Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 17, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Job-work - supply of goods or supply of services - use of own material substantially - the value of the material used/ skill and labour applied by them and the value of input supplied by the customer is almost equal. In our opinion this is a clear case of supply of goods, i. e. ready to use sugar mill roller.
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Composite supply or Mixed supply or works contract - contract for supply, Installation, testing & commissioning Air-Conditioners (involving indoor units, outdoor units, insulation, drain pipes, cabling, additional refrigerant and associated electrical works etc.) - cannot be considered as a ‘mixed supply’ - liable to GST @28%
Income Tax
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Reopening of assessment u/s 147 - notice against dead person - The legal representative not having waived the requirement of notice u/s 148 and not having submitted to the jurisdiction of the AO pursuant to the impugned notice, the provisions of section 292B of the Act would not be attracted.
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Allowability of replacement of dies and moulds as current repairs - when the dies and moulds were attached to the machine to manufacture the designed product, the claim would fall for consideration only u/s 31 as revenue expenses
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Addition u/s 40(a)(ia) - society has failed to deduct TDS - section 40(a)(ia), 40A(3) and section 43B falls in Chapter IV-D which are applicable for computing profits and gains of business or profession - Chapter IV-D is not applicable in respect of charitable trust or institution whose income is to be computed under Chapter-III - no disallowance
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Claim of exemption u/s 11 while filing return u/s 147 - no return originally filed - the income has to be computed on the basis of such return in accordance with the provision of the Act, which of course will be subject to any specific provision in the Act which itself bars a claim or an exemption - AO was not justified in denying the benefit of the exemption u/s 11
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Ad-hoc disallowance of 25% of construction expenses - AO rejected the books of accounts u/s 145 - the income of the assessee should be based on average GP declared by the assessee in the preceding years or the prevailing GP in the same trade or business - disallowance of expenses is not a permissible course of action.
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Allowability of interest on borrowed funds - loan taken for acquisition of share - assessee acquired shares of DPSC Ltd which is in the similar business to control stake is a commencement of business - allowable as deduction u/s 36(1)(iii) as it is a commercial expediency with a view to expand business and acquiring, controlling interest in subsidiary companies
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income of the JV as AOP - formed to secure the work, and after that, there was no involvement in the execution of the work which was done by member - members of the JV have disclosed the entire income which was originally received by JV in their books of accounts and income tax returns who are chargeable to tax at the maximum marginal rate - no addition in the hands of the assessee(JV)
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Capital gain computation - cost of acquisition - assessee was not confronted by the AO before estimating the cost of acquisition of land as on 01.04.1981 without any basis - keeping aside rather ignoring the report of the registered valuer without any discussion is unjustified
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Assessment u/s 153A - Addition u/s 41(1) - No material was recovered during search which could have been treated as incriminating material and would be a base for supporting the action u/s 153(C) - the addition on account of Cessation of liability u/sn 41(1) is illegal, in valid and not sustainable in the eye of law and If such course is permitted it would amount to reopening assessment without any new material - not permissible
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Reassessment u/s 147 - failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment - AO had examined the claim for deduction u/s 80IB(10) in detail, therefore, merely because he did not examine such claim from the angle of clauses (e) and (f) thereof, would not be a valid ground for reopening the assessment - it is mere change of opinion - notice unsustainable
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Addition u/s 40A(3) - the finding of fact has been recorded by two revenue authorities that the payments made by the assessee on a single day did not exceed ₹ 20,000/- to a person - no disallowance u/s 40A(3) - no substantial question of law arises
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Correct head of taxability of interest income - business income or income from other sources - the assessee firm had availed overdraft facility from the bank against the pledged of fixed deposit and overdraft amount was used for the purpose of business and interest was paid - since it is inextricably linked with the business activity, the impugned interest income has to be treated as business income
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Penalty u/s 271(1)(c) - addition sustained by denying the exemption u/s 47(xiv) to the extent of self-generated Goodwill - all the details necessary for assessment were very much available in the return of income itself as well as the entire facts of proprietory concern getting converted into public limited company - no malafide on the part of the assessee in making the claim of exemption - no penalty
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Addition of unexplained loan - taken from a credit institution - Assessee has named the credit institutions where from he received such loans to stand testimony to their irrefutable and impeccable character - AO could not bring on record any conclusive evidence - no addition permissible
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Addition u/s 68 - share capital account received from Director by way of two cheques who was produced before AO alongwith their copy of account, balance-sheet income-tax return and even they are assessed in the same jurisdiction - order passed without dealing with all these details, before terming the amount to be non-genuine and making addition is not sustainable
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Unexplained credit u/s. 68 - addition of share premium being in excess of NAV and balance excepted - section 56(2)(viia) and (viib) are not applicable to the instant assessment year i.e. 2011-12 and applicable only for the assessment year 2013-14 - no addition
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Revision u/s 263 - Deduction U/s. 35D - effect of omission of word ‘industrial’ by the Finance Act, 2008 w.e.f 1/04/2009 - expenses incurred prior to 1/04/2009 - since assessee has fulfilled all the conditions stipulated under the Act for the residual period, there is no error in the order of the Ld. AO granting deduction - CIT is not right in his rem to invoke the revision provisions
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Revision u/s 263 - the sole reason for completing the scrutiny assessment was suspicious LTCG earned by assessee based on information received from Investigation Wing, it could not be believed that A.O. would not have gone through the material available - non discussion the details in the assessment order would not give right to the Ld. Pr. CIT to hold that no investigation or enquiry was made - A.O. has taken one of permissible view - no revision
Customs
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Procedure for safety and security of export cargo & Avoidance of pilferage from Export warehouse in CFS ports under Chennai-IV Commissionerate
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100% EOU - it is not necessary that the material which is imported into India has to be used in the manufacture of articles which are to be exported out of India. Even if the said material is used “for the purpose of manufacture of articles” or “for being used in connection with the production or packaging or job work”, the same shall still be covered by the aforesaid notification and thus would not attract any customs duty.
IBC
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Approval of Resolution plan under I&B Code - Operational Creditor has been paid Nil as against 27.83% to the Financial Creditor - distribution as made between the FC and the OC is arbitrary and discriminatory and in contravention of Section 30(2)(b) of the ‘I&B Code’ - directed to modify the plan with same treatment to OC
Service Tax
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Since the penalties imposed under Section 76 is upheld, penalties imposed under Section 78 cannot be justified, Hence the penalties imposed u/s 78 is set aside - In the present case demand of service tax confirmed invoking the extended period of limitation.
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Waiver of penalties imposed - Short payment of service tax - There is no suppression of fact because the issue involved is of interpretation of law as the confusion was prevailing amongst the builders about the constitutional validity of the levy of service tax on Builders and Developers - Giving benefit of doubt, penalties were rightly set aside.
Central Excise
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CENVAT Credit - ITC on Outward Transportation - letters/certificates have been obtained from the purchasers of the goods showing that the purchasers have not paid any freight charges separately which strongly implies that the appellants have borne the freight charges and have included it in the assessable value on which Excise Duty has been discharged by them - input allowable
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Clandestine removal - allegation to avail the benefit of area based exemption(Rookee unit) wrongly - demand is being confirmed against Ghaziabad unit, without producing any evidence even no discrepancy was found in enquiry - It is well settled law that the findings of clandestine removal are required to be established on the basis of positive and sufficient evidences - demand canceled
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CENVAT Credit - exempted goods as scrap produced in process of manufacture of dutiable good - demand @ 6% of the value of the zinc scarp - when the zinc scrap which is a waste arising out of process of manufacture of finished goods, is not goods manufactured by the appellant, the same cannot be considered as exempted goods manufactured by them - total credit allowable - demand canceled
VAT
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Disallowance of ITC - perversity - alternative appeal remedy - even the exercise were for the limited purpose of finding out the ground of perversity, this Court may encroach into the function of an appellate authority where the facts threadbare are considered, thereafter principle of law decided - petitioner is given liberty to file appeal.
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Refund claim - Review of finalized assessment order - cancellation of ‘C’ form - TIN No.of dealer issued form is not working because it has migrated in GST - once the C form was validly issued and verified by the AVATO while passing the original order then notwithstanding its subsequent cancellation, the assessment order finalised under the CST Act cannot be reviewed - directed to grant refund
Case Laws:
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GST
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2019 (7) TMI 759
Classification of transaction - Composite supply or Mixed supply - contract for supply, Installation, testing commissioning Air-Conditioners (involving indoor units, outdoor units, insulation, drain pipes, cabling, additional refrigerant and associated electrical works etc.) - whether covered under schedule IV, Sr. no 119 of notification No 1/2017 (Central tax rate) dated 28/06/2017 and taxable at 14%? - whether in the subject case there is supply of Works Contract or Composite Supply? - HELD THAT:- As per Section 2(119) of the CGST Act, 2017, unless the context otherwise requires, the term works contract means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract In case of supply of air-conditioning plant, what is done by the contractor is to install a complete unit by itself, which is functional in all respects. Central Air-Conditioning Plant erected at the site of the client and by using different refrigeration equipments are not bought and sold like room/window machines or even splits or package unit and cannot be installed like room/split air-conditioners. In the air-conditioning industry, these are undertaken as projects or AC jobs or works contract - the applicant has installed/combined various equipments are treating the entire units, components as one air-conditioning plant, which cannot be bought or sold as such. This understanding of the applicant is flawed. They themselves have submitted that their agreement dated 21 Aug., 2018, is for supply, installation, testing commissioning of VRF Indoor Outdoor Units suitable for R-410 Gas, refrigerant piping with insulation, drain piping with insulation, MS stands, Cabling, Additional Refrigerant associated electrical works etc. now they also are saying that the entire equipments must be treated as one plant, which is not acceptable. We find that every Indoor and Outdoor units, cabling, electrical works can be removed as such and therefore cannot be considered as immovable property. Naturally bundled services or not - HELD THAT:- In the contract submitted by the applicant the major part of the contract is supply of goods. i.e. VRF Indoor Outdoor Units, refrigerant piping with insulation, drain piping with insulation, MS stands, Cabling, Additional Refrigerant and associated electrical works etc. These goods are delivered to the client by the applicant and such goods that are supplied are used by the applicant to provide services of installation, testing and commissioning of the substations. Without these goods the services cannot be supplied by the applicant and therefore we find that the goods and services are supplied as a combination and in conjunction and in the course of their business where the principal supply is supply of goods - there is a composite supply in the subject case. Whether their transaction is Composite supply liable to 14% being principal goods involved is Air-Conditioner which falls to cover under Schedule IV, Sr. no 119 of Notification No 1/2017 (Central tax rate) dated 28/06/2017? - HELD THAT:- The principal supply in this case is a supply of goods and therefore the GST will have to be paid on the goods at the appropriate rate after classification under the appropriate heading. The principal goods in the subject case is Air-conditioner units which are most important for the applicant to render supply as per the contract. We find that the final deliverable is nothing but ready to operate Air-conditioning System, which can control/cool the temperature of the rooms in the buildings/site. Air Conditioner units falling under Chapter 8415 are taxable @28% and covered under Schedule IV, Sr. no 119 of notification No 1/2017 (C.T. Rate) dated 28/06/2017.Hence the principal supply in their composite supply being goods as described under heading 8537, the applicant is liable to pay GST on the whole contract @ 28% - Thus also the subject supply cannot be considered as a mixed supply because no individual supplies are made in the instant case.
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2019 (7) TMI 758
Job-work - Classification of supply - supply of goods or supply of services - use of own material substantially - activity of converting the bare shaft/beams supplied by the customer into ready to use sugar mill roller - HELD THAT:- From the combined reading on the definition of job work as aforesaid and the procedure of job work as prescribed u/s 143 of the CGST Act and Rule 45 of GST Rules, it is the principal who will send inputs to the job work for undertaking any treatment or process that may or may not amount to manufacture and will bring back same after the completion of job work. Thus the person who send goods to the job worker is a principal and the person who undertakes treatment/ processing is a job worker. In this case we find that applicants are receiving old roller, bare shaft, beams from the customer of the applicant under the cover of Rule 55 Challans. The applicant are then fitting the Shell manufactured out of their own raw material on the said shaft and then machining the same and further fitting the required accessory thereon and thus bringing into existence a usable sugar mill roller or new sugar mill roller which is no doubt a different commercial commodity as compared to the input involved. The product i.e. ready to use sugar mill rollar is handed over to the recipient on completion of the job. Thus even though applicant complies with the definition of job work, but having regard to the concept of job work as explained in the Flyer and the judgment of the Hon ble Supreme Court cited supra, applicant cannot be considered as a job worker within the meaning of Section 2(68) and Section 143 of the GST Act and corresponding rules - In the case at hand applicant has accepted as a matter of fact that the value of the material used/ skill and labour applied by them and the value of input supplied by the customer is almost equal. In our opinion this is a clear case of supply of goods, i. e. ready to use sugar mill roller. The activity undertaken by applicant of converting the bare shaft/beams supplied by the customer into ready to use sugar mill roller (by using one s own raw material) is supply of goods . Valuation - inclusion of the cost of shaft/beam supplied by the customer in the value of the said supply - HELD THAT:- In the present matter it is observed that price is not the sole consideration for the supply and hence sub-section (1) has no application in the present case but sub-section (4) is most appropriate for determination of the value of supply. As per chapter IV, value of supply is determined by applying provision of Rule 27 to Rule 31. However, we find that Rule 27 is the most appropriate and applicable rule for determination of value of supply in the present case. The consideration for the supply of ready to use sugar mill roller by the applicant to the customer is not wholly in money. Further, applicant has not provided any documentary evidence pertaining to open market value or the value of supply of goods of like kind and quality and hence in our opinion sub Rule (b) of Rule 27 is the most appropriate rule to facts of the case for the purpose of determination of value of supply. Applicant has received bare shaft or beams under the cover of Rule 55 challan with declared value of the said bare shaft or beams and as per provisions of sub-rule (b) of Rules 27 the said declared value shall be included in the value of supply of ready to use roller. The cost of shaft/beam supplied by the customer is includible in the value of the said supply for the purpose of payment of GST.
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2019 (7) TMI 757
Release of seized goods - furnishing of bank guarantee - Section 129 of the Kerala GST Act 2017 - HELD THAT:- The respondents release the goods detained as per proceedings in Exts.P5 and P6 subject to the petitioner furnishing Bank Guarantee for the amount determined by the respondents in this behalf and also that the Bank Guarantee is kept alive during the pendency of the proceedings under Section 129. The proceedings are disposed of as expeditiously as possible, preferably within two months from the date of receipt of copy of this order. Proceedings disposed off.
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Income Tax
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2019 (7) TMI 756
Rejection of books of account - AO adopted G.P. Rate @15% instead of 14.52% as disclosed - enhanced the addition by estimating the G.P. @23.01%, after considering the past history - HELD THAT:- AO was right in invoking the provisions of Section 145(3) in rejecting the book result and estimating the gross profit. The assessee could not lead any evidence to the satisfaction of the AO to prove its genuineness. As regards the adoption of gross profit rate @23.01% the Tribunal has upheld the reasoning given by the CIT(A) wherein the CIT(A) has taken the average of the gross profit rate of the two preceding assessment years after considering the previous history of the assessee. On this issue, we find that the finding recorded by the Tribunal is a concluded finding of fact recorded on the basis of material and evidence on record and warrants no interference. The law as to what amounts to substantial question of law is also well settled. It has been emphasized that the finding of fact recorded by the AO or the first appellate authority or the Tribunal cannot be disturbed by the High Court in exercise of powers u/s 260-A unless such finding is perverse or is such which no person of reasonable prudence could arrive at in the given facts of the case. Undisputedly the powers of FAA in matters of assessment are co-extensive with the Assessing Authority, in so far as the CIT(A) had issued a notice and thereafter made the enhancement on the basis of relevant material, no question of law may arise against such estimation as it would remain a finding of fact. In so far as the enhancement made by the CIT (A) is based on cogent material and evidence, the said finding does not suffer from any error of Law. In M. Janardhana Rao Vs Joint CIT [ 2005 (1) TMI 14 - SUPREME COURT] held that in the exercise of the powers under Section 260-A of the Act, the findings of fact of the Tribunal cannot be disturbed.
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2019 (7) TMI 755
Disallowance u/s 14A r.w.r. 8D - AO has not shown any dissatisfaction with the disallowance u/s 14A read with Rule 8D offered suo motu by the assessee - HELD THAT:- As held in the case of Pr. CIT Vs. Gujarat State Fertilizer and Chemicals Ltd . [ 2019 (7) TMI 473 - GUJARAT HIGH COURT] the language of Section 14A of the Act is plain and clear. Before invoking Rule 8D, the AO 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. 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 court 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 view of the above, this appeal fails and is hereby dismissed. - Decided against revenue
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2019 (7) TMI 754
Reopening of assessment u/s 147 - notice against dead person - curable defect u/s 292B - HELD THAT:- The issue raised in this writ application is very limited and no longer res integra and are covered by the decision of this Court in the case of Chandreshbhai Jayantibhai Patel vs. ITO [ 2019 (1) TMI 353 - GUJARAT HIGH COURT] . It was held that notice u/s 148 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 of the Act would not be attracted and hence, the notice under section 148 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 of the Act 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 For the foregoing reasons, the writ application succeeds and is accordingly allowed. - Decided in favour of assessee.
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2019 (7) TMI 753
Assessment u/s 153A - Addition u/s 41(1) - Cessation of liability - as alleged assessee had not been able to produce sufficient supporting evidence to prove genuineness of the creditors - HELD THAT:- The findings of fact recorded by the tribunal that no material was recovered during the search as per the provisions of section 153(C), which could have been treated as incriminating material and which have been made as a base for supporting the action of the department. Under the circumstances, the addition on account of Cessation of liability u/s 41(1) is illegal, in valid and not sustainable in the eye of law. If such course is permitted it would amount to reopening assessment order without any new material. Similar view has been taken by the Apex Court in the case of CIT Versus Sinhgad Technical Education Society [ 2017 (8) TMI 1298 - SUPREME COURT] held as in absence of any incriminating material which was seized as per the provisions of section 153(C), notice u/s 153(C) cannot sustain. - Decided against revenue
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2019 (7) TMI 752
Addition u/s 40A(3) - payments made by the assessee on a single day did not exceed twenty thousand rupees to a person - HELD THAT:- The finding of fact has been recorded by two revenue authorities that the payments made by the assessee on a single day did not exceed ₹ 20,000/- to a person and if, that be so, there could not have been any disallowance under Section 40A(3). We do not find any error not to speak of any error of law in the impugned order passed by the Tribunal warranting any interference in this Tax Appeal.
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2019 (7) TMI 751
Capital gain computation - cost of acquisition of land as on 01.04.1981 - rejection of cost of acquisition based on registered valuer without evidence - HELD THAT:- The findings recorded by the appellate tribunal that the assessee submitted report of registered valuer vide dated 23.09.2013 during assessment proceedings and the value adopted by the registered valuer was ₹ 99/per sq.mt. from the assessment order, it is also discernable that the AO has completely ignore the report of the registered valuer and without any discussion thereon estimated the cost at ₹ 30/per sq.mt. without any reasonable basis and justified reasoning. They are also in agreement with the conclusion drawn by the ld. CIT(A) that the assessee was not confronted by the AO before estimating the cost of acquisition at ₹ 30/per sq.mt. and thus, the AO was not right in estimating the cost of land as on 01.04.1981 at ₹ 30/per sq.mt. without any basis and keeping aside rather ignoring the report of the registered valuer submitted before him during assessment proceedings. In our opinion, the first question is a power question of fact and we do not find any error at the end of the tribunal in taking the aforesaid view. Reopening of assessment - non- issuance of notice u/s.143(2) - HELD THAT:- Tribunal upheld the finding of CIT(A) that there is not any iota of evidence or document to establish that before framing reassessment order u/s.143(3) r/w. s.147, the AO issued mandatory statutory notice u/s.143(2) to the assessee therefore, the reassessment order passed in pursuant to such proceedings without complying with the mandatory provisions of the Act cannot held as valid and sustainable. We are of the view that no error, not to speak of any error of law could be said to have been committed by the tribunal in so far as the second question, which has been passed by the revenue is concerned. - appeal is dismissed.
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2019 (7) TMI 750
Allowability of advance given for R D equipment u/s 35(1)(iv) - Allowability of replacement of dies and moulds as current repairs - entitled to deduction of entry tax paid u/s 43B which was set off against sales tax paid - HELD THAT:- The assessee's own case for the assessment year 2003-04 [ 2014 (2) TMI 522 - MADRAS HIGH COURT] , three substantial questions of law raised in this appeal were considered and they were decided against the revenue and in favour of the assessee It was held that Tribunal was rightly applied the decision reported in CIT Vs. Rane Brake Linings Ltd. [ 2001 (12) TMI 44 - MADRAS HIGH COURT] while allowing the expenditure on Research Development, after analysing the facts of assessee. Further, when the dies and moulds were attached to the machine to manufacture the designed product, the claim would fall for consideration only u/s 31 as revenue expenses. It also held that payment of entry tax has been made by the assesssee; the entry tax paid would get the adjustment as against the Sales Tax liability, consequently, any deduction would amount to total deduction. - the appeal filed by the revenue is dismissed
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2019 (7) TMI 749
Reopening of assessment - entitled to the benefit of Section 80P - Whether assessee is to be treated as primary agricultural society and is carrying on the business of banking or providing credit facilities to its members and is entitled for deduction with respect to the interest received from Class B members who were involved in non-agricultural activity? - HELD THAT:- a) All the four impugned notices will be kept in abeyance and there will be no further proceedings pursuant to the same until disposal of the Special Leave Petitions said to have been filed by respondent / Revenue in Hon'ble Supreme Court against the aforesaid order of Hon'ble Division Bench of this Court particularly in TIRUCHENGODE AGRICULTURAL PRODUCERS COOPERATIVE MARKETING SOCIETY LTD., S-1308 AMMAPET PRIMARY AGRICULTURAL COOPERATIVE BANK LTD. [ 2016 (8) TMI 560 - MADRAS HIGH COURT] wherein held held that the assessees are not co-operative bank and that their activities in the nature of accepting deposits, advancing loans etc., carried on by the assessees are confined to its members only and that too in a particular geographical area. Therefore, the respondent Societies are eligible for deduction under Section 80P (2) (a) (i) b) Subject to the outcome of the aforesaid Special Leave Petitions, i.e., if the Special Leave Petitions are in favour of the Revenue, the impugned orders will stand revived and law will take its course. If the aforesaid scenario unfolds, it is open to the writ petitioner assessee to take all objections and defences available to section 148 notice including calling for reasons and limitation. c) If the Special Leave Petitions end in favour of assessees and if the aforesaid Hon'ble Division Bench orders are confirmed or if the Hon'ble Supreme Court refuses to interfere with the orders of the High Court, all the four impugned notices will stand set aside without further reference to this Court. d) Though obvious it is made clear that this order pertains to benefit under Section 80-P of IT Act qua writ petitioners covered by Hon'ble Division Bench orders against which Revenue submits that SLPs have been filed before Hon'ble Supreme Court and therefore, this order will not preclude Revenue from proceeding against writ petitioners in a manner known to law with regard to other issues, if any.
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2019 (7) TMI 748
Reopening of assessment u/s 147 - deduction u/s 80IB(10) denied - the petitioner had submitted the details of buyers, which revealed that he had sold residential units to, in all, seven parties, who were spouses or had more than one residential unit in the same project - whether there was any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment ? - HELD THAT:- The court in CLIANTHA RESEARCH LTD. VERSUS DY. CIT [ 2013 (7) TMI 452 - GUJARAT HIGH COURT] held that when a claim was processed at length after calling for detailed explanation from the assessee, and the same was accepted, merely because a certain element or angle was not in the mind of the Assessing Officer while accepting such a claim, cannot be a ground for issuing notice for reassessment. In the present case, the assessment is sought to be reopened beyond a period of four years from the end of relevant assessment year, in the absence of any failure on the part of the petitioner to disclose truly and fully all material facts necessary for its assessment, the basic requirement for taking action u/s 147 of the Act as postulated in the first proviso thereto, is not satisfied. Moreover, as discussed hereinabove, during the course of scrutiny assessment, the Assessing Officer had examined the claim for deduction under section 80IB(10) in detail, therefore, merely because he did not examine such claim from the angle of clauses (e) and (f) thereof, would not be a valid ground for reopening the assessment as it would amount to a mere change of opinion . Under the circumstances, the assumption of jurisdiction by the Assessing Officer u/s 147, by issuing notice u/s 148 is invalid, which renders the impugned notice unsustainable. - Decided in favour of assessee.
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2019 (7) TMI 747
Revision u/s 263 - notices were issued by Ld. CIT on four issues i.e deduction U/s. 35D; taxability of JVs; depreciation on Plant Machinery and notional gain on capital items (Forex). - Ld. CIT on verification of the assessment records held that the Ld. AO had framed the assessment in the case of the assessee for both the AYs mechanically and without application of mind which is prejudicial to the interest of Revenue. Deduction U/s. 35D - expenses were incurred during the assessment year 2008-09 - alleged that assessee was not an industrial undertaking but Civil Contractor - HELD THAT:- Though the assessee has incurred the expenditure during the AY 2008-09 wherein the assessee was not entitled for the claim of deduction U/s. 35D as the assessee was not an industrial undertaking , however the Act was amended and the word industrial was omitted by the Finance Act, 2008 w.e.f 1/04/2009. The expenditure incurred by the assessee was subsequent to the 31st Day of March, 1970. In this situation, the assessee has fulfilled all the conditions stipulated under the Act for the residual period viz., AY 2010-11, 2011-12 and 2012-13. Therefore, there is no reason why the benefit of section 35D should not be allowed to the assessee for the AY 2010-11 to 2012-13. Hence, we do not find any error in the order of the Ld. AO for having granted the benefit of deduction U/s. 35.D of the Act for the AY 2010-11 and 2011-12. CIT is not right in his rem to invoke the provisions of section 263 on this count in the case of the assessee for both the relevant AYs. Share of profits from the Joint Ventures - CIT observed that the assessee had reduced the share of profits earned from JV projects while computing it s loss declared in the return of income - CIT opined that the Ld. AO had blindly accepted the version of the assessee without primarily examining the issue whether the profits had been separately assessed or not - HELD THAT:- No merit in the order of the Ld. CIT on this issue because the CIT was at liberty to call for any information from the assessee or grant an opportunity to the assessee to furnish any such requisite details. However, in the case of the assessee the CIT had simply presumed that the assessee might not have assessed the profits derived from the JV projects separately and therefore, invoked the provisions of section 263 which in our view is not appropriate. Therefore, we hereby hold that the reason for invoking the provisions of section 263 on this issue is not warranted. Depreciation on Plant Machinery and Notional gain - HELD THAT:- As per section 43A any gain or loss on account of changes in rate of exchange of currency shall go in enhancing or reducing the cost of capital asset acquired and shall not be adjusted to the taxable income. Notional gain on capital items (Forex) is notional gain on capital items due to change in foreign currency rates thus gain is not actual gain and moreover it is notional gain on capital items and hence the same is not taxable under, Income Tax Act, 1961 . CIT without verifying the submissions of the assessee hastily passed orders for the both AYs 2010-11 and 2011-12 which is not appropriate. Therefore, we do not find any merit in the action of the Ld. CIT for invoking his powers U/s. 263 of the Act on this issue also. Since all the reasons cited by the Ld. CIT for invoking his powers U/s. 263 of the Act are found to be devoid of merits we hereby quash the order passed by the Ld. CIT U/s. 263 of the Act in the case of the assessee for both the AYs 2010-11 and 2011-12. - Assessee appeal allowed
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2019 (7) TMI 746
Addition of unexplained sundry creditor and loan - shown under the head current liabilities and provisions - addition based on preponderance of probability - loan taken from a credit institution - HELD THAT:- As the said sum of ₹ 1,70,73,828/- was a mere outstanding amount against purchase and hence, provisions of section 69 of the Act do not come into play, inasmuch as the purchase recorded in the accounts were not disputed. The amounts outstanding were shown in the balance sheet as 'Current Liabilities' as on 31-03-2009. When the ledger account of the Loading Unloading Expenses on Purchase and Truck Freight on Purchase were produced which showed that the entire series of transactions were genuine since without these expenses the purchases could not have materialized and the subsequent sales could not have taken place. However, the Ld. Assessing Officer did not make any enquiry in respect of the information provided to him and accordingly, his finding in this respect is totally without any basis. - Impugned addition made under the head Current Liabilities by the Ld. AO has been rightly deleted by ld CIT(A). In the instant case, AO could not bring on record any conclusive evidence, except hazarding the observation that the assessee was unable to provide the statement of the secured loan transactions to bring in the charge of undisclosed investment. Assessee has named the credit institutions where from he received such loans to stand testimony to their irrefutable and impeccable character. Conclusion reached by AO was based on subjective perceptions of surmise and conjecture and the findings rendered therein and were not in consonance with the facts and CIT(A) acted aptly by considering appropriate factors absolutely germane to the issue in applying the settled parameter by deleting the impugned addition. That being so, we decline to interfere the order passed by the learned CIT(A), hence, his order on this issue is hereby upheld and the grounds of appeal raised by the Revenue is dismissed. Addition based on estimating the net profit @ 1% - HELD THAT:- Respectfully following the judgment of the Coordinate Bench in the assessee`s own case for AY 2008-09, we direct the Id. AO to determine the net profit of the assessee from M/s S.M .Enterprises at 0.80% and rework the taxable net profit accordingly.
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2019 (7) TMI 745
Unexplained credit u/s. 68 - addition of share premium being in excess of NAV - HELD THAT:- The AO had has accepted the share capital and part share premium and while arriving to the said conclusion he held that the net asset value as per equity share of assessee was ₹ 30.58 per share and, therefore, balance sum was brought as income u/s. 68. We further note that AO had invoked provision to section 68 and section 56(2)(viia) and (viib). But none of the provisions are applicable to the instant assessment year i.e. 2011-12 and infact they are applicable only for the assessment year 2013- 14. Keeping in view of the facts and circumstances of the case and respectfully following the aforesaid precedents including the ITAT, Mumbai decision in the case of ACIT vs. Goldmohur Design Apparel Park Ltd. [ 2018 (9) TMI 525 - ITAT MUMBAI] and ACIT vs. Spectrum Coal and Power Ltd. [ 2018 (1) TMI 1032 - ITAT DELHI] in which various case laws of the Tribunal, as well as Hon ble High Courts have been followed by the Tribunal, we are of the considered view that the addition in dispute on account of part share premium u/s. 68 which is not made in accordance with law and therefore, the same is hereby deleted. - Decided in favour of assessee
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2019 (7) TMI 744
Revision u/s 263 - undisclosed long term capital gains with reference to sale of shares at assessment stage - scrutiny for the reasons of suspicious long term capital gains on shares - HELD THAT:- A.O. in this case passed the assessment order under section 143(3) because the case was selected for scrutiny for the reasons of suspicious long term capital gains on shares. A.O. called for explanation of assessee and assessee filed reply time to time which are part of the record. The explanation of assessee is supported by all the evidences and material on record as to how the assessee has entered into sale and purchase of shares and how the sale consideration have been received by assessee through banking channel. The transaction was conducted through the Demat account. A.O. after making a deep investigation into the issue of long term capital gains also noted in the assessment order that written submissions of the assessee along with copies of Demat account, source of investment in shares, bank account, copies of share certificates, copy of account of Mathiyan Construction are placed on record. It would, therefore, prove that A.O. examined the issue of long term capital gains with reference to sale of shares at assessment stage in the light of evidence and material on record. Thus the reasons for which the case was selected for scrutiny have been satisfied by the A.O. As case was selected for scrutiny because the suspicious long term capital gains earned by assessee. This information must be based on information received from Investigation Wing. D.R. was not justified in contending that report of Investigation Wing have not been considered by the A.O. Since it was the sole reason for completing the scrutiny assessment, therefore, it could not be believed that A.O. would not have gone through the material available before him on record. May be the A.O. has not discussed the details in the assessment order but it would not give right to the Ld. Pr. CIT to hold that no investigation or enquiry have been made at assessment stage. It appears that A.O. has taken one of permissible view in the matter as per Law and if the Ld.Pr. CIT does not agree with the view of the A.O, the assessment order could not be treated as erroneous in so far as it is prejudicial to the interests of the Revenue - Decided in favour of assessee.
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2019 (7) TMI 743
Interest on sticky loans - Co-operative Banks as eligible for deduction u/s. 43D in respect of interest on sticky advances/Non Performing Assets - HELD THAT:- Interest of sticky loans has been laid to rest by Hon ble Jurisdictional High Court in the case of Commissioner of Income Tax Vs. Deogiri Nagari Sahakari Bank Ltd. [ 2015 (1) TMI 1218 - BOMBAY HIGH COURT] held that Co-operative Banks are eligible for deduction u/s. 43D in respect of interest on sticky advances/Non Performing Assets. The aforesaid law has been reiterated in the case of Principal Commissioner of Income Tax Vs. Solapur District Central Co-op. Bank Ltd. [ 2019 (2) TMI 238 - BOMBAY HIGH COURT] . Thus, in view of law laid down by the Hon ble Jurisdictional High Court, ground Nos. 1 to 3 of the appeal by the Department are dismissed. Disallowance u/s. 14A r.w. Rule 8D - HELD THAT:- Assessee has not earned any exempt income in the period relevant to the assessment year under appeal. The Hon ble Delhi High Court in the case of Cheminvest Limited Vs. Commissioner of Income Tax [ 2015 (9) TMI 238 - DELHI HIGH COURT] has held that no disallowance u/s. 14A is to be made in the absence of any exempt income. The CIT (Appeals) has decided the issue in line with the judgment of Hon ble High Court. We find no reason to interfere with the findings of CIT (Appeals) on this issue. Accordingly, the ground No. 4 of the appeal is dismissed being devoid of any merit.
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2019 (7) TMI 742
Addition being increase in the net profit by rejecting books of account u/s 145(3) - HELD THAT:- It is the case of the assessee that as per the accepted accounting principles as applicable to the construction business, the cost is required to be estimated at the end of each year on the basis of technical estimation and after estimating the project cost, the assessee is required to determine the cost of sale to be charged profit and loss account against the sale value. The sale value has been recognized on a percentage completion basis regardless of pendency in completion of work of the project. We however find that while adjudicating the issue, the approach of the CIT(A) appears to be quite generic and devoid of objectivity. While pointing out some errors of lesser impact here and there, the CIT(A) has not compared the project-wise working as per the assessee and as per the AO to locate the area of difference. In the absence of any additional evidence, we do not see any ostensible reason for AO to redo the same exercise based on some submissions of the assessee. The onus was equally placed on the assessee to point out exact area of difference and explanation thereon. CIT(A) has apparently abdicated his responsibilities and shifted the onus again on the AO without any cogent reason. In the absence of objective comparison available for the resultant profits declared by the assessee and computed by the AO, we consider it befitting and expedient to restore the matter back to the file of the CIT(A). CIT(A) shall call for the comparative analysis and other factual details and look into all the aspects afresh objectively and in accordance with law. Needless to say, proper opportunity shall be provided to assessee in this regard. The issue is accordingly set aside to the file of the CIT(A) for de novo adjudication. While coming to aforestated conclusion, we also take note of the objection raised on behalf of the assessee for rejection of books by invoking Section 145(3). However, we are unable to notice any such objection has been raised before lower authorities. In the Revenue s appeal, it will be difficult to appreciate such technical aspect without notice to other side. Thus, such ground requires to be shunned. Be it as it may, we find that the AO has given a very detailed working for determining true profits and consequent defect in the determination of profits. Thus, we do not find any substance in such objection. - Appeal of the Revenue is allowed for statistical purposes.
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2019 (7) TMI 741
Allowability of interest on borrowed funds - loan taken for acquisition of share of company having similar business - proof of commercial expediency behind such loan - HELD THAT:- In the present case, we find that the assessee acquired shares of DPSC Ltd which is in the similar business to control stake is a commencement of business. Therefore in our opinion, the ratio laid down by in the case of Rajeeva Lochan Kanoria [ 1994 (2) TMI 42 - CALCUTTA HIGH COURT] is applicable to the facts on hand and the assessee is entitled to claim deduction of interest paid on borrowed funds. Further in the case of Divakar Solar System Ltd. [ 2016 (12) TMI 1079 - ITAT KOLKATA] the Coordinate Bench of Calcutta Tribunal held that the interest paid on borrowed capital needs to be allowed as deduction u/s 36(1)(iii) as it is a commercial expediency with a view to expand business and acquiring, controlling interest in subsidiary companies. Allowability of payment of Processing fee for availing loan - the said payment of processing fee is an incidental expenses on obtaining borrowed fund which is a revenue expenditure allowable u/s 37(1) - HELD THAT:- Payment of interest on borrowed fund is allowable as deduction u/s 36(1)(iii) and the CIT(A) has rightly held, the payment of processing fee to obtain such loan is an incidental expenses, since we have allowed the payment of interest as an allowable deduction, the processing fee paid on the said loan is also an allowable expenditure u/s 37(1) - Ground No.2 raised by the Revenue is dismissed.
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2019 (7) TMI 740
Penalty u/s 271(1)(c) - transfer of assets and liabilities of the proprietary concern to the company - addition sustained by denying the exemption u/s 47(xiv) to the extent of self-generated Goodwill - HELD THAT:- We find from the materials available on record that all these facts were duly reflected in the return of income itself by the assessee and subsequently during the course of assessment proceedings. Ultimately it is only disallowance of claim of exemption u/s 47(xiv) of the Act made by the ld AO. All the details necessary for assessment were very much available in the return of income itself and the entire facts of proprietory concern getting converted into public limited company were made known to the department. There was no detection as such by the ld AO in this regard. There was absolutely no malafide on the part of the assessee in making the claim of exemption u/s 47(xiv) of the Act as could be seen from the findings rendered hereinabove. We find that the decision that would be applicable to the facts of the instant case would be the decision of Reliance Petroproducts Ltd [ 2010 (3) TMI 80 - SUPREME COURT] wherein it was held that when no information given in the return was found to be incorrect or inaccurate or the details supplied by the assessee was found to be factually incorrect, then primafacie, the assessee cannot be held guilty of furnishing inaccurate particulars. It may at best result in making incorrect claim in law. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. It held that merely because a claim made by the assessee is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Accordingly we hold that the CIT-A had rightly deleted the penalty in respect of denial of exemption u/s 47(xiv) on self generated Goodwill portion partially. Accordingly, we do not find any infirmity in the order of the CIT-A. Penalty u/s 271(1) (c) - denial of deduction u/s 54 - AR argued that it was a bonafide belief on the part of the assessee that since the last payment for purchase of new house was made within the prescribed limitation period by the assessee i.e within one year prior to the date of transfer , he was entitled to claim deduction u/s 54 - HELD THAT:- Assessee's claim was partially negated by the order of this tribunal in quantum proceedings. But this does not mean, that the assessee had furnished inaccurate particulars. It is a genuine difference of opinion on the facts already available on record between the assessee and the AO. There was no detection by the AO on any fresh facts in this regard. All the details were already available with him on record. The assessee did not have any malafide intention to furnish any inaccurate particulars thereon. AO was able to justify his rejection of claim of deduction u/s 54 of the Act only from the details filed by the assessee with regard to the agreement entered for new house on 26.5.2006 and payments made thereon on various dates. Hence it is only a simple disallowance of claim of deduction u/s 54 of the Act by the ld AO. The findings given by us in respect of penalty on self-generated Goodwill hereinabove would hold good for this issue also and the same are not reiterated for the sake of brevity herein. Accordingly, we hold that the ld CITA had rightly deleted the penalty - Revenue appeal dismissed.
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2019 (7) TMI 739
Ad-hoc disallowance of 25% of construction expenses - AO rejected the books of accounts u/s 145 - CIT(A) who has restricted the disallowance to 10% - HELD THAT:- AO instead of estimating the income on the basis of some reasonable and proper criteria being GP or NP has resorted to make disallowance of expenses which is not a permissible course of action under the provisions of section 145(3) r.w.s. 144. It is settled principles of law that after rejection of books of account, the income of the assessee should be based on average GP declared by the assessee in the preceding years or the prevailing GP in the same trade or business. In the case in hand, since it is the first year of reporting the income by the assessee, therefore, the past history of the GP is not available and hence the only option for making the estimation of income of the assessee is to adopt reasonable and proper GP/NP prevailing in the industry. Since the assessee is in the business of real estate and construction, therefore, the provisions of section 44AD also provides guidance for estimation of income. Since the income of the assessee is required to be estimated on some reasonable and proper basis, therefore, in the facts and circumstances of the case, we set aside this issue to the record of the AO for estimation of income by applying a proper and reasonable basis of GP/NP. Needless to say that the assessee be given proper opportunity of hearing before passing the afresh order. Disallowance of indirect expenses - AO has made disallowance of 20% of the said expenses for want of supporting evidence - HELD THAT:- Assessee has failed to produce the books of account as well as the supporting bills and vouchers regarding claim of indirect expenses. AO consequently made the disallowance of 20% of the indirect expenses which was confirmed by the CIT(A). Though there is a failure on the part of the assessee to substantiate its claim, however, once the claim is found to be reasonable and by nature all the expenses itself reveals that the said expenditure was incurred for the purpose of the business of the assessee then the disallowance of 20% without giving any basis is highly arbitrary. Since the issue of best judgement on the basis of estimation of income of the assessee has been set aside to the record of the AO, accordingly this issue is also set aside to the record of the AO to reconsider and decide afresh after giving a proper opportunity of hearing. We may clarify if the income of the assessee is estimated applying GP Rate then only issue of disallowance of indirect expenses arises. On the other hand, if the income of the assessee is estimated on the basis of NP Rate then no question of disallowance of indirect expenses arises. Addition made u/s 68 - assessee was asked to furnish the confirmation of the loan / cash creditors - AO also issued notices u/s 133(6) calling information from the loan creditors - HELD THAT:- Since the assessee has now explained the reasons of discrepancy in recording the transactions in the books of account which could be verified from the bank statement of the assessee as well as loan creditors, therefore, this issue requires a proper verification and examination at the level of the AO. Accordingly, in the facts and circumstances of the case, we set aside this issue to the record of the AO for conducting a proper verification by taking into consideration the bank statement of the assessee as well as loan creditors for reconciliation of the discrepancy as noted during the assessment proceeding. Needless to say that the assessee be given proper opportunity of hearing before passing afresh order. - Appeal of the assessee is allowed for Statistical purposes.
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2019 (7) TMI 738
Reopening of assessment u/s 147 - exemption u/s 11 denied - assessee has not filed the return u/s 139 (4A) reads with section 12A (b) - assessee society was carrying out educational activities which fell within charitable activities u/s 2(15) , it was granted registration u/s 12A - whether, the filing of audit report alongwith the return filed in response to notice u/s 148 will entitle the assessee for benefit of computation of section 11 ? - HELD THAT:- We are of the view that, whether it is a case of a regular assessment or it is a case of an assessment consequent to issue of notice u/s 148, not only the procedure of return as given in section 139 has to be applied, but also such the income has to be computed on the basis of such return in accordance with the provision of the Act, which of course will be subject to any specific provision in the Act which itself bars a claim or an exemption. Section 148 provides that all the provision of the Act has to apply on such return furnished in response to notice u/s 148. The Ld. CIT DR has referred to the words so far as may be to canvass the proposition that all the provision will not apply. This contention of the Ld. DR is not correct in view of our reasoning given above. The meaning of these words so far as may be will not mean to exclude provision of section 11 of the Act. Our above view gets further supported from the amendment made by the Finance Act, 2017 whereby a further clause (ba) has been inserted imposing a further condition that such return of income is to be furnished in terms of section 139(4A), within the time allowed under that section. Firstly, this requirement was not there before this amendment; and secondly, this insertion of additional clause clearly shows that such condition was not there in existing clause (b) of section 12A. Had such condition being there in clause (b) itself, then there was no need to insert a further clause (ba) by the Legislature for denying benefit of section 11 12 in case return is not filed in time as per provision of section 139 (4A). We are also not in agreement with the contention of the Ld. DR that this amendment is clarificatory in nature. As rightly pointed out by the Ld. Counsel that this amendment has been made by the Finance Act, 2017 effective from A.Y. 2018-19, meaning thereby that this clause has not been made applicable even for the A.Y. 2017-18, the return of which were still to be filed. Thus, the Legislature has thought fit to make this amendment applicable from next assessment years onwards and not even to the current A.Y. 2017-18. While interpreting the amendment made by the Finance Act No. 2 of 2014 whereby section 11 (6) was inserted so as to exclude such assets while computing depreciation in respect of which deduction has been allowed as an application of income u/s 11. In view of the above, we hold that AO was not justified in denying the benefit of the exemption u/s 11 of the Act and we direct the AO to compute the income in accordance with the provision of section 11. Ground no.6 is accordingly allowed. Computation of income by the AO on the basis of the Balance Sheet and Income Expenditure account submitted to the Syndicate Bank for the purpose of obtaining loan facilities - HELD THAT:- The dispute about the financial submitted to the bank and submitted by the assessee with the return of income has been got resolved by the AO by making a reference to the special auditor who after auditing has given its report proposing various additions and disallowances on the financials submitted by the assessee. The AO has also made addition and disallowances on the basis of such report. It is not the case where the AO has rejected the report of the special auditor. On the contrary he has accepted the report of the special auditor. The income and expenditure account submitted by the assessee with the return of income which has been audited by the special auditor should be the basis for computing income as per provision of section 11 and 12. We direct the AO accordingly. Disallowance of electricity expenses in the absence of supporting evidences - CIT-A confirmed part addition after calling for remand report on the additional evidences submitted by the assessee in support of its contention - HELD THAT:- assessee has not produced any cogent evidence in respect of balance amount of ₹ 9,653/-and ₹ 1,063/- and hence, the disallowance was confirmed. Since, the assesse has not produced cogent evidence about these expenses of ₹ 10,716/-, we confirm the action of the CIT(A) in disallowing the same. However, this amount instead of making addition as income need to be excluded while considering application of income in terms of section 11t. This ground of appeal is disposed of accordingly. Addition of car insurance expenses - CIT (A) confirmed addition as the assessee has not been able to furnish any proper evidence in support thereof - HELD THAT:- In the absence of supporting evidence, the disallowance made by the CIT (A) is upheld. However, we have held in ground no.11 that while considering disallowances in the absence of supporting evidence that the income of the society is to be computed in terms of section 11 of the Act and accordingly such amount need to be excluded while computing total application of income. Following the same reasoning we direct the AO that this amount instead of making addition as income needs to be excluded while considering application of income in terms of section 11. This ground of appeal is disposed of accordingly. Addition in respect of work-in-progress - HELD THAT:- In the absence of any supporting evidence, the disallowance made by the CIT (A) is upheld. However, as held above in ground no.11 while considering disallowances in the absence of supporting evidence that the income of the society is to be computed in terms of section 11 of the Act and accordingly such amount need to be excluded while computing total application of income. Following the same reasoning we direct the AO that this amount instead of making addition as income needs to be excluded while considering application of income in terms of section 11 Addition u/s 40(a)(ia) - society has failed to deduct tax at source - HELD THAT:- . Chapter-III of the Income Tax Act is regarding incomes which do not found part of the total income. Section 11 which falls in this Chapter is regarding computation of income from property held for charitable/religious purposes and its mode of computation as per the condition prescribed in these sections itself. As against this section 40(a)(ia), 40A(3) and section 43B falls in Chapter IV-D which are applicable for computing profits and gains of business or profession. Thus, the provisions of these sections are applicable in respect of profit and gains of business or profession. This Chapter IV-D is not applicable in respect of charitable trust or institution whose income is to be computed under Chapter-III. Accordingly, no disallowance or adjustment can be made while determining the income of the society under section 11. Penalty levied by the bank for mortgaging a property without the permission of the prescribed authority by invoking Explanation to section 37 - HELD THAT:- As per Explanation -1 to section 37 such expenditure which is incurred for any purpose which is an offense or which is prohibited by law cannot be allowed as deduction while computing income. Even otherwise Explanation 1 to section 37, under which this amount has been disallowed, falls in Chapter IV-D for computation of profits and gains of business or profession. As we have held while adjudicating ground no.14 hereinabove, that the provisions of Chapter IV-D, i.e., section 28 to 44 D are applicable while computing income of business or profession and these provisions are not applicable in respect of the charitable institution whose income is to be computed under section 11 and 12 of the Act falling under Chapter-III. Accordingly, this amount cannot be added by invoking provision of section 37 which falls in Chapter-IV-D not a Chapter-III. Accordingly, we direct the AO to consider this amount as application of income while computing income of the assessee society in terms of section 11. This ground of appeal is accordingly allowed. Addition on account of investment in fixed deposit - HELD THAT:- There cannot be any assumption that amount of ₹ 1,43,41,000/- and amount of ₹ 40,88,000/- are undisclosed investment. Accordingly, the addition made on this account is on incorrect appreciation of facts. As regards the observation of the special auditor in respect of the interest on matured FDR, it is seen that the assessee has accounted for the interest of ₹ 6,13,853/-. As regards the interest on the closing balance of FDR of ₹ 40,88,000/- the same having not been received during the year and assessee society following policy of accounting of interest accrued on FDRs on receipt basis no addition on this account otherwise can be made. In view of the above facts and analysis, we direct the AO to delete the addition of ₹ 1,82,92,536/. This ground of appeal is thus allowed. Addition on account of job work - HELD THAT:- In the absence of supporting evidence, we also confirm the disallowance made by the CIT (A). However, as we have held in ground no.11 while considering disallowances in the absence of supporting evidence that the income of the society is to be computed in terms of section 11 of the Act and accordingly such amount need to be excluded while computing total application of income. Following the same reasoning we direct the AO that this amount instead of making addition as income needs to be excluded while considering application of income in terms of section 11 of the Act. Disallowance of depreciation - HELD THAT:- In the absence of supporting evidence, the disallowance made by the CIT (A) is thus upheld. However, as held above in many grounds while considering disallowances in the absence of supporting evidence that the income of the society is to be computed in terms of section 11 of the Act and accordingly such amount need to be excluded while computing total application of income - we direct the AO that this amount instead of making addition as income needs to be excluded while considering application of income in terms of section 11 Computation of income in accordance with the provision of section 11 and 12 and not in accordance with the provisions of section 28 to 44 D - While adjudicating ground no.6, we have already held that income of the assessee society is to be computed in accordance with the provision of section 11 and 12 . Accordingly, we direct the AO to compute the income in accordance with the provision of section 11 and 12 and not in accordance with provision of section 28 to 44 D. Capital expenditure incurred during the year as application of income towards charitable purposes while computing income of the assessee society - HELD THAT:- As per section 11 income of a eligible institution to the extent of which such income is applied to charitable purposes in India is not be included in the total income. The application of the income towards charitable purposes include application towards acquisition of assets i.e. capital expenditure. As we have already held hereinabove that income of the society is to be computed in accordance with the provision of section 11 and 12, we direct the AO to consider capital expenditure incurred during the year as application of income towards charitable purposes while computing income u/s 11 Addition in respect of the cash deposited in the bank - HELD THAT:- CIT (A) has deleted the first two amounts i.e. ₹ 54,00,000/- and ₹ 49,46,000/- as these deposits in the bank account do not pertain to the year under consideration. As regards the balance the CIT (A) noted cash deposits reported by the AO have been duly recorded by the assessee in its books accounts as tuition fees and hence addition made by the AO is double addition. CIT (A) also noted that the Special auditor appointed by the AO has also not made any adverse observation about the cash deposited in the bank. DR could not controvert the above finding of the CIT (A). We are of the view that the CIT (A) has examined the issue. The deposit in the bank account having been made out of the books of accounts the same cannot be considered to be unexplained deposits in the bank account and accordingly we uphold the order of the CIT (A) and dismiss this ground of appeal. Disallowance of depreciation - alleged that building was under construction as on 31.03.2007 - HELD THAT:- CIT (A) has taken note of the fact that existence of the building was not in doubt as the valuation officer appointed by the AO itself has confirmed the same and the said report has also been relied upon by the AO subsequently. On this basis the CIT (A) has restricted the disallowance in respect of the addition at year end. We are of the view that the fact building was in existence and was in use is not in dispute and hence the CIT (A) was correct in allowing depreciation on the building. The finding given by the CIT (A) is correct and we see no reason to interfere with the order of the CIT (A) and accordingly, this ground is dismissed. Addition in respect of the cash deposited in the bank - CIT (A) noted that cash deposits added by the AO have been duly recorded by the assessee in its books accounts - HELD THAT:- From the assessment order it is evident that the AO has made the addition merely on the ground that cash has been deposited in the bank ignoring the fact that assessee receives tuition fees etc. from the students and mere deposit in the bank account cannot be a ground for making addition. The deposit in the bank account having been made out of the books of accounts the same cannot be considered to be unexplained deposits in the bank account and accordingly we uphold the order of the CIT (A) and dismiss this ground of Revenue s appeal. Addition on the ground of unsupported expenditure - HELD THAT:- CIT (A) after examining the remand report noticed that a sum of ₹ 10,12,427/- is the double addition. Accordingly, the CIT(A) deleted this amount. Since, the disallowance has been deleted by the CIT (A) on the reasoning that this amount have been considered twice and after considering the details submitted by the assessee and examined in the remand report we uphold the order of the CIT(A) and this ground is accordingly dismissed. Addition on reasoning that no such expenditure has been claimed in the income and expenditure account and this was a book adjustment having no income element - HELD THAT:- addition has been deleted by the CIT (A) after considering the remand report and examination of the explanation and evidences submitted by the assessee. Nothing contrary has been pointed out by the Ld. DR and hence the deletion by the CIT (A) is upheld. As regards the deletion of balance expenditure, from the CIT(A) order we note that the CIT(A) has examined each and every expenditure which was subject matter of disallowance by the AO and has deleted that part of the expenditure in support of which the assessee has been able to submit evidences in the remand proceedings and has confirmed those expenditure in respect of which assessee could not submit evidences. The finding of the CIT (A) has not been controverted before us. In view of these facts we uphold the order of CIT (A) Addition on account of investment in FDR - HELD THAT:- AO has simply picked up the figure from the balance sheet with the Syndicate Bank and has on that basis made addition ignoring the fact that the balance sheet submitted by the assessee was subject matter of special audit and assessment has to be completed on the basis of the said balance sheet. We have already held while adjudicating ground no.8 to 11 of the assessee s appeal that the basis for the assessment has to be the balance sheet and income and expenditure account which were subjected to special audit and not the balance sheet and income and expenditure account filed with the Syndicate Bank for collateral security for obtaining the loan. Accordingly, we uphold the order of the CIT (A) and this ground of appeal is dismissed.
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2019 (7) TMI 737
Ad hoc disallowance of site expense - HELD THAT:- CIT(A) has restricted full disallowance to 50% for Bokaro site and labour expense without any drawing comparison or with similar head(s) of expenditure in earlier or succeeding assessment year as well as not pin-pointing any specific defect in the relevant details. We therefore deem it appropriate in larger interest of justice keeping in mind the fact that assessee has also not able to prove each and every details of the impugned claim to restrict this disallowance in issue of a lump sum amount of ₹50,000/- with a rider that shall not be treated as a precedent in any other assessment year. The second substantive ground is treated as partly allowed in above terms. Addition u/s 68 of share capital account in the nature of contribution made by the assessee s managing director - HELD THAT:- Assessee had incurred received the amount in issue from its director by way of two cheques involving sums of ₹30 lac and ₹2.05 lac which stood controverted into share capital. It also produced the said director alongwith this copy of account, balance-sheet income-tax return. There is further no quarrel that they are assessed in the same jurisdiction. The assessment order dated 23.03.2015 in this regard indicates that AO nowhere dealt with all these details before terming the amount in issue to be non-genuine levying to sec. 68 addition. We therefore take into consideration all these peculiar facts to hold that the assessee has duly proved identity, genuineness and creditworthiness of the impugned share capital to have come from its director / managing director. The same is ordered to be deleted.
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2019 (7) TMI 736
Estimating the income of the JV - formed to secure the work, and after that, there was no involvement in the execution of the work which was done by member - rejection of account of JV - taxable in hands of JV even if offered by the members - whether the assessee is liable to tax on the income of members of the joint-venture in their capacity? - CBDT circular No. 07/20016 - HELD THAT:- We note that the assessee as JV has prepared its financial statements, got it accounts audited and filed audit report under form 3CD, and produced the books of accounts during the assessment proceedings. As such the assessee has shown gross income and claimed the expenses of the equal amount against such gross income, leaving the income at NIL. Thus it is transpired that the assessee has offered its income to tax as evident from the financial statements, income tax return filed by it. AO feels dissatisfied with the income disclosed by the assessee as JV in its books of accounts; then he was supposed to disallow the expenses or disturb the income as per the provisions of law. As such it cannot be alleged that the assessee as AOP has not offered the income to tax in the given facts and circumstances. There was no resource available with the JV such as money, material, human resources, and machinery, etc. As all these resources were available with the members of the JV which were also used for the execution of the project. In other words, the assessee was acting merely as the trustee of its members in order to secure the work contracts. A plain reading of the aforesaid clause reveals that both the members of the joint-venture originally agreed to incorporate the JV only to obtain the contracts. It was also agreed that whatever will be the income of the JV will be allocated to the members. In such circumstances, the Hon ble Delhi High Court has not even treated such arrangement, i.e. forming JV to secure the work as JV as AOP in the case of CIT Vs. Oriental Structural Engineers Pvt. Ltd. reported in [ 2015 (3) TMI 102 - DELHI HIGH COURT] wherein it was held the JV was not an association of persons and liable to be taxed on that basis. In present case also AOP was formed only to secure the work, and after that, there was no involvement of such AOP in the execution of the work. As such the entire work was executed by the members of the JV as agreed between them. Accordingly, the fees from the execution of the project work were shared between the members as per their understanding. Thus the Hon ble Delhi High Court (supra) held that the income from such joint venture would not be subject to tax in the hands of AOP. It is also important to note that members of the joint-venture have disclosed the entire income which was originally received by the assessee in their books of accounts and income tax returns. The returns of income of all these members have been subject to the assessment framed u/s 143(3). Thus it can be inferred that there was no loss to the Revenue on account of the income disclosed by the members of the JV even it is assumed that it belongs to the JV. Furthermore, both the JV and the members are chargeable to tax at the maximum marginal rate. We further note that the CBDT in its circular has clarified that there will not be any tax liability on the income of the JV if the same income has been offered to tax by the members of the JV subject to certain conditions. - It is revealed that the assessee has complied with all the conditions as specified by the CBDT circular No. 07/20016. Therefore, in our considered view no addition can be made in the hands of the assessee in the given facts and circumstances on the ground that income was offered to tax by its members and not by the JV. After considering the facts in totality as discussed above, we are of the view that there cannot be any addition in the hands of the assessee for the income as discussed above in the given facts and circumstances. Thus the ground of appeal of the assessee is allowed.
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2019 (7) TMI 735
Reopening of assessment - reasons recorded on a non-existent company - scheme of amalgamation conceived - reasons recorded after almost six years from the date of amalgamation and also mentioned the PAN number of erstwhile company which had ceased to exist - even after intimation to AO that company had merged with another company, the assessment order was passed on the same PAN number of amalgamating company - HELD THAT:- Assessment order passed by Assessing Officer is null and void as the reasons has been recorded on a non-existent assessee and that too when the fact of amalgamation was in the knowledge of department - Decided in favour of assessee
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2019 (7) TMI 714
Natural justice - Tribunal dismissed the appeal for non-prosecution - failure to attend personal hearing - assessee's case is that they have not received notice of hearing and they were not aware that the Tribunal has dismissed assessee's appeal for want of prosecution and they had no knowledge of this order and only on receipt of notice under Section 271(1)(c) they became aware of the dismissal of their appeal - Tribunal has dismissed assessee's appeal for want of prosecution on 27.12.2017 for which the assessee filed a Miscellaneous petition before the Tribunal to recall which was dismissed on the ground that it was filed beyond the time limit specified under Section 254(2) - HELD THAT:- We are not to necessarily interfere with the order passed by the Tribunal dismissing the matter for want of prosecution. As observed by us earlier, the assessee was not diligent in prosecuting the matter and the reasons assigned by the assessee that they were not aware of the order passed by the Tribunal is not convincing. Nevertheless, the respondent Department would be entitled to tax the assessee only for the amount for which they are liable to be taxed and by default the excess tax cannot be recovered, which would be an action without authority of law. Therefore, we deem it appropriate to give one more opportunity to the assessee to file a reconciliation statement and for which the purpose we send back the matter to the Assessing Officer subject to certain conditions. In finally, we were of the opinion that the assessee can be put on terms by directing them to deposit a certain sum of money with the Assessing Officer for being entitled to an opportunity to go before the Assessing Officer and place the reconciliation statement. However, Mr.S.P.Chidambaram, learned counsel for the appellant, on instructions, from his client, submitted that virtually the entire amount of tax has been recovered from the assessee, partly remitted by the assessee and partly adjusted from the refund, which was ordered. In the light of the said submission, we do not impose any condition for deposit of any sum of money. Appeal filed by the assessee is allowed and the orders passed by the CIT(A) is set aside and the matter is remitted back to the Assessing Officer for fresh consideration, who shall give an opportunity to the assessee to file reconciliation statement.
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2019 (7) TMI 713
Revision u/s 263 - addition under Section 40A(3) and deposits made in Karur Vysa Bank - HELD THAT:- Tribunal commented that the CIT(A) having given a clear finding on the above lines ought not to have adjudicated on the additions assailed by the assessee which additions emanated from the original assessment. We endorse the findings rendered by the Tribunal in this regard. The Tribunal was right in holding that the CIT(A) should have confined himself to the additions made by the AO in his order dated 28.11.2014 under Section 40A(3) and for the deposits made in Karur Vysa Bank. Tribunal held that the grounds raised by the revenue in the appeal before it, on the issues other than two additions, do not arise from the assessment order and accordingly rejected the same and dismissed the appeal. The finding of the Tribunal does not call for any interference. Whether the additions under Section 40A(3) was warranted and after taking note of the factual matrix held that the assessee could demonstrate business expediency which justified the payment made in cash. We find no reasons to dislodge the factual findings recorded by the Tribunal. Cash deposit made in Karur Vysa Bank, the Tribunal after considering the factual position affirmed the order passed by the CIT(A) that it was proceeds of the deposits made by the assessee in the assessment year 2005-06 and the assessee had accounted accrued interest of ₹ 77,188/- and the assessee did not raise any ground citing violation of Rule 6DD. The revenue has not made out any grounds to interfere with the said findings of the Tribunal. Similar is the matter concerning the assessment year 2009- 10 - Assessing Officer made a fresh addition under Section 40A(3) on the cash payment for land purchase. The Tribunal noted that the Assessing Officer committed similar mistake as was done in the assessment year 2008- 09 in computing the income of the assessee and consequently held that the CIT(A) having set aside the original assessment, there was no question of adjudicating upon any of the grounds raised by the assessee relating to the original assessment. After rendering such finding, the Tribunal endorsed the view of the CIT(A) that the disallowance under Section 40(3) of the Act could not have been done since they were genuine payments done due to business expediency. Accordingly, the appeal filed by the Revenue challenging the order passed by the CIT(A) for the assessment year 2009-10 was also dismissed. Tribunal while dismissing the appeals filed by the Revenue for the assessment year 2008-09, the cross objections were allowed for the assessment year 2008-09 and allowed for the assessment year 2009-10. We hold that the revenue has not made out any ground to interfere with the orders passed by the Tribunal. For the above reasons, the appeals filed by the revenue are dismissed and the substantial questions of law are answered against the revenue.
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2019 (7) TMI 712
Stay of recovery of tax due - defective return filed - AO raised a demand by referring to the incomplete return - petitioner therefore was advised to file a request for rectification of the return before the first respondent. The request is made under Section 264 - HELD THAT:- Sri. Christopher Abraham, the learned Standing Counsel, having regard to the scheme under Sections 143(1), 154 and 264 of the Income Tax Act fairly states that the observation or the view as held in Ext.P8 is unsustainable and the first respondent has jurisdiction and authority to do the needful on the request of petitioner in accordance with law. The respondents have received notices and have not filed counter affidavit. The statement of Sri Christopher Abraham is placed on record and accepted. The order in Ext.P8 is accordingly set aside and matter remitted to first respondent for consideration and disposal under Section 264 within eight weeks from the date of receipt of a copy of this judgment.
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2019 (7) TMI 711
Pending income tax appeals for 10 to 16 years - HELD THAT:- President or the Senior Vice President concerned of the Tribunal should take appropriate steps and expedite the hearing in these appeals, so as to ensure that final orders in all these appeals are announced at the earliest, preferably within four months from today. Although these directions dispose of the petitioner s grievance, however, this court is of the opinion that given the nature of the averments in this petition, the President of the Tribunal, through the Registrar, should inform this court as to the nature of the pendency with respect to the old cases particularly, the number of appeals pending which are over 5 years, in each Bench. A tabular statement indicating the age of these appeals as well as an action plan of the ITAT with respect to the likely time for their disposal, having regard to the priorities that ITAT may set in this regard, shall also be filed in this court within 8 weeks. List on 17.07.2019.
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2019 (7) TMI 710
Reopening of assessment - entitled to the benefit of Section 80P - whether the primary agricultural credit societies are entitled for the deduction or nor? - HELD THAT:- There is no disputation or disagreement before this Court that these matters are squarely covered by a common order in TIRUCHENGODE AGRICULTURAL PRODUCERS COOPERATIVE MARKETING SOCIETY LTD., S-1308 AMMAPET PRIMARY AGRICULTURAL COOPERATIVE BANK LTD. [ 2016 (8) TMI 560 - MADRAS HIGH COURT] Since department has filed SLPs against these orders, the following order is passed a) All the four impugned notices will be kept in abeyance and there will be no further proceedings pursuant to the same until disposal of the SLPs said to have been filed by respondent / Revenue in Hon'ble Supreme Court against the aforesaid order of Hon'ble Division Bench (supra) b) If the SLPs are in favour of the Revenue, the impugned orders will stand revived and law will take its course. If the aforesaid scenario unfolds, it is open to the writ petitioner assessee to take all objections and defences available to section 148 notice including calling for reasons and limitation. c) If the SLPs end in favour of assessees and if the aforesaid Hon'ble Division Bench orders are confirmed or if the Hon'ble Supreme Court refuses to interfere with the orders of the High Court, all the four impugned notices will stand set aside without further reference to this Court. d) Though obvious it is made clear that this order pertains to benefit u/s 80-P of IT Act qua writ petitioners covered by Hon'ble Division Bench orders against which Revenue submits that SLPs have been filed before Hon'ble Supreme Court and therefore, this order will not preclude Revenue from proceeding against writ petitioners in a manner known to law with regard to other issues, if any.
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Customs
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2019 (7) TMI 728
Demand of differential Customs duty based on the Fe content of iron ore fine - Export of Iron Ore Fines - reliability on test reports - Benefit of N/N. 62/2007-Cus, dated 03.05.2007 - appellant declared the iron content in their Iron ore fines as below 62%, however the test report declared the Fe content in the iron ore as 62.91% - CBEC Circular No. 4/2012-Cus, datd 17.02.2012 - HELD THAT:- This is an unusual case in which there are three test reports indicating different levels of iron content. None of the three test reports are perfect. The test reports produced by the appellant are detailed and elaborate and indicate Fe content of below 62%. However, the samples were collected behind the back of the Customs Officers. Therefore, there is always a doubt as to how the samples were drawn. The test reports are as good as samples drawn. One cannot be termed a diabetic or HIV positive based on a blood test unless it is certain that it was his blood which was tested and not the blood of anybody else - Similarly, the test reports cannot be relied upon unless the samples were drawn authentically from the export goods. In this respect, the only authentic sample which was drawn was sent to the Chemical Examiner because it was drawn in the presence of Customs Officers and Exporter and signed by both the parties. Further, the test report of the Chemical Examiner or the Chief Chemist cannot be brushed aside in favour of reports of private persons. None of the three test reports can be relied upon. Usually, any declaration made in the import/export documents are accepted unless there is evidence to the contrary. The department could not sufficiently establish that the declaration made by the appellant in the shipping bill that the Fe content of iron ore fine was below 62% was incorrect - the confirmation of differential duty demand by the Asst. Commissioner and its affirmation by the impugned order are not sustainable - Appeal allowed - decided in favor of appellant.
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2019 (7) TMI 727
100% EOU - Benefit of N/N. 53/97-CUS - interpretation of the notification - applicability of the notification to goods imported into India for the purpose of manufacture of articles for export of India or for being used in connection with the production or packaging or job work for export of goods by a 100% EOU - HELD THAT:- While interpreting the aforesaid notification, the Hon ble Supreme Court in the matter of M/S. MOSER BAER INDIA LTD. VERSUS COMMR OF CUSTOMS, NOIDA [ 2015 (11) TMI 137 - SUPREME COURT] set aside the order of the Tribunal denying the benefit of the aforesaid Exemption Notification to the appellant and held that a reading of the aforesaid notification clearly manifests that it is not necessary that the material which is imported into India has to be used in the manufacture of articles which are to be exported out of India. Even if the said material is used for the purpose of manufacture of articles or for being used in connection with the production or packaging or job work , the same shall still be covered by the aforesaid notification and thus would not attract any customs duty. Non-speaking order - principles of natural justice - HELD THAT:- We have considered the submission of the learned counsel that the impugned order is a non-speaking order and that the same has been passed in gross violation of the principle of natural justice. So far as the issue of prior approval is concerned, the learned commissioner while passing the impugned order, failed to take into consideration the certificate dated 29.10.2001 issued by the office of the Commissioner of Customs, Mumbai mentioning the model number of the Elevator in question on it, on the basis of which the appellant effected duty free import of the elevator. The matter is required to be remanded to the Adjudicating authority to decide the issue afresh in accordance with law - appeal allowed by way of remand.
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Corporate Laws
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2019 (7) TMI 726
Transfer of Pending Proceedings - Section 434(1)(c) of the Companies Act, 2013 - HELD THAT:- These proceedings be transferred to the National Company Law Tribunal Kolkata Bench, by the Registry of this court, observing all formalities within four weeks of communication of this order. Application disposed off.
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Insolvency & Bankruptcy
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2019 (7) TMI 734
Approval of Resolution plan - Appellant submitted that the Resolution Plan is arbitrary and discriminatory and is against the object of the I B Code - HELD THAT:- Admittedly, as per the original distribution, the Operational Creditor has been paid Nil which is much less than the Liquidation value to which the Appellant is entitled. In such case, we hold that the approved plan is in contravention of Section 30(2) (b) of the I B Code - Further, the distribution as made between the Financial Creditor and the Operational Creditor i.e. 27.83% in favour of the Financial Creditor and Nil amount in favour of the Operational Creditor , is also arbitrary and discriminatory. As per the decision of this Appellate Tribunal in Binani Industries Limited Vs. Bank of Baroda Anr (Supra) [ 2018 (11) TMI 803 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI ] and the Hon ble Supreme Court in Swiss Ribbon Pvt. Ltd. Anr. v. Union of India Ors. (Supra), the Operational Creditors are to be given roughly the same treatment as the Financial Creditors . Such treatment having not been made instead of rejecting the plan, we modify the plan as proposed by Resolution Applicant which also pass the test of Section 30 (2) (b). The Resolution Applicant is allowed to modify and substitute the Resolution Plan and the re-distribution be made in a manner as proposed by 3rd Respondent - appeal allowed to that extent.
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2019 (7) TMI 725
Permission for withdrawal of application filed under section 7 of the I B Code - HELD THAT:- Learned counsel appearing on behalf of Mr. Satyendra Jain Financial Creditor , who filed the application u/s 7 of the I B Code, also accepts the aforesaid fact and also agrees for withdrawal of the petition. We allow the Respondent Mr. Satyendra Jain to withdraw the application filed u/s 7 of the I B Code and the impugned order dated 12th February, 2019 is set aside passed by the Adjudicating Authority, New Delhi Bench - Matter closed as withdrawn.
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Service Tax
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2019 (7) TMI 724
Refund of CENVAT Credit - receipt of services in the premises which are not registered - Some of the unit of appellant were not registered - N/N. 9/2009-ST dated 3.3.2009 - period January, 2011 to March, 2011 - HELD THAT:- It is nowhere disputed by any of the authorities below that all the units are part of the same premises/SEZ unit operating in the said SEZ area and that the service are wholly consumed for the authorised operations. It is also not disputed that the appellant has paid the service tax as well as availed the input services. The invoices shows the payment of service tax on such services - I have been informed that the same have been approved by the Development Commissioner vide letter dated 9.9.2009 and 6.11.2009 respectively. I have also been informed that there is no provision in the online application form to mention all the premises. The rejection of refund claim on the ground of non-registration had come up before a co-ordinate Bench of the Tribunal in the matter of COMMISSIONER OF SERVICE TAX, CHENNAI-II VERSUS SCIOINSPIRE CONSULTING SERVICES (INDIA) PVT. LTD. [ 2016 (10) TMI 41 - CESTAT CHENNAI] in which the Tribunal while relying upon the decision of the Hon ble Karnataka High Court in the matter of MPORTAL INDIA WIRELESS SOLUTIONS (P.) LTD. VERSUS COMMISSIONER OF SERVICE TAX [ 2011 (9) TMI 450 - KARNATAKA HIGH COURT] answered the issue in favour of the assessee. Time and again it has been repeatedly held by the Tribunal that no service tax can be levied on services provided to units situated in SEZ nothwithstanding anything contained in any notification. A combined reading of Section 51 of the SEZ Act read with Section 26 (1) ibid would clearly show that the services in the SEZ shall be exempted from payment of service tax - In my view, in the absence of a statutory provision which prescribes that registration is mandatory, the claim of the Appellant cannot be rejected. It is settled law that any beneficial provision should be interpreted liberally and for a mere procedural lapse, substantive benefit cannot be denied to the Assessee - Since in the instant matter it is only a procedural lapse therefore the same can be condoned. Appeal allowed - decided in favor of appellant.
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2019 (7) TMI 723
Imposition of penalty u/s 76 of FA - delayed payment of service tax - Manpower Recruitment or Supply Agency Service - alleged failure to pay their service tax liability on or before the due date for the period April 2012 to March 2014 - failure to file returns - HELD THAT:- Penalty under Section 76 is for failure to deposit the tax in time. When admittedly appellants were not depositing the tax by the due date, the penalties need to be imposed even if the appellants claim no mens rea - Demand and appropriation of the amounts paid upheld. Classification of services - whether these service qualify to be the Manpower Recruitment Supply Services or are job work services exempted under the Notification 25/2012-ST.? - HELD THAT:- The agreement between the appellant and the M/s Sigma is nothing but a contract labour agreement, executed for the purpose of providing requisite manpower and is not a job work contract. Hence the services provided by the appellant cannot be said to be those in respect of which Sl No 30 of exemption Notification No 25/2012-ST shall apply. - appellants are not eligible for the benefit of said exemption Valuation - addition of Canteen Charges for determining the taxable value - HELD THAT:- The canteen charges are reimbursable expenses for providing the services - Once it is held that these charges have not been recovered from M/s Sigma then by no stretch of imagination can these charges be considered as charges towards providing the taxable service. Hence we hold that such canteen charges which have been recovered by the appellant from their own employees cannot be added to the value determined in respect taxable service provided - Matter for remanded for recomputing the demand after reducing the taxable value by the canteen charges so recovered. Extended period of limitation - HELD THAT:- Since the fact about non-payment of service tax in respect of services provided to M/s Sigma, by treating the agreement as job work agreement was never brought to the knowledge of department hence extended period of limitation has been rightly invoked by the adjudicating authority - The issue of limitation has to be considered on the facts of case in hand and the conduct of the assessee/ appellant. There cannot be application of the decisions in determining the issue of limitation on the basis of the law laid down therein ignoring the facts of case in hand. - Demand confirmed invoking the extended period of limitation. Penalty u/s 76 and 77 of FA - HELD THAT:- It is settled law that penalty under Section 76 77of the Finance Act, 1994 is for the contumacious conduct of the appellants in relation to delay in payment of tax and filing of the relevant returns. These sections do not require establishment of any malafide intentions and mens rea for imposition of penalty. Penalty u/s 76 justified - The appellants had filed their ST-3 returns by the due date hence the we are not in position to uphold the penalty imposed under section 77(2) of the Finance Act, 1994 and also the late fees imposed in terms of Section 70(1) of the Finance Act, 1994 in respect of these returns. Hence penalties and fees imposed in terms of these sections is set aside. Penalty u/s 78 of FA - HELD THAT:- Since the penalties imposed under Section 76 is upheld, penalties imposed under Section 78 cannot be justified, Hence the penalties imposed under Section 78 is set aside. Appeal allowed in part.
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2019 (7) TMI 722
Waiver of penalties imposed - Short payment of service tax - mis-match between the ledger and the bank statement of the respondent - the department was of the view that the service tax payable was ₹ 41,51,6210/- whereas the respondents have discharged service tax amounting to ₹ 29,77,682/- and interest of ₹ 3,67,932/- - demand of service tax alongwith interest and penalties - invocation of section 80 - wilful suppression of facts or not - intent to evade. HELD THAT:- It is true that the issue of service tax on builders was challenged before the Hon ble High Court during the relevant period. It is also not disputed that as soon as the writ petition was rejected by the Hon ble High Court, the respondent instantly took the service tax registration and paid the service tax with interest as per their calculation much before the issuance of show cause notice, although the same was short by few thousand rupees. But that itself shows that there is no mala fide intention to evade the Service Tax on the part of the respondent. There is no suppression of fact because the issue involved is of interpretation of law as the confusion was prevailing amongst the builders about the constitutional validity of the levy of service tax on Builders and Developers. Therefore benefit of doubt that existed in the mind of the assessee is to be given to the respondent. It constitutes a reasonable cause for not paying the service tax in view of Section 80 ibid which was in operation during the period in dispute. Therefore, the learned Commissioner was justified in interfering with the levy of penalty by setting aside the same. Appeal dismissed - decided against Revenue.
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Central Excise
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2019 (7) TMI 733
CENVAT Credit - common inputs used in the manufacture of dutiable and exempted final products - zinc scarp (exempted goods ) produced in process of manufacture of dutiable good - demand an amount equal to 6% of the value of the zinc scarp - non-maintenance of separate records - Rule 6 of CCR, 2004 - period from March 2015 to June 2017 - Department has relied upon Explanation (1) introduced w.e.f. 01.03.2015 to demand the duty raised in the SCN HELD THAT:- It has to be seen that though the said Explanation puts forward a deeming provision that non-excisable goods cleared by payment of consideration are also to be considered as exempted goods, there is no corresponding amendment made in sub-rule (1) of Rule 6 so that the goods that emerged out of process of manufacture falling in clause (1) are also to be considered as exempted goods. As per various decisions, the goods which are not consciously manufactured by the appellants and which emerged in the process of manufacture cannot be considered as goods manufactured by the appellants - Thus, when the zinc scrap which is a waste arising out of process of manufacture of finished goods, is not goods manufactured by the appellant, the same cannot be considered as exempted goods manufactured by them. Credit allowed - appeal allowed - decided in favor of appellant.
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2019 (7) TMI 732
Clandestine removal - allegation of wrong availment of area based exemption - allegation that goods shown to have been manufactured and cleared from Rookee unit, so as to avail the benefit of area based exemption whereas in fact manufactured and cleared from their Ghaziabad unit - allegation based upon the investigations made at the Roorkee Units and the statements of the Managing Director and four employees of Roorkee Unit - different product manufactured by the units - HELD THAT:- The entire case of the Revenue is based upon the scrutiny of the documents at Roorkee . Apart from the statement of the four employees of the Roorkee unit and the Managing Director, there is no further evidence produced by the Revenue in the shape of statements of transporters of the goods or the identification of the buyers. There was also no shortage of raw materials at Roorkee unit, thus indicating that the documents maintained at Roorkee unit were perfect - Wherever the GR numbers are not reflected in the invoices, Managing Director has indicated in his statement that in those case the customers themselves have taken the delivery at the factory gate of Roorkee unit and arranged transport. The Revenue has not bothered to make enquiries from the customers to verify the truth of the said statement of the Managing Director. Appellants have shown documentary proof in the form of GRs showing dispatch to Rishi Kesh, Chandigarh and Pathankot. Revenue has not made any efforts to counter-check this factual aspects either from the transporters or from D.G. Border Roads Organisation. They have placed two affidavits to that effect before the adjudicating authority which do not stand considered by the adjudicating authority - Apart from that the appellants have also produced confirmatory letters from various customers to the effect that they received the goods only from Roorkee unit. The adjudicating authority has not bothered to examine the said customers and has simplicitor discarded the said evidence. It is well settled law that the findings of clandestine removal are required to be established on the basis of positive and sufficient evidences. As already observed, in the present case the demand is being confirmed against Ghaziabad unit, without producing any evidence against the said manufacturing unit. There is not even an iota of evidence indicating that the clearances stand effected from the said unit. Appeal allowed - decided in favor of appellant.
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2019 (7) TMI 731
CENVAT Credit - input services - Outward Transportation of Goods up to the buyer s premises - the sale is on FOR basis - place of removal - HELD THAT:- It is not necessary that there should be a separate contract for supply of goods. The parties can agree to the terms and conditions of the sale in the purchase orders itself. This becomes a concluded contract when the offer is accepted by the supplier/buyer - Therefore, when the purchase orders itself show that the condition for sale is FOR basis, the observations made by the authorities below that the appellant has failed to produce any evidence/contract establishing that they have borne the freight charges, insurance, etc., is without any factual basis and unacceptable. In the present case, letters/certificates have been obtained by the appellant from the purchasers of the goods showing that the purchasers have not paid any freight charges separately. This strongly implies that the appellants have borne the freight charges and have included it in the assessable value on which Excise Duty has been discharged by them. Credit allowed - appeal allowed - decided in favor of appellant.
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2019 (7) TMI 721
Imposition of penalty u/r 26 of Central Excise Rules 2002 - Clandestine removal or not - supply of packing material and loose Gutkha - HELD THAT:- Apart from the fact that supply of loose Gutkha and packing material by itself cannot be held to be a crime or any illegal activity so as to call for imposition of penalty, the entire case of the Revenue is primarily based upon the statement of Shri Sanjay Rathore, who was a co-noticee as also on the statement of M/s.Kanti Chemicals. The said two deponents have not been examined by the Commissioner in terms of the provisions of section 9-D of the Central Excise Act and as is the well settled law, the said statements cannot be admitted as an evidence. If the said two statements are taken out of consideration, nothing survives with the Revenue so as to hold against the appellant. The adjudicating authority has not given any reason to doubt or reject the said statement of the appellant, which also stands recorded in terms of the provisions of section 14 of the Central Excise Act. In the absence of any positive, tangible and sufficient evidences against the appellant, there are no reasons to uphold the penalty upon him - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2019 (7) TMI 730
Refund claim - Review of finalized assessment order - subsequent cancellation of the C form issued to the dealer in Haryana in respect of the inter-state transaction, which was validly issued - suo motu an exercise of the powers of AVATO conferred under 74B (5) of the Delhi Value Added Tax 2004 - HELD THAT:- The impugned order makes no mention of the date of cancellation of the said C form. It is obvious that it has been cancelled subsequent to the assessments under the CST Act being finalised by the AVATO in the present case. Also, the C form has not been cancelled because the firm in Haryana does not exist. In fact it appears to have migrated to the GST regime. The said firm is said to be a tax defaulter. Once the C form was validly issued and verified by the AVATO as indicated in the order dated 5th July 2017, then notwithstanding its subsequent cancellation, the assessment order finalised under the CST Act cannot be reviewed . Jurisdiction - powers of AVATO under Section 74(B)(5) DVAT Act to review the earlier order dated 5th July, 2017 - order reviewed suo moto but without any SCN being issued to the Petitioner - HELD THAT:- The said exercise is declared to be unlawful. The refund due to the Petitioner together with the interest thereon be credited to the account of the Petitioner, if not already done, within a period of four weeks - petition allowed.
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2019 (7) TMI 729
Disallowance of ITC - petitioner claimed refund - Jurisdiction of Court under Article 226 - rank perversity - alternative appeal remedy - HELD THAT:- The petitioner ought to be directed to work out the remedies against Exts.P6 and P6(a) before the appellate authority. This Court after taking note of bare details exhibited in Exts.P1, P4, P5 and P6 was also of the view that without further examination the ground of perversity raised in the writ petition could be considered merits decided. But as rightly pointed out by the learned Government Pleader the exercise were for the limited purpose of finding out the ground of perversity, this Court may encroach into the function of an appellate authority where the facts threadbare are considered, thereafter principle of law decided. The petitioner is given liberty to file appeal within the period of limitation prescribed by the statute and also file an application seeking stay of the order in Ext.P6 - directed to maintain status quo as on date vis-a-vis Ext.P6 for a period of two months - Petition disposed off.
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2019 (7) TMI 720
Tax Deducted at Source - It is the case of the learned counsel for writ petitioner that the work done by the writ petitioner for Chennai Corporation is in the nature of civil works - Section 13 of TNVAT Act - Alternative remedy - HELD THAT:- The rule of alternate remedy or the rule pertaining to exercise of writ jurisdiction under Article 226 notwithstanding alternate remedy, is not an absolute rule, but is a rule of discretion. Though it is not a rule of compulsion and it is a rule of discretion, this Court deems it appropriate to refer to two judgments of Hon'ble Supreme Court viz., UNITED BANK OF INDIA VERSUS SATYAWATI TONDON AND OTHERS [ 2010 (7) TMI 829 - SUPREME COURT] and AUTHORIZED OFFICER, STATE BANK OF TRAVANCORE AND ANOTHER VERSUS MATHEW K.C. [ 2018 (2) TMI 25 - SUPREME COURT] - To be noted, Satyawati Tondon principle was reiterated in latter of the two i.e., K.C.Mathew. In Satyawati Tondon case and K.C.Mathew regarding rule of alternate remedy, the principle that such a rule, though a rule of discretion and not a rule of compulsion, should be exercised with greater rigour in fiscal law statutes has been laid down. This Court is convinced that this is a fit case of relegation to alternate remedy of an appeal to the jurisdictional Deputy Commissioner under Section 51 of TNVAT Act.
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2019 (7) TMI 719
Maintainability of petition - availability of alternative remedy - It is the submission of learned counsel for writ petitioner that if there is a mismatch, the Assessing Officer should have proceeded against the sellers from whom the writ petitioner has purchased and should not have mulcted the writ petitioner with tax - HELD THAT:- This Court is of the considered view that these are all grounds which have to be raised in a statutory appeal. There is no disputation or disagreement before this Court that a statutory appeal is available to the writ petitioner under Section 51 of TNVAT Act. This Court is of the considered view that in the instant case, considering the facts and circumstances of this case, this Court is unable to persuade itself to believe that there is violation of M/S. JKM GRAPHICS SOLUTIONS PRIVATE LIMITED VERSUS THE COMMERCIAL TAX OFFICER [ 2017 (3) TMI 536 - MADRAS HIGH COURT] principle. It comes out clearly that alternate remedy is not an absolute rule. It is a rule of discretion. This Court is unable to persuade itself to believe (in the light of narrative thus far) that there is any violation to JKM Graphics Solution principle as alleged. This Court deems it appropriate to relegate the writ petitioner to the alternate remedy of an appeal under Section 51 of TNVAT Act. As this Court is relegating the writ petitioner to alternate remedy, all questions raised including the questions raised in the instant writ petition are left open to be raised before the Appellate Authority. Reserving the rights of the writ petitioner with regard to appellate remedy, this writ petition is dismissed.
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2019 (7) TMI 718
Validity of assessment - TNVAT Act, 2006 - purchase from sellers, whose registrations have been cancelled - mismatch of records - HELD THAT:- There is a long line of authorities of Hon'ble Supreme Court on this aspect of the matter i.e, exercise of writ jurisdiction notwithstanding alternate remedy. To put these principles in a nutshell, it can be said that rule of alternate remedy is not an absolute rule. In other words, it is not a rule of compulsion, but it is a rule of discretion. Though it is a rule of discretion, Hon'ble Supreme Court in UNITED BANK OF INDIA VERSUS SATYAWATI TONDON AND OTHERS [ 2010 (7) TMI 829 - SUPREME COURT] , has held that, with regard to matters pertaining to taxes, cess etc., i.e., fiscal law in general, the rule of alternate remedy should be applied very strictly or in other words the rule should be applied with utmost rigour. This Court is of the considered opinion that this is a fit case to relegate the writ petitioner to alternate remedy i.e., statutory appeal (under Section 51 of TNVAT Act) to the jurisdictional Appellate Deputy Commissioner. If the writ petitioner chooses to avail alternate remedy, it is open to the writ petitioner to seek condonation of delay subject to the time periods prescribed under Section 51 of TNVAT Act. Besides seeking condonation of delay, it is also open to the writ petitioner to seek exclusion of time spent in the instant writ petition under Section 14 of the Limitation Act. These writ petitions are disposed of relegating the writ petitioner to the statutory appeal remedy in the aforesaid manner.
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2019 (7) TMI 717
Exemption in respect of turnover - turn over involved in the import of equipments from the foreign country - Section 5(2) of the CST Act - reversal of estimation of turn over made on the basis of Rule 9(2A) (a) of the KVAT Rules - input tax credit - HELD THAT:- The assessing authority had not perused the terms of the contract or the purchase order or the documents with respect to the import. Further, we take note of the contradictions on the factual findings with respect to reimbursement of the customs duty. In such circumstances, we are of the considered opinion that the materials available on record need to be re-evaluated in order to arrive at a conclusion as to whether the import was made pursuant to a contract between the awarder and the foreign company and as to whether the import was in pursuance of a purchase order issued by the awarder etc. It is also need to ascertain whether the goods were transmitted in the name of the awarder and whether it was cleared on behalf of the awarder, M/s KRL - the Appellant Tribunal can be directed to reconsider the above aspects and to arrive at a clear finding on the said aspect. Sustainability of the return based on estimation of turnover relying on Rule 9 (2A)(a) - HELD THAT:- In Rule 9(1) the total turnover of a dealer engaged in works contract is stipulated as the contract amount received or receivable. Under subrule (2) of Rule 9, in clause (b) it is provided that, in relation to a works contract in which the transfer of property in goods had taken place not in the form of goods, but in some other form, the value of such goods at the time of incorporation into the work shall be considered as total turnover. Under sub-rule (2A)(a) of Section 9, it is provided that, for the purpose of computing the turnover as provided under sub-rule (2)(b), the value of the goods transferred in execution of the works contract shall not be less than the purchase value and shall include the incidental char instantly purchase mentioned therein. Based on the above provisions, it is contented by the learned Government Pleader that the assessing authority had estimated the turn over by taking note of the provisions contained in Rule 9 (2A) (a). It is contended that, the finding of the Tribunal in this regard is illegal and incorrect. It is pointed out that the Rule quoted by the Tribunal is Rule 9(3) (in the un-amended form) and not Rule 9(2A) (a) - Since we have decided to remit the matter to the Tribunal to look into the question of exemption with respect to the goods imported, we think it only appropriate to direct the Tribunal to consider and decide this issue also afresh, on the basis of the relevant Rule applicable. Denial of the claim for input tax credit - HELD THAT:- The question remains as to whether the credit of input tax against the output tax can be denied based on the fact that the Form of invoice on the strength of which purchase was made by the assessee company was drawn in Form No.8B. Since the other questions are remanded for fresh decision, we are of the opinion that the above issue also can be left open for consideration and for a fresh decision by Appellate Tribunal. The tribunal shall restore the appeal on its file and dispose of the same afresh, after affording opportunity of hearing to both sides - petition allowed by way of remand.
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Indian Laws
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2019 (7) TMI 716
Unconditional stay of Arbitral award - stay of money decree - Proceedings pending before High Court - paymnet on completion of works contract - non-filing of injunction application in the proceedings under Section 34 of the Arbitration Act - HELD THAT:- The Law Commission has categorically recommended that there should be no automatic stay of the arbitral award. While so recommending, the Law Commission report makes no exception for the Government. On the basis of the said report of the Law Commission, the old Section 36 was substituted in 2016, with retrospective effect from 23.10.2015. The backbone of the submissions on behalf of the Respondent-State of West Bengal is that under the provisions of Order XXVII Rule 8A of the CPC, no security shall be required from the Government in case of there being a money decree passed against the Government, and the execution of which is prayed for. If such submission of the respondent is accepted then the same would mean that mere filing of an objection under Section 34 of the Arbitration Act by a Government shall render the award unenforceable as the stay order would be passed in a mechanical manner and as a matter of course, without imposing any condition against the Government judgment debtor. If the contention is accepted, the effect would be that insofar as the Government is concerned, the un-amended provision of Section 36 of the Arbitration Act would automatically come into force. In the present context, the phrase used is having regard to the provisions of CPC and not in accordance with the provisions of CPC. In the latter case, it would have been mandatory, but in the form as mentioned in Rule 36(3) of the Arbitration Act, it would only be directory or as a guiding factor. Mere reference to CPC in the said Section 36 cannot be construed in such a manner that it takes away the power conferred in the main statute (i.e. Arbitration Act) itself. It is to be taken as a general guideline, which will not make the main provision of the Arbitration Act inapplicable. A plain reading of Order XXVII Rule 8A of CPC would make it clear that the same is only regarding security as mentioned in Rule 5 and 6 of Order XLI CPC, which is not to be demanded from the Government while considering the stay application filed by the Government. It, however, does not provide that the decretal amount cannot be required to be deposited in the appeal against a money decree. Although we are of the firm view that the archaic Rule 8A of Order XXVII CPC has no application or reference in the present times, we may only add that even if it is assumed that the provisions of Order XXVII Rule 8A of CPC are to be applied, the same would only exempt the Government from furnishing security, whereas under Order XLI Rule 5 of CPC, the Court has the power to direct for full or part deposit and/or to furnish security of the decretal amount. Rule 8A only provides exemption from furnishing security, which would not restrict the Court from directing deposit of the awarded amount and part thereof. The impugned order passed by the Calcutta High Court granting unconditional stay of the arbitration award dated 21.01.2010, cannot be sustained in the eye of law - Appeal allowed.
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2019 (7) TMI 715
Leave to appeal - Judgment of acquittal in a case under Section 138 of the Negotiable Instruments Act, 1881 - HELD THAT:- Learned counsel for the applicant-appellant has made sincere attempt to pursuade this Court to take a different view, however, keeping in view two positive findings of the Court, one with regard to the admission of the appellant that the cheque in question was handed over to him on 14/15.07.2016 whereas the complaint is dated 30.03.2016 and in Ex.D1 which is a report submitted in previous litigation between the parties that various blank signed cheques have been given by the accused to the applicant-appellant and his accomplices, this Court does not find any ground to grant leave to appeal. Appeal dismissed.
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