TMI Tax Updates - e-Newsletter
April 18, 2017

Case Laws in this Newsletter:

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

Articles

• INELIGIBLE INPUT TAX CREDIT UNDER GST REGIME

News

• The Union Government announces the sale (re-issue) of “Government of India Floating Rate Bonds 2024”, “6.79 per cent Government Stock 2029”, “6.57 per cent Government Stock 2033” and “6.62 per cent Government Stock 2051”

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• Commerce and Industry Minister highlights the importance of services sector in facilitating the knowledge based economy

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• RBI Reference Rate for US $

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Notifications

Service Tax

• 13/2017 - dated 12-4-2017 - ST
  Service Tax (Settlement of Cases) Amendment Rules, 2017

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Circulars / Instructions / Orders

DGFT

• Trade Notice No. 03 - dated 17-4-2017
  Inclusion of details / clarification on the Certification of Origin of Goods for European Union Generalised System of Preferences (EU-GSP) - as notified vide Public Notice No.51 dated 30.12.2016

Highlights / Catch Notes

Income Tax

• Reopening of assessmen - if, notice for reopening of the assessment was issued on one aspect, and in the course of reassessment proceedings another aspect was discovered, the reassessment order would be valid, only if, the aspect, which led to the reopening of assessment, continues to form part of the reassessed income. - HC
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• Disallowance on account of forward booking loss treated as speculation loss - there is a categorical finding by the CIT(A) that the transactions in question were integral to the business and that the loss on such transactions is admissible as deduction under section 37(1) - Claim allowed - AT
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• Set off of losses - Merely because the two set of transactions are liable for different rate of tax, it cannot be said that income from these transactions does not arise from similar computation made - STCL arising from STT paid transactions can be set off against STCG arising from non-STT transactions - AT
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• Validity of reopening of assessment - reasons to believe - Nowhere the Commissioner has recorded a satisfaction note not even in brief. Therefore, it cannot be-said that the Commissioner has accorded sanction after applying his mind and after recording his satisfaction. AT
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• TDS u/s 194I - payment made by the assessee to MMRDA for acquisition of the plot of land on lease from MMRDA - whether the lease premium paid for a long term lease of 60 years can be termed as ‘rent’? - Held no - AT
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• Levy of penalty u/s.271E and 271D - as per the assessee it was to reduce cash handling by the workers of transporters, cab drivers etc. However, ld. ACIT has clearly demonstrated that no such adjustment against cost of fuel was ever done against the advance, on the other hand but such amounts were repaid by the assessee in cash - levy of penalty confirmed - AT
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Customs

• SEZ unit - refund claim - since the appellants have intimated their protest within reasonable time, that is within 2 weeks of payment of duty, this letter issued by them can be considered as intimation of protest. The immediateness of the letter shows that it was not issued solely with intention to extend limitation - refund allowed - AT
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• Imposition of redemption fine and penalty - the mis-declaration occurred because the overseas supplier did not include 5% agency commission in the invoice and instead noted the same on the packages only - the penalty and redemption fine reduced to ₹ 10,000/- each - AT
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FEMA

• Enforcement of a foreign award - violation of FEMA and Regulations made thereunder - if Cruz City has been induced to make an investment on a false assurance of the Keepwell Agreement being legal and valid, Unitech must bear the consequences of violating the provisions of Law, but cannot be permitted to escape their liability under the Award. - HC
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Indian Laws

• Criminal Complaint filed u/s 138 of the Negotiable Instruments Act - According to us, the F.I.R. in question filed against the appellants – herein by Respondent No.2 is only an after-thought with the sole intention to pressurize the appellants not to prosecute their Criminal Complaint filed by them u/s 138 of NI Act - SC
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Service Tax

• CENVAT credit - If the contention of the department is accepted that the appellant cannot be treated as service provider then in the such case payment made by the appellant should not be treated as payment of service tax, accordingly it amounts to reversal of Cenvat credit availed by them, for this reason also demand of Cenvat credit does not exist - AT
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• CENVAT credit - 'exercise equipment' is, indeed, utilised as input for rendering taxable service and that the duty paid on this equipment is permissible as CENVAT credit, irrespective of whether it was initially claimed as 'capital goods.' - AT
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• Suo motu adjustment of tax - the payment of excess service tax paid had been adjusted by the appellant for future payment- Admittedly, these rules have come into force after the impugned period. Therefore, such amendment to the rules is not applicable to the facts of this case. - AT
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• Cenvat credit - On export of goods no duty is payable by the assessee although the goods manufactured by the appellant is dutiable, therefore, merely, claiming benefit of Notification No. 30/2004 ibid, the appellant cannot be denied the Cenvat credit on input/input services - AT
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Central Excise

• SSI exemption - use of brand name of others - The words used on the label Marketed by Elpro International is also not any hurdle in the case of the appellant inasmuch as the said words did not indicate any connection of Elpro to the brand name Calrod due to which appellant could have got undue benefit in the market - Benefit of exemption allowed - AT
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• Misdeclaration of value (MRP) - commodity thinner - assessee was not able to show from the record any material based on which the MRP was declared to the Department - the appellant is not eligible for the benefit as claimed in terms of Section 4A of the CEA, 1944 - AT
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• SSI exemption - alleged clearances through alleged dummy units - The maxim Acta Exteriora Indicant Secreta Interiora (outward acts show the secret intentions) is verily applicable to the appellants - AT
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• Classification of goods - Borotik Boards out of rubber wood - the 'Borotik Boards' in question will only merit classification in erstwhile CETA Heading 4403.00 (4407.9900 w.e.f 28-02-2005) - AT
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• CENVAT credit - chassis - denial on the ground that appellant have availed the benefit of N/N. 6/2002 - Explanation to Rule 3(7) of CCR has to be applied only in cases where the exemption notification is on the condition that no input credit on any of the inputs is available - Cenvat credit cannot be denied - AT
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• CENVAT credit - SSI exemption - once excise duty is paid by the manufacturer on branded goods manufactured, the brand name whereof belongs to another person, on job work basis, the SSI Unit would be entitled to Cenvat/Modvat credit on the inputs - AT
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• CENVAT credit - Railway Track Material - railway track is part and parcel of material handling system integrally connected with the production on movement of dutiable goods - credit allowed. - AT
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Case Laws:

• Income Tax

• 2017 (4) TMI 727
  Reopening of assessment - reasons to believe - Held that:- Careful reading of Section 147 of the Act would show that it empowers an Assessing Officer to reopen the assessment, if, he has reason to believe, that any income chargeable to tax has escaped assessment for the relevant year, ''and also bring to tax", any other income, which may attract assessment, though, it is brought to his notice, subsequently, albeit, in the course of the reassessment proceedings. Explanation 3, to my mind, supports this approach, which emerges upon a plain reading of the said provision, along with the main part of Section 147 of the Act. The emphasis in this behalf is on the expression ''and also bring to tax'' appearing in the main part of Section 147 in relation to the right of the Revenue to assess taxable income discovered during reassessment proceedings. In my view, Explanation 3, clearly, expounds that the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment and such other issue, that comes to his notice subsequently, albeit, in the course of proceedings held under Section 147 of the Act. In other words, if, notice for reopening of the assessment was issued on one aspect, and in the course of reassessment proceedings another aspect was discovered, the reassessment order would be valid, only if, the aspect, which led to the reopening of assessment, continues to form part of the reassessed income. In this case, that the impugned order is assailed on the ground that the concerned authority lacked jurisdiction in the matter. The fact that this charge is established is evident, upon a bare perusal of the record of the case. The foregoing discussion qua the merits of the case would show that the impugned order was passed by concerned authority, even though, the necessary jurisdictional facts were absent and without dealing with the objections filed by the assessee qua the notice issued to it for reopening the assessment. Accordingly, the objection advanced by the Revenue, in this behalf, would have to be rejected. Resultantly, in view of the discussion above, the impugned order is set aside. - Decided in favour of assessee

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• 2017 (4) TMI 726
  Penalty u/s 271(1)(c) - Disallowance of advertising and publicity expenses - non deduction of tds u/s 194A - Held that:- We find that the additions on which the penalty in dispute was levied, has already been deleted by the ITAT (AY 2007-08) in assessee’s own case [2016 (9) TMI 556 - ITAT DELHI ] hence, the penalty in dispute will not survive. Accordingly, we cancel the orders of the authorities below and delete the penalty in dispute - Decided in favour of assessee.

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• 2017 (4) TMI 725
  Disallowance on account of forward booking loss treated as speculation loss - CIT-A allowed claim - Held that:- Even speculative transactions, as long as such transactions are incidental to the main business of the assessee, cannot result in the profits or losses from such transactions being treated separately as that of a speculation business and thus making them ineligible for being set off against normal business profits and losses. Nothing really, therefore, turns on a transaction being settled, otherwise than through delivery, as long as such a transaction has standalone character isolated from the main activities of business. For this short reason alone, the action of the Assessing Officer must be held to be unsustainable in law. In any event, there is a categorical finding by the CIT(A) that the transactions in question were integral to the business and that the loss on such transactions is admissible as deduction under section 37(1). There is a categorical finding by the CIT(A) that the transactions were entered into to safeguard legitimate business interests of the assessee in respect of its foreign exchange transactions. Having heard the rival contentions and having perused the material on record, we approve these well reasoned findings of the first appellate authority, and, for this reason also, decline to interfere in the matter. - Decided against revenue Addition on account of EEFC account on account of forex loss claimed by Assessee - CIT-A allowed claim - Held that:- As regards the amount of ₹ 87,12,768 all it represents is the difference in conversion rate, of US Dollars into Indian rupees, at the point of time when the EEFC account was originally credited vis-à-vis the point of time when subsequent debit entry, or vice versa, is made. As a matter of fact, these entries, truly speaking, do not even represent losses but merely deal with corrections in the conversion rate with respect to the amounts utilized from EEFC account. These corrections are to be taken into account in computing the correct profits and losses. Be that as it may, whether these losses are treated as losses or corrections, the effect is the same- i.e. accounting for foreign exchange at the right rates. Quite interestingly, similar entries resulting in gains have been accepted by the Assessing Officer. These entries are admittedly in accordance with the Accounting Standards which are binding on the assessee. The method of accounting has been consistently followed by the assessee, it is fair and reasonable, and, as a result of the losses so booked, the accounts of the assessee show true and fair picture of the transactions. It is also noted that similar approach, when it resulted in net gains in subsequent assessment years i.e. 2011-12 and 2012-13, was accepted by the revenue authorities. As the assessee is consistently following the mercantile method of accounting, the same accounting treatment for the foreign exchange losses and gains has been given by the assessee all along, the assesse is making entries in respect of such losses and gains, and the treatment is consistent with the Accounting Standards. In view of these discussions, as also bearing in mind entirety of the case, we approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter.- Decided against revenue

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• 2017 (4) TMI 724
  Allowability of the bad debt claim - whether CIT(A) erred in allowing relief to the assessee after admitting the additional evidence under rule 46A ? - Held that:- In the present case, the claim of the assessee is that that assessee has executed an agreement to purchase the land on 12/06/2008 by giving advance amount of Rs. One crore and ultimately the sale deed could not be executed and therefore the assessee has claimed the loss of earnest money as bad debt.We do not find any infirmity in the order of the Ld. CIT appeal with respect to admission of the additional evidences in the form of agreement which assessee could not submit before the Ld. assessing officer. - Decided against revenue. Apparently assessee is neither a moneylender no engaged in the banking business therefore unless such debt has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof his return of all of an earlier previous year the claim of the assessee prima facie is not sustainable. Further, more if it is a business loss it shall be allowed to the assessee in terms of provisions of section 28 of the income tax act. Such losses are liable if it arises during the course of business and it has been incurred in the year in which it is claimed. On perusal of the order of the Ld. CIT appeal, we could not find that the claim of the assessee is examined on these aspects. Therefore we set aside ground No. 1 and 2 of the appeal of the revenue back to the file of the Ld. CIT (A) to decide the issue of afresh after affording opportunity of hearing to the assessee and if need arises to the Ld. assessing officer also. In the result ground No. 1 of the appeal of the revenue is allowed with above direction.

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• 2017 (4) TMI 723
  Interest chargeable under section 201 (1A) - AO has charged interest up to 31st of March 2010 for the reason that from the copies of the income tax acknowledgement filed by the deductee the exact date of payment of taxes by the deductee hospitals cannot be ascertained - Held that:- Interest under section 201 (1A) can be charged from deductor for failure to deduct tax from the date of default till the date of actual tax paid by the deductee only. We do not approve the order of the Ld. assessing officer of charging interest up to 31st of March 2010, as the coordinate bench has held that interest is required to be charged from the date of default till the date of actual tax paid by the hospitals. Even the circular No. 8 /2009 dated 24/11/2009 also said that the liability to charge interest under section 201 (1A) of the income tax act shall rest up to payment of taxes by the deductee on the assessee. In view of this we restore the issue of charging interest under section 201 (1A) to the file of the Ld. assessing officer to work out the interest from the date of default till the date of tax paid by the hospitals in each such case of default. The assessee is also directed to cooperate by furnishing the requisite details of the date of default and the date of payment of taxes by the hospitals for working out the interest chargeable under section 201 (1A) of the act.

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• 2017 (4) TMI 722
  Reopening of assessment - validity and the jurisdiction of the AO to have issued notice under section 148 - Held that:- As can be seen from the objections raised by the assessee during the reassessment proceedings that there was no challenge to the validity of the notice with respect to the grounds raised in the present appeal i.e. (i) reopening on the basis of valuation report (ii) material obtained subsequent to assessment order for issuance of notice under section 148. There were no objections taken by the assessee in the reassessment proceedings on aforesaid grounds. It is settled law that if the assessee chooses not to challenge the notice issued under section 148 of the Act the same is to be treated as valid and final. The objections raised by the assessee pertain to the sufficiency of reasons for issuance of notice under section 148. The same cannot be gone into at the stage of reassessment. The judgment relied upon by the assessee is not applicable in the present case in view of the failure of the assessee to challenge the validity of the notice under section 148 - Decided against assessee Correctness of the valuation report - AR contends that the revenue was not justified to accept the value mentioned in the sale deeds relied upon by the Valuation Officer and rejecting the comparable cases given by the assessee - Held that:- The valuation report the said objections raised by the assessee have been elaborately considered and required adjustments/deductions with respect to location, shape, size and co-ownership were given to determine the net rate per sq. meter. The Ld. AR has failed to point out any specific defect in the said report. The objections are neither substantiated nor supported by evidence.- Decided against assessee

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• 2017 (4) TMI 721
  Ability to offset short-term capital losses (‘STCLs’) first towards short-term capital gains (‘STCGs’) generated from transactions in derivatives and then subsequently towards STCGs from sale of equity shares which were subject to securities transaction tax (‘STT’) - Held that:- Under the provisions of section 70(2), STCL arising from any asset can be set off against STCG arising from any other asset under a similar computation made. Merely because the two set of transactions are liable for different rate of tax, it cannot be said that income from these transactions does not arise from similar computation made as computation in both the cases has to be made in similar manner under the same provisions. Therefore, STCL arising from STT paid transactions can be set off against STCG arising from non-STT transactions. - Decided in favour of assessee.

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• 2017 (4) TMI 720
  Non granting registration under section 12AA - Held that:- In the present case, the assessee was not having any trust deed. So it is quite difficult for the ld.Commissioner to arrive at a firm conclusion about the objects of the trust. In case the trust deed is being written after application for grant of registration, then that deed can never be seen through by the ld.Commissioner for satisfying himself. In any case, we have to set aside the proceedings to the file of the ld.Commssioner for satisfying himself about the objects of the trust. Before us also, copy of the trust-deed with the Charity Commissioner has not been placed on record. The assessee is yet to receive a registration certificate from the Charity Commissioner. In this background, we deem it appropriate to dismiss this application at this stage being premature with a liberty to the assessee to file fresh application before the ld.Commissioner for grant of registration as and when it fulfills necessary requirements. In case the assessee has applied afresh for grant of registration, that application will be decided on merit in accordance with law without getting influenced with dismissal of the present appeal.

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• 2017 (4) TMI 719
  Addition u/s 68 - share capital issued by the assessee to the conduits of entry operators at a huge premium - CIT-A deleted the addition - Held that:- Only reason why Ld. CIT appeal has deleted the addition is that when basic details have been furnished by the assessee before the Ld. assessing officer, he did not make any further enquiry and therefore the addition made by the Ld. assessing officer is held to be invalid. We do not agree with it, the Ld AO has made attempt to examine the shareholders by issuing summons, as well as by deputing inspector to find make local inquiry and at last also summoned the directors of the company but none of them remained present. Even assessee who boosted of producing the directors in earlier assessment years, also did not produce them. Furthermore, all the persons who did not care to appear before the assessing officer throughout the assessment proceedings, spanning over a period of one and half year, suddenly appears before the Ld. CIT appeal on 15/06/2012 and she examines all of them with respect to the transactions and on the same date, she passes an order deleting the whole addition of Rs. one crore. We do not agree with such an approach of the ld CIT (A) and we are also surprised in the casual manner ld CIT (A) has dealt with the whole issue when the nature of transactions, shareholders creditworthiness and genuineness of the share issued are of dubious nature. Therefore we set aside the whole matter back to the file of the ld CIT (A) with a direction to reexamine the whole issues of the share capital issued by the assessee to the conduits of entry operators at a huge premium after examining the shareholders , their creditworthiness , genuineness of the transaction with respect to their relationship with K K Bansal. - Decided in favour of revenue by way of remand.

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• 2017 (4) TMI 718
  Assessment u/s 153A - addition to income - Held that:- On perusal of the satisfaction note as well as the reply of the assessee dated 29.11.2011 we do not find any reference to the amount of ₹ 15 lakhs pertaining to Savsuvida which is on account of advance against capital against the project finance agreement. Furthermore, the seized documents also do not referred to the issue of depreciation, travelling expenses, loss on sale of car as well as of not allowing carry forward of losses. Admittedly, the assessment for the present case was not pending at the time of search because the impugned assessment year is 2005-06 for which the due date of issue of notice expired on 31.03.2007. the date of search is 26.11.2009 therefore, obviously, on the date of search the assessment for the year under appeal was concluded. In the present case looking at the satisfaction note we do not find any material pertaining to the additions made by the ld Assessing Officer as well as no such material was put to our attention by the ld AR on the impugned additions. Therefore, we do not find any infirmity in the order of the ld CIT(A) in holding that there is no incriminating material unearth during the course of search which related to the addition and then deleting the addition. - Decided in favour of assessee

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• 2017 (4) TMI 717
  Levy of penalty u/s.271E and 271D - waiver of penalty u/s 273B - period of limitation - failure to abide by Sec. 269SS and 269T - cash payments - Held that:- There is no dispute that notices issued to the assessee by the ld. ACIT, Kancheepuram u/s. 274 r.w.s. 271D and 271E of the Act were dated 31.8.2015. The penalty orders were also passed by ld. ACIT, Kancheepuram. Such penalty orders were passed on 29.02.2016 and was therefore well within the time limits. What is to be considered is the aggregate amount. No doubt by virtue of Section 273B of the Act, if an assessee could prove that the failure to abide by Sec. 269SS and 269T of the Act was for a reasonable cause then levy of penalty u/s.271D and 271E of the Act, could be excused. However, here in the case before us, first explanation of the assessee was that the amounts received were advances from its customers, so that employees of such customers who came for fueling of vehicles need not make payments in cash. Or in other words, as per the assessee it was to reduce cash handling by the workers of transporters, cab drivers etc. However, ld. ACIT has clearly demonstrated that no such adjustment against cost of fuel was ever done against the advance, on the other hand but such amounts were repaid by the assessee in cash. Coming to the contention of the ld. Authorised Representative that if the loans were disbelieved Sec. 68 of the Act alone could have been applied, ld. Assessing Officer having accepted the loans the line of argument is irrelevant. Considering these circumstances, we are of the opinion that penalty u/s. 271D as well as 271E of the Act for violation of Sec. 269SS and 269T of the Act were rightly imposed, assessee having failed to give a reasonable cause for not levying such penalty. - Decided against assessee

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• 2017 (4) TMI 716
  TPA - AMP expenses to be an international transaction - Held that:- It is a matter of record that the Hon’ble High Court in Sony Ericsson (2015 (3) TMI 580 - DELHI HIGH COURT) has held AMP expenses as an international transaction. It can be seen that in some later decisions, view taken is at variance. Equally, the tribunal is also not consistent in its stand. When the TPO in the instant case held AMP expenses to be an international transaction, he did not have any occasion to consider the ratio laid down in several judgments of the Hon’ble jurisdictional High Court, which is now available for consideration. Respectfully following the predominant view taken in several Tribunal orders of co-ordinate benches, we are of the considered opinion that it would be in the fitness of things if the impugned order is set aside and the matter is restored to the file of TPO/AO for a fresh determination of the question as to whether there exists an international transaction of AMP expenses. If the existence of such an international transaction is not proved, the matter will end there and then, calling for no transfer pricing addition. If, on the other hand, the international transaction is found to be existing, then the TPO will determine the ALP of such an international transaction in the light of the relevant judgments of the Hon’ble High Court, after allowing a reasonable opportunity of being heard to the assessee

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• 2017 (4) TMI 715
  Reopening of assessment - Held that:- Reasons recorded in the instant case shows that there is no mention or allegation that there has been any failure or omission on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of assessment. The contents of the reason fail to meet the statutory requirement. Respectfully following the ratio of the judgment in Haryana Acrylic Manufacturing Company vs. CIT (2008 (11) TMI 2 - DELHI HIGH COURT), we have no alternative but to quash the reassessment proceedings. - Decided in favour of assessee

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• 2017 (4) TMI 714
  Addition u/s 68 - Held that:- The assessee has duly furnished all the details and has also explained that the share application money was adjusted against the running account between the parties. Further, all the necessary details like PAN number, annual financial report of subscribers, cash flow statements etc. were also filed and the investment duly shown in the accounts/financial statement of the investor company. Under the circumstances, we do not find any justification on the part of the lower authorities in making addition of the above amount of ₹ 1,96,00,000/- received by the assessee as share application money from M/s. Infomedia 18 Ltd. The addition made by the lower authorities on this account under section 68 of the Act is hereby ordered to be deleted. Ground No.1 of the appeal is therefore allowed in favour of the assessee. Addition on account of non matching/difference of the figure pertaining to form 26AS - Held that:- If the receipts have already been booked by the assessee in F.Y. 2008-09, the same cannot be booked as income of the assessee for the next year i.e. F.Y. 2009-10. However, the relevant receipts/entries need to be verified by the AO. We accordingly restore this issue to the file of the AO for reconciliation of these entries and if the claim of the assessee is found to be correct, then no addition will be made in respect of the receipts already booked in the earlier assessment year. This issue is accordingly treated as allowed in favour of the assessee. Disallowing the set off of brought forward losses - Held that:- As submitted that information of brought forward losses was very much available on record before the AO in the form of schedule CFL of the e-return of income. Further, the tax auditor has also certified the details of losses and the copy of tax audit report was also available on record. Even the carry forward of losses could very well be verified by the AO from the earlier year assessment orders. He has further submitted that even the factum of brought forward losses can be well verified by the AO at this stage also. Considering the above submissions of the Ld. A.R., this issue is also restored to the file of the AO for verification and if the claim of the assessee is found to be correct, then to allow the same in accordance with law. In view of our findings given above, the appeal of the assessee is treated as allowed.

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• 2017 (4) TMI 713
  Addition on account of reimbursement of expenses to AE as per order of Transfer Pricing Officer - invoking of section 40(a)(i) - Held that:- Section 40(a)(i) of the Act has been invoked to disallow the expenditure on the ground that the requisite tax has not been deducted. The plea of the assessee is that in the subsequent year the requisite tax has been deducted and, therefore, the expenditure may be allowed as deduction in the subsequent year. In view of the aforesaid submission, the action of the Assessing Officer in disallowing the expenditure in this year by invoking of section 40(a)(i) of the Act is hereby upheld and it is further directed that the claim of the assessee for deduction in the subsequent year be examined as per law. We find no reason to adjudicate on the controversy regarding determination of the arm's length price at nil, since it would make no difference to the assessed income, inasmuch as, the said expenditure is otherwise disallowable under section 40(a)(i) of the Act even going by the stand of the assessee. - Decided in favour of assessee for statistical purposes only. Disallowance under section 14A - investment made as a strategic investment in group companies - Held that:- The short point raised by the assessee is based on the decision of the Tribunal in the case of M/s. Dish TV India Ltd. vs. ACIT [2016 (12) TMI 1544 - ITAT MUMBAI] whereby it is canvassed that disallowance be recomputed by excluding the Strategic Investments made by the assessee in its subsidiaries. On this aspect, the Ld. Departmental Representative had no objection and accordingly, the matter is restored back to the file of Assessing Officer to re-work the amount disallowable under section 14A of the Act by excluding the value of Strategic Investments comprised in the total investments. Thus, on this aspect also assessee succeeds for statistical purposes.

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• 2017 (4) TMI 712
  TPA - selection of MAM - Held that:- In case of international transaction relating to purchase of goods from A.E. and resale to unrelated parties, RPM is the most appropriate method. Therefore, in our considered opinion, the Assessing Officer / Transfer Pricing Officer must examine assessee’s bench marking under RPM in an objective manner. If the Assessing Officer / Transfer Pricing Officer are of the view that necessary / relevant data relating to gross profit margin of the comparables selected by the assessee are not available, it is open for the Assessing Officer / Transfer Pricing Officer to call for necessary / relevant materials from the assessee or else the Assessing Officer / Transfer Pricing Officer is free to independently proceed for selection of comparables under RPM after obtaining necessary information. As far as the contention of the learned Departmental Representative in relation to the issue whether license fee / addition license fee should form the cost based, in our view, it does not merit consideration at this stage as this is not an issue arising out of the order of the Transfer Pricing Officer or learned Commissioner (Appeals). It is open for the parties concerned to dwell upon all the issues while determining the arm's length price of the international transaction with the A.E. The grounds raised are allowed for statistical purposes. TDS u/s 194H - disallowance u/s 40(a)(ia) - Held that:- As far as payment to bank towards credit card charges is concerned, as per the decision relied upon by the learned Authorised Representative cited supra, provisions of section 194H are not applicable as the bank makes payments to the assessee after deducting certain fees and it is not a commission. In view of the aforesaid, no disallowance under section 40(a)(ia) can be made in respect of payments made to bank towards credit card charges. As far as the amount paid towards charges for conversion of forex into cash, we are of the view that the matter needs re–examination in view of assessee’s submissions that there is no principal–agent relationship between the assessee and Thomas Cook, therefore, provisions of section 194H is not applicable. We have noticed, though, in the course of the proceedings before the DRP, the assessee had submitted copies of agreement with bank as well as with Thomas Cook India Ltd., the authorities concerned have not properly examined the issue to ascertain the fact whether there is any principal–agent relationship between the assessee and Thomas Cook India Ltd. We, therefore, set aside the issue to the file of the Assessing Officer for fresh consideration after providing adequate opportunity of hearing to the assessee. Addition being the difference between Form no.26AS (TDS certificates) and returned income - Held that:- As could be seen, in the course of proceedings before the DRP, assessee has submitted a revised Form no.26AS. Further, a letter from HDFC Bank has also been submitted, wherein they have admitted of reporting excess interest income. Thus, prima–facie, it appears that the assessee has reconciled the difference, except, for an amount of ₹ 33,638. Therefore, we direct the Assessing Officer to verify the revised Form no.26AS and restrict disallowance, if any, to the un–reconciled amount. Ground partly allowed for statistical purposes.

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• 2017 (4) TMI 711
  Validity of reopening of assessment - reasons to believe - Held that:- Section 147 and 148 are charter to the Revenue to reopen earlier assessments and are, therefore protected by safeguards against unnecessary harassment of the assessee. They are sword for the Revenue and shield for the assessee. Section 151 guards that the sword of Sec. 147 may not be used unless a superior officer is satisfied that the AO has good and adequate reasons to invoke the provisions of Sec. 147. The superior authority has to examine the reasons, material or grounds and to judge whether they are sufficient and adequate to the formation of the necessary belief on the part of the assessing officer. If, after applying his mind and also recording his reasons, howsoever briefly, the Commissioner is of the opinion that the AO's belief is well reasoned and bonafide, he is to accord his sanction to the issue of notice u/s. 148 of the Act. Inthe instant case, we find from the perusal of the order sheet which is on record, the Commissioner has simply put "approved" and signed the report thereby giving sanction to the AO. Nowhere the Commissioner has recorded a satisfaction note not even in brief. Therefore, it cannot be-said that the Commissioner has accorded sanction after applying his mind and after recording his satisfaction. See Shri Gautamchand Kanuga Versus DCIT, Circle – 1, Kalyan [ 2016 (1) TMI 1274 - ITAT MUMBAI] As decided in SARTHAK SECURITIES CO. PVT. LTD. Versus INCOME TAX OFFICER-WARD 7 (3) [2010 (10) TMI 92 - DELHI HIGH COURT] neither the reasons in the initial notice nor the communication providing reasons remotely indicated independent application of mind. Though conclusive proof was not germane at this stage the formation of belief must be on the base or foundation or platform of prudence which a reasonable person was required to apply. From the perusal of the reasons recorded and the order of rejection of objections, the names of the companies were available with the authority and their existence was not disputed. The assessee in its objections had stated that the companies had bank accounts and payments were made to the assessee through banking channel. The identity of the companies was not disputed. Under these circumstances, the initiation of proceedings under section 147 and issuance of notice under section 148 of the Act were to be quashed. - Decided in favour of assessee.

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• 2017 (4) TMI 710
  Power of CIT(A) to remand back the case / sent back the matter to the file of AO for examination - Held that:- CIT(Appeals) has no power to send back the matter to the file of the Assessing Officer. At the best, the CIT(Appeals) may call for remand report from the Assessing Officer and decide the issue by himself in one way or other, therefore, remitting back the matter to the file of the Assessing Officer for re-examination may not be justified. The fact remains that the issue raised by the assessee requires reconsideration by the Assessing Officer, therefore, by exercising the power of this Tribunal, the matter needs to be sent back to the file of the Assessing Officer as rightly submitted by the Ld.counsel for the assessee. Accordingly, the orders of the authorities below are set aside and the issue raised by the assessee in the crossobjection and the issue raised in the appeal are remitted back to the file of the Assessing Officer. The Assessing Officer shall reexamine the issue afresh in the light of material that may be furnished by the assessee for verification and then decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.

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• 2017 (4) TMI 709
  Disallowance of Transportation Charges - Held that:- The Hon’ble Apex Court in S.A. Builders (2006 (12) TMI 82 - SUPREME COURT ) while dealing with the “Commercial Expediency” relating to section 37 held that decision relating to section 37 will also be applicable to section 36(1)(iii) because in section 37 the expression used is “for the purpose of business”. It was further held that consistently it has been held in decision relating to section 37 that expression “for the purpose of business” includes expenditure voluntarily incurred for Commercial Expediency, and it is immaterial, if a 3rd party also benefits thereby. The expression “Commercial Expediency” is an expression of wide import and includes such expenditure as a prudent businessman incurs for the purpose of business. The expenditure may have been incurred under any legal obligation, but yet it is allowable as business expenditure, if it was incurred under Commercial Expediency. In our opinion the transport expenses were incurred by the assessee under business expediency. Thus, in view of the above discussion the disallowance of Transportation Charges of ₹ 14,76,363/- claimed as expenses on account of Transport Outward Claim were allowable expenses, which we delete. - Decided in favour of assessee Disallowance on account of rejection of material - Held that:- The rejected material is destroyed by the MNC to avoid the misuse. Thereafter the customer sends their debit notes for rejected material. The contention of the assessee was not accepted by the AO holding that the assessee failed to file sufficient evidence in support of their claim that the goods were manufactured, delivered to the buyers and were destroyed after rejection. The ld CIT(A) also concluded that the assessee failed to substantiate as to how the quality and printing issue lead to rejection of the goods. The assessee has not filed any confirmation from such client to support their contention and confirmed the disallowance. We have noticed that the lower authorities have not rejected the books of accounts. No findings were given on the debit notes filed by the assessee before the authorities below. Considering the submission of the ld AR for the assessee that similar disallowance was claimed in the preceding years and was allowed to the assessee, we deem it appropriate to restore this ground of appeal to the file of AO to consider it afresh and pass order in accordance with law. The AO is directed to examine the delivery challans of goods supplied and the debit note issued thereafter for rejected goods. Needless to say the AO will provide opportunity of hearing to the assessee. Thus, this ground of appeal is allowed for statistical purpose.

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• 2017 (4) TMI 708
  Penalty under section 271(1)(c) - Unexplained cash credit - Held that:- Tribunal has confirmed the addition only on the basis that the assessee did not obtain any confirmation letter from this party, however, the assessee placed reliance on repayment of ₹ 93,000/- made on 10-05-1991 to the creditor. Hence, it is a debatable issue whether the assessee has repayment or not. Tribunal in respect to this cash credit, we are of the view that there is a debate about re-payment of ₹ 93,000/- made on 10-05-1991 by the assessee to this creditor Shri Ronak Patel. Hence, in any case penalty for concealment cannot be levied. We delete the penalty and allowed the appeal of the assessee on this issue. The assessee before Tribunal explained that the assessee has furnished copy of account of creditor, copy of receipts issued to the creditor, confirmation letter obtain for the year ended 31-03-1989 and 31-03-1991. It is admitted fact that the confirmation letters contained the GIR No. of the creditor. Now, it was claimed before us that the assessee could not obtain fresh confirmation for the year ending 31-12-1987 due to long passage of time. Even the books of account were available for inspection only in August 2009 as per the direction of the Hon’ble Bombay High Court. We find from the penalty order of the AO that he has no were discussed the element of concealment in respect to this cash credit and hence we have no reason to sustain the same. The penalty levied by AO and confirmed by CIT(A) is deleted. In respect to other items on which penalty was levied by AO and confirmed by CIT(A) in all these three years, the Tribunal has deleted the additions, the penalties levied and confirmed will not sustain. AO is directed to delete the penalties in respect to those items which have already been deleted by the Tribunal in quantum. All the three appeals of the assessee are allowed.

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• 2017 (4) TMI 707
  TDS u/s 194I - payment made by the assessee to MMRDA for acquisition of the plot of land on lease from MMRDA - whether the lease premium paid for a long term lease of 60 years can be termed as ‘rent’? - Held that:- In Wadhwa & Associates Realtors Private Limited (2013 (9) TMI 261 - ITAT MUMBAI)the assessee took plot of land from MMRD and made payment of lease premium for allotment of plot of land as also payment for additional built up area and fees for FSI. It is held in the above case that (i) since premium was not paid under lease but was paid as a price for obtaining lease, it preceded grant of lease and, therefore, by any stretch of imagination, it could not be equated with rent which was paid periodically, (ii) payment for additional FSI area could not be equated to rent, and (iii) assessee was not liable to deduct tax at source on both types of payment u/s 194I of the Act. In Navi Mumbai (SEZ) Private Ltd. (2013 (8) TMI 598 - ITAT MUMBAI) it is held lease premium paid by assessee to CIDCO for acquiring leasehold land for a period of 60 years in order to develop a Special Economic Zone (SEZ) amounted to capital expenditure which did not fall within the meaning of ‘rent’ u/s 194I and therefore, the assessee was not liable to deduct tax at source while making the said payment. In Dhirendra Ramji Vora (supra), it has been held by the Tribunal that the lease premium paid to CIDCO does not qualify to be a ‘rent’ within the meaning of section 194I so as to be exigible for deduction of tax at source there under. In Indian Newspapers Society (2013 (9) TMI 158 - ITAT DELHI) the Mumbai Development Authority leased out land in question to the assessee for a period of 80 years for a consideration comprising lease premium of a sum. The AO held that the provisions of section 194I was applicable on such lease payment. The Commissioner (Appeals) having found that such payment was not an advance rent but was a lease payment in the nature of capital expenditure, held that such payment did not fall within the ambit of section 194I of the Act. The Tribunal held that since payment of lease premium was not to be made on periodical basis but it was onetime payment to acquire land with right to construct a commercial complex thereon, section 194I was not applicable. Thus the payment of lease premium does not fall within the ambit of section 194I and, therefore, the assessee is not liable to deduct tax at source while making the said payment - Decided in favour of assessee

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• 2017 (4) TMI 706
  Validity of the reassessment proceedings u/s 147 r.w.s 148 - non application of ind by AO - Held that:- The proceedings u/s 148 of the Act were initiated only on the basis of the information received from the Investigation Wing of the department and the AO had not applied his own mind. Therefore, those proceedings were not valid. Accordingly, the reassessment framed by the AO is quashed. See PR. Commissioner of Income Tax-4 Versus G & G Pharma India Ltd.[2015 (10) TMI 754 - DELHI HIGH COURT] - Decided in favour of assessee.

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• Customs

• 2017 (4) TMI 735
  Liability of interest - provisional assessment - final assessment - sub-section (3) of the Section 18 of CA, 1962 - Held that: - on final assessment, the Assessee is required to discharge interest u/s 28AB from the first day of the month in which the duty was provisionally assessed till the date of payment thereof - appeal dismissed - decided against appellant.

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• 2017 (4) TMI 734
  SEZ unit - refund claim - rejection on the ground of limitation - case of appellant is that having paid the duty under protest, the same cannot be rejected on the ground of limitation - case of the department is that there is no document to show that duty was paid under protest - whether the duty has been paid by the appellant under protest or not? - Held that: - the appellants have intimated their protest of paying the duty by the letter dated 27.02.2009. The adjudicating authority has not accepted this letter stating that it is only a letter requesting for release of bank guarantee and not a letter intimating protest - since the appellants have intimated their protest within reasonable time, that is within 2 weeks of payment of duty, this letter issued by them can be considered as intimation of protest. The immediateness of the letter shows that it was not issued solely with intention to extend limitation. The refund cannot be rejected on the ground of limitation - the rejection of refund claim of ₹ 3,14,923/- remain undisturbed as appellant not contesting the same - appeal allowed - decided partly in favor of appellant.

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• 2017 (4) TMI 733
  Imposition of redemption fine and penalty - valuation - 5% commission payable to the local agent in India - case of the appellants is that they filed live Bill of Entry and declared the value basing upon the invoice routed through their bank. The non inclusion of 5% agency commission noted on the packing of the consignment was only a bonafide mistake - department was of the view that this 5% agency commission should also be included in the assessable value. Held that: - The facts of the case reveal that the mis-declaration occurred because the overseas supplier did not include 5% agency commission in the invoice and instead noted the same on the packages only. The Ld. Counsel has relied upon the judgement in the case of Delphi Automotive Systems Ltd. Vs CC (E), New Delhi [2016 (8) TMI 926 - CESTAT NEW DELHI],where in similar state of facts, the Tribunal has reduced the penalty to ₹ 10,000/-. Following the same, the penalty u/s 114A can be reduced to ₹ 10,000/- - The ingredients of Section 114AA does not stand attracted in the present case. The said section has been wrongly appled by the authorities below - the redemption fine imposed is on higher side. The same can be reduced to ₹ 10,000/-. Appeal allowed - decided partly in favor of appellant.

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• 2017 (4) TMI 732
  Principles of natural justice - Valuation - DEPB Credit - The Department alleges that the exports were overvalued with a view to obtain DEPB credit fraudulently, there were no importers for the goods exported, the value of the goods was outsourced into the firm's bank accounts through one KRK International and some other sources - Held that: - it was incumbent for the adjudicating authority to have dealt with each and every contention of the appellants and indicate his findings thereon. This has not been done - adjudicating authority has ignored the request of the appellants for examination of certain persons He has not even discussed the said request in the impugned order. The impugned order has not gone into all aspects of the dispute concerned and also suffers from denial of natural justice to the appellant herein. In the event, the matter is remanded back to the adjudicating authority for de novo adjudication - appeal allowed by way of remand.

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• Corporate Laws

• 2017 (4) TMI 730
  Changing and/or shifting the registered Office - alteration of Clause II of the Memorandum of Association for shifting its registered Office from the State of West Bengal to the State of Uttar Pradesh as approved by the members by special resolution passed in accordance with Section 114 of the Companies Act, 2013 at its Extraordinary general meeting - Held that:- The purported Extraordinary general meeting showing to be held on 17-02- 2015 and the resolution, if any, passed therein, was not as per the provisions of law. The applicants/respondents 1, 2 and 3 submitted that notice of extraordinary general meeting has been duly served to the petitioner and respondent No. 4 but they failed to show or prove the service of notice upon the petitioner and/or upon the respondent No. 4 and/or upon any other members/shareholders as required under Rule 30 of the Companies (Incorporation) Rules, 2014. Further, the Memorandum and the Articles of Association (Annexure P1 of the Company Petition) shows the Registered Office at 55, Bhupen Bose Avenue, Kolkata, but in the order dated 11th February, 2015 passed by the Regional Director reflect the address as 65, Dilkhusa Street, Kolkata. How and when it is shifted from 55, Bhupen Bose Avenue, Kolkata to 65, Dilkhusa Street, Kolkata is also not explained. More so, when the Memorandum and the Articles of Association show the address of the Company as 55, Bhupen Bose Avenue, Kolkata. How the Regional Director allowed/approved the application of the applicants/Respondents 1,2 and 3 showing the address as 65, Dilkhusa Street, Kolkata, without alteration of the Memorandum and Articles of Association as required under Section 12(4) & 13 of the Companies Act, 2013? - Held that:- It is a settled principle of law that the conduct of the parties is a very relevant factor to be considered in the equitable proceeding. The person/party seeking equitable relief, must come with clean hand and good conduct failing which it constitutes a gross abuse of the process of law and equally, he who seeks equity, must do equity and he who does equity, must come with clean hand. As discussed find that the equity is in favour of the petitioner. Rather, it is the conduct of the applicant/respondent 1, Company and the applicants/respondents 2 and 3, as detailed above, which has been prejudicial to the interest of the petitioners/non-applicants and it would be highly unjust to allow the prayers sought by the applicants/respondents 1, 2 and 3 to transfer the Company petition to Safedabad (UP). The relief as prayed by the applicants/respondents 1, 2 and 3, if granted, would be highly oppressive to the petitioner/non-applicant as the applicants/respondents 1, 2 and 3 have acted in the manner not only prejudicial to the interest of the petitioner/non-applicant but also acted in violation of the established principles/procedures of law while shifting the registered office of the respondent No. l, Company from the local jurisdiction to other and thereafter, from State of West Bengal to the State of Uttar Pradesh.

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• FEMA

• 2017 (4) TMI 729
  Enforcement of a foreign award - express representations were made that the transactions were in compliance with the applicable laws, it is now contended that the SHA was only a device to circumvent the provisions of FEMA - Held that:- The conduct and the stand of Unitech can most charitably be described as plainly dishonest. This court is of the view that permitting Unitech to prevail on such contentions to resist the enforcement of Award would plainly amount to rewarding dishonesty and would be manifestly unjust. Curiously, no such contentions were advanced by Unitech before the Arbitral Tribunal. Further, Unitech has also failed to indicate any credible explanation for not urging the same before the Arbitral Tribunal. Thus, Unitech cannot be permitted to raise such contentions at this stage. It is also necessary to bear in mind that the present proceedings are for enforcement of inter se rights between Cruz City and Unitech and Cruz City cannot be precluded from enforcing its rights which fall within the ambit of private international law. The contentions advanced by Unitech are plainly an afterthought as no such contentions were advanced before the Arbitral Tribunal. Indisputably, the Arbitral Tribunal was the forum of choice and had jurisdiction to decide all disputes between the parties. The Keepwell Agreement was subject to Indian laws and Unitech had full opportunity to challenge the validity of the Keepwell Agreement before the Arbitral Tribunal. However, Unitech having failed to do so, this court finds no reason to entertain such contentions to resist enforcement of the Award. There is also much merit in Mr Mukopadhaya’s contention that Unitech had deliberately refrained from taking any such plea before the Arbitral Tribunal as that may have entitled Cruz City to claim further damages. It is apparent that Unitech has also not provided any reason why such defences were not raised before the Arbitral Tribunal. In the circumstances, this court has little hesitation in finding that the contentions now raised are an abuse of the process of this court and, therefore, must be rejected. This is a fit case where principles of issue estoppel ought to be applied notwithstanding the grounds available under Section 48(1) of the Act. Even if it is accepted that Burley's business was not bonafide, Unitech would be liable to suffer the consequences that would follow under FEMA, but Unitech cannot escape its liability to Cruz City. Insofar as the public policy of India is concerned, the same can be adequately addressed while considering the question of regulatory compliances at the time of remitting the funds recovered from Unitech. When considered in the context of public policy, it would be more pernicious and destructive of the rule of law to permit Unitech to escape its obligations and avoid the Award in comparison to enforcing it. Unitech’s contention that structure contemplated under the Keepwell Agreement read with the SHA provided an assured return at a predetermined rate to Cruz City and this was a flagrant violation of FEMA and Regulations made thereunder, is also bereft of merit. The Put Option provided to Cruz City under the Keepwell Agreement could be exercised only within a specified time and was contingent on the Santacruz project not being commenced within the prescribed period. This was not an open ended assured exit option as is sought to be contended by Unitech. Cruz City had made its investment on a representation that the construction of the Santacruz Project would commence within a specified period. Plainly, if the construction of the Santacruz project had commenced within the specified period - that is, by 17.07.2010 - Cruz City would not be entitled to exercise the Put Option for exiting the investment. Further, the Put Option could only be exercised within a fixed time period of 180 days and the said option would be lost thereafter. The reliance placed by Unitech on the RBI circulars dated 09.01.2014 and 14.07.2014 is also misplaced. In terms of RBI’s circular dated 09.01.2014 optionality clauses granting assured returns on FDI are proscribed. However, it is doubtful whether the said circular would be applicable to cases where a foreign investor founds its claim in breach of contract. Plainly, if an investment is made on representations which are breached, the investor would be entitled to its remedies including in damages. The aforesaid circulars proscribe assured return instruments brought in India under the guise of equity. However, in the present case, Cruz City is only seeking to enforce its obligations against Burley, an overseas entity. Even if it is accepted that the Keepwell Agreement was designed to induce Cruz City to make investments by offering assured returns, Unitech cannot escape its liability to Cruz City. Cruz City had invested in Kerrush on the assurances held out by Unitech and notwithstanding that Unitech may be liable to be proceeded against for violation of provisions of FEMA, the enforcement of the Award cannot be declined. As argued the Keepwell Agreement and the SHA were only a device to overcome the provisions of FEMA is not entitled to raise this plea for the reasons as stated hereinbefore. No such plea was raised before the Arbitral Tribunal. It is plainly an afterthought and an abuse of the process of this court. Secondly, the contention is premised on an erroneous assumption that the Keepwell Agreement provides for an assured return in violation of FEMA. As stated above, the Put Option was relevant only if the construction of the Santacruz Project was not commenced within the specified period of two years. Cruz City had no assurance of exit at a pre-determined return under the Keepwell Agreement in the event the execution of the project was commenced on schedule. And thirdly, if Cruz City has been induced to make an investment on a false assurance of the Keepwell Agreement being legal and valid, Unitech must bear the consequences of violating the provisions of Law, but cannot be permitted to escape their liability under the Award. In view of the above, the objections raised by Unitech under Section 48 of the Act against enforcement of the Award are rejected.

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• Service Tax

• 2017 (4) TMI 756
  CENVAT credit - denial on the ground that services were provided by MSM Singapore therefore MSM India has neither provided any service nor required to obtained the registration and also not required to pay any service tax - With effect from July, 2012 MSM-India took service tax registration by giving the care of address of MSMPL, its sole agent in India. It does not have any physical establishment, infrastructure or equipment in India for production and up-linking of programs, i.e. IPL, T.V. Serials 85 Films. - case of Revenue is that appellant is hot a service provider as the service was provided by their Singapore entity therefore being non service provider they are not entitle for the Cenvat credit. Held that: - There is no dispute that the entity in India and Singapore is the same entity i.e. M/s. MSM Satellite (Singapore) Pte. Ltd therefore the service provider is the same company even though the service was provided from different location. It is admitted fact that even though if the contention of the Revenue is accepted that services were provided by MSM Singapore, but it is also a fact that services were received in India therefore service per se is taxable and the government is legally required to collect the service tax on such services and it had indeed collected. Therefore service tax even though paid by MSM Singapore through their office in India discharged the service tax payment of services tax cannot be disputed. In such a situation Cenvat credit is legally admissible to the appellant - once registration was granted by the department and the service tax was collected consequent Cenvat credit cannot be denied. As per the service tax provisions the service tax liability is based on the place of consumption, therefore in the present case not only the services provided in India but also consumed in India therefore place of provisions is India only. Hence service tax registration obtained by M/s. MSM Satellite (Singapore) Pte. Ltd in India is absolutely in order. Extended period of limitation - penalty - Held that: - entire activity was in the knowledge of the department as the appellant vide their letter dated 24-5-2012 had made detailed representation to the CBEC to seek continue deemed broadcaster status of MSMPL and CBEC when not responded, appellant approached for registration dated 2-7-2012 wherein they have set out detailed reason for seeking registration and also stated that they will be paying service tax on distribution and claiming input service credit. In this fact there is no suppression of facts on the part of the appellant with intent to evade payment of duty - demand of extended period is not sustainable, hence equal amount of penalty u/s 11AC being consequential will also not sustain and same is set aside. As regard penalty imposed upon BCCI on the ground that they have fraudulently passed on Cenvat credit, availment of Cenvat credit by M/s. MSM Satellite (Singapore) Pte. Ltd is legal & correct, the consequential penalty does not survive. Moreover, the payment of service tax made by BCCI is absolutely legal & correct firstly for the reason that being the payment of service charges in Indian rupees the transaction is not of export, Secondly even it is presumed as export it is option of service provider, to opt for payment of service tax on output service or not. In this position, imposition of penalty upon BCCI and on it's officials is absolutely incorrect and illegal. Appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 755
  Stay of order - Refund claim - delay in filing appeal - Section 103 of FA, 1994 - Held that: - it is apparent that the enabling provision for claiming the refund of service Tax does not prescribe anything to meet the eventuality of delay in filing the refund. In other words, it does not confer jurisdiction on the sanctioning authority to condone the delay - Revenue’s stay application allowed - decided in favor of Revenue.

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• 2017 (4) TMI 754
  CENVAT credit - case of Revenue is that credit pertain to 'exercise equipment', which being classifiable under chapter 95 of the Schedule to the CETA, 1985, is not capital goods within the meaning of rule 2 (a) of CCR, 2004 and hence not allowable - Held that: - 'exercise equipment' is, indeed, utilised as input for rendering taxable service and that the duty paid on this equipment is permissible as CENVAT credit, irrespective of whether it was initially claimed as 'capital goods.' Accordingly, the credit has been taken in accordance with the law and cannot, therefore, be denied as sought by Revenue. There is thus no justification for disallowing this credit and for restoration of penalty as proposed in the grounds of appeal - appeal dismissed - decided against Revenue.

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• 2017 (4) TMI 753
  Suo motu adjustment of tax - the payment of excess service tax paid had been adjusted by the appellant for future payment - Held that: - during the relevant period i.e. April, 2006 to September, 2006, there is no bar of excess service tax paid by the appellant for adjustment. The only reason of denial of the adjustment by the ld. Commissioner (Appeals) is that as per amendment in Service Tax Rules w.e.f. 1-3-2007, such adjustment is not permissible. Admittedly, these rules have come into force after the impugned period. Therefore, such amendment to the rules is not applicable to the facts of this case. Appeal allowed - decided in favor of assessee.

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• 2017 (4) TMI 752
  Maintainability of application - Rectification of Mistake - Held that: - Provisions of Section 35C(2) mandates that any application for ROM needs to be filed within six months from the receipt of the said order - The application for ROM in this case has been filed on 1-8-2016 which is almost after a year after receipt of the certified copy of the order. On the ground of limitation only, the application for ROM filed by the Revenue is dismissed - decided against Revenue.

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• 2017 (4) TMI 751
  Penalty - whether penalty u/s 76 of the FA, 1994 is required to be imposed upon the appellant when Service Tax involved, along with interest, was paid by the appellant before the issue of SCN? - Held that: - Once full disclosure of tax liability has been made in the ST-3 Returns then it cannot be said that appellant had any motive to evade payment of Service Tax. At the same time a penalty provided u/s 76 of the FA, 1994 cannot be interpreted to mean that in each and every case of delayed payment penalty is required to be imposed when entire tax liability required to be paid has been fully disclosed in the ST-3 Return - penalty set aside - appeal allowed - decided in favor of appellant-assessee.

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• 2017 (4) TMI 750
  Cenvat credit - Commission paid to their overseas agent under reverse charge mechanism - N.No. 30/2004-C.E., dated 9-7-2004 - Penalty - Held that: - On export of goods no duty is payable by the assessee although the goods manufactured by the appellant is dutiable, therefore, merely, claiming benefit of Notification No. 30/2004 ibid, the appellant cannot be denied the Cenvat credit on input/input services. The appellant cannot be put on adverse position by way of Notification No. 30/2004 - Decided in favor of the assessee.

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• Central Excise

• 2017 (4) TMI 748
  Whether the benefit of N/N. 23/2003-CE dated 31.03.2003 is available to the clearances of cotton yarns made by the respondents in the DTA? Held that: - The denial is based on the fact that the respondents are not availing the cenvat credit facility on the inputs - the goods for which exemption is claimed when manufactured and cleared by unit other than EOU should not be wholly exempted from the excise duty or should not be chargeable to nil rate of duty. It is evident that the fact of the respondents not availing cenvat credit is not a relevant consideration in deciding the question whether they comply with N/N. 23/2003-CE - reliance placed in the case of HANIL ERA TEXTILES LTD. Versus COMMISSIONER OF CENTRAL EXCISE, RAIGAD [2013 (6) TMI 680 - CESTAT MUMBAI] - appeal dismissed - decided against Revenue.

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• 2017 (4) TMI 747
  CENVAT credit - paints - composite contract - there are two parts of each purchase order mainly, (a) Supply of towers (b) Erection and painting of towers. The appellants have paid excise duty on part A and are discharging service tax on part B under the category of Erection, Commissioning and Installation Services, the appellant is availing Cenvat credit of the excise duty paid on paint, which is used in the manufacture of steel tower parts - Held that: - the order of Commissioner (Appeals) suffers from a serious infirmity. As rightly pointed out by the ld. Advocate, first two paragraphs containing findings on merits, in para-5 of the Order-in-Appeal, are exactly the same and are reproduced from the order of the adjudicating authority - the Commissioner (Appeals) has not applied his mind properly to the issue and the order has been passed with less than complete application of mind - matter needs to be re-examined properly by the first appellate authority - appeal allowed by way of remand.

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• 2017 (4) TMI 746
  CENVAT credit - chassis - denial on the ground that appellant have availed the benefit of N/N. 6/2002 dated 01.03.2002 - Held that: - considering the fact that in the appellant's own case, for the earlier period, vide Final Order No. 498-500/08-Ex dated 16.07.2008, this tribunal has held that interpretation of explanation to rule 3 (7) should not lead to a situation of introducing additional condition in the notification i.e. they shall not take credit on any inputs(i.e. all inputs) or forcing them opt for otherwise an optional notification - Rule 3(7) has to be applied only in cases where the exemption notification is on the condition that no input credit on any of the inputs is available - Cenvat credit cannot be denied to the appellant - appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 745
  CENVAT credit - SSI exemption - N/N. 8/2003 CE dated 01.03.2003 - appellants were also manufacturing and clearing the goods affixing the brand name of others, on which they had paid appropriate duty after availing CENVAT Credit on the inputs - CENVAT credit denied on the inputs used in the manufacture of Branded goods, cleared on payment of duty - Held that: - the issue is no more res-integra being covered by the judgement of the Hon’ble Supreme Court in Nebulae Health Care Ltd's case [2015 (11) TMI 95 - SUPREME COURT], where it was held that once excise duty is paid by the manufacturer on such branded goods manufactured, the brand name whereof belongs to another person, on job work basis, the SSI Unit would be entitled to Cenvat/Modvat credit on the inputs - the appellant are eligible to CENVAT credit on the inputs used in the manufacture of branded goods, even though, they had availed benefit of SSI exemption on the goods manufactured on their own account - appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 744
  CENVAT credit - Railway Track Material - Lighting equipment, fittings and fixtures - Refractory cement blocks, plates - Welding Electrodes under Chapter 8311 - Steel Items beam falling under Chapter 72 and Misc. other items - Held that: - the identical issue has come up in the assessee’s own case for the earlier period M/s. Steel Authority of India Ltd. Versus CCE & Customs, Raipur [2016 (12) TMI 840 - CESTAT NEW DELHI], where it was held that The railway track is part and parcel of material handling system integrally connected with the production on movement of dutiable goods - credit allowed. Lighting equipment, fittings and fixtures - Held that: - identical issue came in the assessee own case M/s. Steel Authority of India Ltd. Versus CCE & Customs, Raipur [2016 (12) TMI 840 - CESTAT NEW DELHI], where it was held that Admittedly, 24 hours illumination of shop floors is essential requirement and as such, the role of these High Mast Lighting Equipment has to be recognized in the process of manufacturing activity. Refractory cement blocks, plates - Held that: - reliance was placed in the case of STEEL AUTHORITY OF INDIA LTD. Versus COMMR. OF C. EX., RAIPUR [2008 (4) TMI 94 - CESTAT, NEW DELHI], where it was held that credit on items used in manufacture of parts of capital goods which are further used along with capital goods, is allowed - however, ld. DR for the department submits that facts of the earlier order (supra) are quite different - issue remanded to the adjudicating authority to decide the same de novo - matter on remand. Welding Electrodes under Chapter 8311 - Held that: - the issue is covered by the ratio laid down by the jurisdictional High Court in the case of Ambuja Cements Eastern Ltd. Vs. CCE, Jaipur [2010 (4) TMI 429 - CHHAITISGARH HIGH COURT], where it was held that welding electrodes used in repair and maintenance of plant and machinery are inputs as defined under Rule 2(g) defined in the rule, and thus entitled for cenvat credit - credit allowed. Steel Items beam falling under Chapter 72 and Misc. other items - Held that: - no detailed reasons given in the impugned order pertaining to the denial of Cenvat credit in question. Hence, we set aside the impugned order pertaining to these items and remand the matter to the adjudicating authority to decide the same de novo - matter on remand. Appeal allowed - decided partly in favor of appellant and part matter on remand.

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• 2017 (4) TMI 743
  CENVAT credit - common input services were used for manufacturing activity as well as trading activity - case of Revenue is that trading activity is to be considered as an exempted service - Held that: - amendment brought forth by N/N. 3/2011 incorporating trading activity also as an exempted service in the definition of exempted service, does not have retrospective effect. There is no evidence to establish that appellants are guilty of suppression of facts. Audit was conducted every year as pointed out by Counsel for appellant. The issue whether trading can be considered as exempted service or for that matter service was doubtful prior to 01.04.2011. The issue being interpretational, the appellants cannot be saddled with suppression of facts with intent to evade payment of tax - extended period not invoked. Appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 742
  Imposition of penalty u/r 173Q - appellant submits that there is no allegation of removal of goods with intent to evade payment of duty and the appellant removed the goods without payment of duty - Held that: - since the appellant has mentioned the duty payable @ 12.8% in their invoices issued to their customers, they are required to pay the same u/s 11D of the CEA, 1944. The contention of the ld.Advocate for the appellant cannot be accepted. Therefore, the demand of duty along with interest is justified - there is no allegation of willful mis-statement, suppression of facts or fraud on the part of the appellant. In such a case, imposition of penalty is not called for - appeal allowed - decided partly in favor of appellant.

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• 2017 (4) TMI 741
  Cenvat Credit - PCV raisin used by the appellant in the manufacture and clearance of battery separator - duty paying documents - The whole case against the appellant is that they have illicitly procured raw materials, manufactured finished goods and cleared in a clandestine manner - Held that: - Rule 9 stipulates the records to be maintained and documents required for availing such Credit - In the present case, admittedly there is no documented transaction between M/s. Marvelous Impex and the appellant. Hence, the question of duty paid receipt of PVC resin by the appellant cannot be established. In the illicit transaction involving the raw material PVC resin, the question of having any documented receipt of such raw material and more importantly, duty payment of such input cannot be established. In the present case, no such attempt is being made by the appellant for obvious reasons. Credit not allowed - appeal dismissed - decided against appellant.

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• 2017 (4) TMI 740
  SSI exemption - use of brand name of others - It is the case of the revenue that the appellant had cleared heating elements with brand name Calrod and the wordings on the label Marketed by Elpro International which indicate that Calrod was brand name of Elpro and appellant could not have claimed the exemption on this product - whether the appellant is eligible to avail the benefit of small scale exemption notification in respect of the heating elements cleared by them during the February 1991 to December 1999? - Held that: - appellant has made out a case that the product manufactured and cleared by them with the words Calrod are not the brand name of any other person. On merits, it is held in favor of the appellant as the brand name being their own they cannot be precluded from availing the small scale exemption. The words used on the label Marketed by Elpro International is also not any hurdle in the case of the appellant inasmuch as the said words did not indicate any connection of Elpro to the brand name Calrod due to which appellant could have got undue benefit in the market. Extended period of limitation - Held that: - Nothing is brought on record to show that there was suppression from the side of the appellant as to use of word Calrod as the brand name - demand also hit by limitation. Appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 739
  Misdeclaration of value (MRP) - commodity thinner - benefit of N/N. 13/2002-CE (NT) dated 1.3.2002 - Held that: - In spite of repeated query as to the basis of mentioning MRP for a product for which MRP was not to be mentioned in the packages, ld. Advocate was not able to show from the record any material based on which the MRP was declared to the Department. Therefore, the findings of the lower authorities holding that there was mis-declaration on the part of the appellant is acceptable - the appellant is not eligible for the benefit as claimed in terms of Section 4A of the CEA, 1944 - appeal dismissed - decided against appellant.

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• 2017 (4) TMI 738
  CENVAT credit - Rule 6(3)(b) of CCR 2004 - manufacture of both dutiable as well as exempted finished goods - non-maintenance of separate books - demand of 10% of the value of the exempted products - Held that: - by virtue of retrospective amendment to Rule 6 of CCR 2004 in the FA, 2010, an assessee is eligible to reverse proportionate Cenvat Credit on Inputs attributable to the exempted products - In the present case also, there is no dispute of the fact that the appellant had already reversed the proportionate credit on the Inputs attributable to the exempted products with interest, hence, the impugned order is accordingly set aside - appeal allowed - decided in favor of assessee.

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• 2017 (4) TMI 737
  SSI exemption - dummy units - Acta Exteriora Indicant Secreta Interiora - clearances of corrugated boxes - alleged clearances through seven alleged dummy units created by ACPL, apparently with intention to evade payment of duty - intentional omission and suppression to evade discharge of Central Excise duty - the appellant has admitted and accepted this modus operandi in respect of one such dummy unit, namely, M/s. Appolo Packers, and have conceded that value of clearances of ₹ 28,45,027/- alleged in respect of that unit should be clubbed with that of ACPL. However, in respect of the remaining 6 alleged dummy units, ACPL has contended that they have done only job work for these units, that the said units are independent and distinct and that they had undertaken activity of stitching in their respective premises. Held that: - the contentions of the appellant are but diversionary, albeit futile, tactics to draw attention to perceived deficiencies in investigation and adjudication. But nothing has been demonstrated by the appellant to show that they were pure as the driven snow or that they had no unaccounted clearances. On the other hand, investigation has successfully unearthed a well planned subterfuge of deceit and deception planned and executed by the manufacturer appellant with the nefarious intent of evading central excise duty that was enjoined of them to discharge, adversely affecting the exchequer. The maxim Acta Exteriora Indicant Secreta Interiora (outward acts show the secret intentions) is thus verily applicable to the appellants. Appeal dismissed - decided against appellant.

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• 2017 (4) TMI 736
  Classification of goods - Borotik Boards out of rubber wood - Appellants classified under chapter heading 4403.00 of CETA upto 27.02.2005 and thereafter, under CTH 4407 attracting nil rate of central excise duty. However, department took the view that the products are required to be classified under chapter heading 4405.90 till 27.02.2005 and thereafter under CTH 44091090 attracting 16% advalorem duty? - Held that: - the 'Borotik Boards' in question will only merit classification in erstwhile CETA Heading 4403.00 (4407.9900 w.e.f 28-02-2005). This being so, the impugned orders dated 03-01-2007 (relevant to Appeal E/296/2007) and 29-01-2009 (relevant to Appeal E/290/2009) ordering their classification under erstwhile CETA heading 4405 (present 4409.2090) cannot sustain, and will necessarily required to be set aside, which we hereby do - appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2017 (4) TMI 731
  Works contract - the Central Air Conditioning Plant (CAP) and the Packaged Air Conditioning Plant (PAP) - whether indivisible works contract or outright sale? - Held that: - reliance was placed in the case of State of Andhra Pradesh Versus Kone Elevators (India) Ltd. [2005 (2) TMI 519 - SUPREME COURT OF INDIA], [in short 'Kone-I']. Based on the ratio deducible from the Judgment of the Supreme Court, rendered in Kone-I, the Assistant Commissioner/Assessing Officer came to the conclusion that the transaction in issue involved outright sale and was thus, amenable to tax at the rate of 20% - It however transpires that the Judgment rendered by the three judge bench of the Supreme Court in Kone-I has been overruled by the Constitution Bench of the Supreme Court by the case of KONE ELEVATOR INDIA PVT.LTD. V. STATE OF TAMIL NADU AND OTHERS [2014 (5) TMI 265 - SUPREME COURT] [in short 'KONE-II'] - whether the transaction in issue related to a composite contract or not would have to be re-examined by the Assistant Commissioner/Assessing Officer keeping in mind the ratio of the Judgment of the Supreme Court in Kone-II - The test employed by the Assistant Commissioner/ Assessing Officer in the impugned Judgment is no longer valid. Whether machine tools sold by the petitioner against Form-XVII declarations were to be taxed at concessional rate, (i.e. at the rate of 3%) under Section 3(5) of the Tamil Nadu General Sales Tax Act, 1959? - Held that: - the Assistant Commissioner/Assessing Officer has wrongly placed the onus on the petitioner to establish as to whether or not the machine tools sold by it had been consumed or not. Clearly according to us, once a declaration is furnished by the buyer in Form- XVII, the Department would have to ascertain from the buyer as to whether or not the machine tools had in fact been consumed - the matter requires reconsideration. Appeal allowed by way of remand.

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• Indian Laws

• 2017 (4) TMI 728
  Criminal Complaint filed under Section 138 of the Negotiable Instruments Act - First Information Report - Held that:- We have taken into account the facts of the matter in question as it appears to us that no cognizable offence is made out against the appellants – herein. The High Court was wrong in holding that the F.I.R. cannot be quashed in part and it ought to have appreciated the fact that the appellants - herein cannot be allowed to suffer on the basis of the complaint filed by Respondent No.2 – herein only on the ground that the investigation against co-accused is still pending. It is pertinent to note that the learned Magistrate has opined that no offence is made out against co-accused Nos. 2, 3, 4 and 6 prima facie. According to us, the F.I.R. in question filed against the appellants – herein by Respondent No.2 is only an after-thought with the sole intention to pressurize the appellants not to prosecute their Criminal Complaint filed by them under Section 138 of the Negotiable Instruments Act, 1881. Accordingly, we find that the order so passed by the High Court is not sustainable in the eyes of law and deserves to be set aside.

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