Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
June 17, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Levy of GST - Advisory & Management Fees received in Indian Currency from Domestic Contributors located in India - both, the applicant and the AIF are in taxable territory - Benefit of export not available.
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Profiteering - DTH services - Entertainment Tax was neither allowed as ITC in pre GST era nor has been allowed in the GST era and same was borne by the Respondent hence there is no benefit of ITC has accrued - no evidence to prove that the Respondent had charged more price in the GST era and not passed on the benefit of tax reduction, as the tax rate had increased from 15% to 18% - no Profiteering
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Seizure of the gold ornaments sent for hallmarking - goods entrusted by the petitioners and covered by the delivery chellan and issue vouchers cannot be the subject matter of a confiscation order u/s 130 of SGST - directed to time bound completion of proceedings against the 6th respondent(hallmarking firm) with permition to retain the seized goods for the purposes of completing the enquiry
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Principles of natural justice - decision based on ‘new grounds’, which were never raised before Authority by the Revenue - Appellate Authority should have at least indicated that it is considering the ‘new grounds’ and had afford an opportunity to place on record agreements or other documentary evidences - The failure to do so is violation of principles of natural justice and also serious prejudice to the petitioner - remanded
Income Tax
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Disallowance u/s 14A - Several High Courts have taken a view that where the assessee had not earned exempt income, disallowance of expenditure under Rule 8D of the Income Tax Rules, 1962, would not be permissible
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Registration u/s 12AA - Applicant Society has the objects of charitable in nature with main object to utilize the resources of society for propagation of education, to establish and run education institutions for promotion of modern education in Haryana, to prepare buildings, hostels, sports ground and library - there are no violations of either sec. 11(5) or Sec. 13 during this year or in the next year - no ground for rejection of registration
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Penalty u/s.271E - violation of provision of section 269T - the assessee has not explained the reason why the said amount has been deposited in the bank account of Shri Raju Bharat and what is the urgency or immediate need for the company’s business to deposit the same amount in the bank account of the shareholder - no reasonable cause as per section 273B - penalty confirmed
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Penalty u/s 271(1)(c) - the entire affairs of the business have been kept concealed from the department and only after receipt of information in connection with BCTT and conducting of survey u/s 133A the affairs of the business have come to fore and the revenue has determined the gross profit @ 6.33% on the turnover - penalty leviable
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Cancellation of Registration u/s 12AA - merely because the genuineness of one donation in one year is doubted, it cannot be a ground to draw the inference that the activities of the assessee society are not being carried out in accordance with the objects of the society - Section 12AA(3) does not authorize the CIT to cancel charitable registration with retrospective effect
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Revision u/s 263 - AO was bound to follow the direction given by the Tribunal while passing order in u/s 143(3) r.w.s 254 and not permitted to deal with any other issue as it would have resulted in judicial indiscipline, accordingly, only tested the genuineness of the five sundry creditors, such order cannot be termed as erroneous - Pr. CIT exceeded the jurisdiction by invoking the powers u/s 263
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Reassessment u/s 147 - the reasons as they stand should be sufficient to show that on the reasons recorded the AO could have formed the belief that income chargeable to tax has escaped assessment. Once that requirement is fulfilled same can clarify and explain in the affidavit-in-reply and the appraisal report reveals that there was sufficient material for the AO to form the belief - No infirmity in notice u/s 148
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Exemption u/s 11 - contribution/donation to other charitable trust - Donations are never made with prior agreement and it is solely governed by the will and capabilities of the donor and here no amount has been paid for the benefit of any person specified u/s.13(3) - CBDT also recognizes donation from one charitable trust to another is proper application of income - exemption duly allowable
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Deemed dividend u/s 2(22)(e) - assessee hold 11.61% of shares in SDIPL and 22.81% in AIPL - Since lending of money was a substantial part of the business of SDIPL and AIPL, the money given by it by way of advance or loan to the assessee could not be regarded as a dividend, as it has to be excluded from the definition of “dividend” by virtue of clause (ii ) of Section 2(22)
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Income from Fit-Out Hire Charges - business income OR income from house property - nexus with fixture/feelings/equipments - assessee has disclosed all the materials before the AO and it is not an evasion of tax - there are two separate agreements and each terms have been expressed in the agreement - taxable as business income
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Penalty U/s 271(1)(c) - addition was confirmed by CIT(A) and ITAT, Thus, there is no dispute with regard to the concealment of income and furnishing of inaccurate particulars of income - If there is no variance between the charge levied at the time of initiation of penalty proceedings and the charge levied at the time of imposition of penalty then no fault can be found with regard to defect in notice so as to hold that the penalty is not leviable
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Long Term Capital Gain - penny stock - assessee produced all evidences to explain the source of the amounts received from the brokers and there is no evidence on record to disbelieve that the assessee sold shares through registered Stock Exchange and stock broker - AO was not justified in assessing the sale proceeds of shares as undisclosed income u/s 68 - LTCG allowable
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MAT computation u/s 115JB - AS 13 - insofar as the provision for diminution of value of investment is concerned, the same has actually been reduced from the asset side of the balance sheet and, therefore, is in the nature of a write off, same cannot be added to the book profit u/s 115JB(2)(i)
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Deduction u/s 80IB(10) - housing project having buildings A,B,C,D,E & F out of which A & B complete in all respects and other handed over to land lords - completion certificates issued for less than area as per sanctioned plan - The assessee had claimed deduction in respect of the income arising out of sale of construction only for which completion certificates were issued - deduction allowable
Customs
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Restriction on import of yellow peas - The relevant date for the purpose of import of peas as described in the impugned notifications is the date of import and the date on which the contract has been entered into by the petitioner is not relevant for the present purpose
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Production of additional documents - The approach of the learned authorities below as well as the learned Tribunal has been narrow and pedantic. - They could not take a hyper technical view in the matter.
IBC
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CIR Process - Voting of COC - if any of the ‘Financial Creditor’ remains absent from voting, their voting percentage should not be counted for the purpose of counting the voting shares - no interference at this stage
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Consideration of the ‘Resolution Plan’ submitted by ‘JSW Steel’ - not expressing any opinion as to how the P & H High Court can pass an order, which has no territorial jurisdiction over Delhi, where Pr. Bench of NCLT, New Delhi is situated - directed the Adjudicating Authority to decide the case on merit in accordance with law uninfluenced by any order except the decision of this NCLAT and the Supreme Court
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CIR Process - providing all documents to erstwhile Board and thereafter to convene a meeting of the CoC “afresh” to deliberate and consider the suggestions and objections of the erstwhile Board before passing any Resolution Plan will be treated as a preliminary issue and same will be decided by the Adjudicating Authority before considering other Applications or approval of any Resolution Plan
Service Tax
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Invocation of Extended period of limitation u/s 78(1) of FA - Department was at all times during the period for which the demand has been raised were aware of the declaration made by the respondent that they will not be liable to pay the service tax on 41% levy collected from the contractee and paid over to the Grocerty Market and Shop Board - no suppression of facts to invoke the extended period of limitation
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Invocation of Extended period of limitation - respondent had a bonafide belief that it is entitled to Cenvat Credit in respect of all inputs hence there is no occasion of making of declaration in ST-3 Returns would arise - even Commissioner of Service Tax has himself recorded that the Life Insurance Industry as a whole believed they are entitled to Cenvat Credit - extended period could not be invoked
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Penalty u/s 78 of the FA, 1994 - appellant had correctly advised not to challenged the invocation of the extended period of limitation for recovery of service tax though the parameters/conditions for imposing equivalent penalty u/s 78 is same - appellant after having recovered the service tax from its customer had not paid over the amount to the State clearly point to mala fide conduct - penalty upheld
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Nature of activity - multi-level marketing of the goods - the appellant has adopted a marketing strategy for sale of its product - The activity undertaken by the appellant is primarily a sale of goods and there is no element of Business Support Services for Business or Commerce.
Central Excise
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Bar on utilization of CENVAT Credit on payment of excise duty - Once Rule 8(3A) has been declared as unconstitutional to the extent it prohibited utilizing Cenvat credit by Gujarat High Court, being a central Rules having all India application, it would equally apply within the State of Maharashtra, hence the discharge of payment of duty on the final products utilization of CENVAT Credit is allowable
VAT
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Evasion of tax - imposition of penalty u/s 47(6) of the KVAT Act - revision petitioner could not produce any documents in discharge of their burden, the penalty order which was confirmed by various authorities including the tribunal - no legal or sustainable grounds are existing to invoke the revisional jurisdiction vested on this Court u/s 63 of the KVAT Act
Case Laws:
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GST
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2019 (6) TMI 720
Permission for withdrawal of Advance Ruling application - Classification of goods - Choona (Lime) generally used for Pan (Betel) - whether falls under CH. 2522.20 or other wise? - HELD THAT:- The request of the applicant to withdraw the application voluntarily and unconditionally is hereby allowed without going into the merits or detailed facts of this advance ruling application by this authority.
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2019 (6) TMI 719
Levy of GST - Advisory Management Fees received in Indian Currency from Domestic Contributors located in India - HELD THAT:- The advisory and management fees received by the applicant are for financial services rendered to the AIF - Since the location of both, the applicant and the ALF are in India, the place of Supply is to be determined by applying Sec 12 of the IGST Act, 2017 - It is very clear that both, the applicant and the AIF are in taxable territory and the services rendered by the applicant to the AIF are taxable and therefore GST is payable, by application of the provisions of Section 12(12) of the IGST Act, 2017 - GST is thus leviable on the above transaction. Levy of GST - Advisory Management Fees received in Foreign Currency from Overseas Contributors located outside India - HELD THAT:- The Advisory and management Services are provided to the AIF, which is a separate legal entity which makes investment decisions on the advice of the applicant and therefore sub-section 12 of Section 12 of IGST Act, 2017 will apply in this case also as both supplier and the recipient of service are located in India. For the same reason, we do not agree with the applicant s contention that the transaction with foreign investors should be determined in terms of Section 13 of the IGST Act, 2017 because the recipient of service i.e. AIF is not located outside India and the applicant are not providing any services to the Overseas Contributors. The transaction also do not qualify to be an export of service as the condition specified in sub-clause (ii) of Sub-section (6) of Section 2 of IGST Act, 2017 that recipient of service should be outside India, is not satisfied, and therefore it is not a zero rated supply - GST is thus leviable on the above transaction.
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2019 (6) TMI 718
Maintainability of petition - alternative remedy available - Liability of Interest - recovery proceedings u/s 79 of the CGST/SGST Act - Principles of natural justice - HELD THAT:- The special leave petition is dismissed as not pressed.
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2019 (6) TMI 717
Principles of natural justice - decision based on new grounds , which were never raised before Advance Ruling Authority by the Revenue - vitiation of the decision making process - mutual exclusion of job work and manufacture - HELD THAT:- The Appellate Authority has actually faulted the petitioner for its alleged failure to submit certain agreements and documentary evidences, having a direct bearing upon the new grounds , upon which the Appellate Authority has finally based its decision. The absence of any indication by the Appellate Authority that it proposed to take into consideration the new grounds or the failure on the part of the Appellate Authority to afford the petitioner an opportunity to produce documents or documentary evidences having direct bearing on the new grounds , in our opinion, amounts to failure on the part of the Appellate Authority to adhere to the principles of natural justice. Such failure, vitiates the decision making process and affords a good ground for interference in the exercise of powers of judicial review. The prejudice to the petitioner is quite evident in the facts and circumstances of the present case. The petitioner has been faulted for not providing documentary evidences during the appeal proceedings. There is again, no dispute, that the petitioner was never called upon to produce such documentary evidences in the course of appeal proceedings. In effect, this means that an order adverse to the interests of the petitioner has been made by the Appellate Authority, even after agreeing the petitioner that the primary reasoning of the Advance Ruling Authority was not proper, without affording the petitioner opportunity to meet with or to clarify or to produce materials or documentary evidences which might have had a bearing on the new grounds ultimately relied upon by the Appellate Authority. This, according to us, involves failure of natural justice, thereby vitiating the decision making process leading to the making of the impugned order dated 2nd July 2018. We are satisfied that the Appellate Authority should have at least indicated to the petitioner that it proposed to take into consideration the new grounds and further, afford an opportunity to the petitioner to place on record agreements or other documentary evidences referred to in paragraphs 52 and 56 of the impugned order dated 2nd July 2018, in order to meet these new grounds . The failure to do so has not only resulted in violation of principles of natural justice, but also occasioned serious prejudice to the petitioner. We set aside the impugned order dated 2 July 2018 made by the Appellate Authority and remand the petitioner s appeal to the Appellate Authority for reconsideration on its own merits and in accordance with law. Appeal disposed off.
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2019 (6) TMI 716
Seizure of the gold ornaments entrusted by the petitioners - evasion of tax - SGST Act - gold ornaments sent for hallmarking - HELD THAT:- There being no possibility of an evasion of tax in respect of the goods, by the 6th respondent since the goods themselves belong to the petitioners, I am of the view that the goods entrusted by the petitioners, with the 6th respondent, and covered by the delivery chellan and issue vouchers aforementioned, cannot be the subject matter of a confiscation order under Section 130 passed in relation to the 6th respondent. The Department may be permitted to retain the seized goods for the purposes of completing the enquiry against the 6th respondent in terms of the provisions of the SGST Act, I dispose these writ petitions, by directing that the respondent authorities under the SGST Act shall complete the proceedings against the 6th respondent, within an outer time frame of one month from the date of receipt of a copy of this judgment. Petition disposed off.
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2019 (6) TMI 715
Profiteering - DTH services - it was alleged that benefit of the reduction in the rate of tax was not passed on to the consumers by the DTH operators when the GST was introduced - contravention of the provisions of Section 171 of CGST Act, 2017 - HELD THAT:- The Applicant was not a subscriber of the Respondent and he had filed the present complaint on the basis of the plan chosen by another subscriber, Sh. Vijender Kumar. The details of the plan given by the above applicant also do not match with the plan adopted by him as he had not subscribed to the Value Prime plan but had subscribed to a different plan called My Plan and these above mentioned two plans had different values and features and they could not be compared. Therefore, the allegations made by the Applicant No. 1 has not been established - It is further found from the record that the Entertainment Tax was neither allowed as ITC in pre GST era nor has been allowed in the GST era, and that the cost of the entertainment tax was borne by the Respondent himself as is clear from the invoices produced by him. Accordingly, there is no ground to believe the contention of the above Applicant as no benefit of ITC has accrued to the Respondent which was required to be passed on. It is evident that there is no evidence to prove that the Respondent had charged more price in the GST era and not passed on the benefit of tax reduction, as the tax rate had increased from 15% to 18%. Further, the above Applicant had also not availed the opportunities of hearings to establish his case. Therefore, the Authority is of the view that the DGAP has rightly submitted that the allegation of profiteering is not established in the present case. Due to non-availability of cogent and reliable evidence, the provisions of Section 171 of the CGST Act, 2017 are not attracted and hence there is no merit in the application filed by the above Applicant. Appeal dismissed as not maintainable.
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Income Tax
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2019 (6) TMI 714
Validity of reassessment proceedings - claim of depreciation - normal income of the Assessee remains 'Nil', upon which the MAT provisions were applied - HELD THAT:- We notice that there is virtually no difference in computation income under MAT provisions in the original assessment as well as in reassessment. Entire exercise therefore would be futile. Only on that ground, Appeal is not entertained and disposed off accordingly.
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2019 (6) TMI 713
Carry forward and set off of unabsorbed depreciation of the amalgamating company - set off unabsorbed depreciation prior to A.Y. 1994-95 to 1998-99 beyond 8 years - HELD THAT:- As decided in GENERAL MOTORS INDIA PVT. LTD VERSUS DCIT [ 2012 (8) TMI 714 - GUJARAT HIGH COURT] any unabsorbed depreciation available to an assessee on 1st day of April 2002 (A.Y. 2002-03) will be dealt with in accordance with the provisions of section 32(2) as amended by Finance Act, 2001, thus once the Circular No.14 of 2001 clarified that the restriction of 8 years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from A.Y.1997-98 upto the A.Y.2001-02 got carried forward to the assessment year 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever - Decided in favour of assessee.
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2019 (6) TMI 712
Deduction u/s 80IB(10) - project was complete on or before 31.03.2009 when occupation certificate was accorded only in respect of 9206.30 Sq.Mtr. against sanction of 11960.15 Sq. Mtr. - HELD THAT:- Record of the case would show that CIT (Appeals) and Tribunal concurrently came to the conclusion that the assessee had proposed the housing project comparison of buildings A,B,C,D,E and F. Out of a total area of 11960.15 sq. meters to be constructed as per the building construction permission, the assessee had completed construction of 11,592.43 sq.meters. Necessary completion certificates from the local authority were also issued from time to time and last such certificate was issued on 1st December, 2008. Thus, the construction was completed and duly certified by the local authority before 31st March, 2009. The record further shows that the buildings E and F were not to be constructed and the land was to be handed over to the landlord on account of further developments and dispute. This was the only remaining portion of the construction out of the originally sanctioned plan. The assessee had claimed deduction in respect of the income arising out of sale of construction only for which completion certificates were issued. That being the position, we do not find any error in view of the Tribunal granting deduction under Section 80IB(10) - Decided against revenue
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2019 (6) TMI 711
Disallowance u/s 14A - ITAT confirming the Order of the CIT (A) wherein restricting the disallowance on the ground that during period under consideration, the Respondent - Assessee had not earned any exempt income - HELD THAT:- This being the position, we do not find any error in the impugned Order passed by the Tribunal. Several High Courts have taken a view that where the assessee had earned exempt income, disallowance of expenditure under Rule 8D of the Income Tax Rules, 1962, would not be permissible. - Decided against revenue
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2019 (6) TMI 710
Reopening of assessment u/s 147 - validity of reasons to believe - HELD THAT:- Evidently, the reasons would not set out the entire modus operandi as recorded in the appraisal report, but would briefly set out the gist of the facts and material which led the Assessing Officer to form the requisite belief that income chargeable to tax has escaped assessment. However, the reasons as they stand should be sufficient to show that on the reasons recorded the Assessing Officer could have formed the belief that income chargeable to tax has escaped assessment. Once that requirement is fulfilled, the Assessing Officer can certainly clarify and explain the reasons recorded by him in the affidavit-in-reply and place the material relied upon by him for the purpose of forming the belief that income chargeable to tax has escaped assessment. A perusal of the appraisal report, on which reliance has been placed by the AO, reveals that there was sufficient material for the AO to form the belief that income chargeable to tax has escaped assessment. The material also specifically refers to the petitioner, which clearly establishes a link between the relied upon materials and the petitioner. Considering the nature of material available with the Revenue, it is not possible to state that on the reasons recorded, the Assessing Officer could not have formed the belief that income chargeable to tax has escaped assessment. No infirmity can be found in the action of the respondent in issuing the impugned notice under section 148 - Decided in favour of revenue.
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2019 (6) TMI 709
MAT computation u/s 115JB - disallowance of provision for diminution in value of investment while computing book profit - Accounting Standard 13 - HELD THAT:- In view of the decline in the value of the provisions created in the current year the carrying amount of such investments has been reduced and in case of provisions where there was a rise in the value, the provisions are written back and the net amount of provision has been debited to the profit and loss account. Thus, insofar as the provision for diminution of value of investment to the extent of ₹ 13.85 crores is concerned, the same has actually been reduced from the asset side of the balance sheet and, therefore, is in the nature of a write off. Under the circumstances, the amount of ₹ 13.85 crore though bearing the nomenclature of provision for diminution of value of investment, having been actually written off, cannot be added to the book profit u/s 115JB(2)(i). Tribunal has properly appreciated the material on record while holding that the assessee has duly followed the netting principle propounded in the full bench decision of this court in Vodafone Essar Gujarat [ 2017 (8) TMI 451 - GUJARAT HIGH COURT] No infirmity can be found in the view adopted by the Tribunal so as to warrant interference. The question, therefore, is answered in the affirmative, that is, in favour of the assessee and against the revenue. It is hereby held that the Income Tax Appellate Tribunal was justified in deleting the disallowance of provision for diminution in value of investment while computing book profit u/s 115JB
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2019 (6) TMI 708
Revision u/s 263 by CIT - AO has not made any inquiry, about the application of provisions of u/s 115JB for computing tax on Book Profit - to invoke the power u/s 263, twin conditions must be satisfied with (i) the order of the assessing officer should be erroneous (ii) It must be prejudicial to the interest of the revenue - HELD THAT:- We find that the assessment order has been passed in pursuance to the specific direction given by the Tribunal restoring the issue of examining the genuineness of 5 sundry creditors. AO was bound to follow the direction given by the Tribunal and it was not open for him to ignore the same and further he was also not permitted to deal with any other issue other than the direction given by the Tribunal as it would have resulted in judicial indiscipline. We find that the AO has duly adhered the direction of the Tribunal and tested the genuineness of the five sundry creditors and confirming addition for unexplained four creditors holding them to non-genuine We can therefore, safely conclude that the order framed by the assessing officer u/s 143(3) r.w.s 254 is not erroneous, and thus one of the twin conditions is not fulfilled. Pr. CIT exceeded the jurisdiction by invoking the powers u/s 263 and is therefore, liable to be quashed. - Decided in favour of assessee.
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2019 (6) TMI 707
Registration u/s 12AA - charitable activity or not? - cancellation of the registration retrospectively - assessee had received the donation in lieu of cash from M/s Herbicure Healthcare Bio-Herbal Research Foundation (hereinafter referred to as HHBRF) of Kolkata - whether appellant being a trust exists solely for educational, medical aid and other charitable purposes and not for the purpose of profit? - HELD THAT:- We are of the opinion that the decision of Hon ble Apex Court in the case of M/s Andaman Timber Industries [ 2015 (10) TMI 442 - SUPREME COURT] would be squarely applicable and, respectfully following the same, we hold that the material collected behind the back of the assessee cannot be utilized against the assessee unless the copy of the same is supplied to the assessee and he is given an opportunity to rebut the same. The statement of office bearers of HHBRF cannot be utilized against the assessee because neither the copy of the statement was supplied to the assessee nor the assessee was allowed an opportunity to cross-examine such person whose statement is being sought to be relied upon by the CIT(Exemptions). Once these two documents are ignored, there remains no material for the Department to hold that the assessee received the donation from HHBRF in lieu of cash. The CIT(Exemption) s finding, that the assessee was not carrying out activities in accordance with the objects of the society and no genuine activities are being carried out by the society, is solely based upon the allegation that the assessee received the donation of ₹ 85 lakhs in lieu of cash. As we have already stated, there is no basis for the Department to hold that the assessee received the donation of ₹ 85 lakhs from HHBRF in lieu of cash. Further, merely because the genuineness of one donation in one year is doubted, it cannot be a ground to draw the inference that the activities of the assessee society are not being carried out in accordance with the objects of the society or that no genuine activities are being carried out by the assessee. a conclusion cannot be drawn that the activities of the society are not being carried out in accordance with the objects of the society or that no genuine activity is being carried out by the assessee merely because the genuineness of one donation in one year is doubted. Case of Agra Development Authority [ 2018 (2) TMI 756 - ALLAHABAD HIGH COURT] correctly relied upon to support assessee's contention that Section 12AA(3) does not authorize the Commissioner to cancel charitable registration with retrospective effect. As pointed out that the show cause notice was given in this case by the CIT on 25th January, 2016 while the CIT cancelled the registration from 1st April, 2010, which is not permissible - Decided in favour of assessee
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2019 (6) TMI 706
Penalty u/s 271 (1)(c) - concealment of business income - profits are estimated owing to rejection of books of account or non-availability of complete details - HELD THAT:- This is a clear case of concealment wherein, the entire affairs of the business have been kept concealed from the department. It was only after receipt of information in connection with BCTT and conducting of survey u/s 133A the affairs of the business have come to fore and the revenue has fairly determined the gross profit @ 6.33% on the turnover taking into consideration entire business activities of the assessee. We have also given thought as to whether penalty is levied when addition has been made on estimate basis. At the same time, we find that this case does not fall under the category where the profits are estimated owing to rejection of books of account or non-availability of complete details. This is a case where entire business affairs have been concealed. The assessee has concealed in entirety the factum of running a proprietary concern and the profits derived there on will undisputedly takes the character of concealment of income and hence in view of the above discussion, we decline to interfere with the order of the CIT (A). - Decided against assessee.
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2019 (6) TMI 705
Registration u/s 12AA - registration denied as assessee was not pursuing the charitable objects of education - no genuineness of activities of the society which can be corporate with the aims and objects of the society and the activities of the applicant got severely compromised when a society professing to be charitable is seen to utilize its receipt on assets of luxury of personal use - HELD THAT:- In the present case, the applicant society is not deviating from its main object to utilize the resources of society for propagation of education, to establish and run education institutions for promotion of modern education in Haryana, to prepare buildings, hostels, sports ground and library for institutes of society. The Commissioner of Income Tax, at no point of time has pointed out that the applicant society is not doing these activities. The case laws referred by the Ld. AR are apt in the present case. Thus, CIT has not followed the proper guidelines given by Section 12AA when should be applied. Therefore, we are of the opinion that registration should have been granted u/s 12AA to the Applicant Society as the objects are charitable in nature and as there are no violations of either sec. 11(5) or Sec. 13 during this year or in the next year and possibility of the applicant society contravening the provisions is not a ground to reject the registration u/s 12AA - Decided in favour of assessee.
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2019 (6) TMI 704
Penalty u/s.271E - violation of provision of section 269T - HELD THAT:- There is the violation of section 269TT in repaying the loan of ₹ 1 lakh, otherwise than account payee cheque and account payee draft and accordingly the assessee company is liable to pay penalty u/s 271E . We note that during the course of hearing, the ld. Counsel explained the Bench that the cash amount of ₹ 1 lakh by mistake has been deposited in the bank account of Shri Raju Bharat, Managing Director of the company. The assessee has not explained the reason why the said amount of ₹ 1 lakh has been deposited in the bank account of Shri Raju Bharat what is the urgency or immediate need for the company s business to deposit the same amount in the bank account of the shareholder. Since the assessee has not explained the reasonable cause as per section 273B, which talks about penalty not to be imposed in certain cases we confirm the penalty imposed by the Assessing Officer. - Decided against assessee.
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2019 (6) TMI 703
Disallowance u/s 14A - sufficiency of own funds - HELD THAT:- The value of investments held by the assessee as at the beginning and end of the year was 2.60 crores and 10 lakhs respectively. Admittedly the own funds available with the assessee is more than value of investments and hence as per the decision rendered in the case of HDFC Bank Ltd. [ 2016 (3) TMI 755 - BOMBAY HIGH COURT] no disallowance out of interest expenditure is called for. Accordingly we set aside the order passed by the CIT(A) on this issue and direct the AO to delete the disallowance made in Rule 8D(2)(ii) out of interest expenditure. We notice that the assessee has held units in ICICI prudential Liquid fund to the tune of 2.60 crores as at the beginning of the year and the same has been sold during the year under consideration. Further, during the year under consideration, the assessee has also made fresh investment of 10 lakhs in its subsidiary named M/s Clinigene International Ltd. The assessee has also received dividend income of 114.95 crores during the year under consideration. Thus, we notice that there has been certain amount of activities in the investment portfolio of the assessee. The above said activities, could not have been undertaken without using the establishment of the assessee. Not be practicable to apply provision of Rule 8D(2)(iii) but at the same time some disallowance is called for out of administrative expenses for the reasons mentioned above. Accordingly, a disallowance of ₹ 10,000/- out of administrative expenses may be estimated to take care of provisions of Section 14A and the same would put this issue at rest. We direct the AO to make disallowance of ₹ 10,000/- out of administrative expenses u/s 14A. Appeal filed by the assessee is partly allowed.
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2019 (6) TMI 702
Long Term Capital Gain - penny stock - AO assessing the sale proceeds of shares as undisclosed income - HELD THAT:- AO has also nowhere in the assessment order referred to any material which can prove the complicity of assessee in the alleged accommodation entry operation. If the assessee has taken advantage of the price rise in an open manner through the transaction conducted in the official online system, no adverse inference can be drawn against the assessee. AO has referred to a SEBI order for drawing adverse inference. It is noted that the said SEBI order has been revoked. As per the Ld. AR the AO/CIT(A) was not justified in invoking the provisions of section 68 in regard to the sale proceeds of shares. There is no evidence on record to disbelieve that the assessee sold shares through registered Stock Exchange and stock broker. The assessee produced all evidences to explain the source of the amounts received by the assessee from the brokers. AO was not justified in assessing the sale proceeds of shares as undisclosed income. So, taking note of the documents referred to in para 4 (supra) and the facts discussed above and in view of the above ratio in a similar case in the case of M/s KAFL, reverse the orders of the lower authorities and allow the claim of assessee.
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2019 (6) TMI 701
Exemption u/s 11(4A) - charitable activity u/s 2(15) or not? - as per AO held that hostel and transport facility provided to the students by assessee's Institute are separate businesses and are not covered in the definition of charitable purpose u/s 2(15) - since no separate books of accounts are maintained for this business, the assessee is not entitled for exemption u/s 11(4A) - HELD THAT:- The Hon ble High Court in case of Mallikarjun School Society [ 2018 (2) TMI 1347 - UTTARAKHAND HIGH COURT] held that an educational institute will not cease to be one existing solely for educational purposes since the object is not to make profit. In present case also the assessee society will not ceased to exist as educational institute because it is providing hostel facility or transportation facility or mess facility, as it is an incidental to the education purpose of the assessee society. Therefore, in view of the Hon ble Uttarakhand High Court decision in case of Mallikarjun School Society (supra) and orders of the co-ordinate bench in case of Delhi Public School Gaziabad [ 2018 (5) TMI 1482 - ITAT DELHI] the hostel facility provided by the assessee society is not in the nature of business and is incidental to the attainment of the main object of the providing education to students. Therefore, provisions of Section 11(4A) will not be applicable to the assessee - decided in favour of assessee Depreciation claim of assessee trust - The assessee has provided the depreciation in the income and expenditure in conformity with the Income Tax Rules applicable to the allowance of depreciation of fixed assets. Various decision of the Hon ble Apex Court and Hon ble High Courts relied upon by the Ld. AR highlights the proposition that depreciation should be allowed, even if, the purchase of assets have been claimed by the trust towards application of income - Decided in favour of assessee
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2019 (6) TMI 700
Addition u/s 14A r.w.r. 8D - sufficient funds were available with the assessee, which were much more than the investments made during the year - addition deleted by the CIT(A) - HELD THAT:- CIT(A) has rightly held that from the investment records it can be seen that all the investments mentioned in Schedule F do not yield exempt income. Thus, the CIT(A) properly held that disallowance u/s 14A r.w. Rule 8D(2)(iii) is restricted to only 5% of average investment income from which, is exempt irrespective of where the said exempt income was received during A.Y. 2011- 12 or not. There is no need to interfere with the finding of CIT(A). Ground No. 1 of the Revenue s appeal is dismissed. Addition under clause (iii) of Rule 8D(2) - HELD THAT:- The provisions of section 14A read with Rule 8D provide for disallowance of expenses which are incurred only in relation to the exempt income earned. It is a settled law that while computing the disallowance under Rule 8D(iii), the rate of 0.5% has to be applied to only those investments which actually have resulted in exempt dividend income, rather than 0.5% of the average of total investments. This issue is squarely covered by the judgment of Hon ble Jurisdictional High Court in the case of ACB India Ltd. v. ACIT [ 2015 (4) TMI 224 - DELHI HIGH COURT] - the amount of disallowance under clause (iii) should be restricted to 0.5% of Avg. Investments. Addition on account of interest paid on customer s deposits - HELD THAT:- Since this issue is already decided in favour of the assessee for A.Y. 2006-07 and facts in the present Assessment Year is identical as held assessee submitted that it is under reconciliation. Further when the character of deposit is determined, looking to the nature of operation geographically as well as large subscriber s base , it is not correct to hold that pending reconciliation the deposit become income of the assesse. In view of this we set aside this issue back to the file of the AO to give proper opportunity to the assessee to provide reconciliation of the same and then if the amounts are not at all identifiable with respect to the customers then to that extent addition may be restricted. However, if this amount is identifiable with the subscriber and even if it is not claimed by the subscriber despite disconnection of the services assessee is under obligation to repay whenever demanded by the customer. Therefore, Id Assessing Officer is directed to grant an opportunity to the assessee for reconciliation of the above deposit Addition account of prior period income - net off prior period income and prior period expenditure - HELD THAT:- A perusal of the Profit and Loss account of the assessee company shows that the company has neither taken the prior-period income in its taxable profit, nor has considered the prior period expenses, i.e. the prior period adjustments have been made by the assessee company on below the line profit. The disallowance of prior period expense has to be computed by netting off the prior period income against the prior period expenditure. Thus, the case laws referred by the Ld. AR are apt in the present case. The Assessing Officer as well as the CIT(A) ignored these factual and legal aspects and were not correct in making the entire addition without netting off. We, therefore, remand back this issue with the direction to the Assessing Officer to net off prior period income and prior period expenditure and only tax the net income accordingly - Assessee s appeal is partly allowed for statistical purpose.
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2019 (6) TMI 699
Penalty U/s 271(1)(c) - quantum addition regarding unaccounted sale was made physical stock was found short in survey carried out - HELD THAT:- Nature of specification of charge by the A.O. at the stage of initiation of penalty proceedings at the time of issue of notice us 274 r.w.s 271(1)(c) and at the time of passing the penalty order u/s 271(1)(c) should not be at variance. If there is any variance between the charge levied at the time of initiation of penalty proceedings and the charge levied at the time of imposition of penalty, the penalty order will be vitiated and penalty cannot be sustained. However, if the charge are same then no fault can be found with regard to defect in notice so as to hold that the penalty is not leviable. It is clear that both at the time of initiation of penalty as well as at the time of imposing the penalty, the charge of the A.O. was same i.e. concealment of income and also for furnishing inaccurate particulars of income . This situation is covered by the proposition laid down by the Coordinate Bench in the case of HPCL Mittal Energy Ltd. Vs ACIT 2018 (6) TMI 1554 - ITAT AMRITSAR] . Accordingly, we hold that the penalty has been correctly levied in so far as the charge for initiation of penalty as well as charge while levying the penalty was same. Thus, we do not find any merit in the contention of the ld AR. With regard to merit of penalty so imposed U/s 271(1)(c) we found that there was survey at the business premises of the assessee wherein it was found that the assessee has made unaccounted sales, therefore, stock was found short on physical verification. To the extent of profit on such short stock, addition was made. This addition was confirmed by the ld. CIT(A) and thereafter by the ITAT. Thus, there is no dispute with regard to the concealment of income and furnishing of inaccurate particulars of income, in so far as the addition has been upheld up to the last extent. Accordingly, we do not find any infirmity in the penalty so imposed. - Decided against assessee.
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2019 (6) TMI 698
Income from Fit-Out Hire Charges - business income OR income from house property - AO alleged that there is no direct nexus with so called fixture/feelings/equipments - HELD THAT:- From the perusal of the Rent Agreement dated 30/08/2007, it can be seen that it is with the sole purpose for rent in respect of the entire building to the Multi National company IBM. The Fit Out Agreement dated 18/01/2008 was entered between the parties for the sole purpose of smooth running of the business of the lessee and it is totally a separate legal document. Both these agreements does not have any motive as regards the evasion of the tax aspect. In-fact, when we see the Supplementary Agreement dated 23rd September, 2009, the parties have agreed that the assessee will provide the fixtures in the said premises lease by IBM at a much lower rate than to the estimated cost of ₹ 1,500/-. Thus, in-fact the assessee has disclosed all the materials before the AO and it is not an evasion of tax. The case laws referred by the DR also not relevant as the same are distinguishable in facts. In case of Shambhu Investment there is no separate charges included in the agreement, but in the present case there are two separate agreements and each terms have been expressed in the agreement. Thus, the CIT(A) has rightly considered the income from Fit-Out Hire Charges as business income as held in A.Y. 2008-09. - Decided against revenue.
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2019 (6) TMI 697
Disallowance of interest made u/s 14A r.w.s. 36 - HELD THAT:- Regarding the advances received from the sale of agricultural land amounting to ₹ 15.50 crores and advances received against sale of godown amounting to ₹ 5 crores, the same was rejected by the AO in the absence of specific written agreement. AO did not make any addition treating the advances as bogus. AO did not suspect or disbelieve the genuineness of the receipt of the money to the extent of ₹ 20.50 crores and the AO did not give any finding to hold that the sum of ₹ 20.50 crores claimed by the assessee bears the interest. Therefore, there is no reason to disbelieve the availability of own funds. Accordingly, there is no case of disallowance of interest u/s 36(1)(iii) for diversion of funds towards business purposes. The second line of argument of the assessee was that there was no exempt income received by the assessee in the impugned assessment year, hence, there is no case for disallowance of expenditure relatable to section 14A. Now this issue is settled and this Tribunal in the case of ACN Infotech(India) Pvt. Ltd., Visakhapatnam [ 2018 (12) TMI 58 - ITAT VISAKHAPATNAM] has held that in the absence of exempt income, there is no case for disallowance u/s 14A In the instant case, the assessee did not earn any dividend income and this fact was not disputed by the assessee. Tribunal in the case law cited supra has held that in the absence of dividend income, there is no case for disallowance of interest u/s 14A and the department did not bring any other decision of Hon ble jurisdictional High Court or Hon ble Apex Court to support the case of Revenue. Therefore, respectfully following the view taken by this Tribunal, we hold that there is no case for disallowance u/s 14A. Accordingly, we set aside the orders of the lower authorities and allow the appeal of the assessee.
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2019 (6) TMI 696
TP Adjustment - AMP spend while determining the Arm s Length Price [ALP] in respect of international transaction - HELD THAT:- We find that the facts are identical to the facts considered by the Tribunal in assessee's own case [ 2018 (7) TMI 1991 - ITAT DELHI] wherein held Testing the functions performed by the assessee vis a vis AMP expenses incurred by it, we do not find that the assessee has incurred AMP for the benefit of its AE. All the expenditure incurred by the assessee are in relation to its business and its promotion. Moreover, as mentioned elsewhere, the net margin is much higher than the comparables and looking from that angle also, we do not find any merit in the transfer pricing adjustments. It is incorrect to say that the amount of ₹ 73.83 crores received by the assessee by way of credit notes represents the excess price charged by AE which has been credited to the assessee. The business model of the assessee with its AE is such that the AE ensures that the assessee achieves an arms length return on sales made by it. Assuming, yet not accepting that the assessee should have been compensated by its AE towards AMP and such compensation as worked out by the TPO is ₹ 69.94 crores, then also no adjustment is required since the assessee has received credit notes worth 74.83 crores and has been suitably compensated. Thus as the assessee company has been suitably compensated by its AEs and, therefore, no further adjustment is required - decided in favour of assessee
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2019 (6) TMI 695
Exemption u/s 11 - contribution / donation to ADTA has been made without any prior agreement - HELD THAT:- Donations are never made with prior agreement and it is solely governed by the will and capabilities of the donor. It is also seen that no amount has been paid for the benefit of any person specified u/s. 13 (3) for which benefit of section 11 and 12 may be denied to the assessee. CBDT vide instruction No.1132 dated 05.01.1978 has held that the payment of a sum by one charitable trust to another for utilization by the donee trust towards its charitable objects is proper application of income for charitable purpose in the hands of the donee trust, and the donor trust will not lose exemption u/s 11 merely because the donee trust did not spent the donation during the year of receipt itself. The order of the CIT(A) upholding the action of the AO is not justified. Disallowance on account of EPF contribution of employees u/s 36(l)(va) rws 2(24)(x) - HELD THAT:- In view of the decision of Hon ble Supreme court in the case of CIT Vs. Alom Extrusions [ 2009 (11) TMI 27 - SUPREME COURT] and various other decisions payments made prior to due date of filing of return as prescribed u/s. 139 (1) cannot be disallowed u/s. 36 (1) (va) r.w.s. 2 (24) (x). Since in the instant case admittedly the deposits towards EPF has been deposited prior to the due date of filing of return u/s. 139 (1) therefore, following the consistent view of the coordinate benches of the Tribunal no disallowance u/s. 36 (1) (va) r.w.s. 2 (24) (x) can be made. The ground raised by the assessee is accordingly allowed. Benefit of deemed application on account of interest accrued but not received under clause 2 of explanation to section 11 (1) - HELD THAT:- The amount of accrued interest of FDR is the income derived during the impugned assessment years but not received shall be treated as deemed to be applied. I find merit in the above arguments of the assessee. A perusal of the computation of income for the A.Y.2013-14 shows that the net surplus of ₹ 73,93,794/- includes the income of ₹ 2,81,769/- which has not actually been received. The assessee in its form No.10B in clause No.2 of annexure containing statement of particulars, has clearly mentioned that the assessee has exercised the option of clause 2 of the explanation to section 11 (1) according to which the amount of income is the income deemed to have been applied to charity/ religious purpose in India. Since the amount of interest accrued but not received is the deemed application of income under clause 2 of explanation to section 11 (1) the CIT(A) is not justified in denying the benefit of deemed application. The ground No. 4 raised by the assessee is accordingly allowed. Depreciation claim of assessee trust - HELD THAT:- Hon ble Supreme Court in the case of CIT Vs. Rajasthan Gujarati Charitable Foundation Poona [ 2017 (12) TMI 1067 - SUPREME COURT] has held that income of trust was required to be computed u/s 11 on commercial principles after providing for allowance for normal depreciation and deduction thereof from gross income of trust. Since, the issue stands decided in favour of the assessee by the decision of Hon ble Supreme Court cited (supra) therefore, ground No. 5 of appeal raised by the assessee and additional grounds raised by the assessee are allowed.
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2019 (6) TMI 694
Deemed dividend u/s 2(22)(e) - loan or advance given in return to an advantage conferred upon the company by such shareholder - HELD THAT:- We observe that 69.71% of the total assets of SDPL as on 31.3.2015 and 32.45% of the total assets of AIPL as on 31.3.2015 were deployed by the above lender companies by way of total loans and advances. By no means, the deployment of about 69.71% and 32.45% of the total assets into the business of lending could be regarded as an insignificant part of the business of SDPL and AIPL. We find that find that the SDPL had received by way of interest of ₹ 1,67,16,067 while its total profit was ₹ 50,48,266 excluding interest income earned by SDPL by way of interest, Similarly AIPL has earned interest income of ₹ 17,68,467 and other business had resulted into insignificant income. Therefore, we are of the considered opinion that considering the relevant factors and as ratio laid down by Hon ble Bombay High Court in CIT VERSUS PARLE PLASTICS LTD. [ 2010 (9) TMI 726 - BOMBAY HIGH COURT] , the lending of money was substantial part of the business of the both lender companies under consideration from whom the assessee has received loans and advances. Since lending of money was a substantial part of the business of SDIPL and AIPL, the money given by it by way of advance or loan to the assessee could not be regarded as a dividend, as it has to be excluded from the definition of dividend by virtue of clause ( ii ) of Section 2( 22 ) of the Act. We therefore, hold accordingly.
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Customs
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2019 (6) TMI 693
Advance License Scheme - import of raw material under Advance License which are used in the manufacture the finished products, namely, Metallic Bellows, which were exported with the shipping bills in question - Section 149 of Customs Act - HELD THAT:- The approach of the learned authorities below as well as the learned Tribunal has been narrow and pedantic. They could not take a hyper technical view in the matter and even though a provision like Section 149 of the Act allowed such subsequent documents to be placed on record by the exporter, they have been rejected without assigning proper reasons therefor. The Assessee could have been very well allowed to produce those documents and the validity and veracity of those documents could have been examined by the concerned authority and if the conditions of the Advanced licence were satisfied with the production of these documents, the authority concerned could have verified and could have allowed the requisite benefit to the Assessee. Matter remanded back to the concerned assessing authority, namely, Joint Commissioner of Customs for taking on record these documents and consider the case of the Asseessee afresh in accordance with law.
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2019 (6) TMI 692
Restriction on import of yellow peas - section 3 of the Foreign Trade Act read with the Foreign Trade Policy - relevant date for import - HELD THAT:- It is manifest that the respondent authorities have taken due care in terms of paragraph 1.05 of the Handbook of Procedure. Under the circumstances, it cannot be said that the impugned notifications suffer from any legal infirmity so as to warrant interference. This court had called upon the respondents to explain this position, whereupon the Development Commissioner, AP and SEZ, Mundra has filed an affidavit regarding import of yellow peas in the interregnum period when the notification of withdrawal of the ban on import was issued on 29.8.2018 till 30.8.2018 when the restriction on import was again imposed. A perusal of the Bills of Entry reveals that they were presented between 7:20 pm to 8:05 pm and at a later period than that. From the details furnished by the learned counsel for the Central Government, there is nothing to show that as to at what time the letter dated 29.8.2018 was received by the Government of India Press for the purpose of publishing the same in the Official Gazette. Be that as it may, the respondents have come up with a plausible explanation insofar as the manner in which the Bills of Entry in case of two parties were cleared within the short window between the time of withdrawal of the restriction and reimposition thereof. Besides, just like the petitioner came to know about the notification withdrawing the restriction and placed import orders immediately, the said parties upon coming to know of such withdrawal appear to have acted immediately to take advantage of the same. Therefore, no further inquiry is required to be made in this regard by this court. In the opinion of this Court, in light of what is discussed hereinabove, the contention of the petitioner that he had entered into contract on the date when the restriction came to be removed and, therefore, he is entitled to import of such goods, does not merit acceptance. The relevant date for the purpose of import of peas as described in the impugned notifications is the date of import and the date on which the contract has been entered into by the petitioner is not relevant for the present purpose - in the light of the clear language of the notification dated 29.8.2018 withdrawing the notification dated 2.7.2018, the petitioner in the second petition had no reason to believe that import of peas would be free thereafter and that there would be no restriction thereon. Petition dismissed.
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Insolvency & Bankruptcy
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2019 (6) TMI 691
Consideration of the Resolution Plan submitted by JSW Steel - HELD THAT:- The matter is pending before the Adjudicating Authority (National Company Law Tribunal), Principal Bench, New Delhi and in absence of any order passed by the Adjudicating Authority, we are not inclined to entertain this Appeal. The Hon ble High Court has jurisdiction under Article 226 of the Constitution of India and has also supervisory jurisdiction under Article 227 of the Constitution of India. We are not expressing any opinion as to whether they have the supervisory jurisdiction over all the Tribunals or not, but it is not clear as to how the Punjab and Haryana High Court can pass an order, which has no territorial jurisdiction over Delhi, where Principal Bench of National Company Law Tribunal, New Delhi is situated, who is considering the matter. Appeal disposed off.
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2019 (6) TMI 690
CIR Process - Voting of COC - As the voting is on, which is likely to be completed today by 5.00 p.m., we are not inclined to pass any specific order in the present I.A. No. 1857 of 2019 filed by the IDBI Bank Limited . After voting the decision if taken in terms of the earlier order passed by this Appellate Tribunal on 17th May, 2019, the Resolution Professional instead of placing the matter before the Adjudicating Authority (NCLT), will first place the decision of the Committee of Creditors before this Appellate Tribunal for further orders. We make it clear that if any of the Financial Creditor remains absent from voting, their voting percentage should not be counted for the purpose of counting the voting shares. Place the case for orders along with Interlocutory Application on 2nd July, 2019.
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2019 (6) TMI 675
Corporate Insolvency Resolution Process - petitioner alleged that the CIRP process has not been carried out in accordance with the Insolvency Bankruptcy Code 2016, as the erstwhile Board of Directors (BoD) have not been provided with all the documents including all resolution plans, liquidation value report, fair value report, report on section 29A etc, which are relevant to the matters to be discussed by the Committee of Creditors (CoC) - HELD THAT:- The issue raised by the present petitioner for providing all aforesaid documents and thereafter to convene a meeting of the CoC afresh to deliberate and consider the suggestions and objections of the erstwhile Board of Directors before passing any Resolution Plan (including CA No.286 of 2019) (P-19) will be treated as a preliminary issue. The preliminary issue will be decided by the Adjudicating Authority before considering other Applications or before approval of any Resolution Plan. In deciding the said preliminary issue, Adjudicating Authority will be guided by the judgment in Vijay Kumar Jain's case [ 2019 (2) TMI 97 - SUPREME COURT] and shall not take into consideration any other past practice, procedure, directions, judgments or orders of Adjudicating Authority/NCLAT which are in contravention, contradiction or derogation of the directions of the Hon''ble Supreme Court in the matter of Vijay Kumar Jain's case (supra). Any judgment and order passed by the Adjudicating Authority on the aforesaid preliminary issue is directed to be kept inoperative for two weeks enabling the affected parties to exercise their appellate remedies in accordance with law.
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Service Tax
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2019 (6) TMI 689
Penalty u/s 78 of the Finance Act, 1994 - Invocation of Extended period of Limitation - proviso to Section 78(1) of the Finance Act, 1994 - suppression of facts or not - HELD THAT:- The parameters/conditions for purpose of invoking the extended period of limitation under Section 73(1) of the Finance Act, 1994 are similar/identical to the conditions for imposing equivalent penalty under Section 78 of the Finance Act, 1994. In the facts of the case, the appellant had advisedly and correctly not challenged the invocation of the extended period of limitation for recovery of service tax. The challenge is only to the imposition of penalty and is based on the fact that there is no willful suppression on the part of the appellant as all the due liabilities had been declared in ST-3 Returns, though not paid over to the Revenue. Section 78 of the Finance Act, 1994, equivalent penalty can be imposed in cases of willful misstatement or suppression of facts or for contravention of any of the Act or Rules made thereunder with an intent to evade payment of service tax. In this case, it cannot be disputed that the appellant after having recovered the service tax from its customer had not paid over the amount to the State. Thus, undeniably they have contravened the Finance Act, 1994 and Rules made thereunder, which obliges the assessee to make over the payment to the Government before the specified date - The financial difficulties faced by the appellant can never justify the non-payment of tax to the Government. The above fact coupled with misrepresentation to its customers that the amount collected from them will be paid over to the Government, would clearly point to mala fide conduct on the part of the appellant. Therefore, we see no reason to interfere with the impugned order of the Tribunal. Appeal dismissed - decided against appellant.
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2019 (6) TMI 688
Invocation of Extended period of limitation - Section 73(1) of the Finance Act, 1994 - bonafide belief or not - HELD THAT:- The impugned order records the fact that the respondent was under bonafide belief that the Life Insurance Service per se was not exempted service. It was this which resulted in the respondent proceeding to take credit in respect of inputs used in exempted services. The impugned order records the fact that during the course of investigation nothing has been brought on record that there was any intent on the part of the respondent to evade the service tax payable under the Act. Further, the impugned order places reliance upon the letter dated 29th August 2011 addressed by the Commissioner of Service Tax, Mumbai to Joint Secretary of Central Board of Excise and Customs to the effect that the Life Insurance Companies have all availed Cenvat credit under a bonafide belief that they are entitled to the same. It may not be appropriate to invoke the extended period of limitation while raising demands for incorrect availment of Cenvat credit. The impugned order of the Tribunal has made a detailed examination on the issue of limitation and has come to a finding of fact that there was no intent on the part of the respondent to evade the service tax. This finding of fact is not shown to be perverse. Appeal dismissed.
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2019 (6) TMI 687
Invocation of Extended period of limitation u/s 78(1) of FA - suppression of facts or not - HELD THAT:- The period involved in the present Show Cause Notice is from January 2007 to November 2009. The intimation given to the Department on 19th September 2006, i.e., just before the period for which the demand has been raised. Thus, the Department was at all times during the period for which the demand has been raised were aware of the declaration made by the respondent that they will not be liable to pay the service tax on 41% levy collected from the contractee and paid over to the Grocerty Market and Shop Board. The finding of fact arrived in the impugned order of the Tribunal is that there has been no suppression of facts invoke the extended period of limitation cannot be said to be perverse - Appeal dismissed.
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2019 (6) TMI 686
Export of services or not - providing of Business Auxiliary Service to the service recipient which is based / located outside India - liability of service tax - HELD THAT:- The activity undertaken by the appellant fulfill the condition of Rule 3(2) of the Export of Service Rules, 2005 and therefore, they are not legally required to pay any service tax under the category of Business Auxiliary Service. The matter is no longer res integra and it has already been settled by this Tribunal in IBM INDIA PRIVATE LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX AND COMMISSIONER OF SERVICE TAX, LTU BANGALORE [ 2016 (3) TMI 528 - CESTAT BANGALORE] and M/S. MICROSOFT CORPORATION (I) (P) LTD. VERSUS CST. NEW DELHI. [ 2014 (10) TMI 200 - CESTAT NEW DELHI (LB)] . Appeal allowed - decided in favor of appellant.
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2019 (6) TMI 685
Classification of construction services - Works Contract Service or not - Composition scheme - benefit of the N/N. 32/2007 - HELD THAT:- It is a matter of record that the appellant discharged its Service Tax liability under reduced Service Tax rate by availing the benefit of Composition Scheme under works contract service for payment of Service Tax. It is also a matter of record that the appellant gave intimation for availing the benefit of the Notification No. 32/2007 to the Department on 22.6.2007, much before filing its ST 3 return for the services undertaken by it during the relevant period. As per the Supreme Court judgment in the case of Commissioner of Central Excise Cus, Kerala vs. Larsen and Toubro Ltd. [ 2015 (8) TMI 749 - SUPREME COURT] , the activity involving labour and service charges as well as supply of goods and material will rightly be classifiable under the Work Contract Service as the work contract service was introduced for levy of Service Tax with effect from 01.06.2007. The demand of Service Tax prior to a period 1.6.2007 is not legally not sustainable. From 1.6.2007 onwards the appellant has paid Service tax by availing the composition scheme for payment of Service Tax as per Notification No. 32 of 2007 dated 22.05.2007. by rightly classifying its activity under the works contract service . Appeal allowed - decided in favor of appellant.
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2019 (6) TMI 684
Classification of services - Business support service or not - multi-level marketing of the goods - HELD THAT:- The appellant is primarily engaged in marketing/selling of business kits mainly containing suit lengths with certain other promotional documents. This activity of marketing/selling is more akin to multi-level marketing system. The other activities undertaken by the appellant are for its own business promotion and not for BSS to the distributors. It is a matter of record that the appellant has sold its products directly to the end consumers (new persons) introduced by the existing distributors, who as per the scheme become distributor of the appellant by virtue of purchase of their product, namely, suit length. It can easily be inferred that the Business Support Service includes the activities which support the main business activity like service of providing infrastructure for running an office or a business and like activities - In the present case the appellant has adopted a marketing strategy for sale of its product and has not solicited or provided any Business Support Service to the distributors. It is also relevant that the payments which have been received by the appellant is for sale of its product, namely suit length of various brands on which it has paid the applicable Sales Tax/VAT to the State Government. The activity undertaken by the appellant is primarily a sale of goods and there is no element of Business Support Services for Business or Commerce - appeal allowed - decided in favor of appellant.
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Central Excise
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2019 (6) TMI 683
Bar on utilization of CENVAT Credit on payment of excise duty - vires of Rule 8(3) of CER - Whether the Tribunal was justified in holding that the respondent during the default period can pay its excise duty liability on its final products through its Cenvat account and not only through its PLA in the face of Rule 8(3) of the said Rules? HELD THAT:- Once Rule 8(3A) of the said Rules has been declared as unconstitutional to the extent it prohibited utilizing Cenvat credit, the discharge of payment of duty on the final products, the said provision to the above extent ceases to apply. The Act and the said Rules being all India in its application, the decision rendering a part of it as unconstitutional would equally apply within the State of Maharashtra, in the absence of any contrary view or the appellant showing that the view of the Gujarat High Court in Indsur Global Ltd. [ 2014 (12) TMI 585 - GUJARAT HIGH COURT ] is ex-facie unsustainable. The question as proposed does not give rise to any substantial question of law. Thus, not entertained. Both the appeals are dismissed.
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2019 (6) TMI 682
Extended period of Limitation - Section 11A(1) of Finance Act - HELD THAT:- The learned Tribunal has met with the remand directions of this Court, and since the Tribunal has given cogent reasons for invoking the extended limitation in the first, and second, the issue of alleged misdeclaration of the herbal cough syryup Nivaran-90', whether it was an ayurvedic medicine or not, the assessee can raise all possible objections with regard to the extended limitation before the concerned authority and it is left open to the authority to decide the issues in accordance with law. Appeal dismissed.
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2019 (6) TMI 681
Penalty u/r 26 of CER on Company as well as on Director - principles of natural justice - HELD THAT:- Perusal of order would reflect that no discussion has been made with regard to imposition of penalty at all. The matter requires re-examination on the question whether the appellant was liable to pay the penalty or not after determining the matter under the provision of Rule 26 of the CE Rules, 2002 - Appeal allowed by way of remand.
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2019 (6) TMI 680
Method of Valuation - section 4 or 4A of CEA - classification of goods - HELD THAT:- The order-in-original deals with each product individually and discussed in detail item-wise considering the classification claimed by both sides, literature and HSN Notes etc., expert advice and opinions on these items. The impugned order does not examine the items product-wise. There are no findings in respect of each product/ group. The impugned order is general order. The matter is remanded for fresh decision by Commissioner (Appeals) - appeal allowed by way of remand.
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2019 (6) TMI 679
Re-classification of goods - laminated and non-woven coated fabrics - demand alongwith Interest and penalty - issue of classification disputed by erstwhile partner of dissolved firm - HELD THAT:- The duty liability has been discharged in full. With the partnership firm having been dissolved, an erstwhile partner, in the person of the present appellant, cannot insist that a classification which is not in dispute before us, or was not agitated before the first appellate authority, be taken up for resolution. The classification and, consequent determination of differential duty, will have to be taken as a given. Demand of interest - HELD THAT:- The demand pertains to the period prior to September 1996 and, from circular no. 655/46/2002-CX dated 26th June 2002 of Central Board of Excise Customs, it would appear that interest under section 11AB of Central Excise Act, 1944 is not payable on clearances effected by the assessee. The interest liability is therefore non-existent. Penalty - HELD THAT:- The final classification was not that which was proposed in the show cause notice but one which had been decided by higher appellate authorities in different proceedings. In these circumstances, the invoking of section 11AC of Central Excise Act, 1944 does not appear to be proper. The penalty confirmed in the impugned order is, therefore, set aside. Appeal disposed off.
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2019 (6) TMI 678
CENVAT Credit - common inputs used for exempted as well as dutiable goods - non-maintenance of separate sets of accounts - interest and penalty - HELD THAT:- This issue is now well settled vide retrospective amendment to Rule 6 of CENVAT Credit Rules 2004 under Section 73 of the Finance Act 2010, according to which, when CENVAT credit on common input used for dutiable and exempted goods was availed, reversal of credit attributable to the inputs used in the manufacture of exempted goods is sufficient. The appellant have made out a case to seek waiver of the penalty. Appeal allowed - decided in favor of appellant.
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2019 (6) TMI 677
CENVAT credit - steel gas cylinders - denial of credit on the ground that the steel gas cylinders are used for transportation of the gas - HELD THAT:- The cylinders are admittedly used for storage of gas during the process of manufacturing and also for transportation - In the case of JK. STEEL ALLOYS VERSUS COMMISSIONER OF C. EX., BHAVNAGAR [ 2007 (1) TMI 480 - CESTAT, AHMEDABAD] , it is clearly held that the gas cylinder used for storage of high pressure gas for production in factory, entitled for credit as capital goods, therefore, the cenvat credit of steel gas cylinder is admissible - Credit allowed. CENVAT Credit - input - castor oil - credit was denied by the Revenue on castor oil on the ground that it is not used in the manufacturing and the credit was availed during the exemption period under SSI exemption - HELD THAT:- Even though the appellant is availing the SSI exemption since the lubricating oil is covered under the capital goods, the cenvat credit is admissible for a very simple reason that even though the credit is availed during the exemption, the same is utilized only when the appellant starts paying excise duty and there is no dispute that the lubricating oil is used for lubrication of plant and machinery of the appellant factory - credit allowed. Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2019 (6) TMI 676
Evasion of tax - imposition of penalty u/s 47(6) of the Kerala Value Added Tax Act, 2003 on the ground that petitioner has failed to disprove the allegation of attempt at evasion of payment of tax - HELD THAT:- We notice that the revision petitioner had not taken any such attempt, either for producing or calling for such records, before any of the authorities below. The learned Government Pleader had pointed out that, if the goods had actually crossed the border and brought back, there would have been 'transit pass' issued and surrendered at the Check Post. Since the revision petitioner could not produce any such documents in discharge of their burden, the penalty order which was confirmed by various authorities including the tribunal, cannot be interfered. We do not think that the revision petitioner was successful in discharging their burden to prove before any of the authorities below that, there was no actual attempt at evasion of payment of tax. We do not think that any legal or sustainable grounds are existing to invoke the revisional jurisdiction vested on this Court under Section 63 of the Act. Revision petition dismissed.
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