TMI Tax Updates - e-Newsletter
April 24, 2019

Case Laws in this Newsletter:

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

TMI SMS

• Levy of interest - Delay in Filing of return in GSTR-3B Form - The claim of the revenue for interest on the ITC portion of the tax confirmed

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• Possibility of arrest under GST - despite that there are incongruities within Section 69 and between Sections 69 and 132, No relief granted

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Articles

• NON COGNIZABLE OFFENCES UNDER GST

News

• IEPF Authority in a major success recovers ₹ 1514 Cr of Depositors’Money: Just a beginning / A step towards Investor Protection

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• Note on search conducted in NCR on a group in the Power sector

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Notifications

Customs

• 19/2019-Customs (N.T./CAA/DRI) - dated 22-4-2019 - Cus (NT)
  Amendment in Notification No. 25/2018-Customs (N.T./CAA/DRI) dated 16.11.2018

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• 18/2019-Customs (N.T./CAA/DRI) - dated 22-4-2019 - Cus (NT)
  Appointment of Common Adjudicating Authority by DGRI

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• 17/2019-Customs (N.T./CAA/DRI) - dated 22-4-2019 - Cus (NT)
  Appointment of Common Adjudicating Authority by DGRI

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• 16/2019-Customs (N.T./CAA/DRI) - dated 22-4-2019 - Cus (NT)
  Appointment of Common Adjudicating Authority by DGRI

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FEMA

• FEMA 20 (R) (4) /2019-RB - G.S.R. 312(E) - dated 18-4-2019 - FEMA
  Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) (Third Amendment) Regulations, 2019

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GST

• Order No. 5/2019 - dated 23-4-2019 - CGST
  Central Goods and Services Tax (Fifth Removal of Difficulties) Order, 2019

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• 22/2019 - dated 23-4-2019 - CGST
  Seeks to notify the provisions of rule 138E of the CGST Rules w.e.f 21st June, 2019.

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• 21/2019 - dated 23-4-2019 - CGST
  Procedure for quarterly tax payment and annual filing of return for taxpayers availing the benefit of Notification No. 02/2019– Central Tax (Rate), dated the 7th March, 2019

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• 20/2019 - dated 23-4-2019 - CGST
  Central Goods and Services Tax (Third Amendment) Rules, 2019

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• 19/2019 - dated 22-4-2019 - CGST
  Seeks to extend the due date for furnishing of returns in FORM GSTR-3B for the Month of March, 2019 for three days (i.e. from 20.04.2019 to 23.04.2019).

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GST - States

• 02/2019-STATE TAX - dated 30-1-2019 - Himachal Pradesh SGST
  Governor of Himachal Pradesh appoint the 1st day of February, 2019, as the date on which the provisions of the Himachal Pradesh Goods and Services Tax (Amendment) Act, 2018 (1 of 2019), except clause (b) of section 8, section 17, section 18, clause (a) of section 20, shall come into force.

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• S.O.28/P.A.5/2017/S.172/2019 - dated 22-3-2019 - Punjab SGST
  Punjab Goods and Services Tax (Removal of Difficulties) Order, 2019

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• 283/2019/4(120)/XXVII(8).2019/ CT-II - dated 9-4-2019 - Uttarakhand SGST
  Prescribe the due dates for furnishing of FORM GSTR-1 for those taxpayers with aggregate turnover upto ₹ 1.5 crores for the months of April, May and June, 2019 under the UGST Act, 2017

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• 282/2019/4(120)/XXVII(8).2019/ ON-03 - dated 9-4-2019 - Uttarakhand SGST
  Uttarakhand Goods and Services Tax (Third Removal of Difficulties) Order, 2019

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• 60/2019/3(120)/XXVII(8)/2019 - dated 6-2-2019 - Uttarakhand SGST
  Amendment in Notification No. 914/2017/9(120)/XXVII(8)/2017 dated 10th November, 2017

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Circulars / Instructions / Orders

SEBI

• SEBI/HO/DDHS/DDHS/CIR/P/2019/59 - dated 23-4-2019
  Guidelines for determination of allotment and trading lot size for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs)

Highlights / Catch Notes

GST

• Central Goods and Services Tax (Fifth Removal of Difficulties) Order, 2019
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• Seeks to notify the provisions of rule 138E of the CGST Rules w.e.f 21st June, 2019.
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• Seeks to notify procedure for quarterly tax payment and annual filing of return for taxpayers availing the benefit of Notification No. 02/2019– Central Tax (Rate), dated the 7th March, 2019
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• Central Goods and Services Tax (Third Amendment) Rules, 2019
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• Levy of interest - Delay in Filing of return in GSTR-3B Form - Payment of interest on the ITC portion - The claim made by the revenue for interest on the ITC portion of the tax cannot be found fault with.
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• Possibility of arrest under GST - Possibility of detention to custody - Grant of anticipatory bail - despite our finding that there are incongruities within Section 69 and between Sections 69 and 132 of the CGST Act, 2017, we do not wish to grant relief to the petitioners against arrest.
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Income Tax

• Estimated disallowance of discount to field staff and salary to staff to the tune of 15% of the expenses made - AO neither passed order u/s 144 nor rejected books of accounts - disallowance based on estimation on suspicion and conjectures that the assessee may be inflating its expenses not permissible
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• Reassessment u/s 147 - Cash deposition in his saving bank account - The argument that the whole of deposits cannot be regarded as income and therefore the assumption of jurisdiction is vitiated under law is not correct - so long as there is an element of income which has escaped taxation and which exceeds the maximum amount which is not chargeable to tax, the same is sufficient enough to uphold the jurisdiction u/s 147
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• Taxability of interest income earned prior to commencement of business - because the shareholder of the company was in a position to pass resolution or issue any letter, it cannot change the character of the source of the income - interest earned from the Bank deposits is to be assessed as income from other sources and it cannot be set off against the capital expenditure
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• TDS u/s 194I - Disallowance u/s. 40(a)(ia) - property owned by three persons jointly - in terms of Section 27, the owners did not constitute an AOP but they had to be regarded as co-­owners of the house property - since the rent paid to each individual does not exceed ₹ 1,80,000/­ annually - Section 194I not applicable
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• Penalty u/s 271(1)(c) - assessment u/s 153A - AO is precluded from initiate the penalty proceedings u/s 271(1)(c) in case of already concluded assessment in the absence of any incriminating material found during the search
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• Permanent Establishment (‘PE’) in India - equipment PE - It cannot be denied that the ‘vessel’, on which equipments were placed and personnel was stationed, as fixed place of business through which business is carried on by assessee. Thus condition for PE stands satisfied
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• Addition of share capital u/s 68 - source of source - all the three conditions as required u/s. 68 i.e. the identity, creditworthiness and genuineness of the transaction were placed before the ld AO and the onus shifted to the ld AO to disprove the materials placed before him - Without doing so, the addition, based on conjectures and surmises cannot be justified.
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• Addition on account of bad debt - embezzled by one of the employees of the company - Non–filing of FIR before the Police - embezzlement may not be allowable as bad debt but certainly it has to be allowed as business loss
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• TP adjustment - tested party - As per Guidance Note on report u/s 92E and transfer pricing guidelines issued by the OECD and united nation practical manual of transfer pricing for developing country, the foreign Associate Enterprise(AE) can be selected as a tested party
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• TP adjustment - scope of TP adjustment when assessee is eligible for exemption u/s 10B - Irrespective of profit making ability and exemption available in the country of operation the transfer price of the global market and the corporates must be within the band of pricing - tax saving alone cannot be a decision making process to restrict any TP adjustment
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• TP adjustment - comparable selection - RTP - the %age of RPT is determined based on the availability of comparables - The more we restrict, chances of loosing reasonable comparability is more
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• Rectification of mistake u/s 254 - non consideration of decision refereed by the assessee in dealing with appeal - a mistake apparent from record - Tribunal recalled its order.
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• Jurisdiction of AO - transfer of case u/s 127 - AO at Kurnool had transferred the file to the AO at Hyderabad - only the Pr. Director General or the Pr. CIT or Pr. CIT can transfer the case u/s 127 - issuance u/s 143(2) by the Dy. CIT (IT)-1, Hyderabad is without any authority and also beyond the period of six months from the date of filing of returns
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• Correct head of income - LTCG OR Business income - engaged in the business of building construction and land developers - land shown in balance sheet as investment - it is always open to an assessee to hold the same class of assets as investment and also as stock-in-trade - There is no bar in law for a person dealing in land to also have investment in land
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Customs

• Refund claim - benefit of concessional rate of duty - The wording of the Notification gives no clue or indication to the effect that substitution of the entry is to be retrospectively. The amending Notification is dated 02.05.2005 and hence the benefit will be applicable only from that date.
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• Provisional release of seized goods - Section 110A of the Customs Act, 1962 - Valuation - enhancement of value as per NIDB data for similar goods - goods allowed to be released against bond.
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FEMA

• Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) (Third Amendment) Regulations, 2019
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Corporate Law

• Refund of maturity amount of FDR - There is a maxim in law that a man can lie but a document cannot - there is not enough proof that company had discharged its obligation with reference to this FDR while depositing with IEPF.
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Indian Laws

• Punishment of “Compulsory Retirement” - conduct led to conviction - criminal charge under Customs Act, 1962 - where a charge is levelled and incumbent held guilty of misconduct without adducing any evidence, such order of punishment cannot be sustained.
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• Dishonor of cheque - liability of accused/petitioners to pay 20% or less of the cheque amount to the complainant - Retrospective effect of amendments - provision of Section 143-A of the Act cannot be applied to the pending cases
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IBC

• Corporate insolvency process - Power of Board to decide amount is to be paid to the ‘Financial Creditor’ or ‘Operational Creditor’ including the liquidation value - SC dismissed appeal against the decision of NCLAT
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SEBI

• Guidelines for determination of allotment and trading lot size for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs)
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Service Tax

• Taxability - supply of tangible goods service - Tribunal set aside the demand - CESTAT has recorded only an abrupt finding without discussing the issue and without mentioning any reason for their conclusion.
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• Valuation - the value of taxable services in terms of Section 67 does not include reimbursable expenses for providing such service until May, 2014-15, when Section 67 was suitably amended to make provision for the same
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Central Excise

• Extended period of limitation - Revenue started investigations vide their letter dated November, 2007 and thereafter kept quiet for a period of almost five years and issued show cause notice only on 24.06.2011. There is no explanation by the Revenue for the such delayed issuance of show cause notice - Demand set aside.
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Case Laws:

• GST

• 2019 (4) TMI 1320
  Possibility of arrest - Possibility of detention to custody - Grant of anticipatory bail - Input Tax Credit - fake invoices - input tax credit claimed on the basis of certain invoices, without there being any actual physical receipt of goods - issuance of fake GST invoices - fabricated and fake E-way bills. Grant of anticipatory bail - Arrest in exercise of the power conferred by Section 69(1) of the CGST Act, 2017 - Whether Article 226 can be used as a substitute to section 438, Cr.P.C? - HELD THAT:- Since no first information report gets registered before the power of arrest under Section 69(1) of the CGST Act, 2017 is invoked, the petitioners cannot invoke Section 438 of the Code of Criminal Procedure for anticipatory bail. Therefore, the only way they can seek protection against pre-trial arrest (actually pre-prosecution arrest) is to invoke the jurisdiction of this Court under Article 226 of the Constitution of India. Under sub-Section (1) of Section 70 of the CGST Act, 2017 the proper officer under the CGST Act 2017 has the power to summon a person either to give evidence or to produce a document. The power has to be exercised in the manner as provided in the case of a civil Court under the CPC. - The interesting part of Section 70 is sub-Section (2) of Section 70. This sub-Section declares every enquiry to which Section 70(1) relates, to be deemed to be a judicial proceeding within the meaning of Sections 193 and 228 of the Indian Penal Code. As a consequence, a person who is summoned under Section 70(1) of the CGST Act, 2017, to give evidence or to produce document becomes liable for punishment, if he intentionally gives false evidence or fabricates false evidence or intentionally offers any insult or causes any interruption to any public servant. Where the applicability of Section 438 Cr.P.C. is specifically excluded, the High Court would be extremely cautious in exercising the same power indirectly by resorting to Article 226 of the Constitution of India. Arrest under Section 69 (1) of the CGST Act, 2017 - argument of petitioners is that since the maximum punishment prescribed under Section 132 of the CGST Act, 2017 is imprisonment for five years and also since the petitioners have complied with the notices for appearance, there is no necessity for the Commissioner to order their arrest under Section 69 (1) of the CGST Act, 2017 - HELD THAT:- It is clear from sub-Section (1) of Section 69 of the CGST Act that the power of the Commissioner to order the arrest of a person, can be exercised only in cases where such a person is believed to have committed a cognizable and nonbailable offence. As we have pointed out elsewhere, Section 132(1) of CGST Act, 2017 lists out 12 different types of offences from clauses (a) to (l). The offences specified in clauses (a) to (d) of sub- Section (1) of Section 132 are declared cognizable and non-bailable under sub-Section (5) of Section 132 CGST Act, 2017. All the other offences specified in clauses (f) to (l) of sub-Section (1) of Section 132 of the CGST, 2017 Act are declared as non-cognizable and bailable under sub-Section (4) of Section 132 of CGST Act, 2017 - But the incongruity between Section 69(1) and sub-Sections (4) and (5) of Section 132 of CGST Act, 2017 is that when the very power to order arrest under Section 69(1) is confined only to congnizable and non-bailable offences, we do not know how an order for arrest can be passed under Section 69(1) in respect of offences which are declared non-cognizable and bailable under sub-Section (4) of Section 132 of CGST Act. Section 69(1) of CGST Act, 2017 very clearly delineates the power of the Commissioner to order the arrest of a person whom he has reasons to believe, to have committed an offence which is cognizable and non-bailable. Therefore, we do not know how a person whom the Commissioner believes to have committed an offence specified in clauses (f) to (l) of sub-Section (1) of Section 132 of CGST Act, which are non-cognizable and bailable, could be arrested at all, since Section 69(1) of the CGST Act, 2017 does not confer power of arrest in such cases. Congruence between sub-Sections (1) and (3) of Section 69 read with section 132 of the CGST Act, 2017 - HELD THAT:- Even though Section 69(1) of the CGST Act, 2017 does not confer any power upon the Commissioner to order the arrest of a person, who has committed an offence which is non-cognizable and bailable, sub-Section (3) of Section 69 of the CGST Act, 2017 deals with the grant of bail, remand to custody and the procedure for grant of bail to a person accused of the commission of non-cognizable and bailable offences. Thus, there is some incongruity between sub-Sections (1) and (3) of Section 69 read with section 132 of the CGST Act, 2017. Once it is found that Article 226 of the Constitution of India can be invoked even in cases where Section 438 Cr.P.C. has no application (in contrast to cases such as those under the SC/ST Act where it stands expressly excluded) and once it is found that the limited protection against arrest available under Sections 41 and 41A Cr.P.C. may be available even to a person sought to be arrested under Section 69(1) of the CGST Act, 2017 (though the necessity to record reasons in the authorization for arrest may not be there), it should follow as a coronary that the writ petitions cannot be said to be not maintainable. Protection against arrest - HELD THAT:- A prosecution can be launched only after the completion of the assessment, goes contrary to Section 132 of the CGST Act, 2017. The list of offences included in sub-Section (1) of Section 132 of CGST Act, 2017 have no co-relation to assessment. Issue of invoices or bills without supply of goods and the availing of ITC by using such invoices or bills, are made offences under clauses (b) and (c) of sub-Section (1) of Section 132 of the CGST Act. The prosecutions for these offences do not depend upon the completion of assessment. Therefore, the argument that there cannot be an arrest even before adjudication or assessment, does not appeal to us. Thus. despite our finding that the writ petitions are maintainable and despite our finding that the protection under Sections 41 and 41-A of Cr.P.C., may be available to persons said to have committed cognizable and non-bailable offences under this Act and despite our finding that there are incongruities within Section 69 and between Sections 69 and 132 of the CGST Act, 2017, we do not wish to grant relief to the petitioners against arrest. Petition dismissed.

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• 2019 (4) TMI 1319
  Levy of interest - Delay in Filing of return in GSTR-3B Form - requirement to discharge entire tax liability - delay in filing return due to shortage of ITC, available to off-set the entire tax liability - Payment of interest on the ITC portion - HELD THAT:- While Sub-Section (1) of Section 50 speaks about the liability to pay interest under one contingency, viz., the failure to pay tax within the period prescribed, Sub-Section (3) of Section 50 speaks about the liability to pay interest under a different contingency. Whenever an undue or excess claim of ITC is made or whenever an undue or excess reduction in out-put tax liability is made, a liability to pay interest arises under Sub-section (3). The words on his own used in Sub-section (1), are not used in Sub-section (3) of Section 50 - The liability to pay interest under Section 50 (1) is self-imposed and also automatic, without any determination by any one. Hence, the stand taken by the department that the liability is compensatory in nature, appears to be correct. Sub-section (2) of Section 49 that a credit entry is made in the electronic credit ledger of a registered person, only when the ITC, as self-assessed, is found in the return of a registered person. After a credit entry is made in the electronic credit ledger, the same becomes available for making payment. This is clear from Sub-section (3) of Section 49. If after payment, a balance is still available in the electronic credit ledger, the same is liable to be refunded in accordance with Section 54. Until a return is filed as self-assessed, no entitlement to credit and no actual entry of credit in the electronic credit ledger takes place. As a consequence, no payment can be made from out of such a credit entry. It is true that the tax paid on the inputs charged on any supply of goods and/services, is always available. Admittedly, the petitioner filed returns belatedly, for whatever reasons. As a consequence, the payment of the tax liability, partly in cash and partly in the form of claim for ITC was made beyond the period prescribed. Therefore, the liability to pay interest under Section 50 (1) arose automatically. The petitioner cannot, therefore, escape from this liability. The claim made by the respondents for interest on the ITC portion of the tax cannot be found fault with - the Writ Petition is dismissed.

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• Income Tax

• 2019 (4) TMI 1318
  Nature of income - profit earn on sale of shares - STCG or Business Income - HELD THAT:- It is undisputed position that similar issue came up for our consideration in [ 2019 (4) TMI 1193 - BOMBAY HIGH COURT] . The Revenue s Appeal was dismissed by making observations that in the earlier assessment years the assessee had consistently shown the receipts of sale of share as capital gain which the revenue had also accepted. The tribunal had noted that in the earlier years the assessee had suffered loss. Therefore in the current year if the income was to be treated as business income, capital loss of the earlier year would not be assessable against such income. It appears that the Assessing Officer desired to tax income as business income in the current year, in view of the change in tax rates, between short term capital gain and business income, which in the earlier years was same. In the result, no question of law arises. Income Tax Appeals are dismissed.

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• 2019 (4) TMI 1317
  TDS u/s 194 H - amount withheld by the banks/credit card agency as service charges in respect of credit card services provided - Whether the Respondent, while making payment to the bank of credit card charges, was required to deduct tax at source? - relationship between assessee and bank - HELD THAT:- The amount retained by the bank for the fees charged for having rendered banking services, which cannot be treated as a commission or a brokerage paid in course of use of banking service by a person acting on behalf of another for buying or selling goods. See Commissioner of Income Tax Vs. JDS Apparels P. Ltd. ] 2014 (11) TMI 732 - DELHI HIGH COURT] The bank in question is not concerned with buying or selling of goods or even with the reason and cause as to why the card was swiped. It is not bothered or concerned with the quality, price, nature, quantum etc., of goods bought/ sold. The bank merely provides banking services in the form of payment and, subsequently, collects the payment. The amount punched in the swiping machine is credited to the account of the retailer by the acquiring bank, after retaining a small portion of the same as their charges. The banking services cannot be covered and treated as services rendered by an agent for the principal during the course of buying or selling of goods as the banker does not render any service in the nature of agency. - decided against revenue.

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• 2019 (4) TMI 1316
  Monetary limit - levy penalty u/s. 271AAA - HELD THAT:- When these matters are taken up for hearing, learned Standing Counsel for the Department brought to our notice the Circular instruction issued by the Central Board of Direct Taxes vide Circular No.3/2018, dated 11.7.2018, wherein, it is stipulated that appeals shall not be filed/pursued by the Department before the High Court in cases where the tax effect does not exceed ₹ 50.00 lakhs. In the instant case, the tax effect is said to be less than the monetary limit imposed and, therefore, the Appeals filed by the Revenue are dismissed, as not pressed, keeping open the substantial questions of law for determination in appropriate cases.

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• 2019 (4) TMI 1315
  Correct head of income - sale of Non-agricultural land - Long Term Capital Gain OR Business income - engaged in the business of building construction and land developers - land shown in balance sheet as investment - HELD THAT:- Both the CIT(A) as well as the Tribunal have come to a concurrent finding of fact on examination of the record, that 2.10 lakhs sq. mtrs of land has been held by the Respondent as investment. This, it found is evident from the books of account, balance sheet of the Appellant and the treatment given to it in its accounts. This finding of fact was further confirmed by the visit of the Inspector who was deputed by the AO to verify the correctness of the Respondent's claim that the 2.10 lakhs sq. mtr of land was being held as an investment as no construction activity was carried out on the same. The submission made on behalf of the Appellant completely ignores the fact that, it is always open to an assessee to hold the same class of assets as investment and also as stock-in-trade. There is no bar in law for a person dealing in land to also have investment in land. Thus, there is no substance in the above submission. - Decide against revenue.

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• 2019 (4) TMI 1314
  Stay of Demand - HELD THAT:- It would be in overall interest of all the parties that the CIT(A) who is in seisin of all the appeals for the concerned assessment years, should complete the hearing and pass final orders within six weeks from today. AO who is present in the Court submits that the CIT(A) had sought remand report on certain aspects which would furnish within a week. In these circumstances, the CIT(A) is directed to complete the hearing and pass final orders, within the time indicated i.e. six weeks. As far as the question of stay of demand is concerned, the Court is of the opinion that Principal Commissioner of Income Tax (PCIT) should first decide the application pending under Section 220(6) within ten days. During that time, the notices under Section 226(3) in question shall not be proceeded with and no coercive action shall be taken.

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• 2019 (4) TMI 1313
  Monetary limit - Deduction u/s 80IA - notional profits on account of power generated from its own captive power plant and utilized by itself - HELD THAT:- When the matter is taken up for admission, the learned Standing Counsel brought to our notice the Circular instruction issued by the Central Board of Direct Taxes vide Circular No.3/2018 dated 11.7.2018 wherein it is stipulated that appeals shall not be filed/pursued by the Department before the High Court in cases where the tax effect does not exceed ₹ 50 lakhs. In the instant case, the tax effect is said to be less than the monetary limit imposed and therefore, the appeal filed by the Revenue is dismissed as not pressed, keeping open the substantial questions of law for determination in an appropriate case.

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• 2019 (4) TMI 1312
  Taxability of rental income on properties held as stock-in-trade - assessee is engaged in the business of development of real estate - Only small portion of the number of units constructed by the assessee were given on lease and license basis - income from the property vs business income - allowability of expenditure - HELD THAT:- The Tribunal, having noted the relevant facts, by placed reliance on the decisions of the Gujarat High Court in the case of Neha Builders [ 2006 (8) TMI 105 - GUJARAT HIGH COURT] and of the Supreme Court in the case of Chennai Properties [ 2015 (5) TMI 46 - SUPREME COURT] . It is true that income derived from the property would always be termed as 'income' from the property, but if the property is used as 'stock-in-trade', then the said property would become or partake the character of the stock, and any income derived from the stock, would be 'income' from the business, and not income from the property. If the business of the assessee is to construct the property and sell it or to construct and let out the same, then that would be the 'business' and the business stocks, which may include movable and immovable, would be taken to be 'stock-in-trade', and any income derived from such stocks cannot be termed as 'income from property'. Allowability of expenditure - The Assessing Officer had objected to certain expenditure being claimed by the assessee for earning the business income arising out of running of its units. Once, we hold that the first question regarding taxability of rental income is not to be entertained, automatically the second question would fall - Income Tax Appeal of revenue is dismissed.

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• 2019 (4) TMI 1311
  Benefit of declaration made by the assessee under VDIS - Credit of VDIS - HELD THAT:- As decided in THE COMMISSIONER OF INCOME TAX-I VERSUS PURSHOTTAMDAS P PATEL [ 2019 (1) TMI 1553 - GUJARAT HIGH COURT] Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) in directing to give benefit of declaration made by the assessee under VDIS Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) in deleting the addition made on account of unexplained investment. Appellate Tribunal is right in law and on facts in confirming the order passed by the CIT(A) in reducing the profit on sales of land being assessee's share of 50% of profit. - Decided in favour of assessee.

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• 2019 (4) TMI 1310
  TP adjustment - comparable selection - HELD THAT:- Assessee company, engaged in the business of span technology consulting, application services, systems integration, software development, maintenance, re-engineering and independent testing services thus companies functionally dissimilar with that of assessee need to be deselected from final list. Assessee has adopted 10% RPT whereas TPO adopted 25% filter for RPT. Generally, the %age of RPT is determined based on the availability of comparables. When the comparables are more, the RPT filter is adopted at minimum level whereas when the comparables are less, the RPT % are fixed liberally. Generally, it is selected between 15% or 25% depending upon the availability of comparables. In the given case, TPO has selected 19 comparables. Therefore, it shows that comparables are reasonably more, hence, TPO could have applied 15%. In the given case, out of 19 comparables, assessee accepted only 7 and balance it objected. Therefore, in our considered view, in the restricted atmosphere of selection of comparables, the %age should be 25% not 15%. The more we restrict, chances of loosing reasonable comparability. Therefore, we reject the contention of the assessee and exclusion of the said comparable by the assessee from the list of comparables, is hereby rejected. Exemption u/s 10B - scope of TP adjustment when assessee is eligible for exemption - shifting of profit - HELD THAT:- The decision making and shareholder appetite of expansion will not remain same for all the time or countries. Irrespective of profit making ability and exemption available in the country of operation, the actual profit making ability cannot be determined. Irrespective of situation, the transfer price of the global market and the corporates must be within the band of pricing. It cannot fluctuate. It can be determined or evaluated only by means of comparing pricing pattern of Indian market and global market. When it is found that it is within the band of prices adopted globally, no need of making any adjustment. It cannot be restricted based on the prevailing tax rate in other countries. As we said earlier, the tax saving alone cannot be a decision making process to restrict any TP adjustment. Therefore, ground is dismissed. FBT expenditure treatment as business operating expenses - HELD THAT:- As a principle, the profit margin should be compared with comparables by following similar set of rules and accounting principles. In case of following different methods/rules, we end up reaching different conclusions. Therefore, we remit this issue also to the file of AO/TPO to treat the FBT as business operating expenses for both the assessee as well as comparables to determine the margin and then compare the same for arriving proper ALP. Accordingly, additional ground raised by the assessee is allowed for statistical purposes.

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• 2019 (4) TMI 1309
  Allowability of administrative expenditure as business expenditure - proof of set up of business - Commencement of operations - CIT(A) in her findings held that assessee has not set up its business, but it had applied for change of its main objects as well as approval for setting up the business of news channel. She observed that mere application is not enough, but, it has to show that the requisite approval had been received before it can be said that business was set up - HELD THAT:- We are not in agreement with the observation of the CIT(A) just because assessee has not got approval before the end of the current AY, it cannot be said that the assessee has not set up its business. In our view, assessee company was already incorporated in 2000 and it has modified its objects and taken steps to get the approval from the Ministry of I B. These are all mere approvals required for commencement of the revenue for the business. However, it has to have infrastructure in order to put in place all the facilities as soon as approvals are granted. As we observed earlier, assessee has taken up a place to set up all the above business as well as recruited about 30 employees to carry out the above objects. In that process, it has installed, power, basic machinery, internet, leased line, uplinking and administrative activities, such as collection of news etc. Assessee has made basic infrastructure in order to commence its business. AO has confirmed that assessee has shown income in subsequent AY i.e. AY 2013-14. It does indicate that assessee has received relevant approvals and commenced its business activities in the subsequent AY. Further, it indicates that without basic set up or infrastructure assessee would not have achieved running its activities in subsequent AY itself. Therefore, in our view, assessee has set up its business and commenced its operation in the subsequent AY i.e. 2013-14. Assessee has already set up its business and is eligible to claim basic administrative expenditure as business expenditure in the AY under consideration. - Decided in favour of assessee

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• 2019 (4) TMI 1308
  Jurisdiction of AO - transfer of case u.s 127 - validity of issuance of notice u/s 143(2) by the Dy. CIT (IT)-1, Hyderabad - AO at Kurnool had transferred the file to the AO at Hyderabad - Notice beyond the period of six months from the date of filing of returns - period of limitation - curable defect u/s 292B - HELD THAT:- We find that u/sub-section 3 of section 127, it is provided that provisions of sub-section 1 2 are not applicable and no such opportunity is to be given to the assessee, where the transfer is from any AO, to any other AO where the Offices of such officers are situated in the same city, locality or place. We find that the AO at Kurnool had transferred the file to the AO at Hyderabad and therefore, even if they are both under the jurisdiction of the same Pr. CIT at Hyderabad, the notice u/s 127(1) has to be given to the assessee and it is only the Pr. Director General or the Pr. CIT or Pr. CIT who can transfer the case u/s 127. No such procedure has been followed by the Deptt. Therefore, we are of the opinion that the issuance u/s 143(2) by the Dy. CIT (IT)-1, Hyderabad is without any authority and also beyond the period of six months from the date of filing of returns and therefore, is barred by limitation and hence, not sustainable and the consequent Assessment order passed by the Asstt. CIT (IT) Hyderabad is void ab initio.

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• 2019 (4) TMI 1307
  Rectification of mistake u/s 254 - non consideration of decision refereed - an assessee in default u/s 201(1) - HELD THAT:- We agree that there is a mistake apparent from record and needs rectification by dealing with the case law relied upon by the assessee. Since considerable time has passed after hearing of the appeals, we are of the opinion that both the parties should be given sufficient opportunity of hearing. Therefore, we deem it fit and proper to recall the order of the Tribunal. Rectification of mistake u/s 254 - penalty u/s 271C - allowability of depreciation claimed on such non-compete fee - HELD THAT:- In the assessee s own case for the A.Y 2008-09, wherein the issue of payment of non-compete fee was considered. We find that the assessee had claimed it to be an intangible asset and depreciation thereon or to allow it as deferred revenue expenditure and the AO had rejected the assessee s claim mainly on the ground that genuineness of the payment is not proved and that non-compete fee is not an intangible asset and therefore, depreciation thereon is not allowable. Tribunal had remitted the issue to the file of the AO for deciding afresh and also to decide the allowability of depreciation claimed on such non-compete fee. However, in the order of the Tribunal against the penalty u/s 271C for the A.Y 2008-09, it has been held that the contention of the assessee that the non-compete fee is the business expenditure of the assessee, has been upheld. This finding is thus an erroneous recording of facts and therefore, there is a mistake apparent from record.

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• 2019 (4) TMI 1306
  Assessment u/s 153C r.w.s. 153A - proof of incriminating material found in search - HELD THAT:- Assessing Officer of the searched Company only stated that he was satisfied that sheet numbered 18-19 of the Annexure A/CPL/01 belonged to the assessee but failed to mention that these papers do not belong to the search Company namely M/s. Coastal Projects Ltd. Before the provisions of Section 153C of the said Act can be invoked, the Assessing Officer of the searched person must be satisfied that the seized material (which includes documents) does not belongs to the person referred to in Section 153A (i.e., the searched person). As in PEPSI FOODS PVT. LTD. VERSUS. ASSISTANT COMMISSIONER OF INCOME TAX [ 2014 (8) TMI 425 - DELHI HIGH COURT] had stated that the normal presumption is that the document found during the search belongs to the person on whom the search was conducted. Therefore, it is for the Assessing Officer of the searched person to rebut that presumption and come to a conclusion or 'satisfaction' that the document in fact belongs to somebody else. It is necessary that before the provisions of Section 153C of the said Act can be invoked, the Assessing Officer of the searched person must be satisfied that the seized material (which includes documents) does not belongs to the person referred to in Section 153A (i.e., the searched person). Since the Hon ble Jurisdictional High Court decisions mentioned above is in favour of the assessee, the Assessing Officer of the search Company namely DCIT, Central Circle-4, Hyderabad, in the Satisfaction Note had not stated that the seized material do not belong to the searched person. Therefore, based on the above decisions of the Hon ble Jurisdictional High Court, the issue of notice under section 153C of the Act to the assessee had to be considered as illegal and as a result, Ld. CIT(A) has rightly allowed the legal grounds raised by the assessee, hence, we do not find any infirmity in the action of the Ld. CIT(A), therefore, we uphold the action of the Ld. CIT(A) on the legal issues and dismissed the legal grounds raised by the Revenue. Undisclosed income - sale of property - HELD THAT:- Assessing Officer presumed that the assessee had received the entire consideration of ₹ 6,45,00,000/-, though the seized document only indicates that there was some negotiations for the sale of property bearing No. Sector-65, Noida and there is no indication in it of any definite transaction. There is no mention in the assessment order about the date of sale or any detail regarding the sale transaction. The seized document also indicates the possibility of M/s. Coastal Projects Ltd. acquiring the Company M/s. Humming Birds Solution Pvt. Ltd. which had the property at C-l, Sector-65, Noida. Since it is clearly mentioned in the assessment order that ₹ 70,00,000/- of the consideration was paid by cheque, the Assessing Officer should have at least traced this cheque payment. If there was evidence that the cheque of ₹ 70,00,000/- was received by the assessee Sh. Gulshan Kumar Sethi, then there was some basis for considering that the assessee had received the entire sale consideration of ₹ 6,45,00,000/- for transferring the property either through a sale deed or through the outright transfer of the shares of the Company. In the absence of any such concrete evidence, the addition of ₹ 6,45,00,000/- on the assessee is based only on assumptions and thus, not sustainable. AO had failed to carry out any enquiries to find out the actual recipient / recipients of ₹ 6,45,00,000/- from M/s. Coastal Projects Ltd before adding the above sum as assessee s undisclosed income. In the absence of any concrete evidence, to indicate that the assessee had received the sum of ₹ 6,45,00,000/- from M/s. Coastal Projects Ltd., Ld. CIT(A) has rightly deleted the addition of ₹ 6,45,00,000/- made by the AO, which does not need any interference on our part, hence, we uphold the order of the Ld. CIT(A) on this issue and dismiss the ground raised on the merits of the case. - Decided against revenue

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• 2019 (4) TMI 1305
  TP Adjustment - transactions related to contract revenue from projects - selection of MAM - as contended that the Ld. TPO Ld. DRP erred in adopting the CPM (Most appropriate method) despite the fact that under the identical facts, this Tribunal in earlier years had approved TNMM as most appropriate method - HELD THAT:- We find that the method adopted by the TPO was also held to be correct method. The grievance of adopting this method of the assessee firstly is that it has been done with project to project basis not on the average of all projects. As per the assessee, project to project would not give a true picture as each project has its own life cycle. Secondly, it is stated that set off of surplus revenue/profit exceeding the arms length price and from the other projects has not been given while computing the ALP under a transaction by transaction analysis. We find merit into this contention of the assessee that Ld. TPO erred in comparing individual project margins of transaction with A.E. with aggregate margins earned from transactions with non A.E., which is improper as individual margins are being compared with aggregate margins that is impermissible under law, therefore, the impugned order is set aside. The A.O. is therefore directed to re-compute adjustment after comparing the margins of individual transactions with A.E. with individual transactions margins with non A.E. Comparing the individual transactions with A.E. with aggregate transactions with non A.E. would give a distorted picture of margins, hence, ground Nos.1 2 of the assessee s appeal are partly allowed as indicated herein above.

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• 2019 (4) TMI 1304
  TP adjustment - foreign associated enterprises (AE) consideration as a tested party - HELD THAT:- Indian Transfer Pricing guidelines issued by the Institute of Chartered Accountant of India vide guidance noted on report u/s 92E and transfer pricing guidelines issued by the OECD and considering the united nation practical manual of transfer pricing for developing country, we note that in the assessee`s case under consideration, the Associate Enterprise(AE) can be selected as a tested party. Therefore, we direct the ld. TPO / Assessing Officer to treat the foreign associated enterprises as a tested party and compute the arms length price adjustment accordingly. Consideration of Audited segmental analysis of Associated Enterprises (AE) by DRP - submitted first time before DRP - in respect transaction of purchase of finished goods, receipt of commission and sale of finished goods by the assessee from the AE - assessee purchased finished goods from the AEs for sale to third parties - HELD THAT:- In order to justify the transfer pricing adjustment the segmental results should be considered. We note that the assessee has not submitted the segmental reports before the TPO, however, the assessee has submitted during the DRP proceedings which has not been considered by the ld. DRP. DRP in subsequent years have accepted the segmental analysis of the assessee. We note that where segmental results are available, the adjustment can be made only on the basis of transaction and not on aggregation . See M/S. SYNIVERSE MOBILE SOLUTIONS PRIVATE LIMITED VERSUS DY. COMMISSIONER OF INCOME-TAX CIRCLE 16(2), HYDERABAD [ 2015 (3) TMI 9 - ITAT HYDERABAD] and M/S. BRIGADE GLOBAL SERVICES PVT. LTD. VERSUS THE INCOME TAX OFFICER WARD-1(1) HYDERABAD [ 2014 (9) TMI 143 - ITAT HYDERABAD] . Thus we direct the ld. TPO/Assessing Officer to consider the assessee s audited segmental results to compute arm`s length price (ALP). Administrative supports services and IT support services received by the assessee from the Associated Enterprises (AE) wrongly treated to be in the nature of stewardship functions - HELD THAT:- In subsequent assessment year 2014-15, the ld DRP, in assessee`s own case based on the same facts and circumstances, deleted the addition made by ld TPO on account of administrative supports services and IT support services received by the assessee from the Associated Enterprises (AE), which was wrongly treated by ld TPO to be in the nature of stewardship functions. As the issue is squarely covered in favour of the assessee by the decision of the Co-ordinate Bench , in assessee s own case (supra) we find that the issue is squarely covered in favour of the assessee and therefore we allow the ground no. 3 raised by the assessee.

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• 2019 (4) TMI 1303
  Reopening of assessment u/s 147 - Cash deposition in his saving bank account - it is a case where return of income has not been filed by the assessee and pursuant to notice u/s 148, he has filed his return of income - HELD THAT:- Prior to such notice u/s 148, there is no past history of the assessee where he has filed any return of income wherein he has disclosed the savings bank account. For the first time, the matter was opened for the reason that there are cash deposits in his saving bank account which have escaped taxation. There is sufficient material in possession of the Assessing officer in form of cash deposits in his savings bank account and the factum of such cash deposits and the bank account belonging to the assessee has not been disputed before us. It is also a fact that the assessee has not filed his return of income for the year under consideration and such bank account thus has not been disclosed to the Revenue authorities. Therefore, there is a sufficient nexus between the material and formation of belief that income has escaped taxation. The argument of the ld AR that the whole of deposits cannot be regarded as income and therefore the assumption of jurisdiction is vitiated under law is not correct. To our mind, so long as there is an element of income which has escaped taxation and which exceeds the maximum amount which is not chargeable to tax, the same is sufficient enough to uphold the jurisdiction so invoked by the AO u/s 147 of the Act. Addition treating cash deposits in his saving bank account as unexplained and taxable u/s 69 - HELD THAT:- We find that out of deposits of ₹ 23,45,000, deposits to the extent of ₹ 11 lacs has been found explained as made out of withdrawals in the month of March 2008. Regarding the remaining amount found deposited, we find that the Revenue has accepted the turnover of the assessee from his business of supply of building material to the tune of ₹ 26,04,540, therefore, the source of deposits to the extent of ₹ 12,45,000 found deposited in the bank account can reasonably be held from such business and thus stand duly explained. Regarding the cheque withdrawals/payments made by the assessee to the tune of ₹ 14,46,384, we find that there is an equivalent amount of cheque deposits to the tune of ₹ 14,60,241 in the bank account which again reasonably explain such cheque payments as made out of cheque deposits. In the result, we hereby delete the addition to the extent of ₹ 12,45,000 so sustained by the ld CIT(A). In the result, the ground of appeal is allowed.

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• 2019 (4) TMI 1302
  Claim of deduction u/s 80IC - contention of the assessee has been that the claim of assessee u/s. 80IC included interest subsidy, insurance subsidy and similar incomes which are inextricably linked to the business of the assessee - HELD THAT:- A perusal of the assessment order, as also contended on behalf of the assessee, we find that the Assessing Officer has not examined these incomes as detailed above. In presence of all these facts, and in view of our aforesaid discussion, we think it appropriate to restore this issue to the file of AO to decide the same afresh after examining all the details of income and in the light of recent decision of Hon ble Supreme Court in the case of CIT vs. Meghalaya Steels Ltd. [ 2016 (3) TMI 375 - SUPREME COURT] . Needless to say, the assessee shall be given reasonable opportunity of being heard. Disallowance u/s. 14A r.w.r. 8D - HELD THAT:- The share of profit from firm falls u/s. 10 and exempt from tax. This fact has not been considered by the CIT(A) while examining the contention of the assessee that he had earned exempt income only to the extent of ₹ 2,725/-. However, the assessee has not declared in his written submission before the CIT(A) nor before us whether said exempt income was received by the assessee in A.Y. 2010-11 or not. Once, the assessee had earned substantial exempt income out of investments made in the partnership firm, the contention of the assessee that he had earned exempt income of ₹ 2725/- is nothing but misleading one. Adverting to the calculations made u/r. 8D(2)(ii), we find that the assessee had substantial mixed funds comprising of internal and external funds to take care of the impugned investments. Therefore, the ld. CIT(A) was justified to delete the disallowances made as per Rule 8D(2)(ii). However, while going through the calculation of disallowance made u/r. 8D(2)(iii) by the AO, it is not clear whether average value of investment taken pertains to such investment, from which the assessee had earned exempt income or not. Whether the investment made in the partnership firm for earning exempt income is considered in it or not. In presence of these facts, this issue also deserves to be remitted back to the Assessing Officer for deciding the same afresh after examining true facts and figures of investments, as narrated above and after considering the decision in the case of Joint Investment vs. CIT, [ 2015 (3) TMI 155 - DELHI HIGH COURT] . While deciding this issue, the AO shall also consider the alternative plea of the assessee that in case disallowance out of expenses incurred relating to the eligible unit for deduction u/s. 80IC is sustained, the assessee is entitled to deduction u/s. 80IC with regard to the enhanced profit as per CBDT Circular 37/2016 dated 2nd November, 2016. Accordingly, grounds allowed for statistical purposes. Disallowance of interest on FNCR - HELD THAT:- We find that as per assessee the interest on FCNR was paid on 09.08.2010 before filing the return of income (date of filing of return mentioned in asst. order as 31.03.2012) and as such, this amount is allowable u/s. 43B of the Act. This fact requires verification at the stage of AO. In case the contention of the assessee is found correct, then this amount would be allowable u/s. 43B of the Act and in case it is found otherwise, the AO shall examine the disallowance on the anvil of CBDT Circular No. 37/2016 dated 02.11.2016, as contended by the assessee also in alternate. Accordingly, this issue is also restored to the file of AO to decide it afresh after giving reasonable opportunity of hearing to the assessee. Additions made on account of Sales Promotion Expenses - deduction u/s. 80IC - HELD THAT:- nowhere demonstrate that the impugned expenditure were verified by the CIT(A) from bills/vouchers alleged to have been produced before him or any remand report was called for from the Assessing Officer so as to get them verified. This was incumbent upon the CIT(A) to call for the remand report of the AO, particularly when the AO had observed non-production of complete bills/vouchers in the assessment proceedings. Deletion of addition made by the ld. CIT(A) does not appear justified for want of verification. We, accordingly, remit this issue back to the file of AO for deciding it afresh after making proper and thorough verification of the expenditure from the books of assessee as well as from bills and supporting vouchers thereof. The assessee is required to furnish complete books of account and bills/vouchers before the AO for verification. AO is also directed to examine the alternative contention of assessee that in case disallowance out of expenses incurred relating to the unit eligible for deduction u/s. 80IC is sustained, then the deduction u/s. 80IC may be considered with regard to enhanced profit as per Circular No. 37/2016 dated 02.11.2016. Excess depreciation claimed @ 60% by the assessee on computer UPS - HELD THAT:- This issue stand already decided by Hon ble Jurisdictional High Court in the case CIT vs. BSES Rajdhani Powers Ltd. [ 2010 (8) TMI 58 - DELHI HIGH COURT] . Respectfully following the decision of Hon ble Court, we do not find any justification to interfere with the order of CIT(A) on this count. Foreign traveling expenditure incurred by Managing director Shri S.C. Sehgal along with Mr. Praveen Kumar Ms. Neeta, employee of the company - AO disallowed these expenditures on the premise that the assessee failed to establish any business exigency in this regard - HELD THAT:- We find substance in the contention of assessee. It is not the case of the AO that the impugned expenditure were not supported by any evidence or were not open for verification. Secondly, the submissions made before the CIT(A) were also that the assessee had invested in M/s. Ozone Research Frontier Ltd. in USA, in which research in respect of protein sequence was being carried out and also visited China to attend the Trade Fair. These submissions of assessee do not stand controverted by the DR. Therefore, it cannot be said that the aforesaid visits were made for the purpose other than business. We, therefore, reject this ground. Deduction u/s. 80IC - purchase of Aurvedic medicines were not manufactured by the assessee s undertaking, but were made as a result of trading activities, on which no deduction is available u/s. 80IC - HELD THAT:- AO while disallowing the deduction u/s. 80IC, has wrongly treated the above purchases and sales of manufactured medicines by the eligible unit of Guwahati, whereas the fact is that the aforesaid purchase and sales were made in the trading unit of assessee and not in the account of eligible unit of assessee. This fact needs verification at the stage of AO. In case the above purchase and sales of manufactured medicine is found to have been made by assessee s trading unit, no disallowance can be made on the profit of eligible unit on this count, but if it is found otherwise, the AO shall be at liberty to decide the issue in accordance with law, as it is an admitted fact that the impugned purchases and sale pertain to the Ayurvedic Medicines which were not manufactured by assessee, but by its sister concern M/s. Ozone Ayurvedics. Accordingly, this issue is remitted back to the AO for deciding it afresh in the light of above verification. Sales Promotion Expenses in the name of sister concern - addition u/s 40A(2)(b) - HELD THAT:- AO has failed to bring any material on record to prove that such expenditure made by the assessee are excessive or unreasonable as contemplated u/s. 40A(2)(b) of the Act. The assessee had produced complete details with respect to these payments before the AO, as noted by the ld. CIT(A) in the impugned order. We, therefore, do not find any justification to interfere with the decision of ld. CIT(A) while deleting this addition u/s. 40A(2)(b). The payments made by assessee to its associate concerns worth ₹ 5,22,05,896/- were included in the total sales promotion expenses of ₹ 16,18,96,408/- claimed by the assessee, of which 7.5% has already been disallowed by the AO for want of proper bills/vouchers etc. and that issue has been remitted back by us to the AO for fresh decision. Therefore, while deciding that issue, the AO is directed to reduce this payment of ₹ 5,22,05,896/- from the total Sales Promotion expenses of ₹ 16,18,96,408/- and then if any disallowance is made with respect to the eligible unit of assessee, the resultant enhanced profit of such eligible unit may be considered for deduction u/s. 80IC - Appeals of assessee are allowed for statistical purposes and those of Revenue are partly allowed for statistical purposes.

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• 2019 (4) TMI 1301
  Rectification u/s 254 - assessee was not eligible for deduction u/s 80IB - penalty u/s 271(1)(c) imposed - mistake apparent from the record or not? - assessee delayed the filing of revised return of income - HELD THAT:- Assuming, for the sake of discussion, that the assessee has an arguable case on merits, as contended by the assessee; we cannot be persuaded to review our decision in our aforesaid order dated 11.08.2016 dismissing assessee s appeal. It is settled law that review of an order of ITAT is not permitted in proceedings u/s 254(2) . When a party claims, contrary to a reasoned order of the ITAT on merits, to have an arguable case on merits, or even a good case on merits; even then, a review of the earlier order of ITAT is beyond the scope of Section 254(2), if there is no mistake apparent from the record in the earlier order. What is permitted u/s 254(2) is rectification of mistake apparent from the record; and not a review. There is no mistake apparent from record in our aforesaid order dated 11.08.2016. We have also already expressed that it is settled law that review of an order of ITAT is not permitted in proceedings Under Section 254(2). What is permitted Under Section 254(2) of I.T. Act is rectification of mistake apparent from the record; but there is no mistake apparent from record - Decided against assessee.

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• 2019 (4) TMI 1300
  Penalty u/s 271AAB - in SCN u/s 274 r.w.s 271AAB default has not been specified - HELD THAT:- The penalty u/s 271AAB is not mandatory but the AO has the discretion to take a decision and the same should be based on judicious decision of the AO. Accordingly following the earlier decision of this Tribunal in the case of Ravi Mathur vs. DCIT , [ 2018 (6) TMI 1128 - ITAT JAIPUR] we hold that the levy of penalty u/s 271AAB is not mandatory but the AO has a discretion after considering all the relevant aspects of the case and then to satisfy himself that the case of the assessee falls in the definition of undisclosed income as provided in the explanation to section 271AAB . All the SCN issued by the AO for initiation of penalty proceedings u/s 271AAB are very vague and silent about the default of the assessee and further the amount of undisclosed income on which the penalty was proposed to be levied. See M/S SSA'S EMERALD MEADOWS [ 2016 (8) TMI 1145 - SUPREME COURT] this issue is decided in favour of the assessee by holding that the initiation of penalty is not valid and consequently the order passed u/s 271AAB is not sustainable and liable to be quashed. Levy of penalty u/s 271AAB being unjust and against the provisions of law - undisclosed income as perexplanation to section 271AAB(1) - HELD THAT:- The entries in the seized documents representing the payment on account of land in the absence of the other essential facts regarding the particulars of the land as well as the persons do not constitute undisclosed income of the assessee as defined in the explanation to section 271AAB. Accordingly, the penalty levied under section 271AAB by the AO and confirmed by the CIT (A) is not sustainable and liable to be deleted. Excess cash found in search and seizure - Having considered the facts and circumstances of the case that out of ₹ 21,20,000/-, the department has accepted ₹ 1,20,000/- as petty pocket money and from remaining ₹ 20,00,000/-, the assessee already stated that ₹ 7 to 8 lacs were already recorded in the books of account of the family members as well as of the assessee, then the balance amount of ₹ 12 lacs has to be considered in the light of the fact that the cash was found at the residential premises and from different rooms and, therefore, the past savings of the family members cannot be ignored while considering said amount of ₹ 12 lacs as undisclosed income of the assessee. Accordingly, in the absence of any clear cut finding about the cash not representing and belonging to the other family members as their past savings, the same cannot be treated as undisclosed income of the assessee for the year under consideration. Hence the penalty levied by the AO in respect of the cash found during the search is deleted. Excess Jewellery found - HELD THAT:- The order passed by the AO u/s 271AAB as well as the order of the ld. CIT (A) are silent on the issue of incorrect valuation as well as the timing of acquiring of the personal jewellery of the assessee and the family members. Therefore, in the facts and circumstances of the case, the personal jewellery of the assessee and family members acquired in the past and some part of which was also inherited will not fall in the ambit of undisclosed income. Hence the penalty levied by the AO against such disclosure is not sustainable. It may be pertinent to mention that the statement recorded u/s 132(4) itself would not either constitute an incriminating material or undisclosed income in the absence of any corresponding asset or entry in the seized document representing the undisclosed income. Accordingly, the penalty levied by the AO u/s 271AAB is deleted. - Decided in favour of assessee.

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• 2019 (4) TMI 1299
  Levy of penalty u/s 271(1)(c) - non specification of charge - defective notice - HELD THAT :- Notice issued by the Assessing Officer under Section 274 read with Section 271(l)(c) to be bad in law as it did not specify which limb of Section 271(l)(c), the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of COMMISSIONER OF INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013 (7) TMI 620 - KARNATAKA HIGH COURT) - Decided in favour of assessee.

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• 2019 (4) TMI 1298
  Transfer pricing adjustment - Comparable selection - HELD THAT:- Vishal Information Technologies Ltd. - business model of the company is totally different from the assessee, as, it does not undertake the work itself but out sources it to third party vendors. This fact is clearly discernible from the low employee cost of the company which is evident from the financial statements filed in the paper book. Maple e solutions Ltd. company cannot be treated as comparable due to unreliability of its financial data - the margin of the assessee would be within 5% of the average margin of the rest of the comparables, we do not intend to examine the acceptability or otherwise of Datamatics Financial Services Ltd., Gold Stone Infratec Ltd., Asit C. Mehta Financial Services Ltd., as comparables to the assessee which is left open for adjudication, if arises, in any other assessment year in future. This ground is partly allowed. TP adjustment - interest paid on delayed settlement of traveler s cheques (TCs) and pre paid cards (PPCs) - Difference in interest rates - assessee has paid interest at LIBOR plus 200 basis points - HELD THAT:- The computation of interest by the Transfer Pricing Officer on the basis of RBI ECB rate is flawed since the interest paid by the assessee are to AEs located in foreign countries. In view of the aforesaid, we hold that the interest paid by the assessee to the AEs is at arm's length. The decisions relied upon by the learned Authorised Representative also support this view. Accordingly, the addition made is deleted. Ground is allowed. Addition on account of bad debt - embezzled by one of the employees of the company - Non filing of FIR before the Police - HELD THAT:- The auditors have specifically mentioned about the embezzlement of fund by the employee. Further, the internal note of the company also bears testimony to the fact of the embezzlement. Non filing of FIR before the Police may be due to various reasons. Therefore, for that reason alone, assessee s claim that the amount in question was embezzled cannot be rejected. Having held so, it is seen from the auditor s report that out of the amount of ₹ 15,23,996, the company could recover an amount of ₹ 4,70,000, and the balance amount of ₹ 10,53,996, could not be recovered. Thus, the quantum of loss suffered by the assessee is ₹ 10,53,996 and not ₹ 11,24,899, as claimed by the assessee. Further, though the loss incurred by the assessee on account of embezzlement may not be allowable as bad debt but certainly it has to be allowed as business loss. In view of the aforesaid, we direct the Assessing Officer to allow deduction for an amount of ₹ 10,53,996. Ground is partly allowed.

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• 2019 (4) TMI 1297
  Addition towards share capital u/s 68 - Summons issued u/s 131 complied with - source of source is also proved - HELD THAT:- The share subscribing companies are duly assessed to income tax. It is not in dispute that the share subscribing companies are in existence. It is not in dispute that the share subscribing companies are duly assessed to income tax and their income tax particulars together with the copies of respective income tax returns with their balance sheets are already on record . Hence it could be safely concluded that they are genuine shareholders and not bogus and fictitious. The directors of share subscribing companies also presented themselves before the ld AO in response to summons issued u/s 131 in the instant case. Accordingly, the ratio laid down by the Hon ble Apex Court in the case of M/s Earthmetal Electricals P Ltd [ 2010 (7) TMI 1137 - SUPREME COURT] would be squarely applicable to the facts of the instant case. Source of funds were never established by the investor companies in the case before the Hon ble Apex Court in CIT VERSUS NRA IRON STEEL PVT. LTD., [ 2019 (3) TMI 323 - SUPREME COURT] , whereas in the instant case, the entire details of source of source were duly furnished by all the respective share subscribing companies before the ld AO in response to summons u/s 131 by complying with the personal appearance of directors. Hence the decision relied upon by the ld DR is factually distinguishable and does not advance the case of the revenue. In the facts of the present case, both the nature source of the share capital received with premium were fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed before the AO. Accordingly, all the three conditions as required u/s. 68 i.e. the identity, creditworthiness and genuineness of the transaction were placed before the ld AO and the onus shifted to the ld AO to disprove the materials placed before him. Without doing so, the addition made by the ld AO is based on conjectures and surmises cannot be justified. - Decided in favour of assessee.

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• 2019 (4) TMI 1296
  Reopening of assessment - non issue of statutory notice u/s 143(2) - HELD THAT:- It is the requirement of the judgemental laws that the Assessing Officer is required to issue statutory notice u/s 143(2) of the Act once the assessee filed the return of income in response to notice u/s 148 of the Act. Considering the above cited legal proposition on this issue, [ 2018 (10) TMI 1167 - ITAT MUMBAI] and after hearing both the sides, we are of the opinion the reassessment made by the Assessing Officer is invalid and illegal. Thus, the additional grounds raised by the assessee in the cross objection are allowed. - Decided against revenue.

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• 2019 (4) TMI 1295
  Penalty u/s. 271(1)(c), 271B and 271F - violation of Natural Justice - HELD THAT:- Penalty u/s 271B and 271F - As perused the notice and take note that the notice fixing the date of hearing before CIT(A) is noted as on 06.11.2017 whereas the impugned order has been passed five days before the date of hearing, therefore, there is a clear violation of natural justice and, therefore, we set aside the orders of the CIT(A) and remand the matter back to his file to decide afresh the appeals after providing adequate opportunity to the assessee according to law. Both these appeals of assessee are allowed for statistical purposes. Penalty u/s 271(1)(c) - We note that the impugned order has been passed on 13.11.2017 overlooking the assessee s adjournment application for just cause, which action of CIT(A), according to us, is not reasonable or fair and is in violation of Natural Justice, therefore, we set aside the order of the CIT(A) and remand the matter to his file for fresh adjudication. - Appeals of assessee are allowed for statistical purposes.

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• 2019 (4) TMI 1294
  Bogus LTCG on sale of shares - addition u/s 68 - rejecting the assessee s claim of long term Capital Gains (LTCG) on sale of those shares - claim of exemption u/s 10(38) - HELD THAT:- As decided in Manish Kumar Baid and Mahendra Kumar Baid vs ACIT [ 2017 (10) TMI 522 - ITAT KOLKATA] as held SEBI order did mention the list of 246 beneficiaries of persons trading in shares of KAFL, wherein, the assessee and/or Ashita Stock Broking Ltd s name is not reflected at all. Hence the allegation that the assessee getting involved in price rigging of KAFL shares fails. We also find that even the SEBI S order heavily relied upon by the Id AO clearly states that the company KAFL had performed very well during the year under appeal and the P/E ratio had increased substantially. Thus we hold that the said orders of SEBI is not evidence against the assessee. Transactions of the assessee were bonafide and genuine and therefore the AO was not justified in rejecting the assessee s claim of exemption under section 10(38) of the Act. AO was not justified in assessing the sale proceeds of shares of KAFL as undisclosed income of the assessee u/s 68 of the Act. - Decided in favour of the assessee.

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• 2019 (4) TMI 1293
  Deduction u/s 54 - treatment as residential house for the purpose - HELD THAT:- Merely dealing in purchase and sale of residential building/property will not be regarded as a residential house but only when a residential unit is purchased for the assessee s own residential purpose then, it will be treated as a residential house for the purpose of Section 54. There is no dispute that the assessee has purchased two separate flats at two floors 10th and 11th of the building. Therefore, for considering the two flats as a residential house the various aspects are to be taken into consideration as discussed by us in the foregoing part of this order as well as the term residential house discussed in the various decisions. Issue requires a proper verification and examination in light of the above discussion and observation. Accordingly, the matter is set aside to the record of the Assessing Officer for proper examination and verification of the relevant facts and then decide the same in light of the observation discussed by us in this order. Appeal filed by the assessee is allowed for statistical purposes.

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• 2019 (4) TMI 1292
  Disallowance u/s 14A cannot exceed the exempt income - CIT(A) restricted / upheld the disallowance u/s 14A r.w.r. 8D to the extent of exempt dividend income earned by the assessee - HELD THAT:- In the case of Joint Investments (P) Ltd., Vs. CIT [ 2015 (3) TMI 155 - DELHI HIGH COURT] has taken the view that the disallowance u/s 14A of the Act cannot exceed the exempt income. We hold that the disallowance u/s 14A of the Act in the case on hand should be restricted to the exempt dividend income earned by the assessee in the year under consideration. Consequently, the grounds raised by Revenue are dismissed.

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• 2019 (4) TMI 1291
  Denial of recognition u/s 80G - registration u/s 12AA granted on same date - charitable u/s 2(15) or not? - HELD THAT:- When the details of activities were admittedly filed by the assessee, the CIT(E) ought to have sought clarifications thereon. This cannot be the basis for rejection of the assessee s application. Strangely, in the case on hand, on the very same day i.e., 14.05.2018 when he rejected the assessee s application for recognition under section 80G the CIT(E) has granted the assessee-trust registration under section 12AA of the Act vide order dated 14.05.2018; ostensibly, after examination of the assessee s objects, etc., which the CIT has categorized as Advancement of any other object of general public utility As under section 80G(5)(v) of the Act and restore the matter to the file of the CIT(E) to examine the matter afresh in the light of his order dated 14.05.2018 granting the assessee registration under section 12AA and our observations hereinabove. CIT(E) is directed to afford the assessee reasonable opportunity of being heard in the matter and to file details / submissions required that shall be considered before deciding the issue. - Assessee s appeal is allowed for statistical purposes

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• 2019 (4) TMI 1290
  Best judgment assessment u/s 144 - addition u/s 69A - cash deposited in accounts - admission of additional evidences - non service of notices - HELD THAT:- Whereas the assessee is represented by the legal heir and is ready to substantiate and explain cash deposits made in the bank account. We, considering the facts and circumstances and illness of the assessee, are of the opinion that is a fit case to restore to the file of the AO to meet the ends of justice. We restore the entire disputed issue along with evidences filed to the file of the AO to adjudicate afresh and consider the material filed by the assessee and further the assessee should be provided with adequate opportunity of hearing and pass a speaking order and we order accordingly. Assessee s appeal is allowed for statistical purposes.

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• 2019 (4) TMI 1289
  Recognition u/s 80G rejected - charitable activities are not carried out by the assessee - grant of registration u/s 12AA - HELD THAT:- We found that the CIT(E) has granted registration u/s 12AA of the Act to the assessee and proof was furnished with copy of registration u/s 12AA of the Act dated 25/07/2018. We found that when the registration u/s 12AA of the Act was granted by the CIT(E) after verifying and satisfying requisite conditions complied by the assessee which is not disputed by the revenue and therefore, the assessee is eligible for recognition u/s 80G of the Act. As relying on M/s.Kuncham Mohan Raj Manjula Charitable Trust [ 2019 (3) TMI 1163 - ITAT BANGALORE ] restore this disputed issue to the file of the CIT(E) to adjudicate afresh granting of recognition u/s 80G in the light of grant of registration u/s 12AA and further the assessee should also be provided an adequate opportunity of hearing and shall cooperate in submitting information for early disposal of the application filed for recognition u/s 80G of the Act and allow the grounds of appeal for statistical purposes.

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• 2019 (4) TMI 1288
  Permanent Establishment ( PE ) in India - equipment PE - Fixed place of business in India - income accrued in India - UAE DTAA - Assessee is a tax resident of UAE, and is eligible to avail benefits if any, under the India UAE DTAA - HELD THAT:- There is no dispute that, assessee s equipments as well as Personnel, were stationed on the vessel of Main Contractor, for carrying out grouting. It is also an admitted fact that equipment is the main place of business to assessee. Further, on analysis of the Clause 7.4 of agreement between assessee and Dolphin, relevant to assessment year 2008- 09, provides free of charge, food and accommodation to the personnel on-board of offshore vessel. It cannot be denied that the vessel , on which equipments were placed and personnel was stationed, as fixed place of business through which business is carried on by assesse. Thus in our view ingredients required under Article 5(1) of DTAA stands satisfied. Assessee placed heavy reliance on the order passed by Coordinate bench in its own case for assessment year 2007-08. We very carefully perused the same to follow the view taken therein, however we fail to do so in view of the fact that existence of a fixed place PE has been decided in that case holding that equipment cannot be held as fixed place of business. This observation of the Coordinate bench in assessee s own case is not in accordance with decision of Hon ble Supreme Court in case of Formula One World Championship Ltd vs CIT (International Taxation) [ 2017 (4) TMI 1109 - SUPREME COURT OF INDIA] We therefore, hold that assessee has PE in the form of equipment as fixed place of business in India as per Article 5(1) of India-UAE Treaty and income earned by assessee from contracts are taxable in India. Addition made by AO towards offshore supplies as chargeable to tax in India - deduction u/s 44BB - HELD THAT:- We have already held here in above that assessee has PE in India, offshore supplies are to be directly attributable to activities of PE in India through business connection in India in terms of section 9 (1) (i) of the Act. The alternate plea raised by assessee regarding applicability of special provision of section 44 BB. From the records placed before us, we do not see this issue has neither been dealt with/analysed by Ld.AO/DRP, nor has Ld.Counsel brought out before us as to whether contracts entered into by assessee which are inextricably connected with prospecting or production of Mineral Oil. Accordingly we set aside this issue to Ld.AO for determining applicability of sec.44BB having regards to ratio laid down by Hon ble Supreme Court in case of ONGC Gas Corpn. Ltd. vs. CIT [ 2015 (7) TMI 91 - SUPREME COURT] . In the event the contracts are inextricably connected with prospecting or production of Mineral Oil, benefit must be granted to assessee under section 44 BB of the Act. Interest levied under section 234B - HELD THAT:- Respectfully following the decision of Hon ble Delhi High Court in case of Sedco Forex International Drilling Co. Ltd vs. DCIT [ 2003 (10) TMI 40 - UTTARANCHAL HIGH COURT] , we are inclined to delete the interest levied under section 234B of the Act.

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• 2019 (4) TMI 1287
  Penalty u/s 271(1)(c) - Income Surrendered during search included in return - returned income and the assessed income are same - legal plea in department appeal - HELD THAT:- Since the legal plea taken by the counsel for the assesses in relation to the appeals relating up to assessment years 2010-11 wherein the original assessment proceedings already stood completed and not abated as on the date of search action and that no incriminating material found during the search action go to the root of the case and is crucial to determine the very validity of the initiation of penalty proceedings in an assessment framed u/s 153A, hence the same is taken first for adjudication. Hon'ble Courts in [ 2010 (10) TMI 1052 - BOMBAY HIGH COURT] ; [ 2015 (9) TMI 80 - DELHI HIGH COURT]; [ 2017 (5) TMI 1224 - DELHI HIGH COURT] have been unanimous to hold that if no incriminating material is found during the search action, the addition in the case of already concluded that in the absence of any incriminating material found during the search action, no addition can be made into the income of the assessee by way of revisiting the issue in the case in which the original assessment stood completed. Applying the similar proposition, even when the Assessing officer is precluded from making any addition in the absence of any incriminating material found during the search action in the assessment proceedings carried out u/s 153A in which the original assessment proceedings stood completed and not abated, the Assessing officer, in our view, is also precluded from initiate the penalty proceedings u/s 271(1)(c) in case of already concluded assessment in the absence of any incriminating material found during the search action. Even it is not the case of the Assessing officer that there was any attempt or overt act on the part of the assessee to evade payment of due taxes. Under the circumstances, we hold that the action of the Assessing officer in initiating the penalty in the assessment proceedings carried out u/s 153A was not justified and the consequential levy of penalty being illegal is not sustainable in the eyes of law for the cases relating up to AY 2010-11. We order accordingly. Another legal ground taken by the assessee which goes to the root of the case is that so far as the assessment year 2012-13 is concerned, the Assessing officer was not justified initiating or levying penalty u/s 271(1)(c). That for the year under consideration, the penalty proceeding , if any, that could be initiated was to be under the provisions of section 271AAA of the Act as the assessment year 2012-13, falls in the definition of specified previous year as defined under the provisions of section 271AAA. Admittedly, in this case, no incriminating material was found during the search action and, hence, no undisclosed income of the assessee was found during the course of search. In view of this, the provisions of section 271AAA are not attracted in this case. In view of this, though, we are of the view that the legal plea taken by the assessee that the provisions of section 271(1)(c) are not attracted because the relevant provisions of section 271AAA were applicable, is not tenable, yet we are of the view that otherwise, the provisions of section 271(1)(c) are not attracted in this case in view of our discussion made in the subsequent paras to this order. A collective reading of the entire provisions of section 271(1)(c) reveal beyond doubt that what is material is the resultant addition to the taxable income of an assessee which may invite penalty under the relevant provisions of section 271(1)(c). Though the words used in the first part, i.e. charging provision are Particulars of income, however, for levy of penalty it is not the Particulars of income but rather the quantum of income itself,that is added to the taxable income of the assessee is relevant for the purpose of calculation of the amount of penalty leviable as per the aforesaid provision. The assesses, themselves, declared income in question and paid the due taxes.There was no difference between the offered income and the taxed income.The Hon'ble Calcutta High Court in the case of Commissioner of Income Tax Kolkata-II Vs. Palani Investment Industries Corporation Ltd. [ 2016 (3) TMI 323 - CALCUTTA HIGH COURT] has held that the disclosure and concealment cannot coexist. That when a finding is recorded that the assessee has indeed disclosed, then the conclusion as regards concealment is bad. Even it cannot be said that the assessee furnished inaccurate particulars of income. There was no material on record to indicate that the particulars furnished by the assessee were factually incorrect. Under the circumstances, even otherwise, on merits, the penalty u/s 271(1)(c) is not attracted in this case. - Revenue appeal dismissed

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• 2019 (4) TMI 1286
  TPA - Comparable selection - exclusion of BEML Government Companies - HELD THAT:- Government Companies operate entirely different controlled environment. Their customers are different. Their raw material suppliers are different. Their profit margins are different. They would not operate in a free competitive environment. Therefore, in our opinion, the orders of the lower authorities need to be reversed. The Co-ordinate Bench of the Tribunal has already taken a view in the matter. Government company like BEML cannot be held as a good comparable to the one like the present assessee a private company under consideration. Regarding the DR s argument about the existence of profit making company in the client list of BEML, we find it is not a sustainable argument. We find Hon ble Bombay High Court has given a categorical finding about the requirement of excluding Government companies like M/s. Engineers India Limited held in the case of M/s. Thyssen Krupp Industries India Pvt. Ltd. [ 2013 (11) TMI 930 - ITAT MUMBAI] , is relevant and binding on us. Shifting of ₹ 10 crores from trading segment to the manufacturing segment on ad-hoc basis - HELD THAT:- There is requirement for the Assessing Officer/CIT(A) to undertake the scrutiny of each of the expenditure accounts and analyze the nexus of the expenditure to the trading and manufacture segments on one side and the application of proper and appropriate basis to allocate the expenditure between the segments. AO should also pass a speaking order why the stated sales ratio is inappropriate on given facts. Therefore, we are of the opinion, this issue is required to be remanded to the file of the Assessing Officer/TPO with regard to the approved the applicability of the basis of sales ratio uniformly to all the accounts qua the trading and manufacturing account. With these directions, we remand this issue to the file of the Assessing Officer/TPO for fresh examination of the issue. The Assessing Officer shall grant a reasonable opportunity of being heard to the assessee in accordance with set principles of natural justice. Accordingly, relevant ground no.5 is allowed for statistical purposes. Computation of transfer pricing adjustment - additional ground - TP adjustment to the international transactions with non AEs - HELD THAT:- We are of the opinion that the said issue raised in the additional ground has to be decided in favour of the assessee. Consequently, we direct the Assessing Officer to restrict the adjustments, if any only to the international transaction with AEs. Accordingly, additional ground is adjudicated in favour of the assessee. Accordingly, the additional ground is allowed. Capacity adjustment to the cost - HELD THAT:- Therefore, rejecting the assessee s method for quantifying the capacity utilization adjustment to the tested party, we direct the Assessing Officer to follow the judgement of the Jurisdictional High Court in the case of Petro Araldite (P.) Ltd. [ 2018 (6) TMI 452 - BOMBAY HIGH COURT] . Assessing Officer to follow the precedent in existence on this issue and make the adjustment in any after granting a reasonable opportunity of being heard to the assessee.

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• 2019 (4) TMI 1285
  Taxability of sale tax subsidy/incentive - assessee had was not deposited and claimed the amount of incentive as a capital receipt, which was received in the form of sales tax remission from the West Bengal Government under the West Bengal Incentive Scheme. 1999 - AO rejected the claim on the premise that the subsidy received was revenue in nature and taxable u/s. 28(iv) - AO observed that the remission of sales tax amounted to cessation of trading liability and hence the provisions of Section 41 also attracted - HELD THAT:- Subsidy/incentive was not given to the assessee for the purpose of assisting in carrying on business or trade by way of refund of sales tax nor was there any cessation of liability on account of payment of sales tax attracting the provisions of section 41(1) of the Act. We note that the method of calculation of incentive/subsidy is collection of sales tax but the purpose of giving the incentive was expansion of industries in the backward areas of the State of West Bengal. Since the assessee was not given the incentive for facilitating its business or trade, the amount received by the assessee on account of sales tax remission, was held to be capital in nature. - Decided against revenue Disallowance on expenditure of Repairs Maintenance to the Plant Machinery u/s.37(1) - provision of expenses as on end of FY - no bills and vouchers were produced - AO observed that he could not also verify whether Section 40(a)(ia) had any application - HELD THAT:- On 07.02.2014, the AO had required the assessee to furnish its explanation as to why the repairs expenses should not be disallowed on the ground of being capital in nature. It thus appeared that even by AO's own admission he had required the assessee to explain the nature of the expenditure i.e. whether capital or revenue. We note that nowhere the AO stated that he had required the assessee to produce original bills vouchers but had required the assessee to explain the nature of expenditure, whether these are being revenue or capital. Hence, disallowance on ad hoc basis without any cogent reasons is not justifiable We note that in the accounting parlance, unpaid expenditure for which liability has accrued is described as provision under mercantile system of accounting. Copies of the bills produced by assessee during the assessment stage for verification also established that the amount shown as provision for repairs maintenance related to services which were performed for and upto March 2010 and therefore under the mercantile system of accounting, the assessee was entitled to claim deduction since expenditure pertained to the previous year ending on 31.03.2010. Therefore, we note that there was no justification for the AO to disallow - Decided against revenue. Allowability of additional depreciation u/s 32(1 )(iia) - allegation that Assessee is not engaged in manufacturing activity in terms of section 2(29BA) - HELD THAT:- In the process of blending of butane propane which is carried out in scientific manner with use and aid of sophisticated plant machinery, transformation is brought about and entirely new product by the name LPG is obtained. The said object or product i.e. LPG is known to the trade and commerce by its separate distinctive commercial name and it has a different character and its end use is also different. Accordingly provisions of Section 2(29BA) of the Act and also the ratios laid down by the Supreme Court in several decisions, we have no hesitation in holding that the assessee was engaged in manufacture or production of an article or thing and therefore it was eligible for claiming additional depreciation u/s 32(1 )(iia) - Decided against revenue. TDS u/s 194I - Disallowance u/s. 40(a)(ia) - failure to deduct the tax on total payment on account of rent paid - HELD THAT:- Admittedly, the assessee had paid rent of ₹ 2,61,600/ in respect of a property at Gariahat Road (South), Kolkata which was owned by three persons equally. Since the property in question was owned by three persons jointly, in terms of Section 27 of the Act: the owners did not constitute an AOP but they had to be regarded as co owners of the house property, each having one third defined share or rights in the property. Accordingly the assessee had paid rent of ₹ 87,204/ to each of the three co owners namely. Mr. N.R Dhar. Mrs. Ruby Dhar and Mr. Sandip Dhar respectively. We note that since the rent paid in respect of one property does not exceed ₹ 1,80,000/ annually, hence provisions of Section 1941 of the Act does not apply to the assesee under consideration, hence ld CIT(A) has rightly deleted the addition. - Decided against revenue.

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• 2019 (4) TMI 1284
  Taxability of interest income earned prior to commencement of business - no commercial operations - assessee had claimed that the interest income was capital receipt to be set off against the expenditure incurred during this period - AO held that interest income is taxable under the head income from other sources - set off expenditure also decline - HELD THAT:- Whenever an assessee is in the process of setting up of the business, if any, income arises under any of the heads except under the head profits and gains of business, then such income has to charged to tax under that particular head. As far as interest received from short term deposits which were not immediately required, were held to be taxable following the decision of M/s Tuticorin Alkali Chemicals Fertilisers Ltd. vs. CIT [ 1997 (7) TMI 4 - SUPREME COURT] . Only those sums which were received from contractors, which we can say were inextricably connected with the construction activities, were held to be not taxable, rather than they were held to be reduced from the total capital expenditure. The decision of the Delhi High Court in the case of Indian Oil Panipat Power Consortium Limited vs. ITO [ 2009 (2) TMI 32 - DELHI HIGH COURT] is not applicable to the facts of the assessee s case before us. Thus, it is clear that in the case before us, assessee was still at the pre-commencement stage and during this phase, the assessee had raised equity funds which was invested in fixed deposits of the Banks as well as the holding company and the assessee had earned interest on the same. The same has to be taxed as income from other sources in the light of the decision of the Hon'ble Supreme Court in the case of M/s Tuticorin Alkali Chemicals Fertilisers Ltd. vs. CIT (supra). Because the shareholder of the company was in a position to pass resolution or issue any letter, it cannot change the character of the source of the income.The business was not set up during the relevant previous year and the interest earned from the Bank deposits is to be assessed as income from other sources and it cannot be set off against the capital expenditure. Ground of appeal of the assessee is dismissed. Unless and until the machinery of the project is fully installed and the project becomes operational and the order is executed, it cannot be said that the business has been set up. Before us, the fact is that the assessee had not yet commenced construction of the vaccine project. Therefore, it is clear that business was not set up and there was no question of claiming any expenditure. Set off of business loss against the addition made by the Assessing Officer. - HELD THAT:- As discussed earlier, the business of the assessee was not set up and it had not commenced commercial operations. In such a situation, there is no business loss which is to be computed under the head income from business. As such, there is no question of set off of interest income against business loss. Accordingly, this ground of appeals of the assessee is also rejected.

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• 2019 (4) TMI 1283
  Adjustment in the book profit u/s 115JB - revaluation reserve at time of amalgamation - purchase method adopted for valuing the assets and liabilities at a fair market value and excess on such transfer of assets and liabilities has treated as part of the capital reserve - HELD THAT:- Here in this case, nowhere it has been disputed that the profit and loss account has not been prepared in compliance of requirement of Part-I and Part-II of the Companies Act, 2013 and as per accounting standard. The profit and loss account has been approved by the Statutory Auditors and also laid before the Members in the AGM, which is sacrosanct for computing the book profit u/s. 115JB. Thus, once the accounts have been prepared in accordance with the Companies Act duly certified by statutory auditors and approved by Company AGM, then same cannot be disturbed as held by Hon ble Supreme Court in the case of Apollo Tyres [ 2002 (5) TMI 5 - SUPREME COURT] . Here the AO cannot tinker with such profit and loss account or treat the part of capital reserve by holding that it should have been routed through regular profit and loss account. The reasoning given by the CIT (A) too cannot be upheld for the same reason. As regards the capital gain computed u/s. 10(38), and application of 49(1) for computing the capital gain, the same would be relevant while computing the normal computation of capital gain in the computation of book profit where the sale of investment is included in the books prepared and profit and loss is included in the profit and loss account. It is only in such situation the said exemption u/s. 10(38) cannot be included. Here in this case, the difference between the cost of acquisition of the amalgamated assets and sale consideration has resulted in loss and the same has been duly recorded in the profit and loss account; and thus the contention of the CIT (A) that in computation of book profit capital gain should be computed by taking historical cost of assets is not correct. The proviso to section 10(38) resorted by the CIT (A) cannot be read independently as the same has to read alongwith clause (ii) of section 115JB. Such a finding of the CIT (A) to uphold the addition in our opinion is not correct. Thus, we hold that in this case the provisions of clause (j) of Explanation 1 to section 115JB would not be applicable at all as, there is no disposal of asset from the amount standing in revaluation reserve relating to revalued asset as per the reasoning given above; and accordingly, the addition made by the AO and sustained by the ld. CIT (A) is directed to be deleted. Addition made u/s. 14A - HELD THAT:- We find that the Assessing Officer while making the addition has not examined the veracity of claim made by the assessee nor has he examined the books of account which is a statutory mandate provided in subsection (2) of section 14A. Here in this case, the major exempt income has come from shares of IHFL which has been acquired by the assessee by way of amalgamation. Hence, it cannot be said that the assessee could have incurred any kind of indirect expenses for earning of dividend income. It is trite and well settled law by Hon ble Delhi High court and Now by the Hon ble Apex Court in Maxopp Investment [ 2018 (3) TMI 805 - SUPREME COURT OF INDIA] that if the Assessing Officer has not recorded his satisfaction to disbelieve the disallowance made by assessee, he cannot resort to the provisions of Rule 8D. Thus, in absence of any satisfaction being recorded by the Assessing Officer, no disallowance could have been made. Accordingly, disallowance made by the AO and confirmed by the CIT (A) is directed to be deleted. Since we have already deleted the addition made u/s. 14A, hence we do not deemed fit to decide, whether such disallowance should be made while computing the book profit u/s. 115JB which otherwise is covered by the decision of ITAT Delhi Bench in the case of ACIT vs. Vireet Investment Pvt. Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI]. Appeal of the assessee is allowed.

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• 2019 (4) TMI 1282
  Addition on account of non-reconciliation of commission received from BSNL - assessee is the proprietor of M/s International Telecom Network and is serving as a BSNL franchisee and the marketing partner of BSNL - HELD THAT:- The assessee was unable to reconcile the difference in Form 26AS and ld. Counsel also fairly agreed with us that assessee has failed to reconcile the difference. AO as well as ld. CIT(A) both were wrongly treated the entire receipt as undisclosed income of the assessee instead to tax the profit element. We note that the gross profit rate of assessee is 5% therefore to meet the end of justice, we are of the view that ad hoc disallowance @ 6.5% should be sustained on the differential amount of 26AS to the tune of ₹ 5,82,626/- which comes to ₹ 37,870/-. Therefore we direct the Assessing Officer to disallow, only 6.5% of ₹ 5,82,626/-. Accordingly, we allow this ground partly. Estimated disallowance of discount to field staff and salary to staff to the tune of 15% of the expenses made - Non rejection of books of accounts - HELD THAT:- AO has not passed any order u/s 144 - thus without rejecting books of accounts of the assessee has gone for estimation on suspicion and conjectures that the assessee may be inflating its expenses by paying salary to staff and allowing discount to field staff. Therefore, action of AO is not acceptable. On appeal by the assessee, the ld. CIT(A) held that in order to protect the interest of revenue, it would be suffice to make an estimated disallowance of 15% of the claim of the salary. We note that ld. CIT(A) also sustained the addition based on estimation which is not acceptable for the reasons given above. As regards the discount claimed by the assessee the ld. CIT(A) noted that discount allowed by the Assessing Officer as per his own estimates is more than the amount claimed by the assessee, therefore ld. CIT(A) restricted the claim of the assessee to the lesser of the two figures. However, we note that assessee claimed discount given to field staff at ₹ 31,90,617/- and salary paid at ₹ 19,52,536/-. The Assessing Officer computed the discount @ 2.5% at ₹ 9,44,97,724/- which comes to ₹ 23,62,443/-; as against the claim of the assessee to the tune of ₹ 31,90,617/-. Thus, the Assessing Officer made the total disallowance of ₹ 27,80,709/- (31,90,617 + 19,52,536 23,62,443) which is hereby deleted. Non deduction of TDS - Addition on advertisement charges u/s 40a(ia) - HELD THAT:- If the payee has included the receipts in his books of accounts and has offered for taxes then disallowance on account of non-deduction of TDS, will not arise. The ld. DR for the revenue has fairly agreed with the submission made by ld. Counsel, therefore, we remit this issue back to the file of Assessing Officer with the direction to examine whether receipts has been offered for taxation by the payee. If the payee has offered for taxation then no disallowance shall be made in respect of receipts of ₹ 1,33,500/- TDS u/s 194C - 15% ad hoc disallowance of supervision charges - AO disallowed the supervision charges on the ground that no TDS was deducted on contractual payments to supervisors - HELD THAT:- We note that Assessing Officer has not denied in the assessment order that supervision charges were not paid. We note that these payments are not contractual in nature therefore provisions of section 194C does not apply. Hence, we delete the entire addition made by Assessing Officer Addition on account of legal charges paid by the assessee to Advocate - TDS liability - HELD THAT:- The assessee s explanation was rejected by the Ld. CIT(A) without ascribing any detailed reasoning. We note that the ld. Counsel submitted before the Bench that this payment is against the reimbursement of expenses and does not contain any income element therefore no TDS is required. We find merit in the submissions of the assessee that the said advance is against the reimbursement of expenses which does not require deduction of any TDS, hence, we delete the addition. Disallowance of rent u/s 40a(ia) paid to three different owners - HELD THAT:- All the payments to each person is below threshold limit of ₹ 1,80,000/-, and since it is below threshold limit therefore this does not require any deduction of TDS. However, considering the principle of natural justice and fair play we remit this issue back to the file of the Ld. Assessing Officer to examine whether each payment to these three land lord is below threshold limit of ₹ 1,80,000/- or not, if it is below ₹ 1,80,000/- no disallowance would be made - we direct the AO to examine the payments and adjudicate this issue in accordance with law. Hence we allow this ground raised by the assessee for statistical purposes. Disallowance on account of general expenses, miscellaneous expenses, conveyance expenses, printing, repairs and maintenance expenses - non rejection of books of accounts - CIT(A) reduced it to 15% - HELD THAT:- AO has not pointed out any cogent reasoning for making these disallowances. We note that assessee s books of accounts are not rejected by Assessing Officer u/s 145(3) of the Act and the assessment was carried out u/s 143(3) of the Act. Moreover, the Assessing Officer has not examined the genuineness of these expenses item wise. The Assessing Officer ought to disallow only those expenses for which the assessee has not submitted bills and vouchers to substantiate the bona fide of the claim. Without rejecting the books of accounts of the assessee and to make estimated disallowance is not justifiable and it needs to be deleted. Service tax liability - service tax liability which was directly paid by BSNL after year end from deduction of their account - HELD THAT:- no documentary evidence in support of this claim could be brought on record in the assessment stage and even at the appellate stage. In the absence of documentary evidence this ground was dismissed. We note that ld. DR for the revenue disputed that it is not certain whether impugned amount is a service tax liability or not. Therefore we are of the view that this fact needs to be examined by Assessing Officer whether the impugned amount of ₹ 20,90,729/- is pertained to service tax liability or not. If it is a service tax liability no disallowance is warranted u/s 43B of the Act. Therefore we set aside the order of ld. CIT(A) for this issue and remit the issue back to the file of Assessing Officer to adjudicate the issue in accordance with law.

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• 2019 (4) TMI 1281
  Interest rate paid to related party u/s 40(A)(2)(b) - payment made to the person specified - disallowance @ 3% - HELD THAT:- There were certain non-related parties to whom the assessee has paid interest on the borrowed fund at the rate of 18% per annum. Therefore it is incorrect to hold that the assessee has paid an excessive rate of interest to the related parties. Thus it is transpired from the order of lower authorities that the assessee in most of the cases has paid interest at a higher rate to the related parties. But it is also an undisputed fact that there were very few unrelated parties to whom the interest has been paid at the rate of 18% per annum. Thus it is incorrect to hold that the assessee has paid interest @18% per annum to its related parties only. - Decided in favour of assessee Addition on account of diversion of interest-bearing funds towards interest-free advances/loans/investments - HELD THAT:- On perusal of the balance sheet of the assessee as on 31st March 2010, it was noticed that owned fund and Reserve surplus of the assessee stands 6.51 crores whereas the outstanding credit balance of cash credit (both the accounts) in aggregate is 3 crores approximately. Thus a presumption can be drawn that the assessee has not diverted any borrowed fund for noncommercial activity. See RELIANCE UTILITIES POWER LTD. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT]. Thus we hold that no disallowance of interest expense claimed by the assessee can be made on account of investments as discussed above. - Decided in favour of assessee. Difference in the value of the stock as per the bank statement and as per the audit annual accounts - as explained that the difference is arising on account of the higher value of stock declared to the bank to avail the higher amount of cash credit facility from the bank - HELD THAT:- There was no difference in the quantity recorded by the assessee in its books of accounts in the stock statement as well as the stock statement furnished to the bank. Thus there is no dispute that the difference in the valuation of closing stock for ₹ 39,15,600/- was arising due to the declaration of the higher value of the stock to the bank. In such situations, courts have held that there cannot be any addition in the total income of the assessee in the event assessee has declared the inflated value of the stock. See COMMISSIONER OF INCOME TAX - III VERSUS RIDDHI STEEL AND TUBES PVT. LTD. [ 2013 (10) TMI 291 - GUJARAT HIGH COURT] - Thus the ground of appeal of the assessee is allowed. Difference in the value of debtors as per the bank statement given to bank and as per the audit annual accounts - assessee before the CIT (A) filed certain additional evidence to demonstrate that the difference is arising in respect of one-party namely Quality casting industries which has been written off in the books of accounts of the assessee. However, the appeal of the assessee was rejected by the Ld. CIT (A) on the ground that there was no application under rule 46A was filed by the assessee - HELD THAT:- In our considered view if the assessee failed to move an application for the admission of additional evidence then the Ld.CIT (A) should have granted opportunity to the assessee to rectify the defect. But on perusal of the order of the Ld.CIT (A) we note that no such opportunity to rectify the mistake was given to the assessee. Therefore after considering the facts in totality and in the interest of justice and fair play we are inclined to restore this issue to the file of AO for fresh adjudication as per the provisions of law and in the light of above-stated discussion. Hence the ground of appeal of the assessee is allowed for statistical purposes.

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• 2019 (4) TMI 1280
  Non prosecution of appeal - Monetary limit - low tax effect - HELD THAT:- The petitioner has failed to take steps to furnish the correct address of the respondent and ensure service. On the last date of hearing before the Chamber Judge on 9th January, 2019, none appeared for the petitioner, yet last opportunity was granted to the petitioner to take fresh steps within two weeks. The special leave petition is dismissed for non-prosecution.

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• Customs

• 2019 (4) TMI 1278
  Rectification of mistake - refund of SAD - HELD THAT:- The only issue before the Bench was that the Department s observation that the CA certificate filed in support of the refund claim was not a valid CA certificate and subsequently a demand for the erroneously refunded amount of SAD was confirmed against the assessee and penalty imposed under Section 114A of the Customs Act, 1962. Moreover, the objection in respect of jurisdiction has to be raised at the preliminary stage and not after passing of the order by the Bench. This plea cannot be entertained at this stage. There is no mistake apparent on the face of the records - the miscellaneous applications for rectification of mistake is dismissed.

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• 2019 (4) TMI 1277
  Refund claim - benefit of concessional rate of duty - Effective rate of duty for import of LPG - time limitation - section 27 of CA, 1962 - appellant claims that the duty are paid under protest - HELD THAT:- Section 27 of the Customs Act,1962, specifies a period of six months from the date of payment of duty for filing refund claims - in the present case, the refund claims filed on 19.08.2005, are time barred in respect of 10 Bills of Entry. Only in respect of balance 5 Bills of Entry, the refund claims can be entertained on merit. There is nothing on record to support the claim of the appellant that the duty have been paid under protest . None of the document such as Bills of Entry whose copies are attached with the Appeal Paper Books, indicates as paid under protest . The appellant has also not submitted any other documentary evidence to support their claims. As such, the refund claims in respect of 10 Bills of Entry have been rightly rejected by the lower authorities as time barred. Whether concessional rate of duty can be extended for Propane and Butane by considering them as Liquefied Petroleum Gases (LPG), even when sub-headings were not listed in the Notification? - HELD THAT:- The Notification No.21/02-Cus dt. 01.03.2002 (as amended), during the period of dispute, has extended the benefit of concessional rate of duty to Liquefied Petroleum Gases (LPG) to specify the sub-heading as 27111900. A plain and simple reading of the entries would lead to conclusion that concessional rate will be applicable to only those Liquefied Petroleum Gases (LPG) falling under sub-heading 27111900. The goods imported have been described as Propane/Butane (LPG) and the respective sub-headings have been declared in the Bills of Entry - since the Notification has specified only Liquefied Petroleum Gases (LPG) falling under 27111900 for the concessional rate, it leads to the conclusion that Propane and Butane imported by the appellants will not be entitled to the concessional rate, even if, they are considered as forms of Liquefied Petroleum Gases (LPG). The appellant has argued that the amendment to the Notification carried out through amending Notification No.37/2005-Cus dated 02.05.2005, should be considered as retrospective. The wording of the Notification gives no clue or indication to the effect that substitution of the entry is to be retrospectively. The amending Notification is dated 02.05.2005 and hence the benefit will be applicable only from that date. Rejection of refund claims in respect of 10 Bills of Entry discussed in detail at the preceding Paragraphs, is upheld - Refund claims in respect of balance 5 Bills of Entry have been rightly rejected in the impugned order. Appeal dismissed - decided against appellant.

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• 2019 (4) TMI 1276
  Imposition of penalty on M/s. Libas India, Merchant Exporter - misutilisation of EOU Scheme - HELD THAT:- M/s. Libas India has played a significant role in abetting and facilitating the gross evasion of customs duty by misuse of EOU Scheme by M/s. G.N.Rubbertech Pvt. Ltd. It is seen from records that M/s. Libas India has entered into a Purchase Contract worth ₹ 1,31,58,400/- with M/s. G.N.Rubbertech Pvt. Ltd. on 07.11.2003. Records show date-wise purchase of goods from EOU and date-wise payment made through banking channels. The DRI investigations established the role played by M/s. Libas India in facilitating and abetting the evasion of customs duty by M/s. G.N.Rubbertech Pvt. Ltd. - the appellant has been rightly been penalised by the adjudicating authority. Penalty upheld - appeal dismissed.

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• 2019 (4) TMI 1275
  Provisional release of seized goods - Section 110A of the Customs Act, 1962 - Valuation - enhancement of value as per NIDB data for similar goods - HELD THAT:- The Tribunal has proceeded to redetermine the value of the imported goods for the purpose of executing the Bond backed by the Bank Guarantee as a condition for provisional release of the seized goods. For such purpose Tribunal has taken note of the range of values for the imported goods as appearing in the NIDB Database - the dispute with the Customs Department has progressed to the next stage in as much as the show cause notice on the alleged customs offence has been issued by the DRI, on completion of investigation. The show cause notice has indicated the basis for redetermination of the value of the imported goods. Section 110A does not create an absolute right in favour of the importer, but vests a discretion in the customs authorities to follow such course in appropriate case goes without saying that it is only a discretion to be exercised in accordance with the well settled principles of law governing the exercise of a statutory discretion vested in a public authority, but not caprice. In either case the respondents are required to take a decision expeditiously either to make a regular assessment or a provisional assessment or a decision to confiscate the goods in question if it is permissible under law after following appropriate procedure or provisionally release the goods under Section 110-A of the Customs Act. As already noticed, even in a case where the goods are liable for confiscation, Section 125 of the Customs Act provides for redemption of goods on payment of fine so long as the goods are not goods falling under the category of prohibited goods for the purpose of import. Appeal allowed.

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• Corporate Laws

• 2019 (4) TMI 1274
  Refund of maturity amount of FDR - Case of respondent was that the amount which was unclaimed and unpaid for a period of 7 years from the dates that they became due for payment have been transferred to Investor Education and Protection Fund - HELD THAT:- The appellants have sufficiently approached the 1st respondent about his FDR in the year 1992, 1995 and 2000. The FDR was lastly renewed on 27.8.1991 as admitted by the 1st respondent himself. 1st respondent has wrongly intimated the appellant vide letter dated 20.3.2013 (Page 49) that the FDR was matured for payment on 7.10.1988. We have already observed in para No.21, that the appellants were approaching the 1st respondent for payment of FDR since 1992 to 2000 and the 1st respondent should have refunded the FDR matured amount to the appellants when they had claimed earlier. The 1st respondent has not complied with statutory compliances in law and spirit, has given contradictory statements, which is proved on documents, provided no details to ROC Pune about the unclaimed deposits and the financial years to which it belongs and also is not able to satisfy us that the amount which has been deposited actually belongs to the appellants or other investors. By not intimating the details, 1st respondent has compelled the appellants to approach pillar to post to claim their hard earned money with interest. This is for this reasons that the public in large has lost faith to keep their deposits with the companies. In this case also, one of appellants expired in 1998 claiming his FDR amount from 1st respondent since 1992. This is all proved on documents. T he 1st respondent has deposited the amount with IEPF which was payable during the FY 31st March, 2004 whereas in the case of appellant it was payable during FY 2001-2002. On analysis of this document we observe that the 1st respondent has deposited the amount of other depositors whose deposit was due for transfer in the FY 31st March, 2004. Therefore. 1st respondent is unable to convince us that the amount of appellant has been deposited with the IEPF. There is a maxim in law that a man can lie but a document cannot - there is not enough proof that company had discharged its obligation with reference to this FDR while depositing with IEPF. The conclusion drawn by NCLT are not acceptable - In the interest of justice to the appellant who has been approaching 1st respondent for more than two decades, we direct 1st respondent to make payment to the appellant.

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• Insolvency & Bankruptcy

• 2019 (4) TMI 1273
  Maintainability of petition - existence of default or not - requirement of fulfillment of conditions on the part of financial creditor - section 7 of The Insolvency and Bankruptcy Code, 2016 read with Rule 4 of The Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - HELD THAT:- There is no dispute in the case that the petitioner is the financial creditor. More so when the corporate debtor has admitted the debt by way of an affidavit in reply. The application is also furnished in the prescribed form - I of the Rules and the prescribed fee has also been paid. Along with the application, the applicant proposed the name of the Resolution Professional namely Shri Bhavi Shreyans Shah, CA to act as an interim resolution professional. Form 2 along with the certificate of registration of the proposed interim resolution professional has been annexed and placed at page No. 61 of the application where declaration is made that no disciplinary proceeding is pending against him with the Board or Indian Institute of Insolvency Professionals of ICAI. There is existence of default and that the application under Section 7(2) of the Code is also complete in all respect. The petitioner/financial creditor having fulfilled all the requirements of Section 7 of the Code, the instant petition deserves to be admitted - moratorium is also declared for prohibiting all of the following in terms of sub-section (1) of Section 14 of the Code

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• Service Tax

• 2019 (4) TMI 1272
  Taxability - supply of tangible goods service - service element involved or not while renting the wagons by the Assessee to railways - HELD THAT:- The CESTAT except for stating that there is no foundation in the show cause notice bringing out whether any service element is involved while renting the wagons by the appellant to the Railways, by recording aforesaid one sentence as its conclusion disposed of the entire Appeal. It is by now well settled that in Appeal filed before the CESTAT, it is required to refer to all the materials before the Commissioner (Appeals). The order passed by CESTAT is devoid of any reason. The decision of the Commissioner is overruled with a single observation that there is no foundation in the show cause notice bringing out whether any service element is involved while renting the wagons by the respondent Assessee to the Railways and that in the absence of any such foundation, there cannot be taxability. CESTAT while deciding the Appeal has to exercise its jurisdiction as a fact finding authority. We find that the CESTAT has recorded only an abrupt finding without discussing the issue and without mentioning any reason for their conclusion. The Commissioner after a detailed discussion on the facts of the case passed a reasoned order and decided the Appeal. These facts are not adverted to or dealt with by CESTAT - Appeal allowed.

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• 2019 (4) TMI 1271
  Refund of Service Tax paid - refund was denied on the strength of the CBEC circular no. 106/08-ST dated 11/12/2008 - HELD THAT:- The refund is granted by way of exemption and the onus of establishing that the appellants are entitled for the benefit of notification is on the claimants. In the instant case, the claimants are required to establish at least two facts. Firstly, they are required to establish that duty has been discharged on services availed by them and second, that the said services have been used in the purpose of export. Revenue has vide circular no. 106/08-ST dated 11/12/2008, has clarified that the invoices/challans/bills issued by supplier of taxable services, in confirmity with Rule 4A of Service Tax Rules, 1994 would be sufficient evidence of payment of Service Tax by the Service Provider. The appellants have failed to produce invoice and the invoice produced by them did not contain Service Tax Registration number. Denial of refund on the services of storage warehousing received by them - HELD THAT:- It is also not clear if the said storage and warehousing facility was used for domestic clearance also. No evidence in support of the claim has been produced - the appellants have failed to establish that the said services were used for the specified purpose and consequently, refund on this account is not admitted. Appeal dismissed.

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• 2019 (4) TMI 1270
  Adjustment of excess paid tax with short paid tax - HELD THAT:- The short payment of ₹ 7,43,002/- arose during the financial year 2009-10 as the amount was adjusted from the excess payment made in the financial year 2008-09 and this fact is verifiable from the Statutory records, audited accounts and other relevant documents of the appellant. Service tax on TDS amount - HELD THAT:- The appellants have calculated their Service Tax liability on the gross amount of Commission received and hence, there is no occasion to demand the Service Tax again on the TDS amount received by them which is in fact a portion of gross amount. Appeal allowed - decided in favor of appellant.

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• 2019 (4) TMI 1269
  Classification of services - laying optical fiber cables as per contract executed with various telephone Companies - whether classified under Site Formation Clearance Services or under Erection, Commissioning or Installation Services? - abatement in terms of Notification No.1/06 ibid - Circular dated 24.05.2010 - HELD THAT:- The activities of laying cables under or along side road is one such activity, which has been clarified as not taxable under any clause of sub-clause 105 of Section 65 of the Finance Act, 1994. It is not in dispute that the activity undertaken by the appellant is towards laying of optical fiber cables under or along side road. Consequently, no liability for service tax will arise on the activity in terms of Circular dated 24.05.2010 - Appeal allowed - decided in favor of appellant.

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• 2019 (4) TMI 1268
  Valuation - Market Research Agency Service - inclusion of amount recovered under Actuals in the consideration for payment of service tax - HELD THAT:- This amount was received for hiring of hotel rooms, gift, purchasing product samples etc.; These amounts have been claimed from customers on actuals duly supported by vouchers. The question whether such reimbursable expenses should form part of the taxable value has been decided by the Hon ble Supreme Court in the case of UNION OF INDIA AND ANR. VERSUS M/S. INTERCONTINENTAL CONSULTANTS AND TECHNOCRATS PVT. LTD. [ 2018 (3) TMI 357 - SUPREME COURT OF INDIA] where it was held that the value of taxable services in terms of Section 67 does not include reimbursable expenses for providing such service until May, 2014-15, when Section 67 was suitably amended to make provision for the same - the demand for service tax made on this ground is set aside. Demand for service tax on amounts received from foreign clients - N/N. 6/99 (ibid) - HELD THAT:- It is not in dispute that the appellant has received payment for services provided to foreign clients either in foreign exchange or in Indian Rupees (for Nepal customer). Evidently, the payment for taxable services provided to foreign clients have been received and such amounts cannot be charged to service tax, since they are in the nature of Export of Services . It is on record that the appellant has made certain remittances in foreign currency for purchase of software licences and other expenses connected with providing services to foreign clients. We are of the view that such remittances will not incur the mischief of the proviso in Notification Nos.6/99 21/03 - In any case, the appellant was fully entitled to make remittances in foreign exchange outside the country for legitimate business expenses as permitted by RBI from time to time. In the result, we find no justification to order payment of service tax on the export proceeds. CENVAT Credit - duty paying documents - credit is denied for the reason that this has been availed on the basis of photo copies of the original documents - HELD THAT:- There are no allegations have been made by the Revenue of any fraud or mis-use. No doubts have been cast on the authenticity of the photo copies based on which credit have been availed - there is no reason to deny the cenvat credit on such flimsy grounds. Appeal allowed - decided in favor of appellant.

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• 2019 (4) TMI 1267
  Nature of activity - sale or service - retreading of tyre - whether can be classified under management or maintenance or repair service or not? - HELD THAT:- Hon ble Supreme Court in the case of Commissioner of Central Excise Customs, Kerala Vs. Larsen Toubro Ltd. [ 2015 (8) TMI 749 - SUPREME COURT ], wherein it was held that work contract is separate price of contract in comparison with other taxable service classified in the Act prior to introduction and accordingly it is not possible to classify the tyre retreading partly as work contract and partly as a repair and maintenance contract. It has been held by Hon ble Court that the service tax is leviable on the works contract of service only with effect from 1.7.2007 are not before that. Thus, following the decision of Supreme Court, the demand is set aside. Regarding Appeal No. ST/197/2010 and ST/347/2011 against the order of Commissioner has clarified that the Commissioner has reviewed the order after being aware of the order of Commissioner (Appeals) which was in favour of the appellant assessee. This is in contradiction of the legal provisions as contained in Section 84 of the Finance Act - Appeal No. ST/197/2010 stands dismissed and Appeal No. ST/347/2011 stands allowed. Appeal disposed off.

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• 2019 (4) TMI 1266
  Reverse Charge Mechanism - various Services from persons located outside India and made payment to them in foreign currencies - period from October, 2001 to November, 2006 - HELD THAT:- Section 66A ibid has been inserted in the Statute w.e.f. 18.04.2006, providing for levy of service tax on reverse charge basis on the services procured from abroad. In the terms of the settled law on the subject, no service tax can be demanded for the period upto 17.04.2006 - the demand for service tax for services procured up to 17.04.2006 is set aside. Demand for service tax for the period 18.04.2006 to November, 2006 - HELD THAT:- The appellant has admitted the liability for service tax to the extent of Rs,2,19,13,007/-, which has already been paid along with applicable interest before issue of SCN - demand of service tax with interest upheld - penalty set aside. Services in relation to ADB Projects - HELD THAT:- In respect of services provided to International Organization including ADB, the appellant will be eligible for the benefit of exemption granted by the Notification No.16/2002-ST dated 02.08.2002. In the Certificate dated 23.02.2009 issued by the Chartered Accountant, it has been certified that an amount of ₹ 1,03,610/- has been paid towards professional fees for ADB projects in China - demand set aside. Demand for service tax i.e. 4,61,663/- is relating to subscription cost of publications - HELD THAT:- The Chartered Accountant has certified that the total remittance of ₹ 16,56,652/- has been made on 25th May, 2006 and ₹ 21,15,180/- has been made on 31st August, 2006 towards subscription cost of foreign publication. In the absence of any service procurement, no service tax can be levied on the said amount. Appeal allowed in part.

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• 2019 (4) TMI 1257
  Works Contracts Service - work orders awarded by NTPC - main thrust of the arguments advanced on behalf of both the appellants is that these work orders are in the nature of Works Contracts ? - HELD THAT:- The law on the point regarding leviability of the Service Tax on indivisible Works Contracts has been settled by the Hon ble Supreme Court in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT] . The Apex court held that such contracts are liable for Service Tax only under the category of Works Contract Service with effect from 01/06/2007 and further that such contracts cannot be charged to Service Tax under any other category prior to 01/06/2007. The work orders are required to be scrutinized denovo to decide the liability of Service Tax, if any. The Adjudicating Authority did not have the benefit of the decision of the Hon ble Supreme Court in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT] - Under the circumstances, the impugned orders merit to be set aside and the issue remanded to the Adjudicating Authority for Denovo decision on the Service Tax liabilities of both the appellants involved. Appeal allowed by way of remand.

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• Central Excise

• 2019 (4) TMI 1265
  Condonation of delay in filing captioned tax appeal - section 5 of the Limitation Act, 1963 - HELD THAT:- Considering the averments made in the memorandum of application, the court is of the view that the delay caused in filing the tax appeal has been sufficiently explained - The delay caused in filing the tax appeal is hereby condoned - COD application allowed.

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• 2019 (4) TMI 1264
  Extended period of limitation - clandestine removal - electricity consumption during the period 2009-10 - Whether in absence of any finding in order-in-original regarding invocation of extended period of limitation of 'five years', demand of duty beyond the normal period of limitation of 'five years', demand of duty beyond the normal period of limitation of 'one year' can be sustained? HELD THAT:- The appellant has specifically raised the issue of limitation which has neither been considered by the Tribunal nor finding has been given. The matter is remanded back to the Tribunal for reconsideration.

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• 2019 (4) TMI 1263
  Clandestine removal - the stock shown in ER-1 return was not physically present in the factory - HELD THAT:- There is self-contradiction in the department s own case. On one hand they are alleging that the stock shown in ER-1 return was not physically present in the factory, at the time of handing over of the possession and on the other hand they are accepting the duty of around ₹ 5.00 Lakhs made by the appellant on the sale of the same stock of rusted MS ingots. Not only that, the lower authorities have confirmed the demand of ₹ 7.76 Lakhs (approx.) in respect of the same quantum of inputs and other materials by treating the same as clandestinely removed - it is very hard to understand that if the stock of the goods was not available in the factory, as alleged by the Revenue, how could the appellant sell the same in the year 2015, on payment of duty, which stands accepted by the Revenue - the findings of the lower authorities as self-contradictory and hence not sustainable. Apart from making a bald allegation of removal of the said goods in a clandestine manner, Revenue has not produced any evidence to that effect. Neither the buyers nor the transporters stand identified by the Revenue. Further there is no proof of receipt of consideration against the said removals. Admittedly when the appellant has reflected their goods in ER-1 returns, they are duty-bound to show the clearance of the same and which clearance stands shown by their in the year 2015 by showing the sale of the rusted ingots. Further Revenue has not made any investigations at the end of the buyers of the said rusted ingots so as to establish the sale as fake. Appeal allowed - decided in favor of appellant.

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• 2019 (4) TMI 1262
  CENVAT Credit - the denial of credit in most of the cases is either on the ground that the same are not services or on the technical ground of the invoice not being proper in terms of Rule 4A of the central Excise Rules - HELD THAT:- Various disputed services or input stand held to be admissibly cenvatable input or services by the Tribunal s decision referred - Further, there is neither any allegation nor any finding to the effect that appellant has not received the said services or the said services are not tax paid or they do not stand utilized by the appellant in manufacture of their final product or in their business activity. In the absence of any findings to that effect, the denial of credit on hyper technical and procedural grounds cannot be held to be justified. Extended period of limitation - show cause notice stand issued on 24.06.2011 for the period June, 2006 to March, 2007 - HELD THAT:- Revenue started investigations vide their letter dated November, 2007 and thereafter kept quiet for a period of almost five years and issued show cause notice only on 24.06.2011. There is no explanation by the Revenue for the such delayed issuance of show cause notice - the proceedings by invoking the extended period of limitation against the appellant was not justified. Appeal allowed - decided in favor of appellant.

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• 2019 (4) TMI 1261
  CENVAT Credit - common input services used for exempted as well as dutiable final products - non-maintenance of separate records - applicability of Rule 6(3) of CCR - HELD THAT:- The view of the Department and the impugned order based on the same is frivolous, as even if the appellant want to maintain separate account in respect of the services mentioned above, it would be impossible for them. Lex non cogit ad impossibilia is well settled legal principle and therefore, the option of maintaining separate account and inventory in respect of the services cannot be forced upon them. Section 6(3) of the Rules, on account of retrospective amendment to this Rule, also gives an option to a manufacturer to reverse the proportionate credit in respect of the Cenvated inputs/input services used in or in relation to the manufacture of exempted final products, which the appellant in this case have done. Appeal allowed - decided in favor of appellant.

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• 2019 (4) TMI 1260
  Bar on utilization of CENVAT Credit - default in making payment of Central Excise Duty - constitutional validity of Rule 8 (3A) of the Central Excise Rules, 2002 - HELD THAT:- The Jurisdictional High Court at Calcutta, in the case of M/S. GOYAL MG GASES PVT. LTD VERSUS UNION OF INDIA OTHERS [ 2017 (8) TMI 1515 - CALCUTTA HIGH COURT] has followed the decision of the Gujarat High Court in INDSUR GLOBAL LTD. VERSUS UNION OF INDIA 2 [ 2014 (12) TMI 585 - GUJARAT HIGH COURT] and has held the portion of rule 8 (3A) as ultra vires. There is no bar in making use of Cenvat Credit in making payment of Central Excise Duty even during default period, in view of the fact that the Rule 8 (3A) ibid which steps otherwise, has been struck down as ultra vires. The portion of the order imposing penalties as well as demand for Central Excise Duty is set aside - appeal disposed off.

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• 2019 (4) TMI 1259
  Excess of duty paid towards the scrap - whether excess of duty paid towards the scrap generated is just an adjustment or a claim for refund for which, an application is required? - HELD THAT:- It is not a dispute that the registered job worker had paid the duty and it is not the case that there was also a similar situation of availment of re-credit by the job worker - the appellant had clearly mentioned about the necessary reversal in the cenvat register for the excess debit, which is only a reversal of book entry. This being so, there cannot be any question of refund as no duty is actually paid. The reversal entry made by the appellant is proper and in order in the given facts of the case - appeal allowed - decided in favor of appellant.

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• 2019 (4) TMI 1258
  SSI Exemption - use of Brand name - Clandestine removal - 4054 pieces of GLASSPOLL brand roofings - benefit of Notification No. 1/93-CE - HELD THAT:- The issue now stands settled in terms of decisions of the Hon ble Supreme Court, the latest of which is CCE, BANGALORE VERSUS M/S. VETCARE ORGANICS PVT LTD [ 2015 (6) TMI 156 - SUPREME COURT] . It has been held in this case, involving Notification No. 1/93-CE, that permission to use and user on basis of such permission of brand name, does not make the user the owner of such brand name. The appellant firm is not eligible to the benefit of exemption under Notification No. 1/93-CE, as held by the Commissioner in the impugned order. Extended period of limitation - HELD THAT:- During the material period and until the decision of the COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH-I VERSUS MAHAAN DAIRIES [ 2004 (2) TMI 73 - SUPREME COURT OF INDIA] there were number of decisions of the Tribunal, including the decision of the COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH VERSUS FINE INDUSTRIES [ 2002 (10) TMI 114 - CEGAT, COURT NO. II, NEW DELHI] , which had held that in a case like the instant case, the user of the brand name obtained upon permission, including assignment from the brand owner, was eligible to benefit under the pari materia Notification No. 175/86-CE, unless the specified goods on which the small scale manufacturer used brand name belonging to another person was identical to the goods of such other person and, therefore, the extended period of limitation contained in the Proviso to Section 11A(1) of the Act is not applicable. Clandestine removal - period April, 1998 to September 26, 1998 - HELD THAT:- In the absence of any official translation being brought on record, this dispute cannot be resolved. The employee, Shri Tapan Kumar Bose, is also no longer available as the firm has closed down its business as informed by the appellant s counsel. Moreover, the matter relates to more than 20 years back. In such circumstances it is not possible to arrive at any conclusive finding on this issue. Appeal disposed off.

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• 2019 (4) TMI 1256
  CENVAT Credit - raw material, Calcined Alumina, received from sister unit - denial of credit on the ground that such raw materials have not been purchased by the appellant s unit, but has been procured - Rule 7 (4) of the Cenvat Credit Rules, 2002 - HELD THAT:- An identical dispute has been considered and decided by the Tribunal in EXIDE INDUSTRIES LTD. VERSUS COMMISSIONER OF C. EX., HALDIA [ 2008 (1) TMI 190 - CESTAT, KOLKATA] in favour of the assessee. The Tribunal has taken the view that the cenvat credit will be admissible even in cases when the goods are procured. Appeal allowed - decided in favor of appellant.

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• 2019 (4) TMI 1255
  Supply of certain goods for use as ship stores in the ships belonged to the Indian Navy - benefit of N/N. 64/95 dated 16.03.1995 (Sl.No.3) - under construction vessels - Department was of the view that the benefit of the Notification cannot be extended to the goods supplied to Indian Naval Vessels, which were under construction - HELD THAT:- The Notification extends benefit to goods, other than cigarettes, if supplied as stores for consumption on board a vessel of the India Navy. There were doubts whether the benefit can also be extended to goods supplied to Indian Navy Vessel which are under construction. However, the issue was laid to rest with the decision of the Hon ble Supreme Court on the subject in the case of LEADER ENGINEERING WORKS VERSUS COMMISSIONER OF C. EX., CHANDIGARH [ 2006 (2) TMI 193 - SUPREME COURT OF INDIA] . Since the above clearances are duly supported by certificates from Navy, we find no reason to deny the benefit. Accordingly, the benefit of Notification No.64/95 ibid for the clearances is allowed. Appeal allowed in part.

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• 2019 (4) TMI 1254
  Bar on utilization of CENVAT Credit - default in making payment of Central Excise Duty - constitutional validity of Rule 8 (3A) of the Central Excise Rules, 2002 - HELD THAT:- The Jurisdictional High Court at Calcutta, in the case of M/S. GOYAL MG GASES PVT. LTD VERSUS UNION OF INDIA OTHERS [ 2017 (8) TMI 1515 - CALCUTTA HIGH COURT] has followed the decision of the Gujarat High Court in INDSUR GLOBAL LTD. VERSUS UNION OF INDIA 2 [ 2014 (12) TMI 585 - GUJARAT HIGH COURT] and has held the portion of rule 8 (3A) as ultra vires. There is no bar in making use of Cenvat Credit in making payment of Central Excise Duty even during default period, in view of the fact that the Rule 8 (3A) ibid which steps otherwise, has been struck down as ultra vires. The portion of the order imposing penalties as well as demand for Central Excise Duty is set aside - appeal disposed off.

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• 2019 (4) TMI 1253
  Valuation - inclusion of sales tax retained by the respondent in assessable value - Section 4 (3)(d) of the Central Excise Act, 1944 - HELD THAT:- As per Scheme of the West Bengal Incentive Scheme, 1999, the assessees subscribing to such Scheme are allowed retention of the sales tax collected by them on the goods sold without depositing the same to the Sales Tax Department - The decision of the Hon ble Supreme Court in COMMISSIONER OF CENTRAL EXCISE, JAIPUR-II VERSUS M/S. SUPER SYNOTEX (INDIA) LTD. AND OTHERS [ 2014 (3) TMI 42 - SUPREME COURT] has made it clear that under such circumstances, the benefit of deduction of the sales tax amount under Section 4(4)(d) will not be available. Extended period of limitation - HELD THAT:- The Hon ble High Courts have taken the view that since there was no clarity on the issue, untill the issue is settled by the Apex Court the assessee is not said to be at fault. Hence, extended period would not be available to raise the demand - thus, restricted for normal period - penalty also set aside. The Adjudicating authority is directed to re-quantify the demand within the normal time limit, which is required to be paid along with interest. Appeal allowed in part.

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• 2019 (4) TMI 1252
  Refund of unutilized CENVAT credit - Rule 5 of the CENVAT Credit Rules, 2004 read with Notification No. 27/2012-CE (NT) dated 18/06/2012 - period January, 2013 to March, 2013 - HELD THAT:- The present appeals are squarely covered by the decisions as relied upon by the appellants in the case of MEGMA DESIGN AUTOMATION INDIA PVT. LTD. VERSUS COMMISSIONER OF SERVICE TAX, BANGALORE [ 2015 (9) TMI 939 - CESTAT BANGALORE] - The assessing officer did not have any valid ground for rejecting the refund claims of ₹ 5,77,073/- and ₹ 2,03,935/- respectively, for which the assessee is legally entitled to. Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2019 (4) TMI 1251
  Requirement of pre-deposit - recovery of arrears of entry tax - HELD THAT:- This appeal is disposed of providing that no further recovery be affected against the appellant towards the demand of interest on arrears of Entry Tax and recovery, if any, of the interest from the appellant shall be subject to the final outcome of the Writ-Tax No. 961 of 2018 filed by the appellant - appeal disposed off.

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• 2019 (4) TMI 1250
  Eligibility certificate - exemption u/s 4-A of the U.P. Trade Tax Act - grant of amended certificate of entitlement pursuant to the provision of Sections 42 of the VAT Act, which enables the continuation of the previous benefit so granted . HELD THAT:- Section 42(3)(a) stipulates that those industrial units which was granted benefit of exemption from deduction of tax in view of the earlier Act or under the Central Sales Tax Act may apply to the Commissioner for issue of certificate of entitlement in prescribed form and in prescribed manner. The said provision of the Act nowhere restrict for any grant of certificate of entitlement to those industrial units already availing the benefit under Section 4-A of the Act nor it narrow down the scope for grant of such certificate by the authority so enumerated in the said provision. It only enable the said industrial unit to apply before such authority for the grant of entitlement certificate which is in form of extension of the earlier certificate so granted under the old Act or said to be a recognition of the earlier certificate by the new Act. In the present case, certificate of entitlement was already granted by the Commissioner to the assessee on 10.11.2008, it was the subsequent exemption which was granted by the DLC and additional limit was increased by ₹ 6,48,78,870/- that the assess applied for amended certificate of entitlement. As, DLC has already forwarded the additional grant to the Commissioner, he could have exercised his power under Sub-section 9 of Section 42, which mandates him to amend the certificate of entitlement, and, in case he does not proceed to do so, the assess can file an application. The provisions of Section 42(3)(a) of the Act has to be read in harmony with sub-section (9) of Section 42 of the Act, as word 'may' occurs in sub Section 3(a) of Section 42 of the Act, while the word 'shall' has been incorporated by the Legislature in sub section (9) of Section 42, meaning thereby that the duty is cast upon the Commissioner to amend certificate of entitlement to those industrial units already having been granted the eligibility certificate under Section 4-A by the provisions of the Trade Tax Act, and also the certificate of entitlement - Thus it is clear that provisions of Sub-section 9 of Section 42 are applicable in the present case, and not Sub-section 3(a) of Section 42. Tribunal had rightly directed the Commissioner to grant amended certificate of entitlement to the respondent-dealer, who is entitled for the same and the findings recorded by the Commissioner Commercial Tax in regard to the delay of 8 years, 2 months and 5 days is not sustainable. The question stands answered in affirmative, i.e. in favor of the assessee and against the revenue.

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• 2019 (4) TMI 1249
  Whether the issue of Form C under the Central Sales Tax by the revisionist was under the bona fide belief or deliberately issued to evade tax? HELD THAT:- The revisionist had made an application under Form A of the Central Sales Tax and in the Form, he had disclosed only two items namely, diesel generating sets and control panel. In the said Form, he had also enclosed the list of items for which he was likely to trade in and for which, he would be issuing Form C under the Central Sales Tax. However, the order dated 29.06.1991 passed by the Deputy Commissioner (Executive) Trade Tax, which has been passed after perusal of the record and also after calling for a report from the Assessing Authority, discloses the fact that the revisionist had in fact enclosed the list of items for which he was likely to trade in and for which he was thereby authorized to issue Form C. The revisionist under the mistaken belief submitted that the registration has been granted even for the items for which he had disclosed in the list, continued to issue Form C. It is clear that the revisionist had in fact submitted a list of items, which was contained in the Form A. The registration was granted only with respect of two items and not for all the items as mentioned in the list - The revisionist was never given an opportunity nor any proceedings undertaken with respect of two items contained in the list in pursuance to order dated 29.06.1991 and from the conjoined reading of the entire facts as mentioned above, it cannot be said that there was a deliberate intention on the part of the revisionist to evade tax. The finding of the Tribunal is that the revisionist did not act in a bona fide manner seems to be perverse as there is no material to show that there was intention to evade tax by the revisionist. There is no lack of bona fide on the part of the revisionist, who has voluntarily submitted the list of goods but the same was not duly considered by the respondents. Malafide/malice is a necessary ingredient for imposition of penalty. It cannot be concluded that there was mala-fide/malice which can be attributed to the revisionist for imposition of penalty - revision allowed.

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• Indian Laws

• 2019 (4) TMI 1279
  Punishment of Compulsory Retirement - conduct led to conviction - criminal charge under Customs Act, 1962 - case of petitioner is that what he insisted upon is production of original documents which could not be produced by Presenting Officer - HELD THAT:- The documents relied in support of charges were supplied to petitioner but what he insisted upon is production of original documents which could not be produced by Presenting Officer since original documents belong to Custom Department and Presenting Officer had no access to them - in a departmental proceeding when copies of documents are supplied and it is not shown that said copies are manufactured or tempered, mere fact that original documents are not made available, will not vitiate proceedings as non production of original documents will not make copies of such documents inadmissible in departmental inquiry since Evidence Act, 1872 is not applicable. It cannot be said, in the entirety of facts, that inquiry proceeding in the present case is vitiated in law for non supply or non production of original documents in oral inquiry. Imposition of penalty upon petitioner - HELD THAT:- The factum of carrying of contraband foreign goods by petitioner causing imposition of penalty upon him is a proven fact. Mere oral evidence produced before Inquiry Officer could not have been treated to be a discharge of burden by petitioner. In any case, in assessment of evidence, it is upon Inquiry Officer to believe one evidence and discard another and unless wholly inadmissible evidence has been accepted or there is some otherwise illegality in departmental inquiry, this Court in judicial review would not sit in appeal over the manner in which evidence has been assessed by disciplinary authority. Here is a case where petitioner has been penalized by disciplinary authority by imposing punishment of compulsory retirement on a charge which has not been proved at all since there was no evidence to prove misconduct of petitioner and, therefore, punishment imposed upon petitioner is patently illegal, cannot be sustained. It is true that in departmental inquiry when a person is punished this Court does not enter into judicial review by assessing evidence like appellate authority but where a charge is levelled and incumbent held guilty of misconduct without adducing any evidence, such order of punishment cannot be sustained. The impugned order of punishment and appellate order cannot be sustained - petition allowed.

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• 2019 (4) TMI 1248
  Dishonor of cheque - liability of accused/petitioners to pay 20% or less of the cheque amount to the complainant - Retrospective effect of amendments in the act u/s 143-A and Section 148 of the Act - only challenge raised by the respective petitioners, in all these petitions, is that since the Amendment Act has been enforced with effect from 02.08.2018, therefore, these provisions cannot be made applicable to the cases, where the trials for offence under Section 138 of the Act were already pending or where the appeals have arisen from such trials, which were pending on the date of the enforcement of these provisions. HELD THAT:- It is clear that the dispute between the parties is relating to the applicability of Section 143-A and Section 148 of the Act, introduced vide Amendment dated 02.08.2018, to the cases which were already pending at the stage of the trial; or to the appeals arising from such trials, whether filed before or after the enforcement of the above-said provisions. Another significant aspect to be noted is that the Amendment Act has not specifically made the amendment to be applicable retrospectively. The notification of the amendment also does not specify any other date for the amendment to come in operation. In such a situation, Section 5 of the General Clauses Act would be of some help. This Court finds that all substantive laws have to be prospective in nature and applicability; unless prescribed to be retrospective, whereas all procedural laws have to be applicable to all cases immediately on their coming into operation, including the pending cases. Whether the provisions contained in Section 143-A and Section 148 of the Act are substantive in nature or the procedural one? - HELD THAT:- If the provisions are substantive in nature then the same cannot be applied retrospectively to the pending cases. However, if the same are procedural in nature then the same has to be applied to all the cases, including the one pending before the Court on the date, the amendment was enforced - The substantive right of a person is the entitlement which is available to him by virtue of his very existence or which relates to his being, belongings or the estates. Such rights can be human rights, constitutional rights or statutory rights. Such substantive rights can have variety of facets; depending upon the factual situation in which such right is to be considered. The substantive rights can be governed by the constitutional or statutory provisions. The statutory provisions created by the competent legislature can prescribed certain conditions for crystallizing the substantive right of the person. In such a situation, once the conditions prescribed for crystallizing such right are fulfilled, such substantive right of a person becomes vested right as well. So all substantive rights are not vested rights but all vested rights are substantive rights. A law which essentially deals with forums of adjudication, procedure of adjudication and the mechanism for enforcement of result of such an adjudication, would essentially be procedural in nature. All rights granted by procedural law would be only procedural rights. As a corollary to this, no procedural right can be either substantive or vested right. This Court does not find any substance in argument of learned counsel for the petitioners that since the object and reasons for introducing the amendment relate to giving benefit to the complainant and do not relate to the procedure of the appeal, therefore, it cannot be treated to be a procedural step. All the petitions, wherein the order of the Trial Courts, directing the accused to deposit up to 20% of the cheque amount as interim compensation; are challenged, are allowed.

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