TMI Tax Updates - e-Newsletter
June 3, 2019

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy Service Tax Central Excise Indian Laws

Articles

1. KERALA FLOOD CESS

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. GST Revenue collection for May, 2019

2. Withdrawal of India’s GSP benefits by USA

3. Provisional Estimates of Annual National Income, 2018-19 and Quarterly Estimates(Q4) of Gross Domestic Product, 2018-19

4. Index of Eight Core Industries (Base: 2011-12=100) April, 2019

5. PM-KISAN Scheme extension to include all eligible farmer families irrespective of the size of land holdings

Notifications

Central Excise

1. 02/2019 - dated 29-5-2019 - CE (NT)

Central Board of Indirect Taxes and Customs, appoints the officers

Customs

2. 38/2019 - dated 31-5-2019 - Cus (NT)

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

GST - States

3. G.O. (P) No. 82/2019/TAXES - dated 31-5-2019 - Kerala SGST

Kerala Flood Cess (Amendment) Rules, 2019.

4. F-A-3-33-2017-1-V-(42) - dated 17-5-2019 - Madhya Pradesh SGST

Amendment in the Notification No. F-A-3-33-2017-1-V(42) dated 29th June, 2017.

5. F-A-3-32-2017-1-V-(37) - dated 17-5-2019 - Madhya Pradesh SGST

Amendment in the Notification No. F-A-3-32-2017-1-V(41) dated 29th June, 2017

6. F-A-3-22-2019-1-V-(45) - dated 17-5-2019 - Madhya Pradesh SGST

The Madhya Pradesh Goods and Service Tax Rules, 2019

7. KA.NI-2-691/XI-9(47) - dated 1-5-2019 - Uttar Pradesh SGST

Amendments in the notification No. KA.NI-2-836/XI-9(47)/17-U.P.Act-1-2017-Order-(06)-2017 dated 30th June, 2017.

8. KA.NI-2-690/XI-9(47)/17 - dated 1-5-2019 - Uttar Pradesh SGST

Notifies the following classes of registered persons.

9. KA.NI-2-689/XI-9(47)/17 - dated 1-5-2019 - Uttar Pradesh SGST

Amendments in the Notification No.KA.NI-2-844/XI-9(47)/17-U.P.Act-1-2017-Order-(11)-2017 dated 30th June, 2017.

10. KA.NI-2-688/XI-9(47)/17 - dated 1-5-2019 - Uttar Pradesh SGST

Amendments in the Notification No. KA.NI.-2-843/XI-9(47)/17-U.P. Act-1-2017-order-(10)-2017 Dated 30th June, 2017.

11. KA.NI-2-687/XI-9(47)/17 - dated 1-5-2019 - Uttar Pradesh SGST

Prescribing persons liable to pay tax on reverse charge for the Uttar Pradesh Goods and Services Tax Act, 2017.

Indian Laws

12. F. No. 4(7)-B(W&M)/2019 - G.S.R. 394(E) - dated 30-5-2019 - Indian Law

Sovereign Gold Bond Scheme 2019-20

Highlights / Catch Notes

GST

• Court Presumes Culpable Mental State in Penal Code Offences; Higher Proof Standard Required, FIR Quash Request Denied.

  Case-Laws - HC : Offences punishable under Penal Code OR UPGST Act - mensrea - Section 135 of the U.P.Act provide that in any prosecution for an offence, which requires a cuplable mental state on the part of the accused, the court shall presume the existence of such mental state - the standard of proof would have to be higher to prove commission of an offence punishable under the Penal Code than the U.P. Act - quashing of FIR rejected
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• Concurrent Legal Proceedings Allowed Under Penal Code, CGST, and UPGST Acts; FIR Filing Not Restricted by UPGST.

  Case-Laws - HC : Offences punishable under two or more enactments - Penal Code/CGST Act/ UPGST Act(UP Act) - there is no provision in the U.P. Act which may suggest that the provisions of the U.P. Act overrides or expressly or impliedly repeals the provisions of the Penal Code or bar in the U.P. Act on lodging an FIR under the Code - contention that proceeding could only be drawn against him under the UP GST Act, is liable to be rejected
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• High Court Must Consider Supreme Court Order in Pre-Arrest Bail Cases Involving GST Offenses and Non-Compliance.

  Case-Laws - SC : Grant/non grant of pre-arrest Bail - offence and non compliance of GST provisions - HC directed to keep SC order before granting pre-arrest bail.
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Income Tax

• Taxpayer's Stock Valuation Method u/s 145A Challenged; Case Remanded for Fresh Evaluation.

  Case-Laws - AT : Disallowance on account of valuation of stock u/s 145A - assessee is following exclusive method of accounting for valuing closing stock wherein unutilised MODVAT/Cenvat Credit is not added to the value of closing stock - it is mandatory for taxpayers to follow inclusive method of accounting as per Section 145A - remanded for denovo determination
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• Additions u/ss 41(1) & 68 Impermissible Due to Genuine Transactions and Later Acceptance by Revenue Authorities.

  Case-Laws - AT : Addition u/s. 41 (1) or u/s 68 - no reply by sundry creditors u/s 133(6) - AO has accepted purchases as genuine and the amount outstanding in the name of sundry creditors have been paid through banking channels in subsequent years and purchases in subsequent years has been accepted by the revenue without any doubt - addition not permissible merely because the said creditors were not produced before the AO
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• ITAT Evaluates Stay Petition, Focuses on Royalty Issue After Setting Aside TP Adjustment and Attribution in Other Years.

  Case-Laws - HC : Stay petition - demand raised by AO on three issue, TP adjustment,attribution and royalty - TP adjustment and attribution issue relating to the other assessment years being set aside by the Tribunal - hence the issue contested before the Tribunal by the revenue was only relating to the royalty issue and amount of stay determined based on royalty - ITAT rightly quantified amount for stay
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• Court Rules Invalid Conversion of Survey to Search Without Pending Proceedings u/s 131(1) of Income Tax Act.

  Case-Laws - HC : Validity of Search and seizure - conversion of survey in search - provisions of Section 131(1) could be invoked only if some proceedings were pending - nowhere any satisfaction recorded either of noncooperation or a suspicion that income has been concealed by the petitioner warranting resort to the process of search and seizure - the impugned action of the respondents is quashed
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• LTCG Income Properly Recorded, Not "Undisclosed" Under Sec 271AAB; No Penalty Imposed After Search.

  Case-Laws - AT : Penalty u/s 271AAB - document found during the search is not an incriminating material when the entry and the income were duly recorded in the books of account - income surrendered on account of LTCG in the statement recorded u/s 132(4) does not fall in the ambit of definition of undisclosed income as contemplated in Explanation to section 271AAB - No penalty
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• Penalty u/s 271(1)(c) Not Imposed Due to Lack of Specification on Inaccurate Particulars by Assessing Officer.

  Case-Laws - AT : Penalty u/s 271(1)(c) - advance written off - business or capital loss - genuineness of loss is not in dispute - in the assessment order there is no mention about furnishing of inaccurate particulars and simply made disallowed - in penalty order AO has not specified which particular furnished by the assessee was incorrect, erroneous or false - no penalty
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• Penalty Quashed Due to Discrepancy Between Charge Explained and Actual Levy u/s 27(1)(c) for Income Concealment.

  Case-Laws - AT : Penalty u/s 27(1)(c) - addition u/s 68/69 for cash deposit in bank account - penalty has been initiated on the charge of furnishing inaccurate particulars, but Ld.AO levied penalty on concealment of income - assessee was asked to explain penalty on one count whereas levy has been on other count - itself sufficient for quashing of penalty
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• Interest Deduction u/s 80-IB: Offsetting FDR Interest with Cash Credit Interest Payments Validated by Bank Statements.

  Case-Laws - AT : Deduction u/s 80-IB - netting off of interest - assessee has purchased the FDRs from the cash credit accounts on which it has paid interest which can proved from the statement of account issued by the Canara Bank and SBI, the interest earned on the FDRs is eligible to be set off from/against interest paid on cash credit account
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• Tax Penalty Deleted: Revenue Authority Didn't Appeal Decision on Undisclosed Income u/s 271AAA. Tax Paid Before Return Filing.

  Case-Laws - AT : Penalty u/s. 271AAA - revenue is not in appeal against the findings of the CIT(A) acceptance of the contentions of the appellant with regard to condition of substantiating the manner in which the undisclosed income was derived - further as per Form 26AS tax due was also deposited on much prior to the filing of the return of income - penalty deleted
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• Stay of Demand Granted on Penalty u/s 271(1)(C) for Disallowed Interest and Fees; Prima Facie Case Proven.

  Case-Laws - AT : Stay of demand - Penalty u/s. 271(1)(C) on disallowance of interest and professional fees - assessee has established the prima facie case and balance of convenience in its favour for grant of stay on the balance outstanding demand - stay granted
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• Adhoc Addition to Closing WIP Deviates from Consistent Practices Under AS 7 and Section 145 Compliance.

  Case-Laws - AT : Addition of revaluation of closing WIP - the work in progress followed at cost + net profit so as to bring the contract revenue for the period lying with the requirement of AS 7 as prescribed by ICAI and adopted u/s 145 - method of accounting consistently followed year after year - adhoc addition wrongly made
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Customs

• The petitioner's absence in the proceedings does not justify delaying the adjudication order.

  Case-Laws - HC : The failure by the Petitioner to appear in those proceedings cannot be an excuse to delay the adjudication order.
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• Appellant Seeks Revenue Approval to Mutilate Imported Scrap for Clearance; Chartered Engineers Find Some Material Serviceable.

  Case-Laws - AT : Valuation of imported goods - Scrap - reports of Chartered Engineers suggest that part of the material is serviceable and could also be used as such - the appellant had approached Revenue for mutilation of goods which may be permitted to clear the scrap after mutilation at their own cost
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Service Tax

• Appellants' task-specific agreements do not qualify as "Manpower Recruitment or Supply Agency Service" under service tax rules.

  Case-Laws - AT : Classification of services - the appellants were not required to merely supply manpower or make such manpower available to M/s ONGC, but were required to carry out the task outlined in the agreement - The activity cannot fall within the category of “Manpower Recruitment or Supply Agency Service”
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• Service Tax Refunds Allowed for Mistaken Payments, No Limitation Period Applies.

  Case-Laws - AT : Refund of service tax - When the amount has been paid wrongly by mistake and when service tax is not leviable on the activity, the amount paid does not take the colour of service tax - Period of limitation not applicable.
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• Co-owners' Service Tax Liability on Rent: Threshold Limit Dispute Remanded for Verification.

  Case-Laws - AT : Threshold limit for liable to pay service tax - Renting of Immovable Property Services - co-owner of the Complex - it is not disputed that the income by way of rent is received by them separately and reflected in their income tax returns - if the rent is shared between the appellant and her husband, they would come under the threshold limit - remanded for verification
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• Penalty Waived for Late Service Tax Payment Due to Client Delays u/ss 76 and 80 of the Finance Act.

  Case-Laws - AT : Penalty u/s 76 of FA - delay in payment of service tax - appellant has been reflecting the tax liability in their ST-3 returns but could not pay up the tax only because they did not receive the payments from their clients within proper time - reasonable cause for the delay in paying the service tax - a fit case for invoking Section 80 of the FA - no penalty
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• Penalty for Late Service Tax Payment Nullified; Voluntary Payment Made; No Evidence of Fraud or Suppression Found.

  Case-Laws - AT : Imposition of penalty - Delayed payment of service tax with interest - at the first place, the SCN itself was unnecessary as the duty and interest having paid voluntarily, the Revenue cannot allege suppression or fraud - penalty order is set aside
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• Refund Approved: Appellant's Activities Not Manpower Supply u/s 65(105)(k), Claim Valid for Typing & Housekeeping Services.

  Case-Laws - AT : Refund claim - duty paid under protest on direction of audit - definition of manpower supply u/s 65(105)(k) is not applicable to the appellant as he has not supplied the manpower but is only executing the work on typing and housekeeping for which he is paid and if his work is found to be unsatisfactory, the contract could be terminated as per the terms of the Agreement - refund allowable
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Central Excise

• CENVAT Credit Dispute on Capital Goods: Demand and Penalty Confirmed, Personal Penalty Removed Based on Probabilities.

  Case-Laws - AT : CENVAT credit - capital goods - pre-fabricated structure - the department is not required to prove a case of mathematical precision and is required to prove a case with the pre-ponderance of probabilities - demand confirmed with penalty - However personal penalty deleted.
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• Assessee's Demand Canceled Despite Procedural Lapse in Goods Removal Documented via Delivery Challans and R.G. 1 Returns.

  Case-Laws - AT : Clandestine removal - All the removals done only on delivery challans, had been reflected in their R.G. 1 returns, though specific permission for such removals was not obtained - assessee also got their ground plan endorsed with a portion approved by the jurisdictional Range Superintendent for storing machineries - procedural lapse in not having followed the correct protocol for removal of such goods - demand canceled
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• CENVAT Credit for Outward Transport Beyond Removal Point Ineligible Post-March 2008, Confirms Supreme Court.

  Case-Laws - HC : CENVAT Credit - Goods Transport Agency services for outward transportation of goods beyond the place of removal is eligible within the meaning of ‘input service’ as defined under CCR,2004 - not eligible in view of the amended definition of “input service” w.e.f. 01.03.2008 and also in the light of judgment of the Supreme Court
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Case Laws:

• GST

• 2019 (6) TMI 58
  Grant of pre-arrest Bail - HELD THAT:- As the accused-respondents have been granted the privilege of pre-arrest bail by the High Court by the impugned orders, at this stage, we are not inclined to interfere with the same. However, we make it clear that the High Courts while entertaining such request in future, will keep in mind that this Court by order passed in P.V. RAMANA REDDY VERSUS UNION OF INDIA ORS. [ 2019 (5) TMI 1528 - SUPREME COURT] had dismissed the special leave petition filed against the judgment and order of the Telangana High Court in a similar matter, wherein the High Court of Telangana had taken a view contrary to what has been held by the High Court in the present case.

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• 2019 (6) TMI 57
  Extension of time period for filing of GST Tran-1 - transitional input tax credit - transition to GST Regime - HELD THAT:- The respondents are directed to reopen the portal of the petitioner within two weeks from today. In the event they do not do so, they will entertain the GST TRAN-1 of the petitioner manually and pass orders on it after due verification of the credits as claimed by the petitioner. List this matter on 08.07.2019.

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• 2019 (6) TMI 56
  Processing of GST TRAN-I form - grievance of the petitioner is that he had applied manually before the respondents for processing of GST TRAN-I form but his application has been rejected due to which he is likely to suffer loss of the credit - HELD THAT:- Without prejudice to the merits of the case, respondents are directed to allow the petitioner to make fresh application and in case the petitioner moves any application within next 15 days from today, his application shall be considered and processed by the respondents in accordance with law. Petition disposed off.

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• 2019 (6) TMI 55
  Offences punishable under two or more enactments - mutual exclusion of Indian Penal Code and CGST Act/ UPGST Act (UP Act) - an offence of cheating - as per FIR dealer fraudulently, with a dishonest intention, by submitting false documents, with an intention to evade taxes, obtained registration, thereafter, took inward supply and passed on the goods to end users, without generating outward supply bills, received money in cash and deposited the same in bank account which was not declared at the time of seeking registration - quashing of FIR - bail/ stay on arrest HELD THAT:- The relevant provisions of the U.P. Act as also the Penal Code and the Code, we find that Sections 69, 134, and 135 of the U.P. Act are applicable in respect of offences punishable under the U.P. Act. - They have no application on offences punishable under the Penal Code. Further, there is no provision in the U.P. Act, at least shown to us, which may suggest that the provisions of the U.P. Act overrides or expressly or impliedly repeals the provisions of the Penal Code. There is also no bar in the U.P. Act on lodging an FIR under the Code for offences punishable under the Penal Code even though, for the same act/ conduct, prosecution can be launched under the U.P. Act. Rather, section 131 of the U.P. Act impliedly saves the provisions of the Penal Code by providing that no confiscation made or penalty imposed under the provisions of the Act or the rules made thereunder shall prevent the infliction of any other punishment to which the person affected thereby is liable under the provisions of the U.P. Act or under any other law for the time being in force. The argument of the learned counsel for the petitioner that except for offences specified in sub-section (5) of section 132, sub-section (4) of section 132 of the U.P. Act renders all offences under the U.P. Act non cognizable, therefore no FIR can be lodged, is not acceptable, because sub-section (4) speaks of offences under the U.P. Act and not in respect of offences under the Penal Code. It is noteworthy that section 135 of the U.P. Act makes a significant departure from general law by providing that in any prosecution for an offence under the U.P. Act, which requires a cuplable mental state on the part of the accused, the court shall presume the existence of such mental state. The same does not hold true for offences punishable under the Penal Code. Hence, to prove mensrea , which is one of the necessary ingredients of an offence punishable under the Penal Code, the standard of proof would have to be higher to prove commission of an offence punishable under the Penal Code than what would be required to prove an offence punishable under the U.P. Act. As such, the offences punishable under the Penal Code are qualitatively different from an offence punishable under the U.P. Act. The contention of the learned counsel for the petitioner that no first information report can be lodged against the petitioner under the provisions of the Code of Criminal Procedure for offences punishable under the Indian Penal Code, as proceeding could only be drawn against him under the U.P. Goods and Services Tax Act, 2017, is liable to be rejected and is, accordingly, rejected. We find that, prima facie, necessary ingredients of an offence of cheating, by submitting false information and documents, are clearly spelt out. Because, according to the allegations a bogus firm was got registered by showing false and bogus addresses of business; and, by taking advantage of such registration, inward e-way bills were generated to make purchase of goods worth 35 odd crores and, thereafter, without generating outward supply bills, huge amount of money was deposited in cash in undisclosed bank account, suggesting that goods were sold without proper documentation, with a view to evade taxes. It cannot, therefore, be said that a bare reading of the impugned FIR does not disclose commission of cognizable offences punishable under the Penal Code. In a few decisions of the apex court, it has been held that, in suitable cases, to ensure that a person s liberty is not jeopardized, on account of false implication, protection from arrest, pending investigation, may be granted by superior courts but that power is not ordinarily to be exercised in matters relating to economic fraud. As, in such matters, stay on arrest may become a hurdle in thorough investigation of the matter, particularly in tracing out the money trail. - petition dismissed

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• 2019 (6) TMI 54
  GST TRAN-I form - grievance of the petitioner is that he had applied manually before the respondents for processing of GST TRAN-I form but his application has been rejected due to which he is likely to suffer loss of the credit - HELD THAT:- Considering the facts and circumstances of the case, but without prejudice to the merits of the case, respondents are directed to allow the petitioner to make fresh application and in case the petitioner moves any application within next 15 days from today, his application shall be considered and processed by the respondents in accordance with law. Petition disposed off.

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• 2019 (6) TMI 53
  Processing of Form TRAN-1 credit - Input Tax Credit - HELD THAT:- The Respondents are directed to process the Petitioner s claim for the TRAN-1 credit if tendered manually within two weeks from today. If found eligible, the credit will be allowed to the Petitioner in accordance with law, without undue delay. A report in this regard be placed on record by the Respondents by the next date. List on 10th October, 2019 for compliance.

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• Income Tax

• 2019 (6) TMI 52
  Validity of Search and seizure proceedings - petitioner has contended that powers u/s 131(1) can be invoked only if the proceedings are pending, which is countered by the respondents with reference to Section 131(1A) - HELD THAT:- If power u/s 131(1) is held to be exercisable at any time and at any stage, proceeding or no proceeding, pending or not pending, instituted or not instituted and regardless of whether there is or there is not reason to believe, it may as well result in mischief and/or likely abuse and/or arbitrariness. A completed assessment is a valuable right. It cannot be lightly ignored nor can it, at the mere whim of the officer, be put into jeopardy. To permit such a course would be akin to permitting entry into the penumbra so speculative uncertainty. For reopening an assessment, the Act sets down stringent conditions. The same must first be fulfilled before issuing summons to the assessee. A request simpliciter to the assessee to assist without anything more and without any consequence in default may stand upon an altogether different footing than a summons u/s 131(1) with penalty in default of compliance therewith. Such, however, is not the case here. Similarly, we are in agreement with the argument of the learned counsel for the petitioner that provisions of Section 131(1) could be invoked only if some proceedings were pending. In the instant case there was only a survey operation and no proceedings were pending at that point of time. But the income-tax authority exercised the powers of a court in the absence of any pending proceedings. This issue was determined by a Division Bench of Patna High Court in Rina Sen v. Commissioner of Income-Tax and others [ 1998 (8) TMI 76 - PATNA HIGH COURT] To our minds the income-tax authority violated the procedure completely. Nowhere was any satisfaction recorded either of noncooperation of the petitioner or a suspicion that income has been concealed by the petitioner warranting resort to the process of search and seizure. No hesitation to conclude that the present petition deserves to succeed. The impugned action of the respondents is quashed.

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• 2019 (6) TMI 51
  Monetary limit for maintainability of appeal in HC - tax effect - Addition on account of LTCG on sale of agricultural land - entitled for exemption u/s. 2(14) - HELD THAT:- Revenue fairly concedes that the appeal was filed way back in June, 2018. By virtue of the new litigation policy and the circular issued subsequently on 11.07.2018 by the Central Board of Direct Taxes (CBDT), the subject matter of litigation for approaching the High Court shall be of a minimum value of 50,00,000/- which requirement is not satisfied in the instant case, as in the present case, the tax effect is to the extent of 2,36,480/- only. This Court is also aware of the fact that the scope of the said circular was considered by the Apex Court and in terms of the contents of such circular, it has been held that the same is having retrospective application i.e. in respect of the pending litigations as well. Learned Standing Counsel seeks permission of this Court to withdraw this appeal.

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• 2019 (6) TMI 50
  Stay petition - Transfer pricing and attribution issues as well as confirmation of royalty - HELD THAT:- The issue contested before the Tribunal by the revenue in the present proceedings (stay application) was only relating to the royalty issue and the same is further substantiated in the pleadings of the revenue before this Court This Court is astound by the stand of the revenue insisting for consideration of the entire demand including the transfer pricing and attribution, the same relating to the other assessment years being set aside by the Tribunal. On the remand order challenged before this Court, this Court has directed that no final order shall be passed by the TPO without obtaining special leave of the Court during the pendency of the appeals. The arguments of the revenue requires to be negated insofar as the entire demand to be considered for deciding the stay application. It is clear that the demand relating to the royalty issue alone requires to be considered while adjudicating upon the stay application and the same cannot be enlarged at this stage to include the demand raised on transfer pricing and attribution. This Court is of the considered opinion that no arbitrariness or perversity is found in the interim order of the Tribunal as regards the quantifying the sum of 475 crores to be paid by the assessee as a condition for grant of stay. However, the split-up of payment directed by the Tribunal warrants interference to balance the equities on both the sides. Considering the totality of circumstances of the case, this Court deems it appropriate to direct the assessee to pay a sum of 400 Crores on or before 31.03.2019. The balance amount of 75 Crores shall be paid in two installments

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• 2019 (6) TMI 49
  TP adjustment - Comparable selection - functional dissimilarity - HELD THAT:- EClerx Services Ltd this comparable is a best KPO company outsourcing substantial work to 3rd parties and that assessee is only providing back-office support services with its own human resource to the AEs. Further it has not been disputed that there is any change in the functionality of either companies from earlier years. Under such circumstances we direct Ld. TPO to exclude this comparable from the finalist. Infosys BPO Ltd and TCS E-Serve Ltd. - TCS E-Serve shows that this company is engaged in business process services to the banking and financial services industries which is considered as the primary segment. It is observed that the ownership of TCS e-services with Citibank group and which is a high brand value. See PR. COMMISSIONER OF INCOME TAX VERSUS B.C. MANAGEMENT SERVICES PVT. LTD. [ 2017 (12) TMI 255 - DELHI HIGH COURT] Benchmarking the international transaction pertaining to purchase of fixed assets at nil - MAM selection - HELD THAT:- Assessee purchased certain fixed assets from its AE wherein it had declared certain value. And the same has been rightly reported as purchase of fixed assets with the transacted value, as international transaction. This transaction is definitely covered within the definition of section 92B (1) and for any income arising from an international transaction arm s length price has to be determined in accordance to section 92C. Assessee has applied TNMM as most appropriate method for showing that the international transaction is at arm s length price. As observed from records that the matter needs to be restored back to file of Ld.TPO because markup cannot be taken as zero as has been done by TPO. Admittedly assessee gets depreciation as well as cost plus markup on the fixed assets purchased from AE. From order passed by Ld.TPO at page 225, it is observed that assessee, has not filed documents/evidences/proof showing value of assets as appearing in books of AEs to satisfaction of TPO. We direct Ld.TPO to determine the ALP based upon FAR analysis and on contemporaneous document filed by assessee. Assessee is directed to file all requisite details in respect of price for determining the arm s length price of the transaction.

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• 2019 (6) TMI 48
  Rejection of books of accounts u/s 145 - Trading addition based on GP estimation - taxability of paper concern involved in bullion business and providing the accommodation entries - disallowance of salary expenses - HELD THAT:- CIT(A) has held one of the assessee s concern to be a paper concern, however, going by the submission of the assessee, we find that he has no objection where even the second concern is held to be a paper concern. Therefore, in absence of any objection by the assessee, we proceed with the fact that the findings of th CIT(A) are equally applicable to both of the assessee s concerns which are held to be paper concerns which are involved in providing the accommodation entries and are not involved in actual bullion business. Commission income which can be brought to tax in hands of the assessee in relation to its two paper concerns which are involved in providing the accommodation entries, it may be true that the margins in gemstones business may vary with that of the bullion business but the same cannot be a basis to hold that an entry provider in gemstones and an entry provider in bullion business is to be treated differently so far as determination of their commission income is concerned. No empirical data has been submitted to support the aforesaid contention and in absence thereof and given the fact that in both businesses, the role of the entry provider is largely similar in terms of providing accommodation entries in lieu of commission, we are unable to accept the aforesaid contention of the ld AR regarding scaling down or determining the commission income differently. In the instant case, if we look at the net income so determined by the AO after making trading addition and disallowance of salary expense, it comes to 66,31,966 which gives a net profit rate of 0.12% which is comparable to another case of the entry provider, Mahesh Khandelwal wherein the Co-ordinate Bench has upheld estimate of net profit @ 0.10%. Besides, there is other income of 127,776 which has to be brought to tax separately. No infirmity in the order of the lower authorities and the same are hereby confirmed and the grounds of appeal are accordingly dismissed.

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• 2019 (6) TMI 47
  Penalty u/s 271AAB - assessee filed return of income u/s 139(1) declaring total income which includes surrendered income on account of Long Term Capital Gain and cash found during the course of search - HELD THAT:- The primary condition for treating an income as undisclosed income is that it should represent inter alia any entry in the books of account or other documents found during the search but the said income is not recorded in the books of account. In the case in hand, the document found during the search is not an incriminating material when the entry and the income were duly recorded in the books of account. Therefore, the statement of the assessee recorded u/s 132(4) would not constitute incriminating material. Therefore, the said income disclosed by the assessee cannot be considered as undisclosed income in terms of section 271AAB. We hold that the income surrendered on account of Long Term Capital Gain by the assessee in the statement recorded u/s 132(4) does not fall in the ambit of definition of undisclosed income as contemplated in Explanation to section 271AAB. Regarding cash found during the course of search, there cannot be any dispute that the same falls in the definition of undisclosed income and the same is subject to penalty u/s 271AAB. Accordingly, the penalty levied by the AO and sustained by the ld. CIT (A) on LTCG is deleted and penalty sustained by the ld CIT(A) on cash found during the course of search is upheld. - Decided partly in favour of assessee.

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• 2019 (6) TMI 46
  Addition u/s. 41 (1) or u/s. 68 - addition of sundry creditors and unsecured loan - difference between the sundry creditors as on 31.03.2013 and 31.03.2012 in respect of 4 creditors as unexplained - notices u/s. 133 (6) returned unserved - HELD THAT:- Observation of the Assessing Officer in the assessment order that all the letters were returned back is incorrect. Since in the instant case the purchases are not doubted and the assessee has made payments to the creditors in the subsequent years through banking channels and the purchases made from some of the above parties in the subsequent years were not doubted and the notices u/s. 133 (6) issued to the 3 parties were never returned back meaning thereby these were served on the parties, therefore, addition in our opinion on account of difference in the opening and closing balance of sundry creditors in absence of non production of the creditors is not justified. It is also not understood as to under which provision the addition has been made i.e. either u/s. 41 (1) and section 68. Since in the instant case it is not understood as to whether the addition has been made u/s. 41(1) or 68 and since the Assessing Officer has accepted purchases as genuine and the amount outstanding in the name of sundry creditors have been paid through banking channels in subsequent years and purchases made from the said parties in subsequent years has been accepted by the revenue without any doubt and since the notices issued to the three parties were never returned back as per the letter addressed by the Assessing Officer to the assessee, therefore, merely because the said creditors were not produced before the Assessing Officer for his examination, in our opinion, cannot be a ground for making the disallowance. - Decided in favour of assessee Disallowance of 25% of the various expenses claimed in the P L account (except bank interest and bank charges) - assessee did not furnish the bills and vouchers - CIT(A) restricted the same to 10% of the expenses - HELD THAT:- While disallowance of expense on adhoc basis is justified on account of non submissions of bills and vouchers, however, considering the totality of the facts of the case disallowance of 10% of the expenses sustained by the CIT(A) appears to be on the higher side. We, therefore, restrict such disallowance to 7.5% of expenses. This ground raised by the assessee is partly allowed.

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• 2019 (6) TMI 45
  Addition of TDS recoverable written off as bad debts U/s 36(1)(vii) - HELD THAT:- When assessee has duly shown the amount on account of TDS recoverable in the profit and loss account which fact has otherwise not been disputed by the AO and pertains to the earlier years, we are of the considered view that the issue is required to be remanded back to the AO to decide afresh after providing an opportunity of being heard to the assessee. Ground No.1 is determined in favour of the assessee for statistical purposes. Addition on account of security deposit rent written off u/s 37(1) - HELD THAT:- When it is not in dispute that 100 properties were taken on rent by the assessee to carry out its business out of which 30 properties have been vacated but assessee claimed to have not got the refund of security deposit, the same is allowable revenue expenditure lost in the ordinary course of business. AO has not questioned the books of account maintained by the assessee. So, CIT (A) has erred in confirming the addition which is not sustainable in the eyes of law hence it is ordered to be deleted subject to verification by the AO. Consequently, Ground No.2 is determined in favour of the assessee. Addition on account of advance given by the assessee to M/s. Centrum Direct Ltd. and written off as bad debt u/s 37(1) - HELD THAT:- when assessee proved to have advanced the amount during the ordinary course of its business and books of account have not been disputed and due to non-availing of the services, the advance amount was not refunded, it certainly amounts to bad debt. Assessee has duly produced ledger account entry of sales and also showing debt entries during the assessment proceedings but ld. CIT (A) has confirmed the addition without deciding the issue in controversy. So this issue also requires to be remanded back to the AO to decide afresh after examining the documents relied upon by the assessee. Consequently, Ground No.3 is determined in favour of the assessee for statistical purposes. Disallowance of unrealized amount given for services to M/s. Easy Link on the ground that this debt does not form part of the previous year or earlier year - HELD THAT:- Undisputedly, the amount was advanced by the assessee to M/s. Easy Link against hire charges and electricity charges but on closer of its Bombay branch, the said amount was forfeited by M/s. Easy Link and consequently the same was written off as on 31.03.2009. When the amount advanced by the assessee on account of security deposit was forfeited by the owner having been given in the ordinary course of business. Certainly it was incidental to the business and on business loss it is eligible for writing off as bad debt. Consequently, addition confirmed by the ld. CIT (A) is not sustainable in the eyes of law, hence ordered to be deleted. - Decided on favour of assessee.

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• 2019 (6) TMI 44
  Levy of penalty u/s 27(1)(c) - Difference in charge in penalty initiated and penalty levied - Defective notice - non specification of charge - addition u/s 68/69 for cash deposit in bank account - HELD THAT:- In the present case, penalty has been initiated on the charge of furnishing inaccurate particulars, but Ld.AO levied penalty on concealment of income. It is observed that assessee was asked to explain penalty on one count whereas levy has been on other count. This itself calls for quashing of penalty order passed by Ld.A.O. for all years under consideration. We, therefore, quash and set aside the penalty order so passed for all years under consideration. Accordingly we allow the claim of assessee on the ground of legality and validity of Penalty order for all the years under consideration. - Decided in favour of assessee.

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• 2019 (6) TMI 43
  Deduction u/s 80-IB - excess claim of exemption made - netting off of interest - setting off of amount of interest earned on FDRs against the amount paid to the bank on account of interest on cash credit - HELD THAT:- Assessee has come up with a specific submission that FDRs have been purchased from the cash credit account maintained with the banks and during the year under assessment, assessee firm has paid interest on these cash credit accounts and as such interest earned on fixed deposits on banks should be set off from/against the amount paid to the bank on account of interest in the cash credit accounts. We are of the considered view that when assessee has purchased the FDRs from the cash credit accounts on which it has paid interest, the interest earned on the FDRs is eligible to be set off from/against the amount paid to the bank as interest on cash credit account even by following the rule of consistency. These facts are proved from the statement of account issued by the Canara Bank and State Bank of India. We are of the considered view that when there is no change in the facts and circumstances of the case during the year under assessment and by following the rule of consistency, assessee is entitled for setting off of the interest earned on fixed deposit with the bank against the amount of interest paid to the bank on account of cash credit account on the line of earlier years as well as subsequent years. - Decided in favour of the assessee.

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• 2019 (6) TMI 42
  Levy of penalty u/s. 271 AAA - income surrendered in search and seizure operation u/s. 132 (1) - voluntary disclosures - AO levied penalty being 10% of the surrendered income on the ground that assessee could not substantiate the manner in which the undisclosed income has been earned - CIT-A accepted the contention of the assessee regarding the substantiation of income but upheld penalty on ground of non payment of the taxes due in respect of the undisclosed income in this case in due time - HELD THAT:- The revenue is not in appeal against the above findings of the CIT(A) and therefore, the reason for which the Assessing Officer has levied penalty does not survive. The observation of the CIT(A) that assessee has not paid the taxes in respect of undisclosed income in due time is concerned, we find from the copy of Form No. 26AS that the assessee has deposited the tax due there on 04.01.2010. DR also fairly conceded that the amount has been paid on 04.01.2010 which is much prior to the filing of the return of income as per the entry in Form No.26AS. Merit in the submission of the assessee that penalty u/s. 271 AAA cannot be levied in the instant case since the assessee has paid the taxes due on the surrendered income much prior to the filing of the return of the income . We, therefore, set aside the order of the CIT(A) and direct the AO to cancel the penalty so levied u/s 271AAA. If the revenue at any point of time finds that the assessee has not deposited the taxes due before the due date then the revenue is at liberty to move appropriate application for recalling of this order as per law. - Decided in favour of assessee.

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• 2019 (6) TMI 41
  Penalty u/s 271(1)(c) - defective notice - non specification of charge - allowable deduction either as a business loss or a capital loss? - HELD THAT:- AO has not pointed out any furnishing of inaccurate particulars by the assessee. He simply arrived at the conclusion that the advance written off cannot be allowed as expense in the profit loss account. Thus, in the whole body of the order, no satisfaction has been recorded for initiating penalty proceedings. Only at the end of the computation of income, the Assessing Officer has recorded Keeping in view the facts of the case, I am satisfied that it warrants the initiation of penalty proceedings u/s 271(1)(c) of the I.T. Act . Thus, no specific charge is specified either in the assessment order or in the penalty notices. On these facts, the decision of Hon ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] would be squarely applicable. The assessee filed the return declaring loss of 354.34 crores. Even the Assessing Officer allowed the carry forward of long term capital loss of 350.31 crores. The Revenue authorities have not doubted the correctness of the assessee s claim that it suffered the loss of 5 crores. Meaning thereby, the genuineness of loss is not in dispute. The only dispute was whether it is an allowable deduction either as a business loss or a capital loss. The assessee s claim is not accepted by the Revenue. However, on these facts, we do not find any justification to arrive at the conclusion that the loss claimed by the assessee was mala fide. See RELIANCE PETROPRODUCTS PVT. LTD. [ 2010 (3) TMI 80 - SUPREME COURT] - Decided in favour of assessee.

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• 2019 (6) TMI 40
  Adjustment on account of computation of ALP - HELD THAT:- The issue is squarely covered in assessee s favour by the decision of the Tribunal for Assessment Year 2008-09 2009- 10 [ 2018 (12) TMI 1647 - ITAT DELHI] the facts remains the same and there is no distinguishing factors pointed out by the Ld. DR. Thus, Ground No. 1 is partly allowed for statistical purpose. Disallowance u/s 14A of the Act read with Rule 8D of the Rules to the Administrative Cost - HELD THAT:- As the investment is running into 2.14 lakhs and the funds available with the assessee was running into 100s of crores. Therefore, Ground No. 2 of Revenue s appeal is dismissed. Addition u/s 43B - late payment of ESI - HELD THAT:- As the payment was made within the approved due date of filing of the return u/s 139. Ground Revenues appeal is dismissed.

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• 2019 (6) TMI 39
  Stay of demand - Penalty u/s. 271(1)(C) - disallowance of interest of expenses and disallowance of professional fees - HELD THAT:- The assessee has established the prima facie case in its favour and also balance of convenience is in its favour for grant of stay on the balance outstanding demand in dispute in respect of the AY 2010-11. Accordingly we grant the Stay on the outstanding demand in dispute for the period of 180 days or till the disposal of the aforesaid main appeal, whichever occurs first and also direct the AO not to take any coercive action against the assessee during the stay period or till the disposal of the appeal, whichever occurs first. Also in the interest of justice, the Registry is directed to fix the main appeal of AY 2010-11 for hearing on 15.07.2019. Since the date of hearing is pronounced in the Open Court, hence, there is no need to send the notice for hearing. However, the copy of this Order be given to both the parties DASTI.

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• 2019 (6) TMI 38
  TP adjustment - support service in the nature of global customers support centre from its AEs - HELD THAT:- We find the assessee, in the instant case, has benchmarked the cost paid by the assessee for GCSC services using combined transaction approach and using TNMM method as the most appropriate method with Operating Profit/Operating Cost as profit level indicator. Since the OP/TC was 23.15% which was significantly higher than the arithmetic mean of OP/TC of 6.35% earned by comparable companies, the assessee considered the transaction to be at arm s length. We find the TPO rejected the aggregation approach adopted by the assessee under TNMM and adopted CUP as the most appropriate method in the absence of comparable data. The TPO further held that the assessee was not able to prove the receipt of the benefits and demonstrate the arm s length nature. The TPO accordingly determined the ALP of the aforesaid services at nil on ad hoc basis which has been upheld by the DRP. Tribunal in assessee s own case [ 2017 (9) TMI 1257 - ITAT DELHI] after considering the facts, material evidences, etc., held that the assessee satisfies the need benefit and rendition test. The Tribunal also upheld the TNMM to be the most appropriate method. In absence of any distinguishable features brought before us by the Revenue, we hold that the addition made by the Assessing Officer/TPO and upheld by the DRP is not sustainable. Disallowance of circuit accruals - non-submission of supporting documents - liability incurred/crystalised and estimated expense based on the orders placed for various circuits - HELD THAT:- It is the submission of the ld. counsel for the assessee that the assessee follows mercantile system of accounting and accrues circuit charges on scientific basis. It is also his submission that as per the accounting standards notified u/s 145(2) of the Act, the assessee is required to make provision for circuit accruals for the subject financial year. It is also his submission that the assessee has provided evidence to the extent of almost 98% of the expenses represented by year end circuit accruals for utilization/reversal of circuit accruals made in subsequent year and no adverse finding has been given by the Assessing Officer/DRP. We find merit in the arguments advanced by the ld. counsel for the assessee. The facts of the instant case are identical to the facts of the case decided by the tribunal in assessee s own case [ 2017 (9) TMI 1257 - ITAT DELHI] , therefore, in absence of any contrary material brought to our notice, we hold that the Assessing Officer is not justified in making addition on account of circuit accruals. Disallowance of year end accruals - HELD THAT:- We find the Assessing Officer in the instant case, disallowed an amount of 1.39 crores on account of non-submission of supporting documents relating to the year ending provisions of outstandings. It is the submission of the ld. counsel for the assessee that when the assessee follows mercantile system of accounting and accounts all its expenses pertaining to the year in accordance with the matching principle and was able to substantiate with evidence to the satisfaction of the Assessing Officer in case of more than 95% of the expenses represented by year end accruals, therefore, no disallowance is called for. Since the facts of the impugned assessment year are identical to the facts of the case decided by the Tribunal in assessee s own case [ 2017 (9) TMI 1153 - ITAT DELHI] , therefore, respectfully following the decision of the Tribunal in assessee s own case for preceding three assessment years, we hold that the disallowance made by the Assessing Officer is not justified. Disallowance of output service tax in Other current liabilities - HELD THAT:- It appears that the Assessing Officer has not properly appreciated the accounting entries in their due perspective. The marginal heading of section 43B clearly states that certain deductions to be allowed on actual payment. This means that if the assessee has claimed deductions, the same can be disallowed u/s 43B of the Act. However, in the case in hand, the assessee has not claimed any deduction as the input service tax and the output service tax have never been routed through the P L Account. Respectfully following AT T COMMUNICATION SERVICES (INDIA) P. LTD. VERSUS DCIT [ 2018 (11) TMI 130 - ITAT DELHI] , we restore the issue to the file of the Assessing Officer with a direction to grant an opportunity to the assessee to explain the entries and the Assessing Officer shall decide the issue as per fact and law, after giving due opportunity of being heard to the assessee. Disallowance of support service expenditure - paid to its group company - HELD THAT:- The decision was totally based on commercial considerations. By transferring the cost from ACSI to appellant no added tax advantage is being availed by appellant. We are also of the view that commercial expediency of a particular expenditure incurred by a businessman should be examined from the perspective of the business person and no third party, including the tax authorities, is entitled to question the commercial reasoning/justification of the expenditure so incurred. Since the assessee had not submitted the requisite details before the Assessing Officer, therefore, we restore this issue to the file of the Assessing Officer with a direction to give an opportunity to the assessee to submit the details and decide the issue in the light of the decision of the Tribunal [ 2017 (9) TMI 1257 - ITAT DELHI] as reproduced above. Disallowance of annual revenue share based licence fee - maintenance and usage of the telecom licence payable to the Department of Telecom - HELD THAT:- Tribunal in assessee s own case [ 2017 (9) TMI 1153 - ITAT DELHI] has held that the contention of the assessee that the expense incurred towards revenue share based license fee for maintenance and usage of telecom license payable to Department of Telecom is a recurring fee paid by the license holder on periodic basis towards maintenance and use of the license and the benefit of the same does not extend beyond the close of the year. Further, it is also relevant to note here benefit of the revenue share based license fees paid during one financial year cannot be extended to the subsequent financial year, for which license fee is to be paid separately upon the adjusted gross revenues of such subsequent year. Therefore, payment of the aforesaid annual fee cannot be said to confer any right of an enduring nature upon appellant. - The ground raised by the assessee is accordingly allowed. Disallowance of lease line charges on account of non-deduction of TDS - HELD THAT:- It is the submission of the ld. counsel for the assessee that the leaseline charges are paid to the telecom service provider for faster connectivity service through dedicated leaseline and, therefore, such payment has been made for availing the facility of connectivity services from vendors required for transmission of data and is not for use of any asset involved in provision of such facility covered u/s 194I. It is also the submission of the ld. counsel for the assessee that the assessee was neither in possession nor control of the equipments which were used for providing internet and communication facilities and, therefore, there was a clear absence of the element of leasing of equipments and, therefore, the provisions of section 194I cannot be applied. The various other decisions GLOBAL ONE INDIA P. LTD. VERSUS ACIT [ 2014 (4) TMI 787 - ITAT DELHI] , ALOK INDUSTRIES LIMITED VERSUS DY. CIT, (TDS) 1 (1) , MUMBAI [ 2017 (8) TMI 740 - ITAT MUMBAI] and CIT VERSUS M/S. VODAFONE SOUTH LTD., [ 2016 (8) TMI 422 - KARNATAKA HIGH COURT] , relied on by the ld. counsel for the assessee also support its case. In view of the above discussion, we hold that the assessee is not liable for withholding tax u/s 194I of the Act on account of payment of leaseline charges to other telecom operators for provision of telecom connectivity services required for transmission of data. Accordingly the Assessing Officer is directed to delete the disallowance. Disallowance of foreign exchange loss - assessee had suo motu disallowed a portion of loss as capital in nature and balance claimed as revenue loss - genuineness of the loss - additional evidences - HELD THAT:- It is the submission of the ld. counsel for the assessee that the additional evidences filed now will substantiate the genuineness of the loss. Considering the totality of the facts of the case and in the interest of justice, we admit the additional evidences filed before the Bench at the time of hearing and restore the issue to the file of the Assessing Officer with a direction to go through the same and decide the issue as per fact and law after giving due opportunity of being heard to the assessee. Non-grant of credit for TDS - HELD THAT:- We remit this issue to the file of the Assessing Officer with a direction to grant proper credit of TDS after giving an opportunity of being heard to the assessee.

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• 2019 (6) TMI 37
  Income/ Revenue Recognition - Addition on account of Non-refundable portion of Advance Fee - Year of assessment - Income already been offered by the Appellant for taxation in the subsequent assessment year i.e. AY 2012-13 on account of recognition of the amount by the Appellant as income in that year and the department also has accepted it as income in assessment in AY 2012- 13 - HELD THAT:- As decided in assessee s own case [ 2015 (5) TMI 469 - ITAT DELHI] The issue has been fully considered on similarity facts in 2006-07 assessment year wherein the ITAT considering the same Revenue recognition policy of the assessee allowed the claim of the assessee. The said view on facts has consistently been followed by the ITAT in 2007-08; 2008-09; and 2009-10 assessment years wherein either assessee s appeal has been allowed and where the CIT(A) allowed the relief following the view taken by the ITAT and the department has come in appeal, the departmental appeal has been dismissed. - Decided in favour of assessee.

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• 2019 (6) TMI 36
  Income recognition - addition on account of accrued interest on loans, debentures and bonds - computation of taxable income earned from business of insurance u/s 44 - HELD THAT:- Following the order passed by the Tribunal for AY 2011-12 [ 2019 (4) TMI 959 - ITAT DELHI] and order passed by the Hon ble Delhi High Court in assessee s own case for AYs 1986-87 and 1988-89 [ 2002 (9) TMI 44 - DELHI HIGH COURT] , we are of the considered view that the CIT (A) has rightly deleted the addition by not recognizing an amount of accrued interest on bonds, debentures and investment as income for the years under assessment as per policies framed by the Insurance Regulatory and Department Authority (IRDA). Disallowance u/s 14A - HELD THAT:- in view of the fact that the income of the assessee is to be computed as per section 44 read with Rule 5 of First Schedule coupled with non-obstante clause and in these circumstances, AO is not empowered to travel beyond these provisions. in case of insurance company, the assessee in this case, the income is to be computed as per provisions contained u/s 44 read with Rule 5 of First Schedule, coupled with non-obstante clause and in these circumstances, the AO is not empowered to travel beyond these provisions. Even otherwise, section 14A contemplates an exception for deduction as allowable under the Act are those contained under sections 228 to 438 of the Act and section 44 creates special application of these provisions in case of the insurance companies. - Decided against the Revenue.

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• 2019 (6) TMI 35
  TDS u/s 194C - non deduction of tds - treating the transaction of sale of goods as part of works contract and thereby invoking the provisions of section 40(a)(ia) - admission of additional evidence - HELD THAT:- The assessee has filed form No. 26A before us for the first time as additional evidence which need verification. In case the payee has included the said income in his return of income and paid the tax due thereon, there will be no disallowance u/s 40(a)(ia) in the case of the assessee. Hence, we admit this issue and direct the AO to verify the same. We find that this issue is squarely covered in favour of the assessee by the decision of Ansal Landmark Township Pvt. Ltd. [ 2015 (9) TMI 79 - DELHI HIGH COURT] AO will delete this disallowance after verifying the facts. Needles to say, the issue being covered in favour of assessee, we need not adjudicate this issue on merits. Addition on account of revaluation of closing work-in-progress as on 31.03.2009 - AO rejected the method of valuation of the closing stock i.e. closing WIP, regularly followed by the appellant from-year to year - difference in contract receipts as per AIR information and declared in the return of income - HELD THAT:- The assessee has filed the detailed working relating to opening work in progress and subsequent bills raised in respect of opening WIP or closing WIP during the appellant proceedings before CIT(A). We noted that despite assessee s details filed before AO, the AO could not pointed out any mistake in the books of accounts or any discrepancy and no books of accounts were ever rejected by the AO while applying the profit rate to the work in progress. The assessee is following the method of accounting consistently and it is followed consistently year after year by ascertaining and accumulating the direct cost such as material cost, labour and other identifiable expenses directly relating to a particular ongoing job as on the last day of the accounting year. We also noted that the work in progress followed at cost + net profit so as to bring the contract revenue for the period lying with the requirement of accounting standard AS 7 as prescribed by ICAI and adopted by assessee as per section 145 of the Act. In such circumstances, we are of the view that the AO and CIT(A) has wrongly made adhoc addition, which we delete. - Decided in favour of assessee Penalty u/s 27(1)(c) - addition made by AO on work in progress on adhoc basis - HELD THAT:- It is to be mentioned that we have already deleted the addition of work in progress while deciding the quantum appeal of the assessee. Hence, this penalty will not survive. This penalty is deleted. - Decided in favour of assessee

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• 2019 (6) TMI 34
  Disallowance u/s 14A r/w rule 8D - addition under Rule 8D(2) - CIT(Appeals) restored the issue to AO with a direction to compute the disallowance keeping in view the decision of Maxopp Investment Ltd. v/s CIT [ 2018 (3) TMI 805 - SUPREME COURT] - HELD THAT:- It is well settled that while computing disallowance under rule 8D(2)(iii), the AO can consider only those investments which have yielded dividend income during the year under consideration. Therefore, the disallowance of expenditure under rule 8D(2)(iii) has to be made with reference to the investment of 5,39,000, which yielded dividend income of 38,900. This view of ours is as per the ratio laid down in Cheminvest Ltd. [ 2015 (9) TMI 238 - DELHI HIGH COURT] and Vireet Investment Pvt. Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] We direct the AO to restrict the disallowance u/s 14A the amount already disallowed by the assessee. The grounds are allowed. Disallowance of interest expenditure u/s 36(1)(iii) - as assessee has diverted interest bearing funds for non business purpose by investing in jewellery and shares, the Assessing Officer disallowed interest expenditure u/s 36(1)(iii) - HELD THAT:- From the facts and material available on record, it is evident that the assessee had surplus fund of 92.30 crore available with it. Therefore, the presumption would be, the investments in jewellery and shares must have been made out of the surplus funds available with the assessee. That being the case, no disallowance under section 36(1)(iii) of the Act can be made. See M/S RELIANCE INDUSTRIES LTD [ 2019 (1) TMI 757 - SUPREME COURT] ,RELIANCE UTILITIES POWER LTD. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] and M/S HOLY FAITH INTERNATIONAL PVT. LTD. [ 2017 (8) TMI 185 - PUNJAB AND HARYANA HIGH COURT] - Decided in favour of assessee.

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• 2019 (6) TMI 33
  Disallowance u/s 14A r/w rule 8D - restrict the disallowance u/s 14A to the exempt income earned by the assessee in respective assessment years - HELD THAT:- Undisputedly, the exempt income earned by the assessee during the assessment year 2013 14, was 48,865 and in assessment year 2014 15, was 1,08,136. Whereas, the AO has made huge disallowance by invoking the provisions of rule 8D(2)(iii). Now, it is fairly well settled that the disallowance under section 14A r/w rule 8D cannot exceed the quantum of exempt income earned during the year. No reason to interfere with the decision of the learned Commissioner (Appeals) in directing the Assessing Officer to restrict the disallowance under section 14A of the Act to the exempt income earned by the assessee in respective assessment years. MAT computation - disallowance made while computing the book profit under section 115JB - HELD THAT:- It is evident that the AO has made such disallowance by resorting to the provisions of section 14A r/w rule 8D. As per the ratio laid down in Vireet Investment [ 2017 (6) TMI 1124 - ITAT DELHI] AO while computing the book profit u/s 115JB cannot make any disallowance by making reference to the provisions of section 14A r/w rule 8D. AO retains the power to make disallowance of expenditure incurred for earning exempt income as per Explanation 1(f) of section 115JB of the Act. Therefore, the disallowance made by the Assessing Officer while computing book profit under section 115JB(2) of the Act is unsustainable. AO directed to examine and quantify the expenditure incurred by the assessee for earning exempt income in terms of Explanation 1(f) of section 115JB of the Act without taking aid of rule 8D(2) r/w section 14A of the Act. Grounds no. (i) and (ii) in both the appeals are dismissed and ground no. (iii) is partly allowed for statistical purposes.

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• 2019 (6) TMI 32
  Deduction u/s 35(2AB) - claim of weighted deduction on Research Development expenditure - HELD THAT:- As decided in EICHER MOTORS LTD. VERSUS CIT [ 2017 (9) TMI 1043 - DELHI HIGH COURT] u/s 35 (2AB), both revenue and capital expenditure are allowable in their entirety, excluding expenditure in the nature of cost of any land or building. There was going to be no purpose served in analysing whether the expenditure was of revenue or capital nature. In fact, the AO himself had allowed 100% of the expenditure both of revenue and capital nature and the disallowance was only the additional 50% amount which, again, the CIT (A) had found and correctly so, in the opinion of this Court, ought not to have been disallowed - no hesitation in holding that the Assessee is entitled to the full benefit of Section 35 (2AB) . Also confirmed by EICHER MOTORS LTD [ 2018 (9) TMI 1328 - SC ORDER] - Decided in favour of assessee. Addition on account of provision for warranty - HELD THAT:- We find that similar disallowances were made by the Assessing Officer in A.Ys 2003-04 to 2009-10 and in A.Y 2010-11. The disallowances were deleted by the CIT(A) and the revenue did not prefer any appeal till A.Y 2008-09. In A.Ys 2009-10 and 2010-11, dispute relating to similar disallowances travelled upto the Tribunal and the Tribunal has decided the issue in favour of the assessee and against the revenue in [ 2016 (1) TMI 1076 - ITAT DELHI] assessee had estimated the provisions for warranty on the basis of past history. The estimate of warranty made by the assessee on the basis of past history cannot be treated as a provision for any ascertained liability and allowed the provision for warranty as deduction. Thus no infirmity or perversity in the findings returned by Ld. CIT(A) in allowing the ascertained liability as allowable expenditure u/s 37( 1).- Decided in favour of assessee.

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• 2019 (6) TMI 31
  Allowability of expenses and depreciation of closed unit - assessee has closed operations at its manufacturing unit at Kavesar factory situated at Thane since 1.4.1999 - HELD THAT:- We have observed that this issue is a recurring issue before the tribunal in the case of the assessee. It is also observed that the tribunal in the preceding year AY 2004-05 had held that expenses incurred by the assessee ( including deprecation ) with respect to Kavesar Unit situated at Thane which was lying closed since 01.04.1999 is to be allowed as revenue expenses. The facts being identical in this year and we have no reason to take divergent view than what was taken by tribunal in preceding year AY 2004-05 and also with a view to maintain consistency. ( Ref: Hon ble Supreme Court decision in the case of Radhasoami Satsang v. CIT [ 1991 (11) TMI 2 - SUPREME COURT] ), we hold these expenses be allowable as business expenses. Thus, we hold that these expenses including depreciation with respect to Kavesar Unit located at Thane be allowed as Revenue Expenses. Disallowance of expenditure on account of purchase of application software - Revenue or capital expenditure - HELD THAT:- Respectfully following the decision of tribunal in assessee s own case for AY 2004-05 and with a view to maintain consistency, we hold that expenditure incurred by the assessee for purchase of application software to the tune of 8,65,032/- be allowed as Revenue expenses. We have while taking decision has also noted that these are not operating software but are application software. Disallowance u/s 14A - expenditure incurred in relation to earning of an exempt income - HELD THAT:- No reason to take a different view than what was taken by tribunal in assessee s own case for AY 2004-05 as facts are similar and also with a view to maintain consistency, we uphold disallowance of expenditure to the tune of 2% of exempt income. Disallowance on account of valuation of stock u/s 145A - differential Cenvat Credit in opening and closing stock - exclusive method of accounting OR inclusive method of accounting - HELD THAT:- The assessee is following exclusive method of accounting for valuing closing stock wherein unutilised MODVAT/Cenvat Credit is not added to the value of closing stock. We have observed that Section 145A stipulates that the duties, taxes, fees and cess (by whatever name called) paid to bring the inventory to present location is to be added to value inventory as on the date of valuation. We have observed that the Mumbai-tribunal has passed an elaborate order in the case of Sunshield Chemicals Private Ltd. v. ITO [ 2015 (12) TMI 767 - ITAT MUMBAI] of which one of us was part of DB pronouncing the said order, wherein tribunal held that per Section 145A it is mandatory for taxpayers to follow inclusive method. We are inclined to restore this matter back to the file of the AO for denovo determination of the issue in the light of our above discussions as well decision referred to above.The assessee will be allowed to raise its defence in denovo proceedings. The AO shall provide proper and adequate opportunity of being heard in the set aside proceedings. The grounds of appeal are allowed for statistical purposes We order accordingly. TP Adjustment - guarantee fee for counter guarantee given by assessee to its associated concern(AE) - HELD THAT:- issuance of corporate guarantee by a taxpayer in favour of its AE within meaning u/s 92A is an international transaction which is covered u/s 92B of the 1961 Act. What emerges is that providing of corporate guarantee by a taxpayer to its AE within meaning of Section 92A is an international transaction u/s 92B which need to be benchmarked using CUP method to compute ALP of the said transaction of furnishing of corporate guarantee. ALP to be computed will vary depending upon several internal as well external factors. In our considered view, end of justice will be met if the ALP be determined @ 0.5% p.a. of corporate guarantee issued by assessee in favour of Kansai Paint Company Limited, Japan. We are not inclined to accept the plea of the assessee that providing of corporate guarantee by tax-payer to its AE within meaning of Section 92A can be taken as international transaction u/s 92B only with effect from AY 2013-14 as the insertion of explanation to Section 92B By Finance Act, 2012 is w.e.f. 01.04.2002. The said explanation was declared to be clarificatory in nature.

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• Customs

• 2019 (6) TMI 30
  Release of security - Fraudulent diversion of gold jewellery meant for export - grievance of the Petitioner is that for more than three years since the above instruction, the MMTC has been constrained not to release the BG/ security furnished by the Petitioner to the extent of 81,70,000/- - Section 110 (3) of Customs Act - HELD THAT:- even assuming that the Petitioner failed to appear on the dates fixed in those proceedings, the Adjudicating Officer was supposed to proceed and pass the adjudication order in accordance with law. - Consequently, the failure by the Petitioner to appear in those proceedings cannot be an excuse to delay the adjudication order. The Court finds no justification in law for continuation of the impugned instructions of the DRI to the MMTC by its letters dated 29th October, 2015 and 17th December, 2015. The said instructions are hereby quashed. MMTC will now proceed in the matter as if the two instructions dated 29th October, 2015 and 17th December, 2015 of the DRI are no longer operational. MMTC shall release the security/BG amount to the Petitioner, to the extent it is entitled in accordance with law, forthwith and in any event not later than 10 days from today. As far as the SCN is concerned, if no further hearings are contemplated, the Adjudication Officer should proceed to pass the adjudication order not later than three months from today in accordance with law - petition allowed.

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• 2019 (6) TMI 29
  Requirement of making a pre-deposit - Section 129-E of the Customs Act, 1962 - HELD THAT:- Since the financial condition of the Petitioner has not undergone any significant change, and the above deposit of 5 lakhs has already been made, it is directed that without requiring the Petitioner to make any further deposit, its appeal be considered by the CESTAT on merits in accordance with law as expeditiously as possible. The Defect Matter Hearing Notice dated 29th April 2019 issued by the Registry of the CESTAT is hereby quashed - application disposed off.

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• 2019 (6) TMI 28
  Benefit of Concessional rate of CVD - N/N. 4/2006-CE dt.1.3.2006 - sale of imported Cement to retail consumers at a higher price or not - time limitation - HELD THAT:- The issue has been decided in various cases where it was held in favor of importers - reliance placed in the case of M/S. ANTONY METALS, M/S. VINCENT SONS, M/S. KENSTAR EXIMS, M/S. AATHEES HARD FLOORING, M/S. TRIUMPH ENTERPRISES INVESTMENTS MADURAI (P) LTD., M/S. P.S.S. JAYAM CO., M/S. PRP EXPORTS, M/S. S. JAWAHARLAL AND CO., M/S. AL KABIR IMPEX SERVICES AND M/S. MADHUCON PROJECTS LTD. VERSUS C.C., TUTICORIN [ 2019 (2) TMI 1258 - CESTAT CHENNAI] where it was held in favor of importers on the ground of limitation. Also in the case the case of M/s. Diamond Cement Vs. Commissioner of Central Excise, Bhopal [2017 (1) TMI 1476 - CESTAT NEW DELHI] was relied upon where on the matter of eligibility to concessional rate under serial number 1C of Notification No. 04/2007-CE. has held that the sale to the individual without any intermediary person is entitled for concessional rate of duty. The demand, interest or the penalty cannot survive both on merits as well as on limitation - Appeal allowed - decided in favor of appellant.

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• 2019 (6) TMI 27
  Rectification of Mistake - error apparent on the face of record or not - HELD THAT:- Tribunal in para 6 as well as in para 12 has noted that the appeal filed by Fortune Marketing Ltd. before the Apex Court was dismissed as withdrawn on 13.1.2017. On perusal of the order produced by the ld. counsel, we are convinced that this is an error apparent on the face of record. We therefore hold that the same is to be rectified. ROM application allowed.

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• 2019 (6) TMI 26
  Revocation of CHA License - forfeiture of security deposit - breach of the time limits which have been mandated in Regulation 22 of the CBLR 2013 - HELD THAT:- As the time limits laid down in Regulation 20 of CBLR 2013 have been followed in the breach, the impugned order of revocation and forfeiture of security deposit cannot be sustained and will require to be set aside on this ground alone - appeal allowed - decided in favor of appellant.

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• 2019 (6) TMI 25
  Valuation of imported goods - Scrap - rejection of declared value - enhancement of value in terms of Rule 4 of the customs Valuation (Determination of value of imported goods) Rules, 2007 - HELD THAT:- There are reports of Chartered Engineers which suggest that part of the material is serviceable. We have seen the pictures of material, from which it appears that it contains certain triangular shaped material which could also be used as such. However, the same can also be used as heavy melting scrap for the purpose of melting. The appellant had approached Revenue for mutilation of goods, however, the said request was not considered. We find that in the present circumstances, the appellant may be permitted to clear the scrap after mutilation at their own cost - appeal allowed - decided in favor of appellant.

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• 2019 (6) TMI 24
  Renewal of CHA License - main contention of the Revenue is that the offence report dated 05.10.2011 was received from the DRI subsequent to raids by both DRI and CBI in the year 2012 and the pending case which was at the stage of prosecution evidence as observed in the impugned order are sufficient reasons for the rejection of renewal of the license - HELD THAT:- These facts are not of any help to the Revenue at this stage because all these took place much prior to the Order-in-Original dated 03.11.2014 and those events definitely are the part of records as these were no new events. The Commissioner who passed the above order is presumed to be aware of the facts on records while passing the above adjudication order dated 03.11.2014. The matter thereafter travelled before this Bench and then to the High Court, and apparently the Revenue having known all these developments, has suffered the above orders. We also cannot go into the assessee satisfying or not, of the conditions or non-disclosure of criminal cases, since, as observed by us in the above paragraph these are no new events but the Revenue was very much aware of it since 2012 and, in any case, these are orders after that and as of now, the issue is pending before the Hon ble High Court. Moreover, communication dated 30.05.2017 is also clear when the Assistant Commissioner has indicated the approval of the Commissioner of Customs (Chennai-VIII) Commissionerate in renewing Customs Broker License on 26.05.2017, the same also indicates the life of the renewed license which is ten years thereafter. The impugned order cannot sustain - appeal allowed - decided in favor of appellant.

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• Insolvency & Bankruptcy

• 2019 (6) TMI 23
  Initiation of Corporate Insolvency Resolution Process against the corporate debtor - default in repayment of amount - declaration of Corporate Debtor s account as a nonperforming asset - HELD THAT:- The Corporate Debtor is a guarantor vide a Deed of Guarantee dated 5.1.2015 regarding the loans given to Gupta Global Resources Private Limited (GGRPL). A guarantee is covered by the definition of financial debt provided in Section 5(8), IBC - The contention of the Corporate Debtor that the present petition is barred by the law of limitation does not survive as the guarantee was invoked by the Financial Creditor on 27th April 2017 and the Financial Creditor filed the present petition on 9.4.2018. Stamp Duty - HELD THAT:- The proceedings before this Adjudicating Authority are summary in nature. It is pertinent to mention that stamp duty payable and paid on letter of guarantee is 100 and it has been purchased by the Corporate Debtor. Therefore, the Corporate Debtor has no right to raise the objection of insufficient stamp duty. Mismatch in the principal amount and the interest rate chargeable - HELD THAT:- It is to be clarified that the Adjudicating Authority does not have to ascertain the exact due amount as held by the Hon ble NCLAT in the matter of The Dhar Textile Mills Ltd. vs. Asset Reconstruction Company (India) Limited, Company Appeal (AT) (Insolvency) No. 11 of 2019. The Adjudicating Authority has to satisfy itself that a debt of minimum 1,00,000/- exists. So the contention of the Corporate Debtor regarding the principal amount and interest rate charged is untenable. As per Section 7 of IBC, a petition has to be admitted if a default has occurred, debt is due, and application is complete, and no disciplinary proceedings are pending against the proposed resolution professional - This Petition reveals that there is a debt as defined in Section 3(11) of IBC. Also, there is a default in this case within the meaning of Section 3(12) of IBC. Though the Corporate Debtor has raised a dispute regarding his liability to pay the debt. However, the dispute is irrelevant for admitting a petition U/S 7 of the Code. The application of the Financial Creditor is complete, amount of more than Rs one lac is a due and application is complete. No disciplinary proceedings are pending against the proposed resolution professional. Therefore, this petition deserves to be admitted. Petition admitted - Moratorium declared.

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• 2019 (6) TMI 1
  Application for Early Hearing - HELD THAT:- The petitioner s application moved, as early as on 24.12.2018, for the purpose of de-sealing of the properties and delivery of the same to the Resolution Professional is still pending. The early hearing application moved by the Resolution Professional has also not been entertained. The learned DRAT are directed to hear and dispose of the applications of the Resolution Professional within the next one week - petition disposed off.

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• Service Tax

• 2019 (6) TMI 22
  CENVAT Credit - input services - Health club and fitness centre services - case of Revenue is that in the absence of the endorsement in the Bill of Entry, the appellant are not eligible to avail the credit on the goods received by Z.K. Beauty Fitness Pvt. Ltd., Mumbai as per Rule 9(1) of the CENVAT Credit Rules 2004 - HELD THAT:- The appellant imported the capital goods at their Mumbai office but later on transferred to Mangalore and claimed the CENVAT credit and depreciation on the capital goods but the appellant did not produce any documents before the Adjudicating Authority to establish the transfer of the capital goods from their Mumbai office to Mangalore - Further, before the Commissioner (A), the appellant did produce some photocopies of the documents to prove the transfer of capital goods from Mumbai to Mangalore but the Commissioner (A) refused to take cognizance of the same on the ground that they were not produced before the Original Authority and the Original Authority did not get a chance to examine those documents and therefore, the Commissioner (A) refused to take cognizance of the documentary evidences produced before him. It is deemed fit to remand the case to the Original Authority with a direction to pass a fresh de novo order after affording an opportunity to the appellant to produce all the documents in his possession to prove the transfer of capital goods from Mumbai to Mangalore and also on other issues involved in the present case - appeal allowed by way of remand.

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• 2019 (6) TMI 21
  Business Auxiliary Services - Short payment of Service tax - extended period of limitation - HELD THAT:- The department does not have a case that respondents have suppressed any receipts in the returns. The demand has been raised on the basis of the gross bill amounts observing that certain parts of these bills have not been included for discharging the service tax liability. The respondents have contended that these are profit share and also reimbursable expenses, which are not to be included in the total taxable value. Thus, when the ST-3 returns have regularly disclosed, the entire income received by them and also the books of accounts reflect the amounts as shown in the balance sheet, the Commissioner (Appeals) has rightly held that there is no suppression of facts with intention to evade payment of service tax. Appeal dismissed - decided against Revenue.

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• 2019 (6) TMI 20
  Imposition of penalty - Delayed payment of service tax with interest - liability was paid voluntarily though belatedly - no suppression of facts - Section 73 (3) of the Finance Act, 1994 - HELD THAT:- The only and the obvious conclusion is that in the first place, the SCN itself was unnecessary and duty and interest having paid voluntarily, the Revenue cannot allege suppression or fraud and therefore, the penalty cannot be sustained for which reason the impugned order is set aside - penalty set aside - appeal allowed - decided in favor of appellant.

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• 2019 (6) TMI 19
  Penalty u/s 76 of FA - delay in payment of service tax - no intent to evade - HELD THAT:- Appellant were under much financial hardships and were not getting the payments from the clients within proper time. Further, they were also to get huge refunds from the Income Tax Department. It can be understood that the appellant, during the relevant period, was undergoing much financial stress and therefore, could not deposit the service tax to the Government. In fact, they have filed proper ST-3 returns reflecting their service tax liability. This would show that the appellants had no intention to evade payment of service tax and that it was only a case of mere delay in paying up the tax on account of delay in receiving the payments from their clients. In the present case also, the appellant has been reflecting the tax liability in their ST-3 returns. They could not pay up the tax only because they did not receive the payments from their clients within proper time. We find that the appellant has put forward reasonable cause for the delay in paying the service tax and hence, this is a fit case for invoking Section 80 of the Finance Act, 1994. The penalty under Section 76 ibid is unwarranted - the impugned Order is modified to the extent of setting aside the penalty imposed under Section 76 only, without disturbing the duty demand or interest thereon - appeal allowed in part.

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• 2019 (6) TMI 18
  Refund of service tax - rejection on the ground of time limitation and unjust enrichment - period 07.11.2005 to 26.07.2007 - HELD THAT:- When the amount has been paid wrongly by mistake and when service tax is not leviable on the activity, the amount paid does not take the colour of service tax. If the amount paid which does not the colour of service tax, the same has to be refunded to the claimant subject to the provision of unjust enrichment. That for such refund, the time-limit under section 11B is not applicable - rejection of refund on the ground of time bar is unjustified. However, taking note of the fact that the refund is rejected not only on the ground of time bar but as well on unjust enrichment, the matter requires to be remanded to the adjudicating authority to reconsider this issue of unjust enrichment. Appeal allowed by way of remand.

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• 2019 (6) TMI 17
  Commercial or Industrial Construction Service - Composite contracts - Construction of office buildings and erection of transmission towers and other associated structures - HELD THAT:- For the period 01.06.2007, the demand will not in any case sustain in the light of the decision in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT] - For the period after 01.06.2007, the ratio laid down by the decision of the Tribunal in the case of V. CHINNASAMY, A. ELANGO, VEE VEE CONSTRUCTIONS VERSUS COMMISSIONER OF CENTRAL EXCISE, TRICHY [ 2018 (5) TMI 986 - CESTAT CHENNAI] relied upon by the learned advocate is applicable on all fours in respect of Construction Services provided by the appellant. For the period after 01.06.2007, the demand invoking the extended period of limitation with respect to Works Contract Service cannot sustain and will require to be set aside - the appellant will be liable to pay service tax for the normal period of limitation calculated from the date of issue of the show-cause notice. However, for the same reasons no penalty will be imposable under section 78 ibid for the normal period. Demand with regard to Cleaning Services - HELD THAT:- Ld. Advocate has conceded the tax liability. We do not therefore interfere with the demand of tax and interest - the penalty under section 78 ibid on this score also is unjustified - penalty imposed under section 77 ibid upheld. Appeal allowed in part.

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• 2019 (6) TMI 16
  Threshold limit for liable to pay service tax - Renting of Immovable Property Services - co-owner of the Complex - HELD THAT:- The property has been purchased jointly by the appellant and her husband Shri. M.S. Paramasivam. Several lease agreements have also been produced before us. Some of the lease agreements are entered into by both the appellant and her husband. It is very much brought out by the documents that the appellant is not the absolute owner of the property Lakkshmi Arcade . The sale deed as well as the related documents shows that the property is owned jointly by the appellant and her husband. The contention of the Department that in the land revenue records the name of the appellant alone is shown cannot be made the basis for confirmation of the demand, especially when there is no proof that the village records have been updated. It is not disputed that the income by way of rent is received by them separately and reflected in their income tax returns separately. This being the case, the mere reliance on the land revenue records is not correct. When the property is owned jointly by the appellant and her husband, the demand of service tax raised on the appellant alone, therefore, cannot be sustained. Ld. Advocate for the appellant also contends that if the rent is shared between the appellant and her husband, they would come under the threshold limit - This aspect, however, requires verification. If the rent received by the appellant separately is below the threshold limit during the disputed period, then the appellant would not be liable to pay service tax. Appeal allowed by way of remand.

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• 2019 (6) TMI 15
  CENVAT Credit - input services - GTA services - denial on the ground that Iron ore produced / manufactured is classifiable under CHH 26.01 of the CETA, 1985 and is exempt from duty of excise under Notification No.4/2006-CE dt. 01/03/2006 and hence not eligible for credit on input service - credit was denied also on the ground that the appellant cleared Iron ore from the factory to the port of shipment for export and therefore, in terms of Section 4(3)(c) of Central Excise Act, 1944, the place of removal of goods is the factory and the GTA service towards outward transportation is not eligible for credit as input service - scope of SCN. HELD THAT:- It is undisputed fact that the appellant produced and exported iron ore which is classifiable under Chapter 2601 of CETA 1985 and hence excisable but attracts nil rate of duty under Notification No.4/2006 dt. 01/03/2006 - Further the finding of the Commissioner that the appellants are not manufacturers is not sustainable in law as held by various decisions of the court holding this activity as amounts to manufacture. Further, this finding that the processes undertaken by the appellant do not amount to manufacture is contrary to the grounds made in the show-cause notice and is beyond the scope of show-cause notice. Also, the Department has not challenged the finding of the Commissioner(Appeals) holding that the appellant is eligible for CENVAT credit. In the absence of challenge by the Department, the eligibility of the appellant for CENVAT credit has attained finality. This issue has also been settled by various decisions wherein it has been consistently held that in the case of export, place of removal is the port from where the goods are exported and hence up to the place of port, credit is available - credit allowed - appeal allowed - decided in favor of appellant.

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• 2019 (6) TMI 14
  Demand of Interest and penalty - Manpower Recruitment/Supply Agency Services - scope of SCN - HELD THAT:- The explanation by the authorities below on the argument that the final demand has gone beyond the SCN. It is the settled position of law that such an action is not sustainable and hence, the re-quantified interest liability over and above the interest demanded in the SCN is set aside - Consequently, the adjudicating authority has to see if the payments made towards the above interest after re-quantifying in the light of the deletion of reimbursements by the Commissioner (Appeals) and then proceed to recover the balance, if any, after adjusting all such payments claimed to have been made by the assessee - matter on remand. Penalty - HELD THAT:- Undoubtedly, the issue vis- -vis facts of this case involved interpretation. Moreover, the appellant has also proved its bonafides when it claimed that it had made payments right from investigation stage itself. The appellant has made out a case for exercising discretion under Section 80 of the Finance Act, 1994 and hence, the penalty under Section 78 of the Finance Act, 1994 is set aside. Appeal allowed in part and part matter on remand.

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• 2019 (6) TMI 13
  Refund claim - duty paid under protest - wrong classification of services - appellant rendered typing services to the University of Mysore, which they claimed that they wrongly classified the said service under the category of manpower recruitment and supply - period from January 2006 to January 2007 - rejection of refund claim on the ground that the appellant is a service provider and the said service of providing casual labour attract service tax. HELD THAT:- As per the Agreement between the appellant and the University of Mysore, the appellant is to execute the typing work and housekeeping work of the University. Perusal of the various clauses of the Agreement shows that the appellants are involved in actual execution of work and not merely supplying of manpower - further the definition of manpower supply as contained in Section 65(105)(k) is not applicable to the appellant as the appellant has not supplied the manpower but is only executing the work on typing and housekeeping for which he is paid and if his work is found to be unsatisfactory, the contract could be terminated as per the terms of the Agreement. Appeal allowed - decided in favor of appellant.

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• 2019 (6) TMI 12
  Valuation - Commercial or Industrial Construction Service - Construction of Complex Service - inclusion of monetary value of free materials supplied by their client in the gross amount for the payment of service tax - Composite contract - HELD THAT:- For the period after 01.06.2007, the Chennai Bench of the CESTAT in the case of REAL VALUE PROMOTERS PVT. LTD., CEEBROS PROPERTY DEVELOPMENT, PRIME DEVELOPERS VERSUS COMMISSIONER OF GST CENTRAL EXCISE, CHENNAI [ 2018 (9) TMI 1149 - CESTAT CHENNAI] have extrapolated the ratio laid down by the Hon ble Apex Court in COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT] and held that even after 01.06.2007, service tax liability for composite contracts can only be demanded under Works Contract Service and not under CICS etc. The impugned order demanding the amount of tax liability under CICS for a composite contract will not survive and will require to be set aside - appeal allowed - decided in favor of appellant.

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• 2019 (6) TMI 11
  Classification of services - Manpower Recruitment or Supply Agency Service - operations and maintenance of ONGC s drilling rigs by mobilizing and making available the necessary manpower with due qualification and expertise - HELD THAT:- The contracts have been entered into for the purpose of operating and maintaining oil rigs by M/s FCSP as well as APL. No doubt, the contract requires the appellant to make available sufficient trained and competent personnel for carrying out the agreed activity. The terms of the contract when taken as a whole, including the clauses specifying the consideration payable, it is evident that the appellants are not only required to make available necessary manpower, but also are contracted to complete the task assigned to them i.e. carrying out the operation and maintenance of the drilling rig. Consideration payable is not on the basis of manpower supplied but on the basis of completion of work involved and is paid as lumsum per day of operation per rig. The terms of contract indicate that the appellants were not required to merely supply manpower or make such manpower available to M/s ONGC, but were required to carry out the task outlined in the agreement. The activity carried out by the appellants cannot fall within the category of Manpower Recruitment or Supply Agency Service - appeal allowed - decided in favor of appellant.

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• Central Excise

• 2019 (6) TMI 10
  CENVAT credit - capital goods - pre-fabricated structure - pre-ponderance of probabilities proved - HELD THAT:- The investigation conducted by the department and the material evidences brought on record were not disputed by the appellants at any point of time, either at the adjudication or the first appeal stage. The law in this context in well settled by the Hon ble Supreme Court in the case of D.Bhoormal [ 1974 (4) TMI 33 - SUPREME COURT] that the department is not required to prove a case of mathematical precision and is required to prove a case with the pre-ponderance of probabilities. The Learned Commissioner (Appeals) has thoroughly examined the case and concluded that the Cenvat demand has been correctly disallowed to the appellant. Penalty - HELD THAT:- The vehicle nos. were incorrectly entered by it in the invoices, facilitating the Appellant No.1 to avail the fraudulent Cenvat Credit. Further, it is also evident that the vehicles were not used for transportation of the subject goods for delivery at the factory of the Appellant No.1 - penalty under Rule 26 of the Central Excise Rules, 2002 upheld. Penalty on the Appellant No.2, Shri Owais Shakir Nuri, Director of Appellant No.1 company - HELD THAT:- Neither the original nor the impugned orders have specifically discussed about the role played by the said appellant in the clandestine activities indulged into by the other appellants. Thus, in absence of proper substantiation of the case, the impositions of penalty on the Appellant No.2 cannot be legally sustained. Appeal allowed in part.

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• 2019 (6) TMI 9
  CENVAT Credit - input services - outward GTA service - Circular No. 1065/4/2018-CX dated 08.06.2018 - HELD THAT:- For allowing the cenvat credit on GTA, certain factual aspects to be verified such as whether the sale is on FOR basis, whether the freight is integral part of the sale price, whether the excise duty paid on the value inclusive of freight amount etc. - the matter needs to be re-considered by the adjudicating authority - appeal allowed by way of remand.

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• 2019 (6) TMI 8
  Monetary amount involved in the appeal - demand of Interest - HELD THAT:- I have to agree with the contentions of the Learned Consultant as to the appeal being hit by the National Litigation Policy. Admittedly, there is no demand of any duty in the case on hand, 2nd proviso to Rule 9 mandates payments of duty and fail to do so in full or partly attracts interest under Section 11AB on the balance amount outstanding for the defaulted period. Discernibly, there is no such balance amount outstanding or even a part thereof, to be paid, which only points out that there is no default. Thus, when there is no charge of duty in the first place, independent charge of interest cannot sustain. Hence, there cannot be any substantial question of law. The interest demanded originally and dropped thereafter vide Order-in-Original, is 14,44,026/- which is below the threshold limit for filing Revenue s appeal as per the National Litigation Policy - appeal dismissed being not maintainable.

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• 2019 (6) TMI 7
  Penalty u/s 11AC of the Central Excise Act, 1944 - Valuation - appellants have received certain consumables free of cost from their customers - inclusion of value of free materials in the assessable value - bonafide mistake - after the visit of the Unit, the appellant has paid-up the duty along with interest - HELD THAT:- The goods were subject to leviability of duty only after 09.05.2006. The period involved in the appeal is May, 2006 to March, 2007 and it can be seen that this was transitional period, wherein, the goods were subject to duty and appellant was put with a new burden to pay of Central Excise Duty. It can be understood that the omission to include value of free supplies while arriving at assessable value was only due to bonafide mistake. There is no iota of evidence adduced by the department to establish any positive act on the part of the appellant to establish suppression of facts with intention to evade payment of duty. Therefore, the ingredients of section 11AC are totally absent in the present case. The impugned order is modified to the extent of setting aside the penalty imposed under section 11AC without disturbing the duty demand or interest thereon - appeal allowed in part.

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• 2019 (6) TMI 6
  Levy of penalty - Rule 15 (2) of CER - Section 11 AC of the Central Excise Act - wrong availment of Cenvat credit - HELD THAT:- Revenue has miserably failed to justify, in the first place, the invocation of extended period of limitation. When there is an agreement that there is no suppression etc., then, the same will equally hold good for invoking extended period of limitation as well, since the ingredients/requirements of law for invoking larger period wholly rests on suppression, etc. So, viewed in this context, what is not applicable to one cannot be made applicable to another: when there is no suppression for levying penalty, there can be no case for suppression for invoking larger period also. This assumes more relevance and importance especially when there was an audit in September 2009. I accept the contentions of the assessee as to the non-justification in invoking the larger period and I am therefore constrained to hold that the proceedings in the above appeal is badly hit by limitation since there is no case made out by the Revenue to justify the invocation of extended period. This being so, the impugned order cannot be sustained - appeal allowed - decided in favor of appellant.

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• 2019 (6) TMI 5
  Clandestine manufacture and removal - PVC pipes - service of order - imposition of penalties - HELD THAT:- The discrepancies have not been properly and satisfactorily explained by the appellant. The adjudicating authority has picked up the sale value etc., from the books of the appellant as noted at paragraph-3 of the SCN. But, it is also a fact that upon being pointed out, the appellant admitted duty liability and paid the duty, but interest alone was paid late, on 03.09.2014, which is after the date of the OIO - impugned order upheld. Service of order - HELD THAT:- There is a finding that Shri V. Satish appeared before the Superintendent along with duly authorization letter which fact was not denied. Therefore, the contention of the Ld. DR that the order was served as per request on the authorized person is required to be accepted, but the fact remains that the same was never served on the individual who was also saddled with penalty. Penalty u/s 11AC - HELD THAT:- There are no allegation as to suppression, fraud, etc. either in the SCN while proposing the penalty or is there any discussion about the same while confirming, in the Order-in-Original. Hence, the above penalty is liable to be set aside - penalty under Section 11AC could be imposed only when the conditions mentioned in Section 11AC exists - there is absolutely nothing on record to suggest any suppression, fraud, etc. for which reason duty of excise was not paid or short paid, etc., and therefore, I have to only assume that the conditions are not satisfied in this case. Penalty under Rule 26 on Shri V. Satish, Incharge - HELD THAT:- Though penalty is imposed but the statutory requirements of serving the order on him is not complied with and thus, the said appellant has not been served with the reasons and the order whereby a demand is raised against him. Hence, even though an order imposing penalty remains on paper, in the absence of communication of the same, the order cannot be enforced - order cannot sustain. Appeal allowed in part.

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• 2019 (6) TMI 4
  SSI exemption - allegation of the Department is that since the appellant has cleared the goods on payment of duty for a short period, they cannot thereafter avail SSI exemption for the remaining part of the financial year - no intimation given to the Department regarding intention to avail SSI Exemption - HELD THAT:- On perusal of paragraph 2(i) of the Notification, however, it is seen that when a manufacturer intends not to avail exemption contained in this Notification and instead, pay the normal rate of duty on the goods cleared by him , such option shall not be withdrawn during the remaining part of the financial year - In the present case, the appellant has not furnished any intimation to the Department showing that they have no intention to avail the option of SSI exemption benefit. The Larger Bench of the Tribunal in the case of ANKIT PACKAGING LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, HYDERABAD [ 2003 (12) TMI 86 - CESTAT, NEW DELHI] has considered the very same issue and has held that even though a few clearances were made by the manufacturer on payment of Excise Duty, it cannot be considered as de facto opting out of the exemption of the Notification. Appeal allowed - decided in favor of appellant.

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• 2019 (6) TMI 3
  Clandestine removal - Department took the view that the endorsement in the ground plan of Guindy unit by the Superintendent did not appear to show that permission was accorded to M/s. CMS to remove and store their non-duty paid goods at the premises of M/s. MOC - HELD THAT:- In the present case, the impugned goods were being stored outside the factory premises of M/s. CMS. They were thus only being stored in the premises of their sister unit. Removals of goods have been meticulously entered in the R.G. 1 returns required to be filed by M/s. CMS from time to time. There is also no allegation that some or all of the goods which had been so shifted from M/s. CMS to M/s. MOC had been clandestinely removed therefrom or diverted without discharge of duty liability - On the other hand, as per the facts on record, M/s. CMS had paid duty on the machineries manufactured by them and transferred to Guindy unit, albeit on a notional value, and, at the time of clearance of complete machineries, they would pay the appropriate duty on the actual value, after adjusting the duty earlier paid by them. In respect of the impugned goods, such duty amount paid on provisional basis based on the notional value amounted to 16,42,425/-, which was, in any case, more than even the enhanced duty demand of 15,65,921.19/- proposed to be demanded in the corrigendum to the Show Cause Notice - there was nothing mala fide about the practice being followed by M/s. CMS. All the removals, though done only on delivery challans, had been reflected in their R.G. 1 returns. Though specific permission for such removals was not obtained, it cannot be denied that M/s. MOC had got their ground plan endorsed with a portion approved by the jurisdictional Range Superintendent for storing machineries. The appellants could very well have qualified for permission to store the finished goods outside their factory premises in terms of the amendment brought about in Rule 47 ibid with effect from 10.05.1989. At the most, there has been some procedural lapse in not having followed the correct protocol for removal of such goods. We are constrained to note that such a procedural lapse which could have been resolved by suitable warning and/or advice from the Department, has been blown up to this extent. If this is not making a mountain of a mole hill, then what is? Appeal allowed - decided in favor of appellant.

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• Indian Laws

• 2019 (6) TMI 2
  Arbitral Award - price adjustment/escalation clause - fixed costs - escrow account - whether in the facts and circumstances of the case, the Division of the High Court is justified in interfering with the award passed by the learned Arbitrator, confirmed by the learned Commercial Court, in an appeal under Section 37 of the Arbitration Act? Price adjustment/escalation - HELD THAT:- The learned arbitrator interpreted the relevant clauses of the contract and specifically held that the date of commencement of the first operating year for the purposes of clauses 5.2.2 read with 5.4.3 would be 25.06.2011 and accordingly the zero year for the purpose of price escalation would be 2011-12 and therefore the appellant shall be entitled to the enhanced amount as is applicable in the year 2013-14 (the price escalation). Having considered the reasoning given by the learned arbitrator, we are of the opinion that the interpretation by the learned arbitrator was both possible as well as plausible. Therefore, merely because some other view could have been taken, the High Court is not justified in interfering with the interpretation made by the arbitrator which as observed was possible and plausible. Therefore, in the facts and circumstances of the case, we are of the opinion that the High Court has clearly exceeded in its jurisdiction in interfering with the award passed by the learned arbitrator with respect to claim no.1 price adjustment/escalation - the impugned judgment and order passed by the High Court for quashing and setting aside the award passed by the learned arbitrator with respect to claim no.1 price adjustment/escalation cannot be sustained and the same deserves to be quashed and set aside. Fixed costs - an amount of 78 crores awarded by the learned arbitrator with respect to compensation of loss - HELD THAT:- Having gone through the relevant material on record, we are of the opinion that the High Court has rightly set aside the award passed by the learned arbitrator with respect to claim no.2. Except the CA s certificate, no further evidence had been led with respect to actual loss. Considering the material on record, it is on the contrary found that in the relevant year the quantity of the coal lifted by the respondent was much above the fixed quantity. Thus, the award passed by the learned arbitrator with respect to claim no.2 was contrary to the evidence on record and therefore is rightly set aside by the High Court. Escrow account - HELD THAT:- From the correspondence between the parties, it appears that even the appellant consented for opening the escrow account. The appellant also agreed that the amount to be deposited in the escrow account will be recovered by the respondent from immediate next payment of the coal bills of the joint venture company PKCL raised towards dispatches of coal from appellant s coal blocks. Thus, thereafter it was not open for the appellant to claim the amount lying in the escrow account. If the amount lying in the escrow account is returned to the appellant, the purpose and object of opening the escrow account which was as per the guidelines of the Ministry of Coal would be frustrated - The object and purpose of opening the escrow account was to see that the appellant company fulfils the contract as per the agreement and till the closure of the coal blocks - the High Court has rightly interfered with the award passed by the learned arbitrator with respect to claim no.3 escrow account by observing that the reasoning is perverse or so irrational that no reasonable person could have arrived at on the material/evidence on record. Appeal allowed in part.

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