Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 5, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
DGFT
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F. No. 17/3/2018-EP (Agri.IV) - dated
27-2-2019
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FTP
Central Government approved Scheme 'Transport and Marketing Assistance' (TMA) for Specified Agriculture Products
GST - States
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ORDER No. 2 - dated
18-3-2019
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Punjab SGST
Punjab Goods and Services Tax (Second Removal of Difficulties) Order, 2019
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S.O.18/P.A.5/2017/S.9/Amd./2019 - dated
28-2-2019
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Punjab SGST
Seeks to amend Notification No. S.O.16/P.A.5/2017/S.9/2017, dated the 30th June, 2017
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S.O. 24/P.A.5/2017/S.11/Amd./2019 - dated
28-2-2019
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Punjab SGST
Inser the Explanation in the Notification No. S.O.17/P.A.5/2017/Ss.9, 11, 15 and 16/2017, dated the 30th June, 2017
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S.O. 23/P.A.5/2017/S.9/Amd./2019 - dated
28-2-2019
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Punjab SGST
Seeks to amend Notification No. S.O. 35/P.A.5/2017/S.9/ 2017, dated the 30th June, 2017
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S.O. 22/P.A.5/2017/S.11/Amd./2019 - dated
28-2-2019
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Punjab SGST
Seeks to amend Notification No. S.O.37/P.A.5/2017/S.11/2017, dated the 30th June, 2017
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S.O. 21/P.A.5/2017/Ss. 9, 11, 15 and 16/Amd./2019 - dated
28-2-2019
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Punjab SGST
Amendment in Notification No. S.O.17/P.A.5/2017/Ss.9, 11, 15 and 16/2017, dated the 30th June, 2017
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S.O. 20/P.A.5/2017/S.11/2019 - dated
28-2-2019
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Punjab SGST
Exemption on supply of gold by nominated agency for export of jewellery
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S.O. 19/P.A.5/2017/S.11/Amd./2019 - dated
28-2-2019
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Punjab SGST
Amendment in Notification No. S.O.18/P.A.5/2017/S.11/ 2017, dated the 30th June, 2017
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G.S.R.8/P.A.5/2017/S.164/Amd.(26)/2019 - dated
12-2-2019
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Punjab SGST
Punjab Goods and Services Tax (Amendment) Rules, 2019.
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S.O.10/P.A.5/2017/Ss.1 and 51/Amd./2019 - dated
8-2-2019
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Punjab SGST
Amendment in Notification No. S.O.144/P.A.5/ 2017/Ss.1 and 51/2018, dated the 03rd September, 2018
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Order No. 1/2019 - dated
31-1-2019
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Punjab SGST
Punjab Goods and Services Tax (Removal of Difficulties) Order, 2019
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S.O.5/P.A.5/2017/S.96/Amd./2019 - dated
28-1-2019
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Punjab SGST
Seeks to amend Notification No. S.O. 107/P.A.5/ 2017/S.96/2017, dated 07th December, 2017
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Revision of FORM GST TRAN-1 - The object and purpose of the transitional arrangements made u/s 140 of the Act requires to be achieved to its logical end - petitioner directed to approach the Nodal Officer in terms of circular dated 03.04.2018.
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Classification of goods - Plastic Seedling tray - the tray itself is not a part of any machine or used with any machine or electronically driven nor is it an accessory of any agricultural machinery - To be classifiable under CTH 39269099 as articles of plastics not elsewhere specified. - Liable to GST
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Input tax credit - GST paid on cars provided to their different customers on lease rent - Assessee is eligible for availment of input tax credit (ITC) on motor vehicle for the Tax paid by it while acquiring the said vehicles.
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Clinical Establishment or not - Healthcare company - activity of diagnosis pre and post counselling therapy and prevention of diseases by providing necessary sophisticated tests - Applicant has failed to prove their legal status as Clinical Establishment.
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Services provided by club or association - supply of services by an unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration shall be treated as supply of services - liable to GST.
Income Tax
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Levy of capital gains tax on sale of agricultural land - just because, the assessee has not been able to generate desired agricultural income from the said lands would not change the character of agricultural land to a non-agricultural land.
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Revision u/s 263 by CIT - different interpretation of a decision of court relating to assessee - CIT has not brought on record any cogent & conclusive material which would prove or show that the course followed by the AO was unsustainable in law - AO followed one of the course permissible in law - revision order quashed
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Condonation of delay of 280 days - not filed appeal against penalty being smallness of the amount - revenue has started prosecution of the Director by issuing notice u/s 276/277 - The assessee acted on the advice his tax advisor keeping in view the cost of litigation, which in our view is a reasonable cause
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Revision u/s 263 by CIT - Pr. CIT noted that proposal was received u/s 263 from the Assessing Officer for review of the assessment - there is no bar u/s 263, to invoke jurisdiction if the Pr. CIT was satisfied regarding conditions of Section 263
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Date of acquisition for computation of LTCG - if allotment is not a conditional allotment and do not envisages cancellation of the allotted property, in any manner then the assessee has acquired right in a specific property on date of allotment - Subsequently, execution of agreement of sale was nothing but mere improvement in assessee’s existing rights to acquire a specific property - Gain is long term capital gain
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Reassessment u/s 147 - No challenge of reassessment in first round - not raised the question to challenge reopening in clear terms before the authorities below is fatal - cannot be permitted to raise subsequently as an after-thought
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Penalty u/s 271D - The mere proof that the loans were repaid through cheques and there was no attempt to induct black money into the business, itself cannot be considered as a reasonable cause or as a compelling circumstance under which the mandate of Section 269SS can be violated -penalty upheld
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Validity of proceedings u/s 148 - huge amount of discrepancy and mistakes in the ‘reasons recorded’, divorced from the facts of the case, cannot clothe the AO with the jurisdiction to reopen the assessment u/s 147 - no reasons to belief based on borrowed satisfaction
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Penalty u/s 271(1)(c) - acceptance /rejection of explanation by Tribunal is a fact finding exercise hence no substantial question of law arises unless it is proved that finding of tribunal is perverse.
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Disallowance u/s 40A(2) - Educational qualifications and work experience of the directors were ignored as irrelevant because of the low salary/remuneration benevolently and magnanimously accepted by them in the earlier years - Professional and fair conduct in earlier years should not frowned to be treated as a ground to disallow fair and genuine payment u/s 40A(2)(a)
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Disallowance u/s 40(a)(ia) - failure to deduct TDS u/s 195 - in view of Protocol between India and Spain, the restrictive meaning of ‘Fee for Technical Services’ appearing in Article 13(4) (c ) Indo-UK DTAA must be read as forming part of Indo-Spain DTAA, hence fabric testing would not constitute fee for technical services and consequently, no TDS required u/s 195
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Penalty u/s 271(1)(c) - excess claim of interest expenditure on loan for property - voluntarily admission of the mistake suo motto prior to being confronted by AO is sufficient to delete penalty even if failure to file revise return
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Revenue expenditure vs WIP - business of Real Estate - expenses not related to the work in progress and debited to the P & L account being administrative expenses and selling expenses, marketing expenses are allowable as revenue expenditure
Customs
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Scheme for Rebate of State and Central Taxes and Levies on export of garments and made-ups (RoSCTL)
Indian Laws
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Rejection of the plaint on the ground that the suit was barred u/s 4 of the Benami Transaction (Prohibition) Act, 1988 - Prohibition of the right to recover property held benami - The matter required fuller and final consideration after the evidence was led by the parties.
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Consumer protection - validity of one-sided agreement between the builder and buyer - right of buyer of flat in case of default committed by the builder / developer - The Appellant–Builder could not seek to bind the Respondent with such one-sided contractual terms.
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Constitutional validity of Sections 35AA and 35AB of the Banking Regulation Act, 1949 - Reserve Bank of India (RBI) Circular issued on 12.02.2018, by which the RBI promulgated a revised framework for resolution of stressed assets - circular quashed.
IBC
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Corporate insolvency resolution process - validity of suit or recovery of dues in the trial court - attempt on the part of the petitioner to escape liability of paying dues - overriding effect of provision of IBC - Order of trial court sustained.
Service Tax
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Additional liability of service tax - scope of the contract - Unless the said additional service tax liability is ex-facie admitted in the contract, this court cannot either vary the terms of the contract nor direct the respondent-railway to reimburse the service tax liability to the petitioner-contractor.
Case Laws:
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GST
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2019 (4) TMI 307
Classification of goods - Plastic Seedling tray - part and accessories of agriculture machinery or not - rate of GST - whether classified under Chapter 8201 or otherwise? - SI.No. 137 of Notification No 2/2017-Central Tax dt 28.06.2017 - challenge to AAR decision - Held that:- Base metals and articles of base metals only are covered under Section XV of the Customs Tariff Act. Those articles which are made of base metals or on support of base metal are only covered under Chapter 82 of the customs Tariff Act - As apparent from the submissions of the Appeal itself the article under consideration is made only of plastics/ polypropylene. In the case at hand, the product, Agricultural Seedling Tray , is made up of Plastics and not of any of the base metals specified in the section notes as stated by the Appellant themselves - only those hand tools which are of base metal and has a working edge, used as a hand tool in agriculture merits classification under this residual entry. The product at hand is neither made of base metal nor has a working edge as required of a tool under this chapter and therefore the product is not to be classified under Chapter 8201. Classification under a Heading is to be governed only by the relevant Tariff-entries, Heading-description, etc. Heading 8201, as discussed above, do not envisage that all items used for agriculture would be covered therein but specifically as given in the General Explanatory Notes to Chapter 82, mentioned above, are to be classified based on the constituent material it is made of - The lower authority has considered the above and accordingly pronounced the Ruling. There is no reason to interfere with the same. AAR decision upheld.
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2019 (4) TMI 306
Classification of goods - Plastic Seedling tray - part of agriculture machinery or not - Classified under Chapter 8201 or otherwise? - applicability of N/N. 2/2017-Central Tax dt 28.06.2017 as amended - input tax credit of tax paid or deemed to have been paid - liability of GST - Held that:- The product in question is Seedling Trays made of fully of plastic i.e. polypropylene and hence it cannot be classified under chapter 82 or anywhere under Section XV and accordingly it cannot be classified under 8201 as Hand tools, such as spades, shovels, mattocks, picks, hoes, forks and rakes; axes, bill hooks and similar hewing tools; secateurs and pruners of any kind; scythes, sickles, hay knives, hedge shears, timber wedges and other tools of a kind used in agriculture, horticulture or forestry - the tray itself is not a part of any machine or used with any machine or electronically driven nor is it an accessory of any agricultural machinery. Rice planting machinery do not need these seedling trays to function and hence cannot be classified as parts or accessories of agricultural machinery. The subject goods are rightly classifiable under CTH 39269099 as articles of plastics not elsewhere specified. Applicability of the exemption under Notification No. 2/2017 - Held that:- The exemption stipulated therein applies to goods classifiable under CTH 8201 only. The product in hand is not classified under CTH 8201 and therefore the exemption is not available to the product in hand. The product in hand being classified under CTH 3926, is covered by entry at SL No. 111 of Schedule III of Notification No 01/2017-C.T. (Rate) dated 28.06.2017 as amended and SL No 111 of Schedule III of G.O. (Ms) No. 62 dated 29.06.2017 no. II (2)/CTR/532(d-4) / 2017, which covers Other articles of plastics and articles of other materials of headings 3901 to 3914 [other than bangles of plastic, plastic beads and feeding bottles] and is taxable @ 9% CGST and 9% SGST. Admissibility of Input Tax Credit of tax paid - Held that:- The applicant has not put forth any specifics requiring a ruling. However, having held that the supply of 'Agricultural Seedling Trays', are taxable the input tax credit is available subject to fulfilment of all the conditions of Section 16 and Section 17 of CGST /TNGST Act, 2017 and the relevant rules governing the admissibility of credit of tax paid on Inputs.
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2019 (4) TMI 305
Request for withdrawal of Advance Ruling application - Input tax credit - credit in respect of an input (invoice) at any time within the limitation prescribed under Section 16(4) - Held that:- The application filed by the Applicant for advance ruling is dismissed as withdrawn.
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2019 (4) TMI 304
Input tax credit - GST paid on cars provided to their different customers on lease rent - Section 17(5) of Central Goods and Service Tax Act, 2017 - Held that:- In respect of motor vehicles, except in certain circumstances, the Input Tax Credit is not available. These exceptional situations are enumerated in the Sub Section 5(a) after the amendment and sub section 5(a)(i) and (ii) before the amendment - In the present case, the Applicant is providing cars on Lease Rent to their customers for carrying passengers and hence not covered by the exception as provided in clause (B) and (C) of sub section 5(a) after the amendment and in clause (B) and (C) of sub section5(a)(i) before the amendment as well as in Sub section 5 (a) (ii) of Section 17 before the amendment. The sub section 5 (a) (i) reads as for making following taxable supplies namely and sub section 5(a)(A) after the amendment /5(a)(i) (A) before the amendment, reads as further supply of such vehicles or conveyances . The term 'Supply' is wide in its import and includes all forms of supply of goods and / or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to the made for a consideration by a person in the course or furtherance of business. Similarly a taxable supply means a supply of goods and / or services which is chargeable to goods and service Tax under the GST Act. The activities carried by the Applicant regarding supply of tax paid motor vehicles on monthly lease rent plus Goods Service Tax as applicable to their customer under a proper agreement properly satisfies the conditions laid down under Section 17(5) (a) (i) (A) before the amendment and under subsection 5(a)(A) after the amendment to make it eligible for availment of input tax credit on motor vehicle for the Tax paid by it while acquiring the said vehicles. ITC allowed.
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2019 (4) TMI 303
Clinical Establishment or not - Healthcare company - activity of diagnosis pre and post counselling therapy and prevention of diseases by providing necessary sophisticated tests - Sr.No.74 of N/N. 12/2017 - Central Tax (Rate) dated 28.06.2017 - Held that:- The applicant has categorically mentioned that they have collaboration with companies, which in turn are accredited by NABL and DSIR. The Applicant is has neither come forward with the names of such companies with which the Applicant claims to have collaboration, nor have the Applicant produced any document evidencing their own status of accreditation by NABL, which obviously is the sole accreditation body for testing and calibration laboratories. In absence of anything brought on record by the Applicant, we are compelled to believe that the Applicant is making a vain attempt to circumvent the essential condition for qualification of Clinical Establishment. Needless to say that irrespective of the work being undertaken by the Applicant, there is no evidence before us even to indicate that the Applicant is a Clinical Establishment. Mere involvement in sophisticated testing and providing consultancy would not be a sufficient criterion, though necessary, for qualifying as a Clinical Establishment per se. The exemption for which the instant Application has been filed is Service Specific as well as Service Provider Specific. Thus to qualify for the said exemption an establishment has to satisfy dual conditions of providing Healthcare Service as well as being a Clinical Establishment. Thus while the service provided by the Applicant may be Healthcare Service, they do not qualify to be a Clinical Establishment The Applicant has failed to prove their legal status as Clinical Establishment and they are merely working as ancillary or sub-contractors to other accredited companies, and accordingly the Applicant are not entitled to avail exemption under Notification no. 12/2017-CT(Rate) and corresponding notification issued under MPGST Act.
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2019 (4) TMI 302
Revision of FORM GST TRAN-1 - Section 172 of the Act, Rule 120A of the CG ST Rules 2017 - disentitlement of the credit to the petitioner defeating the object of Transitional arrangements - It is the contention of the petitioner is facing difficulty in implementing Section 140 of the Act, 2017, it is necessary to invoke Section 172 to enable the petitioner to avail the transitional arrangements for input tax credit and the same ought to have been considered by the respondent Authorities. Held that:- Rule 117 of the Rules provides for submitting a declaration electronically in FORM GST TRAN-1 within 90 days from the appointed day on the common portal specified therein, separately, the amount of input tax credit to which the registered person is entitled to take input tax credit under Section 140. The Commissioner is empowered to extend the period of 90 days by a further period not exceeding 90 days for submitting the declaration electronically in FORM GST TRAN-1 in terms of Rule 117[1A]. A reading of this Rule suggests that it relates to filing of the declaration electronically in FORM GST TRAN-1 for the first time. Subsequent to amendment to Rule 117 by inserting sub-rule 1A, the time period specified for filing FORM GST TRAN-1 has been extended for further period not beyond 31.03.2019, in respect of registered person who could not submit the said declaration by the due date on account of technical difficulties on the common portal and in respect of whom, the Council has made recommendations. Section 172 of the Act contemplates about the removal of difficulties wherein correction/rectification/revision of the FORM GST TRAN-1 can also be addressed on general or special basis, taking into account the ground realities qua effective implementation of Section 140 of the Act. Even on the technical glitches arising out of the petitioner/assesse s inadvertence requires to be addressed by the Nodal Officers appointed in terms of Circular instructions dated 03.04.2018. The object and purpose of the transitional arrangements made under Section 140 of the Act requires to be achieved to its logical end. Hence, keeping open all the rights and contentions of the parties, it would be appropriate for this Court to direct the petitioner to approach the Nodal Officer appointed for the State of Karnataka in terms of circular dated 03.04.2018. The writ petition is disposed of with a direction to the petitioner to approach the jurisdictional Nodal Officer and the Nodal Officer is directed to consider the grievances of the petitioner in accordance with law.
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2019 (4) TMI 301
Revision of Form GST Tran-1 - transitional input tax credit - removal of difficulties in correction/rectification/revision of the FORM GST TRAN-1 - Held that:- This Court is of the considered opinion that the petitioner is entitled to revise or rectify the errors in the FORM GST TRAN-1 in terms of Rule 120A wherein the Commissioner is empowered to extend the time period specified in Rule 117. As the petitioner is intending to revise the FORM GST TRAN-1 for the first time, the same squarely comes under Rule 120A. Hence, the respondent authorities ought to have considered the request/representation of the petitioner to permit or allow it to revise the declaration in FORM GST TRAN-1. In view of the Nodal Officers being appointed to address the grievances of the tax payers due to technical glitches, it would be appropriate for this Court to direct the petitioner to approach the Nodal Officer appointed for the State of Karnataka in terms of the circular dated 03.04.2018. It is the specific case of the petitioner that the error could not be rectified only due to the technical glitches. If so, It is incumbent on the Nodal Officer to address the grievances of the petitioner. The writ petition is disposed of with a direction to the petitioner to approach the jurisdictional Nodal Officer and the Nodal Officer is directed to consider the grievances of the petitioner in accordance with law.
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2019 (4) TMI 300
Services provided by club or association - supply of goods or supply of services? - Charitable activities or not - Association of Inner Wheel Club of India, not registered under the GST Act, sated to be affiliated to International Inner Wheel and the administrative body for all Inner Wheel Club spread in 27 Inner Wheel Districts all over India - challenge to AAR decision - Held that:- The Appellant did not categorically state the details of charitable work undertaken by them and whether those activity/activities comes under the charitable activities - the main activity of the club is charitable work as claimed by the Appellant has no firm base to stand on. Inner Wheel Club membership can only be availed against payment of annual membership fees, renewable annually. Only the members are granted various facilities and/or benefits, enabling them to attend conventions/meetings for the furtherance of the objectives of the Organisation. Such facilities/benefits are not available to the non-members of the Organisation. Schedule II of GST Act enumerates activities which are to be treated as supply of goods or as supply of services. It states in para 7 that supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration shall be treated as supply of goods - A conjoint reading of various provisions of the law implies that supply of services by an unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration shall be treated as supply of services. There is no infirmity in the ruling pronounced by the West Bengal Authority for Advance Ruling - AAR decision upheld.
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Income Tax
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2019 (4) TMI 308
Demand raised u/s 201(1) and interest u/s 201(1A) - TDS u/s 195 - payments towards use of software - case of Revenue was that the payments made for use of software was taxable as royalty under Explanation 4 to section 9(1)(vi) - HELD THAT:- We hold that the payments made by assessee for use of software were not taxable as royalty and hence, the assessee has not defaulted in not deducting tax at source out of such payments. Consequently, there is no merit in raising the demand under section 201(1) of the Act and charging interest under section 201(1A) of the Act. Payments towards subscription charges / fees for use or access to database or portal - treatment as ‘royalty’ on the same simile that the definition of ‘royalty’ under DTAA had not undergone any change - HELD THAT:- There is no merit in holding the aforesaid payments as liable to deduct tax under section 201(1) of the Act and consequently, the assessee has not defaulted in not deducting the tax out of such payments. Hence, the demand created under section 201(1) of the Act and interest charged under section 201(1A) is cancelled - the payments made for purchase of hardware cannot be held to be royalty. The said amount was held to be liable to tax as royalty by the authorities below on the ground that software was held to be royalty. No merit in the orders of authorities below in this regard. CIT(A) in the later paras have directed the Assessing Officer to verify the stand of purchase of hardware raised by the assessee. However, since we have already decided the issue in turn, relying on the order of Tribunal in John Deere India Pvt. Ltd. Vs DDIT [2019 (3) TMI 458 - ITAT PUNE] we find no merit in the stand of authorities below in this regard and the same is dismissed. Monetary limit - Grossing up under section 195A - HELD THAT:- The tax effect involved in the appeal of Revenue is below the monetary limit prescribed by the CBDT vide Circular No.3/2018, dated 11.07.2018. In view of the said Circular prescribing the limits for filing the appeals before the Tribunal by the Revenue and since the tax effect in the present appeal filed by the Revenue is below the said limit, then the appeal of Revenue is not maintainable and the same is dismissed.
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2019 (4) TMI 299
Reopening of assessment u/s 147 - original assessment u/s 143(3) - no allegation of absence of full and true disclosure by the Assessee of all material facts necessary for the assessment - notice based on addition in subsequent year - addition deleted in appeal - no information in possession of the AO specific to AY 1986-87 which could have formed the basis of the formation of his opinion that income had escaped assessment. - Held That:- It is not possible for this Court at a distance in time of three decades after the event, to be unmindful of the fact that for AY 1987-88, ultimately, there were no additions made to the income of the Assessee. If that was the only basis for reopening the assessment of AY 1986-87 it would be an entirely futile exercise for this Court to allow the reopening of the assessment for 1986-87 to remain. this Court is satisfied that in the present case the jurisdictional requirement of Section 147(b) of the Act as stood at the relevant time is not fulfilled. There was no information available to the AO specific to AY 1986-87 on the basis of which he could have formed a belief that income has escaped assessment - question answered in favour of the Assessee
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2019 (4) TMI 298
State liability to deduct TDS u/s 192 - making payment of salary from the Grant-in-Aid, to the Teachers in the respondents Societies/Schools, who may be Nuns or Sisters or Missionaries working as Teachers in such Institutions - scope of Canon Law - HELD THAT:- The controversy in the present appeals is squarely covered by a recent decision in Union of India Vs. The Society of Mary Immaculate (Tamil Nadu) and others [2019 (3) TMI 1253 - MADRAS HIGH COURT] wherein this Court held that the State is liable to deduct income tax at source under Section 192 of the Income Tax Act, 1961, while making payment of salary from the Grant-in-Aid, to the Teachers in the respondents Societies/Schools, who may be Nuns or Sisters or Missionaries working as Teachers in such Institutions. salary in question was not directly received by the Congregation or Religion by overriding diversion of title, but were paid by the State to the Teachers who are Nuns or Missionaries and thereafter, it might have been applied or made over to the Church or Diocese or the Institution run by them. Merely by illustrative view of the entry shown as deposit of salary in common bank account or such Nuns or Missionaries not signing the receipt of salary in the Registers maintained by the Institution itself is not sufficient to prove such facts for all such persons belonging to the said class and the same cannot be taken as a proof of diversion of their salary income by overriding title in favour of the Institution or the Religion. The salary is paid under the contract of employment with which Educational Institution or the Church or Diocese is not even a privy to such contract of employment qua the State Government. Neither the Income Tax Department nor the State Government have anything to do with the religiious character of the Institution, may be Teachers or Nuns or Missionaries and therefore, they cannot take a stand for not making the tax deduction at source in view of the Canon Law. - Decided in favour of revenue
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2019 (4) TMI 297
Prosecution u/s 276 - willful concealment of income and evasion of tax - the petitioner had challenged the aforesaid sanction order dated 21.3.2006 which was quashed by order dated 21.3.2006 with a direction that competent authority is not precluded to re-examine the matter - HELD That:- Once the sanction order has been quashed by this Court in a writ petition filed by the petitioner, the criminal compliant filed against him on the basis of the sanction order dated 21.3.2006 does not survive. It is also important to note here that the Central Board of Direct Taxes (CBDT) issued a circular dated 7.2.1991 and it has directed that no prosecution is to be initiated under Section 276-C(1) of the Ac if the income sought to be evaded is less than ₹ 25,000/-. In the present case, on remand from the Income Tax Appellate Tribunal, the penalty has been imposed only of ₹ 4,000/-, which is much below of ₹ 25,000/- - entire criminal proceedings against the petitioner are quashed
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2019 (4) TMI 296
Penalty u/s 271(1)(c) - assessee agreed to the addition of cash credits - assessee offered for taxation genuine loans to avoid protracted litigation - money in question remitted by the son and daughter of the said senior partner Mr.Jaganathan - tribunal reduced penalty from 200% to 100% - substantial question of law - HELD THAT:- The matter of explanation furnished by the assessee firm, being accepted by the learned Tribunal or not, is a fact finding exercise and unless the findings of the Tribunal can be held to be perverse, in our opinion, no substantial question of law arises. We do not find any such perversity in the order passed by the learned Tribunal. Tribunal has already reduced the penalty to the minimum level of 100% of tax on such concealed income. It cannot be said that merely because the assessee has agreed to a particular addition to be made in his declared income, the penalty under Section 271(1)(c) of the Act cannot be imposed nor there is any merit in the proposition that since the penalty was not imposed for the cash entry in the name of daughter for which also the assessee agreed for the said addition, no such penalty could be imposed for the credit in the name of the son Mr.Anandha Kumar Jagannathan and in the name of the third party Mr.Rueban Robert Ponnia. No substantial question of law arising in the present appeal filed by the assessee.
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2019 (4) TMI 295
Disallowance u/s 14A - ITAT replacing the words “such expenditure” by “such investment” in relation to the disallowance - HELD THAT:- The change was brought about “on appreciation of the facts” and it was accordingly recorded that the mistake pointed out by the assessee was correct, in turn leading to the correction as aforesaid. This is purely a question of fact and does not involve any question of law, much less any 'substantial question of law'. Since no other question/ground is raised, we are of the view that there is no substantial question of law as envisaged under Section 260A of the I.T. Act to call for interference of this Court.
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2019 (4) TMI 294
Diversion of income - disallowance of expenses for transportation of the employees, paid to the Employees' Welfare Trust - Tribunal held that there was force in the version of the assessee that it was only towards the transportation cost of the employees as arranged by the Welfare Trust - HELD THAT:- Section 40A(9) permits deduction only in respect of contributions like provident fund, approved superannuation fund and approved gratuity fund [as envisaged under the relevant clauses of Section 36]. The 'Employees Welfare Trust' is contended as not an approved one and it does not come within the purview of the statutory prescriptions. In fact, in respect of the transportation of the employees, the Tribunal verified the facts and figures and held that the contribution effected was to an 'approved fund' and further that, the Transportation of the employees would otherwise have had to be undertaken by the assessee company, in terms of the service conditions. This finding also is a question of fact and no substantial question of law is involved. Disallowance of interest and other expenses under section 14A to 0.5% of the total interest and expenditure - HELD THAT:- Dis-allowance of the interest worked out by the Commissioner of Income Tax [Appeals] on the basis of the loan taken and for the period in which it was held. It was after referring to the facts and figures, that a definite finding was rendered by the Tribunal, interdicting disallowance of interest on other expenses to an extent of 0.5% of the total interest and the expenditure. The said aspect is more a question of fact, than any question of law and as such, even if the additional ground and the question of law mooted by the Department are permitted to be raised by allowing the I.A., it will not tilt the balance in any manner projecting any substantial question of law. Loss sustained on IRFC bonds - capital loss OR business loss - version of the Department, with reference to the loss sustained on IRFC bonds is that it is a 'capital loss' and not a business loss - HELD THAT:- The verdict passed by the Tribunal, in favour of the assessee under this head is perfectly within the four walls of law and does not warrant any interference, as no substantial question of law is involved. See APOLLO TYRES LTD. VERSUS COMMISSIONER OF INCOME TAX [2002 (5) TMI 5 - SUPREME COURT]. Addition u/s 43A - Adjustment of actual cost of capital asset only on settlement of the liability, that is, on actual payment - entitled to claim the deduction due to foreign exchange fluctuation - HELD THAT:- he said question is in relation to Section 43A of the I.T. Act. The Court has rendered a finding placing reliance on the verdict passed in APOLLO TYRES LIMITED VERSUS THE ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 11, NEW DELHI AND THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 1 (1) , ERNAKULAM. [2019 (4) TMI 82 - KERALA HIGH COURT] and connected cases, which stands answered against the Department and in favour of the assessee. Scope of remand proceedings - omission of first proviso to clause (ii) of Sub section (1) to Section 32 with effect from 1/4/1996 by finance Act which provided for 100 % depreciation - HELD THAT:- The first proviso to Clause (ii) of sub section (1) of Section 32 [which provided for 100% depreciation] was omitted w.e.f. 01.04.1996 and as such, the remand is bad. This Court is of the view that this is a matter which can be considered by the assessing officer even on remand and there is no estoppal against law. As such it is not a matter for interference of this Court.
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2019 (4) TMI 293
Penalty u/s 271D - violation of Section 269SS - accepting the loans or deposits in cash - persons from whom the loans were availed were having bank accounts - loans were repaid through cheques drawn in the name of the lenders - non-utilization of the money by the assessee for any of his business purposes - HELD THAT:- reasonable cause contemplated under Section 273B should be a reasonable cause as to why or what was the reason which compelled the assessee to accept the loans or deposits in cash. In other words, it should be proved that there existed reasonable and acceptable cause for not accepting the loans or deposits through crossed cheques or demand drafts. When analysed based on the dictum as mentioned above, none of the facts contended or proved by the appellant will constitute a valid explanation or reasonable cause coming within the purview of Section 273B. The mere proof that the loans were repaid through cheques drawn in the name of the lenders or that there was no attempt to induct black money into the business, itself cannot be considered as a reasonable cause or as a compelling circumstance under which the mandate of Section 269SS can be violated. It cannot be termed as a reasonable cause contemplated under Section 273B to condone the violation. Hence, we are of the opinion that, the appellant has not succeeded in bringing the case within the ambit of Section 273B, warranting exoneration from imposition of penalty under Section 271D. - Decided in favour of revenue
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2019 (4) TMI 292
Reassessment u/s 147 - No challenge of reassessment in first round - deduction u/s 80 HHC on the interest earned on the bank deposits - HELD THAT:- Assessee having not raised the said question in clear terms before the authorities below cannot be permitted to raise the said question now as an after-thought. The said contention of the Assessee is liable to be rejected and the same is accordingly rejected. Thus, the question framed for consideration on 27.10.2009 is answered as against the Assessee and in favour of the Revenue. Merits of claim u/s. 80HHC since interest on Bank Deposits earned in the ordinary course of business, is taxable as Business income and is excluded from Section 56 of the Act, in "Income from Other Sources" we are of the opinion that the Tribunal should consider the issue again in view of the later decisions of this Court viz., M/s.Ashok Leyland Ltd Vs. The Deputy Commissioner of Income Tax [2018 (4) TMI 715 - MADRAS HIGH COURT]. Therefore, we remit the matter back to the learned Tribunal to decide the said issue afresh on merits in view of the latest decisions of this Court .
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2019 (4) TMI 291
Reopening of assessment u/s 147 - breach of section 11(3)(d) - eligibility of reason to believe - misuse or abuse of funds by the trustees of the trust - violation of section 11(2) read with section 11(3)(d) of the Act as payment was made to CIMS Hospital Pvt. Ltd. for Linac machine - HELD THAT:- There is a general allegation of breach of sections 11 to 13, without stating as to why such violation is alleged. Thus, AO seeks to disallow for violation of section 11(3)(d) and section 11(2). As discussed hereinabove, considering the reasons recorded by the Assessing Officer for reopening the assessment, there was no material with him on the basis of which he could have formed the belief that on account of donation of ₹ 3,00,00,000/- to CIMS Hospital Pvt. Ltd., the petitioner had violated the provisions of section 11(3)(d) of the Act. Insofar as violation of section 11(2) is concerned, such violation has been alleged only as a consequence of violation of the provisions of section 11(3)(d) of the Act. Therefore, on the reasons recorded, the Assessing Officer could not have formed the belief that income chargeable to tax has escaped assessment. from the reasons recorded it is evident that the Assessing Officer has consciously decided that there was violation of section 11(3)(d) of the Act, and since on the reasons recorded, the Assessing Officer could not have formed the belief that income chargeable to tax has escaped assessment, the impugned notice under section 148 of the Act lacks validity and cannot be sustained. - Decided in favour of assessee
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2019 (4) TMI 290
Disallowance u/s 40A(2) - payment to related persons - salary and advisory fee paid to the director as excessive and unreasonable expenditure - HELD THAT:- Tribunal has failed to apply test of prudent and reasonable business person. The disallowance was solely predicated on percentage of increase in the payments made to the directors and not whether payments made were reasonable, fair and commensurate with the market value of the work and services rendered or benefit accrued. Further several aspects and findings recorded and highlighted by the Commissioner of Income Tax (Appeals) relevant and important for deciding the issue and question have not been noticed and ignored. Tribunal should not have discarded independent evidence in the form of TDS certificates showing the salary/remuneration drawn by Dr. U.V. Somayajulu and Tilak Mukherji when they were working with a third party. These were arms-length payments market driven and for market value. This was the best evidence. Educational qualifications and work experience of the directors were ignored as irrelevant because of the low salary/remuneration benevolently and magnanimously accepted by them in the earlier years. Professional and fair conduct in earlier years should have been appreciated and not frowned to be treated as a ground to disallow fair and genuine payment under Section 40A(2)(a) read with Clause (b) of the Act. A provision which requires a just and fair approach by the assessee must be interpreted and applied in a just and fair manner by the authorities. CIT(Appeals) had also pointed out that these three directors had earned income which was taxable at the maximum rate of tax. Therefore, this was not a case where an attempt was made to evade taxes. The salary/remuneration paid was taxed in the hands of the recipients at the highest slab. Expenditure incurred was income earned. Former was allowed as a deduction and the latter was taxed as taxable income. This is an added factor which should have been considered, but was ignored and not treated as relevant. - Decided in favour of assessee.
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2019 (4) TMI 289
TP adjustment - comparable selection - comparable analysis - Related party transactions - segmental details availability - Functions Assets and Risk analysis (FAR) - HELD THAT:- Sonata Software Limited - Related party transactions, as reported in the annual report by Sonata Software Limited, is indeed more than 50% of sales and therefore, this company does not pass the related party filter applied by the TPO. E Infochips Bangalore Ltd. company is primarily engaged in software development and IT enabled services which is considered as the only one reportable segments and therefore there is no segmental information available with respect to the software development activities as well as IT enabled services. In view of this the above comparable is required to be excluded from the comparability analysis of the software development service segment of the assessee. Infinite Data Systems Private Limited is engaged in a wide variety of services including software technical consultancy services etc. It is our considered opinion that these services cannot be compared with software development services provided by a captive service provider like the assessee in the absence of segmental information. Infosys limited has a huge brand value, it has huge turnover, and its Finacle' Software is a leading product in banking industry. Therefore, it is functionally different and has significant R&D. Working capital adjustment - HELD THAT:- It is necessary to allow working capital adjustment for better comparability. Accordingly, we direct the AO/TPO to grant working capital adjustment on the final set of comparables Risk adjustment - HELD THAT:- It is not necessary to give any directions on the issue of risk adjustment. We note that the contentions of the Ld. AR on risk adjustment in the present case have been rendered academic as the entire TP adjustment gets deleted consequent to the exclusion of the 4 companies as directed above and upon grant of the working capital adjustment. We, therefore, feel that it is not necessary to return any findings on the above issue. - Appeal of the assessee stands partly allowed
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2019 (4) TMI 288
Date of acquisition for computation of LTCG - allotment date or date for Registered Agreement for Sale - HELD THAT:- The said allotment is not a conditional allotment and do not envisages cancellation of the allotted property, in any manner. Therefore, the assessee has acquired right in a specific property which is clearly earmarked in the layout plan. The full payment of the same has been made by the assessee by 24/07/2008 which is evident from assessee s letter containing payment details as placed on page no. 4 of the paper-book. Subsequently, agreement of sale has been executed by the builder in assessee s favor on 25/03/2010 which was nothing but mere improvement in assessee s existing rights to acquire a specific property and part parcel of the same transaction. Respectfully, following the decision in PR. CIT Vs. VEMBU VAIDYANATHAN [2019 (1) TMI 1361 - BOMBAY HIGH COURT], we confirm the stand of Ld. first appellate authority to the extent that the resultant gains were Long-Term Capital Gains in nature. Eligibility to claim deduction u/s 54F - nature of certain capital gains earned by the assessee - HELD THAT:- Assessee has made the payment within stipulated time as envisaged by Section 54F and the allotment in a specific property has been obtained by the assessee on 14/04/2012 which is evident from allotment letter. Therefore, since all the conditions of Section 54F was fulfilled by the assessee, there could be no occasion to deny the benefit of deduction to the assessee. Therefore, no infirmity could be found in the impugned order. - Decided against revenue.
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2019 (4) TMI 287
Assessments u/s 153A r.w.s. 143(3) - addition of advertisement expenses based on post-search investigation - CIT(A) deleted addition based on earlier year order - disallowance u/s 14A - HELD THAT:- Since in A.Y. 2007-2008, admittedly, the departmental appeal have been dismissed by the Tribunal on account of low tax effect, therefore, the same requires readjudication at the level of the CIT(A). We, accordingly, set aside the Orders of the authorities below and restore this issue to the file of CIT(A) with a direction to redecide this ground on merits giving reasons for decision in the same, by giving reasonable, sufficient opportunity of being heard to the assessee and A.O. Admission of additional ground - addition is not permissible if no incriminating material found - HELD THAT:- we are of the view that additional ground raised in all the matters are legal in nature and there is no need to investigate into fresh facts, therefore, additional ground shall have to be admitted. Since the additional ground raised for the first time and have not been adjudicated in two years by the authority below, therefore, the same requires consideration at the level of the Ld. CIT(A). We, accordingly, set aside the orders of the authorities below and restore the additional ground to the file of Ld. CIT(A) with a direction to decide this additional ground as per law, by giving reasonable and sufficient opportunity of being heard to the assessee and A.O. in all the three years. Disallowance u/s 14A - HELD THAT:- We find from the impugned order that assessee has merely submitted before CIT(A) that he has not earned any substantive exempt income, on which, no finding of fact have been recorded by the CIT(A) as well. It is well settled law that if the assessee did not earn any exempt income, no disallowance under section 14A could be made. We rely upon the Judgment in the case of Cheminvest Ltd. [2015 (9) TMI 238 - DELHI HIGH COURT]. No finding of fact have been recorded by the CIT(A) on the same. Therefore, this issue also requires re-consideration at the level of the CIT(A) - since we have admitted additional ground which is purely legal in nature and directed the CIT(A) to decide the same as per Law, therefore, the issue on merit shall have to be decided after deciding the legal issue which would have bearing on the assessment of income of assessee as per law. In case assessee succeeds on legal ground, perhaps, there may not be any need to decide grounds on merits. Set aside the Orders of the authorities below and restore the matter in issue to the file of CIT(A) to decide the issues afresh as is directed above, therefore, this issue is also restored to CIT(A) with a direction to decide this issue afresh, by giving reasonable, sufficient opportunity of being heard to the assessee and A.O.
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2019 (4) TMI 286
Order of the CIT(A) exparte - denial of principle of natural justice - Disallowance u/s 14A r.w.r.8D - addition in respect of non deduction of TDS u/s 195 on the income charitable tax in India u/s 40(a)(i) - Disallowances of interest on late deposit of TDS - HELD THAT:- It is pertinent to note that the order of the CIT(A) is ex-parte and has not taken cognizance of the relevant evidences produced before the AO during the assessment proceedings as well. The order is non-speaking. Therefore, we are setting aside the order of the CIT(A) and remanding back all the issue to the file of the CIT(A) for deciding the issues on merit. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice
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2019 (4) TMI 285
Revision u/s 263 by CIT - Pr. CIT noted that proposal was received u/s 263 from the Assessing Officer for review of the assessment - HELD THAT:- The findings of fact recorded by the Learned Pr. CIT have not been rebutted by the Learned Counsel for the Assessee through any evidence or material on record. The Order Sheet of the Assessing Officer clearly supports the finding of Pr. CIT that Assessing Officer did not enquire into any of the matter in issue at assessment stage. It would, therefore, clearly show that Assessing Officer passed the assessment order, without making any enquiry for verification with regard to low profit, huge expenses and sundry creditors, which he should have made at assessment stage. Since, it is an admitted case of sharp fall in gross profit and net profit as compared to earlier year and that the case was selected for limited scrutiny on four items including unsecured loans, expenses and low net profit, therefore, it was the duty of the Assessing Officer to have examined the issues in detail before accepting the explanation of assessee. However, in the present case, the Assessing Officer did nothing in the matter and without enquiry or verification of the facts, accepted the returned income. Thus, there was no application of mind while passing assessment order. Therefore, Explanation-2 to Section 263 of the Income Tax Act, 1961, would be clearly attracted in the case of the assessee. We may also note that there is no bar u/s 263, if a reference is made by the AO to the Pr. CIT to invoke jurisdiction u/s 263. Pr. CIT may get information from any source, but, before proceeding under section 263, the Pr. CIT shall have to satisfy the conditions of Section 263 of the Income Tax Act before invoking jurisdiction. In the present case, as noted above, the Learned Pr. CIT has satisfied all the conditions of section 263 before taking action against the assessee under section 263. Pr. CIT was justified in invoking jurisdiction under section 263 - Decided against assessee.
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2019 (4) TMI 284
Bogus LTCG - Penny Stock - principle of preponderance of probabilities - Unexplained cash credit u/s 68 - HELD THAT:- Transaction of the assessee of deriving long term capital gains of ₹ 1,69,12,820/- by selling shares of M/s Dhanleela Investment & Trading Co. Ltd. was treated as bogus by the Revenue only on the basis of suspicion and probability and without finding any defect in the various documentary evidences filed by the assessee. As transaction of the assessee are supported by the relevant documentary evidences, the additions made by the AO by treating the sale transaction as bogus is unsustainable. We, therefore, delete the addition. The transaction of long term capital gains derived by the assessee as genuine and correct further addition made by the Assessing Officer is also liable to be deleted and accordingly, the same is hereby deleted. - Decided in favour of assessee.
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2019 (4) TMI 283
Assessment u/s 147 - assessee is a non existing company or a bogus company - Validity of the reassessment proceedings - addition u/s 68 - in the instant case has taken recourse of the provision of section 147 as against 153(C) - HELD THAT:- AO in the instant case, after obtaining the report of the investigation wing has applied his mind and taken one approval of the higher authorities. He has also disposed of the objections. Since, the rereopening was based on specific information. No notice u/s 153C is also required. The various arguments advanced by the Ld. Counsel for the assessee in the instant case are without any merit and therefore, the legal ground raised by the assessee challenging the validity of the reassessment proceedings is dismissed. So far as the merit of the case is concerned find from the copy of the Assessment Order framed u/s 153C/153A in the case of M/s. VIP Leasing & Finance Private Limited, that the assessment in that case has been completed u/s. 153C and 153A. The address of the assessee has been given at 209, 2nd Floor, Sunder Kiran Building, WEA, Karol Bagh, New Delhi with PAN No. AAACV0475F. The audited accounts and the paper book in the case of M/s. VIP Leasing & Finance Private Limited disclosed the name of the assessee in the schedule of investment at Sr. No. 132 according to which an amount of ₹ 30 lacs has been invested in shares of the assessee company. There are also various investments in shares of different companies. No adverse inference has been drawn in the order passed u/s 153C/153A. The assessee in the instant case has filed the copy of the assessment order in the case of share applicant i.e. M/s. VIP Leasing & Finance Private Limited. Since the assessment has been framed u/s. 153C and 153A, it cannot be said that the assessee is a non existing company or a bogus company. Since this vital evidence was not considered by the AO or CIT(A) although the same was very much available with the department during the course of the assessment proceedings, therefore, deem it proper to restore this issue to the file of the Assessing Officer with a direction to verify the assessment record of M/s. VIP Leasing & Finance Private Limited from their Assessing Officer and decide the issue afresh and in accordance with law after giving due opportunity of being heard to the assessee. - Appeal filed by the assessee partly allowed for statistical purpose
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2019 (4) TMI 282
Deduction u/s. 54 in respect of two residential flats - vide amendment to Sec. 54, vide the Finance (No. 2) Act, 2014 with effect from 01.04.2015, “a residential house” was substituted by “one residential house in India” - scope of amendment - HELD THAT:- The case of the assessee for the A.Y. 2013-14 and the amendments in Section 54 of the Act came into the existence by virtue of Finance Act (no. 2) 2014 w.e.f. 01.04.2015. Undoubtedly, the said amendment is not required to be applicable in the case of the assessee which is specifically for the A.Y. 2013-14. Taking into account all the facts and circumstances, we are of the view that the finding of the CIT(A) is quite correct which is not liable to be interfere with at this appellate stage. Accordingly, these issues are decided in favour of the assessee against the revenue.
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2019 (4) TMI 281
Addition u/s 68 - case selected for scrutiny u/s 143(2) - AO alleged that assessee company has failed to prove the identity, creditworthiness and genuineness of the share subscriber companies - HELD THAT:- Section 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source shall be assessed as its undisclosed income. In the facts of the present case, both the nature & source of the share application received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO's record. Accordingly all the three conditions as required u/s. 68 i.e. the identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO is based on conjectures and surmises cannot be justified. In the facts and circumstances of the case as discussed above, no addition was warranted u/s 68 - Decided in favour of assessee.
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2019 (4) TMI 280
Income accrued in India - supply of telecommunications hardware to Indian telecom operators - ‘royalty’ income from supply of software on a gross basis - India-Finland DTAA - existence of PE in India - HELD THAT:- Contention of the Ld. DR is not tenable that the facts of the year under considerations are distinguishable from A.Y. 1997-98, 1998- 99 because issue that “the assessee has a fix place PE in the NIPL office and DAPE in the form of NIPL” has already been dealt with by the Special Bench II as is evident from a question of law framed by Hon’ble High Court on the findings returned by the Tribunal in SB II holding that NIPL did not constitute a fix place PE of the assessee. When the revenue has failed to prove that there exists PE of the assessee these grounds raised by the revenue have become infructuous being consequential in nature. Taxability of interest from vendor financing - assessee has not treated the amount to be legally claimed nor has acknowledged any debt due to its customer as delayed payment no income can be said to accrue to the assessee on account of delayed payment as neither there was any corresponding liability on any of the debtors nor the assessee had claimed any entitlement on such an interest. So AO/CIT(A) have erred in imputing ₹ 50,000,000/- as income from vendor financing for the purpose of taxability in the hands of assessee in India as business income. In view of what has been discussed above, we are of the considered view that following the decision rendered by SB-1 and SB-II which is applicable to the facts and circumstances of the cases at hand on account of identical facts, existence of fixed place PE of assessee in India is not established, consequently appeals filed by the assessee allowed.
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2019 (4) TMI 279
Condonation of delay of 280 days - not filed appeal against penalty being smallness of the amount - revenue has started prosecution of the Director by issuing notice under section 276/277 - appeal filed - HELD THAT:- Considering the facts and circumstances of the case and the ratio of law laid down in B. MADHURI GOUD VERSUS B. DAMODAR REDDY [2012 (7) TMI 1019 - SUPREME COURT OF INDIA], we are of the view that the assessee has acted on the advice of his tax advisor. The assessee acted on the advice keeping in view the cost of litigation, which in our view is a reasonable cause. And the assessee is now compelled to file the present appeal. We have also found that the assessee has got merit in their favour. Levy of penalty u/s 271(1)(c) - assessee debited the capital expenditure of franking charges for increase in authorized share capital without adding back the same in its computation of income - Addition accepted - HELD THAT:- AO has not disputed the contention of assessee in the penalty order. The contention of assessee throughout the proceeding are that the franking charges were inadvertently mistake to be disallowed by the assessee as the same was not reported in TAR. The assessee’s contention is that the error was unintentional and bonafide mistake. The assessee has shown reasonable cause by offering the franking charges during the assessment by offering suomoto disallowance at the cost of repetition, we may ad that the assessee while filing reply to the show-cause notice that assessee realized its error and admitted that aforesaid franking charges ought to have been disallowed. This fact is duly recorded by Assessing Officer in para-2.1 of the penalty order. AO has not countered the bonafide explanation furnished by assessee. In Price Waterhouse P. Ltd. vs. CIT (2012 (9) TMI 775 - SUPREME COURT) held that the penalty under section 271(1)(c) could not be levied, where it involves a mistake by assessee on account of human error - we direct the Assessing Officer to delete the entire penalty.- Decided in favour of assessee.
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2019 (4) TMI 278
Method of accounting - Rejection of books of account - Mercantile system OR cash system of accounting - HELD THAT:- As noticed that the basis of rejections of the books of account and the method of accounting by the assessing officer was that the books of accounts of the assessee did not match with audited accounts and therefore, the genuineness of the expenditure could not be ascertained. The contention of the assessee is that the assessee has been following the same method and the assessing officer in other years had accepted the books results. There is no reason to adopt a different method and reject books of account, it is contention of the assessee that all the queries of AO were duly explained. This contention of the assessee is not acceptable under the facts of the present case. The AO in his order has pointed out specific defects which in our view are sufficient to reject of books of accounts. Therefore, no interference is called for in the finding of the Authorities below. - Decided against assessee Profit estimation - AO suggesting that the assessee is earning profit @8%- as submitted by assessee submitted that appellant is a Development Authority which work for execution of social welfare housing schemes of State Government, therefore earning profit cannot be applied that the a civil contractor - HELD THAT:- In the present case the assessing officer has mechanically applied @ 8% treating the assessee as a civil contractor without looking into fact that the assessee has also been carrying out social welfare schemes for EWS under aegis of the government of M.P. Therefore, the profit rate as applied by the assessing officer and confirmed by the Ld. CIT(A) cannot be sustained. Looking to the facts of the case and the fact that assessee is also carrying out Social Welfare Schemes. We restrict this profit @ 4%. - Decided partly in favour of assessee. Claim of set off brought forward losses of previous years - HELD THAT:- We find that before the ld. CIT(A) this ground was raised by the assessee, however no finding is given by the ld. CIT(A). Therefore, considering the facts, we deem it proper to restore ground No.2 & 6 to the file of the ld. CIT(A) for decision a afresh. Ld. CIT(A) is hereby directed to decide this issue in accordance with law.
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2019 (4) TMI 277
Assessment u/s 153A - Addition based on seized documents - addition of net profit @2% of suppressed receipts - A.O treated them as incriminating material and went ahead to make additions for suppressed receipts @10% of the gross receipts disclosed by the assessee in the regular books of accounts - HELD THAT:- In these given circumstances it cannot be said that the addition for suppressed receipts made by A.O are not based on any incriminating material. Though the assessee is challenging it to be a dumb document but the addition made by the Ld. A.O have a direct nexus with the incriminating material found during the course of search. Various judgments referred and relied by the Ld. Counsel for the assessee can apply only in those cases where the additions for completed assessments post search are made without any basis of incriminating material found during the course of search. In the case of assessee the facts are different because the additions for Assessment Year 2007-08 to 2011-12 have been made by Ld. A.O on the basis of incriminating material found during the course of search and such incriminating material has no specific mention of the assessment year for which they relates except for few entries, therefore the A.O was within his powers to make the additions for the block of assessments for Assessment Years 2007-08 to 2013-14 taking the basis of incriminating material found during the course of search. Therefore this common Ground No.2 raised by the assessee for Assessment Year 2007-08 to 2011-12 needs to be dismissed. Addition on the suppressed receipts - HELD THAT:- alleged seized material referred to by the Ld. A.O contains certain business transaction not explained satisfactorily by the assessee before the lower authorities and also before us which justify the action of the Ld. A.O of rejecting the books of accounts and estimating the suppressed receipts. Though Ld. A.O made the addition for suppressed receipts which in our view was not justified and Ld. CIT(A) was fair enough to apply 2% of net profit rate on the alleged suppressed receipts by taking basis of net profit rate disclosed by the assessee for various assessment years which ranges from 0.59% to 2.05%. In our considered view no interference is called for in the findings of Ld. CIT(A) sustaining the addition to the extent of 2% of the enhanced turnover. Unexplained cash deposit u/s 68 - peak cash credit addition - HELD THAT:- If an addition for peak cash credit of ₹ 1,44,579/- is sustained for 2012-13 it will take care of the peak cash credit with the assessee and thus no addition of ₹ 9,52,752/- and ₹ 31,30,750/- is called for. We accordingly order so and sustain the addition for ₹ 1,44,579/- for unexplained cash for Assessment Year 2012-13 and delete the addition for ₹ 31,30,750/- for Assessment Year 2013-14. In the result Ground No.3 for assessee’s appeal for Assessment Year 2012- 13 is partly allowed and that for Assessment Year 2013-14 is allowed. Unaccounted cash receipt - HELD THAT:- Some employee of the assessee or the group company has written these figures but these documents were found at the assessee’s premises and has the reference of assessee but he failed to explain the transactions in these seized documents even when the burden lies heavily on the shoulders of the assessee, which in the instant case seems not to have been properly fulfilled. As the reply/submission made by the assessee/Ld. Counsel for the assessee in our view are unsatisfactory and vague, we find no reason to make any interference in the findings of Ld. CIT(A) confirming the addition for unaccounted cash receipt. Addition regarding Agra project of IBD Group - unaccounted investment/expenditure on the basis of seized paper - HELD THAT:- assessee cannot go away without explaining the contents of such seized material which has some bearing/connection with the business projects run by the group concern. Ld. A.O has also not made proper enquiry about IBD project of Agra so as to correlate the seized material showing the entry of ₹ 7,33,000/- with the details if any of IBD group. In our view this issue of addition of ₹ 7,33,000/- needs to be set aside to the file of Ld. A.O for afresh adjudication so as to decide accordingly as per the provisions of law after calling necessary information from the assessee about the Agra project and IBD group and any other details as necessary to examine the facts after providing reasonable opportunity to the assessee to file its submission in this regard. - ground is allowed for statistical purposes
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2019 (4) TMI 276
Disallowance of year-end accruals - accruals created towards normal business expenditure incurred by the Appellant - assessee follows mercantile system of accounting accruals in accordance with 'matching principle' - HELD THAT:- As relying on previous AYs [2018 (11) TMI 130 - ITAT DELHI] and [2018 (4) TMI 33 - ITAT DELHI] in the present Assessment Year as well the Assessing Officer has not pointed out any mistake in the calculation nor there was case by the Revenue that assessee has not paid certain bills. In fact during the financial year relevant to the said assessment year, the assessee had accounted all the expenses relatable to the subject Financial Year for which bills/invoices would have been received/paid after close of the Financial Year by way of year ending accruals. Thus, the issue is identical in the present assessment year as well, hence Ground No. 1 is allowed. Addition on account of non-charging of mark up on support services charges able to AGNS - HELD THAT:- The assessee as well as AGNSI are profit making entities and there was no tax incentives earned by the assessee at any point of time. Thus, charging of mark up on support service charges which were billed to AGNSI was not correct on part of the Assessing Officer. Besides that, the issue is squarely covered in assessee’s own case for A.Y. 2010-11[2018 (4) TMI 33 - ITAT DELHI]. Hence, Ground No. 2 is allowed. Addition on account of non deduction of TDS on reimbursement of salary - HELD THAT:- The employees seconded to the assessee company are working as the employees of the assessee company, their salary is subject to TDS u/s 192 of the Act and, therefore, provisions of section 195 are not applicable on the facts of the case in hand. Thus, the issue is squarely covered by the order of the Tribunal in assessee’s own case [2018 (11) TMI 130 - ITAT DELHI]. Hence, Ground No. 3 is allowed.
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2019 (4) TMI 275
Disallowance u/s 40(a)(ia) - failure to deduct TDS u/s 195 - Fee for Technical Services - payment made by the assessee to the Spanish company - Indo-Spain DTAA - whether in view of the Protocol to India-Spain DTAA, a restrictive meaning of the “Fee for Technical Services’ has to be read in the context of Indo- Spain DTAA? - HELD THAT:- Referring the decision of in Steria (India) Ltd., vs. CIT [2014 (5) TMI 629 - AUTHORITY FOR ADVANCE RULINGS] and para 7 of the Protocol between India and Spain, the restrictive meaning of ‘Fee for Technical Services’ appearing in Article 13(4) (c ) Indo-UK DTAA must be read as forming part of Indo-Spain DTAA as well and, therefore, the payment made by the assessee to the Spanish company for fabric testing would not constitute fee for technical services and consequently, section 195 of the Act has no application to such a receipt. With this view of the matter, we find it difficult to sustain the addition and accordingly, direct the learned AO to delete the same. - Decided in favour of assessee
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2019 (4) TMI 274
Entitlement to raise additional grounds of appeal before the appellate authority - Allowable deduction u/s 43B(f) - provision made for leave salary made by the appellant based on actuarial valuation - whether provisions of section 43B(f) is unconstitutional? - HELD THAT:- We have noted that the Assessing Officer not accepted the revised claim of the assessee. The ld. CIT(A) also concurred with the decision of Assessing Officer. However, keeping in view the ratio of law laid down in CIT vs. Pruthvi Brokers and Shareholders [2012 (7) TMI 158 - BOMBAY HIGH COURT] we admit the additional ground of claim raised by assessee and restore the issue to the file of Assessing Officer to decide the issue as per the decision of coordinate bench in Everest Industries Ltd. vs. JCIT (2018 (4) TMI 426 - ITAT MUMBAI). The grounds of appeal is restored to the file of AO in case the decision of Hon'ble Supreme Court comes in favour of the assessee in future, then the assessee is free to seek amendment of assessment order. - Appeal of the assessee is allowed for statistical purpose
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2019 (4) TMI 273
Profit estimation on bogus purchases - assessee was the beneficiary of accommodation entries in form of bogus purchase bills as well as unsecured loans - addition towards 12.5% profit on alleged bogus purchases - HELD THAT:- considering the fact that sales are not doubted and also there is no mismatch between quantity of goods purchased and sold, the AO has estimated fair amount of profit by considering various parameters including amount of VAT applicable to the goods and also the probable percentage of amount saved by the assessee by obtaining accommodation entries. Keeping these facts in mind, if you examine percentage of profit applied by the AO, i.e. 12.5% on alleged bogus purchases, we find that the AO was fair enough to adopt a reasonable percentage of profit on alleged bogus purchases - No error in the finding recorded by the AO in arriving at 12.5% profit on alleged bogus purchases. Addition towards unsecured loan taken - HELD THAT:- Mere furnishing of confirmation letter, ledger extract and bank statement is not sufficient enough to come out of the shadow cast upon the assessee and what is required to be proved is genuineness of transactions. In this case, the AO has brought out number of reasons to doubt transactions between the parties, but the assessee failed to file any evidence to contradict the facts brought out by the AO while making addition towards unsecured loan. Therefore, we are of the considered view that the lower authorities were right in making addition towards unsecured loan taken from three companies belonging to Shri Bhanwarlal Jain and hence, we are not inclined to deviate from the findings recorded by the Ld.CIT(A). Accordingly, the ground of appeal taken by the assessee is rejected. Disallowance of interest u/s 14A r.w.r. 8D(2)(ii) - assessee claims that no interest bearing funds have been used for investment - HELD THAT:- We find that the assessee’s capital is more than the amount of investments in shares which yielded exempt income. Therefore, AO was erred in quantifying disallowance of interest u/r 8D(2)(ii) of I.T. Rules, 1962. Accordingly, we direct the AO to delete addition towards interest expenditure. Disallowance of expenditure u/r 8D(2)(iii) we find that the assessee has incurred various common expenditure including salaries, conveyance, telephone and other overhead expenses. Since the assessee has not disputed the fact of earning exempt income, the possibility of incurring certain expenditure towards such income cannot be ruled out. Further, since the assessee has not filed any apportionment of expenses in respect of exempt income, we find no reason to interfere with the findings of AO and Ld.CIT(A) in confirming the disallowance of expenditure u/r 8D(2)(iii) @0.5% of average value of investments amounting to ₹ 26,049. - Decided partly in favour of assessee.
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2019 (4) TMI 272
Deduction u/s 10B - business of carrying out R D activity on Functional Genomics, Bioinformatics and Chemistry and also trading in biotechnology tools and instruments - AO alleged that activity are on behalf of the AE in USA not eligible for deduction u/s 10B for Functional Genomics Division - Export Oriented Undertaking (EOU) - HELD THAT:- Basic form and content of the deliverables given by the assessee to the AE requires examination on the facts of the matter in the light of the recitals of the Research and Development Services Agreement entered into between the assessee and its AE and contradictory submissions put forward by the assessee before the authorities below. Such an examination has not been carried out by the authorities below - remand the issue back to the file of the AO for a proper, thorough and comprehensive examination of the facts related to the functions and activities of the assessee s Functional Genomics Division and also examine the form, nature and content of the deliverables of this division and to then decide on the allowability of the assessee s claim for deduction under section 10B - Ground of Revenue s appeals for both Assessment Years 2008-09 and 2009-10 treated as allowed for statistical purposes. Deduction u/s 10A 10AA computation - exclusion of certain expenses both from Export turnover as well as Total Turnover - HELD THAT:- We find no reason to interfere with or deviate from the finding rendered by the ld. CIT(A) on this issue with respect to the deduction under section 10A and 10AA of the Act, and therefore respectfully following the decision of the Hon'ble Apex Court in the case of CIT Vs. HCL Technologies Ltd. [2018 (5) TMI 357 - SUPREME COURT] we uphold the impugned order of the learned CIT (Appeals) s order allowing the assessee's claim for deduction under Section 10A and 10AA of the Act. Consequently, the grounds raised by revenue are dismissed.
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2019 (4) TMI 271
Revision u/s 263 by CIT(IT) - different interpretation of a decision of court relating to assessee - directing the AO to assessee the FD interest, which is in the name of Ferani Hotels Pvt. Ltd. as income and holding the assessment as erroneous and prejudicial to the interest of the Revenue - HELD THAT:- AO had conducted enquiry before completion of assessment. The AO had issued notices u/s 133(6) of the Act to Ferani as well as Indian Bank and obtained required information. The AO had also examined the judgment of Hon’ble Bombay High Court NUSLI NEVILLE WADIA AND OTHERS AND VICE-VERSA. [2012 (7) TMI 1088 - BOMBAY HIGH COURT] and interpreted in her own way the directions. By interpreting the directions in her own way the AO had come to conclusion that the amounts collected by Ferani from Flat purchasers constituted assessee's income liable to be taxed in A.Y. 2013-14. Without going to the merits or demerits of the AO's interpretation of the High Court judgment, we are of the considered opinion that the evidence on record shows that the AO had applied her mind to the contents of Hon’ble Bombay High Court judgment. Wherever the AO found that inference was required to be drawn against the assessee, such inference was drawn. The same judgment had directed Ferani to maintain account in respect of sums collected from Flat purchasers and further directed Ferani to invest the amounts collected in Fixed Deposits which would be governed by the final order of the Trial Court. If interpreting the said directions of the Court to mean that the deposits were made by Ferani and in that view, the AO did not include the interest in the assessed total income then it would only mean that the AO had followed one of the legal course permissible in law. Since in AO's opinion interest on FD was not assessable as assessee's income, the AO also did not allow the credit for taxes paid by way of TDS from interest on FD which by CIT's own admission was reported by the Bank in Statement-26AS. According to us, in such circumstances it was not a case where there was any failure on the part of the AO to conduct proper enquiries and gather relevant information. The AO had in fact gathered relevant material and information from Ferani & Indian Bank. CIT sought to interpret the directions of Hon’ble Bombay High court in a manner different from the AO and has directed the AO to assess even the interest on FD as assessee's income. We also noted that the CIT has not brought on record any cogent & conclusive material which would prove or show that the course followed by the AO was unsustainable in law. When the AO after conducting the enquiries, which the circumstances demanded, had followed one of the course permissible in law, then it was not open for the CIT to treat the assessment order erroneous within the meaning of Sec. 263. See Malabar Industrial Company Vs CIT [2000 (2) TMI 10 - SUPREME COURT]. Hence, we quash the revision order and allow the appeal of assessee.
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2019 (4) TMI 270
Validity of proceedings u/s 148 - validity of ‘reasons recorded’ - addition u/s 68 on the basis of information received from Investigation wing and on same lines of reasons recorded - HELD THAT:- Once AO receives any information or material from investigation wing or from elsewhere, then instead of recording the reasons from borrowed satisfaction, he has to independently apply his mind and verify the record of the assessee before forming his ‘reason to believe’ for reopening the case u/s 147. Formation of ‘reason to believe’ is a jurisdictional fact, which AO must spell while recording his ‘reasons’ and should be germane to the facts of the assessee and material or information coming on record. If jurisdictional fact has been recorded on wrong premise or on incorrect assumption of facts, whether fully or partially, then jurisdiction cannot be acquired to reopen the assessment. Thus, when any information dehors any live link nexus with the income escaping assessment, then it cannot be held to be valid information for reopening the assessment u/s 147. We agree with the contentions of the Ld. Counsel that, if there are such a huge amount of discrepancy and mistakes in the ‘reasons recorded’, divorced from the facts of the case, then such reasons cannot clothe the AO with the jurisdiction to reopen the assessment u/s 147. Here in this case AO in his remand report submitted before the Ld. CIT(A) and also in view of the observation made by the Ld. CIT(A), it is amply established that there are various discrepancies and it is for this reason alone, Ld. CIT(A) has deleted the various additions. Hence, we hold that such ‘reasons recorded’ cannot be held to be in accordance with law, and because of such huge discrepancy and errors, it cannot be held that AO could have entertained ‘reason to believe’ based on borrowed satisfaction of someone else. Thus, the entire reopening is held to be invalid. Addition u/s 68 - HELD THAT:- In absence of any inquiry, such a material or documents filed by the assessee cannot be discarded. AO has simply relied upon the information received from Investigation Wing, without even carrying out any prima facie inquiry so as to show that assessee’s contention or material filed by him cannot be relied upon. Even at the stage of CIT(A) no such inquiry has been done and most of the additions otherwise also stands deleted for the reasons that they were not received in this year but in the earlier years. No iota of evidence of material so as to confirm these additions on merits and therefore, we have no hesitation in deleting the entire addition, because assessee has been able to discharge its prima facie onus by proving the identity, creditworthiness and genuineness of the share application money received. In absence of any material or inquiry conducted by the AO that these are non-existing entities or a paper company and there being no rebuttal from the side of the department, addition made u/s 68 is directed to be deleted. Accordingly, in view of our finding in assessee’s appeal is allowed.
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2019 (4) TMI 269
Stay petition - TDS u/s 194C - demand u/s 201(1A) - HELD THAT:- The hearing in all related appeals involved in all stay applications have been completed today. Considering the facts that a bundle of issues on various facts are raised by assessee, therefore, keeping in view, the order of Hon’ble jurisdictional High Court and co-ordinate benches of this tribunal on the issue raised in the present appeal, the revenue is restrained from taking any coercive action for three months or till the pronouncement of order in all appeals whichever is earlier. The order was pronounced in open court while concluding the hearing in all the appeals. All the stay applications filed by the assessee are disposed off accordingly.
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2019 (4) TMI 268
Addition of differential interest income - Interest as per Form 26AS Interest as per books - normal computation of income and to the book profits computed u/s. 115JB - HELD THAT:- Admittedly neither the assessee nor the AO had called for details of interest credited by the banks from the respective banks nor did they ascertain the methodology adopted by the bank for accounting for accrued interest. Since both the banks and assessee are following mercantile system of accounting, the interest accrued on the Fixed Deposits should tally, i.e., should be of same figure, only if uniform method of calculating accrued interest is followed by the assessee and the banks. As submitted by AR, if there is difference in methodology, there bound to be difference between the interest income calculated by the assessee and that credited to account of the Fixed Deposits by the bank. A.R rightly submitted that the said difference would get neutralized upon maturity of fixed deposit. Though the provisions of Section 37BA provide for giving credit for TDS only in the assessment year for which such income is assessable, the said provisions also provide for spreading of TDS credit, i.e., giving credit of TDS amount over the years during which the relevant income is offered. In the interest income, according to the assessee, the difference in interest income has arisen due to the difference in the methodology followed for accounting for interest income. Hence, it is not a case of understating interest income, which would warrant making additions. Accordingly, if the methodology adopted by the assessee and the bank for providing accrued interest differs, then, it will be difficult to implement the provisions of Section 37BA as it cannot be said that the methodology adopted by the bank alone is correct one. As stated that the assessee is consistently following same methodology for accounting for accrued interest and the relevant computations are also certified by the statutory auditors. It is not the case of the AO that the assessee has kept unaccounted deposits with banks. In this kind of situation, if the AO is satisfied with the computation of accrued interest income made by assessee, then the explanations of the assessee may be accepted in order to settle the matter. We are holding so for the reason that the difference, if any, would get neutralized upon maturity of fixed deposit and further the assessee is consistently following same method over the years, whose computations are verified by the statutory auditors. Accordingly, AO may be directed to examine the computation made by the assessee for accounting of accrued interest and if he is satisfied that the same methodology is followed over the years, then the AO may restrict the addition being the net amount of difference of interest income over FYs. 2009-10 to 2013-14 and this, in our view, will put this issue at rest. - Appeal of assessee is treated as allowed for statistical purposes.
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2019 (4) TMI 267
Assessment u/s 153A - Addition of on-money received on sale of flats - HELD THAT:- The statements of the employees, in search and seizure cases, can be used only if they are supported by some kind of collaborative evidence. However, DR could not point out the evidence proving the receipt of alleged on money. As the assessment for the AY. 2008-09 was not pending, so, without some incriminating material, AO should not have made the addition to the total income of the assessee. That the order of CIT(A) does not suffer from any legal or factual infirmity. Moreover, taking into consideration, the decision of the Coordinate Bench of ITAT in the case of group concern and also in order to maintain judicial consistency, we apply the same findings in the present case which are applicable mutatis mutandis. Resultantly this ground raised by the revenue stands dismissed. Disallowance on conveyance and telephone expenses - Disallowance made by the AO stating that the assessee was unable to establish that these expenses were incurred solely for ‘business purposes’ and thus made adhoc disallowance - HELD THAT:- Assessee being a company, is a separate juristic entity, therefore any element of ‘personal expenses’ would therefore need to be demonstrated with reference to the directors. The said proposition has been rendered in the case of Sayaji Iron & Engeneering Co. Vrs. CIT (2001 (7) TMI 70 - GUJARAT HIGH COURT). Thus, CIT(A) had rightly deleted the disallowances while keeping in view the above judgments. Even before us, no new facts or contrary judgments have been brought on record in order to controvert or rebut the findings so recorded by CIT(A). Therefore, there are no reasons for us to interfere into or deviate from the findings so recorded by the CIT(A). - this ground raised by the revenue stands dismissed.
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2019 (4) TMI 266
Penalty u/s 271(1)(c) - non specification of charge - defective notice - HELD THAT:- As decided in COMMISSIONER OF INCOME TAX, BANGALORE AND THE INCOME TAX OFFICER, WARD-6 (3) , BANGALORE VERSUS M/S SSA’S EMERALD MEADOWS [2015 (11) TMI 1620 - KARNATAKA HIGH COURT] as relying on M/S MANJUNATHA COTTON AND GINNING FACTORY & OTHS., M/S. V.S. LAD & SONS, [2013 (7) TMI 620 - KARNATAKA HIGH COURT]imposing of penalty u/s 271(1)(c) of the Act is bad in law and invalid for the reason that the show cause notice u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income. - Decided in favour of assessee.
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2019 (4) TMI 265
Levy of capital gains tax on sale of land - nature of land sold - capital asset - agricultural land by the revenue department and as per the deed of purchase and sale made by the appellant - land could not be used for large scale agricultural operations - entitlement to claim the exemption u/s.10(1) - HELD THAT:- AO has not made any addition on account of the rejection of the assessee’s claim of agricultural income. The assessee owned more than 90 acres of land is also not disputed. A perusal of the Assessment Order clearly shows that the AO has examined the VAOs of the various villages wherein the assessee properties are situated. As noticed that the said VAOs were not provided for cross-examination to the assessee. A perusal of what has been extracted by the AO in respect of the VAO statements recorded clearly shows that as per the revenue records, the said lands were agricultural lands during the relevant period. The examination of the VAOs has also brought out the fact that the agricultural operations had been done on the said lands. How the AO draws the conclusion that the lands were left barren after purchase by the assessee is not coming out of the Assessment Order. It is also an admitted fact that the said lands are beyond 8 kms from the nearest Municipality. Thus, clearly, the said lands do not fall within the purview of the definition of capital asset under Income Tax Act. Once, the revenue records clearly shows that the said lands are agricultural lands and it is also noticed that the agricultural operations have been done on the said lands, just because, the assessee has not been able to generate desired agricultural income from the said lands and the assessee had sold the said lands within one year of its purchase, would not change the character of agricultural land to a non-agricultural land. This view of ours is supported from the principles laid down in the case of M.S.Srinivasa Naicker [2007 (1) TMI 149 - MADRAS HIGH COURT] as also the decision in the case of Ashok Kumar Rathi [2018 (1) TMI 277 - MADRAS HIGH COURT]. This being so, we are of the view that what has been sold by the assessee is an agricultural land and consequently the assessee is entitled to claim the benefit of exemption u/s.10(1) - Decided in favour of assessee.
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2019 (4) TMI 264
Penalty u/s 271(1)(c) - deduction u/s 80IC - restricting claim to 25% of the eligible profits as against 100% claimed by on account of substantial expansion carried - addition made in the quantum proceedings had been upheld both by the CIT(A) and the I.T.A.T. - bonafide belief - HELD THAT:- Identical issue of levy of penalty on account of restriction of claim of deduction u/s 80IC to 25% of the eligible profits as against 100% claimed by the assessee beyond a period of five years, claimed on account of substantial expansion carried out, has been decided in favour of the assessee in the case of Hycron Electronics [2015 (10) TMI 2752 - ITAT CHANDIGARH] and M/s Quixotic Healthcare ( [2019 (1) TMI 1055 - ITAT CHANDIGARH] by the I.T.A.T. holding that this claim f the assessee was based on a bonafide belief. The I.T.A.T. held that differing orders passed by the revenue authorities, appellate authorities, the High Court and Supreme Court on this issue lend credence to the fact that the belief of the assessee was a bonafide belief. Thus we delete the penalty levied u/s 271(1)(c) - decided in favour of assessee.
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2019 (4) TMI 263
Revision u/s 263 - interest received u/s 28 of the Land Acquisition Act is part of enhanced compensation or taxable as other sources - assessee claimed whole of the interest exempt as capital gains earned from sale of rural agricultural land - CIT held that the assessment order passed by the AO u/s 143(3) having failed to add 50% of the interest income as per the provisions of Section 56(2)(viii), 57(iv) and 145A(b) under the head 'income from other sources' and having not properly examined the facts of the case and accepted the version of the assessee without due examination - HELD THAT:- There is no error in the order of the AO treating the interest received by them u/s 28 of the LAA,1894, as compensation following the proposition laid down by the apex court in GHANSHYAM (HUF) [2009 (7) TMI 12 - SUPREME COURT] . We set aside the order passed by the ld. Pr. CIT u/s 263. - Decided in favour of assessee
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2019 (4) TMI 262
Penalty u/s 271(1)(c) - excess claim of interest expenditure on loan for property - inadvertent bonafide mistake on the part of her accountant - assessee voluntarily filed with the A.O that aforesaid mistake of excess claim of deduction of interest expenditure to be added to her returned income - HELD THAT:- we are of the considered view that now when the assessee in the course of the assessment proceedings had voluntarily admitted the mistake that had crept in her ‘return of income’, then merely for the reason that she could not undo/rectify the mistake in her ‘Original’ return of income by filing a ‘revised’ return of income would not justify levy of penalty under Sec. 271(1)(c) in her hands. It is neither the case of the revenue, nor a fact that the excess claim of deduction that was raised by the assessee was found to be a bogus claim that was raised in the thin air. Rather, as observed the aforesaid claim of interest expenditure raised by the assessee was in context of the loans which were raised by her for making of investments in other concerns. We thus in terms of our aforesaid observations are of a strong conviction, that though the disallowance made by the A.O at the behest of the assessee would though suffice for saddling her with additional tax liability, however, in the totality of the facts of the case no penalty under Sec.271(1)(c) on the said count could have validly been imposed on her. - Decided in favour of assessee.
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2019 (4) TMI 261
Disallowance on account of handsets issued on FOC basis to employees, dealers and After Market Service Centers - capitalization of marketing expenses - HELD THAT:- Referring to the findings of the tribunal [2018 (1) TMI 1366 - ITAT DELHI] and Hon’ble High Court in assessee’s own case [2018 (9) TMI 877 - DELHI HIGH COURT] on the above issue hold the field, and we do not find any reason to take a different view from the same. While respectfully following, we hold that the assessee could not have claim title and depreciation, once the mobile phones had been given and ownership had been transferred to the employees, dealers, sales personnel and after sales service centres, and consequently the addition made by the learned AO on this aspect needs to be deleted. Closing Stock on account of handsets damaged in transit - HELD THAT:- In respect of the value of the handsets damaged in transit is concerned, it comes only to ₹ 20,64,911/-which constitutes only 0.31% of appellant’s total turnover for the year and while respectfully following the order in ACIT vs. Grohe India private limited [2014 (3) TMI 104 - ITAT DELHI], we hold that it is not unlikely that some of the items may have been damaged or lost during transit, therefore, such a shortage due to damage or loss has to be considered reasonably keeping in view the magnitude of such short is being 0.31% of the total turnover and hence cannot be held as an unusual loss. Further, we are convinced with the argument that if valuation of closing stock is changed then the value of opening stock should also be changed on the same basis or method and the closing stock of a particular year is the opening stock of the subsequent year as such it does not materially affected the accounts and profits disclosed by the assessee. the adjustment now sought to be made is revenue neutral and at best may result in requirement or postponement of revenue and in view of the concept of materiality which is well recognized both in accountancy and the law. Accounting standards notified by the CBDT under section 145(2) mandates that the concept of materiality be taken into consideration when finalizing the accounts of an assessee. Keeping in view all these things we are of the considered opinion that no addition on account of the closing stock due to the handsets damaged in transit is warranted in this matter - Decided in favour of assessee.
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2019 (4) TMI 260
Grant of registration u/s 12A rejected - failure to produce material to substantiate its claim that society’s aims/objects and terms of memorandum are of the charitable nature and the same are being followed - adequate opportunity of being heard - principle of natural justice. - HELD THAT:- The representative of the appellant society could not properly represent the case of the society and did not file the relevant documents. For misrepresentation of the representative of the appellant society, the appellant society should not suffer, therefore, it will be appropriate in the interest of justice to remand back this matter to the file of the Commissioner of Income Tax, Faridabad for taking on record the relevant documents which were called by the Commissioner of Income Tax and then pass appropriate order as regards whether to grant registration u/s 12AA(1)(b)(ii) or not. Needless to say, the appellant society be given opportunity of hearing by following principles of natural justice. Hence, appeal of the appellant society is partly allowed for statistical purpose.
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2019 (4) TMI 259
Allowable revenue expenditure - business of Real Estate - WIP in construction development - Disallowance of expenditure incurred on employee cost, administrative expenses and selling and marketing expenses debited to P& L Account - Guidance Note on Accounting for Real Estate Transaction - proof of incurring indirect expenses - CIT-A deleted the addition - HELD THAT:- From the wordings of AS-2 that the administrative expenses which are not related to bringing the inventories (work-in-progress) to their present location and condition are to be excluded from the Inventories being work in progress in the assessee’s case. Moreover, it is also categorically stated that the selling expenses shall not form part of Inventories. The assessee being following the accounting policies framed by the ICAI by way of AS 2 and report of EAC, worked out the closing work in progress considering the expenses directly attributable to the construction of the project and the expenses which were not directly attributable to work in progress has been debited to Profit & Loss account. The above accounting method followed by the assessee has been also fortified by the “Guidance Note on Accounting for Real Estate Transaction” issued by the Institute of the Chartered Accountants which vide paragraph 2.2 defines the “Project Cost (i.e. which expenses shall be included while determining the project cost) Accounting treatment given in Guidance note on Real Estate Transaction is at par with AS 2 reproduced above and the assessee has followed these accounting principles in preparing its accounts year after year including the year under consideration. We found that the assessee, in compliance to these accounting principles, determined the expenses which are not related to the work in progress and debited the same to the profit & loss account being administrative expenses and selling expenses incurred for day to day functioning of the business and marketing; likewise, the expenses directly attributable to the work in progress have been debited to work in progress. No merit for the disallowance made by the AO on account of employee, cost, administrative expenditure and selling and marketing expenses, which are essentially in the nature of revenue expenditure. - Decided in favour of assessee. Addition u/s 14A - HELD THAT:- As recorded by the CIT(A) that during the year assessee has received ₹ 54.01 crores on account of security premium whereas maximum outstanding amount of investment made was ₹ 36.50 crores. Since own fund was more than the investment, no disallowance was warranted in terms of the decision in the case of Reliance Utilities and Power Ltd.[2009 (1) TMI 4 - BOMBAY HIGH COURT]. The finding so recorded with regard to the availability of interest free funds vis-a-vis investment has not been controverted by the learned D.R. by bringing on any cogent material on record. No infirmity in the order of the CIT(A) for deleting the addition under Section 14A by recording definite finding - Decided in favour of assessee.
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2019 (4) TMI 258
Addition u/s 36(1)(iii) - addition of notional interest in WIP - own interest free funds available with the assessee - HELD THAT:- The assessee has reserves and surplus of more than ₹ 48 crores. It has internal accrual during the year which can take care of such investments. The assessee took us through net cash flow from operations available on page no.20 of the annual report which suggest that the assessee has net cash flow. Thus, considering interest free funds available with the assessee in the shape of share capital, reserves and surplus, as well as net revenue from operations, we are of the view that alleged investment in WIP could be assumed as carried from these surplus funds. No notional interest ought to be calculated for capitalization. See case of CIT Vs. Reliance Utilities & Power Ltd [2009 (1) TMI 4 - BOMBAY HIGH COURT] - Decided in favour of assessee.
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Customs
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2019 (4) TMI 257
Maintainability of petition - alternative remedy of appeal - Valuation of export goods - fabrics and ready-made garments - exports made in proxy dummy - inflated export value so as to avail undue and otherwise inadmissible export benefits advantage - rejection of declared FOB value - Held that:- This Court is not commenting upon the issue and upon the findings given by the learned Commissioner, as the petitioner is having an alternative remedy of preferring an appeal before the Customs, Excise Service Tax Appellate Tribunal - This Court is of the opinion that as the order has been passed by an authority competent under the statute to pass an order and as the order has been passed after hearing the petitioner in detail, the present petition deserves to be dismissed on the ground of availability of alternative equally efficacious remedy. No case for interference is made out in the matter - petition dismissed.
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2019 (4) TMI 256
Principles of natural justice - opportunity of cross-examination - petitioner’s grievance is that the Commissioner of Customs who adjudicated the various show cause notices refused and omitted to provide an opportunity of cross-examining four individuals, two of whom were named in the show cause notices - Held that:- This Court is of the opinion that the petitioner, who has an alternative remedy, may invoke it, if so advised. At the same time, in the event the appeal is filed before the CESTAT, it would consider the same on merits and remand the matter for appropriate provision of opportunity of cross-examining the concerned witnesses. This remand is only for the purposes of providing opportunity of cross-examination to the petitioner (in other words, the appropriate remit order to record the cross-examination of witnesses only shall be made). This Court is also informed that the requirements in the statute of pre-deposit in all these cases would work out a substantial amount of about ₹ 1.4 crores. The CESTAT shall entertain and adjudicate on the merits of the appeal, including the remand provided the petitioner deposits 1% of the penalty amount in each case levied by the order-in-original within a time stipulated by the CESTAT - petition disposed off.
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2019 (4) TMI 255
Validity of demand notice - service of less charge demand notices sent to the CHA of the appellant - proper service of notice or not - time limitation - Classification of imported goods - Marble Slabs - classifiable under heading 6802 21 90 or not? - benefit of N/N. 4/2006-CE dated 01.03.2006 - Held that:- As per Section 28, the notice to be given to the person who is liable to pay the duty - In this case, the appellant are only person who are liable to pay the duty and the notice should have been served on the appellant - Unless otherwise, the other person, in this case the CHA, is specifically authorized for the purpose of receiving the less charge demand notice. Nothing is on record to show that the appellant has specifically given authorization to the CHA for receiving the less charge demand notice. The appellant received the less charge demand notices from their CHA M/s. Shakti Enterprises Pvt. Limited only on 23.08.2008 i.e. much after the lapse of six months time provided under Section 28 of the Customs Act, 1962. Therefore, all the less charge demand notices are time-barred. Appeals are allowed on limitation without going into merit of the case.
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2019 (4) TMI 254
Smuggling - Gold Biscuits - time limit for issuance of SCN - Held that:- A perusal of the Mahazar makes it clear that is has recorded what transpired on the eventful day of 03.10.2018 at the Airport upon the arrival of the appellant. There are two witnesses already assembled at the arrival hall, at 19:15 Hrs; but it is not clear if they were also the other passengers are outsiders. In their presence, the said Mahazar is drawn, they witness the appellant identifying his bag/baggage, its screening through the screening machine and then the body search of the appellant at Air Intelligence Unit Room situated near arrival hall. The gold chain allegedly concealed in the neck area and two Gold Biscuits allegedly hidden in his both socks were found and the same were weighed with the help of electronic weighing scale available in the customs arrival hall; they also witness one Mr. C.N. Badrinath being requested for valuation, who heeds to the request and weighs the above items there only and informs that as on 04.10.2016, the rate per gram was ₹ 3138/-, assess the value of the above items at ₹ 10,45,833/-; he also submits a certificate dated 04.10.2016, etc. - the above Mahazar dated 03.10.216 has also been signed by the witnesses on 03.10.2016 wherein it refers to valuation certificate dated 04.06.2016, i.e, the next day. With this discrepancy, the evidentiary value of the Mahazar cannot therefore be sustained. The appellant is only questioning the validity of SCN on the ground that the same is in violation of Section 110(2) of the Act. Admittedly, there is no allegation by the Revenue that the service of the notice in question is for the reasons attributable to the assessee. The time-limit of six months has also been reiterated, even by the CBEC, vide Circular No. 7/2013-Cus. Dated 19.02.2013. Appeal allowed.
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Insolvency & Bankruptcy
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2019 (4) TMI 253
Corporate insolvency resolution process - validity of suit or recovery of dues in the trial court - attempt on the part of the petitioner to escape liability of paying dues - Difference between initiation of corporate insolvency process by financial creditors under section 7 of the IBC and insolvency resolution process by operational creditors under section 8 of the IBC - HELD THAT:- As relying on M/S. INNOVENTIVE INDUSTRIES LTD. VERSUS ICICI BANK & ANR. [2017 (9) TMI 58 - SUPREME COURT OF INDIA] when insolvency resolution is by an operational creditor, the moment there is existence of dispute, the operational creditor gets out of clutches of the IBC. In the present case, although the resolution process was initiated by a financial creditor under section 7 of the IBC, the resolution plan prepared under the provisions of the IBC and the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, recognized the claim of respondent No.1 as an operational creditor and under Regulation 38 of the aforesaid Regulation of 2016, priority is given to the amount due to respondent No.1 as an operational creditor over the dues of financial creditors. Thus, when the resolution plan provides for the dues payable to respondent No.1, subject to the pending suit, it cannot be said that any error was committed by the Trial Court in passing the impugned order. The aforesaid position of law, when applied to the facts of the present case clearly demonstrates that the attempt on the part of the petitioner to escape liability of paying dues of respondent No.1 as an operational creditor, was correctly shot down by the Trial Court by passing the impugned order. Therefore, it is held that the suit filed by respondent No.1 cannot be dismissed as claimed by the petitioner in the application at Exhibit153. Accordingly the writ petition is found to be without any merit and it is dismissed.
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2019 (4) TMI 252
Corporate Insolvency Resolution Process - pre-existing dispute - Corporate Debtor failed to make payment of the principal amount and interest @18% towards the supply of elastic rail clips - HELD THAT:- Referring to case of MOBILOX INNOVATIONS PRIVATE LIMITED VERSUS KIRUSA SOFTWARE PRIVATE LIMITED [2017 (9) TMI 1270 - SUPREME COURT OF INDIA] and VIJAY NIRMAN COMPANY PVT. LTD. [2018 (9) TMI 1533 - SUPREME COURT OF INDIA] in case of a dispute existing between the parties prior to the issuance of the demand notice, a petition under S. 9 of IBC is liable to be dismissed. The Corporate Debtor vide emails dated 27.9.2016 and 30.11.2016 informed the Operational Creditor about quality issues with respect to the Elastic Rail Clips. The Operational Creditor sent the demand notice on 13.1.2018. Therefore, before the issuance of demand notice, the Corporate Debtor raised a dispute regarding quality. Petition dismissed
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2019 (4) TMI 251
Corporate insolvency procedure - Resolution Plan approval by the Committee of Creditors of the Debtor Company - Resolution Applicant is seeking waiver in respect of number of liabilities - HELD THAT:- Resolution Applicant is seeking waiver in respect of number of liabilities, however, the same should be restricted to those government liabilities which are ascertained and crystallised as on the date when the CIRP commenced. On commencement of CIRP due to pronouncement of moratorium if any tax is levied, the same requires waiver. The approval of the CoC of a Resolution Plan is to be accepted in toto by the Adjudicating Authority if a 75% voting share approves the said Plan. Because of the latest decision the scope of any suggestion or alteration in the impugned Resolution Plan is very limited. As far as the procedure is concerned, in this case the same has been followed as per the provisions of the Insolvency Code, therefore, the Resolution Plan has to be approved. On the approval of the Resolution Plan, this Bench directs that moratorium order passed by this Tribunal under Section 14 of the Code shall cease to effect and that the Resolution Professional shall forward all the record relating to the conduct of the corporate insolvency resolution process and the Resolution Plan to the Insolvency and Bankruptcy Board of India to be recorded on its database. Copy of this order be communicated to the Resolution Professional, Resolution Applicant, Financial Creditors and the counsel representing the guarantors of the suspended Board of Directors.
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PMLA
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2019 (4) TMI 250
Offence under PMLA - attachment of property involved in money laundering - HELD THAT:- The assets which have been the subject matter of attachment in the appeals at hand are not tainted property , the same having been seemingly acquired prior to the criminal activity giving rise to accusations of money-laundering. But, they are sought to be attached and subjected to eventual confiscation on account of they being the alternative attachable properties or deemed tainted properties, which is permissible in law. The audi car (subject matter of first appeal) was acquired by a transaction which has no direct connection with the case of money-laundering. There is no clarity as to the value of proceeds of crime which are to be confiscated as against value of the attached property as indeed the extent of the debt yet to be recovered by the secured creditor. The monetary gains made by the transactions which are subject matter of the accusations of money-laundering on account of illicit foreign exchange transactions (third appeal) or the case of cheating by use of fabricated defence supply orders (fourth appeal), both involving public servants, require closer scrutiny as to the claim of the respondent banks of bonafide action. Though there is no such element of complicity on part of any of the officials of the respondent banks in the case relating to fictitious hospital equipment (second appeal) or the one involving consortium of banks (fifth appeal), scrutiny respecting legitimacy and bonafide of the claim on the touchstone, inter alia, of the subsisting value of the secured interest and chronology of events leading to attachment would be necessary. It will be appropriate that such further scrutiny as is necessary on the touchstone of above principles is undertaken by the appellate tribunal after calling for further responses (and inputs) from each side. Ordered accordingly. Thus, the appeals are allowed. The impugned decisions of the appellate tribunal are set aside. The matters arising out of the appeals of the respondents stand revived and restored for further consideration by the appellate tribunal.
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2019 (4) TMI 249
Prevention of Money Laundering - retain the records without recording any ‘reason to believe’ - HELD THAT:- In the present case, the statutory obligations laid down in section 20 (1), 20(2), 20 (4) and 21(4) of PMLA have not been complied with. An attempt has been made to retain the records without recording any ‘reason to believe’. The provisions of section 8 (3) (a) provides that the attachment or retention of property or record seized shall continue during the investigation for a period not exceeding ninety days. The said prescribed period has already been expired as more than a year has already elapsed but the properties and records have not been returned so far which is in clear violation of the provisions of PMLA. No prosecution complaint has been filed against the Appellant. In the light of above, the present appeal is allowed. The impugned order is set-aside pertaining the appellant. The application filed by the respondent under Section 17(4) for retention of documents is dismissed accordingly. The document/records shall be returned to the appellant by the respondent forthwith.
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Service Tax
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2019 (4) TMI 248
Consulting Engineering Services - levy of service tax - Held that:- The instant appeal is disposed of in terms of the signed order.
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2019 (4) TMI 247
Principles of Natural justice - denial of cross-examination of the persons - Clearing and forwarding agency, custom house agent and steamer agency services - Held that:- Indisputably, the statements of the petitioner No.2-the Managing Director of petitioner No.1 company were recorded by the respondent Nos.3 and 4. Petitioner No.2 cannot seek for cross examination of himself. Similarly respondent No.4 is the Superintendent, who is the adjudicating authority, has discharged the statutory functions, exercising the powers vested under the provisions of the Act. No cross-examination of any witnesses whose statements are recorded by the adjudicating authority is sought in the present proceedings, petitioner No.2 is requesting to cross-examine himself and the adjudicating authority which is inappropriate and cannot be acceded to - the proceedings are restored to the file of the Commissioner of Central Excise and Service Tax to provide an opportunity to file reply/objections and to adduce evidence, if any, to the petitioners - petition disposed off.
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2019 (4) TMI 245
Scope of the terms of contract - reimbursement of additional liability of service tax - supply and washing of bedrolls to the passengers travelling in the trains - Held that:- The issue raised in these present writ petitions is a matter of contract between the two parties and the same cannot be pronounced by this court at this stage prematurely. Neither the said issue for bearing additional tax liability has been adjudicated by any competent authority of the respondent-railway or the Service Tax Department nor the parties have raised this dispute before the agreed alternative forum of arbitration. There has been no novation of contract between the parties after July 1, 2012 with regard to variation of rates for the services rendered by the petitioner-contractor nor apparently the respondent-railway has agreed to bear the additional tax liability in the form of service tax after its imposition by the amendment of law with effect from July 1, 2012. This court respectfully cannot adopt the said view of the Delhi High Court in the case of GOVT OF NCT OF DELHI VERSUS MBL INFRASTRUCTURE LTD. [2012 (3) TMI 437 - DELHI HIGH COURT], in the present case as the terms of the contract are different and rates quoted are inclusive of all taxes and moreover the parties to the contract should have allowed the said issue to be either mutually agreed between the parties either by way of novation of the contract terms or by getting the matter adjudicated in the forum of arbitration. Unless the said additional service tax liability is ex-facie admitted in the contract, this court cannot either vary the terms of the contract nor direct the respondent-railway to reimburse the service tax liability to the petitioner-contractor. Petition dismissed.
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2019 (4) TMI 244
Non-payment of service tax - Management Consultant Services received form the overseas providers - Business Auxiliary Services provided in India - Held that:- The words “The Central Excise Officer” used in Section 73 (1) & 73 (2) of Finance Act, 1994 cannot be read to be the same officer. It suffices if a Central Excise Officer is vested with such powers becomes “The Central Excise Officer” for the purposes of the Sections referred above. It is not the case of the appellants that the ADG, DGCEI issued the SCN and the Commissioner of Central Excise who adjudicated the case is not Central Excise Officers. In bureaucracy, officers keep on changing due to transfers, etc. If one considers the proposition that the same officer who has issued the SCN should adjudicate the case leads to an impracticable situation. Reverse charge mechanism - services availed from a provider located outside India - Liability of service tax - Held that:- The appellants are not required to pay Service Tax under ‘reverse charge mechanism’ for the period prior to 18.04.2006 even though a payment for the part of the period was received after 18.04.2006. Liability of service tax - commission charges received - Cum-duty benefit - Held that:- The appellants are entitled for cum-duty benefit for the Service Tax payable or paid by them for the period 09.07.2004 to 31.03.2007. For this reason issue needs to go back to the adjudicating authority to compute the cum-duty Service Tax for the period 09.07.2004 to 31.03.2007. Extended period of limitation - penalty - Held that:- The appellants have not demonstrated their bonafides vis-à-vis invocation of extended period. It is not the case of the appellants that they have kept the Department informed of all their activities and made a mention of the same in the CT-3 Returns. In the absence of the same, the Department would have no way to find out the taxable services rendered by the appellants and the remuneration received. Therefore, the extended period is squarely invokable in the case - the penalty cannot be imposed under both Sections 76 & 78 of the Finance Act, 1994 during the relevant period. Therefore, the penalties imposed under Section 76 is set aside. Appeal allowed by way of remand.
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2019 (4) TMI 243
Mandap Keeper service - demand of service tax - Held that:- The appellants are not taxable as a Mandap Keeper in respect of corporate booking of rooms where conference hall is provided as a complimentary. However, wherever the appellants have only let out the said banquet/ conference halls for use and charge for the same, appropriate Service Tax is payable - Demand of Service Tax on Mandap Keeper shall be restricted to the cases where the banquet halls/conference rooms have been allowed to be used per se. Beauty treatment and health fitness service - Hair cutting services - demand of service tax - Held that:- The main dispute between the Department and the appellants is about providing the bifurcation and documentary evidence thereof. We find that wherever the appellants have provided the services of therapeutic massage , the same shall not be liable for Service Tax and wherever, massage per se is provided Service Tax shall be paid. Similarly, it was contended by the Department that the appellants have not produced any documentary evidence that they were doing only hair cutting/dying during the period 01.08.2002 to 16.06.2005 - Service Tax in respect of Beauty Treatment and Health and Fitness Centre shall be re-computed after allowing cum-duty benefit. Club or association Service - Membership fee - demand of service tax - Held that:- It was held in number of cases that in view of the mutuality of interest and looking into the fact that the members of the club are providing services to themselves; no Service Tax is leviable on the same - demand set aside. Dry cleaning services - internet caf - demand of service tax - Held that:- The appellants claim that a small portion was for internet services and most of the receipts were for usage of ISD/STD telephone. We find that necessary bifurcation may be submitted to the authorities for computation of applicable duty. Similarly, the appellants may produce proof regarding their claim that they have not provided dry clean service to their customers. Wherever they have provided such services to the customers, the same shall be chargeable to Service Tax. For this reason, we find that the case needs to be remanded back to the original authority for appreciation of evidence given by the appellants and to compute the Service Tax liability - Service Tax in respect of Dry Cleaning and Internet Caf shall be re-computed after allowing cum-duty benefit. Business Auxiliary Service - demand of service tax - It is not the appellant s case that they are receiving a fixed rent. They are getting a percentage of sales as the remuneration. They have allowed their premises to be utilized for the display and also providing sales personnel and packing materials and are offering facilities for branding of the products in a place outside the shop. This certainly amounts to promotion of business therefore charging of Service Tax under the BAS category is tenable - demand upheld. Extended period of limitation - Held that:- Mere submission of Returns regularly is not enough for the Department to know the activities of the appellant. The appellant being well aware of the provisions of Service Tax have not declared relevant details to the Department - extended period is invokable and penalties are imposable - however, during the relevant periods both under Section 76 and Section 78 cannot be imposed. Appeal allowed in part and part matter on remand.
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2019 (4) TMI 242
Management Maintenance or Repair Services - services of construction of roads and clearing and cooling pond materials - non-payment of service tax - January 2006 to September 2006 - N/N. 25/2012-ST dated 20.06.2012 - Held that:- Notification mentiones that the road should be for use by general public whereas Section 97 does not mention any such condition. The Notification cannot go beyond the statute and in case of a difference; statute shall prevail over the Notification. Moreover the work undertaken by the appellant comes under the category of Works Contract and therefore is not taxable before 01.06.2007. Clearing of cooling pond materials undertaken by the appellants - Held that:- The work order was for 10,000 Cu.M @ 180 per Cu.M. Therefore, this work also comes under the ambit of Works Contract and therefore not chargeable Service Tax before 01.06.2007. In view of this the other submissions of the appellants that they come under transportation service and that VAT has been paid on the work undertaken for clearing of cooling pond become redundant - Appeal allowed.
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2019 (4) TMI 241
Cleaning services to Child Trust Hospital - CBEC circular in F. No. B1/6/2005-TRU dated 27.7.2005 - Held that:- In the present case, the assessee has produced documents to show that the said hospital been given approval under section 80G(5)(iv) of the Income Tax Act for deduction in donations made to Kanchi Kamakoti Child Trust Hospital. The department merely alleges that the hospital is receiving fees and therefore cannot be considered as non-commercial hospital. No evidence is put forth by the department that the hospital has collected expenses / fees from patients for treatment. If a hospital merely collects registration fees for registration of the patient and does not collect expenses for treatment, it cannot be said that the said hospital would fall out of the category of non-commercial building / hospital. The department having failed to establish with evidence, that Child Trust Hospital is a commercial building, the conclusion arrived by the Commissioner (Appeals) that the said hospital is a non-commercial hospital and the services rendered by the assessee to the hospital would not come within the purview of service tax requires no interference. Imposition of penalty - outdoor caterings service - extended period of limitation - Held that:- Apart from alleging that the assessee did not disclose the service tax payable under cleaning service, there is no allegation of suppression of facts on the part of the assessee. The cleaning services are not subject to levy of service tax - the conclusion of the Commissioner (Appeals) that demand for the extended period cannot sustain requires no interference, the penalty has been rightly set aside by the Commissioner (Appeals). Outdoor catering service - demand of service tax - Held that:- Appellant have availed credit on various input services like telephone, courier, security which are used for providing outdoor catering service. On such score, it is very much clear that there is violation of the condition of the notification. Therefore, the assessee cannot take the benefit of notification. The demand confirmed by Commissioner (Appeals) for the normal period on outdoor catering service is legal and proper. Resultantly, the impugned order does not call for any interference. Appeal disposed off.
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Central Excise
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2019 (4) TMI 240
Interpretation of statute - substitution of old rules with new CENVAT Rules 2002 - Whether the demand issued under erstwhile Rule 57(l)(ii) is legally valid after those Rules were substituted with new CENVAT Rules 2002 and whether the proceedings could continue under Section 38A of Central Excise Act, 1944 in view of Sections 131 and 132 of the Finance Act, 2001 which have introduced saving and validating provisions? - Held that:- Omission would be included in the meaning of repeal. Section 38A of the Act (inserted in 2001 with retrospective effect from 1944) will make the notice dated 17th January, 2000 valid even post 1st April, 2000. This is in view of Section 38A (c) of the Act which states that any amendment, repeal, supersession or rescinding shall not affect any right, privilege, obligation or liability acquired, accrued or incurred under any rule so amended, repealed, superseded or rescinded. This is further qualified by providing that any investigation, legal proceedings may be continued, as if the Rule had not been amended, rescinded, repealed or superseded. In fact, the above provision is an amalgamation of Section 6 6A of the General Clauses Act, 1897 which applies to Acts, while Section 38A of the Act is specifically in relation to Rules under the Act - the view of the CESTAT cannot be upheld. Whether on the facts and in the circumstances of the case the observation of the CESTAT that the principles of natural justice were violated on the grounds mentioned in para 5(e) (CESTAT order page 13) when it is on records that the Respondents herein themselves were responsible for not availing the opportunity offered from time to time of inspection of all documents? - Held that:- his submission cannot be accepted as the entire basis of the Revenue's case against the Respondents is circumstantial to conclude that superior grade steel was diverted elsewhere after taking MODVAT Credit thereon and substituted with a lower grade steel to manufacture said goods. The correctness of these statements made by the person can only be tested, if the same is processed through cross examination of the party affected by it. In the absence of cross examination, the order suffers from breach of natural justice. So also, non-supply of documents relied upon by the Revenue would make the order bad, being in breach of natural justice - the finding of the CESTAT that there has been a breach of principles of natural justice in the order passed by the Commissioner of Central Excise is upheld - decided in favor of the Respondent-Assessee and against the Appellant-Revenue. Whether the CESTAT was right in law in setting aside penalty of 85,00,000/imposed on Shri C.I. Vaghani, Director of M/s. Milton Polyplas (I) Pvt. Ltd. and Managing Director of M/s. Milton Plastics Ltd. and ₹ 45,00,000/on Shri Satish Kulkarni, Chief of Operation of Milton Polyplas (I) Pvt. Ltd., under Rule 209A of Central Excise Rules 1944? - Held that:- We are not examining this issue as the entire show cause notice has now been restored to the Commissioner of Central Excise for fresh disposal after following the principles of natural justice - effectively this issue is also remanded for reconsideration Appeal disposed off.
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2019 (4) TMI 239
Rejection of Settlement Commission application - non-fulfillment of condition of Section 32E of the Central Excise Act, 1944 - petitioner has contended that the Superintendent has travelled beyond the order which was unconditional and the Commission has committed serious error in relying on the letter issued by the subordinate officer - Held that:- Even if condition u/s Section 32 is mandatory, the appropriate remedy for the Registrar or the Superintendent is to go before the judicial member of the Commission. The order is required to be modified, however, the Commission subject to provisions of Section 32 admitted the matter and written a letter and taking support of subordinate officer of the Commission passed the order which is not proper. The Commission will reconsider the matter in view of law laid down by the Commission itself in accordance with law - petition allowed.
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2019 (4) TMI 238
Imposition of penalty u/r 26 of the Central Excise Rules, 2002 - availment of credit u/r 12B of Central Excise Rules, 2002 - fake invoices without receiving the goods - Held that:- The case of revenue against the said appellant was on all four identical to the case of Appellant-1 and the quantum of penalty imposed on him was same as that imposed on present appellant. Tribunal has after consideration of all the issues dismissed the appeal in that case. Following the said order of tribunal and taking note of the fact that by their acts appellant has/ was in process of facilitating the fraudulent rebate in excess of ₹ 1,00,00,000/- we uphold the order of Commissioner against Appelant-1 and dismiss his appeal. Appellant -2 has knowingly or unknowingly became party to the conspiracy and fraud committed by Shri K K Gupta and his Muni Group of Companies. Accordingly we have no hesitation in holding that penalty under Rule 26 of Central Excise Rules, 2002 is justified - Commissioner has imposed a penalty of ₹ 1,00,00,000/- on Appellant-2, who is Group B Central Government Employee. The penalty imposed is his highly disproportionate to the means of the person on whom it has been imposed, might be equivalent to all his life earnings. In our view taking into account all the facts and the fact that Appellant-2 could have been the innocent victim of the conspiracy of Shri K K Gupta, we are of the view that ends of justice will be met if penalty amount on Appellant-2 is reduced to ₹ 10,00,000/-. Appeal allowed in part.
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2019 (4) TMI 237
CENVAT Credit - area based exemption - genuineness of purchase of Menthol Solution & DMO - denial on the grounds that the farmers are non existence ensuring non supply of raw material by commission agents to J&K based units and absence of evidence by the appellant - Held that:- The appellant had shown from the records that there was periodical checks conducted by the jurisdictional Central Excise officers, who found that the suppliers are manufacturers of the goods and we also take note of the fact that the suppliers has obtained necessary permission from the Directorate of Industries to manufacture the goods and necessary permission from the Pollution Control Board and moreover during the period, the suppliers are selling the goods and it was found that there was movement of goods inward/outward. The suppliers are manufacture of goods and have cleared the same on payment of duty, in that circumstances, the cenvat credit availed by the appellant cannot be denied - the appellant have correctly availed the cenvat credit on the goods supplied by their suppliers located in the state of Jammu & Kashmir - appeal allowed - decided in favor of appellant.
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2019 (4) TMI 236
SSI Exemption - values based exemption - clubbing of clearances - dummy units - Held that:- It appears that the basis for arriving at this proposition is that Navneet Industries had also filed ER-1 returns for the period April 2008 to July 2008 and that they had surrendered their registration certificate only w.e.f. 11.08.2008. All the same, there is no proof brought forth in the SCN that Navneet Industries were actually and still functioning from the very same premises which had been taken over by the appellant, namely, at No. 142-A, Sadayankuppam, Village Road, Manali, Chennai-600 0103. For reasons best known to Navneet Industries, the said entity has filed ER-1 returns for clearances purportedly effected by them. However, even the copies of ER-1 returns filed by Navneet Industries relied upon in the SCN were not furnished to the appellants herein. There is also no indication that investigations were extended by department to Navneet Industries also, to bring out irrefutable evidences that the said entity had been manufacturing in the same premises even after they handed over the premises to the appellants. The argument that in the present case, since clubbing is sought to be made of two units which are allegedly manufacturing and clearing goods from the same premises, therefore SCN is not required to be given to the other unit is a facile one. When the value of clearances of another unit, whether it is in the same premises or far removed is sought to be added for the purpose of arriving at aggregate clearances ie., the ratio of the case laws relied upon by the Ld. Advocate will apply in all fours. The allegations made in the SCN cannot be sustained - Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2019 (4) TMI 235
Levy of tax - purchase of wheat - Correctness of disclosed purchases made by the applicant from the registered dealers - Held that:- The order passed by Tribunal dated 08.02.2019 is unsustainable as it has not recorded any finding to the affect the ground taken by the department regarding the survey made on 23.05.2015 and, further, the findings recorded by the Tribunal to the extent that as the selling dealer has not disclosed the sale for the month of April, May and June 2015 in his return, the purchases so made by the revisionist shall be held to be from the unregistered dealer. As the tribunal is the last fact finding court, it should have recorded specific finding for arriving at such conclusion. The order passed by Tribunal dated 08.02.2019 is set aside and the matter is remanded back with the direction to the tribunal to decide the case afresh on merits - revision allowed by way of remand.
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2019 (4) TMI 234
Rectification of mistakes - mistake apparent on the face of the record - nonspeaking order - principles of natural justice - Held that:- It is well-settled law that no writ jurisdiction can ordinarily be exercised where alternative and efficacious remedy available under the Act is not exhausted by the assessee - The endeavour made by the learned senior counsel to bring the case within the exceptions to the rule of alternative remedy recognised by the courts has failed. On this ground alone, it can be held that the writ petition is not maintainable. The writ petitions does not merit any consideration and stands dismissed.
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2019 (4) TMI 233
Levy of higher tax - inter-State sales - C-Forms - composite sale transaction - deferred payment which was not included in the particulars of C-Form would not take the sale out of one under Section 8(1) of the Central Sales Tax Act, 1956 - Held that:- Section 8(1) and 8(4) of the CST Act read with Rule 12 of the Central Sales Tax (Registration and Turnover) Rules, 1957 makes it clear that concessional rate can be availed by the selling dealer only if the purchasing dealer furnishes a declaration duly filled and signed by him before the latter's Assessing Officer. C-Form is the necessary requirement for availing concessional rate; which, otherwise, would have to be levied under sub-section (2) of Section 8. As per sub-section (4) of Section 8, the declaration has to be duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars in a prescribed form and furnished from a prescribed authority. The prescribed authority is the AO of the purchasing dealer. The prescribed form is C-Form as is available under the Rules of 1957. The prescribed particulars are also very clear from the C-Form as available in the Rules of 1957 itself, which is in triplicate and inter alia has to contain the particulars of bills or cash memo with the amount; being the sale consideration. Hence, only that portion of the bill amount as available in the C-Form could be levied with tax at the rates applicable under sub-section (1) of Section 8. The assessment years are 2005-06 and 2006-07 and after more than a decade, the assessee cannot be permitted to produce C-Forms which relates to long prior assessment years. The very submission of the assessee that if time is granted to produce C-Forms even now, indicates that there is no C-Form furnished by the purchasing dealer till now. Levy of higher tax under Section 8(2) of the CST Act is perfectly justified - decided in favor of the Revenue and against the assessee and reject the revisions.
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Indian Laws
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2019 (4) TMI 246
Imposition of exemplary cost - failure to initiation of disciplinary action - It is contended by the learned counsel for the petitioner that the petitioner was wholly unaware of the pendency of the proceedings and nature of proceedings subsequent to his transfer - Opportunity of hearing - Held that:- It is deposed that the petitioner was not aware of the sentiments expressed by the Court nor was it ever intimated to him and that if he had been made known of the sentiments expressed by the Court, he would have taken immediate corrective steps and he further states that he has the highest regards for the order/direction issued by this Court. That at no point of time, he has ever intended to commit any defiance of the orders of this Court. He contends that neither the department nor the counsel appearing on behalf of the department have ever conveyed the sentiments of the Court. Hence he was not aware of the developments. It is contended that no notice was issued to him by this Court nor was he heard before passing strictures against him and imposing costs. Apex Court in the case of STATE OF KARNATAKA VS PUBLIC CONCERN FOR GOVERNANCE TRUST AND OTHERS, [2007 (1) TMI 548 - SUPREME COURT OF INDIA] to contend that the Courts must afford an opportunity of hearing to the concerned person before passing strictures against them. The contentions raised on behalf of the petitioner is not controverted by the counsel for the respondents and a perusal of the records also does not indicate as to whether any notice was sent to the petitioner or that he was put on notice or that he was aware of the sentiments expressed by this court. The said observations rendered without affording opportunity to the petitioner are required to be struck off - Accordingly it is struck off.
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2019 (4) TMI 232
Maintainability of plaint - rejection of the plaint on the ground that the suit was barred under Section 4 of the Benami Transaction (Prohibition) Act, 1988 - Prohibition of the right to recover property held benami - Whether the matter comes within the purview of Section 4(3) of the Act? Held that:- Whether the plea raised by the appellant is barred under Section 4 of the Act or not could not have been the subject matter of assessment at the stage when application under Order VII Rule 11 CPC was taken up for consideration. The matter required fuller and final consideration after the evidence was led by the parties. It cannot be said that the plea of the appellant as raised on the face of it, was barred under the Act. The approach must be to proceed on a demurrer and see whether accepting the averments in the plaint the suit is barred by any law or not. The application preferred by the second defendant under Order VII Rule 11 CPC is dismissed - appeal allowed.
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2019 (4) TMI 231
Consumer protection - validity of one sided agreement between the builder and buyer - right of buyer of flat in case of default committed by the builder / developer - Direction to pay the amount awarded by the National Commission with Interest - discharge of loan amount - Tripartite Loan Agreement - Held that:- In the present case, admittedly the Appellant Builder obtained the Occupancy Certificate almost 2 years after the date stipulated in the Apartment Buyer s Agreement. As a consequence, there was a failure to hand over possession of the flat to the Respondent Flat Purchaser within a reasonable period. The Occupancy Certificate was obtained after a delay of more than 2 years on 28.08.2018 during the pendency of the proceedings before the National Commission. The Respondent Flat Purchaser has made out a clear case of deficiency of service on the part of the Appellant Builder. The Respondent Flat Purchaser was justified in terminating the Apartment Buyer s Agreement by filing the Consumer Complaint, and cannot be compelled to accept the possession whenever it is offered by the Builder. The Respondent Purchaser was legally entitled to seek refund of the money deposited by him along with appropriate compensation. A term of a contract will not be final and binding if it is shown that the flat purchasers had no option but to sign on the dotted line, on a contract framed by the builder - The contractual terms of the Agreement dated 08.05.2012 are ex-facie one-sided, unfair, and unreasonable. The incorporation of such one-sided clauses in an agreement constitutes an unfair trade practice as per Section 2 (r) of the Consumer Protection Act, 1986 since it adopts unfair methods or practices for the purpose of selling the flats by the Builder. There is no hesitation in holding that the terms of the Apartment Buyer s Agreement dated 08.05.2012 were wholly one-sided and unfair to the Respondent Flat Purchaser. The Appellant Builder could not seek to bind the Respondent with such one-sided contractual terms - appeal dismissed.
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2019 (4) TMI 230
Constitutional validity of Sections 35AA and 35AB of the Banking Regulation Act, 1949 - real bone of contention is a Reserve Bank of India (RBI) Circular issued on 12.02.2018, by which the RBI promulgated a revised framework for resolution of stressed assets - Held that:- Section 21 makes it clear that the RBI may control advances made by banking companies in public interest, and in so doing, may not only lay down policy but may also give directions to banking companies either generally or in particular. Similarly, under Section 35A, vast powers are given to issue necessary directions to banking companies in public interest, in the interest of banking policy, to prevent the affairs of any banking company being conducted in a manner detrimental to the interest of the depositors or in a manner prejudicial to the interest of the banking company, or to secure the proper management of any banking company. It is clear, therefore, that these provisions which give the RBI certain regulatory powers cannot be said to be manifestly arbitrary. When it comes to lack of any guidelines by which the power given to the RBI is to be exercised, it is clear from a catena of judgments that such guidance can be obtained not only from the Statement of Objects and Reasons and the Preamble to the Act, but also from its provisions. A cursory reading of Section 35A makes it clear that there is nothing in the provision which would indicate that the power of the RBI to give directions, when it comes to the Insolvency Code, cannot be so given. The width of the language used in the provision which only uses general words such as public interest and banking policy etc. makes it clear that if otherwise available, we cannot interdict the use of Section 35A as a source of power for the impugned RBI circular on the ground that the Insolvency Code, 2016 could not be said to have been in the contemplation of Parliament in 1956, when Section 35A was enacted. Dr. Singhvi s contention must, therefore, fail. Section 35AA makes it clear that the Central Government may, by order, authorise the RBI to issue directions to any banking company or banking companies when it comes to initiating the insolvency resolution process under the provisions of the Insolvency Code. The first thing to be noted is that without such authorisation, the RBI would have no such power. There are many sections in the Banking Regulation Act which enumerate the powers of the Central Government vis- -vis the powers of the RBI. The Banking Regulation Act specifies that the Central Government is either to exercise powers along with the RBI or by itself. The role assigned, therefore, by Section 35AA, when it comes to initiating the insolvency resolution process under the Insolvency Code, is thus, important. Without authorisation of the Central Government, obviously, no such directions can be issued. The default would mean non- payment of a debt when it has become due and payable and is not paid by the corporate debtor. Therefore, what is important to note is that it is a particular default of a particular debtor that is the subject matter of Section 35AA. It must also be observed that the expression issue directions to banking companies generally or to any banking company in particular occurring in Section 35A is conspicuous by its absence in Section 35AA. This is another good reason as to why Section 35AA refers only to specific cases of default and not to the issuance of directions to banking companies generally, as has been done by the impugned circular. The impugned circular will have to be declared as ultra vires as a whole, and be declared to be of no effect in law. Consequently, all actions taken under the said circular, including actions by which the Insolvency Code has been triggered must fall along with the said circular. As a result, all cases in which debtors have been proceeded against by financial creditors under Section 7 of the Insolvency Code, only because of the operation of the impugned circular will be proceedings which, being faulted at the very inception, are declared to be non-est. The transferred cases and petitions are disposed off.
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2019 (4) TMI 229
Consumer protection - seeking refund or deficiency in service - condition of purchase of Installation of 1KVA Online UPS while purchasing the equipment - Held that:- The pre-installation requisite clearly stipulates that the appellant has to provide: (i) Efficiently air-conditioned room (ii) 1KVA Online UPS for running of the equipment (iii) Broadband connection for “i-track” (Remote Diagnostics Tool). The equipment will be provided with “i-track” remote facility at the time of installation. In the brochure supplied to the appellant, there is no commitment of supply of instrument with on-board laundry facility. Thus, the appellant could not insist on on-board laundry facility which was never committed to be delivered to the appellant along with the instrument nor there could be any installation of the equipment without installation of 1KVA Online UPS as part of pre-installation requirements. The email from the manufacturer will not override the pre-conditions of installation which are in view of electricity supply conditions in the country. All the authorities under the Consumer Protection Act, 1986 (Act) have found that there is no deficiency in service or restrictive trade practice. There is no error in the orders passed by the Forums constituted under the Act which warrant interference in the present appeals - appeal dismissed.
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2019 (4) TMI 228
Regularization of the services of Forest Department - Learned Single Judge rejected the claim of the Appellants regarding the minimum of the pay scales by holding that such a direction cannot be granted under Article 226 of the Constitution of India - Held that:- The Appellants-herein are not entitled to be paid the minimum of the pay sales. We are not called upon to adjudicate on the rights of the Appellants relating to the regularization of their services. There is no opinion on the contention of the State Government that the Appellants are not entitled to the reliefs as they are not working on Group ‘D’ posts and that some of them worked for short periods in projects - the Appellants are entitled to be paid the minimum of the pay scales applicable to regular employees working on the same posts. The State of Uttar Pradesh is directed to make payment of the minimum of pay scales to the Appellants with effect from 1st December, 2018. Appeal allowed.
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2019 (4) TMI 227
Validity of initiation of the complaint by the Special Power of Attorney of Sairabee - Held that:- The decision of this Court in A.C. Narayanan vs. State of Maharashtra and Another [2015 (4) TMI 847 - SUPREME COURT OF INDIA], wherein this Court has clearly held that a complaint filed by the power of attorney would be maintainable in law. If that is so, the initial complaint filed by the appellant on behalf of Sairabee as the complainant would not be invalid in law as held by the High Court in the order under challenge. After the death of Sairabee, the application filed by the appellant was to continue the criminal prosecution as the legal heir of the deceased Sairabee, the High Court seems to have understood this application to be for continuance of the criminal prosecution in his capacity as a Power of Attorney. The High Court therefore ought to have allowed the continuance of the proceedings as prayed by the appellant and ought not to have quashed the proceedings as it has been done - Appeal allowed.
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