TMI Tax Updates - e-Newsletter
July 12, 2019

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Insolvency & Bankruptcy Law of Competition Service Tax Central Excise CST, VAT & Sales Tax

Articles

1. Conditions to claim Input Tax Credit in GST

   By: Ganeshan Kalyani

2. NATIONAL APPELLATE AUTHORITY FOR ADVANCE RULING

   By: DR.MARIAPPAN GOVINDARAJAN

News

1. Agreements between India and Mozambique

Notifications

Customs

1. G.S.R. 493(E) - dated 10-7-2019 - ADD

Corrigendum - Notification No. 24/2019-Customs (ADD) dated the 18th June, 2019

GST - States

2. Order No. 06/2019--State Tax - dated 4-7-2019 - Goa SGST

Goa Goods and Services Tax (Sixth Removal of Difficulties) order, 2019

3. 38/1/2017-Fin(R&C)(11/2019-Rate) - dated 3-7-2019 - Goa SGST

Seeks to specifies retail outlets established in the departure area of an international airport, beyond the immigration counters, making tax free supply of goods to an outgoing international tourist, as class of persons who shall be entitled to claim refund.

4. 38/1/2017-Fin(R&C)(105)/3058 - dated 3-7-2019 - Goa SGST

Goa Goods and Services Tax (Fourth Amendment) Rules, 2019

5. 38/1/2017-Fin(R&C)(104)/3059 - dated 3-7-2019 - Goa SGST

Seeks to provide exemption from furnishing of Annual Return / Reconciliation Statement for suppliers of Online Information Database Access and Retrieval Services (“OIDAR services”)

6. 38/1/2017-Fin(R&C)(103)/3060 - dated 3-7-2019 - Goa SGST

Seeks to prescribe the due date for furnishing FORM GSTR-1 for registered persons having aggregate turnover of up to 1.5 crore rupees for the months of July, 2019 to September, 2019

7. 38/1/2017-Fin(R&C)(102) - dated 1-7-2019 - Goa SGST

Seeks to amend Notification No. 38/1/2017-Fin (R&C)(101)/2804, dated 8th May 2019

8. F.12(46)FD/Tax/2017-Pt-IV-22 - dated 1-7-2019 - Rajasthan SGST

Refund mechanism for outgoing international tourist.

9. F.12(46)FD/Tax/2017-Pt-IV-21 - dated 28-6-2019 - Rajasthan SGST

Rajasthan Goods and Services Tax (Fifth Removal of Difficulties) Order, 2019.

10. F.12(46)FD/Tax/2017-Pt-IV-20 - dated 28-6-2019 - Rajasthan SGST

The Rajasthan Goods and Services Tax (Fourth Amendment) Rules, 2019.

11. F.12(46)FD/Tax/2017-Pt-IV-19 - dated 28-6-2019 - Rajasthan SGST

To provide exemption from furnishing of Annual Return / Reconciliation Statement for suppliers of Online Information Database Access and Retrieval Services (OIDAR services).

12. F.12(46)FD/Tax/2017-Pt-IV-18 - dated 28-6-2019 - Rajasthan SGST

To Prescribe the due date for furnishing FORM GSTR-1 for registered persons having aggregate turnover of up to 1.5 crore rupees for the months of July, 2019 to September, 2019.

13. F.12(46)FD/Tax/2017-Pt-III-17 - dated 24-6-2019 - Rajasthan SGST

Amendment in Notification No F.12(46)FD/Tax/2017-Pt-III-06 dated 23.04.2019.

SEZ

14. S.O. 2452(E) - dated 4-7-2019 - SEZ

Central Government de-notifies an area of 46.6894 hectares thereby making resultant area as 8434.5890 hectares at Mundra Taluka, District Kutch, in the State of Gujarat

Circulars / Instructions / Orders

GST - States

1. GST Circular No. 28/2019 - F.17(134)ACCT/GST/2017/4595 - dated 28-6-2019

Processing of refund applications in FORM GST RFD-01A submitted by taxpayers wrongly mapped on the common portal.

FEMA

2. 01 - dated 11-7-2019

Exim Bank's Government of India supported Line of Credit of USD 100 million to the Government of Independent State of Papua New Guinea

3. 02 - dated 11-7-2019

Exim Bank's Government of India supported Line of Credit of USD 24.50 million to the Government of the Republic of Senegal

Highlights / Catch Notes

Income Tax

• Appellant's Illegal Gratification Charge u/s 69 Dismissed; No Evidence Found Beyond Report and FIR.

  Case-Laws - AT : Addition u/s 69 of Illegal gratification paid by the assessee - said accusation against the Appellant was purely and solely based on the Shunglu Committee Report, FIR lodged by the CBI - addition u/s 69 is without any evidence of incurring such expenses, cannot sustain.
  Visit to Get Source

  ---

• Section 145(1) Income Tax Act: Outstanding Payments Not Taxable Due to Lack of Accrual or Receipt.

  Case-Laws - AT : Correct method of accounting u/s 145 (1) - real income - the bills that are not received by the assessee are not at all admitted by the person who is supposed to pay it and there is no obligation of payment on the shoulder of Organizing Committee - Thus the outstanding payments has neither accrued to the assessee, nor received by it - not taxable
  Visit to Get Source

  ---

• Section 153C proceedings initiated in 2014 cover Assessment Years 2009-10 to 2014-15; AY 2008-09 is time-barred.

  Case-Laws - AT : Initiation of proceedings as barred by limitation - proviso to section 153C - satisfaction to initiate proceedings u/s 153C was arrived on 15.09.2014 and the six Assessment Years immediately preceding the same would commence from Assessment Year 2009-10 and end with Assessment Year 2014-15 - hence Assessment Year 2008-09 is outside the ambit of section 153C
  Visit to Get Source

  ---

• Court Reexamines Tax Method for Flat Sale: FMV as LTCG, Excess as Business Income.

  Case-Laws - AT : Method of computation of business income - sale of flat - conversion of land into stock-in-trade - assessee claimed that FMV on the date of conversion of land into stock-in-trade is liable to be taxed as LTCG and excess consideration accrued/ received over and above FMV is liable to be taxed as business income - remanded to redetermined the tax liability
  Visit to Get Source

  ---

• Cash Payment Disallowance u/s 40A(3) Deleted After Assessee's Undertaking Not to Claim Future Expenditure.

  Case-Laws - AT : Disallowance u/s 40A(3) - part payment in cash in excess of the limit prescribed u/s 40A(3) for purchase of land - since it forms part of stock and trade the provisions of Section 40A(3) comes into operation - Ld. Counsel for the Assessee in his capacity as Officer of the court stated that he will give an undertaking that the impugned amount will not be claimed as expenditure in subsequent years against the revenue/gross turn over - disallowance deleted
  Visit to Get Source

  ---

• Retirement Payments Processed with TDS Deductions, Qualify for Deductions u/s 37, Not Sections 36(1)(iv) or (v).

  Case-Laws - HC : Expenditure paid to its retired employees - the payments effected in terms of the Retirement Regulations, 1979 have been strictly made to the retired employees' account after deduction of TDS wherever applicable - the payment would fall within the general deductions u/s 37 and cannot be brought u/s 36(1)(iv) and (v) of the Act
  Visit to Get Source

  ---

• Unexplained Investment Addition u/s 69: No Further Addition for Assessee as Mandate Holder of Brother's Account.

  Case-Laws - HC : Addition u/s 69 - unexplained investment - addition had been made by the AO by treating the amount deposited to the bank account owned by the brother of the assessee as income of the assessee - once addition had also been made in the hands of the bank account holders then no addition is called for in the hand of assessee in the capacity of mandate holders of the accounts - no substantial questions of law
  Visit to Get Source

  ---

• Court Quashes Reassessment Notice u/s 148 Due to Change of Opinion and Lack of New Evidence.

  Case-Laws - HC : Reassessment notice u/s 148 - in pursuant to notice u/s 142(1), petitioner had furnished complete details with various documentary evidence and case was discussed by the ITO - It cannot be said that the tangible material which is said to have come to the notice of the AO was not taken into consideration and the income chargeable to tax have escaped assessment - reopening on the basis of the very same material, is change of opinion - notice quashed
  Visit to Get Source

  ---

• Court Rules: Section 14A Prerequisite Must Be Met Before Applying Rule 8D for Mixed Fund Interest Expenses.

  Case-Laws - HC : Addition u/s 14A r.w.r. 8D regarding interest expenses - mixed funds used for investments - the condition precedent of recording the requisite satisfaction which is a safeguard provided in Section 14A should not be overlooked before going to Rule 8D - Rule 8D would not be attracted automatically even if mixed funds are used - no disallowance
  Visit to Get Source

  ---

• Tax Deduction Denied for ATM Maker's Pondicherry Unit u/s 80IA; Income Not Generated by Unit's Resources.

  Case-Laws - HC : Deduction u/s 80IA - manufacture of ATM in Pondicherry unit - income arising from installation, AMC charges, technical charges, consultation charges and licence fee - since the men, material and machinery of the Pondicherry industrial undertaking were not used to earn above income - no deduction
  Visit to Get Source

  ---

• Offshore Equipment Sale Not Taxable in India: No Permanent Establishment or Income Accrual per Transaction Rules.

  Case-Laws - AT : Income accrued in India - profit on supply of equipment - offshore supply - goods were sold from outside India, thus, the risk and title were also transferred outside India and no transaction took place in India- the custom clearance, inland transportation were done by purchaser and assessee at no stage involved in the said activities - no PE involved in the sale it only done supervision after the supply of equipments - not taxable
  Visit to Get Source

  ---

• Reassessment Allowed u/s 147 if AO Overlooked Issue in Original Assessment, Even Within Four Years.

  Case-Laws - AT : Reassessment u/s 147 - within 4 years from the end of relevant AY - when no opinion was formed by Ld. AO on any issue during original assessment proceedings and the same was altogether skipped, there would be no bar to reach the requisite satisfaction on the basis of findings in subsequent assessment year - In such a case, deeming fiction of Explanation-2 would come into play and the income shall be deemed to have escaped assessment
  Visit to Get Source

  ---

• Assessee Accused of Collecting Rs. 15 Crores from Public; Over 1,500 Investors File FIRs and Lawsuits.

  Case-Laws - AT : Addition to equity & to unsecured loans & sundry creditors - when 1500 investors have filed FIR's & law suits claiming about ₹ 15 crores as paid by them and Crime Branch status report clearly establishes that the assessee had collected funds from public at large and had not repaid them - Therefore, the existence of the depositors cannot be doubted - no addition called for
  Visit to Get Source

  ---

• Section 80IC Deduction Allowed After Assessee Proves Manufacturing Activity with Documentation and No Adverse Observations in Remand Report.

  Case-Laws - AT : Disallowance u/s. 80IC - allegation of no manufacturing activity - assessee filed various documents to show that paper was transported to Rudrapur and sent back to the printer in Delhi, then printed sheets were sent from Delhi to Rudrapur where books were manufactured which were transported to Delhi - No adverse observation was made by the AO in the remand report - deduction allowable
  Visit to Get Source

  ---

• Assessee's Trade Discount Exempt from TDS Deduction; Not a Commission u/s 194H, No Disallowance per Section 40(a)(ia).

  Case-Laws - AT : TDS u/s 194H - benefit given by the assessee was in the nature of ‘trade discount’ and not ‘commission’ - assessee is not required to deduct TDS u/s. 194H on such discount, which was not in lieu of any services for effecting sales, but was a trade discount - no disallowance u/s 40(a)(ia)
  Visit to Get Source

  ---

• Penalty under Income Tax Act's Section 271(1)(c) dismissed due to inadvertent error; no deliberate income understatement found.

  Case-Laws - HC : Penalty u/s 271(1)(c) - disallowance of interest u/s 43B(e) - after being pointed it out, assessee immediately filed rectification u/s 154 - fining of facts that it is an inadvertent error and cannot be stated to be a contumacious conduct on the part of the assessee and cannot be stated to be with an intention to understate his income by furnishing inaccurate particulars - no substantial question of law
  Visit to Get Source

  ---

• Refund Must Be Issued Despite Section 143(1D) Notice; Department Ordered to Release Funds Within One Month.

  Case-Laws - HC : Refund of income tax - as per department(Respondents) refund cannot be issued in view of Section 143(1D), since notice u/s 143(2) of the Act is already issued - respondents cannot avoid processing the return u/s 143(1) and granting refund to the Petitioner if due as per such return - directed to release refund within one month
  Visit to Get Source

  ---

Corporate Law

• Legal Heir Seeks to Continue Deceased Father's Petition on Company Oppression and Mismanagement; Faces Procedural Challenges.

  Case-Laws - Tri : Continuation of petition for Oppression and Mismanagement by the legal heir of deceased petitioner - the son can hardly maintain the company petition which is filed by making various acts of oppression and mismanagement by his father.
  Visit to Get Source

  ---

• Demerger Scheme Rejected for Non-Compliance with Section 230(1) of Companies Act; Tribunal to Reconsider Case.

  Case-Laws - AT : Sanction of scheme of demerger - The mandate of law engrafted u/s 230(1) of the Act requiring the Tribunal to order calling of meeting of the creditors/ members of the concerned companies not being complied with and the mandatory provisions being observed in breach, the impugned order cannot be supported - The Tribunal, at the very threshold stage, was not required to venture into the merits - remanded to tribunal
  Visit to Get Source

  ---

• Injunction Issued on Agenda Item Ignored; EGM Decision to Remove Director Deemed Illegal Due to Mismanagement.

  Case-Laws - AT : Oppression and mismanagement - Termination of services - Civil Judge passed an injunction prohibiting any discussion on item No.2 in the agenda notice dated 21.10.2009, which was duly conveyed to the company and all concerned - despite discussions made and also took a resolution removing original Respondent No.5, from the post of Director/Managing Director - hence decision taken in the EOGM held on 14.11.2009 in respect of Item No.2 is not legal
  Visit to Get Source

  ---

• Company Wrongly Removed from Register for Non-Filing Despite Significant Transactions, Tribunal Overlooked Key Activities.

  Case-Laws - AT : Restoration of name of company on the ROC - failure to file the returns - It being admitted by ROC that the accounting transactions undertaken qua its avowed objective were significant, the business being carried on by the company cannot be termed cosmetic or inconsequential - Tribunal has overlooked the factum of the significant accounting transactions - removal of name from the ROC was not justified
  Visit to Get Source

  ---

Service Tax

• Exemption Notification Valid for Construction Services to Govt. Authorities; Service Tax and Penalties Unsustainable.

  Case-Laws - AT : Applicability of exemption notification - Construction services - services to GDA, U.P. Jal-Nigam and other Government Authorities - construction of 33 and 11 KVA electric substations at Indirapuram, it is also related to transmission of electricity covered by negative list after 01.07.2012 - cover by N.No.45/2010-ST dated 20.07.2010 and N.No..11/2010-ST dated 27.02.2010, the ST & penalty is not sustainable
  Visit to Get Source

  ---

• SMS Interconnection Usage Not Taxable Without Invoice: No Tax Liability u/r 3(a) of 2011 Tax Rules.

  Case-Laws - AT : Taxable service or not - Interconnection usage for SMS - free services - Since there was no issue of Invoice, the point of taxation under Rule 3(a) of the Point of Taxation Rules, 2011, has not occurred - Since the point of taxation has not occurred under any of the clauses of the said Rule 3, the liability to pay service tax has not arisen.
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2019 (7) TMI 550
  TP Adjustment - Comparable selection - excluding Axis as a comparable - HELD THAT:- As pointed out by this Court in Rampgreen Solutions Pvt. Ltd. v. CIT [ 2015 (8) TMI 931 - DELHI HIGH COURT] comparability analysis by the transactional net margin method may be less sensitive to certain dissimilarities between the tested party and the comparables. However, that cannot be the consideration for diluting the standards of selecting comparable transactions/ entities. A higher product and functional similarity would strengthen the efficacy of the method in ascertaining a reliable arm s length price. Therefore, as far as possible, the comparables must be selected keeping in view the comparability factors as specified. Wide deviations in profit level indicator must trigger further investigations/ analysis In the present case the reasons given by the ITAT for excluding Axis as a comparable appear to be plausible and based on a detailed analysis of the different profiles of the Assessee and Axis. Consequently, the Court is not persuaded that the ITAT has erred in excluding Axis as a comparable. No substantial question of law arises.

  ---

• 2019 (7) TMI 549
  Refund of income tax - Petitioner filed a revised return which also gave rise to refund claim - revenue ignoring process the return u/s 143(1) instead issued a notice of scrutiny assessment u/s 143(2) - HELD THAT:- Petitioner was informed that the refund cannot be issued in view of Section 143(1D), since notice u/s 143(2) of the Act is already issued. A reference is also made to a draft assessment order for the year under consideration, which if ultimately finalized would give rise to a tax demand from the Petitioner instead of department paying refund. We would notice, as per different decisions of this Court and other High Courts, none of these grounds will be sufficient to enable the Respondents to withhold the refund arising out of the said return for the assessment year 2015-16. see Group M. Media India (P) Ltd. V/s. UOI [ 2017 (1) TMI 1149 - BOMBAY HIGH COURT] ; Tata Projects Limited V/s. Dy. CIT 2017 (12) TMI 1525 - BOMBAY HIGH COURT] ; Tata Teleservices Ltd. V/s. CBDT [ 2016 (5) TMI 724 - DELHI HIGH COURT] As per the settled law, the Respondents cannot avoid processing the return u/s 143(1) and granting refund to the Petitioner if due as per such return. The Respondents have not cited justifiable reasons why such refund cannot be released. Respondents are directed to process the return u/s 143(1) and release refund if due, with statutory interest as payable within one month from the date of receipt of copy of this order.

  ---

• 2019 (7) TMI 548
  Reopening of assessment u/s 148 - tangible material - change of opinion - HELD THAT:- Necessary details were called for by the authority concerned in connection with the assessment proceedings by issuing notice u/s 142(1) . In response to such notice, the writ applicant had furnished complete details as indicated from various documentary evidence on record. The entire case was discussed by the ITO with the writ applicant. The details furnished by the writ applicant in response to the notice issued were verified. Ultimately, the assessment was carried out and that is how the order dated 26.10.2015 came to be passed. It cannot be said that the tangible material which is said to have come to the notice of the Assessing Officer was not taken into consideration at the relevant point of time on account of which the income chargeable to tax could be said to have escaped assessment. On the basis of the very same material, the assessment cannot be reopened on some change of opinion. In the facts and circumstances of the present case, we are of the view that the issue of notice u/s 148 is not justified. In the result, this petition succeeds and is hereby allowed.

  ---

• 2019 (7) TMI 547
  Rejection of books of accounts - AO is not satisfied about the correctness or completeness of the accounts of the assessee - addition made, on account of suppressed sale, by using the material collected by the Excise Department; including the statements of relevant witnesses recorded during the search - HELD THAT:- As decided in VRUNDAVAN CERAMICS PVT. LTD. [ 2018 (5) TMI 1274 - GUJARAT HIGH COURT] as held excise show-cause notices in case of the present assessee are yet to be adjudicated. What would be the material on record during such proceedings is not possible for us to foresee. Secondly, the Tribunal has mainly proceeded on the basis of absence of section 4A of the Central Excise Act at the relevant time which, in the opinion of the Tribunal, alone could have permitted the department to substitute the sale price by the transaction value of the goods. Such is not the case in the present group of cases. We would, therefore, be well advised to clear such controversy. - Decided against revenue

  ---

• 2019 (7) TMI 546
  Addition u/s 69 - unexplained investment - ITAT deleted addition - HELD THAT:- As Revenue conceded before it that the addition had been made in the hands of the representative bank account holders to which the amount deposited would be made by the assessee in the capacity of mandate holders of the accounts. Whereas, another finding of fact recorded by the Appellate Tribunal is that addition had been made by the AO by treating the amount deposited to the bank account owned by the brother of the assessee namely, Shri Samir Kumar as income of the assessee. None of the three questions proposed could be termed as the substantial questions of law. In our opinion, no error not to speak of any error of law could be said to have been committed by the Tribunal in passing the impugned order.

  ---

• 2019 (7) TMI 545
  Penalty levied u/s 271(1)(c) - Assessee had claimed the unpaid interest to the schedule bank in its profit and loss account and failed to disallow the same u/s 43B(e) - No Revised Return - whether Assessee has proved that the furnishing of inaccurate particulars leading to incorrect claim of expenditure was inadvertent - HELD THAT:- Admittedly, the case on hand is not a case of survey, but it is a case where the assessee having come to know about the same, after the Assessing Officer pointed it out, immediately filed petition for rectification u/s 154 along with explanation stating that it is an inadvertent error. The decision in the case of Price Waterhouse Coopers Private Limited [ 2012 (9) TMI 775 - SUPREME COURT] is also identical where in the tax audit report filed by the assessee, it was indicated that provision towards payment of gratuity was not allowable, but the assessee therein failed to add the said provision to total income. Considering the said fact, the Hon ble Supreme Court held that no penalty could be imposed for such mistake. As noted by the CIT(A) as well as the Tribunal, the conduct of the assessee clearly establishes that it is an inadvertent error and cannot be stated to be a contumacious conduct on the part of the assessee and cannot be stated to be with an intention to understate his income by furnishing inaccurate particulars. - Decided against revenue

  ---

• 2019 (7) TMI 544
  Reopening of assessment u/s 147 - notice against dead person - invalid notice - curable defect u/s 292B - HELD THAT:- As decided in CHANDRESHBHAI JAYANTIBHAI PATEL VERSUS ITO [ 2019 (1) TMI 353 - GUJARAT HIGH COURT] Notice u/s 148, which is a jurisdictional notice, has been issued to a dead person. Upon receipt of such notice, the legal representative has raised an objection to the validity of such notice and has not complied with the same. The legal representative not having waived the requirement of notice u/s 148 and not having submitted to the jurisdiction of the Assessing Officer pursuant to the impugned notice, the provisions of section 292B would not be attracted and hence, the notice u/s 148 of the Act has to be treated as invalid. In the absence of a valid notice, the Assessing Officer has no authority to assume the jurisdiction u/s 147 and, hence, continuation of the proceeding u/s 147 pursuant to such invalid notice, is without authority of law. The impugned notice as well as the proceedings taken pursuant thereto, therefore, cannot be sustained - Decided in favour of assessee.

  ---

• 2019 (7) TMI 543
  Deduction u/s 80IA - income arising from installation, AMC charges, technical charges, consultation charges and licence fee - HELD THAT:- Assessing Officer correctly after examining the facts of the case, found that the income earned from AMC (Annual Maintenance Charges of ATM), installation and technical charges, consultation charges and licence fee of software do not constitute income from the industrial undertaking which was established in Pondicherry, since this was not derived from the industrial undertaking, as the men, material and machinery of the Pondicherry industrial undertaking were not used to earn income and therefore, denied deduction under Section 80IA As contended that the assessee s business of production, sale, installation and maintenance of ATMs by providing necessary software is a very high security risk, as they dispense large amounts of cash and in view of special type of machine, provision of maintenance service is an integral part of manufacturing and selling activity, the above submissions made by Mr.M.P.Senthil Kumar were never pleaded either before the Assessing Officer, or before the CIT(A) or before the Tribunal either in the same tenor or in a different manner. Therefore, such a plea cannot be raised at this juncture - assessee has not made out any ground to interfere with the first issue as well. Alternate claim made by the assessee stating that the expenditure incurred in carrying out annual maintenance work should be excluded while computing profit under Section 80IA this issue was considered by the CIT(A) in paragraph 4.6 of the order dated 28.02.2005 and was rejected on the ground that there was no positive income from the Pondicherry unit. - Decided against assessee. Disallowance of brokerage/commission - no proof that assessee has derived business advantage by paying sales commission - HELD THAT:- The assessee was dealing with the Bank of Punjab Limited and the business was continuous one. Therefore, the Tribunal opined that the assessee failed to establish that there was necessity to identify once again the Bank of Punjab Ltd., as its customer. Further, the Tribunal noted that there is nothing on record to show that the assessee has derived business advantage by paying sales commission. Every factual findings recorded by the Tribunal will clearly show that the assessee miserably failed to establish their claim regarding the disallowance of brokerage/commission - no substantial question of law arising for consideration on this aspect. Disallowance u/s 40A(2)(a) and 40A(2)(b) - software purchased from M/s.Diebold Inc., and M/s.Chip Trans - HELD THAT:- The assessee sought to justify the gross difference in the amount paid in respect of software purchased from both the companies on the ground that M/s.Diebold Inc., was their associate concern, whereas, M/s.Chip Trans was a third party. This aspect of the matter was considered by the Assessing Officer, the CIT(A) as well as the Tribunal and factually, it was found that the stand taken by the assessee does not merit consideration We cannot be called upon to review and redo the factual exercise in an appeal filed under Section 260A of the Act. Therefore, no substantial question of law arises with regard to the disallowance made under Sections 40A(2)(a) and 40A(2)(b) in respect of purchase of software from M/s.Diebold Inc., and M/s.Chip Trans, and there is no ground made out by the assessee to interfere with the order of the Tribunal in this regard.

  ---

• 2019 (7) TMI 542
  Depreciation claim on assessee trust - HELD THAT:- Tribunal holds that there is no clarity as to how the computation of depreciation has been made and it opined that the quantum of depreciation allowable to the assessee for the impugned assessment years requires a re-visit by the Assessing Officer. Accordingly, the finding was set aside and the matter has been remanded back to the Assessing Officer for consideration afresh in accordance with law. First and second substantial questions of law would not arise for consideration, since the matter has been remanded to the Tribunal for fresh consideration. Therefore, the first and second substantial questions of law are not answered and are left open. Expenditure paid directly to its retired employees - Expenditure incurred allowable under Section 37(1) even after allowing expenditure under Section 36(1)(iv) and (v) - Government of India has approved and notified an Employees Retirement Regulations termed as the Tuticorin Port Trust Employees Regulations, 1979 - HELD THAT:- Nature of deduction claimed by the assessee in respect of the payments made in terms of the statutory regulation would fall within the general deductions under Section 37 and cannot be brought u/s 36(1)(iv) and (v) of the Act. Therefore, the reasons assigned by the CIT(A) and the Tribunal are perfectly in order. Furthermore, the payments effected in terms of the Retirement Regulations, 1979 have been strictly made to the retired employees account after deduction of tax at source wherever applicable. In respect of the claim for deduction on similar grounds made by the assessee for the earlier assessment years, the same has been granted and these contentions advanced by the assessee before the CIT(A) and the Tribunal were not disputed, neither there is any material placed before us to show that the assessee was factually wrong in raising such a contention. Therefore, we hold that the assessee having been granted similar benefit for the earlier years, the same cannot be denied for the subsequent years, especially when, the nature of payment is in the same fashion in terms of a statutory regulation. Revenue has not made out any ground to interfere with the order passed by the Tribunal.

  ---

• 2019 (7) TMI 541
  Disallowance u/s 14A read with Rule 8D - excess of own funds - recording satisfaction with the correctness of the claim of the assessee - HELD THAT:- The language of Section 14A of the Act is plain and clear. Before invoking Rule 8D, the Assessing Officer is obliged to indicate that having regard to the accounts of the assessee, he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to the income which does not form part of the total income under the Act. To put it in other words, the condition precedent of recording the requisite satisfaction which is a safeguard provided in Section 14A should not be overlooked before going to Rule 8. In such circumstances we are not impressed by the submission canvassed on behalf of the Revenue that once there are mixed funds, Rule 8 would be attracted automatically. We are of the view that the ITAT rightly relied on the decision of the Bombay High Court in the case of CIT Vs. Reliance Utilities Power Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] as given a clear finding that the assessee had interest free funds of its own As decided in CORRTECH ENERGY PVT. LTD. [ 2014 (3) TMI 856 - GUJARAT HIGH COURT] assessee did not make any claim for exemption of any income from payment of tax - It was on this basis that the tribunal held that disallowance under section 14A of the Act could not be made MAT computation - disallowance under section 14A in computing the book profit - HELD THAT:- No error could be said to have been committed by the ITAT in taking the view that no addition in the book profit can be made on the basis of the calculations worked out under section14A Deduction u/s 80IA( 4) at the rate on which the GEB supplied power to its customers - generation of power for captive consumption - HELD THAT:- This issue is directly covered by the decision of this Court in the case of CIT Vs. Gujarat Alkalies and Chemicals [ 2016 (10) TMI 1111 - GUJARAT HIGH COURT] for the purposes of deduction under Section 80IA in case of the eligible business as if the transfer had been made at the market value of such goods or services. It is in this context that the question of substituting the actual consideration by the market value comes into picture. We may notice that the Tribunal did not accept the contention of the assessee that the electricity is neither goods nor services and that, transfer of electricity, therefore, would not be covered under subSection (8) of Section 80IA of the Act. However, in so far as the Tribunal s reasoning to adopt the market value of the goods at 5.40 ps. per unit is concerned, we find no error. Income from the Carbon Credits - revenue or capital receipts - HELD THAT:- As decided in ALEMBIC LIMITED [ 2017 (9) TMI 189 - GUJARAT HIGH COURT] Receipts of carbon credit are in nature of revenue receipts. See CIT v. Subhash Kabini Power Corporation Ltd. [ 2016 (5) TMI 793 - KARNATAKA HIGH COURT] ) and Commissioner of Income tax v. My Home Power Limited [ 2014 (6) TMI 82 - ANDHRA PRADESH HIGH COURT] - Tax appeal is dismissed. Disallowance on account of the late payment of employees contribution towards the PF/ESI under section 36( 1)(va) r/w. 2(24)(x) - payment before or after due date - HELD THAT:- From the explanation of the assessee, it is discernible that it has made payment before the due date, but on account of certain technical objection, cheques deposited have been returned, which ultimately after removal of objection was cleared. Thus, it could be construed that payment was within the due date and therefore, deduction ought to be granted to the assessee Short term capital gain due to the Slump Sale of Wind Energy Business - HELD THAT:- This issue is also squarely covered by the decision of this Court in the case of Commissioner of Income tax Vs. Gauranginiben S. Sodhan Indl. Reported [ 2014 (2) TMI 78 - GUJARAT HIGH COURT] held that income chargeable under the Head Capital Gains, shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset, the amounts mentioned therein that is the expenditure incurred wholly and exclusively in connection with such transfer and the cost of acquisition of the asset and the cost of any improvement thereto. Main thrust of section 48 of the Act, therefore, is the full value of consideration received or accruing as a result of the transfer of the capital asset as reduced by expenditure mentioned therein and the cost of acquisition of the asset. Section 55A, as we have noticed, refers to the reference to DVO for ascertaining the fair market value of a capital asset. Such ascertainment of fair market value with the aid of the DVOs report would have no relevance for the purpose of determining full value of consideration received or accruing as a result of the transfer of the capital asset for the purposes of section 48 - reference to DVO for ascertaining the fair market value of the capital asset as on the date of the sale in the present case would be wholly redundant. Date of transfer of the Wind Energy Business of GFL to IRL on slump sale is 30/03/2012 - HELD THAT:- This question is corelated to the question aforesaid and squarely covered by Gauranginiben S. Sodhan (supra). ITAT committed no error in passing the impugned order. - Decided against revenue

  ---

• 2019 (7) TMI 540
  Capital gain - development agreement entered - nature of transaction between the assessee and the developer would fall within the definition of transfer u/s 2(47) - whether the Tribunal was right in interpreting the terms of development agreement and rejecting the contentions that the entire transfer took place in an earlier year and no portion of capital gains is taxable in the year under consideration, viz., 2001-2002? - HELD THAT:- The Tribunal was of the view that the assessee was only a licensee. We do not agree with the said finding on account of a crucial fact which cannot be disputed by the Revenue, viz., the No Objection Certificate issued by the Appropriate Authority under Section 269-UL of the Act. The approval clearly states the extent of land which has been agreed to be transferred. So far as the development agreement dated 27.03.1994 is concerned, the extent of land agreed to be transferred is 47.5% of undivided share in 18675 sq.ft., the extent of built-up area which was agreed to be transferred measure 6500 sq.ft. The apparent sale consideration for the land and building was 98,99,100/- which was approved by the Appropriate Authority. So far as the second development agreement dated 24.05.1995 is concerned, the extent of land agreed to be transferred was 3997 sq.ft, i.e., 45% of undivided share in 8882 sq.ft. However, in the said agreement, there was no building. These agreements were considered by the Appropriate Authority and noting there is an agreement to transfer property with reasonable certainty and on being satisfied about the apparent sale consideration, no objection was granted. Therefore, it would be incorrect to state that the development agreement do not contemplate transfer of immovable property, but we may say that there is a clear certainty in the extent to be transferred. Therefore, in our considered view, the transaction would continue to qualify under the definition of transfer as defined under Section 2(47)(v) of Act. Value of cost of construction - appellate authority reckoned the delay in completing the project, obtained information from the developer and uniformly fixed the cost at 717/- per sq.ft., for both the agreements as against 450 per sq.ft., and 550/- per sq.ft., respectively, as mentioned by the assessee - HELD THAT:- In the absence of any material to doubt the cost of construction, which was consciously agreed to between the parties, question of adding the damages paid by the developer on account of non fulfilment of the condition in the agreement with regard to the time limit of handing over the possession of the constructed area can in no way increase the cost of construction at the hands of the appellant/assessee. Therefore, the finding in this regard requires to be set aside and accordingly, it is hold that the cost of construction as mentioned in the agreement, namely, 480/- and 550/- respectively, are confirmed and the second substantial question of law is answered accordingly. Inclusion of entire damages, deposit and rent free accommodation to be assessed as capital gain - HELD THAT:- The development agreement makes it abundantly clear and the first of the covenants states that the developer shall provide free of rent for the owners alternate residential accommodation. Admittedly, rents were paid by the developer, rental deposit was paid by the developer and the agreement does not provide for any adjustment of these payments as against the consideration payable under the development agreement. Therefore, the Tribunal committed an error in including the same to be assesseed as capital gains. Accordingly, this finding is set aside and the substantial question of law is answered in favour of the assessee. Exemption u/s 54 - Tribunal rejected the claim of the assessee on the ground that the transfer as per the development agreement dated 27.03.1994 was only land and not building - HELD THAT:- So far as the development agreement dated 27.03.1994 is concerned, the schedule to the agreement clearly contemplates transfer of not only the land, but also building thereon. This is evidently clear from the order of the Appropriate Authority dated 22.06.1994, which shows that the extent of building is 6,500 sq.ft. This document of transfer was accepted and No Objection Certificate was issued by the Appropriate Authority. Therefore, there could be no better document to establish that what was transferred was not only the land, but also that the building standing thereon. So far as the development agreement dated 24.05.1995 is concerned, we find there is no building thereon and in fact, a readjustment of schedule A of the property has been mentioned in the agreement which in fact, is the schedule property in the development agreement dated 27.03.1994. Thus the assessee is entitled to exemption under Section 54 of the Act. - Decided in favour of the assessee.

  ---

• 2019 (7) TMI 539
  Prosecution under the Income Tax Act - exemption from appearance - Non bailable warrant - HELD THAT:- Having regard to the facts and circumstances and the submissions made across the bar and taking note of his physical condition, it is of the view that necessary directions can be issued to the petitioner to appear before the learned Magistrate. Non bailable warrant issued against the petitioner will stand quashed. The petitioner shall appear before the learned Magistrate on 26.06.2019 and his bail application, if any, shall be considered and orders shall be passed on the same day itself. The apprehension of the learned counsel that his application for bail will not be positively considered is misconceived in view of the nature of allegations against the petitioner. After appearing before the learned Magistrate, the petitioner may file an application in tune with the directions issued by this Court in Raju T.P. v. State of Kerala [ 2009 (6) TMI 1017 - KERALA HIGH COURT] seeking exemption from appearance. If any such application is filed, the learned Magistrate shall consider the same and pass appropriate orders on its merits.

  ---

• 2019 (7) TMI 538
  Disallowance u/s 40A(3) - payment in cash in excess of the limit prescribed u/s 40A(3) for making payment for purchase of land - HELD THAT:- The details of payment through cheque and cash were provided in the sale deed placed before the registering authority along with the identity of the payers and sellers and the same was duly registered. Genuineness of the transaction as well as the concerned parties is not under dispute. But since the land purchased by the assessee forms part of stock and trade the provisions of Section 40A(3) comes into operation. During the course of hearing when the question was asked the assessee that what would be situation if the assessee will claim the cost of land as expenditure in subsequent years then will it not violate the provisions of Section 40A(3) in the year of claim. Assessee in his capacity as Officer of the court stated that the assessee will give an undertaking to the effect that the impugned amount will not be claimed as expenditure in subsequent years against the revenue/gross turn over. Ld. Departmental Representative also did not oppose to the statement given by the assessee. In view of the undertaking which shall be given by the assessee before the Ld. Assessing Officer of not claiming the alleged amount as expenditure in subsequent years, set aside the finding of Ld. CIT(A) and allow the sole ground raised by the assessee and delete the disallowance made u/s 40A(3) -. Appeal of the assessee allowed.

  ---

• 2019 (7) TMI 537
  Disallowance of discount offered to doctors - allowable business expenditure - HELD THAT:- As decided in assessee s own case [ 2019 (4) TMI 414 - ITAT AHMEDABAD] the commercial expediency and prudence are inseparable. If the expenditure is incurred to facilitate carrying on of business of the assessee and is supported by the commercial expediency, it does not matter that the payment is in voluntarily or not necessary or that it also enures to the benefit of a third party. If the object is business promotion, the expenditure can be said to be wholly and exclusively for the purposes of the assessee s business. The assessee in the instant case demonstrated on facts that payment of such discounts are integrally connected to the sales/turn over achieved or has potential to achieve. The discount expenses have thus been incurred with the object of furthering the trade or business interest of the assessee. Therefore, such expense falls within the expression wholly and exclusively referred to in Section 37. No hesitation to concur with the conclusion drawn by the CIT(A) for allowability of discounts given to stockiests/distributors etc. However, we are unable to understand the reasoning of the CIT(A) for discarding the claim of discount expenditure paid to the Doctors. When the test of commercial expediency applied in its natural perspective, there is no reason to exclude Doctors purchasing medicines from C F agents for the purpose of eligibility of discount payments. We thus set aside the action of the CIT(A) to this extent and direct the AO to allow the trade discount paid to all parties including Doctors as ordinary business expenditure. - Decided in favour of assessee. Disallowance of administrative expenditure calculated in terms of Rule 8D(2)(iii) r.w.s. 14A - disallowance of administrative expenses - HELD THAT:- In the identical facts, the issue in the instant assessment year is also remitted back to the file of the AO for re-computation of disallowance under Rule 8D(2)(iii) of the IT Rules with reference to these investments which have actually yielded exempt income instead of gross investments. Eligibility of interest expenditure incurred by the assessee as business expenditure delayed payment of trading liability - HELD THAT:- As decided in assessee s own case [ 2019 (4) TMI 414 - ITAT AHMEDABAD] we are in agreement with the plea of the assessee that merely because the assessee company is paying huge interest on outstanding credit balance to Sun Pharma while no interest is being charged by the assessee from its debtors cannot be the justifiable reason for resorting to the disallowance of interest. Disallowance u/s 14A with reference to interest expenditure disallowed under Rule 8D - HELD THAT:- No merit in the grievance of the Revenue in the light of the fact that the claim of the assessee towards sufficient interest free funds to carry out investments in excess of the corresponding investments not been rebutted by the Revenue. The investments holding the potential to yield tax free income stands at 16.42 Crores whereas the own interest free funds by way of share capital and reserves stands at 116.50 Crores. Therefore, in such a scenario, no disallowance under Rule 8D(2)(ii) is permissible in case of CIT vs. UTI Bank Ltd. [ 2013 (8) TMI 238 - GUJARAT HIGH COURT] ; CIT vs. HDFC Bank Ltd. [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] and Reliance Utilities Power Ltd [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] . Hence, we decline to interfere with the decision rendered by the CIT(A) on this score.

  ---

• 2019 (7) TMI 536
  Disallowance u/s 14A - expenditure attributable the exempt income under Rule 8D(2)(ii), towards proportionate interest expenditure and towards administrative expenditure Rule 8D(2)(iii) of the IT Rules - HELD THAT:- In the light of the fact that own funds are in substantially excess of the corresponding investment, there is no warrant to invoke Rule 8D(2)(ii) in view of the judicial precedents noted above. Therefore, disallowance under Rule 8D(2)(ii) requires to be deleted by the AO. As regards the administrative and general expenses the assessee could not explain with evidence about the actual expenditure attributable to earning of such income. The statute has provided a formula for ascertaining disallowance which cannot be ordinarily departed from. No compelling circumstances have been shown. Therefore, we decline to interfere with the disallowance made under Rule 8D(2)(iii) of the IT Rules.Ground No.1 of the assessee is partly allowed. Disallowance u/s 36(1)(va) - default in payment of employees contribution to PF - HELD THAT:- In view of the decision of the Hon ble Gujarat High Court in case of CIT vs. Gujarat State Road Transport Corporation [ 2014 (1) TMI 502 - GUJARAT HIGH COURT] we do not find any merit in the grievance of the assessee on this score. Ground No.2 of the assessee s appeal is dismissed. Method of computation of business income as a consequence of sale of flat - conversion of land into stock-in-trade - AR thus submitted that the cost price of FMV on the date of conversion of land into stock-in-trade is liable to be taxed as long term capital gain and excess consideration accrued / received over and above FMV is liable to be taxed as business income - HELD THAT:- We find merit in the plea of the assessee for setting right the error committed by the assessee. We, therefore, are disposed to entertain deviation in the claim originally made which may result in lower tax liability. The issue however has not been examined by the Revenue authorities on facts. Therefore, we consider it appropriate to set aside the issue to the file of the AO for fresh adjudication in the light of submissions to be made by the assessee with factual evidences before AO. It will thus be open to the assessee to show before the AO that it was over assessed incorrectly or subjected to higher tax in any manner owing to its own mistake. The AO shall determine the issue in accordance with law after giving fair opportunity to the assessee. Ground No.3 of the assessee s appeal is accordingly allowed for statistical purposes.

  ---

• 2019 (7) TMI 535
  Disallowance u/s. 80IC - as alleged no manufacturing activity conducted - proof of carrying out publishing activity from the eligible undertaking - assessee did not carry out any printing or binding of books in the eligible undertaking at Rudrapur as neither the paper nor the printed material reached the eligible unit for printing, cutting and binding etc. - HELD THAT:- The assessee filed his confirmation during appellate proceedings on which no adverse comment was given by the AO in the remand report. The difference in the value of machinery in the bill and the Form 16 has no bearing on the deduction claimed u/s 80IC of the Act. The only thing required to be proved that the machinery was transported to Rudrapur and used there. The assessee produced evidences to prove this fact on which no adverse observation was given by the AO in the remand report. The assessee s explanation regarding the cartage being included in the other expenses in the return of income on verification was found correct. The assessee filed various documents like purchase bills of paper, lorry receipts, bills of transporter, Form 16 issued by the VAT department for entry of any goods in Uttarakhand to show that paper was transported to Rudrapur and sent back to the printer in Delhi, then printed sheets were sent from Delhi to Rudrapur where books were manufactured which were transported to Delhi. No adverse observation in respect thereof was made by the AO in the remand report. Thus, the suspicion of the AO that no manufacturing activity took place at the eligible undertaking of the assessee is not supported with any evidence and is just a surmise. The paper purchased from S. Chand Co. Pvt Ltd was of an insignificant amount and is of no consequence. The gross profit ratio of the appellant company is 34% which is much lesser than the GP ratio of the other two group companies engaged in the same business. Thus, no adverse observation in terms of the provisions of the sub- sections (8) or (10) of the section 80IA of the Act can be drawn. The claim of the assessee in respect of carrying out publishing activity from the eligible undertaking was found genuine on the basis of relevant evidences placed on record and not refuted by the AO in the remand report and thus, assessee is eligible to deduction u/s 80IC Once the deduction u/s 80IC of the Act is allowed in the initial assessment year i.e. in the AY 2010-11 after due verification of the prescribed conditions and there is no change in the facts, then the deduction cannot be disallowed in subsequent years on the ground of non-fulfillment of conditions laid down in section 80-IC of the Act. This view has been fortified by the decision of the Hon ble Delhi High Court in the case of CIT vs. Tata Communication Internet SErvicse Ltd. [ 2011 (8) TMI 633 - DELHI HIGH COURT] - Decided in favour of assessee TDS u/s 194H - Disallowance of Trade discount u/s 40(a)(ia) - trade discount OR commission - HELD THAT:- In the case of Skol Breweries [ 2013 (10) TMI 416 - ITAT MUMBAI] as held that when a purchase / sales is made at discounted price, it is called discount but when an incentive is given for undertaking task / job/ services provided or on sale of goods by one person on behalf of other, then it is commission. Since the benefit given by the assessee to M/s S. Chand Co. Ltd. was in the nature of trade discount and not commission , therefore, the assessee was not required to deduct income tax at source u/s. 194H of the Act, thus, no disallowance can be made u/s. 40(a)(ia) - Decided in favour of the assessee. Disallowance for delay in deposit of Employees Contribution to PF - due date of filing of return of income - HELD THAT:- The employees contribution to EPF was deposited well before the due date of filing of return of income. The assessee has explained the circumstances in which such delay has been occurred. Thus, relying on the judgment of CIT vs. Vinay Cement Ltd. [ 2007 (3) TMI 346 - SC ORDER] and CIT vs. AIMIL Ltd. [ 2009 (12) TMI 38 - DELHI HIGH COURT] the addition was rightly deleted by the Ld. CIT(A), which does not need any interference on our part, therefore, we uphold the action of the Ld. CIT(A) on the issue in dispute and reject the ground raised by the Revenue.

  ---

• 2019 (7) TMI 534
  Penalty u/s.271(1)(c) - Reimbursement of cost inclusion in the total income of the assessee, addition on account of Receipt for IT Support and Managerial services - HELD THAT:- Quantum appeal of the assessee came up for consideration before the Tribunal in [ 2019 (7) TMI 402 - ITAT PUNE] which has been disposed off vide a separate order by holding that Reimbursement of cost cannot be included in the total income of the assessee. Similarly, the other addition on account of Receipt for IT Support and Managerial services has also been deleted by holding that the same is not includible in the total income of the assessee either as Royalty or Fees for technical services. Thus, it is seen that both the additions made in the assessment order stand deleted. Since the second addition, forming bedrock of the extant penalty, does not survive anymore, there remains no question of any penalty thereon. As such, we uphold the impugned order deleting the penalty. Fees for technical services (FTS) - reimbursement received by the assessee from Faurecia Technology Center India Pvt. Ltd. towards part of salary paid by it to the expatriate which was treated by the AO as and included in the total income - HELD THAT:- This ground are similar to those of the preceding year. In the order passed for the A.Y. 2011-12, the Tribunal has held that the amount received by the assessee for rendering of IT support services and Managerial services can neither be construed as Royalty nor as Fees for technical services. Following the same view, we direct to delete the addition. Treating income from providing IT support services taxed as Royalty as well as fees for technical services (FTS) - HELD THAT:- It is observed from the Costs Allocation Agreement between the assessee and Faurecia Technology Center India Pvt. Ltd. a resident of France, rendered services to the Indian entity which have been narrated in Exhibit-1 of the agreement. On going through the nature of services, it is seen that these are similar to the Technical services provided by Faurecia Automotive Holding, France, to Faurecia Technology Center India Pvt. Ltd., which the Tribunal has dealt with in its order for the A.Yrs. 2011-12 and 2012-13. The Tribunal has held that such services are not in the nature of Royalty/FTS and accordingly deleted the addition. The ld. DR fairly admitted that the Technical services discussed in the case of M/s. Faurecia Automotive Holding are similar to those rendered by the instant assessee. We order to delete the addition.

  ---

• 2019 (7) TMI 533
  Addition to equity to unsecured loans sundry creditors - CIT(A) recorded facts that 1500 investors have filed FIR s law suits claiming about 15 crores as paid by them - Crime Branch status report clearly establishes that the assessee had collected funds from public at large and had not repaid them - HELD THAT:- Addition does not stand as there is no doubt that there were depositors. The facts are that the appellant had collected funds and had not repaid them. Further there were investors who had filed law suits against the appellant for recovery of their money. Therefore, the existence of the depositors cannot be doubted. The addition on all three accounts is therefore deleted. Addition of car running and maintenance expenses - 1/5th was disallowed on account of personal use by directors - HELD THAT:- In the case of a company disallowance on account of personal use of vehicle cannot be made. Hence, the addition was rightly deleted by the Ld. CIT(A), which does not need any interference on our part, therefore, we uphold the action of the Ld. CIT(A) on the issues in dispute and reject the ground raised by the Revenue.

  ---

• 2019 (7) TMI 532
  Condonation of delay - delay in filing the appeals before the CIT(A) - HELD THAT:- There was a long delay in filing the appeals before the CIT(A). The reason advanced by the assessee is that on closure of the company Al Zarafa Travels and Manpower Consultants (P) Ltd., one of the employees of the company retained the assessment orders and the penalty orders with him and on 01/07/2017, the papers were handed over to the CA, Shri James Thomas which could be informed to the assessee only on 13/03/2018. Hence, there was delay in filing the appeals before the CIT(A). We are of the opinion that there is reasonable cause in filing the appeals before CIT(A) belatedly. Accordingly, we condone the above delay in filing the appeals before CIT(A) and remit the issue to the file of the CIT(A) to admit the appeals and decide the issues in dispute in accordance with law after affording reasonable opportunity of being heard to the assessee.

  ---

• 2019 (7) TMI 531
  Reopening of assessment u/s 147 - within 4 years from the end of relevant assessment year - HELD THAT:- We concur with this submission provided the issue was already examined by Ld. AO in the regular assessment proceedings. To reiterate the settled position of law, review of orders by revenue authorities is not permissible under law and review in the garb of reassessment is not permissible. Further, as settled by numerous judicial pronouncements, the reassessment proceedings could not be triggered merely on the basis of change of opinion. In contrast, when no opinion was formed by Ld. AO on any issue during original assessment proceedings and the same was altogether skipped, there would be no bar to reach the requisite satisfaction on the basis of findings in subsequent assessment year. In such a case, deeming fiction of Explanation-2 would come into play and the income shall be deemed to have escaped assessment in cases wherein (i) income chargeable to tax has been under assessed ; or (ii) such income has been assessed at too low a rate ; or ( iii ) such income has been made the subject of excessive relief under this Act ; or ( iv ) excessive loss or depreciation allowance or any other allowance under this Act has been computed; The plea of Ld. Counsel for revenue is acceptable to that extent. Keeping in mind the factual matrix of the case and above legal propositions, we hereinafter proceed to adjudicate each of the issues, on legal grounds as well as on merits. Deduction allowed u/s 36(1)(viia) not adjusted while computing bad debts u/s 36(1)(vii) - HELD THAT:- Factual matrix would lead us to conclude that an opinion was already formed by Ld. AO during regular assessment proceedings and the reassessment proceedings were triggered merely on the basis of Revenue Audit objections. The reopening was done on the same set of facts as available during original assessment proceedings. The ratio of decision of Hon ble Bombay High Court rendered in ICICI Home Finance Co. Ltd. [ 2012 (8) TMI 312 - BOMBAY HIGH COURT] would squarely apply to this issue. Therefore, we hold that that there was no independent application of mind by Ld. AO while triggering reassessment proceedings against the assessee and assessment proceedings was nothing but mere change of opinion. - This being so, we have no hesitation in holding that the stated issue could not be a valid reason to invoke reassessment proceedings against the assessee. Unpaid bonus remained to be added back - HELD THAT:- There was no bar under law to resort to reassessment proceedings in such cases of omissions. Rather, Explanation-2 creates a deeming fiction of escapement of income wherein there was an underassessment of income. Secondly, as evident from recorded reasons, this was not the only reason to trigger reassessment proceedings against the assessee. Thirdly, it was not a mere plain computational error rather an omission of such a nature which could not be termed as mistake apparent from record - no such adjustment was made by the assessee in its computation of income and Ld. AO had no occasion to consider the same and the said omission could not be said to be a fault on the part of Ld. AO. For the same reasons, the decision in Hindustan Unilever Ltd. V/s DCIT [ 2010 (4) TMI 206 - BOMBAY HIGH COURT] as relied upon by Ld. AR, would be distinguishable and not applicable to the facts of the case. Resultantly, we uphold the validity of reassessment proceedings on this issue. The issue, on merits, as already stated, would require no indulgence since the said additions have already been accepted by the assessee in view of the fact that deduction of the same has already been allowed in subsequent AY 2005-06 on payment basis. Deduction u/s 35DDA disallowed - Under assessment of income on account of Excess Deduction u/s 35DDA towards VRS payment - HELD THAT:- AO during regular assessment proceedings and the reassessment proceedings were triggered merely on the basis of Revenue Audit objections. The reopening was done on the same set of facts as available during original assessment proceedings. The ratio of decision of Hon ble Bombay High Court rendered in ICICI Home Finance Co. Ltd. (supra) would squarely apply to this issue. Therefore, we hold that that there was no independent application of mind by Ld. AO while triggering reassessment proceedings against the assessee and assessment proceedings was nothing but mere change of opinion. Assessee is entitled to amortize VRS expenditure only to the extent of 1/5th of the amount paid in connection with voluntary retirement scheme. The balance would be allowable in equal installments of each of the 4 succeeding years. A combined reading of the above facts would lead us to a conclusion the only provisions under which the said deduction has been claimed as well as allowed to the assessee is Section 35DDA which provides for deduction only to the extent of 1/5th in the first year. The provisions of statute being expressly crystal clear, we hold that the assessee was entitled to claim deduction only to the extent of 1/5th only during impugned AY against aggregate payment of 191 Crores. The decision of Hon ble Bombay High Court rendered in Bhor Industries Limited [ 2003 (2) TMI 20 - BOMBAY HIGH COURT] , in our considered opinion, would not apply-firstly because admittedly the said decision is prior to introduction of Section 35DDA and secondly, no such disallowance u/s 43B was there and therefore, the said case is factually distinguishable. Therefore, we reverse the stand of Ld. first appellate authority, in this regard and restore the stand of Ld. AO. However, it is made very clear that our adjudication of the issue, on merits, would come into play only if our stand, on legal grounds, is subsequently reversed by any higher judicial authority. Deduction of Bad Debts u/s 36 (1)(vii) - HELD THAT:- The perusal of working / computations would reveal that the issue of disallowance of bad debts was extensively examined by AO during regular assessment proceedings with due application of mind. AO not only identified the bad debts under each category but also revised the gross figures of Bad-debts. Specific additions were made in cases where requisite documents / evidences were not furnished by the assessee. This is further fortified by the fact that Ld. AO, while computing the income of the assessee specifically computed the figure of bad debts of 492.25 Crores as allowable to the assessee. Therefore, the allegation of the revenue that the issue of bad debts of balance amount of 492.25 Crores remained to be examined / verified in regular assessment proceedings, would not have any sound basis. Secondly, no new tangible material came into the possession of AO and further disallowance was made on same sets of facts. Thirdly, the issue of bad-debts was already pending before CIT(A) on the date when notice u/s 148 was issued to the assessee - There could be no estoppel against law and any limitation imposed by law on the powers of AO could not be overcome by acquiescence of the assessee. In view of our finding that the matter was thoroughly examined by AO in regular assessment proceedings and assessee s appeal against the same was pending, the observation of Hon ble Bombay High Court in assessee s Writ Petition (for AY 2003-04 [2011 (11) TMI 304 - BOMBAY HIGH COURT] would squarely apply to the facts of the case. To trigger the reassessment proceedings for re-examination of the same would be nothing but a review of the order, which is impermissible. Therefore, reopening could not be upheld on this issue on account of change of opinion as well as on account of doctrine of merger. Exemption u/s 10(23G) - exemption not allowable as the bank was neither infrastructure capital company nor infrastructure fund established for mobilizing resources as found while scrutinizing the return for AY 2005-06 - HELD THAT:- Assessee during regular proceedings, had filed along with its computation of income, complete details of income eligible for exemption u/s 10(23G). By way of note no. 11(b) attached to and forming part of computation of income, this fact was clearly spelt out by the assessee. A specific query, in this regard, was raised by AO vide notice dated 17/10/2005 question no. 4 asking assessee to file the complete details / evidences in support of the said claim. The assessee, vide submissions dated 17/07/2006 submitted the requisite details as asked for by AO. Thereafter, the assessee s eligibility to claim the same was exhaustively dealt with by AO vide paragraph-5 (page nos. 2 to 7) while framing assessment order u/s 143(3) on 29/12/2006. In fact, an addition of 64.69 Crores was made by AO in the regular assessment proceedings which was subject matter of further appeal before first appellate authority. Therefore, the reconsideration of the stated issue on same set of facts would be nothing but mere change of opinion which is impermissible under law. This issue was duly considered by Ld. AO during regular assessment proceedings and therefore, the ratio of decision of Hon ble Apex Court rendered in CIT Vs. Kelvinator of India Ltd. [ 2010 (1) TMI 11 - SUPREME COURT] would apply to the facts of the case. Secondly, the argument of doctrine of merger as advanced by Ld. AR would also be applicable to the factual matrix. Therefore, we hold that Ld. AO had no jurisdiction to invoke reassessment proceedings on this issue. As far as the merits of the case are concerned, it is admitted position that the issue stood squarely covered in assessee s favor by the decision of this Tribunal in assessee s own case for AY 2005-0 [ 2017 (11) TMI 1839 - ITAT MUMBAI] wherein co-ordinate bench at para-71 has held that the assessee was eligible to claim exemption u/s 10(23G).

  ---

• 2019 (7) TMI 530
  Assessment u/s 153C - proof of incriminating material found in search - HELD THAT:- This proposition laid down by the Hon ble jurisdictional High Court in the case of IBC Knowledge Park P. Ltd. [ 2016 (5) TMI 372 - KARNATAKA HIGH COURT] is impliedly approved by the Hon ble Apex Court in the case of CIT Vs. Sinhgad Technical Educaiton Society [ 2017 (8) TMI 1298 - SUPREME COURT] as the Hon ble Apex Court took the view that proceedings under section 153C of the Act can be initiated only in respect of those Assessment Years for which there is incriminating seized material which prima facie represent undisclosed income. Revenue put forth the proposition that the learned CIT(A) ought to have sustained even those additions based on material, not relied upon to invoke proceedings u/s 153C and that the CIT(A) ought to have exercised his co-terminus powers to do so. After due consideration thereof, we are unable to concur with this proposition; in as much as the CIT(A) could not have proceeded further in sustaining those additions for the reasons that the invoking of the provisions of section 153C in the case on hand has no legs to stand on and the entire proceedings is void-ab-initio. In this view of the matter, we are of the opinion that the CIT(A) has rightly cancelled the orders of assessment for Assessment Years 2008-09, 2011-12 and 2012-13. Consequently, ground Nos. 1 and 2 of Revenue s appeals for Assessment Years 2008-09, 2011-12 and 2012-13 are dismissed. Initiation of proceedings as barred by limitation in view of the proviso to section 153C - HELD THAT:- We are inclined to concur with the argument put forth by the assessee that in the event the initiation of proceedings under section 153C is found to be in order, the year of search in the case on hand is to be reckoned as Assessment Year 2015-16 as the satisfaction to initiate proceedings under section 153C of the Act was arrived on 15.09.2014 and the six Assessment Years immediately preceding the same would commence from Assessment Year 2009-10 and end with Assessment Year 2014-15. In these circumstances, Assessment Year 2008-09 is outside the ambit of section 153C of the Act in the case on hand. - CIT(A) was correct in deciding this ground in favour of the assessee. Initiation of proceedings under section 153C of the Act in the case on hand, for Assessment Years 2008-09, 2011-12 and 2012-13, is bad in law, thereby rendering the assessment proceedings for the impugned Assessment Years void-ab-initio; we refrain from deciding on the other grounds raised by Revenue on merits for these years as they are rendered academic in nature.

  ---

• 2019 (7) TMI 529
  Bogus LTCG - penny stock - Addition u/s 68 - exemption u/s 10(38) denied - HELD THAT:- We note that the assessee has purchased the shares through online through registered brokers and sold the same also in the Bombay Stock Exchange through the registered brokers and the shares were duly dematerialized and the purchase/sale consideration was through the banking channel. We note that the Tribunal had the occasion to consider the claim of the assessee in the same scrips (M/s. TTML) in a similar case that of ROHIT JALAN VERSUS ITO, [ 2019 (5) TMI 1377 - ITAT KOLKATA] wherein the Tribunal allowed the claim holding that M/s. TTML scrips are not bogus and it was a genuine scrip. Tribunal (supra) relied on the decisions of the Hon ble Supreme Court in the case of Andaman Timber Industries [ 2005 (3) TMI 763 - SC ORDER] and considering the facts in totality, the claim of the assessee cannot be denied on the basis of presumption and surmises in respect of penny stock by disregarding the direct evidences on record relating to the sale/purchase transactions in shares supported by broker s contract notes, confirmation of receipt of sale proceeds through regular banking channels and the demat account. Accordingly, directed the A.O. to treat the gains arising out of the sale of shares under the head capital gains- Short Term or Long Term as the case may be. The transactions were all through account payee cheques and reflected in the books of accounts. The purchase of shares and the sale of shares were also reflected in Demat account statements. The sale of shares suffered STT, brokerage etc. In the facts and circumstances of the case, it cannot be held that the transactions were bogus - Decided in favour of assessee.

  ---

• 2019 (7) TMI 528
  Correct method of accounting u/s 145 (1) - whether the assessee is free to choose proper method of accounting or not ? - whether the assessee is following this method regularly or not - HELD THAT:- The method of accounting adopted by the taxpayer consistently in regularly cannot be discarded by the revenue on the view that he should have adopted a different method of keeping accounts but the concept of real income is certainly applicable in judging whether there has been an income or not and such principle must be applied with care and within their recognized limits. It is further held that the income has really accrued or arisen to the assessee must be judged in the light of the reality of the situation and if the method of accounting employed by the assessee, real income of the assessee cannot be properly deduced there from, the income tax officer may determine the income as per his wisdom - CIT vs. Macmillan Co [ 1957 (10) TMI 5 - SUPREME COURT] has held that the choice of the method of accounting lies with the assessee. The only precondition is that assessee must show that he has followed the method regularly for his own purposes. On careful analysis of the section 5 of the act, it is amply clear that income of the assessee is chargeable to tax when it accrues and arises. The assessee has right to offer such income if the same is though accrued but not received, to offer it for taxation on receipt basis. In this case, the bills that are not received by the assessee are not at all admitted by the person who is supposed to pay it. - no obligation of payment on the shoulder of Organizing Committee. Thus the outstanding payments, on the facts of the case, has neither accrued to the assessee, nor received by it. Not accepting the books of accounts maintained by the assessee on Cash basis and stated that the profit of the assessee cannot be deduced from it - real income - In the present case assessee itself has shown that though it has raised the bills but some of the bills have not been received till now because of protracted litigation which itself proves that even in the mercantile system of accounting such income has not accrued. Nothing more could have been shown as an income then what is received by the assessee. It is not the case of the revenue that assessee has not shown income what has been received by it. It is also not the case of the revenue that expenditure claimed by the assessee has not been paid. In view of this, both receipts and outflow of cash are undisputed - cash method of accounting, which is followed by the assessee for the impugned assessment year as well as subsequently, cannot be rejected and the income of the assessee should not be computed on mercantile method of accounting. Accordingly, ground number 1 of the appeal of the assessee is allowed. Addition of Illegal gratification paid by the assessee - During the course of search proceedings, one email dated 16/06/2010 sent by Mr. Binu Nanu to the GL events France was found and seized - HELD THAT:- Arbitration Tribunal has clearly negated the accusations of fraud, corrupt practices, collusion and cartelization leveled against the Appellant Company (Claimant). Also it is to be seen that from the award above, it is derived that the said accusation against the Appellant was purely and solely based on the Shunglu Committee Report, FIR lodged by the CBI based on which the search was conducted on the Appellant Company and pursuant to which in the assessment above addition was made. In view of above facts and without commenting on any other report or investigation, it is apparent that charges against the assessee of paying illegal gratification and its consequent addition u/s 69 is without any evidence of incurring such expenses. Thus ground no 2 of the appeal is allowed. TP adjustment - ALP of International Transactions - TPO after summarily rejecting the TP study wherein TNMM was used to determine the arm s length price of the international transaction, he applied CUP method - HELD THAT:- Method applied by TPO is not in consonance with law and therefore, the method applied by the appellant being illustrated by sufficient documents and evidences on record deserves to be accepted. The learned dispute resolution panel has also upheld the above ALP of transaction only on the protective basis without giving any reason that why they are agreeing with the finding of the learned transfer-pricing officer to apply the cup method. Even during proceedings before them, no enquiries were made with respect to the arm s-length price of these international transactions when complete details are available before them. No reasons are shown before us by the learned CIT DR that comparable selected by the assessee does not have the similar FAR analysis. He further also could not show us that taking the current year data of the above comparable; the margin of the assessee is not quite high then those comparables. In view of this, we do not find any reason to uphold the adjustment proposed by the learned transfer-pricing officer to the arm s-length price of the international transactions of the assessee. Accordingly, ground number 3 of the appeal of the assessee is allowed. Disallowance of differential amount of bill seized - HELD THAT:- Payment of such bills were also made by account payee cheque and which were already on record at the time of search as well as produced before the learned assessing officer. The bank statement of the assessee also showed that those bills have been discharged by the assessee. Before the AO assessee also produced the original copies of the invoices. It is also fact that assessee was awarded the contract of the two clusters of the Commonwealth games which is at different sites. The one site was games , the other site was at the Noida express highway and the another cluster activities were being carried out at 5 different sites. The explanation of the assessee also cannot be discarded that the bills in relation to such materials and services were also received at site only at the time of delivery of material services. Further, despite the production of the original invoices and the overwhelming evidence of payment of these parties through account payee cheques showing their names, addresses, permanent account Nos the learned assessing officer did not make any further enquiry that whether such bills were raised by those parties are not, in absence of this enquiry, merely because these bills were not seized at the time of search, the addition has been made. It is not in the hands of the assessee that what documents must be seized by the search party and what documents must be left out. Addition cannot be sustained. Thus, ground number 4 of the appeal of the assessee is allowed. Disallowance of part-time expenses - addition u/s 40A(3) - HELD THAT:- AO has compared the appellant with M/s Pico Deepali Overlays Consortium without providing the relevant details of this party to the appellant. Admittedly, no opportunity was given to the appellant to examine/ cross-examine the relevant officials of M/s M/ Pico Deepali Overlays Consortium to challenge the comparison drawn with M/s Pico Deepali Overlays Consortium. AO should have at least compared the requirement of Foreign Technical experts of that company with the appellant. It is also a cardinal principle that any material used against the assessee, should be confronted to the assessee with reasonable opportunity of explaining it. This has not been done. Therefore, in view of overwhelming evidences produced by the assessee of presence of foreign expatriates, with their passport detail and expenses details coupled with the liability of assessee to bear it, it cannot be said that these expenses were not incurred wholly and exclusively for the purposes of the business of the assessee - ground number 5 of the appeal of the assessee is allowed. Disallowance of the bogus purchases - onus to prove - HELD THAT:- After the appellant duly discharged its onus to prove the transaction as genuine, the onus shifts to the Ld. AO to disprove the appellant with due evidence and reasons. However, in the instant case the Ld. AO did not provide any reason or any evidences and on complete surmise held that the bills produced by the appellant are bogus. Further, the learned assessing officer has not commented anything on the amount of purchases made by the assessee from the party existing at the same address with the Garg Road lines. The learned assessing officer also did not grant any opportunity of cross-examination of the partner of M/s Garg Road lines to the assessee. The facts in the present case are similar to the facts in case of M/s Nitin Enterprises . Therefore we direct the learned assessing officer to delete the disallowance of INR 5 87058/ because of purchases made from Garg Road lines treated by him as a bogus purchases. Accordingly, ground number 6 of the appeal of the assessee is allowed. Addition of professional fees paid by the assessee - bogu bills produced - HELD THAT:- AO ignoring all the details and documents on record and without providing any reason held that the bills are bogus as the appellant was involved in receiving bogus bills, which was uncorroborated. Even otherwise, the Ld. AO made the addition of professional fees three times. Firstly, the professional fees of 1,03,15,369/- was disallowed while dealing with it separately under para 19(g) of the assessment order. Secondly, the professional fees of 1,03,15,369/- were again disallowed while disallowing entire expense in para 28 of the assessment order. Further, same amount of professional fees is also included in the addition made because of Bills seized, sundry creditors, and expense liability. Further, the expenses of 28,52,376/- allowed by the Ld. AO in para 16 of Draft order was also ignored by him while computing total income. In view of above facts, the disallowance out of the professional fees cannot be withheld. Accordingly, we direct the learned AO to delete the above disallowance. Hence, ground number 7 of the appeal of the assessee is allowed Excess of expenditure on travelling and conveyance - HELD THAT:- No adverse inference can be drawn simply because some other party has allegedly incurred expenditure less than the appellant has. The appellant, by no stretch of reasoning, can be required to follow on identical business models to that of M/s Pico Depali Overlays Consortium, and the failure to do so cannot be a consideration for disregarding the appellant s expenditure. Even otherwise, none of the expenditures has been incurred on the related parties or for non business purposes. On identical reasoning, we already deleted disallowance of expenditure on per diem expenditure. Accordingly we direct the learned assessing officer to delete the disallowance - ground number 8 of the appeal of the assessee is allowed. Addition of related party payments treated as bogus expenditure - AO made addition alleging that bills could not be relied upon as the appellant was engaged in the practice of receiving bogus bills - HELD THAT:- Reason provided by the AO is not acceptable for making addition u/s 40A(2)(b). AO is required to provide the comparable cases that the same is not at arm s length or in excess of the fair market value of such services, which was not done. Further, the addition made by the AO of 15,57,987/- against the bill seized instead of paid amount of 26,55,954/- shows the non-application of mind by the AO. AO did not verify the amount of actual payment of 26,55,954/-, the details of which were already on record before the Ld. AO. He was only concerned with the bill seized value of 15,57,987/-. This very clearly shows that the A.O. did not proceed in accordance with law. Accordingly, for the reasons provided in deleting the disallowance in case of Meroform P Ltd, we also direct the ld AO to delete the above disallowance. Accordingly ground no 9 of the appeal is allowed. Addition u/s 69C on negative cash balance - HELD THAT:- On careful reading of these orders of the lower authorities we found that the cashbook of the assessee showed negative balance on certain days and therefore the addition is made of such negative balance as expenditure have been incurred by the assessee without having known source of such income. We have also considered the explanation given by the assessee but we are not convinced. Accordingly, we confirm the order of the learned assessing officer on this issue. Ground number 10 of the appeal of the assessee is dismissed Disallowance of revenue expenditure treated as capital expenditure - HELD THAT:- Assessee is engaged in the business of the event organization and has been part of the Organization, which conducted the Commonwealth games 2010. Looking at the nature of the business of the assessee the Fire detection alarm which has been fitted at the various places cannot be held to be the item of the capital expenditure as it related to fire alarms, heat detector, smoke detector et cetera which are deployed at the various project sites. The assessee has also incurred expenditure on the traffic barriers and shown it is a consumables. Further the expenditure cannot also be considered as a capital expenditure which is incurred on the dynamometer for the purpose of the business of the company. Therefore the AO is directed to delete the above disallowance and treat the above expenditure as revenue in nature Furniture as needs to be understood that assessee is in the business of organizing such events and it never purchased these furniture with a view to have any enduring benefit. Merely because it is titled as furniture, it cannot be held to be capital expenditure. Its user in the hands of the assessee must be evaluated. Thus, it cannot be held as capital expenditure. Purchase of motor car it has been correctly treated by the learned assessing officer and the learned dispute resolution panel as capital expenditure. The assessee is entitled for the depreciation thereon at the respective rates. Merely because of the reason that assessee has sold these items as a scrap does not make them revenue expenditure. Ground number 11 of the appeal of the assessee is partly allowed. Disallowance on payment of services of security guard - HELD THAT:- AO has incorrectly considered that expenditure was a security deposit is completely based on surmise and suspicion. The invoice of security service provides complete details of what kind of service was taken and for what purpose it was taken. Further, the Ld. AO also did not provide any evidence for treating this expenditure as security deposit, however, all the details and documents available with the appellant truly justify that the payment was made for security services provided at CWG, 2010 which are genuinely for the purpose of business. In view of this we direct the learned assessing officer to delete the disallowance - ground number 12 of the appeal is allowed. Addition towards the value of the closing stock - addition u/s 68 - HELD THAT:- Assessee has shown that the above stock is already credited to the profit and loss account and therefore it is already gone to swell the profits of the assessee for the year. The assessee has also submitted the details of the closing stock stating the items, quantity, rate, and amount of the closing stock and despite the above information available with the assessing officer he made the addition u/s 68 - No reason to sustain the above addition for the reason that 1st of all it is a double addition and 2nd it cannot be added when the assessee has given a complete details of the quantity and the items along with the rates and the amount of the closing stock carried forward to the next year, the stock has also been sold by the assessee in next year and receipt of such sale has already been disclosed in the subsequent year. In view of this ground number 13 of the appeal of the assessee is allowed. Addition towards the advances recoverable - HELD THAT:- Sum included custom duty refundable of which was paid by the assessee to the government of India. Further sum of assignment credit refund was with respect to the Senate credit on service tax. Further sum was commercial taxes paid by the assessee under protest to U P since tax authorities. Advance to an employee for the expenses incurred by her for the business of the assessee company. Since the advances were not utilized it was outstanding as in advance. Further sum is outstanding receivable on sale of motorcar which was sold as scrap. As the motor car has been held to be capital expenditure by us in earlier ground of appeal therefore the above amount has already gone to the credit of the block of the asset of the motor car. In view of this we find that the learned assessing officer has wrongly made an addition to the total income of the assessee of the above sum. In view of this ground, number 14 of the appeal of the assessee is allowed Addition of sundry creditors and value of the balance sheet - item of the other liabilities - HELD THAT:- As the assessee has produced all relevant details available with respect to the above sundry creditors and other expenses outstanding and the learned assessing officer has not made any enquiry to prove that these are non- genuine liabilities, the addition in the hands of the assessee cannot be sustained. Accordingly, we direct the learned AO to delete the disallowance - ground number 15 of the appeal of the assessee is allowed Disallowance of statutory liabilities - disallowance u/s 37/69C - HELD THAT:- We do not find any reason to sustain the disallowance u/s 37/69C with respect to the tax deduction at source payable. The above amount is the amount of tax deducted by the assessee on various payments of the salaries, interest, payment to contractors and rent to various service providers. This amount has not been claimed by the assessee as deduction from the total income. Therefore the learned assessing officer is directed to delete the disallowance to the total income of the assessee. With respect to the service tax payable provisions of section 43B of the income tax act apply to every assessee irrespective of the method of accounting employed by them. If those sums have been paid by the assessee before the due date of the filing of the return of income for the impugned assessment year, both these sums are required to be granted as deduction to the assessee. Even otherwise, the above addition cannot be sustained u/s 37/69C. Therefore, the above ground of appeal is sent back to the file of the learned assessing officer with a direction to grant deduction of tax deduction at payable and to verify the provisions of section 43B with respect to VAT and CST as well as service tax payable, if assessee has claimed the deduction thereof - Ground 16 of the appeal of the assessee is allowed with above directions. Addition of unsecured loan - addition u/s 68 - HELD THAT:- assessee has discharged its onus cast up on it u/s 68 - AO has not carried out any inquiry on the same. Thus, addition was made incorrectly by the AO and did not have any valid reason to disprove the documents submitted by the assessee. Therefore, it is clear that assessee has established identity, creditworthiness, and genuineness of the transactions by submitting adequate evidences, which has not been disapproved by the learned assessing officer by cogent inquiries. - delete the addition u/s 68 - ground number 17 of the appeal is allowed. Addition being alleged difference between the purported target costs - addition u/s 69A - HELD THAT:- Merely looking at the price of the material the addition cannot be made in the hands of the assessee. Even otherwise the learned assessing officer has invoked the provisions of section 69A of the act which can only be invoked in those cases where the money in question is not recorded in the books of accounts of the taxpayer. In the present case the assessee has moved the total sale consideration, the total purchase cost on by the assessee and therefore there is nothing which is excluded. Hence, the provisions of section 69A of the act cannot be applied. In view of this we direct the learned assessing officer to delete the addition being the difference between the purported target cost and the consideration to be received from the organizing committee by the assessee under section 69A of the act. Accordingly, ground number 18 of the appeal of the assessee is allowed. Addition being the alleged difference between the price quoted by the appellant to organizing committee in comparison to the price allegedly quoted by other vendors - HELD THAT:- Assessee has executed projects related to Commonwealth Games. The allegation of the Ld. AO is that the Assessee has charged more consideration for these projects in comparison to other vendors. Even if it is presumed that, the allegation of the Ld. AO is correct, still charging of higher consideration is undoubtedly an item of income for the Assessee, which has been duly recorded in the books of accounts of the Assessee as per the Method of Accounting and not an expenditure incurred by the Assessee. Therefore, the condition precedent to the application of provisions of Section 69C is not fulfilled in the instant case. In view of the above action of the ld AO in making the addition invoking the provisions of Section 69C is not sustainable. Thus, we direct the AO to delete the same. Ground no 19 of the appeal is allowed. Disallowance of total expenditure incurred by the assessee - AO has disallowed the total expenditure incurred by the assessee despite making individual disallowances of all the expenses - HELD THAT:- established that the appellant had maintained proper books of accounts and all the transaction in respect of income, expenditure, assets and liabilities are duly recorded in the books. AO also accepted that the appellant had maintained proper books of accounts as all the additions and disallowances were made according to the amount reflected in the books. Total expenditure also includes the expenditure such as salaries and bonus, bank charges, rates and taxes, interest expenditure, insurance and other several expenditures, which are to be verified separately. It was the responsibility of the assessing officer to verify the expenditure individually head wise. However, instead of doing so the Ld. AO assessed on overall basis and disallowed whole of the expenditure. Finding of ld DRP is that definitely 100% expenses cannot be held bogus. Definitely, no business can be done without incurring any expenditure. However, they have directed to make the disallowance of 35.85 Crores, but on what basis there is no finding. The only reason given is that at least the sum of 35.85 crores paid to the OC and DDA have been recouped through the bogus billing in the books of accounts. DRP also did not care to find out the actual bogus expenditure, if any incurred by the assessee. No merit in the disallowance made by the ld AO and sustained by the ld DRP. Accordingly Ground no 20 of the appeal is allowed.

  ---

• 2019 (7) TMI 527
  Income accrued in India - profit on supply of equipment - PE in India - offshore supply - contracts for supplies and services executed in India for MUL - DTAA between India and Japan - HELD THAT:- In the present case the goods were sold to MUL from outside India. Thus, the risk and title were also transferred outside India and no transaction took place in India. The custom clearance, inland transportation were also done by the MUL on its own and assessee at no stage involved in the said activities. There was no PE involved in the sale. In fact supervision was done after the supply of equipments. The revenue could not establish that the assessee is having fixed place PE or supervisory PE. The ratio laid by the Hon ble Apex Court in case of M/s Ishikawajima Harima Heavy Industries Ltd. [ 2007 (1) TMI 91 - SUPREME COURT] is applicable in the present case. Therefore, Ground Nos. 1 to 1.4 and 2 to 2.1 of the Revenue s appeal is dismissed. Supervisory PE in terms of Article 5(4) of the DTAA - Taxability of FTS - DR s isolated Purchase Order having more than 180 days - HELD THAT:- The period of supervision in case of individual contracts did not exceed a period of 180 days except the one purchase order mentioned hereinabove and they did not constitute supervisory PE in terms of Article 5(4) of the DTAA. DR s isolated Purchase Order having more than 180 days cannot establish that each individual Purchase Orders are interlinked. In fact, these Purchase Orders are very much independent and separate from each other and thus, does not constitute the supervisory PE or fixed PE. AR also submitted during the hearing that the sole Purchase Order which has more than 180 days has been offered to tax in earlier Assessment Year i.e. 1999-00. Hence, the issue raised in the present appeal filed by the Revenue is squarely covered by the decision of the Tribunal for A.Y. 1999-00 which is now confirmed by the Hon ble High Court as well as by the Hon ble Supreme Court. Thus, in the present case the FTS was liable to be taxed at 20% under Article 12(2) of the DTAA. Hence, Ground Nos. 3 to 3.1 in Revenue s appeal are dismissed. Interest u/s 234B - role of the assessee/payee/deductee in short-deduction or non-deduction of tax - HELD THAT:- There was no requirement to pay advance taxes in respect of income which was liable to tax deduction at source. Hence, no interest under section 234B of the Act is leviable. This issue is covered in favour of the assessee by the jurisdictional High Court in case of Mitsubishi Corporation and Jacobs Incorporated [ 2010 (8) TMI 37 - DELHI HIGH COURT] wherein it is categorically held that interest is not leviable on the assessee since its entire income is subject to tax deduction at source. Taxability of receipts from O M contract - FTS and is to be taxed on gross basis without allowing any deduction for expenditure u/s 44D OR Business income - assessee declare loss - HELD THAT:- This issue is covered by the order of the Tribunal in assessee s own case for AY 1999-00, wherein after going through the facts of O M contract, held that the services received by the assessee does not fall under FTS and has to be considered as service in relation to construction, assembly of project i.e. business income. Thus, the amount received under O M agreement is business income and taxable under article 7(3) of DTAA on net basis. Disallowance of amount paid by the assessee on the ground that liability which doesn t relate to the assessee - expenditure in respect of transportation of the material supplied - HELD THAT:- Under Article 5 of the agreement between assessee and ETPL, however, the assessee had authorized, which merely entitled ETPL to collect receive contract price from SSNNL for each portion. The Ld. AR rightly submitted that there is a difference between accrual of income and incurring of expenditure. Under the agreement entered by assessee with ETPL, it has incurred a liability and in fact paid the said sum on transportation to ETPL. It is not denied that the assessee under the contract with SSNNL could have recovered the amount. However, in the absence of any agreement with SSNNL, to pay the extra amount due to escalation of cost, no income has either accrued or was received by the assessee. There is no a finding given by the Assessing Officer that assessee has not honored the commitment. Thus, the assessee has paid to ETPL under its contractual liability even though the same could not be recovered from SSNNL. Therefore, the disallowance made of the expenditure incurred of 16,80,400/- which has been physically paid by the assessee is to be allowed by the AO. Interest income not declared - AO held that the assessee has not disclosed the interest income earned in the original return of income and also the revised return of income - HELD THAT:- From the records it can be seen that during the assessment proceeding, the assessee submitted revised return of income filed on 30th March, 2009 vide e-filing acknowledgment in which the interest income was disclosed and tax was paid on it. Inadvertently, the income was not captured in the head of income from other sources , however, the same was duly included in the tax payable and tax was paid on it. Further, the assessee filed submission on 8th September, 2009 with the Assessing Officer informing about the revised computing of income wherein interest income was disclosed in the computation of income. Thus, the assessee completely disclosed the interest income in Schedule S1 of the revised return of income form filed on 30th March, 2009. It is only inadvertent error in the filing of the revised return form but the tax was paid suo-moto before the enquiry of the AO. Therefore, it is not a deliberate mistake on part of the assessee and the tax is also duly paid by the assessee. Therefore, the AO was not right in making the said addition.

  ---

• 2019 (7) TMI 526
  Bogus LTCG - Penny stock - prices of the shares were artificially hiked to create non-genuine LTCG to the beneficiaries - unexplained cash credit u/s 68 - exemption of income u/s 10 (38) denied - HELD THAT:- Transactions of the assessee of purchase of shares of M/s Esteem Bio and M/s Turbotech., holding of the shares for more than one year and the sale of shares through a registered share broker in a recognized Stock Exchange and payment of Securities Transaction Tax thereon, all were supported by documentary evidences which were placed before the lower authorities. Revenue could not point out any specific defect with regards to the documents so submitted by assessee. In our considered view, effect of a transaction which is supported by documentary evidences cannot be brushed aside on suspicion or probabilities without pointing out any defect therein. AO himself observed that the movement in price of shares of M/s Esteem Bio and M/s Turbotech were without any backing of financial performance of the said companies. In our considered view, the above factor at best was a pointer or cause for careful scrutiny of the transaction by the AO but from it cannot be concluded that transactions were sham. It is a matter of common knowledge that prices of shares in the share market depends upon innumerable factors and perception of the investor and not alone on the financial performance of the company. We also find from record that Ld. AO also didn t confront copies of statements recorded by Investigation Wing, Kolkata of Sh, Nikhil Jain, Sh. Sanjay Vora, Sh. Rakesh Somani, Sh. Anil Kumar Khemka and Sh. Bidyoot Sarkar to the appellant during assessment proceedings and merely extracted copies of their statement in the assessment order only. AO has not confronted any material to the assessee nor provided any adequate opportunity to the assessee to defend her case. Since the statements were not confronted to the assessee, she was deprived of her right to cross examine the witnesses. Also whatever they have stated in their statement is no gospel truth and cannot be applied blindly to all the persons who have brought the scrips in the entire country. Atleast some inquiry should have done from these persons, whether they have provided any entry to the assessee, if the request for cross examination was not possible at that stage. Cross examination of a person in whose basis any adverse inference is drawn, then it cannot be primary evidence or material to nail the assessee and simply based on the statement no addition can be made. Entire documentary evidence on record has not been disputed by the authorities below and there is no rebuttal to the explanation of assessee. No other adverse materials have been brought on record against the assessee. Further, no proper enquiry has been conducted by the A.O. on the documentary evidences filed by assessee. Whatever statements have been referred to in the order was general in nature with whom assessee did not have any transaction. Assessee has entered into genuine transaction of sale and purchase of shares and therefore, satisfied the conditions of Section 10(38) - Decided in favour of assessee.

  ---

• 2019 (7) TMI 519
  Tribunal dismissing the appeal of the revenue - roving inquiry - set-aside matter is pending with the Commissioner of Central Excise for fresh adjudication and findings of the Central Excise department regarding under invoicing is not negated or quashed till dated by any higher appellate authority - HELD THAT:- No error not to speak of any error of law could be said to have been committed by the Tribunal in dismissing the appeal filed by the Revenue. The question proposed cannot be termed as a question of law much less a substantial question of law in view that no error could be said to have been committed by the Tribunal. There is no substantial question of law involved in this Tax Appeal.

  ---

• 2019 (7) TMI 518
  Obligation to seek exemption under Section 12AA - real income accrued to society - statutory levy under the VAT Act, 2005 is being collected by virtue of the powers entrusted by the State Government to the respondent Assessee - surplus of income over expenditure - whether the retention of a part of the VAT collected by the respondent Assessee till the process of determination of its actual expenditure incurred on the collection, followed by deposit of balance surplus amount in the Government Treasury for onward transmission to the State Government, can be treated as the real income in the hands of the respondent Assessee for the purpose of IT Act, 1961? - HELD THAT:- SLP dismissed.

  ---

• 2019 (7) TMI 473
  Addition u/s 14A r.w.r. 8D on account of the interest expenses - assessee was maintaining mixed funds and has failed to establish that it has its own surplus funds for investment in dividends - non recording the satisfaction by the Assessing Officer before applying the formula given in sub-rule (2) of Rule 8D - whether once there are mixed funds, Rule 8D would be attracted mandatorily? - ITAT upholding the relief under Section 14A of the Act on account of the interest expenses - HELD THAT:- The language of Section 14A of the Act is plain and clear. Before invoking Rule 8D, the Assessing Officer is obliged to indicate that having regard to the accounts of the assessee, he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to the income which does not form part of the total income under the Act. To put it in other words, the condition precedent of recording the requisite satisfaction which is a safeguard provided in Section 14A should not be overlooked before going to Rule 8. In such circumstances we are not impressed by the submission canvassed on behalf of the Revenue that once there are mixed funds, Rule 8 would be attracted automatically. In the overall view of the matter, we are convinced that no error, not to speak of any error of law, could be said to have been committed by the Tribunal in passing the impugned order.

  ---

• Customs

• 2019 (7) TMI 517
  Scope of SCN - Classification of imported goods - Blankets - Revenue is of the view that the said blankets are classifiable under CTH 60019200, whereas respondent classified the same under CTH 63014000 - HELD THAT:- The CESTAT has correctly come to the view on a finding of fact that the goods which were imported were blankets and fell within the purview of Chapter Heading 63014000. There is no merits in the appeal - appeal dismissed.

  ---

• 2019 (7) TMI 516
  Classification of imported goods - import of vessels Lewek Altair and Lewek Atlas - whether classified under CTH 8905 90 90? - HELD THAT:- There is no legal infirmity in the impugned judgment and order warranting our interference under Section 130-E(b) of the Customs Act, 1962. Appeal dismissed.

  ---

• 2019 (7) TMI 515
  Free Trade Agreements - SAFTA/ISFTA Rules - Concessional rate of duty - import of consignment of Aracknut and Black pepper from Sri Lanka - whether CMA agreement dated 13.3.2015 will substitute SAFTA and ISFTA rules qua verification of COO? - HELD THAT:- Though SAFTA and ISFTA agreements go by the nomenclature of Free Trade Agreement ( FTA for brevity), for all practical purposes, they are treaties within the meaning of Article 73(1)(b) of the Constitution of India and they are traceable to Entry 14 of List I of Seventh Schedule to the Constitution of India. In this regard, Article 51(c) of the Constitution of India is also of relevance. SAFTA rules and ISFTA rules in contradistinction are municipal laws in international law parlance. Be that as it may, the same cannot be said of CMA agreement dated 13.3.2015 between Governments of India and Sri Lanka. Being an agreement made between two sovereign States, this CMA agreement also certainly qualifies as part of treaties (if not a treaty by itself) for the purpose of mode of implementation of treaties. In the light of section 151B(5) of Customs Act, this Court has no hesitation in coming to the conclusion that CMA agreement dated 13.3.2015 will prevail over the procedure for verification of COO adumbrated in SAFTA Rules and ISFTA Rules as this CMA agreement also has been signed by two sovereign States. This court deems it appropriate to not to interfere with the impugned SCN by holding that it is open to respondents 1 and 2 to issue an addendum or corrigendum to impugned SCN adverting to CMA agreement and mentioning as to how COOs were verified and as to why they are unacceptable, in an appropriate manner without disclosing the contents of aforesaid communications dated 23.4.2018 and 15.5.2018 (immunity / privilege for which has been sustained) - The reason why this court refrains from interfering with the impugned SCN is owing to the principle that writ jurisdiction being a discretionary jurisdiction will ordinarily not be exercised for quashing a SCN and that it will be done only in rare and exceptional cases, if a SCN is found to be wholly without jurisdiction or wholly illegal for one reason or the other. This Court is of the considered view that this is not a rare and exceptional case where impugned SCN is wholly illegal, warranting interference of this court in the discretionary writ jurisdiction under Article 226 of Constitution of India - Petition dismissed.

  ---

• 2019 (7) TMI 514
  Maintainability of appeal - appropriate forum - disposal of the case only on the application of Early Hearing, without giving opportunity to the respondent - Principles of natural justice - HELD THAT:- Against an order of the Appellate Tribunal relating to the determination of any question having a relation to the rate of duty of customs or to the value of goods for the purposes of assessment shall lie before the Supreme Court and the High Court has no jurisdiction to entertain an appeal against such order. Having regard to the fact that controversy involved in the present case directly relates to the question of determination of rate of duty of customs, the appeal is not maintainable before this Court. The appeal is disposed of as not maintainable before this Court

  ---

• 2019 (7) TMI 513
  Extension of export obligation period - Import of machinery under EPCG Scheme - learned Adjudicating authority issued the order-in-original without considering the extension of export obligation period which was permitted by the DGFT - pre-deposit in terms of Section 129-E of the Customs Act duly made - HELD THAT:- The issue needs to be re-considered by the Commissioner (Appeals), especially, in view of extension of export obligation period granted to the appellant by the Competent Authority that is DGFT - appeal allowed by way of remand.

  ---

• 2019 (7) TMI 512
  Request for adjournment - non-prosecution of the case - HELD THAT:- It is apparent that several adjournments without any cogent reason have already been availed by the appellant. Also vide order dated 29.01.2019, the written request for adjournment was reluctantly accepted by this Tribunal with the direction that no further adjournment shall be granted. Still more than six adjournments have already been obtained by the appellant, thereafter that too by filing the similar applications. The copies attached on record makes it clear that except personal difficulty or being suffering from viral fever , no other reason while praying for adjourning the matter (in any of the applications filed till date) has been mentioned. The present appeal is nothing but a time gaining strategy of the appellant and that the appellant is not at all interested in pursuing this appeal - this case deserves to be dismissed for want of prosecution. Appeal dismissed for want of prosecution.

  ---

• Corporate Laws

• 2019 (7) TMI 525
  Oppression and Mismanagement - Continuation of petition by the legal heir of deceased petitioner - Whether the acts of oppression and mismanagement is still maintainable, at the instant of the son of the petitioner, as legal heir since he is not part of those acts and oppression and mismanagement alleged to have been made by the original petitioner? HELD THAT:- It is a settled position of law that the acts of oppression and mismanagement should not only be existing at the time of filing company petition, they should also being continuous harsh and burdensome leading to the conclusion that the directors action lack in probity and those grounds should justify winding up of the company under the just and equitable clause. As per law, as legal heir of his father Mr. A. Mayuresh Bhat (son) can get deceased father estate, which includes shares held by his father, after applying for the same as per law and respondent No. 1-company has to consider it. Admittedly, shares of original petitioner is not in dispute and this is not the issue raised in the instant petition by the son. However, the son can hardly maintain the company petition which is filed by making various acts of oppression and mismanagement by his father (Shri Arun Bhat). However, Mr. A. Mayuresh Bhat (son), after getting transmission of the shares of his father, he may claim his rights basing on such transmission, in accordance with law. Moreover, the son is prima facie holding 4 per cent. shares by contributing share capital of 2,00,000 and share application of 42,100 and also stated that he is hardly involved in the affairs of the company by attending the annual general meeting/board meetings as contended by the respondents. Therefore, he cannot maintain instant petition filed by his father, under section 397/398 of the Act, 1956. The petitioner failed to substantiate the acts of oppression and mismanagement as alleged by him in the company petition and some of reliefs as sought in the main company petition are also not tenable and cannot be granted. However, the legal heir can claim transmission of shares of his father by submitting necessary documents to respondent No. 1-company and thereafter, the company has to take suitable action for the same. And thereafter, if the son still feels that respondent No. 1-company is resorting to acts of oppression and mismanagement, he is at liberty to file a fresh company petition in accordance with law. Petition dismissed.

  ---

• 2019 (7) TMI 524
  Restoration of name of company on the Register of Companies - failure to file the returns with the ROC from financial year 2009 onwards - jurisdiction of Registrar of Companies under Section 248 of the Companies Act, 2013 - failure to notice that the parameters set out in Section 252(3) of the Act - HELD THAT:- Matrix Power has been struck off the Register of Companies on the ground of non-filing of financial statements and annual returns for the financial years 2009-10 to 2017-18, though it is not disputed that the company has filed Income Tax Returns and Bank Statements for Assessment Years 2008-09 to 2017-18, which demonstrated significant accounting transactions during the aforesaid period. The only conclusion deducible from this documentary evidence and unhesitatingly accepted by the Respondent ROC is that Matrix Power had been carrying on business and was in operation during the relevant period. It being admitted by ROC that the accounting transactions undertaken by the company qua its avowed objective were significant, the business being carried on by the company cannot be termed cosmetic or inconsequential. What stares in the face of impugned order is the fact that the Tribunal has overlooked the factum of the significant accounting transactions admittedly undertaken by the company during the relevant period justifying no conclusion other than the one that the company was in operation and carrying on business. Ironically the ROC, while admitting this factual proposition, sought to strike off the name of the company from its register ignoring and shutting out the vital evidence though in its report before the Tribunal as also before this Appellate Tribunal such proposition of fact is pleaded and reiterated. It is therefore safe to conclude that removal of name of the company from the Register of Companies was not justified as the ground projected i.e. the company was not in operation and not carrying out business during the relevant period did not exist. Respondent is directed to restore the name of M/s Matrix Power Controls India Pvt. Ltd. to the Register of Companies subject to statutory compliances being filed together with the prescribed fees and penalties leviable thereon as mandated by law - Appeal allowed.

  ---

• 2019 (7) TMI 523
  Oppression and mismanagement - Termination of services of 1st appellant as an employee - HELD THAT:- Due to internal disputes within the Management, the bank account being suspended for operation, the company was in financial crises. In these circumstances the need for raising funds through issue of equity shares cannot be held to be unreasonable. There is also force in the argument of the Learned counsel for the Respondent that these shares have been issued to the appellant himself and his supporters. It cannot said that it is fair allotment of shares. We observe that even if the company was in need of funds, the new equity shares should have been issued in a fair manner to the existing shareholders on pro-rata basis as per their holding in the company. This company being company of employees is being run by the employees. While the present parties before us are rival groups who continue to claim right to Management and continue to assert rights against each other and have created various confusions relating to the incidents and facts. The confusion gets reflected even in the impugned order. It appears to us that this company which appear to be running well needs to be protected from internal group rivalries. The appointment of 1st Respondent, Shri Deba Kumar Hazarika, as Director is held illegal - decision taken at the EOGM dated 14.11.2009 removing original R-5 as Director and Managing Director of the Company is set aside - Impugned order is set aside - appeal allowed.

  ---

• Law of Competition

• 2019 (7) TMI 522
  Sanction of scheme of demerger - compromise or make arrangements with creditors and members - Section 230 and 232 of the Companies Act, 2013 r/w Rule 3 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016. HELD THAT:- The Tribunal, while dealing with an application under Section 230 of the Act, on being satisfied that the compromise or arrangement has been proposed in connection with a scheme for the reconstruction of the company or companies involving merger/ amalgamation of two or more companies and under the scheme property or liabilities of the transferor company is required to be transferred to transferee company or divided among/ transferred to two or more companies is required to order meeting of the creditors or members, as the case may be, to be called. Sub-section (9) thereof empowers the Tribunal to dispense with calling of a meeting of creditors where such creditors, having at least 90% value agree to and confirm the scheme of compromise or arrangement - This is a sine quo non for proceeding further and any order of sanctioning or refusing to sanction such compromise or arrangement by the Tribunal would be without jurisdiction unless the Tribunal has dispensed with calling of such meeting of creditors/ members in terms of Sub-section (9). It is manifestly clear that at the stage of calling of meeting of creditors/members for consideration of the scheme of compromise or arrangement the Tribunal is not required to examine the merits of the scheme qua the proposed compromise/ arrangement. Any such indulgence on the part of Tribunal would fall foul of the provision engrafted in Section 230 (1) of the Act and would be without jurisdiction. The mandate of law engrafted under Section 230(1) of the Act requiring the Tribunal to order calling of meeting of the creditors/ members of the concerned companies not being complied with and the mandatory provisions being observed in breach, the impugned order cannot be supported. The Tribunal, at the very threshold stage, was not required to venture into the merits of the proposed scheme of demerger which had to be examined only after obtaining the consent of creditors/members with requisite majority. The Tribunal seriously erred in dismissing the application on merit when the stage of consideration of the proposed scheme of demerger was yet to arrive. The impugned order suffers from serious legal infirmity and the same is set aside - the matter is remanded back to the National Company Law Tribunal, Bengaluru Bench for proceeding further - appeal allowed by way of remand.

  ---

• Corporate Laws

• 2019 (7) TMI 511
  Rectification in the Register of Members of Respondent No.2 - scope of Section 59 of the Companies Act, 2013 - conversion of 906599 CCDs into equity shares - sufficient cause stipulated under Section 59 of the Act - HELD THAT:- With change of law now under Section 59 of the Act, NCLT can deal with rectification and all questions including incidental and peripheral questions raised with regard to rectification for the purpose of deciding legality of the rectification. NCLT which exercises widest possible powers in a matter under Section 241, 242 of the Act; which even otherwise is expected to always keep interest of the Company in forefront, cannot be treated as unequipped only because the Petition is under Section 59 of the Act. In the present matter, firstly, we are of the view that there were really no complex questions involved and even if it was to be said that there were any complex questions, the same had to be decided by the NCLT and in Appeal, this Tribunal is bound to consider whether or not entry made in the Register of Members could be upheld. There is no substance in the arguments of the contesting Respondents that Section 59 could not be resorted to if the effect would be reduction in capital under Section 66 of the Act. Contesting Respondents who have held back the copy of Resolution of the Board of Directors dated 26th March, 2018, cannot be heard on this count without they first showing justification as to how they entered disputed shares against the name of Appellant in the Register of Members. Again, even if a Resolution was taken by Promoter Directors on their own, in the face of facts of the matter and Articles of Association, the same would be and has to be termed as illegal. We direct cancellation of entry of the name of Appellant in the Register of Members of Respondent No.2 showing 906599 equity shares purported to have been credited on the basis of conversion of 906599 CCDs standing in the name of the Appellant - Appeal allowed.

  ---

• Insolvency & Bankruptcy

• 2019 (7) TMI 510
  Validity of Resolution plan - HELD THAT:- No ground is made out to entertain the appeal preferred by Appellant- Mr. Prashant Ruia or by the Intervenor- Essar Steel Asia Holdings Limited - shareholder of the Corporate Debtor . An issue which has been settled by the Hon ble Supreme Court i.e., eligibility of ArcelorMittal India Pvt. Ltd. as a Resolution Applicant for Essar Steel India Limited , cannot be re-agitated again and again. Any such attempt is clearly barred by the principles of res judicata - Therefore, the Application preferred by the Appellant- Mr. Prashant Ruia and Intervenor- Essar Steel Asia Holdings Limited deserves to be rejected. Whether the Committee of Creditors can delegate its power to a Sub Committee or Core Committee for negotiation with the Resolution Applicant for revision of plan? - whether the Sub Committee or the Committee of Creditors are empowered to distribute the amount amongst the Financial Creditors and the Operational Creditors and other Creditors? - HELD THAT:- A Sub-Committee or Core Committee is unknown and against the provisions of the I B Code . There is no provision under I B Code which permits constitution of a Core Committee or Sub-Committee nor the I B Code or Regulations empowers the Committee of Creditors to delegate the duties of the Committee of Creditors to such Core Committee / Sub- Committee . From sub-clause (b) of sub-section (2) of Section 30, it is clear that the Resolution Professional is required to notice whether the Resolution Plan provides for the payment of the debts of the Operational Creditors in such manner as may be specified by the Board. The said provision makes it clear that the Resolution Applicant in its Resolution Plan must provide the amount it proposes to pay one or other Creditors, including the Operational Creditors and the Financial Creditors - Sub-section (3) of Section 30 suggests that the Resolution Professional is required to present before the Committee of Creditors , the Resolution Plan which confirms the conditions referred to in sub-section. Sub-section (4) of Section 30 provides that the Resolution Plan is required to be approved by a vote of not less than 66% of voting share of the Financial Creditors , after considering its feasibility and viability and such other requirements as may be specified by the Board . Thereby, all members of the Committee of Creditors who are present are required to go through the Resolution Plan to find out whether it is in accordance with sub-section (2) of Section 30; and whether it s feasible and viable and meets all the requirements as specified by the Board as also whether the Resolution Applicant is ineligible in terms of Section 29A of the I B Code or not. From Regulation 38, particularly clause (1A), it is clear that Resolution Plan must include a statement as to how it has dealt with the interests of all stakeholders, including Financial Creditors and the Operational Creditors , of the Corporate Debtor - the distribution of amount to the Operational Creditors , Financial Creditors and other stakeholders are to be made by the Resolution Applicant and required to be reflected in the Resolution Plan . The Committee of Creditors has no role to play in the matter of distribution of amount amongst the Creditors including the Financial Creditors or the Operational Creditors . The Committee of Creditors is only required to notice the viability, feasibility of the Resolution Plan , apart from other requirements as specified by the Board and ineligibility of the Resolution Applicant in terms of Section 29A. Section 53 cannot be made applicable for distribution of amount amongst the stakeholders, as proposed by the Resolution Applicant in its Resolution Plan . The Financial Creditors cannot be discriminated on the ground of Secured or Unsecured Financial Creditors for the purpose of distribution of proposed amount amongst stakeholders in the Resolution Plan by the Resolution Applicant . Where the Successful Resolution Applicant does not pay the total dues to the Creditors such as the Financial Creditors or the Operational Creditors but pays lesser amount than the claim, then in such case, the profit should be distributed amongst all the Creditors including the Financial Creditors and the Operational Creditors - after the distribution of the amount of 42,000 Crores in a manner as shown in the preceding paragraphs, if any amount is found to have been generated as profit during the Corporate Insolvency Resolution Process after due verification by the Auditors, it should be distributed amongst all the Financial Creditors and the Operational Creditors on pro-rata basis of their claims subject to the fact that it should not exceed the admitted claim.

  ---

• 2019 (7) TMI 509
  Appointment of Liquidator - claim of Appellant as a Financial Creditor not admitted - Section 35(1)(a) of the Insolvency Bankruptcy Code, 2016 - HELD THAT:- We have noticed that the Resolution Professional is no more functioning and another person is appointed as liquidator. Therefore, there is no question of bias with the present liquidator. Appeal disposed off.

  ---

• 2019 (7) TMI 508
  Admissibility of petition - Initiation of Corporate Insolvency Resolution Process - existence of debt or not - section 7 of The Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The scheme of the code is to ensure that when a default takes place, in the sense that a debt become due and is not paid, the Insolvency Resolution Process begins. Default is defined in Section 3(12) in very wide terms as meaning non-payment of a debt once it become due and payable, which includes non-payment of even part thereof or an instalment amount. The meaning of debt as per Section 3(11) is liability or obligation in respect of a claim and the meaning of claim , as per Section 3(6) means a right to payment even if it is disputed. The Code gets triggered the moment default is rupees one lakh or more (Sec. 4). Initiation of Corporate Insolvency Resolution Process under Section 7 or 9 do not amount to recovery proceedings, the question of deciding the claim which may include the interest by the Adjudicating Authority does not arise for the purpose of triggering the Corporate Insolvency Resolution Process. It is clear that the application being complete and in absence of any other infirmity, and the corporate debtor having not denied the debt and default, the adjudicating authority cannot reject the application preferred by the appellant company - there is admitted debt and efforts are/were being made by the respondent to come out of the financial obligations. Existence of default - HELD THAT:- There is no dispute in the case that the petitioner is the financial creditor - On perusal of record, it is held that there is existence of default. The application under Section 7(2) of the Code is also complete in all respect. The petitioner/financial creditor having fulfilled all the requirements of Section 7 of the Code, the instant petition deserves to be admitted - Petition admitted - moratorium declared.

  ---

• 2019 (7) TMI 507
  Admissibility of petition - initiaton of CIRP - Section 7 of the Insolvency and Bankruptcy Code, 2016 - no default in existence - HELD THAT:- It is made clear that the application under Section 7 is not a petition. In fact, no affidavit is required to be made, nor any pleadings is to be made like a litigation. From the decision of the Hon ble Supreme Court in M/S. INNOVENTIVE INDUSTRIES LTD. VERSUS ICICI BANK ANR. [ 2017 (9) TMI 58 - SUPREME COURT ] , it is clear that the meaning of debt if read along with Section 3(11) means claim which includes even if it is disputed claim. As per the said decision, if the Adjudicating Authority is satisfied that a default has occurred, the Corporate Debtor is entitled to point out that a default has not occurred in the sense that the debt , which may also include a disputed claim, is not due. A debt may not be due if it is not payable in law or in fact. Thus, it is clear that even when there is a default then the only plea that can be taken is that the debt is not payable in law or in fact. In the present case, it is not the case of the Appellants that debt is not payable in law or in fact - there is sufficient record shown in Part IV and Part V on the basis of that Adjudicating Authority has satisfied that the Form-1 is complete. There is no merit in the appeal - appeal dismissed.

  ---

• 2019 (7) TMI 506
  Admissibility of petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 - Initiation of Corporate Insolvency Resolution Process - corporate debtor - Default of debt - HELD THAT:- Section 7(1) of the Code says that the financial creditor may file an application against the corporate debtor in the event of default of debt and as per sub-section (2) of Section 7 of the Code, the application has to be filed in Form No.1, as prescribed in the Rules. This compliance has been duly made by the petitioner. The petitioner-bank has brought abundant evidence of default, as discussed hereinabove, and the requirement of Section 7(3)(a) is fulfilled - the conditions provided for in Section 7(5) (a) of the Code are fulfilled and the petition for initiation of the Corporate Insolvency Resolution Process against the corporate debtor, Ria Constructions Limited, is admitted. Petition admitted - moratorium declared.

  ---

• Service Tax

• 2019 (7) TMI 521
  Taxable service or not - interconnection usage for SMS provided by the Appellant to the said 6 telecom service providers - no consideration/ charges agreed upon between the Appellant and the said 6 Telecom operators - no agreement/contract arrived at and executed with the aforesaid 6 Telecom service providers with regard to charges for interconnection usage for SMS - no Invoices were raised by the Appellant on the said 6 Telecom service providers - demand of service tax with interest and penalty - extended period of limitation - period prior to November 2012, i.e. April 2011 to September 2012. HELD THAT:- The settled legal position is that where a service is rendered free without charging any consideration, the same does not attract service tax - It must therefore follow that as admittedly during the period April 2011 to September 2012, no amount was charged and paid for providing Interconnection usage for SMS, there was no taxable service. The definition of service given in Section 65B (44) of the Finance Act 1994 requires that to constitute a service, the activity carried out by a person for another should be for consideration - In the present case, the telecom service providers in question declined to enter into agreements providing for charging of consideration for the interconnection usage for SMS and no amount was charged and paid for the interconnection usage for SMS. Issuance of invoice - Applicability of POT Rules - HELD THAT:- The issuance of an Invoice pre-supposes and requires the existence of an agreement/ contract between the parties under which the parties have agreed upon a consideration/ charge/ price for a sale or service. An Invoice is a commercial document issued for debiting the recipient of goods/ service with the agreed price. This, in the first place, requires the existence of an agreed price. When there is no contract/ agreement, as in the present case and hence no price/ consideration is agreed upon, the question of issuing an Invoice for the same does not arise - Since there was no issue of Invoice, the point of taxation under Rule 3(a) of the Point of Taxation Rules, 2011, has not occurred - Since the point of taxation has not occurred under any of the clauses of the said Rule 3, the liability to pay service tax has not arisen. Extended period of limitation - HELD THAT:- The SCN is also bad for invoking extended period of limitation as enquiry in the transaction under dispute had started in February, 2013 whereas the show cause notice was issued only on 31.03.2014 for the period under dispute April, 2011 to September, 2012. Appeal allowed - decided in favor of appellant.

  ---

• 2019 (7) TMI 520
  Applicability of exemption notification - Construction services - services to Ghaziabad Development Authority, U.P. Jal-Nigam and various other Government Authorities - period from 01.04.2009 to 31.03.2014 - HELD THAT:- Reliance placed in the case of M/S. SHIV SHANKAR ELECTRICALS AND CONTRACTORS VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, GHAZIABAD [ 2019 (1) TMI 1593 - CESTAT ALLAHABAD] wherein it was decided that taking into consideration the exemption provided through Notification No.45/2010-ST dated 20.07.2010 and Notification No.11/2010-ST dated 27.02.2010, the service tax on construction of electric substation is not sustainable. It is settled by now that construction of electric Substation is also related to transmission of electricity - the demand of service tax of 64,22,925/- along with equal penalty is set aside. Demand of around 1.55 lakhs - HELD THAT:- The learned Counsel for service provider has submitted that the services were provided to a trust and the same was exempted. However, they are not in position to establish through record that the services were provided to trust and therefore, they are not contesting the service tax and interest but they are contesting penalty on the same - penalty set aside - demand with interest upheld. Appeal allowed in part.

  ---

• 2019 (7) TMI 505
  Classification of services - services of loading and unloading of coal, transportation of coal, removal of over-burden coal within the mining area - whether classified under Mining Services or under Cargo Handling Services? - HELD THAT:- There is no merit in the appeal - appeal dismissed.

  ---

• 2019 (7) TMI 504
  Condonation of delay in filing appeal - appeal filed before this Tribunal beyond the prescribed time limit of three months for filing the appeal against the impugned order - delay of 310 days and 890 days in filing of these appeals, although there has been a substantial delay in filing the appeal beyond the prescribed period as per the Finance Act - whether the Commissioner (Appeals) is empowered to condone the delay in filing appeal before him under the provisions of Section 85 of Finance Act or not? - HELD THAT:- The Hon ble Supreme Court in the case of Hongo India Pvt. Ltd. [ 2009 (3) TMI 31 - SUPREME COURT ] has in a specific and clear term dealt with the application of Section 5 of Limitation Act under the provisions of Central Excise Act which is also applicable in case of Finance Act by virtue in Section 83 of thereof - The decision of Hongo India (P) Ltd. has been specific to the Central Excise Act wherein it is held that that legislative intend by giving liberal interpretation, limitation cannot be extended by invoking the provisions of Section 5 of the Act. Language used in the section makes the position clear that the legislature intended the appellate authority to entertain the appeal by condoning delay only up to 30 days after expiry of 60 days which is normal period for preferring the appeal. Thus the prescribed time limit of three months under the provisions of Section 85 of the Finance Act cannot be extended by importing the provisions of Section 5 of Limitation Act. Appeal allowed - decided in favor of Revenue.

  ---

• 2019 (7) TMI 503
  Consulting Engineer service - Non-payment of service tax - Appellant is collecting erection and commissioning charges which were shown under job work receipts and the same are chargeable to service tax w.e.f. 1.7.2003 - demand alongwith interest and penalty - period 1.7.2003 to 9.9.2004 - demand under Works contract service for the subsequent period - Change in classification of services - Scope of SCN. HELD THAT:- The Appellants during this period were engaged in the erection of transmission towers. The facts of the case show that the Appellant during the relevant period, were engaged in the supply of electricity transmission towers as well as rendering services of erection of the same. Such services would undoubtedlymerit classification under Works Contract Service. From the assessment order passed by the VAT authorities for the impugned period, it is found that the Appellant s services were classified under Works Contract under Gujarat VAT. The Hon ble Apex Court in the case of COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT] has held that Works contracts are not liable for service tax for the period prior to 01.06.2007. Also by virtue of Notification No. 45/2010-ST dated 20.7.2010, exemption was granted from payment of service tax to any service in relation to transmission and distribution of electricity - Undoubtedly the services rendered by the Appellant were related to erecting towers for transmission of electricity and hence merits exemption by virtue of subject Notification. During the impugned period, the activity of only commissioning and installation was taxable and only from 10.9.2004, the services of erection were included /adduced to commissioning and installation service so as to make the same taxable. The same is explicit from the CBEC Circular No. 59/8/2003-ST dated 20.6.2003. Demand under Works contract service for the subsequent period - for the subsequent period, the Revenue authorities have themselves classified the service under the category of works contract for the same activity - HELD THAT:- In view of facts of the case, the Hon ble Apex Court order in COMMISSIONER, CENTRAL EXCISE CUSTOMS VERSUS M/S LARSEN TOUBRO LTD. AND OTHERS [ 2015 (8) TMI 749 - SUPREME COURT] and Tribunals order as well as CBEC circulars, Notifications issued under Section 11-C of Central Excise Act, we hold that the services of erection rendered by the Appellant during the impugned period are not liable for service tax. Change in classification of services - scope of SCN - HELD THAT:- In the show cause notice, the demands were made under the category of Consulting Engineer, whereas in the impugned order, the demands were made under the category of erection services, which amounts to change of classification. Clearly, the demand has traveled beyond the scope of show cause notice as no demands were made under the category of erection service - for this reason also demand is not sustainable. Appeal allowed - decided in favor of appellant.

  ---

• 2019 (7) TMI 502
  Demand of interest and penalty - CENVAT credit wrongly taken and utilized - reversal of the credit prior to the issuance of SCN - Rule 14 of the Cenvat Credit Rules read with proviso to Section 11 A(1) along with section 11(4) of the Central Excise act - HELD THAT:- In view of the findings recorded by the ld. Commissioner (Appeals) in para-5 of the impugned order, it was fact that the appellant had revered the cenvat credit under dispute, prior to issue of show cause notice. In this view of the matter, the penalty imposed under Rule 15(2) of Cenvat Credit Rules read with Section 11 AC is set aside. Demand of Interest - HELD THAT:- In view of the amended Rule 14, it is held that the appellant is liable for interest only to the extent they have utilized the cenvat credit - Accordingly, the appellant is directed to file the calculation and or evidence before the Adjudicating Authority within a period of 45 days from the date of receipt of this order and the same shall be verified by the Adjudicating Authority. If any interest is found to be payable, the same shall be paid by the appellant within 30 days of such intimation by the Adjudicating Authority. Appeal allowed by way of remand.

  ---

• 2019 (7) TMI 501
  Time Limitation - Power of Commissioner (Appeals) to condone delay - Renting of immovable property service - Service tax not paid - no service tax registration has been obtained - HELD THAT:- The Appeal has not been filed in compliance of Section 35 of Central Excise Act, 1944 which provides period of 60 days to the appellant for an Appeal to be filed against the decision or Order passed by the original Adjudicating Authority however, the Section provides discretion to the Commissioner to allow the Appeal to be presented within a further period of 30 days if he is satisfied that the appellant was prevented by sufficient cause from presenting the Appeal within the aforesaid period of 60 days. Apparently and admittedly the present Appeal is beyond the period of 90 days - reliance placed in the case of Singh Enterprises Vs. Commissioner Of C. Ex., Jamshedpur [ 2007 (12) TMI 11 - SUPREME COURT ] which impresses that Commissioner (Appeals) has no authority to condone the delay. Appeal dismissed - decided against appellant.

  ---

• 2019 (7) TMI 500
  Demand of service tax on penalty - penalty which is deducted from the supplier/contractor s bill and on encashment of bank guarantee of defaulters/ suppliers - scope of Section 66E(e) of the Finance Act - HELD THAT:- The said amount of penalty in question is part of the net amount, after deduction of service tax and other applicable tax from the gross amount. Further, the service tax is a destination based tax and the amount is taxable only once - Thus, admittedly, when the amount is already taxed and it is part of the taxed amount, being deducted from the bill, by way of penalty and reflected by the appellant under the head Miscellaneous Income not pertaining to Revenue . The said amount cannot be again subjected to service tax on this score alone. Further, this amount is not for any service to be rendered under Section 66E(e) of the Finance Act. The service tax and penalty retained by the Commissioner (Appeals) is set aside - appeal allowed - decided in favor of appellant.

  ---

• 2019 (7) TMI 499
  Demand of Interest on refund - Section 11 BB of the Central Excise Act - applicability of condition no.2(j) under Notification no.17/2009-ST dated 07.07.2009 - HELD THAT:- The requirement of Condition No.2(j) of the Notification no.17/2009-ST was applicable to the appellant/assesse, as the said notification was issued by way of substitution of the earlier notification no.41/2007 and accordingly, the contention of the appellant that the condition no.2(j) is not applicable to them, is rejected. There is no delay on the part of the Revenue in granting the refund - this appeal for interest on refund is rejected - Appeal dismissed - decided against appellant.

  ---

• 2019 (7) TMI 498
  Refund of tax collected without authority of law - whether denial of refund of tax, collected without authority of law, whether the same is justified? - HELD THAT:- Under the scheme of the Act read with Rules, there is no such authority or power under which Revenue officer can collect the service tax for the second time from an assessee receiving the input/input service in case of defalcation, by the provider of service, who have admittedly collected the amount of tax. The action of Revenue in collecting the service tax for the second time alongwith interest from the appellant- assessee, is also hit by Article 265 of the Constitution of India, which provides that no tax can be collected without authority of law. Refund allowed - The appellant is entitled to refund of the full amount deposited alongwith interest as per rules - appeal allowed - decided in favor of appellant.

  ---

• 2019 (7) TMI 497
  Restoration of appeal - service of order - Time limitation - condonation of delay of about 297 days in filing appeal - HELD THAT;- The order of the Hon ble Uttarakhand High Court, appears to have either not been brought to the notice of the Commissioner (Appeals), or the Commissioner (Appeals) failed to take notice of the same, as it appears from the impugned order-in-appeal. Further, this Tribunal also at the time of passing of the Final Order skipped to take notice of the order of the Hon ble Uttarakhand High Court, which was mentioned in para-3 of the statement of facts. Thus, it appears to be mistake of fact apparent on record, committed by this Tribunal, while disposing the appeal. From the order of the Hon ble Uttarakhand High Court, it is apparent that the Hon ble High Court granted indulgence, while relegating the matter to the appellate authority, to dispose of the appeal on merits. The ld. Commissioner (Appeals) is directed to hear the appeal on merits and pass a reasoned order in accordance with law - Appeal allowed by way of remand.

  ---

• 2019 (7) TMI 496
  Levy of service tax - amount of TDS deducted under Section 194 C of the Income Tax Act - it was alleged that the appellant failed to produce sufficient documentary evidence in support of their submission that no amount was received by them against the credit entries and that no TDS Certificate has been issued - HELD THAT:- From the records of Appeal, it has been established that although the necessary documents in support of appellant s contention were part of Appeal before the Commissioner, but the learned Commissioner failed to look into it while passing the impugned order - it is deemed appropriate to remand the matter to the adjudicating authority to decide the issue afresh - appeal allowed by way of remand.

  ---

• 2019 (7) TMI 495
  Condonation of delay of 478 days and 435 days in filing the appeals - power of Commissioner (Appeals) to condone delay - HELD THAT:- The issue whether the Commissioner (Appeals) has powers to condone the delay beyond the period of 30 days, as provided under the Act, stands settled by the Hon ble Supreme Court decision in the case of Singh Enterprises [ 2007 (12) TMI 11 - SUPREME COURT ]. It stands held that the Commissioner (Appeals) has no powers and jurisdiction to condone the delay beyond the period of 30 days, after expiry of 60 days, which is the normal period for preferring the appeal. Inasmuch as in the present appeals, the delay is more than 30 days, there are no justifiable reasons to interfere with the impugned order of the Commissioner (Appeals). Appeal dismissed.

  ---

• 2019 (7) TMI 494
  Exemption form service tax - Job-workers - benefit of N/N. 8/2005 dated 1 March 2005 - HELD THAT:- It is not in dispute that the goods are produced using raw materials or semi finished goods supplied by the appellant and the goods so produced are returned back to the manufacturer for use or in relation to manufacturer of the goods falling under the First Schedule to the Central Excise Tariff Act 1985. What is contended by the Department is that the appellant has not been able to substantiate that appropriate duty of excise has been paid by the manufacturer. A perusal of the aforesaid notification and the proviso leaves no manner of doubt that the exemption shall apply in a case whether goods so produced by the job workers are returned for use in or in relation to manufacture of any other goods falling under First Schedule to the Central Excise Tariff Act, 1985, on which appropriate duty of excise is payable. A certificate has also been given by the manufacturer which clearly indicates that they have discharged or shall be discharging liability of excise duty for the final products upon the clearance from the factory - this would satisfy the requirements of the Notification dated 1 March 2005. The Appellate Authority was, therefore, not justified in holding that it was for the appellant to substantiate whether appropriate duty of excise has been paid by the manufacturer or not - appeal allowed - decided in favor of appellant.

  ---

• 2019 (7) TMI 493
  Reverse charge mechanism - technical testing and analysis services - assessee s case is that since such services stand provided outside India, they cannot be taxed in India on reverse charge basis - HELD THAT:- Since such services stand provided outside India, they cannot be taxed in India on reverse charge basis - Reliance placed in the case of GLAXOSMITHKLINE CONSUMER HEALTHCARE LTD VERSUS COMMISSIONER OF SERVICE TAX [ 2014 (1) TMI 258 - CESTAT NEW DELHI] - demand set aside. Consulting engineers service - appellant procured technical know-how from their foreign collaborators against payment of royalty - demand of service tax - HELD THAT:- Reliance placed in the case of COMMISSIONER OF C. EX. SERVICE TAX, BANGALORE VERSUS MOLEX (INDIA) LTD. [ 2007 (4) TMI 48 - CESTAT,BANGALORE] laying down that the said activity will not fall under the ambit of consulting engineer - demand set aside. Time Limitation - HELD THAT:- Inasmuch as the same is for the period 2009-10 till September, 2011 whereas the show cause notice issued on 22nd June, 2012. She submits that whatever service tax required to be paid by them, was available as a cenvat credit and as such the entire situation of the Revenue neutral and there cannot be any malafide on their part, so as to rightly invoke longer period. Appeal allowed - decided in favor of appellant.

  ---

• Central Excise

• 2019 (7) TMI 492
  Cash refund - assessee is unable to utilize credit on inputs - clause (c) to the proviso to section 11B(2) of the Central Excise Act, 1944 - HELD THAT:- The issue decided in the case of M/S. GAURI PLASTICULTURE P. LTD., BOMBAY DYEING MANUFACTURING CO. LTD., M/S. SIMPLEX MILLS CO. LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE, INDORE, THE COMMISSIONER OF CENTRAL EXCISE, MUMBAI IV, THE UNION OF INDIA THROUGH THE COMMISSIONER OF CENTRAL EXCISE MUMBAI I [ 2019 (6) TMI 820 - BOMBAY HIGH COURT] where it was held that the transitional provision does not enable us to hold that the amount of un-utilised Cenvat Credit can be refunded in cash. The substantial question of law is answered in the negative i.e. in favour of the Appellant-Revenue and against the Respondent-Assessee - appeal allowed.

  ---

• 2019 (7) TMI 491
  Maintainability of petition - appealable order or not - compliance with the requirement of pre-deposit - HELD THAT:- Since the principal submissions going to the root of the matter have not been dealt with by the Commissioner, the impugned order could be termed as violative of the principles of natural justice. If that be so, according to Mr. Dave, this petition may be entertained without asking the writ-applicant to prefer an appeal before the Appellate Tribunal. Let notice be issued to the respondents, returnable on 24.07.2019. The respondent No.2 shall be served directly. Notice to the respondent No.1 shall go through the court.

  ---

• 2019 (7) TMI 490
  CENVAT Credit - input service - commission agents for the sales activity of finished products - post manufacturing activities - HELD THAT:- Similar issue has come up for consideration before the coordinate bench of this Tribunal in the case of SIMBHAOLI SUGAR LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MEERUT-II [ 2018 (4) TMI 1657 - CESTAT ALLAHABAD] where the Tribunal has allowed the Appeal considering the cenvat credit to be eligible as input service credit in terms of Rule 2(l) of Cenvat Credit Rules. Credit allowed - appeal allowed - decided in favor of appellant.

  ---

• 2019 (7) TMI 489
  Imposition of penalty - demand itself has been set aside vide PHIL ISPAT PRIVATE LIMITED, AIRAN STEEL POWER PRIVATE LIMITED, SHRI NK BHOJANI, SHRI MANOJ SHARMA, ARORA (CG) ENERGY AND STEEL P LTD, RADHA MADHAV INDUSTRIES PVT LTD, KALINDI ISPAT PVT LTD, MANGAL SPONGE STEEL PVT LTD, SHRI RUPESH AGRAWAL, SATYA POWER ISPAT LTD, SHRI ANAND SINGHANIA, SHRI AKHILESH SINGHANIA VERSUS C.C.E. S.T. -RAIPUR [ 2018 (11) TMI 912 - CESTAT NEW DELHI] - HELD THAT:- There is no question of imposition of penalty on the present appellant. It stands already set aside. Appeal allowed - decided in favor of appellant.

  ---

• 2019 (7) TMI 488
  CENVAT Credit - input service - compensation granted for providing services for building and bringing into commercial operations services as that of fabrication, installation errection and commissioning services for various plants machineries - extended period of limitation - HELD THAT:- Hon ble Apex Court in the case of COMMISSIONER OF CENTRAL EXCISE CUSTOMS VERSUS MDS SWITCHGEAR LTD. [ 2008 (8) TMI 37 - SUPREME COURT] has affirmed the decision of Hon ble Tribunal observing that the recipient is entitled to the credit of duty paid - In this case the allegation against the assessee was that the semi-finished goods received from their sister concern was over-valued in order to pass on Modvat credit. The Department denied the credit taken at the recipient s end. However, the Hon ble Tribunal held in favour of the assessee and also observed that there was no loss of revenue vide its decision reported as MDS SWITCHGEAR LTD. VERSUS COMMR. OF C. EX., CUS., AURANGABAD [ 2001 (4) TMI 130 - CEGAT, MUMBAI] . Hon ble Supreme Court upheld the judgment of Hon ble Tribunal. Department also in a Circular No. 1014/2 dated 1st February, 2016 has clarified that the Cenvat Credit of CVD paid voluntarily is admissible, as it is a settled position that a buyer is entitled to avail cenvat credit of duty paid by the supplier - Similar is the situation in the present case as far as the impugned compensation is concerned. Also there is no apparent mensrea on the part of the appellant to evade any duty rather the fact remains is that the duty stands already paid. The Cenvat Credit thereof cannot be disallowed. Extended period of limitation - HELD THAT:- The SCN should not have been issued or if issued, it should have been within one year of the fact being into notice of the Department - The Department in the present case has invoked the extended period of limitation alleging suppression or misrepresentation on part of the appellant. As already held that there is absence of malafide intent/mensrea, the Department is held not entitled to invoke the said extended period of limitation. Appeal allowed - decided in favor of appellant.

  ---

• 2019 (7) TMI 487
  Imposition of the oil cess and National Calamity Contingent Duty (NCCD), education cess (EC), secondary and higher secondary education cess (SHE) - condensate which emerges out during the process of processing of the natural gas in the appellant s natural gas processing plant - HELD THAT:- This issue has previously been decided by this Tribunal in the appellant s own case M/S FOCUS ENERGY LTD. OTHERS VERSUS C.C.E. JAIPUR [ 2018 (12) TMI 1168 - CESTAT NEW DELHI] where it was held that The oil cess is not leviable on the condensate and under OIDA. Appeal allowed - decided in favor of appellant.

  ---

• 2019 (7) TMI 486
  Classification of goods - Nimbus Masala Soda - whether classified under Chapter Heading 22029029 (fruit pulp or fruit juice based drinks) or under Heading 22021020 (Lemonade)? - period September 2014 to June 2015 - HELD THAT:- The products which are not essentially and waters with flavouring, elements as lime and lemon, would not fall for classification under 22021020 (lemonade). On the other hand, if the products are not essentially water and the lemon juice is the basis of fruit drink and is not merely use as a flavouring agent the product will fall under 22029029. Nimbu masala soda 7 UP alongwith other products in the said decision is held to be classified under Tariff Item No. 22029029 as fruit pulp or fruit juice based drink - the Adjudicating Authority below have ignored the relevant criteria that lemon juice has been used by the appellant as fruit juice and not merely as flavouring agent while manufacturing Nimbus soda. Imposition of penalty - HELD THAT:- There was no malafide intention of the appellant to evade the duty. Penalty upon the company as well as Shri Gopal Krishna Kasturi is therefore opined to have wrongly been imposed. Appeal allowed - decided in favor of appellant.

  ---

• 2019 (7) TMI 485
  Liability of National Calamity Contingency Duty (NCCD) - contention of the Appellant is that National Calamity Contingency is in the nature of a duty and, therefore, entitled for the benefit of the Exemption Notification - HELD THAT:- The Supreme Court in the case of M/S HERO MOTOCORP LIMITED VERSUS COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE [ 2019 (6) TMI 762 - SUPREME COURT ] where it was held that the NCCD is in the nature of excise duty and is, thus, entitled to the benefit of the exemption notification. The imposition of duty on National Calamity Contingent, therefore needs to be set aside - the payment for EC and SHEC, in such circumstances, will also have to be set aside. Appeal allowed - decided in favor of appellant.

  ---

• 2019 (7) TMI 484
  CENVAT credit - input credit - purchase of finished/semifinished AC pressure pipes, which they have cleared on payment of duty - HELD THAT:- As per the law laid down by Hon ble Bombay High Court in THE COMMISSIONER OF CENTRAL EXCISE, PUNE VERSUS AJINKYA ENTERPRISES [ 2012 (7) TMI 141 - BOMBAY HIGH COURT] and by the Gujarat High Court in COMMISSIONER OF CENTRAL EXCISE VERSUS DELTA CORPORATION [ 2013 (2) TMI 31 - GUJARAT HIGH COURT] where it was held that Once the duty on final products has been accepted by the department, CENVAT credit availed need not be reversed even if the activity does not amount to manufacture. Credit need not be reversed - appeal allowed - decided in favor of appellant.

  ---

• 2019 (7) TMI 483
  CENVAT Credit - input service - service tax paid on transportation of goods by Railway, distributed through ISD of the assessee - denial of credit on the ground that the service provider was not registered till 22.01.2013, when they received the registration certificate and service tax code - HELD THAT:- It is deemed fit and proper by allowing this appeal by way of remand to the adjudicating authority with the direction that he shall ascertain the status of registration and compliance of Western Railway from the concerned Commissionerate where Western Railway is registered, i.e. Service Tax-I, Mumbai, Division-II, Range Group-X. If Western Railway is found to have filed return, in that case the input service credit cannot be denied. Appeal allowed by way of remand.

  ---

• 2019 (7) TMI 482
  CENVAT Credit - waste/exempt goods - Fly Ash/Coal Ash - waste emerging on burning of coal for generation of electricity in the captive Thermal Power Plant - reversal of credit at the specified rate, read with Rule 6(3)(i) of the Cenvat Credit Rules - HELD THAT:- The Fly Ash/Coal Ash is the residual waste and not a manufactured product emerging during the course of generation of electricity. Thus, in absence of being a manufactured product, the same is not excisable and there is thus no excise duty attracted, nor any reversal of duty under Rule 6(3) of Cenvat Credit Rules, 2004 is warranted. Reliance placed in the case of UNION OF INDIA VERSUS RAMKRISHNA MILLS CO. LTD. [ 2006 (8) TMI 669 - SC ORDER] and M/S JAI BALAJI INDUSTRIES LTD. VERSUS CCE ST, RAIPUR [ 2017 (6) TMI 898 - CESTAT NEW DELHI]. Appeal allowed - decided in favor of appellant.

  ---

• 2019 (7) TMI 481
  Maintainability of appeal - non-prosecution of the case - recovery of wrongly availed cenvat credit alongwith the interest and the appropriate penalties - HELD THAT:- The appellant is not interested at all in pursuing their case. The amount of duty involved herein is more than 3.5 Crores. In these circumstances, we find no reason to accept the today s request of adjournment. Appeal dismissed for non-prosecution.

  ---

• 2019 (7) TMI 480
  Time LImitation - SCN - issued after 26 months after conducting of the audit - CENVAT Credit - input services - HELD THAT:- The SCN was issued after 26 months after conducting of the audit - Hon ble Allahabad High court in the case of COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX VERSUS TRIVENI ENGINEERING AND INDUSTRIES LTD. [ 2015 (1) TMI 760 - ALLAHABAD HIGH COURT] held that if a show cause notice is issued after a gap of 22 months after an audit was conducted then proviso to sub-section 1 of section 11A of Central Excise Act, 1944 is not applicable unless there is a clear indication mentioned in respect of suppression or fraud etc. The ruling of Hon ble Allahabad High Court in the said case is squarely applicable in the present case where omission on the part of the appellant came to the knowledge of department on 27.02.2009 and show cause notice was not issued within normal period of limitation. Since extended period limitation is not applicable equal penalty is not imposable. Matter remanded to the original authority to decide the inadmissible Cenvat credit for the normal period of four months - appeal allowed by way of remand.

  ---

• CST, VAT & Sales Tax

• 2019 (7) TMI 479
  Effect of bifurcation of the State of Madhya Pradesh into the successor State of Madhya Pradesh and the State of Chhattisgarh by the Madhya Pradesh Reorganisation Act, 2000 - exemption or benefit of deferment of sales tax granted under the Madhya Pradesh Commercial Tax Act, 1994 read with the applicable rules - whether the industrial unit in the reorganised State of Madhya Pradesh and under the new State of Chhattisgarh would continue to avail the benefit of such exemption or deferment even after the bifurcation in both the states, irrespective of the location of the industrial unit which would be in one of the two states? HELD THAT:- The law in force before the appointed date, which in the present case is 1st November, 2000, would continue to apply to the successor or reorganised State of Madhya Pradesh as it existed before bifurcation. This is natural and normal as the laws enacted by the legislature and the executive of the State of Madhya Pradesh would obviously apply to the territories forming part of it after its reorganisation/division. As a result of bifurcation some areas that were earlier part of the State of Madhya Pradesh would now form part of the new State of Chhattisgarh, albeit this would not matter and affect application of the laws as they applied prior to the appointed date to the territories that required a part of the reorganised State of Madhya Pradesh. The effect, thereof, is that the laws enacted by the State of Madhya Pradesh before the reorganisation would continue to apply to the areas forming part of the new State of Chhattisgarh and also the reorganised State of Madhya Pradesh, but within their territorial confines. The enactments or the laws in force in the unified State of Madhya Pradesh would continue to apply to the two states, not as one or the same enactment or law, but as two separate enactments or laws as applicable to two different states. Appeal allowed.

  ---

• 2019 (7) TMI 478
  Principles of natural justice - validity of reassessment order - reassessment order was passed without providing reasonable opportunity to the petitioner - proceedings were pending under the provisions of Insolvency and Bankruptcy Code, 2016 - HELD THAT:- The proceedings were pending before the NCLT as well as the National Company Law Appellate Tribunal under the provisions of Insolvency and Bankruptcy Code, 2016. The assessment order passed and the books of accounts said to have been furnished by the Accounts Officer representing the IRP in the Insolvency proceedings though may not be unjustifiable but the principles of natural justice warrants an opportunity to the petitioner to put-forth its claim inasmuch as the tax amount paid under the KVAT Act disputed by the prescribed authority. The matter is restored to the file of the prescribed authority to redo the assessment.

  ---

• 2019 (7) TMI 477
  Classification of goods - rate of tax - paver bricks - Validity of reassessment orders - Karnataka VAT Act - Whether classified under the residuary entry taxable at the rate of 14.5% or at a lesser rate of tax as applicable to the goods coming under entry No.2 of the III schedule of KVAT Act? - HELD THAT:- This very issue was the subject matter in the case of THE ASSISTANT COMMISSIONER OF COMMERCIAL TAXES, (ENFORCEMENT) -1, THE COMMISSIONER OF COMMERCIAL TAXES AND STATE OF KARNATAKA VERSUS M/S. H.H. CEMENT PRODUCTS AND M/S. PEECI INDUSTRIES [ 2016 (3) TMI 1094 - KARNATAKA HIGH COURT] ], wherein the Division Bench of this Court extensively analyzing the issue in the light of various judgments has come to a decision that the attempt of the learned counsel for the assessee that the language used all kinds of bricks in entry No.2 of III schedule should be given to the word bricks , cannot be countenanced for the simple reason that the said expression is followed by the words the like . It is evident that the order of the Division Bench in H.H.Cement Products is not set aside by the Hon ble Apex Court. It is only at the request of the assessee to withdraw the appeal with liberty to approach the statutory Authorities, permission was granted as sought for, with an observation that the statutory Authority is at liberty to take an independent view in the matter. Hence, the arguments of the learned counsel for the petitioners that the Division Bench ruling, the basis for invoking re-assessment proceedings is nullified, cannot be countenanced. The petitioners are at liberty to approach the statutory Authorities and produce any additional evidence in support of their claim - Petition disposed off.

  ---

• 2019 (7) TMI 476
  Classification of goods - rate of tax - High Mast Iron Pole - whether classified under the Residuary entry of Entry No.1 of Part VI of Schedule II or under Entry No.64 of Part II of Schedule II of the VAT Act? - HELD THAT:- The clause in Entry 30 i.e. as specified in Sec. 14 of the Central Salex Tax Act, 1956 except those mentioned elsewhere in this Schedule is disjuncted by a comma after the clause (viii), signifies that the clause in question covers entire Entry 30 and not alone clause (viii) - We are strengthened in our conclusion of this by another fact that Entry 30 alongwith Clause (i) to (viii) were incorporated in Schedule II of VAT Act 2002 from the very inception of Act of 2002; whereas, in the CST the Liquified petroleum Gas (LPG) for domestic use was inserted as clause (va) to Section 14 of 1956 Act with effect from 18.4.2006 by Act 21 of 2006. The reference to the provision of 1956 Act is not an error on the face of record. On the contrary the provisions of Section 14 of 1956 Act is expressly made applicable. Petition dismissed.

  ---

• 2019 (7) TMI 475
  Maintainability of petition - alternative statutory remedy - it is the specific submission of learned State Counsel that writ petitioner has to necessarily avail the further alternate remedy by filing a regular statutory appeal to TNSTAT inter alia under Section 58 of TNVAT Act - HELD THAT:- It was always open to writ petitioner to accelerate the Tax Case Revision pending before Hon ble Division Bench of this Court and if a finding is rendered, the same will bind the Tribunal i.e., TNSTAT. Suffice to say that this cannot be a ground to bypass the alternate remedy. This Court considers it appropriate to dismiss the instant writ petition assailing the impugned order albeit without expressing any opinion or view on the merits of the matter. All questions are left open to be decided by TNSTAT, if the writ petitioner chooses to file a regular statutory appeal to the Tribunal. Petition dismissed.

  ---

• 2019 (7) TMI 474
  Principles of natural justice - Ext.P7 order dated 15.01.2019 - whether violative of Articles 14, 19(1)(g), 265 and 300A of Constitution of India or not? - HELD THAT:- Section 25 of the Act confers power on the second respondent to assess or reassess the alleged escaped turnover. In other words the second respondent is reopening the self-assessment already accepted for the subject year. The assessment is reopened by referring to two circumstances already referred to above. The petitioner through both the replies i.e. Exts.P3 and P5 requested for opportunity of hearing before a decision is taken. The case of respondents is that Ext.P7 is not vitiated by the breach of principle of natural justice, for opportunity was afforded through Ext.P2, reply is received through Ext.P3 and thereafter order in Ext.P7 was made. In the considered view of this Court the said contention loses sight of an important circumstance to appreciate the effectiveness of procedural fairness afforded by the second respondent to the petitioner. The petitioner in Ext.P3 as well as in Ext.P5 has been demanding opportunity of hearing firstly to reconcile the disputed details or explain the reasons basing on which the second respondent is entertaining on the subcontract execution and Form 20H. Ext.P7 alone warrants interference and accordingly set aside. Matter remitted to second respondent for consideration and disposal in accordance with law - petition allowed by way of remand.

  ---