TMI Tax Updates - e-Newsletter
May 9, 2017

Case Laws in this Newsletter:

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

Articles

1. Changes in the definition of inputs,input services and capital goods

   By: Pradeep Jain

2. Ingredients of Invoice, debit note and credit note under CGST Act,2017

   By: Sanjeev Singhal

3. CONSUMER WELFARE FUND UNDER CGST ACT, 2017

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. GST scheduled for July 1 rollout: Jaitley

2. GST will make domestic companies more competitive

3. Auction for Sale (Re-issue) of Floating Rate Bonds 2024

4. Release of monthly Wholesale Price Index (WPI) for April 2017 under new series of WPI (Base 2011-12)

5. RBI Reference Rate for US $

6. DIPP & WIPO to set up Technology and Innovation Support Centers

7. The Union Finance Minister (FM) Shri Arun Jaitley holds a bilateral discussion with the Finance Minister of Japan, Mr Taro Aso; calls upon Japanese companies to set up facilities in India

8. The Union Finance Minister (FM) Shri Arun Jaitley asks the Asian Development Bank (ADB) to set up a regional hub in New Delhi for the South Asia region to meet growing aspirations of the people

Notifications

DGFT

1. 06/2015-2020 - dated 8-5-2017 - FTP

Implementation of Target Plus Scheme as per the decision of the Hon`ble Supreme Court dt. 27.10.2015 in CA No. 554 of 2006

Money Laundering

2. F. No. C-18015/3/2013-Ad.ED - S.O. 1420(E) - dated 5-5-2017 - PMLA

Amendment in Notification No. S.O. 372(E), dated the 5th February, 2016

Circulars / Instructions / Orders

DGFT

1. Trade Notice No.06/2018 - dated 8-5-2017

Implementation of the Hon'ble Supreme Court's Judgment dated 27th Oct 2015 in Civil Application No. 554 of 2006 with regard to Target Plus Scheme (TPS) Scrips for the exports made in the year 2005-06 over 2004-05

Highlights / Catch Notes

Income Tax

• Court Rules Share Transfer to Partners Not Tax Avoidance; Section 45(4) Income Tax Act Not Applicable.

  Case-Laws - HC : Capital gain - partnership firm - conversion from investment into stock in trade of shareholding - Firm transferred the shares as loss to partners and adjusted its profit - partners transferred the shares at profit and adjusted against their loss - tax avoidance or not - No additions - Section 45(4) is not attracted - HC
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• High Court Rules No Interest u/ss 234B & 234C for Income Computed u/s 115J Before 115JA & 115JB.

  Case-Laws - HC : Income computed under Section 115J for the period prior to enforcement of Section 115JA and Section 115JB would not attract interest u/s 234B and 234C - HC
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• Refund Amount Clarified: Interest Waiver by CCIT Not 'Interest on Interest' u/s 244A(1)(b) of Income Tax Act.

  Case-Laws - HC : Interest on refund - Expression ‘in any other case’ occurring in Section 244A(1)(b) - The sum found refundable to the Petitioners as a result of the waiver of interest order passed by the CCIT is a definite sum that was wrongly deducted from the Petitioners as interest. Payment of interest on that sum by the Revenue cannot be characterised as payment of 'interest on interest'. - HC
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• Expenditure Classification Before Project Start: No Absolute Rule, Context Matters for Capital vs. Revenue Decision.

  Case-Laws - HC : Nature of expenditure - when the expenditure was incurred, the project had not begun - There cannot be any absolute proposition of law that every expenditure made prior to the commencement of the project may not be treated as revenue expenditure and the same is to be treated as capital - HC
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• Software Expenditure for Billet Heater Programming Classified as Capital by Commissioner due to Long-Term Benefits.

  Case-Laws - AT : Software expenses - capital expenditure OR revenue expenditure - software having more than 2 years life - CIT(A) has held that expenditure on software for billet heater programming was of capital nature since it resulted into an enduring benefit to the assessee - additions confirmed - AT
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• Assessee Can Claim Exemptions u/ss 11 and 12; No Disallowance for Unapproved Pension Contributions.

  Case-Laws - AT : The assessee being entitled to exemption under sections 11 and 12 of the Act, no disallowance on account of contribution to unapproved pension and gratuity funds can be made - AT
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• Notice Issued by Assistant Commissioner, Not Income-tax Officer, Invalidates Assessment Due to Procedural Error.

  Case-Laws - AT : As per the instruction the notice was to be issued by the Income-tax Officer but the notice was issued by the Assistant Commissioner of Income-tax. Therefore in view of above the notice is invalid and consequently the assessment framed by the Income-tax Officer becomes void - AT
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Customs

• Refund Denied for Special Additional Duty Due to Discrepancy in Imported and Sold Goods for Proflex Roof Project.

  Case-Laws - AT : Refund claim - SAD - denial on the ground that what they have imported was different from what they have sold viz. Laying of proflex roof with material-curved length of installed roof - rejection of refund sustained - AT
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• Court Questions Validity of Increased Clove Import Valuation; Proper Officer's Justification Under Scrutiny.

  Case-Laws - AT : Valuation of imported goods - cloves (old crop) - validity of enhancement of assessable value - we are deprived of wisdom of the ‘proper officer’ in reaching the conclusion that the value be enhanced - The assessment effected in the bill of entry should not sustain - AT
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• Free Shipping to Drawback Denied: Inconsistent Description Between Purchase Documents and Export Invoices for HDPE/Woven Bags vs. PP Sacks.

  Case-Laws - AT : Conversion of shipping bills - free shipping bills to drawback shipping bills - it is not possible to correlate the purchase documents of ‘HDPE/woven bags’, with the description of ‘PP sacks’ appearing in the export invoices - conversion not allowed - AT
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Service Tax

• Jungle and Bush Removal Not Classified as Site Formation or Demolition Services for Tax Purposes.

  Case-Laws - AT : Service namely, removing of jungle and bushes in the existing premises of the building does not fall under the definition of Site Formation and Clearance, Excavation, Earthmoving and Demolition Services - AT
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• Additional Registration and Handling Charges Not Subject to Service Tax, Legal Fees for Services Exempt.

  Case-Laws - AT : Valuation - includibility - whether the amount collected by the appellant under the name of registration charges or handling charges from the customers over and above the legal charges, viz., smart card and vehicle registration fees for getting the vehicle registered with the RTO authorities, etc. is chargeable to service tax or otherwise? - Held No - AT
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• SEZ Service Tax Exemption Applies to Sub-Contractors Without Direct Contracts, Rules Court under Notification No. 04/2004-ST.

  Case-Laws - AT : Services to SEZ developer - N/N. 04/2004-ST - denial on the ground that respondent was a sub-contractor and was never awarded a contract by SEZ developer - exemption cannot be denied to the assessee - AT
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Central Excise

• Job Worker Validly Pays Service Tax Without Exemption; CENVAT Credit Claim Upheld as Legitimate Under Notification No. 8/05-ST.

  Case-Laws - AT : CENVAT credit - job-work - the service tax provider i.e. job worker has opted to pay service tax without availing the exemption N/N. 8/05-ST which cannot be objected, therefore service tax paid by the job worker is correct and legal therefore the Cenvat credit availed by the appellant cannot be disallowed - AT
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• Dispute Over Oxytetracycline Capsules Classification: Chapter 3003.10 vs. Subheading 3003.20 Affects Excise Duties.

  Case-Laws - AT : Classification of goods - classified under Chapter 3003.10 or sub heading 3003.20? - name of the product is Oxytetracycline Capsules I.P. 500mg which is generic name and appearing in the Indian pharmacopoeia, therefore this product is not P&P Medicament by any stretch of imagination. - AT
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• Employee's Penalty Reduced to Rs. 2.5 Lakh u/r 26 for Unknowingly Aiding Employer's Illegal Activities.

  Case-Laws - AT : Imposition of Penalty u/r 26 of CER, 2002 - quantum of penalty - clandestine removal - appellant unknowingly got involved as an employee in the clandestine activity of his employers - the appellant is liable to penalty but at the same time the quantum of penalty imposed is quite high and harsh - penalty reduced to ₹ 2,50,000/- - AT
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Case Laws:

• Income Tax

• 2017 (5) TMI 346
  Capital gain - partnership firm - conversion from investment into stock in trade of shareholding - Firm transferred the shares as loss to partners and adjusted its profit - partners transferred the shares at profit and adjusted against their loss - tax avoidance or not - Held that:- Tribunal correctly considered applicability of Section 45 (2) and has observed that it is a case of outright sale of share holding by Assesses Firm to its partner and that to for consideration, hence it can not be a case of distribution by dissolution of Firm or even under the word "otherwise" because sale is not covered under Section 45 (4) of Act, 1961. Further, all the partners have not purchased shares as only 16 partners out of 18 purchased and that too, not in their profit sharing ratio as explained by Assesses. More that 90% shares were purchased by M/s Siddharth Construction Co. Pvt. Ltd while it was having 41% share in the Assesses Firm. Hence, Section 45 (4) is not attracted. Revenue repeatedly referred to the findings of A.O to contend that the entire transaction was a device to avoid tax in the same transaction but could not dispute that CIT(A) and Tribunal have considered each and every aspect on which the matter has been examined by A.O. in detail and concurrent findings of fact have been recorded by both appellate authorities that there was no shame transaction as presumed/assumed by A.O. and his finding was clearly incorrect and conjectured. - Decided against revenue

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• 2017 (5) TMI 311
  Undisclosed investment - statement u/s 132(4) at the time of search - whether no statement of the vendor of the assessee was recorded at the time of raid as required under Section 132(4)? - Held that:- On a perusal of the order passed by the Tribunal and that of the High Court [2015 (7) TMI 364 - KERALA HIGH COURT] it is not clear whether a statement so recorded under Section 132(4) at the time of search was available on record and that apart we do not notice anything or any analysis made by the Tribunal or the High Court with regard to the effect or revised returns filed by the vendor. The findings have been recorded written on the basis of the sworn affidavits in the statement. We are not satisfied with the analysis made by the Tribunal or that by the High Court. In our considered opinion this material on record should have been adverted to by the Tribunal as the final fact finding authority in a proper perspective keeping in view the law in the field. We remand the matter back to the Tribunal for reconsideration.

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• 2017 (5) TMI 310
  Direction issued by the ITAT to exclude the reimbursement cost while calculating the operating cost for determining the Arm’s Length Price (‘ALP’) of the international transaction involving the Assessee during the AY in question - Held that:- In the present case, as is evident from the passage extracted hereinbefore from the impugned order of the ITAT, after the examination of the agreement the ITAT came to a definite factual conclusion as regards reimbursement of the infrastructure costs of the Assessee by the AE without any mark up. Thus the decision has turned purely on facts. The ground of perversity ought not to be casually pleaded. It requires a detailed study of the entire record by the Appellant. In the present case, for instance, the ITAT after examining the agreement between the Assessee and its AE has agreed with the Assessee that the reimbursement of the infrastructure cost has no mark-up. Unless there is a specific plea to the effect that the said factual finding is perverse, the Court cannot, at the instance of a general plea of perversity, entertain such a ground of appeal by the Revenue. No substantial question law arises

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• 2017 (5) TMI 309
  Levy of interest under Sections 234B and 234C - income of the appellant assessed and liable to tax as per the provisions of Section 115-J of the Act - Held that:- In the instant case we are seized with the matter of the assessment for the year 1989-90 when neither of the two Sections 115JA and 115JB of the Act were in-existence what to say about Sub-Section 4 and Section 5 to the aforesaid provisions. Therefore, we are of the view that the decision of the Supreme Court in Rolta India Ltd. (2011 (1) TMI 5 - SUPREME COURT OF INDIA) would not be applicable to the present case and that the question regarding the levy of interest under Section 234B and 234C of the Act on the tax computed under Section 115J would stand covered by the decision of Kwality Biscuits Ltd.approved by the Supreme Court. [2006 (4) TMI 121 - SUPREME Court] In view of above, the question hereinabove is answered in favour of assessee and against the department and it is held income computed under Section 115J for the period prior to enforcement of Section 115JA and Section 115JB would not attract interest under Section 234B and 234C of the Act.

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• 2017 (5) TMI 308
  Interest on refund - Expression ‘in any other case’ occurring in Section 244A (1) (b) - whether would include the amount of refund which constitutes the interest that has been waived by the Income Tax Department (‘Department’) under Section 220 (2A) of the Act? - Held that:- The decision in Union of India v. Tata Chemicals Limited (2014 (3) TMI 610 - SUPREME COURT ) is clear in its enunciation that even if there is no express statutory provision for payment of interest, the government cannot avoid its obligation to reimburse the lawful monies "together with accrued interest" for the period of "undue retention". Once it is clear that Section 244A (1) (b) of the Act which talks of “any other case” does not have to be interpreted restrictively and can include situations like in the present case, then it is evident that there is nothing in the said provision which prohibits the payment of interest on an amount of refund due to the Petitioners as a result of the waiver of interest under Section 220(2A) of the Act. The circular of the CBDT dated 26th April 2016 accepts the above proposition laid down in Union of India v. Tata Chemicals Limited (supra) in its entirety. The sum found refundable to the Petitioners as a result of the waiver of interest order passed by the CCIT is a definite sum that was wrongly deducted from the Petitioners as interest. Payment of interest on that sum by the Revenue cannot be characterised as payment of 'interest on interest'. Thus this Court sets aside the impugned orders of the AO denying the Petitioners interest on the amounts refunded to them pursuant to the waiver order dated 30th March 2015 of the CCIT. The interest amount as claimed by the Petitioners on the amount refunded to them will now be paid by the Department to the Petitioners within four weeks from today in terms of Section 244 A (1) (b) of the Act from the date of recovery till the date of payment.

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• 2017 (5) TMI 307
  Deduction u/s 36(1)(viii) computation - loan was assigned transferred before 5 years from the date of sanction - Held that:- It cannot be said that the learned ITAT has committed any error in holding that while working out the deduction under Section 36(1) (viii) of the IT Act, the loan portfolio / loan was assigned / transferred before 5 years from the date of sanction is not material. Under the circumstances, no error has been committed by the learned ITAT on the aforesaid proposed question of law. The direction issued by the learned ITAT is very clear and seems to be absolutely in consonance with the explanation (h) to Section 36(1)(viii) of the IT Act. Under the circumstances, when the entire issue is at large and the direction issued by the learned ITAT is very clear while remitting the matter back to the learned Assessing Officer, we see no reason to interfere with the same. It goes without saying that the learned Assessing Officer after giving an opportunity to the assessee shall consider the entire issue with respect to the working out deduction under Section 36(1)(viii) more particularly explanation (h) to Section 36(1)(viii) of the IT Act.

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• 2017 (5) TMI 306
  Trading addition - G.P. estimation - AO made the additions solely on the basis of the documents seized during the course of survey - Held that:- AO did not specifically reject the audited books of accounts produced by the respondent – assessee. CIT(A) deleted the additions made by the Assessing Officer, which was made solely on the basis of the incriminating material documents seized. Cogent reasons have been given by the learned CIT(A) as well as the learned tribunal in deleting the additions made by the Assessing Officer. We are in complete agreement with the view taken by the learned CIT(A) as well as the learned tribunal while deleting additions made by the Assessing Officer, more particularly, when the Assessing Officer did not reject the audited books of accounts produced and relied upon by the respondent – assessee. So far as the estimation of the GP at 13% on Rs. 65 lakhs is concerned, it is required to be noted that on the basis of the incriminating material, the learned CIT(A) directed to make the addition in the hands of the respondent – assessee of Rs. 65 lakhs. On appreciation of evidence and on the basis of the estimation the learned CIT(A) determined the GP at 13% and the same has been confirmed by the learned tribunal. By giving cogent reasons and on estimation basis, which is permissible, when the learned CIT(A) estimated the GP at 13% of Rs. 65 lakhs, it cannot be said that any substantial questions of law arise.

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• 2017 (5) TMI 305
  Addition of excess payment of interest expenditure - whether the assessee did not establish the commercial expediency of making payment of interest at @ 15% instead of 12.50%? - ITAT delted the addition - Held that:- considering the fact that the respondent – assessee paid the interest at the rate of 15% and the Assessing Officer was of the opinion that the assessee ought to have paid the interest at the rate of 12.5% and as observed by the learned tribunal the respondent – assessee paid the interest at the rate of 15% looking to the commercial expediency, it cannot be said that the learned tribunal had committed any error in deleting the addition . We are complete agreement with the view taken by the learned tribunal. - Decided in favour of assessee

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• 2017 (5) TMI 304
  Disallowance of expenditure incurred for Ahmedabad Township Office Project - revenue v/s capital expenditure - Held that:- A.O. made disallowance of aforesaid amount treating it as capital and categorizing in capital account, against claim of the assessee to treat it as revenue expenditure, on the ground that at the time when the aforesaid expenditure was incurred, the project had not begun. However, it is required to be noted that in the books of accounts / profit and loss account, the assessee claimed the same as revenue expenditure. There cannot be any absolute proposition of law that every expenditure made prior to the commencement of the project may not be treated as revenue expenditure and the same is to be treated as capital. In the facts and circumstances of the case the learned tribunal has rightly deleted the disallowance of expenditure - Decided in favour of assessee

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• 2017 (5) TMI 303
  Disallowance of commission to foreign agents - TDS u/s 195 - non deduction of tds - whether foreign agents had any operation carried out in India as per the provisions of Section 9(1)(i)? - Held that:- When the respondent – assessee had produced necessary documentary evidence in the form of confirmation letters of the commission paid to the foreign agents, necessary documents /invoices on which the commission have been paid have been produced and the commission has been paid through banking channel and with respect to the very foreign agents in the previous years the claim of the respondent – assessee had been accepted consistently, learned CIT(A) as well as the learned tribunal has rightly deleted the disallowance made by the Assessing Officer. We are in complete agreement with the view taken by the learned tribunal as well as the learned CIT(A). - Decided in favour of assessee

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• 2017 (5) TMI 302
  Interest free loans and advances - Held that:- In the present case, the Assessing Officer did not carry out the necessary exercise. The Assessing Officer, in fact, granted partial relief and for the balance without carrying out the necessary exercise, he has disallowed the same and made an addition. The Commissioner of Income Tax (Appeals) found that this addition cannot be sustained both on facts and in law. The loans were given in the earlier year and there was sufficient general reserve available for investment. If the Assessing Officer did not make any efforts to show any nexus between the borrowing and the subsequent advancing of loans to the subsidiary company, then, the disallowance made by the Assessing Officer had to be deleted. We do not think that the Tribunal's exercise of maintaining the order of the Commissioner of Income Tax (Appeals) raises any substantial question of law. More so, when it was ascertained that no interest bearing funds were released for advancing the sums to the subsidiary company or its related company on account of share application money.The assessee had sufficient reserves. - Decided against revenue

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• 2017 (5) TMI 301
  Disallowance made under section 40(a)(ia) - retrospectivity - effect of amendment to section 40(a)(ia) - Held that:- The issue involved in the present appeal is squarely covered against the revenue and in favour of the assessee in light of the decision of the Division Bench of this Court in the case of Commissioner of Income Tax, Ahmedabad Versus Omprakash R. Chaudhary [2015 (2) TMI 150 - GUJARAT HIGH COURT] by which the view has been taken that the amendment made in section 40 (a)(ia) of the Income Tax Act, 1961 by Finance Act 2010 is retrospective in operation and having effect from 1st April 2005 i.e. from the date of insertion of Section 40 (a)(ia) of the Act. It is reported that decision of the Division Bench of this court in the case of Omprakash R. Chaudhary (supra) has been approved by the Hon'ble Supreme Court subsequently. In view of the above, no error has been committed by the learned tribunal in deleting the disallowance made by the A.O. made u/s. 40(a)(ia) of the Act. - Decided in favour of assessee.

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• 2017 (5) TMI 300
  Capital gain on transfer of converted shares - partnership firm - contention of Assessees that share were converted into stock in trade thus no capital gain - Held that:- Tribunal which has recorded findings that conversion of investment of shares into stock-in-trade was reality and genuine as relying on case of CIT Vs M/s Raj Kumar Singh and Co. Lucknow [2017 (5) TMI 346 - Allahabad high court] wherein held it is a case of outright sale of share holding by Assesses Firm to its partner and that to for consideration, hence it can not be a case of distribution by dissolution of Firm or even under the word "otherwise" because sale is not covered under Section 45 (4) of Act, 1961. - Decided in favour of assessee.

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• 2017 (5) TMI 299
  Deduction u/s 80P(2)(a)(i) - Held that:- Income Tax Appellate Tribunal is right in law in holding that the appellant is not entitle to deduction up to Rs. 1,48,64,914/- u/s 80P (2)(a)(i) as against the business income assessed at Rs. 1,60,74,331/- and not entitled to deduction as envisaged under the said provision the Income Tax Act, 1961. See Totgars Co-operative Sale Society Ltd. V. ITO, [2010 (2) TMI 3 - SUPREME COURT ] Deduction of expenses on account of interest paid on the borrowed funds under Section 57 - income of the assessee had been assessed as income from other sources under Section 56 - Held that:- In the present case, the appellant had claimed the income to be business income and therefore, no claim for deduction under Section 57 of the Act was made. Once the income of the assessee is treated as income from other sources by the revenue authorities, the assessee would be entitled to claim deduction under Section 57 of the Act in respect of expenses incurred for earning that income. Thus, it would be in the interest of justice that the matter is remitted back to the Assessing Officer to decide the claim of the assessee for deduction under Section 57 of the Act. Accordingly, the issue under thisquestion is sent back to the Assessing Officer, who shall decide the same afresh, in accordance with law, after affording an opportunity of hearing to the appellant.

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• 2017 (5) TMI 298
  Addition with the aid of section 50C(1) - Held that:- The alleged agreement/MOU was executed on 5.7.2007. This memorandum contains that sale consideration would be calculated at the rate of Rs. 1195/- per sq.meter. The vendee has paid an amount of Rs. 20 lakhs by cheque bearing no.366815 dated 12.4.2007 and amount of Rs. 12 lakhs through account payee cheque on 23.5.2007. Thereafter schedule of payment has been given in para-2 of the memorandum. This schedule of payment is subsequent to alleged execution of the sale deed. But one thing is clear from this memorandum, a right in persona has been created in favour of the vendee as well as in favour of the vendor, which he can be enforced with the help of suit for specific performance. In such situation, we are of the view that fair market value of this property ought to have been determined by the AO as provided in section 50C(2). We, therefore, set aside this issue to the file of the AO for re-adjudication. The ld.AO shall call for a report from the DVO as contemplated in section 50C(2) and the ld.DVO shall keep in mind any encumbrance created on the property by virtue of the alleged execution of the agreement. In this way, first grievance of the assessee is allowed for statistical purpose. Disallowance out of cost of transfer while computing capital gain - Held that:- CIT(A) has remitted this issue for re-verification and reconsideration. No interference is called for in such finding of the ld.CIT(A), because the ld.AO shall verify whether any expenditure is incurred by the assessee for transfer of this capital asset and if some expenditure was incurred then he will allow this expenditure. This ground of appeal is also allowed for statistical purpose.

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• 2017 (5) TMI 297
  Disallowance of software expenses - capital expenditure OR revenue expenditure - Held that:- CIT(A) has held that expenditure on software for billet heater programming was of capital nature since it resulted into an enduring benefit to the assessee. The Ld. CIT(A) has further reported that life of this kind of software was not less than 2 years and stated that depreciation on the same to be allowed as applicable. We find that assessee failed to disprove the facts as elaborated in the findings of the Ld.CIT(A),therefore we do not find any reason to interfere in the findings of the Ld CIT(A). Disallowance of deduction u/s. 80IA - claim not available to the assessee in respect of COGEN Unit I and and COGEN Unit II as both had generated power for captive use only - Held that:- Respectfully following the Hon’ble Gujarat High Court in the case of Alembic Ltd. [2016 (7) TMI 1239 - GUJARAT HIGH COURT] wherein allowed the claim of the assessee even in respect of electricity generation plant established by the assessee and the income derived from such enterprise of the assessee, it would have to be held that the assessee fully complied with the requirements prescribed under section 80-IA in order to avail the benefits provided therein. Therefore, the contention based on the interpretation of the expression `derived from’ could have no application to the case where the provisions of section 80-IA got attracted. - Decided in favour of assessee

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• 2017 (5) TMI 296
  Validity of reopening of assessment - Estimation of income - truck operators - Held that:- In the present case, there was no scrutiny assessment. The return was processed only under section 143(1) of the Act. There is nothing with the assessee to say that the AO was not possessed any fresh information. The observation of the AO in the reasons to the effect is that on verification of record he found certain discrepancies. Now this record would contain all the information possessed by him. In other words, he has not made reference to a specific source of information, but he has pointed out various defects discerned to him on verification of record, and therefore, he has issued notice. Thus in the present case, a perusal of the reason would indicate that the AO had the information and therefore he was justified in issuing notice under section 148 of the Act. - Decided against assessee. Applicability of provision of section 44AE which provides tax on presumptive basis - Addition under the head truck expenses - Held that:- The income of the assessee ought to be estimated by taking a guidance under section 44AE of the Act. The AO ought to have not enhanced the income at such a level under garb of making disallowance on estimate basis. The ld.CIT(A) has erred in rejecting ground no.2 of the assessee’s appeal, whereby it has prayed that its income ought to be computed with the help of section 44AE. We direct the AO to compute the income of the assessee by taking 11 trucks at the rate prescribed in section 44AE relevant to the assessment year. The AO, thereafter grant all consequential benefits i.e. salary and interest to the partners as per section 40b of the Income Tax Act. Since we have changed very basis for determination of income, therefore all other grounds vide which partial disallowance has been upheld by the ld.CIT(A) out of various expenditure are concerned, that would become redundant, and therefore, we are not required to record specific finding on these issues. In this way, both the appeals are disposed of.

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• 2017 (5) TMI 295
  Denial of exemption under section 11 - AO treating the assessee as a mutual concern - proof of charitable purposes - Held that:- Neither the Assessing Officer in the assessment order nor the learned Departmental Representative at the time of hearing has brought any material to demonstrate that there is any change in the object of the trust in the impugned assessment year as compared to earlier assessment years, wherein, the issue has been decided in favour of the assessee. That being the case, in our view, consistent with the view of the Tribunal and the Hon'ble Jurisdictional High Court in assessee’s own case it has to be held that the assessee is entitled to exemption under section 11 of the Act as a charitable trust. For invoking the first proviso to section 2(15), it is necessary and incumbent on the part of the Assessing Officer to give a factual finding that the assessee has derived income by engaging itself in trade, business or commercial activity. In the absence of any such finding the first proviso to section 2(15) cannot be attracted. More so, when the Tribunal and the Hon'ble Jurisdictional High Court in the preceding assessment years have held that the objects of the assessee qualify the object of general public utility, hence, is existing for charitable purpose as per section 2(15) of the Act. As far as the decision in the case of Navi Mumbai Merchants Gymkhana (2014 (5) TMI 1115 - ITAT MUMBAI ) relied upon the by learned Departmental Representative, on a careful reading of the said order of the Tribunal, we have noticed that in the said case, though, the decision of the present assessee was cited, however, the bench after examining the facts has expressed that facts in both cases are distinguishable as in case of Navi Mumbai Merchants Gymkhana (supra), the Assessing Officer has held that the assessee derives income from trading and business and commercial activity as per first proviso to section 2(15) and further he has also given factual finding that entry into the club for membership is restricted to a group of individuals only. Thus, in case of Navi Mumbai Merchants Gymkhana when the bench itself has expressed that the facts are distinguishable from the facts of the present assessee, the decision rendered therein cannot be made applicable to the assessee. In view of the aforesaid, we hold that the learned Commissioner (Appeals) was justified in allowing assessee’s claim of exemption under section 11 of the Act. - Decided in favour of assessee.

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• 2017 (5) TMI 294
  Disallowance under section 80IB(10) - prorata deduction in respect of completed flats - pahase wife completion - Held that:- When the assessee envisaged the construction of project phase 1 then he had permissible area to a certain extent, under which he could only construct 148 flats, which he constructed and completed by the stipulated date. The assessee had claimed deduction u/s. 80IB(10) of the Act in respect of those 148 flats only in the respective years. However, since, the assessee is a business man and on later date, because of the additional FSI available, the assessee constructed additional space, does not mean that the additional flats constructed by the assessee were part of the eligible project, which was sanctioned to the assessee in 2003; because in 2003 the additional FSI was not available to the assessee. Hence, the situation which arises in future cannot be dated back to deny the claim of deduction to the assessee. Accordingly, we hold so. The project phase 2 is an independent project which was sanctioned on 09.05.2008 and was constructed thereafter and its non-completion cannot deny the claim of deduction made by the assessee in respect of project phase 1. The assessee admittedly has not claimed any deduction u/s. 80IB(10) of the Act on the additional flats. In any case and without prejudice to our order, the assessee is entitled to prorata deduction u/s. 80IB(10) of the Act in respect of completed flats. Accordingly, we direct the Assessing Officer to allow the claim of deduction u/s. 80IB(10) of the Act on the profits of the part of eligible project comprising of 148 flats - Decided in favour of assessee.

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• 2017 (5) TMI 293
  Addition on account of warranty provisions - Held that:- We find that exercise of warranty claim during the year is from the provision account which does not affect profit and loss account. Under new policy percentage of last 8 quarters of warranty cost vs. last 8 quarterly sales were used for making the warranty expenses provision. We find that the assessee is manufacturing a product which requires warranty and the assessee has adopted reversing excess provision. The assessee is making provision of warranty applying the percentage of cost to the turnover based on past record making the process more scientific bringing into higher degree of accuracy. The assessee is following mercantile system of accounting. Therefore, we are of the view that the issue in controversy is squarely covered by the decision in the case of Rotork Controls India (P) Ltd. vs. CIT [2009 (5) TMI 16 - SUPREME COURT OF INDIA ] wherein allowed the claim of provision for warranty stating that, "with making of provision on the basis of estimated present value of contingent liability holds good during the assessment years in question qua warranty claims - Decided in favour of assessee. Disallowance on account of provision for bad and doubtful debts - Held that:- Following the decision the case of T.R.F. Limited [2010 (2) TMI 211 - SUPREME COURT] we are of the view that the assessee’s claim of bad debt and doubtful debt is covered by the decision of the Hon'ble Supreme Court and as per the decision of the Hon'ble Supreme Court wherein the Hon'ble Supreme Court has categorically restored this matter to the file of the Assessing Officer to examine whether the bad debt or part thereof has been written off in the accounts of the assessee, the matter has to be examined by the Assessing Officer de novo and considering all the above aspect, the matter may be decided. We, therefore, restore this issue to the file of the Assessing Officer to do the needful after providing the assessee reasonable opportunity of being heard.

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• 2017 (5) TMI 292
  Re-opening of the assessment u/s.147 - “reason to believe” - assessee has shown sales consideration of property lesser than the valuation considered for registration purposes - Held that:- As per Explanation 2 of Section147 it is very clear that due to disclose lower sale consideration by the assessee, the income chargeable to tax had escaped assessment. The assessee has not produced anything before the Commissioner of Income Tax (Appeals) to show as to how this fact was fully and truly disclosed before the assessing authority and that there was not failure on the part of assessee, especially when provisions of the section 50C is applicable. Hence, the Commissioner of Income Tax (Appeals) considered the action of the Assessing Officer is fully covered by the provisions of Explanation 1 to Section 147 It is possible that with due diligence the Assessing Officer would have ascertained this fat at the time of original assessment also, but in view of the explanation (1) it does not mean that there was no default on the part of the assessee. Hence, reopening u/s.147 is held to be valid. The assessee has tried to take shelter under the exception provided by the above stated proviso where an assessment under sub-section (3) of section 143 has been completed, no action after the expiry of four years from the end of the assessment year can be taken. But as stated above, when the assessee has not disclosed fully and truly the facts necessary for the assessment, this proviso will not come to its rescue. - Decided against assessee Confirming the action of the AO in invoking the provisions of the section 50C - Held that:- Assessee made a request the AO to refer the valuation issue to the valuation cell u/s.50C(2) of the Act, which was not considered by the AO. When this was raised before the Ld.CIT(A), he also rejected it. In our opinion, we find merit in the argument of the ld.A.R. Before considering valuation u/s.50C(1) of the Act, if the assessee requests for reference to Departmental Valuation Officer (DVO), the AO shall refer the matter to the DVO and he cannot overlook it. Hence, we direct the AO to refer the matter to the DVO and thereafter frame the assessment in accordance with law. This ground of assessee is allowed.

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• 2017 (5) TMI 291
  Addition on account of interest earned on deposits - whether interest earned on deposits with banks and miscellaneous income earned by the assessee are eligible for exemption under section 10(20)- Held that:- The assessee being engaged in the activity of promotion and development of market committees and in the process engaging in undertaking capital projects of the market committees, the income from sale of tender forms and enlistment fees of contractors has direct nexus with the main activity carried out by the assessee and therefore is to be treated as having been earned in the course of carrying out its activities. Further the activities of the assessee having been held to be falling in the purview of section 10(20) of the Act by the Income-tax Appellate Tribunal these incomes are also exempt under section 10(20) of the Act. The rest of the income, being miscellaneous in character is assessable as income from other sources, which is also exempt under section 10(20) of the Act. Therefore the entire miscellaneous income is held to be exempt under section 10(20) of the Act. Disallowance on account of contribution to pension fund - Disallowance on account of repair of godowns/boundary walls/roads - Held that:- Where entire income of the assessee has been held to be exempt under section 10(20) of the Act, there is no case for making disallowance of any expenses at all. Any disallowance made will only result in enhancing the income of the assessee which in any case has been held to be exempt from tax. Further the entire income earned from rendering services has been held to be exempt at the threshold itself and, therefore, there is no requirement of resorting to computational provision relating to income under the head business and provision stipulated under sections 28 to 44 of the Income-tax Act, 1961. In view of the above, the disallowances are deleted and the ground raised by the assessee is allowed. Entitlment to exemption under sections 11 and 12 - Held that:- Disallowance made on account of contribution of unapproved pension and gratuity funds, relate to the computational provisions of the income assessable under the head "Income from business and profession" more specifically under section 36 of the Act. Since the income of the assessee has been held to be exempt under sections 11 and 12 of the Act at the threshold itself, we hold that there is no occasion to apply the computational provision provided under Chapter IV of the Act running from sections 28 to 44, in computing the income since the same is attracted only if the income is brought to tax under the head "Income from business and profession". Even the Central Board of Direct Taxes vide its Circular No. 5P(LXX-6) dated June 19, 1968 has stated that the word "income" for the purpose of claiming exemption under sections 11 and 12 of the Act should be understood in its commercial sense. In view of the above we hold that in the present case, the assessee being entitled to exemption under sections 11 and 12 of the Act, no disallowance on account of contribution to unapproved pension and gratuity funds can be made and the addition made on account of the same is, therefore, directed to be deleted.

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• 2017 (5) TMI 290
  Validity of assessment framed u/s 143(3) - notice under section 143(2) not issued by the jurisdictional Income-tax Officer - Held that:- As per the instruction the notice was to be issued by the Income-tax Officer but the notice was issued by the Assistant Commissioner of Income-tax. Therefore in view of above the notice issued by the Assistant Commissioner of Income-tax is invalid and consequently the assessment framed by the Income-tax Officer becomes void. Also as per the order sheet entries incorporated in the preceding para graphs, it is observed that the selection of scrutiny was made on June 20, 2005 and notice under sections 143(2)(ii) and 142(1) was issued on July 11, 2005 i.e., beyond the period of the scrutiny as specified in Instruction No. 10 of 2004 dated September 20, 2004. We set aside the orders of the Revenue authorities by quashing the order of the assessment framed under section 143(3) of the Act since the issue of notice under section 143(2) of the Act was not done by the Income-tax Officer as specified in CBDT Instruction No. 1 of 2011 dated January 31, 2011. As the assessment proceedings under section 143(3) of the Act have been held as invalid, therefore in our considered view the other issues raised by the assessee do not require any adjudication. - Decided in favour of assessee

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• 2017 (5) TMI 289
  Claim of deduction under section 54F - Held that:- The assessee has not deposited within the due date for filing of return of income. In fact, the assessee filed the return on February 6, 2013 within the time provided under section 139(4) of the Act. The return was not filed within the time provided under section 139(1) of the Act. Therefore, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the Assessing Officer. Accordingly, the orders of the authorities below are set aside and the entire claim of deduction under section 54F of the Act is remitted back to the file of the Assessing Officer. The Assessing Officer shall reconsider the issue afresh and find out whether the assessee has invested the money in construction of property after getting approval of Panchayat Union Disallowance of amount invested in REC Bonds - Held that:- Admittedly, the property was sold on January 10, 2011 and the assessee deposited a sum of Rs. 50 lakhs on March 31, 2011 and another sum of Rs. 20 lakhs on June 30, 2011 in REC Bonds. REC Bond, admittedly, is a capital gain bond. Since the deposit was made within the due date for filing of the return of income, this Tribunal is of the considered opinion that the Commissioner of Income-tax (Appeals) has rightly allowed the claim of the assessee. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.

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• Customs

• 2017 (5) TMI 323
  Refund claim - SAD - denial on the ground that what they have imported was different from what they have sold viz. Laying of proflex roof with material-curved length of installed roof - Held that: - the Hon’ble Gujarat High Court in the case of PROFLEX SYSTEMS Versus COMMISSIONER OF CUSTOMS [2017 (3) TMI 216 - GUJARAT HIGH COURT], framed the question of law in regard, and anlysing the issue observed that proflex roof is different from the imported coil sheets, hence benefit of N/N. 102/2007-Cus dated 14.9.2007 cannot be extended to the assessee - appeal dismissed - decided against assessee.

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• 2017 (5) TMI 322
  Valuation of imported goods - cloves (old crop) - validity of enhancement of assessable value - Held that: - All that is available on record are the assessed bills of entry without any speaking order commuting the rationale adopted by the ‘proper officer’ to paper. Consequently, we are deprived of wisdom of the ‘proper officer’ in reaching the conclusion that the value be enhanced - no purpose would be served by directing that lack be made good now as the ‘proper officer’ may not, in all probability, be available to do so. The assessment effected in the bill of entry should not sustain - appeal dismissed - decided against Revenue.

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• 2017 (5) TMI 321
  Conversion of shipping bills - free shipping bills to drawback shipping bills - export of Maida - duty drawback on packing material - the said product was packed in Polypropylene (PP) bags - Held that: - It would be wrong to deny due duty benefits to a genuine exporter - Since it is not possible to ascertain the weight of the packing material exported, it will not be possible to grant drawback claim which is based on the weight of the packing material - it is apparent that it is not possible to correlate the purchase documents of ‘HDPE/woven bags’, with the description of ‘PP sacks’ appearing in the export invoices. In the absence of correlation it is not possible to consider conversion of free shipping bills to drawback shipping bills - appeal dismissed - decided against appellant.

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• 2017 (5) TMI 320
  Import of certain parts and machinery of the export goods - N/N. 104/2009 - Status Holder Incentive Scrip Scheme - denial on the ground that said notification issued under the scheme is only for various capital goods - confiscation - penalty - Held that: - the appellant had declared the goods correctly with the claim of notification. It was now in the hands of Customs Authority to examine such claim of the assessee and to allow or deny the benefit of the same - It is well settled law that claim of any exemption benefit by the importer, which claim stand made by correctly declaring the goods, cannot lead to any confiscation or imposition of penalty. The appellant according to their understanding, had claimed the benefit of N/N. 104/09 and had correctly placed all the facts before the Customs authorities - confiscation and penalty set aside - appeal allowed - decided in favor of appellant.

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• Corporate Laws

• 2017 (5) TMI 318
  Void lease deed - prayer for an order and direction to hand over possession of the property of the company in liquidation to the official liquidator - Held that:- The onus was on Modi Rubber Limited as well as Bharat Marketing to plead and prove that the said alleged sub-lease in favour of Bharat Marketing by Modi Rubber Limited was not only a bonafide transaction but was in the interest of the company in liquidation and also that the said transaction was carried out in ordinary course of business by the company in liquidation. It is not in dispute that it was not the business of the company in liquidation to grant property of the company on lease or sub-lease. Modi Rubber Limited as well as Bharat Marketing have failed to plead and prove that the transaction was a bonafide transaction and was in the interest of the company, for the benefit of the company in liquidation and was carried out in ordinary course of business. The Calcutta High Court in case of Prudential Capital Markets Limited (in liquidation) [2007 (10) TMI 393 - HIGH COURT OF CALCUTTA] as considered the similar facts and has held that section 536(2) of the Companies Act, 1956 provides for preservation of all the assets of a company upon commencement of the winding up proceedings, for ultimate distribution thereof amongst the creditors following winding up. It is held that the disposition of its properties and the effects made by a company after commencement of the winding up is covered by section 536(2) of the Companies Act, 1956. The Calcutta High Court declared the lease as void and held that the respondent was not entitled to any protection to remain in possession of the shops in question and was also not entitled to any protection under Andhra Pradesh Rent Control Act. The Company Court accordingly, directed the respondent to deliver vacant possession of the shops to the Official Liquidator. For the aforesaid reasons, the sub-lease executed by Modi Rubber Limited on 20th May, 2002 in favour of Bharat Marketing is thus declared as void. The oral application made by Modi Rubber Limited and Bharat Marketing for validating the said sub-lease is rejected. The Official Liquidator has made out a case for an order and direction against Bharat Marketing to hand over vacant and peaceful possession of the property of the company in liquidation as prayed in prayer clause (b) of the Official Liquidator s Report.

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• 2017 (5) TMI 316
  Winding up petition - Held that:- Indian Overseas Bank has already filed 52 original applications before Debt Recovery Tribunal, Bombay against the respondent for recovery of over Rs. 1123,19,62,542/-. This court also noticed that the account of the respondent has been declared as fraudulent by the secured creditors in the CDR meetings and all the lenders have already exited and have decided to file the recovery proceedings against the respondent. The respondent though had applied before BIFR for revival, could not succeed. This court has held that there are not even remotest possibility of revival of the respondent company. Before the remaining assets of the respondent are friterred away, appointment of the Official Liquidator as Provisional Liquidator is absolutely warranted. As in case of Sublime Agro Limited vs. Indage Vinters Limited in Company [2010 (3) TMI 1180 - BOMBAY HIGH COURT] held that CDR scheme is admittedly a voluntary scheme and not binding on the unsecured creditors of the company. It is held that the provisions pertaining to winding up proceedings under the Companies Act are more particularly meant for protecting the interest of the unsecured creditors of the company who are most affected lot when a company becomes commercially insolvent. The secured creditors of the company can always pursue their claim by keeping themselves out of the winding up proceedings. By the said judgment this court admitted the said Company Petition No.136 of 2014 and has also appointed the Official Liquidator as the provisional liquidator. At the request of the learned counsel for the respondent, this court has directed not to advertise the petition for a period of two weeks from the date of the said order. In my view the said judgment delivered by this court in Company Petition No.136 of 2014 applies to the facts of this case. I am respectfully bound by the said judgment. Thus Company Petition admitted.

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• 2017 (5) TMI 313
  Liability of A Director who had resigned from the company - vicarious liability - Offences punishable under Sections 406, 420 and 114 of IPC - Held that:- It is evident even from perusal of the FIR that the complainant himself was aware about legal status of the petitioner that the petitioner is no more attached to the company against which the FIR is registered. A perusal of the FIR would also indicate that all the allegations in FIR, insofar as representing or inducing the complainant are concerned, are directed against other accused persons, where no role of the petitioner is coming out. It has also come on record that the petitioner has resigned from the company much prior to even date on which the complainant contacted the existing Directors of the company for the purpose of transaction and thereafter, in series of transactions, the goods were sent by relying upon representation made by other accused persons and this would not attribute any role to the petitioner. The resignation which is there on record is a document which is evidence sufficient to come to conclusion that the relation between the petitioner and Shivami Enterprise has thus ended. Over and above, the communication to the Sales Tax authorities to discontinue his name from VAT / TIN numbers is also indicative of the fact that intention of the petitioner was to once and for all terminate any relation with Shivami Enterprise. In view of the aforesaid, this Court has no hesitation in coming to conclusion that no further prosecution of the petitioner under this FIR is warranted. Over and above this, when the Investigating Agency has cited the petitioner as witness No.5 in the charge sheet, there is more so reason for this Court to quash the FIR qua the present petitioner.

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• Insolvency & Bankruptcy

• 2017 (5) TMI 317
  Winding up petition - Failure and neglected to repay the loan under the Dollar Loan Agreement - first GOL loan and second GOL loan were classified as non-performing assets in the books of the petitioner - Held that:- A perusal of the record, including the minutes of various meetings of the JLF clearly indicates that the respondent has admitted the liability of the petitioner from time to time. The respondent is heavily indebted not only to the petitioner in the aforesaid two petitions but large number of other creditors. The liabilities of the respondent are much more than the assets. A perusal of the minutes of the meeting of the JLF clearly indicates that the liabilities of the respondent, including the statutory liabilities and towards the arrears of wage is also substantial in addition to the liabilities of the other secured and unsecured creditors. The promoters of the respondent have admitted before this Court that the shareholding of the promoters is now reduced to 2%. Upon raising a query by this Court to the learned counsel for the respondent whether the respondent would be in a position to infuse any funds to revive the company, learned counsel for the respondent, on instructions, states that in view of the fact that the shareholding of the promoters is now reduced to 2%, there is no possibility of the promoters infusing any further funds. A perusal of the record clearly indicates that neither the promoters nor the investors are now agreeable to infuse any funds in the respondent for its revival. None of these parties have made any offer before this Court also though repeatedly asked to infuse any funds even at this stage. The ONGC Limited has already terminated the major contract awarded to the respondent. In these circumstances, do not find any scope of any revival of the respondent company in the facts and circumstances of this case highlighted aforesaid. The respondent in this case has not only admitted the liability of the petitioner but of large number of other creditors. Though there was an attempt made by the intervenors by holding large number of meetings from time to time during the period between 18th April, 2014 and February, 2017, the members of the JLF could not revive the respondent. These two petitions are pending in this Court since 2014. The respondent however, could not make any other proposal also for clearing the dues of these petitioners. Thus before the assets of the respondent are frittered away, the same are required to be protected by this Court in the interest of all the creditors, including the petitioners by passing appropriate orders including by appointing the Official Liquidator as a Provisional Liquidator. Thus the facts of this case, it is clearly beyond reasonable doubt that the respondent has not only admitted the liabilities of the petitioner, but is heavily indebted to large number of creditors. Inspite of several opportunities the respondent had for its revival, the respondent is not in a position to revive. In this situation, it is not inclined to accept the submission of the learned counsel for the respondent and the intervenors that these petitions are filed with a view to pressurize the respondent company and are not bonafide. Petition admitted.

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• 2017 (5) TMI 315
  Proceedings transferred to the NCLT, Mumbai - whether in the present proceedings the conditions for not transferring set out in the proviso to Rule 3 of the said Company (Transfer of Pending proceedings) Rule, 2016 are satisfied and thus are not required to be transferred to NCLT? - Held that:- The legislature, accordingly, inserted proviso (ii) under Section 434(1)(c) of the Companies Act, 2013. Insofar as the proceedings other than the winding up are concerned, it is clear beyond reasonable doubt that where hearings have been completed and only pronouncement of order is pending or reserved with a view to avoid any delay and prejudice to the rights of the parties to the proceedings who are likely to be affected by such transfer at such stage, the legislation has provided such safeguard not to transfer such proceedings at such stage to the NCLT. Admittedly in this case the hearing of this petition was not concluded and thus in view of Section 434 (1)(c) read with proviso thereto, read with the Companies (Removal of Difficulties) Fourth Order, 2016, read with the Companies (Transfer of Pending Proceedings) Rules, 2016, these proceedings stood transferred to the NCLT with effect from 15th December, 2016. In my view the interpretation of the proviso to Rule 3 as sought to be canvased by the learned Senior Counsel for the petitioner thus being contrary to aforesaid provisions can not be accepted. Insofar as the winding up proceedings are concerned, the pending proceedings as on 15 December, 2016 in High Court shall stand transferred to the NCLT or not depend upon the effect of service under Rule 26 of the Companies (Court) Rules, 1959 or not whereas the criteria for transfer of all other proceedings including proceedings under Section 560 of the Companies Act, 1956 is different and transfer thereof is based on and is depending upon the condition whether hearing in such matters is concluded and the proceedings are reserved for orders for allowing or not. In my view, there is no discretion left in the hands of the Court to not to transfer such proceedings to the NCLT on the ground that it would be more convenient or that in the interest of justice the proceedings shall be heard by this Court, though the hearing is not concluded and proceedings are not reserved for order for allowing or not. Thus the present proceedings stand transferred to the NCLT, Mumbai. The Tribunal shall proceed with the matter from the stage before its transfer. Since the argument were not concluded before this Court, the parties may advance their argument before the NCLT.

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• PMLA

• 2017 (5) TMI 312
  Regular bail under Section 439 Cr.P.C. seeked in case registered under Sections 3 & 4 of Prevention of Money Laundering Act, 2002 - Held that:- Antecedents of the petitioner are also to be noted. Undisputedly, the petitioner along with others is also involved in case FIR No.197/2016 registered under Section 420/409/188/120B IPC on 14.12.2016 by Crime Branch and ECIR No.14/DZ-II/2016 registered on 16.12.2016 by ED for the offences under Sections 3/4 PMLA. It is alleged that on 10.12.2016 at around 10.00 p.m., raid was conducted by Crime Branch and Income Tax Department at the petitioner’s office premises jointly. It is alleged that during the said raid Rs. 13.62 crores were recovered which included Rs. 2.62 of new currency in the Rs. 2000 denomination. Record reveals that during 06/08.10.2016, there was also income tax raid in the office and residential premises of the petitioner. In the said raid, the petitioner had surrendered about Rs. 128 crores which related to past investment in his company. It is to be ascertained as to, to whom the huge cash recovered in the present proceedings belonged as there is no reliable or credible document on record to infer if the petitioner has obtained it from any legal / legitimate sources. Possibility of it to be ‘proceeds of crime’ can’t be ruled out.Taking into consideration the serious allegations against the petitioner and other factors including severity of the punishment prescribed in law, find no sufficient ground to grant bail to the petitioner. Bail application dismissed.

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• Service Tax

• 2017 (5) TMI 345
  Validity of notice of motion - delay of 776 days in filing the motion - condonation of delay - non-removal of office objections - change in panel of advocates - Held that: - the advocates appearing for the Revenue, are first the officers of the court. They ought not to dance to the tune of the senior level officials and particularly the Service Tax Commissionerate in Pune. If any advice and opinion tendered is being misconstrued and used against them, then, it is for them to decide whether to continue and render their service to the Revenue - this Commissioner ought to know that there cannot be any justification for not visiting the Registry and seeking inspection of the files, particularly in matters involving a huge tax liability but rely only on some communication from the advocate. There are 82 matters, which are disposed of by a common order by the Registry. In all of them, no compliance with the procedural rules was made. If tomorrow all the Commissionerates and Commissioners or high ranking officials place before this court such causes or reasons for condoning the erroneous delay, they should be reminded at once that they are not special litigants. The Government is not a special litigant nor the Tax Department or the Revenue. The delay is condoned in the larger interest of justice and because some steps have been taken to set right the state of affairs, the notice of motion is allowed.

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• 2017 (5) TMI 344
  Site Formation and Clearance, Excavation, Earthmoving and Demolition Services - whether the service of removing of jungle and bushes inside the building area is chargeable to Service Tax under the head of Site Formation and Clearance, Excavation, Earthmoving and Demolition Services? - Held that: - on perusal of definition of Site Formation and Clearance, Excavation, Earthmoving and Demolition Services, defined under clause 97(a) of Section 65 of the FA, 1994, it can be seen that the main clause of the definition does not cover the service of the appellant i.e. removing of jungle and bushes. Even if it is considered the inclusion clause of the definition, by no stretch of imagination, the same can be classified under the inclusion category of the definition of the subject service - service namely, removing of jungle and bushes in the existing premises of the building does not fall under the definition of Site Formation and Clearance, Excavation, Earthmoving and Demolition Services - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 343
  Refund claim - N/N. 41/2007-ST dated 6.10.2007 - denial on the ground that the services are not specified services for refund as these services have not been received by the appellant at port for export of goods - Held that: - CBEC Circular 112/06/2009-ST dated 12.03.2009, clarified that the service provided/received in the port area do qualify as port services - refund allowed. Refund claim - denial on account of discrepancy in the transport of documents, the name of the ICD Code etc. are not mentioned in the transportation documents along with description of the goods - Held that: - this service has not been received by the appellant for transportation of goods at port for export with regard to the goods exported, therefore, the said defect is technical in nature - in terms of Board Circular No. 112/6/2009-ST dated 12.03.2009 procedural infractions in respect of export documents are required to be ignored while granting refund - refund cannot be denied. Refund claim - denial on the ground that invoice has been issued in the name of head office of the appellant for the input services - Held that: - this is a technical defect - there is otherwise no dispute about the input services received by the assessee. The substantive benefit cannot be denied on the procedural grounds - refund allowed. Refund claim - denial on the ground that the appellant failed to provide the invoice issued by the M/s APL Pvt. Ltd., New Delhi who has provided the transport service - Held that: - these invoices have not been produced by the appellant before the adjudicating authority. In that circumstances, the matters needs examination at the end of the adjudicating authority to examine the invoices - matter on remand. Appeal allowed - part matter allowed and part matter on remand.

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• 2017 (5) TMI 342
  Valuation - includibility - whether the amount collected by the appellant under the name of registration charges or handling charges from the customers over and above the legal charges, viz., smart card and vehicle registration fees for getting the vehicle registered with the RTO authorities, etc. is chargeable to service tax or otherwise? - Held that: - the same issue in the appellant's own case [2016 (1) TMI 738 - CESTAT MUMBAI], has been decided by this Tribunal in their favor, and was held that the RTO charges and extra charges related thereto does not fall under the support service of business or commerce - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 341
  Site Formation, Excavation and Clearance Service - dumping of waste material within the plant premises at locations shown during the site visit and also does the dozing and leveling (as required) - whether the activity undertaken by the respondent in the factory premises of M/s Sunflag Iron and Steel Co. Ltd. will fall under the category of Site Formation, Excavation and Clearance Service during the period 2005-06 to 2009-10? - Held that: - perusing the definition of Site Formation and Clearance, excavation and earthmoving and demolition Service, the activity undertaken by respondent will not fall under any of the category - appeal rejected - decided against Revenue.

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• 2017 (5) TMI 340
  Penalty - failure to discharge the service tax liability under the reverse charge mechanism - C&F Agents service - case of appellant is that since the law was very nascent at that time and tax liability under reverse charge mechanism was improperly appreciated by them hence they did not discharge tax liability in time but subsequently they discharged the tax liability - the interest liability is discharged by the appellant, although belatedly. Held that: - during the relevant period there was confusion as to who has to discharge the service tax liability under the reverse charge mechanism - there is no intention to evade tax as they being Government of Maharashtra undertaking, accordingly we hold that this is a fit case for invoking the provisions of Section 80 of the FA, 1994 for setting aside the penalties imposed - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 339
  Penalty u/s 78 - Insurance Auxiliary Service - commission paid to agents - It was noticed that this service tax @ 10.30% was applicable up to 24/02/2009 and subsequently the tax liability was 12.36%. CERA audit team pointed out the short levy of the service tax due to wrong application of the percentage by the appellant for the period 24/02/2009 onwards - assessee discharged duty with interest on being pointed out - Held that: - the appellant had been filing service tax returns with the authorities and have also shown the amount of tax liability i.e. tax discharged by them. Wrong application of rate of service tax liability for the period 24/02/2009 cannot be held against them as an with intention to evade payment of tax as subsequently the appellant have discharged the service tax liability correctly at the application rate i.e. 12.26% - the lower authorities should not have issued any SCN to the appellant, who has discharged the service tax liability which was short-paid by them for the period 24/02/2009 to 28/02/2009 - penalty set aside - appeal allowed - decided in favor of assessee.

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• 2017 (5) TMI 338
  Services to SEZ developer - N/N. 04/2004-ST - denial on the ground that respondent was a sub-contractor and was never awarded a contract by SEZ developer - Revenue was of the view that the respondent had never provided services directly to the SEZ unit but was contracted as a sub-contractor to provide services to a unit in SEZ - Held that: - the said notification exempts any taxable service provided by any service provider for consumption of the service within a Special Economic Zone, subject to following/adhering to the conditions - It is also undisputed that all the conditions mentioned in the notifications are satisfied by the SEZ developer i.e. M/s Reliance Industries Ltd. Reliance was placed in the case of SUJANA METAL PRODUCTS LTD. Versus COMMISSIONER OF C. EX., HYDERABAD [2011 (9) TMI 724 - CESTAT, BANGALORE], where it was held that where the services are rendered to SEZ or a unit in SEZ, as long as it is rendered for consumption in a Special Economic Zone, the services are exempt. The provisions of Section 26 of the Special Economic Zone overrides provisions of other law and exempts any services or taxes if the same are consumed in Special Economic Zone. Appeal dismissed - decided against Revenue.

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• Central Excise

• 2017 (5) TMI 337
  Principles of natural justice - alternative remedy - non-consideration of the series of authorities cited before the said respondent no.2 by Learned Advocate for the petitioners in the proceeding under Section 5(3) of the Tikha Tenancy Act of 2001 - power yo issue writs - Held that: - the power to issue prerogative writs under Article 226 of the Constitution of India is plenary in nature and the said power is not limited by any other provisions of the Constitution. The law is well-settled that the High Court can exercise jurisdiction under Article 226 of the Constitution in spite of having alternative remedy when the principle of natural justice is violated or when the order is passed without jurisdiction or the vires of any statute is under challenge or prayer is made for enforcement of any Fundamental Right. The Single Bench of the High Court can exercise writ jurisdiction in relation to an order passed by the Commissioner of Central Excise or by the Commissioner of Customs, in spite of having alternative remedy of preferring appeal before CESTAT when principles of natural justice are violated or when the order has been passed without jurisdiction. The natural corollary is that the present writ application is not maintainable before the Single Bench of the High Court - The writ application is, thus, dismissed.

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• 2017 (5) TMI 336
  Whether the Respondents having once failed in their attempt to get the CCESC reopen the proceedings by invoking Section 32 K(3) of the CE Act, could have again gone before the CCESC with another application on the same grounds and asking for an identical relief, namely, annulment of the final order dated 14th December, 2015 passed by the CCESC? Held that: - Whatever may be the grounds, which are pleas of the Respondents, may have been justified, the Respondents did make an attempt by filing an application before the CCESC by invoking Section 32 (K)(3) of the CE Act. That attempt was not successful. With that attempt having failed, as is made clear by the communication dated 16th December, 2015, the next course available to the Respondents was to file a writ petition before this Court in which they could have questioned both the earlier order dated 14th October, 2015 and the subsequent order dated 16th December, 2015. However, going back to the CCESC six months thereafter with another application seeking the same relief, was impermissible in law. There is no question of a party going repeatedly before the CCESC with an application for identical prayer, once having failed before the CCESC. Recognising such a remedy would be fraught with grave consequences as it will give unbridled powers to the CCESC to get the review order over and over again. Petition dismissed.

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• 2017 (5) TMI 335
  Validity of SCN - time limitation - Whether the CESTAT was justified in holding that the SCN dated 13.1.1999 invoking the provisions of Section 11A(1) is barred by limitation on the basis of SCN dated 23.6.1997 which is issued only for the purpose of seizure of the goods and not for any demand under Section 11A? - Held that: - on the very same allegations and documents, another show cause notice dated 13th January, 1999 was issued and that was for the same purpose. Though the Commissioner (Appeals) confirmed this demand, what one finds from a reading of his order as well that the basis for the SCN dated 26th March, 1997 was the seizure. It is in these circumstances that the CESTAT's conclusion is unassailable - appeal dismissed - decided against Revenue.

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• 2017 (5) TMI 334
  Penalty u/s 11AC on the company - appeal was earlier dismissed on the ground of non-supply of relevant documents namely, statements, Panchnama etc. relying which allegation of clandestine removal was made - Held that: - the authorities below even though imposed penalty under Section 11AC of CEA, 1944, however, not extended the benefit of discharging 25% of the penalty imposed on fulfillment of the conditions laid down under the said provision. Penalty on director - Held that: - With regard to penalty imposed on the Director Shri Neemit Punamiya and Shri Kanayalal M. Bhanushali, transporter, the ld. Commissioner (Appeals) has recorded a detailed finding about their involvement in the act of removal of goods without payment of duty. Penalty on employees - Held that: - the said employees had acted as per direction of the Director of the Company who was managing day to day affairs. In these circumstances, the penalty imposed on the employees seems to be little harsh - penalty imposed on each of the employees namely, Shri Raghunath Malik and Shri Hemal Rameshbhai Desai is reduced from Rs. 1.50 lakh and Rs. 1.0 lakh to Rs. 50,000/-. Appeal allowed - decided partly in favor of appellant.

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• 2017 (5) TMI 333
  Time limitation - suo-moto re-credit taken by assessee - capital goods - N/N. 214/86 - Held that: - appellant have declared their suo moto recredit in their ER1 return and in the Cenvat account and also disclosed the fact before jurisdictional Asstt. Commissioner. The fact of suo moto re-credit was very much in the knowledge of the department. The show cause notice was issued after normal period of one year i.e. on 26-2-2008. As per the facts elaborated above there is no suppression of facts for taking suo moto credit by the appellant, hence demand is clearly time bar - appeal allowed - decided in favor of assessee.

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• 2017 (5) TMI 332
  CENVAT credit - job-work - whether the job work goods on which the Cenvat credit was availed by the appellant was returned back from the job worker or otherwise? - Held that: - merely on the basis that the green copy of the challan was not available it cannot be conclusively held that the job work goods have not been returned, when the goods are sent for job work, for the entire transaction of the job work, there are various stages of sending of the job work goods to the job worker, return of the goods from job workers, the payment of job work charges, the recording of the said transaction in the books of accounts of the appellant, after job work, removal of goods on payment of duty by the principal etc. - there can be so many other evidences by which it can be established about the issue of goods for job work and return thereof and subsequent use in the manufacture of final products and clearances of final products on payment of duty. However, all these aspects have not been properly verified by both the authorities below - matter remanded for reconsideration - appeal allowed by way of remand.

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• 2017 (5) TMI 331
  CENVAT credit - duty paying invoice - the investigation revealed that M/s.Wind Industries admitted that they have issued manufacturer's invoice without manufacture of the goods and showing payment of duty, whereas they neither manufactured the goods nor paid the duty - Held that: - The investigation has clearly revealed that the invoice which originated from Wind Industries is without manufacturing of the goods and without payment of duty. The very same invoice was the basis for issuance of the first stage dealer invoice by J.K. Metal Feeders. Therefore, under this investigation, it is established that the invoice which was received by RMIL, the duty shown therein was not paid. Therefore, under any circumstances, the duty which was not paid, credit of same cannot be allowed - credit not allowed. Penalties u/s 11AC and Rule 25 - Held that: - since RMIL was not aware about the wrong doing by collusion between Wind Industries and J.K. Metal Feeders. They had a bonafide belief that the invoice is valid and the duty shown in the invoice stood paid. Therefore, there is no malafide on the part of RMIL - penalties set aside. As regards the penalty imposed on J.K. Metal Feeders, it is very clear that there was a fraud committed by J.K. Metal Feeders, colluded with Wind Industries. Therefore, the penalties imposed on J.K. Metal Feeders is sustained. Appeal allowed - decided partly in favor of assessee.

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• 2017 (5) TMI 330
  CENVAT credit - job-work - The case of the department is that the Cenvat credit on production or processing of goods is not liable to be paid by the job worker as service provider as the same was exempted under N/N. 8/05-ST dated 1-3-2005 - Held that: - From the combined reading of both the provisions of Section 93 and Section 5A of CEA, it is an option to the assesee in service tax whether to avail exemption notification or to pay service tax - In the present case the service tax provider i.e. job worker has opted to pay service tax without availing the exemption N/N. 8/05-ST which cannot be objected, therefore service tax paid by the job worker is correct and legal therefore the Cenvat credit availed by the appellant cannot be disallowed - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 329
  Penalty u/s 11AC - M/s.BPCL had cleared one consignment of ATF from the refinery on 25/12/2004 under bond. However, the same was shown as duty paid receipt at M/s.BPCL ASF Santacruz, Mumbai. Duty of Rs. 12,17,948/- was subsequently paid on 05/03/2005 and interest was also paid on 10/03/2006 on delayed payment of duty - Held that: - the penalty u/s 11AC can be imposed only when non-paid/short paid duty was not paid with intent to evade payment of duty and the same is liable to be paid as determined under sub-section (2) of Section 11A - In the present case, since there is no SCN proposing demand. Firstly, there is no duty which is short paid or non-paid. Secondly, the duty so paid by the appellant was not determined by carrying out the exercise as provided under sub-section (2) of Section 11A, ie., adjudication of duty demand. Therefore, in the fact of the present case, the ingredients for imposition of penalty under Section 11AC is absent - penalty set aside - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 328
  SSI exemption - N/N. 8/2003-CE dated 1.3.2003 - denial on the ground that the assessee has availed CENVAT credit - reversal of credit when it was understood that they are not able to export the goods - Held that: - the credit availed was not utilized by the appellant. In this situation, when the credit though availed and reversed before utilization thereof, it will amount to non-availment of credit. Accordingly, the condition of N/N. 8/2003-CE stand complied with - the appellant is entitled for the SSI exemption N/N. 8/2003-CE dated 1.3.2003 - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 327
  MODVAT Credit - inputs used in the manufacture of exempted goods - N/N. 15/1994-CE - the Appellant had reversed the proportionate CENVAT Credit on the inputs attributable to the products cleared from the factory, claiming benefit of exemption N/N. 15/1994-CE, dt.1.3.94 - Held that: - The very same issue has been considered by Hon'ble Allahabad High Court in Hello Mineral Water (P) Ltd [2004 (7) TMI 98 - ALLAHABAD HIGH COURT], where it was held that petitioner is thus entitled to the benefit of the said Notification No.15/1994-CE, dated 1-3-2004 and reversal of Modvat credit on the inputs namely PVC granules used in the manufacture of PVC/PP bottles, which have been admittedly reversed by the petitioner, even though after clearance of the final product - appeal dismissed - decided against Revenue.

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• 2017 (5) TMI 326
  Classification of goods - Oxytetracycline Hydrochloreide Capsule 500mg - classified under Chapter 3003.10 or sub heading 3003.20? - - Held that: - the identical issue has been considered by the coordinate Bench of this Tribunal wherein in case of M/s. Pfizer Ltd vide Order No. A/85566/16/EB dated 13-1-2016 the product namely Oxytetracycline Hydrochloride Capsule 500mg was held classifiable under 3003.20 as medicament other than the P&P medicament therefore in the present case also the same medicine is involved therefore ratio of the aforesaid decision of this Tribunal is clearly applicable. From the label it can be said that name of the product is Oxytetracycline Capsules I.P. 500mg which is generic name and appearing in the Indian pharmacopoeia, therefore this product is not P&P Medicament by any stretch of imagination. The product in question i.e. Oxytetrcycline Capsules I.P. 500 mg is a generic medicine, other than the P&P medicament and correctly classifiable under Chapter heading 3003.20 - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 325
  Valuation - CAS-4 duly certified - administrative cost and profit - includibility - Rule 6 (B) (ii) of the Central Excise Rules, 1975 - Held that: - appellant did not submit CAS-4 certified data before the Commissioner and consequently the Commissioner in the impugned order has compared certain elements of the cost with those declared in the original work-sheet submitted along with the price declaration and come to the conclusion that the data submitted in the unsigned work-sheet is incorrect - it was wrong on part of the appellant to submit an unsigned work-sheet of CAS-4 before Commissioner. Now the appellants have submitted the said data duty certified. The same was not submitted before adjudicating authority matter is remanded to original adjudicating authority to re-examine in light of the CAS-4 certificate now submitted - appeal allowed by way of remand.

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• 2017 (5) TMI 324
  Imposition of Penalty u/r 26 of CER, 2002 - quantum of penalty - clandestine removal - job work - penalty imposed on the appellant an employee of the main party, M/s Qualimax Electronics (P) Ltd., situated at D-12, Site-IV, Industrial Area, Sahibabad, Distt. Ghaziabad, during the relevant period - the employee is believed to be involved in evasion of duty and in this way he has dealt with the goods which were cleared without payment of duty liable to confiscation - Held that: - the appellant was a small-time employee drawing a salary of Rs. 10,000/- during the relevant period. Although, he is an educated person, but it is not the case of Revenue that he was entitled to and/or getting the share in the clandestine activity of his employer. It appears that the appellant unknowingly got involved as an employee in the clandestine activity of his employers - the appellant is liable to penalty but at the same time the quantum of penalty imposed is quite high and harsh - penalty reduced to Rs. 2,50,000/- - appeal allowed - decided partly in favor of appellant.

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• CST, VAT & Sales Tax

• 2017 (5) TMI 319
  Natural justice - validity of assessment order - the petitioner was not given sufficient opportunity to put forth their case by filing supporting documents - Held that: - unless the petitioner is informed of the decision on their request for extension, they cannot be expected to proceed further either this way or that way. When a request is made by the petitioner seeking for extension of time by way of writing, such request has to be considered and decided either by accepting or rejecting the same and such decision has to be duly communicated to the assessee by fixing a next date of hearing so as to enable such assessee to be prepared for appearance on that day for completion of the assessment proceedings - the assessment order passed without intimating the decision taken on the request for extension of time, is in violation of the principles of natural justice and therefore on that ground alone, the assessment order has to be set aside - petition allowed - decided in favor of assessee.

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• Indian Laws

• 2017 (5) TMI 314
  Complaints filed under section 138 of the N.I. Act for the dishonour of the cheques - whether the complaints, for the dishonour of the cheques, could not have been filed in the court of the 12th Additional Chief Judicial Magistrate, Vadodara as the territorial jurisdiction to try the complaints would be with the court at New Delhi? - Held that:- The commencement of proceedings before the Magistrate under Chapter XVI starts with the issue of process under Section 204 Cr.P.C. If in the opinion of a Magistrate taking cognizance of the offence there is sufficient ground for proceeding, and the case appears to be a summons case, he shall issue his summons for the attendance of the accused, but if it is a warrant case, he may issue a warrant, or, if he thinks fit, a summons, for causing the accused to be brought or to appear at a certain time before such Magistrate or (if he has no jurisdiction himself) some other Magistrate having jurisdiction. No summons or warrant shall be issued against the accused under sub-section (1) until a list of the prosecution witnesses has been filed. In a proceeding instituted upon a complaint made in writing, every summons or warrant issued under sub-section (1) shall be accompanied by a copy of such complaint. The aforesaid provisions make it clear that the Magistrate is required to issue summons for attendance of the accused only on examination of the complaint and on satisfaction that there is sufficient ground for taking cognizance of the offence and that he is competent to take such cognizance of offence. Once the decision is taken and summons is issued, in the absence of a power of review including the inherent power to do so, the remedy lies before the High Court under Section 482 Cr. P.C or under Article 227 of the Constitution of India and not before the Magistrate. Section 201 Cr.P.C., as noticed earlier, can be applied immediately on receipt of a complaint, if the Magistrate is not competent to take cognizance of the offence. Once the Magistrate taking cognizance of an offence forms his opinion that there is sufficient ground for proceeding and issues summons under Section 204 Cr.P.C., there is no question of going back following the procedure under Section 201 Cr.P.C. In the absence of any power of review or recall the order of issuance of summons, the Magistrate cannot recall the summons in exercise of its power under Section 201 Cr.P.C. (see Devendra Kishanlal Dagalia vs. Dwarkesh Diamonds Private Limited & Ors., ( 2013 (11) TMI 1473 - SUPREME COURT)) For the foregoing reasons, hold that the Court at Vadodara has the territorial jurisdiction and the complaints filed by the complainant for the offence under section 138 of the N.I. Act are maintainable. 51. In the result, all the applications fail and are hereby rejected. Notice is discharged. The interim relief, earlier granted in terms of para-14(d), stands vacated forthwith. Direct service is permitted.

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