Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
April 9, 2020
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Levy of GST - salary paid to Director of the company who is paid salary as per contract - Reverse charge mechanism (RCM) - the services rendered by the Director to the company for which consideration is paid to them in any head is liable to pay GST under RCM - Situation will remain same in case the Director also is a part time Director in other company also - AAR
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Classification of service - “Leasing service” against payment of Royalty - rate of GST - royalty for extraction of iron - till 31.12.2018 the rate of GST on the impugned services was applicable at the rate of tax as applicable to like goods involving transfer of title of goods i.e. 5% in the case of iron ore, the goods supplied by the applicant, and the rate of GST stands increased to 18% (CGST 9% + SGST 9% ) from 01.01.2019 onwards. - AAR
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Levy of GST - water charges collected from the customers (residential society) for supply of water under Contract Il - The supply of water in Contract-Il and supply of maintenance services in Contract-I are to the same society (RWA) and relevant to each other, hence there appears no case of direct supply of water by the applicant to the individual residents of the society(RWA). - the applicant is required to pay GST as applicable on Contract-I. - AAR
Income Tax
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Disallowance u/s.14A - investment in shares - Assessee had aggregate interest-free funds by way of share capital and reserves which are more than the investment in shares and mutual funds - Thus, in this way, the assessee was having enough interest-free funds and, hence, the disallowance out of interest expenditure could not have been made - AT
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Penalty u/s 271D - contravention of Section 269SS - cash loan taken by the assessee - There existed reasonable cause for the assessee for accepting cash loans from his own brother-in-law and since there is nothing to suggest that the transaction is a commercial transaction and is not genuine, penalty liable to be deleted - AT
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Income accrued in India - Article 15(1) of India-Austria DTAA agreement - if services are rendered outside India such income would not be taxable in India - the salary and the foreign allowance was received in India for the services rendered abroad and by virtue of DTAA and the Act, there is no bar in law for receiving the money in India. - AT
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Addition of long term capital gain u/s. 50C - Provisions of section 45(3) is not a specific provision overrides the other provisions of the Act, importing a deeming fiction provided in section 50C of the Act cannot be extended to another deeming fiction created by the statute by way of section 45(3) to deal with special cases of transfer. - AT
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Disallowance of bogus purchases - Addition @ 12.5% of the aggregate of disputed purchases - Even the entire transaction are not verifiable the lower authorities are entitled to tax the income component of transaction only - AO has made a reasonable disallowance, which does not require any interference - AT
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Exemption u/s 54F - investment in the name of husband / spouse - In the absence of an express provision contained in these provisions that the investment should be in the name of the assessee only any such interpretation would amount to introducing words in the provision which are not there. - AT
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Penalty u/s 271 (1)(c) - unsecured loan treated as unexplained cash credit u/s 68 - the assessee cannot get the benefit of immunity from the penalty merely there was no specific charge in the penalty notice issued under section 274 of the Act or in the assessment order - AT
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Income from house property - deductions claimed u/s 24(a) - society charges - If, the amount paid to society charges includes municipal taxes levied by the local authorities, then to that extent the Ld. AO is directed to allow deductions out of rental income. If the amount relates to maintenance of property, then the Ld. AO is right in denying deductions for said amount out of rental income.- AT
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Disallowance u/s 36(1)(iii) - Interest free funds to sister concerns - the net worth of the assessee has been reduced substantially due to losses incurred from the business. At the same time, the long term borrowings and short term borrowings are increased substantially. From the above, it is very clear that there is no interest free fund available with the assesee to explain loans and advances given to sister concerns. - Additions confirmed - AT
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Disallowance on account of depreciation on intangible assets being value of license acquired from the Indian Railways for running the container trains on Indian Railways - commercial right acquired by the assessee by way of this license for an enduring benefit would amount to capital asset and eligible for depreciation u/s 32(1)(ii) - AT
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Unexplained cash payment made by the assessee relating to the admission of his son into P.G. medical course under management quota - the addition is based on the statement of the third party though assessee has not specifically asked for cross examination, it is the duty of the Assessing Officer to give opportunity to the assessee and allow him cross-examination. - AT
DGFT
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One-time condonation under the EPCG Scheme–Extension till 31.03.2021. - Public Notice
Indian Laws
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Guidelines for Functioning of Court during the outbreak of COVID-19 pandemic - in exercise of the powers conferred on the Supreme Court of India by Article 142 of the Constitution of India to make such orders as are necessary for doing complete justice, directions issued - SC
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Restraint from declaring the account of the petitioner as a Non-Performing Asset (NPA) - effects of COVID-19 pandemic. - The classification of the account of the petitioner as an NPA on 31.03.2020 could not have been done by the respondent. Accordingly, status quo ante is restored qua the classification of the account of petitioner and the account classification as it stood on 01.03.2020 shall stand restored - HC
Service Tax
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Enhancement of penalty u/s 78 from 25% to 100% by the corrigendum order - WCS was highly litigated and lot of interpretation issues were there. Taking pragmatic view of the matter, it is found that there is no contumacious conduct on the part of the appellant and accordingly, the penalty under section 78 & section 77 is set aside - the corrigendum was issued beyond jurisdiction, and is a nonest in law. - AT
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Erection, Commissioning & Installation services - there is no difference between the activity of laying an electrical cable and the activity of laying an optical fibre cable and the Board circular applies in both the cases and no service tax can be charged on this activity. - AT
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Man Power Recruitment and Supply Agency Service - reverse charge mechanism (RCM) - the appellants have issued Form-16 series to the said employees as their employer and deducted TDS from their salaries and therefore the appellants were employer and there was employer-employee relationship - No service tax liability - AT
Central Excise
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Jurisdiction - power to issue SCN - Refund of unutilised CENVAT Credit - the appellant has so far not been put to any disadvantage because the show cause notice proposing recovery of excess refund is yet to be adjudicated upon by the Asst. Commissioner. - AT
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CENVAT Credit - input services - GTA service - outward transportation of finished goods - If the appellant has included the freight charges in the transaction value while discharging the excise duty, they would be eligible for the credit of service tax paid on freight charges incurred by them upto the buyer’s premises. - AT
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Reversal of CENVAT Credit - The appellant has been availing CENVAT credit only on the proportionate amount of inputs which are gone into manufacture of either dutiable goods or in the manufacture of exempted goods which are exported. Therefore, there is no availment of common input credit. - Further, here goods are exported, direction by revenue to the petitioner to pay 10% of sale price of exempted goods u/r 6(3)(b) is not justified - AT
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Valuation - allowability of deductions - The Commissioner (Appeals) has allowed the discounts on the basis of the invoices, credit notes and equalised octroi/ entry taxes - Appeal of the revenue dismissed - AT
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Valuation - price variation clause - the price of finished goods is to be revised and duty is to be paid on higher price. In case the price of raw material falls, the appellant is entitled to claim less amount of the manufactured goods. Therefore, as per the said clause, as per price variation clause, the duty needs to be recalculated as per the amount received from the buyer towards supply of goods by the appellant. The same is required to be examined by the adjudicating authority. - AT
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Imposition of penalty u/s 209A of the erstwhile Central Excise Rules 1944 in remand proceedings - The order of dropping penalty was never challenged in any subsequent proceedings.. Therefore, in remand proceedings for third party, penalty cannot be imposed on the appellant. - AT
VAT
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Inter-state transaction or not - providing of foundation seeds to the farmers, supervision of its growing and dispatch from U.P. to Kota in the State of Rajasthan - The Tribunal has rightly held that this aspect of the transaction culminated in the State of U.P. wherein the procurement of the said seeds takes place from the farmers by the assessee/through their contractor is an intra-State sale - HC
Case Laws:
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GST
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2020 (4) TMI 235
Classification of service - Leasing service against payment of Royalty - rate of GST - royalty for extraction of iron - payment made to National Mineral Exploration Trust (NMET) Fund, District Mineral Foundation (DMF) Fund and Goa Mineral Ore Permanent Fund Trust (GMOPFT) - levy of GST- rate of GST . Leasing service against payment of Royalty - HELD THAT:- Royalty is a charge by the State Government in lieu of consideration of the exploitation and extraction of the mineral resources by the lessee. The payment of royalty is a statutory levy in accordance with the provisions of Mines and Mineral (Development and Regulation) Act, 1957 against licensing services by the Government for right to extract minerals and the same is subject to levy of GST under Reverse Charge Mechanism. Taxability - classification - rate of tax - contribution to the District Mineral Foundation (DMF), National Mineral Exploration Trust (NMET) and Goa Mineral Ore Permanent Fund Trust (GMOPFT) - HELD THAT:- The activities/ functions entrusted to the Trust are related to Exploration and Evaluation of Minerals which is duly covered under SAC code No. 997337 which classifies Licensing services for the right to use minerals including its exploration and evaluation - As per Section 9B of the MMDR Act, DMF (District Mineral Foundation) is a trust which is formed by the State Government with an objective to work for the benefits and interest of the persons and areas affected by mining-related operations. Any person who is liable to pay royalty towards the exploration of minerals shall pay a certain percentage of the royalty amount towards DMF. By no stretch of imagination, the contributions paid the said trusts can be treated as donation. In case of failure to contribute to the above trusts, the business/ rights of iron ore extraction would legally get hampered and terminated. Whereas, donations are always of voluntary nature here in the instant case there is a compulsion to make payment to the said trusts in proportion to the amount of royalty and sale proceeds. Thus there hardly remains any doubt that the contributions paid by M/S Cosme Costa to the said trusts are amounts being paid in the course of furtherance of their business activities only - Further, the activities carried out by DMF, NMET and GMOPFT are squarely covered under the clause (i) of the Section 2(17) of the GST Act, 2017 which enumerate any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities in the definition of the business . Liability to pay GST on royalty paid to the Goa Government and amount paid to the Funds - HELD THAT:- Section 2(98) of the GST Act, 2017 stipulates that reverse charge means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or sub-section (4) of Section 5 of the Integrated Goods and Services Tax Act - Further, Reverse Charge Mechanism is applicable for certain notified services as mentioned in the Notification No. 13/2017 -Central Tax (Rate) dated 28.06.2017. As per Sr. No. 5 of the said Notification, ser-vices supplied by the Central Government, State Government, Union Territory or Local Authority to a business entity attracts GST under reverse charge basis. Rate of GST on the supply (Royalty and amount paid to the Funds) the services of Licensing services for the right to use minerals including its exploration and evaluation - HELD THAT:- The services are covered under entry No. 17 of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017. On careful perusal of the notification it may be seen that the said services are specifically not mentioned in any of descriptions of entry No. 17 and thereby it qualifies to be categorized in the residual clauses/ serial of entry No. 17, wherein it has been specified that the rate applicable for such service should be the same rate as applicable for the supply of like goods involving transfer of title in goods - till 31.12.2018 the rate of GST on the impugned services was applicable at the rate of tax as applicable to like goods involving transfer of title of goods i.e. 5% in the case of iron ore, the goods supplied by the applicant, and the rate of GST stands increased to 18% (CGST 9% + SGST 9% ) from 01.01.2019 onwards.
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2020 (4) TMI 234
Levy of GST - water charges collected from the customers for supply of water under Contract Il - HELD THAT:- The applicant is involved in two agreements where Contract-I is for maintenance services provided to the Resident Welfare Association (RWA) and Contract-II is for supply of water to the individual resident residing in the society (RWA) - GST on services provided by the Resident Welfare Association (RWA) to its resident members is @ 18% when each unit household in a society pays more than ₹ 7500/- per month for said services and the supplier of services (RWA in the present case) is registered by way of crossing over of threshold limit of ₹ 20 lakhs. The applicant is providing services to the society (RWA) in two parts viz. all services of maintenance (other than supply of water) and supply of water. Further, as a general practice across trade and market, the maintenance services is inclusive of supply of water and hence supply of water provided by the applicant through a separate agreement raises a suspicion in its activity. The reason behind the suspicion is that the water received by the society (RWA) is used for multiple purpose i.e. for gardens, washing cleaning, swimming pool and for the use in the apartments etc. and is stored in the common underground water tank which is maintained by the society (RWA) - it is observed that the applicant seems to have bi-furcated the services provided to society (RWA) in order to escape the condition of ₹ 7500 per month per member or it might be crossing the GST registration threshold limit of ₹ 20 lakh. The supply of water in Contract-Il and supply of maintenance services in Contract-I are to the same society (RWA) and relevant to each other, hence there appears no case of direct supply of water by the applicant to the individual residents of the society(RWA). Contract-I and Contract-II appears to be directly linked with each other as there is no case of direct supply of water by the applicant to the individual residents of the society therefore the applicant is required to pay GST as applicable on Contract-I.
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2020 (4) TMI 228
Levy of GST - salary paid to Director of the company who is paid salary as per contract - Reverse charge mechanism - levy of GST if the Director also is a part time Director in other company also - N/N. 13/2017- Central Tax (Rate) dated 28.06.2017. HELD THAT:- The consideration paid to the Directors is against the supply of services provided by them to the applicant company and are not covered under clause (1) of the Schedule Ill to the CGST Act, 2017 as the Directors are not the employee of the Company. In the instant case Director is the supplier of services and the applicant company is the recipient of the services. So it is very clear that the services rendered by the Director to the company for which consideration is paid to them in any head is liable to pay GST under RCM - also, the applicant company is located in the taxable territory and the Director's consideration is paid for the supply of services by the Directors to the applicant company and hence the same is liable to GST by way of reverse charge basis as provided under Notification No. 13 /2017- Central Tax (Rate) dated 28.06.2017 issued under Section 9(3) of the Central Goods and Services Tax Act, 2017. Situation will remain same in case the Director also is a part time Director in other company also, and will attract GST under reverse charge mechanism.
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Income Tax
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2020 (4) TMI 233
Reopening of assessment u/s 147 - no service of notice u/s 148 - HELD THAT:- None of the notices were returned by the postal authorities as unserved for want of complete or correct address the presumption of bonafide as obtaining in favour of the State would hold the ground. In any case, the appellant has received the notices sent by the Ld. AO on that same address as late as May 2017 and it cannot claim that the address was incorrect or incomplete. In view of the admission of the appellant the claim of the appellant that it did not receive the notices issued by the Ld. AO because of the address on which the said notices were sent by the Ld. AO was either incomplete or incorrect is not tenable Whether additional/fresh evidence was taken into consideration by the Commissioner of Income Tax (Appeals)? - HELD THAT:- AO by its report dated 26.03.2018 submitted its response to the fresh evidence of the appellant and rejected the same and recommended that the grounds raised by the appellant were neither maintainable nor acceptable in the eyes of the law and the appeal of the appellant deserved to be dismissed by this office. No substantial question(s) of law
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2020 (4) TMI 232
Disallowance of contribution to Energy Conservation Fund - HELD THAT:- Contribution towards fund is connected with the business and is not diversion of Income and allowable u/s.37(1) Contribution towards provident fund - HELD THAT:- It is not in dispute that this Court in Commissioner of Income Tax vs. M/s. State Bank of Bikaner and Jaipur [ 2014 (5) TMI 222 - RAJASTHAN HIGH COURT] binds and covers the dispute against the revenue. However, the learned counsel for the revenue informs that the Special leave to Petition filed by the revenue against the aforesaid judgement is pending before the Supreme Court. Even though these questions with respect to interpretation of Section 43B of the Act were answered against the revenue, but they are subject to the final order of the Supreme Court on these questions.
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2020 (4) TMI 231
Addition of the excess stock found during the course of survey - Assessee as contended that the stock of finished goods was valued by the survey team at selling price and not at cost - HELD THAT:-Assessee as invited our attention to the list of finished goods prepared by the survey team and submitted that the Assessing Officer may be directed to verify the stand of the assessee. It is, however, observed that no such stand was taken by the assessee either before the Assessing Officer during the course of assessment proceedings or even before the ld. CIT(Appeals) during the course of appellate proceedings - also no evidence brought on record by the assessee in the form of relevant bills to support and substantiate his stand that the stock of finished goods was valued by the survey team at selling price and not at cost - no merit in the contention raised by the assessee on this issue and rejecting the same, we uphold the impugned order of the ld. CIT(Appeals) confirming the addition made by the Assessing Officer on account of excess stock found during the course of survey. Grounds No. 2 3 of the assessee s appeal are accordingly dismissed. Addition on account of the estimated profit from the sale of excess stock presumed to have been made by the assessee - AO presumed that the excess stock found during the course of survey must have been sold by the assessee outside the books of account and such sale should have generated disclosed profits to the assessee. He accordingly applied gross profit rate of 11% to the excess stock - HELD THAT:- As rightly submitted by the assessee, the excess stock found during the course of survey having been added to the total income of the assessee as unexplained investment, the same became part of the stock of the assessee as incorporated in his books of account and in the absence of any evidence to show that it was sold by the assessee outside the books of account generating any undisclosed profit to the assessee, the addition made by the Assessing Officer was purely based on assumptions and surmises and the ld. CIT(Appeals) was not justified in confirming the same. We, therefore, delete the said addition made. Disallowance of telephone expenses - disallowance being 10% of the total telephone expenses claimed by the assessee was made by AO on account of personal uses of telephone by the assessee - HELD THAT:- Disallowance of 10% of the total telephone expenses claimed by the assessee for personal uses is quite fair and reasonable. Having regard to all the facts and circumstances of the case including the fact that the assessee was carrying on the business in his proprietary capacity where the personal usage could not be ruled out in the absence of any record maintained by the assessee in the form of call register, etc. to show that this substantial expenditure on telephone was wholly and exclusively incurred for the purpose of business. We accordingly uphold the impugned order of the ld. CIT(Appeals) confirming the disallowance made by the Assessing Officer out of telephone expenses and dismiss Ground of the assessee s appeal .
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2020 (4) TMI 230
TP Adjustment - comparable Selection - M/s. GDL functional comparability - HELD THAT:- While giving effect to the Ld. DRP s direction, the TPO in the first round did not consider M/s. GDL as comparable, so the assessee was not aggrieved by the action of TPO and did not prefer the appeal against the direction of the Ld. DRP. Subsequently when the TPO suo moto revised/rectified its order by including this company M/s. GDL as comparable and directed certain adjustments and pursuant to it, the AO giving effect to the same, the assessee is before us and has pointed out that M/s. GDL is functionally different and asset intensive and, therefore, cannot be a comparable with that of the assessee. We find considerable force in this contention of assessee, however, without getting into the details, as pointed out by the assessee as such, we note that the Ld. DRP itself in assessee s own case for AY 2013-14 has found that this company (M/s. GDL) is functionally different from that of the assessee and cannot be a comparable since the FAR is different DRP s reasons given to exclude M/s. GDL is self explanatory, therefore, we agree with the contention of the assessee that M/s. GDL cannot be included as a comparable for computing the ALP, therefore, we direct M/s. GDL should not be included as a comparable while computing ALP. The appeal of the assessee is allowed.
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2020 (4) TMI 229
Disallowance u/s.14A - investment in shares made by the assessee and its source - HELD THAT:- CIT(A) after considering the applicability of section 14A of the Act held that out of interest nothing was to be disallowed since the Assessing Officer had not attached attributability of such interest to any particular income and thus only administrative expenses were found to be disallowed. Thus, in this way, the disallowance of interest and administrative expenses in terms of section 14A have already been considered and decided by Ld.CIT(A) in an appeal against original order passed u/s.143(3) of the Act. Thus, in the present circumstances, the Ld.CIT(A) while passing the impugned order had rightly concluded that Assessing Officer was not justified in enhancing such disallowances by re-working the disallowance from interest and administrative expenses. Even otherwise, it was rightly concluded by the ld.CIT(A) that the provisions of Rule 8D of the Income Tax Rules, 1962 are applicable from AY 2008-09 as held by Hon ble Bombay High Court in the case of Godrej Boyce Mfg.Co.Ltd. [ 2010 (8) TMI 77 - BOMBAY HIGH COURT] - Since the year under consideration is AY 2006-07, therefore we are also of the view that as per the decision of Hon ble Bombay High Court in the case of Godrej Boyce Mfg.Co.(supra), the provisions of Rule 8D are not applicable for the year under consideration. Assessee had aggregate interest-free funds by way of share capital and reserves and amounting to ₹ 195.10 crores which are more than the investment in shares and mutual funds amounting to ₹ 129.80 crores. Thus, in this way, the assessee was having enough interest-free funds and, hence, the disallowance out of interest expenditure could not have been made while relying upon the ratio laid down by the Hon ble Bombay High Court in the case of CIT vs. Reliance Utilities and Power Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] Since Ld.CIT(A) had rightly concluded that disallowance of ₹ 2,56,00,942/- out of interest expenditure made by the Assessing Officer as per section 14A of the Act was not justified keeping in view the principles laid down by the Hon ble Bombay High Court as well as the Coordinate Bench of ITAT Ahmedabad and even no new facts or circumstances have been brought before us in order to controvert or rebut the findings so recorded by the Ld.CIT(A). Therefore, we find no reason to interfere with or deviate from the findings so recorded by the Ld.CIT(A). Long Term Capital Loss - investment sold by the assessee was acquired by him in a scheme of amalgamation - HELD THAT:- As period of holding by the amalgamating companies is to be included in the period of holding by the assessee. Accordingly, ld.CIT(A) has rightly held that assessee held capital asset from the date on which the amalgamating companies acquired such assets and the Assessing Officer was, therefore, not justified in considering the date of amalgamation for the purpose of indexation. The ld.CIT(A) while reaching to said conclusion had relied upon the decision of Hon ble Bombay High Court in the case of CIT vs. Manjulla J. Shah [ 2009 (10) TMI 646 - ITAT MUMBAI] wherein under the similar circumstances, the Hon ble Court decided the controversy. No new facts or circumstances have been brought before us in order to controvert or rebut the findings so recorded by the Ld.CIT(A). Therefore, we find no reason to interfere into or to deviate from such findings of the Ld.CIT(A) and we uphold the findings of the Ld.CIT(A) and reject the ground raised by the Revenue. Addition of disallowance u/s.14A while computing the Book Profit/Income u/s.115JB - HELD THAT:- Book profit has to be computed as per the audited books of accounts maintained by the assessee and the audited results which have been approved in the AGM by the shareholders. Only those adjustments can be made to the approved book profit, which are specifically mentioned in the Income Tax Act. Thus, in our view, any notional adjustment in the book profit is not permissible. No new facts or circumstances have been brought before us in order to controvert or rebut the findings so recorded by the Ld.CIT(A). Therefore, we find no reason to interfere with or deviate from the findings so recorded by the Ld.CIT(A). See GUJARAT STATE ENERGY GENERATION LTD. [ 2011 (4) TMI 179 - ITAT, AHMEDABAD]
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2020 (4) TMI 227
Penalty u/s 271D - contravention of Section 269SS - cash loan taken by the assessee - AR submitted before us, the assessee had borrowed cash loan from his own brother in law due to unavoidable circumstances - HELD THAT:- It is not in dispute that the assessee has obtained the cash from his own brother-in-law. It is also not in dispute that the assessee obtained the cash loan for the purpose of acquiring immovable property wherein he was constrained to resciend the agreement in the event the balance purchase consideration is not paid within the stipulated time and in such event the transaction has to be reversed. Further, there is nothing on record to suggest that the transaction is not genuine and bona fide. In this situation, the decisions relied by AR supports the case of the assessee. In the case of ITO vs. Trilokchand [ 2002 (12) TMI 195 - ITAT AMRITSAR] it has been categorically held that when the assessee recieves cash loan from his wife for acquiring immovable property it will not result in commercial transaction and there is no breach of provisions of section 269SS of the Act and accordingly penal provisions under section 271D of the Act cannot be invoked. There existed reasonable cause for the assessee for accepting cash loans from his own brother-in-law and since there is nothing to suggest that the transaction is a commercial transaction and is not genuine, we hereby direct the Ld. AO to delete the penalty levied for ₹ 6 lakhs invoking the provisions of section 271D - Decided in favour of assessee.
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2020 (4) TMI 226
Income accrued in India - tax the salary income and the foreign allowance received by the assessee for services rendered outside India - Article 15(1) of India - Austria DTAA agreement and section 90 and section 5(2) of the Act - HELD THAT:- During the previous relevant to AY 2014-15, the assessee qualifies as a non-resident in India and as a tax resident in Austria. The salary and allowances are earned by the assessee in respect of employment rendered in Austria due to his foreign assignment. Hence, the first two conditions enumerated under Article 15(1) of the India-Austria DTAA stands satisfied. Therefore, the assessee s claim of exemption in regard to his salary income as per the provisions of Article 15(1) of the India-Austria DTAA in the return of income filed by him is appropriate. In the case of ITO Vs. Sunil Chitranjan Muncif [ 2013 (11) TMI 222 - ITAT AHMEDABAD] on which reliance placed by the assessee, it was held that there was no dispute about the fact that the assessee is a NRI and the salary income received by him in India for employment exercised in UK has been offered by him for taxation in UK in pursuance of Article 16 of DTAA with UK. Hence, the salary received by the assessee was not taxable in India in pursuance of DTAA between India and UK. In the case of DIT Vs. Prahlad Vijendra Rao [ 2010 (11) TMI 803 - KARNATAKA HIGH COURT] on which reliance placed by the assessee, held that under section 15 of the Act even on accrual basis salary income is taxable i.e. it becomes taxable irrespective of the fact whether it is actually received or not; only when services are rendered in India it becomes taxable by implication. However, if services are rendered outside India such income would not be taxable in India. Other objections raised by the Ld. AO that evidence was not produced for receiving the foreign allowance outside India and the bank account of the assessee maintained abroad was not produced is not relevant because the facts of the case establishes that the salary and the foreign allowance was received in India for the services rendered abroad and by virtue of DTAA and the Act, there is no bar in law for receiving the money in India. Hereby direct the Ld.AO to delete the tax imposed on the assessee with respect to his salary income and the foreign allowances earned by him outside India during the relevant assessment year. - Decided in favour of assessee.
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2020 (4) TMI 225
Proceedings u/s 153A - Exemption u/s.54B denied - Whether incriminating material during search or not? - HELD THAT:- On verification of the detail filed by the assessee, the assessing officer observed that a payment to the amount for ₹ 7 lacs towards purchase of new asset was made before the date of transfer of existing capital asset. The assessee has filed return of income u/s. 153A of the act to the amount of ₹ 14,75,110/- and the same income was declared in the original return of income filed u/s. 139(1) of the act on 27th October, 2010. It is clearly demonstrated from the finding of the assessing officer that as per the return of income the assessee has shown long term capital gain from sale of land against which the assessee has claimed exemption u/s. 54B - It is also clear from the findings of the lower authorities on verification of the submission of the assessee made during the course of assessment proceedings, the assessing officer has noticed that payment of ₹ 7 lacs was made for purchasing of new assets before the date of transfer of capital asset. It is clearly established from the finding of the assessing officer reported in the assessment order that impugned addition was not made on the basis of any incriminating material found during the course of search. After considering the judicial pronouncement referred in the case of Saumya Consturction Pvt. Ltd. [ 2016 (7) TMI 911 - GUJARAT HIGH COURT] wherein it is held that if no incriminating material during search found no addition can be made on the basis of material collected after search. In the light above facts and decision of Jurisdictional High Court as cited above, we consider that assessing officer has disallowed the claim of deduction to the extent of ₹ 7 lacs on the basis of submission made by the assessee during the course of assessment proceedings and same was not based on any incriminating material, therefore, the impugned addition was bad in law. - Decided in favour of assessee.
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2020 (4) TMI 224
Nature of expenditure - Allowable Revenue expenditure - selling expenses - whether as part of the project cost and thus capital in nature? - HELD THAT:- The substantive issue for determination is whether the selling expenses incurred by the assessee are allocable to the specific development contract under taken by the assessee and thus required to be added to the contract costs in progress or such expenses can be allowed as revenue expenditure. On perusal, it is noticed that the Accounting Standard -7 issued by ICAI clearly spells out that the selling and administrative cost are required to be excluded from the contract costs while drawing financial statements. Hence, the action of the assessee resonates that the parameters of AS-7 referred to in the instant case. We also find merit in the plea of the assessee that expenses incurred in the normal course of business is required to be allowed, after setting up of business irrespective of the fact whether the revenue is not yet earned in view of the decision in the case of Western India Vegetable products Ltd. [ 1954 (3) TMI 59 - BOMBAY HIGH COURT] . The action of the assessee in any case is a revenue neutral affair and the revenue is not put to any tax loss per se by such alleged premature claim. The controversy is no longer resintegra and clearly covered by the decision of the co-ordinate Bench of the Tribunal in Sunny Vista Realtors Pt.Ltd. vs ACIT [ 2017 (2) TMI 954 - ITAT MUMBAI] - In the similarly placed situation, the co-ordinate Bench has adjudicated the issue in favour of the assessee by a detailed order. In parity with the view taken by the co-ordinate Bench and having regard to the tax neutrality, we find considerable merit in the objection raised by the assessee. - Decided in favour of assessee.
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2020 (4) TMI 223
Bogus purchases - addition to the extent of 12.5% by AO - CIT(A) directed to restrict the addition to the extent of 6.5% of alleged bogus purchases - HELD THAT:- In case of bogus purchases where sales are accepted, quantitative details of purchases, sales and stock was filed with copy of delivery challans, the addition is required to be made only to the extent of lower GP declared by the assessee on bogus purchases as compared to G.P. on normal purchases. As per the G.P. statement chart placed on record we found that the GROSS PROFIT declared by assessee in respect of alleged bogus purchases was more than the GROSS PROFIT declared in the normal purchases. Under these facts circumstances, applying the judicial pronouncement laid down by Hon ble Jurisdictional High Court in M/S MOHOMMAD HAJI ADAM CO. [ 2019 (2) TMI 1632 - BOMBAY HIGH COURT] we do not find any merits for the addition so upheld by CIT(A).- Decided in favour of assessee
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2020 (4) TMI 222
Addition of long term capital gain u/s. 50C - transfer of land as capital contribution to a Limited Liability Partnership by invoking section 50C - capital contribution u/s 45(3) - determination of full value of consideration received or accrued as a result of transfer of capital asset - HELD THAT:- We find that the issue is covered in favour of the assessee by the ITAT decision for the A.Y. 2012-13 [ 2017 (12) TMI 1677 - ITAT MUMBAI]. Provisions of section 45(3) is not a specific provision overrides the other provisions of the Act, importing a deeming fiction provided in section 50C of the Act cannot be extended to another deeming fiction created by the statute by way of section 45(3) to deal with special cases of transfer. Since the Act itself is provided for deeming consideration to be adopted for the purpose of section 48 of the Act, another deeming fiction provided by way of section 50C cannot be extended to compute deemed full value of consideration as a result of transfer of capital asset. We are of the considered view that the profits or gains arising from the transfer of a capital asset by a partner to a firm in which he is or becomes a partner by way of capital contribution, then for the purpose of section 48, the amount recorded in the books of account of the firm shall be deemed to be full value of consideration received or accruing as a result of transfer of a capital asset. AO cannot import another deeming fiction created for the purpose of determination of full value of consideration as a result of transfer of a capital asset by importing the provisions of section 50C. Therefore, we reverse the finding of the CIT(A) and delete the addition made towards recomputation of long term capital gain on account of transfer of capital asset into partnership firm.- Decided against revenue Depreciation of block of assets, building as claimed by the assessee prevailing over the provisions of section 45 over the provision of section 50C - HELD THAT:- As ground 1 is decided in favour of the assessee consequentially provisions of 45(3) would prevail over the provisions of section 50C. Hence, ground 5 becomes infructurous and the value as deducted from the block of asset by the appellant holds true along with the depreciation claimed thereon. Disallowance u/s. 14A - HELD THAT:- As relying on the decision of CIT vs. Delite Enterprises [ 2009 (2) TMI 498 - BOMBAY HIGH COURT], Cheminvest Ltd. [ 2015 (9) TMI 238 - DELHI HIGH COURT] and ACIT vs. Vireet Investments (P) Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] . Following the above case laws, the ld. CIT(A) correctly upheld that the disallowance only to the extent of exempt income earned.
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2020 (4) TMI 221
Correct working of the capital gain for which exemption claimed u/s 54F - AR submitted that for the addition made there had been no specific notice and the assessee did not get proper opportunity to explain the working of the long term capital gain - CIT- A enhancing addition - HELD THAT:- AO admitted the claim of the assessee for exemption u/s 54F(1)(b) in respect of investment on long term capital gain but instead of taking actual sale consideration received, has adopted the figure of sale consideration by invoking Section 50C. This is not in accordance with the provision of Section 50C which has created a deeming fiction. Section 54F is an exemption provision and it has given its applicability in itself, therefore, Section 50C will not come under picture. Long Term Capital Gain exemption is admissible u/s 54F(1)(b) wherein total taxable gain comes to ₹ 2,68,830/- only as the investment made by the assessee adopting the figure of the actual sale consideration received in consequence with Section 54F of the Income Tax Act. CIT(A) while enhancing the addition has ignored the very effect of the provisions of Section 54F. Besides this, the CIT(A) while enhancement has not given any reasons as to why the enhancement is necessary and why the assessee is not justified in adopting the figure of the actual sale consideration received. Thus the Assessing Officer as well as CIT(A) failed to justify the stand by making addition of ₹ 30,17,456/- in respect of long term capital gain without granting exemption u/s 54F of the Income Tax Act. It is pertinent to note that we have already taken a view in case of assessee s wife Smt. Anita Miglani [ 2019 (12) TMI 1100 - ITAT DELHI] wherein the same order of the CIT(A) was under challenge that the enhancement was not right. The facts of the present case that of assessee s case is identical, therefore, the appeal of the assessee is allowed.
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2020 (4) TMI 220
Disallowance of bogus purchases - Addition @ 12.5% of the aggregate of disputed purchases - HELD THAT:- CIT(A) affirmed the action of AO holding that disallowance of 12.5% in the business of wholesale trading of electronic items such as computer parties, accessorises, print cartridges and Sony tapes are rational and justified. We have noted that before us the assessee has not filed even a single document to substantiate his contention. We are conscious of the fact that under the income tax proceeding only tax can be levied on the income component and not on the entire transaction. Even the entire transaction are not verifiable the lower authorities are entitled to tax the income component of transaction only. We have noted that lower authorities have made the disallowance keeping in view the nature and business activities of the assessee and disallowed 12.5% of the tainted purchases. In our view, the Assessing Officer has made a reasonable disallowance, which does not require any interference at our end - Appeal of the assessee is dismissed.
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2020 (4) TMI 219
Long Term Capital Gain - sale of agricultural land by the co-owners - sale consideration received in cash by the assessee and other co-owners as per the information received from the Investigation Wing Jaipur - True payment of sale consideration to the sellers of the land - HELD THAT:- As clearly stated that except the sale considerations as recorded in the sale deeds and received through cheques, no other payment was received. Therefore, when the transactions recorded in the seized material has no connection and particularly has no contemporaneous relation with the transaction of sale through sale deeds dated 24.08.2006 then the assumption of the AO that these transactions are pertaining to the sale consideration received by the assessee is without any basis. Once Shri Madan Mohan Gupta during his statement recorded by the AO has clearly denied having paid any cash to the assessees, then there is no basis for coming to the conclusion that the assessees have received the alleged cash against the sale of agricultural land in question. Except the statement of Shri Madan Mohan Gupta recorded during the course of search and post search enquiry, the alleged seized documents do not reveal any such transaction except the entries of the amounts under the head RPS and that too not related to the period or the transaction in question. The statement of Shri Madan Mohan Gupta as recorded during the search and seizure action cannot be the basis of the addition in the hands of the assessees when in his examination during the course of assessment proceedings he has denied the alleged payment of cash to the assessee. AO has not brought on record any material or facts to show that the land in question carries a value of more than ₹ 12 crores as alleged and thereby the assessees have suppressed the sale consideration as reported in the Sale Deeds. On the other hand, the assessees have brought on record a sale instance whereby M/s. Shri Kalyan Buildmart Pvt. Ltd. through its Director Shri Madan Mohan Gupta purchased adjoining land bearing Khasra nos. 403 404/148 measuring 0.58 hectare vide Sale Deed dated 04.04.2007 for a consideration of ₹ 72,00,000/-. This subsequent sale instance and sale consideration as well as the stamp duty valuation of the land in question clearly corroborates the prevailing fair market value as claimed by the assessees and declared in the Sale Deeds. Subsequent sale of the adjoining land and purchased by the same party M/s. Shri Kalyan Buildmart Pvt. Ltd. as well as the stamp duty valuation of the land corroborates sale consideration shown in the sale deeds executed by the assessees. Therefore addition made by the AO is devoid of any substance or merit but solely on the presumption and surmises which is not sustainable when Shri Madan Mohan Gupta himself during the assessment proceedings has denied. Accordingly, the addition is deleted. - Decided in favour of assessee.
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2020 (4) TMI 218
Penalty u/s.271(1)(c) - Whether assessee has concealed or furnished inaccurate particulars of its income - addition towards bogus purchases, disallowance u/s. 80IB addition towards undisclosed income and expenditure - HELD THAT:- On a careful perusal of the order of the Ld.CIT(A) and the reasons given therein, we do not find any good reason to interfere and disturb the findings in the order passed by the Ld.CIT(A) in sustaining penalty u/s. 271(1)(c) - CIT(A) has elaborately discussed the issues of additions/disallowances and rightly sustained the penalty u/s. 271(1)(c) of the Act on the said additions and disallowances made by the AO. Thus, as the findings and observations of the Ld.CIT(A) have not been rebutted with evidences by the assessee, we do not see any infirmity in the order passed by the Ld.CIT(A) in sustaining the action of the Assessing Officer. Grounds raised by the assessee are dismissed.
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2020 (4) TMI 217
Exemption u/s 54F - investment in the name of husband / spouse - assessee has claimed the entire long term capital gain as exempt from tax u/s 54F by purchasing a new residential property in the name of her husband - denied deduction u/s 54F as the assessee has not invested the sale consideration in her name - HELD THAT:- In the entire section 54, the requirement that the purchase to be made or the construction to be put up by the assessee, should be in the name of the assessee, is not expressly stated. Therefore, to attract section 54 of the Act, what is material is the investment of the sale consideration in acquiring or constructing residential premises. Once the sale consideration is invested in any of these manners, the assessee would be entitled to the benefit conferred under these provisions. In the absence of an express provision contained in these provisions that the investment should be in the name of the assessee only any such interpretation would amount to introducing words in the provision which are not there. The Court could not legislate when Parliament has deliberately not used those words in the section. The same view was taken by the Hon ble Madras High Court in the case of CIT v. Gurnam Singh [2008 (4) TMI 28 - PUNJAB AND HARYANA HIGH COURT] Assessing Officer has to see whether the investment in the new residential house has been made out of the sale consideration received from the sale of property situated at Corporation No.13, Narayanaswamy Iyengar Street, Gandhinagar, Bengaluru. If the purchase of new house situated at 25 26, 5th Cross, Gandhinagar, Bengaluru, was made out of sale consideration on transfer of capital asset, then the assessee is entitled to deduction u/s 54F of the Act. Accordingly, remit this issue to the file of the Assessing Officer with the above observations for fresh consideration - Appeal filed by the assessee is partly allowed for statistical purposes.
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2020 (4) TMI 216
Penalty u/s 271 (1)(c) - unsecured loan treated as unexplained cash credit under section 68 - whether the assessee has furnished inaccurate particulars of income with respect to the cash credit which were treated as unexplained under section 68 ? - HELD THAT:- Assessee failed to explain or furnish the basic details of the parties from whom it has taken loan during the year. Thus in the absence of explanation/ documentary evidence and the assistance from the side of the assessee, the Revenue cannot be held guilty in not discharging its onus in the present facts and circumstances. It is well-settled law that an obligation gets discharged due to impossibility of performance. The law of impossibility of performance does not necessarily require absolute impossibility, but also encompass the concept of severe impracticability - doctrine of impossibility of performance applies in this case. Due to uncontrollable circumstances, the performance of the obligation to verify the loan creditors was not possible by the Revenue as no details were furnished by the assessee. Thus the impossibility of performance releases the Revenue from its obligation to verify such liability in the present facts and circumstances. A default occurs only when an obligation is not performed. We find that the assessee has not furnished the basic details about the parties therefore we hold that the assessee has furnished inaccurate particulars of income. Regarding the contention of the assessee that there was no specific charge levied by the AO whether the assessee has concealed the particulars of income or furnished inaccurate particular of income, in this regard we note that the AO has mentioned the specific charge in the penalty order by stating that the assessee has furnished inaccurate particulars of income. Accordingly we hold that, the assessee cannot get the benefit of immunity from the penalty merely there was no specific charge in the penalty notice issued under section 274 of the Act or in the assessment order. - penalty in the present case was correctly levied by the AO which was subsequently confirmed by the learned - Decided against assessee.
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2020 (4) TMI 215
Revision u/s 263 - AO had erred in allowing the impugned set off of LTCL - set- off of long term capital loss - HELD THAT:- Assessment has to be both erroneous as well as causing prejudice to the interest of the Revenue before sec.263 revision jurisdiction is invoked. Coming to the relevant facts involved in the instant lis, we note that although the assessee s returns of income assessment year(s) 2005-06, 2010-11 and 2011-12 had stated LTCL the corresponding sec. 143(3) assessment dated 28.12.2007 had taken the loss figure as nil in the assessment year and the latter two assessment year(s) returns had been summarily processed on 27.07.2011 and 21.02.2012 u/s 143(1) we observe in this backdrop of facts that the impugned LTCL stood reduced to the extent of ₹19,85,394/- only whereas the relief granted to the assessee during the course of re-assessment read an amount of ₹40,31,675/-. PCIT has rightly exercised his sec. 263 revision jurisdiction followed by his directions under challenge to the Assessing Officer for finalizing the impugned computation afresh as per law. The same stands affirmed therefore. Suffice to say, the Assessing Officer s consequential assessment shall be framed after affirming adequate opportunity of hearing to this taxpayer who shall be at liberty to raise all factual legal pleas in support of the impugned LTCL set off claim. - Decided against assessee.
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2020 (4) TMI 214
Income from house property - deductions claimed u/s 24(a) - Disallowance of society charges while determining the annual value of the flat - assessee has claimed deductions towards society charges paid to Maple Society out of rental income - HELD THAT:- In respect of society charges for maintenance of property no deductions could be allowed, because while computing income under the head house property, the statutory deduction @ 30% has been provided, which take care all expenses related to repairs and maintenance of the property. Therefore, we are of the considered view that the Ld. AO, as well as the Ld.CIT(A) was right in coming to the conclusion that no further deduction is allowed towards any expenses, when statutory deductions @ 30% is provided u/s 24(a) out of rental income. But, the facts remains that, deduction claimed by the assessee includes amount paid towards local taxes is not emanating from the records. It is the claim of the assessee that it includes municipal taxes, whereas the Ld. AO noted that it is paid for maintenance of the property. Therefore, we are of the considered view that the issues needs to go back to the file of the Ld. AO to ascertain the correct facts with regard to nature of expenses. If, the amount paid to society charges includes municipal taxes levied by the local authorities, then to that extent the Ld. AO is directed to allow deductions out of rental income. If the amount relates to maintenance of property, then the Ld. AO is right in denying deductions for said amount out of rental income. Addition as donation to local Ganesh Mandals etc. - assessee has claimed deductions for donations paid to local mandals such as Ganesha mandals etc deductible u/s 37(1) - HELD THAT:- Assesee claims that these are compulsory donations one has to paid to local mandal in order to run business smoothly. We find that it is a general practice prevailing in business that in some occasions, the business people needs to pay certain donations to local peoples for celebrations of various festivals and functions and those donations are compulsory in nature in order to smoothly conduct the business of the assessee. Therefore, we are of the considered view that donations paid by the assessee to local Ganesha mandals are necessarily incurred wholly and exclusively for the purpose of the business of the assessee and are deductible u/s 37(1) - Decided in favour of assessee.
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2020 (4) TMI 213
Disallowance u/s 36(1)(iii) - Interest free funds to sister concerns - HELD THAT:- It is an admitted fact that the assessee has made huge borrowing from banks and other financial intuitions and diverted part of such funds to sister concerns to give interest free loans and advances. As per the provisions of section 36(1)(iii), if any borrowed funds is diverted for non business purposes, then interest paid to that extent is not allowable as deduction. In light of the above factual and legal background, if you examine the claim of the assessee that it has given loans and advances to the sister concerns out of business expediency, we find that the assessee has failed to substantiate its claims with the fact that there is an established business connection with the assessee and the sister concerns No doubt, the principles laid down by the Hon ble Supreme Court ,in the case of SA builders Ltd. vs CIT [ 2006 (12) TMI 82 - SUPREME COURT] has applicable, if the assessee made out a case of business expediency in advancing loans to sister concerns. Since, the assessee has failed to make out a case of business connection, we are of the considered view that the case laws relied upon the by the assessee in the case of S.A builders Ltd. vs CIT (supra) has no application to the facts of the present case. Coming back the second arguments of the assessee in the case of Reliance Utilities and Power Ltd [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] - The assessee has made an alternative argument, in light of above judgment that if own funds is in excess of loans and advance or there is mixed funds, including own funds, then the presumption goes in favour of the assessee that loans and advances given is out of interest free funds. In this case, on perusal of facts available on record, including financial statements of the assessee, we find that for the year under consideration, the assessee has incurred losses from its business. Further the net worth of the assessee has been reduced substantially due to losses incurred from the business. At the same time, the long term borrowings and short term borrowings are increased substantially. From the above, it is very clear that there is no interest free fund available with the assesee to explain loans and advances given to sister concerns. Ratio laid down by the Hon ble Bombay high court, in the case of Reliance utility power ltd, is also not applicable to the facts of the present case. As regards, another arguments of the assesee, in light of financial statements for the year that the Ld. AO has incorrectly taken loans and advances as per schedule of short term loans and advances of ₹ 3,34,26,601/- as against actual amount of loans and advances to related parties is only at ₹ 2,58,72,330/- and therefore, if at all interest disallowances is required to be made then the Ld. AO may be directed to interest disallowances to the extent of loans and advances actually given to sister concerns. As per financial statements filed for the year, the assessee has given loans and advances to related parties of ₹ 2,58,72,330/-, whereas the Ld. AO has taken the figure of ₹ 3,34,26,600/-, which includes other advances given in the normal course of business. It is an undisputed fact that advances given in the course of normal business cannot be considered as diversion of interest bearing funds for non business purpose. Therefore, we are of the considered view that the Ld. AO is incorrect in taking other advances for the purpose of disallowances of interest u/s 36(1)(iii) of the Act. However, the facts with regard to the details of loans and advances is available with the Ld. AO, at the time of assessment proceedings is not clear from the records. Therefore, for the limited purpose of verification of facts with regard to the actual amount of loans and advances given to sister concerns out of interest bearing funds, we restored the issue back to the file of the Ld. AO and direct him to consider the arguments of the assessee, in light of financial statements filed for the year that actual amount of loans and advances given to related parties is only at ₹ 2,58,72,330/-. If the Ld. AO found that the actual amount of loans and advances to related parties to is only ₹ 2,58,72,330/-, then the Ld. AO is directed to restrict interest disallowances u/s 36(1)(iii) to that extent - Appeal filed by the assessee for AY 2013-14 is partly allowed for statistical purpose.
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2020 (4) TMI 212
Deduction u/s 80IA - Disallowance in respect of inland port and the rail system, depreciation on assets retired from active use, on assets not registered, on land and also on registration fees - HELD THAT:- Claim under section 80IA of the Act on inland container depots covered by ground No. 1 of assessee s appeal and rail system (rolling stock) covered by ground No. 1 of the appeal of the Revenue, in assessee s own case [ 2017 (10) TMI 1324 - DELHI HIGH COURT] observed that the Revenue s contention was resurrected for the previous years in assessee s own case [ 2012 (5) TMI 260 - DELHI HIGH COURT] and Hon ble High Court approved the reliance on previous ruling in respect of rolling stock also. Hon ble Supreme Court in assessee s own case reported in [ 2018 (5) TMI 359 - SUPREME COURT] held that inland container depots or inland ports, subject to provisions of section 80IA of the Act and deduction can be claimed for income earned out of these depots. On this score ground No. 1 of assessee s appeal stands allowed and ground No. 1 of Revenue s appeal stands dismissed. Disallowance on account of depreciation on intangible assets being value of license acquired from the Indian Railways for running the container trains on Indian Railways - HELD THAT:- In assessee s own case [ 2018 (9) TMI 142 - ITAT DELHI] a coordinate Bench of this Tribunal in the light of the decision of the coordinate Bench [ 2017 (1) TMI 1586 - ITAT DELHI] for the assessment year 2008-09 and 2009-10 wherein this issue was covered and dealt with in extenso, reached a conclusion that the license acquired by the assessee from the Indian Railways for running the container trains on Indian Railways is a commercial right and it is eligible for depreciation under section 32(1)(ii) of the Act. In view of this consistent view,and also fortified by the decision of Areva [ 2012 (4) TMI 79 - DELHI HIGH COURT] we hold that commercial right acquired by the assessee by way of this license for an enduring benefit for a period of 20 years would amount to capital asset and eligible for depreciation under section 32(1)(ii) of the Act. Disallowance being the claim of deduction on account of advance lease rent paid for the land taken on long-term lease for business purpose on pro rata basis - HELD THAT:- As submitted that the facts and circumstances involved in this matter also are identical to those obtaining for the assessment year 2008-09 and 2009-10 as well as 2010-11 and therefore the issue requires factual verification at the end of the learned Assessing Officer, and it is prayed that the same course may be followed for this year also. We grant the request and remand the issue to the file of the learned Assessing Officer for necessary verification and to decide it according to law on such factual verification of the details to be furnished by the assessee. Disallowance of depreciation on the assets retired from the active use - HELD THAT:- This issue is also squarely covered by the decisions in earlier assessment years. In CIT vs. Yamaha motor India Private Limited [ 2009 (8) TMI 27 - DELHI HIGH COURT] held that actual user of the machinery is not required with respect to discarded machinery and the condition which was eligible for depreciation is that the machinery being used for the purpose of the business would mean that the discarded missionary is used for the purpose of the business in the earlier years for which depreciation was allowed. Relying upon such observations of the Hon ble High Court in assessee s own case, a coordinate Bench of this Tribunal for the assessment year 2008-09 [ 2017 (1) TMI 1586 - ITAT DELHI] held the issue in favour of the assessee. Disallowance of depreciation on the assets which were not registered in the name of the assessee - HELD THAT:- This issue is also squarely covered by the order dated 31/10/2017 of the Hon ble High Court in [ 2017 (10) TMI 1324 - DELHI HIGH COURT] wherein it was held that inasmuch as the assessee has been paying all the amounts to the transferor and obtained possession, and has also been using the same for business purpose, depreciation is allowable as held by the Tribunal.
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2020 (4) TMI 211
Unexplained cash payment made by the assessee relating to the admission of his son into P.G. medical course under management quota - Addition based on statement recorded u/sec 132(4) - no opportunity to cross-examine the cashier - HELD THAT:- When the seized material was found in the premises of the college, it has to be presumed that it belonging to the college. When the addition is proposed in the hands of the assessee and when assessee has specifically denied, the Assessing Officer should have given opportunity to cross-examine the cashier and thereafter he has to pass the assessment order. In this case, without giving opportunity to the assessee to cross-examine the person who has given statement u/sec. 132(4) on behalf of the college, simply addition was made on the basis of seized material, in my view, is not correct. Addition made by the Assessing Officer and confirmed by the ld. CIT(A) cannot survive. Accordingly, addition is deleted. Assessing Officer based on the seized material and statement given by the cashier of the college addition was made. Therefore, the addition is based on the statement of the third party though assessee has not specifically asked for cross examination, it is the duty of the Assessing Officer to give opportunity to the assessee and allow him cross-examination. In this case, the assessee specifically denied that he has not paid any amount other than the amount paid by him as per the Government prescribed fee. Keeping in view of the principles laid down in ANDAMAN TIMBER INDUSTRIES VERSUS COMMISSIONER OF CENTRAL EXCISE, KOLKATA-II [ 2015 (10) TMI 442 - SUPREME COURT] , the addition made by the Assessing Officer has to be deleted. Addition of gift from his close relatives - case of the assessee is that his son has received gifts from his relatives for admission in P.G. college and the amount was paid through demand draft - HELD THAT:- CIT(A) simply rejected the explanation of the assessee without giving any reason that the transaction is not genuine and the assessee s son has no other source. The assessee has given a detailed explanation and filed bank statements and particularly payment is made through demand draft. The assessee particularly submitted before the ld. CIT(A) that his relatives have contributed for payment of fee and the same is deposited in the bank account and paid through demand draft, in my opinion, addition cannot be made on the basis of suspicious without there being any basis. If at all, the Assessing Officer is having any doubt about the donations received by the assessee, he ought to have summoned the donor and called the explanation and thereafter decide the issue. Without making any effort, simply making the addition on the basis of suspension is not correct. Thus, find that the addition made by the Assessing Officer cannot survive and the same is deleted. - Decided in favour of assessee.
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2020 (4) TMI 210
Exemption u/s 11 - rejecting application made for the registration u/s 12A - applicant had not filed the requisite details nor had submitted any evidence or accounts to show the charitable activities; and that the charitable and religious nature of the objectives and genuineness of the activities of the trust or institution cannot be established - Approval u/s 80G rejected - HELD THAT:- There is no dispute that the observation of the Ld. CIT(E) that assessee had not filed the requisite details nor submitted any evidences or accounts to show the charitable activity; that the charitable and religious nature of the objectives and genuineness of the activities of the trust or institution cannot be established; and that charitable activity was not substantiated; are not only contrary to materials on record established by the Paper Book, but and also in contradiction with paragraphs 1 and 2 of the impugned order dated 30.09.2019 passed by the Ld. CIT(E) himself. The appellant has expressed willingness to furnish any further materials or evidences to the Ld. CIT(E) for the satisfaction of the Ld. CIT(E) if the issues in dispute are restored to the file of the Ld. CIT(E) for fresh order; and the Ld. CIT(DR) has expressed no objection to this. In view of the foregoing, we set aside the aforesaid impugned order dated 30.09.2019 of the Ld. CIT(E) and direct him to pass fresh order(s) in respect of the assessee s application for registration under Section 12AA of I.T. Act and in respect of the assessee s application for approval under Section 80G of I.T. Act; in accordance with law; after providing opportunity to the assessee to furnish any further materials or evidences that the Ld. CIT(E) may find relevant for deciding the issues regarding registration under Section 12AA of I.T. Act and approval under Section 80G of I.T. Act - Appeals by the assessee are partly allowed.
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2020 (4) TMI 209
Capital gain on sale of a property - entitled to the benefit of deduction u/s.54F - Assessment of right income - whether the property is HUF property or that of the Assessee in his individual capacity should be assessed? - HELD THAT:- The said issue which is fundamental and vital has not been decided by the CIT(A) and since the view of the Revenue on this aspect in the form of order of AO/CIT(A) is not available for consideration by the Tribunal, we are of the view that the order of the CIT(A) should be set aside and the entire issues that arise for consideration before the Tribunal should be directed to be decided afresh by the AO. In this regard we find the issue whether the property belongs to HUF or individual was raised by the Assessee for the first time only before CIT(A). We therefore set aside the order of the CIT(A) and remand the issue of taxation of capital gain to the AO for consideration de novo after affording opportunity of being heard to the Assessee. We make it clear that all issues set out in the earlier part of this order is left open for adjudication de novo by the AO. Assessee's appeal is treated as allowed for statistical purpose.
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Customs
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2020 (4) TMI 208
Stay of operation of impugned Order-In-Appeal - Smuggling - Gold - admissible evidence - foreign marking of goods - Absolute Confiscation - HELD THAT:- Though the contention of Shri Rajesh Kumar Seth is that Revenue could not establish that the goods were brought from Nepal, however, he was also not in a position to produce any document which could establish as to how he got possession of gold. Therefore, the impugned Order-In-Appeal is modified and the redemption fine reduced to ₹ 1 lakhs and penalty on Shri. Rajesh Kumar Seth to ₹ 1 lakhs under Section 112 of Customs Act, 1962 - appeal allowed in part.
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Insolvency & Bankruptcy
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2020 (4) TMI 207
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- It is found that Manager of the respondent company appeared and fairly admitted the debt - it is also found that the instant petition filed by the applicant is well within limitation and there is no denial of the operational debt and/or any pre-existing dispute regarding the operational debt from the corporate debtor. In the instant application, from the material placed on record by the Applicant, this Authority is satisfied that the application is complete in all respect and the Corporate Debtor committed default in paying the operational debt to the Applicant - In the instant case, the documents produced by the operational creditor clearly establish the 'debt' and there is default on the part of the Corporate Debtor in payment of the 'operational debt' - Also, the corporate debtor has never raised any dispute on issuance of notice u/s 8 of the I B Code nor have ever raised any dispute prior to the issuance of notice. The corporate debtor has committed default in payment of operational debt and, therefore, it is a fit case to initiate Insolvency Resolution Process by admitting the Application under section 9(5)(1) of the Code - Petition admitted - moratorium declared.
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2020 (4) TMI 206
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT:- Having gone through all the documents placed on record by the Financial Creditor, it is found that the Financial Creditor has been able to prove its case. The Ld. Counsel for the Financial Creditor has taken us through all the documents placed on record. It has been shown from the record that the recovery certificate to the tune of ₹ 4,02,64,296.75 was issued by the DRT, Ranchi in favour of the Financial Creditor on 17th May, 2017 in the O.A. No. 371 of 2015 filed on 20th July, 2015 after the date of NPA dated 23rd November, 2014. The Financial Creditor had pursued its legal rights and remedies without any delay and the present petition was filed on 2nd August, 2019. In view of the fact that the claim of the Financial Applicant have already been crystallised by DRT in its proceedings and the Recovery Certificate issued, followed by admission of the claim by the ld. Counsel appearing on behalf of the Corporate Debtor, we have no hesitation in admitting the petition and initiating Corporate Insolvency Resolution Process against the Corporate Debtor - application admitted - moratorium declared.
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Service Tax
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2020 (4) TMI 205
Jurisdiction - power of authority to issue SCN - SCN is issued by the Deputy Director/Deputy Commissioner (DC) under the Directorate General of Goods and Services Tax Intelligence, Chandigarh Zonal Unit - imited prayer pressed at this stage by the Petitioner is that proceedings pursuant to the said SCN should continue before the Principal Commissioner (PC) who is seized of the adjudication of a similar SCN issued to an other automobile dealer. HELD THAT:- The Court sees merit in the contention of the Petitioner that if the subject matter of both SCNs is the same, viz., charging of service tax on discount and incentives received by the Petitioner from the car manufacturer, it would be in the interest of the Respondents themselves that consistent orders are passed in both the cases - the Court directs that further proceedings pursuant to the impugned SCN dated 7th October, 2019 be continued before the PC, Central Goods and Service Tax, Chandigarh. Petition disposed off.
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2020 (4) TMI 204
Enhancement of penalty u/s 78 from 25% to 100% - reasonable cause for not paying the tax on receipt of the mobilization advance existed or not - jurisdiction to issue corrigendum - HELD THAT:- The appellant was registered with the department; they have been filing returns regularly and further maintaining proper books of accounts in the ordinary course of business. As regards the transaction in dispute, the receipts are through banking channels properly recorded in the books of accounts and further the appellant had deposited the tax along with interest before the issue of SCN. Further, it is also noticed that WCS was highly litigated and lot of interpretation issues were there. Taking pragmatic view of the matter, it is found that there is no contumacious conduct on the part of the appellant and accordingly, the penalty under section 78 section 77 is set aside - the corrigendum was issued beyond jurisdiction, and is a nonest in law. Appeal allowed - decided in favor of appellant.
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2020 (4) TMI 203
Refund of CENVAT Credit - input services - Rent-a-Cab Operator services, Outdoor Catering services, Pest Control services, Custom House Agents services, Gym/Health Club services, Business or Management Consultants services, Tour Operator services and Cleaning services - nexus with the exported service or not - HELD THAT:- It is now a well settled legal position that denial of Cenvat credit must be done, if necessary, only by issuing notice under Rule 14 of CCR, 2004. Having allowed the Cenvat credit or having not denied the Cenvat credit, they cannot reject refund of Cenvat credit. In fact, there is no one to one correlation between the input/ input services on which Cenvat credit has been taken and the exported services. The refund is allowed only as per the formula given under Rule 5 of CCR, 2004 read with Notification No. 5/2006, on a proportionate basis. The rejection of refund is not sustainable - appeal allowed - decided in favor of appellant.
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2020 (4) TMI 202
Non-payment of service tax - Erection, Commissioning Installation services - appellant is undertaking contracts for M/s BSNL for laying and jointing of optical fibre cables - demand of tax, interest, penalties as well as late fees - CBEC vide circular No. 123/5/2010-TRU, dated 24.05.2010 - HELD THAT:- Revenue wants to charge service tax upon the appellant on the activity of laying of optical fibre cables. The laying of cables along side roads has been categorically held to be not taxable by the CBEC in their circular dated 24.05.2010 - The only argument against the applicability of this circular to this case is that it should not apply to fibre optical cables because it dealt with only electrical cables. This issue has been examined at length by the Hon ble Tribunal, Mumbai in the case of COMMISSIONER OF CENTRAL EXCISE, NAGPUR VERSUS H.M. SATYANARAYAN ENGINEERS CONTRACTORS [ 2018 (8) TMI 736 - CESTAT MUMBAI] and it has been held that there is no difference between the activity of laying an electrical cable and the activity of laying an optical fibre cable and the Board circular applies in both the cases and no service tax can be charged on this activity. Demand do not sustain - appeal allowed - decided in favor of appellant.
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2020 (4) TMI 201
Non-payment of Service tax - GTA Service - reverse charge mechanism - export of services or not - invocation of extended period of limitation for the period 01.01.2005 to 30.09.2008 - demand alongwith interest and penalties - HELD THAT:- The provisions of law are very clear that on both the services, the appellant being service recipient is liable to pay service tax. Therefore, on merits it is held that appellant is liable to pay service tax along with interest in question. Penalties - HELD THAT:- The appellant was under bonafide belief that whatever service tax they will pay, they are entitled to take CENVAT credit. Therefore, by invoking Section 80 of the Finance Act, 1994 the penalty imposed on the appellant is set aside. Appeal disposed off.
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2020 (4) TMI 200
CENVAT Credit - input services - supply of tangible goods services - Man Power Recruitment and Supply Agency Service - reverse charge mechanism - motor spirit and high speed diesel oil - demand of interest on reversal of cenvat credit - penalty. Supply of tangible goods service - deemed sale - HELD THAT:- Though the owner of the equipment had insured the goods, the effective control was with the appellant and therefore the issue is covered by definition of deemed sale and therefore service tax under the category of supply of tangible goods service‟ is not leviable on the transaction of use of dredgers and other equipments by the appellant - demand set aside. Man Power Recruitment and Supply Agency Service - reverse charge mechanism - HELD THAT:- In the present case, the appellants have issued Form-16 series to the said employees as their employer and deducted TDS from their salaries and therefore the appellants were employer and there was employer-employee relationship and therefore, we hold that the said demand of around ₹ 1.65 crores cannot sustain - Demand set aside. CENVAT Credit - input - fuels - penalty - HELD THAT:- The appellant could not establish that the goods used by the appellants were eligible to be inputs and therefore, the impugned order is upheld in so far as the same is concerned, with disallowance of cenvat credit of around ₹ 34 lakhs with penalty of ₹ 2 lakhs. Demand of interest on reversal of cenvat credit - HELD THAT:- Once the inputs are issued for use, there is no need to reverse the cenvat credit. However, the appellants have voluntarily reversed the cenvat credit and we do not interfere with such voluntary reversal. We hold that on such reversal interest is not payable - the demand of interest is set aside. Appeal allowed in part.
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Central Excise
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2020 (4) TMI 199
Jurisdiction - power to issue SCN - Refund of unutilised CENVAT Credit - inclusion of sales to 100% EOUs - HELD THAT:- Both the Asst. Commissioner and Commissioner (Appeals) are fully competent to decide the show cause notice not only in terms of CENVAT Credit Rules 2004 but also in terms of the provisions of CGST Act 2017. At this stage, there are no inconsistency in the order of the first appellate authority inasmuch as he has followed the law as it applied during the relevant period - Also, the appellant has so far not been put to any disadvantage because the show cause notice proposing recovery of excess refund is yet to be adjudicated upon by the Asst. Commissioner. Appeal dismissed - decided against appellant.
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2020 (4) TMI 198
CENVAT Credit - input services - outward transportation of finished goods from the factory to their buyer s premises - April 2011 to June 2017 - HELD THAT:- Appellant has produced sample invoice / purchase orders to contend that they have paid Central Excise duty after including freight charges; that it is also argued by her that since the goods have been delivered at the buyer s premises without collecting freight charges from the customer and the same is borne by the appellant, they are eligible for credit of service tax paid on the freight charges upto the buyer s premises - To peruse the documents relating to the issue under consideration it is best to remit the case back to the adjudicating authority who shall look into the documents furnished by the appellant to determine the place of removal. If the appellant has included the freight charges in the transaction value while discharging the excise duty, they would be eligible for the credit of service tax paid on freight charges incurred by them upto the buyer s premises. Appeal allowed by way of remand.
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2020 (4) TMI 197
Bar on utilization of Cenvat credit - Rule 8(3A) of Central Excise Rules (CER), 2002 - denial on the ground that they had not paid the duty in time and thereby forfeited their right to use Cenvat credit - HELD THAT:- A plain reading of Rule 8(3A) of CER, 2002, makes it clear that it applies to such cases where the assessee had defaulted in payment of excise duty beyond 30 days from the due date - This does not apply to the present case because in their case they have already paid as duty even before the audit whatever they declared as payable. The audit actually found that some additional amounts were payable over and above what was declared in their ER returns as duty. Rule 8(3A) does not apply to every case where the department, during the scrutiny of returns, during audit or during investigation finds any additional amount is payable as duty of excise. All such demands will be recoverable by issuing a notice under section 11A of the Central Excise Act, 1944, but they do not get covered under Rule 8(3A) of Central Excise Rules, 2002. The assessee s case is a case of demand under section 11A and is not covered by Rule 8(3A) and hence demand on this ground needs to be set aside - penalty also set aside - appeal allowed - decided in favor of appellant.
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2020 (4) TMI 196
Reversal of CENVAT Credit - actual consumption of inputs used for manufacture of dutiable goods or used for manufacture of exempted goods which are exported - non-maintenance of separate records - requirement to reverse 6% of the value of exempted goods - HELD THAT:- In this present case, the appellant is not taking any CENVAT credit at all on the invoices at the time of receipt of inputs. There is a specific input output co-relation for every batch of every drug known as consumption coefficient according to which the quantity of inputs which have gone into the manufacture of that particular batch of the particular drug can be ascertained. The appellant has been availing CENVAT credit only on the proportionate amount of inputs which are gone into manufacture of either dutiable goods or in the manufacture of exempted goods which are exported. Therefore, there is no availment of common input credit. The credit is availed only on such quantity of inputs as gone into the manufacture of dutiable products or exempted products which are exported. Whether in a case where the exempted goods are exported under bond, whether the assessee is required to reverse an amount under Rule 6(3) or whether it gets covered by Rule 6(6) and hence no reversal is required? - HELD THAT:- In respect of the same appellant, this Bench in ASTRIX LABORATORIES LTD., VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX, HYDERABAD-I AND VICE VERSA [ 2018 (3) TMI 837 - CESTAT HYDERABAD] and ASTRIX LABORATORIES LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS SERVICE TAX, HYDERABAD-I, [ 2019 (5) TMI 1344 - CESTAT HYDERABAD] has decided in favour of the appellant on both these issues, holding that such case where goods are exported, direction by revenue to the petitioner to pay 10% of sale price of exempted goods u/r 6(3)(b) is not justified. If the exempted products are exported outside India the provisions of Rule 6(6)(v) of CCR are applicable. Appeal allowed - decided in favor of appellant.
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2020 (4) TMI 195
Valuation - allowability of deductions - main grievance of the revenue against the order of the first appellate authority is that the assessee has not submitted CA certificate along with necessary documents to prove that they have passed on the discounts claimed to the buyers - HELD THAT:- The Commissioner (Appeals) has allowed the discounts on the basis of the invoices, credit notes and equalised octroi/ entry taxes - On identical issue, this bench had upheld the order of the Commissioner (Appeals) for earlier periods in respect of the same respondents in COMMISSIONER OF CENTRAL TAX MEDCHAL GST VERSUS ACE TYRES LTD., UNIT II, EXEL RUBBER LTD. [ 2019 (11) TMI 377 - CESTAT HYDERABAD] . This decision has, so far not been overturned or set aside by any higher judicial forum. Therefore, the decision is binding on this bench. The miscellaneous application filed by the revenue is dismissed as infructuous and the impugned orders are upheld - Appeal dismissed - decided against Revenue.
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2020 (4) TMI 194
CENVAT credit on inputs and input services used in manufacture - Activity amounted to manufacture - roof bolts and W straps prepared and cleared by the respondents for use in mines - Valuation - price variation clause - HELD THAT:- dispute whether the activity undertaken by the appellant amounts to manufacture or not the same has been settled by this Tribunal vide an order [ 2010 (2) TMI 395 - CESTAT, BANGALORE ] The activity undertaken by the appellant amounts to manufacture, therefore, in terms of Rule 3 of CENVAT Credit Rules 2004, the appellant is entitled to take CENVAT credit on inputs and input services used in manufacturing of the said excisable goods. Admittedly, the said benefit has not been granted by the adjudicating authority - Further, the appellant has been able to produce the tender document as well as their purchase agreement show that on escalation of prices of raw material, the price of finished goods is to be revised and duty is to be paid on higher price. In case the price of raw material falls, the appellant is entitled to claim less amount of the manufactured goods. Therefore, as per the said clause, as per price variation clause, the duty needs to be recalculated as per the amount received from the buyer towards supply of goods by the appellant. The same is required to be examined by the adjudicating authority. The matter is sent back to the adjudicating authority to calculate the demand after allowing CENVAT credit available to the appellant on inputs and input services used in the manufacture of the goods cleared by them and in terms of price variation clause - Penalty is not imposable - appeal allowed by way of remand.
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2020 (4) TMI 193
Imposition of penalty u/s 209A of the erstwhile Central Excise Rules 1944 in remand proceedings - case of appellant is that in remand proceedings against the main party, penalties on the appellants cannot be imposed - HELD THAT:- It is a fact on record that the adjudicating authority vide his order dated 29.10.2004 dropped the penalty proposed in the show-cause notice against the appellants. The order of dropping penalty was never challenged in any subsequent proceedings.. Therefore, in remand proceedings for third party, penalty cannot be imposed on the appellant. There are no merit in the order of imposing penalties on the appellant - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2020 (4) TMI 192
Inter-state transaction or not - providing of foundation seeds to the farmers, supervision of its growing and dispatch from U.P. to Kota in the State of Rajasthan - whether the transaction cannot be treated as purchase within the State of U.P., since the process of purchase was completed in Kota in the State of Rajasthan when the processing and testing of the seeds was complete in Kota and thereafter it was accepted by the applicant company? - HELD THAT:- Undoubtedly, from a perusal of the record as well as various documents annexed by the revisionist it is clear that procurement of such seeds is taxable within the State of U.P. It has been admitted that the farmers are paid 90 percent of the price at the stage when the said transaction takes place and the remaining amount is paid depending upon the quality of certificate issued by the unit at Kota - The Tribunal has rightly held that this aspect of the transaction culminated in the State of U.P. wherein the procurement of the said seeds takes place from the farmers by the assessee/through their contractor is an intra-State sale which is totally covered by the provisions of Trade Tax Act. There is no infirmity with the order of the Tribunal which has delved into all the aspects including various contracts and determined that sale of seeds by farmers is taxable in Uttar Pradesh - No other fact or argument was placed before this Court which could persuade this Court for interfering with the order passed by the Tribunal. Revision dismissed.
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Indian Laws
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2020 (4) TMI 191
Guidelines for Functioning of Court during the outbreak of COVID-19 pandemic - HELD THAT:- Courts at all levels respond to the call of social distancing and ensure that court premises do not contribute to the spread of virus. This is not a matter of discretion but of duty. Indeed, Courts throughout the country particularly at the level of the Supreme Court and the High Courts have employed video conferencing for dispensation of Justice and as guardians of the Constitution and as protectors of individual liberty governed by the rule of law. Taking cognizance of the measures adopted by this court and by the High Courts and District Courts, it is necessary for this court to issue directions by taking recourse to the jurisdiction conferred by Article 142 of the Constitution. The concerned courts shall maintain a helpline to ensure that any complaint in regard to the quality or audibility of feed shall be communicated during the proceeding or immediately after its conclusion failing which no grievance in regard to it shall be entertained thereafter - The District Courts in each State shall adopt the mode of Video Conferencing prescribed by the concerned High Court. The presiding officer shall have the power to restrict entry of persons into the court room or the points from which the arguments are addressed by the advocates. No presiding officer shall prevent the entry of a party to the case unless such party is suffering from any infectious illness.
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2020 (4) TMI 190
Restraint from declaring the account of the petitioner as a Non-Performing Asset (NPA) - non-payment of instalment due - since the instalment that was due on 01.01.2020 was not paid within 30 days, the account of the petitioner was classified as SMA-1 and thereafter since it was not paid within 60 days, the account was classified as SMA-2 - case of petitioner is that instalment for repayment which fell due on 01.01.2020, which is the subject matter of the present petition, could not be paid by the petitioner because of adverse economic conditions brought about by the effects of COVID-19 pandemic. HELD THAT:- If the interpretation given by learned counsel for the respondent were to be accepted, then an account which was classified as a Standard Asset as on 29.02.2020, cannot become an NPA post 01.03.2020unless it goes through the process of SMA. Since the account cannot be classified as SMA for instalments falling due post 01.03.2020, where was the question of stipulating a moratorium for classification as a Non-Performing Asset (NPA) - The restriction on change in classification as mentioned in the Regulatory Package shows that RBI has stipulated that the account which has been classified as SMA-2 cannot further be classified as a non-performing asset in case the instalment is not paid during the moratorium period i.e. between 01.03.2020 and 31.05.2020 and status quo qua the classification as SMA-2 shall have to be maintained. The effect of the same would be that for a period of three months there will be a moratorium from payment of that instalment. However, stipulated interest and penal charges shall continue to accrue on the outstanding payment even during the moratorium period. If post the moratorium period borrower fails to pay the said instalment, classification would then automatically change as per the IRAC guidelines. The classification of the account of the petitioner as an NPA on 31.03.2020 could not have been done by the respondent. Accordingly, status quo ante is restored qua the classification of the account of petitioner and the account classification as it stood on 01.03.2020 shall stand restored - Petitioner shall pay on or before 25.04.2020, the instalment which fell due as on 01.01.2020 along with interest accrued thereon till the date of the payment irrespective of the lockdown position. List before the concerned Roster Bench on 04.05.2020.
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