Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 24, 2018
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
Highlights / Catch Notes
Income Tax
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TDS u/s 195 - Taxability of management fees paid by the appellant to UST Global - The remuneration received by the US Company for the services offered to the Indian Company being not a technical or consultancy service as defined under the DTAA, would also not be a fee for included services. - Not taxable - No TDS liability u/s 195.
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Speculative loss or not - the impugned loss falls under the proviso (d) to section 43(5) of the Act and therefore cannot be treated as speculative loss and as such the assessee is eligible to set off the impugned loss from future and option transactions against other business income earned by the assessee during the year.
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Disallowance u/s 37(1) - interest paid by the assessee u/s 30(4) of the MVAT Act, 2002 is penal in nature as it has its germane to infraction of law by the dealer while filing original return of VAT and the interest paid u/s 30(4) of MVAT Act, 2002 cannot be allowed as deduction while computing income under the head ‘Profits and Gains of Business or Profession‘
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Deduction u/s 80IB(11C) - additional income offered during survey - investment in building - excess cash found - while confirming the additions, deduction 80IB(11C) disallowed.
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Long term Capital gain (LTCG) - transfer of property under a development agreement - in the absence of any consideration received by the assessee in the impugned assessment year the assessee cannot be subjected to long term capital gain on execution of development agreement.
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Additions made by AO and agreed upon by the assessee - Even if there is an agreed addition, the admission or surrender of that income cannot operate as a estoppels and the Income Tax authorities are bound to consider and allow whatever relief is permissible under law.
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Revision u/s 263 - unexplained credits - set off of net loss from capital assets with cash credit - applicable rate of tax @30% u/s 115BBE on unexplained cash u/s 68 - order of revision confirmed since AO has allowed the excess benefit.
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Validity of assessment u/s 153A instead of u/s 153C - neither a search was initiated u/s 132 nor books of account, other documents or any assets were requisitioned u/s 132A against the assessee. - the notice U/s 153A issued to the assessee was without jurisdiction
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In case of interest income earned by an assessee, only the expenditure (not being in the nature of a capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income is to be allowed as a deduction under Sec. 57(iii)
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Nature of receipt - additions towards receipt of Corpus Fund - additions on account of Corpus contribution received by the appellant being a Trust - held as capital receipt - not liable to be taxed.
Customs
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100% EOU - customs private bonded warehouse - the action of the appellant to remove the machinery from EOU to DTA without any permission from the authorities, is incorrect and the findings reached by the lower authorities is correct - demand with penalty confirmed.
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Advance Authorization - non-fulfillment of export obligation - Since the only ground on which demand was confirmed was non-submission of EODC and the same has now been submitted by the appellant, demand set aside.
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Benefit of exemption - import of “Anesthesia Ventilatory System” - the impugned goods can be considered as ventilator used with anesthesia apparatus and eligible for the exemption claimed.
Corporate Law
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Due date for submission of DIR-3 KYC extended to 15-9-2018
Indian Laws
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Dishonor of cheque due to stop-payment - Once the accused rebutted the presumption under Section 138 of Negotiable Instruments Act, the complainant is liable to prove his case. The complainant failed to prove his case. Since, the cheques were returned on the request for stop payment and the said stop payment was not issued by the accused.
IBC
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Corporate Insolvency Resolution Process - the Company has right in the general meeting to impose restrictions and conditions which will prevail over the powers of the Board as specified in sub-section (3) of Section 179.
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Corporate Insolvency Resolution Process - failure to pay dues against purchase of material - Section 9(5)(ii)(d) of the Code provides that adjudicating authority shall reject the application if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility.
Service Tax
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BSS - Reverse charge mechanism - The activity undertaken by the Railways for granting various approvals and supervision for siding constructed by the appellant are of statutory in nature and is sovereign function of the Railways. Therefore, on that account, the appellant is not liable to pay service tax.
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Demand of Interest - Suo motto adjustment of excess service tax paid in the subsequent months - The Department should have considered the practical difficulties on account of which the appellant has devised the system of paying in advance and subsequently adjusting the excess payment - demand set aside.
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Refund of service tax paid - onstruction activity relating to villas - The residential units constructed by them were individual independent houses not covered by the definition of residential complex
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Valuation - reimbursable postage charges in sending ordinary notice, registered notice and legal notices - only with effect from May 14, 2015, by virtue of provisions of Section 67 itself, such reimbursable expenditure or cost would also form part of valuation of taxable services for charging service tax.
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Event Management Service - it is clear that the services provided to the organizers is alone covered under event management and organizing of an event is not covered. Further the Board circular categorically mentions that road shows and camps are covered under the Business Exhibition Service.
Central Excise
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SSI Exemption - dummy units - All the units are entitled to get benefit of SSI notification, there is no requirement to maintain statutory records. Once, they are not entitled to maintain statutory records, the allegation that goods were found in short and/or excess, is legally not sustainable and liable to be set aside.
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Refund of excess duty paid - price variation clause - where it was held that where there is price variation clause and the prices have been reduced subsequent to clearance, refund is admissible.
Case Laws:
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GST
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2018 (8) TMI 1267
Levy of GST on the one-time lease premium - letting plots of land on lease basis - long term lease - Held that:- Delay condoned - Issue notice, returnable in six weeks.
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Income Tax
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2018 (8) TMI 1266
Diversion of income at source - overriding title - income of assessee - Joint venture agreement - Held that:- The Special Leave Petition is dismissed on the ground of low tax effect.
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2018 (8) TMI 1265
Additions u/s 68 - huge cash has been deposited in this bank account of M/s. Amizara Securities and Finance Pvt. Ltd. from where the drafts had been issued to the assessee. Hence the conclusion of the AO was that this is nothing, but a bogus entity formed by the assessee itself. The assessee has used this name as a Private Limited company or as a proprietary concern for converting unaccounted money by depositing cash in the bank accounts of this concern and receiving funds from them. Hence, he added the amount to the income of the assessee. Held that:- No evidence being on record to suggest that the transactions of the assessee with this Private Limited Company were not genuine, the additions were deleted. After this, the Tribunal found that there was no occasion for the Revenue to raise this issue. After noting the contentions of the Revenue in this appeal, it was found that the addition has been rightly deleted and when the Commissioner returned a clear finding of fact. The finding of fact is that the transactions were genuine and the essential ingredients and element by which section 68 was invoked is hopelessly lacking. - Decided against the revenue.
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2018 (8) TMI 1264
TDS u/s 195 - Taxability of management fees paid by the appellant to UST Global - DTAA between India and USA - Fee for included services - Article 12 of the said DTAA - definition of “make available” as per the India-USA DTAA - Held that:- There can be no dispute that the income generated by the US Company under the agreement entered into with the Indian Company as remuneration for the services provided is brought within the scope of total income under Section 5(2) of the Act. The services which come under the 'included services', meaning a technical and consultancy service as understood by the DTAA, have further been elaborated in sub-clauses (a) and (b) of Clause 4 under Article 12. We are concerned with sub-clause (b) of Article 12(4), which speaks of technical knowledge, experience, skill, know-how, or processes, or consist of development and transfer of a technical plan or technical design. The same has to be read along with the MOU which has been entered into on May 15, 1989 and is a part of the notified DTAA. The MOU and the narrow definition given to 'included services' takes the services availed by the appellant herein, out of the 'included services' as per the DTAA. The non-resident Company only assists the Indian Company in making the correct decisions on such aspects as is specifically referred to in the agreement, as and when such advise is required. There is no transfer of technology or know-how, even on managerial, financial, legal or risk management aspects; which would be available for the Indian Company to be applied without the hands-on advise offered by the US Company. The advise offered on such aspects would have to be on a factual basis with respect to the problems arising at various points of time and there cannot be found any transfer of technical or other know-how to the Indian Company. The remuneration received by the US Company for the services offered to the Indian Company being not a technical or consultancy service as defined under the DTAA, would also not be a fee for included services. The remuneration so obtained by the US Company definitely being an income accruing within India would not, hence, be taxable in India under the DTAA. - Consequently no TDS liability u/s 195 AO is directed to consider the claim of expenditure afresh without looking at the application of Section 195(1), which is not applicable. - Decided in favor of assessee.
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2018 (8) TMI 1263
Stay of demand - appeal is pending before CIT(A) - Held that:- The said appeal is pending before the Appellate Authority. That does not mean that the petitioner cannot escape from the tax payable as per the orders passed by the Deputy Commissioner Income Tax dated 08.03.2017 exercising powers under section 154 of Income Tax Act. The Commissioner of Income Tax appeals is directed to dispose of the appeal pending before him on merits within ten weeks from the date of receipt of certified copy of this Order. Till such consideration of the appeal, the interim order granted by this Court shall enure to the benefit of the petitioner
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2018 (8) TMI 1262
Deduction u/s 80HH or 80HHC - Held that:- We refrain from passing any positive direction except to state the correct legal position. In fact, the assessee while challenging the assessment order before the Commissioner of Income Tax (Appeals), in the memorandum of grounds, has specifically stated that the Assessing Officer erred in not granting proper deduction under Section 80HHC of the Act and in particular, the Assessing Officer is not right in excluding exchange gain of ₹ 2,58,204/- from export turnover and DEPB of ₹ 36,48,697/- in computing Profits of the Business. The tax case appeal is allowed and the order passed by the Tribunal is set aside. Consequently, the order passed by the Commissioner of Income-tax (Appeals) is set aside and the matter is remanded to the Assessing Officer to apply the decision in the case of CIT v. Avani Exports (2015 (4) TMI 193 - SUPREME COURT) and proceed to grant proper deduction to the assessee under Section 80HHC of the Act. - Decided in favor of assessee.
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2018 (8) TMI 1261
Levy of penalty u/s 271 - validity of notice issued u/s 274 - The notice sent in a printed form without mentioning the grounds - ITAT dismissed the appeal on the ground of delay - Held that:- the petitioner has made out a case that his case falls under exceptional category for exercising power under Articles 226 and 227 of the Constitution of India to interfere with the order passed by the Tribunal dismissing the Misc. Petition only on the ground of delay. In view of the aforesaid reasons, the writ petition is allowed. The impugned order passed by the Income Tax Appellate Tribunal dismissing the Misc. Petition on the ground of delay is hereby quashed. - ITAT directed to decide the issue on merit.
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2018 (8) TMI 1260
Speculative loss or not - loss incurred by the assessee on Future & Option Transactions - Held that:- In the given circumstances justice needs to be given in favour of the assessee and we therefore respectfully following the judgment of Hon'ble High Court of Calcutta in the case of CIT V/s Asian Financial Services Ltd (2016 (3) TMI 685 - CALCUTTA HIGH COURT) as well as the decision of Coordinate Bench of Delhi in the case of Sucon India Ltd V/s ACIT (2017 (2) TMI 723 - ITAT DELHI) are of the considered view that the loss incurred by the assessee on account of future and option transactions entered during the year cannot be termed as speculation loss in view of the explanation to section 73 of the Act. We further held that the impugned loss falls under the proviso (d) to section 43(5) of the Act and therefore cannot be treated as speculative loss and as such the assessee is eligible to set off the impugned loss from future and option transactions against other business income earned by the assessee during the year. Decided in favorof assessee.
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2018 (8) TMI 1259
Disallowance u/s 37(1) towards VAT paid as alleged penalty for violation of law - penalty levied by the Sales Tax Department for violation of law - whether this interest payable u/s 30(2) and 30(4) of MVAT Act, 2002 is compensatory or penal in nature. - Held that:- after going through the relevant provisions of the MVAT Act, 2002 and other material on record, we have no hesitation to hold that interest paid by the assessee u/s 30(4) of the MVAT Act, 2002 is penal in nature as it has its germane to infraction of law by the dealer while filing original return of VAT and the interest paid u/s 30(4) of MVAT Act, 2002 cannot be allowed as deduction while computing income under the head ‘Profits and Gains of Business or Profession‘ keeping in view Explanation 1 to Section 37(1) of the 1961 Act. The AO is directed to bifurcate the payments as between interest paid by the assessee u/s 30(2) and 30(4) of the MVAT Act, 2002 respectively and allow interest paid u/s 30(2) of MVAT Act, 2002 as deduction from income computed under the head ‘Profits and Gains of Business or Profession‘ , while interest paid by the assessee u/s 30(4) of MVAT Act, 2002 shall be disallowed while computing income chargeable to tax under the head ‘Profits and Gains of Business or Profession‘. - Decided partly in favor of revenue. Disallowance u/s 14A r.w.r. 8D - assessee did not earned exempt income during the year - Held that:- if no exempt income is earned by the assessee during the previous year relevant to the impugned assessment year , no disallowance u/s 14A of the 1961 Act is called for - Decided against the revenue.
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2018 (8) TMI 1258
Transfer pricing adjustment - Receipt of business support services - The assessee applied Transactional Net Margin Method (TNMM) for demonstrating that this international transaction was at ALP. In order to benchmark this transaction, the assessee selected its foreign AE as tested party and chose foreign comparables. The assessee segregated services availed under twelve heads, which have been set out on pages 5 and 6 of the TPO’s order. - TPO rejected the claim of assessee. Held that:- the assessee furnished some evidence in support of some of the services, though such evidence was not complete as has been recorded by the TPO in respect of other services, such as, Controllers, Corporate Law, Procurement, Treasury and Business Advisory. Thus, the international transaction of receipt of services entered into by the assessee with its AEs prima facie does not appear to be bogus, at least to some extent for which evidence was furnished. It is found that the TPO rejected the TNMM as applied by the assessee and stated to have applied the CUP method for determining the ALP of the international transaction of receipt of intra-group services. While applying the CUP method, it was obligatory upon him to bring on record some comparable uncontrolled instances availing similar services as per the mandate of rule 10B(1)(a)(i). Not even a single comparable case has been brought on record to facilitate a comparison between the price for the services availed by the assessee vis-à-vis that paid by other comparables in similar circumstances. The matter is remitted to the file of AO/TPO for determining the ALP of the international transaction of ‘Receipt of business support services’ de novo as per law after allowing a reasonable opportunity of hearing to the assessee.
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2018 (8) TMI 1257
Rejection of registration u/s. 12AA - educational institution - CIT(E) observed that the assessee was filing return in ITR-5 instead of ITR-7 and losses were being carried forward as per section 72 and the Society started profit from assessment year 2014-15 and 2015-16. Thereafter, he applied registration u/s. 12AA. - Held that:- CIT(E) has rejected the registration application without complete examination of the activities of the assessee society as per section 12AA of the Act. While going through the audit report submitted by the Chartered Accountant in Form No. 3CD for assessment years 2013-14, 2014-15 and 2015-16, we find that the assessee-society is running computer training/educational and coaching Institutes. We also noted from the income and expenditure account that the society has received discount in all the three years. Matter remanded back to CIT(E) to examine the activities of the assessee de novo as per provisions of section 12AA r.w.s. 2(15) to ascertain whether the activities of the assessee society are within the objects of the society and whether the activities carried out by the assessee are charitable in nature or not. - Decided in favor of assessee.
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2018 (8) TMI 1256
Protective assessment u/s 153A r.w.s 143 - amounts received from Free Trade Union Multipurpose Trust (FTUMPT) - appellant was assessed to tax u/s 44AD of the Act - Held that:- once substantive addition made in the case of alleged beneficiary has been deleted by the ITAT, there is no reason to sustain addition made by the AO towards protective addition in the hands of the assessee more particularly, when assessee has demonstrated with evidence that such receipt has been part of his income-tax returns and also he has carried out necessary repair works to the trust. - Additions deleted - Decided in favor of assessee. Additions u/s 68 - unexplained cash deposits found in two bank accounts - Additions on the ground that there are huge credits in two bank accounts for which the assessee has not filed any explanation to prove sources of income. - Held that:- the assessee has filed paper book containing bank statements of two proprietory concerns and bank statements of savings bank account maintained in Bharat co-operative Bank Ltd, Kalina Branch and ICICI Bank, Vile Parle (E) Branch to explain credits found in bank accounts with corresponding withdrawals from other bank accounts, but fact remains that the assessee has not filed a chart explaining date-wise credit found in two bank accounts and corresponding withdrawals from two proprietory concerns’bank accounts. - Matter remanded back to the file of AO for examination of facts.
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2018 (8) TMI 1255
Disallowance u/s 36(1)(iii) - assessee has given interest free advances to its subsidiary company - related party covered under s.40A(2)(b) - Held that:- The assessee has own funds (interest free) which is nearly six times of the corresponding interest free advances. Thus, on facts presumption required to be drawn in favour of the assessee that interest free investment in sister concern is utilized out of own funds. - CIT(A) has corrected deleted the additions - Decided against the revenue. Allowability of set off of MAT credit - Held that:- The co-ordinate bench thus took a view that for the purposes of tax credit under s.115JAA of the Act, tax would include surcharge and education cess. In parity, we hold identically. - Decided against the revenue.
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2018 (8) TMI 1254
Additions u/s 68 - unexplained cash found in the suitcase while travelling in train - assumption and presumption - Held that:- The authorities have acted merely on suspicion. On the contrary, the father-in-law of the assessee has categorically owned up the money. The authorities below without appreciating the evidences submitted by the father-in-law of the assessee, proceeded to make addition and confirmed the same. The Ld. Counsel for the assessee has taken us through various documents demonstrating that wife of the assessee was in process of purchasing a property. It is also on record that father-in-law of the assessee was having sufficient money to give such gift to his daughter. - Additions so made deleted - Decided in favor of assessee.
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2018 (8) TMI 1253
Deduction u/s 80IB(11C) - additional income offered during survey - investment in building - excess cash found - additions for non deduction of TDS on security expenses, AMC charges and Medical and Surgical expenditure - Held that:- Merely stating that this amount pertains to the receipts from hospital would not absolve the assessee from the burden to prove that these amounts were part of the receipts from the hospital. The assessee has not placed any second material suggesting that the amount pertained to the receipts from hospital. - while confirming the additions, deduction 80IB(11C) disallowed.
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2018 (8) TMI 1252
Genuineness of expenditure - making charges of gold ornaments - Assessee contended that, AO has disallowed 53% of the total expenditure and adopted the minimum rate of ₹ 82/- per gram against average making charges of ₹ 166.66/- per gram which is highly unreasonable and arbitrative. - The CIT(A) adopted the rate of ₹ 140/- per gram against the average price paid to local smiths at ₹ 166/- per gram. - Held that:- considering the facts and merits of the case we are of the considered opinion that adopting the rate of ₹ 150/- per gram as average would be fair and reasonable to meet the ends of justice - Decided partly in favor of assessee. Additions u/s 68 - purchase of jewellery from Veer Jewellers - unexplained cash credit - AO observed that no prudent person would involve in such a huge transaction around ₹ 81.00 lakhs in a casual manner and return the precious metal without obtaining the proper receipt. - Held that:- The assessee explained that both the stock and liability was declared in the books of accounts, hence no case for making the addition. No other evidence was brought on record by the revenue to controvert the submission made by the assessee with regard to admission of stocks as well as the liability in the assessee’s books of accounts.. Since the liability as well as the stock are declared and continued in the books of accounts, there was no under assessment, and there was no bogus liability to make the addition. - Decided in favor of assessee.
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2018 (8) TMI 1251
Exemption u/s 10AA - primary conditions of eligibility - continuation of the old business - Held that:- assessee has established an independent unit in the SEZ at Andheri to carry out manufacture and export of plain and studded golden and silver jewellery and started commercial production from A.Y. 2006-07 onwards. - AO was incorrect in denying the benefit of deduction claimed under Section 10AA of the Act. - Decided against the revenue. Deemed dividend - additions u/s. 2(22)(e) r.w.s. 56 - loans and advances received from the two lender companies - It is the claim of the assessee that the loans and advances received from the above two companies are normal business transactions in the nature of intercorporte loans and hence the AO was erred in applying the provisions of Section 2(22)(e) - Held that:- In this case the undisputed fact is that common shareholders having substantial share holding in assessee company as well as lender companies. Therefore we are of the view that the loans and advances received by the assessee from the two companies comes within the ambit of provisions of Section 2(22)(e) of the Act. - Additions confirmed - Decided in favor of revenue.
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2018 (8) TMI 1250
Depreciation claim on leased assets u/s 32 - Held that:- following the decision for earlier year, claim of depreciation allowed, Decided in favor of assessee. Disallowance u/s 14A - Held that:- when own funds in the form of share capital and reserves is in excess of amount invested in shares and securities which yielded exempt income, then no disallowance can be made towards interest expenditure u/s 14A of the Act. Claim of bad debts - Any amount of loan outstanding in respect of bill discounting - money lent in the ordinary course of business of banking or money lending - fulfilling the conditions prescribed u/s 36(1)(iii) and 36(2) - Held that:- The CIT(A), after considering relevant submissions of the assessee has rightly deleted addition made by the AO. - Decided against the revenue. Higher rate of depreciation @40% instead of 25% - assets being motor lorries, motor buses and motor taxis - Held that:- leasing out of the trucks by the assessee to others for consideration amounts to running the same on hire and will entitle to claim for higher depreciation. - Claim of the assessee allowed. Addition of late payment compensation charges on non performing assets. - the assessee is following method of accounting whereby it is accounting interest and late payment charges on NPAs on accrual basis; however, for the purpose of taxation, the same is considered on receipt basis - Held that:- AO has made addition towards late payment compensation charges on accrual basis and also made similar addition on said charges on receipt basis in the subsequent financial years. Since we have already directed the AO to make addition towards late payment compensation charges on receipt basis in the year of receipt of such charges, addition made on accrual basis in the impugned assessment year is directed to be deleted. However, the fact with regard to the claim of the assessee that it has offered to tax such charges on receipt basis in AY 2002-03 are not clear from the orders of the lower authorities. - Mattered remanded back for verification. Decided partly in favor of assessee.
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2018 (8) TMI 1249
Long term Capital gain (LTCG) - transfer of property under a development agreement - assessment year in which taxable - as per the agreement developer will complete the project within 18 months and in return the developer will hand over 35% of the residential area of the project. - Held that:- So, until the project comes into existence it cannot be said that the consideration, which the assessee is to receive in terms of the development agreement exists. That being the case, in the absence of any consideration received by the assessee in the impugned assessment year the assessee cannot be subjected to long term capital gain on execution of development agreement. The assessee cannot be charged to long term capital gain in the impugned assessment year. Hence, the addition made on account of long term capital gain is deleted. - Decided in favor of assessee.
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2018 (8) TMI 1248
Additions made by AO confirmed by the CIT(A) - discrepancy in books of accounts - According to the AO, during the course of assessment proceedings he himself vide letter dated 28/12/2010 agreed for an addition of ₹ 60 lakhs to cover up the deficiencies as pointed by the AO for various entries. - the consent given by the assessee cannot be applied as a Doctrine of estoppels against the assessee and the assessee has a legal right to challenge the assessment order before the appellate authority. Held that:- Justice should not be denied on account of lapses in procedural compliances. Sec. 246 does not lay down that an appeal against the addition of a surrendered amount per se would be disentitled. Even if there is an agreed addition, the admission or surrender of that income cannot operate as a estoppels and the Income Tax authorities are bound to consider and allow whatever relief is permissible under law. The assessee had himself agreed for addition of ₹ 60 lakhs, the CIT(A) refused to take up the appeal on merits. Since the assessee was trying to put forward supporting evidences before the CIT(A), in that circumstances, it was appropriate for the CIT(A) to call for remand report from the Assessing Officer and to decide the matter afresh. Merely because the assessee failed to file his objections to the variation suggested in the notice under section 144B, it cannot be said that the assessment ceases to be an assessment under section 143(3). Hence, the assessee can file an appeal against the assessment before the Appellate Assistant Commissioner in spite of his failure to file objections to the draft assessment order under section 144B - Matter restored before AO - Decided in favor of assessee. Additions u/s 68 - proving source of cash credits - Held that:- If the assessee files only confirmation letters and offers no explanation regarding the nature and source thereof, the explanation offered by the assessee cannot be considered as satisfactorily explained before the AO. Then the sum so credited is to be treated as unexplained credits. In the present case, though the amount was contributed by the partners as their capital introduction, only confirmation letters from the partners cannot prove all the ingredients of section 68 of the Act and it will only prove the identity of the lenders. Matter remanded back to AO - Decided partly in favor of assessee.
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2018 (8) TMI 1247
Revision u/s 263 - unexplained credits - set off of net loss from capital assets with cash credit - applicable rate of tax @30% u/s 115BBE on unexplained cash u/s 68 - eligibility for set off of brought forward business loss and unabsorbed depreciation - Held that:- The assessee has treated the unexplained credit to the tune of ₹ 1.86 crores which was credited to the capital account as unexplained income u/s. 68 of the Act and thereafter, set off the net business loss of ₹ 1,76,24,221/- against that unexplained income. - As such, the AO allowed excess relief to the assessee which is prejudicial to the interest of the Revenue. In other words, the failure on the part of the AO to make necessary enquiry rendered the assessment order erroneous which also resulted in allowing excess relief which rendered the assessment order prejudicial to the interest of the revenue. As such, the CIT remitted the issue back to the file of the AO to examine the issue afresh. Treatment of unexplained cash as business income or income from other sources - Held that:- the assessee has not proved the source of unexplained credit, the identity, capacity, genuineness and credit worthiness of the transactions in question and further, it has also not shown the amount in its duly audited accounts as its business income. This leads to the inference that once the assessee has not shown the receipt as its business income, there is no reason as to how the accounting treatment given by the assessee can be overruled by the authorities. Therefore, in our opinion, the aforesaid case law is not applicable in the assessee's case. We are unable to hold that unexplained cash credits assessed under section 68 are to be assessed as income from other sources under section 56. Decided against the assessee.
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2018 (8) TMI 1246
Validity of assessment u/s 153A instead of u/s 153C - Levy of penalty u/s 271AAB - alleged documents found from search action on other person - Held that:- neither a search was initiated under section 132 nor books of account, other documents or any assets were requisitioned under section 132A against the assessee. - the notice U/s 153A dated 24/07/2015 issued to the assessee was without jurisdiction and consequently entire assessment proceedings were void and illegal ab-initio. The assessment is, thus, quashed.
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2018 (8) TMI 1245
Nature of receipt - additions towards receipt of Corpus Fund - additions on account of Corpus contribution received by the appellant being a Trust - revenue receipt or capital receipt - Exemption u/s 11 - Trust was not registered u/s. 12A - Held that:- The amount was received by the assessee towards corpus fund with a specific purpose of allocating such funds for different welfare activities. The assessee had at no stage sought exclusion of the amounts received by it towards corpus fund from the scope of its total income by invoking the provisions contemplated under Sec. 11(1)(d) of the Act. Rather, the contention of the assessee before the lower authorities as well as before us was that the registration of a trust under Sec. 12A would not change the character of the receipt in its hands. On a perusal of the trust deed, it emerges that as the main object of the assessee trust was not for the benefit of the general public, but was solely dedicated for the welfare of the retired employees of the bank, thus, the same could not be held as a charitable trust as contemplated under Sec.2(15) of the Act. As the amount of ₹ 2,30,00,000/- received by the assessee trust from Bank of India towards corpus fund is in the nature of a ‘capital receipt’, therefore, the same could not have been brought to tax as the income of the assessee under Sec. 2(24)(iia) of the Act. - Decided in favor of assessee. Claim of expenditure against interest income u/s 57 - Held that:- in case of interest income earned by an assessee, only the expenditure (not being in the nature of a capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income is to be allowed as a deduction under Sec. 57(iii) of the Act. - as the expenditure of 3,09,78,345.30, viz. (i) D-mat charges of ₹ 386/- ; (ii) Legal expenses of ₹ 11,236/-; and (iii) Medical Relief Expenses ₹ 3,09,66,723/- incurred by the assessee cannot be construed as having been laid out or expended wholly and exclusively for the purpose of making or earning of the interest income on the aforesaid FDR’s and bank account of the assessee, therefore, the same cannot be allowed as a deduction as against the interest income of the assessee. - Decided against the assessee.
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2018 (8) TMI 1244
Deduction u/s 54B - capital gains arising on sale of agricultural land - The assessee has neither acquired the new asset (agricultural land) nor deposited the amount of capital gain in the specified bank account within the due date of filing of return of income under s.139(1) - belated return was filed u/s 139(4) - Held that:- when an assessee furnishes return subsequent to due date of filing return under s.139(1) but within the extended time limit under s.139(4), the benefit of investment made up to the date of furnishing of return of income prior to filing return under s.139(4) cannot be denied on such beneficial construction. On the basis of legal principles set out above, the assessee would be required to demonstrate before the AO that the investment in the new asset has actually happened before furnishing of return of income by the assessee under s.139(4) of the Act on 24.02.2014. The AO shall grant relief to the assessee under s.54B of the Act in accordance with law, where it is found that the investment has been carried out in the new asset as contemplated in Section 54B before the date of furnishing belated return of income under s.139(4) of the Act. - Matter remanded back - Decided in favor of assessee ex parte for statistical purposes.
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Customs
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2018 (8) TMI 1243
Merchandise Exports From India Scheme (MEIS) - independent application of mind - Held that:- There is no independent application of mind for this second respondent has been forwarding to the petitioner the letters from the Customs. The petitioner says that there is no linkage with what is alleged to be a wrongful and illegal act and subject matter of an investigation and thereafter, the show cause by the Customs. The petitioner says that a specific order should be passed after hearing the petitioner so that the petitioner can challenge it by urging that there is no mandate to withhold, suspend or cancel the benefits merely because of an investigation or a pending show cause notice. The jurisdictional Central GST and Central Excise Officers cannot issue a command of the nature relied upon by this authority, according to the petitioner to withhold the benefits. Petition disposed off.
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2018 (8) TMI 1242
100% EOU - customs private bonded warehouse - whether the appellant has violated the Provisions of Section 58 of the Customs Act, 1962 read with Notification No. 52/2003 -CUS in relation to capital goods which were imported without payment of duty? Held that:- There is no dispute that the capital goods which were imported without payment of duty claiming the benefit of Notification No. 52/2003 were transferred out of the EOU after their importation and bonding in the EOU. Though, there is a claim of the appellant the machinery was not installed in DTA unit, it is a finding of the Adjudicating Authority that the machinery was installed and used for the manufacture of the goods in DTA unit - Both the Lower Authorities have recorded a concurrent finding and the machinery which were imported by claiming the exemption for installation in EOU, were not installed, were found in DTA. Appellant was not able to produce any documents to show that they done so by seeking the permission of the Revenue Authorities. In the absence of any such evidence, the action of the appellant to remove the machinery from EOU to DTA without any permission from the authorities, is incorrect and the findings reached by the lower authorities is correct - also, penalties imposed by First Appellate Authority are appropriate. Appeal dismissed - decided against appellant.
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2018 (8) TMI 1241
Advance Authorization - non-fulfillment of export obligation - appellant has failed to produce the required EODC showing that they have fulfilled the export obligation - Held that:- The appellant has completed the export obligation which has been certified in the letter issued by the DGFT - Since the only ground on which demand was confirmed was non-submission of EODC and the same has now been submitted by the appellant. In view of this redemption letter, the impugned order is not sustainable in law - appeal allowed - decided in favor of appellant.
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2018 (8) TMI 1240
Misdeclaration of imported goods - import of used Toyota Landcruiser, Model 2005 - rejection of transaction value - enhancement of value - quantum of redemption fine and penalty - Held that:- Department has made out a good case for rejection of the transaction value for the reasons that there was differences in the Bill of Lading and invoice whereas the invoice was issued by M/s. World Wide Motors, Dubai, UAI on 08/11/2009. The Bill of Lading dt. 29/12/2009 showed the shipper to be one Mrs. T. William, Dial House, West Midlands, UK and the port of loading to be Felixstone and port of discharge as Cochin - Department was in its right to recourse the Rule 9 of the Customs Valuation Rules, 2007. Having established the fact of wrong description, the burden has shifted to the importer in the absence of any documentary evidence to substantiate the correctness or otherwise of the invoice, valuation under Rule 9 is quite acceptable - It is seen that the Department has placed reliance on the list price as is available on the internet from Toyota UK since the car was imported from UK, it was obvious that the Department has taken the listed prices from the UK website. Due discount of depreciation was allowed to arrived at the value of the car at the time of import. Quantum of redemption fine and penalty reduced - appeal allowed in part.
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2018 (8) TMI 1239
Benefit of N/N. 21/2002 Cus. dated 01.03.2002 (Sl. No. 363 (A) - imported “Anesthesia Ventilatory System” - denial of benefit of the said Notification and assessed the goods on merits under Chapter Heading 90192090 as “Anesthesia Apparatus and instruments” - Held that:- Identical issue decided in favor of appellants in the case of CC (I&G), New Delhi Vs. Datex Ohmeda (India) Ltd [2009 (3) TMI 161 - CESTAT, NEW DELHI], where it was held that the impugned goods can be considered as ventilator used with anesthesia apparatus and eligible for the exemption claimed. The appellant will be entitled to grant the benefit of the Notification - appeal allowed - decided in favor of appellant.
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Insolvency & Bankruptcy
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2018 (8) TMI 1270
Corporate Insolvency Resolution Process - Whether it is mandatory for the ‘Board of Directors’ to place the proposal before the shareholders in the ‘Extra Ordinary General Meeting’ (EoGM) before moving an application under Section 10 of the ‘I&B Code’ for initiation of ‘Corporate Insolvency Resolution Process’ against the Company itself - violation of the provisions of the’ Articles of Association’ of the Company and other provisions of law. Held that:- the Company has right in the general meeting to impose restrictions and conditions which will prevail over the powers of the Board as specified in sub-section (3) of Section 179. the ‘Board of Directors’ of a Company is not empowered to file an application under Section 10 for its own liquidation or dissolution or ‘Corporate Insolvency Resolution Process’. For the said reason, the application under Section 10 filed by the Board of Directors was not maintainable. The argument that Section 59 of the ‘I&B Code’ is the only provision for liquidation, cannot be accepted as initiation of ‘Corporate Insolvency Resolution Process’ by the Company (‘Corporate Debtor’) against itself under Section 10 may result into its own liquidation. If the ‘Resolution Process’ starts and ultimately fails because of non-approval of the ‘Resolution Plan’, at that stage provisions of ‘Articles of Association’ cannot be given effect nor the approval of the shareholders can be taken. In effect, order (s), passed by the Adjudicating Authority appointing any ‘Interim Resolution Professional’, declaring moratorium, freezing of account, and all other order (s) passed by the Adjudicating Authority pursuant to impugned order and action, if any, taken by the ‘Interim Resolution Professional’, including the advertisement, if any, published in the newspaper calling for applications all such orders and actions are declared illegal and are set aside. The application preferred under Section 10 of the I&B Code, 2016 is dismissed.
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2018 (8) TMI 1269
Corporate Insolvency Resolution Process - objections raised by the Corporate Debtor - according to learned counsel for the appellant, the respondent do not come within the meaning of ‘financial creditor’ as defined under section 5(7)&(8) of the I & B Code. - Held that:- What is in dispute is the debt as claimed, which is not clear as to whether such amount is payable pursuant to such agreement. Thus, there being a dispute about the claim arising out of a particular agreement, and as the respondents have not made it clear that as to against which agreement Rupees Five Crore has been adjusted, we are of the view that it was not a fit case for initiation of corporate insolvency resolution process under section 7, and parties should have been allowed to move before a Court of competent jurisdiction for appropriate relief. For the reasons aforesaid we have no other option but to set aside the impugned order dated 5th January, 2018. In effect, order (s), passed by the Adjudicating Authority appointing ‘Resolution Professional’, declaring moratorium, freezing of account, and all other order (s) passed by the Adjudicating Authority pursuant to impugned order and action taken by the ‘Resolution Professional’, including the advertisement published in the newspaper calling for applications all such orders and actions are declared illegal and are set aside. The ‘Corporate Debtor’ (company) is released from all the rigour of law and is allowed to function independently through its Board of Directors from immediate effect.
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2018 (8) TMI 1268
Corporate Insolvency Resolution Process - failure to pay dues against purchase of material - Held that:- A bare perusal of the e-mails clearly shows that there is a pending dispute regarding defects and delay caused in supply of goods between the parties since October, 2015, which is much before the issuance of demand notice by applicant. In the present case the respondent has raised evidence of an existing dispute along with sufficient particulars. The case records reveal that there was existence of dispute much prior to the issuance of notice under Section 8 of the Code. The claim of the dispute suggests the need for elaborate investigation. The moment there is existence of such a pre-existing dispute, the corporate debtor gets out of the clutches of the Code. In the facts of the case we are satisfied that a dispute truly exists much prior to the issuance of Section 8 notice. Not only there is a pre-existing dispute but also the respondent company in its reply to the Section 8 notice has clearly communicated to the applicant the fact of ‘existence of dispute’. Section 9(5)(ii)(d) of the Code provides that adjudicating authority shall reject the application if notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility. Present petition fails and the same is rejected.
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Service Tax
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2018 (8) TMI 1233
Penalty for failure to timely depositing the service tax on the professional services - delay due to ill-health of the mother of the assessee’s partner, which was not considered as reasonable cause by the Tribunal - Held that:- As to in what circumstances such family reasons will be reasonable cause or not would depend upon the facts of each case and therefore, unless the relevant details are discussed, the Tribunal could not have brushed aside these reasons by one liner, especially when the Division Bench decision of the Tribunal in almost similar circumstances on account of cancer of the father of the proprietor of the service provider firm, the Division Bench set aside the penalty in the aforesaid case of Raj Kumar Ora [2009 (2) TMI 36 - CESTAT, NEW DELHI] - the matter deserves to be reconsidered by the Tribunal in the facts and circumstances of the case - appeal allowed by way of remand.
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2018 (8) TMI 1232
GTA Services - short payment/non payment of service tax - Held that:- The order passed by the learned Tribunal in the present case, does not give proper and detailed fin dings of facts, nor does it discuss the various amendments of law in this regard and their applicability, of the same to the facts and circumstances of the case - The learned Tribunal has essentially relied upon the speech of the Finance Minister delivered in the Parliament in the year 2004 only, for holding that the present appellant/assessee was not liable to pay service tax for the aforesaid period, without discussing the relevant provisions of law and the notifications. The matter deserves to be remanded back to the learned Tribunal for decision afresh in accordance with law - appeal allowed by way of remand.
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2018 (8) TMI 1231
Commercial training or coaching service - educational institution - It is the specific case of the petitioner that he is running an educational institution and is not liable to pay any Service Tax - inordinate gap between the show cause notice and the impugned order - opportunity of personal hearing - Held that:- From the date of issue of show cause notice in the year 2008 till the date of impugned order, there is an inordinate delay of 8 years. The same is not explained in the impugned order. Though the same is sought to be justified in the objection statement at paragraph-1 8, but when the impugned order does not reflect the reasons for the delay, the same cannot be taken into consideration merely because it is mentioned in the objection. The fact remains that from the date of issue show cause notice and impugned order, there is a gap of 8 years. Same is un- explained and there is no reasons assigned in the impugned order. In view of the inordinate gap between the show cause notice and the impugned order, the Commissioner was not justified in passing the impugned order without providing proper opportunity of personal hearing. Matter is remanded to the to the Principal Commissioner of Service Tax, Bengaluru for fresh adjudication in accordance with law - petition allowed by way of remand.
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2018 (8) TMI 1230
CENVAT Credit - Rule 5 of CCR - Whether the CESTAT, Principal Bench, New Delhi under its order dated 11th April, 2013 is right in arriving at the conclusion that the assessee was required to be treated as Output Service Provider and, therefore, was entitled to have relaxation of CENVAT credit irrespective of the provisions of Rule 5 of the Rules of 2006?” Held that:- Though, Counsel for the appellant has tried to raise point that the Cenvat credit will be available not only for unutilized credit, however, the same point was not placed before the first authority - the observation made by the Tribunal treating the appellant as 'Output Service Provider' is correct. Appeal dismissed - decided against appellant.
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2018 (8) TMI 1229
Liability of service tax - gross amount of commission received by the distributors - Whether the appellant being distributors of Amway India Enterprise Pvt. Ltd. is liable to pay the service tax on the gross amount of commission received by the distributors? Held that:- The very same issue has been considered in receipt of number of distributors by Delhi Bench in the case of Charanjeet Singh Khanuja Vs. CST, Indore/ Lucknow/ Jaipur/ Ludhiyana [2015 (6) TMI 585 - CESTAT NEW DELHI], wherein the principle was laid down that which commission will attract the service tax and which will not, since the demand made on the consolidated amount, for the purpose of verification and re-quantification, the matter was remanded to the adjudicating authority. Following the judgement, the impugned order is also set aside and matter remanded to the adjudicating authority to pass a fresh order on the line of observation made in the case of Charanjeet Singh Khanuja - appeal allowed by way of remand.
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2018 (8) TMI 1228
Business Support services - Reverse charge mechanism - Revenue was of the view that appellant was required to pay service tax on the services received from the Railways for construction of siding from Sarai Banjara railway station to Thermal Power Plant under the category of Support services under reverse charge mechanism. Held that:- Railways includes siding also for transportation of public carriage of passengers or goods - Admittedly, in the case in hand, the siding has been required to be constructed for transportation of coal upto the plant of the appellant. Therefore, the siding in question is covered under the definition of Railways. As per Section 21 of the Railways Act, certain sanctions are required for construction of that siding and Section 22 and 23 provide various formalities to be complied with. Therefore, the Railway is required to construct the siding and have to supervise the same and the said properties of railways cannot be interfered by anybody else. In the case in hand, the appellant themselves have constructed the siding under the supervision of the Railways. Therefore, they are required to make payment of mandatory departmental chares, cost of OHE work and D&G charges. It is not disputed that all these charges have been paid by the appellant for various approvals and supervisions by the Railways for construction of siding by the appellant. The said execution of such work cannot be done without mandatory approvals and supervisions by the railways. In that circumstances, in terms of CBEC Education guide 2012, TRU Circular dated 20.06.2012, the services in question cannot be termed as Support Services under Section 65B of the Finance Act, 1994. The activity undertaken by the Railways for granting various approvals and supervision for siding constructed by the appellant are of statutory in nature and is sovereign function of the Railways. Therefore, on that account, the appellant is not liable to pay service tax. Also, the granting of approvals and supervision are in relation to the Railways which is exempted from payment of service tax under N/N. 25/2012- ST dated 20.06.2012 at Serial No. 14A - appellant are not liable to pay service tax. Appeal allowed - decided in favor of appellant.
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2018 (8) TMI 1227
Works Contract Service - Commercial or Industrial Construction services - it was a contention of the appellant construction contract supply and services would fall under works contract services that they have paid VAT on the works contract services - penalties - Held that:- The period involved in this case is post 01.06.2007 - In the adjudication order that there is no dispute as to the facts that the contracts which were executed by the appellant/assessee during the period in question were works contract. Since the issue involved is regarding the works contract prevailing the same in the various services. The issue is no more res integra as per the judgment of the Apex Court in the case of Larsen & Tourbo Ltd. [2015 (8) TMI 749 - SUPREME COURT], where it was held that Works contract were not chargeable to service tax prior to 1.6.2007. Non-imposition of penalties - Revenue argued on the non-imposition of penalties - Held that:- Since we have already allowed the assessee’s appeal on merits, there are no merits in the appeal filed by the Revenue. Appeal allowed - decided in favor of assessee.
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2018 (8) TMI 1226
Maintenance or repair services - Reverse Charge Mechanism - appellant has paid an amount to their holding company for maintenance of SAP computer software system - period from 01.01.2005 to 18.04.2006 - Held that:- This law is now settled by the Apex Court in the case of Indian National Ship Owners Association [2009 (12) TMI 850 - SUPREME COURT OF INDIA] by holding that before enactment of Sec.66A, there was no authority vested with the Government to levy service tax on the amounts paid for services received from outside India - for the period from 01.01.2005 to 18.04.2006, service tax liability would not arise on appellant under reverse charge mechanism. Post 18.04.2006 - for the period in question, i.e., 19.04.2006 to 31.05.2007, the demand has been raised under maintenance or repair services, the reasoning given by adjudicating authority is that software maintenance is also a maintenance of goods - Held that:- The explanation which was added to bring into tax net, the computer software as goods was held to be effective from 01.06.2007 only - In the case in hand, it is submitted and not disputed by the revenue that from 01.06.2007 appellant has started discharging appropriate Service Tax liability on the payments made by them under reverse charge mechanism - period post 19.04.2006 to 31.05.2007; the demands confirmed by the adjudicating authority are unsustainable and liable to be set aside. Appeal allowed - decided in favor of appellant.
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2018 (8) TMI 1225
Business Auxiliary Service - it was alleged that the activities undertaken for the promotion of the business of others would fall under the category of 'Business Auxiliary Service' which is a taxable service w.e.f. 01/07/2003. Held that:- The services rendered by the appellant do not fall in the definition of BAS as it existed during the relevant time - Also, the appellant is only getting an incentive for booking the space in the ship as per the requirements of the shipper and he is getting only brokerage from the steamer line or steamer agent which is nothing but a business incentive / commission - This issue has been considered by the Tribunal in the case of AVR Cargo Agency Pvt. Ltd. [2018 (6) TMI 524 - CESTAT CHENNAI], where it was held that the commission received from the airlines prior to 10.9.2004 cannot be subjected to service tax under Business Auxiliary Service. Appeal allowed - decided in favor of appellant.
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2018 (8) TMI 1224
Demand of Interest - Suo motto adjustment of excess service tax paid in the subsequent months - Section 11B of the Central Excise Act read with Section 83 of Finance Act, 1994 - Held that:- It is an admitted fact that the appellant on account of practical difficulties, paid the service tax in advance. Further, the BSNL is a Government owned company and the subscriber cannot be made to pay the service tax directly to the registration office but the payment is to be routed through the Customer Service Centres - in the present case, it was the excess payment which was made and the same was adjustment during the subsequent months but the Department raised the objection that the same Cannot be and therefore the Department is asking for the interest for the period until it becomes proper payment by way of sanction of refunds. The Department should have considered the practical difficulties on account of which the appellant has devised the system of paying in advance and subsequently adjusting the excess payment and we do not find any infirmity in the procedure followed by the appellant and the Department has also not raised objection from the very beginning. The impugned order demanding interest is not sustainable in law - appeal allowed - decided in favor of appellant.
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2018 (8) TMI 1223
Refund of service tax paid - refund claimed on the ground that service do not constitute a residential complex chargeable to service tax - whether the construction activity relating to villas undertaken by the appellants comes under the construction of residential complex service? - Held that:- It is clear that construction of residential complex having not more than 12 residential units is not to be taxed. For the levy to be applicable it should be residential complex comprising of more than 12 residential units - In the instant case, the appellants constructed individual residential house, each being a residential unit - It is also brought on record that the plan of each of the building has been approved by the municipal authorities separately. The residential units constructed by them were individual independent houses not covered by the definition of residential complex - appeal allowed - decided in favor of appellant.
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2018 (8) TMI 1222
Banking and Other Financial Services - reimbursable postage charges in sending ordinary notice, registered notice and legal notices - Held that:- The issue is squarely settled in favour of the appellants in the case of UOI vs. Intercontinental Consultants and Technocrats Pvt. Ltd. [2018 (3) TMI 357 - SUPREME COURT OF INDIA] wherein the Hon'ble Supreme Court has categorically observed that only with effect from May 14, 2015, by virtue of provisions of Section 67 itself, such reimbursable expenditure or cost would also form part of valuation of taxable services for charging service tax - appeal allowed - decided in favor of appellant.
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2018 (8) TMI 1221
100% EOU - Intellectual Property Services - services of temporary transfer of technical know-how - Held that:- Identical issue decided in appellant own case AVT MC CORMICK ING. (P) LTD. VERSUS CCE&C, COCHIN [2018 (2) TMI 1034 - CESTAT, BANGALORE], where it was held that As per Article 253 of the Constitution of India, for implementing any treaty agreement or convention with any country or any decision made at international conference etc., there should be a municipal legislation enacted for giving effect to such international agreement or treaties - demand set aside - appeal allowed - decided in favor of appellant.
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2018 (8) TMI 1220
Event Management Service - non-payment of service tax - date when the service became effective - Circular No.80/10/2004-ST dt. 17/09/2004 - Held that:- In terms of Circular No.80/10/2004-ST dt. 17/09/2004 make it very clear that the said type of programmes are clearly considered as business exhibition and organizers of such service are exempted under the category of Business Exhibition Service rather than Event Management Service - it is clear that the services provided to the organizers is alone covered under event management and organizing of an event is not covered. Further the Board circular categorically mentions that road shows and camps are covered under the Business Exhibition Service. The services rendered by the appellants come under Business Exhibition Service chargeable to service tax prior to 10/09/2004 - portion of the demand confirmed requires to be dropped and the same has to go to the original authority for quantification of the tax payable by the appellants for the period 10/09/2004 to 15/12/2004. Penalty - Held that:- The issue being one related to interpretation of the provisions of statute, penalty cannot be imposed on the appellants. Appeal allowed by way of remand.
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Central Excise
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2018 (8) TMI 1218
Condonation of delay in filing appeal - Penalty - petitioner is carrying out a small scale industry - Recovery of outstanding balance defaulted duty of Excise - Section 11A(4) of the Central Excise Act - Held that:- The Appellate Authority ought to have entertained the appeal on merits instead of dismissing the appeal in view of the provisions of Section 35 of the Central Excise Act, 1944. When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. The impugned order passed by the Appellate Authority cannot be sustained. In order to do justice between the parties, the delay has to be condoned exercising the powers of this Court under Articles 226 and 227 of the Constitution of India and the mater requires reconsideration by the Appellate Authority - petition allowed by way of remand.
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2018 (8) TMI 1217
Valuation - inclusion of value of the CFCs and gum tapes - finalization of provisional assessments - Held that:- There is no denial that there was short payment on this account while there was excess payment overall during the relevant period. Time Limitation - Held that:- The appellant has not disclosed full facts and had suppressed the value of these two items in the data provided to the department. However, the appellant has already paid duty in excess of the proposed demand. Therefore, the demand needs to be set off against the excess duty paid, as done by the lower authority. Penalty u/s 11AC - Held that:- The penalty which can be imposed is equal to the amount of duty not paid or short paid or erroneously refunded. In this case, the net effect of the finalization of the assessment after taking into consideration the value of CFCs and gum tapes would be that the appellant had still paid duty in excess. Therefore, there is no scope for imposing penalty under Sec.11AC because the net differential duty would be negative. The demand is confirmed - penalty set aside - appeal allowed in part.
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2018 (8) TMI 1216
SSI Exemption - dummy units - case of the Department is that, all the Appellant firms/companies are the dummy units of one Shri B.M. Garg (proprietor of Garg industries), which have been created to fragment and/or bifurcate the total clearances so as to fall within the exemption limit of SSI benefit - demand entirely based certain alleged private records recovered by the department. Held that:- Upon perusing the Panchnama, it is found that the same does not give any description of the documents recovered and, instead uses the expression “file containing misc. loose pages” without indicating what the said misc. loose papers are. The Panchnama does not specifically state who had actually found the documents sought to be relied upon and from where he had found them. The Panchnama simply states that documents pertaining to sale and purchase, manufacture and clearance of goods were found in the room. Moreover, there is nothing stated in the panchnama as to whether the documents recovered were sealed or not, so as to avoid any manipulation and, in case they were sealed, whether any panchnama proceedings were recorded while de-sealing the said records. Cross-examination - principles of natural justice - Held that:- As no opportunity of cross-examine has been given to the appellant, the Commissioner has committed error in law in relying upon the statements. The charge of clandestine clearance is a serious charge and the department is required to prove the allegations of clandestine clearance by producing sufficient positive and cogent evidence - In the present case, the case of the department is based upon certain private records which are seriously disputed by the appellant and, corroborating the same by statements for which the appellant had not been afforded opportunity to rebut. Use of Brand nae of others - Held that:- Since beginning, it is the stand of all the appellants that neither of them nor Shri B.M. Garg or any other individual are owner of the brand names in issue. Shri Adesh Tiwari- Manager of Deepak Hinges, had also confirmed this fact in his statement dated 25.06.14. Nothing has been brought on record by the department to establish that the said brand names belonged to any “other person”. Thus, SSI benefit cannot be denied to the appellant(s) on the ground of using the brand name of other person - benefit allowed. Clubbing of clearances - Held that:- The facts of the case does not warrant clubbing of clearances of all the units as the Commissioner has confirmed the demand jointly as well as severally on each of the companies/firms thus accepting their separate and independent identity. All the units are entitled to get benefit of SSI notification, there is no requirement to maintain statutory records. Once, they are not entitled to maintain statutory records, the allegation that goods were found in short and/or excess, is legally not sustainable and liable to be set aside. Appeal allowed - decided in favor of appellant.
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2018 (8) TMI 1215
Method of Valuation - section 4 or 4A of CEA - manufacture of Nozzles (8409 99 20), Injectors (8409 99 30), Pumps (8413 30 10), delivery valves & elements (8413 30 10) - valuation claimed u/s 4A of CEA on the ground that the products viz., Nozzles, injectors, etc.,are commonly used for manufacturing of automobiles and these items have to be construed as parts, components and assemblies of automobiles - scope of SCN. Held that:- Both the lower authorities were in error in traversing beyond show cause notice and confirming the demands raised on the ground and reasoning that goods manufactured by appellant were in a solitary case sold by automobile dealers while essentially the allegation was only that these goods are used as parts, components and accessories of automobiles but the allegations in the show cause notice and the factual position is that the appellant is clearing these goods for various other applications like used in pumps, used for drawing water, generation of electricity, etc. Appeal allowed - decided in favor of appellant.
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2018 (8) TMI 1214
Refund of excess duty paid - price variation clause - denial of refund on the ground that the price reduced at subsequent date is not required to be refunded by placing reliance in the case of MRF LTD. VERSUS COLLECTOR OF CENTRAL EXCISE, MADRAS [1997 (3) TMI 104 - SUPREME COURT OF INDIA]. Held that:- Wherever there was an upward revision in the price, the assessee has been paying differential duty and when there is a revision in price, he will be entitled to refund provided it is within the time limit prescribed under Sec.11B. If the assessee had opted for provisional assessment he could have claimed refund within one year from the finalization of provisional assessment but in this case he has claimed the refund within one year from the date of clearance of goods since the assessments were not provisional. Hon’ble Supreme Court had held in the case of MRF Ltd [1997 (3) TMI 104 - SUPREME COURT OF INDIA] that post clearance reduction in price does not evade the duty liability - It is found that this judgment was passed in the context of the valuation of goods under Section 4 of the Central Excise Act prior to 01.07.2000. During the relevant period, value was the normal price, i.e., price at which such goods were ordinarily sold in the course of whole sale trade at the time and place of clearance - the ratio of the judgement do not apply to the facts of present case. The ratio of the case of PTC Industries Ltd [2016 (8) TMI 200 - CESTAT NEW DELHI] is squarely applicable to the present case, where it was held that where there is price variation clause and the prices have been reduced subsequent to clearance, refund is admissible. Appeal allowed - decided in favor of appellant.
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2018 (8) TMI 1213
Rectification of mistake - Rule 41 of CESTAT(Procedure) Rules, 1982 - in the case of M/S. TRANSWORLD GARNET INDIA PVT. LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE (APPEALS) [2017 (10) TMI 341 - CESTAT BANGALORE], the Tribunal allowed the appeal of the appellant and set aside the impugned order which denied the refund of ₹ 5,32,440/- and ₹ 4,89,600/- - Held that:- Once the impugned order has been set aside with consequential relief, the Assistant Commissioner should not have denied the refund claim of ₹ 4,89,600/- merely on the ground that the same has not been specifically mentioned in the Final Order dt. 24/08/2017. The original authority is directed to grant the refund of ₹ 4,89,600/- which the applicant/appellant is entitled to in view of the Final Order in the case of M/S. TRANSWORLD GARNET INDIA PVT. LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE (APPEALS) [2017 (10) TMI 341 - CESTAT BANGALORE] - application disposed off.
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2018 (8) TMI 1212
Clandestine manufacture and removal - MS Ingots - Revenue entertained a view that the respondents have suppressed their production for the Financial Year 2009-10 and 2010-11 - demand based on input output ratio - Held that:- Revenue in their memo of appeal have again reiterated their stand that input output ratio, which were primarily based upon the statement of the assessee’s employee should be adopted for arriving at the quantum of manufacture of final product. The charges of clandestine removal are required to be proved not on the basis of input output ratio, which fluctuates depending upon number of factors like grade and purity of sponge iron, grade and purity of scrap, the metallurgical process adopted for production, the power supply conditions etc. For upholding the charge of clandestine removal, the onus to prove the same lies heavily on the Revenue and is required to be discharged by production of positive, tangible and cogent evidences - The same are admittedly absent in the present case and the entire case of the Revenue is on the basis of input output ratio, which cannot be appreciated. Appeal dismissed - decided against Revenue.
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2018 (8) TMI 1211
Rectification of Mistake - there is an error in the finding recorded in para 82 and the word "not" should precede the word "sustainable" - Held that:- There is an error apparent in para 82 of the Final Order dt. 14/02/2018 and therefore we allow the inserting of the word "not" in the said para after the word 'is' and before the word 'sustainable' - ROM Application allowed.
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CST, VAT & Sales Tax
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2018 (8) TMI 1210
Exemption u/r 12-A of the U.P. Trade Tax Rules, 1948 - denial on the ground that Form 3-A which had been submitted were invalid - Held that:- An incongruous situation has arisen where under the impugned order so far as this revision is concerned the matter stands remanded to the Assessing Authority whereas for the other assessment years in respect of the same revisionist the matter stands remanded to the First Appellate Authority vide judgment dated 12.04.2018. In this view of the matter, the same are applicable in this case also this Court is of the view that this matter should also be remanded to the First Appellate Authority instead of the Assessing Authority with the caveat that in proceedings, if any, held by the Assessing Authority after the passing of the interim order dated 18.05.2001 the pleadings or material collected therein, if at all, can be utilized and/or taken into consideration by the First Appellate Authority to decide the appeal in question. The First Appellate Authority shall now proceed to consider the First Appeal of the revisionist herein pertaining to the assessment year 1995-96 - revision disposed off.
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Indian Laws
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2018 (8) TMI 1238
Hand over 8 flats and 16 parking spaces to respondent No.1/plaintiff - principles of moulding of relief - For passing such mandatory order the learned Single Judge placed reliance on the decision of this Court in Gaiv Dinshaw Irani and Others Versus Tehmtan Irani and Others [2015 (9) TMI 1066 - SUPREME COURT], holding that the Courts ought to mould the relief in accordance with the changed circumstances for trying the litigation or to do complete justice. Held that:- The appellant could be bound only by the agreement dated 10 March, 2003 in his favor and executed by him. Admittedly, the said agreement is the subject matter of arbitration proceedings, inter alia because respondent No.2 had failed to discharge its obligation thereunder. The appellant has already parted with the possession of flats to respondent No.2 in furtherance of agreement dated 10th March, 2003 and respondent No.1/plaintiff could be accommodated only against those flats. Asking the appellant to hand over additional 8 flats and 16 parking spaces by way of mandatory order, would be to superimpose the liability of respondent No.2/defendant No.1 on the appellant for discharging its obligation qua respondent No.1/plaintiff in relation to the agreement entered between them dated 22nd September, 1999 and including Settlement Agreement dated 4th November, 2016 and Consent Terms dated 25th September, 2017, to which the appellant is not a party. The learned Single Judge as well as the Division Bench have committed fundamental error in applying the principle of moulding of relief which could at best be resorted to at the time of consideration of final relief in the main suit and not at an interlocutory stage. The nature of order passed against the appellant is undeniably a mandatory order at an interlocutory stage. There is marked distinction between moulding of relief and granting mandatory relief at an interlocutory stage. As regards the latter, that can be granted only to restore the status quo and not to establish a new set of things differing from the state which existed at the date when the suit was instituted. It is well established that an interim mandatory injunction is not a remedy that is easily granted. It is an order that is passed only in circumstances which are clear and the prima facie material clearly justify a finding that the status quo has been altered by one of the parties to the litigation and the interests of justice demanded that the status quo ante be restored by way of an interim mandatory injunction - In the factual scenario in which mandatory order has been passed against the appellant is in excess of jurisdiction. Such a drastic order at an interlocutory stage ought to be eschewed. It cannot be countenanced. The invocation of principle of moulding of reliefs so also the exercise of power to grant mandatory order at an interlocutory stage, is manifestly wrong - The appellant would be bound only by the agreement entered with respondent No.2 dated 10th March, 2003 and at best the tripartite agreement dated 11th September, 2009. The respondent No.2 having failed to discharge its obligation under the stated agreement dated 10th March, 2003, cannot be permitted to take advantage of its own wrong in reference to the arrangement agreed upon by it with respondent No.1/plaintiff and including to defeat the claim of the appellant in the arbitration proceedings. It is appropriate to revive the ad-interim order passed by the Single Judge of the High Court on 3rd December, 2012 in Notice of Motion No.147/2013 and as corrected on 17th December, 2012, which shall operate until the disposal of the suit or until it is modified by the High Court on account of subsequent developments, if any, as and when occasion arises - appeal allowed.
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2018 (8) TMI 1237
Dishonor of cheque due to insufficiency of funds - Section 138 of the Negotiable Instruments Act - case of the defence is that the respondent/accused did not know the complainant and he only knew the Power of Attorney Holder of the complainant and no cheques were issued - Held that:- In view of the specific evidence of D.Ws.2 and 4 coupled with the non-production of the alleged pro-note said to have been executed by the accused and also to the effect that Ex.P.7 came into existence only on 17.02.2001 much after filing of the present complaints and taking into entirety of the circumstances, the Lower Appellate Court has rightly came to a conclusion that Ex.P.7 does not advance the case of the complainant and disbelieved the evidence of complainant and rightly disregarded the document Ex.P.7. The next limb case of the respondent/accused is that he never knew the complainant and he only knew the Power of Attorney Holder of the complainant - Held that:- The Lower Appellate Court has rightly appreciated the evidence and correctly came to the conclusion that in the absence of specific averments in the complaint regarding the date of borrowal and discrepancy in the evidence of P.W.1 and D.W.3 viz., between the Power of Attorney Holder and his Principal and in view of the supporting evidence of D.Ws.2, 4 and 5, who have clearly supported the suggestive case of the respondent/accused and failure on the part of the complainant to produce the material documents such as pro-note alleged to have been executed by the accused, loan agreement and the relevant documents, the trial Court has clearly held that the suggestive case has been probabalised. The complainant has failed to prove the legally enforceable pre-existing debt in support of the cheque in issue and accordingly, rejected the case of the complainant and the same cannot be found fault with and in view of the specific evidence of D.W.3 and the probablized evidence of D.Ws.2 and 4 and coupled with the want of material evidence as pointed out in the preceding paragraphs, the finding rendered by the Lower Appellate Court cannot be found fault with - Criminal appeal dismissed.
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2018 (8) TMI 1236
Revisional jurisdiction - inherent power and jurisdiction under Section 482 of the Code of the Criminal Procedure, 1973 - validity of continuation of the proceedings before the trial court - Held that:- The petition at hand is a classic illustration of an accused in a matter involving offence under Section 138 of the Negotiable Instruments Act, 1881 making the complainant (drawee of the cheque) dance around, for years on end (now seven years), taking not only him (the complainant) but also the courts for a ride - The conduct of the petitioner in issuing a postdated cheque (pursuant to a settlement) that failed upon presentation is not one that would “enhance the credibility” of cheque transactions. The complainant, in the hope of realization of its dues, continued to agree to enlargement of time. Some more money was paid, in bits and pieces, by installments, to some extent, over a prolonged period. In a case of this nature, it is naturally the expectation of the complainant (the creditor) that his entire dues would be settled, and this would include not only the principal amount represented by the cheques but also the interest that would have accrued thereupon. On account of prolonged proceedings, the liability of the accused has only increased. Petition dismissed with costs of Rupees two lakhs.
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2018 (8) TMI 1235
Dishonor of cheque due to stop-payment - Section 138 of Negotiable Instruments Act - The case of the accused is that he never issued any cheques and he had no legal enforceable debt to issue cheques in favor of the complainant - rebutting of presumption under Section 138 of Negotiable Instruments Act - Held that:- Once the accused rebutted the presumption under Section 138 of Negotiable Instruments Act, the complainant is liable to prove his case. The complainant failed to prove his case. Since, the cheques were returned on the request for stop payment and the said stop payment was not issued by the accused. The complainant did not prove the case as alleged by him. Further, the statutory notice Ex.P.4 was admittedly returned without serving on the accused. It is seen from the notice that the amount mentioned as 2,50,000/-, whereas the total cheque amount is 3,50,000/-. That apart, the said notice was returned for the reason no proper address, no door number and no street name . Therefore, the statutory notice was not at all sent to the proper address. This Court is of the considered opinion that the complainant did not fulfil the requirements under Section 138 of Negotiable Instruments Act. Therefore, the trial Court after considering the entire evidence and facts and circumstances of the case, has rightly acquitted the accused and the judgment passed by the the Judicial Magistrate No.I, Gobichettipalayam does not warrant any interference from this Court - Criminal appeal dismissed.
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2018 (8) TMI 1234
Dishonor of cheque for want of funds - Offences u/s 138 of The Negotiable Instruments Act - It is the specific case of the private complainant namely Sree Guruvayurappan Investments that the respondent herein has borrowed a sum of ₹ 2,85,000/- on 24.04.2004 and agreed to repay the said amount with interest at 36% p.a., and executed a promissory note - Held that:- The Trial Court has come to the right conclusion that the respondent has successfully rebutted the presumption and same is hereby confirmed. The standard of proof that is required to discharge the onus of proofs, on the accused is not as that of the prosecution and the standard of evidence that is to be adduced by the defendant to rebut the presumption under Section 139 of the Negotiable Instruments Act is that of the preponderance of the probability either through direct or circumstantial evidence. For the said purpose, the learned counsel for the respondent/accused also relied upon the evidence adduced by the complainant. The Trial Court has rightly come to the conclusion that the respondent has not issued the cheque in question for any legally enforceable debt. Accordingly, the trial Court has acquitted the accused. The said order does not require any interference and the same is hereby confirmed - Criminal appeal dismissed.
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2018 (8) TMI 1219
Offences punishable u/s 138 of Negotiable Instruments Act - cheques were dishonoured for the reasons "Exceeds Arrangement" and "out of date" - notices were returned unserved with an endorsement "left" - Held that:- A perusal of the records shows that out of 16 cheques, 11 cheques were presented beyond the period of 6 months. However, there are 5 more cheques, which were returned for the reason " Exceeds Arrangement". Therefore, the learned Metropolitan Magistrate, Fast Track Court No.II, Egmore, Chennai can proceed further against the petitioners herein with regard to those 5 cheques - Since the 2nd petitioner has issued the cheques in favour of the respondent/complainant, there is no necessity to aver specifically in the complaint that the 2nd petitioner was in charge of day to day affairs of the company and therefore, he can be prosecuted for the alleged offence punishable under Section 138 of the Negotiable Instruments Act. Authority to represent the respondent/complainant M/s SEW Eurodrive India Private Ltd. - Held that:- Along with the complaint, the authorization issued to Mr.C.V.Shivakumar is filed as document No.25 and in the facts and circumstances, it cannot be said that the complaint filed by the respondent/ complainant is not maintainable - There is no reason to quash the proceedings in C.C.No.106 of 2012 on the file of the Metropolitan Magistrate, Fast Track Court No.II, Egmore, Chennai and hence the petition is liable to be dismissed. Petition dismissed.
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