Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
August 8, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Indian Laws
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Recovery of VAT after repealing of VAT Act post GST - Summons for recording of statement - Section 78 of the State GST Savings Act saves the provisions of the VAT Act so far as they relate to any payment or recovery of tax under the VAT Act and any purpose connected or incidental thereto relating to any period prior to the commencement of the State GST Act.
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CENVAT Credit - after filing the the TRAN-1 Form online, the Petitioner noticed that the electronic account ledger did not reflect the entire amount of credit - Respondents(dept.) is directed to either open the portal so as to enable the Petitioner to file the TRAN-1 electronically or to accept a manually filed TRAN-1 form on or before 13th September, 2019 and thereafter process the claim in accordance with law
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Valuation - transfer to branches located outside the State - the applicant shall adopt the open market value as per Rule 28(a) as well as also opt to value the same at 90% of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person - If the recipient is eligible for full ITC, such a value shall be deemed to be the open market value
Income Tax
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Processing of returns with refund claims u/s 143(1) - time barring - returns up to assessment year 2017-18 - can be processed now and intimation can be sent to the assessee concerned by 31.12.2019
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Arbitral Foreign Award - whether the compensation received by the decree holder towards breach of contract is liable for taxation in India as it is a “windfall gain” - Article 22(3) of DTAA between India and Switzerland - Held No
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Assessment u/s 153A - petitioner contended that after issuance of notice u/s 153A pending demand also abate - there is no statutory provision under the Income Tax Act which provides that in case search was conducted/assessment proceeding u/s 153A has been initiated, then, the tax, which remains unpaid by the assessee for the same period, cannot be recovered from the assessee
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Stay of demand - AO directed to pay 20% of demand for stay which was not complied - Ld. single Judge put precondition to 10% deposit to consider stay petition by CIT(A) - Since the statute does not stipulate any pre-condition, it is not just and proper for this court to insist upon any such pre-condition for consideration of the stay petitions even non-compliance of the conditions AO will not preclude the appellants from approaching the CIT(A) seeking stay
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Reopening of assessment - notice u/s 148 barred by limitation - Though the notice u/s 148(2) was first published in the newspaper on 09.12.2017 which was beyond the period of limitation but the record reveals that the notice was first issued on 30.03.2017, which as per Section 149(1)(b) was within limitation - the contention that the notice was barred by time is negatived - reassessment valid
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Reassessment u/s 147 - admission of grounds of appeal of the Assessee under Rule 27 of the ITAT Rules - an Assessee may not have appealed or filed a cross-objection but he is free to defend such order on all grounds including on any of the grounds decided against him by the authority whose order is otherwise in his favour
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Penalty u/s 271(1)(c) - combined order of penalty for additions made vide order u/s 143(3) r.w.s. u/s 153A and u/s 143(3) r.w.s. 147 - AO required to initiate two penalty proceedings by issue of separate notices u/s 271(1)(c) and to pass separate penalty orders independently - there was a defect in the penalty order passed hence the same is unsustainable
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TP adjustment - AO/TPO has not followed direction of DRP - As per section 144C(13) the AO is bound to pass the final assessment order in conformity with the direction of the DRP and there is no scope for any deviation from the direction - directed to comply with the direction of the learned DRP on the issue of adjustment to the International transaction of import of finished goods
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TDS u/s 195 - buying agency services or FTS - payment in response to buying agency agreement for activities of coordination with the manufacture for procurement of goods by the assessee outside India cannot be classified as FTS and accordingly, not liable for deduction of TDS and disallowance u/s 40(a)(i) is not warranted
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Allowability of contribution to Group Gratuity Policy of LIC of India - the trust has not been approved by the Department - the assessee is entitled for deduction for payment of group gratuity to LIC as it has has no control over the funds contributed and it is receiving the gratuity payment directly from the LIC as per the scheme which is paid to the employee on happening of the event
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TP Adjustment - the assessee was also supplying packaging material and also straws were sold to the customers as business strategy which were imported from AE - the business strategy applied by assessee and the transaction of sale of straws cannot be benchmarked separately - applied TNMM method for comparables selection
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Depreciation on toll way rights u/s 32(1)(ii) @ 25% - expenditure incurred by the assessee for construction of road under BOT contract by the Government of India has given rise to an intangible asset as defined under Explanation 3(b) r/w section 32(1)(ii) - assessee is eligible for depreciation @ 25%
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Adjustment in book profit u/s 115JB - depreciation claimed on land after amortization of land which was taken for use from the State government without transferring the title - no jurisdiction to go behind the net profit shown in the P&L account except to the extent provided in Explanation - addition rightly deleted
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Rejection of the books of account - since before invoking Section 145, the AO had not given any opportunity to the Assessee and therefore, could not have drawn an adverse influence against it - no indication by the AO that how the assessee has inflated its profit and correspondingly inflated its assets or deflated its liabilities - CIT(A)/ITAT order appears to be on sound legal basis consistent with the law
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Assessment u/s 153C - the normal presumption is that document belongs to searched person. It is for the AO to rebut that presumption and come to a conclusion or "satisfaction" that the document in fact belongs to somebody else based on some cogent material - no error much less an error of law could be said to have been committed in taking the view that there is no cogent material for arriving at the substantive satisfaction
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Disallowance of interest u/s 36(1)(iii) - if the interest bearing funds have been utilized for the business purpose only as per the terms of the loan and nothing contra has been brought on record to prove the fact that the interest bearing funds shown above have been utilized for non business purpose by the Revenue - no disallowance
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Addition towards professional fees for valuation of know-how u/s 37(1) - the expenditure is not incurred for the acquisition of know-how; it is incurred only for the purpose of valuation of the know-how and same in isolation has not created any asset nor has it added any value in the know-how of the assessee - expenditure is in the revenue field and allowable u/s 37(1)
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Attachment orders - petitioner(bank) taken over property of guarantor of loan and sold the same - firstly attachment made by the dept. of the the properties belonging to the guarantor for realizing the tax dues of lender(assessee) secondly the bank being the secured creditor and their claim prevails over the other claims including Crown debts - dept. is not entitled to continue the attachment
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Disallowance of accumulation of income u/s 11(2) - Non-filing of audit report in Form 10CCB - when there was no assessment u/s 143(3) and the fact that the assessee has separately filed Form No.10 along with the Board Resolution, along with the covering letter dated 01.04.2009, it is a fit case where the AO should be directed to take note of Form No.10 and take a decision on merits
Customs
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Clarification regarding applicability of Notification 45/2017- customs dated 30.06.2017 on goods which were exported earlier for exhibition purpose/consignment basis
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Advance authorization - export obligation - belated issue of redemption certificates as poof - An importer who duly complied with such export obligations in terms of the exemption granted under the Foreign Trade Policy cannot be penalised for delay on the part of the authorities in processing the necessary documentation.
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Project imports - Levy of interest for duty foregone - failure to fulfil the export obligation - The recovery of differential duty and charging of interest confirmed - However, confiscation and penalty set aside.
State GST
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Issues related to GST on monthly subscription/contribution charged by a Residential Welfare Association from its members
Service Tax
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Service tax liability on Domain Names - The transaction in domain name is a transaction in property in the goods and amounts to transaction of sale of goods - Domain name are akin to trade mark, making them the property of the person who owns it - service tax not attracted.
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Leased Circuit Services/ Telecommunication Services - Admittedly, the provider of such service is not a Telegraph authority under the Indian Telegraph Act - no taxable service is rendered by the foreign service provider and accordingly no amount of tax is payable.
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Construction of Residential Complex Service - the subcontractor is independently liable to pay service tax even though service tax liability has been discharged by the main contractor
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Valuation - Classification of service - non inclusion of cost recovered towards Transportation and cargo handling - demand confirmed with interest and penalty.
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Imposition of penalty - non-payment of service tax - It is true that ignorance of law is no excuse, but at the same time non-payment has to be with an intention to evade payment of service tax. - Levy of penalty deleted.
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Validity of SCN - When the Show Cause Notice, which is the foundation on which the department has to build up its case, is vague and lack details, it has to be held that the impugned order based on such a Show Cause Notice is bad in law and cannot be sustained.
Central Excise
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Rebate / refund - export of goods - Rule 18 of the Central Excise Rules, 2002 - It was a self contained scheme - None of the conditions and limitations provided under the aforesaid notification were such as may be read to contain a stipulation of limitation of one year from the relevant time or from the date of shipment etc. for the purpose of making a claim for rebate.
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Cenvat Credit - mentioning the names of their clients in the Cenvat registers - There is no prescribed format for making such registers and there is no law which debars the appellants from maintaining separate registers for two different clients - Credit cannot be denied on this ground.
Case Laws:
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GST
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2019 (8) TMI 368
Valuation - transfer to branches located outside the State - distinct person or not - applicant is of the view that the second provision is applicable to their case, i.e., where the recipient is eligible for full input tax credit, the value declared in the invoice shall deemed to be the open market value of the goods or services - HELD THAT:- In the case at hand, the applicant has branches outside the state of Tamil Nadu, hence, both are said to be related as per the explanation to Section 15. The supply is also to distinct person and therefore the value to be adopted is governed by rules prescribed as per Section 15(4) of CGST Act. As per Rule 28(a), it is clear that for supply between distinct persons, the value shall be the open market value of such supply. As per Explanation (a)to Chapter IV of CGST Rules, 2017, Determination of value of supply, Open Market Value of a supply of goods means the full value in money, excluding the integrated tax, central tax, State tax, Union territory tax and the cess payable by a person in a transaction, where the supplier and the recipient of the supply are not related and the price is the sole consideration, to obtain such supply at the same time when the supply being valued is made - In the instant case the applicant supplies the same goods i.e. Lenses, Frames, Sun Glasses, Contact Lenses as well as Reading Glasses, Complete spectacles to both recipients in Tamil Nadu and its branches outside Tamil Nadu. In the case at hand, the applicant states that their recipients in other states further supply such goods to their customers without any further value addition, repackaging, labeling etc. i.e. they are supplied as such. In such a scenario, Rule 28 gives an option to the supplier, i.e. the applicant, to adopt an amount equivalent to 90% of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person as the value at which the supplier .i.e. the applicant supplies to his distinct/ related branch in another state - In the instant case, the applicant has the option to adopt a value which is 90% of supplies made by the branch outside Tamil Nadu to an unrelated customer which are made under similar circumstances in respect of the characteristics, quality, quantity, functional components, materials, and the reputation of the goods supplied to the branch recipient by the applicant. If the applicant does not use this option for supplies to the recipient who further supplies to their customers as such, he has to supply at open market value which is available as per Rule 28(a). The applicant shall adopt the open market value as per Rule 28(a) as the same is available for the supplies made to the distinct recipient outside the state. Instead of the available open market value, the applicant can also opt to value the same at 90% of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person. If the recipient is eligible for full input tax credit, such a value shall be deemed to be the open market value.
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2019 (8) TMI 367
CENVAT Credit - prevalent glitch with the TRAN-1 form - trial and error phase - HELD THAT:- The Court has in several recent orders including BHARGAVA MOTORS VERSUS UNION OF INDIA ORS. [ 2019 (5) TMI 899 - DELHI HIGH COURT] and UNINAV DEVELOPERS PVT. LTD. VERSUS UNION OF INDIA ORS. [ 2019 (8) TMI 85 - DELHI HIGH COURT] directed the Respondents in similar circumstances to either re-open the portal to enable the Petitioners therein to again file the TRAN-I form electronically or to accept a manually filed TRAN-1 form. The Court has in those orders noted that the GST system is still in the trial and error phase. The Court directs the Respondents in the present case also to either open the portal so as to enable the Petitioner to file the TRAN-1 electronically or to accept a manually filed TRAN-1 form on or before 13th September, 2019. The Petitioner s claims thereafter be processed in accordance with law - petition disposed off.
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2019 (8) TMI 342
Recovery of VAT after repealing of VAT Act post GST - Summons for recording of statement - challenge is essentially on the basis that by reason of the Constitution (One Hundred and First Amendment) Act, 2016 read with the Maharashtra State Goods and Services Tax Act, 2017, the State of Maharashtra could not have continued the application and effect of the provisions of the VAT Act, and in particular, Section 64 thereof, beyond one year after the appointed day or taken steps thereunder - vires of Section 78 of the Maharashtra Goods and Services Tax Related Laws (Amendments, Validation and Savings) Act, 2017. HELD THAT:- There is no inconsistency between the provisions of Section 78 of the State GST Savings Act and the Constitution as amended. The Constitution Amendment Act provides for concurrent power of the State legislature to make laws with respect to goods and services tax, i.e. any tax on supply of goods, or services or both. The State GST Act has been enacted by the State legislature under this power. Just as it could enact any law relating to tax on supply of goods, or services or both, it could amend or repeal or save any such law. The VAT Act is one such law, which it had the power to amend or repeal or save. Section 78 of the State GST Savings Act saves the provisions of the VAT Act so far as they relate to any payment or recovery of tax under the VAT Act and any purpose connected or incidental thereto relating to any period prior to the commencement of the State GST Act. There is no inconsistency or repugnancy here with the Constitution as amended. The constitution, as amended, empowers the State legislature to make laws with respect to tax on supply of goods or services. It is under this very power that the State can enact, amend or repeal any law providing for tax on supply of goods. The tax on supply of goods occasioned by sale of goods can be provided for or done away with under this very constitutional power. No such law made or repealed or saved by the State legislature can be said to be inconsistent with Article 246A of the Constitution brought in by the Amendment Act. What it observes is that any sub ordinate legislation, in order to survive the repeal of its parent statute, must be referred to in the Saving Act by express words and not by implication. It cannot possibly be suggested that the sub ordinate legislation under the VAT Act, such as rules, regulations, notifications, etc. issued thereunder, has not been expressly saved by Section 78 of the State GST Savings Act. The wordings of the Section leave no manner of doubt that all these are expressly referred to and saved. The saving provision is both explicit and expansive. It saves all rules, regulations, orders, notifications, form, certificate and notices, appointments and delegation of powers issued under the VAT Act. There is, thus, no substance in the contention. The challenge, in the premises, to the vires of Section 78 has no merit - So far as the other grievance of the Petitioner, namely, non-consideration of its application in Form 701 (made on 2 May 2018) is concerned, learned Counsel for the Respondents states that it has already been heard and shall be disposed of within three weeks. Petition disposed off.
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2019 (8) TMI 341
Detention of goods - Section 129 (1) of CGST Act, 2017 - Part B/E-Way Bill was also generated and produced for inspection - HELD THAT:- The issues raised are at preliminary stage and this Court is not convinced to entertain the writ petition and adjudicate upon merits at this stage. To confirm to the scheme under the Act, the writ petition is disposed of by this order. The petitioner submits bank guarantee for the tax and penalty as shown in Ext.P11 and applies for release of goods by enclosing a copy of this order within two days from today. The 1st respondent shall release the goods detained under Ext.P9 and subjected to enquiry in Ext.P10 within twelve hours from the date and time of receipt of bank guarantee.
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Income Tax
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2019 (8) TMI 366
Assessment u/s 153A - petitioner contended that after issuance of notice u/s 153A pending demand also abate - HELD THAT:- In the present case, it is true that a notice was issued u/s 153. The petitioner was asked to furnish true and correct particulars of income including the income, which was included by the petitioner in the original return while finalizing the total income, meaning thereby, the return filed in response to the notice u/s 153A includes the income tax income (if any) in addition to income originally declared by the petitioner while filing the return u/s 139(1). Meaning thereby, in short, it is as clear as noon of the day that even after filing of the return u/s 153 , in fact, originally declared and demand raised thereon remains alive. There is no statutory provision under the Income Tax Act, 1961, which provides that in case search was conducted/assessment proceeding under Section 153A has been initiated, then, the tax, which remains unpaid by the assessee for the same period, cannot be recovered from the assessee. In the considered opinion of this Court, the ground raised by the petitioner for quashment of notice by taking into account Section 153A does not arise. It is not the case of the petitioner that the notice is without jurisdiction. It is admitted position that till today, no reply to the notice nor any return for the said assessment years as required were furnished before the learned Authority. Even though if any order of assessment or re-assessment is passed, the petitioner is having statutory remedy of appeal. Furthermore, there is time limit prescribed for completion of assessment u/s 153-A. On due consideration of the aforesaid, no case is made out to entertain this writ petition.
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2019 (8) TMI 365
Disallowance of depreciation on non-compete fees - HELD THAT:- The rights acquired by the assessee under the said agreement not only give enduring benefit, protected the assessee s business against competence, that too from a person who had closely worked with the assessee in the same business. The expression or any other business or commercial rights of similar nature used in Explanation 3 to subsection 32(1)(ii) is wide enough to include the present situation. TDS u/s 195 - disallowance u/s.40(a)(ia) for non deduction of tax on commission payable to foreign agents - HELD THAT:- As admitted facts are that the non-resident agents appointed by the assessee for procuring export orders do not have permanent establishment in India. Their agents are situated outside India. Their activities as commission agents are being carried out outside India. The Tribunal therefore correctly held that there was no liability on the assessee to deduct tax at source. Merely because a portion of the sale to the overseas purchasers took place in India, would not change situation vis a vis the commission agents. As relying on assessee's own case [ 2018 (10) TMI 615 - GUJARAT HIGH COURT] . - Decided in favour of assessee.
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2019 (8) TMI 364
Assessment u/s 153C - cogent materials between the documents seized and the assessee - satisfaction - Tribunal interpreting the term 'belongs to' as 'ownership' in Section 153C - whether intention of the legislature is always that section 153C is applicable when documents seized in a searched premise belongs to or its content thereof pertains to some other person in view of amendment by Finance Act, 2015 - HELD THAT:- Section 132(4A)(i) clearly stipulates that when inter alia any document is found in the possession or control of any person in the course of a search it may be presumed that such document belongs to such person. It is similarly provided in Section 292C(1)(i). In other words, whenever a document is found from a person who is being searched the normal presumption is that the said document belongs to that person. It is for the AO to rebut that presumption and come to a conclusion or satisfaction that the document in fact belongs to somebody else. There must be some cogent material available with the Assessing Officer before he/she arrives at the satisfaction that the seized document does not belong to the searched person but to somebody else. Surmise and conjecture cannot take the place of satisfaction . Having regard to the materials on record, if the CIT, Ahmedabad and the Appellate Tribunal relied upon the decision of the Delhi High Court in the case of Pepsi Foods Private Limited [ 2014 (8) TMI 425 - DELHI HIGH COURT] then, in our opinion, no error much less an error of law could be said to have been committed in taking the view that there is no cogent material for arriving at the substantive satisfaction. In the documents, which were seized during the course of search, there may be some reference of the assessee, but that itself would not be sufficient. It is necessary to show some nexus on the basis of some cogent materials between the documents seized and the assessee. - appeal fails and is hereby dismissed
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2019 (8) TMI 363
Disallowance of accumulation of income under Section 11(2) - Non-filing of audit report in Form 10CCB to claim - no assessment under Section 143(3) - Held that:- Under the facts and circumstances of the case, more particularly when there was no assessment under Section 143(3) of the Act and the fact that the assessee has separately filed Form No.10 along with the Board Resolution, along with the covering letter dated 01.04.2009, it is a fit case where the assessing officer should be directed to take note of Form No.10 accompanied by the Board Resolution and take a decision on merits. As we have taken a decision on the assessee's entitlement to file Form No.10, the substantial questions of law, which have been framed by the assessee are not required to be answered and are left open. For the above reasons, the appeal is allowed and the order passed by the Tribunal as well as the CIT (A) are set aside and the order passed by the Deputy Director of Income Tax (Exemptions)-II dated 28.03.2011 is also set aside. The authority is directed to take note of the Form No.10 and the Board Resolution and take a decision on merits and in accordance with law.
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2019 (8) TMI 362
Rejection of the books of account of the Assessee - AO alleged that assessee shown higher profit to claim deduction u/s80IC - estimate addition of expenses u/s 69C - AO had not examined any comparable units before concluding that the Assessee has shown more than ordinary profits given that the consumption of stock did not match with the items produced by the Assessee - HELD THAT:- Assessee s appeal was allowed by the CIT(A) by an order dated 3rd March, 2015 inter alia on the ground that before invoking Section 145, the AO had not given any opportunity to the Assessee and therefore, could not have drawn an adverse influence against it. The ITAT observed on merits that to show the higher profit the assessee either might have inflated the assets or have understated certain liabilities, in absence of this, the profitability cannot be shown at higher figure. The corresponding effect of the higher profit has not been identified by the learned assessing officer. No indication has also been drawn by the assessing officer that how the assessee has inflated its profit and correspondingly inflated its assets or deflated its liabilities. The reasoning of both the CIT (A) as well as the ITAT in disagreeing with the AO s rejection of the Assessee s books of accounts appears to be on sound legal basis consistent with the law. The said orders, therefore, do not call for interference. No substantial question of law arises.
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2019 (8) TMI 361
Deduction u/s 80HHC - whether interest income assessed as business income is to be excluded from the 'profits and gains of business for purposes of Section 80HHC and if so whether the gross or net interest is excludable? - HELD THAT:- The bank from which the assessee availed loans for their export business, in no uncertain terms had mentioned that from and out of the export sale proceeds, they (bank) would divert some of it upon realisation of the sale proceeds towards Fixed Deposits in the name of the assessee being additional security for the loans. Thus, it is seen that the conversion of a portion of the export sale proceeds on realisation as Fixed Deposits was not on the volition of the assessee, but by a unilateral act of the bank over which, the assessee had no control. Furthermore, the bank had made it explicitly clear that the Fixed Deposits are created for being treated as additional security for the loans availed by the assessee. The Revenue does not dispute the fact that the loans availed by the assessee was for their export business. In such circumstances, there can be no dispute to the fact that these receipts have a direct and immediate nexus to the activity of export done by the assessee and in such circumstances, the said income is not deductible from the said profits of business. The Revenue cannot dispute the immediate nexus between the activity of export and the creation of Fixed Deposits to be retained by the bank as additional security towards the loan availed for the export business. Fixed Deposits have been created by the bank themselves by carving out a portion of the export sale proceeds on realisation and retaining them as Fixed Deposits in the name of the assessee to be retained by the bank as additional security for the loan availed by the assessee for their export business. As mentioned earlier, the conversion of a portion of the sale proceeds as Fixed Deposits was done by the bank themselves and not on the volition of the assessee. Therefore, we are fully convinced that the transaction was connected and closely linked with the assessee's business activity. Tribunal erred in dismissing the assessee's appeal.
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2019 (8) TMI 360
Deductions u/s 80P - notice under Section 142(1) calls upon the noticee to file income tax returns for the Assessment year 2017-18 - HELD THAT:- Suffice to say that writ petitioner/noticee in impugned order shall file returns for the Assessment Year 2017-18 as called for in the impugned notice, but it is open to the writ petitioner noticee in the impugned notice to claim that they are entitled to claim deductions under Section 80P of IT Act. If such a claim is made, the same shall be dealt with in accordance with law and in the light of the obtaining legal position that has been laid down by this Court. As this puts an end to the anxiety of the writ petitioner, instant writ petition is disposed of holding that the writ petitioner/noticee in impugned notice shall respond to impugned notice inter alia by filing income tax returns for the Assessment Year 2017-18 and such reply/returns shall be processed in accordance with law.
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2019 (8) TMI 359
Deduction u/s 80IA(4)(iii) - CIT(A) directing the AO to treat the rental income from the letting out of property as 'business income' - HELD THAT:- The learned Senior Standing Counsel for the appellant has produced a letter in Corporate Circle 4(2)/2017-18 dated 05.1.2018 issued by the Deputy Commissioner of Income Tax, Corporate Circle 4(2), Chennai-34 stating that the approval notification from the Central Board of Direct Taxes in respect of deduction under Section 80IA(4) of the Act has been received for the respondent and he submits that he has been instructed to withdraw these appeals. The said submission of the learned Senior Standing Counsel for the Revenue is recorded. The letter dated 05.1.2018 is placed on record. The above tax case appeals are dismissed as withdrawn. The substantial questions of law are left open.
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2019 (8) TMI 358
Reopening of assessment - Notice to Legal representatives of the deceased - whether notice u/s 148 (2) was barred by time ? - HELD THAT:- In the case at hand, evidently, the assessee died on 15.08.2013, as the assessment year is 2010-11, six years elapsed at the end of said assessment year i.e. on 31.03.2017. Though it is contended on behalf of the petitioner that the notice u/s 148(2) was first published in the newspaper on 09.12.2017 which was beyond the period of limitation; however, the record reveals that the notice u/s 148(2) was first issued on 30.03.2017, which as per Section 149(1)(b) was within limitation. Thus, the contention that the notice u/s 148 (2) was barred by time is negatived. Chapter XV of the 1961 Act lays down provision regarding liability in special cases. Section 159 where under provides for that where a person dies, his legal representatives shall be liable to pay any sum which the deceased would have been liable to if he had not died, in the like manner and the same manner and to the extent as the deceased. And the legal representative of the deceased shall, for the purpose of the 1961 Act, be deemed to be assessee. In the present case, the Assessing Officer, after subjecting the petitioner, legal representative of late Ram Singh, to the notice u/s 142(1), found the undisclosed income of ₹ 33,20,000/- which led him to pass the Assessment Order on 27.12.2017 which has been affirmed in the revision u/s 264. These orders when tested on the anvil of the above analysis cannot be faulted with.
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2019 (8) TMI 357
Stay demand - AO directed to pay 20% of demand for stay which was not complied - Ld. single Judge put precondition to 10% deposit to consider stay petition by Appellate Authority - HELD THAT:- Power to grant stay of recovery pending disposal of the appeal is a power vested on the appellate authority, which is discretionary in nature and which need to be exercised based on prima facie satisfaction about the merits of the appeal. Since the statute does not stipulate any pre-condition for deposit of any portion of the demand for consideration of the stay petition, it is not just and proper for this court to insist upon any such pre-condition for consideration of the stay petitions. Non-compliance of the conditions stipulated by the Assessing Authority will not in any manner preclude the appellants from approaching the Appellate Authority seeking stay of the demand, pending disposal of the appeal. Therefore we are inclined to allow the writ appeal and to modify the impugned judgments to the following terms- (i) There will be a direction to the 3rd respondent [CIT(A)] to consider and pass appropriate orders on Ext.P7 stay petitions filed by the appellants seeking stay of the recovery, pending disposal of the statutory appeals, at the earliest, after affording an opportunity of personal hearing to the appellants. At any rate, the stay petitions shall be disposed of within one month from the date of receipt of this judgment. (ii) Till the disposal of the stay petitions as directed above, the demands impugned in the statutory appeals shall be kept in abeyance.
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2019 (8) TMI 356
Attachment orders - recovery proceedings - attachment made by the first respondent of the properties belonging to the fourth respondent for realizing the tax dues from the third respondent - HELD THAT:- In view of the above settled position of law, even assuming that the properties belonged to the third respondent, still the petitioner-Bank has priority over the said properties as secured creditor than the first respondent. Even, that question does not arise in this case, when admittedly, the properties so attached by the first respondent do not belong to the third respondent and on the other hand, they belong to the fourth respondent. Admittedly, the fourth respondent is not the defaulter before the first respondent. Therefore, the very attachment made by the first respondent of the properties belonging to the fourth respondent for realizing the tax dues from the third respondent, cannot be justified. In any event, in view of the fact that the petitioner being the secured creditor and their claim prevails over the other claims including Crown debts, this Court is of the view that the first respondent is not entitled to continue the attachment over the subject matter properties any further. Accordingly, this writ petition is allowed and the first respondent is directed to raise the attachment and communicate the same to the second respondent within a period of two weeks from the date of receipt of a copy of this order, so as to enable the petitioner to get the sale certificate registered before the second respondent.
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2019 (8) TMI 355
Deduction u/s 10B in respect of Benzarone Pure - manufacture or production of an article or not - HELD THAT:- Considering the process which Benzarone Crude is subjected to for the purpose of converting it into Benzarone Pure as well as considering the fact that the Benzarone Pure is a distinct marketable commodity, different from Benzarone Crude which is not capable of being used as such, the conversion of Benzarone Crude to Benzarone Pure would fall within the ambit of the expression manufacture or produce as contemplated u/s 10B. The Tribunal was, therefore, justified in holding that the assessee is entitled to deduction u/s 10B in respect of the said product. - answered in favour of the assessee and against the revenue Deduction u/s 10B in respect of BFX-P - manufacture or production of an article or not - HELD THAT:- It is an admitted position that no manufacturing process in respect of the said product has been brought on record either before the CIT(A) or even before this court. The chart referred to by the CIT(A) in his order shows that except for the work in progress being shown as BFX-P, no further details have been provided regarding the final product or the chemical formula. In the absence of any material having been placed on record to indicate the process carried out on BFX-P, it cannot be said that any process of manufacture or production has taken place so as to entitle the assessee to deduction u/s 10B in respect of the said product. The Tribunal was, therefore, not justified in allowing the deduction u/s 10B in respect of BFX-P. - answered in favour of the revenue and against the assessee
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2019 (8) TMI 354
Penalty u/s 271(1)(c) - defective notice - HELD THAT:- Show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. Following the decision M/S MANJUNATHA COTTON AND GINNING FACTORY OTHS., M/S. V.S. LAD SONS, [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] we hold that the orders imposing penalty in all the assessment years have to be held as invalid and consequently penalty imposed is cancelled. Levy of penalty in the present case cannot be sustained. We therefore cancel the orders imposing penalty on the Assessee and allow the appeal by the Assessee. In view of our above conclusions on the issue of defect in show cause notice u/s.274 of the Act, we are not dealing with the other arguments made on merits of the orders imposing penalty on the assessee - Decided in favour of assessee.
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2019 (8) TMI 353
Penalty u/s 271(1)(c) - combined order of penalty for additions made vide order u/s 143(3) r.w.s. u/s 153A and u/s 143(3) r.w.s. 147 - HELD THAT:- AO passed the common penalty order imposing penalty u/s 271(1)(c) in respect of the additions made vide order 143(3) r.w.s. u/s 153A and the order passed u/s 143(3) r.w.s. 147 on two different dates. Both the orders are independent of each other. AO required to initiate two penalty proceedings by issue of separate notices u/s 271(1)(c) of the Act and to pass separate penalty orders independently. Therefore, there was a defect in the penalty order passed by the AO u/s 271(1)(c) and the same is unsustainable. DR fairly conceded that in the instant case, the additions representing the penalty were deleted by the CIT(A) and the department did not prefer appeal against the CIT(A) order, hence there is no enforceable demand in respect of the penalties. As submitted by the DR since the additions representing penalty were deleted, the penalty also gets squared off and accordingly gets cancelled and there would be no grievance to the assessee. Accordingly, we set aside the order of the CIT(A) and delete the penalty levied by the AO. - Appeal of the assessee is allowed.
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2019 (8) TMI 352
Disallowance u/s 14A r.w.Rule 8D(2)(iii) - HELD THAT:- Hon ble Delhi High Court in the case of Joint Investments (P) Ltd., Vs. CIT [ 2015 (3) TMI 155 - DELHI HIGH COURT] has taken the view that the disallowance u/s 14A cannot exceed the exempt income. Similar view has been expressed by the Hon ble High Court in the case of CIT Vs. Holcim India Pvt. Ltd. [ 2014 (9) TMI 434 - DELHI HIGH COURT] . Respectfully following the aforesaid judicial pronouncements (supra), we hold that the disallowance u/s 14A in the case on hand should be restricted to the exempt dividend income earned by the assessee in the year under consideration. Disallowance u/s 40(a)(i) - TDS u/s 195 - payments of commission to foreign agents paid outside India for services rendered outside India - HELD THAT:- Respectfully following the aforesaid decision of the Co-ordinate Bench of this Tribunal in the assessee s own case [ 2017 (11) TMI 1844 - ITAT BANGALORE] , we also hold that the payment of commission to non-resident agent AV Sons in the case on hand cannot be considered as having been accrued or arisen or deemed to accrue or arise in India as the services were rendered outside India and the payment of commission was also outside India. In this view of the matter, the assessee was not obliged to effect any deduction of tax on the commission payments to the foreign agent AV Sons who is stationed outside India. Short grant of credit in respect of TDS - assessee contends that the AO has not granted it TDS credit as reflected in the 26AS of the assessee - HELD THAT:- As contended above, we direct the AO to examine / verify the assessee s claim that of short grant of credit for TDS to the extent of ₹ 2,68,927/- in accordance with law. Consequently, ground No.12 of assessee s appeal is allowed for statistical purposes.
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2019 (8) TMI 351
TP adjustment to the International transaction of import of finished products - choice of comparables for TNMM analysis of distribution function - TPO/AO has not considered the direction of learned DRP - HELD THAT:- As per the provisions of section 144C(13) the AO is bound to pass the final assessment order in conformity with the direction of the DRP. There is no scope for the AO/TPO for any deviation from the direction issued by the DRP. In the instant case, the learned TPO/AO ought to have followed the direction of the DRP and this omission on the part of the learned AO/TPO should have been rectified by them at the earliest. This omission in the impugned order, which is against the rule of law, cannot be continued. The impugned order to the extent of addition made in respect of adjustment to International transaction of import of finished goods is set aside and matter is remitted back to the AO/TPO to comply with the direction of the learned DRP on the issue of adjustment to the International transaction of import of finished goods. The grounds No. 2 to 2.3 of the appeal are accordingly allowed for statistical purposes. AMP adjustment - expenditure on advertisement, marketing and sales promotion - HELD THAT:- The issue in dispute of determination of AMP adjustment is restored to the file of the Assessing Officer for deciding in accordance with the direction given by the Tribunal in assessment year 2006-07 [ 2019 (5) TMI 1598 - ITAT DELHI] . It is needless to mention that the assessee shall be afforded adequate opportunity of being heard. TDS u/s 195 - disallowance u/s 40(a)(i) in respect of buying agency services - procurement of goods from outside India - according to the lower authorities, the expenditure on buying agency services are in the nature of fee for technical services in terms of section 9(1)(vii) - HELD THAT:- Since identical issue of buying commission paid in response to buying agency agreement for activities of coordination with the manufacture for procurement of goods by the assessee is involved in the instant case, respectfully following the finding of the Tribunal [ 2013 (1) TMI 106 - ITAT DELHI] we hold that consideration paid by the assessee cannot be classified as fee for technical services and accordingly, not liable for deduction of tax at source and disallowance under section 40(a)(i) is not warranted. The ground of the appeal from 9 to 9.3 are accordingly allowed.
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2019 (8) TMI 350
TPA - comparable selection - HELD THAT:- Cerner Healthcare Solutions P. Ltd. Vs. ITO [ 2017 (1) TMI 1491 - ITAT BANGALORE] which is for the same AY i.e. Assessment Year 2010-11 and we have noted that in para 2 of this Tribunal order, this is noted by the Tribunal in this case that Cerner Healthcare Solutions P. Ltd. Vs. ITO (supra) that Cerner Healthcare Solutions Pvt. Ltd. is a captive service provider engaged in the business of rendering software development services to its AE. Hence the functional profile of the present assessee and Cerner Healthcare Solutions Pvt. Ltd. is same and therefore, in our considered opinion, this Tribunal order is applicable in the present case. Respectfully following this Tribunal order, we hold that no interference is called for in the order of CIT (A) regarding exclusion of Tata Elxsi Ltd. We decline to interfere in the order of ld. CIT(A) on this issue. KALS information systems - comparability of this company has been examined by the Tribunal in a series of decisions including in the case of Trilogy e-business Software India Ltd. The Tribunal has also noted that in the balance sheet of this company as on 31.03.2010, there are inventories of ₹ 60,47,977/- and on the basis of these facts, this finding is given that this company is in the business of software products and therefore, it is held that the same cannot be compared with a pure software development services provider company. Hence, in the present case, we hold that because of this functional dissimilarity as held by the Tribunal in the case of DCIT vs. Electronics for Imaging India (P.) Ltd. (supra), no interference is called for in the order of ld. CIT(A) regarding this direction to exclude KALS information systems Ltd. Infosys Ltd. - Tribunal in that case has reproduced the relevant portion of the Tribunal order rendered in the case of DCIT vs. Electronics for Imaging India (P.) Ltd. [ 2016 (2) TMI 1123 - ITAT BANGALORE] as per which it was held that Infosys Ltd. is having a huge brand value and intangibles as well as having bargaining power and the same cannot be compared with the assessee who is providing only software development services to its AE. Respectfully following this Tribunal order, we hold that Infosys Ltd. should be excluded. Persistent Systems Ltd ., it was held that this company is engaged in diversified activities and earning revenue from various activities including licencing of products, royalty on sale of products as well as income from maintenance contract, etc., and therefore, this company cannot be considered as functionally comparable with the assessee. Sasken Communication Technologies Ltd. , it was held that this company earns revenue from three segments but the segmental operating margins are not available and therefore, in the absence of relevant segmental data and particularly operating margins, this composite data cannot be considered as comparable with the assessee for software development services segment. Respectfully following this Tribunal order, we hold that these two comparables i.e. Persistent Systems Ltd. and Sasken Communication Technologies Ltd. should also be excluded. Larsen Toubro Infotech Ltd. - tribunal considered another Tribunal order rendered in the case of M/s. SumTotal Systems India Pvt. Ltd. [ 2014 (8) TMI 870 - ITAT HYDERABAD] and held that this is not a good comparable because there are no segmental details and it is seen from the annual report that revenues are reported from software development services and products and how much is from services and how much is from products could not be analysed. Respectfully following this Tribunal order, we hold that in the present case, Larsen Toubro Infotech Ltd. also cannot be considered as a good comparable. TP analysis i.e. consideration of foreign exchange fluctuation gain / loss as operating in nature for the purpose of computation of margin of the assessee as well as the comparable companies - HELD THAT:- Since the details in this regard is not available and there is no finding of any of the authorities below in this regard, we feel it proper to restore the matter back to the file of AO / TPO for fresh decision with the direction that if it is found that foreign exchange fluctuation gain / loss of the tested party i.e. of the assessee or of the comparable companies is in respect of the current year s turnover then the same should be considered for TP analysis but if such gain / loss is not in respect of current year s turnover, then the same should be ignored in case of both i.e. the tested party and of the comparable companies. In case the data in this regard regarding comparable company is not made available by the assessee, then it should be presumed that such foreign exchange gain / loss for comparable company is not in respect of current year s turnover because generally, the accounting of foreign exchange gain / loss is considered in the sales only if such gain / loss has been received in the year of sale itself and only when such gain / loss is received and accounted for in a later year then only the same is accounted for separately as exchange fluctuation gain / loss. Accordingly, ground no. 11 is allowed for statistical purposes. The AO/TPO should decide this issue as per above discussion after providing adequate opportunity of being heard to assessee. Working capital adjustment - Tribunal has given a direction to the AO to carry out the working capital adjustment as per the actual figures and not to apply any cap. In the present case also, we restore the matter back to the file of AO/TPO to work out the working capital adjustment on actual figure without applying any cap. ICRA Techno Analytics Ltd - this company is engaged in diversified activities of software development and consultancy, engineering services, web development hosting and substantially diversified itself into domain of business analysis and business process outsourcing, and therefore, this cannot be regarded as functionally comparable with that of assessee who is rendering software development services to its AE and on this basis, it was held that ICRA Techno Analytics Ltd. is not a good comparable Tata Elxsi Ltd - This company is engaged in development of niche product and development services which is entirely different from the assessee company, engaged in software development services and respectfully following this Tribunal order rendered in the case of DCIT vs. Electronics for Imaging India (P.) Ltd. [ 2016 (2) TMI 1123 - ITAT BANGALORE] it was held by the Tribunal that there is no error or illegality in the direction of DRP to exclude this company from the set of comparables. In the present case also, no difference in facts could be pointed out by ld. DR of revenue and therefore, respectfully following this Tribunal order, we hold that there is no error or illegality in the order of ld. CIT(A) on this issue.
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2019 (8) TMI 349
TP adjustment of ALP of the international transaction - royalty of technical know-how, assistance and trade mark - HELD THAT:- The functional, assets and risk profile of the assessee also remained the same in the current year. We find merit in the above argument of the ld. counsel. A perusal of the royalty agreement w.e.f. 1st April, 2003 shows that the terms and conditions of the agreement are same as that of royalty agreement applicable during assessment years 2002-03 and 2003-04. The agreement effective as on 01.04.2001 as applicable during assessment years 2002-03 and 2003-04 was a single agreement which dealt with both technical know-how and assistance and trade mark whereas in the current year the assessee had split the royalty agreement into two separate agreements i.e., technical know-how and assistance agreement and use of trade mark made under the label of corporate agreement. Tribunal in assessee s own case [ 2017 (5) TMI 1639 - ITAT DELHI] in the immediately preceding assessment year has deleted the adjustment made by the A.O./TPO on account of payment of royalty, therefore, we uphold the order of the CIT(A) on this issue and the ground raised by the Revenue on this issue is dismissed. Depreciation @ 60% on printers - HELD THAT:- We find the issue relating to depreciation on computer peripherals, namely, printers and UPS at 60% stands decided in favour of the assessee by the coordinate Benches of the Tribunal where it is being consistently held that printers and UPSs are integral part of the computer system and are entitled to depreciation @ 60%. We, therefore, uphold the order of the CIT(A) in allowing depreciation @ 60% on computer peripherals and reverse the order of the CIT(A) in allowing 25% depreciation on UPSs as against 60% claimed by the assessee. Thus, the ground raised by the Revenue on this issue is dismissed and the additional ground raised by the assessee in Cross Objections is allowed. Allowing deduction u/s 80HHC - HELD THAT:- Since the computation along with evidence was not submitted by the assessee either before the Assessing Officer or before the CIT(A) and since no such details are available in the audited accounts of the assessee as in the P L Account, there is only one entry i.e., receipt of ₹ 1,73,08,013/- on account of DEPB, therefore, we agree with the argument of the ld. DR that this matter should be restored to the file of the Assessing Officer with a direction to examine the profit element in the sale of DEPB licence and to recompute the deduction u/s 80HHC in the light of the decision in the case of Topman Exports [ 2012 (2) TMI 100 - SUPREME COURT] . AO shall decide the issue as per fact and law, after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The issue relating to DEPB as per the first additional ground of the Cross Objections is allowed for statistical purposes. Interest income on fixed deposits for the computation of deduction u/s 80HHC - Assessee fairly conceded that this issue has been decided against the assessee by the Hon'ble High Court in the case of Ram Honda Power Equipment [ 2007 (1) TMI 86 - HIGH COURT, DELHI] In view of the above submission of the ld. counsel for the assessee, this issue is decided against the assessee. Allowability of contribution to Group Gratuity Policy of LIC of India - the trust has not been approved by the Department - HELD THAT:- We find an identical issue had come up before the Visakhapatnam Bench of the Tribunal in the case of District Cooperative Central Bank vs. ITO and Tribunal relying on various decisions held that the assessee is entitled for deduction for payment of group gratuity to LIC of India towards group gratuity scheme. It was held that the assessee has made the payments to the LIC towards group gratuity scheme directly in approved schemes. The assessee has also obtained the policy in favour of the bank. The assessee has no control over the funds contributed to LIC towards the gratuity. The assessee is receiving the gratuity payment directly from the LIC of India as per the scheme which is paid to the employee on happening of the event i.e. retirement or death or resignation. Respectfully following the decision cited (supra), we hold the assessee is entitled to the deduction for contribution to Group Gratuity Policy of LIC of India.
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2019 (8) TMI 348
TP Adjustment - assessee in the packaging solutions division had been carrying on various closely linked transactions - aggregation transactions of packaging solutions with import of straw from AE - applied TNMM method as most appropriate method - HELD THAT:- The Tribunal while deciding the issue in assessment year 2009-10 [ 2017 (9) TMI 1836 - ITAT PUNE] had noted the fact that as part of its packaging activity, as business strategy, it was identifying the customers and marketing its products to them. In addition, the assessee was also supplying packaging material and also straws were sold to the customers as business strategy. The said straws were imported from associated enterprises for sale to the customers. So, this was business strategy applied by assessee and the transaction of sale of straws cannot be benchmarked separately, once the aggregation approach is to be applied. Following the same parity of reasoning, we allow the claim of assessee and delete the transfer pricing adjustment made in the hands of assessee as by applying TNMM method, it was held that aggregation of transactions undertaken by it were at arm's length price with the margins of comparables finally selected. There is no dispute about selection of comparables. Allowability of expenses which was disallowed in earlier year for non deposit of TDS - since TDS was deposited in current year - HELD THAT:- In the year under consideration, the said TDS was deposited and the assessee claimed the said expenditure as allowable in its hands. However, the issue of deductibility of TDS in assessment year 2011-12 has been set aside by the Tribunal to the Assessing Officer and consequent to its being settled, in case no disallowance is made in assessment year 2011-12, then the issue raised by way of ground of appeal No.6 would become academic; otherwise, the same needs to be allowed in the hands of assessee.
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2019 (8) TMI 347
Depreciation on toll way rights u/s 32(1)(ii) @ 25% - difference between the assessee s claim of depreciation and the amortization of expenses allowable for the year under consideration by treating the toll way rights as an intangible asset under section 32(1)(ii) - HELD THAT:- Special Bench of this Tribunal in the case of M/S. PROGRESSIVE CONSTRUCTIONS LTD. AND VICE-VERSA [ 2017 (3) TMI 1167 - ITAT HYDERABAD] has held that the expenditure incurred by the assessee for construction of road under BOT contract by the Government of India has given rise to an intangible asset as defined under Explanation 3(b) r/w section 32(1)(ii) of the Act. Hence, assessee is eligible to claim depreciation on such asset at the specified rate As relying on M/S. PROGRESSIVE CONSTRUCTIONS LTD. (supra), CIT(A) rightly directed the AO to allow the assessee s claim of depreciation @ 25% treating the toll way rights as an intangible asset under section 32(1)(ii) of the Act. Thus, we find no reason to interfere with the order passed by the ld. CIT(A). Thus, the ground raised by the Revenue stands dismissed.
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2019 (8) TMI 346
Condonation of delay of 1625 days - filing single appeal against order u/s 143(3) as well as order u/s 154 - HELD THAT:- There was no negligence or inaction on the part of the assessee in filing the appeal. It was only the advice of the Chief Accountant based on which assessee acted upon. However, on being pointed out by the CIT(A) that two separate appeals need to be filed, the assessee without further delay filed the appeal against the order u/s 143(3). The circumstances leading to delay in filing the appeal does not reveal that the act of the assessee is intentional or that there was some other motive behind in delay in filing the appeal. Thus, following the ratio laid down by the Hon'ble Supreme Court in the case of Ram Nath Sao @ Ram NathSahu and Others [ 2002 (2) TMI 1280 - SUPREME COURT] followed by the Pune Bench of the Tribunal in the case of Atlas Copco [ 2019 (4) TMI 564 - ITAT PUNE] we hereby condone the delay in filing of appeal by the assessee. Addition towards professional fees for valuation of know-how u/s 37(1) - revenue OR capital expenditure - HELD THAT:- From the nature of expenditure incurred, we find that the expenditure is not incurred for the acquisition of know-how; it is incurred only for the purpose of valuation of the know-how. Admittedly, the expenditure in isolation has not created any asset nor has it added any value in the know-how of the assessee, benefit of which can be said to have accrued to the assessee over a longer period. Further, valuation of know-how was in the course of business of the assessee as know-how pertained to the business of the assessee. Further, assessee has placed before us the detailed valuation report obtained by him for valuation of know-how and the copies of invoices for professional fee paid for carrying out the valuation exercise. Thus, we find that the said expenditure is not in the nature of capital expenditure but is in the revenue field; and, thus is allowable u/s 37(1). The order of CIT(A) is accordingly set aside and the AO is directed to delete the addition made on account of professional fee paid for valuation of know-how. - Ground allowed
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2019 (8) TMI 345
Computation of deduction u/s 80IA - income derived from sources other than generation and distribution of power is not eligible for deduction - HELD THAT:- As relying on assessee's own case [ 2019 (5) TMI 1664 - ITAT DELHI] disallowance by the AO and confirmed by the ld. CIT (A) to the tune of ₹ 2,99,54,875/- while computing the deduction allowable u/s 80IA is not sustainable and all the items of income qua which deduction has been sought by the assessee u/s 80IA are allowable deduction and order passed by the AO and ld. CIT (A) is not sustainable. Consequently, ground no.2 is determined in favour of the assessee. MAT computation - inclusion of income-tax on perquisites on accommodation in computing the book profit u/s 115JB - HELD THAT:- Income-tax paid or payable or provision thereof could not be added back to arrive at the peak profit as the adjustment thereof was not supported by the statutory provisions. In view of the matter, addition made by the AO and confirmed by the ld. CIT (A) is not sustainable in the eyes of law, hence ordered to be deleted. Ground No.3 is determined in favour of the assessee. Addition u/s 14A read with Rule 8D - HELD THAT:- Assessee has not made investment out of the interest bearing funds rather made entire investment out of its own funds and out of interest free funds provided by the Government of India and has suo motu disallowed a sum of ₹ 41,34,68,339/- u/s 14A of the Act, AO without recording any valid satisfaction as to how the working made by the assessee is not correct invoked the provisions contained u/s 14A mechanically, no further disallowance can be made in mechanical manner. So, we are of the considered view that ld. CIT (A) has rightly deleted the addition and there is no scope for interference into the same. Consequently, Ground No.1 is determined against the Revenue. Adjustment in book profit u/s 115JB in respect of provisions - provisions made for gratuity, leave encashment, post-retirement medical benefits, LTC, baggage allowance and matching contribution on leave encashment - HELD THAT:- Following the decision rendered by Hon ble Punjab Haryana High Court in assessee s own case for AY 2002-03 [ 2010 (7) TMI 969 - PUNJAB AND HARYANA HIGH COURT] nd subsequent decisions rendered by the Tribunal for AYs 2004-05 to 2010-11, we are of the considered view that the ld. CIT (A) has rightly held that provision for gratuity, leave encashment, post-retirement medical benefits, LTC, baggage allowance and matching contribution on leave encashment had been estimated on actuarial basis and was liability which was credited in present though it is to be discharged on future date, so it cannot be held to be a provision for unascertained liability so as to fall under clause (c) of Explanation 115JB (2). Disallowance in computing the book profit u/s 115JB - depreciation claimed on land after amortization of land - no depreciation is allowable under Companies Act and nor any rate of depreciation is provided under Schedule XIV - land taken for use from the State government without transferring the title - HELD THAT:- Tribunal in assessee s own case for AY 2004-05, we are of the considered view that in view of the law laid down by Hon ble Supreme Court in Apollo Tyres Ltd. vs. CIT [ 2002 (5) TMI 5 - SUPREME COURT] followed by coordinate Bench of the Tribunal for AY 2004-05, AO has no jurisdiction to go behind the net profit shown in the P L account except to the extent provided in Explanation to section 115J. So, the contention raised by the Revenue that the amount is not a depreciable asset is not tenable and the ld. CIT (A) has rightly deleted the addition. So, we find no scope to interfere in the findings returned by the ld. CIT (A), hence Ground No.3 is determined against the Revenue.
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2019 (8) TMI 344
Disallowance of interest u/s 36(1)(iii) - disallowance of interest on the capital work in progress, on the interest free advances given for capital purpose and interest on investments - HELD THAT:- From the details, it can be found that the interest bearing funds have been utilized for the business purpose only as per the terms of the loan. Nothing contra has been brought on record to prove the fact that the interest bearing funds shown above have been utilized for non business purpose by the Revenue. Since the assessee has been found to be having sufficient own funds and the loan funds have been utilized for the business purpose, keeping in view the established legal position as narrated we decline to interfere in the order of the Ld. CIT(A) on the issue of disallowance u/s 36(1)(iii). Disallowance u/s 14A r.w.r. 8D - HELD THAT:- we hold that in the peculiar facts and circumstances of the case, wherein the assessee has received no exempt income, no disallowance can be made u/s 14A, in view of the position of law as considered by the various Courts. Hence, we find no reason to interfere in the order of the Ld. CIT(A) which is rightly based on the judicial pronouncements. - Decided against revenue
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2019 (8) TMI 343
Penalty u/s 271(1)(c) - disallowance of carry forward and set-off of brought forward losses by holding that there is no provision under the Income Tax Act as per which the loss at the time of splitting the society can be carried forward to the newly formed society - disallowance of excess depreciation( full rates) had been claimed in case of assets put to use for less than 180 days during the year - defective notice - HELD THAT:- The assessee explained that claim of set-off of brought forward losses pertaining to earlier year of parent company were claimed as per the legal advice and that when assessee realized it is a mistake that depreciation is allowable only to the extent of 50% for use of the assets for half of the year then assessee surrendered the amount for taxation, therefore, in such circumstances, it cannot be believed that the assessee-society has concealed the particulars of income or furnished inaccurate particulars of income. The assessee-society bonafidely made a claim of set-off of the brought forward losses and excessive depreciation because of the legal advice. Therefore, the circumstances explained clearly show that penalty need not be imposed in the facts and circumstances of the case. Further, AO in the penalty proceedings noted that notice dated 28th November, 2008 was issued to the assessee before levy of the penalty, in which the AO has mentioned as under : (iii) have concealed the particulars of your income or _______furnished inaccurate particulars of such income. AO in this notice was thus not sure or definite whether assessee has concealed the particulars of income or furnished inaccurate particulars of income. Therefore, on such issue, no penalty is leviable against the assessee-society. The show cause notice issued before levy of the penalty is invalid because it did not contain under which limb of Section 271(1)(c), penalty was to be imposed against the assessee-society. Therefore, penalty proceedings itself are vitiated. - Decided in favour of assessee.
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2019 (8) TMI 335
Entitlement to claim deduction u/s 35AD(v)(aa) - specified business referred to in Sub-Section (2) if it commences operations - HELD THAT:- SLP dismissed.
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2019 (8) TMI 334
Disallowance u/s 35D - HELD THAT:- Claim of the assessee as 1/5 related to expenses IPO F.Y. 2007-2008 and 2009-10, this deduction was allowed. We have also noticed that 1/5 expenses was allowed by the CIT(A) in assessment year 2008-2009 and 2009-10. Therefore, we justify the decision of learned CIT(A) to allow the claim of preliminary expenses to the amount of ₹ 20,11,387/- consisting of ₹ 11,11,226+9,00,161. After perusal of the above facts, we observed that claim of the assessee to the amount of ₹ 11,11,226/- was never disallowed in any of the earlier years and similarly for the assessment year 2008-09 abd 2010-11the learned CIT(A) had allowed the deduction of ₹ 900161/- in the light of the fact and findings reported int he decision of the learned CIT(A), we do not find any merit in the ground of appeal of the revenue therefore the same is dismissed. Disallowance u/s 36(1) - interest free funds given - assessee failed to prove that such funds were given for business purposes - HELD THAT:- During the course of assessment proceedings on perusal of the details of loan and advances the assessing officer noticed that assessee has shown ₹ 20 lacs as outstanding receivable from M/s Red Event India Pvt. Ltd. He observ4ed that during the assessment yea₹ 2008-09 and 2009-10 the assessing officer has given the findings that amount of advances to M/s Red Event Pvt. Ltd. was interest free advances and no purchases or services were obtained from the said party by the assessee. Accordingly the assessing officer has treated this amount advanced for non business purposes. Therefore, the assessing officer has charged interest @ 12% to the amount of ₹ 2,10,000/- on the said advances and added the same to the total income of the assessee Disallowance u/s 14A read with rule 8D - whether no exempt income is earned - HELD THAT:- Question proposed by the Revenue, is squarely covered by a decision of this Court in GREENLAND INFRACON P. LTD. [ 2019 (7) TMI 614 - GUJARAT HIGH COURT].
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2019 (8) TMI 333
Reopening of assessment u/s 147 - withdraw the deduction allowed u/s 54F - whether the respondent is justified in rejecting the objections to the notice u/s 148 without considering the merits raised by the Assessee? - HELD THAT:- In the instant case, the reason assigned by the AO for proposing to withdraw the deduction allowed under Section 54F is that the assessee owns more than one residential house on the date of transfer of the original asset. In his objections dated 12.01.2017, the assessee had attempted to clarify that he did not own more than one residential house at the time of sale of the original asset. This specific objection has been overruled by the AO in the impugned order dated 09.10.2017, not only without assigning any reasons but also with an observation that there was no iota of doubt that the assessee owns more than two residential property on the date of sale. In the absence of consideration of the objections raised by the petitioner in the impugned order, it cannot be said that the impugned order is a speaking order and consequently, the order is in contravention of the rulings in GKN Driveshafts (I) Ltd. [ 2002 (11) TMI 7 - SUPREME COURT] For the foregoing reasons, this Court is of the considered view that it would be appropriate to remit the matter back to the respondent for proper consideration of the objections and to pass a speaking order, as held in GKN Driveshafts (I) Ltd., case . Consequently, the impugned order of the respondent dated 09.07.2017 is hereby set aside and the matter is remanded back to the respondent herein for fresh consideration of the petitioner's objections dated 12.01.2017 for the purpose of passing a speaking order, after giving due opportunity of personal hearing to the petitioner. Such an exercise shall be completed, within a period of six weeks from the date of receipt of a copy of this order.
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2019 (8) TMI 332
Addition u/s 68 - HELD THAT:- We are of the view that matter requires reconsideration at the level of the A.O. Assessee is in business of trading of waste paper. The entire business is depending upon cash purchase and cash sales. A.O. should have consider the nature of business of assessee and should have consider that there were joint accounts with family members of the assessee and matter should have been enquired into whether the cash deposited in the joint accounts belongs to the other family members as well. Since no detailed enquiry have been done at the assessment stage and addition is made merely in the absence of assessee and that assessee explained that due to his ill-health, the evidences could not be produced before A.O, therefore, one chance could be given to assessee to explain the matter in issue before A.O. supported by documentary evidences. We set aside the Orders of the authorities below and restore the matter in issue to the file of A.O. with a direction to re-decide the grounds of appeal so raised by the assessee above, by giving reasonable, sufficient opportunity of being heard to the assessee. - Appeal of assessee allowed for statistical purposes.
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2019 (8) TMI 331
Claim of exemption u/sec. 54 in respect of sale proceeds received - HELD THAT:- We are of the opinion that simply there is a delay on the part of the builder in non-completing the construction on account of minor repairs and obtained completion certificate subsequently, cannot a ground to deny the claim of exemption u/sec. 54. In this context, the Hon'ble Karnataka High Court in the case of Dilip Ranjrekar [ 2019 (1) TMI 158 - KARNATAKA HIGH COURT] has observed that the investment is made in a new property and the construction was completed within a period of three years as narrated in section 54 of the Act, the delay was not because of the assessee and is beyond his control and upheld the order of the Tribunal. In the case of Sardarmal Kothari [ 2008 (6) TMI 15 - MADRAS HIGH COURT] has observed that assessee having purchased land by investing the capital gains and constructed residential house and also produced completion certificate from the municipal authority, exemption u/sec. 54F could not be denied on the ground that the construction was not completed within the specified period. We are of the opinion that assessee s claim u/sec. 54 cannot be denied. Hence, the order passed by the ld.CIT(A) is cancelled and directed the Assessing Officer to allow the exemption claimed by the assessee u/sec. 54 - this appeal filed by the assessee is allowed.
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2019 (8) TMI 330
Disallowance u/s.14A - HELD THAT:- We find from the balance sheet of the assessee that own funds of the assessee in the form of share capital and reserves and surplus as on 31/03/2014 was ₹ 85.03 Crores (as on 31/03/2003 it was ₹ 84.02 Crores), as against the total investments made by the assessee as on 31/03/2014 in the sum of ₹ 6.33 Crores (as on 31/03/2013 it was ₹ 9.37 Crores.) This goes to prove that assessee is having sufficient own funds in his kitty to make investment thereon. We find that the ld. CIT(A) by placing records on CIT vs Reliance Power and Utilities Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT] and CIT vs. HDFC Bank Ltd. [ 2016 (3) TMI 755 - BOMBAY HIGH COURT] had deleted the disallowance of interest made under second limb of rule 8D (2) of the rules. We do not find any infirmity in the said action of the ld. CIT(A). Disallowance u/s.36(1)(va) r.w.s. 2(24)(x) - delayed payment of provident fund and ESI dues beyond the due dates specified under the respective acts - HELD THAT:- We find that the date of remittance of PF and ESI dues for each month is duly tabulated in pages 8 9 of the order of CIT(A) and from which it is seen that the entire dues were duly remitted by the assessee on or before the due date of filing of return of income and hence, by respectfully following the decision of Hon ble Jurisdictional High Court in the case of CIT vs. Ghatge Patel Transport Ltd [ 2014 (10) TMI 402 - BOMBAY HIGH COURT] , CIT vs. Hindustan Organic Chemicals Ltd. [ 2014 (7) TMI 477 - BOMBAY HIGH COURT] and DCIT vs Hind Filter Ltd., [ 2017 (12) TMI 810 - BOMBAY HIGH COURT] CIT(A) had deleted the disallowance made u/s. u/s.36(1)(va) r.w.s. 2(24)(x) of the Act which does not call any interference. Accordingly, ground No.2 raised by the revenue is dismissed. Adhoc disallowance towards travelling and conveyance - HELD THAT:- No ad hoc disallowance of travel expenses @5% in the sum of ₹ 26,90,802/- is warranted in the facts and circumstances of the case. However, we find that this Tribunal for A.Y.2012-13 in assessee s own case on the impugned issue had remanded the matter back to the file of the ld. AO for fresh examination in pages 11 12 of its order which are not reiterated for the sake of brevity. Respectfully following the said decision, we deem it fit to remand this issue to the file of the ld. AO with the similar directions prevailing as in A.Y.2012-13 supra. Accordingly, ground raised by the revenue is allowed for statistical purposes.
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2019 (8) TMI 311
Arbitral Foreign Award - Section 48 of the Arbitration and Conciliation Act, 1996 - Right of appeal to Supreme Court - the stand of the income tax department is that compensation received by the decree holder towards breach of contract is liable for taxation in India as it is a windfall gain and hence is covered under Article 22(3) of the Double Taxation Avoidance Agreement (DTAA) subsisting between India and Switzerland. HELD THAT:- Even a plain reading of Article 22(3) of the DTAA shows that the amounts received by the decree holder as compensation, towards breach of contract cannot fall within its ambit. The language of Article 22(3) is unambiguous. What falls within its ambit is only income received from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or gambling or betting of any nature. It is only such income which can be taxed, if at all, in India. Monies received towards arbitration costs and legal costs - HELD THAT:- The income tax department proceeded on completely erroneous view of the matter - The income tax department has treated monies received under the award towards arbitration costs and legal costs as income of the decree holder and thereby proceeded to take the stand that the same will be taxable as fee for technical services , both under the provisions of Income Tax Act, 1962 and the DTAA - the stand taken by the income tax department on this score would also have to be rejected. The Registry is directed to release the balance amount available with it along with accrued interest to the decree holder without deducting any sum towards withholding tax - petition disposed off.
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2019 (8) TMI 309
Reopening of assessment u/s 147 - ITAT justification in quashing the reassessment order passed by AO u/s 147 admitting grounds of appeal of the Assessee under Rule 27 of the ITAT Rules - HELD THAT:- The point stands answered against the Revenue by the decision of the Gujarat High Court in Principal Commissioner of Income Tax, Vadodara-2 v. Sun Pharmaceuticals Industries Ltd. [ 2017 (9) TMI 1416 - GUJARAT HIGH COURT] holding that although an Assessee may not have appealed or filed a cross-objection, in a different proceedings before the Appellate Forum / Tribunal, he is free to defend such order on all grounds including on any of the grounds decided against him by the authority whose order is otherwise in his favour. Consequently, this Court is not persuaded to frame any question on this issue. Disallowance u/s 35(1)(ii) - HELD THAT:- This issue is concerned are that according to the Revenue the actual research expenses have been incurred by the Mother Dairy Fruits and Vegetables Ltd. whose subsidiary is the present Assessee. The Assessee apparently reimbursed the expenses incurred on scientific research for Mother Dairy Fruits and Vegetables Ltd. The Assessee has been assessed in Gujarat prior to the AY in question and for an earlier AY 2002- 03 where again in reassessment proceedings such expenses were sought to be disallowed, the High Court of Gujarat decided the issue in favour of the Assessee by its order in Dhara Vegetable Oil and Foods Co. Ltd. v. The Deputy Commissioner of Income Tax [ 2012 (7) TMI 593 - GUJARAT HIGH COURT]
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Customs
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2019 (8) TMI 340
Legality and validity of Detention order - Smuggling - Section 3(1) of COFEPOSA Act 1974 - HELD THAT:- This Court is of the view that steps for service had been taken by the respondents promptly and the impugned order does not suffer from delay in execution. This Court is of the view that Respondent Nos. 1 and 2 have not only adequately explained the delay, if any, in execution of the impugned order, but have also explained that it was due to the conduct of the petitioner (as he was evading service), due to which recourse had to be taken under Section 7(1)(b) of COFEPOSA. Consequently, there is warrant to consider that the link between issuance of the impugned order and the execution has not snapped but strengthened. This Court is also of the view that the person, against whom mala fides are alleged, has to be impleaded as a party to the proceeding to enable him/her to answer the allegations. In the present case, even though the petitioner had alleged personal mala fides against Shri Sunil Kumar Singh, he had not impleaded him as a respondent. The allegation that the impugned order was based on extraneous reasons cannot be examined - petition dismissed.
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2019 (8) TMI 339
Advance authorization - export obligation - belated issue of redemption certificates as poof - Violation of Condition (ix) of Customs Notification No.96 of 2009 dated 11.09.2009 - imports made by the petitioner during the financial year 2010-2011 - HELD THAT:- The Foreign Trade Policy, 2009-2014, permitted a manufacturer of excisable goods to import raw materials, packaging materials and consumables without payment of customs duty by obtaining an advance authorisation from the Director General of Foreign Trade, Government of India, subject to conditions. Notification No.96/2009-Cus. dated 11.09.2009 was issued by the Ministry of Finance, Government of India, granting exemption from payment of customs duty on such imported materials. Condition (ix) therein stipulated that such an importer must produce evidence of discharge of its export obligations to the satisfaction of the Deputy Commissioner of Customs or the Assistant Commissioner of Customs within a period of sixty days of the expiry of the period allowed for fulfilment of such export obligations or within such extended period as may be allowed by the customs authorities. It is an admitted fact that the petitioner obtained Advance Authorizations bearing Nos.0910040870, 0910040652 and 0910040522 in January/February, 2010 from the Assistant Director General of Foreign Trade, Hyderabad Regional Office, for duty-free import of raw materials for use in the manufacture of its finished products for export. The export obligations in this regard were to be fulfilled within three years from the date of issuance of such advance authorizations. It is an admitted fact that the petitioner completed and complied with its export obligations as per the aforestated condition within the stipulated period of three years. However, the redemption certificates in proof of fulfilment of such export obligations by the petitioner were issued and filed belatedly. Advance Authorization Scheme - HELD THAT:- It was therefore for the authorities themselves to put in place necessary machinery to see that such certificates were issued promptly, so that they could be produced within the time stipulated in Condition (ix) of Notification No.96 of 2009 dated 11.09.2009. An importer who duly complied with such export obligations in terms of the exemption granted under the Foreign Trade Policy cannot be penalised for delay on the part of the authorities in processing the necessary documentation. Petition allowed - decided in favor of appellant.
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2019 (8) TMI 338
Assessment of Bills of Entry -import of furniture items - rejection of declared value - enhancement of value - respondent case is that assessment to be done on the value arrived at on the basis of weight of furniture - HELD THAT:- here shall be a direction to the respondent to assess/process ten Bills of Entry being Bills of Entry Nos.9803441 dated 23.5.2017, 9868109 dated 13.7.2015, 2118846 dated 3.8.2015, 2386527 dated 27.8.2015, 3041417 dated 26.10.2015, 3984296 dated 21.1.2015, 4691028 dated 24.3.2016, 5064428 dated 27.4.2016, 5337994 dated 20.5.2016 and 5391516 dated 25.5.2016 in accordance with the orders dated 9.2.2016 and 31.3.2016 of Commissioner of Customs (Appeals-II) bearing Reference C.Cus II Nos.135 to 137/2016 and 297/2016 respectively, within eight weeks from the date of receipt of a copy of this order. The outcome shall be communicated to the writ petitioner under Due Acknowledgment within seven working days therefrom. Though obvious, it is made clear that consequences, which flow from the outcome, will proceed without any further reference to this Court. Petition disposed off.
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2019 (8) TMI 337
Smuggling - contraband gold - gold concealed under seat No.12A and disembarkment at Mumbai leaving the said gold in the aircraft itself making arrangements to retrieve the same - imposition of penalty - HELD THAT:- The original authority has examined all the material facts and the statements given by the appellants before the Custom Officer wherein they have clearly confessed their guilt. Further, the Commissioner (A) has also considered all the submissions raised by the appellants before him regarding their defence and after considering the entire evidence, the Commissioner (A) has rightly come to the conclusion that appellant No. II (Rajendra Prakash Pawar) is the key conspirator and mastermind in the illegal activity of contraband gold. He is the sole investor of money and who has sponsored in procuring the contraband gold into India through carriers supposedly arranged by Shri Abdullah in Dubai. The Commissioner (A) further observed that he devised entire plan and put in place all suitable arrangements to execute the illegal act by dubious way of concealing the impugned goods to the seats allotted to the carrier and appellant-I and III have aided and abetted the illegal activity on payment of hefty remuneration. The contention of the learned counsel for the appellant saying that the appellants were not subjected to cross-examination is not tenable in law because the appellants never retracted their statements at any point of time and in their original statements made before the Customs Officer under Section 108, they have clearly admitted their involvement in smuggling activity on payment of remuneration - The versions of the appellants given before the Customs Officer were also proved from their WhatsApp communication. The appellants have admitted their involvement in smuggling the contraband gold and therefore, they have been rightly imposed penalty under Section 112(a) of the Customs Act, 1962 - appeal dismissed - decided against appellant.
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2019 (8) TMI 336
Project imports - Levy of interest for duty foregone - failure to fulfil the export obligation - classification of imported machinery - whether classified under heading 9801 of First Schedule to Customs Tariff Act, 1975 or otherwise - HELD THAT:- It cannot be disputed that the EXIM policy pertaining to the scheme did provide for furnishing of an undertaking on the part of the importer/licensee to commit themselves to payment of interest in addition to the duty foregone at the time of import in the event of failure to fulfil the obligation - The divergence between the notification and the Policy on the consequences of failure to fulfil the export obligation was held to favour the implementation of the former but such is not the issue in the present circumstances owing to there being no incongruity. Confiscation of goods - HELD THAT:- A plethora of decisions of the Tribunal have held that the notifications issued in pursuance of the EXIM Policy, having provided for the alternative of payment of duty in the event of failure to fulfil the export obligation, renders the discharge of either of these option to be sufficient compliance with the condition to be fulfilled in the relevant notification issued under Customs Act, 1962, thus eliminating the scope for invoking section 111(o) of Customs Act, 1962 to confiscate the imported goods. Section 111(o) of Customs Act, 1962 empowers confiscation for non-fulfilment of post-importation conditions which have not been regularised by the appropriate authority - With the recovery of duty, the requirement to comply with the post-importation condition does not exist. Consequently, the imports stand regularised and section 111(o) of Customs Act, 1962 becomes inapplicable. With negation of section 111(o) of Customs Act, 1962, the imposition of penalty is not sustainable - Confiscation and penalty set aside. The recovery of differential duty and charging of interest in the impugned order are sustained and the order modified to set aside the confiscation and penalty - Appeal allowed in part.
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Insolvency & Bankruptcy
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2019 (8) TMI 329
Maintainability of petition - Initiation of Corporate Insolvency Resolution Process - Corporate Debtor - Section 8 of Insolvency Bankruptcy Code, 2016 - existence of dispute as on the date of issue of Demand Notice - pre-existing dispute or not - HELD THAT:- The Hon ble Supreme Court in Mobilox Innovations Pvt. Ltd. Vs. Kirusa Software (P) Limited [ 2017 (9) TMI 1270 - SUPREME COURT ] it is held that the existence of dispute and/or the suit or arbitration proceeding must be pre-existing i.e. it must exist before the receipt of the Demand Notice or Invoice as the case may be. In the present case, the existence of dispute apparently establishes that the goods supplied by the Appellants have been rejected as per Quality Control Report. In the impugned judgement, the Adjudicating Authority gave his finding to establish the existence of dispute with regard to LOC issued by the Respondent to the extent of ₹ 39,15,148/-. The IBC, 2016 is not a recovery proceeding - the Adjudicating Authority rightly rejected the petitions with aforesaid reasons - petition dismissed.
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2019 (8) TMI 328
Maintainability of application - Initiation of Corporate Insolvency Resolution Process - existence of dispute or not - Operational Creditor - Section 9 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- As we find that there is a pre-existing dispute, we hold that the application under Section 9 was not maintainable. Appeal dismissed.
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PMLA
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2019 (8) TMI 327
Grant of Regular Bail - non-application of mid - principles of Natural Justice - HELD THAT:- It is settled position of law that that the parameters for cancellation of bail and the grounds for challenging the order of grant of bail on the ground of arbitrary exercise of discretion, are altogether different. In matters of grant of bail, the merits of the case are not required to be gone into in detail. The court below in the impugned orders has taken note of the gist of the offence alleged against respondent-accused persons and has thereafter, taken into consideration the fact that the final report had been filed. This Court is of the considered view that respondent-accused persons deserve bail on merits and so, impugned orders granting bail to respondents-accused persons are not liable to be interfered with, as the impugned orders do not suffer from any infirmity or illegality - petition dismissed.
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Service Tax
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2019 (8) TMI 326
Levy of penalty u/s 78 - Short payment of service tax or not? - the Tribunal has recorded a finding of fact that the returns were filed and due taxes have been paid. In case of delayed deposit of tax, interest has also been paid by the respondent-assessee - It was held in the case that once the taxes have been paid, along with interest, the entire proceedings under the Finance Act, 1994 are concluded - HELD THAT:- No interference required - SLP dismissed.
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2019 (8) TMI 325
Business Auxiliary Service - short payment of service tax - price variation clause - downward revision of work contract - violation of Rule 6(4) of Service Tax Rules, 1994 - adjustment of excess payment of service tax - HELD THAT:- The appellants have produced the certificate from the service receiver who has certified that original bills were revised and they have paid the Service Tax on revised invoice. Further, the appellant has also produced the certificate of Chartered Accountant for the revision of invoices of the service receiver and accordingly the reduction in invoice value was due to negotiations and revised invoices were raised - the demand of ₹ 1,40,397/- confirmed is not tenable in law and is set aside. Availment of CENVAT credit of ₹ 48,717/- paid as rent and telephone bills - HELD THAT:- In the SCN, it is not disputed that the input services are in relation to rendering output service and hence input service in terms of Rule 2(l) of the CENVAT Credit Rules. Further, the payment made in respect of service received and consumed as service provider and further output services are not exempted from tax and Service Tax is payable on output services therefore there is no dispute with regard to the receipt of services as utilized for output service and as per provision of Rule 4(7) of CENVAT Credit Rules, the appellant has availed the credit of Service Tax on input services which is permitted under Rule 4 (7) of CENVAT Credit Rules therefore denial of credit is set aside. CENVAT Credit on Short payment of Service Tax amounting to ₹ 1,77,839/- for the period 2013-14 - denied on the ground that the invoice produced by the appellant does not provide the details of the recipient of service and the same is not appearing on the face of the invoice - HELD THAT:- The Commissioner (Appeals) has not denied the fact that the input services are in relation to rendering output services. Further, the appellants have availed the credit of Service Tax on input services only after the payment made to the service provider. Further, the appellant has also produced Chartered Accountant certificate for proof of availment of CENVAT credit in the input ledger credit and payment made to the service provider. Further, the appellant has recorded the payment in the input credit ledger and bank statements also showing the payment of Service Tax of ₹ 1,77,839/- - the denial of the CENVAT credit only on the ground that the name of service recipient is not mentioned in the invoice is not sustainable in law when all other details which are required as per Rule 9 are present. Extended period of limitation - HELD THAT:- The period covered in the SCN is 4/2013 to 3/2015 and the SCN was issued on 30.12.2016 which is clearly beyond the normal period of 18 months and therefore the entire demand raised in the SCN is time barred - further extended period cannot be invoked because the appellant has disclosed all the receipts in the ST-3 Returns and there is no suppression on the part of the appellant to evade the Service Tax. Appeal allowed on merits as well as on limitation.
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2019 (8) TMI 324
Leased Circuit Services/ Telecommunication Services - Reverse Charge Mechanism - remittances made by the appellant as monthly rentals charged by foreign internet service providers for procuring bandwith - HELD THAT:- Such foreign internet service provider are not Telegraph authority, which is a condition precedent for levy of service tax. Admittedly, the provider of such service is not a Telegraph authority under the Indian Telegraph Act - no taxable service is rendered by the foreign service provider and accordingly no amount of tax is payable. Demand of service tax - rental charges charged by the appellant from its customers for the rent of its wireless routers/ radio - HELD THAT:- Admittedly, this activity qualify as deemed sale of goods as the said activity tantamount to transfer of right to use these goods . Admittedly, in the transaction, the goods in question were delivered by the appellant and the effective possession and control of the goods have been given. Thus, the said activity amounts to sale, on which admittedly appellant have paid VAT / sale - no service tax is payable by the appellant on the rental of wireless/ router or radio. Demand of service tax - rental/ lease charges (Interconnectivity Charges), charged by the appellant from other ISP for the rent/ lease of its optical fibre cables - HELD THAT:- It is a service provided by one Telegraph authority to another - Service Tax under the provisions of lease circuit service or telecommunication service is exigible only when service is provided by a Telegraph authority to a subscriber. This has also been clarified by the CBEC vide Circular No. B/11/1/2001-TRU - no service tax payable. Online Information and Database Access or Retrieval Services - amounts received by the appellant for the sale of domain names to various customers - HELD THAT:- Demand of Interest and penalties - HELD THAT:- The transaction in domain name is a transaction in property in the goods and amounts to transaction of sale of goods - Domain name are akin to trade mark, making them the property of the person who owns it - service tax not attracted. Appeal allowed - decided in favor of appellant.
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2019 (8) TMI 323
Construction of Residential Complex Service - Non-payment of service tax - sub-contract - construction of residential complex for Rajkot Municipal Corporation - time limitation - HELD THAT:- There is no dispute on the taxability as has been held by the Larger Bench in the case of CST, New Delhi vs. Melange Developers Pvt. Limited [ 2019 (6) TMI 518 - CESTAT NEW DELHI-LB ] that the subcontractor is independently liable to pay service tax even though service tax liability has been discharged by the main contractor - demand upheld. Time Limitation - HELD THAT:- If any assessee is of the belief that being sub-contractor they are not liable to pay service tax, in the light of amendment in Circular in 2005, the assessee should have approached the department and make the position clear regarding their bonafide belief. But in the present case, the appellant did not approach the department regarding their bonafide belief nor they obtained the registration. Therefore, when the Board issued amendment in 2005, it cannot be said that the appellant entertained bonafide belief correctly. In the case of Max Tech Oil Gas Services Pvt. Limited [ 2016 (10) TMI 833 - CESTAT NEW DELHI ], on the identical issue of taxability on sub-contractor, it was clearly held that extended period is invokable. Similarly, in the case of Sew Construction Limited [ 2010 (11) TMI 469 - CESTAT, NEW DELHI ], the Tribunal has dealt with the liability to pay service tax by the sub-contractor and has clearly held that since registration was not sought, claim of bonafide belief cannot be accepted and demand for the extended period was maintained and penalty was also intact. Appeal dismissed - decided against appellant.
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2019 (8) TMI 322
Valuation - Classification of service - Cargo Handling Services or Supply of Tangible Goods Services? - non inclusion of cost recovered towards Transportation and cargo handling - services provided and agreed to be provided cannot be said to the services in respect of handling mere transportation of goods - HELD THAT:- It is quite evident that there is no breakup of charges towards transportation of goods and other services available as part of contract documents between the appellants and M/s CWC. It is also evident that M/s CWC had not provided any breakup even afterwards. What appellant claims is that there were certain breakups agreed during the negotiations between them and M/s CWC. But we find what so ever appellants claim is not part of the agreement/ contract documents. Then what is factual basis for claiming such breakup. Extended period of limitation - HELD THAT:- It is quite evident that appellants were charging the service tax from their customer and not depositing the same with the government. They were also not filing the Service Tax returns even after knowing about their liability for the same. Thus, extended period of limitation is applicable in the facts and circumstances of this case. Demand of interest - HELD THAT:- Since the demand of tax has been upheld the demand for interest will follow. It is now settled law that interest under Section 75, is for delay in the payment of tax from the date when it was due. Since appellants have failed to pay the said Service Tax by the due date interest demanded cannot be faulted. Penalty u/s 78 - HELD THAT:- It is now settled position in law that penalty under section 78 can be imposed only if the ingredients specified in the said section are present. The ingredients specified for invoking the Section 78 are identical to those specified for invoking the extended period of limitation as provided by Section 73 ibid. Since in respect of show cause notice, the demand could have been made by invoking the extended period of limitation as provided by Section 73, we uphold the penalties imposed under Section 78 of The Finance Act, 1994. Penalty u/s 76 and 77 of FA - HELD THAT:- Penalty under Section 76 of the Act is imposed for failure to pay Service Tax by the due date - By not taking registration, paying the service tax by due date and not filing ST-3 returns by the due date appellants have contravened the provisions of Section 68, 69 70 of Finance Act, 1994 read with Rule 4,5,6 7 of Service Tax Rules, 1994. Thus appellants have made themselves liable to penalty under Section 77 ibid. Hence the penalties imposed upon by the adjudicating authority under this section are upheld. Appeal dismissed - decided against appellant.
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2019 (8) TMI 321
Imposition of penalty - non-payment of service tax under reverse charge mechanism (RCM) - Selling Commission‟ services provided in relation to export of goods to foreign agents in foreign currency - reverse charge mechanism - applicability of exemption granted under Section 26 of the Special Economic Zone Act, 2005 - period of dispute is from 3 March, 2009 to 31 March 2011 - suppression of facts or not - extended period of limitation - HELD THAT:- It is true that the exemption was granted under Section 26(1) (e) of the 2005 Act, subject to the provisions of sub section (2) and Notification dated 3 March, 2009 provided that the exemption from payment of Service Tax shall be by way of refund. Thus, it was obligatory on the part of the appellant to have deposited the service tax on reverse charge mechanism and then claimed refund. This was not done and it is only when the Department pointed out this fact to the appellant when it visited the offices of the appellant, that the appellant immediately deposited the amount of service tax as also interest and thereafter claimed refund. This refund was granted to appellant by orders dated 31 January, 2012 and 13 February, 2012 and the amount was also paid to the appellant. These refund orders, as pointed out by the learned counsel for the appellant have attained finality. The refunds were granted since taxable services were provided by the appellant to carry out authorized operation in SEZ. Extended period of limitation - HELD THAT:- The appellant had submitted a detailed reply to the show cause notice pointing out that the appellant had for bona fide reasons not deposited the service tax and in any case when the Department brought to the notice of the appellant the Notification dated 3 March, 2009, the appellant deposited the entire service tax as also interest. The appellant cannot be said to have had any intention to evade payment of service tax, more particularly when the Notification dated 3 March, 2009 enabled the appellant to claim refund of any service tax paid by it in its entirety. It is plausible that the appellant may not have paid service tax because of ignorance of the Notification dated 3 March, 2009. The subsequent Notification dated 1 March, 2011, which superseded earlier Notification dated 3 March, 2009, is in similar terms and it also provides for exemption of payment of service tax by way of refund - It is true that ignorance of law is no excuse, but at the same time non-payment has to be with an intention to evade payment of service tax. The requirement that suppression has to be with an intent to evade payment of Service Tax. The orders imposing penalty for the reason that the appellant had not deposited the Service Tax cannot, therefore be sustained - appeal allowed - decided in favor of appellant.
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2019 (8) TMI 320
Validity of SCN - Business Auxiliary Services - evasion of payment of service tax - case of appellant is that SCN is vague and apart from indicating the amount under various heads of miscellaneous income on technical fee , technical knowhow , commission and income from seminar , it does not mention as to why the said services would fall under BAS - HELD THAT:- When the Show Cause Notice, which is the foundation on which the department has to build up its case, is vague and lack details, it has to be held that the impugned order based on such a Show Cause Notice is bad in law and cannot be sustained. In COMMISSIONER OF C. EX., BANGALORE VERSUS BRINDAVAN BEVERAGES (P) LTD. [ 2007 (6) TMI 4 - SUPREME COURT] , the Supreme Court observed that the Show Cause Notice is the foundation on which the department has to build up its case and if the allegations in the Show Cause Notice are not specific and on the contrary are vague and lack details, it would be sufficient to hold that the noticee was not given proper opportunity to meet the allegations. The Madras High Court in THE COMMISSIONER OF CENTRAL EXCISE VERSUS M/S INDIAN OIL CORPORATION, CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL [ 2017 (6) TMI 573 - MADRAS HIGH COURT] also observed that the Show Cause Notice has to give material particulars since it is the very basis and foundation for the proceedings initiated by the department. Appeal allowed - decided in favor of appellant.
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Central Excise
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2019 (8) TMI 319
Utilization of CENVAT credit - Whether the assessee is eligible to utilize the CENVAT Credit availed on input services viz. Telephone, Courier etc. towards payment of service tax on 'agency commission' falling under the category of services namely 'insurance auxiliary services' which is not an output service? - HELD THAT:- We adjourn the hearing of these two appeals by a week. We make it clear that on the next occasion if the Revenue is not represented to prosecute its Central Excise Appeal No.225 of 2014, we will be inclined to dismiss the Revenue's appeal. Stand over to 7th August, 2019.
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2019 (8) TMI 318
Condonation of delay of 887 days in filing this motion - extension of time for removal of office objections granted by this Court - HELD THAT:- In the present facts, the applicant had failed to remove the office objections and as directed by the Prothonotary and Senior Master on 1st March, 2016. This Court granted their application by restoring the appeal subject to the applicants removing the office objections within 4 weeks. However, the applicant failed to act upon the same and the affidavit as originally filed did not indicate how and when the applicants realized that the order of this Court was not complied with, time was taken to file an additional affidavit. The additional affidavit as filed also does not indicate as to when the applicant came to know that they had not complied with the order dated 23rd June, 2017 of this Court. Thus, the date when they came to know of non-compliance of the order is critical in any application for condonation of delay, as if the above is accepted the time taken thereafter needs to be explained. The affidavit and additional affidavit are both silent on this aspect. The application for condonation of delay in taking out the motion is rejected.
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2019 (8) TMI 317
Rebate of duty - Rule 18 of the Central Excise Rules, 2002 - rebate on exports beyond one year from the date of shipment being dispatched - period February 2013 to October 2013 - HELD THAT:- Upon consideration of the provisions of Section 11A of the Act as also Rule 57-I of the Rules, both prior to the amendment and after the amendment made on 05.10.1988, the Supreme Court held - the provisions of Section 11A of the Act were not an omnibus provision and that the situation arising before it had to be dealt with according to the unamended Rule 57-I of the Rules because section 11A was the law to provide for recoveries of excise duty not-levied or not-paid or short-levied or short-paid while Rule 57-I was the law for availment of MODVAT credit, a completely separate or different contingency, not covered under section 11A of the Act. Insofar as the Rule 57-I did not provide for any period of limitation and did not borrow the rule of limitation from Section 11A of the Act, by way of first reason, the Supreme Court rejected the defence set up by the manufacturer and held the recovery sought by the revenue to be within time. The scheme for rebate under Rule 18 of the Rules read with Notification No. 19 of 2004 dated 06.09.2004 is a special law granting rebate from excise duty to exporters. It is not a scheme for general rebate (under section Explanation A to 11B of the Act). The rebate is not a general rebate from excise duty (that may be otherwise available under the Act). The scheme to grant rebate from excise duty on goods exported by the petitioner was a special beneficial scheme provided under Section 37 of the Act read with Rule 18 of the Rules and notification No. 19 of 2004 dated 06.09.2004, to provide incentive to manufacturers to export their manufactured goods. It was a self contained scheme - None of the conditions and limitations provided under the aforesaid notification were such as may be read to contain a stipulation of limitation of one year from the relevant time or from the date of shipment etc. for the purpose of making a claim for rebate. There is no room to add to those conditions and limitations by reading the general provisions of section 11B of the Act into it. Petition allowed.
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2019 (8) TMI 316
Time Limitation - Classification of goods - manhole cover - classified under heading 7324 or under 7325.10? - N/N. 13/2002-CE (NT) dated 01.03.2002 - appellant argued that they were not sure of the classification and they had doubt which resulted in non-payment of duty - HELD THAT:- It is apparent that in 1999, in registration certificate itself they had sought classification as CI Casting under heading 7325.10 and CI Sanitary Fittings under 7324. The appellant were classifying the product in the year 2000 under heading 7325.10 as apparent from Invoice No. 148 dated 04.01.2000 and subsequently they changed the classification. There was a conscious decision to change classification after 2000. In invoice/ declaration prior to 01.04.2000, they have correctly classified and alter they have changed the classification - Thus, it is apparent that appellant had no bonafide belief otherwise - the extended period of limitation has rightly been invoked. Since the appellant are contesting the issue only on limitation, the appeal filed by the appellant is rejected.
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2019 (8) TMI 315
Clandestine Removal of finished goods - MS/SS ingots - allegation based on parallel invoices - reliance placed on statement of Sh. Devki Nandan, weigh bridge incharge of the Appellant, recorded under the provisions of section 14 of Central Excise Act - weighment slips, recovered during the course of search - Valuation of the alleged shortage of stock - imposition of Personal penalty. Alleged shortage of finished goods of 128.435 MT - HELD THAT:- There may be a possibility of variation of 10% to 15%, but the shortage cannot be stated to be illusory, as worked out during physical stock taking. The panchnama / mahazar was drawn in front of two independent witnesses who witnessed the physical stock taking. In case of disagreement of the method of stock taking the appellant should have raised objection during the time of stock taking or soon thereafter or within a period of few days (one week), which is not the case - the alleged shortage of finished goods if held to be correct, but there needs to be some allowances say 15%, is given for error or variation, as the stock taking was done in a hurried manner. Parallel invoices - HELD THAT:- In the course of verification of the alleged buyers / receiver of the goods before the Commissioner (Appeals), Shri A. K. Malhotra, Director of M/s Rathi Steel Dakshin Limited stated that his statement was taken under pressure. Further, he had already retracted his statement vide letter dated 02.08.2017. the other alleged buyers, were not examined by the Revenue in adjudication proceedings. Demand based on the weighment slips, recovered during the course of search - HELD THAT:- The Director of the appellant has given a plausible explanation, that they also weighed the goods of outsiders on their weighbridge and such weighment slips pertain to outsiders material. Such plausible explanations have not been found to be untrue. There is also no proof to establish clearance of goods under the weighment slips whatsoever. Hence, it is held that the demand based on the weighment slips is only presumptive or fictional and not based on any material evidence, and hence the same is set aside. Valuation of the alleged shortage of stock - HELD THAT:- It would be appropriate to consider the value mentioned in the alleged parallel invoices. Thus, demand shall be reworked adopting the value mentioned in such invoices - the demand for the quantity alleged to be cleared clandestinely is worked out. The adjudicating authority is directed to calculate the duty payable on this quantity on the basis of the rates of ingots found mentioned in the alleged parallel invoices. Accordingly, the appellant company shall also be entitled to reduced penalty under Section 11AC of the Act. At the same time appellant be entitled to pay 25% of the duty, recalculated. Personal penalty on Shri Anshul Agarwal and Shri Nitish Ranjan - HELD THAT:- No case of active concealment and/ or case of clandestine removal is made out against them, under the facts and circumstances. Accordingly, penalty under Rule 26 against both these appellants are set aside. Appeal allowed in part.
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2019 (8) TMI 314
Rebate claim - CENVAT Credit of excise duty/CVD paid on such inputs and were utilising the same for payment of duty on finished goods cleared to respective principal manufacturers - Cenvat registers of the appellant were called for scrutiny while their application for sanction of rebate claim was being examined - credit has been availed on the documents of SIL/SCPPL - HELD THAT:- It has been pointed out by the appellant that each page of register also contains ECC Code of appellant. Appellant have explained that two separate registers maintained by them in respect of inputs received from two different clients and thus there is no error in mentioning the names of their clients in the Cenvat registers. There is no prescribed format for making such registers and there is no law which debars the appellants from maintaining separate registers for two different clients. In these circumstances the allegation in the notice and in the impugned order that the Cenvat credit taken and utilized from the said two registers does not belong to the appellant is misplaced - if the Revenue believed that the said registers did not belong to the appellant and in fact belonged to SIL and SCPPL, then the same could have been essentially verified from the other financial record of the appellant. There is no scrutiny of other financial records done and therefore, the allegation remains unsubstantiated - demand on this count is set-aside. No investigation or verification of records has been done to ascertain if the goods were received in the factory and utilized for the purpose of manufacture of final product or not. The only requirement under the law to avail credit of duty paid on inputs is that the said goods should have suffered duty liability and should have been used in the production of finished goods which are liable to duty - In the instant case, no investigation whatever has been done to ascertain that the goods were received and utilized in the manufacture of goods. Whatever be the address in the invoice documents on the strength of which the credit has been availed, the credit cannot be denied if the goods are in fact received in the factory and utilized for the manufacture of finished goods. The demand set aside and the matter remanded to original adjudicating authority. The appellant may produce all the necessary record of receipt and use of goods in the manufacture, in terms of Rule 9 of Cenvat Credit Rules, 2004 - The matter may be decided after examining the evidence. Denial of credit also on the ground that inputs on which credit is availed are not owned by the appellant - HELD THAT:- There is no such requirement in the law that only inputs which are owned by the assessee, the credit in relation to such inputs which are owned by the assessee can be availed. The only requirement is that the credit of inputs used in relation of manufacture of finished goods can be availed. Availment of CENVAT Credit in excess - HELD THAT:- While the SCN cites Rule 3(7) of Cenvat Credit Rules, 2004, it does not disclose exact manner as to how this calculation has been made and the impugned has also not dealt with the issue. Thus, the order of the Commissioner is not a speaking order consequently, this demand is also set-aside. The Commissioner is directed to disclose the exact manner the demand has been calculated and the details of formula applicable to the facts of the case. Penalty on SIL, SCPPL and Shri R.L. Shetty, (employee of SIL) - penalty imposed alleging that they have aided and abetted M/s. Agro Pack Limited to projected themselves as manufacturer at Ankleshwar and took credit in the Cenvat account registers and allowed the same to be utilized illegally by M/s. Agro Pack Limited. - HELD THAT:- The said allegation has not been upheld in the order passed and consequently, penalty on SIL and SCPPL and Shri R.L. Shetty is set-aside - As regards penalties on Shri Tushar Patel, Shri Bipin Patel and Shri Harish M. Patel, employees of M/s. Agro Pack Limited, the matter is remanded for determination of penalty, after examining the facts in respect of wrong availment of credit, if any. Appeal allowed in part.
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CST, VAT & Sales Tax
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2019 (8) TMI 313
Non-compliance with the pre-deposit - time period of 120 days from the date of receipt of the order under appeal - whether failure to pay the pre-deposit amount within the stipulated period? - HELD THAT:- The Supreme Court had occasion to consider this very aspect in S.E.GRAPHITES PRIVATE LIMITED V/s. STATE OF TELANGANA [2019 (7) TMI 589 - SUPREME COURT] , wherein it was held that the belated payment of the pre-deposit would not vitiate the appeal and that such an appeal would have to be considered on merits. The appeal shall stand remitted to the file of the Tribunal for consideration on merits - Petition allowed.
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Wealth tax
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2019 (8) TMI 312
Penalty u/s 18(1)(c) of the Wealth Tax Act - alleged that the assessee would have escaped from payment of wealth tax - HELD THAT:- CIT(A) proceeded to affirm the orders passed by the AO levying penalty by referring to the amendment to the Statute, which came into force with effect from 01.4.1997. To be noted that the assessments under consideration are for the years 1997-98 and 1998-99 and the assessee's specific case was that they were under the bona fide belief that the house property would not fall within the definition of the term 'asset' as defined u/s 2(ea)(i) of the Act. It is not in dispute that in the case on hand, the assessee did not file the return. In the first instance, notice was issued u/s 17(1) and only thereafter, the return was filed. This, according to the assessee, was because of their bona fide belief that the property would not fall within the definition of the term 'asset' as defined under Section 2(ea)(1). If at all the AO imposes penalty under Section 18(1)(c), by referring to Explanation 3, the AO should have rendered a finding that there was no reasonable cause shown by the assessee so as to invoke the deeming provision. As rightly pointed out by the Tribunal, there was no such finding by the CIT(A). We also find that there was no such specific finding rendered by the Assessing Officer as well. Thus, in the absence of any proof to show that there was an attempt on the part of the assessee to conceal the particulars or to furnish inaccurate particulars, the levy of penalty was not justified. - Decided against the Revenue
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Indian Laws
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2019 (8) TMI 310
Dishonor of cheque - insufficiency of funds - acquittal of offence u/s 138 of the Negotiable Instruments Act, 1881 - legally enforceable debt as contemplated under Section 138 of the NI Act or not - limitation of a liability beyond a period of three years - HELD THAT:- A perusal of the record reveals that, in the instant case, the last business transaction between the parties took place on 26.7.2005 and thereafter, no other business transaction took place between the parties. The Appellate Court has, hence, rightly held that in these circumstances, the cause of action to enforce the said liability, as per law, against the respondent No.2 remained in existence only up to July 2008. Further, it has also been correctly held by the Appellate Court that the Trial Court has although acknowledged the handwritten copy of the account statement, which had not been disputed by the respondent No. 2, to arrive at the conclusion that the cheque dated 12.6.2009, was not against the time-barred liability, but a perusal of the material placed on record reveals that the said document pertains to the account being maintained by the respondent No.2 (appellant therein) and is about the balance which got forwarded on 1.4.2009 and cash entry of ₹ 5000/-, dated 2.6.2009, and even if the said document is deemed to be correct, the said payment of ₹ 5000/- on 2.6.2009 does not extend the period of limitation since the cash payment was made after the expiry of the period of limitation - Though, it is correct that once the signatures are admitted on the cheque, existence of legally enforceable debt or liability has to be presumed, but it is to be noted that the said presumption is rebuttable and in the instant matter, the respondent No.2 has been able to rebut the said presumption by showing that the liability for payment against the goods supplied arose in July 2005 and the limitation to file the case on the said liability expired in July 2008. It is well settled that the presumption, which is contained in Section 139 of the NI Act, only raises the presumption that the cheque has been issued for the discharge of a debt or liability and existence of legally recoverable debt is not a matter of presumption. The Appellate Court has rightly held that the alleged responsibility of the respondent No.2, if any, had already become time-barred as on the date of the issuance of cheque and, therefore, the same cannot be said to be in discharge of a legally enforceable debt or liability - Petition dismissed.
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