TMI Tax Updates - e-Newsletter
May 30, 2018

Case Laws in this Newsletter:

GST Income Tax Customs Service Tax Central Excise CST, VAT & Sales Tax

TMI SMS

• GST - Transfer of business as a whole of one of the units of the Applicant in the nature of a going concern amounts to supply of service.

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Articles

1. INPUT TAX CREDIT (ITC) IN GST (PART-II)

   By: Alkesh Jani

2. GIST OF RECENT PRONOUNCEMENTS ON GST (PART-XII)

   By: Dr. Sanjiv Agarwal

News

1. Second Bi-Monthly Monetary Policy Statement, 2018-19

2. India signs Loan Agreement with the World Bank for USD 21.7 Million for Strengthening the Public Financial Management in Rajasthan Project; Project to contribute to improved Budget Execution, enhanced Accountability and greater efficiency in Revenue Administration in Rajasthan.

3. RBI Reference Rate for US $

Notifications

GST

1. 24/2018 - dated 28-5-2018 - CGST

NACIN has been notified as the authority for conducting the examination for GST Practitioners under rule 83 (3) of the CGST Rules, 2017.

2. 11/2018 - dated 28-5-2018 - CGST Rate

Seeks to amend notification No. 04/2017- Central Tax (Rate) dated 28.06.2017 so as to notify levy of Priority Sector Lending Certificate (PSLC) under Reverse Charge Mechanism (RCM)

3. 12/2018 - dated 28-5-2018 - IGST Rate

Seeks to amend notification No. 04/2017- Integrated Tax (Rate) dated 28.06.2017 so as to notify levy of Priority Sector Lending Certificate (PSLC) under Reverse Charge Mechanism (RCM)

4. 11/2018 - dated 28-5-2018 - UTGST Rate

Seeks to amend notification No. 04/2017- Union Territory Tax (Rate) dated 28.06.2017 so as to notify levy of Priority Sector Lending Certificate (PSLC) under Reverse Charge Mechanism (RCM)

GST - States

5. 56/GST-2 - dated 28-5-2018 - Haryana SGST

Notification regarding Levy of GST on PSLC on RCM basis

6. 55 /GST-2 - dated 28-5-2018 - Haryana SGST

Notification under Rule 83(3) of the HGST Rules, 2017

7. F-A-3-17-2018-1-V (48) - dated 25-5-2018 - Madhya Pradesh SGST

Notified National Academy of Customs, Indirect Taxes and Narcotics, Department of Revenue, Ministry of Finance, Government of India

8. F-A 3-15-2018-I-V (47) - dated 21-5-2018 - Madhya Pradesh SGST

Amendments in Madhya Pradesh Goods and Services Tax Rules, 2017

9. F. A-20017-1-V-(46) - dated 16-5-2018 - Madhya Pradesh SGST

State Government appoints the Jurisdiction officers.

10. F-A-3-16-2018-1-V-(44) - dated 16-5-2018 - Madhya Pradesh SGST

Waives the late fee payable FORM GSTR-3B by the due date for each of the months from October, 2017 to April, 2018

11. F.17(131)ACCT/GST/2017/3578 - dated 28-5-2018 - Rajasthan SGST

Notification u/s 48 of the RGST Act,2017

12. F.17(131)ACCT/GST/2017/3560-3563 - dated 23-5-2018 - Rajasthan SGST

Notification to authorize the proper officer to intercept any conveyance to verify the e-way bill.

IBC

13. F. No. 30/13/2018-Insolvency - G.S.R. 422 - dated 1-5-2018 - IBC

Insolvency and Bankruptcy Board of India (Annual Report) Rules, 2018

Circulars / Instructions / Orders

GST - States

1. 1357/GST-2 - dated 18-5-2018

Officer authorized for enrolling or rejecting application for Goods and Services Tax Practitioner under the Haryana Goods and Services Tax Act, 2017.

DGFT

2. 12/2015-2020 - dated 28-5-2018

Enlistment under Appendix 2E - Agencies Authorized to issue Certificate of Origin - (Non- Preferential) - reg.

Customs

3. Instruction No. 10/2018 - dated 29-5-2018

Single Window Project- clearance of food consignments by Customs officers at locations where FSSAI has provided delegation-reg.

4. F No 390/Misc/116/2017-JC - dated 25-5-2018

Reduction of Government litigation-Introduction of monetary limit at the level of Commissioner (Appeals), in legacy Central Excise & Service Tax matters only : regarding

5. 86/2018 - dated 23-5-2018

Amendments in Handbook of Procedures 2015-20 and ANF – 4F & ANF-4G –reg.

Companies Law

6. 06/2018 - dated 28-5-2018

Clarification with regard to provisions under section 135(5) of the Companies Act, 2013

Highlights / Catch Notes

GST

• Business Unit Transfer as Going Concern Exempt from GST; Considered Supply of Service Under GST Rules.

  Case-Laws - AAR : GST - Intent to sell unit along with all assets and liabilities - The transaction of transfer of business as a whole of one of the units of the Applicant in the nature of a going concern amounts to supply of service - Exempt from tax - AAR
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• NACIN Named Authority for GST Practitioner Exam u/r 83(3) of CGST Rules, 2017.

  Notifications : NACIN has been notified as the authority for conducting the examination for GST Practitioners under rule 83 (3) of the CGST Rules, 2017.
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• GST Update: PSLC Transactions Now Under Reverse Charge Mechanism, Shifting GST Payment Responsibility to Service Recipients.

  Notifications : GST - levy of Priority Sector Lending Certificate (PSLC) brought under Reverse Charge Mechanism (RCM) - Notification as amended
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Income Tax

• Income Surrendered in Survey to Be Treated as Business Income, Not Taxed u/s 69 or Section 115BBE.

  Case-Laws - AT : Surrender of income during survey - to be treated as Business income or taxable u/s 69 - AO was not justified in taxing the surrender made on account of excess stock and excess cash found U/s 69. Thus, there is no justification for taxing such income U/s 115BBE of the Act. - AT
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• Company Avoids Penalties Despite Cash Transactions Violating Section 269SS of Income Tax Act; Directors' Loans Repaid in Cash.

  Case-Laws - AT : Penalty - loan/deposits in cash and in violation of provisions of section 269SS - three directors who have advanced money to the assessee-company and have been repaid in cash - No penalty u/s 271D and 271E - AT
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• Section 263 Revision Initiated for Transfer Pricing Issues on Interest-Free Loans to Associates; TPO to Determine ALP.

  Case-Laws - AT : Initiation of revision proceedings u/s 263 - transfer pricing - interest free loans to associate companies out of borrowed capital - international transaction - a reference shall be made to the TPO for determining the ALP - AT
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• Company's Director's Foreign Education Costs Approved as Revenue Expenditure for Future Export Business Growth.

  Case-Laws - AT : Expenses incurred in respect of foreign education of the Director - the main purpose as per the company is that education of director would be useful in expanding the export business of the company in long run - allowed as revenue expenditure - AT
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• Section 40(a)(ia) allows expense disallowance for non-deduction of TDS, independent of default status u/s 201(1).

  Case-Laws - AT : Additions for non-deduction of TDS - Sec 40(a)(ia) is a disabling provision which and not an enabling provision. - there is nothing in the language of Sec.40(a)(ia) to the effect that it is only when an Assessee is treated as an Assessee in default under Chapter XVII B of the Act by an order passed u/s.201(1) of the Act, can a disallowance be made u/s.40(a)(ia).
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• No Penalty for Late TDS Returns Filed Before Section 200A(1) Amendment; Changes Apply Only Prospectively.

  Case-Laws - AT : Imposition of late filing fee u/s 234E - late filing of TDS return - substitution made by clause (c) to (f) u/s 200A(1) can be read as having prospective effect and not having retrospective effect - no penalty.
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DGFT

• Appendix 2E Update: New Agencies Authorized to Issue Non-Preferential Certificates of Origin for International Trade by DGFT.

  Circulars : Enlistment under Appendix 2E - Agencies Authorized to issue Certificate of Origin - (Non- Preferential) - Appendix 2E as amended.
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Service Tax

• CENVAT Credit on Tippers: Extended Limitation Period Not Applicable Due to Complete, Accurate Returns Filed by Respondent.

  Case-Laws - AT : CENVAT credit - tippers - extended period of limitation - return has been filed giving complete details of CENVAT credit availed by them on tippers - it was not alleged by the department that the respondent had not given such details or given incorrect details in their ST3 return - extended period of limitation cannot be invoked - AT
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Case Laws:

• GST

• 2018 (5) TMI 1651
  Supply of goods and/or services - Intent to sell unit situated at Hiriyur along with all assets and liabilities - Whether the transaction would amount to supply of goods or supply of services or supply of goods & services? - N/N. 12/2017-Central Tax (Rate) dated 28.06.2017 - Whether the transaction would cover under sl.no.2 of the N/N. 12/2017-Central Tax (Rate) dated 28.06.2017? Held that:- The activity of transfer of a going concern constitutes a supply or service. The Notification further provides 'Nil' rate of tax on such a supply - the transfer of a going concern constitutes a supply of service - A going concern is a concept of accounting and applies to the business of the company as a whole. Transfer of a going concern means transfer of a running business which is capable of being carried on by the purchaser as an independent business. In the instant case, the Applicant has not furnished any documentary evidence to establish that the Applicant is a going concern except their admission that its an ongoing business and the transaction proposes to transfer all the assets and liabilities to the new owner. It implies that the business will continue in the new hands with regularity and a nature of permanency. Ruling: - The transaction of transfer of business as a whole of one of the units of the Applicant in the nature of a going concern amounts to supply of service - The transaction of transfer of one of the units of the Applicant as a going concern is covered under SI. No. 2 of the N/N. 12/2017-Central Tax (Rate) dated 28.06.2017 subject to the condition that the unit is a going concern.

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• 2018 (5) TMI 1650
  Implementation of GST - e-bill on Renting Shuttering Material to builders, contractors and individuals - invocation of writ jurisdiction - Held that: - Learned counsel for the petitioners was unable to demonstrate that any cause of action arises in favor of the petitioners at this stage to invoke the extra ordinary writ jurisdiction of this Court under Articles 226/227 of the Constitution of India - petition dismissed.

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• 2018 (5) TMI 1649
  Constitution of appellate authority - Section 129(1)(a) of Haryana Goods and Services Tax/Central Goods and Services Tax of the Act, 2017 - Held that: - learned counsel for the State has produced the notification dated 19.04.2018 appointing the Appellate Authority under the Haryana Goods and Services Tax Act, 2017. The notification had been made effective from July 01, 2017. As the Appellate Authority has been constituted, the grievance to that extent has been rendered infructuous. Time Limitation - Held that: - as the petitioner could not file appeal earlier because of non-constitution of the Appellate Authority, which has now been appointed vide notification dated April 19, 2018, the appeal filed by the appellant shall not be dismissed only on account of delay. Petition disposed off.

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• 2018 (5) TMI 1615
  Personal presence of Officials - Generation of E-way bill - Section 129 (3) of the UPGST 2017 - Held that: - we required the presence of respondent 3 to explain his conduct on the allegations made against him in the pleadings and the respondent no. 2 to suggest the ways and means to remedy the situation but it appears that we were misled by the petitioner and at the time of first hearing neither the fact had been pointed out by learned Standing Counsel appearing for the State-respondents nor we noticed the same and without noticing the fact we required the respondents no. 2 & 3 to be present in person. Sri Manish Goel, learned Additional Advocate General has also placed before us the previous record of the assessee for the period 1999 till 26.03.2018 showing that penalty has been levied for evasion of the tax against the petitioner firm at least 25 times which goes to show that he is a habitual evader of tax. Personal appearance of both the officials on future date is exempted.

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• Income Tax

• 2018 (5) TMI 1648
  Assessability of land sold by the assessee - nature of land - business income or capital gain - assessee submitted land had been converted into stock-in-trade from capital asset - application for getting the land as non-agricultural land for the purpose of carrying on the development on the said land - Held that:- The agreement between the parties is to develop the project and sell tenements / flats to the prospective buyers. Reading the terms of agreement, it is clear that the terms have been agreed between the parties for developing the said plot of land and it is eventually sale to different buyers. In order to safeguard its interest, the assessee as owner of the plot of land had agreed to receive consideration in advance i.e. at the time when the amount is received in part but in advance by the developer. But the said amount received by the developer cannot crystallize the transaction of sale of different flats / tenements to the prospective buyers till the project is completed. The developer M/s. J.K.R. Builders has recognized the completion and sale of developed portion in assessment year 2011-12 and has offered the income to tax in the said year. Consequently, the business profits arising to the assessee were taxable in the hands of assessee in the year when the project was completed and tenements / flats were handed over to the prospective buyers. The year under appeal is the year when the assessee received advance which does not culminate any completion of transaction and assessability of the amount as business profits in the hands of assessee. Accordingly, we hold so. Since the amount is not assessable to tax as his business profits in the year under consideration, the capital gains arising on conversion of capital asset into stock-in-trade is also not to be taxed in the hands of assessee in the year under consideration but in the year in which the business profits are to be taxed. The assessee has offered the said income in assessment year 2011-12 as offered by the developer in assessment year 2011-12. The Revenue has opposed the said by pointing out that the developer had followed the project completion method, which is one of the method for recognizing the revenue. Said method which has been followed by the developer is one of recognizing accrual of income in the hands of builder. Accordingly, we find no merit in the stand of Revenue in this regard. As already held that the capital gains has to be worked out on the basis of fair market value of the property as on the date of conversion and not on the basis of market value of the property. Accordingly, grounds of appeal No.1 to 3 raised by the assessee are allowed.

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• 2018 (5) TMI 1647
  Validity of reopening of assessment - notice against non existent entity - scheme of amalgamation conceived - Held that:- AO issued notice u/s 148 in the name of M/s.SHL but it is also not in dispute that M/s.SHL was amalgamated with M/s. BCFL vide Judgment of the Hon’ble jurisdictional Delhi High Court Dated 19th January, 2011. Pursuant to such amalgamation, M/s.SHL ceased to exist. Subsequently, this company was also renamed as M/s. STLL. Intimation of amalgamation of M/s.SHL was provided to various authorities. Copies of some of the letters are also placed in paper book filed by the Assessee. The assessee, therefore, intimated to the Revenue Department about the merger of M/s.SHL with other Company prior to the issue of notice under section 148 of the I.T. Act. Since on the date of issue of notice under section 148, M/s.SHL did not exist, therefore, recording reasons in their name or issue notice under section 148 is clearly void abinitio, illegal and invalid - Decided in favour of assessee.

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• 2018 (5) TMI 1646
  Surrender of income during survey - to be treated as Business income or taxable u/s 69 - AO made the additions u/s 69 while calculating the tax rate as per provisions of Section 115BBE - Held that:- As per decision in the case of Bajrang Traders [2017 (11) TMI 388 - RAJASTHAN HIGH COURT] as observed that the Hon'ble High Court in respect of excess stock found during the course of survey and surrender made thereof was found to be taxable under the head ‘business and profession’. Similarly in respect of excess cash found out of sale of goods in which the assessee was dealing was also found to be taxable as business income. Applying the proposition of law laid down in the judicial pronouncements as discussed above, I hold that the lower authorities were not justified in taxing the surrender made on account of excess stock and excess cash found U/s 69. Thus, there is no justification for taxing such income U/s 115BBE of the Act. So far as the surrender of income is on account of incriminating documents, it is not clear as to whether it was out of the business transaction, the assessee was carrying on in the regular course of business. However, authorities had not given any finding on the nature of such incriminating documents nor with regard to income surrender with respect to these documents. Restore the issue with regard to surrender of income arising out of incriminating documents to the file of the Assessing Officer to find out the nature of such income if arising out of the business transaction carried on by the assessee and to decide the issue afresh as per law..

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• 2018 (5) TMI 1645
  Eligibility to deduction u/s 54F - assessee was owning only one asset and the income of which was chargeable under the head "income from house property" - Held that:- AO has erred in denying the deduction in the section 54F of the Act. The restriction imposed by section 54F as mentioned above disentitling the claim of deduction u/s 54F not only requires that the assessee owns more than one residential house but it also requires that income from such residential house is chargeable to tax under the head income from house property. In the assessee’s case since the second condition of income of such residential house being chargeable to tax is not being met, the Assessing Officer was not justified in denying the assessee deduction u/s 54F of the I. T. Act, 1961. We have also perused the decision of the ITAT, Delhi ‘E’ Bench dated 04.08.2017 in the case of ACIT vs. Mohinder Kumar Jain reported (2017 (8) TMI 480 - ITAT DELHI) wherein similar and identical issue was dealt by the Tribunal in assessee’s favour.

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• 2018 (5) TMI 1644
  TDS u/s 195 - non deduction tds on marketing expense paid to foreign companies - addition u/s. 40(a)(i) - income accrued in India - India tax treaty benefits - Held that:- Article 24(1)(a) provides that in order to avail the benefit of tax treaty more than 50% of the number of shares of a company should be owned directly or indirectly by one or more individual resident of one of the contracting states i.e. either in India or USA. In assessee’s case, the shares of M/s. BNKe Solutions Inc., USA incorporated in USA were 100% owned by the Indian Tax Resident and, therefore, conditions of Article 24(1)(a) were clearly fulfilled. In the said circumstances, therefore, we do not find merit in the objection raised by the ld. DR at this stage before the Tribunal. We are in agreement with the assessee that the payment of 2,96,05,045/- made by the assessee to foreign entities towards marketing and sale support services were not chargeable to tax in India and in that view of the matter the assessee was right in law in not deducting any tax thereon under sec. 195 - Decided in favour of assessee Addition on account of employee’s contribution to PF by invoking provision of section 36(1)(va) - contribution to PF after the due date of the relevant Act - held that:- Deduction claimed should be allowed as the employee’s contribution to PF 2,72,482/- and loss of 8,18,562/- derived by the assessee on sale of fixed assets in the P 5,46,200/- in the computation of income. Therefore, the Ld. CIT(A) held the finding of AO to be factually erroneous and hence, deleted the impugned disallowance holding it to be a double addition. . DR appearing on behalf of the revenue was unable to controvert this fact and could not point out any infirmity in the order of the Ld. CIT(A) - Decided in favour of assessee Disallowance of deduction claimed u/s. 35DD in respect of travelling expenses - Held that:- There is no precondition set out in the above section mandating any certification from the auditor. We note that the tax auditor indeed did not report this claim u/s. 35DD of the Act but the tax auditor’s non-report could not disentitle the assessee from making a claim which was otherwise legally permissible. We note that the Ld. CIT(A) after examining the details of travelling expenses found that it was incurred wholly and exclusively for the purpose of scheme of demerger and this finding has remained uncontroverted before us. In such a scenario, in our considered view, therefore, the claim made by the assessee u/s. 35DD of the Act was legally permissible - Decided in favour of assessee

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• 2018 (5) TMI 1643
  Levy of fee u/s 234E - whether late filing fee u/s 234E has rightly been charged in the intimation issued u/s 200A/206CB while proceeding the TDS returns/statements, the enabling clause (c) having been inserted in the section w.e.f. 01.06.2015 - Held that:- There was no enabling provision in the Act u/s 200A for raising demand in respect of levy of fee u/s 234E. As such, as per the assessee, in respect of TDS statement filed for a period up to 31.03.2015, no late fee could be levied in the intimation issued u/s 200A of the Act. We accept the grievance of the assessees as genuine. Accordingly, the orders of the CIT(A) are reversed and the fee so levied under section 234E of the Act is cancelled. - See Sudershan Goyal vs. DCIT (TDS) [2018 (5) TMI 1626 - ITAT AGRA] - Decided in favour of assessee.

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• 2018 (5) TMI 1642
  Net profit estimation - CIT-A granted substantial relief to the assessee and sustained the addition towards difference in closing stock - Held that:- The survey team itself had made physical valuation of inventories and had arrived at the value as on 30.3.2010 at 34,71,533/- only. The difference between purchases and sales thereafter worked out to 23,61,057/- (35,25,479-11,64,422) as observed by both the AO and CIT-A would lead to further increase in closing stock by 23,61,057/-. Total closing stock as on 31.3.2010 should be 58,32,590/- as against the closing stock of 54,26,130/- declared by the assessee in the balance sheet filed in support of return of income, thereby leading to a difference of 4,06,460/- which has been rightly added by the CIT-A. The survey team valued the closing stock as on 30.3.2010 based on physical verification of inventories at 34,71,533/-, whereas the closing stock that was reflected in the computerized profit and loss account was 1,52,97,868/-. Hence the computerized statement in the instant case cannot be relied upon as it contained deficiencies due to system getting corrupted. Assessee had also given the statement on oath at the time of survey that the total income for the whole year would be approximately 35 lacs for which due taxes would be paid by him. The returned profit by the assessee was 34,63,940/-. Hence there is no much variation in the approximation done by the assessee on the date of survey vis a vis the actual profit. We also find from the Gross Profit and Net Profit Chart of earlier years that assessee had reported higher GP and NP during the year under appeal despite the huge reduction in turnover. The ld CITA had rightly sustained the addition only towards difference in closing stock and the same does not require any interference.- Decided against revenue

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• 2018 (5) TMI 1641
  Accrual of capital gain - year of assessment - assessee as co owner - assessee contesting that refundable deposit is not part of sale consideration and when sale consideration has taken up for computation of capital gains, deposit does not get taxed separately - Held that:- Both the development agreements entered into by assessee and other co-owners did not envisage handing over of the physical possession of the land until the approvals of the building plans and one agreement M/s. Siri Lakshmi Balaji Constructions was even cancelled on 24-09-2012 as the developer failed to proceed with the development activity and no plans were approved by any authority. With reference to agreement with M/s. Siri Balaji Constructions, even though the said concern partly fulfilled the agreement, it could not complete the construction and ultimately land owners and flat owners completed the project and properties were sold by the ‘committee’ as per the orders of the Lok Adalat. In the case of Amiantit International Holding Ltd [2010 (2) TMI 123 - AUTHORITY FOR ADVANCE RULINGS] it was held that "capital gain" cannot arise on the basis of uncertain or indefinite future contingencies or hypothetical and imaginary estimations" Thus the incidence of capital gains does not accrue or arise in the year under consideration and so the orders of AO and Ld. CIT(A) are liable to be set aside. - Decided in favour of assessee.

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• 2018 (5) TMI 1640
  Addition on account of TPO order u/s 92CA(3) by rejecting the TNMM selected by the assessee - Held that:- TNMM is not applicable on the given set of facts has nowhere been discussed by the TPO in the impugned order. Therefore, the ld.DR cannot improve the case of the TPO at this level. More so when, consistently from the Asstt.Year 2002-03, it has been held that method adopted by the assessee is an appropriate method. In the assessee’s own case, this aspect has been accepted upto the level of ITAT. There is no justification for disturbing of that method by taking different opinion from order of the ITAT passed in similar facts of the same assessees. Taking into consideration earlier orders of ITAT passed in assessee’s case for the Asstt.Year 2002-03 to 2004-05, we are of the opinion that the ld.CIT(A) has based his finding on the orders of predecessor. There is no independent discussion in this order. Thus, the findings have been upheld by the ITAT, and therefore, we do not see any reasons to deviate ourselves from those finding. Misc. expenses to be written off - Held that:-After taking into consideration the finding of the ld.CIT(A), we are of the view that lump-sum addition confirmed by the ld.CIT(A) is little on the higher side, because the assessee has contended that if written off is not allowable, then actual expenses incurred during the year ought to be allowed. In other words, case of the assessee is that by following mercantile system of accounting, it has incurred various expenses, which has been written off in this year. Therefore, to meet ends of justice, assessee deserves a further relief of 5,00,000/-. In other words, addition confirmed by the ld.CIT(A) of 15,00,000/- is restricted to 10,00,000/- (Ten Lakhs) only, and thus the assessee gets a further part relief. Accordingly, this interconnected ground raised in the appeal of the Revenue and CO of the assessee is partly allowed. Deemed dividend u/s 22(22)(e) - Held that:- When the CIT(Appeals) as well as Tribunal concurrently held that looking to large number of adjustment entries in the accounts between two entities, the amounts were not in the nature of loan or deposit, but merely adjustments, application of section 2(22)(e) of the Act would not arise. Consequently, no question of law arises. Disallowance under section 40(a)(ia) - Held that:- If TDS has been deposited prior to the due date of filing of return, then no disallowance has to be made. The ld.CIT(A) has rightly deleted the disallowance, and we do not find any error in this ground of appeal. It is rejected. Gratuity provision - Held that:- While filing return of income the assessee has included an amount for additions in the total income. When it realized the provision made for gratuity for the year under consideration, then it had filed an application and submitted to the AO that current year’s claim only 20,69,905/-. This amount could be disallowed. The ld.CIT(A) has rightly appreciated the controversy and has rightly directed that AO that only for the provision made in the current year could be disallowed and not opening balance. Therefore, after looking into the finding of the ld.CIT(A), we do not find any error in it. This ground of appeal is rejected Correct figure of depreciation - Held that:- CIT(A) has rightly observed that the claim of the depreciation as made by the assessee, and it was for the AO to compute the correct figure of depreciation admissible to the assessee. The ld.CIT(A) has directed the AO to grant correct amount of depreciation. There could not be any fault to this finding, hence this ground of appeal is rejected. Direct the AO to include other income in the eligible profit for the purpose of grant of deduction under section 10B of the Act. Allow set off prior period expenditure against prior period income and only net income is to be added to the total income of the assessee. Addition u/s 14A - Held that:- We are of the view that the ld.CIT(A) though changed reasoning, but confirmed disallowance of same amount. Once investment was made by the assessee, then it was not required to be continuously monitor it and administrative expenditure could not be estimated at this magnitude which has been worked out by the AO with help of Rule 8D. To our mind, ends of justice would be met, if an adhoc disallowance of 3,00,000/- be sustained for earning of tax free income. We allow this ground of appeal partly and confirm the addition to the extent of 3,00,000/-.

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• 2018 (5) TMI 1639
  Validity or reopening of assessment - reasons to believe that the disallowance made on account of Section 14A in respect of proportionate interest and the average value of investment Held that:- AO did not give any evidence of any tangible material in his possession in the recorded reasons other than the original material on which disallowance under section 14A was based in the original assessment order under section 143(3) of the Act. Hence there is no ‘tangible material’ to come to the conclusion that there is escapement of income. There is a conceptual difference between power to review and power to re-assess. The AO has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfillment of certain pre-conditions as explained above and if the concept of “change of opinion” is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of “change of opinion” as an in-built test to check abuse of power by the AO. Hence, after 1.4.1989, the AO has power to re-open, provided there is “tangible material” to come to the conclusion that there is escapement of income from assessment. Therefore, we are of the view that an error discovered on a reconsideration of the same material (and no more) does not give AO, the power to assume jurisdiction to make reassessment. - Decided in favour of assessee

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• 2018 (5) TMI 1638
  Addition on account of discrepancy in value of stock statement furnished to the bank and the value of stock reflected in the audited financials - addition made taking note of the statement of assets hypothecated against cash credit by the assessee from Overseas Bank of India, after comparing it with the assessee’s balance sheet as on 31.03.2010 - Held that:- It was a practice to inflate stock to draw higher credit from bank and without physical verification of stock by bank, the stock statement furnished by assessee to bank cannot be the sole basis to draw adverse view against assessee. Therefore the explanation of assessee is accepted by us, in the absence of physical verification by Bank of the stock as on 31.03. 2010. As there are divergent views on this issue by other Hon’ble High Courts,thus decision favorable for the assessee needs to be taken, we accept the explanation rendered by the assessee company for the difference in stock position between statement given to the Bank as well as that given in the balance sheet. - Decided in favour of assessee. Disallowance of excessive claim of the expenditure - assessee had started the new line of business which was manufacturing of bricks - Held that:- Referring to fact that the assessee is remitting royalty to the Government of West Bengal for excavation of mud and new machines purchased by the assessee for excavation of mud for which assessee had incurred cost of 27,48,000/-for the Hitachi Hydraulic Excavator powered by Isuzu Engine on 12.11.09 and the truck purchase for 8,00,000/- and that the electronic equipment (Tough Rider) at the cost of 3,74,400/- goes on to show that the assessee had set up the unit for manufacture bricks and the royalty to Govt for excavating mud and coal and electricity consumption, labour payments booked and sales of bricks, VAT documents filed are facts which throw light that assessee had started manufacturing and sale of bricks this year and has thus justified its expenditure for production of bricks as stated above - Decided in favour of assessee. Addition account of share application money introduced into the company - Held that:- ll the three directors of the company were filing I.T. Returns and the amounts has been adjusted from their remuneration and thus the source of the introduction of the share application money has been explained. We also note that all the three were residing at the same house, therefore expenditure in the house was common and so the remuneration from the company could be adjusted for purchase of shares of own company is a plausible explanation in the facts of the case. Therefore since the assessee has discharged the onus casted upon it in respect of introduction of share application money, the Assessing Officer ought not to have made addition - Decided in favour of assessee. Disallowance of depreciation on machinery - assessee did not produce the purchase bill of the machinery and could not explain the source of investment of the capital expenditure - Held that:- We note that the assessee had not only set up the manufacturing but also started production of the same which are revealed from the fact that the consumption of electricity has gone up from 51,163/- to 5,46,270/- and the fuel and oil was booked for the first time was to the tune of 11,14,250/-, coal consumed for the first time to the tune of 15,93,830/- and labour charged of 25,25,210/- etc., all these facts goes on to show that the assessee had set up manufacturing and started production and sales of the bricks which is corroborated by the VAT details which emanating from Page No.37 to 41 of the Paper Book, details of which is given in Page No.36. Thus the assessee has been able to prove that it has made addition to machinery (fixed assets) - Decided in favour of assessee.

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• 2018 (5) TMI 1637
  Claim of expenses u/s 37(1) - contrbution for construction of Rajasthan Bhawan, Mumbai - Held that:- assessee got the rebate of 75% as well as the right to use the accommodation by its officers/employees visiting at Mumbai - assessee has received the benefit in the shape of accommodation against the expenditure for construction of Rajasthan house and thus an allowable expenditure u/s 37(1) - Decided in favor of assessee.

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• 2018 (5) TMI 1636
  Condonation of delay in filing of appeal - date of order for Levy of fees u/s 234E - communication of intimation through email address - Held that:- the concerned files along with the impugned orders were got misplaced by the employee of the assessee and when the files were found, the appeals were filed without any further delay - it has been duly supported by the affidavit of the Assistant Engineer of the assessee Nigam - thus there is no ulterior purpose to file the appeal belatedly, in the interest of justice delay is condoned. Other than the alleged e-mail, no other record was referred for service of notice to the assessee - assessee has not claimed any delay in filing the appeals before the CIT (A) whereas the CIT (A) has considered the appeals filed by the assessee as barred by limitation - thus a defective memo is issued to the assessee or the assessee ought to have been given an effective opportunity of hearing on the point of delay - allowed for statistical purposes. After considering the explanation of the assessee, the ld. CIT (A) shall decide the issue of condonation of delay and thereafter the appeals on merit, if need arises.

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• 2018 (5) TMI 1635
  Penalty u/s 271D and 271E - assessee has obtained loan/deposits in cash and violated provisions of section 269SS - three directors who have advanced money to the assessee-company and have been repaid in cash. - Held that:- Transactions of availing loans and its user by the assessee have not been doubted. These are found to be genuine. Only allegation against the assessee is of venial and technical breach. No doubt breach is there, but the assessee has a plausible explanation. It has been in the business since 1980 in exporting dyes and intermediatries. Thus, in order to re-establish itself, it has availed certain cash loans which has been used for fulfillment of promises given for the purpose of BIFR. An identical situation has been evaluated by ITAT’s Third Member decision in the case of Mrs.Rupali R. Desai (2003 (7) TMI 647 - ITAT MUMBAI). As far as repayment of cash loans is concerned, identical circumstances are available with the assessee, therefore, we are of the view that the assessee has been able to demonstrate reasonable cause for not visiting the assessee with penalty under section 271D and 271E. We allow both the appeals of the assessee and delete penalty. - Decided in favour of assessee.

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• 2018 (5) TMI 1634
  Disallowance of deduction of interest receipt from banks u/s 80P(2)(a)(i) - Held that:- interest income earned by the assessee by providing credit facilities to its members is deposited in the banks for a short duration which has earned interest - such interest is attributable to the business of providing credit facilities to its members - Decided in favor of assessee.

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• 2018 (5) TMI 1633
  Initiation of revision proceedings u/s 263 - transfer pricing - interest free loans to associate companies out of borrowed capital - international transaction - Held that:- assessee is a firm which is engaged in the business of providing infrastructure facilities to educational institutions - assessee had advanced an interest free loan being transaction of lending of money to its associate enterprise as per Sec. 92B(1) - thus the assessee who is under a statutory obligation to have filed the report in Form 3CEB has failed to do so - since assessee has advanced loan to its associated enterprise but had in blatant violation of the statutory obligation of form 3CEB - thus a reference shall be made to the TPO for determining the ALP. - Decided in favor of revenue. Disallowance of interest on borrowed capital u/s 36(1)(iii) - Held that:- determining of ALP relates to the income to be charged including allowance for any expense or interest arising from any international transaction, while for the disallowance under Sec. 36(1)(iii) relates to the claim of deduction from income - Decided in favor of assessee.

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• 2018 (5) TMI 1632
  G.P. estimation - assessment u/s 153A - rejection of books of accounts - Held that:- As decided in assessee's own case once GP rate is estimated, it is of the view that is not only the GP rate of the immediately preceding year but the average rate of at least 3 to 5 years must be looked into. If we go the average of the preceding 3 years of the five years must be looked into. If we go the average of the preceding 3 years of the five years, we find that the GP rate shown by the assessee is on the higher side. We, therefore, set aside the order of the CIT(A) and delete the addition. Undisclosed purchases from Rourkela Steel Plants - Held that:- We find that the document on the basis of which the additions were made in the hands of the assessee do not belong to the assessee as the document itself states that they belong to Shree Gopal Engineering & Chemical Works (P) Ltd. and moreover, the assessee during appellate proceedings had sworn through affidavit that this document do not belong to it and had duly made submissions to learned CIT(A). In view of the above, ground decided in favour of the assessee.

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• 2018 (5) TMI 1631
  Disallowance u/s 40(a)(ia) made on account of non-deduction of TDS on interest payment - Held that:- amended provision of Sec 40(a)(ia) should be interpreted liberally and equitable and applies retrospectively, w.e.f. AY 2005-06 so that an assessee should not suffer unintended and deleterious consequences beyond what the object and purpose of the provision mandates - since the amendment was curative in nature, it should be given retrospective effect - assessee has filed its returns on 01.08.2005 in accordance with the due date u/s 139 - hence is allowed to claim the benefit of the amendment - decided in favor of assessee.

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• 2018 (5) TMI 1630
  Tax liability of notional interest on interest free loan advanced to subsidiary companies - disallowances of interest paid to group Companies - disallowances of foreign education expenses - Held that:- if there are funds available both interest free and over draft and or loan taken, then a presumption would arise that investment would be out of the interest free funds generated or available with the company, if the interest free funds were sufficient to meet the investments - interest free funds available with assessee is 151 crores whereas the amount identified as interest free advances given by the assessee to sister concern is only 30.50 crores - Therefore, the disallowance of interest cannot be made on that ground only - thus disallowance of interest u/s 36(1)(iii) is not sustained - Decided in favor of assessee. Expenses incurred in respect of foreign education of the Director - Held that:- the main purpose as per the company is that education of director would be useful in expanding the export business of the company in long run - this expenditure is in the nature of training expenditure of the Director herself - thus full tuition fee is allowed - Decided in favor of assessee. Disallowance of interest on term loan and car loan u/s 14A - Held that:- interest is related for the purposes of investment in exempt income yielding investment - thus allowed - Decided in favor of assessee.

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• 2018 (5) TMI 1629
  Addition on unexplained cash and investment in stock - addition on basis of the statement recorded during the course of survey - non maintenance of books of accounts - Held that:- The assessee is a kirana merchant and running a kirana shop at a small place, where he is carrying out the business of kirana in retail. As per the provisions of Section 44AA read with Section 44AF of the Act, the assessee was not required to maintain any books of account. The assessee had retracted from the statement as made before the assessing authorities. Thus we find merit in the contention of assessee that the AO ought to have considered the facts in right perspective. Allow grounds and direct the AO to delete the additions made in respect of unexplained cash, unexplained investment in stock, addition made by estimating the total sale and the addition which was solely made on the basis of the statement recorded during the course of survey Addition on account of cash advances and kirana debtors and addition made on account of undisclosed purchases of ‘Mahua’, also be deleted - Decided in favour of assessee.

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• 2018 (5) TMI 1628
  Nature of expense revenue or capital - enduring benefit or not - expenses incurred in the process of setting-up new retail outlets. - Project Development Expenditure - Capital work in progress - Held that:- the expenditure is on account of salaries, machinery and other repairs, travelling and conveyance, professional fee, electricity expenses, telephone expenses, etc - which clearly shows its revenue nature - though it is debited in the books of account as capital work-in-progress, that the same have been claimed as revenue expenditure u/s 37(1) - as per the case of Taparia Tools Ltd. vs JCIT, [2015 (3) TMI 853 - SUPREME COURT] appeal of revenue is dismissed - decided in favor of assessee.

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• 2018 (5) TMI 1627
  Deduction on account of Provision for Bad and Doubtful Debts u/s.36(1)(viia) - diversified decisions - whether the co-ordinate Tribunal decision has to be followed in preference to a non jurisdictional High Court decision? - Held that:- Going by the hierarchical system in our country, this Tribunal in the case of Syndicate Bank (2000 (6) TMI 121 - ITAT BANGALORE) preferred to follow the decision of Hon’ble Punjab 58,31,851 on account of Demand Drafts and pay orders is still reflected in the books of accounts of the assessee as on 313.2007 and therefore the same stands acknowledged by the assessee and the liability subsists. In this view of the matter, we find that the authorities below have failed to establish the primary requisite for invoking the provisions of section 41(1) of the Act and hold that the provisions of section 41(1) of the Act would not le attracted in the case on hand in respect of the outstanding liability TDS u/s 194A - disallowance of interest expenses made by the AO u/s 40a(ia) - non furnishing furnished Form 15 G and Form 15 H - Held that:- The requirement of filing of Form 15G and 15H with the prescribed authority viz., CIT is only procedural and that cannot result in a disallowance u/s 40a(ia) of the Act. To the extent that payment of interest relates to the Government and the exempted category of persons, the assessee is directed to furnish required details to the AO and the AO will consider the claim of the assessee after affording opportunity of being heard to the assessee. TDS liability on interest paid on term deposits and savings bank account - Held that:- The argument of the learned counsel for the Assessee to treat the interest expenses as allowable u/s.28(i) on commercial principles cannot be accepted, especially in the context of Sec.40(a)(ia which are provisions which are meant for collection of taxes. Sec 40(a)(ia) is a disabling provision which and not an enabling provision. As rightly submitted by the learned DR, there is nothing in the language of Sec.40(a)(ia) to the effect that it is only when an Assessee is treated as an Assessee in default under Chapter XVII B of the Act by an order passed u/s.201(1) of the Act, can a disallowance be made u/s.40(a)(ia) of the Act of the expenses claimed in respect of which there is a default in deducting tax at source. The arguments raised by the learned counsel for the Assessee are without any merit and rejected.

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• 2018 (5) TMI 1626
  Imposition of late filing fee u/s 234E while processing the TDS returns - Held that:- as per the view of the case SRI. FATHERAJ SINGHVI AND OTHERS VERSUS UNION OF INDIA AND OTHERS [2016 (9) TMI 964 - KARNATAKA HIGH COURT], we find that substitution made by clause (c) to (f) u/s 200A(1) can be read as having prospective effect and not having retrospective effect - thus the demand u/s 200A for computation and intimation for the payment of fee u/s 234E could not be made - the levy of the fee is cancelled - Decided in favor of assessee.

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• Customs

• 2018 (5) TMI 1625
  Smuggling - Foreign origin Gold - Town Seizure - Confiscation - Penalty - the whole case of revenue is based on the retracted statement (s) of appellant S.A. Khan and father of the other appellant Shri Mridul Agarwal. Held that: - Gold is not a prohibited item and can be imported upon payment of duty. Further, it is a case of town seizer and the customs officers have seized the Gold on the suspicion of smuggling, without there being any actual evidence of smuggling - these persons are not examined in the adjudication proceedings and as such their statements are not admissible, as evidence under the provisions of Section 138B of Customs Act. Penalties - Held that: - the appellants namely Shri Mridul Agarwal and Shri Satish Kumar have categorically denied their connection with the seized Gold and in absence of any corroborative evidence the imposition of penalty on them is bad and fit to be set aside - penalty imposed on Shri S.A. Khan, as smuggling is not established. Absolute confiscation - Held that: - as the appellant Shri S.A. Khan have not discharged the burden of proof under Section 123 of the Act (the presumption of gold being smuggled), the confiscation is upheld but the absolute confiscation is set aside by the learned Commissioner. Appeal allowed in part.

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• 2018 (5) TMI 1624
  Rectification of mistake application - smuggling of the gold - Order passed by the Commissioner, Central Excise (Appeals) - Jurisdiction of Tribunal to decide the case in view of the proviso to Section 129A(1) of the Customs Act, 1962 - Held that: - The issue of jurisdiction now raised by the Revenue through the present application cannot been entertained as it rests on a mixed question of facts and law, which if considered, would amount to review of the order, a jurisdiction not conferred by the statute on this Tribunal - ROM application dismissed.

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• 2018 (5) TMI 1623
  100% EOU - Debonding of goods on payment of duty - some of the goods had become obsolete and were not being put to use - Held that: - As per the verification carried out by the departmental officers, it stands concluded that many of these capital goods had become obsolete and were no longer capable of being used. From the record, it is found that the appellant had agreed to the de-bonding of such goods and voluntarily paid the duty - the duty paid is in order. There is no justification for ordering confiscation of the imported goods inasmuch as the goods were found in the bonded premises of the appellant during the course of verification - confiscation and penalty set aside. Appeal allowed in part.

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• Service Tax

• 2018 (5) TMI 1622
  Refund claim - export of services - time limitation - Section 11B of Central Excise Act, 1944 - Held that: - Larger Bench of the Tribunal in the case of CCE & CST, Bangalore Vs. Span Infotech (India) Pvt. Ltd. [2018 (2) TMI 946 - CESTAT BANGALORE] has unanimously held that the relevant date for the purpose of time limit for consideration of refund claim under Rule 5 of CCR may be taken as the end of the quarter in which the FIRCs are received in case the refund claims are filed on quarterly basis - matter remanded to the original authority to consider the end of the quarter in which the FIRCs are received - appeal allowed by way of remand.

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• 2018 (5) TMI 1621
  Refund of unutilized CENVAT credit - rejection on the ground of time limitation and also on the ground that the appellants have not furnished the invoices and service tax details and service tax registration number not available on the invoices - Held that: - Larger Bench in the case of CCE &CST, Bangalore Vs. Span Infotech (India) Pvt. Ltd. [2018 (2) TMI 946 - CESTAT BANGALORE], after hearing of the party, has unanimously held that the relevant date for the purposes of deciding the time limit for consideration of refund claim under Rule 5 of CCR may be taken as the end of the quarter in which the FIRCs are received in cases where refund claims are filed on a quarterly basis - this case needs to be remanded back to the original authority to decide the refund claims as per the decision of the Larger Bench - appeal allowed by way of remand.

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• 2018 (5) TMI 1620
  Refund of unutilized CENVAT credit - time limitation - Section 11B of the Central Excise Act - Held that: - Larger Bench in the case of CCE &CST, Bangalore Vs. Span Infotech (India) Pvt. Ltd. [2018 (2) TMI 946 - CESTAT BANGALORE], has unanimously held that the relevant date for the purposes of deciding the time limit for consideration of refund claim u/r 5 of CENVAT Credit Rules may be taken as the end of the quarter in which the FIRCs are received in cases where refund claims are filed on a quarterly basis - the appeal needs to be remanded back to the original authority to dispose of the refund claim - appeal allowed by way of remand.

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• 2018 (5) TMI 1619
  CENVAT credit - tippers - extended period of limitation - Section 73(1) of the Finance Act - Held that: - As per the provisions of Section 73(1) of the Act, the relevant date for issuing the SCN is one year from the date when the ST3 return is filed or ought to have been filed and in the present case, the return was filed on 10/09/2009. Therefore, the SCN should have been issued on or before 10/09/2010 whereas the SCN was issued on 13/08/2011 much after the normal period by invoking the larger period. The appellant failed to bring any material to show that there was suppression on the part of the appellant to evade the payment of tax. The assessee filed the return on 10/09/2009 giving complete details of CENVAT credit availed by them on tippers and it was not alleged by the department that the respondent had not given such details or given incorrect details in their ST3 return filed on 10/09/2009 or had availed credit fraudulently or without receiving the subject capital goods. In the case of P. V. Narayana Reddy [2008 (10) TMI 178 - CESTAT, BANGALORE], it has been held that demand raised invoking extended period when returns are regularly filed is not sustainable. Appeal dismissed - decided against Revenue.

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• Central Excise

• 2018 (5) TMI 1618
  Penalty - duty paid before issuance of SCN - Section 11A(2) of CEA - Held that: - Since the duty was paid along with interest before issue of SCN, the appellant is entitled to the benefit of Section 11A(2) whereby it is provided that if the duty is paid along with interest, then the Department should not issue the show-cause notice unless there is a fraud or suppression or willful misstatement - In the present case, the Department has not been able to establish that there was a wilful misdeclaration with intent to evade payment of duty - appeal allowed - decided in favor of appellant.

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• 2018 (5) TMI 1617
  Reversal of CENVAT credit - recovery of ineligible credit passed on by declaring stocks in nonexistent premises and not existent stock - whether the appellants are required to pay back Cenvat Credit passed on as registered dealers or otherwise? - Held that: - all the appellants were registered dealers, were not manufactures; they had applied for and got provisional registration certificate as dealers; they had issued invoices as registered dealers during the period in question and that they had maintained the records in form RG 23 A instead of RG 23(D) - the provisions of Rule 12 of Cenvat Credit Rules 2002, as has been sought to be applied, cannot be invoked against the appellants, accordingly the question of confirming the demands raised does not arise - appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2018 (5) TMI 1616
  Rectification of assessment order - The grievance of the petitioner is that certain amounts paid by the petitioner have not been given credit to in Exts.P1 to P4 modified assessment orders - Held that: - the writ petition is disposed of directing the first respondent to take a decision on Exts.P5 to P8 applications within two months from the date of receipt of a copy of this judgment.

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• 2018 (5) TMI 1614
  Refund with interest - time barred deemed assessment - Held that: - In the present case, the initial assessment order dated 26.3.2013 had been set aside which was sent by registered post bearing No. 2791 dated 10.12.2013 as per Annexure P.7 appended alongwith replication. The assessment order in pursuance of remand order passed on 29.12.2016 as per Annexure R.1 attached with the written statement, was clearly barred by limitation as it had not been passed within the limitation period - the assessment of the petitioner company would be governed by Section 15(1) of the Act as a case of deemed assessment in terms of the return filed on 25.11.2010 wherein the petitioner had claimed refund on account of excess tax deposited/deducted towards its liability for the said year - petitioner was entitled to refund of 30,42,838/- in accordance with law - Petition allowed.

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