TMI Tax Updates - e-Newsletter
July 4, 2019

Case Laws in this Newsletter:

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

Articles

1. GST ON EMPLOYEE’S SERVICES IN OTHER STATES

   By: Dr. Sanjiv Agarwal

2. RECENT NOTIFICATIONS ISSUED UNDER CGST ACT, 2017

   By: DR.MARIAPPAN GOVINDARAJAN

3. CBIC vide Notification No. 31/2019-Central Tax dated June 28, 2019, has made various amendments in CGST Rules, 2017

   By: Bimal jain

News

1. Clarification regarding Annual Returns and Reconciliation Statement

2. Anti Profiteering Mechanism under GST

3. GOODS AND SERVICE TAX CONCEPT & STATUS (AS ON 01st July, 2019)

4. GST – An Update (As on 1st July, 2019)

5. Corruption Cases

6. Investment in SEZS

7. Customs Duty on US Products

8. Invest India Programme

9. Investment under Make in India

10. Non-Performing Loan Ratio

11. Identification of Benami Properties

12. Removal of charges on RTGS & NEFT

13. Revival of economy from slowdown

14. Guidelines for relief measures to farmers under natural calamities

15. Ratification by India of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting

Notifications

GST - States

1. CCT/26-2/2018-19/47/808 - dated 28-6-2019 - Goa SGST

Seeks to prescribe the due date for furnishing FORM GSTR-3B for the months of July, 2019 to September, 2019

2. CCT/26-2/2018-19/46/809 - dated 28-6-2019 - Goa SGST

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

3. 64/GST-2 - dated 28-6-2019 - Haryana SGST

Notification to prescribe the due date for furnishing FORM GSTR-3B for the months of July, 2019 to September, 2019 under the HGST Act, 2017

4. 63/GST-2 - dated 28-6-2019 - Haryana SGST

Notification to prescribe the due date for furnishing FORM GSTR-1 for registered persons having aggregate turnover of more than 1.5 crore rupees for the months of July, 2019 to September, 2019 under the HGST Act, 2017

5. 31/2019-State Tax - dated 28-6-2019 - Maharashtra SGST

MGST (Fourth Amendment) Rules, 2019.

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/CFD/DIL2/CIR/P/2019/76 - dated 28-6-2019

Streamlining the Process of Public Issue of Equity Shares and convertibles- Implementation of Phase II of Unified Payments Interface with Application Supported by Block Amount

Income Tax

2. 14/2019 - dated 3-7-2019

Clarification regarding taxability of income earned by a non-resident investor from off-shore investments routed through an Alternate Investment Fund

DGFT

3. Trade Notice No. 22/2019-20 - dated 3-7-2019

Review of the Foreign Trade Policy- inviting suggestions

4. 15/2015-2020 - dated 3-7-2019

Amendments in Appendix 4J of Hand Book of Procedures 2015-20

Highlights / Catch Notes

Income Tax

• Non-Resident Investor Income from Offshore Investments via Alternate Investment Funds: Tax Regulations and Loss Set-Off Conditions Explained.

  Circulars : Clarification regarding taxability of income earned by a non-resident investor from off-shore investments routed through an Alternate Investment Fund - set off loss
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• Lease Premium Taxable in Full in Current Year, Not Spread Over 99-Year Period.

  Case-Laws - AT : Taxability of lease premium - whether it could be spread over the period of 99 years or the same has to be assessed in the hands of assessee in the year in which it enters into lease agreement - Being the revenue in nature, entire amount is taxable in the instant AY itself.
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• Company's Village Development Spending for Goodwill Recognized as Allowable Business Expense.

  Case-Laws - AT : Disallowance of expenditure incurred towards village development - In order to earn goodwill of the people residing in the neighbor-hood area and to keep social relations with residents, assessee company has to incur certain expenditure, repaired certain village roads and given donations during social occasions - allowable business expenditure
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• Company's Capital Loss Claim on Redeemed Shares Deemed Legitimate; New Share Subscription Valid for Tax Benefits.

  Case-Laws - AT : Addition regarding claim of capital loss - redemption of the preference shares - in order to get the return on old investment, it has redeemed the shares by subscribing fresh shares with better return and term - it is decision for the benefit of the company and simply because it is reducing taxable income does not mean that it will become bogus - allowable capital loss
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• Foreign Currency Ad Expenses Not Subject to Section 195 Withholding; No Disallowance u/s 40(a)(i) of Income Tax Act.

  Case-Laws - AT : TDS u/s 195 - expenses in foreign currency - Advertisement and business promotion expenses - do not fall in the nature of technical, managerial or consultancy services - unless an amount (income) can be said to have accrued or arisen in India or deemed to have accrued or arisen in India, the provisions of section 195 is not applicable - no disallowance u/s 40(a)(i)
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• Charitable Institutions Can Donate to Others u/s 11 Without AO Interference, Ensuring Genuine Transactions.

  Case-Laws - AT : Deduction u/s 11 - donation to other charitable institution - AO could not enquire into the selection of the donee or the purpose of the donation unless the genuineness is doubted - donation by one charitable institution to another such institution is permissible in law and would be treated as application of income
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• Court Grants Stay as Assessing Officer's Discretion Under Income Tax Act Section 220(6) Found Unreasonable.

  Case-Laws - HC : Stay of demand - exercise of discretion - when section 220(6) confers discretion upon AO while considering an application, it has to be exercised in a reasonable and proper manner - If the exercise of such discretion is arbitrary or capricious or suffers from the infirmity of non-application of mind, it is always open for the aggrieved person to knock the doors of this court - stay granted
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• Supreme Court: Legal expenses for defending company and MD in criminal case allowed as business expenditure u/s 37.

  Case-Laws - AT : Allowablity of Legal expenses u/s 37 - defending company & MD in criminal proceedings - since the Hon’ble Supreme Court has quashed the entire proceedings against the Company & MD, they had not committed any offence and company has decided to defend the MD to protect the image and goodwill of the company - allowable as business expenditure
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• Addition Deemed Without Jurisdiction: No Incriminating Material Found in Search u/ss 132, 153A, and 68.

  Case-Laws - AT : Assessment u/s 153A and u/s 68 - assessment for the assessment year 2011-12 was already completed when search action u/s 132 was carried out - no incriminating material found during the search in respect of the addition made by the AO - the addition is without jurisdiction
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• Disallowance under Income Tax Act Section 56(2)(viib) overturned for non-resident share application money. Funds exempted from tax.

  Case-Laws - AT : Disallowance u/s 56(2)(viib) - issuance of shares with premium - share application money was received by the company from a non-resident company - since provisions of section 56(2)(viib), does not apply to consideration received from a non-resident - disallowance should be deleted
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• Court Dismisses Writ Petition on Tax Assessment; Directs Petitioners to Use Dispute Resolution Panel Remedy u/s 144C.

  Case-Laws - HC : Maintainability of writ against draft assessment order passed u/s 143 (3) r.w.s. 144C - effective and efficacious alternative remedy - The DRP is empowered by the Act to consider the objections, and pass suitable orders - no other good reasons pleaded by the petitioners to bypass the statutory remedies - writ dismissed
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• Tribunal Quashes CIT's Revision u/s 263; AO's Inquiry on LTCG Exemption Found Sufficient, No Legal Questions Raised.

  Case-Laws - HC : Revision u/s 263 - exemption of the LTCG - CIT had not undertaken any such exercise reaching to the conclusion that the assessment order was erroneous and prejudicial to the interest of the Revenue - Tribunal recording finding of facts that AO, before allowing claim u/s 10(38) has conducted sufficient inquiry while quashing revision - no substantial questions of law arises
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Customs

• Customs Broker License Revocation: Reply to Show Cause Notice Within 30 Days to Avoid Delays in Proceedings.

  Case-Laws - HC : Revocation of CBL License - 90 days from the date of issuance of SCN is when the noticee submits reply within 30 days and in a case like this, when the noticee has not sent the statement of defence / reply to SCN beyond 30 days time frame, 90 days time frame in the regulation if at all can be computed only from the date of reply
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• Penalty Imposed for Customs Duty Evasion; Notice Required Before Adverse Order on Goods Seizure.

  Case-Laws - AT : Levy of personal penalty - evasion of customs duty diverting the imported goods to other entities - without any notice, no adverse order can be passed against the owner/ possessor of the goods from whose custody the goods have been seized.
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PMLA

• Court Sets Aside Property Attachment; Appellant Recovers Under SARFAESI, RDDBFI Acts, and I&B Code.

  Case-Laws - AT : Money Laundering - Provisional attachment - appellant created a mortgage over the Secured Property prior to the commission of the Scheduled Offence - Appellant has already have possession of property & initiated recovery proceedings under the SARFAESI and RDDBFI Act and insolvency proceedings under the I&B Code for enforcement of its interest - order of attachment of properties is set-aside
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SEBI

• SEBI's Phase II Launches UPI-ASBA Integration to Streamline Equity Shares and Convertibles Public Issue Process for Investors.

  Circulars : Streamlining the Process of Public Issue of Equity Shares and convertibles- Implementation of Phase II of Unified Payments Interface with Application Supported by Block Amount
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Service Tax

• Failure to Deposit Service Tax Due to Financial Hardship Deemed Insufficient; Tax, Interest, and Penalty Confirmed.

  Case-Laws - AT : Appellant were receiving the payments inclusive of the service tax amount but were not depositing the same - the plea advanced for not depositing the tax is financial hardship, same cannot be reason to justify such misappropriation of the money - demand of tax, interest and penalty confirmed
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Central Excise

• Discrepancies in ER-1 Returns and Balance Sheet: Case Remanded for Further Review on Job Work Manufacturing Duty Exemption.

  Case-Laws - AT : Clandestine manufacture and removal - difference in quantity of goods as shown cleared in ER-1 returns and the balance sheet - this difference is only because the appellant manufactured the goods on job work basis for which they are not liable to duty - Since details are not reflected from the records and also order-in-original was passed before the additional reply - matter remanded
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VAT

• Court Sets Aside Re-assessment Order Due to Violation of Natural Justice Principles; Fresh Order to be Issued.

  Case-Laws - HC : Principles of Natural Justice - sufficient opportunity of being heard - The action of the respondent in issuing multiple proposition notices proposing different tax liabilities and passing the impugned re-assessment order in haste cannot be appreciated - impugned order set aside with direction to pass fresh order
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• Court Orders Access to 'C' Forms for Concessional Tax on Diesel Post-GST Within Five Days of Order Receipt.

  Case-Laws - HC : Issue of 'C' Form post introduction of GST - purchase of HSD on concessional rate of tax at 2% - Department directed to allow access to the website and download 'C' Forms, in any case shall not be more than 5 working days from the date of receipt of a copy of this order.
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Case Laws:

• GST

• 2019 (7) TMI 141
  Revision of Form GST-TRAN-1 - request of the petitioner to credit 50% of the capital goods for the period April 2017 to June 2017 in Form GST TRAN-1 denied - HELD THAT:- It is evident that figure mentioned in Form GST TRAN-1 appears to be a technical glitch arising out of the inadvertence of the petitioner. The proceedings are restored to the file of respondent No.6 to re-consider the request of the petitioner for redressal of the grievances in accordance with law - the impugned order at Annexure-A is set aside - petition disposed off.

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• 2019 (7) TMI 140
  Rectification of Form GST TRAN- 01 and filing Form GST TRAN-02 - HELD THAT:- The process having been initiated for permitting the petitioner to rectify the GST Form TRAN-01 and to file Form GST-TRANS-02 as recommended by the Nodal Officer, no further direction as sought for, is necessary - respondent No.3 shall expedite the process of considering the recommendation of the Nodal Officer to permit the petitioner to rectify the GST Form TRAN-01, and further to file Form GST TRAN-02. Compliance shall be made in an expedite manner, preferably within a period of eight weeks from the date of receipt of a copy of the order. Petition disposed off.

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• 2019 (7) TMI 139
  Unable to upload Form GST TRAN-02 - It is the grievance of the petitioner that his attempt to file Form GST TRAN-02 on 28.03.2019 was a futile exercise due to technical error of not filing Form GST-TRAN-01 - HELD THAT:- This Court is of the considered view that Form GST TRAN-2 was not available on the Portal till March 2018. It may be for various reasons, Form GST TRAN-1 was not submitted by the petitioner well within the extended period provided - Considering the transitional period and to achieve the object of the provisions, this Court finds it appropriate to direct the Nodal Officer to consider the request of the representation submitted by the petitioner dated 25.09.2018 and 16.11.2018 at Annexure-F and G respectively in accordance with law and take decision in an expedite manner. Petition disposed off.

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• 2019 (7) TMI 138
  Profiteering - supply of construction services related to purchase of an apartment in the project Independent Floor Phase-II - benefit of Input Tax Credit (ITC) by way of commensurate reduction in the price of the apartment purchased by him, on implementation of GST not passed on - contravention of provision of Section 171 of the CGST Act, 2017 - penalty - HELD THAT:- It is clear from the plain reading of Section 171 (1) mentioned above that it deals with two situations one relating to the passing on the benefit of reduction in the rate of tax and the second pertaining to the passing on the benefit of the ITC. On the issue of reduction in the tax rate, it is apparent from the DGAP s Report that there has been no reduction in the rate of tax in the post GST period; hence the only issue to be examined is as to whether there was any net benefit of ITC with the introduction of GST. On this issue it has been revealed from the DGAP s Report that no ITC has been availed by the Respondent in the post-GST period and therefore, there was no additional benefit of ITC which had accrued to the Respondent post-GST as compared to pre-GST period. In view of the fact that there was no reduction in the rate of tax nor there was increased additional benefit on account of ITC, the provisions of Section 171 of CGST Act, 2017 could not be invoked in this case. The allegation of not passing on the benefit of ITC is not established. Even the charging of GST @18% in post-GST regime is not within the scope of Section 171 of CGST Act, 2017 - The DGAP in his investigation Report has clearly stated that in the post-GST regime the Respondent had not availed ITC and there was no ITC available with the Respondent, the benefit of which could have been passed on to the recipients. The provisions of Section 171 of the CGST Act, 2017 are not attracted in the present case and therefore, the contentions of the Applicant No. 2 also do not fall under the scope of Section 171 of the CGST Act, 2017. Further, it has been revealed from the records that Respondent had completed the project Independent Floor Phase-Il prior to implementation of the GST and he had neither availed ITC on any of the inputs procured in the GST Regime, nor had he availed/carried forward the pre-GST credit pertaining to the stock held in hand as on 30.06.2017. Therefore, he is not liable to pass on the benefit of ITC to the above Applicants - the provisions of Section 171 (1) of the CGST Act, 2017 which state that a reduction in rate of tax on any supply of goods or services or the benefit of input tax credit shall be passed on to the recipient by way of commensurate reduction in prices , have not been contravened in the present case, as the same are not even applicable. The allegation that the Respondent has not passed on the benefit of ITC is not sustainable - the application filed by the Applicant requesting action against the Respondent for alleged violation of the provisions of the Section 171 of the CGST Act is not maintainable and hence the same is dismissed.

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• Income Tax

• 2019 (7) TMI 137
  Addition based on the basis of statements recorded u/s 132(4) - presumption laid down u/s 292C ignored - unexplained cash - assessee retracted from the admission made by him during the course of search - survey was converted into search and the statement of the assessee u/s 132(4) was recorded on 10.10.2014 at 10:15 PM and thereafter search was concluded on 11.10.2014 in the morning and the assessee stated that such cash belonged to the appellant-company as undisclosed income - Subsequent retraction from the surrender without having evidence or proof of retraction - HELD THAT:- SLP dismissed.

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• 2019 (7) TMI 136
  Maintainability of writ against draft assessment order passed u/s 143 (3) r.w.s. 144C - effective and efficacious alternative remedy under the IT Act - valuation of the share for the buy-back u/s 77 A of the Companies Act - Determination of FMV under Rule 11UA - taxability of excess consideration over FMV u/s 56(1) - violation of principles of natural justice - matter refer to TPO who come to conclusion no adverse inference is drawn - HELD THAT:- In the present case, buy-back of shares in accordance with Section 77A of the Companies Act was completed before 01.06.2013 and the Income Tax Returns filed by the petitioners were also accepted by the Assessing Officer, however notice un/s 143(2) dated 28.08.2015 and 31.08.2015 were issued and the impugned Draft Assessment Orders came to be passed on 31.12.2017, i.e., nearly about 2 1/2 years after initiation of the proceedings. It is to be noted that the Draft Assessment Orders are required to be passed within the prescribed time. In the meanwhile, the Authorized Representative of the petitioner-Company appeared before the respondent and submitted the documents and a reply to the showcause notice. The dates and events mentioned would prove that there is no breach of violation of principles of natural justice.This Court does not find any merit in the contention that the principles of natural justice has been violated. The Dispute Resolution Panel is empowered by the Act to consider the objections, and pass suitable orders, viz., may confirm, reduce or enhance the variations proposed in the draft order. The Assessing Officer is bound to pass final Assessment Orders in tune with the order of the Dispute Resolution Panel. Against the final order, the First Appeal lies before the CIT(A) u/s 246 and Second Appeal lies before the Appellate Tribunal u/s 253. Thereafter, an appeal lies to the High Court u/s 260A on the substantial questions of law. In the matter on hand, except the two grounds dealt with supra, no other good reasons pleaded by the petitioners to bypass the statutory remedies. Keeping in mind, the principles laid down in the above decisions and the facts of this case, in my opinion, these Writ Petitions are not maintainable at this stage. In that view, these Writ Petitions fail and they are accordingly dismissed.

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• 2019 (7) TMI 135
  Revision u/s 263 - exemption claimed u/s 10(38) of the LTCG from the sale of shares of Radford Global Ltd. - AO during assessment proceedings not only asked to furnish all relevant documents pertaining to the investment but also called copies of the assessment orders for immediately preceding three years including AY 2012-13, wherein the assessee made investments - whether A.O. has passed the assessment order without making inquiries/verification in the light of the survey report which should have been made ? - HELD THAT:- The assessee being dissatisfied with the order passed by the CIT preferred an appeal before the Appellate Tribunal. Tribunal took the view that the CIT while holding that the assessment order was erroneous in exercise of its power u/s 263 ought to have indicated that the conclusion or findings recorded by the AO were either not based on correct facts or the order had been passed in breach of the provisions of the Act or revision made thereunder. Tribunal took the view that the CIT had not undertaken any such exercise reaching to the conclusion that the assessment order was erroneous and prejudicial to the interest of the Revenue. In short, on the facts and materials on record, the Appellate Tribunal recorded a finding that the PCIT was not correct and justified in issuing notice u/s 263 and also was not justified in passing the order revising the assessment order. No error not to speak of any error of law could be said to have been committed by the Tribunal in passing the impugned order. In our opinion, none of the two questions formulated in the memorandum of the Tax Appeal could be termed as substantial questions of law. The matter is more on facts. We would not like to disturb the findings recorded by the Appellate Tribunal. The Appellate Tribunal is the last fact finding authority. Having regard to the scope of appeal under Section 260-A of the Act, we would not like to disturb the findings of fact arrived at by the Appellate Tribunal.

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• 2019 (7) TMI 134
  Stay of demand - petitioner is directed to deposit 10% amount in seven equal installments starting from 31.03.2019 till 30.09.2019 - default committed in payment of second and third installment be condoned and the petitioner would deposit the entire 10% amount by 30.07.2019 - HELD THAT:- As the petitioner has shown bona fides in depositing 10% amount as directed under the impugned order, we are inclined to exercise our jurisdiction and condone the delay of payment of two installments more particularly when the petitioner has shown bona fides to deposit the amount by 30.07.2019 itself. The impugned order is modified instead of depositing the amount by installments as directed under the impugned order, the petitioner shall deposit the 10% amount as directed by 30.07.2019. The deposit of 4,24,285/made by the petitioner shall be adjusted in the said After the deposit of the amount is made within the time as stipulated the Appellate Authority shall hear the appeal expeditiously. Writ petition is disposed of.

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• 2019 (7) TMI 133
  Stay of demand - condition to deposit 40% firstly - HELD THAT:- The submissions made by the counsel are noted and prima facie this Court is of the view that the request of the petitioner to furnish immovable property in compliance with the depositing 40% is untenable and therefore cannot be considered much less a direction could be issued to respondents to receive immovable property security towards compliance with 40% condition imposed in the conditional stay order. Objection that the 40% condition is also onerous is not fully correct. The appellate authority to the extent required, as it appears from Ext.P4 examined the case and exercised of the discretion. In normal circumstances this Court in exercise of its jurisdiction under Article 226 may not interdict the orders passed by exercising discretion and power of the authority, unless the admissible legal grounds are made out in this behalf. No special reason is assigned for 40% deposit and instead of 20% of demand which is a norm mostly looked at pending appeal. Though this Court shall not be understood as substituting its discretion for the power already exercised in the 1st respondent, to meet the ends of justice and in the circumstances of this case condition of 40% imposed by Ext.P4 is modified as 30%, first instalment payable on or before 15.07.2019 and 2nd instalment payable on or before 15.08.2019.

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• 2019 (7) TMI 132
  Computation of capital gains u/s 45(2) - expenditure incurred by the assessee for making a property free from encumbrances.- whether payment made by the purchaser to the escrow agent was cost of improvement ? - whether expenditure incurred for protecting, preserving and improving the title of land and hence the expenditure has to be allowed as part of the agreement by the then directors with Smt.P.Thillaikarasi, the assessee company had no liabilities? - HELD THAT:- The matter concerned an expenditure incurred by the assessee for making a property free from encumbrances. CIT(A) took into consideration the factual aspects that the assessee had to pay a consideration of 5.5 Crore to one Smt.Tillaikarasi to clear an encumbrance which was created in her favour. Therefore, an amount of 2.75 Crore was paid to Mr.Vikram Mohan by the original shareholders of the assessee company Mr.K.Rajesh and Mrs.Srivalli. This was for the purpose of returning the original title deeds held by Mr.Vikram Mohan. Apart from that a sum of 2.74 Crore each was paid to Mr.K.Rajesh and Mrs.Srivalli outgoing shareholders. This expenditure incurred was held to be an eligible deduction for the purpose of preserving and protecting the title of the property. The factual aspect was tested by the Tribunal in great length and the appeal filed by the Revenue was rejected. On going through contentions advanced before us, we find no question of law much less a substantial question of law arises for consideration in these appeals. For the above reasons these Tax Case Appeals are dismissed.

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• 2019 (7) TMI 131
  Stay of the demand being tax penalty - whether the assessee is required to pay the entire amount of demand when the appeal is pending ? - HELD THAT:- It is true that the assessee should establish a prima facie case and should show a balance of conveyance in his favour and also establish that he will be put to irreperable hardship if the demand of entire tax and penalty would not be stayed before the Tribunal. The three cardinal principles which are granted by Civil Courts while granting reliefs are equally applicable before the Quasi Judicial and Tribunal. During the pendency of this writ petition before this Court on account of certain technical errors, the assessee has paid a further sum of 5,00,000/- and as on date, the assessee has paid 60,31,279/- as against 85,53,832/-. This amount paid by the assessee would be sufficient to safeguard the interest of the Revenue. Writ petition is partly allowed and the order and direction issued by the Tribunal is modified and the Tribunal is directed to reckon the payments effected upto date i.e., 60,31,279/- to be sufficient to protect the interest of Revenue and the Tribunal may proceed to hear the appeal and decide on merits and in accordance with law.

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• 2019 (7) TMI 130
  Monetary limit - low tax effect - maintainability of appeal by revenue - HELD THAT:- Tax effect in these appeals are lesser than the threshold limit mentioned in Circular No.3 of 2018, dated 11.07.2018, issued by the Central Board of Direct Taxes, which fixes the monetary limit as 50,00,000/- for the Department to pursue the matters. Furthermore, the Revenue has not been able to point out any distinguishing features, by which the Circular No.3 of 2018, dated 11.07.2018, cannot be applied. Revenue cannot pursue these Appeals in view of the low tax effect. Hence, these Appeals are dismissed and the Substantial Questions of Law, framed for consideration, are left open.

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• 2019 (7) TMI 129
  Stay of demand - recovery proceedings - maintainability of writ - respondent granted the petitioner three days time to pay at least 20% of the demand - HELD THAT:- Facts reveal that in the impugned order dated 25.10.2018 the third respondent granted the petitioner three days time to pay at least 20% of the demand and produce a copy of the challan to him. Thus, though the instruction provides for review before the PCIT, sufficient time was not granted to the petitioner. Not only that, the AO did not even wait for three days for the petitioner to comply with the directions issued by him and with undue haste, on the very next day that is, on 26.10.2018, recovered 8,27,80,220/- by way of adjustment from the refund payable to the petitioner while giving effect under section 254 in case of assessment year 2013- 14. Thus, since the Assessing Officer had started making recovery without giving any time till the application for review filed by the petitioner before the PCIT could be heard, the petitioner approached this court by way of this petition. Considering the conduct of the third respondent and the urgency of the matter, no fault can be found in the conduct of the petitioner in invoking the writ jurisdiction of this court. The third respondent, by his very conduct in not waiting for even three days in terms of the order passed by him and making coercive recovery, has created a situation which has compelled the petitioner to discard the remedy of review before the PCIT and approach this court for relief This petition under article 226 of the Constitution of India is maintainable. Exercise of discretion - Insofar as the contention that if the petitioner wants to avail of the benefit of the Instructions issued by the CBDT, it has to avail of the remedy before the PCIT and that the remedy under section 220(6) of the Act being discretionary, no jurisdictional question arises, is concerned, in the opinion of this court, when section 220(6) confers discretion upon AO while considering an application thereunder, it goes without saying that such discretion has to be exercised in a reasonable and proper manner. If the exercise of such discretion is arbitrary or capricious or suffers from the infirmity of non-application of mind, it is always open for the aggrieved person to knock the doors of this court. This contention therefore, does not merit acceptance. Petitioner has made out a strong case for grant of stay against recovery of the disputed amount. Considering the fact that the third respondent has already recovered an amount of 8,27,80,220/- by adjusting the refund due to the petitioner for assessment year 2013-14, no further recovery is warranted

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• 2019 (7) TMI 128
  Deduction u/s 11 - addition on account of donation given to other charitable institution - non-availability of information such as purpose of donation, basis of selection of done - reasons for utilization of fund that have been accumulated for the purpose and objectives of the assessee s trust, to a done whose objectives are on altogether different track - HELD THAT:- We find merit in the arguments of the Ld. Counsel for the assesee that the AO could not enquire into the selection of the donee or the purpose of the donation unless the genuineness is doubted. It has been held in various decisions that donation by one charitable institution to another such institution is permissible in law and would be treated as application of income. The donee in the instant case is a charitable institution which is evidenced by the order passed by the DIT (Exemption) u/s. 80G on 31.03.2011 which covers the period for A. Y. 2011-12 onwards. The observation of the AO that the assessee had not furnished details of past years accumulations etc is also factually incorrect since such information was filed by the assesse vide letter dated 05.02.2005 addressed to the Assessing Officer, copy of which is placed at page No. 87 to 90 of the paper book. In view of the above discussion we are of the considered opinion that the Ld. CIT(A) is fully justified in deleting the addition made by the AO on account of donation given to M/s. Subros Educational Society (registered). The ground raised by the revenue is accordingly dismissed. Addition of sponsorship expenses payable to M/s. Escort Heart Institute and Research Centre - non production of the necessary details - HELD THAT:- Although the amount of 1.50 crores has been claimed as sponsorship fee payable for organizing seminars and continuing medical education events, however, the assessee furnished only 2 vouchers for 11,16,000/- which the Assessing Officer has allowed. In our opinion the assessee is duty bound to furnish all the requisite details for the examination of the AO especially when an amount has been claimed as deduction on the basis of the claim made by another institution as sponsorship fees. Assessee cannot be absolved of its responsibility by not producing requisite details for the examination/ verification of the Assessing Officer. Considering the totality of the facts of the case and in the interest of justice we deem it proper to restore the issue to the file of the AO with a direction to give one more opportunity to the assessee to substantiate with evidence to his satisfaction Depreciation to assessee trust - HELD THAT:- CIT(A) relying on various decisions held that assessee is entitled to claim depreciation even if the value of the asset has been claimed as application of income in the year of purchase in the light of various decision and in conformity with the past assessment. According to the CIT(A) the Act was amended w.e.f. 01.04.2015 to deny deduction on account of depreciation and not for the earlier years. We do not find any infirmity in the order of the Ld. CIT(A) on this issue. The Hon ble Supreme Court in the case of CIT Vs. Rajasthan and Gujarati Charitable Foundation Poona [ 2017 (12) TMI 1067 - SUPREME COURT] has already decided the issue in favour of the assessee by holding that depreciation is allowable on the assets, the cost of which is fully allowed as application of income u/s. 11 in the past years.

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• 2019 (7) TMI 127
  Deduction u/s. 80P - pro rata expenses in respect of interest earned from deposit held with nationalized bank - HELD THAT:- We direct the assessing officer to allow pro rata expenses in respect of interest earned from deposit held with nationalized bank and cooperative bank for computing the deduction u/s. 80P after examining/verification and affording adequate opportunity to the assessee. Therefore, the appeal of the assessee is partly allowed for statistical purposes.

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• 2019 (7) TMI 126
  TDS u/s 195 - Addition on account of expenses in foreign currency - HELD THAT:- It appears from the records that the appellant incurred expenses pertain to Advertisement and other general business promotion through engagement of a party in UK. The relevant invoice raised by the said party was also before the authorities below wherefrom it was revealed that the party do not fall in the nature of technical, managerial or consultancy services, but pure marketing service was rendered by the non-resident for promotion of business of the appellant outside India in a particular specified territory. According to the assessee, unless an amount can be said to have accrued or arisen in India or deemed to have accrued or arisen in India, the provisions of section 195 is not attributed and consequently the provisions of section 40(a)(i) is also not applicable. When the payee does not have any permanent establishment in India and when the payment were made outside in India for such services then such payment to foreign parties ought not to have been considered as accrued or arisen in India by the AO which is not at par GE INDIA TECHNOLOGY CENTRE PRIVATE LTD. VERSUS CIT. [ 2010 (9) TMI 7 - SUPREME COURT] and TOSHOKU LIMITED (AND ANOTHER APPEAL) [ 1980 (8) TMI 2 - SUPREME COURT] . Respectfully following the same, we do not find any infirmity in deleting the same by the Learned CIT(A) so as to warrant interference. We thus confirm the same. Hence, Revenue s ground of appeal is dismissed. Exemption of income u/s 10AA - higher profits reported by it in comparison to the sister concern - reduction in net profit of eligible business made by the AO - HELD THAT:- No infirmity in the order passed by the Learned CIT(A) in deleting the reduction in net profit of allowable business as made by the Learned AO wrongly invoking the provision of section 10AA(9) r.w.s. 80IA(10) of the Act. We thus confirm the same. Hence, revenue s ground of appeal is found to be devoid of any merit and thus dismissed.

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• 2019 (7) TMI 125
  Disallowance of expenditure incurred towards village development - expenditures were in the nature of donation or in the nature of gratuitous payments not incurred for business exigency - CIT(A) has deleted following earlier year orders - HELD THAT:- In order to earn goodwill of the people residing in the neighbor-hood area and to keep social relations with residents, assessee company has to incur certain expenditure, which would ultimately facilitate the assessee s business, otherwise there would be friction or law and order situation which would arise if it adopt continuous unfriendly approach with the residents residing in the surrounding areas. In order to show good gesture, it has repaired certain village roads and given donations during social occasions. To our mind, such incurrence of expenditure are essential in running factory smoothly and the CIT(A) has rightly deleted disallowance. In the past similar expenditures were claimed, which have been allowed by the ld.CIT(A), and orders of the CIT(A) were upheld by the ITAT. Taking into consideration this consistent approach in the past, we do not see any reason to interfere in the orders of the CIT(A). Disallowance on account of contribution to Refrigerant Gas Manufacturer Association - HELD THAT:- In the past, similar expenditures have been allowed to the assessee. Therefore, respectfully following the order of the ITAT in earlier years, we do not see any reasons to interfere in the orders of the CIT(A) on this issue. All these grounds are rejected. Disallowance of loss occurred due to fluctuation of foreign exchange - HELD THAT:- As decided in assessee s own case [ 2013 (11) TMI 1268 - ITAT AHMEDABAD] has examined this issue and held that as per judgment of the Hon ble Supreme Court in the case of Woodward Governor India Pvt. Ltd. [ 2009 (4) TMI 4 - SUPREME COURT] if there is a loss on account of foreign exchange fluctuations and liability was in the revenue account, then such loss is to be allowed to the assessee. The department has not demonstrated before us that this claim made by the assessee was not in revenue account in all these three years. Therefore, we are of the view that the ld.CIT(A) has rightly deleted the disallowance Income from share transactions - Capital Gain or business income - HELD THAT:- The higher volume is because some of the investments were made by the assessee for strategic holding in the sister concerns, and therefore, this one factor alone be not construed that the assessee was trading in shares. It is pertinent to observe that when any explanation or a defence of an assessee based on number of facts supported by evidence and circumstances required consideration whether explanation is sound or not must be determined not by considering the weight to be attached to each single fact in isolation but by assessing the cumulative effect of all the facts in their setting as a whole. If all the factors discussed above are considered conjunctively then it would give an inference that the investments made by the assessee were for the purpose of achieving long term benefit and on sale of such investment any gain or loss is required to be assessed under the head capital gain . Similarly, we do not find force in the grounds of appeal raised by the Revenue that on sale of mutual fund profit be assessed as business income. CIT(A) has rightly held that on sale of mutual fund only capital gain arise to the assessee. As in all the earlier years assessee be treated as investors and on sale of shares/mutual funds, profit/loss be assessed under the head capital gain/loss. AO shall give effect accordingly. Disallowance of expenses on professional fees - HELD THAT:- In the foregoing paragraphs, we have rejected the Revenue contentions and upheld order of the CIT(A) that gains from transactions of securities are to be taxed as capital gain, therefore, the expenditure towards professional fees whose disallowance was upheld by the ld.CIT(A), deserves to be upheld. Disallowance u/s 14A - HELD THAT:- Expenses has a direct nexus, but it is neither discernible from the assessment order nor from the CIT(A) s order. Major part of the expenses i.e. 91,63,869/- has been deleted by the CIT(A) by following judgment of Hon ble Bombay High Court in the case of Reliance Utilities and Powers P.Ltd [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] on the basis that the assessee was having more interest free funds, than the investment. In this situation, part expenditure cannot be culled out unless a direct nexus has been demonstrated. It is neither discernible in the assessment order nor in the CIT(A) s order. We have extracted relevant finding of the ld.CIT(A). In view of the above discussion, we are of the view that this disallowance is not discernible. Consequently, ground of appeal raised by the Revenue is rejected, whereas ground of appeal raised by the assessee is allowed. Accrual of income - interest on refund - HELD THAT:- Whatever effect is being given to the orders of the higher appellate authorities in earlier years as well as this year, authorizing the assessee to receive refund, then interest be calculated according to the amount of refund, if any, accrued to the assessee. In other words, according to the assessee, this issue requires to be decided against the assessee, but the amount of refund be determined after giving effect to the appellate orders, and accordingly, interest be computed on such refund. We direct the AO to carry out this exercise while determining the exact amount of interest accrued to the assessee on the basis of the refund. In this way, this ground is allowed for statistical purpose. Capital expenditure allowability - HELD THAT:- Assessee has taken land on lease at Noida for the purpose of business from New Okhla Industrial Development Authority. The said authority requires that construction should be done within the prescribed time limit. However, due to various commercial reasons, the company has deferred the construction plans, and thus, the assessee needed to pay fees towards extension of time limit to such authority in the Asstt.Year 2005-06. It has claimed extension charges of 9,60,000/- whereas in the Asstt.Year 2006-07 it has claimed such charges at 3,20,000/-. This claim of the assessee was not allowed by the AO. According to the AO, it was a capital expenditure, whereas the assessee has submitted that it was a paid for protecting the title of the land. Asessee has contended that this issue has been decided against the assessee consistently from the Asstt.Year 2002-03. Disallowance u/s 14A - HELD THAT:- Gross investment by the assessee in the Asstt.Year 2006-07 is of 53,081 lakhs. It has reserves surplus of 71,153 lakhs. Thus, it has far more interest free funds than the investment. We find that the ld.CIT(A) has noticed the profit earned during the year at 97 crores. Compensation received under Montreal Protocol at 8.68 crores. The ld.CIT(A) thereafter made reference to the decision of Hon ble Bombay High Court in the case of Reliance Utilities Power P.Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] and observed that if the share capital and reserves surplus including profit for the current year are higher than the amount of investment, no disallowance is required out of interest expenditure. We have upheld verbatim finding in the Asstt.Year 2005-06 in the foregoing paragraphs. Therefore, taking into consideration our discussion on this issue in the Asstt.Year 2005-06, we do not find any merit in this ground of appeal. It is rejected. As far as disallowance at the rate of 0.5% of average investment for taking care of administrative expenses is concerned, we do not find any error in the finding of the AO. The finding of the ld.CIT(A) is being modified to the extent that against working of such disallowance a set off of the amount which the assessee has disallowed itself in all these three years. This ground of appeal is partly allowed all three years. Entitled for deduction u/s 80IA on the value of the captive power generated by it - HELD THAT:- AO has adopted the purchase rate of GUVNL at 3.2 per unit as market value of the power produced by the assessee in the captive power, whereas the case of the assessee is that value of such power be calculated at the rate at which the assessee has been purchasing power from GUVNL.We have dealt with this issue in earlier assessment years as well as Asstt.year 2012-13, 2013-14. These grounds of appeals are allowed in the same term and the AO is directed to follow order of the ITAT in the Asstt.Year 2012-13 and 2013-14. Receipt of proceeds on sale of carbon credit deserves to be treated as capital receipt and requires to be excluded from taxable income - See ALEMBIC LIMITED [ 2018 (3) TMI 1764 - GUJARAT HIGH COURT] Addition regarding claim of capital loss - shares in Inox Global Services Ltd - redemption of the preference shares by subscribing fresh shares - HELD THAT:- The ld.CIT(A) took note of the facts how the assessee has subscribed preference shares in the F.Y.2001-02 and 2002-03, and how they have been redeemed by subscribing fresh cumulative redeemable preferential shares. In fact, there is no loss to the assessee except loss computed on account of indexation. In order to get the return on old investment, it has redeemed the shares by subscribing fresh shares with better return and term. It is decision for the benefit of the company. Simply because it is reducing taxable income does not mean that it will become bogus. After considering the finding of the ld.CIT(A), we do not find any error in it, and this ground of appeal raised by the Revenue is rejected. Disallowance of depreciation with aid of section 40(a)(ia) r.w.s. 194C - purchases of wind turbine - HELD THAT:-Thus, for the purpose of 14 numbers of wind turbines, there was a separate contract and it was only for supply of goods. On this purchase price, the assessee was not required to deduct TDS u/s 194C. The ld.CIT(A) has made reference to the Circular of the Board bearing no.681, and thereafter followed various orders of the ITAT on this point. The AO has erred in construing the purchases of 14 numbers of wind turbine as a work contract on whose payment the assessee was to deduct TDS. We have extracted finding of the ld.CIT(A), wherein the ld.CIT(A) has considered all aspects on this issue. After going through the finding we do not find any error in it. Accordingly, we do not find any merit in the grounds of appeal raised by the Revenue. Depreciation on consultancy fee capitalised - consultancy agreement with Mckinsey Co. HELD THAT:- There is no dispute with regard to obtaining of report as well as recognizing payable amount to MC . Now this expenditure is either allowed as a revenue expenditure or it is to be capitalised. If others have claimed the revenue expenditure, then, the AO should specify it, and if it has not been claimed by any-one than the assessee has capitalised, then it could not be partly allowed to the assessee. Therefore, the CIT(A) has committed an error in restricting the allowance to 20%. This order, therefore, is not sustainable. We allow both the grounds of appeal raised by the assessee and reject the grounds raised by the Revenue. We direct the AO permit the assessee to capitalised the payment made by the assessee to MC and allow depreciation consequentially in both the years. Disallowance of long term capital loss - sale of cumulative preference shares - HELD THAT:- A perusal of the finding of the ld.CIT(A) would indicate that the ld.CIT(A) has considered all contentions of the assessee, and also CBDT circular 704 of 1995. It is pertinent to note that total shares were not owned by the assessee, rather on receipt of money in instalment from the purchaser, HISL, it would buy from others. Thus, assessee was not in position to deliver the shares physically. The ld.CIT(A) has recorded a categorical finding that transaction did not materialize in this year. Transfer of ownership as per share transfer form took place on 9.4.2008 i.e. financial year relevant to the Asstt.Year 2009-10 and not 2008-09. Assessee is not entitled to claim loss on sale of IGSL shares. The loss has rightly been denied and we do not find any merit in this ground of appeal. It is rejected. Penalty u/s 271(1)(c) - pre-operative expenses paid to M/s.Mckinsey Co. - loss in respect of share of IGSL - HELD THAT:- If we examine the facts of the present case, then it would reveal that the assessee has entered into transaction for transfer of such shares on 1.2.2008. It construed the transaction as taken place in the Asstt.Year 2008-09; whereas the AO disagreed with the assessee on the ground that physical delivery of shares as well as payment has taken place in subsequent assessment year i.e. in April, 2008. Therefore, the assessee is not entitled for claiming the loss in the Asstt.Year 2008-09. To our mind, the assessee has not withheld any information. It is a difference of opinion between the assessee as well as the AO about the allowability of loss in a particular year. It does not deserve to be visited with penalty on such aspect. Therefore, we allow the appeal of the assessee and delete penalty imposed on the assessee on both the issues.

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• 2019 (7) TMI 124
  Carry forward of unabsorbed depreciation - restriction of eight years - HELD THAT:- The CBDT Circular No. 14 of 2001 has clarified that the restriction of eight years for carry forward and set off of depreciation has been dispensed with. Assessee has brought to our notice that the Special Bench decision [ 2010 (6) TMI 516 - ITAT, MUMBAI] has been reversed by the Hon ble Bombay High Court. In appeal titled Times Guarantee Limited Vs. DDIT (supra), after considering the decision in the case of CIT Vs. Hindustan Unilever Pvt. Ltd. [ 2016 (7) TMI 1245 - BOMBAY HIGH COURT] decided the issue in favour of assessee/appellant. Thus, the decision of Special Bench in case of Times Guarantee Limited does not hold water as on today. Claim of carry forward of unabsorbed business loss of amalgamating company and set off of the same against business income of assessee - HELD THAT:- The provisions of section 72A(2) lays down certain conditions to be complied with before the accumulated loss/unabsorbed depreciation of amalgamating company are carried forward and set off against the business income of amalgamated company. A perusal of order dated 12-04-2013 passed by the AO giving effect is ambiguous in specifying the conditions as envisaged u/s. 72A(2) that are not complied with. Similarly, in the impugned order the findings of CIT (Appeals) are cryptic on this issue. It is not emanating either from the order of AO or from the order of CIT(Appeals) the conditions set out u/s. 72A that have been complied/not complied by the assessee. Assessee has brought to our notice that the Revenue is approaching the BIFR for modification of scheme for which the liberty has been granted by the Hon ble Apex Court. Thus, we deem it appropriate to restore this issue to the file of AO to decide the same afresh by passing speaking order after considering the revised directions of BIFR, if any and after affording reasonable opportunity of hearing to the assessee, in accordance with law. Hence, ground No. 2 of the appeal is allowed for statistical purpose. Addition on account of depreciation on non compete fees - no claim of deprecation was made in return - HELD THAT:- Assessee in return of income for the impugned assessment year has not claimed deduction in respect of depreciation on non compete fees (intangible asset). The assessee raised claim of depreciation on intangible asset by placing reliance on the order of CIT (A) for assessment year 2006-07 in First Appellate proceedings. The assessee s claim was rejected. AO while giving effect to the order of CIT (Appeals) made addition of the claim made by assessee without realizing the fact that no such claim was made in return of income and the claim made during First Appellate stage was rejected. Since, the claim was not made in the return of income, no addition was warranted. We find merit in the submissions of assessee. The findings of CIT (A) in deleting the addition are upheld and ground No. 3 of the appeal by the Revenue is dismissed sans merit.

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• 2019 (7) TMI 123
  Taxability of freight charges from transportation of cargo through Feeder Vessels - AO held taxable in India both u/s 44B as well as Article 8 of the India-Germany Tax Treaty - HELD THAT:- Tribunal vide order for the assessment year 2007 08 hold that the freight income from feeder vessels is exempt from tax in India under Article 8 of the India-Germany Tax Treaty which was challenged by the Revenue before the Hon ble Jurisdictional High Court. However, the Hon ble Jurisdictional High Court while deciding Revenue s appeal in [ 2016 (9) TMI 1519 - BOMBAY HIGH COURT] upheld the decision of the Tribunal. In fact, the Assessing Officer as well as learned DRP have not disputed the aforesaid factual position. Thus, as per the decision of the Co ordinate Bench and the Hon ble Jurisdictional High Court in assessee s own case, as referred to above, the issue raised in these grounds stand decided in favour of the assessee. Therefore, respectfully following the same, we delete the addition made by the AO. - Decided in favour of assessee.

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• 2019 (7) TMI 122
  Assessment of trust - claiming exemption on the ground that it is an extended arm of State Government - HELD THAT:- After withdrawal of exemption under section 10(20A) of the Act by Finance Act w.e.f. 01.04.2003, the assessee was made taxable entity. - The issue which arises in the present appeal is multi-fold, wherein the first ground which has been raised in all the years by the assessee is that since it was extended arm of State Government of Maharashtra and consequently, income of assessee was not taxable under the Income Tax Act. We find no merit in the said plea raised by assessee and the same is decided against assessee. Assessment of trust - assessability of lease premium in the hands of assessee - application of matching principle - Capital gains - transfer of asset - entire lease rent for 99 years has been brought to tax in the year of receipt, then cost of construction plus land cost plus infra cost is to be allowed on proportionate basis - HELD THAT:- Even after 01.04.2002 in the return of income, the assessee had not claimed any such land cost or constructed cost, since it had offered the lease premia in the form of rent in its hands from year to year. It was only after the order passed under section 263 of the Act, lease premia in totality was assessed in the hands of assessee in the year in which the assessee had entered into agreement of lease. The corresponding fall out to which is that the concept of matching principle has to be applied and where the assessee had entered into agreement to lease, then the cost of said assets needs to be allowed as deduction in its hands. Taxability of lease premium after spread over the period of 99 years - The question which arose was the assessability of lease premium in the hands of assessee i.e. whether it could be spread over the period of 99 years or the same has to be assessed in the hands of assessee in the year in which it enters into lease agreement. The assessee has clearly mentioned that the allotment of land was made by respective State Governments for development of area and has also pointed out that as in the case before the Hon ble High Court, there was no renewal clause after 99 years in the agreement. Further, in case any lessee surrenders the lease after initial period of 5 years, then 93/99 years premium had to be returned. Such a liability was contractual liability of assessee. In the facts before the M.P. AUDYOGIK KENDRA VIKAS NIGAM (INDORE) LTD., SPECIAL ECONOMIC ZONE VERSUS ASSTT. COMMISSIONER OF INCOME TAX 3 (I) , INDORE) [ 2018 (10) TMI 62 - MADHYA PRADESH HIGH COURT] it was noted that land was transferred through the Government of Madhya Pradesh and apart from there, assessee was also authorized to purchase / acquire land of its own. The assessee was undoubtedly, managing and leasing the said land as an independent owner of land, the sums equated as land premium was used for incurring expenditure to develop the land and maintaining industrial infrastructure. Hon ble High Court held that there was no denial that the transaction had to be taxed under the Income-tax Act, unless the same is exempted by a particular provision of the Act. The assessee was offering 1/99 of land premium (out of total land premium received by it during the year) as taxable. The assessee claimed that lease premium was not its income before the Hon ble High Court, so it was decided that the said land premium was the income of assessee to be taxed under the Income-tax Act. Vide para 31 it was held that from the perusal of clauses of memorandum, it was revealed that the assessee was in the business of leasing out of land and getting rental income as well as premium, therefore, the land premium is nothing but a revenue receipt in the form of advance rent, which has loosely been named as land premium. The assessee itself had offered 1/99th portion of such land premium as revenue receipt to be taxed in the year under consideration, which goes to prove that the nature of receipt is revenue. The issue thus, has been decided on the basis of income offered by assessee i.e. @ 1/99 of lease premium as advance rent and the appeal has been dismissed. Tribunal has decided the issue of recognition of revenue receipts while deciding appeal against order passed by Commissioner u/s 263 which is for the instant assessment year itself. The issue of assessability of lease premium has been decided against the assessee. We have in the paras hereinabove decided the alternate issue of allowing deduction of cost / depreciation by following matching principle of accounting. In such circumstances, we find no merit in the pleadings of learned Authorized Representative for the assessee in applying dictate of Hon ble High Court of Madhya Pradesh. Accordingly, this plea is dismissed. The grounds of appeal on merits are thus, allowed in favour of assessee.

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• 2019 (7) TMI 121
  Ad hoc disallowance of travelling expenses @20% - HELD THAT:- Since these expenses have already been allowed by the Assessing Officer in the previous years and there is no change in facts and circumstances of the assessee s business therefore, based on the principle of consistency, these expenses should be allowed in the year under consideration. See RADHASOAMI SATSANG VERSUS CIT [ 1991 (11) TMI 2 - SUPREME COURT] Disallowance of foreign exchange fluctuation loss - HELD THAT:- This issue involved in the present appeal is no longer res integra. We note that the loss pertaining to foreign exchange fluctuation is an allowable expenditure for that we rely on the judgment of Hon ble Supreme Court in the case of CIT vs. Woodward Governor India Pvt. Ltd. [ 2009 (4) TMI 4 - SUPREME COURT] . Thus allow the claim of the assessee. Disallowance u/s 56(2)(viib) - issuance of shares with premium - share application money was received by the company from its parent company, Chryso SAS , a non-resident company - FMV as per Rule 11(UA)(2) - HELD THAT:- We note that the provisions of section 56(2)(viib), does not apply to consideration received from a non-resident. Hence, the disallowance made by the AO under section 56(2)(viib) of the Act, should be deleted. Determination of arm s length price by TPO / A.O. for management and other administrative services received by the assessee by considering the ALP as NIL - HELD THAT:- Assessee has established the nature of services including quantum of services received by the related party, that services were provided in order to meet specific need of the Assessee for such services, the economic and commercial benefits derived by the Assessee of intra-group services. Issue is squarely covered in favour of the assessee by the decision of the Coordinate Bench in assessee s own case and there is no change in facts and law and the Revenue is unable to produce any material to controvert the aforesaid findings. Therefore, we are of the view that arm s length price adjustment made by the DRP/Assessing Officer in respect of management services - Decided in favour of assessee.

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• 2019 (7) TMI 120
  Assessment u/s 153A - HELD THAT:- On the date of search carried on 3.3.2011, the assessment for the assessment year 2006-07 was not pending as already assessment order was passed on 24.12.2009 as stated above. Thus, in terms of 2nd proviso to section 153A, the assessment for the assessment year 2006-07 cannot be held to be abated assessment. Further, from the records it is clear that no incriminating material was found qua the addition made during the course of search and therefore, in view of the proposition laid down in the case of CIT vs. Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] and MEETA GUTGUTIA PROP. M/S. FERNS N PETALS [ 2017 (5) TMI 1224 - DELHI HIGH COURT] no addition can be made in case of unabated assessment if no incriminating material has been found during the course of the search qua that assessment year. Here in this case AO has simply made the addition on the basis of already material available on record during the course of the original assessment proceedings, therefore, the addition made is beyond the scope of section 153A and same is directed to be deleted. Disallowance u/s 14A - HELD THAT:- Fresh proceedings u/s 153(A) was initiated in wake of search and seizure action carried out on 3.3.2011. Thus, on the date of search, assessment proceedings for the assessment year 2005-06 was not pending and in view of 2nd proviso to section 153A, such an assessment is reckoned as unabated assessment. AO noted that the Tribunal in the first round of proceedings has set aside the disallowance u/s 14A read with rule 8D to be decided afresh. AO instead of passing the fresh assessment order in view of the direction of the Tribunal has made the disallowance in the present proceedings of 41,637/-, which has been confirmed by the CIT (A) also. The disallowance has been worked out by calculating 0.25% of the investment of the average investment. Here in this year also, the aforesaid addition is not based on any incriminating material and therefore, being an unabated assessment, addition could not be made without any incriminating material. Our reasoning given in the earlier appeal following the ratio and principles laid down by the Hon ble Jurisdictional High Court, we delete the said addition. - Decided in favour of assessee.

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• 2019 (7) TMI 119
  Assessment u/s 153A - additions u/s 68 - share application money - absence of incriminating material during search - HELD THAT:- We find that the assessment for the assessment year 2011-12 was already completed when search action u/s 132 was carried out at the premises of the assessee. No incriminating material found during the search in respect of the addition made by the AO, therefore, the addition made by the AO in the impugned assessment year is without jurisdiction. Thus, the legal ground raised by the assessee is allowed and the assessment order is held as invalid, consequent upon the entire addition made therein are directed to be deleted.

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• Customs

• 2019 (7) TMI 118
  Condonation of delay in filing appeal - appeal was wrongly filed before wrong forum - HELD THAT:- The appellant specifically took the plea that it filed an appeal before the Deputy Commissioner of Customs, in the first instance, under the misconception that the said authority was the appellate authority but having realized it s mistake, it preferred an appeal before the appropriate appellate authority. The tribunal, however, found that this plea was not substantiated with any evidence and on that ground held against the appellant. Though no material seems to have been produced before the tribunal in support of the plea taken by the appellant, the said lapse has been cured in this appeal. The appeal submitted by the appellant before the Deputy Commissioner of Customs, Air Cargo Terminal, Shamshabad Airport, Hyderabad, on 28.03.2016 is now placed on record and the same bears the endorsement of the office of the Deputy Commissioner of Customs, Air Cargo Complex, Shamshabad, Hyderabad, with the date 28.03.2016 in proof of receipt thereof. Therefore, it cannot be doubted, at this stage that the appellant did, in fact, prefer an appeal before the wrong authority on 28.03.2016, as claimed by it. The delay is condoned - the appeal shall stand restored to the file of the Commissioner of Customs and Central Excise (Appeals), the second respondent herein for consideration afresh on merits and in accordance with law - appeal allowed.

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• 2019 (7) TMI 109
  Revocation of CBL License - forfeiture of security deposit - imposition of penalty - petition assailed on the ground of violation of sub Regulation (5) of Regulation 17 of CBLR 2018 - it is the specific and pointed case of the writ petitioner that the Assistant Commissioner of Customs has not filed the enquiry report within 90 days from the date of issue of SCN. Whether there is violation of 90 days time frame adumbrated in regulation 17(5) of CBLR 2018? HELD THAT:- In the instant case, SCN is dated 14.09.2018 and learned counsel for writ petitioner submitted that SCN was served on writ petitioner on 15.09.2018. However, the reply of writ petitioner, i.e., written statement of defence of writ petitioner was admittedly sent only on 22.11.2018, which is not within 30 days time limit for such reply stipulated in Regulation 20(1) of CBLR 2013 and 17(1) of CBLR 2018 - Therefore, 90 days time frame stipulated under Regulation 20(5) of CBLR 2013 can be tested only by taking 22.11.2018 as the reckoning date in this case as reply / statement of defence has been given by writ petitioner only on that date. The writ petitioner not having submitted its statement of defence to SCN within 30 days time frame under Regulation 17(1), cannot claim the benefit of Regulation 17(5) to have the impugned order quashed. As a matter of judicial discipline, this Court proceeds on the basis that all these time frames have been held to be mandatory. A careful perusal of Regulations 17 and 20 of CBLR 2018 and CBLR 2013 respectively bring into sharp focus that these time limits are sequential for proceedings and they certainly have cascading effect on one another. This principle comes out clearly from a circular issued by the Central Board for Excise and Customs being Circular No.9/2010 dated 08.04.2010. In the instant case, this Court has already held that 90 days from the date of issuance of SCN is when the noticee submits reply within 30 days and in a case like this, when the noticee has not sent the statement of defence / reply to SCN beyond 30 days time frame, 90 days time frame in the regulation if at all can be computed only from the date of reply and if so computed in the instant case, it is within 90 days period prescribed under Regulation 20(5) of CBLR 2013 and Regulation 17(5) of CBLR 2018 - this court comes to a conclusion that it cannot be gainsaid by writ petitioner that there is violation of Regulation 17(5) of CBLR 2018 and have the impugned order set aside on that lone ground. Alternative remedy - HELD THAT:- It is open to writ petitioner to file an appeal under section 129A(1) of the Customs Act, 1962, to CESTAT against impugned order - If writ petitioner chooses to avail alternate remedy and file an appeal to CESTAT, it is open to writ petitioner to seek condonation of delay as well as exclusion of time spent in this writ petition in the light of section 14 of the Limitation Act and if writ petitioner chooses to do so, CESTAT shall decide such applications on its own merit. Petition disposed off.

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• 2019 (7) TMI 108
  Benefit of exemption from payment of Custom Duties - violation of post import conditions - Sl No 230 of Notification No 21/2002-Cus 01.03.2002 - import of Paver Finisher - alleged evasion of customs duty diverting the imported goods to other entities much before the completion of five years from the date of import and not using the goods in terms of the conditions of the notifications and thereby not adhering to end use conditions. HELD THAT:- It is admitted that Appellants had claimed the exemption in respect of the said pavers by producing the documents in respect of projects namely Major Maintenance works of State High way No 47 portion between Meerut and Bijnore of 65 kms under UP state Road Project and construction of rehabilitation of State Highway 47 of portion between Bijnore to Nazirabad of 53 kms length. The paver was permitted clearance under exemption 21/2002-Cus, which allowed clearance under complete exemption subject to the condition that the goods were actually used by the importer himself in the projects for which said goods are cleared. Undisputedly these pavers were never used by Appellant 1 in any of the above two referred projects thereby contravening the conditions prescribed by the exemption notification. On the contra these were transferred by the Appellant 1, in first instance for use in Delhi Gurgaon Project of Jaypee DSC Infrastructure. It is now settled position in law that exemption notification needs to be construed strictly and it is for the person claiming the exemption to satisfy that all the conditions prescribed by the notification are fulfilled. Thus, by transferring the imported goods cleared for use in particular projects to some other project, Appellant 1 had at that instance itself contravened the conditions of exemption granted subject to actual user condition. For the contraventions done by transferring these pavers to Delhi Gurgaon Project with using them in the projects for which the goods have been cleared, the goods had become liable for confiscation under Section 111(o). In view of the fact that Appellants had given an undertaking to use the goods cleared under exemption according to prescribed post importation conditions in our view demand of duty made under Section 12 of the Customs Act, 1962 cannot be faulted with - It is also worthwhile to point Section 28 is a machinery provision for determination of the duty short paid/ not paid or erroneously refunded. When there is no such determination needed and duty as determined at time of assessment but for the exemption allowed subject to certain post importation conditions, the quantum of duty short paid/ not paid is not to be determined again and Appellant 1 should have in terms of undertaking given deposited the duty amount immediately in case of violation of any post importation conditions. Requirement of demand notice - Appellants have contended that for demanding the duty under 125(2) a notice under Section 125 is a must - HELD THAT:- When the duty has been demanded in terms of the undertaking given by the appellant 1, that they will in case of violation of post import conditions pay back the duty determined in respect of the said goods but for exemption, the duty demand has to be made from them only in terms of their undertaking. It is fact that notice proposing confiscation of goods should also have been issued to owner of the goods/ person from whose possession the goods have been seized. But once seized and power to seize such goods can be shown to exist the notice will have to be issued to the person who had contravened the provisions of law which have made the goods liable for confiscation. It is settled law that without any notice, no adverse order can be passed against the owner/ possessor of the goods from whose custody the goods have been seized. The goods become liable for confiscation on account of violations as prescribed by Section 111 of the Customs Act, 1962. Once the goods are held liable for confiscation, the physical availability of the goods or their presence is not mandatory for proceeding under section 125 or Section 112 and 114 of the Customs Act, 1962 - In the present case Appellant 1 has by way of undertaking agreed to comply with the post import conditions, in case of non compliance with the same he could have been proceeded against even in absence of the goods. Confiscation upheld - quantum of redemption fine reduced - penalties are rightly imposable on them in terms of Section 112 (1) of the Customs Act, 1962. Appeal allowed in part.

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• Corporate Laws

• 2019 (7) TMI 106
  Release of amount received as sale consideration from the sale of Lot No.1 along with interest accrued on the said amount - company under liquidation - requirement on the part of applicant that the applicant deposits the workmen dues as computed under Section 529-A of the Companies Act, 1956 - HELD THAT:- The only impediment for releasing the amount is that the appellant has not made a fresh claim as directed by this Court in Company Appeal No.9 of 2015, dated 06.10.2015. A perusal of the order dated 06.10.2015 passed in Company Appeal No.9 of 2015 does not indicate that the intention of the Court in directing the Official Liquidator to adjudicate the claim of the appellant by entertaining a fresh claim is not to once again undertake adjudication process for determination of the amount payable, as the amount initially determined by the Official Liquidator through Form 69 dated 08.06.2015 has been set aside by this Court in Criminal Appeal No.9 of 2015, dated 06.10.2015 - the entitlement amount that has to be paid to the appellant stands determined and now what all is required to be done is the disbursal of the entitled amount. The order dated 06.10.2015 needs to be understood in the context of the material on record and the developments which have taken place. The Official Liquidator is directed to take necessary steps for disbursal of the amount lying to the credit of the company in liquidation - application allowed.

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• Insolvency & Bankruptcy

• 2019 (7) TMI 117
  Initiation of Corporate Insolvency Resolution Process - Section 10 of the Insolvency and Bankruptcy Code, 2016, R/w Rule 7 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - HELD THAT:- As per the provisions of Section 42 of the Insolvency and Bankruptcy Code, 2016, a creditor may appeal to the Adjudicating Authority against the decision of the liquidator within fourteen days of the receipt of the rejection or acceptance of claim. The liquidator vide letter dated 10.10.2018 has rejected the contention of the applicant for being treated as financial creditor and the appeal against the same has been filed on 16.11.2018 with a delay of 22 days, which has neither been explained nor any application for condonation of delay has been filed - the application being time barred stands rejected.

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• 2019 (7) TMI 105
  Admissibility of petition - initiation of Corporate Insolvency Resolution Process - default in repayment of principal amount and interest - existence of debt - HELD THAT:- The Corporate Debtor has admitted the debt and its inability to service the debt by way of interest due to financial difficulty in its Affidavit dated 10.4.2019. It is stated in the Affidavit that the Corporate Debtor does not have funds to either pay the interest or the principal amount - the existence of debt and default is reasonably established as even admitted by the Corporate Debtor itself. The Application under sub-section (2) of Section 7 of I B Code, 2016 is complete. The existing financial debt of more than rupees one lakh against the corporate debtor and its default is also proved - the petition filed under section 7 of the Insolvency and Bankruptcy Code for initiation of corporate insolvency resolution process against the corporate debtor deserves to be admitted. Petition admitted - moratorium declared.

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• 2019 (7) TMI 104
  Admissibility of application - initiation of Corporate Insolvency Resolution Process - default in payment of dues - time limitation of service of order - HELD THAT:- On perusal of the material available on record it is found that service of notice is complete. That, despite issuance of notice by the petitioner, the respondent has not made payment of outstanding amount nor raised any dispute. That, the last invoice raised upon the respondent is dated 21.04.2018 and, therefore, the petition is filed well within time. The scheme of the Code is to ensure that when a default takes place, in the sense that a debt becomes due and is not paid, the Insolvency Resolution Process begins. Default is defined in Section 3(12) in very wide terms as meaning non-payment of a debt once it becomes due and payable, which includes non-payment of even part thereof or instalment amount. Even otherwise, the important condition precedent is an occurrence of a default. On perusal of the documents on record, it is evident that the default has occurred as stated hereinabove i.e. the execution of settlement agreement by the corporate debtor and the part payment thereon confirming the operational debt is due and payable. The Application filed by the Applicant is complete in all respects - Adjudicating Authority is of the view that it is a fit case to initiate Insolvency Resolution Process by admitting the Application under Section 9(5)(1) of the Code. Petition admitted - moratorium declared.

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• 2019 (7) TMI 103
  Admission of the application - initiation of Corporate Insolvency Resolution Process against the Corporate Debtor - Section 7 of the Insolvency and Bankruptcy Code, 2016 r/w Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - HELD THAT:- The perusal of the Affidavit filed by the Corporate Debtor shows that the Corporate Debtor has fairly admitted that the loans were availed from the Financial Creditors and during the course of arguments, the Counsel for the Corporate Debtor has submitted that the Corporate Debtor has no objection in case the Application is admitted. Besides the admission made by the Counsel for the Corporate Debtor, the documentary evidence placed on the case file is sufficient in order to ascertain the existence of a default on the part of the Corporate Debtor. The Financial Creditors have fulfilled all the requirements and have proposed the name of a Resolution Professional for appointment as the IRP after obtaining his consent in Form- 2. Therefore, the Application stands admitted - commencement of the Corporate Insolvency Resolution Process is ordered - Mr. Anil Kumar Khicha is hereby appointed as IRP - moratorium declared.

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• PMLA

• 2019 (7) TMI 116
  Money Laundering - Provisional attachment order - reason to believe - nexus with the allegation of crime committed by the defendants/respondent no. 2 Bharat Bomb and other persons concerned involved for the offences of money-laundering - HELD THAT:- From the facts of the present, it is evident that legal issues of the Appellant case are similar to the judgement rendered by Hon ble Delhi High Court in Directorate of Enforcement vs. Axis Bank Ors. [ 2019 (4) TMI 250 - DELHI HIGH COURT ] as (a) The Appellant is not an accused and is bona fide third party to the transactions complained of by the ED; (b) The Appellant disbursed a loan in accordance with law to the Respondents Accused and created a mortgage over the Secured Property prior to the commission of the Scheduled Offence in respect of the Secured Property; and (c) The Appellant commenced the proceedings under SARFAESI Act against the Secured Property prior to its provisional attachment. (d) The said property was not acquired from the proceed of crime. The appellant is always at liberty to approach the Special Court to initiate the proceeding for disposal of mortgaged property, if so desired, who is agreeable to deposit the excess amount if such situation will arise. Counsel for appellants after taking the instructions from his clients stated that his clients are duty bound to deposit the excess amount with the respondent - The Appellant has already initiated recovery proceedings under the SARFAESI and RDDBFI Act and insolvency proceedings under the I B Code for enforcement of its interest. S. 13 SARFAESI allows secured creditors to enforce security. The possession is already with the appellant. The impugned order is set-aside with regard to attachment of properties mortgaged with the appellant - rest of the attachment shall continue.

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• Service Tax

• 2019 (7) TMI 115
  Security Agency Service - appellant were receiving the payments inclusive of the service tax amount but were not depositing the same - demand of short paid service tax alongwith interest and penalty - HELD THAT:- Undisputed fact is that Appellants are registered providers of taxable service under the category of Security Agency Services. During the period under dispute, appellant were raising the invoices on their customers/ clients for the services rendered along with the applicable taxes. They were receiving the payments inclusive of the service tax amount but were not depositing the same. They were also not filing the ST-3 returns regularly as required by the Finance Act, 1994 read along with the Service Tax Rules, 1994. The plea advanced by the appellants for not depositing the tax is on account of financial hardship. If such plea is entertained, then not only the scheme of indirect taxation will be impacted but the entire mechanism of fair trade and commerce will collapse. Can really financial hardship, be the reason for holding on the money collected from the customer/ client be valid reason for nonpayment of tax due to the government. In the scheme of indirect taxation the tax depositor is only a conduit for depositing the tax collected from the recipient of taxable service to the government. Financial hardship cannot be reason to justify such misappropriation of the money which was never held as the money by the appellant. Penalty u/s 78 of FA - HELD THAT:- In the case of Jamshedpur Branch, the penalty imposed under Section 78 is higher than the demand of tax. Such an approach is contrary to the provisions of Section itself. However since the matter in respect of Jamshedpur Branch is remitted back to the original authority for re-computation of tax payable, the authority shall reconsider the quantum of penalty and make it equal to the tax demand - In respect of Jamshedpur Branch is on all grounds except for grounds re-computation of tax payable and quantum of penalty under Section 78 is rejected. Original Authority to recompute the demand and penalties under Section 78 of Finance Act, 1994 after affording them a chance of hearing. Appeal dismissed.

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• Central Excise

• 2019 (7) TMI 114
  Clandestine manufacture and removal - difference in quantity of goods as shown cleared in ER-1 returns and the balance sheet - HELD THAT:- Ld. counsel for the appellant has adverted to the additional reply filed by them to argue that they are doing trading activity also and the goods manufactured on job work basis were sold by them. However, the details with regard to the break-up of goods manufactured on job work basis and sold by them is not available from the records. Since these details are not reflected from the records and also taking note of the fact that order-in-original was passed before the additional reply could be filed by appellants, the matter requires to be remanded to the original authority for reconsideration of this issue. Appeal allowed by way of remand.

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• 2019 (7) TMI 102
  Valuation - Job work - applicability of Rule 11 of the said Valuation Rules or not - HELD THAT:- There is no reason to entertain these Civil Appeals - appeals dismissed on the ground of delay as well as on merits.

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• 2019 (7) TMI 101
  Clandestine manufacture and removal - Aluminum profiles/billets/ logs etc. - denial of CENVAT Credit - credit denied on the ground that they have availed cenvat credit without receipt of goods on the basis of Bills of Entry - suppression of production - demand based on various pen drives - presence of corroborative evidences or not. The demands of 1,76,98,647/- and 11,62,356/- has been confirmed against the Appellant on account of goods allegedly cleared through M/s Parnami Transport and M/s TCC Carriers - personal pen drive of Shri Sukhdev alias Saral Patidar, diary of Shri Ritesh Gupta, loading challans of M/s Parnami Transport and personal diary of Shri Sunil Atri of TCC Carriers have been relied upon - HELD THAT:- The Appellant has challenged the manner of taking the data from pen drive as well as the data of the pen drive itself. The Pen drive data is said to be record of clandestine clearance and the same has been taken from the office computer, but we find that no computer has been identified from which such data was copied. There is no source computer on which such data/ record of alleged clandestine clearances was being maintained by the Appellant concern M/s KLMPL. It leads to serious doubt about the credibility of such data found in pen drive - There is no findings as to on whose instructions such data was maintained by him. Shri Shri Sukhdev alias Saral Patidar has never clarified as to for what purpose the data was copied by him in his pen drive, nor has he said as to from which computer such data was copied. In such facts, the data found in the pen drive is not a reliable piece of evidence. No evidence in the form of checkpost record has been adduced to show that the goods were transported from Pithampur to Indore. Even, the loading challans of M/s Parnami Transport shows transportation of goods from Indore to Delhi and even in such challans Ritesh has been shown as consignee and other parties as consignors, which allegedly has been clarified by the transporter that in the loading challans consignor stands for the recipient and the consignee stands for the supplier, i.e. Shri Ritesh - the loading challans show transportation from Indore whereas the Appellant s factory is located at Pithampur. Further Shri Ritesh Gupta, during recording of his statement, has refused that his diary contains details of clandestine removal of any goods or that the goods covered by such loading challans were cleared by them clandestinely. It is also a fact that no statement of any of the buyers has been relied upon in the show cause notice, though the show cause notice states that the buyers in their statement have accepted receipt of goods. We find that none of the buyers has accepted receipt of alleged clandestinely removed goods by the Appellant. The evidences relied upon by the Revenue are incomplete and do not have any evidentiary value - In absence of any buyer of the goods or transportation evidence, money receipts, the demands based upon alleged clandestine removal of goods, cannot be sustained. Demand of duty of goods said to be transported through TCC Carriers - reliance has been placed only upon the pen drive of Shri Sukh Dev alias Saral Patidar and personal diary of Shri Sunil Atri of M/s TCC Carriers - HELD THAT:- The pen drive is not reliable as it is not even known as to from where such data was generated/ copied/ prepared on Pen drive. The pen drive and personal diary of Shri Atri of M/s TCC Carriers are third party documents and do not show any connection with the Appellant for the alleged clandestine clearances. Therefore, there is no reason to demand duty on such alleged clearances. Since none of the procedures under Section 36B has been followed, the data of the pen drive is not admissible as evidence. Some of the demand are confirmed against the Appellant on the basis of data found in personal pen drive of Shri Shailesh Yadav, employee of anodizer/ processor M/s KI. Shri Yadav was also working for M/s Sunshine Marketing - demand on the ground that no invoices towards clearances were found at M/s KI, whereas their records show the receipt of material - HELD THAT:- There is no acceptance on the part of the owner of M/s KI, that the data maintained in the pen drive belongs to their concern. It is also a fact that Shri Shailesh Yadav was also working for M/s Sunshine Marketing, as also stated by Shri Dinesh Mittal, partner of M/s Sunshine Marketing. M/s Sunshine Marketing were engaged in anodizing and were undertaking such activity on behalf of other suppliers in addition to M/s KLMPL. Further, even if the data found in the pen drive of Shri Shailesh Yadav is matching with the pen drive data of Shri Sukhdev Patidar, it cannot be a conclusive ground to hold that the goods were clandestinely cleared by M/s KLMPL to M/s KI. It is an accepted fact from the show cause notice that in premises of M/s KI, the goods were also being received from M/s Vimsar, M/s Krishna Profiles as well as other persons. In such case it cannot be alleged that the goods found to be entered in seized records of M/s KI or M/s Sunshine (which was also operating from the same premises) belong to the Appellant - KLMPL. The Pen drive of Shri Shailesh Yadav is his personal pen drive and were not maintained by him under the instruction of Appellant. Nor the same is corroborated with any records of Appellant firm to show that the same were clandestine removed goods. In such case, it cannot be concluded that the clearances by M/s Kuchchal International to M/s H.M. Enterprises were of goods manufactured by the Appellant and cleared clandestinely without payment of duty - when no incriminating evidence at the Appellant end and the buyers end has been found. Neither their statements are inculpatory, in that case on the basis of third party records or pen drive, the duty cannot be demanded from the Appellant. Demand of 8,09,315/- has been made on the basis of pen drive of Shri Sukhdev alias Saral Patidar on alleged clearance of Aluminium dross - HELD THAT:- No investigation seems to have been undertaken to locate the buyer of such goods or transportation. Thus the allegations lack the corroboration, and in absence of same the demand of 8,09,315/- is not sustainable Further dross being a waste product, the same is not dutiable. Demand of 7,47,242/- has been confirmed against Appellant concern on the ground that the pen drive of Shri Shailesh Yadav and records of M/s Sunshine show the receipt of such goods - HELD THAT:- M/s Sunshine was receiving goods from other parties also viz. M/s Vimsar, M/s Ravi Enterprises, M/s Hindustan Marketing amongst others. In absence of any corroborative evidence of removal of goods from the Appellant (KLMPL) factory, it cannot be said that the records of M/s Sunshine Marketing or pen drive of Shri Shailesh Yadav point to removal of goods without payment of duty by KLMPL - the charges are mainly based upon the pen drive of Shri Shailesh Yadav employee of M/s KI and who was also maintaining records/ stock of M/s Sunshine Marketing. In case where the demands are based upon the pen drive and such records are third party records and in absence of any affirmation by the Appellant, it cannot be concluded that the Appellant has removed the goods without payment of duty. In case of M/S HINDUSTAN MACHINES AND OTHERS VERSUS CCE, DELHI [ 2013 (5) TMI 543 - CESTAT NEW DELHI] it was held that the internal records maintained by a worker in his private capacity is not sufficient to alleged clandestine removal. The show cause notice has relied upon the statement of driver of vehicle no. MP-09-KA-4616 Shri Raghuvir Maurya, that he was transporting goods from the Appellant factory to premises of M/s KI. However as pointed out by the ld. Counsel no record of such clearance has been brought on record. Merely on the basis of statement of Shri Raghuvir Maurya, it cannot be said that the goods were transported clandestinely through such vehicle and therefore there is no ground to demand duty. Demand of 21,24,217/- on the ground that the Appellant had availed credit of duty on the basis of bills of entries of the goods, i.e. Aluminum Scrap, shown to have been purchased on high sea sale basis from M/s Moongad Aluminium and also on the basis of invoices issued by M/s Satya Sales Corporation, Mumbai - HELD THAT:- The allegation of clandestine production vis- -vis allegation of non-receipt of raw material is contrary to each other. The payment against the purchase of imported scrap has been legally made against valid documents for availing credit and even if the goods have first reached Indore and then brought to Appellant s factory, it does not cast a doubt on non-receipt of imported goods. In such view of the facts, we find that the credit availed by the Appellant on imported scrap cannot be denied - In case of credit of 2,41,739/-, the adjudicating authority has denied the same on the invoice issued by M/s Satya Sales, Belapur. It is alleged that as the invoices do not show mode of transportation and vehicle registration numbers and therefore, it cannot be presumed that the goods were delivered to the Appellant. The invoice issued by M/s Satya Sales Corporation is a valid invoice issued in the name of the Appellant and in absence of any significant evidence, the credit available to the Appellant cannot be denied on the basis of irregularity committed by the supplier. Further in case of cenvat demand no diversion of goods by M/s Moongad Aluminium or M/s Satya Sales Corporation, has been shown. Hence there cannot be any demand against M/s KLMPL. Demand of 1,53,163/- made against the Appellant on the ground that they have cleared the goods to M/s Kuchchal International, M/s Sunshine Marketing and M/s Baser Sales Corpn - HELD THAT:- We find that the demand has been made on the basis of alleged receipt of goods at the job workers / processors premises, i.e. anodizers or dealers premises. However, no investigation has been conducted at the Appellant s end or their factory and the demand is based on the records of such alleged job workers. Only on the basis of documents of the third parties, without any corroborative evidence at the end of the manufacturers, the demand does not sustain. In case of M/s Sanmati Fabricators, we find that they could not submit the invoice being the job worker. However, this cannot be a reason that such goods were cleared clandestinely by the Appellant. The charges of clandestine removal must be proved with independent / cogent / clear and tangible evidence in the form of receipt of raw material, utilization of such raw material for clandestine manufacture of finished goods, manufacture of finished goods with reference to installed capacity, consumption of electricity, labour employed and payment made to them, packing materials used, discrepancy in raw material and final product, clandestine removal of goods with reference to entry of vehicles in the factory premises, loading of goods, transporters documents such as LRs, statements of drivers, entries at check-posts and the receipt of goods by the consignees, amount received from the consignees, statement of consignees admitting receipt as well as receipt of sale proceeds by the consignor and its disposal. Demand not sustainable - appeal allowed - decided in favor of appellant.

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• 2019 (7) TMI 100
  Clandestine manufacture and removal - Ingots - weighment slips - Third party evidences - Cross-examination of statements of witnesses - the case of the revenue is based on the loose slips recovered during the course of investigation on 18.12.2007 in the premises of M/s V. K. - principles of natural justice - HELD THAT:- No discrepancy in statutory records/stocks in the premises of M/s waryam was found. On the basis of these loose slips recovered from M/s V. K., it has been alleged that weighment slips pertains to M/s Waryam on same investigation, some of the slips were found by the revenue pertains to M/s V. K. and the case of clandestine clearance of dutiable goods was made out against M/s V. K. and the said show cause notice was adjudicated, thereafter, the matter travelled up to this Tribunal. All the documents which have been relied upon by the revenue have been recovered from the premises of M/s V. K. the third party - The said documents cannot be relied in the absence of any corroborative evidence. Cross-examination of statements of witnesses - Principles of natural justice - HELD THAT:- The two buyers were examined by the revenue with regard to the clandestine clearance of the goods, therefore, Shri Ajay Jain of M/s Ajar Amar Steel denied that they have not received any goods without invoices. Revenue has failed to appreciate the said statement of Shri Ajay Jain, but Shri Kamal Chopra has admitted that they have purchased a meagre quantity of 249.985 Mts of steel ingots, but the appellant sought cross examination of Shri Kamal Chopra, the same was denied - In terms of Section 9-D of Central Excise Act, 1944, the adjudicating authority is required to examine in chief of the witness of the statements have been relied and thereafter to make up his mind that the statement made by the witness is correct and thereafter to offer cross examination of the said witness to the appellants. The said procedure has not been followed, therefore, there is a gross violation of principal of natural justice. As the revenue has failed to come with tangible evidence to allege the clandestine manufacture and removal of goods, therefore, the impugned order is set aside and no demand of duty is sustainable - Consequently, no penalty is imposable on all the appellants. Appeal allowed - decided in favor of appellant.

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• 2019 (7) TMI 99
  Clandestine removal - clandestine procurement of large quantities of raw materials/inputs, which had been subsequently been used in the clandestine manufacture and sale of finished goods without payment of duty - appellants sought soft copy of the printouts of computer/laptop but the same were not supplied to the appellants - cross examination of panch-witnesses as well as Central Excise officers also sought but not provided - admissible evidences - section 36B of Evidences Act. HELD THAT:- The procedure prescribed under section 36B of Central Excise Act, 1944 has not been followed. Therefore, the printouts taken from CPU are not admissible evidence to allege clandestine manufacture and clearance. Moreover, in earlier round of litigation, this Tribunal has directed to supply soft copies of the documents but the direction of this Tribunal has not been complied with - thus as the adjudication authority has not followed the direction of this Tribunal, on this ground alone, the impugned order is liable to be set aside. Also, in the show cause notice, it has been alleged that printouts have been taken from the laptop whereas in the adjudication order, the adjudicating authority held that the printouts taken from the CPU which creates doubt. In that circumstance, on the basis of electronic printouts, the demands against the appellants are not sustainable. The allegation against M/s. Waryam manufacturer of ingots is not sustainable as no other corroborative evidence has been produced by the Revenue on record. Therefore, the demand confirmed against M/s. Waryam is set aside. In the case of M/s. Vee Kay, we find that the production capacity has been worked out to 10781 MT by the department itself - HELD THAT:- If we take alleged clandestine production into consideration the total production worked out to 186 41.01 MT which is beyond annual production capacity of M/s.Vee Kay - No contrary evidences has been brought on record by the Revenue. Furthermore, In the remand, proceedings, the adjudicating authority was directed to allow cross examine of the panchas and central excise officers whose statements relied upon by the adjudicating authority but no cross examination has been granted to the appellant. Therefore, the impugned order has been passed in gross violation of principles of natural justice and not following the direction of this Tribunal. As the Revenue has failed to come with positive evidence except printouts taken from the laptop/CPU, the charge of clandestine manufacture is not sustainable against M/s. Vee Kay. Therefore, the demand against M/s. Vee Kay is not sustainable - As no demand of duty is sustainable against M/s. Vee Kay and M/s. Waryam, therefore, no penalty is imposable on all the appellants. Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2019 (7) TMI 113
  Validity of Rule 6(4)(m)(i) of the Karnataka Sales Tax Rules, 1957 read with Explanation III to Rule 6(4) of the said rules - interpretation of statute - scope of charging section - whether the condition of use in the same form in which such goods are purchased under Rule 6(4)(m)(i) of the KST Rules expands the scope of charging section i.e. Section 5B under KST Act, 1957? - appellant purchased timber in log forms, plaster of paris, plywood, glass sheets and the said purchases have been manufactured to produce the goods which are necessary for interior decoration - AO denied deduction from purchases from works contract receipts applying Rule 6(4)(m)(i). HELD THAT:- Section 5B of the KST Act and Rule 6(4)(m)(i) of the KST Rules operate in different spheres. Section 5B is a charging provision for levy of sales tax whereas Rule 6(4)(m)(i) is a provision for deduction from tax. Under Section 5B, tax can be levied on transfer of property in the goods whether as goods or in some other form whereas Rule 6(4)(m)(i) provides for a deduction in respect of the goods which have already suffered tax and which are used in the same form. Thus, it appears to be in clear consonance with the charging provision and does not militate against Section 5B of KST Act, 1957. This Court in State of Tamil Nadu Vs. Pyare Lal Malhotra and Others [ 1976 (1) TMI 151 - SUPREME COURT ] has held that if the separate commercial commodities emerge out of the goods already taxed earlier, the new commercial commodity is liable to sales tax provided there is a law to this effect - It can be inferred from this case that Sales tax can be levied on the same goods only once so long as they retain their identity of goods of a particular type, and If separate commercial commodities emerge out of the (goods already taxed earlier), then the said new commercial commodity is liable to sales tax. What emerges from the scheme of the Act and Rules framed thereunder is that Rule 6(4)(m)(i) purports to grant benefit to the assessee by allowing deductions for the value of goods which have already suffered taxation and which goods substantially retain their original identity while being used in the execution of a works contract. Explanation III to Rule 6(4) clarifies it further by categorically providing that in case the goods are transformed into a different commodity which then is used in the execution of works contract, then the benefit of deduction cannot be availed. It is trite law that tax provisions granting exemptions/concessions are required to be strictly construed as recently held by this Court in M/s. Achal Industries Vs. State of Karnataka [ 2019 (3) TMI 1483 - SUPREME COURT ]. There is no variance between Rules 6(4)(m)(i) read with Explanation III and Section 5B of the KST Act, 1957 and what is contended by the appellant in assailing the validity of Rule impugned hereunder is misconceived and without substance. Provisional assessment served under Section 28(6) - HELD THAT:- Whether the assessee was eligible under Rule 6(4)(m) (i) is a question of fact which has to be determined in the assessment proceedings and since the provisional assessment has not been finalised due to pendency of the instant proceedings, it may not be advisable for this Court to dilate on the subject issue of the notices served upon the appellant at this stage and leave it open to the appellant to address before the assessing authority in the pending appropriate assessment proceedings, if so advised. Appeal dismissed - decided against appellant.

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• 2019 (7) TMI 112
  Concessional rate of tax - purchase of High Speed Diesel Oil for use in generation and distribution of electricity and other forms of power - C forms not downloaded - HELD THAT:- There is no disputation or disagreement that the instant writ petitions clearly fall within the four corners of M/S. THE RAMCO CEMENTS LTD. VERSUS THE COMMISSIONER OF COMMERCIAL TAXES, THE ADDITIONAL COMMISSIONER (CT) [ 2018 (10) TMI 1529 - MADRAS HIGH COURT] where it was held that The respondents are directed to permit these petitioners to download C forms, as has been done in the past for the purpose of purchasing petroleum products against the issuance of C declaration forms It follows as a natural sequitur that prayers in the instant writ petitions deserve to be acceded to and therefore instant writ petitions stand allowed - Consequently, necessary action has to be taken by the Revenue/Department/Respondents forthwith which in any case shall not be more than 5 working days from the date of receipt of a copy of this order. Petition allowed.

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• 2019 (7) TMI 111
  Principles of Natural Justice - validity of reassessment order - sufficient opportunity of being heard not provided to the petitioner - HELD THAT:- It is settled law that an order passed by the quasi judicial authority sans providing reasonable opportunity of being heard is void ab initio and the same cannot be approved by this Court contrary to the fundamental rule of natural justice. The action of the respondent No.1 in issuing multiple proposition notices proposing different tax liabilities and passing the impugned re-assessment order in haste cannot be appreciated - Issuing of revised proposition notices would indicate the perfunctory nature of action of the respondent No.1. With the fond hope that such cavalier action shall not be repeated by the respondent No.1 in future, this Court deems it appropriate to set aside the re- assessment order and the consequential demand notice at Annexure-A, impugned herein, with liberty to the petitioner to file reply/objections to the last proposition notice dated 16.04.2019 - petition disposed off.

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• 2019 (7) TMI 98
  Belated invocation of writ jurisdiction - Recovery of VAT dues - Form VAT 202 - HELD THAT:- We agree with the High Court that the Writ Petition suffered from latches, hence the Special Leave Petition is dismissed.

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• 2019 (7) TMI 97
  Validity of assessment order - time sought to file requisite records namely Books of Accounts and other related documents, which was not provided - principles of natural justice - HELD THAT:- The respondent shall reschedule/adjourn the personal hearing tomorrow i.e., 02.07.2019 and await verdict in W.P.No.16792 of 2019 before conducting personal hearing and dispose of these matters - In the adjourned / rescheduled personal hearing, the documents already submitted by the writ petitioner shall be examined and a personal hearing shall be held. Post personal hearing, the respondent shall pass Assessment orders afresh within a period of three weeks from the date of personal hearing - Petition allowed by way of remand.

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• Indian Laws

• 2019 (7) TMI 110
  Demand of Bribe - illegal gratification or not - Offences punishable under Section 7 13(2) read with Section 13(1)(d) of Prevention of Corruption Act, 1988 - Learned Spl. PP for the CBI has vehemently contended that since the FSL revealed that the hand-wash, pant pocket wash and wash of the bed-sheet turned pink, it proves beyond reasonable doubt that the bribe amount was indeed accepted by the respondent and the said evidence in itself is sufficient to prove the case of the prosecution beyond reasonable doubt against the respondent. HELD THAT:- V. Swaminathan the complainant deposed that the respondent was representing himself as one Mr. Sachdev and did not disclose his identity which he came to know when he attended the meeting of IMWG at Chennai in January 2009 to make out a case of initial demand. However, these facts were deposed by the complainant for the first time in his testimony before the Court only and thus the learned Trial Court rightly rejected the same being material improvements. Further, the testimony of V. Swaminathan, shadow witness and the TLO Insp. Rajesh Chahal does not establish specific demand of bribe by the respondent during the trap proceedings. The tape recorded conversations exhibited by the prosecution purportedly of the recording of the conversations at the time of trap does not reveal a demand of bribe. The investigating officer in his testimony before the Court admitted that the version in the purported transcript for demand of bribe was admittedly not there when the actual cassette was played in Court. Thus, there is no evidence to establish demand of bribe at the time of raid. Case of the respondent in his statement under Section 313 Cr.P.C. was that he was innocent and falsely implicated at the instance of Dr. Shyam Aggarwal, Chairman of IMWG who was known to Vineet Aggarwal S.P. CBI and in conspiracy with the complainant, this corruption case was foisted on the respondent. The respondent had strongly objected to conducting of confidential IMWG Meeting in Chennai in the presence of complainant whose 5 applications were pending. The respondent had witnessed bribe given to Dr. Shyam Aggarwal by the complainant for conspiring to conduct IMWG Meeting in complainant s hotel and permitting him to try to influence members to give NOC to all his pending applications - Further, DW-2 in his cross-examination admitted that on 8th April, 2009 the Cabinet Secretariat granted NOC for applying for the export license by M/s. Titanium Taltalum Products Ltd. The documents produced in defence evidence prima facie fortify the claim of the respondent in his statement under Section 313 Cr.P.C. Considering the fact that the view expressed by the learned Trial Court based on the evidence adduced is a plausible view, this Court finds no ground to interfere in the impugned judgment of acquittal. Appeal dismissed - decided against appellant.

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• 2019 (7) TMI 107
  Maintainability of the plaint - Valuation - Undervaluation of the relief claimed in the suit - HELD THAT:- Order VII Rule 11(b) of the CPC permits rejection of the plaint where the relief claimed is undervalued and the plaintiff, on being required by the Court to correct the valuation within the time to be fixed by the Court, fails to do so - The suit as aforesaid is for the reliefs of declaration and permanent injunction. Section 8 of the Suits Valuation Act, 1887 provides that in suits other than those referred to in Section 7(v), (vi), (ix) and (x)(d), the value as determined for the computation of court fees and the value for the purposes of jurisdiction shall be the same - The present suit, where the plaintiffs as a consequence of declaration are seeking permanent injunction, qualifies under Section 7(iv)(c) as a suit for declaratory decree and consequential relief and in accordance therewith the plaintiffs are required to set out in the plaint the value at which they value the relief and court fees is to be computed thereon - The Suits Valuation Act provides for valuation for the purposes of jurisdiction to be the same as for the purposes of court fees. The plaintiffs have valued the relief of declaration with consequential relief claimed in the suit, for the purposes of court fees and jurisdiction, at 2 crores and paid appropriate court fees thereon - It is not in dispute that the Court of minimum pecuniary jurisdiction for entertaining a suit, valuation whereof is in excess of 2 crores, is this Court. The present suit is not for declaration qua liability of the plaintiffs for the debts of the defendant, for it to be said that the maximum liability of each of the plaintiffs as member of the defendant under the Memorandum and Articles of Association having been pegged at 100/-, the statement required to be made by a plaintiff under Section 7(iv)(c) supra cannot be of a valuation of more than 100/- - Thus no merit is found in the contention qua valuation, for seeking rejection of the plaint. Jurisdiction of this Court - Bar as created under Section 430 of the Companies Act, 2013 - HELD THAT:- The grievance in the present suit, though may have its genesis in the complaints of the plaintiffs of mismanagement, the subject matter of the present suit is not mismanagement but the action of the defendant of issuing notice to the plaintiffs to show cause why the membership of the plaintiffs should not be terminated. The said grievance is not a grievance of mismanagement and oppression, even though the cause of action may have its genesis in complaints of plaintiffs, of mismanagement and oppression - Though this is clear as daylight but the defendant also, by filing an application under Order VII Rule 11 of the CPC running into as many as 93 pages and by raising all sorts of arguments, did not allow the same to be seen immediately, resulting in the order being reserved. The application under Order VII Rule 11 of the CPC is found to be misconceived and is dismissed.

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