Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
June 5, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
TMI SMS
News
Notifications
Highlights / Catch Notes
GST
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Nature of supply - divisible contract [Supply of goods & Supply of Services] or an indivisible contract [works contract] - Construction of power lines, erection of transmission towers and transformers - Held as works contract - liable to be taxed @12% of IGST - AAR
Income Tax
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Revision u/s 263 - if the enquiry of such unexplained investment is not done then same would be erroneous order prejudicial to the interest of the Revenue u/s 263 - thus if assessee is failed to explain the source of investment of the deposits with the bank, it shall be considered as an income u/s 69 - HC
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Presumption to service of notice u/s 148 - revenue failed to discharge the onus - also notice which u/s 148 was sent on the address where the assessee was not residing - thus reassessment proceedings without effecting proper service of notice on the Assessee are invalid and liable to be quashed - HC
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Disallowance of purchases - Even if the purchases are not genuine or are bogus the entire addition to the income of the assessee is uncalled for and wrong. The purpose of the statute is only to tax the income of the assessee, which is only a fraction of the total purchases. - AT
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Penalty u/s 271C - non deduction of tds - Since the assessee has filed the certificates of the recipients with proof that the recipients have offered the income to tax in their hands, the assessee shall not be treated as an “assessee in default” u/s 201(1) of the Act - No Penalty - AT
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Charitable purpose - Application of loan repayment allowability - The repayment of loan is not an allowable deduction against profit and gains of the business even under section 30 to 43C of the Act - the assessee is not eligible for application of loan repayment against the income for charitable purposes. - AT
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Charitable purpose - assessee has claimed only exemption u/s 10(21) - Order of CIT(A) allowing exemption u/s 11(1) set aside - matter restored before CIT(A) - AT
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Disallowance of long term capital loss on sale of shares - sham transactions or genuine transactions - - It seems to be a case of tax planning by the assessee, though the transactions having been carried out between the group companies - AO directed to allow the set off such loss against the long term capital gain - AT
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Exemption u/s 10 - whether the assessee is solely existing for educational purpose and the Government has financed - this issue requires detailed verification - can not be done by mere stating adjustments u/s 143(1) - can be done only by way of scrutiny assessment. - AT
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Deduction u/s 80IA - claim of higher depreciation from 30% to 15% on commercial vehicles - this depreciation is related to B.T.Road Project. Hence the disallowance of depreciation of 15% would only go to increase the profits of B.T.Road Project and consequentially the assessee would be entitled for higher claim of deduction u/s 80IA - AT
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Penalty u/s. 271AAA - assessee is not at fault for substantiating the manner for earning the undisclosed income, in the absence of any specific query raised by the Authorised Officer while recording statement u/s. 132(4) - No penalty - AT
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Benefit of exemption u/s 11 -assessee is holder of shares in violation of provisions of section 13(1)(d) - it is only the income from such investment or deposit which has been made in violation of section 11(5) that is liable to be taxed and violation u/s 13(1)(d) does not result in the denial of exemption u/s 11 to the total income of the assessee trust - AT
Customs
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Fraudulent export of low quality goods - Penalty on CHA u/s 114 of CA - appellant held to be equally responsible for the fraudulent export of low quality goods with the sole aim of claiming the undue benefits duty drawback from Customs Department. - AT
Service Tax
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Construction service - The flats sold by the land owner before the completion certificate was obtained will invite the liability of Service Tax upon the land owner. However, the flats sold after the said date of receiving completion certificate, since no more construction services were rendered after the said date, the land owner will not invite any liability to the Service Tax. - AT
Central Excise
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Price escalation - Price Variation clause - duty short levied - Since both the parties were not aware of escalated price or possibility of escalation at the time the goods were removed, the supplementary invoice cannot be a ground to call the said duty paid as the short levied - demand of interest set aside - AT
Case Laws:
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GST
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2018 (6) TMI 111
Classification - Nature supply - divisible contract [Supply of goods & Supply of Services] or an indivisible contract [works contract] - Construction of power lines, erection of transmission towers and transformers - single composite contract, but with three connected agreements for Supply of Materials, Erection and Civil Works respectively - KPTCL is a Government body or not - Whether the contract, executed by them for KPTCL, is a divisible contract [Supply of goods & Supply of Services] or an indivisible contract [works contract]? - Whether the tax rate of 12% [CGST-6% + SGST-6%] is applicable to the contract, in pursuance of N/N. 24/2017-Central Tax (Rate) dated 21.09.2017? Held that:- The composite supply of works contract as defined at Section 2 clause 119 of CGST Act 2017 is treated as supply of service in terms of serial no.6, Schedule II of CGST Act'2017 - the applicant, being the successful bidder, got the single composite contract, but with three connected agreements for Supply of Materials, Erection & Civil Works respectively. All the three agreements were awarded to the applicant in response to a single tender notification & the general terms and conditions are commonly applicable to all the three agreements. The applicant is supplying the material and providing the erection of towers service and also civil works service. Therefore the contract entered by the applicant is of the nature of “indivisible' and squarely falls under the works contract, which is a service. Whether the applicant is entitled for the concessional rate of GST @ 12% as per Notification No.24/2017 Central Tax (Rate) dated 24.09.2017 or not? - Held that:- The regulatory bodies and other autonomous entities would not be regarded as the government or local authorities for the purposes of the GST Acts. Therefore M/s KPTCL can not be a State Government - Further M/s KPTCL, who awarded the contract to the applicant, are registered under Companies Act 1956 as a company and is a separate entity. Therefore it can not be considered as the State Government or a State Government Authority. Hence the applicant is not entitled for the benefit of the concessional rate of GST @ 12%, in terms of N/N. 24/2017-Central Tax (Rate) dated 21.09.2017. Ruling:- The contract contract entered by the applicant is of the nature of 'indivisible' and squarely falls under the works contract, which is a service - The Applicant is not entitled for the benefit of concessional rate of GST @12% in terms of Notification No.24/2017-Central Tax (Rate) dated 21.09.2017.
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2018 (6) TMI 110
GST return filling - seeking allowance of tax credit - prayer seeking to either reopen and reinstate the facility of online submission of TRAN-I to the petitioner or to accept the Hard copy of TRAN-I of the petitioner - Held that:- It is appropriate to dispose of the present writ petition by permitting the petitioner to approach the concerned authorities and to raise a notice of demand in accordance with law within a period of two weeks from today - petition disposed off.
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2018 (6) TMI 109
IGST on the imported goods - warehoused goods - Point of Taxation - sale of warehoused goods between the importer and any other person - Validity of Circular issued by CBEC dated 24th November 2017 - According to the petitioners, IGST on the imported goods can be levied only at the time of clearance of goods and the Government of India has no authority to levy such tax at the time of sale of warehoused goods before the customs clearance? Notices issued.
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2018 (6) TMI 108
Alternative remedy of appeal - Penalty in excess of 50% of value of goods - section 129 (1) (b) of UPGST Act - Release of seized goods on furnishing of security for applicable tax and additional penalty - Held that:- Against the order dated 30.11.2017 the petitioner has an statutory efficacious alternative remedy of filing an appeal under Section 107 of the U.P. Goods and Service Tax Act, 2017 read with Rule 109 A of the Rules - the instant writ petition is disposed of with the direction that in case, the petitioner files an appeal against the order dated 30.11.2017 within the next one week from today, the same shall be heard and decided in accordance with law by the appellate authority within a period of one month therefrom. The vehicle being Truck bearing Registration No.U.P. 21 BN 5211 on which the goods were found loaded may be released forthwith without demanding any security from the petitioner - petition disposed off.
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Income Tax
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2018 (6) TMI 107
Taxability of fees received from Indian clients - withholding of tax - income from interest - whether fee payable by a customer in India under the financing arrangement would be taxable as ‘interest’ or FTS under Indo-France Tax Treaty - or whether it shall be taxable as business income - Held that:- Front end fee other than appraisal fee is to be paid after the signing of the agreement. Hence, front end fee other than appraisal fee has to be treated to be in relation to a debt claim and is income from interest under the India France DTAA following the view of JOINT DIRECTOR OF INCOME TAX (OSD) - (IT) RANGE 1, MUMBAI VERSUS M/S COMMONWEALTH DEVELOPMENT CORPORATION, [2010 (2) TMI 1150 - ITAT MUMBAI]. Commitment fee, cancellation fee, amendment fee and monitoring fee are directly related to debt claim as the fee are charged after disbursement of loan - and thus are treated as interest income under India France DTAA. Determination of PE - Held that:- Determination of PE is dependent of facts of each year - in the present case Applicant has only given a certificate that there is no PE and thus it needs to be examined by the AO - proper facts about reimbursement of expenses are also not provided - allowed for statistical purpose. Front end fee in the nature of appraisal fee (in the absence of any PE in India) would not be subjected to withholding tax under section 195 of the Act.
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2018 (6) TMI 106
Validity of penalty orders u/s 271AAB - penalty notice issued under Section 274 read with Section 271 - penalty where the search has been initiated - Held that:- SLP dismissed - HC order confirmed.[2017 (12) TMI 70 - ALLAHABAD HIGH COURT] HC has held no proceeding under Section 271(1)(c) are initiated by the assessing authority during the course of the assessment proceeding under Section 143(3), the impugned penalty proceedings under Section 271AAB are fully justified and are initiated in accordance with law - Decided in favour of assessee.
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2018 (6) TMI 105
Revision u/s 263 - Doctrine of merger - Disallowance for labour charges, expenses of commission and work in progress - whether the Commissioner of Income Tax (Appeals) exercising jurisdiction u/s 263 could re-consider the claim of development expenses which had been considered by the AO? - Held that:- Appellate Commissioner has considered the matter while concurring with the order passed by the Assessing Officer, and therefore, the order of the Assessing Officer stood merged with the order of the Appellate Commissioner. In such circumstances, the same question cannot be re-opened by the Revisional Authority exercising power under Section 263 of the Act. Expenses of purchase of land and profit from sale of properties - Held that:- Appellate Authority considered both the appeals and in his order ordered for deletion of the additions made by the Assessing Officer, as a result the conclusions regarding purchase price paid for acquiring the lands and the sale proceeds received by selling the lands stood concluded as per the order of the Appellate Commissioner - no scope for the Revisional Commissioner to exercise jurisdiction under Section 263 also had no justification to add cost price in a sum of ₹ 2,71,13,658/- stating that it pertained to sales made for the subsequent year. Assessee submitted full details regarding payment of commission and also proper TDS has been deducted on the said expenses - thus it was not open for the revisional authority u/s 263 to interfere with the same only because another view was possible as followed in the case of THE COMMISSIONER OF INCOME TAX VERSUS SHRI NIRAV MODI [2016 (6) TMI 1004 - BOMBAY HIGH COURT] - Decided in favor of assessee. - Decided in favor of assessee.
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2018 (6) TMI 104
Penalty u/s 271D - whether the amount in issue was not a loan within the meaning of Section 269SS - Held that:- Tribunal in his order has primarily relied on entries in the books of account and thus the two cash payments were imprest, and therefore neither loan nor deposit - also the interest accrued on the FDRs was duly reflected in the returns of income of the assessee - thus we take the statement made by the counsel for the respondent/ assessee that the matter may be remanded to the Tribunal for fresh adjudication and accordingly the matter is set aside - hence no final opinion is given on penalty u/s 271D.
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2018 (6) TMI 103
Evasion of taxes - complaint under Sections 276C and 277 r.w.s 278B - Prosecution proceedings - Whether accused Pardeep Kumar, is the partner of accused No.1 and has willfully attempted to evade the tax, penalty and interest chargeable, imposable under the Income tax Act? - Method of accounting u/s 145 - cash credits u/s 68 - impugned judgment of acquittal passed by the trial Court confirmed by Additional Sessions Judge - Held that:- It has been rightly contended for the learned counsel for the respondent that Rajinder Singh has not been examined as a witness in the Court who recorded their statements so those statements cannot be taken into evidence as per rules of law of evidence. A criminal Court has to decide the case on the basis of independent evidence. It cannot base the conviction on the report submitted by the Assessment Valuation Officer, on the basis of which the department has made the assessment of the income of the assessee. The offence of abetment has not been proved to be committed by respondent No.1 and 2. The law is well settled that the revisional jurisdiction of this Court is quite limited - the Court is to interfere only if there is an illegality or infirmity apparent on the face of the judgment/order passed by a Court below - since there is no illegality or infirmity with the impugned orders the petition stands dismissed.
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2018 (6) TMI 102
Disallowance of payment of commission - Held that:- Md. Ali Samarie of Baghdad was an agent and rendered services to the assessee and thus no question of law is involved. Expenses allowed. Whether the expenses towards drawings/ designs software consultancy charges are revenue or capital in nature? - Held that:- The consultancy charges were on account of drawings and designs prepared by a particular agency - the drawings and designs could not have been treated as a capital asset and subjected to depreciation. Whether tender deposits made for filing tenders are allowed as deduction u/s 37? - Held that:- As per the discussion in the order it is found as expenditure. Since the questions raised are not of such character that require any consideration - thus appeal is dismissed.
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2018 (6) TMI 101
Grant of absolute stay - Pre- deposits - demand of disputed tax entirely - genuine hardships - Held that:- Considering the facts and circumstances of the case, the matter being seized of by Appellate Authority, the respondent-Authorities are expected to consider the genuine hardship that would be caused to the assessee due to the high-pitched assessment. Hence, in the circumstances, this court is of the opinion that interest of justice would be sub-served in directing the petitioner to deposit 20% of the total enforceable demand in addition to 20% deposited and furnishing suitable security for another 35% of the total demand. Order - The impugned order at Annexure-A is modified. The petitioner shall deposit 40% of the total enforceable demand. Deductions shall be given to the amount already deposited. Sufficient security shall be furnished for 35% of the enforceable total demand within a period of four weeks from today.
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2018 (6) TMI 100
Registration u/s12AA - request for condonation of delay for filing Form 10 - reasons for delay - Held that:- The learned Judge scanned the materials available on record and held that there was no exorbitant delay in filing the statutory forms - thus there is no case to arrive at a finding that Form No.10 was belatedly submitted by the respondent without any justifiable reason - Decided in favor of assessee.
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2018 (6) TMI 99
Revision u/s 263 - assessing officer concluded the assessment accepting the income returned by the assessee in his revised return of income on the basis of peak (deposit) credit - unexplained source of investment i.e. carrying on retail business of iron and steel - Held that:- Assessee has failed to substantiate his retail business - the business is not declared to Sales Tax Department and no tax is paid, no balance sheet, profit and loss or income and expenditure account is maintained - assessee has never disclosed the details of any bank accounts even after issuance of notice u/s 143(2) - thus if the enquiry of such unexplained investment is not done then same would be erroneous order prejudicial to the interest of the Revenue u/s 263 - thus if assessee is failed to explain the source of investment of the deposits with the bank, it shall be considered as an income u/s 69 - hence order of CIT cannot be faulted with - Decided against the assessee.
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2018 (6) TMI 98
Presumption to service of notice u/s 148 - notice sent through speed post and not having been received back - Whether the notice u/s 148 is correctly send where the address on such notice is completely different? - Held that:- The legal requirement of service of notice upon the Assessee u/s 148 is a jurisdictional pre-condition to finalizing the reassessment - the onus is on the Revenue to show that proper service of notice has been effected u/s 148 on the Assessee or an agent duly empowered by assessee - here revenue failed to discharge the onus - also notice which u/s 148 was sent on 22nd March 2010 on the address where the assessee was not residing - thus reassessment proceedings without effecting proper service of notice on the Assessee are invalid and liable to be quashed - Decided in favor of assessee.
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2018 (6) TMI 97
Disallowance of purchases - guinity of claim - payment to the parties were made by account payee cheques - Held that:- We find merit in the contention of the learned AR that the purchases in the present case are not bogus and the parties involved are not declared as hawala parties by the sales tax department of Government of Maharashtra. Even if the purchases are not genuine or are bogus the entire addition to the income of the assessee is uncalled for and wrong. The purpose of the statute is only to tax the income of the assessee, which is only a fraction of the total purchases. Under these circumstances we are of the considered view that the total addition to the income of the assessee on account of purchases from three parties is not justified and cannot be sustained. We, therefore, deem it fit and proper to apply a gross profit rate of 4% and set aside the order of the CIT(A) - Decided in favour of assessee in part.
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2018 (6) TMI 96
TDS u/s 195 - commission expenditure paid to USA based payee - non deduction of TDS - Indo - USA DTAA benefits - PE In India - Held that:- Once the assessee’s payee derives business profits in question without having permanent establishment not taxable in India, the instant taxpayer’s case is very well covered under Article 7 of the Indo-USA Double Avoidance Agreement - as per Section 90(2) Government of India has executed Double Taxation Avoidance Agreement and the assessee to whom it applies, the provision of the Act would be applicable to the extent they are more beneficial - thus CIT(A) has rightly reversed the AO's action invoking the disallowance - Decided in favor of assessee.
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2018 (6) TMI 95
Benefit of exemption u/s 11 denied - whether the assessee can be denied the benefit of exemption u/s 11 on the ground that the assessee was holder of shares in violation of provisions of section 13(1)(d) ? - Held that:- It is well settled that where investments or deposits have been made by a charitable trust which are in violation of section 11(5) of the Act, the benefit of exemption u/s 11 of the Act would not be denied on the entire income of the assessee and only the investments / deposits made in violation of provisions of section 11(5) would attract maximum marginal rate of tax - See CIT vs. FR Mullers Charitable Institutions [2014 (2) TMI 1033 - KARNATAKA HIGH COURT] - Decided in favour of assessee.
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2018 (6) TMI 94
Penalty u/s 271C - Assessee in default u/s 201(1) - non deduction of tds - TDS u/s 194C OR 194J - Held that:- Isuue to be remanded to the file of the AO for verification of the transactions which are technical in nature, requiring deduction of tax at source u/s 194J of the Act and the services which require deductions u/s 194C of the Act. Therefore, the issues are set aside to the file of the AO for de novo verification and only in respect of the transactions which require the deduction of tax at source at a higher rate u/s 194J of the Act, shall the interest u/s 201(1A) shall be considered. Since the assessee has filed the certificates of the recipients with proof that the recipients have offered the income to tax in their hands, the assessee shall not be treated as an “assessee in default” u/s 201(1) of the Act. Since the assessee has not been treated as “an assessee in default” u/s 201(1) of the Act, the penalty u/s 271C are not sustainable as held by the Coordinate Bench of the Tribunal in the case of ACIT vs. M/s. Nexgen Educational Trust [ 2017 (11) TMI 191 - ITAT HYDERABAD] - Decided in favour of assessee.
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2018 (6) TMI 93
Taxability of remuneration and interest received from partnership firm as business income - Held that:- We found strength in the arguments of ld. AR on perusal of the Section 28(v) of the Act which specifically mentions that the charge ability of interest income the remuneration of the partners - Interest income and remuneration are as per the provision of Act are taxable as business income Allowability of expenditure as claimed as deduction in the business income - Held that:- We find that the assessee’s income is chargeable under the business income as discussed above also the assessee is entitled for the claim of expenditure which is wholly exclusively utilized for the earning of above income are allowable. AO has disputed the genuineness of the expenses, therefore, we are of the opinion that the assessee should not be deprived to claim the addition if allowable. Accordingly, we direct the AO to verify the expenditure as claimed on the business income Charging of interest u/s.234A & 234B which is consequential, and the AO is directed to calculate the interest u/s.234A & 234B of the Act as per the law laid down by the Hon’ble jurisdictional High Court in case of Ajay Prakash Verma [2013 (1) TMI 140 - JHARKHAND HIGH COURT]
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2018 (6) TMI 92
Benefit u/s 10(21) denied - AO held that the assessee has not been notified by the CBDT as “Scientific research Association” for granting benefit - Held that:- Restore this issue to the file of the Ld. CIT(A) for verifying the status of litigation in the matter of notifying the assessee as “Scientific Research Association” and, thereafter, to take a decision in accordance with law after providing opportunity of being heard to both the parties. The ground of the appeal of the Revenue is, accordingly, allowed for statistical purposes. Charitable purpose - assessee has claimed only exemption u/s 10(21) - Order of CIT(A) allowing exemption u/s 11(1) set aside - matter restored before CIT(A) Charitable purpose - Application of loan repayment allowability - loans received or the money borrowed by the assessee has not been shown as income at any point of time by the assessee - Held that:- The repayment of the loan is not allowed in the profit and loss account even under the general principles. Therefore, in our opinion, the ratio of the decision of the Hon’ble Supreme Court in the case of Rajasthan Gujarati Charitable Foundation, Poona [2017 (12) TMI 1067 - SUPREME COURT] is not applicable and the assessee is not eligible for application of loan repayment against the income for charitable purposes. We also note that the Tribunal in order [2016 (11) TMI 527 - ITAT DELHI] has also disallowed application of loan repayment - Decided against assessee.
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2018 (6) TMI 91
Disallowance of long term capital loss on sale of shares - sham transactions or genuine transactions - Held that:- Assessee has genuinely entered into the sale of shares which are supported with the transfer deeds, Board resolution and the confirmation of payments for transfer of such shares and were duly shown in the books of accounts of the assessee. Sole issue raised by the revenue is that the price at which these were transferred was not based upon valuation report and thus the AO rejected the setting off the said loss against the long term capital gain. It seems to be a case of tax planning by the assessee, though the transactions having been carried out between the group companies. Both Commissioner of Income Tax (Appeals) as well as the Tribunal have rendered a finding of fact that the consideration of ₹ 750/- and ₹ 936/- per share received on the sale of the shares by the respondent assessee was in fact the full consideration which have been disclosed to the revenue. The revenue has not in any manner shown that the consideration disclosed by the respondent assessee to the revenue is not the correct consideration received by them and that the same should be replaced. Long term loss on sale of shares cannot be allowed to be non-genuine and therefore, we direct the AO to allow the set off such loss against the long term capital gain on compensation received by the assessee upon surrender of tenancy rights by setting aside the order of CIT(A) on this issue.- Decided in favour of assessee. Penalty u/s 271(1)(c) - Held that:- Since, we have allowed the long term capital loss on sale of shares to be genuine and allowable to be set off against the compensation received from surrender of tenancy rights and thus allowed the appeal of the assessee in quantum appeal. Consequently, the penalty as levied u/s.271(1)(c) does not survive.
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2018 (6) TMI 90
Exemption u/s 10 - rejecting the claim of exemption and making the adjustment u/s 143(1) - whether declining the claim of exemption made in the return of income, while processing such return of income u/s 143(1) would ipso facto authorized and entitled the Revenue to treat the disallowance so made as a recoverable demand without making any further inquiry as provided under the Act, for the purpose of scrutiny assessment? - Held that:- Issue of claim of exemption by the assessee whether it falls under the category u/s 10(23C)(iiiab) or under section 10(23C)(iiiad) is debatable. As per Section 10(23C)(iiiab), exemption is available if any university or other educational institution existing solely for educational purposes and not for the purpose of profit and which is wholly or substantially financed by the Government. It is not in dispute that the assessee University is established by the Government of Madhya Pradesh. Nothing is on record suggesting that the assessee is not existing for educational purposes. The issue whether contention of the assessee that it is solely existing for educational purpose and the Government has financed it requires verification by conducting detailed enquiry and this can not be done by mere stating adjustments u/s 143(1) of the Act, which, thus, can be done only by way of scrutiny assessment. We, therefore, respectfully following the decision of Hon'ble Jurisdictional High Court in the case of M/s. Bharat Oman Refineries Limited, Mumbai vs. ITO, Bhopal [2015 (1) TMI 100 - MADHYA PRADESH HIGH COURT] hold that the issue being debatable, authorities below ought to have made the detailed scrutiny as provided u/s 143(3) of the Act - decided in favour of assessee.
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2018 (6) TMI 89
Deduction claimed u/s 80IA denied - meaning and scope of the term "works contract" - works contract or developer of infrastructure facilities - widening of existing roads by construction of additional lanes of a highway - whether the interest income was to be set off against the interest expenditure and the net income was to be excluded for the purpose of calculation of deduction u/s 80IA - apportionment of expense of the expenses of Head Office - Held that:- The assessee had received payments from the Government in progress of its work has no bearing on eligibility of deduction u/s 80IA - contention of AO that the assessee had not undertaken any entrepreneurial and investment risk is an incorrect interpretation of the facts. The assessee deploying its resources i.e. finance, technical expert, human resources, material, machinery, labour etc. in the construction work clearly exhibits the risks undertaken by the assessee. The assessee was to indemnify the employer of any losses/damage caused to any property/life in course of execution of works. Further, it was responsible for the correction of defects arising in the works at its cost. Thus, it cannot be said that the assessee had not undertaken any risk. It is clear that the assessee was not a works contractor simplicitor and was a developer and hence Explanation to section 80IA(13) of the Act does not apply to the assessee. In addition to developing the infrastructure facility, the assessee was even operating and maintaining the same. Thus, clearly the assessee is eligible for deduction u/s 80IA of the Act. Interest income - the same represents interest on fixed deposits - there is a direct nexus of the fixed deposit with the development activity of the assessee. AO in the assessment order has pointed out that there were interest expenses incurred by the assessee on cash credit, equipment finance and unsecured loans. The total of the interest paid including bank charges (which are as per Section 2(28A) are also considered to be interest) for the BT Road project was ₹ 6,56,124. We find that the interest income and interest expenses are closely linked and hence we direct the ld AO to consider the net interest while determining the profit of the enterprise. In the instant case, the net interest expense is more and hence it would not affect the computation of deduction u/s 80IA of the Act. Apportionment of expenses and depreciation apportionment - we find that we have directed to consider the interest and bank charges net of interest income. We find that the amount of ₹ 8,84,703/- includes the bank interest and bank charges of ₹ 6,56,124/-. Thus the balance amount of ₹ 2,28,579/- and the amount of depreciation of ₹ 1,00,505/- shall also be reduced from computation of deduction u/s 80IA of the Act. To this extent the order of the ld AO is upheld. Whether the CITA was justified in upholding the action of the ld AO in reducing the claim of depreciation from 30% to 15% on commercial vehicles? - Held that:- Total contract value undertaken by the assessee includes a sum towards removal of earth from working site including loading, unloading and carriage within a distance of 2 km over pacca road. For this purpose, the commercial vehicles of the assessee had been used for execution of the development project undertaken by the assessee. Hence it could be safely concluded that the vehicles were used for the purpose of business for transportation of goods of running them on hire as admittedly the total contract value includes hire charges (in different nomenclature) and accordingly entitled for higher rate of depreciation @ 30%.- this depreciation is related to B.T.Road Project. Hence the disallowance of depreciation of 15% would only go to increase the profits of B.T.Road Project and consequentially the assessee would be entitled for higher claim of deduction u/s 80IA of the Act. We find that the CBDT in its Circular No. 37 of 2016 dated 2.11.2016 had also confirmed this aspect.
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2018 (6) TMI 88
Loss on account of fluctuation of foreign currency - allowable busniss expenditure - notional loss or not - Held that:- Loss on account of fluctuation of foreign currency on the date of balance sheet is not a notional loss as held by the A.O and the CIT(A) and in allowable as expenditure if it is on revenue account. Loss disallowed on the ground that it is capital loss - whether the FCCB issue expenses are in the nature of capital or Revenue? - Held that:- Till the bonds are converted into share capital, they remain as a loan fund and cannot be held as equity fund and thus capital in nature [See M/s Crane Software Ind Ltd.- 2011 (2) TMI 1414 - ITAT BANGALORE]. From the financial statements for the F.Y 2008-09, and schedule 4 thereof, it is seen that unsecured loans include FCCBs worth ₹ 101,72,00,000/- The assessee has stated that the disallowance is made only in A.Y 2009.10, whereas the balance of the expenditure which has been claimed in subsequent assessment years, has been allowed as a deduction in the assessment completed u/s 143(3) r.w.s 147 of the IT Act for the A.Y 2010-11. We hold that the assessee, which is following a uniform and consistence method of accounting, and has claimed the expenditure in accordance with the notification of the Min of Corporate Affairs and the A.O has allowed the same in the subsequent assessment years, the revenue cannot take a contrary stand only for the A.Y 2009-10. In the result, the grounds of the appeal of the assessee on this issue are allowed.
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2018 (6) TMI 87
TDS u/s 194C OR 194I - tds liability on display charges paid by the assessee - Held that:- Assessing Officer has gone by a sample contract, which is dated 01.01.2011 and is clearly not relevant to the period under dispute. Therefore, the reference and reliance on such contract by the Assessing Officer is of no avail to adjudicate the controversy in question for the period under consideration - set-aside the order of CIT(A) and direct the Assessing Officer to re-decide the controversy based on the material assessee may furnish before him.
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2018 (6) TMI 86
Depreciation claim allowability - assets were utilised for less than 180 days - Held that:- As submitted on behalf of the assessee before the CIT(Appeals), depreciation at 50 per cent. of the normal rate only was claimed by it on the addition made to the power plant during the year under consideration after October 1, 2007 since the said assets were put to use for less than 180 days during the year under consideration. Keeping in view this specific claim made by the assessee, the learned Commissioner of Income-tax (Appeals) directed the Assessing Officer to verify the same and allow appropriate relief to the assessee. In our opinion the impugned order of the learned Commissioner of Income-tax (Appeals) on this issue is quite fair and reasonable - Decided against revenue
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2018 (6) TMI 74
Payment made to owners of the agricultural land from whom the land was purchased - Held that:- The explanation given by revenue u/s 37(1) is not well - thus this is to decide what constitutes infraction of other provisions of law - other submission is that the such amount has to be taken as falling within the mischief of the said provision, in our opinion, is an incorrect premise - hence no question of law arises. Admit following question of law :- “Did the ITAT fall into error in holding that the sum of ₹ 27,11,797/- on account of interest, could not be sustained in the circumstances of the case?”
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2018 (6) TMI 73
Penalty u/s. 271AAA - unexplained cash payments offered as additional income - no specific query raised by the Authorised Officer while recording statement u/s. 132(4) - Held that:- As during the assessment proceedings, the assessee has stated that the undisclosed income in dispute has been earned from transactions in land / properties and from other speculative activities and for this claim, papers and correspondence was also found and seized Since no specific query was raised at the time of recording statement u/s. 132(4) and during the assessment proceedings, however, the manner was substantiated by filing written submission and also referring relevant documents relating to undisclosed income, which were found and seized. CIT(A) has rightly held that assessee is not at fault for substantiating the manner for earning the undisclosed income, in the absence of any specific query raised by the Authorised Officer while recording statement u/s. 132(4). The assessee has substantiated the manner, during the assessment proceedings, therefore, the Ld. CIT(A) has rightly deleted the penalty in dispute. - Decided in favour of assessee
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Customs
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2018 (6) TMI 84
Auction - matter pending adjudication - Release of consignment of imported goods - the petitioner sent a letter dated 22.4.2018 (Annexure P-17) to respondent No.2 not to auction the goods as the matter was pending adjudication before the competent authority, but no response has been received till date - release the consignment of imported goods comprising of Re-Rollable Steel Scrap Imported and to waive the amount of demurrage/detention charges - Held that:- We dispose of the present petition by directing respondent No.2 to take a decision on the letter dated 22.4.2018 (Annexure P-17), in accordance with law by passing a speaking order and after affording an opportunity of hearing to the petitioner within a period of one month from the date of receipt of the certified copy of the order.
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2018 (6) TMI 83
Payment of refund in cash - Period of Limitation - SAD Refund - appeal not filed within the mandatory period from the date of the original authority s order and is time barred - Held that:- The time limit for filing appeal prescribed in Section 128 is 60 days period between the date of communication of the original authorities order to the date of filing of the appeal before Commissioner (Appeals). The appellant was not aggrieved by the original authority s order received on 25.04.2016. He became aggrieved only on 30.12.2016, when his attempt to secure the recredit into the FPS licence failed - the time limit in this case, for purposes of Section 128 is to be reckoned from 30.12.2016. From such date the appeal is filed within time. The time exhausted in pursuing the matter with DGFT should be excluded for the purpose of computation of the limitation period, as per terms of Section 14 of the Limitation Act, 1963 - Impugned order set aside - the matter remanded to the Commissioner (Appeals) to pass orders on merit.
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2018 (6) TMI 82
Fraudulent export of low quality goods - Penalty on CHA u/s 114 of CA - gross overvaluation of exports to avail higher / undue and ineligible drawback benefits - role of exporter in the said blunder - Held that:- CHA is duty-bound to advise the client to comply with the provisons of the Act and the regulations diligently ensuring the imparting of correct/relevant information to the client for clearance of cargo or baggage. If there is any non compliance by the client, it is the duty of CHA, the appellant herein, that he must bring it to the attention of the Deputy or Assistant Commissioner. It is his fiscal accountability that he must promptly pay the Government all moneys received from the client for duties and taxes. The appellant’s plea that he was never concerned with the goods illegally exported, being merely an agent of the exporter is nothing but an eye-wash Keeping in view the obligations of the CHA as enshrined in Rule 11 of the Regulations 13 of the Regulations’ 2013, it is crystal clear that no inferior quality goods can be exported and imported, that too, for a period of more than two years continuously without the knowledge of the CHA. The defence of the appellant also stands vitiated from his own admission that he used to receive a percentage of the duty drawbacks and other benefits apart from the normal charges - it is held that the Commissioner (Appeals) has rightly held the appellant to be equally responsible for the fraudulent export of low quality goods with the sole aim of claiming the undue benefits duty drawback from Customs Department. Appeal dismissed - decided against appellant.
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Corporate Laws
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2018 (6) TMI 85
Transfer of cases - where an application under Section 230-232 of the Companies Act, 2013 can be filed if the registered office of two companies are situated within the territorial jurisdiction of two different NCLT Benches? - Held that:- From clause (d) of Rule 16, we find that the Hon’ble President of the NCLT has power to transfer any case from one Bench to other Bench when the circumstances are so warranted. The cases in hand circumstances warrants that the President exercises his power under Rule 16(d) to transfer one of the case from one Bench to other Bench where other matter is pending including the cases where transferor and transferee companies are at different places of the country. For the reasons aforesaid, we set aside the order dated 17th November, 2017 passed by the NCLT, New Delhi Bench with liberty to the appellant to file application before the Hon’ble President, NCLT, New Delhi to transfer one of the case either to Chandigarh Bench or the Bench at New Delhi for hearing of both the case by one of the Bench. The appeal stands disposed of with the aforesaid observations.
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Service Tax
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2018 (6) TMI 81
Maintainability of appeal - demand of service tax - appeal challenged on the ground that against the said Order-in-Original the appellant had already filed appeal before the Commissioner (Appeals) - Held that:- Since the appellant is raising the preliminary objection about the maintainability of appeal before the Commissioner (Appeals) therefore it is appropriate and also in the interest of justice, to remand the matter back to the Commissioner (Appeals) to decide the matter afresh, after hearing the appellant on the question of maintainability of Appeal - appeal allowed.
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2018 (6) TMI 80
Evasion of service tax - Construction service - liability of service tax - date of completion certificate - whether the liability is confined to the builder/developer or shall be shared by the land owner, who has parted with his land with an intention to be converted into a residential complexes and has simultaneously sold the portion of the developed property to the buyers of his choice - Penalty u/s 78 of FA - suppression of facts with intend to evade payment of tax - applicability of Section 73 (3) of Finance Act Held that:- The flats sold by the land owner before the completion certificate was obtained i.e. before 20th March, 2012 will invite the liability of Service Tax upon the land owner. However, the flats sold after the said date of receiving completion certificate, since no more construction services were rendered after the said date, the land owner will not invite any liability to the Service Tax. Also with respect to the one flat, which has been gifted by him to his own son vide Deed dated 30thOctober, 2012, the liabilities stand exempted under Section 65 (91A) of the Finance Act - there is no infirmity in the order under challenge where the extra levy of the subsequent sale of flats has been done away. So, as far as that part of the order is concerned, it is upheld. Penalty u/s 78 - tax liability deposited before issuance of SCN - Held that:- There has been plethora of judgements that where the assessee has paid the tax liability before the issuance of show cause notice and the authorities could not find any fraud or wilful intention on the part of the respondent, in terms of provisions contained in Section 73 (3) of the act, no further proceedings were warranted - the act of land owner for getting the map approved for the complex to be constructed on this land by same developer prior the sale is complete since invites no service tax liability, the appellant cannot be accused of suppressing the facts with an intention to commit fraud or wilful suppression - There is no evidence on record which can prove beyond reasonable doubt about the alleged fraud or wilful intention to suppress the facts, so as to evade tax liability - penalty set aside. Appeal allowed in part.
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Central Excise
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2018 (6) TMI 79
Manpower Recruitment Agency Service - principles of natural justice denied - submissions not noted by Appellant Authority - Held that:- The Appellate Tribunal has not even bothered to record the gist of submissions made before it. The findings recorded are cryptic. The Appellate Tribunal has not adverted to the findings recorded by the first appellate authority - the Appellate Tribunal has failed to perform its duty. Appeal restored to the file of the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench at Mumbai for consideration afresh - appeal allowed in part.
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2018 (6) TMI 78
Price escalation - Price Variation clause - duty short levied - higher price of the goods - interest on delayed payment - supplementary invoice due to price escalation on account of increase in input labour and other costs - Held that:- The balance of higher price of the goods is due to the reasons, which could not be foreseen by the appellant at the time he made delivery of those goods and thus, it cannot be considered as the retrospective revision of the price - the Commissioner (Appeals) has wrongly held that the price indicated by the supplementary invoice is directly relatable to the value of goods on the date of clearance because on the date of clearance there was no agreement between the seller and the buyer of the goods about the escalated price as are mentioned in the supplementary invoice and in accordance of Section 4 of the act whatever the transaction value is agreed between the parties at the time of clearance is relevant for Section 11A and even the purpose of Section 11AB the expression “ought to have been paid” would mean the time when the price is agreed upon by the seller and the buyer. Since both the parties were not aware of escalated price or possibility of escalation at the time the goods were removed, the supplementary invoice cannot be a ground to call the said duty paid as the short levied. Demand do not sustain - appeal allowed.
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2018 (6) TMI 77
Refund of pre-deposit u/s 35FF of CEA - Period of limitation - Interest on delayed refund - time limitation u/s 11AB - calculation of period - Held that:- Section 35FF of the Act provides that where an amount of deposit by the Respondent in pursuant of an Order passed by the Commissioners (Appeals) or Appellant Tribunal under the first proviso of Section 35F is required to be reviewed consequent upon the Final Order of the Appellant Authority and such amount is not reviewed within three months from the date of communication of such Order to the Adjudicating Authority, the interest at the rate specified in Section 11BB after the expiry of three months from the date of communication of the Order till the date of the refund should be paid along with the refund of deposit - Section 35FF would apply to all refunds of pre-deposit pending on the date of its insertion and as it itself states that liability to interest starts three months from the Order of Appellate Authority, the relevant date is not the date when Section 35FF was inserted, but the date of the Order of the Appellate Authority. Tribunal in the matter of Commr. of C. Ex. & S.T., Panchkula versus Sainsons Paper Industry Limited [2016 (2) TMI 288 - CESTAT NEW DELHI] has held that it can be said that prior to 10/05/08, i.e. before introduction of 35FF, the Respondent was entitled to get refund of pre-deposit, as per Board Circulars even without submitting an application and was also entitled to interest for delayed refund. Interest allowed - appeal dismissed - decided against Revenue.
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2018 (6) TMI 76
Clandestine removal of finished goods - excise duty demand - sponge iron - captive consumption - suppression of facts - penalties - Held that:- The investigation undertaken by Revenue has conclusively established that the production has not been fully accounted in the statutory record maintained in the Excise Division. The total quantum of production of sponge iron has been determined by the adjudicating authority on the basis of various records recovered during investigation and confirmed and admitted by the appellant‟s employees - the total quantum of sponge iron manufactured but not accounted has been arrived at 92.142 MT. The total quantum of finished products manufactured therefrom has been worked out and the excise duty demanded on such quantum of finished products. We find the above basis is fair and is backed by the documents recovered during search - findings of lower authority upheld. Shortage of 5007.290 MT of sponge iron found during physical verification - Held that:- Since the shortage stands admitted, we find no reason to interfere with the demand raised on the finished products on the basis of the above shortage - demand of Central Excise duty which stands confirmed by the Adjudicating Authority against PIL-I, alongwith the penalty imposed, upheld. Penalties on the Directors as well as various employees - Held that:- the adjudicating authority in paragraphs 52 to 59 has elaborately discussed the roles played by various employees of the appellant in the suppression of the actual production and clearance of the finished products without accounting and without payment of duty - penalties upheld. Penalties imposed on the transporter - Held that:- These transporters have played the key role in transporting the finished products such as bloom, billets, ingots clandestinely removed from the factory of the appellant without payment of duty, accompanied by trading bills/ challans - penalties upheld. Penalties on various alleged buyers of the finished products - Held that:- Such buyers have been identified only from the details found in the trading invoices - Revenue authorities have failed to carry out any investigation against them. No evidence is found in record that such buyers have actually received the goods. No statements have been recorded from any of the buyers - penalties not justified. Appeal allowed in part.
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2018 (6) TMI 75
Method of valuation - MRP based value or transaction value - Description of the goods - Classification - Applicability of section 4A to 'FINIT' cleared by Hindustan Petroleum Corporation Ltd - insecticides or mosquito repellants - scope of Notification issued under section 4A - Held that:- Every product classified in 3808 10 of the Schedule of the Central Excise Tariff act, 1985 would not be liable to assessment under section 4A owing to the general nature of the said heading while the abatement notification is specific to mosquito repellants. Among the various goods classified under that heading, mosquito repellants are normally purchased by individual consumer while the other goods that may be classified therein have commercial application. The intent of the notification is to subject goods that require state intervention for protection of consumers to be taxed on the basis of printed price. That according to us, is the touchstone for determining the relevance of the valuation provision. - Decided against Revenue.
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