Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 26, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Educational Institution or not - Charitable Society imparting Medical Education - The applicant has entered into a joint project with the State and Central Governments to form MGIMS which is an entity different from that of the applicant. Hence, the applicant cannot be said to be satisfying all the criteria of an "Educational Institution".
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Refund of inverted duty structure/ unutilized input tax credit - Scope of Section 54(3) of the CGST Act read with Rule Rule 89(5) regarding "input services" - there is nothing in the Rule 89 of the CGST Rules, 2017, as amended, that overrides the Section 54 of the CGST Act, 2017 and they have to be read together harmoniously while granting refunds.
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Transitional Credit - transition to GST regime - prayer to Nodal Officer, to forward writ petitioner's file to fourth respondent for reopening the aforesaid TRAN-01 - Officer director to pass a speaking order after hearing on the issues of short credit and manual filing.
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Benefit of waiver earlier granted for Entertainment/Luxury Tax in GST regime - The State Government may have taken a view on the report dated 6 March 2019 of the high level committee. If the same has been accepted, the State Government should take a policy decision so that the benefit can be extended to all similarly situated parties - matter adjourned for government response
Income Tax
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Reassessment u/s 147 - Sanction granted by the CIT u/s 151 - simply written “Yes I agree” which does not in any manner shed any light as to whether there was any application of mind at all by the Pr.CIT, - When a superior authority is given power by the legislature, to grant sanction to then that power needs to be exercised with due care and circumspection and after due application of mind - reassessment quashed
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Disallowance u/s 40(a)(ia) - payment of pigmy commission had direct nexus with the business income of the assessee on which deduction u/s 80P(2)(a)(i) was claimed - If the disallowance u/s.40(a)(i) results in increase in income which would otherwise go to enhance the income on which the Assessee is eligible for deduction, then the CBDT Circular would be applicable and deduction will be allowable
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Notice u/s 271AAB to levy penalty u/s 271(1)(c) - AO gets the jurisdiction to levy the penalty by issuing a notice and therefore, it is not a procedural requirement but is a jurisdictional one - two provisions operate in different circumstances and by issuance of notice u/s 271AAB AO cannot thereafter change it to section 271(1)(c) and levy penalty thereunder - no penalty
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Reassessment u/s 147/148 - Initiation of rectification u/s 154 by the AO and simultaneously initiating the reassessment u/s 147/148 on the same reasons, particularly when there is no failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment, are not sustainable in the eyes of law and is liable to be quashed
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Abatement of pending appeal before High Court - notice not served to assessee/LR - Appellant died and his LRs are not available to argue - present Appeal as having abated with a liberty to the LR to revive the said Appeal with proper Application in case, they consider it appropriate
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Penalty u/s 271(1)(c) - limitation period u/s 275(1)(a) - limitation begins to run from the date of the order of the ITAT was served upon the CIT (Judicial) - penalty order in the present case to be barred by limitation
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Enhancement by CITA) to book profit computation u/s.115JB - provisions were sought to be added u/s 115JB only pursuant to an amendment by the FA 2008 w.e.f 01/04/2001 - Hence, on the date of passing of order u/s.143(3) on 31/01/2006, the ld. AO could not have added the same - what could not have been done by the ld. AO as per law prevailing at that time, the ld. CIT(A) could not do by exercising enhancement powers
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Derivative trading loss as business loss - when undisputedly assessee has entered into transaction of derivatives after 01.04.2006 in a recognised stock exchange as per Circular No.2/2006 dated 25.01.2006, loss arising in F&O transaction has to be treated as business loss - right in treating the derivative trading loss as business loss u/s 43(5) clause (c) & (d)
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Power of CIT(A) for enhancement - declare TDS return as non-est - appeal relates to fee u/s. 234E - Act contains provision for declaring a return of income filed as invalid u/s.139(9) but no such provision for declaring a return of TDS as invalid - there is no power conferred, either under those provisions or under any other provisions of the Act, to declare the return of TDS filed u/s 200(3) as non est
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Disallowance on account of non- utilisation of loan - @ 14% of loan amount - there is nothing on the record that the assessee has diverted interest bearing borrowed funds by granting interest free loans to sister concern and even The turnover of the assessee was increase @ 17% - it cannot be concluded that the assessee used the working capital for other than business purpose - disallowance deleted
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Allowability of business loss - the embezzlement by one of the Directors/employee during the ordinary course of business is a pilferage of the company funds can be a business loss, irrespective of criminal prosecution of the accused director/employee - subsequent recovery if, any, would not determine the claim of the Assessee in the present year writing off the same as a business loss
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Stay petition - prima facie case - on objections being filed by the assessee, the AO disposed of the objections then in appeal the CIT(A) ought to have considered the validity of the reopening and not rejected the appeal on the ground that the assessee participated in response to the notice issued u/s 148 - this would be sufficient to hold that the assessee has made out a prima facie case
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Understated/suppressed production - assessee had supplied all the relevant details to the lower authorities such as register which are subject to regular check and subject to audit, Raw material Register, production register and audited books of account with tax audit report - since there was no specific defect was found by the AO, no addition is called for
Customs
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Clarifications regarding Refunds of IGST paid on import in case of risky exporters
DGFT
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Allocation of quantity for export of preferential quota sugar to EU under CXL quota
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Inclusion of Paragraph 2.79F in the Handbook of Procedures of the Foreign Trade Policy (FTP) 2015-20 to lay down the procedure for Global Authorisation for Intra-Company Transfer (GAICT) of SCOMET items/software/technology
Service Tax
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Rejection of Refund claim - export of services - the entire credit which was carried forward in TRAN-1 stood reversed by the appellant voluntarily in its GSTR-3B filed for the month of April 2018 - The denial of refund is not in accordance with law.
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Refund Claim u/s 104 of the Finance Act, 2017 - retrospective exemption - The time-limit prescribed u/s 104 (3) is only directory, but however, the time as well as the procedure prescribed under Section 11B applies in full. - refund to be allowed if the refund application is within the time-limit prescribed u/s 11B and not otherwise
Central Excise
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Refund claim - destroying goods outside the factory premises without permission - Expired drugs / medicines - conditions are procedural or mandatory in nature - ESTAT committed fundamental error in construing the Exemption Notification as directory by condoning the lapse on the part of the assessee
VAT
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Best Judgement Assessment - legislation itself has undergone two changes upon introduction of the VAT Act and thereafter GST regime - In such facts, no useful purpose would be served in remitting the matter to the authority to pass a fresh order at this belated stage after more than 20 years of the close of the assessment year.
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Interest on refund - the wording of Section 42(1) of DVAT Act is unambiguous which talks of the two dates i.e. date the refund was due to be paid to the person and “until the date‟ on which the refund is “given‟ - The word “given‟ should mean, the date on which the refund amount is actually received by the Petitioner and not the date on which the refund order is issued - directed to pay interest
Case Laws:
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GST
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2019 (7) TMI 1229
Refund of inverted duty structure/ unutilized input tax credit - input services - Section 54(3) of the CGST Act - in-principle applicability of Notification 21 and 26 - HELD THAT:- The contract in the nature of services. Execution of construction of large projects such as MTHL Project entails procurement of various inputs, input services and capital goods such as cement, concrete, steel and steel structures, bridge accessories, formworks, plant and equipment, labour, etc. All such goods and services attract GST at varied rates, depending on the nature of such procurement. The ITC paid on the inputs and services are higher than output supply. Therefore, the transaction is covered under Inverted duty structure. In such cases as in the subject case, to avoid the cascading effect, Govt. has allowed relief in the form of Refund of unutilized Input tax Credit as provided in Section 54 of the CGST Act. A reading of the provisions of Section 54 (3) (ii) and Notification No 21 of 2018 implies that the formula prescribed (for determination of eligible refund amount) under Rule 89(5) of CGST Rules i.e. for Net ITC only considers ITC on inputs , for computing the amount of eligible refund. Therefore any portion of the ITC availed on 'input services' is not available as refund under the said Rules - thus, the refund of unutilized input tax credit (comprising of both goods and services) shall be allowed only in cases mentioned in (i) and (ii) i.e the allowance of such refund of credit is only when credit availed on goods is higher that the tax rate on output supplies. Thus, there is nothing in the Rule 89 of the CGST Rules, 2017, as amended by the Notifications 21 and 26 of 2018, that overrides the Section 54 of the CGST Act, 2017 and they have to be read together harmoniously while granting refunds. Whether the Applicant wishes to understand how does the Notification 21 and 26 apply in a scenario where factually following financials may exist? - scope of Advance Ruling application - HELD THAT:- Section 95 says that, the term 'advance ruling' means a decision provided by this authority to the applicant on matters or questions specified in subsection 2 of Section 97, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant - We find from the above subsection 2 of Section 97, that the method of calculation of refund is not covered therein. The provisions of Section 95 state that the applicant shall ask the question in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by them on matters or questions specified in, and to that extent only, the authority shall answer/give a ruling to those category of issues. Thus this query is with respect to the formula involved in calculation of refund. Such queries do not fall under Section 97 of the CGST Act - in the present case, applicant has posed the question no 2 that is not covered under the category mentioned from (a) to (g) of subsection (2) of section 97 of CGST ACT. Hence we refrain from taking up the question for any discussion.
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2019 (7) TMI 1228
Benefit of waiver earlier granted for Entertainment/Luxury Tax in GST regime - eligibility and entitlement Certificate dated 5 April 2017 for the period 1 April 2017 to 31 March 2027 - HELD THAT:- The benefit granted under the eligibility/entitlement certificate dated 5 April 2017 and 22 June 2016 could not be given effect to and even though the Petitioner had set up a hotel on the basis of the representation made by the State Government. The Respondents do not dispute that the facts in this case are similar/identical to those in the case of ADLABS ENTERTAINMENT LIMITED VERSUS UNION OF INDIA [ 2018 (12) TMI 1353 - BOMBAY HIGH COURT ] . The only distinction, if any, in this case, the waiver was of luxury tax and in the earlier case, the waiver was of entertainment tax. Both of the taxes stand subsumed in the GST. The State Government may have taken a view on the report dated 6 March 2019 of the high level committee. If the same has been accepted, the State Government should take a policy decision so that the benefit can be extended to all similarly situated parties. For the purpose of taking instructions, Mr. Kadam, learned AGP for the State, seeks time and requests this petition be heard along with ADLABS ENTERTAINMENT LIMITED VERSUS UNION OF INDIA (supra). - adjourned by a period of two weeks - Stand over to 30 July 2019.
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2019 (7) TMI 1227
Permission for withdrawal of petition - Section 74 of the Central Goods and Services Tax Act, 2017 - HELD THAT:- We have no reason to doubt that the Appellate Authority shall decide both the applications at the earliest and in accordance with law, preferably within a period of two weeks. The appeal may also be decided at the earliest. Petition disposed off.
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2019 (7) TMI 1195
Educational Institution - Charitable Society having the main object and factually engaged in imparting Medical Education - compliance with the provisions of Central Goods and Service Tax Act, 2017 and Maharashtra Goods and Service Tax Act, 2017 or not - requirement of registration - no taxable supply - distinct persons - HELD THAT:- The applicant and MGIMS can be considered as distinct persons since MGIMS is a joint project between the applicant and the State/Central Govts. Thus the educations services are seen to be rendered by MGIMS and not the applicant. The Judicial Authorities have already held that Applicant Society is a 'State' under Article-12 of Constitution of India. MGIMS has been considered a State, within the meaning of Article 12, by the Hon'ble Court. It is not that Kasturba Health Society has been considered as a 'State'. The conclusion drawn by the applicant that they can also be considered as 'State' is not correct since it is also seen that the Respondent in the above case mentioned by the applicant is MGIMS and not the applicant. Hence, both the applicant and MGIMS are not one and the same organization. Whether the applicant, a Charitable Society having the main object and factually engaged in imparting Medical Education, satisfying all the criteria of Educational Institution , can be said to be engaged in the business so as to cast an obligation upon it to comply with the provisions of Central Goods and Service Tax Act, 2017 and Maharashtra Goods and Service Tax Act, 2017 in totality? - HELD THAT:- It is MGIMS which appears to be engaged in imparting Medical Education and not the applicant. The applicant has entered into a joint project with the State and Central Governments to form MGIMS which has a different form from that of the applicant. Hence, the applicant cannot be said to be satisfying all the criteria of an Educational Institution . Whether the applicant, a Charitable Society having the main object and factually engaged in imparting Medical Education, satisfying all the criteria of Educational Institution is liable for registration under the provisions of section 22 of the Central Goods and Service Tax Act, 2017 and Maharashtra Goods and Service Tax Act, 2017 or it can remain outside the preview of registration in view of the provisions of section 23 of the said act as there is no Taxable supply? - HELD THAT:- We do not agree with the applicant's contention that they are imparting Medical Education and satisfying all the criteria of an Educational Institution - Scheme GST being a tax on the event of 'supply' every supplier needs to get registered. However, as per the scheme of the Act, not every supplier is required to get registered. Only those suppliers, whose aggregate turnover of all supplies exceeds the threshold limit as prescribed under Section 22 (including exempted and taxable supplies). Thus to be registered a person satisfies two conditions namely, supply of taxable goods or services or both and aggregate turnover in a financial year exceeds threshold limit. Thus a person who is engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax is not liable for registration under Section 22 of the GST Act. Thus even without referring to section 23 of the Act, we can say that a person, whose aggregate turnover of all supplies is other than taxable supply, is not liable for registration - The applicant has not given details of the business conducted by it and therefore considering the fact that it is MGIMS and not the applicant who are imparting Medical Education, the liability of the applicant to obtain registration will depend on the facts and circumstances of their business. Whether the fees and other charges received from students and recoupment charges received from patients (who is an essential clinical material for education laboratory) would constitute as outward supply as defined in section 2 (83) of The Central Goods and Service Tax Act, 2017 and Maharashtra Goods and Service Tax Act, 2017 and if yes then whether it will fall in classification entry at Sr. No 66 or the portion of nominal amount received from patients (who is an essential clinical material for education at Sr. No. 74 in terms of Notification 12/2017 Central Tax - dt. 28/6/2017? - HELD THAT:- Such fees and other charges and recoupment charges appear to be collected by MGIMS/Kasturba Hospital. Since the supply in this case is not done by the applicant, as per Section 95 of the CGST Act, they cannot apply for advance ruling and the same is outside the purview of this authority. Whether the cost of Medicines and Consumables recovered from OPD patients along with nominal charges collected for Diagnosing by the pathological investigations, other investigation such as CT-Scan, MRI, Colour Doppler, Angiography, Gastroscopy, Sonography during the course of diagnosis and treatment of disease would fall within the meaning of composite supply qualifying for exemption under the category of educational and / or health care services? - HELD THAT:- Such fees and other charges and recoupment charges appear to be collected by MGIMS/Kasturba Hospital. Since the supply in this case is not done by the applicant, as per Section 95 of the CGST Act, they cannot apply for advance ruling and the same is outside the purview of this authority. Whether the nominal charges received from patients (who is an essential clinical materials for education laboratory) towards an Unparallel Health Insurance Scheme to retain their flow at one end for the purpose of imparting medical education as a result to provide them the benefit of concessional rates for investigations and treatment at other end would fall within the meaning of supply eligible for exemption under the category of educational and / or health care services? - HELD THAT:- It is not clear from the submissions as to who is receiving such nominal charges from patients. From the submissions made by the applicant we find that such charges appear to be collected by MGIMS/Kasturba Hospital and since the supply in this case is not done by the applicant, as per Section 95 of the CGST Act, they cannot apply for advance ruling and the said matter is outside the purview of this authority. Whether the nominal amount received for making space available for essential facilities needed by the students and staffs such as Banking, Parking, and Refreshment which are support activities for attainment of main activities and further amount received on account of disposal of wastage would fall within the meaning of supply qualifying for exemption under the category of educational and/or health care services? - HELD THAT:- It is not clear from the submissions as to who is receiving such nominal amounts from students and staff. From the submissions made by the applicant we find that such amounts appear to be collected by MGIMS/Kasturba Hospital and since the supply in this case is not done by the applicant, as per Section 95 of the CGST Act, they cannot apply for advance ruling and the said matter is outside the purview of this authority.
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2019 (7) TMI 1194
Transitional Credit - transition to GST regime - prayer to Nodal Officer, to forward writ petitioner's file to fourth respondent for reopening the aforesaid TRAN-01 - HELD THAT:- There is no dispute and disagreement that authorised representative of writ petitioner had considerable difficulty in going before the second respondent on 27.3.2019. It is also not in dispute that this was owing to lack of clarity about which Officer should hear the authorised representative of writ petitioner. In effect, there is no disputation that nothing happened on 27.3.2019 before the second respondent. This Court is of the considered view that it would be appropriate to direct the second respondent now hear out writ petitioner's authorised representative (pursuant to proceedings dated 26.3.2019 made by my predecessor learned Judge, more particularly paragraph-7 thereof) and pass orders within a fortnight therefrom on writ petitioner's grievance qua short credit including manual filing. Petition disposed off.
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Income Tax
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2019 (7) TMI 1226
Exemption of the income arising out of its export business - Whether the duty drawback of Appellant which is included in the purchase of the appellant which forms the part of expenses of the eligible unit ? - HELD THAT:- The case of the assessee seeking exemption of the income arising out of its export business, is squarely covered by the Judgment of the Supreme Court in the case of Liberty India [ 2009 (8) TMI 63 - SUPREME COURT] since the receipts in question arise out of the duty draw back payment of the Government of India. In Liberty India, as is well known, the Supreme Court had held that the DEPB benefits (similar to the duty draw back payments) would not qualify for exemption from tax since the same are not directly connected to the assessee's export business. Assessee placed reliance on the subsequent decision of the Supreme Court in the case of CIT V/s. Meghalaya Steels Ltd. [ 2016 (3) TMI 375 - SUPREME COURT] . We are conscious that in such decision, the Supreme Court had granted the benefit of exemption in respect of a subsidy received from the Government. In the process, the Supreme Court had held that the ratio laid down by the Supreme Court in the case of Liberty India (supra) would not apply in such a case. However, we cannot apply the decision of the Supreme Court in the case of Meghalaya Steels Ltd. (Supra) since the case of the present assessee is squarely covered by the decision in the case of Liberty India (Supra). No question of law arises.
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2019 (7) TMI 1225
Penalty u/s 271(1)(c) - levied after the expiry of the limitation period u/s 275(1)(a) - Tribunal order served on the CIT (Judicial) - ITAT deleted penalty - HELD THAT:- ITAT has followed this Court s decision in Odeon Builders Private Limited [2017 (3) TMI 1266 - DELHI HIGH COURT ] and held that even for the purposes of the penalty order under Section 271(1)(c) read with Section 275(1)(a) the limitation begins to run from the date of the order of the ITAT was served upon the CIT (Judicial). Revenue sought to distinguish the said decision in Odeon Builders Private Limited on the ground that it was in context of the Revenue filing an appeal under Section 260A. However, he was unable to dispute that the wording of Section 275 (1) (a) as far as Commissioner of Income Tax and other officers was identical to the wording in both Section 158 (BFA)(3)(c) and Section 260 A of the Act. Consequently, the Court finds no error in the ITAT having followed the decision of this Court in Odeon Builders Private Limited to hold the penalty order in the present case to be barred by limitation. - Decided against revenue
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2019 (7) TMI 1224
Addition on account of the excess burning loss - loss shown by the assessee ranging from 7.64% to 10% - AO estimated the burning loss @2% of the total input of the raw material - Tribunal deleted this addition but confirmed addition based on GP rate of earlier year - HELD THAT:- Having heard Ms.Mauna Bhatt, learned Senior Standing counsel appearing for the revenue and having gone through the materials on record, we are of the view that no error not to speak any error of law could be said to have been committed by the tribunal in recording the aforesaid findings. The matter is substantially on facts much less on any question of law. In view of the concurrent findings of fact recorded by two revenue authorities against the revenue, we are not inclined to disturb such finding. In the result, this appeal fails and is hereby dismissed.
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2019 (7) TMI 1223
Stay petition - seeking refund the tax recovery made - HELD THAT:- During the pendency of the proceedings before the CIT(A), respondent No.2 has issued a letter of attachment to the petitioner s bankers and the entire demand has been recovered through the bankers of the petitioner. Being aggrieved by the same, the petitioner is before this Court. Having heard the learned counsel appearing for the parties and perusing the material on record, more particularly, in view of the tax demanded being recovered by the respondent Authorities, this Court is of the considered opinion that interest of justice would be sub-served in directing ITAT to dispose of the appeal in accordance with law in an expedite manner.
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2019 (7) TMI 1222
Stay petition - prima facie case - substantial amount already paid - HELD THAT:- In the instant case, we find that on objections being filed by the assessee, the Assessing Officer disposed of the objections and passed an order on 10.11.2017. Therefore, we are of the prima facie view that the CIT(A) ought to have considered the validity of the reopening and not rejected the appeal on the ground that the authorized representative of the assessee participated in response to the notice issued u/s 148. This, in our considered view, would be sufficient for the present to hold that the assessee has made out a prima facie case. Coming to the next aspect as regards the balance of convenience is concerned, the learned counsel for the assessee relied upon a decision of the Kolkata Bench of the Tribunal in respect of one Ravindra Sanghai (HUF) [ 2012 (5) TMI 811 - ITAT KOLKATA] and submitted that it also pertains to dealing of shares in the company M/s.Multiplus Resources. In the said case, the Tribunal ruled in favour of the assessee by order dated 22.05.2012. Thus, we find that the balance of convenience, at this stage, would lean in favour of the assessee. Total tax paid by the assessee is ₹ 19,98,004/- out of the tax demand of ₹ 28,20,927/- which comes to nearly 71% of the demand. If interest on the tax is added, then the amount which has been paid by the assessee would be little more than 42%. Thus, going by the payment effected by the assessee towards the tax component, we find that the interest of the Revenue is sufficiently safeguarded. That apart, the assessee had requested for an early hearing of the appeal raising various contentions including the contention that the Chennai Tribunal has remanded similar matters for further verification. Payment effected by the assessee, thus for, that is prior to the passing of the interim order by the Tribunal and upon compliance of the payment of first instalment totalling a sum of ₹ 19,98,004/- would sufficiently safeguard the interest of the Revenue. Accordingly, the respondent need not insists upon any further payment till the disposal of the appeal and the balance tax and interest payable by the assessee shall remained stayed till the disposal of the appeal filed by the assessee before the Tribunal.
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2019 (7) TMI 1221
Abatement of pending appeal before High Court - notice not served as assessee had expired and LR has left the Country to USA and there was nobody available in the said address to be served with the notice of the present Appeal - HELD THAT:- We find some force in the submission made by the learned Counsel for the Revenue. Since the Appellant died and his legal representatives are not available to argue the present Appeal or to engage a Counsel to appear in the matter, we dismiss the present Appeal as having abated with a liberty to the legal representatives to revive the said Appeal with proper Application in case, they consider it appropriate. The connected miscellaneous petition is also dismissed. Copy of this judgment be sent to the address of the Assessee as well as to the address of the learned counsel, who represented the Assessee. earlier viz., Mr.K.Ram Gopal, who is also said to have unfortunately expired.
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2019 (7) TMI 1220
Allowability of business loss - embezzlement of the cash by director/employee of the Company - ITAT allowed the claim of the assessee - HELD THAT:- The embezzlement by one of the Directors or an employee of the business of the Assessee Company during the ordinary course of business can be a business loss of the Assessee irrespective of criminal prosecution of the accused director/employee of the Company. The final fate of the criminal proceedings or recovery of the amount in question would not determine the claim of the Assessee in the present year writing off the same as a business loss. Tribunal had rightly held it to be a business loss as it was treated to be only a pilferage of the company funds by an employee or a Director on the Board of Company. Therefore, such findings of facts by the Tribunal do not give rise to any substantial question requiring our further consideration u/s 260A. Thus we do not find any merits in the Appeal filed by the Revenue and the same is liable to be dismissed.
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2019 (7) TMI 1219
Deduction u/s 80P(2) - benefit of deduction u/s 80P(2)(a)(i) on interest income earned and u/s 80P(2)(d) in respect of interest received from Co-operative institutions - AO assessed under the head Income from Other Sources and not income from business - HELD THAT:- Hon ble Supreme Court in [ 2010 (2) TMI 3 - SUPREME COURT] has held that the benefit of deduction u/s 80P(2)(a)(i) is only on income which is assessable under the head Income from Business . Interest earned on investment of surplus funds not immediately required in short term deposits and securities by a Co-operative Society providing credit facilities to members or marketing agricultural produce to members is not business income but income from other sources and the society is not entitled to special deduction. Therefore whether the source of funds were Assessee's own funds or out of liability was not subject matter of the decision of the Hon'ble Karnataka High Court in the decision cited by the learned DR. To this extent the decision of the Hon'ble Karnataka High Court in the case of Tumukur Merchants Souharda Co-operative Ltd. ( [ 2015 (2) TMI 995 - KARNATAKA HIGH COURT] still holds good. Hence, on this aspect, the issue should be restored back to the AO for a fresh decision after examining the facts in the light of these judgment of the Hon'ble Apex Court rendered in the case of The Totgars Co-operative Sale Society Ltd.(supra) and of Hon'ble Karnataka high Court rendered in the case of Tumukur Merchants Souharda Co-operative Ltd.(supra) - appeal allowed for statistical purposes
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2019 (7) TMI 1218
Reopening of assessment u/s 147/148 - failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment - notice issued u/s 154 issued on same issue on which no order whatsoever has been passed - HELD THAT:- Undisputedly, originally assessment in this case was framed u/s 143 (3) of the Act. It is also not in dispute that AO has initially issued a notice u/s 154/155 of the Act, available at pages 1 2 of the paper book, but when assessment record was perused in the open court, there is neither any order sheet nor final order, if any, passed consequent upon the notice issued u/s 154. Relying on DAMODAR H. SHAH VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX [ 2000 (6) TMI 27 - GUJARAT HIGH COURT] and BERGER PAINTS INDIA LTD. [ 2009 (8) TMI 557 - CALCUTTA HIGH COURT] , we are of the considered view that initiation of rectification proceedings u/s 154 by the AO and simultaneously initiating the reopening of assessment proceedings u/s 147/148 of the Act on the same reasons, particularly when there is no failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment, are not sustainable in the eyes of law and as such consequent assessment framed u/s 143 (3)/148 of the Act is liable to be quashed. - Decided in favour of assessee
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2019 (7) TMI 1217
Derivative trading loss as business loss - AO has ignored clause (d) inserted in section 43 (5) by the Finance Act, 2005 w.e.f. 01.04.2006 and relied upon the decisions rendered prior to amendment - HELD THAT:- We are of the considered view that when undisputedly assessee has entered into transaction of derivatives after 01.04.2006 in a recognised stock exchange as per Circular No.2/2006 dated 25.01.2006, loss arising in F O transaction has to be treated as business loss and not loss in speculative business. CIT (A) has rightly directed the AO to treat the derivative trading loss as business loss as per provisions contained u/s 43(5) clause (c) (d) and the same has to be allowed to be set off against the other business income received by the assessee from the trading of Alcoholic Liquor. So, we are of the considered view that the contention raised by the ld. DR that section 73 Explanation 1 is a deeming provision applicable to the facts and circumstances of the case is not tenable as it does not talk of F O transactions. The case law of CIT-I vs. Intermetal Trade Ltd. [ 2006 (7) TMI 130 - MADHYA PRADESH HIGH COURT] relied upon by the ld. DR is also not applicable to the facts and circumstances of the case. Consequently, finding no illegality or perversity in the impugned order passed by the ld. CIT (A), present appeal filed by the Revenue is hereby dismissed.
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2019 (7) TMI 1216
Penalty u/s 271(1)(c) - AO was not satisfied with the assessee s explanation and holding that the assessee could not have offered the additional income after the search and concealment of income based on an estimate, he levied the minimum penalty i.e. 100% of the amount sought to be evaded - HELD THAT:- Penalty u/s 271(1)(c) is levied for not offering the additional income to tax in the original returns of income for offering the same only after confrontation during the course of search. Non-striking off the irrelevant portion of the show cause notice u/s 271(1)(c) - AO does not specify as to whether the assessee has concealed the particulars of income or furnished inaccurate particulars of income. DR had submitted that the assessee had concealed the income as well as furnished inaccurate particulars of income, but we find that the AO has used or and not and between concealment of income and furnishing of inaccurate particulars of income. Therefore, it is clear that the AO was not clear in his mind whether it was a case of furnishing of inaccurate particulars or concealment of income or he has failed to strike off the irrelevant portion in the proforma of the notice before issuing the same. Therefore, the additional grounds of appeal is to be admitted and allowed in view of the decision of the jurisdictional High Court in the case of Pr. CIT vs. Baisetty Revati reported in [ 2017 (7) TMI 776 - ANDHRA PRADESH HIGH COURT] The additional ground is therefore, allowed. Even on merits of the other grounds, we find that the disallowance of expenditure was not because it has been found to be bogus expenditure but it was because the assessee could not substantiate the same with bills and vouchers. In response to the show cause notice u/s 271(1)(c), the assessee had filed its explanation and there is no finding of the AO that the assessee s explanation is not acceptable or that it is not bonafide. Therefore, we are in agreement with the contentions of the learned Counsel for the assessee that though it is a good ground for making addition, it cannot be a ground for penalty u/s 271(1)(c) as held by the Hon'ble Supreme Court in the case of Reliance Petrochem Ltd [ 2010 (3) TMI 80 - SUPREME COURT] Notice u/s 271AAB to levy penalty u/s 271(1)(c) - HELD THAT:- AO gets the jurisdiction to levy the penalty by issuing a notice and therefore, it is not a procedural requirement but is a jurisdictional one. By issuing a notice, the AO has intimated the assessee the reasons for initiating penalty and the assessee gets an opportunity to explain the circumstances under which the default, if any, was committed and as to why the penalty was not leviable. By issuance of notice u/s 271AAB AO is seeking assessee s explanation as to why the penalty should not be levied on the undisclosed income declared in the returns of income, whereas u/s 271(1)(c) he is seeking assessee s explanation for furnishing of inaccurate particulars or concealment of income. Therefore, we agree with the findings of the CIT (A) that these two provisions operate in different circumstances and by issuance of notice u/s 271AAB AO cannot thereafter change it to section 271(1)(c) and levy penalty thereunder. Therefore, we do not find any reason to interfere with the order of the CIT (A). - Decided against revenue.
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2019 (7) TMI 1215
Reopening of assessment u/s 147 - reasons to believe - in original assessment u/s 143(3) AO made independent enquiries u/s 133(6) from the share subscribers in connection with the share capital - HELD THAT:- In the present case the recorded reasons nowhere made out any case that the alleged escapement was resulted as a consequence of the assessee s omission or failure to disclose truly fully all material facts necessary for its assessment. In fact we note that in the reasons recorded, the AO had not spoken any facts which would throw light that the disclosed facts of share subscription monies received during the year could be taken as false or untrue or from which it could be inferred that there was any failure on the part of the assessee in disclosing fully and truly all material facts necessary for the assessment of the assessee. We therefore do find any reasons to interfere with the findings of the CIT(A) holding that the initiation of reassessment proceedings was bad in law as it did not satisfy the conditions precedent in proviso to Section 147. Sanction granted by the CIT u/s 151 was in a mechanical manner or upon due application of mind - HELD THAT:- We find that on the proforma which is available in the paper book, the Commissioner has simply written Yes I agree which does not in any manner shed any light as to whether there was any application of mind at all by the Pr.CIT, who was duty bound to have looked in to carefully the reasons recorded by the AO and seen the history behind the assessment which was proposed to be reopened by the AO. When a superior authority is given power by the legislature, to grant sanction to do an act by an authority below him, then that power needs to be exercised with due care and circumspection and after due application of mind. We note that the coordinate Bench of this Tribunal on similar facts circumstances in the case of Hirachand Kanunga Vs DCIT [ 2015 (5) TMI 757 - ITAT MUMBAI] held that a mere mention of approved in the report by the Commissioner and thereby according sanction for reopening of assessment u/s 147 did not amount to recording of proper satisfaction u/s 151(1) of the Act and hence held the notice issued u/s 148 to be bad in law. We are therefore of the opinion that the Commissioner had mechanically accorded permission. Thus, we hold that the sanction granted by the Commissioner u/s 151 is invalid and so, the notice of the AO dated 22.03.2016 is bad in law and has to be necessarily struck down. For the reasons discussed in the foregoing therefore, we are in agreement with the order of the Ld. CIT(A) wherein he has cancelled the assessment order passed after reopening u/s 147 of the Act for the reason that the conditions prescribed by law were not complied with resulting in the order passed by the AO being without jurisdiction and therefore a nullity. Accordingly we uphold the order of the ld. CIT(A). - Decided against revenue
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2019 (7) TMI 1214
Deduction u/s 35(2AB) - in-house research and development - alleged that the assessee has not furnished copy of the agreement entered into with the prescribed authority for carrying out inhouse research and development facility - HELD THAT:- Deduction u/s.35(1)(i) and Sec.35(2AB) are similar except that the deduction u/s.35(2AB) is allowed as weighted deduction at 200% of the expenditure while deduction u/s.35(1)(i) is allowed only at 100%. The conditions for allowing deduction u/s.35(1)(i) and under Sec.35(2AB) are identical with the only difference being that the Assessee claiming deduction u/s.35(2AB) should be engaged in manufacture of certain articles or things. It is not in dispute that the Assessee is engaged in business to which Sec.35(2AB) applied. The other condition required to be fulfilled for claiming deduction u/s.35(2AB) is that the research and development facility should be approved by the prescribed authority. The prescribed authority is the Secretary, Department of Scientific Industrial Research, Govt. Of India (DSIR). It is not in dispute that the Assessee in the present case obtained approval in Form No.3CM as required by Rule 6 (5A) of the Rules. In these facts and circumstances and in the light of the judicial precedents on the issue, we are of the view that the deduction u/s.35(2AB) of the Act ought to have been allowed as weighted deduction at 200% of the expenditure as claimed by the Assessee and ought not to have been restricted to 100% of the expenditure incurred on scientific research. We hold and direct accordingly and allow the appeal of the Assessee - See M/S. MAHINDRA ELECTRIC MOBILITY LTD. VERSUS THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 4 (1) (2) , BANGALORE. [ 2019 (1) TMI 20 - ITAT BANGALORE] As decided in M/S. SUN PHARMACEUTICAL INDUSTRIES LTD. [ 2019 (4) TMI 1727 - ITAT AHMEDABAD] merely because the prescribed authority failed to send intimation In Form No. 3CL, would not be reason enough to deprive the assessee`s claim of deduction under section 35(2AB) of the Act. Disallowance u/s 14A - assessee submitted that the assessee has earned exempt agricultural income but has no exempt income by way of dividend from shares and investments - HELD THAT:- As agreed by both the parties, we set aside this issue to the file of the AO for fresh adjudication in accordance with law after verifying the fact. AO is directed to apply proposition of law laid down by the Hon ble Delhi High Court in the case of Cheminvest Ltd. vs. CIT [ 2015 (9) TMI 238 - DELHI HIGH COURT] and not to disallow any expenditure in excess of exempt income earned by the assessee. These grounds are allowed for statistical purposes.
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2019 (7) TMI 1213
Power of CIT(A) for enhancement - appeal relates to fee for default in furnishing statements u/s. 234E - The CIT(Appeals) accepted the claim of the assessee in view of the judgment of the Hon ble High Court of Karnataka wherein it was held that amendment made u/s. 200A providing that fee u/s. 234E could be computed at the time of processing of return and issue of intimation has come into effect only from 1.6.2015 and had only prospective effect, accordingly, fee u/s. 234E cannot be charged and cancelled the intimation u/s. 200A, he however, declare return of TDS filed by the assessee is non est HELD THAT:- In the case of Manoj Kumar Jaiswal . [ 2019 (5) TMI 528 - ITAT BANGALORE] , this Tribunal decided identical issue holding that the Act contains provision for declaring a return of income filed as invalid u/s.139(9). There is no such provision for declaring a return of TDS as invalid. Therefore, there is no power conferred, either under those provisions or under any other provisions of the Act, to declare the return of TDS filed u/s. 200(3) as non est. The Tribunal also held that in appeal against an order u/s.200A, the provision of law applicable, in so far as the powers of CIT(A) in an appeal u/s.200A, was clause (c) of section 251 and that clause empowers the CIT(A) to pass such orders in the appeal as he thinks fit. The Tribunal held that a reading of the aforesaid clause would show that the CIT(Appeals) in the cases to which the said clause applies, can pass such orders as he thinks fit, but that power is circumscribed by the words in the appeal . Therefore, the CIT(Appeals) cannot travel beyond the subject matter of the appeal, which was as to whether fee u/s. 234E can be levied or not; and not the question, whether the return of TDS filed by the assessee is non est in law? Since the facts and circumstances of the case in these appeals are identical to the case referred to above, following the decision in those appeals, we allow the appeals of the Assessee by holding that the conclusion of the CIT(Appeals) holding that return of TDS filed by the assessee is non est in law is not valid in the eyes of law and the said direction is directed to be deleted and the order of the CIT(Appeals), to this extent, is held to be bad in law. - Decided in favour of assessee.
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2019 (7) TMI 1212
Deduction u/s 80IC - substantial expansion - initial assessment year - as per AO 100% deduction is admissible for first five years, and thereafter for the subsequent 5 years, deduction u/s 80IC is allowable @ 25% only - HELD THAT:- As decided in S M/S. AARHAM SOFTRONICS [ 2019 (2) TMI 1285 - SUPREME COURT] in case substantial expansion is carried out as defined in clause (ix) of sub-section (8) of Section 80-IC by such an undertaking or enterprise, within the aforesaid period of 10 years, the said previous year in which the substantial expansion is undertaken would become initial assessment year , and from that assessment year the assessee shall been entitled to 100% deductions of the profits and gains. Such deduction, however, would be for a total period of 10 years, as provided in sub-section (6). For example, if the expansion is carried out immediately, on the completion of first five years, the assessee would be entitled to 100% deduction again for the next five years. On the other hand, if substantial expansion is undertaken, say, in 8th year by an assessee such an assessee would be entitled to 100% deduction for the first five years, deduction @ 25% of the profits and gains for the next two years and @ 100% again from 8th year as this year becomes initial assessment year once again. However, this 100% deduction would be for remaining three years, i.e., 8th, 9th and 10th assessment years. We find that the order of Hon ble Supreme Court in the case of Pr. CIT vs M/s. Aarham Softronics (supra) being passed by a Larger Bench of the Hon ble Supreme Court has stronger force as a precedent as compared to decision of Hon ble Supreme Court in the case of CIT vs Classic Binding Industries [ 2018 (8) TMI 1209 - SUPREME COURT] - Decided in favour of assessee.
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2019 (7) TMI 1211
Disallowance on loss of sale of items held in capital WIP - AO held that project is not identifiable hence it is not incidental to the assessee s business - HELD THAT:- At the outset, the ld. AR pointed out that these expenses incurred towards steel structures and steel fabrications were not incurred for a new project as such. Moreover, the assessee is not following project completion method. It is not known from where the ld. AO had material to come to this conclusion. These expenditures were incurred for an ongoing project which was kept in capital work in progress. We find that the reliance placed by the ld. AR on the Co-ordinate Bench decision of this Tribunal in the case of Idea Cellular Ltd., vs. ACIT which was approved by High Court in [ 2016 (10) TMI 181 - BOMBAY HIGH COURT] is well founded and consequently applicable to the facts of the instant case. As relying on M/S. IDEA CELLULAR LTD (supra), we hold that the losses incurred by the assessee in the sum has to be treated as incidental business loss and hence to be allowed as revenue expenditure to the assessee for the A.Y.2003-04. Accordingly, the ground No.2 raised by the assessee is allowed and ground No.3 raised by the revenue is dismissed. Enhancement by CITA) to book profit computation u/s.115JB - Provision of deferred tax, Provision for diminution in value of investments and Provision for bad and doubtful debts - CIT(A)'s enhancement powers u/s 251(1)(a) - HELD THAT:- Three issues viz. provision for deferred tax; provision for diminution in value of investments; Provision for bad and doubtful debts vis- -vis computation of book profits u/s.115JB were already added by the ld. AO in the re-assessment order framed on 31/12/2007. Admittedly, the ld. CIT(A) issues enhancement notice to the assessee by way of recording in the order sheet only on 07/03/2011, on which date these three additions have already been made by the ld. AO in the re-assessment order. Hence, by respectfully following the decision of Jaipur Tribunal, [ 2018 (7) TMI 1398 - ITAT JAIPUR] we hold that the ld. CIT(A) erred in exercising enhancement powers in terms of Section 251(1)(a) in the facts and circumstances of the case before us. Even on merits, we find that the AO in the original assessment proceedings u/s.143(3) completed on 31/01/2006 had applied the law prevailing on that date. These three items i.e. provision for deferred tax; provision for diminution in value of investments; Provision for bad and doubtful debts were sought to be added in the computation of book profits u/s.115JB only pursuant to an amendment brought by the Finance Act 2008 with retrospective effect from 01/04/2001. Hence, on the date of passing of order u/s.143(3) on 31/01/2006, the ld. AO could not have added these three items in the computation of book profits u/s.115 JB. Hence, what could not have been done by the ld. AO as per law prevailing at that time, the ld. CIT(A) could not do by exercising enhancement powers - enhancement made by the ld. CIT(A) with respect to aforesaid three items in the computation of book profits u/s.115JB deserves to be deleted and is hereby deleted. Claim of provision of warranty expenses - HELD THAT:- Decided in favour of assessee as relying on own case [ 2018 (4) TMI 1696 - ITAT MUMBAI]. Allowability of Expenses incurred towards issue of foreign currency convertible notes - allowability as revenue expenditure - HELD THAT:- We find that the ld. AR stated that this issue is also covered by the order of this Tribunal in assessee s own case for A.Y₹ 2004-05 to 2006-07 [ 2018 (4) TMI 1696 - ITAT MUMBAI] Following the decision of the Hon'ble Rajasthan High Court in Secure Meters Ltd. [ 2008 (11) TMI 66 - HIGH COURT RAJASTHAN] has held that irrespective of the fact whether the debenture issued is convertible or non- convertible, it is in the nature of loan. Therefore, any expenditure incurred in relation to issuance of such debenture is allowable as expenditure. and had granted relief to the assessee which do not call for any interference. Accordingly, ground No.2 raised by the revenue is dismissed.
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2019 (7) TMI 1210
Addition on account of lower GP - HELD THAT:- AO in absence of necessary documentary evidences rejected the books of account. AO also recorded that a survey was conducted by the investigation wing of the revenue on Tayal group in Mumbai on 10 September 2013, wherein the statement of Shri Praveen Kumar Tayal was recorded. During the course of survey, instances of claim of bogus expenses on account of purchase a capital assets were found. The assessee is stated to be beneficiary of bogus expenses. AO in absence of evidence estimated ad hoc addition by treating the GP rate of earlier years as a benchmark. Before CIT (A) no documentary evidences were furnished except repeating the same stand as taken before the assessing officer. CIT (A) confirmed the action of assessing officer in absence of any documentary evidences. Before us, the assessee neither filed any documentary evidences nor any written submission to substantiate this ground. Therefore, we do not find any justification to interfere with the finding of learned CIT (A). In the result this ground of appeal is dismissed. Disallowance of administrative expenses - HELD THAT:- While working the disallowances the AO worked out disallowance of ₹ 2.61 crore. Before learned CIT (A) the assessee stated that the administrative expenses is only just 2.87% of turnover and that in preceding year it was 2.42% of the total turnover. The assessee also stated that the turnover of assessee was increased about 17% from the proceeding financial year. CIT (A) after considering the submission of the assessee concluded that in absence of any corroborative evidence it cannot be said that the assessee has discharged onus. CIT (A) confirmed the action of the AO. However, on the working of disallowances the AO was directed to correct the figure of disallowances. Before us the assessee neither furnished any documentary evidence not filed any written submission to substantiate the ground of appeal, therefore, we do not find any justification in interfering the finding of CIT (A). In the result this ground of appeal is also rejected. Addition on account of non- utilisation of loan - AO disallowed 14% of loan - CIT(A) deleted the addition - HELD THAT:- Disallowances are based on an assumption and presumptions that entire working capital limits availed by assessee was not utilised for the purpose of business. There is nothing on the record that the assessee has diverted interest bearing borrowed funds by granting interest free loans to sister concern. The assessee has shown that against working capital loan of ₹ 208.03 crore, it was having closing inventory of 197.87 crore and directors of ₹ 154.32 crore respectively which is aggregating to ₹ 352 .15 crore. the working capital loan availed from the bank was around 59.07% of the current asset. The turnover of the assessee was increase from ₹ 611 Crore to ₹ 718 Crore i.e 17%. Therefore it cannot be concluded that the assessee used the working capital for other than business purpose and deleted the disallowances. We have seen the finding of the CIT (A) is based on sound reasoning. No contrary facts is brought to our notice to take to take other view, thus, we affirm the action of the ld. CIT (A). In the result this ground of appeal is dismissed. Disallowance u/s 14A - no exempt income received - HELD THAT:- The learned CIT (A) after considering the submission of the assessee and following the ratio laid down by Hon ble Delhi High Court in Cheminvest ltd [ 2015 (9) TMI 238 - DELHI HIGH COURT] held that no disallowance u/s 14A is called for, once there is no exempt income received or receivable by the assessee during the relevant previous year. We have noted that the AO nowhere in the assessment order has a specified that the assessee has received any dividend income during the relevant period. In absence of any finding of AO that the assessee earned any exempt income, we are in agreement with the finding of learned CIT (A) that during the relevant period the assessee has not received any exempt income therefore, no disallowance u/s 14A is warranted. In the result the ground of appeal raised by revenue is dismissed
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2019 (7) TMI 1209
Rectification of mistake u/s 254 - Disallowance u/s 14A without recording proper satisfaction - HELD THAT:- AO before resorting to the computation mechanism provided in rule 8D of the rules had indeed recorded his satisfaction having regard to the accounts of the assessee that the claim of the assessee that no expenditure was incurred for earning dividend income could not be accepted. This goes to prove the compliance made by the AO of the decision rendered by the Hon ble Supreme Court in the case of Maxopp Investment [ 2018 (3) TMI 805 - SUPREME COURT] which have been heavily relied upon by the ld. AR before us. We find that the assessee has been preferring this miscellaneous application for the second time on the very same issue without any substance and also trying to misuse the provisions of the Act by resorting to review of the order passed by this Tribunal in the guise of rectification. In our considered opinion, there is no mistake apparent on record within the meaning of Section 254(2) of the Act warranting any rectification as this Tribunal had duly addressed the arguments of the assessee and the intention behind introduction of Section 14A with rule 8D(2)(iii) in its order - Miscellaneous Application of the assessee is dismissed.
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2019 (7) TMI 1208
Bogus LTCG - addition u/s 68 in respect of sale proceeds of shares of M/s Kailash Auto Finance Limited (KAFL) treating the same as income from undisclosed sources - off market transaction for purchase of shares - claim u/s u/s. 10(38) denied - HELD THAT:- The assessee has furnished all evidences in support of the claim of the assessee that it earned LTCG on transactions of his investment in shares. The purchase of shares had been accepted by the AO in the year of its acquisition and thereafter until the same were sold. The off market transaction for purchase of shares is not illegal as was held by the decision of Co-ordinate Bench of this Tribunal in the case of Dolarrai Hemani vs. ITO [ 2016 (12) TMI 1074 - ITAT KOLKATA] and PCIT Vs. BLB Cables Conductors Pvt. Ltd. [ 2018 (8) TMI 525 - CALCUTTA HIGH COURT] wherein all the transactions took place off market and the loss on commodity exchange was allowed in favour of assessee. The transactions were all through account payee cheques and reflected in the books of accounts. The purchase of shares and the sale of shares were also reflected in Demat account statements. The sale of shares suffered STT, brokerage etc. In the facts and circumstances of the case, it cannot be held that the transactions were bogus. - Decided in favour of assessee.
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2019 (7) TMI 1207
Deduction u/s. 80P(2)(a)(i) - alleged that co-operative society carrying on the business of baking - scope of clause no.(4) of section 80P - HELD THAT:- According to the revenue the Hon ble Supreme Court in the case of Citizens Co-operative Society Ltd. [ 2017 (8) TMI 536 - SUPREME COURT] has also held it is also important to ascertain as to what is the nature of income which is claimed as exempt and as to how the principle of mutuality is not violated in respect of such income. According to the revenue the principle of mutuality will not be satisfied, if the person from whom income from providing credit facilities is derived is a nominal member who has no right to participate in the profits of the Assessee. Such grievance would be addressed by setting aside the issue of deduction u/s.80P(2)(a)(i) to the AO for consideration afresh, with a direction to the Assessee to produce a certificate from RBI that it does not possess license from it for doing banking business and further that the business carried on by the Assessee is not akin to business of a co-operative bank. Further the first part of Sec.80P(2)(a)(i) allows deduction in respect of income derived by a co-operative society from the business of banking. Even the claim of the Assessee for deduction requires to be examined under the first part of Sec.80P(2)(a)(i). The relevant law governing co-operative societies of the concerned State providing status of different categories of members in so far as the affairs of the co-operative society are concerned, is also required to be examined. It is only income which arises from dealing with members and which is either in the nature of banking or providing credit facilities to members that would be allowed as deduction. All these aspects also require examination. - remanded to AO with directions Disallowance u/s 40(a)(ia) - no exception to co-operative societies for non deduction of tax for pigmy commission payments - HELD THAT:- The disallowance u/s 40(a)(ia) was made on account of non-deduction of tax at source on payment of pigmy commission and therefore, it had direct nexus with the business income of the assessee on which deduction u/s 80P(2)(a)(i) was claimed. Aggrieved by the order of the CIT(Appeals), the revenue has raised ground No.6. In our view, the aforesaid ground of appeal would depend on the outcome on grounds No.1 to 6 in the set aside proceedings. If the disallowance u/s.40(a)(i) results in increase in income of the Assessee which would otherwise go to enhance the income on which the Assessee is eligible to claim deduction u/s.80P(2)(a)(i), then the CBDT Circular referred to by CIT(A) would be applicable. Therefore this issue is also set aside to the AO to decide afresh in the light of the decision on the eligibility of Assessee for deduction u/s.80P(2)(a)(i).
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2019 (7) TMI 1206
Disallowance of expenses u/s 14A r.w. rule 8D - HELD THAT:- Assessee had own surplus funds which were more than investments in dividend yielding shares. The law by now is well-settled that if available interest-free funds are much more than investments in dividend yielding shares, then there can be no disallowance under rule 8D(2)(ii) of the Act. In the case of CIT Vs. HDFC Bank Ltd. [ 2014 (8) TMI 119 - BOMBAY HIGH COURT] it was held where assessee's own funds and other non interest bearing funds were more than investment in tax free securities, no disallowance of part of interest payments under section 14A of the Act can be made. In light of the above factual and legal position, we are of the view that disallowance of interest under rule 8D(2)(ii) cannot be sustained and the same is directed to be deleted. Disallowance under rule 8D(2)(iii) - We have considered the expenditure debited in the profit loss account and we find that only bank charges of ₹ 35,676/-, remuneration to auditors of ₹ 8500/-, salary and wages of ₹ 2,46,000, travelling and conveyance of ₹ 60,000/-, vehicle maintenance of ₹ 1,81,816- are expenses which are general in nature and all other expenses are attributable to the activities other than activity of investment in shares which are likely to yield exempt income. Therefore, only the aforesaid expenses can be considered for disallowance under rule 8D(2)(iii). We may also mention here that the mandate of section 14A of the Act is that the expenditure incurred in relation to income which does not, form part of total income has to be determined having regard to the account of the assessee. Therefore, nexus between expenses sought to be disallowed and earning of dividend income has to be seen before applying the provisions of rule 8D of the IT Rules. In that view of the matter, we direct that disallowance of expenses should be restricted to the items as set out above. There is no merit in the appeal because the law, by now is well settled that disallowance u/s 14A of the Act cannot exceed exempt income earned by the assessee
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2019 (7) TMI 1193
Revision u/s 263 - CIT directing the AO to undertake afresh the exercise of assessment for the AY in question - ITAT concluded that the AO had during the course of Assessment proceedings after making detailed and specific inquiries in relation to the Assessee s stock, accepted the reconciliation report with respect to the variation of value of stock, having again examined the impugned order of the CIT in the light of the original assessment order of the AO - HELD THAT:- This Court is not persuaded to conclude that the impugned order of the ITAT suffers from any legal infirmity. In particular, this Court concurs with the view of the ITAT that in the present case the AO had indeed undertaken a detailed inquiry into the aspect of valuation of stock and that, therefore, the requirements for assumption of jurisdiction by the CIT under Section 263 of the Act were not fulfilled. The Court does not find any substantial question of law arising from the impugned order of the ITAT. The appeal is accordingly dismissed.
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2019 (7) TMI 1163
Levy of the penalty u/s 271C (1) - non dedction of TDS on employees claims towards their LFC - HELD THAT:- In STATE BANK OF INDIA VERSUS THE ACIT (TDS) , JAIPUR [ 2019 (1) TMI 145 - ITAT JAIPUR] although LFC claim was made by many employees, the objection was only regarding 12 employees and for this one of various reasons, the Tribunal came to the conclusion and the Tribunal did not accept the contention that assessee bank has not deducted tax intentionally. The second reason in that case for which the Tribunal deleted the penalty was this that the assessee has complied with the Tribunal order in quantum proceedings and deposited the outstanding demand along with interest and has taken corrective steps in the subsequent years as well. On this factual aspect also, the required details are not available on record and there is no finding of any of the authorities below on this factual aspect. Hence we feel it proper to set aside the order of ld. CIT(A) and restore the matter back to the file of ld. CIT(A) for fresh decision in the light of this Tribunal order rendered in the case of State Bank of India Vs. ACIT (supra) after examining the facts of the present case in the light of this Tribunal order keeping in mind the above discussion after providing adequate opportunity of being heard to both sides. Appeals filed by the assessee are allowed for statistical purposes.
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2019 (7) TMI 1162
Stay of outstanding demand - HELD THAT:- Balance of convenience is not in favour of grant of stay in these cases. Hence these stay petitions are hereby dismissed. The alternative prayer of the assessees for grant of early hearing is allowed, as the ld. DR had no objection for the same. The registry is directed to post all these cases on out-of-turn basis on 4th July, 2019 (04.07.2019). As the date is announced in the open court, no separate notice shall be issued to either party. Ordered accordingly.
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Customs
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2019 (7) TMI 1192
Import of Pigeon Peas i.e., Toor Dal - N/N. 19/2015-2020 issued by the Director General of Foreign Trade with regard to importability of said goods - release of seized goods - HELD THAT:- If the importers, who are similarly placed qua writ petitioner, have got the benefit, this Court is of the considered view that writ petitioner herein is also entitled to the same benefit as no exceptional circumstances have been pointed out to say that this writ petitioner stands on a different putting and is not entitled to a similar relief. The instant writ petition is ordered directing the respondents, more particularly, the second respondent to release the writ petitioner's consignment of 'Toor Whole (Pigeon Peas)' imported by the petitioners, subject to writ petitioner paying 10% of the invoice value towards duty and furnishing bank guarantee for another 10% within a fortnight from the date of receipt of a copy of this order. Petition disposed off.
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Corporate Laws
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2019 (7) TMI 1191
Non-filing of Form 32 - cessation of the applicant from the board of the claimant company by the company - violation of Section 303 of the Companies Act - HELD THAT:- In the absence of any other material on record, it is quite clear that the applicant ceased to be a director of the complainant company prior to the filing of the winding up petition. The present complaint would not lie against him - Application allowed.
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2019 (7) TMI 1190
Scheme of Compromise - Scheme of arrangement with the FD holders - maintainability of application - HELD THAT:- The Scheme of Compromise with FD holders is outside the purview of Section 391/394 of the Companies Act, 1956. The legal right available to the FD holders for filing prosecution for non-repayment of Fixed Deposit cannot be withdrawn under any Scheme. The impugned order has rightly protected the interest of the FD holders. Shares already trade are not disturbed to avoid legal complications. If pending litigation shares are received subject to outcome, those shares still in the hands of FD holders on the date of impugned order lose protection and such FD holders cannot insist on holding on to them as Scheme has been rejected. Intervenors whether they fall in one category or the other category as per impugned order dated 12.3.2018 would be regulated accordingly. Application disposed off.
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Insolvency & Bankruptcy
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2019 (7) TMI 1189
Admissibility of petition - Arbitral Award - financial creditor - it was submitted that an Arbitral Award cannot be treated as a financial debt - initiation of CIRP against two sets of Corporate Debtor for the same set of claim - HELD THAT:- It is not in dispute that the Gujarat NRE Mineral Resources Limited - ( Corporate Debtor ) since amalgamation failed to perform its duty, for the said reason, the Award was passed in favour of the 1st Respondent. Therefore, the amount disbursed by the 1st Respondent- Jindal Steel and Power Limited to the Corporate Debtor on failure, performance became time value for money as the 1st Respondent is entitled for interest @ 30% p.a. on the unadjusted advance payment as allowed by the Arbitral Tribunal - Therefore, the 1st Respondent comes within the meaning of the Financial Creditor . In the present case, the Appellant has not triggered any application under Section 7 or Section 9 against Gujarat NRE Coke Limited which is undergoing liquidation. Gujarat NRE Coke Limited filed application under Section 10 on the basis of which Corporate Insolvency Resolution Process was started. The Appellant has triggered Corporate Insolvency Resolution Process only against Bharat NRE Coke Limited - ( Corporate Debtor ), therefore, it cannot be held that the Appellant had triggered two Corporate Insolvency Resolution Process against two different sets of the Corporate Debtor for same set of claim. Further the Financial Creditors of the Corporate Debtor having 96% of the voting shares have also not raised any such plea. In fact, it appears that the contest between the Appellant and the 1st Respondent is whether 1st Respondent can be a member of the Committee of Creditors or not which cannot be decided by this Appellate Tribunal while deciding the question of initiation of the Corporate Insolvency Resolution Process against the Corporate Debtor - there is no merit in the appeal - appeal dismissed.
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2019 (7) TMI 1188
Admissibility of petition - initiation of CIRP - application rejected on the ground that the claim of the Appellant falls within the ambit of disputed claim - Section 8(1) of the I B Code - HELD THAT:- From bare perusal of the impugned order dated 19th September, 2018, it will be evident that the Adjudicating Authority have noticed the aforesaid disputed fact to come to the conclusion and hold that the claim amount raised by the Appellant is a disputed claim - In an application under Section 9, it is always open to the Corporate Debtor to point out pre-existence of dispute. It is to be shown that the dispute was raised prior to the issuance of demand notice under Section 8(1). In Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software (P) Limited [2017 (9) TMI 1270 - SUPREME COURT], the Hon ble Supreme Court held that the existence of the dispute and/or the suit or arbitration proceeding must be pre-existing i.e. it must exist before the receipt of the demand notice or invoice, as the case may be. Thus, the existence of dispute must be pre-existing i.e. it must exist before the receipt of the demand notice or invoice. If it comes to the notice of the Adjudicating Authority that the operational debt is exceeding ₹ 1 lakh and the application shows that the aforesaid debt is due and payable and has not been paid, in such case, in absence of any existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before the receipt of the demand notice of the unpaid operational debt , the application under Section 9 cannot be rejected and is required to be admitted. The Respondent has defaulted to pay more than ₹ 1 Lakh and in absence of any pre-existing dispute, and the record being complete, the application under Section 9 preferred by the Appellant was fit to be admitted - appeal allowed.
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2019 (7) TMI 1187
Liquidation Order - Section 33 (1) (a) of the Insolvency and Bankruptcy Code, 2016 - According to learned counsel for the Appellant, the order of liquidation may affect the Corporate Debtor and if the Central Government comes to know that it has gone for liquidation, it may not allow subsidies - HELD THAT:- It is still open to the Ministry of Electronics Information Technology to release subsidies, if otherwise permissible, as in spite of the order of liquidation, the Corporate Debtor is to continue as a going concern to ensure revival and resolution even during the liquidation process. The Competent Authority of the Ministry of Electronics Information Technology will consider the case of the Corporate Debtor in terms with the direction of the Hon ble High Court of Delhi, as referred to above, uninfluenced by the order of liquidation, as the Corporate Debtor is to continue as a going concern. Appeal disposed off.
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2019 (7) TMI 1186
Admissibility of application - Section 9 of the Insolvency and Bankruptcy Code, 2016 - rejection on the ground that the claim is time barred - whether the claim is barred by limitation as observed by the Adjudicating Authority? - HELD THAT:- In the present case, it is not in dispute that right to apply under Section 9 accrued to the Appellant on 1st December, 2016, when I B Code came into force. Therefore, we find that the application under Section 9 filed by the Appellant is within the period of three years from the date of right to apply accrued. The winding up petition was filed before the Hon ble High Court of Judicature at Madras which had not reached finality and in the meantime, as the I B Code came into force, the demand notice under Section 8(1) was issued on 14th November, 2017 for payment of outstanding amount along with the interest. Thus, as we find that there is continuous cause of action the claim is within the period of limitation. Case remitted to the Adjudicating Authority for admission of the case after notice to the parties - appeal allowed by way of remand.
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Service Tax
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2019 (7) TMI 1205
Condonation of delay in filing appeal - time limitation of appeal - HELD THAT:- This Court is of the opinion that the explanation given can hardly be characterized as reasonable. The appellant does not cite any unforeseen circumstance or compelling necessity which prevented it from approaching the Appellate Commissioner on time. The view expressed by the Commissioner and the CESTAT do not call for interference - appeal dismissed.
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2019 (7) TMI 1185
Rejection of Refund claim - export of services or not - Rule 6A of the Service Tax Rules, 2004 - HELD THAT:- It is an undisputed fact that the appellant did not reverse the equal amount as required by the condition at paragraph 2(h) of Notification No. 27/2012 (supra). But the fact also remains that there was no provision in the ACES system to debit the value of refund and also the fact that the entire credit which was carried forward in TRAN-1 stood reversed by the appellant voluntarily in its GSTR-3B filed for the month of April 2018 - The above facts are sufficient compliances with the condition at paragraph 2(h) since post G.S.T., the scenario is different than the one prevailing prior to G.S.T. regime. Otherwise, it would become an impossible task for an assessee, more so when the filing of ST-3 returns itself was done away with. The denial of refund is not in accordance with law - appeal allowed - decided in favor of appellant.
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2019 (7) TMI 1184
CENVAT Credit - waste/by-product - Bagasse - inputs/input services which are used in the manufacture of dutiable goods and exempted product - Rule 6(1) of CENVAT Credit Rules, 2004 - HELD THAT:- The ratio laid down by the Hon ble Supreme Court in UNION OF INDIA VERSUS DSCL SUGAR LTD. [ 2015 (10) TMI 566 - SUPREME COURT] , held that Bagasse emerged during the course of manufacture of sugar and molasses as a by-product cannot be subjected to the provisions of Rule 6 of CENVAT Credit Rules, 2004. Appeal allowed - decided in favor of appellant.
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2019 (7) TMI 1183
CENVAT Credit - input services - tours travels - hotel expenses - HELD THAT:- It is considered proper to remand the matter to the original adjudicating authority to re-determine the admissibility/ in admissibility of Cenvat Credit on the basis of the documents already produced by the appellant before it since scrutinization of such voluminous documents at the second appeal late stage would amount to mini trial which is not supposed to be done in an appeal proceeding. Requirement of CA certificate, though not a mandatory requirement under the provision of CCR 2004, could act as an additional corroborative evidence in support of appellant s claim for which no finding on the legality of the Commissioner s order for production of CA certificate is required to be given at this stage. Appeal allowed by way of remand.
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2019 (7) TMI 1182
CENVAT Credit - time limitation - whether the refund of Cenvat credit claimed by the Appellant is beyond the limitation period as prescribed under Section 11B of the Central Excise Act, 1944 as applicable to Service Tax vide Section 83 of the Finance Act, 1994? - HELD THAT:- Even though the appellant had paid service tax on the services, which is not leviable to service tax during the relevant time, still they had to file the refund claim within the period prescribed under Section 11B since the statutory authority cannot ignore the specific enactments under which the refund claim is filed. Admittedly in the instant matter the refund claim had been filed beyond the statutory time limit of one year, therefore, the learned Commissioner was justified in rejecting the Appeal filed by the Appellant. Appeal dismissed - decided against appellant.
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2019 (7) TMI 1181
Refund claim - specified services used in relation to the authorised operations in the Special Economic Zone - refund rejected only on the basis that CST/VAT has also been charged by the supplier and therefore it is the sale of goods and not service - benefit of N/N. 17/2011-ST dated 1.3.2011 - Principles of natural justice - HELD THAT:- It is true that if the supplier has charged service tax and the assessee has paid the same, they the assessee is eligible for the Cenvat Credit. But this important aspect has also not been dealt with in the impugned order although as per the learned Counsel the Invoice was produced before the 1st Appellate Authority. Be that as it may, in my view the impugned order is a non-speaking order. Without going into the merits of the contentions raised herein, the impugned order is set aside only to the extent of rejection of the amount of ₹ 1,51,348/- and remanding the matter back to the 1st Appellate Authority with a direction to decide the Appeal after following principles of natural justice - appeal allowed by way of remand.
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2019 (7) TMI 1180
Rectification of Mistake - short payment of service tax under the category of Clearing Forwarding Services and GTA Services - penalty - error apparent on the face of record or not - HELD THAT:- The appellants have filed ST-3 returns for the disputed period and they have not given details of GTA service tax liability. It is explained in the statement of Shri V.K.Balasubramanian that they had not reflected the details of GTA, since service tax was paid by the service recipient as per law and they were under bonafide belief that they are not required to pay any service tax. Further from statement of Shri M. Venkatraman it is also established that though they were raising invoices, they could not pay up the service tax liability as there was delay in getting payments from their customers. The appellants have filed returns during the disputed period but had not made disclosure with regard to the GTA services. Whether this was a bonafide belief or not cannot be decided in an ROM application - there is apparent error on the face of record in the observations noted by the Tribunal that the appellants have not filed any returns. In these circumstances, the entire penalty imposed cannot sustain, as they had filed returns. C F services - Delay in payment - HELD THAT:- The penalty imposed with regard to C F services requires to be set aside - The penalty in respect of GTA services is sustained. The penalty being composite penalty, the adjudicating authority is directed to quantify the penalty in respect of GTA services. ROM application allowed by way of remand.
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2019 (7) TMI 1179
Refund Claim u/s 104 of the Finance Act, 2017 - retrospective exemption in certain cases relating to long term lease of industrial plots - applicability of time limitation - HELD THAT:- The issue is more or less identical to the case of M/S. ROOP AUTOMOTIVES LTD. VERSUS THE COMMISSIONER OF G.S.T. CENTRAL EXCISE, CHENNAI OUTER COMMISSIONERATE [ 2019 (7) TMI 907 - CESTAT CHENNAI] where it was held that The time-limit prescribed under Section 104 (3) is only directory, but however, the time as well as the procedure prescribed under Section 11B applies in full. The Adjudicating Authority is therefore required to grant refund if the refund application is within the time-limit prescribed under Section 11B and not otherwise. Appeal allowed in part and part matter on remand.
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2019 (7) TMI 1178
Classification of services - Online data base retrieval and access service or not - extended period of limitation - revenue neutrality - levy of Interest and penalty - subsequent SCN. HELD THAT:- Admittedly the impugned order-in-original arose from the subsequent show cause notice dated 23.10.2013 and admittedly an earlier show cause notice was issued dated 22.04.2009. Thus, the Revenue was aware of the facts of the appellant case. Thus, there is no justification for invocation of extended period as held by Hon ble Supreme Court in the case of NIZAM SUGAR FACTORY VERSUS COLLECTOR OF CENTRAL EXCISE, AP [ 2006 (4) TMI 127 - SUPREME COURT]. Revenue neutrality - HELD THAT:- The issue is wholly Revenue neutral as the said input service was directly relatable to rendering of output service by the appellant. It is admitted fact that the appellant has discharged service liability on the output service transportation of passengers by air service. Thus, there is no case of any constumuous conduct or malafide on the part of appellant. Further, the admitted fact is that the appellant has filed their ST-3 returns from time to time and have maintained proper record of their transaction in the ordinary course of business. The appellant has made out case both on the question of Revenue neutrality and also as to non-applicability of extended period of limitation. Appeal allowed - decided in favor of appellant.
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Central Excise
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2019 (7) TMI 1204
Refund in cash of CENVAT credit - Whether cash refund is permissible in terms of clause (c) to the proviso to section 11B(2) of the Central Excise Act, 1944 where an assessee is unable to utilize credit on inputs? - Whether by exercising power under Section 11B of the said Act of 1944, a refund of unutilized amount of Cenvat Credit on account of the closure of manufacturing activities can be granted? - Whether what is observed in UOI VERSUS SLOVAK INDIA TRADING CO. PVT. LTD. [ 2007 (1) TMI 556 - SC ORDER ] can be read as a declaration of law under Article 141 of the Constitution of India? - HELD THAT:- Larger Bench of this Court in this case [ 2019 (6) TMI 820 - BOMBAY HIGH COURT ] disposed of all the three questions referred to it by Division Bench of this Court by answering the same in favour of the Revenue and against the Assessee. In the above view, it is an admitted position before us substantial questions of law in Central Excise Appeal Nos.13 of 2007 and 257 of 2007 are answered in favour of the Revenue and against the Assessee.
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2019 (7) TMI 1177
Classification of goods - rice bucket elevator - rice conveyor - whether the impugned goods are classifiable under CETH 8428 or under CETH 8437 of CETA? - HELD THAT:- The Civil Appeals are dismissed accordingly.
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2019 (7) TMI 1176
Prayer for withdrawal of the special leave petition - HELD THAT:- On consideration of the grounds mentioned in the application, leave to withdraw the special leave petition, as prayed for, is granted. The application for withdrawal stands allowed and the special leave petition stands disposed of as withdrawn.
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2019 (7) TMI 1175
Maintainability of appeal - Section 35-G of the Central Excise Act, 1944 - whether the credit availed of, by the assessee/respondent in the facts of the present case was authorized by law or the rules, especially Rule 2(l) of the Cenvat Credit Rules, 2004? HELD THAT:- According to the agreement of the parties, the assessee manufactured articles which were ultimately cleared by its principal i.e. M/s. Parle Products Pvt. Ltd. There is no dispute that Central Excise levy was borne by Parle. The assessee was merely authorized to manufacture the goods. So far as provisions of Service tax is concerned, this Court notices that there were two components. One, job work itself i.e. manufacture of confectionery and biscuits, which was the provision of service, i.e. the main service to M/s. Parle Products Pvt. Ltd. and secondly, the transportation services. It is the second component which is in issue in the present case. There is nothing either on record or in the show cause notice or even in the Order in Original which suggests that the agreement, which parties entered into whereby service tax was to be borne by the assessee and input credit was to be claimed by it, was prohibited in law - Furthermore, it is not revenue s case that M/s. Parle Products Pvt. Ltd. availed of, such Cenvat credit as a matter of fact. This Court is of the opinion that no question of law arises - appeal dismissed - decided against Revenue.
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2019 (7) TMI 1174
100% EOU - Refund claim - destroying goods outside the factory premises without permission - Expired drugs / medicines - conditions are procedural or mandatory in nature - conditions prescribed in the N/N. 22/2003-C.E. Dated 31- 03-2003, as amended vide N/N. 30/2015-C.E. Dated 25.05.2015 and Notification No.52/2003-Cus. Dated 31-03-2003, as amended vide Notification No.34/2015-Cus. Dated 25.05.2015 not fulfilled - mandatory provision of Rule 3 of Cenvat Credit Rules 2004 not considered. HELD THAT:- It is accordingly urged that the CESTAT was well within its jurisdiction in holding the same being directory/procedural in according the refund of duty. These contentions when tested on the anvil of the law laid down by Hon'ble Supreme Court in Eagle Flask Industries Ltd. [ 2004 (9) TMI 102 - SUPREME COURT ] and in Commissioner of Customs (Import), Mumbai Vs. Dilip Kumar And Company and others [ 2018 (7) TMI 1826 - SUPREME COURT ] do not merit consideration. The substantial question of law is answered in favour of the appellant that the CESTAT committed fundamental error in construing the Exemption Notification [Notification No.22/2003-C.E., Notification No.30/2015-Central Excise, Notification No.52/2003-Cus Notification No.34/2015- Cus.] as directory by condoning the lapse on the part of the assessee in destroying the manufactured goods outside the unit without permission of the concerned Authority. Appeal disposed off.
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2019 (7) TMI 1173
Clandestine removal - SSI Exemption - goods were removed under simple delivery challans, without accompanying with Central Excise invoices - the department has solely considered the hand written private records prepared by Shri Satish Batra to hold that the same are the sales invoices issued by the Appellant No.1 - HELD THAT:- It transpires that the private records reflected the particulars of bills raised by the job workers, showing quantum of material received, consumed for manufacture of resultant final product, generation of scrap and the job work charges. Further, it is also noticed that the submissions of the appellant No.1 that it had maintained the job work register and the daily stock account, reflecting the transaction particulars, were not considered by the adjudicating authority inasmuch as no such findings were recorded by him in the impugned order. In the reply to show cause notice dated 03.04.2002, the appellant no.1 had submitted the evidences of exports with statutory documents and the remittances received by it towards exportation of goods. The department had not adduced any material evidence to show purchase of excess raw material, manufacture of alleged final product, electricity consumption and other evidences etc. to demonstrate that the appellant had in fact, clandestinely manufactured and cleared the final product out of the factory premises, without payment of central excise duty. Thus, in absence of proper substantiation of the allegation of clandestine removal, the charges leveled against the appellants cannot be sustained for confirmation of the adjudged demands. Appeal allowed - decided in favor of appellant.
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2019 (7) TMI 1172
CENVAT Credit - input services - GTA Services - Courier Services - place of removal - HELD THAT:- There is no allegation that the appellant has included the Air freight charges also for availing the credit on GTA Services. In fact, the show-cause notice has been issued proposing to disallow the credit on GTA Services and Courier charges alleging that these are not input services as per the definition. The present contention of the department that appellants have included the Air freight charges also in the GTA Services ought to have been alleged in the show-cause notice. Further, as per the definition of GTA Service, it includes only transportation of goods by road. A fresh ground raised in the show-cause notice is put forward by Commissioner (Appeals) to deny the credit. Again, Commissioner (Appeals), who is a fact finding authority in case of doubt ought to have called for the report from the Range Superintendent. Instead, the matter is again remanded for another round of litigation. The department cannot deny credit on assumptions and presumptions. The appellants have pleaded in the reply to show-cause notice itself that they have availed credit only from the factory upto the airport. There is nothing brought out by the department to discredit this contention made by the appellants. Courier services - HELD THAT:- The Courier Services having been availed by the appellant mainly for outward transportation of documents as well as samples of the product, the said service qualifies as an input service having availed in relation to manufacture of finished products - the disallowance of credit on GTA Services and Courier Services is unjustified and requires to be set aside - credit allowed. Appeal allowed - decided in favor of appellant.
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2019 (7) TMI 1171
Clandestine removal - appellant had manufactured and cleared the impugned goods in the name of M/s. Nikita Plast, Daman without depositing the duty amount to the Government but instead deposited to the bank account of M/s. Nikita Plast - Freezing of accounts - HELD THAT:- As far as the submission of the learned counsel appearing for the Fancy Bag Industries and Manoj Mehta, the only defense of Manoj Mehta is that he was the Manager of Fancy Bag Industries which is a proprietary concern and in the show-cause notice proposal is made to recover the duty from him whereas the demand has been confirmed against the proprietorship concern which is not tenable in law. This argument of the learned counsel is not tenable in view of reply of Manoj Mehta to the show-cause notice wherein he has admitted that he is in-charge of Fancy Bag Industries which is a proprietorship concern and is also looking after the day-to-day affairs. The entire illegal activity has been done by Manoj Mehta without the knowledge of Nikita Plast. In the absence of any evidence to prove the role of the appellant, Nikita Plast, freezing of the account and adjusting the amount therein towards the duty liability is wholly unjust, illegal and improper and therefore I order for defreezing of the account of the Nikita Plast and also hold that the appropriation from the said account is without any authority of law - the order of demand against the Fancy Bag Industries and also the imposition of penalty on Manoj Mehta is upheld - the penalty imposed on Nikita Plast under Rule 26 of Central Excise Rules, 2002 and also order for defreezing of the account of Nikita Plast with immediate effect is dropped. Appeal allowed in part.
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2019 (7) TMI 1170
Demand of interest on the differential duty paid through supplementary invoices - subsequent increase in price of goods - price escalation clause - Section 11AB of the Central Excise Act 1944 - time limitation - HELD THAT:- It is a settled law that time limit as prescribed under Section 11A of the Central Excise Act is also applicable for recovery of interest in view of the decision of the Supreme Court in the case of CCE VERSUS TVS WHIRLPOOL LTD. [ 1999 (10) TMI 701 - SC ORDER] . Extended period of limitation - HELD THAT:- In the present case there is no suppression, fraud or collusion and therefore the longer period of limitation is not invokable in the present case. The appellant is only liable to pay interest for the normal period as prescribed by law whereas in both the appeals substantial period is beyond limitation. For the purpose of computing the interest for the normal period the case is remanded back to the original authority to quantify the interest for the normal period of one year which the appellants will be liable to pay - appeal allowed by way of remand.
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2019 (7) TMI 1169
CENVAT credit - input services - pest control services availed at the godowns and depots of the appellant - HELD THAT:- The issue decided in appellant own case M/S. HINDUSTAN COCA COLA BEVERAGES PVT. LTD. VERSUS COMMISSIONER OF GST CENTRAL EXCISE CHENNAI OUTER [ 2019 (2) TMI 404 - CESTAT CHENNAI] where it was held that the pest control services availed by the appellant are input services - credit allowed. There is no case made out by the Revenue to sustain the penalty levied and confirmed under Rule 15 (1) of the CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. Appeal allowed - decided in favor of appellant.
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2019 (7) TMI 1168
CENVAT Credit - input found short in the stock - period 2007-08 and from 01.04.2009 to 28.04.2010 - goods written off - demand of interest and penalties imposed - HELD THAT:- The appellant has explained that the shorage is due to writing off of the raw materials in their books of accounts. The department has not adduced any evidence to the contrary. There is no allegation that goods were removed from the factory. In paras 10, 11 and 12 of the order passed by the original authority, the adjudicating authority has stated that the credit has been wrongly availed, since there is shortage of raw materials. When there is shortage of raw materials by writing off, Rule 3(5B) of Cenvat Credit Rules, 2004 would apply. The period involved being prior to 01.03.2013, the demand of interest and imposition of penalties with respect to credit alleged to be wrongly availed in regard to shortage of raw materials cannot sustain and requires to be set aside - decided in favor of assessee. Excess credit availed by the assessee - HELD THAT:- Admittedly, the appellants have availed wrong credit by taking credit twice on the same invoices. Though, the appellants contend that it is an inadvertent mistake, they are liable to pay interest on the wrong credit availed by them till the reversal of the credit. Taking note of the fact that the credit availed by them was reversed on being pointed out, the situation does not warrant imposition of penalties - Penalty set aside. Appeal allowed in part.
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2019 (7) TMI 1167
CENVAT Credit - input services - Goods Transport Agency Services utilized for outward transportation of goods from their factory to the customer s premises - place of removal - period from Apr. 17 to Jun. 17 - HELD THAT:- The delivery is free on road . The appellant has not collected any freight charges from the buyer. So also, the risk on the goods is on the appellant as per Condition No.23 of the purchase order. All these would go to show that the sale took place at the buyer s premises. The freight charges are included in the assessable value for discharging the excise duty - In the instant case, the facts reveal that the freight charges have been included in the assessable value and no separate freight has been collected from the purchaser though the goods have been delivered at the buyer s premises. The decision in COMMISSIONER, CUSTOMS AND CENTRAL EXCISE, AURANGABAD VERSUS M/S ROOFIT INDUSTRIES LTD. [ 2015 (4) TMI 857 - SUPREME COURT] will apply to determine the place of removal. Thus, the finding by the authorities that the place of removal is the factory gate and not the buyer s premises is factually wrong. The denial of credit of service tax paid on outward transportation of goods upto the buyer s premises is unjustified. Appeal allowed - decided in favor of appellant.
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2019 (7) TMI 1166
CENVAT Credit - input services - Goods Transport Agency Services used for outward transportation of finished goods from the factory to their customer s premises - place of removal, factory gate or not - period from Apr. 12 to Mar. 16 - HELD THAT:- On perusal of various purchase orders, it is seen that the delivery terms is F.O.T. The learned counsel for appellants submitted that the delivery is free on terms . The terms are specified in the purchase order as well as in customers letters, which show that the appellant has to bear the freight charges, insurance etc., and deliver the goods to the customer s premises. It is also reflected from the purchase orders that the appellant has paid excise duty on the single price quoted in such orders. Invoices clearly show separate freight charges have been collected from the customers. The freight charges having been incurred by the appellants and also included in the assessable value, the place of removal can only be the buyer s premises as laid down by Hon ble Apex Court in the case of COMMISSIONER, CUSTOMS AND CENTRAL EXCISE, AURANGABAD VERSUS M/S ROOFIT INDUSTRIES LTD. [ 2015 (4) TMI 857 - SUPREME COURT] . The credit availed on outward transportation of goods upto the buyer s premises is eligible as decided by Division Bench of the Tribunal in the case of M/S ULTRATECH CEMENT LTD. VERSUS C.C.E. KUTCH (GANDHIDHAM) [ 2019 (2) TMI 1487 - CESTAT AHMEDABAD] . Credit allowed - appeal allowed - decided in favor of appellant.
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2019 (7) TMI 1165
CENVAT Credit - Job work - duty paid chassis from various manufacturers including M/s. Tata Motors Ltd. - principal to principal basis transaction - demand alongwith penalty u/r 27 of CER - HELD THAT:- This Tribunal vide its earlier order in the case of HYVA INDIA LTD, M/S. TATA MOTORS LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX- BANGALORE-I [ 2019 (3) TMI 548 - CESTAT BANGALORE] on identical issue has allowed the appeal of the assessee by setting aside the duties and also dropped the penalties imposed on Tata Motors. Appeal allowed - decided in favor of appellant.
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2019 (7) TMI 1164
Refund in cash of CENVAT credit - Whether cash refund is permissible in terms of clause (c) to the proviso to section 11B(2) of the Central Excise Act, 1944 where an assessee is unable to utilize credit on inputs? - Whether by exercising power under Section 11B of the said Act of 1944, a refund of unutilized amount of Cenvat Credit on account of the closure of manufacturing activities can be granted? - Whether what is observed in UOI VERSUS SLOVAK INDIA TRADING CO. PVT. LTD. [ 2007 (1) TMI 556 - SC ORDER ] can be read as a declaration of law under Article 141 of the Constitution of India? - CBIC Instruction No. 370 dated 11 th July 2018 - HELD THAT:- Larger Bench of this Court in this case [ 2019 (6) TMI 820 - BOMBAY HIGH COURT ] disposed of all the three questions referred to it by Division Bench of this Court by answering the same in favour of the Revenue and against the Assessee. Dismissal/withdrawal of appeal on low tax effect - CBIC Instruction No. 370 dated 11 th July 2018 - HELD THAT:- This instruction issued by CBIC is binding upon the officers of the Central Excise. The fact that no such objection was taken by the Respondent would not prevent/bar the Respondent from bringing it to the notice of the Revenue and this Court before final disposal of the Appeal. In fact, it is the obligation of the Commissioner to follow the CBIC instruction. The fact that he had not withdrawn the appeal earlier, does not bestow a right not to follow the CBIC instructions merely because no objection to the same was taken by the Respondent. It is at this stage that the appeal is being disposed of by the Division Bench in accordance with the directions/orders of the Larger Bench of this Court. Therefore, it is for the Commissioner to decide at least at this stage whether it seeks to press this appeal or not. Stand over to 30 July 2019.
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CST, VAT & Sales Tax
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2019 (7) TMI 1203
Liability of tax - Whether in absence of any statutory provision enabling the revenue to draw and rely on any presumption as to trading performed by the assessee/transporter, any tax liability could have been fixed merely because the assessee did not furnish the details of the consignor and the consignee of completed transactions? - HELD THAT:- Section 8 A(5) of the Act is not with respect to completed transactions of transportation of goods. Rather it is a provision that governs the conduct of the parties while the goods are in course of transportation. It is in that regard that the Act provides that the dealer would handover to the transporter complete documents/prescribed forms and the transporter or a person-in-charge of the vehicle (who would be carrying such goods during transportation), shall on demand, made under Section 13 (2) of the Act, produce such documents etc. for inspection. It is in the event of failure to discharge such obligations that an adverse presumption has been provided to be drawn on presumptive basis. It is true that the presumption would remain rebuttable. In absence of any material or evidence being brought on record to establish that though the assessee was a transporter but had engaged in trading in goods, again it could never be said that the assessee was liable to pay tax. It was for the revenue to have brought evidence to establish that the assessee had engaged in trading activity. That evidence being lacking the best judgement assesment and quantification of turnover are found to be with no legs. The question of law is answered in favor of assessee-revisionist and against the revenue-respondent. Revision allowed.
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2019 (7) TMI 1202
Interest on refund - starting date of limitation - Section 42 of the DVAT Act - HELD THAT:- The wording of Section 42(1) of DVAT Act is unambiguous. It talks of the two dates i.e. date the refund was due to be paid to the person and until the date‟ on which the refund is given‟. The word given‟ should in the context of the provision mean, the date on which the refund amount is actually received by the Petitioner and not the date simply on which the refund order is issued. As a matter of routine, the Court notes that invariably, the refund amount is not received by an Assessee on the date of issuance of the refund order. That date is usually a later date - in the present case, the Respondent has not disputed the fact that the refund amount was in fact received by the Petitioner only on 14th September, 2017. The Petitioner is entitled to interest on the refund amount issued by the order dated 25th August, 2017 for the period from 11th September, 2015 till 14th September, 2017. The said interest amount calculated in terms of Section 42 read with Rule 34 and 36 of the DVAT Rules will be credited to the Petitioner s account not later than 16th August, 2019. Petition disposed off.
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2019 (7) TMI 1201
Best Judgement Assessment - rejection of books of accounts - estimation of undisclosed turn over of medicines - imposition of penalty - HELD THAT:- The penalty had been imposed on the assessee on the allegation of the goods being not properly accounted for and that penalty has been sustained upto this Court, the books of account of the assessee are found to have been rightly rejected. However, rejection of the books of account may not lead to any fanciful or exaggerated conclusion as to quantification of the turnover. It is settled principle in law, though certain guess work is necessarily involved in the course of making a best judgment assessment, however that guess work must be informed with reasons and based on cogent material and evidence on record. This rule of prudence introduces rationality and proportionality in the estimation made by the assessing authority with reference to the infraction of law noted or detected by him - Keeping that in mind it does appear, in absence of any other material on similar transactions having been performed by the assessee during the assessment year in question, the assessing authority and the appeal authority have not been right in contemplating and allowing for more than ten fold increase in the turn over. It does not appear proper that the estimation of the turn over may have been made and sustained at ₹ 3,50,000/-. Normally, the matter would have been remitted to the appeal authority to make a fresh assessment in light of the observations made above, without making any observation as to the estimation made by the authority. However, the present is a case of A.Y. 1997-98, the legislation itself has undergone two changes upon introduction of the VAT Act and thereafter GST regime - In such facts, no useful purpose would be served in remitting the matter to the authority to pass a fresh order at this belated stage after more than 20 years of the close of the assessment year. Appeal allowed in part.
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2019 (7) TMI 1200
Restoration of Assessment Proceeding - review of impugned order - HELD THAT:- With regard to the withdrawal of the impugned order dated 19th March, 2019, the impugned order dated 19th March, 2019 is hereby set aside. The proceedings are restored to the file of Deputy Commissioner of Sales Tax to pass fresh, order of assessment in accordance with law. All contentions are kept open and parties are at liberty to produce fresh evidence in support of the case. The review notice dated 21st May, 2019 issued by the Joint Commissioner of Sales Tax has now become infructuous, as the basic order dated 19th March, 2019 is itself set aside - Impugned order set aside - petition allowed.
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2019 (7) TMI 1199
Best Judgement assessment - rejection of books of accounts - books could not be produced during one survey though stock found at the time of survey was found to be far less than that found in the recorded account books during the assessment proceedings - HELD THAT:- Other than that survey, there is no other incriminating material available against the assessee as may warrant rejection of his books of account. Coming to the survey itself, the only defect noted was of the account books having not been produced. Thus, in that survey, no incriminating material was discovered against the assessee. While rejection of books of account may have been in order if the stock physically found was excess of that which was found recorded in the books of account, however, in view of the opposite fact being in existence, the opposite conclusion of acceptance of the goods appears to be wholly justified in view of the complete absence of any other incriminating material or circumstance to establish that the assessee was engaged in trading or sale of goods outside its books of account or to doubt the correctness of the books of account. The question of law, as framed above, is answered in the negative i.e. in favour of the assessee and against the revenue - revision allowed.
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2019 (7) TMI 1198
Requirement with the compliance of security deposit - HELD THAT:- In the light of the undisputed position as far as the seven writ petitioners are concerned, this Court has no difficulty in accepting the submission of learned Standing Counsel for Salem City Municipal Corporation that the fiscal authority has taken 15% as the tax payable for the purpose of computing security deposit under by-law 6, which has been extracted and reproduced - A further careful and close reading of by-law 6 reveals that the method of computation contemplated in 6.2 of the by-laws is that the security deposit is based on 'full capacity of the auditorium for a period of seven days'. Security deposit is for the purpose of ensuring that if there is any default in payment of tax, the exchequer is not left high and dry. Therefore, this Court finds no illegality in the second respondent adopting 1 half times of tax payable i.e., 15% in this scenario for arriving at the security deposit that has been demanded. Mode of deposit - HELD THAT:- Though a part of the security deposit has been received by way of a cheque drawn in favour of the second respondent, in the light of the submissions made on instructions by Standing Counsel that the cheques have since been encashed and the monies have been deposited to Municipal Fund of cash, which is a permitted mode of deposit, this Court finds no infirmity or illegality in the mode of deposit also. Petition dismissed.
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2019 (7) TMI 1197
Concessional rate of tax at 2% - 'C' forms - purchase of High Speed Diesel Oil for use in generation and distribution of electricity and other forms of power - HELD THAT:- The issue decided in the case of SUNDARAM FASTENERS LIMITED VERSUS THE STATE TAX OFFICER, THE JOINT COMMISSIONER (CS) , (SYSTEMS) [ 2019 (6) TMI 1136 - MADRAS HIGH COURT] where it was held that respondents are directed to permit these petitioners to download 'C ' forms, as has been done in the past for the purpose of purchasing petroleum products against the issuance of 'C' declaration forms. Petition allowed.
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2019 (7) TMI 1196
Rejection of Input tax credit - rejection on the ground of stock maintained by the revisionist on the ground that the revisionist had failed to provide requisite information in Form-A - HELD THAT:- The prescription of Rule is mandatory in character inasmuch as word used are shall furnish , it clearly indicates that the revisionist was bound to provide the information in the prescribed form. It is immaterial that the data which was to be supplied to the Assessing Authority was voluminous is no ground for not providing the same in prescribed format. It is admitted that the data which was provided by the revisionist was exhaustive running into hundreds of pages. Be that as it may, same was to be provided in prescribed format and in absence of which the Tribunal has rightly held that the revisionist was not entitled to the benefit of Input Tax Credit - as per provisions of Rule 20(3) of the Rules, 2008, it is mandatory to provide the information in the prescribed form and by not doing so, the assesee cannot avail of the benefit accruing there from. No other point has been argued by the learned counsel for the revisionist. Revision dismissed.
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