TMI Tax Updates - e-Newsletter
July 31, 2017

Case Laws in this Newsletter:

Income Tax Customs Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Articles

• SUPERINTENDENT OF CENTAL TAX AS A ‘PROPER OFFICER’

News

• Printing of Post-GST Rates on Old Stock

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• Sale of bottled water on same rate Post GST

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• No shortage of Essential Drugs post introduction of GST, smooth supplies being maintained: Shri Mansukh L. Mandaviya

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• GST has not impacted consumer offtake, says HUL

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• The Union Minister of Finance, Defence and Corporate Affairs, Shri Arun Jaitley: Bureaucrats are free to render their advice/opinion during the process of decision making

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Notifications

GST - States

• G.O. Ms. No. 058 - dated 29-6-2017 - Tamil Nadu SGST
  The Tamil Nadu Goods and Services Tax Rules, 2017

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• G.O. Ms. No. 172 - dated 21-7-2017 - Telangana SGST
  Appointing the Commissioner or Commercial Taxes, Telangana State as Commissioner of State Tax.

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• G.O. Ms. No. 123 - dated 30-6-2017 - Telangana SGST
  Appoints the Certain sections. w.e.f. 01.07.2017 - Appointment of proper officer - Classes of goods to be of perishable or hazardous nature

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• 05/2017 - dated 30-6-2017 - Telangana SGST
  Notification on Fixes Interest Rates per annum under the Act.

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• 01/2017-State Tax - dated 30-6-2017 - Telangana SGST
  The Telangana Goods and Services Tax Rules, 2017.

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• 01/2017-State Tax (Rate) - dated 29-6-2017 - Telangana SGST
  Rates of Taxes on Goods and Services.

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• G.O. Ms. No. 109 - dated 24-6-2017 - Telangana SGST
  Specifying the category of persons exempt from obtaining registration under the Act.

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• G.O. Ms. No. 108 - dated 24-6-2017 - Telangana SGST
  Notifying the Common Goods and Service Tax Electronic Portal.

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• G.O. Ms. No. 107 - dated 24-6-2017 - Telangana SGST
  Notifying the appointed day for certain provisions.

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• F.1-11(91)-Tax/GST/2017(Part) - dated 29-6-2017 - Tripura SGST
  Registered person shall not be eligible to opt for composition levy.

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• 13/2017-State Tax (Rate) - dated 29-6-2017 - Tripura SGST
  Notify the categories of services on which tax will be payable under reverse charge mechanism under Tripura State Goods and Services Tax Act [Section 9 (4)]

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• 12/2017-State Tax (Rate) - dated 29-6-2017 - Tripura SGST
  Notify the exemptions on supply of services under Tripura State Goods and Services Tax Act [Section 11(1)].

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• 11/2017-State Tax (Rate) - dated 29-6-2017 - Tripura SGST
  Notify the rates for supply of services under Tripura State Goods and Services Tax Act and value of construction services and lottery.

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• 10/2017-State Tax (Rate) - dated 29-6-2017 - Tripura SGST
  Exempts intra-State supplies of second hand goods.

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• 09/2017-State Tax (Rate) - dated 29-6-2017 - Tripura SGST
  Exempting supplies to a TDS deductor by a supplier, who is not registered, under section 11 (1).

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• 08/2017-State Tax (Rate) - dated 29-6-2017 - Tripura SGST
  Exemption from reverse charge upto ₹ 5000 per day under section 11 (1).

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• 07/2017-State Tax (Rate) - dated 29-6-2017 - Tripura SGST
  Exemption from Tripura State Goods and Services Tax supplies by CSD to Unit Run Canteens and supplies by CSD Unit Run Canteens to authorised customers notified under section 11 (1) and section 55 CSD.

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• 06/2017-State Tax (Rate) - dated 29-6-2017 - Tripura SGST
  Prescribing refund of 50% of Tripura State Goods and Services Tax on supplies to CSD under section 55.

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• 05/2017-State Tax (Rate) - dated 29-6-2017 - Tripura SGST
  Specifying supplies of goods in respect of which no refund of unutilised input tax credit shall be allowed under section 54 (3).

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• 04/2017-State Tax (Rate) - dated 29-6-2017 - Tripura SGST
  Prescribing reverse charge on certain specified supplies of goods under section 9 (3).

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• 03/2017-State Tax (Rate) - dated 29-6-2017 - Tripura SGST
  2.5% concessional Tripura State Goods and Services Tax rate for supplies to Exploration and Production notified.

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• 02/2017-State Tax (Rate) - dated 29-6-2017 - Tripura SGST
  Exempts intra-State supplies of goods.

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• 01/2017-State Tax (Rate) - dated 29-6-2017 - Tripura SGST
  Notifies the rate of the state tax.

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• F. 1-11 (91)-TAX/GST/2017 - dated 22-6-2017 - Tripura SGST
  Appoints the Certain Sections.

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• F. 1-11 (91)-TAX/GST/2017 - dated 22-6-2017 - Tripura SGST
  Notifying of www.gst.gov.in as the common GST Electronic Portal.

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• F. 1-11 (91)-TAX/GST/2017 - dated 22-6-2017 - Tripura SGST
  Supplies of Services on reverse charge basis.

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Income Tax

• 76/2017 - dated 28-7-2017 - IT
  U/s 10(46) of the Income-tax Act, 1961 Central Government notifies Himachal Pradesh Electricity Regulatory Commission, a commission established by the Government of Himachal Pradesh, in respect of the specified income arising to that Commission

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SEZ

• S.O. 2214(E) - dated 7-7-2017 - SEZ
  Central Government de-notifies an area of 2.2338 hectares at Kittampalayam and Karumathampatti Village, Palladam Taluk, Coimbatore District in the State of Tamil Nadu

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Highlights / Catch Notes

Income Tax

• Determination of ALP - in case of service provider, the ALP of import of capital equipment, the depreciation cost of which is recharged with a markup cannot be determined to be nil because it is a tax neutral transaction and revenue is dependent upon the cost incurred (which includes depreciation).
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• Taxability in hands of society - fund transferred to ‘Distribution Pool Fund Account’ it is not taxable in the hands of the Society. - SC
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• Revision u/s 264 in favor of assessee - condonation of delay in filing an application - in terms of the proviso to Section 264 (3), the PCIT should also examine whether there was any justifiable reason for such delay. - HC
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• Invocation of Section 145 - rejecting the books of accounts - When there are audited accounts of an entity and the calculation of the GP ratios hinges upon their analysis, the AO should not lightly undertake an exercise that would amount to negating those accounts. - HC
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• Applying transfer pricing formula - associate enterprises - there has to be an enterprise in the nature of a firm and another enterprise who holds not less than 10% interest in such firms. Such facts are also not applicable in the present case - HC
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Customs

• Detention of imported goods - demurrage and detention charges - Regulation 6(1) of the Handling of Cargo in Customs Areas Regulations, 2009 - The DRI was of the view that these consignments required 100% examination before these could be released - whether any direction could be given to the Mumbai Port Trust to waive the demurrage charges? - Held No - SC
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• Levy of ADD - Plain Gypsum Plasterboard - It is not possible to accept the submission that the impugned Notification dated 7th June, 2017 was issued after the expiry of the original ADD Notification which came to an end at the midnight of 6th June, 2017. - HC
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Service Tax

• VCES declaration - the appellant case is that they had mistakenly applied the rate of tax at 10%, instead of the prescribed rate of 12%. - denial of the benefits contained therein for a technical lapse is not proper and justified.
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• 100% EOU - refund claim - input services - labour contract service - office maintenance - staff training expenses - subscription charges - insurance expenses - clearing charges - denial on the ground that same is not related to the manufacture of the product - Credit allowed.
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Central Excise

• 100% EOU - refund claim - commission given to foreign agent - As a 100% EOU it is required to achieve positive net foreign exchange for which they have to ensure constant foreign market for their products - denial of credit is unjustified
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• Renting of immoveable property service - road is used for transportation of goods - denial on the ground that the road located outside the factory - the service of renting of road to the respondent is an input service and the credit is admissible
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Case Laws:

• Income Tax

• 2017 (7) TMI 1016
  Deduction towards license fee, external development charges and conversion charges - computation of sale consideration - Held that:- No merit in this petition. The special leave petition is, accordingly, dismissed. HC Order confirmed [2017 (2) TMI 495 - DELHI HIGH COURT] wherein held in the absence of any obligation under any agreement between the appellant, the UBPL and UDHPL to pay monies of any sort to the original allottee, the appellant could not claim the sum of ₹ 6.75 crores towards deduction from income. The AO had further disallowed and disputed the addition of such costs on the ground that no such expenses had at all been incurred by the assessee and the perusal of the Sale Deed showed that the sale consideration was inclusive of all rights. Hence, the costs of transfer of rights alongwith all developments/constructions thereon were included in the sale consideration - Decided against assessee

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• 2017 (7) TMI 1015
  Taxability in hands of society - fund transferred to ‘Distribution Pool Fund Account’ - respondent – Society assessed to tax on its income as ‘person’ as defined under Section 2(31) - Held that:- No merit in this special leave petition. It is, accordingly, dismissed. HC order confirmed [2016 (12) TMI 237 - KARNATAKA HIGH COURT] as stating that Income of the Society cannot be anything beyond the scope of Chapter XVI of the Bye – laws. Therefore, logically the amount transferred to the ‘Distribution Pool Fund Account’ cannot be brought within the umbrella of Chapter XVI. Hence, it is not taxable in the hands of the Society. In the premise, the substantial question of law deserves to be answered against the appellant-Revenue.

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• 2017 (7) TMI 1014
  Entitled to weighted deduction in terms of the provision of Section 35B(1)(b)(iv) - appointment of agent - High Court [2005 (8) TMI 107 - ALLAHABAD High Court] rejecting the claim of the assessee, observed that at no stage, the assessee had put up a case that it had maintained branch or agency outside the country - Held that:- No doubt, the assessee was not maintaining any branch office. However, the case of the assessee was that Mr. Jack Barouk was appointed as his agent. It was the specific case made out by the assessee right from the stage of the assessment proceedings and was specifically argued before the ITAT, as mentioned above, which was accepted by the ITAT. Referring to agreement entered into between the assessee and Mr. Jack Barouk it is in the form of communication dated 24th October, 1977 addressed by Mr. Jack Barouk to the assessee stating therein the terms and conditions on which two parties agreed to work together. In this communication, Mr. Jack Barouk agreed to keep the goods of the assessee in his godown, show the said products to the visiting customers personally and secure orders from the territories mentioned therein namely, Benelux and France. This communication further states that he will be given 5% commission on all goods shipped by the assessee to the aforesaid territories on the orders procured by the said Mr. Jack Barouk. The assesseee had accepted and agreed on the aforesaid terms contained in the said communication and there is a specific endorsement to this effect by the assessee that the said communication, on acceptance by the assessee, became a valid and enforceable agreement between the parties. The aforesaid terms clearly state that Mr. Jack Barouk had agreed to work as an agent of the assessee and on the orders procured he was to get 5% commission. This aspect that the agreement was in fact an agency agreement stands conclusively established by the registration given by the Reserve Bank of India vide its letter dated 29th October, 1977. Captioned communication of the Reserve Bank of India reads as “Registration of Selling Agency Arrangement”. Thus, while giving its accord to the arrangement established between the parties it was termed as an agency arrangement. Thus, no hesitation in coming to the conclusion that Mr. Jack Barouk was an agent of the assessee and, therefore, all the conditions stipulated in Section 35B(1)(b)(iv) for giving weighted deduction of expenditure incurred by the assessee stands established. We, thus, allow this appeal and set aside the impugned order of the High Court and restored of that ITAT. - Decided in favour of assessee.

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• 2017 (7) TMI 1013
  Deduction permissible under Section 80HHC(1) in respect of computing the total income in relation to the export business - interest income earned - Held that:- There is hardly any relevancy regarding the nature of the interest income earned by the assessee-appellant. Notwithstanding its nature, as the specified percentage of the said interest is deductible from the "profits of business" computed under the head "profits and gains of business and profession" as provided under the explanation (baa) to sub-section (4C) of Section 80HHC of the Act, the interest income as specified is deductible. Accordingly, the substantial question raised in this appeal is answered holding that the interest income earned by the assessee of the description specified is deductible from the income of the assessee under the head "profits and gains of business and profession" and this would be in addition to the deduction permissible under Section 80HHC(1) in respect of computing the total income in relation to the export business.

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• 2017 (7) TMI 1012
  Revision u/s 264 in favor of assessee - condonation of delay in filing an application - Held that:- When Section 264(3) uses the expression to ‘the date on which he otherwise came to know of it’, it refers to the date on which the Petitioner actually had a copy of the intimation. He could either get it from the Department or get it from any other source. In other words, it would not be sufficient that the Petitioner came to know of the fact that his return had been processed. Till such time the Petitioner had a copy of the intimation under Section 143(1) of the Act, the limitation period under Section 264 (3) of the Act would not begin to run. Considering that Section 264 is a provision intended to benefit the Assessee, no other interpretation is possible on a plain reading of it. Thus PCIT was in error in holding that the revision petition was time barred. The Court would also like to observe that where in a given case, the PCIT is of the view that a certain petition is time barred, then in terms of the proviso to Section 264 (3), the PCIT should also examine whether there was any justifiable reason for such delay. He need not wait for an application to be filed by an Assessee for that purpose. He may put the Assessee on notice of this fact and require the Assessee to show sufficient cause for the delay. This may avoid needless multiplicity of the proceedings, particularly, when the delay is not substantial and can be explained by the Assessee. Since the PCIT has declined to examine the issue on merits, the Court sets aside the impugned order dated 21st December, 2016 passed by the PCIT and restores the Petitioner’s revision application to his file for disposal on merits in accordance with law. The Petitioner's aforementioned revision application shall be placed before the PCIT on 4th September, 2017 for this purpose.

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• 2017 (7) TMI 1011
  Invocation of Section 145 - interpretation to Section 80IA (8) and (10) - ITAT concluded that the AO had arbitrarily made the addition by rejecting the books of accounts and the additions made by the AO were rightly deleted by the CIT(A) - Held that:- The expression “such reasonable basis” pre-supposes that the AO has to explain with sufficient clarity why the AO is rejecting the profit figures as put forth by the Assessee which emerges from the audited accounts of the Assessee. In the present case, for instance, the AO had to explain why he was rejecting for AY 2006-07 the GP ratio of 38.05% and substituting it with a rate of 23%. What the AO appears to have done in the present case is to reject an explanation given by an Assessee as to the difference in the selling price of the products manufactured by it at its Baddi unit compared to that at Delhi unit. The AO proceeded on the basis that the sales were to related parties thus giving an unfair advantage to the Assessee. The above approach of the AO was rightly found by the CIT(A) to be not justified. Without pointing out the error, if any, in the accounts or disturbing the figures of sales or purchases, to compare the trading results of business of two units and simply reject was clearly not a “reasonable basis”, as contemplated by the proviso to Section 80-IA (8) of the Act. The AO’s order does not explain the basis for determining the GP ratio of 23% instead of 38.05% for AY 2006-07 and 25% instead of 43.07% for AY 2007-08. In the circumstances, the ITAT’s conclusion that the AO’s order was passed on conjectures and surmises cannot be said to be erroneous. When there are audited accounts of an entity and the calculation of the GP ratios hinges upon their analysis, the AO should not lightly undertake an exercise that would amount to negating those accounts. Question (i) is answered in the negative by holding that the ITAT did not err in holding that invocation of Section 145 of the Act in the facts of this case was not justified. Question no. (ii) is answered in the negative by holding that the impugned order of the ITAT in its interpretation of Section 80-IA (8) and (10) of the Act is not erroneous. - Decided in favour of the Assessee.

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• 2017 (7) TMI 1010
  Validity of reopening of assessment - addition of dividend income - Held that:- A perusal of the reply submitted by the Petitioner to the questionnaire, which was issued on 29th October, 2009 by the AO as part of the proceedings under Section 143 (3) of the Act, clearly reveals that the dividend income was fully disclosed in the reply dated 17th November, 2009. The questionnaire having been duly replied to and the assessment order having been passed under Section 143 (3) of the Act on 30th December 2009, it cannot be said that AO did not form an opinion on the issue. The questionnaire specifically sought details of several incomes, which were submitted by the Assessee. Even the proceedings under Section 263 did not raise the issue of disallowance of expenditure incurred for earning exempt income under Section 14-A of the Act. Under Section 263 of the Act, the Revenue had an opportunity to revisit the assessment order insofar if it was incorrect and prejudicial to the interests of the Revenue. However, even in the Section 263 proceedings this issue was not raised. In view of the fact, that there was a full disclosure by the Assessee of all the material facts relating to the exempt income it cannot be said that the condition for reopening of the assessment is satisfied on this count. Even the second reason is a mere reproduction of the earlier notice dated 28th March, 2013. The nature of business of the Petitioner has always been known to the Revenue year after year. Even in this reason there is not even a whisper of the failure by the Petitioner to make a full and true disclosure of all the material facts necessary for the assessment. Thus, the impugned notice does not satisfy the rigors of Sections 147/148 of the Act as there has been no non-disclosure of the material facts by the Petitioner. In fact, even the reasons accompanying the impugned notice do not even say that there is any failure by the Petitioner to disclose fully and truly all the material facts. - Decided in favour of assessee.

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• 2017 (7) TMI 1009
  FEFG taxability in this year under Section 43A - Foreign Exchange Fluctuation Gains - Held that:- Tribunal has accepted that the Assessee has utilized the loan for the purpose of purchase of ship. It is also not disputed by the learned counsel for the Revenue that if the Assessee has utilized the loan for the purpose of purchase of ship, then the benefit given by the Tribunal cannot be disputed. However, contention of the learned counsel for the Revenue relying on the observations of the Commissioner (Appeals) in the Judgment is that the Assessee has not purchased the ship from the loan which has been advanced, does not appear to be proper. The Commissioner in its Judgment has accepted that the Assessee has acquired Vessel Bulk Prosperity. On perusing the agreement between the Assessee and the party advancing loan, the ship, as is subject matter of the said agreement, means 10500 deadweight tonne motor vessel bulk cargo transhipper known as “Bulk Prosperity”. The Commissioner accepts that the Assessee has acquired Bulk Prosperity. In view of this, the finding of the Tribunal that the Assessee has acquired the ship from the loan advanced is not perverse and the same is based on documentary evidence. We do not find any perversity in the same. Even finding of the Tribunal holding that the FEFG of ₹ 23.11 lakhs cannot be separately taxed as FEFG as the Assessee offered income under the TTS is concerned, the same is covered by the Order of this Court in [2010 (1) TMI 38 - BOMBAY HIGH COURT]

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• 2017 (7) TMI 1008
  Denying the benefits of sections 11 and 12 - assessee had transferred the Fresh Frozen Plasma Units to its sister concern at a rate lower than the market rate - Held that:- The Tribunal reversed the decision of the Revenue authorities inter alia on the grounds that for number of years, there was no such instance of sale of the units to the sister concern at a reduced rate, the number of units represent a small portion of the total turnover, that such activity was discontinued in later years and most importantly, the said sister concern had advanced unsecured interest free loans of more than ₹ 3 crores over a long period of time. The Tribunal also accepted the assessee's explanation that shelf life of such product was extremely short and there were no immediate takers in the market. It was noticed that in certain cases, due to such reasons, the unit has sold to the other blood banks at the same rate. The Tribunal noted that the sister concern i.e. Celestial Biologicals Limited had provided for unsecured loan to the tune of ₹ 3.43 crores since the financial year 2003-04. Even going by moderate notional interest, the accumulated interest on loan till 31.03.2009 would reach ₹ 2.51 cores. No interest was charged by Calestial Biological Limited. The considerations of the Tribunal are based on facts and evidence on record. No question of law arises. - Decided against revenue

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• 2017 (7) TMI 1007
  Tds on cargo handling charges - Tribunal held that cargo handling charges are in the nature of contract u/s 194C and not fees of professional or technical services covered u/s 194J - requirment of technically competent and skilled persons technically competent and skilled persons - Held that:- It is not disputed that for the Assessment Year 2008-09, between the same parties, similar issue had arisen and the Commissioner had held that the cargo handling charges are in the nature of contract and not fees of professional and technical services. The Revenue did not file any appeal before the Tribunal and had accepted the said order. As such, for the present year, the appellant would not be in a position to deviate from the principles of consistency. - Decided against revenue

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• 2017 (7) TMI 1006
  Sale of immovable property - Transaction assessed taking into consideration the stamp value assessment - nature of consideration that is made by the competent authorities keeping in view Section 50C - Held that:- Taking note that the transaction disclosed by the assessee regarding sale of immovable property for the purpose of consideration of the capital gains at ₹ 61,00,000/-, keeping in view the fact that the stamp value assessment for it had fixed the value of such property at ₹ 92,52,000/, the Assessing Officer has taken into consideration the same. In view of the objections raised by the assessee and keeping in view the provisions contained in Section 50C, reference was made to the District Valuation Officer, Bengaluru. The District Valuation Officer through the order dated 17.12.2008 has fixed the fair market value of the property in question at ₹ 1,50,11,400/-. It is in that light having kept in view the provision of the Act and the procedure that was required to be adopted, since in that circumstance, the value fixed by the stamp valuation authority was necessary to be taken into consideration, the value of ₹ 92,62,000/- was taken into consideration and assessment has been completed. The consideration as made therein has been upheld by the Tribunal as well. Therefore, in the circumstance where the provision of law has been kept in view and the procedure has been followed, at this juncture to contend that a question of law arises in this appeal would not be acceptable. The procedure has been adopted and stamp value assessment is applied. Further though the learned counsel for the appellant contends that the valuation as made by the District Valuation Officer is without basis, the said aspect cannot be considered in an appeal of the present nature by treating it as a question of law for consideration herein as the assessment made therein a factual determination.

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• 2017 (7) TMI 1005
  Applying transfer pricing formula - associate enterprises - Held that:- Clause (i) would apply in a case where goods or articles are manufactured or transferred by one enterprise. In the present case, admittedly M/s. Blue Gems does not either manufacture or process any articles. It merely purchases rough diamonds from the international markets and supplies to the assessee. Clause (j) would apply when an enterprise is controlled by an individual. In the present case, both the enterprises are partnership firms. There is nothing to suggest that they are controlled by any individuals. Clause (l) would of course apply in a case where the enterprise is a partnership firm. However, for applicability of the said clause, there has to be an enterprise in the nature of a firm and another enterprise who holds not less than 10% interest in such firms. Such facts are also not applicable in the present case. The Tribunal in our opinion therefore committed no error in holding that the assessee and M/s. Blue Gems not being associate enterprises, the question of applying transfer pricing formula would not arise.

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• 2017 (7) TMI 1004
  AMP expenditure treated as international transaction Coming to the case at hand - Held that:- We are of the considered view that when the TPO has determined the AMP expenses to be international transaction, he had no occasion to follow the ratio of the judgments in Rayban Sun Optics India Ltd. vs. CIT [2016 (9) TMI 1293 - DELHI HIGH COURT], Pr. CIT vs. Toshiba India Pvt. Ltd. [2016 (8) TMI 1175 - DELHI HIGH COURT] and Pr. CIT vs. Bose Corporation (India) Pvt. Ltd. (2016 (8) TMI 1177 - DELHI HIGH COURT) rendered by Hon’ble jurisdictional High Court discussed in the preceding paras since those judgments were not available to him. Aforesaid decisions have consistently been followed by coordinate Benches of the Tribunal. In these circumstances, we are of the considered view that it would be in the interest of justice if the impugned order is set aside and the matter is restored to the file of TPO/AO for fresh determination of the question to determine, “as to whether AMP expenditure is international transaction”, in the light of the judgments rendered by Hon’ble Delhi High Court discussed in preceding paras. In case the existence of such an international transaction is not proved, there shall not be any transfer pricing addition, by the ld. AR for the assessee. However, in case the international transaction is proved to be existed, then the TPO will determine such international transaction in the light of the judgment rendered by Hon’ble jurisdictional High Court after providing an opportunity of being heard to the assessee. TPO/AO is also required to benchmark the distribution and marketing functions both being interconnected and intertwined on an aggregate basis in accordance with the decision rendered by coordinate Bench in assessee’s own case for AY 2011-12. However, so far as first part of the directions issued by the DRP qua legal issues are concerned, the assessee sought to reserve its right to argue the same before the competent forum. However, we are of the considered view that this remedy is otherwise always available to the assessee to argue on legal issues before the competent authority

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• 2017 (7) TMI 1003
  Addition on account of unexplained cash deposits in bank account on account of excise duty - Held that:- The assessee has explained the source of deposit of entire license fee of ₹ 3,30,16,69,936/- deposited by the AOP, which included the deposit of ₹ 79,50,000/-, and thus the deposit of amount of ₹ 79,50,000/-, claimed by the Assessing Officer towards the excise duty, stand explained. In our opinion, the order of the Ld. CIT-A on the issue in dispute is comprehensive and well reasoned and no interference Unexplained investment in purchase of car - Held that:- In view of no explanation of source of investment by the assessee, the Assessing Officer held the investment as unexplained. During first appellate proceedings, the assessee explained the same as ₹ 5.00 lakhs from own resources and balance ₹ 15 lakh out of loan taken from HDFC bank. During remand proceeding, the Assessing Officer verified these facts. In view of the verification by the Assessing Officer, the Ld. CIT-A accepted the explanation of the assessee and deleted the addition. In our opinion, the action of the Ld. CIT-A, in deleting the addition is well reasoned and justified as the source of investment stands duly explained and which is also verified by the Assessing Officer. Receipt of payment from various parties - reconciliation of the TDS with incomes/receipts declared in the return of income - N.P. determination - Held that:- Assessee has explained payments corresponding to TCS reflected in the form No. 26- AS related to the assessee. In the additional evidences, the assessee furnished copy of ledger accounts of all the relevant parties appearing in the books of accounts of the AOP showing the purchases made from those parties and the payments from bank account of the AOP to those parties. Once the payment to those parties has been verified from the books of the AOP, in our opinion no addition could have been made in the case of assessee. In these circumstances, the finding of the Ld. CITA on the issue in dispute is comprehensive and well reasoned and we do not find any error in the same

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• 2017 (7) TMI 1002
  TPA - ALP determination - payment to CWS and CWHK for no services rendered by them - Held that:- As decided in assessee's own case [2014 (5) TMI 897 - DELHI HIGH COURT] Hon’ble High Court observed that the authority of the TPO is to conduct the transfer pricing analysis to determine the ALP and not to determine whether there is a service or not from which the assessee benefits. This aspect of the exercise is left to the AO. Hon’ble High Court further held that in this case, the issue is, “whether an independent entity would have paid for such services”. Importantly in reaching this conclusion, neither the Revenue, nor this court, must question the commercial wisdom of the assessee, or replace its own assessment of the commercial viability of the transaction. The services rendered by CWS and CWHK in this case concern liaising and client interaction with IBM on behalf of the assessee – interaction with IMB’s regional offices in Singapore and US was necessary. It is further held by Hon’ble High Court whether it is commercially prudent or not to employ outsiders to conduct this activity is a matter that lies within the assessee’s exclusive domain and cannot be second–guessed by the Revenue. So, following the above the detail of specific activities for which cost was incurred by both CWS and CWHK and the attending benefit to the assessee have not been considered till date, which need to be provided, in addition to the consideration of the ALP vis-à-vis the total cost claimed by these AEs, the case is remanded to the AO/TPO for ALP assessment, followed by the AO’s assessment order in accordance with law. Reimbursement of cost and payment of referral fees to the foreign AEs - Held that:- Again following the aforesaid judgment passed by the Hon’ble High Court in assessee’s own case, the case is remanded to the file of AO to comply with the directions contained in paras 37 and 45 of the judgment (supra) on the question of referral fees, the report of TPO validating the arms length price is binding on the AO who may verify the transactions and assessed the deductions u/s 37 of the Act in accordance with law.

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• 2017 (7) TMI 1001
  Arm’s length price - salary expenses of two expatriate employees and reimbursement of actual expenses - Held that:- While the employees were sent to India for a certain period of time, the employees were still rightfully entitled to the same level of salary as they were earning in their country origin. This fact has to be verified by the TPO. Further the Ld. AR pointed out that both the employees brought with them the valuable expertise and experience for the assessee company. The Ld. AR demonstrated the same with the relevant documents which was before the DRP, but the DRP has not taken cognizance of the same. During the hearing, the Ld. DR pointed out that all the relevant documents in support of Ld. AR’s submissions related to salary expenses of two expatriate employees, the same was not tendered before the TPO in the aforementioned. There is no finding to that effect in TPO’s order but though it was submitted before the DRP, the DRP also failed to look into this crucial evidence. Therefore, this issue needs to be looked into and these documents have to be verified. The DRP order is non speaking order. Therefore, this issue is remanded back to the TPO/A.O. Needless to say, the assessee will be allowed a reasonable opportunity of hearing. Payments in the nature of cost contributions/ reimbursements - Held that:- TPO has disallowed this expenses by making adjustment with respect to consultancy charges of ₹ 2.68 crores which was totally ignored by the Assessing Officer while giving effect to its order dated 15/11/2010. The A.O is directed to make proper adjustment as relates to consultancy charges and then quantify the addition. Appeal of the assessee partly allowed for statistical purpose.

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• 2017 (7) TMI 1000
  Lease rental raising from exploitation of commercial property - income from house property instead of business income - search and seizure operation u/s 132 - Held that:- Since the facts in the years under consideration are identical to the facts involved in the assessment year i.e. 2012-13 which has been decided by the ld CIT(A) in assessee’s favour by following the judgment of the Hon'ble Supreme Court in case of M/s. Chennai Property and Investment Ltd. Vs CIT (2015 (5) TMI 46 - SUPREME COURT ). In the present case the assessee stated that department had not preferred any appeal against the order dated 29.01.2016 passed by the ld CIT(A) for the subsequent assessment year i.e. Assessment Year 2012-13, the said averment needs verification. We therefore deem it appropriate to set aside this issue back to the file of AO for verification of the facts and if the department accepted the rental income as business income in subsequent year 2012-13 then for the assessment years under consideration also, the same stand to be taken. Appeals of the assessee allowed for statistical purposes.

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• 2017 (7) TMI 999
  Deduction u/s 80IC - said deductions were not allowed while processing the return by the CPC, Bangalore for the reason that it was a belated return - assessee filed application u/s 154 seeking a claim of deduction - Held that:- CIT(A) in the impugned order categorically stated that the return filed by the assessee was within the extended period so it could not be said to be delayed return. He also mentioned in para 5.2 of the impugned order that the downloaded e return for the relevant assessment year revealed that the assessee had claimed deduction both u/s 80IB and 80IC of the Act. The said observation is correct, as evident from Page No. 2 and 23 of the assessee’s Paper Book which are copies of the computation of income and downloaded return of income in Form No. ITR V/. At Page No. 2 the assessee mentioned in the computation of income, the deduction u/s 80IB amounting to ₹ 428609/- and u/s 80IC for ₹ 29965494/-. The said figures are also mentioned at Page No. 23 which is copy of the return of income filed by the assessee. No valid reason to interfere with the finding of the ld CIT(A). - Decided against revenue

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• 2017 (7) TMI 998
  Unexplained cash deposits - Held that:- The registration authority has recorded that both the seller and purchaser were present before him and both parties accepted the facts of the document after listening and understanding the same and accepted the fact of exchange of the sale amount recorded in the sale deed. In the sale deeds also it is clearly mentioned that both parties have read, listened and understood the contents of the deed. The assessee did not co-operate with the Assessing Officer and explained the source of deposits and only before the first appellate authority, the assessee made a claim that the cash deposits was out of sale of lands. The matter was then remanded to the Assessing Officer and he recorded the statement of the purchasers, wherein they denied of giving any extra or hidden money other than what was recorded in the sale deeds. We also note that the assessee has not informed to the registration authority about any sale amount received in excess of the sale consideration recorded in the sale deeds. The assessee also did not file any return of income declaring sale of land as agriculture income. We observe that the assessee did not file return of income or disclosed the source of cash deposit before the Assessing Officer even specifically asked by the Assessing Officer under the notice issued under section 148 and 142 (1) of the Act respectively. It is also not in dispute that those notices were not served on the assessee as on one occasion the assessee alongwith his son attended before the Assessing Officer and sought adjournment but subsequently did not comply with the assessment proceedings. In such circumstances, the claim of the assessee that actual amount transacted was more than the amount recorded in the sale deed, cannot be accepted. - Decided against assessee.

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• 2017 (7) TMI 997
  Disallowance of loss without rejecting books of accounts of the assessee under provision of section 145(3) - AO disallowed the losses from the two projects merely on the ground that there was a fall in overall gross profit rate of the company as compared to the last year - Held that:- We find that the assessee has duly explained the reason for the losses. When the project is spread over more than one year and the assessee has followed percentage completion method for recognizing profit from such project, the amount of profit or loss from the project, may vary from year to year. In our opinion, when the assessee has explained the reasons for losses, the action of the AO in rejecting the losses without pointing out any defect in the explanation of the assessee, is not justified. The Assessing Officer has nowhere held that either the assessee inflated it purchases or suppressed it sales and merely the low gross profit rate cannot be basis for disallowing the losses. When the Assessing Officer failed to find any fault in the explanation of the assessee justifying the losses claimed following the percentage completion method, the action of the Assessing Officer in disallowing such losses is arbitrary and not in accordance with law. Addition on account of payment to M/s. Lurgi Life Science (LLS), Germany for drawing charges - CIT-S deleted addition - Held that:- We find that the payment for getting technical know-how in the form of drawing etc. in the year under consideration has also been made in continuation of the agreement dated 03/09/2003 between the assessee and LLS, Germany. Thus, respectfully following the decision of the Tribunal in assessee;s own case there was no independent control of the assessee over the rights. It could only used them for the purpose of business. Article 3.5 also contemplates that the rights are non-exclusive non-transferable basis and for a single use only. If all these clauses are being considered then it would reveal that assessee has not acquired the rights of technical knowhow. Independently, rather it has acquired used of such technical knowhow. There is no enduring benefit to the assessee. Learned First Appellate Authority has appreciated these clause in right perspective and we do not see any reason to interfere in the order of the learned CIT(A) on this issue. This ground of appeal is rejected Addition towards expenditure on organizing seminars for updating its engineers, held as capital expenditure - Held that:- The expenditure was for keeping its engineers updated with the latest knowledge relating to set up and install of services in the field of biodiesel and discussions held in the conference helped the technical staff in solving day-to-day problems. As submitted that in assessment year 2008-09 also the assessee made payment for membership fee and registration fee to ‘Biodiesel Association’ but the Tribunal upheld the finding of the Ld. CIT-A, holding the expenditure as revenue in nature. Thus we uphold the finding of the Ld. CIT-A in holding the expenditure as revenue in nature. Addition on account of provision for warranty - Held that:- we are of the opinion that the liability accrued and existed and there was no uncertainty as to incurring of liability as it was under contractual legal obligation. The assessee has incurred expenses in subsequent year before finalization of the financial statement. The expenses are related to the project completed in the year under consideration and the corresponding revenue has already been recognized. The assessee debited said expenses as provision of warranty in the year under consideration. In such circumstances, it is evident that while finalizing the financial statement the amount, the expenditure was ascertained. We find that the Ld. CIT-A has allowed the claim of the assessee following the judgment in the case of Rotork Controls India Private Limited (2009 (5) TMI 16 - SUPREME COURT OF INDIA ) as held provision for warranty is an ascertained liability as long as it is based on actuarial valuation. This is done on historical cost and on experience of the assessee. Thus, there can be no scope for any disallowance. Addition on account of bad debts - Held that:- Assessee has already shown above debts as income in earlier years and the Revenue has not disputed the fact of debt shown as income in earlier years. The assessee has demonstrated written off of the bad debts in the year under consideration and thus both the conditions in respect of the above bad debts are fulfilled. The Ld. CIT-A has also following the decision of the Hon’ble Supreme Court in the case of TRF Ltd Vs. CIT, (2010 (2) TMI 211 - SUPREME COURT ) accepted the claim of the assessee and allowed the ground raised by the assessee in this respect. Addition on account of disallowance of interest expenses - CIT-A allowed the claim - Held that:- In our opinion, it is well known business practice that the manufacturer ask for advance for executing orders, and thus the advance made by the assessee is part of normal business practice and in the nature of commercial expediency. Thus, the disallowance deserve to be deleted both on the account of the sufficient own capital in the hand of assessee company as well as on the ground of advance made on account of business expediency. In view of above, we are of the opinion that finding of the Ld. Commissioner of Income-tax (Appeals) on the issue in dispute is well reasoned and no interference on our part is required. Accordingly, we uphold the same Disallowance of extra depreciation on computer peripherals/accessories - Held that:- CIT-A has followed the decision of the Hon’ble Delhi High Court in the case of CIT Vs. BSES Rajdhani Powers Ltd. (2010 (8) TMI 58 - DELHI HIGH COURT ), wherein the Hon’ble High Court has agreed with the Tribunal that computer accessories and peripherals such as printers, scanners and servers etc. form an integral part of the computer system. In fact, the computer accessories and peripherals cannot be used without the computer, hence they are part of computer system and entitled at the higher rate of 60% depreciation. Thus, respectfully following the above decision of the Hon’ble Delhi High Court, we uphold the finding of the Ld. CIT-A on the issue. Appeal of the Revenue dismissed.

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• 2017 (7) TMI 996
  TPA - selection of most appropriate method - ALP determination - Held that:- As noted for the three years under consideration selection of most appropriate method is not in dispute, we deem it appropriate to refer to sub-Rule (2) of Rule 10C of the IT Rules, 1962 for the sake of clarity noting that since it is a recurring issue and that in the peculiar niche area of cosmetics there are multiple players in the limited market the persuasiveness of the arguments that the business model of direct sales or retail sales as far as the specific target customer base is concerned the business model of direct sales may not be a relevant criteria thus we make it clear that the issue has been left open to be decided as and when and if ever a challenged is posed to the application of RPM as the most appropriate method In order to take guidance from the Rules we deem it appropriate to refer to Rule 10C of the IT Rules wherein sub-Rule (1) of Rule 10C throws light on the criteria to be adhered to and makes it clear that for the purposes of sub-section (1) of section 92C, the most appropriate method shall be the method which is best suited to the facts and circumstances of each particular international transaction or specified domestic transaction, and which provides the most reliable measure of an arm’s length price in relation to the international transaction or the specified domestic transaction, as the case may be. Thus though the issue may be of academic interest in the present proceedings we deem it appropriate to clearly and ambiguously set out that on the selection of the most appropriate method there is no finding given as the issue is not under challenge in the present proceedings. In view of the above detailed reasoning and the conclusion the issues are remitted back to the TPO in the respective years to comply with the aforesaid directions set out hereinabove.

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• 2017 (7) TMI 995
  Upward adjustment of arm’s length price of assessee’s international transaction - selection of comparable - Held that:- Assessee company is a wholly owned subsidiary of Ciena Corporation, USA, and engaged in provision of software development and marketing software services to its overseas group company. Assessee is a 100% EOU under the Software Technology Park Scheme incorporated on June 27, 2005 and commenced its operation w.e.f. April 10, 2006. Assessee company is remunerated on cost plus basis for providing services, namely, contractual software development and marketing software services, thus companies with functional dissimilarity and extra ordinary events impacting profitability of the comparable company nee to be deselected from final list of comparable. Depreciation disallowance on the assets purchased from AE - Held that:- Coordinate Bench dealt with the issue in detail on the identical facts for AY 2009-10, and held that in case of service provider, the ALP of import of capital equipment, the depreciation cost of which is recharged with a markup cannot be determined to be nil because it is a tax neutral transaction and revenue is dependent upon the cost incurred (which includes depreciation). Thus the value as recorded in the books of account is to be upheld and deletion of addition made by disallowing or reducing the amount of depreciation on the assets purchased from AE is not sustainable. Not only this, TPO for FY 2010-11 and FY 2007-08 has upheld that the price charged for import of capital equipment complies with the arm’s length standard and the assessee has brought on record the order of TPO for FY 2010-11 and FY 2007-08 holding that the price charged for import of capital equipment complies with the arm’s length standard which is available as Appendix 2 and Appendix 3 annexed with the synopsis. So, in these circumstances, we hereby delete the addition on this account made by disallowing or reducing the amount of depreciation on the assets purchased from the AE

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• 2017 (7) TMI 994
  Disallowing the commission expenses - genuineness of expenditure - Held that:- Disallowance of the claim of payment of commission to the service agent by AO is that, “part of the commission is still payable”, is not tenable for the reasons that AO has lost sight of the fact that as per terms and conditions of the agreement entered into between assessee and the agent commission is to be paid after receipt of payment by the assessee for the goods exported” Second ground for disallowing the claim of payment of commission to the service agent that the agreement does not suggest any specific reference to any specific service rendered to the agent to the assessee company is, “also not tenable for the reasons inter alia that in each agreement, the services to be rendered by the commission agents are extensively elaborated. Statement furnished by the assessee company shows that the FOB value of export to the parties where agency commission is payable along with updated statement of commission agent/payable during AY 2006-07 in respect of the export made and as such, the outstanding commission payable continues to be shown as liable in the books of account which have never been rejected by the AO. In these circumstances, genuineness of the business transaction and payment made to the service agent cannot be disputed Observation made by the AO that no invoice below has been raised by the service agents which makes the business transaction doubtful is not tenable because when as per agreement, commission @ 4% or 10% in case of different agents, as the case may be, is already agreed upon between the parties on the goods exported and services have been rendered and export contracts stands executed, we do not find any reason to disallow the claim only because of the fact that invoices have not been raised by the service agents. Even otherwise, when assessee company has categorically spread its income into 3 years then expenditure have also to be spread in 3 years and the disallowance cannot be made on the ground that the amount of agency commission was payable even during 2010. The contention of the ld. DR that no document / correspondence is there on record to prove that as to what services have been rendered by the service agents, is again not tenable for the reason that when intricate projects have been executed by the assessee company as per terms and conditions of the agreement, which could not have been completed without local assistance and only thereafter assessee company has earned turnover of ₹ 167 crores with net profit of 17%, the ld. CIT (A) has rightly concluded that the services have been rendered for a genuine business transaction and payment for the agency services is allowable. - Decided against revenue

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• Customs

• 2017 (7) TMI 977
  Detention of imported goods - demurrage and detention charges - Regulation 6(1) of the Handling of Cargo in Customs Areas Regulations, 2009 - The DRI was of the view that these consignments required 100% examination before these could be released - whether any direction could be given to the Mumbai Port Trust to waive the demurrage charges? - Held that: - Neither the regulations nor the provisions of the Customs Act can impinge or in any manner affect the statutory power of the Major Port Trusts to levy rates under the Act. In fact, the Authority that framed the Regulations was itself aware of this because Regulation 6(l) itself begins with the words subject to any other law for the time being in force . It is, therefore, obvious that the Regulations are subject to any other law including the Major Port Trust Act. Therefore, these Regulations cannot in any manner affect the right of the Port Trust. We are, therefore, of the view that the High Court erred in holding that the law settled by this Court in a catena of judgments referred to above was no longer applicable in view of the 2009 Regulations. Reliance placed by the Union of India on Section 128 of the Major Port Trusts Act is totally misplaced. This provision only deals with the right of the Central Government to collect customs duties. It does not deal with the rights of the Port Trust to collect rates including demurrage. Whether any direction could be issued to the DRI/Customs Authorities to pay the demurrage charges to the Port Trust and the detention charges to the Shipping Line? - Held that: - even though there may be some delay on the part of the DRI and the customs authorities, the respondent-importers have also been guilty of delaying the matter and, therefore, they cannot claim that they are not liable to pay demurrage and detention charges. We may, however, clarify that the respondent-importers are free to approach the Mumbai Port Trust in terms of Section 53 of the Act for exemption and remission of demurrage and other charges and the Board may take a sympathetic view while considering the case of the respondent-importers under Section 53. As far as detention charges of the Shipping Line are concerned, in addition to what we have observed above, we are of the view that the High Court could not in writ proceedings have directed the DRI/Customs to pay the detention charges to the Shipping Line since these were to be paid on the basis of a contract between the respondent-importers and the shipping line. Appeal allowed - decided in favor of appellant.

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• 2017 (7) TMI 976
  Maintainability of petition - alternative remedy of appeal - whether hot rolled or cold rolled of all grades/series; whether or not in plates, sheets, or in coil form or in any shape, of any width, of thickness 1.2 mm to 10.5 mm in case of hot rolled coils, 3 mm to 10.5 mm in case of hot rolled plates & sheets; and upto 6.75 mm in case of cold rolled flat products? - Held that: - reliance placed in the case of Hindustan Lever Ltd. Now Know As Hindustan Unilever Limited Versus Union of India & Others [2017 (5) TMI 818 - DELHI HIGH COURT], where it was held that The power under Article 226 of the Constitution is an extraordinary one and should not be exercised in a routine manner especially when the Petitioner has an efficacious and adequate alternative statutory remedy available. This Court is not persuaded to take a different view in the present petition for both the reasons noted hereinbefore viz., the petition is premature since no notification has yet been issued by the Central Government consequent upon the Final Finding dated 4th July, 2017 and secondly, even if such a notification is issued, the Petitioner has an alternative statutory remedy of an appeal before the CESTAT - petition dismissed.

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• 2017 (7) TMI 975
  Levy of ADD - Plain Gypsum Plasterboard - imported from China PR, Indonesia, Thailand, and UAE - N/N. 26/2017-Cus.(ADD) dated 7th June, 2017 - whether the impugned notification, dated 7th June, 2017, is sustainable in law in view of the interpretation of Section 9A(5) of the CTA by the Supreme Court in Kumho Petrochemicals Company Limited. [2017 (6) TMI 526 - SUPREME COURT OF INDIA], where it was held that Section 9A(5) of the Act and its proviso do not mandate a public notice or a Gazette Notification as a pre-condition for initiation of sunset review investigation - Held that: - What appears to have weighed with the Supreme Court in Kumho Petrochemicals Company Limited was the void or gap between the expiry of the original notification and the issuance of the notification extending the ADD i.e., between 1st and 23rd January, 2014. That case is distinguishable from the present case on the basis of this single fact. The facts in Kumho Petrochemicals Company Limited revealed the existence of a sizable hiatus of more than 20 days between the two notifications i.e., one continuing the ADD and the original ADD notification. That is, however, not the case here as the intention of the Central Government to continue the ADD without a gap is evident in the present case. There is no hiatus as such between the original notification imposing the ADD and the impugned notification continuing it. If indeed, in terms of Section 5 (3) of the GCA, which by analogy could be extended to notification issued by the Central Government as well, the notification comes into operation “immediately on the expiration of the day preceding its commencement”, it takes us to the point where there is no gap whatsoever between the expiration of the old notification with the commencement of the new. The key words are “immediately on the expiration.” It is not possible to accept the submission of Mr. Sethi that the impugned Notification dated 7th June, 2017 was issued after the expiry of the original ADD Notification which came to an end at the midnight of 6th June, 2017. Petition dismissed - decided against petitioner.

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• 2017 (7) TMI 974
  Benefit of exemption from basic Customs Duty - CVD - case of respondent is that Circular Knitting Machines imported by the petitioner are only (Knitted) Fabric Making Machines and are not required for manufacture of Garments - Held that: - the Hon'ble Supreme Court in the case of Commissioner of Customs, Kolkata Vs. Rupa And Co. Ltd., [2004 (7) TMI 90 - SUPREME COURT OF INDIA] wherein the Hon'ble Supreme Court while considering the similar facts with regard to the textile machinery imported under EPCG scheme defined what would be meant by the term capital goods has held that So long as the imported machinery is used by a person who manufactures garments, which are then used to meet the export obligation, the importer will be entitled to benefit of 100% exemption under the Notification - petition allowed - decided in favor of petitioner.

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• Insolvency & Bankruptcy

• 2017 (7) TMI 971
  Corporate Insolvency Resolution Process - The Insolvency & Bankruptcy Code 2016 - Held that:- The debtor company defaulted in repaying its debt to the financial creditor, this Bench hereby admits this application prohibiting all of the following of item-I, namely: - (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, Tribunal, arbitration panel or other authority; (b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; (c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002(SARFAESI Act); (d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. (II) That supply of essential goods or services to the corporate debtor if continuing, shall not be terminated or suspended or interrupted during moratorium period. (III) That the provisions of sub-section (1) Section 14 shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator. (IV) That the order of moratorium shall have effect from 06.06.2017 till completion of the corporate insolvency resolution process or until this Bench approves the resolution plan under sub-section (1) of section 31 or passes an order for liquidation of corporate debtor under section 33, as the case may be. (V) That the public announcement of the corporate insolvency resolution process shall be made immediately as specified under section 13 of the Code. (VI) That this Bench hereby appoints, Mr. Dhinlal Shah, 9, Urmikunj Society, Nr. St. Xavier's College Corner, Navrangpura, Ahmadabad- 380009, Gujarat, India, Registration Number: IBBI/IPA-01/2016-17/015, as Interim Resolution Professional to carry the functions as mentioned under Insolvency & Bankruptcy Code.

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• 2017 (7) TMI 970
  Initiating corporate insolvency resolution process under Sections 10 of the Insolvency and Bankruptcy Code, 2016 - Held that:- The figures extracted indicate the losses and fall in revenue considerably. The 'Applicant Company' is facing the notice under SARFAESI Act, 2002, apart from huge amount of default committed in respect of operational creditors. In view of the aforesaid discussion, the instant petition deserves to be admitted. It is, however, observed that the Applicant Company save some sketchy particulars has not given any road map as to how it is going to keep itself afloat as a going concern. However, keeping in perspective the objects for which 'the Code' has been brought into force and to balance the interest of all stakeholders, it is satisfied that the instant application warrants lo be admitted to prevent further erosion of capital and to safeguard the assets of the Applicant Company/Corporate Debtor. Also declare a moratorium as contemplated under Section 14 of 'the Code'

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• Service Tax

• 2017 (7) TMI 993
  Business Auxiliary Services - mobilization of deposits/debentures, delivering deposits/debenture receipts, and providing other incidental services - whether the activities carried out by the appellant would fall under the scope of BAS under Section 65 (19) of the Finance Act, 1994 as it stood prior to 10.09.2004 before its amendment? - Held that: - it is seen that the adjudicating authority has found that the appellant accepted application forms from investors applied for debentures/deposits of their client and in a fiduciary capacity on behalf of those companies in handling the applications from the investors; that they have to coordinate with these companies in the advertisement, canvassing and that they have to identify prospective customers for lending based on predetermined criteria. Time limitation - Held that: - It has to be seen that appellants were discharging service tax under Banking and Financial Services and were filing regular returns - It is correct that there was confusion prior to 10.09.2004 as to whether all the services rendered on behalf of client would fall under BAS - when the appellant has written letter dated 29.10.2004 immediately, the fact has come to the knowledge of department and therefore in our view the SCN dated 02.05.2006 is time barred. Appeal allowed - decided in favor of appellant.

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• 2017 (7) TMI 992
  Business Auxiliary Services - It was noticed that the respondent had not amended the registration certificate to include BAS and also did not mention the same in their ST-3 returns. However, the respondent took a separate registration on 05.09.2006 in respect of BAS - Held that: - at the instance of the Central Excise Officers, they paid vide cash, the entire tax alongwith interest before issuance of the Show Cause Notice. In any event, the respondent was entitled to avail CENVAT Credit and the situation is Revenue neutral - appeal dismissed - decided against Revenue.

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• 2017 (7) TMI 991
  Refund claim - N/N. 41/2007-ST dated 10.06.2007 - rejection on account of time bar - Held that: - the similar issue came up before this Tribunal in the case of Gran Overseas Ltd. [2017 (1) TMI 234 - CESTAT NEW DELHI] wherein this Tribunal has held that the time limit prescribed in notification issued from time to time is to supplement the provision of mere act - the clarifications given by the CBEC vide Circular dated 12.03.2009 is merely a clarification and the same is applicable retrospectively - the refund claims filed by the appellants are within period of limitation - refund allowed. Refund claim - clearing and forwarding services - CHA Services - denial on the ground that the services are not port services - Held that: - these services are related to the CHA services and not clearing and forwarding services and they have wrongly mentioned as clearing and forwarding services. It is fact on record that these services received from the CHA - refund allowed. Refund claim - services relating to collection of foreign exchanges - Held that: - the service tax was collected by the bank for realization of export proceeds and vouchers were issued by the bank. Therefore, there is no dispute about export of goods and charges collected by the bank for realization of export proceeds. Thus, refund claim is not deniable for the procedural lapses, if any and the same should be allowed. Refund claim - cleaning services - technical testing and analysis services - Held that: - since the appellant is not pressing for refund on this ground, the same is rejected. Refund allowed - appeal allowed - decided in favor of appellant.

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• 2017 (7) TMI 990
  VCES declaration - the appellant case is that they had mistakenly applied the rate of tax at 10%, instead of the prescribed rate of 12%. He further submits that the differential amount of service tax was paid along with interest suo moto and thus, the VCES declaration filed by it was true to the extent of 99.87% - Held that: - since the value declared in the VCES declaration was true to the extent of 99.87%, it cannot be said that such declaration is ‘substantially false’ for denial of the benefit provided under the VCES Scheme. Thus, in terms of the CBEC Circular No.170/5/2013-ST, dated 08.08.2013, there was no requirement of issuance of any show cause notice, seeking confirmation of the adjudged demand. It is not the case of Revenue that the appellant otherwise is not entitled for availing the benefits contained in the VCES Scheme. Thus, denial of the benefits contained therein for a technical lapse is not proper and justified. Appeal allowed - decided in favor of appellant.

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• 2017 (7) TMI 989
  CENVAT credit - Chartered Accountant Services - common input services - Security Service - Telephone Service - Held that: - where contention of the assessee was that their transaction was covered by provisions of Sub-rule (1) of Rule 6 of CCR, 2004, it was necessary for Revenue to establish in the Show Cause Notice that the said transaction attracted provisions of Sub-rule (2) of said Rule 6 that Cenvat Credit was availed in respect of such input services to such extent that they were used for providing both taxable & exempted services and no separate account was maintained and hence provisions of Sub-rule (3) of Rule 6 ibid were invocable - I do not find from the said Show Cause Notice that Cenvat credit was availed on such quantity of input service which was used for providing exempted output service and the situation was covered by Sub-rule (1) of said Rule 6. Therefore, there was no case for invocation of Sub-rule (3) of said Rule 6. The said SCN dated 13/03/2015 is not sustainable - appeal allowed - decided in favor of appellant.

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• Central Excise

• 2017 (7) TMI 987
  Natural justice - opportunity to the noticee to cross examine the witnesses - rehearing of case - error apparent on the face of record - Held that: - the Apex Court has held that rehearing of a case can be done on account of some mistake or an error apparent on the face of the record or for any other sufficient reason - In the present case, there is no error apparent on the face of the record and the petitioner in fact under the guise of review is challenging the order passed by this Court, which is under review. The Apex Court in the case of State of West Bengal and Ors. Vs. Kamal Sengupta and Anr. [2008 (6) TMI 578 - Supreme Court Of India], has held that a mistake or an error apparent on the face of the record means a mistake or an error which is prima-facie visible and does not require any detail examination - In the present case the petitioner has not been able to point out any error apparent on the face of the record, on the contrary this Court has decided the case on merits. The scope of review has held that re-appreciation of evidence and rehearing of case without there being any error apparent on the face of the record is not permissible in light of provisions as contained U/s 114 and Order 47 Rule 1 of Code of Civil Procedure, 1908. Petition dismissed - decided against petitioner.

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• 2017 (7) TMI 986
  Principles of Natural Justice - maintainability of appeal - non-appearance of appellant before ld. Commissioner (Appeals) - Held that: - in spite of various opportunities of personal hearing given by the first appellate authority, the appellant did not appear before him. Accordingly, the appellate authority has proceeded to decide the appeal without observing the principle of natural justice. I also find that no documents were filed before him. Under the circumstances, I set aside the impugned order and remand the matter to the ld.Commissioner (Appeals) for re-consideration of the case on merit - appeal allowed by way of remand.

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• 2017 (7) TMI 985
  CENVAT credit - input credit distribution - job-work - the Service Tax credit taken by Howrah unit on the basis ISD Invoice/Challan issued by the head office (Service Distributor) has been denied under Rule 7(b) of the Cenvat Credit Rules as the goods manufactured by the Bhadreawar unit were exempted vide N/N. 8/2005-ST dated 01.03.2005 - Held that: - Rule 4(5)(a) provides that Cenvat Credit on inputs shall be allowed even if any inputs as such or after being partially processed are sent to a job worker and after re-processing therefrom are received back by the manufacturer within the stipulated period - Thus, it is clear that the processed material of the Bhadreshwar Unit has been sent back to the Howrah unit who used it in the manufacture of the final product and cleared on payment of duty. It cannot be said that the Bhadreshwar Unit is exclusively engaged in manufacture of the exempted goods - Rule 7(b) of CCR debarred the distribution of credit of Service Tax attributable to Service Tax used by one or more units exclusively engaged in the manufacture of exempted goods or providing of exempted services shall not be distributed. Rule 4(5)(a) has not given any exemption from the levy of duty on the job-worked material. Therefore, the findings of the lower authorities cannot be sustained. Appeal allowed - decided in favor of appellant.

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• 2017 (7) TMI 984
  100% EOU - refund claim - commission given to foreign agent - denial on the ground that the credit taken on the service tax paid on the commission paid to foreign agent does not qualify to be an 'input service as per the definition - Held that: - The commission paid to foreign agent is necessarily an activity related to business of manufacture. The inclusive part of the definition is very wide since it does not exclude any specific category of service related to business. With effect from 1.4.2011 these words 'activities related to business was deleted from the definition. The period involved in the present case is prior to 1.4.2011 - The appellant has explained in reply to SCN that being an exporter appellant has to find source of foreign buyers for which they have to engage foreign agents to whom the commission is paid. As a 100% EOU it is required to achieve positive net foreign exchange for which they have to ensure constant foreign market for their products - denial of credit is unjustified - appeal allowed - decided in favor of appellant.

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• 2017 (7) TMI 983
  Valuation - stock transfer to sister unit - Section 4 (1) (b) of Central Excise Act, 1944 read with Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - Held that: - the assessee is not contesting the liability and would like to submit only on the ground that entire transaction would give rise to a revenue-neutral situation. Thus SCN issued beyond the normal period is not sustainable - even if the duty has to be paid by appellant as alleged in the SCN, their sister concern would be able to take credit - confirmation of demand, interest and the imposition of penalty is unsustainable - appeal allowed - decided in favor of appellant.

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• 2017 (7) TMI 982
  Clandestine manufacture and removal - shortage of cenvat inputs - M.S. Ingots - Held that: - the revenue had neither disclosed any material nor described the method of stock taking to counter the case. The only contention is that the small quantity was lying in the factory premises and therefore, the weighment was done easily. I am unable to accept the contention of the revenue without any basis, such as, the details of the weighment etc - The Tribunal consistently observed in various decisions that stock verification cannot be conducted by a rough estimation - reliance placed in the case of M/s. Raika Ispat Udyog Pvt. Ltd. Versus CCE, Raipur [2016 (7) TMI 1029 - CESTAT NEW DELHI], where it was held that apart from the allegation of shortage based on estimation, no other corroborative evidence is presented to show that possible clandestine manufacture, clearance, transport or buyers of such goods. The judicial view is that the stock taking would be conducted in a proper manner, which is obviously supported by some material such as, weighment slip, counting slip etc, as the case may be. It cannot be on the basis of eye estimation or otherwise - The assessee claimed that the said materials were lying at their factory and informed the department subsequently and no enquiry was conducted thereon. That the allegations in the instant case are clandestine removal of the goods and revenue had not disputed the major portion of the demand dropped by the Adjudicating Authority. Appeal dismissed - decided against Revenue.

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• 2017 (7) TMI 981
  Refund of Central Excise Duty - denial on the ground of unjust enrichment - Held that: - the certificates issued by the customers indicated that the respondents were reimbursed only as much duty as was paid by respondent to the exchequer. Further, Revenue has not brought forward any reason as to why provision under Rule 7(6) of Central Excise Rules was invokable in spite of such clear finding by the ld. Commissioner (Appeals) - in case of any change in Purchase Order no surplus amount has been paid and that any excess/short amount paid earlier had been adjusted against supplementary/further bills of ITI - refund allowed - appeal dismissed - decided against Revenue.

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• 2017 (7) TMI 980
  Renting of immoveable property service - road used by the appellant - denial on the ground that the road located outside the factory of the respondent and it is not used in or in relation to the manufacture of final product - Held that: - even though the road is located outside the factory premises but the service of renting of immoveable property is received and used by the respondent. The road is used for transportation of goods which is directly related to the manufacture of final product in their factory - the service of renting of road to the respondent is an input service and the credit is admissible - appeal dismissed - decided against Revenue.

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• 2017 (7) TMI 979
  CENVAT credit - job-work - manpower services - duty paying documents - denial on the ground that the service tax was not paid earlier and not shown in the invoice, cenvat credit was availed on the supplementary invoice - Held that: - Though the service tax was not paid at the time raising the invoice but undisputedly paid the service tax and subsequently issued supplementary invoice. It is permissible to avail the cenvat credit on the strength of supplementary invoice - The allegation of the lower authority that credit is not admissible on supplementary invoice issued in respect of service tax paid under suppression of fact is not found to be correct for the reason that the period involved in the present case is 2008, whereas this embargo of suppression of fact in respect of the supplementary invoice was brought under Rule 9(1) (bb) w.e.f. 1.4.2011, therefore denial of credit on this ground is also not sustainable - appeal allowed - decided in favor of appellant.

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• 2017 (7) TMI 978
  CENVAT credit - freight outward service - whether the appellant is entitled for cenvat credit on the freight outward service in respect of removal of goods for export? - Held that: - the appellant is responsible for delivery of the export goods upto the place of foreign buyer therefore in India the ‘place of removal’ is the port of export - in case of port of export being a ‘place of removal’, all the services upto the export of goods from the port of export shall be treated as input service and the credit is admissible - appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2017 (7) TMI 973
  Penalty u/s 17 (3) (b) (ii) of the M.P. General Sales Tax Act, 1958 - It is the case of the petitioner that in conformity with the policy to tax raw materials at a lower rate under the Sales Tax Act and also under the Act, 1976, general rate of entry tax on raw material was 7% under Section 4 of the said Act. The State Government could specify local area or areas and the goods for levy of entry tax at a rate not exceeding 10% by notification under Section 4A of the Act, 1976 - - It is the further case of the petitioner that despite showing sufficient cause under Section 17 (3) (b) (ii) of the Act, 1958, penalty to the extent of 4,09,09,903/- ₹ was imposed holding that Section 17 (3) (b) is automatic and mandatory though the petitioner had sufficient cause for not paying balance of tax that was assessed, whereas the admitted tax as per the return had already been paid and the returns filed are late only by three days. Held that: - A focused glance of Section 17 (3) (b) of the Act, 1958 would show that if a registered dealer fails without sufficient cause to pay the amount of tax in the manner prescribed under subsection (2) of Section 22 or fails to furnish his return under sub- section (1) or revised return under sub-section (2) for any period in the manner and by the date prescribed thereunder, the Commissioner may, after giving such dealer a reasonable opportunity of being heard, impose a penalty provided under Section 17 (3) (c) (ii), a sum equal to one percent of the tax for every month or part thereof. Therefore, the condition precedent for levy of penalty is that dealer must have failed without sufficient cause to comply with the provisions of Section 22 (2) or Section 17 (1) or Section 17 (2) of the Act, 1958 and further that a reasonable opportunity of hearing has to be granted to the dealer before imposing penalty. It is settled law that an order imposing a penalty for failure to carry out a statutory obligation is the result of quasi-criminal proceedings and penalty will not ordinarily be imposed unless the party obliged has either acted deliberately in defiance of law or was guilty of contumacious or dishonest conduct, or acted in conscious disregard of its obligation. A penalty will not also be imposed merely because it is lawful to do so. In spite of a minimum penalty prescribed, the authority competent to impose the penalty may refuse to impose the penalty if the breach complained of was a technical or venial breach, flew from a bona fide though mistaken belief - taking note of the statutory provisions and principles governing imposition of penalty and the nature of penalty i.e. penal provision, the authority imposing penalty has to exercise that jurisdiction in consonance with the aforesaid provisions of law. Whether the assessing authority is justified in imposing penalty after giving a reasonable opportunity of being heard as contemplated under Section 17 (3) (b) of the Act, 1958? - Held that: - the assessing authority has neither given reasonable opportunity of hearing before imposing penalty and even not recorded that failure to pay the tax within the stipulated time is without sufficient cause. The revisional authority has also perpetuated the illegality. The order of the assessing authority duly upheld by the revisional authority to the extent of imposing penalty, is hereby quashed - petition allowed - decided in favor of petitioner.

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• 2017 (7) TMI 972
  Exemption on stock transfer - it is alleged that the assessee did not produce any documents to discharge its burden as contained in Section 6A of the Central Sales Tax Act - Held that: - it is the specific case of the assessee that it has traced out documents which would satisfy the requirements of Section 6A. Photocopies of these documents have also been produced before this Court as Annexure-A6 - the assessee claims that it has traced out the documents which would substantiate its claim for exemption and as the claim for exemption on sales return is already remitted to the assessing officer, we are inclined to think that ends of justice require that the assessee should be given a fresh opportunity to produce Annexure-A6 documents before the assessing officer and that the assessing officer should examine those documents and reconsider the claim of the assessee on merits - appeal allowed by way of remand.

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• Indian Laws

• 2017 (7) TMI 969
  Charges against the petitioner who is charged for the offences under Sections 120-B r/w 420, 471, 482 IPC, 13(1) (a) (b) r/w. 9(B) (e), 10(A), (bb) (c ) of Drugs and Cosmetic Act, 1940 and Section 132 and 135 of Customs Act, 1962 and substantiate offences thereof - Held that:- On careful perusal of the final report filed by the respondent and the statement recorded during the investigation and also documents collected would reveal that there is a prima facie case against this petitioner and there are incriminating materials against this petitioner to proceed further. But whereas the trial court as well as first appellate court have conducted mini trial except the fact that they have not examined the witnesses and discussed elaborately and passed the orders. On the other hand fact as to whether he is a qualified person to say about the materials and whether he has knowledge about the chemicals can be decided only after the trial and not at this stage. One thing is clear that having gone in details of discussions and giving reason for allowing the discharge petition in CMP.No.276/2011 by the trial court and also further dismissal order of learned IV Additional Sessions Judge while considering the revision, it is relevant to mention that this court and Apex court time and again reiterated that at this stage of framing of charge, it is enough to see the final report and documents annexed with as to whether a prima facie case is made out and an incriminating material available to proceed against the accused and further the Hon'ble Apex Court has time and again has held that at the time of framing of charge roving enquiry need not be conducted and also the defence taken by the accused need not be looked into. At this stage, the Court has to see from the oral and documentary evidence collected during the investigation reveal as to whether any incriminating materials are available against the accused to proceed further. Admittedly in this case, on reading of a final report and also oral and documentary evidence annexed with the final report, this court finds that there is a prima facie case against the accused and also there are incriminating materials against this petitioner/4th accused to proceed further.

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