TMI Tax Updates - e-Newsletter
April 26, 2017

Case Laws in this Newsletter:

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

TMI SMS

• Union is not exempted from the levy of indirect tax under Article 285 of the Constitution - GM, W. Railway can be termed as a dealer - HC

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Articles

1. The law laid down by jurisdictional High Court being binding, prima facie adjustments can be made in order u/s 143(1) even if issue is debatable – so held by the Supreme Court also a case showing double standard followed by tax authorities increasing litigation.

   By: DEVKUMAR KOTHARI

2. GST Issues in MSME Sector

   By: Ravi Kumar Somani

News

1. GST to boost domestic manufacturing, won't up inflation: Adhia

2. Presentation for GST Conclave/Workshop

3. Goods and Services Tax – AN OVERVIEW

4. PFRDA smoothens the Process of Registration of Retirement Advisers; Process of submitting application transformed from Physical Mode to Online Mode

5. Online Statement Of Transaction (e-SOT) and the e-PRAN card launched for Atal Pension Yojana (APY) subscribers; More than 45 lacs subscribers to be benefitted

6. Establishment of Spices Farmers Producer Companies (SFPCs) in Arunachal Pradesh - Inauguration by Commerce and Industry Minister Smt. Nirmala Sitharaman

7. Launch of IPR Awareness Campaign for Schools

8. RBI Reference Rate for US $

Notifications

Central Excise

1. 11/2017 - dated 24-4-2017 - CE (NT)

Notification under Section 11C of the Central Excise Act on Heena Powder and Paste falling under Chapter 33

DGFT

2. 05/2015-2020 - dated 24-4-2017 - FTP

Amendment in Table A of Schedule 2 and Appendix 3 of ITC(HS) Classification of Export and Import Items

Income Tax

3. 32/2017 - dated 21-4-2017 - IT

Income-tax (8th Amendment), Rules, 2017

Highlights / Catch Notes

Income Tax

• Court Rules Waiver of Interest by Banks is Income Under Income Tax Act Section 41(1.

  Case-Laws - SC : Benefit of provisions of Section 72A - whether waiver of interest by financial institutions would not be treated as income of the appellant-assessee under Section 41(1)? - Tribunal committed an error in treating the waiver of interest as not income of the assessee - SC
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• Court Upholds Constitutionality of Finance Act Provisions; Section 80(5) and Section 10B(1) Not Violating Article 14.

  Case-Laws - HC : Restriction on multiplicity of claims of deductions - whether Section 80(5) inserted by Finance Act, 2009 and the fourth proviso to S.10B (1)inserted by the Finance Act, 2006 arbitrary, discriminatory, unreasonable, and violative of Article 14 of the Constitution of India? - Held NO - HC
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• Disallowed Section 80IB Deductions for R&D Expenses Rejected; No Income Additions Made Due to Lack of Evidence.

  Case-Laws - HC : Deduction u/s 80IB on account of disallowance of R&D expenses - A.O. Has made this disallowance holding that the profits of the appellant were overstated on account of no expenses being debited for R&D facilities - No additional facts have been brought on record to support the notional disallowance on account of R&D expenditure - No additions - HC
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• R&D Expenditure Disallowed u/s 35(2AB) Due to DSIR Non-Approval; Consider u/s 35(1)(iv) Instead. &D.

  Case-Laws - AT : Disallowance of scientific Research and Development expenses - weighted deduction - Once the Revenue authorities accepted that the expenditure was incurred towards R&D and it was disallowed u/s.35(2AB) of the Act on the reason of non-approval by the DSIR, then it should be considered u/s.35(1)(iv) - AT
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• Penalty Order u/s 271(1)(c) Invalid Due to Lack of AO's Specific Satisfaction in Initiation.

  Case-Laws - AT : AO having failed to record his satisfaction while initiating proceedings for imposition of penalty u/s 271(1)(c) as to which limb of the provisions of section 271(1)(c) is attracted, the order imposing penalty is invalid - AT
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• Court Rules TDS u/s 195 Not Needed for Non-Resident Technical Services; No Disallowance u/s 40(a)(i.

  Case-Laws - AT : TDS u/s 195 - Disallowance u/s. 40(a)(i) - FTS - it cannot be said that the rendering of services by the non residents to the assessee made available to the assessee , such services , for its future use or utilization on a reasonably permanent basis - since the amount is not taxable, TDS is required to be deducted - AT
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Customs

• Importers Can Fulfill Export Obligations Without EODC Using Alternative Documents; No Violation of Advance License Conditions.

  Case-Laws - AT : Import against advance license - If discharge of export obligation can be established by the importer from the other documents, as has been done in the present case, the non-submission of EODC certificate can not be held to be violation of condition of notification - AT
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• Import Valuation on High Sea Sale Irrelevant; Appellant Proves Declared Values Match Contemporaneous Imports, Blocking Value Enhancement.

  Case-Laws - AT : High seas sales - Valuation - the import on high sea sale basis has no relevance for the purpose of value - appellant has been able to establish the contemporaneous imports the value of which is almost near to the values declared by the appellant, the enhancement is unsustainable. - AT
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VAT

• High Court Rules Western Railway's General Manager is a Dealer for VAT and Sales Tax, Not Exempt by Article 285.

  Case-Laws - HC : Union is not exempted from the levy of indirect tax under Article 285 of the Constitution - General Manager, Western Railway can safely be termed as a dealer - HC
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Case Laws:

• Income Tax

• 2017 (4) TMI 1037
  Benefit of provisions of Section 72A - whether waiver of interest by financial institutions would not be treated as income of the appellant-assessee under Section 41(1)? - Held that:- In the instant case, the assessee was given the benefit of accumulated loses of the amalgamated company. The effect thereof is that thought these loses were suffered by the amalgamated company they were deemed to be treated as loses of the assessee company by virtue of Section 72A of the Act. In a case like this, it cannot be said that the assessee would be entitled to take advantage of the accumulated loses but while calculating these accumulated loses at the hands of amalgamated company, i.e., HPL, the income accrued under section 41(1) of the Act at the hands of HPL would not be accounted for. That had to be necessarily adjusted in order to see what are the actual accumulated loses, the benefit whereof is to be extended to the assessee. We, thus, agree with the High Court in its analysis of Section 41(1) along with Section 72A of the Act held that:- in order to facilitate the merger of sick industrial units with sound ones and as and by way of offering an incentive in that behalf section 72A was introduced, whereunder, by a deeming fiction, the accumulated loss or unabsorbed depreciation of the amalgamating company is treated to be a loss or, as the case may be. The Revenue before the first appellate authority emphasized the application of section 72A of the Act, to the facts of the case. The first appellate authority and also the Tribunal failed to consider the scope and object of section 72A of the Act. Thus, the Tribunal committed an error in treating the waiver of interest as not income of the assessee

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• 2017 (4) TMI 1036
  Restriction on multiplicity of claims of deductions - Validity of Section 80(5) and the fourth proviso to S.10B (1) - whether Section 80(5) inserted by Finance Act, 2009 with effect from 01.04.2003 and the fourth proviso to S.10B (1)inserted by the Finance Act, 2006 w.e.f. 01.04.2006 as arbitrary, discriminatory, unreasonable, and violative of Article 14 of the Constitution of India? Held that:- As far as Section 80A (5) was concerned, it was added to prevent multiplicity of claims of deductions with respect to the same transactions, under the Act. The insertion of the impugned provisions does not curtail any vested rights that the petitioner or assessee had, but only imposes upon them a duty, an obligation to claim deductions in a timely manner and in the return so filed. The right to claim such deductions still vests in the assessees who are eligible for it. The other perspective in such cases is that the impugned provisions are interwoven into the mechanism which Parliament found appropriate to create for the purpose of claiming deductions. In such cases, (unlike in cases where no such benefits are sought) the assessee has to necessarily claim the benefit while filing a return within the time, under Section 139 (1). These provisions are rather like limitation periods, which are statutes of repose (“Limitation is a statute of repose. The fourth proviso to Section 10B (1) is a qualifying proviso and it only seeks to limit the general provision in Section 10B (1) with a further stipulation or condition. As held in State of A.P. v. Nallamilli Ramli Reddi, (2001 (8) TMI 1396 - SUPREME COURT) Article 14 of the Constitution of India permits reasonable classification on fulfillment of two factors: (a) that the classification must be found on intelligible differentia which distinguishes persons grouped together from others who are left out of the group, and (b) that differentia must have a reasonable connection with the object sought to be achieved. As discussed earlier, the objective behind insertion of the impugned provisions was to defeat multiple claims of deductions and to ensure better tax compliance. Thus, the impugned provisions (fourth proviso to Section 10B (1) and Section 80A (5)) so inserted acknowledge the existence of persons owning 100% EOUs and seek to limit their time to claim deductions under the Act. The decision in Sham Bhar Khandige v. Agricultural I.T.O., AIR (1962 (8) TMI 67 - SUPREME COURT], is authority for the proposition that where there are more than one methods of assessing a tax and the Legislature selects one among such many, the Court will not be justified to invalidate the law on the ground that the Legislature should have adopted another method, which in the opinion of the Court, is more reasonable or appropriate, the exception being where the court is convinced that the method adopted is capricious and fanciful. Thus with the addition of the fourth proviso to Section 10B(1) of the Act, the manner of claiming deduction is now time barred under the provisions of the Section 139(1) and relief cannot be granted after expiry of the time mentioned in Section 139(1). Thus, Parliament acted within its power to differentiate between a return of income filed under Section 139(1) and a belated return filed under Section 139(4) for the purposes of deductions claimed Section 10B(1). For the foregoing reasons, the order of the CIT (A) has to be and is upheld; the challenge to the provisions has to fail.

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• 2017 (4) TMI 1035
  Revision u/s 263 - Dividend income taxability - benefits of the Indo Oman DTAA - whether AO's order was erroneous in law and prejudicial to the revenue? - Held that:- assessee is also justified in complaining that the CIT could not have branded the AO's order as erroneous in the facts and circumstances of this case. As noticed previously, in the earlier years, the AO had finalized the scrutiny assessment, considered the impact of Articles 11 and 25 of the Indo Omani DTAA, and issued pointed queries on the issue of dividends earned. He had also considered whether a PE had earned dividend income. In such circumstances, the CIT could not have stated that another view rendered the AO's plausible view erroneous. Clarification has to be regarded as conclusive; if the tax authorities had any doubts, they could not have proceeded to elevate them into findings, but rather addressed them to Omani authorities- if not directly, then through Indian diplomatic channels. In not doing so, but proceeding to interpret the laws and certificate of Omani authorities, the revenue, especially the Commissioner fell into error. As far as the submission of the revenue, that the assessee did not have a Permanent Establishment in Oman is concerned, this court is of opinion that admittedly, for about 5 years, i.e 2002 to 2006, a common order was made under Article 26 (2) (b) of the Income Tax Law of Oman. That order first included dividend income (in the total income determined) and thereafter granted deduction. For later years as well, assessments were made similarly. The ITAT also noticed as follows: "Up to the tax year 2011 dividend has been first included in the total income and thereafter deduction has been granted. The facts mentioned above clearly establish that the Assessee Society is entitled to getting credit for the deemed dividend tax by virtue of the provisions of DTAA read with Section 90 of the Income Tax Act, 1961 together with the clarifications issued by the Sultanate of Oman and the assessment made under the Omani Laws. In view of the above it is respectfully submitted that on merits also Assessee Society is entitled for the tax credit which has been rightly allowed by the Assessing Officer and, therefore, the Ld. PCIT has completely erred in giving directions to the Assessing Officer under Section 263 to withdraw the said tax credit." These findings are, in this court's opinion, in consonance with logic and reason and do not call for interference. Both questions of law are answered in favour of the assessee.

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• 2017 (4) TMI 1034
  Availability of alternative remedy - method to be followed to determine the ALP of the petitioner's case - Held that:- When an alternative remedy is available, more particularly, in the cases of fiscal nature, invoking of the jurisdiction under Article 226 of the Constitution of India, is not permissible. When the petitioner is having an alternative remedy of appeal to file the appeal before the CESTAT, it is for them to file such appeal and canvass all the points. This Court exercising discretionary jurisdiction under Article 226 of the Constitution of India, is not inclined to entertain this writ petition only on the reason of availability of alternative remedy. It is however made clear that this Court is not expressing any view on the merits of the matter raised by the petitioner herein, as it is for the Appellate Authority to consider and decide. Accordingly, these writ petitions are dismissed only on the ground of availability of alternative remedy, with liberty to the petitioner to approach the said First Appellate Forum.

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• 2017 (4) TMI 1033
  Validity of reopening of assessment - proceedings initiated beyond the period of limitation - Held that:- Section 148(1) provides for service of notice as a condition precedent to making order of assessment. It is held that “service under the new Act is not a condition precedent to conferment of jurisdiction on the Income Tax officer to deal with the matter. But it is a condition precedent to the making of the order of assessment. It is further held that as Income Tax Officer had issued notice within limitation, the officer can proceed to complete the assessment after complying with the requirement. Apparently in these cases, though a notice was generated on 30/3/2015, it is not stated that they have issued the said notice. According to them, enquiry revealed that the assessee's address was at Chennai and therefore notice was sent in the said address which was returned without being served. Thereafter gathering one more address of the assessee, the letter was finally served on 13/4/2015. It would therefore be seen that all attempts had been made by the officer to serve the notice on the petitioners by generating the notice on 30/3/2015 and sending the same by registered post on 31/3/2015. Of course, no notice was sent or issued in the address shown in the return. But there is an explanation for the same. Whenever notices are sent, it is being received by unauthorized persons and therefore they have found out the address of the assessee from the registered document and notice was sent by registered post on 31/3/2015. As held by the Apex Court, once the notice is issued, thereafter, assessment can be taken only after service of notice. There is proof to show that notice has been issued and therefore, it is of the view that the authorities have complied with the requirements of the statute in accordance with law. As already found that the notice had been issued within the period of limitation, it would suffice as far as the proceedings are concerned. There is no merit in the contention urged on behalf of the petitioners - assessee.

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• 2017 (4) TMI 1032
  Disallowance of deduction u/s. 80IB of the Act on account of Central Excise Refund - Held that:- Apex Court in the case of Commissioner of Income-Tax v. Meghalaya Steel Limited [2016 (3) TMI 375 - SUPREME COURT] approved the decision of Delhi High Court rendered in case of CIT v. Dharam Pal Prem Chand Limited [2008 (11) TMI 231 - DELHI HIGH COURT] in which, it is held that the refund of excise duty should not be excluded in arriving at the profit derived from business for the purpose of claiming deduction under Section 80-IB of the Act Deduction u/s 80IB on account of disallowance of remuneration under Section 40 (b) and disallownace under Section 43B - Held that:- The present Tax Appeal deserves to be dismissed qua the same in light of the recent CBDT Circular No. 37/2016 [F. No. 279/MISC/ 140/2015/ITJ] dated 2nd November 2016 wherein the Board has accepted the settled position that the disallowances made under sections 32, 40(a) (ia), 40A(3), 43B, etc. of the Act and other specific disallowances, related to the business activity against which the Chapter VI-A deduction has been claimed, result in enhancement of the profits of the eligible business, and that deduction under Chapter VIA is admissible on the profits so enhanced by the disallowance. Accordingly, henceforth, appeals may not be filed on this ground by officers of the Department and appeals already filed in Courts/Tribunals may be withdrawn/not pressed upon Deduction under Section 80IB on account of disallowance of R&D expenses - Held that:- A.O. Has made this disallowance holding that the profits of the appellant were overstated on account of no expenses being debited for R&D facilities. The appellant has submitted that the reimbursement expenses were made to cover a host of facilities and services that were availed of from SPIL and that the expenses on account R&D for products developed and launched were included in that. As find that the notional disallowance on account of R&D expenses has been made on similar lines as the disallowances made for royalty, management fees and selling and distribution expenses. As discussed above, the said notional disallowances were found untenable by the Tribunal and were deleted in its order dated 12.06.2012. No additional facts have been brought on record to support the notional disallowance on account of R&D expenditure. Accordingly, following the rational behind the Tribunal's decision on the disallowances of royalty etc., the disallowance on R&D expenses is deleted and the ground raised by the appellant is allowed

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• 2017 (4) TMI 1031
  Addition u/s 14A r.w.R 8D both for normal taxation purposes and taxation under Section 115JB - Held that:- The issue is covered against the Revenue in light of the decision of Delhi High Court in the case of Maxopp Investment Limited v. Commissioner of Income-tax, reported in [2011 (11) TMI 267 - Delhi High Court]. Learned counsel appearing on behalf of the Revenue is not in a position to point out anything contrary to the said decision

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• 2017 (4) TMI 1030
  Disallowance of scientific Research and Development expenses not eligible for weighted deduction u/s.35(2AB) - Held that:- In this case, there is no dispute that the assessee incurred a sum of Rs. 4,19,14,375/- for the purpose of R&D, which is capital in nature to the extent of Ld.CIT(A) agreed. However, since it is a capital expenditure, he disallowed the same. In our opinion, a part of expenditure incurred by the assessee towards unapproved R&D facilities was not entitled for deduction u/s.35(2B) of the Act and that itself cannot be a reason to disallow the same u/s.35(1)(iv) of the Act. 100% of the deduction on the capital expenditure incurred on the R&D activity was to be allowed. Once the Revenue authorities accepted that the expenditure was incurred towards R&D and it was disallowed u/s.35(2AB) of the Act on the reason of non-approval by the DSIR, then it should be considered u/s.35(1)(iv) of the Act, Being so, in our opinion, the Ld.CIT(A) is not justified in disallowing the same. For this purpose, we placed reliance in the judgement of Co-ordinate Bench of Hyderabad in the case of Dy. CIT v. Reliance Celulose Products Ltd. [2013 (8) TMI 762 - ITAT HYDERABAD] wherein held that Merely because part of the expenditure incurred by the approved R&D facilities is not considered for weighted deduction u/s.35(2AB) of the Act would not render that expenditure is not towards R&D or not for the purposes of the business. Allowability of such expenditure u/s.35(1) or under other appropriate provisions will have to be considered. In view of the judgements, we hold that unapproved R&D capital expenditure of Rs. 11,73,074/- and revenue expenditure of Rs. 3,95,68,226/- is not entitled for weighted deduction u/s.35(2AB) of the Act, However, unapproved R&D capital expenditure of Rs. 11,73,074/- to be considered u/s.35(1)(iv) of the Act. If the assessee fulfills the condition in terms of explanation below the provisions 35(1) of the Act as held by the P&H High Court in the case of CIT v. FCS International Marketing (P.) Ltd. [2005 (8) TMI 60 - PUNJAB AND HARYANA High Court]. Accordingly, we hold that the matter is required to be referred by the AO to the prescribed authority and only on the basis of such order from the prescribed authority, as may be passed, that the AO has to make any disallowance. Disallowance made u/s.14A of the Act r.w.r. 8D - Held that:- we direct the Assessing Officer to disallow the expenditure u/s.14A to the extent of exempted income only. See Redington (India) Ltd. v. Addl. CIT [2017 (1) TMI 318 - MADRAS HIGH COURT]. This ground of appeal of assessee is partly allowed. Partly confirming the disallowance u/s.37(1) being gift of gold coins to doctors/medical practitioners - Held that:- The Medical Council (professional Conduct, Etiquette and Ethics ) Regulations, 2002 prohibits the distribution of gift to the doctors and medical practitioners. Accordingly, this ground raised by the assessee is dismissed and the by the Revenue is allowed. Allowing the differential interests on borrowed funds diverted for non business purposes - Held that:- The view that where the amount is advanced from a mixed account or share capital or sale proceeds or profits, it would not be deemed as diversion of borrowed capital or that the Revenue had not been able to establish nexus of the funds advanced to group concern with the borrowed funds is not correct. Once it is borne out from the record that the assessee had borrowed certain funds on which liability to pay tax is being incurred and on the other hand, certain amounts had been advanced to its group concern or others without carrying any interest and without any business purpose, the interest to the extent the advance had been made without carrying any interest is to be disallowed under Section 36(1)(iii) of the Act. Accordingly, we are of the opinion that the assessee used certain amounts to advance group concern as interest free and that portion of interest cannot be allowed while computing the business income of the assessee. Being so, we confirm the order of the AO and reverse the order of the Commissioner of Income-tax(Appeals) on this issue.

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• 2017 (4) TMI 1029
  Penalty under section 271(1)(c) - claim of loss on account of write–off of fixed asset - Held that:- Hon'ble Karnataka High Court in CIT v/s Manjunatha Cotton & Ginning Factory, [2013 (7) TMI 620 - KARNATAKA HIGH COURT] held, order imposing penalty has to be made only on the ground on which the penalty proceedings has been initiated. In the present case, neither the assessment order nor the notice issued under section 274 indicate the exact charge on the basis of which the Assessing Officer intends to impose penalty under section 271(1)(c). Therefore, viewed in the light of the principles laid down in the judicial precedents discussed herein above, we are of the opinion that the Assessing Officer having failed to record his satisfaction while initiating proceedings for imposition of penalty under section 271(1)(c) as to which limb of the provisions of section 271(1)(c) is attracted, the order imposing penalty is invalid. In view of the aforesaid, we hold that the imposition of penalty u/s 271(1)(c) in the present case is not justified. - Decided in favour of assessee.

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• 2017 (4) TMI 1028
  Revision u/s 263 - order prejudicial to the interest of Revenue or not - Held that:- As seen the paper book filed by the assessee and the documents/papers contained/mentioned therein were duly made available before the Assessing Officer, before framing the assessment u/s. 143(3) of the Act and are satisfied that he asked the assessee to furnish the necessary details, therefore, the observation made by the ld. Commissioner is not substantiated as has been alleged in the revisional order. Admittedly, an incorrect assumption of fact or an incorrect application of law would satisfy the requirement of order being erroneous u/s. 263 of the Act. The phrase “prejudicial to the interest of the Revenue” u/s. 263 of the Act, has to be read in conjunction with the expression “erroneous” order by the Assessing Officer. Every loss of Revenue as a consequence of assessment order cannot be termed as ‘prejudicial to the interest of Revenue’, meaning thereby, “prejudice” must be prejudice to the Revenue administration. At the same time, if another view is possible revision is not permissible. Totality of facts, clearly indicates that assessment u/s. 143(3) of the Act was framed by the Assessing Officer after obtaining necessary details from the assessee and further the same were examined by him. Therefore, even if, the same has not been spelt elaborately in the assessment order it cannot be said that there is a ‘lack of enquiry’ or ‘prejudice’ has been caused to the Revenue, as we have discussed various case laws in earlier part of this order which are identical to the facts before us. Our view is further fortified by the decision of Mumbai Bench of the Tribunal (wherein one of us i.e. JM is signatory to the order ) in the case of Mehta Trading Company (2014 (11) TMI 292 - ITAT MUMBAI) which is also on identical facts/issue. The Commissioner invoked revisional jurisdiction u/s 263 with respect to commission of Rs. 2,12,136/- at the rate of Rs. 25 per piece to Rajendra Jain and Kiran Jain by observing that no such commission was paid in earlier year for similar sales. The assessee explained that commission was paid to these parties for looking after the logistic issue. We find that the assessee vide letter dated 11/07/2011, addressed to the Ld. DCIT, in response to notice u/s 142(1) clarified the factual matrix and again vide letter dated 26/07/2011 addressed to Ld. DCIT duly furnished the partywise details of commission paid with name, address and purpose (all these documents are available in the paper book of the assessee). The zerox copy of agreement and credit note was also enclosed along with the memorandum of understanding dated 10/04/2008. Thus, we are satisfied that the assessment was framed after making due enquiry and on perusal/examination of documentary evidence. In such a situation, invoking revisional jurisdiction u/s 263 cannot be said to be justified. - Decided in favour of assessee

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• 2017 (4) TMI 1027
  TDS u/s 195 - Disallowance u/s. 40(a)(i) - payment made to non- residents situated outside India without the deduction of tax source - payment of warehouse charges - Held that:- Admittedly the disallowance made by the Ld. AO is only for non- deduction of tax at source and accordingly only the provisions of section 40(a)(i) of the Act is invoked by him. There is no dispute as to the allowability of such payments as an eligible deduction otherwise. We also find that expecting a person to foresee the future amendment in the statute vis-a- vis tax withholding liability would only result in impossibility of performance on the part of the tax deductor. We also find that the Hon'ble Supreme Court in the case of Krishnaswamy S. Pd. and Anr. v. Union of India (2006 (2) TMI 75 - SUPREME Court ) has also accepted and approved this legal maxim. In view of these findings and respectfully following the various judicial decisions relied upon herein above, we have no hesitation in directing the Ld. AO to delete the disallowance of payment of warehouse charges u/s. 40(a)(i). Payment of warehousing charges to Camrette Logistics Inc. USA - Held that:- Applying the definition of FIS in the Treaty to the facts of the present case in the light of the various decisions referred to above, it cannot be said that the rendering of services by the non residents to the assessee made available to the assessee, such services , for its future use or utilization on a reasonably permanent basis. Hence the payments made thereon by the assessee would not fall under the ambit of fees for technical services or fees for included services as per the treaty. The provisions of section 90(2) of the Act are very clear that the assessee is entitled to take the benefit of the treaty if the same is beneficial to it. Hence the provisions of the treaty would prevail over the Act. - Decided in favour of assessee. Disallowance made u/s 40(a)(i) in respect of payments made for professional / technical services -Held that:- We find from the nature of services rendered by TRW Automobile Japan and TRW Automobile USA , though the same fall under the ambit of Fees for Technical Services as per the provisions of the Act, but the same does not fall as such as per the respective DTAAs in view of the fact that it cannot be said that the rendering of services by the non residents to the assessee made available to the assessee , such services , for its future use or utilization on a reasonably permanent basis. For the detailed reasoning given on the make available theory, we hold that the subject mentioned payments made to TRW Automobile Japan and TRW Automobile USA by the assessee would not fall under the ambit of fees for technical services or fees for included services as per the treaty. The provisions of section 90(2) of the Act are very clear that the assessee is entitled to take the benefit of the treaty if the same is beneficial to it. Hence the provisions of the treaty would prevail over the Act. Hence we hold that the assessee is not obligated to deduct tax at source and hence no disallowance u/s 40(a)(i) - Decided in favour of assessee.

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• Customs

• 2017 (4) TMI 1046
  Confiscation of goods - misdeclaration - undervaluation - actual owner of goods - claim of Revenue is that goods imported by M/s Golden Enterprises earlier were delivered to the godowns of firms controlled by Shri. Vinay Kumar and goods for import vide impugned bills of entry are also for delivery to Sh. Vinay Kumar and actually Sh. Vinay Kumar is the actual importer of these goods - Held that: - Shri P.K. Suri appeared before us on 28.02.2017, during hearing of the case to show that the Revenue is whimsically alleging that there is no such one Shri. P.k. Suri. Moreover, after passing the order of this Tribunal dated 12.07.2016, the appellant came forward to get the goods released and paid the duty and claiming ownership as the appellant has filed bills of entry - the appellant (M/s Golden Enterprises owned by Shri. P.K. Suri) is the importer of the goods in question and the goods are required be delivered to the importer in whose name bills of entry filed. Further, as there is no other claimant of the goods, the appellant is actual owner of the said impugned goods - Revenue is directed to release the goods immediately to the appellant - appeal dismissed - decided against appellant.

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• 2017 (4) TMI 1045
  Whether prior to amendment on 4.12.2014 of steel and steel products (Quality Control Order) and CBEC Circular dtd.7.11.2014, when sales contract, invoices and B/L dates are prior to such amendment the provisions of steel and steel quality control order dated 4.12.2014 would apply? Held that: - The Ministry of Steel vide its order No. SO 3065(E) dtd.4th December 2014 made applicable BIS registration to all the products described in relevant IS Standard numbers. Thus, it is only with effect from 4th December 2014, the product imported by the appellants came under restriction requiring BIS certification. It is not in dispute that the goods namely Prime Newly Produced Steel Deformed Bar covered under Customs Tariff Heading 72283019 covered under the subject two Bills of Entry both dtd. 12.12.2014 were supplied under commercial invoice dtd.18th September 2014 and the goods were shipped under Bill of Lading dtd. 12th September 2014 from Port in China. It is also not in dispute that the subject goods were shipped in terms of Contract No. GM2-LW 1407066-X dtd.7.7.2014 and in terms of Letter of Credit No.139514 FLCS0009 dtd.11.7.2014. Thus, it is also not in dispute that the goods were shipped prior to issuance of amendment order dtd.4.12.2014 by the Ministry of Steel inter alia requiring BIS registration the goods covered by ITC (HS) codes 72283029. In view of this, the goods imported by the appellants vide the subject two Bills of Entry did not require certification by BIS. The goods covered under Bills of Entry No 7681532 and 7681537 do not require certification of Bureau Indian Standards as CBEC Circular and Steel Quality Control Order dated 4.12.2014 cannot have retrospective effect. Appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 1044
  Import against advance license - export obligation - Benefit of N/N. 93/2004 dated 10.9.2004 - denial on the ground that the appellant could not produce EODC from DGFT and thus violated the condition of the notification - whether the Customs duty foregone in terms of notification at the time of import is required to be adjudicated and confirmed, in case EODC are not produced but the factum of export is otherwise established from the parallel document? - Held that: - The notification condition requires the importer to produce the evidence of discharge of export obligation to the satisfaction of the authorities. Such discharge of export obligation can be established by any evidence, which need not be EODC. If such discharge of export obligation can be established by the importer from the other documents, as has been done in the present case, the non-submission of EODC certificate can not be held to be violation of condition of notification - appeal rejected - decided against Revenue.

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• 2017 (4) TMI 1043
  100% EOU - conversion of shipping bills - rejection of shipping bills filed prior to the issuance of ‘No Dues Certificate’ - denial on the ground that ‘No Dues Certificate’ was not issued by the Revenue - whether the balance shipping bills filed prior to the issuance of ‘No Dues Certificate’ can be converted into draw back shipping bills or not? - Held that: - the appellant having completed formality for exiting out of 100% EOU status on 26.9.2007 itself, was entitled to the benefit of DTA unit, irrespective of non-issuance of the ‘No Dues Certificate’. The issuance of said certificate is only an extension of the event of the appellant having became a non-100% EOU. As soon as they have discharged their discharged certificate from EOU scheme, they became entitled to the benefit of DTA unit for claim of draw back irrespective of time taken by the Revenue for issuance of the certificate. The adjudicating authority has already extended benefit of conversion of free shipping bills into draw back shipping bills for the period subsequent to issuance of ‘No Dues Certificate’ and there is no dispute about the appellants right to do so, we hold that he would be entitled to such benefit for the previous period also - the Commissioner to examine the appellants claim vis-à-vis various shipping bills from the date of discharging their full duty liability from which date the appellants would be considered as a DTA unit - appeal allowed by way of remand.

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• 2017 (4) TMI 1042
  High seas sales - Valuation - The imports made in the name of M/s. S B International, and subsequent purchase of the goods on high sea sales basis from them - It stands recorded in the impugned order that contemporaneous import of identical or similar goods was not available - Held that: - It is Revenue’s own case that the goods in the present case are telescopic channels and drawers rather than the simple channels. If that be so, if telescopic channels are imported at the same price as is clear from another Bill of Entry, we really fail to understand as to how the other Bill of Entry are not contemporaneous and value shown in them cannot be adopted. The adjudicating authority has further rejected the evidence of contemporaneous imports by observing that whereas the goods in the present case were bought on high sea basis and imports at Kolkata were direct, the same cannot be considered to be at the same commercial level. We find no merits in the above distinction made by the adjudicating authority, as the import on high sea sale basis has no relevance for the purpose of value - as the appellant has been able to establish the contemporaneous imports the value of which is almost near to the values declared by the appellant, the enhancement is unsustainable. Valuation in USD and time gap of the import of goods, subsequent period taken for sale etc, are valid grounds to reflect upon the expenses which the importer may incur to further dispose of his goods in India. Appeal allowed - decided in favor of appellant.

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• Service Tax

• 2017 (4) TMI 1052
  Liability of tax - the Transporter in this case, though, an individual had rendered service to the appellant/ Assessee, which is a partnership firm - who is liable to pay tax, appellant or service provider? - Held that: - the appellant/ Assessee, being a registered partnership firm, which falls under clause 'g' of Rule 2(1)(d)(v) of the 1994 Rules, would be liable to pay the service tax, in respect of service provided to it, by an individual Truck Operator - the other aspect, as to whether the appellant/ Assessee would be entitled to claim the benefit of Notification dated 03.12.2004, has not been touched upon by the Tribunal - The Tribunal is, consequently, directed to re-hear the parties once again, after giving notice to the parties - appeal allowed by way of remand.

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• 2017 (4) TMI 1051
  Payment under wrong accounting code - demand on the basis that the appellant has not paid the amount collected as service tax on supervision charges under the accounting code “consulting engineering service”. The same has wrongly been paid by the appellant under the accounting code of “technical inspection and certification agency service” - Held that: - it is clear that if the full tax liability has been discharged, payment under a wrong account head will not make the appellant liable to pay the service tax again - matter remanded back to the Original Authority for detailed scrutiny of the total service tax liability of the appellant vis-à-vis the total payment of service tax during the material time - appeal allowed by way of remand.

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• 2017 (4) TMI 1050
  Classification of service - classified under management consultancy services or legal consultancy services - reverse charge mechanism - Held that: - the impugned order did not examine the vital issues before upholding the original order which itself was very brief and did not examine the factual or legal issues, as required before deciding on the refund - there are various factual errors in the impugned order, especially in para 5.3 of the same. We find that the impugned order as it stands cannot be sustained - matter has to go back to the Original Authority for a fresh consideration - appeal allowed by way of remand.

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• 2017 (4) TMI 1049
  Works Contract Service - composite services - case of appellant is that the services provided by them pertain to the period prior to 01.06.2007 and hence only from that date, works contract service was made taxable service under FA, 1994 - Held that: - the matter is no longer res integra. Composite services of the genre provided by the appellant herein prior to 1.6.2007 would fall under the ambit of 'works contract service'. The contention of the appellant that the said services would not be leviable under service tax prior to 01.06.2007 from which date works contract service became taxable is correct. This is the law that has been laid down by the Hon’ble Apex Court in the landmark judgment in the case of CCE & Cus., Kerala Vs Larsen & Toubro Ltd.[2015 (8) TMI 749 - SUPREME COURT]. - appeal allowed - decided in favor of appellant.

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• 2017 (4) TMI 1048
  CENVAT credit - courier/freight services used for delivery/transportation of the goods from port of export to foreign buyers premises - denial on the ground that the goods have been sold by the appellant on Delivered Duty Paid (DDP) basis - whether in the case of export of the goods, place of removal is port of export or not? - Held that: - CBEC circular No. 999/6/2015-Cx dt.28.2.2015 clarifies that that if the seller does not reserve its right for delivery of the goods then destination in the case is the port of export is place of removal of the goods. The same is not in the case in hand. In fact, the respondent has sold the goods on Delivered Duty Paid basis which means that the seller bear all the cost and risks involved in bringing the goods to the place of destination and has an obligation to clear the goods not only for export but also for import, to pay any duty for both export and import and to carry out all Customs formalities. The ownership right of the goods remains with the respondent. Therefore, CBEC circular is not relevant to the facts - credit on courier and transportation charges to the respondent for transportation of the goods to the foreign buyer premises allowed - appeal dismissed - decided against Revenue.

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• 2017 (4) TMI 1047
  Refund of CENVAT credit - input services used for providing output services which are exported - Held that: - there is no dispute to the fact that the respondents herein have exported the services to a recipient situated abroad and for rendering such services, they had engaged the service providers who have discharged service tax liability, of which cenvat credit has been availed - following the decision of the Tribunal in the case of AMP Capital Advisors India Pvt. Ltd. [2015 (6) TMI 122 - CESTAT MUMBAI] the impugned orders are correct - appeal rejected - decided against Revenue.

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• CST, VAT & Sales Tax

• 2017 (4) TMI 1041
  Scope of State taxation - whether the departmental catering service being a property of the Union of India through General Manager, Western Railway, it squarely falls within the exemption provision and particularly carved out by Article 285 of the Constitution of India? - Held that: - reliance placed in the decision in the case of KARYA PALAK ENGINEER, CPWD. Versus RAJASTHAN TAXATION BOARD, AJMER [2004 (8) TMI 114 - SUPREME COURT OF INDIA], where it was held that Union is not exempted from the levy of indirect tax under Article 285 of the Constitution. Whether Central Public Works Department can safely be termed as a dealer? - Held that: - again reliance was placed in the case of KARYA PALAK ENGINEER, CPWD. Versus RAJASTHAN TAXATION BOARD, AJMER, where it was held that the argument that in terms of the language of the definition of the dealer under Section 2(14) of the Rajasthan Act appellants can not be a “dealer”, will also have to be rejected. Petition dismissed - decided against petitioner and in favor of Revenue.

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• 2017 (4) TMI 1040
  Pre-deposit - demand is based on the cancellation of the registration of the dealers from whom purchases were made by the appellant with retrospective effect - in earlier round of litigation against the order of pre-deposit the matter reached before this Court and the Division Bench of this Court vide its order dated 15/2/2013 passed in Tax Appeal No.850 of 2012 waived pre-deposit and granted unconditional stay - whether demand of pre-deposit at this stage is justified? - Held that: - though opportunity was given to the appellant dealer to prove genuineness of the transactions, the appellant dealer failed to avail such an opportunity and failed to prove genuineness of the transactions - when the appellant has failed to satisfy and/or prove genuineness of the transactions, it cannot be said that the learned tribunal has committed any error in directing the appellant to deposit Rs. 13 Lacs (approximately 10% of the total demand, excluding interest and penalty), which calls for interference of this Court. No substantial question of law arise in the present appeals - appeal dismissed - decided against appellant.

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• Indian Laws

• 2017 (4) TMI 1039
  Grant of a Beer/Wine Bar FL-11 Licence under the Foreign Liquor Rules - what date should be reckoned as the date of consideration of licence - Held that:- Indubitably, the processing of the application for grant of licence commences from the date of application. The final decision on the proposal is required to be taken by the State Government. The date on which a formal, final decision is taken by the competent authority, alone, would be the relevant date. The recommendation made by the subordinate authority, even if significant for taking a formal decision by the competent authority, will be of no avail. In the present case, the learned Single Judge has assumed the date on which recommendation was made by the Excise Commissioner i.e. 28th March, 2012, as the relevant date. That assumption is untenable. For, that was not the date on which the final decision was taken by the competent authority. Whereas, before a final decision could be taken by the competent authority on the application submitted by the Respondent, the Foreign Liquor Rules were amended on 18th April, 2012. The application submitted by the Respondent for grant of licence, unquestionably, must be treated as pending and under consideration on this date. A priori, no fault can be found with the State Authority for calling upon the Excise Commissioner to examine the proposal and submit his fresh recommendation keeping in mind the amended provisions of the Foreign Liquor Rules. In other words, the application for grant of FL-11 licence submitted by the Respondent was required to be considered by the competent authority keeping in mind the amended provisions which came into force w.e.f. 18th April, 2012. That is precisely what has been done by the Excise Commissioner, as can be discerned from his speaking order dated 5th June, 2012, for invoking the restriction of distance of 200 metres from the objectionable site. Since the learned Single Judge of the High Court proceeded to decide the writ petition filed by the Respondent merely by referring to the pronouncement of the Division Bench of the same High Court in the case of Kallada Hotels and Resorts (2012 (2) TMI 611 - KERALA HIGH COURT) coupled with the fact that the Respondent had asked for a wider relief to declare the amendment of 18th April, 2012 as void to the extent it has introduced the restriction of distance of 200 meters from objectionable institutions for getting FL-11 licence, we deem it appropriate to relegate the parties before the learned Single Judge to decide the writ petition afresh, keeping in mind the settled legal position.

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• 2017 (4) TMI 1038
  Complaints filed under Section 138 of the Negotiable Instruments Act for the dishonour of the cheques - whether the complaints should be quashed? - whether merely because there is an arbitration clause will take away the right of the complainant to move for criminal prosecution? - Held that:- As held in S. W. Palanitkar vs. State of Bihar [2001 (10) TMI 1150 - SUPREME COURT] merely because there is an arbitration clause in a commercial transaction agreement, the same would not operate as a bar for instituting criminal prosecution, if such breach even prima facie constituted a criminal offence. An arbitration clause in a agreement in respect of business transaction is not a bar for filing a criminal complaint under Section 138 of the Negotiable Instruments Act for dishonour of the cheque. It is also settled law that merely because there is a civil remedy available, the same is not a ground to quash the criminal proceedings, if the allegations, prima facie, made out a criminal offence as well.In view of the above discussion, the contention as regards the arbitration clause should fail and is hereby rejected. Only because the possession of the premises came to be handed over to the complainant by terminating the lease agreement at an early stage, will not absolve the accused from their liability incurred under the agreement. The cheques, at the relevant point of time, could be said to have been issued in favour of the complainant in discharge of a legally enforceable debt. Indisputably, on the date when the cheques were issued, there was a debt / liability in presenti in terms of the lease agreement. However, I leave it upon the Trial Court to look into this issue after appreciating the evidence that the parties may lead in the course of the trial. Ordinarily, a defence of an accused, although appears to be plausible, should not be taken into consideration for exercise of jurisdiction under Section 482 of the Cr.P.C. Section 142(c) invests certain Magistrates with the power of trying offences punishable under Section 138. When power is given to try an offence, it includes the power to convict or acquit and, in case of conviction, to exercise the sentencing discretion also to award an appropriate sentence, allowed by law. In order to convict an accused, the court must find him guilty. No case is made out for the quashing of the two complaints under Section 138 of the Negotiable Instruments Act.

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