TMI Tax Updates - e-Newsletter
June 1, 2017

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Insolvency & Bankruptcy PMLA Service Tax Central Excise Indian Laws

Articles

1. Valuation of supply under CGST Act,2017 and Rules thereof

   By: Sanjeev Singhal

2. TRADEMARK: PROTECT YOUR BRAND

   By: sandeep jain

News

1. Dr. Hasmukh Adhia, Revenue Secretary reiterates that the Goods and Services Tax (GST) would be implemented from July1, 2017; States that GST would help in creating lot of jobs for young generation

2. Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others – Palm Oil, Crude Palmolein, RBD Palmolein, Others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified

3. Asian Development Bank (ADB) and Punjab National Bank (PNB) sign $100 million loan to finance Solar Rooftop projects

4. Online APAR for Indian Trade Service SPARROW-ITS Launched

5. CBDT extends the due date for furnishing Statement of Financial Transaction (SFT)

6. RBI Reference Rate for US $

Notifications

Customs

1. 22/2017 - dated 31-5-2017 - Cus

Seek to further amend Notification No. 73/2006-Customs dated 10th July, 2006

2. 51/2017 - dated 31-5-2017 - Cus (NT)

Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Sliver

Income Tax

3. 7/2017 - dated 30-5-2017 - IT

Procedure for Acceptance of Statement of Financial Transactions from Sub-Registrar Office and Post Offices (SFT) as per section 285BA of Income-tax Act. 1961 read with Rule 114E of Income-tax-Rules 1962

4. 6/2017 - dated 30-5-2017 - IT

Declaration in Form 15G/15H to be furnished to the Deductor/Payer for each Financial Year - Clarifications

5. 41/2017 - dated 29-5-2017 - IT

Under section 80G(2)(b) the Central Government Notified “Ariyakudi Sri Srinivasa Perumal Temple, Kottivakkam, Chennai,” to be place of historic importance and a place of public worship

Circulars / Instructions / Orders

DGFT

1. Trade Notice No. 02 - dated 24-4-2017

Regarding MEIS application

2. Trade Notice No. 01/2018 - dated 21-4-2017

Free Trade Agreement between India and EAEU

Customs

3. 20/2017 - dated 31-5-2017

Facility for Online Generation of Rotation Number by Shipping Lines/Agents - reg.

Highlights / Catch Notes

Income Tax

• Claiming Section 80G Benefits Requires More Than Meeting Section 10(23C) Conditions; Additional Criteria Must Be Met.

  Case-Laws - HC : Benefit of section 80G - The fulfilment of conditions under Section 10(23C) of the Act is only one of the conditions prescribed under Section 80G of the Act but besides the said condition other conditions are also necessary to be satisfied for claiming benefit of Section 80G - assessee failed to satisfy one of those conditions - no exemption benefit - HC
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• Interest on Advanced Tax: Seized Amounts Can Offset Tax Liability, Interest u/ss 234B/234C Incorrect.

  Case-Laws - AT : Interest on Advanced Tax - - section 132 B(1) does not prohibit utilization of amounts seized during the course of search towards the advance tax liability - charge of Interest u/s. 234B and 234C is not correct - AT
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• No Penalty for Missing Audit Report: Section 271B Not Invoked as Return Deemed Complete by AO u/s 153C.

  Case-Laws - AT : Penalty u/s. 271B - If the audit report was not enclosed to the return of income filed by assessee subsequently in response to proceedings u/s. 153C, AO should have treated the return as defective return. No such action was taken by the AO, which indicates that the return is complete in all respects - No penalty - AT
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• No Penalty for Suppression in Stock if Deduction Claimed in Good Faith u/s 271(1)(c.

  Case-Laws - AT : Penalty u/s 271(1)(c) - suppression in closing stock - Even if some deduction or benefit is claimed by the assessee wrongly but bonafide and no malafide can be attributed, the penalty would not be levied. - AT
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• Interest Received by AOP Member Must Be Taxed in Member's Hands per Section 67A Guidelines.

  Case-Laws - AT : Assessee is member of AOP and received interest as member of the AOP, hence as per section 67A, the income has to be computed in the hands of AOP and the share income has to be brought to tax in the hands of member of AOP - AT
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• Trust Classified as Indeterminate Due to Unspecified Beneficiaries and Unascertainable Shares at Establishment Time.

  Case-Laws - AT : Status of indeterminate trust - the names of the beneficiaries are not specified in the trust and the individual shares of the beneficiaries are not ascertainable on the date of the institution of the trust. Therefore, the assessee cannot be categorised itself as a determinate trust - AT
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• Gifts from Hindu Undivided Family are Taxable as 'Income from Other Sources' u/s 56(2) of Income Tax Act.

  Case-Laws - AT : Receipt of Gift from HUF - income from other sources - whether HUF comes under the term ‘group of relatives’ defined u/s 56(2)? - Held Yes - Receipt of Gift from HUF - income from other sources - whether HUF comes under the term ‘group of relatives’ defined u/s 56(2)? - AT
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Customs

• Court Rules SAD Rate Fluctuations Legal; No Grounds to Declare Rate Fixation Unreasonable for Domestic Manufacturers.

  Case-Laws - HC : Levy of SAD - level playing field for indigenous manufacturers - The mere fact that there might be some inconvenience for a short period on account of the increase or decrease in rates of SAD is not by itself a reason to declare the fixation of the rate of duty as unreasonable or illegal.- HC
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• Machinery for Preparing Animal Feed Classified Under CTH 8479, Not Agricultural or Horticultural Category.

  Case-Laws - AT : Classification of machinery for preparing animal feedings stuff - classified under CTH 8436 10 00 or under CTH 8479 89 99? - it cannot be considered as an agricultural machine or horticultural machine - goods to be classified under CTH 8479 - AT
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Corporate Law

• Public company conversion to private requires special resolution and tribunal approval; alters articles of association.

  Case-Laws - Tri : Conversion from public to private company - Alternation of articles by special resolution subject to the approval by the tribunal - conversion allowed - Tri
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Service Tax

• Service Tax Demand on Gun Testing Services by Quality Assurance in Kanpur for J&K Deemed Unsustainable.

  Case-Laws - HC : Levy of service tax in the State of Jammu and Kashmir (J&K)- demand of service tax in relation to services said to be rendered by Gun testing conducted by Quality Assurance Establishes (SA) Kanpur for the purposes of quality assurance - Demand is not sustainable - HC
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• Agricultural Produce Marketing Committee exempt from service tax on "market fees" and "mandi shulk" under negative list provisions.

  Case-Laws - AT : Liability of service tax - “market fees” or “mandi shulk” - the appellants, being an Agricultural Produce Marketing Committee, is excluded from the tax liability - Services relating to agricultural produce by way of storage or warehousing are in the negative list. - AT
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• Bangalore Service Tax Commissioner Can't Demand Taxes for Services Rendered Outside Jurisdiction.

  Case-Laws - AT : Territorial Jurisdiction - demand of service tax - Commissioner of Service Tax, Bangalore has no jurisdiction to make any demand of service tax in respect of consideration received for jurisdictions outside Bangalore - AT
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Central Excise

• Compost from press-mud, spent wash, and boiler ash not deemed a manufactured product u/r 6 of Cenvat Credit Rules.

  Case-Laws - AT : Cenvat Credit - Emergence of Compost - whether manufactured product or not? - dumping of the viz., press-mud, spent wash and boiler ash in the compost pit - Compost is capable of use as fertilizer in farms - applicability of Rule 6 of CCR - No demand - AT
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• SSI Exemption Allowed for "Minimax" Brand; Partnership Firm and MEI Can Use Name Without Losing Eligibility.

  Case-Laws - AT : SSI exemption - use of brand name of others - it can be said that at the most, the name “Minimax” belongs to both the entities namely, the partnership firm as well as MEI - exemption was allowed - AT
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Case Laws:

• Income Tax

• 2017 (5) TMI 1428
  Reopening of assessment - reasons to believe - Held that:- In the present case, as already noticed, the reasons to believe contain not the reasons but the conclusions of the AO one after the other. There is no independent application of mind by the AO to the tangible material which forms the basis of the reasons to believe that income has escaped assessment. The conclusions of the AO are at best a reproduction of the conclusion in the investigation report. Indeed it is a 'borrowed satisfaction'. The reasons fail to demonstrate the link between the tangible material and the formation of the reason to believe that income has escaped assessment. The Court is satisfied no error has been committed by the ITAT in the impugned order in concluding that the initiation of the proceedings under Section 147/148 to reopen the assessments for the AYs in question does not satisfy the requirement of law. The question framed is answered in the negative, i.e., in favour of the Assessee and against the Revenue.

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• 2017 (5) TMI 1427
  Renewal of the exemption under Section 80G(5) denied - as during the search and seizure operations an unaccounted cash was recovered and as such the assessee respondent was not properly maintaining its books of accounts - Held that:- Tribunal is not justified that as the respondent assessee meets the requirement of the above conditions contained in sub-section 10(23C), it is also entitle to the benefit under Section 80G of the Act. There is no dispute that search and seizure operation was carried out in the premises of the respondent assessee and that a sum of 11.25 lacs was recovered in cash. This amount was not shown in the account books maintained by the respondent assesssee. It has come on record that the respondent assessee admitted before the Income Tax Settlement Commission that the cash found during the search and seizure operations amounting to 11.25 lacs belonged to it and that the receipts relating to this cash were not recorded in the account books. The above very fact clearly establishes beyond any doubt that the respondent assessee was not maintaining regular accounts of its receipts and expenditure. It is precisely on this ground that the application for renewal of approval/registration has been rejected. Assessee failed to fulfill one of the essential conditions for grant of renewal of approval/registration under Section 80G of the Act, we are of the opinion that the tribunal committed manifest error of law in setting aside the order of the Commissioner and in directing for grant of registration under Section 80G(5) to the respondent assessee. The fulfilment of conditions under Section 10(23C) of the Act is only one of the conditions prescribed under Section 80G of the Act but besides the said condition other conditions are also necessary to be satisfied for claiming benefit of Section 80 G of the Act. The respondent assessee failed to satisfy one of those conditions as mentioned earlier. Question of law answered in favour of the revenue and against the assessee and it is held that benefit under Section 80 G shall only be available on the strict compliance of the conditions laid down therein and not merely by satisfying the conditions of Section 10 (23 C) of the Act.

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• 2017 (5) TMI 1426
  Validity of assessment u/s 153C - Whether the ITAT was correct in holding that in the absence of any satisfaction of AO of the searched person, the assessment framed by invoking the provisions of Section 153C cannot be sustained? - Held that:- The Court finds that there is no discussion in the impugned order of the ITAT on whether the documents referred to in the Satisfaction Note were, in fact, incriminating. The ITAT invalidated the proceedings under Section 153 C of the Act only on the ground of there being no Satisfaction Note by the AO of the searched person. As discussed earlier, this was factually erroneous. There was no occasion for the ITAT to examine the other grounds of challenge to the assumption of jurisdiction under Section 153 C of the Act. Consequently, the impugned order dated 13th March 2015 of the ITAT is hereby set side. The Court restores to the file of the ITAT for a further hearing all the appeals in which the impugned order was passed for consideration of the further grounds including the question whether the assumption of jurisdiction by the AO under Section 153C qua the Assessee was justified on the ground that the documents seized and stated to belong to the Assessee were not incriminating.

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• 2017 (5) TMI 1425
  Revision petition u/s 264 - Assessment u/s 153A/153C - satisfaction note - assumption of jurisdiction by the AO under Section 153C of the Act was illegal and therefore the entire proceedings were void ab initio - HELD THAT:- In the Ganpati cases, the satisfaction note clearly records the view that the documents listed therein belong to the other person. The satisfaction note is of the AO of the searched person who also happens to be the AO of the other person i.e. Ganpati. Merely because the note also does not categorically state that the documents mentioned therein do not belong to the searched person (Aseem Kumar Gupta Group) will not invalidate the assumption of jurisdiction under Section 153C qua Ganpati. The view taken by the CIT in the impugned order does not call for interference. The remand to the AO for giving Ganpati a further opportunity regarding the nature of the documents and the validity of the additions made as a result thereof also calls for no interference. The writ petitions by Ganpati fail and are hereby dismissed. Orders in the cases of Shushre and Shrey - The Court notes that in the impugned orders dismissing the revision petitions of Shushre and Shrey, the CIT has noted that despite several opportunities being granted to the ARs of the Assessees, they did not appear and no submissions on merits of the case were made by the two Assessees during present proceedings. In the circumstances, no fault can be found with the CIT for declining to interfere on merits with the additions made by the AO. Even otherwise, in these writ proceedings, it is difficult for the Court to examine the documents seized and determine if in fact they could be said to be incriminating qua each of the said Assessees. There could be instances where the very nature of the document for e.g., a balance sheet or P L account of the Assessee, which already stood disclosed during the original assessment proceedings, can be said to be non-incriminating. That again will depend on the facts and circumstances. However, the documents listed out in both the above satisfaction notes qua Shushre and Shrey are not such that can be said to be non-incriminating on a bare perusal. There was sufficient opportunity for both Assessees to demonstrate how they were not. But they did not avail of the opportunity. In the writ jurisdiction, this Court has to be satisfied that the CIT s impugned orders are not unfair, unjust or irrational and are consistent with the basic procedural requirements. On none of these counts do the impugned orders of the CIT in the present case warrant interference. Consequently, the petitions of Shushre and Shrey also are held to be without merit. The impugned orders of the CIT are accordingly upheld and all the writ petitions are dismissed

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• 2017 (5) TMI 1424
  Cognizance against the petitioner under Section(s) 276C (1) and 276C (2) - Held that:- In the instant case from the facts mentioned, in detail, it is apparent that the petitioner has not been exonerated by the Income Tax Department in the adjudication proceeding till date. The assessment done by the Income Tax Department has been upheld by the Hon’ble High Court. As per own averment of the petitioner, Special Leave Petition filed by the petitioner is still pending in the Hon’ble Supreme Court of India. In such circumstances, this Court does not find any illegality in the impugned order dated 01.02.2013 passed by the Presiding Officer (Special Court), Economic Offences, Patna, in Complaint Case taking cognizance against the petitioner under Section(s) 276(1) and 276(2) of the Income Tax Act.

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• 2017 (5) TMI 1423
  Interest on Advanced Tax - Non grant of credit for cash seized during search - charge of Interest u/s. 234B and 234C - Held that:- We find that it is not disputed that assessee has offered the amounts seized as undisclosed income during search. The revenue has also accepted the same as assessee’s income. In such situation when assessee has requested to adjust the cash seized against the assessee’s liability towards tax the authorities below have erred a not adjusting the cash seized against the tax liability including of tax liability. In this regard we note that Hon'ble jurisdictional High Court in the case of CIT vs. Shri Jyotindra B. Mody [2011 (9) TMI 97 - BOMBAY HIGH COURT ] had held that once assessee offers to tax undisclosed income including the amounts seized during search, the liability to pay advance tax in respect of that amount arises even before completion of the assessment. The Hon'ble High Court further held that section 132 B(1) of the Act does not prohibit utilization of amounts seized during the course of search towards the advance tax liability. Provision of Explanation 2 to Section 132 (B) (4) which excludes advance tax from the ambit of existing liability is applicable from 1st June 2013 and not applicable to the assessment years involved in this appeal. Thus we find that assessee was entitled to adjustment of cash seized and offered for taxation towards its liability for taxes including advance tax. Hence in our considered opinion the authorities below have erred in charging interest u/s. 234 B and 234 C on the facts of the circumstances of the case. - Decided in favour of assessee.

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• 2017 (5) TMI 1422
  Best judgment assessment - non opportunity of being heard - Held that:- Admittedly, the assessment was framed consequent to the directions issued by the Additional CIT and as per the directions, claim of the assessee for computing the long term capital gain was to be rejected and it was to be computed as a short term capital gain, meaning thereby that the directions of the Additional CIT was prejudicial to the assessee and before the issue of the same, an opportunity of being heard should have been afforded to the assessee as per the proviso to section 144A of the Act. Unfortunately the Additional CIT has not afforded any opportunity of being heard before issuing such directions. Thus it is of the view that capital gain computed pursuant to the directions of the Additional CIT deserves to be set aside. Accordingly set aside the order of the AO passed consequent to the directions of the Additional CIT for computing the capital gain and restore the matter to the file of the AO to recompute the capital gain after affording an opportunity of being heard to the assessee. If the AO feels that the direction of Additional CIT is to be complied with, he may place the matter before the Additional CIT to first afford opportunity of being heard to the assessee and then readjudicate the issue afresh and directions be issued thereafter. Accordingly, the appeal of the assessee is allowed for statistical purposes.

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• 2017 (5) TMI 1421
  Penalty u/s. 271B - non enclosure of audit report to the return of income - Held that:- As seen from the order of the AO u/s. 153C, it is very clear that AO has initiated penalty proceedings for not enclosing the audit report, but not for completing the audit before the due date. Board Circular No. 5 of 2007 clearly states that while uploading the return, no audit report should be attached to the return and also further states that it should not be furnished separately also before or after due date. Non-enclosure of audit report to the return of income does not attract any penalty u/s. 271B, as specified in the Board Circular extracted above. Since AO has initiated the penalty proceedings only for non-enclosure of audit report along with the Return, we are of the opinion that the same is not attracting penalty, on the facts of the case, as assessee has complied with the Board Circular. If the audit report was not enclosed to the return of income filed by assessee subsequently in response to proceedings u/s. 153C, AO should have treated the return as defective return. No such action was taken by the AO, which indicates that the return is complete in all respects. Since prior approval of the Addl. CIT u/s. 153D was also taken by the AO before completion of assessment, we are of the opinion that non enclosure of audit report to the return of income does not attract penalty proceedings u/s. 271B. Accordingly, penalty levied is cancelled. - Decided in favour of assessee.

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• 2017 (5) TMI 1420
  Deduction u/s 80IB(10) - whether the assessee is a developer - assessee was not the owner of the land on which the project was constructed and approval by the local authority was not granted to the assessee but to the land owner - Held that:- The business model adopted by the assessee does not vitiate the claim of deduction under section 80IB(10) but then the Assessing Officer has primarily declined the deduction with that basic approach. There is no dispute regarding assessee having taken the entrepreneurial risk and acted as an entrepreneur rather than as a contractor, and that is what is relevant. In view of the above discussions, as also bearing in mind entirety of the case, we approve the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter.

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• 2017 (5) TMI 1419
  Penalty u/s 271(1)(c) - suppression in closing stock - Held that:- In the present case, the AO has not collected any incriminating material against the assessee with regard to the closing stock of shares of Apollo Tyres valuing 60,58,065/- . The disclosure was made by the assessee through revised computation of income vide letter dated 8/8/06 and not under the constraint of exposure to adverse action by the AO. It is, thus, the case where disclosure has been made voluntarily and out of free will, but not under compulsion. Taking the entire gamut of the case into account, we note that there was no case for the AO that the explanation offered by the assessee was not bona fide or there was a concealment. It is repeatedly held by the Courts that the penalty on the ground of concealment of particulars or non-disclosure of full particulars can be levied only when in the accounts/ return an item has been suppressed dishonestly or the item has been claimed fraudulently or a bogus claim has been made. When the facts are clearly disclosed in the return of income, penalty cannot be levied and merely because an amount is not allowed or taxed to income, it cannot be said that the assessee had filed inaccurate particulars or concealed any income chargeable to tax. Further, conscious concealment is necessary. Even if some deduction or benefit is claimed by the assessee wrongly but bonafide and no malafide can be attributed, the penalty would not be levied. As argued that not filing correct return of income is equal to filing incorrect return of income and therefore the assessee can be said to be guilty of filing inaccurate particulars of income but for levy of penalty u/s. 271(1)(c) this status is not sufficient. The AO has to show by some positive material with which he can compare that what was filed by the assessee was inaccurate or was false leading to the inference that the assessee has concealed income or filed inaccurate particulars of income. Mere disallowance or not accepting the claim of the assessee will not be sufficient. The assessee had disclosed all material facts, it is held that there is no case of concealment or furnishing of inaccurate particulars of its income in respect of the disallowances. In view of above, we note that the case law relied upon by Ld. DR in the case of Mak Data (P) Ltd. vs. CIT-II (Sura) is relating to voluntary disclosure and hence, distinguished to the facts and circumstances of the present case. In view of the above, we are of the considered opinion that Ld. CIT(A) has rightly held that the AO was not justified in levying penalty u/s. 271(1)(C) in respect of the said disallowances. Accordingly, the same was rightly cancelled, which does not need any interference on our part, hence, we uphold the action of the Ld. CIT(A) in deleting the penalty in dispute and reject the ground raised by the assessee. - Decided in favour of assessee.

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• 2017 (5) TMI 1418
  Penalty u/s 271(1)(c) - whether assessee has concealed his income or furnished inaccurate particulars of his income and called for explanation from the assessee - Held that:- In the present case, the assessee has disclosed all the particulars before completion of the assessment u/s 143(3), though the details were filed in the scrutiny proceeding. Further, scrutiny assessment proceedings have taken for AY 2011-12, but, the assessee has disclosed all the details in respect of 2008-09, 2009-10 and 2010- 11 also. Therefore, the attempt made by the assessee to disclose the particulars of income shows the bonafides of assessee. In the present case, the assessee has discharged the burden by giving detailed explanation before the AO. The AO simply rejected the explanation without discharging the burden cast upon him, as the assessee has disclosed the particulars of income in the scrutiny assessment.We find that neither the AO nor the CIT(A) has dealt with the issue in correct perspective. Thus we are of the view that the case of the assessee is not a fit case to attract the provisions of section 271(1)(c) - Decided in favour of assessee.

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• 2017 (5) TMI 1417
  Penalty proceedings u/s. 271(1)(c) - defective notice - Held that:- After perusing the notice dated 31.12.2007 issued by the AO to the assessee, we are of the view that the AO has initiated the penalty for furnishing inaccurate particulars of income/concealment of income, but in the penalty order dated 06.11.2009 he has stated that he is satisfied that the assessee has furnished the inaccurate particulars of income. In our view the penalty in dispute is not sustainable in the eyes of law, because the AO has not recorded any clear finding whether the assessee was guilty of concealment of income or furnishing of inaccurate particulars of income. Secondly, the notice u/s. 271(1)(c) has been issued to the assessee levying the penalty for furnishing of inaccurate particulars of income/concealment of income, whereas the penalty in dispute has been levied by the AO on account of furnishing of inaccurate particulars. Thus we delete the penalty in dispute and decide the issue in favor of the assessee and against the Revenue.

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• 2017 (5) TMI 1416
  Interest income as a member of the AOP - Method of computing a member’s share in income of association of persons or body of individuals - Held that:- As per section 67A, the total income of the AOP from all the heads of income should be computed and, then, any salary, interest, bonus, commission or remuneration paid to member of the AOP shall be deducted from the total income of the AOP. Balance, if any, should be apportioned in the hands of members of the AOP in proportionate to their share holding ratio in the AOP. The share of profit or loss and the salary, remuneration, interest etc. paid to the member of the AOP constitute the share income of the member which should be brought to tax in the hands of the assessee since the shares of the AOP are determinate. In the instant case assessee is member of AOP and received interest as member of the AOP, hence as per section 67A, the income has to be computed in the hands of AOP and the share income has to be brought to tax in the hands of member of AOP. This issue has not been considered by this AO or CIT(A). Therefore, we are of the considered opinion that the issue should be remitted back to the file of the AO to consider taxing the share income of the assessee as per the provisions of section IT Act. This view is supported by the Hon’ble MP High Court decision in the case of CIT Vs. D&H Secheron Electrodes Ltd. [2005 (1) TMI 92 - MADHYA PRADESH High Court]. Accordingly, we set aside the issue in dispute to the file of the AO with a direction to compute the income of the AOP and the share income of the AOP in the hands of the Members of AOP i.e. assessee. Accordingly, the additional ground raised by the assessee is allowed for statistical purposes.

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• 2017 (5) TMI 1415
  Claim of Depreciation after claiming exemption u/s 11 - whether claim of depreciation by assessee trust would amount to double deduction? - Held that:- We find that the issue is squarely covered by a decision of the co-ordinate bench in the case of ACIT vs. Vishwachetan Foundation IBMR [2016 (6) TMI 792 - ITAT BANGALORE] as relying on DIT (Exemptions) v. Al-Ameen Charitable Fund Trust [2016 (3) TMI 462 - KARNATAKA HIGH COURT] wherein held while acquiring the capital assets what is allowed as exemption is the income out of which such acquisition of asset is made and when the depreciation deduction is allowed in the subsequent years, it is for the losses or the expenses representing the wear and tear of such capital asset incurred, if not allowed then there is no way to preserve the corpus of the trust for deriving its income. - Decided against revenue

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• 2017 (5) TMI 1414
  Disallowance u/s 43B on account of sales tax 60,92,457/- as the same was made towards supply of software and hardware. - Decided against revenue Addition on account of consultancy charges - failure to file the required documents in support of the claim for said consultancy charges - Held that:- The documentary evidence filed by the assessee for the first time before the CIT(Appeals) and since the said evidence was not filed by the assessee before the Assessing Officer during the course of assessment proceedings for the reason explained by the assessee, the CIT(Appeals) forwarded the same to the assessee for his verification and comments. In the remand report submitted to the CIT(Appeals), the AO however did not make any adverse comment on the additional evidence filed by the assessee in support of its case and keeping in view the same as well as all the other facts of the case, we find no infirmity in the impugned order of CIT(Appeals) deleting the disallowance made by the AO on this issue to the extent of 42,03,229/-. Moreover, as rightly pointed out by the assessee, the Revenue has challenged the relief given by the CIT(Appeals) on this issue in the ground raised with specific reference of 40(a)(i) of the Act for the failure of the assessee to deduct tax at source from the relevant payment whereas the provisions of Sec. 40(a)(i) of the Act introduced with effect from assessment year 2004-05 are actually not applicable to the year of A.Y. 2003-04. Disallowance u/s. 40A(3) - Held that:- It is observed that the expenditure incurred by the assessee in cash was partly covered by the exceptional circumstances as prescribed in Rule 6DD inasmuch as the said expenditure was incurred by the assessee at different sites situated in remote places where banking facilities were not available. A finding of fact in this regard has been recorded by CIT(Appeals) in his impugned order after verifying the relevant details and documents furnished by the assessee and after obtaining remand report from the AO wherein no adverse comments were offered. At the time of hearing before us, the Ld. DR has not been able to rebut or controvert these finding recorded by CIT(Appeals). We therefore find no justifiable reason to interfere with the impugned order of CIT(Appeals) Disallowance made by the AO out of various expenses - Held that:- No specific or material defects were pointed out by the AO to dispute or doubt the genuineness of the said expenditure incurred by the assessee or its business expediency. Keeping in view all these facts and circumstances, we are of the view that ad hoc disallowance made by the AO out of various expenses arbitrarily was excessive and unreasonable and CIT(Appeals) is fully justified to restrict the same to the reasonable extent. When the Ld. DR has sought to contend that the CIT(Appeals) has also not given any basis for the disallowance sustained by him out of various expenses, the Ld. counsel for the assessee has pointed out that the CIT(Appeals) has finally sustained disallowance to the extent 10% of the expenses claimed by the assessee under various heads and keeping in view that the net profit rate declared by assessee for the year under consideration was higher than that of the immediately preceding year, we find that the disallowance so sustained by CIT(Appeals) is quite tame and reasonable.

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• 2017 (5) TMI 1413
  Addition of deemed dividend to the extent of reserves and surplus u/s 2(22)(e) - Held that:- We find that the accounts / documents stated by the Ld. Counsel of the assessee have not been looked into by the AO. The said documents have been cursorily examined by the Ld. CIT(A). These accounts/ documents have a definite bearing on the facts in the instant case. In view of the above, the order of Ld. CIT(A) is set aside and the same is restored to the file of the AO to make an assessment as per the provisions of the Act after giving reasonable opportunity of being heard to the assessee. The assessee is directed to file the details before the AO. Appeal of assessee allowed for statistical purposes.

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• 2017 (5) TMI 1412
  Addition u/s 68 - proof of creditworthiness of the creditor and genuineness of the transaction - Held that:- Though, the assessee filed copy of the confirmation and copy of the election card of the creditor which may prove identity of creditor but the assessee failed to prove creditworthiness of the creditor. The creditor has no explanation of source of the cash deposited in his bank account Form (J) were filed before the Ld.CIT(A) showing sale proceeds of agricultural produce but these were also not sufficient to prove the creditworthiness of the creditor because after excluding the expenses incurred for earning agricultural income and household expenses , nothing would be left with the creditor because only Form (J) were filed for 5,73,843/- only in which also Ld.CIT(A) found certain defects. No other evidence has been produced to prove creditworthiness of the creditor. Assessee failed to produce the creditor before the AO for examination in order to find out the truth in the matter, therefore, the assessee deliberately withhold the creditor to be produced before the AO for examination. If the assessee was interested in producing the creditor for examination by the income tax authorities, the assessee should have made a request to the Ld.CIT(A) in this respect, therefore, the facts remained that the assessee could not produce sufficient evidences before the authorities below to prove creditworthiness of the creditor and genuineness of the transaction in the matter. - Decided against assessee.

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• 2017 (5) TMI 1411
  Status of indeterminate trust - charge of tax where share of beneficiaries unknown - "pass through" treatment - Held that:- Admittedly, on the date of institution of the Trust deed, the identities of the contributors/beneficiaries are unknown. Therefore, the assessee trust cannot be held as a Determinate Trust. Further, before the Assessing Officer, the assessee’s AR, vide his letter dated 09.12.2015, has emphasized the assessee is not governed by the provisions of section 10(23FB) of the Act. Therefore, the assessee cannot get “pass through” status. Therefore, the ld. CIT(A) has held the assessee is an indeterminate trust. The decision of the Madras High Court in the case CIT v. P. Sekar Trust dated [2009 (4) TMI 38 - MADRAS HIGH COURT] is not applicable to the facts of the present case, because, in it, the beneficiaries are incorporated on the day of institution of the trust deed and moreover, they did not receive any income in that year. Further the individual share of the beneficiaries is ascertainable on the date of the trust. When the beneficiaries have no income to be taxed, then how will the representative assessee become taxable? But in the present case, the names of the beneficiaries are not specified in the trust and the individual shares of the beneficiaries are not ascertainable on the date of the institution of the trust. Therefore, the assessee cannot be categorised itself as a determinate trust and find no reason to interfere with the orders of the ld. CIT(A) on this issue - Decided against assessee. Taxability of interest income in the hands of the assessee - Held that:- Since the Assessing Officer has observed that the above beneficiaries have been transferred to TSGF subsequent to the interest earning period and therefore, the interest income cannot be the income of TSGF. The Assessing Officer has further observed that the interest was earned while the assessee held the entire funds as its own before transfer to TSGF. Hence, the income passed on to TSGF was only application of income earned by the assessee and therefore, the same cannot be allowed as expenditure. The assessee has not filed any details of having transferred the interest income to TSGF so that the assessee cannot be tax on the interest income, which were not retained by it. Under the above circumstances, we are of the opinion that the Assessing Officer has rightly brought to tax the interest income in the hands of the assessee since the transfer of 639 beneficiaries to TSGF was accomplished subsequent to the interest earning period and therefore, interest income cannot be taxed in the hands of TSGF.- Decided against assessee. Disallowance of 50% of the management expenses - Held that:- By the shifting of substantial portion of the funds to TSGF, during the year, TSGF is also equally benefitted. Hence, in all fairness 50% of such expenses pertain to TSGF and hence the balance portion of 50% of the Management fee of . 40,35,344/- is allowed as expenditure in the hands of the assessee and the balance was brought to tax. Since the expenses required to be shared and therefore, the ld. CIT(A) has observed that the disallowance made by the Assessing Officer is quite reasonable. The Assessing Officer has given proper reason for making the disallowance, which was confirmed by the ld. CIT(A). Before us, the ld. Counsel for the assessee could not controvert the above findings of the Assessing Officer with valid reason to take different view. Thus, the ground raised by the assessee is dismissed.

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• 2017 (5) TMI 1410
  Receipt of Gift from HUF - income from other sources - whether HUF comes under the term ‘group of relatives’ defined u/s 56(2)? - Held that:- The case of the assessee is squarely covered by the decision in the case of Veenit Kumar Rahgavjibhai Bhalodia vs ITO [2011 (5) TMI 584 - ITAT RAJKOT ]. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, conclusion drawn in the order of the Tribunal, material available on record, assertions made by the ld. respective counsels, if kept in juxtaposition and analyzed, we find that while adjudicating the issue, the Bench duly considered section 56 of the Act and on the question of chargeability of tax on a question whether a gift received from relative held that it is exempt from tax under the provision of section 56(2)(vi) on a question whether HUF is a group of relatives, it was held that the gift received from HUF would be exempt from tax u/s 56(2)(vi) of the Act. It is noted that in the case before Rajkot Bench of the Tribunal, the amount was received from HUF, where the assessee was also member of HUF. - Decided against revenue

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• 2017 (5) TMI 1409
  Disallowance of payment of royalty - Held that:- An identical issue was considered by this Bench of the Tribunal in Shriram Transport Finance Co. Ltd. v. DCIT [2016 (8) TMI 1204 - ITAT CHENNAI] as found that the payment was made by the assessee for using logo which belongs to Shriram Ownership trust. Since the payment was made for using the logo which belongs to Shriram Ownership Trust, this Tribunal found that the payment made by the assessee is in the revenue field. Disallowance under Section 14A - Held that:- The exemption extended to dividend income would relate only to the previous year when the income was earned and none other and consequently the expenditure incurred in connection therewith should also be dealt with in the same previous year. Thus, by application of the matching concept, in a year where there is no exempt income, there cannot be a disallowance of expenditure in relation to such assumed income. See M/s. Redington (India) Ltd. Versus ACIT [2017 (1) TMI 318 - MADRAS HIGH COURT] Appeal filed by the Revenue is dismissed.

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• 2017 (5) TMI 1408
  Legality of special audit u/s 142(2A) - no show cause notice issued - Time barred assessment - Held that:- The issue arising in the present appeal is similar to the issue in assessment year 2000-01 and following the same parity of reasoning, we hold that since no show cause notice was issued by the Assessing Officer at predecisional stage of making reference for special audit under section 142(2A) of the Act, the assessment had to be completed within period prescribed under the Act i.e. by 31.12.2007. The assessment order in the present case has been passed on 08.08.2008 and the same being beyond the period of limitation, is barred and hence, is held to be invalid. Since the assessment is held to be time barred, then the other grounds of appeal raised by the assessee do not survive and the same are dismissed. The ground of appeal No.1 raised by the assessee is thus, allowed. Denial of exemption under section 11 - Held that:- There cannot be wholesale denial of exemption under section 11 of the Act for violation of provisions of section 13(1)(c) of the Act and the income which is subject matter of violation only, could be brought to tax. Thereafter, the Tribunal vide para 153 onwards considered various violations contemplated under section 13(1)(c) of the Act and allowed exemption under section 11 of the Act subject to the condition that no such exemption would be given in respect of disallowance made for violating the provisions of section 13(1)(c) of the Act. Following the same parity of reasoning, ground of appeal No.4 raised by the assessee is partly allowed. Whether the activity of assessee is commercial activity with profit motive and it does not exist solely for charity? - Held that:- We have already observed in the paras hereinabove that the findings of Tribunal that the assessee trust does not exist solely for the profit and is not carrying out any commercial activity, if the capital expenditure and the depreciation is consideration as application of income, then the assessee had deficit in each of the years under appeal. Following the same parity of reasoning as held by the Tribunal (supra) in assessee’s own case we allow the ground of appeal raised by the assessee. Entitle the assessee to claim exemption under section 11 - violation of provisions of section 13(1)(c) - vehicle maintenance expenses - Held that:- vehicle maintenance expenses are to be allowed to the extent of 50% and the balance is to be disallowed under section 13(1)(c) of the Act. Credit Card expenses disallowed - Held that:- Credit Card expenses are to be allowed to the extent of 50% and the balance is to be disallowed under section 13(1)(c) of the Act. It may be clarified herein itself that the disallowance made under section 13(1)(c) r.w.s. 13(3) of the Act does not entitle the assessee to claim exemption under section 11 of the Act. Honorarium paid to Shri B E Avhad - Only 50% of the said expenditure merits to be allowed in the hands of assessee and the balance is hit by section 13(1)(c) of the Act and hence, added in the hands of assessee, on which the assessee is not entitled to claim exemption under section 11 of the Act. Foreign tour expenses are to be disallowed in the hands of assessee. Scholarship given to Rahul Karad, who is son of Managing Trustee - Held that:- The scholarship paid to the son of Managing Trustee is squarely hit by the provisions of section 13(1)(c) of the Act. It may be pointed out herein itself that the said person Shri Rahul Karad was not an employee in the relevant year and he had not completed his course, for which scholarship was given to him. He is an associated person of the assessee trust and in view thereof, the expenditure paid by the trust to its associated persons is squarely hit by provisions of section 13(1)(c) of the Act. The scholarship paid by the assessee trust to its employees has been allowed in the hands of assessee. However, the present scholarship has been paid to the son of Managing Trustee, who was not employee during the year and hence, the exemption is hit by the provisions of section 13(1)(c) of the Act. Accordingly, we hold so. Notional interest on advance made to Shri Rahul Karad - The said interest is due on the loan of 18 lakhs advanced to Shri Rahul Karad, who was the son Managing Trustee, which is hit by provisions of section 13(1)(c) of the Act. Following the same parity of reasoning as in the case of scholarship paid to Shri Rahul Karad, who is not the employee of assessee during the year under consideration, we uphold the interest due on such advances made to Shri Rahul Karad at 1,27,529/- Denial of exemption under section 11 - unexplained investment - On-money payment for purchase of land - Held that:- The entries marked as ‘6’ against amount of 1,07,50,000/-, which was highest figure appearing in the impounded document is the actual consideration paid for purchase of 417 guntas of land. In view of the nature and sequence of entries noted in the said document, the evidence collected by the Assessing Officer and in view of the statement recorded of Shri Jatyan, for which the assessee did not avail opportunity of cross-examination, the cash consideration of 73,58,000/- being the on-money component in the transaction of purchase of 417 guntas of land at Kelgaon is not recorded in the books of account and hence, is to be treated as unexplained investment under section 69 of the Act. The same is thus, added to the income of assessee, against which the assessee is not entitled to claim any exemption under section 11 of the Act. Accordingly, the order of CIT(A) in upholding the addition of 73,58,000/- is confirmed. Expenditure connected with the provision made for paying higher salary to the employees as per 5th Pay Commission - Held that:- Issue restored back to the file of Assessing Officer for reconsideration.

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• Customs

• 2017 (5) TMI 1440
  Levy of SAD - import of ‘sulphur' and 'rock phosphate’ - N/N. 23/2002-Cus dated 1st March 2002 - the intent and purpose of SAD was “to afford a level playing field for indigenous manufacturers of goods which were also imported from outside, to protect the indigenous industry” - the case of petitioner is that with the issuance of the impugned N/N. 23/2002-Cus effective 1st March 2002 however this ‘level playing field’ was completely disturbed. The said notification was issued in supersession of N/N. 19/2011-Cus - Held that: - It is not as if in the present case, the impugned notification reflected in N/N. 23/2002-Cus dated 1st March 2002 has no basis - The mere fact that the government made a reference to the prevailing rates of customs duty and not to sales tax or local tax and the impact thereof would not per se render the decision contrary to section 3 A CTA - The mere fact that there might be some inconvenience for a short period on account of the increase or decrease in rates of SAD is not by itself a reason to declare the fixation of the rate of duty as unreasonable or illegal. The Court is not satisfied that in the impugned notification can be said to be arbitrary or irrational or that it has been issued by the government without taking into account all the relevant factors. Consequently, the Court is not inclined to interfere with the impugned notification dated 1st March 2002 which in any event has been superseded by the N/N. 23/2003-Cus dated 1st March 2003. Petition dismissed - decided against petitioner.

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• 2017 (5) TMI 1439
  Redemption fine - Central Board of Excise & Custom s instruction dated 06.10.2006 - Section 125 of the Act - Held that: - discretionary power u/s 125 of the Act, 1962 would require to be exercised judiciously. The main requirement of judicial decision is to give reason - In the present case, the Adjudicating Authority had not given any reason for the purpose of assessment of the amount of fine. Hence, such order cannot be sustained in the eye of law - the matter is remanded to the Adjudicating Authority to decide afresh - appeal allowed by way of remand.

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• 2017 (5) TMI 1438
  Penalty u/s 114 (iii) of CA, 1962 - DEPB-cum-drawback scheme for export of silk tops - mis-declaration of goods - act/omission during the course of their performance as customs officers, dealing with export cargo - Held that: - to impose penalty u/s 114 (iii) on the officers of customs, it is necessary to establish with supporting evidence, a positive act on the part of the officers to abet a omission or an act of another person which will render the connected goods liable for confiscation u/s 113. Failure, if any, in discharge of duty assigned or negligence on the part of the Custom Officer by itself cannot bring in penal consequence in terms of the said section. It is apparent that in the absence of documents based on which allegations were made, the whole proceedings against the appellants become seriously jeopardized. The attempt by the Original Authority to rely on certain incidental and collateral evidence is also not found sustainable. None of these evidences will lead to the conclusion based on “preponderance of probability” as stated by the Original Authority. Even for such preponderance of probability evidences are required. The presumptions and possible inferences by deciding authority cannot substitute evidences. There is no sustainable ground to impose penalties u/s 114 on the appellants in the present case - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 1437
  Mis-declaration of description and value of induction Cooker - benefit of N/N. 21/12 - Held that: - letters have been issued by the Revenue to the known addresses and the appellant did not take due care in making arrangement for delivery of letters in the given addresses. They have not intimated revised address etc. to the Revenue. However, considering that defense of the appellant has to be considered before finalization of the adjudication, we find it fit and necessary to remand the matter back to the original authority for a fresh adjudication - appeal allowed by way of remand.

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• 2017 (5) TMI 1436
  Jurisdiction of the DRI officers to issue SCN - scope of proper officer - Availing of fraudulent duty exemptions - Held that: - sub-section 11 was inserted under Section 28 of the Customs (Amendment and Validation) Act, 2011 dt. 16/09/2011, assigning the functions of proper officers to various DRI officers with retrospective effect - Later on, i.e. for the period subsequent to the amendment, the issue of DRI officers having the proper jurisdiction to issue the SCN came up before the Hon’ble Delhi High Court in the case of Mangali Impex Vs. UOI [2016 (5) TMI 225 - DELHI HIGH COURT], inter alia, laying down that even a new inserted Section 28(11) does not empower either the officers of DRI or the DGCEI to adjudicate the SCN issued by them for the period prior to 08/04/2011. There are two views holding the field and the matter now stand before the Hon’ble Supreme Court - matters remanded to the original adjudicating authority to first decide the issue of jurisdiction, after the availability of Supreme Court decision in the case of Mangali Impex. Appeal allowed by way of remand.

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• 2017 (5) TMI 1435
  Imposition of penalty u/s 114A on interest - Held that: - in the case of CCE Vs B. Suresh Vasudev Baliga [2015 (1) TMI 1206 - CESTAT BANGALORE] on an identical issue the Tribunal has held that the penalty u/s 114A cannot be imposed on interest - appeal dismissed - decided against Revenue.

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• 2017 (5) TMI 1434
  Classification of imported machinery - machinery for preparing animal feedings stuff - classified under CTH 8436 10 00 or under CTH 8479 89 99? - Held that: - what has been imported is a complete cattle feed manufacturing plant comprising of several assorted equipments and their parts. It is also to be noted that all these equipments working together are designed to manufacture cattle feed on an industrial scale - When we refer to the heading of 8436, we are of the view that the imported machines do not fall within any of the categories of machines outlined therein. For example, it cannot be considered as an agricultural machine or horticultural machine. It is also not a machine which finds use in forestry or poultry or bee-keeping. It is also not connected with germination plant or poultry incubators. The impugned order classified the goods under CTH 8479. This heading is applicable for machines and mechanical appliances having individual functions and not specified elsewhere in the chapter. Since the imported machines are capable of performing the independent function of manufacturing of cattle feed and this function is distinct and independent from any other machine or appliance listed out individually in Chapter 84, we find no infirmity in the classification ordered by the learned Commissioner in the impugned order. Appeal dismissed - decided against appellant.

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• Corporate Laws

• 2017 (5) TMI 1433
  Conversion from public to private company - Alternation of articles by special resolution subject to the approval by the tribunal - Held that:- Petitioner has complied with provisions of Section 14 to be read with Rule 68 of NCLT Rules, 2016. Therefore, having regard to all the circumstances, the conversion from public to private is in the interest of the Company which is being made with a view to comply efficiently with the provisions of Companies Act, 2013 causing no prejudice either to the members or to the creditors of the Petitioner. Therefore, the conversion is hereby allowed. The Petitioner is hereby directed to give effect of the conversion by requisite alteration in its Articles which is hereby addressed and communicate the altered Articles within a period of 15 days to the Registrar.

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• Insolvency & Bankruptcy

• 2017 (5) TMI 1432
  Claim of 'Operational Creditor' within the meaning of sections 8 & 9 of the Insolvency and Bankruptcy Code, 2016 - whether insolvency process be initiated against Respondent 'Corporate Debtor' as it has committed default and has not been able to pay despite the demand made - Held that:- Debt may arise out of provision of goods or services or dues arising out of employment or dues arising under any law for time being in force and payable to the Centre/State Government. The framer of the Code have also defined the expression 'Financial Debt' in section 5(8) to mean a debt which is disbursed against the consideration of time value of money. However the framer of the Code has not included in the expression 'Operation Debt' as any debt other than the 'Financial Debt'. It is thus confined to aforesaid four categories like goods, services, employment and Government dues. In the present case the debt has not arisen out of the provisions of goods or services. The debt has also not arisen out of employment or the dues which are payable under the statute to the Centre/State Government or local body. The refund sought to be recovered is necessarily associated with the delivery of the possession of immovable property which has been delayed. The 'Operational Creditors' are those persons to whom the 'Corporate Debt' is owed and whose liability from the entity comes from a transaction on operations. The final report of the Committee in para 5.2.1 defines 'Operational Creditor' like the wholesale vendor of spare parts whose spark plugs are kept in inventory by Car Mechanic and who gets paid only after spark plugs are sold to acquire the status of 'Operational Creditor' so and so forth. The Petitioner in the present case has neither supplied any goods nor has rendered any service to acquire the status of an 'Operational Creditor'. As given the time line in the code it is not possible to construe section 9 read with section 5(20) & (21) of the Code so widely to include within its scope even the cases where dues are on account of advance made to purchase the flat or a commercial site from a construction company like the Respondent in the present case especially when the Petitioner has remedy available under the Consumer Protection Act and the General Law of the land. Therefore we are not inclined to admit the petition. The petitioners cannot be treated as 'Operational Creditor' within the meaning of section 9 as the debt incurred by the respondents has not arisen out of provisions of goods, services or employment. It can also not be considered 'Financial Debt' within the meaning of section 5(8) to mean a debt which is disbursed against the consideration of the time value or money.

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• PMLA

• 2017 (5) TMI 1429
  Regular bail under Section 439 Cr.P.C. in case registered under Sections 3 and 4 of PMLA - Held that:- Admitted position is that the premises where raid was conducted on 10.12.2016 i.e. R-89, Greater Kailash part-I, New Delhi, did not belong to the petitioner. It is also admitted that at the time of recovery of 2.62 crores in the denomination of 2000 currency notes, the petitioner was not present in the said premises. When specifically enquired as to how the money recovered from Rohit Tandon’s premises was connected with the petitioner, the learned counsel informed that statements of co-accused Rohit Tandon and his employees have been recorded and they have disclosed in their statements that the currency belonged to the petitioner. These statements are to be tested during trial. Status report reveals that Vijay Kumar @ Kant Mishra has claimed ownership of the new currency recovered from the spot before Income Tax Department. No credible evidence is on record to infer as to whom the money belonged and how the petitioner was beneficiary. Considering the above facts and circumstances and detention period undergone by the petitioner since 19.12.2016, he is admitted to bail on furnishing personal bond in the sum of 5 lacs with one surety in the like amount to the satisfaction of the Trial Court. The petitioner shall not leave India without prior permission of the Trial Court.

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• Service Tax

• 2017 (5) TMI 1467
  Attachment of bank account - natural justice - without notice to the petitioner, without hearing him and without granting him proper opportunity, the action has been taken and the original order imposing the tax liability dated 31.3.2013 was never served on the petitioner - Held that: - petitioner was not aware on what ground tax liability has been imposed and his right to file the appeal is taken away as the limitation for filing the appeal is already over if the order was passed on 31.3.2013 - against the order dated 31.3.2013, the petitioner has a right to file an appeal before the Commissioner, Appeals, and the petitioner can very well raise all these grounds in the appeal by contending that he acquired the knowledge and got a copy of the order - questions with regard to issuance of the notice, its service and allied issues are left open to be considered by the appellate authority - petition disposed off.

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• 2017 (5) TMI 1466
  Levy of service tax in the State of Jammu and Kashmir - Whether the respondent-Department is entitled to charge service tax in relation to services said to be rendered by Gun testing conducted by Quality Assurance Establishes (SA) Kanpur for the purposes of quality assurance? Held that: - in the case of M/S Bumrah Gun Works and ors vs. Union of India and ors, OWP No. 1391/2010 decided on 22.11.2016, where a batch of writ petitions on the similar claim was considered by the Division Bench of this Court and disposed of by holding that in terms of Section 64 of the FA, 1994, service tax is not applicable to the State of Jammu and Kashmir. It was also held that the quality testing of guns does not attract the service tax - petition allowed - decided in favor of appellant.

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• 2017 (5) TMI 1465
  Liability of service tax - “market fees” or “mandi shulk” - lease amount - appellant charged “market fee” for issuing licence to traders, agents, factory/cold storage owners or other buyers of other agricultural produce. The appellants also let out land and shops to traders and collected allotment fee/lease amount for such land/shop - Held that: - with the introduction of Negative List Regime of Taxation w.e.f. 1.7.2012, the appellants services were excluded from the tax liability - the appellants, being an Agricultural Produce Marketing Committee, is excluded from the tax liability - Services relating to agricultural produce by way of storage or warehousing are in the negative list. In respect of shops, premises, buildings, etc. rented/leased out for any other commercial purpose other than with reference to agricultural produce (like bank, general shop etc.), the same shall not be covered by the negative list and the appellants shall be liable to service tax. The appellants are liable to pay service tax under the category of “renting of immovable property service” for the period upto 30.06.2012 - For the period from 1.7.2012 (Negative List Regime), the appellants are not liable to pay service tax under the said tax entry in respect of shed/shop/premises leased out to the traders/others for storage of agricultural produce in the marketing area. The Negative List will not cover the activities of renting of immovable property for other than agricultural produce - The demands, wherever raised invoking extended period, shall be restricted to the normal period - penalties set aside. The threshold exemption available to the small scale service provider in terms of the applicable notifications during the relevant years, shall be extended to the appellant on verification of their turnover. Appeal allowed - decided partly in favor of appellant.

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• 2017 (5) TMI 1464
  Valuation - whether reimbursable out-of-pocket expenses has to be included in the gross value of taxable services? - Held that: - in the case of Intercontinental Consultants & Technocrats [2012 (12) TMI 150 - DELHI HIGH COURT], the Hon’ble High Court of Delhi has held in favor of the assessee thereby observing that the same need not be included in the gross value of taxable services - the appellants are not liable to pay service tax on the reimbursable out-of-pocket expenses - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 1463
  Refund of CENVAT - denial on the ground that the premises were not registered - Held that: - The Hon’ble High Court agreeing with the views on identical issue of law taken by the Hon’ble High Courts of Karnataka in mPortal India Wireless Solutions Pvt. Ltd. Vs. Commissioner of Service Tax, Bangalore [2011 (9) TMI 450 - KARNATAKA HIGH COURT], where it was held that Registration not compulsory for refund - appeal dismissed - decided against Revenue.

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• 2017 (5) TMI 1461
  Refund claim - unutilised CENVAT credit - rejection of claim on the ground that amount attributable to medical policy taken for the employees is eligible for credit, however, the amount attributable to their family members is not admissible. In absence of documentary evidence with break up details, the credit as a whole on this service was held to be not admissible - Held that: - appellants have categorically declared that they are not recovering any such amount from the employees. The expenditure is borne by the appellants themselves. As such, we find that the claim of the appellant on this credit is sustainable. An amount of 5,89,322/- was denied as credit and refund was rejected, in respect of payments made for advertising service, designing service and event management service - Held that: - the appellants have arranged and availed these various services in connection with their business activities and considering the nature of their business and output service, we hold that the credits are available on such services as they are connected to their business of rendering taxable output service. CENVAT credit - security services provided to clients - parking area for interview and event of the appellant - outdoor catering services - rent-a-cab expanses - Held that: - Since the credit on various input services availed by the appellants were held to be eligible to them, we find that the original authority has to examine that claim for due sanction in terms of the provisions, under which the said claim was filed. The Original Authority directed to verify the claim filed by the appellant for sanction - appeal allowed by way of remand.

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• 2017 (5) TMI 1460
  Benefit of N/N. 12/2003-ST dated 20.06.2003 - exemption from service tax on the value of materials supplied to the client during the course of service - Held that: - the invoices categorically indicate repair and service charges and supply of material charges separately. The VAT payable and service tax payable as per the applicable rates are shown separately. In view of these factual finding, the eligibility of the appellant for concession under N/N. 12/2003 cannot be denied - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 1459
  Refund claim - Terminal Handling Charges - Custom House Agents service - denial on account that these are not port services - Held that: - Since the services were availed and utilized within the port for export of goods, irrespective of the classification of the services done by the service provider, the same should merit consideration has “Port Service” - refund allowed. Banking charges - rejection on the ground that no documentary evidences were produced by the appellant, showing payment of service tax on the charges claimed by the banks - Held that: - Since the appellant submits that it has adequate documents to demonstrate payment of service tax on the bank charges, the matter should be verified by the original authority - matter on remand. With regard to payment of service tax by utilizing the cenvat credit under reverse charge mechanism, we find that the Tribunal in the case of Kansara Modler Ltd. [2014 (1) TMI 1095 - CESTAT NEW DELHI] had held that as a recipient of service, the service tax payment can be made under reverse charge mechanism by utilizing the cenvat credit - the appellant is eligible for payment of service tax from cenvat account. Appeal allowed - part matter decided in favor of appellant and part matter on remand.

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• 2017 (5) TMI 1458
  Refund claim - denial on the ground that debit notes are not valid documents in terms of Rule 4A of STR, 1994 and Rule 9 of CCR, 2004 - Held that: - Rule 4A of the STR, 1994 provides the manner of distribution of credit based invoice, bill or challan by the service provider. The said statutory provision also mandates the mode and manner of preparation of such documents. No embargo has been created in the service tax statue for not allowing the refund amount claimed on the basis of debit notes issued by the service provider - the matter should go back to the original authority for verification of the debit notes to be submitted by the appellant - matter on remand. Time limitation - refund denied on the ground that the same was not filed within 60 days from end of the relevant quarter, during which the goods were exported - Held that: - Since notification dated 06.10.2007 provides for certain conditions for claiming the exemption, the same are required to be strictly followed/ observed by the tax payer. Thus if the refund claim is filed beyond the period of 60 days, the condition of the notification has not been fulfilled. Accordingly, denial of refund on the ground of limitation by the authorities below is proper and justified. Appeal dismissed - decided against appellant.

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• 2017 (5) TMI 1457
  Jurisdiction of Commissioner of Service Tax, Bangalore for the purpose of payment of service tax - Held that: - the service tax has to be paid separately in the various jurisdictions where branch offices are there even though the Income Tax return is filed consolidated for the entire operations of the appellant's company - the SCN dt. 03/04/2003 and the impugned order passed thereon are not justified inasmuch as the Commissioner of Service Tax, Bangalore has the jurisdiction only to demand service tax, if not paid or short-paid within his jurisdiction. Since it is evident that the total demand of service tax to the tune of 34 lakhs also covers the service rendered within the jurisdiction of the four branch offices outside Bangalore for which separate registrations have been taken and service tax paid separately, it will be necessary to exclude such demand pertaining to outside jurisdictions. Commissioner of Service Tax, Bangalore has no jurisdiction to make any demand of service tax in respect of consideration received for jurisdictions outside Bangalore. Consequently demands raised pertaining to outside jurisdictions are set aside and will need to be excluded - the demand has to be restricted to the normal period of limitation - appeal allowed by way of remand.

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• 2017 (5) TMI 1456
  100% EOU - Refund claim of unutilised CENVAT credit - Held that: - it is clear that while arriving the export value, only the value final products and output services exported during the given period, has to be taken into consideration and not the value of the equipment exported. The appellant has failed to substantiate how the value of equipment exported is their final product or output services in the instant case - decided in favor of appellant.

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• Central Excise

• 2017 (5) TMI 1462
  Valuation - it appeared to the Department that they had collected 5% of the list price over and above the value declared in the Central Excise invoice. It was alleged that the said difference thereof relating to 5% of commercial invoice was required to be allowed in the transaction value for payment in terms of section 4(3)(d) of the CEA - Held that: - the very same issue has been decided by this Tribunal in their own case [2008 (2) TMI 105 - CESTAT, CHENNAI], where it was held that discount given was a purely commercial one and admissible for deduction from the list price in determining the assessable value - appeal dismissed - decided against Revenue.

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• 2017 (5) TMI 1455
  Compounded Levy Scheme - manufacture of pattas/patties of Stainless Steel - The issue involved in the present appeals is that the Appendix-II challans submitted by the appellants to the Central Excise Superintendent is not actually a genuine document of duty payment - Held that: - Admittedly, it is the Department, which had certain information regarding such fraudulent activity and based on that, initiated an inquiry. I do not find that the failure of the Department to detect the forgery much earlier should extend the advantage to the appellants. The appellants cannot gain, in any manner, on the basis of a forged document. Even if it is considered, for argument sake, that the Department should have found out the fraudulent activity much earlier, I do not find that the same can be the basis for keeping the appellants totally out of picture with reference to non-payment of duty. The fact remains that the appellants produced a fraud document claiming duty payment. The department is well within their right to proceed and recover the central excise duty, not paid to the Government. Extended period of limitation - Held that: - since the documents have been established to be fraud or fake, obviously, the fraud was involved and that was sufficient to extend the period of limitation. Appeal dismissed - decided against appellant.

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• 2017 (5) TMI 1454
  Valuation - related party transaction - Whether the appellant, manufacturer of CI pipes, fittings etc. have been rightly charged or demanded duty as short paid on the allegation that they have cleared goods to related person at lower value and have undervalued the clearances as compared to other independent buyers? Held that: - the appellant and the said firm Raj Iron Foundry, Agra are not relatives, one being a limited company registered under the Companies Act and the other being a partnership firm - So far the issue of interconnected undertakings is concerned, there is no such allegation nor any fact is on record, if the two partners of the said Raj Iron Foundry, hold directly or indirectly, not less than 50% of the shares, whether a preference or equity, of the appellant company or exercise control, directly or indirectly, whether as Director or otherwise over the body corporate, as defined under section 2(g) of Monopolies and Restrictive Trade Practices Act, 1969 as made applicable to the definition of “related persons” under the Central Excise Act - neither the allegation of related person is sustainable nor the allegation of interconnected undertakings which although have not been established or averred - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 1453
  Shortage of finished goods - excess of finished goods - confiscation - redemption fine - penalty - Held that: - it is admitted position in the case that the stock verification was done on eye estimation basis, moreover, the discrepancies in stock taking have been admitted by the Revenue in the adjudication order which has not challenged by the Revenue, therefore, the charge of shortage/excess of finished goods is not sustainable - redemption fine and penalty are not imposable - appeal dismissed - decided against Revenue.

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• 2017 (5) TMI 1452
  CENVAT credit - improper and irregular availment of credit of duty without actually receiving the inputs - correctness of SCN - Held that: - the entire basis of the SCN is in question and the department has not proved the basis for the Annexures and the allegations raised in the show cause notice. The entire proceedings are obviously hobbled ab initio incoherence and errors. The appellant then, is being asked to defend the indefensible and to show cause to allegations which are shredded is unintelligibility. In the case of Ispat Industries Ltd. Vs. CCE, Nagpur [2012 (11) TMI 147 - CESTAT, MUMBAI], the Tribunal held that for every case, SCN is the foundation and the assessees are required to defend the allegation made in the show cause notice. The flaws in the SCN are fatal to the proceedings and hence the impugned order will require to be set aside - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 1451
  Cenvat Credit - Emergence of Compost - whether manufactured product or not? - dumping of the viz., press-mud, spent wash and boiler ash in the compost pit - Compost is capable of use as fertilizer in farms - applicability of Rule 6 of CCR - Held that: - the issue is squarely covered in favor of the assessee by the case of [2014 (8) TMI 322 - CESTAT MUMBAI], where it was held that if the Commissioner (A) has dropped the demand on merit as well as on point of limitation and if the department has filed appeal before the Tribunal only challenging the findings of the Commissioner (A) dropping the demand on merit and in the appeal, no challenge is made to the findings of the Commissioner (A) dropping the demand on limitation, then the appeal filed by the department will not survive - there is no infirmity in the impugned order passed by the Commissioner (A) - appeal dismissed - decided against Department.

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• 2017 (5) TMI 1450
  Pre-deposit - whether mandatory deposit of seven and half percent as per Section 35F (i) of the CEA 1944, is required to be paid in cash or the same can be paid from CENVAT Credit Account maintained by the appellants - Held that: - deposit u/s 35F (i) cannot be made from CENVAT Credit Account, is not the correct appreciation of law so long as the CENVAT Credit is permissible for utilisation as per Rule 3(4) of the CCR, 2004 - appeal is allowed by way of remand to the First Appellate Authority with directions to decide the appeal on merits without insisting on any further pre-deposit - appeal allowed by way of remand.

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• 2017 (5) TMI 1449
  Waste/residue - Dutiability - the recovered oil sold by the appellant - fatty acid - N/N. 89/95-CE dated 18/05/1995 - Revenue held the view that these are by products and cannot be considered as waste to be covered by the said notification - Held that: - the two main products namely recovered oil and the tank sledge are not liable to Central Excise duty as they are either covered under exemption as waste product in terms of N/N. 89/95-CE or not arising out of manufacturing process as in the case of bottom sediments called tank sledge - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 1448
  Clandestine removal - non-consideration of the plea of the appellant with reference to duplication of entries in their accounts, maintained in the computer - Held that: - The appellants, have indulged in clandestine removal by itself, should not lead to a conclusion that there could be summary finding of quantification of duty on all entries available in the private records - conclusion based on the inference without any supporting evidence cannot be summarily made, while the documents maintained by the appellant in the form of sales ledger in the computer can form basis for examination, the claims made by the appellant to discard certain entries, if they are cogently explained should also be considered - matter remanded back to the Original Authority for re-examination of the matter restricting only to the claim of the appellant with reference to the possibility of duplication of computerized data entries maintained, as sales ledger - appeal allowed by way of remand.

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• 2017 (5) TMI 1447
  Penalty u/r 26 - Manufacture - N/N. 11/2006-CE (NT) dated 29/05/2006 - The Revenue is aggrieved that in spite of the main respondent fulfilling the condition by paying full duty liability with interest alongwith 25% penalty, the penal proceedings under Rule 26 cannot be closed - Held that: - it cannot be construed that impugned notice had not been issued to the respondent under Sub-Section (1) of Section 11 A of the Act ibid. Accordingly, the proposal for penalty u/r 26 ibid. initiated in the impugned notice against the respondents has correctly been concluded by the adjudicating authority consequent to deposit of entire duty, interest and penalty of 25% of the duty involved by M/s Sachdeva Auto Centre in terms of first proviso to Sub-Section (2) of the Section 11 A ibid - there is nothing in the present appeals by the revenue to controvert the above findings. Regarding the plea of the respondent regarding entitlement of credit of duty already paid, I find that the cross appeal can agitate only matters which were decided in the impugned order. While cross appeal can be considered as an appeal for all purposes, even such appeal can only raise points which were subject matter of decision of impugned order - the cross appeals are liable to be rejected. Appeal rejected - decided against Revenue.

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• 2017 (5) TMI 1446
  Unjust enrichment - refund of interest paid for delayed payment of interest - Held that: - prior to amendment to Rule 9B (5) of the CER 1944, the doctrine of unjust enrichment was not applicable to refund arising consequent to finalization of provisional assessment - The proviso to Rule 9B(5) was amended vide N/N. 45/99 dated 25.06.99 and since the refund claim in the instant case has arisen prior to 25.06.99, the bar of unjust enrichment will not be applicable - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 1445
  Deemed Manufacture - packing, repacking, lebelling and relabeling of spare parts - Section 2(f) (iii) of CEA, 1944 read with N/N. 2/2006-CE(NT) dated 01/03/2003 - Held that: - the admitted fact on record that the LML Ltd. had admitted their mistake and deposited the tax with interest and also informed the competent official of Revenue, in this view of the matter, the show cause notice is bad and not tenable as no further amount either towards duty or interest was recoverable - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 1444
  Classification of goods - untrimmed sheets and circles - classified under CTH 74.09 of schedule to CETA, 1985 - benefit of N/N. 134/94-CE dated 27.10.94 and 8/96-CE dated 23.07.96 - extended period of limitation - validity of SCN - Held that: - the SCNs dated 03.07.2003 onwords up to 17.03.2008 are not tenable in law because the Department has referred the issue of admissibility of N/N. 67/95-CE by CBL when the original authority had decided the matter in favour of CBL through the Order in Original dated 27.04.2000 which was not challenged by revenue. In first 06 SCN dated 01.08.1996 to 22.07.1997 that only 14111.625 Kg of untrimmed copper sheets attracted Central Excise Duty @ 2000/- per MT for the period from January, 1996 to July, 1996 and attracted duty @ 3500/- per MT from August, 1996 to December, 1996 and the entire amount of duty that could have been confirmed was 36,844/-. We therefore, modify the Order-in-Original to the extent that duty of 36,844/- is confirmed and appellant is directed to pay interest on the same. The duty of 17,49,185/- and 89,698/- already paid to be taken into consideration for refund of excess duty paid after taking into consideration the interest that is liable to be paid. The remaining part of the impugned Order-in-Original dated 31.12.2008 is set aside. Appeal allowed - decided partly in favor of assessee.

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• 2017 (5) TMI 1443
  CENVAT credit - availment of excess CENVAT Credit than the related invoices - Held that: - the Adjudicating Authority had not considered the certain facts while denying the CENVAT Credit - the matter is remanded to the Adjudicating Authority to decide the issues afresh - appeal allowed by way of remand.

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• 2017 (5) TMI 1442
  SSI exemption - use of brand name of others - the appellants had cleared the goods with the brand name TRANSPADE which belonged to a proprietary concern viz. M/s. Transpede of which Shri S.B. Ghorpade was the proprietor. He was also Managing Director of the appellant/assessee company - Held that: - In the case of CCE Vs. Minimax Industries [2011 (1) TMI 782 - DELHI HIGH COURT], the Hon'ble Delhi High Court had occasion to examine a similar case of denial of SSI benefit in respect of goods cleared with the brand name MINIMAX, In the said case, this brand name was being applied to goods manufactured by M/s.Minimax Industries. The allegation was that this brand name belonged to another unit, which was the sole proprietorship concern of Mr. Mohd. Yamin. It was held in the case that it can be said that at the most, the name “Minimax” belongs to both the entities namely, the partnership firm as well as MEI - exemption was allowed - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 1441
  Clandestine manufacture - Pan Masala and Pan Samagri - the two machines found in the open premises of the factory no information was given to the range/division office of Central Excise - Held that: - it is admitted fact that the factory comprises of covered space only. There is no open space in the approved factory premises. It is further admitted fact that the two additional machines were found lying in the open premises in uninstalled condition - the said machines had arrived in the last two days and they were lying in uninstalled condition and that one was defective and another yet to be installed and/or brought inside the factory, and these facts have not been found to be untrue and further corroborated by the supplier of the machines, in his statement u/s 14. The duty demanded from the appellant of 25 lakhs u/r 9 of the said Rules is not sustainable and further the order of confiscation is also not sustainable - appeal allowed - decided in favor of appellant.

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• Indian Laws

• 2017 (5) TMI 1431
  Default under Negotiable Instruments Act - whether an offence under Section 138 of the Act can be said to have been committed when the period provided for under Section 138 Clause (c) of the proviso has not expired? - Held that:- The complaint under the Act filed before the expiry of 15 days is pre-mature and cannot be treated as a legally constituted complaint in the eyes of law. Therefore, the proceedings initiated on the basis of such complaint are liable to be quashed and set-aside. Resultantly, there is merit in this petition and the same is accordingly allowed and the judgment passed by Additional Sessions Judge whereby the petitioner has been convicted and sentenced to undergo simple imprisonment for one month and to pay a sum of 1,00,000/- as compensation under Section 138 of the Act, is set-aside.

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• 2017 (5) TMI 1430
  Offence punishable under Section 138 of the N.I. Act - Held that:- The trial court has erred in convicting the respondent No.2 for the offence punishable under Section 138 of the N.I. Act as the appellant has failed to produce cogent and reliable evidence in support of his claim made in the complaint. The appellate court has rightly appreciated the evidence produced by the parties and has not committed any illegality in setting aside the judgment passed by the trial court and in acquitting the respondent No.2 for the offence punishable under Section 138 of the N.I. Act.

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