi) ought to be interpreted meticulously, on a case-to-case basis. The larger objective of an educational/ charitable purpose of the institution and its manifestation can only be subjectively adjudged; for instance, in the present situation, the balance sheets of the assessee demonstrate how the profits are utilized for the growth and maintenance of the very schools they are accrued from, thus, subscribing to a charitable motive. Educational institutions may take more creative steps to qualify their objectives as an “educational purpose” that is more universal than the individual objectives set out in the memoranda of objectives of such institutions. For instance, a percentage of profits earned from a business activity indulged in by such an educational institution may be mandated towards fructifying the implementation the provisions of the Right to Education Act, 2009, particularly, to create a more sensitive learning environment for children with disabilities in implementation of the provisions in the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995, or have a system to analyze the ratio of inflow of money over progressive assessment years as opposed to how much of this money is channeled back into the growth and maintenance of such educational purpose, in order to put in place a visible system of accountability. This is an observation, to ensure that the purpose for which section 10(23C)(vi) of the Act was introduced, is adequately fulfilled and not disadvantageously circumvented by vested parties. For the foregoing reasons, the writ petition has to succeed. - Decided in favour of assessee.
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2018 (4) TMI 713
Income tax refund and interest thereon adjusted towards demand - whether the interest on income tax refund is chargeable to tax in this year according to the above facts? - Held that:- Claim of the assessee that it has not received any refund is devoid of any merit as the refund was not issued by issue of cheque to the assessee but was adjusted against the outstanding demand for assessment year 2004 – 05. Naturally, when the demand is outstanding for A Y 2004 – 05 there was no question of issuing any refund voucher to the assessee Whether the interest on income tax refund is chargeable to tax in this year? - Held that:- Income tax refund is chargeable to tax under the head income from other sources on accrued or receipt basis according to the method of accounting employed by the assessee. Admittedly, the assessee is following the mercantile method of accounting. Therefore, the interest on income tax refund if the revenue has admitted it shall be chargeable to tax as and when it is determined and refund voucher thereof. In the present case the Ld. AO as well as the Ld. CIT (A) has already interest of ₹ 102537/– has been determined and refund voucher is been prepared by the revenue but instead of issuing the cheque same has been adjusted against the outstanding demand of the assessee for assessment year 2004 – 05. In the interest amount has already accrued to the assessee of ₹ 1 025237/– same is chargeable to tax in the year in which it is determined. In the present case, it has been determined on 1/3/2011 and therefore it is chargeable to tax in AY 2011 – 12. In view of above facts we do not find any infirmity in the order of Ld. CIT (A) in confirming the order of the Ld. assessing officer holding that interest to the extent of ₹ 1025237/– is correctly charged to the tax for the impugned assessment year. - Decided against assessee.
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2018 (4) TMI 712
Claim of exemption u/s 54 - assessee had independently acquired multiple flats, which however, were joined/merged together and used by the assessee as a single residential unit - Held that:- Hon'ble High Court of Bombay in the case of CIT-21, Mumbai vs. Devdas Naik (2014 (7) TMI 173 - BOMBAY HIGH COURT) had concluded that that where acquisition of two flats had been done independently by the assessee, but however, the said flats were constructed in such a way that the adjacent units or flats could be combined into one, and eventually had been merged into a single unit and were used for the purpose of residence by the assessee, the latters claim of exemption under section 54 could not be denied. - Decided in favour of assessee.
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2018 (4) TMI 711
Treatment of the amount of TDS as an application of income under section 11(1)(a) - Held that:- in the case of the assessee before us, the immunity from taxation that has been granted to the income of the said charitable trust cannot be denied on the ground that the deemed income under sec. 198, i.e tax deducted at source under Sec. 194A of ₹ 13,28,823/- had not been actually spent for the purpose of charity during the year. A.R had averred that the tax deducted at source for the year under consideration, viz. A.Y 2012-13, which was received by the assessee as a refund on 20.03.2014, i.e in the period relevant to A.Y 2014-15, was shown by the assessee as its income in the said year of receipt, viz. A.Y 2014-15 while working out its entitlement of exemption under Sec. 11 for the said year. We thus set aside the matter to the file of the A.O for the limited purpose of verifying the veracity of the aforesaid claim so raised before us by the ld. A.R. That in case the claim of the ld. A.R that the tax deducted at source of ₹ 13,28,823/- was shown by the assessee as its income in A.Y 2014-15 is found to be in order, then the said amount shall not be treated as the income of the assessee under Sec. 11 for the year under consideration i.e A.Y 2012-13.
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2018 (4) TMI 710
Disallowance of labour expenses - Held that:- There is no restriction or bar on the part of an assessee to put his signature in vernacular or in English, as per his choice, and thus no adverse inference on the said count could have validly be drawn in the hands of the assessee. We are of the view that it is not the case of the A.O that on verification got done from the forensic laboratory, it was proved that the said two signatures were not of the same person/persons. We, thus, are of the view that as the assessee had placed on record substantial documentary evidence to substantiate the authenticity of his claim of expenses towards labour charges, which we are afraid had not been thoroughly verified by the lower authorities, who rather adopting a half hearted approach had hushed through the matter and on the basis of premature observations have drawn adverse inferences in the hands of the assessee, therefore, are unable to persuade ourselves to sustain the addition of ₹ 8.45 lac sustained by the CIT(A) in respect of payments made by the assessee to the aforesaid five parties. Thus, the addition of ₹ 8.45 lac sustained by the CIT(A) is deleted. Addition on account of redevelopment/deemed rental income - Held that:- In case the CIT(A) had any doubts as regards the veracity of the said documents, he could have directed the Assessing Officer to have made necessary verifications from the said respective builders, so that the truth may have surfaced. We are further of the view that as the assessee had claimed that the huts under consideration were demolished, therefore, the alternative view of the Assessing Officer that in case the addition made towards redevelopment allowance does not survive, the addition would be called for in the hands of the assessee on account of deemed rental income also cannot be accepted. We are of the view that as claimed by the A.R, now when the huts in itself were demolished and were no more in existence, therefore, the aforesaid alternative contention of the department cannot be sustained. Nothing has been placed on our record or canvassed before us by the ld. D.R to controvert the aforesaid contention of the A.R. In terms of our aforesaid observations, delete the addition of ₹ 2.30 lakhs made by the AO on account of redevelopment/deemed rental income. Reopening of assessment - Held that:- No contention was advanced by the ld. A.R to support the challenge thrown to the validity of the reassessment proceedings before us. We, thus, in absence of any contention having been raised by the ld. A.R on the issue under consideration, are unable to find any infirmity in the order of the CIT(A) upholding the validity of the reopening of the assessment made by the Assessing Officer under section 147 of the Act.
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2018 (4) TMI 709
Addition being interest on loan disallowed by the AO - Held that:- As explained by the assessee that the purpose of borrowing additional funds/loan was that there were addition towards capital for work in progress of ₹ 2,47,76,337/- due to renovation and modernization in assessee’s factory premises. The Ld. CIT(A) has noted after going through the audited P&L Account and the Balance Sheet wherein it was discernible that the assessee had renovated and modernized the factory, which fact could not be controverted by the Ld. DR before us and since the amount of loan has been utilized for the purpose of business which qualifies to be allowed u/s. 36(1)(iii)/Sec. 37 of the Act and, therefore, the Ld. CIT(A) has rightly allowed the claim of the assessee which does not call for any interference from our part and, therefore, we dismiss this ground of appeal of the revenue. Addition of legal and professional expenses - Held that:- The professionals appointed were experts in their respective fields, and that their services were retained to groom and train the new recruits as no suitable replacement was readily available. We note that the assessee has discharged the initial onus casted upon it to claim the expenditure by submitting the name, address, PAN etc, (of the professionals) the AO could not have added the amounts back without further verification and ought not to have casted any doubt about the genuineness of the expenditure without bringing any adverse material against the assessee. And since the expenditure was for business purpose the expenditure claimed on this count needs to be allowed and it was rightly allowed by the Ld. CIT(A). Addition disallowed on account of foreign tour expenses claimed by the assessee - Held that:- CIT(A) has allowed the travelling expense i.e. air ticket of ₹ 3,60,545/-, however, restricted the claim of ₹ 6,39,000/- which was claimed to have been expended on account of boarding and lodging. The Ld. CIT(A) taking into account the element of personal expenditure sustained 20% of the disallowance which works out to ₹ 1,26,000/- and thus assessee got a relief of ₹ 8,64,545/-. Against the action of CIT(A) only revenue is in appeal - Mrs. Zhu Xintian the research manager having visited foreign countries wholly and exclusively for business purposes of the assessee company is entitled to claim the expenditure and we do not want to interfere in the order of the Ld. CIT(A), which is hereby upheld. This ground of revenue appeal is dismissed. Disallowing on account of publicity expenses - non deduction of tds - TDS u/s 194C - Held that:- The assessee entered into an agreement with M/s.STP Pharmaceuticals Pvt. Ltd. according to which M/s. STP will manufacture the pharmaceutical products in the brand name "Sorbiline" by using materials from its own source and sell the same to the assessee on "principal to principal" basis. Therefore, undoubtedly the provisions of clause (e) of Explanation (iv) of sec. 194C gets attracted in the instant case and as such, the entire expenditure of ₹ 58,77,566/- being paid to M/s.STP Pharmaceuticals Pvt. Ltd for purchase of "Sorbiline" does not come under the ambit of sec. 194C, therefore, the AO erred on this issue, which has been rightly corrected by the Ld. CIT(A), which calls for no interference, so we confirm the order of Ld. CIT(A). Addition of promotional expenses - distribution of gifts - Held that:- Since the assessee has produced bills and invoices for purchase of the SS Dinner set from M/s. Subhalakshmi Enterprises and has made the payment through banking channel, the purchases cannot be disbelieved on a statement recorded behind the back of the assessee and without confronting the assessee company with the adverse material and unless the assessee had an opportunity to cross examine the person who has deposed on behalf of M/s. Subhalakshmi Enterprise, the internal communication received by the AO cannot be a ground to find fault with the veracity of the claim/invoices/bills/bank statement etc. produced by the assessee to discharge the onus to show that it has purchased the gift (SS Dinner set) from M/s. Subhalakshmi Enterprise - the assessee has not given the list of recipients of gifts i.e. distributors/dealers when asked for by the Ld. CIT(A)/AO, therefore, we are inclined to disallow 30% of the claim. The AO is directed to restrict the claim to 30% of its claim and the assessee gets partial relief. Accordingly, this ground of cross objection of assessee is partly allowed.
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2018 (4) TMI 708
Validity of assessment passed in the name of non-existing entity - scheme of amlagamation adopted - Held that:- The documents on record reveal that the erstwhile assessee namely M/s Synovate India Pvt. Ltd. stood amalgamated with another entity namely IPSOS Research Private Limited in terms of order of Hon’ble Bombay High Court dated 03/05/2013. Pursuant to same, M/s Synovate India private Limited filed relevant Form No. 21 intimating aforesaid change in the name of the assessee company to Registrar of Companies on MCA portal vide SRN No. B79186417 dated 11/07/2013 and the same has been approved on 23/07/2013 meaning thereby that the erstwhile assessee has completely ceased to exist with effect from 23/07/2013. We find that it is settled law that passing of assessment order in the name of non-existent entity is a jurisdictional defect and is not merely a technical defect which could not be cured by the provisions of Section 292B. - Decided in favour of assessee.
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2018 (4) TMI 707
Addition on account of unabsorbed depreciation claimed for AY 1997-98 - carry forward beyond the period of eight years - Held that:- Once Circular No. 14 of 2001 of CBDT clarified that the restriction of eight years for carry forward and set off of unabsorbed depreciation had been dispense with, the unabsorbed depreciation from the assessment year 1997-98 upto the assessment year 2001-02 got carried forward to the assessment year 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by the Finance Act, 2001, and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever. This view has been adopted by the Hon’ble Delhi High Court in the cases of Motor & General Finance Ltd. vs. ITO (2017 (5) TMI 637 - DELHI HIGH COURT) and Pr. CIT vs. British Motor Car Co. (2018 (1) TMI 547 - DELHI HIGH COURT ). - Decided in favour of assessee.
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2018 (4) TMI 706
Penalty levied U/s 234E - relevant date of service of notice of demand - Held that:- Section 246A of the Act provides regarding the appealable order before the CIT(A). The outcome of processing under sub-Section (1) of Section 200A are appealable w.e.f. 01/6/2015 only. Prior to that the levy of fees U/s 234E was not an appealable order. Thus, the fees for failure to furnish the statement as per Section 200 of the Act is levied U/s 234E of the Act and the period from 01/7/2012 to 01/6/2015 is not appealable. Thus, the fees levied for default in quarter 4 of financial year 2013-14 and the demand was raised on 30/05/2014 is not appealable. However, the revenue had not produced any evidence to establish this fact. As per the assessee’s claim the demand notice had not received on e.mail as mentioned by the revenue. The relevant date of service of notice of demand is 28/11/2016, therefore, this issue is restored back to the file of the ld. CIT(A) to be decided on merit. - Decided in favour of assessee for statistical purposes only.
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2018 (4) TMI 705
Claim of depreciation made for acquiring right to render BPO services to Cummins in USA. - whether acquisition of right to render BPO services was deductible expenditure under section 37(1) - Held that:- In assessment year 2010-11 DRP held the assessee eligible to claim depreciation on the said consideration paid being intangible asset, covered by the ratio laid down by the Hon'ble Supreme Court in CIT Vs. Smifs Securities Ltd. (2012 (8) TMI 713 - SUPREME COURT). Since the Assessing Officer in the year under consideration had also held the payment made by the assessee was at best being payment for goodwill and where similar claim has been allowed in the hands of assessee in assessment year 2010-11, we hold the assessee to be entitled to claim depreciation on the right to render BPO services being goodwill in the hands of assessee. Thus, we reverse the order of Assessing Officer in disallowing depreciation of ₹ 2.26 crores. Accordingly, we direct the Assessing Officer to allow the said claim of assessee. The grounds of appeal No.1 and 2 raised by the assessee are allowed. Ground raised by the assessee on without prejudice basis in allowing the said expenditure as deductible under section 37(1) of the Act is rejected. Transfer pricing adjustment - Held that:- The assessee was offering skills and rule based services i.e. transaction processing, finance & accounting, HR processing, etc; technology based services e.g. Technical help desk solutions and knowledge based solutions such as Sarbanes Oxley solutions, data analytics, etc. The assessee was offering enterprise and extensive solutions in the core business area of knowledge based, skill based and technology based services, thus companies functionally dissimilar with that of assessee need to be deselected from final list.
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2018 (4) TMI 704
Disallowance of the interest claimed by way of set of - income from other sources - establishment of nexus - interest income with interest expenses - Held that:- No expenditure can be allowed against the income from other sources, unless it is wholly and exclusively incurred for the purposes of making or earning of such income. As in the present case, no such nexus could be established in respect of the expenditure incurred by the assessee. Further to claim of set off u/s 70(1) against interest income, there has to be a loss under the head income from other sources or any other head of income except capital gain which is not the case of the assessee - Decided against assessee. Deduction claimed u/s 54F - denial of claim by CIT-A as assessee was holding two residential houses in his name, so he is not entitled for the deduction under section 54F - Held that:- The action of the CIT(A) cannot be justified in holding both these properties as residential houses merely on the basis of their location in Jaipur House residential colony, Agra without appreciating the material facts regarding the purpose for which the properties were used; the house no. 273 in particular which was used for business purpose as it was let out by the assessee to M/s Client Technology Ltd. Agra for godown purpose. It is clear that although on the day of transfer of original asset, assessee had in his possession two residential houses i.e. 273, Jaipur House and 293, Jaipur House, however, the house no. 273 was let out to M/s Client Technology Ltd. Agra for business purpose and therefore, assessee is legally entitled for deduction under section 54F of the Act. The property was used by the assessee for business purpose by way of lease out to M/s Client Technology Pvt. Ltd. for commercial purpose of stocking of electronic items duly supported with commercial electricity connection for the period relevant. The ld. DR has not brought on record any material evidence in rebuttal to the contention of the assessee. - Decided in favour of assessee.
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2018 (4) TMI 703
Reopening of assessment - claim of the assessee for deduction u/s. 80IB(10) is not allowable and is liable to be withdrawn - Held that:- The tangible and material incriminating information came in possession of the AO during the course of assessment proceedings conducted by the AO for AY 2009-10 that the assessee did not meet the conditions stipulated for claiming deduction u/s 80IB(10) but still the same were claimed by the assessee for AY 2007-08, which led to reopening of the concluded assessment for the impugned assessment year 2007-08 u/s 147 of the 1961 Act. There is no estoppel against law and any view which is adopted by the AO in original assessment proceedings which is in contravention of the law is not sustainable will fall within rigors of Section 147/148 as the AO cannot form any opinion which is contrary to the express provisions of law and hence the instant case is covered within rigors of Section 147/148 of the 1961 Act as the view adopted by the AO was perverse and contrary to the provisions of Section 80IB(10), as there could not be two different views on this issue and hence there can be no question of change of opinion by the AO. Any view adopted by the AO which is contrary to the provisions of law will give rise to an occasion for Revenue to reopen the concluded assessment within rigors of Section 147/148 as the income had escaped assessment due to perverse view contrary to law adopted by the AO in original assessment. Hence reopening of the concluded assessment u/s 147 in the instant case before us is considered to be valid as also on merits, the assessee claim for deduction u/s 80IB(10) deserves to be rejected and the appeal of the Revenue stood allowed. In view of the major error which crept in the orders for AY 2009-10 and AY 2010-11 wherein the learned CIT(A) and tribunal proceeded on the belief that the project was approved by SRA on 04-06-2004 which was a wrong belief instead of correct date of approval of the project by SRA on 07-11-2002 and the said error goes to the root of the matter to decide this controversy because CBDT vide its notification no. 67 dated 31-08-2010 which was later clarified vide notification no. 2 of 2011 had mandated grant of benefit u/s 80IB(10) to slum rehabilitation / redevelopment project which were approved on or after 01-04-2004 but by local authority, and before 31st March 2008, thus no benefit could be allowed to projects approved prior to 01st April 2004, the said error/mistake cannot be allowed to be perpetuated as there is no heroism in perpetuating the mistake is a cardinal principle of jurisprudence. Assessee is not entitled for deduction u/s 80IB(10) of the 1961 Act w.r.t. its residential project at Parel,Mumbai and the appeal of the Revenue is allowed.
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2018 (4) TMI 702
Disallowance of interest expenditure - Held that:- Excess borrowings made by Shri J.P. Agarwal from the assessee company was in the normal course of business and to retain the facility of loan availed from the bank, which clearly demonstrates the business nexus of the advances made by the company to Shri J.P. Agarwal. Hence, it cannot be said that the monies advanced to Shri J.P. Agarwal were for non-business purposes. Once the money is borrowed for the purpose of business and interest is paid thereon, the same would be squarely allowable as deduction u/s 36(1)(iii) of the Act. Accordingly, the lending of monies to Shri J.P. Agarwal (Individual) and Shri J.P. Agarwal (Karta of HUF) is for the purpose of business and hence no proportionate disallowance of interest paid on borrowed capital could be made in respect of amounts advanced to these two parties. With regard to amounts advanced to Kolkata Concrete Pvt. Ltd. (sister concern of the assessee) assessee had charged interest on the amounts advanced to them during assessment year 2008-09 and had offered to tax - since M/s Kolkata Concrete Pvt. Ltd. was facing financial crunch and was in bad position, the assessee company waived its right to charge interest during assessment year 2009- 10 i.e. the year under appeal and was able to recover a substantial portion of balance outstanding in the sum of ₹ 1,36,30,495/- during the year, thereby leaving a meager balance of ₹ 9,09,183/- as on 31.03.2009. In any case, we find that the assessee is having sufficient funds to make advance to M/s Kolkata Concrete Pvt. Ltd. as is evident from the balance sheet. Hence, there cannot be any disallowance of interest u/s 36(1)(iii) - Decided in favour of assessee Disallowance u/s 14A - Held that:- The assessee is having sufficient own funds and in any case we are inclined to agree with the argument of AR that the interest received by the assessee is to be netted off with interest paid and bank interest also deserves to be excluded for the purpose of computing disallowance under the second limb of Rule 8D(2) - Once the bank interest is reduced from the total interest payment and the resultant figure thereon is netted off with interest received by the assessee on the loan given by the assessee, then there is no positive figure of interest payment. Hence, no disallowance under the second limb of Rule 8D(2) is warranted. With regard to disallowance under the third limb of Rule 8D(2) in the sum of ₹ 2,515/- the ld. AR fairly agreed for the same. In any case it is already settled that the disallowance under 14A read with Rule 8D cannot exceed the exempt income claimed by the assessee - addition made under the second limb of Rule 8D(2) is hereby directed to be deleted and disallowance under the third limb is sustained - Decided partly in favour of assessee.
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2018 (4) TMI 701
Denial of claim of exemption u/s.10(38) - gains earned by it from the sale of equity shares - Denial of natural justice - assessment having been done pursuant to a search, ought have been u/s.153A to 153D of the Act and not u/s.143(3) - Held that:- Relevant para in the assessment order relied by the ld.A.R, for buttressing this argument hardly suggest that the assessment done on the assessee was pursuant to a search. Just because an investigation was done by the investigation Department of the Department, based on some leads they might have had, reports of which were used against the assessee, would not ipso facto mean that the assessment was pursuant to any search. There is nothing whatsoever on record to suggest that the assessment was based on materials unearthed during a search. As already mentioned rules of justice do require that the reports of investigation wing, relied on bythe ld. Assessing Officer, as well as the statement recorded from Mr.Sunil Dokania are put to the assessee and its explanation sought, before deciding whether these are relevant in the assessment of the assessee. I also find the SEBI through its order dated 21.09.2017(supra) did vacate its interim exparte order dated 29th March, 2016 restraining 244 entities, inter alia including M/s.Kailash Auto Finance Ltd., from buying, selling or dealing in securities. Thus the question whether the transactions claimed by the assessee, as giving rise to the long term capital gains exempt from tax u/s.10(38) of the Act, were real or sham, requires a re-visit by the ld. Assessing Officer. I set aside the orders of the lower authorities and remit the issue back to the file of the ld. Assessing Officer for consideration afresh in accordance with.
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2018 (4) TMI 700
Receipt for relinquishment of right to sue the party - to be treated and taxed as business income OR capital receipts - Held that:- We are inclined to follow the findings of the Co-ordinate Bench in assessee’s own case for A.Y. 2009-10 [2018 (4) TMI 621 - ITAT AHMEDABAD] as held find no merit in the instant plea as the assessee has neither paid any consideration money nor carried out any development activity. It had merely obtained a licensee right to enter into possession into three parcels of land not creating any easement or interest therein as per Section 52 of the easement law. We further observe that the assessee developer could not have entered into full fledged possession in performance of the agreement in view of statutory bar u/s. 63 of the Bombay Tenancy and Agricultural Land Act, 1948 (applicable in Gujarat state). There is no material indicating the above lands being converted to non agricultural. The same sufficiently indicates that assessee’s license right existed on paper only. Hon’ble Bombay high court’s decision in Manoj B. Joshi’s case (2008 (7) TMI 1007 - BOMBAY HIGH COURT) holds that such an amount is not to be taxed as income u/s.2(24) of the Act. Assessee’s above development license acquired in its all three agreements does not amount to part performance requiring compulsory registration u/s.17 of the Registration Act. We therefore conclude in this view of all this evidence as well as legal position that the impugned compensation amount is not liable to be treated as income u/s.2(24) of the Act nor the same is taxable as capital gain for business income being in the nature of a capital receipt. - Decided against revenue
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2018 (4) TMI 699
Diversion of income - Allowable busniss expenditure u/s 37 - deduction of the amount utilized by it from TIUF towards construction of flyovers etc. - Held that:- Hon'ble Delhi High Court in the assessee’s own case has held that the amount standing in TIUF and interest is not diverted at source by way of overriding title and has to be included in the taxable income of the assessee and, simultaneously, the expenditure incurred on construction of flyovers etc. is a revenue expenditure, which should be allowed as deduction. We cannot give effect to this judgment unless not only the question of allowing deduction as claimed through the additional ground is allowed, but also the inclusion of the amount in the total income, being the stand point of the Revenue, is also upheld. Since both the sides are fairly accepting this position, we are of the considered opinion that the ends of justice would meet adequately if the impugned order on this issue is set aside and the matter is restored to the file of Assessing Officer for considering the taxability and deductibility in terms of the aforesaid judgment of the Hon'ble Delhi High Court in the assessee’s own case. Provision for leave encashment allowability - Held that:- The deduction cannot be allowed in terms of section 43B (f) on the making a mere provision unless the amount is actually paid. As the assessee has admittedly not made the payment of the amount in question and claimed deduction on the basis of provision, we are of the considered opinion that the assessee’s contention cannot be accepted on this score. Similar view has been taken by the Delhi Tribunal in DLF Home Developers Ltd. vs. ACIT (2013 (11) TMI 963 - ITAT DELHI). - Decided against assessee. Addition on account of income from ‘Dilli Haat.’ - Held that:- The twin conditions of objects and nature of activity, it clearly emerges that both the tests are satisfied inasmuch as the object of the assessee company is to promote tourism by providing entertainment to tourists through cultural events etc. Further, the nature of the business activity of the assessee unmistakably deciphers that it cannot be carried out without letting out stalls on regular frequency to different craftsmen. In the above hue, we have absolutely no doubt in our mind that income of ₹ 1.82 crore earned by the assessee from use of craft stalls on 15 days basis is ‘Business income’ and has been erroneously considered by the authorities below as ‘Income from house property’. The impugned order is pro tanto vacated. In view of decision in holding rental income from craftsmen as ‘Business income’ on the first principles, we do not consider it expedient to discuss other issues raised by both the sides in support of their respective claims as to whether or not the assessee was owner of ‘Dilli Haat’, which is a mandatory condition for computing income under the head ‘Income from house property’ and rule of consistency etc. For the remaining amount of ₹ 54.00 lac, we find that the same consists of ₹ 41.00 lac, being, income from space rented on regular basis and ₹ 12.99 lac, being, licence fee for allowing activities of food court, souvenir shops, bank and PCO. This amount of ₹ 54 lac has been earned by the assessee from the letting out of its permanent structures. The same cannot be equated with income of ₹ 1.82 crore discussed above, being, licence fee for use of craft stalls on 15 day basis. The ld. AR was fair enough not to contest the taxability of ₹ 54.00 lac as income held by the lower authorities to be falling under the head ‘Income from house property.’ Addition under Section 40A(3) - Held that:- Rule 6DD deals with cases and circumstances in which a payment or aggregate of payments exceeding the specified limit may be made to a person in a date otherwise by an account payee cheque or account bank draft. Clause (l) provides that “where the payment is made by an authorized dealer over a money changer against purchase of foreign currency or travellers cheque in the normal course of his business”. Since the instant transaction is duly covered under Rule 6DD(l), we hold that the learned CIT(A) was justified in deleting this disallowance. Disallowance u/s 40(A)(7) on account of provision of gratuity - Held that:- CIT(A) has recorded that the assessee made payment towards approved gratuity fund before the due date of filing of return of income under Section 139(1) of the Act and thus the provisions of Section 43B are not attracted. This finding has not been controverted by the ld. DR. Disallowance on account of late deposit of employer’s contribution to the provident fund - Held that:- It is seen as an admitted position that the assessee deposited the employees’ contribution towards EPF and ESIC before the due date u/s 139(1) of the Act - addition to be deleted. Addition on payments made by the assessee to professional and contractors by treating the same as covered under Section 40(a)(ia) - Held that:- Disallowance under Section 40(a)(ia) would be called for only if the assessee fails to deduct tax at source. If, however, deduction of tax at source is made but under a wrong section or there is some calculation mistake in the amount deduction of tax at source, the provision of Section 40(a)(ia) cannot be attracted. As the case of the assessee is that of short deduction of tax at source due to non charging of surcharge and not a case of non deduction of tax at source, we hold that the provision of Section 40(a)(ia) cannot be magnetized and consequently no disallowance is warranted. The impugned order is set aside to this extent. This ground is allowed. Disallowance u/s 40(a)(ia) on account of short deduction of tax at source - Held that:- Facts of this ground are similar to those of last ground of the assessee’s appeal for the A.Y. 2007-08. Here also, the assessee did deduct tax at source, but such tax withholding was without proper surcharge which resulted into overall short deduction of tax at source. Following the view taken hereinabove, we allow this ground of appeal.
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2018 (4) TMI 698
Assessment u/s 153C - Held that:- The conclusion drawn by the first appellate authority regarding the retrospective application of amended provision of section 153C of the Act cannot be sustained and the assessee’s case would be governed by the provisions of sub–section (1) of section 153C of the Act as it existed prior to its amendment by Finance Act, 2015, w.e.f. 1st June 2015. As discussed earlier, the seized document on the basis of which the Assessing Officer has initiated proceedings under section 153C has been factually proved to be not belonging to the assessee which has also been accepted by the first appellate authority. Therefore, the condition precedent of section 153C of the Act was not satisfied at the time of initiation of assessment proceedings under the said provision. That being the case, the proceedings initiated under section 153C of the Act for the assessment years 2005–06 to 2010–11 are vitiated and as a natural corollary, the assessment orders passed in pursuance to such proceedings have to be held as invalid. Claim of deduction under section 80IB(10) - Held that:- There is nothing either in the statement of Sashikant Chhatrawala or Sameer Bhojwani to conclude that the housing project was constructed as per seized unapproved plan dated 31st December 2001. As regards the allegation of the Assessing Officer that four flats have been merged to make it two flats, thereby, violating the conditions of 80IB(10)(c), the learned Commissioner (Appeals) held, if after the flats were sold by the assessee the purchasers merged the flats the assessee cannot be held responsible for alleged violation of conditions of section 80IB(10) of the Act. Commissioner (Appeals) held, when the assessee has constructed the housing project as per the approved plan with each residential unit having built–up area of less than 1,000 sq.ft, assessee’s claim of deduction under section 80IB(10) cannot be disallowed. Accordingly, he directed the Assessing Officer to allow assessee’s claim of deduction under section 80IB(10) of the Act. Allowance of assessee’s claim of deduction under section 80IB(10) in respect of leave and licence fees - Held that:- The unsold flats, being stock-in-trade of the housing project, being the immediate source of the impugned rental income, we find direct nexus of the said income to the housing project on hand. Therefore, the said income is derived from the housing project, making the income eligible for deduction u/s 80IB(10) of the Act.
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2018 (4) TMI 697
Disallowance of loan processing charges - CIT-A allowed the claim - Held that:- CIT(A) allowed the deduction claimed by the assessee on the ground that the assessee availed loan of ₹ 75 lakhs + ₹ 55 lakhs + ₹ 60 lakhs totaling to ₹ 1.9 lakhs from Corporation Bank for which the bank charged 1% of the loan towards loan processing charges and these amounts were charged on 28.04.2010, 18.09.2010 and on 16.03.2010 and all three dates fall within the year under consideration and the loan was also in the nature of cash credit. He accordingly allowed the claim of deduction. We find no infirmity in the same especially when assessee has availed cash credit from the bank and bank charged processing charges during the impugned assessment year. - Decided against revenue Disallowance of expenses u/s 14A read with Rule 8D - Held that:- assessee has not received any dividend income during the year could not be controverted by the Revenue. Therefore, we find no infirmity in the order of the ld. CIT(A) deleting the disallowance u/s 14A r.w. rule 8D on the ground that the assessee has not earned any exempt income during the year. - Decided against revenue Addition on account of repairs and maintenance u/s 37 - Held that:- We find the assessee has shown rent receipt of ₹ 2,12,50,000/-. Therefore, it is not coming out clearly from the order of the ld. CIT(A) as to how he arrived at the conclusion that the repair and maintenance expenses related to the new premises at Ajmol Khan Road, Karolbagh. Since the factual details are not coming out clearly, therefore, considering the totality of the facts of the case, we deem it proper to restore this issue to the file of the Assessing Officer with a direction to adjudicate this issue afresh. Disallowance made by the Assessing Officer u/s 40A(2)(b) under the head salary - Held that:- No infirmity in the order of the ld. CIT(A) as he has given justifiable reasons while deleting or sustaining the disallowance u/s 40A(2)(b) made by the Assessing Officer. He has considered the qualification of the concerned persons and the nature of job/responsibility of each of the persons and accordingly he has come to a conclusion that the salary paid to Aradhana Mehra, Roshni Mehra and Pawan Mehra are justified where the salary paid to remaining persons are not justified. We do not find any infirmity in the finding given by the ld. CIT(A) on this issue. Accordingly, the order of the ld. CIT(A) is upheld and the ground raised by the Revenue and the assessee is dismissed. Addition to interest paid to the specified persons as per the provisions of section 40A(2)(b) - Held that:- So far as disallowance of interest on advances paid to Mehra Sons Jewelers Pvt.Ltd., Namita Mehra and Sakshi Mehra are concerned, the ld. CIT(A) has given a categorical finding that these advances are for business purpose or salary advance for which no disallowance of interest is called for. So far as advances to other parties are concerned, ld. CIT(A) has given a finding that the assessee could not substantiate with evidence regarding the justification of diversification of interest bearing funds for which he sustained the disallowance of interest. Under these circumstances and in view of the detailed reasoning given by the ld. CIT(A) on this issue, we find no infirmity in his order on this issue
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2018 (4) TMI 696
Revision u/s 263 - AO has not considered proviso to Section 2(15) while deciding the case - Held that:- We found that the order passed by the AO while giving effect to the direction of CIT, the assessed income comes to the very same figure at which it was originally assessed by the AO vide order dated 27/12/2011. Thus, the assessed income as per the original assessment dated 27/12/2011 vis-ŕ-vis assessed income as per the order passed u/s.143(3) r.w.s. 263 dated 30/10/2015 comes to the very same figure of ₹ 528,65,24,460/-. Accordingly, we observe that no prejudice has been caused to the Revenue in terms of assessed income and tax thereon. Once it is held that no prejudice has been caused to the Revenue, invocation of powers u/s.263 was not justified, in so far as twin condition of Section 263 with regard to order of AO being erroneous as well as prejudicial to interest of revenue is not complied with. See case of Slum Rehabilitation Authority [2016 (1) TMI 798 - ITAT MUMBAI] - Decided in favour of assessee
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2018 (4) TMI 695
Revision u/s 263 - Held that:- Almost all the issues on which show cause notice was issued u/s. 263, stood examined by the Assessing Officer by issuing the questionnaire with respect thereto in the assessment proceedings u/s. 143(3) of the Act. The issues raised by the first appellate authority also stood resolved by ITAT in appeal for A.Y. 2010-11, which stood affirmed by Hon’ble jurisdictional High Court vide their decision [2017 (4) TMI 1035 - DELHI HIGH COURT]. Therefore, respectfully following the decision of Hon’ble jurisdictional High court in the case of assessee itself for A.Y. 2010-11, we do not find any good reason to sustain the decision reached by learned Pr. CIT passed u/s. 263 of the IT Act. As a result, the appeal of the assessee deserves to be allowed.
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2018 (4) TMI 694
Disallowance of interest payments - Held that:- Interest expenses incurred by the assessee have been added to the Closing Stock of Work in progress. Hence if this claim of expenditure is disallowed, it would result into reduction in the Cost of Work-in-progress. By any stretch of imagination this cannot be considered as income of the assessee as the same has only been carried forward as Cost to the future years and not been claimed as expenditure for this year. Since the amount is not at all debited to the Profit & Loss A/c, the addition of the Interest Paid to the income of assessee firm by the AO is bad in law. No merit in the action of lower authorities for adding the interest paid by assessee which was added in the work in progress during the years under consideration and has not been claimed as expenditure. Appeals of assessee are allowed.
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2018 (4) TMI 693
Reopening of assessment - Addition on account of Long Term Capital Gains on protective basis - Held that:- The assessee admitted that the sale-deed was registered in the year 2011-12 but he received full consideration in the A.Y. 2008-09, therefore, he offered the same to tax under the head of long term capital gain. In the above said facts and circumstances of the case, the Long term capital gain has been assessed to tax on protective basis in the A.Y. 2008-09. The long term capital gain assessed on protected basis in the assessment year 2008-09 is herby treated as substantive assessment. Therefore in the said circumstances, we are of the view that the notice u/s 148 of the I.T. Act, 1961 to the assessee dated 21.03.2012 for the A.Y. 2005-06 and 2006-07 are not justifiable and are held to be wrong against law and facts and are hereby ordered to be set aside by relying upon the law settled in Hindustan Lever Ltd. Vs. R. B. Wadkar (2004 (2) TMI 41 - BOMBAY High Court).
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2018 (4) TMI 692
Validity of reopening of assessment - ITO at Ghaziabad jurisdiction over the matter - Held that:- The mere factum of the agreement found by the DDIT (Inv.), Ghaziabad having been forwarded by him to the AO at Ghaziabad cannot confer jurisdiction on the AO at Ghaziabad, when the assessee has always been and remains assessed at Agra. The fact that the assessee remained posted as Chief Engineer, Ghaziabad and had been residing in Ghaziabad, again, cannot confer jurisdiction on the AO at Ghaziabad to issue notice under sections 147/148 of the IT Act, when undisputedly and admittedly, the assessee has never been assessed at Ghaziabad and he has always been and continues to be assessed at Agra. Apropos the observation that the AO at Ghaziabad would have jurisdiction over the matter under section 124(1) of the Act, this observation gets nullified by the very next observation, i.e., the assessment has been completed by the AO in Agra. The grievance of the assessee in this regard is found justified and it is accepted as such - Decided in favour of assessee.
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2018 (4) TMI 691
Non granting depreciation and expenses on insurance pertaining to the Kavesar unit - Held that:- As decided in assessee's own case for AY 2003-04 disallowance sustained by the Ld. CIT(Appeals) on account of depreciation and other expenses of Kavesar Factory was deleted by the Tribunal accepting the alternative contention of the assessee that the expenses incurred to protect the business assets should be allowed as deduction as held by Hon’ble Bombay High Court in the case of Hindustan Chemical Works Ltd.[1979 (2) TMI 16 - BOMBAY High Court] - also held by the Tribunal that the assets of Kavesar Unit having already entered the block of assets of the assessee, depreciation thereon could not be disallowed on the ground of non-user as the use of block of assets was to be considered and not the use of individual assets. - Decided in favour of assessee Disallowing the expenditure on purchase of application software - revenue or capital expenditure - Held that:- the expenditure incurred by the assessee towards the purchase of application software is revenue in nature. See Amway India Enterprises case [2011 (11) TMI 4 - DELHI HIGH COURT]. Non grating deduction claimed u/s 35D - Held that:- As decided in assessee's own case for AY 2003-04 direct the AO to allow the deduction claimed by the assessee under section 35D for the year under consideration keeping in view the expenses eligible for such deduction as quantified by him in assessment year 1999-2000. Disallowance u/s 14A - allocating other expenditure and depreciation on H.O. assets to the exempt income - Held that:- we direct the AO to restrict the disallowance u/s 14A to 2% of the total exempt income of the assessee, in place of the disallowance made by the AO and the enhancement done by the Ld. CIT(A). - Decided partly in favour of assessee Additions for unutilised Modvat Credit to the closing stock - Held that:- There is no dispute that the purchases made by the assessee are accounted for net of MODVAT credit. In M/s Diamond Dye Chem Ltd. [2017 (7) TMI 616 - BOMBAY HIGH COURT] held the income was not generated to the extent of Modvat credit or unconsumed raw-material. Merely because the Modvat credit was irreversible credit offered to manufacturers upon purchase of duty paid raw-materials, that would not amount to income which was liable to be taxed under the Act. It is also held that whichever method of accounting is adopted, the net result would be the same. - Decided in favour of assessee Disallowing lease rentals not debited to Profit & Loss Account - Held that:- We have heard the rival submissions and perused the relevant materials on record. It is found that the assessee is not the owner of the leased cars. It has not claimed depreciation u/s 32 in respect of the said cars. In the facts of the case, there is merit in the contentions of the Ld. counsel that the principal amount of lease rentals be allowed as a deduction u/s 37(1) of the Act.- Decided in favour of assessee Disallowing professional fees by treating it as capital expenditure - Held that:- We find that the aforesaid expenses do not create any new fixed asset or enhance the production capacity of the business. These expenses are for repairs and renovation of existing assets, hence should be allowed as deduction. Disallowance to be deleted - Decided in favour of assessee Computing deduction u/s 80HHC - AO held that for computing the deduction u/s 80HHC, the total turnover should include sales tax, excise duty and sale of raw materials - Held that:- For the purposes of working out the formula and in order to avoid distortion of arriving export profits clause (baa) stood inserted to say that although incentive profits and "independent incomes" constituted part of gross total income, they had to be excluded from gross total income because such receipts had no nexus with the export turnover. Therefore, in the above formula, we have to read all the four variables. On reading all the variables it becomes clear that every receipt may not constitute sale proceeds from exports. That, every receipt is not income under the Income-tax Act and every income may not be attributable to exports. This was the reason for this Court to hold that indirect taxes like excise duty which are recovered by the taxpayers for and on behalf of the Government, shall not be included in the total turnover in the above formula - See CIT v. Ravindranathan Nair [2007 (11) TMI 10 - Supreme Court of India] Disallowance on account of bad debts - Held that:- As decided in TRF Ltd [2010 (2) TMI 211 - SUPREME COURT ] after 01.04.1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. However, in the present case, the Assessing Officer has not examined whether the debt has, in fact, been written off in accounts of the assessee. When bad debt occurs, the bad debts account is debited and the customer’s account is credited, thus, closing the account of the customer. In the case of companies, the provision is deducted from sundry debtors. - Disallowance to be deleted - Decided in favour of assessee
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2018 (4) TMI 690
G.P. estimation on bogus purchases - Held that:- End of justice will be met in this case, if GP ratio of 10% on alleged bogus purchase is added to income of the assessee against which credit for the declared GP ratio will be granted by AO. In a nutshell, the AO is directed to restrict the disallowance of alleged purchase of ₹ 7,16,98,624/- by estimating the same at 3.7% (10% minus 6.30%) for the AY 2006-07. Facts being identical our decision for the AY 2006-07 applies mutatis mutandis to AY 2007-08. Accordingly, the AO would estimate the profit element embedded in the purchase of ₹ 22,11,65,706/- @ 3.37% (10% minus 6.63%) for A.Y.2007-08. We make it clear that we are not disturbing the additional income of ₹ 45,17,013/- offered by the assessee for A.Y. 2006-07 and ₹ 1,46,63,286/- for A.Y. 2007-08.
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2018 (4) TMI 689
Set off of loss brought forward of the earlier years to be set off in the current assessment year - since 51% shareholding as on 31st March 2009, 31st March 2010 and 31st March 2012 is not with the same persons, the loss cannot be set off - Held that:- Section 79 of the Act provides for carry forward and set off of losses. In the present appeal, the assessee is not seeking carry forward of losses to be set off but the assessee is seeking to set off the brought forward losses of the earlier years to be set off in the current assessment year and therefore provisions of section 79 may not be applicable. The said section would apply if there is a change in voting power in the assessment year when the loss is sought to be carried forward and set off against the subsequent year losses. The assessee in the present appeal for A.Y. 2012-13 is seeking to set off loss incurred in A.Y. 2009-10 and 2010-11. The issue before us relates to loss of A.Y.2009-10 and 2010-11 to be set off against income of A.Y.2012-13. Mr. Vijay Wadhwa and Mrs. Vinita Wadhwa through their shareholding in RPL and WGH as on 31st March 2009 and 31st March 2010, i.e., the last day of the previous year in which the loss was incurred, held voting rights to the extent of 56% and 53% respectively and as on 31st March 2012 held 100% of shares carrying voting rights directly and therefore the assessee appellant is entitled to carry forward and set off of loss of A.Y. 2009-10 and 2010-11 against income of A.Y. 2012-13. - Decided in favour of assessee.
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2018 (4) TMI 688
Adjustment made by TPO w.r.t. license fee and management fees - Held that:- No merit in the analysis carried out by the TPO by benchmarking the licence fee. In fact assessee by aggregation of transactions in the TP study had benchmarked the arm's length price of all the transactions by comparing operating profit / operating cost at the entity level was 25.49% as against the non-AE it was 5.26 % . The comparability analysis in the TP study carried out by the assessee by aggregation of transactions adopting TNMM as the most appropriate method has not been examined by either of the authorities below who have merely concentrated merely on the issue of aggregation / segregation of transactions. The CIT (A) has mechanically accepted the results of the assessee to be at arm’s length by accepting the operating profit / operating cost of the assessee as 25.49% as against non-AE at 5.26%. In that view of the matter, we deem it appropriate to remand the issue to the file of the CIT (A) for examining the correctness of the ALP at the entity level by applying the TNMM as the most appropriate method by aggregating the transactions. The CIT (A) is directed to take the remand report from the TPO in this regard and afford the assessee adequate opportunity of being heard in the matter. Management fees addition - comparability analysis in the TP study carried out by the assessee by aggregation of transactions adopting TNMM as the most appropriate method has not been examined by either of the authorities below who have merely concentrated merely on the issue of aggregation / segregation of transactions. The CIT (A) has mechanically accepted the results of the assessee to be at arm’s length by accepting the operating profit / operating cost of the assessee as 25.49% as against non-AE at 5.26%. In that view of the matter, we deem it appropriate to remand the issue to the file of the CIT (A) for examining the correctness of the ALP at the entity level by applying the TNMM as the most appropriate method by aggregating the transactions. The CIT (A) is directed to take the remand report from the TPO in this regard and afford the assessee adequate opportunity of being heard in the matter. Thus Ground of revenue appeal are allowed for statistical purposes.
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Customs
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2018 (4) TMI 686
Provisional release of goods - Jurisdiction - Held that: - Merely because a point of jurisdiction is raised by the Petitioner, does not mean that the Competent Authority is automatically denuded of its power and Authority in law to adjudicate the show cause notice - All that would happen is that he will be obliged to render a finding on this preliminary objection of jurisdiction. If the Revenue is unable to adjudicate the show cause notice and pass the order within a period of four weeks from today, then, the Revenue shall consider the request of the Petitioners for provisional release of the goods, no separate application would be necessary for that purpose. Petition disposed off.
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2018 (4) TMI 685
Maintainability of petition - alternative remedy of appeal - Held that: - the Hon'ble Supreme Court, as well as this Court, held that, ordinarily, writ petition should not be entertained when the Statutes provide for an effective and alternative remedy, more so, in revenue matters - where hierarchy of appeals is provided by the Statute, the party must exhaust the statutory remedies before resorting to writ jurisdiction. Suspension of CHA License - penalty - Regulation 20 of the Customs Brokers Licensing Regulations, 2013 - non-adherence of the mandatory time limit prescribed in Regulation 19(2) of the CBLR - classification of imported goods - the appellant had wrongly classified the goods in question despite the existence of order-in-appeal No.1323 of 2014, dated 30.07.2014, passed against the importer M/s.BenQ India Pvt. Ltd, by the Commissioner of Customs (Appeals), Chennai. Held that: - Writ Court, while dismissing the writ petition, directed the appellant herein, to submit their reply, to the show cause notice, dated 03.11.2017, within a period of 30 days, from the date of receipt of a copy of the order impugned herein and upon compliance of the directions contained in paragraph 15, of the show cause notice, the respondent shall adjudicate the show cause notice and pass final orders as expeditiously as possible, preferably within a period of two months from the date on which, the case is ready for adjudication. Writ Court has also made it clear that show cause notice issued under Regulation 20, shall be adjudicated by the respondent without being in any manner influenced by the observations made in the order of the Writ Court - there is no infirmity or illegality, in the impugned order, passed by the Writ Court, as Courts have time and again, held that where hierarchy of appeals, is provided by the Statute, the party must exhaust the statutory remedies, before resorting to writ jurisdiction. The parties are directed to strictly adhere to the time line, framed in the impugned order. Appeal dismissed - decided against appellant.
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2018 (4) TMI 684
Suspension of CHA license - time limitation - Held that: - from the stage of initiation of the investigation, till the issue of suspension order, substantial period was lapsed, which itself establish that there was no emergency to suspend the license immediately. Therefore, the suspension of license is not necessary - The very fact in that case was that the alleged violation is of year 2005 as the import had taken place in Sept, 2005 and order of suspension was issued on 30.10.2006, which indicated that there was no emergency, which required license to be suspended. The Hon’ble Bombay High Court in the case of National Shipping Agency [2006 (2) TMI 306 - CESTAT, MUMBAI] held that power of suspension is emergent power to be used in those cases where it is required that CHA license to be immediately suspended. Appeal allowed - decided in favor of appellant.
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Corporate Laws
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2018 (4) TMI 683
Oppression and Mismanagement - Petitioner-Appellant submitted that the affairs which have been or are being conducted in a prejudicial or oppressive manner both can be looked into and thus past affairs can also be considered - Held that:- We find that have been relates to present perfect tense. It relates to action that began some time in the past and is still in progress. Wording are being relates to present continuous tense. There is a difference between have been and had been . Had been would be past perfect tense indicating acts which were committed in the past and which came to an end in the past. Apart from this, in view of our earlier finding that since 2005 itself the petitioner has had Board of Directors constituted of its own selected Chairpersons and also its own nominee and nominees of other lenders, except one promoter, as well as the management of the Company itself has had been with Petitioner and other lenders, such Petitioner can clearly not be heard putting blames on others. Thus, the petition would require to be dismissed even on this count. With R.O.C. after Petitioner and Promoters with enquiry under Section 206 of the New Act, the Appellant s object in filing Petition appears to be to stop and delay action being taken against the Petitioner, its employees and other lenders for the acts committed with regard to Respondent No. 1 Company which in turn had an impact on the Project which the Respondent No. 1 had taken up. No doubt, a person lending money may put conditions to protect its interest but there has to be a limit and it is unthinkable that the lenders took over the Company itself and committed acts attracting actions under the Companies Act and other Acts from which now protection was sought. The NCLT rightly held that the Petitioner had not approached the NCLT with bonafide intention. Looking to the facts of the present matter and above discussions, we order that the affairs of this Company ought to be investigated under Section 210 of the New Act in public interest. The Central Government should take steps accordingly. Whoever from the promoters, shareholders as well as the Petitioner-Appellant or other lenders, is found to be responsible for acting against Public Interest, needs to be made accountable. Central Government may also as part of investigation direct, at the cost of Company, forensic audit of the Company preferably under supervision of officials of Comptroller and Auditor General of India at least since 2005 if not earlier. In our view, the Government of Madhya Pradesh and Central Government both need to urgently consider the way forward in public interest to get project completed. We direct accordingly and decline to set aside the dismissal of the Company Petition. We however maintain the dismissal of the Company Petition but for the reasons discussed by us. The appeal is dismissed.
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2018 (4) TMI 682
Prohibition from accessing the securities market directly or indirectly - SEBI advising the appellant to dissociate from discharging the obligations as a Merchant Banker in view of the 3 year restraint imposed by the order of the WTM of SEBI - Prohibition of manipulative and deceptive devices, insider trading and substantial acquisition of securities or control - Held that:- Provisions in the SEBI Act, PFUTP Regulations and the clarification given by the Hon’ble Supreme Court merchant banking is undoubtedly an act of dealing in securities and therefore direction to a Merchant Banker not to undertake merchant banking business when under restraint is fully justified. There is no suspension or cancellation of the license of the Merchant Banker in the instant matter requiring separate procedure to be followed. In any case, the requirement of following the procedure laid out in the Intermediaries Regulations, 2008 would arise when a fresh matter is taken up against a Merchant Banker not when a restraint order is imposed on it on account of serious PFUTP violations. As such, both the appeals are without any merit and liable to be dismissed. No merit in the argument of the appellant company that its present management is completely disconnected from the management prior to 2008. Similarly, we find no merit in the arguments of the appellant that Ashok Shah as a separate entity has been penalized by a separate order of SEBI and as such the impugned orders herein is a double whammy to the appellant company. There is all round lack of credibility in the arguments submitted by the appellant in the context of the fact that they are neither willing to give details of their past association nor their present association nor any documents related details regarding dealing in the shares of Platinum. In fact, on a question from the Bench whether there is any other order passed by SEBI against the appellant, the Learned Senior Counsel for the appellant stated in the negative. When he was told that two other appeals are pending before this Appellate Tribunal against the appellant the Senior Counsel had no information about the same because we note that separate Counsel was engaged in respect of those two appeals and the Learned Senior Counsel in these appeals was kept in dark about those matters - the appellants are suppressing facts and providing only misleading information just to take this Appellate Tribunal for a ride. As evidenced from the records of RoC produced before us, that Ashok Shah continued to be in the board of the appellant company intermittently as director / managing director though for short spells on each occasion. It is also on record that Ashok Shah and related entities hold majority stake (58%) in the appellant company. As such, we do not find any merit in the arguments of the appellant that the appellant company had a clean break with its past directors / management, which is far from the truth. Given these continued association of Ashok Shah and related entities with the appellant company the latter’s unwillingness to produce details relating to the dealings in the shares of Platinum, including their argument that shares belonged to Mahavir Impex, become dubious and as such cannot be accepted. The argument that the respondent did not follow the procedure laid out in suspending / cancelling the merchant banking license is without any merit, because no such order has been passed by the WTM of SEBI in the order dated August 12, 2016 - When the WTM’s order dated August 12, 2016 has clearly found the appellant liable for violation of PFUTP Regulations, 2003 and accordingly the appellant is restrained from accessing the securities market and the registration of the appellant as a Merchant Banker has not been either suspended or cancelled by the impugned communication dated December 22, 2016, the question of following the procedure for suspending or cancelling the license does not arise at all. Accordingly, we do not find any merit in the arguments regarding violation of natural justice. No merit in these appeals and both appeals are dismissed with no order as to costs. Consequently,
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Insolvency & Bankruptcy
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2018 (4) TMI 687
Corporate insolvency process - no notice under sub-section (1) of Section 8 of the ‘I&B Code’ was issued by the Appellant, nor necessary information were furnished as per Rule 5 - Held that:- We are not inclined to interfere with the impugned order dated 26th July, 2017 passed by the Adjudicating Authority, Principal Bench, New Delhi. However, the order passed by the Adjudicating Authority will not come in the way of Appellant to issue notice under sub-section (1) of Section 8 of the ‘I&B Code’ to the ‘Corporate Debtor’, and to file an application under Section 9 of the ‘I&B Code’, if there is a debt and default by the ‘Corporate Debtor’. In such case, the Adjudicating Authority may decide the application uninfluenced by the impugned Order dated 26th July, 2017 and the judgment passed by this Appellate Tribunal. The appeal is dismissed with aforesaid observation. However, in the facts and circumstances of the case, there shall be no order as to cost.
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FEMA
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2018 (4) TMI 681
Violation of FERA - lending against the deposit without taking any primary security - Held that:- Bank had lent money against the security of deposits in the NRNR accounts. There was no bar in such type of lending as is apparent from the RBI’s Notification. The bank was required to comply with the condition attached to such lending as prescribed by the RBI under the FERA/FEMA. One such condition was that the bank could grant loan facilities to resident individuals, firms, companies in India against the collateral of such fixed deposits. In spite of the aforesaid conditions of granting loans against collateral security of such deposits the bank continued to grant loans to the resident individual (third parties) treating them as primary security. Understood that the assets created out of the proceeds of the loan could only be the primary security and not the deposits in the present case. Thus, the action of the bank in lending against the deposit without taking any primary security was not in consonance with the provisions of the Act. Details as enumerated at para 5 supra, proves the violation of FERA. RBI’s suspension of the said account also point towards the wrong doing. Banks are expected to act as trustees of public money rather than misusing the powers granted by the regulators thereby facilitating abuse of the Act by unscrupulous persons. The appellant bank therefore cannot be absolved of the charges against it.
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PMLA
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2018 (4) TMI 680
Provisional attachment order - Appellant explained the position of the acquittal but the adjudicating authority, PMLA, New Delhi still attached the properties of the appellant - Held that:- “Proceeds of Crime” under Section 2(1)(u) of the PML Act is a property which is “derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence”. Scheduled Offence is a predicate offence and the occurrence of the same is a prerequisite for initiating investigation into the offence of money laundering. The Trial Court has already acquitted the appellant of any offence which can be termed as scheduled offence under the PMLA. The respondent has also fairly agreed to this point - three properties standing in the name of the appellant and which do not from a part of the confiscated properties vide the Trial Court order dated 29.09.2016 and 07.10.2016 are ordered to be released from the attachments, attached by the ED vide the impugned order dated 17.03.2017 - Appeal allowed
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Service Tax
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2018 (4) TMI 676
Non-payment of service tax - commission received - Business Auxiliary Services - Held that: - it appears that the appellant has shown in the balance sheet the income as ‘commission’ which is subjected to service tax under the category of ‘Business Auxiliary service’ - It is an after-thought that it was profit sharing with the family members. The appellant himself has shown the commission income in the balance sheet which is subjected to service tax - impugned order sustained - appeal dismissed.
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2018 (4) TMI 675
Taxability - expenditure in foreign currency - amounts were deducted from export proceeds by the banks towards their charges - Held that: - the issue is covered by the decision in the case of M/s Dileep Industries Pvt. Ltd. Versus CCE, Jaipur [2017 (10) TMI 1231 - CESTAT NEW DELHI], where it was held that The foreign banks while remitting the money to the Indian Bank, deduct their charges for collection of bills which in turn are charged by the Indian Banks from the appellants. When it is so, then the appellant are not entitled to pay the service tax - demand not sustainable - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 674
Classification of services - service of Painting of EHV Line Tower, Aluminium Equipment structure, providing earth pits etc. to Maharashtra State Electrical Transmission Co. Ltd. - classifiable under the category of “Management, Maintenance or Repair Service” or Erection, Commission or Installation Service? - validity of SCN - Held that: - no proper reason and discussion has been made for classification of services in both the heads. On one hand the adjudicating authority viewed that the non-payment was due to lack of professional assistance and on the other hand the larger period of limitation has been invoked and penalty imposed - impugned order is thus cryptic and erroneous. Matter remanded to decide the same afresh after giving the opportunity to the Appellant - appeal allowed by way of remand.
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2018 (4) TMI 673
Demand of service tax - Supply of Tangible Goods for use Service - contract between the Appellant and the owner of different vessels was meant for transportation of coastal goods - Held that: - The fact that the Appellant before issuance of SCN were depositing service tax as directed by the revenue and were informing of the same goes on to show that there was no ground for alleging any malafide intention against them coupled with the fact that the issue if revenue neutrality is also involved - appeal allowed by way of remand.
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2018 (4) TMI 672
Refund claim - services received by them in their Unit - rejection on the ground that the services were wholly consumed in SEZ and hence not eligible for refund - Held that: - From the provisions contained in Section 26(1)(e) of the SEZ Act, read with Rule 30(10) of the SEZ Rules, 2006, it can be seen that no service tax is payable on the services provided by a service provided to a SEZ unit. Further, Sec. 51 of the SEZ Act also makes an over-riding provision that SEZ Act shall have effect even if there is anything inconsistent contained in any other law for the time being in force or in any instrument having effect by virtue of any other law. N/N. 9/2009-S.T. and amended N/N. 15/2009-S.T. have been only issued to operationalize the exemption/ immunity available to SEZ unit under Sec. 26(1)(e) of the SEZ Act, 2005 and cannot bar the refund claim to the Appellant. The refund of service tax sought by Appellant cannot be rejected on the ground that the services were wholly consumed in SEZ and the Appellants are eligible for the refund. Some of the claim amount was rejected on the ground of excess claim in case of some invoices and that some of the invoices are not in Appellant's name or minor discrepancy. In such circumstances it is fit to remand the case back to the adjudicating authority to grant refund where the invoices were not in name of Appellant - appeal allowed by way of remand.
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2018 (4) TMI 671
Erection, commissioning and installation Service - agreement with Vidarbha Irrigation Development Corporation for providing and laying of M.S Pipe line in two rays for Rising main of Paghora Lift Irrigation Scheme under Gosikhurd Project - Held that: - the Tribunal in Appellant’s own case Shonan Siddarth JV [2016 (12) TMI 485 - CESTAT MUMBAI] has held that the services are covered under the category of Commercial or Industrial Construction Service - in CBEC Circular No. 116/10/2009 – ST dt. 15.09.2009 the intention of the government is clear that the contracts towards commerce or industry are liable for tax. In the present case the pipelines were laid for Maharashtra Government and the contract as awarded by Vidharbha Irrigation Development Corporation, Nagpur for irrigation purpose. Thus the contract has no relation with industry or commerce - the activity of the Respondent is not liable for any service tax. Appeal dismissed - decided against Revenue.
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2018 (4) TMI 670
Recovery u/r 14 of CCR readwith Section 73 (2) of the Finance Act, 1994 - input service distribution (ISD) - demand on the ground that they have wrongly availed cenvat credit in respect of Haridwar Unit which is manufacturing excisable goods which are exempted from duty in terms of N/N. 50/2003 - case of appellant is that Appellant is mere Input Service Distributor and has himself did not avail cenvat credit hence the recovery in terms of Rule 14 is not sustainable. Held that: - the Input Service Distributor registration is only for the purpose of distribution of credit. He can be held accountable only in case of improper distribution of credit which is not the issue in the present case. This Bench in the previous proceedings against the Appellant in Mahindra & Mahindra Ltd. Versus Comm. of Service tax, Mumbai [2017 (7) TMI 167 - CESTAT MUMBAI] has already held that Rule 14 of CCR can be made applicable only on the person who avails the Cenvat credit wrongly or utilizes the credit,it is not invokable against the Input Service Distributors. Demand set aside - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 669
Scientific Technical Consultancy Service - Reverse Charge Mechanism - services received from foreign firm namely, M/S Rosoboronexport, Russia - Held that: - in the appellant's own case in an identical issue reported as Commissioner of Central Excise, Nashik Vs. Hindustan Aeronautics Ltd. [2015 (5) TMI 668 - CESTAT MUMBAI], this Tribunal has decided the matter in favor of the assessee, where relying in the case of R.M. Dhariwal (HUF) vs. CCE Pune III - [2014 (1) TMI 409 - CESTAT MUMBAI], it was held that that transfer of trade name and formulae transferred for a consideration cannot be services which would fall under "Scientific or Technical Consultancy Service". Appeal allowed - decided in favor of appellant.
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2018 (4) TMI 668
Refund of service tax paid by mistake - rejection on the ground of time limitation - Held that: - When it is undisputed that the respondent herein is not required to discharge any service tax law on the various services rendered by them as per Notification No. 12/2012, I find that the judgment of the Hon'ble High Court of Bombay in the case of Parijat Construction [2017 (10) TMI 659 - BOMBAY HIGH COURT] will apply in full force, where it was held the Division Bench of this Court in Hindustan Cocoa [1994 (6) TMI 18 - HIGH COURT OF JUDICATURE AT BOMBAY] has held that the limitation prescribed under Section 11 B of the said Act to be not applicable to refund claims for service tax paid under a mistake of law - the respondent are eligible for the refund of the amount of service tax paid by mistake - appeal dismissed - decided against Revenue.
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2018 (4) TMI 667
Refund claim - time limitation - Section 11B of Central Excise Act, 1944 - unjust enrichment - whether the respondent herein is eligible for the refund of the amount paid as service tax though not payable? - Held that: - the respondent had made payment of service tax under an assumption that the respondent was liable to do so when there was no liability - the issue covered by the decision in the case of M/s Parijat Construction, M/s Giriraj Construction Versus Commissioner of Central Excise [2017 (10) TMI 659 - BOMBAY HIGH COURT], where it was held that the limitation prescribed under Section 11 B of the said Act to be not applicable to refund claims for service tax paid under a mistake of law. Unjust enrichment - Held that: - the respondent had produced a Chartered Accountant's certificate indicating clearly that the amount of refund claim filed by them are reflected in the balance sheet as amounts receivable from the Central Excise department and they have not passed on the amount to their customers - In the absence of any contrary evidence to indicate that respondent has recovered the amount from their customers, the first appellate authority has come to a correct conclusion in holding that there is no unjust enrichment in this case. Refund allowed - appeal dismissed - decided against Revenue.
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2018 (4) TMI 666
Refund claim - service tax erroneously paid - denial on the ground of mentioning the commission amount on the shipping bill or in the bill of export - procedure stated under N/N. 18/2009-ST dated 07/07/2009 - Held that: - Hon'ble High Court of Gujarat in a similar situation in the case of Commissioner of Central Excise& Customs, Swat -1 V. ABG Shipyard Ltd [2013 (9) TMI 741 - GUJARAT HIGH COURT] had clearly ruled that non declaration of the commission amount on the shipping bill is a procedural lapse, when the amount of commission paid is not disputed and the service tax liability on that is also discharged - appeal dismissed - decided against Revenue.
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2018 (4) TMI 665
Refund claim - time limitation - relevant date - whether for the purpose of refund claim u/r 5 and Notification issued thereunder, the time period of 1 year for filing the refund should be reckoned from the date of invoice of the export service or from the receipt of convertible foreign exchange? Held that: - this Tribunal consistently held that the relevant date for filing the refund is date of receipt of convertible foreign exchange/ FIRC - reliance placed in the case of M/s. Bechtel India Pvt. Ltd. Versus CCE, Delhi [2013 (7) TMI 490 - CESTAT NEW DELHI]. Appeal dismissed - decided against Revenue.
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2018 (4) TMI 664
Commercial Training and Coaching Center - case of Revenue is that the certificate of marks is issued by the Board of Intermediate Education (BIE) and not by appellant; as appellants are not issuing any certificates to the students and cannot claim exemption; coaching for the intermediate education and for National Entrance Examination are distinct activities and coaching for such entrance examinations does not lead to issue of any certificate recognized by law - N/N. 33/2011-ST. For the period 2011-2012 - Held that: - For applicability of the exemption, post 1.5.2011, plain reading of the notification is that the coaching or training should lead to issue of a certificate / degree / diploma or educational qualification recognized by law. It is significant that, post 1.5.2011, even the controversy relating to issue of certificate / degree etc. is settled in favour of the appellant as the notification clearly provided that the coaching or training should lead to issue of a certificate etc - It is settled law that if the plain meaning of the exemption notification covers the assessee, the benefit should be allowed - even if courses can be artificially split as intermediate and entrance coaching, the essential character flows from the intermediate training and hence the appellants are eligible for the exemption under N/N. 33/2011-ST with effect from 01.05.2011. For the period 2012-2013 - Held that: - the primary activity of the Appellant is to impart intermediate education. The Appellants are imparting training for various national entrance tests which are integrated to their intermediate courses as prescribed by the Board. Therefore, the predominant nature of the service will be imparting formal education which stands excluded from service tax net - the activity of the Appellants are not taxable for the impugned period also. For the period 2013-2014 - Held that: - during the period from 01.07.2012 to 31.03.2'013 as regards imparting skill, knowledge, education or development of course content or any other knowledge, all stood exempt from the payment of service tax by a combined reading of Section 66B, 66D and N/N. 25/2012-S.T., dated 20.6.2012 - demand not sustainable. For the period 2014-2015 - Held that: - essentially an activity by an 'education institution' as defined with reference to Section 66D of the Finance Act, 1994 was outside the purview of service tax and the Appellants are squarely covered in the ambit of the same, accordingly demand of service tax under any category fails - demand fails. Appeal allowed.
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2018 (4) TMI 663
Commercial coaching and training services - Appellant herein imparts education to their students for 11th and 12th Standards and Society is recognised by Andhra Pradesh Intermediate Board - It is the case of the Revenue that the demand of the service tax liability is correct as the appellant herein has not issued any certificate or diploma or degree or any educational qualification recognised by law which would exclude the appellants from service tax net. Held that: - diagonally opposite views on the taxability of the services of the kind rendered by the appellant herein by the two Member Benches of the Tribunal - Since there is divergence of views between two Benches of the Tribunal of equal strength, it is imperative that the said difference be settled by a Larger Bench of the Tribunal. Hon’ble President to constitute a Larger Bench to come to a conclusion as to which view would be correct in the circumstances.
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2018 (4) TMI 662
Application of settlement of a case - Supply of Tangible Goods service - input tax credit - Section 32E (1) of the Central Excise Act, 1944 - Held that: - Had investigating officers found their Cenvat credit claim in order, the available Cenvat credit would have proposed for appropriation towards their Service Tax liability. Bench finds that due to non-filing of ST-3 returns at relevant time and non-production of original duty paying document and Cenvat register evidencing availment and debit of Cenvat credit from their Cenvat credit account, the claim of availability of Cenvat credit of ₹ 83,67,707/to them in their Cenvat credit account is not legally tenable. Applicant has himself claimed in their reply that the said amount of Cenvat credit is available to them. They have not stated that the said amount of Cenvat credit was availed and utilized by them. Moreover, the issue regarding determining the admissibility of Cenvat credit to the applicant is not before the Bench, since the said issue has not been raised in the impugned SCN. The applicant by wrongly claiming the said payment has in fact defaulted in making true disclosures of facts. The claimed CENVAT credit which is neither shown as availed nor utilized in the statutory records like, ST-3 returns/ CENVAT Register and disputed by Revenue, cannot be considered as valid payment towards their Service Tax liability. The Bench do not find it a fit case for settlement under Section 32F(5) of the Central Excise Act, 1944 as made applicable to Service Tax matters under Section 83 of the Finance Act, 1994 since the applicant has not paid the entire accepted Service Tax liability along with applicable interest. The application filed by the applicant M/S. Rajasthan Crane Services is rejected as under Section 32E (1) of the Central Excise Act, 1944 as made to Service tax matters under Section 83 of the Finance Act, 1994 - application dismissed.
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Central Excise
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2018 (4) TMI 661
Excisability - pipe used for erection, installation and laying of pipeline - whether the respondent has manufactured pipe and whether the same is excisable and liable for duty? - Held that: - the pipe is manufactured which is movable, hence marketable and subsequent to the manufacture, it is taken to the site where the pipe has to be laid down and that the laying process is carried out - the respondent has carried out the manufacturing of pipe which is excisable. CENVAT credit - input used in the manufacture of pipe - Held that: - no verification of the input invoices has been carried out - the duty payable, if any, by the respondent cannot be taken as cenvat credit by MSEB - this fact has not been verified before coming to the conclusion on the aspect of revenue neutrality by the learned Commissioner. Appeal allowed by way of remand.
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2018 (4) TMI 660
CENVAT credit - GTA Services - place of removal - Held that: - the issue of availability of cenvat credit on outward GTA has been settled by the Hon’ble Supreme Court in the case of Ultra Tech Cement Ltd. [2007 (3) TMI 738 - CESTAT AHMEDABAD], where it was held that the credit is not admissible from the place of removal to buyer’s premises w.e.f. 1.4.2008 - the credit taken after 1.4.2008 should be prima facie available - During the period prior to 1.4.2008, the cenvat credit in respect of GTA service from place of removal was available. However no verification of documents was carried out as observed by the learned Commissioner that documentary evidence has not been produced in respect of the submission made by the appellant - appeal allowed by way of remand.
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2018 (4) TMI 659
Demand of Interest - time limitation - Revenue is essentially in appeal against the order on the ground that the provisions of Section 11AB can be invoked in absence of demand of duty paid under Section 11A(2) or paid under Section 11A(2B) - Held that: - no demand of interest can be made beyond the period of limitation when the Revenue has failed to show any ground for invocation of longer period of limitation - reliance placed in the case of COMMISSIONER OF CENTRAL EXCISE & CUSTOMS, VADODARA-II Versus M/s GUJARAT NARMADA FERTILIZERS CO LTD [2012 (4) TMI 309 - GUJARAT HIGH COURT], where it was held that when the period of limitation had already expired and when the extended period beyond one year was not available to the department as held by the Commissioner himself in his order in original, to our mind the respondent was not liable to pay even the basic duty - appeal dismissed - decided against Revenue.
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2018 (4) TMI 658
Excisability - manufacture - scrap of old and used machinery cleared from their factory - Held that: - There is no doubt waste and scrap generated during machining would be excisable - The Order-in-Original does not give any detail findings regarding process which resulted in generated of items Waste and scrap generated out of manufacturing –M.S. heavy scrap and Waste and scrap – M.S. fabricated pipes, angles, channels etc. The original Adjudicating Authority directed to examine the process which resulted in generated of item mentioned - appeal allowed by way of remand.
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2018 (4) TMI 657
Rectification of mistake - there is an error to the extent that the Order-in-Original No. 48/Commr/M-II/07 dated 10.12.2007 was not mentioned hence the same may be corrected - Held that: - there is an apparent error in the preamble of the order in as much as only one Order-in-Original was mentioned, therefore in the preamble the words and figures "arising out of Order-in-Original No. 25/2006 dated 06.10.2006 passed by the Commissioner of Central Excise, Mumbai-Il" is corrected and read as "(arising out of Order-in-Original No. 25/2006 dated 06.10.2006 passed by the Commissioner of Central Excise, Mumbai-I-I and Order-in-Original No. 48/Commr/M-II/07 dated 10.12.2007 passed by the Commissioner of Central Excise, Mumbai-ll.)" - ROM application allowed.
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2018 (4) TMI 656
CENVAT credit - capital goods and inputs, which were subsequently written off as obsolete - the obsolete capital goods and the inputs were written off in the year 2005 - Held that: - identical issue decided in the case of PCOMMR. OF CENTRAL EXCISE Versus INDIAN PETROCHEMICALS CORPN. LTD. [2007 (8) TMI 359 - HIGH COURT OF JUDICATURE AT BOMBAY], where it was held that The Tribunal in a long line of judgments where goods have been shown as written off in the books, have taken a view that the benefit is available - credit allowed - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 655
CENVAT credit - whether the appellant is required to pay an amount equivalent to 6% of the value of the goods cleared which the department claims as trading activity or otherwise? - Held that: - If an input is cleared from the factory of the appellant on reversal of CENVAT credit availed on such inputs, the question of invoking the provisions of Rule 6(3A) of the CENVAT Credit Rules, 2004 does not arise as per the ratio laid down by the Tribunal in the case of Commissioner of Central Excise, Ghaziabad v. U. P. Telelinks [2015 (10) TMI 1156 - CESTAT NEW DELHI], where it was held that assessee is not required to pay any amount equivalent to 6% /8% of the value of inputs cleared as such or reversal of proportional credit attributable to input cleared - appeal allowed - decided in favor of appellant.
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2018 (4) TMI 654
Penalty u/r 15(2) of CCR 2004 read with Section 11AC of the CEA 1944 - wrong availment of CENVAT credit - Rule 6(3) (i) of the CCR 2004 - common input services - Held that: - reliance placed in the case of Commissioner of Central Excise, Ludhiana v. Sangrur Agro Ltd, [2010 (2) TMI 438 - PUNJAB & HARYANA HIGH COURT], where it was held that section 11AC of the Act would be applicable only if there is an attempt to evade duty. Case relates to reversal of amount under Rule 6(3)(b) of the cenvat Credit Rule 2004 thus section 11AC is not applicable - penalty set aside - appeal allowed.
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2018 (4) TMI 653
Refund of CENVAT credit - time limitation - export of goods - Rule 5 of the CCR 2004 read with N/N. 227/12 dated 18.6.2012 - Held that: - the limitation would start from the end of the quarter, during which exports have taken place - appeal dismissed - decided against Revenue.
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2018 (4) TMI 652
Classification of goods - Sifton and Sifteron - Revenue sought to classify the products under CETH 69.11, attracting 30% of duty - appellant claims that product should be rightly categorised under CETH 3823 during the relevant time, as 'miscellaneous chemical products', attracting 20% duty - penalty. Held that: - The signed notification issued by the Ministry clearly includes CETH 6911 and is clearly covered by Sl. No. 12, attracting 300% of duty. Apparently, the private publication had the placed after the entry 69.11, resulting in such confusion. Penalty set aside - duty liability upheld - appeal allowed in part.
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CST, VAT & Sales Tax
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2018 (4) TMI 651
Assessment of tax - Section 3(4) of the Tamil Nadu General Sales Tax Act, 1959 - chemicals - proportionate value of purchases made against Form XVII - Bearings - Held that: - identical issue decided in the case of Tube Investments of India Ltd. (Formerly known as M/s. TI Diamond Chain Ltd.) Versus The State of Tamil Nadu, represented by the Commercial Tax Officer [2010 (10) TMI 938 - MADRAS HIGH COURT], where it was held that Section 3(4) of the Act will have no application since situs of the export sales of the petitioners for the purpose of said Section was the State of Tamilnadu and by virtue of the said factual position, the applicability of Section 3(4) stands excluded for the exigibility of tax - revision dismissed.
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2018 (4) TMI 650
Valuation - includibility in purchase turnover - transport subsidy paid for transport of sugarcane beyond 40 Kms (cane development charges) - Whether the transport subsidy is part of the purchase price liable to be taxed? - Held that: - In Ponni Sugars (Erode) Limited Vs. Deputy Commercial Tax Officer [2005 (11) TMI 247 - SUPREME COURT OF INDIA], the issue as regards transport subsidy has been considered by the Hon'ble Supreme Court and it was held that As found as a matter of fact that the transport subsidy formed part of the consideration for the purchase of the sugarcane by the appellant from the sugarcane growers - tax case revision dismissed.
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2018 (4) TMI 649
Reopening of assessment - Section 16(1) of the Tamil Nadu General Sales Tax Act 1959 - purchases of groundnut - inter-state supply - case of revenue is that the dealers have not accounted for the purchases of Groundnut from Karnataka dealers, which were detected during the course of verification of extracts received from the Enforcement Wing Officers. Held that: - The business connection with the Karnataka Commission agents are the dealer will not be a conclusive proof to show whatever the transactions accounted in the order State are genuine unless the purchasers role has been proved beyond doubt. In none of the transaction there in no single checkpost records produced. The Assessing Officer cannot simply brush aside by stating that it is not his duty when heavy burden is cast upon the dealers and when the dealers are asked to prove the negative point. There is no other alternative except the Department to prove to provide all the required materials. Since the materials have not been provided after reasonable opportunity, it is concluded that the alleged purchase omissions by the dealers are not proved beyond doubt - There is no perversity in the finding of the Tribunal nor any illegality, warranting reversal. The issue as to whether reasonable opportunity has been given to the assessee, has been, held in favor of the assessee. Tax Case Revision is dismissed.
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2018 (4) TMI 648
Revision of assessment order - TNGST Act, 1959 - deletion of addition - penalty restricted from 150% to 50% - case of Revenue is that the Tribunal erred in allowing the appeal on the ground that incriminating records recovered from the residence of one of the partners pertain to the transactions in jewellery and it is not proved by the department that the partner himself did such business. Held that: - there is no material irregularity or illegality in appreciation of the evidence, both by the Appellate Authority and Tribunal - Respondent is not a dealer of Silver and Gold Jewellery. Assessing Officer has assessed the turnover, relating to silver and gold, as if they relate to the business of the respondent dealer. There is no perversity in the finding. There is no irregularity or illegality, warranting reversal of the order of the Tribunal. Tax case revision dismissed.
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2018 (4) TMI 647
Validity of assessment order - second sales - machinery - under-assessment of tax - Held that: - Section 10 contemplates that for the purpose of assessment of tax under the Act, the burden of proof that any transaction or turnover of a dealer is not liable to tax shall lie on such dealer. When exemption of tax on second sales is claimed by the assessee, it is for the assessee to establish that the transactions were bona fide on two aspects, namely, (i) that the purchases were made by the assessee and the goods so purchased had suffered tax already and (ii) that such purchases were made from the dealers whose registration were in force on the date of purchases. The respondent had proved with records, the sufferance of tax was in anterior sales within the state. The first appellate authority, after due verification of the connected records and other related materials, allowed the claim of the assessee, as second sales of machinery and the Tribunal, upon due consideration of the facts, has concurred. Tax case revision petition is dismissed
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Indian Laws
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2018 (4) TMI 717
E-auction - main contention of the writ petitioner is that Rules 8 and 9 of the Security Interest (Enforcement) Rules 2002 are mandatory and that in no circumstances, the same can be ignored - Held that: - Merely because the petitioner has committed default in payment and even taking it for granted that there was dilatory tactics, in repayment, and that the borrower has been litigating, by filing applications before the Tribunal, the same are not tenable grounds, to arrive at the conclusion that there was waiver of statutory provisions, by the borrower of the notice period of 30 days and that the said mandatory period of 30 days, can be ignored. Decision of Debts Recovery Appellate Tribunal, Chennai is contrary to the well settled judicial pronouncements of the Hon'ble Supreme Court. Any of the measures referred to in sub-section (4) of Section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management or restoration of possession, of the secured assets to the borrower or other aggrieved person. The interest of the auction purchaser also requires should be protected - Union Bank of India directed to refund the bid amount with 9% interest, to the auction purchaser, within thirty days from the date of receipt of a copy of this order. Compensation of ₹ 75,000/- awarded by the Debts Recovery Tribunal, is set aside. If the petitioner is dispossessed, auction purchaser and Union Bank of India, are directed to restore possession of the aforementioned property to the writ petitioner, within one month, from the date of receipt of a copy of this order - petition disposed off.
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2018 (4) TMI 679
Suit for specific performance of the agreement - Respondent No.2 i.e. the alleged subsequent purchaser filed an application under Order 1 Rule 10 of the Code to become a party (defendant) in the suit - it was alleged that the suit in question (specific performance of agreement) is hit by the provisions of Order 2 Rule 2 of the Code because the relief of specific performance, which is claimed in the present suit could be and ought to have been claimed by the plaintiff - Sucha Singh in the previously instituted suit which he had filed for permanent injunction. Held that: - the Trial Court and the High Court erred in allowing the application filed by respondent No.2 under Order 7 Rule 11 of the Code and thereby erred in dismissing the suit as being barred by the provisions of Order 2 Rule 2 of the Code by taking recourse to the provisions of Order 7 Rule 11 of the Code. In our opinion, the provisions of Order 2 Rule 2 of the Code are not attracted to the facts of this case and, therefore, civil suit should not have been dismissed as being barred under Order 2 Rule 2 of the Code. It is clear from the reading of Order 2 Rule (1) of the Code that whenever the plaintiff files a suit on the basis of a cause of action pleaded in the plaint, he is under a legal obligation to include and claim all the reliefs against the defendant, which have accrued to him on the cause of action pleaded by him in his plaint - the sine qua non for invoking Order 2 Rule 2(2) against the plaintiff by the defendant is that the relief which the plaintiff has claimed in the second suit was also available to the plaintiff for being claimed in the previous suit on the causes of action pleaded in the previous suit against the defendant and yet not claimed by the plaintiff. Whether Sucha Singh (original plaintiff) could claim the relief of specific performance of agreement against the respondents/defendants in addition to his claim of permanent injunction in the previously instituted suit? - Held that: - the original plaintiff (Sucha Singh), in clear terms, had stated in the previous suit that he wants to withdraw the suit because he wants to file appropriate proceedings before the competent forum in relation to the subject matter of the suit. The Trial Court recorded his statement on 27.11.1998 and allowed withdrawal of the suit - reading of the statement of the original plaintiff (Sucha Singh) coupled with the permission granted by the Court to withdraw the suit satisfies the requirement of Order 23 Rule 1 (3) of the Code. Appeal allowed.
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2018 (4) TMI 678
Arbitration award - waiver of the right of de novo trial by conduct - the conduct of the appellant-Company amounts to waiver or not - Whether an Umpire has to hear the matter de novo on a Reference or from the stage of disagreement between the Arbitrators? Held that: - the word de novo hearing should be given a purposive interpretation and it should be understood as a fresh hearing of the matter on the basis of pleadings, evidence and documents on record. If the party wants to re-examine a witness or objects to the documents admitted, the Umpire is to hear the parties and decide the application in the interest of justice. If the appellant-Company was serious in its endeavor that it should get an opportunity to get the evidence recorded afresh, an application could easily have been filed before starting the proceedings before the Umpire. It is only from oblique references that the appellant-Company seeks to derive such intent. This aspect is clearly an afterthought which arose during the culmination of the proceedings before the Umpire. Further, even the sum and substance of the highly belated application dated 29.01.2000 for commencement of proceedings de novo clearly shows that it was not asking for re-hearing/re-recording of the evidence but was actually requesting for review of the order of the two Arbitrators. From the above, there is no doubt that the conduct of the appellant-Company amounts to waiver and the application filled on 29.01.2000 is nothing but trying a last armory to turn the case around. The Umpire was right in dismissing the said application. Appeal dismissed.
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2018 (4) TMI 677
Lifting of Attachment of properties - Jurisdiction of Tax Recovery Officer - Held that: - it is evident from the face of the record and it is again not in dispute that notice under Rule 2 of second schedule was served on the defaulter on 05.01.2013 and that the sale transactions executed by the said defaulter-assessee took place thereafter. Therefore, this Court is of the view that it would not be open to the purchasers to claim the benefit of the proviso to Section 281(1) of the Act. There cannot be any doubt that a sale is a contractual transaction. For a contract to be valid, it must be made by the free consent of parties competent to contract. The Hon'ble Supreme Court in Tax Recovery Officer Versus Gangadhar Viswanath Ranade (Decd.) [1998 (9) TMI 1 - SUPREME COURT] has held that it is the function of the civil Court to declare a transaction to be null and void and that the Tax Recovery Officer cannot exercise the said function - Therefore, the respondent clearly erred in declaring the transactions to which the petitioners are parties as null and void. Petition allowed in part.
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