Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 8, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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GST - Classification of the PVC floor mat - The present product is made from PVC only and there should be no doubt whatsoever that the same would fall in Chapter 39 which covers PVC, a polymer and articles thereof - cannot be classified under the Heading 5705 - applicable rate of GST theron would be 18% (9% each of CGST and SGST) - AAR
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Rate of GST - Dried Tobacco Leaves - undergone the process of curing after harvesting of tobacco leaves - to be classfied as unmanufactured tobacco covered in HSN Code 2401 - Liable to GST @ 14% (CGST) + 14% (SGST) or 28% (IGST) - AAR
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GST - Seizure of goods during interstate movement - Power of State Legislature or the State Government has to make law/rules to govern interstate movement of goods - Power to detain a consignment for not carrying documents prescribed by them for transporting goods in the course of interstate trade - HC
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Detention of goods with vehicle - E-Way Bill No.01 not available - HC directed the Assistant Commissioner, Commercial Tax, Mobile Squad--XI, Kanpur, U.P. to appear before the Court to explain as to under which authority of law he intercepted the vehicle and passed the seizure order despite E-Way Bill No.01 was generated and produced.
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Grant of registration under GST Statutes - mistake in providing the PAN number of another firm for the purpose of obtaining registration - To err is human - HC directed the respondents concerned to make appropriate provisions to tackle issues of the instant nature as well.
Income Tax
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MAT - computing the income u/s 115JB - prior period expenses - The reasons for disallowing the expenditure u/s 37 of the Act cannot be adopted for adding the same to the book profit u/s 115JB of the Act as the mode of computation of income under these two provisions entirely different - AT
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TDS u/s. 194J - Interest include the service fee charge by the bank in respect of money borrowed - A plain look at the statutory provision makes it clear that assessee was not under obligation to deduct the TDS on account of loan processing charges paid to the bank. - AT
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Disallowance of staff welfare expenses - self made vouchers - There is no allegation from the Assessing Officer that the expenses claimed by assessee are unreasonable. We also observe that external documents in such kind of expenses are not normally available - claim of expenditure allowed - AT
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Transfer of shares without adequate consideration - Method of valuation u/s 56 - Section 56 allows the assessee to adopt one of the methods of their choice. But, the AO held that the assessee should have adopted only one method for determining the value of the shares - Action of AO is not legal and and proper - AT
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Expenditure incurred for maintaining corporate entity - There is no doubt that the assessee is a corporate entity. Even if it is not carrying on any business activity it has to incur some expenditure to keep up its corporate entity. Therefore expenditure incurred by it has to be allowed. - AT
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Addition made on share premium u/s.68 - share premium received from its holding companies namely situated at Hongkong, who are non resident entities - the said share premium is on account capital transaction and is not an income within charging Sections of the 1961 Act. - AT
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Accrual of interest earned on earmarked funds - Assessee is bound to follow the directions of C & AG of India - when interest on earmarked fund is not related to the assessee and shall have to be spent for specific purpose, it could not be treated as income of the assessee - AT
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Loss worked-out by special auditor appointed by the AO - Loss determined by the special auditor appointed by the Department shall have to be accepted by the A.O. as against tentative figure given by the assessee. - AT
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Advances written off - deduction u/s 37(1) - Advances to the employees or advances made for cylinders have to be held to made for carrying out business of the assessee - The expenses were of revenue nature.As there was direct and intimate relation between the advances made and the business of the assessee,same has to be allowed as regular business expenditure u/s.37 - AT
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Provision for bad and doubtful debts of standard asset - the provision for standard assets cannot be equated with the Provision for bad and doubtful debt and the assessee’s argument that only the nomenclature is different is unacceptable. - AT
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Disallows of interest expenditure u/s 14A - the disallowance has to be made even in case of strategic investments in the associate company. - AT
Customs
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Clarification regarding classification of Solar Panel/Module equipped with Elements
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Extension of facility of Direct Port Delivery (DPD) to Top 1083 importers at JNCH-Regarding
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Import of food items - List of “Out of Scope” items as received from FSSAI
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Import by EOU/EHTP/STP/BTP without payment of duty by Following Rule 5 of Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017
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Confiscation - absence of the BIS stickers on the Cold Rolled Non-Grain Oriented Silicon Steel Sheet in Coil - the bona fide of the appellant is evident on the face of the record as they offered to re-export the goods, on the clearance being object to for domestic consumption - There is no deliberate breach of the quality control order and for the venial breach the provisions of confiscation and penalty are not attracted - AT
Service Tax
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Classification of services - making false ceiling, partitions, panelling, boxing, applying wall papers, carpeting etc. - appellants are no where involved even in the design and drawing of the work - The appellants cannot then be slotted into the category of Interior Decorator Service. - AT
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Construction of a building for use as hospital by a charitable organization does not fall under the category of ‘commercial or industrial construction’ - demand of service tax set aside - AT
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Levy of service tax on commission received from the RBI for the tax collection, RBI bonds, payment of pension, PPF etc - the bank has been appointed as agent of RBI, it is transacting Government business which is in the nature of a sovereign function performed on behalf of the Government and hence not liable to service tax - AT
Central Excise
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Removal of goods for weighment without document - they could have prepared a adhoc documents which would indicate that the vehicle was being sent for weighment purposes, was to return back to the factory on further documentation - demand of duty confirmed - AT
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Classification of Anmol Coconut Oil - the product Anmol Coconut Oil, is classifiable under Tariff Item 15131900 as edible oil - AT
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Benefit of exemption - the debit of any amount under the DEPB Scheme is a mode of payment of duty on the imported goods and the goods cleared under DEPB Scheme cannot be treated an exempted goods, but they can only be treated to be duty-paid goods. - AT
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Valuation - inclusion of royalty in assessable value - The running royalty is includible in the assessable value of blooms/bars cleared by the KCSSL, as the royalty is not in the nature of brand or IPR but in the nature of Techn0104' Transfer Fee for the purpose of Casting Specialty Alloy. - AT
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CENVAT credit - process does not amount to manufacture - When the duty has been discharged by the appellant for a prolonged period, the department thereafter cannot turn around and deny the credit alleging that the process does not amount to manufacture based upon new decisions evolved. - AT
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Valuation - sale of goods through depot - Speed MS/HSD - the goods cleared from the factory is plain MS/HSD but the same goods are sold from the depot as Speed MS/HSD. Therefore, all the goods which are cleared as plain MS/HSD, which was subsequently sold as Speed MS/HSD, the sale price of such plain MS/HSD shall apply. - AT
VAT
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Rate of tax - sale of potato chips with a brand name - potato chips will fall under the processed vegetable and when there is a specific entry, the tax applicable to that entry alone has to be applied and it is not expected to go to the residuary item. - HC
Case Laws:
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GST
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2018 (5) TMI 529
Classification of goods and/ or services or both - Rate of GST - Dried Tobacco Leaves - Determination of the liability to pay tax on goods or services or both - appellant engaged in trading of Dried Tobacco Leaves - whether such 'Dried Tobacco Leaves' will be classified under Heading 2401 of HSN or the same may be classified in Heading 2403 of HSN or in any other Heading of HSN? - Held that: - It is observed that the heading 2401 of HSN covers Tobacco Leaves and Unmanufactured Tobacco. However, heading 2403 covers 'Manufactured Tobacco'. Hence, to determine the correct classification under HSN, it has to be first ascertained whether the goods proposed to be supplied are unmanufactured tobacco or the same can be considered as manufactured tobacco. It is observed that HSN notes for heading 2401 specifically mention that the said heading covers whole plants or leaves in the natural state and also cured or fermented leaves. Hence, even after the process of curing or fermenting of Tobacco Leaves, they remain covered under heading 24.01. As far as rate of GST under Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 is concerned, it is observed that 'Tobacco Leaves' attract 2.5% (CGST) and 2.5% (SGST) or 5% (IGST) under S. No. 109 of Schedule-I of Notification No. 1/2017 -Central Tax (Rate) dated 28.06.2017. Whereas, 'unmanufactured tobacco (other than tobacco leaves)' attract 14% (CGST) and 14% (SGST) or 18% (IGST) under S. No. 13 of Schedule-IV of the said Notification - All the three categories which are covered as 'Tobacco Leaves' in S.NO. 109 of Schedule-1 of Notification No. 1/2017 - Central Tax (Rate) dated 28.06.2017 as per CBEC Circular F.No. 332/2/2017-TRU dated December 2017, covers only those Tobacco Leaves which have not undergone any processing like curing, fermentation etc. Since the goods proposed to be supplied by the applicant are admittedly undergone curing by Sun-dry/ Air-dry processes, the same cannot be called 'Tobacco Leaves' and would be covered as ‘unmanufactured tobacco (other than tobacco leaves)'. Circular No. 81/5/87 - CX-3 dated 23.06.1987 issued by the Ministry of Finance - Held that: - the same is regarding classification of unmanufactured tobacco merely broken by beating and then sieved and packed for consumption as chewing tobacco (Zarda) and it was clarified that the same should be classifiable as unmanufactured tobacco under heading 2401. Hence, the same is not applicable in the present case. Circular No. 143/12/2011-ST dated 26.05.2011 - Held that: - the same is regarding levy of Service Tax on certain processes in relation to agriculture and hence, the same is not applicable in the present case. N/N. 12/2017 Central Tax (Rate) dated 28.06.2017 - Held that: - the notification pertains to levy of GST on certain processes related to agriculture. Hence, the same is not applicable in the present case. Ruling:- 'Dried Tobacco Leaves' which have undergone the process of curing after harvesting of tobacco leaves are 'unmanufactured tobacco' covered in HSN Code 2401 - However, they are not covered under S. No. 109 of Schedule-1 of Notification No. 1/2017- Central Tax (Rate) dated 28.06.2017 @ 2.5% (CGST) + 2.5% (SGST) or 5% (IGST), but the same are covered under S. No. 13 of Schedule- IV of the said Notification as 'unmanufactured Tobacco (Other than Tobacco Leaves)' @ 14% (CGST) + 14% (SGST) or 28% (IGST).
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2018 (5) TMI 528
Classification of the PVC floor mat - applicable rate of GST - whether classified under CTH 5705 or otherwise? - Manufacturing at two stages - Stage I being PVC Monofilament production and carpet piling process and stage 2 being Web-lamination and backing process. The prime raw material being used for the aforesaid product is PVC (Poly Vinyl Chloride). - Whether to be termed as ‘textile’ or ‘textile material’ as defined in dictionary. Held that: - PVC falls in Chapter 39, more specifically Heading 39.04, The impugned product is nonwoven and is impregnated with liquid PVC. We have seen above that the Chapter 39 covers substances called polymers and semi-manufactures and articles thereof, provided they are not excluded by Note 2 to the Chapter. The Note 2 reproduced above excludes goods of Section Xl and Section XI excludes nonwovens, impregnated, coated, covered or laminated with plastics, or articles thereof, of Chapter 39. The impugned product is not only impregnated but also coated with PVC, which is a plastics of Chapter 39. - The present product is made from PVC only and there should be no doubt whatsoever that the same would fall in Chapter 39 which covers PVC, a polymer and articles thereof. Having seen thus, there arises no occasion for us to discuss the Heading 5705 which is claimed as being applicable. The case laws being buttressed in respect of the applicability of the Heading 5705 also need no discussion as to their applicability or otherwise. However, we would like to observe herein that we are not at all disagreeable to the point that there are man-made textiles but the same are not required to be referred to here in view of the impugned product being clearly classifiable under Chapter 39 as per discussions held hereinabove. The Heading 3918 covers floor coverings of plastics, whether or not self-adhesive, in rolls or in the form of tiles - the applicant informs that the manufactured product is a product of running length which is then cut into size as given/ specified by the customer. The product is described as being a PVC Carpet Mat and therefore, it is clear that the impugned product would fall in the entry no.104A of Schedule Ill, thereby attracting tax at the rate of 18% (9% each of CGST and SGST). Ruling:- PVC floor mat, as described hereinabove, would fall in the Customs Tariff Heading 3918 and the applicable rate of GST theron would be 18% (9% each of CGST and SGST).
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2018 (5) TMI 527
Seizure of goods with vehicle - post GST implementation - at the time of interception the goods were not accompanied with E-way bill-01 - contention of the petitioner is that the State authority has no jurisdiction to prescribe any documentation in respect of transaction which is covered under IGST Act - Held that: - The issue came up for consideration before Kerala, Madras and Telangana and Andhra Pradesh High Courts which have categorically held that the State Legislature or the State Government has no power to make law/rules to govern interstate movement of goods and cannot even detain a consignment for not carrying documents prescribed by them for transporting goods in the course of interstate trade. E-way bill system has been prescribed only recently by a notification of the Government of India dated 7th March 2018 whereby Rule 138 of the C.G.S.T. Rules 2017 has been amended and other Rules have been incorporated in this regard. These amendments are to come into force from a date to be specified by the Central Government - the fact of the matter is that on the date of incident i.e. 17.12.2017 neither there was any E-way Bill System nor any notification by the Central Government under Rule 138 of the C.G.S.T. Rules 2017 requiring the carrying of a T.D.F. Form or any other such document in the course of inter-State supply/movement of goods, as such, the very basis for passing the impugned orders and taking action against the petitioner as impugned herein is apparently erroneous and illegal. On the relevant date i.e. 17.12.2017 there was no requirement of carrying T.D.F. Form-1 in the case of an inter-State supply of goods. In fact on the relevant date there was no prescription of the documents to be carried in this regard under Rule 138 of the C.G.S.T. Act 2017, accordingly, the seizure and penalty imposed upon the petitioners based on the notification dated 21.7.2017 issued under Rule 138 of the U.P.G.S.T. Act 2017, which was not applicable, is clearly illegal. Validity of notifications - We are faced with two judgments given by the Coordinate Benches of this Court with diametrically opposite conclusions:- a) the earlier judgment in U.P. Kar Adhivakta Sangathan [2018 (5) TMI 460 - ALLAHABAD HIGH COURT] has affirmed the notification dated 21.07.2017 issued by the State of U.P.; b) the judgment dated 13.04.2018 in Satyendra Goods Transport Corporation [2018 (4) TMI 807 - ALLAHABAD HIGH COURT], while not invalidating the notification, has effectively held that the seizure and penalty imposed upon the petitioner based on the notification dated 21.07.2017 issued under Rules 138 of the U.P. GST Rules was illegal. While one judgment seems to have not considered relevant statutory provisions, the other judgment seems to have overlooked the earlier judgment which may, otherwise, have constituted binding precedent. In such situation, it may be said that the doctrine of per incuriam applies to both judgments, though in different contexts - it would not be appropriate for us to comment on the correctness of either of the two judgments delivered by co-ordinate Benches of this Court or embark on a third independent course of our own. Judicial propriety requires us to refer the matter to a larger Bench for an affirmative pronouncement on the validity of the notification dated 21.07.2017 and the Circulars issued there-under. The goods and the vehicle are both lying seized since they were first detained by Mobil Squad Officials. In the interest of justice, we provide that the goods and the vehicle shall stand released forthwith upon the petitioner furnishing an indemnity bond for the value of the tax and penalty levied by the authorities as confirmed by the order of the first appellate authority dated 14.12.2017 - Let the papers be placed by the Registry before the Hon'ble the Chief Justice for nomination/constitution of an appropriate larger Bench for reference of the matter as mentioned.
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2018 (5) TMI 526
Detention of goods with vehicle - E-Way Bill No.01 not available - Held that: - respondent no.2-Assistant Commissioner, Commercial Tax, Mobile Squad--XI, Kanpur, U.P. is directed to appear before the Court on 13.04.2018 to explain as to under which authority of law he intercepted the vehicle and passed the seizure order despite E-Way Bill No.01 was generated and produced - respondents are directed to release the seized goods and vehicle forthwith - petition allowed.
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2018 (5) TMI 525
Delay in grant of registration under GST Statutes - mistake in providing the PAN number of another firm for the purpose of obtaining registration - grievance of the petitioner is that since the GST statutes came into being from 01.07.2017, the petitioner is unable to comply with the statutory requirements in relation to the business for the period from 01.07.2017 to 12.08.2017 - Held that: - To err is human - it is obligatory for the respondents concerned to make appropriate provisions to tackle issues of the instant nature as well, so as to enable persons like the petitioner to comply with the statutory requirements from the date of introduction of the GST statutes - fourth respondent is directed to provide registration to the petitioner under the GST statutes with effect from 01.07.2017 - petition allowed.
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2018 (5) TMI 524
Non-disclosure of information - The Complainant reiterated the contents of his RTI application and stated that complete and satisfactory information had not been provided to him - Held that: - The Commission observed that a voluntary disclosure of all information that ought to be displayed in the public domain should be the rule and members of public who having to seek information should be an exception. An open government, which is the cherished objective of the RTI Act, can be realised only if all public offices comply with proactive disclosure norms. The Commission directs the Respondent to furnish the broad details of income and expenditure to the Complainant within a period of 15 days from the date of receipt of this order. Complaint disposed off.
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Income Tax
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2018 (5) TMI 517
Maintainability of appeal - petition barred by limitation - Held that:- Petitioner's right conferred under the provisions of the Act to file an appeal should not be foreclosed on technicalities. To avoid all technical objections being raised and to secure the interest of revenue, this court is inclined to issue the appropriate directions. 9. In the result, the writ petition is disposed of by directing the petitioner to file a proper appeal petition before the Commissioner of Income Tax(Appeals) in respect of the assessment for the year 2015-16, within a period of ten days from the date of receipt of a copy of this order. The petitioner is also entitled to file a stay petition in the said appeal. On receipt of the appeal petition, the Commissioner of Income Tax(Appeals), Coimbatore is directed to entertain the appeal without rejecting the same on the ground of limitation and hear the appeal
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2018 (5) TMI 516
Depreciation on Wind Mills already adjusted against the profits of Printing Business artificially carried forward for the impugned assessment year for the purpose of denial of relief u/s 80IA - Held that:- In the assessee's own case, for the earlier assessment year, an identical issue was considered [2016 (7) TMI 1232 - MADRAS HIGH COURT] as relying on decision in Velayudhaswamy Spinning Mills (P) [2010 (3) TMI 860 - Madras High Court] Tribunal has not erred in holding that there was no rectification possible under Section 80-I in the present case, albeit, for reasons somewhat different from those which prevailed with the Tribunal. There being no carry forward of allowable deductions under the head depreciation or development rebate which needed to be absorbed against the income of the current year and, therefore, recomputation of income for the purpose of computing permissible deduction under section 80-I for the new industrial undertaking was not required in the present case. - Decided in favour of assessee
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2018 (5) TMI 515
Transfer pricing addition - comparable selection criteria - functional similarity - Held that:- Assessee was engaged in the business of labor assisted assembly process of semi-conductor devices of different types which were mainly used in general power management applications. Semi-conductor manufacturing involved two phases of production-Wafer Fabrication and Assembly. The assessee was primarily an assembler of semi-conductor devices such as rectifiers, discrete and modules which were essentially low technology activity involving manual labor operations. Thus companies functionally dissimilar with that of assessee need to be deselected from final list.
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2018 (5) TMI 514
TPA - adjustment on account of Fixed Assets - Held that:- We find that the assessee has benchmarked the same at cost which has been accepted by the revenue and Ld. DRP, after appreciating the evidences submitted by the assessee has deleted this adjustment altogether. It has been submitted before us that no appeal against the same has been filed by the revenue and therefore, the matter has already attained finality. Adjustment on account of Sales Support Services - prime grievance of the assessee revolves around method of cost allocation between trading activity and sales support services - Held that:- Assessee, vide its letter dated 18/10/2010 made several submissions to contest the adjustment under this head. The said submissions, in our opinion, are vital to adjudication of this issue since these submissions, besides pointing out certain errors in the computations made by Ld. TPO, contain alternative submissions as to cost allocation and determination of ALP of these transactions. The said submissions have altogether been ignored by Ld. TPO as well as Ld. DRP, since the same, prima facie, has been submitted by the assessee after passing-off of the order by Ld. TPO - remit this matter back to the file of Ld. AO / TPO for due consideration and re-adjudication Use of multiple year data - Held that:- No force in the same since it is settled proposition and also in terms of Rule-10B(4), single year data of impugned AY has to be given preference to benchmark the transactions as against data of earlier years. This ground raised in all the three years fails.
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2018 (5) TMI 513
Revision u/s 263 - nature of subsidy received - Held that:- While adjudicating the nature of subsidy received by the assessee whether it is capital/Revenue in nature. AO shall follow the ratio decidendi laid by the Hon’ble Jurisdictional High Court in the case of Rasoi Limited (2011 (5) TMI 23 - CALCUTTA HIGH COURT) in case if the facts and law are identical. AO to give effect to the order of the CIT in respect of both the issues after hearing the assessee and pass a speaking order. We dismiss the present appeal of the assessee and do not comment on the order of the Principal CIT U/s 263 of the Act, for which the assessee is in appeal before us.
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2018 (5) TMI 512
Valuation of the closing stock - cost of market price adoption - Held that:- AO has gone ahead with arriving the value of closing stock by adopting the cost of market price whichever is lower by adopting the gross profit rate 15% which is incorrect. The assessee has furnished the reconciliation of stocks found at the time of survey and the actual stock difference was 0.036 gms in respect of gold and 0.027 gms. in respect of silver and with regard to the cloth business, it was ₹ 1,31,403/-. Considering the deficiencies found during the course of survey and the explanation offered by the assessee at the time of hearing and the fact that the AO did not make out a case for excess stock of ₹ 28.26 lakhs with the quantitative differences, we hold that the additional income admitted by the assessee amounting to ₹ 20,00,000/- in respect of stock difference is reasonable and accordingly we confirm the addition of ₹ 20,00,000/- and delete the balance. The appeal of the assessee on this ground is partly allowed. Addition of unsecured creditors - Held that:- We have verified the creditors confirmation letters received by the AO subsequently and the same required to be considered. Therefore, we are of the view that in the interest of justice, the issue should be remitted back to the file of the AO to decide the issue afresh on merits. We direct the AO to verify the confirmations and decide the issue afresh on merits. The assessee’s appeal on this ground is partly allowed.
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2018 (5) TMI 511
Provision for bad and doubtful debts u/s 36(1)(vii)(a) - Held that:- The provisions are not allowable deduction and only the expenditure actually incurred or ascertained as per the system of accounting is the allowable expenditure except the provision for Bad and doubtful debts discussed above. The above classification of the provision clearly shows that it was purely general and contingent in nature. There is no indication of non-recoverability of the debt. Therefore the provision for standard assets cannot be equated with the Provision for bad and doubtful debt and the assessee’s argument that only the nomenclature is different is unacceptable. The provision is required only to meet the unexpected eventuality in the interest of the banking, but it is neither an allowable expenditure nor an ascertained liability. We hold that the provision for standard assets is not an allowable deduction and we set a side the order of the Ld.CIT(A) and restore the order of the AO. The appeal of the revenue is allowed on this ground. Provision made against the standard assets u/s 36(1)(viia) under the head ‘provision for bad and doubtful debts’ - Held that:- The assessee made the provision for bad and doubtful debts in aggregate of ₹ 6,12,89,928/- which includes provision made against standard assets amounting to ₹ 69,37,085/-. This issue was discussed in the earlier order for the assessment year 2010- 11 and confirmed the addition made by the AO allowed the appeal of the revenue. The issue in favour of revenue and against the assessee. Revenue’s appeal on this ground is allowed. Writing back of excess provision of bad and doubtful debts against non-rural advances - Held that:- There is no dispute with regard to the creation of provision for bad and doubtful debts and no dispute with regard to the fact that the assessee bank has rural branches and given rural advances. CIT(A) is squarely applicable to the assessee, hence, we do not see any reason to interfere with the order of the CIT(A). There was a mistake in CIT(A) as discussed in this order earlier which needs verification. The Ld.CIT(A) has directed the AO to verify the provision made in the books of accounts and if it is found any excess provision the same should be brought to tax. Allow the correct deduction for the relevant assessment years and excess if any claimed by the assessee may be disallowed. Accordingly, the issue is remitted back to the file of the AO to work out the correct disallowance as per the directions given in this order. The appeal of the assessee on this ground is allowed for statistical purpose.
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2018 (5) TMI 510
Estimation of income from the business of IMFL - 10% OR 5% - Held that:- The coordinate bench of the Tribunal in the case of Tangudu Jogisetty (2016 (7) TMI 379 - ITAT VISAKHAPATNAM) has considered the profit level in the line of business and decided that 5% of purchase price is reasonable profit margin in the line of IMFL business and directed the A.O. to re-compute the profit of the assessee. Thus we direct the A.O. to re-compute the income of the assessee at 5% of purchase price. This ground of appeal raised by the assessee is allowed. Addition on account of unproved creditors - Held that:- Addition includes the source consisting of sundry creditors and the unsecured loans. While the sundry creditors and the unsecured loans are the source for investment, the investment made by the assessee is application of funds. AO has not brought on record any asset or expenditure over and above the total investments outstanding of ₹ 18,00,288/- as at the end of the year. The addition representing unsecured creditors and the unsecured loans amounts to taxing the same source twice which amounts to double addition. Therefore we find merit in the argument of the AR that having brought the investment to tax, the liabilities representing the investments should not be treated as income once again. The unsecured loans and the unsecured creditors required to be given telescopic benefit from the addition made on account of investments. We set aside the orders of the lower authorities and delete the addition. - Decided in favour of assessee.
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2018 (5) TMI 509
Disallowance u/s 14A - Held that:- No disallowance is called for u/s 14A in the absence of exempt income. Accordingly, we confirm the order of the Ld.CIT(A) and dismiss the appeal of the revenue. See case of M/s Rashtriya Ispat Nigam Ltd., Visakhapatnam [2017 (12) TMI 182 - ITAT VISAKHAPATNAM]
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2018 (5) TMI 508
Advances written off by the assessee - business loss allowability - Held that:- FAA held that same could be allowed as per provisions of section 28 of the Act i.e. as a business loss and that the assessee had not produced sufficient evidence to support the claim. As gone through the details available on pages 173,180-181 of the Paper book. The nature of the advances clearly prove that the assessee had advanced certain amounts for business purposes only. Advances to the employees or advances made for cylinders have to be held to made for carrying out business of the assessee. As far as genuineness of the expenditure is concerned,we find that the AO and FAA have not held that sums were not advanced. The expenses were of revenue nature. As there was direct and intimate relation between the advances made and the business of the assessee,same has to be allowed as regular business expenditure u/s.37 of the Act. It can also be allowed as business loss as per section 28.In short, advances written off cannot be disallowed in any manner.- Decided in favour of assessee.
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2018 (5) TMI 507
TPA - AMP expenditure - Held that:- As gone through the agreements entered in to by the AE's with the assessee, that in the agreements there is no condition about sharing of AMP, that the agreements talks of using best efforts to market and distribute the product or promote the products in a commercially reasonable manner. In our opinion, these terms do not give any indication that the AE and the assessee had to share AMP expenses. If the AE was benefitted indirectly by the AMP expenditure incurred by the assessee, it cannot be held that it had entered into agreement for sharing AMP expenses. Bright Line Method should not have been applied by the TPO. Thus First of all the issue before us is not an assessee that is engaged in distribution and manufacturing of certain goods, so the question of slicing of expense in two portions would not arise. The other part of the argument that matter should be restored back to the file of the AO/TPO as they were following the order of LG [2013 (6) TMI 217 - ITAT DELHI] and did not have benefit of later judgments of the Hon’ble High Court, we would like to mention that matter can be restored back in certain conditions only. Restoration of matters to the AO's is not a tool to give one more opportunity of hearing to the litigants. It is not advisable to prolong the judicial proceedings in the name of fair play. It is not a case where new evidences have been placed on record by the assessee, that were not made available to the AO at the time of original assessment. It is not also a matter wherein some ground of appeal has remained un-adjudicated. There is violation of principles of natural justice. So, we hold that it is not a fit case to be sent back to the TPO for fresh adjudication - Decided in favour of assessee. Depreciation on plant and machinery and building to be allowed as relying on assessee's own case[2015 (12) TMI 1673 - ITAT MUMBAI] Disallowance of payment made to doctors(Convention Expenses) - Held that:- The Hon’ble Delhi High Court in the case of MAX Hospital, Pitampura (2014 (1) TMI 1829 - DELHI HIGH COURT) has clearly held that MCI could issue guide lines for the Doctors only and that the MCI in its affidavit admitted that it has ‘no jurisdiction’ to pass any order against the ‘Petitioner hospital’. Ethics Committee of MCI is authorised to pass some order about the infrastructure of any hospital. But, as far as corporate entities are concerned MCI cannot issue any guide lines. Therefore, we are not dealing with the issue as to from which AY. the guide lines would be applicable. We would also like to hold that distribution of free samples cannot be treated as violation of Expl. 1 to section 37(1). Additional ground of appeal - allowing consequential depreciation on non compete fee - as argued that while deciding the appeal for the AY. 2002- 03, the Tribunal had directed the AO to allow depreciation on payment made for non compete fee treating the same as capital expenditure. Following the above order of the Tribunal, we allow the additional ground raised by the assessee. Non upholding the adjustment based on BLT on the premises that it was not the most appropriate method - Held that:- While deciding the appeal filed by the assessee, we have held that AMP expenses was not an International transaction. Therefore, the issue of applying BLT as the MAM would not arise. Tribunal had taken the same view while deciding the appeal for the AY. 2010-11. Accordingly, we decide the effective ground of appeal, raised by the AO, against him.
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2018 (5) TMI 506
Revision u/s 263 - claim of deduction u/s 80IA(4) - Held that:- We uphold the contentions of the assessee that order passed u/s 263 of the Act for A.Y.2009-10, 2010-11 and 2011-12 are bad in law as no incriminating material relatable to the claim of deduction u/s 80IA(4) was found during the course of search and as the assessments have not abated and are completed assessments. The Hon’ble Madras High Court in the case of M/s Tamilnadu Petro Products Ltd. Vs ACIT [2010 (11) TMI 645 - MADRAS HIGH COURT] allowed deduction u/s 80IA where the facility was one of captive consumption. Thus even if the facility was for captive use, deduction u/s 80IA(4) cannot be denied. Thus we hold that, on merits the assessee is entitled to claim deduction u/s 80IA of the Act. Hence we find the orders of the ld. Pr.CIT passed u/s 263 not sustainable on facts as well as in law. Thus we hold that the order of the AO in all the four assessment years 2009-10 to 2012-13, are not erroneous or prejudicial to the interest of the revenue warranting revision by the ld. Pr. CIT u/s 263 of the Act. Hence, we cancel the orders passed by the ld. Pr. CIT u/s 263 of the Act and allow all these four appeals of the assessee.
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2018 (5) TMI 505
Disallowance u/s 14A - proportionate interest expenditure u/s 8D(2)(ii) of the Income Tax Rules - Held that:- It has come on record that the ld. Coordinate Bench in assessee’s own case has held that such a disallowance is to be made on “netting “ formula. The assessee has already disallowed entire net interest expenditure of ₹ 13,59,442/- on the very lines. The said co-ordinate bench further concludes regarding administrative expenditure that the same would be exigible to disallowance if only claimed as deduction and not otherwise. Learned DR is unable to refer to any material indicating such expenditure actually claimed as incurred. We therefore adopt judicial consistency in the impugned assessment year as well to confirm the CIT(A)’s findings under challenge. - Decided in favour of assessee
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2018 (5) TMI 504
Assessment of income - disregarding the loss worked-out by special auditor (appointed by Income Tax Department)- Held that:- In the assessment year under appeal, when special auditor determined the income of assessee at loss, A.O. differed with it and taken tentative figure of profit shown in the return of income. The A.O, therefore, cannot take different view in assessment year under appeal. It is the duty of the Revenue Authorities to work-out correct taxable income of the assessee. The special auditor was appointed by the A.O. and as such, its report is binding on the A.O. Therefore, the A.O. should have adopted the base figure of loss to work-out the taxable income of assessee.The Ld. CIT(A) being an Appellate Authority has correctly came to the conclusion that loss determined by the special auditor appointed by the Department shall have to be accepted by the A.O. as against tentative figure given by the assessee. No infirmity have been pointed out in the order of the Ld. CIT(A). - Decided against revenue Addition u/s 40(a)(ia) - tax was not deducted at source before the close of the relevant financial year - Held that:- CIT(A) merely deleted the addition because of the amendment in Section 40(a)(ia) of the I.T. Act without considering the issue on merit and even without considering the findings of the A.O. that assessee admitted that there was a default for TDS on the payment of ₹ 12,41,447/-. Even for other deposits of TDS, no details have been brought on record as to when tax was deducted and deposited. The matter, therefore, requires reconsideration at the level of the Ld. CIT(A). We, accordingly, set aside the order of the Ld. CIT(A) and restore this issue to his file with a direction to redecide this issue in accordance with law, by giving reasons for decision on merit in the appellate order, by giving reasonable, sufficient opportunity of being heard to the assessee. - Decided in favour of revenue for statistical purposes. Addition made on account of interest earned on earmarked funds - treatment given to liability for earmarked funds being treated as income of the assessee - Held that:- in earlier year, C & AG of India has directed that interest earned during the year on unspent earmarked fund should be credited to the same earmarked fund. Assessee is bound to follow the directions of C & AG of India. The assessee, therefore, correctly taken the interest to such fund and rightly contended that it has no authority to use, expend or utilise the interest earned for its own purposes. Therefore, when interest on earmarked fund is not related to the assessee and shall have to be spent for specific purpose, it could not be treated as income of the assessee. The Ld. CIT(A), correctly, deleted the addition - Decided in favour of assessee Disallowance under section 14A - calculated expenses u/s 14A by the special auditor were made exclusively for the income which does not form part of the total income under this Act - Held that:- No merit in this ground of appeal of the Revenue. The special auditor was appointed by the Income Tax Department who has reported that though assessee has made investments in shares of various companies, but, no dividend is received on such investments. It is, therefore, clear that no dividend income have been received or earned by the assessee. No other fact brought on record against the assessee. In the case of Cheminvest Ltd [2015 (9) TMI 238 - DELHI HIGH COURT] held that “no disallowance be made under section 14A when no exempt income is received or receivable”. Since, assessee did not earn any exempt income in assessment year under appeal, therefore, no disallowance is permissible. - Decided in favour of assessee
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2018 (5) TMI 503
Transfer of shares without adequate consideration - Addition made on account of excess share premium u/s. 56 - method adopted for determining the value of the shares - non following rule of consistency for the year under appeal - Held that:- AO cannot adopt a method of his choice. In the case under consideration the whole controversy has arisen because of the AO has rejected the method adopted by the assessee. Considering the ratio of Taparia Tools (2015 (3) TMI 853 - SUPREME COURT), we hold that the AO had ‘tampered’ with the provisions of the Act. Section 56 allows the assessee to adopt one of the methods of their choice. But, the AO held that the assessee should have adopted only one method for determining the value of the shares. In our opinion, it was beyond the jurisdiction of the AO to insist upon a particular system, especially the Act allows to choose one of the two methods. Until and unless the legislature amends the provision of the Act and prescribes only one method for valuation of the shares, the assessees are free to adopt any one of the methods. Therefore, in our opinion the order of the FAA does not suffer from any factual or legal infirmity. As in the earlier assessment year, the AO had, while completing scrutiny assessment, accepted the valuation of same shares at ₹ 25, 500/-. But, during the year under appeal why did he not follow the earlier year’s order is not known. As per the basic principles of taxation, the AO's are not governed by the principles of res judicata and every assessment is a fresh assessment. But, it is also equally accepted that the AO's should not deviate from the earlier years’ decisions without assigning any concrete and justifiable reasons. Tax determination cannot be left to whims and fancies of a person. Thus AO should have given some reasons for not accepting the valuation for the year under consideration whereas for the earlier year he had accepted the valuation. It is a clear violation of principle of consistency. - Decided in favour of assessee Expenditure incurred for maintaining corporate entity - Disallowance as business expenses - as per AO assessee had not carried out any business activity for the year under appeal - Held that:- While making the disallowance he forgot the basic fact that assessee is a corporate entity. For maintaining the corporate status assessee has two incur certain expenditure and same could not be disallowed in absence of earning profit in a particular year. There is no doubt that the assessee is a corporate entity. Even if it is not carrying on any business activity it has to incur some expenditure to keep up its corporate entity. Therefore expenditure incurred by it has to be allowed. See Preimus Investment And Finance Ltd [2015 (6) TMI 756 - ITAT MUMBAI] - Decided in favour of assessee
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2018 (5) TMI 502
Addition made on share premium u/s.68 - satisfactory explaination - nature of share premium - Justification of the excess premium received compared to its intrinsic value - Held that:- Revenue has already accepted the share capital to the tune of face value of equity shares amounting to ₹ 4.19 crores raised by the assessee from these two non-resident holding companies during the year as no additions were made, wherein by implication ingredients of Section 68 were deem to have been fulfilled and even ECB to the tune of ₹ 7.50 crore raised by the assessee from Asia Compound Limited, Hongkong during the impugned assessment year was accepted by Revenue and ingredients of Section 68 was accepted to be fulfilled by the assessee as no addition has been made by Revenue. The incriminating information used by the AO to discredit the valuation of ₹ 20 per equity shares arrived at by assessee using DCF method is based on perverse finding of facts recorded by the AO, which findings of the AO are already rejected by us. We have no hesitation in confirming/sustaining well reasoned appellate order of CIT(A) keeping in view factual matrix of the case and hence no addition is warranted towards share premium of ₹ 4,18,65,830/- received by the assessee from its holding companies namely Asian Compounds Limited, Hongkong and Finproject Asia Limited, Hongkong, who are non resident entities as the said share premium is on account capital transaction and is not an income within charging Sections of the 1961 Act. So far as deeming fiction of Section 68 is concerned, there is no reliable incriminating finding of fact available on record justifying our interference to the well reasoned order of learned CIT(A) which we sustain. Thus, the appellate order of learned CIT(A) stood confirmed. Revenue fails in this appeal which stood dismissed. - Decided against revenue.
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2018 (5) TMI 501
Revision u/s 263 - non discussion of the issues - Payment to SCPL, Loss on account of exchange fluctuation, Reimbursement of travelling expenses not claimed by the assessee and Gifts received by the assessee from his father - Held that:- Order was passed by the AO under section 143(3) of the Act after conducting necessary enquiries and considering the submission filed by the assessee during the assessment proceedings. It is undisputed fact that the order the AO was nonspeaking and returned income was accepted under the assessment proceedings but in our considered view non discussion of the issues in the assessment order cannot render the order as erroneous and prejudicial to the interest of Revenue on account of non-verification of the issues. On perusal of order sheet entries maintained by the CIT u/s 263 of the Act it was revealed that the necessary details were called for by the Ld CIT which were duly filed by the assessee. Thereafter the order was passed by the Ld CIT u/s 263 holding the order of the AO as erroneous in so far prejudicial to the interest of the revenue in respect of the aforesaid items. The copies of the order sheet entries is available on record. From the order sheet of the Ld CIT we note that that is no allegation that order of the AO in respect of the aforesaid items is erroneous in so far prejudicial to the interest of Revenue. Consequently it can be inferred that the order of the AO has been held as erroneous in so far prejudicial to the interest of Revenue in respect of the aforesaid items without giving portability to the assessee. Therefore in such circumstances we are of the view that the Ld CIT has exceeded his jurisdiction u/s 263 - Decided in favour of assessee
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2018 (5) TMI 500
Addition made for salary, wages and bonus - AO treated the entire expenditure as incurred in connection with the agricultural income only - Held that:- In the absence of the information we are of the view that all the expenses incurred by the assessee cannot be treated as business expenses. Therefore case the justice shall be served if the disallowance made by the AO is restricted to the reasonable extent. Hence, in the interest of justice & fair play we are inclined to restrict the disallowance of the expenses to the tune of 50% of the expenses claimed by the assessee. We restrict the disallowance to the extent of 50% of the expenditure as discussed above. Accordingly, AO is directed. Thus, the part ground regarding salary, wage & bonus of appeal of assessee is partly allowed. Disallowance of miscellaneous expenditure - CIT- A reduced the disallowances to the extent of 50% of the miscellaneous expenses - Held that:- Disallowances made by the AO and subsequently party confirmed by the learned CIT(A) has been made without the application of mind. We also note that the disallowances of the expenses cannot exceed the amount of actual expenses claimed by the assessee. Therefore we are of the view no disallowance on account of Misc. expenditure in the given facts and circumstance is warranted. On questioned to the ld. DR, he failed to bring any satisfactorily reply. No hesitation to reverse the order of authorities below. Accordingly AO is directed. Hence the ground of appeal of the assessee is allowed. Agricultural income - CIT(A) reducing the agricultural income to ₹ 2.40 lakh instead of ₹ 16,68,430/- - Held that:- We find from the order of the Ld. CIT(A), it is clear that the assessee has earned agricultural income from its agricultural land but the same was quantified at ₹ 20,000 per acre only. However, on perusal of the order of Ld CIT(A) we note that the basis of ₹ 20,000 per acre has not been substantiated by the Ld CIT(A) on the basis of documentary evidences produced by assessee. The assessee before the CIT-A submitted that some of the buyers of agriculture appeared before the AO and accepted to have purchased the agricultural products from the assessee. But the buyers failed to furnish the books of accounts. However, we find that the submissions made by the assessee have not been adjudicated by the Ld CIT(A) during the appellate proceedings. Addition to be deleted Enhancing the income on account of negative cash balance - Held that:- The undisputed fact of the case is that the issue of negative cash balance as observed by the AO during the remand proceedings was not there during the original assessment proceedings. The matter was remanded by the Ld CIT(A) to the AO for his comments on the specific issue but the AO exceeded his jurisdiction by examining the fresh issue which was not subject matter of the remand report. As relying on CIT vs. Indo-Aden Salt Works Company [1958 (10) TMI 29 - Bombay High Court] AO cannot take up the fresh issue in the remand proceedings. Thus we are inclined to reverse the order of authorities below. Accordingly, AO is directed. Hence, the ground of appeal of the assessee is allowed. Addition on account liability and provision respectively - Held that:- Receipt by the assessee was supported on the basis of assessment order and audited financial statements of CSIPL. The AO has also not disputed the aforesaid facts in his remand report but commented that CSIPL is not traceable at the given address. After considering the facts in totality we are of the view that the addition made by the AO cannot be sustained merely on the ground that the party is not traceable. The Revenue has not brought any defect in the submissions and details filed before the AO during the remand proceedings. Similarly we note that the provision for income tax is arising from the earlier years therefore no addition for the same can be made for the year under consideration. - Decided in favour of assessee Addition on account of secure loan - admission of additional evidence - Held that:- The identity, credit worthiness and genuineness of the transactions was established beyond doubt therefore no additions on account of unexplained cash credit as specified under section 68 can be made in the given facts and circumstances.1 We also note that there is no adverse comment by the AO regarding the transactions of loan through banking Channel.CIT-A adjudicated the issue after calling for the remand report from the AO and considering the submission of the assessee made during the remand proceedings. It cannot be said that the ld. CIT(A) has admitted the additional evidence - Decided against revenue
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2018 (5) TMI 499
Addition of staff welfare expenses - expenses are supported with the self-made vouchers and the details of payee are not mentioned - CIT-A deleted addition observing that the accounts of assessee was duly audited and the amount of such expenses claimed by assessee are reasonable in comparison the volume of the business of assessee - Held that:- There is no allegation from the Assessing Officer that the expenses claimed by assessee are unreasonable. We also observe that external documents in such kind of expenses are not normally available. We uphold the order of CIT(A) and this ground of Revenue is dismissed. Addition on account of foreign travel expenses - as per revenue assessee failed to provide the documentary evidence such as, air tickets, boarding passes of travelling expenses, purpose of visit, place of visit and persons with whom assessee met during his visit - Held that:- We note that assessee has furnished all details of bills in respect of foreign travel expenses, purpose of such visit, place of visit etc., which have been duly filed in the paper book filed before us. AO during the course of assessment proceedings has not brought anything on record pointing out any defect in such documents. In this regard, DR has also not brought anything on record contrary to the finding of Ld. CIT(A). - Decided against revenue Addition under the provision of Section 14A r.w.r 8D - sufficiency of own funds - Held that:- There is no ambiguity with regard to own fund available with the assessee. In such facts and circumstances a presumption can be drawn that investment has been made out of own fund of assessee. Therefore no disallowance on account of interest expense should be made under Rule 8D(2)(ii) of IT Rules. See Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT] - no disallowance of interest expense claimed by the assessee can be made under the provision of Section14A of the Act r.w.r. 8D - Decided in favour of assessee Addition on account of contribution to the employees P.F. - assessee failed to deposit the employee’s contribution within the due date specified under the Provident Fund Act - Held that:- From the assessment order we find that all the payment of employees contribution were made before the due date of filing of Income Tax Return as specified u/s 139(1) of the Act. Now, this issue stands covered in favour of assessee and against the Revenue by the decision in the case of CIT v. M/s Vijay Shree Limited [2011 (9) TMI 30 - CALCUTTA HIGH COURT] as held deletion of the amount paid by the Employees' Contribution beyond due date was deductible by invoking the aforesaid amended provisions of Section 43(B) of the Act - Decided in favour of assessee. Non deduction of tax deducted at source (TDS) u/s. 195 w.r.t.194A - payment on account of interest to certain parties based outside India have been made without deducting TDS u/s 195 - Held that:- Assessing Officer misunderstood the certificate issued in Form 15CA. As per Form 15CA the assessee was not liable for the deduction of TDS on the expense of interest. The AO has not brought anything on record suggesting that assessee has incurred expenses without the deduction of TDS as per the provision of the Act. The AO has just relied on the Form 15CA/15CB issued by the CA and treated the assessee in default. As such, in our considered view the basis of disallowance of interest expenses made by AO does not hold good - Decided in favour of assessee Non deduction of TDS u/s. 194J - Held that:- Interest include the service fee charge by the bank in respect of money borrowed. Therefore, the impugned processing fee will be treated as payment to the bank in the nature of interest expense. As per the Section 194A of the Act there is no liability to deduct the TDS on the interest payment made to banking company to which the Banking Regulation Act, 1949 applies. A plain look at the above statutory provision makes it clear that assessee was not under obligation to deduct the TDS on account of loan processing charges paid to the bank. We find no reason to interfere with the finding arrived by the Ld. CIT(A). Decided in favour of assessee
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2018 (5) TMI 498
MAT - computing the income u/s 115JB - prior period expenses - Held that:- The reasons for disallowing the expenditure u/s 37 of the Act cannot be adopted for adding the same to the book profit u/s 115JB of the Act as the mode of computation of income under these two provisions entirely different. - We are inclined to accept the contentions of the assessee that the prior period expenses cannot be added to the book profit computed under the Companies Act for computation of income u/s 115JB of the Act. The assessee’s grounds of appeal accordingly allowed. Opening balance of the provisions for bad and doubtful debts as on 1.4.2008 - Held that:- AO has no jurisdiction to tinker with the net profit arrived at under the provisions of the Companies Act. There is also no doubt that the provision made for bad and doubtful debts has to be added back to the net profit. The bad debts written off ought to have been debited to the P&L A/c as per the provisions of the Companies A/c and thereafter the net profit is to be arrived at to which the adjustments under the Explanation (1) are to be made. Where the AO has no jurisdiction to tinker with the accounts of the assessee, likewise the AO has no authority to make an adjustment not provided under the explanation. Therefore, we see no reason to interfere with the order of the CIT (A) on this issue as the assessee has clearly debited the provision of ₹ 22.81 crores to the P&L A/c. The assessee’s ground of appeal No.4 is accordingly rejected. Addition of provision for non moving and obsolete stock on the ground that it is a provision which has to be added to the book profit for MAT computations - Held that:- The nature of the item or of expenditure cannot be determined merely by the nomenclature but the AO and the CIT (A) ought to have gone into and examined the nature of the expenditure claimed by the assessee particularly whether it has been debited to the P&L A/c. As we are satisfied that it is not a provision and has not been debited to the P&L A/c, we direct the AO to recompute the taxable income u/s 115JB of the Act without adding the provision for non moving and obsolete stock to the book profit. The assessee’s ground of appeal is accordingly allowed. Provision for leave encashment as an ascertained liability and therefore, cannot be added to the book profit. Provision for Fringe Benefit Tax is not similar to the provision for Income Tax. CBDT Circular No.8/2008 dated 29.8.2005 has clarified that the FBT is a liability of the employer and is in the nature of the expenditure laid out and expended wholly and exclusively for the purpose of business or profession of the employer and therefore, is an allowable deduction for the computation of book profit u/s 115JB of the Act
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2018 (5) TMI 497
Disallowance of the claim of deduction u/s 80IB(10) - Held that:- In the case before us, the assessee had admittedly completed four buildings i.e. G, H, I & K and has also furnished the occupancy certificate dated 29.3.2012. Therefore, the assessee is clearly eligible for deduction u/s 80IB(10) on the profits earned from these buildings. Entitlment to deduction u/s 80IB(10) on the profits from blocks F, K & L for which the assessee has not obtained the occupancy certificate from GHMC, Hyderabad as on 30.03.2013 but has already submitted an application for the same - Held that:- Where the assessee has applied for issuance of occupancy certificate and the Municipal Authorities do not refuse to issue the certificate within 21 days from the date of receipt of such application, then the occupancy certificate has to be presumed to have been issued. In the present case, the assessee has made an application on 30.03.2008 and within 21 days thereafter, the Municipal Authorities did not refuse the occupancy certificate and therefore, it is clear that the assessee’s claim has not been denied and hence has to be deemed to have been issued. It is another fact that the assessee itself made a fresh application again for issuance of completion certificate on 28.05.2013, in reply to which, the Municipal Corporation vide letter dated 13.06.2013 pointed out certain defects, which, in our opinion are not substantial and essential for considering the blocks to be incomplete. They are only peripheral works, which may be part of the housing project but are not essential. Therefore, the assessee is entitled to the deduction u/s 80IB(10) even for the Blocks of F, K and L. Denying the claim of deduction u/s 80IB is that the area in some of the flats exceeded 1500 sft. As held by the Hon'ble Madras High Court in the case of Viswas Promoters (2012 (11) TMI 1117 - MADRAS HIGH COURT), the assessee is entitled to deduction in respect of the flats which do not exceed the area of 1500 sft on pro-rata basis. The AO is accordingly directed to allow the deduction. As regards the claim of interest income, as a deduction u/s 80IB(10) of the Act, the learned Counsel for the assessee has placed reliance upon the decision in the case of CIT vs. Indo Aquatics Ltd reported in (2014 (10) TMI 974 - TELANGANA AND ANDHRA PRADESH HIGH COURT) wherein held that the interest earned on deposits for opening letters of credit is entitled to exemption and that it is an essential activity for undertaking exports as the deposit of amounts for that purpose is a condition precedent. In present case the assessee was required to keep the deposits as margin money with the Banks for completion of the project and hence is attributable to the project and the assessee is eligible for deduction u/s 80IB(10) on such interest income. The AO is accordingly directed to allow the same.- Decided in favour of assessee
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2018 (5) TMI 496
Disallowing the additional amount u/s 14A r.w.r. 8D(2)(i) on account of interest expenditure directly relating to earning the exempt income - Held that:- The investments in the subsidiary company are out of commercial expediency and made from the strategic point of view in order to gain control over the said subsidiary company and not to earn dividend. As in Max Opp Investments Ltd Vs CIT [2018 (3) TMI 805 - SUPREME COURT OF INDIA] has held that the disallowance has to be made even in case of strategic investments in the associate company. Therefore, following the ratio laid down by the apex court we uphold the order of CIT(A) . The ground raised by the assessee is dismissed. MAT computation - addition made u/s 14A - Held that:- Addition made under section 14A while computing the profit under MAT provision is squarely covered by the decision of Special Bench of the Tribunal in the case of ACIT vs. Vireet Investment (P.) Ltd [2017 (6) TMI 1124 - ITAT DELHI]wherein it has been held that computation under clause (f) of Explanation 1 to section 115JB(2) is to be made without resorting to computation as contemplated under section14A read with rule 8D of the Act. Accordingly, the ground raised by the assessee is allowed and the AO is directed to delete the addition while computing book profit under MAT Addition of interest not allowable under section 36(1)(iii) - Held that:- The advances were either transferred to the assessee company from those subsidiary which merged with the assessee w.e.f. 01.04.10 or given to subsidiary out of commercial expediency for purchase of flat are under business commitment under MOU entered into by the assessee with M/s. Smit Capital Services Pvt. Ltd. We observe that all the advances are connected with the business of the assessee and none was given for non business purposes. The case of the assessee is squarely covered by the decision of “S.A. Builders vs. CIT” (2006 (12) TMI 82 - SUPREME COURT). We are not in agreement with the findings of Ld. CIT(A) that advances were given for non business purposes and nor out of commercial consideration. Consequently, the disallowance of interest amounting affirmed by the Ld. CIT(A) cannot be sustained.
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2018 (5) TMI 495
Initiation of proceedings u/s. 153A - Held that:- Since the assessment for assessment year 2007-08 had attained finality and no incriminating material was found during search, assessment u/s.153A r.w.s. 144 is without jurisdiction. Accordingly, the impugned order is set aside and ground No. 1 raised in appeal by assessee is allowed. Addition of advance received for selling of shares - Held that:- No share transfer had taken place till the date of filing the confirmation although advance was received around 7 years back. Neither money was refunded nor shares were transferred. Moreover, confirmation filed does not include details like PAN or the other details like Bank Statement to show the creditworthiness of Mr. Deepesh Kotecha. In the circumstances, Xerox copy of confirmation is not found credible. For the appellant’s failure to furnish satisfactory evidences regarding the transaction claimed by the appellant the cash credit remains unexplained and addition made by AO to that extent is upheld. Addition of cash seized during assessment proceedings from locker - Held that:- Appellant does not maintain any cash book and there is no corroborative evidence to explain the source of cash found in the locker. It has been noted that appellant was investing in FDRs and keeping deposits in the group concerns. Only possible source of cash could be from hiring of machines. For want of cash book, it is not possible to ascertain as to what was cash left with the appellant after meeting out business and personal expenditure. Therefore no interference with the finding of AO is called for. Addition upheld.
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2018 (5) TMI 494
Deemed dividend u/s 2(22)(e) - common shareholders - Held that:- The provisions of section 2(22)(e) of the Act would not be attracted in this case as the assessee company is not a shareholder in the company M/s Dayal Steels Pvt. Ltd who had given advance to the assessee company and we note that the assessee company’s name does not figure in the list of the shareholders. Hon’ble Delhi High Court in the case of CIT vs. A.R. Magnetics Pvt. Ltd. [2012 (4) TMI 624 - DELHI HIGH COURT] wherein held that the provisions relating to deemed dividend could not be invoked merely because the shareholders were common. In this case, it is seen that the sole ground for making the addition was that Mrs Rani Chawdhari was a common shareholder in both the companies. Therefore, we are unable to concur with the findings of the Ld. CIT (A) - Decided in favour of assessee.
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2018 (5) TMI 493
Disallowance u/s 14A r.w.r. 8D - Held that:- It is the mandatory requirement u/s 14A of the Act, 1961 and Rule 8D of the Income Tax Rules, 1962 to record satisfaction, and if the satisfaction/reasons are not mentioned the question of applying Rule 8D did not arise. On the aspect of administrative expenses being disallowed since there was a failure by the Assessing Officer to comply with the mandatory requirement of Section 14A(2) read with Rule 8D (1) (A) of the Rules record of satisfaction is required there under. The question of re-applying Rule 8D(2) (iii) of the Rules did not arise. In the present case also, the same does not arise. AO as well as the CIT(A) have failed to take into account the expenses incurred by the assessee and there was no satisfaction recorded by the Assessing Officer regarding invocation of Rule 8D. This legal aspect was overlooked by the Assessing Officer as well as by the CIT(A). Therefore, the order of the CIT(A) does not survive. - Decided in favour of assessee.
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2018 (5) TMI 492
Revision u/s 263 - liquidated damages are taxable as capital gain or revenue receipt - Held that:- We find that AO has not examined regarding liquidated damages and AO failed to make enquiry. Secondly, the Ld. DIT(IT) has also not made enquiry whether liquidated damages are taxable as capital gain or revenue receipt. DIT(IT) has come to a conclusion that it is liable for tax under the provisions of section 56(2)(vi). DIT(IT) has also not applied his mind properly. Therefore, we are of the opinion that whether the liquidated damages received by the assessee are as per the document filed by the assessee is liable for taxation or not. AO and the Ld. DIT(IT) has not applied their mind at all. Therefore, in the interest of justice and fairplay, we are of the opinion that it requires verification at the end of the AO. Therefore, relying upon the decision in the case of Malabar Industrial Co. Ltd. vs. CIT (2000 (2) TMI 10 - SUPREME Court), we find that AO failed to apply his mind in perspective order passed by him and hence erroneous. AO has not applied his mind. AO has also not verified any supporting material and without making any enquiry. Therefore, we are of the opinion that Ld. DIT(IT) has rightly exercised the jurisdiction under section 263(1). DIT(IT) has without making enquiry has come to a conclusion that this amount is taxable under section 56(2)(vi) of the Act. Therefore, we modify the order of Ld. DIT(IT) and restore this issue back to the file of AO to verify the claim of the assessee that the sum of ₹ 34,57,318/- is liable to tax being a capital income or revenue receipt or whether not taxable as capital gain - Appeal of the assessee is partly allowed
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Customs
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2018 (5) TMI 523
Transferring the customs cases to Mumbai Bench of CESTAT - Jurisdiction to issue notice - unwanted strike by the advocates - Held that: - ad-interim relief granted. When there prima facie appears to be lack of jurisdiction to pass such an order, we are inclined to issue Notice returnable on 13.06.2018. Ms. Trusha K.Patel, learned advocate, waives service of notice on behalf of respondent no.1. - there exists lack of jurisdiction in respondent no.2 in passing impugned decision - Direct service permitted today.
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2018 (5) TMI 521
Suspension of CHA License - it was claimed that there was no urgency in the matter for suspending the license of the Customs broker, as the Principal Commissioner has waited for suspending the licence from 27/09/2017 till 08/03/2018 - Held that: - the Commissioner of Customs may in appropriate cases, where immediate action is necessary suspending the licence of a Customs Broker is not mandatory in each and every case, even though, the proceedings under CBLR, 2013 are undergoing by the Commissioner of Customs. Secondly, the suspension can be made only in appropriate cases, where immediate action is necessary. The case is related to import for which the Bill of Entry was filed in March 2017 for which a show-cause notice under Customs Act was issued in September 2017, if at all there was necessity to suspend the licence, the department should have taken action immediately after detection of the case, which was not done so in this case and the department waited for more than six months - thus, there was no immediate requirement of suspension of the licence. The order suspending the Customs Broker licence is set aside - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 520
Condonation of delay of 147 days in filing appeal - case of appellant is that Shri. Anilkumar Dugar, who was appointed to look after the filing of appeals, was traveling and due to the same had lost track of the Appeal that the same could not be filed on times - Held that: - the reasons stated by the applicant in the application as well as in the submissions during argument do clearly appear that there is a negligence on the part of the applicants in filing the appeals - there are no sufficient cause for condoning the delay. However in litigation, the most important part is that justice should be delivered by deciding the matter on merit. Therefore, the dismissal of appeal only for delay will not render justice. Therefore, we condone the delay but subject to payment of cost of ₹ 10,000/-. COD application allowed on payment of a cost.
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2018 (5) TMI 519
Provisional release of detained goods - Heavy Melting scrap - the imported goods were found containing CR sheets/sheet cutting cut to various sizes weighing 132.895MT and 159.575MT respectively - Whether the goods can be released provisionally to the appellant as per the terms and conditions of Para 10 of this order, as held by Member (Judicial) - Difference of opinion - majority order. Held that: - from the said clarification dated 22/06/2017, it is found that the same refers to the clarification issued by NISST on 24/03/2017 and also reaffirming their findings that the goods in question were melting scrap as opined by them in report dated 14/03/2017. Therefore, I do not find that the contents of said clarification dated 22/06/2017 issued by NISST are having any developments after the said order dated 12/04/2017 has been passed. Further the said report dated 18/04/2017 has also been dealt with in para 24 of said order dated 12/04/2017 and consequence to be followed on receipt of said report dated 18/04/2017 have been ordered in the said paragraph. No purpose would be served by remanding the matter back to the original authority as opined by Member (Technical). In view of the majority decision, it is held that the goods can be released provisionally to the appellants as per terms and conditions enunciated in Para 10 of the order of Member (Judicial) and the appeals are not required to be remanded back to the original adjudicating authority. Appeal disposed off.
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2018 (5) TMI 518
Classification of imported goods - whether the goods are Knitted fabric or Netted fabric? - Held that: - Clearly, if the party had asked for re-testing of the same, the same should have been done at a higher appellate level - first report dt. 28.02.2007 and second report dt. 04.10.2007 have indeed been prepared by the same officer whereas, as per para 13 of the Manual of Revenue Laboratories, if a party demands a re-test, the Chief Chemist is the appellate testing authority. The matter is remanded back to the adjudicating authority to get the goods re-tested at a higher appellate level - appeal allowed by way of remand.
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Service Tax
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2018 (5) TMI 490
Validity of service tax inquiry summons - Production of documents concerning the enquiry against the first petitioner relating to their liability to pay service tax under the Finance Act, 1994 - case of petitioner is that the first petitioner Board has no liability to pay service tax in respect of its transactions under the Finance Act, 1994 - Held that: - the issue to be decided in the said appeals as also in the writ petition is one and the same. In the circumstances, I am of the view that it may not be appropriate to permit the petitioners to raise the said issue collaterally in this proceedings - it would have been appropriate for the petitioners to approach the Appellate Tribunal referred to above for relief in respect of the summons which is impugned in the writ petition. Petition dismissed.
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2018 (5) TMI 489
Pre-deposit - non-compliance with time limit - Section 35F of the CEA - Section 35 (1) of CEA - Held that: - Section 35 (1) is in respect of type of appeal which can be filed before the Commissioner (Appeals) and it does not deal with entertaining appeal by Commissioner (Appeals). Section 35F in turns deals only with the entertaining the appeal subject to condition of pre-deposit of seven and half percent - both Sections are Independent and have got no overriding effect on the other - It nowhere prescribes the time limit for making predeposit and the provisions of Section 35 F cannot be read in context of Section 35 (1) as it has got no application. Once the appeal has been filed within the time limit the same cannot be dismissed on the ground of late payment of pre deposit amount. Matter remanded to Commissioner (Appeals) to hear the case on merits - appeal allowed by way of remand.
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2018 (5) TMI 488
CENVAT credit - input services - beauty treatment - Health club - Rent A cab - Tour Operators - Rail Travel Agent - Mandap Keeper - Outdoor caterers - interior decorators - Pandal and Shamiana Contractors - denial on account of nexus - Held that: - The Mandap keeper were used for arranging sales promotion events, seminars and sessions with channel partners, business meetings which are required for business operations - In case of Endurance Technologies 2013 (32) STR 95 (TRI) the credit on Mandap keepers were allowed as the same were used for Annual day celebrations - credit allowed. Outdoor caterer service - Held that: - the same has been used for canteen facilities to the visiting customers and service providers. Further the services were used for arranging food during training sessions, sales promotion events, business seminars, meeting with channel partners which are in turn required to execute various business activities and endaveours - all these activities are related with business activities only and hence the credit is available to the Appellant. Pandal or Shamiana Contractor Service - Held that: - the services has been used for marketing or promotional events and hence it has to be considered as Input Service - In case of Public Creation Services we find that it was used by corporate image improvement and maintaining business relations. Such service undoubtedly which helps in increasing business is qualified to be an input service - credit allowed. Club and Association services - Held that: - The Club and Association services has also been used hosting corporate events and business meetings and they also have to be considered as input service and credit stands allowed - credit allowed. Rail travel agent services - Held that: - The rail travel agent services has been availed for travelling of employees for business purposes only and therefore it also qualify as Input Service as held in case of Jindal Pipes Ltd. [2013 (5) TMI 244 - CESTAT NEW DELHI] - credit allowed. Dry Cleaning Service Held that: - the service has been availed for cleaning of furniture and upholstery of office premises which is clearly towards maintenance of office and hence eligible for credit - credit allowed. Health and fitness services Held that: - the services were availed by them towards providing health checkup of employees and for Health awareness and Fitness workshop. The activity is to make aware the employees of their Health and Fitness so that they remain health and contribute actively in their work - credit allowed. Sound recording services Held that: - the services were availed for advertising/ marketing/ sales promotion campaigning which also falls in category of Input Service - credit allowed. Extended period of limitation - penalty - Held that: - the show cause notice has not brought out any fact or instance that the Appellant had availed the credit with the malfide intention or has suppressed the facts - there is no ground to raise demand by invoking extended period - for the same reason, penalty also set aside. Appeal allowed - decided in favor of appellant.
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2018 (5) TMI 487
Commercial or industrial construction service - charitable trust - Whether the service provided for construction of hospital which is run by the trust is liable to service tax under ‘commercial or industrial construction'? - Board circular dated 17/09/2004 - Held that: - from the Circular, it is very clear that the building of civil construction which are fully used by charitable organisation for the purpose of providing treatment not taxable being non-commercial ventures - construction of a building for use as hospital by a charitable organization does not fall under the category of ‘commercial or industrial construction’. - demand set aside. Whether the GTA service provided for construction of building for Tata Consultancy Service located in SEZ is liable for service tax? - clause (e) of Section 26(1) of SEZ Act, 2005 - Held that: - the taxable service provided to the developer or unit to carry on the authorised operation under the SEZ is exempted - In the present case the service of GTA is admittedly provided for construction of building in the SEZ. Therefore, the said service is exempted - demand set aside. Whether the GTA service availed in connection with the construction of hospital is liable to service tax? - time limitation - Held that: - In the present case, the GTA service is used by the appellant and the appellant is the deemed service provider. Hence the GTA service is integral to construction of hospital building. Therefore, the GTA service relating to construction of hospital is taxable in the hands of the appellant - the appellant have not disclosed the transaction of GTA to the department as no ST-3 returns were filed declaring the value of GTA service to the department. Therefore, extended period in respect of show cause notice dated 31/12/2012 is rightly invoked - As regard the show cause notice dated 14/10/2013 we agree with the submissions of Learned Counsel that once the department came to know about the activity of the appellant and a show cause notice was issued then in the subsequent show cause notice invocation of extended period is not available to the department - demand relating to show cause notice dated 14/10/2013 for the extended period i.e. for April 2011 to September 2011 is time-barred. The penalty commensurate to the demand of GTA relating to the hospital is maintained along with interest. Appeal allowed in part.
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2018 (5) TMI 486
Short payment of service tax - main allegation is that service tax paid by the tax payer as shown in the ST-3 returns for this period was less than the tax payable as calculated on the value shown in the same ST-3 returns by them for the impugned period - penalty - Held that: - it is clear that the adjudicating authority has primarily focused on comparing the figures given by the appellants in the first and second round of adjudication. In the first round of litigation, CESTAT Chennai had clearly indicated that the adjudicating authority came to pass the impugned demand as the proper reconciliation exercise was avoided. These directions of the CESTAT Chennai have evidently not been followed in the de novo adjudication. In the circumstances, while this Bench is averse to remand matters again and again, we are left with no other alternative but to once more send the matter back to the adjudicating authority to cause reconciliation as per the directions already given by the Tribunal Penalty - Held that: - the issue is on a matter of interpretation of the figure provided by the appellants - there is definitely a case for waiver of penalty imposed under Section 78 since none of the ingredients which call for imposition of penalty under that section is present. Matter is remanded to the adjudicating authority for de novo adjudication - appeal allowed by way of remand.
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2018 (5) TMI 485
Classification of services - appellants were engaged in making false ceiling, partitions, panelling, boxing, applying wall papers, carpeting etc. - Department took the view that these activities would fall under the category of ‘Interior Decorator Service’ and not under the category of Commercial or Industrial Construction Service (CICS) - whether the service would be classifiable under Interior Decorator Service or under CICS? - Held that: - Interior Decorator Service involves provision of advice, consulting technical assistance or services provided by way of intelligence or skill. There is no supply of material envisaged in the provision of services under Interior Decorator Service. From the sample copies of invoices submitted along with the appeal, it is found that the activities involving making mirror panelling, false ceiling, lunch room tables, sofa, chairs, laminated panelling etc. with the materials to be supplied by the appellants themselves - It is also interesting to note that in all these invoices, the work has to be completed as per design and drawing and specifications as provided by M/s.Gypsum India Ltd. Discernably, the appellants are then no where involved even in the design and drawing of the work that has been entrusted to them. The appellants cannot then be slotted into the category of Interior Decorator Service. Appeal allowed - decided in favor of appellant.
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2018 (5) TMI 484
Penalty u/s 78 - penalty imposed on the ground that appellant failed to disclose the facts about taxable service provided by them and receipt pf consideration from their clients and failed to show the same in the ST-3 returns - Held that: - the lower authorities should not have issued any SCN to appellant for imposition of penalty as admittedly the entire amount of Service Tax liability with interest thereof was discharged on being pointed out. Reliance placed in the case of Commissioner of C. Ex., Nagpur-II Versus Galaxy Construction Pvt. Ltd. [2017 (4) TMI 503 - BOMBAY HIGH COURT], where it was held that when an assessee had paid the service tax in full together with interest, the proceedings against the assessee would be concluded including the proceedings under Section 73(3) of the Finance Act, 1994 - penalty set aside - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 483
Refund of service tax paid - SEZ unit - rejection on the ground that the specified services were procured prior to UAC approval - Held that: - The issue is no more res integra as this Tribunal in the case of Mylan Laboratories Ltd. [2017 (9) TMI 423 - CESTAT HYDERABAD] has held that The bone of contention in these appeals being that the service tax liability was discharged correctly and when it was discharged the said services were not mentioned in the list of approved services, this cannot be a reason for rejection of refund claim as it is an avowed policy of the Govt of India that SEZ unit should not be burdened with any taxes in order to make them competitive. Since the procedural formality of receiving the UAC approval is also complete, the ratio of Mylan Laboratories Limited case will apply in full force to the case in hand. Refund allowed - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 482
Benefit of N/N. 8/2005-ST dated 01/03/2005 - Job work - Production / Manufacture of goods - BAS - Department took the view that since goods are produced not exclusively using the raw material supplied by the client, the respondent will not be entitled to the benefit of notification exempting service tax - Held that: - The proviso to section 93, specifies that the benefit has to be available if the assessee are using the raw material supplied by the clients. The proviso does not specify that the goods should be produced only using the raw materials or semi-finished goods supplied by the clients. There is no dispute in the present case that the semifinished goods was supplied by M/s Grasim Industries Limited on such goods. The activity of rubber lining has been carried out - benefit of notification cannot be denied. Appeal dismissed - decided against Revenue.
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2018 (5) TMI 481
Refund of service tax paid - rejection on the ground that the description of the services on the invoices of Xerox India Ltd is not acceptable as the service provider is required to mention the actual service description in the invoices raised by them - Held that: - the findings of the lower authorities that the description of the services is not acceptable seems to be incorrect as from the invoices it is clear that the services rendered is indicated by the service provider as support services of business or commerce - refund allowed. The appellant is an SEZ unit is not disputed and the receipt of the services is also not disputed as also the payment of service tax to the service provider. In the absence of any adverse findings on these issues, appellant herein is eligible for claiming the refund of the service tax paid by the service provider which is in consonance with the law. Appeal allowed - decided in favor of appellant.
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Central Excise
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2018 (5) TMI 480
Valuation - Speed MS/HSD - case of the Department is that in case of Speed MS/HSD, the sale price of Speed MS/HSD at which the goods are sold from their depot should be applied - even though the goods cleared from the factory, plain MS/HSD were sold from the depot as Speed MS/HSD, whether the sale value of Speed MS/HSD or plain MS/HSD nearest to the time of clearance of the goods shall apply? - Rule 7 of the Central Excise Valuation Rules, 2000 Held that: - from Rule 7, it is seen that when the goods are not sold from the place of removal but are transferred to depot from where excisable goods are to be sold after their clearance from the place of removal, but value shall be normal transaction value of such goods sold from the said other place at or about the same time and where such goods are not sold at or above the same value, at the time nearest to the time of removal of the goods under assessment. In the present case, the goods cleared from the factory is plain MS/HSD but the same goods are sold from the depot as Speed MS/HSD. Therefore, all the goods which are cleared as plain MS/HSD, which was subsequently sold as Speed MS/HSD, the sale price of such plain MS/HSD shall apply. Appeal allowed - decided in favor of appellant.
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2018 (5) TMI 479
CENVAT credit - inputs - denial on the ground that the processes undertaken by the appellant do not amount to manufacture - whether the demand / recovery of the credit availed by the appellant alleging that the process does not amount to manufacture is sustainable or not? - Held that: - the Board Circular No. 211/08/2005 dated 2.3.2005 has clarified that the activity does not amount to manufacture. This clarification is pursuant to the Hon’ble Delhi High Court and Hon’ble Supreme Court’s decision - In the present case, without entering into the controversy whether the activity amounts to manufacture or not, we are of the view that when Board having issued Circular No. 584/21/2001 dated 7.9.2001 clarifying that the activity amounts to manufacture and collected excise duty, cannot later turn around and deny the credit alleging that the activity is not manufacture. When the duty has been discharged by the appellant for a prolonged period, the department thereafter cannot turn around and deny the credit alleging that the process does not amount to manufacture based upon new decisions evolved. Appeal allowed - decided in favor of appellant.
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2018 (5) TMI 478
Valuation - inclusion of royalty in assessable value - whether running royalty paid by M/S KCSSL is includible in the assessable value of the goods cleared from Mundhwa unit? - Held that: - the running royalty though measured on the basis of value of sale is in respect of techn010U provided for manufacture of goods. In article 3 of the said agreement, it is envisaged that transfer of is in respect of Specialty Alloy Facilities. Exhibit A of the said agreement listed alloy grades, which will be licensed in the agreement - it is apparent that the technology transfer is used at the stage of casting. In other words, the products manufactured in Mundhwa unit namely, Bloom and Bars, being casting product already contained the technology transfer in the shape of specialty alloy. Thus it is apparent that the transferred technology is contained in the intermediate product cleared by the Mundhwa unit. The running royalty is includible in the assessable value of blooms/bars cleared by the KCSSL, as the royalty is not in the nature of brand or IPR but in the nature of Techn0104' Transfer Fee for the purpose of Casting Specialty Alloy. Extended period of limitation - Held that: - the appellant has claimed that its unit at Ranjangaon is entitled to CENVAT Credit of the duty paid at Mundhwa unit. The said claim has not been contested by the Revenue - extended period cannot be upheld. Penalty u/s 11AC - Held that: - In view of the fact that no allegation of suppression/misdeclaration can be upheld, the penalty under Section 11AC is set aside. Appeal allowed.
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2018 (5) TMI 477
CENVAT credit - input services - place of removal - whether the appellant is entitled for cenvat credit on CHA service used for export of goods? - Held that: - In case of export of goods the ownership of goods remained with the exporter till it is cleared for export from port of export, therefore in case of export, the port of export is the place of removal - CHA service which is used for export of goods is well within the place of removal, hence the credit is admissible - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 476
Time limitation - suppression of value - short payment of duty - Held that: - it is clear that the respondent have not suppressed any fact and the entire details of supply was well within the knowledge of the departmental officer. Therefore the Commissioner (Appeals) finding dropping the demand of time bar is absolutely correct - Revenue has not made out any ground to deviate from the finding of the Commissioner (Appeals) - appeal dismissed - decided against Revenue.
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2018 (5) TMI 475
Benefit of N/N. 4/2006-CE - notification prescribes the condition of process of manufacture of goods within the same factory whereas in the present case, the assessee had cleared kraft paper manufactured by them to a job worker for lamination process. Held that: - the very issue has been addressed by the Tribunal in the case of ABC Paper Vs CCE Jallandhar [2015 (5) TMI 164 - CESTAT NEW DELHI], where the conversion of the pulp into paper rolls was done by the appellant therein on job work basis and therefore benefit of N/N. 4/2006-CE was denied to the appellant. However, the Tribunal has held that as the manufacturer undertaking to discharge duty liability on finished products and job work sending back paper rolls to manufacturer under job work challan without payment of duty, benefit of said exemption notification is not deniable to the manufacturer. Benefit cannot be denied - appeal dismissed - decided against Revenue.
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2018 (5) TMI 474
Whether the assessees are eligible to avail exemption as per Notification No. 4/2006 under Sl. No. 91 and clear the goods on concessional payment of duty or whether it is mandatory to avail ‘nil’ rate of duty as provided under Sl. No. 90? Held that: - The demand made in the appeals filed by M/s. Srivari Packaging Industries, M/s. Srivari Print Pack and M/s. Shri Ram Cartons cannot sustain for the reason that they have rightly availed credit of duty passed on by M/s. Kovai Maruthi Paper and Boards Pvt. Ltd. who have cleared goods on payment of concessional rate of duty under Sl. No. 91 of Notification No. 4/2006. Appeal allowed - decided in favor of appellant.
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2018 (5) TMI 473
Valuation - inclusion of value of scrap in assessable value - CENVAT credit availed on the entire input/raw materials consumed - Held that: - When the appellants have availed Cenvat credit on the entire input/raw materials consumed, their contention that the value of that part of the raw material which remains as remnant parts from the steel sheet has to be deducted cannot be accepted - The Cost Auditor has deducted the value of the scrap recovered. Therefore there are no grounds to interfere with the impugned order - appeal dismissed.
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2018 (5) TMI 472
Benefit of N/N. 6/2002-CE dated 01.03.2002 - Department was of the view that since the CVD is debited in the DEPB scrip, there is no payment of duty on the imported goods and therefore appellant is not eligible for exemption under Sl.No. 244 (C) of Notification No. 6/2002 - whether the central excise duty exemption under Notification No. 6/2002 dated 01.03.2002 (Sl.No. 244 (C) is eligible for RBD Palmolein oil when the RBD Polmolein oil is imported on debit of DEPB scrip? Held that: - issue stands decided in the cases of Tanfac Industries Ltd. [2009 (4) TMI 92 - MADRAS HIGH COURT] where in the Hon’ble Jurisdictional High Court has held that the debit of any amount under the DEPB Scheme is a mode of payment of duty on the imported goods and the goods cleared under DEPB Scheme cannot be treated an exempted goods, but they can only be treated to be duty-paid goods. Demand do not sustain - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 471
Rectification of mistake - even though the duty stand reduced, the original penalty confirmed in the order will stand maintained - Held that: - there is an error in paragraph 4 of the order, which is contrary to the direction given to the adjudicating authority for the requantification of the duty - Last sentence of paragraph 5 may be corrected - ROM Application allowed.
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2018 (5) TMI 470
Rectification of Mistake - no order was passed in respect of Appeal No. E/ 432/12. Shri R.V. Shetty - appellant case is that the said appeal may be heard afresh and order be passed - Held that: - though the appeal No. E/ 432/ 12 appearing in the preamble of the order, however, no order was passed in respect of the said appeal. Therefore, the appeal No. E/432/ 12 mentioned in the preamble of the order is deleted. The last two sentences of the order in para 4 at page 3 i.e. "I do not find any infirmity in both the orders of the lower authorities, hence the impugned order is upheld Revenue's appeals are dismissed" is corrected and be read as "I, therefore, do not find any infirmity in the impugned order of the lower authority, hence the impugned order is upheld. Revenue's appeal is dismissed." ROM application allowed.
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2018 (5) TMI 469
Area based exemption - N/N. 50/2003-CE dt. 10.06.2003 - demand under Business Auxiliary Service - benefit of exemption notification was denied to the appellants on the premise that they have not filed any declaration under the N/N. 50/2003 as required and the demand of Service Tax was confirmed under the category of Business Auxiliary Service as job work activity, they are liable to Service Tax. Whether the demand can be confirmed under Business Auxiliary Service for the period prior to 16.06.2005 under the category of Business Auxiliary Service for the activity of bullet proofing of vehicle or not? - Held that: - Admittedly, the appellants are not producing the goods on behalf of the client, moreover, the appellants are engaged in the activity on the goods produced by their clients and further processing for the bullet proofing of those vehicles - Admittedly, for the period, prior to 16.06.2005, the word processing of goods was missing, in that circumstances, the demand of Service Tax for the period prior to 16.06.2005 is not sustainable - in this case the period involved is prior to 16.06.2005, therefore, the demand of Service Tax on account of Business Auxiliary Service is set aside - demand set aside. Whether the appellant is entitle to benefit of exemption N/N. 50/2003-CE or not? - Difference of opinion - majority order - Held that: - the appellant has got an acknowledgment of having a letter addressed to Assistant Commissioner intimating availment of the said Notification No. 50/2003 and a copy of which having acknowledged by Sector Officer and that the Sector Officer is part and parcel of establishment of Assistant Commissioner, therefore, as held in various pronouncements that a communication submitted to any authority under establishment was to be treated as submitted to the head of the office. The letter acknowledged by Sector Officer is an intimation submitted to the Assistant Commissioner. If that is not held so than in further each and every acknowledgment is to be given by Assistant Commissioner himself and the same will not be practical and possible - Therefore, the appellant had filed intimation that they would be availing benefit of notification no. 50/2003 with the Assistant Commissioner - appellant entitled for benefit of notification. In view of the majority decision the appeals are allowed
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2018 (5) TMI 468
Demand of duty - captive manufactured goods (moulds) cleared to their job workers without payment of duty - extended period of limitation - revenue neutrality - Whether in the facts and circumstance of the case and evidences placed on record, Member (Judicial) is correct in holding there being Revenue neutral situation, in terms of Rule 4(5) (a)/(b) of Cenvat Credit Rules, 2004, the appellant is not required to reverse Cenvat credit? - difference of opinion - majority order. Held that: - the provisions of clause (b) of sub-rule 5 of Rule 4 of Cenvat Credit 2001 provide that if moulds are brought into the factory by a manufacturer, he is eligible for availment of Cenvat Credit of duty paid on the same. Further, the manufacturer of the goods is required to pay Central Excise duty on the goods manufactured. Incidentally, in the present case, the manufacturers of moulds and the legal entity eligible to avail Cenvat Credit of duty so paid is one and the same, on following all the provisions of law, the situation emerges that the appellant is required to debit their Cenvat Account for payment of Central Excise duty on the moulds manufactured by them and removed to the job-worker under said provisions of Rule 4 (5) (b) and further they are eligible to take Cenvat Credit of the same duty paid. The situation is Revenue neutral. In view of the majority decision, the appeal is allowed.
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2018 (5) TMI 467
Refund claim - duty paid under protest - Classification of goods - Anmol Coconut Oil - Appellant had been claiming classification of Anmol Coconut Oil under Chapter 15 of the CETA more specifically under Tariff Item 15131900 from 2005 - According to Revenue the product was classifiable under Chapter 33 under Tariff Item 33059019 as hair oil - Held that: - the issue of classification of the product Anmol Coconut Oil, is classifiable under Tariff Item 15131900 as edible oil and accordingly the same was chargeable to nil rate of duty under the Tariff is settled Unjust enrichment - Held that: - the appellant had paid the duty under protest and also not passed on the burden of duty as they have admittedly shown the amount as recoverable from the Central Excise Department in their balance-sheets. The Adjudicating Authority is directed to grant the refund alongwith interest as per rules within a period of 75 days from the date of receipt of a copy of this order - appeal allowed - decided in favor of appellant.
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2018 (5) TMI 466
100% EOU - debonding of unit - demand of of ₹ 3,37,48,484/- on the goods which were within the factory premises or that of job workers and which were not cleared and also on the goods which were under the process of manufacture or manufacture had not been completed - Held that: - demand not sustainable for the reasons that the differential duty was demanded on the goods which had not came into existence and on the goods which were not removed from the factory of manufacture of appellant or their job workers - the confirmation of demand of ₹ 3,37,48,484/-, interest thereon and equal penalty are not sustainable. Demand of of duty on Remnants of ₹ 8,12,05,337/- - Held that: - the confirmation of demand of under valuation on Remnants is not sustainable because the same was confirmed by relying on CBEC Circular dated 29/09/1994, which is rescinded through Circular dated 16/08/2010 - the demand of differential Central Excise duty of ₹ 8,12,05,337/-, interest thereon and equal penalty are not sustainable. Demand of ₹ 9,64,168/- - depreciation denied on the ground that they were not capital goods since they were not put to use - Held that: - demand not sustainable as catalyst on first charge were treated as capital goods and that there was no such allegation in the Show Cause Notice and therefore, the adjudication proceedings travelled beyond the Show Cause Notice and therefore confirmation of demand is not sustainable. Appeal allowed - decided in favor of appellant.
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2018 (5) TMI 465
Demand of duty - HTS wire scrap removed from the premises of the appellant without preparation of documents - Held that: - there is no correspondence from the appellant for renewal of the permission to remove scrap on weighment challan - even if there is no weighment challan they could have prepared a adhoc documents which would indicate that the vehicle was being sent for weighment purposes, was to return back to the factory on further documentation, and the documents which were carried by the Assistant Clerk cum Cashier was blank in all respects - demand upheld - appeal dismissed - decided against appellant.
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2018 (5) TMI 464
CENVAT credit - inputs - Plates, Shape & Section, MS Angles, GP Sheet, HR Coil, CR step, MS Channels, Paints, Welding Electrodes etc. - Held that: - the appellants had led evidence before the Courts below that the items in question like Welding Electrodes, MS electrodes, MS plate, Shape and Section etc have been utilised for fabrication of mostly Capital Goods - the definition of inputs in Rule-2 (k) read with Explanation-2 provides– input includes goods used in the manufacture of capital goods which are further used in the factory of the manufacturer - credit allowed. Penalty - Held that: - Since, the Cenvat credit on items in question is admissible neither the penalty on appellant company nor on Managing Director is maintainable. Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2018 (5) TMI 463
Consumption of Diesel oil - manufacture and sale of sugar and bagasse etc - manufacturing activity carried or not? - during the period when the manufacturing activity of the assessee was completely closed, it shown purchases of diesel oil on concessional rate of tax against form 3 Kha and consumption thereof - Section 3-B of the U.P. Trade Tax Act, 1948. Held that: - The assessee has set up a case that the diesel oil was consumed in the maintenance of machines during the period when the manufacturing activities were closed. The contention of the assessee was rejected by the authorities. The Tribunal being the last fact finding authority has recorded a finding of fact that the assessee has no records to establish that how the diesel oil in question was used in maintenance of machines. No perversity could be shown by the assessee in the aforesaid findings of fact recorded by the Tribunal - liability of the assessee under Section 3 B of the Act upheld. Liability to tax of sale of bagasse - Held that: - Since no tax was paid by the assessee on purchases of sugarcane, therefore, the liability to tax on sale of bagasse as determined by the assessing authority, can not be interfered with. Revision dismissed.
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2018 (5) TMI 462
Stay of Recovery proceedings - petitioner prays that the recovery against him be interdicted at least until such time as the stay petition is considered by the Appellate Tribunal - Held that: - the petitioner can be given some respite from the rigor of recovery, at least until such time as his stay petition is considered by the Appellate Tribunal - Until such time as the Appellate Tribunal passes an order on the stay petition, and communicates the same to the petitioner, all steps for recovery of amounts against the petitioner, confirmed through Ext.P1 assessment order, shall be kept in abeyance - petition allowed.
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2018 (5) TMI 461
Rate of tax - sale of chips with a brand name - taxable at 4% under Entry 107 of Part B of the first Schedule or at 12.5% under residuary entry? - Held that: - Entry No.107 in Part B of the first Schedule specifically specifies that processed fruit and vegetables including fruit jam, jelly, etc., other than those specified in the fourth Schedule, are liable to be taxed at 4% and for the other goods under Entry 69, the tax payable would be at the rate of 12.5% - potato chips will fall under the processed vegetable and when there is a specific entry, the tax applicable to that entry alone has to be applied and it is not expected to go to the residuary item. The product in question to be taxed at 4% - petition allowed.
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Indian Laws
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2018 (5) TMI 491
Liability of respondent to pay the cheque amount - Held that: - Trial Court rightly held that the petitioner failed to prove that there was any legal liability of the respondent to pay the cheque amount and dismissed the complaint, thereby acquitting the respondent - petition dismissed.
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