Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
July 31, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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Principle of consistency - There is a significant value which must attach to observing the requirement of consistency and certainty. Individual affairs are conducted and business decisions are made in the expectation of consistency, uniformity and certainty. To detract from those principles is neither expedient nor desirable.
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Assessment against amalgamating company - notice u/s 143(2) was issued to non-existent company - Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law.
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Assessment u/s 153C - it is necessary that before the provisions of section 153C can be invoked, the AO of the searched person must be satisfied that the seized material which included documents) does not belong to the person referred to in section 153 A, i.e., the searched person.
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Penalty u/s 271AAB or 271AAA - non issue of notice u/s 274 read with Section 271AAB - corrigendum issued stating that Section 271AAA should be read as Section 271AAB - Penalty order confirmed.
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LTCG - fair market value as on 1.4.1981 - The reasonable approach would have been to adopt the valuation in the Wealth Tax Assessment, since the Tribunal holds that the assessee could not have been taken two different values i.e., one valuation is under the Wealth Tax Assessment and another is under Income Tax Act.
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Ex- parte order - ITAT dismissed the appeal for non appearance - the expression “dispose of the appeal on merits” occurring Rule 24 would acquire significance. In other words, there is a duty cast on the Tribunal to adjudicate the claim on merits even in the absence of parties or their authorized representative.
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Characterization of expenditure - expenditure incurred by way of renovation and Interior work of Stadium - assessee did not create a new asset or create a source of enduring benefit - Essentially, the expenditure was for upgradation of the existing facilities - allowed as revenue expenditure.
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Depreciation on goodwill - goodwill generated in the process of amalgamation - assessee failed to claim depreciaion in the original ITR or revised ITR but claimed first time before the Tribunal - AO directed to allow deprecation on goodwill - Tribunal has jurisdiction to examine the question of law.
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Disallowance of interest u/s 36(1)(iii) - interest bearing loans versus advances - as long as commercial expediency is established, there remains no reason for making any disallowance and it is entirely the prerogative of the assessee to charge or not to charge interest on such advances made. The AO cannot sit in the arm chair of the businessman and determine how the business is to be run.
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Disallowance u/s 36(1)(iii) and additions u/s 68 - a perusal of the balance sheet of the loan creditor shows that it has got sufficient share capital and free reserves of its own and, therefore, merely because the assessee has incurred loss during the current year should not be a ground for making the addition u/s 68
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Additions u/s 68 - assessee has discharged the onus cast on it by proving all the three ingredients of section 68, namely, the identity and credit worthiness of the persons and the genuineness of the transaction. Further, it is not a case of issue of any bogus share capital with high premium. - No additions.
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Deduction u/s 80P(2) - whether Souharda Sahakari registered under the Karnataka Souharda Sahakari Act, 1997 are also co-operative societies within the meaning of Sec.2(19) ? - HELD Yes
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Set off of business loss against the income brought to tax u/s 69B r.w.s 115 BBE - The instant appeal relates to Assessment Year 2012-13 and therefore the assessee’s case will not be hit by provisions of Section 115BBE(2)
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Deduction u/s 54 against the LTCG - assessee failed to construct the new residential house within a period of three years from the date of sale due to delay in the handing over of the possession of the plot by the developer - assessee cannot be held responsible for not complying the law - Benefit of exemption allowed.
Customs
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Extension of period for Detention of goods - post amendment, two conditions are to be satisfied: one, the Commissioner has to record his reasons in writing, why the extension is necessary, and two, inform the person from whom such good were seized before the expiry of the period so specified. The latter condition is equally important, because it is a pre-requisite for the exercise of the power of extension.
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Jurisdiction - power of Additional Director General to issue SCN - Proper officer - The order has been passed after following the principles of natural justice and fair play, the show-cause notices were issued by the competent authority, and therefore, the question of interference by this Court, in light of alternative remedy, does not arise.
IBC
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Exclusion of certain period from CIRP - revival of mining lease - Mere delay in passing revival order by issuing GO for revival of the Leases. It cannot be said that Prospective Resolution Applicants are not able to file resolution plan with RP on that ground alone. - Till date no one came forward to file Resolution plan for the corporate debtor - no grounds to exclude the time as prayed.
Service Tax
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Validity of subsequent SCN - Extended period of Limitation - in a case where a show cause notice has been issued for the earlier period on certain set of facts, then on the same or similar set of facts another show cause notice, invoking the extended period of limitation, cannot be issued as the facts were already within the knowledge of the department
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Validity of SCN issued to a dead person - There is no specific provision or machinery provision for recovery of tax dues, after death of the proprietor. - Section 87 (c) of the Finance Act is not applicable.
Central Excise
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CENVAT Credit - suo moto re-credit - firstly the appellant has paid the duty through CENVAT credit account during the disputed period and later on at the direction of the Superintendent, they paid the duty along with interest in cash and took recredit in their CENVAT credit account which is permitted in law as he is not required to pay the duty twice.
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Validity of adjudication of case after 13 years of Issue of Show Cause Notice (SCN) - The explanation offered by the respondents/ Revenue for delay is not convincing. - The impugned order quashed and set aside.
VAT
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Adjustment of Input Tax Credit - outstanding declaration forms under CST Act as on 30.6.2017 (e.g. C forms) - Rule 117 of the Gujarat Goods and Services Tax Rules read with Form GST TRAN-1 provides the mechanism for computing the input tax credit attributable to pending declaration forms. - grievance raised by the petitioners would not survive.
Case Laws:
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GST
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2019 (7) TMI 1453
Classification of goods - geared motor - whether classified under 8501 or under 8483 for the purpose of payment of GST? - gears and gearings or not? - rate of CGST/SGST as per N/N. 1/2017-C.T. (Rates) and GO (Ms) No. 62, dated 29-6-2017 - HELD THAT:- The applicant is engaged in the manufacture of Geared motors which consists of Electric motor and Gear boxes. Electric Motor is a bought out item either locally or imported from their related party. Gear reducers or gear boxes are imported from their related party. Both are assembled in India by the applicant depending on the specifications given by their buyers. Gear motor is a single unit consisting of gear box and electric motor, coupled and integrated. Classification of Geared Motor - HELD THAT:- The gear boxes of all kinds are classifiable under Tariff Heading 8483. The Explanatory Notes to 8483 clearly specify that this heading does not cover gear boxes combined with a motor and they are to be classified in the same heading as motor - composite machines with individual components intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or Chapter 85, than the whole falls to be classified in the heading appropriate to that function and are to be classified as being that machine which performs the principal function. In the purchase order and sale invoice of the applicant it is seen that the supply is a geared motor which is a single supply and not two individual supply of gear boxes and electric motors. They are fitted together, assembled and supplied by the applicant. Therefore, this is not a mixed supply as claimed by the applicant. In view of the above, it can be held that the 'Gear Motor' is rightly to be classified under CTH 8501. Whether the gear motors can be considered as 'gears' and 'gearings'? - scope of Advance Ruling - HELD THAT:- The Act limits the Advance Ruling Authority to decide the issues earmarked for it under Section 97(2) and no other issue can be decided by the Advance Ruling Authority. The question raised does not fit in any of the clauses of Section 97(2) of the CGST Act / Tamil Nadu GST Act (TNGST) and therefore not answered for the reason not within the ambit of this authority. Whether the rate of CGST/SGST as per Notification No. 1/2017-C.T. (Rates) and GO (Ms) No. 62, dated 29-6-2017 is - (a) 9% as per Schedule-Ill (Sl. No. 372); (OR) (b) 9% as per Schedule-Ill (Sl. No. 369A); (OR) (c) 14% as per Schedule-IV (Sl. No. 135)? - HELD THAT:- The rate applicable to 'Gear motors' classifiable under CTH 8501 is 9% CGST/SGST as per Sl. No. 372 of Schedule III of Notification No. 1/2017-C.T. (Rate), dated 28-6-2017 and Notification No. vide G.O. (Ms) No. 62, dated 29-6-2017 as amended.
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2019 (7) TMI 1452
Transitional Credit/adjustment of excess of input tax credit against future liabilities of the petitioner - purchase of cartridge - unjust enrichment - financial year 2007-08 and 2011-12 - credit reflected in the ledger - whether, the credit reflected in the electronic credit ledger of the petitioner amounts to either availment or utilization of the credit? - HELD THAT:- While Section 73 of the BGST Act enables proceedings for determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized for reasons other than fraud or willful misstatement or suppression of fact, where such default is committed by reason of fraud or willful misstatement or suppression of fact, a similar procedure inviting such action is provided under section 74 of the BGST Act - It is undisputed that it is on the application made by the petitioner under section 140 of the BGST Act that the credit earned got reflected on the electronic credit ledger on 28.8.2017 as admitted by Mr.. Kejriwal showing a credit balance of ₹ 42,73,891.00 as also taken note of in the order impugned - Section 73 makes a dealer liable for proceedings in case of short payment of taxes or erroneously refunded taxes or for wrongly availing or utilizing input tax credit. The legislative intent present in these provisions is eloquent and I am in no confusion to hold that be it a charge of wrong availment or utilization, each is a positive act and it is only when such act is substantiated that it makes the dealer concerned, liable for recovery of such amount of tax as availed from the input tax credit or utilized by him but in each of the two circumstances, the tax available at the credit of the dealer concerned must have been brought into use by him thus, reducing the credit balance - A plain reading of Section 73 would confirm that it is only on such availment or utilization of credit to reduce tax liability, which is recoverable under section 73(1) read alongside the other provisions present thereunder. In fact the position is made even more clear by reading the said provision alongside sub-section (5), (7), (8), (9) to (11). The Assistant Commissioner of State Taxes has somewhere got confused to treat the transitional credit claimed by the dealer as an availment of the said credit when in fact an availment of a credit is a positive act and unless carried out for reducing any tax liability by its reflection in the return filed for any financial year, it cannot be a case of either availment or utilization. It is rightly argued by Mr. Kejriwal that even if the respondent no.3 was of the opinion that the petitioner was not entitled to such transitional credit at best, the claim could be rejected but such rejection of the claim for transitional credit does not bestow any statutory jurisdiction upon the assessing authority to correspondingly create a tax liability especially when neither any such outstanding liability exists nor such credit has been put to use. This important aspect of the matter has eluded the wisdom of the respondent no.3 while passing the order. In fact it is on a complete misappreciation of legal position which lies at the foundation of the demand raised by the impugned order whereby the credit amount reflected in the credit ledger to the tune of ₹ 42,73,869.00 has been treated as an outstanding tax liability against the petitioner to order for its recovery together with interest and penalty even when the electronic credit ledger status at Annexure 7 confirms to a credit in favour of the petitioner i.e. a negative tax liability. The order dated 6.11.2018 passed by the respondent no.3, the Assistant Commissioner of State Taxes in purported exercise of power vested in him under section 73 of the BGST Act is held per se illegal and an abuse of the statutory jurisdiction and is accordingly quashed and set aside - Petition allowed.
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Income Tax
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2019 (7) TMI 1451
TP adjustment - 3% of the amount of guarantee given by the assessee on behalf of AE - HELD THAT:- Special Leave Petition is dismissed.
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2019 (7) TMI 1450
Reopening of assessment u/s 147 - unexplained source of fund under Section 68 and cash fund under Section 269SS - HELD THAT:- Special Leave Petition is dismissed.
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2019 (7) TMI 1449
Assessment against amalgamating company - amalgamating company having ceased to exist - Principle of consistency - HELD THAT:- the notice under Section 143(2) under which jurisdiction was assumed by the assessing officer was issued to a non-existent company. The assessment order was issued against the amalgamating company. This is a substantive illegality and not a procedural violation of the nature adverted to in Section 292B. In the present case, despite the fact that the assessing officer was informed of the amalgamating company having ceased to exist as a result of the approved scheme of amalgamation, the jurisdictional notice was issued only in its name. The basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law. This position now holds the field in view of the judgment of a co-ordinate Bench of two learned judges which dismissed the appeal of the Revenue in Spice Enfotainment 2017 (12) TMI 754 - SC ORDER] . The decision in Spice Enfotainment has been followed in the case of the respondent while dismissing the Special Leave Petition for AY 2011-2012. In doing so, this Court has relied on the decision in Spice Enfotainment. We find no reason to take a different view. There is a value which the court must abide by in promoting the interest of certainty in tax litigation. The view which has been taken by this Court in relation to the respondent for AY 2011-12 must, in our view be adopted in respect of the present appeal which relates to AY 2012-13. Not doing so will only result in uncertainty and displacement of settled expectations. There is a significant value which must attach to observing the requirement of consistency and certainty. Individual affairs are conducted and business decisions are made in the expectation of consistency, uniformity and certainty. To detract from those principles is neither expedient nor desirable.
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2019 (7) TMI 1448
Charitable activity u/s 2(15) - exemption u/s 11 - whether activity of the Assessee did not cease to be a charitable activity for the purposes of Section 2(15) because the Assessee charged a management fee for defraying its administrative expenses? - HELD THAT:- In the impugned order the ITAT has noticed that the Assessee is a company registered under Section 25 of the Companies Act. It gives 85% of the donation received by it to the Government of India for HIV Aids and only 15% of its total donation is given to other societies for awareness and treatment of poor HIV Patients. The entire amount spent by the Assessee is through societies and trusts. It also runs its own project for the welfare of HIV and AIDS patients. In the above circumstances it has been held that merely because the Assessee charges management fees to defray the administrative costs it would not make its essential activity a business activity. The Court is unable to find any legal infirmity in the impugned order of the ITAT. No substantial question of law arises.
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2019 (7) TMI 1447
Assessment u/s 153C - duty of AO to establish that to whom the documents, found in the search proceedings, belongs to - HELD THAT:- Unless and until it is established that the documents do not belong to the searched person, the provisions of section 153C do not get attracted because the very expression used in section 153 C is that where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153 A . In view of this phrase, it is necessary that before the provisions of section 153 C can be invoked, the Assessing officer of the searched person must be satisfied that the seized material ( which included documents) does not belong to the person referred to in section 153 A, i.e., the searched person. In the satisfaction note, which is the subject matter of these writ petitions, there is nothing therein to indicate that the seized documents do not belong to the Jaipuria Group. This even apart from the fact that there is no disclaimer on the part of the Jaipuria Group insofar as these documents are concerned. Assessee relied on circular No. 24/2015 dated 31.12.2015, issued by the CBDT, in which, the Board following the decision of Hon'ble Supreme Court in case of M/s Calcutta Knitwear's [ 2014 (4) TMI 33 - SUPREME COURT] has directed that where the satisfaction by the Assessing officer of the person searched and other person is not found recorded, the Department should not press that mater in Appeal. Thus, keeping in view rival submissions in light of judicial pronouncements as discussed above and CBDT Circular (supra) the assessment in the assessee case for the assessment year under consideration is held as illegal and void-ab initio. Accordingly, the grounds raised by the assessee relating to applicability of section 153 C are allowed.
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2019 (7) TMI 1446
Alternate remedy - Deduction u/s 80P - whether Primary Agricultural Societies carrying on the business of providing credit facilities to its members are entitled to claim deductions? - HELD THAT:- This Court is of the considered view that this is a fit case to relegate the writ petitioners to the alternate remedy by way of a statutory appeal. This Court is informed that remedy of filing statutory appeal to the Commissioner (Appeals) is available for the writ petitioners under Section 246A of IT Act. This Court is informed that in some of these writ petitions, writ petitioners have already preferred statutory appeals. If that be the case, it is open to the writ petitioners to pursue their appeals and obviously this order can be pressed into service before the Appellate Authority. With regard to exercise of writ jurisdiction on the teeth of alternate remedy, this Court reminds itself that alternate remedy is a rule of discretion. This Court disposes of these writ petitions leaving open all questions including the questions/grounds raised in the instant writ petitions to be canvassed in statutory appeals before Commissioner (Appeals) under Section 246-A. At his juncture, learned counsel for writ petitioners submit that writ petitioner would opt for the alternate remedy (obviously in cases where appeals have not already been filed) and this Court may consider condonation of delay. Condonation of delay - the relevant provision is Section 249(3) of IT Act and power vests with the Appellate Authority, namely Commissioner (Appeals) to condone the delay. Therefore, this Court considers it appropriate to exclude the time spent in the instant writ petitions i.e, the time from the date of presentation of instant writ petitions to the date on which instant order copy is made available in computing the time within which statutory appeals under Section 246A of IT Act have to be preferred. This course is adopted by placing reliance on Section 14 of Limitation Act. However, it is made clear that notwithstanding such exclusion, if there is delay, it is open to the writ petitioners to seek condonation of such delay inter alia under Section 249(3) of IT Act and the Appellate Authority shall deal with such prayers for condonation of delay on their own merits and in accordance with law.
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2019 (7) TMI 1445
Alternate remedy - Deduction u/s 80P - whether Primary Agricultural Societies carrying on the business of providing credit facilities to its members are entitled to claim deductions? - HELD THAT:- There is a time limit of 30 days prescribed for preferring an appeal under Section 246A of IT Act, which lies to Commissioner (Appeals). At the request of writ petitioner, time that has been spent in the instant writ petition i.e., time from the date of filing of instant writ petition to the date on which this order is made available shall stand excluded for computing limitation for filing an appeal under Section 246A of IT Act. Even after such exclusion, if there is a delay, it is open to the writ petitioner to seek condonation of the same under Section 249(3) of IT Act and such a prayer for condonation of delay shall be dealt with by the Appellate Authority on its own merits. This writ petition is disposed of, leaving it open to the writ petitioner to avail alternate remedy of statutory appeal to Commissioner (Appeals) under Section 246A of IT Act, in the manner set out supra in this order.
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2019 (7) TMI 1444
Alternate remedy - Deduction u/s 80P - whether Primary Agricultural Societies carrying on the business of providing credit facilities to its members are entitled to claim deductions? - HELD THAT:- There is a time limit of 30 days prescribed for preferring an appeal under Section 246A of IT Act, which lies to Commissioner (Appeals). At the request of writ petitioner, time that has been spent in the instant writ petition i.e., time from the date of filing of instant writ petition to the date on which this order is made available shall stand excluded for computing limitation for filing an appeal under Section 246A of IT Act. Even after such exclusion, if there is a delay, it is open to the writ petitioner to seek condonation of the same under Section 249(3) of IT Act and such a prayer for condonation of delay shall be dealt with by the Appellate Authority on its own merits. This writ petition is disposed of, leaving it open to the writ petitioner to avail alternate remedy of statutory appeal to Commissioner (Appeals) under Section 246A of IT Act, in the manner set out supra in this order.
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2019 (7) TMI 1443
Penalty u/s 271AAB or 271AAA - non issue of notice under Section 274 read with Section 271AAB - corrigendum issued stating that Section 271AAA should be read as Section 271AAB - HELD THAT:- The two documents which have been placed on record today indicate that the penalty order passed in the case of the appellant herein was approved by the Joint Commissioner of Income Tax. There is no substantial difference between Section 271AAA and Section 271AAB of the Act, except that Section 271AAA would apply in cases where search has been initiated under Section 132 on or after the first day of June 2007 but before the first day of July 2012, whereas Section 271AAB would apply in cases where search has been initiated under Section 132 on or after the first day of July 2012. No interference is warranted with the order passed by the Appellate Tribunal. The Appellate Tribunal could not be said to have committed any error, much less an error of law, in passing the impugned order. - Decided against assessee
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2019 (7) TMI 1442
LTCG - fair market value as on 1.4.1981 - valuation of the property as sold by the assessee for the purpose of computation of capital gain - Tribunal held that the assessee for the purpose of valuation under the Wealth Tax Act has adopted a value and there is no going back on the said valuation - HELD THAT:- Attempt of the assessee before the CIT(A) was to take advantage of the notification issued by Government of Puducherry, much after the relevant date, which is 01.04.1981. Therefore, any subsequent notification issued by the Government of Puducherry could have been taken advantage by the assessee that too before the CIT(A) for the first time. Assessee himself has accepted before the Assessing Officer that the valuation of the property, as adopted by him, in the Wealth Tax Assessment may be taken into consideration. However, to the said extent the Assessing Officer did not grant relief. We find the reasons assigned by the Tribunal are perfectly legal and valid considering the factual position. However, valuation adopted by the assessee in the Wealth Tax Assessment was not adopted by the Assessing Officer and there has been a deduction even in that valuation. The reasonable approach would have been to adopt the valuation in the Wealth Tax Assessment, since the Tribunal holds that the assessee could not have been taken two different values i.e., one valuation is under the Wealth Tax Assessment and another is under Income Tax Act. Therefore to that extent, we are of the view that the assessee is entitled to relief. Appeal is partly allowed and the matter is remanded to the AO to compute the capital gain by taking the value of the land at ₹ 1,65,600/- and the value of the building at ₹ 80,000/- and the Assessing officer is directed to redo the assessment to the extent indicated. Consequently, substantial questions of law is left open.
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2019 (7) TMI 1441
Ex- parte order of the ITAT dismissing the appeal - none had appeared on behalf of appellant and as such appeal came to be dismissed and finding recorded by the tribunal in that regard is to the effect that matter was also heard exparte qua the assessee - HELD THAT:- Case of appellant or its authorized representative does not appear when the matter is called for hearing tribunal can dispose of said appeal on merits after hearing the respondent. Though in the instant case Tribunal has recorded that it has heard the counsel appearing for the revenue, order dated 31.03.2017 passed by tribunal does not disclose as to the reason for rejecting the grounds urged in appeal memorandum and no supporting reasons have been assigned. It is in this background, the expression dispose of the appeal on merits occurring Rule 24 would acquire significance. In other words, there is a duty cast on the Tribunal to adjudicate the claim on merits even in the absence of parties or their authorized representative. In the instant case, it would not end at this stage, an application was filed for recall of said order. For recalling the order, reasons assigned by the counsel appearing on behalf of assessee was, he had noted down the date of hearing erroneously as 30.04.2017 instead of 30.03.2017. The possibility of said error occurring cannot be ruled out, particularly when number of cases are being handled by the authorized representative of assessee. Under such circumstances, the technicalities, if any, has to give way for substantial justice or in other words, on the ground of technicalities, substantial justice cannot be sacrificed. To put it differently, an opportunity, if afforded to the assessee to put forth his case before the Tribunal, no prejudice or loss would have caused to the revenue, but on the other hand, appeal could have been adjudicated by the Tribunal on merits and finality could have been given.
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2019 (7) TMI 1440
Characterization of expenditure - expenditure incurred by way of renovation and Interior work of Stadium, construction of foundation of camera, staircase, control room, fabrication and erection of structural steels, fixing of MS sliding gates, different pipes for sprinkler system in the main ground, excavation of soil, purchasing of LED Reply screen, electric materials etc. for upgrading the stadium in accordance with ICC Standards - revenue or capital expenditure - HELD THAT:- Perusal of the materials on record and in particular the impugned judgment of the Tribunal would show that the respondent-assessee had organized several matches of ICC Champion s Trophy. In order to do so, the assessee had undertaken upgradation of the stadium which included arranging the facility for training and warm up areas, providing passages, walk ways, staircase etc., improving the media facility, installation of electronic score board and other similar facilities. The board had also expended in providing proper security and car parking facilities. It was in this background the Tribunal had held that the expenditure was revenue in nature. Looking to the nature of expenditure, it can be seen that the assessee did not create a new asset or create a source of enduring benefit. Essentially, the expenditure was for upgradation of the existing facilities. No question of law arises.
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2019 (7) TMI 1439
TP Adjustment - DRP has directed the TPO to allow 1% of total cost to the assessee as against 1% of corporate charges allowed by the TPO - HELD THAT:- TPO should give effect to the directions of the DRP in letter and spirit. The direction of the DRP has been mentioned elsewhere and since the DRP has directed the TPO to compute the ALP at 1% of total cost the same should be followed. We accordingly direct the TPO / AO to follow the directions of the DRP and if found that after giving effect to the directions total cost of the assessee works out to be higher than what has been paid by the assessee towards corporate charges no adjustment on account of corporate charges need to made. Accordingly grounds No.2 to 2.7 are allowed. Transfer pricing adjustment on account of interest on foreign currency loan extended to AE - TPO applied rate of interest at 17.26% - HELD THAT:- We find that the loan agreement with FSS, Japan clearly mentions that the borrower shall pay interest rate of 1.5% over prevailing LIBOR and the transaction is in US dollar. Similarly the agreement with FSS Beijing show interest at 150 basis points over prevailing LIBOR and the transaction is in US dollar. Considering the facts of the case in the light of the agreements and in the light of the decision of DRP in A. Y. 2012-13 wherein all the apprehensions raised by the DR has been duly considered by the DRP which is also under appeal before us in we are of the considered view that rate of interest at LIBOR + 1.5% should be taken as the rate and since the assessee has already charged the interest on loan at LIBOR + 150 basis points, the TP adjustment in interest on loan amounting to ₹ 2356249/- deserves to be deleted. TDS u/s 195 - Disallowance being expenses incurred on corporate charges u/s. 40a - HELD THAT:- As given a thoughtful consideration to the nature of services provided by AE. In our considered view no such services make available technical knowledge etc to the assessee. No technical knowledge experience or skill as required by article 12 is acquired as a result of provision of the services by Aricent USA. In terms of the provisions of article 12 of the Indo US DTAA fees paid by the assessee to its AE Aricent USA would not be taxable in India and therefore, the assessee was not required to deduct tax at source. We accordingly direct the Assessing Officer to delete the disallowance. Depreciation on goodwill - scheme of amalgamation approved - assessee failed to claim depreciaion in the original ITR or revised ITR but claimed first time before the Tribunal - HELD THAT:- A conspectus reading of the Judgment of SMIFS SECURITIES LTD. [ 2012 (8) TMI 713 - SUPREME COURT] clearly show that the Hon ble Supreme Court was seized with the facts of amalgamation of one company with the assessee company and has held that the excess consideration paid by it over value of net asset acquired of the amalgamating company amounted to goodwill for which the depreciation was to be allowed. The Hon ble High Court of Delhi in the case of Hindustan Coca Cola Beverages Private Limited [ 2011 (1) TMI 138 - DELHI HIGH COURT] has upheld the findings of the Tribunal that payments made towards business acquired on slum price and a part of the price so paid was allocated to the intangible asset covered under the head goodwill. Considering the settled position of law and in the light of the factual matrix of the assessee discussed elsewhere we direct the Assessing Officer to allow deprecation on goodwill as per rates applicable for the year under consideration.In the result, the additional ground raised by the assessee is allowed and appeal of the assessee is allowed. Non giving of the correct credit of prepared taxes, tax deducted at sources and MAT credit - HELD THAT:- Assessing Officer should compute the correct tax liability and give all the credits of the prepaid taxes including credit of TDS. AO should also compute the MAT credit as per the provisions of the law. We direct accordingly. Transfer pricing adjustment on account of payment of corporate charges - HELD THAT:- Transfer pricing report the assessee has treated payment of administrative corporate fees payment as part of operating expenses. The TPO has held that this transaction is having bearing on income of the assessee and hence to be analyzed separately. The undisputed fact is that the OPM of the assessee is @ 27.36% whereas that of all the comparable companies is @ 14.24%. As mentioned elsewhere the AE was created as a SPV for the purpose of giving services to the group companies for which the AE has charged cost + 5% as a marker and the assessee is making such payment in lieu of receiving vide scope of services from its AE. We are of the considered view that these are all inter linked transactions and therefore, should not be evaluated on a separate basis. This is also supported by OECD guidelines which provide for evaluation of combined transactions where such transactions are closely linked or continues and cannot be evaluate separately. Technical know how fee paid by the assessee is to be benchmarked applying TNMM at the entity level - HELD THAT:- We hold that TNMM is the most appropriate method for this international transaction and since the OPM of the assessee is higher than the OPM of the comparable companies, we are of the considered view that the benefit and the necessity test applied by the TPO/ DRP is uncalled for and accordingly direct the TPO/ AO to delete the addition Transfer pricing adjustment on account of reimbursement of expenses - HELD THAT:- We are of the considered view that the transaction of reimbursement of expenses is closely linked with the entire business of the assessee. However, a careful perusal of the additional evidences shows that some of the evidences are not from third party. However, since the TPO has made the addition without offering any opportunity to the assessee, we restore this issue to the files of the TPO. The assessee is directed to furnish all the related evidences and the TPO is directed to examine such evidences and decide the issue afresh as per the provisions of the law. Transfer pricing adjustment allegedly on account of re-characterizing the inter company receivables as unsecured loan extended by the assessee of its AE - HELD THAT:- It is not the case of the revenue that the impugned transaction is sham or bogus transaction, therefore, the recharacterization of the receivables as unsecured loans is uncalled for. There is no dispute that remittances from unrelated third parties have also come with a time lag exceeding the agreed period and the undisputed fact is that the assessee has not charged any interest for delay in receipt of such remittances from unrelated parties. In the light of such undisputed fact any delay in remittances from associated enterprises should not be re-characterized as unsecured loans There is no dispute that the OPM of the assessee @ 27.36% is higher than the average working capital adjusted margins of the comparable companies @12.97%, this being so no adjustment is called for in the light of the decision of Kusum Healthcare [ 2017 (4) TMI 1254 - DELHI HIGH COURT] In our considered view since the receivables have been received by the assessee within ordinary time period it cannot be re-characterized as unsecured loans and accordingly no adjustment on account of delay in receipt of receivables can be made in the income of the assessee considering the fact that the similar delay is there in respect of receivables from unrelated third parties. Considering the facts of the case in hand in totality in the light of the factual matrix discussed here in above viz-a-viz judicial decisions on the point of issue we are of the considered view that resorting to Explanation (1)(c) to section 92B of the Act is uncalled for. We accordingly direct the Assessing Officer / TPO to delete the transfer pricing adjustment . Charging of interest u/s. 234B and 234C - HELD THAT:- Levy of interest is mandatory though consequential. We direct the Assessing Officer/ TPO to levy interest as per the provisions of the law. Interest u/s. 234 C of the Act has to be charged on the returned income.
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2019 (7) TMI 1438
Disallowance of interest u/s 36(1)(iii) - interest paid in respect of capital borrowed for the purpose of business or profession is to be allowed as deduction - HELD THAT:- CIT(A) after considering all evidences produced before him relating to the impugned advance, in the form of agreement entered into by the assessee with sister concern for making the advances, the copy of ledger account of the sister concern, bills of material purchased from sister concern, has given a finding of fact that the advances are for making the purchases of medicines from the sister concern, for utilization in the business of the assessee. The Revenue has been unable to controvert this factual finding of the CIT(A). In the light of the same, the CIT(A),we hold has rightly held the advances to be commercially expedient for the assessee . The order of the CIT(A) deleting the disallowance of interest ,therefore calls for no interference on our part since the interest is undisputedly paid for the business of the assessee only. The reliance placed by the DR on the decision of the Hon'ble Jurisdictional High Court in the case of Abhishek Industries Ltd. [ 2006 (8) TMI 123 - PUNJAB AND HARYANA HIGH COURT] is we find misplaced since the ratio laid down in that case of disallowance of interest expenses where there are mixed funds available with the assessee, was based and proceeded on the premise that the advance was for non-business purpose, while in the present the advances have been held to be for business purpose. As for the Revenues contention that the disallowance was warranted since the assessee had itself charged interest on such advances in assessment years 2010-11 and 2011-12, we do not find any merit in the same also for the reason that firstly the assessee had explained the reasons for charging the interest in those years, as that the advance in those years was utilized for setting up the manufacturing unit of the sister concern and that subsequently once with the unit was set up, the advance was for the purpose of purchase of medicine from the sister concern and no interest was, therefore, charged on the same. The said explanation has not been shown to be incorrect by the Revenue. Even otherwise, as long as commercial expediency is established, there remains no reason for making any disallowance and it is entirely the prerogative of the assessee to charge or not to charge interest on such advances made. The AO cannot sit in the arm chair of the businessman and determine how the business is to be run. In view of the above, we uphold the order of the Ld.CIT(A) in deleting the disallowance of interest. The ground of appeal Nos.1, 2 3 raised by the Revenue are, therefore, dismissed. Disallowance of salary, wages - assessee failed to demonstrate that the services in lieu thereof were received by it - HELD THAT:- Undisputedly the salary register filed during assessment proceedings, and claimed and held to be a piece of evidence by the CIT(A) was the one from which it was noted that there were no signatures against salary/wages paid to certain employees. Therefore, we hold, it cannot be said to be evidence of payment of salary/wages at all. Having held so,the evidences subsequently filed were therefore not clarificatory evidences but were in fact additional evidences filed . As per Rule 46A of the Rules ,these evidences could be taken note of by the CIT(A) only after giving the AO reasonable opportunity to examine and or rebut them.The Hon ble Delhi High Court in the case of Manish Buildwell [ 2011 (11) TMI 35 - DELHI HIGH COURT] has categorically held that additional evidences filed by assesses and admitted for adjudication by CIT(A) ,as per Rule 46A,have necessarily to be confronted to the AO for the purposes of taking account of the same. In view of the above, We therefore consider it fit to restore the issue back to the CIT(A) ,directing him to confront the additional evidences to the AO and thereafter adjudicate the issue in accordance with law after obtaining the comments of the AO.
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2019 (7) TMI 1437
Disallowance u/s 36(1)(iii) - addition as assessee has diverted its interest bearing funds for purchase of an industrial plot at Greater Noida which has not been put to use for business - CIT(A) enhancing the disallowance - HELD THAT:- The own capital funds of the assessee is far more than the investment made in the industrial plot and the income of the assessee during the impugned assessment year is more than 1.06 crores. Therefore, no disallowance u/s 36(1)(iii) is called for. We find merit in the above argument of assessee. It is an admitted fact that in the past assessment years the Assessing Officer has not made any disallowance u/s 36(1)(iii) on account of purchase of this industrial plot out of borrowed funds. No disallowance has been made in assessment year 2009-10 and 2010-11 and although disallowance has been made u/s 36(1)(iii) for assessment year 2008-09, however, the disallowance is for some other reasons and not on account of investment in this particular industrial plot. Subsequent to passing of the order for impugned assessment year which was upheld by the CIT(A) the A.O. in the order passed u/s 153A/143(3) for assessment year 2012-13, has not made any such disallowance. We, therefore, find merit in the argument of the assessee that following the rule of consistency no disallowance u/s 36(1)(iii) is called for. Even otherwise, the bank account of the assessee is a mixed one where the own funds as well as the business receipts are deposited. The own capital of the assessee is far more than the investment made for the industrial plot which, according to the Assessing Officer, has not been put to use for business purposes. The income of the current year of the assessee of ₹ 1.06 crores is much more than the investment towards industrial plot. We, therefore, hold that no disallowance could be made u/s 36(1)(iii) on account of the said investment in the industrial plot in view of the decision of the Hon'ble Bombay High Court in the case of Reliance Utilities Power Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] . The grounds of appeal No.1 and 2 by the assessee are, therefore, allowed. Addition on account of loan received u/s 68 - HELD THAT:- We find force in the argument of the ld. counsel for the assessee that when the Assessing Officer has not doubted the identity and credit worthiness of the party and genuineness of the said advance of ₹ 1 crore in the subsequent year, how can he disbelieve the amount of advance of ₹ 29,50,000/- during the current year especially when the assessee has furnished all the details such as the copy of confirmation, bank account statements reflecting the advances so received, copies of ITRs/audited financial statements, etc. Further, the amount so obtained as advance has also been repaid by the assessee in the subsequent years and it is not a case of bogus share capital. Therefore, various decisions relied on by the CIT(A) as well as the DR are not applicable to the facts of the present case. Further a perusal of the balance sheet of the loan creditor shows that it has got sufficient share capital and free reserves of its own and, therefore, merely because the assessee has incurred loss during the current year should not be a ground for making the addition u/s 68 especially when in subsequent year more than ₹ 1 crore has been accepted by the AO in the order passed u/s 153A/143(3). We, therefore, set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition of ₹ 29,50,000/-. So far as the amount of ₹ 5 lakhs received from Mahesh Finsec Pvt Ltd. is concerned, we find M/s Mahesh Finsec Pvt. Ltd., has filed the return of income for assessment year 2010-11 declaring total income of ₹ 2,35,251/- and ₹ 26,97,925/- for assessment year 2011-12 in the name of M/s RPL Capital Finance Ltd. after its merger with the said company. The balance sheet of RPL Capital Finance Ltd., as on 31st March, 2011 shows capital and free reserves of ₹ 53.78 crores. When the assessee has filed the full details of the said lender along with the copy of the income tax return, audited financial statements, bank statements, confirmation, etc., we are of the considered opinion that the assessee has discharged the onus cast on it by proving all the three ingredients of section 68, namely, the identity and credit worthiness of the persons and the genuineness of the transaction. Further, it is not a case of issue of any bogus share capital with high premium. We, therefore, set aside the order of the CIT(A) on this issue and direct the AO to delete the addition. The grounds raised by the assessee are accordingly allowed.
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2019 (7) TMI 1436
Levy of penalty u/s. 271(1)(c) - furnishing of inaccurate/concealment particulars of income - vagueness and ambiguity in recording of satisfaction - HELD THAT:- AO invoked only the charge of furnishing inaccurate particulars of income . It is evident that while recording satisfaction the AO was not clear in his mind as to which charge u/s. 271(1)(c) is to be invoked for initiating penalty. The ambiguity in the mind of Assessing Officer with regard to charge u/s. 271(1)(c) for levy of penalty is evident writ large. The Hon ble Karnataka High Court in the case of Commissioner of Income Tax Vs. Manjunatha Cotton and Ginning Factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] has held the assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty should be imposed to the assessee. The manner in which the Assessing Officer has initiated penalty in the instant case clearly shows vagueness in the mind of Assessing Officer with regard to the charge to be invoked for levy of penalty u/s. 271(1)(c) of the Act. Thus, the satisfaction recorded by the Assessing Officer falls short of legal requirement as envisaged by the Hon ble High Court. The impugned order is set aside and the appeal of assessee is allowed.
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2019 (7) TMI 1435
Scope of amendment to Section 40(a)(ia) - Retrospective effect of amendment made by the Finance Act, 2010 in Section 40(a)(ia) - whether the amendment being curative in nature should be applied retrospectively i.e., from the date of insertion of the provisions of Section 40(a)(ia) or to be applicable from the date of enforcement - deduction for the tax deducted and paid to the government? - HELD THAT:- Amended provision of Sec 40(a)(ia) should be interpreted liberally and equitable and applies retrospectively from the date when Section 40(a) (ia) was inserted i.e., with effect from the Assessment Year 2005-2006 so that an assessee should not suffer unintended and deleterious consequences beyond what the object and purpose of the provision mandates. As the developments with regard to the Section recorded above shows that the amendment was curative in nature, it should be given retrospective operation as if the amended provision existed even at the time of its insertion. Since the assessee has filed its returns on 01.08.2005 i.e., in accordance with the due date under the provisions of Section 139 IT Act, hence, is allowed to claim the benefit of the amendment made by Finance Act, 2010 to the provisions of Section 40(a)(ia) of the IT Act. See M/s Calcutta Export Company [2018 (5) TMI 356 - Supreme Court]
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2019 (7) TMI 1434
Reopening of assessment u/s 147 - validity of reasons to believe - refundable security deposit - HELD THAT:- Assessing Officer has not brought on record any tangible material or information to establish a case of escapement of income. The whole basis of the reopening in the instant case is based on addition made in assessment year 2013-14 which, in our opinion, cannot be termed as tangible material for the purpose of the provisions of section 147 of the IT Act, especially when the Assessing Officer in the assessment year 2012-13 has accepted this very issue after due examination and no addition has been made. In our opinion, for the purpose of section 148, the requirement of tangible material is mandatory irrespective of mode of original assessment as held by the Hon'ble Delhi High Court in the case of Tupperware India P. Ltd. [ 2015 (8) TMI 517 - DELHI HIGH COURT] Further, as held by the Hon'ble Supreme Court in the case of Mahendra Mills Ltd. [ 1975 (3) TMI 1 - SUPREME COURT] the term record includes the entire record of subsequent and preceding years. Since the issue of refundable security deposit was examined in assessment year 2012-13 and the opinion so formed will be equally relevant for assessment year 2009-10 to 2011-12 as well and as such the reassessment proceedings based on a different view adopted in assessment year 2013-14, in our opinion, would be based on change of opinion and reappraisal of facts already on record. Therefore, we agree with the contention of the ld. counsel for the assessee that the reassessment proceedings so initiated are void on the ground that the reasons are not based on any tangible material for recording of such reasons. The various decisions relied on by the ld. DR are distinguishable and not applicable to the facts of the present case. In view of the above discussion, we hold that the reassessment proceedings initiated by the Assessing Officer are not in accordance with the law. - Decided in favour of assessee.
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2019 (7) TMI 1414
Benefits of section 80-IA - transfer of machinery from Aurangabad Unit in excess of 20% of the total value of the plant machinery - claim beyond the prescribed statutory period of 10 years - Revenue had contended before the Tribunal that the petitioner had transferred its machinery previously used at Aurangabad to its units at Daman and thereby breached this condition - HELD THAT:- The Tribunal in a detailed discussion contained in the impugned judgment, had rejected the contention. The Tribunal had taken into account the valuation of the existing machinery used at Daman and the valuation of the written down value of the machinery transferred from Aurangabad to come to the conclusion that the same did not exceed 20% of the total value of the machinery. The entire issue is thus based on factual consideration and on appreciation of evidence on record. No question of law arises. Unit 2 at Daman is nothing but an extension of the existing unit and the assessee desired to extend the benefits of section 80-IA beyond the prescribed statutory period of 10 years - Tribunal noted that the operations of Unit-1 at Daman started in A.Y. 1995-1996 and the operations of the Unit-2 at Daman started during the period relevant to the Assessment Year 1999-2000. It was further noted that the products manufactured at both the Units were different, though some of the pharmaceutical formulations may be common. The Tribunal noted that in Unit-1, the assessee was manufacturing oral liquids only, whereas at the Unit-2, the assessee had started manufacturing tablets, capsules as well as certain orally administered liquids. The assessee had also commenced for the first time manufacturing activity of certain antibiotics. The Tribunal, therefore, came to the conclusion that the formation of Unit-2 at Daman cannot be seen as a mere extension of the assessee s existing unit-1. The Tribunal has discarded the Revenue s contention that both the Units shared common amenities and common central excise registration and, therefore, cannot be seen as a separate industry, was rejected by the Tribunal. The assessee had presented full details of purchase of new plot, efforts made for obtaining separate excise registration for the new industry as well as for obtaining of a separate electric connection. Again, the Tribunal has examined the relevant factors and come to the conclusion which does not given rise to any substantial question of law.
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2019 (7) TMI 1413
Revision u/s 263 - Set off of business loss against the income brought to tax u/s 69B r.w.s 115 BBE - A.O did not allow the claim of any expenditure against the surrendered income which in his view was taxable u/s 69 as unexplained investment and assessee was liable to tax on the amount - claim of deduction being the expenses on account of depreciation, interest, remuneration and other expenses claimed against the income surrendered by the assessee as unaccounted investment in hotel building during the course of survey u/s 133A conducted on 12.7.2011 - HELD THAT:- Similar issue was dealt in the case of M/s. Sanjay Bairathi Gems Ltd, Jaipur [ 2017 (8) TMI 721 - ITAT JAIPUR] wherein l after considering the various judgments of Hon ble courts held that the assessee is eligible for set off of business loss against the income brought to tax u/s 69B r.w.s 115 BBE Departmental Representative failed to place any other material or judgment favouring the revenue in order to controvert the finding of Ld. CIT(A). At any stage revenue has not disputed the fact that the alleged amount surrendered during the survey was unaccounted business income of the assessee and not from any other sources. Section 115BBE of the Act was inserted by Finance Act, 2012 w.e.f. 1.4.2013 which restricts the claim of deduction in respect of any expenditure or allowance or set off of any loss against the income shown by the assessee or assessed u/s 68, 69, 69A,69B, 69C 69D of the Act. The instant appeal relates to Assessment Year 2012-13 and therefore the assessee s case will not be hit by provisions of Section 115BBE(2) of the Act. We therefore find no inconsistency in the finding of Ld. CIT(A) and the same requires no interference. - Decided against revenue
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2019 (7) TMI 1412
Deduction u/s 80P(2) - whether Souharda Sahakari registered under the Karnataka Souharda Sahakari Act, 1997 are also co-operative societies within the meaning of Sec.2(19) ? - HELD THAT:- The Souharda Cooperatives enjoy functional autonomy in design and implementation of their Business plans, customer service activities, etc., based on the needs of their members. Unlike other forms of cooperatives in India, the interference of State / Central in day-to-day operations of Souharda Cooperatives is almost minimal. The above discussion would show that souharda co-operatives are also one form of co-operative societies registered under a law in force in the State of Karnataka for registration of co-operative societies. Therefore the conclusion of the revenue authorities that co-operative societies and co-operatives are different and that co-operative registered as Souharda Sahakari cannot be regarded as co-operative societies is unsustainable. We therefore hold that the Assessee should be allowed deduction u/s.80P(2)(a)(i) of the Act, as the ground on which the same was denied to the Assessee is held to be incorrect. However, the other conditions for allowing deduction u/s. 80P(2)(a)(i) of the Act needs to be examined by the AO. Therefore, remand the question of allowing deduction u/s. 80P(2)(a)(i) of the Act to the AO, except the issue already decided above. Appeal by the Assessee is allowed for statistical purposes.
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2019 (7) TMI 1411
Reopening assessment proceedings u/s 147 - reason to suspect OR reason to believe - non-application of mind - HELD THAT:- Action of the AO has been taken mechanically on the basis of alleged report of Investigation Wing. The mere recording/ formulation of reasons on the basis of reproduction of information from Investigation Wing and, issuing notice for initiation of re-assessment proceedings does not constitute application of mind much less independent application of mind. Hence, the proceedings are without jurisdiction. It is settled law that AO cannot act mechanically on the basis of report of Investigation Wing and to show that the AO has applied his mind, he must distinct all those materials and he must also show that what was material on record. Hence, initiation of proceedings is also based on non-application of mind much less independent application of mind. Assessee are exactly on similar facts and circumstances of the present case, hence, respectfully following the precedent in the case of Mohan Aggarwal, ACIT, [ 2019 (2) TMI 109 - ITAT DELHI] that view that proceedings initiated by invoking the provisions of section 147 by the AO and upheld by the CIT(A) are nonest in law, without jurisdiction and without applying his mind. Hence, the reassessment is quashed and accordingly, allow the legal grounds raised by the assessee. No other ground has been adjudicated as the same has not been argued by the Ld. Counsel for the assessee.
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2019 (7) TMI 1410
Deduction u/s 54 against the LTCG received on sale of residential house - assessee failed to construct the new residential house within a period of three years from the date of sale due to delay in the handing over of the possession of the plot by the developer - HELD THAT:- Date of investment made in the purchase of residential plot is not relevant, because, what is relevant is that the investment made in the purchase of land forms an integral part of the cost of new residential house and the same is allowable as exemption along with the cost of construction and other related cost of construction of the new residential house within a period of three years. Besides in the instant case, investment for purchase of plot has been made out of the part sale consideration received as advance only, so as to construct the house thereon and there is no embargo to the purchase of plot or start construction prior to the sale of house property, as held by the Hon ble Karnataka High Court in the case of CIT vs. J.R. Subramanya Bhat [ 1986 (6) TMI 7 - KARNATAKA HIGH COURT] which was followed by CIT vs. H.K. Kapoor (Decd.) [ 1997 (8) TMI 44 - ALLAHABAD HIGH COURT] . The first step was to purchase the land, which was done. Thereafter the developer was to handover the plot, so that assessee could have constructed the house within time allowed of 2 years. However, no step could be put forward thereafter because possession of land was not given by the Developer, for reasons beyond the control of the assessee. If an assessee sells his house property and utilises the money for acquiring a plot for the construction of the house and if facts and circumstances point out that assessee intended to construct the house, which has been found so, then it is clear that he wants to avail exemption as provided under the law. Now if the developer after receiving the money could not fulfill the obligation within time, then can assessee be held responsible for not complying the law. The Hon ble Supreme Court in the case of Sanjeev Lal Vs. CIT [ 2014 (7) TMI 99 - SUPREME COURT] has laid down the purposive interpretation of section 54 to give a liberal approach to the assessee who clearly intended to claim benefit of section 54. Thus amount utilized by the assessee in the acquisition of land should be construed as amount invested in purchase/ construction of residential house. The intention of the statute as provided in section 54 has been fully satisfied by the assessee in the present case. Thus, on the facts of the present case, we hold that the assessee is entitled for exemption under section 54 of the Act and AO is directed to allow the exemption us/ 54. - Decided in favour of assessee.
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Customs
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2019 (7) TMI 1433
Time limit for issuance of SCN - Seizure/Detention of goods - Did the CESTAT fall into error in holding that goods had to be released in the circumstances of the case since no notice preceded extension of detention under Proviso to Section 110(2) of the Customs Act, 1962? HELD THAT:- There is no time limit for issuing a show cause notice, under Section 124 of the Customs Act. However, in case a show cause notice is not issued, for some reason, Section 110 would operate. Section 110 (2) states that goods cannot be detained for more than six months, unless a show cause notice (i.e. under Section 124) is issued; the proviso clothes the revenue with the power of extending the period by another six months. Under the pre-amended law, the power under the proviso could be exercised, for sufficient cause - Now, the amendment has done away with that expression; the power to extend (the period of detention) after amendment states that, if the Commissioner of Customs may, for reasons to be recorded in writing, extend such period to a further period not exceeding six months and inform the person from whom such good were seized before the expiry of the period so specified. The change in the statute, in the opinion of this court, is a significant one. The previous provision required the Commissioner to show sufficient cause, which meant that such cause had to be based on objective considerations. The amended provision merely requires the Commissioner to record the reasons in writing and inform the person from whom such good were seized before the expiry of the period so specified . In this court s considered view, the amended provision deliberately sought to overbear the previous view that a notice before extension was necessary. Now two conditions are to be satisfied: one, the Commissioner has to record his reasons in writing, why the extension is necessary, and two, inform the person from whom such good were seized before the expiry of the period so specified. The latter condition is equally important, in the opinion of this court, because it is a pre-requisite for the exercise of the power of extension. The pre-amended provision was silent on this aspect. This Court is of opinion that the impugned order cannot be sustained - appeal allowed - decided in favor of appellant.
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2019 (7) TMI 1432
Mis-declaration of imported goods - various types of yarn and blankets - Evasion of Customs Duty by mis-declaring value and description of goods - invocation of sub-section 11 to Section 28 of the Act - parallel proceedings - HELD THAT:- At the time of hearing, it is stated by the learned counsel for the respondents that the impugned show cause notice (P-1) already stands adjudicated vide order dated 11.3.2019 (R-1/1) passed by the Commissioner of Customs, Amritsar and against said order, petitioner has already availed the remedy of appeal under the provisions of Customs Act in June 2019 - Learned counsel for the petitioner does not dispute the fact that statutory appeal before CESTAT, Chandigarh already stands filed and therefore, two parallel proceedings cannot continue. Petition disposed off by relegating the petitioners to pursue the remedy of appeal already filed before the CESTAT, Chandigarh.
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2019 (7) TMI 1431
Mis-declaration of imported goods - various types of yarn and blankets - Evasion of Customs Duty by mis-declaring value and description of goods - invocation of sub-section 11 to Section 28 of the Act - parallel proceedings - HELD THAT:- At the time of hearing, it is stated by the learned counsel for the respondents that the impugned show cause notice (P-1) already stands adjudicated vide order dated 11.3.2019 (R-1/1) passed by the Commissioner of Customs, Amritsar and against said order, petitioner has already availed the remedy of appeal under the provisions of Customs Act in June 2019 - Learned counsel for the petitioner does not dispute the fact that statutory appeal before CESTAT, Chandigarh already stands filed and therefore, two parallel proceedings cannot continue. Petition disposed off by relegating the petitioners to pursue the remedy of appeal already filed before the CESTAT, Chandigarh.
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2019 (7) TMI 1430
Jurisdiction - power of Additional Director General, Ahmedabad to issue SCN - whether the show-cause notice was issued by the competent authority or not? - availability of alternative remedy - HELD THAT:- Undisputedly, in the present case, two show-cause notices were issued by the Additional Director General, DGCEI Ahmedabad. One of the show-cause noticee was answerable to the Commissioner (Customs), Exports, Uran District Raigarh and the other was answerable to the Additional Commissioner, Customs Central Excise, Indore. The respondent No.4 has issued a show-cause notice dated 30.01.2004 to the petitioner to show cause the respondent No.3 as to why the duty drawback amounting to ₹ 6,40,92,368/- wrongly availed by the petitioner should not be disallowed under Rule 16 of the Customs, Central Excise and Service Tax Drawback Rule, 1995 and recovery of Central Excise Duties amounting to ₹ 2,25,930/- under Rule 12 of the CENVAT Credit Rules and recovery of ₹ 5,72,174/- under the proviso to Section 11-A along with penalty and interest be not recovered - Another show-cause notice was issued to the petitioner to show-cause to respondent No.2 as to why DBK amount to ₹ 26,08,366/- should not be allowed under Rule 16 of the Customs, Central Excise and Service Tax Drawback Rules, 1995 along with penalty and interest. This Court is not dealing with the merits of the case, as the petitioner does have an alternative remedy - In the present case, there is a remedy of appeal and the petitioner on some pretext or the other is delaying the matter. He could very well raised all grounds by filing an appeal. Recovery, which is running in crores, is pending against the petitioner. The show-cause notice can never said to be a vague show-cause notice or a show-cause notice issued by an authority not competent to issue the showcause notice. In the present case, the petitioner was served with the proper show-cause notice, he was granted an opportunity of hearing and detailed and exhaustive order has been passed by the competent authority - it is certainly true that alternative remedy is not an absolute bar, but the fact remains that the petitioner is having equal efficacious alternative remedy. The order has been passed after following the principles of natural justice and fair play, the show-cause notices were issued by the competent authority, and therefore, the question of interference by this Court, in light of alternative remedy, does not arise. This Court is of the considered opinion that the petitioner is having an alternative remedy and as the department has not been able to recover the due amount since 2004, the question of interference by this Court does not arise - petition dismissed.
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2019 (7) TMI 1429
Mis-declaration of imported goods - Article 226 of the Constitution of India - HELD THAT:- The instant writ petition is disposed off in terms of order in the case of M/S GUPTA G AND COMPANY VERSUS UNION OF INDIA AND OTHERS [ 2019 (7) TMI 1337 - PUNJAB AND HARYANA HIGH COURT] where it was held that in case of non-consensus of claim/counter claim i.e. duty declared by petitioner vis-a-vis duty proposed by DRI, the Settlement Commission shall also consider the aspect of referring back the matter to the adjudicating authority in view of the provisions of Section 127-I of the Customs Act, 1962. The petitioners are directed to appear before the Settlement Commission on 7.8.2019.
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Corporate Laws
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2019 (7) TMI 1427
Oppression/ mismanagement Appellants have assailed the impugned order primarily on the ground that the Tribunal erred in passing the impugned order in as much as the Petitioner had been repaid the entire consideration amount paid by him for the purchase of shares and the petition was barred by limitation - HELD THAT:- The unrebutted and uncontroverted factual matrix placed before the Tribunal as also forming the bedrock of the matter in issue before this Appellate Tribunal leads to no other conclusion than the one that the factum of transfer of majority shareholding in favour of Petitioner by Respondents 2 to 4 and approval of the transfer of 25,500 equity shares of the Company in favour of the Petitioner for a consideration amount of ₹ 70 Lakhs by the Board of Directors remains undisputed and stands proved. No fault can be found with the finding that Respondents No. 2 to 4 have been conducting the Company s affairs prejudicial to the Petitioner as also to the interests of the Company justifying the directions slapped in terms of the impugned order. Time Limitation - HELD THAT:- It is the dictum of law that the issue of limitation should be alive to the mind of the court dealing with the lis and has to be looked into irrespective of the fact that such an issue has not been raised by the Defendant/ Respondent - Appellants (Respondents 2 to 4 in Company Petition) would be within their rights to legitimately raise the issue of limitation notwithstanding the fact that their right to file defense stood forfeited. Unless the lis/ appeal falls within the exceptions enumerated under Sections 4 to 24 of the Limitation Act, 1963, the mandate of law enshrined in Section 3 cited above renders it imperative upon the Court/ Tribunal hearing the suit/ appeal to dismiss the lis filed or preferred after the prescribed period of limitation. Thus, no exception can be taken to such issue being raised by the Appellants (Respondents 2 to 4 in Company Petition). The impugned order does not suffer from any legal infirmity and the Company Petition is not barred by limitation - appeal dismissed.
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Insolvency & Bankruptcy
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2019 (7) TMI 1426
Admissibility of petition - Initiation of Corporate Insolvency Resolution Process - Corporate Debtor - Time Limitation - HELD THAT:- Section 3(6) defines claim to mean a right to payment even if it is disputed. The Code gets triggered the moment default of ₹ 1 lakh or more (Section 4) occurs. It is clear that when the Respondent has disputed the amount, as the amount is more than ₹ 1 lakh, the application under Section 9 cannot be rejected. Time Limitation - HELD THAT:- It is clear that the application is maintainable within three years from the date when the right to apply accrues. Since, the Insolvency and Bankruptcy Code, 2016 has come into effect since 1st December, 2016, we hold that the application is not barred by limitation - The Adjudicating Authority while passing the order, failed to appreciate the facts and erroneously held that there is a pre-existing dispute and the claim is barred by limitation. Case remitted back for denovo consideration - appeal allowed by way of remand.
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2019 (7) TMI 1425
Salary of a Liquidator - period involving Corporate Insolvency Resolution Process and the prior period - Appellants submitted that the Adjudicating Authority has failed to decide the claim of the Appellantsworkmen, who actually performed the duties during the Corporate Insolvency Resolution Process , but have not been paid the salary - HELD THAT:- An order of liquidation has already been passed. This apart, the disputed question of fact, as to whether the Appellants have actually worked during the Corporate Insolvency Resolution Process or the earlier period, cannot be dealt with by the Adjudicating Authority till such information could have been obtained from the Resolution Professional or claim is decided by the Liquidator. We are not inclined to interfere with the impugned order dated 25th April, 2019, but allow the Appellants-all 272 workmen and employees to file individual claims before the Liquidator, who after going through the record and taking into consideration the pleadings made by workmen/ employees will determine the claim. If claim of one or other workmen/ employee is rejected, it will be open to them to move before the Adjudicating Authority, who may decide the same in accordance with law. Gratuity and Provident Funds - HELD THAT:- It is sufficient to say that the same cannot be treated to be the asset of the Corporate Debtor . They are to be disbursed among the employees/ workmen who are entitled for the same. Appeal disposed off.
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2019 (7) TMI 1424
Exclusion of certain period from CIRP - revival of mining lease - delay in passing revival order - exclusion of period of 135 days from 27.08.2018 to 08.01.2019 and in addition to it the period of 147 days starting from 09.11.2018 to 04.04.2019 from the CIRP of the corporate debtor - grounds on which exclusion is sought that Government of Telangana revived the mining lease under Rule 20(6) of Minerals (other than Atomic Hydro Carbons Energy Minerals) Rules, 2016 - HELD THAT:- Pendency of IA No. 551/2018 is not a ground for exclusion. It is filed against decision of RP in admitting the claims of certain financial creditors. There is ample time for any resolution applicant to submit resolution plan on or after 10.01.2019. 270 days already expired from the date of admission. No bidder came forward to bid for corporate debtor company. Had there been really resolution applicants for acquiring the corporate debtor company. Resolution plan would have been filed. When ample time is given for Prospective resolution applicants yet none filed any resolution plan to acquire corporate debtor company and to make it on going concern. Mere delay in passing revival order by issuing GO for revival of the Leases. It cannot be said that Prospective Resolution Applicants are not able to file resolution plan with RP on that ground alone. Till date no one came forward to file Resolution plan for the corporate debtor. There are absolutely no justifiable grounds for extending certain period as prayed from CIRP. Already application was filed by RP for passing order of liquidation following approval by CoC. The two grounds referred to in the application basing on which exclusion is sought are not at all sufficient grounds for exclusion of CIRP. Applicant also not filed any resolution passed by CoC authorising to file application for exclusion. There are absolutely no grounds to exclude the time as prayed - application dismissed.
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2019 (7) TMI 1423
Closure of CIRP proceedings against Corporate Debtor - cessation of order of moratorium - HELD THAT:- In terms of Inherent powers envisaged under Rule 11 of NCLT Rules, 2016 and in view of the consent terms between the parties and non-formation of CoC, this Adjudicating Authority deems it just proper to Close the CIRP proceedings against the Corporate Debtor. The fees of the IRP shall be paid by the corporate debtor as per the terms agreed between the parties. The CIRP proceedings against the Corporate Debtor i.e., Ranga Particles Board Industries Limited shall stand closed and the order of moratorium shall stand ceased.
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Service Tax
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2019 (7) TMI 1422
Validity of subsequent SCN - Invocation of Extended period of Limitation - Non-payment of service tax - Renting of Immovable Property Services - period October 2008 to March, 2009 and September, 2009 to October, 2009 - HELD THAT:- It is not disputed by the ld. Authorised Representative that earlier also a show cause notice dated 08/10/2010 was issued to the Appellants for the same issue concerning the same licensee, covering the period April, 2009 to August 2009. If that is so and if the department is aware about the alleged misdeeds in the year, 2010 itself, when the first show cause notice was issued, then why the department waited for three long years for issuing the second show cause notice for the same issue that too by invoking the extended period. It is legally unsustainable. Undisputedly, the second show cause notice dated 22/4/2013 was issued covering the period October, 2008 to March, 2009 and September, 2009 to October, 2009 by invoking the extended period. The first/earlier show cause notice dated 08/10/2010 was issued to the Apellants covering the missing interregnum period of the second show cause notice i.e. April, 2009 to August, 2009, therefore the fact about non-payment of Service tax by the Appellants was within the knowledge of the department. In view of these facts the extended period could not have been invoked in the second show cause notice. It is settled legal position that in a case where a show cause notice has been issued for the earlier period on certain set of facts, then on the same or similar set of facts another show cause notice, invoking the extended period of limitation, cannot be issued as the facts were already within the knowledge of the department - the appeal filed by the Appellants deserves to be allowed on the point of limitation itself - Appeal allowed - decided in favor of appellant.
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2019 (7) TMI 1421
Availing benefit of Abatement of Service Tax and Cenvat Credit - Air Travel Agency Service - Rail Travel Service - Tour Operator - Cab Operator booking - N/N. 1/2006 ST dated 01.03.2006 - HELD THAT:- On an identical issue in the appellant s own case for the subsequent period, this Tribunal [ FCM TRAVEL SOLUTIONS (INDIA) PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE, CUSTOMS AND SERVICE TAX MYSORE [ 2017 (10) TMI 802 - CESTAT BANGALORE] has remanded the case back to the original authority for the purpose of verifying whether the appellants have reversed the proportionate credit and if they have reversed, extend the benefit of the decision of this Tribunal relied upon by them. The present appeal is also allowed by way of remand.
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2019 (7) TMI 1420
Business Auxiliary Service - demand of service tax - period from 01/02/2006 to 31/03/2008 - export of services - HELD THAT:- The Commissioner has also relied upon the Board s Circular No.111/05/2009 dt. 24/02/2009 and has given a categorical finding that the services rendered by the respondent fall in the definition of export of service as provided in the Export of Service Rules, 2005. In view of the clear finding of the Commissioner holding that the services rendered by the respondent is export of service and hence the said service is not liable to service tax. Appeal dismissed - decided against Revenue.
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2019 (7) TMI 1419
Maintainability of appeal - monetary amount involved in the appeal - HELD THAT:- In view of the low tax effect involved in the matter, the instant special leave petition is dismissed.
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2019 (7) TMI 1418
100% EOU registered with STPI - Refund of accumulated CENVAT Credit - denial of refund on the ground of nexus - Rule 5 of Cenvat Credit Rules 2004 read with N/N. 5/2006 CE (NT) - export of services or not - refund barred for technical reasons such as incomplete forms, inadequate data, difference in figures etc. or not. Whether the service rendered by the appellant is export of service? - HELD THAT:- The appellants are exporting services in relation to Information Technology Software. The recipient is undisputedly Samsung Korea which is outside India. The appellants are receiving the renumeration for the services rendered in foreign exchange. Therefore, we find that the activity undertaken by appellants amounts to export of services. It is understood that the Department does not dispute the claim of export of services by the appellants. We find that the appellants have submitted a declaration given by Samsung, Korea stating that these services were used by them for the purpose of its business outside India. However, the learned authorized representative submits that this certificate was not produced before the Commissioner (Appeals) - Therefore, it would be in the interest of justice that the matter should go back to the learned Commissioner (Appeals) to appreciate the evidence submitted by the appellants in this regard. Whether some of the input services which are disputed have nexus with the output service provided by the appellants? - HELD THAT:- The appellants have given elaborate submissions on the applicability of such services as settled by various decisions - the entire issue of nexus between the input service and output service has been clarified by CBEC Circular 120/01/2010 ST and the case-law cited by the appellants. In view of the above, the issue of examining nexus in respect of each of the input service requires to be seen in the light of ratios of judgments by Tribunal and higher Courts and the circulars issued by the Board - For this purpose also the matter requires to be remanded to the lower authorities. Whether refund will be barred on technical reasons such as incomplete forms, inadequate data, difference in figures etc. - HELD THAT:- As long as the refund claim is in order and necessary documents as required as per law and as long as there is no dispute about the eligibility of the particular service to be eligible for refund, minor discrepancies should not be a hindrance. Appeal allowed by way of remand.
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2019 (7) TMI 1417
Validity of SCN issued to a dead person - whether the SCN can be issued in the name of a dead person proprietor, and whether the adjudication order has got any legal sanctity? - HELD THAT:- The issue of show cause notice in the name of deceased person under the provisions of Finance Act, 1994, is ab initio void in view of the ruling of the Hon ble Supreme Court in the case of SHABINA ABRAHAM AND OTHERS VERSUS COLLECTOR OF CENTRAL EXCISE CUSTOMS [ 2015 (7) TMI 1036 - SUPREME COURT] . There is no specific provision or machinery provision for recovery of tax dues, after death of the proprietor. In the facts and circumstances of the case, Section 87 (c) of the Finance Act is not applicable. Appeal allowed - decided in favor of appellant.
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2019 (7) TMI 1416
Refund of service tax - development charges, as exempted, with retrospective effect under section 104 (1) of Finance Act, 1994 - time limitation - refund claim was filed only on 16.11.2017, which is beyond the due date - HELD THAT:- It was essential for the appellant to get information from SIPCOT as to the eligibility of the refund. They also had to obtain the necessary documents in the nature of service tax paid challan of SIPCOT as well as the certificate issued by SIPCOT stating that they have not claimed any refund. It has to be noted that Section 104 does not identify as to who can make the refund application. If it had mentioned that service provider could make the application and pass over the amount to the service recipient, it would have been easy to apply within the limitation prescribed. In cases where SIPCOT has not collected and has borne the incidence of tax, SIPCOT can make the refund application. The person who can make the refund claim having not been specified in the section, the plea put forward by the appellants that they were unable to make the claim before 30.09.2017 is not without substance. The rejection of refund claim on the ground of time bar is unjustified - appeal allowed - decided in favor of appellant.
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2019 (7) TMI 1415
Extended period of limitation - Whether the SCN dated 02.05.2013 is issued validly invoking the extended period of limitation for disallowing the cenvat credit taken by the appellant during the financial year 2009-2010? - HELD THAT:- In spite of the audit objection and three reminders, the appellant had not responded in writing and thereafter, the Revenue also did not take any further action, and only after 24 months, the show cause notice was issued. The normal period of limitation during the period of dispute is 18 months. Further, no reason has been given by the Revenue for not issuing the show cause notice for all these months, during the period of 18 months as permissible. The appellant has maintained proper documents of the transactions and submitted ST-3 Returns regularly. Thus, in the facts and circumstances, no case of falsification of record and/or suppression or any contumacious conduct is made out against the appellant. The extended period of limitation is not available to the Revenue - appeal allowed - decided in favor of appellant.
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2019 (7) TMI 1394
Rectification of Mistake - inadvertent mistake or not - Refund of Service Tax collected from the petitioner/contractor and deposited by the Housing Board with the Tax Authorities - HELD THAT:- The order dated 7.3.2019 is hereby modified to the extent that it will be petitioner-contractor who will file a fresh application claiming refund of service tax collected from him and deposited by the Housing Board with the Tax Authorities within three weeks from today and the same shall be considered by the authorities concerned within next one month and release the admissible/due refund in accordance with law. Application allowed.
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Central Excise
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2019 (7) TMI 1409
Validity of adjudication of case after 13 years of Issue of Show Cause Notice (SCN) - 100% EOU - The writ-applicants pointed out to the appellate authority that the revival of the proceedings after 13 years could be termed as impermissible in law. According to Mr. Dave, for no fault on the part of the writ-applicants, the department kept the sword hanging on their neck for a period of 13 years. HELD THAT:- The explanation offered by the respondents for delay is not convincing. - The impugned order passed by the Commissioner, GST and Central Excise (Appeals), Vadodara affirming the order passed by the Joint Commissioner, CGST, Bharuch dated 27/12/2017 is hereby quashed and set aside - application allowed.
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2019 (7) TMI 1408
CENVAT Credit - Input Service Distribution - invoices were addressed to their head office at Hadapsar, Pune, but credit was availed at their Nasik unit - period 2013-2014 - HELD THAT:- The Appellant had instructed the service provider to render the service at their factory at Nasik and also raise bills at their Nasik address. The description of service mentioned in the purchase orders tallies with the services rendered by the service provider as mentioned in the respective invoices addressed to their head office. In these circumstances, there cannot be any doubt that these services had been received at their Nasik unit and utilised in the manufacture of their excisable goods - the Appellants are eligible to avail the credit on the respective input service invoices as the services were used in or in relation to use of the finished goods at Nasik unit. Appeal allowed - decided in favor of appellant.
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2019 (7) TMI 1407
CENVAT Credit - suo moto re-credit - appellants have availed the credit and paid the duty through CENVAT credit which was in violation of Rule 8(3A) of the CCR - improper documents - ineligibility in terms of Rule 9 and Rule 11(2) of CCR - HELD THAT:- Both the authorities have wrongly held that appellants have taken the credit on the basis of challan which is not a valid document to take CENVAT credit as per Rule 9 of the CCR. Perusal of statement of input credit submitted by the appellant for the period October-December 2014, the appellants have used the words CENVAT credit reversed 05/10/2013 to 26/11/2013 - further, the appellant was asked to reverse the credit earned and utilized by them only on 26/11/2014 and thereafter he paid the amount and interest in cash and once he paid the amount and the interest in cash on 26/11/2014, then he is entitled to take the recredit of input credit because there is no dispute by the Department that the appellant has once paid the duty through the CENVAT credit and subsequently at the instance of the Department paid the duty in cash along with interest and thereafter has taken the recredit in the cenvat credit account. On identical facts, the Tribunal in the case of total Environment Woodwork P. Ltd. Vs. CCE, C ST, Bangalore-I [ 2017 (1) TMI 1534 - CESTAT BANGALORE ] has held that once it is proved that the appellant has paid the duty twice once through CENVAT credit and again in cash along with interest, then the appellant is well within his right to take the recredit of the same - In the present case also, firstly the appellant has paid the duty through CENVAT credit account during the disputed period and later on at the direction of the Superintendent, they paid the duty along with interest in cash and took recredit in their CENVAT credit account which is permitted in law as he is not required to pay the duty twice. The impugned order denying the recredit is not sustainable in law and therefore the impugned order is set aside - Appeal allowed - decided in favor of appellant.
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2019 (7) TMI 1406
Clandestine removal - shortage of finished goods as well as input - reliability on Section 9 (D) of the Central Excise Act - cross-examination of witnesses - HELD THAT:- It was the most logical and practical method of weighment of finished goods namely MS bars and raw material namely, MS Ingots. We find that weight of one bundle of each size of MS bars have been taken from the weigh bridge installed in the factory premises of the appellant and the print out of the weighment slip has also been taken and the quantity of the bundles of each size of MS bar was counted in the presence of Panchas as well as authorized representative of the appellant and thereafter the stock of available finished goods namely MS bars and raw material namely MS Ingots was arrived at by the officers as well as Panchas and the authorized representative of the appellant. The veracity of the Panchnama and the availability of the finished goods as well as the raw material on the date of visit cannot be challenged as an afterthought by the appellant only because each and every MS bar and each and every ingots of raw material was not individually weighed by the visiting officers. The entire proceedings were conducted in a mutually agreed way which was the best possible practical and logical way of weighment. The appellant has failed to contradict the findings of the Panchnama except advancing an argument that since each and every MS bar or each and every MS ingots was not been weighed the shortage of finished goods and raw material by the officers through Panchnama dated 11/12/2008 cannot be relied upon. These arguments of the appellant are not legally tenable - The demand of duty amounting to ₹ 83,57,897/- on finished goods namely MS bars and an amount of ₹ 24,72,672/- on MS ingots found short, has rightly been confirmed by the impugned order-in-original. Demand of central excise duty amounting to ₹ 35,72,980/- on account of fake cash sale by adopting lower assessable value - HELD THAT:- Apart from Shri Pramod Gupta, the drivers of trucks or owners of transport vehicles have admitted that no transportation of old, rejected and pitted steel have taken place. Further the appellant did not advance any explanation for clearance of old, rejected and pitted steel at the time of adjudication. The appellants claim that due to closure of the factory certain goods got deteriorated and they have to be cleared on lower price is without any evidence and the claim made by the appellant is devoid of any merit. The statement recorded of the concerned employees of the appellant also endorse the findings and the stand taken by the Department that fresh finished goods were cleared by the appellant by declaring the same as old, reject and pitted steel. The appellants have not produced any cogent explanation to contradict the findings given in the impugned order whereunder the Adjudicating Authority has confirmed the duty of central excise amounting to ₹ 35,72,980/- on this count. Penalty on appellant Shri Shrivats Rathi - HELD THAT:- It is a proven fact that certain quantities of the finished goods as well as raw materials were cleared clandestinely from the appellant premises without discharging central excise duty liability. From the statements of the various employees and Shri Shrivats Rathi himself, it comes out that for all the omission and commission, the employees of the appellant were taking directions from Shri Shrivats Rathi (appellant No. 2). We also find from a perusal of the record of the appeals as well as various statements recorded during the course of investigation that the ultimate beneficiary of the pecuniary benefits arising out of the central excise duty evasion, follow to Shri Shrivats Rathi. Thus the provisions of Rule 26 (1) of the Central Excise Rules, 2002 have rightly been invoked and confirmed in the impugned order against Shri Shrivats Rathi - the personal penalty imposed on Shri Shrivats Rathi reduced from ₹ 75 lakhs under Rule 26 (1) of Central Excise Rules, 2002 to ₹ 50 lakhs. Appeal allowed in part.
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2019 (7) TMI 1405
CENVAT Credit - inputs - Repairs and Maintenance Services as that of fitting, fabrication work, dismantling work, etc. - period w.e.f. April 2011 to June 2017 - scope of inputs beyond 01 April, 2011 - HELD THAT:- The cenvat credit for the similar services availed by the appellant prior 01.04.2011 has been allowed to the appellant. The impugned 9 show cause notices cover the period beyond April 2011 to June 2017, which have been issued after the amendment in the definition of inputs having an exclusion clause thereof - the activities as that of Fabrication, Erection and Commissioning are covered under the inclusive part of the input services till they are meant for Repair, Maintenance, Renovation or Modernisation of the factory or the premises and even the office of the manufacturer. These services are not to be considered as input, if and only if, the services are used for erecting a civil structure or for erecting a support structure for the machinery. Further, Commissioner has not specified as to what fabrication and erection amounts to support of capital goods. We are of the opinion that demand cannot be confirmed on the basis of the conjunctions and surmises. Findings of Commissioner (Appeals) are, therefore, held to be unreasonable and without any reasoning and thus are hereby set aside. Demand with respect to the cenvat credit availed on the fabrication/ dismantling amounting to civil works as was availed in the period April 2011 to May 2011 - HELD THAT:- The Commissioner is observed to have created a right bifurcation of the fabrication/dismantling work with respect to the civil structure/ support structure and with respect to the repair, maintenance. Hence, we hereby confirm this demand and take this observation of the Commissioner to be an additional ground for setting aside the remaining demand. The CENVAT credit availed on the fabrication/dismantling, etc. qua the civil work the denial thereof is confirmed - the denial with respect to remaining cenvat credit is hereby set aside - appeal allowed in part.
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2019 (7) TMI 1404
Validity of SCN - whether SCN dated 3.12.2014 was rightly issued? - Demand u/r 8(3A) of the Central Excise Rules, 2002 - HELD THAT:- The stay order of Hon ble Supreme Court was considered by the Hon ble Delhi High Court in PRINCIPAL COMMISSIONER OF C. EX., DELHI-I VERSUS SPACE TELELINK LTD. [ 2017 (3) TMI 1599 - DELHI HIGH COURT ] wherein under the similar facts issue, it has been held that an order keeping in abeyance the judgement of a lower court or authority does not deface the underlying basis of the judgement itself, i.e. its reasoning. The Commissioner (Appeals) has erred in confirming the demand under Rule 8(3A) along with penalty under Rule 25 of Central Excise Rules. There was no default or tax in arrear on the day of issue of show cause notice. Appeal allowed - decided in favor of appellant.
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2019 (7) TMI 1403
Valuation - MRP based valuation or not - manufacture of Pan Masala - different RSP of Pan Masal - retrospective amendment brought to 1st proviso to Rule 8 of the PMPM Rules, 2008, w.e.f. 13.04.2010, by virtue of Section 109 read with 4th Schedule of Finance Act No.2 of 2014 - effect of amendment. If Pan Masala when packed in the pouches of different RSPs using same machine during the month, then whether duty should be paid on pro-rata basis attributable to the number of days used for manufacturing a particular RSP or duty required to be paid considering that pouches with new RSP is manufactured for the whole month as if a new machine deemed to have been used for the purpose of packing Pan Masala? HELD THAT:- The learned A.R. for the Revenue has fairly submitted that the impugned orders have been passed much earlier to the Finance Act, 2014 and since the amendment brought to Rule 8 has been made effective retrospectively i.e. from 13.04.2010, therefore, the matter be remanded to the Adjudicating authority for considering the said amendment and decide the issue accordingly. There is no objection from the learned Advocate for the Appellant - the said issue remanded to the Adjudicating authority for determination afresh the same in the light of retrospective amendment. Abatement on sealing of machines - Revenue s contention is that if one machine is sealed and the remaining machines available in factory are functional, then abatement for the closure period for that machine is not allowed, unless the factory as a whole remain closed for the period for which the abatement is claimed - HELD THAT:- A plain reading of Rule 10 of PMPM Rules, 2008 makes it clear that unless all packing machines available in the factory have been sealed and factory remains completely closed, abatement for the sealing of one machine cannot be allowed - Since we are remanding the matter to the Adjudicating authority, the issue of abatement may also be considered. Appeal allowed by way of remand.
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2019 (7) TMI 1402
Clandestine manufacture and removal - excess of raw-material/difference in stock - mis-representation/suppression of facts on part of the appellant - Time Limitation - HELD THAT:- Apparently and admittedly, the impugned demand is solely based upon the letter as was received by the Revenue Department from Income Tax Department on 4th December, 2009. Admittedly no investigation in furtherance of said information has been conducted by the Revenue Department except for recording the statement of the Director of assessee, namely, Shri Sharat Jain on 17th January, 2014. There is no explanation on the part of the Department about the delay of almost 5 years in acting upon the information, which they had since the year 2009. It is also an apparent-admitted fact that the Revenue Department was regularly conducting the audit of the respondent even after receiving the said information till the year 2012-2013 that too without noticing any short coming as was informed by Income Tax Department in the year 2009. Also in absence of no investigation by the Department, there is no positive evidence on record, which may prove any mis-representation or suppression of facts on part of the assessee - the Commissioner (Appeals) has committed no error while denying the Department the entitlement to invoke the extended period of limitation. It has been observed by the Commissioner (Appeals) that there is no admission of the alleged guilt by said Shri Sharat Jain except for the mention that the stock difference as has been noticed by the Income Tax Department, has been challenged by the assessee-respondent before Commissioner (Appeals), Income Tax, and outcome has not yet been finalized. The Commissioner (Appeals) has gone observing that Commissioner of Income Tax (Appeals) has categorically set aside the findings of the excess stock - once the inventory is found defected, its reliability for estimating the income also becomes doubtful. This decision shatters the sole basis of reliance for the present adjudication as admittedly, the Revenue Department had no other information than the said inventory. This amounts to having no evidence. Appeal dismissed - decided against Revenue.
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2019 (7) TMI 1401
CENVAT Credit - common input services used in manufacturing as well as trading activity - non-maintenance of separate records - Rule 6(2) of CENVAT Credit Rules, 2004 - HELD THAT:- This issue is no more res integra and has been settled by various decisions of the Tribunal wherein it has been consistently held that the assessee has an option to reverse the credit as per the formula prescribed in Rule 6(3A) and if the assessee has not exercised the option prior to the availment of credit then the same can be exercised subsequently. In the case of M/S. ASTER PVT. LTD. VERSUS CC CE, HYDERABAD [ 2016 (6) TMI 866 - CESTAT HYDERABAD] , this Tribunal again reiterated that Rule 6(3A) is only a procedural which cannot deny the substantive right. In the present case, the appellants are prepared to reverse the proportionate credit which according to them comes to only to ₹ 15,922/- along with interest. Penalty - no suppression of facts - HELD THAT:- There was no suppression of fact with intent to evade payment of duty. Further the non-reversal was due to bona fide belief founded by the appellant regarding the eligibility of the credit - the appellant is not liable to penalty. Appeal allowed in part.
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CST, VAT & Sales Tax
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2019 (7) TMI 1400
Valuation - inclusion of freight charges in assessable value - whether the freight charges paid by the assessee to bring the goods to his place of business, is to be included in his turnover? - HELD THAT:- Perusal of the order of the Tribunal reveals that the claim of the sale by endorsement could not be established by the assessee by any documentary evidence. The documentation relied upon by the assessee was only to the effect of intimation made by the assessee to the railway authorities of the manner in which the coal supplied had been dealt with. As to the claim of commission agency, also no evidence could be led to establish its existence. In any case, since the pleas were allowed to be taken by this Court, at present what survives for consideration is whether the findings recorded by the Tribunal suffer from any error of law - both findings recorded by the Tribunal are based on appraisal of evidence and material on record. The assessee could not establish either that it had performed the sale in transit by endorsement or that it had acted as a commission agent. revision dismissed.
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2019 (7) TMI 1399
Deemed Assessment - Form WW - discrepancies and differences between the returns filed by writ petitioner and the annual returns in Form WW, which has also been filed by writ petitioner - HELD THAT:- The submission of learned counsel for writ petitioner that respondent should have given details of mismatch and then called upon the writ petitioner to explain the same pales into insignificance. This is more so, as rightly pointed out by learned State counsel, both the returns have been filed by writ petitioner. Alternative remedy - HELD THAT:- It is open to writ petitioner to file a statutory appeal under Section 51 of TNVAT Act to the jurisdictional Appellate Deputy Commissioner. If the writ petitioner chooses to do so, though obvious, it is made clear that conditions of pre-deposit and other conditions for appeal will operate. Petition dismissed.
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2019 (7) TMI 1398
Validity of revised assessment order - Assessment Year 2013-14 - TNVAT Act - discrepancy in Form WW - Section 27 of TNVAT Act - HELD THAT:- This Court does not interfere with the impugned order in writ jurisdiction. This Court is convinced that as mentioned supra this is a fit case to relegate the writ petitioner to alternate remedy of appeal to the jurisdictional Appellate Deputy Commissioner inter alia under Section 51 of TNVAT Act. Petition disposed off.
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2019 (7) TMI 1397
Validity of assessment order - case of the writ petitioner is that the Assessing Officer concerned was transferred and the new incumbent has passed the impugned Assessment Orders without verifying whether there was a deviation proposal sent by his predecessor - HELD THAT:- There is no reference to the aforementioned deviation proposal in the impugned orders. Besides this, considering the peculiar facts and circumstances of instant case, this Court is of the view that it may be appropriate to direct the sole respondent to give an opportunity of personal hearing - this view is taken owing to the peculiar facts and circumstances of this case and this Court does not express any view or opinion as to whether personal hearing is necessary in all and every case when it is not made statutorily imperative. The impugned orders are not set aside, but they are given the character and colour of further revisional notices for the purpose of facilitating a Denovo revisional assessment. Though obvious, it is made clear that this course is being adopted without expressing any opinion or view on merits of the matter - Writ petitioners, shall pay 15% of the disputed tax [tax liability alone excluding penalty] within a fortnight from the date of receipt of this order.
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2019 (7) TMI 1396
Validity of revised assessment order - levy of penalty - Deemed assessment - TNVAT Act - HELD THAT:- First respondent cannot be found fault with for passing the impugned order, as writ petitioner dealer has sent a reply saying that writ petitioner has no objections to make qua the proposal and the writ petitioner will approach the Court if revised assessment order is passed. One more reason as to why first respondent cannot be found fault with is, personal hearing granted to writ petitioner (though a date was clearly specified) has also not been availed of by writ petitioner - This Court is of the considered view that this writ petition is bereft of merits, there is no ground to interfere with the impugned order and the writ petition is liable to be dismissed. It is open to writ petitioner to file a statutory appeal against the impugned order under Section 51 of TNVAT Act, subject to limitation and subject to pre-deposit condition thereunder if the writ petitioner chooses to do so - Petition dismissed.
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2019 (7) TMI 1395
Adjustment of Input Tax Credit - outstanding declaration forms under CST Act as on 30.6.2017 (e.g. C forms) - Effect of migration to GST regime - Validity of clause 12.5(c) of Part IV of Form 205B prescribed by Notification No.(GHN-05) VAR- 2018(47)/TH dated 19.1.2018 - filing of final return in Form 205B without requirement of reduction of input tax credit under clause 12.5(c) of Part IV read with Annexure V of the said Form - whether clause 12.5(c) of Part IV of Form 205B is ultra vires the provisions of the Value Added Tax Act, 2003? HELD THAT:- the input tax credit shown in the monthly return in Form 201 for the months of April, May and June 2017 will be allowed against the admitted output tax in accordance with the monthly return in Form 201 and thereafter if any input tax credit remains, the same would be reduced in accordance with Annexure-V to Form 205B. - the brought-forward input tax credit as well as the input tax credit to be carried forward from 1.7.2017 onwards would be adjusted as per clause 12.5(c) of Part IV of Form 205B. - Rule 117 of the Gujarat Goods and Services Tax Rules read with Form GST TRAN-1 provides the mechanism for computing the input tax credit attributable to pending declaration forms. The grievance as sought to be redressed should not survive - this writ-application is disposed of without going into the issue as regards the legality and validity of clause 12.5(c) of Part IV of Form 205B prescribed by the Notification No.(GHN-05) VAR-2018(47)/TH dated 19.1.2018.
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Indian Laws
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2019 (7) TMI 1428
Non-compliance of the amended clause No.6.4.2.1 - invitation of tenders for construction of seeds storage structures alongwith the amenities for seven villages in different Districts of the State of Gujarat - HELD THAT:- The writ-applicant participated in the tender process. It appears that, later one of the conditions providing the eligibility criteria came to be modified. The writ-applicant is aggrieved by such action on the part of the Corporation in modifying the eligibility criteria. In such circumstances, the writ applicant thought fit to come before this Court with the present petition. Application disposed off.
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