Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
June 25, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Classification of goods - Marine engines, Marine gear boxes and Marine generator supplied by the applicant to dealers of shipyard manufacturers are used as Parts of vessels and subject to GST accordingly.
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Provisional attachment of stock and Bank Accounts - section 83 of the Central Goods and Service Tax Act, 2017 - case of petitioner is that no notice under section 46 was issued at the relevant point of time when the order of provisional attachment was passed - orders of provisional attachment quashed.
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Attachment of bank account - Garnishee order - Demand of interest on ITC component - On payment of admitted sum, communication to bank (Garnishee) shall stand set aside.
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Valuation of supply of goods and services between the distinct entities - the applicant can apply Rule 28 of the GST Rules, 2017 to determine the value of supply of goods for supply of goods by one distinct entity (factory/depot) as defined u/s25(4) of the CGST Act to another entity having same PAN (factory/depot).
Income Tax
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Penalty imposed u/s 272A(2)(c) - non furnishing the information called for u/s 133(6) - there was total lack of co-operation on the part of the assessee society as well as threat - penalty confirmed.
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Capital gain - agriculture land situates beyond 8 kms. from the municipal limit or not? - Talati is akin to Patwari in other parts of India. He is a village accountant and as contemplated in sections 16 and 17 of the Gujarat Land Revenue Code 1879 - Thus, cognizance could be taken on the basis of his certificate - CIT(A) should to make a reference to Google-map etc.
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TDS u/s 194IA - assessee had purchased the land on piece meal basis. - since, the value mentioned in each sale deed is less than ₹ 50 lakhs, therefore, the provisions of Section 194IA will not be applicable to the assessee.
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Entitled to deduction u/s 80P - AO has to conduct an inquiry into the factual situation as to the activities of the assessee society to determine the eligibility of deduction u/s 80P - AO is not bound by the registration certificate issued by the Registrar of Kerala Cooperative Society.
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Deduction u/s 10A on suo moto transfer pricing adjustment made by the assessee - AO directed to delete this disallowance and grant benefit of deduction u/s 10A on the amount of voluntary TP adjustment made by the assessee.
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Excess interest levied u/s 234A - due date of return 15.10.2010 - Date of tax deposited 24.3.2014 - Date of voluntary return filed 7-5-2014 - filing of return in response to notice u/s 148 23-6-2017 - demand of interest confirmed only for 42 months as against 81 months as computed by the AO.
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Penalty u/s 271B - failure to get the accounts audited u/s 44AB - It is the mandatory obligation of the assessee to get the accounts audited and submit the Audit report before the due date. The illiteracy or ignorance of the partners is not a sufficient reason.
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Penalty u/s 271B - the assessee did not get the accounts audited u/s 44AB since he was under the bonafide impression that sale transaction of litigated land as capital gains but not business and the same appears to be reasonable cause as required u/s 271B - Penalty waived.
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Capital loss - sale of shares to sister concern when the transaction for sale to an outside buyer for a much higher price is being processed - the transaction is neither fraudulent nor a colourable device - Authorities cannot enter into the shoe of the assessee to decide the prudence of commercial expediency of a particular transaction.
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Deduction u/s 80P - reopening of assessment u/s 147 - notices kept in abeyance subject to the outcome of the the Apex Court in the SLP
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If assessee was not liable to pay the tax in question, the department had no business to retain it even if it was wrongly paid - In case it is not a case of Revision u/s 264, authorities could have invoked section 119.
Customs
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Classification of imported goods - "MIT-50% and CIT/MIT-14%" i.e. "5-chloro-2-methyl-4-isithiazolin-3-one - 2-methyl-4-isothiazolin-3-one" - being not used as an insecticide but as preservatives, not to be classified under CTH 3808 94 00.
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The CVD leviable on imported goods is directly related to duty of excise required to be paid by the Indian manufactured goods and there being no duty of excise on the dross, no CVD is leviable on the imported aluminium dross.
Corporate Law
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Disqualification of Directors. - Section 164(2)(a) of the Act resulting in an ineligibility for a director after a lapse of three consecutive financial years cannot be held to be capricious or a disproportionate repercussion, lacking in reasonableness or any rationale.
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Disqualification of Directors. - The vires of Section 274(1)(g) of the 1956 Act upheld - the said provision did not violate any fundamental right under Article 19(1)(g) of the Constitution.
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Disqualification of Directors - no period commencing prior to 01.04.2014 and ending after the said date can be the basis for reckoning the continuous period of three financial years during which financial statements or annual returns are not filed by any company.
Indian Laws
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Recovery of penalty against the company/ partnership firm - Cenvat Credit - Application seeking to vacate the interim relief - There is no good reason to vacate the interim order passed by this court.
IBC
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Initiation of CIRP - Appellant (Corporate Debtor) made feeble attempt to contend that the debt acknowledgement letter was manipulated and fictitious and same could not be made a basis for either reckoning the period of limitation or for entertaining claim.
PMLA
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Offence under PMLA - retention of the seized cash from the appellant’s office - no complaint under section 8(3)(a) has been filed against appellant within 90 days - Having in possession of proceed of crime and period of investigation on the basis of suspicion are two different situations.
Service Tax
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Short payment of service tax - dredging services - Appellant had recorded all the transactions in books of accounts and produced the same before the audit officers during audit - but failed to file necessary periodical ST-3 returns - Demand confirmed invoking Extended period of limitation. - Penalty waived u/s 80.
Central Excise
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Classification of goods - printing ‘duplex board and kraft paper’ - by virtue of Chapter Note 12 to Chapter 48, these items will fall in Chapter 49 being goods of printing industry
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CENVAT Credit - fake invoices - fraudulent availment of CENVAT Credit based on CENVAT invoices issued by certain registered Central Excise Dealers without actual supply of material - Demand with penalties confirmed - However, personal penalty imposed on MD reduced.
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Area based exemption - Disallowing certain Investments made in North Eastern states - It appears to be a case of double penalty to a manufacturer being a law-abiding person who withdrew the money from the escrow account and made investments in the identified sectors with prior approval of the Jurisdictional Commissioner of Central Excise and that has been later disallowed by the committee and recovery proceedings are initiated.
Case Laws:
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GST
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2019 (6) TMI 1108
Valuation of supply of goods and services - Determination of value of supply of goods on the transactions between the distinct entities - valuation on the basis of cost of production - fluctuation of cost of production - cost of production depending on cost of inputs and input services - distinct entities/distinct persons - HELD THAT:- As per the scheme of GST, tax is payable on ad-valorem basis and taxable value is the transaction value i.e. the price actually paid or payable, provided the supplier and recipient are not related and the price is the sole consideration. In the case at hand, the factory, the depots located in different states sharing common PAN but different GST registrations are distinct person as specified in subsection (4) of Section 25 of the GST Act. Under the GST law, various categories of persons such as related persons, distinct persons have been identified as the relation between the supplier and recipient may influence the consideration. In such cases specific rules have been provided. Rule 28 of the GST Rules, has been specified to determine the value of transaction between related persons. As per second proviso to Rule 28, if the recipient is eligible for full input tax credit, the invoice value will be deemed to be open market value. Applicant has informed this authority that they intent to issue invoice inter alia declaring value of supply liable to GST and they further informed that the recipient is eligible to claim full input tax credit. There is no breach by the applicant by changing the method of determination of value of supply by application of Rule 28 instead Rule 30 of the GST Rules. Thus, the applicant can apply Rule 28 of the GST Rules, 2017 to determine the value of supply of goods for supply of goods by one distinct entity (factory/depot) as defined u/s25(4) of the CGST Act to another entity having same PAN (factory/depot).
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2019 (6) TMI 1107
Classification of goods - Main Propulsion engine for ships - Marine Gear box - marine generator - Marine engine for other applications like pumps - applicability of entry at Sr. no. 252 of Notification No. 1/2017- Central Tax (Rate) dated 28/06/2017 - rate of tax - whether the goods/parts used by the applicant are parts of a ship/boat/vessels? HELD THAT:- Diesel engines are known as compression ignition internal combustion piston engines, are classified under Heading 8408 and are mainly differentiated as Marine Propulsion Engines, Engines of a kind used for the propulsion of vehicles of Chapter 87 and the third as Other Engines. They can further be classified on the basis of operations viz . 2-stroke, 4-stroke, single acting, double acting and finally, on the basis of Cylinder arrangement namely, horizontal, vertical, radial, etc. DMEs are those engines which are used in marine vehicles namely boats , ships , submarines, etc. Both 2-stroke as well as 4-stroke engines are used in the marine industry. The engines used for the main propulsion or turning the propellers of the normal ships are usually slow speed 2-stroke engines while those used for providing auxiliary power are usually 4-stroke high speed diesel engines. The engine itself is made up of several components such as the crankshaft, bedplate , pistons , liner , etc. A very specific description and mention of such engines is made under Heading 8408 of the GST Tariff and in view of the same it is very clear that Marine Engine is classifiable under heading 8408 of the GST Tariff. Under Sr. No. 115 of Schedule IV of Notification No. 1/2017 - Central Tax (Rate) dated 28th June 2017, the tax rate for Marine Engine is 14% each of CGST and SGST. Gear Boxes - HELD THAT:- In view of the fact that a very specific description and mention of such gear boxes is made under Heading 8483 of the GST Tariff, we find that Gear Boxes are classifiable under Heading 8483 of the GST Tariff. These are marine gear boxes which are used in the Marine industry for driving Marine Propulsion engines, driving Electrical propulsion and driving different types of pumps used in the manufacturing of Ships/Boats/Vessels. Under Sr. No. 135 of Schedule IV of Notification No. 1/2017 - Central Tax (Rate) dated 28th June 2017, the tax rate for Gear Boxes is 14% each of CGST and SGST. Marine Generator - HELD THAT:- The marine generator are generating sets with compression-ignition internal combustion piston engines. They are a combination of an electric generator and any prime mover other than an electric motor and working with the engine. Therefore, Marine Generator is used as part of the marine engine which is further used for manufacturing of ships/boats/vessels. It is an essential part of ship and is used when the main engine fails to work on the ships. They generate the electricity to move the engine and supply of electric power for other purposes on the ships. We find that if it is supply individually then as per Notification 1/2017, date 28.6.2017, it falls under entry no. 373 of Schedule III for the tax rate of 18% under CGST ACT. The items like Marine Engines, Marine Gearbox and Marine Generators which are covered under different HSN code are fitted on the boats/ ships [vessels, by the manufacturing companies. They clearly fall under the expression essential parts of a ship or vessel and a ship cannot be imagined to be in existence without these parts - the items that are discussed as essential parts of a ship/vessel are such essential components of a vessel/ship without which the ship would not be complete and would not exist. These are very integral for the functioning of the ship and can also be separated from the ship for repair/replacement. Marine engines, Marine gear boxes and Marine generator supplied by the applicant to dealers of shipyard manufacturers are used as Parts of vessels falling under 8901,8902,8904,8905,8906 and 8907. So the specific entry Sr. No. 252 of Schedule I of Notification No. 1/2017 - CT (Rate) dated 28 th June 2017 is clearly applicable to the same goods.
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2019 (6) TMI 1106
Provisional attachment of stock and Bank Accounts - section 83 of the Central Goods and Service Tax Act, 2017 - case of petitioner is that no notice under section 46 was issued at the relevant point of time when the order of provisional attachment was passed - HELD THAT:- Section 46 of the Act is with regard to notice to return defaulter. Plain reading of section 46 would indicate that if a registered person fails to furnish a Return under section 39 or section 44 or section 45, a Notice would be issued requiring him to furnish such Return within a period of 15 days in such form and manner as it has been prescribed - Section 62 clarifies that if a registered person, to whom a Notice under section 46 has been served, fails to furnish the Return, the proper officer may, thereafter proceed to assess the tax liability of such person to the best of his judgement taking into account all the material available with him and issue the Assessment Order within a period of five years from the date specified under section 44 for furnishing of the Annual Return for the financial year to which the tax not paid relates. Section 83 would come into play only after the necessary action is taken under section 62 of the Act, referred to above. The language of section 83 is plain and simple. Section 83 makes it clear that during the pendency of any proceedings under section 62, if the Commissioner is of the opinion that for the purpose of protecting the interest of the Government revenue he may, by order in writing, attach provisionally any property including the Bank Account belonging to the taxable person. The facts of this case are quite clear. It appears that much before the notice under section 46 came to be issued or rather, much before the assessment could be undertaken under section 62 of the Act, the authority straightway proceeded to pass orders of provisional attachment of the goods as well as two Bank Accounts, referred to above. Such action cannot be said to be in accordance with law. The impugned orders of provisional attachment of the goods as well as the two Bank Accounts deserve to be quashed - appeal allowed - decided in favor of appellant.
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2019 (6) TMI 1105
Attachment of bank account - Garnishee order - Demand of interest on ITC component - HELD THAT:- Identical issue decided in the case of M/S. DONGSUNG AUTOMOTIVE PVT. LTD. VERSUS THE SUPERINTENDENT OF CENTRAL TAXES, KANCHEEPURAM, THE ASSISTANT COMMISSIONER OF CGST CENTRAL EXCISE, CHENNAI AND INDIAN OVERSEAS BANK [ 2019 (6) TMI 892 - MADRAS HIGH COURT] . The balance available in the writ petitioner's account as of 12.06.2019 is ₹ 33,77,394/- - As the bank has not been arrayed as respondent, Registry shall communicate this order to the aforesaid bank at the aforesaid address and from and out of the aforesaid balance of little over ₹ 33,00,000/-, the said bank shall pay out an admitted sum of ₹ 9,15,121/- to the Assistant Commissioner of GST and Central Excise, Maraimalainagar Division (first respondent herein) forthwith. In all other aspects, communication dated 21.05.2019 bearing reference C.No.IV/16/30/2019-Tech-III from the first respondent to the aforesaid bank will stand set aside. This would mean that the writ petitioner can operate aforesaid bank account with the exception of aforementioned admitted sum of ₹ 9,15,121/-, which shall be paid by the Bank to the first respondent - On payment of aforesaid amount on or before 20.06.2019, the impugned communication dated 21.05.2019 from the second respondent to the Indian Overseas Bank will stand set aside. Petition disposed off.
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Income Tax
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2019 (6) TMI 1104
Nature of expenditure - fertility improvement program amongst milk animals - revenue or capital - HELD THAT:- SLP dismissed. However, the question of law is kept open.
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2019 (6) TMI 1103
Stay petition - condition stipulated was reduced to 50% of the amount directed in the order of the CIT(Appeals) - HELD THAT:- We see no reason to entertain this petition under Article 136 of the Constitution of India. The Special Leave Petition is, accordingly, dismissed. However, since time to make payment of the first installment is to expire today, we extend the time by a further period of two weeks from today.
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2019 (6) TMI 1102
Penalty levied u/s 271(c) - non deduction of tds by assessee trust - entitled to the exemption under Section 194-I in view of Section 44AB - reasonable cause within the meaning of Section 273(B) - HELD THAT:- Leave granted. Tag with M/S US TECHNOLOGIES INTERNATIONAL P. LTD. VERSUS COMMR. OF INCOME TAX [ 2011 (9) TMI 1185 - SC ORDER]
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2019 (6) TMI 1101
Limitation for passing order u/s.201(1) - TDS u/s 194 - deemed dividend u/s. 2(22)(e) - HELD THAT:-Tax Appeal is admitted on the following substantial questions of law: [A] Whether on the facts and in the circumstances of the case and in law, the Appellate Tribunal is right in dismissing the appeal of the Revenue without appreciating the fact that Section 201(3) of the Act was amended by the Finance Act, 2012 with retrospective effect from 01/04/2010 whereby the limitation wad substituted from four years to six years for passing the order u/s. 201/(1) of the Act where the TDS statement had not been filed. [B] Whether on the facts and circumstances of the case and in law, the Appellate Tribunal is right in dismissing the appeal of the Revenue without appreciating the fact that as per the amended provisions of Section 201(3) of the Act by the Finance Act, 2012 with retrospective effect from 01/04/2010 the limitation for passing order u/s.201(1) of the Act in the case of the assessee for the year A.Y. 201011 expires only 31/03/2016 i.e. within six years from the end of the financial year in which the loan of ₹ 2.07 crores was given to Shri Prakash Khatri, Chairman and Managing Director of the assessee company, who was holding 98.20% shareholding in company during the period under consideration, which was constituted as deemed dividend u/s. 2(22)(e) of the Act. [C] Whether on the facts and in the circumstances of the case and in law, the Appellate Tribunal is right in dismissing the appeal of the Revenue without appreciating the fact that the assessee had not deducted the tax at source as required under the provisions of Section 194 of the Act from the loan of ₹ 2.07 crores given to Shri Prakash Khatri, Chairman Managing Director of the assessee company, who was holding 98.20% shareholding in the company during the period under consideration, which was constituted as Deeded Dividend u/s. 2(22)(e) of the Act and accordingly clause (ii) of Section 201(3) of the Act as amended by the Finance Act, 2012 with retrospective effect from 01/04/2010 is applicable? [D] Whether on the facts and in the circumstances of the case and in law, the Appellate Tribunal is right in dismissing the appeal of the Revenue relying on TATA TELESERVICES VERSUS UNION OF INDIA 1 [ 2016 (2) TMI 414 - GUJARAT HIGH COURT] ?
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2019 (6) TMI 1100
Assessment of trust - assessee had shown receipt received pursuant to the settlement and for withdrawing the suit filed by the assessee against the original defendant in respect of an immovable property - revenue or capital receipt - Tribunal justification in not deciding the appellant's claim of certain receipts being capital receipts despite reproducing appellant's entire submission in the Tribunal order - HELD THAT:- From the reproduced portion of the Tribunal's judgment, it can be gathered that in view of the fact that the Tribunal had decided the question of accumulation of the Trust's fund in favour of the assessee, the Tribunal refrained from deciding the assessee's contention that the receipt was not taxable at all. In view of the fact that the Tribunal has rested its judgment only on the assessee's alternative contention and as pointed out by the learned counsel for the assessee that it may happen that this ground may fail on account of future developments, it is necessary that the assessee must get an answer to its primary contention of the receipt not being taxable at all. Under these circumstances, we request the Tribunal to decide this issue on merits. For this limited purpose, we place the proceedings back before the Tribunal for deciding this question in accordance with law. We have not expressed any opinion. All contentions of both the parties on ground ground are kept open. The appeal is disposed of.
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2019 (6) TMI 1099
Revision u/s 264 - Fringe benefit tax - benefits provided to the employees of the writ petitioner bank - rectification application under Section 154 of the Act was filed contending that there has been an erroneous charge of interest - whether the department is justified in retaining the tax paid by the petitioner towards the FBT tax for the contribution made by them to pension fund for the subsequent assessment year 2007-08? - HELD THAT:- The writ petitioner had succeeded before the Tribunal in respect of the assessment year 2006-07. The Tribunal had held that the statutory contribution made to superannuation fund is outside the ambit of FBT. This is, of course subject to the determination of the issue by the higher courts. But, the position as on date is that the contribution made to the superannuation fund is not leviable to FBT. It is true that the writ petitioner had made voluntary payment. But, it is not the question of voluntariness or otherwise of the assessee in the matter of making payment. The question is one of liability. The department represents the soveriegn power of the State in matters relating to taxation. Whether the department had illegally collected the tax from the citizen or whether the assessee mistakenly paid the tax to the department, the consequence is one and the same. If the assessee had mistakenly paid, it is a case of illegal retention by the department. I sustain the stand of the authority that Section 264 of the Income Tax Act was clearly not applicable in this case. But then, Section 119 of the Income Tax Act could have been invoked. The authority ought to have posed only one question to himself i.e., whether the assessee was liable to pay the tax in question or not. If he was not liable to pay the tax in question, the department had no business to retain it even if it was wrongly paid. Of course, the question of paying interest for the retained amount will not arise. It is subject to the outcome of the challenge that is pending before the Madras High Court at the instance of the department. It is open to the respondent to pass such orders as the facts and circumstances warrant. But then, an applicant ought not to have been simply shown the door. . Volenti non fit injuria is a maxim invoked in the law of torts. It means that there is no injury to one who consents. The respondent appears to have applied the said principle while considering the petitioner's application. The respondent failed to note that the issue was not one of revisability of an order but one of refund. While the authority is right in holding that no revisable order existed, he should have also looked a little beyond and seen that no liability also existed. - Matter restored before the Pr. CIT.
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2019 (6) TMI 1098
Entitlement to the benefit of Section 80P - reopening of assessment u/s 147 - HELD THAT:- Benefit of Section 80P to Cooperative Societies is being carried further to Hon'ble Supreme Court by way of Special Leave Petitions. It is the specific case and stated position of the learned Revenue counsel that the IT department, has not given legal quietus to the order, but is agitating the matter further by filing Special Leave Petitions in Hon'ble Supreme Court. There is no disputation that the aforesaid order of Hon'ble Division Bench [ 2016 (8) TMI 560 - MADRAS HIGH COURT] has neither been stayed nor reversed. Therefore, it holds the field. Though this could be the end of the matter and this Court would have been inclined to set aside the impugned notices, this Court takes a slightly different view owing to the second submission made by learned counsel, which is a crucial aspect of the trajectory of the hearing today. It may be too late in the day for the Revenue to issue notices under Section 148 afresh, if they are set aside now and ultimately if the Revenue succeeds in the Special Leave Petitions, which are said to have been filed. Impugned notices kept in abeyance subject to the outcome of the the Apex Court in the SLP as referred above.
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2019 (6) TMI 1097
Capital loss - sale of shares to sister concern when the transaction for sale to an outside buyer for a much higher price is being processed - Whether the, tribunal was right in holding that the capital loss arising out of sale of shares to sister concern when the transaction for sale to an outside buyer for a much higher price is being processed is genuine and ought to be allowed? - HELD THAT:- The parties entered into an agreement for transfer of shares on 06.06.2002. After noting these facts, the Tribunal observed that the Assessing Officer has imagined beyond stretch that the assessee was having knowledge of sale of shares of M/s.Bush Boake Allen India Ltd., because sale of PCL shares took place even before grant of permission by the Government of India to M/s.Bush Boake Allen Ltd. Tribunal agreed with the contention of the assessee that the assessee was not a party or had influence in the decision taken by the M/s.Bush Boake Allen India Ltd., for the purchase of shares. Furthermore, on facts, the Tribunal found that the transaction is neither fraudulent nor a colourable device. Ultimately, the Tribunal held that when the transaction is within the parameters of law, then the Income Tax Authorities cannot enter into the shoe of the assessee to decide the prudence of commercial expediency of a particular transaction. With the above reasons, the Tribunal dismissed the appeal filed by the Revenue. There is no substantial question of law arising for consideration in this case. We cannot be called upon to re-appreciate the evidence which was made available with the CIT(Appeals) and the Tribunal which in our considered view, has elaborately considered the factual matrix. So far as decision in the case of Commissioner of Income Tax Vs. Ashini Lease Finance Private Ltd., [ 2008 (5) TMI 673 - SUPREME COURT] we find that on facts, the Court found that it is a clear case of circular transaction. The Revenue does not dispute before us that there is a third party involved in the present transaction, it is a Government of India company - no substantial question of law .
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2019 (6) TMI 1096
Penalty u/s 271(1)(c) - defective notice - notice initiating the penalty proceedings did not specify clearly as to whether the penalty proceedings were initiated for concealment of particulars of income or for furnishing inaccurate particulars of income - admission of additional ground - HELD THAT:- There is no fresh investigation on facts is required, the additional ground raised by the assessee has to be adjudicated, hence, the same has to be admitted by following the judgment in the case of National Thermal Power Co. Ltd. [ 1996 (12) TMI 7 - SUPREME COURT] the additional ground raised by the assessee is admitted. Validity of the notice - from the reference to notice it is not clear whether Assessing Officer has initiated penalty proceedings for concealment of particulars of income or for furnished inaccurate particulars. Therefore, the notice issued by the Assessing Officer is a vague notice and is liable to be quashed in the light of the decision of Smt. Baisetty Revathi [2017 (7) TMI 776 - ANDHRA PRADESH HIGH COURT] and also the decision of SSA s Emerald Meadows [ 2016 (8) TMI 1145 - SC ORDER] . - Decided in favour of assessee.
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2019 (6) TMI 1095
Penalty u/s 271B - non-maintenance of books of accounts, for assessee s failure to get the accounts audited as required u/s 44AB - Assessee had received the sale proceeds from the sale of disputed property and paid the advance tax - assessee filed the return of income declaring Nil income and claimed the refund of the entire amount of advance taxes paid along with detailed note on long term capital gains - AO treated the receipt as business income and the receipts exceeded the specified limit of ₹ 40,00,000/-, the AO initiated penalty proceedings u/s 271B - HELD THAT:- From the penalty order of the AO, it is observed that the assessee made only single transaction which is stated to be advance for purchase of land and property and there were no series of transactions. The assessee was under the impression that the advance received by the assessee was not taxable in the impugned assessment year since the transaction was not finalized. Even if it is to be taxed, the same is to be taxed under the head capital gains , but not under the head business income . That was the reason that the assessee did not get his accounts audited as required u/s 44AB of the Act. There is no dispute that the transaction was single transaction. No other expenditure was also claimed by the assessee. The AO did not bring any other material to support that the assessee has carried on the business in the earlier year or subsequent year in the assessment order. There is no issue of complexity involved in the receipts of the assessee. The assessee is a mechanical engineer, as observed from the assessment order and he is not engaged in the business, there are no other business transaction carried on by the assessee as brought out by the AO in the assessment order. Therefore, we hold that the assessee did not get the accounts audited since he was under the bonafide impression that sale transaction of litigated land as capital gains but not business and the same appears to be reasonable cause as required u/s 271B. Accordingly, we hold that there is reasonable cause for not getting the accounts audited - Decided in favour of assessee.
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2019 (6) TMI 1094
Adhoc disallowance of 10% of wages paid to boat staff - Case was selected for scrutiny - CIT(A) dismissed the appeal of the assessee for non prosecution without going into the merits - HELD THAT:- CIT(A) has passed the order ex-parte for non prosecution. Therefore, in the interest of justice, we remit the matter back to the file of the CIT(A) with a direction to decide the appeal on merits and the Ld.AR has been directed to comply with the notices issued by the CIT(A). Accordingly, appeal of the assessee is allowed for statistical purpose. Penalty u/s 271B - failure to get the accounts audited u/s 44AB - assessee s gross receipts exceed ₹ 40,00,000/- as per the provisions of section 44AB - HELD THAT:- We have heard both the parties and perused the material placed on record. The assessee has assigned reasons for failure to get the accounts audited such as survey u/s 133A was conducted, part time accountant is incapable of summarizing the transactions and the partners ignorance. Survey u/s 133A was conducted in January 2008, whereas, the time limit for filing the appeal was 30.09.2008. It is the mandatory obligation of the assessee to get the accounts audited and submit the Audit report before the due date. The illiteracy or ignorance of the partners is not a sufficient reason. Therefore, we do not see any reason to interfere with the order of the CIT(A) and the same is upheld.
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2019 (6) TMI 1093
Excess interest levied u/s 234A - whether interest u/s 234A could have been charged only till the time tax liability was outstanding? - due date of return 15.10.2010 - Date of tax deposited 24.3.2014 - Date of voluntary return filed 7-5-2014 - filing of return in response to notice u/s 148 23-6-2017 - HELD THAT:- As in Priti Prithwala vs. ITO [ 2003 (3) TMI 743 - ITAT MUMBAI] on similar ground of appeal held that in section 234A, the word regular assessment are used in the context of computation. It does not show that the order passed under section 143(3)/144 shall be substituted by section 147. In term of section 234A(1)(a)(b), the period for which interest liability is calculated is the period between the date on which return was due to be filed and the ending on the date, the same is actually furnished and when no return is furnished, ending on the completion of assessment under section 144. Section 234A(1)(b) contemplates the situation where no return has been furnished, in such a case, the period prescribed is ending on the date of completion of the assessment. Once the assessee conceded his liability to pay interest under section 234A, there was no point in going further into the matter and exemption whether interest was not liable to pay. As assessee submits that the assessee could not be made liable to pay interest for the period during which it was not possible on their part to file the return. Therefore, we direct the Assessing Officer to re-compute the interest up to the date of filing of return. Hence, Ground No. 3 of the appeal is allowed. Interest u/s 234B - HELD THAT:- We find the interest u/s 234B is chargeable from the first day of assessment year till the date of assessment year on the amount of assessed tax due ( i.e. tax payable TDS) from time to time. We direct the Assessing Officer to compute the interest under section 234B as under:- From 1.4.2010 till Marcfh 2014 on the assessed tax due which is considered as X Tax payable TDS (+) X = Y Then calculate interest from 1.4.2014 till the date of completion of assessment on the amount of Y. We direct the assessing officer to recompute the interest as stated above.
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2019 (6) TMI 1092
Deduction u/s 10A on suo moto transfer pricing adjustment made by the assessee - as per AO suo moto transfer pricing adjustment could not be included as part of the total turnover of the undertaking and resultantly could not also form part of the total profit of the undertaking - HELD THAT:- An identical case came up for hearing in the case of I-Gate Global Solutions Limited [ 2014 (6) TMI 1007 - KARNATAKA HIGH COURT] as returned a finding that the assessee was entitled to deduction u/s 10A in respect of income declared in the return of income on the basis of computation of ALP. Also in APPROVA SYSTEMS PVT. LTD. VERSUS THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 1, PUNE [ 2018 (3) TMI 1031 - ITAT PUNE] allowed deduction u/s 10A of the Act on the voluntary transfer pricing adjustment made by the assessee by noting that the assessee was entitled to deduction u/s 10A of the Act on additional income offered on account of suo moto adjustment on account of transfer pricing provisions and that the provisions of section 92C(4) of the Act were not attracted The first proviso to section 92C(4) is evidently applicable only to situations where adjustment to the ALP is made by the Assessing Officer/TPO/Ld. DRP and not to the voluntary adjustment made by the assessee itself. If the legislative intent was to treat the adjustments made by the Assessing Officer at par with the voluntary adjustment made by the assessee, the legislative intent would have been expressed in different words and section 92C(4) would not have referred to computation of income made by the AO in terms of the ALP determined u/s 92C(3) based enhanced income - Thus we direct the AO to delete this disallowance and grant benefit of deduction u/s 10A on the amount of voluntary TP adjustment made by the assessee. - Decided in favour of assessee. Transfer pricing adjustment in respect of notional interest on outstanding receivables - HELD THAT:- As in M/S COTTON NATURALS (I) PVT. LTD. [ 2015 (3) TMI 1031 - DELHI HIGH COURT] held that the interest rate should be market determined interest rate applicable to the currency concerned in which the loan has to be repaid and that the interest rate should not be computed on the basis of interest payable on the currency or legal tender of the place or the country of residence of either party. A perusal of the order of the TPO as well as the directions of the Ld. DRP shows that these aspects have not been duly considered by either of the authorities below and they have simply proceeded to make the transfer pricing adjustment on a certain notion without looking into the specific facts of this case. Therefore, in view of aforementioned anomalies, as pointed out by the Ld. AR, with which we are in complete agreement, we deem it appropriate to restore this issue to the file of the TPO for adjudicating the issue afresh after duly considering our observations as well as after giving due opportunity to the assessee to present its case - Assessee's ground allowed for statistical purposes. Not allowing set off of brought forward loss - AO is directed to allow the same after due verification. Set off of available MAT credit - AO is directed to do the needful as per law.
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2019 (6) TMI 1091
Penalty u/s 271(1)(c) - whether penalty proceedings were initiated for furnishing inaccurate particulars of income whereas penalty was levied for concealment of income as well as for furnishing inaccurate particulars of income? - HELD THAT:- There is no variation in the charge for levy of penalty and show cause notice issued for levy of penalty. Accordingly, the proposition laid down by the Coordinate Bench in the case of HPCL Mittal Energy Ltd. Vs ACIT [ 2018 (6) TMI 1554 - ITAT AMRITSAR] will not help the assessee so as to persuade us to cancel the penalty so imposed. 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 on the basis of incriminating documents so found, unaccounted sales was worked out. Reasonably the A.O. made addition with regard to profit earned on such unaccounted sales which has been confirmed by the CIT(A) and the Tribunal. 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. It has not been shown by the ld AR as to whether the order of the Tribunal in quantum appeal was challenged before the Hon ble High Court and the Hon ble High Court has accepted substantial questions of law so as to suggest that it is debatable issue. The penalty has been levied with reference to the incriminating material found during the course of survey which indicated exact amount of unaccounted sales. These unaccounted sales have been confirmed both by the CIT(A) and the Tribunal. A.O. has levied penalty only with respect to profit earned on these unaccounted sales which has not been disclosed in the return of income. Accordingly, it cannot be said that the penalty was levied with reference to estimation of income. Accordingly, we do not find any infirmity in the penalty so imposed. We are inclined to agree with the DR Shri Ashok Khanna that the A.O. was justified in imposing penalty u/s 271(1)(c) - Decided against assessee.
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2019 (6) TMI 1090
Nature of expenditure - software license fees paid to AE - AO rejected contentions of assessee and disallowed expenditure claimed. However, Ld.AO granted depreciation at 25% - HELD THAT:- As decided in assessee's own case [ 2017 (8) TMI 281 - ITAT DELHI ] assessee made payment for software licenses purchased from parent entity. Ld.AO disallowed, considering it to be capital expenditure, and provided corresponding depreciation at 25%. On perusal of order for assessment year 2007-08, it is observed that similar disallowance was made by AO on license expenses, and factual matrices of this issue as submitted by both parties are similar with that of assessment year 2007-08. DRP has also recorded that this Tribunal in assessee s own case for assessment year 2007-08 and 2008-09 deleted such disallowance made by AO, against which revenue has not filed any appeal before Hon ble High Court . Thus the issue has attained finality. Addition of advance and debts - HELD THAT:- It is observed that details has been furnished, however, Ld.AO has not verified same. While taking a look at details of advances to venders, it is observed that these are small payments all made on one single day in the month of May, 2012 totalling to ₹ 1,75,895/-, which is difficult for AO to verify. Upon a query being raised to Ld.Counsel regarding same, he submitted that, what is necessary to be verified is details of bad debts for which invoices have been placed. T here is no dispute that sum of ₹ 8,03,982/- has been written off by assessee in its books of accounts. From invoices placed at page 90-94, it is apparent that they pertain to preceding assessment years. Thus assessee satisfies requirements specified under section 36 (1) (vii) of the Act. TP adjustment - comparable selection - HELD THAT:- Referring to functions performed, assets involved and risk assumed by assessee under software development service segment companies functionally dissimilar with that of assessee need to deselected from final list. Infosys Ltd. company was owning brand and having substantial intangible assets which cannot be held to be suitable comparable for assessee who was only providing software deployment services - this company is not functionally comparable to assessee inasmuch as, it is also engaged in software development services and generate substantial revenue from the sale of its own products. Larsen and Toubro Infotech Ltd. to de rejected for nonavailability of segmental data. See SAXO INDIA PVT. LTD VERSUS. ACIT, [ 2016 (2) TMI 604 - ITAT DELHI] Comparable having extraordinary event during year should be excluded. Under software deployment service segment, assessee is rendering deployment services of its skilled employees to the AE, is or their customers, which is remunerated on cost plus basis. It is also peculiar to note that the cost is determined to be salary earned by such employee who is put on the project. The working module of assessee need to matched with comparable selected. No benefit from services for which payments has been made, - TPO determined ALP of the international transaction at Nil Assessee could not establish whether such services were needed by assessee (i.e. Need Test) - HELD THAT:- It is pertinent to note that requirement of services should be judged from viewpoint of assessee as a businessman. Therefore in this regard we are of view that assessee has to substantiate that these services are required by it. Since assessee, as service receiver received certain services as per agreement dated 23/10/2008, proves that such services were required by assessee. Further, assessee belongs to MNE organization and that Aircom UK provided service to its group companies across the globe. It is observed that all companies are situated in different countries, operating in different geographies have also received and used these services which is evident from allocation list submitted by assessee reproduced hereinabove. Therefore this itself proves that, for assessee to remain competitive in its business such services are required. Therefore, in our considered opinion, assessee stands satisfied need test, which is alleged by ld.TPO to have not been satisfied by assessee. Whether such services are rendered to assesse by AE ( i.e. Rendition test) - Whether assessee has derived any economic or commercial benefit from these services ( i.e. Benefit test) - these services, assessee has to demonstrate and satisfy Evidence Test or rendition test and benefit test, as envisaged u/s 92 (2) of the Act, and that, services provided by AE are neither duplicative nor shareholder s activity. Ld. AO/ TPO is then directed to determine Arm s length price of these services based on documents submitted by assessee by determining most appropriate method‟ and Comparability analysis.
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2019 (6) TMI 1089
Entitled to deduction u/s 80P - assessee in this case is a registered as co-operative societies under the Kerala State Co-operative Societies Act, 1969 - AO for denying the claim of deduction u/s 80P of the I.T.Act, treated the assessee as a co-operative bank and not a co-operative society - HELD THAT:- Larger Bench of the Hon ble jurisdictional High Court in the case of The Mavilayi Service Cooperative Bank Ltd. [ 2019 (3) TMI 1580 - KERALA HIGH COURT] held that the Assessing Officer has to conduct an inquiry into the factual situation as to the activities of the assessee society to determine the eligibility of deduction u/s 80P - as held by the Hon ble High Court that the Assessing Officer is not bound by the registration certificate issued by the Registrar of Kerala Cooperative Society classifying the assessee-society as a cooperative society. The Hon ble High Court held that each assessment year is separate and eligibility shall be verified by the Assessing Officer for each of the assessment years. The issue of deduction u/s 80P(2)(a)(i) is restored to the AO. AO shall examine the activities of the assessee and determine whether their activities are in compliance with the activities of a cooperative society functioning under the Kerala Co-operative Societies Act, 1969 and grant deduction u/s 80P(2) in accordance with law. It is ordered accordingly. Appeals filed by the Revenue are allowed for statistical purposes.
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2019 (6) TMI 1088
Penalty u/s 272A(2)(c) - non furnishing the information called for u/s 133(6) - HELD THAT:- The assessee has not offered any valid reason for not furnishing the information called for u/s 133(6) of the Act. Many of the notices issued by the ITO (Intelligence) were never responded to by the assessee. In many instances the Assessing Officer has mentioned that when they had approached, the assessee Society, for seeking information u/s 133(6) of the Act there was total lack of co-operation on the part of the assessee society as well as threat There is no reasonable cause furnished by the assessee as mentioned u/s 274 of the I T Act for non furnishing of information sought by the ITO(intelligence) u/s 133(6) of the Act it is of the view that the order imposing penalty cannot be quashed. It is ordered accordingly. - Decided against assessee.
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2019 (6) TMI 1087
TDS u/s 194IA - purchase of the land on piece meal basis from same party - each transaction is less than 50 lakhs but total amount is much more - consideration for the transfer of an immovable property - HELD THAT:- As per sub-section (2) of Section 194IA no deduction under sub-section (1) shall be made where the consideration for the transfer of an immovable property is less than ₹ 50 lakhs.The assessee in instant case had purchased three properties on three different dates, although, they bear the same Khasra number and the seller is the same. This indicates that the assessee had purchased the land on piece meal basis. In my opinion, since, the value mentioned in each sale deed is less than ₹ 50 lakhs, therefore, the provisions of Section 194IA will not be applicable to the assessee. Merely because, the seller is the same and the Khasra number of the three properties purchased by the assessee are same, the same cannot be a ground to treat the assessee as an assessee in default when the value mentioned in each sale deed executed on 3 different dates is less than ₹ 50 lakhs. Set aside the order of the CIT(A) and direct the AO not to treat the assessee as an assessee in default. The ground raised by the assessee is accordingly allowed. TDS on Labour payment - payment made by the assessee to labour is below ₹ 20,000/- - CIT(A) has not justified in confirming the same - HELD THAT:- Total labour payment of ₹ 27,07,195/- the assessee had not deducted TDS on an amount of ₹ 13,55,585/- for which the AO held the assessee as an assessee in default. Since, the assessee could not substantiate with evidence before the CIT(A) that no payment has been made exceeding ₹ 20,000/- to any person in a single day, he upheld the action of the AO. Assessee that given an opportunity he will produce the details either before the AO or before the CIT(A) as the case may be to substantiate that no payment exceeding ₹ 20,000/- has been paid to any person in a single day and that the assessee is not liable to deduct TDS from such labour payment. Restore the issue to the file of the AO with a direction to give one more opportunity to the assessee to substantiate with evidence to his satisfaction that assessee is not liable to deduct tax @ 2% on the amount of ₹ 13,55,585/- being the labour payment. AO shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. The ground raised by the assessee is accordingly allowed for statistical purposes.
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2019 (6) TMI 1086
Capital gain - capital asset within the meaning of section 2(14) - whether the land situates beyond 8 kms. from the municipal limit or not ? - geographical situation and applicability of amendment carried out in the definition of agriculture land by way of Finance Act, 2013 - HELD THAT:- Both the Revenue authorities have not disputed that the land sold by the assessee was not agriculture land. Dispute is about its geographical situation and applicability of amendment carried out in the definition of agriculture land by way of Finance Act, 2013. As far as applicability of amendment carried out in the definition of agriculture land way of Finance Act, 2013 is concerned, Board has already considered this aspect in the circular no.17 of 2015 and opined that it will be applicable only from the assessment year 2014-15. We have extracted this circular while taking cognizance of the finding recorded by the Tribunal in Akashdeep [ 2016 (9) TMI 918 - ITAT AHMEDABAD] . Similarly, Board has explained that distance between municipal limit and agriculture land is to be measured having regard to the shortest road distance and not by way of crow s flight. Third aspect is that even if the assessee has included gain on transfer of this land in his return of income, he has every right to plead that gain is not taxable and it be excluded from his taxable income. Duty of the AO is to determine right tax liability in the hands of the assessee, and not on the basis of erroneous admission. Therefore, even if the assessee has admitted initially about the taxability, and later on realize his right then his right has to be given effect and adjudicated upon. The only circumstance, which has left for consideration is, whether the land situates beyond 8 kms. from the municipal limit or not. The assessee is relying upon the certificate issued by Talati. The Talati is Revenue official appointed by the State Government. His duty is to maintain accounts and record all rights in a particular village. The illegible written on page no.20 notes signature i.e. Talaticum -mantry, Bhuvaladi Gram Panchayat, which means, he is a revenue official-cum-accountant for this gram panchayat. He is not an elected person rather he is competent person to give certified copy of land record and other certificates. We do not find any merit in the contention of the ld.DR that he is not a revenue official rather an elected person in the gram panchayat. Talati is akin to Patwari in other parts of India. He is a village accountant and as contemplated in sections 16 and 17 of the Gujarat Land Revenue Code 1879. Thus, cognizance could be taken on the basis of his certificate. CIT(A) has just made a bald reference to Google-map etc., but has not pin-pointed what was the distance given in the Google-map in 1994 when the Central Government has issued notification for the purpose of section 2(14) of the Income Tax Act. His observation that this is evident from Google-map also is just an observation without any scientific look to the data recorded as on 6.1.1994. Therefore, we are of the view that the land transferred by the assessee was not a capital asset within the meaning of section 2(14) and gain arising from such transfer is not taxable in his hand. As far other alternative contention is concerned, we do not deem it necessary to adjudicate them because we have held that on transfer of this agriculture land, long term capital gain is not leviable in the hands of the assessee.
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2019 (6) TMI 1085
Capital gain computation - deduction u/s 50C - assessee argued that the order of the District Registrar was faulty and the guideline value of the vacant site in the area subsequent to the registration of the document also was lesser than the value adopted by the District Registrar - HELD THAT:- Transactions of agreement and possession was handed over on 16.11.2010 and the part payment was also received by the assessee on 16.11.2010. Therefore respectfully following the view taken by this tribunal in the case of Appana Hari Naga Venkat Rao [ 2019 (2) TMI 1650 - ITAT VISAKHAPATNAM] we hold that market value determined by the SRO for registering the document as on 16.11.2010 has to be considered as the full value of consideration but not the value determined in the sale deed. Even otherwise from careful verification of the proceedings of the District Registrar, the market rate as on the date of execution or the sale deed was ₹ 26,000/- i.e. on 28.02.2011, but not as on16.11.2010 Since there was substantial time gap between the sale agreement and the sale deed, there is a possibility of increase in the market rate. The assessee had obtained the market value certificate as on 16.11.2010 from the Joint Sub Registrar vide certificate dated 27.05.2015 for the same door No.2-4-34 and it was ₹ 16,000/- per sq.yard as on 16.11.2010. Subsequent to the execution of the sale document also the assessee has obtained the guideline value for the same municipal number of 2-4-34 and the market value as on 18.04.2011 was at ₹ 12,000/- per sq.yard. The District Registrar fixed the market rate at ₹ 26,000/- as against the guide line value of ₹ 12,000/- or ₹ 16,000/- as per their own records without giving reason for deviating the SRO value or the market value fixed as on 16.11.2010 as agreed by both the parties. On 08.06.2017 also, the assessee has obtained the market value certificate from Joint Sub Registrar, Registration and Stamps Department of Govt. of Andhra Pradesh which was certified that the value of the vacant land at Door No.2-4-34 was ₹ 12,000/- as on 28.02.2011. AO brushed aside the evidence produced by the assessee for irrelevant differences in the certificate such as change of locality etc. AO ought to have considered that even though there may be multiple names for the same locality or street, Door No is unique and remains the same for each house in a town or municipality. Subsequent to the sale of the land also, the Joint Sub Registrar has given the market value of the property at ₹ 12,000/- per sq.yd as discussed above. The purpose of capital gains, the full value of consideration has to be taken as determined by Stamps and Registration Authority as on 16.11.2010, the date of sale agreement. Since, we have already taken view that the market value as on sale agreement has to be considered for the purpose of capital gains we are not inclined to comment on the issue of market value determined by the District Registrar, since the same is pending in the court. CIT(A) and delete the addition made by the AO and direct the AO to compute the capital gains as per the stamp value assessed in the sale agreement cum possession dated 16.11.2010. - Appeal of the assessee is allowed
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2019 (6) TMI 1084
Penalty imposed u/s 272A(2)(c) - non furnishing the information called for u/s 133(6) - period of limitation - HELD THAT:- As decided in M/S. KAKOOR SERVICE CO-OPERATIVE BANK LTD [ 2018 (1) TMI 548 - ITAT COCHIN] notice issued u/s 133(6) should be reckoned for considering the time limit u/s 275(1)( c) of the Act is de-void of any merits; because Section 275(1)( c) prescribes the time limit only from the date of initiation of penalty proceedings; namely issuance of notice u/s 274 Reasonable cause, as mentioned in section 273B of the Act for non furnishing information sought u/s 133(6) - assessee has not offered any valid reason for not furnishing the information called for u/s 133(6) of the Act. Many of the notices issued by the ITO (Intelligence) were never responded to by the assessee. In many instances the Assessing Officer has mentioned that when they had approached, the assessee Society, for seeking information u/s 133(6) of the Act, there was total lack of co-operation on the part of the assessee society as well as threat (reference order imposing penalty u/s 272A(2)(c ) - Decided against assessee.
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2019 (6) TMI 1083
Exemption u/s 11 - charitable activity u/s 2(15) - earning profit despite no profit motive - main objective of the assessee is promotion of industrial growth in Karnataka - In the course of carrying on its activities, the benefit arising from such promotion - HELD THAT:- As decided in assessee's own case [ 2015 (10) TMI 481 - ITAT BANGALORE] Assessee does not driven primarily by desire or motive to earn profits but to do charity through advancement of an object of general public utility. The assessee is operating on no profit basis. This is substantiated by the actual income received on operations of the Assessee and the expenditure incurred set out in the earlier paragraphs of this order. The proviso to Sec.2(15) is therefore not applicable to the case of the Assessee. We therefore hold that the Assessee is entitled to the benefits of Sec.11 - AO has not disputed the conditions necessary for allowing exemption u/s.11 except the applicability of proviso to Sec.2(15). The said proviso is not applicable to the case of the Assessee, we hold that the Assessee s income is not includible in the total income and therefore the income returned by the Assessee is directed to be accepted. Allow the grounds of appeal of the assessee.
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2019 (6) TMI 1082
Exemption u/s.80G(5)(vi) - CIT(E) has rejected the recognition u/s 80G by mentioning that charitable activities are not carried out by the assessee - grant of registration u/s 12AA already done - HELD THAT:- Prima facie, the CIT(E) has rejected the recognition u/s 80G by mentioning that charitable activities are not carried out by the assessee. We found that the CIT(E) has granted registration u/s 12AA to the assessee and the ld.R has furnished copy of registration u/s 12AA of the Act dated 27/09/2018. We found that when the registration u/s 12AA of the Act was granted by the CIT(E) after verifying and satisfying requisite conditions complied by the assessee which is not disputed by the revenue and therefore, the assessee is eligible for recognition u/s 80G of the Act. As decided in M/S. KUNCHAM MOHAN RAJ AND MANJULA CHARITABLE TRUST VERSUS THE COMMISSIONER OF INCOME TAX (EXEMPTION) , BENGALURU. [ 2019 (3) TMI 1163 - ITAT BANGALORE] restore this disputed issue to the file of the CIT(E) to adjudicate afresh granting of recognition u/s 80G of the Actin the light of grant of registration u/s 12AA and further the assessee should also be provided an adequate opportunity of hearing and shall cooperate in submitting information for early disposal of the application filed for recognition u/s 80G of the Act and allow the grounds of appeal for statistical purposes.
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2019 (6) TMI 1081
Deemed dividend u/s 2(22)(e) - assessee has received loan from M/s. S.G.Equipments Machines Pvt. Ltd., where the assessee holds 50% of the share-holding - as per assessee amount has to be worked out based on the current year accumulated profits after adjustment of deemed dividend of assessment year 2008-09 - HELD THAT:- Amount has been assessed in the hands of the assessee as deemed dividend in assessment year 2008-09 an as such, the deemed dividend so assessed should be reduced from the accumulated profits and balance amount of accumulated profits should be considered in the current year for the purpose of section 2(22)(e) of the Act. Accordingly, we direct the AO to compute the deemed dividend as discussed above applying the ratio of the decision in the case of M/s.Aswani Enterprises [ 2018 (10) TMI 373 - MADRAS HIGH COURT] Unexplained credit in capital account - HELD THAT:- Assessee has not filed details on this aspect of addition before the AO in assessment proceedings and there is no finding by the AO in respect of submission of any information/details by the assessee. Further there may be various reasons for the assessee for not filing the details and also the assessee shall not gain or benefited by delaying the process of furnishing evidence to substantiate the claims. - Matter remitted before AO for fresh adjudication and also provide adequate opportunity of hearing to the assessee.
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2019 (6) TMI 1080
Bogus purchases - estimate the additions @12.5% - HELD THAT:- We find that assessee was in possession of primary purchase documents and the payments to the suppliers was through banking channels. The assessee had established corresponding sales before AO. The books of accounts were audited wherein quantitative details of stock was provided. There could be no sale without actual purchase of material keeping in view the fact that the assessee was engaged in trading activities. At the same time, the assessee failed to produce even a single supplier to confirm the purchase transactions. The delivery of material could not be substantiated. Therefore, in such a situation, the addition, which could be made, was to account for profit element embedded in these purchase transactions to factorize for profit earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against such bogus purchases. AO, in our opinion, had clinched the issue in the right perspective and was fair enough to estimate the additions @12.5%. Therefore, concurring with the stand of AO, we restore the order of AO. Accordingly, the enhancement of ₹ 72.93 Lacs as made by Ld. first appellate authority stands deleted.
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Customs
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2019 (6) TMI 1079
Valuation of imported goods - enhancement of the assessable value of the goods based upon the calculation of recoverable percentage of aluminium and the prices as reflected in the LME on the relevant date - Rule 9 of Customs Valuation Rules - HELD THAT:- As per the settled law the transaction value is the assessable value unless established to be incorrect. The aluminium content recoverable from the dross cannot be adopted as a reason for enhancing the transaction value, for which sufficient evidences establishing that there was flow back of money from the importer to the supplier of the goods are required. The latest decision of the Hon ble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, NOIDA VERSUS M/S. SANJIVANI NON-FERROUS TRADING PVT. LTD. [ 2018 (12) TMI 738 - SUPREME COURT] has observed that transaction value has to be accepted as correct assessable value and the same cannot be enhanced on the basis of NIDB data. Applicability of CVD - HELD THAT:- Inasmuch as the CVD leviable on imported goods is directly related to duty of excise required to be paid by the Indian manufactured goods and there being no duty of excise on the dross, no CVD is leviable on the imported aluminium dross. Appeal allowed - decided in favor of appellant.
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2019 (6) TMI 1078
Classification of imported goods - MIT-50% and CIT/MIT-14% i.e. 5-chloro-2-methyl-4-isithiazolin-3-one - 2-methyl-4-isothiazolin-3-one - whether classified under Customs Tariff Heading 2934 99 00 of Customs [Tariff] Act, 1975 or under CTH 3808 94 00 as disinfectants ? - HELD THAT:- The Learned Commissioner (Appeals) in deciding the classification of the imported goods under CTH 3808 94 00 of Customs Tariff Act, 1975, ignored the information obtained by the appellant from the Ministry of Agriculture certifying that the goods in question do not fall under the Schedule to the Insecticides Act, being not used as an insecticide but as preservatives. Without any basis, the Learned Commissioner (Appeals) has unilaterally come to the conclusion that these products are liable to be registered under Insecticides Act since classifiable under CTH 3808 94 00. No evidence has been adduced by the Revenue to establish that these products were used other than preservatives by the appellant. Appeal allowed - decided in favor of appellant.
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2019 (6) TMI 1077
Smuggling - Gold Biscuits of Foreign marking - no document showing the acquisition of gold biscuits could be produced - imposition of penalties - HELD THAT:- The investigation established the fact that gold biscuits of foreign origin were carried/smuggled by Shri Tanmoy Saha and Shri Alekh Hossain and ownership of the seized gold biscuits was claimed by Shri Sudip Saha. There is no reason to interfere with the conclusion of the Commissioner (Appeals) that the seized gold biscuits are liable for confiscation under Section 111(b) and (d) of the Customs Act, 1962 - the penalties imposed on the three appellants under Section 112 (b)(i), are justified considering their involvement in the smuggling of 10 pieces of gold biscuits of foreign origin - the penalties imposed under Section 112 (b)(i) on the three appellants for their purported smuggling on the basis of their voluntary statements only which is not corroborated with any evidence, have been rightly set aside by the First Appellate Authority as no penalty can be imposed on the appellants for their past acts of smuggling on presumption. Appeal dismissed.
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Corporate Laws
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2019 (6) TMI 1076
Disqualification of Directors. - Vires of Section 164(2)(a) of the Companies Act, 2013 as well as Section 54 of the Companies (Amendment) Act, 2017 - proviso has been inserted to clause (a) of sub-section (1) of Section 167 of the Act as well as Section 167(1)(a) itself. Whether Section 164(2)(a) of the Act is ultra vires Articles 14 and/or 19(1)(g) of the Constitution being manifestly arbitrary or on the principle of proportionality? - HELD THAT:- On perusal of Section 164(2) of the Act, in light of the above references, it is noted that a twofold consequence is prescribed if there is an infraction of either Section 164(2)(a) or (b), or both. The first is that a director of the defaulting company cannot be re-appointed as a director of the said company. Secondly, such a director cannot also be appointed as a director of any other company for a period of five years. The Parliament in its wisdom has prescribed the two-fold consequence under the Act though as per Section 274(1)(g) of 1956 Act, there was only one consequence viz., that a director of a defaulting company could not be appointed as director of any other company for a period of five years. But under Section 164(2) of the Act, a director of a defaulting company cannot be re-appointed as a director of a defaulting company for a period of five years. The prescription of a two-fold consequence cannot be held to be manifestly arbitrary as the Parliament in its wisdom has prescribed the same having regard to the objects sought to be achieved which have been elaborately stated by the Bombay High Court as well as Gujarat High Court and which are reiterated. The only aspect that requires further consideration is the expression is or has been a director of a company . On a reading of Section 164(2)(a) of the Act, it is clear that a person who is a director of the company when the default occurs i.e., when for any continuous period of three financial years, financial statements or annual returns are not filed would be faced with the consequences mentioned under the Section. But there has been a debate at the Bar over the expression has been a director of a company . Petitioners counsel contended that the expression has been cannot extend to a person who is a director of a defaulting company prior to the three material years. There is force in the said contention. The expression has been is not equivalent to the expression was . The phrase has to be interpreted to mean a person was a director during the period of three years i.e., continuous period of three financial years during which financial statements or annual returns were not filed and who may have since ceased to be a director. Even if such a director has subsequently ceased to be a director after the default has occurred, he would be disqualified. The vires of Section 274(1)(g) of the 1956 Act upheld - the said provision did not violate any fundamental right under Article 19(1)(g) of the Constitution. The ineligibility to be re-appointed as a director of the defaulting company under Section 164(2) of the Act is significant for, when juxtaposed with the fact that such a director cannot be re-appointed in any other company for a period of five years, (although any other company may not be in default), it is logical that such a director is also ineligible to be re-appointed as a director of the company in default. The ineligibility to be re-appointed as a director of a defaulting company stems from the fact that a director, being a member of the governing body of a company, must ensure that the company does not default either under Section 164(2)(a) or (b), as the case may be. Further, the ineligibility to be reappointed is not in the nature of a disqualification as under Section 164(1) of the Act, but only results in a temporary suspension for a period of five years which is in order to ensure compliances as stipulated under Section 164(2) of the Act. Moreover, under Section 164(1) of the Act, the material period resulting in the ineligibility is three years and not immediate which, in my view, is a reasonable period. Thus, Section 164(2)(a) of the Act resulting in an ineligibility for a director after a lapse of three consecutive financial years cannot be held to be capricious or a disproportionate repercussion, lacking in reasonableness or any rationale. Whether Section 164(2)(a) of the Act is in violation of principles of natural justice and hence ultra vires Article 14 of the Constitution as it does not envisage any hearing prior to disqualification or post-disqualification? - HELD THAT:- It becomes clear that there would be no dispute with regard to the fact that financial statements or annual returns are not filed by a company for three continuous financial years. Similarly, when there is a failure to repay the debentures accepted by a company or to pay interest thereon or to redeem debentures on the due date or to pay interest due thereon or to pay any dividend declared and such failure to pay or redeem continues for one year or more the ineligibility for re-appointment applies. When such facts are apparent and show a failure by the company, for whatsoever reason or cause, the director of such a company sustains a disqualification in the form of an ineligibility - But it is only concerned with there being violation of Section 164(2)(a) or (b) of the Act, as the Act considers the same to be a serious lapse on the part of the company and it affects the directors of such a company. The disqualification is by operation of law on an emerging and coming into existence of a set of facts. There is no legal infirmity in the said provision as there is no violation of principles of natural justice and Article 14 of the Constitution is not violated. Accordingly, point No.2 is answered against the petitioners. Whether Section 164(2)(a) of the Act has retrospective operation and therefore, is unreasonable and/or arbitrary as per Article 14 of the Constitution? - Whether there has been any illegal exercise of power by the concerned respondent-authority in publishing the List of Directors, including the names of petitioners as disqualified directors, under Section 164(2)(a) of the Act? - HELD THAT:- The consequences that would visit a director of a defaulting company as per Section 164(2) of the Act being distinct from what was envisaged under the 1956 Act, it is held that no period commencing prior to 01.04.2014 and ending after the said date can be the basis for reckoning the continuous period of three financial years during which financial statements or annual returns are not filed by any company. Thus, point No.4 is answered by holding that the List of directors disqualifying the petitioners herein with effect from 01.11.2016 till 31.10.2021 could not have published by taking into consideration a period prior to 01.04.2014 as well subsequent thereto while computing continuous period of three financial years under Section 164(2)(a) of the Act. Whether Section 167(1)(a) of the Act is ultra vires Article 14 and/or Article 19(1)(g) of the Constitution as being manifestly arbitrary? - Whether proviso to Section 167(1)(a) of the Act is ultra vires Articles 14 and/or 19(1)(g) of the Constitution as being manifestly arbitrary? - HELD THAT:- I find much force in the argument of learned ASG that the proviso is only clarificatory in nature as Section 167(1)(a) of the Act categorically states that the office of the director shall become vacant in case he incurs any of the disqualification specified in Section 164 of the Act . The aforesaid expression cannot be read down to refer only to those disqualifications under Section 164(1)(a) to (h) of the Act. It even incorporates a disqualification incurred under Section 164(2) as well as (3) of the Act. Thus, the object of introducing Section 167(1)(a) of the Actwhen such a provision was conspicuous by its absence in 1956 Act-is to bring in higher degree of transparency and accountability in corporate governance so as to ensure control over the companies in the interest of share-holders and the public in general and in the interest of Indian economy - I do not think that it could be contended by the petitioners that Section 167(1)(a) of the Act did not envisage vacation of office of a director under Section 164(2) of the Act. Under the proviso to Section 167(1)(a) of the Act, the director of a defaulting company continues to hold the office of Director despite disqualification, his DIN cannot be cancelled. On the issue of cancellation of DIN, reference was made to Companies (Appointment and Qualification of Directors) Rules, 2014. Under Rule 14, the consequences of disqualification of directors under Section 164(2) of the Act are mentioned. That every director shall inform to the company concerned about his disqualification under sub-section (2) of Section 164 of the Act in Form DIR-8 before he is appointed or re-appointed. Further, whenever a company fails to file the financial statements or annual returns, or fails to repay any deposit, interest, dividend, or fails to redeem its debentures, as specified in sub-section (2) of section 164, the company shall immediately file Form DIR-9, to the Registrar furnishing therein the names and address of all the directors of the Company during the relevant financial year. That cancellation or surrender or deactivation of DIN is stipulated in Rule 11. It is contended that Rule 11 does not permit cancellation of or deactivation of DIN on account of disqualification of a director under Section 164(2) of the Act at all. That DIN could be cancelled on account of the death of a director or a director being declared as a person of unsound mind by a competent Court or being adjudicated as a insolvent or for other reasons, but, not for suffering a disqualification under Section 164(2) of the Act.
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Insolvency & Bankruptcy
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2019 (6) TMI 1075
Maintainability of appeal - Initiation of CIRP - Corporate Debtor - Section 7 of the I B Code - HELD THAT:- Section 7 of I B Code providing for initiation of Corporate Insolvency Resolution Process by Financial Creditor came into force on 1st December, 2016. Remedy by way of triggering of insolvency resolution process on the ground of default committed qua the financial debt was admittedly not available to a Financial Creditor prior to such date. It is not disputed by learned counsel for the Appellant that the application under Section 7 of I B Code came to be filed by the Financial Creditor on 12th October, 2018. The triggering of Corporate Insolvency Resolution Process, therefore, cannot be said to be beyond limitation, more so as there has been acknowledgement of debt on 26th February, 2015 and remedy for initiation of Corporate Insolvency Resolution Process in terms of Section 7 of I B Code was not available prior to 1st December, 2016. That apart, there has been continuing cause of action as OA 1194 of 2016 filed by the Financial Creditor against the Corporate Debtor before the Debts Recovery Tribunal, Mumbai on 19th October, 2016 is still pending adjudication. Learned counsel for the Appellant made feeble attempt to contend that the debt acknowledgement letter dated 26th February, 2015 was manipulated and fictitious and same could not be made a basis for either reckoning the period of limitation or for entertaining claim. In absence of such plea having been raised before the Adjudicating Authority besides no complaint alleging forgery, fabrication/ fudging of record being lodged, this argument must be rejected with the contempt that it deserves. Appeal dismissed - decided against appellant.
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PMLA
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2019 (6) TMI 1074
Offence under PMLA - retention of the seized cash from the appellant s office - HELD THAT:- Reading of Sections 17 to 21 that outer limit upto the date for deciding the application for retention of property within the meaning of sub-section 4 of Section 21 is 180 days from the date of seizure of any property or records. The said period is not extendable. The person concerned/aggrieved party of such order, is entitled to file the appeal under Section 26 of the Act. The same shall be heard and after giving an opportunity of being heard, the appellant Tribunal shall pass the order either to confirm the order of retention or to modify or setting aside the same. PMLA is a Special Act. The provisions of the said Act are mandatory. They have to be applied as it. Being an independent Act, no different meaning can be given. They have to be interpreted as it is. It is correct that the power to attach or seize or freeze a property can be exercised only if the officer concerned has material in his possession who has a reason to believe that property sought to be attached or seized is proceed of crime or related to the crime irrespective as to whether complaint under the schedule offence and prosecution complaint under PMLA is filed or not against the party who has in his possession of proceeds of crime. But, the situation where the investigation was being done on the basis of a mere suspicion against the party where the statute provides prescribed period of time and mandates the condition that it would continue during investigation for a period not exceeding ninety days. Having in possession of proceed of crime and period of investigation on the basis of suspicion are two different situations. The law laid down earlier where the time limit was not provided may not be applicable because of change of situation by virtue of amendment which was carried on 19.4.2018, the specific period is prescribed in the Act for the purpose of investigation. Earlier, no specific timeline was set to complete the investigation and to file the prosecution complaint. The mandates now is changed whereby it is mandated that the retention shall continue during investigation for a period not exceeding ninety days, as provided under section 8(3)(a) of the Act or under the corresponding law of any other country, before the competent court of criminal jurisdiction outside India. The second part of the provision is not applicable in the absence of such situation. In the light of above, the appeal is allowed. The impugned order dated 02.04.2018 against the appellant is set-aside.
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Service Tax
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2019 (6) TMI 1073
Admissibility of appeal - sale of space for advertisements service - inclusion of amount charged and received by the appellant from M/s. Sporting Frontiers for selling advertisement rights in respect of cricket stadium - double taxation - penalties - HELD THAT:- The appeal is admitted on the substantial questions of law.
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2019 (6) TMI 1072
Maintainability of petition - demand of service tax and levy of penalty - alternative efficacious remedy - Section 37(C) of the Central Excise Act, 1944 - HELD THAT:- We are not impressed by the submission of the learned counsel that this petition may be entertained without asking the writ applicant to avail the alternative remedy of preferring an appeal before the Appellate Tribunal. We are not going into the issue whether the grievance redressed by the writ-applicant as regards non-supply of the documents is genuine or not. Let this argument be canvassed before the Appellate Tribunal. We leave it for the Appellate Tribunal to consider such argument, if at all the writ-applicant deem fit to prefer an appeal before the Tribunal. Writ-application disposed off without expressing any opinion on merits only on the ground that the petitioner has an alternative efficacious remedy of preferring an appeal under Section 86 as referred to above before the Appellate Tribunal.
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2019 (6) TMI 1071
Short payment of service tax - dredging services - period 2009 -10 - non-payment of service tax for the period 2009 -10 and also non-filing of returns due to financial problem - Extended period of limitation - penalty - HELD THAT:- The fact remains that the Appellant had recorded all the transactions in books of accounts and produced the same before the audit officers during audit. However, the appellant failed to file necessary periodical ST-3 returns to the department, therefore, the fact regarding non payment of service tax was not brought to the notice of department. Therefore, extended period is rightly invoked by the lower authority; accordingly, the demand majority of which amount paid by the appellant is sustainable. Penalty u/s 76 and 78 of FA - HELD THAT:- The penalty under Section 76 78 both cannot be imposed simultaneously in the view of Honb le Gujarat High Court judgement in case of Raval Trading Co., Vs. CST [ 2016 (2) TMI 172 - GUJARAT HIGH COURT ], accordingly, penalty imposed under Section 76 is set aside - As regard penalty imposed under Section 78, as per the appellant s submission, the non payment of service tax is due to financial difficulties. It is also observed that the appellant have recorded the transaction in their books of account and from which only audit could point out the non payment of service tax. With these facts, the appellant has made out a strong case for waiver of penalty under Section 78 invoking Section 80 of the Finance Act, 1994. The appellant have made out a case for waiver of penalty imposed under Section 78 invoking Section 80 of the Finance Act, 1994. Therefore, despite the extended period of demand is invoked, the penalty imposed under Section 78 is though sustainable otherwise, but in the facts and circumstances of the case, there is reason to invoke section 80 - penalty set aside. Scope of SCN - demand of ₹ 7,07,616/- - HELD THAT:- The demand of ₹ 7,07,616/- has been confirmed which was not even proposed in show cause notice which is not sustainable being beyond the scope of show cause notice - demand not sustainable. Appeal allowed in part.
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2019 (6) TMI 1070
Levy of Service Tax - appellant provided to government authorities in respect of erection, commissioning and installation of water treatment plant - HELD THAT:- The appellant had submitted the contract agreement with various government authorities from which it can be seen that whether the service provided by the appellant is for commercial purpose or for other public amenities. Despite the contract submitted to the original authority, he has not considered the same properly. As regard the claim of the appellant that the services are of work contract as the same was provided as turnkey project with material and work contract tax was paid in this regard. The necessary document was not produced before the original authority, now he has produced certain documents such as, CA Certificate, payment of work contract tax, etc., therefore the entire matter needs to be re-considered - appeal allowed by way of remand.
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2019 (6) TMI 1069
Renting of immovable property Service - vacant land given on rent to the lessee on which the Hutch Company has erected and installed transmission tower for mobile telephone - HELD THAT:- While renting of immovable property by the appellant to M/s Hutch Company, it is admittedly a vacant land on which Hutch Company has installed a transmission tower for mobile telephone on their own, therefore, the installation of transmission tower cannot be attributed to the appellant. The appellant s activity is confined to providing the vacant land to M/s Hutch Company, therefore, it is clear that the appellant has rented out only vacant land. With this amendment, it is clear that prior to 01.07.2010, the vacant land given on lease subsequently any construction on such land at a later stage was not covered under immovable property. Accordingly, the activity of the appellant was not taxable prior to 01.07.2010, therefore, the demand is not sustainable. Appeal allowed - decided in favor of appellant.
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Central Excise
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2019 (6) TMI 1068
Recovery of penalty against the company/ partnership firm - Cenvat Credit - Application seeking to vacate the interim relief - HELD THAT:- The present application has been preferred on absolute misreading of the decision of the Supreme Court in Asian Resurfacing of Road Agency Pvt. Ltd. and another vs. Central Bureau of Investigation [2018 (4) TMI 3 - SUPREME COURT] , more particularly, the observations made in paras 34 and 35 referred to above. The observations of the Supreme Court with regard to continuation of any interim order beyond the period of six months in any civil or criminal proceedings arising from a trial fell altogether in a different context. The observations made in the decision of the Supreme Court in the context of Civil and Criminal litigation cannot be made applicable in a Tax Appeal. An identical issue fell for the consideration of a Division Bench of the High Court of Bombay in the case of ORACLE FINANCIAL SERVICES SOFTWARE LTD, MUMBAI VERSUS DEPUTY COMMISSIONER OF INCOME TAX-13 (1) (1) ORS. [2019 (3) TMI 1320 - BOMBAY HIGH COURT] , where it was held that power of the Assessing Officer to review the situation every six months, would not authorize him to lift the stay previously granted after full consideration and insist on full payment of tax without the assessee being responsible for delay in disposal of the appeal or any other such similar material change in circumstances. There is no good reason to vacate the interim order passed by this court. If the Revenue is so much concerned about the interim relief which is operating in favour of the assessee, than it should take necessary steps to see that the Tax Appeal is taken up for final hearing - application dismissed.
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2019 (6) TMI 1067
Area based exemption - Disallowing certain Investments made in North Eastern states - establishment of manufacturing unit - Demand of duty with interest - HELD THAT:- Indisputably, economically and industrially, the North East India represents one of the least developed regions of the country and that appears to be one of the reason for which the Central Government has come out with a scheme to encourage entrepreneurs/manufacturers to establish their manufacturing units in the seven North Eastern States in availing exemption from central excise by investing in plant and machinery in the manufacturing units or infrastructure or civil works or social projects in the seven North Eastern States including Tripura in availing such benefits - The Central Government has come out with various Central Development Projects in the North East sharing 90 per cent of the cost which was later on converted into 100 per cent funding by the Central Government for projects in the region and also introduced Act East Policy to enhance the importance of the region in engaging with South East Asian neighbours and to promote North East Special Infrastructure Development Scheme and with this object behind it Central Government has come with a scheme to grant exemption from the excise duty under its notifications dated 25-8-2003, 21-1-2004 followed with dated 9-7-2004 respectively. The Central Government in exercise of its powers conferred under sub-section (1) of Section 5A of the Central Excise Act, 1944 read with sub-section (3) of Section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 came with the notification dated 25th August, 2003 opening investments in plant and machinery in a manufacturing unit which is located in the seven North Eastern States for exemption of Central Excise to a limited extent, but it reveals that the Central Government later realize that it is not advisable to remain confined to one sector of plant and machinery and the other sectors also have a potential to cater developments in the States and also the sector of infrastructure or civil works or social projects in the seven North Eastern States to make the manufacturer flexible to claim 100% exemption from Central Excise subject to fulfilment of other conditions and in supersession of the earlier notification dated 25th August, 2003 introduced Notification No. 8/2004, dated 21st January, 2004 but actions of the manufacturer for claiming exemption on investments remains directly under the aegis to the satisfaction of the committee under Condition D of the notification. Indisputably, in the instant case, the petitioner opened the escrow account and all operations including withdrawals and investments have been made with a prior approval of the Jurisdictional Commissioner of Central Excise who has been introduced as an officer to monitor the functioning of the manufacturers with restrictions and adequate check and balances over withdrawals from the escrow account and to keep a vigil over the investments which are made by the manufacturer in the two identified sectors identified in Condition B of the notification being a watchdog to safeguard the interest of the revenue and it was indisputably complied with by the petitioner and it is not the case of the respondents that there was any objection ever raised by the Jurisdictional Commissioner of Central Excise either while withdrawals from the escrow account or in reference to the investments made by the petitioner in the sectors indicated in Condition B of the notification. It appears to be a case of double penalty to a manufacturer being a law-abiding person who withdrew the money from the escrow account and made investments in the identified sectors referred to in Condition B with prior approval of the Jurisdictional Commissioner of Central Excise and that has been later disallowed by the committee and recovery proceedings are initiated. In the given circumstances, the money which the manufacturer withdrew had already been invested under the sectors which are identified under Condition B and is not open at his disposal, at the same time after the decision being taken by the committee disallowing such investments, manufacturer has been called upon to deposit such investments which has been disallowed with interest which could never be the intention of Central Government in extending the exemptions to such of the manufacturers who are investing money in the seven North Eastern States to seek exemption from the excise duty with the prior approval of the Jurisdictional Commissioner of Central Excise. The procedure adopted by the committee deserves to be reviewed in the light of what has been observed by us and as a word of caution we would like to observe that the Jurisdictional Commissioner of Central Excise or the Committee is supposed to interpret conditions of the notifications liberally to its optimum vitality but implement strictly in true spirit. Petition allowed - decided in favor of petitioner.
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2019 (6) TMI 1066
CENVAT Credit - fake invoices - fraudulent availment of CENVAT Credit based on CENVAT invoices issued by certain registered Central Excise Dealers without actual supply of material - HELD THAT:- It is an undisputed fact that the appellants have availed credit on fictitious invoices. There was no movement of goods at all. As per Rule 3 of CCR 2004, credit can be availed on invoices issued by the manufacturer/dealers. The credit is eligible on the duty paid goods/inputs received in the factory and used in manufacture of finished products. In the present case, there was no receipt of goods into the factory. The book adjustments with regard to CENVAT duty has to be as per the provisions of CENVAT Credit Rules 2004. The provision clearly states that credit is available when the goods are received in the factory. The law does not allow to issue invoices without receipt of goods. It is conceded by the appellants that fictitious invoices were generated and passed on. Irregular availment of CENVAT Credit is very much clear from the narration of the facts itself and the said fraud would not have come to light but for the investigations conducted by the Officers of DGCEI. It is sufficiently established that the appellants had deliberately suppressed and misstated facts with intent to avail wrong CENVAT Credit which they are not otherwise eligible - the impugned orders do not call for any interference with regard to confirmation of demand or penalties on the appellants. Demand of penalty - HELD THAT:- When equal penalty has been imposed on the assessee M/s Reliance Cellulose Products Limited, the penalty of ₹ 22.00 lakhs on the Managing Director, in our view, is on higher side. We, therefore, reduce this penalty to ₹ 10.00 lakhs. Only. But for this interference, the confirmation of demand, interest or the penalties imposed on other assessees as well as Managing Director of M/s Pavan Drugs Chemicals Pvt. Ltd. does not call for any interference. Appeal allowed in part.
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2019 (6) TMI 1065
Classification of goods - printing duplex board and kraft paper - whether fall under Chapter 48 or 49 of the First Schedule to the Central Excise Tariff Act, 1985? - HELD THAT:- The items in dispute being registers, answer sheets, certificates, writing pads, books, receipts, school diaries, school prospectus etc., are all printed with name and logo of particular organisations. Accordingly by virtue of Chapter Note 12 to Chapter 48, these items will fall in Chapter 49 being goods of printing industry - We find that not a single RUD, is in form of stationery which is meant for general use. The appellant is not liable to Excise duty as the items in dispute printed by them fall under Chapter 49 and the tax rate under CETH Chapter 49 is nil - appeal allowed - decided in favor of appellant.
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