TMI Tax Updates - e-Newsletter
April 25, 2019

Case Laws in this Newsletter:

GST Income Tax Customs Securities / SEBI Insolvency & Bankruptcy FEMA Service Tax Central Excise CST, VAT & Sales Tax

Articles

1. REPLACEMENT OF INTERIM RESOLUTION PROFESSIONAL

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Notification - II for Departmental Examinations - 2019 for Ministerial Examination

2. Repayment of 6.05% Government Stock 2019

Notifications

DGFT

1. 02/2015-2020 - dated 24-4-2019 - FTP

Amendment in Appendix 3 (SCOMET items) to Schedule- 2 of ITC (HS) Classification of Export and Import Items, 2018

2. 01/2015-2020 - dated 23-4-2019 - FTP

Prohibition on import of milk and milk products from China

GST - States

3. F-10-8/2019/CT/V (10) - dated 11-2-2019 - Chhattisgarh SGST

CORRIGENDUM - Notification No. 03/2019-State Tax, dated the 29th January, 2019

SEBI

4. SEBI/LAD-NRO/GN/2019/10 - dated 22-4-2019 - SEBI

Securities and Exchange Board of India (Infrastructure Investment Trusts) (Amendment) Regulations, 2019

5. SEBI/LAD-NRO/GN/2019/09 - dated 22-4-2019 - SEBI

Securities And Exchange Board Of India (Real Estate Investment Trusts) (Amendment) Regulations, 2019

Circulars / Instructions / Orders

GST

1. 99/18/2019 - dated 23-4-2019

Clarification regarding filing of application for revocation of cancellation of registration in terms of Removal of Difficulty Order (RoD) number 05/2019-Central Tax dated 23.04.2019

2. 98/17/2019 - dated 23-4-2019

Clarification in respect of utilization of input tax credit under GST

DGFT

3. TRADE NOTICE NO. 07/2019-20 - dated 23-4-2019

Implementation of MOU between India and Mozambique for import of pigeon peas and other pulses grown in Mozambique

Highlights / Catch Notes

GST

• Amendment to Rule 62 of CGST Rules, 2017: New Procedures for Service Providers in the Composition Scheme.

  Act-Rules : Composition Scheme - Form and manner of submission of statement and return - Rule 62 of the Central Goods and Services Tax Rules, 2017 - Provision amended to incorporate procedure in relation for service providers.
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• GST Registration Reinstatement u/r 23: File Pending Returns Within 30 Days for Revocation of Cancellation.

  Act-Rules : Revocation of cancellation of registration - Rule 23 of the Central Goods and Services Tax Rules, 2017 - Pending Returns to be filed within 30 days
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• New Circular Clarifies Process to Revoke Canceled GST Registration Under Removal of Difficulty Order 05/2019-Central Tax.

  Circulars : Clarification regarding filing of application for revocation of cancellation of registration in terms of Removal of Difficulty Order (RoD) number 05/2019-Central Tax dated 23.04.2019
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• New Circular Clarifies Input Tax Credit Use Under GST, Outlines Methods to Avoid Penalties and Optimize Compliance.

  Circulars : Clarification in respect of utilization of input tax credit under GST
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• GST Council Lacks Mechanism for Public Grievance Redressal; Judge Missteps by Ordering Council to Address Issues.

  Case-Laws - HC : Obligation of GST council to address grievance raised by General public - There is no mechanism for consideration and disposal of representations made by the general public to the Council after conducting personal hearing of the parties who make such representations. - The learned Single Judge has wrongly exercised his discretion in issuing a direction to GST Council.
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• GST Must Be Charged on Total Freight Amount Including Diesel Costs Provided by Service Recipient.

  Case-Laws - AAR : Valuation - inclusion of value of Diesel used in the trucks/ vehicles - Applicant are required to charge GST on the total amount including the cost of diesel i.e. on the total freight amount inclusive of the cost of diesel so provided by the service recipient
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• GST TDS Exemption on Pure Services to Municipal Bodies; Not Applicable if Goods Exceed 25% of Composite Supplies.

  Case-Laws - AAR : Levy of GST TDS - service to municipal corporation/local authority - No GST TDS on pure service nil rated and Composite supply where supply of goods is not more than 25% of total value of supply - supply other than mentioned above if GST is applicable then GST TDS is also applicable
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Income Tax

• Section 56(2)(vii)(b): No Tax on Property Received via Power of Attorney Without Consideration, Recipient Not Owner.

  Case-Laws - AT : Addition u/s 56(2)(vii)(b) - receipt of property through general power of attorney without consideration - it cannot be said that the assessee received the property as owner and was liable to pay the tax on the stamp duty value of the said property
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• Assessing Officer Must Prove Share Application Money as International Transaction for Interest Disallowance in Transfer Pricing Case.

  Case-Laws - AT : TP adjustment - disallowance of interest - characterizing the share application money to associate enterprises as interest free advance - onus is upon the AO to prove that it is an international transaction of capital financing - Such a presumption cannot change the character of transaction
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• Sale of Shares Ruled as Capital Gain, Not Business Income; Trading in Land by Subsidiaries Irrelevant to Assessee's Taxation.

  Case-Laws - AT : Income from sale of shares - business income OR capital gain - trading of under lying assets (land) of the subsidiary companies - sale of shares can not be treated as trading in land so as to be taxed as business income in the hands of the assessee.
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• Court Upholds Capital Loss Set-Off for Long-Held Shares, Recognizes Legitimate Tax Planning, Not Avoidance.

  Case-Laws - AT : Set off of capital loss - tax planning vs tax avoidance - shares were held by assessee for long period - transaction has not been doubted - sold at a price which was more than NAV value of shares as on date of sale of shares- allowable even if it is a case of tax planning within four corners of law and the same cannot be brushed aside.
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• Rental Income from Mall with Amenities Classified as Business Income; Intent to Rent Commercial Space Confirmed.

  Case-Laws - HC : Rental income of shopping mall - provided range of common facilities and amenities upon which the occupiers could run their business from the leased out premises - factors clearly indicate that assessee desired to enter into a business of renting out commercial space to interested individuals and business houses - business income
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• Front End Fees Classified as Interest u/s 2(28A) of the Income Tax Act; Spread Over Loan Duration.

  Case-Laws - HC : Disallowance of front end fees - front end fee is part of interest under Section 2(28A)- interest payment was spread over the duration of the loan - Therefore, it should spread over a period of time
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• Tribunal's Failure to Address Grounds Constitutes Error, Rectifiable u/s 254. Responsibility to Address All Grounds.

  Case-Laws - HC : Rectification u/s 254 - A ground which is raised and not given up when remains undecided in the judgment of the Tribunal, gives rise to an error on the face of record, which is rectifiable - it is the duty of the Tribunal to dispose of such ground and give its opinion thereon
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• Assessing Officer's Failure to Scrutinize Low Land Purchase Costs Justifies Revision u/s 263.

  Case-Laws - AT : Revision u/s 263 - source of purchase declared was examined by AO but unrealistically lower costs of purchases not examined - no relevant meaningful inquiry was conducted in respect to correctness of the cost of purchase of land - lack of inquiry - Revision justified
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• Transfer Pricing Adjustments: Rule 10B(4) Clarifies Comparable Transaction Selection, Allows Prior Data Consideration for Analysis.

  Case-Laws - AT : TP adjustment - comparable selection - Rule 10B(4)- the data to be used in analysing the comparability of an uncontrolled transaction shall be the data relating to the financial year - proviso to this rule further provides that data relating to a period not being more than two years prior to [the current year] may also be considered if such data have an influence on the determination of TP in relation to the transactions being compared
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• Income Tax Deduction Allowed for SRA Project; Section 80IB(10) Clauses (a) and (b) Do Not Apply Per CBDT Notice.

  Case-Laws - HC : Deduction u/s 80IB - assessee was awarded contract by the Slum Rehabilitation Authority (SRA) under Slum Rehabilitation Program for development of a plot of land - as per notification of CBDT, requirements of clauses (a) and (b) of Section 80IB(10) would not apply to such projects - deduction allowable
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• Tribunal Misunderstands AO and CIT(A) Findings, Case Remanded for Reassessment of Facts and Reasoning.

  Case-Laws - SC : Recording of wrong facts & reasoning by Tribunal - Tribunal did not correctly appreciate as to what AO and CIT (A) held and what was their reasoning which led to their respective conclusion - Tribunal being the last Court of appeal on facts, its finding on the question of fact is of significance - case remanded to tribunal
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• Disallowance u/s 40A(3) not applicable; tour bill reimbursements to employees didn't exceed INR 20,000. Rule 6DD exception applied.

  Case-Laws - AT : Disallowance u/s 40A (3) - reimbursement of expenses to employee - exception of rule 6DD - for purpose of disallowance u/s 40 A (3) both expenditure and payment should exceed INR 20,000/- - in case of reimbursement of tour bills to various staff each expenditure does not exceed above limit - no disallowance called for
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DGFT

• DGFT Prohibits Milk and Milk Product Imports from China Due to Safety and Quality Concerns.

  Notifications : Prohibition on import of milk and milk products from China
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IBC

• Financial creditors must prove enforceable debts; personal loans to friends not exempt under Assam Money Lenders Act, 1934.

  Case-Laws - Tri : Initiation of Corporate Insolvency Resolution Process - financial creditor (FC) - proof of enforceable debts - individual in lending business - FC failed to prove that lending money to friends not in the courses of a business is exempted from the purview of the Assam Money Lenders Act, 1934.
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• Financial Creditor Needs Solid Proof for Insolvency; Dishonour Memo Alone Not Enough per Case Circumstances.

  Case-Laws - Tri : Initiation of Corporate Insolvency Resolution Process - financial creditor - proof of enforceable debts - A dishonour memo cannot be taken as a proof of default in the peculiar nature and circumstances of the case in hand.
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Service Tax

• Reverse Charge on Foreign Service Payments Not Covered by Section 66A of Finance Act 1994.

  Case-Laws - AT : Reverse charge mechanism - The payment made to ‘service providers outside the country’ does not qualify for being subject to tax under section 66A of Finance Act, 1994
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• Taxpayer Challenges Service Tax Recovery; Claims Payments Not Covered Under VCES, Avoids Defaulter Status for Deposits.

  Case-Laws - HC : Recovery of service tax dues of the assessee from the bank a/c - dafaulter - VCES application was on grounds that two of the deposits made by the petitioner towards his arrears of tax dues was not covered under the Scheme - it was nevertheless a tax deposit and to that extent the petitioner could not be held a defaulter.
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Central Excise

• Performance Bonus Excluded from Assessable Value for Tax on Refractory Bricks and Monoliths.

  Case-Laws - AT : Valuation - inclusion of performance bonus received by the appellant from their buyer towards the out performance of refractory bricks and monolithi as heat guarantee bonus - the said amount need not be included in the assessable value.
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• Penalty Waiver Tied to Complete Revenue Neutrality; Evading Payment Intent Irrelevant for Penalty Decisions.

  Case-Laws - HC : Waiver of penalty - Complete revenue neutrality is linked with the question of imposition of penalty - the duty is chargeable but it is 100% refundable, the question of intention to evade payment of duty pales into insignificance.
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Case Laws:

• GST

• 2019 (4) TMI 1402
  Valuation - inclusion of value of Diesel provided by service recipient used in the trucks/ vehicles - transport services - whether to charge GST on freight amount excluding diesel cost or on total freight which is inclusive diesel cost? - HELD THAT:- Any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods or services or both is includible in value. In the instant case, the service recipient i.e. M/s Shree Raipur Cement, C.G is providing diesel to the vehicles used by the applicant to transport cement/clinker in the course of business of cement by the cement company. Diesel so provided by the service recipient to the applicant for use in trucks/ vehicles of the applicant forms an important and integral component of this business process, without which the process of supply of cement can never get materialized. Applicant are required to charge GST upon M/s Shree Raipur Cement, C.G on the total amount including the cost of diesel i.e. on the total freight amount inclusive of the cost of diesel so provided by the service recipient i.e. M/s Shree Raipur Cement.

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• 2019 (4) TMI 1401
  Rate of GST - Natural Calcite Powder - HELD THAT:- From the HSN Code and tariff it can be easily concluded that Natural Calcite Powder in essence is a Calcite in powder form and thus can be classified under HSN Code 25309030 and attracts GST @ 5%.

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• 2019 (4) TMI 1400
  Levy of GST TDS - Cleaning services of road, garden, toilets undertaken by Municipal Corporation of Pratapgarh district - Pure services/ composite services - HELD THAT:-The applicant is a local authority constituted under the provisions of Article 243W of Constitution of India. It provides various civic services directly or indirectly to citizens residing in Pratapgarh viz. cleaning of roads, gardens, toilets and waste collection etc. It at times also hires various contractors and receives the services from contractors on rate basis - The services received by the applicant are not only pure services but also involves supply of goods viz. construction of toilets involves supply of manpower services along with goods like bricks, pipes etc. The services received by the applicant from various contractors is a supply of both i.e. supply of goods and services and therefore may not exempted under serial no. 3 of Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 if supply of goods crosses threshold limit of 25%. For the activities undertaken by the applicant in which if there is only pure services then it will attracts nil rate of tax. In other activities where there is composite supply and supply of goods is less than 25% out of total supply then also it attracts nil rate of duty. As for these activities, there is Nil rate of GST so provisions of TDS will also not be applicable on the applicant - If the activity undertaken by the applicant where there is Works Contract of Composite Supply composite supply of goods and services and quantum of supply of goods is more than 25% then rate of GST will be applicable as mentioned in respective Notification. As the activities attracts GST and are not Nil rated therefore, provisions of TDS will be applicable. In Composite supply of goods and services where supply of goods is more than 25% of the total value of supply, will attracts GST @ 12% (SGST 6%+CGST6%) if the activity fall under purview of Serial No. 3 of Notification 11/2017 (CT-rate) dated 28.06.2017 as amended from time to time and if not, then GST @ 18% will be applicable. Provisions of GST TDS will apply as the activity in this case is taxable.

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• 2019 (4) TMI 1399
  Revision of Declaration in Form GST Tran-I - Rule 120-A of the Central Goods and Service Rules, 2017 - transitional credit - HELD THAT:- The grievance of the petitioner is being looked into by the Union of India and, therefore, the present petition stands disposed of permitting the Union of India to proceed ahead in the matter and to pass an appropriate order, in accordance with law.

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• 2019 (4) TMI 1398
  Obligation of GST council to address grievance raised by General public - Withdrawal of levy of tax on the recycled plastic products - HELD THAT:- There is no mechanism provided in the Constitution or any other statute for the Goods and Services Tax Council to adjudicate the grievances raised by the general public. There is no mechanism for consideration and disposal of representations made by the general public to the Council after conducting personal hearing of the parties who make such representations. Learned counsel for the writ petitioners has not brought to our notice any provision in the Constitution or any other statute which imposes a duty on the Goods and Services Tax Council to adjudicate on the grievances raised by the members of the general public with regard to imposition and levy of goods and services tax on any product. Article 226 of the Constitution provides that every High Court shall have power to issue to any person or authority orders and writs including a writ in the nature of mandamus for the enforcement of any of the rights conferred by Part III of the Constitution and for any other purpose. It is well-settled that a mandamus lies to secure the performance of a public or statutory duty in the performance of which the one who applies for it has got sufficient legal interest - The writ of mandamus is limited to the enforcement of the obligation imposed by law. The learned Single Judge has wrongly exercised his discretion in issuing a direction to the Goods and Services Tax Council to consider Ext.P2 representation and pass orders thereon, after conducting personal hearing of the writ petitioners - Petition dismissed.

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• Income Tax

• 2019 (4) TMI 1397
  Penalty u/s 271(1)(c) - excessive deduction claimed u/s 10B - Addition of excess stock - findings of facts - HELD THAT:- SLP dismissed.

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• 2019 (4) TMI 1396
  Speculative transaction - international price of crude palm oil and related products had declined during the relevant year and the same affected the Indian market - as per tribunal assessee had not taken delivery of a consignment of sugar and the assessee suffered damages as a consequence thereto - Date which has to be reckoned for the purpose of determining the arm s length price in a contract with an associate concern - HELD THAT:- SLP dismissed.

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• 2019 (4) TMI 1395
  Recording of wrong facts reasoning by Tribunal - benefit of deduction u/s.57(iii) - whether payment was made for enlarging the control and management over - capital expenditure or revenue expenditure - whether the High Court [ 2017 (8) TMI 647 - BOMBAY HIGH COURT] was justified in dismissing the appeal filed by the department - HELD THAT:- We find that the Tribunal did not correctly appreciate as to what AO and CIT (A) held and what was their reasoning which led to their respective conclusion. Having wrongly observed about their respective reasoning and the finding, the Tribunal proceeded to examine the case and eventually reversed the order of CIT (Appeals). The High court did not notice the aforesaid observation of the Tribunal and upheld the order of the Tribunal. In such a situation like the one arising in the case and keeping in view the question involved, we are of the considered opinion that the matter deserves to be remanded to the Tribunal for deciding the appeal filed by the respondent-Company (assessee) afresh on merits because the Tribunal being the last Court of appeal on facts, its finding on the question of fact is of significance. Remanding the case is not likely to cause any prejudice to any party because the aggrieved party will have a right of appeal to the High Court and then to this Court against any adverse order. We consider, in the interest of both the parties, to remand the appeal to the Tribunal for its hearing afresh on merits in accordance with law, keeping all the issues open. We allow the appeal, set aside the orders of the High Court and the Tribunal and remand the appeal to the Tribunal for its decision afresh on merits in accordance with law uninfluenced by any observations made in the impugned order, order of the Tribunal and in this order.

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• 2019 (4) TMI 1394
  Denial of natural justice - Addition of on money received with respect to subject land of the assessee which was evidence by the document seized during search u/s 132 - non making available opportunity of cross-examining - HELD THAT:- Despite earlier order dated 28.01.2019 granting four weeks as last opportunity to take appropriate steps for service on the respondents, it is reported that no steps are taken. Hence the special leave petition stands dismissed for non-prosecution.

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• 2019 (4) TMI 1393
  Rectification u/s 254 - Non consideration of specific ground raised - TP adjustment on Payment of Corporate fees - admission of additional evidence allowed - Tribunal neither considered itself nor ask the AO to re- decide - HELD THAT:- As before the Tribunal the assessee had raised specific ground to challenge the addition on Payment of Corporate fees . In fact, this was the substantial part of the Petitioner s challenge in the Appeal before the Tribunal. In support of such ground, the Petitioner had also sought permission to produce additional evidence. Such permission was granted. Additional evidence was allowed to be brought on record. Thereafter the choice before the Tribunal was either to ask the Assessing Officer to take such additional evidence into account and re- decide the issue or to do itself. Unfortunately, the Tribunal did neither. Tribunal disposed of the Petitioner s Appeal without giving any answer to the Petitioner s challenge to the addition made by the Assessing Officer. The power of rectification of the Tribunal flowing from section 254(2), howsoever, restricted, would definitely be available in a situation like the present one. When the Appellant before the Tribunal raises a ground, presses the ground in service, it is the duty of the Tribunal to dispose of such ground and give its opinion thereon. A ground which is raised and not given up when remains undecided in the judgment of the Tribunal, gives rise to an error on the face of record, which is rectifiable. The impugned order of the Tribunal is set aside. The Petitioner s request for rectification of the original judgment of the Tribunal dated 18/10/2017 is granted.

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• 2019 (4) TMI 1392
  Eligibility to deduction u/s 10A - AO denied claim as undertaking was formed by the transfer to a new business of machinery and plant previously used for any purpose - whether undertaking should not be formed by the transfer to a new business of machinery and plant previously used for any purpose? - HELD THAT:- The unit in question was transferred as going concern, entire business was transferred to the new owner who claimed continued benefit under Section 10A of the Act. This issue is squarely covered by the decision of Division Bench of this Court in the case of CIT Vs. Sonata Software Ltd. [ 2012 (4) TMI 99 - BOMBAY HIGH COURT] as held that sale of business was not a reconstruction within the meaning of Section 10A of the Act. - Decided against revenue.

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• 2019 (4) TMI 1391
  TP Adjustment - include ICRA Management Consultancy Services Ltd., Kinetic Trust Limited in the set of comparable companies - HELD THAT:- Perusal of the impugned judgment would show that in addition to giving independent reasons, the Tribunal had also heavily relied on the decision in case of the very assessee for the earlier assessment years 2008-09 and 2009-10 in which both these comparable were included despite the opposition by the Department. Revenue brought to our notice an order dated 17.11.2016 passed in the Revenue s Income Tax Appeal [ 2016 (11) TMI 1510 - BOMBAY HIGH COURT] in which such an issue had been raised but not entertained by the Court. In that view of the matter, Question No. (a) is not entertained. Striking down the additional markup margin of 3% to the average PLI of the comparable companies selected by the TPO - HELD THAT:- Assessee, in addition to investment advisory services had also rendered portfolio management services. However, the Tribunal, in the impugned judgment held that there was no evidence of the assessee had rendered any such additional services. This question also, therefore, is not entertained.

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• 2019 (4) TMI 1390
  TP Adjustment - excluding the comparables Rolta India Ltd and KLG Systels Ltd on the basis of turnover - HELD THAT:- Tribunal had come to the conclusion that the instances of Rolta India Ltd and KLG Systels Ltd cannot be included in the comparables with the assessee since they are not functionally similar. Notably, the Tribunal s earlier decision in case of Berh India Ltd, on which reliance was placed in the present judgment does not seem to have been carried in the appeal by the Revenue. On such ground, Income Tax Appeal is dismissed.

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• 2019 (4) TMI 1389
  Disallowance of interest expense - Whether interest receipt/payment were directly related to the business activity? - HELD THAT:- Assessee had entered into an agreement with the cooperative society for development of land for the purpose of which the assessee had deposited certain amounts with MHADA. Somehow, the project did not materialize. The assessee had received a total sum of Rs. 1.47 cores and Rs. 60 lakhs, which is shown by way of interest and compensation respectively. Both the receipts were shown as business income. The assessee had also interest expenditure of Rs. 1.50 crores in the same year. AO rejected the claim of interest expenditure. CIT (Appeal) and Tribunal concurrently held that the assessee was in the business and the interest was paid wholly and exclusively for earning income. FAA had given a categorical finding that there was a direct relation between interest received by the assessee and the interest paid by him, that because of the dispute the assessee was following a particular method of accounting. FAA had rightly held that the transaction related with interest receipt/payment were directly related to the business activity of the assess. - Decided against revenue.

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• 2019 (4) TMI 1388
  Correct head of income - activity of leasing out of shops and other commercial establishments to various persons - building was constructed for the purpose of shopping mall - House Property Income OR Business Income - HELD THAT:- The significant features are that the assessee had obtained loan from the bank for its mall-complex project. That the assessee had entered into lease and license agreement with individuals for letting out commercial space. Majority of these licensees was for a period of 60 months. In addition to providing such commercial space on lease, the assessee also provided range of common amenities. List of which is reproduced earlier. These facilities included installation of elevators, installation for Fire Hydrant Sprinkler system, installation of central garbage collections and disposal system, installation of common dining arrangement for occupants and the staff, common water purifier and dispensing system, lighting arrangement for common areas etc. The assessee did not simply rent a commercial space without any additional responsibilities. The assessee executed lease and license agreements and also provided range of common facilities and amenities upon which the occupiers could run their business from the leased out premises. The charges for such amenities were also broken down in two parts. Charges for several common amenities was included in the rentals. Only on the consumption based amenity such as electricity, the occupant would be charged separately. All factors thus clearly indicate that assessee desired to enter into a business of renting out commercial space to interested individuals and business houses. - Decided against revenue

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• 2019 (4) TMI 1387
  Deduction u/s 80IB(10) in respect of redevelopment project - not eligible for deduction in view of the board instructions under Section 119 - Tribunal allowed claim - HELD THAT:- In case of assessee in the earlier assessment year on identical question held that Commissioner [Appeals] in his judgment has specifically observed that the project of the assessee is approved as slum rehabilitation project by slum rehabilitation authority of the State and the same has also been notified. The assessee has submitted the project and the plan dated 28/04/2004 and the same was approved by the Rehabilitation Authority on 04/06/2004, the same is filed on record. The Tribunal has also considered the said aspect, so also proviso to Section 80IB(10) of the Act and has correctly passed the order. The judgment of the Tribunal cannot be faulted with.

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• 2019 (4) TMI 1386
  Nature of receipt - amount received for non -compete agreement - revenue or capital receipt - HELD THAT:- Similar questions were examined by this Court in case of ARUN TOSHNIWAL ANURAG A. TOSHNIWAL VERSUS THE DY. COMMISSIONER OF INCOME OTHERS [ 2015 (4) TMI 516 - BOMBAY HIGH COURT] held that it is only vide the Finance Act, 2002 which came into effect from 1st April, 2003 the said capital receipt was now taxable under section 28(va). Had the assessee not entered into an agreement of non-compete, he would have earned the amount from the business carried on out of the division which was sold. It is the sale of the said division that has deprived him of the income and part of the sale consideration itself, he was required to execute an agreement of non-compete and the compensation received under the said agreement was relatable on a consideration for sale of the business of the division and, therefore, for these reasons also, we are of the view that the amount is taxable under Section 28(va) - both the assessee have received the amount pursuant to the agreement dated 2nd June, 2008 that is well after 1st April, 2003 and would be covered by the provisions of Section 28(va) of the Act. We are accordingly of the view that no relief can be granted to the appellants. - Decided against the assessee.

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• 2019 (4) TMI 1385
  Deduction u/s 80IB - assessee was awarded contract by the SRA under Slum Rehabilitation Programme for development of a plot of land - whether CBDT s Notification dated 05.01.2011 speaks of the SRA Scheme being eligible u/s. 80IB and not the contractor (the executor) who is clearly barred from the deduction u/s. 80IB ? - HELD THAT:- Nothing contained in clauses (a) or (b) of Section 80IB(10) would apply to the housing project carried out in accordance with a scheme framed by the Central Government or a State Government for re construction or re development of existing building in areas, declared to be slum areas under any law for the time being in force and such scheme is notified by the board in this behalf. Thus, the schemes as duly notified by the board for redevelopment of slum areas, have been given special concession, given their special requirements. Once such a notification as referred to in the said proviso is issued by the CBDT, requirements of clauses (a) and (b) of Section 80IB(10) of the Act would not apply to such projects. In the present case, we may re call such notification has already been issued, covering all Slum Redevelopment Schemes prepared by the State of Maharashtra under the Maharashtra Redevelopment Town Planning Act. It was under such scheme that, the assessee had engaged itself in developing housing project. - Decided against revenue

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• 2019 (4) TMI 1384
  Levy of penalty u/s 272A(2)(k) - late filing of the quarterly returns - introduction of E-TDS filing - cause of delay was the non-acquaintance of the staff with the newly introduced procedures - HELD THAT:- As decided in assessee s own case wherein the ITAT cancelled the penalty levied under Section 272A(2)(k) as held in the F.Y. 2005-06 filing of e-TDS return was introduced and there was a change from filing annual returns to quarterly return. In respect of the first quarter also there occurred some delay. It is, therefore, clear that with the introduction of the e-TDS return filing and change from the filing of annual returns to quarterly returns the delay was caused. There is nothing unacceptable in the explanation of the assessee that the cause of delay was the non-acquaintance of the staff with the newly introduced procedures. The violation in this respect is a venial breach of law and does not attract penalty proceedings in the very first year of introduction of the new procedures. We, therefore, delete the addition. - Decided in favour of assessee.

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• 2019 (4) TMI 1383
  Set off of short term capital loss - tax planning vs tax avoidance - purchase on exorbitant price and after getting ssle at minimal price - HELD THAT:- The perusal of Balance Sheet, financials of the said company, wherein the company had not entered into any major transactions of carrying on the business reflects that there was no merit in purchase of shares at face value with premium of Rs. 9,900/- per share after few days of incorporation of the said company. Further, this purchase was on 13.01.2010 and on 27.01.2010 bonus shares were issued and on 29.01.2010 the shares were sold at face value of Rs. 100/- plus premium of Rs. 760/- per share. The assessee has failed to justify first the cost of purchase i.e. with premium of Rs. 9,900/- per share and then the sale consideration i.e. premium of Rs. 760/- per share. In the absence of the same, the loss claimed by assessee is not justified and we uphold the orders of authorities below in denying the set off of short term capital loss of Rs. 15.08 crores on sale of shares of Vadhivare Specialty Chemicals Ltd. The grounds of appeal No.1 and 3 raised by assessee are thus, dismissed. Denial of set off of capital loss - sale of shares of Pentagon Manufacturing and Marketing Ltd. against long term capital gains arising on sale of shares of FEM - HELD THAT:- We thus, find no merit in the stand of AO that the transaction of booking loss by selling shares by the assessee to his daughter is colourable device, cannot be accepted. Once the transaction has been entered into within four corners of law and the transaction has not been doubted; where the shares which were held by assessee for long period were sold at a price which was more than NAV value of shares as on date of sale of shares, then it may be case of tax planning within four corners of law and the same cannot be brushed aside. Applying the ratio laid down by the Hon ble High Court of Punjab Haryana in Porrits Spencer (Asia) Ltd. Vs. CIT [ 2010 (3) TMI 179 - PUNJAB HARYANA HIGH COURT] wherein it has been held that once the transaction is genuine and merely it has been entered into with a motive to save tax, it would not become a colourable device and consequently, earn any disqualification. We direct the AO to allow the claim of assessee and set off of loss on sale of shares of Pentagon against gains arising on sale of shares of FEM. The grounds of appeal No.2 and 4 raised by assessee are thus, allowed. Loss claimed on sale of shares of Reliance Industries Ltd. - HELD THAT:- Facts of assessee are similar to the facts before the Hon ble Bombay High Court in Pr. CIT Vs. Adar Cyrus Poonawalla [ 2018 (11) TMI 1339 - BOMBAY HIGH COURT] , we hold that the sale of shares of Reliance Industries Ltd. by the assessee after the announcement of bonus issue at the market price which is available on the stock market and where the transaction has not been doubted, there is no merit in not allowing set off of capital loss on the ground that it was colourable device to evade payment of taxes.

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• 2019 (4) TMI 1382
  Disallowance u/s 40A (3) - payment in excess of INR 20,000 in cash for purchases and reimbursement of expenses to employee - exception of rule 6DD - HELD THAT:- On consideration of details of payment made we find that mineral and metal trading Corp (MMTC) is though a government undertaking but a public listed company, therefore it cannot be said that payment is made to government - no business exigency or any other situation falling in to exception of rule 6DD was shown. The question of genuineness does not determine the disallowance u/s 40A (3). Non genuine expenses as such are not allowable u/s 28 and therefore same cannot be question u/s 40A (3). In view of this we do not find any infirmity in confirming disallowance u/s 40A (3) With respect to amount reimbursed to various employees, for purpose of disallowance u/s 40 A (3) both expenditure and payment should exceed INR 20,000/-. As in case of reimbursement of tour bills to various staff each expenditure does not exceed INR 20,000/- , disallowance of INR 966500/ under section 40A (3) is unwarranted. Revenue has not pointed out that any of such expenditure and payment both exceeds specified limit. In view of this, ground of assessee is partly allowed. Valuation of work in progress (WIP) - - method of valuation and its cost components disputed - allegation that inventory classification is not as per requirement of schedule VI of Companies The Act, 1956 - AS-2 - HELD THAT:- Undisputed position that in subsequent years learned assessing officer has accepted method of valuation as well as cost component included for inventory valuation of inventory, addition made by learned assessing officer in current year cannot be sustained Disallowance u/s 36 (1) (iii) - interest paid on borrowed funds at higher rate - interest free or interest at lower rate on advances to subsidiary or sister concern - no nexus been proved that amount is advanced out of borrowed funds - HELD THAT:- Fact shows that for year ended on 31/3/2011 assessee have given an outstanding loan and advances to sister concern unrelated parties amounting to Rs. 41.27 Crores. However assessee has also stated that it has share capital and reserves and surplus as per audited accounts available as on that date shows that assessee has non-interest-bearing funds available with him of INR 715,00,00,000. Non-or lower interest-bearing advances given to subsidiary or sister concern are less than interest free funds in form of share capital and reserves and surplus available with assessee, interest disallowance u/s 36 (1) (iii) cannot be made. Hence, in view of above facts, we reverse finding of lower authorities in disallowing interest expenditure. Disallowance u/s 14 A r.w.r. 8D - non recording of satisfaction - assessee suo motu disallowance u/s 14A - HELD THAT:- As before proceeding to apply provisions of rule 8D or enhancing disallowance, learned assessing officer is required to record a satisfaction that having regard to kind of assessee suo motu disallowance u/s 14A was not correct. In present case, such satisfaction by assessing officer is missing. He has merely proceeded on basis of finding of special auditor under section 142 (2A) of the Act. Therefore, disallowance made by learned assessing officer is not sustainable. Accordingly, we direct learned assessing officer to delete disallowance in excess of disallowance offered by assessee u/s 14 A Disallowance of deduction u/s 80 IB/IC - fair market value of goods transferred from Noida Division to eligible unit is higher in terms of provisions of section 80 IA (8) read with 80 IB (13) and 80 IC (7) - unprocessed goods profit Mark up to extent of 2% instead of 10% as computed by assessing officer was restricted - HELD THAT:- in absence of any mandate available that Central Excise valuation rule 8 provides for market price of such goods, same cannot be imported into provisions of section 80 IA (8). However, as assessee himself has stated that profit can be imputed at rate of 1 or 2% of value of transaction price recorded in books of accounts, we direct learned assessing officer in case of processed goods such as Kattha and cardamom to compute 2% on process charges as profit for computation of market price of goods transferred inter-unit. Accordingly, learned assessing officer is directed to consider transaction value of goods, which are not processed and sent to eligible unit, is recorded in books of accounts. With respect to goods, which are processed through job work and transferred to eligible unit, learned AO is directed to impute 2% profit over job work charges i.e. cost incurred by assessee for determination of profit u/s 80 IA. Disallowance of deduction u/s 80 IB/IC by applying provisions of section 80 IA (8) read with section 80 IB (13) and 80 IC (7) - rate of technical knowhow fee on value of goods transferred from perfumery dividend to eligible unit should be 2.75% as against 2.5% declared by appellant - no such adjustment in subsequent year - HELD THAT:- This fact has not been controverted by learned departmental representative. Therefore, it is a fact that in subsequent year claim of assessee has been accepted by learned assessing officer and not disputed whereas in this year it has been disputed. Therefore, it is apparent that when claim of assessee has been accepted in subsequent year on identical facts and circumstances, which is not disputed, therefore there is no reason to sustain any such addition during year. Deduction u/s 80IB/80IC - excess profitability in eligible unit for tax holiday - fair market value of goods transferred is higher in terms provisions of section 80 IA (8) read with section 80 IB (13) and 80 IC (7) - HELD THAT:- identical issue with respect to applicability of rule 8 of Central Excise valuation rules, ( 2000) has been applied by learned assessing officer to determine fair market value of goods transferred inter-unit. We have already discussed applicability of rule 8 of Central Excise valuation rules, 2000 for purpose of working out market price of goods transferred and rejected same while deciding ground number 8 of appeal of assessee. Therefore, for similar reason we also do not subscribe addition made by learned assessing officer by applying Central Excise valuation rules and imputing 10% profit margin in goods transferred to determine market price of such goods. Allocation of cost of corporate office - profit margin determination - CIT A apply a profit margin of 10% against 26.14% applied by AO - HELD THAT:- In absence of any finding that head office, branches or depot are providing any services and are considered as a profit centre by assessee or any finding by learned assessing officer, no further profit can be attributed on actual cost allocated by these units to eligible units. Actual cost charged by 3rd parties are merely allocated to eligible and non eligible units of assessee without making any further noticeable addition to such costs, profit ratio of 10% over and above cost cannot be imputed for working out eligible profit of unit. CIT A followed earlier years order. . Learned CIT DR also did not point out before us that was there any value addition made by these head office or branches to various cost allocated by assessee. In view of this ground, of appeal of assessee is allowed and AO is directed to not to markup any profit element on allocation of common cost to eligible undertaking. Deduction of claim of deduction u/s 80 IB/80 IC - royalty on use of brand name Rajinigandha by eligible units in terms of provisions of section 80 IA (8) read with section 80 IB (13) and 80 IC (7) - HELD THAT:- No doubt, there is a service to the eligible unit for using the brand name but its market value is required to be determined. Assessee has not given this brand name for exploitation to any third party. Further for market value in relation to services of user of above brand name would be price that such goods or services would ordinarily fetch in open market. Assessee has also not allowed anybody else to utilize above brand. Ld AO has compared with the brand name Tulsi Mix for which assessee is paying royalty, which is owned by third party. There is no comparison shown by the ld AO that both are similar brands. Further in later on years ld AO himself has not adjusted the legible profit on this account, therefore, it is apparent that ld AO himself do not think that such adjustment is required to be made. Therefore, brand market value is also not determined by learned assessing officer Disallowance of claim of purchase of sandalwood oil - Addition based on seized papers - year of assessment - HELD THAT:- Seized document does not belong to AY 2010-11 but for Ay 2011-12. There is no material shown to us by the LD CIT DR, which authorizes us to impute the seized papers pertaining to later years for making addition in the earlier years. Revenue has also not initiated any redressal mechanism provided in the act. No reasons are given by the ld AO or ld CIT (A) to extrapolate those seized documents for AY 2010- 11. We have also taken cognizance of those papers in AY 2011-12 and upheld addition on those papers n appeal of assessee for that year. Therefore, in view of above facts, no addition is warranted in this AY on the basis of the seized papers Transfer pricing adjustment - interest on loan to wholly owned subsidiary in Switzerland - whether ? Swiss LIBOR should be taken for benchmarking interest rate and not Indian rate? - HELD THAT:- However in absence of any such clause in agreement it cannot be said that such loan is required to be repaid in Indian Rs. Only and therefore, PLR has been correctly applied where fact shows that loan has been granted in foreign currency. As decided in JYOTI CNC AUTOMATION PVT LTD. [ 2018 (8) TMI 757 - GUJARAT HIGH COURT] held that since AE is situated in France, it is most appropriate to consider mark up on basis of average speed over LIBOR charged in France. Accordingly, orders of learned lower authorities are reversed with respect to applicability of Indian interest rate on such loan for benchmarking interest transaction of loan advanced. No other arguments were advanced by either of parties on other issues involved other than that of applicability of PLR vs. LIBOR. Reduction of claim u/s 80 IB - allocation of expenses - taking into account expenditure such as depreciation of fixed assets of corporate office and expenses of depot incurred by business of assessee for providing services to eligible undertaking - HELD THAT:- AO has not made any adjustment on account of allocation of depreciation from AY 2013-14 onwards, which is also supported by order of learned transfer pricing officer for AY 2013-14 and 2014-15. In view of above facts we do not find any infirmity in order of learned CIT A in directing learned assessing officer to not to consider depreciation on various assets for purpose of reduction of claim under section 80 IB and 80 IC. Deduction 80IB/IC inflated due to less royalty payment - Adjustment of claim of deduction u/s 80IB/IC on ground that royalty @ 1% of net sales paid to M/s. Dharampal Satyapal Sons P. Ltd. (Third party) is less than rate approved by Regional Director of Central Government which is 3% and as such profit of eligible units and consequential claim of - HELD THAT: - Reasons given by ld CIT (A) for deleting addition are found to be correct. No infirmity was also pointed out by learned departmental representative. It may be appreciated that rate approved by Regional Director is maximum rate and there could we no ground or basis for treating same for any adjustment in terms of provisions of section 80IA(10) r.w.s 80IB(13) and 80IC(7) . It is relevant to note that same rate of royalty @1% is being paid by both eligible as well as non-eligible units and as such, impugned adjustment is on arbitrary and mechanical basis. CIT(A) deleting adjustment of deduction u/s 80IB/IC on account of notional royalty in respect of Tulsi Brand in excess of 1% being payable by eligible units to M/s. Dharampal Satyapal Sons P. Ltd. Deserves to be upheld as same rate was applied and accepted even by AO in respect of non-eligible units. Reduction of claim u/s 80 IB/80 IC on account of processing charges of betel not at rate of 3% in place of 2.5% taken by assessee - HELD THAT:- AO has taken an incorrect view that on account of job charges to its associate concern for processing beetling has resulted into over statement of profit of industrial undertaking eligible for deduction u/s. 80IB/80IC. finding of CIT(A) is well reasoned as he has held that rate approved by Regional Director is maximum rate and there could no ground or basis for treating same for any adjustment in terms of provisions of section 80IA(10) r.w.s 80IB(13) and 80IC(7) of The Act. It is relevant to note that same rate of processing charges @ Rs. 2.5 per Kg is being paid by both eligible as well as non-eligible units and as such, impugned adjustment is on arbitrary and mechanical basis. Accordingly, we uphold order of ld CIT (A) and direct assessing officer not to alter deduction u/s. 80IB/80IC of eligible undertaking on account of variation in job charges. Excise duty refund for computation of deduction u/s 80 IC - HELD THAT:- We uphold order of learned CIT A in holding that excise duty refund is part of eligible income for deduction u/s 80 IC. Disallowance of prior period expenses - HELD THAT:- CIT A correctly deleted disallowance on ground that neither special auditor nor assessing officer has specifically mentioned any details about prior period expenditure and he also considered that assessee himself is also disallowed prior period expenditure of Rs. for 527338/ in return of income itself. Further, as learned assessing officer has not pointed out about time when bills were admitted by assessee has a liability by approving it. Further finding and conclusion of CIT (A) are well reasoned. Special auditor and assessing officer have failed to point out specific expenditure and disallowance is on mechanical basis without appreciating facts of case. Addition on foreign exchange fluctuation - HELD THAT:- Loan transaction being on capital account, gain or loss arising on fluctuation of foreign currency is capital in nature and not taxable under Income tax The Act. Learned departmental representative also could not point out any reason to say that order of learned CIT A is incorrect and foreign exchange fluctuation gain arising to assessee on statement of foreign currency loan is not a capital receipt. Lesser rate of job work charges from sister concern in comparison to other related parties - HELD THAT:- It is evident that addition of higher rate of job charges is on hypothetical basis and against concept of real income. Further, it is not open to assessing officer to sit in armchair of assessee and to make business decisions on arbitrary basis. Further, there is no provision in Income tax The Act, 1961 that warrants such adjustment and as such, action of assessing officer in increasing rate of job work charged from sister concern M/s. Dharampal Premchand Ltd. is not sustainable under law. Order of CIT (A) is well reasoned and learned departmental representative could not controvert order of learned CIT A therefore, addition in respect of job work has rightly been deleted Profit arising out of sale of shares - Messer s coastal Project s private limited pertains to Messer is SR credits private limited and not to assessee company - HELD THAT:- there is no material or evidence on record to establish that consideration received by M/s. S.R. Credits P. ltd. is received or transferred to assessee or has been utilized by assessee and as such, allegation of colourable device is unsubstantiated and uncorroborated. Mere fact that shares have finally been purchased by foreign institutional investors furthermore strengthens fact that transaction is genuine and fully acted upon by respective parties. It is not case of assessing officer that assessee has breached or contravened any provisions of Income tax The Act, 1961 and as such impugned addition is on hypothetical basis and total disregard to principle of real income. In view of above facts we do not find any infirmity in order of learned CIT capital in deleting whole addition on account of profit on sale of shares of Messer s coastal Project private limited which in fact pertains to Messer is SR credits private limited and not to assessee. Disallowance of eligible income u/s 80 IB/80 IC by applying provisions of section 80 IA (8) - fair market value of goods transferred from silver foil division to eligible undertaking was held than that declared by appellant - HELD THAT:- silver is a commodity price of which fluctuates every hour therefore approach of learned lower authorities in adopting average purchase price during year cannot substitute market value of silver purchased by assessee for its eligible unit. Therefore, at most processing cost of silver is service that has been transferred by non-eligible unit to eligible unit, which should have been done at market rate. At present assessee has considered process cost on actual cost basis and has loaded on price of silver. Therefore, we direct assessing officer to adopt a margin of 2% over process cost of processed silver transferred from non-eligible unit to eligible unit and to sustain disallowance of deduction to that extent only. Addition on purchase of sandalwood oil - HELD THAT:- There is no basis for taking minimum price for purpose of computing above addition. According to us, average price if taken by revenue for purpose of making addition would obliterate to some extent any difference between purchases on various dates, of different quantities, of different qualities, from different parties, from different destination and of different rates. This is also supported from fact that assessee has purchased sandalwood from 4 different parties of 18894.210 KG. In those 4 parties, two parties were alleged bogus bill providers are also included. Total purchases are of Rs. 1436436257/- during year. Average rate of purchases from balance two parties (ignoring 2 parties who provided bogus bills) ranges from Rs. 75882.10 - to INR 28272.38. Average rate of purchases is INR 54156.49 per kg. In view of above facts, we direct learned assessing officer to make addition in hands of assessee for 16702.800 kg by replacing purchase price shown by two parties in their bills by average rate of purchases of INR 54156.49 per kilogram which works out difference of Rs. 41,31,92,185/-. Accordingly addition of Rs. 41,31,92,185/- is confirmed and balance addition is deleted

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• 2019 (4) TMI 1381
  TDS u/s 194J - Carriage Fees/Channel Placement Fees - Whether payments made for use/right to use of process are royalty as per Explanation 6 to section 9(l)(vi) hence such payments are covered u/s. 194J ? -HELD THAT:- Co-ordinate Bench of ITAT, Mumbai A Bench in assessee s own case has considered the issue in the light of the provisions of Section 194J and by following the decision of Hon ble Bombay High Court in the case of CIT vs. NGC Networks (India) Pvt. Ltd., [ 2018 (5) TMI 1148 - BOMBAY HIGH COURT] held that channel placement fees is not a royalty in terms of Explanation-2 to Section 9(i)(vi) of the Income Tax Act, 1961, therefore, no disallowance could be made u/s.40(a)(ia) for failure to deduct tax at source u/s.194J There is no error in the findings recorded by the CIT(A) in deleting additions made by the AO towards carriage fees / channel placement fees u/s.40(a)(ia) of the Income Tax Act, 1961. Hence, we are inclined to upheld the order of CIT(A) and dismiss the appeal filed by the revenue. Addition u/s 14A - disallowance of expenses incurred in relation to exempt income - HELD THAT:- Assessee has not earned any exempt income for the year under consideration. AO has brought out this fact in his assessment order. Once, there is no exempt income for the year under consideration whether expenses incurred in relation to earning exempt income contemplated u/s.14A could be disallowed or not is no longer res integra. See BALLARPUR INDUSTRIES LIMITED [ 2016 (10) TMI 1039 - BOMBAY HIGH COURT] and CHEMINVEST LIMITED VERSUS COMMISSIONER OF INCOME TAX-VI [ 2015 (9) TMI 238 - DELHI HIGH COURT] . Decided in favour of assessee.

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• 2019 (4) TMI 1380
  TP adjustment - comparable selection - correctness of excluding DCW Ltd from the final list of comparables - losses are continuously incurred for three or more years that a comparable can be excluded, but the question really is as to which three years are to be taken into account - whether the period to be taken into account is any three years in the past, or the current year and two immediately preceding years ? - arm s length price for purchase of raw material pertaining to manufacturing activity - HELD THAT:- We find guidance from Rule 10B(4) which provides that the data to be used in analysing the comparability of an uncontrolled transaction with an international transaction shall be the data relating to the financial year [(hereafter in this rule and in rule 10CA referred to as the current year )] in which the international transaction has been entered into and proviso to this rule further provides that data relating to a period not being more than two years prior to [the current year] may also be considered if such data reveals facts which could have an influence on the determination of transfer prices in relation to the transactions being compared . The fact about profit in the financial year 2010-11, as also in the financial year 2015-16 onwards, is not even disputed by the revenue authorities below. In view of these discussions, the exclusion of DCW Ltd from the list of final comparables is not justified on the ground that it is a persistent loss making company. In the event of DCW Ltd being accepted as a valid comparable, there will be no need to deal with other issues raised with respect to this arm s length price determination, as, in that event, the profitability of the tested party will be well within acceptable range. TP Adjustment relating to availing of management services - ALP determination of payments tp AEs - as per TPO assessee has clubbed the payment of management service charges with manufacturing/ trading and benchmarked such aggregated transactions together using Transactional Net Margin Method as the Most Appropriate Method, using the assessee as the tested party - HELD THAT:- relied on decision in own case [ 2017 (3) TMI 1727 - ITAT AHMEDABAD] The only justification for taking ALP of services at NIL is under CUP but then there has to be something on record to show that in an arm s length situation these services are rendered without consideration. The worth of services cannot be decided by the TPO, nor is it open to him to question, as such an approach implicitly does, the commercial expediency of these services. It is only elementary that how an assessee conducts his business is entirely his prerogative and it is not for them to decide what is necessary for an assessee and what is not. It is not for the TPO to question assessee s wisdom in making payment for the services, which, in the opinion of the TPO, are not of much use. The TPO has travelled much beyond his powers in questioning commercial wisdom of assessee s decision to take benefit of expertise of its AEs. As perused the evidence of services rendered and the nature of services in question, on random sample basis. In our considered view, there is reasonable evidence of the rendition of service and it cannot be open to TPO to proceed on the basis that the services were not rendered. The method of ascertaining the arm s length price, on the basis of TPO s subjective perception about worth of services, is not sustainable in law either. In view of these discussions, as also bearing in mind entirety of the case, we deem it fit and proper to delete the impugned ALP adjustments. - Decided in favour of assessee.

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• 2019 (4) TMI 1379
  Addition u/s 40(a)(ia) - Freight charges to shipping lines airlines - assessee is not liable to deduct TDS in respect of the exempted parties covered u/s.197 - AO has accepted the assessee s stand in order passed u/s.154 - HELD THAT:- In respect of airport/port charges, since these were reimbursed by the clients of the assessee to the assessee towards the monies defrayed by the assessee towards these authorities, the CIT(A) has rightly deleted the addition. Therefore, this issue also does not survive. Addition u/s 40(a)(ia) - Custom clearance charges, shipping line charges, documentation charges and other payments viz, handling charges, rent etc - reimbursement of actual expenditure - pure agent - HELD THAT:- Since the assessee has not laid proper materials before the AO during the course of assessment, these issues are remitted back to the file of the AO for a fresh examination. The assessee shall place all the materials in support of its contentions and comply to the requirements of AO in accordance with law. AO after affording adequate opportunity to the assessee shall pass a speaking order. The corresponding grounds are treated as partly allowed for statistical purposes.

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• 2019 (4) TMI 1378
  Revision u/s 263 by CIT - source of purchase declared was examined by AO - unrealistically lower costs of purchases declared - no inquiry on correctness of the cost of purchase of land - preponderance of evidence - HELD THAT:- A perusal of the questionnaires issued and reply made by the assessee thereon clearly shows that no relevant meaningful inquiry was conducted in respect to correctness of the cost of purchase of land. What was inquired was source of cost of purchase declared. The issue raised by the Pr.CIT is altogether different and quite valid for that matter. A bare look at the assessment order also gives the infallible impression that the assessment order was passed in a routine and perfunctory manner without any discussion on any aspect of the assessment whatsoever. The preponderance of evidence clearly indicates unrealistically lower costs of purchases declared formally which would warrant an inquiry with the competent registering authority as well as with other comparable cases and by other realistic means. Pr.CIT in discharge of its solemn duty under s.263 of the Act could not remain oblivious of the facts objectively drawn. There is an apparent plausibility in the action of the Pr.CIT by resorting to powers under s.263 which is of wide amplitude. The circumstances clearly exist which demands inquiry which was not done by the AO while discharging of statutory function. Thus, armed with fairly extensive powers, the Pr.CIT, in our view, has taken action compatible with circumstances. The purchase transaction culminated and stood consummated during the year under review. Therefore, the cause of action did exist in relation to the assessment order in question. Hence, the Pr.CIT was fully justified in invoking its power under s.263 of the Act to set aside the assessment framed without any application of mind on the crucial aspect which is self-revealing from the stamp duty payment itself. A lack of inquiry on a pertinent point which demonstrates possible revenue leakage of staggering amount would definitely tantamount to the order being both erroneous as well as prejudicial to the interest of the Revenue. The assessee has not estopped in any manner from dealing with the inquiry as specified to the AO and to rebut the perception that the prima facie belief on error in the original order is not correct - Decided against assessee

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• 2019 (4) TMI 1377
  Stay on the recovery of the outstanding demand - additions made on account of unexplained cash credit u/s 68 and interest on such unexplained cash credit - HELD THAT:- We are inclined to grant a stay of outstanding demand subject to the deposit of Rs. 20,00,000/- towards the outstanding demand as discussed above in two installments. The first installment of Rs. 10 Lacs shall be deposited on or before 28th February 2019 and the remaining installment of Rs. 10,00,000/- will be deposited on or before 15th March 2019. It is also important to note that after making the aforesaid payment of Rs. 20 lacs the total payment of the outstanding demand shall constitute 52.06% of the total demand including interest. Accordingly, we direct that the said outstanding demand be kept in abeyance till the disposal of the appeal by the Tribunal or for six months whichever is earlier. We also direct the registry to fix the appeal of the assessee for hearing out of turn on 12th April 2019, which is a date agreed by the ld Representative of both the sides as convenient to them. The assessee shall not seek any adjournment of the case on the date of hearing and if it does so, the bench hearing the appeal of the assessee will be at liberty to revoke this order granting the stay of recovery of the outstanding demand.

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• 2019 (4) TMI 1376
  Addition made u/s 68 - as alleged parties are mere accommodation entry providers who provide accommodation entry in the form of unsecured loans as per the requirements of the beneficiary - CIT-A deleted the addition - HELD THAT:- CIT(A) after appreciating the facts had rightly relied upon the judgment in the case of Lovely Exports Pyt Ltd. [ 2008 (1) TMI 575 - SUPREME COURT OF INDIA] , wherein it was held that the AO is at liberty to bring to tax the amounts in their respective hands of the investors if their identity, genuineness and creditworthiness is not proved. AO should have made efforts to assess the amounts in the hands of the investors at least on protective basis. Even in case, the creditworthiness of the investors is not proved it will not automatically give license to the assessing authority to make additions in the hands of the recipient u/s 68 unless it is proved that it is the unexplained and unaccounted money of the appellant which has been introduced in its books of account in the name of bogus/non-existent entities. Since the AO had not observed the principles laid down by the Hon ble Apex Court, thus Ld. CIT(A) had rightly deleted the additions, more particularly after appreciating the facts that the assessee had filed all the details and supporting documentary evidences to prove the identity, genuineness and creditworthiness of the lenders. We also cannot lost sight of the fact that amount was paid by the investors from their running bank accounts which were also duly accounted in the books of the assessee as well as investors as is evident from the audited financial statements coupled with confirmation of the creditors. - Decided against revenue Addition made on account of deemed rent - CIT-A deleted the addition - as per AO said premises were vacant during whole of the year and not let out at all during the year, hence the provisions Section 23(1)(c) would not apply and therefore assessee is not eligible for any deduction on account of vacancy and annual value of all the vacant property should be taken in terms of section 23(1)(a) - HELD THAT:- AO made additions u/s 23 of the Act on account of deemed rent in respect of the properties of the assessee lying vacant. Whereas assessee had categorically stated that he had all the intention to let out these premises but for want of suitable tenants, despite best efforts put in by the Estate Agents, whose services had been engaged, he could not find suitable tenants during the previous year under consideration and the said premises remained vacant for the whole of the year. Since the said properties remained vacant for whole of the relevant financial year, therefore Ld. CIT(A) taken into consideration the CBDT Circular No. 14/2001, wherein it was stated that where the property or any part of the property is let and was vacant during the whole or part of the previous year and owing to such vacancy, the actual rent received or receivable is less than ALV, the sum so received or receivable during the year is less than the sum received or receivable during year shall be annual value, then no deemed rent could be assessed. CIT(A) also noted that the AO had not considered the admissible deduction towards Municipal taxes and society maintenance charges. See DR. PRABHA SANGHI [ 2013 (1) TMI 18 - ITAT DELHI]., SMT. POONAM SAWHNEY VERSUS ASSESSING OFFICER, WARD 31(2), NEW DELHI [ 2007 (10) TMI 445 - ITAT DELHI] - Decided against revenue.

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• 2019 (4) TMI 1375
  Revision u/s 263 - non deduction of TDS u/s 195 on commission - whether the order of the AO is erroneous in so far prejudicial to the interest of the Revenue on account of non- deduction of TDS u/s 195 r.w.s 40(a)(i) ? - HELD THAT:- Regarding the contention of the assessee that there was not initiated any proceedings under section 263/ 147 in respect of the assessments framed u/s 143(3) pertaining to the assessment year 2011-12 and 2012-13, we find force in his argument. Revenue has admitted the claim of the assessee for the commission expenses to the foreign parties without deducting the TDS u/s 195 in the assessment years 2011-12 and 2012-13 which has reached to the finality. CIT u/s 263 was under the obligation to initiate the proceedings u/s 263, for the assessment years as discussed above. Thus in our considered view after considering the facts circumstances of the case, the order of the AO cannot be held as erroneous insofar prejudicial to the interest of Revenue - Decided in favour of assessee.

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• 2019 (4) TMI 1374
  Unverified purchases u/s 37 - HELD THAT:- The assessee has failed to furnish supporting documents to prove the genuineness of sundry creditor. The submission of assessee for making sale and cash payments to it in subsequent FYs. has remained unsubstantiated and is without documentary evidence. It is strange that on one hand that the AR states that there addresses are not available as the creditors are old on the other hand it is claimed that cash payments and sales have been made to them. In the circumstances it was rightly held by the CIT(A) that the AO was justified to make addition of Rs. 10,64,650/-, hence, he confirmed the same as on account of unverified purchases u/s 37 of the Act, which does not need any interference on my part, hence, uphold the action of the Ld. CIT(A) on the issue of dispute and reject the ground raised by the assessee. Unexplained creditors - these creditors have been created on account of purchases made in FY 2008-09 and have been brought forward since then - on one hand the AR states that there addresses are not available as the creditors are old on the other hand it is claimed that cash payments have been made to them - HELD THAT:- It is revealed from these facts that the assessee has obtained benefit by cessation of these liabilities as there is no evidence on record to show that these creditors have even made claim to recover the outstanding balances from the assessee. It is not relevant that assessee, has shown these credits payables in its books of account, during the year. The overall facts of the case and surrounding circumstances are enough to show that these credit balances have not been claimed by these creditors and thus there is cessation of liability on this account. In the circumstances, Ld. CIT(A) has rightly held that AO was justified to make additions , hence, he confirmed the same u/s. 41(1) of the Act, which does not need any interference on my part, hence, uphold the action of the Ld. CIT(A) on the issue of dispute and reject the ground no. 2 raised by the assessee.

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• 2019 (4) TMI 1373
  Allowability of interest - interest paid to Tata Realty Infrastructure Limited - advance received for purchase of land - partly refunded with interest - interest liability clause in MOU between party is not clear - HELD THAT:- Payment of interest in case of non-performance or part performance of a contract was very much flowing from the MoU. Not only that, we find that it is not in dispute that assessee has paid interest to TRIL on which TDS has duly been deducted. It is also not a case of the department that TRIL has not treated the interest as its interest income or has not offered it for tax. If the interest has been paid during the regular course of business and under commercial expediency in terms of a contract and other party has also acknowledged the receipt of such a payment as interest, then revenue cannot judge the transaction so as to disallow payment of interest as a non-business expenditure or can hold that it is not for business purpose. The expenditure has to be allowed if it has been incurred wholly and exclusively in the course of business as long as there is a reasonable nexus between the expenditure and business. Apart from that, here the transaction is between two unrelated parties who have entered into a business transaction and have renegotiated the terms and conditions of the contract when the performance by one of the parties was not as per the terms agreed and non-performance entailed payment of interest which has actually been paid which fact is not in dispute. Thus, there could be no question of disallowance. Income from sale of shares - business income OR capital gain - HELD THAT:- What has to be seen is, firstly, the objective of acquiring the shares, that is, whether it has been treated as investment or to enjoy income there from or to make profit by buying and selling shares in short run; secondly, the period of which shares have been held, that is, whether the shares are held for more than three years; thirdly, whether there is frequency of transactions in a particular share; and lastly, the treatment and classification given in the books of accounts has to be given significance. If we apply the said guidelines, then all the factors indicate that intention was never to trade in shares. Here the revenue s stand that there was trading of under lying assets of the subsidiary companies, cannot be upheld in law as shareholder does not have right to assets of the company but only share in profit. The company alone can with the approval of board of directors sell its assets. Thus, we do not find any reason as to why sale of shares is treated as trading in land so as to be taxed as business income in the hands of the assessee. Hence, in view of our discussion made above, we hold that income from sale of shares cannot be taxed as business income but has to taxed as capital gain. Disallowance interest u/s 36(1)(iii) - recharacterizing the share application money as interest free advance - HELD THAT:- If AO is making notional disallowance of the interest paid for capital borrowed for the business purpose, then he has to prove the nexus, that the borrowed capital has been used for interest free advance or loan and that to be for non-business purpose. If such nexus is not proved then AO cannot proceed to make disallowance on the interest paid u/s 36(1)(iii). Assessee company has more than Rs. 9281.87 crores of accumulated reserves and during the year itself its reserves have increased by Rs. 1379 crores and amount of share application money advance was only Rs. 245.34 crores. Thus, in such circumstances, presumption is always in the favour of the assessee that these are advances out of surplus funds only and such presumption has been laid down by the Hon ble Jurisdictional High Court in the case of CIT vs. Max India Ltd. (P H) High Court, [ 2017 (3) TMI 1254 - PUNJAB AND HARYANA HIGH COURT] . Thus, under the facts and circumstances of this case, we hold that no disallowance can be made. TP adjustment - disallowance of interest - characterizing the share application money to associate enterprises as interest free advance - HELD THAT:- If any money has been advanced for acquisition of shares which is a capital asset, same cannot be treated as capital financing unless the parties have intended or agreed to convert the same. Such an intention has to be gathered from any agreement or arrangement or understanding. If parties have treated it to be share application money for subscription of shares, then onus is upon the AO to prove it contrary that it is an international transaction. Here AO has drawn presumption on the ground that there was delay in allotment of shares, hence it is an international transaction of capital financing. Such a presumption cannot change the character of transaction. TPO/ AO cannot disregard any apparent transaction and substitute it by recharacterizing the said transaction without any material or exceptional circumstances that the assessee has tried to conceal the real transaction. Investment made in shares or applying for the shares cannot be given different colour so as to expand the scope of transfer pricing adjustment by recharacterizing it as interest free loan. Thus, we are unable to uphold the contention of the department that share application money pending allotment should be recharacterized as loan till the period it is allotted after a reasonable time. Accordingly, the adjustment made by the TPO is directed to be deleted. Treatment of rental income from properties - business income OR income from house property - HELD THAT:- Here the entire rental income has been earned from letting out the properties owned by the assessee, hence when income has been earned from simply letting out the property then it has to be taxed under the head income from house property . Hon ble Supreme Court in the case of Raj Dadarkar vs ACIT [ 2017 (5) TMI 586 - SUPREME COURT OF INDIA] , after considering the earlier judgements held that wherever there is an income from leasing out of premises and collecting rent, normally such an income is to be treated as income from house property, if the conditions of provisions of Section 22 of the Act are satisfied. Moreover, it has also been pointed out by the Ld. Counsel that all throughout in the earlier years assessee has been showing rental income under the head income from house property which has been accepted by the revenue under the scrutiny proceedings in various years. The details of earlier assessment accepting the rental income as income from house property has been given in the chart enclosed. Thus, under these facts and circumstances, we hold that rental income cannot be treated as business income and consequently, benefit of standard deduction of 30% has to be allowed. Disallowance of prior period expenditure - HELD THAT:- As pointed out by the liability has been crystallised during the relevant assessment year and it was never claimed in preceding assessment year. He also drew our attention to the relevant bills of the additional paper book V to show that most of the bills related to consultancy charges and travelling expenses of the Directors which was submitted and received by the assessee during the year and therefore, based on these bills assessee has claimed expenditure. Accordingly, when bills have been received during the year then we do not find any reason as to why such expenditure is to be disallowed and hence same is deleted. Disallowance u/s 14A - HELD THAT:- A O without examining the accounts and nature of expenditure debited and recording his satisfaction has mechanically proceeded to make disallowance u/s 8D for sum of Rs. 12,37,07,018/-. Now in view of the judgment of Hon ble Jurisdictional High Court in the case of Joint Investment (P) Ltd. vs CIT, [ 2015 (3) TMI 155 - DELHI HIGH COURT] and Cheminvest vs. CIT, [ 2015 (9) TMI 238 - DELHI HIGH COURT] , it has been well settled that disallowance u/s 14A cannot exceed the exempt income, therefore, no disallowance could have been made more than the exempt income. Since assessee has already disallowed more than the exempt income, therefore, no further disallowance can be made and same is directed to be deleted. In the result this issue is allowed in favour of the assessee.

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• 2019 (4) TMI 1372
  Assessment u/s 153A - absence of incriminating materials found in search - HELD THAT:- In the absence of any connection with the incriminating material, the additions/disallowances in respect of concluded assessments are not permissible in law. Thus, in the absence of incriminating materials found in search, the action of the AO is contrary to the position of law judicially enumerated. Where the additions/disallowances itself are unsustainable and bad in law, the controversy cropped up in the Revenue s appeal on merits of additions/disallowances is rendered non est . Therefore, the appeal of the Revenue requires to be dismissed at the threshold as the action of the AO itself suffers from lack of jurisdiction. - Decided in favour of assessee.

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• 2019 (4) TMI 1371
  Penalty under section 271C - TDS u/s 194H not deducted - allegation that assessee has paid commission to M/s AD Educational Research for services provided in respect of procurement of students - expert services of the service provider to run certain academic courses of study under distance education mode - sharing of revenue - HELD THAT:- There is sharing of revenues by the assessee with the service provider to the extent of 50% of association fees and 20% of course fees. In the MOU, there is reference to scope of services to be rendered by the service provider and prima facie, it gives an impression of rendering of services - through the MOU, there is pooling of academic resources of the University with the marketing resources of the service provider whereby the virtual footprint of the University has been envisaged to be expanded through distance education programmes and setting up of IAACs in close association with the service provider. Looking at the terms of the MOU whereby the assessee has agreed to share fees as high as 50% of association fees and 20% of course fees with the service provider, the said payment seems to be more in the nature of revenue sharing rather than payment of commission for services rendered by the service provider. Therefore, it cannot be held conclusively that such payments would surely fall in the definition of commission so defined in section 194H It is clearly a debatable issue and on such issue, levy of penalty for non- deduction of TDS cannot be justified. Therefore, the explanation of the assessee that it was under a bonafide belief that such payments doesn t call for TDS thus cannot be disputed. It is also noted that subsequent to TDS verification by the Department when such matter was pointed out to the assessee, the latter has complied with the same by depositing appropriate TDS along with interest. As held by the Hon ble Supreme Court in case of Nova Scotia [ 2016 (1) TMI 583 - SUPREME COURT] , for levy of penalty u/s 271-C what is necessary is to establish that there was contumacious conduct on the part of the assessee which, we find, is not present in the case of the assessee. In light of above discussions and keeping in view the provisions of section 273B of the Act, the penalty so levied u/s 271C is hereby directed to be deleted. - Decided in favour of assessee.

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• 2019 (4) TMI 1370
  Book profit computation u/s 115JB - A.O. has rejected the revise computation of book profit as the assessee had not claimed the same while filing the original return - CIT(A) also not considering - ITAT powers to admit the grounds otherwise than by filing the original return - HELD THAT:- We find that the revised computation of the assessee has been rejected by the A.O. solely on the ground that the assessee has not filed the same in the original return of income. This aspect has been confirmed by the CIT(A). We note that in the case of Goetze (India) Ltd. v. CIT [ 2006 (3) TMI 75 - SUPREME COURT] has expounded that the ITAT has powers to admit the grounds otherwise than by filing the original return. In the present case, in our considered opinion, the revised computation submitted by the assessee does not deserve to be rejected solely on the ground of not filing it along with the original return. Accordingly, in the interest of justice, we remit this issue to the file of the A.O.

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• 2019 (4) TMI 1369
  Addition u/s 68 - loan received from Mrs. Laxmi R. - HELD THAT:- Assessee has furnished the bank statement, Form 26 AS and confirmation, the copy of income-tax return but the authorities below have not pointed out any defect in such detail filed by the assessee. In case, the details as discussed above were not believable, then the authorities below were empowered to verify the same to the concerned party, but none of the authority below has exercised power given under section 131/133(6). Once the assessee has submitted basic details of the party from whom he has taken a secured loan, then the onus imposed on the assessee u/s 68 was discharged. Therefore, without verifying the necessary details filed by the assessee, there cannot be any addition u/s 68 of the Act. See MURLIDHAR LAHORIMAL VERSUS COMMISSIONER OF INCOME-TAX. [ 2005 (11) TMI 32 - GUJARAT HIGH COURT] - no addition can be made in the hands of the assessee u/s 68. Hence, we set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition made by him. Thus, the ground of appeal of the assessee is allowed.

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• 2019 (4) TMI 1368
  Addition u/s 68 - assessee failed to establish the claim of loan for introducing the capital - HELD THAT:- Assessee has not filed any material to establish the identity of the creditors, creditworthiness of the creditors and genuineness of transaction. When the assessee claims that he borrowed unsecured loan for introducing the capital, it is the obligation of the assessee to establish the identity of the creditors, creditworthiness of the creditors and genuineness of the transaction. Since the assessee failed to establish the above requirements, the CIT(Appeals) has rightly confirmed the addition made by the Assessing Officer. Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. Disallowance of expenses for non-production of bills / vouchers - HELD THAT:- Assessee has not discharged the primary obligation / onus by supporting necessary material. With regard to payment of interest and depreciation, CIT(Appeals) directed the AO to verify and if it is actually found correct, it may be allowed. This Tribunal is of the considered opinion that payment of interest and depreciation on written down value of the machinery can be very well ascertained by the assessee from the respective banks. CIT(Appeals) has rightly directed the AO to verify and if it is found correct, it has to be allowed. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. Disallowance of current liabilities - HELD THAT:- Assessee has not filed any evidence before the Assessing Officer as well as the CIT(Appeals) to establish that the liabilities were discharged during the year under consideration. In the absence of any material, the CIT(Appeals) has rightly confirmed the addition made by the Assessing Officer. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. - Decided against assessee.

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• 2019 (4) TMI 1367
  Entitled for section 80IC deduction from pan masala manufacturing - Revenue has not filed its appeal after annexing form no. 35 and statement of facts. His further case is that section 80IC deduction issue does not emanate from the Revenue s grounds - HELD THAT:- We find no merit in this technical objection as both form no. 35 as well as statement of facts form part of record before us in the instant case file. It further transpires that the above stated grounds sufficiently seek to revive the Assessing Officer s action disallowing assessee s section 80IC deduction claim relating to pan masala manufacturing. We therefore adopt judicial consistency to revive the impugned section 80IC disallowance under this said particular in tune with the learned co-ordinate bench s decision. The Revenue succeeds in its grievance to this extent. The assessee had also claimed u/s 80IC deduction from profits derived from sale of 7190 wrist watches. D/R fails to dispute during the course of hearing that the Revenue s statement of facts in the instant case file makes it clear that the said watches formed part of assessee s brought forward stock worth Rs. 3,55,72,579/-. It therefore emerges that the assessee had very well manufactured the said wrist watches in the eligible undertaking only in earlier assessment years and derived profits from sale in the impugned assessment year. Revenue s grievance regarding the assessee s deduction claim relating to this latter issue of wrist watches. Direct the Assessing Officer to finalise consequential computation of assessee s claim u/s 80IC deduction disallowance only to the tune of the amount relating to the former issue of pan masala manufacturing as per law.

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• 2019 (4) TMI 1366
  Unexplained deposits in cash - assessee has no business or source of income - assessee has claimed gift from father-in-law and cash receipt from her husband - assessee has also claimed receipt from hand loan from four persons - HELD THAT:- When the assessee has no business or source of income, it is not known how the entire sale of stock and machineries were allowed to be withdrawn by one partner in the partnership firm. This Tribunal is of the considered opinion that in the absence of any evidence for sale of stock or sale of machineries, the CIT(Appeals) has rightly found that the entries in the books of account are afterthought and there was huge cash deposit on a single day, therefore, there was no merit in the claim of the assessee that a sum of Rs. 61,00,000/- was withdrawn from the partnership firm s account. Gift said to be received by the assessee from her father-in-law genuineness of transaction and creditworthiness of creditors or the donors were not established. Therefore, the CIT(Appeals) has rightly confirmed the addition made by the Assessing Officer. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. Cash receipt from the assessee s husband - the source claimed by Shri Vasudevan such as receipt of cash advance earlier for machinery purchase from Shri S.K. Pandian, Shri R. Nagaraj and Shri D. Palanisamy were not established. In the case of Shri Vasudevan s assessment, the source was not accepted by the Assessing Officer that attained finality. Since the source for creditors was found to be not available for making payment of Rs. 23,00,000/- to the assessee, the assessment in the case of assessee has to be confirmed. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. Land lease - assessee claims that due to pollution control problem, the partnership firm M/s Balu Process decided to close down the operation and the land and building were leased out and an advance of Rs. 20,00,000/- was received - HELD THAT:- Admittedly, the land and building were of dying unit. The assessee claims that it was leased to one Shri Muruganantham who appears to be a driver by profession. Shri Muruganantham earns only Rs. 7500/- per month. It is not known the object of leasing out of dying unit to a driver. In respect of three lessees, namely, Shri Sundaram, Shri Shyam Jayakumar and Smt. Rajeswari, no material evidence appears to be brought on record by the assessee to substantiate the genuineness of transaction and creditworthiness of the lessees for making payment to the assessee. This Tribunal is of the considered opinion that the CIT(Appeals) has rightly confirmed the order of the Assessing Officer. - Assessee s appeal rejected.

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• 2019 (4) TMI 1365
  Addition u/s 56(2)(vii)(b) - receipt of property through general power of attorney without consideration - Transfer of rights in respect of a plot - as submitted assessee is merely a Power of Attorney holder and not the owner of the said plot - AO was of the view that the value of the said plot equal to stamp duty value @ Rs. 1 lac per marla was chargeable to tax in the hands of the assessee as income from other sources - HELD THAT:- Power of Attorney does not give ownership rights to the assessee and that the document referred to and relied upon to infer transfer of the plot was nothing but the Power of Attorney executed by the lady owner in assessee s favour. Thus a general Power of Attorney was given to the assessee by Smt. Harsharan Kaur to maintain the property, it cannot be said that the assessee received the property and was liable to pay the tax on the stamp duty value of the said property. See SURAJ LAMP INDUSTRIES PVT. LTD. VERSUS STATE OF HARYANA ANOTHER [ 2011 (10) TMI 8 - SUPREME COURT OF INDIA] and ASSISTANT COMMISSIONER OF INCOME-TAX. VERSUS JANAK RAJ CHAUHAN. [ 2005 (8) TMI 284 - ITAT AMRITSAR] - Decided in favour of assessee.

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• 2019 (4) TMI 1364
  Absence of statutory notice u/s 143(2) within stipulate time - AO holding jurisdiction over the case never issued notice u/s 143(2) - notice u/s 143(2) issued by the Dy. CIT, Circle-1, Jalandhar, who was not the A.O vested with the jurisdiction over the case of the assessee - curable defect u/s. 292B - HELD THAT:- We find that the Dy. CIT Circle-IV, Jalandhar i.e. the AO vested with the jurisdiction over the case of the assessee had only issued a notice u/s 143(2), dated 28.05.2014. However, as the aforesaid notice issued by the Dy. CIT Circle-IV, Jalandhar under Sec.143(2) was beyond the specified time period contemplated under Sec.143(2), hence the same had no existence in the eyes of law. We are of the considered view that as there was no valid transfer of jurisdiction over the case of the assessee from the ACIT, Range IV, Jalandhar to Dy. CIT/ACIT, Circle-I Jalandhar, therefore, no valid notice could have been issued by the latter under Sec.143(2) of the I.T. Act. A.O exercising the jurisdiction over the case of the assessee had failed to issue a notice u/s. 143(2) within the stipulated time period, therefore, the assessment framed by him under Sec.143 (3), san issuance of the aforesaid notice is absolutely bereft of any force of law and cannot be sustained. Our aforesaid view that a valid assessment under Sec. 143(3) presupposes issuance of a notice under Sec.143(2) finds support from the judgement of the Hon ble Supreme Court in the case of ACIT Anr. Vs. Hotel Blue Moon [ 2010 (2) TMI 1 - SUPREME COURT OF INDIA] as held the omission on the part of the assessing officer to issue notice under Sec.143(2) cannot be held to be merely a procedural irregularity, as the same goes to the very validity of assumption of jurisdiction by the A.O and is not curable. A.O exercising the jurisdiction over the case of the assessee had failed to issue a notice u/s. 143(2) within the specified time period, thus the consequential assessment framed under Sec.143(3) by him cannot be sustained - Decided in favour of assessee

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• 2019 (4) TMI 1363
  Addition u/s. 68 - credits of sale of penny stock - HELD THAT:- Independent findings of the AO, which are corroborated by the information given by the Investigation Wing, the assessee has failed to substantiate the genuineness of alleged share transactions in respect of long term capital gain u/s. 10(38) of the Act. The landmark decision in the case of McDowell and Company Limited, [ 1985 (4) TMI 64 - SUPREME COURT] are squarely applicable in this case wherein it has been held that tax planning may be legitimate provided it is within the framework of the law and any colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by dubious methods. However, the case laws cited by the assessee are on distinguished facts, hence, not applicable in the instant case. Assessee has failed to substantiate his claim before the lower revenue authorities as well as before this Bench. CIT(A) has rightly confirmed the addition in dispute, which does not need any interference on our part - Decided against assessee.

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• 2019 (4) TMI 1362
  Additions on account of technical know-how expenses - Whether expenditure incurred in the form of technical know-how is capital in nature ? - HELD THAT:- Know-how was to remain the sole and exclusive property of the provider and the appellant company is required to fully exploit the same. Further the technical know-how was also to be paid in relation to the sales affected by the assessee company. It is also required to be noted that assessee is engaged in the same business for which technical know-how is by the assessee and it is not at its an altogether a new line of business which is developed. In the present appeal the facts above are absolutely identical to the proceedings for earlier years [ 2018 (6) TMI 1598 - ITAT NEW DELHI] and the same is also evident from last para at the AO s order at page 4. The arguments of the AO in the assessment order and the arguments of the Ld. AR in their written submissions are also identical to the arguments made during the appellate proceedings for A.Y. 2011-12 and A.Y. 2010-11. Since there are no new facts and arguments from the either side, thus have no hesitation in following my own order in the case of the appellant for the appeal for A.Y. 2011-12 and A.Y. 2010-11. Hence following the precedent of my earlier order hold that the AO has erred in making an addition on account of disallowance of Technical Know-how Expenses. - Decided against revenue.

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• 2019 (4) TMI 1361
  TP Adjustment - upward adjustment of provision for IT Enabled Services - comparable selection - HELD THAT:- TCS E Serve Ltd. - The income reported by the TCS E serve is under the one head transaction process and other services . From such a description, it is very difficult to deduce as to how much is for rendering technical services for software testing, verification and validation and how much is for transaction services. Apart from that, various courts including that of Hon ble Delhi High Courts have held that the association of higher brand value of Tata and TCS have impacted its revenue and the profitability in a positive manner, because associated with such a big brand, has a direct impact on price negotiation which ultimately affects the profitability also. Thus, on functional level and looking to technical services rendered by the TCS E Serve Ltd., we are of the opinion that it cannot be held to be comparable with the assessee whose functions are purely back end office support services. Thus, this comparable is directed to be excluded. TCS E Serve International Ltd. - software testing, verification and validation of software are highly technical and require high level of technical expertise for carrying out such type of software relating testing, and therefore, such a function cannot be compared with that of the assessee. Again, in the profit and loss account, the income has been shown as transaction processing and other services which does not give any segmental information with regard to the technical services rendered by this company, therefore, we hold that at the functional level this company cannot be held to be comparable. Omega Healthcare Ltd. - Since the only reason assigned to reject this company is that its financial data is not available in public domain, accordingly, we remand this comparable to the file of the TPO who shall examine the annual report and decide accordingly. Caliber Point Business - if the quarterly results of the relevant financial year of this company are available and margins can be computed proportionately, then same can be adopted; and simply because this company follows different financial years ending, the same cannot be excluded if functionally it is found to be comparable. Accordingly, we remand this comparable back to the file of the TPO to examine the quarterly results and see the proportionate profit margin. R Systems International Ltd. (Segmental) - We direct the TPO to examine the quarterly result and work out the proportionate profit margin of bench mark with the PLI of the assessee. Accordingly, this comparable is accepted subject to aforesaid condition. Microgenetic System Ltd., CG-VAK Software Export Ltd. and Microgenitics Systems Ltd - these comparables have been rejected by the TPO on the ground that the revenue of these companies are less than Rs. 5 crore and in case of CG-VAK another point of rejection has been taken by the ld. CIT(A) is that employee cost is less than 25% - HELD THAT:- Only reason for rejecting the three comparables is that their turnover is less than Rs. 5 crores, and therefore, same cannot be included for the comparability analysis. Such a filter applied by the TPO in the search matrix of assessee to reject the comparables cannot be upheld as it amounts to cherry picking. We find that now this issue of rejection on low turnover stands settled by the judgment of Hon ble Delhi High Court in the case of Chryscapital Investment India Pvt. Ltd vs. Dy.CIT, [ 2015 (4) TMI 949 - DELHI HIGH COURT] . Thus, we hold that these comparables cannot be rejected on low turnover filter. Accentia Technologies Pvt. Ltd - HELD THAT:- we find that this company is engaged in providing healthcare receivables cycle management services. It is not in dispute that in pursuance of scheme amalgamation of erstwhile company, Ascent Info Serve Pvt. Ltd. with the assessee company, this company was amalgamated with the assessee company during the relevant financial year and hence there is an extraordinary event during the year. Apart from the functions and services provided by this company has been held to be high level KPO services providing company which now has been held to be functionally different from the company providing BPO Services. I-Gate Global Services Ltd. - no segmental information with regard to the information technical services, i.e., development of software products and also there is an extraordinary event of amalgamation, therefore, this company has rightly been excluded by the ld. CIT(A). Infosys BPO Ltd. company has a high brand value and incurred brand building expenditure of about Rs. 78 crores, whereas assessee does not hold any significant intangibles. Apart from that, it is a substantial selling and marketing expenses which is 6.93% of sales, whereas in case of the assessee, it has not incurred any expenses for business promotion/marketing etc. being a captive service provider. Such a huge brand value and marketing expense has a direct effect in negotiation of prices and impacts profit margins . Thus this company cannot be held to be comparable. Disallowance of deduction u/s.10A on interest income earned from short term deposits - AO considering the same as income from other sources - HELD THAT:- The words derived by undertaking in Section 10A are derived from the words enshrined in Chapter VI A, and therefore, Profits Gains of undertaking including incidental income by way of bank deposits is also entitled for 100% deduction u/s.10A. Keeping in view this principle of law, we remand the issue for a limited purpose to the file of the Assessing Officer to examine the contention of the assessee that, whether the fixed deposits made by the assessee was made for over margin money obtaining bank guarantee; or for making prepayment of ECB for which funds were parked on temporary basis pending approval from the requisite authorities; or is in any manner inextricably linked with the assessee s business. If the contention of the assessee is found to be correct on facts then deduction of such an interest has to be allowed while computing the profits u/s.10A. Reconciliation of interest with TDS certificates - as per AO assessee has declared interest income of Rs. 63,67,249/- - in TDS certificates interest income credit at Rs. 64,69,690/-. - HELD THAT:- No infirmity in the order of the ld. CIT(A), because if the difference of interest amount has already been offered to tax in the year of accrual then there is no point for taxing the same in this year. In any case, we have already held while deciding ground no.4 to 4.2 subject to certain verification by the Assessing Officer if the interest income is subject to deduction, then ostensibly no addition can be made. Accordingly, in view of the direction given in ground no.4 and also in line with the direction of the ld. CIT(A), we hold that the Assessing Officer shall verify and delete the addition accordingly. Unbilled revenue realized within the stipulated period for the purpose of computing the export turnover - AO has reduced the export turnover of assessee alleging that assessee has failed to realize unbilled revenue of and amount receivable within six months, i.e., time stipulated for deduction u/s.10A. - HELD THAT:- The matter should have been examined by the ld. CIT(A) and allowed. Since, he has simply given the direction for verification, therefore, we hold that Assessing Officer should verify the same and allow the exemption of unbilled revenue u/s.10A if it has been realized within six months of the end of the relevant financial year. The Assessing Officer shall also verify, whether the amount of Rs. 2,59,241/- forms part of the export turnover of the assessee or not. Disallowance made u/s.40A(2)(b) - HELD THAT:- The assessee is reimbursed with mark up on the cost incurred. If the cost is reduced then at the same time, mark up on such cost also gets reduced. Therefore, in such a business model there could not be any disallowance on the salary expenses. In any case assessee is a 100% export oriented unit eligible for deduction u/s.10A and if while computing the profits of the undertaking Assessing Officer has allowed the deduction u/s.10A, then such a disallowance ostensibly will only go to enhance the income of the assessee which again would be subject to deduction u/s.10A. Therefore, such a disallowance in the case of the assessee becomes purely academic. In any case, when this issue has been decided in favour of the assessee in the Assessment Year 2009-10, then on this ground also, we do not find any reason to deviate from such a precedence and accordingly, disallowance made u/s.40A(2)(b) is directed to be deleted. Adjustment u/s 115JB - MAT - provisions for bonus by considering it as unascertained liabilities - HELD THAT:- No detail or working has been given before us in this regard, therefore, we deem it fit to restore this issue to the file of the Assessing Officer who shall examine, whether the provision has been made on the basis of rational or scientific basis or not and assessee shall demonstrate that such a reasonable degree of estimation has been considered while making the provision. If it is found that provision has been made on rational and reasonable basis, then such a provision needs to be allowed and cannot held to be contingent or unascertained. With this direction, this matter is restored back to the file of the Assessing Officer who shall decide this issue after giving due opportunity to the assessee. - Appeal of the assessee is partly allowed.

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• 2019 (4) TMI 1321
  Addition made on account of front end fees - capital or revenue or deferred revenue expenditure - front end fee is part of interest u/s 2(28A) - assessee claimed amortization of the expense u/s 35D - HELD THAT:- The facts of this case are very similar to those before the Supreme Court in MADRAS INDUSTRIAL INVESTMENT CORPORATION LIMITED VERSUS COMMISSIONER OF INCOME-TAX [ 1997 (4) TMI 5 - SUPREME COURT] Here the assessee was required to pay front end fee to obtain loan from a bank or financial institution. It also had to pay interest. As I have observed above, the front end fee is part of interest under Section 2(28A) of the said Act. Now this interest payment was spread over the duration of the loan. Therefore, the front ends fee constituted interest liability of the assessee spread over a period of time. Obtaining the loan and paying interest to service it ensured long term benefit to the assessee. Hence, this expenditure was revenue and not capital. Furthermore, according to the above decision, the assessee was entitled to amortize it. Tribunal is required to re-determine this issue by considering Madras Industrial Investment and determine the allowable revenue, expenses of the assessee for the relevant assessment year. The impugned order of the tribunal is set aside with regard to the issue concerning front end fee. - Decided in favour of the assessee. Addition of unrealized foreign exchange gain - HELD THAT:- Assessee conceded that the decision of in the case of Commissioner of Income Tax Vs. Woodward Governor India P. Ltd. [ 2009 (4) TMI 4 - SUPREME COURT] was in favour of the revenue. Thus question is answered in favour of the revenue as the issue is covered against the assessee by the above judgment of the Supreme Court. That part of the impugned order dealing with unrealized foreign exchange gain is set aside.

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• Customs

• 2019 (4) TMI 1360
  Reclassification of goods - imported Water Treatment and Distribution System comprising several packages - whether classified under tariff item 3209.10 of the First Schedule to the Customs Tariff Act, 1975 or otherwise? - HELD THAT:- The goods in question are more appropriately classifiable under the tariff entry 8413.70 - Reading of the tariff entries, supports the classification urged by the appellant. As the Department has not been able to convince any merit in its case, it would be inappropriate to reject the present appeal on the ground that the appellant s claim for reclassification had been raised belatedly. Appeal allowed - decided in favor of appellant.

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• 2019 (4) TMI 1359
  Refund of Customs Duty - the duty was refunded twice - time limitation - HELD THAT:- There is no doubt that the duty amounting to Rs. 2,72,701/- has been realized twice from the respondent, first time through Bank Draft deposited at SBI, Air Cargo Complex and second time by electronically debiting Rs. 2,72,701/- along with interest of Rs. 84,052/- - Appeal dismissed - decided against Revenue.

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• Securities / SEBI

• 2019 (4) TMI 1358
  Minimum Public Shareholding [MPS] requirement - scope of amendment in SCRR Rules [ Securities Contracts (Regulation) Act] in 2010 - Scheme of Arrangement and Amalgamation seeked by which the MPS requirements would be achieved SEBI approached the Calcutta High Court for modification of the Scheme of Amalgamation - SEBI to restrain the Directors for noncompliance of the MPS requirement - Whole Time Member held that the DPSC and its Directors had not complied with the MPS requirement HELD THAT:- After the amendment in SCRR Rules in 2010, promoters in a public listed Company cannot hold more than 75% shares of that Company. The requirement of law was for greater public participation in a listed Company and, therefore, atleast 25% of the shares in a listed Company was required to be held by the public. The amendment stipulated that those Companies with public shareholding of less than 25% was required to achieve the same within a period of 3 years from the date of commencement of the first amendment that is by 3rd June, 2013. In order to achieve this target, the Company came out with a Scheme of Arrangement and Amalgamation under Sections 390, 391 and 394 of the Companies Act, 1956 by which the MPS requirements would be achieved. The Scheme was initially sanctioned but was subsequently modified on the intervention of SEBI by the Calcutta High Court. Transfer of shares by IPCL to the Trust was not sufficient compliance of the MPS requirement under Rule 19 and 19A of the SCRR Rules. The Calcutta High Court accordingly directed that in order to achieve the 25% minimum public shareholding in the amalgamated Company 32,63,16,563 shares were required to be sold by the Trust to the public through a public offer. We find from a perusal of the orders of the Calcutta High Court that a specific direction was issued to the Trust to divest its shares by making a public offer. No direction whatsoever was given to the Company or its Directors. Contention of the respondent that if the MPS requirement was not achieved through this public offer pursuant to the direction of the Calcutta High Court it was still open to the Company and its Directors to ensure compliance of the requirement of law by adopting any of the methods as prescribed by SEBI vide its circulars cannot be accepted as it would run counter to the Scheme of Arrangement and Amalgamation as sanctioned by the Calcutta High Court. It would also violate the directions given by the Calcutta High Court. Whole Time Member has misinterpreted the orders of the Calcutta High Court and has committed an error in holding that the DPSC and its Directors had not complied with the MPS requirement and that there was a failure on the part of DPSC and its Director to comply with the directions of the Calcutta High Court. The directions of the Calcutta High Court was only against the Trust and not against the Company and its Directors. Non-compliance of the MPS requirement cannot at this stage result in issuance of a restraint order. Once SEBI approached the Calcutta High Court for modification of the Scheme of Amalgamation it was no longer available to SEBI to restrain the Directors for non-compliance of the MPS requirement. We are further of the view that since the Calcutta High Court had directed the Trust to divest its shares in order to achieve the MPS requirement under Rule 19 and 19A of the SCRR Rules it was no longer open to adopt any other method as per the circulars without taking leave from the Calcutta High Court. The impugned ex-parte interim order dated 4th June, 2013 passed by the Whole Time Member and the confirmatory order dated July 25, 2017 cannot be sustained and are quashed. In the light of the aforesaid it is not necessary for this Tribunal to dwell into the contention as to whether the appellant being a Non Executive Director was otherwise responsible for the affairs of the Company or not. The appeals are allowed.

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• Insolvency & Bankruptcy

• 2019 (4) TMI 1357
  Initiation of Corporate Insolvency Resolution Process - section 9 of Insolvency and Bankruptcy Code, 2016 read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - Corporate Debtor - maintainability of application - HELD THAT:- The Applicant has filed an affidavit affirming that in respect of the amount claimed or any part thereof, the Applicant has not received nor had any person, on its behalf had received in any manner the amount due to them as required u/s. 9(3)(c) of I B Code nor has received any notice of dispute raised by the corporate debtor under section 9(3)(b) of the IBC, 2016 - As on date, a total sum of Rs. 3,39,750/- along with 18% interest is due from the Corporate Debtor. The debt occurred on account of services provided by the operational creditor under the Brokerage Agreement. The registered office of corporate debtor is situated in Delhi and therefore this Tribunal has jurisdiction to entertain and try this application - The default occurred from 09.08.2018, hence the debt is not time barred and the application is filed within the period of limitation. The present application is complete and the Applicant is entitled to claim its dues, which remain uncontroverted by the Corporate Debtor, establishing the default in payment of the operational debt beyond doubt. In the light of above facts and records, the present application is admitted. The Application stands admitted in terms of Section 9(5) of IBC, 2016.

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• 2019 (4) TMI 1356
  Initiation of Corporate Insolvency Resolution Process - financial creditor - proof of enforceable debts - Section 7 of the Insolvency Bankruptcy Code, 2016 read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - Corporate Debtor - it was alleged that an amount of Rs. 35,00,000.00 only is the outstanding amount due from the respondent/corporate debtor with interest @15% per annum as on 30-10-2017 and that the respondent/corporate debtor has failed in repayment of the said amount. Whether the petitioner/financial creditor succeeds in establishing a legally enforceable debt is due from the respondent/corporate debtor to the petitioner/financial creditor as alleged? If so, whether the claim is barred by law of limitation? - HELD THAT:- The FC in the case in hand is not a money-lender registered under the provisions of the Assam Money Lenders Act, 1934 (Assam Act IV of 1934). According to the ld. Counsel for the FC the FC is an individual and lending money to friends not in the courses of a business is exempted from the purview of the said Act and hence no registration is required and hence lending money is legal and proper. However none of the provisions of the Act brought to my notice to uphold the submission of the ld. Counsel for the FC I am taking judicial notice of filing three similar applications under section 7 of the I B Code by the very same petitioner alleging lending money before this Bench. Sections 18 and 19 of the Limitation Act can apply only in cases of acknowledgment made within the period of limitation. The cheque cannot be considered as proof of payment as per section 19 of the Limitation Act. In view of the above said discussion I am also coming to a conclusion that the claim of the FC if any found sustainable, is barred by limitation. Whether the dishonour of cheque amount to be a default in repayment of a loan as per S. 3(12) of the I B Code? If so whether the cheque return memo can be a proof of record of default as alleged by the financial creditor? - HELD THAT:- A dishonour memo cannot be taken as a proof of default in the peculiar nature and circumstances of the case in hand. Therefore, the FC also failed in proving the default in repayment of the loan as alleged by the FC - the application filed under section is liable to be dismissed. Application dismissed.

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• FEMA

• 2019 (4) TMI 1355
  Offence under FEMA - writ petition in the High Court against the Union of India and sought therein a writ of mandamus claiming refund of the pre-deposit amount - High Court allowed the appeals, set aside the order of the Tribunal and restored the order of the Adjudicating Authority - Whether the High Court was justified in allowing the appeals filed by the Union of India. HELD THAT:- High Court did not examine the case of the parties in the context of material placed by the appellants, though the Tribunal in Para 29 of its order has considered the said material. High Court should have taken into consideration the said material with a view to decide as to whether it was relevant or/and sufficient, and whether it could justify the appellants case as contemplated under Section 8 of FEMA. High Court seemed to have proceeded on wrong assumption that since the appellants did not file any material, a case was made out against them. This observation of the High Court, in our view, was contrary to the record of the case and hence, interference in the impugned order is called for. The proper course in such a case would be to remand the case to the High Court and request the High Court to decide the appeal afresh on merits in accordance with law. Appeals succeed and are accordingly allowed. The impugned order is set aside. The case is remanded to the High Court for deciding the appeals afresh on merits in accordance with law keeping in view the observations made above.

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• Service Tax

• 2019 (4) TMI 1354
  Maintainability of an appeal before the High Court - Benefit of Notification No.1/2009 ST dated 5th January, 2009 - Whether the Tribunal was right in holding that the condition of Notification No.1/2009 ST dated 05.01.2009 i.e. invoice of the service provider bearing the details of consignment note, cannot be expected to be complied with by the assessee as the condition was not prevailing at the time? - HELD THAT:- The issue arising in the present appeal is with regard to applicability of an exemption Notification. Thus, it is a clear case of rate of duty issue. Therefore, in terms of Sections 35G and 35L of the Central Excise act, 1944 which have been incorporated in Section 83 of the Finance Act, 1994, the appeal filed by the appellant is not maintainable before this Court. The appeal not being maintainable before this Court is dismissed.

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• 2019 (4) TMI 1353
  Recovery of service tax dues of the assessee from the bank a/c - dafaulter - VCES application was rejected on grounds that two of the deposits made by the petitioner towards his arrears of tax dues was not covered under the Scheme and thus his deposits were not in tune with the declaration so made by him - HELD THAT:- Despite there being no dispute on the deposit towards the arrears of taxes by the petitioner, yet under the cover of Clause 110 of the VCES, 2013 that the respondent authorities in the Customs, Central Excise and Service Tax Department has proceeded to invoke the provision of Section 87 of Finance Act, 1994 to recover a sum of Rs. 34,32,226/- from the petitioner, inter alia, on grounds that the petitioner had failed to pay taxes in conformity of the declaration. We would find it difficult to trace a single instance of an abuse of statutory power which is present in the present case because in our opinion even if under the misplaced understanding of the Assistant Commissioner, two deposits made by the petitioner did not qualify under the Scheme, it was nevertheless a tax deposit and to that extent the petitioner could not be held a defaulter for being proceeded under the provisions of Section 87 of the Finance Act, 1994. Petition allowed.

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• 2019 (4) TMI 1352
  Reverse charge mechanism - recipient of services that were utilised for rendering call centre services - section 66A of Finance Act, 1994 - revenue neutrality - HELD THAT:- Section 66A of Finance Act, 1994, infused with the legal fiction of the recipient as the deemed provider and sans recourse to inclusion in the definition of person liable for paying tax , was the alternate charging section. With the impossibility of detecting the arrival of the service in India inherent in such transactions, the charging provision would have remained unenforceable. As an indirect tax that is manifest in consumption at the destination, the superfluity of such detection in domestic transaction could not hold for cross-border transactions and the gap was filled by notifying the Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 as the guide rail for such determination. The scope and limitation of the pertinent Rules would is of more relevance than the charging section in Finance Act, 1994. There can be no doubt that services procured domestically or imported for carrying on of business or commerce is taxable; to the extent of taxability of output or output service, the tax liability, borne or paid, as the case may be, is adjusted through CENVAT Credit Rules, 2004 and, to the extent that the output or output service is exported, refund under CENVAT Credit Rules, 2004 is an inalienable entitlement. In the circumstances of the present dispute, such refund is undeniable even if the legal fiction of recipient being the provider burdens the appellant with tax. Revenue neutrality - HELD THAT:- Procurement of services for use in business or commerce outside India is, unlike the claim of neutrality in other situations to evince lack of motive for evasion of tax, is revenue neutrality, unalloyed and unadulterated. Here, it is not mere off-set. Here, it is not refund of tax whose incidence was borne. Here it is tax that has to be refunded to the person who paid the tax. The payment made to service providers outside the country does not qualify for being subject to tax under section 66A of Finance Act, 1994 - Appeal allowed - decided in favor of appellant.

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• 2019 (4) TMI 1351
  Nature of activity - manufacture or service? - duty paid on the C.R. coils received from Tata Steel - job-work - activity of cutting of H.R./C.R. Coils of iron or non-alloyed steel into sheets and slitting of sheets into strips - Central excise duty already paid - demand of service tax justified or not? - HELD THAT:- The Revenue having collected, without any demur or reservation, central excise duty on the subject H.R. coils during the material period and having not refunded the same to TRL, cannot now turn around and contend that TRL was liable to make payment of service tax on the ground that the job of slitting/cutting of H.R. coils amounted to providing business auxiliary services within the meaning of the Finance Act, 1994. In similar circumstances pertaining to demand of excise duty vis- -vis service tax, in the case of K. R. Packaging Vs. Commissioner of C.Ex. Service Tax [2017 (2) TMI 893 - CESTAT NEW DELHI], where it was held that In the instant case, the assessee-appellants had already paid the Service Tax under the bona fide belief and the half yearly returns were also being accepted by the Department as the assessee-appellants were having the registration for the Service Tax and the payment was made for this period. No double jeopardy can be applied in this case. Demand of service tax not justified - appeal dismissed - decided against Revenue.

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• 2019 (4) TMI 1350
  Extended period of limitation - short payment of service tax - it is alleged that the appellant has not paid service tax on the gross amount received by them on services rendered as the same was required to be paid - HELD THAT:- It has been held by the various decisions of Hon ble Tribunal that if the demand is raised at the strength of Audit Objection and the necessary information is available in RT-12/ ST-3 return the extend of demand cannot be sustained. In this case, the appellant has submitted the ST-3 returns indicating the amount received from their clients for providing the taxable services. The taxable value has been arrived as per the sales bills for the relevant years the appellant states that in this case the main contractor has also paid service tax which was not taking into consideration by the Adjudicating Authority - the extended period of limitation is not available to the Revenue and the demand is required to be limited to the normal period only. Appeal allowed by way of remand.

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• 2019 (4) TMI 1349
  Short payment of service tax - waiver of demand of service tax - HELD THAT:- BSNL during relevant time, had short paid service tax to the extent of about Rs. 52.88 lakhs. However, it is also seen that BSNL has suo-motu made payment of such differential service tax of Rs. 74.20 lakhs. As such, no more service tax is required to be paid. Revenue has filed the present appeal challenging the amount of service tax dropped by the adjudicating authority. On the basis of recalculation of service tax dues and submission of a Certificate from the independent Chartered Accountant, the correct service tax liability has been arrived at and settled by BSNL. Appeal allowed - decided in favor of appellant.

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• 2019 (4) TMI 1348
  Business Auxiliary Service - appellant entered into contract agreement with M/s. Oil and Natural Gas Corporation Ltd.(ONGCL) for providing cranes on hire basis - HELD THAT:- The definition of Business Auxiliary Service under Section 65(19) is clearly applicable only when the service is rendered on behalf of someone else. Perusal of the contract reveals that the activity can at best fall under Section 65(105) (zzzz) w.e.f. 16.05.2008 - Since the entire demand in the present proceedings is for the prior period, there is no justification for the levy of the service tax under the category of Business Auxiliary Service. Appeal allowed - decided in favor of appellant.

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• 2019 (4) TMI 1347
  CENVAT Credit - input services - container services used for outward transportation of the final products upto the place of buyer - HELD THAT:- The issue in dispute in the present case is squarely covered by the judgment of the Hon ble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE SERVICE TAX VERSUS ULTRA TECH CEMENT LTD. [ 2018 (2) TMI 117 - SUPREME COURT OF INDIA] , where it was held that Cenvat Credit on goods transport agency service availed for transport of goods from place of removal to buyer s premises was not admissible to the respondent. Appeal dismissed - decided against Revenue.

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• Central Excise

• 2019 (4) TMI 1346
  Waiver of penalty - revenue neutrality - no suppression of facts - notification dated 27.03.2008 - HELD THAT:- The question of total revenue neutrality in terms of the notification No.32/1999-CE dated 08.07.1999 was eclipsed by the notification dated 27.03.2008 where-under duty refund has been reduced. Though the question as to whether notification dated 27.03.2008 will survive or not but as on date, it is in force therefore, on such basis complete revenue neutrality is not available - Complete revenue neutrality is linked with the question of imposition of penalty in the context of the intention of a party to evade duty. It is clear that the duty is chargeable but it is 100% refundable, the question of intention to evade payment of duty pales into insignificance. But where the duty charged is not 100% refundable, then any act of concealment, misstatement or suppression of facts will give rise to the intention to evade payment of duty. The case is remanded back to CESTAT for deciding the appeal afresh - appeal allowed by way of remand.

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• 2019 (4) TMI 1345
  Delay for grant of registration - HELD THAT:- May be the petitioner has a reason for expressing such concern but then undisputedly, as of present, neither there is any such order on record of the proceedings which confirms such attempt by the respondents nor any proceeding has been initiated in this regard. In such admitted circumstances noted, we do not deem it necessary to express our opinion on the issue expressed at this stage but would preserve liberty for the petitioner to contest any such attempt by the concerned department, if any initiated. Petition disposed off.

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• 2019 (4) TMI 1344
  Suo moto credit of excess duty paid or refund claim - the only ground of Revenue is that in view of the ruling of Larger Bench in the case of BDH INDUSTRIES LTD. VERSUS COMMISSIONER OF C. EX. (APPEALS), MUMBAI-I [ 2008 (7) TMI 78 - CESTAT MUMBAI] wherein this Tribunal held that all types of refunds have to be filed under Central Excise Act and Rules made thereunder and no suo-motu credit of the duty paid in excess may be taken by the assessee. HELD THAT:- The Larger Bench had taken the view with regard to the provisions of unjust enrichment. Whereas in the present case, there is no such dispute of unjust enrichment as the appellant was allowed rebate after taking in to consideration the element of unjust enrichment. Accordingly, the facts herein are different and the ruling in the case of BDH Industries of Larger Bench of this Tribunal is not attracted. The matter relates to rectification of mistake, both on the part of the assessee as well as the Department. Thus rectification has to be carried out in full - By sitting tight on the repeated request of the assessee to take back the Cenvat Credit was unjust and unfair under the facts and circumstances. The SCN is misconceived and an abuse of the provisions of the scheme of the Central Excise Act and the Rules - Appeal dismissed - decided against Revenue.

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• 2019 (4) TMI 1343
  CENVAT Credit - input services - GTA and Courier Services which were used for transporting the finished goods up to the buyer s premises - place of removal - HELD THAT:- Hon ble Apex Court in the case of COMMISSIONER OF CENTRAL EXCISE SERVICE TAX VERSUS ULTRA TECH CEMENT LTD. [ 2018 (2) TMI 117 - SUPREME COURT OF INDIA] has held that the credit on outward transportation is eligible only up to the place of removal. When the goods are sold on FOR basis on the basis of purchase orders, the assessable value has to include freight charges to the buyer s premises. Thus, for valuation purposes, the purchase order can be looked into to decide whether the sale is on FOR basis. The same document can be relied upon for deciding the place of removal to determine the eligibility of credit on outward transportation also. The matter requires to be remanded to the Original Authority who is directed to look into the Circular as well as the documents produced by the appellant and determine the place of removal and then decide the issue of eligibility of credit on outward transportation of finished goods - Appeal allowed by way of remand.

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• 2019 (4) TMI 1342
  Valuation - manufacture of cakes and pastries falling under chapter CTH 1905 Brand Name Monginis - relationship between appellant and dealer - principal and consignment agent relationship - Rule 7 of the Central Excise (Valuation) Rules, 2000 - HELD THAT:- On perusal of the agreement, it does not reveal that M/s. Banami was acting as a consignment agent of the appellant. A consignment Agent is required to receive the goods manufactured and dispatches them to customers, identified by the manufacturer (Principal), accompanied by invoices issued on behalf of the manufacture. On perusal of the terms of agreement indicates otherwise. There is absolutely no restriction as to whom the goods are being sold further. The goods are sold under the invoices of M/s. Banami at MRP fixed by the appellant - there is nothing on record to conclude that M/s. Banami was acting as a consignment Agent of the appellant. The transaction between appellant and M/s. Banami is on Principal to Principal basis and hence, Excise Duty is to be paid only in terms of Section 4 (1a) of the Act - there is no justification for resorting to valuation in terms of Rule 7 of the Central Excise Valuation Rules, 2000 - appeal allowed - decided in favor of appellant.

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• 2019 (4) TMI 1341
  Valuation - inclusion of Freight in assessable value - Railway freight has been paid by the appellant and recovered separately - Place of removal - HELD THAT:- In the case of disputed clearances, the goods were booked through Railways. The appellant has paid the Railway freight at the behest of the buyer, but recovered the same separately. The freight charges are never mentioned in the relevant invoices nor included in the price for payment of Central Excise duty. In such cases the question to be decided is the place of removal. From the Railway Receipts it is seen that it is made in favour of the buyer. Railway Receipt is one of the documents specified in Section 2(iv) of the Sale Goods Act as document of title to the Goods - As per Section 39 ibid, delivery of goods to the carrier is to be considered as delivery of goods to the buyer. In view of the above it is clear that the goods stand sold to the buyer at the factory gate. The factory being the place of removal, there is no mandate for adding freight charges. Scope of SCN - HELD THAT:- The case decided by the adjudicating authority is entirely different from the case made out in the show cause notice issued on the basis of the C AG objection. Since the adjudicating authority has discussed and decided an issue which was not the subject matter of show cause notice - impugned order cannot be sustained. The issue is remanded back to the adjudicating authority for passing denovo order - appeal allowed by way of remand.

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• 2019 (4) TMI 1340
  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 1339
  Clandestine manufacture and removal - denial of cross-examination - Section 9D (i) of the Central Excise Act - corroborative evidences or not - HELD THAT:- It is apparent from the record that the appellant has indeed indulged in trading activity from their office at Patna. The ld. Adjudicating authority has failed to take cognisance of this corroborative evidence to support the claim by the appellant that they have indulged in the trading activity on which there was no justification of raising the demand, considering that the appellant has indulged in clandestine manufactured goods. It is also on record that the adjudicating authority has not allowed cross examination of the investigating officer, who has prepared the investigation report against the assessee on the basis of resumed documents from their factory and office premises. The allegation of clandestine manufacture and clearance of the goods is serious charge as required to be substantiated by the corroborative evidence, which has not been done in this case. The clandestine manufacturing and clearance of the goods is required to be proved by the various other supporting evidence as clandestine manufacture thereof and sale thereof. No such investigation has been conducted by the investigating officer. In absence of such detailed investigation demand is not sustainable. Appeal allowed - decided in favor of appellant.

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• 2019 (4) TMI 1338
  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 1337
  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 1336
  Valuation - inclusion of performance bonus received by the appellant from their buyer towards the out performance of refractory bricks and monolithi as heat guarantee bonus - Section 4 of the Central Excise Act - HELD THAT:- The issue is decided both for pre as well as post amendment of Section 4 of the Act, wherein the transaction value concept was brought in for the purpose of assessment with effect from 1/7/2000 - the said amount need not be included in the assessable value - appeal allowed - decided in favor of appellant.

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• 2019 (4) TMI 1335
  CENVAT Credit - common inputs used in dutiable as well as exempt goods - non-maintenance of separate records - Rule 6(3)(b) of CCR, 2004 - HELD THAT:- In the present case, the process of dehydration of Coal Tar does not result in emergence of any new or different article having a distinctive name, character or use. After carrying out the process of dehydration, the goods remain the same viz. Coal Tar. The technical characteristic and use of the goods also remain the same. The process of dehydration simply results in removal of the moisture content from the Coal Tar. In technical and commercial parlance, the Coal Tar and dehydrated Coal Tar are treated as the same commodity. The provisions of erstwhile Rule 57CC and (d) equally applicable in respect of Cenvat Credit Rules, 2004 till the explanation was inserted in the said Rule vide Notification No. 6/2015-CE(NT) - It is also well settled that the provisions of Rule 6 of Cenvat Credit Rules are not applicable to the non-excisable goods till the explanation was inserted. Appeal dismissed - decided against Revenue.

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• 2019 (4) TMI 1334
  Clandestine manufacture and removal - discrepancy of stock - corroborative evidence or not - whether the evidences, other than the retracted oral evidences, are capable of being used as corroborative evidence? - HELD THAT:- In the entire records of proceedings, there is no evidence to indicate that there was clandestine manufacturing. There is no independent tangible evidence on record of any clandestine purchases or receipt of the raw materials required for the manufacturing of the alleged quantity of finished goods for its clandestine removal from the factory. In the entire notice and the order, there is no satisfactory and reliable independent evidence as regards the unaccounted manufacture and/or receipt of the huge quantities of raw materials. The quantities of the alleged bags dispatched from the factory would require some transportation arrangement for delivery from the factory. However, any reliable evidence about any vehicle coming in or going out of the factory without proper entries is not forthcoming. There is also no cogent evidence about any freight payment for any such movement. There is no cogent evidence of disproportionate and unaccounted receipt and consumption of the basic raw materials and packing material, required for manufacturing alleged quantity of unaccounted finished goods - also, unaccounted production in the factory of the appellant-company has not been established. There is no dispute on the fact that in adjudication proceedings, the charge of clandestine removal and undervaluation is definitely to be established on the basis of preponderance of probabilities. However, it cannot be merely on the basis of presumptions and assumptions - Revenue failed to substantiate the findings recorded in the impugned Order regarding production capacity to persuade us to reject the contention of the appellant that there is failure on the part of respondent to collect any evidence in relation to either procurement of raw materials by the appellant or production of huge quantity of final goods alleged as removed clandestinely to sustain the charge of clandestine removal. Once unaccounted production is not established, even otherwise, there can be no clandestine removal thereof. Unaccounted removals have in any case not been established on the basis of the evidence available on record. The ratio laid down by the Hon ble Apex Court in OUDH SUGAR MILLS LTD. VERSUS UNION OF INDIA [ 1962 (3) TMI 75 - SUPREME COURT OF INDIA] , is clearly applicable in the peculiar facts of the instant case inasmuch as the demand cannot be sustained without any tangible evidence, based only on inferences involving unwarranted assumptions. Appeal allowed - decided in favor of appellant.

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• 2019 (4) TMI 1333
  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 1332
  Valuation - clearances made to Deputy Commissioner Singhbhum - institutional customers - HELD THAT:- There is no infirmity in the proposal the respondent has asserted categorically that no such supplies were made during the disputed period - As such the Revenue s appeal is rejected but with the direction to the adjudicating authority to charge duty @Rs.400 Per MT if any such clearances have been made in the disputed period. Appeal dismissed - decided against Revenue.

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• 2019 (4) TMI 1331
  Clearances certified by the designated authority in the Ministry of Non-conventional Energy Sources, New Delhi - benefit of N/N. 33/2005-CE dated 08.09.2005 - appellant produced the required certificate for quantity of 100 meters of cables and cleared the total quantity of 418 meters - HELD THAT:- The Notification grants exemption from payment of duty on the goods certified by the authority stipulated in the Notification. In this regard, the required certificate is also on record only for quantity of 100 meters. As such, the excess quantity of 318 meters of cables, will be liable for payment of duty - appeal dismissed - decided against appellant.

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• 2019 (4) TMI 1330
  CENVAT Credit - the credit taken on such inputs subject to process loss, was not reversed to the extent relatable to the purported quantity of inputs lost - Rule 4 (5)(a) of the Cenvat Credit Rules, 2004 - HELD THAT:- There will be certain conversion loss as no process can be undertaken on 100% conversion basis. If the resultant product has to meet the standard specification, the quantity loss invisibly could not be said to have been removed from the premises in terms of Rule 4(5)(a) of the Rules rendering its invocation erroneous on the facts of the present case. Allegation and demand to the contrary is articulated in the impugned order and the adjudication orders are therefore, baseless contrary to law and cannot sustain the demand sought to be imposed upon the appellant. In the absence of any contravention, there can be no basis for recovery of any duty by means of credit reversal or otherwise or interest thereon, in terms of Rule 14 of the Rules, read with Sections 11A and 11AA/AB of the Act. There can also be no penalty imposed upon the appellant in terms of Rule 15 (2) of the Rules read with Section 11AC of the Act. Appeal allowed - decided in favor of appellant.

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• 2019 (4) TMI 1329
  CENVAT Credit - input services - outward freight - place of removal - period from March, 2005 to December, 2007 - Rule 3 of the Cenvat Credit Rules, 2004 - HELD THAT:- Facts of this case is squarely covered by the decision in the case of COMMISSIONER OF CENTRAL EXCISE, BELGAUM VERSUS M/S. VASAVADATTA CEMENTS LTD. [ 2018 (3) TMI 993 - SUPREME COURT] , where it was held that from 01.04.2008, the CENVAT credit is available only upto the place of removal whereas as per the amended Rule from the place of removal which has to be upto either the place of depot or the place of customer, as the case may be. Credit has to be allowed - appeal dismissed - decided against Revenue.

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• 2019 (4) TMI 1328
  CENVAT Credit - input - inputs received in wooden containers and/or pallets - whether the pallets, being the packing materials of the said finished goods were treated as inputs in the manufacture of the said goods - HELD THAT:- The pallets which were purchased by the Appellant @40/- per Kg. Were sold @Rs. 11/- per kg. under the description Scrap Wood/broken Pallet . There was no allegation that the price charged was not the transaction value and that the such sale was undervalued. Nor was there any allegation that the sales were made to related persons.This price difference weighs heavily against the allegation by the department that the pallets were removed as such. The Appellant has claimed that they had included the value of pallets in the value of finished, for the purpose of paying excise duty, even when such finished goods were packed with recycled/returned pallets on which no CENVAT credit was availed by them. Central Excise Rules provides for imposition of duty on the waste arising out of the manufacturing process, but the packaging materials cannot be termed as waste arising out of manufacturing process. Hence, it may be concluded that no duty is payable when unusable or redundant packaging materials are removed from the factory, nor reversal of CENVAT credit is warranted. Appeal dismissed - decided against Revenue.

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• CST, VAT & Sales Tax

• 2019 (4) TMI 1327
  Imposition of penalty u/s 13A(4) of the U.P. Trade Tax Act - Goods seized on the ground that Mobile Squad Authorities presumed that goods in question are meant to be delivered at the address which is mentioned in the loose purchi - HELD THAT:- Section 13A(4) of the Act provides that the penalty under the said provision can be imposed only when the goods were omitted from being shown in the account books, register and other documents referred to in Sub-Section 1 of Section 13 A of the Act. No other ground has been provided in Sub-Section 4 of Section 13A for imposing the penalty therein. The assessing authority of the revisionist has converted security in penalty imposed under Section 13A(4) of the Act - the order passed by the First Appellate Authority is affirmed - revision allowed.

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• 2019 (4) TMI 1326
  Rejection of claim of stock transfer - Submission of declarations or certificates to the Sales Tax Officer - Rule 8A of sub-Rule (4) of the C.S.T (U.P.) Rules, 1957 - HELD THAT:- The provision of Rule 8A(4) provides that in case, if there is any minor omission or mistake found in a declaration of a certificate furnished by the dealer, it shall be returned to the dealer who shall be given an opportunity of having the omission or mistake rectify by the dealer or the department concerned of the Government from whom he had received the declaration. In the present case, admittedly, there was no mistake noticed by any of the authority nor there was any minor omission seen by the authority. In fact, the findings are recorded otherwise by the authorities that in Form F there was no detail with respect of number of vehicle, transport company, bills issued by the revisionist, date etc. - the revisionist cannot claim the advantage of Rule 8A (4) of the Rules. Revision petition dismissed.

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• 2019 (4) TMI 1325
  Constitutional Validity of Section 174 of KSGST Act - time limitation u/s 25(1) of the KVAT Act - HELD THAT:- The issue covered by the decision in the cas of M/S. SHEEN GOLDEN JEWELS (INDIA) PVT. LTD. VERSUS THE STATE TAX OFFICER (IB) -1, AND OTHERS [ 2019 (2) TMI 300 - KERALA HIGH COURT] , where it was held that The petitioner s plea is rejected that the State lacks the vires to graft Section 174 into KSGST Act, 2017. Petition dismissed.

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• 2019 (4) TMI 1324
  Requirement with the pre-deposit - 30.55% of the penalty - Section 31 (2) of the Bihar Value Added Tax Act, 2005 - HELD THAT:- The legislature has been conscious while conferring a right in the assessee to pray for interim relief pending statutory appeal questioning an order of assessment, interest or a penalty and even though a discretion is vested in the Appellate Authority and the Revisional Authority to set up such terms and conditions as deem proper while considering application for stay of tax and interest but no such discretion to set up terms and conditions is present in so far as the prayer for stay of penalty is concerned. Meaning thereby either the Appellate Authority can accept or reject the prayer for interim stay but in case he is persuaded with the prayer so made then he cannot set up conditions therefor. The excess deposit of tax made by the petitioner, that the issue, whether or not the petitioner has made himself liable for penalty, is pending before the Appellate Authority, we direct the Joint Commissioner, Commercial Taxes (Appeal), Central Division, Patna to dispose of the appeal of the petitioner in accordance with law without coercing him for pre-deposit of the amount as found in the order impugned for the purpose of grant of interim stay and which order of penalty shall remain in abeyance and which amount of penalty so imposed would be governed by the final outcome of the appeal pending before the Appellate Authority - petition allowed.

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• 2019 (4) TMI 1323
  Service of notice - validity of assessment order - ex parte proceedings - no notice was ever served on assessee,- HELD THAT:- As it is clear from the perusal of order of the assessing authority that the notice under Section 21(2) was served on the assessee but he did not participate in the reassessment proceedings and further neither the first appellate authority nor the Tribunal has recorded any finding or has come to conclusion that no notice was served on the assessee it was only the contention of the assessee which was recorded by the Tribunal while remanding back the matter to the assessing authority for decision afresh. No interference is required as the present revision is against a remand order, however, it is made clear that the assessing authority while passing the order shall first consider whether the notice under Section 21(2) of the Act was served on the assessee and further the proceedings are time barred or not. After considering the said question, the assessing authority shall pass the order as directed by the Tribunal. Revision disposed off.

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• 2019 (4) TMI 1322
  Liability of Interest on the Entry Tax - U.P. Tax on Entry of Goods into Local Areas Act, 2007 - Whether the Petitions filed by the appellant challenging the demand notices dated 04.05.2018 and 05.05.2018 issued after judgment dated 04.05.2018 of the High Court in Writ Petition No.25730 of 2017 is barred by Principle of Res-judicata, in view of the dismissal of Writ Petition No.25730 of 2017 on 04.05.2018? - HELD THAT:- Writ Tax No.474 of 2017, which de-tagged with the Bunch of Writ Petition No.25730 of 2017 is still pending for consideration before the High Court. Present is a case where the Division Bench while deciding Writ Petition No.25730 of 2017 consciously restricted the consideration to three questions as noted in the judgment of this Court dated 21.03.2017 and did not permit to raise any submission other than three questions as noted above or proceed to consider any other questions. The issue which has not been expressly permitted to be decided by judgment dated 04.05.2018 cannot operate as res judicata in subsequent writ petition filed by the appellant where the challenge to the leviability of the interest has been raised. The question relating to nature and extent of liability to pay interest on Entry Tax under the scheme of Act, 2007 need to be examined by this Court in these appeals - the High Court in the impugned judgment committed error in upholding the preliminary objection of the respondent - the question relating to nature and extent of liability of interest on Entry Tax under the scheme of Act, 2007 need to be examined and answered in these appeals. Whether Act, 2007 does contain any substantive provision for charging interest? - HELD THAT:- The liability of the interest under Section 12(3) is confined to one particular situation and does not provide for any universal application for payment of interest. Requirement of payment of interest under Section 12 (3), thus, is for a particular situation and has no application with regard to any other instance of liability to pay tax. Present is a case where appellant is not receiving any goods from any manufacturer, hence, in the present case Section 12 has no applicability. The application of provisions of VAT Act, 2008 is provided by Section 13 of Act, 2007 with certain changes in points of details. Section 33 of the VAT Act, 2008 which has been mentioned to apply under Section 13 has to be applied with respect to payment and recovery of tax. Thus, the payment of interest which is contemplated under Section 33 on the amount of tax has to be applied with regard to the payment of Entry Tax and the interest thereon. Even if provision of Section 33 of VAT Act, 2008 to be treated as machinery provision which is to be applied by virtue of Section 13 of Act, 2007, the machinery provision has to be interpreted in a manner so as to make the liability effective and treated to be substantive law. This Court in INDIA CARBON LTD. VERSUS STATE OF ASSAM (AND OTHER APPEALS) [ 1997 (7) TMI 566 - SUPREME COURT OF INDIA ] held that the provision relating to interest in the latter part of Section 9(2) can be employed by the States sales tax authorities only if the Central Act makes a substantive provision for the levy and charge of interest on Central sales tax and only to that extent. Section 9(2) was considered in two parts. This Court treated the first as substantive provision whereas second part only for procedural purpose alone, due to the above reason, this Court held that any claim of interest was unfounded - In the case before us, Section 33 has been made applicable by virtue of Section 13 mutatis mutandis. There is no such dichotomy in Section 13 as was noticed in India Carbon Ltd. in Section 9(2) of the Central Sales Tax Act. There is no hesitation in rejecting the submission of the learned counsel for the appellant that Act, 2007 does not contain any substantive law for levy of the interest - question answered accordingly. Other questions and issues need to be remitted to the High Court for consideration. The questions for determining the liability of interest and various aspects including factual aspects need to be examined and considered by the High Court - appeal allowed by way of remand.

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