TMI Tax Updates - e-Newsletter
April 21, 2017

Case Laws in this Newsletter:

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

TMI SMS

• Notice u/s 143(2) dated 29/09 posted as on 30/09 - cannot be presume that served as on 30/09 - scrutiny assessment u/s 143(3) is not Valid

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• Offshore supply contract - S. 44BBB is computational provision - cannot enlarge the scope of total income as provided u/s 4,5, & 9 of IT Act

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• CENVAT credit - exercise equipment is, indeed, utilised as input for rendering taxable service - Credit allowed as Inputs - Tri

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• Set off of losses u/s 70 - STCL arising from STT paid transactions can be set off against STCG arising from non-STT transactions - Tri

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Articles

1. RATE OF GOODS AND SERVICES TAX

   By: DR.MARIAPPAN GOVINDARAJAN

2. Project Import Scheme – (PIS)

   By: malay pota

News

1. NALCO OFS over-subscribed 3 times; Government of India to raise ₹ 1200 crores

2. Commerce and Industry Minister says Government will engage constructively with US and other countries to resolve the visa issues

3. Fin Min ratifies 8.65% rate on EPF: Labour Minister

4. Government of India to issue Sovereign Gold Bonds 2017-18 – Series I

5. RBI Reference Rate for US $

6. Amendment to Pradhan Mantri Garib Kalyan Deposit Scheme

Notifications

Customs

1. 40/2017 - dated 20-4-2017 - Cus (NT)

Rate of exchange of conversion of the foreign currency with effect from 21st April, 2017

Income Tax

2. 31/2017 - dated 19-4-2017 - IT

U/s 138(1) of IT Act 1961 - Central Government specifies Special Commissioner of Police, Crime, Delhi (Office of Crime Branch & Economic Offences Wing, Delhi Police)

3. 30/2017 - dated 19-4-2017 - IT

U/s 138(1) of IT Act 1961 - Central Government specifies Inspector General of Police, Economic Offences Wing, CSO, Kerala

SEZ

4. S.O. 1183(E) - dated 7-4-2017 - SEZ

Central Government de-notifies an area of 2.920 hectares at Village Chokkanahalli Taluka, Yelahanka Hobli, Bangalore North, in the State of Karnataka

Circulars / Instructions / Orders

Customs

1. 34/2017 - dated 16-3-2017

Implementation of Phase-I of Automation of Refund claims and Manual Brand rate drawback claim i.e. Digitization of Refund claims and Manual Brand rate Drawback claims at JNCH, Nhava Sheva – Reg.

2. 32/2017 - dated 15-3-2017

Procedure for Verification of Customs Out of Charge (OOC), Delivery Order (DO), “Container No, seal No & condition of seal” by Customs, CFS & Port Terminal, responsibilities; reg.

3. 33/2017 - dated 15-3-2017

Procedure for submitting “advance intimation” of at least 72 hours from importer availing DPD Facility to shipping lines. reg.

4. 31/2017 - dated 9-3-2017

Customs Clearance on thebasis of self-certified Copies of PTA/FTA certificates in case of DPD/AEO Clients– Reg.

Highlights / Catch Notes

Income Tax

• Bank Statement Fails to Prove Business Purpose of Credit Card Expenditures, Says Assessing Officer.

  Case-Laws - AT : Nature of expenditure through credit card - The bank statement, produced by it before the AO indicates the expenditure incurred but it does not prove the fact of incurring of expenditure for the business - AT
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• Penalty u/s 271(1)(c) Not Applicable for Deemed Dividend Addition u/s 2(22)(e) of Income Tax Act.

  Case-Laws - AT : Penalty u/s 271(1)(c) - addition of deemed dividend u/s 2(22)(e) - addition on account of deemed provisions cannot be construed as furnishing inaccurate particulars of income or concealment of income - AT
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• Genuine Transactions Confirmed: Shares of Unlisted Fictitious Company Not Transferred to Demat Account, No Adverse Inference Needed.

  Case-Laws - AT : Accommodation entries - if the shares were of some fictitious company which was not listed in the Bombay Stock Exchange/National Stock Exchange, the shares could never have been transferred to demat account. Shri Mukesh Choksi may have been providing accommodation entries to various persons but so far as the facts of the case in hand suggest that the transactions were genuine and therefore, no adverse inference should be drawn. - AT
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• State Renewal Fund Contributions Qualify as Business Expenditures u/s 37(1) of Income Tax Act.

  Case-Laws - AT : Contribution to State Renewal Fund - allowable expenditure - it was a legal obligation of the assessee towards contribution of the said amount to the State Renewal Fund and there being a legal obligation as well, to be allowed u/s 37(1) as business expenditure - AT
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• No TDS on Payments to KPMG Switzerland Due to Mutuality Principle u/s 195; Indian-Swiss Tax Treaty Applied.

  Case-Laws - AT : TDS u/s 195 - payment made to KPMG International, Switzerland without TDS - principle of Mutuality application - Indian-Switzerland tax treaty - Once such identity is established, the surplus income would not be exigible to the tax on the principle that no man can make a profit out of himself - No TDS liability - AT
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• Corporate Guarantee Fee for Associated Enterprises Set at 0.50% to Meet Arm's Length Pricing in Transfer Pricing.

  Case-Laws - AT : TPA - ALP - the corporate guarantee commission fee which is to be recovered from AE should be 0.50% which would meet the arms length requirement. - AT
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• Section 68 Income Tax: Cash Deposits Uncovered, Middleman Involvement Confirmed Through Financial Transfers via RTGS.

  Case-Laws - AT : Addition u/s 68 - the documents available with the AO could not be ignored as they reveal the modus operandi of the working particularly in the case of the assessee, as to how with the help of a middleman, cash was first deposited into M/s Transnational Growth Fund Pvt. Ltd. and thereafter to the assessee company through RTGS - additions confirmed - AT
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Customs

• Anti-Dumping Duty on Graphite Electrodes from China Upheld; Tribunal Confirms Proper Valuation Method Used by Authority.

  Case-Laws - SC : Levy of anti-dumping duty (ADD) upon the import of graphite electrodes - Designated Authority had followed an acceptable method of determining the normal value of electrodes within China by comparing individual work undertaken by an exporter vis-à-vis the export price imposed and that there was no infirmity in the matter of such determination - Findings of the tribunal sustained - SC
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• High Court Rules Sealing Factory Premises Under EPCG Scheme Violates Section 110 of Customs Act, 1962 Protocols.

  Case-Laws - HC : Sealing of factory premises - seizure of machinery - EPCG Scheme - the act of locking the immovable property instead of movable property, against the provisions of Section 110 of the CA, 1962 and against the Scheme of the Act. - HC
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Indian Laws

• Cheque Presented After Validity Period; Section 138 of Negotiable Instruments Act Not Applicable to Expired Cheques.

  Case-Laws - HC : The cheque was presented by the complainant for encashment after the expiry of currency of three months and in such circumstances, the provisions of Section 138 of the Negotiable Instruments Act are not attracted - HC
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• High Court Affirms PF Organization's Right to Attach Properties Over Secured Creditors for Dues.

  Case-Laws - HC : Attachment of immovable properties ordered by PF organization - priority over the dues - Secured creditors (Banks) or PF organization - PF organization was within its power to issue the order - HC
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Service Tax

• Interest Not Required for Retrospective Liabilities in Renting of Immovable Property Service; Demand for Penalty Set Aside.

  Case-Laws - AT : Renting of Immovable Property Service - interest need not be paid for the liability it is created retrospectively - interest on duty cannot be recovered from the respondents as liability to pay interest is in the nature of a quasi-punishment - demand of interest and penalty set aside - AT
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• Excess Service Tax Adjustment Allowed Across Quarters u/r 6(4A) of Service Tax Rules, 1994.

  Case-Laws - AT : Adjustment of excess amount of service tax paid - Rule 6(4A) of Service Tax Rules, 1994 - Adjustment cannot be denied on the ground that adjustment is possible only for succeeding month or quarter, whereas in the present case excess amount of service tax paid in the 4th quarter of FY 2012-2013 and the adjustment of the said excess amount made in 2nd, 3rd and 4th quarter of FY 2013-2014 - AT
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• EPFO's Inspection and Administrative Charges Not Subject to Service Tax Under Employees' Provident Funds Act 1952.

  Case-Laws - AT : Taxability of amount collected by the EPFO towards, inspection charges and administrative charges, penal damages, penal interest from defaulters. - The appellants are not liable to pay service tax on their statutory activities performed in terms of EPMF & MP Act, 1952 - AT
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• Agency Fee Classified as "Consulting Engineer Service" for Tax Purposes; Service Tax and Penalty Confirmed on Road Projects.

  Case-Laws - AT : Agency fee - Consulting Engineer Service or not? - They have merely provided the technical capabilities and expertise in the management and supervision of projects relating to construction of roads, for which they have received the agency fees - Demand of service tax confirmed with penalty - AT
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• Export of Service Rules, 2005: Business Auxiliary Service Tax Demand Overturned; Services Classified as Exports Based on Consumption Location.

  Case-Laws - AT : Business Auxiliary Service - Export of Service Rules, 2005 - destination has to be decided on the basis of place of consumption, not the place of performance of service in case of Business Auxiliary Service - demand set aside - AT
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• Reversal of Credit Allows Abatement Benefit Under Notification No. 1/2006-Service Tax After Initial Denial Due to Credit Use.

  Case-Laws - AT : Benefit Abatement - N/N. 1/2006-service tax - denial on the ground that the assessee has availed credit - subsequent reversal of credit even after utilization of the same and clearance of the final product will relate to a situation as if no credit was ever availed - benefit of abatement allowed - AT
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• Appellants' CENVAT Credit Claim on VAT and Personal Calls Rejected Due to Lack of Documents; Dismissed on Limitation Grounds.

  Case-Laws - AT : CENVAT credit - appellants have availed CENVAT credit on VAT and also on the personal telephone calls used by employees - no documents have been furnished at all. The appellants, therefore, have no case on merits - However, demand set aside on the ground of period of limitation - AT
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• Lessor's Payments for Factory Workers Not Taxable Under Manpower Recruitment and Supply Services.

  Case-Laws - AT : Taxability - manpower recruitment and supply services - payments received by lessor on behalf of the workers used by the lessee of a factory for carrying out their operation - it appears that the service out of ambit of taxable service - AT
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Central Excise

• CENVAT Credit Valid Despite Missing Loan License for M/s Wanbury Ltd.; Consignee Named on Invoices.

  Case-Laws - AT : CENVAT credit - the Department cannot deny credit alleging that M/s Wanbury Ltd., in whose name the bill was issued did not possess loan license. The invoices contain the name of consignee appellant/manufacturer - credit allowed - AT
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• Appellant Rightly Avails CENVAT Credit for Service Tax on Biscuit Transportation u/r 3 of CCR.

  Case-Laws - AT : CENVAT credit - input service - outward transport - the appellant has paid Service tax in respect of the input service i.e. the outward transportation of the biscuits to the place of removal. As such, in view of Rule 3 of CCR the appellant has rightly availed Cenvat credit - AT
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• Waiver of Pre-Deposit u/s 35F: 7.5% Duty Deposit Required for All Cases Post-Finance Bill 2014 Amendment.

  Case-Laws - AT : Waiver of pre-deposit - Section 35F of the CEA, 1944 - there is no scope for interpretation that the 7.5% is required only in cases wherein the proceedings have been initiated on or after the amended section 35F in the Finance Bill, 2014. - AT
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• Appellant Can Use Compounding Facility Per Notification 34/2001-CE, No Duty on Aluminum Scrap Under 89/95-CE.

  Case-Laws - AT : Compounding scheme - Aluminum Circles - the appellant is entitled to the compounding facility under N/N. 34/2001-CE, and they have rightly paid the duty - the appellants are also not required to pay duty on the Aluminum Scrap removed, in terms of N/N. 89/95-CE - AT
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• Section 11B Limitation Not Applicable: Refund Request u/r 6(3) Cenvat Credit Rules Accepted.

  Case-Laws - AT : Refund -- limitation provided u/s 11B shall not be applicable in the present case where the respondent sought refund of an amount reversed in terms of Rule 6 (3) of CCR - AT
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• No Interest on Delayed Central Excise Refund Due to Timely Tribunal Order and Re-quantification Process.

  Case-Laws - AT : Interest on delayed refund - The demand was very much existing at the time of passing Tribunal order for the reason that re-quantification was directed to the original adjudicating authority. Therefore in the present case it cannot be said that there is delay on the part of the department in sanctioning of the refund claim - No interest is payable - AT
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VAT

• High Court Rules Interest Mandatory for Late Tax Deposits Under UPVAT Act Section 34(8); Tribunal's Penalty Deletion Unjustified.

  Case-Laws - HC : Penalty u/s 34(8) of the UPVAT Act - once it is found that tax deducted at source was not deposited within time, as was warranted under sub-section 6, payment of interest follows as a consequence and has to be paid - Tribunal was not justified in deleting the penalty - HC
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• High Court Rules: Reversal of Input Tax Credit Doesn't Cancel Dealer's Registration Under VAT and Sales Tax Act.

  Case-Laws - HC : Cancellation of registration certificate - The Act does not contemplate that if claim of I.T.C. is reversed the registration of a dealer could be cancelled in addition to reversal of ITC - HC
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Case Laws:

• Income Tax

• 2017 (4) TMI 873
  Disallowance of claim of depreciation - Held that:- FAA had no occasion to verify the correctness of the claim made by the assessee in absence of the said documents. Therefore,we are of the opinion that,in the interest of justice,matter should be restored back to the file of the FAA for fresh adjudication.He would decide the issue after affording a reasonable opportunity of hearing to the assessee and after considering the additional evidences produced before us. Ground is decided in favour of the assessee,in part. Disallowance of business expenses incurred by the assessee through credit card based on information of the AIR statement - Held that:- We find that the assessee had not produced documentary evidences about the expenditure to prove that same was incurred wholly and exclusive for the business purposes. The bank statement, produced by it before the AO indicates the expenditure incurred but it does not prove the fact of incurring of expenditure for the business. Therefore, in our opinion the order of the FAA does not suffer from any legal infirmity. Upholding the same, we decide ground of appeal against the assessee.

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• 2017 (4) TMI 872
  Penalty u/s 271(1)(c) - addition of deemed dividend under section 2(22)(e) - Held that:- The lower authorities clearly brought on record that there was no authority by way of Board Resolution from M/s.Chroma Print India Pvt Ltd. to give the said amount of 52,64,846/- . When there is no resolution or authority from the Board of Directors of the said company, to give the said amount to the assessee, it cannot be said that there exist in commercial expedience to grant such a huge amount to the assessee. In such circumstances, in our opinion, the provisions section 2(22)(e) of the Act is applicable to the amount received by the assessee from the said company and in this regard, we do not find any infirmity in the order of the CIT(Appeals) There is no Board Resolution passed by the company to give money to the assessee. Board of Directors of the amalgamated company had a Board meeting on 30.06.2010 approving the scheme of amalgamation. The petition of amalgamation was dated 23.07.2010. Hence, the statement of the assessee is that the balance in the books of account of M/s.Mind Ware Pvt Ltd., was to be considered have no merit. More so, the balance appeared in the books of account of M/s.Chroma Print India Pvt Ltd. was before filing the amalgamation petition dt.23.07.2010. Being so, this argument cannot hold any merit. This argument is also rejected. - Decided against assessee Coming to the penalty levied in our opinion the addition on account of deemed provisions cannot be construed as furnishing inaccurate particulars of income or concealment of income. See CIT Vs. Reliance Petroproducts Pvt. Ltd. [2010 (3) TMI 80 - SUPREME COURT ]. - Decided against revenue

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• 2017 (4) TMI 871
  Validity of reopening of assessment - not adjusted the loss of the STP units at Hyderabad and Gurgaon against the profit from other section 10A units, swelling it’s claim for deduction under section10A to that extent - Held that:- A perusal of the assessment order dated 26.12.2008 shows that the assessee had in fact claimed deduction at a higher amount, i.e., without adjusting the loss (being at Rs. . 268.72 lacs), only during the assessment proceedings (vide letter dated 18.12.2008/PB pg. 29) – that per the return of income being upon such adjustment, duly supporting it with a certificate from the CA in Form F, which on verification appeared correct, and allowed on that basis (para 5 of the assessment order). How could then, we wonder, this form a reason for an income escaping assessment, which is clearly a change of opinion, barring reassessment. - Decided in favour of assessee Merger with Orbitech Solutions Ltd.- assessee had followed ‘pooling of interest’ method in taking over the assets and liabilities of the amalgamating company - Held that:- apart from not claiming any expenditure (claimed @ 1/5th, as provided u/s. 35DD) for the current year, also ‘surrender’ that claimed for the earlier years, citing the receipt from OBL on that account. In fact, if there was any such understanding with OBL, it would not have preferred any claim for merger expenses in the first place, debiting the said expenditure to the account of OBL in it’s accounts. In any case, it would, on its receipt (of merger expenses), transfer back the expenditure deducted from the ‘General Reserve a/c’ (falling under the head ‘Reserve 33 lacs being reflected in this account, so that it is this balance only which could be transferred directly to the Balance Sheet. This only would be in consistence with what is being stated in the Notes to the Accounts. In other words, the assessee’s claim is contradicted by its’ own accounts as well as it’s return of income. The AO is thus justified in holding a honest belief that what is being stated is not correct, and that therefore income had escaped assessment. The condition of the first proviso to section 147 is satisfied. The reassessment notice is accordingly valid on this count.- Decided against assessee Schedules VII and VIII to the Balance Sheet (as at the relevant year-end), which are in respect of ‘Loans there being no expenditure against which the same could be considered as received. Also, the expenditure incurred, where and to the extent claimed as a deduction, cannot also be considered as having been recovered, which would be inconsistent with the assessee’s accounts, duly audited, and the returns, duly verified, furnished for the current, preceding and even succeeding year/s. The same is, as other receipts, in-asmuch as there is no corresponding obligation to return the value received, either in cash or any kind, only in the nature of income, and rightly assessed as so and, in fact, to that extent, rightly taken in accounts to the income account. As regards the assessee’s alternate claim, the amount is neither in respect of export nor received in convertible foreign exchange and, accordingly, there is no basis for it’s claim for deduction u/s. 10A or s. 80HHE in its respect. Qua quantum, the AO shall verify the assessee’s claim in this regard and decide on the foregoing terms on the basis of his factual findings. The onus to prove its claim/s, we may add, would be on the assessee. The assessee’s claim is partly allowed on the foregoing terms, disposing the aforesaid grounds of the appeal. Disallowance of legal and professional fee - Held that:- reference to the Notes to the Accounts to the assessee’s final accounts for AY 2009-10, is part of the legal charges paid to a law firm for acquisition of a US company by the name Data Inc., USA (at USD 6 lacs). The expenditure being in respect of acquisition of a company, was thus construed as capital in nature. The primary facts are not disputed; in fact, at any stage, including before us, being, rather, arising from the assessee’s own audited accounts. We accordingly find no infirmity in the said disallowance, and confirm the same.

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• 2017 (4) TMI 870
  Contribution to State Renewal Fund - allowable expenditure - Held that:- We find that the similar issue has been decided in favour of the assessee by the judgment of the Hon’ble Rajasthan High Court rendered in the case of CIT vs. Rajasthan State Seeds Corporation Ltd.[2016 (9) TMI 59 - RAJASTHAN HIGH COURT ] as held any normal expenditure for the welfare and benefit of the employees is allowable expenditure under section 37(1), the Tribunal has come to a finding of fact that it was a legal obligation of the respondent-assessee towards contribution of the said amount to the State Renewal Fund and there being a legal obligation as well in our view the Tribunal has come to a correct conclusion. - Decided in favour of assessee Disallowance of prior period expenses - Held that:- As decided in assessee's own case CIT(A) has given a finding of fact that with respect to the Head Office an amount pertains to reversal of double income booked in F.Y. 2002-03 with respect to maintenance charges. The ld. CIT(A) has given further finding of fact that an amount with respect to the head Officer pertains to wrong entry of interest income in FY 2002-03 & 2003-04 with respect to toll project on capital deployed by the appellant. This finding of fat is not controverted by the ld. D/R by placing any material on record. We are in agreement with the observations of the ld. CIT(A) that reversal of income wrongly declared in earlier years, is allowable. Hence, this ground of the revenue is dismissed - Decided in favour of assessee Disallowance of u/s 80IA - Held that:- As in assessee’s own case in pertaining to the assessment year 2011-12 the assessee has demonstrated that the authorities below have taken incorrect figure of turnover. Another contention of the assessee is that the amount related to Head Office is already apportioned and, therefore, there was no need for apportionment of the same. We find merit in the contention of the ld. Counsel for the assessee. Therefore, the ground raised in the appeal of the revenue is dismissed. Disallowance of expenditure on account of depositing the employee’s contribution beyond the prescribed time limit - Held that:- The issue is no more res integra. The issue has been decided by the Hon’ble Jurisdictional High Court rendered in the case of CIT vs. State Bank of Bikaner & Jaipur (2014 (12) TMI 65 - RAJASTHAN HIGH COURT) and also in the case of CIT vs. Jaipur Vidyut Vitran Nigam Ltd. [2014 (1) TMI 1085 - RAJASTHAN HIGH COURT]

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• 2017 (4) TMI 869
  TDS u/s 195 - payment made to KPMG International, Switzerland without TDS - principle of Mutuality application - Indian-Switzerland tax treaty - Held that:- There is a complete identity between the contributors and participators; the actions of the participators and contributors are in furtherance of the mandate of the association. There seems be no element of profit by the contributors from a fund made by them, which could only be expended or returned to themselves. Based on these conditions case of the assessee falls within the four corner of the ambit of the ‘Principle of Mutuality’. Thus, we do not find any reason or ground to interfere in the order passed by learned Commissioner (Appeals) hence the appeal filed by the revenue is dismissed.

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• 2017 (4) TMI 868
  Adjustment between loss on security trading activity and profit on derivative trading by KSSBL - Held that:- As mentioned here-in-above, ‘Derivative’ is an instrument whose value depends on its underlying cash or physical asset. Hence it means that the value is derived from the value of the underlying asset like securities and commodities. In view of the above, the order of learned CIT(A) is set aside and the AO is directed to verify ‘having identical underlying shares’ (1.1/ grounds of appeal), ‘integral part of composite arbitrage / hedging mechanism’ (1.2 / grounds of appeal), ‘adjunct of simultaneous opposite transactions in derivative segment’ (1.4 / grounds of appeal). The assessee is directed to file the details on the above before the AO. If after verification, the contentions of the assessee in grounds of appeal 1.1; 1.2 1,88,56,982/- offered by the assessee as per revised computation of income filed along with the application dated 15.11.2011 before him. In case the assessee fails to prove the above , then the AO is directed to arrive at business income as done in his assessment order after complying with the direction in para 7.1 here-in-above.

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• 2017 (4) TMI 867
  Disallowance of exemption u/s 10AA - Held that:- Profit derived from the units situated at SEZ, engaged in the business of trading activity in the nature of import and re-export of goods falls within the definition of the term ‘services’ as defined in section 10AA of the Act. Consequently, the assessee is eligible for exemption u/s 10AA of the Act, towards export profit derived from eligible unit located at SEZ. The CIT(A), after considering the relevant provisions of the Act, has rightly deleted additions made by the A.O. towards disallowance of exemption u/s 10AA of the Act. We do not find any error in the order passed by the CIT(A). Hence, we uphold CIT(A) order and reject the ground raised by the revenue.- Decided against revenue Disallowance of bad debt written off in respect of debts receivable from export sales - Held that:- The assessee has written off bad debts as irrecoverable in the books of accounts. We further observed that these debts are offered as income in computing income in the earlier years. The conditions prescribed u/s 36(1)(vii) and 36(2) of the Act has been fulfilled. Therefore, we are of the view that merely because assessee had not obtained approval of RBI to write off debts pertaining to foreign party, the claim of the assessee could not be disallowed. The CIT(A) after considering the relevant provisions of the Act and also relied upon the decision of Hon’ble Supreme Court in the case of TRF Limited Vs. CIT (2010 (2) TMI 211 - SUPREME COURT ), has rightly deleted additions made by the A.O. towards disallowance of bad debt written off. - Decided against revenue Disallowance on loss of forward contracts - Held that:- The assessee has entered into a forward exchange contracts with its bankers to hedge the export receivables in foreign currency, in order to safeguard against price fluctuation in realization of trade debtors. During the year, in respect of such hedging contracts, the assessee incurred loss of an amount of 3,41,583/-. We further observed that the assessee has achieved an export turnover of over 100 crores. We further observed that the transaction entered into by the assessee with its bankers is not in the nature of speculative transaction as defined u/s 43(5)(d) of the Act. Therefore, we are of the view that any loss incurred on forward contracts entered with its bankers to hedge the export receivables, in order to safeguard against price fluctuations in realization of trade debtors is in the nature of business loss, but not speculation loss as defined u/s 43(5)(d) of the Act. The CIT(A) after considering the relevant details has rightly deleted additions TDS u/s 194C - disallowance of clearing and forwarding charges u/s 40(a)(ia) of the Act, for non- deduction of tax at source - Held that:- No disallowance can be made u/s 40(a)(ia) of the Act, for the amounts which have been paid on or before the end of the financial year. However, the assessee has failed to file necessary evidences with regard to paid and payable. Therefore, we set aside the issue to the file of the A.O. and direct the A.O. to examine the issue with reference to the books of accounts of the assessee to ascertain the fact of paid and payable and if expenditure is paid within the same financial year, then the A.O. is directed to delete additions made u/s 40(a)(ia) of the Act. In other words, the A.O. is directed to restrict disallowance to the extent amount remaining payable at the end of the financial year.

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• 2017 (4) TMI 866
  Transfer pricing adjustment - comparable selection - application of turnover filter - Held that:- The assessee is aggrieved by the order of Assessing Officer / TPO in considering the turnover range on cost basis instead of turnover basis and hence, the inclusion of Helios and Matheson Information Technology Ltd., which was identified as comparable even though its total turnover was 213.37 crores. The grievance of assessee in considering the turnover range on cost basis merits to be allowed. Various Benches of the Tribunal including the Pune Bench of Tribunal in series of cases have held that the turnover basis is to be adopted range for the selection of companies. The total turnover of the assessee was 14.37 crores, as against which we hold that the turnover filter of 1 to 200 crores merits to be applied. Since the turnover of Helios and Matheson Information Technology Ltd. was more than 200 crores i.e. 213.39 crores, then the same merits to be excluded from the final list of comparables. Accordingly, we hold so. The ground of appeal raised by the assessee is thus, partly allowed. Assessee which is providing software development services thus selection of comparable as companies functionality dissimilar with that of assessee need to dis-selected as final list of comparable. Non-allowance of risk adjustment - Held that:- We direct the Assessing Officer to allow the risk adjustment and re-compute the margins of comparables by applying the ratio laid down by Delhi Bench of Tribunal in the case of Sony India Pvt. Ltd. (2008 (9) TMI 420 - ITAT DELHI-H) and compute the TP adjustment, if any, in the hands of assessee. Assessee is against applicability of +/- 5% and the benefit can be allowed if the adjustment is within such range and hence, no adjustment is to be made in case it is not more than 5% from the arm's length price. We hold so. Allowance of payment made for meeting expenses, travel cost, stay cost, etc. - Held that:- uthorized Representative for the assessee pointed out that the said expenditure was part of operating cost and was recovered @ 7%. The factual aspects of this issue are not clear and the Assessing Officer/Transfer Pricing Officer is directed to redecide the same after allowing reasonable opportunity of hearing to the assessee. We hold so.

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• 2017 (4) TMI 865
  Addition u/s 68 - proof of identity, creditworthiness and genuineness - Held that:- Though the assessee had produced the PAN, Bank details, ITR, balance sheet of the creditor company to substantiate the unsecured loan of 27.5 lacs received by it, however, it was not able to produce the creditor before the AO particularly, in view of the fact that the AO was not able verify the information furnished. The inspector had given a report that no company existed at the given address. The onus shifted back to the assessee after such report of the inspector had come. The said onus was not discharged by the assessee and the primary requirements of identity, creditworthiness and genuineness could not be conclusively established as required under section 68 of the Act. The documents available with the AO could not be ignored as they reveal the modus operandi of the working particularly in the case of the assessee, as to how with the help of a middleman, cash was first deposited into M/s Transnational Growth Fund Pvt. Ltd. and thereafter to the assessee company through RTGS. In the face of such incriminating documents evidencing the accommodation entry, we find no merit in the present appeal. - Decided against assessee.

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• 2017 (4) TMI 864
  TPA - ALP - Addition on corporate guarantee given to Associated Enterprise (AE) - Held that:- As decided in Videocon Industries vs. DCIT [2017 (3) TMI 187 - ITAT MUMBAI] in similar circumstances the details of loans vis-à-vis the security thereof had already been reproduced above. It has also been brought on record that State Bank of India has charged bank guarantee commission to assessee by giving 50% concession on the rate of 1.75% which works out to approximately 0.875%. If various factors and risk involved are evaluated which is quite normal under the foreign guarantee like, country risk, currency risk and entity risk etc., then charging of corporate guarantee commission would fall down below 0.5%. Thus, this constitutes a kind of internal CUP available to the assessee to benchmark the transaction of giving corporate guarantee/letter of undertaking. Moreover, there are catena of decisions wherein this Tribunal has held that corporate guarantee commission around 0.50% can be accepted as ALP. Accordingly, we hold that the corporate guarantee commission fee which is to be recovered from AE should be 0.50% which would meet the arms length requirement. Thus, under the facts and circumstances of the case, we direct the TPO/Assessing Officer to take the corporate guarantee fee @ 0.50% and make the adjustment accordingly Disallowance of depreciation on intangible assets confirmed Disallowance on account of provisions for post retirement medical scheme - Held that:- As held in assessee’s own case for Ay 2009-10 similar liability has been held to be an unascertained liability which was not allowable as a deduction under section 37(1) of the Act. Disallowance of prior period expenses - Held that:- Assessee has not filed any documentary evidence even before us to substantiate his claim or the payment receipt with regard to service tax for claiming exemption u/s 43B of the Act. However, considering the contention of ld. AR of the assessee, we restore this ground of appeal to the file of AO to examine the issue afresh, if the claim of the assessee is covered by the prevision of section 43B of the Act and passed the order in accordance with law.

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• 2017 (4) TMI 863
  Reopening of assessment - Accommodation entries - Held that:- A careful reading of the stated reasons for reopening of the assessment shows that the assessment has been reopened merely on the information received from Investigation Wing. A.O. is required to consider the material on record in case of the assessee and thereafter is required to form an independent opinion on the basis of the material on record that the income has escaped assessment. Without forming such an opinion, solely and mechanically relying upon the information received from other source, there cannot be any reassessment for the verification. Non application of independent mind by AO the assumption of the jurisdiction to reopen the assessment in exercise of power u/s. 147 of the Act is bad in law and contrary to the provisions of Section 147 of the Act Accommodation entries - Gains arising out of the sale of shares - capital gain or business income - Held that:- There is no denying that consideration was paid when the shares were purchased. The shares were thereafter sent to the company for the transfer of name. The company transferred the shares in the name of the assessee. There is nothing on record which could suggest that the shares were never transferred in the name of the assessee. There is also nothing on record to suggest that the shares were never with the assessee. On the contrary, the shares were thereafter transferred to demat account. The demat account was in the name of the assessee, from where the shares were sold. In our understanding of the facts, if the shares were of some fictitious company which was not listed in the Bombay Stock Exchange/National Stock Exchange, the shares could never have been transferred to demat account. Shri Mukesh Choksi may have been providing accommodation entries to various persons but so far as the facts of the case in hand suggest that the transactions were genuine and therefore, no adverse inference should be drawn. In the light of the decisions of the Hon’ble Supreme Court in the case of Andaman Timber Industries (2015 (10) TMI 442 - SUPREME COURT ) and considering the facts in totality, the claim of the assessee cannot be denied on the basis of presumption and surmises in respect of penny stock by disregarding the direct evidences on record relating to the sale/purchase transactions in shares supported by broker’s contract notes, confirmation of receipt of sale proceeds through regular banking channels and the demat account. Accordingly, we direct the A.O. to treat the gains arising out of the sale of shares under the head capital gains- “Short Term” or “Long Term” as the case may be. - Assessee appeal allowed.

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• 2017 (4) TMI 862
  Application of correct rate of surcharge on dividend distribution tax [DDT] - assessee proposed dividend in the accounts for the year ended 31/03/2011 - Held that:- As found that in the grounds of appeal, the assessee has attributed the difference to interest u/s 115P and pleaded for deletion of interest on the premises that DDT has been paid by assessee within time. Further, the issue of additional demand does not form subject matter of final assessment order assailed before us. Rather, the demand has been raised in ‘Notice of Demand’ u/s 156 and ‘Income Tax Computation Form’. Therefore, the proper course of action, in such a case, would be to file rectification application before the AO. Therefore, this ground requires no adjudication / direction at our end and the same is accordingly, dismissed. Disallowance of depreciation on non-compete fees - Held that:- During AY 1999-2000, the assessee company purchased Glass division from NIPL as a going concern on slump sale basis for a net consideration of 186.52 crores. In the absence of specific values being ascribed to the various assets while arriving at the above sale consideration, the net slump purchase consideration of 186.52 crores was apportioned over various assets and liabilities on fair basis. These values were arrived at on the basis of Technical estimates made by the management in accordance with Accounting Standard-10. The assessee claimed depreciation u/s 32 on values recorded in the books of assessee Company. In the alternative, the assessee claimed depreciation @25% on non-compete fees being ‘intangible assets’. But DRP following Tribunal’s order in assessee’s own case for earlier years, decided both the alternatives against assessee. The Ld. Counsel for Assessee [AR] has fairly conceded that depreciation on fixed assets have not been allowed in earlier years. Even the claim of 25% depreciation on non-compete fees paid by him was also not allowed by Tribunal in AY 1999- 2000. But thereafter, Tribunal in AY 2001-02, relying upon the judgment of Madras High Court in Pentasoft Technologies Ltd. V DCIT [2013 (11) TMI 1057 - MADRAS HIGH COURT ] 58.95 crores as against 59.26 crores as on 31/03/2011. We find that on identical set of facts, the issue has been decided by Tribunal in assessee’s favor for AY 2006-07. Moreover, Hon’ble Bombay High Court in CIT Vs Phil Corp. Ltd. [2011 (6) TMI 912 - BOMBAY HIGH COURT] has taken a view that investment in subsidiary company for acquisition of shares form integral part of assessee’s business and hence interest thereupon is allowable. Keeping all these factors in mind, we are inclined to delete impugned additions. Additions of proportionate interest on borrowed funds qua ‘receivables’ from subsidiary companies - Held that:- No TP adjustment has been made for the impugned transaction and secondly the outstanding amount represent ‘receivables’ on account of debtors for sales / technical fees as per the contention of the assessee. Therefore, on the facts and circumstances of the case, we deem it fit to restore this issue back to the file of AO for fresh adjudication in proper perspective including benefits derived by AE on account of receivables vis-à-vis normal debtors of the business. The assessee is directed to cooperate with the lower authorities forthwith to substantiate its claim forthwith falling which the AO shall be at liberty to adjudicate the same on the basis of material available on record. TP adjustments against loan transaction and corporate guarantee - Interest Free Loan to Subsidiaries - Held that:- In principal it is agreed that LIBOR rate plus some mark-up shall apply to the transaction. To calculate the appropriate mark-up on the same, as per contentions of Ld. DR, we deem it fit to restore the matter back to the file of AO for limited purposes of calculation of appropriate mark up with the help of the said data base. The ground is allowed for statistical purposes. Corporate Guarantee - Held that:- Hon’ble Bombay High Court in CIT Vs. Everest Kento Cylinders Ltd. (2015 (5) TMI 395 - BOMBAY HIGH COURT ) has observed that issuance of a corporate guarantee are distinct and separate from that of bank guarantee and therefore, no TP adjustment can be made in respect of guarantee commission by making comparison between guarantees issued by commercial banks as against a corporate guarantee issued by holding company for benefits of its AE, a subsidiary company. Further, in the said case, the Hon’ble court has affirmed guarantee adjustment of 0.50% upheld by the Tribunal. Therefore, respectfully following the same, we restrict TP adjustment against bank guarantee to 0.50%. This ground is partly allowed. Addition on account of certain interest income - Held that:- Adequate efforts have been made by assessee and the assessee cannot be asked to prove the negative. We agree with AR’s stand that additions cannot be made solely on the basis of Form 26AS entries only which is well settled by various judicial pronouncements. The revenue has not brought anything on record to substantiate its stand and relied merely upon entries in Form 26AS. It appears that the same is erroneous and has crept in due to quoting of wrong PAN by the Bank in their TDS returns and therefore, at least addition, in such a scenario, in the hands of assessee could not be in made. Thus, we are inclined to delete the impugned addition. The bench was informed that similar entries are appearing in Form 26AS of the assessee for other assessment years also. Therefore, the assessee is directed to pursue the correction thereof forthwith with due diligence. The revenue is also directed to scrutinize the TDS return of ‘Bank of America’ and enable to Bank to take steps in rectifying the impugned errors. Foreign exchange gains arising out of loans given to subsidiaries - Held that:- We fail to understand when the item has not been credited to the Profit 104.23 crores, the set off of which was not allowed to assessee. DRP concluded that since the issue was consequential, AO was directed to consider the said claim. However, in the final computation of income, we find that credit thereof was not granted to the assessee. Therefore, reiterating the stand of DRP, AO is directed to verify the claim of assessee in this respect and allow the same as per statutory provisions.

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• Customs

• 2017 (4) TMI 881
  Appellate Jurisdiction - maintainability of appeal - levy of anti-dumping duty (ADD) upon the import of graphite electrodes - Held that: - There was a power of suo motu revision with the Board as well as a revisional jurisdiction to be exercised on an application by an aggrieved person. The Central Government under Section 131 (originally enacted) and under Section 129DD (Substituted by Act 21 of 1984) was also vested with a revisional jurisdiction - under the CA, 1962, (as amended), against an order of the appellate tribunal on a question not relating to duty or to classification of goods, an appeal lies to the High Court on a substantial question of law. A reference, again, on a question of law, may also be made to the High Court in respect of similar orders of the appellate tribunal (not relating to determination of duty or classification of goods) passed on or before 1.7.2003. The report of the Designated Authority neither suffers from any excessive imposition of confidentiality nor from the alleged non-consideration of any of the grounds urged on behalf of the appellant. The tribunal further held that the Designated Authority had followed an acceptable method of determining the normal value of electrodes within China by comparing individual work undertaken by an exporter vis- -vis the export price imposed and that there was no infirmity in the matter of such determination. The findings recorded by the learned appellate tribunal on the basis of which the appeal of the present appellant has been dismissed are findings of fact arrived at on due consideration of all relevant materials on record - appeal dismissed by refusing admission - decided against appellant.

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• 2017 (4) TMI 880
  Imposition of penalty - section 130 of CA, 1962 - mens rea - the decision in the case of M/s Kunal Travel (Cargo) Versus Commissioner of Customs & Central Excise [2016 (12) TMI 521 - ALLAHABAD HIGH COURT] contested where there was a deliberate strategy to keep the basmati rice in the front of container in order to avoid the detection of the non-basmati rice which was sought to be taken out surreptitiously, and penalty was justified - Held that: - there is no legal and valid ground for interference - SLP dismissed.

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• 2017 (4) TMI 879
  Sealing of factory premises - seizure of machinery - EPCG Scheme - Held that: - there is partial compliance of the statement, which was recorded by this Court on 29th March, 2017. Now the lock placed on the outer door of the room, where the machine was installed, has been removed. Prima facie, this re-enforces this Court's view in arriving at a conclusion that the respondents proceeded to place a lock and seal on the immovable property, namely, the outer door of the factory premises, where the machine was installed. Thus, we do find the act of locking the immovable property instead of movable property, against the provisions of Section 110 of the CA, 1962 and against the Scheme of the Act. We allow this writ petition by directing the respondents that the seized machine shall be released on the petitioners' executing a Bond in favour of the respondents and by imposing an additional condition, namely, until the respondents take recourse to law and for a reasonable period, namely, till 31st July, 2017, the petitioners shall not transfer or dispose of the machine, but, it shall be retained by them in safe custody - petition allowed - decided in favor of petitioner.

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• Service Tax

• 2017 (4) TMI 903
  Agency fee - Consulting Engineer Service or not? - tripartite agreement - whether agency fee received by M/s. IRCON is bundled alongwith the cost of road project or is a separate fee received by them for providing consulting engineer service? - Held that: - The admitted facts are that there was a Tripartite Agreement dated 31.08.2004 for the construction/up-gradation/commissioning and maintenance of different road projects in the state of Bihar under PMGSY. Under the agreement, IRCON was selected as executing agency for construction/up-gradation/commissioning of the project - The appellants are neither the owner of the constructed roads nor do they construct the road themselves. They have merely provided the technical capabilities and expertise in the management and supervision of projects relating to construction of roads, for which they have received the agency fees. It is also clear from the Tripartite Agreement that the agency fee did not include the cost of road construction, materials or charges for the labour. It is also clear from the Clause 11.2 of the agreement that M/s. IRCONs fee covers the cost of the preparation of DPR, cost involved in inviting and deciding tenders but the cost does not covers the cost of advertisement of tenders in the news papers. In the same clause it is mentioned that latter shall form part of the project cost, which clearly shows that M/s. IRCON s fee is not part of the project cost. The receipt of consultancy fee from the Govt. of Bihar for the construction of rural roads was deliberately suppressed by the appellant and the appellants mis-declared the value of taxable consulting engineer services provided by them. Therefore, the penalty imposed is justified. Appeal dismissed - decided against appellant.

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• 2017 (4) TMI 902
  Banking and Other Financial Services - taxability of amount collected by the EPFO towards, inspection charges and administrative charges, penal damages, penal interest from defaulters. - appellant is involved in collection of contribution from the employers covered by the provision of the Act, collection of inspection charges and administrative charges, penal damages, penal interest from defaulters and disburse accumulated provident fund to the Members alongwith interest, pay various kinds of pension benefits to members and to family members and incur expenses in administering the scheme - Revenue entertained a view that the appellants are engaged in providing taxable service under the category of “Banking and Other Financial Services - Held that: - the appellant is a statutory authority created for a specified welfare function. Section 1 (3) of EPMF & MP Act stipulates that it applies to establishments of specified categories, mainly employing 20 or more persons. The schemes framed under the Act are to be laid in the Parliament as mentioned in Section 6D. Section 7A talks about determination of moneys due from employers. Such determination, in case of dispute, will be resolved by the officers mentioned therein. The appellant is concerned with ‘Public’ – namely the employers who are governed by the EPMF & MP Act. The employers are governed by the said Act for delivery of welfare benefits to the employees (members of the Fund). The appellant is an “authority” having vested with statutory powers to enforce the due contribution of fund, administration charges, penal charges etc. The appellant has power to impose penal consequence on employers for violation of any provisions of EPMF & MP Act, and also for coercive recovery of dues. The fee and other charges collected by the appellant from the employers in the present dispute are fixed by the law with no discretion or option vested with appellant or the employers. As such these cannot be considered as amounts received for providing any taxable service of BOFS. The employees who ultimately benefit, have not paid any consideration to the appellant. They only contributed their part of fund, through the employer, to the appellant. The contribution to the fund is not the subject matter of disputed tax liability. The other charges like administrative charges, inspection charges paid by the employers, are being subjected to service tax. We find that in the absence of a service provider and service recipient relation between the appellant and the employers, no service tax liability can arise in the transaction. The exemption now granted vide N/N. 9/2010-ST to EPFO (appellant) has no relevance to decide their tax liability during the present disputed period which is under pre-negative list based tax regime. We note that the service tax liability on various services rendered by Government or statutory /public authorities under went statutory changes after the new tax system (based on negative list) was introduced with effect from 01/07/2012. In fact, the Circulars dated 18/12/2006 and 23/08/2007 (code 999.01) issued in the pre-negative list regime are no longer applicable, as clarified by Board vide Circular No. 192/02/2016 – ST dated 13/04/2016. The appellants are not liable to pay service tax on their statutory activities performed in terms of EPMF & MP Act, 1952 - appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 901
  Business Auxiliary Service - agreement with holding company for providing promotional activities - Held that: - The issue involved in this case is no more res-Integra in view of the decision in the case of [2016 (7) TMI 1209 - CESTAT NEW DELHI], while examining the scope of Export of Service Rules, 2005 with reference to BAS, where it was held that destination has to be decided on the basis of place of consumption, not the place of performance of service in case of Business Auxiliary Service - demand set aside - appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 900
  Abatement - N/N. 1/2006-ST dated 01/03/2006 - denial on the ground that the assessee has availed credit - Held that: - the appellants have reversed the full Cenvat credit availed alongwith applicable interest later. All the credits alongwith applicable interest, have been reversed before adjudication by the Commissioner - reliance was placed in the case of CCE Jaipur-I Versus M/s. Sanjay Engineering Industries [2016 (8) TMI 93 - RAJASTHAN HIGH COURT], where it was held that subsequent reversal of credit even after utilization of the same and clearance of the final product will relate to a situation as if no credit was ever availed - the denial of abatement under N/N. 1/2006-ST is not justifiable - appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 899
  Adjustment of excess amount of service tax paid - Rule 6(4A) of Service Tax Rules, 1994 - denial on the ground that adjustment is possible only for succeeding month or quarter, whereas in the present case excess amount of service tax paid in the 4th quarter of financial year 2012-2013 and the adjustment of the said excess amount made in 2nd, 3rd and 4th quarter of financial year 2013-2014 - Held that: - reliance placed in the case of M/s. Jubilant Organosys Ltd. Versus CCE, Meerut-II [2014 (10) TMI 138 - CESTAT NEW DELHI], where it was held that adjustment of service tax paid in excess in certain months towards the service tax liability of the subsequent months cannot be denied on such technical grounds - appeal allowed - decided in favor of assessee.

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• 2017 (4) TMI 898
  Refund claim - denial on account that appellant had not obtained registration and in the case of refund claim for 4/2012 to 6/2012, the refund claim made on 28.06.2013 is barred by limitation - Circular issued by Registry is sufficient compliance of Rule 6(A) of CESTAT Procedure Rules or not? - Held that: - The issue whether assessee is eligible for refund for the period prior to obtaining registration is settled by the judgment in the case of the M/s m Portal India Wireless Solution Pvt. Ltd.[2011 (9) TMI 450 - KARNATAKA HIGH COURT], where it was held that Registration not compulsory for refund - the rejection of refund on the ground that appellant had not obtained registration before filing of refund claim is not legal or proper. Time limitation - Held that: - In the case of export of services, the relevant date (starting point) for computing the period of one year as prescribed in Section 11 B of C.E Act would be the date of receipt of FICR - The Ld. Counsel does not have a case that when computed from the date of receipt of FICR, the refund claim filed for quarter June, 2012 is fully within time. He submitted that some of the transactions would be within time. This aspect has to be verified by the adjudicating authority. Appeal partly allowed - part matter on remand.

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• 2017 (4) TMI 897
  Renting of Immovable Property Service - interest - penalties - case of appellant is that the appellant did not collect the service tax from the tenants as the tenants refused to pay service tax. For this reason appellants failed to discharge the liability of service tax to the department. However they later paid the service tax along with interest. The interest amount for the period from 08.05.2010 onwards was calculated and paid by appellant. That appellant is not liable to pay interest prior to this date and also not liable for penalty since the service were made taxable with effect from 01.07.2007 retrospectively. Held that: - The Hon’ble Apex Court in the case of Star India Pvt. Ltd.[2005 (3) TMI 10 - Supreme Court], held that interest need not be paid for the liability it is created retrospectively - interest on duty cannot be recovered from the respondents as liability to pay interest is in the nature of a quasi-punishment. The appellant is not liable to pay interest prior to 08.05.2010 and also the penalty. The appellant has paid the interest on the entire demand after 08.05.2010 till payment - the demand of interest and the penalty imposed u/s 76 is unsustainable. However, the late fee imposed u/s 70 of the FA, 1994 upheld. Appeal disposed off - decided partly in favor of assessee.

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• 2017 (4) TMI 896
  CENVAT credit - duty paying documents - Held that: - appellants have availed CENVAT credit on VAT and also on the personal telephone calls used by employees and also in some cases they have taken credit by double entry. Credit has been taken on documents for purchase of items and not on service tax. In certain cases, no documents have been furnished at all. The appellants, therefore, have no case on merits. SCN has been issued invoking the extended period of limitation alleging suppression of facts with intent to evade payment of duty. Therefore, as the Commissioner (Appeals) has recorded his finding that there is no intention on the part of appellant to evade payment of service tax, the demand raised invoking the extended period also becomes unsustainable. Demand is time barred - appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 895
  Taxability - manpower recruitment and supply services - payments received by lessor on behalf of the workers used by the lessee of a factory for carrying out their operations in the category of ‘manpower recruitment and supply services’ - Held that: - we do not find any role for the respondent as an intermediary. The employees, originally recruited by the lessor, were placed at the disposal of the lessee as part of that agreement which allowed the latter to operate the distillery. It would appear that the terms of remuneration are also not the subject of the agreement between the lessor and the lessee and we do not find any clause that specifies period of employment of these workers with the lessee - nature of the transaction between the respondent and the lessee and its failure to conform to the description of the taxable service takes the service out of ambit of taxable service - appeal dismissed - decided against Revenue.

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• Central Excise

• 2017 (4) TMI 894
  Waiver of pre-deposit - Section 35F of the CEA, 1944 - appellant claim that right of appeal accrues on the date of initiation of the assessment proceedings. Therefore the law prevailing on that date shall be relevant and not law on the date of its decision or the date of filing of appeal. Therefore, in this case the mandatory deposit of 7.5% is not applicable - Revenue claims that the pre-deposit of 7.5% is the requirement for filing appeal before this Tribunal which became effective from the enactment of the Finance Bill, 2014. Therefore, the initiation of the proceeding is not relevant for the purpose of mandatory pre-deposit of 7.5%. Held that: - From a plain reading of the aforesaid Section 35F, it is clear that the pre-deposit of 7.5% is pre-requisite for filing appeal in this Tribunal and it is not related to proceedings of the appeal. Therefore, deposit of 7.5% is requirement for filing the appeal before this Tribunal. Therefore, the submission of ld. counsel that it is to be taken from the date of initiation of the proceedings is absolutely irrelevant. If the legislators have any intention not to collect 7.5% in cases where the proceedings have been initiated prior to enactment of Finance Bill, 2014, the same would have been incorporated in amended Section 35F explicitly. In the absence of such explicit provision, there is no scope for interpretation that the 7.5% is required only in cases wherein the proceedings have been initiated on or after the amended section 35F in the Finance Bill, 2014. Reliance placed in the case of Nimbus Communications Limited, Versus Commissioner of Service Tax, Service Tax-VI, & Others [2016 (8) TMI 451 - BOMBAY HIGH COURT], where it was held that On and after the enforcement of the provision of Section 35F of the Act, as amended, an appellant has to deposit the duty and penalty as stipulated and unless the appellant were to do so, the Tribunal shall not entertain any appeal. The applicant is required to make a pre-deposit of 7.5% of the adjudged dues which the applicant failed to do so - the appeal is not maintainable for want of pre-deposit in terms of Section 35F. Appeal dismissed being non-maintainable.

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• 2017 (4) TMI 893
  Compounding scheme - Aluminum Circles - N/N. 34/2001 CE dated 28/06/2001, as amended - whether the compounding facility have been rightly rejected? - whether the appellant is liable to pay Central Excise duty on removal of the scrap during the period of dispute June, 2003 to March, 2006? Held that: - there is no cotumacious conduct on the part of the appellant in not paying the duty on Aluminum Circles, their intermediate product. The appellants were holding the bona-fide belief that as the final product is not taxable, accordingly, they need not pay the tax nor required to register with the Department - the appellant have paid the duty by opting for the compounding scheme, soon after, the inspection and much before the issue of SCN under proper intimation to the Revenue. There is no ostensible reason for rejecting the compounding facility for payment of duty on Aluminum Circles, given by the courts below. The reason given for rejection of exemption on removal of scrap when the final product is not liable to duty, is far-fetched and amounts to stretching the law which is not permissible - the appellant is entitled to the compounding facility under N/N. 34/2001-CE, and they have rightly paid the duty - the appellants are also not required to pay duty on the Aluminum Scrap removed, in terms of N/N. 89/95-CE. Appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 892
  De-bonding from EOU scheme - Refund claim - unjust enrichment - Held that: - the duty paid by the respondent at the time of conversion is eligible for refund - In fact, when the respondent has paid duty for the second time on the goods by raising invoices, the earlier duty paid at the time of conversion becomes an extra duty and becomes a mere deposit in the hands of department - the duty paid by the respondent while de-bonding from EOU to DTA becomes a deposit in the hands of department and therefore is to be refunded to the respondent, in case the duty is paid once again at the time of clearance of goods in DTA - appeal dismissed - decided against Revenue.

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• 2017 (4) TMI 891
  Refund of cenvat credit reversed earlier which was not required to be reversed - period of limitation - refund of an amount equal to 5% of the value of exempted goods reversed in terms of Rule 6 (3) of the CCR, 2004 - Whether the time limitation of one year as provided u/s 11B is applicable? - Held that: - There is no dispute that this amount does not represent excise duty. If this amount is not liable to be reversed, the same can be allowed as re-credit similarly in the manner as the Cenvat credit is allowed at the time of receipt of input/input service. Since the amount is not under the head of excise duty, the refund thereof does not fall under the term of Section 11B. Accordingly, limitation provided u/s 11B shall not be applicable in the present case where the respondent sought refund of an amount reversed in terms of Rule 6 (3) of CCR. However, an amount of 9,34,758/- plus interest of 3,25,000/- was confirmed as a demand in the adjudication process - The said order was not challenged by the respondent. Therefore, the demand of 9,34,758/- along with interest of 3,25,000/- attained finality - the amount of 9,34,758/- plus 3,25,000/- cannot be refunded to the respondent. Appeal allowed - decided partly in favor of appellant.

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• 2017 (4) TMI 890
  Interest on delayed refund - whether the appellant is entitle for the interest on the refund of duty @ 12% on the delay sanction of refund in respect of pre-deposit of 1 crore consequent to setting aside the order appealed and remand of the matter to the Commissioner for re-computation of the demand? - Held that: - demand was not finally decided by this tribunal - The demand was very much existing at the time of passing Tribunal order for the reason that re-quantification was directed to the original adjudicating authority. Therefore in the present case it cannot be said that there is delay on the part of the department in sanctioning of the refund claim - appellant is not entitled to any interest - appeal dismissed - decided against appellant.

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• 2017 (4) TMI 889
  MODVAT credit - manufacture of 'breakfast cereals' - case against the appellant is that the inputs that were shown to have been consumed in the RG 23A Part I was allegedly in excess of that shown in the stock ledger - Held that: - the appellant either did not, or would not, take up the responsibility of reconciling the two records. It is also seen that a plea was entered before the original authority that admitting of the issues and returns would clearly demonstrate that there was no deficit - there is no option but to hold that the appellant did not attempt to participate in a formal closure in accordance with the directions of the Tribunal. Without such reconciliation there is no scope for any reduction in the liability to duty on merit. Extended period of limitation - Held that: - There is also no allegation that any goods have been removed clandestinely. The scope for invoking the extended period in section 11A of CEA, 1944 does not exist in the absence of the ingredients permitting such. Appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 888
  CENVAT credit - case of the department is that appellant have availed credit on the invoices issued by their regional marketing office, which is not registered as input service distributor during the period 16-6-2005 to 5-1-2006 - Held that: - obtaining registration and distribution of the service is procedural requirement and for such procedural lapse credit cannot be denied - credit allowed - appeal dismissed - decided against Revenue.

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• 2017 (4) TMI 887
  CENVAT credit - whether appellants are entitle for the credit on input or input services mainly GTA Service, Courier Service, CHA, C& F Service etc. used in export of goods? - Held that: - This issue has come up in various cases before this Tribunal and it has been consistently held that in case of export, place of removal stand extended upto the port of export therefore all the services required for export of goods are admissible input services, accordingly, credit is admissible for all such services - credit allowed - decided in favor of assessee.

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• 2017 (4) TMI 886
  MODVAT credit - duty paying documents - credit of 6,75,658/- disallowed for wanting of original duty paying document - credit of 16,72,886.00 was disallowed on the ground that depot issued invoice is not registered - Held that: - Since the original documents was not before the Ld. Commissioner(appeals) and proof of submission of documents before adjudicating authority was not produced by the appellant to the Commissioner(appeals - Commissioner(Appeals) has rightly remitted the matter to the original adjudicating authority for verification of the documents. As regard the modvat credit of 16,72,886.00, the duty paying characteristic is established, receipt of input Is not under dispute and entire co-relation is established right from duty payment of the goods and receipt of the same goods in the factory of the appellant - credit allowed. Appeal allowed - part matter decided in favor of assessee and part matter on remand.

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• 2017 (4) TMI 885
  CENVAT credit - input service - outward transport of biscuits to the depot of PBPL - Held that: - appellants were under obligation to transport biscuits to various depots of PBPL as such obviously the place of removal was/were depots where the appellant was required to supply manufactured biscuit as per direction of the appellant - the appellant has paid Service tax in respect of the input service i.e. the outward transportation of the biscuits to the place of removal. As such, in view of Rule 3 of CCR the appellant has rightly availed Cenvat credit - appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 884
  Refund claim - rejection on the ground of limitation - case of appellant is that as such excess amount of 2,59,410/- is in the nature of Revenue deposit and no limitation is attracted - Held that: - the amount excess paid in December, 2003 is in the nature of Revenue deposit. Further, there is no limitation for refund of Revenue deposit - the refund claim is not barred by limitation - refund allowed - decided in favor of appellant.

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• 2017 (4) TMI 883
  CENVAT credit - duty paying documents - non receipt of inputs - Held that: - No discrepancy is pointed out by department on the respective dates in the registers maintained by the appellant. The department has also not conducted any investigation with regard to the transportation of goods to the appellant company - Other than mere allegation that some entries were found in the private note book of a third party there is no evidence to prove fraudulent availment of credit - there is no ground to take a different view and also the revenue has miserably failed to establish that appellant has engaged in fraudulent availment of CENVAT credit - appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 882
  CENVAT credit - case of Revenue is that the appellant is only a consignee in the invoices. That the invoices were billed to M/s Wanbury Ltd., who did not have a loan license for manufacture of final products using the inputs - Held that: - it is established that the goods were received in the appellant factory who is the manufacture of final products. So also the duty has been paid on the goods pertaining to the disputed invoices. On such score, the Department cannot deny credit alleging that M/s Wanbury Ltd., in whose name the bill was issued did not possess loan license. The invoices contain the name of consignee appellant/manufacturer - credit allowed - decided in favor of assessee.

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• CST, VAT & Sales Tax

• 2017 (4) TMI 878
  Penalty u/s 34 (8) of the UPVAT Act - late deposit of TDS - Revenue contends that liability to pay penalty consequent upon delayed deposit of tax deducted at source is a necessary corollary of delayed deposit of tax deducted at source, and considerations like intent or malafide etc. are not material - Held that: - reliance was placed in the case of Price Waterhouse Coopers Pvt. Ltd. Vs. commissioner of Income Tax and another [2012 (9) TMI 775 - SUPREME COURT], for coming to the conclusion that where interest over delayed deposit of tax deducted at source is paid, the levy of penalty may not be imposed. The requirement of deposit of interest is an independent provision, which has no relevance so far as imposition of penalty is concerned. Under the statutory scheme, once it is found that tax deducted at source was not deposited within time, as was warranted under sub-section 6, payment of interest follows as a consequence and has to be paid. Imposition of penalty is a distinct provision imposing liability of penalty to the extent permitted in law. Tribunal was not justified in deleting the penalty levied under Section 34 (8) - matter is remitted back for a fresh consideration on the quantum of penalty to be imposed - appeal allowed by way of remand.

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• 2017 (4) TMI 877
  Cancellation of registration certificate - assessee had wrongly claimed benefit of I.T.C., showing purchase of goods from M/s Shree Krishna Builders & Developers, Chandpur, Bijnor, whereas no such sale was made by the concerned developer - whether wrongful claim of I.T.C is sufficient ground for cancellation of registration certificate? - Held that: - In case claim of I.T.C. is found to be false or incorrect, then it can be reversed by invoking jurisdiction under Section 14 of the Act - By virtue of proviso to Section 14, the assessee would only be liable to pay interest at a rate of 15% per annum - The Act does not contemplate that if claim of I.T.C. is reversed the registration of a dealer could be cancelled in addition to reversal of ITC - revision allowed - decided in favor of assessee.

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• 2017 (4) TMI 876
  Quashing of FIR - case of Revenue is that the applicant evaded the tax liability of 24,96,72,373/by preparing false record, the goods were exported outside the State of Gujarat, and thereby, evading the Value Added Tax payable to the State of Gujarat - offence punishable under Sections 177, 406, 409, 419, 420, 465, 468, 471, 474, 477(A) and 120B of the Indian Penal Code and Sections 85(1) (b)(c)(e)(f)(g) and 85(4) of the Gujarat Value Added Tax Act, 2003. Held that: - some of the offences with which the applicant herein has been charged is found both in Section 85 of the Value Added Tax Act and also under the Indian Penal Code. However, from the record, it can clearly be seen that in addition to the offences which are common in both the statute, the F.I.R. is also registered for certain offence under Sections 406, 409, 420, 465, 468, 471, 474, 477(A) and 120B of the Indian Penal Code. If the special Act has an overriding effect like the one under the Information Technology Act, then it makes all the difference. Once the special provisions having the overriding effect do cover a criminal act and the offender, he gets out of the net of the Indian Penal Code. It cannot be said, by any stretch of imagination, that Section 85 of the Gujarat Value Added Tax Act, 2003 covers the offences punishable under Sections 177, 406, 409, 419, 420, 465, 468, 471, 474, 477 and 120B of the Indian Penal Code. Reliance was placed in the case of State of West Bengal Versus Narayan K. Patodia [2000 (4) TMI 777 - SUPREME COURT OF INDIA], where By lodging FIR alone no investigation is conducted by the police. It is the first step towards starting investigation by the police. If High Court was of the opinion that investigation has to be conducted by the Bureau then also there was no need to quash the FIR. The matter is still at the stage of investigation. The Investigating Officer is otherwise duty bound to act in accordance with law in support of the prosecution case before the chargesheet is filed - application rejected - decided against applicant.

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• Indian Laws

• 2017 (4) TMI 875
  Attachment of immovable properties ordered by PF organization - priority over the dues - Secured creditors (Banks) or PF organization - Held that:- Inclusion of Section 31B does not change the position insofar as primacy of claim under the provisions of the EPF Act is concerned. The mention of Government dues which would include revenues, taxes, cesses and rates due to the Central Government, State Government or local authority would not take into its fold, the first charge created by operation of law in the form of Section 11(2) of the EPF Act. On the other hand, what is sought to be recovered by the petitioner-Bank from respondent No.2 is its debts which are included in Section 11(2) of the EPF Act and therefore, there is no hesitation in holding that the PF organization was within its power to issue the order dated 09.08.2016. The challenge, therefore, for quashing and setting aside the aforesaid order fails. The petition is dismissed.

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• 2017 (4) TMI 874
  Prosecution of offence alleged by virtue of Section 141 of the Negotiable Instruments Act - Held that:- The provisions of Section 138 of the Negotiable Instruments Act are enacted taking into consideration the currency of cheques for a period of six months from the date of issue or the reduced period of validity, whichever is earlier. Therefore, this provision of the Negotiable Instruments Act contemplates cheque with lesser period of validity than six months, which is the general banking practice and stipulates that the cheque should be presented for encashment either within the period of six months or within the period of validity of the cheque, whichever is earlier. Hence, a cheque, which is issued with the reduced validity period, has to be presented for encashment within the expiry of that period so as to attract the provisions of Section 138 of the Negotiable Instruments Act. Indisputably, in the case on hand, the cheque was presented by the complainant for encashment after the expiry of currency of three months and in such circumstances, the provisions of Section 138 of the Negotiable Instruments Act are not attracted in this case in view of Clause (a) of the proviso to Section 138 of the Negotiable Instruments Act.

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