Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 3, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
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 on sale of tenancy right - The transfer of tenancy rights cannot be treated as sale of land or building declared as neither a supply of goods nor of services in para 5 of Schedule III to CGST Act, 2017. Thus a consideration for the said activity shall attract levy of GST
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Power to levy of advertisement tax - omission of clause (b) of sub-Section (2) of Section 172 and Sections 192 and 193 of the U.P. Municipal Corporation Act, 1959 - proceedings stayed - HC admitted the appeal.
Income Tax
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TDS u/s 194H - The sale of prepaid sim cards and RCVs by the assessee to the distributors are on principal–to–principal basis, hence, outside the ambit of section 194H of the Act. - AT
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TDS u/s 194J - payment for service charges - reimbursement of expenses - the payment made by KSL and ML to HSL for various expenses incurred would be a reimbursement and not a fee for technical services, Section 194J is not attracted. - HC
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Holding loss as speculative loss - transactions of forward (future) contract of sale of gold to the Bank or the MMTC - assessee failed to correlate these forward contract transactions of gold and corresponding purchases and export of jewellery. - AT
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Additions towards interest on capital - the interest payment relating to the addition confirmed as unexplained cash credit in the hands of the firm is not allowable and the same is to be treated as income in the hands of the firm as unexplained sources. - AT
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Additions u/s 68 - Unsecured loans - partnership firm - Making addition of unsecured loans relating to the partnership firm in the hands of the assessee is bad in law and unsustainable - AT
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Registration u/s. 12AA - charitable activities or busniss activities - Sukhmani centers - society is to run on a self-sustaining basis - the assessee is undertaking business and, accordingly, is hit by the second proviso to section 2(15) - AT
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Expenses related to the foreign travels of the family members of the directors - business expediency - As the assessee may stand to derive some business benefit from such social intercourse and, further considering that the son/s has joined business subsequently, indicating a business purpose as well, we consider it proper to restrict the disallowance to 40% of the impugned expenditure, i.e. qua TA and conveyance - AT
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Disallowance of 20% of Legal & Professional Fees paid - authorities have not identified, if the payments made to related party is unreasonable - Legal & Professional Fees is only 2.02% of the sales. No justification in partial disallowance of Legal and Professional Expenses - AT
Customs
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Valuation - challenging assessed bill of entry - payment of duty at the enhanced value and clearance of the goods in urgency cannot preclude the assessee from challenging the assessed bill of entry on the sole ground that goods stand cleared at the enhanced value. - AT
IBC
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Corporate insolvency process - Authorization - the application has been filed by the authorised persons, we hold that both the applications on behalf of the ‘Financial Creditors’ were maintainable. - AT
Central Excise
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Whether the omission of Section 3A of the Central Excise Act, 1944 by Section 121 of Finance Act, 2001, without any saving clause would affect the proceedings in respect of which decision has already been taken prior to the date of omission? - the issues are answered in favour of the department - HC
VAT
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Levy of tax on works contract - interstate transaction - divisibility of the contract would not empower the Authorities to subject the inter state transaction to tax under the State Tax Act on the ground that the petitioner has employed dubious methods to avoid payment of tax to the State - HC
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Classification of All-in-one Diapers, Under-pads and Sanitary Napkins - Such Underpads or Diapers definitely help them in maintaining good medical and hygienic conditions of their body and therefore, such items can certainly be said to be “similar articles” read with “wadding gauze and bandages for medical and surgical purpose” etc. - HC
Case Laws:
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GST
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2018 (5) TMI 170
Levy of advertisement tax - omission of clause (b) of sub-Section (2) of Section 172 and Sections 192 and 193 of the U.P. Municipal Corporation Act, 1959 - Held that: - Prima facie, the issue requires scrutiny - further proceedings to remain stayed till next date of listing.
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2018 (5) TMI 169
Levy of advertisement tax - omission of clause (b) of sub-Section (2) of Section 172 and Sections 192 and 193 of the U.P. Municipal Corporation Act, 1959 - Held that: - Prima facie, the issue requires scrutiny - further proceedings to remain stayed till next date of listing.
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Income Tax
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2018 (5) TMI 161
Assessment u/s 153D - requirement of fresh approval for complying with the remand directions under Section 263, in a case where the assessment under Section 153A as originally framed after compliance of Section 153D - Held that:- Section 153D of the Act had been duly complied with by the A.O. The contention raised that even an order of remand cannot be passed without complying with Section 153D of the Act is beyond the scope of the section. Tribunal rightly held that Section 153D is for assuming jurisdiction to pass an assessment order under Section 153A of the Act and the A.O. would not loose the jurisdiction to frame assessment while complying with remand order. The contention of appellant that the order dated 18.03.2014 was passed under Section 143(3) read with Section 263 of the Act is not well founded. Though in the heading Section 143(3)/ 263 of the Act are referred to from the order it is clear that it has been passed under Section 153A read with Section 143(3) of the Act and the same has been passed pursuant to the remand under Section 263 of the Act. In the heading the A.O. has mentioned Section 143(3) read with Section 263 of the Act only to show that the assessment is being framed as per the directions of the CIT in revisional proceedings. Appeal dismissed.
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2018 (5) TMI 160
Reopening of assessment - bogus accommodation entries obtained - disposal of objections - non examining of contentions - Held that:- In view of the reasons recorded in our order dated 12th April, 2018 without examining the other contentions raised on behalf of the Petitioner, the two orders dated 17th November, 2017, disposing of the Petitioner's objections to the reasons in support of the notices dated 30th March, 2107, are quashed and set aside. The Petitioner is given an opportunity to file fresh objections to the reasons in support of the impugned notice dated 30th March, 2017 in the context of the material now made available (relied upon by the Revenue in its affidavit in reply). AO would pass a fresh order, disposing of the objections within a period of four weeks from the date of filing of the fresh objections. AO will not act upon the impugned notice for the period of four weeks from the date of the communication of the fresh order, disposing of the Petitioner's objections.
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2018 (5) TMI 159
Transfer Pricing Adjustment made on account of the expenditure towards Advertisement, Marketing and Promotion (AMP ) - Stay against demand - Held that:- As against the impugned demand of ₹ 22.17 crores, the Tribunal granted the stay with deposit of ₹ 2 crores in addition to ₹ 3.32 crores; and looking to the issues involved, as regards expenditure towards AMP, it is difficult to deduce that the writ petition was filed in an entirely irresponsible manner or that the authorities should be penalized in monetary terms on that count. In the totality of circumstances, we do not find it necessary to dilate further in this matter. In our view, interest of justice shall be served with the clarification that the observations occurring in the order impugned would only be considered as being relevant for the purpose of the consideration of the matter for interim relief and by waiving the costs imposed. It would, however, be expected of the authorities concerned to take necessary steps so as to guard against filing of frivolous petitions, as indicated and observed by the learned Single Judge.
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2018 (5) TMI 158
Application for rectification u/s 154 rejected - rectification of the intimation issued under Section 143(1) seeked - Held that:- The Principal Commissioner of Income Tax 22 has filed an affidavit from which it is clear that he has taken stock of the facts arising in this Petition. The affidavit very fairly states that in view of the order of the CIT(Appeal) along with the material available on record, it is clear that the AO ought to have allowed the rectification application in respect of Assessment Year 1997-98. Commissioner of Income Tax has in his affidavit assured us that the issue would be resolved promptly and the refund along with interest thereon in accordance with the provisions of law, shall be granted to the Petitioner-Assesssee, preferably within the period of six weeks from today. The affidavit also record the regret on the part of the Revenue for the inconvenience caused to the Petitioner - Assesse. Rectification to be allowed.
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2018 (5) TMI 157
Process of filing a tax case appeal - attachment orders - Held that:- Since the appeal filed as against the assessment order for the year 2009-10 is pending before this court in a tax case appeal filed by the petitioner, which is in SR stage, and as against the order passed by the tribunal for the assessment year 2010-11, the petitioner is in the process of filing an appeal, this court is of the view that a condition can be imposed, so that, interest of the Revenue will be safeguarded and simultaneously, the assessee will also have a partial relief. Considering the above, the writ petition is disposed of by directing the petitioner to pay a sum of ₹ 5,00,000/- towards assessment for the year 2010-11. Since it is represented that the petitioner is undergoing severe financial crisis, they are granted six weeks time from today to pay the said amount.
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2018 (5) TMI 156
Payment to the cane growers in excess of the price fixed by the Government - payment for business expediency - Held that:- Mere use of the word advance in the letter of the Sugarcane Growers Association by itself would not change the character of the payment, especially when the amount paid was an ascertained liability and the assessee was following mercantile system of accounting and the payment was also done during the relevant accounting year. Furthermore, the Tribunal rightly observed that the assessee could not avoid this payment in view of the business expediency, as the entire business of the assessee was depending upon the supplies of sugarcane. For the above reasons, we find, there are no merits in the appeal. - Decided in favour of assessee
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2018 (5) TMI 155
Computation of deduction u/s 80HHC - Whether Machine Charges and other income should be treated as income derived out of business - Held that:- The assessee is not carrying on machining activity as its main line of business. This fact has been admitted by the CIT(Appeals) as well as before the Tribunal. The activity of machining done by the assessee is when the machinery, which is used for manufacturing activities for export, was lying idle. When the machineries are not put to use for manufacturing activity, the assessee has engaged in machining work, undertaking it as a job work. Commissioner of Income Tax (Appeals) as well as the Tribunal rightly held that the assessee had used plant and machinery to get income and that has to be considered as business income only. Further, with regard to a sum of ₹ 26,000/- representing other income, the Commissioner of Income Tax (Appeals) as well as the Tribunal held that it has to be treated as business profit. - Decided in favour of assessee.
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2018 (5) TMI 154
Reopening of assessment - addition of unexplained credit under Section 68 - eligibility of reason to believe - Held that:- The Income Tax Officer would be in a position to consider the introduction of capital for the relevant year only in case returns were filed by the appellant. The appellant having failed to file its return of income for the Assessment Years 2010-11 and 2011-12 cannot be heard to say that the Income Tax Officer was not correct in re-opening the assessment when it was made known at a later point of time that capital was introduced in the course of the earlier two financial years. The reasons given by the Income Tax Officer would satisfy the statutory requirements for re-opening the assessment. We are therefore of the view that the appellant has not made a case to interfere in the proceedings initiated by the Income Tax Officer for re-opening the assessment for the Assessment Years 2010-11 and 2011-12 - Decided against assessee.
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2018 (5) TMI 153
Method of computing the exemption under Section 10-A - whether the expenses excluded from the export turnover are also to be excluded from the total turnover for the purpose of Section 10-A - Held that:- As decided in Commissioner of Income-tax Versus Tata Elxsi Ltd. [2011 (8) TMI 782 - KARNATAKA HIGH COURT] if the export turnover in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded in computing the export turnover as a component of total turnover in the denominator. The reason being the total turnover includes export turnover. The components of the export turnover in the numerator and the denominator cannot be different.
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2018 (5) TMI 152
Not deducting TDS u/s 194J - assessee in default - payment for service charges - whether the payments made by the assessee to M/s. Hospet Steel Limited are reimbursement of expenses on cost to cost basis and does not constitute income component? - Held that:- As in Hyderabad Industries Ltd., Vs Income Tax Officer and Another (1991 (1) TMI 134 - KARNATAKA High Court) held that, “an amount which will not be included in the total income of a person cannot be considered as “income” for the purpose of deduction of tax at source at all. The purpose of deduction of tax at source is not to collect a sum which is not a tax levied under the Act, it is to facilitate the collection of tax lawfully leviable under the Act.” In view of the factual finding of the appellate authorities that the payment made by KSL and ML to HSL for various expenses incurred would be a reimbursement and not a fee for technical services, Section 194J is not attracted. Assessee falls outside the scope of Section 194J r/w Section 200 of the Act during the relevant assessment years. Consequently, the provisions of Sections 201 and 201(1A) of the Act are not attracted. We do not find any material irregularity or infirmity in the orders passed by the appellate authorities. - Decided in favour of assessee
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2018 (5) TMI 151
Accrued interest on loans as classified as “Non-performing Assets” - accrual of income - Held that:- When an asset becomes non-performing, it ceases to yield in come and once a particular asset is shown to be a non–performing asset, then it is nothing but no revenue is yielded. In such cases, paying tax would not arise. Substantial question of law against the revenue.
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2018 (5) TMI 150
Computing the income for the purpose of deduction provided u/s 10AA - gross total income of the eligible undertaking - Held that:- This issue is no more res-integra in view of the judgment of this Court in the case of The Principal Commissioner of Income Tax V/s BTP Infoserve Private Limited [2017 (12) TMI 1125 - KARNATAKA HIGH COURT] whereby placing reliance on the judgment of Commissioner of Income Tax and others V/s Yokogowa India Limited [2016 (12) TMI 881 - SUPREME COURT] has held that the stage of deduction under Section 10A of the Act would be while computing the gross total income of the eligible undertaking under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI of the Act. - Decided in favour of assessee.
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2018 (5) TMI 149
Reopening of assessment validity - Held that:- The apprehension of the appellant – assessee is that the order of the Tribunal in not considering the cross objections filed by the assessee on merits would come in the way of the appellant, in the event revenue prefers an appeal and the matter to be decided on merits of the case. The Tribunal has dismissed the appeal filed by the revenue on merits of the case. The question what was required to be considered by the Tribunal was the claim of the assessee that the reopening of the assessment is not valid and on merit also though several grounds were urged, the same was not adjudicated, cannot be a ground for the assessee to prefer this appeal merely on apprehension. It is true that the revenue’s appeal being dismissed, adjudicating on the cross objections filed by the assessee would be only in the academic interest. No substantial question of law.
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2018 (5) TMI 148
Levy of penalty u/s 271(1)(c) - set off unabsorbed depreciation of an earlier assessment year i.e., 2001-02, in computing the income as originally returned for the assessment year 2006-07 - Held that:- It is not in dispute that the substantial question of law raised by the appellant, in this appeal requires to be examined in the light of the judgment in the case of Commissioner of Income Tax and another vs. Manjunath Cotton and Ginning Factory (2013 (7) TMI 620 - KARNATAKA HIGH COURT) No arguments being advanced and the present issue not being adjudicated by the Tribunal, in the light of the judgment referred to above, we find it appropriate to remand the matter to the Tribunal to reconsider the matter in the light of the judgments of this Court referred to above. Appeal is allowed. The order impugned herein is set aside and remanded to the Tribunal to reconsider the matter afresh
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2018 (5) TMI 147
Disallowance of prior-period royalty payments - Use of trademark pursuant to license agreement - assessee has not claimed the same in AY 2004-05 but claimed the same as prior period items in AY 2005-06 which has been denied by the revenue on the premise that the same had already crystallized in AY 2004-05 - Held that:- The payment pertains to AY 2004-05 and the liability had already crystallized in that AY only and therefore, the assessee, following mercantile system of accounting, was eligible to claim the same in AY 2004-05 only. The tax neutrality plea raised before us by Ld. AR could not be accepted since there was no justifiable reason which prevented the assessee to claim the same or make provision thereof in AY 2004-05. Therefore, in our opinion, the deduction thereof has rightly been denied to the assessee in the impugned AY. However, as a logical consequence, since the expenditure is a legitimate claim of the assessee and the assessee was entitled to claim the same in AY 2004-05, Ld. AO is directed to verify and consider the claim of the assessee for AY 2004-05. Technically, the grounds stands dismissed, however, the assessee shall get consequential relief in AY 2004-05. Adjustment of interest on Income Tax demand with interest on Income Tax refund received by the assessee - Held that:- The claim of the assessee has been allowed on the premise that between two persons, there could only be one account and therefore, the benefit of netting was available to the assessee. See DIT Vs. Bank of America NT & SA [2014 (12) TMI 551 - BOMBAY HIGH COURT] Disallowance u/s 14A - Held that:- The bare perusal of the financials of the assessee reveal that Shareholders’ funds of more than ₹ 500 crores far exceeds the meager investment of ₹ 9.37 crore made by the assessee. Further the opening investments stood at ₹ 8.91 crores which demonstrate that fresh investment were marginal in the impugned AY and therefore, interest disallowance, in our opinion, is not justified. The expenses disallowance is estimated at 5% of exempt income earned by the assessee. AO is directed to re-compute the same Provision of leave encashment - Held that:- The same was initially suo-moto disallowed by the assessee u/s 43B(f) in computation of income but later on claimed during assessment proceedings in view of the judgment of Hon’ble Calcutta High Court rendered in Exide Industries Ltd. Vs. UOI & Ors.[2007 (6) TMI 175 - CALCUTTA High Court]. The same has been denied by the lower authorities since the revenue’s appeal against the same was pending before Hon’ble Apex Court and the Hon’ble Court, by way of interim order, stayed the operation of the cited judgment of the Hon’ble Calcutta High Court. Both the representative converged on the point that suitable directions may be given to the lower authorities to apply the ruling whenever rendered by Hon’ble Apex Court in the aforesaid matter. Thus Isuue restored back TP adjustment on account of Sale of finished goods - MAM - CUP Method or TNMM - Held that:- AR submission that the adjustment are primarily related with sale made by assessee to its AE situated at Hong Kong and therefore, the CUP rates for Hong Kong only should be compared to work out the said disallowance as against average rates of various countries taken by Ld. TPO is acceptable. We hereby reduce the impugned TP adjustment to ₹ 43,620/- as per the computations placed before us. This ground stands partly allowed. It is agreed between the representatives that this approach shall remain valid only for this impugned AY and would not be applicable in any other AY.
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2018 (5) TMI 146
TPA - taking preoperative cost as a basis for arriving at the ALP - Held that:- As the depreciation claims of the partnership firm of the assessee as that of companies under Company Law are being different, we do not find any reason to interfere with the decision of the DRP, in taking the operating cost exclusive of depreciation for comparison. Accordingly, the order of the DRP is confirmed and Revenue’s grounds on this issue are rejected. Determination of price for purchase of software - Held that:- When the product is purchased the rights automatically transferred and asper the agreement placed on record, 10% of the cost is considered towards IP Rights on which necessary withholding taxes were already considered and paid. In view of that we do not agree with the reasoning given by the DRP in restricting the value of the IP Rights at NIL, since the Hon’ble Delhi High Court in the case of EKL Appliances Ltd (2012 (4) TMI 346 - DELHI HIGH COURT) has already held that TPO / DRP cannot interfere the business decision therefore determining of value at NIL cannot be upheld. We modify the order of the DRP and direct the AO to accept the purchase price as at Arm’s Length. - Decided in favour of assessee
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2018 (5) TMI 145
TDS u/s 194H - non deduction of tds discount given to the purchaser of the flat - Disallowance u/s 40(a)(ia) - Held that:- As in assessee’s own case for the Asstt. Year 2008-09 [2012 (7) TMI 424 - ITAT, DELHI] wherein this very issue was dealt with by the Tribunal and was answered in favour of the assessee holding that for this particular discount amount, the provisions u/s 194H are not attracted. - Decided in favour of assessee Disallowance u/s 40A(2)(b) - disallowance of commission paid to sub brokers - Held that:- No abnormality in this submission on behalf of the assessee because to boost the morale of the prospective purchasers and to induce them to invest in the pre launched projects, would definitely serve the purpose of the assessee. When the learned CIT(A) found that the AO made the disallowance at 25% without quantifying the exact amount of advertisement expenditure which did not pertain to the assessee, it equally applies to sustaining such disallowance to 10% of the expenditure. In the absence of any basis for disallowance or the yardstick for its quantification, we do not see any reason to sustain 10% disallowance also. This was more particularly in view of the fact that the insertion of the name of the sister concern, namely, Surendra Buildtech P. Ltd., was for the purpose of inviting more investment in the pre launched projects, which is certainly in furtherance of the business interest of the assessee. Delete the disallowance on this count. - Decided in favour of assessee Deemed dividend addition u/s 2(22)(e) - Held that:- in view of peculiarities involved in this line of business depending upon the need, there is exchange of money between different sister concerns for the purpose of business and not for any personal benefits. Since the finding of the learned CIT(A) is that this particular type of transactions are carried out in the regular course of business and do not fall within the ambit of Section 2(22)(e) of the Act, we find no material whatsoever to disturb the findings of the learned CIT(A) in this respect. So also in respect of the amounts advanced to Shri S.M. Mukhija(HUF), we also found that they cannot bring to tax in the hands of the assessee, who is a different taxable entity. For these reasons while agreeing with the learned CIT (A) on this aspect, we dismiss the fourth ground of appeal of the revenue. Addition of interest on loan - AO disallowed the interest stating that the loan actually represents the home loan as it is in the name of the assessee and his wife, as such, any interest paid on the same cannot be allowed as business expenditure - Held that:- In this case, there is no fact finding of the authorities below to the effect that the loan was not utilized for business. No concur with learned CIT(A) that merely because the letter does not appear to be reliable one coupled with the fact that the interest rate for home loan and business loan are different as well as ICICI is being governed by the RBI Regulations, cannot advance a business loan under the pretext of home loan. We cannot ignore the fact that in the Asstt. Year 2005-06 and 2006-07, interest paid on the loan was allowed. In fact, assessment for the Asstt. Year 2006-07 is a scrutiny assessment u/s 143(3). The interest on business loan is allowable as business expenditure. - Decided in favour of assessee Disallowance of business promotion expenses and car and telephone expenses - Held that:- CIT(A) gave relief to the extent of ₹ 50,000/- to the assessee and restricted the disallowance to ₹ 50,000/-. It does not appear to be an unreasoned one. Further, for the earlier assessment years also, there was disallowance of 10% of the car and telephone expenses. It is not brought to our notice that this disallowance was deleted subsequently. Fact remains that the assessee has not been maintaining any log book and is unable to justify the entire expenditure. In these circumstances, we find it difficult not to sustain 10% disallowance of the expenses on account of car and telephone maintained. - Decided against assessee. Addition on low withdrawals - Held that:- Having regard to the cost of living in the society and other relevant factors, we are not in agreement with the assessee that a sum of ₹ 60,000/- would be sufficient on account of household expenses. Taking on record that no rent payment is required and electricity charges are shown separately and also that one of the children is already in the business, we take a pragmatic view that a sum of ₹ 10,000/- per month would be the minimum requirement way back in the Financial Year 2006-07 and estimate the annual household expenses at ₹ 1,20,000/-, as such, after reducing the same by ₹ 60,000/- declared by the assessee, we restrict the addition to a sum of ₹ 60,000/- - Decided partly in favour of assessee.
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2018 (5) TMI 144
Transfer Pricing Adjustment - selection of comparable - functionally dissimilarity - Held that:- Assessee company was engaged in business of software development and Information Technology enables services (ITes), thus companies functionally dissimilar with that of assessee need to be deselected from final list.
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2018 (5) TMI 143
TDS u/s 194H - disallowance made u/s 40(a)(ia) - non–deduction of tax at source on alleged commission payment to the distributors on sale of recharge coupon vouchers (RCVs) - principal–to–principal basis - Held that:- The sale of prepaid sim cards and RCVs by the assessee to the distributors are on principal–to–principal basis, hence, outside the ambit of section 194H of the Act. Therefore, no disallowance under section 40(a)(ia) can be made. - Decided in favour of assessee.
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2018 (5) TMI 142
Holding loss as speculative loss - whether the transactions of forward (future) contract of sale of gold to the Bank or the MMTC are speculative transaction or not? - Held that:- Object of entering into forward contract transaction has to be seen from the contract agreements and underlying assets. In the case of the assessee for claiming benefit of clause (a) of Section 43(5) of the Act, its forward contract transactions should have been corroborated one by one, with the purchases of gold and supply of jewellery manufactured. Before the Assessing Officer, the assessee failed to correlate these forward contract transactions of gold and corresponding purchases and export of jewellery. Even such details have not been filed either before the Ld. CIT(A) or before us. Thus, on this ground, the assessee cannot be allowed the benefit of proviso (a) to section 43(5) of the Act in absence of any documentary evidences to support its contention of fulfilling conditions of proviso (a) to section 43(5) of the Act. - Decided against assessee Transaction of foreign currency forward contracts as speculative by the Ld. CIT(A) - Held that:- We note that the Ld. CIT(A) has decided the issue in view of the facts noted in the case of forward contract transactions of the gold and no documentary evidence in support have been referred in his findings on the issue in dispute.We feel it appropriate to restore this issue to the file of the Assessing Officer for deciding afresh after providing adequate opportunity of being heard to the assessee, with liberty to the assessee to file necessary documentary evidence in support its claim. Thus, the ground Nos. 1 to 4 of the appeal of the Revenue are accordingly allowed for statistical purposes. Addition on account of interest at the rate of 10% on the sum expended by the assessee to partners on account of interest-free advances - Held that:- We find that the Ld. CIT(A) has arrived at the conclusion after verifying the capital accounts of the partners that no loans/advances have been given to the partners out of borrowed fund and no interest has been paid to the partners and thus the disallowance of notional interest was not justified.
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2018 (5) TMI 141
Disallowance u/s 14A - Held that:- In absence of any tax free income earned by the assessee, disallowance u/s 14A could not be made. In a similar vein, it has been held in Cheminvest Ltd. v. CIT (2015 (9) TMI 238 - DELHI HIGH COURT) that section 14A will not apply if no exempt income is received or receivable during the relevant previous year. In CIT vs. Chettinad Logistics (P) Ltd. (2017 (4) TMI 298 - MADRAS HIGH COURT) has held that section 14A cannot be invoked where no exempt income was earned by the assessee in the relevant assessment year. Allowability of business expenses - Held that:- In the instant case, the assessee failed to file before the AO evidence to substantiate the allowability of the above expenses. The assessee also failed to establish that these expenses were incurred wholly and exclusively for the business purpose. As mentioned hereinbefore at para 10, the Ld. CIT(A), having examined (i) the addition made by the AO, (ii) addition confirmed by the CIT(A), (iii) addition confirmed by the ITAT for AYs 2006-07, 2007-08, 2008-09 and 2009-10 has confirmed a disallowance of ₹ 12,44,930/- (Rs.29,96,221/- minus ₹ 12,44,930/-). Thus the Ld. CIT(A) has given a relief of ₹ 17,51,291/-. As the above order of the Ld. CIT(A) is based on a comparative analysis being contextual, we confirm the same and uphold the disallowance of ₹ 12,44,930/-. Accordingly, the above grounds of appeal are dismissed.
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2018 (5) TMI 140
Reopening of assessment - notices were not received by the assessee which was the reason for non-appearance of the assessee before the Ld. CIT-A leading to dismissal of appeal ex-parte - Held that:- Since there was no representation of the assessee before the learned CIT-A as there were a change in address of the assessee from M/s Purna Purshottam Export, 304, Veena Niketan, Vayuduta Complex, Opp, Blue & White MTNL Bldg., Devidas Lane, Borivali (W), Mumbai-400 092 to M/s. Purnapurshottam Exports, Gala no. 6A, Ground floor, Hi-tex Industrial Compound, Behind Petrol Pump, S.V. Road, Dahisar (E), Mumbai-400068 which could not be notified to the learned CIT(A) inadverantly as claimed by the assessee now , we in the interest of the substantial justice are of the considered view that the matter need to be set aside and restored to the file of learned CIT-A for fresh / de-novo adjudication of the issue on merits in accordance with law after giving proper and adequate opportunity of being heard to the assessee in accordance with principal of natural justice in accordance with law
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2018 (5) TMI 139
Treating the income from warehouse as income from ‘house property’ instead of ‘business income’ - Held that:- Tribunal in assessee’s own case wherein income from warehousing was accepted by the Tribunal in the A.Y.2008-09 and 2013-14 [2018 (3) TMI 1509 - ITAT MUMBAI] as income from business. Tribunal after considering various judicial pronouncements correclty reached to the conclusion that income from warehousing was liable to be assessed under the head ‘business income’ rather than income from ‘house property’. As the facts and circumstances during the years under consideration are same, respectfully following the order of the Tribunal in assessee’s own case, we do not find any justification for treating the warehousing income as income from ‘house property’. - Decided in favour of assessee
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2018 (5) TMI 138
Assessment proceedings u/s.153A - Held that:- We had also deliberated on the judicial pronouncements cited by learned AR and DR during the course of hearing before us as well as relied on by the lower authorities while passing their respective orders. With regard to the ground No.1 taken by the Department we found that additions were deleted by CIT(A) which were found to be without any incriminating document, hence not sustainable in the assessment proceedings u/s.153A of the Act for non- abated assessment years. CIT(A) has relied on the decision of Mumbai Tribunal in the case of All Cargo Global Logistics Ltd. [2012 (7) TMI 222 - ITAT MUMBAI(SB)]. Accordingly, CIT(A) was justified in deleting the additions made on issues other than those based on any incriminating material found during the course of search. CIT(A) for restricting the disallowance to the extent of 25% of total travelling expenses for want of verification and possible non business expenses. Adding the disallowance u/s.14A while computing book profit u/s.115JB is covered in favour of assessee by the decision of the Special Bench in the case of ITAT(Special Bench) in the case of M/s. Vireet Investment Pvt. Ltd. [2017 (6) TMI 1124 - ITAT DELHI].
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2018 (5) TMI 137
Initiation of reassessment proceedings u/s 148 - addition on account of undisclosed income - Held that:- In the instant case there is not an iota of evidence which could suggest that the assessee had made any investment so as to justify the addition made by the AO. In our opinion the inference drawn by the AO is based on mere suspicion and is unsupported by any material whatsoever. It has not been demonstrated by any cogent material that it was the assessee who had made the investment/paid cash for acquiring shares of M/s Pioneer Finvest Ltd Unless any evidence is brought on record justifying that it was the assessee who had made any such investment, the addition is unsustainable in law. It is well settled rule of law that suspicion howsoever strong cannot par take the character of evidence. We, thus, find no infirmity in the order of learned CIT (Appeals) who has deleted the addition - Decided against revenue.
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2018 (5) TMI 136
Additions towards interest on capital - CIT dismissed the appeal of the assessee holding that the admission of interest income in the hands of the individual partners shall not determine the allowability of interest expenditure and the relevant factor to allow the interest on capital is whether capital introduced is genuine or not - Held that:- In this case, in the preceding paragraphs, we have sustained the addition upheld by the CIT(A) since the assessee failed to establish the sources for introduction of capital by the partners in the hands of the firm. Therefore, the interest payment relating to the addition confirmed as unexplained cash credit in the hands of the firm is not allowable and the same is to be treated as income in the hands of the firm as unexplained sources. Therefore, we do not find any infirmity in the order of the Ld.CIT(A) and the same upheld. The appeal of the assessee on this issue is dismissed. Disallowance of 20% of expenditure attributed to trailors and vans - Held that:- The assessee could not produce vouchers to the extent of the above expenditure. The assessee has maintained the regular books of accounts which are subject to audit u/s 44AB of I.T.Act . The assessee also produced the books of accounts before the AO and it is also common as observed by the Ld.CIT(A) that in the transport business various expenses are incurred by truck, lorry drivers during the journeys undertaken by them, do not maintain proper vouchers but mostly self made vouchers. - Decided against assessee. Depreciation on trailor No.2D6699 - AO allowed 50% of the depreciation since the trailor bearing No. NLO 2D 6699 was put to use less than 180 days and registered on 15/12/2008 - CIT(A) confirmed the addition since the assessee failed to produce the bills for purchase of trailor in the Financial year 2007-08 - Held that:- During the appeal hearing, the Ld.AR did not furnish any evidence to controvert the findings of the CIT(A). Therefore, we do not find any reason to interfere with the Ld.CIT(A) and appeal of the assessee on this ground is dismissed.
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2018 (5) TMI 135
Unexplained investment - source for capital not explained by any of the partner - Held that:- Since the assessee’s capital investment is in the partnership firm is properly explained, the A.O. is not permitted to make the investment made by the other partners in the partnership firm as income in the hands of the assessee. If the source for capital is not explained by any of the partner , the same required to be taxed either in the hands of the partnership firm or in the hands of the respective partner but not in the hands of the assessee. Accordingly, addition made by the A.O. in the hands of the assessee with regard to the investment in capital of the firm is bad in law and the same is unsustainable. Hence, we uphold the order of the ld. CIT(A) and dismiss the appeal of the revenue on this ground. Unsecured loans appearing in the balance sheet of the partnership firm - Held that:- The unsecured loans are appearing in the books of the partnership firm but not in the books of the assessee. The only investment made by the assessee is contribution to capital which was explained in his hands. If the sources of unsecured loans are unexplained, the addition should be made in the hands of the partnership firm but not in the hands of the assessee. The assessing officer has not established that the unsecured loans were introduced by the assessee in the partnership firm his unexplained source of income. Making addition of unsecured loans relating to the partnership firm in the hands of the assessee is bad in law and unsustainable. Hence we up hold the order of the Ld.CIT(A) and dismiss the appeal of the revenue on this ground. Addition made by the AO on account of gifts received by the assessee from the family members - Held that:- Since all of them are assessed to tax and the CIT(A) has discussed the sources of accumulation of income, we do not see any reason to suspect the genuineness of the gifts received by the assessee. In case the A.O. is of the opinion that the sources of gifts are unexplained the same should be brought to tax in the hands of the donors but not in the hands of the assessee. Once the source is explained by the assessee, the burden shifts on revenue to disprove the evidence furnished by the assessee. In the instant case, though the assessee furnished the affidavits, the revenue did not shift the burden to the assessee by disproving the genuineness of the gifts. Therefore, we do not see any reason to interfere with the order of the Ld. CIT(A) and the same is upheld. This ground of appeal is dismissed.
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2018 (5) TMI 134
Registration u/s. 12AA - charitable activities or busniss activities - Sukhmani centers - formation of societies to take full advantage of the E-Governance in all citizens related services, providing for the same through a single window mechanism in an integrated fashion - society is to run on a self-sustaining basis - Held that:- The society is to operate on the self-sustaining principle. The same itself implies being run on sound business principles in-asmuch as it would ensure recovery of cost – which is not subject to any competitive pressure of the market, and a reasonable margin. Outsourcing is to be through the tendering process. A part (and not insubstantial) of the revenue generated is also to be given to Punjab E-Governance Society (refer object clauses 4(f),(g) & (h)). Fixing of the rate with the approval of the State Government, thus, would not detract from the fact that the activity is being run on sound business principles and, further, envisaged with reasonable continuity. The revenue comes from different avenues, which includes the sale of statutory forms. As such, nothing turns on the fact, as argued, that but for this, the business (undertaking) would not have returned a surplus (profit), which argument is though valid for only two years. How, one may ask, the sale of forms be ignored, which is an integral part of the assessee’s undertaking? In fact, the service rates, which are in addition to the statutory fee being charged by the Government, could be increased at any time, of course following the procedure for the purpose. It is, as explained, the ability to produce profit from the stated/pursued (set of) activity/s, that is relevant. In our view, therefore, the assessee is undertaking business and, accordingly, is hit by the second proviso to section 2(15) of the Act. SEE Sukhmani Society for Citizen Services, Mansa [2012 (11) TMI 947 - ITAT AMRITSAR] - Decided against assessee.
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2018 (5) TMI 133
Reopening of assessment - bogus accommodation entries - Held that:- Merely because the statement was recorded on 12.12.2008 while making assessment for assessment year 2001-02, the same cannot be presumed that the said party was also issuing bogus accommodation entries for assessment year 2002-03. It has been held in various decisions that for the purpose of issuing notice u/s 148, the facts of one assessment year cannot be imported in another assessment order without due verification. The assessment for assessment year 2002-03 has been reopened on the basis of an undated assessment order for assessment year 2001-02. We find merit in the argument for the assessee that the re-assessment proceedings initiated by the Assessing Officer is not as per law. We, therefore, quash the re-assessment proceedings initiated by the Assessing Officer. Appeal filed by the assessee is allowed.
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2018 (5) TMI 132
Grant of registration u/s 12A rejected - assessee had never in the past filed its return of income, claiming to be exempt u/s 10(23C)(iiiab) - proof of charitable activities - Held that:- As submitted by the assessee and as is evident from the order of the CIT(E) also, the applicant had filed its Financial Statements before the CIT(E) and as stated that these Financial statements were audited and that even complete Books of accounts were maintained by the applicant. The examination of these documents would sufficiently reveal the activities carried out by the applicant and whether they are being carried out as per the stated objects of the applicant University. CIT(E) should have examined these documents for satisfying himself vis à-vis the genuineness of the activities carried out by the assessee society and not rested his conclusion solely on the basis that no Income tax returns were filed by the applicant University. Therefore, we cannot subscribe with the action of the CIT(E) in rejecting the application of the assessee merely for the reason that he was unable to satisfy himself vis-à-vis the genuineness of the activities carried out by the assessee society in the absence of the income tax returns filed by it in the earlier years. The assessee has not filed income tax returns in earlier years or had for that matter incorrectly claimed exemption u/s 10(23C)(iiiab), may call for some action to be taken as prescribed under the law but that does not and cannot lead to the conclusion that the activities of the assessee society are ingenuine so as to deny registration u/s 12AA of the Act to the assessee society. Similarly, the absence of PAN also cannot be a reason for denying the said registration. Moreover we find no merit at all in the contention of the CIT(E) that the applicant University should have claimed exemption under section 10(23C)(iiiad) or 10(23C)(vi) and not sought registration u/s 12AA so as to claim exemption u/s 11 of the Act. Thus we hold that the application be reconsidered afresh by the Ld.CIT(E) in the light of the conditions to be satisfied as per the provisions of section 12AA of the Act after examining the financial statements and other relevant documents which the Ld.CIT(E) considers necessary for arriving at the prescribed satisfaction of the genuineness of the objects and activities of the assessee university. - Decided in favour of assessee for statistical purposes.
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2018 (5) TMI 131
Addition of bogus purchases - Held that:- The assessee has proved the genuineness of the transactions and the parties suppliers had not only appeared before the AO but they had also filed affidavits confirming the sale of goods. Therefore, reversing his order, we decide first effective ground of appeal (GOA) in favour of the assessee.
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2018 (5) TMI 130
Addition to forfeiture of share application money - assessment year - Held that:- We find that the share application money has continued to be reflected as part of the ‘Shareholder’s Funds’ in the past since Assessment Year 2005-06 and in the instant year, no event has taken place to say that there is any write-back of the share application money. AO, in our view, has grossly erred in holding that “assessee has not been able to give any specific reason as to why the same cannot be assessed in the current year”. The Assessing Officer has wrongly put the onus on the assessee, rather, in our view, the onus was on the Assessing Officer to show as to why, inspite of assessee having written-back the amount in the subsequent year, the impugned sum was liable to be assessed in the instant year itself. Assessing Officer has assessed the same in the instant year without any rationale which, in our view, has been rightly set-aside by the CIT(A). Determination of profit u/s 115JB - MAT - Held that:- We affirm the decision of CIT(A) in holding that the income relating to the SEZ unit is excludible while computing the book profit u/s 115JB of the Act. Thus, the CIT(A) made no mistake in setting aside the action of the Assessing Officer, which is hereby affirmed. Computation of deduction eligible u/s 10A - Held that:- In the case before us, it is factually evident that the interest income on FDRs with bank is with respect to the borrowings which have in turn been utilised for the eligible business and, therefore, such interest income would be eligible for the benefits of Sec. 10A of the Act. So far as the interest earned on electricity security deposit is concerned, in a similar situation, our co-ordinate Bench in the case of M/s. Dania Oro Jewellery Pvt. Ltd. vs ITO [2018 (1) TMI 240 - ITAT MUMBAI] held such interest income to be eligible for the benefits of Sec. 10A of the Act. Exclusion of sundry credit balances written-back in determining the profits of business for computing deduction u/s 10A - Held that:- The details of the sundry credit balances written-back. A perusal of the same shows that in most of the cases, the items are revenue in nature and, therefore, in our view, such income is also eligible for the benefits of Sec. 10A of the Act. Assessment of interest income - Held that:- The said income has been reduced twice and, therefore, rectification needs to be carried out to increase the profits of the business to that extent. The said aspect is factual in nature and the matter is restored back to the file of the Assessing Officer for appropriate appreciation of facts and decision thereon. Thus, on this aspect, assessee succeeds for statistical purposes. Exclusion of unrealised export sale proceeds from the figure of export turnover in order to calculate deduction admissible u/s 10A - Held that:- The plea raised by the assessee before us is fair and proper and the same is also not disputed by the ld. DR. Accordingly, we direct the Assessing Officer to consider any sum realised out of the unrealised export sales of ₹ 5,18,97,639/- as part of the export turnover as and when the same is received as per the extant guidelines of Reserve Bank of India for the purpose of calculating deduction u/s 10A of the Act. Thus, on this aspect, assessee succeeds for statistical purpose.
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2018 (5) TMI 129
Determination fair market value determined by valuation officer - full value of sale consideration u/s 50C - Held that:- As per the DVO’s letter, which has been attached as Annexure A to the DVO’s final report, the record and details of the inquiries made by the DVO were not maintained. It has not been shown as to how it is not practicable to do so and as to how it is beyond the scope of the guidelines for valuation. As such, if any inquiries were made, since the results thereof were to be utilized against the assessee, these alleged inquiries having been conducted at the back of the assessee, the results thereof ought to have been, in accordance with the principles of natural justice, been necessarily confronted to the assessee. This has not been done. Accordingly, the matter is remitted to the AO, to be decided afresh on directing the DVO to conduct proper inquiries into the matter and to file a fresh valuation report after confronting the results of the inquiries to the assessee and deciding any objections against such inquiries, which may be raised by the assessee. The assessee shall be afforded due and adequate opportunity of hearing.
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2018 (5) TMI 128
Nature of receipt - Excise Duty refund and interest subsidy - revenue or capital receipt - AO treated as revenue receipt subject to tax as the impugned amount was given to assessee after the commencement of commercial production - Held that:- On identical facts and circumstances in the case of Shree Balaji Alloys (2011 (1) TMI 394 - Jammu and Kashmir High Court) has treated the impugned receipt as capital in nature and accordingly not chargeable to tax. The incentives received by assessee in the form of excise duty refund and interest subsidy are capital in nature and accordingly not chargeable to tax. We hold that the order of the CIT(A) is correct and in accordance with law and no interference is called for. - Decided against revenue.
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2018 (5) TMI 127
Depreciation on capital subsidy - Held that:- Referring to legal position explained by Hon’ble Supreme Court in the case of P.J Chemicals Ltd.[1994 (9) TMI 1 - SUPREME Court]. We are of the view that CIT(A) has rightly allowed the claim of depreciation of assessee.
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2018 (5) TMI 126
Disallowances under the head of T.A. & Conveyance - business expediency - expenses related to the foreign travels of the family members alleged to have been borne by the assessee company and claimed as expenses can not be considered genuine, because foreign visit of the family members are the private visits - Held that:- The nexus with business has to be clear and straightforward, and not remote or vague, as would appeal to a man of business, i.e., motivated and guided solely by business consideration. The same cannot be said in the present case/s. The accompaniment of wife/s appears to be purely for social purpose, as clearly her interaction is restricted to social platforms. As regards son/s, he is an outsider to the business, at least for the relevant years. As for the later year (A.Y.2014-15),AR clarified that the son/s had joined business, and which may perhaps led to the acceptance of the assessee’s claim for that year (at 80%). The nexus of the impugned expenditure with the business for the years under reference is tenuous and, in the least, not total. In other words, the expenditure bears a significant component of personal (non-business) element. As the assessee may stand to derive some business benefit from such social intercourse and, further considering that the son/s has joined business subsequently, indicating a business purpose as well, we consider it proper to restrict the disallowance to 40% of the impugned expenditure, i.e. qua TA and conveyance
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2018 (5) TMI 125
Disallowance of 20% of Legal & Professional Fees paid - Held that:- Neither the AO nor the CIT(A) has bring any cogent material on record while making adhoc disallowance @ 20% of expenditure. AO or the Ld. CIT(A) has not referred anywhere that no such services as referred in the corporate service agreement, is undertaken by the Anand Automotive Systems Ltd. No specific reason is identified for making adhoc disallowance only. No specific reason is mentioned as to why the disallowances made @ 20% only. Availing of such services from the group concern is not un-common. The lower authorities have not identified, if the payments made to related party is unreasonable. No comparable on reason cum industry is referred by lower authorities. Moreover, we have seen that Legal & Professional Fees is only 2.02% of the sales. No justification in partial disallowance of Legal and Professional Expenses, which we delete. - Decided in favour of assessee 20% of disallowance of advertisement and publicity expenses - Held that:- The assessee has shown to have incurred expenses on advertisement, gift, coupons, simple expenses and export expenses. The Assessing Officer disallowed the 20% on the basis of his discretion. The Ld. CIT(A) confirmed the disallowance without specifying any reason. Moreover, the lower authorities have not identified, if the payments made to related party is unreasonable, we have seen that advertisement and publicity is only 4.30% of the sales. In absence of any specific reason for disallowance @ 20% of the expenses, the adhoc disallowance is not sustainable. - Decided in favour of assessee Disallowance of 20% of share of common marketing expenses - Held that:- No period of validity of agreement is mentioned in this agreement as well. We have noted that the lower authority has not disputed the expenses incurred in relation to the agreement, only the validity of agreement was disputed. The lower authority has not brought any material on record that payment incurred on common marketing expenses is in-genuine or unreasonable. Considering the fact that neither any adverse material was brought on record nor any specific reason was mentioned before disallowing 20% only of the common marketing expenses. We have seen that share of common marketing expenses is only 1.61% of the sales. No justification in making adhoc disallowance @ 20% of the common marketing expenses - Decided in favour of assessee Disallowance of 20% of commission discount - Held that:- Neither any adverse material was brought on record or any specific reason was mentioned before disallowing 20% of commission and discount payments. The lower authorities have no identified that the payment made on account of commission and discount is unreasonable. Thus when the lower authority has neither disputed the genuinenity nor given any specific reason for adhoc disallowance, the disallowance is not justifiable. Moreover, we have seen that commission and discount is only 2.07% of the sales.- Decided in favour of assessee
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2018 (5) TMI 124
Disallowance u/s.14A - Held that:- AO is directed to restrict the disallowance u/s.14A to the exempt income earned in line with the decision of the Hon’ble Delhi High Court in the case of M/s.Joint Investments Pvt. Ltd. [2015 (3) TMI 155 - DELHI HIGH COURT]. For the AY 2011-12, as it is noticed that the disallowance u/s.14A as computed is lower than the exempt income earned, the disallowance as confirmed by the Ld.CIT(A) stands upheld. In regard to the computation of the book profits u/s.115J, as it is noticed that the issue is squarely covered by the decision in the case of M/s.Vireet Investment Pvt. Ltd.[2017 (6) TMI 1124 - ITAT DELHI] the AO is directed not to include the disallowance u/s.14A when computing the book profits u/s.115J. Hire charges paid by the assessee company in respect of chartered flight in respect of the travel of the Managing Director of the assessee company - Held that:- The details in respect of the expenditure incurred for hiring of the Chartered flight was produced before the AO only on the last day of the assessment. This being so, in the interest of natural justice, this issue is restored to the file of the AO for re-adjudication after granting the assessee adequate opportunity to substantiate its case Expenditure incurred in respect of the expansion of the assessee’s business - Held that:- AO is directed to allow the expenditure as Revenue expenditure. See COMMISSIONER OF INCOME-TAX Versus RANE (MADRAS) LTD. [2007 (6) TMI 25 - HIGH COURT, MADRAS ] Carry forward of the unabsorbed depreciation - as per AO 08 years limitation in respect of the carry forward of the depreciation had expired - Held that:- As it is noticed that the issue under appeal is squarely covered by the principles laid down by the Hon’ble Gujarat High Court in the case of Gujarat Themis Biosyn Ltd.[2014 (5) TMI 194 - GUJARAT HIGH COURT] as also the decision of the General Motors [2012 (8) TMI 714 - GUJARAT HIGH COURT], and as it is noticed that the Ld.CIT(A) has followed the principles laid down by the Hon’ble Gujarat High Court in the above decisions in respect of the carry forward of the unabsorbed depreciation by treating the same as depreciation for the current year, we find no reason to interfere in the findings of the Ld.CIT(A) on this issue
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2018 (5) TMI 123
Reopening of assessment - loss on sale of shares and also deduction u/s.36(1)(iii) - Held that:- It is possible that with due diligence of the Assessing Officer would have ascertained this fact at the time of assessment, if any also, but in view of the explanation (1) it does not mean that there was no default on the part of the assessee. The entire reassessment proceeding in this case is valid and therefore, the action of the Assessing Officer is upheld. The issue taken up by the AO in reopening of assessment viz. to consider loss on sale of shares and also deduction u/s.36(1)(iii) which was not at all considered in the course of original assessment, though it was completed u/s.143(3) and mere production of records by the assessee before the AO at the time of original assessment itself cannot be led to the conclusion that the AO had applied his mind wherein it requires due diligence and application of mind from the end of the AO.- Decided against assessee. Non-granting of loss on loss of shares by treating the same as capital loss - Held that:- investments in shares were not at all considered as stock in trade as the assessee was not dealing in shares. Once the shares are treated as investments, loss arising out of purchase and sale of shares is only a capital loss and it is not a business loss. In other words, assessee having carried on no business activity and treated the shares as investments from year to year, income or loss arising out of sale of such shares is to be considered as capital gain or capital loss. The share being a capital asset cannot acquire different character because of treatment accorded to it by the assessee in its return of income; contrary to the treatment given in the books of accounts. Hence, this ground of appeal of assessee stands rejected. Non-granting of deduction u/s.36(i)(viii) towards interest on deposit - Held that:- The interest income earned on deposit of surplus money would be assessable as income from other sources. If the interest income is from a fund, which has been kept as deposit from surplus capital, it would be assessable as income from other sources only. If the surplus funds are invested instead of keeping them idle, the income by way of interest should be treated as income from other sources. In the present case since there is no evidence to show that the borrowed fund was used for making fixed deposit, it is to be considered as assessee has deposited its surplus fund as fixed deposit instead of keeping them idle, the income by way of interest should be treated as income from other sources. - Decided against assessee. Disallowance u/s.14A r.w.Rule 8D - Held that:- Since the investment does not yield any exempted income, there cannot be any applicability of sec.14A r.w. Rule 8D of the Income Tax Rules, 1962. Accordingly, this ground of the assessee in this appeal is allowed.
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Customs
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2018 (5) TMI 168
Penalty u/s 112 of CA and u/s 114AA of CA - misdeclaration of goods - Held that: - The appellant does not dispute and accepts that he wanted to take delivery of the consignment and was present outside the clearance gate with the gate pass. It is also not disputed that the consignment was mis-declared and was not imported by M/s Rajdhani Crafts, Jaipur. Contents and value of the consignment is not challenged. The appellant also has accepted that he had also made a request for transportation of the goods and that he had prior knowledge and information about the mis-declaration of the goods and the actual contents - penalty u/s 112 upheld. Penalty u/s 114AA - Held that: - The appellant had used the false and incorrect gate pass and had caused to be used the said false declaration, statement and document - penalty upheld. Appeal dismissed - decided against appellant.
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2018 (5) TMI 166
Valuation - imported Heavy Melting Scrap - enhancement of value on the basis of DoV data of similar goods - whether clearances of goods by paying customs duty on the higher enhanced assessable value, precludes the assessee from challenging the same before the higher appellate forum? - Held that: - as the goods imported by the appellant were required in the assessee’s factory, the same were cleared by them on payment of the duty on enhanced value and this fact by itself cannot be adopted as a ground for resolving the disputed issue of valuation. The fact that the assessed bills of entries were challenged by the appellant before Commissioner (Appeals), by way of filing appeals, is itself indicative of the fact that the appellants were not satisfied with such enhancement and have exercised their right of appeal provided under the statute - payment of duty at the enhanced value and clearance of the goods in urgency cannot preclude the assessee from challenging the assessed bill of entry on the sole ground that goods stand cleared at the enhanced value. Enhancement of value without first rejecting the transaction value - Whether in view of the mis-declaration of the goods impacting the rate of duty and the value of the goods, the order of the Ld. Commissioner (Appeals) should be upheld and appellants’ appeal dismissed in Appeal No.C/60002/2016, C/60003/2016 and C/60006/2016, as held by Member (Technical) - difference of opinion - majority order. Held that: - in Appeal nos. C/60002/2016 and C/60006/2016, the transaction value has not been rejected by Revenue, therefore, in those two appeals, I agree with the view expressed by Member (Judicial). In sofaras the Appeal No. C/60003/2016 is concerned, I find that the appellant had given consent for enhancement of value, therefore, I agree with the view expressed by Brother Member (Technical) - all the appeals except appeal No. C/60003/2016 are allowed and the said appeal no. C/60003 of 2016 is rejected.
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2018 (5) TMI 165
Penalty u/s 112 (a) of the Customs Act, 1962 on CHA - failure to discharge the obligations of provisions of Section 13 (d)(e) Custom House Agent Licensing Regulations, 2004 - Held that: - the impugned order examined the role of the appellant as CHA in terms of Regulation 13 of CHALR. However, no proceedings at all have been initiated under CHALR as could be seen from the appeal records - under the Regulation itself, no action has been initiated. The penal provisions under Section 112(a) are much more comprehensive and serious compared to violation of obligations of CHA under the Regulation. The violation of abetting an offence has to be established by evidence of deliberate act or omission by the CHA. Penalty not warranted - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 164
Validity of proceedings - present impugned order confirmed on the strength of the proceedings in case of the DRI notice issued - Held that: - the proceedings in the instant case depending on the proceedings of an another wherein DRI had issued SCN vide F. No. DRI/SRU/INC-06/2007 dated 16.11.2007, which was adjudicated by OIO No. 3/Commr/ICD-Valvada/JNPT/2012 dated 29.3.2012, which stand remanded to the original adjudicating authority by the Tribunal vide Order No. A/11279 to 11288/2013 dated 10.10.2013. It is prudent to remand the instant matter to the original adjudicating authority to decide the matter - appeal allwoed by way of remand.
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2018 (5) TMI 163
Rectification of mistake - case of applicant is that while formulating the opinion as recorded at para 6 of the order, this Tribunal has considered certain aspects of the pleas raised but has not considered all the arguments advanced while arriving at the conclusion recorded at para 9 of the order - Held that: - Tribunal after considering all aspects of the case and after hearing both sides and going through the records/evidences, arrived at the conclusion that the appeal filed by Liladhar T. Khusiliani was devoid of merit. The contention of the appellant now that if all the evidences are considered again including the reasoning and arguments made in the written submissions, the conclusion would be different - ROM application dismissed.
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2018 (5) TMI 162
Refund of duty - finalization of assessment - Held that: - the Adjudicating Authority should consider the case laws as relied upon by the Learned Advocate while the passing the order in denovo proceedings - appeal allowed by way of remand.
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Corporate Laws
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2018 (5) TMI 122
Filling of objections - Held that:- As Counsel for the HDFC Bank requests for a week's time to file objections. However, the objections raised by the Counsel on behalf of Hero Fincrop Ltd. have been filed and the same shall be furnished to the counsel for RP as well as the successful resolution plan applicant. The response to the objections, if any, be filed within a week with a copy in advance to counsel opposite. List for arguments on 24.04.2018.
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Insolvency & Bankruptcy
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2018 (5) TMI 173
Corporate insolvency process - Authorization to file application - Held that:- We find that the Officers of the respective Banks have been authorised by the Competent Authority to file the application. Mr. Pallav Sangal is an Officer of the Standard Chartered Bank Limited, who has been authorised by the Chief Executive Officer of the Bank. The Chief Executive Officer has been authorised by the Standard Chartered Bank to authorise any person for taking action in accordance with law. Similarly, in the case of DBS Bank Limited, we find that Mr. Pankaj Jain has been authorised by the Board of Directors of the DBS Bank Limited. In view of the fact that the application has been filed by the authorised persons, we hold that both the applications on behalf of the ‘Financial Creditors’ were maintainable. In any case if one of the application is admitted, the ‘Corporate Insolvency Resolution Process’ starts. In such case, it is not necessary to admit the other application, who (2nd Applicant) is entitled to file claim before the ‘Resolution Professional’.
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2018 (5) TMI 172
Corporate Insolvency Resolution Process - Held that:- As provided in Rule 7(1) of the Rules, the Corporate Applicant has to make an application under Section 10 of the 'Code' in Form 6 accompanied with documents and records required therein and as specified in IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The instant petition deserves to be admitted. It is further observed that the applicant-company save some sketchy particulars and has not given any road map as to how it is going to keep itself afloat as a going concern. However, keeping in perspective the objects for which the Code has been brought into force and to balance the interest of all stakeholders, we are satisfied that the instant application warrants to be admitted to prevent further erosion of capital and to safeguard the assets of the Applicant-Corporate Debtor. The petition is admitted.
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2018 (5) TMI 171
Corporate Insolvency Resolution Process - proof of occurrence of default - Held that:- Considering the voluminous evidences annexed along with the Application and in the light of the provisions of Section 10 of The Code hereby hold that the conditions as prescribed under section 10 of The Code have duly been fulfilled. Since this is a Petition of “Corporate Debtor”, therefore, the Insolvency Process shall commence as prescribed under Section 10 of IBC 2016. On one hand the existence of Financial Debt as well as Operational Debt is proved, on the other hand the occurrence of “default” is also established. The Corporate Debtor had failed to pay the amounts due and also failed to adhere to or comply with the other terms of Facility agreements. The Financial Debts have been classified as “Non-Performing Asset” in the books of the Financial Creditor. The Petition under consideration therefore deserves “Admission”. The Corporate Debtor has intimated the name of the IRP Mr. Vijaykumar V. Iyer, Address: Deloitte Touche Tohmatsu India LLP, Indiabulls Finance Centre, Tower 2, 27th Floor, Senapati Bapat Marg, Elphinstone Road (West), Mumbai - 400 013, email: [email protected], Registration No. IBBI/IPA-001/IP-P00261/2017-18/10490 in Part-II of Form No.6 and the said IRP has given his consent in Form No.2, placed on record. The Petition is hereby “Admitted”.
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Service Tax
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2018 (5) TMI 167
Refund/rebate of service tax paid - N/N. 41/2012-ST - rejection on the ground of time bar - whether the limitation of time imposed by the notification for claiming the refund of Service Tax on inputs which went into export of goods can be altered by reckoning the date on which the appellant received the invoices instead of the date of Let Export Order as laid down in the notification? Held that: - the Notification is a subordinate legislation made by the Government in exercise of the powers delegated by the Parliament. This power is given to the Government and not to the officers or to this Tribunal. Hence, the provisions of this notification including the time limit and the date of reckoning the time limit cannot be modified by the officers or by this Tribunal. It has been laid down in a catena of judgements by the Hon ble Supreme Court and High Courts that a statutory time limit has to be adhered to and the Courts cannot modify them. The appellant cannot be granted refund of Service Tax paid on services used in the goods exported by them beyond one year from the date of LEO as specified in the N/N. 41/2012-ST - appeal dismissed - decided against appellant.
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2018 (5) TMI 119
Maintainability of petition - recovery proceedings - Held that: - The disputed question of fact whether the petitioner is Goods Transport Agency or Goods Transport Operator cannot be adjudicated in the writ proceedings - No ground is made out by the petitioner to challenge the impugned order date d 30.04.2014 belatedly at this stage that too circumventing the alternative and efficacious remedy available under the Act - petition without any substance and is dismissed.
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2018 (5) TMI 118
Refund claim of service tax paid - appellant claims that the service tax was not liable to be paid and it was paid erroneously - Held that: - the issue of leviability of service tax on construction services of residential complexes has attained finality by the judgment of Gujarat High Court in the case of Commissioner of Service Tax vs Sujal Developers [2011 (4) TMI 1023 - Gujarat High Court] - Therefore, the appellant are eligible to refund of the service tax paid during the period 2005-2006. Since the refund claim has not been examined on the aspect of unjust enrichment, the matter needs to be remanded to the adjudicating authority to examine the the issue of unjust enrichment - appeal allowed by way of remand.
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2018 (5) TMI 117
Extended period of limitation - Service Tax on the value of SIM Card during relevant period from August, 2002 to June, 2003 - Held that: - The appellant in the present case claimed that they have paid the Service Tax for the normal period. However, they have not paid the demand for the extended period of limitation and prays for setting aside the same on ground of limitation - appeal is allowed by way of remand for the limited purpose of verification of the amount of Service Tax with interest payable for the normal period.
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2018 (5) TMI 116
Business Auxiliary Service - primary business of the appellant is selling motor bikes/scooters and they are authorized dealer of ‘Bajaj’ brand - Held that: - the identical issue has been decided by this Tribunal in the case of Rennaissance Leasing & Finance Pvt. Ltd. Vs. Commissioner of Central Excise, Jaipur [2017 (3) TMI 559 - CESTAT NEW DELHI], where it was held that the said activities are covered under the tax entry of “Business Auxiliary Service” in terms of Section 65(105)(zzb) of Finance Act, 1994 inasmuch as they are promoting and marketing the services provided by the client banks - demand upheld - appeal dismissed - decided against appellant.
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2018 (5) TMI 115
CENVAT credit - capital goods - Tower and Tower materials - assessee failed to make any observation that this credit should have been spread over in two financial years - interest - penalty - Held that: - the respondents are liable to pay interest for taking the credit of 50% of credit in advance on the capital goods allowed by the learned Commissioner - to ascertain the quantum of interest the matter is remanded to the learned Commissioner - matter on remand. Penalty u/r 15(1) of the CCR 2004 - Held that: - penalty itself is not imposable in view of the judgment of the Hon'ble Gujarat High Court in the case of Asstt. Commissioner of Central Goods & Service Tax, Division-VIII (Vejalpur) Vs. Vodafone Essar Gujarat Ltd. [2017 (10) TMI 82 - GUJARAT HIGH COURT] - penalty set aside. Appeal disposed off.
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2018 (5) TMI 114
Business Auxiliary Services - commission for providing the service of arranging loans from the financial institutions on behalf of the manufacturer - Held that: - the Commission received by Maruti Udyog Ltd. has already suffered service tax - the issue is covered by the judgment of this Tribunal in the case of SAI Service Station Ltd. [2013 (10) TMI 1155 - CESTAT MUMBAI], where it was held that demanding duty on the same amount again amounts to double taxation - appeal dismissed - decided against Revenue.
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2018 (5) TMI 113
Refund of excess amount of service tax - Section 11B of CEA, 1944 - Held that: - there is no basis or requirement to amend the work orders, to be eligible to the refund of excess service tax paid - It is quite natural that the value of service tax would be reduced by the service receivers, if the service provider failed to conform the services for which the work orders issued - refund allowed - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 112
Refund claim - time limitation - N/N. 41/2012 - Held that: - The refund claim filed by the appellant of the amounts paid when they complied with the VCES scheme take the advantage of abatement on interest and penalty under the said scheme - the First Appellate Authority was correct in holding that the refund claims filed by the appellants was hit by limitation - appeal dismissed - decided against appellant.
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Central Excise
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2018 (5) TMI 111
Valuation - part of sales consideration or not? - Delivery charges - the decision in the case of C.C.E., Visakhapatnam-II Versus Hindustan Petroleum Corporation Ltd. [2017 (1) TMI 1575 - ANDHRA PRADESH HIGH COURT] contested - Held that: - We are not inclined to interfere with the order passed by the High Court - SLP dismissed.
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2018 (5) TMI 110
Whether the omission of Section 3A of the Central Excise Act, 1944 by Section 121 of Finance Act, 2001, without any saving clause would affect the proceedings in respect of which decision has already been taken prior to the date of omission? - respondents raised preliminary objection that the amount involved is covered by the circular. Held that: - the issues are answered in favour of the department but looking to the fact that the tax amount involved is covered by the circular. Therefore, we clarify that the parties in future will be covered by the decision of Supreme Court in the case of Shree Bhagwati Steel Rolling Mills v. Commr. of Central Excise [2015 (11) TMI 1172 - SUPREME COURT]. Appeal disposed off.
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2018 (5) TMI 109
Levy of duty - M.S. Ingots/billets - Section 3 of the Central Excise Act, 1944 read with Notification No. 30/97-C.E. (N.T.), dated 1-8-1997 - Held that: - From the perusal of Section 38A(c) it is evident that it shall not affect right, privilege, obligation or liability acquired, accrued or incurred under any rule, notification or order so amended or repealed, superseded or rescinded. Admittedly, the liability in the instant case pertains to the period from 1-10-1999 to 31-3-2000. Section 3A of the Act was omitted on 11-5-2001. Thus, during the period of liability of the appellant, Section 3A of the Act was in existence. Therefore, in view of the Section 38A(c) of the Act, liability of the appellant, which was acquired during the period for which charging section as well as Rules were in vogue, cannot be wiped out. Annual production capacity of the furnaces - Held that: - annual production capacity of the furnaces of the appellant has been carried out in terms of Rule 3(2) of the Rules with the help of technical expert and after physical measurement of the furnaces, order dated 9-3-1998 was passed. The aforesaid order was upheld by the Tribunal and it has been held by the Tribunal that in case of the closure of the furnaces for continuation but not less than seven days as per paragraph 6(3) of the instructions, the appellant shall be entitled to abatement in the duty. In case the furnaces of the appellant were not functional, the appellant would be entitled to seek abatement of the duty from the authorities. Appeal dismissed.
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2018 (5) TMI 108
SSI exemption - use of brand name - case of Revenue is that the respondent have used the brand name ‘RIAT SONS’, whereas the brand ‘RIAT’ belonged to another person i.e. M/s.RIAT Machine Tools - Held that: - the respondent is using the brand name ‘RIAT SONS’ while the brand name ‘RIAT’ was owned by M/s.RIAT Machine Tools (M/s.RMT). Admittedly, both the brand names were registered with the trade mark authority and recognized as not similar. It is documented from the brand name registration certificate dated 24.9.2005 submitted by the respondent and from para 4 of the show cause notice that the brand name used by the respondent is ‘RIAT SONS’ and by M/s. RMT is ‘RIAT’ and the two brand names were not similar and were distinct brand names. In that circumstance, it cannot be said that the respondent is using brand name of another person - appeal dismissed - decided against Revenue.
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2018 (5) TMI 107
CENVAT credit - duty paying documents - on the premise that in some invoices either invoice no. is not mentioned or invoices having hand written number - renting service - Held that: - It is not in dispute that the assessee has not received input service having not paid service tax thereon. These services have been used by the assessee in the course of their business of manufacturing, in that circumstance, it is not the case of the Revenue that these input services are not covered under Rule 2(l) of Cenvat Credit Rules, 2004 - credit allowed. CENVAT credit - on the premise that in some invoices either invoice no. is not mentioned or invoices having hand written number - denial on the premise that the said input service is not covered under 2(l) of Cenvat Credit Rules, 2004 for the period prior to 1.4.2011 - Held that: - the Technical Director is an employee of the company who assisted the assessee to do day to day manufacturing operation. The rent paid for technical director as terms of employment and is a part of expenses incurred by the assessee - the assessee is entitled to avail credit of service tax paid on rent for residence of Technical Director. Extended period not invokable. Appeal dismissed - decided against Revenue.
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2018 (5) TMI 106
CENVAT credit - input services - interior decorator service - Held that: - the issue is covered by the judgment of this Tribunal in the case of M/s V E Commercial Vehicles Ltd. Vs CCE & ST Indore [2018 (2) TMI 906 - CESTAT NEW DELHI], where it was held that the credit is admissible on the service - credit allowed - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 105
CENVAT credit - air travel agent service - Held that: - admissibility of cenvat credit of the service tax paid on air travel agent service used by the employees for sales/marketing attending legal issues etc. is covered by the judgment of the Division Bench Keihin Fie Pvt Ltd Versus Commissioner of Central Excise, Pune [2017 (10) TMI 122 - CESTAT MUMBAI], where it was held that travelling of the executive and staff is inevitable to run the business therefore service is related to travelling i.e. Air & Rail Travel Booking Services is necessary service for running the business hence in our view credit is admissible - credit allowed - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 104
CENVAT credit - input - MS Angles, MS Beam, SS Plate/Coil/ Sheet, Round Bar, Scrap bar, Channel etc. used for repair and maintenance of capital goods - Held that: - issue decided in the case of KISAN SAHKARI CHINI MILLS LTD. Versus COMMISSIONER OF C. EX. LUCKNOW [2013 (292) ELT 394], where it was held that the activity of repair and maintenance of plant and machinery is an activity which has direct nexus with manufacture of final products and the goods used in this activity would be eligible for Cenvat credit. There is no dispute of the fact that these items were used in the factory for repair and maintenance of the capital goods - credit allowed - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 103
CENVAT credit - boiler and parts of the boiler of the Appellant were installed in Unit II, used for generation of electricity and exclusively used in their Unit I where Cenvat Credit has been availed - credit availed at Unit I is denied - Held that: - the issue is covered by the judgment of this Tribunal in OPG Metals Pvt. Ltd. [2016 (7) TMI 497 - CESTAT CHENNAI], where it was held that the department has not disputed the duty-paid nature of the capital goods, discharge of duty by the appellant, usage of capital goods for generation of electricity and consumption of such electricity by the appellant in the manufacture of dutiable final products. Credit cannot be denied. Credit allowed - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 102
CENVAT credit - input service - courier service - Held that: - issue of credit of service tax paid on Courier Service has been held to be admissible in the case of Haldyn Glass Ltd. & Ors. Vs CCE [2017 (8) TMI 1217 - CESTAT AHMEDABAD] - credit allowed - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 101
CENVAT credit - Premium towards group Medical Insurance policy to employees and their families - Held that: - the premium paid in relation to coverage extended to the family members would not be eligible if separate premium is required to be paid - From the records, it is not clear whether separate premium is required to be paid for including the insurance coverage family members. To ascertain the said fact, the matter needs to be remanded to the adjudicating authority. Premium paid towards the employees located at Chennai - Held that: - appellant submits that the employees are stationed their factory at Vadodara but have been sent to Chennai for discharging certain functions, therefore, service tax paid on insurance policy of said employees are eligible to credit - This fact has also not been verified. Appeal allowed by way of remand.
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2018 (5) TMI 100
CENVAT credit - ‘outdoor catering service’ (canteen service) has been provided to the employees at their factory - Held that: - the issue is covered by the Division Bench judgment of this Tribunal in Reliance Industries Ltd [2016 (8) TMI 123 - CESTAT MUMBAI], hence in principle the appellants are eligible to avail credit of service tax paid on ‘Canteen Service’ provided to the employees in their factory. To ascertain whether any amount has been recovered from the employees, the matter needs to be remanded to the Adjudicating Authority - appeal allowed by way of remand.
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2018 (5) TMI 99
Refund claim - case of Revenue is that even though the invoices are claimed to have cancelled but no intimation was filed with the Dept. nor the procedure laid down under Para 12 of CBEC Manual has been followed - Whether the appellant is entitled to refund duty paid against invoices (Total 11 invoices) dtd 31.3.2013 where the goods were consigned to one M/s Bhawani Industries Ltd, but goods were not cleared from the factory? Held that: - the procedure has been laid down in the CBEC Manual to avoid detailed scrutiny of the movement of the goods once proper declaration was filed within the time limit specified under the said procedure. In the event, the procedure has not been followed, the burden is on the assessee to establish, adducing corroborative evidences that the duty though has been paid on the goods, but it could not be cleared from the factory due to cancellation of the order or for any other reason. In the present case, no findings have been recorded in this regard - the matter is remanded to the Adjudicating Authority to ascertain in detail by scrutinizing the evidences produced by the appellant and to arrive at a conclusion on the eligibility of refund. Appeal allowed by way of remand.
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2018 (5) TMI 98
Clandestine removal - shortages in the stock of finished goods - Held that: - the duty involved on shortages in the stock of finished goods had been paid by the appellant on the date of visit of the officers and explaining the reasons of shortages, the Authorized Signatory Shri Yogesh D Patel, in his statement dated 09.12.2011 informed that the goods were cleared without payment of duty, which was later, confirmed by the Director. The order of the Ld. Commissioner (Appeals) upheld, except the quantum of penalty imposed on the Director which is found to be excessive, is reduced. Appeal allowed in part.
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2018 (5) TMI 97
Clandestine removal - It is the submission of appellant that except for the recovery of the diary and the statement of the individual from the factory of the main appellant there is no corroborative evidences - Held that: - In the absence of any corroborative evidences that supports the allegation of clandestine removal relying only on statements of the managing director for confirmation of demand is not in consonance of law - a similar situation came in the case of CCE, Jaipur Vs. Tara Chand Narash Chand [2018 (1) TMI 209 - RAJASTHAN HIGH COURT] wherein it was held that only on the basis of statement the case cannot be sustained - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 96
Clandestine removal - demand based on statements of the buyers which was not retracted immediately, but was retracted subsequently - Held that: - reliance placed in the case of COMMISSIONER OF CENTRAL EXCISE Versus OMKAR TEXTILE MILLS PVT. LTD. [2010 (8) TMI 322 - GUJARAT HIGH COURT], where it was held that Demand cannot be raised merely based on statement retracted later without any corroborative material - demand withheld - appeal dismissed - decided against Revenue.
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2018 (5) TMI 95
Clandestine removal - demand based on statements of the buyers which was not retracted immediately, but was retracted subsequently - Held that: - reliance placed in the case of COMMISSIONER OF CENTRAL EXCISE Versus OMKAR TEXTILE MILLS PVT. LTD. [2010 (8) TMI 322 - GUJARAT HIGH COURT], where it was held that Demand cannot be raised merely based on statement retracted later without any corroborative material - demand withheld - appeal dismissed - decided against Revenue.
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2018 (5) TMI 94
Rectification of mistake - it is contended that Bench while passing Final Order No. A/ 13079/2017 dt 5.10.2017 has not extended the benefit of paying penalty of 25% of the confirmed demand - Held that: - the appellant had not taken this point in the grounds of appeal nor was it argued when the matter was heard and disposed on 5-10-2017 - when the issue were not argued before the Bench no finding are given, question of rectification of mistake does not arise as provisions of Sec 35C of the CEA 1944 provides for rectification of mistake apparent on the face of the record - ROM dismissed.
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2018 (5) TMI 93
CENVAT credit - common input services in the manufacture and supply of oxygen gas for medical purposes - non-maintenance of separate records - Rule 6(3) of CCR 2004 - Held that: - though there was a categorical submission on behalf of the appellant that they are not using any inputs/ input services in the manufacture and supply of oxygen gas for medical purposes, the demand has been confirmed observing that inputs/ input services were used in the manufacture of oxygen exempted from duty being supplied for medical purposes. To ascertain the facts, whether the appellant had used any inputs/ input services in the manufacture of oxygen supplied for medical purposes, the matter needs to be remanded to the adjudicating authority - appeal allowed by way of remand.
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2018 (5) TMI 92
CENVAT credit - input services - Internet and Telephone Services at various places - Held that: - the issue is not very clear as to how the appellant is claiming the branch office at Vapi, Surat specifically addressed to the needs of the factory premises at Dadra and Bharuch - The First Appellate Authority has categorically recorded that the appellant did not produce any evidence to show the services were received in the respective units. The matter needs reconsideration by the Adjudicating Authority - appeal allowed by way of remand.
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2018 (5) TMI 91
CENVAT credit - duty paying documents - Rule 9 of the CCR 2004 - Triplicate copy and extra copy of invoices, which are mostly supported by the certificate issued by the Jurisdictional Range Superintendent - Held that: - the duty paid character of the inputs mentioned in the invoices is certified by the Jurisdictional Range Superintendent. Discrepancy between quantity mentioned in the input invoices and Cenvat Credit Register - Held that: - in the invoices it is shown on notional area wise, whereas in the Cenvat Credit Register it is mentioned calculating the area considering the thickness of the veneer. Besides, there is no dispute of the fact that the inputs mentioned in the invoices had been duly received and utilized in the manufacture of finished goods. Appeal allowed - decided in favor of appellant.
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2018 (5) TMI 90
CENVAT credit - input - Cables - Construction Chemicals - Welding Rods - Plastic Crates etc. - Held that: - the inputs are allowed credit in various judgements - reliance placed in the case of Singhal Enterprises Pvt. Ltd vs CCE&C, Raipur [2016 (9) TMI 682 - CESTAT NEW DELHI] and National Co-op Sugar Mills Ltd vs CCE, Madurai [2016 (7) TMI 1073 - MADRAS HIGH COURT]. CENVAT credit - invoices which was in the name of head office and not in the name of Unit - Held that: - the issue is covered by the judgement of the Hon’ble Gujarat High Court in Dashion Ltd’s case [2016 (2) TMI 183 - GUJARAT HIGH COURT], where it was held that there is nothing in the said Rules of 2005 or in the Rules of 2004 which would automatically and without any additional reasons dis-entitle an input service distributor from availing Cenvat credit unless and until such registration was applied and granted - credit allowed. Appeal allowed - decided in favor of appellant.
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2018 (5) TMI 89
CENVAT credit - CHA Services - Courier Service - Repair and Maintenance Service - Manpower Recruitment Service - Erection of Temporary Shed for storage of inputs/finished goods during monsoon season - Held that: - the admissibility of credit of service tax paid on these services viz. CHA Services', 'Courier Service', 'Repair and Maintenance Service', ‘Manpower Recruitment Service' and Erection of Temporary Tarpulin Shed Service' are covered by the various judgments of the Tribunal - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 88
CENVAT credit - whether the appellant wrongly availed credit of ₹ 48,11,855/- without receiving the input steel materials of 599 MT.? - cross-examination not allowed - principles of natural justice - Held that: - statements which are challenged by the appellants required to be subjected to cross examination - also, the show cause notice being issued by the DGCEI, who has no jurisdiction to issue the notice during the relevant period, the said issue being contested by the appellant, the matter is remanded to the Adjudicating Authority - appeal allowed by way of remand.
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2018 (5) TMI 87
CENVAT credit - receipt of invoices without receipt of inputs - Held that: - the appellant M/s Alpha Nippon Innovative Ltd. had availed the credit and reversed the same while issuing the invoice in favour of their customer M/s Electrotherm (India) Ltd. Both sides have fairly accepted that appropriate duty has been paid on hydraulic cylinders and hydraulic power pack, by M/s Faraday Shop, the manufacturer of the inputs, and the said inputs were received and utilized by M/s Electrotherm (India) Ltd., accordingly, credit is admissible to them. To ascertain the exact amount of credit admissible to M/s Electrotherm India Ltd., which cannot be in any case more than the duty paid by the input manufacturer, M/s Faraday Shop the matter needs to be remanded to the adjudicating authority to ascertain the said fact. Appeal allowed by way of remand.
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2018 (5) TMI 86
CENVAT credit - Coils, Plates, HR Sheets, MS Angles, Channels, Beams etc. for construction/ fabrication of structural/ foundation of machinery within the factory premises - Held that: - the issue settled by the decision in the case of Singhal Enterprises Pvt. Ltd. Vs. Commissioner of Central Excise & Customs, Raipur [2016 (9) TMI 682 - CESTAT NEW DELHI], where it was held that applying the “User Test” to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of ‘Capital Goods’ as contemplated under Rule 2(a) of the Cenvat Credit Rules, hence will be entitled to the Cenvat Credit - credit allowed. CENVAT credit - excess amount of duty paid - the education cess and Secondary Higher Education cess which was not payable but paid - Held that: - the issue is covered by the judgment of Bombay High Court in Nestle India Ltd.’s case [2011 (6) TMI 164 - BOMBAY HIGH COURT], where it was held that he payment of excise duty must be treated as valid, therefore, the claim of Modvat credit must be treated as excise duty validly paid - credit allowed. Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2018 (5) TMI 85
Validity of reassessment order - demand issued in Form VAT-180 - grievance of petitioner is that three days of opportunity was provided to the petitioner- company to file objections - principles of natural justice. Held that: - It is settled legal principle that principles of natural justice has to be complied with by quasi judicial authority while concluding the assessment/ reassessment. Providing of such opportunity is not a mere formality, reasonable opportunity has to be provided so that the assessee gets reasonable time to meet the contents of the notice or comply with the discrepancies pointed out in the notice. Indisputably, assessment proceedings were pending from 13.02.2015 when Form 275 was issued by the prescribed authority. The proposed tax in terms of the notice dated 24.03.2018 is based on fresh grounds which were not adverted to, by the prescribed authority in the earlier proposition notice. If so, providing three days time to the assessee cannot be construed as reasonable opportunity at any stretch of imagination. It is well settled by now that alternative remedy is not an absolute bar to entertain the writ petition under Articles 226 and 227 of the Constitution of India when the principles of natural justice are violated - the principles of natural justice being violated in passing the reassessment order impugned herein, relegating the petitioner-assessee to the appellate remedy would not be justifiable. Reassessment order as well as demand notice at Annexure-C are quashed - matter is remitted to the prescribed authority-Respondent No.3 to reconsider the matter after providing reasonable opportunity to the petitioner in accordance with law - appeal allowed by way of remand.
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2018 (5) TMI 84
Levy of tax on works contract - interstate transaction - Validity of reassessment order - supply of elevator and other spare parts - installation, testing and commissioning of elevators - the returns filed by the petitioner for the tax periods in question rejected - tax levied along with consequential penalty and interest treating the transaction as works contract exigible to tax under the Karnataka Value Added Tax Act, 2003. Whether the reassessment order passed under Section 39[1] of the KVAT Act is without jurisdiction? - Held that: - it is now well settled that alternative remedy is no bar for entertaining the writ petition when the challenge is to the jurisdiction of the Authority passing the impugned order. Hence, relegating the petitioner to avail the alternative remedy available under the KVAT Act would not be justifiable. Whether the movement of goods occasioned from Thane, Maharashtra for executing the works contract in the State of Karnataka would be construed as local sale exigible to levy of tax under the KVAT Act? - Held that: - the nature of contract is relevant to determine the transaction whether is a sale simpliciter or works contract - It may be true that the main contract of supplying, installation and commissioning of lifts/elevators might have been split into two, viz., purchase order and work order placed by the customer/purchaser to avoid taxes payable to the State of Karnataka and both these orders are intrinsically interlinked with each other but movement of goods from Thane, Maharashtra to Karnataka pursuant to contract executed between the parties cannot be disputed. The case of the revenue that the works contract receipts received by the petitioner in relation to turnkey project undertaken is being brought to tax which is in purview of Section 4(1)(c) of the KVAT Act, 2003, cannot be countenanced as the divisibility of the contract would not empower the Authorities to subject the inter state transaction to tax under the State Tax Act on the ground that the petitioner has employed dubious methods to avoid payment of tax to the State - levying tax under the provisions of KVAT Act, 2003 on the transaction of the contract executed by the petitioner set aside. Petition allowed - decided in favor of petitioner.
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2018 (5) TMI 83
Time limitation - jurisdiction to pass Assessment Order beyond the period of five years from the end of the year of Assessment - Section 32 read with Section 9 (2) of the CST Act - principles of natural justice - Held that: - On verification of records placed before the Court, it is manifestly clear that the proposition notice was issued by the prescribed Authority before concluding the assessment in as much as fixing the tax liability - the ground of unjust enrichment has no merit. Limitation - Held that: - it is not in dispute that the Constitutional validity of the amendment made to Section 40 of the KVAT Act extending the time limit to conclude the re-assessment has been upheld - This amendment effected by Act No.54 of 2013 with effect from 01.04.2005 retrospectively having been held to be Constitutionally valid - assessments not barred by limitation. Maintenance of records for five years - Held that: - it is obligatory on the part of the petitioner to maintain the books of account until the assessment reaches finality. Penalty - Held that: - In the absence of any notice issued by the prescribed Authority for levying penalty, imposition of penalty is ab initio void and the same deserves to be quashed - penalty set aside. Appeal allowed in part.
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2018 (5) TMI 82
Refund of input tax credit - grievance of the petitioner in the writ petition concerns the inaction on the part of the first respondent in passing orders on the same - Held that: - materials on record indicate that the assessment of the petitioner has been revised on the basis of the audit objection and the petitioner has satisfied the demand for additional tax made pursuant to the revision. Want of confirmation from the Accountant General as to the steps taken on the basis of the audit objection cannot be a reason for delaying consideration of application for input tax refund. If an assessee is entitled to input tax refund in accordance with the provisions contained in the Act and the Rules made thereunder, the assessing authority is bound to allow such requests. Petition allowed.
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2018 (5) TMI 81
Rate of tax - All-in-one Diapers, Under-pads and Sanitary Napkins - whether these commodities are taxable at the concessional rate of 4.5% under Schedule III of the Act or would be taxable in the residuary entry at the rate of 14.5% of the Act? - Vires of Section 60(8) of KVAT Act - retrospective effect of order passed by the Commissioner . Held that: - the petitioner cannot successfully challenge the constitutional validity and vires of Section 60(8) of the Act and this Court does not find any lack of legislative competence of the State Government in enacting and amending Section 60(8) of the Act - such orders of Advance Ruling Authority can be undone or modified by overriding power vested in the Commissioner himself under Sub Section (8) inserted by Act No.54 of 2013 with effect from 01.08.2013, and that cannot be said to be inconsistent, conflicting or ultra vires the provisions nor the said provisions can be said to be lacking the legislative competence on the part of the State Legislature. Whether Clarification issued by Commissioner cannot be given retrospective effect? - Held that: - Sub Section (8) of Section 59 does not give any such power to the learned Commissioner to issue any such Clarification or Ruling with a retrospective effect. In the absence of any such specific power, the respondent-Commissioner could not have issued the impugned clarification by the impugned order at Annexure-A dated 11.09.2014 to be effective from 01.04.2005 onwards - the retrospectivity of the said order does not fit into the parameters of Sub Section (8) of Section 59 of the Act and to that extent, it deserves to be quashed. Rate of tax - All-in-one Diapers, Underpads and Sanitary Napkins - Held that: - It is well settled that if a commodity can by some rational understanding or analysis be brought or related to specific entry in the tax laws, the same cannot be taxed under the residuary entry and what is important is to apply the Trade Parlance Test or Common Parlance Test and not to apply the hair splitting exercise to apply the technical terms. The heading of the said Entry 60 namely, ‘Medical and Pharmaceutical preparations’ enumerating several items also inter alia including therein, “Wadding Gauze, Bandages and similar articles for medical, surgical etc., purposes” has to be read ‘ejusdem generis’ and the items manufactured and sold by the assessee are not the items which are alien to the said Entry 60 - They may not be exactly “Wadding Gauze or Bandages’” but they serve almost same or similar purposes - Such Underpads or Diapers definitely help them in maintaining good medical and hygienic conditions of their body and therefore, such items can certainly be said to be “similar articles” read with “wadding gauze and bandages for medical and surgical purpose” etc. Petition allowed.
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2018 (5) TMI 80
Validity of reassessment order - absence of regular Officer in the position of the Joint Commissioner of Commercial Taxes (Appeals) - Held that: - the present petitions are disposed of with a liberty and direction to the petitioner Assessee to approach the said Respondent No.1 – Joint Commissioner of Commercial Taxes (Appeals), Mysore along with the stay applications filed or which if not already filed, may be filed within a period of one week from today and the petitioner assessee may appear before the said Authority in the first instance on 03/10/2017 and the said Authority will decide the stay application in accordance with law - petition disposed off.
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Indian Laws
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2018 (5) TMI 121
Smuggling - prohibited goods - cannabis mixture weighing about 18.85 kgs - absence of independent witnesses - Held that: - the grounds on which the High Court have reversed the findings of conviction of the accused-respondents ought not to be accepted - no suggestion was given to the witnesses (PWs 12 and 13) who had taken the samples to the laboratory that the contraband parcel has been tampered with. PW-16, who had chemically examined the contraband samples, was fully cross-examined by the defence. There is nothing in his evidence to suggest that the sample(s) came to him in a torn or otherwise doubtful condition. In the absence of any animosity between the police party and the accused and having regard to the large quantity of contraband that was recovered (18.85 kgs.), we are of the view that it is unlikely that the contraband had been planted/foisted in the vehicle of the accused persons. Order of the High Court acquitting the accused-respondents set aside - order of the learned Trial Court convicting the accused-respondents under Section 20 read with Section 29 of the Narcotic Drugs and Psychotropic Substances Act, 1985 restored.
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2018 (5) TMI 120
Preserving of case property - case of respondent is that the case property was destroyed under the provisions of the Act and the inventory and photographs were submitted during trial which form primary evidence under the Act - Held that: - The contraband stuff as also the samples sealed as usual were handed over physically to the Investigating Officer Harvinder Singh (PW 6). Also the trial Court in its judgment specifically passed instructions to preserve the seized property and record of the case in safe custody, as the co-accused Bhanwarlal was absconding. Omission on the part of the prosecution to produce the bulk quantity of seized opium would create a doubt in the mind of Court on the genuineness of the samples drawn and marked as A, B, C, D, E, F from the allegedly seized contraband. However, the simple argument that the same had been destroyed, cannot be accepted as it is not clear that on what authority it was done. Appeal dismissed.
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