TMI Tax Updates - e-Newsletter
April 20, 2017

Case Laws in this Newsletter:

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

TMI SMS

• Once the Govt. has treated the supply of food to the workers as sale, Revenue cannot treat the same as service and impose tax liability - HC

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• There cannot be any intention to evade service tax under reverse charge mechanism as it can be availed as CENVAT credit - demand set aside

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• DVAT refund - notice uploaded on the Petitioner’s Web ID quashed - VAT commissioner directed to ensure refund with interest - HC

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• Failure to file ITR for 2 AYs - Compounding of offence u/s 276CC was rightly rejected since it cannot be said to be the first offence - HC

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• Motor car registered in the name of Director, but funded by the company & shown as assets of the assessee co., claim of depreciation allowed

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Articles

1. GOODS AND SERVICE TAX PRACTITIONERS

   By: DR.MARIAPPAN GOVINDARAJAN

2. INTERPRETATION OF CENTRAL GOODS AND SERVICES TAX (CGST) ACT (PART-1)

   By: Dr. Sanjiv Agarwal

News

1. Draft GST Rules - Appeals and Revision

2. Draft GST Rules - Advance Ruling

3. Draft GST Rules - Accounts and Records

4. Cabinet approves permission to avail external assistance by State Government entities from bilateral agencies for implementation of vital infrastructure projects

5. Cabinet approves signing of the Protocol amending the Convention between India and Portugal for avoidance of Double Taxation

6. RBI Reference Rate for US $

Notifications

Customs

1. 37/2017 - dated 12-4-2017 - Cus (NT)

Customs (Settlement of Cases) Amendment Rules, 2017

DGFT

2. 03/2015-2020 - dated 19-4-2017 - FTP

Exemption from the application of quantitative ceiling and export bans on export of organic agricultural products (wheat, non-Basmati rice) and organic processed products (edible oils and sugar) and enhancement of quantitative ceiling on export of pulses & lentils

Circulars / Instructions / Orders

DGFT

1. 02/2015-2020 - dated 19-4-2017

Amendment in Standard Input Output Norms A-39 under Chemical & Allied Product Group –reg.

Customs

2. 15/2017- Customs - dated 19-4-2017

Rescinding Board Circular F. No. 528/213/87-Customs (TU) -reg.

3. F. No. 15017/63/2017-Dir(ICD) - dated 19-4-2017

Meeting with representatives of Foreign Missions -reg.

Highlights / Catch Notes

Income Tax

• Section 271(1)(c) Penalty Not Applicable Due to Lack of Actual Concealment Finding u/s 41(1)(a.

  Case-Laws - AT : Penalty u/s 271(1)(c) - addition on remission/cessation of liability as per the provisions of section 41(1)(a) - the income was merely estimated without finding any concealment as such, hence the penalty is not attracted. - AT
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• Company Entitled to Claim Depreciation on Car Registered to Director, as Company Funds Used for Purchase.

  Case-Laws - AT : Claim of depreciation on motor car registered in the name of the Director and not the company - As the funds for purchase of vehicles have been provided by the assessee company and they have been shown as assets of the assessee company. Hence, the assessee company should be considered as owner for all practical purposes and hence it is entitled for depreciation - AT
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• Court Upholds Rejection of Taxpayer's Compounding Application for Non-Filing u/s 276CC; Not a "First Offense.

  Case-Laws - HC : Compounding of offence u/s 276CC - assessee failed to file the return for two assessment years - it cannot be said to be the "first offence" committed by the assessee - Rejection of the compounding application submitted by the petitioner is absolutely in consonance with the Guidelines, 2014. - HC
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• Disagreement with AO's view u/s 263 and Rule 8D(2)(ii) doesn't make assessment erroneous or prejudicial.

  Case-Laws - AT : Revision u/s 263 - Disallowance u/s 14A r.w. rule 8D(2)(ii) - the mere fact that the CIT is not in agreement with the view adopted by the AO, would not render the order of assessment erroneous and prejudicial to the interest of Revenue. - AT
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• Assessing Officer's Protective Assessment on Wife's Capital Gains Unjustified Without Substantive Order.

  Case-Laws - AT : Validity of protective assessment - AO had taxed the capital gains in the hands of the assessee as it was found that her husband had not filed return of income.In absence of a substantive order the AO was not justified in passing a protective order - AT
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• Court Upholds AO's Decision to Disallow Firm's Travel Expenses, Concluding They Weren't for Employee Use.

  Case-Laws - AT : Disallowance out of travel expenditure - AO has rightly declined the said travelling expenses being not incurred upon the employees of the assessee firm - AT
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• Tax Assessment Void Due to Missing Section 143(2) Notice; Scrutiny Assessment Legally Ineffective.

  Case-Laws - AT : Validity of assessment proceedings - scrutiny assessment - AO has not issued any notice u/s 143(2) of the I.T. Act to the assessee. During the entire assessment proceedings, the assessment order in dispute is invalid, void abnitio - AT
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• Section 68: Assessee Not Required to Explain Source of Funds Before April 1, 2013; New Rules Apply Afterward.

  Case-Laws - AT : Addition u/s 68 - the assessee is not required to explain source of source of the fund gets buttressed by the amendment made in section 68 with effect from 01.04.2013, which empowers the AO to examine source of source in case of share application money from 01.04.2013 and no other cases prior to that. - AT
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• Revision u/s 263 Quashed Due to Inadequate Inquiry, Not Complete Lack of Inquiry by Assessing Officer.

  Case-Laws - AT : Revision u/s 263 - revenue failed to bring on record that the order passed by the AO was erroneous and prejudicial to the interest of the Revenue - This is a case of inadequate enquiry on the part of the AO and not a case of lack of enquiry - Revision order quashed - AT
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Customs

• Refund Claim Deemed Unjustified After Short Landing of Goods; No Action Against Steamer Agent.

  Case-Laws - AT : Refund claim - short landing of goods - till date no action has been proposed or taken against the Steamer Agent - rejection of refund is unjustified - AT
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• Transaction Value Rejected Due to Unjustified Discount; Declared Value u/r 4(1) Not Accepted.

  Case-Laws - AT : Valuation - Rejection of transaction value on the ground that there is a discount which has been offered to the appellant which is not in conformity with the trade practice - there is no reason why the declared value in question was not accepted under Rule 4(1) - AT
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• Duty Drawback on Re-Imported Goods: Original Authority to Consider Drawback for Collected Duties if Not Re-Exported in Time.

  Case-Laws - AT : Duty drawback - re-imported goods not re-exported within stipulated time - if the lower authorities are intending to collect the duty liability on the re-imported goods, the original authority should consider sanction of drawback to appellants in respect of duty, if any, recovered on re-imported goods - AT
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Indian Laws

• Firm Must Be Named as Accused in Criminal Cases u/s 141 for Partner Liability in Negotiable Instruments Act.

  Case-Laws - HC : Liability under section 141 of the N.I. Act - criminal cases against partnership firm - the complaint was liable to be dismissed on the very first day of its presentation and no process could have been issued against the partners in the absence of the partnership firm being an accused - HC
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• Section 141 allows trying additional offenders with the accused in the same trial based on new evidence.

  Case-Laws - HC : Liability under section 141 of the N.I. Act - When such a trial proceeds against the known accused, if the evidence led in trial discloses offences committed by other persons who could be tried along with the accused, then there need not be a fresh complaint and fresh order of cognizance against those persons - HC
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Service Tax

• High Court Rules: Food Supply to Workers is a Sale, Not a Service, Affecting Tax Obligations.

  Case-Laws - HC : Scope of service - Once the State Authorities have treated the supply of food to the workers of the petitioner as sale, it is not open to the respondents to treat the same as service and impose a liability - HC
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• Non-payment and late filing of service tax returns don't trigger Section 78 without fraud, misstatement, or fact suppression.

  Case-Laws - AT : Mere non-payment of service tax and mere non-filing of returns does not attract the provisions of Section 78 as it contains the words fraud, wilful mis-statement and suppression of facts - AT
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• Refund Claim for Interest Time-Barred Despite Voluntary Payment Before Show Cause Notice; Appellant Entitled to Service Tax Refund.

  Case-Laws - AT : Refund of interest - demand held as time barred - even though the appellant paid the amount voluntarily prior to issuance of show cause notice, he has contested the demand - the appellant can claim refund of service tax as well as the interest thereon - AT
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• No Show Cause Notice Required if Tax and Interest Paid Before Issuance, Per Section 73(3) of Finance Act 1994.

  Case-Laws - AT : Imposition of penalties - provisions of Section 73(3) of the FA, 1994 will be applicable in cases wherein appellant has discharged service tax liability and the interest thereof on being pointed out by the authorities before the issuance of the SCN, and there is no necessity to issue SCN for penalties - AT
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• No Intent to Evade: Extended Limitation Period Inapplicable, CENVAT Credit Creates Revenue-Neutral Situation, Demand Set Aside.

  Case-Laws - AT : Extended period of limitation - there cannot be any intention to evade the service tax liability as the entire service tax paid under reverse charge mechanism can be availed as CENVAT credit by the appellant - demand set aside on revenue neutral situation - AT
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• Service Tax Refund or Exemption: Revenue Neutrality for 100% Export Oriented Units Using Rent-a-Cab Services.

  Case-Laws - AT : 100% EOU - Rent-a-Cab service - the service recipient of the appellant, who is a 100% EOU, benefit of non-payment of service tax or refund of the service tax paid, can be claimed by the 100% EOU, this is a revenue neutral situation - AT
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• Tribunal Refers Service Tax Implications on Outbound Tours by Tour Operators to Larger Bench for Further Examination.

  Case-Laws - AT : Tour Operator Service - business of organizing outbound tour - division bench of tribunal referred the matter to the larger bench
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• Penalties Dropped: No Evidence of Tax Evasion Intent Found; Section 73(3) Invoked After Full Payment Before Notice Issued.

  Case-Laws - AT : Delayed payment of service tax with interest before issue of SCN - Invocation of section 73(4) - Levy of penalty - the adjudicating authority has failed to record any evidence to demonstrate that there has been suppression with intent to evade tax - there was every reason to resort to section 73(3) of FA, 1994 to stop further proceedings consequent upon the payment of tax and interest in full - penalties set aside
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• Appellant barred from contesting order-in-original after six years; correction must follow legal procedures.

  Case-Laws - HC : Validity of challenge made against order-in-original - Erroneous orders of statutory forums and/or courts can only be corrected by a procedure known to law - after more than six years have expired, the appellant cannot be permitted to challenge the order-in-original via the present proceedings - HC
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Central Excise

• Refund Claim Allowed for Unjust Enrichment on Finished Goods; Dealers Couldn't Issue Excisable Invoices Due to Lack of Registration.

  Case-Laws - HC : Refund claim - unjust enrichment - refund claim forming part of finished goods - the dealers were not registered with the department and therefore, could not issue excisable invoices passing on the duty in turn to their customers - refund allowed - HC
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• Rail Freight Services CENVAT Credit Denied Pre-2009; Eligible for Service Tax Credit on Goods Transportation by Rail.

  Case-Laws - AT : CENVAT credit - credit availed on this service is denied for the reason that rail freight was brought under service tax net only w.e.f 01.09.2009 - appellants are eligible for credit, off the service tax paid on transportation of goods by rail. - AT
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• SSI Exemption: Use of Brand Name Not Indicating Trade Connection May Affect Tax Applicability Under Paragraph 5 Explanation.

  Case-Laws - HC : SSI exemption - If the use of the brand name or trade name is not intended for the purpose of indicating a connection in the course of trade between such specified goods and the person using such name or mark, then the same may not fall within the definition of the expression brand name or trade name under the Explanation under paragraph 5 of the Exemption Notification - HC
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• Prima Facie Case Established on SSI Exemption; Appellant Must Prove Trading Activity Following Seized Records and Buyer Probes.

  Case-Laws - AT : SSI Exemption - proof of trading activity - since the Department had established the prima-facie case on the basis of seized private records and investigation carried out with the buyers and the statement of the sole proprietor, the onus was on the appellant to show the substantive proof of trading - demand confirmed - AT
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• Chimney Manufacture and Marketability Confirmed: Excise Liability Established for IEF.

  Case-Laws - AT : Excisability - manufacturing / fabrication of chimney - goods have in fact been manufactured and marketed by IEF and thus the marketability of the goods is established. Since the manufacture and marketability of the goods is established the excise liability follows - AT
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VAT

• Court Quashes Notice, Directs VAT Commissioner to Process Refund with Interest Under DVAT Sections 74A and 42.

  Case-Laws - HC : Revision of order - Section 74A of the DVAT Act - Entitlement to interest u/s 42 of the DVAT Act - delayed grant of refund - notice uploaded on the Petitioner’s Web ID quashed - VAT commissioner directed to ensure refund with interest - HC
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Case Laws:

• Income Tax

• 2017 (4) TMI 826
  Escapement of income - method of accounting followed - Held that:- According to us, as indicated right at the outset, it is not disputed by the Revenue that the Assessee has been consistently following the 'Project Completion Method', for accounting its income. It is also, not disputed before us, by the learned counsel for the Revenue that, except for the assessment years in issue, the said method of accounting has not been assailed by the Revenue.There is no dispute that the project has not been completed as yet. Therefore, having regard to the aforesaid circumstances, in particular, that the method of accounting followed by the appellant is a recognised method of accounting, which has not led to escapment of income, we see no reason to interfere with the impugned judgment and order of the Tribunal. No substantial question of law.

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• 2017 (4) TMI 825
  Denial of natural justice - bank accounts of petitioner, a statutory local authority, have been attached on account of non-payment or deposit of the T.D.S. and not been heard, opportunity of making submission and document has not been afforded to them - Held that:- The petitioner being a statutory local authority, interest of justice requires that they should be granted one more opportunity of being heard and for laps of any omission on the part of some officer the Statutory Body should not suffer. Keeping in view the aforesaid, we allow this petition in part and dispose it of in the following manner:- The petitioner shall appear before the Assessing Officer or the competent authority of the department along with a certified copy of this order and submit all their objections with regard to the demands made along with all relevant documents on 10th of April, 2017 and on the same being done, the competent authority shall proceed to decide the matter in accordance with law after considering the objections and documents that may be filed by the petitioner.

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• 2017 (4) TMI 824
  Compounding of offence under Section 276CC rejected - failure to file the return for two assessment years years - whether for any prior year any show cause notice for prosecution is issued and served upon the petitioner or not? - Held that:- In the present case, for AY 2011-12, the show cause notice was already issued under Section 276 CC of the Act on 27.10.2014 for non filing of return before due date (for AY 2011-12) and despite the same for the subsequent years i.e. for AY 2013-14 the assessee did not file return of income before due date of filing of return. Therefore, again the petitioner assessee committed the offence for AY 2013-14. Thus, it cannot be said that in AY 2013-14 it can be said to be the first offence committed by the assessee. Under the circumstances, the respondent no.1 has rightly rejected the compounding application submitted by the petitioner. Rejection of the compounding application submitted by the petitioner is absolutely in consonance with the Guidelines, 2014. The impugned order passed by the respondent no.1 rejecting the compounding application submitted by the petitioner cannot be said to be either illegal or contrary to the Guidelines, we see no reason to interfere with the same. In view of the above and for the reasons stated above, present petition fails and same deserve to be dismissed and is accordingly dismissed.

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• 2017 (4) TMI 823
  Disallowance u/s 14A - Held that:- The issue in dispute is squarely covered in favour of the assessee by the decision of the Hon’ble High Court rendered in the case of Correctech Energy [2014 (3) TMI 856 - GUJARAT HIGH COURT] as observed that if no tax free income was earned by the assessee, then no expenses can be construed as incurred by the assessee, because plain reading of section 14A provides that if an assessee incurred expenditure in relation to earning of tax free income then such expenditure would not be allowed. The assessee did not earn tax free income, then where is the question of allocating expenditure. CIT(A) is not justified in confirming the disallowance. - Decided in favour of assessee Nature of expenditure - revenue v/s capital expenditure - Non-deduction of TDS - Held that:- With the assistance of the ld.representatives, we have gone through the record. He disallowed claim of the assessee on account of non-deduction of TDS. Thus, the ld.CIT(A) has changed the colour of the dispute. The ld.CIT(A) thereafter did not confront the assessee as to why this expenditure should not be treated as capital expenditure. Similarly, the ld.CIT(A) himself has also not tallied with items purchased by the assessee whether these electrical fittings were meant for repairing work or they are related to some new products/items. Considering this aspect, we vacate the findings of the ld.CIT(A). The expenditure cannot be disallowed to the assessee, because it was not required to deduct TDS on the purchases. In case the AO has granted deprecation, then, he will withdraw depreciation and allow the expenditure as revenue expenditure. Thus, this ground of appeal is allowed in favour of assessee TDS u/s 194C - disallowance under section 40(a)(ia) - argument raised by the assessee that payment did not exceed Rs. 50,000/- and therefore, liability for TDS deduction does not arise - Held that:- .CIT(A) has considered this aspect and observed that the assessee was required to deduct TDS under section 194C where the limit is Rs. 20,000/-. Before us, the ld.counsel for the assessee failed to controvert this finding of the CIT(A). Similar argument was raised with regard to the payment made to Hemal Shah and Associates. The ld.CIT observed that limit was of Rs. 20,000/- which has been exceeded by the assessee. In view of this finding of CIT(A), we do not see any reason to interfere in it. - Decided against assessee

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• 2017 (4) TMI 822
  Penalty u/s 271(1)(c) - addition on remission/cessation of liability as per the provisions of section 41(1)(a) - Held that:- In case of Asstt. IT., Cirle-2, Gurgaon Versus Shri Shailesh Mital [2014 (1) TMI 1303 - ITAT DELHI] on similar and identical issue wherein the addition was made by the AO on account of unconfirmed trade creditors agreed upon by the assessee. In this case penalty proceedings were initiated for furnishing inaccurate particulars of income. The assessee did not prefer appeal against the assessment order. In this case the assessee submitted that in respect of sundry creditors, the liability did not cease to exist but the outstanding amount was surrendered to avoid litigation and no penalty was leviable. We further note that the Ld. CIT(A) in this case concluded that “the penalty could not be levied on the amount surrendered by the assessee, unless there was material on the record to show that the surrendered item was his income. There was no case of furnishing of inaccurate particulars of income so as to make the assessee liable for penal consequences” which was later been confirmed by the ITAT, Delhi, as aforesaid. Keeping in view of the facts of the case, we are of the considered opinion that it become evident that the income assessed by the AO was agreed upon by the assessee as a measure of cooperation and with a view to escape penal consequences. However, we further note that assessment order also do not indicate any concealment of income at all. In our view, the income was merely estimated without finding any concealment as such, hence the penalty is not attracted. We also find that section 271(1)(c) postulates imposition of penalty for furnishing of inaccurate particulars and concealment of income. On the facts and circumstances of this case the assessee’s conduct cannot be said to be contumacious so as to warrant levy of penalty. - Decided in favour of assessee

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• 2017 (4) TMI 821
  Deduction u/s. 80IC - adjustment made on account of freight charges - Held that:- AO stated that the Baddi Unit was purchasing goods from Faridabad unit and not debiting freight charges. The AO has only made presumptions. The assessee has stated that Baddi Unit has incurred Rs. 44,63,799/- on freight and labour in respect of all purchases. Thus, the Ld. CIT(A) has rightly observed that this amount of Rs. 24,53,532/- is not to be reduced from the total deduction claimed and not to be added to the total income, which does not need any interference on our part, hence, we uphold the action of the Ld. CIT(A) on the issue in dispute and accordingly dismiss the ground no. 1 raised by the Revenue. Addition on interest expense - AO made the adjustment stating no interest has been shown in Baddi. - Held that:- The assessee stated that funds on which interest was paid was utilized for Faridabad unit. Hence, Ld. CIT(A) found the merit in the contentions of the assessee. The AO has worked out the interest expenses on a presumptive basis which is not correct. Thus, the Ld. CIT(A) has rightly observed that the amount of Rs. 16,64,268/- is not to be reduced from the profits and not to be added to the total income, which does not need any interference on our part, hence, we uphold the action of the Ld. CIT(A) on the issue in dispute and accordingly, dismiss the ground no. 2 raised by the Revenue. Presumptive interest expense on account of loan - Held that:- The assessee stated that interest expenses were shown in Baddi unit. . Thus, the Ld. CIT(A) has rightly found the merit in the assessee’s contentions. The interest of 12% has been disclosed in the books of account of the Baddi Unit. The addition therefore was rightly deleted by the Ld. CIT(A) and deduction was allowed on this amount, which does not need any interference on our part, hence, we uphold the action of the Ld. CIT(A) on the issue in dispute and accordingly, dismiss the ground no. 3 raised by the Revenue. Un-proportioned expenses - AO stated that rent, training charges and other administrative charges were not considered while computing the figure of common expenses - Held that:- The assessee has agreed for Rs. 5,00,970/- but stated that the balance expenses were for the Faridabad Unit only. Hence, the Ld. CIT(A) has rightly accepted the contentions of the assessee and rightly directed to modify the same accordingly and partly allowed, which does not need any interference on our part, hence, we uphold the action of the Ld. CIT(A) on the issue in dispute and accordingly, dismiss the ground no. 4 raised by the Revenue. Addition to interest income - Held that:- As per section 80IC the gross total income should include profit and gains derived by an undertaking or enterprise from any business referred to in the section. The interest income clearly is not from the manufacturing or production business of the assessee. Hence, the Ld. CIT(A) has rightly observed that the interest income may be treated as part of business profits and the amount of Rs. 17,46,414/- was rightly directed to be added to the total income of the assessee, which does not need any interference on our part, hence, we uphold the action of the Ld. CIT(A) on the issue

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• 2017 (4) TMI 820
  Validity of reopening of assessment - information received from the Addl. Directorate of Income Tax (Investigation) as relied upon - Held that:- AO has not applied his mind so as to come to an independent conclusion that he has reason to believe that income has escaped during the year. In our view the reasons are vague and are not based on any tangible material as well as are not acceptable in the eyes of law. The AO has mechanically issued notice u/s. 148 of the Act, on the basis of information allegedly received by him from the Addl. Directorate of Income Tax (Investigation), New Delhi. Keeping in view of the facts and circumstances of the present case and the case law applicable in the case of the assessee, we are of the considered view that the reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed. - Decided in favour of assessee.

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• 2017 (4) TMI 819
  Disallowance of depreciation invoking of section 40(a)(ia) in respect of ERP system software purchased by the assessee and capitalized the same - Held that:- Once the assessee has capitalized the payment in question, then even the assessee has not deducted tax at source on such payment, the provisions of section 40(ia) cannot be invoked for disallowance of the claim of depreciation. Accordingly, we set aside the orders of the authorities below and allow the claim of the assessee.

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• 2017 (4) TMI 818
  Validity of assessment proceedings - non-Service of notice u/s 143(2) - Held that:- AO has not issued any notice u/s 143(2) of the I.T. Act to the assessee. During the entire assessment proceedings, the assessment order in dispute is invalid, void abnitio and against the provisions of the law and the impugned order is not sustainable in the eyes of law and hence, we cancel the same by accepting the Cross Objection filed by the Assessee.

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• 2017 (4) TMI 817
  Admission of additional evidence by the CIT(A) - Held that:- The assessee has reasonable cause also for admission of additional evidence as evident from the fact that the issue of cash credits was first time raised on 06.12.2010 just before the completion of the assessment (23 days; time period between the order sheet entry dated 06.12.2010 through which the above mentioned details were called and the conclusion of the assessment proceedings vide impugned order.) and that too when the requisite details were required to be called from third persons. Thus, it appears that the assessee has reasonable cause in ensuring compliance. Therefore, in our considered opinion, the Ld. CIT(A) has rightly held that it is a fit case for admission of additional evidence. Addition u/s 68 - Held that:- The assessee has discharged her onus of proving identity, the source of loan and the genuineness of transactions in accordance with the provisions of section 68. It is a settled law that the assessee is not answerable to explain source of source of the fund. In light of the fact that there is no cash deposit in the bank accounts of the three persons for advancing loan and their categorical admission confirming loan during the remand proceedings, we are of the considered view that the loans aggregating to Rs. 38,50,000/- cannot be charged to tax in the Assessee’s hands u/s 68 particularly in absence of any contrary evidence brought on the record by the AO. Hence, we find that Ld. CIT(A) has rightly observed that the assessee is not required to explain source of source of the fund gets buttressed by the amendment made in section 68 with effect from 01.04.2013, which empowers the AO to examine source of source in case of share application money from 01.04.2013 and no other cases prior to that. This amendment further does not give power to the AO to examine source of source of non-share capital cases and that too prior to 01.04.2013. Undisputedly; the assessee has given complete addresses and credit worthiness of the persons from whom she has taken loans. CIT(A) observed that there is no material which may even raise doubt about the genuineness of the loans. Therefore, it was rightly held that the AO has erred in taxing above mentioned loans aggregating to Rs. 38,5O,OOO/- u/s 68 in the hands of the appellant. Therefore, the addition was rightly deleted - Decided in favour of assessee

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• 2017 (4) TMI 816
  Revision u/s 263 - inadequate enquiry versus lack of enquiry - assessee borrowed interest bearing loans and extended interest free loans - erroneous and prejudicial to the interest of the Revenue - Held that:- When the entire capital account of the assessee has been examined by the AO and nothing has been brought on record by ld. CIT that there is any escapement of income by making withdrawal from the capital account as its closing balance was Rs. 14.86 crores during the year under assessment. Also When the assessee submitted the complete details of unsecured loans along with confirmation of each of the transaction, bank account of each of the person and income-tax acknowledgement return of each lenders from whom unsecured loans were availed to the AO who has duly examined the same during the course of assessment, it cannot be a case of lack of enquiry. On proof of ownership of the premises / factory located there is not an iota of doubt on the file to dispute the fact that the factory premises and goddown is ancestral property of assessee’s family. Moreover, when no rent has been claimed in the balance sheet qua the property in question it would not affect the tax liability of the assessee in any manner. The assessee argued that the assessee could not furnish PAN of only those parties in whose case there was no further transactions at the time of assessment proceedings and that the account of the 13 parties out of 17 parties stood squared off in subsequent years and details thereof was filed before ld. CIT. This fact goes to prove that a discreet enquiry has been conducted by the AO qua all the sundry creditors and the findings of the ld. CIT that the AO did not make any enquiry even on sample basis to find out the genuineness of the sundry creditors is based upon surmises. At the most, it can be a case of inadequate enquiry, in which ld. CIT has no power to intervene u/s 263 of the Act. Bare perusal of the written submissions filed by the Revenue, it goes to prove that the Revenue has merely relied upon the case law to clarify the legal position so as to invoke the provisions contained u/s 263 of the Act but has failed to bring on record that the order passed by the AO was erroneous and prejudicial to the interest of the Revenue by bringing on record the evidence as we have discussed in detail in the preceding paras. This is a case of inadequate enquiry on the part of the AO and not a case of lack of enquiry by any stretch of imagination thus the order passed by CIT u/s 263 is hereby quashed. Resultantly, the appeal filed by the assessee is allowed.

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• 2017 (4) TMI 815
  Addition on account of transfer pricing adjustment - selection of comparable - Held that:- The assessee, in a nutshell, is engaged in providing travel security services, thus companies dissimilar in functinalty with that of assessee need to be De-selected from final list of comparable.

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• 2017 (4) TMI 814
  Claim of depreciation on motor car registered in the name of the Director and not the company - Held that:- As decided in Edwise Consultants Pvt. Ltd. [2015 (12) TMI 297 - ITAT MUMBAI] as relying on case of Aravali finlease Ltd (2011 (8) TMI 814 - Gujarat High Court ) and has taken the decision that the depreciation is allowable in the hands of the company, even if it is registered in the name of its director provided that the vehicle is used for the purpose of business of company and income derived there from was shown as income of the company. As the funds for purchase of vehicles have been provided by the assessee company and they have been shown as assets of the assessee company. Hence, the assessee company should be considered as owner for all practical purposes and hence it is entitled for depreciation - Decided in favour of assessee Disallowance u/s.14A - Held that:- We find that assessee has not earned any exempt income in the present assessment year. Hence on the basis of Hon’ble Delhi High Court decision in the case of Cheminvest Ltd. Vs. CIT (2015 (9) TMI 238 - DELHI HIGH COURT), since no exempt income has been earned no disallowance u/s.14A is liable to be made. However, in this case CIT(A) has affirmed the disallowance of Rs. 69,140/-. In this view of the matter revenue cannot have any grievance. Accordingly, we uphold the order of the learned CIT(A). - Decided against revenue Disallowance of prior period expenses - Held that:- We find that Assessing Officer has not accepted the assessee’s claim of prior period expenditure on the basis that assessee has not filed revised return. Nowhere in the assessment order, assessing officer has mentioned that otherwise he is satisfied with the expenditure claimed. In our considered opinion learned CIT(A) has erred in appreciating these aspect since Assessing Officer has not examined the veracity of these expenditures. We remand the issue to the file of the Assessing Officer. Assessing Officer will examine the veracity of these expenditures and allow accordingly as per law.

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• 2017 (4) TMI 813
  Disallowance of loss arising out of share transactions - Held that:- There is no dispute with regard to the fact that the impugned shares form part of the stock in trade of the assessee. Even if the shares under consideration formed part of shares acquired during the stock scam period, yet the fact remains that the loss claimed by the assessee relates to valuation of closing stock and the loss has arisen on account of diminution in the value of stock only. Since the valuation of stock in trade has been done as per the accounting system followed by the assessee and since the value adopted is supported by stock exchange quotation, we are of the view that the same cannot be considered as non-genuine loss. Accordingly we are of the view that the impugned loss should be allowed while computing the income of the assessee. Accordingly, we set aside the order passed by the learned CIT(A) and direct the Assessing Officer to allow the loss Assessment of interest income - under the head Income from Other sources OR Income from Business - Held that:- Since the assessee was held to be continuing its business activities and since these deposits have been made in connection trading activities of the assessee, the co-ordinate benches in assessee's own case for previous AYs have held that the interest income should be treated to incidental business income and accordingly directed the AO to assess the same as business income of the assessee. Assessment of Prior period income - Held that:- The interest income should be in the respective years only, as the AO is not entitled to assess an item of income which does not belong to that year. Accordingly we direct the AO to exclude the income of other years and they may be assessed in the respective years in accordance with law. The TDS credit should also be restricted to the extent of relevant income assessed during the year under consideration and the remaining amount of TDS should be allowed credit in the respective years of assessment. The deduction of prior period expenses may also be considered in the respective years. We order accordingly. The order of Ld CIT(A) is modified accordingly. Disallowance of expenses - assessee did not carry on any business activities - Held that:- As in the earlier paragraphs, by following the orders passed by coordinate benches, we have held that the assessee should be considered as carrying on business activities. Hence the expenditure claimed by the assessee should be allowed. Accordingly we set aside the order passed by Ld CIT(A) on this issue. Applicability of Explanation 73 to the assessee - Held that:- In AY 2002-03 & 2003-04 the coordinate bench of Tribunal has held that the provisions of Explanation 73 would apply to the assessee in that year, since the interest income was directed to assessed as business income. In the instant year also, we have held that the interest income should be assessed as business income. However, the Ld A.R requested that this matter may be set aside to the file of the AO for examining the applicability of Explanation 73 to the assessee during the instant year. Hence the above said provisions would apply to the assessee as the assessee did not have income from other sources. However, if the assessee is able to demonstrate before the AO to his satisfaction that the provisions would not apply to the assessee, the AO may decide the issue in accordance with the law.

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• 2017 (4) TMI 812
  Revision u/s 263 - Disallowance u/s 14A r.w. rule 8D(2)(ii) - Held that:- CIT has not controverted the factual aspects of the AO’s finding that no disallowance of interest on loans debited by the assessee is called for thereon (ostensibly under rule 8D(2)(ii) of the Rules) since almost the entire investment was made strategically in group concerns for the purposes of the assessee’s business, but proceeded beyond the show cause notice he issued to the assessee by directing inquiry to be carried out under section 57(ii) of the Act also alongwith the disallowance to be made under rule 8D(2)(ii) of the Rules. We also find that the learned CIT/learned D.R. for Revenue have also not controverted the judicial pronouncements cited by the assessee in support of its various contentions, on jurisdiction as well as on merits. CIT has merely taken a different view on the same set of facts. Since it is clear to us that inquiry in respect of the requirement of disallowance of interest under section 14A r.w. rule 8D of the Rules was conducted by the AO in the assessment proceedings, as is evident from the order of assessment for A.Y. 2011-12, and he took a possible view that no disallowance was called for on interest, ostensibly in respect of rule 8D(2)(ii) of the Rules and that disallowance was called for under rule 8D(2)(iii) of the Rules; the mere fact that the CIT is not in agreement with the view adopted by the AO, would not render the order of assessment erroneous and prejudicial to the interest of Revenue. - Decided in favour of assessee

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• 2017 (4) TMI 811
  Penalty under Section 271(1)(c) - wrong claim of deduction under Section 80IB(10) - bonafide belief - Held that:- The claim of the deduction under Section 80IB(10) raised by the assessee in respect of the interest on margin money parked in the form of fixed deposits with bank, remaining under a bonafide belief that the same being inextricably interlinked and interwoven with the business of the assessee, is a claim raised by the assessee on account of a mistaken interpretation of a statutory provision on its part, which on the said count would not invite penalty under Section 271(1)(c) in the hands of the assessee. We thus set aside the order of the CIT(A) and quash the penalty in the hands of the assessee. - Decided in favour of assessee

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• 2017 (4) TMI 810
  Enhancement of Income - calculation of long-term capital gain i.e. deduction u/s. 54 - reference to DVO - Held that:- The assessee had sold his inherited property in which she had a 12.5% share is a coparcener of Hindu Undivided Family (HUF),that all the coparceners of HUF decided to develop the property and the development agreement was entered with the developer, that the assessee had shown his long-term capital gain at Rs. 19.26 lakhs in his return of income, that the original assessment was revised by the AO, as per the direction of the CIT, passed u/s. 263 of the Act, that in the order passed u/s.143(3)r.w.s. 263, the AO enhanced the income of the assessee,that he did not consider the claim made by the assessee during the course of assessment proceedings towards deduction u/s.54 of the Act,that the FAA confirmed the order of the AO and made further additions. We find that the entire plot of land was not handed over by the HUF to the developer,that the FAA had adopted wrong figures in the Tables for enhancing the income of the assessee,that the assessee had objected to the valuation of stamp duty authorities,that the matter was not referred to the DVO,that the assessee had challenged the original order of the AO before the FAA,that the then FAA had decided the issue in favour of the assessee,that during the assessment/appellate proceedings,challenging the order passed u/s.143(3)r.w.s.263 the order of the then FAA was not considered,that one of the grounds raised the assessee before the FAA remained unadjudicated.In our opinion,in these circumstances,the matter should be restored back to the file of the FAA for fresh adjudication,in the interest of justice. Appeal filed by the assessee stands partly allowed.

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• 2017 (4) TMI 809
  Validity of protective assessment passed by the AO with regard to immovable property sold - AO received specific information under CASS - Held that:- In the case under consideration the AO had taxed the capital gains in the hands of the assessee as it was found that her husband had not filed return of income.In absence of a substantive order the AO was not justified in passing a protective order.Considering the above, we hold that the protective assessment passed by the AO was invalid and without the sanction of the law.So,reversing the order of the FAA,we decide first two grounds in favour of the assessee. Even on merits,the matter had to be adjudicated in favour of the assessee. The AO has gone only by the sale deed and has conveniently forgot the affidavit of the ex-husband of the assessee as well as the divorce decree.Tax liability has to determined by substance of a transaction and not by forum.DS had admitted that he was the sole owner of the part of flat F.1 and sale proceeds were received by him for selling the same.The AO/FAA had made no inquiry with DS. The assessee has discharged the burden cast upon her.It was the turn of the revenue authorities to make further inquiries in that regard. We find that they decided the issue without going to the substance and the surrounding circumstances. We are opinion that order of the FAA cannot be endorsed even on merits.Grounds decided in favour of the assessee

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• 2017 (4) TMI 808
  Disallowance u/s.14A - average value of investment after amalgamation - Held that:- Bombay High Court vide its order,dated 05/08/2001,had approved the scheme of amalgamation with effect from 01/04/2010, that in pursuance of the scheme three entities merged with the assessee company only on 01/04/2010 and not before that.It is a fact that NFIPL,AMMSPL and YFPL got amalgamated with the assessee from a particular date and the assessee had taken the balances of these entities for calculating the disallowance as per Rule 8D read with section 14A of the Act. In our opinion, the FAA had rightly held that investment in all the three companies would form the part of average value of investment contrary to the finding of the AO. As we do not find any legal or factual infirmity in his order,so,confirming the same,we decide the first ground of appeal against the AO. Disallowance of interest u/s.36(1) (iii) - Held that:- We find that assessee had advanced loan to AFL, that it had not charged any interest from AFL, that it had on its own disallowed Rs. 11,77,28,592/- on interest free loans given to various entities.Though in the books of accounts the assessee had written off Rs. 6.58 crores, but, in the statement of income it had not claimed the deduction. But, we find that there is need to make further verification about the position of interest free funds available with the assessee and interest free loan advanced by it.Therefore, in the interest of justice, we are restoring back he issue to the file of the AO for further verification. He is directed to afford a reasonable opportunity to the assessee. Second Ground is decided in favour of the AO, in part.

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• 2017 (4) TMI 807
  Disallowance out of travel expenditure - Held that:- As decided in the assessee’s own case for A.Y. 2009-10 a notice was issued by the AO, but no plausible explanation was tendered by the assessee. Moreover it is incumbent upon the assessee to prove this fact that the said expenditure was incurred upon the employee or incurred for business purpose. Therefore, in such circumstances, the AO has rightly declined the said travelling expenses being not incurred upon the employees of the assessee firm, which has subsequently been confirmed by the learned CIT(A). - Decided against assessee. Set off of Business Loss against LTCG - Held that:- We find that identical issue of set off of business loss against capital gains (whether STCG or LTCG) was considered by the Coordinate Bench in its order in the case of Sumaria Appliance Pvt. Ltd. [2014 (9) TMI 353 - ITAT MUMBAI ] and it was held that the assessee had no option to carry forward business loss to subsequent years without setting off of the same against capital gains arising during the year.- Decided against assessee.

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• Customs

• 2017 (4) TMI 836
  Maintainability of SCN - jurisdiction to issue SCN - case of petitioner is that SCN is issued 'ex-fecie' without jurisdiction - Held that: - The SCN which was adjudicated earlier but the adjudication order is challenged in Appeal and the Appeal is still pending. Therefore, it is not as if a SCN duly adjudicated and resulting in a finding or a final conclusion against the petitioner before this Court. We do not see how in the present facts and circumstances and peculiar to the petitioner before us he can claim that this is a second SCN. This is a first and substantive SCN to the petitioner. His role has already been set out in the SCN issued to the private limited companies. It is only with a view to get over any technical objections that a separate SCN has been issued to the petitioner. There is, therefore, no impediment in an adjudication of the SCN issued to the petitioner. The SCN against the petitioner be adjudicated in this order - petition allowed.

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• 2017 (4) TMI 835
  BIFR - discharge of export obligation - whether the petitioner has a legal right to the relaxation and concessions under Article 226 of the Constitution of India? - discrimination - similar relaxations and concessions as sought by the petitioner have been granted by the PRC to a large number of similarly circumstanced exporters - Held that: - It is well settled that discretionary power cannot be exercised arbitrarily. If facts - it appears that the PRC has rejected the prayer of the petitioner for procedural relaxation and concession without proper application of mind to the contentions of the petitioner - In a large number of cases, specific examples of which have been given in the writ petition and/or annexures thereto, PRC has considered exports under free shipping bills. Further the contention of the petitioner that exports were made under free shipping bills, only because the Advance License numbers were not accepted by reason of defects in the software, has been ignored. The PRC has not recorded any definite finding that the Advance License numbers could be accepted in the software. Petition allowed - The PRC is directed to reconsider its order dated 13.10.2015 in the light of the observations made above - decided in favor of petitioner.

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• 2017 (4) TMI 834
  Refund claim - according to appellant as there was short landing of goods, they had paid excess customs duty - refund rejected on the ground that the appellant has not established that the goods have short landed - Held that: - The Steamer Agent is responsible for the documents filed before the customs authorities - If the document is false, the department can issue notice or take necessary action against Steamer Agent for any false document filed before them. Even though these documents such as Annexure to the Statements of Facts and weighment certificate have been furnished before the department, as well as been subject of scrutiny at the time of adjudication, till date no action has been proposed or taken against the Steamer Agent - there is short landing of goods as stated in the weighment certificate dated 30.09.2010 - rejection of refund is unjustified - appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 833
  Benefit of N/N. 158/95-Cus - duty drawback - re-imported goods not re-exported within stipulated time - Held that: - identical issue came up before the Tribunal in the case of Medinex Laboratories Pvt. Ltd. vs. CCE, Mumbai [2003 (3) TMI 504 - CEGAT, MUMBAI], where it was held that since the conditions of the bond under which duty free clearance on re-importation was allowed was not fulfilled in time, the lower authorities have rightly demanded the duty in terms of the bond and Bank Guarantee on the re-imported goodss. However, since the re-imported goods on which duty has been collected, have been re-exported subsequently, the matter is remanded to the original authority for considering sanction of draw back - if the lower authorities are intending to collect the duty liability on the re-imported goods, the original authority should consider sanction of drawback to appellants in respect of duty, if any, recovered on re-imported goods - appeal allowed by way of remand.

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• 2017 (4) TMI 832
  Valuation - Rejection of transaction value on the ground that there is a discount which has been offered to the appellant which is not in conformity with the trade practice - Held that: - the lower authorities have not given any contemporary price and also do not put any evidence to show that these discounts were special discount - the ratio of the decision of the apex Court in the case of Eicher Tractors Ltd vs. Commissioner Customs, Mumbai [2000 (11) TMI 139 - SUPREME COURT OF INDIA] squarely covers the issue, where it was held that When a discount is permissible commercially, and there is nothing to show that the same would not have been offered to any one else wishing to buy the old stock, there is no reason why the declared value in question was not accepted under Rule 4(1) - appeal allowed - decided in favor of appellant,

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• Corporate Laws

• 2017 (4) TMI 829
  Oppression and mismanagement - Disassociation from the activities concerning South Asian Human Rights Documentation Centre (SAHRDC) seeked by one of the founder trustee of a Trust - Held that:- In relation to the transfer of 5001 equity shares of the petitioner by the respondents we hold that the said transfers are fraudulent and sham and declare it to be illegal and void and that the mere entry in the annual returns or share register of the transfer of shares in the absence of documentation and no consideration been passed is not binding on the petitioner and we hold that the 2nd respondent as well as the others to whom he is alleged to have transferred upon collusion subsequently are to be considered only as bare trustees on behalf of the petitioner and the 1st respondent company is hereby directed to rectify its register of members by registering the transfer of impugned shares in the name of the petitioner and deleting the name of the second respondent as well as to whom he had transferred the impugned shares subsequently within a period of 30 days from the receipt of the order. The 1st respondent company is further directed to return the letter of allotment as well as issue the necessary share certificates in the name of the petitioner for the 5001 equity shares held by the petitioner and in case of its non traceability issue duplicate share certificates upon the petitioner applying for the same within the prescribed statutory period as mandated under law without insistence of any further document. In relation to the reliefs for oppression and mismanagement as we have already held the acts of the respondents in depriving the petitioner of his shareholding amounts to oppression, we intend to mould the reliefs keeping in mind the facts and circumstances of the case as well as the interest of the company. The petitioner as is evident from Annexure A-5 of the petition even in the year 2003 had expressed his intent categorically to dissociate himself from the affairs of the 1st respondent company as well from other entities associated with SAHRDC Trust including IA-SAHRDC. Further serious allegations have been levelled against both its Indian and International arms and that the funds of the international trust are being laundered through the 1st respondent company and the same is siphoned off by the 4th respondent for his own personal benefit. Against such a back drop it may not be possible for the petitioner to work with the 4th respondent amicably in relation to the affairs of the company in view of their equal holding and the only way out seems to be to direct the respondents to purchase the shareholding of the petitioner at the face value of the shares. The initial petition C.P. No. 67 of 2007 was filed in the year 2007 and it will be in the interest of justice that the 50% shareholding of the petitioner i.e 5001 equity shares, is purchased by the respondents 2 to 4 either jointly or severally for valuable consideration as on 01.04.2007 at a fair value to be computed based on the financial statements of the 1st respondent company to be evaluated by an Independent Chartered Accountant - Mr. Alok Bajaj. The professional fee of the Independent Chartered Accountant appointed for the purpose of valuation shall be paid by respondents 2 to 4. The Chartered Accountant appointed for the purpose of valuation shall complete the exercise within a week from the date of receipt of the order and Respondents 2 to 4 either jointly or severally shall purchase the 5001 equity shares (i.e) 50% of the shareholding based on the fair value ascertained by the independent chartered accountant appointed vide this order, within a period of 4 weeks thereafter.

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• Service Tax

• 2017 (4) TMI 861
  Computer training services - Held that: - the Tribunal held that in the facts and circumstances, the demand within the limitation and normal period deserves to be confirmed. The demand beyond the normal period cannot be confirmed and no suppression is proved. Manpower recruitment service - Held that: - The law was amended and it is only from 16th June, 2005 that manpower recruitment or supply to third parties is brought within the net of the tax - the assessee was held liable to pay service tax with effect from 16th June, 2005 under that category. Intellectual property service - Business support service - Held that: - the respondent assessee has the property rights over a software, which was allowed to be used by their clients. That is why the demand within the limitation period was confirmed - As far as the business support service is concerned, even on that count the demand is confirmed. Appeal dismissed - decided against Revenue.

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• 2017 (4) TMI 860
  Scope of service - whether the food supplied by an employer to the workers at a subsidized rate, would come within the meaning of the expression service, irrespective of whether the food is supplied within the premises or outside the premises? - Held that: - any supply of subsidized food to the workers by the management of a Company, has to be seen as part of the pay package that the workers have negotiated with the employer. Under the Factories Act, 1948 and even under the Industrial Disputes Act, 1947, the expression wages would include within its purview, anything that is supplied at a subsidized rate - the food supplied by an employer to its employees at a subsidized rate forms part of the wages under Section 2(rr) of the Industrial Disputes Act, 1947. Once the State Authorities have treated the supply of food to the workers of the petitioner as sale, it is not open to the respondents to treat the same as service and impose a liability - petition allowed - decided in favor of petitioner.

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• 2017 (4) TMI 859
  Validity of challenge made against order-in-original - the appellant chose to take recourse to an appellate remedy against the order-in-original, albeit, after the prescribed period of limitation had expired - Held that: - It is settled law that statutory forums and/or Courts, can and/or do decide matters both rightly and wrongly, albeit, within the limits of their respective jurisdictions. Erroneous orders of statutory forums and/or courts can only be corrected by a procedure known to law - keeping in view of the contention that the order-in-original was passed in breach of principles of natural justice, we can only state that, if, this assertion is correct, it is an error pertaining to jurisdiction, which could have, perhaps, been corrected, if, appropriate timely steps had been taken by the appellant, which could include a remedy by way of a petition filed under under Article 226 of the Constitution - after more than six years have expired, the appellant cannot be permitted to challenge the order-in-original via the present proceedings - appeal dismissed - decided against appellant.

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• 2017 (4) TMI 858
  Imposition of penalty u/s 78 of FA, 1994 - It was noticed by the department that appellants did not file ST-3 returns and did not discharge their service tax liability for the period from April 2010 to March 2011 - case of appellant is that they had provided the services to Government Departments and they did not receive the service tax component. They could not discharge their tax liability only because of financial hardships - Held that: - total demand raised is arrived from the financial statements and such other documents furnished to the department by the appellant. Nothing hidden was unearthed by the department. Mere non-payment of service tax and mere non-filing of returns does not attract the provisions of Section 78 as it contains the words fraud, wilful mis-statement and suppression of facts - The impugned order is modified to the extent of setting aside the penalty imposed under Section 78 only without disturbing the confirmation of demand, interest thereon or the late fee imposed u/s 77 of FA, 1994 - appeal allowed - decided partly in favor of assessee.

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• 2017 (4) TMI 857
  Refund of interest - demand held as time barred - case of appellant is that interest is of compensatory nature and since the demand itself is held to be time barred, the appellant is not liable to pay the same. The interest cannot be retained by the department - Held that: - Merely because an assessee pays an amount prior to the issuance of SCN, or before passing of adjudication order, he cannot be put into a disadvantaged position than an assessee who pays the amount after the stage of adjudication or at any other appellate stage - even though the appellant paid the amount voluntarily prior to issuance of show cause notice, he has contested the demand. At the level of adjudication itself, the demand in respect of the period 2005-06 was set aside as being time barred. In such a case, the appellant can claim refund of service tax as well as the interest thereon - the rejection of claim for refund of interest is improper - appeal allowed - decided in favor of assessee.

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• 2017 (4) TMI 856
  Imposition of penalties u/s 76, 77 and 78 of the FA, 1994 - payments made to the overseas parties - Held that: - the appellant have discharged the service tax liability along with interest thereof for the period 18/04/2006 onwards on the amounts paid by them to the overseas service providers as provided u/s 66A of the FA, 1994 - the entire service tax along with interest thereof has already been paid by the appellant on being pointed out. Since the appellant has already paid the entire tax liability along with interest before issuance of show cause notice, we find that the ratio of the decision of the Hon’ble High Court of Karnataka in the case of Commissioner V. Manipal County [2011 (9) TMI 1094 - KARNATAKA HIGH COURT] will apply where it was held that provisions of Section 73(3) of the FA, 1994 will be applicable in cases wherein appellant has discharged service tax liability and the interest thereof on being pointed out by the authorities before the issuance of the SCN, and there is no necessity to issue SCN for penalties - penalties set aside - appeal allowed - decided in favor of assessee.

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• 2017 (4) TMI 855
  Banking and financial services - Extended period of limitation - amounts paid by appellant to various service providers who had facilitated raising of External Commercial Borrowings (ECB) during March 2007 - taxability - Held that: - the service tax liability arises under Section 66A of the Finance Act, 1994 and is already discharged by the appellant. At the same time, there cannot be any intention to evade the service tax liability as the entire service tax paid under reverse charge mechanism can be availed as CENVAT credit by the appellant for the discharge of Central Excise duty on the various products manufactured by them - impugned order set aside on revenue neutral situation - appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 854
  100% EOU - Rent-a-Cab service - buses used by the appellant for transportation of employees of their customers from the residential premises to workplace and vice-a-versa - Held that: - the issue is now squarely covered by the decision of the Hon’ble High Court of Uttarakhand in the case of Commissioner, Customs And Central Excise, Meerut-I Versus M/s. RS. Travels [2014 (10) TMI 817 - UTTARAKHAND HIGH COURT], where it was held that when there is only a contract of hire and there is no renting of the cab, there is no question of the assessee being assessed in respect of services rendered in connection with rent–a-cab as there is no renting at all - the service recipient of the appellant, who is a 100% EOU, benefit of non-payment of service tax or refund of the service tax paid, can be claimed by the 100% EOU, this is a revenue neutral situation - appeal allowed - decided in favor of assessee.

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• 2017 (4) TMI 853
  Invocation of section 73(4) of FA, 1994 - Levy of penalty - case of appellant is that the provisions of section 73(3) of FA, 1994 is squarely applicable to them, that with the insertion of Explanation 2 therein, the imposition of penalty is not warranted, that w.e.f. 10th May 2008 penalties u/s 76 and section 78 were mutually exclusive, and that section 80 of FA, 1994 should have been invoked - Held that: - the adjudicating authority has failed to record any evidence to demonstrate that there has been suppression with intent to evade tax and with the ingredients for imposition of penalty being conspicuously absent, there is no scope for recourse to section 73 (4) of Finance Act, 1994 to issue notice for confirmation of tax and for imposition of penalty - there was every reason to resort to section 73(3) of FA, 1994 to stop further proceedings consequent upon the payment of tax and interest in full - penalties set aside - appeal allowed - decided in favor of assessee.

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• 2017 (4) TMI 852
  Tour Operator Service - business of organizing outbound tours - case of appellant is that the service tax is destination based consumption tax and should be levied at the location where the services are consumed or in other words where the services are used - case of Revenue is that the services of “Tour Operator” was placed in Rule 3(1) (ii) of Export of Service Rules, 2005. As such, till the time the tour operator is located within India service would be deemed who have been provided within India. Matter referred to larger bench with the following questions: i) Whether the service that appellant are providing is taxable service under Section 65(105)(n) of the Finance Act as held by Tribunal in their own case or otherwise? ii) Whether the appellant is said to be providing the said service within the taxable territory?

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• Central Excise

• 2017 (4) TMI 851
  Refund claim - unjust enrichment - refund claim forming part of finished goods - Held that: - the Tribunal took into account the relevant factors such as the certificates issued by the independent Chartered Accountants. The Tribunal satisfied itself that the Chartered Accountants had verified the books and on such verification certified that the refund claimed did not form part of the finished goods. The Tribunal conclusion that the appellant had, therefore, not passed on the duty incidence to the dealers/customers cannot be said to be perverse - the dealers were not registered with the department and therefore, could not issue excisable invoices passing on the duty in turn to their customers - appeal dismissed - decided against Revenue.

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• 2017 (4) TMI 850
  Maintainability of appeal - Appellant has failed to submit the income tax assessment order to substantiate that the depreciation claimed on the capital goods was reversed. In absence of evidence, the matter not being possible to conclude, appeal is rejected accordingly - Held that: - It is not disputed by Ms.Hemalatha, who appears for the Revenue, that such evidence was placed before the Tribunal. Therefore, both the counsels are agreed that the impugned Judgment and order of the Tribunal needs to be set aside so a decision on merits can be rendered in the matter - appeal maintained - Tribunal to decide the appeal of the appellant/assesse on merits.

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• 2017 (4) TMI 849
  SSI exemption - N/N. 8/2003, dated 01-3-2003 - use of brand name of others - It was alleged by the officials that the appellants are engaged in the manufacture and sale of the branded items, not entitled to the benefit of the Exemption Notification and that therefore the appellants ought to have registered themselves under the CEA, 1944. Whether the purchase of standard moulds containing certain names as inscriptions and the manufacture of products out of those moulds with the same names, would tantamount to the manufacture of goods bearing a brand name or trade name so as to be deprived of the benefit of exemption in terms of paragraph-4 read with Explanation (A) under para-5 of the Exemption N/N. 8/2003, dated 01-3-2003? - Held that: - The mere fact that the specified goods manufactured by a person bear a brand name or trade name of another manufacturer, is not sufficient to conclude that those goods are manufactured by such other manufacturer or trader - If the use of the brand name or trade name is not intended for the purpose of indicating a connection in the course of trade between such specified goods and the person using such name or mark, then the same may not fall within the definition of the expression brand name or trade name under the Explanation under paragraph 5 of the Exemption Notification - It is this essential requirement of establishment or existence of a connection in the course of trade between the specified goods and their manufacturer that has been overlooked by the Department as well as by the CESTAT. Hence, we are of the considered view that the first question of law is to be answered in favor of the appellants. Whether the Tribunal and the respondents were right in denying the benefit of the CBEC Circular bearing No.52/52/94, dated 01-9-1994 to the appellants? - Held that: - if a brand name is not owned by any particular person, the use thereof will not deprive a unit of the benefit of the small scale exemption scheme. This applies not only to locks but to all other goods specified in N/N. 1/93-C.E - if certain names are available in the market freehold for anyone to use, the industry cannot be taken to be manufacturing goods under the brand name of some other manufacturer - benefit of circular allowed - decided in favor of assessee. Appeal allowed - decided in favor of assessee.

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• 2017 (4) TMI 848
  Whether the N/N. 12/2014-C.E. dated 11.07.2014 was clarificatory in nature and whether the same can be applied retrospectively for the period 17.03.2012 to 10.07.2014 in respect of the paper bidis manufactured by the appellants? Held that: - from the wording of the notification, no concessional rate was available to the appellants during the impugned period. The relevant entry no.2403 1929 was not there in the N/N. 12/2012-C.E. The appellants have built their case on the Budget Changes, 2012-2013 and on the letter of Joint Secretary, TRU. However, the N/N. 12/2012-C.E. does not reflect the tariff entry of the appellants product at Sl.No.48, which gives exemption to the products under tariff heading 2403 1990. It is also an admitted fact that no representation of any kind was made by the appellants to the Government during the intervening period and that N/N. 12/2014-C.E. does not expressly mention that it is clarificatory in nature. On being asked, the appellants have not been able to show anything to substantiate that N/N. 12/2014-C.E. was clarificatory in nature. Benefit of N/N. 12/2014-C.E. cannot be claimed retrospectively and is held to be prospective in nature. Hence, demand and the interest thereon are upheld. As for the penalty, the N/N. 12/2012-C.E. is clear and unambiguous and hence it cannot be said that there was a problem in interpreting the notification - it was a clear case of misuse of notification for which penalty has been rightly imposed in all the orders. Appeal dismissed - decided against asseessee.

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• 2017 (4) TMI 847
  Benefit of N/N. 50/2003-CE dated 10.06.2003 - denial on the ground that assessee filed the option for claiming benefit of exemption notification, two months later. Revenue claims that the assessee is entitled to the benefit of notification only with effect from the date when department was informed by the assessee on their claim of benefit of the notification - Held that: - Hon’ble Supreme Court in the case of Commissioner of C. Ex. New Delhi Vs Hari Chand Shri Gopal [2010 (11) TMI 13 - SUPREME COURT OF INDIA] has held that though exemption provisions have to be complied with strictly some latitude may be shown in case of some requirements which are directory in nature, the non-compliance of such requirements would not affect the substance of notification granting exemption - The liberal attitude, therefore, has to be taken in this regard, when the assessee otherwise is entitled to the benefit of exemption N/N. 50/2003 - appeal allowed - decided in favor of assessee.

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• 2017 (4) TMI 846
  CENVAT credit - input service - garden maintenance service - Held that: - gardening would definitely contribute to aesthetic looking of the factory of the manufacture and would also be an eco-friendly activity. However, so long as such activity does not pass the test of usage criteria, or is not enjoined on them by various statutory requirements as discussed, and further such activity is also not barred or excluded by the exclusion provision (A), (B), (BA) and (C) in the second part of the definition of Rule 2 (l) ibid, the same cannot be treated as an eligible input service - demand upheld. Penalty - Held that: - it is a fact that there are contrary decisions in respect of the eligibility of the said service. Element of confusion cannot be ruled out - penalty set aside. Appeal disposed off - decided partly in favor of assessee.

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• 2017 (4) TMI 845
  Whether the appellant had crossed the SSI limit under N/N. 8/2003 dt. 01.03.2003 and had willfully suppressed production and clearance to evade payment of duty? Held that: - mere balance sheet entry does not support the appellant's case in the absence of proof of documents of trading - appellant did not disclose to the Department the name of the seller from whom they procured the excisable goods, details of payment made to the buyers, proof of transit etc. - since the Department had established the prima-facie case on the basis of seized private records and investigation carried out with the buyers and the statement of the sole proprietor, the onus was on the appellant to show the substantive proof of trading in the form of documents mentioned above that the appellant failed to discharge its burden. The appellant had suppressed the production and crossed SSI exemption limit in 2005-06 - appeal dismissed - decided against appellant.

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• 2017 (4) TMI 844
  Excisability - chimney - appellant claim that chimney is not excisable goods and is immovable structure - job-work - IEF have manufactured various parts of Fume Extraction System on job work basis for KTMS and job work challan were raised by IEF - Held that: - IEF has manufactured the goods in their factory premises on job work basis as per the design given by KTMS. From these facts it is apparent that the goods have in fact been manufactured and marketed by IEF and thus the marketability of the goods is established. Since the manufacture and marketability of the goods is established the excise liability follows - demand upheld. Imposition of penalty on KTMS - Held that: - no specific role of KTMS has been identified in the impugned order. The only ground on which penalty has been issued is KTMS should have been aware that there is excise liability. This is insufficient for imposition of penalty - penalty set aside. Appeal disposed off - decided partly in favor o appellant.

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• 2017 (4) TMI 843
  CENVAT credit - input services - Township security service - Transport services for employees/Guest - Canteen Services - professional/consultancy services - Held that: - In the case of rent-a-cab services the Ld. Counsel has conceded that the respondent is not eligible for credit of this service after 01.04.2011 to the tune of Rs. 14,265/-. Therefore, the credit on rent-a-cab services/transportation services to the tune of Rs. 14,265/- is disallowed. Outdoor catering services - Held that: - It is also brought out that only a negligible amount is collected from the employees as administration charges. The rest is borne by the appellant - when out of total amount only negligible amount is recovered as administration cost which is not intended to defray from the cost of food the same cannot be considered as charges being recovered from the employees - credit allowed. Township security services - Consultancy services - Held that: - Township security services and Consultancy services are availed by respondent prior to 01.04.2011. During the relevant period the definition of input services was so wide as it included the words activities relating to business - there is no ground to interfere with the view of the Commissioner (Appeals) in not imposing penalty in this regard. Appeal allowed - decided partly in favor of appellant.

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• 2017 (4) TMI 842
  100% EOU - valuation - clearance of goods from 100% EOU Unit to DTA - Revenue was of the view that the cost of copper and brass ingots cleared by the appellant are less than the value of the scrap prevailing in the market during the point of time - Held that: - the issue is covered by the judgment and order of this Tribunal in the case of Indo Micronutrients Pvt. Ltd. [2017 (3) TMI 650 - CESTAT NEW DELHI], where it was held that a comparison cannot be made between the ingots manufactured from ore and the ingots manufactured from scrap. Both will vary in quality and value - appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 841
  CENVAT credit - power generated and transferred to their sister concern - It is the case of the Revenue that the input services are not used in respect of the power which is generated and captively consumed - Held that: - in an identical issue in respect of very same assessee but situated at Chittorgarh, Rajasthan, in the case of M/s Hindustan Zinc Limited Versus CCE & ST, Jaipur - II [2016 (6) TMI 402 - CESTAT NEW DELHI] it was held that the electricity has been used in the manufacture of dutiable final products and also the fact that all units belong to the appellant the denial of credit is not justifiable - credit allowed - appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 840
  CENVAT credit - duty paying invoices - Held that: - There is then no doubt that appellant had issued cenvatable invoices knowing fully well that there is no movement of goods and thus facilitated availment of irregular credit by fabricated documentation. Appellants have sought to defend their actions contending that it was only a book adjustment for showing more turnover in their books of accounts - imposition of penalty u/r 26 set aside - also considering the crucial and important role played by the appellant in the commitment and execution of the fraud, penalty amount of Rs. 25,00,000/- is very much proportionate to the acts and omissions of the appellant - appeal dismissed - decided against appellant.

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• 2017 (4) TMI 839
  CENVAT credit - credit availed on this service is denied for the reason that rail freight was brought under service tax net only w.e.f 01.09.2009 - Held that: - if the service provider is a person other than Government Railways the services are liable for levy of service tax. The various invoices produced alongwith the appeal memorandum shows that the appellants have received the services of transportation of goods on rail from M/s Boxtran and Concor. These are agencies which undertake transportation of goods by rail operated by the Indian Railways. Therefore the service tax has been rightly collected by these companies and rightly paid by the appellant. In that case the appellants are eligible for credit, off the service tax paid on transportation of goods by rail. The services received by the appellant for repair/maintenance of SAP software is a taxable service. The appellant is therefore eligible for credit. CENVAT credit - demurrage charges - Held that: - The invoices establish that the said service tax was paid in respect of demurrage charges incurred by them for the goods imported, which was used by them in the factory. Therefore the credit has been wrongly denied. Appeal allowed - decided in favor of assessee.

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• 2017 (4) TMI 838
  CENVAT credit - fraudulent cenvatable invoices - Held that: - Unless there is independent corroborative evidence to establish fraudulent availment of credit and thereby clandestine removal of goods, the demand cannot be sustained. In the present case, the department has failed to put forward sufficient evidence to establish the allegations in the SCN. In view thereof, the demand is unsustainable - appeal allowed.

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• 2017 (4) TMI 837
  MODVAT credit - whether the appellant-assessee is entitled to Modvat Credit and set of the input tax credit with the output tax assessed for the period April, 1999 to August, 1999? - whether penalty of Rs. 2 lakhs have been rightly imposed u/r 173Q of CER 1944? - Held that: - Modvat Credit is deniable only in case of fraud and contumacious conduct on the part of assessee. That being not the case, the Ld. Commissioner have erred in denying the benefit of Modvat/Cenvat Credit to the appellant - the issue is remanded to the learned Commissioner to allow the Modvat claim after verification of the claim amount in accordance with law. Penalty u/r 173Q of CER, 1944 - Held that: - there is no contumacious conduct and/or suppression of facts on the part of the appellant. Therefore, no penalty is imposable under the provisions of Rule 173Q of CER, 1944. Appeal allowed by way of remand.

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• CST, VAT & Sales Tax

• 2017 (4) TMI 831
  Revision of order - Section 74A of the DVAT Act - Entitlement to interest u/s 42 of the DVAT Act - delayed grant of refund - Held that: - the undated and unsigned notice proposing the exercise of the revisionary jurisdiction was at best vague. It did not satisfy the basic requirement of the law - if the allegations in the show cause notice are not specific and are on the contrary vague, lack details and/or unintelligible that is sufficient to hold that the noticee was not given proper opportunity to meet the allegations indicated in the SCN. Apart from the fact that there was a total non-application of mind to the facts of the case, there is sufficient indication from the notes on files that the invocation of the revisionary powers under Section 74A of the DVAT Act was to delay making the refund which was overdue for over six years. The Court is left no manner of doubt is that this was plainly an abuse of power vested in the Commissioner which calls for disapproval in strongest terms. The Court accordingly sets aside the undated and unsigned notice of the Commissioner, VAT uploaded upholding on the Petitioner’s Web ID proposing the invocation of the powers under Section 74A of the DVAT Act to revise the order dated 14th October 2016 of the OHA VAT commissioner directed to ensure that the refund due to the Petitioner in relation to the monthly returns filed in July 2010 together with the interest accrued thereon is disbursed/paid into the account of the Petitioner not later than 8th May 2017. - petition allowed.

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• 2017 (4) TMI 830
  Validity of order of assessment - The petitioner claims that the very notice dated 03.10.2016, was served on the petitioner only on 15.10.2016 and therefore, they were not in a position to appear for the personal hearing on 14.10.2016. However, the respondent passed the impugned order of assessment on 31.10.2016, stating that the petitioner did not file any objections and also not attended the 3 personal hearing on the date fixed - Held that: - the respondent is not justified in concluding that the petitioner has not filed their objections and attended the personal hearing, inspite of receipt of the notice dated 03.10.2016. Therefore, it is evident that the principles of natural justice is violated in this case. On that ground, the order of assessment has to be set aside and the matter needs to be remitted back to the respondent for passing fresh order after hearing the petitioner - appeal allowed by way of remand.

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• Indian Laws

• 2017 (4) TMI 828
  F.I.R. - offence punishable under Sections 66(1)(b), 65(A)(E), 116(B) and 81 of the Bombay Prohibition Act - Held that:- Considerable emphasis has been laid upon the fact that the acts and omissions, which amount to a criminal offence under the Bombay Prohibition Act, have not been incorporated into the body of the Indian Penal Code as separate or distinct offence. It would have made the Indian Penal Code extremely cumbrous, if the offences under the various special and local Acts were included as separate offences under the Indian Penal Code and punishments separately provided for them in the said Code. To avoid repetition, the provisions have been made in the Indian Penal Code with reference to the offences generally and distinct punishment has been provided for them in Sections 109 to 117 of the Indian Penal Code. Where abetments of offences, under the special or local Act, satisfy the conditions of Sections 109 to 117, all the ingredients constituting an offence are complete, and there does not appear to be any reason why a person against whom all the ingredients of these offences are present should not be prosecuted under those sections. The applicants herein could be said to have abetted the commission of the offences punishable under the Bombay Prohibition Act. Section 107 of the I.P.C. explains what amounts to abetment. Abetment can be by way of instigation, it can be by way of aiding any act or illegal omission and it can be in the form of a conspiracy. To put it in other words, Clause secondly of Section 107 of the I.P.C. provides that a person abets the doing of a thing, if he engages with one or more other person or persons in any conspiracy for the doing of that thing, if an act or illegal omission takes place in pursuance of that conspiracy, and in order to the doing of that thing. This litigation has been contested by the State tooth and nail and why not. The reason is obvious. One may not find an open bar on a public street, but the number of cases, as on date, pending in the different Courts in the State of Gujarat, bears eloquent testimony to the fact that either the policy is not effective or something is wrong with the implementation of the law. Out of 3,99,221 criminal cases pending as on 28th February 2017 in the State of Gujarat, 55,645 cases are under the Bombay Prohibition Act. It is high time that the Central Government should consider denotifying Daman as a part of the Union Territory and make it a part of the State of Gujarat so as to make the Prohibition Act applicable, which may have its own effect, and more particularly, after the recent amendment in the Act, providing more stringent provisions. It is for the Central Government to consider this issue at the earliest before it is too late in the day. With the above, all the applications fail and are hereby rejected. Notice, if any, stands discharged. The adinterim order, if any, stands vacated forthwith. It is needless to clarify that ultimately, at the end of the investigation, if chargesheet is filed against any of the applicants herein and there is no legal evidence to connect any of the applicants with the alleged offence, except the statements of the coaccused, then it shall be open for the applicants to challenge the chargesheet before the appropriate forum in accordance with law.

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• 2017 (4) TMI 827
  Liability under section 141 of the N.I. Act - criminal cases against partnership firm - Held that:- As decied in OANALI ISMAILJI SADIKOT Versus STATE OF GUJARAT AND 1[2016 (3) TMI 290 - GUJARAT HIGH COURT ] when Subsection (4)(b) of Section 319 of the Code says that it will be presumed that the newly added person had been an accused person when the Court took cognizance of the complaint upon which the inquiry or trial was commenced, the same indicates that the Court is not empowered to take cognizance of any fresh offence if any accused is impleaded by invoking Section 319 and the newly added accused could be tried only for the offence already taken cognizance against the other accused. The policy of the Code is that the offence can be taken cognizance of once only and not repeatedly upon discovery of further particulars. In a given case, the complainant may not even know the names and other particulars of the offenders, and it would, therefore, be sufficient for him to lodge a complaint making the persons who are known as the accused. When such a trial proceeds against the known accused, if the evidence led in trial discloses offences committed by other persons who could be tried along with the accused, then there need not be a fresh complaint and fresh order of cognizance against those persons. Also reiterate that the complaint was liable to be dismissed on the very first day of its presentation and no process could have been issued against the partners in the absence of the partnership firm.

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