TMI Tax Updates - e-Newsletter
April 22, 2017

Case Laws in this Newsletter:

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

TMI SMS

• Renting of immovable property service - residential property cannot be taxed even if used for furtherance of business or commerce - Tri

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• Sale of old depreciable assets - LTCG or STCG - if whole business sold as slump sale, section 50(2) is not applicable - Taxable as LTCG - SC

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• Deduction u/s 80IB - the flower beds which are below the floor level can not form part of constructed area of flat - Tri

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• Self adjustment of service tax paid in excess cannot be denied on the ground that adjustment is possible only for succeeding month/ quarter

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• Payment received by lessor on behalf of the workers used by the lessee of a factory is not taxable as Manpower recruitment & supply services

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Articles

1. Transition Provisions under CGST Act,2017 with Rules

   By: Sanjeev Singhal

2. ANTI PROFITEERING MEASURES IN GST

   By: Dr. Sanjiv Agarwal

News

1. Service charge not mandatory; govt issues guidelines

2. World Bank Approves $ 375 Million Loan for Developing National Waterway-1

3. Pradhan Mantri Garib Kalyan Deposit Scheme (PMGKDS), 2016 - Amended

4. Date for filing of declaration under PMGKY extended upto 10th May, 2017

5. RBI Reference Rate for US $

6. The Union Finance Minister holds a bilateral meeting with the US Commerce Secretary

Notifications

Customs

1. 16/2017 - dated 20-4-2017 - Cus

Exempt goods falling under chapter 30 of first schedule of Customs tariff Act 1975, for supply under Patient Assistance Programme run by specified pharmaceutical companies

Income Tax

2. F. No. 3(1)-W&M/2016 - dated 19-4-2017 - IT

Amendment to Pradhan Mantri Garib Kalyan Deposit Scheme, Notification No S.O. 4061 (E)

Circulars / Instructions / Orders

Income Tax

1. 14/2017 - dated 21-4-2017

Extension of time for filing declaration under the Taxation and Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016

Companies Law

2. 02/2017 - dated 20-4-2017

Clarification regarding online generation of Challans for Offline payment cases

Highlights / Catch Notes

Income Tax

• Business Sale Taxed as LTCG, Not STCG, Under Income Tax Act; Section 50(2) Inapplicable for Entire Business Sale.

  Case-Laws - SC : Slump sale - taxable as LTCG or STCG - sale of depreciable assets - the provisions of Section 50 (2) would apply to a case where the assessee transfers one or more block of assets, which he was using in running of his business. Such is not the case here because in this case, the assessee sold the entire business as a running concern. - SC
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• High Court Upholds Special Audit u/s 142(2A) Due to Complex Business Transactions and Specialized Activities.

  Case-Laws - HC : Special audit u/s 142[2A] - AO's formation of belief that looking to the multiplicity of the transactions in the accounts and specialized nature of business activities of the assessee, a special audit is called for, and therefore, it cannot be faulted. - HC
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• Reopening Assessment: Incorrect Claim of Interest Paid to Indian Banks for Tanker Hire Charges in Foreign Currency.

  Case-Laws - HC : Reopening of assessment - payment made towards Tanker Hire Charges in foreign currency on cash basis - the grounds on which the assessment is sought to be reopened is that the interest was paid to the banks situated in India. However, the same is factually not correct. - HC
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• Amendment to Income Tax Act Section 142(2C) on "suo motu" Special Audit Authority Effective from April 1, 2008.

  Case-Laws - HC : Special audit - Power of the AO - the amendment whereby the word "suo motu" were inserted in sub section (2C) of Section 142 was to be applicable with effect from 1st April, 2008 only, the amendment cannot be said to be clarificatory or retrospective in nature. - HC
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• Flower Beds Below Floor Level Excluded from Constructed Area for Section 80IB(10) Tax Deduction Eligibility.

  Case-Laws - AT : Deduction u/s 80IB - the flower beds which are below the floor level can not form part of constructed area of flat for the purpose of determining the eligibility of the assessee to deduction u/s 80(IB)(10) of the Act. - AT
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• Taxing Unapproved Flat Advance Is Unjustified; Income Declared Post-Approval Can't Be Taxed Twice.

  Case-Laws - AT : There is no merit in the action of AO for bringing tax net advance amount received in respect of flat for which no permission was there for construction. Moreover, assessee itself has offered the said amount in the subsequent year when the plan was approved; there is no reason to tax the very same income double - AT
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• Tax Authority Must Consistently Apply Expert Opinions on Poultry Manure in Agricultural Tax Assessments, Rules CIT(A.

  Case-Laws - AT : Additions against Sale of manure in the nature of poultry droppings - AO had accepted the expert opinion insofar as it related to feed consumption of bird at 55-60 KGs for 60-weeks. However, when it came to poultry dropping, he refused to consider the opinion of the said expert - CIT(A) was justified in directing the A.O. to accept the expert opinion in toto. - AT
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• TPO's Role Limited to Evaluating Arm's Length Pricing, Not Benefits in Royalty Payment Agreements.

  Case-Laws - AT : TPA - the jurisdiction and power of TPO is to determine arm's length price of Royalty and the order of TPO holding that the assessee had not derived any benefit under the said Agreement is beyond the scope of TPO while benchmarking the international transaction for the purpose of determining arm's length price - AT
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Indian Laws

• Mumbai Courts Hold Exclusive Jurisdiction in Arbitration Agreement Due to Being Designated Juridical Seat.

  Case-Laws - SC : Exclusive jurisdiction clause for the courts in arbitration agreement - Scope of the agreement - Thus Mumbai courts alone have jurisdiction to the exclusion of all other courts in the country, as the juridical seat of arbitration is at Mumbai. - SC
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• Supreme Court Affirms Rule 5: Swift Recovery for Micro, Small Enterprises in Madhya Pradesh as Land Revenue Arrears.

  Case-Laws - SC : State Government permissibility to enact Rule 5 of the Rules for recovery of the amount as arrears of land revenue - Madhya Pradesh Micro and Small Enterprises Facilitation Council Rules, 2006 - , providing a speedy recovery by way of arrears of land revenue, in fact, was the need of the day and Rule 5 has been rightly enacted to ensure speedy recovery and to ensure that small, micro and medium industries do not suffer. - SC
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Service Tax

• Tax on Renting Immovable Property for Business Use Overturned; Nature of Parties Irrelevant to Tax Scope.

  Case-Laws - AT : Renting of immovable property service - case of Revenue is that since the property is used for furtherance of business or commerce, the renting of immovable property service is liable to tax - The argument of revenue is not correct - The nature of contracting parties or the occupation of the occupant has no relevance to decide the scope of the tax entry - demand set aside - AT
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• Hotel Room Charges Excluded from Mandap Keeper Service Category for Service Tax in Event Hires.

  Case-Laws - AT : Mandap Keeper Services - the hotel rooms hired by the persons at the time of hiring the mandap/garden area to conduct marriage etc. - room charges for letting out the rooms in the hotel cannot be included in the ‘Mandap Keeper Service’ for service tax liability - AT
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• High Court Rules Registration Not Required for Cenvat Credit Refund u/r 5 of 2004 Rules.

  Case-Laws - HC : Refund of unutilized cenvat credit - Rule 5 of the 2004 Rules does not stipulate registration of premises as a necessary prerequisite for claiming a refund - refund allowed - HC
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• Penalty and Extended Limitation Unjustified for Non-Declaration Amid Contentious Service Tax Obligation Due to Ongoing Litigations.

  Case-Laws - AT : Levy of penalty - extended period of limitation - suppression of facts cannot be alleged on mere non-declaration in the returns when the issue whether service tax is payable on the said services was contentious as several litigations were pending - AT
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• Guilty of Fact Suppression: Equal Penalty Imposed u/s 78 of the Finance Act, 1994.

  Case-Laws - AT : Penalty - There was sufficient evidence to establish that the respondent is guilty of suppression of facts - The law laid u/s 78 of the FA, 1994 mandates imposition of equal penalty when suppression of facts are established. - AT
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Central Excise

• Refund Granted: Pre-Deposit Recorded as Expenditure Not Unjust Enrichment, Says Court in Central Excise Case.

  Case-Laws - AT : Refund claim - unjust enrichment - Merely because it was shown as expenditure, the department cannot contend that pre-deposit made by appellant is hit by unjust enrichment - refund allowed - AT
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VAT

• High Court Confirms Higher 12.5% Tax Rate for Cement After Petitioner Used Fraudulent Registration Document.

  Case-Laws - HC : Concessional rate of tax - cement - taxable at 4% or 12.5%? - the petitioner is relying upon a fake document of registration and he was also aware that ‘cement’ was never specified in the registration certificate of M/s Meghrudra Enterprises - demand confirmed - HC
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Case Laws:

• Income Tax

• 2017 (4) TMI 925
  Slump sale - deduction u/s 48(2) - sale of depreciable assets - taxable as LTCG or STCG - whether the case of the assessee was covered u/s 50(2) because it was in the nature of short term capital gain? - Held that:- The case of the respondent (assessee) does not fall within the four corners of Section 50(2) of the Act. Section 50 (2) applies to a case where any block of assets are transferred by the assessee but where the entire running business with assets and liabilities is sold by the assessee in one go, such sale, in our view, cannot be considered as “short-term capital assets”. In other words, the provisions of Section 50 (2) of the Act would apply to a case where the assessee transfers one or more block of assets, which he was using in running of his business. Such is not the case here because in this case, the assessee sold the entire business as a running concern. As rightly noticed by the CIT (appeal) that the entire running business with all assets and liabilities having been sold in one go by the respondent-assessee, it was a slump sale of a “long-term capital asset”. It was, therefore, required to be taxed accordingly. Our view finds support with the law laid down by this Court in Commissioner of Income Tax, Gujarat vs. Artex Manufacturing Co. [1997 (7) TMI 7 - SUPREME Court].

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• 2017 (4) TMI 924
  Validity of reopening of assessment - notice issued to non existent company - HC [2016 (12) TMI 872 - GUJARAT HIGH COURT] held the impugned notices issued against the non existent Company, cannot be sustained and the same deserves to be quashed and set aside - Held that:- After having heard for quite sometime, the learned Senior Counsel appearing for the petitioner(s) sought permission to withdraw the special leave petitions in order to pursue the matter upto Income Tax Appellate Tribunal after completion of the assessment. Permission is granted. Special Leave Petitions are, accordingly, dismissed as withdrawn.

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• 2017 (4) TMI 923
  Claim of deduction u/s 80IA - Tribunal not allowing the appellant to raise additional ground in appeal - Held that:- The claim for deduction under Section 80IA of the Act was not made before the Assessing Officer or the CIT(A) but was made for the first time only before the Tribunal nor was there any evidence in support of the claim for the subject assessment year on record. Thus it stands covered by the above decision in Gurjargravures Pvt. Ltd. (1977 (11) TMI 1 - SUPREME Court). The aforesaid decision of the Apex Court was subject matter of consideration in Jute Corporation of India Ltd.(1990 (9) TMI 6 - SUPREME Court ) wherein the Court while distinguishing Gurjargravures Pvt. Ltd. (supra) held that the additional ground could also be raised before the appellate Authority if such ground could not have been raised at the earlier stage i.e. when the return of income was filed. This is only when the assessee is able to satisfy the appellate Authority that the ground now raised was bona fide and the same could not have been raised earlier for good reasons. - In such cases, the raising of additional ground could be allowed. In this case, there is nothing on record to indicate as to what was the reason which prevented the appellant assessee from raising a claim for deduction under Section 80IA of the Act for subject assessment year during the proceedings before the Assessing Officer and the CIT(A). Therefore, in the above facts , the view taken by the Tribunal in not allowing the appellant to raise additional ground in appeal is correct. Where only a pure question of law arises from facts which are already on record, then there is no reason why the appellate authority should not consider the question of law so as to determine the correct tax liability of an assessee in accordance with law. However, where evidence is to be examined and that is not on record, then it will be considered only if the parties seeking to raise the additional ground satisfies the authority concerned that for good and sufficient reasons, the ground could not be raised before the lower authorities. In the present facts, no such ground has been made out by the assessee before the Tribunal. In the present facts, as pointed out above and being reiterated once more, the additional ground, which is raised, is not a pure question of law, but would depend upon the satisfaction of the authority as to the facts existing in the subject assessment year for allowing the benefit of Section 80IA of the Act. - Decided in favour of the respondent – revenue and against the appellant – assessee.

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• 2017 (4) TMI 922
  Deemed to have constructive notice of a case - appearance of Advocate on behalf of Revenue - Held that:- In terms of Rule 658 of the Bombay High Court (Original Side ) Rules, the party, at whose instance the References have been made, (in this case the Applicant-Assessee) is required to take all steps to bring References to final conclusion and for that purpose, shall serve notice upon the opposite party within a period of two months from the receipt of the References by the High Court from the Tribunal. The Applicant-Assessee has admittedly not served these References upon the Respondent-Revenue. It, therefore, appears that the Applicant-Assessee was not interested in pursuing these References. Merely because the References have now come up on board almost sixteen years after being filed, the Applicant-Assessee is seeking to revive its interest in the matter by pleading constructive notice. In the facts of this case, there is no notice of the References to the Revenue, constructive or otherwise. Therefore, we hold that the Applicant-Assessee is not interested in prosecuting the References as they have not been served upon the Revenue. In the above view, both these References are returned unanswered.

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• 2017 (4) TMI 921
  Special audit under Section 142 [2A] - proper material on record and reasons recorded - Held that:- As per amended Section 142 [2A] of the Act, apart from the nature and complexity of the accounts, etc., even in case of multiplicity of transactions in the accounts or specialized nature of business activity of the assessee and the interests of the Revenue, the Assessing Officer can pass an order for special audit in exercise of powers conferred under Section 142 [2A] of the Act. Therefore, while forming an opinion to get the accounts audited by special auditor; considering the specialized nature of business activities of the assessee, there need not be any books of account before the Assessing Officer. In the present case, having found that there are complex issues relating to introduction of land by the partners into the firms; revaluation of land; credit of partners in capital account equal to revalued amount of land; conversion of capital account to loan account of shareholders and issues relating to issuance of equity shares against the balances of revaluation credits at an unreasonable premium, and after having been satisfied that considering the specialized nature of business activities of the assessee, the Assessing Officer has passed an order of special audit in exercise of powers under Section 142 [2A] of the Act. We see that the decision for audit of the assessees' account is backed by proper material on record and reasons recorded by the Assessing Officer. His formation of belief that looking to the multiplicity of the transactions in the accounts and specialized nature of business activities of the assessee, a special audit is called for, and therefore, it cannot be faulted. No error and/or any illegality committed while passing the order under Section 142 [2A] of the Act. Under the circumstances, the present writ petitions deserve to be dismissed

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• 2017 (4) TMI 920
  Disallowance of claim of depreciation on non compete fees - Held that:- Considering the fact that the similar claim on non compete fees was allowed in the earlier years and same has been accepted by the Revenue in essence of any change in facts, the assessee is rightly held to be entitled to the depreciation on non compete fees. In the recent decision in the case of Commissioner of Income Tax, Delhi IV vs. M/s. Dalamia Promoters & Devels (P) Ltd [2015 (9) TMI 1247 - SUPREME COURT] has observed and held that Rule of consistency does demand that there being no change in circumstances, the similar treatment is required to be given as per previous years. - Decided in favour of assessee Disallowance of claim of reduction from stock of packing material and from stock of finished goods - AO disallowed the said claim due to failure on the part of the assessee to produce requisite evidence in respect of its claim of reduction of closing stock - Held that:- As found that the assessee has followed due procedure, maintained the list of packaging material contains clear description of the goods that were considered to be not usable and also the list for damaged stock clearly show the material, quantity and description of the various items which were lying at different godowns across the country which were considered to be damaged and accordingly the statement for provision for damage was prepared and on that basis the goods have actually been reduced from the closing stock of finished goods, it cannot be said that the learned CIT(A) as well as learned Tribunal has committed any error in deleting the disallowance of claim - Decided in favour of assessee Disallowance of claim of foreign travel expenses - Assessee could not furnish the details to substantiate the nature of expenses incurred whether they were for personal or business purpose - Held that:- The assessee has submitted the complete details of employees who have travelled abroad, duration of visit, countries visit, nature and amount of expenses and purpose of travel. The learned CIT(A) also observed that even otherwise considering annual turnover of more than Rs. 195 crores, the foreign travel expenditure of Rs. 3,20,467/only was required to be allowed, more particularly, when the same was duly supported by documentary evidence. The aforesaid has been confirmed by the learned Tribunal. Considering the facts and circumstances of the case, we are of the opinion that the learned Tribunal as well as learned CIT(A) rightly deleted the disallowance - Decided in favour of assessee Disallowance of web designing charges, trade mark expenses and survey expenses - AO disallowed the said expenditure by treating the same as capital expenditure - Held that:- Delhi High Court in the case of CIT vs. Indian Visit Com Pvt Ltd (2008 (9) TMI 8 - DELHI HIGH COURT ) held that in case of expenditure on website, there is no change in the fixed assets of the assessee and no asset has been created but it is a tool for facilitating the business of the assessee and therefore, held expenditure of website to be of revenue nature. - Decided in favour of assessee Trade mark expenses, also and following decision of the Hon'ble Supreme Court in the case of Finlay Mills Ltd (1951 (10) TMI 1 - SUPREME Court) the learned CIT(A) held that the trade mark expenses is of revenue in nature as the same does not created any assets or it does not result into any advantage of enduring nature.- Decided in favour of assessee Survey expenses looking to the nature of the business of the assessee to keep their products constantly updated keeping in view the customer preferences and the market demand and requirement trends, such survey is required. Therefore, the learned Tribunal correctly held survey expenses as revenue in nature.- Decided in favour of assessee TDS u/s 194C - disallowance u/s 40(a)(ia) incurred on account of gift article purchased for sales promotion - Held that:- Considering the fact that merely because the logo of the company was added on the gift article which was to permit its business, it cannot be said that the purchase of goods article was a work contract for which TDS was required to be deducted. Logo was required only for the purpose of identification of the company. Therefore, the same is rightly held to be allowable as business expenditure. We are in complete agreement with the view taken by the learned CIT(A) as also learned Tribunal.- Decided in favour of assessee

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• 2017 (4) TMI 919
  Reopening of assessment - payment made towards Tanker Hire Charges in foreign currency on cash basis - Held that:- From the objections it appears that payment of Tanker Hire Charges was made to the resident of U.K. and Singapore only. Revenue is not in a position to point out any tangible material available with the A.O. in support of his belief that any payment of Tanker Hire Charges was made to the resident of France, on which T.D.S. was required to be deducted. There is not tangible material available with the A.O. to form an opinion that the income chargeable to tax has escaped assessment within the meaning of section 147. The assessment is sought to be reopened beyond the period of four years and there does not appear to be any failure on the part of the assessee in not disclosing the true and correct facts necessary for assessment and also on the ground that there was no tangible material available with the A.O. with respect to any payment of Tanker Hire Charges to the resident of France, on which T.D.S. was required to be deducted and thereby no income chargeable to tax has assessed the assessment, the impugned reassessment proceedings cannot be sustained and the same deserves to be quashed and set aside. It is required to be noted that one of the grounds on which the assessment is sought to be reopened is that the interest was paid to the banks situated in India. However, the same is factually not correct. As per the specific case on behalf of the assessee so stated even in the objections, no amount of interest was paid to any of the banks situated in India. Under the circumstances, assumption of jurisdiction to reopen the assessment on the aforesaid ground is on incorrect factual premise. Under the circumstances also the impugned reassessment proceedings deserve to be quashed and set aside. Present petition succeeds. The impugned notice issued upon the assessee under section 148 of the Income Tax Act, 1961 for the A.Y. 2009-2010 is hereby quashed and set aside. - Decided in favour of assessee.

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• 2017 (4) TMI 918
  Special audit - Powers of AO prior to amendment in Section 142 (2C) with effect from 1st April 2008, to suo motu extend the time limit for the special auditor to submit his report in terms of Section 142 (2A) Held that:- It is not in dispute that said question stands answered in favour of the Assessee and against the Revenue by the decision of this Court in Commissioner of Income Tax v. Bishan Saroop Ram Kishan Agro (P) Ltd (2011 (5) TMI 540 - DELHI HIGH COURT ) wherein held the amendment whereby the word "suo motu" were inserted in sub section (2C) of Section 142 was to be applicable with effect from 1st April, 2008 only, the amendment cannot be said to be clarificatory or retrospective in nature. The amendment was prospective and was to be applicable with effect from 1st April, 2008 only - Decided against the revenue.

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• 2017 (4) TMI 917
  TDS u/s 195 - Addition of reimbursement of expenses to the head office(HO)for expenses incurred on behalf of the assessee by the HO - Held that:- We find that the assessee had made payment its sister concern located in Singapore for the services rendered by that entity, that it had claimed the payments were reimbursements only without any mark up. The assessee had produced the debit note raised by the foreign entity.The invoices issued by the SGS talk about reimbursement,software maintenance charges,data communication charges, EDP consumables and others.If the DRP had some doubt about maintenance of software,it should have called for explanation from the assessee. But,doubt cannot take place of evidence to confirm any addition. Page 24 of the paper book contains detail of various charges paid by the assessee to the foreign entity.The Panel has not brought anything on record to controvert the entries appearing in it. Besides,Protocol 7 to the DTAA also supports the stand taken by the assessee. As relying on Steria case [2016 (8) TMI 166 - DELHI HIGH COURT] we are of the opinion payment made by the assessee was neither royalty nor FFTS. It was case of pure and simple reimbursement. Secondly, the assessee had not made any payment to Singapore Telecommunication - Decided in favour of assessee. Not allowing the TDS credit on interest income paid to HO - Held that:- During the course of hearing before us, the AR stated the assessee had paid interest to the HO for which TDS was paid, that the departmental authorities had denied to give credit for the taxes paid,that AO should be directed to give the credit for the tax paid by it, the DR left the issue to the discretion of the Bench. Thus we are of the opinion that matter should be sent back to the file of AO.He is directed to give credit for the taxes paid after verification. Second Ground is allowed in favour of the assessee,in part. Adjustment to the sales credit commission earned on sale of treasury products on behalf of the AE - Held that:- Identical issue stands decided in favour of the assessee by the order of the Tribunal for the AY.2008-09 wherein as considered it fair and proper and in the interest of justice to set aside this matter to the A.O./TPO with a direction to consider the said objections of the assessee and recompute the average margin of the comparables after taking into consideration the said objections. We also direct the A.O./TPO to apply the average margin of comparables so recomputed to the operating cost of the assessee relating to its relevant transactions with its AEs in order to determine the ALP of the said transaction as well as the TP adjustment to be made in respect of such transactions.Needless to observe that the A.O. shall offer proper and sufficient opportunity to the assessee of being heard on this matter.

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• 2017 (4) TMI 916
  Revision u/s 263 - assessment order treating the subsidy from the Government of Maharashtra as capital receipt is erroneous and prejudicial to the interest of the Revenue - Held that:- Now subsidy given by the Central Government or a State Government or any authority etc. for any purpose, except where it is taken into account for determination of the actual cost of the asset under Explanation 10 section 43(1), has become chargeable to tax. Even if a subsidy is given to attract industrial investment or expansion, which is a otherwise a capital receipt under the preamendment era, shall be treated as income chargeable to tax, except where it has been taken into account for determining the actual cost of assets in terms of Explanation 10 to section 43(1). This amendment is patently prospective. As the assessment year under consideration is 2008-09, section 2(24) (xviii) shall have no operation. In view of the foregoing discussion, we are satisfied that the subsidy received by the assessee from the Government of Maharashtra is a capital receipt and accordingly not chargeable to tax. It is a settled legal position that if two views are possible on a particular point and the Assessing Officer has taken one of such possible views, it is not open to the CIT to treat the assessment order erroneous and prejudicial to the interest of the Revenue and impose the other possible view as against the one canvassed by the Assessing Officer. The discussion made in the preceding paras amply shows that the view taken by the AO in treating subsidy received from the Maharashtra Government as a capital receipt, in any case, being a possible view, cannot be interfered with in the proceedings u/s 263 of the Act. We, therefore, set aside the impugned order. - Decided in favour of assessee.

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• 2017 (4) TMI 915
  Disallowance u/s 14A - Held that:- We remit back the matter to the file of the Ld. AO to consider the issue afresh in the light of the above order of the Tribunal in the case of Lakshmi Electrical Drives Ltd [2017 (4) TMI 238 - ITAT CHENNAI] and pass appropriate order in accordance with merits and law. We also make it clear that for the investments made in mutual funds, provisions of Section 14A read with Rule 8D will be applicable since the assessee would incur some expenditure at least for the decision making process as to in which mutual fund the investment has to be made and at what point of time exit from such funds. It is ordered accordingly.

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• 2017 (4) TMI 914
  Unaccounted production and scrap out of alleged undisclosed imports - Held that:- The actual imports, as verified from the bills of entry produced by the assessee were reproduced in the impugned order in the tabulation form. Therefore, it was found that the actual shortage out of tin imported on the basis of licenses issued for 8118.706 MT works out to only 2.754 MT, which is undoubtedly negligible. The difference of 59.025 MT earlier arrived at is mainly relatable to the import of 20.620 MT on license no. 3079530, and of 36.847 MT on 11.09.1991 on license No. 2240176. After considering the import in 1991-92 of 57.467 MT, the figure of total import between Assessment Year 1984-85 and 1989-90 comes to 8058.283 MT, which is marginally less than the quantity of 8059.975 MT recorded in the appellant's books of accounts. The combined import of a total quantity of 8115.772 MT on the basis of licenses issued between 16.07.1984 and 17.12.1987, is supported by the bills of entry, as well as the order of the Addl. DG of Foreign Trade dated 20.10.1994. Therefore, the addition made of unaccounted production and scrap out of alleged undisclosed imports, entirely on the basis of the seized Form A, was accordingly found to be without basis, and was rightly deleted by the Ld. CIT(A), which does not need any interference on our part, hence, we uphold the order of the Ld. CIT(A) on the issues in dispute and accordingly, we dismiss the ground nos. (i) & (ii) raised by the Revenue. Addition on account of interest relatable to interest free advance - Held that:- the asssessee has shown that as against the interest free advance of Rs. 7,05,000/- to Shri Ravi Goyal, the balance sheet shows a credit balance of Rs. 3,00,000/- in the name of Shri Ravi Goyal. Hence, the interest free advance is only Rs. 4,05,000/-, which is out of capital of Rs. 6,53,883/- as well as internal accrual. The balance sheet indicates that the assessee had sufficient funds from which the interest free advance could have been advanced. The Assessing Officer has not proven the utilization of the interest bearing funds in making the interest free advances. In the body of the order, the disallowance of interest is stated to be as discussed in Assessment Year 1993-94 at page No. 14 to 15. Hence, the observation of the Assessing Officer cannot be said to be based on facts or on verification of the utilization of borrowed funds. No disallowance of interest paid to the bank is justified without rebuttal of the assessee’s contention that the advances had been given from his own capital and internally generated funds. Hence, the addition made of Rs. 84,600/- on this account was rightly deleted, which does not need any interference on our part, hence, we uphold the order of the Ld. CIT(A) - Decided against revenue

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• 2017 (4) TMI 913
  Validity of assessment u/s 143(3) r.w.s.153A passed on the non-existing entity - Held that:- The assessment made u/s 143(3) r.w.s.153A are bad in law being nullity in the eyes of law as the search warrant was issued in the name of non-existing entity. - Decided in favour of assessee Appointment of DVO - Held that:- We find that the valuation office was engaged by the Department from Central Public Works Department, Government of India, who was technical expert. After perusing the provisions of section 132 (2) of the Act, we find in the search cases it is usually to take opinion of technical experts from the qualified engineers working in CPDW. In the case before us, the services of DVO was taken for the measurements of flats which in our opinion, no other person could have done better way as the matter being highly technical. We also find that due opportunity was given to the assessee by the department to controvert the finding of the AO by giving copy of the valuation report, so, in view of these facts we are of the considered view that the ground raised by the assessee has no substance and therefore, the ground raised by the assessee is dismissed. Denying the claim for deduction u/s 80IB(10) for including the flower bed area which is open to sky and not on floor level and 50% of common wall area as part of built up area prescribed under section 80IB(14) - Held that:- We find considerable force in the submissions of the assessee that the flower bed area and common wall area are not includible in the definition of built up area while calculating the eligible limit of 1000 sq. ft for the purpose of allowing deduction u/s 80IB(10) of the Act. The flower bed area is open to sky and not covered by any sides whereas balcony is covered with three sides. The flower bed area is few inches below floor level. It is the submission of the assessee that the flower bed area is outside the balcony area and the starting point for the flower bed area is a point where the balcony area ends.After considering the rival submissions and materials placed before us including the decisions of the rival parties we find that the flower beds which are below the floor level can not form part of constructed area of flat for the purpose of determining the eligibility of the assessee to deduction u/s 80(IB)(10) of the Act. CIT(A) directing the AO to exclude the service area, window area, window projection, cupboard projection from the definition of built up area for calculating the deduction u/s 80IB(10) of the Act and the eligible area of 1000 sq. ft. - Held that:- On going through the findings of the ld. CIT(A), we do not find any valid reason to include service area, window area, window projections and cupboard projection in the built up area for calculating eligible built up area of 1000 sq.ft for the purpose of computation of deduction u/s 80IB(10) of the Act. Entitlement to deduction of profits u/s 80(IB)(10) in respect of 10 floor completed - Held that:- BMC has issued completion certificate qua the 10 floors on which the assessee calculated the profits of Rs. 61,56,52,158/-. In our opinion the provisions of Act provides for the deduction of profits accruing from housing projects fulfilling the conditions as envisaged in section 80(IB)(10) irrespective of the fact whether the project is completed partly or wholly. In the instant case before us the BMC issued part completion certificate for 10 floors which testified that the 10 floors were complete. So far as the statement recorded during the search is concerned that has no significance in view of the part completion issued by the BMC. We hold that the assessee was entitled to deduction of profits u/s 80(IB)(10) in respect of 10 floor completed.

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• 2017 (4) TMI 912
  Addition of rental income - difference in TDS amount and corresponding income shown in Form 26AS - Held that:- None of the departmental authorities have taken care to properly verify the reconciliation statement submitted by the assessee with reference to Form 26AS as well as the ledger account copies and the return of income filed for the previous assessment years, wherein the assessee claimed to have declared the income corresponding to excess TDS amount. On the basis of documents submitted before us, it has been demonstrated by the assessee that the excess TDS in the impugned assessment year is on account of non-deduction of TDS on service tax as well as amenities amount paid to the assessee in the earlier assessment years. Thus, from the aforesaid material placed on record, we are satisfied that in reality there is no difference in rental income claimed to have been received by the assessee as per the return of income and as attempted to be made out by the department on the basis of the TDS amount shown in Form 26AS. Accordingly, we delete the addition - Decided in favour of assessee. Disallowonce of business expenditure - assessee had not carried out any manufacturing and business activity and is only effecting sales for stock clearance - Held that:- AO has not denied the fact that the assessee is carrying on its trading activity by disposing of the stock available with it. If that is the case, certainly the assessee requires infrastructure/establishment to carry on its business activity even if it relates to disposing of the stock available with it. For carrying on such activity also assessee has to employ person by incurring salary cost, rent payment and many other ancillary and incidental expenditures like electricity, conveyance etc. Similarly, there can be no dispute that bad debts are in course of its regular business activity. Once it is held so, there is no need for the assessee to demonstrate that it has failed in its attempt to recover the debt from the parties. The only requirement being, the assessee has to write off the debt in its books of account. As far as interest expenditure is concerned, when there is no dispute that the assessee is maintaining its establishment to carry on its trading activity it requires capital to run such activity as it has to incur day to day expenditure as well as other regular business expenditure. It is evident the AO has not raised any doubt with regard to the genuineness of the expenditure apart from making general observations. Thus we agree with the CIT(A) that expenditure claimed by the assessee is allowable - Decided in favour of assessee.

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• 2017 (4) TMI 911
  Accrual of income - Taxation of net advance amount received in respect of flat No.701 there is no reason to tax the very same income double. - Decided in favour of assessee.

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• 2017 (4) TMI 910
  Levy of fees under section 234E in intimation issued under section 200A(1) - default in furnishing the TDS statements - Held that:- As decided in Maharashtra Cricket Association Vs. DCIT(CPC)-TDS, Ghaziabad [2016 (10) TMI 104 - ITAT PUNE] the amendment to section 200A(1) of the Act is procedural in nature and in view thereof, the Assessing Officer while processing the TDS statements / returns in the present set of appeals for the period prior to 01.06.2015, was not empowered to charge fees under section 234E of the Act. Hence, the intimation issued by the Assessing Officer under section 200A of the Act in all these appeals does not stand and the demand raised by way of charging the fees under section 234E of the Act is not valid and the same is deleted. The intimation issued by the Assessing Officer was beyond the scope of adjustment provided under section 200A of the Act and such adjustment could not stand in the eye of law. - Decided in favour of assessee

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• 2017 (4) TMI 909
  Sale of manure in the nature of poultry droppings - CIT(Appeals) directed to exclude dropping of birds reared by contract farmers from stock available for sale - Assessment u/s 153A - Held that:- Assessing Officer had accepted the expert opinion insofar as it related to feed consumption of bird at 55-60 KGs for 60-weeks. However, when it came to poultry dropping, he refused to consider the opinion of the said expert. The said expert had clearly mentioned that recoverable manure would not exceed 10 KGs per bird. In our opinion, when reliance is placed on the opinion of an expert, it cannot be considered in part and rejected in part. It should have been considered in whole. Since the addition made by the A.O. is based on the expert opinion of Prof. D. Narahari, Senior Vice President of Indian Poultry Science Association, we are of the opinion that the CIT(Appeals) was justified in directing the A.O. to accept the expert opinion in toto. Assessee itself had estimated the droppings per year per bird at 14 KGs, which was higher than the estimation of 10 KGs per bird made by the expert. We are, therefore, of the opinion that the order of the CIT(Appeals) cannot be faulted on this count. Insofar as bird droppings were concerned, Assessing Officer himself had excluded bird droppings of poultry raised by contracting farms. Such reduction in bird droppings, as noted by the Ld. CIT(Appeals), was to be based on the number of birds grown at contracting farms and not based on the number of birds held in closing stock as done by the Assessing Officer. Just because assessee had valued stock of birds considering a particular strength, we cannot say that poultry droppings of birds under contact farming were not to be excluded. We are of the opinion that the CIT(Appeals) was fair in giving such directions. We do not find any reason to interfere with the order of the CIT(Appeals) in this regard also. Unexplained investment addition under Section 69B - Held that:- Assessee had estimated and admitted unaccounted income from sale of bird droppings and broken eggs during the course of assessment proceedings before the Assessing Officer. We have already upheld the order of the CIT(Appeals) with regard to deletion of additions made by the Ld. A.O. on additional income estimated from sale of bird droppings. In our opinion, the finding of the Ld. CIT(Appeals) that additional income from bird droppings for various assessment years covered by the search assessment was adequate to meet the onmoney payment of Rs. 2,37,99,820/- was justified. Telescoping was rightly allowed by the Ld. CIT(Appeals). We do not find any reason to interfere with the order of the CIT(Appeals) on this aspect also. Revenue appeal dismissed.

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• 2017 (4) TMI 908
  Transfer pricing adjustment - arm's length price in relation to international transactions - selection of comparable - Held that:- The assessee was engaged in the business of manufacture and sale of drive train components namely propeller shafts, universal joints, axles and components thereof which constitute heart of the transmission system. The assessee had set up units to manufacture different components at different places. Thus companies dissimilar with that of assessee in functionality will be deselected for final list of comparable. Working of operating profit margins of the assessee - rectification application - Held that:- In view of our decision in holding that there is a mistake in working out the PLI of assessee company, we direct the Assessing Officer to adopt the figure as adopted in order passed under section 154 read with Rule 13 of the DRP Rules dated 26.09.2014. The Assessing Officer is directed to verify the said claim of assessee and determine the refund due to the assessee along with interest as per the Act. The ground of appeal raised by the assessee is thus, allowed. Disallowance of Management Fees - Held that:- Where there is nexus between the expenditure incurred and the purpose of business, then the revenue cannot put itself in the arm chair of the businessman to decide how much of the expenditure is reasonable. Applying the proposition laid down in S.A. Builders Ltd. Vs. CIT [2006 (12) TMI 82 - SUPREME COURT ]we hold that the expenditure incurred by the assessee on management fees in order to facilitate smooth running of its business is an allowable expenditure in the hands of assessee. Similar expenditure has been allowed in the hands of assessee in preceding year. Another aspect of the issue is that the said management fees is to be taxed in the hands of recipient and even the service tax has been paid by the recipient, evidence of which is placed in the Paper Book. Once the commercial expediency of expenditure is established, then the same is to be allowed as business expenditure in the hands of assessee. - Decided in favour of assessee Royalty paid by the assessee to its associate enterprises - TPA - Held that:- where the Royalties were paid in terms of approval granted by SIA / RBI, then the same are to be considered at arm's length rate. Following the said proposition laid down in CIT Vs. SGS India Pvt. Ltd. (2015 (11) TMI 1619 - BOMBAY HIGH COURT) and ACIT Vs. M/s. Dow Agrosciences India Pvt. Ltd. (2016 (12) TMI 936 - ITAT MUMBAI ), we hold that where the payment of Royalty by the assessee to its associate enterprise Dana Corporation is @ 2.85%is liable to be considered at arm's length rate and no addition is warranted on this count. Accordingly, the claim of assessee is thus, allowed. In any case, the jurisdiction and power of TPO is to determine arm's length price of Royalty and the order of TPO holding that the assessee had not derived any benefit under the said Agreement is beyond the scope of TPO while benchmarking the international transaction for the purpose of determining arm's length price. Accordingly, we hold so.- Decided in favour of assessee

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• 2017 (4) TMI 907
  Disallowance out of Business Promotion and Misc. Expenses claimed - Held that:- The assessee was not able to furnish the relevant details and supporting documents evidences in respect of the claim of the aforementioned expenses before the Assessing Officer (‘AO’) in the course of assessment proceedings. We find from the record that even in appellant proceedings, and also before us, except for raising the ground, the assessee was not able to bring on record any material evidence to establish the claim of the aforementioned expenses. In this view of the matter, we find that the disallowance made by the AO of 10% of the aforementioned expenses to be reasonable in the factual matrix of the case and consequently uphold the same. - Decided against assessee. Addition u/s 41(1) - Held that:- We are of the opinion that the authorities below have not brought on record any evidence or material, including statements of creditors, etc. to show that the debts owed to them have been extinguished or that there was remission or cessation of liability, despite the extension of the period of limitation by acknowledgement of the creditors in the assessee’s balance sheet as on 31/03/2007. We, therefore, hold that the addition of Rs. 10,38,403/- upheld by the Ld. CIT(A) is not sustainable and direct the A.O to delete the same. See CIT vs. Sugauli Sugar Works (P) Ltd.(1999 (2) TMI 5 - SUPREME Court ) - Decided against revenue.

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• 2017 (4) TMI 906
  Disallowance u/s 40(a)(ia) - scope of amendments - Held that:- Hon’ble Supreme Court in the case of Alom Extrusions Ltd ( 2009 (11) TMI 27 - SUPREME COURT ) will equally to the amendment to Sec.40(a)(ia) of the Act whereby a second proviso was inserted in sub-clause (ia) of clause (a) of Section 40 by the Finance Act, 2012, w.e.f. 1-4-2013. The provisions are intended to remove hardship. It was argued on behalf of the revenue that the existing provisions allow deduction in the year of payment and to that extent there is no hardship. We are of the view that the hardship in such an event would be taxing an Assessee on a higher income in one year and taxing him on lower income in a subsequent year. To the extent the Assessee is made to pay tax on a higher income in one year, there would still be hardship. The Hon’ble Delhi High Court in the case of CIT Vs. Ansal Land Mark Township (I) Pvt.Ltd.[2015 (9) TMI 79 - DELHI HIGH COURT ] has taken the view that the insertion of the second proviso to Sec.40(a)(ia) of the Act is retrospective and will apply from 1.4.2005. We therefore accept the submission on behalf of the Assessee are of the view that it would be sufficient if the order of the CIT(A) is set aside and the issue remanded to the AO for verification as to whether payees have included the receipts from the Assessee in their returns of income in terms of the decisions referred to above. In case the payees are not cooperating in providing details, the AO should call for the information u/s. 133(6) or 131 of the Act, for verification of the same. In this regard the Assessee should furnish all the details of assessment particulars of the recipients of payment from the Assessee to the AO to ensure that he does not have any difficulty in making the required verification. The other issues raised by the Assessee in its appeal are therefore left open without adjudication, for the present. - Appeal of the Assessee allowed for statistical purpose.

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• Customs

• 2017 (4) TMI 934
  Undertaking to pay penalty in installments - the balance amount towards penalty will be paid by the appellant in three monthly installments of Rs. 25,000/- each commencing from 05.04.2017 - Revenue, says that, if penalty is paid in the manner indicated above, the demand would get satisified - appeal allowed.

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• Corporate Laws

• 2017 (4) TMI 932
  Auction notice - deposit with SEBI Sahara Refund Account not been done - Held that:- As no amount has been deposited by the contemnor, we are inclined to go ahead with auction for the Aamby Valley City near Lonavala, Maharashtra. It is submitted by Mr. Shekhar Naphade, learned Amicus Curiae assisting the Court in the matter that the Official Liquidator of the Bombay High Court may be appointed to conduct the sale. Mr. Arvind P. Datar, learned senior counsel being assisted by Mr. Pratap Venugopal, learned counsel appearing for the SEBI shall provide the necessary details of the said property to the Official Liquidator, who with his team, shall make the valuation and proceed with the auction. Learned counsel appearing for the contemnor shall provide all the necessary details of the property also to the Official Liquidator within forty-eight hours. If the Official Liquidator requires some amount, which is reasonable, as agreed to by Mr. Datar, he can make a requisition for the same, and the same shall be paid from the SEBI Sahara Refund Account. Mr. Pratap Venugopal, learned counsel assisting Mr. Datar shall forward this order to the Official Liquidator of the Bombay High Court and also all the details that of the Aamby Valley City near Lonavala, as submitted by the contemnor to this Court, so that the Official Liquidator can verify from the contemnor and, thereafter, proceed in accordance with law. If the contemnor, as directed herein-above, gives the necessary details within forty-eight hours from the date of information, the Official Liquidator shall report to this Court directly. Let the matter be listed at 2 p.m. on 27th April, 2017, on which day, the contemnor, Mr. Subrata Roy Sahara, shall remain personally present before this Court. Dr. Prakash Swamy, who has filed the affidavit in I.A. No.247 of 2017, shall also remain personally present at 2 p.m. on 27th April, 2017 before this Court.

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• 2017 (4) TMI 931
  Winding up petition - whether the petitioner-Company, and the respondent-Company have initially entered into a Marketing Budget, which was duly approved by the Chief Financial Officer, and the respondent-Company or not? - Held that:- Admittedly, on 30.3.2016, the petitioner-Company had sent a statutory notice to the respondent-Company. In Para-5 of the said notice, the petitioner-Company h ad claimed that the respondent-Company owe them an amount of Rs. 1,63,06,154/- as on 8th of May 2014. The said para has been denied specifically by the respondent-Company in its reply dated 10th of May 2016. The respondent-Company, has denied that the payment of Rs. 70 lakhs was part payment of the alleged amount of Rs. 2,33,06,154/-. It further claimed that the payment of Rs. 70 lakhs was, in fact, full and final payment of the amount owed by the respondent-Company to the petitioner-Company. Therefore, it further denied the fact that on 8th of May 2014, an amount of Rs. 1,63,,06,154/- was owed by the respondent-Company to the petitioner-Company. Since the denial is an absolute one, since the denial has been made in reply to the statutory notice issued by the petitioner-Company, the learned counsel for the petitioner is unjustified in claiming that denial is an after-thought. Considering the fact that respondent-Company has denied that it owes any debt to the petitioner-Comp any, considering the disputed questions of fact which are involved in the present case, naturally the present winding up petition is not maintainable before this Court. In the present case, since evidence, both oral and documentary, needs to be led in order to decide the disputed questions of fact mentioned herein above, clearly the winding up petition is not the proper remedy

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• FEMA

• 2017 (4) TMI 930
  Proceedings under Section 13 of the Foreign Exchange Management Act, 1999 read with Rule 9 of the Foreign Exchange Management (Adjudication Proceedings and Appeal) Rules, 2000 - Held that:- Reasons have been clearly disclosed by the second respondent in the communications dated 04.11.2016 by specifically indicating that the case requires an indepth examination, meaning thereby, the objections raised by the petitioners as against the allegations levelled against them are required to be considered further and for such consideration, the petitioner must appear in person to putforth their case. Therefore, the reliance placed by the learned Senior counsel for the petitioners on the Division Bench decision of the Bombay High Court will not lend support to his case. For all the above reasons, hold that the communications dated 04.11.2016, which are impugned in these writ petitions, are intended for carrying out an indepth examination by the second respondent as against the allegations raised against the petitioners. Such communications, in my considered opinion, are also in compliance of the principles of natural justice. By the communications dated 04.11.2016, the second respondent has not determined the case against the petitioners or passed an order adverse to their interest. Therefore, the writ petitions are only liable to be dismissed and the petitioners are not entitled for any relief in these writ petitions. The second respondent is hereby directed to issue a fresh notice to the petitioners indicating the date, time and venue for the personal hearing to be given to the petitioners and if any such notice is received, the petitioners are at liberty to appear before the second respondent either in person or through an authorised representative to putforth their defence.

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• PMLA

• 2017 (4) TMI 926
  Money laundering - PMLA Act - petition for stay - Held that:- First appeal is a matter of statutory right and though there is no provision for stay, inherent power is vested with the Appellate Authority to grant interim order protecting the interest of the parties, pending disposal of the appeal. The appeal to the Appellate Tribunal is provided under Chapter 6 of PMLA Act and though under Section 26 of the said Act, there is no express provision for filing petition for stay, in the light of the settled legal position, the Appellate Tribunal has rightly entered petition for stay and at the request of the learned counsel for the respondent, namely the Deputy Director of Enforcement Directorate, Chennai, granted time till 18.04.2017 to file counter with a liberty to file a rejoinder. It is also pertinent to point out at this juncture that provisional order of attachment has also been made absolute and it is the submission of the learned Senior Counsel appearing for the petitioner that the immovable property has also been mortgaged with M/s.Vijaya Bank, Mount Road, Chennai. The learned Senior Counsel appearing for the petitioner, on instructions, would submit that the petitioner will not further encumber or alienate or create any third party right in respect of the immovable property, which is the subject matter of attachment and the said submission, on instructions, is placed on record. Petition for stay has been posted on 18.04.2017 by the first respondent and taking into consideration the averment made by the petitioner in para 11 of the affidavit that her husband is suffering from paralysis and coronary artery disease and living with stunt in the heart and is still under treatment to cure his paralysis and that she along with her family are residing in the premises in question, this Court is of the view that till 18.04.2017, further proceedings in pursuant to the impugned notice of eviction dated 28.02.2017 passed by the third respondent is to be deferred.

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• Service Tax

• 2017 (4) TMI 954
  Management Consultancy Services - appellants carried out various research, development project, training programmes, acting as nodal agency on behalf of different Ministries of the Central Government and Madhya Pradesh Government. Revenue entertained a view that the appellants are liable to service tax in respect of these activities carried out on behalf of the various government Ministries - case of appellant is that the appellants did provide service, which can be categorized under the various taxable categories like “Consulting Engineer, Convention Service, Management Consultants and Market Research Agency” and it cannot be said that they are an arm of the Government and they are rendering these services as an executory function of the Government. Held that: - The appellants were to submit full records of the expenditure with reference to each project to the concerned Ministry. Any surplus of the amount given as grant should be returned to the Government. We find that the decision of the Tribunal in Apitco Ltd. [2010 (7) TMI 176 - CESTAT, BANGALORE], is squarely applicable to the facts of the present case where there was no payment, by any government to the assessee, of any amount in excess of what is called "grant-in-aid". Thus any service provider-client relationship between the assessee and the governments is ruled out. The appellants are not liable to service tax in respect of these activities carried out, by using the grant-in-aid given by the various Ministries/departments of the Government. Though the appellant claimed in the appeal that the invoices indicated that the amount is inclusive of service tax, no evidence is submitted to support such contention. As such, we find that the same requires verification of the actual invoices by the jurisdictional officer. CENVAT credit - denial on the ground that the invoices were not in the appellant’s name but were not in the name of branch/head office - Held that: - denial of credit only on the ground that the address of branch office or head office was mentioned instead of appellant’s address cannot be the ground for denial of otherwise eligible cenvat credit. Appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 953
  CENVAT credit - irregular availment - Department alleged that as the service provider of security service discharged 100% of the tax liability, they have paid in excess 75% of service tax. Further, since liability to pay 75% has not been discharged by the appellant, that amounts to non-payment of service tax to that extent and hence they have appeared to have availed excess cenvat credit - Held that: - There could no dispute that service tax leviable has been fully paid. This fact will therefore satisfy the requirement of Rule 3 ibid and particularly, when such tax liability has been passed on to the appellant and they have also made payment thereof to the service provider, there can be no denial to them of such cenvat credit - credit allowed - appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 952
  Renting of immovable property service - case of Revenue is that though the accommodation is for residential purpose, ultimately such letting out improves the business or commerce of the appellant as well contractors, who took the accommodation on rent. Since the property is used for furtherance of business or commerce, the renting of immovable property service is liable to tax - Held that: - the actual usage of the property for a particular purpose will decide the nature, either ‘residential‘ or used in ‘furtherance of commerce or business‘. The nature of contracting parties or the occupation of the occupant has no relevance to decide the scope of the tax entry - Explanation-I to the tax entry explains the scope of the term, for use in course or furtherance of business or commerce’. It includes use of space in an immovable property as factories, office, buildings, warehouses, theatres, exhibition halls and multiple use buildings. Admittedly, in the present case, the property has not been used for any one of these purposes - demand withheld - appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 951
  CENVAT credit - inputs - input services - Held that: - the steel, cement and such other items have been used to construct the building which is used by appellant to provide the output service of Renting of Immovable Property. Therefore, the credit availed on inputs by appellant prior to 01.04.2011 is eligible for credit - The credit availed on cement, steel etc., as inputs which are used for construction of building after 01.04.2011 is not admissible as per definition of inputs w.e.f. 01.04.2011. From the above, the credit availed on inputs by appellant after 01.04.2011 is not eligible for credit. Input services - The department has denied credit alleging that all these services are for setting up of premises of the appellant and therefore not admissible - It is the case of appellant that the input services were not availed for setting up of the premises, but the services were availed only for modernization and renovation of the premises - Held that: - The period involved in this issue is after 01.04.2011 only. The definition of input services w.e.f. from 01.04.2011 also underwent amendment, whereby the services relating to setting up of factory/premises of provider of output service was deleted from the definition - From the table itself it is clear that the services are not per se for construction of building or setting up of premises and these are merely renovation/modernization works. The services in the table show that these are construction services for laying the flooring, Erection of Machinery, Electric Installation Works, Single Leaf Door, Installation Boom Barriers, Electrical Consultancy Charges. Since these services would fall within the category of modernization, renovation services which come within the inclusive part of the definition of input services, the services are eligible for credit. Extended period of limitation - credit availed on inputs after 01.04.2011 - Held that: - the eligibility of credit was interpretational issue, and appellants were under bonafide belief that credit is admissible while availing the credit - there is no evidence to establish that appellant had availed the irregular credit on inputs after 01.04.2011 by suppression of facts with an intention to evade payment of duty - the extended period is not invokable. Appeal allowed - decided in favor of assessee.

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• 2017 (4) TMI 950
  Rejection of refund claim - N/N. 41/2007 - rejection on account of time limitation - Held that: - The appellant has confined the contest to refund claim in respect of October 2007 to December 2007 in the present appeal. If the period of six months is computed as provided in the amendment of 32/2008-ST the refund claim is well within the period of six months. The amendment dated 18.11.2008 uses the word that for the words sixty days the words six months shall be substituted - impugned order to the extent of rejecting the refund claim for quarter October 2007 to December 2007 is set aside - appeal allowed - decided partly in favor of assessee.

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• 2017 (4) TMI 949
  Imposition of penalty u/s 78 of FA, 1994 - It was revealed that respondents had actually received higher taxable value than that was disclosed in their returns. As it appeared to department that respondents were not co-operating a further search was conducted in their premises on 27.07.2006 and certain documents were recovered - Held that: - the respondent has furnished details to the department only after repeated intimations. Even after that, the department was able to collect proper data for quantification of the demand of service tax only after conduct of search in the premises of the respondent and also after approaching the clients of the respondent. This itself is sufficient evidence to establish that the respondent is guilty of suppression of facts - The law laid u/s 78 of the FA, 1994 mandates imposition of equal penalty when suppression of facts are established. The adjudicating authority imposed penalty of Rs. 35 lakhs which in my view is in excess of that which is allowed in the said provision. However, the respondent is liable to pay equal penalty which is Rs. 32,87,607/- of the service tax confirmed in appeal no. 258/2009 and Rs. 12,26,432/- in appeal no. 259/2009 - appeal allowed - decided in favor of Revenue.

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• 2017 (4) TMI 948
  Mandap Keeper Services - the hotel rooms hired by the persons at the time of hiring the mandap/garden area to conduct marriage etc - Revenue case is that room rent received is also to be considered as an amount received in connection with providing “Mandap Keeper Services” - Held that: - The Tribunal examined similar set of facts and held that such room charges for letting out the rooms in the hotel cannot be included in the ‘Mandap Keeper Service’ for service tax liability - Reference can be made to the decision of the Tribunal in the case of Rambagh Palace Hotels Pvt. Ltd. Vs. Commissioner of Central Excise, Jaipur, [2013 (12) TMI 556 - CESTAT NEW DELHI] - appeal allowed - decided in favor of assessee.

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• 2017 (4) TMI 947
  Valuation - freight - outward movement of goods of the bread division - inapplicability of N/N. 34/2004-ST dated 3rd December 2004 - case of Revenue is that each consignment was freighted at a cost below the threshold prescribed therein was not evidenced - Held that: - Taxability is a primary requisite for raising a demand and in the absence of law providing for levy of the tax, a demand cannot be allowed to sustain merely owing to procedural rigours - it is in the fitness of things that coverage u/s 65(105)(zzp) of FA, 1994 needs to be ascertained despite being raised for the first time before first appellate authority and if so, the extent to which the freight is excluded from the purview of tax. As facts pertaining to the legal issue requires to be examined, it would be appropriate for the original authority to undertake this task - matters remanded back to the original authority to consider the plea of the appellant that the goods were transported by individual truck owners - matter on remand.

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• 2017 (4) TMI 946
  CENVAT credit - ISD invoices are not proper - The department entertained a view that since the invoice is issued to the appellants R&D unit, the same is not eligible for credit on the ground that R&D unit is not providing any output service - Held that: - The credit is solely denied for the reason that R&D cannot be considered as output services or input services, because such services do not have nexus with services exported - The Ld. Counsel also argued on the grounds of limitation. This contention of the department that CENVAT credit taken by the appellant attributable to their R&D unit is irregular, does not have any merits - credit allowed - decided in favor of appellant.

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• 2017 (4) TMI 945
  Penalty u/s 78 of FA, 1994 - GTA services - Scientific and Technical Consultancy services - appellant had utilised the services of a foreign service provider for management and maintenance service during the period 2007-08 to 2010-11 and paid an amount of Rs. 1,88,17,627/- to the foreign service provider - contention of the Department is that the assessee by not taking registration for Management and Maintenance or Repair services received from foreign service provider and by not disclosing the value of the said service in their returns are guilty of suppression of facts and are liable to pay penalty - reverse charge - Held that: - suppression of facts cannot be alleged on mere non-declaration in the returns when the issue whether service tax is payable on the said services was contentious as several litigations were pending - In the case of Vijay Television (P) Ltd. Vs. CST, Chennai [2008 (7) TMI 232 - CESTAT CHENNAI] it was held that mere non-declaration of details in the ST-3 returns cannot be a ground for invoking the extended period - penalty set aside. Penalty u/s 73(4A) and Section 77 - Held that: - Since the appellant has not filed proper returns and had not taken registration for the said service, appellant is liable to pay penalty u/s 77 - Since the appellant has paid service tax along with interest before issuance of SCN, Section 73(3) would apply and therefore the penalty imposed u/s 73(4A) is set aside. Appeal disposed off - decided partly in favor of assessee.

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• 2017 (4) TMI 943
  Refund of unutilized cenvat credit - export of services - unregistered premises - case of assessee is that in the absence of a statutory provision, prescribing that, registration of the premises was mandatory for availing input service tax credit, the Assessee could not be denied refund of unutilized cenvat credit on input services - Whether the decision of CESTAT i.e. Respondent No.1 in allowing refund of Cenvat credit even without registration is correct? - Held that: - Mere perusal of Rule 5 of the 2004 Rules, would, inter alia, show that where a service provider, provides an output service, which is exported, without payment of service tax, he would be entitled to refund of cenvat credit, as determined by the formula provided in the Rule - Rule 5 of the 2004 Rules does not stipulate registration of premises as a necessary prerequisite for claiming a refund - refund allowed - appeal dismissed - decided against Revenue.

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• Central Excise

• 2017 (4) TMI 944
  Maintainability of appeal - alternative remedy - dismissal on the ground that the order assailed in the writ petition was appealable order and there was alternative remedy under the CEA, 1944 - Held that: - we cannot intervene on a point not specifically pleaded before us, on the basis of oral submission of the learned counsel on procedural issues, arising subsequent to delivery of the judgement by the learned First Court - We do not find any purpose would be served in keeping the appeal pending, having regard to our finding on merit of the case in the stay petition - appeal dismissed.

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• 2017 (4) TMI 942
  Maintainability of appeal - project import - the subject issue is pending before the Apex Court in the case of M/s. Om Metals Spml Jv Unit 2 Versus CCE & ST, Jaipur [2013 (11) TMI 1361 - CESTAT NEW DELHI] - Held that: - Since the very subject issue is pending before the Apex Court, of which we have made a reference, we consider it appropriate to dispose of the instant appeal on the terms referred to supra and it will be open for the parties to move an application for revival of the proceedings, if so required, after decision of the Apex Court - application disposed off.

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• 2017 (4) TMI 941
  Imposition of penalty - case of appellant is that appellant had paid the entire service tax alongwith interest in regard to BAS services even before issuance of SCN - Held that: - Appellant has paid service tax of Rs. 3,56,681/- alongwith interest in regard to GTA service prior to issuance of SCN. A small amount of Rs. 1,38,050/- stands unpaid with regard to GTA services. Therefore, the confirmation of entire demand and equal penalty imposed on the entire service tax u/s 78 of FA is unjustified. The penalty to the extent that has been paid by appellant prior to issuance of SCN requires to be set aside - The impugned order is modified to the extent of revising the penalty u/s 78 to the amount of service tax short paid by the appellant to the tune of Rs. 1,38,050/-. The penalty imposed u/s 77 is sustained - appeal disposed off - decided partly in favor of appellant.

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• 2017 (4) TMI 940
  Clandestine manufacture and removal - Ms Ingots - Held that: - The Appellant has given certificate issued by the Chartered Engineer that the Capacity of two furnace installed in the Appellant Unit is 5 Mt each. However during the test check by the officers the capacity of molten material was found to be 5.450 MT and 5.600 MT. In this context if some more quantity can be processed in the furnace than its installed capacity the same cannot be made a ground to allege that the assessee always processed the goods more than the installed capacity. The Appellant in his submission has stated that the pressed Scrap will take less space rather than non pressed scrap and therefore the processing capacity of furnace would vary. We are of the view that otherwise also the processing capacity of the furnace would depend upon the nature and quality of raw material as well as other factors. The maximum capacity result of a heat cannot be applied in each and every heat. Therefore the results of yield would vary and cannot remain constant. Even otherwise the capacity of furnace can not be a ground to demand duty. It has to be shown that the goods were indeed manufactured in the Appellant factory and the same were cleared - In absence of evidence of receipt of raw material and clearance of finished goods, absence of buyers and receipt of any money consideration, the charges of clandestine removal cannot be sustained. Appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 939
  Refund claim - unjust enrichment - denial on the ground that the amount deposited by them during the investigation is shown in their books of account as expenditure and not as receivable - Held that: - Undisputedly, the amount has been deposited during the investigation proceedings. It is in the nature of a pre-deposit. The appellant has deposited the amount of Rs. 3,38,749/- during investigation only with an intention of reducing the burden in case the litigation goes against him. There are no specific instances raised showing the amount being passed on to others. Merely because it was shown as expenditure, the department cannot contend that pre-deposit made by appellant is hit by unjust enrichment - refund allowed - decided in favor of assessee.

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• 2017 (4) TMI 938
  Penalty - whether simultaneous penalty u/r 25 of CER, 2002 and Section 11AC of the CEA, 1944, can be imposed? - Held that: - from the very language of the Rule, it is evident that the scheme of the Act read with the Rules, does not provide for two separate penalties, one u/s 11AC of the CEA, 1944 and another u/r 25 of the CER, 2002 - appeal dismissed - decided against Revenue.

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• 2017 (4) TMI 937
  Rectification of mistake - appellant have also taken the ground of revenue neutrality, which have not been considered while passing the Final Order by this Tribunal and as such there is a mistake apparent on the record, leading to miscarriage of Justice - Held that: - I find that the ground of revenue neutrality was taken which have not been considered, leading to miscarriage of Justice. Accordingly, I modify the Final Order dated 02nd November, 2015 by setting aside the balance tax confirmed Rs. 1,88,364/- approximately, on the invoices No.50 and 51 dated 27/06/2007 and further reduce the penalty to Rs. 36, 201/- under Rule 15 of CCR, 2004 read with section 11 AC of the Act, being the amount already debited vide PLA entry No.13 dated 22/09/2014 - ROM allowed.

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• 2017 (4) TMI 936
  Liability of interest - short payment of tax - the actual cost of cement and steel is much higher during the said period compared to the price fixed by APSEB and the respondents - assessee claims that there was no demand for interest either in the show cause notice or in the duty confirmation orders and therefore they are not liable to pay interest - Held that: - there was no demand of interest in the show cause notice and there was no confirmation of liability to pay interest in the adjudication order also. As there was confusion in the law regarding the liability to pay interest, Section 11AA was introduced. The first proviso to this section speaks about liability to pay interest on all orders passed prior to 1995, if not paid within three months of the date of determination of duty. Explanation (1) and (2) explains how the date of determination of duty is to be reckoned. These explanations deal only with date of determination of duty when the demand is reduced or increased in further stage of appeal. It does not speak of a situation of remand, or a situation where the duty determined is maintained by the appellate forum. Since the appellate authority vide order dated 05.01.2001 has not modified, but maintained the order passed by the adjudicating authority, the liability to pay duty starts from the date of determination of duty which the date of the adjudication order i.e. 04.12.1996. The respondent having not paid the duty within three months from 04.12.1996, the respondent is liable to pay interest till the date of payment of duty - the respondent is liable to pay interest on Rs. 4,12,050/- from 04.12.1996 till date of payment of duty. In regard to the duty demand of Rs. 6,20,103/- the argument of the department that the date of determination of duty is the date of first Order-in-Original i.e. 30.04.1997 is not tenable. In this matter, the Tribunal had remanded the matter for denovo adjudication. Even though in denovo adjudication the very same amount was determined, it will not set the clock back regarding date of determination of duty. Remand by the Tribunal would mean that the order under challenge has lost it s significance - respondent is not liable to pay any interest in respect of demand of Rs. 6,20,103/-. Appeal allowed - decided partly in favor of Revenue.

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• 2017 (4) TMI 935
  Remission of duty - rejection on the ground that the appeal against the rejection of remission of duty is pending before the CESTAT, Bangalore and also that the recovery is stayed by the Tribunal - Held that: - The litigation in respect of the rejection of remission of duty has attained finality. The said judgment passed by the Tribunal is reported in Everest Organics Ltd., (respondent herein) Vs CCE, CUS and ST, Hyderabad-I [2014 (1) TMI 1712 - CESTAT BANGALORE] where the Tribunal upheld the rejection of request for remission of duty - demand upheld - appeal allowed - decided in favor of Revenue.

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• CST, VAT & Sales Tax

• 2017 (4) TMI 933
  Concessional rate of tax - cement - taxable at 4% or 12.5%? - concessional rate denied on the ground that it was not a registered dealer in the item ‘cement’ - whether the petitioner can escape tax liability on account of fraud committed by the purchasing dealer i.e. M/S Meghrudra Enterprises? - Held that: - selling dealer like petitioner is required to satisfy itself that the purchasing dealer was a registered dealer and the goods purchased were actually specified in the latter’s registration certificate - the petitioner is relying upon a fake document of registration and he was also aware that ‘cement’ was never specified in the registration certificate of M/s Meghrudra Enterprises. This being the situation, petitioner is not entitled for any tax benefit at the cost of State exchequer - petition dismissed - decided against petitioner.

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• 2017 (4) TMI 905
  Refund claim - excess VAT paid during different periods - Held that: - only impediment which the Revenue/DVAT has put forward to withhold the petitioner’s claim for the larger sum of over Rs. 4 crores is the fresh SCN u/s 74A issued on 17.02.2017. Considering the circumstances, this Court is of the opinion that the respondents should, while processing the petitioner’s claim for refund of Rs. 4 crores, keep aside the amount of Rs. 12,55,471, which is proposed to be adjudicated through the SCN impugned in WP(C) 2282/2017 - petition allowed - decided in favor of petitioner.

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• 2017 (4) TMI 904
  Refund claim - Revision of order - Section 74A of the DVAT Act - Entitlement to interest u/s 42 of the DVAT Act - delayed grant of refund - the decision in the case of Garg Roadlines Versus Commissioner, Trade & Taxes [2017 (4) TMI 831 - DELHI HIGH COURT], referred - Held that: - It is stated by the respondents that they will obtain instructions and in case the amounts are not refunded, the respondents shall indicate by what dates the petitioner would be refunded the amounts - respondents are directed to process the petitioner’s case for refund - petition allowed - decided in favor of petitioner.

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• Indian Laws

• 2017 (4) TMI 955
  Conviction of the appellant under Section 138 of the Negotiable Instruments Act, 1988 - Held that:- As the duration of the appellant's custody, as is evidenced by the certificate to that effect, that the appellant is entitled to the benefit of the discretion contained in Section 427 of the Code. In arriving at this conclusion we have, as required, reflected on the nature of the transactions between the parties thereto, the offences involved, the sentences awarded and the period of detention of the appellant as on date. It is thus ordered that the substantive sentences of 10 months simple imprisonment awarded to the appellant in the two complaint cases referred to hereinabove would run concurrently. Needless to say, the appellant would have to serve the default sentences, if the fine by way of compensation, as imposed, has not been paid by him. The appeals are thus allowed to this extent. The appellant would be entitled to all consequential reliefs with regard to his release from custody as available in law based on this determination.

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• 2017 (4) TMI 929
  Exclusive jurisdiction clause for the courts in arbitration agreement - whether, when the seat of arbitration is Mumbai, an exclusive jurisdiction clause stating that the courts at Mumbai alone would have jurisdiction in respect of disputes arising under the agreement would oust all other courts including the High Court of Delhi, whose judgment is appealed against? - Held that:- A conspectus of all the provisions shows that the moment the seat is designated, it is akin to an exclusive jurisdiction clause. On the facts of the present case, it is clear that the seat of arbitration is Mumbai and Clause 19 further makes it clear that jurisdiction exclusively vests in the Mumbai courts. Under the Law of Arbitration, unlike the Code of Civil Procedure which applies to suits filed in courts, a reference to “seat” is a concept by which a neutral venue can be chosen by the parties to an arbitration clause. The neutral venue may not in the classical sense have jurisdiction – that is, no part of the cause of action may have arisen at the neutral venue and neither would any of the provisions of Section 16 to 21 of the CPC be attracted. In arbitration law however, as has been held above, the moment “seat” is determined, the fact that the seat is at Mumbai would vest Mumbai courts with exclusive jurisdiction for purposes of regulating arbitral proceedings arising out of the agreement between the parties. Thus Mumbai courts alone have jurisdiction to the exclusion of all other courts in the country, as the juridical seat of arbitration is at Mumbai. This being the case, the impugned judgment is set aside. The injunction confirmed by the impugned judgment will continue for a period of four weeks from the date of pronouncement of this judgment, so that the respondents may take necessary steps under Section 9 in the Mumbai Court. Appeals are disposed of accordingly.

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• 2017 (4) TMI 928
  State Government permissibility to enact Rule 5 of the Rules for recovery of the amount as arrears of land revenue - Madhya Pradesh Micro and Small Enterprises Facilitation Council Rules, 2006 - whether speedy remedy could have been provided under the Rules framed under the Act of 2006? – Held that:- Section 30 of the Act of 2006 extracted above clearly authorizes the State Government to frame the rules to carry out the provisions of the Act and the power is general, as is apparent from reading of section 30(1), 30(2) and 30(2)(b). The objective of the Act is to provide protection to the micro, small and medium enterprises and to facilitate their development. In order to carry out the objective of the Act speedy recovery mechanism has been provided under Rule 5 of the Rule by providing that amount awarded in an arbitral award can be recovered as arrears of land revenue. No doubt that Rule 5 is inconsistent with the provisions contained in section 36(1) of the Act of 1996 which provides recovery mechanism under Order 21 of CPC as a decree, but, in the matter of providing such remedies, it is open to legislate different remedies which may be inconsistent. It is a question of electing a remedy. Election of a remedy for recovery of the amount would depend upon the choice of the award-holder. Both the provisions i.e. section 36 of the Act of 1996 as well as Rule 5 of the Rules of 2006 intend to recover the amount though by different procedures. Intendment of provisions is same. There is no question of any prejudice being caused to the judgment debtor. Thus, the submission raised by learned senior counsel on behalf of the appellant that Rule 5 is inconsistent and repugnant to the provisions of section 36 of the Act of 1996 cannot withstand judicial scrutiny and is liable to be rejected on the anvil of the aforesaid reasoning. The submission was raised on behalf of the appellant that Order 21 of the CPC provides more safeguards under different rules, which are referred to above, to a judgment debtor to raise various kinds of objections to file suits and has a right to object also at various stages. No doubt that a detailed procedure is provided under the CPC. But by now it is well known that after a decree is obtained, it has become more difficult to ensure its speedy execution due to misuse of the provisions by unscrupulous judgment debtors of a detailed procedure prescribed for execution of a decree in CPC which was never envisaged. Thus, providing a speedy recovery by way of arrears of land revenue, in fact, was the need of the day and Rule 5 has been rightly enacted to ensure speedy recovery and to ensure that small, micro and medium industries do not suffer. Thus the procedure for recovery of land revenue envisaged under Rule 5 of the Rules could not be said to be discriminatory, it being quite reasonable procedure. It cannot be said to be harsh or drastic but is quite a reasonable procedure and it furthers the mandate of the Act. The difference between the procedure of execution of Rule 5 and that of CPC cannot be said to be unconscionable so as to attract the vice of discrimination.

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• 2017 (4) TMI 927
  Parliamentary Standing Committee - can be referred before court in a proceeding or not - Whether before the drug was accepted to be used as a vaccine in India, the Drugs Controller General of India and the ICMR had followed the procedure for said introduction? - Held that:- Parliamentary Standing Committee report may not be tendered as a document to augment the stance on the factual score that a particular activity is unacceptable or erroneous. However, regard being had to the substantial question of law relating to interpretation of the Constitution involved, we think it appropriate that the issue be referred to the Constitution Bench under Article 145(3) of the Constitution. We frame the following questions for the purpose of reference to the Constitution Bench:- (i) Whether in a litigation filed before this Court either under Article 32 or Article 136 of the Constitution of India, the Court can refer to and place reliance upon the report of the Parliamentary Standing Committee? (ii) Whether such a Report can be looked at for the purpose of reference and, if so, can there be restrictions for the purpose of reference regard being had to the concept of parliamentary privilege and the delicate balance between the constitutional institutions that Articles 105, 121 and 122 of the Constitution conceive?

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