TMI Tax Updates - e-Newsletter
August 23, 2018

Case Laws in this Newsletter:

GST Income Tax Service Tax Central Excise CST, VAT & Sales Tax

TMI SMS

• Deduction u/s 80IC - exemption at the rate of 100% beyond the period of five years on the ground of substantial expansion cannot be allowed

  ---

• A member of Legislative Assembly (MLA) is not eligible for claiming exemption 10(14) r.w.r 2BB against postal allowance.

  ---

• Set off of unabsorbed business loss - set off against Short Term Capital Gain U/s. 50 - STCG on sale of business assets - set off allowed.

  ---

Articles

1. RUMORS ON GST ON EXTRA NEUTRAL ALCOHOL IMPACT CAPITAL MARKET

   By: Dr. Sanjiv Agarwal

News

1. Banks in Kerala decide to reschedule loans, waive fees for new cheque books

2. Finance Commission of India holds second consultation with economists in Pune

Notifications

DGFT

1. 27/2015-2020 - dated 21-8-2018 - FTP

Amendment in import policy of biofuels

GST

2. 35/2018 - dated 21-8-2018 - CGST

Seeks to extend the due date for filing of FORM GSTR-3B for the month of July, 2018

GST - States

3. 31/2018 - State Tax - dated 6-8-2018 - Chhattisgarh SGST

Seeks to lay down the special procedure for completing migration of taxpayers who received provisional IDs but could not complete the migration process

4. 22/2018 - State Tax (Rate) - dated 6-8-2018 - Chhattisgarh SGST

Amendment in Notification No. 8/1017-State Tax (Rate), F- 10-43/2017/CT/V (76), dated the 28th June, 2017

5. F.12(46)FD/Tax/2017-Pt-II-087 - dated 10-8-2018 - Rajasthan SGST

Prescribing the due dates for quarterly furnishing of FORM GSTR-1 for those taxpayers with aggregate turnover of upto ₹ 1.5 Crore for the period from July, 2018 to March, 2019.

6. F.12(56)FD/Tax/2017-Pt-III-085 - dated 6-8-2018 - Rajasthan SGST

Amendment in the Notification No. F.12(56)FD/Tax/2017 Pt-I-46 dated 29.06.2017 regarding exemption of Tax under section 9(4) of RGST Act, 2017.

7. F.12(56)FD/Tax/2017-Pt-III-084 - dated 6-8-2018 - Rajasthan SGST

Special procedure for completing migration of taxpayers who received provisional IDs but could not complete the migration process.

8. F.1-11(91)-TAX/GST/2018(Part) - dated 8-8-2018 - Tripura SGST

Seeks to lay down the special procedure for completing migration of taxpayers who received provisional IDs but could not complete the migration process

Circulars / Instructions / Orders

GST - States

1. 21T of 2018 - dated 20-8-2018

Announcement of Special Campaign for GST Migration Pending cases.

Highlights / Catch Notes

Income Tax

• 100% Income Tax Exemption Denied Beyond Five Years for Manufacturing Expansion u/s 80IC.

  Case-Laws - SC : Deduction u/s 80IC - claiming the exemption at the same rate of 100% beyond the period of five years on the ground that the assessee has now carried out substantial expansion in its manufacturing unit cannot be allowed.
  Visit to Get Source

  ---

• ITAT Rules Discrepancies in Capital Work in Progress Not Taxable u/s 69C; Apply Sections 69 to 69B Instead.

  Case-Laws - HC : Charging section for discrepancy between book value and physical value of capital work in progress- ITAT observed that the same cannot be taxed u/s 69C of the Income Tax Act, but it can be taxed u/s 69 to 69B only - the same has to be added to the income only under Section 69A
  Visit to Get Source

  ---

• Court Rules Income Additions Invalid Without Stock Verification and Account Examination u/s 133A Survey.

  Case-Laws - AT : Undisclosed income - admission of declaration of income during survey u/s 133A - without physical verification of stock and examining books of accounts, additions on the basis of mere statement cannot sustain.
  Visit to Get Source

  ---

• Share Premiums Examined Under Corporate Veil Doctrine; AO and CIT(A) Disagree on Income Categorization.

  Case-Laws - AT : Nature of income received in the name of share premiums - lifting of corporate veil - AO taxed the same business income - CIT(A) taxed the same as income from other sources - AO directed to examine that, whether the assessee company was used as a vehicle to pass on the benefit to shareholders/ directors.
  Visit to Get Source

  ---

• MLAs can claim transport allowance exemption u/s 10(14) and rule 2BB, but not postal allowance.

  Case-Laws - AT : A member of Legislative Assembly (MLA) is eligible for claiming exemption 10(14) r.w.r 2BB against the transport allowance - However, postal allowance is not covered by the said rule.
  Visit to Get Source

  ---

• Section 263 Revision Addresses Unexplained Cash Deposits in Taxpayer's Account; Calls for Further Verification by Assessing Officer.

  Case-Laws - AT : Revision u/s 263 - source of cash deposits in his bank account/s - The withdrawal of petty amounts, despite abundant cash-in-hand, only points out to the cash flow statement being not correct or complete, requiring further verification. There is no finding by the AO on this. - Revision upheld.
  Visit to Get Source

  ---

• Unabsorbed business losses can offset short-term capital gains from business asset sales u/s 50 of the Income Tax Act.

  Case-Laws - AT : Set off of unabsorbed business loss - set off against Short Term Capital Gain U/s. 50 - income arising out of a sale of business asset though not taxable as profits and gains from business or profession is an income in the nature of business and unabsorbed business losses can be set off against such income.
  Visit to Get Source

  ---

• Interest on Tax Refunds Not Business Income, Ineligible for Deduction u/s 80IE of Income Tax Act.

  Case-Laws - AT : Deduction u/s 80IE - whether interest on income refund is as part of business income or not - interest on income tax refund is held not eligible for deduction under section 80IE of the Act
  Visit to Get Source

  ---

• Reassessment of Tax Case Beyond Four Years Upheld, But Additions by Assessing Officer Deleted on Merit.

  Case-Laws - AT : Reopening of an assessment beyond 4 years - issue of bogus purchases - specific and concrete information available with the AO - Reassessment proceedings sustained - However, additions made by the AO deleted on merit.
  Visit to Get Source

  ---

Service Tax

• Indian Banks Liable for Service Tax on Foreign Bank Charges Under Reverse Charge; Appellant Not Responsible.

  Case-Laws - AT : Foreign Banks Charges - liability of service tax - reverse charge mechanism - Indian Banks are recipient of service, therefore, the appellant cannot be held as recipient of service provided by Foreign Banks to the Indian Banks. - the appellant is not liable to pay service tax under RCM.
  Visit to Get Source

  ---

• Tamil Nadu Schools' Computer Training Exempt from Service Tax, Court Rules in Favor of Education Department Agreement.

  Case-Laws - AT : Commercial Coaching or Training Service - computer training has been imparted to schools as per the agreement entered into with the Education Department of Tamil Nadu - training is according to the syllabus, as approved by the Government of Tamil Nadu - demand of service tax set aside.
  Visit to Get Source

  ---

• Service Tax Not Applicable: Selling Forms at Actual Price Not a Business Auxiliary Service, Rules TNOU.

  Case-Laws - AT : BAS - sale of forms of Tamil Nadu Open University - appellant has purchased and sold the forms at the actual price. There are no ingredients attracting the levy of service tax under Business Auxiliary Services in this activity - demand do not sustain.
  Visit to Get Source

  ---

• Appellants collected undisputed service tax under Survey and Exploration Service; demand for payment upheld.

  Case-Laws - AT : Demand of service tax - It is not in dispute that the appellants have collected the amount of service tax under Survey and Exploration Service. This allegation has not been refuted by the appellant either during adjudication stage or before this forum - demand upheld.
  Visit to Get Source

  ---

• Space Rental for Stores Classified as Immovable Property Service; Charges Based on Net Sales Percentage.

  Case-Laws - AT : Renting of Immovable Property Services or not - provision of the space for setting up the stores - consideration by way of amount calculated as percentage on the basis of net sales during the year - the entire amounts received in terms of these agreements are nothing but rent for providing space for conducting the said retail business.
  Visit to Get Source

  ---

• Assessee Liable for Service Tax on 1.3% Royalty Payment to UK Firm for Ceramic Fibre Products.

  Case-Laws - AT : Intellectual Property Service - assessee paid royalty of 1.3% of the net selling price of Ceramic Fibre Products to Morgan Crucible Co. Plc. UK - Assessee are liable to pay service tax, with interest thereon, on the Royalty charges paid.
  Visit to Get Source

  ---

• Service Tax Demand on Agricultural Extension Services Set Aside; Not Classified as Business Auxiliary Service.

  Case-Laws - AT : Business Auxiliary Service or Agricultural Extension Services? - The appellant was required to provide scientific research and knowledge to agriculture practices through farmer education and training. As per agreement, the appellant has provided the said service. - Demand of service tax set aside.
  Visit to Get Source

  ---

Central Excise

• Tribunal Upholds High Court Ruling, Approves Refund of Accumulated Cenvat Credit After Factory Closure.

  Case-Laws - HC : Refund of accumulated Cenvat Credit - closure of factory - the judicial discipline is required to be maintained. The Tribunal cannot distinguish the High Court judgments. - Refund allowed.
  Visit to Get Source

  ---

• CENVAT Credit Cannot Be Denied if Service Provider Fails to Deposit with Revenue.

  Case-Laws - AT : CENVAT Credit - denial of credit on the sole ground that the service provider has not deposited the same with the Revenue - credit cannot be denied on this ground.
  Visit to Get Source

  ---

• 100% Export Oriented Unit Case: Respondents Eligible for Nil Countervailing Duty on Under-Valued Goods as if Made in India.

  Case-Laws - AT : 100% EOU - Under-Valuation - For quantification of additional duty in such a case, it has to be imagined that the article imported had been manufactured or produced in India and then to see what amount of excise duty was leviable thereon - the respondents herein would very well be eligible for Nil CVD
  Visit to Get Source

  ---

• Court Rules Design Drawings Lacking Intrinsic Value Excluded from Product Valuation for Tax Assessment.

  Case-Laws - AT : Valuation - inclusion of cost of design and drawing - The drawings supplied by the customers being only dimensions of the components could therefore have no value - there is no justification to hold that the cost of drawings supplied by the customers is required to be included in the assessable value of the final product.
  Visit to Get Source

  ---

Case Laws:

• GST

• 2018 (8) TMI 1145
  Detention of goods - first contention is that there is no cause for directing a Bank Guarantee to be furnished - Held that:- The Section specifically speaks of a Bank Guarantee and we find that the appellant had agreed to furnish a Bank Guarantee before the learned Single Judge - no interference required. Furnishing of Bank Guarantee only for the tax and penalty - Held that:- It is directed to release the goods on the appellant furnishing Bank Guarantee for tax and penalty found due and a bond for the value of goods in the form as prescribed under Rule 140(1) of the CGST Rules. Appeal disposed off.

  ---

• Income Tax

• 2018 (8) TMI 1209
  Deduction u/s 80IC - claiming the exemption at the same rate of 100% beyond the period of five years on the ground that the assessee has now carried out substantial expansion in its manufacturing unit - units established in certain special category States - units situated in the State of Sikkim, Himachal Pradesh and Uttaranchal and North-Eastern States. Held that:- The essence of Sib-Section 3 as well as Sub-Section 6 have already been reproduced above. Whereas the exemption is provided @ 100% of such profits and gains for five assessment years commencing with the initial assessment years and, thereafter, 25% (or 30% where the assessee is a company) of the profits and gains for next five years. The deduction is limited to a period of 10 years. When we keep in mind the aforesaid scheme and spirit behind this provision, such a situation cannot be countenanced where an assessee is able to secure deduction @ 100% for the entire period of 10 years. If that is allowed it will amount to doing violence to the provisions of sub-section (3) read with sub-section (6) of Section 80-IC. A pragmatic and reasonable interpretation of Section 80-IC would be to hold that once the initial Assessment Year commences and an assessee, by virtue of fulfilling the conditions laid down in sub-section (2) of Section 80-IC, starts enjoying deduction, there cannot be another “Initial Assessment Year” for the purposes of Section 80-IC within the aforesaid period of 10 years, on the basis that it had carried substantial expansion in its unit. Once the assessees had started claiming deduction under Section 80-IC and the initial Assessment Year has commenced within the aforesaid period of 10 years, there cannot be another initial Assessment Year thereby allowing 100% deduction for the next 5 years also when sub-section (3), in no uncertain terms, provides for deduction @ 25% only for the next 5 years. It may be asserted again that the assessee's accept the legal position that they cannot claim deduction of more than 10 years in all under Section 80-IC. Decided in favor of revenue.

  ---

• 2018 (8) TMI 1208
  Settlement of a case - rejection of application u/s 245D(4) on account of a failure to make a full and true disclosure of its undisclosed income - Held that:- In view of our view on the issue of full and true disclosure in respect of facilitation charges, no question of entertaining this Petition can arise. This, even if, we are of the view that the issue of deduction under Section 80IB(10) of the Act may require consideration. - However, it is made clear that the Assessment Proceedings under the Act, will proceed on its own merits. Nothing stated in the impugned order of the Commission or this order should influence the assessing procedure under the Act. - Decided against the assessee.

  ---

• 2018 (8) TMI 1207
  Charging section for discrepancy between book value and physical value of capital work in progress- ITAT observed that the same cannot be taxed u/s 69C of the Income Tax Act, but it can be taxed u/s 69 to 69B only - ITAT observed that Section 69C of the Act would not be applicable to the facts of the present case as there is no evidence of any unaccounted expenditure. The difference was only on account of estimation of the value of Work in Progress by the site engineers in November, 2008 and actually arriving at the value on physical verification which is reflected in the return of income as on 31.3.2009. In the above circumstances, no occasion to apply Section 69C of the Act would arise. Held that:- The proposed question that the Tribunal held that there is a difference in the book value and the physical value of the Work in Progress is factually not correct. We did point out this to the counsel for the Revenue but he insisted to pressing this question. However, during the course of his submission, he was not able to substantiate the above presumption in the question as framed. In the above view, in the facts of this case, question as proposed is academic, unless the Revenue first challenges finding of fact arrived at by the Tribunal. The finding of fact is that, there is no excess work in progress than that declared by the RespondentAssessee as on 31.3.2009 and the valuation done of the workinprogress as on 31.11.2008 was only on provisional basis. Moreover, even if assume that the closing stock i.e. workinprogress is in excess of that recorded/disclosed by the Respondent, the same has to be added to the income only under Section 69A of the Act - Decided against the revenue.

  ---

• 2018 (8) TMI 1206
  Computation of Exemption u/s 10A - reduction of expenses from the total turnover - revenue contended that, as per clause [iv] of the Explanation 2 to Section 10A, such expenses are to be reduced only from the export turnover - Transfer pricing adjustment - selection of comparable - Held that:- in these type of cases, unless an ex-facie perversity in the findings of the learned Income Tax Appellate Tribunal is established by the appellant, the appeal at the instance of an assessee or the Revenue under Section 260-A of the Act is not maintainable - Decided against the revenue.

  ---

• 2018 (8) TMI 1205
  Transfer pricing - assessee applied Transactional Net Margin Method (TNMM) as the Most Appropriate Method (MAM) and OP/OC ratio was taken as the Profit Level Indicator (PLI) in the TNMM analysis. The assessee had taken itself as the tested party and the PLI was computed at 19.41%. The assessee chose a set of nine comparables with a PLI of 22.41%. Thus, the assessee considered its international transaction to be at arm’s length. - The TPO drew a final set of nine comparables with an average PLI of 26.24% and proposed an adjustment of 13,20,31,648/- with respect to Arms’ Length Price (ALP) of the international transactions. Held that:- keeping in view the principle of consistency and also respectfully following the ratio laid down by the Coordinate Bench, we direct the TPO to examine the facts and allow the depreciation adjustment to the assessee In view of the facts being undisputed regarding the assessee not having raised any objection before the Ld. DRP regarding working capital adjustment to be granted to it as well as in view of the settled judicial precedent, we direct the TPO to re-compute the margins without making any negative working capital adjustment. Accordingly, this ground stands allowed. Issue of reimbursements - While agreeing with the contention of the assessee that reimbursements should be excluded from both the assessee’s margins as well as the margins of the comparables, we deem it fit to restore the issue to the TPO/Assessing Officer for examining the claim of the assessee in light of the evidences filed by the assessee along with its application dated 21.1.2016 and submitted to the office of DCIT – TP- 2(3)(1) New Delhi. Thus, this ground stands allowed for statistical purposes. Notional interest being charged on receivables - the adjustment made by the TPO/Ld. DRP on account of interest on receivables is not sustainable in the eyes of law in the case of the assessee as, undisputedly, the taxpayer is a debt free company. Consequently, this ground is also allowed in favour of the assessee. Other issues - Selection of comparable and disallowance u/s 14A r/w Rule 8D. The appeal of the assessee stands allowed

  ---

• 2018 (8) TMI 1204
  Levy of penalty - notice issued u/s 274 r.w.s. 271 - AO has not struck off the inappropriate words - Held that:- Since in the instant case, the Assessing Officer has not struck off the inappropriate words in the notices issued u/s 274 r.w.s. 271, therefore, the notice does not specify under which limb of section 271(1)(c) the penalty proceedings had been initiated i.e. whether for concealment of income or for furnishing of inaccurate particulars of income. Therefore, the penalty proceedings become bad in law. - Decided in favor of assessee.

  ---

• 2018 (8) TMI 1203
  Monetary limit for filing an appeal - the tax effect in the Departmental Appeal is less than 20 lakhs. - Held that:- Pending appeals below the specified tax effect may be withdrawn/not pressed. Learned CIT (DR) in view of the above Board Circular did not press the Departmental Appeal. We may also note that the Appeal of the Department above would not fall within the exceptions provided in the Board Circular. In the result, the Departmental Appeal is not maintainable as have been filed against the instruction of the Board. The Departmental Appeal is dismissed as withdrawn/not pressed by the Learned CIT (DR).

  ---

• 2018 (8) TMI 1202
  Transfer pricing - arm’s length price of international transaction related to provision of I.T. services - selection of comparable - inclusion and exclusions - Held that:- In so far as E-Infochips Bangalore Ltd is concerned, From a careful perusal of the profit of this company, we find that this company is equipped to carry out high-end technology driven services and product development which is not the Profile of the assessee. This company has been rightly excluded from the final set of comparables by the DRP. Hence no interference is called for. Coming to Infinite Data Systems Private Limited, tt can be safely concluded that the business profile of the Infinite Data Systems Private Limited does not match with that of the assessee. Therefore, the DRP has rightly excluded this company from the final set of comparables. No interference is called for. Decided against the revenue.

  ---

• 2018 (8) TMI 1201
  Transfer pricing - second round of litigation - de novo determination of the Arms Length Price - fresh benchmarking - selection of comparable - Apart from the fresh search, the TPO redrew the appellant- company’s segmental by: (i) treating the reimbursement of expenses received as part of profit and loss account; (ii) reallocation of certain expenses which were not actuals based on the revenue of each segment; & (iii) treating the provision/liabilities written back as non operative in nature. - Further, the TPO did not allow the benefit of economic adjustments, i.e., working capital and risk, while computing the arms’ length margins of the respective segments of the company. The TPO also made an adjustment on account of period of delay in receipt of payments from AEs. The TPO imputed an Indian based interest at the rate of 10.84% p.a. for the period of delay in receipt of payments from AEs beyond 60 days. Held that:- appeal filed by the assessee is allowed.

  ---

• 2018 (8) TMI 1200
  Undisclosed income - admission of declaration of income during survey u/s 133A - Held that:- the statement recorded u/s. 133A of the Act de hors incriminating material found at the time of survey cannot be the basis to make any addition. In other words, there should have been evidence found which can lead to the conclusion that assessee has suppressed income. In the present case, no such exercise has been carried out by the AO or the CIT(Appeals). In the course of survey u/s. 133A of the Act, the inventory has to be compared with the stock as per the books of account. While arriving at the value of inventory, the cost price has to be determined and due deduction given towards direct expenses. In other words, if the stock found at the time of survey carries a tag of sale price, then to arrive at the purchase price of the assessee, gross profit margin as declared in the relevant assessment year and direct expenses have to be reduced. Only then the value of inventory at the time of survey can be ascertained. If the inventory is more than the value as recorded in the books of account, then addition u/s. 69 as unexplained investment in stock has to be made. If there is a shortfall, then the presumption is that the assessee has sold goods outside the books of account and then appropriate profit margin has to be added to the total income. Without following the procedure which is normally adopted in the case of a survey, the AO cannot be allowed to make additions - Decided in favor of assessee.

  ---

• 2018 (8) TMI 1199
  Validity of reassessment proceedings u/s 147 - initiation of proceedings u/s. 148 - The case of the revenue for disallowing the expenses was that in the search conducted u/s. 132 of the act in the case of M/s. Murudeshwar Ceramics Ltd., it transpired that the assessee received labour charges and transportation charges from the above company, but did not incur any expenditure as the assessee did not actually carry out any activity for the aforesaid company. Held that:- there was no direct or live nexus with the belief formed by the AO that income of the assessee has escaped assessment compared with the material that came to the possession of the AO. In other words, there was nothing incriminating against the assessee found in the course of search, which can lead to a belief that income of assessee chargeable to tax has escaped assessment by reason of assessee claiming bogus expenditure. The statements recorded in this regard are general and vague and admission in the case of person searched cannot be the basis to form such belief. I therefore quash the proceedings u/s. 148 of the Act and allow the appeal of the assessee. Decided in favor of assessee.

  ---

• 2018 (8) TMI 1198
  Additions u/s 56(2)(viib) - valuation of issue of share - AO rejected the discounted cash flow method and arrived at the value of share by Net Asset Value (NAV) method and arrived at the value of 1.17 per share and the difference of 1.64 (2.81 - 1.17) per share is added by applying section 56(2)(viib) of the Income Tax Act, 1961 [“the Act”]. - Held that:- order of CIT(Appeals) should be set aside and CIT(Appeals) should be directed to examine the reasons given by the assessee as to why DCF method was the most appropriate method of valuation of shares of the assessee in the facts & circumstances and the nature of industry in which the assessee operated. - Decided in favor of assessee for statistical purposes.

  ---

• 2018 (8) TMI 1197
  Denying registration u/s 12AA - charitable activity - establishment of school in a building on permanent basis - Held that:- at the time of processing application for registration under section 12AA of the Act, Ld. CIT is not expected to go in to details, and powers are limited only to examine as to whether or not objects of assessee are “charitable” in nature and examination regarding genuineness of the activities. In the event Ld. CIT do not have sufficient material to doubt genuineness of activities, registration under section 12AA of the Act, cannot be refused to assessee. Natter remanded back to CIT for reconsideration of application for registration under section 12AA of the Act as per law.

  ---

• 2018 (8) TMI 1196
  Transfer pricing - adjustments towards profit attributable to the assessee in connection with sale of intangible assets by adopting the profits split method - Held that:- there is no international transaction during the relevant AY and the addition made by the AO is accordingly deleted. - Following the decision in the case of DQ ENTERTAINMENT INTERNATIONAL LTD. [2018 (1) TMI 726 - ITAT HYDERABAD], decided in favor of assessee.

  ---

• 2018 (8) TMI 1195
  Non-prosecution of appeal by the appellant assessee - the matter was adjourned many a times including once at the request of the assessee. In these circumstances, it appears that the assessee is not interested in prosecuting his appeal. - the appeal filed by the assessee is dismissed for non prosecution.

  ---

• 2018 (8) TMI 1194
  Deduction u/s 54 - purchase of Residential Property in Joint Name - AO disallowed 50% claim of the assessee whereas 100% investment was made by the assessee - Held that:- assessee is entitled to the benefit of deduction of - under section 54 of the Act towards capital gain on the premise that the entire amount towards consideration of purchase of flat at Nandnavan Housing Co-operative Society has been paid by the assessee and merely because his father’s name has been inducted as jointowner, the said claim cannot be denied. - Decided in favor of assessee.

  ---

• 2018 (8) TMI 1193
  Nature of income received in the name of share premiums - lifting of corporate veil - AO taxed the same business income - CIT(A) taxed the same as income from other sources - These shares were issued with huge share premium and share premiums were determined without any basis - Held that:- The arrangement and circumstances leading to issue and allotment of shares may draw some doubts that certain benefits may have passed on to the directors. But the question is whether the directors/shareholders have really benefited with this arrangement and the assessee company was used as arrangement to pass on the benefit. AO has invoked section 28(iv) to convert the capital receipt as revenue. This section refers to any benefit/perquisite arising from business or exercise of a profession. This capital receipt is not generated in the business whereas ld. CIT(A) confirmed the capital receipt as income from other sources without establishing that this is income of the assessee when the assessee has not even commenced the business. The alleged receipt is the benefit intended to pass on to the director/shareholdes of the company. We noticed that this capital investment was received by the assessee as 0% convertible preferential shares. No doubt there is no immediate outflow to the company in terms of dividend but it is convertible in the near future as equity share capital. The AO/CIT(A) have restricted themselves by stopping the investigation based on circumstantial evidence and applying test of human probabilities. In order to lift the corporate veil for the purpose of determining whether any benefit is passed on to the shareholders/directors, they have to bring on record proper evidence/cogent material. We direct the AO to redo the assessment keeping in mind that no doubt the assessee has received this capital receipt and what circumstances which lead to investment is not important but whether the assessee company was used as a vehicle to pass on the benefit to shareholders/directors. Decided in favor of assessee for statistical purposes.

  ---

• 2018 (8) TMI 1192
  Transfer pricing - arm’s length price (ALP) adjustment - notional interest granted on loan - Article 11(2) of the India-Finland Double Tax Avoidance Agreement (DTAA) - benchmarking the transaction at SBI Prime Lending Rate and not LIBOR - Held that:- Article 9 is attracted in this case. The transfer prising adjustment on account of interest is to be taxed by including the same in the profits of the assessee as it is not accrued by reason of conditions made and imposed between the Associate Enterprises. - Article 11, does not apply, as no interest accrues or arises in this case and the question of ‘payment’ of such interest simply does not arise. What is sought to be taxed is a Transfer Pricing adjustment which is permitted under Article 9 which talks about accrual and not payment. - In this case there is no obligation to pay interest. The learned council for the assessee projects a scenario which would never ever arise in the facts of this case and claims that, interest can be taxed only on payment, in view of Article 11. Such an argument is flawed. - Decided against the assessee. Regarding benchmarking the transaction - Held that:- The loan in question in this case has been given in US Dollars. Though the loan has been consumed in India, the repayment has to be made in US Dollars. - LIBOR has to be applied while benchmarking the international transaction in question. In view of the above discussion, this issue is decided in favour of the assessee.

  ---

• 2018 (8) TMI 1191
  Disallowance u/s 40A(3) - cash payments for hiring trucks beyond the limits prescribed - disallowance of conveyance expenses - disallowance based on surmises - Held that:- the fact that the truck drivers, insist on cash payments for smooth supply of trucks, is not denied by the revenue. It is also not disputed that to ensure that at no point of time, the assessee is deprived of trucks, he was forced to pay in cash. The Assessing Officer in this case has not doubted the business expediency or genuineness of these transactions. We also find that the copies of the bills produced evidence that payments were made though agents. - Additions made u/s 40A(3) deleted - Decided in favor of assessee. On the issue of disallowance of conveyance allowance the ld. Assessing Officer has erroneously held that conveyance allowance is same as “Travelling Allowance”. Both these expenditures are different. In any event, as there are no vouchers produced, we restrict the disallowance to 25% of the expenditure claimed. - Decided partly in favor of assessee.

  ---

• 2018 (8) TMI 1190
  Exemption towards receipt of various allowances u/s 10(14) read with Rule 2BB - member of Legislative Assembly (MLA) - whether assessee was an Ex-MLA or MLA during the relevant previous year. If the assessee was an Ex-MLA, he would not have received salary from the Legislative Assembly. He would have been at the best eligible for pension under the rules applicable for the Members of the Assembly. - Held that:- Assessing Officer has in the assessment order itself mentioned receipt of salary of E6,00,000/- by the assessee from State Legislative Assembly. Hence, in my opinion, assessee was entitled to claim the benefits available to him u/s.10(14) of the Act. Allowances mentioned in Rule 2BB definitely covered transport allowance of E2,40,000/- received by the assessee. However, postal allowance is not covered by the said rule. Hence, in my opinion, assessee was eligible for claiming exemption on the transport allowance of E2,40,000/- received by him but not on the postal allowance of E30,000/-. - Decided partly in favor of assessee.

  ---

• 2018 (8) TMI 1189
  Income from house property - assessee had received rental receipts as well as maintenance charges from lessees. Assessee had shown its income under the head ‘’income from business/profession’’ - AO took the view that though it was on separate agreements, provision for such services were inseparable from the activity of renting out the property. - Held that:- the income of the assessee both from leasing the space as well as providing maintenance services had to be considered only under the head income from business. Ld. Assessing Officer fell in error in treating such amounts under the head income from house property. We are of the opinion that assessee’s income has to be considered only under the head ‘’income from business’’. Ordered accordingly - Decided in favor of assessee.

  ---

• 2018 (8) TMI 1188
  Revision u/s 263 - source of cash deposits in his bank account/s - CIT observed that no proper enquiry can be said to have been made by the AO, who completed the assessment in haste, and without proper application of mind. - Held that:- No satisfactory answer to any of the foregoing was forthcoming even before us, even as, as explained, it is the non-enquiry by the AO that is the relevant or material. The withdrawal of petty amounts, despite abundant cash-in-hand, only points out to the cash flow statement being not correct or complete, requiring further verification. There is no finding by the AO on this. In fact, the affidavit from Sh. Yash Pal states of his having withdrawn the amount, though unable to purchase the vehicle arranged by the assessee for him. That is, the money was withdrawn by him on own account and not for and on behalf of the assessee. The version before the AO was clearly different. The third area of enquiry, as pointed out by the ld. Pr. CIT, is most striking. This is as, again, without doubt, purchase of a second-hand car is not generally paid for in advance. It could no doubt be so in a particular case, as where the vehicle is identified, and the proposed buyer apprehends loss of opportunity on account of the car dealer (middle-man) not having enough funds to purchase the vehicle. That is, an advance to facilitate the purchase, closing the deal, while in the instant case the purchase remains pending for over eleven months from the date of advance! Further still, the advance of Sh. Rajan Ghai has not been adjusted against any car purchased by him, but against that by his brother Sh. Gagan Ghai, i.e., as explained. The explanation, on the very face of it, is unconvincing and needs further enquiry, which is what the ld. Pr. CIT has directed. Decision of CIT sustained - Decided against the assessee.

  ---

• 2018 (8) TMI 1187
  Disallowance of deduction u/s 80P - income earned from the financing activities with the members - allocation of all the common expenses towards interest income only - Counsel for the assessee before us claimed that before disallowing the deduction u/s 80P of the Act in respect of other income as discussed above, the AO should have allowed the claimed of the expenses incurred by the assessee in relation to such other income not eligible for deduction u/s 80P of the Act. In support of his contention, ld. AR submitted that in the identical facts and circumstances, the Hon’ble ITAT in the A.Y. 2012-13 in the own case of the assessee has directed to allow the expenses incurred in relation to concern income. Accordingly, the ld. AR prayed before us to give the direction to the lower authorities for allowing the expenses incurred by it in relation to other income not eligible for deduction u/s 80P of the Act. Matter remanded back.

  ---

• 2018 (8) TMI 1186
  Set off of unabsorbed business loss - set off against Short Term Capital Gain U/s. 50 - Held that:- u/s.72 of the Act gains out of business or profession carried on by the assessee and assessable to tax though under the head other than income from business and profession of that assessment year can be set off against loss under the head ‘profits and gains of business or profession’ carried forward from earlier years. - further, income arising out of a sale of business asset though not taxable as profits and gains from business or profession is an income in the nature of business and unabsorbed business losses can be set off against such income. Following the decision in the case of Digital Electronics Ltd.vs. Addl. CIT [2010 (10) TMI 722 - ITAT, MUMBAI], Decided in favor of assessee.

  ---

• 2018 (8) TMI 1185
  Disallowance u/s u/s 36(1)(va) r.w.s. 2(24)(x) - failure to deposit EPF & ESI before the due date of filing of income tax return (ITR) - Held that:- we are inclined to restore the issue on hand to the file of AO for fresh adjudication and in accordance to the provision of law as well as after considering the order of this Tribunal in the case of Suzlon Energy Ltd. [2018 (8) TMI 447 - ITAT AHMEDABAD] - Decided in favor of assessee for statistical purposes.

  ---

• 2018 (8) TMI 1184
  Addition of ESI Contribution and PF Contribution 36(1)(va) r.w.s 43B - failure to deposit before due date - Held that:- we are inclined to restore the issue on hand to the file of AO for fresh adjudication and in accordance to the provision of law as well as after considering the order of this Tribunal in the case of Suzlon Energy Ltd. (2018 (8) TMI 447 - ITAT AHMEDABAD). Depreciation - personal use of the vehicles - Held that:- the assessee has been given depreciation on the vehicle in the earlier years, but the AO made no disallowance for the same. Therefore, in our view, the principle of consistency needs to be made. - following the decision in the case o Sayaji Iron & Engg. Co. [2001 (7) TMI 70 - GUJARAT HIGH COURT], decided in favor of assessee.

  ---

• 2018 (8) TMI 1183
  Disallowance u/s.40(a)(ia) for failure to deduct TDS - assessee in default u/s 201 - disallowance of expenses u/s.37 on account of infringement of the law - AO was of the view that the gift given by pharmaceutical and allied health sector industries to medical practitioners and their professional association is prohibited under the Medical Council Act, 1956 - Held that:- no disallowance needs to be made if the recipient has included the payment made by the assessee in its receipts and has paid the taxes thereon. - the claim of the assessee for the interest expenses cannot be denied due to non deduction of TDS under section 194A r.w.s.40(a)(ia) of the Act. - the claim of the assessee for the interest expenses cannot be denied due to non deduction of TDS under section 194A r.w.s.40(a)(ia) of the Act. - Decided against the revenue. Sale promotion expenses - Held that:- CIT(A) reversed the order of AO by observing that the assessee is not a pharmaceutical company. Therefore, the Circular issued by CBDT cannot be applied. The ld. CIT(A) also observed that the assessee had not supplied any item free of cost to the hospitals, but these items were representing part of the machinery and equipments supplied to various parties. - order of CIT(A) confirmed - Decided against the revenue.

  ---

• 2018 (8) TMI 1182
  Deduction u/s 80IE - whether interest on income refund is as part of business income or not - Held that:- interest on income tax refund is held not eligible for deduction under section 80IE of the Act and the action of the ld CIT(A) is hereby confirmed - Decided against the assessee.

  ---

• 2018 (8) TMI 1181
  Reopening of an assessment beyond 4 years - issue of bogus purchases - AO estimated the Gross Profit on such alleged bogus purchases at the rate at which the assessee has shown the Gross Profit. - information was unearthed during the course of search in the case of other party - Held that:- When there is a specific and concrete information available with the Assessing Officer after completion of assessment, there is certainly reason to believe that the income had escaped assessment and therefore we do not see any infirmity in the order of the Assessing Officer in reopening the assessments. We also find that there is no considerable force in the submissions of the Ld. Counsel for the assessee that the basis for making of addition is not adhered to. - Reassessment proceedings sustained - Decided against the assessee. Bogus Purchases - Estimation of income - The Revenue came to know that the Bhanwarlal Jain Group was issuing the accommodation entries to various parties through different entities. - Held that:- statements reflecting payments made by the assessee to them, copy of acknowledgment of Income Tax Returns filed by them to show that the transaction of sales made to the assessee are genuine. We also find that the Gross Profit margin shown by the assessee is ranging in between 7.02% to 7.62% consistently. Further, the disallowance / estimation of profit of purchases by treating them as bogus cannot be made only on the statements recorded from third parties, especially when the suppliers have responded to the notice u/s. 133(6) of the Act and filed all the necessary documents to prove the genuineness of the purchases made by the assessee. - All the purchases are genuine - No adition can be made - Decided in favor of assessee.

  ---

• 2018 (8) TMI 1159
  Rejection of the books of account - G.P. determination - applying a net profit rate of only 1 per cent - Held that:- We do not find any merit in this petition. - The SLP is accordingly dismissed.

  ---

• 2018 (8) TMI 1158
  Revision u/s 263 - adequacy of inquiries or verification done by the AO - Held that:- We do not find any merit in this petition. - The SLP is accordingly dismissed.

  ---

• 2018 (8) TMI 1157
  Rectification of mistake - Denying the carry forward of losses and depreciation - Held that:- We do not find any merit in this petition. - The SLP is accordingly dismissed.

  ---

• 2018 (8) TMI 1156
  Undisclosed investment - undisclosed ownership of assessee in the 22 properties - additions on account of distribution of profit between two partners - addition made in respect brokerage earned by the assessee - Held that:- We do not find any merit in this petition. - The SLP is accordingly dismissed.

  ---

• 2018 (8) TMI 1155
  Disallowance under section 40(a)(ia) - Held that:- We do not find any merit in this petition. - The SLP is accordingly dismissed.

  ---

• 2018 (8) TMI 1154
  Initiation of proceedings against the Assessee u/s 153C - cash payments from unaccounted sources - whether document belonged to the Assessee? - Held that:- We do not find any merit in this petition. - The SLP is accordingly dismissed.

  ---

• 2018 (8) TMI 1153
  Disallowance of embezzlement loss which represented 70% of the total loss of the assessee - embezzlement by its employee - Held that:- We do not find any merit in this petition. - The SLP is accordingly dismissed.

  ---

• 2018 (8) TMI 1152
  Stay of demand - Additions u/s 68 - laundering of black money - CIT(A) granted a stay on condition of payment of 50% of the amounts. The learned Single Judge reduced it to 20%. - Held that:- Considering the entire circumstances as also the failure of the assessee to produce the details at the first stage, we are of the opinion that the assessee will have to make a deposit of 1% of the tax addition made under Section 68 of the Act within a period of one month from the date of receipt of a certified copy of this judgment.

  ---

• 2018 (8) TMI 1151
  Disallowance u/s 14A - ITAT deleted the diallowance by holding that, in this case for both years, the assessee had offered amounts as disallowance claiming them to be expenditure for tax exempt income. The Assessing Officer merely proceeded to reject such amount as expenditure and straightaway applied Rule 8D without adducing any reasons. ITAT did not fall into error in holding as it did; no substantial question of law arises. - Decided against the revenue.

  ---

• 2018 (8) TMI 1150
  Reopening of assessment - Addition u/s 68 - ITAT deleted the addition as no notice was issued under Section 143(2), before the completion of assessments - Held that:- We do not find any merit in this petition. - The SLP is accordingly dismissed.

  ---

• 2018 (8) TMI 1149
  Disallowance u/s 14A read with general principles of section 37(1) of the Income Tax Act, 1961 - expenditure expended wholly and exclusively for the purposes of business or profession - SLP is dismissed on the ground of low tax effect.

  ---

• 2018 (8) TMI 1148
  Addition on the ground of unexplained construction and working in progress expenses - profit estimation - no books of accounts and supporting bills/vouchers were maintained by the assessee at the time of search - Held that:- The SLP is dismissed both on the ground of delay and merit.

  ---

• 2018 (8) TMI 1147
  Exemption / deduction u/s 10AA - failure to fulfill the conditions of Section 10AA(4)(ii) - manufacture and export of jewellery - modernization of existing unit or new undertaking - The SLP is dismissed both on the ground of delay and merits.

  ---

• 2018 (8) TMI 1146
  Deduction u/s 80IB(10) - development and construction of the housing project - works contractor or developer - SLP dismissed.

  ---

• Service Tax

• 2018 (8) TMI 1180
  CENVAT credit - various input services - scope of the term "up to the place of removal" - Held that:- There are no merit in this appeal - The same is, accordingly, dismissed.

  ---

• 2018 (8) TMI 1179
  Foreign Banks Charges - liability of service tax - reverse charge mechanism - appellant have made payment of 3,16,46,565/- under the head of Foreign Banks Charges to the Foreign Banks towards interest, Foreign Bank Commission / Charges, Foreign Bank Charges for LC-retired and other charges - Held that:- From the Circular 20/2013-14-ST-I (Commissioner of ST-I, Mumbai T.N.) dated 10.02.2014 , it is clear that when the Indian Banks are collecting charges including the charges of Foreign Banks toward import and export of the goods of their client. In such case, as regard the service tax liability under Reverse Charge Mechanism, the Indian Banks are recipient of service, therefore, the appellant cannot be held as recipient of service provided by Foreign Banks to the Indian Banks. Accordingly, the appellant is not liable to pay service tax under Reverse Charge Mechanism. This very same issue has been considered by this Tribunal in the case of Greenply Industries Ltd [2015 (12) TMI 80 - CESTAT NEW DELHI], wherein Division Bench of this Tribunal has held that when the assessee is not directly making the payment to the Foreign Banker towards any service provided by the said Foreign Banker to the Indian Bank, the assessee is not liable to pay service tax. Any bank charges paid by Indian Bank to the Foreign Banks even though in connection with import and export of the goods and the same was debited to the appellant, the service tax liability does not lie on the appellant. Matter remanded to adjudicating authority to verify the quantification and if any service tax liability arises, the same may be demanded from the appellant - appeal allowed by way of remand.

  ---

• 2018 (8) TMI 1178
  Franchise Service - Demand of Service Tax for the period 2003-04 to 2007-08 - Caution Deposit collected - difference in the figures in the Profit and Loss Account as well as the ST-3 returns - administrative materials and promotion materials sold to the Franchisees - material kit supplied by CSC Publications and Ramiah Publications. Franchise Service - Caution Deposit collected - Held that:- For franchise services, the appellant has enclosed the challans in respect of the service tax paid on this count - the appellant has discharged the service tax and the demand is upheld. Franchise services - difference in the figures in the Profit and Loss Account as well as the ST-3 returns - Held that:- The fact as to what is the reason for the difference has to be verified by the adjudicating authority and for this reason, matter remanded to adjudicating authority - matter on remand. Franchise Services - administrative materials and promotion materials sold to the Franchisees - Held that:- The demand raised on the cost recovered from the Franchisees for supply of course materials and administrative materials cannot sustain and requires to be set aside, demand set aside. Franchise Services - Material kit supplied by CSC Publications and Ramiah Publications - Held that:- It is settled law that study materials supplied cannot be included in the taxable value for levy of service tax. Thus, the demand raised on the ground of amount received by CSC Publications and Ramiah Publications for supply of study materials to the Franchisee cannot sustain and requires to be set aside - demand set aside. Commercial Coaching or Training Service - demand of service tax for the period 2003-04 to 2007-08 - difference in the figures shown in ST-3 returns and Profit and Loss Account - amount received for imparting training to government staff and private companies - amount received by the appellant for sale of course materials to students - computer training imparted to students - computer training has been imparted to schools as per the agreement entered into with the Education Department of Tamil Nadu - JDC Summer Classes - income received from computer rentals. Commercial Coaching or Training Service - difference in the figures shown in ST-3 returns and Profit and Loss Account - Held that:- This issue also requires to be remanded to the adjudicating authority - matter on remand. Commercial Coaching or Training Service - amount received for imparting training to government staff and private companies - Held that:- As per Notification No. 09/2003 and 01/2004 Computer Training Institutes were exempt from service tax only till 30.06.2004 and therefore, after 30.06.2004 they are liable to pay the service tax - the appellant is liable to pay service tax after 30.06.2004 on this count - appeal allowed in part. Commercial Coaching or Training Service - amount received by the appellant for sale of course materials to students - Held that:- It is settled law that the study materials supplied cannot be subject to levy of service tax. Further, as per the Show Cause Notice itself, the amount is collected by sale of study materials to the students. No service tax can be levied on the transaction of sale and, therefore, the demand raised on this count requires to be set aside - appeal allowed, Commercial Coaching or Training Service - computer training imparted to students - Held that:- Computer Training Institute would fall under Vocational Training Institute in terms of Notification No. 24/2004 until 16.06.2005 - the appellant is eligible for exemption up to 16.06.2005. The demand for the period up to 16.06.2005, therefore, requires to be set aside - the appellant is liable to pay service tax from 16.06.2005 along with interest. Commercial Coaching or Training Service - computer training has been imparted to schools as per the agreement entered into with the Education Department of Tamil Nadu - Held that:- It is very much clear that the training imparted by the appellants is according to the syllabus, as approved by the Government of Tamil Nadu. Such training does form part of the course/curriculum of school education and the appellant is eligible for exemption under Notification No. 10/2003 - appeal allowed. Commercial Coaching or Training Service - JDC Summer Classes - Held that:- the Ld. Counsel at the time of hearing submitted that the appellant is not contesting the same and has paid up the amount in respect of this demand. Commercial Coaching or Training Service - income received from computer rentals - Held that:- The rent income received for leasing the computer hardware, etc., cannot be taxed under Computer Training Services. In any case, these agreements include imparting computer training to the students and therefore the benefit of exemption under Notification No. 10/2003 would be applicable to the appellant - demand set aside - appeal allowed. Business Auxiliary Services - demand of service tax due to rounding off - period 2003-4 to 2007-08 - the incentives received from M/s. Tally - sale of forms of Tamil Nadu Open University - amount of short paid tax by the appellant due to rounding off - penalties. Business Auxiliary Services - the incentives received from M/s. Tally - Held that:- The said issue as to whether the incentives received for the use of software would be subject to levy of service tax, has been decided in the case of D. Pauls Consumer Benefit Ltd. Vs. C.C.E. [2017 (3) TMI 1019 - CESTAT NEW DELHI], where it was held that They are by using these GDS/CRS for booking tickets, receiving incentives from the said companies for every segment booked by them. Hence, the service provided by the assessee-Appellants has rightly been covered under the heading Business Auxiliary Service - the demand on this count is legal and proper and is upheld. Business Auxiliary Services - sale of forms of Tamil Nadu Open University - Held that:- In the Show Cause Notice as well as the impugned order, it is seen that the appellant has purchased and sold the forms at the actual price. There are no ingredients attracting the levy of service tax under Business Auxiliary Services in this activity - demand do not sustain. Business Auxiliary Services - amount of short paid tax by the appellant due to rounding off - Held that:- The Ld. Counsel has submitted that the appellant is not contesting the said demand. The same is upheld. Penalties - Held that:- The issues involved in all the three services are mostly interpretational, especially with regard to the exemption Notification as to whether Computer Training Institute would be eligible for exemption as also with regard to the exemption under Notification No. 10/2003. Further, there were issues with quantification. Being interpretational issues, the penalties on the demands cannot sustain and require to be set aside - penalty set aside. Appeal disposed off.

  ---

• 2018 (8) TMI 1177
  Survey and Exploration of Minerals - execution of integrated Seismic Job services and drilling of shot holes for Sector S-4 in Cambay Basin, Gujarat with ONGC in respect of M/s.Geofizyka Torun - It was alleged that appellant had collected service tax from the said person, however did not remit the same to the Government in respect of one invoice dt. 31.03.2007 raised for an amount of a sum of 57,98,435/- involving service tax liability of 7,09,728/- accordingly - Held that:- Specific geological, geographical or prospecting activity or map-making is a sine qua non for meriting inclusion under the above service category for becoming exigible to service. From the meagre facts available on record and due to absence of contract submitted by appellant, we are not able to make a headway in deciding the matter - Accordingly, the issue concerning tax liability of 43,20,959/- with interest, relating to the contract dt. 16.12.2004/- referred to in para-3 of the SCN dt. 1.10.2007, the matter is being remanded to the adjudicating authority for analyzing the contract to arrive at a decision whether in fact the services provided would fall within the scope of “Survey and Exploration of Mineral” service. Demand of service tax - Survey and Exploration Service - Held that:- It is not in dispute that the appellants have collected the amount of service tax under Survey and Exploration Service. This allegation has not been refuted by the appellant either during adjudication stage or before this forum - demand upheld. Penalties - Held that:- The matter is remanded to the original adjudicating authority to arrive at a reasoned decision whether the penalties proposed in the notice require to be imposed or otherwise and accordingly, the quantum of any penalties that may be confirmed will have to be determined based on the final tax liability, if any, that may be confirmed by the said original authority. Appeal is partly dismissed and partly remanded.

  ---

• 2018 (8) TMI 1176
  Commercial or Industrial Construction service - Benefit of abatement under N/N. 01/2006-ST dated 01.03.2006 - denial of benefit on the ground that they have availed CENVAT credit hence, they have contravened the condition of notification - Held that:- The appellant though availed CENVAT credit in respect of input services but the same was reversed along with interest before issue of show cause notice - Tribunal in the case of M/S PUNJAN BUILDERS VERSUS COMMISSIONER, CENTRAL EXCISE & SERVICE TAX, VADODARA-II [2015 (12) TMI 490 - CESTAT AHMEDABAD] has held that reversal of CENVAT Credit does not absolve from violation of the conditions of notification. Benefit of abatement allowed - appeal allowed - decided in favor of appellant.

  ---

• 2018 (8) TMI 1175
  Penalty - service tax on Charges paid to the Overseas banks on Nostro and Vostro accounts and SWIFT Charges - Demand of Service Tax - Held that:- In an identical issue in the case of The Karur Vysya Bank Ltd. Vs. C.C.E. & S.T., Tiruchirappalli [2018 (7) TMI 532 - CESTAT CHENNAI] wherein, inter alia, the penalties imposed have been set aside by holding that During the relevant period, the issue whether an assessee is liable to pay service tax under reverse charge mechanism was under much litigation. The same reasoning can be extended to the appellants - penalties u/s 77 and 78 set aside - appeal allowed - decided in favor of appellant.

  ---

• 2018 (8) TMI 1174
  Nature of activity - Renting of Immovable Property Services or not - provision of the space for setting up the stores - consideration by way of amount calculated as percentage on the basis of net sales during the year - case of appellant is that they are not providing any taxable service and the agreements entered by them with M/s Pantloon & M/s Trent were for profit sharing - Whether the agreements between the appellant and M/s. Pantaloons and M/s. Trent Ltd. can be treated as agreement for renting of space or are these agreements only for profit sharing? - extended period of limitation - penalty. Held that:- The appellants have provided the space to the said companies for conducting report of business and for provisions of the said space. They are receiving certain “Fees”, the said “Fees” cannot be anything other than as charges for provision of the space, hence is in nature of rent - The submission made viz-a-viz the other activities being undertaken by the appellant in terms of the said agreement do not justify to consider the amount received as anything other than rent because in view of the clause (4(b) of the agreement which specifically provides that “The company shall be exclusively in charge of the management and running of the said business from the said premises”. The conduct of retail business from the said premises was so responsible of the company which had necessary expertise in doing so. This is also supported by the fact that appellants are neither having necessary expertise/experience in the field of retail sales of the said product - the entire amounts received in terms of these agreements are nothing but rent for providing space for conducting the said retail business. Time limitation - Held that:- There is no doubt that appellants had not disclosed the facts with regards to said two agreements to the department the other these facts which were in the knowledge where exclusively no disclosed hence suppressed. Accordingly, there is no denial that extended period has to be invoked for demanding the tax short paid - when vital facts for determination of the tax liabilities have been suppressed from the department invocation of extended period of limitation cannot be faulted with. Demand of Interest - Held that:- Since taxes has not been paid when the demand of interest cannot be set aside. It is a settled law that interest is an absolute liability cannot be waived in any circumstances - demand of interest upheld. Penalties - Held that:- Since in the present case tax has been evaded by resorting to fraud, suppression, mis-statement etc. penalty under Section 78 is justifiable - penalty u/s 76 also upheld - For failure to file proper returns penalty has been imposed under Section 77, which is also upheld. Appeal dismissed - decided against appellant.

  ---

• 2018 (8) TMI 1173
  Telephone Service - Internet Telecommunication Service - Leased Circuit Service - Reverse Charge Mechanism - demand of Service Tax - Held that:- Since all the relevant documents showing that the service tax was paid by the appellant to the service providers were filed before the Adjudicating Authority, the demand cannot be collected again from the appellant. This is a case of procedural lapse and it has been decided in various decisions by the Tribunal, Hon’ble High Courts and Hon’ble Supreme Court time and again that tax cannot be demanded for the second time once it has been established that it was already paid by the appellant. Appeal allowed - decided in favor of appellant.

  ---

• 2018 (8) TMI 1172
  Intellectual Property Service - assessee paid royalty of 1.3% of the net selling price of Ceramic Fibre Products to Morgan Crucible Co. Plc. UK. - demand from 18-04-2006 - Held that:- The said Agreement required the assessee to pay royalty annually to their foreign service provider, based at 1.3% of ceramic refractory fibre sales. As per the two related show cause notices dated 11.8.2008 and 02.02.2009 such payments have been made from September 2004 to December 2006 and January 2007 to December 2007 respectively. No infirmity is then found in the inclusion of Lower appellate authority in para 5.1 of the impugned order that transfer of knowhow is not a onetime affair for which royalty charges are being paid even during the disputed period. Assessee are liable to pay service tax, with interest thereon, on the Royalty charges paid, only w.e.f. 18.04.2006, i.e. after enactment of Section 66A of the Act - appeal allowed - decided in favor of Revenue.

  ---

• 2018 (8) TMI 1171
  Business Auxiliary Service or Agricultural Extension Services? - appellant was working a super distributor for one major pesticides/insecticides manufacturer and were engaged in marketing and promotion of pesticides/insecticide manufactured by their principal - Held that:- Nowhere it is coming out that the appellant is doing marketing and promotion of the product of their principal. Moreover, in the impugned order, the Ld. Commissioner has observed that the “Agricultural Extension Service” is of scientific research and knowledge by observing that “None of the supporting documents which the Noticee have submitted to substantiate their claim that they have been providing Agricultural Extension Service, could show that the farmers were being given any training through scientific research and knowledge to agriculture practices through farmer education and training.” The appellant was required to provide scientific research and knowledge to agriculture practices through farmer education and training. As per agreement, the appellant has provided the said service. The finding of the Ld. Commissioner is not appreciable. The appellant has provided ample evidence in respect of nature of the services provided by them by way of photographs and agreement of other materials but the Revenue has not come with an evidence that the appellant was engaged in the marketing and promoting the product of their principal while providing Agricultural Extension Service - the appellant is not providing any taxable service but is providing only Agricultural Extension Service. Receipt of remuneration in terms of sale by the appellant of the product of their principal - Held that:- The appellant is getting separate commission on which they are discharging service tax liability. Therefore, on the basis of remuneration, it cannot be held that the appellant is providing service of marketing and promotion. As on merits the services rendered by the appellant are “Agricultural Extension Services” and are covered under negative list as per section 66D of the Finance Act, 1944, therefore, the appellant is not liable to pay service tax - as the issue is decided on merits, the issue of penalty is not taken up. Appeal allowed - decided in favor of appellant.

  ---

• Central Excise

• 2018 (8) TMI 1170
  CENVAT Credit - duty paying documents - the Bill of Entry did not bear endorsement of proper office of Customs - Rule 9 of the Cenvat Credit Rules, 2004 - Held that:- Under the Cenvat Credit Rules, 2004, there is no such requirement of endorsement on the Bill of Entry. Further, Bill of Entry is also a specified documents for taking Cenvat credit - the appellant has rightly taken Cenvat credit on the basis of endorsement on Bill of Entry in absence of endorsement by the proper office of Customs - credit allowed - appeal allowed - decided in favor of appellant.

  ---

• 2018 (8) TMI 1169
  Refund of accumulated Cenvat Credit - closure of factory - Whether in the facts and circumstances of the present case, Appellate Tribunal was correct, in law, and justified in holding that there is no provision for allowing refund of accumulated Cenvat Credit on closure of the factory? - Rule 5 of the Cenvat Credit Rules, 2004. Held that:- The principle of estoppel applies as once the department has accepted the view taken by the Tribunal it will not be appropriate to challenge the same by choosing the present assessee - the judicial discipline is required to be maintained. The Tribunal cannot distinguish the High Court judgments. They are bound by the High Court judgments even jurisdictional High Court and at the most they can refer it back prior to distinguish on facts but no authority has been made. Full Bench decision of the Tribunal has to be followed. Reliance placed in the case of UNION OF INDIA VERSUS SLOVAK INDIA TRADING CO. PVT. LTD. [2006 (7) TMI 9 - KARNATAKA HIGH COURT], where Karnatake High Court has held that Tribunal is fully justified in ordering refund particularly in the light of the closure of the factory and in the light or the assessee coming out of the Modvat Scheme. Appeal allowed - decided in favor of assessee.

  ---

• 2018 (8) TMI 1168
  CENVAT Credit - denial of credit on the sole ground that the service provider has not deposited the same with the Revenue - Held that:- The appellant has admittedly procured the Cenvatable services of construction of factory from M/s. Keil India Engineering Pvt.Ltd. and all the requisite particulars stand mentioned in the said invoices so raised by the service provider. The service provider is also registered with the Service Tax department for their Delhi unit, but their NOIDA unit, who has actually provided the services were not registered. However, registration number stands given in the invoice along with the amount of Service Tax. The appellant is neither expected nor is under any legal obligation to find out that the Service Tax so mentioned in the invoices stands actually paid by the service provider or not. In terms Rule 4(7) of Cenvat Credit Rules readwith Rule 9 of Cenvat Credit Rules, the only requirement of the assessee is to pay the value of the services as also the quantum of service tax as assessed in the invoice raised by the service provider and then to avail the credit. The assessee cannot be held responsible for any default in non-deposit of duty by the service provider and the credit of the service tax paid by him to the service provider for further deposit in the exchequer kitty cannot be denied to him on account of the lapse of the service provider. Inasmuch as the appellant has admittedly paid the Service Tax amount to the service provider, along with value of the goods, the fact that the said service provider has not further deposited the same with the government, cannot lead to denial of credit to the present appellant - appeal allowed - decided in favor of appellant.

  ---

• 2018 (8) TMI 1167
  Excisable goods or not? - by-products - Soap stock - soap sludge - Acid Oil - whether Acid Oil and Soap Sludge which are obtained by further conversion of such Soap Stock would require to be treated as excisable goods requiring discharge of Central Excise duty liability? Held that:- The ratio of the Apex Court in Indian Aluminium Company [2006 (9) TMI 6 - SUPREME COURT OF INDIA] and of the various Tribunal s decisions like Ricela Health Foods Ltd. [2018 (2) TMI 1395 - CESTAT NEW DELHI] and others would squarely apply with regard to soap stock , hence it cannot be held as excisable goods and denied benefit of Notification No.89/95-CE. Soap Stock - Acid Oil - Held that:- Soap Stock is consciously again processed by the appellants which results in emergence of Acid Oil and Soap Sludge. It then cannot be said that emergence of acid oil is an unintended by product - the acid oil is an intended final product resulting out of conscious process of soap stock. The said acid oil would then have to be considered as a new product with a different name, character and use, and exigible to excise duty as applicable - duty liability upheld - The manner of calculation of duty liability arrived at in the Annexure to the SCN will then have to be reworked to restrict the assessed liability with interest as applicable, only to clearances of acid oil (during the impugned period). For this limited purpose, the matter is being remanded to the original adjudicating authority. Liability of Interest - Held that:- The interest liability as applicable will be payable on such reworked duty liability. Penalty - Held that:- As the issue on excisability of the by product / waste arising in such refining of vegetable oil was mired in confusion and also in litigation for quite some time till the Larger Bench decision in the case of Ricela Health Foods Ltd. [2018 (2) TMI 1395 - CESTAT NEW DELHI], the ingredients of Section 11AC cannot be foisted on to the appellants. For such reason, the penalty of 23,81,941/- imposed on the appellants under that Section will require to be set aside. Appeal allowed in part and part matter on remand.

  ---

• 2018 (8) TMI 1166
  100% EOU - CVD equal to basic excise duty payable - Under-Valuation - Ladies Knitted Brassier - Department took the view that as the values so adopted was much less than the ultimate sale price charged by distribution centre to their wholesale buyers, therefore there has been short payment to the tune of 44,36,674/- for the period April 2008 to December 2008 - N/N. 23/2003-CE dt. 31.03.2003. Exemption from CVD equal to basic excise duty payable - Held that:- The matter has been well settled by the Hon’ble Apex Court in SRF Ltd. Vs CC (Import and General), New Delhi [2015 (4) TMI 561 - SUPREME COURT] where the Hon’ble Supreme Court followed the principle laid down in Thermax Pvt. Ltd. [1992 (8) TMI 156 - SUPREME COURT OF INDIA] namely for the purpose of attracting additional duty under Section 3 on the import of a manufactured or produced article the actual manufacture or production of a like article in India is not necessary. For quantification of additional duty in such a case, it has to be imagined that the article imported had been manufactured or produced in India and then to see what amount of excise duty was leviable thereon - the respondents herein would very well be eligible for Nil CVD in view of Notification No.30/2004- CE. Valuation of goods - scope of SCN - Held that:- Since the SCN has not invoked Rule 7 of the Customs Valuation Rules, the confirmation of the alleged differential duty value on the basis of deductive value i.e. Rule 7 of the said Rules would be travelling beyond the scope of the said SCN. Appeal dismissed - decided against Revenue.

  ---

• 2018 (8) TMI 1165
  Valuation - inclusion of cost of design and drawing received from its customers in the assessable value - After three and a half years, the Revenue issued a SCN dated 31.03.2011 - Held that:- The designs and drawings were intended not to be valued because the customer wanted it that way and perhaps without even a minor change. Admittedly, the design and drawing is not shown as a separate excisable goods in the invoices and it is not the case of the Revenue that with reference to its value both the drawing and the final products are removed. Further, the process undertaken by the appellant assessee is only the manufacture of sheet metal components which involve only cutting and welding of MS plates and thereafter cutting them to the required specification of its customers and as pleaded by the Ld. Counsel for the assessee, this does not require any specialized drawings but for the dimensions of the components. The drawings supplied by the customers being only dimensions of the components could therefore have no value - there is no justification to hold that the cost of drawings supplied by the customers is required to be included in the assessable value of the final product. Appeal allowed - decided in favor of appellant.

  ---

• 2018 (8) TMI 1164
  Refund claim - mistake of law or not? - claim of refund on the ground that they did not receive any audit note nor any show cause notice indicating the liability of duty of 22,70,569/- - Held that:- The requirements of Sections 11A(5), (6) & (7) ibid and Section 73(4A) ibid having been met by the assessee in order to avail the benefit of lower penalty, no show cause notice was issued as mandated under said Sections and the proceedings were correctly concluded - there is no mistake of law which the Ld. Advocate could pinpoint - appeal dismissed - decided against appellant.

  ---

• CST, VAT & Sales Tax

• 2018 (8) TMI 1163
  Kerosene intended for the manufacture of LAB - Competency of the officer on special duty (OSD) to file an appeal on behalf of the State of Maharashtra - Held that:- There is no legal and valid ground for interference - The Special Leave Petitions are dismissed.

  ---

• 2018 (8) TMI 1162
  Deduction u/s 3-F(2)(b)(iii) of U.P. Trade Tax Act, 1948 - Works contract - deduction was disallowed on the ground that the revisionist was a manufacturer of finished aluminium windows - Whether the Tribunal has erred in treating the petitioner as a manufacturer so as to deny the benefit claimed by it under section 3-F(2)(b)(iii) of the U.P. Trade Tax Act 1948 based on the work-contracts dated 1.12.2006 and 25.3.2006? Held that:- The Tribunal shall also take into account the assertion of the revisionist herein that in the earlier assessment year i.e. 2003-014 and the years subsequent to the one in dispute, i.e. year 2007-08 such deductions were allowed by the Revenue under similar works contract with the same parties - In view of the above, the question as to whether the revisionist was entitled to the deductions claimed under Section 3-F(2)(b)(iii) or not shall be looked into by the Tribunal in the light of what has been stated herein and record its finding accordingly in accordance with law keeping in mind Rule 68(5) of the U.P. Trade Tax Rules, 1948, as the relevant issue have not been appropriately considered. Tax Revision disposed off.

  ---

• 2018 (8) TMI 1161
  Entry tax - import of Toyota Prado car from the Gulf in 1999 - demand of entry tax with interest - petitioner pleads financial hardship - Held that:- In view of the persistent plea that the petitioner is only a driver, the Government may let him pay the amount in a few instalments. Though the petitioner pleads that he needs at least 15 instalments, this Court cannot use the discretion under Article 226 of the Constitution of India to interfere with the taxing power of the State or its recovery mechanism, unless the Government's action violates any of the established legal principles of judicial review. So the petitioner must pay the entry tax along with interest in 10 equal monthly instalments, commencing from 05.9.2018 - petition disposed off.

  ---

• 2018 (8) TMI 1160
  Time Limitation - Section 25(1) of the KVAT Act - further amendment made by introduction of a proviso extending the time for completion of assessment first in the year 2010 and then regularly extended in the subsequent years - Held that:- Notices in all the cases coming under Group-A, were issued by the respective Assessing Authorities, after the expiry of 5 years from the last date of the assessment year. Later, there was a proviso introduced extending the period for completion of assessment till the end of the year. These amendments were made in the successive years after 2010, the benefit of which was claimed by learned Special Government Pleader (Taxes) for sustaining the notices issued - the action initiated by the Department after the period of limitation provided, by issuance of notices under Section 25(1) cannot be sustained. Introduction of Section 25B in the KVAT Act by the Kerala Finance Act, 2013 w.e.f. 01.4.2013 - Held that:- There is no reason to find the invocation of Section 25B, to be proper, after the period of limitation provided under Sections 24 and 25 has expired. The same is also hit by limitation. The power of the legislature to make an amendment, with retrospective effect, is undisputed but the requirement is that unless the same is expressed in clear language or implied, without any scope for doubt, then the amendment would only be prospective. We are of the opinion that when there is a substitution, unless the same is expressed to be prospective the Courts could always interpret it to be retrospective, looking at the scheme of the enactment, the purpose and object of the amendment, especially when the amendment by substitution, was intended at removing an obvious anomaly or correcting a blatant error or obliterating an absurdity or bringing it in consonance with any other law or the Constitution. The subject substitution which we are concerned with, relating to limitation, is not retrospective neither by reason of express words nor on grounds of intendment. Limitation, though procedural in nature, any action taken after its expiry, creates disabilities and obligations. The right accrued to an assessee, after the expiry of the period of limitation, not to be assessed or re-assessed can be meddled with only by an amendment, expressed or implied to be retrospective. Power of the legislature to make laws prospectively and retrospectively which included the subsidiary or auxilary power to validate laws - Held that:- When a particular statute is declared invalid, the legislature has the power to suitably amend the law by use of appropriate phraseology, rectifying the defects and removing the inconsistency pointed out by the Court. In that context the legislature also could validate the actions taken under the earlier statute as if the defects pointed out never existed; which cannot be termed as an incursion on the judicial power. The amendment by substitution in the present case, extending the period of limitation from 5 years to 6 years to be not applicable to those assessments which stood completed and the 5 year period for re-opening of assessment under Section 25(1) stood expired. Appeal dismissed - decided against Revenue.

  ---

• 2018 (8) TMI 1144
  Detention of goods with vehicle - demand of tax and penalty - Held that:- Indeed, the petitioner has an efficacious alternative remedy under Section 107 of the Central Goods and Service Tax Act. Nevertheless, the petitioner has agreed to provide the Bank guarantee as mandated under Rule 140 of the CGST Rules and to have the goods released, subject to the departmental proceedings now initiated through Ext.P4 series - the respondent will release the petitioner's goods on its providing the Bank guarantee for the value of the goods as mentioned in Ext.P4 - petition allowed.

  ---