Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 12, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Insolvency & Bankruptcy
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
TMI Short Notes
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Income Tax:
Does ICDS apply for the purposes of computing exemption u/s 11 to 13.
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Income Tax:
Does ICDS apply to the applicability aspect of the TDS.
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Income Tax:
How will ICDS apply to companies which adopted Ind-AS. (Indian accounting standards)
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Income Tax:
Whether ICDS is applicable to Non-Residents whose income is liable to be taxed at a flat rate of tax like interest, royalty and fees for technical services u/s 115A.
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Income Tax:
Whether the provisions of ICDS shall apply to Banks,
Non-banking financial institutions, Insurance companies, Power sector,
etc.
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Income Tax:
Can ICDS would apply to other categories of taxpayers whose income is taxed under presumptive tax schemes (i.e. u/s 44AD, 44ADA, 44AE, 4BB, 44BBA, 44BBB) as there is no specific exclusion provided.
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Income Tax:
Can a assessee opt to change his method of accounting from mercantile to cash basis.
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Income Tax:
Can a assessee can follow different methods of accounting for different sources of income under the same head of income, or different heads of income.
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Income Tax:
Can ICDS apply to a person following cash system of accounting and to the person whose books of account for the year are not required to be audited u/s 44AB.
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
Income Tax
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ICDS would apply to the taxpayers whose income is taxed under presumptive tax schemes (i.e. u/s 44AD, 44ADA, 44AE, 4BB, 44BBA, 44BBB) for limited purpose of determination of turnover
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ICDS - If the assessee is following mercantile system of accounting for his manufacturing business and cash system of accounting for his commission agency business, then ICDS would then apply only to the manufacturing business, and not to the commission agency business
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MAT computation - Provision for bad and doubtful debts - If, at the end of the year showing the loans and advances on the asset aside of the balance sheet as net of the provision for bad debt, it would amount to a write off and such actual write off would not be hit by clause (i) of the explanation to section 115JB - HC
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Addition u/s 68 - peak credit theory - accommodation entry provider - ITAT went merely on the basis of accountancy, overlooking the settled legal position that peak credit is not applicable where deposits remain unexplained under Section 68 - HC
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Penalty u/s. 271D - contravention of provision of Section 269SS - reasonable cause for not accepting loans by way of account payee cheque or demand draft - These loans are genuine transaction which were accepted by way of cheques by its sister concern - No penalty
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Exemption u/s 10(1) - agricultural income - proof of agricultural operations - business of plant floriculture / tissue culture - exemption allowed.
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Compensation paid by the assessee to the family members of deceased divers was in course of the assessee business, and the assessee had rightly considered the business expediency and there after incurred the said legitimate business expenses.
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TDS u/s 194H - SIM cards and recharge coupons were sold in cash. The customers and shopkeepers were offered discount on the face value of the SIM cards. Apropos the recharge coupons, on the other hand, a small margin was kept by the assessee out of the commission/discount offered by BSNL - No TDS liability.
Customs
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Reimbursement of Central Sales Tax (CST) - goods purchased from EOU - Irrespective of the location of the Manufacturing Units selling such products to the petitioner in the course of inter-state Trade and charging CST, the goods continue to be the "Goods manufactured in India" which is the requirement in the said Foreign Trade Policy for entitling the petitioner - refund allowed - HC
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Refund claim - Cess - unjust enrichment - The amount realized from the foreign buyer was only FOB value - the refund of cess is not hit by unjust enrichment
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Confiscation of goods - shipping bills were not entered in export goods arrival register maintained at CFS, STT, ICD, Dadri - drawback claim - goods were exported and export proceeds were realized - show cause notice set aside
Corporate Law
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Membership of the private company exceeded 50 or not - joint share holdings - exclusion of employee quota - The submission that such employee quota share does not remain as employee quota or that there is no bar for transfer of such shares by the employees under Article 59 of the Articles of Association, cannot be accepted - HC
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Membership of the private company exceeded 50 or not - Deemed public company - The number of members of the compnay has not exceeded 50 by virtue of transfer of shares by the appellant (singly) to the appellant jointly with his children and wife - HC
Service Tax
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Maintenance and repair service - repair, alteration, renovation or restoration or similar service in relation to commercial buildings and civil structures - the classification under commercial and industrial construction service has to be ruled out.
Case Laws:
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Income Tax
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2017 (8) TMI 452
Reopening of assessment - loan received by the petitioner from private company to be treated as a deemed dividend in terms of section 2(22)(e) - Held that:- In neither of the two documents, he has dealt with the factual assertion made by the petitioner viz. that the sum in question was advanced by the petitioner to the company and was not received by the petitioner from the company by way of a loan. The petitioner has produced the audited accounts in the balance-sheet which we have perused. The amount in question is shown as a demand to the said company. Loan is an advance made by the petitioner to the said company. The stand taken by the Assessing Officer in the reasons recorded that such sum was received by the petitioner from the company by way of a loan, is thus even otherwise not correct. We have therefore proceeded on such basis. If that be so, the reason for reopening the assessment completely lacked validity. The sole ground to reopen the assessment was that the loan received by the petitioner from private company should be treated as a deemed dividend in terms of section 2(22)(e). When on facts the petitioner is able to show that the amount in question was advanced by the petitioner to the company and was not received by the company by way of a loan, section 2(22)(e) would have no applicability. The impugned notice is set aside. Petition is allowed in favour of assessee.
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2017 (8) TMI 451
MAT computation - Provision for bad and doubtful debts - to be treated as provision for liability or not - computation of book profit for the purpose of MAT liability u/s 115JB - Held that:- Referring to statutory provisions, the situation that arises is that prior to the introduction of clause(i) to the explanation to section 115JB, as held in case of HCL Comnet Systems and Services Ltd. (2008 (9) TMI 18 - SUPREME COURT) the then existing clause (c) did not cover a case where the assessee made a provision for bad or doubtful debt. With insertion of clause (i) to the explanation with retrospective effect, any amount or amounts set aside for provision for diminution in the value of the asset made by the assessee, would be added back for computation of book profit under section 115JB of the Act. However, if this was not a mere provision made by the assessee by merely debiting the Profit and Loss Account and crediting the provision for bad and doubtful debt, but by simultaneously obliterating such provision from its accounts by reducing the corresponding amount from the loans and advances on the asset side of the balance sheet and consequently, at the end of the year showing the loans and advances on the asset aside of the balance sheet as net of the provision for bad debt, it would amount to a write off and such actual write off would not be hit by clause (i) of the explanation to section 115JB. The judgment in case of Deepak Nitrite Limited (2011 (8) TMI 1209 - GUJARAT HIGH COURT) fell in the former category whereas from the brief discussion available in the judgment it appears that case of Indian Petrochemicals Corporation Ltd. (2016 (9) TMI 110 - GUJARAT HIGH COURT), fell in the later category. There is no conflict between the two judgments and both operate in different fields.
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2017 (8) TMI 450
Addition on account of unexplained deposits in the bank accounts of the assessee - addition u/s 68 - basis of peak credit theory - Assessee is a Chartered Accountant - Assessee does not deny that he is an accommodation entry provider - Held that:- Where an Assessee was unable to explain the sources of deposits and the corresponding payments then he would not get the benefit of 'peak credit'. The legal position in respect of an accommodation entry provider seeking the benefit of 'peak credit' appears to have been totally overlooked by the ITAT in the present case. Indeed, if the Assessee as a self-confessed accommodation entry provider wanted to avail the benefit of the 'peak credit', he had to make a clean breast of all the facts within his knowledge concerning the credit entries in the accounts. He has to explain with sufficient detail the source of all the deposits in his accounts as well as the corresponding destination of all payments from the accounts. The Assessee should be able to show that money has been transferred through banking channels from the bank account of creditors to the bank account of the Assessee, the identity of the creditors and that the money paid from the accounts of the Assessee has returned to the bank accounts of the creditors. The Assessee has to discharge the primary onus of disclosure in this regard. While the AO in the present case did not question the working out of the peak credit by the Assessee, he, at the same time, insisted that the additions made by him to the returned income of the Assessee should be sustained. The peak credit worked out by the Assessee was on the basis that the principle of peak credit would apply, notwithstanding the failure of the Assessee to explain each of the sources of the deposits and the corresponding destination of the payment without squaring them off. That is not permissible in law as explained by the Allahabad High Court in the aforementioned decisions which, this Court concurs with. As already noted, the ITAT went merely on the basis of accountancy, overlooking the settled legal position that peak credit is not applicable where deposits remain unexplained under Section 68 of the Act. The question of law framed by this Court, is accordingly, answered in the negative i.e. in favour of the Revenue and against the Assessee.
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2017 (8) TMI 449
Estimation of profit in respect of IMFL business - 10% OR 5% - Held that:- The coordinate bench of the Tribunal in the case of Tangudu Jogisetty (2016 (7) TMI 379 - ITAT VISAKHAPATNAM) has considered the profit level in the line of business and decided that 5% of purchase price is reasonable profit margin in the line of IMFL business and directed the A.O. to re-compute the profit of the assessee. Thus we direct the A.O. to re-compute the income of the assessee at 5% of purchase price. Accordingly, this ground of appeal raised by the assessee is allowed. Unexplained cash credits - proper evidence to substantiate the claim - Held that:- Assessee has not filed any details with regard to creditworthiness of the parties. Even before the tribunal, the assessee is not filed any details in respect of creditworthiness of the creditors. Therefore, find no reason to interfere with the order of the ld.CIT(A). Thus, this ground of appeal raised by the assessee is dismissed. - Decided against assessee.
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2017 (8) TMI 448
Estimation of profit in respect of IMFL business - 10% OR 5% - Held that:- The coordinate bench of the Tribunal in the case of Tangudu Jogisetty (2016 (7) TMI 379 - ITAT VISAKHAPATNAM) has considered the profit level in the line of business and decided that 5% of purchase price is reasonable profit margin in the line of IMFL business and directed the A.O. to re-compute the profit of the assessee. Thus we direct the A.O. to re-compute the income of the assessee at 5% of purchase price. Accordingly, this ground of appeal raised by the assessee is allowed. Unexplained cash credits - additional evidence to substantiate the claim - Held that:- Assessee filed an additional evidence on 15/02/2017 and submitted that he is in the process of collecting the evidence and ultimately he succeeded in collecting the evidence and therefore, same may be considered and admitted and remitted matter back to the Assessing Officer for fresh consideration. As find that all the confirmation letters filed by the assessee were obtained from the creditors, who belongs to the assessee’s village and the amount is below ₹ 20,000/-. When the assessee has borrowed funds from friends and relatives, who are belonging to the same village, as to why he has taken near about five years to collect the confirmation letters. The assessee has not given any explanation for that. Also find that the additional evidence filed by the assessee in the form of confirmation letters is only an afterthought. It is not a fit case to admit the additional evidence, hence, reject the same. Assessee has not filed any details to substantiate his case - Decided against assessee.
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2017 (8) TMI 447
Penalty u/s. 271D - contravention of provision of Section 269SS - reasonable cause for not accepting loans by way of account payee cheque or demand draft - accepting loan by book adjustment, through journal entries - Held that:- The assessee has filed a paper book containing details of loan ledgers of parties appeared in the books of account of M/s. Atlanta International and also ledger accounts of loan creditors in the books of accounts. On perusal of details field by the assessee, we find that these loans have been transferred by book adjustment by way journal entries. We further noticed that the assessee has paid interest on these loans after duly deducting applicable TDS. We further observed that, it’s not a case of A.O that these loans are not genuine transactions. The AO neither doubted genuineness of the loan nor these are not a bonafide transaction or that the entries were made with a view to evade tax. In the absence of any finding as to genuineness of the transactions or the loans were accepted to evade taxes, penalty cannot be levied u/s. 271D of the Act, merely there is violation of Section 269SS of the Act. These loans are genuine transaction which were accepted by way of cheques by its sister concern. The assessee claims that it was under the bonafide belief that, acceptance of loans or deposit by book adjustment would not attract the provision of Sections 269SS of the Act. There is a reasonable cause, for failure to comply with the provision of Section 269SS of the Act, therefore penalty cannot be levied u/s. 271D of the Act. - Decided in favor of assessee.
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2017 (8) TMI 446
Income from supply of software and software maintenance/support services to the entities engaged in exploration of mineral oil - characterization of income - taxability as royalty - Indo-Canada Double Taxation Avoidance Agreement - taxable under the provisions of section 44D/44DA read with section 115A OR could be covered under the provisions of section 44BB of the Act - Held that:- Respectfully following the above decision of the Tribunal in the case of Reliance Industries Limited (2016 (6) TMI 96 - ITAT MUMBAI) we hold that the receipt from sale of software by the assessee from outside India is not taxable as royalty in terms of the articles of the Double Taxation Avoidance Agreement between the India and the Canada. Income from software supply and software maintenance/support services etc. - should be taxed under section 44D/44DA of the Act or under section 44BB? - Held that:- In the instant case, we observe that, the Assessing Officer himself has assessed the income from software maintenance/support services under the section 44BB of the Act, and now, it is contested before us that said income should fall under section 44D/44DA of the Act. In our considered opinion, once the Assessing Officer has accepted the taxability of income under section 44BB of the Act, he cannot be allowed to change the stand taken by him in the assessment order. Even otherwise, in view of the decision in the case of Oil and Natural Gas Corporation Limited v. CIT [2015 (7) TMI 91 - SUPREME COURT], if the substance of the contract/agreement is connected with the prospecting, extraction or production of mineral oil, the income has to be assessed under the provisions of section 44BB of the Act. In the case, the assessee supplied software and provided software maintenance/support services in respect of software supplied, which were to be utilised in exploration of mineral oil, and thus the relevant income from sale of software and software maintenance/support services has been rightly assessed under section 44BB of the Act. The amendment brought by the Finance Act, 2011 cannot be made effect from the retrospective effect as that it adversely affects the interest of the assessee. It is well settled law that an amendment to the taxing statute, if results in higher tax burden on the assessee then it is prospective in nature and not retrospective. We are not inclined to accept the contentions advanced on behalf of the Revenue, for the simple reason that the issue is squarely covered by the decision of the hon'ble Delhi High Court in the case of DIT-II v. OHM Ltd. [2012 (12) TMI 422 - DELHI HIGH COURT]. Assessment of income from sale of software to the entities engaged in exploration of mineral oil as taxable under section 44BB - Held that:- We find that supply, installation etc. of software used for oil and gas exploration has been held as taxable under section 44BB of the Act. In the present case, the software maintenance/support services has already been accepted by the assessee as falling under section 44BB of the Act. Since the software maintenance/support services was carried in respect of the software sold by the assessee, both the activity of sale of software and software maintenance/support services are composite contract to be considered under section 44BB of the Act. In the instant case, the learned Commissioner of Income-tax (Appeals) has assessed the supply of software and software maintenance/support services as taxable under section 44BB of the Act. As in the case of CIT v. Halliburton Offshore Services Inc. [2007 (9) TMI 230 - UTTARAKHAND HIGH COURT] held that the amount paid or payable whether in India or outside India have to be included for the purpose of computing global receipts under section 44BB of the Act - Decided against assessee.
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2017 (8) TMI 445
Exemption u/s 10(1) - agricultural income - proof of agricultural operations - business of plant floriculture / tissue culture - Held that:- basic operations are carried out in the present case, which require human skill and labour, and subsequent operations, no matter how sophisticated, if that be used against the assessee, are only to foster the growth and to protect the produce, we find that the income from these operations can only be said to be agricultural income. The authorities belong indeed erred in law and on facts of this case in holding that the impugned income is not agricultural income. We, therefore, direct the Assessing Officer to treat the said income as agricultural income under section 2 (1A)(b)(i) of the Act. - Decided in favour of assessee.
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2017 (8) TMI 444
Allowable business expenditure - disallowance of non-contractual payment /gratuitous payment for the purpose of business - business expediency - Held that:- Whatever test may be applied in deciding whether any expenditure is allowable as a deduction under section 37, the essential requirement must in every case be as to whether the expenditure was either in reality or as a measure of business expediency necessary either for the purpose of earning profit or for protecting and safeguarding the business assets of the assessee including goodwill or in connection with some transaction or activity which is directly and substantially connected with the running of the business of the assessee or is intimately connected with the assessee business activities. It has to be shown in every case that not only the expenditure was wholly and exclusively laid out, but it was so laid out for the purpose of the business of the assessee, that is, some purpose directly connected with or attributable to the assessee normal business activities or the protection of its business interest, in the instant case the expenses incurred in connection with the accident occurred in course of the business where 7 lives of divers were lost, thus the expenditure incurred was wholly and exclusively for the purpose of the company's business. In view of the above legal and factual position we are of the view that compensation paid by the assessee to the family members of deceased divers was in course of the assessee business, and the assessee had rightly considered the business expediency and there after incurred the said legitimate business expenses - Decided against revenue
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2017 (8) TMI 443
Assessment u/s 153A - addition based on any incriminating material found during the course of search - Procurement of accommodation entries through share application money from non-descript companies - addition u/s 68 - CIT(A) has deleted the additions after considering the assessments of six share applicants out of eight and has categorically recorded a finding that the additions so made are not based on any incriminating material found during the course of search Held that:- It is now settled that in the cases of search, no addition can be made unless there is incriminating material found in the search to support such additions. However, in the instant case, there is no material on record and there is no whisper in the assessment order as well as in the order of ld. CIT(A) to show as to what material was found at the time of search, which led the Assessing Officer to make the impugned addition. The search memo is not available before us to know about the material found in the search. CIT(A) has also not recorded any finding as to the material found in the course of search. Therefore, unless it is ascertained as to what material was found on search and whether it was incriminating or not, the decision of making addition by the Assessing Officer and its deletion by the ld. CIT(A) cannot be supported. Besides, the ld. CIT(A) has admitted the additional evidences u/s. 46A. The impugned order shows that the ld. CIT(A) called for the remand report of the AO, but we do not find in the impugned order as to what was the rebuttal or contention of the Assessing Officer in the said remand report on admission of additional evidence, whatsoever, submitted before the ld. CIT(A). We, accordingly restore the matter to the file of ld. CIT(A) for deciding the appeal afresh after making proper examination of records in the light of observations made above Decided in favour of revenue for statistical purposes.
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2017 (8) TMI 442
TDS u/s 194H - sale of SIM cards / pre-paid recharge coupons -Disallowance of discount and activation charges u/s 40(a)(ia) - non deduction of tds - principal to agent relationship between assessee and the customers - Held that:- Similar facts had already been adjudicated in assessee s own case for the preceding year as held since no dealer or sub-dealer was appointed either by Bharat Sanchar Nigam Ltd. (BSNL) or by the assessee, for the purpose of marketing the products and/or service of the Bharat Sanchar Nigam Ltd., the entire sales were to customers, either directly or through shopkeepers, who rendered services to the customers. The entire sales were in cash. No commission was paid by the assessee to the customers. Then, Section 194H of the Act does not cover such discounts as under consideration herein and that being so, obviously the provisions of Section 40(a)(ia) of the Act was wrongly applied. When purchasing the SIM cards and recharge coupons from BSNL, the assessee had to deposit the money in advance. Undisputed, it is to customers directly and to petty shopkeepers, that the SIM cards and recharge coupons were sold in cash. The customers and shopkeepers were offered discount on the face value of the SIM cards. Apropos the recharge coupons, on the other hand, a small margin was kept by the assessee out of the commission/discount offered by BSNL. Then, activation charges were given by BSNL to the assessee on new connections, and a major portion thereof was given to the customers as discount. As discussed, it was on the basis of the mistaken presumption of existence of relationship of principal and agent, that the discount offered by the assessee to its customers was considered by the Assessing Officer as commission. This, however, is not so, to reiterate it was only discounts offered to the customers, on a principal to principal basis, on which, no TDS was either required to be made or was actually made. - Decided in favour of assessee.
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2017 (8) TMI 441
Deemed income - difference between revenue disclosed by the assessee in P&L account and the amount of the receipts shown in Form No.26AS - Held that:- Identical issue has already been dealt with in AY 2005-06 [2010 (11) TMI 630 - ITAT DELHI] in assessee’s own case by the ITAT, Delhi Bench ‘B’, New Delhi (order available at page 1 to 45 of the paper book) and has been answered in favour of the assessee. Moreover, the assessee has been held to have borrowed in the capacity of an agent and this proposition of fact and law has also been accepted by the ld. DRP in its order for AY 2009-10 lying at page 47 to 63 of paper book 1. So, impugning the accounting policy followed by assessee by ld. CIT (A)/AO is mis-interpretation of settled proposition in assessee’s own case by the ITAT as well as DRP. Addition being the amount paid/payable by the assessee to third party vendors - vendors did not respond to the notice issued by the AO u/s 133 (6) - Held that:- The assessee is carrying on the business of advertisement for Samsung Groups of company in print and electronic media by way of outsourcing from the vendors, When the vendor raises the bill on the assessee for the payment of the amount, then assessee raises bill for the amount payable to the vendors plus its remuneration on its clients. Perusal of P&L account, available at page 74 of the paper book 1 of 2, shows that the assessee has not declared its receipt from its clients on income side and payment to the vendors on the expenditure side which otherwise does not amount to under-statement of income. This issue requires to be determined on the basis of factual and legal position applicable in this case and by following the order dated 17.08.2016 (supra) passed by the coordinate Bench for AY 2010- 11, applicable to the identical facts of this case, the impugned order is set aside and the matter is restored to the AO for deciding this issue afresh after providing an opportunity of being heard to the assessee. In case, the payment is actually made by the assessee to the vendors in terms of the Agreement then no addition can be made otherwise addition on account of alleged payment can be made. Addition u/s 68 - ad hoc addition being 50% of the amount paid/payable to the vendors to whom no notices were sent by the AO - Held that:- When no notice has been sent to the vendors to whom the payments have been made by assessee by raising bills to his clients along with its remuneration, no ad hoc addition can be made. We are of the considered view that this issue is also required to be restored to the AO to decide afresh after issuing notice and procuring requisite information under the law and to decide the issue afresh after providing an opportunity of being heard to the assessee. Non deduction of tds - payment made to its vendors for supply of material - Held that:- As discussed in the preceding paras, while determining grounds above all the vendors have not come up before the AO and out of 22 vendors, only 8 vendors have confirmed the receipt and such an addition cannot be made by randomly picking up the facts. Secondly, when the issue has already been determined in favour of the assessee by the Tribunal in AY 2010-11 that the assessee is not a sub-contractor but an agent, the service element is apparently not there in the supply of material to attract section 194C of the Act. So, in the given circumstances, we are of the considered view that this issue is required to be determined afresh after providing an opportunity of being heard to the assessee after due verification. So far as question of disallowance of payment i.e. 50% of the balance amount made to its vendors for supply of material without deduction of TDS u/s 40(a)(ia) of the Act on ad hoc basis is concerned, the same is also required to be determined afresh in the light of the findings returned on grounds no.3 to 8. Furthermore, the entire facts as to the supply of material by the vendors are yet to be brought on record by the AO by making discreet investigation. So, consequently, grounds no.9 to 14 are determined in favour of assessee. Addition on account of decrease in the Net Profit (NP) ratio - Held that:- Bare perusal of the comparative chart of GP and NP rates for AY 2007-08 and AY 2013-14 goes to prove that net profit ratio in the instant case has never been consistent and even otherwise, it cannot be consistent as it depends upon numerous reasons. When the audited books of account have not been rejected, merely making an addition on ground of fall in NP ratio is not sustainable in the eyes of law. Moreover, the assessee has duly explained the reasons for fall in the net profit ratio in AY 2011-12 viz. fall in service income; increase in personnel expenses; and increase in depreciation charges which have been reproduced by the ld. CIT (A) of the impugned order but has not preferred to assign any reason for not accepting the contentions raised by the assessee. So, in view of the facts and circumstances of the case, we are of the considered view that in the absence of any cogent reasons, addition on the basis of fall in net profit ratio, that too without rejecting the books of account, is not sustainable, hence deleted.
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Customs
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2017 (8) TMI 433
Maintainability of petition - adjustment towards antidumping duty on the imported goods - time limitation - Section 28 of the Customs Act - Held that: - Admittedly the said amount was adjusted by making voluntary payment along with others by the Petitioner though it was time barred. The law is settled that the Revenue Department/Authorities are not required to issue a demand beyond 5 years period under Section 28 of the Customs Act. By impugned order dated 30.05.2016, the said amount is adjusted towards antidumping duty on goods imported apart from the other order. The Settlement Commissioner, while passing the final order on Petitioner's Application in para 2.2 referring to Chart even noted the four bills of entry beyond the period of 5 years including the issue in question. Therefore, having once noted, there was no question of appropriation of this amount by the SNC. The Petitioner's voluntary deposit, in no way, can bring the said amount within the purview of 5 years period so prescribed. The position of law of Bill of Entry beyond the period of 5 years is clear. Therefore, on this sole ground, we are inclined to consider the case of the Petitioner as contended - The bar of Section 127J needs to be considered from the point of the authority in question. But, in view of above observation on admitted position on record, as case is made out, we are inclined to invoke Article 226 of the Constitution of India, in the present case. The parties cannot be remedyless if case is made out. The Petitioner has no other alternative and efficacious remedy and as the writ petition against such order passed by the Settlement Commissioner in Settlement cases is maintainable - petition maintained.
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2017 (8) TMI 432
Reimbursement of Central Sales Tax (CST) - purchases of Medical Equipments from other suppliers in the course of inter-state Trade and Commerce - denial of benefit on the ground that the goods purchased from EOU - Held that: - there is no justifiable reason for the Respondent-Authority to deny such benefit of CST reimbursement to the petitioner -Company merely because the goods in question are purchased from a Unit situated in EOUs/SEZs/EHTP/STPI specified Zones or areas and deny the said benefit merely because the Units are located in EOU/SEZ area. Irrespective of the location of the Manufacturing Units selling such products to the petitioner - Company in the course of inter-state Trade and charging CST, the goods continue to be the "Goods manufactured in India" which is the requirement in the said Foreign Trade Policy for entitling the petitioner -Company to claim such reimbursement of CST paid under the Central Sales Tax Act, 1956. Moreover, the specific amendment in the said Foreign Trade Policy for the year 2015-2020 removed the said anomaly and discrimination as to the source of Units from which the petitioner may purchase such goods in the course of inter-state trade and commerce and the said amendment can be treated only as a clarificatory one and can be applied to the previous period also - petition allowed - decided in favor of petitioner.
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2017 (8) TMI 431
Absolute Confiscation - Foreign Currency of 13500 Euros and Indian Currency of ₹ 10,00,000/- - The Appellate Commissioner upheld the absolute confiscation of Indian Currency and passed an order on 25.05.2016, by rejecting the order passed by Commissioner of Customs (Appeals) of converting of absolute confiscation to allowance of confiscation on redemption - whether the respondent can refuse to implement the order passed by the Commissioner of Customs (Appeals), on the ground that they have filed a revision before the Central Government? - Held that: - The High Court of Punjab and Haryana in the case of NVR Forgings Vs. Union of India [2016 (5) TMI 7 - PUNJAB AND HARYANA HIGH COURT] considering the validity of an order passed by the Revisional Authority of the Central Government in the Cadre of Joint Secretary to Government testing the correctness of the order passed by the Commissioner of Customs (Appeals) and while considering the validity of such an order, held that the cadre of Joint Secretary to the Government of India is equivalent to the cadre of Commissioner of customs (Appeals) and therefore, the Revisional Authority cannot sit in judgment against the order passed by the Commissioner of Customs (Appeals) - non-implementing order passed by the Commissioner of Customs (Appeals) on the ground that the revision was pending, cannot be countenanced. The petitioner having succeeded before the Commissioner of Customs (Appeals), cannot be directed to file Bank guarantee for the entire amount and the Revenue, which has filed the revision, having lost before the Commissioner of Customs (Appeals), it would be sufficient, if a bond is executed by the petitioner to secure the interest - petition allowed - decided in favor of petitioner.
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2017 (8) TMI 430
Classification of imported goods - old & used Digital Multifunctional Print & Copier Machines with accessories and attachments - release of goods on payment of redemption fine and penalty - Held that: - similar issue decided in the case of Shivam International Vs. Commissioner of Customs, Cochin [2013 (3) TMI 408 - CESTAT BANGALORE] wherein the Tribunal disposed of a batch of the appeals by holding that the impugned orders to the extent of confiscation and consequent penalties challenged in respect of 'old & used digital multifunctional print and copier machines' are incorrect and liable to be set aside - the imposition of redemption fine and penalties on the appellants is not sustainable in law, for the used Digital Multifunction Machines imported by the appellants. Redemption fine in case of imported ‘analog photocopiers’ - Held that: - With regard to this item, no finding has been given in favour of the appellants. Therefore, with regard to 'analogue photocopiers' the concerned appellants are liable to pay redemption fine and penalty. Appeal allowed - decided partly in favor of appellant.
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2017 (8) TMI 429
Refund claim - Cess - unjust enrichment - Held that: - issue is no more res integra and is squarely covered by the decision in the case of ASIA PACIFIC COMMODITIES LTD. Versus ASSISTANT COMMR. OF CUS., KAKINADA-I [2012 (11) TMI 919 - ANDHRA PRADESH HIGH COURT], where the cess was levied after the same was abolished. The amount realized from the foreign buyer was only FOB value. It was held by the Hon'ble Andhra Pradesh High Court that all duties, cess etc are to the sellers account and also as the amount realized as per the Banker's certificate was only FOB value, therefore there is no unjust enrichment and the cess had to be refunded - the refund of cess is not hit by unjust enrichment and the appellants are entitled for the refund - appeal allowed - decided in favor of appellant.
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2017 (8) TMI 428
Confiscation of goods - shipping bills were not entered in export goods arrival register maintained at CFS, STT, ICD, Dadri - drawback claim - Held that: - it is very clearly held by the Original Authority that the clearance for export of goods was given by the Customs Authorities that goods were exported and the export proceeds were realized. The Original Authority in the Order-in-Original has made some observations on few issues about the procedure followed. The appellant in the above stated grounds of appeal has very clearly submitted the procedure being followed in the EDI System and submitted that the entries in the EDI System are based on protection through password and therefore, we do not find any strength in the allegations leveled against the appellant in the said show cause notice about procedure being not followed. The requirement of admissibility of drawback is that the goods are exported and export proceeds are realized and at the time of export, shipping bills under the claim of drawback is filed and assessed accordingly - the appellant had followed the proper procedure and Let Export Order was given by Customs Authorities and goods were exported and export proceeds were realized. SCN not sustainable - appeal allowed - decided in favor of appellant.
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Corporate Laws
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2017 (8) TMI 426
Membership of the private company exceeded 50 or not - joint share holdings of the members - exclusion of employee quota - Deemed public company - transfer of five shares of the appellant (singly) to the appellant jointly with his children and wife - according to the respondents resulted in the membership of the 1st respondent company exceeding 50 thereby rendering the 1st respondent a public company. Held that:- In view of the condition imposed in Section 3(1)(iii)(b)(ii), even if the employee share holders who continued to be the members after their employment ceased are also required to be excluded categorically while computing the number of members fifty as restricted under Section 3(1)(iii)(b). In my view, any such transfer made by such employee share holder in favour of his wife or children would not make his wife or children as a member to be included within the number of fifty members and such member, if any, would be continued to be excluded for the purpose of computation of fifty members under Section 3(1)(iii)(b) of the Companies Act, 1956. The submission of the learned senior counsel for the respondent no.1 that such employee quota share does not remain as employee quota or that there is no bar for transfer of such shares by the employees under Article 59 of the Articles of Association, cannot be accepted. (i) The number of members of the respondent no.1 has not exceeded 50 by virtue of transfer of shares by the appellant (singly) to the appellant jointly with his children and wife. (ii) Interim protection granted by the Supreme Court in favour of the appellant to continue for a period of twelve weeks.
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Insolvency & Bankruptcy
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2017 (8) TMI 425
Maintainability of petition - petitioner claiming to be the Operational Creditor as against the Respondent Company/Corporate Debtor - Held that:- Even though the claim which remains unanswered as per the statement of the Petitioner/Operational Creditor to the extent of ₹ 8,28,394/-, which is well the above statutory minimum of ₹ 100,000 fixed by IBC, 2016 for maintaining a petition, the Operational Creditor does not seem to have complied with the mandatory requirement of serving notice of default as well as notice of application on the Corporate Debtor at its registered office nor complied with the provisions of Sub-Section (3) of Section (9) in relation to documents to be annexed along with the application, in the sense that a copy of certificate from the financial institution maintaining the accounts of the Operational Creditor confirming that there is no payment of unpaid operational debt by the Corporate Debtor which has not been furnished before this Tribunal. While the dispatch of notice of demand seems to have been sent as per the postal receipt dated 7.2.2017 to the registered office of the company located at Okhla Industrial Estate, however, no satisfactory proof of service of notice of default has been enclosed for our verification. Further, in relation to the notice of application sent by the Petitioner dated 7.6.2017, a tracking report has been produced by the Petitioner as Annexure-A to the additional affidavit filed on 6.7.2017 which shows that on 5.6.2017 an attempt to deliver the postal cover has been made but 'remains unclaimed' and in the circumstances we do not have any other option other than to conclude that both demand notice and the notice of application has not been served on the financial debtor as required under the provisions of IBC, 2016 read with 'AAA' Rules. Considering all the above, the application requires to be dismissed.
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2017 (8) TMI 424
Corporate Insolvency process in respect of Respondent corporate debtor - Insolvency and Bankruptcy Code, 2016 - Held that:- The term “dispute" has to be given a wide meaning and shall contained all type of dispute related to amount of debt or quality of goods. In the present matter, the corporate debtor never admitted the claim of the operational creditor and had raised its own counter claim against the operational creditor. As discussed above corporate debtor has raised dispute with sufficient particulars. Hence, the amount of claim raised by the operational creditor clearly falls within the ambit of disputed claim. Section 9(5)(ii)(d) of the Code provides that adjudicating authority shall reject the application if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. For the reasons stated above this petition fails and the same is rejected. We make it clear that any observations made in this order shall not be construed as an expression of opinion on the merit of the controversy and the right of the Applicants before any other forum shall not be prejudiced on account of dismissal of instant application.
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FEMA
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2017 (8) TMI 423
Alternative remedy of appeal - Guilty for contravention of the provisions of Section 3(c) of the Foreign Exchange Management Act, 1999 - Held that:- When the statutory alternative remedy of appeal is available, the High Court should not entertain an application under Article 226 of the Constitution of India. When a right or liability is created by the statute, the High Court must insist that before availing remedy under Article 226 of the Constitution of India, a person must exhaust the remedies available under the relevant statute. However, the same is subject to certain exceptions which do not attract the present case and do not call for interference to the facts of the instant case. Writ petition is disposed of directing petitioner Nos.2 to 4, who are the legal representatives of deceased petitioner No.1, to file an appeal before the Special Director (Appeals) under Section 17 of FEMA and if such an appeal is filed within a period of forty five (45) days from today, the appellate Forum shall consider the question of limitation having regard to the provision of Section 14 of the Limitation Act, 1963 and also having regard to the fact that petitioner Nos.2 to 4 were bona fidely pursuing their case under Article 226 of the Constitution of India before this Court. Along with the appeal, petitioner Nos.2 to 4 shall also make an application seeking interim order which shall also be dealt with. If an application seeking interim order is filed along with the appeal, the authority shall dispose of the same within a period of six (6) to eight (8) weeks from the date of filing of the said application in accordance with law.
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Service Tax
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2017 (8) TMI 440
Short payment of tax - extended period of limitation - case of appellant is that Revenue was aware of the short payment in the year 2004 and therefore, extended period of limitation cannot be invoked - Held that: - the knowledge of Revenue after the evasion has taken place, is irrelevant for invocation of extended period of limitation - appellant arguement on limitation fails. Adjustment of amount already paid - case of appellant is that they have already paid the entire amount of duty and therefore, same should be adjusted against the demand made - Held that: - The appellants have not given any evidence to link the said payment with the service tax leviable during 14/05/2003 to 28/05/2003. In the absence of any evidence to link the two together, it is not the possible to allow adjustment of the said amount against the duty leviable. Appeal dismissed - decided against appellant.
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2017 (8) TMI 439
Penalty u/s 78 of FA, 1994 - demand was confirmed u/s 73A(4) of the Finance Act, 1994 - Held that: - From the above plain reading of the Section 78 it can be seen that penalty under such Section can only be imposed when service tax is determined under Sub-Section (2) of Section 73 - in the present case admittedly the service tax was determined under Section 73A(4) of the Finance Act, 1994. Therefore the penal provisions of Section 78 is consequentially not applicable in the case of demand of service tax determination under Section 73A(4) - demand of tax with interest upheld - penalty set aside - appeal allowed - decided partly in favor of appellant.
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2017 (8) TMI 438
Maintenance and repair service - repair, alteration, renovation or restoration or similar service in relation to commercial buildings and civil structures - if the service provided by the appellant is in the nature of management, maintenance and repair service or commercial and industrial construction service? - Benefit of N/N. 1/2006-ST - Held that: - A perusal of the contract provided by the appellant shows that the contract is titled as maintenance contract and a list of items of work is specified therein against which rates for the same have been mentioned. The arrangement between the service provider and the service recipient is that, as and when an item of work is required to be done, the same would be done by the service provider and the payment would be made as per the rate prescribed in the rate contract. The nature of work is clearly in the nature of regular maintenance which may include replacement of certain items or provision of certain new items - the classification under commercial and industrial construction service has to be ruled out. In these circumstances, the claim of the appellant that the service is commercial and industrial construction cannot be accepted - appeal dismissed - decided against appellant.
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2017 (8) TMI 437
Clearing and Forwarding Agent Service - case of appellant is that the service provided by them is not C&F service but packaging service - Time limitation - valuation - reimbursement expenses - includibility - Held that: - the appellant had not filed any reply before original adjudicating authority - the issues have not been considered by the original adjudicating authority due to non co-operation of the appellant - In the interest of justice, the impugned order is set aside and the matter is remanded to the original adjudicating authority to give his finding on the issues - appeal allowed by way of remand.
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2017 (8) TMI 436
Penalties u/s 77 and 78 - appellant have collected the service tax from their client and not deposited to the Government exchequer - Held that: - The reason given for non-payment of service tax in time is that the appellant was facing the financial crisis is not satisfactory, for the reason that if the appellant had bona fide intention, they would have declared the service tax liability in their ST-3 Return, but they failed to do so. Had the department not initiated the inquiry of non-payment of service tax the same could have left undetected which may cause the revenue loss to the Government - Section 80 not invoked. Moreover, since there is a suppression of fact, as regard non-payment of service tax the provisions of Section 73 (3) is also not applicable to the appellant case. Appeal dismissed - decided against appellant.
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2017 (8) TMI 435
Maintenance or Repair Services - maintenance and repair services mainly in respect of Defence customers like Air force, Navy, Army and Coastguard, in addition to civil customers like M/s. ONGC - Held that: - the issue involved in the present case is no more res integra and has been settled in favor of the appellant by the Hon'ble Supreme Court in the case of Larsen and Toubro Ltd. [2015 (8) TMI 749 - SUPREME COURT], wherein the Hon'ble Supreme Court has categorically held that before 1.6.2007 there was no charging Section to specifically levy service tax on works contract or mechanism to tax service element derived from gross amount charged for works contract less value of property in goods transferred in execution of the works contract and in the present case, the period involved is July 2003 to September 2004 - appeal allowed - decided in favor of appellant.
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Central Excise
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2017 (8) TMI 434
Valuation - cost of specification and cost of developing screen printing - includibility - Held that: - the designs and drawings charges are required to be added in the assessable value - appeal dismissed - decided against appellant-assessee.
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CST, VAT & Sales Tax
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2017 (8) TMI 427
Principles of Natural Justice - Service of Notice - Form VAT N- 2 - petitioner claim is that the change of address duly communicated to Department - maintainability of petition where alternative remedy available - Held that: - The narration of facts noticed clearly shows that certain factual matrix is required to be established for which the first appellate authority would be proper forum instead of invoking writ jurisdiction of this Court under Articles 226/227 of the Constitution of India at the first instance - The Apex Court in Commissioner of Income Tax and others vs. Chhabil Dass Agarwal, [2013 (8) TMI 458 - SUPREME COURT], considered the question of entertaining writ petition where alternative statutory remedy was available and held that Act provides complete machinery for the assessment/re-assessment of tax, imposition of penalty and for obtaining relief in respect of any improper orders passed by the Revenue Authorities, and the assessee could not be permitted to abandon that machinery and to invoke the jurisdiction of the High Court under Article 226 of the Constitution when he had adequate remedy open to him by an appeal to the Commissioner of Income Tax (Appeals). The writ petition is disposed of by relegating the petitioner to alternative remedy of appeal against the impugned order dated 31.03.2016 - decided in favor of petitioner.
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