TMI Tax Updates - e-Newsletter
August 17, 2019

Case Laws in this Newsletter:

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

Articles

1. A brief information on Advance Ruling under GST

   By: Ganeshan Kalyani

2. RECENT ADVANCE RULINGS IN GST (PART-19)

   By: Dr. Sanjiv Agarwal

3. OVERVIEW OF COMPANIES AMENDMENT ACT 2019

   By: KANIKA LOHIYA

News

1. MCA amends provisions related to Differential Voting Rights under Companies Act

2. Four New Products get GI Tag

Notifications

Companies Law

1. File No. 1/5/2019-CL-I - S.O. 2947 - dated 14-8-2019 - Co. Law

Central Government appoints the 15th day of August, 2019 as the date on which the provisions of various Sections of the Companies (Amendment) Act, 2019 shall come into force

Customs

2. 61/2019 - dated 14-8-2019 - Cus (NT)

Tariff Notification in respect of Fixation of Tariff Value of Edible Oils, Brass Scrap, Poppy Seeds, Areca Nut, Gold and Silver

3. 60/2019 - dated 14-8-2019 - Cus (NT)

Exchange Rates Notification No.60/2019-Custom(NT) dated 14.08.2019

GST - States

4. 15/2019 (State Tax) - dated 21-6-2019 - Arunachal Pradesh SGST

Seeks to amend Notification No. 14/2019-State Tax, dated 23rd April 2019

Circulars / Instructions / Orders

Income Tax

1. 19/2019 - dated 14-8-2019

Generation/ Allotment/ Quoting of Document Identification Number in Notice/ Order/ Summons/ letter/ correspondence issued by the Income-tax Department

IBC

2. IBBI/CIRP/023/2019 - dated 14-8-2019

Filing of Forms for the purpose of monitoring corporate insolvency resolution processes and performance of insolvency professionals under the Insolvency and Bankruptcy Code, 2016 and the regulations made thereunder.

Highlights / Catch Notes

Income Tax

• Deduction Denied u/s 80IB: Saloon Business Not Integral to Hotel Operations, Lacks Direct Profit Connection.

  Case-Laws - HC : Deduction u/s 80IB (7)(a) - assessee failed to establish that the saloon business was the part and parcel of the core activity of the hotel business - There must be, for the application of the word "derived from", a direct nexus between profits and gains and the industrial undertakings - Additions confirmed.
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• Assessee's Evidence Validates Share Transactions; Deletion of Bogus LTCG and LTCL Additions Confirmed.

  Case-Laws - AT : Bogus LTCG/LTCL - the assessee has duly placed on record the relevant contract notes, share certificate(s), detailed corroborative documentary evidence indicating purchase / sale of shares through registered brokers by banking channel, demat statements etc. - Additions deleted.
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• Assessee Disputes AO's Combined Order Over Multiple Years, Citing Double Taxation Avoidance Agreement Concerns.

  Case-Laws - AT : Common order passed by AO for more than one assessment years - Assessee has raised common grounds of appeal feeling aggrieved by the order of AO, and on the issue of DTAA, the assessee had raised general ground and therefore, there is no prohibition for the AO to pass a common order for all the assessment years.
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• Commissioner of Income Tax (Appeals) Grants Relief Due to Lack of Evidence on Vendors' Residency Status u/s 195.

  Case-Laws - AT : TDS u/s 195 - rate of withholding tax - CIT(A) granted relief - if this is the contention of the revenue that the vendors of Ireland, Netherland, Singapore, Israel, France, Germany, Australia and Belgium etc. are not residents of respective countries, the revenue should have brought on record some evidence in this regard.
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• Assessing Officer Finds Share Purchase and Sale Fraudulent; Assessee Fails to Prove Authenticity of Transaction.

  Case-Laws - AT : Bogus LTCG - AO has unearthed the bogus transaction of purchase and sale of shares which was not real and assessee has failed to dispel all the quarries raised by the AO to establish that the transaction in question was real and not beyond human probabilities.
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• Adidas AG's Insurance Compensation Not Taxable in India under Income Tax Act Sections 5 and 9(1)(i).

  Case-Laws - AT : Whether the compensation received by the Adidas AG has accrued u/s 5 or deemed to accrue as per section 9(1)(i) of the Act? - M/s Adidas AG has paid premium in respect of the policy from time to time and also paid tax in Germany in relation to the amount in question of insurance claim. - Amount not taxable in India.
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• Income-tax Department Requires Document Identification Number for All Communications to Ensure Transparency and Accountability.

  Circulars : Generation/Allotment/Quoting of Document Identification Number in Notice/Order/Summons/letter/correspondence issued by the Income-tax Department
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• Tax Liability Upheld u/s 68 for Unexplained Cash Deposits Before Loan from Relatives; Evidence Deemed Insufficient.

  Case-Laws - HC : Addition u/s 68 - loans from relatives through banking channel - it is also not in dispute that cash deposits were made in the bank account of the creditor just before advancing the loan and no explanation was forthcoming before the authorities below - the onus of proving the source of a sum of money found to have been received by the assessee is on him and if he disputes the liability for tax - addition sustained
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• Agricultural Land as Capital Asset: Section 2(14) Focuses on Distance from Municipality with 10,000+ Population for Tax Purposes.

  Case-Laws - HC : Capital asset” u/s 2(14) - agricultural land - scope of word “any municipality” - Section 2(14)(iii)(b) contemplates calculating distance of the land in question from the nearest municipality it does not mean the jurisdictional municipality, it only means that the municipality from which the distance is calculated should have a population of not less than 10 thousand - capital assets
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• No Unaccounted Money Added: Assessee Cleared u/s 69A for Cash Found in Search, Claimed by Brother-in-Law.

  Case-Laws - AT : Addition of unaccounted money u/s 69A - cash found during the course of search u/s 132 - the assessee all along claims that said cash belongs to his brother in law who also confirmed then no adverse inference could be drawn against the assessee that said cash belongs to the assessee and assessee is unable to explain source of cash found during the course of search - no addition
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• Court Condones 655-Day Appeal Delay Due to Work-from-Home Employee's Negligence u/s 273B.

  Case-Laws - AT : Condonation of delay of 655 days - negligence of an employee - mistake of employee working at residence appears to be reasonable and comes within the meaning of reasonable cause, as provided u/s 273B - a litigant does not stand to benefit by filing an appeal late, rather it creates undue hardship to the litigant, because of tax demand - delay condoned
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• Assessment Reopened u/s 147 Quashed Due to Lack of Tangible Material; Notice Issued u/s 148 Invalid.

  Case-Laws - HC : Reopening of assessment u/s 147 - the notice u/s 148 on the basis of “on verification of records” - the AO has power to reopen the assessment, provided there is “tangible material” to come to the conclusion that there is escapement of income from assessment and the reasons must have a live link with the formation of belief - in absence of tangible material it is mere change of opinion - notice quashed
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• Section 32AB Deduction Upheld: Amalgamated Company Retains Assets, Ensures Continued Eligibility for Tax Relief.

  Case-Laws - HC : Deduction granted u/s 32AB - appellant was amalgamated with its parent company - the assets in respect of which relief was allowed u/s 32AB are still held by the amalgamating company even after amalgamation and gets fused by one company - deduction rightly allowed
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• No TDS on Telecom Roaming Charges: Payments Not Technical Services u/s 194J.

  Case-Laws - AT : TDS u/s 194J - roaming charges paid by it to other service providers - the payments made for interconnection are not fees for rendering any technical services as envisaged in section 194J, therefore, no tax is de ductible at source u/s 194J on payment of roaming charges to the OTOs and the assessee therefore cannot be treated as an assessee in default
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• Scholarship Expenses u/s 37: Allowable for Professional Growth, Not Capital in Nature, Boosts Business Value.

  Case-Laws - AT : Allowability of expenditure u/s 37 - expenditure on scholarship - there are innovative ways visualized by the professional to make themselves visible in the professional circle and to build their own professional profile for generating higher and value added business - cannot be held to be capital expenditure in nature as no fresh new fixed assets is created by paying the scholarship sum - allowable expenditure
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• Assessment Reopening u/s 147 Invalid; Issues Already Addressed in Prior Appeal, Assessment Order Quashed.

  Case-Laws - AT : Reopening of assessment u/s 147 - when the issues were subject matter of appeal before the CIT(A) in the case of original assessment, the AO cannot re-visit the same by re-opening the assessment u/s. 147 and also in view of second proviso to section 147 - assessment order is quashed
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• Income Accumulation Benefits u/s 11(2) Apply Only to Direct Property Income, Not Deemed Income u/s 11(3)(c).

  Case-Laws - AT : Allowability of accumulation u/s 11(2) of the income assessed u/s 11(3)(c) - the benefit of accumulation shall be available only to the “income derived from the property” and not to “deemed income”, since the income assessed u/s 11(3) cannot be considered to be an income derived from the property, same is not be eligible to accumulate
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• Restrictive Covenant: Income from Agreement to Avoid Insurance Business is Capital Receipt, Not Taxable Income.

  Case-Laws - HC : Characterization of income - received to restrain the assessee firstly, preventing them from entering into insurance business, secondly, preventing them from entering into an agreement with any other foreign insurance company - the condition is clear and lucid and it is to be treated as a 'restrictive covenant' - amount received was a capital receipt
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• CBDT Circular Permits 10% Depreciation on Employee Residential Flats Without Specific Conditions or Factory Premises Requirement.

  Case-Laws - HC : Depreciation @10% on residential flats used for its employees - CBDT Circular dated 12.12.1996 - there was no such restriction in the Circular issued by the Board stating that the benefit would accrue to the assessee only if the residential accommodation is situated within the factory premises nor if the accommodation is provided to all the employees - depreciation allowable @10%
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Customs

• Court Rules on Related Party Transaction in Import Valuation; Department Lacks Evidence for 1% Value Increase.

  Case-Laws - AT : Valuation of imported goods - related party transaction or not - Department has not adduced any evidence of any contemporaneous imports - Loading of value by 1% in respect of imported capital goods i.e. slitting line, which is already included in the value declared is sufficient.
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• Import Duty Demand Overturned After EOU Notifies Department of Supplier Deception in Paraffin Wax Case.

  Case-Laws - AT : 100% EOU - import of Fully Refined Paraffin Wax - The appellant has been cheated / duped by the supplier and the appellant immediately inform the Department regarding the conditions of the impugned goods and followed the procedure as per the guidance given by the Department - Demand of duty with interest and penalty set aside.
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• Customs Review: Granola Bars with Whole Grain Oats Not Classified as Cereals Due to Baking Process Transformation.

  Case-Laws - AT : Classification of imported goods - Granola Bars - mixture of whole grain rolled oats - The alteration of character is a consequence of the baking after mixing which is substantively different from adding to pre-cooked or prepared grain. - It would not be appropriate to fit the imported goods under the category of cereals or prepared food in the absence of coverage by the residuary entry.
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• Customs Case: Revenue Misses Timely Info Check, Later Accuses Importer of Fact Suppression; Highlights Need for Prompt Action.

  Case-Laws - AT : Extended period of limitation - suppression of facts - The Revenue had all resources and opportunities in 2013 to either know from the importer all the technical information that they required. Since Revenue have not done so, in 2016 they cannot make allegation that importer did not provide them all the information.
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• Penalty Imposed for Misdeclaration of Goods with Fake ETA Certificates; Mens Rea Not Required u/s 112(a)(ii) of Customs Act.

  Case-Laws - AT : Levy of penalty - misdeclaration of goods - Equipment Type Approval (ETA) certificates have been found to be fake - mens-rea is not required - appellant are liable to penalty u/s 112 (a) (ii) of the Customs Act, 1962
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• Export Oriented Units exempt from duties on cotton waste; no repayment needed if obligations met or duties equated.

  Case-Laws - AT : Benefit of exemption notification -EOU - export of cotton waste generated in manufacturing of cotton yarn - the cost of production of the finished goods invariably subsume the value of the materials that are embedded in the waste, hence such value have already been either included in the obligation for export or subject to rate of duty not less than that suffered by a domestic unit - no need for repay duties foregone at the time of import
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Corporate Law

• Directors' Penalty Reduced in Cost Audit Report Case u/s 233B(11) of Companies Act; Highlights Fine Disparity.

  Case-Laws - AT : Fine for non preparation & filing of Cost Audit Report in time - prosecution u/s 233B(11) of the Companies Act - the Company and the Directors have not been treated equally - reduced penalty from 2 lakhs to 40 thousands on director
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Indian Laws

• Trustees Not Liable for Cheque Dishonor Under NI Act Sections 138 & 141 if They Didn't Sign the Cheque.

  Case-Laws - HC : Dishonor of Cheque - Prosecution proceedings against the trustee who has not signed the cheque - The "trust" is not a "body corporate" or an "association of individuals" as provided in the Explanation to section 141 of the N. I. Act. Therefore, no prosecution against the trustees, invoking the provisions u/s 138 / 141 of the NI Act, can be maintained.
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IBC

• Tribunal Dismisses CIRP Petition for Concealment of Prior Filing, Imposes Rs. 2,00,000 Cost on Applicant.

  Case-Laws - Tri : Admissibility of CIRP petition - Applicant seems to have deliberately concealed the filing of previous petition before this Tribunal based on the same original transaction - The petition is rejected in limine with cost of ₹ 2,00,000
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• CIRP application dismissed: Brokerage payment not "financial debt" under Companies Act sections 186(2) and (3). No loan evidence found.

  Case-Laws - Tri : Maintainability CIRP application - the amount paid to the CD towards brokerage can be "financial debt"? - There is nothing on record to show that the financial creditor gave loan after complying the conditions stated in section 186(2),(3) of the Companies Act - the transaction as potrayed by the financial creditor against the CD cannot be recognized as the transaction of loan - hence There is no default in paying such debt - application dismissed
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PMLA

• Appellate Tribunal Cannot Confiscate or Release Property in Money Laundering Cases, Only Special Court Can Restore It.

  Case-Laws - AT : Money Laundering - Release of attached property - exercise of the powers of confiscation or release of the attached property by this Appellate Tribunal is beyond the scope of activities of this Tribunal and would be grossly illegal. Moreover as per Section 8(8) even the powers of restoration of such confiscated property or thereof to a claimant with a legitimate interest in the property vests with the Special Cour
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Central Excise

• Joint Commissioner Can Issue Show-Cause Notice Even If Duty Exceeds Rs. 2 Crore; Circulars Don't Invalidate Authority.

  Case-Laws - HC : Jurisdiction of Joint Commissioner to issue SCN - duty/tax involved in the present case exceeds ₹ 2 crore - By merely relying upon the circular, it cannot be said that the Joint Commissioner had no jurisdiction to issue the show-cause notice and adjudicate the same.
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• Pre-deposit is mandatory for appeals against Tribunal orders; no waiver allowed under Article 226 writ petitions.

  Case-Laws - HC : Waiver of pre-deposit - There is no good reason to waive the mandatory requirement of pre-deposit, which, in any case, cannot be waived as it is an appeal against the order passed by the Tribunal and not a writ petition under Article 226 of the Constitution of India.
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• Court Dismisses Rs. 2 Lakh Compensation Claim Against Excise Officers Citing Good Faith Under Central Excise Act.

  Case-Laws - HC : Suit filed by the appellant/plaintiff claiming ₹ 2 Lakhs as compensation for the loss of reputation and goodwill caused by the officers of Central Excise - When the respondents acted in good faith under the provisions of the Central Excise Act or rule made there under, no suit, prosecution or other legal proceedings shall lie against the Officers.
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• Interest Demand on Reversed Credit Not Retroactive for Pre-March 2015 Credits; No Revenue Loss or Assessee Advantage Found.

  Case-Laws - AT : Demand of interest on reversal of credit - The aforesaid provisions brought into effect on 14th March, 2015 cannot be applied (retrospectively) for the credit amount already shown in the returns prior to March 2015 (i.e. August 2011 when the fire incident occurred) - when the wrong credit is not utilized for payment of final output duty on final products, neither the assessee gets any advantage nor there is any Revenue loss to the Government - Demand of interest set aside.
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• Cigarette Packaging Labels Classified as "Articles of Paper," Not "Printed Cartons"; Assessee's Classification Prevails Over Show-Cause Notice.

  Case-Laws - AT : Classification of ‘labels’ used in packing of cigarettes - ‘articles of paper’ and ‘not printed cartons’- if the alternative proposed in the show-cause notice is not defensible, the claimed classification will prevail even if other headings be more apt - the failure of the product to be covered by the heading proposed in the SCN suffices for acceptance of the one claimed by assessee - articles of paper
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VAT

• Court Upholds Ex Parte Assessment Order Favoring Revenue; Assessee Failed to Challenge Merits in Appeal.

  Case-Laws - HC : Deemed assessment - it is a tough case inasmuch as the assessment order was passed ex parte and none of the appeal authorities have considered the merits of assessment order, yet, this Court in exercise of its revision jurisdiction is constrained to answer the question in the affirmative i.e. against the assessee and in favour of the revenue in view of the fact that the assessee never raised such challenge on merits, before the appellate authorities.
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• Court Rules Self-Acquired Property Cannot Be Attached for Dealer's Tax Arrears Under GVAT Act; Protects Owner's Rights.

  Case-Laws - HC : Attachment of self acquired property other than dealer - arrears of tax revenues under GVAT Act - the writ applicant is neither dealer nor the agent but he is father of the dealer - the property which has been attached is self acquired property of the writ applicant, the same could not have been attached
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Case Laws:

• GST

• 2019 (8) TMI 713
  Release of seized goods and vehicle - Sections 129 and 130 respectively of the GST Act, 2017 - HELD THAT:- The amount has been deposited by the writ-applicant towards the tax and penalty. In such circumstances, the respondents are directed to immediately release the truck as well as the goods seized by them under the provisions of the GST Act.

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• 2019 (8) TMI 712
  Release of seized Truck - goods have been already released - HELD THAT:- As the goods have been released, we direct that the vehicle in question being Truck, having registration No.MH-48-AG-0126, belonging to the petitioner shall also be released forthwith.

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• Income Tax

• 2019 (8) TMI 739
  Addition u/s 68 - loans from relatives through banking channel - creditworthiness or genuineness of the transaction as suspicious - HELD THAT:- Apex Court in the case of Principle CIT vs. NRA Iron and Steel Pvt. Ltd. [ 2019 (3) TMI 323 - SUPREME COURT] and held that if the Assessee Company-Respondent failed to discharge the onus required u/s 68, the Assessing Officer was justified in adding back the amounts to the Assessee s income. In the case in hand, though the stated transaction of alleged loan is through bank but the assessee was not able to explain or substantiate the source; creditworthiness of the creditor and the genuineness of the transactions before the AO and before the CIT(A) and Tribunal. It is also not in dispute that cash deposits were made in the bank account of the creditor just before advancing the loan to the assessee and no explanation was forthcoming before the authorities below and even during the course of arguments before the Tribunal. Therefore, in view of the concurrent findings of fact recorded by the AO, the CIT(A) and the Tribunal that the assessee was unable to satisfactorily explain the source of investment in the said property at any stage, no error could be pointed out in the impugned orders which may warrant interference by this Court. The law is well settled that the onus of proving the source of a sum of money found to have been received by the assessee is on him and if he disputes the liability for tax, it is for him to show that the receipt is not income or it is exempted from tax. In the absence of such proof, the revenue is entitled to treat it as taxable income. - decided against assessee

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• 2019 (8) TMI 738
  Reopening of assessment u/s 147 - change of opinion - HELD THAT:- The Appellate Tribunal, as a last fact finding authority, has taken the view that the reopening is nothing, but change of opinion and there was no failure on the part of the assessee in disclosing all the necessary information for the purpose of making assessment. We take notice of the fact that the Tribunal has relied upon a decision of this Court in the case of Sadbhav Engineering Ltd vs. DCIT [ 2010 (7) TMI 521 - GUJARAT HIGH COURT] We are convinced that no error, not to speak of any error of law could be said to have been committed in passing the impugned order. - Decided against revenue.

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• 2019 (8) TMI 737
  Reopening of assessment u/s 147 - the notice u/s 148 on the basis of on verification of records is nothing but a chance of opinion - capital gain on property sold - inquiry was carried out during the original assessment - HELD THAT:- The AO has power to reopen the assessment, provided there is tangible material to come to the conclusion that there is escapement of income from assessment and the reasons must have a live link with the formation of belief. In the present case, there is no tangible material. The issuance of the impugned notice u/s.148 is nothing but mere change of opinion. In absence of any new tangible material available with the A.O., it is not open to the A.O. to change his opinion by issuing the notice of reassessment. From the reasons recorded it can be said that the original assessment is sought to be reopened in exercise of powers u/s 147/148 on change of opinion by the AO, which is not permissible more particularly when the original assessment is sought to be reopened after a period of four years from the end of the assessment year. Under the circumstances, the conditions stipulated under first proviso to section 147 are not satisfied and therefore, on the aforesaid ground alone, the impugned notice deserves to be quashed and set aside. In view of the above and applying the ratio laid down in the decisions referred and for the reasons stated above, present petition succeeds and the impugned notice dated 27/3/2018 issued by the respondent u/s 148 is held to be illegal, without jurisdiction, bad in law and deserves to be quashed and set aside

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• 2019 (8) TMI 736
  Validity of assessment - order in the name of a dead person - returns was filed by writ petitioner on 30.9.2016, post demise of assessee - dept contended that impugned assessment order is software generated and the respondent cannot change certain details - HELD THAT:- With regard to the first of the threefold submissions pertaining to software, suffice to say that it is for the Income Tax Department to update data software to make allowance for such situations. In the considered view of this Court, such situations may not be infrequent and isolated. Situations wherein returns are filed post demise of the assessee by legal heir are common situations and therefore, it is for the Income Tax Department to ensure that adequate updation is made in the software in this regard. That puts an end to the first of the threefold submissions pertaining to software. Curable defect u/s 292-B - Learned counsel for writ petitioner pressed into service some orders to say that this Court has held that proceedings against a dead person are nullity, but learned Revenue Counsel says that these orders are distinguishable on facts as they pertain to notices whereas the instant writ petition is one assailing an assessment order made u/s 143(3) - it may not be necessary to delve into those aspects of the matter further and it would serve the purpose to direct the respondent to redo the assessment in the name of the writ petitioner on merits of the returns and in accordance with law. In the considered opinion of this Court, this will safeguard the interest of the writ petitioner (assessee s legal heir) as well as protect the interest of the Revenue. Respondent is directed to redo the assessment after putting the writ petitioner on notice. Respondent so redoing the assessment shall be on merits of the returns filed on 30.9.2016 and obviously in accordance with law

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• 2019 (8) TMI 735
  Depreciation @10% on residential flats used for its employees - flats are situated outside factory premises - CBDT Circular dated 12.12.1996 - HELD THAT:- As in DELHI CLOTH AND GENERAL MILLS CO. LTD. [ 1965 (2) TMI 110 - PUNJAB HIGH COURT] after referring to the Circular issued by the Board as published in Page 447 of the Income Tax Manual Part III, 10th Edition, held that the premises where the employees were housed, for which, they paid rental the company were in the near vicinity of the mills, that the rental of those premises were fixed and did not change with the change of the occupant, that the rental deducted from the wages of the employee or employees occupying the premises, that those employees were engaged in the main business of the company and their residence in the buildings in dispute was incidental to the main occupation i.e. the carrying on of the business of the company and that in true perspective, those buildings were part of the business equipment of the owner or in other words, it was the business asset of the owner. The above legal position will squarely apply to the facts of the present case. Tribunal rightly held that there was no such restriction in the Circular issued by the Board stating that the benefit would accrue to the assessee only if the residential accommodation is situated within the factory premises. Furthermore, the said Circular does not restrict the benefit only if the accommodation is provided to all the employees, which, obviously, is a business expediency and it is not for the AO to sit in the arm chair of the assessee to decide as what would be best for their employees. Deduction u/s 80HHC - Tribunal allowing deduction on the basis of book profits u/s 115JA and not on the basis of eligible profits under Section 80HHC as per normal computation - HELD THAT:- An identical question was considered by us in the case of CIT Vs. Sundaram Brake Linings [ 2018 (10) TMI 368 - MADRAS HIGH COURT] . In this decision, we referred to the decision rendered by us in the case of CIT Vs. Bannari Amman Sugars Limited [ 2018 (7) TMI 1845 - MADRAS HIGH COURT] the decision of the Hon ble Supreme Court in the case of Ajanta Pharma Ltd. Vs. CIT [ 2010 (9) TMI 8 - SUPREME COURT] and the decision of the Hon ble Supreme Court in the case of Bhari Information Technology Systems Private Limited [ 2011 (10) TMI 19 - SUPREME COURT] and answered the question against the Revenue.

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• 2019 (8) TMI 734
  Deduction granted u/s 32AB - whether deduction can be withdrawn since the appellant was amalgamated with its parent company? - HELD THAT:- In Shaw Wallace Co.Ltd. Vs. CIT [ 1978 (7) TMI 57 - CALCUTTA HIGH COURT] the Court examined the effect of amalgamation and it was held that the entire capital and assets of the transferor-companies having vested in the assessee, as a result of the said amalgamations, the assessee became the sole owner of the capital of the transferor-companies. There was, therefore, no extinguishment of the right of the assessee in participating in the capital on the liquidation of the transferor-companies. The share held by the assessee in the transferor-companies represented the capital invested by the assessee in the said companies and by the said amalgamation the assessee became the sole owner of the entire capital of the transferor companies. By virtue of the said amalgamations the assessee as the transferee-company became the sole repository of all the rights which flowed from or were embedded in the shares held by the assessee in the transferor-companies. For all the above reasons it was held that, there was not extinguishment of any right of the assessee as holder of the shares in the transferor-companies. The CIT(A) while allowing the appeal filed by the assessee and rightly held that the assets in respect of which relief was allowed u/s 32AB are still held by the amalgamating company even after amalgamation and gets fused by one company. - Decided in favour of the assessee. Machinery maintenance charges which was paid by LGB - AO disallowed the same for want of proof - HELD THAT:- A perusal of paragraph no.(iv) of the assessement order dated 23.03.1994 shows that the AO at no point of time accepted the stand taken by the assessee, in fact, the AO comes to the conclusion that the assessee has not been able to place any material to substantiate the stand and in the absence of any evidence the amount was disallowed and added back. Therefore, the findings of the CIT(A) is contrary to record. CIT(A) further states that there can be no benefit of any kind whatsoever in the assessee s accounting the expenditure for repairs at an inflated figure and paying the tax at a reduced quantum. In our view, this can be a test to be applied to decide, as to whether, the machinery maintenance charges is allowed as expenditure. CIT(A) applied a wrong test and came to the a conclusion. The Tribunal, therefore, rightly reversed the order passed by the CIT(A) and we find no good grounds to interfere with the order of the Tribunal. Accordingly, substantial question of law no.3 is answered against the assessee. Addition for payments made to LGB, which the assessee claimed as expenditure - HELD THAT:- This issue is discussed by the AO as after examining the entire facts, including the reply given by the assessee dated 12.12.1991, held that the claim made by the assessee was arbitrary and there is no scientific basis for such a claim and consequently worked out the expenses based on the system followed by the assessee for the AY 1989-90. CIT(A) could not controvert the finding recorded by the AO which was done by him after taking note of the factual position but proceeded on the basis that what was done by the AO is not realistic. In our view, that could not be the manner in which the CIT(A) could have reversed the finding of the AO, rendered after examining the entire facts. Tribunal, on appeal, for its part re-examined the factual issue and set aside the findings of the CIT(A) and restored the order of the AO. As rightly pointed out by the learned Senior Standing Counsel for the Revenue, this issue revolves entirely on facts and there is no substantial question of law arising for consideration. No substantial question of law

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• 2019 (8) TMI 733
  Capital asset u/s 2(14) - agricultural land - scope of word any municipality used in definition - HELD THAT:- Contention of the writ petitioner s counsel cannot be accepted for the reason that Section 2(14)(iii)(b) contemplates calculating distance of the land in question from the nearest municipality. Merely because Villukury Village falls within Padmanabhapuram Division, it does not mean that Padmanabhapuram Municipality will have to be taken as the jurisdictional municipality for the purpose of computing the distance. The expression used is any municipality . Of course, as rightly contended by the writ petitioner s counsel, we will have to take note of the qualifying expression namely as referred to in item (a) . It only means that the municipality from which the distance is calculated should have a population of not less than 10 thousand and that it should be a municipality as statutorily understood. It has no other meaning or connotation beyond it. In this view of the matter, I hold that the order impugned in this writ petition is very much sustainable. There is no merit in this writ petition.

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• 2019 (8) TMI 732
  Characterization of income - amount received towards restrictive convenant - revenue or capital receipt - HELD THAT:- It was the first time, the Government of India took a decision to permit foreign insurance companies to set up general insurance business in India. The entire matter was regulated by the Government of India under the relevant regulations. Thus, several competing companies in India were desirous of starting insurance business with foreign partnerships / Joint ventures. Therefore, commercial prudence demanded the U.K.Company to restrain the assessee, preventing them from entering into insurance business, which they had not done earlier, secondly, preventing the assessee from entering into an agreement with any other foreign insurance company. The condition is clear and lucid and it is to be treated as a restrictive covenant and merely because the assessee was not in the insurance business is not a ground to read down the condition. Thus, we are of the considered view that the interpretation given by the CIT(A) to the said covenant is just and proper and we do not agree with the finding of the assessing officer as well as the Tribunal in this regard. CIT(A) was fully justified in holding that the amount received by the assessee was a capital receipt and was right in deleting the addition made by the AO. Further, we note that the amount has been credited to the capital receipt account in the balance sheet for the year ending 31.03.2001 and the amount does not come anywhere within the inclusive definition of Income as envisaged in Section 2(24). it will be beneficial to refer to the decision of Hon ble Supreme Court in GUFFIC CHEM (P) LTD. MANDALAY INVESTMENT P. LTD VERSUS CIT [ 2011 (3) TMI 6 - SUPREME COURT]. The Hon ble Supreme Court has held that payment received as non-competition fee under a negative covenant has to be treated as a capital receipt till the Assessment Year 2003-04 . We are of the clear view that the order passed by the Tribunal dated 31.07.2007 reversing the order passed by CIT(A) calls for interference. In the light of the above, the appeal filed by the assessee is allowed and the order passed by the tribunal is set aside and the order passed by the CIT(A) dated 13.01.2005 is restored and the substantial question of law framed is answered in favour of the assessee.

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• 2019 (8) TMI 731
  Allowability of expenditure u/s 37 - expenditure on scholarship - whether expenses incurred to bring into existence and advantage for the enduring benefit of the profession, thus treating the same as capital expenditure - HELD THAT:- It is not the AO but the assessee is carrying on the profession. He knows better that what kind of expenditure he should incur for furtherance of his business. To judge allowability of an expenditure, the learned AO should put himself into the shoes of the assessee and then decide that whether the expenditure incurred by the assessee is necessary or not for the business of the assessee. Thus, allowability of expenditure should always be judged from the mindset of the assessee. AO cannot put his thinking to say that the expenditure incurred by the assessee is not wholly and exclusively incurred for his profession, unless, he brings his level of thinking to the level of the professional, like assessee. The requirement of incurring the expenditure by a professional/businessman changes by the changes in the dynamics of the business, its complexities and its uniqueness. The level at which the assessee is carrying on the profession, perhaps, he might not have thought it proper to increases visibility by attending the conferences, seminars et cetera. He has different vision of carrying himself in the professional field to increases visibility and social status. He thought fit to set up a scholarship to Indian students in Oxford University. Thus, in the present case definitely there is a nexus between the expenditure incurred by the assessee and the professional services rendered by the assessee. We are of the opinion that the assessee has incurred the above expenditure wholly and exclusively for the purposes of the business. In the professional field there are innovative ways visualized by the professional to make themselves visible in the professional circle and to build their own professional profile for generating higher and value added business. It may be, sponsoring a seminar, becoming knowledge partners, setting up the prizes and awards, creating the competitive award ceremonies, hosting vibrant summits of various states. Therefore, it is apparent that at least in the case of the professionals, the way they promote themselves, is changing very fast and the benefits of such expenditure are huge and wide. Therefore according to us the impugned expenditure incurred by the assessee is a revenue expenditure allowable u/s 37 (1) Thus assessee has incurred the above expenditure wholly and exclusively for the purposes of the business.The expenditure incurred by the assessee is the routine day-to-day expenditure incurred by the assessee for promoting his professional profile. These expenditure cannot be held to be capital expenditure in nature as no fresh new fixed assets is created by paying the scholarship sum. Further merely because in the agreement it is mentioned as an annual gift in the form of scholarship, it does not become a gift. - Decided in favour of assessee. Addition on account of foreign exchange loss - assessee is a lawyer by profession and he is following the cash system of accounting - HELD THAT:- Admittedly, the method of accounting of the invoices raised in foreign currency adopted by the assessee of recording the same at the foreign exchange rate prevailing as on the date of raising of the invoice. Further when there is a realization, naturally, there would be a difference in the rates of exchange between currencies, such loss or gain would be accounted for in the profit and loss account itself. Whenever, the bills are realized the necessary impact of foreign exchange gain or loss going to profit and loss account will eliminate the difference between the mercantile method of accounting and the cash basis of accounting, and the correct revenue would be derived as per the Cash Method of accounting. Merely because of the reason that assessee records the invoices prepared in foreign currency at the rate prevailing thereon for control purposes and subsequently offsetting it whenever the bills are realized by debit or credit to the profit and loss account, the net impact is that whatever is cash received is recorded in the profit and loss account. Thus, according to us, there is no addition is warranted even in cash method of accounting adopted by the assessee. No infirmity in the order of the learned CIT A in deleting the addition on account of foreign exchange loss - Decided in favour of assessee.

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• 2019 (8) TMI 730
  Condonation of delay of 655 days - negligence of an employee - HELD THAT:- We have carefully considered reasons given for not filing appeal within the due date provided under the Act, and found that the reasons given by the assessee that he could not noticed service of order from the office of the CIT(A) due to mistake of assessee working at residence appears to be reasonable and comes within the meaning of reasonable cause, as provided u/s 273B. We further noted that ordinarily, a litigant does not stand to benefit by filing an appeal late, rather it creates undue hardship to the litigant, because of tax demand. Therefore, when the appellant gives reasons, for not filing the appeal within the due date prescribed under that and such reasons are supported by necessary sworn affidavit, then merely for the reason of no supporting evidences, the contents of affidavit cannot be ignored. We are of the considered view that there is a reasonable cause for not filing appeal within the time limit provided under the Act, and hence, the delay in filing of appeal is condoned and appeal filed by the assessee is admitted for hearing Addition of unaccounted money of the assessee u/s 69A - cash found during the course of search o/s 132 - assessee claims that cash found during the course of search belongs to his brother in law, who also confirmed this facts - HELD THAT:- The assessee all along claims that said cash belongs to his brother in law Shri. Sanath kumar Shetty and this fact was even confirmed by his brother in law Mr. Sanath kumar Shetty. Therefore, we are of the considered view that merely for the reason that there is a difference in statement given at the time of search and statement given in sworn affidavit regarding source of cash in the hands of Mr. Sanath Kumar Shetty, no adverse inference could be drawn against the assessee that said cash belongs to the assessee and assessee is unable to explain source of cash found during the course of search. We further noted that it is not a case of the AO that there is a difference between statement given during the course of search and explanation furnished during the course of assessment proceedings. The assessee has right from the date of search to till date of assessment had taken one stand, in respect of cash found from his residence. Therefore, we are considered view that the Ld.AO, as well as Ld.CIT(A) erred in sustained additions towards cash found, during the course of search u/s 69A - appeal filed by the assesse is allowed

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• 2019 (8) TMI 729
  Treatment of Business income as Royalty income - Article 12 of India-Ireland DTAA - no fixed place of business or permanent establishment in India - assessee sells subscriptions to its Indian customers/subscribers, on the basis of which they are able to access Gartner s research products over the internet from its data server which is located outside India in lieu of subscription fees - A.O observed that the assessee as the copyright owner of the research products exploited copyright protection vigorously. HELD THAT:- Tribunal while disposing off the appeal of the assessee for A.Y 2007-08 [ 2014 (1) TMI 1281 - ITAT MUMBAI] , placed reliance on the decision of the Hon ble High Court of Karnataka in the case of Wipro Ltd. Vs. ITO [ 2011 (10) TMI 473 - KARNATAKA HIGH COURT] had concluded, that the subscription fees received by the assessee would constitute royalty . Admittedly, the issue and also the facts and the circumstances in the present appeal of the assessee remains the same as were involved in its appeals for the preceding years. We uphold the view taken by the CIT(A) that the A.O had rightly concluded that the subscription fees of Rs. 90,10,34,288/- received by the assessee from its Indian customers/subscribers was to be assessed as royalty as per the provisions of Sec. 9(1)(vi) of the Act r.w Article 12 of the India-Ireland DTAA and subjected to tax @10% on gross basis as per Article 12 of the India-Ireland DTAA. - appeal filed by the assessee is dismissed

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• 2019 (8) TMI 728
  Addition u/s 41 - AO alleged that liabilities which have ceased to exist in respect to M/s. Basanti Finance Investment Co. Limited and M/s. Shree Mahalaxmi Trading Investment Co - HELD THAT:- As regards the liability standing in the name of M/s. Basanti Finance Investment Co. Limited, the assessee has submitted that the same represented an advance received by the assessee and since the same was not claimed by the assessee as deduction while computed the income for the year under consideration or any of the earlier years, we find merit in the contention of the assessee that the same cannot be treated as income by invoking the provisions of section 41(1) - keeping in view that this claim is made by the assessee specifically for the first time before the Tribunal, we consider it just and proper to give an opportunity to the AO to verify the same. We accordingly direct the AO to verify this claim of the assessee from the relevant record and decide the issue afresh in accordance with law. As regards the liability standing in the name of M/s. Shree Mahalaxmi Trading Investment Co. we are of the view that the liability standing in the name of M/s. Shree Mahalaxmi Trading Investment Co. Limited could not be treated as ceased to have existed during the year under consideration, especially when nothing was brought on record by the AO to conclusively prove the cessation of liability during the year under consideration. The decision of the Hon ble Supreme Court in the case of CIT vs.- Sugauli Sugar Works Pvt. Limited [ 1999 (2) TMI 5 - SUPREME COURT] relied upon by the ld. Counsel for the assessee supports this view, wherein it was held that the cessation of the liability may occur either by reason of the operation of law i.e. on the liability becoming unenforceable at law by the creditor and the debtor declaring unequivocally his intention not to honour his liability when payment is demanded by the creditor. Since this situation is not occurred in the present case, we hold that the addition of Rs. 86,58,069/- made by the AO and confirmed by the ld. CIT(Appeals) by treating the liability standing in the name of M/s. Shree Mahalaxmi Trading Investment Co. Limited by invoking the provision of section 41(1) is not sustainable. We accordingly delete the same. Ground No. 1 of the assessee s appeal is accordingly treated as allowed. Amount payable by assessee to Bhikam Chand Jhawar(HUF) as ceased to have existed as per section 41(1) assessee was asked by the Bench to show any documentary evidence whereby the amount in question was ever demanded by Bhikam Chand Jhawar(HUF). He, however, has failed to show any such evidence. On the other hand, he has admitted that the amount in question is still not paid by the assessee to the said party even after a period of more than eight years and the same is still shown as outstanding in the books of account of the assessee - liability in question was rightly treated by the AO as ceased to have existed and the ld. CIT(Appeals) is fully justified in confirming the addition made by the AO on this issue under section 41(1). We accordingly uphold the impugned order of the ld. CIT(Appeals) and dismiss Ground No. 2 of the assessee s appeal. Trading liability payable to M/s. Daga Trading Company by treating the same as income u/s 41(1) - HELD THAT:- As submitted by the ld. Counsel for the assessee, an amount of Rs. 17,99,020/- shown as payable by the assessee to the said party as on 31.03.2011 was paid through proper banking channel in the month of June, 2012 and the receipt of the same was duly acknowledged by the said party as per the confirmation of account placed at page no. 97 of the paper book. A separate confirmation letter was also issued by the said party to show that the amount of Rs. 17,99,020/- in question was receivable from the assessee-company towards invoices raised in the month of August, 2009 and the same was outstanding as on 31.03.2012. Keeping in view this documentary evidence placed on record and having regard to the fact that the liability in question was settled by the assessee subsequently through proper banking channel, which was duly acknowledged by M/s. Daga Trading Company, we are of the view that the existence of the liability in question was duly established by the assessee and in the absence of anything brought on record by the Assessing Officer to prove otherwise, the addition made by him under section 41(1) and confirmed by the ld. CIT(Appeals) is not sustainable. We accordingly delete the said addition and allow Ground No. 3 of the assessee s appeal. Addition on account of the amounts payable to M/s. Bimal Kumar Jhanwar (HUF) and Bimal Kumar Jhanwar respectively - HELD THAT:- We restore this matter to the file of the AO for deciding the same afresh after verifying the claim of the assessee that the amounts in question have been duly paid through banking channel to the concerned parties in the subsequent years. If the amount is found to have been paid by the said parties as claimed by the ld. Counsel for the assessee, the AO shall delete the addition made to the total income of the assessee on this issue. Ground No. 4 of the assessee s appeal is accordingly treated as allowed. MAT computation - treatment of provision made for Gratuity payable u/s 115JB as unascertained liability - HELD THAT:- this matter also requires verification by the AO keeping in view the contrary findings recorded by the authorities below to the effect that there was no evidence produced by the assessee to prove that the amount in question was a provision made for ascertained liability. We, therefore, set aside the impugned order of the ld. CIT(Appeals) on this issue and restore the matter to the file of the AO for deciding the same afresh after giving proper and sufficient opportunity of being heard to the assessee. Delayed payment of employees contribution towards P.F. and ESIC - HELD THAT:- This issue is squarely covered in favour of the assessee by the decision of the Hon ble Supreme Court in the case of CIT vs.- Alom s Extrusions Limited [ 2009 (11) TMI 27 - SUPREME COURT] and CIT vs.- Vijay Shree Limited [ 2011 (9) TMI 30 - CALCUTTA HIGH COURT] . Accordingly we respectfully follow the said judicial pronouncements and uphold the impugned order of the ld. CIT(Appeals) giving relief to the assessee on this ground. Ground No. 1 of the Revenue s appeal is accordingly dismissed. Additional depreciation on new plant and machinery - claim disallowed by AO on the ground that the same was claimed in respect of certain parts of plant and machinery, which could not function on its own as plant and machinery - HELD THAT:- Similar issue was decided by the Chandigarh Bench of this Tribunal in favour of the assessee in the case of Adarsh Steel Rolling Mills vs.- DCIT [ 2014 (2) TMI 1363 - ITAT CHANDIGARH] and following the same, he directed the Assessing Officer to allow additional depreciation on the parts of the plant and machinery, which were already installed. At the time of hearing before us, no case law taking contrary view in favour of the Revenue on this issue has been cited by the ld. D.R. We, therefore, respectfully follow the decision of the Coordinate Bench of this Tribunal in the case of Adarsh Steel Rolling Mills (supra) and uphold the impugned order of the ld. CIT(Appeals) allowing the claim of the assessee for additional depreciation.

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• 2019 (8) TMI 727
  Reopening of assessment u/s 147 - assessee claimed that issues raised in reopening was subject matter of the regular assessment proceedings u/s. 143(3) and in appeal CIT(A) had given directions to the AO for allowing claims after verification of the facts/documents - HELD THAT:- When the issues were subject matter of appeal before the CIT(A) in the case of original assessment, in our opinion, the Assessing Officer cannot re-visit the same by re-opening the assessment u/s. 147 of the Act and also in view of second proviso to section 147. Further, the Jurisdictional High Court in assessee s own case [ 2010 (11) TMI 127 - KERALA HIGH COURT] has deleted the addition made u/s. 43B with regard to supply surcharge, inspection fee and electricity duty and liability u/s. 115JB of the Act in favour of the assessee. Being so, in our opinion, re-opening of the assessment is bad in law and hence, the assessment order passed u/s. 147 of the Act vide order dated is 31.12.2010 is quashed. Disallowance of the Supply surcharge, Inspection fee, Electricity Duty u/s 43B - HELD THAT:- The Jurisdictional High Court in assessee s own case [ 2010 (11) TMI 127 - KERALA HIGH COURT] wherein it was held when s. 43B(a) speaks of the sum payable by way of tax etc., the said provision is dealing with the amounts payable to the sovereign qua sovereign, but not the amounts payable to the sovereign qua principal. Therefore s. 43B cannot be invoked in making the assessment of the liability of the appellant under the IT Act with regard to the amounts collected by the appellant pursuant to the obligation cast on the appellant under s. 5 of the Electricity Duty Act, 1963. - In view of the above judgment of the Jurisdictional High Court, we are inclined to dismiss this ground of appeal of the Revenue. Computation of MAT income u/s 115JB - HELD THAT:- Jurisdictional High Court in assessee s own case (supra) wherein it was held assessee, a statutory corporation constituted under s. 5 of the Electricity Supply Act, 1948, is not a company for the purpose of Companies Act and is not required to keep and maintain its accounts in the manner specified in the said Act and, therefore, the fiction laid down in s. 115JB is not applicable while making the assessment of the assessee - In view of the above judgment of the Jurisdictional High Court, we are inclined to dismiss this ground of appeal of the Revenue - decided against revenue

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• 2019 (8) TMI 726
  TDS u/s 194H - on discount extended to its pre-paid distributors on distribution of prepaid services - pre-paid cheques for SIM - short deduction of TDS - HELD THAT:- Admittedly the legal issue as far as the Tribunals and authorities within the territorial jurisdiction of the Karnataka High Court and the Rajasthan High Court are concerned, there is no doubt that the issue stands concluded in favour of the assessee. Admittedly for the Tribunal s and the authorities which are in the territorial jurisdiction of the Kerala High Court, Delhi High Court and the Calcutta High Court are concerned, the issue can be considered to be settled against the assessee. Apex Court in the case of CIT Vs Vegetable Products [ 1973 (1) TMI 1 - SUPREME COURT] , CIT Vs Madho Prasad Jatia [ 1976 (8) TMI 3 - SUPREME COURT] , CIT Vs J.K. Hosiery Factory [ 1986 (3) TMI 4 - SUPREME COURT] has held that in case of divergent view interpretation which favours the assessee need to follow. Thus, in case of cleavage of opinions, the issue is well settled that in the absence of decision of the jurisdictional High Court, the binding precedent for the Tribunals and authorities would be the decisions in favour of the assessee not only on the principles of ambiguity but also on the principle that these decisions are latest in point of time. Accordingly, the legal issue on facts to be established stands concluded in favour of the assessee. Accordingly, the sale of prepaid sim cards by the assessee to the distributors are on principal to principal basis and hence out side the ambit of section 194H. Therefore, the assessee was not required to deduct tax on the same and, therefore, could not be held to be an assessee in default for not deducting tax at source. - decided in favour of the assessee TDS u/s 194J - default for non-deduction of tax at source on roaming charges paid by it to other service providers - HELD THAT:- We have heard the rival submissions and perused the material available on record. It is seen that the Co-ordinate Bench in THE DCIT (TDS) , VERSUS M/S IDEA CELLULAR LTD. [ 2018 (6) TMI 1646 - ITAT CHANDIGARH] considered an identical appeal of the Revenue and concluded that the payments made for interconnection are not fees for rendering any technical services as envisaged in section 194J. Therefore, no tax is deductible at source u/s 194J on payment of roaming charges to the OTOs and the assessee therefore cannot be treated as an assessee in default. Accordingly, in the peculiar facts and circumstances of the present case in the absence of any infirmity having been pointed out by the Revenue in the order, we find no merit in the departmental appeal. The grounds, accordingly, are dismissed.

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• 2019 (8) TMI 725
  Assessment u/s 153A - addition u/s 68 made alleging accommodation entries based on Inv. Wing report - absence of any incriminating documents found during the course of search in case of the assessee company - HELD THAT:- On perusal of the assessment order itself, we are of the view that the assessee deserves to succeed in the matter. The reason for the same is evident from the Office note which forms part of the assessment order and which has been submitted by the Revenue before the Bench as part of the appeal documentation. Assessing Officer has given a finding that on verification of documents submitted by the assessee and called from the investor companies, it is found that the amount of investment agrees with the balance reflected in the books of the assessee as well as investors companies. We therefore find that the assessee company has duly discharged the initial onus cast on it u/s 68 and once initial onus has been satisfied by the assessee company to the satisfaction of the AO and once the AO is satisfied with the documentation so submitted by the assessee company and which has also been confirmed by him directly from the investor companies, we failed to understand as to why in the body of the assessment order, he has merely proceeded basis the information received from the Investigation Wing, Mumbai in respect of search and seizure operation in case of Sh. Praveen Kumar Jain Group and has kept silent on the documentation and verification so carried out by him in respect of direct evidences so submitted by the assessee company. In the instant case, we find that the assessee has originally filed its return of income on 10.10.2007 and time limit for issuance of notice u/s 143(2) has expired on 30.09.2008 before the date of search which was carried out on 26.09.2012. Therefore, on the date of search, the assessment for the impugned assessment year was not pending/abated and already stood completed. Further, on perusal of the assessment order, we find that there is no discussion or finding by the Assessing Officer that any incriminating document was found during the course of search relating to the investment made by any of these companies in the assessee company, rather the whole basis of assessment is the information received from the Investigation Wing, Mumbai during the course of assessment proceedings. Therefore, in absence of any incriminating documents found during the course of search in case of the assessee company, the law is well settled that no addition may be made in the hands of the assesse company. The decision of the Hon ble Delhi High Court in case of Meeta Gutgutia [ 2017 (5) TMI 1224 - DELHI HIGH COURT] , the Hon ble Gujarat High Court in case of Saumya Construction (P.) Ltd [ 2016 (7) TMI 911 - GUJARAT HIGH COURT] and Jai Steel (India) ACIT [ 2013 (6) TMI 161 - RAJASTHAN HIGH COURT] support the case of the assessee company. - Decided against revenue

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• 2019 (8) TMI 724
  Assessment of unutilized amount out of accumulated income u/s 11(3) - assessee has put a plea before the AO that the income so assessed u/s 11(3)(c) should also be allowed to be accumulated u/s 11(2) - HELD THAT:- We noticed that the Mumbai Bench of the Tribunal has considered an identical issue in the case of The Trustees, the B.N. Gamadia Parsi Hunnarshala [ 2001 (4) TMI 928 - ITAT MUMBAI] and has taken the view that the benefit of accumulation shall not be available to income assessed u/s 11(3). Tribunal has expressed the view as an alternative view. In the first instance, it has held that the benefit of accumulation shall be available only to the income derived from the property and not to deemed income . Since the income assessed u/s 11(3) cannot be considered to be an income derived from the property, the above said argument of the assessee shall fail. In any case if the argument of the assessee is accepted as correct for a moment then the provisions of sec. 11(3)(c) would be renders otiose, since the assessee would be filing application for accumulation u/s 11(2) after every expiry of the period of accumulation without applying it for stated objectives. This would result in non-taxing of income perpetually and it would defy the intention of the legislature in introducing sec. 11(3). Assessee shall not be eligible to accumulate the income assessed as deemed income u/s 11(3). Accordingly, we are of the view that the Ld CIT(A) was justified in confirming the action of the AO in assessing entire amount of Rs. 91.65 lakhs as income of the assessee without granting any benefit of accumulation. Accordingly we confirm the order passed by ld CIT(A) in both the appeals. - Decided against assessee.

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• 2019 (8) TMI 723
  Reopening of assessment u/s 147 - based on material found in subsequent year assessment - HELD THAT:- On the basis of the material found during the course of scrutiny proceedings for the subsequent years, the AO found that taxable income escaped assessment. Therefore he reopened the assessment for the year under consideration. Since the assessment was reopened on the basis of tangible material found subsequent to the assessment, this Tribunal is of the considered opinion that the AO has rightly reopened the assessment. Disallowance of bad debts written off relating to rural debt - HELD THAT:- On the basis of the material found during the course of scrutiny proceedings for the subsequent years, the AO found that taxable income escaped assessment. Therefore he reopened the assessment for the year under consideration. Since the assessment was reopened on the basis of tangible material found subsequent to the assessment, this Tribunal is of the considered opinion that the Assessing Officer has rightly reopened the assessment. Deduction U/s.36(1)(viia) - assessee submitted that the very same issue was decided against the assessee in the assessee s own case by this Tribunal for the assessment year 2011-12 [ 2016 (4) TMI 753 - ITAT CHENNAI ] Deduction U/s 36(1)(vii) - In view of the Judgments of the Apex Court in Vijaya Bank [ 2010 (4) TMI 46 - SUPREME COURT ] and Catholic Syrian Bank Ltd [ 2012 (2) TMI 262 - SUPREME COURT ] this Tribunal is of the considered opinion that the bad debts in respect of non-rural branches has to be allowed as bad debts written off U/s.36(1)(vii) of the Act. In view of the above, we are unable to uphold the order of the lower authorities. Accordingly the orders of both the authorities below are set aside and the addition made U/s.36(1)(vii) of the Act is deleted. Deduction U/s.36(1)(viia) based on advance outstanding and not on incremental advances - HELD THAT:- Admittedly, the CIT(A) followed the order of this Tribunal in the assessee s own case for the assessment year 2010-11. Rule 6ABA of the Income Tax Rules clearly shows that any advance that has been made and outstanding at the end of each month has to be taken for the purpose of deduction U/s.36(1)(viia) of the Act. The Rule does not say that only the incremental advance has to be considered. Moreover, this issue was also decided in favour of the assessee by this Tribunal in the assessee s own case for the assessment year 2010-11. [ 2014 (9) TMI 1179 - ITAT CHENNAI ] Taxability of amount received under Agricultural Debt Relief and Debt Waiver Scheme - HELD THAT:- CIT(A) directed the assessee to furnish the relevant information before the Assessing Officer and directed the Assessing Officer to examine the matter. Under the scheme of Income-Tax Act, the CIT(A) has no power to set aside the assessment for reconsideration. However this Tribunal is of the considered opinion, it has to be verified whether the interest income was offered for taxation earlier. Accordingly in exercise of jurisdiction conferred on this Tribunal, the orders of both the authorities below are set aside and the issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter afresh in accordance with law after giving reasonable opportunity to the assessee. Disallowance made based upon the population of village instead of ward - HELD THAT:- This issue is decided against the assessee by this Tribunal in the assessee s own case for the assessment year 2011-12 [ 2017 (4) TMI 1424 - ITAT CHENNAI ] Restriction of relief U/s 90 to the extent of tax paid in foreign country instead of tax charged on the foreign income which is included in total income - HELD THAT:- Admittedly this issue was decided against the assessee by this Tribunal for the assessment year 2011-12 [ 2017 (4) TMI 1424 - ITAT CHENNAI ] by order dated 03.04.2017. Moreover U/s.90 of the Act, only to the extent of tax paid in foreign country, the relief has to be granted. In this case, the Assessing Officer already granted relief to the extent of tax paid in the foreign country. In view of the above, this Tribunal did not find any reason to interfere with the order of the lower authorities and the same is confirmed. Depreciation on goodwill - HELD THAT:- Issue was decided against the assessee by this Tribunal in the assessee s own case for the assessment year 2013-14 Loss on revaluation of trade derivatives - HELD THAT:- We heard Shri Clement Ramesh Kumar, the Ld. Departmental Representative also. According to the Ld.DR this issue was decided in favour of the assessee for the assessment year 2011-12 by this Tribunal in [ 2017 (4) TMI 1424 - ITAT CHENNAI ]. In view of the above this Tribunal did not find any reason to interfere with the order of the lower authority and the same is confirmed. Depreciation on UPS - depreciation at the rate of 60%- HELD THAT:- This Tribunal for the assessment year 2013-14 found that the assessee is eligible for depreciation at the rate of 60% on the UPS. In this case, the Assessing Officer allowed only 15% of depreciation. Therefore the CIT(A) has rightly allowed depreciation at the rate of 60%. In view of the above, this Tribunal do not find any reason to interfere with the order of the CIT(A). Accordingly the same is confirmed. Disallowance made u/s.40(a)(ia) on account of short deduction - HELD THAT:- No doubt, the Kolkata High Court in the case of S.K. Tekriwal [ 2012 (12) TMI 873 - CALCUTTA HIGH COURT ] found that in case of short deduction there cannot be any disallowance U/s.40(a)(ia) of the Act. However as rightly submitted by the Ld.DR, there are other High Court Judgments which is in favour of the Revenue also. In case of any Judgment by Madras High Court that is binding on the Assessing Officer. Since the Ld.DR could not produce the details immediately, the issue is remitted back to the file of the Assessing Officer - orders of both the authorities below are set aside and the issue is remitted back to the file of the Assessing Officer to re-examine the issue and bring on record all the available Judgments on the issue. If there is a Judgment by Madras High Court, the same has to be followed in preference to the other High Court Judgments. Depreciation claimed by the assessee on the asset taken over from Bank of Tamilnadu - HELD THAT:- This issue was admittedly examined by this Tribunal for the assessment year 2010-11 [ 2013 (4) TMI 751 - ITAT CHENNAI ] and remitted back the matter to the file of the Assessing Officer. Similarly for the assessment year 2013-14 also, the very same issue was remitted back to the file of the Assessing Officer. For the sake of consistency for the year under consideration also the issue is remitted back to the file of the AO. Applicability of provision of Section 115JB - Both the representatives for the assessee and the Revenue very fairly submitted that this issue was decided in favour of the assessee in the assessee s own case for the assessment year 2011-12 [ 2017 (4) TMI 1424 - ITAT CHENNAI ] In view of the above this Tribunal do not find any reason to interfere with the order of the lower authority. Accordingly the same is confirmed.

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• 2019 (8) TMI 722
  TP Adjustment - international transaction of provision of corporate guarantee for loans taken by AEs - HELD THAT:- Tribunal has accepted in assessee s own case for AYs 2009-10 and 2010-11 [ 2016 (1) TMI 853 - ITAT MUMBAI] wherein it has followed the decision of the Hon ble Bombay High Court in the case of CIT v. Everest Kanto Cylinder Ltd. [ 2015 (5) TMI 395 - BOMBAY HIGH COURT] as direct the AO to restrict the adjustments to 0.5% - Facts being identical, we follow the above order of the Co-ordinate Bench in assessee s own case and direct the AO to restrict the adjustment at 0.5% of the loan amount advanced by the bank to its AEs. Disallowance in respect of Annual Information Report (AIR) reconciliation - HELD THAT:- We admit the supporting evidence filed by the Ld. counsel in the instant case for the reason that these are merely in connection with reconciliation of tour sales as reflected in the AIR statement vis-a-vis the books of accounts. We are of the considered view that the reconciliation in respect of AIR is a purely factual issue which needs verification at the level of the AO. Therefore, we set aside the order of the Ld. CIT(A) on the above matter and restore the matter to the file of the AO to make an order afresh following the above Instruction of CBDT, after giving reasonable opportunity of being heard to the assessee. We direct the assessee to file the relevant documents/evidence before the AO Disallowance of travel booking engine and SAP software expenses considered as Capital Work-in-Progress ( CWIP ) in the books of account and claimed as revenue in the return of income - HELD THAT:- On identical issue, the ITAT, Mumbai in assessee s own case for AY 2012-13 has held that the salary and professional fees incurred for the development of the travel booking engine is to be allowed as a revenue expense as the same has not been incurred to acquire a new asset to be used in a new line of business Non-entitlement of Foreign Tax Credit (FTC) - Interest on loans and advances to one of its subsidiaries, CNK Australia - the AO did not grant foreign tax credit by holding that no details are available on record to show that the interest income had been offered to tax in India and that such interest income was not reflected as a part of interest income - HELD THAT:- We find that the rectification application filed by the assessee on the above matter u/s 154 of the Act on 30.11.2017 regarding non-grant of foreign tax credit is pending before the AO. Along with it, the assessee has filed the details of foreign tax credit along with the certificate issued by the Australian Taxation Office evidencing the deduction of tax by CKL Australia. Also, the assessee has filed before the AO the details of corresponding interest income offered to tax by the assessee - we direct the AO to decide the above issue as per the provisions of the Act and dispose off the rectification application dated 30.11.2017 without further delay. Thus the ground of appeal No. 21 to 23 are allowed for statistical purposes. Non-grant of TDS and non-grant of dividend distribution tax ( DDT ) - HELD THAT:- As evident from the record, the assessee has filed a rectification application dated 30.11.2017 before the AO. We direct the AO to pass an order after verifying the facts and dispose off the said rectification application.

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• 2019 (8) TMI 721
  Levy of penalty u/s 271(1)(c) - Addition u/s 68 - HELD THAT:- Ld. CIT(A) upheld the levy of penalty U/s 271(1)(c) stating that the Explanations appended to section 271(1)(c), entirely indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing the return. The object behind the enactment of section 271(1)(c) read with Explanations indicates that the said section has been enacted to provide for a remedy for loss of revenue. The penalty under that provision is a civil liability. Willful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution u/s 276C of the Income-tax Act. We are of the view that the order of the Ld. CIT(A) is well-reasoned and is in accordance with law, having regard to facts and circumstances of the present case. Impugned order of Ld. CIT(A) is, therefore, hereby confirmed. - Decided against assessee.

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• 2019 (8) TMI 711
  Characterization of income - interest realized on debentures - Interest realized on debentures to be taxed as business income - The matter has been called out for twice. None appears for the appellant. The civil appeal is dismissed for non-prosecution [ 2018 (12) TMI 706 - SC ORDER] - HELD THAT:-Application for restoration is within time and the same is allowed. Hence, order [ 2018 (12) TMI 706 - SC ORDER] dismissing the appeal is recalled and the civil appeal is ordered to be restored to its original number. Registry is directed to proceed accordingly.

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• 2019 (8) TMI 710
  Settlement Commission applications u/s 245(D)(1) - whether or not the disclosure was full and true? - Pr. CIT submitted a report u/s 245D(2B) nowhere directly or indirectly indicated that the income disclosed by the petitioner is not full and true - Settlement Commission permited the CIT (DR) to raise objections to the admission of the application and more so in permitting him to go beyond the report - decision making process of the Settlement Commission - permitting the Principal Commissioner to supplement the report submitted by the Commissioner by way of oral submissions - permission to raise objection to the admission of the application and be heard before the assessee and too, to supplement an incomplete report on the basis of the material and evidences on record - preliminary report based on prima-facie findings recorded by the Principal Commissioner or Commissioner - HELD THAT:- As stated that this petition has become infructuous, accordingly, the instant special leave petition is dismissed on having become infructuous. However, the question of law is left open.

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• 2019 (8) TMI 709
  Reopening of assessment u/s 147 - failure on the part of the petitioner to disclose fully and truly all material facts - international transaction disclosure - assessment beyond a period of four years from the end of the relevant assessment year - HELD THAT:- Keeping in view the tax effect involved in this matter, we do not see any reason to interfere in the matter. The special leave petition is, accordingly, dismissed.

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• 2019 (8) TMI 708
  Deduction u/s 80IB (7)(a) - Hotel business - income from Saloon - income from the saloon section by the appellant-hotel - Whether after holding the saloon activity as desirbale and CIT (A) holding it to be an integral part of the Hotel business which finding holds goods, the Tribunal is legally justified in holding that the receipts from saloon business are not derived from the hotel business? - HELD THAT:- The authorities below have examined the contract or franchisee agreement of the assessee with M/s. HLL, which has a separate and distinct identity from the hotel business of the appellant. The authorities below have also examined the decision of the Hon ble Apex Court in the case of CIT vs. Sterling Foods [ 1999 (4) TMI 1 - SUPREME COURT ] wherein the Apex Court has inter alia held that the word derived from restricts the qualifying profits to the profits directly arising from the particular activity and not the receipts unrelated to the eligible business. There must be, for the application of the word derived from , a direct nexus between profits and gains and the industrial undertakings. The authorities below therefore, came to the conclusion that because the appellant was not fulfilling any of the requisite conditions and the income was not directly derived from the business and had no direct nexus, the benefit of section 80IB (7)(a) of the Income Tax Act, 1961 was rightly denied. As such the assessee clearly was not eligible for it. Thus as the assessee failed to establish that the saloon business was the part and parcel of the core activity of the hotel business. - Decided in favour of the department and against the assessee.

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• 2019 (8) TMI 707
  Disallowance of the benefit under Section 80 IB on proportionate basis - deduction on pro rata basis - HELD THAT:- As decided in own case [ 2015 (7) TMI 1302 - DELHI HIGH COURT ] the provision is capable of being construed in a manner that is beneficial to the assessee by allowing the deduction on pro rata basis to the number of residential units that have complied with the requirement of section 80 IB of the maximum built up area. In view of this, we do not find any infirmity in the order of the learned CIT(A) and direct the learned assessing officer to allow the claim of the assessee on pro rata basis as directed by the Hon ble Delhi High Court in assessee s own case for earlier years. Accordingly, the ground No. 1 of the appeal of the revenue is dismissed The Court is not informed of the Revenue having challenged the decision of this Court in the Assessee s own case for AY 2009-2010 referred to hereinbefore. In any event the Court finds the factual position in the present AY is not very different from that in the earlier AY. - No substantial question of law.

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• 2019 (8) TMI 706
  Addition u/s 68 - AO made the addition was because the directors of the share subscribers did not turn up before him - HELD THAT:- In this case on hand, the assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants, thereafter the onus shifted to AO to disprove the documents furnished by assessee cannot be brushed aside by the AO to draw adverse view cannot be countenanced. In the absence of any investigation, much less gathering of evidence by the AO, we hold that an addition cannot be sustained merely based on inferences drawn by circumstance. Applying the propositions laid down in these case laws to the facts of this case, we are inclined to uphold the order of CIT(Appeals) To sum up section 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source shall be assessed as its undisclosed income. In the facts of the present case, both the nature source of the share application received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO s record. Accordingly all the three conditions as required u/s. 68 of the Act i.e. the identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO is based on conjectures and surmises cannot be justified. In the facts and circumstances of the case as discussed above, no addition was warranted under Section 68 - Decided in favour of assessee.

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• 2019 (8) TMI 705
  Revision u/s 263 - reopening of assessment u/s 147 - addition u/s 68 - HELD THAT:- We are sufficient to establish the escapement of income of the assessee from the assessment and there was a valid reason for the AO to reopen the assessment to bring to tax the said escaped income. The refusal by the AO to rectify the mistake as pointed out by the assessee in the said letter also does not support the case of the assessee as the same was done by the AO by giving a valid reason that the mistake pointed out by the assessee not being apparent from record was beyond the scope of rectification u/s 154. As regards the contention of the learned counsel for the assessee that even the Ld. CIT vide his impugned order passed u/s 263 has held the order of the AO passed u/s 143(3)/147 as erroneous, we find that the error allegedly pointed out by the Ld. CIT in the order passed by the AO u/s 143(3)/147 is entirely on a different issue relating to the share capital and share premium received by the assessee during the year under consideration and there is nothing in the said order to show that the order of the AO was erroneous on the issue on which it was reopened relating to undisclosed service charges. We, therefore, find no merit in the case of the assessee that the reopening of assessment itself being bad in law, the assessment made by the AO u/s 143(3)/147 as well as the consequential order passed by the Ld. CIT u/s 263 are invalid. The assessee has challenged the impugned order passed by the Ld. CIT u/s 263 on various counts. At the time of hearing before us, the learned counsel for the assessee however has not raised any contention in support of the said ground raised by the assessee. As rightly submitted by the learned DR, a similar order passed by the Ld. CIT u/s 263 in the case of Rajmandir Estates Pvt. Ltd. [ 2016 (5) TMI 801 - CALCUTTA HIGH COURT] involving identical facts and circumstances was upheld by the Hon ble Calcutta High Court. Although the learned counsel for the assessee has submitted that the decision of Hon ble Calcutta High Court in the case of Rajmandir Estates Pvt. Ltd. (supra) relied upon by the learned DR in support of the revenue s case is distinguishable on fact, he has not been able to point out any material distinction in the facts involved in the present case vis-a-vis the facts involved in the case of Rajmandir Estates Pvt. Ltd. (supra). As submitted by the learned DR, the SLP filed by the assessee in the case of Rajmandir Estates Pvt. Ltd. has already been dismissed by the Hon ble Supreme Court. In the facts of the present case are considered in the light of the decision in the case of Rajmandir Estates Pvt. Ltd. (supra), we find that there is no infirmity in the impugned order passed by the Ld. CIT u/s 263 and upholding the same, we dismiss this appeal of the assessee.

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• 2019 (8) TMI 704
  Unexplained credit u/s 68 - unsecured loans receipts - HELD THAT:- Section 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source shall be assessed as its undisclosed income. In the facts of the present case, both the nature source of the loan received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the lender / loan creditor. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO s record. Accordingly all the three conditions as required u/s. 68 of the Act i.e. the identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO is based on conjectures and surmises cannot be justified. In the facts and circumstances of the case as discussed above, no addition was warranted under Section 68 of the Act. Therefore, we do not want to interfere in the impugned order of Ld. CIT(A) which is confirmed and consequently the appeal of Revenue is dismissed. Addition of interest on loan granted - Since we have found the loan amount given to the assessee to the tune by M/s. Silver Cross Marketing Pvt. Ltd. as genuine, the interest expenditure booked by the assessee is an allowable expenditure and we note that the interest received from assessee company on the loan has been offered by the lender [M/s. Silver Cross Marketing Pvt. Ltd]. in its return and offered to tax. Therefore, the addition made by AO disallowing the interest claim also has been rightly deleted by the Ld. CIT(A) which action of the Ld. CIT(A) does not deserve to be interfered with. Therefore we confirm the same. - Decided against revenue.

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• 2019 (8) TMI 703
  TP adjustment - MAM selection - assessee s challenge to rejection of CUP method by the department. - Comparable selection - HELD THAT:- Issue of rejection of CUP by the TPO and as upheld by the ITAT [ 2015 (11) TMI 1527 - ITAT DELHI] was not challenged by the assessee before the Hon ble High Court also and, thus, the issue has attained finality for all practical purposes. Therefore, we have no other alternative but to dismiss ground nos. 3, 4, 4.1 and 4.2 of the assessee s appeal in this year also by respectfully following the ratio laid down by the Coordinate Bench in assessee s own appeal for assessment year 2010-11 as aforesaid. Thus, ground nos. 3, 4, 4.1 and 4.2 stand dismissed. Remuneration to the assessee from the international transaction cannot be greater than the overall revenue received from the third party. In this regard, the assessee has drawn our attention to the order of the Delhi Tribunal in the case of Global Vantedge vs. DCIT [ 2009 (12) TMI 668 - ITAT DELHI] wherein the Tribunal had held that adjustment on account of arm s length price of international transactions cannot exceed the maximum arm s length price. Entire amount recovered by the AE from the third party i.e. DMRC had been passed on to BTIPL and, therefore, BTIPL could not have recovered any amount which is higher than the amount charged by the AE from the third party. It has been pleaded that although this ground was vehemently raised before the Ld. CIT (A), the CIT (A) did not specifically adjudicate this ground and proceeded to dismiss the assessee s challenge to rejection of the CUP method without considering these alternate arguments of the assessee. As perused the order of the CIT (A) and we do note that although the Ld. CIT (A) has duly reproduced the submissions of the assessee in this regard, he, however, has not adjudicated this issue specifically. The discussion of the CIT (A) centers around the rejection of CUP method but does not refer to the submissions of the assessee regarding the issue as aforesaid. Interest of substantial justice would be served if these grounds are reconsidered by the Ld. CIT (A) and the Ld. CIT (A), after giving due opportunity to the assessee, passes a speaking order on the issue. Accordingly, ground nos. 4.3, 5 and 5.1 are restored to the file of the CIT (A) to be considered afresh and for the purposes of passing a speaking order after giving due opportunity to the assessee to present its case. Thus, ground nos. 4.3, 5 and 5.1 stand allowed for statistical purposes. Comparable selection - Texmaco Rail and Engineering Limited - in the earlier year, only segmental results pertaining to heavy engineering segment were included whereas in this year, the margins at the entity level have been taken. Therefore, it will be in the fitness of things if only segmental results of heavy engineering segment are included by the TPO and further the TPO also gives adequate adjustment in respect of free of cost supplies. As far as the assessee s claim of extraordinary event is concerned, it is seen that the TPO has duly considered the assessee s claim of extraordinary event and has noted that this company has been a steady performer and that the demerger has not caused any radical difference to the performance of the company. This observation of the TPO could not be contradicted by the Ld. AR on facts. Therefore, this argument is rejected and accordingly, this comparable is restored to the file of the TPO/Assessing Officer for re-adjudication and recomputation of the margin after including only the heavy engineering segment after giving the benefit of adjustment with respect to free of cost supplies. Titagarh Wagons Limited - this comparable has been objected to on the ground that this company is dealing in wagons whereas the assessee company is dealing in Metro train coaches and bogies and, thus, they were functionally dissimilar - this company was taken as a comparable in the previous assessment year also and the ITAT had held this company functionally comparable after providing for fee of cost supplies adjustment. It is seen that in the immediately preceding year, the TPO had taken only the wagon segment of the company whereas in the current year, the company has been taken as a whole.This, in our considered opinion, needs rectification. Accordingly, while upholding the inclusion of this company as a comparable, we direct the TPO to recompute the margin after providing for fee of cost supplies adjustment and also after taking the results of only wagon segment for the purpose of comparability. Braithwaite and Co. Limited - Although the assessee has agitated the inclusion of this comparable on the ground of functional incomparability because this company deals in manufacturing of wagons, bogies, couplers, steel casting and structural fabrications as against the metro coaches which were being manufactured by the assessee company, the fact remains that this company was held as a comparable by the ITAT in the immediately preceding year also. ITAT had directed that adjustment should be made with respect to FOC supplies while computing the margins. In this year, the TPO, while giving effect to the order of the CIT (A), has not given effect to the FOC supplies adjustment. Therefore, this comparable is restored to the file of the TPO for the limited purpose of re-computing the margin of this comparable after making suitable adjustment with respect to FOC supplies. Besco Limited - In the case of this comparable also, it is seen that the Ld. Commissioner of Income Tax (A), while following the order of the ITAT in the immediately preceding year, had directed that FOC supplies adjustment should be given while computing the margins but the TPO while giving effect to the order of the Ld. Commissioner of Income Tax (A) has not done so. Therefore, this comparable is also restored to the file of the TPO for recalculation of the margin after making adjustment to FOC supplies. Jessop and Company Limited - This comparable has been agitated by the assessee on the ground that the TPO has taken combined segmental profitability of both EMU and Wagon segments whereas in the immediately preceding assessment year 2010-11, these two segments were taken as two different segments. It has also been agitated that there are computational errors while computing the margin of this company. It has also been agitated that the TPO has taken the miscellaneous income as operating income for the purposes of calculating of margin of this company. In view of the anomalies pointed out by the Ld. AR in this regard, we deem it fit to restore this comparable also to the file of the TPO for duly considering these objections of the assessee.

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• 2019 (8) TMI 702
  Reopening of assessment u/s 148 - period of limitation - HELD THAT:- As far as bar of limitation is concerned, we find from the perusal of records that the delay in filing of the appeals was explained in writing (in identically worded three separate letters) - we decline to dismiss the appeals on grounds of limitation. On merits, we find that Ld. CIT(A) has passed speaking orders. Relevant portions of the impugned orders of the Ld. CIT(A) have already been reproduced in foregoing paragraph (B) of this order. During appellate proceedings in Income Tax Appellate Tribunal ( ITAT , for short) no material has been brought for our consideration to persuade us to take a view different from the view taken by the Ld. CIT(A) in the impugned order. After hearing the Ld. DR and after perusal of materials on record, and further, in view of the foregoing discussion, we decline to interfere with the impugned orders of Ld. CIT(A). In view of the foregoing discussion, the three appeals filed by assessee are dismissed. Assessee will be at liberty to approach ITAT for restoration of the appeals in accordance with Proviso to Rule 24 of Income Tax (Appellate Tribunal), Rules, 1963. If the assessee does approach ITAT for restoration of the appeals in ITAT, the matter will be considered in accordance with law having regard to the facts and circumstances.

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• 2019 (8) TMI 701
  Deemed dividend u/s 2(22)(e) - AO noticed that assessee had received loan from Mahesh Ginning Pvt. Ltd., in which both the partners of the firm i.e., Goverdhandash H. Tayal and Gopal Hazarimal Tayal held 18.19% share each and assessee firm had only two partners holding 50% share each - HELD THAT:- It is an undisputed fact that assessee had received loan from Mahesh Ginning Pvt. Ltd., in which both the partners of the assessee also held 18.19% shares each. CIT(A) while deciding the issue in favour of the assessee has given a finding that the chief ingredient of Sec.2(22)(e) of the Act is that one should be a shareholder on the date on which the advance was made. Though the advances were made out of the profits of the lending company but the assessee was not the registered shareholder and beneficial interest was not existing. She therefore, following the decision of CIT Vs. Universal Medicare Private Limited [2010 (3) TMI 323 - BOMBAY HIGH COURT ] and other decisions cited in the order, has held that the receipt of loan cannot be contemplated as deemed dividend u/s 2(22)(e) of the Act. Before us, Revenue has not pointed out any contrary binding decision in its support. We therefore find no reason to interfere with the order of Ld.CIT(A). Thus, the grounds of the Revenue are dismissed.

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• 2019 (8) TMI 700
  Bogus LTCG/LTCL - gain derived from sale of shares held in various scrips - treating the impugned STCL pre-arranged bogus loss - HELD THAT:- Identical action holding the assessee s STCL as bogus since derived from rigging of the scrip prices in issue and involving accommodation entry in collusion with the concerned entry operators. Hon ble apex court s decisions in Sumati Dayal vs. CIT [ 1995 (3) TMI 3 - SUPREME COURT] and CIT vs. Durga Prasad More [ 1971 (8) TMI 17 - SUPREME COURT] are quoted during the course of hearing at the Revenue s behest. It strongly argues that the department has disallowed/added the impugned STCL based on circumstantial evidence unearthed after a series of search actions / investigations undertaken by the DDIT(Inv). Find no merit in Revenue s instant arguments. The fact remains that the assessee has duly placed on record the relevant contract notes, share certificate(s), detailed corroborative documentary evidence indicating purchase / sale of shares through registered brokers by banking channel, demat statements etc., The Revenue s only case as per its pleadings and both the lower authorities unanimously conclusion that there is very strong circumstantial evidence against the assessee suggesting bogus STCL accommodation entries. I find that there is not even a single case which could pin-point any making against these assessees which could be taken as a revenue nexus. CBDT s circular dated 10.03.2003 has itself made it clear that mere search statements in the nature of admission in absence of supportive material do not carry weight. I notice that this tribunal s coordinate bench s decision in Mahavir Jhanwar vs. ITO [ 2019 (3) TMI 210 - ITAT KOLKATA] has taken into consideration identical facts and circumstances as well as latest developments on legal side whilst deleting the similar bogus LTCG addition Coupled with this, hon ble jurisdictional high court s other decisions in CIT vs. Rungta Properties Pvt. Ltd. [ 2017 (6) TMI 521 - CALCUTTA HIGH COURT] to hold such transactions in scrips supported by the corresponding relevant evidence to be genuine. Assessee had filed all of her detailed evidence during scrutiny. The Assessing Officer s show cause notice(s) u/s. 142(1)/143(2) of the Act nowhere sought to treat the impugned profits as bogus. I adopt the above extracted reasoning mutatis mutandis therefore to delete the impugned STCL disallowance / addition of Rs. 36,48,564/-. Unexplained commission expenditure disallowance, if any shall automatically follow suit as a necessary corollary. No other argument or ground has been agitated before me during the course of hearing. - Decided in favour of assessee.

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• 2019 (8) TMI 699
  TP Adjustment - allocation of regional office expenses - HELD THAT:- The assessee vide reply dated 19.09.2013 filed before the TPO ledger extracts of the expenses payable for the AY 2009-10 AY2010-11, in which the amount of regional office expenses were accounted for. Admittedly, during the year ended 31.03.2009, the assessee was allocated total regional office expenses of Rs. 15,612,766/- by ANZ Singapore. Out of this, the assessee paid an amount of Rs. 5,84,506/-. Since the assessee was operating under the cost plus remuneration model, the entire costs of Rs. 15,612,766/- was charged by the assessee to ANZ Singapore, along with the mark-up. The assessee realized it in the subsequent year that the balance amount of 15,028,260/- was no long payable by it. Therefore, the assessee reversed an amount of Rs. 15,028,260/- during the subsequent year i.e. AY 2010-11. A perusal of Form 3CEB for AY 2010-11 clearly indicates disclosure of the transaction for reversal of these expenses. Further, it is found that as the assessee had debited such regional office expenses to its P L account, the same formed part of the cost base which was charged to the AE along with a mark-up and the same was offered to tax in AY 2009-10. Thus in the impugned assessment year the assessee-company claimed a deduction for the regional office expenses and at the same time correspondingly offered to tax the amount recovered from AE towards such regional office expenses plus the mark-up - we direct the AO to delete the disallowance of Rs. 15,612,766/- made towards transfer pricing adjustment. Thus the 1st ground of appeal is allowed. Ad-hoc basis 25% of foreign travel expenses - HELD THAT:- It is found that in response to the query raised by the AO, the assessee vide submission dated 22.02.2013 had filed the details with respect to foreign travel expenses incurred by it. After receipt of the above details, the AO could have made inquiry and verified the contentions of the assessee. He has not done so. Without finding any fault in the details submitted by the assessee, the AO has resorted to an ad-hoc disallowance @ 25% of the foreign travel expenses. As the disallowance made by the AO is not based on any inquiry or evidence, we delete the addition of Rs. 4,31,124/- and allow the 2nd ground of appeal. Severance payments allowed by the AO in five equal instalments u/s 35DDA - rectification application filed by the Appellant under Section 154 - HELD THAT:- There is no discussion on the above issue in the assessment order passed by the AO, whereas it is the submission of the assessee that it has filed rectification application dated 04.05.2013 before the AO on which no action has been taken so far. Considering the above matter, the Ld. CIT(A) directed the AO to dispose off the petition of the assessee expeditiously pending before him. As crystal clear from the above, there is a specific direction from the Ld. CIT(A) to the AO to dispose off the rectification application expeditiously pending before him. Therefore, the 3rd ground of appeal is allowed for statistical purposes. Allowing the reduction of reversal / write back of the regional office expenses from the cost base while computing the Appellant s operating margin in respect of provision of services of marketing of financial products to its Associated Enterprise - Appellant prays that appropriate deduction should be allowed from the cost base in respect of reversal / write back of the regional office expenses and the resulting operating margin i.e. 15.75% as computed by the Appellant should be restored instead of 8.5% as computed by the AO / TPO - HELD THAT:- The finding of the Tribunal in the case of Logica Pvt. Ltd. (supra) is applicable in the present case. Moreover, as reflected in the P L account of the assessee for the impugned assessment year under the head other income-provision written back , it has reversed the deduction it had claimed in the earlier year and offered the same to tax during the AY 2010-11. Therefore, the reversal of regional office expenses amounting to Rs. 15,028,260/- while computing the OP/TC margins of the company for AY 2010-11 would be 15.75%, thus the said international transaction would meet arm s length criteria. Thus the 1st ground of appeal is allowed. Selection of comparable - During the course of hearing it is argued by the Ld. counsel that if the reversal of regional office expenses is considered, while computing the OP/TC margin workings for AY 2010-11, then there is no necessity of adjudicating the above additional grounds of appeal as the OP/TC margins of the assessee-company would be 15.75% and the said international transaction would meet arm s length criteria. As we have allowed the 1st ground of appeal which relates to the reduction of reversal/written back of the regional office expenses from the cost base, the additional grounds of appeal becomes academic in nature. Disallowing expenses on foreign travel including the accommodation and meals expenses on an ad-hoc basis - HELD THAT:- During the AY 2010-11, the assessee has claimed expenses amounting to Rs. 54,43,579/- on account of foreign travel, accommodation and meals, air fare other miscellaneous expenses etc. On the same reasons on the basis of which disallowance was made for AY 2009-10, the AO made a disallowance of Rs. 13,60,895/- (25% of Rs. 54,43,579/-) in AY 2010-11. It is found that similar details as for AY 2009-10 were filed by the assessee before the AO for AY 2010-11. Facts being identical, we follow our decision for AY 2009-10 mentioned at para 3.5 hereinabove and delete the ad-hoc disallowance of Rs. 13,60,895/- made by the AO and allow the 2nd ground of appeal. Depreciation on leased motor cars - HELD THAT:- We find that in the instant case the assessee has split the lease rental payment into finance charges and principal charges, with the finance charges being charged to the P L account. The assessee has not claimed depreciation u/s 32 of the Act on cars taken on finance lease due to lack of ownership. This is evident from the depreciation schedule which is a part of the tax audit report in Form No. 3CD. We direct the AO to delete the disallowance made by him towards depreciation on leased motor cars. Accordingly, the 3rd ground of appeal is allowed.

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• 2019 (8) TMI 698
  TP Adjustment - determination of arm s length price of AMP expenditure by applying BLT - HELD THAT:- While deciding identical nature of dispute in assessee s own case for the assessment year 2011 12, learned DRP in direction dated 28th December 2015, have deleted the adjustment made by the Transfer Pricing Officer on account of AMP expenditure by recording a factual finding that the Transfer Pricing Officer has failed to demonstrate that there is an agreement/arrangement between the assessee and the AE for incurring AMP expenditure. While doing so, DRP has relied upon the decision of the Hon ble Delhi High Court in Maruti Suzuki India Ltd. [ 2015 (12) TMI 634 - DELHI HIGH COURT] . Thus, viewed in the light of the ratio laid down in the decisions cited by the learned Authorised Representative, including the decision of the Hon ble Delhi High Court in Martuti Suzuki India Ltd. (supra), it has to be concluded that the AMP expenditure incurred by the assessee in India cannot come within the purview of the international transaction. Hence, the Transfer Pricing Officer has no jurisdiction to determine the arm s length price of AMP expenditure. Having held so, it is now necessary to deal with the contention of the learned Departmental Representative to restore the issue to the Assessing Officer for keeping it pending till the issue is settled by the Hon ble Supreme Court. In our view, the aforesaid contention of the learned Departmental Representative is not acceptable. As per the prevailing legal position, the AMP expenditure incurred by the assessee in India cannot come within the purview of international transaction. That being the case, the adjustment made by the Transfer Pricing Officer cannot survive. Therefore, we do not find any necessity to restore the issue to the Assessing Officer. Grounds are allowed. Adjustment to the arm s length price of royalty paid to the A.E. - HELD THAT:- Undisputedly, in the impugned assessment year the assessee has benchmarked the royalty payment by applying CUP method. It is observed, the Transfer Pricing Officer has rejected the benchmarking of the assessee with some general observations. If the benchmarking done by the assessee is not acceptable to the Transfer Pricing Officer, he must provide the basis/reasoning on which he found it unacceptable. Even assuming that the benchmarking done by the assessee was not correct, TPO should have benchmarked the royalty payment by applying any of the prescribed methods. However, without applying any prescribed method he has simply determined the arm s length price of royalty payment at nil. Transfer Pricing Officer is not in accordance with statutory provisions, hence, unsustainable. In any case of the matter, except the impugned assessment year the payment of royalty in all other assessment years has been accepted by the TPO to be at arm s length. Therefore, applying the rule of consistency also, the payment of royalty @ 5%, as was paid in the earlier and subsequent assessment years, has to be accepted. More so, when the relevant facts relating to royalty payment permeating through different assessment years remain unchanged. In view of the aforesaid, we hold that royalty paid to the assessee by the AE has to be accepted. The ground raised is allowed. Unutilized MODVAT/CENVAT credit - HELD THAT:- Undisputedly, the unutilized MODVAT credit has been added only to the closing stock by the Departmental Authorities by invoking the provision of section 145A of the Act. However, now it is fairly well settled that adjustment, if any, under section 145A of the Act has to be made both to the opening stock and closing stock as well as purchases and sales. In fact, in assessee s own case for the assessment year 2004 05, the Tribunal [ 2011 (5) TMI 967 - ITAT MUMBAI] has held that adjustment on account of MODVAT credit has to be made both in respect of closing stock, opening stock, purchases and sales. The same view has been expressed by the Tribunal while deciding assessee s appeal for the assessment years 2006 07, 2007 08 and 2008 09 Re computation of depreciation by reducing from Written Down Value (WDV) the amount of depreciation which was not actually allowed to the assessee - HELD THAT:- DRP while considering the objections of the assessee has also directed the Assessing Officer to compute deprecation on the basis of WDV as on 1st April 2002, after reducing the deprecation actually allowed in the preceding assessment years. As it appears, the Assessing Officer has not carried out the aforesaid direction of learned DRP. In our view, the aforesaid proposition also applies to the assessee s claim of depreciation in the impugned assessment year. Accordingly, we direct the AO to compute depreciation keeping in view the decision of the Tribunal in the assessment year 2002 03. Thus, ground is allowed for statistical purpose. Disallowance of product development expenditure - HELD THAT:- While deciding assessee s appeal on identical issue in assessment year 2002 03, [ 2010 (1) TMI 1271 - ITAT MUMBAI] the Tribunal has allowed assessee s claim of deduction by treating the expenditure as revenue in nature. The same view was expressed by the Tribunal while deciding the appeals for the assessment years 2004 05, 2005 06 and 2008 09. In fact, while deciding Revenue s appeal against the decision of the Tribunal for the assessment year 2004 05, the Hon ble Jurisdictional High Court [ 2014 (7) TMI 96 - BOMBAY HIGH COURT] has upheld the decision of the Tribunal. Therefore, respectfully following the consistent view of the Tribunal and the decision of the Hon ble Jurisdictional High Court on the disputed issue, we delete the addition made by the Assessing Officer. This ground is allowed. Nature of expenses - expenditure on Legal and professional fees - revenue or capital expenditure - HELD THAT:- Undisputedly, relying upon the past assessment orders the Assessing Officer has disallowed the payment made to Strategic Systems Pvt. Ltd., by treating it as capital in nature. However, while considering the issue relating to similar disallowance made towards payment made to the very same party in the assessment year 2008 09 has allowed assessee s claim by treating it as revenue in nature. Disallowance u/s 40(a)(i) - HELD THAT:- disallowance made under section 40(a)(i) of the Act was deleted since the assessee had fulfilled the conditions of section 10(6A) of the Act. In fact, in the impugned assessment year also, learned DRP has directed the Assessing Officer to verify whether conditions of section 10(6A) of the Act have been fulfilled and thereafter allow relief to the assessee. It is the contention of the learned Authorised Representative before us that in the impugned assessment year the assessee has fulfilled the conditions of section 10(6A) of the Act. In view of the aforesaid, we direct the Assessing Officer to verify the aforesaid claim of the assessee and if assessee s claim is found to be correct, in the sense that all the conditions of section 10(6A) of the Act have been fulfilled, no disallowance under section 40(a)(i) of the Act can be made, as held by the Tribunal in the assessment year 2007 08 (supra). This ground is allowed subject to verification. Treating the interest income as income from other sources - HELD THAT:- No details of bank deposits could be provided by AR despite specific request being made by the bench due to which we are unable to ascertain the fact that whether these deposits have direct nexus with the business of the assessee, The Ld. AR has attributed the parking of funds to general credit float enjoyed by the assessee without brining anything on record to substantiate the same. Hence, we deem it fit to restore the matter back to the file of AO to examine the nature of Bank FDR particularly the tenure of the deposit and also verify the fact of credit float enjoyed by the assessee and decide the issue afresh in accordance with law. The assessee is directed to cooperate with the lower authorities forthwith to substantiate his submissions. The ground of revenue s appeal is allowed for statistical purposes Set off of brought forward business loss before setting off unabsorbed depreciation - HELD THAT:- As it appears, this issue was not raised by the assessee before learned DRP. When a query to this effect was raised to the learned Authorised Representative, he conceded that the issue was not raised before learned DRP and further submitted that the assessee would file a rectification petition before the Assessing Officer in respect of the said issue. In view of the aforesaid submissions of the learned Authorised Representative, this ground is dismissed. Claimed set off of brought forward business loss against the interest income which was treated as income from other source - HELD THAT:- While deciding ground no.12 relating to characterization of interest income as income from other sources, we have restored the issue to the Assessing Officer for fresh adjudication. Thus, the issue raised in this ground is consequential to the decision to be taken by the Assessing Officer on the characterization of interest income. Therefore, this issue is also requires to be restored back to the Assessing Officer. It is relevant to observe, in the course of hearing, the learned Authorised Representative made a without prejudice submission that irrespective of the head under which the interest income is assessed, the character and essence of the interest income is in the nature of business income, hence, the brought forward business loss has to be set off against such income. In support of such contention, he relied upon the decision of the Hon ble Jurisdictional High Court in Sham Progretti S.P.A. v/s ACIT, [ 1981 (2) TMI 50 - DELHI HIGH COURT] . In our view, in course of proceedings before the Assessing Officer the assessee can raise such contention and if such contention is raised by the assessee, the Assessing Officer has to consider the same on merit.With the aforesaid direction, this ground is allowed for statistical purpose. Set off of unabsorbed depreciation against the interest income assessed under the head income from other sources - HELD THAT:- It is observed, while deciding the objection of the assessee on the aforesaid issue, learned DRP in Para 12.5 of its directions has held that unabsorbed depreciation being part of current year s depreciation is eligible for set off against income under any other head including income from other sources. Accordingly, the Assessing Officer was directed to allow set off of unabsorbed depreciation. However, as it appears, the Assessing Officer has not implemented the aforesaid direction of learned DRP which, in our view, is unacceptable. Accordingly, we direct the Assessing Officer to implement the direction of learned DRP on the issue and allow set off of unabsorbed depreciation. This ground is allowed. In the result, assessee s appeal is partly allowed.

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• 2019 (8) TMI 697
  TDS u/s 195 - assessee is a Indian company and the payees are foreign companies based in US, Ireland, Singapore, Australia, Israel etc. with their residential status being that of resident and non-resident respectively - default u/s. 201(1) - DTAA provisions - HELD THAT:- Assessee has raised common grounds of appeal feeling aggrieved by the order of AO, and on the issue of DTAA, the assessee had raised general ground and therefore, in our considered opinion, there is no prohibition for the AO to pass a common order for all the assessment years. In all the cases before the AO, the payee (recipient) was non-resident. It is not disputed that payment was made for purchase of software. It is also not disputed before the AO that tax was not deducted as mandated by law before making payment. Therefore, all the necessary conditions as required under law for invoking provisions of s. 201 were in place and therefore in our view, the action on the part of lower authorities is in accordance with law. We hold accordingly. Regarding the arguments of the learned AR of the assessee that the orders passed by the AO are time barred, we respectfully follow the tribunal order in the case of Google as reproduced above and hold that these orders are not time barred as these are passed within six years. In the result, all the six appeals filled by the assessee in the proceedings u/s 201 201 (1A) are dismissed. Mistake rectifiable u/s 154 - addition of grossing up of tax u/s 195A - HELD THAT:- There may be an argument that it is not an apparent mistake rectifiable u/s 154, the AO has also increased the demand in respect of Surcharge and Education Cess and it is a fact that the demand of TDS is as per provision of Income Tax Act in some years where the rate of withholding tax as per DTAA is higher and hence, not raising demand in respect of Surcharge and cess is an apparent mistake rectifiable u/s 154 and therefore, we hold that these orders u/s 154 are not bad in law although some demands raised in these orders may be bad in law and the same can be deleted on merit. Rate of tax is 15% in USA, UK, Austria and Canada and 20% in Spain because as per the assessee it is 10% for these countries also - HELD THAT:- We find that as per Para 13 of the combined impugned order, learned CIT (A) has directed the AO to levy surcharge and cess only in respect of royalty payments made to vendors which are resident of such countries with which the DTAA with India allows withholding of more than 11.33% and in respect of other payments, he has deleted the levy of surcharge and cess. Hence, we find no merit ion these grounds also and these are also rejected. Interest u/s 201 (1A) - HELD THAT:- This is a settled position of law as per the judgment of Hon ble apex court rendered in the case of Hindustan Coca Cola Beverage Pvt. Ltd. Vs. CIT 2007 (8) TMI 12 - SUPREME COURT] that if tax is paid by the deductee, demands from deductor for tax u/s 201 (1) cannot be raised but the deductor has to pay interest u/s 201 (1A) till the date of payment taxes by the deductee. Hence, in our considered opinion, the ratio of this judgment is this that if tax was deductible by the payer, interest u/s 201 (1A) is payable by him till the payment of such tax by him or by the payee. Accordingly, we hold that there is no merit in Ground No. 7 and it is also rejected. Rectification u/s 154 - HELD THAT:- A categorical finding is given by CIT (A) that as per the agreements between the assessee company and various parties to whom payments were made, the assessee company had to deduct TDS if required by law or by the income tax authorities and hence, there is no basis to infer that the assessee company had to bear the cost of taxes payable on remittances was to be borne by the assessee company. This finding of CIT (A) could not be controverted by the learned DR of the revenue and we find no infirmity in the ultimate finding of CIT (A) that there was no apparent mistake in the order passed by the AO which can be rectified u/s 154 On this aspect, we uphold the order of CIT (A). These grounds are rejected. Levy of surcharge and cess - This is the case of the department that in respect of royalty payment to those countries also for which DTAA prescribes withholding tax rate of 10%, surcharge and cess should be levies because no proof is brought on record by the assessee about proof of residency of those parties in those countries - HELD THAT:- It is stated by CIT (A) that the assessee has submitted the details regarding software payments, name of vendor, country of vendor and amount paid and he has also stated in the same Para that he has gone through the details carefully. He has noted in the same Para that it was claimed by the assessee before him that withholding tax rate for payment of royalty to all countries in dispute except Greece is 10% but he has held that this claim is not correct and he has noted the withholding tax rate on payment of Royalty in respect of USA, UK, Austria, and Canada is 15% and the same for Spain is 20%. This shows that learned CIT (A) has not accepted the claim of the assessee without examination and verification. Hence, if this is the contention of the revenue that the vendors of Ireland, Netherland, Singapore, Israel, France, Germany, Australia and Belgium etc. are not residents of respective countries, the revenue should have brought on record some evidence in this regard. In the absence of any evidence even in one case that the vendor of a country of 10% withholding tax rate is in fact resident of some other country having higher withholding tax rate, we do not find any reason to interfere in the order of CIT (A). This Ground is also rejected.

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• 2019 (8) TMI 696
  Bogus LTCG - assessee has adopted a colourable device to evade the tax and found the transaction bogus, sham and nothing but a racket of accommodation entry - HELD THAT:- No doubt assessee has meticulously completed the paper work by routing his entire investment through banking channel but the results thereof are altogether beyond human probabilities. Because neither in the past nor in the subsequent years, assessee has indulged into any such investment having huge windfall. Had the assessee been so intelligent qua the intricacies of the share market, he would have definitely undertaken such risk taking activities in the past or future by making such investment in the unknown stock. So, we are of the considered view that what appears to be apparent in making investment by the assessee in unknown stock is not real when examined the whole transaction of sale and purchase of the stock with huge windfall to the assessee. So, the irresistible conclusion in this case is meticulous paper work by the assessee in making investment in unknown stock by the assessee and then selling the same as per convenience of the broker and entry operator by rigging prices at astronomical rate shows that the tax authorities have been compelled to examine the entire transactions in the light of the surrounding circumstances and has unearthed the bogus transaction of purchase and sale of shares which was not real and assessee has failed to dispel all the quarries raised by the AO to establish that the transaction in question was real and not beyond human probabilities. Rendered by the coordinate Bench of the Tribunal in cases cited as Pooja Ajmani vs. ITO [ 2019 (4) TMI 1665 - ITAT DELHI] and Udit Kalra [ 2019 (4) TMI 834 - DELHI HIGH COURT] subsequently affirmed by the Hon ble jurisdictional High Court, we are of the considered view that purchase and sale of shares of unknown company, Cressanda Solution Ltd., having no profile, financial growth, risk factor etc. available with the assessee, whose shares were purchased @ Rs. 10 per share by the assessee and sold @ Rs. 476 to Rs. 503.90 per share, is merely a sham transaction credited to get the bogus profit at astronomical rate under the garb of LTCG in connivance with the entry providers to make undisclosed income as disclosed one by evading the tax. CIT (A) has passed a valid and reasoned order on the basis of law applicable to the facts and circumstances of the case. Case laws relied upon by the ld. AR for the assessee are not applicable to the facts and circumstances of the case. Consequently, the question framed is answered in the negative, hence the appeal filed by the assessee is hereby dismissed.

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• 2019 (8) TMI 663
  Transfer pricing adjustment on account of AMP expenditure and its benchmarking - HELD THAT:- set aside the orders of the Authorities below and restore the matter to the file of the AO/TPO to take action in the instant year following the direction of the Tribunal n the case of the assessee for assessment year 2006-07 [2019 (5) TMI 1598 - ITAT DELHI] Addition in respect of amount of insurance compensation pertaining to fire, received by the Adidas AG - whether the claim of insurance received by the Adidas AG under GIP is income accrued in the hands of the assessee or not? - HELD THAT:- Policy of insurance against loss of stock by fire taken by the assessee from Bajaj Allianz (BA) was to secure stock in trade, which is a tangible asset, whereas the Global Insurance Policy (GIP), taken by the Adidas AG from Zurich insurance was for securing investment made in subsidiaries or say financial interest, which is an intangible asset. Thus, the interest insured by the assessee and the interest insured by the Adidas AG are two different interest, the later one is larger than the earlier one. After considering the submission of the parties, we are of the firm view that loss in economic value of the financial interest, constituting insurable interest in the case of Adidas AG, which though has been computed with reference to loss of stock by the fire in the hands of the assessee, it is distinct and separate from the insurance claimed by the assessee from the Bajaj Allianz. The Adidas AG has paid premium separately for the Global insurance policy and no part of the same has been allocated to the assessee or reimbursed by the assessee. Under the Global insurance policy, which was entered between Adidas AG and Zurich insurance, privity of contract was between the said two parties, without assessee being a party. We agree with contention of the learned counsel that the assessee was not having any right or obligation under the said GIP. The Adidas AG, has shown the said compensation received under the GIP from the Zurich insurance as its income and paid taxes accordingly. We may like to emphasize here that the compensation settled under the GIP is for diminution in the financial interest of Adidas AG after adjusting the loss compensated by Bajaj Allianz, which is in accordance with German Law in existence which prohibit the Adidas AG to directly insure assets of subsidiary in India. In view of no right or obligation of the assessee in the GIP, prima facie said income cannot be assessed in the hand of the assessee. Whether the compensation received by the Adidas AG has accrued under section 5 of the Income Tax Act and deemed to accrue as per section 9(1)(i) of the Act? - Correspondence in emails was related to application of the income and not as under whose hand it would be taxable. Further, the issue as to whether the income by way of claim under GIP from Zurich insurance is liable to be taxed in the hands of the assessee, cannot be decided by either the employees of the Adidas AG or Zurich insurance. Merely, expressing some advice or opinion by them as how this amount of claim received can be transferred to the assessee, should not be treated as admission by the assessee of claim money taxable in its hand. Further, we agree with the contention of the Ld. counsel of the assessee that insuring the financial interest in the subsidiary by M/s Adidas AG is not a tax avoidance scheme and the policy was taken to cover the contingent losses that may or may not arise in future. We find that M/s Adidas AG has paid premium in respect of the policy from time to time and also paid tax in Germany in relation to the amount in question of insurance claim. We reject the observation of the lower authorities alleging that colourable device was adopted by the assessee for evading taxes in India. We are of the opinion that claim of insurance received by M/s Adidas AG is not taxable in the hands of the assessee either under section 5 or under section 9(1)(i) of the Act. The grounds of the appeal raised by the assessee are accordingly allowed.

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• Customs

• 2019 (8) TMI 720
  Imposition of penalties - Improper importation of goods - clearance of goods ex-bond with the benefit of concessional rate of duty - HELD THAT:- In the original adjudication proceedings, penalty of Rs.5,00,000 was imposed on the second respondent herein and it was on his appeal that the matter was remanded back to the original authority. If at all, any penalty that could be imposed by the original authority in fresh proceedings would have to be limited by this ceiling - In terms of the instructions issued by Government of India on litigation to be initiated by Revenue, penalty that could have been imposed is well below the threshold prescribed therein. Appeal dismissed - decided against Revenue.

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• 2019 (8) TMI 719
  Violation of import conditions - Benefit of exemption notification -EOU - export of cotton waste generated in manufacturing of cotton yarn - diversion of imported raw materials in the making of goods cotton waste, cleared to the domestic tariff area at nil rate of duty - HELD THAT:- There could be no doubt that no manufacturer sets out to produce waste which is only incidentally generated in the process of manufacture of finished goods. Appellant is required to take approval of the competent authority for manufacture of identified goods and the scheme itself acknowledges that any waste and rejects arising therefrom would be treated akin to approved finished goods. Therefore, there is no requirement to export such goods for entitlement to the benefit of the exemption notification under Central Excise Act, 1944 and Customs Act, 1962. Clearances from export oriented unit into the domestic tariff area are subject to duties of central excise even though the rate and the value applicable are derived from the provisions of Customs Act, 1962 and the Customs Tariff Act, 1975. There is no dispute that the impugned goods are a waste product and have been subject to the process of assessment as decreed by law. There is also no dispute that the impugned goods have materially altered from the raw materials utilised for manufacture and were not the duty free goods removed as such. The only issue that arises is the discharge of duty liability and the dispute is limited to the non-payment of duty arising from non-dutiability. The scheme of export oriented unit is intended to provide special facilities to units that are engaged in export and even in the matter of clearance of domestic tariff area are subject to higher duties than a corresponding domestic unit is. The policy prescription also includes a ceiling on the quantity of goods that may be sold in the domestic market. A unit operating outside the scheme is subject only to the duties of excise on their finished products and there is no limit on the clearance that may be effected from the factory. The scheme of conditions in the exemption notifications under the Central Excise Act, 1944 and Customs Act, 1962 are intended to ensure that a unit operating under the scheme does not derive any unintended advantage vis- -vis a unit operating outside by utilisation of exempted raw material and consumables. It cannot have been the conception behind the scheme to subject the waste generated by such units to a levy that is not less than that devolving outside the scheme; more so, as the cost of production of the finished goods invariably subsume the value of the materials that are embedded in the waste. Hence such value have already been either included in the obligation for export or subject to rate of duty not less than that suffered by a domestic unit and does not confer any unwarranted advantage to the appellant. Appeal allowed - decided in favor of appellant.

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• 2019 (8) TMI 695
  Seizure of Gold - Smuggling - offence punishable under Section 135 of The Customs Act, 1962 - Jurisdiction of SCN - HELD THAT:- This Court is of the considered view that the aforesaid exceptions warranting interference in writ jurisdiction have not been made out by the writ petitioner in the instant case. Therefore, while not interfering with the impugned SCN and obviously the Seizure Mahazar prior to the impugned SCN, this Court deems it appropriate to direct respondents to afford an opportunity of personal hearing to the writ petitioner by communicating the date, time and venue of the personal hearing well in advance and thereafter proceed with the adjudication and carry the impugned SCN to its logical end. In the interregnum, it is made clear that there is no impediment for the respondents to process the application for provisional release under Section 110-A of said Act, which is said to have been made. Petition disposed off.

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• 2019 (8) TMI 694
  Imposition of penalty u/s 112(b)(i) of the Customs Act, 1962 - smuggling of goods or not? - HELD THAT:- Section 112 deals with penalty of improper importation of goods etc. Section 112(b)(i) provides any person who acquires possession of or is in any way concerned in carrying removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any goods which he knows or has reason to believe are liable to confiscation under Section 111 of the Customs Act, 1962, shall be liable to penalty. The expressions which he knows or has reason to believe are liable to confiscation in Section 112(b) are very crucial. It has to be ascertained as to whether such person knows or has reason to believe that the goods are liable for confiscation for imposition of penalty under Section 112(b) of the Act. In the instant case, it is seen that the Customs Officers on 02.03.2017 found one Orange colour Polythene Bag Lying on the table of the Billing Counter of the shop. Shri Mayeenuddin informed the Officers that the said packet was kept by Mr. Rouf who left the place before entering the Officers. It is stated by Shri Mayeenuddin that since there was no other customer in the shop at that time, he was going through the Accounts of the Shop. The Customs Officers immediately took possession of the orange colour polythene packet. Md. Saleh Ahmed who is the owner of M/s Zaman Traders stated that he deals with hardware items like sanitary goods, pipes, pipe fittings etc. Both the appellants in their statements stated that they have no knowledge of the material contained in the said packet. There is no material available on record that the appellants had any knowledge of the seized gold. It appears that the Adjudicating Authority imposed penalties on the basis of assumption and presumption, which is not permissible under the law. There is no justification to impose penalty on the appellants - appeal allowed - decided in favor of appellant.

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• 2019 (8) TMI 693
  Valuation of imported goods - related party transaction or not - rejection of transaction value - enhancement of value by 7% - Rule 8 of Customs Valuation Rules, 2007 - HELD THAT:- The foreign suppliers and the Appellants are partners of the Joint Venture; as per the agreement the importers and suppliers are partners in business; two employees of the suppliers, that is Metal One Corporation, are nominated as directors of MSSCL. Therefore, we find that as found by the original authority the foreign suppliers and the Appellants are related. The adjudicating authority and the Appellant authority have sought to load the value of imported goods at a flat 8% of profit margin. The original authority has stated to rely on Arcelor Mittal. However, no details have been furnished - the reasons given by the Original Authority for not accepting the same are not satisfactory, as it was not established to the supplier company and had posted higher profit percentage, if any. Without providing any such data simple rejection of the declared profit margin is not acceptable. Moreover department has not adduced any evidence of any contemporaneous imports so as to indicate under valuation by Appellants. Loading of value by 1% in respect of imported capital goods i.e. slitting line, which is already included in the value declared is sufficient - Appeal allowed in part.

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• 2019 (8) TMI 692
  Interest on delayed refund of SAD - N/N. 102/2007-Cus. dated 14.9.2007 - HELD THAT:- It is very much clear that the original authority who has sanctioned the refund vide Order-in-Original No.260/2018 dated 29.5.2018 has observed that the refund claim has been filed on 29.3.2016. Thus the refund claim was submitted within the time and before the correct jurisdiction during the relevant time. The refund, however, has been sanctioned only on 29.5.2018. Thus, obviously, there is a delay in sanctioning the refund. The appellant has also repeatedly issuing communication to the department requesting for processing the refund expeditiously. The appellants are eligible for interest on the delayed payment of refund in terms of Section 27A of the Customs Act, 1962. Thus, the refund sanctioning authority is directed to grant interest to the appellant from three months of the date of filing of refund claim i.e. on 29.3.2016 till the payment of the refund - Appeal allowed - decided in favor of appellant.

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• 2019 (8) TMI 691
  100% EOU - import of Fully Refined Paraffin Wax - production of re-warehousing certificate as proof of receipt of goods in the bonded premises - HELD THAT:- The appellants have imported Fully Refined Paraffin Wax but he supplier has not supplied the said goods and has supplied Paraffin White Powder which is unfit for use by the appellant in the manufacture of wax candles. Immediately, on receipt of the goods and its examination, the appellant informed the department and sought their guidance. The Department advised the appellant to follow the procedure in terms of Circular No. 60/1999 and also to follow the procedure in terms of Circular No.19/2006-Cus. The appellant have followed the procedure prescribed in Circular No.19/2007 wherein it is clarified that the self-warehousing / bonding procedure need not be followed if any discrepancy is found at the time of examination of the imported goods. Further, I find that once the appellant lodged the complaint to the police and the impugned goods were seized and was auctioned by the order of the Jurisdictional Magistrate on 26.8.2017 and also the sale proceeds of Rs. 10,000/- were deposited in the court. Since the goods have already been auctioned by the order of the Court, it was not possible for the appellant to comply the conditions of re-warehousing certificate and further, it was not possible for the appellant to submit re-warehousing certificate as the goods imported was not Fully Refined Paraffin Wax . The appellant has been cheated / duped by the supplier and the appellant immediately inform the Department regarding the conditions of the impugned goods and followed the procedure as per the guidance given by the Department - Appeal allowed.

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• 2019 (8) TMI 690
  Confiscation - redemption fine - penalty - smuggling - action against the buyer of goods instead of the importer - Micro SD Cards - HELD THAT:- It is an admitted fact that these are goods purchased from Delhi by duly VAT paid bills through Tax Invoice Nos 152, 153, 154 for the entire quantity of 10,800 pieces of Micro SD Cards from the supplier M/s Deepak International, Hardhyan Singh Road, Delhi. It is also an admitted fact that Ledger and Bank Statement of the Appellant shows that he paid the Supplier M/s Deepak International, an amount of Rs. 20,40,000/- by two Cheques from his Bank Account. It is also an admitted fact that there was wide discrepancy in the Inventory List prepared by the Customs officers and findings of Joint Inspection where the Appellant also participated. There is force in the contention of the Ld. Counsel for the Appellant that if Revenue had doubt about these goods being smuggled, they should have taken some action against the supplier but no such action was taken - also there is force in the contention of Ld. Counsel for the Appellant that these goods are not notified and do not fall under the ambit of Section 123, but even then the Department has sought to shift the onus on the Appellant to prove that the goods are legally imported by not taking any action against the supplier. The confiscation, redemption fine and demand of duty is therefore set aside - appeal allowed.

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• 2019 (8) TMI 689
  Classification of imported goods - Granola Bars - mixture of whole grain rolled oats - classified under heading 1905 9090 of the First Schedule to Customs Tariff Act, 1975 or under heading 1904 9000 of the First Schedule to Customs Tariff Act, 1975 - HELD THAT:- The composition of the bars comprises various products and that the oats used are subsumed in the final product which are known as granola bars representing not the grain that it contains but the composition as a whole. The alteration of character is a consequence of the baking after mixing which is substantively different from adding to pre-cooked or prepared grain. It would, therefore, not be appropriate to fit the imported goods under the category of cereals or prepared food in the absence of coverage by the residuary entry. Furthermore, it is seen that the first appellate authority has, instead of justifying the classification adopted by the assessing authority, canvassed thereon for the rejection of the classification claimed by the importer. This, in our opinion, detracts from being in accord with the mechanism of re-classification. Appeal allowed - decided in favor of appellant.

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• 2019 (8) TMI 688
  Extended period of limitation - suppression of facts - Classification of imported goods - PHASE CAB EQ SHPG ASM (200V) - whether classified under heading 8537 of Customs Tariff or under heading 8504? - eligibility for reduced rate of duty under Notification No. 69/2011 - Order-in-Appeal dated 26/08/2014 through which it was held that the impugned goods were classifiable under heading 8504 was challenged before this Tribunal with application of condonation of delay of 749 days - HELD THAT:- Hon ble High Court has held that in respect of impugned goods for which the Bill of Entry dated 26/07/2013 was filed by importer the Department has finally classified the goods under heading 85044010 and was affirmed by Commission (Appeal ) and not interfere by the Tribunal - We also note that contention of Revenue is that the importer has not provided all the information required to arrive at the correct classification, and therefore, there is suppression. We do not accept the contention of the Revenue because for passing the order dated 12.09.2013 the goods were subjected to first check and after filing of the Bill of Entry by importer the goods were first examined by Revenue and then they have proposed to be classified under heading 8504 and through the order dated 12/09/2013 the classification was decided under heading 8504. The Revenue had all resources and opportunities in 2013 to either know from the importer all the technical information that they required. Since Revenue have not done so, in 2016 they cannot make allegation that importer did not provide them all the information. Suppression of facts or not - HELD THAT:- Since in all the three Show Cause Notices the basis for issue of Show Cause Notice is suppression, we hold that suppression on behalf of the importer is not established in this case. Demand set aside - appeal allowed - decided in favor of appellant.

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• 2019 (8) TMI 687
  Levy of penalty - misdeclaration of goods - Equipment Type Approval (ETA) certificates have been found to be fake - Re-export of seized goods was allowed - import of wireless fitness watch/ wireless fitness tracker having declared as Fitbit Alta - HELD THAT:- It is an admitted fact that ETAs produced by the importer were found to be fake on verification. Once the ETAs is found fake, the argument put forth by the learned Counsel of the appellants that country of manufacture was not relevant and not required to be mentioned on ETA holds no ground - Here country of manufacture is not in the dispute but there is a violation of relevant notification issued by the Ministry of Telecommunication No. GSR 45(E) dated 28/01/2005 which requires the importer to produce a valid ETA issued by the Ministry of Telecommunication. Once it is on record that the ETA was not issued by the Ministry of Telecommunication and was fake, all other arguments that country of origin was not required on ETA etc. become meaningless. Requirement of elements of mens rea - argument advanced by the learned Counsel is that they were not personally involved in the forgery of the ETAs and it was the third party who had given them fake ETAs and thus no mens-rea was involved on their part - HELD THAT:- In view of the fact that the Hon ble Apex Court has held in a number of cases that mens-rea is not necessary for contravention of a civil act - The Hon ble High Court of Madras in the case of Commissioner of Customs (Export), Chennai-I versus Bansal Industries [ 2006 (9) TMI 58 - HIGH COURT, MADRAS ] has upheld an imposition of penalty under Section 112 of the Customs Act without involving any mens-rea. Rectification of mistake or not - corrigendum issued for imposition of penalty - HELD THAT:- The corrigendum issued for imposing of penalty under Section 114AA of the Customs Act, 1962 which had no reference in the original order is not sustainable as it amounts to review of the original order. There is no reference that the original order had considered imposition of any penalty u/s 114AA of the Customs Act - once the order is passed by the Adjudicating Authority, he becomes a functus officio and he cannot reopen the case. Only clerical mistakes, which are apparent on record can be rectified by a corrigendum - Penalty u/s 114AA set aside. Thus, the appellant are liable to penalty u/s 112 (a) (ii) of the Customs Act, 1962 and thus there is no infirmity in the order-in-original on this count, however, considering all the facts and circumstances of the matter the quantum of penalty u/s 112 (a) is reduced to Rs. 10,00,000/- - appeal allowed in part.

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• 2019 (8) TMI 664
  Release of seized goods - Gold - power of respondent to make seizure - Section 110 of the Customs Act, 1962 - In the meantime SCN was issued - HELD THAT:- Writ petitioner shall make an application to the 1 st respondent under Section 110 A of the Customs Act 1962 seeking provisional release of the seized goods which forms subject matter of instant writ petition i.e., Gold weighing 2.810 kilograms, valued at Rs. 91,95,725/-. Aforesaid application to 1 st respondent shall be made by writ petitioner within a fortnight from the date of receipt of a copy of this order. Petition disposed off.

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• Corporate Laws

• 2019 (8) TMI 718
  Penalty for non preparation filing of Cost Audit Report in time - initiation of prosecution u/s 233B(11) of the Companies Act, 1956 - NCLT allowed application for compounding with equal fine on company directors - HELD THAT:- There is substance in the argument of the learned Counsel for the Appellants that the Company and the Directors have not been treated equally. Impugned order maintained with regard to imposing of fine under Section 148(8) for FY 2014 2015 and 2015 2016 and substitute 40,000 in place of 2,00,000 with regard to the Directors/Officers, i.e. present Appellants No.2 to 5 - rest order maintained - appeal allowed in part.

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• Insolvency & Bankruptcy

• 2019 (8) TMI 717
  Maintainability of application - CIR process - corporate debtor - the amount paid to the corporate debtor towards brokerage cannot be financial debt - default in paying debt - section 7 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- In this case, the financial creditor stated amount of Rs. 1,00,00,000 was given as a loan to the corporate debtor. They did not produce on record loan agreement. They did not state what was the terms and conditions of repayment of loan. They did not state what was the rate of interest agreed. They produce on record working computation of default at annexure II. Their own chart shows that interest was charged at rate of 12 per cent. but it was charged only on amount of Rs. 95,00,000 that is after deducting sum of Rs. 5,00,000 which was received by them from the corporate debtor through RTGS. The financial creditor was not in position to give any loan to anybody as claimed by them. Unless conditions stated in sub-sections (2) and (3) of section 186 of the Companies Act, 2013 are fulfilled. There is nothing on record to show that the financial creditor gave loan after complying above conditions. Hence, the transaction as potrayed by the financial creditor against the corporate debtor cannot be recognized as the transaction of loan and it cannot be said to be financial debt . The corporate debtor gave three cheques to the financial creditor. But those cheques cannot be said to be given toward repayment of loan. The cheque amount is too high, i. e., Rs. 10,00,000, Rs. 40,00,000, Rs. 50,00,000, etc. Repayment of loan, generally cannot be by way of such huge instalment value. The cheques must have been drawn by the corporate debtor towards some other transaction but certainly not towards repayment of loan. There exist no financial debt payable by the corporate debtor to the financial creditor. The financial creditor may recover money, if any, due by any other suitable mode - there is no financial debt due and payable by the corporate debtor. There is no default in paying such debt. Application dismissed.

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• 2019 (8) TMI 686
  Admissibility of application - initiation of Corporate Insolvency Resolution Process - default on the part of the Corporate Debtor - case of appellant is that the impugned order was passed ex-parte - Section 9 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- We find that except vague statement made by the Appellant, there is nothing on the record to suggest that the Hon ble Supreme Court has passed specific order prohibiting M/s. Sahara Q Shop Unique Products Range Limited - ( Corporate Debtor ) to release or pay any amount. We are not inclined to interfere with the impugned order dated 15th December, 2017 on purported ground that there is no default on the part of the Corporate Debtor - Appeal dismissed.

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• 2019 (8) TMI 685
  Admissibility of petition - Initiation of Corporate Insolvency Resolution Process - sale of PLP Duct Pipe - existence of dispute or not - Section 9 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- In order to trigger the provisions of the IBC on the basis of Section 9, it is necessary for the Operational Creditor, to show that there is outstanding operational debt and that there is a default - On hearing Counsel and perusing Impugned Order, we are unable to accept the submissions of Appellant. Appellant has failed to show debt due. Also, the supply order which is being relied on by the Appellant itself mentioned in the reference, and it shows that supply order was being given to the Respondent on the basis of RC Agreement dated 05.06.2017. This is clearly a date which is prior to the Agreement dated 26th December, 2017, which is being relied on by the Appellant. The Appellant has failed to show that operational debt existed. Appeal dismissed.

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• 2019 (8) TMI 684
  Admissibility of petition - initiation of Corporate Insolvency Resolution Process - scope of Financial Creditor - existence of debt/default or not - sub-section (7) of section 5 of IBC - whether the money was borrowed against consideration for time value of money and according to the petitioner the money was given on payment of the interest? - HELD THAT:- The petitioner has filed copies of the order passed by the Judicial Magistrate in the criminal complaints under section 138 of the Negotiable Instruments Act (annexures A to H) to suggest that the proceedings against the respondent-corporate debtor were consigned in terms of section 299 of the Code of Criminal Procedure, 1973, the directors of the respondent-corporate debtor having been declared proclaimed offenders. In one of the case, however, the accused have put in appearance and the matter is pending. The important question was whether the interest was debited in the account of the respondent-corporate debtor maintained in the books of account of the petitioner before May 25, 2018 and details thereof. It is admitted that there is no entry debiting the interest in the account of the respondent being maintained by the petitioner before entry dated May 20, 2017 to the tune of Rs. 2,07,82,027. The loan is said to have disbursed in the year 2013 and it is admitted that there is no entry of debiting the interest in any of the financial years except when the dispute between the parties arose. The petition is rejected in limine with cost of Rs. 2,00,000 with a direction to deposit the amount of costs in the Prime Minister Relief Fund within a period of one month of receipt of certified copy of the order.

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• FEMA

• 2019 (8) TMI 683
  Hawala transactions - Contravention of provisions of Section 3(b) and Section 3(c) of FEMA, 1999 - allegation based on statement of various persons - submission of the appellant was that the appellant has been wrongly implicated in the case and nothing was seized or recovered from his possession - HELD THAT:- The impugned order has alleged that he received money (Indian currencies) from some other people some of whose name are Poonam, Getha, Raja Ram, Devidoss, Jaloor etc. who in turn has arranged this money from people from abroad. Thus, it appears that the impugned order has not established the appellant receiving the money directly from abroad. Moreover, there is no restriction on circulation of Indian money within the country, at least under FEMA - the department has not investigated those people who are Indians and who have delivered the money to him in India although the details of some of them like their mobile numbers etc. was available to the investigating authority. Moreover, the analysis of phone calls has also not been done in a complete manner as it does not show the details of the conversations. It is appropriate to remand the case back to the original authority to do a thorough investigation both on the issues raised above as well as any other issues which they may like to investigate and pass a speaking order establishing the link as required under Section 3(b) and 3(c) of FEMA, 1999 - appeal allowed by way of remand.

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• 2019 (8) TMI 682
  Acquiring and transferring foreign exchange equivalent to Rs. 208 crores without the prior general or special permission of the RBI - Section 8(1) of FERA, 1973 - allegation is made that M/s. THL have not provided any documents to prove the source of funds which they have invested/remitted to M/s. Sterlite Industries (India) Limited etc. in India and because some of the Directors are common to both the companies, it has been held that this money has actually been funded by M/s. Sterlite Industries (India) Limited to M/s. THL and then back to M/s. Sterlite Industries (India) Limited. HELD THAT:- There is no prima facie evidence, documentary or otherwise on which the adjudicating authority has relied upon to conclusively prove the above charges. Whether there is a round tripping of funds, the interests of the common Directors in each of these companies, the actual source of funds, are matters of detail which will be gone into at the final hearing stage. Prima facie, it is found that the appellants have a strong case on merits and accordingly stay the pre-deposit. They have not pleaded for any undue hardship and hence no orders are passed on the same. List the matter for final hearing on 14th October, 2019.

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• 2019 (8) TMI 681
  Restoration of appeal - appeal was dismissed on time limitation as well as for non-compliance with the pre-deposit - HELD THAT:- That Delhi High Court s order, clearly mentions only two appeals i.e. 475 and 543 of 2004 of having being remanded to the AT. There is no such order with regard to the other two appeals i.e. 473 and 488 of 2003 and hence it was legally required for the appellants to have filed, if they so desired, a proper restoration of appeal applications with valid grounds and reasons. As discussed above, they have failed to do so either in their applications or during the hearing - the restoration of appeals applications in appeal No. 473 488 of 2003 is dismissed as rejected as is without any grounds and substance. Other two appeals i.e. 475 543 of 2004 which has been remanded by the Hon ble Delhi High Court - HELD THAT:- The final hearing was commenced on 11.04.2019, adjourned and treated as part heard to 11.07.2019 at the request of one of the appellants and again adjourned and treated as part heard to 26.07.2019 at the request of the other appellant. However, again on 26.07.2019, there was a request for adjournment by one of the appellants - appeals were released from part heard and is now listed to be heard afresh on 25th October, 2019.

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• PMLA

• 2019 (8) TMI 680
  Money Laundering - Release of attached property - VAT refund - export of the readymade garments to Bangladesh - forged and fabricated shipping bills - scheduled offences or not - proceeds of crime - first contention of the appellant that since the predicate offences were not schedule offences on the day they filed their refund application with the State Government i.e. 11.03.2013, therefore the impugned order is illegal - principles of harmonious construction. HELD THAT:- An interpretation of a statute is best when we know why it was enacted. The interpretation given by the financial institution/Assets Reconstruction company would tantamount to making the PMLA redundant. The legislature has come out with the law of PMLA in fulfillment of our international obligations as laid in the Preamble of the PML Act so that money laundering and proceeds of crime could be effectively dealt with. If we see the intent of PMLA and DRT Act or SARFAESI Act, the purpose of these are entirely different. SARFAESI Act and the DRT Act deal with debts due to any secured creditor which shall have priority over all other debts and all revenues, taxes, cesses and other rates due to the Central Government, State Government or local authority. On the other hand, in PMLA there are no dues, debts, revenues, taxes, cesses and other rates which is payable to the Central Government, State Government or local authorities. Properties are attached under PMLA, they being proceeds of crime - So the powers of confiscation or release of the attached property is only vested with the Special Courts and this Appellate Tribunal does not have any such powers. Hence exercise of the powers of confiscation or release of the attached property by this Appellate Tribunal is beyond the scope of activities of this Tribunal and would be grossly illegal. Moreover as per Section 8(8) even the powers of restoration of such confiscated property or thereof to a claimant with a legitimate interest in the property vests with the Special Court. Section 8(8) was amended by the Finance Act, 2018, introducing a separate proviso to reinforce this point giving the court further powers to allow such restoration even during the course of the trial. Usurping this power by the Appellate Tribunal would be a blatant violation of the law itself. There is no merits in the appeals or the claim of the asset reconstruction company - appeal dismissed.

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• Service Tax

• 2019 (8) TMI 679
  Refund of accumulated CENVAT Credit - period October 2016 to December 2016 - Rejection on the ground that the refund application was filed beyond the time limit of one year specified under N/N. 27/2012-CE(NT) - HELD THAT:- The claim has been filed for the period October 2016 to December 2016. According to the Ld. Counsel, the first payment was received on 25.11.2016 and the refund claim was filed on 31.10.2017, which squarely places the application for refund within the normal period of limitation and hence the appellant s appeal needs to be allowed. For the sole purpose of factual verification of the dates and decision in terms of notification No. 27/2012-CE(NT) as amended by Notification No. 14/2016-CE(NT), dt. 01.03.2016, the matter is remanded to the original authority - Appeal allowed by way of remand.

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• Central Excise

• 2019 (8) TMI 716
  Classification of labels used in packing of cigarettes - Whether the labels would fall within heading no. 4819 90 of the First Schedule to Central Excise Tariff Act, 1985? - appellant contends that the classification decided by the Tribunal had adjudged the classification to be under heading no. 4818 90 of the First Schedule to Central Excise Tariff Act, 1985 which, after the amendment, was intended only for articles of paper and not printed cartons. HELD THAT:- In classification disputes, it is well settled that if the alternative proposed in the show-cause notice is not defensible, the claimed classification will prevail even if other headings be more apt. In view of this, we do not have to classify the product based on submissions made by either side. The consequence of the failure of the product to be covered by the heading proposed in the show cause notice suffices for acceptance of the one claimed by assessee. Appeal allowed - decided in favor of appellant.

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• 2019 (8) TMI 714
  Jurisdiction of Joint Commissioner to issue SCN - duty/tax involved in the present case exceeds Rs. 2 crore - Circular No. 1049/37/2016-CX dated 29-Sep-2016 - evasion of Central Excise Duty - willful suppression of unaccounted manufacture and clearance/selling activity of articles of diamond studded gold jewellery - exemption N/N. 28/2016-CE dated 26.07.2016 - Rules 108 and 109A(1) of the CGST Rules, 2017, read with Section 107 of the CGST Act, 2017. HELD THAT:- By merely relying upon the circular, it cannot be said that the Joint Commissioner had no jurisdiction to issue the show-cause notice and adjudicate the same - reliance placed in the case of Supreme Court in the case of PAHWA CHEMICALS PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, DELHI [ 2005 (2) TMI 136 - SUPREME COURT] , wherein the very same issue had cropped up where it was held that the Superintendent had jurisdiction to issue showcause- notice and the Deputy Commissioner had jurisdiction to adjudicate. One another Circular No.31/05/2018-GST dated 9th February 2018 is relied upon where it was held that It has now been decided by the Board that Superintendents of Central Tax shall also be empowered to issue show cause notices and orders under section 74 of the CGST Act. Thus, in the present case, the writ-applicant has an alternative remedy of preferring a statutory appeal - writ-application is disposed of without going into the merits of the matter and with a liberty to the writ-applicant to avail of the alternative efficacious remedy of preferring an appeal before the Appellate Authority.

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• 2019 (8) TMI 678
  Liability of National Calamity Contingency Duty - POY produced and captively consumed within the factory of production by the Petitioner - period from October 2007 to February 2008 - petitioner has drawn our attention to the order of the Supreme Court in the case of Bajaj Auto Limited v. Union of India [ 2019 (3) TMI 1427 - SUPREME COURT ] and submitted that ratio therein would govern the case of the petitioner. HELD THAT:- The ratio of the Supreme Court, when stated to govern the case and the petition was filed prior to the judgment rendered by the Supreme Court and considering the contentions raised in the petition, we do not propose to relegate the petitioner to avail alternative remedy, as suggested by learned counsel for the respondent - the ratio of the Supreme Court judgment is not in dispute and would squarely govern the case. Petition allowed.

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• 2019 (8) TMI 677
  Imposition of penalty - removal of trucks on the basis of invalidation letters issued in terms of Foreign Trade Policy (FTP) 2009-14 - supplies were not effected against International Competitive Bidding (ICB) - HELD THAT:- In the present case, finding of facts arrived at by the tribunal reveals that there was no element of fraud and suppression etc. with an intent to evade payment of duty. The department was informed by the assessee about duty and clearance also along with reasons - The tribunal has gone to the extent in holding that the department was also having knowledge about the error and in those circumstances, the tribunal has allowed the appeal preferred by the assessee. In the considered opinion of this Court, purely question of fact is involved in the present appeal and no substantial question of law arises in the matter, therefore, the admission is declined.

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• 2019 (8) TMI 676
  Waiver of pre-deposit - case of petitioner is that in view of its poor financial condition, appellant was not in a position to pay the huge amount of pre-deposit - section 35F of CEA, 1944 - HELD THAT:- Section 35F of the Act, as it earlier stood, invested the Tribunal with the discretion to dispense with the requirement of pre-deposit, if it was of the opinion that the deposit of duty demanded or penalty levied would cause undue hardship to such person, however, subject to such conditions as the Tribunal may deem fit to impose so as to safeguard the interests of the revenue. However, Section 35F of the Act, amended vide the Finance (No.2) Act, 2014, which came into force w.e.f. 01.04.2014, has done away with that discretion - Section 35F(i) of the Act provides that unless the appellant has deposited 7.5% of the duty in case where the duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute, in pursuance of a decision or an order passed by an officer of Central Excise lower in rank than the Commissioner of Central Excise, the Tribunal or the Commissioner (Appeals), as the case may be, appeal shall not be entertained. Legislative mandate contained in Section 35F of the Act is intended to safeguard the interest of the revenue as the discretion provided in the earlier unamended Section 35F of the Act vested in the Tribunal gave rise to enormous cases where the litigant used to frequently cite the reason of undue hardship, which would consume the adjudicatory time and resources of the Tribunal or, as the case may be, of the Commissioner (Appeals). It was in order to suppress such mischief that the Parliament amended Section 35F of the Act. There is no good reason to waive the mandatory requirement of pre-deposit, which, in any case, cannot be waived as it is an appeal against the order passed by the Tribunal and not a writ petition under Article 226 of the Constitution of India. Application dismissed.

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• 2019 (8) TMI 675
  Suit filed by the appellant/plaintiff claiming Rs. 2 Lakhs as compensation for the loss of reputation and goodwill caused by the officers of Central Excise - allegation of Clandestine removal - Bidis - - HELD THAT:- On behalf of the appellant, the evidence has been adduced but there is nothing on record to show that the Respondents/defendants officers have any intention to cause any harm to the appellant firm. In the absence of it, merely any error in conducting the aforesaid proceedings with regard to imposition of fine against which the remedy of appeal is also available and was availed by the appellant, it cannot be said that the aforesaid proceedings were intended by the Respondents/defendants to cause harm to the reputation and business of the appellant/plaintiff. In the circumstances, the findings of the learned trial Court do not require any interference, as the same are just and proper. When the respondents acted in good faith under the provisions of the Central Excise Act or rule made there under, no suit, prosecution or other legal proceedings shall lie against the Respondents/defendants. Thus the learned trial Court has not committed any error in adjudicating that the suit cannot lie in view of the provisions of Section 40 of the Central Excise Act against the Respondents/defendants - appeal dismissed.

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• 2019 (8) TMI 674
  Demand of interest and penalty - CENVAT Credit - inputs - irregular availment of Cenvat Credit on input stored outside the factory in contravention of Rule 8 of the Cenvat Credit Rules, 2004 - period June 2011 to March 2013 - whether penalty and interest can be imposed for availing Cenvat credit on inputs stored outside the factory? HELD THAT:- The Ld. Commissioner has made a detailed examination of the ER-1 returns filed by the appellant, on perusal of which he has given a specific finding that availment and reversal of credits have duly been reflected in the said returns which is based on the RG-23A Pt-II registers maintained at both the places within the factory as well as the Storage tank located outside the factory. He also observed that said availment of credit has been shown under the head of other payment in ER-1 returns. Moreover, he has admitted that merely because of error in availment of credit when the entire input covered in an invoice are received in the factory, the substantial benefit of cenvat credit cannot be denied. Demand of interest - HELD THAT:- The fact that adequate credit balance is available during the material period and is not in dispute. Despite that credit has been pre-maturely reflected in the RG-23 register and ER-1 return since goods were not received in the factory, there is no consequent short payment of duty and hence no loss to exchequer - Moreover, as the Ld. Commissioner himself has observed that for mere procedural lapse, the substantial benefit of credit cannot be denied, more particularly in case where there is a sufficient credit balance always available during the period in dispute - interest cannot be levied when sufficient credit balance is available, despite that a portion of credit amount has been availed contrary to the guidelines issued in trade notices, inasmuch as in such cases there is no loss to the exchequer and therefore there cannot be any question to compensate the Revenue by levying interest. The demand of interest and the penalty imposed cannot be sustained and accordingly, the same are set aside - appeal allowed - decided in favor of appellant.

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• 2019 (8) TMI 673
  CENVAT Credit - difference in the CENVAT credit figures in the two returns filed by the assessee i.e., monthly ER-1 returns vis-a-vis the annual ER-4 return - time limitation - HELD THAT:- I have perused the ER-4 returns where the alphabet E with decimals have appeared at multiple places which can only be attributed to the system error, a fact not controverted by the Revenue and therefore, no negative inference can be drawn against the assessee merely based on the data contained in ER-4 return. I also find that Ld. Commissioner has made a categorical finding that the assessee has duly submitted the CENVAT Credit Register at the adjudication stage which corresponds to the ER- 1 return and therefore, the Credit figures disclosed in the said ER-1 return have to be accepted as sacrosanct without any demur. There is no reason to saddle the assessee with the demand of CENVAT Credit, as has been rightly held by the Ld. Commissioner in the impugned order by setting aside the duty demand. Whether the matter should be remanded back to the original authority? - HELD THAT:- Since the Ld. Commissioner is satisfied on both the counts (i) that there was a system error based on which he has set aside the duty demand and (ii) that the assessee had submitted the Credit Register at the adjudication stage which corresponds to the credit figure shown on ER-1 returns, there is no reason to remand the matter as no purpose would be further served in the given facts of the case - In any case, the whole proceeding is hit by limitation inasmuch as the Show Cause Notice in the present case was issued on 16.10.2014 for the impugned period 2010-11. Since the proceedings have been initiated on the basis of statutory returns, this is not a case of suppression and therefore demand cannot survive on limitation also. Appeal allowed in part.

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• 2019 (8) TMI 672
  CENVAT Credit - destruction of goods by fire - packing materials destroyed by fire in the factory - HELD THAT:- The Appellant had never stated the fact of having issued the packing material (goods in question) to the production floor prior to the proceedings before this Tribunal. I agree with the submissions made by the Ld. DR that factual submissions being made for the first time before the Tribunal cannot be entertained. The Tribunal being an Appellate Authority cannot be presented with different or additional set of facts as compared to the facts presented before the lower authorities. Therefore, it is not possible to test the veracity of the additional factual submissions of the Appellant at this stage. The Chartered Engineer s report and SAP records do not aid the case of the Appellant in view of the above reasons - the duty amount of which credit was availed before the fire incident in August 2011, has already been reversed in May 2015 which has been duly recorded in the impugned order on Page no 6. Therefore, the duty amount already stands paid by way of reversal of credit which is not in dispute. Demand of Interest and penalty - HELD THAT:- The Ld. Commissioner has recorded that the Appellant had sufficient credit balance in its account. Based on the applicable provisions under Rule 14 of the CENVAT Credit Rules, as was in force during the period April 2012 to February 2015, the Appellant is not required to pay any interest. The Ld. Commissioner has committed a fundamental error in applying the said amended provisions since the same would apply in those cases where it is to be ascertained whether the credit is deemed to be utilized in March 2015 in respect of the credit amount availed in March 2015, i.e. both availment and utilization of credit during the period after the amendment took place. The aforesaid provisions brought into effect on 14th March, 2015 cannot be applied (retrospectively) for the credit amount already shown in the returns prior to March 2015 (i.e. August 2011 when the fire incident occurred). It is also relevant to take note of the above Allahabad High Court decision in CCE, Ghaziabad vs. Ashoka Metal Decor (P) Ltd.[2010 (4) TMI 738 - ALLAHABAD HIGH COURT] wherein the Hon ble High Court held that when the wrong credit is not utilized for payment of final output duty on final products, neither the assessee gets any advantage nor there is any Revenue loss to the Government. Since the appellant had sufficient credit balances, in any case, there would be no loss of Revenue to the exchequer. Therefore, the imposition of interest and penalty in the present proceedings cannot sustain and hence, the same are set aside - Duty amount since already paid is not interfered with. Appeal allowed in part.

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• 2019 (8) TMI 671
  Clandestine manufacture and removal - validity of stock verification proceedings - shortage of goods - vires of Rule 223A of CER - HELD THAT:- Proceedings under Rule 223A for shortage of goods is to be based on stock taking in the factory in the presence of the proper officer . The said rule makes it explicit that the involvement of the proper officer for applicability of the said provision and for initiation of any proceeding for recovery of any duty short paid found on the basis of the said stock taking carried out in the presence of the proper officer is an absolute requirement. The materials on record herein undisputedly evidence that there was no involvement of the proper officer in the subject annual stock taking carried out on its own by the appellant - There is thus no stock taking under Rule 223A of the said Rules. Hence, the impugned order and the duty demand confirmed thereby under Rule 223A are also sustainable since the stock taking cannot be held to be under Rule 223A of the said Rules. It is also found that there is no denial of the fact that the stocks were ascertained by the appellant on the basis of sectional measurement basis and not on actual weighment basis, but, however, the clearances were effected upon actual weighment basis. In such cases there is bound to be difference in weighments. A case of shortage or excess of stock and/or clandestine removal thereof without payment of duty is not established in such a situation. In the case of ROURKELA STEEL PLANT [SAIL] VERSUS COMMISSIONER OF C. EX., BHUBANESWAR [ 2000 (7) TMI 726 - CEGAT, KOLKATA ] this Bench of the Tribunal, in the case of another sister unit of the appellant, has also held that based upon the difference shown in the figures in the annual financial accounts entered according to sectional weight and RGI register showing dispatch figurers on Railway Receipt weighment basis, a case of clandestine manufacture and removal cannot be sustained. Appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2019 (8) TMI 715
  Attachment of self acquired property - arrears of tax revenues - Gujarat VAT Act - whether the self-acquired property of the ownership of the writ applicant who is neither dealer nor agent, could have been attached for the purpose of recovering the dues payable by the respondent No.3 under the Act, 2003? HELD THAT:- Once the liability of the defaulting dealer is assessed and fixed, the next step would be to recover the requisite amount with penalty or interest. Such amount can be recovered by the authorities under the Act, 2003 by way of land revenue measures as provided under the Bombay Land Revenue Code. Two things are very amply clear. The property of the ownership of the defaulting dealer can only be provisionally attached. The language of the statute is very clear. Section 45 provides that he may by order in writing attach provisionally any property belonging to the dealer . In such circumstances, in the first instance, the property which is of the ownership of the writ applicant could not have been attached for the purpose of recovery of the amount of tax, penalty or interest due and payable by the respondent No.3. It is not the case of the department that the writ applicant has defaulted, in any manner, with regard to payment of the tax under the Act, 2003. The argument of the learned AGP that the writ applicant would fall within the ambit of the words other person as figuring in Section 46 of the Act, 2003 deserves to be outright rejected. In the case of State of Gujarat vs. Jwelly Tea Co. [2016 (2) TMI 94 - GUJARAT HIGH COURT] it was held that The legislature having treated a Hindu Undivided Family as a taxable entity, distinct from the individual members constituting it, it was not open for the appellant to attach the movable properties of an individual member - the Tribunal was wholly justified in holding that the property of the individual member of the Hindu Undivided Family could not be attached under section 45 of the GVAT Act. One aspect which needs to be clarified is that only the land belongs to the writ applicant. The writ applicant is neither dealer nor the agent but he is father of the dealer. The property which has been attached is self acquired property of the writ applicant. Therefore, the land of the ownership of the writ applicant could not have been attached. Application allowed.

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• 2019 (8) TMI 670
  Refund of amount collected without authority of law including TDS - Sharing of revenue between two States - it was held that the fact remains that TDS is not to be deducted and the demand originally made by the 1st respondent is without authority of law - HELD THAT:- No case is made out to interfere with the impugned order(s) passed by the High Court. SLP dismissed.

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• 2019 (8) TMI 669
  Permission to withdraw the special leave petition - Maintainability of petition - Reason-ability of Stay allowed by Tribunal - HELD THAT:- Permission is granted - The special leave petition is dismissed as withdrawn.

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• 2019 (8) TMI 668
  Imposition of penalty of over Rs. 11.05 lakhs - Section 27(1) of TNVAT Act - attachment of bank account of petitioner - HELD THAT:- This Court is of the considered view that in the light of the undisputed position as it unfurls in the hearing today, without expressing any view on the merits of the matter, writ petition can be disposed of by passing an order whereby the assessee gets a breather and the interest of Revenue is also protected. It is not in dispute that with regard to penalty liability of little over Rs. 11.05 lakhs of G.Jayabal i.e., Rs. 11,05,037/- to be precise, a sum of Rs. 1,51,038/- has already been debited from the bank account of the writ petitioner Company and the same has been paid out to the Department. In addition to this, the writ petitioner Company will now pay 25% of the penalty amount of Rs. 11,05,037/- to the first respondent - For the balance after giving credit to the aforesaid Rs. 1,51,038/- and 25%, a personal bond shall be provided by the deponent of the aforesaid affidavit filed in support of the instant writ petition. On the aforesaid payment being made and a bond being furnished in appropriate format as required by the Department, the impugned attachment order will stand raised. - petition disposed off.

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• 2019 (8) TMI 667
  Deemed assessment - Section 27(2)(b) of the U.P. VAT Act, 2008 - absence of any prior notice having been issued to the assessee so as to allow him 15 days time to submit his revised return in terms of Rule 45(13)(a) of the Rules - Assessing Officer had issued such notice to the assessee on 19.03.2017 served on 20.03.2017. HELD THAT:- Under Section 24 of the Act, a taxable dealer is obliged to submit its tax return for different tax periods, as also its annual return. Section 25 of the Act provides for assessment of tax for a tax period i.e. a provisional assessment. Tax period has been defined under Section 2(ak) of the Act, as a period for which a dealer is liable to submit tax return under Section 24 of the Act - Section 26 of the Act provides, every taxable dealer, for each assessment year shall be assessed to tax payable by him and to amount of Input Tax Credit (I.T.C.) admissible to him - Thus, it fixes the scope and purpose of an assessment to be made. It is in the above statutory context, provisions of Sections 27, 28 and 29 of the Act appear and they provide for self-assessment; assessment of tax after examination of record and; assessment of tax of turnover escaped from assessment year appear. Section 28 of the Act provides for a full-fledged or regular assessment to be made. However, it departs from its predecessor enactment i.e. U.P. Trade Tax Act, 1948. The Act contemplates a regular assessment upon examination of records be made only in certain cases specified in sub-section (1) of Section 28 of the Act - Thus, though section 26 of the Act requires an assessment to be made in each case, as to tax payable and I.T.C. entitlement available, besides the legal fiction under section 27 of the Act the same may also arise as a consequence of an assessment after examination of records or upon reassessment order made under section 29 of the Act i.e. as a result of conscious application of mind by the assessing authority to the books of account, return of annual turnover, prescribed statements and replies etc. that may collectively form the record of the assessment case. In a case where the assessee files its revised return in response to a notice issued under Rule 45(13)(a) of the Rules, and the assessing officer feels satisfied, as to its completeness and correctness, he may accept the same in exercise of power conferred under Rule 45(13)(b) of the Rules. In that case, the annual return would constitute the self-assessment, of which intimation would be given to the assessee. Thus, Section 27 of the Act read with Rule 45(13)(a) and (b) of the Rules provide for a deemed assessment in case the original return is accepted in entirety or a self-assessment if the revised return is accepted. In either case, no order of assessment would come into existence. In both cases, a legal fiction (with twin consequences discussed above) arises. Though the provisions of Section 28(1)(b)(i) and (iv) of the Act and Rule 45(13)(a) of the Rules, do over lap and in either case regular assessment after examination of records may be passed and further in either case that resort may be had upon a detection being made by the assessing officer that the return filed is incomplete or incorrect or contains wrong particulars, the immediate consequence arising upon such detection would be different, depending upon the time when such defect is noticed and/or acted upon by the assessing authority. Thus, in the first place, there never arose an order under Section 27 of the Act. Only a legal fiction of deemed assessment arose on 31.3.2017, for the limited purpose of creating a demand of admitted tax and entitlement of Input Tax Credit (ITC). No third purpose or inference arose. Then provisions of Section 28 of the Act being independent of Section 27 of the Act, upon the satisfaction of the assessing officer being found existing in terms of Section 28(1)(b) of the Act, that power could be exercised irrespective of the fact whether any proceedings had been conducted under Section 27 of the Act and irrespective of the fate of those proceedings. The initiation of proceedings under section 28 of the Act, vide notice dated 27.2.2018 did not suffer from any infirmity - though a deemed assessment for A.Y. 2014-15 had come into existence on 31.03.2017, yet, it did not preclude the assessing officer to make an assessment upon examination of record under Section 28 of the Act, which order is found to have been passed in accordance with law, upon a valid notice dated 27.02.2018. Though it is a tough case inasmuch as the assessment order was passed ex parte and none of the appeal authorities have considered the merits of assessment order, yet, this Court in exercise of its revision jurisdiction is constrained to answer the question in the affirmative i.e. against the assessee and in favour of the revenue in view of the fact that the assessee never raised such challenge on merits, before the appellate authorities. Revision dismissed.

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• 2019 (8) TMI 666
  Validity of revised assessment order - deemed assessment - reasonable opportunity to show cause not provided - proviso to Section 27(2) of TNVAT Act - HELD THAT:- Unfortunately, in the files of the Department there is no notice or nothing has been mentioned about the personal hearing though the aforesaid copies of revisional notices dated 07.04.2017 and 31.01.2018 wherein opportunity of personal hearing has been granted form part of the files. Therefore, this Court is of the considered view that the ideal way to put an end to this controversy is to afford a personal hearing opportunity to the writ petitioner and direct the respondent to redo the revised assessment. Petition allowed by way of remand.

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• Indian Laws

• 2019 (8) TMI 665
  Dishonor of Cheque - trust - Prosecution proceedings against the trustee who has not signed the cheque - petitioner argued that since trust is not an association of individuals , no successful prosecution against the petitioners, invoking the provisions under section 141 of the N. I. Act, can be sustained - HELD THAT:- All the trustees are the owners of the property, but they are obliged to use the same in a particular manner. If a number of trustees exist, they are the joint owners of the property. The trustees are bound to maintain and defend all suits, for the preservation of the trust-property and the assertion or protection of the title thereto. Thus it appears that the trust is not capable of suing and being sued in a court of law, even though the trustees can maintain and defend suits for the preservation and protection of the trust-property. Therefore, a trust is not a juristic person or a legal entity, as the juristic person has a legal existence of its own and hence it is capable of suing and being sued in a court of law. Thus it appears that a trust is not like a body corporate, which has a legal existence of its own and therefore can appoint an agent - thus trust is not a body corporate. Whether the trust is an association of individuals or not? - HELD THAT:- A mere combination of persons or coming together of persons, without any intention to have a joint venture or carry on some common activity with a common understanding and purpose to achieve some common benefit, would not convert two or more persons into a body of individuals/association of persons - it is clear from section 3 of the Act that the trustees do not get any benefit out of the trust-property and the benefit will be obtained individually by the beneficiaries or the beneficiaries and the author of the trust. Therefore, it cannot be said that the trustees are persons join together for a common action to achieve some common benefit. It is true that the beneficiaries get the benefit. However, the beneficiaries do not become the beneficiaries by their own volition. Since the common purpose of the trust is not to achieve benefit to the trustees, the trust cannot be said to be an association of persons/body of individuals . The trust is not a body corporate or an association of individuals as provided in the Explanation to section 141 of the N. I. Act. Therefore, no prosecution against the trustees, invoking the provisions under section 141 of the N. I. Act, can be maintained. Consequently, no successful prosecution against the petitioners, invoking the provisions of section 141 of the N. I. Act, can be sustained. Since the petitioners did not sign the cheque, no successful prosecution against the petitioners under section 138 of the N. I. Act can be sustained and consequently, no purpose will be served even if the prosecution against the petitioners is permitted to be continued - In the said circumstances, I am inclined to quash the complaint and further proceedings against the petitioners in the above said case, invoking the inherent power under section 482 of the Cr.P.C., to secure the ends of justice. Application allowed.

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