TMI Tax Updates - e-Newsletter
August 21, 2017

Case Laws in this Newsletter:

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

TMI Short Notes

1. Where a term has not been defined under ICDS, nor under the Act, but has different interpretations given to it by the courts in tax cases, and in ICAI Accounting Standards, which interpretation would prevail while interpreting ICDS.

  Income Tax:

2. Does ICDS apply to computation of Minimum Alternate Tax (MAT) u/s 115JB of the Act or Alternate Minimum Tax (AMT) u/s 115JC of the Act.

  Income Tax:

3. In case of conflict between ICDS and other specific provisions of the Income-tax rules, 1962 governing taxation of income like rules 9A, 9B etc. of the Rules, which provisions shall prevail.

  Income Tax:

4. Certain ICDS provisions are inconsistent with judicial precedents. Whether these judicial precedents would prevail over ICDS.

  Income Tax:

Articles

1. WHEN CAN ONE TAKE ITC FOR RCM CASES?

   By: Shripada Hegde

2. Place of Supply under GST and determination of nature of supply under GST

   By: CA.VINOD CHAURASIA

3. 10 Step Approach to GST Compliance

   By: Tarun Agarwalla

4. An understanding of E-commerce and other related provisions

   By: CASanjay Kumawat

News

1. LAST DATE FOR PAYMENT OF GST AND FILING OF RETURN 3B FOR JULY 2017 EXTENDED BY 5 DAYS

2. Last Date for Payment of Gst and Filing of Return in Form GSTR 3B For July 2017 Extended By 5 Days

3. GST SECTORAL SERIES - FAQ: Gems & Jewellery

4. GST SECTORAL SERIES – FAQ : IT/ITES

5. FM inaugurates the National Conference on Insolvency and Bankruptcy :Changing Paragdigm in Mumbai

6. Customs Brokers Licensing and Revocation Regulations, 2017 - DRAFT

7. Clarification regarding number of Taxpayers added after Demonetization

8. Web Based System for Online Processing of Application for ICD/CFS/AFS (An Initiative under ‘Minimum Government Maximum Governance’)

Notifications

Customs

1. 38/2017 - dated 18-8-2017 - ADD

Seeks to impose anti-dumping duty on "Textured Toughened (Tempered) Glass", originating in or exported from China PR

2. 73/2017 - dated 18-8-2017 - Cus

Amendment in Notification No. 60/2011-Customs which Exempts specified goods from customs duty for sale in Balat, Kalaichar, Srinagar (Tripura) or Kamalasagar (Tripura) border haats at Indo-Bangladesh border

GST

3. 19/2017 - dated 18-8-2017 - CGST Rate

Seeks to reduce CGST rate on specified parts of tractors from 14% to 9 %

4. 19/2017 - dated 18-8-2017 - IGST Rate

Seeks to reduce IGST rate on specified parts of tractors from 28% to 18 %

5. 19/2017 - dated 18-8-2017 - UTGST Rate

Seek to reduce UTGST rate on specified parts of tractors from 14% to 9 %

GST - States

6. 19/2017-State Tax (Rate) - dated 18-8-2017 - Bihar SGST

Amendments in the Notification No. 1/2017-State Tax (Rate), dated the 29th June, 2017.

7. (03) - dated 8-8-2017 - Chhattisgarh SGST

Notification For Filing Return in Form GSTR-3B

8. 17/2017-State Tax - dated 31-7-2017 - Chhattisgarh SGST

The Chhattisgarh Goods and Services Tax (Third Amendment) Rules, 2017.

9. 01/2017-State Tax - dated 16-8-2017 - Delhi SGST

Date for filing of GSTR-3B.

10. CCT/26-2/2017-18/7 - dated 18-8-2017 - Goa SGST

Last date for furnishing of return in FORM GSTR-3B.

11. CCT/26-2/2017-18/6 - dated 8-8-2017 - Goa SGST

Extends the time limit for furnishing the return FORM GSTR-3.

12. CCT/26-2/2017-18/5 - dated 8-8-2017 - Goa SGST

Extends the time limit for furnishing the filing of details of inward supplies in FORM GSTR-2

13. CCT/26-2/2017-18/4 - dated 8-8-2017 - Goa SGST

Time period for filing of details of outward supplies in FORM GSTR-1.

14. CCT/26-2/2017-18/3 - dated 8-8-2017 - Goa SGST

Date for filing of GSTR-3B.

15. 22/2017-State Tax - dated 18-8-2017 - Gujarat SGST

The Gujarat Goods and Services Tax (Fifth Amendment) Rules, 2017.

16. 19/2017-State Tax (Rate) - dated 18-8-2017 - Gujarat SGST

Amendment In Notification, No.(GHN-31)GST-2017/S.9(1)(1)-TH, Notification No. 01/2017-State Tax (Rate), dated the 30th June, 2017,

17. 23/2017-State Tax - dated 17-8-2017 - Gujarat SGST

Dates of filling in GSTR3B for July 2017

18. 21/2017-State Tax - dated 8-8-2017 - Gujarat SGST

Time Limit for filing GSTR-3B

19. (GHN-56)GST-2017-S.9(1)(5)TH - dated 11-7-2017 - Gujarat SGST

Corrigendum - No.(GHN-31)GST-2017/S.9(1)-TH dated the 30th June, 2017 Notification No. 01/2017-State Tax (Rate),-

SEZ

20. S.O. 2667(E) - dated 10-8-2017 - SEZ

SEZ - Central Government de-notifies an area of 5.03.54 hectares at Perungalathur Village, Chennai in the State of Tamil Nadu

Circulars / Instructions / Orders

GST - States

1. ORDER No. 05/2017 - dated 21-7-2017

Assignment of functions to proper officers.

Highlights / Catch Notes

GST

• IGST Rate Schedule Updated: New Rates are 5%, 12%, 18%, 28%, 3%, and 0.25% per section 5(1) Notification.

  Notifications : IGST Rate Schedule u/s 5(1) - notifying rates of IGST @ 5%, 12%, 18%, 28%, 3% and 0.25% - As amended by notification dated 18-8-2017
  Visit to Get Source

  ---

• CGST Rate Schedule Amended: New Rates at 2.5%, 6%, 9%, 14%, 1.5%, and 0.125% per Section 9(1).

  Notifications : CGST Rate Schedule u/s 9(1) - notifying rates of CGST @ 2.5%, 6%, 9%, 14%, 1.5% and 0.125% - As amended by notification dated 18-8-2017
  Visit to Get Source

  ---

• UTGST Rate Changes: Amended Rates u/s 7(1) Include 2.5%, 6%, 9%, 14%, 1.5%, and 0.125.

  Notifications : UTGST Rate Schedule u/s 7(1) notifying rates of UTGST @ 2.5%, 6%, 9%, 14%, 1.5% and 0.125% - As amended by notification dated 18-8-2017
  Visit to Get Source

  ---

• GST Payment and GSTR 3B Filing Deadline for July 2017 Extended by Five Days.

  News : Last Date for Payment of Gst and Filing of Return in Form GSTR 3B For July 2017 Extended By 5 Days
  Visit to Get Source

  ---

• UTGST Rate on Tractor Parts Reduced from 14% to 9% in New Notification.

  Notifications : Rates of UTGST on specified parts of tractors from 14% to 9 % - Notification
  Visit to Get Source

  ---

• IGST Rate on Tractor Parts Reduced from 28% to 18% for Enhanced Affordability and Agricultural Support.

  Notifications : Rate of IGST reduced on specified parts of tractors from 28% to 18 % - Notification
  Visit to Get Source

  ---

• CGST Rate on Tractor Parts Reduced from 14% to 9% According to New Notification.

  Notifications : Rates of CGST on specified parts of tractors reduced from 14% to 9 % - Notification
  Visit to Get Source

  ---

• New Guidelines for Filing FORM GSTR-3B: Determine Tax Payable, Adjust ITC, and Pay by August 20, 2017.

  News : Guidelines for filing of return in FORM GSTR-3B FOR July 2017, determination of tax payable, adjustment of ITC, payment of tax by 20.8.2017 etc.
  Visit to Get Source

  ---

Income Tax

• Misclassification of Assessee as Co-operative Bank u/s 80P(4) Affects Tax Benefits Eligibility for Co-operative Societies.

  Case-Laws - AT : Eligibility for the benefits of u/s 80P(2)(a)(i) - it is a complete misnomer on the part of the Assessing Officer to treat the assessee as a co-operative bank within the meaning of Sec. 80P(4) of the Act without establishing that the assessee is a co-operative bank in the eyes of law.
  Visit to Get Source

  ---

• Section 11 Exemption Upheld: Meal Coupons for Chairman & Guests Don't Violate Section 13(1)(c) of Income Tax Act.

  Case-Laws - AT : Exemption u/s 11 - violation of provisions of section 13(1)(c) - providing food to the officers and their guests - 73 meals coupons utilized by the Chairman - exemption cannot be denied
  Visit to Get Source

  ---

• Court Sets Income Estimation at Rs. 13,300 Per Acre for Fish Tanks Without Books of Accounts.

  Case-Laws - AT : Estimation of income from fish tanks - cultivation of the fish ponds - Estimation of water spread area and the bund area - in the absence of books of accounts we hold that ₹ 13,300/- per acre of water spread area appears to be reasonable
  Visit to Get Source

  ---

• Interest Waiver Dispute u/s 220(2) of Income Tax Act Highlights Jurisdictional Concerns and Decision-Maker Principles.

  Case-Laws - HC : waiver of interest u/s 220(2) - Jurisdiction - the officer, who heard the petitioner in person was not the Officer/Chief Commissioner, who decided the matter - The legal principle is that the person who hears must decide. - HC
  Visit to Get Source

  ---

• High Court Dismisses Revenue Appeal: Payment for Enlarging Control Is Not Capital Expenditure, Deduction Allowed u/s 57(iii.

  Case-Laws - HC : Benefit of deduction u/s.57(iii) - whether payment was made for enlarging the control and management over - capital expenditure or revenue expenditure - HC dismissed the revenue appeal
  Visit to Get Source

  ---

• Tax Deduction u/ss 80IA/80IB Continues for 10 Years Unless Initial Year Relief is Withdrawn.

  Case-Laws - HC : Deduction u/s 80IA/80IB - once deduction is granted in the initial Assessment Year, the same would continue for the period of 10 consecutive year unless the relief for initial year is also withdrawn at the time of withholding the relief under Section 80IA/IB - HC
  Visit to Get Source

  ---

• Court Rules Reassessment Notice u/s 147 Insufficient to Deny Tax Deductions u/s 10B.

  Case-Laws - HC : An attempt to make reassessment after the notice u/s 147 is on the basis that the petitioners were not carrying out manufacturing activities, cannot be a ground to refuse the benefits of deduction in terms of Section 10B - HC
  Visit to Get Source

  ---

• Arm's Length Principle Upheld: Non-Availing Services Doesn't Justify Claim Rejection; Payments to AE Not Challenged by TPO/DRP.

  Case-Laws - AT : TPA - ALP of umbrella of services - Non-availing of services cannot be the basis for rejecting the claim - TPO or the DRP has not stated that payment made by the assessee to its AE were not at Arm’s length.
  Visit to Get Source

  ---

Customs

• Anti-Dumping Duty Imposed on Chinese Textured Toughened Glass to Protect Domestic Industries from Unfair Pricing Practices.

  Notifications : Anti-dumping duty on Textured Toughened (Tempered) Glass, originating in or exported from China PR imposed - Notification
  Visit to Get Source

  ---

• Customs Duty Exemption Amended for Goods Sold at Border Haats Along Indo-Bangladesh Border Per Notification No. 60/2011-Customs.

  Notifications : Amendment in Notification No. 60/2011-Customs which Exempts specified goods from customs duty for sale in Balat, Kalaichar, Srinagar (Tripura) or Kamalasagar (Tripura) border haats at Indo-Bangladesh border - Notification
  Visit to Get Source

  ---

• Court Declares Extension of Anti-Dumping Duty Invalid Due to Expiry of Original Notification Before Amendment.

  Case-Laws - HC : Anti-dumping duty - Whether Amendment Notification dated January 23, 2014, amending Notification dated January 02, 2009 by allowing it to remain in force till January 01, 2015 issued after the expiry date of the original Notification i.e. January 01, 2014 is without any legal authority and is, therefore, null and void? - Held Yes - HC
  Visit to Get Source

  ---

Indian Laws

• New Online System for ICD, CFS, AFS Applications Boosts Efficiency in Logistics Under 'Minimum Government Maximum Governance' Initiative.

  News : Web Based System for Online Processing of Application for ICD/CFS/AFS (An Initiative under ‘Minimum Government Maximum Governance’)
  Visit to Get Source

  ---

• Demonetization Boosts India's Taxpayer Base: Government Reports Rise in Registrations, Highlights Enhanced Tax Compliance Efforts.

  News : Clarification regarding number of Taxpayers added after Demonetization
  Visit to Get Source

  ---

Service Tax

• Helicopter lease from foreign lessors deemed a sale, not a service; service tax demand set aside.

  Case-Laws - AT : Classification of service - taking two helicopters on lease from the two foreign lessors ADA, Abu Dhabi and BLFIL, Ireland on dry lease basis - activity is in the nature of sales (deemed sale) or service - held as deemed sale - demand of service tax set aside.
  Visit to Get Source

  ---

• CENVAT Credit Denied for Golf Club Membership: Not Related to Business Activities, Rules Court.

  Case-Laws - AT : CENVAT credit - Golf Club Membership is not related to the assessee's business and therefore, they are not entitled to the CENVAT credit of service tax paid on club membership of the appellant
  Visit to Get Source

  ---

Case Laws:

• Income Tax

• 2017 (8) TMI 668
  Unexplained cash credit - HC has decided [2013 (7) TMI 523 - KARNATAKA HIGH COURT] that the essence is that the credit should be shown in the account and that would satisfy the requirement of Section 68 of the Act. Once the credit so mentioned in the Section is found to be not supported by any acceptable evidence, then the sum so credited may be charged to income-tax as the income of the assessee of that previous year and Decided in favour of the Revenue. The special leave petition is dismissed on the ground of delay.

  ---

• 2017 (8) TMI 667
  Bogus lease - Determine the annual letting value of the property to the sub-lessee on the basis of the municipal valuation - double taxation - HC allowed the Revenue's appeal and held that the nature of leases executed by the assessee being bogus and structures being raised by the assessee himself and it would be proper to include the net rental value to the income of the assessee - Held that:- Going by the nature of transaction, a clear finding of fact is arrived at by the authorities below that a devise was made by the appellant herein to show lesser income at his hand and because of this reason only he purportedly entered into a lease agreement with his wife, son and daughter-in-law in respect of the aforesaid property of which he is paying by letting them at a very nominal rates and allowing his family members to sub-let the same at a much higher rents. In these circumstances, these findings of fact cannot be interfered with in the present appeals. It has been held by this Court in Income Tax Officer v Ch. Atchaiah [1995 (12) TMI 1 - SUPREME Court] that the Assessing Authority has a right to tax the "right person". Once it is found that the income in fact belongs to the appellant he was the right person for taxing the said income, it was permissible for the Income Tax Authorities to tax the said income at the hands of the assessee. At the same time, we also find that the Income Tax Authorities have read the same income at the hands of the wife, son and daughter-in-law of the assessee as well who, as per the department itself, "wrong person". There would be double taxation on the same income at the hands of two persons. In these circumstances, it will always be open to the wife, son and daughter-in-law of the assessee to seek redressal of the taxation of income at their hands in appropriate proceedings.

  ---

• 2017 (8) TMI 666
  Application for settlement of cases - Fulfillment of the requirement of Section 245C relating to making a full and true disclosure of its income “which has not been disclosed” before the AO - Held that:- No doubt, Section 245C (1) of the Act requires the applicant to make a full and true disclosure of the income which has not been disclosed before the AO and the manner in which said income has been earned but this, by no means, requires to the applicant to demonstrate that there is a fresh source of income which was not earlier disclosed by the Assessee. It can happen that an income which was not earlier offered to tax, like an excessive claim for depreciation, is now withdrawn and, as a result, income is offered to tax before the ITSC. This will satisfy the requirement of Section 245C (1) of that Act that what was not earlier disclosed before the AO is now offered to tax. Consequently, the Court sets aside the order dated 4th November, 2016 passed by the ITSC and restores the Petitioner’s application to the file of the ITSC. The said application will be taken as having been proceeded with by the ITSC in terms of Section 245D (1) of the Act. For the further stages in the application, it will be listed before the ITSC on 20th September, 2017.

  ---

• 2017 (8) TMI 665
  Disallowing claim of bad debts - Held that:- Assessee, appearing on advance notice, has produced before the Court copies of the “Schedules annexed to and forming part of the balance sheet as on 31st March, 1998” which show that the bad debts have been written off in the books of accounts. Consequently, the Court declines to frame any question on this issue. The said documents are taken on record. Suppression of gross profits - Held that:- During the physical reconciliation, the Assessee found that the physical availability of the stock was lower than the amount noted in the accounts. The CIT (A) noted that the provision of stock was part of cost of sale which was already added back by the Assessee in the computation of income. If the differential amount was added back, the GP rate worked out to 18.11% which was more than the GP rate estimated by the AO, i.e. 16.66%. Since a sum of 1,25,05,318/- was already offered to tax by the by the Assessee, the CIT (A) was of the view that no further addition was called for. No substantial question of law arises

  ---

• 2017 (8) TMI 664
  Concealment of income - mens rea - Commission of offence under section 181 IPC - accused had made statement having glaring contradiction with regard to existence of locker No.152 with State Bank of Indore, Rewari held in the joint name of the accused and his wife - order of acquittal - Held that:- No ground is made out to grant special leave to appeal. The judgment passed by the trial Court is well reasoned one and does not suffer from any illegality or infirmity. It comes out to be a result of due application of mind and there is no defect apparent on the face of it. The trial Court came to the conclusion that: 1. No offence against the accused stood proved since provisions of Oath Act, 1969 have not been complied with inasmuch statement of accused was recorded in parts after taking breaks and oath was not administered to him by Deputy Director of Income Tax regarding his statement after every break. 2. The sanction to prosecute the accused as required under Section 181 IPC has not been properly proved. 3. It has been established on record that accused was hypertensive and undergoing regular treatment at the time of search and seizure and he could be perplexed at that time in view of his medical condition and as admitted by PW1 in his cross-examination that accused was in nervous state of mind while making statement, as such it cannot be said that it was a deliberate case of falsehood on a matter of substance. 4. There was no mens rea on the part of the accused to commit an offence. 5. There is no material on record to show that due application of mind on the part of complainant to conclude that it was in the interest of justice to file a complaint. Furthermore, it has been contended on behalf of the accused and not refuted by counsel for the complainant that Income Tax Appellate Tribunal vide order dated 16.1.2013 has come to the conclusion that addition of 15.5 lacs was not sustainable in the hands of the assessee and he has explained the sources. Accordingly, the appeal of assessee (Dr.Kaushal Goyal) was allowed and addition was deleted. Thus it comes out that it was not a case of concealment of income.

  ---

• 2017 (8) TMI 663
  AO jurisdiction to set off the losses prior to computation of deduction 10A - validity of order passed u/s.143(3) r/w.144C - Held that:- Sub-section (13) of s.144C is specific and mandates that the Assessing Officer shall issue the order of final assessment in conformity with the directions of the DRP without provision of any further opportunity of being heard to the assessee, within one month from the end of the month, in which the directions are received. There is thus a vital distinction in the scheme of assessment as provided under s.144 B vis-a-vis that which is set out in s.144C. While the Assessing Officer in terms of s.144 B is bound by the directions issued by the IAC, the Statute is silent as regards any fetter to his powers otherwise. Contrast this with sub-section (13) of s.144C, the elements of which have been set out in detail above. It reveals a conscious decision by Legislature to limit the independent participation of the Assessing Officer in the process of assessment only to the stage of proposal of variations in terms of s.144C(1) and not thereafter. The express language of sub-section (13) thereof would admit of no other interpretation. Acceptance of the proposition advanced by the Department would tantamount to giving leave to the Assessing Officer to pass more than one order of assessment in the course of a single proceeding, which is not envisaged in the scheme of the Act. Subsequent assessments either rectifying, revising or reopening the original assessment are permitted by exercising specified powers under different statutory provisions. The order of draft assessment under section 144C(1) is for all intents and purposes an order of original assessment though in draft form. In this light of the matter, the order of the Tribunal to this effect is right in law and calls for no interference. The variation in the order of final assessment dated 22.2.2014 relating to the priority of set off of losses is purely misconceived and an excess of jurisdiction by the Assessing Officer in terms of s.144C(13) of the Act. The questions of law are thus answered in favour of the Assessee and against the Department.

  ---

• 2017 (8) TMI 662
  Payment of non-compete fee - allowable business expenditure - ingenuity of expenditure - Held that:- In order to ascertain the legal nature of a transaction, one has to look at the entire transaction as a whole and cannot adopt a dissecting approach. The burden on the assessee to establish that the transaction is bonafide and genuine has not been discharged, particularly in the light of the admitted facts set out by the assessing officer relating to the continued control exercised by the assessee in the business. - Decided against assessee. Brand equity intangible asset eligible for depreciation in terms of Section 32(1)(ii) - Held that:- Decided in favour of the assessee and against the Revenue holding that brand equity constitutes an intangible asset in terms of Section 32(1)(ii) of the Act upon which depreciation is liable to be granted.

  ---

• 2017 (8) TMI 661
  Addition u/s 14A - ITAT deleted the disallowance by linking investment to the source of funds for the purpose of excluding interest expenditure from the consideration under Section 14A - Held that:- The Tribunal has found that the interest free funds are more than investments. It was observed that the Assessee had sufficient interest free funds to cover the investment. The balance sheet shows that the Assessee has interest free funds amounting to 14,88,38,332/and the investment of 9,71,56,751/, which shows that the Assessee was having sufficient interest free funds to make the investment. Considering the factual matrix of the present case, the judgment of this Court in Commissioner of Income Tax vs. Reliance Utilities and Power Ltd. (2009 (1) TMI 4 - BOMBAY HIGH COURT ) would squarely apply. The Tribunal has not committed any error in applying the said judgment. - Decided against revenue

  ---

• 2017 (8) TMI 660
  Addition u/s 14A - interest expenditure - CIT(A) made no disallowance in terms of Rule 8D(2)(ii) but restricted the disallowance to 5,97,861/- being 0.5% of the total investments in terms of the provisions of Rule 8D(2)(iii) - Held that:- Assessing Officer could not produce before us any material or evidence, which may compel us to reverse the findings of the CIT(A). The CIT(A) has given a finding after appreciating the fact that no disallowance under Rule 8D(2)(ii) can be made in respect of the interest expenditure. We do not find any infirmity or illegality in the finding of the CIT(A). - Decided against revenue. Addition u/s 36(1)(iii) - interest on unsecured loans - Held that:- No disallowance of interest on unsecured loans can be made. We also noted that the assessee had interest free surplus funds of 2447.49 lacs, which was sufficient to meet the investment made by the assessee in Hassan Biomass Company Pvt. Ltd. This fact is clearly borne out of the order of the CIT(A). The learned DR, even though relied on the order of the Assessing Officer, he could not contradict the fact that the interest free funds available with the assessee were much more than the investment made by the assessee in Hassan Biomass Company Pvt. Ltd. In view of this fact, the natural inference will be that the investment made amounting to 3,25,00,000/- in Hassan Biomass Company Pvt. Ltd. are not out of unsecured loan but out of interest free surplus funds available with the assessee. We, therefore, confirm the order of the CIT(A) deleting the disallowance made by the Assessing Officer u/s. 36(1) (iii) of the I T Act. Appeal filed by the Revenue is dismissed.

  ---

• 2017 (8) TMI 659
  Allowability of GSB Expenses - addition u/s 40(a)(ia) - allowable busniss expenditure - Held that:- Admittedly, these expenses were not disallowed by invoking the provision of section 40(a)(ia) by the Assessing Officer in the Assessment Order. Therefore, the Ld. CIT(A) has also not accepted the contention of the Assessing Officer and there is no ground by the revenue in this respect. Therefore, it can be inferred that the genuinity of expenditure is not doubted by the AO. Under these facts we do not see any reason to interfere into the order of the Ld. CIT(A), same is hereby affirmed. Ground no. 1 of the Revenue’s appeal is dismissed. Addition of the Stone Expenses - CIT-A restricted the addition - Held that:- Approach of the Ld. CIT(A) is self-contradictory, therefore, same cannot be sustained in view of the fact that the assessee has not placed any bills and vouchers for supporting its claim. Hence, he restores the finding of the AO on this issue. On the other hand he restricted the disallowance on adhoc basis. Therefore, we set aside the order on this issue and confirm the finding of AO. This ground of Revenue’s appeal is allowed. Disallowance of the Labour Expenses - Held that:- CIT(A) has restricted the disallowance on adhoc basis at the one hand he has confirmed that the assessee has not keeping proper record and the Assessing Officer has made disallowance @ of 5% of the total labour expenses that appears to be justified. Therefore, we set aside the order of Ld. CIT(A) and restore the finding of the AO. This ground of Revenue’s appeal is allowed. Disallowance of expenses to Hire Charges and Crane Loader Expenses - Held that:- CIT(A) delete the addition in the basis, that Assessing Officer has not given specific instance. There is no dispute with regard to the fact that this expenditure was made on adhoc basis. Therefore, we do not see any reason into the finding of the Ld. CIT(A), same is hereby affirmed. This ground of Revenue’s appeal is dismissed. Disallowance of JCB (Hot Mix Plant) - Held that:- As regards Sh. Zakir Hussain being a creditor for outstanding Hot mix plant related expenses he had earlier denied any transaction with the assessee. Later on he failed to appear before the AO in the second round (His affidavit was submitted by the assessee as replacement for his physical presence). Accordingly the amount shown against his name is also considered not verified 20,000/-. The Revenue has not placed any contrary material. Since the Assessing Officer has invoked the provision of Section 40A(3) on the basis of the statement of Shri Satya Narayn Nagar who subsequently retracted the statement and made a fresh statement. Under these facts, we do not see any reason to interfere into the finding of the Ld. CIT(A), same is hereby affirmed. This ground of Revenue’s appeal is dismissed. Addition invoking the provision of section 40A(3)

  ---

• 2017 (8) TMI 658
  Eligibility for the benefits of u/s 80P(2)(a)(i) - co-operative society engaged in the business of banking or providing credit facilities to its members - Held that:- The claim of the assessee for exemption u/s 80P(2)(a)(i) of the Act is on account of it being engaged in the business of providing credit facilities to its members, and not the business of banking. Factually speaking, find no infirmity in the claim of the assessee inasmuch as there is no case made out by the Assessing Officer that the assessee society has a banking licence to carry on business of banking. The only point made out by the Assessing Officer is that the activities of credit society are akin to a society carrying on banking business. In my considered opinion, it is a complete misnomer on the part of the Assessing Officer to treat the assessee as a co-operative bank within the meaning of Sec. 80P(4) of the Act without establishing that the assessee is a co-operative bank in the eyes of law. Therefore, the CIT(A) made no mistake in allowing the claim of assessee for exemption u/s 80P(2)(a)(i) of the Act and accordingly, Revenue fails in this aspect. Claim for exemption u/s 80P(2)(d) with respect to interest on deposits with other co-operative banks - Held that:- In view of the clear phraseology of Sec. 80P(2)(d) of the Act and the judgment of the Hon'ble Karnataka High Court in the case of M/s. The Totgars' Cooperative Sale Society Limited (2017 (1) TMI 1100 - KARNATAKA HIGH COURT ), the amount of interest earned by the assessee from deposits with other co-operative banks is eligible for exemption. Accordingly, on this aspect also, order of CIT(A) is set-aside and the Assessing Officer is directed to allow the claim of the assessee.

  ---

• 2017 (8) TMI 657
  Assessment u/s 153A - Proof of incriminating material found during the course of search - Held that:- Addition made in the three years is not based on any incriminating material found during the course of search. In the absence of any challenge to such factual findings of the CIT(A), we find that the CIT(A) has made no mistake in applying the ratio of the judgment of the Hon'ble Bombay High Court in the case of All Cargo Global Logistics Ltd., (2015 (5) TMI 656 - BOMBAY HIGH COURT ) for deleting the impugned addition. At the time of hearing, the emphasis of the ld. DR was only on the point that the ratio laid down in the judgment of the Hon'ble Bombay High Court in the case of All Cargo Global Logistics Ltd., (supra) has not become final since the SLP filed by the Department is pending. However, in our considered opinion, the point made out by the Department does not distract from the subsisting binding nature of the ruling of the Hon'ble Bombay High Court and, therefore, we find no merit in the plea raised by the Revenue. Thus, the order of the CIT(A) is liable to be affirmed. - Decided against revenue

  ---

• 2017 (8) TMI 656
  Exemption u/s 11 - Violation of provisions of Section 13(1) and 13(2) - Loan advanced to founder trustee - Held that:- As per the assessment order, it is observed that the assessee has explained before the Assessing Officer that the amount was given for purchase of buses and the same could not be materialized and the amount was lying with the founder. However, no evidence was furnished by the assessee to the Assessing Officer. The issue regarding payment of advance to Shri Akula Mohana Chalapati Rao on 13.10.2010 came before the CIT(Appeals). No other discussion was made by the Assessing Officer in the assessment order with regard to the executive body meeting held on 18.09.2008, purchase agreement, tender documents etc.. CIT(Appeals) also has not made any enquiry with the seller of the busses whether it is first hand or second hand buses, no such details were verified by the Ld.CIT(Appeals). - Matter remanded back. Exemption u/s 11 rejected - violation of provisions of section 13(1)(c) - providing food to the officers and their guests - 73 meals coupons utilized by the Chairman - Held that:- The number of meals coupons utilized was 73 and the same were utilized for the purpose of providing food to officers and VIPs visiting the Society from various departments / organizations. It was also observed by the Ld.CIT(Appeals) that the Society is located in far away place, where there are no hotels etc. for supply of food. In such circumstances, the assessee has provided food to the officers and their guests visiting the society, signing the coupon on the rear side. The explanation appears to be reasonable and we do not find any reason to interfere with the order of the Ld.CIT(Appeals). Accordingly, the revenue’s appeal on violation of provisions of section 13(1)(c) r.w.s. 13(2)(a) with regard to 73 meals coupons utilized by the Chairman is dismissed.

  ---

• 2017 (8) TMI 655
  Assessment u/s 153A - Estimation of income from fish tanks - cultivation of the fish ponds - Estimation of water spread area and the bund area - The Fisheries Dept. estimated the income of the assessee @ 22,000/- per acre - assessee had offered 3,43,270/- as income from fish tanks - Held that:- As per the board circular the estimated income per acre was 4000/- on water spread area of 70% of the Fish pond for the year 1993-94 and the same cannot be said to be reasonable for the assessment year 2006-07, which is after 13 years. However, with regard to water spread area of 70% remained unchanged. The Ld. CIT(A) confirmed the estimation of income @ 22,000/- per acre inclusive of bunds and 13,300/- for 70% of water spread area since the assessee is not maintaining the books of accounts. The Ld. A.R did not place any evidence to disprove the estimation confirmed by the Ld. CIT(A). The revenue also did not place any evidence to show that the estimation of income @ 13,300/- is not reasonable. Therefore, in the absence of books of accounts we hold that 13,300/- per acre of water spread area appears to be reasonable and accordingly we uphold the order of the Ld. CIT(A). The estimation of water spread area and the bund area is in accordance with the circular issued by the CBDT. Accordingly, we uphold the order of the Ld. CIT(A) and the revenue’s appeal on this ground is dismissed. Additions made u/s 40A(3) - income estimated - Held that:- In this case, the assessing officer completed the assessment estimating the income @ 22,000/- per acre. The assessee has not maintained the books of accounts which fact was accepted by both the parties. The purchases were made by Shri Radha Krishna but there is no evidence to show that the expenditure was debited to the P&L account and claimed as a deduction in the hands of the assessee. Therefore we are of the view that the revenue has not placed sufficient evidence to prove that the expenditure was debited by the assessee and attract the disallowance u/s 40A(3) of I.T. Act. Further, the assessment in this case was completed by estimation and once the income is estimated the entire deductions or additions from section 30 to 43D of the Act deemed to have taken care of and no further disallowance or addition required to be made. See Dabros Industrial Company Private Limited Vs. CIT [1975 (7) TMI 21 - CALCUTTA High Court ] - Decided in favour of assessee.

  ---

• 2017 (8) TMI 654
  Estimation of income - determination of N.P. - assessee is engaged in the business of (IMFL) liquor trade - Held that:- The very same issue of estimation of profit in the trade of IMFL was considered by the coordinate bench of the Tribunal in the case of Tangudu Jogisetty [2016 (7) TMI 379 - ITAT VISAKHAPATNAM] and held that estimation of 5% net profit on purchase is reasonable and directed the A.O. to estimate the net profit of 5% on total purchases net of all deductions Unexplained Loans and advances - Held that:- The reason of the assessee that the confirmations could not be obtained due to the circumstances beyond the control is not acceptable and appears to be after thought. The time limit for completion of the assessment was 2 years from the end of the relevant assessment year and the assessee must submit the evidences within the time limit to support the claim. In this case, both the A.O. and the CIT(A) have given sufficient opportunities but the assessee failed to furnish the confirmations before the A.O./CIT(A). Hence, we hold that there is no reasonable cause for non-submission of the confirmations before the A.O. and the CIT(A), accordingly, the petition for admission of additional evidence is rejected. The assessee has not even furnished the names and addresses of the persons from whom advances were taken at the time of assessment proceedings as well as the CIT(A) and failed to establish identity, creditworthiness and the genuineness of the creditors. Therefore, the CIT(A) has rightly confirmed the addition made by the A.O. and the same is upheld. Unexplained investment - Held that:- Though assessee claimed to have received the amounts from Shri Krishna Rao and Shri Krishna Murthy, the assessee has not even furnished the confirmation letters, addresses of the persons, PAN numbers and his creditworthiness of the creditors. Even at the time of appeal hearing, the assessee did not furnish any such details. Therefore, we do not find any infirmity in the order. The Ld. CIT(A) and the same is upheld.

  ---

• 2017 (8) TMI 653
  Penalty u/s 271(1)(c) - treating a loss claimed as normal business loss as a speculative loss - whether the disallowance of assessee’s claim for set off of share trading loss against other income by treating the same as speculation loss as per Explanation to Section 73 of the Act will attract the penalty under section 271(1)(c)? - Held that:- This issue is squarely covered in favour of the assessee by the various judicial pronouncements cited by the ld. counsel for the assessee including those which have been relied upon by the ld. CIT(Appeals) in his impugned order while cancelling the penalty imposed by the Assessing Officer under section 271(1)(c). In one of such cases, namely CIT –vs.- SPK Steels Pvt. Limited [2004 (1) TMI 21 - MADHYA PRADESH], it was held that penalty under section 271(1)(c) was not exigible in respect of disallowance of assessee’s claim for set off of share trading loss by treating the same as speculative in nature as per Explanation to Section 73 on the basis of preliminary details furnished by the assessee along with the return of income as the assessee could not be said to have filed inaccurate particulars or concealed particulars of his income, which was chargeable to tax. The penalty imposed by the Assessing Officer under section 271(1)(c) was not sustainable as mere treatment of business loss as speculation loss by the Assessing Officer did not automatically warrant inference of concealment of income and there was nothing on record to show that in furnishing its return of income, the assessee had either concealed its income or had furnished any inaccurate particulars of income. See CIT –vs.- Auric Investment & Securities Limited [2007 (7) TMI 276 - DELHI HIGH COURT ] Thus no infirmity in the impugned order of the ld. CIT(Appeals) cancelling the penalty imposed by the Assessing Officer under section 271(1)(c) - Decided in favour of assessee.

  ---

• 2017 (8) TMI 651
  Rental income from leasing of property owned by the assessee - treatment of income from business OR income from house property - Held that:- The business asset of the assessee company were let out to different persons. Since the assessee has received the rentals from letting out of not the building structure only but it is a factory premises including all fittings and fixtures. Therefore in the facts and circumstances of the case, when the business asset of the assessee is let out but after discontinuing the business activity of the textile mill then the rental income cannot be treated as income from house property however the same would be assessed as income from other sources. Since the factory building was neither acquired nor held by the assessee for the purpose of letting out but it was held by the assessee for its textile business which was discontinued then for the claim of business income cannot be accepted. Accordingly, in view of the above discussion, the Assessing Officer is directed to assess the rental income as income from other sources and allow the deductions as per Section 57 of the Act as well as the expenditure on maintenance of the company in existence.

  ---

• 2017 (8) TMI 650
  Validity of reopening of assessment - subsequent notice - change of opinion as the officers are different - Held that:- There is no factual difference for reopening the assessment as proposed in the first notice and as presently proposed in the impugned notices. The only difference being the language, as the officers are different. The same documents which formed the basis for reasons for reopening and issuance of notice dated 25.01.2001 is identical to that of the reasons, which are set out for the issuance of the impugned notice. Further the petitioner was kept completely in the dark about the closing of the proceedings on technical grounds, stated to be endorsed on 31.03.2002 and the Officers, who endorsed the same was very well aware that it will be a time barred assessment if anything is not done within the said date as already reassessment proceedings were commenced and the petitioner is being heard in the matter. Therefore, find that there is no fresh material in possession of the Assessing Officer suggesting escapement of the income at the time of issuance of notice dated 25.01.2001. Thus it is a clear case where the respondent is attempting to reopen a settled issue with no fresh materials and therefore, the impugned notice is wholly without jurisdiction as it is a mere change of opinion. - Decided in favour of assessee.

  ---

• 2017 (8) TMI 649
  waiver of interest u/s 220(2) - Jurisdiction - the officer, who heard the petitioner in person was not the Officer/Chief Commissioner, who decided the matter - Held that:- It is true that the Chief Commissioner, who offered opportunity of personal hearing to the petitioner on 21.03.2016 and on 24.03.2016 is not the Chief Commissioner, who has passed the impugned order. The legal principle is that the person who hears must decide. Therefore, by applying the said principle to the case on hand, the only conclusion that can be arrived at is to send back the matter for fresh consideration before the first respondent, on the plea for waiver of interest under Section 220(2) and Rule 5 of the Second Schedule to the Income Tax Act, 1961. - Matter remanded back.

  ---

• 2017 (8) TMI 648
  Penalty under Sections 271(1)(c) - assessee surrendered additional income - unaccounted closing stock found during survey - Held that:- In the present proceedings, the Assessing Officer accepted the revised return of income filed by the respondent – Assessee declaring additional income of 1.40 crores. The Assessing Officer did not independently either in the Assessment proceedings or even in the penalty proceedings examine the contention of the respondent – Assessee that there was no excess stock as found by the Income Tax Officer during the survey proceedings. Neither any exercise was done independently to find out whether the excess stock alleged was supported by any other evidence. This particularly in the face of the respondent – Assessee asserting that the stock taking was not properly done. In-fact, at the very first instance, the respondent – Assessee did point out that no exercise was done to weigh the stock to determine the the shortage if any. In-fact, the shortage was arrived at on basis of estimate and the respondent – Assessee had itself surrendered additional income to buy peace of mind and avoid unnecessary litigation. It did not accept that actual stock was more than that recorded in its books and during the proceedings also submitted a chart showing no excess stock. In the present facts, the respondent – Assessee was consistently stating that there is no excess stock in his possession. That, it was subject to central excise control and no proceeding for clandestine removal of goods etc. were initiated against the respondent – Assessee. Further, in these facts, the respondent – Assessee, the CIT(A) and the Tribunal have held that no penalty is imposable, as the respondent – Assessee herein has consistently contended that there is no excess stock. This contention has not been examined and commented upon the Revenue before imposing of penalty. Thus, the impugned order of the Tribunal calls for no interference. - Decided in favour of assessee.

  ---

• 2017 (8) TMI 647
  Benefit of deduction u/s.57(iii) - whether payment was made for enlarging the control and management over - capital expenditure or revenue expenditure - Held that:- In the present case, the Respondent/Assessee has been denied the deduction under Section 57(iii) by the CIT (A) only because of absence of income by way of dividend/interest in the subject Assessment Year. This connection/nexus between allowing of deduction u/s.57(iii) of the Act only upon earning of income in the subject Assessment Year has been negatived by the Apex Court in Rajendra Prasad Moody (1978 (10) TMI 133 - SUPREME Court ). In fact, the only requirement is that the expenditure is with the object of earning income and not dependent upon actual earning of income in fact. In this case, the impugned Order of the Tribunal has recorded a finding that the amount of 3.25 Crores were paid to Mr.G.R.Handa by the Respondent/Assessee only with a view to safeguard its investment in M/s.A.P.Rayons Ltd. so as to earn dividend/interest income. The decision of Gujarat High Court in Sarabhai Sons (P) Ltd. (1993 (1) TMI 53 - GUJARAT High Court ) relied upon by the Revenue would have no application to the present facts. Thus, on the present facts, no interference with the impugned Order is called for as it merely follows the Apex Court decision in Rajendra Prasad Moody (supra). The question as framed on behalf of the Revenue seeks to deny the respondent/assessee the benefit of Section 57(iii) of the Act on the ground that it is in the nature of capital expenditure as it was expended for enlarging control and management of M/s.A.P. Rayons Ltd. This finding of capital expenditure by the Assessing Officer was negatived by the CIT (A), who held it was allowable as a deduction under Section 57(iii) of the Act, only subject to earning of income. Section 57 (iii) of the Act itself excludes expenditure of capital nature. However, the Revenue accepted the above finding of the CIT (A), as no appeal on this aspect was filed to the Tribunal. Therefore, the question, as formulated, does not arise from the impugned Order of the Tribunal.

  ---

• 2017 (8) TMI 646
  Deduction under Sections 80IA/80IB - entitled in law to deduction for 10 consecutive assessment years - AO observed that, it does not carry out processing/manufacturing activities but only does trading in milk. - Held that:- We have perused the decision of Paul Brothers (1992 (10) TMI 5 - BOMBAY High Court). We note that there is no finding in the order above to the effect that the in the initial year the claim under Section 80IA/IB of the Act was granted by virtue of an order passed under Section 143(3) of the Act. Nothing has been brought on record to indicate that there has been some change in manufacturing process from that existing when the claim was allowed in the initial year i.e. Assessment Year 1996- 1997 and subject Assessments. The intent/object of the deduction under Section 80IA/IB of the Act is to encourage setting up of industries to manufacture goods which are not specified in the Eleventh Schedule to the Act. In absence of the Revenue being able to establish that for the subject Assessment Years, the facts with regard to the performance were different from facts with regard to the performance in which the claim for deduction in initial year was allowed, the grant of deduction in the subsequent subject Assessment Year cannot be withheld. The other issue raised by Mr. Bhattad that merely because a claim was allowed in an earlier year would not prohibit the revenue from disallowing the claim in subsequent assessment years is no longer res-integra as this Court in Paul Brothers (supra) as it is categorically held that in absence of deduction granted in the initial Assessment Years being withdrawn, the relief for subsequent Assessment Years could not be withheld. The basis for the same is found in sub-clause (3) under Section 80IA/IB of the Act which gives deduction for 10 consecutive years to the profit and gains of an Industrial undertaking from initial year of assessment when the deduction was allowed, subject to the condition laid down therein. Therefore, once deduction is granted in the initial Assessment Year, the same would continue for the period of 10 consecutive year unless the relief for initial year is also withdrawn at the time of withholding the relief under Section 80IA/IB of the Act. - Decided in favour of the appellant-Assessee

  ---

• 2017 (8) TMI 645
  Entitled to benefits under Section 80-IB(10) - developed project on less than one acre of land - Held that:- Two authorities viz. the CIT as well as the Tribunal conclusion that the project of 'Saket-Dham' in respect of which exemption is claimed under Section 80-IB(10) of the Act was a project constructed on 1201 sq. mts. is on the basis of the sanction dated 02.01.2003 issued by the Municipal Corporation in respect of the construction of 'Saket-Dham' stating that the same is on land having an area of 1201 sq. mts. Further, the agreement of sale of flats entered into by the appellantassessee in building of 'Saket-Dham' also records the fact that the project has been developed on 1201 sq. mts. of land. This view of CIT has also been re-iterated by the Tribunal in the impugned order. In the above view, the submission of Mr. Shrivastava that the project was sanctioned by the Nagpur Municipal Corporation of 'Saket-Dham' on a land of 4047 sq. mts. cannot be accepted, as it was not even brought on record before the Authorities under the Act. There is nothing on record to indicate that before the Tribunal, the aforesaid submission was even made by the appellant-assessee. Therefore, in the above view, the concrete findings by the two authorities on facts cannot even be said to be perverse in any manner. So far as the submission of appellant-assessee that he is entitled to balance land of 2846 sq. mts. from Mr. Trivedi. This in view of the suit which has been filed, should be subject to extending the benefit under Section 80-IB(10) of the Act, cannot be accepted. On date the project 'Saket-Dham' was completed and even till the date, the appellant-assessee does not have possession of the balance land of 2846 sq. mts. and the right which he is claiming has yet to be crystallized. The deduction under Section 80-IB(10) of the Act cannot be granted on a speculative basis of a future uncertain event. The requirement of section has to be satisfied when the deduction/exemption is claimed. Nothing has been shown to us which would prohibit the CIT from disallowing the benefit of exemption under Section 80-IB(10) of the Act, while exercising powers of Revision. Moreover, no fault can be found with the exercise of powers of the CIT. - Decided against assessee.

  ---

• 2017 (8) TMI 644
  Reopening of assessment - deduction u/s 10B - eligibility - no manufacturing activity - Held that:- It is not disputed that the only ground on which the respondents are trying to sustain the impugned assessment after the notice under Section 147 of the said Act is on the basis that the petitioners were not carrying out manufacturing activities, cannot be a ground to refuse the benefits of deduction in terms of Section 10B of the said Act. The petitioners in fact as such were entitled for the said deduction which otherwise stood concluded by the Assessment Order passed in the proceedings under Section 143 of the said Act in regular Assessment Order. - Decided in favour of assessee.

  ---

• 2017 (8) TMI 643
  Bogus purchases - Disallowance of purchases to the tune of 12.5%. - AO received information from the DGIT (Inv.), Mumbai that the Sales tax Department had carried out extensive investigation on various VAT dodgers (hawala operators) who were known to be issuing accommodation bills to various parties by issuing bogus bills without supplying actual material - Notices sent to parties u/s 133(6) retuned back by the postal authority with the remarks "not known", "no such address", "left" etc.. Held that:- The assessee has claimed that the material purchased from these parties was used/consumed for its printing and publishing business but consumption/utilization of the said material for printing/publishing business of the assessee was not proved. The onus is on the assessee to prove consumption/utilization of the said material for assessee printing/publishing business of the assessee with material evidences, which the assessee failed to prove. As the assessee has claimed that the said material so allegedly purchased from six hawala entry operators was consumed/utilized for its printing/publishing business, there is always possibility of deflating/suppressing profits by obtaining bogus bills unless utilization/consumption is proved. Under these circumstances keeping in view factual matrix of the case, both the parties fairly agreed that the matter needs to be set aside and restored to the file of the A.O. for de novo determination of the issue on merits in accordance with law - Matter remanded back.

  ---

• 2017 (8) TMI 642
  Transfer pricing adjustment - whether the payment made by the assessee under the head management service should be allowed or not? - TPO and DRP sustained the additions even after 2nd round of proceedings - DRP observed that, TPO had rightly rejected the TNM method, that intra group services had to be benchmarked separately, that the TPO had rightly applied the CUP method, that the evidences produced by the assessee indicated that some incidental benefit might have been accrued to it. Held that:- while deciding the ALP of umbrella of services what has to considered is the right of assessee that it is entitled to avail. If it avails only a few services out of the boquet of services the TPO should not reject the TP study of the assessee on the ground that it did not avail all the services or the majority of services as mentioned in the agreement. Availing selected services from a composite agreement is sufficient for claiming the deduction. For rejecting the TP study of the assessee the TPO should prove that price shown by the assessee from the services availed was not at arm’s length. Non-availing of services cannot be the basis for rejecting the claim. These are two different things and are fundamentally separate. In the case under consideration the TPO or the DRP has not stated that payment made by the assessee to its AE were not at Arm’s length. Therefore, we decide the first ground of appeal in favour of the assessee. Addition on account of non reconciliation of TDS statement and the computation of income -Held that:- Before us, the AR stated that due to mistakes committed by some of the deductors of tax mismatch of income had occurred, that proper verification was not done by the AO in that regard. The DR stated that the issue could be decided on merits. In our opinion, in the interest of justice matter should be remanded back to the file of the AO for fresh adjudication. He is directed to afford a reasonable opportunity of hearing to the assessee. The assessee would submit all the necessary documents to reconcile the TDS statement with computation of income. Second ground of appeal is decided in favour of the assessee, in part.

  ---

• 2017 (8) TMI 641
  Bogus purchases - AO observed that, transaction of purchase of material four parties are nothing but a colorable devices using forged and fabricated bills for the purposes of evasion of income-tax. - Notice u/s 133(6) returned as unserved - Held that:- In the absence of utilization/consumption of the material so purchased from these alleged entry providers being proved for manufacturing of finished goods, there is always possibility of manipulations to suppress profits and evade taxes and hence it is critical for the assessee to prove utilization/consumption of these material so purchased for manufacturing of finished goods dealt with by the assessee. In our considered view keeping in view factual matrix of the case and in the interest of justice to both the parties, the matter needs to be set aside and restored to file of A.O. for denovo determination of this issue by the AO on merits in accordance with law and the assessee is hereby directed to prove the consumption/utilization of the material so purchased from these alleged entry providers for manufacture of the engineering goods so dealt with by the assessee with cogent evidences before the A.O. including production of excise records concerning stocks and also to prove that these purchases to the tune of 82,54,793/- from these alleged entry operators were genuine. The AO shall admit all relevant evidences /material filed by the assessee in de-novo proceedings before adjudicating this issue on merits in accordance with law.

  ---

• 2017 (8) TMI 640
  Addition made u/s. 14A - Held that:- We noticed that the assessee has held investments in three schemes of mutual funds and all of them have been liquidated during the year. Accordingly, we are of the view that there is merit in the contentions of the assessee that the provisions of Rule 8D(2)(iii) of the I.T. Rules should not be applied in the facts and circumstances of the case. Since the assessee has received dividend income and since there were activities relating to liquidation of mutual funds, we are of the view that some amount should be disallowed u/s 14A of the Act. Accordingly, in order to put this issue at rest, we modify the order passed by Ld CIT(A) on this issue and direct the Assessing Officer to make a disallowance of 5000/- out of administrative expenses to meet the requirements of 14A of the Act and in our view the same would meet the ends of justice. Addition relating to foreign exchange gains - income disclosed on non-qualifying ship - Held that:- In the instant case, assessee has accounted for the foreign exchange differences arising on ECB loan as per the Accounting Principles and hence the same is required to be ignored for the purpose of computing total income as per the provisions of section 43A of the Act as held in the case of Vodafone East Ltd (2015 (9) TMI 1358 - ITAT KOLKATA). In respect of foreign exchange gain difference arising on other items, we noticed that the assessee has allocated the gain between the qualifying ships and non-qualifying ships. Income from qualifying ships is computed under tonnage tax scheme. Since the exchange difference on other items have arisen out of shipping business, it will form part of shipping income. Since the income from qualifying ships was computed under tonnage tax scheme, no separate addition is required to be made in respect of foreign exchange gain allocated to qualifying ships. In view of the foregoing discussions, we are of the view that there was no requirement to make any further addition on account of foreign exchange gains over and above that was offered by the assessee as relating to nonqualifying ship. - Decided in favour of assessee.

  ---

• 2017 (8) TMI 639
  Penalty u/s. 271(1)(c) - assessee concealed the particulars of income or furnished inaccurate particulars of income - Non mentioning of specific charge - Held that:- In this case, the Assessing Officer has not brought out any specific charge for which the penalty has been imposed on the assessee under section 271(1)(c) of the Act. He has not brought out whether the assessee has concealed the particulars of income or whether the assessee has furnished inaccurate particulars of income. Even the Assessing Officer has not initiated the proceedings for any particular charge. The Assessing Officer levied penalty without mentioning any specific charge. In CIT v. Atul Mohan Bindal [2009 (8) TMI 44 - SUPREME COURT] where Hon'ble Supreme Court was considering the same provision, observed that the Assessing Officer has to be satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income. Thus, the satisfaction of the Assessing Officer about the concealment of particulars of income or furnishing of inaccurate particulars of such income is essential before levying any penalty u/s.271(l)(c). - Decided in favour of assessee.

  ---

• 2017 (8) TMI 621
  Interest free loan given to Andhra Pradesh Rayons Limited - deduction of royalty on Bamboo exploited - Held that:- Decided in favour of assessee as relying on The Commissioner of Income Tax, Nagpur Versus M/s. Ballarpur Industries Ltd. [2017 (8) TMI 610 - BOMBAY HIGH COURT ] Addition u/s 40A - addition on account of contribution made by the assessee to various educational institutions not in the capacity as an employer - Held that:- The issue raised herein stands concluded against the revenue and in favour of the applicant-assessee by the decision of this Court in Mahindra & Mahindra Ltd. .vs. CIT (2003 (1) TMI 71 - BOMBAY High Court) and CIT .vs. Mahindra & Mahindra Ltd.(2005 (9) TMI 54 - BOMBAY High Court) .

  ---

• Customs

• 2017 (8) TMI 631
  Legality of the seizure - imported mobile phone battery cell - delay in passing an order of provisional release in respect of the consignment imported - Held that: - this Court has been shown copy of the Adjudication Order dated 20th July, 2017 passed by the Joint Commissioner ICD-TKD (Import), New Delhi, inter alia, rejecting the declared assessable value of the goods imported under B/E dated 3rd May, 2017 while simultaneously re-assessing the value of these imported goods, which were seized by the Department - petition dismissed - decided against petitioner.

  ---

• 2017 (8) TMI 630
  Anti-dumping duty - Whether Amendment Notification dated January 23, 2014, amending Notification dated January 02, 2009 by allowing it to remain in force till January 01, 2015 issued after the expiry date of the original Notification i.e. January 01, 2014 is without any legal authority and is, therefore, null and void? Held that: - as the facts involved in the present petition are identical to the Apex Court decision in Union of India vs. M/s. Kumho Petrochemicals Co. Ltd [2014 (7) TMI 732 - DELHI HIGH COURT], the impugned N/N. 37 of 2015, dt.6.8.2015 is quashed and set aside. Besides seeking quashing of the impugned notification, the petitioners also seek a direction that the respondent be directed to refund anti-dumping duty paid by the petitioner after 25.7.2015. We are not inclined to grant this prayer in view of decision of this Court in Commissioner of Customs (Imports), Mumbai .vs. Kanakia Constructions Pvt. Ltd., [2008 (7) TMI 156 - HIGH COURT BOMBAY], wherein our Court has set aside the order of Central Excise, Customs and Service Tax Appellate Tribunal which had held that since antidumping duty is covered by Section 9A of the Customs Tariff Act, 1975, the doctrine of unjust enrichment does not apply. This Court restored the issue to the Tribunal for fresh consideration and also examine whether the doctrine of unjust enrichment is applicable in the facts of the case. The petitioners would be entitled to refund of anti-dumping duty paid after 25.7.2015 on our having set aside the N/N. 37/2015, it would be subject to compliance with the law - petition allowed - decided in favor of petitioner.

  ---

• 2017 (8) TMI 629
  Refund claim - amount of exemption not claimed - rejection of refund on the ground of non-filing of appeal against the bills of entry, which had subsequent attained finality - Held that: - the record is clear that the competent officer though obliged to take heed of the prevailing situation, i.e., exemption notification which entitled the assessee to clear the goods without payment of duty upon being pointed out, the assessee is entitled to the refund of the amount, given that the amounts could not have been collected lawfully in the first place - refund cannot be denied - appeal dismissed - decided against Revenue.

  ---

• 2017 (8) TMI 628
  Benefit of Concessional rate of duty - N/N. 21/2002 - imported SPECO Asphalt Mixing Plant Model - The original authority observed that the catalogue from the supplier did not have any indication that the mixing plant is with the bag type filters and therefore held that the conditions of the notification are not fulfilled for which the benefit of concessional rate of duty cannot be allowed - whether the goods imported as such would form to the description mentioned in Sl. No. 230 and that too only to the effect that whether it would confirm the bag type filter arrangements? - interpretation of statute - Held that: - The respondents have imported filter bags and the adjudicating authority had denied the benefit holding that since the housing has been imported by them, it cannot be called as bag filter arrangement. The Commissioner (Appeals) has discussed in detail with regard to the meaning of the word Arrangement and how such word as to be interpreted when used along with the words bag filter arrangements - In the impugned order, the Commissioner (Appeals) has expressed his view that when the plant/machinery are imported for road construction activity and put to use by actual user, denial of the benefit on the sole ground that the housing for the filters are not imported does not keep with the purpose of interpretation of the notification - appeal dismissed - decided against Revenue.

  ---

• Corporate Laws

• 2017 (8) TMI 624
  Wrongful acts and conducts of suppression and mismanagement - Omission to serve notice for the meetings - Whether convening meetings for increasing the share capital of the Company, allotment of fresh shares, alteration of Memorandum of Association and Articles of Association of the Company and the appointment of the two directors to the Board of Directors as whole-time Directors of the Company, amount to oppression against the Petitioners? - Held that:- Omission to give notice of meeting was held to be oppression. Not sending notices to shareholders/directors and passing resolutions therein is held oppressive to members and constitute mismanagement of Companies. Moreover, the Respondents claim to have served the notice to the Petitioners through “Certificates of Posting”, and it is their case that the Petitioners despite being in the know of the meetings chose not to attend the same. However, the Petitioners contend that they were never notified about the meetings that were held to pass the aforementioned resolutions and therefore the meetings were convened in violation of the Companies Act, 1956. Section 97 of the Companies Act, 1956 contemplates notice of increase of share capital or of members. Serving of notice to members for general meetings is mandatory under all circumstances. Even though the Petitioner had apparently been notified of all the meetings and the ongoings of the Company, which are evident only through “Certificates of Posting”, the Petitioner failed to attend any of the meetings. Moreover, since the Petitioner, until the share capital was increased, was the holder of 49% shareholding in the Company, no special resolutions could have been passed without his participation and vote on the same. Therefore, it is concluded that there is a clear case of oppression against the Petitioner. The meetings that were convened by the Board of Directors have not been properly notified to the Petitioner and resolutions therein were passed in absence of the vote of the Petitioner thereby constituting statutory violation. Also notices that were allegedly served by the Respondents onto the Petitioner were not proper. The reason for the same being that, the alleged notice, for the meeting that was held on 18th February, 2010, was stated to have been sent by the Company on the same day from Ranchi which was the date of the board meeting on 18th February, 2010. Moreover, after the alleged meeting of 18th February, 2010, another board meeting according to the Respondents was held at Kolkata on 19th February, 2010, notice of which was sent on the same day 19th February, 2010 to the shareholders of the Company. Therefore, issue nos. 1 and 2 are conclusively decided in affirmative in favour of the Petitioner.

  ---

• Insolvency & Bankruptcy

• 2017 (8) TMI 623
  Insolvency Resolution Process - Insolvency and Bankruptcy Code, 2016 - Held that:- Neither Section 7 of the Code nor the relevant Rule 4 of the Adjudication Rules do not contemplate any notice to other Financial Creditors. Section 7 of the Code and Rule 4 of the Adjudication Rules contemplate only notice to the Corporate Debtor. The learned Counsel for the Corporate Debtor appeared before this Adjudicating Authority and he was heard. Moreover, even the Applicant herein wants winding up of Alok Industries Ltd. The provisions of Insolvency Code initially contemplates Insolvency Resolution Process and in case of failure of Resolution Process, then the Company would go for liquidation. Therefore, no prejudice is going to be caused to the present Applicant even if CP No.(IB) 48/2017 is admitted. In case of admission of CP No. (IB) 48/2017, the present Applicant can as well represent his claim before the Interim insolvency Resolution professional and he will become one of the Members of Creditors Committee. Therefore, no prejudice is going to be caused to the debt due to the present applicant or for that matter any other Creditor even in case Insolvency Resolution Process is initiated under Section 7 of the Code. In case CP No.(IB) 48/2017 is not admitted, the present Applicant can pursue his remedies in the winding up proceedings pending before the Hon'ble High Court of Bombay. Therefore, there is no need to permit the present Applicant to intervene in the proceedings in CP No.(IB) 48/2017, that too on the date on which the matter is listed for pronouncement of orders in CP No.(IB) 48/2017.

  ---

• Service Tax

• 2017 (8) TMI 638
  Reverse charge mechanism - GTA service - case of appellant is that the service was new at the time as it was introduced in 2004 - Held that: - reverse charge on the Goods Transport Agency was introduced under Notification No. 36/2004 dt. 31.12.2004. The plea that the appellants were not aware of the new liability is not acceptable for more than one reason. Firstly, they were registered as construction service provider. Secondly, had the non-payment been for initial few months, it could perhaps be understandable that they were not aware, but the period in this case stretches to over three years. Hence, it cannot be contended that the appellants were not aware of their liability for such a long period especially when there were many agitations at the time on levy of Service Tax on GTA by operators. Extended period of limitation - Held that: - there was willful suppression on the part of the appellants as they were aware of the freight paid by them but knowingly chose not to take registration and to discharge their statutory obligations - the extended period has been correctly invoked. Penalty - Held that: - As there is clear-cut of element of suppression, the penalty has also been rightly imposed. Appeal dismissed - decided against appellant.

  ---

• 2017 (8) TMI 637
  Classification of service - taking two helicopters on lease from the two foreign lessors ADA, Abu Dhabi and BLFIL, Ireland on dry lease basis - activity is in the nature of sales (deemed sale) or service - Business Support Service or activity as supply of tangible goods for use without transfer of right of possession and effective control - Held that: - for the period prior to 01.07.2012, inspite of the transactions, in question, being deemed sale and, hence, not covered by the section 65(105)(zzzzj) pertaining to Supply of Tangible Goods for use without involving transfer of right of possession and effective control over the goods, the Commissioner has still gone on to subject them to service tax by classifying the same as Business Support Service (infrastructure support service u/s 65(105)(zzzq) r/w section 65(104c)) of the Act The Commissioners findings for the period w.e.f. 01.07.2012 holding that the leasing of helicopters by the Appellant from the two lessors located abroad is a service not covered by the Negative List or any exemption, is absurd, as he has not even discussed the definition of service given in Section 65B(44) r/w definition of declared service in Section 66E of the Finance Act 1994, and how the transactions, in question, which admittedly involve transfer of right of possession and effective control over the goods during the period of lease would be covered by the above mentioned definition of service. As discussed above, since the leasing of helicopters by the Appellant from the two lessors abroad involves transfer of right of possession and effective control over the helicopters/transfer of right to use the helicopters from the lessors to the Appellant during the period of lease, these transactions being deemed sale covered by Article 366 (29A)(d) of the Constitution ,are not covered by the definition of service as given in Section 65B(44) read with Section 66E of the Finance Act, 1994 and, hence, there is no question of levying Service Tax on these transactions. As per the agreements with lessors, the transaction is of deemed sale within the manning of Article 366 (29A) of Constitution. Therefore mere non payment of sales tax will not alter the status of deemed sale in the facts of the present case. Demand of service tax, interest and penalty set aside - Appeal allowed - decided in favor of appellant.

  ---

• 2017 (8) TMI 636
  100% EOU - Refund of unutilised CENVAT credit - denial on the ground that the appellants are providing software services to their clients in Genova and Texas etc., and the said export is software which is not brought under service tax net and not covered under Rule 2(e) of CCR, 2004 since it is not an exempted service - Held that: - in the case of Apotex Research Pvt Ltd. [2015 (3) TMI 346 - CESTAT BANGALORE], the Division Bench of this Tribunal held that CENVAT credit for export of exempted service would be available as refund - appeal allowed - decided in favor of appellant.

  ---

• 2017 (8) TMI 635
  CENVAT credit - Club and association service - input services - case of appellant is that the Karnataka Golf Club Membership fee is related with the business of the company because the club is being used for promoting the business of the company and therefore, the same fall in the definition of 'input service’ - Held that: - reliance placed in the case of Toyota Kirloskar Motor Pvt Ltd. [2017 (2) TMI 841 - CESTAT BANGALORE], where it was held that Golf Club Membership is not related to the assessee's business and therefore, they are not entitled to the CENVAT credit of service tax paid on club membership of the appellant - appeal dismissed - decided against appellant.

  ---

• 2017 (8) TMI 634
  CENVAT credit - input services - whether the appellant is entitled to cenvat credit of service tax paid on various services in connection with the Annual Day Celebration as well as repair and maintenance of traffic signal at Kariad? - Held that: - The definition of 'input service' as provided in Rule 2(I) of the Cenvat Credit Rules 2004 has been given a very wide interpretation by the decision in the case of M/s. Delphi Automotive System Pvt. Ltd. Versus CC, CE & ST, Noida [2015 (3) TMI 297 - CESTAT NEW DELHI], wherein it has been held that an activity relating to the business of the company fall in the definition of 'input service' - appeal allowed - decided in favor of appellant.

  ---

• 2017 (8) TMI 633
  CENVAT credit - Telephone charges - Airport Related services - scope of input services - Held that: - the Telephone Services fall in the definition of 'input service' and the appellant is entitled to cenvat credit of the same - appeal allowed - decided in favor of appellant.

  ---

• Central Excise

• 2017 (8) TMI 632
  Classification of goods - manufacture of Indian Kattha which is also called as Catechu - classified under Tariff Item No. 14049050 or under Tariff Item No. 13021990 which is a residual entry with a description as others? - Held that: - the decision in the case of Commissioner of Central Excise Service Tax, Kanpur Versus M/s Brij Kattha & Kanchan Udyog [2017 (7) TMI 454 - CESTAT ALLAHABAD], relied upon, wherein this Tribunal had already decided the classification of identical goods under Tariff Item No. 14049050 - appeal dismissed - decided against Revenue.

  ---

• CST, VAT & Sales Tax

• 2017 (8) TMI 627
  Jurisdiction - assessment - whether notices of default assessment of the tax and interest under Section 32 of the Act dated 15th May, 2017 have been issued by the concerned VATO exercising jurisdiction on the Petitioner? - Held that: - Under Section 66, the powers of the Commissioner have been delegated to the Special Commissioner, VATO and to such other person, as the Government thinks necessary. Thus, the notice under Section 32 of the Act can only be issued by the VATO who exercises jurisdiction on a party on the concerned date. The Court merely directed that the OHA shall decide the objections of the Petitioner after “the concerned VATO” has passed the order in respect of the 1st and 2nd quarters of 2015-16 within a period of two months from 15th March, 2017. The presumption by the Respondent that this direction should be deemed to be considered as acceptance by this Court that the AVATO Ward-72 had jurisdiction, is not borne out from the order. In any event, the question of jurisdiction goes to the root of the matter specifically when the imposition of tax and penalty thereupon are concerned, and hence the issue of jurisdiction ought to have been decided by the Respondent before proceeding further. The stand of the Respondent that it could not have waited for a decision on jurisdiction first before passing the assessment orders, as the time period fixed as per the order dated 15th March 2017, also appears to be clearly an attempt to cover up its own delay, inasmuch as, after the said order which prescribed two months for the entire exercise to be completed, the Respondent waited till 9th May, 2017 to issue even the first notice under Section 59 of the Act. Ward No.69 being the correct Ward from where the Petitioner carries on its business, and this fact already being well within the knowledge of the authorities since 22nd January, 2016, the AVATO Ward-72 clearly lacked the jurisdiction to pass the impugned orders. Petition allowed - decided in favor of petitioner.

  ---

• 2017 (8) TMI 626
  Recovery of Sales Tax Arrears - whether arrears of sales tax can be demanded from a person who has resigned from the post of Director long before such recovery proceedings were initiated? - section 19-B - Held that: - section 19-B will apply only if a company had been wound up and to the directors who hold the said status at the time of winding up of the company - said section cannot be invoked here. As regards section 18 of the Central Sales Tax Act, even if any private company is wound up after the Act, the person who was a director, during the period for which the tax is due, is also jointly and severally liable to pay the amount. But since the company in question is not in liquidation or is not yet wound up, the impugned proceedings taken against the petitioner cannot be sustained. The fact that the petitioner had resigned from the Directorship of Entel Limited on 08.12.1998 and the same was accepted by the Board of Directors of Entel Limited on 22.12.1998 has not been disputed by the 1st respondent, as it has been admitted by him in the written instructions to the learned Additional Government Pleader - demand not sustainable - petition allowed - decided in favor of petitioner.

  ---

• 2017 (8) TMI 625
  Time Limitation - Interpretation of Statute - Sub-sections (3) and (4) of Section 77 and Section 30(2) of the PVAT Act - The petitioner's case is that for the assessment year 2008-2009, if at all, the Assessing Officer seeks to re-open the assessment, it should have been done before 31.03.2014 and likewise, for the assessment year 2009-2010, it will be 31.03.2015 and for the assessment year 2010-11, it will be 31.03.2016. The impugned notices issued on 28.02.2017, are beyond the five year period, as stipulated under Section 30(2) of the PVAT Act and therefore, they are liable to be set aside on the ground of lack of jurisdiction - Held that: - The authority for Clarification and Advance Ruling has issued a clarification on 23.09.2013 stating that the said goods were residual goods and liable to be taxed at 12.5% upto 31.12.2011 and at 14.5% with effect from 01.01.2012 under Entry No.1 of Part A of Fourth Schedule of PVAT Act. Thus, by referring to the said Clarification and Advance Ruling, the respondent has issued the impugned notices on 28.02.2017 and would state that in view of the embargo placed under Sub-section (3) of Section 77 of the PVAT, the respondent cannot take a decision on the said issue and the issue having been decided by the Advance Ruling authority only on 23.09.2013, the impugned notices issued on 28.02.2017 are well within the period of limitation, which expires only on 22.09.2017. Hence, it is the contention of the learned Government Advocate that the limitation for reopening the assessment should be computed from 23.09.2013 and therefore, the impugned notices are not time barred. The crucial words to be interpreted are "an application" and "an applicant" occurring in sub-section (3) of Section 77 of PVAT Act. In my considered view, in the present factual matrix, both these expressions can refer to only the assessee/dealer, who has approached the authority under Section 77 of the PVAT Act. If any other interpretation is to be given, then it would be expanding the scope of Sub-section 3 of Section 77 of the PVAT Act and would be directly in conflict with Section 30(2) of the PVAT Act, which prescribes an outer time limit for the Assessing Officer to re-do an assessment in the event he comes to a conclusion that the assessee has been assessed to lower rate of tax. In other words, if the interpretation given by the respondent is to be accepted, the finality attached to an order of assessment itself would be lost, as sub-section (2) of Section 30 of the PVAT Act would be rendered otiose. Admittedly, the respondent has already assessed the petitioner to tax in respect of the three assessment years and what the Assessing Officer seeks to do by issuing impugned notices is to revise the assessment, that too, based upon a Clarification given by the Advance Ruling authority at the instance of third party dealers. Therefore, the respondent cannot be given the advantage of reopening the assessment under the guise that the Advance Ruling authority has given a clarification, which will bind the goods dealt with by the petitioner - If the interpretation given by the respondent is to be accepted once again, this will run counter to the finality attached to an order of assessment as mentioned in Section 30(2) of the PVAT Act. This Court is of the clear view that the impugned notices are clearly barred by limitation and the respondent is not entitled to reopen the assessment beyond the expiry of 5 years in respect of each of the assessment years, namely, 2008-09, 2009-10 and 2010-11, which came to an end on 31.03.2014, 31.03.2014 and 31.03.2016 respectively - petition allowed - decided in favor of petitioner.

  ---

• Indian Laws

• 2017 (8) TMI 622
  Conviction under Sections 20(ii)(c) of NDPS Act - recovery of commercial quantity of cannabis - Held that:- The house from where the seized cannabis was recovered belonged to the accused appellant. The plea taken by the appellant that his house was not searched does not create the possibility of an alternate doubt strong enough to say the alternate view in favour of the accused appellant is as nearly reasonably probable as that against him. Thus, the plea that instead of the house of the accused appellant some other house was searched appears to be a plea without any substance, for if the accused appellant is a resident of the same village he could have easily adduced evidence to probabilise his plea. A mere suggestion to prosecution witnesses that the house from where the seized cannabis was recovered does not belong to him cannot be accepted to be a sufficient compliance of probabilising the plea of lack of possession when it was within the reach and means of the appellant to show that even though he is a resident of Nagaypam, Jamunamukh, his house is situated at a different location in that village and is different from the one in which the search was conducted and the contraband was recovered. Thus no interference with the judgment and order of the learned Trial Court is called for.

  ---