Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
June 13, 2020
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Dead loss v/s bad debts - investment made by the assessee in a sister concern for purchase of equity shares which into liquidation - ITAT has not recorded a specific finding by assigning reasons that in the books of account the debts have been written off. Only in a single sentence, it is stated that the assessee had in its books of account written off its debt as irrecoverable. - Matter restored before AO to ascertain the facts.
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Amortization of de-merger expenses claimed by the assessee u/s. 35DD - the deduction u/s 35DD of the Act is a continuing one and when the said deduction was allowed in the initial year of claim, then in absence of change in the factual matrix, the Revenue could not disturb the continuing claim in the subsequent years.
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Approval u/s 80G(5) rejected - CIT (E) has misdirected himself by requiring the assessee society to submit a list of proposed donors and a plan for raising donations. In our considered opinion this is entirely irrelevant at the time of considering the assesee’s application for approval u/s 80G
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TDS u/s 194J - Payment of Minimum Guarantee Royalty (MGR) - consideration for the sale distribution or exhibition of cinematographic films - the payments made by the assessee do not fall under the term "Royalty" and do not attract the provisions of TDS
Customs
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Imposition of penalty u/s 112(a) of the Customs Act - Charge of abatement - Connivance between the employee of the CHA and importer - Illegal Import - prohibited goods - the appellant under the influence of the importer, filed the bills of entry without completing the KYC formalities. Further, from the appreciation of the facts and on perusal of the impugned order, it is evident that no case of connivance is made out against the appellant /employee i.e. no allegation or finding of any additional gain or reward received by him. - appellant has unknowingly abetted or been instrumental in the nefarious activity of the import of the prohibited goods, by the actual importer. - Penalty levied, but reduced.
Service Tax
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Extended period of limitation - From the facts as available on record specifically the correspondences with CBEC, the issue involved in those correspondences were in relation to Central Depository Services and not in relation to services of providing for “provision and transfer of information and data processing”. - Demand confirmed invoking the extended period of limitation.
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Classification of services - Throughout Appellants were providing for “provision and transfer of information and data processing” and these are provided in relation to their depository operations. Thus the services provided by them to Depository Participants are covered by the definition of Banking and Financial services and are liable to service tax under that category.
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Consulting Engineer Service - There are no merits in the submissions made by the learned Chartered Accountant to effect that since the value of services received by the Appellant from the overseas suppliers was included in the value of the goods imported by them, these services could not be subjected to service tax leviable under Finance Act, 1994.
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Insurance Auxiliary Services - brokerage received from overseas reinsurance - Export of service or not - Non receipt of consideration in foreign exchange - the basis of the circular, which is clarified that Notification Nos. 6/99, 9/01, 13/02 and 2/03 would not apply to export of service, the question of receiving the payment in convertible foreign exchange does not arise. Even the Export of Service Rules, 2005 does not put an embargo in relation to taxable service as specified in Rule 3(3)(i), (ii) and (iii) of the Export of Service Rules.
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Service tax liability on promoters / builder / developer prior to 01.06.2010 in respect of construction of residential complex - CBEC has clarified that, the period prior to 01.06.2010, construction(residential) provided by builder / developer will not be taxable - Demand set aside.
Central Excise
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CENVAT Credit - input services - appellant manufactures intermediate chemicals Phthalic Anhydride for their own another unit - the appellant have rightly taken the proportionate credit in respect of Advertisement service & Storage and ware housing service.
Case Laws:
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Income Tax
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2020 (6) TMI 271
Stay petition - HELD THAT:- On instructions of ACIT, states that on 04th June, 2020, the Assessing Officer has referred the stay application to Principal Commissioner of Income Tax- 6, Delhi for consideration. He states, on instructions, that the impugned order dated 19th February, 2020 shall not be acted upon till the Principal Commissioner of Income Tax-6, Delhi, decides the petitioner s stay application. The statements/undertakings given by Mr. Ruchir Bhatia, learned counsel on instructions, are accepted by this Court and the respondents are held bound by the same. Statements/undertakings, the present writ petition and application are disposed of with a direction to the Principal Commissioner of Income Tax-6, Delhi, to decide the stay application within two months. It is clarified that till the said application is decided by the Principal Commissioner of Income Tax-6, Delhi, no coercive action shall be taken against the petitioner on the basis of the impugned order dated 19th February, 2020.
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2020 (6) TMI 270
Dead loss v/s bad debts - investment made by the assessee in a sister concern for purchase of equity shares which into liquidation - HELD THAT:- From perusal of the order passed by the assessing officer, it is evident that assessing officer has not examined the fact whether or not the assessee has entered an amount as written off as bad debt. From the order passed by the Commissioner of Income Tax (Appeals) also it is evident that he has not recorded a specific finding that the assessee had written off the debt in the books of account. Tribunal also has not recorded a specific finding by assigning reasons that in the books of account the debts have been written off. Only in a single sentence, it is stated that the assessee had in its books of account written off its debt as irrecoverable. Entitlement benefit of capital loss - The issue with regard to loss of shares in a company, which went under liquidation was considered by Gujarat High Court in CIT VS. JAI KRISHNA [1997 (2) TMI 65 - GUJARAT HIGH COURT ] and it was held that a person who gets nothing on account of liquidation of a company and suffers loss, his loss has to be treated as capital loss by virtue of Section 46(2) of the Act. The tribunal has followed the aforesaid decision and has held that the assessee is entitled to benefit under Section 46(2) of the Act in respect of an amount for diminution of value of investment made in Gujarat Instruments Ltd - sister concern. We concur with the view taken by Gujarat High court. The impugned order passed by the Income Tax Appellate Tribunal is modified and the finding that the assessee is entitled to the benefit of capital loss is set aside. The matter is remitted to the assessing officer who shall decide the same in the light of law laid down by the Supreme Court in the case of T.R.F [2010 (2) TMI 211 - SUPREME COURT] - In the result, both the substantial questions of law are answered accordingly. In the result, the appeal is disposed of.
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2020 (6) TMI 269
Stay of demand - mandating the appellate authorities to ask for deposit 20% of the amount for the purpose of entertaining the adjudication of the appeal - HELD THAT:- In Mavilayi Service Co-operative Bank Ltd. v. Commissioner of Income Tax [ 2019 (3) TMI 1580 - KERALA HIGH COURT] wherein for considering the appeal the demand of 20% as a condition precedent has been negated. Argument of the petitioner is in consonance with findings rendered in the judgment referred to above and reiterated by the Division Bench. AO or the appellate authority while exercising the power of appeal or stay of the assessment proceedings under section 226 of the Income Act 1961 are enjoined obligation to give regard and respect to the directions of the Hon'ble High Court. It would not be necessary that the payment of 20% can be dispensed with only if there is an order of the high court. The judgment of the Full Bench followed by the Division Bench has an enuring effect on all the authorities. There will be a direction to the 1st respondent to decide the appeal on merits within a period of six months, without asking for 20% of the demanded amount, after affording an opportunity of hearing to the petitioner and the revenue and pass a reasonable and speaking order.
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2020 (6) TMI 268
TP Adjustment - working capital adjustments - HELD THAT:- Transfer pricing law is to determine the correct arm`s length price of the assessee`s transactions with its associated enterprises(AE). For the sake of argument, let say, if these additional evidences were not admitted by us, then it would have not been possible to determine the correct transfer pricing adjustments (ALP-adjustments) and as a result there will not be correct determination of tax liability of the assessee company. Therefore, we have to admit these additional evidences. As explained above, and in the interest of justice and fair play, we admit these additional evidences (relating to working capital adjustments) filed before us and we remit these additional evidences to the file of ld TPO with the direction to examine these additional evidences and adjudicate the issue in accordance with law. For statistical purposes, the ground raised by the assessee is allowed. Comparable selection - eClerx Services Limited (eClerx) is functionally different from the assessee company, it is not a comparable company so far Segment Reporting is concerned. The eClerx Services limited operates under a single primary segment i.e. data analytics and process outsourcing services therefore different from the assessee company. The eClerx Services limited, is engaged in providing KPO services to global clients. Besides, due to high turnover with significant fluctuations in revenues and profits, the eClerx Services limited should not be selected as comparable company. Therefore, we direct the TPO/AO to exclude the eClerx Services limited, as this company is not a comparable company, as explained above, hence it requires to be excluded. TCS eServe International Limited (TCS eServe) had a high brand value and, therefore, was able to command greater profits, besides, it operated on economic upscale. The TCS eServe International is engaged in the business of software testing, verification and validation and thus not comparable, therefore, we direct the ld TPO/AO to exclude the TCS eServe International, as this company is not a comparable company with the assessee, as explained above, hence it requires to be excluded. Denial of claim of exemption of interest under section 10A - HELD THAT:- Hon`ble High Court of Calcutta in the case of Hindustan Gum Chemicals Ltd [ 1989 (8) TMI 45 - CALCUTTA HIGH COURT] held that in order to compute deduction under section 10B of the Act, the profits of the business of the undertaking would include its entire business income including interest income on fixed deposits. We note that judgment of the Hon`ble High Court of Calcutta (supra) is in the context of section 10B of the Act but the ratio of this judgment is squarely applicable to section 10A deduction. Therefore, respectfully following the judgment of the Hon`ble High Court of Calcutta in the case of Hindustan Gum Chemicals Ltd (supra), we direct the AO/TPO to allow deduction under section 10A in respect of interest income of fixed deposits.
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2020 (6) TMI 267
Disallowance being amortization of de-merger expenses claimed by the assessee u/s. 35DD - scheme of demerger approved by the Hon ble Delhi High Court - HELD THAT:- the AO had considered the de-merger to be complete and effective, then he could not adopt a contrary stand in respect of corresponding expenses and deny the deduction claimed u/s 35DD of the Act alleging the demerger to be incomplete. It is further noted that the initial year of claim of deduction u/s 35DD of the Act was AY 2010-11. In the matter of, [ 2016 (9) TMI 1199 - SUPREME COURT] it was held that once the claim u/s 35D of the Act was accepted in the initial year i.e. AY 1995-96, then the clock had started running in favour of the assessee which was to continue for the entire period of ten years and the benefit once granted in the initial year could not be denied in the subsequent year. Disallowance u/s. 14A read with Rule 8D - suo moto disallowance - HELD THAT:- ClT(A) directed the AO to restrict the disallowance under Rule 8D(2)(iii) by considering only those investments which have yielded tax free income during the year. We find that this direction of the Ld. ClT(A) is in accordance with the decision rendered by this Tribunal in the case of REI Agro Ltd. Vs. DClT [ 2013 (9) TMI 156 - ITAT KOLKATA] which has since been upheld by the Hon'ble Calcutta High Court. Since the Ld. CIT(A) adjudicated the issue, as stated above, by following the decision the Tribunal, Kolkata Benches following the dictum of law laid in REI Agro Ltd. (supra), we do not see any reason to interfere with the order of the Ld. CIT(A) on this issue. Therefore, this ground of the Revenue is dismissed. Deduction u/s 43B - employees' contribution deposited by employer beyond the prescribed due date - HELD THAT:- We note that this issue is no longer res integra. We note that the Hon ble Calcutta High court [ 2011 (9) TMI 30 - CALCUTTA HIGH COURT] has held that employees contribution to PF and ESI paid on or before the due date of filing of return of income u/s. 139(1) of the Act should be allowed as deduction.
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2020 (6) TMI 266
Deduction u/s 80P(2)(a)(i) - assessee is a co-operative society registered under the Kerala Co-operative Societies Act, 1969 - AO had denied the claim of deduction u/s 80P for the reason that assessee was essentially doing the business of banking and disbursement of agricultural loans by the assessee was only minuscule AND concluded that the assessee cannot be treated as co-operative society - HELD THAT:- Narration in loan extracts in the audit reports by itself may not conclusive to prove whether loan is a agricultural loan or a non-agricultural loan. The gold loans may or may not be disbursed for the purpose of agricultural purposes. Necessarily, the A.O. had to examine the details of each loan disbursement and determine the purpose for which the loans were disbursed, i.e., whether it is for agricultural purpose or non-agricultural purpose. In this case, such a detailed examination has not been conducted by the A.O. At the time of assessment, the judgment of the Hon ble jurisdictional High Court in the case of Chirakkal Service Cooperative Bank Ltd. [ 2016 (4) TMI 826 - KERALA HIGH COURT] was ruling the roost and the certificate issued by the Registrar of Co-operative Society terming the assessee as a primary agricultural credit society would be sufficient for grant of deduction u/s 80P. Dictum laid down in the case of The Mavilayi Service Co-operative Bank Ltd. v. CIT [ 2019 (3) TMI 1580 - KERALA HIGH COURT] view that there should be fresh examination by the Assessing Officer as regards the nature of each loan disbursement and purpose for which it has been disbursed, i.e., whether it for agricultural purpose or not. The A.O. shall list out the instances where loans have disbursed for non-agricultural purposes etc. and accordingly conclude that the assessee s activities are not in compliance with the activities of primary agricultural credit society functioning under the Kerala Co-operative Societies Act, 1969, before denying the claim of deduction u/s 80P(2) . There should be fresh examination by the AO as regards the nature of each loan disbursement and purpose for which it has been disbursed, i.e., whether it for agricultural purpose or not. A.O. shall list out the instances where loans have disbursed for non-agricultural purposes etc. and accordingly conclude that the assessee s activities are not in compliance with the activities of primary agricultural credit society functioning under the Kerala Co-operative Societies Act, 1969, before denying the claim of deduction u/s 80P(2) - Appeal filed by the assessee is allowed for statistical purposes.
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2020 (6) TMI 265
Approval u/s 80G(5) rejected - assessee society is running a school and a B.Ed. college - assessee s society was given approval u/s 12AA - HELD THAT:- Assessee society has been granted registration u/s 12AA of the Act by the department and, therefore, it remains undisputed that the department had found the activities of the assessee society genuine and, therefore, the genuineness of the activities cannot be doubted within a short span of six months. CIT (E) has himself stated that the assessee society has been running educational institutions and, thus, it is an accepted fact by the department that the society is carrying on educational activities. CIT (E) has drawn adverse inference from the fact of the assessee earning interest from FDRs and from the fact of maintaining FDRs. It is an accepted practice and a well known fact that educational institutions are directed to maintain some sort of reserve funds in the form of FDRs by the bodies granting affiliation and, therefore, the assessee cannot be put to a disadvantage for following the mandatory requirement by the affiliation bodies and boards. CIT (E) has misdirected himself by requiring the assessee society to submit a list of proposed donors and a plan for raising donations. In our considered opinion this is entirely irrelevant at the time of considering the assesee s application for approval u/s 80G. That the assessee had no history of receiving donations in the past also cannot be a ground for rejecting assessee s application u/s 80G. In another case of CIT vs. Rajmala Educational Society [2011 (10) TMI 459 - PUNJAB AND HARYANA HIGH COURT ] held that merely because there was some surplus with the assessee trust, the same could not be the ground to deny registration u/s 80G (5) of the Act. CIT (E) was not justified in rejecting the assessee s application for grant of approval u/s 80G (5) of the Act on frivolous grounds. We direct the Ld. CIT (E) to grant the approval u/s 80G (5) - Decided in favour of assessee.
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2020 (6) TMI 264
TDS u/s 194J - Payment of Minimum Guarantee Royalty (MGR) - non deduction of TDS - Disallowance u/s 40(a)(ia) - whether consideration for transfer of rights in respect of any copyright for films used in connection with would fall within the definition of royalty? - as argued that the assessee did not purchase the cinematographic film but purchased only theatrical distribution rights - HELD THAT:- The non-inclusive part consists of consideration for the sale distribution or exhibition of cinematographic films. The Assessing Officer misread the provision in the second part of the clause with regard to exhibition of cinematographic films. He wrongly held that what the assessee purchased is copyrights and hence liable to TDS. In fact, the copyrights are always with the producer. The distributor is only given the right exhibition of cinematographic films. Hence, such transactions do not attract the provisions of TDS. Further, the minimum guarantee amount which is paid by the distributor for acquiring the exhibition rights of a movie is a fixed expenditure for the distributor that is paid to producers irrespective of the fact whether the film generates a profit or incurs losses. Hence, the payments made by the assessee do not fall under the term Royalty and do not attract the provisions of TDS. The appeal of the revenue on this ground is dismissed. Deemed Dividend addition u/s 2(22)(e) - advances out of commercial transaction - HELD THAT:- Assessee has received ₹ 1,50,000/- as commercial advance for granting rights for distribution of movie and the amount was paid to M/s Sukrit Pictures on 03.05.2010 was commercial advance for screening of the movie. It is a fact on record that the amount received from ACEL which is running a Cinema Theatre in Rohtak has given loan to Sukrit Pictures which is the distributor. Thus, this is the amount received from the theatre owner to the distributor of the films. It is a pure commercial transaction between the movie theatre and the distributor. In view of the judgment of CIT Vs Creative Dyeing Printing Pvt. Ltd. . [ 2009 (9) TMI 43 - DELHI HIGH COURT] wherein it has been held that amounts advanced to the assessee by another company for the business purpose wherein both the entities are having common Directors and if it is in the nature of a commercial transactions, the provisions of Section 2(22)(e) of the Act are not attracted. - Decided in favour of assessee. Unexplained Investments - difference in opening and closing balance - HELD THAT:-Addition made by the Assessing Officer can be said to be an addition made cursorily without looking into the capital introduced and the profits of the year. Therefore, the addition is hereby directed to be deleted. AO observed that the assessee made cash deposits of ₹ 9,17,000/- in the bank account of Karur Vysya Bank Ltd. and treated the same as unexplained. Before us the ld. DR argued that the assessee could not prove the sources of this cash deposits satisfactorily. We find as per ld. CIT (A), the cash was duly reflected in the cash book and the same has been deposited in the bank account. The ld. CIT (A) held that the assessee has earned an amount of ₹ 2,06,73,705/- which was generated during the course of film distribution business. CIT (A) has examined the cash book and tallied the same with the sales register. CIT (A) thereafter deleted the addition since no discrepancy has been found. Hence, we hereby decline to interfere with the order of the ld. CIT (A). Unrealized Rent addition - claiming deduction u/s 24(a) - HELD THAT:- We find that the ld. CIT (A) has confirmed the addition owing to failure of the assessee to fulfill the conditions laid down in the Rules. Hence, we decline to interfere in the order of the Id. CIT (A). Sale of Jewellery - HELD THAT:- Before the Assessing Officer, the assessee submitted that they sold 500 gms gold bars standard @1950 per gm and the purchase was of ornaments. It was argued before the ld. CIT (A) that the bullion was received at the time of marriage and cost of acquisition should be taken as Nil. Thus, we find that there are two different explanation offered by the assessee. No evidence of gold bars received by the assessee. We have gone through the order of the ld. CIT (A) wherein the issues relating to purchase of gold ornaments in the year 1999 and 2000 have been adequately demolished by going through the items purchased and items sold which do not tally and could not be reconciled. Hence, we hereby uphold the decision of the ld. CIT (A) on this issue. Unexplained cash deposits in Karur Vysya Bank - HELD THAT:- The fact that assessee is an authorized signatory of those accounts does not establish that accounts belonged to the assessed when both these entities are separately assessed. Therefore, the nature and source of deposits needs to be examined in the hands of M.S. Education Society and Tyagi Public School respectively but not in the hands of the assessee. Hence, we hereby direct that the addition is liable to be deleted in the hands of the assessee.
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Customs
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2020 (6) TMI 263
Imposition of penalty u/s 112(a) of the Customs Act - Charge of abatement - Connivance between the employee of the CHA and importer - Illegal Import - prohibited goods - Import of the undeclared goods namely R-22 Gas Cylinders and Salaam Mishri - HELD THAT:- The lapses on the part of the appellant can at worst be termed as negligence in discharge of his obligations under the CBLR. However, the Revenue has failed to adduce any evidence of deliberate involvement or connivance of the appellant in the mis-declaration. Therefore, the charge of abetment on part of the appellant to render the goods liable to confiscation is unsustainable. Thus, the appellant is not liable to penalty under Section 112 (a) of the Customs Act, 1962. Secondly, on the basis of aforementioned findings, which are self-contradictory, inasmuch as the appellant has been charged of not knowing the importer/proprietor and at the same time has been alleged to have aided /abetted the importer in his wrong doings. It is a matter of ordinary prudence that one cannot connive with a person he does not know or has not met. Further, the appellant, as the employee of the CHA firm, G-Card Holder, has only filed the bill of entry on the basis of the documents received by him from the representative of the importer. There is no allegation of forging or manipulation of any documents by the appellant. Further, there is no case or allegation that the appellant knowingly made wrong declaration in the bills of entry on behalf of the importer. Further, there is no statement by any co-noticee or other person suggesting connivance or knowledge of any mis-declaration on the part of this appellant - It is inappropriate interpretation on the part of the Adjudicating Authority that under Regulation 11 (n) of CBLR, it is required to make physical verification of his clients address, IEC No. and other KYC documents. The appellant-CHA firm had known the said Shri Deepak Kapoor Intermediary, who was bringing them the clearance work on regular basis. Further, the said Shri Deepak Kapoor was also known to Mr. Narinder Narula, Proprietor of the CHA firm. The appellant, being employee of the CHA firm, placed great reliance on Mr. Kapoor and thus, was negligent in ensuring the KYC compliance - Further, the appellant under the influence of Mr. Deepak Kapoor, filed the bills of entry without completing the KYC formalities. Further, from the appreciation of the facts and on perusal of the impugned order, it is evident that no case of connivance is made out against the appellant /employee i.e. no allegation or finding of any additional gain or reward received by him. The penalty imposed is very high and disproportionate to the offence by this appellant. Accordingly, the penalty imposed under Section 112(a) of the Customs Act is reduced from ₹ 34,14,020/- to ₹ 10,00,000/- - Appeal allowed in part.
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2020 (6) TMI 262
Levy of Redemption Fine and Penalty - re-export of goods - goods are in the nature of food items - HELD THAT:- The Tribunal in the case of M/S. ARIHANT GROUPS VERSUS COMMISSIONER OF CUSTOMS [ 2019 (9) TMI 1290 - CESTAT CHENNAI] had considered the very same issue with regard to redemption fine imposed for direction of re-export of goods. In para 5 of the said order, the Tribunal relied upon the decision of the jurisdictional High Court in SANKAR PANDI VERSUS UNION OF INDIA [ 2001 (12) TMI 83 - MADRAS HIGH COURT] , which was upheld by the Supreme Court in UNION OF INDIA VERSUS SANKAR PANDI [ 2010 (3) TMI 1247 - SC ORDER] - Thus, the redemption fine imposed for re-export of the goods cannot sustain and requires to be set aside. Levy of Penalty - HELD THAT:- Taking into consideration that the goods have been re-exported, the penalty of ₹ 2,00,000/- imposed is on the higher side, which requires to be reduced. Appeal allowed in part.
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Corporate Laws
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2020 (6) TMI 261
Grant of Bail - collusion in fraud - petitioner has been charge-sheeted under section 447 of the new Companies Act - HELD THAT:- There are no substance in the argument of the learned Counsel for the SFIO that the twin conditions prescribed under section 212(6) of the New Companies Act, 2013 start with negation of bail to the accused and the court could grant bail to such an accused only if the court records a satisfaction qua the accused being not guilty of the alleged offence and also a satisfaction that if released on bail the accused is not likely to commit any similar offence again. Also this court does not find substance in the insistence of the learned counsel for the SFIO that the application of the twin conditions, as prescribed under Section 212(6), are mandatory and have to be applied to all the considerations of grant of bail to the accused facing charge covered by section 447 of the New Companies Act. No doubt the statutory language of section 212 (6) has prescribed the twin conditions to be considered by the court, in case the prosecutor raises his objection to the grant of bail, however a similar language existing in the Prevention of Money Laundering Act, which was para materia to the language of the twin conditions contained in section 212(6) of the new Companies Act, had earlier come-up for consideration of the Supreme Courts in case of Nikesh Tarachand Shah [ 2017 (11) TMI 1336 - SUPREME COURT ] case and such language has already been declared to be ultra vires by the Supreme Court in that case. This court is under obligation to consider the nature of offence and the material placed on record before the special court, by way of charge-sheet against the petitioner, for consideration of question of granting bail to petitioner. In the present case, not keeping the books and records qua the dealings between the Cynosure Real Estate Company of the co-accused Vivek Harivyasi and the companies of the petitioner, in their respective offices; despite impending legal threat of severe punishment prescribed above provisions itself creates initiation of deceitful intention. There is nothing on record to even remotely suggest that the said money was given by the companies of the petitioner to the Cynosure Real Estate Company of the co-accused Vivek Harivyasi petitioner as loan on any terms and conditions. Although, the petitioner has relied upon some financial entries in his ledger and bank accounts, however, these are only the financial statements of his companies as defined under section 129 of the Companies Act; and which can be compiled at any time by matching the bank account entries; and these are not the books of account as required under section 128 of the Companies Act; which comprise of the original agreements and original records - the allegation of the prosecution that it can be a ploy to route the cash money by the petitioner and his co-accused Vivek Harivyasi by squandering the money of the CUIs of the Adarsh Group, cannot be easily brushed aside. Although the learned Counsel for the petitioner has submitted that the since the statement of the petitioner was recorded by the investigating officer who has powers akin to the police powers, therefore, the alleged admission by the petitioner has to be treated as a confession, which is not admissible under section 25 of the Evidence Act, however, this court does not find any substance in this argument. The Companies Act 2013 is a special statute. As per the provision contained in section 212(3) the investigation of the offences by the authorities under this Act has to be carried out only as per the provisions of this Act. Still further, under sections 435, 436 and section 439 the trial of an offender under this Act is to be conducted by the Special Court in accordance with Cr.P.C. and the procedure as modified under this Act. Section 217(7) specifically provides that the statement made by a person before the investigating officer shall be admissible against such person and can be used against him. This court finds substance in the argument of the learned Counsel for the SFIO that since, as per the charge-sheet the petitioner is given to manipulations, for earning money, therefore, it cannot be denied that by nature, the petitioner could be manipulative. Hence, this court has no reason to believe that if the petitioner is released on bail, he is not likely to influence the witnesses of the case and also not likely to destroy the evidence against him. The past conduct of the petitioner has also not been exemplary - this court finds force in the argument of the counsel for the SFIO that at that time the petitioner was not sure of him being made an accused in the case. Therefore he might not have resorted to that exercise. But now, when the petitioner is fully aware that his alleged crime has been detected, it may not be in the fitness of the things to expect the same straightforward conduct from the petitioner, who is alleged to be manipulative by disposition. Petition dismissed.
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Insolvency & Bankruptcy
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2020 (6) TMI 256
Final approval of Resolution Plan - applicant prayed for an urgent hearing because the 180 days CIRP period has already expired on 24/02/2020 and the extended period of 90 days will expire soon on 24/05/2020 - HELD THAT:- he assets of the Corporate Debtor are going to rest in a safer hand who is engaged in the very same kind of business as the Corporate Debtor. The RP Mr. Amit Pareek deserves special appreciation for finding out a resolution applicant whose plan has been approved by the CoC by 100% vote share even in these difficult time of pandemic due to COVID-19. All the provisions of mandatory requirements are seen complied by the resolution applicant as per Form H submitted by the RP. It provides provision for the payment of insolvency resolution process, payment of the debts of operational creditors, management of the affairs of the Corporate Debtor, and provides provision for implementation and supervision of the resolution plan. This is a case in which the CoC has judiciously distributed the financial bids to the stakeholders according to their entitlements. There is nothing in the plan, so as to disapprove it. The CoC has very well deliberated with the two plans and decided the viability, feasibility and financial matrix of each plans and approved one with 100% vote shares of the members of the CoC. Resolution Plan approved.
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2020 (6) TMI 254
Maintainability of application - Valuation of the assets of Company in Liquidation - HELD THAT:- Prima facie, there is not procedural lapse and it cannot be said that the assets of the Company are being sold by the Corporate Debtor at a low price. Liquidator has followed the norms prescribed under the Insolvency and Bankruptcy Code, 2016 and relied on the valuation reports of two registered valuers. This application is not maintainable.
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2020 (6) TMI 250
Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of dispute or not - HELD THAT:- On the similar facts and documents the applicant has filed a case against V.A.M Resorts and hotels Pvt. Ltd. which is registered as CP (IB) No. 353/ALD/2018, in which today the order has been passed and the case has been admitted, moratorium granted and IRP appointed. This Adjudicating Authority is of the considered view that since CP (IB) No. 353/ALD/2018 has already been admitted and moratorium has been granted, hence this petition becomes infructuous. The present petition is dismissed as infructuous.
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Service Tax
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2020 (6) TMI 260
Non-payment of service tax - Composite Contract - Construction Services - Appellant was paying service tax regularly on all the services and stopped making payment of tax from January, 2009 in view of Circular No. 108/02/2009 ST dated 29.01.2009 - whether composite contracts are liable to service tax prior to 01.06.2007 when the classification of works contract service was introduced in the Finance Act, 1994 w.e.f. 01.06.2007? HELD THAT:- Admittedly, the appellant have supplied both material and labour / service in the contracts executed by them. We find that the issue is no longer res-integra and it has been held by Hon ble Supreme Court in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT] that prior to 01.06.2007 only service contracts simplisitter (not involving supply of material) are taxable under the existing classification of CICS, ICS, CCS, etc. - demand set aside. Service tax liability on promoters / builder / developer prior to 01.06.2010 in respect of construction of residential complex - HELD THAT:- The CBEC by way of clarification vide Circular No. 108/02/2009-ST dated 29.01.2009 r/w Circular No. 151/2/2012-ST dated 10.02.2012, have clarified that for the period prior to 01.06.2010, construction(residential) provided by builder / developer will not be taxable - Admittedly, the tax under this category, of ₹ 42,01,090/- relates to the period prior to 01.06.2010. Accordingly, this ground is allowed in favour of the appellant and the demand is set aside. Maintenance and repair service - HELD THAT:- Learned Counsel urges that the appellant does not dispute the tax liability, and they have already paid the amount of ₹ 90 lakhs (approximately) prior to the show cause notice, and shall pay the balance if any, upon reconciliation. Demand under the head renting of immovable properties for the period 2007-08 to 2009-10 - HELD THAT:- Learned Counsel states that they have already paid the tax prior to the issue of show cause notice, and within the window provided for payment of tax under this head, when this taxable head was re-introduced by Finance Act, 2010 after the same was quashed by Hon ble Delhi High Court in HOME SOLUTIONS RETAILS (INDIA) LTD. VERSUS UNION OF INDIA ORS [ 2011 (9) TMI 46 - DELHI HIGH COURT] . - Since admitted tax has been deposited, no penalty. Service tax of ₹ 20,685/- under the head engineering consultancy services - HELD THAT:- Learned Counsel states that they did not dispute this amount, thus same is confirmed. - Penalty u/s 77 and 78 of the Finance Act - HELD THAT:- As the issues involved are interpretational in nature and the appellant have deposited the admitted taxes prior to issue of show cause notice, along with interest - Penalties set aside. The appellant is liable to deposit, if any tax is found short paid, on arithmetical verification. Appellant is also directed to file a calculation of their final tax liability, with the details of payment of such tax liability, before the adjudicating authority for his information and perusal - appeal allowed - decided in favor of appellant.
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2020 (6) TMI 259
Insurance Auxiliary Services - brokerage received from overseas reinsurance - Export of service or not - Non receipt of consideration in foreign exchange - HELD THAT:- There is no doubt that the services of the appellant are beneficial both to Indian insurance company and the foreign reinsurer as the former gets the benefit of reinsurance and the latter gets the business of reinsurance. The appellant is receiving money in Indian Rupees. Instead of remitting the entire amount to the overseas reinsurer in convertible foreign exchange and receiving his brokerage in convertible foreign exchange, he is deducting the brokerage and is only remitting the net amount to the overseas reinsurer. The issue decided in the case of SUPRASESH GENERAL INSURANCE SERVICES BROKERS (P.) LTD. VERSUS COMMISSIONER OF SERVICE TAX, CHENNAI [ 2008 (11) TMI 82 - CESTAT, CHENNAI] where it was held that Under RBI Regulations, there was a requirement of such an agreement under law and the permission of the RBI has to be obtained before remitting the foreign exchange. That issue does not arise in the present case and the provisions of the Service Tax Act does not impose such a condition. In any event, as we have held that the basis of the circular, which is clarified that Notification Nos. 6/99, dated 9-4- 1999, 9/01, dated 16-7-2001, 13/02, dated 1-8-2002 and 2/03, dated 1-3-2003 would not apply to export of service, the question of receiving the payment in convertible foreign exchange does not arise. Even the Export of Service Rules, 2005 does not put an embargo in relation to taxable service as specified in Rule 3(3)(i), (ii) and (iii) of the Export of Service Rules. The Hon ble High Court of Madras in SUPRASESH GENERAL INSURANCE SERVICES BROKERS PVT. LTD. VERSUS THE COMMISSIONER OF SERVICE TAX, CUSTOM, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL [ 2015 (9) TMI 1219 - MADRAS HIGH COURT] has held that such cases amount to export of service and that the amounts which have been retained as brokerage in Indian Rupees by deducting instead of remitting the entire amount abroad and receiving back foreign currency should be treated as receipts for export in foreign currency. Hon ble High Court of Madras has decided that the demand of service tax on such amounts is not sustainable. Appeal allowed - decided in favor of appellant.
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2020 (6) TMI 258
Consulting Engineer Service - Import of services - cost is included in the value of goods imported and customs duty paid - Reverse Charge Mechanism (RCM) - service provider located outside India and was not having any permanent establishment or office in India - Time Limitation - Interest - penalty - HELD THAT:- Undisputedly Appellants have entered into contract for provision of services with the overseas service provider. The terms of Contracts are univocal and clear to this effect. The defence put forth by the Appellants for not paying the service tax on the service received by them in terms of Section 68 of Finance Act, 1994, is that they have discharged the customs duty, on the documents, drawing and designs received by them by adding the value of these as per the decision of Apex Court in case of ASSOCIATED CEMENT COMPANIES LTD. VERSUS CC [ 2001 (1) TMI 248 - SUPREME COURT] , and hence demand of service tax on the same is contrary to the view expressed by the Apex Court, treating drawing and designs as goods. There are no merits in the submissions made by the learned Chartered Accountant to effect that since the value of services received by the Appellant from the overseas suppliers was included in the value of the goods imported by them, these services could not be subjected to service tax leviable under Finance Act, 1994. Time Limitation - HELD THAT:- By not making proper and complete declaration in respect of the services received from overseas service provider, before the jurisdiction Service Tax Authorities and in their ST-3 return, on which service tax was to be discharged by the Appellant s as per section 68 of Finance Act, 1994, Appellant have suppressed the necessary information and for the said suppression service tax demand invoking extended period limitation as per proviso to Section 73(1) is justified - the demand made in this Show Cause Notice by invoking the extended period of limitation as per proviso to Section 73(1) of Finance Act, 1994 is upheld. Interest - HELD THAT:- Since the demand of tax has been upheld the demand for interest will follow. It is now settled law that interest under Section 75, is for delay in the payment of tax from the date when it was due. Since appellants have failed to pay the said Service Tax by the due date interest demanded cannot be faulted. Penalties - HELD THAT:- Taking note of the fact that Appellants are a public sector undertaking, amounts demanded as service tax will be admissible to the Appellants will be admissible to them as CENVAT Credit and the provisions of Section 80 of the Finance Act, 1994, though the penalties under Section 76, 77 78 are imposable, they should be waived by the application of Section 80. The appeal is partly allowed to the extent of setting aside the penalties imposed on the Appellant.
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2020 (6) TMI 257
Classification of services - Banking and Financial Services or not - non-payment of service tax on operational income received on account of transaction fees, custodial fees etc, by wrongly claiming exemption from service tax as per Board Circular No.B.II/1/200/TRU dated 09.07.2001 - HELD THAT:- Throughout Appellants were providing for provision and transfer of information and data processing and these are provided in relation to their depository operations. Thus the services provided by them to Depository Participants are covered by the definition of Banking and Financial services and are liable to service tax under that category. Extended period of limitation - Held that:- Appellants have taken the stand that extended period of limitation cannot be invoked as the relevant facts were in knowledge of the revenue and hence they had not suppressed anything from the revenue authorities with the intention to evade payment of tax. They have relied upon various case laws on the subject. From the facts as available on record specifically the correspondences with CBEC, the issue involved in those correspondences were in relation to Central Depository Services and not in relation to services of providing for provision and transfer of information and data processing . - Demand confirmed invoking the extended period of limitation. The benefit of cum tax value as per section 67(2) of the Finance Act, 1994 should be extended to the appellant s while determining the tax payable. The Commissioner has erred in not extending the benefit of tax already paid by the appellant in respect of certain services sought to be taxed again in the present proceedings. Hence the matter for quantification of demands on the above lines need to be remanded back to the original adjudicating authority for denovo consideration. Demand of Interest - HELD THAT:- Since the demand of tax made is upheld, the demand of interest made under Section 75 of the Finance Act 1994, is also upheld. Penalties - HELD THAT:- The Penalties imposed under Section 75A, 77 78 of Finance Act, 1994 is justified but needs to be redetermined in light of re-quantification of demand in de-novo proceedings. Appeal allowed by way of remand.
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2020 (6) TMI 251
Short payment of Service Tax - GTA Services - reverse charge mechanism - N/N. 13/2008 dated 01.03.2008 - non-filing of requisite declaration acknowledging that no Cenvat credit has been availed by the Appellant with respect to the exempted amount of service tax has not been filed - whether such declaration is mandatory for seeking the benefit of the exemption notification? - Time Limitation - HELD THAT:- The GTA Services stands excluded from the definition of output service w.e.f 01.07.2012. No question of availability of Cenvat credit is any more available to the recipient of GTA Services. The demand of declaration about not availing the Cenvat credit stands redundant in view of the said amendment. The notifications are extending substantial benefit to the assessee. The same cannot be denied for want of meagre procedural lapse. In the present case there is not even the said procedural lapse. Denying the benefit of the impugned notification for alleging the payment by the Appellant as short is, therefore, opined to be a wrong finding. Adjudicating authority below are required to be updated with respect to the latest laws and the respective amendments while adjudicating the respective issues. Time Limitation - HELD THAT:- Department could not have proved the mandate of any such declaration. Accordingly, no question of suppression of facts on part of Appellant at all arises as is otherwise alleged by the department. The adjudicating authority is held to have erroneously formed the opinion about mis-representation and suppression on part of the Appellant. Appeal allowed - decided in favor of appellant.
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Central Excise
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2020 (6) TMI 255
CENVAT Credit - input services - Advertisement service and Storage/Ware housing service which are used for end product i.e. paint - appellant manufactures intermediate chemicals Phthalic Anhydride for their own another unit - HELD THAT:- There is no dispute that the appellant is engaged in manufacture of intermediate Chemicals namely Phathalic and the same was used in the manufacture in their own another unit therefore, the common service i.e. advertisement and storage and Ware housing can be attributed to both i.e. paint manufacturing as well as intermediate product i.e. chemical manufacturing therefore, the appellant have rightly taken the proportionate credit in respect of Advertisement service Storage and ware housing service. The appellant have rightly taken the credit - Appeal allowed - decided in favor of appellant.
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2020 (6) TMI 253
Clandestine Removal - clearance of goods without issuance of invoice without payment of duty - SCN issued after a gap of four years of investigation - time limitation - HELD THAT:- The facts of the case are not disputed. That an investigation was conducted on the premises of M/s Pankaj Ispat Limited and records recovered in clandestine procurement of raw material. Moreover, the show cause notice has been issued after a gap of almost four years. Similar issue decided in the case of MANMEET ISPAT PRIVATE LIMITED VERSUS COMMR. OF C. EX., CUS. S.T., RAIPUR [ 2020 (1) TMI 418 - CESTAT NEW DELHI] where it was held that the show cause notice dated 3.2.2016 issued after four years is hopelessly barred by limitation. The proceedings against the appellant are not sustainable on the basis of third party evidence which is highly time barred - appeal allowed - decided in favor of appellant.
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2020 (6) TMI 252
Interest on Rebate Claim - duty adjustment - whether the interest is payable on the duty adjustment issue? - HELD THAT:- When Commissioner (Appeals) hold that while calculating the interest, could have been remanded the matter back to the adjudicating authority with open remand as appellant has challenged the issue of liability of interest itself before the adjudicating authority. In view of this, as held by the Commissioner (Appeals) the calculation of interest is in violation of the principles of natural justice. The matter is remanded back to the adjudicating authority to find out whether the appellant is liable to interest or not, thereafter, how much the interest is payable, if any - Appeal allowed by way of remand.
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