Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
May 8, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
FEMA
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Classification of vehicle - Rate of Compensation Cess under GST - The Tata Harrier vehicle whose ground clearance in unladen condition is 205 mm and in laden condition is 160 mm, would fall under Sr. No. 52B of the Notification No. 1/2017-Compensation Cess. (Rate).
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Concessional rate of GST - supply of works contract service in respect of Original Works pertaining to construction of a Low Cost House in an AHP - Notification 01/ 2018, no-where restricts the benefit to a ‘Developer’ only. The Notification entry is qua the supply of service and not qua the person - Benefit of reduced rate of GST @12% allowed.
Income Tax
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Revision u/s 263 - Deemed dividend addition u/s 2(22)(e) - loan from group company being Non-Banking Financial Company - a conscious decision was taken by AO as regards the non-applicability of section 2(22)(e) to the loan amounts in question while completing the assessment under section 153A/143(3)- no revision
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Penalty u/s 271(1)(c) - error in filing return - Once the assessee is served with a notice of scrutiny assessment, corrections to the declaration of his income, would not grant an immunity from penalty - The assessee revised income voluntarily before he was confronted with the incorrect claim - original declaration of income suffered from a bonafide unintended error - no penalty
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Reassessment u/s 147 - AO simply taking note of the DIT(Inv.) letter has borrowed the satisfaction without independent application of mind to form reason warrant holding a belief that income chargeable to tax has escaped assessment - no reasonable enquiry and materials - cannot reopen the assessment even if original assessment was u/s 143(1)
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Income accrued in India - royalty or fees for technical services - subscription fees receipts for online data base - assessee only gets access to a copyrighted article or judgment and not the copyright - cannot be treated as royalty under Artile–12(3) of India–Germany Tax Treaty.
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Capital gain computation - challenge of correctness of DVO report - CIT(A) ought to have examined the report on merits - under a statutory obligation to serve notice of hearing to the DVO and thus afford him an opportunity of hearing
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Exemption u/s. 54 - outer limit for the purchase or construction of the new asset 54(2) - it can safely be gathered that the conscious, purposive and intentional providing by the legislature of “date of furnishing the return of income u/s 139” cannot be substituted and narrowed down to Sec.139(1)- time limit provided for filing of the ‘return of income’ will include return u/s 139(4) as well as the revised return u/s 139(5)
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Addition u/s 68 - assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants, thereafter the onus shifted to AO to disprove the documents - In the absence of any investigation, much less gathering of evidence by the AO - addition cannot be sustained merely based on inferences drawn by circumstance
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Revision u/s 263 - cost of acquisition - valuation as on date OR as on 01.04.1981 - The valuer as simply commented upon condition of the property during the course of his verification only - when two views are possible and that has resulted in loss of the revenue it cannot be treated as erroneous order prejudicial to the interest of the revenue unless the view taken by the AO is unsustainable in law
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Accommodation of bogus transaction - entry operator - Presumption of Section 132(4A) stood against the assessee - complete onus to negate the same was on assessee which has remain undischarged - addition justified
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Reopening of assessment u/s 147 - AO recorded his satisfaction about escapement of income for sale of investments - no addition made on this issue - addition made for issued of share capital to twenty two share subscribing companies - not permissible Unless in the order u/s 147 the AO makes addition on the ‘foundational’ issue for which the reason was recorded
Customs
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Ban on operation as ‘authorized courier’ - Eternity is accepted only in matters of faith. No statute can, or should, arrogate such and we do not find such in the Courier Imports and Exports (Clearance) Regulations, 1998.
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Extended period of limitation - import of goods - The entire case of the revenue is based on the few statements recorded by the Custom officers. - Since all the facts including the catalogues relied upon in show cause notice were made available to revenue as early as in 2002, the delay in issuance of show cause notice could not be justified.
FEMA
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Violation of Section 10(6) of FEMA - advance remittance is permissible in law against imports - One is failed to understand why a person would make alleged hawala transactions through banking channel.
Corporate Law
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Non-payment of dividend to the shareholder is an offence, which invites penal action. However, non-payment of dividend to the shareholder will not be called an offence if the payment is not made because the dispute between the parties exists.
PMLA
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Retention of property / document under PMLA - outer limit upto the date for deciding the application for retention of property is 180 days from the date of seizure of any property or records. The said period is not extendable as per the scheme of the Act, unless the prayer for retention is allowed and subject to filling of prosecution complaint within 90 days from the date of passing the retention order.
Service Tax
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Classification of services - Reverse charge mechanism (RCM) - there is no evidence in support of the claim of the Appellant that what they were required to pay M/s Lear Corporation, USA was not the maintenance charges for usage of the software but the charges for the software. - Demand confirmed.
Central Excise
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It cannot be said that only because audit party had found some credit availed as inadmissible, suppression of fact is made out. Further it is not established that appellant had any malafide intention to suppress its duty liability from the department.
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Concessional rate of duty - benefit of Sr. No.3 to Notification No. 23/2003-CE - denial of benefit on the ground that when raw materials were procured from 100% EOU / SEZ units, the same amounts to “imports” for the purpose of procurement of goods - Contention of the revenue is not acceptable.
VAT
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Assessment order - effect of order, prospective or retrospective? - Merely because the order of 11th September, 2006 is set aside by the Maharashtra Sales Tax Tribunal by its judgment and order dated 20th January, 2015, the transactions covered and dealt with by that judgment, which gave rise to a tax liability, cannot now be reopened.
Case Laws:
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GST
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2019 (5) TMI 494
Classification of vehicle - Tata Harrier vehicle - whether classifiable under Tariff Item 8703 32 91 or 8703 32 99 of the First Schedule to the Customs Tariff Act, 1975? - HELD THAT:- Considering the subject vehicle as having a compression-ignition internal combustion piston engine (diesel or semi-diesel) of a cylinder capacity exceeding cc but not exceeding 2500cc, it is to be held that the subject Tata Harrier vehicle Will be considered as motor cars and classifiable under heading 8703 32 91 of the GST Tariff. If the vehicle satisfies only the conditions mentioned in main clause but is not satisfying any one or all of the conditions mentioned in Explanation , whether it would still be covered under Entry at Sr. No. 52B of Notification No. 1/2017- Compensation Cess (Rate) dated 28.06.2017 as amended? - HELD THAT:- In taxing statute, the word include/ including is generally used in interpretation clauses as a word of enlargement, though the use of word include/ including in the restrictive sense is not unknown. In view of the specifications given by the applicant there is no doubt that the subject vehicle will attract 22% compensation cess under Sr. No. 52 B of the said Notification - Hence if the vehicle satisfies only the conditions mentioned in main clause but is not satisfying any one or all of the conditions mentioned in Explanation , then it would not be covered under Entry at Sr. No. 52B of the said Notification. For the purpose of Cess @ 22% under Sr. No: 52B of Notification No. 1/2017 Compensation Cess (Rate) dated 28.06.2017 as amended, whether the ground clearance of the vehicle is to be considered in laden condition or in unladen condition? - HELD THAT:- The rate of tax on the subject vehicle before it is sold to buyers. It is but natural that the ground clearance given in the Notification must arrived in unladen state, when there are no passengers/driver occupying the vehicle. We are of the opinion and we agree with the submissions of the jurisdictional office in this regard that the ground clearance in laden condition cannot be considered because the same will vary depending on the weight of passengers and luggage occupying the vehicle and will therefore cannot be constant. Whether Tata Harrier vehicle whose ground clearance in unladen condition is 205 mm and in laden condition is 1.60 mm, would fall under $r. No. 52B of the Notification No. 1/2017-Compensation Cess. (Rate) dated 28.06.2017 as amended? - HELD THAT:- The Tata Harrier vehicle whose ground clearance in unladen condition is 205 mm and in laden condition is 160 mm, would fall under Sr. No. 52B of the Notification No. 1/2017-Compensation Cess. (Rate) dated 28.06.2017. Whether GST Compensation Cess @ 22% under Sr. No. 52B of Notification No. 1/2017-Compensation Cess (Rate) dated 28.06.2017 as amended, will be applicable to Tata Harrier vehicle? - HELD THAT:- GST Compensation Cess @ 22% under Sr. No. 52B of Notification No. 1/2017-Compensation Cess (Rate) dated 28.06.2017 will applicable in the subject case. Whether vehicle whose ground clearance in unladen condition is more than 170 mm but below 170mm in laden condition, will get covered under Sr. No. 52B of Notification No. 1/2017-Compensation-Cess (Rate) dated 28.06.2017? - HELD THAT:- To get covered under Sr. No. 52B of Notification No. 1/2017-Compensation.Cess (Rate) dated 28.06.2017, the ground clearance should be more than 170 mm in unladen condition - the ground clearance must be considered only on the basis on unladen weight and are firmly of the opinion that the minimum ground clearance must be considered only on the basis of unladen condition.
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2019 (5) TMI 493
Concessional rate of GST - supply of works contract service in respect of Original Works pertaining to construction of a Low Cost House in an AHP - Benefit of N/N. 01/2018-CentraI Tax (Rate) dated 25.01.2018 - HELD THAT:- Entry (v) (da) of Notification 01/ 2018, no-where restricts the benefit to a Developer only. The Notification entry is qua the supply of service and not qua the person and therefore once a project qualifies as an AHP, the benefit of concessional rate of tax would be available in respect of works contract services pertaining to Low Cost Houses, irrespective of it supplied by the or the Contractor. In the subject case the project qualifies as an AHP, and the benefit of concessional rate of tax would thus be available to the applicant. The applicant will be eligible for concessional rate @ 12% in the project. The concessional rate will applicable only for residential units of upto 60 sq mts., in their project and not for commercial units.
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Income Tax
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2019 (5) TMI 458
TDS u/s 195 - non-deduction of tax at source on the payment to non-residents which was disallowed u/s 40(a)(i) - India - UK DTAA - PE In India - HELD THAT:- No material whatsoever to demonstrate and establish that the services were rendered in India in lieu of the payment under consideration. The Non-resident payees were not alleged to have a redence or place of business or business connection in India either. We note that the ITAT in the own case of the assessee [ 2014 (10) TMI 1003 - ITAT AHMEDABAD] has held that the impugned payment is not subject to the provisions of section 195 of the Act. Thus the addition made by the AO under section 201(1) 201(1A) of the Act was directed to be deleted. Addition made by the AO under section 201(1) 201(1A) of the Act was directed to be deleted. - Decided in favour of assessee. Additional depreciation u/s 32(iia) on the machinery as given on lease - asset used for less than 180 days - AO disregarded the contention of the assessee by holding that the assets were used in the business of leasing and not in the business of manufacture. Thus the assessee is not entitled to the additional depreciation - HELD THAT:- It is an undisputed fact that the assessee is engaged in the manufacturing business as well as in the business of leasing. Therefore the condition imposed under section 32(iia) of the Act gets fulfilled for claiming the additional depreciation. Regarding this we find support and guidance from the judgment of Hon ble Gujarat High Court in the case of Diamines Chemicals Ltd [ 2013 (12) TMI 373 - GUJARAT HIGH COURT] claiming the deduction under Section 32(1)(iia) of the Income-tax Act setting up wind-mill has nothing to do with the power industry and what is required to be satisfied in order to claim additional depreciation is that the setting up of new machinery or plant should have been acquired and installed by an assessee, who was already engaged in the business of manufacture or production of any article or thing. We are of the considered opinion that the assessee is eligible for the additional depreciation under section 32(iia) of the Act. - Decided in favour of assessee.
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2019 (5) TMI 436
Penalty u/s 271(1)(c) - error in filing return - fresh declaration of revised income voluntarily before assessee was confronted with the incorrect claim - bonafide unintended error - HELD THAT:- Once the assessee is served with a notice of scrutiny assessment, corrections to the declaration of his income, would not grant an immunity from penalty. Particularly, in a case where the assessee during such scrutiny assessment is confronted with a legally unsustainable claim which he thereafter forgoes, may not be a ground to delete penalty. However, in the present case the facts are glaring. The assessee made a fresh declaration of revised income voluntarily before he was confronted with the incorrect claim. The assessee had blamed the accountant for an error in filing the return. Affidavit of the occupant was also filed. As stated by the counsel, such error was committed by other group assessees also. Some of them corrected the error even before the scrutiny notices. In view of such facts, we do not find that the Tribunal is in error in coming to the conclusion that the original declaration of income suffered from a bonafide unintended error. No question of law arises. Income Tax Appeal is dismissed.
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2019 (5) TMI 435
Stay of demand - conditional stay - Recovery of outstanding tax demands - payment of 20% of the disputed demand to assure stay - HELD THAT:- As decided in MRS. KANNAMMAL VERSUS INCOME TAX OFFICER WARD 1 (1) TIRUPUR [ 2019 (3) TMI 1 - MADRAS HIGH COURT] The existence of a prima facie case for which some illustrations have been provided in the Circulars themselves, the financial stringency faced by an assessee and the balance of convenience in the matter constitute the trinity , so to say, and are indispensable in consideration of a stay petition by the authority. The Board has, while stating generally that the assessee shall be called upon to remit 20% of the disputed demand, granted ample discretion to the authority to either increase or decrease the quantum demanded based on the three vital factors to be taken into consideration. The petitioner will appear before the respondent Assessing Officer on 02.04.2019 along with copy of his stay application as well as all materials in support of the request for stay and the application shall be disposed of within two weeks from 02.04.2019, i.e on or before 16.04.2019. It is brought to our attention that, subsequent to the passing of the impugned order, notices under Section 226(3) of the Income Tax Act, 1961 have been issued to Karur Vysya Bank, Valasaravakkam Branch, Axis Bank, Virugambakkam Branch, City Union Bank, Mandaveli Branch, HDFC Bank, Saligramam Branch, Indian Bank, Ayanavaram and Perambur Branches, all dated 06.03.2019 attaching the accounts of the petitioner therein. The attachments will continue, subject to the orders passed by the 2nd respondent in the stay application and the Banks shall not appropriate any balance until orders are passed in the stay application. Status quo, as on date to be maintained in regard to further recovery, till 16.04.2019 or date of order to be passed in the stay application, whichever is earlier.
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2019 (5) TMI 434
TP adjustment - excluding Infosys Technologies Ltd. from the list of comparables for determining ALP - HELD THAT:- The Tribunal while accepting the plea of the assessee had recorded that the assessee is providing services of commissioning of software embedded in the equipment supplied by M/s ZTE Telecom to its customers in India. The services provided by the assessee also includes localization and customization and is engaged in providing low end software services. The requirements of and specifications provided by the AE(s) that ZTE India Pvt. Ltd. provides software support services. Thus, neither it is engaged in end to end development of a product nor does it own any products. The assessee diagnosis and correct the software and further updates for the bugs in those software. It also performed routine maintenance for the software whereas the Infosys Technologies Ltd. operates at full fledged risk and perform the services of application design, software engineering and the technology lapse. The assessee was not even the developer of the software but merely providing software support services. As concluded that the Infosys Technologies Ltd. could not be treated to be a comparable in the present case for assessing ALP and, thus, it directed the TPO to exclude Infosys Technologies Ltd. from the comparability analysis of software support systems segment of the assessee while determining Arm's length price of international transactions Further, Delhi High Court in CIT v. Agnity India Technologies Pvt. Ltd. [ 2013 (7) TMI 696 - DELHI HIGH COURT] had held that in similar line of business as that of the assessee the Infosys Technologies Ltd. could not be treated to be a comparable while determining Arm's Length Price of International Transactions. No substantial question of law
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2019 (5) TMI 433
Rectification u/s 154 - addition of prior period expenses and late payments of employees/employer s contribution towards PF in rectification order - HELD THAT:- Having failed to raise issue challenging quashing of rectification order u/s 154, we have no option to proceed further in dismissing the appeal for failure to raise ground questioning the order of CIT(A) involving the root of the case. Therefore, the appeal of the Revenue is dismissed. Addition on account of miscellaneous expenditure - miscellaneous expenses including the preliminary expenses and pre-operative expenses, deferred revenue expenses and portal website development expenses. These expenses relate to earlier years which have been written off in accordance with statutory provisions - HELD THAT:- CIT(A) after examining the matter and the reply of the AO, find that the Assessing Officer has drawn certain adverse inferences where there was, according to the AO non-compliance / non-satisfactory compliance to his show-cause letter. As carefully considered the submissions of the A.R. Find that the AO has made the disallowance without recording any specific finding, and therefore the basis for such disallowance is not supported. In so far as the claim for writing off deferred expenditure on portal development, agree with the contention that this practice is being followed on a regular basis from year to year, and has also been accepted. Notice issued beyond the prescribed time limit as required u/s 143(2) - HELD THAT:- Without bringing on record the relevant evidence to show that was issued beyond time limit, we cannot give any finding on such bald submissions but however in the interest of justice, we deem it proper to remand the matter to the file of CIT(A) for his fresh consideration and pass order by giving reasons thereon. Therefore, ground raised under Rule 27 of the Income Tax (Appellate Tribunal) Rule 1963 by the assessee is allowed for statistical purposes and in view of the decision taken by us in ground raised by the assessee under Rule 27, grounds raised by the Revenue in the main appeal becomes academic and requires no adjudication at this point of time - Appeals of the Revenue are partly allowed for statistical purposes.
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2019 (5) TMI 432
Penalty levied u/s 271(1)(c) - satisfaction recorded by the AO while initiating penalty proceedings - HELD THAT:- While levying penalty, the Assessing Officer has held that the assessee has concealed particulars of its income by furnishing of inaccurate particulars of the same. In view thereof, where the AO had initiated penalty proceedings for one limb and levies penalty for both limbs; we find no merit in levy of aforesaid penalty under section 271(1)(c) of the Act. We find support from the ratio laid down in CIT Vs. Shri Samson Perinchery [ 2017 (1) TMI 1292 - BOMBAY HIGH COURT] wherein it was held that where there is no proper satisfaction for initiating penalty proceedings and in the absence of proper show cause notice to the assessee, there is no merit in levy of penalty. Accordingly, we delete the penalty levied under section 271(1)(c) of the Act in both the appeals. The grounds of appeal raised by assessee in both the appeals are thus, allowed.
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2019 (5) TMI 431
Revision u/s 263 - Deemed dividend addition u/s 2(22)(e) - loan from group company being Non-Banking Financial Company - AO completing the assessments under section 153A/143(3) - assesse was not the share holder - HELD THAT:- As rightly contended by the assessee, all the relevant details to ascertain the applicability of section 2(22)(e) to the loan amounts in question taken by the assessee-company during the years under consideration from the other Group Companies thus were either available on the record before the AO or the same were called for by him during the course of assessment proceedings by raising specific queries and after applying his mind to the said details, a conscious decision was taken by him as regards the non-applicability of section 2(22)(e) to the loan amounts in question while completing the assessment under section 153A/143(3) of the Act. In our opinion, it, therefore, cannot be said that there was an error in the orders of the AO in not making any enquiry or verification on the issue of applicability of section 2(22)(e) to the loan amounts in question as alleged by the Principal CIT and the revision under section 263 by the ld. Principal was not called for. AO is not only expected to be aware of such legal position but is also duty-bound to apply the same while completing the assessments, especially when it is propounded by PRADIP KUMAR MALHOTRA VERSUS COMMISSIONER OF INCOME-TAX, WEST BENGAL-V [ 2011 (8) TMI 16 - CALCUTTA HIGH COURT] . In the present case, AO thus had not only made the enquiry or verification as required in the facts of the case to ascertain the applicability of section 2(22)(e) to the loan amounts received by the assessee from the other group companies, but a conscious decision was also taken by him keeping in view the legal position that section 2(22)(e) was not applicable to the loan amounts in question received by the assessee during the years under consideration from the other Group Companies. There was thus no error in the orders of the AO for the years under consideration passed u/s 153A/143(3) as alleged by the Principal CIT and the revision of the same under section 263 by the ld. Principal CIT was not called for. In that view of the matter, we set aside the impugned orders passed by the ld. Principal CIT under section 263 and restore that of the Assessing Officer passed under section 153A/143(3) - Decided in favour of assessee.
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2019 (5) TMI 430
Reopening of assessment u/s 147 - reasons to believe as not synonymous to reason to suspect - borrowed satisfaction - original assessment u/s 143(1) - assessee had suppressed its income by using LTCG treating it as exempted which is/are reported as bogus by the directorate - HELD THAT:- When the AO was in receipt of the information from the DIT(Inv.) he ought to have made reasonable enquiry and collect materials which would make him believe, that there is escapement of income. As stated earlier, it has to be remembered that information is not synonymous to truth. At the cost of repetitions, we note that AO simply on the basis of the investigation report of DIT (Inv.) has jumped into conclusion that there is an escapement of income which is erroneous since it does not satisfy the jurisdictional fact and law for reopening as envisaged u/s. 147 AO simply taking note of the DIT(Inv.) letter has borrowed the satisfaction without independent application of mind to form reason warrant holding a belief that income chargeable to tax has escaped assessment. Just because a letter has been received from the DIT(Inv.) the AO cannot reopen the assessment even if original assessment was u/s. 143(1). AO based on the reasons recorded as set out above could not have initiated a fishing enquiry to find out the veracity of the information given by the DIT(Inv.). The reasons recorded by AO does not stand the test as laid by plethora of judicial precedence as discussed above which is sine qua non to assume jurisdiction u/s 147 we find that the reasons recorded by the AO to justify reopening the assessment u/s. 147 fails and, therefore, the very assumption of jurisdiction to reassess the assessee falls. Since the AO failed to validly assume jurisdiction u/s. 147 the assumption of jurisdiction by him to re-open the assessment itself is qorum non judice and, therefore, all subsequent action is null in the eyes of law and therefore, we quash the reopening and consequent reassessment order framed by him. AO had made some enquiry (Pre-reopening) at least then he would have definitely stumbled across the order of the Tribunal passed in ACIT Vs. Swastik S. Ghuwalewala [ 2013 (5) TMI 1005 - ITAT KOLKATA] wherein the Tribunal has held that the purchase and sale of shares of M/s. Bakra Pratisthan Ltd. (M/s. BPL) is not bogus vide order dated 23.05.2013 and we note that the instant reopening notice was issued by AO on 28.03.2017. So in the light of Tribunal order in respect to the scrip in lis, question of reopening would arise or not at the first instance should have been taken independent by the AO - Decided in favour of assessee.
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2019 (5) TMI 429
Reopening of assessment u/s 147 - addition u/s 68 - case reopen based of reasons that sale of shares held as investments represented assessee s income escaping assessment - addition made regarding share capital raised - CIT-A quashed reopening notice - HELD THAT:- Unless in the order u/s 147 the AO makes addition on the foundational issue for which the reason was recorded, the AO is not permitted to make addition in respect of any other issue for which reason was not recorded prior to issue of the notice. See SOFTWARE CONSULTANTS [ 2012 (2) TMI 18 - DELHI HIGH COURT] and INDU ARTS VERSUS ACIT, CIRCLE 19 (1) , NEW DELHI. [ 2017 (6) TMI 449 - ITAT DELHI] The reasons which the AO recorded on 09/02/2015 and as set out in the foregoing, do not in any manner suggest that the AO was satisfied that the share subscription amounts received during the relevant year represented assessee s income escaping assessment. Undeniably in the reasons set out, the AO has made reference to two separate and distinct transactions; one involving the shares which the assessee issued to twenty two share subscribing companies and another involving sale of investments which the assessee held in other bodies corporate. It may be so that Shri Mahavar or companies managed by him were connected with both the set of transactions. However both the sets of transactions were separate from each other and consequences flowing from these sets of transactions were also separate and could not be intermixed. In the reasons the AO recorded his satisfaction about escapement of income specifically with reference to assessee s transactions involving sale of investments totaling ₹ 34 Crs. The satisfaction recorded did not any manner suggest that in AO s opinion share subscription amount of ₹ 30.20 Crs. received during the year from 22 subscribers represented assessee s income escaping assessment. We therefore concur with the findings of the Ld. CIT(A) that no addition was made in the order u/s 147/143(3) dated 31.03.2016 with reference to the reasons for which the assessment was reopened and in that view of the matter the impugned order u/s 147/143(3) is held to be legally unsustainable. No reason to interfere with the findings returned by the Ld. CIT(A) in his order. - Decided in favour of assessee.
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2019 (5) TMI 428
Accommodation of bogus transaction - entry operator - notional commission on unsecured loan - incriminating material has been found in the search proceedings and statement has been given under oath u/s 132(4) - presumption of statement made u/s 132(4A) - retraction of statement - HELD THAT:- The assessee, in statement on oath u/s 132(4) during search proceedings, categorically admitted to be engaged in providing accommodation entries of varied nature through two name-sake entities without carrying out any actual business activity. The modes-operandi adopted by the assessee has elaborately been enumerated in the impugned order as well as in the statement given by the assessee. The incriminating material in the shape of Annexure A-1 to Annexure A-5 in respect to parallel accounts containing details of cash transactions etc. was found from the possession of the assessee which unequivocally corroborated the aforesaid statement. AR has submitted that the statement was retracted but it is noted that the statement has been retracted after lapse of more than 10 months without any supporting facts to demonstrate that the same was given under any coercion or threat. Presumption of Section 132(4A) stood against the assessee and complete onus to negate the same was on assessee which has remain undischarged. All these factors do not inspire us to accept the submissions of Ld. AR that additions of the two entities were not justified in the hands of the assessee. Therefore, lower authorities, in our considered opinion, were quite right in making the impugned additions in the hands of the assessee, under the given circumstances. Estimation of rate of commission earned by the assessee on providing accommodation entries. - HELD THAT:- The chain of the transactions establishes that the assessee has received commission on three accounts viz. commission on import purchases made on behalf of other entities, commission on accommodation local sales bills provided to other entities and commission on entries of loans and advances being provided to certain beneficiaries. The commission on local purchases stated to be made by the two entities, under the circumstances could not be sustained. Nothing has been brought on record to suggest that the assessee has received commission on account of local purchases stated to be made by the two entities. The same is also not supported by the statement made u/s 132(4). Therefore, the addition on account of commission on local purchases, as made by lower authorities, in our opinion, could not be sustained. Therefore, we delete the same. The commission on account of accommodation entries of loans and advances has been estimated @2.4%. However, no material has been brought on record to justify the same. The assessee has also not indicated the same in the statement made u/s 132(4). Therefore, under the given circumstances, we estimate the same @0.5%. Ground No. 3 stand partly allowed. Commission on import has been estimated @0.275% whereas commission on sales has been estimated @0.075%. We estimate the commission on import @0.2% and commission on sales @0.05%. Ground Nos. 5, 7 8 stand partly allowed. Allowance for expenditure - CIT(A) has estimated the expenses as 25% of unaccounted commission. - HELD THAT:- The perusal of material on record reveal that the assessee had employed four persons during the year to carry out various transactions. One of the entities was a corporate entity for which additional expenditure has to be incurred to maintain the corporate personality. Keeping in view the same, we enhance the same to 50% of unaccounted commission. The income reflected by M/s Abhayaraj Gems Private Ltd. the proprietor of M/s Rishabh Impex could not be termed as real income and therefore, the credit of the same shall be granted to the assessee. The assessee, in its own return of income, has reflected salary from M/s Abhayaraj Gems Private Ltd. which also, for the same reasons, could not be termed as real income and therefore, the same would stand deleted from the income of the assessee.
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2019 (5) TMI 427
Capital gain computation - transfer of capital asset u/s 2(14) or not - non promulgation of development agreement as planned - whether there is a transfer of capital asset or not under section 2(14) ? - assessee entered into development agreement for development of the land wherein assessee along with others has to give vacant possession of the property starting from 8th month of the date of execution of this deed and shall accommodate the second party s plans for development but as developer was not fulfilled the contract as per the terms and conditions, the possession is not given to the developer - It is the case of the assessee is that the developer M/s. IPL Infraservices Pvt. Ltd. has not obtained necessary approvals and plans, sanctions from the competent authorities and not acted as per the development agreement and no development has taken place and submitted that there is no transfer of the capital asset. HELD THAT:- We find that when the Assessing Officer has asked the assessee in respect of development agreement and possession of the property it is submitted by the assessee that there is an agreement dated 01/05/2008 and as per the agreement, the developer has to obtain necessary plans, approvals and sanction from the competent authorities due to slump in the real estate, the developer has not developed the land. Therefore the possession is with the assessee and is running poultry in the same land which he running earlier also. All the relevant details are filed, in our opinion, the assessee has discharged his burden casted upon him to show that the possession is with the assessee. Under the above facts and circumstances of the case, once the assessee has discharged his burden, it is the duty of the Assessing Officer to examine the details filed by the assessee and he has to prove that possession is still with the developer and not with the assessee. In the present case, the developer has not discharged his obligation as per the agreement, therefore taxking the capital gains is not justified. From the assessment order, it is very clear that the Assessing Officer has not pointed out anything in respect of the notice issued to the developer and not called any explanation from the assessee in respect of the same. Therefore, we find that the Assessing Officer without making any enquiry, which is necessary in passing the assessment order, he arrived to a conclusion that there is a transfer of capital asset - the possession has not been handed over to the developer and, therefore, there is no transfer of capital asset as per section 2(14) - Decided in favour of assessee.
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2019 (5) TMI 426
Estimation of income - rejection of books of accounts - estimation of income at 5% - HELD THAT:- As relying on SRI VENKATESWARA WINES VERSUS THE INCOME TAX OFFICER, WARD 10 (4) , HYDERABAD. [ 2015 (11) TMI 1746 - ITAT HYDERABAD] direct the AO to adopt 3% of the cost of goods of liquor sold as the income of the assessee. Accordingly, the grounds raised on this issue are allowed. Addition of interest from bank deposit - AO made this addition under the head income from other sources - AR has submitted that interest income earned are out of deposits, which are made only for the purpose of business - HELD THAT:- We remit this issue back to the AO to verify the interest income. If it is earned out of free deposits, the additional income may be sustained. Addition u/s 68 - petition for admission of the additional evidences - HELD THAT:- We admit the additional evidences (supra) submitted by the assessee, as the same are important evidences to decide the issue. Since the additional evidences submitted before the ITAT for the first time, the revenue authorities had no occasion to consider the same. Remit the issue back to the file of the AO with a direction to consider and verify the additional evidences submitted by the assessee and decide the issue in accordance with law after providing an opportunity of being heard to the assessee in the matter. Thus, this ground is allowed for statistical purposes.
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2019 (5) TMI 425
Revision u/s 263 - valuation of capital gain - valuation of property - the bungalow is found in extremely dilapidated condition - cost of acquisition - valuation as on date OR as on 01.04.1981 - property was constructed during Portuguese Regime - finding of the Learned CIT that the cost of property should be taken as Nil for calculation of the long term capital gain - CIT observed that the Registered Valuer report suffers from self contradiction - HELD THAT:- The order of the AO could not be termed as erroneous or prejudicial to the interest of the revenue warranting exercise of revisional jurisdictional u/s 263 because the Learned CIT formed a different opinion. The valuer as simply commented upon condition of the property during the course of his verification only. This does not automatically mean that property was under bad and dilapidated condition as on 01.04.1981. However, we find that when two views are possible and that has resulted in loss of the revenue it cannot be treated as erroneous order prejudicial to the interest of the revenue unless the view taken by the Assessing officer is unsustainable in law. We find nothing contrary to come to a conclusion that the Learned AO has not made any enquiry in the assessment proceeding. Taking into consideration, the entire aspect of the matter we are of the considered view that the order impugned before us is nothing but a change of opinion and the very basis of such order i.e. the finding of the CIT does not depict the original factual matrix of the matter. At the cost of repetition we say that the valuation of the property was made upon inspection on 31.01.2009. The description of the property was in respect of that relevant point of time and not of the 01.04.1981 of which the valuation was assessed by the registered valuer. Since, the very basis of the finding of the CIT is not proper, we find no merit in the order impugned before us u/s 263 of the Act passed by the Learned CIT. Thus, the same is hereby quashed. The appeal preferred by the assessee is, therefore, allowed.
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2019 (5) TMI 424
Determination of income u/s 44BB - Receipts on account of reimbursements of expenses were includable in the gross receipts - HELD THAT:- Assessee was engaged in the business of providing offshore supply vessel in respect of all the contracts mentioned in the Assessment Order. In the present case also the amount which is paid to the assessee is towards the expenses incurred on behalf of the payer and no where mentions that it is for reimbursement of expenses. The assessee also relied upon the decision of Sedco Forex International Inc. which is now decided by the Hon ble Apex Court [ 2017 (11) TMI 78 - SUPREME COURT] against the assessee. Receipts qualified for determination of income under Section 44BB of the Act has been decided in favour of the assessee in assessee s own case for A.Y. 2011-12 Taxability of receipts on account of mobilization for the activities carried outside Indian Territorial Waters - includibie in the revenue taxable u/s 44BB - HELD THAT:- The provision of Section 44BB considers inclusion of all kind of amount paid or payable to the assessee or to any person on his behalf on account of the provision of services or facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of mineral oils in India. Thus, both the grounds are dismissed.
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2019 (5) TMI 423
Deduction u/s 80P(2)(a)(i) - interest income received by the assessee on investments made with District Co-operative Banks, Other Banks etc. - assessee is a primary agricultural credit societies, registered under the Kerala Co-operative Societies Act, 1969 - whether interest income received by the assessee on investments with sub-treasuries and banks was liable to be assessed under the head income from other sources or income from business ? - HELD THAT:- In the instant case the assessee had made investments with sub-treasuries, District Co-operative Banks, other Banks in the course of its business of banking / providing credit facilities to its members. Therefore, it was entitled to deduction u/s 80P(2)(a)(i) in respect of interest income that was received on such investments in view of the above judicial pronouncements. Since we have found that the interest income was earned in course of carrying on business of banking and entitled to deduction u/s 80P(2)(a)(i), the claim u/s 80P(2)(d) is not considered. See THE VAVVERU CO-OPERATIVE RURAL BANK LTD. VERSUS THE CHIEF COMMISSIONER OF INCOME TAX, VIJAYAWADA [ 2017 (4) TMI 663 - ANDHRA PRADESH HIGH COURT] - Decided against revenue.
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2019 (5) TMI 422
Addition u/s 68 - summons u/s. 131 was issued director of the assessee company to produce the investor/investors directors along with requisite documents - Since director of the Assessee Company and share subscribing companies did not appear before him - HELD THAT:- In this case on hand, the assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants, thereafter the onus shifted to AO to disprove the documents. In the absence of any investigation, much less gathering of evidence by the Assessing Officer, we hold that an addition cannot be sustained merely based on inferences drawn by circumstance. In the facts of the present case, both the nature source of the share application received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO's record. Accordingly all the three conditions as required u/s. 68 of the Act i.e. the identity, creditworthiness and genuineness of the transaction was placed before the AO. The addition made by the AO is based on conjectures and surmises cannot be justified. Therefore, we do not want to interfere in the impugned order of Ld. CIT(A) which is confirmed and consequently the appeal of Revenue is dismissed - Decided against revenue.
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2019 (5) TMI 421
Penalty u/s 271(1)(c) - addition u/s 41 on account of cessation of liability - bonafide explanation - assessee claimed that the said Alok Textile Traders stood merged with M/s Alok Textiles Limited and it was cited as one of the reasons by the assessee for not getting confirmation from the said party - HELD THAT:- The assessee has offered an explanation which is a bonafide explanation as to existence of its liability to said concern as on 31.03.2009 which is also reflected to be payable in its books of accounts. The assessee did discharge its burden as is laid on it under penalty provisions as is contained in Section 271(1)(c). Now it is for the Revenue to rebut the same with cogent incriminating material that explanation offered by the assessee in penalty provisions are false. The Revenue did not bring any incriminating material to prove that the said liability ceased to exist and the assessee had obtained any benefit as is contemplated u/s 41(1) - AO did not made any enquiry with the aforesaid party as no notices u/s. 133(6) or summons u/s 131 were issued by the AO to Alok Textile Traders ( Now Alok Textiles Limited) to unravel truth. AO has not brought any cogent incriminating material to prove that the assessee has obtained any benefit as is contemplated u/s. 41(1). The assessee has rightly relied on the decision of ITAT, Mumbai benches in the case of Shiva Pigments Private Limited v. ITO [ 2012 (10) TMI 861 - ITAT MUMBAI] - thus no penalty u/s 271(1)(c) is exigible on the assessee Income from sub-letting of the premises - income from house property or income from other sources - bonafide belief - dispute regarding taxability of head of income in respect of sub-letting is going on - HELD THAT:- Obviously with a view to avoid litigation for the year under consideration, the assessee filed return of income on 26.09.2009 declaring rental income from sub-letting as income from house property despite the fact that the assessee being not owner of the said property. The explanation put forward by the assessee is bonafide which takes it out from the clutches of penalty provisions as are contained in Section 271(1)(c) and we hereby order deletion of the penalty levied by the AO u/s. 271(1)(c) of the Act. - Decided in favour of assessee.
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2019 (5) TMI 420
Assessment u/s 153A - Deduction u/s 80IA - second search and seizure action - deduction claimed by the assessee in the return of income filed on 31.03.2007 and the same was fully allowed by the AO originally in the assessment completed u/s 153A r.w.s. 143(3) - HELD THAT:- Since the said assessment dated 31.12.2007 had become final before the second date of search conducted on 28.10.2010, the deduction allowed u/s 80IA in the said assessment could have been restricted by the AO only on the basis of any incriminating material found during the course of second search conducted on 28th 29th October, 2010. As submitted by assessee, there was, however, no such incriminating material found during the course of search on the basis of which the claim of the assessee for deduction u/s 80IA as originally allowed was restricted by the AO and this position clearly evident from the assessment order passed by the AO is not disputed even by the ld. D.R. We, therefore, find no infirmity in the impugned order of the CIT(Appeals) deleting the disallowance made by the Assessing Officer on account of assessee s claim for additional deduction u/s 80IA - Decided against revenue Disallowance u/s 40(a)(ia) - proceedings initiated u/s 153A pursuant to the second search and seizure action - payment of the corresponding TDS is found to have been made to the credit of Central Government before the due date of filing of the return - HELD THAT:- As original assessment proceedings resulting into disallowance u/s 40(a)(ia) had become final, we are of the view that the ld. CIT(Appeals) was not justified in entertaining and allowing the new claim made by the assessee on this issue and even the assessee has not disputed this position. We accordingly reverse the impugned order of the ld. CIT(Appeals) on this issue and allow Ground of the Revenue s appeal. New claim made by the assessee for deduction u/s 80IA for the first time during the course of proceedings u/s 153A r.w.s. 143(3) - AO denied to entertain the said claim while the CIT(Appeals) not only entertained the said claim but also allowed the same on merit- HELD THAT:- As original assessment proceedings not allowing any deduction u/s 80IA had become final, we are of the view that the ld. CIT(Appeals) was not justified in entertaining and allowing the new claim made by the assessee for deduction u/s 80IA for the first time during the course of proceedings under section 153A r.w.s. 143(3) and even the ld. Counsel for the assessee has not disputed this position. We, therefore, reverse the impugned order of the ld. CIT(Appeals) allowing the claim of the assessee for deduction u/s 80IA - Decided in favour of revenue Exemption u/s 86 - HELD THAT:- The original assessment for A.Y. 2008-09 thus had become final and in the absence of any incriminating material found during the course of search, the disallowance made by the Assessing Officer in the assessment completed u/s 153A r.w.s 143(3) on account of assessee s claim for exemption u/s 86 was not sustainable
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2019 (5) TMI 419
Addition u/s 68 - Share premium collected by the assessee - HELD THAT:- On perusal of the chart given for fund position of each share applicant it reveals that the net owned funds of each share applicant were several times more than the investment made in equity of the assessee. It is evident that each share applicant had substantial resources of their own compared with the total investible funds available with each share applicants and that investment made in the equity shares and the assessee company was not significant. We note that the AO did not point out any defect or infirmity in the documents placed on record by the assessee as well as the share subscribers. Thus the creditworthiness of the aforesaid share subscribers cannot be disputed. Assessee had produced the aforesaid documents to explain the nature and source of the share capital along with share premium of the six corporate shareholders. AO had accepted the share capital subscribed by these six corporate entities. However, without pointing out any defects has whimsically without giving any reason by a cryptic order has added the entire share premium which was also given by the very same six corporate entities u/s 68 of the Act. AR brought to our notice that the similar additions were made by the Assessing Officer in five cases wherein the AO accepted the share capital but added the share premium which action of the AO was not upheld by the Tribunal. As decided in APEAK INFOTECH, YOGESH INFOTECH, AMPLY INFOTECH, WESTLINE TRADING COMPANY, JASPER COMMERCE, INEX INFOTECH [ 2017 (9) TMI 1590 - BOMBAY HIGH COURT] the amendment to section 68 of the Act by the addition of proviso thereto took place with effect from April 1, 2013. Therefore, it is not applicable for the subject assessment year 2012- 13. So for as the pre-amended section 68 of the Act is concerned, the same cannot be invoked in this case, as evidence was led by the respondents- assessees before the Assessing Officer with regard to identity, capacity of the investor as well as the genuineness of the investment. Therefore, admittedly, the Assessing Officer did not invoke section 68 of the Act to bring the share premium to tax. - Decided in favour of assessee
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2019 (5) TMI 418
Addition u/s 68 on account of share capital (including share premium raised by the assessee for the relevant assessment year) - proof of the identity, creditworthiness and genuineness of the share applicants - HELD THAT:- Assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants, thereafter the onus shifted to AO to disprove the documents furnished by assessee cannot be brushed aside by the AO to draw adverse view cannot be countenanced. In the absence of any investigation, much less gathering of evidence by the Assessing Officer, we hold that an addition cannot be sustained merely based on inferences drawn by circumstance. We are inclined to uphold the claim of the assessee. To sum up section 68 provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source shall be assessed as its undisclosed income. In the facts of the present case, both the nature source of the share application received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO's record. Accordingly all the three conditions as required u/s. 68 of the Act i.e. the identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO is based on conjectures and surmises cannot be justified. In the facts and circumstances of the case as discussed above, no addition was warranted under Section 68 - We are inclined to delete the addition confirmed by the Ld. CIT(A) and consequently the appeal of Assessee is allowed.
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2019 (5) TMI 417
Levy of penalty u/s 271(1)(c) - defective notice - non specification of charge - HELD THAT:- As relying on SSA'S EMERALD MEADOWS [ 2016 (8) TMI 1145 - SC ORDER] and MANJUNATHA COTTON AND GINNING FACTORY OTHS., M/S. V.S. LAD SONS, [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] imposing of penalty u/s 271(1)(c) of the Act is bad in law and invalid for the reason that the show cause notice u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income. Also see DR. MURARI MOHAN KOLEY [ 2018 (9) TMI 1 - CALCUTTA HIGH COURT] - Decided in favour of assessee.
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2019 (5) TMI 416
Disallowance of expenditure of transportation and handling charges for fresh fruit bunches for the A.Y. 2013-14 and disallowed 80% of the expenditure for the A.Y.2014-15 which indicates that FFB expenditure - HELD THAT:- Nature of expenditure incurred by the assessee is that of loading, unloading charges at collection centers, transportation expenses from collection center to manufacturing unit, further loading and unloading charges from manufacturing centre to the empty bunches clearance centre and the identical expenditure of transportation from manufacturing unit to dumping location and unloading charges at the dumping location. These activities are necessary for any manufacturing of palm oil. Expenditure incurred relating to the FFBs appears to be inevitable and the business cannot run without incurring such expenses. From going through the P L account, it reveals that the assessee did not debit any other expenditure relating to the collection of fresh fruit bunches and clearance of empty bunches under any other head and there is no dispute on this issue. The assessee has adopted the method of contractual payments instead of factual and actual expenditure and the modus operandi adopted by the assessee for booking the above expenditure is not in order as rightly observed by the Ld.CIT(A). After going through the note, we agree with the observation of the Ld.CIT(A) that without carrying on the above activities and incurring the expenditure, the company cannot run it s basic operations and make finished product. It is basic requirement for the company to collect the fresh fruit bunches of palm from collection centers to the manufacturing unit and clear the empty bunches as per the pollution control norms. The AO did not make any personal inspection to estimate the probable / reasonable expenditure to be incurred on said activities of the company. AO also did not reject the books of accounts when he suspected the genuineness of expenditure. The assessee has submitted the comparative chart of the expenditure incurred in the earlier years and on comparative study, the expenditure allowed by the CIT(A) appears to be reasonable. Though the identical expenditure was debited in the earlier years, the AO did not make any disallowance. DR or the AO did not place any evidence to show that the process explained by the assessee in the note is faulty or the expenditure allowed by the CIT(A) is unreasonable and or excessive. Therefore, considering the facts and merits of the case, we are of the considered opinion that disallowance of expenditure to the extent of 30% appears to be reasonable. Accordingly, we uphold the order of the Ld.CIT(A) and dismiss the appeals of the revenue as well as the assessee. Addition was made on agreed basis - ground regarding that the assessee had agreed for the disallowance of expenditure - HELD THAT:- In assessment the assessee had agreed for the disallowance due to paucity of time and subject to not to initiate the penalty proceedings. The assessing officer did not accept the conditional offer made by the assessee and proceeded to complete the assessment and initiated the penalty proceedings u/s 271(1)(c). Once the AO rejects the conditional offer, the same loses its character of binding nature and is no longer valid. Hence the revenue s appeal on this ground untenable, hence, dismissed.
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2019 (5) TMI 415
Addition of cash deposits in Axis Bank - as alleged assessee could not produce any evidence to support the explanation of the assessee to prove the credits in the bank account were in fact related to business transactions - represent the trade transactions - CIT(A) upheld the disallowance considering peak credit - HELD THAT:- Since, there were withdrawals as well as deposits in the bank account it is reasonable to hold that the deposits were made out of cash withdrawals and the deposits and withdrawals are circulation of the same money. Therefore, we are of the considered view that in the facts and circumstances of frequent cash deposit and the withdrawal, it is correct to make the addition of peak credit balance, but not the entire deposits which the Ld.CIT(A) has directed the AO. Hence, we do not see any reason to interfere with the order of the CIT(A) and the same is upheld. The appeal of the revenue on this ground is dismissed. Addition of unsecured loans received from the creditor u/s 68 - HELD THAT:- In the instant case, what the commissioner has examined is the income tax record which is already available with the department and the account copy of the bank account, which was also furnished by the assessee at the time of original assessment proceedings. Furnishing of Aadhar card is fortifying the identity already accepted in original assessment and the same cannot be treated as additional evidence. Since the assessee has furnished the copy of the bank account to establish the balance available and there was sufficient balance in the account to advance the amount of ₹ 10 lakhs to the assessee, CIT(A) has rightly observed that the assessee has satisfied the identity, credit worthiness and genuineness of the transaction and accordingly deleted the addition. No reason to interfere with the order of the Ld.CIT(A) and the same is upheld. The appeal of the revenue on this ground is dismissed. Addition of credits in the bank account of ING Vysya - deposits relates to sales - additional evidence - HELD THAT:- Neither the CIT(A) nor the AO reconciled the deposits made in the bank account with the sales declared by the assessee in the P L account and verified whether the deposits in the ING Vysya bank and other bank accounts relate to business transactions or not. Though the Ld.CIT(A) entertained the additional evidence, the same was not referred to the AO as required under Rule 46A of Income Tax Rules. CIT(A) has not given opportunity to the AO to verify the additional evidence and to submit the comments on the additional ground. Therefore, we are of the considered opinion that the issue should be remitted back to the file of the Ld.CIT(A) to call for the remand report from the AO and decide the issue afresh on merits of the case. Addition in IndusInd Bank - deposits relates to sales - additional evidence - HELD THAT:- The assessee consistently claimed the deposits in the bank account represent the turnover. However, neither the AO nor the assessee have reconciled the total turnover declared in the trading account or VAT with the deposits made in the bank account and the sales admitted by the assessee. It is a fact that the assessee is engaged in the business and made sales to various parts of the state. It is also a fact that the sales are deposited in various locations. In the circumstances making addition of deposit in the bank account without verification would cause injustice to the assessee. In this case, it is to be seen whether deposits relates to sales or not. If the deposits are related to sales, only gross profit required to be brought to tax, but not the entire deposits. In case, the deposits do not represent sales, the addition should be restricted to peak credits if the same money is in circulation. All these aspects were not examined by the AO / CIT(A). Hence, issue requires detailed examination - remit the matter back to the file of the Ld.CIT(A) for re-examination - Appeal of the revenue is partly allowed for statistical purpose.
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2019 (5) TMI 414
Addition being 8 % of total Work In Progress(WIP) - projects at the stage of completion and no sale or opening/closing of WIP were shown by the assessee in P L, A/c. - Incremental WIP including expenditure incurred in previous year - second round of litigation - The whole controversy is that any income on the WIP on construction work carried out by the assessee is chargeable to tax in the impugned assessment year - HELD THAT:- The method of accounting being completed contract method is also consistently followed by the assessee which was permitted by AS-7 issued by ICAI till it was amended in the year 2002. This is second round of litigation and despite that the Revenue is not able to controvert the contentions of the assessee with any cogent incriminating material even before us and only bald statements are made which has no basis whatsoever. We have no material on record to hold that the assessee had any other stream of income apart from these service charges which emanated from construction and development work carried out by the assessee for these two societies and which stood declared in return of income filed with Revenue for AY 2003-04. So far as tribunal observations in its order dated 24.11.2010 in first round of litigation as to verification that the WIP for the impugned AY 2000-01 of ₹ 23.32 crores from the construction of residential buildings of these two societies being carried forward to subsequent years till the work was completed in AY 2003-04 of which income was being offered for taxation by assessee, we have no hesitation in holding that the assessee has sufficiently discharged its onus in proving that it only worked for these two societies since its formation in June 1997 till the construction was completed in previous year 2002-03 relevant to AY 2003-04 and the income earned from the construction work carried out with respect to these societies were ultimately offered for taxation in AY 2003-04 and due taxes paid to Revenue. The detailed reasoning is outlined by us in our conclusions as above in preceding para s of this order. Now it was for the Revenue to have brought on record cogent incriminating material to disprove and dislodge the contentions of the assessee by making necessary enquiries and investigations which in our considered view, the Revenue failed to bring on record any cogent incriminating material to dislodge contention of the assessee and we have no hesitation in confirming the well reasoned appellate order dated 12.03.2014 passed by CIT(A) - Decided against revenue
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2019 (5) TMI 413
Penalty u/s. 271B - delay the filing of the tax audit report - filed after a gap of 7 months 5 days - non-compliance with the statutory provision of the Act - assessee submitted that the return of income and tax audit report was uploaded on income tax website after the due date only because of technical default as PAN of it was not registered on income tax website - reasonable cause for the non-compliance - HELD THAT:- It was the 1st year when it was made mandatory to upload the tax audit report online. Therefore, we can understand that the assessee may not be well aware of the procedures for uploading the tax audit report online. Being the 1st year of filing tax audit report online, we are taking the sympathetic view and accordingly directing the AO to delete the penalty under section 271B of the Act in the interest of the justice fair play. The assessee has made the substantial compliance by filing the tax audit report in which no specific defect was pointed out by the assessee in the assessment framed u/s 143(3). Therefore we are of the view that there was no palpable prejudice caused to the Revenue. See GOVIND GARG PROP. GARG ENTERPRISES VERSUS ITO, WARD- 2 (3) , AJMER [ 2017 (6) TMI 433 - ITAT JAIPUR] There was no mala-fide intent of the assessee to delay the filing of the tax audit report. Therefore we are of the considered opinion the penalty under section 271B in the given facts circumstance is not sustainable. Second year of the assessee when it committed the default - whether the assessee was a serial defaulter in compliance with the provision of section Act - assessee was to file the tax audit report on 30-11-2014 but filed on 31-1-2015 for the AY 2014-15 with the delay of two months only - HELD THAT:- First notice for the AY 2013-14 u/s 271B was issued on 11-3-2016 whereas the time limit to file the tax audit report for the year under consideration (2nd year) was 30-11-2014. Thus it is clear that the assessee was not aware of the proceeding of the section 271B which was initiated much later as discussed above. Therefore in our considered view, the assessee deserves the sympathetic view as taken in the AY 2013-14. In view of the above and considering the length of delay, we reverse the order the authorities below. Therefore the ground of appeal of the assessee is allowed.
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2019 (5) TMI 412
Taxable gift - assessment u/s 15(2) of the Gift Tax Act - Valuation to determine the ownership of the property - Owner of the gifted property - actual value of the property - Valuation by DVO - assessee, late Smt.Fathima Rahim executed a deed settling 94 cents of land along with building in which Fathima College of Pharmacy is housed in favour of her son, who is the legal heir of the assessee - HELD THAT:- Land and building at Survey No.3308/1 3 of Kilikolloor village, Kollam in which the Malik Dinar Trust running the Fathima College of Pharmacy was actually owned by the assessee Mrs.Fathima Rahim and not by the Malik Dinar Trust. This apart, in ground number 2(5) of the appeal, the assessee has also agreed to the fact that the land and building therein are her own and not of the said Trust. As the ownership is proved now, transfer of this captioned property through a deed of partition without executing a valid gift deed entered into on 20.04.1995, to Mr.Azad Rahim, the assessee's son and legal heir shall necessarily be considered for taxation under the Gift Tax Act as deemed gift by virtue of the provisions of section 4(1)(c) of the Gift Tax Act. By virtue of the said section, where there is a release, discharge, surrender, forfeiture etc in property by a person, the value of such release, discharge, surrender, forfeiture etc to the extent to which it has not been found to the satisfaction of the Assessing Officer to have been bonafide, shall be deemed to a gift made by the person responsible for release, discharge, surrender, forfeiture etc. Considering all the above, no infirmity in the decision of the Assessing Officer has taken to bring to tax the value of the land and building amounting to ₹ 37,04,000/- which in turn been gifted to the assessee s son / legal heir, as determined by the Valuation Officer of the Department and accordingly, the same is confirmed. Decided against assessee.
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2019 (5) TMI 411
Allowance of depreciation on non compete fee - whether assessee s claim of depreciation on non compete fee @ 25% by treating it as an intangible asset is acceptable or not? - HELD THAT:- The Tribunal while deciding assessee s appeal in assessment year 2001 02 [2016 (4) TMI 583 - ITAT MUMBAI] taking note of the decisions of M/S. INGERSOLL RAND INTERNATIONAL IND. LTD. [2014 (6) TMI 934 - KARNATAKA HIGH COURT] and M/S. PENTASOFT TECHNOLOGIES LTD. [2013 (11) TMI 1057 - MADRAS HIGH COURT] allowed assessee s claim of depreciation by treating the non compete fee as an intangible asset. The same view was reiterated by the Tribunal while deciding assessee s appeal for subsequent year also. Therefore, facts being identical, following the consistent view of the Tribunal in the orders referred to above, as well as the decision of different High Courts cited supra, we uphold the decision of the learned Commissioner (Appeals) on the issue in allowing claim - decided against revenue Disallowance of interest on borrowed funds - AO disallowed a part of interest expenditure on the reasoning that investments made by the assessee in sister concerns are not for the purpose of business - HELD THAT:- While deciding dispute arising out of similar disallowance made by the Assessing Officer in the assessment year 2001 02, the Tribunal in [2016 (4) TMI 583 - ITAT MUMBAI] has decided the issue in favour of the assessee by holding that the investment of funds in sister concerns are for the purpose of business. The same view was reiterated by the Tribunal while deciding the issue in assessment year 2006 07 [2016 (10) TMI 1037 - ITAT MUMBAI] , and for the assessment year 2011 12 . [2017 (4) TMI 862 - ITAT MUMBAI] . Disallowance on account of interest attributable to interest free loan to the sister concern and director - HELD THAT:- Assessing Officer has computed notional interest on certain amounts shown as receivable from a sister concern and one of the directors. Commissioner (Appeals) after verifying the facts on record has found that the amount receivable from the sister concern is not in the nature of loan and the loan advanced to one of the directors is out of surplus fund. The aforesaid factual finding of learned Commissioner (Appeals) remains uncontroverted. Further, the Tribunal while deciding the issue in the preceding assessment years, in the orders referred to above, has deleted similar disallowance made by the Assessing Officer. In view of the aforesaid, we uphold the decision of learned Commissioner (Appeals) on the issue. Disallowance of employees contribution to provident fund (P.F) and pension fund - sum paid within the grace period allowed under the relevant Acts. within the grace period allowed under the relevant Acts - HELD THAT:- Undisputedly, the assessee has paid the employees contribution to PF and pension fund within the grace period allowed under the relevant Acts. Moreover, such payments have been made by the assessee much before the due date of filing of return of income for the impugned assessment year as per section 139(1) of the Act. That being the case, following the decision of CIT v/s Ghatge Patil Transports Ltd. [2014 (10) TMI 402 - BOMBAY HIGH COURT] , we uphold the decision of learned Commissioner (Appeals) by dismissing the ground raised. Transfer pricing adjustment - marketing fee paid to the Associated Enterprises (AE) - assessee has benchmarked each of the transactions separately by applying one of the prescribed methods - HELD THAT:- The assessee had entered into various international transactions with its AEs, such as, sale of goods to AE in USA, royalty on sales received, sale of goods to AE in Sri Lanka and marketing fee paid to the AE in USA. It is relevant to observe, the assessee has benchmarked each of the aforesaid transactions separately by applying one of the prescribed methods. TPO while determining the arm's length price of marketing services fee paid has aggregated it with the sales made to the AE at USA and while doing so has selected / rejected comparables relating to the sales segment. In our view, the aforesaid approach of the Transfer Pricing Officer is unacceptable. When the Transfer Pricing Officer is examining the arm's length price of the marketing fee paid, he cannot club it with the sales transaction since both are separate and distinct transactions.The agreement between the assessee and the AE clearly establish that the payment of marketing fee is not linked to sales. Therefore, benchmarked separately. Moreover, the assessee is following the aforesaid method of benchmarking all the transactions separately consistently over the years. It is also fact on record that the Department has accepted the benchmarking done by the assessee in all other years except the impugned assessment year. Therefore, there being no material difference in facts, following the rule of consistency also assessee s benchmarking has to be accepted Disallowance for provision of doubtful debts - added back to the income computed under the normal provisions - no adjustment while computing the book profit u/s 115JB - HELD THAT:- As could be seen, the Assessing Officer has added back the provision for doubtful debt taking recourse to Explanation-1(c) to section 115JB(2), as it is not set out for meeting any ascertained liability. However, the facts on record reveal that the amount in dispute is not a liability but debt receivable by the assessee. That being the case, Explanation-1(c) to section 115JB would not apply. The order passed by the learned Commissioner (Appeals) on the issue is upheld. Adjustment made to the arm's length price of interest on interest free loan advanced to the Associated Enterprise (AE) and commission on corporate guarantee provided to the AE - LIBOR rate OR Prime Lending Rate (PLR) of RBI. - HELD THAT:- The provision of interest free loan to the AE comes within the purview of international transaction under section 92B hence, transfer pricing provisions will apply. Moreover, since by provision of interest free loan, a benefit has accrued to the AE which may not have been the case if such loan would have been advanced by a third party, determination of arm's length price of the interest on such loan has to be made. We agree with the Commissioner (Appeals) that interest cannot be charged by applying PLR rate, since, the loan has been advanced to the AE in a foreign country. Therefore, we direct the Assessing Officer to charge interest on interest free loan to the AE at LIBOR plus 200 basis points. As regards guarantee commission for provision of corporate guarantee, we are unable to accept the contention of the learned Authorised Representative that it does not come within the purview of international transaction as defined under section 92B. In the decisions referred to by the learned Commissioner (Appeals), the Hon'ble Jurisdictional High Court has upheld the decision of the Tribunal in computing corporate guarantee fee @ 0.5%. In view of the aforesaid, we uphold the decision of the learned Commissioner (Appeals) on the issue. Transfer pricing adjustment to the price paid for purchase of moulds - no proper benchmarking of transaction - HELD THAT:- Assessee was unable to justify its claim that the international transaction relating to purchase of moulds was benchmarked by applying CUP method. Similarly, while determining the arm's length price of the disputed transaction, the Transfer Pricing Officer has not followed any prescribed method, but has determined the arm's length price on purely estimation basis. This, in our view, is legally unsustainable. The Transfer Pricing Officer is duty bound to determine the arm's length price of the international transaction by following any one of the methods prescribed in the statute. The Transfer Pricing Officer has not justified or provided any valid reason why 25% downward adjustment has to be made to the price paid. That being the case, the addition made on account of transfer pricing adjustment is unsustainable. Assessee has also not properly benchmarked the transaction, we are inclined to restore the issue to the Assessing Officer for determining the arm's length price of the international transaction relating to purchase of moulds by applying any one of the prescribed methods. In this context, the Assessing Officer should consider assessee s claim of determination of arm's length price by applying entity level TNMM.
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2019 (5) TMI 410
Exemption u/s 11 - charitable activity or not? - inter-trust donation by one charitable trust to another for utilization by the donee trust towards charitable objects - as per AO activities of the trust are not of charitable in nature being not involved in providing relief to the poor, education and medical relief etc. also that at the most, the trust can be treated as advancement of other objects of general public utility and on this ground also, the assessee is not entitled for any relief because income of the trust during the year under assessment exceeds ₹ 25,00,000/-. - HELD THAT:- As decided in assessee's own case [ 2019 (2) TMI 1616 - UTTARAKHAND HIGH COURT] inter-trust donation by one charitable trust to another for utilization by the donee trust towards charitable objects is proper application of income for charitable purpose in the hands of donee trust and it will not affect the exemption claimed by the assessee u/s 11 of the Act in any manner whatsoever nor inter-trust donation can be termed as deviation from its objects as it is nowhere the case of the Department that the donee trust has not applied such sums for charitable purpose by deviating its funds, hence relief granted by ld. CIT (A) needs no interference - Decided against revenue Receiving consideration on sale of medicines, publications, CD-VCDs, etc. - whether such activities of the trust cannot be said to be charitable in nature as it is receiving consideration while carrying out its business activities which falls under the explanation of advancement of any object of any public utility under section 2(15) ? - HELD THAT:- Objects of the assessee trust fall within the purview of providing medical relief, imparting education or relief to the poor and are not in the nature of general public utility, so the proviso to section 2(15) of the Act is not attracted in case of the assessee trust. So, ld. CIT (A) has rightly decided the issue in favour of the assessee by following the decision rendered by the Tribunal in assessee s own case for AY 2009-10 [ 2019 (2) TMI 1616 - UTTARAKHAND HIGH COURT] - Decided in favour of assessee.
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2019 (5) TMI 409
Assessment u/s 153A - addition u/s 68 - initiation of search action u/s 132 - no incriminating document/material was found during the course of search - assessment was not abated at the time of initiation of search action u/s 132 - HELD THAT:- We find the assessee in the instant case filed the original return of income on 25th September, 2009 for the impugned assessment year. The return was duly accepted and intimation u/s 143(1) of the Act was issued. No assessment or reassessment was completed u/s 143(3) or 148 and no notice u/s 143(2) was issued thereafter or any other proceedings have been commenced to disturb the said return of income. Therefore, it has attained finality prior to the date of search on 18th June, 2013. It is an admitted fact that in the search action u/s 132, no incriminating document/material was found and seized at the time of search and also subsequently. Since at the time of initiation of search action u/s 132 the assessment or reassessment was not abated and the additions made in the assessment order passed u/s 153A dated 29th March, 2016 are not based on any incriminating document/material seized, therefore, in view of the decision in the case of CIT vs. Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] , the addition made by the Assessing Officer cannot be sustained. Thus in absence of any incriminating material found during the course of search, no addition can be made u/s 153A of the Act in case of a non-abated assessment. So far as the loose papers seized and inventorised it is an admitted fact that these papers do not belong to the assessee and these papers belong to the six investor companies of the assessee. Further, these are all statutory combined registers which were required to be maintained as per Companies Act, 1956 and the transactions reflected in the registers pertained to the share issue and transfer in relation to those six investor companies of the assessee. Therefore, this cannot be called as incriminating material. - Decided against revenue.
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2019 (5) TMI 408
Difference in amount as revenue from operations as against the TDS certificate and claimed credit of TDS - HELD THAT:- The assessee in its service tax return has accounted the gross revenue as ₹ 3,10,81,172/-. CIT(A) upheld the action of the AO the reasons for which has been reproduced in the preceding paragraphs. It is the submission of the assessee that the assessee in the subsequent year has offered the balance amount to tax which has been accepted in the order passed u/s 143(3) and, therefore, taxing the same in the impugned assessment year will amount to double taxation. Merely because the other party has declared the same as expenditure, it does not automatically become the income of the assessee and the certificate issued by the payer company which has been countersigned by the assessee company is binding on both the sides. It is also his submission that total receipts and expenditure are fully matching as per the matching concept. Alternate submission of the assessee that the matter may be restored to the file of the Assessing Officer with a direction to verify as to what statement has been given by Hindustan Motors in their accounts. We find some force in the argument of the assessee regarding the alternate contention. A perusal of the Consulting Service Agreement shows that the stamp paper was purchased on 26th March, 2013 and the date in the Consulting Service Agreement is blank. Since this certificate was furnished at the time of hearing and was not available before the AO or the CIT(A), therefore, we deem it proper to restore the issue to the file of the AO with a direction to obtain further information from Hyundai Motor India Ltd. regarding the nature of the agreement. He should also keep in mind the order passed u/s 143(3) in the subsequent assessment year. The grounds raised by the assessee are accordingly allowed for statistical purposes.
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2019 (5) TMI 407
Deduction u/s 80P(2)(a)(i) - interest income received by the assessee on investments made with Sub-Treasuries, District Co-operative Banks, Other Banks etc. - assessee's are primary agricultural credit societies, registered under the Kerala Co-operative Societies Act, 1969 - whether interest income received by the assessees on investments with sub-treasuries and banks was liable to be assessed under the head income from other sources or income from business ? - HELD THAT:- In the instant case the assessees had made investments with sub-treasuries, District Co-operative Banks, other Banks in the course of its business of banking / providing credit facilities to its members. Therefore, it was entitled to deduction u/s 80P(2)(a)(i) of the I.T.Act in respect of interest income that was received on such investments . See THE VAVVERU CO-OPERATIVE RURAL BANK LTD. VERSUS THE CHIEF COMMISSIONER OF INCOME TAX, VIJAYAWADA [ 2017 (4) TMI 663 - ANDHRA PRADESH HIGH COURT] - Decided in favour of assessee.
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2019 (5) TMI 406
Assessment u/s 153A - Bogus LTCG - HELD THAT:- In absence of any incriminating material the addition cannot be made by the AO in the proceedings u/s 153A when the assessment for the year was not pending as on the date of search. Following the decision as relied upon the AR as well as the decision of this Tribunal in case of DCIT vs. M/s A.M. Exports [ 2019 (1) TMI 696 - ITAT JAIPUR] we deleted the addition made by the AO on account of long term capital gain. Since, we have deleted the addition on the legal ground therefore, we do not propose to go into the merits of the issue regarding the genuineness of the transactions as raised in ground. Unaccounted transaction detected during the course of search and seizure action as recorded in the loose papers and other incriminating material found and seized - HELD THAT:- Considering inflow as well as out flow of cash and cheques as recorded in the seized papers the CIT(A) took the peak of incoming cash at ₹ 7,14,920/- and sustained the addition to that extent. We find that in the statement recorded U/s 132(4) as well as Section 131 the assessee apart from specific amounts has also surrendered ₹ 93,00,000/- on account of sundry/ miscellaneous items of unaccounted expenses or irregularity in the books of accounts if any. The said amount of ₹ 93,00,000/- was surrendered by the assessee to cover any irregularity in the claim in the books of accounts. Disallowance made by the AO which are restricted by the CIT(A) is very well covered by the said amount of ₹ 93,00,000/- when the AO has not pointed out any other irregularity or discrepancy in respect of any other year cover under the search to consume or utilize the said sundry amount of ₹ 93,00,000/- surrendered by the assessee. Accordingly, the addition restricted by the CIT(A) is not sustainable when the assessee has already surrendered extra amount of ₹ 93,00,000/- to cover such irregularity. Addition on account of receipt recorded treating as unaccounted receipt of the assessee - addition restricted by the CIT(A) by applying N.P. rate of 13.28% on the said amount which comes - HELD THAT:- Though the assessee has explained that this amount of ₹ 2,00,000/- is nothing but representing the imprest account maintained by the employees of the assessee who keep these details for making day to day payment for various sites. Since the assessee has already surrendered on account of miscellaneous/ irregularity of ₹ 93,00,000/- then the amount of ₹ 26,650/- confirmed by the CIT(A) is already covered by the said disclosure made by the assessee accordingly, the same is deleted. Addition made on account of difference between the surrendered recorded restricted by CIT(A) by applying the NP rate at 13.28% - HELD THAT:- The assessee in the statement recorded U/s 132(4) of the Act has made surrendered of ₹ 1,67,00,000/- on account of unaccounted expenditure of the assessee. During the course of the assessment proceedings, the AO noted that the actual account of expenditure recorded in the seized material is ₹ 1,73,72,171/- and there is excess expenditure of ₹ 6,32,171/- which was added to the income of the assessee. CIT(A) restricted the addition by apply the NP @ 13.28% which comes to ₹ 83,952/-. We find that this amount of ₹ 83,952/- is also covered by the miscellaneous surrendered of ₹ 93,00,000/- by the assessee on account of the sundry/irregularity in the accounts of the assessee. Accordingly without going into the other contention raised by the AR when this amount is also covered by the said miscellaneous surrendered the addition is not justified and the same is deleted . A ppeal filed by the assessee are allowed.
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2019 (5) TMI 405
Income accrued in India - royalty or fees for technical services - subscription fees receipts - assessee company is a tax resident of Germany - Permanent Establishment (PE) in India - India Germany Tax Treaty - Whether payment received by the assessee is only in the nature of business profit ? - HELD THAT:- A customer/subscriber can access the data stored in the database by paying subscription. Tribunal, Ahmedabad Bench, in ITO v/s Cedilla Healthcare Ltd. [ 2017 (1) TMI 554 - ITAT AHMEDABAD] following decision of Authority for Advance Ruling in Dun Brad Street Espana, S.A. [ 2011 (7) TMI 957 - BOMBAY HIGH COURT] while considering the nature of subscription paid to a U.S. based company viz. Chemical Abstract Services, which is in the same line of business and is stated to be the competitor of the assessee, held that the subscription paid for online access to the database system scifinder is not in the nature of royalty. Assessees were maintaining databases of information collated from various journals and articles and allowed access to the users to use such material as required by them. Keeping in view the ratio laid down in the decisions (supra), the payment received by the assessee has to be held to have been received for use of copyrighted article rather than for use of or right to use of copyright. Whether the subscription fee can be treated as fees for technical services ? - It is evident that the assessee has collated data from various journals and articles and put them in a structured manner in the database to make it more user friendly and beneficial to the users/customers who want to access the database. The assessee has neither employed any technical/skilled person to provide any managerial or technical service nor there is any direct interaction between the customer/user of the database and the employees of the assessee. The customer/user is allowed access to the online database through various search engines provided through internet connection. There is no material on record to demonstrate that while providing access to the database there is any human intervention. Department has not brought any material on record to demonstrate that the assessee has employed any skilled personnel having knowledge of chemical industry either to assist in collating articles from journals / magazines which are publicly available or through them the assessee provides instructions to subscribers for accessing the online database. The assessee even does not alter or modify in any manner the articles collated and stored in the database. In the aforesaid view of the matter, the subscription fee received cannot be considered as a fee for technical services as well. Online databases are provided by Taxman, CTR online, etc. which are accessible on subscription not only to professionals but also any person who may be having interest in the subject of law. When a subscriber accesses the online database maintained by Taxman/CTR online etc. he only gets access to a copyrighted article or judgment and not the copyright. Similar is the case with the assessee. Therefore, in the facts of the present case, the subscription fee received by the assessee cannot be treated as royalty under Artile 12(3) of India Germany Tax Treaty. Thus the addition made has to be deleted, as, the payment received by the assessee is only in the nature of business profit which cannot be brought to tax in India in the absence of PE. - Decided in favour of assessee.
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2019 (5) TMI 404
Capital gain computation - reference was made to the DVO u/s 50C(2) - methodology adopted by the DVO - challenge of correctness of DVO report - HELD THAT:- The assessee is indeed correct, even though somewhat serendipitously. that the CIT(A) ought to have examined the matter on merits. Of course, before doing so, the CIT(A) was under a statutory obligation to serve notice of hearing to the DVO and thus afford him an opportunity of hearing. Clearly CIT(A) took too narrow and somewhat superficial a view of his powers under the scheme of the law, and the assessee did not point out the specific legal provisions to him either. Be that as it may, the fact remains that correctness of the DVO s report is to be examined on merits and there is no adjudication, on that aspect, by the CIT(A). In view of these discussions, as also bearing in mind entirety of the case, we deem it fit and proper to remit the matter to the file of the CIT(A) for adjudication on merits in accordance with the scheme of the law, after giving a due and reasonable opportunity of hearing to the assessee as also to the DVO, and by way of a speaking order. We further direct the CIT(A) to dispose of the remanded proceedings within three months of receiving this order, and, in case the DVO does not avail the opportunity of hearing, on the basis of material on record and submissions of the assessee.
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2019 (5) TMI 403
Disallowance of exemption u/s. 54 - investment towards the purchase of the new residential property under consideration upto the date of filing of his revised return of income u/s 139(5) - outer limit for the purchase or construction of the new asset as per sub-section (2) of Sec. 54 is the date of furnishing of the return of income u/s.139 - HELD THAT:- On a plain and literal interpretation of the aforesaid statutory provision, it can safely be gathered that the conscious, purposive and intentional providing by the legislature of date of furnishing the return of income under Sec.139 cannot be substituted and narrowed down to Sec.139(1). In our considered view the date of furnishing of the return of income u/s 139 would safely encompass within its sweep the time limit provided for filing of the return of income by the assessee u/s 139(4) as well as the revised return filed by him u/s 139(5). Assessee in the case before us was entitled to claim exemption u/s. 54 to the extent he had invested towards the purchase of the new residential property under consideration upto the date of filing of his revised return of income u/s. 139(5) i.e. on 15.11.2014. As is discernible from the records, as the assessee had invested an amount of ₹ 2,49,94,008/- towards the purchase of the property under consideration up to 15.11.2014, i.e. the date of filing of the revised return of income u/s. 139(5) which we find is much in excess of LTCG of ₹ 1,44,51,461/- (after indexing) that had arisen on the sale of the aforementioned old residential flat, therefore, no part of the LTCG as rightly claimed by the assessee was liable to be brought to tax during the year under consideration. We thus in terms of our aforesaid observations set aside the order of the CIT(A) and vacate the disallowance of the assesses claim of exemption u/s. 54.
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2019 (5) TMI 402
TP Adjustment - selection of comparable - main three issues are viz. (i). exclusion of comparables selected by the assessee in its TP study report for benchmarking its non binding investments advisory services rendered to its AE; (vi) functional profile of Ladder up Corporate Advisory Pvt. Ltd. selected as a comparable by the TPO is similar to that of the assessee; and (iii). non granting the benefit of economic/risk adjustments to the assessee - HELD THAT:- The three companies which were selected by the assessee as comparables for benchmarking the ALP of its international transactions, but were rejected by the lower authorities viz. (i) IDC India Ltd; (ii) ICRA Management Consulting Services Ltd; and (iii) Mecklai Financial Services Ltd are good comparable and safely be taken as a comparable to a company providing non-binding investment advisory services. We are of the considered view that the TPO/DRP had erred in excluding the aforementioned company. We thus in terms of our aforesaid observations being of the considered view that as the aforementioned company i.e. Ladderup Corporate Advisory Pvt. Ltd. which was carrying on merchant banking and investment banking activity was functionally different from the assessee that was providing nonbinding investment advisory services and thus could not have been selected as a comparable for benchmarking the international transactions of the assessee during the year under consideration had wrongly been selected as a comparable for benchmarking the nonbinding investment advisory services provided by the assessee to its A.E during the year under consideration. We thus in terms of our aforesaid observations direct the A.O/TPO to exclude the aforementioned company i.e Ladderup Corporate Advisory Pvt. ltd. from the final list of the comparables and recompute the ALP of the international transactions of the assessee for the year under consideration. We have given a thoughtful consideration and are of the considered view that now when the comparables selected by the TPO/DRP have been excluded by us from the final list of comparables, hence the seeking of risk adjustment by the assessee in the backdrop of the fact that the comparables selected by the TPO/DRP unlike the assessee are entrepreneurs and undertake full range of economic risks does no longer subsists and for the said reason is rejected. Exclusion of comparable selected by assessee - Alomndz Global Securities Ltd. - Crisil Risk Infrastructure Solutions Limited - ICRA Management Consulting Services Ltd. HELD THAT:- directed the AO/TPO to include these in comparable also directed the AO/TPO to exclude e-Clerx Services Ltd and Hartron Communications Ltd. In terms of our aforesaid observations we direct the A.O/TPO to recompute the ALP of the international transactions of the assessee after including/excluding the aforementioned companies from the final list of the comparables. In case the ALP of the assessee is found to be within the safe harbour margin of +/- 5% of the mean margin of the final list of comparables then no TP adjustment would be called for in hands of the assessee.
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Customs
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2019 (5) TMI 492
Amendment / conversion of shipping bill - Time Limitation - Whether the 2nd respondent tribunal was right in holding that the 1st respondent is entitled to the benefit of the Circular No.36/2010, dated 23.09.2010 and that the period of limitation of 3 months under the said circular is not applicable to the 1st respondent as Section 149 does not impose any period of limitation? HELD THAT:- The order passed by the Tribunal is remanding the matter for consideration of the adjudicating authority to examine the documents on the basis of which amendment is sought and also to ensure as to whether those documents were available at the time of filing of the shipping bills or not, and if those documents on the basis of which amendment is sought were available at the time of filing of the shipping bills, then the respondent/importer is entitled for conversion of the shipping bills from Advance Licence Scheme to DEPB Scheme. There is no substantial question of law involved in this appeal - Appeal dismissed.
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2019 (5) TMI 491
Liability of Export Duty - Iron Ore Fines - N/N. 15/2016-Cus dt. 01/03/2016 - quantum of Fe content - liability of export duty of 30% if Fe content is more than 58% - HELD THAT:- The Commissioner (Appeals) took the view that the Fe content is to be estimated on the basis of discharge Port Report by ignoring the report of the Chemical Examiner. It is evident that copy of test report of Chemical Examiner, relied by the Original Customs Authority for assessment, has not been made available to the respondent. Before relying on such a report, the basic principles of natural justice require that the respondent, should be given a chance to rebut the report of the chemical examiner including the misgivings on the manner of drawing of samples and testing thereof. The assessment is required to be done Denovo after giving a copy of the Chemical Examiner Report along with the copy of Test Memo prepared by Customs at the time of drawing the samples - matter is remanded to Original Authority for Denovo Assessment.
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2019 (5) TMI 490
Suspension of CHA License - correctness of continuing of the order of suspension despite the long drawn investigation having failed to crystallise the memo of charges against the appellant herein - time limitation - HELD THAT:- In THE PRINCIPAL COMMISSIONER OF CUSTOMS (GENERAL) MUMBAI VERSUS UNISON CLEARING PVT. LTD., AND OTHERS. [ 2018 (4) TMI 1053 - BOMBAY HIGH COURT] , the Hon'ble High Court of Bombay had disapproved of the setting aside of the detriment imposed in accordance with Customs Brokers Licensing Regulation, 2018 merely on failing the test of adherence to the time-line. While acknowledging the prescriptions as statutorily binding, the Hon'ble High Court held that the time-line and adherence thereof needed further test against the facts and circumstances of each case and the reasons for delay should also be considered to appreciate and assign the responsibility as well as consequences thereof. The relationship of a custom broker with a licensing authority is one of near employment as a facility for smooth clearance of cargo on behalf of importers/exporters who may be at other locations. Unlike tax disputes, the consequence of detriment under the Licensing Regulations has a bearing on the lives of the brokers as well as their dependents. There can be no doubt that suspension for long periods of time or disproportionate penalties impact these persons. It is in acknowledgement of the criticality of expeditious action that the Regulations contemplate prescription of timeline, without which an atmosphere of lack of accountability would pervade the entire exercise. All that is available on record is that the investigation in a major fraudulent activity is still under way. It is not the case of the respondent- Commissioner that any act on the part of the appellant has delayed the initiation of proceedings. The explanation that investigation is pending is also not readily acceptable. It would appear that either the evidence required to sustain the proceedings is not available or that the role of the customs broker may not have been so critical in the transaction to fraudulently claim the drawback. Either way, the continuation of suspension in such circumstances does not, in our opinion, appear to be in concord with the principles of accountability or of prompt response. There is no evidence of any lack of cooperation on the part of appellant herein. The cause of justice cannot be further enabled except by an immediate revocation of the suspension and reinstatement of the licence - Appeal allowed.
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2019 (5) TMI 489
Application for early hearing - revocation of CHA License - HELD THAT:- The appellant is a customs broker whose licence has been revoked without just reason; that due to this survival of the customs broker as well as livelihood of their employees are badly affected, hence early hearing may be granted - Early hearing is granted. Appeal is posted for hearing on 27.05.2019.
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2019 (5) TMI 488
Imposition of redemption fine and anti dumping duty - HELD THAT:- Since appellants are not pressing any point taken in the appeal and do not wish to claim the goods, we are not passing order on the merits of the case - Appeal dismissed - decided against appellant.
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2019 (5) TMI 487
Forfeiture of security deposit - ban on operation as authorized courier - HELD THAT:- The Regulations are not framed under any special authority or law but is a procedure notified under the general powers vested in section 157 of Customs Act, 1962; the opportunity for representing to the Chief Commissioner of Customs against any penalty does not foreclose recourse to the appellate jurisdiction in section 129 of Customs Act, 1962. The respondent has invoked the power to suspend under regulation 14 of the Courier Imports and Exports (Clearance) Regulations, 1992. Implicit in this invoking is the lack of prima facie justification for establishing one of the grounds that could lead to revocation of registration, and/or forfeiture of security, as enumerated in the said Regulation. A lack at the stage of suspension cannot be filled at the stage of notice without the inquiry mandated in the power to suspend. It can only be deduced that the notice, as well as the detriments, have been proceeded with despite this lack. Consequently, the de-registration and forfeiture lack the authority of law. Eternity is accepted only in matters of faith. No statute can, or should, arrogate such and we do not find such in the Courier Imports and Exports (Clearance) Regulations, 1998. Yet the respondent has taken it upon himself to resort to banning operation for all time to come which is not a jurisdiction that is permissible to be invoked under Regulations. It is tantamount to interference with exercise of regulation 10 of Courier Imports and Exports (Clearance) Regulation, 1988 which is not within the scope of notice issued to the appellant. Appeal allowed - decided in favor of appellant.
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2019 (5) TMI 486
Valuation - undervaluation of imported goods - enhancement of transaction value - Rejection of transaction value not done - Entire case of under valuation made out in the present proceedings is that Appellant 1 had supplied the goods imported by them to DESU at much higher price than the price declared by them on Bill of Entry - HELD THAT:- Without rejecting the transaction value in the course of international trade in just and reasonable manner he could not have applied the rule 5 to 8. Further in case he was able to reject the transaction value then also he had to determine the transaction value by application of rules 5 and 6 first before coming to rule 7. Higher value charged by the appellants at the time of sale of imported goods cannot be reason for rejection of transaction value in course of international trade. Thus, in the absence of any just and reasonable cause for rejection of transaction value, we are not in position to sustain the order of Commissioner - declared value upheld. Appeal allowed - decided in favor of appellant.
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2019 (5) TMI 485
Extended period of limitation - import of goods - SCN for demand of duty in respect of imports made vide bill of entries filed during the period 15.03.2000 to 18.10.2001 was issued on 11.03.2005 - HELD THAT:- The appellants have made the declaration on the Bill of Entries as per the description given in the invoices of the foreign supplier. Since the description as has been given by the foreign supplier declare on the Bill of Entries, the appellants cannot be held guilty for mis declaring the same. The classification declared by the appellants on the Bill Of Entry is as per their understanding and assessment, it is for the assessing officer to determine the correct classification and duty payable. It is not the case of the department that appellants have made any declaration which was contrary to the documents available with the importer at the time of filing of Bill of Entry. No evidence has been produced by the department to the effect that catalogue of the DANLOAD 6000 was called for by the assessing officer and not produced by the appellants. The entire case of the revenue is based on the few statements recorded by the Custom officers. The statement of Mr Shrish were recorded on 20.02.2002, 11.06.2002, 25.08.2004 and 03.02.2005, Shri Fifadra on 03.04.2002 and of Shri Atul on 19.11.2003. Since all the facts including the catalogues relied upon in show cause notice were made available to revenue as early as in 2002, the delay in issuance of show cause notice could not be justified. Correction of clerical errors, etc. - Section 154 of Customs Act, 1962 - HELD THAT:- From plain reading of the Section it is evident that the Section is available for correction of arithmetical mistakes or clerical errors in the decisions or orders and not the Show Cause Notice. By applying the said Section for correction of the error in the Show Cause Notice, has gone beyond the scope of section. Appeal allowed - decided in favor of appellant.
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Corporate Laws
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2019 (5) TMI 484
Non-distribution of dividend to the complainant - Whether the process and summons issued under section 127 of the Companies Act without taking into account the provision of section 127(c) of the Companies Act can be granted? HELD THAT:- There is a dispute regarding the right to receive dividend, as the matter was referred to National Company Appellate Law Tribunal and if the dispute regarding right to receive dividend exists, then no offence under the section shall be deemed to have been committed. Thus, non-payment of dividend to the shareholder is an offence, which invites penal action. However, non-payment of dividend to the shareholder will not be called an offence if the payment is not made because the dispute between the parties exists. The dispute regarding entitlement to receive the dividend exists. The act of non-payment of dividend by the directors of the company can be justified because according to them, a particular shareholder is not entitled to receive dividend. Mere having opinion or holding view that a shareholder is not entitled to receive dividend is not sufficient but there should be existence of a dispute as understood by law. Mere denial of the entitlement is not enough to get the benefit of Section 127(c) but the real dispute between the parties should exists. Similarly, mere denial of existence of dispute by the shareholder after pursuing litigation against the company and its directors cannot render dispute non-existing. Indeed this can be ascertained on the basis of the facts and circumstances of each case - In the present case, admittedly the dispute exists between the shareholder and the directors and it was pending in Company Law Tribunal and National Company Appellate Law Tribunal. It was also pending before the Arbitrator. In absence of such litigations before the Company Law Tribunal and arbitrator, it would have been difficult to state that there is a dispute between the petitioner and the respondent, then the fact of dispute should have been the subject matter of trial and evidence and it would not have been considered at the stage of quashing of process. The record placed before the learned trial Judge itself discloses the proviso of Section 127(c) of the Companies Act and if material placed before the Court clearly fulfills the requirement of the proviso or an exception, then it cannot be ignored and the learned trial Judge after taking into account the material placed before and the proviso, should have formed opinion that offence under section 127 is not constituted. Application disposed off.
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2019 (5) TMI 483
Scheme of arrangement to improve net worth through partnership - Convention of the meeting of secured and unsecured creditors of the applicant company - approval and implementation of proposed scheme of arrangement to pay to the creditors - HELD THAT:- There is a clear approval of the scheme in the meeting of the statutory creditors and the employees. There is however some confusion in the meeting regarding unsecured creditors and secured creditors. Coming to the meeting of the unsecured creditors, it is clear from the report of the Chairman that what was put to vote in the meeting was a scheme envisaging that 50% of the debt of the unsecured creditors would be paid over a period of 24 months. Orally, in the middle of the voting procedure, the scheme was modified based on an oral offer of the petitioner Company that the petitioner Company would try and pay 100 % payment to the unsecured creditors of their outstanding dues. This aspect was reiterated in court when the hearing took place. Taking into account the error in the report, the votes cast in the meeting for the modified scheme i.e. payment of 100% debt and no objections given by some of the creditors in court, the new scheme appears to have got the support of more than 70% of the value of unsecured creditors but still falls short of three-fourth of the value of the creditors. Secured Creditors - HELD THAT:- It is stated by the learned senior counsel for the petitioner that there are only two secured creditors. Both were present in the meeting but could not vote as their representatives were not duly authorized. The net result is that the Chairman had no option but to invalidate the proceedings and hold that the meeting could not reach at a conclusion. Essentially the meeting lacked quorum. However, as rightly pointed by the learned senior counsel for the petitioner, none of the two secured creditors has filed any objections in court against the scheme. It be appropriate for this court to completely outrightly reject the scheme and to scuttle the initiative sought to be taken by the petitioner company to try and revive itself. In equity it would be in the interest of justice that a fresh meeting is called of the unsecured creditors to vote freshly for the newly propounded scheme of the petitioner Company for the unsecured creditors, namely, repayment of 100% dues within a period of 24 months. A similar direction, in the interest of justice, may also be given for a fresh meeting of secured creditors. The petitioner company may convene a meeting of the unsecured creditors to consider and if appropriate, to approve the modified scheme of the petitioner for repayment of 100% of the outstanding debt and a meeting of the secured creditors for both class of creditors. List on 23.04.2019 for further consideration.
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2019 (5) TMI 482
Scheme of De-merger of company - Filing of detailed working of the share exchange ratio - convening and holding meeting of equity shareholders - issuance and publication of notice of the said meeting - HELD THAT:- The learned counsel for the Applicant Company has also represented that the Applicant Company has filed financial statements as on 31.03.2018 as Annexure A-4. CA No. 49/2019 was filed for placing on record the unaudited provisional financial statements as on 30.09.2018 in respect of the Applicant Company as at Annexure A-59 - the directions are issued with respect to calling, convening and holding of meetings of the shareholders, secured and unsecured creditors or dispensing with the same as well as issue of notices including by way of paper publication. First Motion Petition stands disposed of.
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Insolvency & Bankruptcy
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2019 (5) TMI 481
Appointment of Interim Resolution Pofessional - conditional approval of the resolution plans by CoC - HELD THAT:- Regulation 39(3) of the CIRP Regulations does not give room for CoC to pass a conditional approval but only means that the CoC can approve resolution plans which include such modifications to the original plan as the CoC deems fit. Thus, the approval given on the 9th meeting is a conditional approval given to a resolution plan which was not in its final form but still under discussions. The final form was received by the RP on 26.05.2018 which the RP forwarded to SBI, which then gave its oral confirmation to the resolution plan. There are several material irregularities in this procedure followed by the RP. First, the RP bypassed the procedure of calling a meeting to discuss the resolution plan in its final form, in which NSEL would have also been a participant according to Section 24(3)(c) of the Code. In the instant case the RP did not call a meeting of the CoC to approve the final draft of the resolution and further, did not even supply a copy of the final draft of the resolution plan to the other participant of the CoC meetings i.e. NSEL. Second, the RP filed the present application before this Tribunal on the basis of a conditional approval and the written non-conditional approval of SBI dated 29,05.2018 was submitted to this Tribunal only on 25.07.2018 as a response to NSEL's objection. Third, the application for approval of resolution plan was filed on 30.06.2018 when the CIRP period of 270 days had expired on 26.05.2018. The resolution plan is not approved and the application filed by the RP is dismissed and the application filed by the objector, in view of the said dismissal, succeeds.
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2019 (5) TMI 480
Implementation of the Resolution Plan - reduction of capital - HELD THAT:- The 'Resolution Plan' filed with the Application meets the requirements of Section 30(2) of I B Code, 2016 and Regulations 37, 38, 38(1A) and 39 (4) of IBBI (CIRP) Regulations, 2016. The 'Resolution Plan' is also not in contravention of any of the provisions of Section 29A. The Resolution Professional has also certified that the Resolution Plan approved by the CoCs does not contravene any of the provisions of the law for the time being in force. The Compliance Certificate is placed at pages 29 to 32 of the typed set filed with the Application. The 'Resolution Plan' annexed with MA/31/IB/2019 filed in CP/655/IB/2017 is hereby approved, which shall be binding on the Corporate Debtor and its employees, members, creditors, guarantors and other stakeholders involved in the Resolution Plan including Resolution Applicant. The Resolution Applicant shall pursuant to the Resolution Plan approved under Sub-section (1) of Section 31 of the I B Code, 2016, obtain all the necessary approval as maybe required under any law for the time being in force within a period of one year from the date of approval of the Resolution Plan by this authority or within such period as provided for in such law - the order of moratorium dated 03.04.2018 passed by this Adjudicating Authority under Section 14 of I B Code, 2016 shall cease to have effect from the date of passing of this Order.
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2019 (5) TMI 479
Defreezing of bank account of Corporate Debtor - case of the respondent is that though the amount was transferred into the RP's account to meet CIRP cost, however, the insurance claim amount is the property of the Respondent. Reason being that though the amount was received during moratorium period , but the fire in the premises broke out pre-moratorium and at that point of time the premises were mortgaged with the Respondent Bank. HELD THAT:- The damaged premises were mortgaged with the Respondent Bank and the insurance claim is the property of the Respondent Bank. Moreover, since the Respondent/SBI wishes to opt out of the liquidation estate U/ s 52 of the code, and realise its security interest on its own, therefore, it can be held that since the property is under the exclusive charge of the bank therefore, all encumbrances thereon and all incomes and claim including the insurance claim, therefrom relate to the Respondent Bank. It is justifiable to direct the liquidator to place on record the remaining assets yet to be disposed off under liquidation process along with the information of liquidated value. On the basis of such detail now demanded, it can be ascertained that how much work is yet to be performed by the liquidator so as to determine the cost of liquidation as well as professional fees - Application allowed in part.
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2019 (5) TMI 401
Initiation of Corporate Insolvency Resolution Process - Financial Creditor - Secured creditor in liquidation proceedings - Whether SBI, the Financial Creditor is legally entitled to stay out of liquidation? - HELD THAT:- The rights of a secured financial creditor are protected by giving him an option to take away the assets secured with him out of liquidation. In such a scenario, the secured creditor has a liberty to realise its security interest on its own. All that has to be seen by the liquidator at this juncture is that whether the secured creditor is complying with the provisions of above subsection 3 of section 52 i.e. the records of such security interest maintained by an information utility and whether the Secured Creditor is complying with Regulation 37 of the IBBI (Liquidation Process), Regulations, 2016. Sub-regulation (7) of the above said Regulation 37 (Liquidation Process) mentions that the provisions of regulation 37 shall not apply if the secured creditor enforces his security interest under SARFAESI Act, 2002 or RDDB Act, 1993. In the present case, SARFAESI proceedings are already initiated, hence, the Secured Creditor SBI is not even under an obligation to tell the liquidator the estimate of the amount that can be realized from sale of secured assets as per Regulation 37 stated above. Therefore, all SBI has to prove to the liquidator is that there was some property which was secured with itself against the loan granted. The secured creditor s rights have to be protected and respected. They must have the choice of taking their collateral and selling it on their own. Hence, the first question with respect to the secured creditor opting out of the liquidation estate, stands answered in affirmative. Whether Section 29A is applicable to liquidation proceedings in a situation when the Secured creditor realises the security interest on its own? - HELD THAT:- The Hon ble legislatures were very much aware about this attempt of the defaulters to indirectly take control of the stressed assets, therefore, restriction was imposed in the Proviso annexed to sub-section f of S. 35(1). As far as s. 52 is concerned, the scope is limited to grant rights to a Financial Creditor for sale of a property. Naturally, that right should not give permission to a Financial Creditor to sell that property to a defaulter/promoter/director. Therefore, it is necessary as well as need of the hour to read the rights enshrined U/s 52 along with the proviso of sub-section (f) of S. 35(1) as well as S. 29A of the Code - this prayer of the applicant/Liquidator, that the secured creditor availing its option U/s 52 of the Code should not sell the assets to the erstwhile promoters/directors, is hereby accepted - question answered in affirmative. Whether the Secured Creditor exercising his right U/s 52(1)(b) of the Code has to make payment of workmen s dues out of the amount realised from the sale of such secured assets as the EPF/workmen s dues, which do not form part of the liquidation estate? - HELD THAT:- The present position is that Sec 53 of the Code gives the waterfall mechanism for distribution of proceeds from the sale of assets of the Corporate Debtor. S. 53 (1)(b) states that after meeting the CIRP and liquidation cost, second priority will be given equally to (i.) workmen s dues for the period of two years preceding the liquidation commencement date and,( ii). the debts owed to a secured creditor in the event such secured creditor has relinquished security in the manner set out in section 52(1)(a). Therefore, workmen s dues or EPF dues are placed in the waterfall mechanism and are not to be paid as per S. 326 of the Companies Act, 2013 because of S. 238 of the Code which gives overriding provisions to the insolvency Code and secondly, S. 326 as of now stood de-notified - the interpretation of Sec 53(1)(b)(ii) of the Code is that if the secured creditors do not relinquish the charge over the secured assets but exercise their option to liquidate a secured asset by exercising option U/s 52 , then it is mandated that the workmen s dues and the debt of secured creditor shall not rank equally. Once the secured creditor is out of liquidation U/s 52(1)(b) of the Code, it is relieved from all the clutches of the insolvency code or the liquidation process. To move under SARFAESI Act, or any other act, to sell the assets to any party, is all the prerogative of the secured creditor because his rights are given a specific protection by the code. Application allowed in part.
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FEMA
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2019 (5) TMI 478
Contravention of Section 3(a) and (b) of FEMA, 1999, contravention of Section 6(3)(g) of FEMA, 1999 and Section 10(6) of FEMA, 1999 - HELD THAT:- There is no statement or document or admission on record to substantiate the said allegations. In this regard, no investigation was done by the department in India or abroad. No show cause notice has been issued for alleged under valuation by the customs authorities and there is no dispute on this aspect. If department wished to prove the aforesaid allegations. As per department they had all information in this regard, which fact is apparent from the impugned complaint however department did not do anything in this regard, who only interpreted the cash book entries and come to the conclusion that these entries were factual and held against the Appellants, without any corroborative evidence available on record. Pertaining to violation of Section 10(6) of FEMA, the basis of the said allegation is that the Appellant firm had made remittance to its foreign suppliers towards import advance payment of ₹ 3.44 crores through proper banking channel but have made actual import of ₹ 2.49 crores and excess payment of ₹ 95 lacs was made to square off alleged differential value arising on account of alleged under valuation of the imported goods. In this regard the Respondent held that there was no doubt that advance remittances for imports are permissible under law, however the Respondent held against the Appellants on this count only on the ground that there was no co-relation between the said advance remittances and imports although Appellants produced different details to establish the said co-relation, accordingly it was held that Appellants were guilty of contravention of section 10(6) of FEMA 1999. The Respondent did agree that advance remittance is permissible in law against imports. Appellant had produced different evidence / details to establish the co-relation between the advance remittance and imports, however the Respondent was not convinced and only on that ground held Appellants guilty of violation of Section 10(6) of FEMA, 1999. One is failed to understand why a person would make alleged hawala transactions through banking channel. The business of Appellant firm was on-going business and Appellant had and continued to import electronic components from various suppliers. It is alleged on behalf of the Appellant that they had imported the goods against the aforesaid advance payments so made over period of time. In this regard, along with typed written submissions filed during arguments, Appellant had placed on record chart showing the co-relation between the advance remittances of ₹ 95 lacs, therefore the allegation in regard to alleged undervaluation have been made herein above and the same are reiterated. The provisions of Section 39 of FEMA, 1999 are not applicable to the fact of the present case and the respondent was merely presuming the cash book as documents for the purpose of investigation under FEMA, 1999. The said cash book was not seized from the custody / control of the Appellants, the same was not seized from the personal computers of either of the partners. The alleged cash books were denied and it was stated that neither of the partners were aware of the contents of the same and that the said alleged cash book was maintained by Shri Pankaj/Shri Dinesh. No statement of either of them was ever recorded by the department. Thus, in the absence thereof, said cash book cannot be held to be substantive evidence to establish alleged violation by the Appellants. Even in a strong matter against the accused parties, it is still the duty of the department to prove the case beyond any doubt for each charge by discharging the burden. It is the admitted position that the department chose not to record statement of Shri Pankaj or Shri Dinesh Gaud. The department has also not called upon the Appellants to produce Shri Pankaj and/or Shri Dinesh. It is submitted on behalf of the appellant that the failure of the department to summon there who were authors of the alleged entries made in the cash book. Entire basis of the case of the department is that the Appellants had made alleged violations in order to square off the alleged difference in value of the imported goods / components viz. under valuing the same and paying the alleged difference in value to its overseas supplier through non-banking channels. There no evidence on record to substantiate the said allegations. There is no statement or document or admission on record to substantiate the said allegations. No independent investigation was done by the department in India or abroad. No show cause notice has been issued in this regard viz. for under valuation by the Customs Authorities. The department at least should have recorded statement of Shri Pankaj and Dinesh Goud to this effect from the sellers of the Appellant or other persons in India or abroad who were allegedly paid money being alleged differential value on behalf of overseas suppliers of Appellant. The Respondent only read and interpreted the cash book entries and it was the violation of various provisions against the appellant without there being any corroborative evidence available on record. Either said witnesses would have been summoned after obtaining the address or the appellants should have been directed to produce them. There is no evidence on record to show that any exercise is done. Adjudicating Authority erred holding that the Appellants should have produced Shri Pankaj/Shri Dinesh for recording their statement rather than finding fault with the department for not interrogating that the said two persons. As stated above Shri Pankaj and Shri Dinesh had left the firm during investigation by DGCEI and it is not the case of department that Appellants had any role in that regard, rather Shri Pankaj was the person who got the case registered against the Appellants as alleged and it was duty of department to prove its case. Department has therefore was unable to discharge the said onus. In the light of above, the appeals are allowed and the impugned order is set aside. All the appeals are disposed of.
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2019 (5) TMI 477
Stay petition - Offence under FEMA - amount imposed towards penalty against the appellants - HELD THAT:- The appellant has no case on merit, however, it is admitted by the counsel for the respondent that in para-9 of the impugned order, the findings are beyond the charge made in the show cause notice. A perusal of para 9 of impugned order under heading ORDER shows that the penalties on the appellants have been imposed without referring to the provisions of sub paras of para 4 of Schedule 1 of which the appellants have been held guilty of contravention of the provisions of each and every sub paras of para 4 of Schedule 1 to Regulation 5(1) in violation of principles of natural justice even if the appellant has no case of merit in this regard. The amount imposed towards penalty against the appellants are not commensurate with the contravention alleged against the appellants whereas the contraventions are technical in nature warranting a lesser penalty of ₹ 2 lakhs. While deciding the stay application, the appellants were directed to deposit ₹ 4 lakhs with the respondent as a penalty amount and the said amount has already been deposited by the appellants. The impugned order is passed contrary to the provision of section 13(1) of the Act and thus it is modified. The penalty already deposited under the said provision be appropriated by the respondent (as counsel for the appellant is agreeable for the same). The Revision Petition filed by the respondent is become infractuous.
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PMLA
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2019 (5) TMI 476
Offence under PMLA - outer limit upto the date for deciding the application for retention of property within the meaning of sub-section 4 of Section 21 is 180 days from the date of seizure of any property or records. The said period is not extendable - HELD THAT:- The person concerned/aggrieved party of such order, is entitled to file the appeal u/s 26 of the Act. The same shall be heard and after giving an opportunity of being heard, the appellant Tribunal shall pass the order either to confirm the order of retention or to modify or setting aside the same. Where the Adjudicating Authority decides by an order confirm the retention under Sub-section (1) of Section 17 or Section 18 for the purpose of continuation during investigation for a period not exceeding ninety days under this Act before the Competent Court, or under the corresponding law of any other countries as the case may be under Sub-section (3) (a) of Section 8 may take necessary action within the time prescribed. In failure to do so under this Act, all the proceedings, seizures/frozen under Section 17 would be lapsed ipso facto. It is settled law that if a particular thing is to be done in a particular manner, it must be done in that manner only and none other. Reliance in this regard is also placed on a judgements of Hon‟ble Supreme Court in the cases of Dipak Babaria and another vs. State of Gujarat [ 2015 (8) TMI 775 - SUPREME COURT] and J. Jayalalitha Anr vs State of Karnataka Ors [ 2013 (9) TMI 1182 - SUPREME COURT] The provisions of section 8 (3) (a) provides that the attachment or retention of property or record seized shall continue during the investigation for a period not exceeding ninety days. It is admitted position that no prosecution complaint has been filed against the Appellant herein. The properties and records of the Appellant were seized only for the purpose of investigation. The period of 90 days as prescribed under section 8 (3) (a) has already elapsed as more than an year has been expired. No prosecution complaint has been filed by the respondent against the appellants. The said fact has been admitted by the learned counsel for the respondent.
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2019 (5) TMI 475
Prevention of Money Laundering Act - application for retention of property within the meaning of sub-section 4 of Section 21 is 180 days from the date of seizure of any property or records - HELD THAT:- It is clear from the reading of Sections 17 to 21 that outer limit upto the date for deciding the application for retention of property within the meaning of sub-section 4 of Section 21 is 180 days from the date of seizure of any property or records. The said period is not extendable. The person concerned/aggrieved party of such order, is entitled to file the appeal under Section 26 of the Act. The same shall be heard and after giving an opportunity of being heard, the appellant Tribunal shall pass the order either to confirm the order of retention or to modify or setting aside the same. Where the Adjudicating Authority decides by an order confirm the retention under Sub-section (1) of Section 17 or Section 18 for the purpose of continuation during investigation for a period not exceeding ninety days under this Act before the Competent Court, or under the corresponding law of any other countries as the case may be under Sub-section (3) (a) of Section 8 may take necessary action within the time prescribed. In failure to do so under this Act, all the proceedings, seizures/frozen under Section 17 would be lapsed ipso facto. If a particular thing is to be done in a particular manner, it must be done in that manner only and none other. Reliance in this regard is also placed on a judgements in the cases of Dipak Babaria and another vs. State of Gujarat [ 2015 (8) TMI 775 - SUPREME COURT] and J. Jayalalitha Anr vs State of Karnataka Ors [ 2013 (9) TMI 1182 - SUPREME COURT] The provisions of section 8 (3) (a) provides that the attachment or retention of property or record seized shall continue during the investigation for a period not exceeding ninety days. It is admitted position that no prosecution complaint has been filed against the Appellant herein. The properties and records of the Appellant were seized only for the purpose of investigation. The period of 90 days as prescribed under section 8 (3) (a) has already elapsed as more than 3 years 10 months have been passed. No prosecution complaint has been filed by the respondent against Smt. Sudeep Kaur Sawhney or her husband, Shri G.S. Sawhney. The said fact has been admitted by the learned counsel for the respondent. We allow the appeals. The impugned order is set-aside. The seizure lapses on the expiry of statutory period of ninety days. Admittedly, no prosecution complaint has been filed. The accounts are defreezed which were attached by letter issued by ED.
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2019 (5) TMI 474
Offence under PMLA - Provisional Attachment Order - whether any proceedings against the appellant survived once his father was not convicted under any offence? - HELD THAT:- It is not denied by the respondent that his father expired before competition of trial and final order. He was not convicted accused when expired. In the present case, there was no FIR against the appellant. No charge-sheet was filed against the appellant. He was not charged. He had purchased the property after selling two properties owned by him. The Supreme Court judgment U. SUBHADRAMMA AND ORS. VERSUS STATE OF A.P. AND ORS. [ 2016 (7) TMI 1514 - SUPREME COURT] is directly on the issue in hand. In the light of above, the impugned order passed by the Adjudicating Authority is set-aside by allowing the appeal. The provisional attachment order is also quashed.
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2019 (5) TMI 473
Offence under PMLA - Provisional Attachment Order - HELD THAT:- Respondent No. 1 and the Adjudicating Authority have not complied with the mandatory statutory requirement of the Proviso to Section 8(2), PMLA. The appellant had interest in the property in question, but no mandatory notice required under section 8(2) was served. Section 8(2) is a mandatory provision, it is mandated under the proviso that if property is claimed by a person other than accused, he shall also be given an opportunity of being heard to prove that the property is not involved in money laundering. Despite of above, no notice was given. The appellant is, no doubt, claimant in the attached property. It is not understood why the requisite notice was not issued by the respondent and Adjudicating Authority. Despite being Appellant s claim to the said Property, Respondent failed to fulfill its statutory duty, in terms of Rule 3(2) PML (Issuance of Provisional Attachment Order) Rules, 2013, to supply a copy of the Provisional Attachment Order to the Appellant at the time of the issuance of the same. Respondent-ED even prima facie is not able to establish any collusion/connection of the Appellant and accused person/seller. The impugned order is not sustainable against the appellant. The same is set-aside by allowing the appeal. Consequently, Provisional Attachment Order against the said impugned property 15A/18, East Patel Nagar, New Delhi is also quashed.
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2019 (5) TMI 472
Offence under PMLA - applications filed by the respondent under Section 17(4) for retention of document - application for retention of property is 180 days from the date of seizure of any property or records - HELD THAT:- No report against the appellants has been forwarded to the Magistrate. No complaint against the appellants was filed before a Magistrate. No cognizance of schedule offence was taken by any authority or Additional Secretary to the Government of India. Under Section17(1) (A), it is the duty of the officer authorised if where it is found that it is not practicable to seize such property, can make such order that the person concerned shall not transfer or deal with the said property prior to the permission of the officer authorised. A copy of the said order shall be served upon the person concerned. Section 17, Sub-section (2) stipulates that after search and seizure, the authorised officer shall immediately forward a copy of the reason so recorded along with the material in his possession to the Adjudicating Authority in a sealed cover. It is clear from the reading of Sections 17 to 21 that outer limit upto the date for deciding the application for retention of property is 180 days from the date of seizure of any property or records. The said period is not extendable as per the scheme of the Act, unless the prayer for retention is allowed and subject to filling of prosecution complaint within 90 days from the date of passing the retention order. No doubt, once the prayer is allowed, the person concerned/aggrieved party of such order, is entitled to file the appeal under Section 26 of the Act. The same shall be heard and after giving an opportunity of being heard, the Appellant Tribunal shall pass the order either to confirm the order of retention or to modify or setting aside the same. The provisions of section 8 (3) (a) provides that the attachment or retention of property or record seized shall continue during the investigation for a period not exceeding ninety days. The said prescribed period has already been expired as more than a year has already elapsed but the properties and records have not been returned so far which is in clear violation of the provisions of PMLA. No prosecution complaint has been filed against the Appellants. In the light of above, the present appeals are allowed. The impugned orders dated 08.02.2018 and 22.02.2018 are set-aside pertaining to the appellants. The applications filed by the respondent under Section 17(4) for retention of documents are dismissed accordingly. All documents/materials and records shall be returned to the respective appellants by the respondent accordingly.
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Service Tax
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2019 (5) TMI 470
Demand of service tax - Good Transport Agency Service - time limitation - HELD THAT:- The order in appeal on the same issue for earlier period was subject matter of appeal before CESTAT. CESTAT Mumbai Bench in BHIMA S.S.K. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE PUNE III [ 2018 (5) TMI 220 - CESTAT MUMBAI] has allowed the appeal filed by the Appellant - Since the appeal filed by the Appellant against the earlier order of Commissioner (Appeal) on the same issue has been allowed we do not find any merits in the impugned order of Commissioner (Appeals). Appeal allowed - decided in favor of appellant.
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2019 (5) TMI 469
CENVAT Credit - input services - air travel agent tour operator services - life insurance/general insurance services - rent-a-cab services - period from April, 2008 to March, 2013 - HELD THAT:- A bunch of documents had been brought by the learned Counsel for the appellant to substantiate that those services were used for providing output services which are in the nature of providing Market Research Services to the clients and not for personal use of its employees but the authorities below had not taken strain in inspecting those documents before given their respective findings. It is a fit case which requires to be re-adjudicated by the Adjudicating Authority - appeal allowed by way of remand.
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2019 (5) TMI 468
CENVAT Credit - non-contravened of Rules as made under Cenvat Credit Rules, 2004 - penalty - HELD THAT:- The idea of introducing cenvat credit had a preconceived motive of reducing cascading effects of indirect taxes, as a result of which, the ultimate consumers will have final products and services at a much lower price. The idea was conceived by the Government in the form of introducing Cenvat Credit Fules, 2004. The basic conditions of allowing credit was that the person, who is willing to take such credit, should have had paid the taxes to the Government Exchequer. The appellant s firm in order to provide services to M/s Century Pulp Paper for procurement of EPCG Licenses from DGFT, Kolkata, had availed the services of M/s Sakshi Tradelink Pvt. Ltd. represented by Mr.Rajesh Singh. The document filed by the ld.Counsel that M/s Sakshi Tradelink Pvt. Ltd. is regularly complying with all the statutory liabilities before various Department and their name is also portal all the Ministries of Company Affairs, which shows that they have filed their Annual Returns and Statements upto 31st March, 2018. It is also showed their registered office and other details. Copies of the Bank statement of the Appellant Firm reflect payments made to M/s Sakshi Tradelink Pvt. Ltd. Hon ble Allahabad High Court in the case of THE COMMISSIONER OF CENTRAL EXCISE CUSTOMS SERVICE TAX VERSUS M/S. JUHI ALLOYS LTD., ANIL KUMAR SHUKLA [ 2014 (1) TMI 1475 - ALLAHABAD HIGH COURT] , have dismissed the Departmental Appeal, where similar issue was raised by the Department in respect of the invoices, on which cenvat credit was availed. Penalty - HELD THAT:- Since the appellants have paid the entire amount of demand along with interest, which is also almost equal to the amount of demand, no penalties should be imposed - the penalties are set aside. Appeal allowed.
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2019 (5) TMI 467
Penalty u/s 76 and 78 of FA - Non-payment of service tax in time - service tax along with interest paid later - omission on part of appellant - HELD THAT:- The only reason stated for non-payment of service in time is that there was an omission on their part. There is no sufficient cause to invoke section 80 for waiver of penalty imposed under Section 78 - the penalty under Section 78 is upheld. As regard the penalty imposed under Section 76, in view of the Hon ble Gujarat High Court judgment in the case of M/S RAVAL TRADING COMPANY VERSUS COMMISSIONER OF SERVICE TAX [ 2016 (2) TMI 172 - GUJARAT HIGH COURT] , penalties under Section 76 and 78 cannot be imposed simultaneously - the penalty imposed under Section 76 is set aside. Appeal allowed in part.
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2019 (5) TMI 466
Refund of unutilized CENVAT Credit - rejection on the ground that the claim pertained to the period before taking registration and hence respondents are not eligible to claim refund of such unutilized cenvat credit - HELD THAT:- The issue in dispute is no longer res integra and has been laid down to rest by a number of decisions and in particular the judgement of the Hon ble High Court in THE COMMISSIONER OF GST CENTRAL EXCISE, CHENNAI VERSUS BNP PARIBAS SUNDARAM GLOBAL SECURITIES OPERATIONS PVT LTD. [ 2018 (6) TMI 676 - MADRAS HIGH COURT] , wherein it has been held that registration of assessee s premises is not a pre-requisite for claiming credit of refund under Rule 5 of CCR, 2004. Refund allowed - appeal dismissed - decided against Revenue.
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2019 (5) TMI 465
Principles of natural justice - Non-payment of service tax - erection, commissioning and installation services - works contract services - period from 2008-09 to 2012-13 - HELD THAT:- The Appellant requested for an opportunity to demonstrate, which they failed to do earlier, before the adjudicating Commissioner that major portion of the work undertaken by them either on sub-contract basis or by themselves, relate to execution of projects connected with dams, hydro-electric power projects etc, hence not taxable. An opportunity may be accorded to the Appellant to place before the adjudicating Commissioner all the contracts/work orders and accordingly it is to be ascertained whether the claim of the Appellant is correct or otherwise - appeal allowed by way of remand.
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2019 (5) TMI 464
Classification of services - Reverse charge mechanism - appellant procured and utilized the design software of M/s Lear Corporation, USA through an online computer network - whether the services received by the Appellant from M/s Lear Corporation, USA against software usage agreement are in the nature of management, maintenance or repair service as alleged by the Revenue or in the nature of information technologies software service claimed by the Appellant? HELD THAT:- Undisputedly, by an agreement between the Appellant and M/s Lear Corporation, USA for usage of software, the Appellant agreed to pay annual maintenance charges which M/s Lear Corporation, USA required to pay to the vendors of the softwares. These charges which have been paid by the Appellant to M/s Lear Corporation, USA has been claimed as software usage charges and not maintenance charges for the software - Further, there is no evidence in support of the claim of the Appellant that what they were required to pay M/s Lear Corporation, USA was not the maintenance charges for usage of the software but the charges for the software. On the other hand, M/s Lear Corporation, USA had paid to the vendors maintenance charges of the software which they ultimately collected from the Appellant. Therefore, the Ld. Commissioner has rightly classified the services received by the Appellant under the category of management, maintenance, or repair service under Section 65 (105)(zzg) read with Section 65(64) of Finance Act, 1994. Whether the services received through internet is taxable from 01.03.2008 as claimed by the Appellant? - HELD THAT:- The issue has been considered by this Tribunal in the case of VODAFONE CELLULAR LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, PUNE-III [ 2017 (12) TMI 1205 - CESTAT MUMBAI] where it was held that Such services were brought into tax net by insertion of proviso to Rule 3 (ii) of the Taxation of Services (Provided From Outside India and Received in India), Rules, 2006 vide N/N. 6/2008 - ST dt. 01.03.2008 - thus, the Appellant is required to discharge service tax from 01.03.2008. The matter is remanded to the Adjudicating Authority to recalculate the demand for the period from 01.03.2008 onwards - the imposition of penalty under Section 78 of Finance Act, 1994 is unwarranted. However, penalty under Section 76 and 77 are imposable on the Appellant, hence sustained - appeal allowed by way of remand.
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Central Excise
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2019 (5) TMI 471
Default in payment of duty - withdrawal of facility for fortnightly payment of duty and payment through RG 23A Part II for a period of two months or till the deposit of defaulted amount whichever was later - invocation of provisions of Rule 8(3A) of the Rules - HELD THAT:- The Party had paid whole of the defaulted amount along with interest on 17.10.2001. Since the Party had made the whole of the dues within one month, therefore, they were entitled to utilize their cenvat credit account for payment of duty w.e.f. 24.11.2001. The Tribunal had noticed that the Party had not contravened the provisions of Rule 8(3A) of the Rules by utilizing the credit account for payment of duty w.e.f. 18.1.2002. Therefore, the demand of ₹ 1,69,38,241/- was set aside by the Tribunal and the Party was not liable to pay any penalty in this regard. No illegality or perversity could be pointed out by the learned counsel for the revenue in the aforesaid findings recorded by the Tribunal in all the three appeals which may warrant interference by this Court - the substantial questions of law are answered against the revenue and in favour of the assessee - appeal dismissed.
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2019 (5) TMI 463
Clandestine removal - alleged shortages - HELD THAT:- The shortage has been explained by the Internal Auditor. No actual stock taking was done and in view thereof, there is no reason to disbelieve the statement of the Internal Auditor. The charge of clandestine removal is a serious charge and must be supported by evidence. This is completely lacking on the present facts. Appeal dismissed.
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2019 (5) TMI 462
Valuation - inclusion of amount of VAT/Sales Tax recovered by the appellants and retained by them in assessable value - Section 4 of the Central Excise Act, 1944 - HELD THAT:- The issue involved in the present case stands decided against the appellant by the Hon ble Supreme Court in the case of Super Synotex (India) Ltd. V CCE Jaipur [ 2014 (3) TMI 42 - SUPREME COURT ] - The Apex Court held that the amount of sales tax concession retained by the manufacturer is required to be added to the assessable value for paying the Central Excise duty. The demand is to be restricted within the normal time limit - the matter to original authority only for the limited purpose of re quantifying the demand falling within the normal period of limitation - appeal allowed by way of remand.
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2019 (5) TMI 461
Non- reversal of CENVAT credit taken previously on capital goods - packing and levelling Machines - introduction of compounded levy scheme w.e.f. 27-02-2010 - Rule 5(3A) of the CCR, 2004 - suppression of facts or not - HELD THAT:- A bare perusal of Rule 16, sub Rule 1 7 would make it clear that no CENVAT credit on capital goods can be availed after 8th March, 2010 and no other provision of CENVAT Credit Rule 2004 shall apply in relation to notified goods. If CENVAT credit is not permitted to be availed on capital goods after notified dates and CENVAT credit Rule 2004 will not be applicable in relation to notified goods, which in the present case means manufacturing tobacco, it cannot be said that without an express provision, whatever credit was availed for old and unused machines are to be refunded by applying provision of CENVAT credit rules 2004. Audit - suppression of facts or not - HELD THAT:- EA 2000 audit was therefore held to be participative audit. Likewise CERA audit is conducted by the Comptroller and Auditor General of India in respect of receipt and expenditure of the Government of India. It also discharges revenue audit which covers central excise, service tax and customs laws during which time the assesses were examined by CERA audit party to point out the deficiencies, leakage of revenue and non recoveries of dues by the Central Excise Department - It cannot be said that only because audit party had found some credit availed as inadmissible, suppression of fact is made out. Further it is not established that appellant had any malafide intention to suppress its duty liability from the department. Appeal allowed - decided in favor of appellant.
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2019 (5) TMI 460
Supply of various goods to Essar Power Gujarat Limited, Salaya Power Plant of 1200 MW capacity (2 X 600 MW) - goods supplied against International Competitive Bidding - Benefit of N/N. 06/2006-CE dated 01.03.2006 - HELD THAT:- There is no dispute that the appellant has satisfied all the eligibility conditions, such as, the goods covered by the Certificate issued by the authorities specified within the Notification. The only objection of the Revenue is that the goods were supplied to a projects comprising two Power Plants of 600 MW capacity each. But we find that combined capacity of the power plant at Salaya implemented by Essar Power Gujarat Limited, was 1200 MW. Similar dispute has been decided in favour of the assessee by the Delhi Bench of the Tribunal in the case of CROMPTON GREAVES LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, INDORE [ 2015 (10) TMI 1916 - CESTAT NEW DELHI] . Benefit of notification allowed - appeal allowed - decided in favor of appellant.
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2019 (5) TMI 459
Goods supplied to projects funded by an International Organization, approved by the Government of India - benefit of N/N. 108/95-CE dated 28.08.1995 - Whether the exemption under Notification No.108/95-CE dated 28.08.1995 is available when the goods have been dispatched in the name of contractors approved and assigned with the project work by the Project Authority? HELD THAT:- The issue decided in the case of H. SARKAR CO. VERSUS COMMISSIONER OF C. EX., KOLKATA-II [ 2008 (1) TMI 728 - CESTAT, KOLKATA] and CATERPILLAR INDIA PVT. LTD. VERSUS COMMISSIONER OF C. EX., PONDICHERRY [ 2005 (3) TMI 243 - CESTAT, NEW DELHI] , where it was held that notification No. 108/95-CE dated 28.08.1995 is also available to sub-contractors for manufacture and supply of goods for or on behalf of the main contractor (who has won the contract for the supply of goods to the projects financed by the Un or an international organization and approved by the Government of India) for execution of the said project, subject to compliance of other specified conditions, if any. Appeal dismissed - decided against Revenue.
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2019 (5) TMI 457
Goods cleared to Public Funded Research Institutions as well as to certain other Institutions - benefit of N/N. 10/97-CE dated 01.03.1997 - Department was of the view that the benefit of the notification will not be available to the goods under the certificate since category 1(d) is for prototype for which value limit of ₹ 50,000/- applies - HELD THAT:- The notification permits duty free clearances for goods to be supplied to Public Funded Research Institutions. DRDO, to whom the appellant has cleared the goods, is one of the agencies specified in the notification. The goods cleared by the appellant are covered by the amended certificates and the appellant will be entitled to the benefit of the duty free clearance under the said notification. The goods mentioned in the DRDO certificate are not in the nature of Prototype as can be seen from the amended certificate issued by DRDO in respect of one set of the items for appeal no. E/75033/2019. Thus, the benefit cannot also be denied for the same goods cleared to DRDO - Appeal allowed - decided in favor of appellant.
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2019 (5) TMI 456
Area Based Exemption - N/N. 33/99 dated-8/7/1999 - the installed capacity for the manufacture of tea in the factory was increased by more than 25% by way of substantial expansion since 24/12/1997 - HELD THAT:- There are discrepancies in the total number of machines installed in various sections prior to and subsequent to the expansion of factory. But the Chartered Engineer Shri R. Das, who has inspected the factory after the expansion, has certified that as a result of the installation of additional equipment, the installed capacity has been increased by more than the limit of 25% specified in the notification. We note that such conclusion of the Chartered Engineer has not been disputed either by the original or first Appellate Authority. The opinion expressed by the Chartered Engineer may be accepted to arrive at the conclusion that the appellant has duly expanded the installed capacity over 25% and satisfies the substantial expansion as per Notification. The appellant has satisfied the requirement of substantial expansion by more than 25% - appeal allowed - decided in favor of appellant.
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2019 (5) TMI 455
Area Based Exemption - N/N. 33/99 dated-8/7/1999 - increase in installed capacity by more than 25% (since 24/12/1997) by substantial expansion of their factory - rejection only on the ground that the appellant has failed to submit the necessary documents supporting the claim of expansion - HELD THAT:- The order passed by the Original as well as the First Appellate Authority indicates that both the authorities have proceeded to reject the claim of expansion only on the ground that the appellant has failed to submit the necessary documents supporting the claim of expansion. On the basis of the documents submitted, it can be said that the claim for the benefit of Notification is required to be evaluated de novo after considering all these documents. The issue remanded to original authority for a de novo decision - appeal allowed by way of remand.
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2019 (5) TMI 454
CENVAT Credit - outward freight/transportation and outward delivery services (outward GTA Service) - period from 2005-06 to 2007-08 - HELD THAT:- The issue decided in the case of COMMISSIONER OF CENTRAL EXCISE, BELGAUM VERSUS M/S. VASAVADATTA CEMENTS LTD. [ 2018 (3) TMI 993 - SUPREME COURT] , where it was held that from 1-4-2008, with the aforesaid amendment, the Cenvat credit is available only upto the place of removal whereas as per the amended Rule from the place of removal which has to be upto either the place of depot or the place of customer, as the case may be. Credit allowed - appeal allowed - decided in favor of appellant.
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2019 (5) TMI 453
Refund of duty paid - case of Revenue is that the duty was not paid fully by the due date - HELD THAT:- The appellant is eligible for refund of duty paid by them in earlier cases, in terms of Notification No. 20/2007-CE (Supra) as amended. It is recorded in the adjudication order that all the statutory records are available and it is also observed that the manufacturers availed CENVAT Credit for input services available within the last day of the month for payment of duty on the assessable finished products cleared during the month and the balance amount of duty was paid through the account (PLA). Verification report from The Range Officer was also obtained which found the refund claim in order. The Range Officer had visited the factory and the factory was inspected and examined of the necessary parameter. Appeal allowed - decided in favor of appellant.
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2019 (5) TMI 452
Valuation - cost construction method - period July, 2000 to Sept, 2007 - extended period of limitation - HELD THAT:- Merely because, the CAS-4 certificates were not produced before the adjudicating authority, in our opinion, the said determination of value and differential duty cannot be said to be incorrect unless contrary certificate is produced by the Revenue to establish that the said method of determination of assessable value is incorrect or CAS-4 certificate produced by the assessee-appellant is incorrect. Extended period of limitation - penalty - HELD THAT:- There is merit in the observation of the learned Commissioner (Appeals) in arriving at the assessable value of stock transferred goods adopting CAS-4 method for the entire period. Needless to mention that CAS-4 method for assessing the value of stock transferred goods have been introduced in the year 2003. Before, the said introduction, there were lot of confusion in the determination of value of stock transferred goods and goods captively consumed. In these circumstances, there is no justification to impose penalty on the appellant for not applying CAS-4 method in the determination of assessable value initially. Consequently, the penalty imposed on the appellant is set aside demand limited to the normal period of limitation. The assessee s appeals are remanded to the adjudicating authority to re-quantify the demand for the normal period of limitation.
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2019 (5) TMI 451
CENVAT Credit - input services - freight for outward transportation of goods upto buyer s premises - HELD THAT:- It is necessary to determine the place of removal to consider the eligibility of credit of service tax paid on freight charges upto the buyer s premises. The present appeal is also being remanded to the appellate authority with the same directions as aforesaid, for de novo adjudication - Appeal allowed by way of remand.
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2019 (5) TMI 450
Concessional rate of duty - benefit of Sr. No.3 to Notification No. 23/2003-CE dated 31.03.2003 - denial of benefit on the ground that when raw materials were procured from 100% EOU / SEZ units, the same amounts to imports for the purpose of procurement of goods by the Appellant and hence, ineligible for such benefit of Sr. No.3 to Notification No. 23/2003-CE dated 31.03.2003 - HELD THAT:- The definition of the terms import and export in Customs Act, 1962, SEZ Act, 2005 as well as FT (D R) Act, 1992 clearly show that only the goods physically brought from outside India will be treated as imported goods. Since SEZ is located within India only, it cannot be assumed to be foreign territory. Even the deeming fiction created under Notification No.23/03-CE limits its scope to goods received from other 100% EOUs as well as certain deemed exports supplies under para 8.3(a) and (b) of the FTP. Such deeming fiction does not cover goods received from SEZ at all. That despite defining the term DTA in Notification No. 23/03-CE (Sr. No.3), the condition No.3 states that in order to claim benefit of concessional rate under Sr. No.3, wholly from raw materials produced or manufactured in India . The condition does not state that wholly from raw materials produced or manufactured in DTA , and such meaning therefore cannot be artificially assigned by revenue authorities. Since goods produced and supplied by SEZ unit to the Appellant are to be treated as produced in India only, the condition No.3 to Notification No. 23/03-CE can be said to be fulfilled in such circumstances. Benefit allowed - appeal allowed - decided in favor of appellant.
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2019 (5) TMI 449
SSI Exemption - N/N. 08/2003 CE dt.1.3.2003 - clearance made by the appellant s DTA unit to their 100% EOU and inclusion of such amount in SSI limit - HELD THAT:- The show-cause notice proposed to add the value of clearance made by the appellant s DTA unit to their 100% EOU, solely on the ground that the goods were cleared without proper documents, invoices but under delivery challans. There is no dispute of the fact that the intermediate goods viz. casing is which were duly received in their 100% EOU. As per clause (3A) of the Notification no. 08/2003CE dt. 1.3.2003 as amended, in determining the aggregate value of clearances of all excisable goods for home consumption, the value of clearances of goods to 100% EOU cannot be taken into consideration. In the present case, there is no dispute of the fact that the appellant had cleared the intermediate product, namely casing , to their sister concern an 100% EOU against delivery challans-cum-invoices, which are duly recorded in the Books of Accounts of both the Units. Also, it is not in dispute that the said casings were used in the manufacture of final products by their 100% EOU, and the finished goods were ultimately exported by the said 100% EOU, and the said facts had not been challenged. Therefore, adding the value of clearance made to 100% EOU in computing the aggregate value of clearances for home consumption of the DTA Unit is contrary to the position of law and accordingly unsustainable. Appeal allowed - decided in favor of appellant.
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2019 (5) TMI 448
Recovery of Central excise duty - green houses/poly houses assembled at the factory and thereafter cleared in knocked down condition for assembly at site - it was aleged that appellant had not discharged appropriate Central Excise duty for the period from April 2006 to March 2008 - extended period of limitation - penalty - HELD THAT:- The green house/poly house was first manufactured and then cleared in knocked down condition for assembly at site. In these circumstances, excise duty is leviable for the clearances affected by the appellants. Further, it is noticed that the appellant had artificially split the price of the green house/poly house, as value of raw material and service charges relating to assembly at site. In such scenario invoking of extended period and imposition of penalty under Section 11AC of Central Excise Act, 1944 is clearly justified. The appellant be allowed to discharge 25% of the penalty imposed under Section 11AC of the Central Excise Act, 1944 subject to fulfillment of condition laid down there under - appeal allowed in part.
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2019 (5) TMI 447
Non-payment of duty - it was alleged that appellant had recovered additional amount of ₹ 5,40,753/- and failed to discharge duty of ₹ 86,521/- - HELD THAT:- After analyzing the relevant invoices that the appellants had issued debit notes for recovery of the conversion charges, whereas the excise invoices were issued for determining the duty payable on the assessable value of the product determined by the appellant. There is no recovery against the invoices and also by way of issuing debit notes. However, the appellant has admitted that the amount of ₹ 1,06,000/- was recovered towards administration and miscellaneous charges but the same was not considered in calculating the value of the product - the appellant is required to discharge duty of ₹ 16,960/- - demand upheld. SSI exemption - Allegation of using other s brand name - HELD THAT:- Trade Marks, which were used by the seller i.e. the appellant allows/ authorizes the buyers to use the same during the course of distribution of the product. The intention of the parties is also evident from the Affidavit-cum-Disclaimer certificate issued by the said buyers. Therefore, the conclusion by the authorities below that the appellant had sold the brand name of the distributors/buyers and hence the same belong to the distributor/buyer, is without any merit and evidence on record - demand set aside. The differential duty of ₹ 16,960/- with interest is confirmed against the appellant and all other proceedings initiated against the appellant is hereby dropped - appeal allowed in part.
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2019 (5) TMI 446
Mis-declaration of goods - cotton and Polyester Cotton blended textile fabrics and yarn - Section 4(b) of Central Excise Act, 1944 - HELD THAT:- Appellants have not been able to substantiate their claim that the demand of duty as determined by the Commissioner is not in accordance with the evidence available of record, nor have they been able to produce any document/ record to dispute the quantification of demand as made by the Commissioner. In absence of any tangible evidence in form of record or documents we do not find any merits in the submissions made by the appellants to this effect. Penalty under Rule 173Q, 9(1), 52(A), 210 and 226 of Central Excise Rules - HELD THAT:- Since penalty was set aside by the earlier order of Tribunal we are not in position to uphold the imposition of penalty this time. Appeal allowed in part.
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2019 (5) TMI 400
CENVAT Credit - input services - GTA Services - place of removal - HELD THAT:- The Hon ble Supreme Court in the case of M/S ULTRATECH CEMENT LTD. VERSUS C.C.E. KUTCH (GANDHIDHAM) [ 2019 (2) TMI 1487 - CESTAT AHMEDABAD] has held that credit is eligible from the place of removal upto the buyer s premises. However, in the case of COMMISSIONER, CUSTOMS AND CENTRAL EXCISE, AURANGABAD VERSUS M/S ROOFIT INDUSTRIES LTD. [ 2015 (4) TMI 857 - SUPREME COURT] , the Hon ble Apex Court has held that when the sale is on FOR basis, all the charges / cost have to be included in the assessable value for the payment of central excise duty. Thus, in such cases, when the sale takes at buyer s premises, the place of removal is the buyer s premises. Matter remanded to the Commissioner (Appeals) who shall look into the issue of eligibility of credit on GTA service after determining the place of removal - appeal allowed by way of remand.
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CST, VAT & Sales Tax
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2019 (5) TMI 445
Demand of Bank Guarantee from dealers - HELD THAT:- This petition is taken out by urgent circulation. The respondents have appeared on advance notice. They would require time for filing reply. Without gathering full facts and response from the respondents, we do not find this fit case for grant of reliefs as prayed for. Prima facie it would appear that the action taken by the Indian Oil flows from historical background, mentioned in the impugned communication and noted above. Further, essentially, the relationship between the dealers and Indian Oil Corporation is one of contractual nature. It may be that Indian Oil being a State within the meaning of Article 12 of the Constitution of India would have to act reasonably, even in course of such contractual relation.
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2019 (5) TMI 444
Assessment order - effect of order, prospective or retrospective? - whether the impugned order denying prospective effect to the assessment from the date of MSTT order dated 20/01/2015 is unjustified? HELD THAT:- If the impugned assessment order is perused, it is apparent that the assessing officer went by the effect given to the tribunal s order by this court by terming it as applicable to all live proceedings. If the assessment in hand pertaining to financial year 2013-14 is considered live, then, the assessment order overlooks the fact that it is not the financial year, but the transactions covered and dealings up to 20th January, 2015, which is the relevant factor. It is nowhere indicated in the impugned assessment order that the transactions covered are post 20th January, 2015. The case of the petitioner that up to January, 2015 they have collected and paid tax at the rate of 15% of the turnover actually used by them after claiming goods return and therefore, the claim of goods return will have to be allowed and the payment of tax on the remaining value as per the return filed by the petitioners up to 20th January, 2015 should be held as valid, appears to be correct. It is an accurate understanding of this court s order. This is not a case of any undue or uncalled for or illegal benefit being conferred on the dealer. This is a case of misreading and misinterpretation of the judgment of this court. Merely because the order of 11th September, 2006 is set aside by the Maharashtra Sales Tax Tribunal by its judgment and order dated 20th January, 2015, the transactions covered and dealt with by that judgment, which gave rise to a tax liability, cannot now be reopened. This Court has clearly dealt with the issue of prospectivity to the order of the MSTT in the light of section 52(2) of the BST Act. Once this Court has come to the conclusion that this was a fit case where the MSTT ought to have exercised its discretion and granted prospective effect to its judgment and order , then, the contention of Shri Sonpal that the order of the MSTT having merged with the order of the Commissioner and therefore the effect of prospectivity has to be from the year 2006 , can only be stated to be rejected. Petition allowed.
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2019 (5) TMI 443
Maintainability of appeal - petitioner s grievance is that the long pendency of the application seeking waiver, was contrary to Section 74(3) - HELD THAT:- It is evident on a plain reading of the two provisions that right to appeal is conferred upon the aggrieved party under Section 72. The appeal has to be preferred to the Deputy Commissioner or the Excise Commissioner [or in the case of the primary order being made by the Excise Commissioner to the Financial Commissioner under Section 72(3)]. The limitation for such an appeal is within 30 days from the date of the communication of the impugned order - A joint reading of the relevant parts of Section 72 and Section 74, clarifies that if the appeal is properly filed, in the sense that it is accompanied by the amount in dispute, determined by the primary assessing authority as a demand, the requirements of Section 72(7) would apply. On the other hand, if there is no compliance with Section 74(1) and the aggrieved party seeks relief by way of waiver of pre-deposit under Section 74(2), the application has to be made for that purpose setting out the grounds. This Court is of the opinion that there is no consequence of the kind that is sought to be urged with regard to Section 74(3). One of the indications of a statute being mandatory is that it is cast in imperative terms and the consequence of the failure to comply with such mandate is provided. Not only is Section 74(3) silent as to the consequence of non-compliance, the use of the words where it is possible to do so expressly indicates its directory (and not mandatory) nature. This is in contrast to Section 72(7), where the proviso provides the consequence for non-compliance. Petition allowed.
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Wealth tax
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2019 (5) TMI 442
Transit House as assessable under Wealth Tax - whether 'Transit House' fell within the definition of 'Assets', as defined in Section 2 (ea) of the Wealth Tax Act,1957, and was assessable to Wealth Tax or not ? - HELD THAT:- Issue decided in favour of the Assessee by a Coordinate Bench of this Court under the Income Tax Act and also under the Wealth Tax Act. Under the Income Tax Act in Commissioner of Income Tax v. Carborandum Universal Ltd . (present Assessee) [ 1997 (10) TMI 11 - MADRAS HIGH COURT] and under the Wealth Tax Act in Carborandum Universal Ltd. v. Deputy Commissioner of Income Tax , [ 2012 (7) TMI 775 - MADRAS HIGH COURT] two different Coordinate Benches of this Court have decided the said issue in favour of the Assessee.
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2019 (5) TMI 441
Asset within the canopy of section 2(ea) of the W.T. Act - HELD THAT:- Assessee had sold the land with dilapidated structure over it lock, stock and barrel to a third party and earned long term capital gain. In our view, this is not a proper ground for disallowing the claim of the assessee. Admittedly, what was sold during the Assessment Year 2006-07 was land with structure. When there is a structure on the land and when it is not in dispute that the structure was put to use in the earlier assessment years for manufacturing activity and when what was sold was commercial establishment it cannot be classified as urban land u/s 2(ea) - the land with structures which was used in earlier years for manufacturing, is not an asset within the canopy of section 2(ea) of the W.T. Act. It is in our view continues to be a commercial asset. Thus, we delete the addition made herein for both the assessment years.
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2019 (5) TMI 440
Wealth Tax Liability - Whether vehicles reflected in the balance sheet are chargeable to wealth tax? - assessee has not filed Wealth Tax Return for the A.Y. 2009-10 hence, the case was reopened - difference finding of statement of wealth chargeable to tax and ultimately net wealth tax liability has been computed by the AO - appellant has not demonstrated that vehicle have been purchased out of loan, and the loan outstanding is more than the value of vehicle? - Since the appellant company has not been able to quantify the debt outstanding against the vehicle, plea of the assessee that the cash credit account has been used to purchase the said vehicle was, therefore, not accepted by the CIT(A) and thus at the time of hearing, the Learned Counsel further prays for the issue to be set aside to the file of the Learned CIT(A) to verify the same afresh - HELD THAT:- It fit and proper to set aside the issue and to restore the same to the file of the CIT(A) for fresh adjudication of the matter as indicated above. We further direct the CIT(A) to consider the relevant record in support of the claim of the assessee which is also part of the record before us and also to take into consideration, the details of the accounts and/or relevant evidences which the assessee may choose to file in support of his claim at the time of hearing of the appeal. Hence, the assessee s appeal is allowed for statistical purposes.
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Indian Laws
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2019 (5) TMI 439
Whether a Revision Petition under Section 21(b) of the Consumer Protection Act, 1986 is maintainable before the National Commission Dispute Redressal Commission against an Order passed by the State Commission in an execution proceeding? HELD THAT:- The nature of execution proceedings is materially different from the nature of proceedings for adjudication of a consumer complaint. Execution proceedings are independent proceedings. Orders passed for enforcement of the final order in the Consumer dispute, cannot be construed to be orders passed in the consumer dispute - Execution proceedings even though they are proceedings in a suit, cannot be considered to be a continuation of the original suit. Execution proceedings are separate and independent proceedings for execution of the decree. The merits of the claim or dispute, cannot be considered during execution proceedings. They are independent proceedings initiated by the decree holder to enforce the decree passed in the substantive dispute. There is no remedy provided under Section 21 to file a Revision Petition against an Order passed in appeal by the State Commission in execution proceedings. Section 21(b) does not provide for filing of a Revision Petition before the National Commission against an Order passed by the State Commission in execution proceedings. In the present case, the National Commission committed a jurisdictional error by entertaining the Revision Petition u/S. 21(b) filed by the Appellant Board against an appeal filed before the State Commission, in Execution proceedings - The National Commission erroneously allowed the Revision Petition u/S. 21(b) which was not maintainable. Thus, Revision Petition was not maintainable against the Order passed by the State Commission in an appeal arising out of execution proceedings. Appeal disposed off.
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2019 (5) TMI 438
Production of additional evidence before the State Commission in the pending Appeal - production of additional evidence at the appellate stage - HELD THAT:- A party can produce additional evidence at the appellate stage, if it establishes that notwithstanding the exercise of due diligence, such evidence was not within its knowledge, or could not even after the exercise of due diligence, be produced by it at the time when the decree appealed against was passed. These documents are of relevance to establish that the Appellants are not in a position to obtain the Occupancy Certificate from the MCGM until the unauthorized structures, which are in violation of the approved plans, are removed. In the absence of these documents, the Appellants would not be in a position to substantiate their case that they are unable to obtain the Occupancy Certificate, and comply with the directions issued by the District Forum. The State Commission was in error by rejecting the Application filed by the Appellants under Order XLI Rule 27, CPC by merely stating that the documents are not necessary . The said Order is an unreasoned one. The State Commission must have taken a holistic view of the matter - the Interim Order dated 10.12.2015 passed by the State Commission is hereby set aside. The matter is remitted to the State Commission to take the additional documents on record, and decide the Appeal on merits in accordance with law - Appeal allowed.
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2019 (5) TMI 437
Selection process of sports persons for appointment by the Government of India - grievance of the Petitioner is that there cannot be any justifiable reason for not considering his candidature as he fulfills all the parameters - Respondents draws the attention of this Court to the fact that the Petitioner stood at 27th Rank in the 'Mid Field' category. For the three posts in 'Half Line/Mid Field' category, 19 candidates were called for the Personal Interview. Since the Petitioner's Rank was 27, he was not called for the Personal Interview - HELD THAT:- On a careful consideration of the respective contentions, this Court comes to an irresistible conclusion that the Petitioner is not entitled to seek the relief as claimed by him in the present Writ Petition. Further, the shortlisted candidates viz., Karanbir Singh (Sl.No.41) -1st Place in Junior Nationals, 2018, Center Half, was awarded the total marks of 55.5 (46 + 9.5). Similarly, Harmanjit Singh (Sl.No.42) - 1st Place in Junior Nationals, Center Half, was awarded the total marks of 51.5 (42 + 9.5). Likewise, Akshay Hooda (Sl.No.43), 3rd Place in Junior Nationals, 2015, Center Half, secured the total marks of 51 (42 + 9). At the risk of repetition, this Court points out that the Petitioner was awarded a total mark of 34.5 (28 + 6.5) by the Selection Committee, based on the documents furnished by him. In fact, he stood 27th Rank in the 'Mid Field' category. Looking at from any angle, the observations of the Tribunal in negativing the Writ Petitioner/Applicant's relief as sought for in the Original application and the consequent direction issued to the Respondents to inform him of the process adopted for shortlisting including the norms and criteria under which the suitability of the candidate was assessed, based on which, he could not be included in the shortlist of the selected candidates, are without any legal flaw.
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