TMI Tax Updates - e-Newsletter
May 25, 2017

Case Laws in this Newsletter:

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

TMI SMS

• Cash credit - additions u/s 68 confirmed towards unexplained Cheques found, despite non-encashment of the cheques by the assessee - HC

  ---

Articles

1. EXTENSION OF PROVISIONAL ATTACHMENT UNDER SERVICE TAX PROVISINS

   By: DR.MARIAPPAN GOVINDARAJAN

2. Case Studies on Supply Definition

   By: Alok Agarwal

News

1. GST execution from July 1 a challenge for industry

2. GST Council may reconsider steep levy on hybrid cars next week

3. Income Tax Department Steps up Actions under Benami Transactions (Prohibition) Amendment Act, 2016

4. Key Achievements and Initiatives of Department of Financial Services for providing Social Security and Credit to various sections of society and ensuring Financial Inclusion

5. RBI Reference Rate for US $

6. 3rd RCEP Inter-sessional Ministerial Meeting

Notifications

Customs

1. 21/2017 - dated 22-5-2017 - Cus

Exemption whole of duty of Customs and additional duty of Customs, if any, payable on the import of such cut and polished diamonds during the period from the 9th March, 2012 to 1st March, 2017 by the authorized agencies/ offices in India of laboratories

Circulars / Instructions / Orders

DGFT

1. 08/(2015-2020) - dated 24-5-2017

Amendment in the Public Notice No.05/2015-2020 dated 27th April, 2017

Highlights / Catch Notes

Income Tax

• High Court Upholds Additions u/s 68: Unexplained Sums Credited in Accounts Must Be Properly Explained, Cash or Cheque.

  Case-Laws - HC : Addition u/s 68 - Section 68 is clear enough as it uses the term "sum is found credited in the books of accounts of the assessee". It does not make any distinction between any cash or cheque transaction. - Despite non-encashment of the cheques by the assessee, additions confirmed - HC
  Visit to Get Source

  ---

• Equity shares held over 16 years classified as Long Term Capital Gains, not business income.

  Case-Laws - HC : Income derived from the sale of equity shares - business income or Long Term Capital Gain - the said equity shares not only for one year but for more than 16 years and that the shares were listed shares, the income derived from their transfer has rightly been treated as Long Term Capital Gain and not as business income. - HC
  Visit to Get Source

  ---

• Court Rules: No Dual Fair Market Value Estimates for Land as of April 1, 1981, by Different Co-Owners.

  Case-Laws - HC : Capital gains - there cannot be two estimations of the fair market value as on 1st April 1981 in respect of the very land in question, but in case of different assessee/co-owner - HC
  Visit to Get Source

  ---

• High Court Rules AO's Decision Unjustified for Not Verifying Transaction Genuineness and Investor Creditworthiness u/s 68.

  Case-Laws - HC : Addition u/s 68 - genuineness of the transaction and the credit worthiness of the foreign investor - AO would have inquired into their veracity from the bank(s) to ascertain the truth of the assessee’s claims. Having not done so, he was not justified in disregarding the assessee’s contentions - HC
  Visit to Get Source

  ---

• AO Can't Add Bogus Purchases Based Only on Sales Tax Data and Section 133(6); Needs Thorough Investigation.

  Case-Laws - AT : Addition on the alleged bogus purchase - AO cannot sit back and make the addition by simply relying upon the information obtained from the Sales Tax Department and issuing notices u/s 133(6) - AT
  Visit to Get Source

  ---

• Lease rental income remains eligible for deduction under section 80-IAB.

  Case-Laws - AT : Whether lease rental income shall continue to be eligible for deduction under section 80-IAB? - Held Yes - AT
  Visit to Get Source

  ---

• Court Rules Assessee Can Claim Deduction u/s 54F for Multiple Properties as Single Residential Unit.

  Case-Laws - AT : Deduction u/s.54F - 5 properties which were purchased by the assessee by DRT auction wherein clubbed the same as one property - Assessee shall be granted with deduction u/s.54F as the investment in entire property to be considered as a single residential unit, since the consideration received from sale of capital asset was so invested. - AT
  Visit to Get Source

  ---

• Tax Assessment Reopening u/s 147 Invalid Due to Insufficient Basis and Incorrect Legal Application.

  Case-Laws - AT : Reopening of assessment - the entire basis for the formation of belief to invoke section 147 is a damp squib. As a Corollary, the reasons recorded are not in sync with section 147 of the Act and are marred by wrong application of law and therefore cannot be sustained. - AT
  Visit to Get Source

  ---

• Penalty for Late TDS Filing Contested u/s 272A(2)(k); Late Tax Payment Deemed Reasonable Cause, No Penalty Imposed.

  Case-Laws - AT : Penalty imposed u/s. 272A(2)(k) - late filing of TDS returns - reasons for delay - the filing of quarterly statements is consequential to payment of taxes. The delayed payment of taxes itself is the reasonable cause for late filing of quarterly statement and hence the assessee is not exigible to the levy of penalty. - AT
  Visit to Get Source

  ---

Customs

• Debate on Mixed Xylene Classification: Falling Under CTH 29.02 or CTH 27.07? Determined as CTH 27.07.

  Case-Laws - AT : Classification of Mixed Xylene - classified under CTH 29.02 or under CTH 27.07? - the subject goods is a mixture containing less than 95% by weight of xylene isomers and hence would be appropriately classifiable under Heading 27.07 (SH 2707.30-Xylole)- AT
  Visit to Get Source

  ---

Indian Laws

• Accused Fails to Present Probable Defense u/s 138; Prosecution Succeeds Due to Unchallenged Liability Presumption.

  Case-Laws - HC : Offence under Section 138 of Negotiable Instrument Act - if the accused is able to raise a probable defence, which creates a doubt about the existence of liability or enforceable debt, then the prosecution can fail. But, in the instant case, the petitioner has failed to raise any probable defence to rebut the presumption. - HC
  Visit to Get Source

  ---

Service Tax

• No Service Tax Liability on Business Exhibition Services from Foreign Providers Performed Outside India.

  Case-Laws - AT : Business Exhibition Service - service received from foreign service provider - There is not even part performance or part receipt of service within India - there cannot be any liability of Service Tax for the subject services which have entirely been performed outside India - AT
  Visit to Get Source

  ---

• Free After-Sale Services Exempt from Service Tax on Manufacturer's Margin to Dealer.

  Case-Laws - AT : Free after-sale services rendered to the customers - service tax liability cannot be on the part of margin given by the manufacturer to the dealer as being inclusive of the charges of free sale service - AT
  Visit to Get Source

  ---

• Land Sale Transactions Not Taxed as Real Estate Agent Commission, Court Rules in Favor of Appellant.

  Case-Laws - AT : Real Estate Agent Service - the activities undertaken by appellant therein and held that the activities of purchase and sale of the land and the amount received by them, and the difference between purchase price and sale price cannot be held as commission and taxable under real estate agent services - AT
  Visit to Get Source

  ---

• Clarification on Service Tax Liability: TDS Absorption on Foreign Remittances Under Reverse Charge Mechanism Explained.

  Case-Laws - AT : Liability of Service tax on TDS amount absorbed by the assessee on foreign remittance - reverse charge mechanism - the value which is to be considered for the discharge of service tax liability under reversal charge mechanism is equal to the actual consideration charged for the services provided or to be provided - AT
  Visit to Get Source

  ---

• Multi-Level Marketing Not Subject to Extended Service Tax Under Business Auxiliary Services Classification.

  Case-Laws - AT : Business Auxiliary Services (BAS) - activity of providing Multi Level Marketing to its principal - the demand for extended period of limitation cannot be sustained - AT
  Visit to Get Source

  ---

Central Excise

• CENVAT Credit Dispute: Rule 6(2) Compliance Challenged Due to Unavoidable Waste in Dutiable and Exempted Products.

  Case-Laws - AT : CENVAT credit - common input services used in dutiable as well as exempted products - since in the present case, the exempted final product has emerged as an unavoidable waste or by-product, compliance of provisions of rule 6(2) is impossible - AT
  Visit to Get Source

  ---

• CENVAT Credit Denied: Final Product Classified as Exempt Under Notification No. 50/2003-CE and Rule 6(1), 2004.

  Case-Laws - AT : CENVAT credit - area based exemption - N/N. 50/2003-CE - Since the only final product manufactured by respondents are held to be exempted goods, the benefit of CENVAT Credit is not eligible in the terms of Rule 6(1) of CCR, 2004 - AT
  Visit to Get Source

  ---

VAT

• Mehndi Cone Classified Separately for UP VAT; Tax Rate Differs from Mehndi Leaves and Powder.

  Case-Laws - HC : Rate of tax - classification - Mehndi Cone - UP VAT - the 'Mehndi Cone' is a new product, which comes into being after Mehndi powder is processed by adding oil and chemicals. Once a distinct new entity has come into existence, it cannot be said to be either Mehndi leave or Mehndi powder. - HC
  Visit to Get Source

  ---

• No Penalty for Goods Transported from Railway Yard to Manufacturing Site Under CST Act Section 8(3)(b), High Court Rules.

  Case-Laws - HC : Levy of penalty under CST - The activity of transporting the goods from railway yard to the manufacturing location is an activity which is integrally connected to the manufacturing process and the goods purchased in respect of such transpiration would also be covered under Section 8(3)(b) of CST Act - No penalty - HC
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2017 (5) TMI 1115
  Addition u/s 68 - cheques received by assessee admittedly were not presented for collection in Bank - Held that:- In the case at hand, there is no dispute that the assessee had received cheques for a sum of Rs. 15,00,000/- and entries in this regard were made in his books of accounts having received the said amount by way of unsecured loans from various persons. The assessee has also offered an explanation regarding the above entries but the explanation was not found to be satisfactory by the Assessing Officer and it was held that the aforesaid entries were in the nature of accommodation entries so as to raise bogus liabilities. The submission is that the entry of credit in the books of accounts may be relevant only when there is a cash transaction and not where the payment is through the cheques unless the cheques are cleared and encashed. Section 68 of the Act is clear enough as it uses the term "sum is found credited in the books of accounts of the assessee". It does not make any distinction between any cash or cheque transaction. The sum found credited in the books of accounts of the assessee includes within its fold, the entry either by way of cash or by cheque irrespective of the encashment of the cheques. Thus both the essential conditions for applicability of Section 68 of the Act stands fulfilled. Despite non-encashment of the cheques by the assessee, the entries of credit appearing in his books of accounts for which no plausible explanation to the satisfaction of the Assessing Officer was furnished would attract Section 68 of the Act and the sum so credited by the entries would be deemed to be income of the assessee chargeable to tax. - Decided against assessee.

  ---

• 2017 (5) TMI 1114
  Revision u/s 263 - dis-allowance of transportation charges for non deduction of tds - effect of retrospective amendment - Held that:- The amendment brought about in Section 40(a)(ia) is not only has limited retrospectivity but complete retrospectivity and would be applicable to the assessment year 2009-10 also to which the instant case belongs. In view of the above, as the petitioner has deposited the tax deducted at source on 3.9.2009 before the expiry of the last date for the filing of the return under Section 139(i) of the Act i.e. 30.9.2009, he is entitle to the benefit of the above provision and the transportation charges of Rs. 10,34,600/- are allowable as deduction from the income for the purposes of computing income chargeable to tax under the head, "Profits and gains of business or profession" from income. Accordingly, the impugned order dated 15.3.2016 (Annexure-5) and the Assessment Order dated 31.12.2014 are quashed in so for they disallow the transportation charges to be deducted from the income of the petitioner for computing its taxable income. - Decided in favour of assessee.

  ---

• 2017 (5) TMI 1113
  Income derived from the sale of equity shares - business income or Long Term Capital Gain - Held that:- The equity shares were held by the assessee company since 1988-89 as a long term investment i.e. for a period of more than one year prior to the assessment in question and that the said equity shares were transferable through recognised stock exchange meaning thereby that they were listed shares. The Government of India Ministry of Finance Department of Revenue vide Circular No.6 of 2016 of the Central Board of Direct Taxes 29th February, 2016 referring to the earlier circular No. 4 of 2009 dated 15th June, 2007 has laid down that in order to reduce litigation, the sale of listed shares would be treated as capital gain if they are held by the assessee for a period of more than 12 months immediately preceding the date of these transfers. Thus the said equity shares not only for one year but for more than 16 years and that the shares were listed shares, the income derived from their transfer has rightly been treated as Long Term Capital Gain and not as business income.

  ---

• 2017 (5) TMI 1112
  Penalty u/s 271(1)(c) - ITAT deleted penalty - Held that:- What weighed with the ITAT was that there was no actual concealment of income or furnishing of inaccurate particulars of income by the Assessee. The Assessee was found to have made a few claims which are found not allowable. That, by itself, could not lead to an inference as regards the concealment of income. The view taken by the ITAT based on the decision of the Supreme Court in Commissioner of Income-tax, Ahmedabad v. Reliance Petroproducts P. Ltd. [2010 (3) TMI 80 - SUPREME COURT] is a plausible view to be taken. No substantial question of law.

  ---

• 2017 (5) TMI 1111
  Assessment of income - 'capital gains’ or under ‘other sources’ - proof of bogus transaction - Held that:- Assessee have furnished the necessary information of purchase bills, sale bills, ledger accounts, De-mat account copies in support of transactions. Since there is no other information so as to come to conclusion that the transactions entered by the assessee are bogus, these are to be accepted as transactions entered in normal course. The enquiry from the NSE that M/s. Alliance Intermediaries and Net Work P. Ltd., is not a broker or sub-broker does not establish that the transactions with that company is bogus. Moreover, as far as Smt. Sarita Devi is concerned, the purchase transactions mostly pertain to long term capital gains and have been entered in earlier year and have been recorded as on 31.03.2006. A.O. even though has reopened the assessment in that year also, much before this assessment was reopened, the said proceedings were dropped without taking any adverse view. Consequently, the purchases shown in that year in the balance sheet has to be accepted as genuine and subsequent sale thereon cannot be considered as bogus, on presumptions and assumptions. In view of that we have no hesitation in holding that the capital gains declared by the assessee should be assessed as capital gains only. We are not in agreement with the action of the A.O. either for reopening of assessment or for treating the transactions as bogus, since the very basis for reopening the assessment was not provided to the assessee nor an opportunity was given to cross-examine the socalled Mr. Chokshi. There is no basis for treating the said transactions as not genuine. Considering the documents placed on record and the case law relied, we have no hesitation in directing the A.O. to accept the long term capital gains and short term capital gains declared by Smt. Sarita Devi and short term capital gains declared by Ms. Nitika Kumari under the head “Capital Gains” only. - Decided in favour of assessee.

  ---

• 2017 (5) TMI 1110
  Scope of revision u/s 263 - erroneous order, prejudicial to the interest of Revenue - Held that:- Coming to the phrase "prejudicial to the interest of Revenue", Court said in Malabar Industrial Co. Ltd. (2000 (2) TMI 10 - SUPREME Court) that it is not an expression of art and not defined in Act, 1961. When considered with its ordinary meaning, it is of wide import and not confined to mere loss of tax. Court was of the view that scheme of Act was to levy and collect tax in accordance to the provisions of Act and this task is entrusted to Revenue. If, due to erroneous order of Income Tax Officer, Revenue is loosing tax, lawfully payable by a person, it will certainly be prejudicial to the interest of Revenue. However, every loss of revenue, as a consequence of an order of Assessing Officer, cannot be treated as prejudicial to the interest of Revenue. For example, when Income Tax Officer adopted one of the course permissible in law and it resulted in loss of revenue, or where two views are possible and Income Tax Officer has taken one view with which Commissioner does not agree, it cannot be treated erroneous order, prejudicial to the interest of Revenue, unless view taken by Income Tax Officer is unsustainable in law. Aforesaid view taken in Malabar Industrial Company Ltd. (Supra) has been followed in CIT Vs. Max India Ltd. [2007 (11) TMI 12 - Supreme Court of India], where also Court has reiterated that expression 'erroneous' should be read in conjunction with phrase "prejudicial to the interest of Revenue. ITAT was not justified in quashing the order u/s 263 and confirming the order u/s 143(3) of the Income Tax Officer, 3(2), Lucknow. - Decided against assessee.

  ---

• 2017 (5) TMI 1109
  Reopening of assessment - value estimated by the registered valuer of the assessee as on 1st April 1981 was on the higher side and in variance with the fair market value which has resulted into escapement of income - Held that:- Considering the affidavit-in-reply and material on the record so also the order of assessment, it appears that in the case of brother of the assessee and the co-owner of the very land ie., in the case of Shri Ashwinkumar Chimanlal Raval, the Assessing Officer had determined/estimated, and/or considered the fair market value as on 1st April 1981 at Rs. 10,19,250/- and consequently, the assessment order has been passed in the case of co-owner of the very land in question estimating the fair market value at Rs. 10,19,250/- as on 1st April 1981 and accordingly, the long term capital gain has been worked out. It is reported that in the case of co-owner of the very land in question ie., Shri Ashwinkumar Chimanlal Raval, the learned CIT [A] dismissed the appeal preferred by the said assessee, and therefore, the fair market value which was applied/estimated in the case of co-owner is required to be considered and applied by the Assessing Officer, even in the case of the assessee – being the coowner of the very land in question, since there cannot be two different estimations of the fair market value as on 1st April 1981 with respect to the same land but in the case of different assessees/co-owners. Under the circumstances, now when the order of assessment is already passed, in the aforesaid peculiar facts of the case, we refuse to entertain the present petition challenging the order of assessment under Section 147 and relegate the petitioner to prefer the appeal before the CIT [A] against the order of assessment under Section 147 and keeping all the contentions/defence which would be available to the parties; more particularly available to the petitioner-assessee. As observed as such there cannot be two estimations of the fair market value as on 1st April 1981 in respect of the very land in question, but in case of different assessee/co-owner. Thus without expressing anything further on merits in favour of either parties, we relegate the petitioner to avail alternative statutory remedy available by way of appeal before the CIT [A] against the order of assessment under Section 147 of the Act.

  ---

• 2017 (5) TMI 1108
  Addition u/s 50(C) - circle rate had undergone an upward revision by 16.09.2004 - Held that:- Where there is adequate external evidence supporting the assessee’s case that the transaction has been recorded and been reflected objectively in the form of a registered instrument (agreement to sell dated 27.05.2004), and all subsequent payments made have adhered to the time schedule agreed upon in respect of the amounts, the application of Section 50(C) would be unwarranted. ITAT’s conclusion that the transaction was covered by two deeds, both of which characterised as sale deeds though not strictly correct in one sense, describes the nature of the agreements between the parties. Quite possibly there can be a situation like the present one where transaction recorded in the agreement to sell are acted upon over a period of time - and in the interregnum the circle rates are increased. Application of Section 50 (C) in such cases would result in extreme hardship. Parliament has recognized this mischief and has added proviso to Section 50 (C) (i) w.e.f. 01.04.2017. No substantial question of law.

  ---

• 2017 (5) TMI 1107
  Addition u/s 68 - genuineness of the transaction and the credit worthiness of the foreign investor - Held that:- The assessee had furnished all relevant data before the AO and the CIT(A), which, however, were not inquired into by the AO. Instead he obdurately adhered to his first impression and/or initial understanding that the entire transaction was neither creditworthy nor genuine. The assessee relied upon the documents to prove that the monies had been received through banking channels from its principal and other related companies; it had submitted the FIPB Approval authorizing the assessee company to raise capital upto Rs. 600 crores, copy of certificates of incorporation of share holders, copy of bank statement and the confirmation given by the remitters towards remittance of share capital etc. This was all that the assessee could have furnished in the circumstances. It could not be expected to prove the negative that the monies received by it were suspicious or not genuine infusion of capital etc. The assessee had discharged its burden of proof in terms of the settled dicta in Divine Leasing (2006 (11) TMI 121 - DELHI HIGH COURT ). It is only logical to expect that if the AO was not convinced about the genuineness of the said documents, he would have inquired into their veracity from the bank(s) to ascertain the truth of the assessee’s claims. Having not done so, he was not justified in disregarding the assessee’s contentions that the infusion of monies into its accounts was legitimate. Consequently, the AO was not justified in making additions of the various sums under Section 68 - Decided in favour of assessee.

  ---

• 2017 (5) TMI 1106
  Disallowance on account of salary and bonus paid to the Director - Held that:- After the appointment of Mr. Abhinav Kumar, due to his tremendous efforts and business generating capability the turnover of the company in the A Y in question grew by more than 18 times as compare to last FY. Further the total receipts of the assessee company rose from Rs. 42.81 Lacs in FY 2007- 08 to 831.73 Lacs in FY 2008-09. Further the personnel expenses reduced from 34.71 % of the total turnover in FY 2007-08 to 19.37% the provisions of section. Therefore, to appreciate the efforts of Mr. Abhinav Kumar, Director of the Company and for above mentioned reasons the Bonus was decided by the Board of Directors of the assessee company vide Resolution dated 16.3.2009 at Rs. 50,00,000/- lacs, which within the provisions of the Companies Act 1956 read with Income Tax Act 1961, which was reasonable and justified. We find considerable cogency in submission of the Ld. Counsel of the assessee that Section 40A(2)(a) cannot be invoked and have no application unless it is first concluded that the expenditure was excessive or unreasonable. We further note that the AO in the assessment order as well as Ld. CIT(A) in enhancement notice, erred in deciding the amount of salary and bonus of Mr. Abhinav Kumar, as the reasonableness of the remuneration has to be considered from the point of view of a Company and it was not open to the Assessing Officers as well as Ld. CIT(A) to adopt a subjective standard with regard to the proper remuneration which should be paid to its Directors. - Decided in favour of assessee.

  ---

• 2017 (5) TMI 1105
  Penalty u/s. 271(1)(c) - addition being business income offered by the appellant during the course of survey operation - CIT-A deleted the penalty - Held that:- The assessee has surrendered Rs. 30 lacs vide its letter dated 13.3.2007 addressed to the AO, after survey u/s. 133A carried out on the business premises of the assessee on 12.2.2007, as per record available with us. We have not seen that assessee has any retraction from its surrender of Rs. 30 lacs made vide his letter dated 13.3.2007 by mentioning any plausible reasons. More seriously, the assesse has not shown the amount of Rs. 30 lacs on account of surrender in the return of income and offer for taxation, neither any mention has been made nowhere in the return of income or accounts explaining the return. Only the AO has noticed this mistake committed by the assessee in the return of income. AO asked the assessee vide his Order sheet entry dated 10.8.2009 and assessee filed its reply to the same vide his letter dated 31.8.2009 by stating that we have no objection if the assessment for the financial year 2006-07 is made considering the taxable profit at Rs. 30 lacs (surrendered during survey) plus average taxable profit for the last two preceding financial years. As per the penalty order the assessee has written a letter dated 13.3.2007 offering the surrender amount of Rs. 30 lacs on account of discrepancy in the stocks, purchases and expenses etc. and other documents. We are of the view that Ld. CIT(A) has not considered these aspects in the impugned order while deleting the penalty in dispute and passed a non-speaking order. Therefore, the impugned order is not sustainable in the eyes of law and the same is set aside. This matter requires thorough investigation as mentioned above, at the level of the Ld. CIT(A) - Decided in favour of revenue for statistical purposes

  ---

• 2017 (5) TMI 1104
  P.E. in India - business profit accrued in India - India USA DTAA - whether the activities of Branch in India are only preparatory and auxiliary services rendered to Head Office in the US and consequently there is no PE? - Held that:- As in assessment years 2003-04, 2004-05 and 2006-07 [2014 (11) TMI 102 - ITAT DELHI ] it has throughout been held that the assessee is having a PE in India. Thus the assessee has a PE in India as per the provisions of Article 5(2)(b) and (c) of Indo-US DTAA. Therefore, ground Nos.1 to 6 are dismissed. Profits attributable to the branch in India - Held that:- In assessment year 2006-07, the Tribunal has directed the Assessing Officer to recompute the income of the assessee in the light of the decision of ITAT in the assessee’s own case for assessment year 2003-04 and 2004-05. We accordingly, set aside the impugned order and restore the matter to the file of the Assessing Officer with a direction to recompute the income of the assessee in the light of the decisions of the ITAT in the assessee’s own case for assessment years 2003-04, 2004-05 and 2006-07.

  ---

• 2017 (5) TMI 1103
  Time barred appeal - maintainability of appeal - assessment order sent through speed post - reasons for delay - Held that:- There is no denial of assessee through any evidence that the assessment order was not served upon him in the year 2002. The assessee also produced copy of the GPA executed in favour of his brother who was residing at the same address of the assessee whereby he was authorized to file appeals, application etc. The Assessing Officer also confirmed in his report to the Ld. CIT(A) that the assessment order sent through speed post cover was not received back unserved by the Income Tax Department. These facts therefore clearly prove that the assessment order was validly served upon to the assessee through speed post in the year 2002. Thus the appeal was clearly time barred by 10 years 1 month and 18 days. The assessee did not file any application for condonation of delay and no sufficient material was produced before Ld. CIT(A) to explain delay in filing the appeal to the satisfaction of the Ld. CIT(A). Ld. CIT(A) was therefore justified in holding that appeal of assessee is time barred and is not maintainable. - Decided against assessee.

  ---

• 2017 (5) TMI 1102
  Rental income received from property - business income or income from house property - Held that:- By a catena of decisions, courts, time and again, have held that where subject matter that is let out or given on licence is not a bare tenement but is a complex one like the one in present facts and circumstances, income derived therefrom which is not separable as income from letting out building and “income letting out from furniture, plant and machinery”, etc., such composite income shall not be covered by income from house property. In the present case rental income received from lease of building is not derived either wholly or even substantially from the ownership of the property. The income is not derived from mere letting of a tenement but income is derived from a complex of letting substantial part of which is other than bare tenement. It is further observed from bare reading of agreements that arrangement in the present case, is in the course of and as a part of business of company and enterprise which it has entered upon is of providing special facilities. Respectfully following decision of Hon’ble Supreme Court in the case of Shambhu Investment Pvt. Ltd vs CIT (2003 (1) TMI 99 - SUPREME Court) and discussions herein above, we are of considered opinion that rental income earned by assessee from lease of building would be taxable under the head “income from business and profession”. Ld. AO is directed to grant depreciation on building while computing income from business as per law. - Decided against assessee.

  ---

• 2017 (5) TMI 1101
  Addition on the alleged bogus purchase - information obtained from the Sales Tax Department - addition of 12.5% profit in addition to the normal profit declared by the assessee - Held that:- Without corresponding purchases being effected the assessee could not have made the sales. Moreover, the Assessing Officer has not brought any material on record to conclusively establish the fact that purchases are bogus. Merely relying upon the information from the Sales Tax Department or the fact that parties were not produced the Assessing Officer could not have treated the purchases as bogus and made addition. If the Assessing Officer had any doubt with regard to purchases made, it was incumbent upon him to make further investigation to ascertain the genuineness of the transactions. Without making any further enquiry or investigation the Assessing Officer cannot sit back and make the addition by simply relying upon the information obtained from the Sales Tax Department and issuing notices under section 133(6) of the Act. When the payment to the concerned parties are through proper banking channel and there is no evidence before the Assessing Officer that the payments made were again routed back to the assessee, the addition made by estimating further profit of 12.5% earned by the assessee is not sustainable in law and facts. Keeping in view the totality of facts and circumstances of the case, we are inclined to restrict the addition to the extent of 2% of such purchases. - Decided partly in favour of assessee.

  ---

• 2017 (5) TMI 1100
  Additions on the fictitious sales @ 4% - survey action u/s 133A - Held that:- CIT(A) on the basis of material placed before him granted substantial relief deleting a number of addition. Before us, the assessee neither filed any documentary evidence nor any written submission to substantiate his claims. We have seen that the learned CIT(A) sustained the various additions on the basis of the incriminating material found against the assessee in the survey action under section 133A conducted on 29.04.1998. Moreover, the assessee himself admitted that he was engaged in a hawala transactions. The ld CIT(A) passed the order after considering all the material available before him. The assessee despite availing a number of opportunities has not come forward to substantiate his version. Thus, in these circumstances, we do not find any good reason to interfere in the order passed by ld. CIT(A) - Decided against assessee.

  ---

• 2017 (5) TMI 1099
  Disallowances deduction u/s. 80HHC - scope of amendment - Held that:- Hon'ble Gujarat High Court in AVANI EXPORTS & OTHERS v/s CIT [2012 (7) TMI 190 - GUJARAT HIGH COURT] held that the impugned amendment granting benefit restricting it to a class of assessees whose turnover is less than Rs. 10 crores is permissible prospectively but the way it has been enacted, it takes away an enjoyed right of a class of citizens who availed of the benefit by complying with the requirements of the then provisions of law. The Hon'ble Court has further held that the impugned amendment is violative for its retrospective operation in order to overcome the decision of the Tribunal, and at the same time, for depriving the benefit earlier granted to a class of the assessees whose assessments were still pending although such benefit will 'be available to the assessees whose assessments have already been concluded. The Hon'ble High Court has quashed the impugned amendment only to the extent that the operation of the said section could be given effect from the date of amendment and not in respect of the earlier assessment years of the assessees whose export turnover is above Rs. 10 crores. Therefore, in view of the above decision by the Hon'ble Gujarat High Court, the disallowance u/s 80HHC amounting to Rs. 1,66,77,703/-, which was made merely on the basis of the amended provisions of Section 80HHC, was rightly deleted, which does not need any interference on our part, hence, we uphold the same and dismiss the ground raised by the Revenue.

  ---

• 2017 (5) TMI 1098
  Reopening of assessment - Held that:- It is clear that once four years have gone by, a reopening notice can be sent only if income which has escaped assessment is more or likely to be more than C1,00,000/-. That apart, assessee’s objection to the reasons given for re-opening were never disposed of by ld. Assessing Officer, prior to completing the assessment. The judgment of Hon’ble Apex in the case of Rajesh Jhaveri Stock Brokers P. Ltd, (2007 (5) TMI 197 - SUPREME Court) is of little help to the Revenue when reopening is time barred and objection to reasons given for reopening were not dealt prior to completion of the assessment. Have no hesitation to hold the reassessment proceedings as well the reassessment as invalid and bad in the eyes of law. It stands set aside. - Decided in favour of assessee.

  ---

• 2017 (5) TMI 1097
  Eligibility for deduction u/s. 80-IA - whether lease rental income shall continue to be eligible for deduction under section 80-IAB ? - Held that:- Leasing of house property, inasmuch as the lessees (who are to be, or presumably so, in info-tech business) would be able to undertake their businesses only on the developed property being made available to them, could not therefore but be regarded as the principal activity yielding income from the development of a SEZ. In fact, even the income (to the assessee) from providing ancillary and maintenance services to these businesses arises or stands to arise only on account of, or by virtue of, their being lessees. The lease rental income, on the lease of the house property thereto, would thus, in our view, notwithstanding the use of the words ‘profits and gains’ and ‘business’ in section 80-IAB(1), qualify to be eligible for deduction there-under. That is, the lease rental is within the contemplation of the profits derived by a developer of a SEZ from the ‘business’ of developing it, eligible for deduction u/s. 80-IAB.The head of income under which the said income is assessable, which is on the basis of the source – from amongst the specified sources under the Act, most appropriate for the said income, so that it is not assessable as business income but as income from house property, would not be a limiting or debilitating factor. We decide accordingly, and the assessee succeeds qua it’s alternate ground, i.e., in principle.’ Eligibility for deduction u/s. 80-IA(4)(iii) - Held that:- Besides drawing support from the terms of the relevant provision (s.80- IA(4)(iii)), the Revenue does on the O.M. dated 10/2/2016 by DIPP, GOI, stating the reasons for the non-notification of the assessee’s industrial park by CBDT, i.e., the relevant wing (Department) in the Central Government, which is to notify the same. There is, we are afraid to say, no reference to the satisfaction of the conditions of section 80-IA(4)(iii) in the order by the tribunal for AYs. 2010-11 & 2011-12 (also see r.18C(3)). This, i.e., the non-notification by the CBDT, has in fact been challenged by the assessee before the Hon’ble jurisdictional High Court (refer Gds. 2.2 to 2.4 of the Revenue’s appeal, and as also admitted by the ld. AR before us), so that our order, as that by the tribunal for the earlier years, would, and which is even otherwise the case, subject to the directions and the findings by the H’ble Court. We, accordingly, find no infirmity in the Revenue’ objection, which shall operate to fail the assessee’s claim for deduction under section 80-IA(4)(iii), and which has therefore been rightly denied by the Revenue, whose case is thus sustainable in law.

  ---

• 2017 (5) TMI 1096
  Granting of deduction u/s.54F - 5 properties which were purchased by the assessee by DRT auction wherein clubbed the same as one property - Held that:- In the present case, the assessee purchased the whole property as a single property by auction by DRT and it cannot be said that all the properties are different properties so as to deny the deduction u/s.54F of the Act. In the present case the Commr. (A) has brought on record, and his findings have not been successfully impugned before us, that while the total area or the plot sold was 2146 sq. yards, the let out structure built in 1960 occupied only 108 sq. yards. Thus, the property sold was substantially self occupied by the assessee and the provisions of s. 54 were rightly relied upon by the assessee before the lower authorities. Lands appurtenant to the buildings within the meaning of s. 54 would be those enjoyed with and occupied with the buildings in question. Considering the location and the various structures on the plot of land and having seen the site plan we are convinced that the entire plot of land could be treated as land appurtenant to the buildings sold by the assessee. The dictionary meaning given to us by the Deptl. Rep. does not really bear out the contention of the Department. Assessee shall be granted with deduction u/s.54F of the Act as the investment in entire property to be considered as a single residential unit, since the consideration received from sale of capital asset was so invested. - Decided against revenue.

  ---

• 2017 (5) TMI 1095
  Loans to Director out of interest bearing funds raised by the assessee - admission of additional evidence - Held that:- Before learned CIT(A) the assessee made submissions that interest is paid on term loans which were raised in financial year 2007-08 for purchase of premises and equipments and it is not possible to grant loans to Director during the relevant previous year out of interest bearing funds raised by the assessee as the interest bearing funds raised by the assessee stood utilized during the financial year 2007-08 itself. It was also submitted by the assessee before learned CIT(A) that interest bearing working capital loan raised by the assessee from bank were utilized for business of the assessee which could be verified from the Balance Sheet of the assessee. CIT(A) instead of adjudicating the said contentions raised by the assessee rejected the contentions of the assessee on threshold on the grounds that such arguments were not raised by the assessee before the AO. The learned CIT(A) committed an error in not considering the said contentions of the assessee on merits. The learned CIT(A) powers are co-terminus with powers of the AO . The learned CIT(A) should have forwarded the additional evidences to learned AO for seeking remand report as mandated u/r 46A of 1962 Rules for necessary examination, enquiry and verification by the AO of these additional evidences. Thus, we are inclined to set aside and restore this issue to the file of the AO for de-novo determination of the issue on merits in accordance with law.

  ---

• 2017 (5) TMI 1094
  Registration u/s 12A cancelled - cancellation of registration as the activities of the assessee are in the nature of trade, commerce or business , and gross receipts are in excess of Rs. 10 lacs invoking newly inserted proviso to Section 2(15) of 1961 Act - Held that:- The activities of the assessee of Banquet Hall Hiring, Hospitality (Restaurants) and Permit Room (Bar) are in the nature of carrying on trade, commerce, or business for consideration, which are hit by proviso to Section 2(15) of 1961 Act. We further observe that the receipts from these activities, during the previous year relevant to the impugned assessment year 2009-10, are far in excess of minimum prescribed threshold limit. This requires detailed enquiry and examination by the Ld. DIT(Exemption) as to the various activities undertaken by the assessee over a period of time and its nexus with activity of rendering of trade commerce or business as contemplated and mandated by amended Section 2(15) of 1961 Act read in conjunction with significant observations made in the above order dated 14-2-2017 in North Indian Association (2017 (3) TMI 37 - BOMBAY HIGH COURT). Thus, enquiry and examination by learned DIT(E) is further required to arrive at a conclusion whether activities of the assessee are genuine or not in context of Section 11 of the Act read with amended Section 2(15) of the Act and breach of threshold limit over a period of time. The learned DIT(E) shall also examine whether services were only rendered to members or was it also rendered to non-members. The learned DIT(E) shall also examine every activity carried on by the assessee before concluding on merits as to whether activities of the assessee are hit by amended provisions of Section 2(15) of the Act. - Appeal filed by the assessee allowed for statistical purposes.

  ---

• 2017 (5) TMI 1093
  TPA - exclusion of one M/s. Mahindra Consulting Engineers Limited from the list of comparables considered by the ld. TPO for fixing the ALP - Held that:- No doubt this company appeared in the list of comparables selected by the assessee itself. Assessee had taken no grounds before TPO or ld. DRP for its exclusion. However, by virtue of decision of Special Bench in the case of Quark Systems (P) Ltd (2009 (10) TMI 591 - ITAT, CHANDIGARH) we are of the opinion that an assessee could not be estopped from seeking an exclusion of a comparable even before the appellate authority, if it could show that the selected comparable was not really a good comparable. As per assessee M/s. Mahindra Consulting Engineers Limited was having a turnover of F102.43 Crores whereas its own turnover was only F8.48 Crores. We are of the opinion, the question whether the turnover filter could be applied for exclusion of M/s. Mahindra Consulting Engineers Limited from the list of comparables, has to be considered by the ld. Assessing Officer /TPO. We remit this issue back to ld. Assessing Officer/TPO. Excluding foreign exchange loss on cancellation of forward contracts while working out operating margin of the assessee - whether forex loss suffered by the assessee on account of cancellation of its forward forex contracts could be considered as operative or non operative in nature? - Held that:- There is a clear observation that entering into forward contract for covering the risks of exchange rate fall, was a normal business transaction. Of course there indeed is an observation that extraordinary fluctuations could warrant an adjustment if it could be demonstrated that such a phenomena was absent for comparable cases. Nothing of this sort was demonstrated by the assessee here. In such circumstances we are of the opinion that ld. DRP fell in error in directing the ld. TPO to exclude foreign exchange loss/gain, considering it to be non operating in nature, while computing operating margin of the assessee as well as that of comparables. Directions given by the ld. DRP in this regard are set aside.

  ---

• 2017 (5) TMI 1092
  Reopening of assessment - wrong claim of carry forward of unabsorbed depreciation - Held that:- It is difficult to accept the cause/justification recorded by the AO in this regard. Admittedly, the AY 2006-07 is merely a transient year where the carry forward of earlier year has been brought forward to this year and again carried forward to next year for set off in the appropriate assessment year. AY 2006-07 only seeks to disclose the pending entitlement of the assessee in respect of unabsorbed depreciation rightfully or wrongfully. This has no impact on the “chargeable income” of the AY 2006-07 which is alleged to have escaped assessment. Therefore, the precondition for invoking jurisdiction under section 147 in so far as this reason is concerned is untenable in law and cannot be upheld. - Decided in favour of assessee. Failure to increase the book profit computed under section 115JB of the Act on account of bad debts reserves debited to P&L Account - Held that:- A bare reading of Explaantion-1(c) to section 115JB would suggest that the aforesaid clause is meant to increase the book profit in respect of provisions towards unascertained liabilities. It is apparent that bad debts reserves is not on account of any provision towards any liability far less unascertained liabilities. The provision, as pleaded by the assessee, is in the nature of amounts set aside for diminution in the value of sundry debtors which is an asset rather than a liability. Therefore, the entire basis for the formation of belief to invoke section 147 is a damp squib. As a Corollary, the reasons recorded are not in sync with section 147 of the Act and are marred by wrong application of law and therefore cannot be sustained. - Decided in favour of assessee.

  ---

• Customs

• 2017 (5) TMI 1128
  Issuance of SCN - scope of section 28 of CA - Classification of imported goods - thermistors - Whether no SCN u/s 28 of the CA can be issued to the appellant when the goods have been provisionally assessed and the said assessment has not been finalised u/s 18? - Held that: - Section 18 of the Customs Act deals with provisional assessment of duty and Section 28 mainly deals with the recovery of dues from the concerned persons in case of short levies or non-levies of duty or erroneous refund. The SCN dated 24.4.2014 issued in this case to the appellant has not made a mention of ‘reassessment’ or ‘final assessment’ as per the provisions of Section 18(2) of CA, 1962, though subject goods initially were assessed and released provisionally. However, from the proceedings initiated by the SCN, it is clear that Revenue wants to have ‘finalisation of provisional assessment’, though specific mention of provisions Section 18(2) and Section 18(3) were not made. Therefore, considering the present facts, the SCN issued by the Revenue to appellant is the proceedings u/s 18(2) and 18(3) along with Section 28 of CA - the issuance of SCN for the present facts is legally valid recourse for ‘finalisation of assessment’. The original adjudicating authority will finalise provisionally assessed Bill of Entry during the fresh adjudication proceedings, which are being ordered by this order, for which the appellant shall be given opportunity of personal hearing and submission of necessary documents/evidence as admissible by law - appeal allowed by way of remand.

  ---

• 2017 (5) TMI 1127
  Classification of imported goods - Mixed Xylene - classified under CTH 29.02 or under CTH 27.07? - Held that: - to fall in Heading 29.02, xylene must contain 95% or more by weight of xylene isomers, all isomers being taken together and xylene of lower purity would fall in heading 27.07 - In the instant case, the subject goods is a mixture containing less than 95% by weight of xylene isomers and hence would be appropriately classifiable under Heading 27.07 (SH 2707.30-Xylole) - appeal dismissed - decided against appellant.

  ---

• 2017 (5) TMI 1126
  Mis-declaration of description and value of goods - redemption fine - penalty - Held that: - This revision of value is made basically in terms of revised invoice produced by the importers themselves during the course of examination of the goods. Admittedly, the value of goods (permissible for import) was mis-declared, at the lower side, by 10 times. This shows the seriousness of the offence. A revised value of the permissible goods alone comes to Rs. 1,10,62,837/-. The Original Authority imposed a redemption fine of Rs. 15 lakhs, which works out to less than 15% of the assessable value. I find such a redemption fine is fair and reasonable in terms of Section 125 of the CA, 1962. The reduction of the said fine to Rs. 5 lakhs by the impugned order is not justified. There is no reason at all recorded for such reduction. The reasons recorded by the impugned order for setting aside the penalty is not legally justifiable. The provisions of Section 112(b) is correctly invoked for penalties on these Directors. Appeal allowed - decided in favor of Revenue.

  ---

• 2017 (5) TMI 1125
  Exemption under N/N. 93/2004-Cus dated 10.9.2004 - fulfillment of export obligation - it was alleged that appellant failed to submit the Export Obligation Discharge Certificate from the DGFT who is a licensing authority for the advance licenses - Held that: - the export obligation needs to be fulfilled by the appellants. The notification nowhere specify that such fulfillment of the export obligation is to be established only on the basis of EODC to be obtained from the DGFT. It would be open to the Customs authorities to satisfy themselves about the fulfillment of such export obligation on the basis of other export related documents also - matter remanded to the original adjudicating authority with a direction to undertake verification of the export documents and to satisfy about the fulfillment of the said obligation - appeal allowed by of remand.

  ---

• 2017 (5) TMI 1124
  Refund of CVD - rejection on the ground that the assessment order has not been challenged - Held that: - It is to be noted that at the time of filing Bill of Entry and its assessment, there was no lis between the Revenue and the importer regarding the eligibility of concession as per the notification. The lis has arisen only with the filing of refund claim by the respondent - refund allowed - appeal dismissed - decided against Revenue.

  ---

• 2017 (5) TMI 1123
  Penalty u/s 114(iii) of the CA, 1962 - IEC code - Held that: - Provisions of Section 114 of the CA, 1962 will not be applicable in this case as just introducing to a person who enabled the main accused/appellant to get I.E. Code by any stretch of imagination does not call for imposing penalty u/s 114 (iii) of the CA, 1962 - penalty set aside - decided in favor of appellant.

  ---

• Corporate Laws

• 2017 (5) TMI 1118
  Oppression and mismanagement - removal of the Director - Held that:- The observations of the CLB that the provisions of Section 397 and 398 of the 1956 Act would not be applicable in the instant case, as the grievance articulated by the appellant are in the nature of directorial complaints, in my view, does not bear in mind the fact that in a small private limited company, such as DPPL, which emerged out of a partnership comprising of members of one family, who, decided to give a corporate structure to their business relationship, only to manage their affairs in a manner which would benefit each member of the family - would, necessarily, give rise to charge of oppression, upon exclusion of a member, who represents a branch of the family, from an assigned managerial role. In the given case, the appellant, stands excluded from a managerial role, after having invested over a period of 34 years, in a manner of speech, his "blood, toil and sweat" to the growth of DPPL - it cannot but, to my mind, be an act of oppression. To entertain any other view, in my opinion, would cause such deep chasm between law and justice that it would defeat the very purpose, for which these provisions are enacted. More often than not a single infraction, which has a continuing impact, as in this case can be more oppressive than a series of acts. This is not, in substance, a case of a single act of oppression, as was sought to be portrayed by the counsel for the respondents. Therefore, the removal of the Director in a widely held public limited company may not always compare, with the removal of a Director in a closely held private company, where, as in this case, each branch of the family is expecting to be represented on its BOD. In such cases, removal of a member from the BOD, can amount to oppression and mismanagement, when, it is carried out on made-up and flimsy grounds, as in this case and would, thus, in my opinion, bring the action within the ambit of provisions of Sections 397 and 398 of the 1956 Act. In a public limited company, much would depend on the facts obtaining in that case. Say, for example, where, controlling interest is centered in one or more groups, and shares, though, listed on the Stock Exchange, are not freely traded. In such cases, different connotations may arise. The acts of oppression, in my view, will, thus, have to be examined, bearing in mind the totality of circumstances obtaining in a case, without being unduly burdened by the fact that it is a family company, or a private limited company, or even a public limited company. For grant of relief, qua oppression, the principles of quasi partnership are applicable, even to a public limited company. Allow the appeal and set aside the impugned order of the CLB dated 28.05.2015. Resultantly, the decision taken at the EOGM convened on 27.06.2009, to remove the appellant as the Director of DPPL and as a consequence thereof, his removal as the Executive Director is held to be bad in law. It is relevant to note that the nature of jurisdiction, which stood vested upon the High Court under Section 66 of the Income Tax, 1922, is different from the jurisdiction, which is conferred on the CLB under Sections 402 of the 1956 Act. In the given case, the failure to exercise such jurisdiction may give rise to a question of law under Section 10F. That the power of CLB under Section 402 of the 1956 Act is of the widest amplitude, is statutorily exemplified by clause (g) of the very same provision. Clause (g) of Section 402 brings within its sway, all other matters, qua which it is just and equitable for CLB to make a provision.

  ---

• Service Tax

• 2017 (5) TMI 1148
  Reverse Charge Mechanism - liability of tax - Scientific Technical Consultancy service - Held that: - the revenue contends that the respondent received taxable service in terms of the agreement, from China. The respondent refuted the charge stating that they have only imported equipments and paid money towards that import. The agreement for design was later amended and there was no payment, for other than the equipments, to their contracting parties in China - This aspect has been noted by the impugned order. In fact, the Commissioner (Appeals) advised the Revenue to verify any payments towards the disputed proforma invoice, to confirm the tax liability of the respondents. He instructed that the matter can be verified with RBI for any payment in foreign currency - there is also no verification or follow up details were ascertained by the Revenue before the proceedings were initiated with the allegation of non-payment of service tax - appeal allowed by way of remand.

  ---

• 2017 (5) TMI 1147
  Alternative statutory appellate remedy to file an appeal - Held that: - the petitioner has to only seek for alternative remedy before the First Appellate Authority and canvass all the points raised in this writ petition. As it is admitted that the petitioner has also paid more than 60% of the tax demand, there cannot be any difficulty for the petitioner to seek for an Interim Stay of further recovery, pending disposal of the first appeal - petition allowed by way of remand.

  ---

• 2017 (5) TMI 1146
  Demand of service tax - there is no evidence produced to controvert the facts on record - demand upheld. CENVAT credit - Benefit of N/N. 1/2006-St - demand on the ground that related documents (Invoices/Bills) have not been produced by the appellant - demand upheld. There is no scope to give any relief to the appellant even in case of penalties imposed u/s 76 of the FA, 1994 and Rule 15 (3) of CCR, 2004, when the appellant did not present any redeeming facts in their favor. Appeal dismissed - decided against appellant.

  ---

• 2017 (5) TMI 1145
  Business Exhibition Service - service received from foreign service provider - reverse charge mechanism - Held that: - section 66A is a deeming provision which says that such service shall be taxable service and such taxable service shall be treated so as if the recipient has himself provided the service in India and accordingly, the provisions of FA, 1994 for levy of service tax will be applicable to such facts - the appellant did not provide/receive any service within India. In other words, the subject services have been fully performed outside India only. There is not even part performance or part receipt of service within India - there cannot be any liability of Service Tax for the subject services which have entirely been performed outside India - appeal allowed - decided in favor of appellant.

  ---

• 2017 (5) TMI 1144
  Free after-sale services rendered to the customers - taxability - Held that: - the issue is no more res integra as identical issue came up before the Tribunal in the case of CCE v. Automotive Manufacturers Ltd. [2015 (12) TMI 549 - CESTAT MUMBAI] wherein the Tribunal held that service tax liability cannot be on the part of margin given by the manufacturer to the dealer as being inclusive of the charges of free sale service - demand rightly dropped - appeal dismissed - decided against Revenue.

  ---

• 2017 (5) TMI 1143
  Real Estate Agent Service/Real Estate Consultant Service - case of appellant is that they did not act as “real estate agent” or ‘real estate consultant’ but in fact they have purchased the land and Transferable Development Rights (TDR) and sold the same for a premium/profit - whether the first appellate authority was correct in setting aside the demands raised with interest and also the penalties imposed under the category of “real estate agent” service? - Held that: - Revenue has not come out with contrary evidence to show that the respondent’s services would get cover under the definition of ‘real estate agent’ services or ‘real estate consultant’ services. The first appellate authority was correct in coming to such a conclusion that the activities as undertaken by the respondent would not fall under the category of ‘real estate agent’ services or ‘real estate consultant’ services. A similar/identical issue was before this Bench in the case of Sarjan Realties Ltd. [2014 (7) TMI 933 - CESTAT MUMBAI], where the bench has categorically considered the definition of the Real Estate Agent and the activities undertaken by appellant therein and held that the activities of purchase and sale of the land and the amount received by them, and the difference between purchase price and sale price cannot be held as commission and taxable under real estate agent services. Demand set aside - appeal rejected - decided against Revenue.

  ---

• 2017 (5) TMI 1142
  Liability of Service tax on TDS amount absorbed by the assessee on foreign remittance - reverse charge mechanism - case of appellant is that the service tax liability under Section 66A is already discharged on the amount of consideration paid by them to the service providers situated abroad - Department contended that appellant having discharged the Income Tax liability on the amount so paid, Service Tax liability arises on the Income Tax amount deducted as TDS and paid to Government of India - whether the appellant is required to discharge the service tax on an amount paid by them as TDS for the payment remitted to the service providers situated abroad or otherwise? - Held that: - It is not the case of Revenue that appellant has not paid the said amount and less paid to the service providers situated abroad. On a perusal of the records, we find that this plea of the appellant that the amount paid actually by them is not controverted by the adjudicating authority or by the first appellate authority. Identical issue came up before this Bench in the case of Magarpatta Township Development and Construction Co. Ltd. [2016 (3) TMI 811 - CESTAT MUMBAI], where it was held that the value which is to be considered for the discharge of service tax liability under reversal charge mechanism is equal to the actual consideration charged for the services provided or to be provided - In the case in hand, it is undisputed that appellant herein had only paid the actual consideration as per the agreement and nothing else - demand set aside - appeal allowed - decided in favor of appellant.

  ---

• 2017 (5) TMI 1141
  Business Auxiliary Services - activity of providing Multi Level Marketing to its principal - extended period of limitation - penalty - Held that: - the activity of Multi Level Marketing whether liable to levy of service tax was contentious issue, which was resolved by the Tribunal in the case of Charanjeet Singh Khanuja [2015 (6) TMI 585 - CESTAT NEW DELHI], holding that such activity should fall under the Business Auxiliary Service - there was ambiguity in interpretation of the statutory definition of Business Auxiliary Service, thus, the demand for extended period of limitation cannot be sustained - considering the fact that the appellant has not involved in the fraudulent activities concerning suppression fraud etc, the penalty imposed u/s 78 ibid can be set aside invoking Section 80 in the interest of justice. Matter remanded back to the original authority for quantification of service tax liability payable by the appellant within the normal period of limitation - appeal allowed by way of remand.

  ---

• 2017 (5) TMI 1132
  Penalty u/s 78 - wrongful availment of Cenvat credit in respect of sales commission and thereafter the distribution of the same to their factory at Gujarat - Held that: - the subject amount of Cenvat credit of Rs. 2,19,981/- cannot be the part of the proceedings initiated by Revenue at two places, though assessee may have offices registered under the Revenue at two places - When Commissioner, Ahmedabad-III has already confirmed the demand disallowing the Cenvat credit amounting to Rs. 3,55,20,028/- which included the Cenvat credit involved in the present proceedings amounting to Rs. 2,19,981/-, there cannot be any question to penalise twice for wrong Cenvat credit taken by the assessee once - penalty set aside - appeal allowed - decided in favor of appellant.

  ---

• Central Excise

• 2017 (5) TMI 1140
  Condonation of delay - Levy of penalty under Rule 26 of Central Excise Rules - Clandestine removal fo goods - Held that: - the appellant was CHA and being a CHA the appellant was required to take due care and was supposed to know the law, the learned tribunal has refused to condone the delay. However, it appears that there does not appear to be any other mala fide intention on the part of the appellant in not preferring the Appeal within the period of limitation. As such, by not preferring the Appeal within the period of limitation, the appellant was not going to be benefited. Even otherwise, considering the fact that when against the Order-in- Original other Appeal /Appeals at the instance of the co-noticee is /are pending before the learned tribunal, the learned tribunal ought to have condoned the delay even on imposing reasonable cost - on imposing reasonable cost to be deposited with the Commissioner of Central Excise, which the appellant has agreed to pay to the Department, delay caused in preferring the Appeal be condoned - appeal allowed - decided in favor of appellant.

  ---

• 2017 (5) TMI 1139
  Service of notice - the sole ground on which the Tribunal has remanded the matter to the adjudicating authority to decide afresh on the grounds of appeal raised by the Revenue is that the respondents were not appearing before the Bench and were not contesting the grounds of appeal of the Revenue on merits and that it was difficult to proceed in the matter - Held that: - the petitioner herein had invoked the powers of the Tribunal under rule 41 of the rules and not under section 35C(2) of the Act. Insofar as the order dated 30th November, 2015 is concerned, the Tribunal has not entered into any discussion on the merits of the appeal but has merely remanded the matter on the ground that the respondents (the petitioner herein and others) had not contested the appeal of the Revenue on merits and it was difficult to proceed in the matter. The Tribunal was not justified in not entertaining the application made by the petitioner for recalling its earlier order dated 30th November, 2015 and restoring the appeal - petition allowed - decided in favor of petitioner.

  ---

• 2017 (5) TMI 1138
  CENVAT credit - common input services used in dutiable as well as exempted products - Revenue took the view that in terms of the provisions of Rule 6(2), of the CCR, 2004, the appellant was required to pay an amount equal to 10% of the value of the exempted goods sold by them - Held that: - since in the present case, the exempted final product has emerged as an unavoidable waste or by-product, compliance of provisions of rule 6(2) is impossible - appeal dismissed - decided against Revenue.

  ---

• 2017 (5) TMI 1137
  Refund claim - Business Auxiliary Service - export of services - Held that: - the matter is covered by the Tribunal’s decision in the appellant’s own case M/s National Engineering Industries Ltd. Versus CCE, Jaipur [2017 (5) TMI 750 - CESTAT NEW DELHI], where it was held that the services are considered as export of services and refund allowed on same - the original authority is directed to consider the appellant’s refund claim as admissible in law - appeal allowed by way of remand.

  ---

• 2017 (5) TMI 1136
  Rectification of mistake - maintainability of appeal - the application filed by the applicant for rectification of mistake under Section 35C(2) of the Act, for the orders passed by this Tribunal under Section 35F of the Act - Held that: - no application u/s 35C(2) of the Act is maintainable against the orders passed by this Tribunal u/s 35F of the Act - the application for rectification of mistake filed by the applicant is not maintainable - appeal dismissed being not maintainable.

  ---

• 2017 (5) TMI 1135
  100% EOU - Adjudication done in careless manner - recycling of ferrous and non ferrous scrap - benefit of N/N. 53/97-Cus dated 03.06.1997 - cumulative NFE - Held that: - the Tribunal vide its order APEX RECYCLING PVT. LTD. Versus COMMISSIONER OF CENTRAL EXCISE, DELHI-I [2008 (8) TMI 64 - CESTAT NEW DELHI] had given two fold directions to be followed at the time of de novo adjudication. The second direction, where matter was to be sent to the Development Commissioner for calculation of the cumulative NFE and his direction for de-bonding, was to be complied with after adjudication of the valuation issue - both the parties have agreed that the second condition has not been complied with in the impugned order - we approve the impugned order regarding the discussion on the valuation issue but is set aside to facilitate and remand the matter back to the original authority to comply with the direction no. 2 pertaining to Development Commissioner for calculation of cumulative NFE - appeal allowed by way of remand.

  ---

• 2017 (5) TMI 1134
  CENVAT credit - various inputs - adhesive tape, welding electrodes, gum boots, concrete sleepers, fish plate, rail and rail crossing, high mast light/HMPV lamp, high pressure sodium vapour, flood , galvanised tower, GI flat, GI rod, lightening pole, ladder, tough tray, cabin fan etc. - Held that: - the appellant is entitled to Cenvat credit for the subject items - in appellant’s own case M/s Steel Authority of India Ltd. Versus CCE & ST, Raipur [2016 (8) TMI 1110 - CESTAT NEW DELHI], the Cenvat credit facility benefit in case of welding electrodes also has been allowed - corresponding penalty imposed by the impugned order in this regard is also dropped - appeal allowed - decided in favor of appellant.

  ---

• 2017 (5) TMI 1133
  CENVAT credit - duty paying invoices - the appellants have availed the credit on the invoices without receipt of the goods covered under the said invoices - natural justice - Held that: - the entire evidences are of third party i.e. either from the broker dealing in the sale of inputs, transporter who transported the goods and the actual recipient of the goods in Gujarat - when the evidences of third party is used against an assessee for deciding confirmation of demand against them, it is necessary that the request of cross-examination should accepted - it is very clear that not only on the request of the assessee but even for admission of any statement for relying upon any statement, in any case, the adjudicating authority is duty bound to first cross-examine the persons whose statement is being relied upon, otherwise the said statements cannot be used in deciding the case - matter remanded to the original adjudicating authority for decision afresh - appeal allowed by way of remand.

  ---

• 2017 (5) TMI 1131
  Restoration of stay application - ex-parte order passed due to default in making the appearance on 09th January, 2017 - Held that: - there is sufficient reason for non appearance of these applicants on the date fixed, that is 09th January, 2017, due to delay of train and/or illness of Counsel’s father-in-law - in the interest of Justice we recall the stay order dated 09/01/2017 in respect of these appellants/applicants - the stay applications are restored to its original numbers and the same are fixed for hearing on 08th May, 2017 - decided in favor of applicant.

  ---

• 2017 (5) TMI 1130
  Penalty u/r 209A of the CER, 1944 - Held that: - not only demand against main appellant M/s. Ferro Alloys Corpn. Ltd but also other appellants, Shri. Vinod Saraf and Shri. P.D. Lele on whom penalties u/r 209A was imposed have been dropped. The present appellants against whom penalties u/r 209 A were imposed are also on the same footing of the Shri. Vinod Saraf and Shri. P.D. Lele and therefore present appellants also deserve the same relief - Once the said duty demand was set aside, consequential penalties imposed on the present appellants also do not sustain - penalties set aside - appeal allowed - decided in favor of appellant.

  ---

• 2017 (5) TMI 1129
  CENVAT credit - area based exemption - N/N. 50/2003-CE dt. 10.1.2003 w.e.f. 30.10.2004 - denial of credit on the ground that clearances effected under the said notification are not required to pay any duty, therefore, they are not entitled to take any credit - Held that: - the goods produced by the respondents are mentioned in the first schedule to the CETA, 1985. It is not the case of the respondents that the final products manufactured by them falls in Annexure-I appended to the notification. Therefore, the contention of the respondents, that the goods manufactured by them are not specifically exempted is completely erroneous. Since the final products manufactured by the respondent are specified in the notification and the same is cleared from the unit located in the specified zone, the goods manufactured by the respondents are exempted goods. Since the only final product manufactured by respondents are held to be exempted goods, the benefit of CENVAT Credit is not eligible in the terms of Rule 6(1) of CCR, 2004. It is not the case of the respondents that they are manufacturing dutiable as well as exempted goods - the respondents are entitled to keep the credit on inputs as on 30.10.2004 for payment of duty as and when such a need arises - appeal allowed - decided in favor of Revenue.

  ---

• CST, VAT & Sales Tax

• 2017 (5) TMI 1122
  Works contract - Whether the construction work of building done by the revisionist over its own land, falls under the definition of works contract on behalf of the prospective purchaser of the property? - Held that: - an agreement was duly arrived at between the parties for carrying out construction activities and pursuant to such contract the developer had also received money, the existence of works contract is clearly established - Tribunal as well as the authorities were justified in treating the construction work undertaken to be works contract. Whether tax can be imposed u/s 3 F of the U.P. Trade Tax Act, on the goods purchased from outside the State of U.P., specifically for the purpose of being used in the construction of building for which risk and reward passed on the purchaser on execution of sale deed? - Held that: - There does not seem to be much clarity on facts in the order of the Tribunal on such aspects. Whether, the addition of 20% profits made in the purchase value of goods purchased for being used in the construction activity is based on surmises and conjectures and, therefore, not sustainable in the eyes of law? - Held that: - Learned Standing Counsel seems to be right in contending that proper factual premise do not appear to have been laid by the assessee in that regard. Matter on remand for consideration of these two aspects - appeal allowed by way of remand.

  ---

• 2017 (5) TMI 1121
  Rate of tax - classification - Mehndi Cone - whether 'Mehndi Cone' would be covered by Entry 23 of Schedule-1 of U.P. VAT Act or not? - Held that: - The entry specified in the notification grants exemption under Schedule-1 to Mehndi leaves or powder and not Mehndi itself - the 'Mehndi Cone' is a new product, which comes into being after Mehndi powder is processed by adding oil and chemicals. Once a distinct new entity has come into existence, it cannot be said to be either Mehndi leave or Mehndi powder. Exemption is not allowed to Mehndi or all its derivatives, but is restricted to 'Mehndi leaves' and 'Mehndi powder' alone - The Tribunal has rightly come to the conclusion that the paste, which is created in the process is a cosmetic preparation as various oil and chemicals are added to Mehndi powder so as to exclude it from the purview of exemption notification. 'Mehndi Cone' does not fall within the exemption notification issued under Schedule-I - appeal dismissed - decided against Revenue.

  ---

• 2017 (5) TMI 1120
  Validity of reassessment order - Section 42(9)(c) of the KVAT Act - principles of natural justice - Held that: - it is obvious that the petitioner had been given ample opportunities by the assessing authority for filing the relevant documents and for stating his position. Moreover, even the notice is sued u/s 39(1) r/w Section 72(2), 36 and 37 of the KVAT Act, was duly served on the petitioner. Therefore, the petitioner is not justified in claiming that during the re-assessment proceedings, no opportunity of hearing was granted to the petitioner. Once an opportunity of hearing was given to the petitioner to produce the relevant documents within a period of seven days, the petitioner was duty-bound to avail an opportunity. Petition dismissed - decided against petitioner.

  ---

• 2017 (5) TMI 1119
  Whether penalty under Section 10 (b) of CST Act can be levied even in respect of “class of goods” being exempted from payment of tax, when such goods are permitted to be purchased as per the list annexed to the Certificate of Registration? Held that: - the goods which have been purchased by the dealer against Form-C were undisputedly included in the certificate of registration. The very fact that the goods purchased by the dealers were included in the certificate of registration and those goods alone have been purchased by them against Form-C establishes the bonafides of the dealers or in other words there was no intention to suppress at the time of purchasing the goods. It has to be presumed that the authorities were satisfied the said goods are for use in the manufacturing and processing of goods for sale by the dealers. In terms of Rule 3 (5) of the CST Rules, the notified authority while granting the certificate of registration would have included the goods in the said certificate only upon satisfying itself that the said goods are indeed eligible for inclusion in terms of the end use and as such a presumption has to be raised in favor of the dealers. Hence, it cannot be gainsaid by the authorities that the dealers had misrepresented or gave a wrong impression regarding the usage of goods to attract levy of penalty. It was not the case of the adjudicating authorities that the goods in question which have been purchased by the appellant/dealer had not been purchased by them on inter state basis. But on the other hand it was their specific case that appellant / respondent had misused Form-C as these goods are not integrally connected with the manufacturing process. Under Rule 3(5) of the CST Rules the notified authority at the time of granting registration certificate is required to conduct an enquiry as it deems fit and then issues the registration certificate containing list of goods upon being fully satisfied that the particulars contained in the application are correct. Once the goods are included in the certificate of registration which in terms of Rule 5 of the CST Rules is done, an enquiry regarding the feasibility of use of such goods in the manufacturing process or processing of goods for sale etc. the eligibility to purchase such goods against Form-C would not be a ground available to the adjudicating authority and deprive the dealer such benefit on the ground that the goods are not used in the manufacture or processing of goods for sale. When once the item has been included in the registration certificate, automatically it would be eligible for the concession until and unless the registration certificate is either amended, cancelled or annulled - In the instant case the rail and its spares for rail used by the appellant for movement of raw materials (fly ash) to the manufacturing unit and also loose cement from the manufacturing unit to the packing unit have direct link to the activities carried on by the appellant namely manufacture of cement and it is an integral part of the said activity. The whole process of operation is integral and is essentially of mining nature. The activity of transporting the goods from railway yard to the manufacturing location is an activity which is integrally connected to the manufacturing process and the goods purchased in respect of such transpiration would also be covered under Section 8 (3)(b) of CST Act. Hence, the goods purchased by the appellant in STA No.154/2016 would not contravene the provisions of the act and therefore the order of levy of penalty in the case of the appellant under suo moto proceedings cannot be sustained. Appeal allowed - decided in favor of assessee.

  ---

• 2017 (5) TMI 1091
  Refund claim - C-Form in original - demand of documents was not for the purpose to frame fresh default assessments of tax and interest - Held that: - The Revenue shall ensure that the refund applications are processed and appropriate orders are made before the next date of hearing indicating the interest amount and the extent to which it is granted - petition allowed by way o remand.

  ---

• Indian Laws

• 2017 (5) TMI 1117
  Offences under Sections 8/15/18/19 NDPS Act - petitioners have been asked to surrender possession of the properties mentioned in the order within 30 days of the service of the order - Held that:- The remedy of writ is an absolutely discretionary remedy and the High Court has always the discretion to refuse to grant any writ, if it is satisfied that the aggrieved party can have an adequate or suitable relief elsewhere. The Court, in extraordinary circumstances, may exercise the power, if it comes to the conclusion that there has been a breach of principles of natural justice or procedure required for decision has not been adopted. Thus it is apparent that the petitioners have rushed directly to this Court and have by-passed the statutory alternative remedy, which is not permissible in view of the aforesaid settled position. It may be noted that when an alternative and equally efficacious statutory remedy is open to a litigant, he should be required to pursue that remedy and not to invoke the extra ordinary jurisdiction of the High Court to issue a prerogative writ as the writ jurisdiction is meant for doing justice between the parties where it cannot be done in any other forum. SCN issued under Section 68H(1) of the NDPS Act, 1985 whereby the petitioners were required to indicate the source of income , earnings or assets out of which or by means of which they have acquired or possessed or has interest in the property - Held that:- The writ petitions against the show cause notice are not maintainable. Issuance of show cause notice is a statutory provision subject to limitation. The purpose of its issuance is to seek a reply for the proposed actions thereunder, before initiation of adjudication proceedings. In other words, show cause notice is merely answerable and not questionable in a writ proceeding. Therefore, afore-captioned writ petitions are not maintainable and are liable to be dismissed.

  ---

• 2017 (5) TMI 1116
  Offence under Section 138 of Negotiable Instrument Act - existence of liability or enforceable debt - Held that:- The petitioner/accused failed to prove by any probable defense that the existence of liability was either improbable or doubtful. So far as the judgments relied upon by the learned counsel appearing for the petitioner in Rangappa (2010 (5) TMI 391 - SUPREME COURT OF INDIA) has held that the petitioner can raise the presumption by preponderance of probabilities and if the accused is able to raise a probable defence, which creates a doubt about the existence of liability or enforceable debt, then the prosecution can fail. But, in the instant case, the petitioner has failed to raise any probable defence to rebut the presumption. Hence, the above judgment is not applicable to the petitioner's case. The another judgment relied upon by the learned counsel for the petitioner in T.R. Palanisamy (2012 (6) TMI 862 - MADRAS HIGH COURT ), is also not factually applicable to the petitioner's case. In the above circumstances, it is of the considered view that the petitioner/accused had failed to rebut the initial presumption under Section 139 of Negotiable Instruments Act. Considering all the above materials, both the court belows had convicted the petitioner and find no illegality or irregularity in the judgment of the courts-below, hence, the revision fails and is liable to be dismissed.

  ---