TMI Tax Updates - e-Newsletter
August 9, 2019

Case Laws in this Newsletter:

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

TMI SMS

• Supply and installation of submersible pump sets - does not qualify to be a “Works Contract” - GST rate will be rate applicable on goods

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• Power to conduct Audit by the service tax department post GST upheld - savings clause permits the proceedings initiated or to be initiated

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TMI Short Notes

1. Reopening of assessment u/s 147 - Notice issues u/s 148 kept in abeyance since the issue of Deduction u/s u/s 80P(2)(a)(i) is pending before the Apex Court

  Income Tax:

Articles

1. RECENT ADVANCE RULINGS IN GST (PART-18)

   By: Dr. Sanjiv Agarwal

2. Invoice Reference Number (IRN) under GST

   By: Ganeshan Kalyani

News

1. The Insolvency and Bankruptcy Code (Amendment) Act, 2019

2. 53rd Convocation of Indian Institute of Foreign Trade held in Delhi

3. Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others – Palm Oil, Crude Palmolein, RBD Palmolein, Others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified

Notifications

Customs

1. 57/2019 - dated 8-8-2019 - Cus (NT)

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

Circulars / Instructions / Orders

RBI

1. RBI/2019-2020/36 DBR.No.Ret.BC.10/12.01.001/2019-20 - dated 7-8-2019

Change in Bank Rate

Income Tax

2. 17/2019 - dated 8-8-2019

Further Enhancement of Monetary limits for filing of appeals by the Department before Income Tax Appellate Tribunal, High Courts and SLPs/appeals before Supreme Court — Amendment to Circular 3 of 2018 - Measures for reducing litigation

3. 18/2019 - dated 8-8-2019

Clarification in respect of filling-up of the ITR forms for the Assessment Year 2019-20

GST - States

4. 2023/GST-2 - dated 5-8-2019

Corrigendum to Circular issued vide memo No. 927/GST-2, dated 16th April. 2019 and amended vide corrigendum dated 11.07.2019

5. F.16(26)TAX/(GST)/CCT/2017-18/436 - dated 5-8-2019

Directions regarding use of designation after introduction of Rajasthan Goods and Services Tax Act, 2017

6. 1879/GST-2 - dated 26-7-2019

Refund of taxes paid on inward supply of indigenous goods by retail outlets established at departure area of the international airport beyond immigration counters when supplied to outgoing international tourist against foreign exchange

7. 1882/GST-2 - dated 26-7-2019

Clarification on doubts related to supply of Information Technology enabled Services (ITeS services)

8. 1885/GST-2 - dated 26-7-2019

Clarification in respect of goods sent/taken out of India for exhibition or on consignment basis for export promotion

9. GST Circular No. 33/2019 - F.17(134-Pt-II)ACCT/GST/2017/4676 - dated 23-7-2019

Issues related to GST on monthly subscription/contribution charged by a Residential Welfare Association from its members

10. 1778/GST-2 - dated 22-7-2019

Clarification on various doubts related to treatment of secondary or post-sales discounts under GST

11. 1775/GST-2 - dated 22-7-2019

Processing of refund applications in FORM GST RFD-01A submitted by taxpayers wrongly mapped on the common portal

12. 1772/GST-2 - dated 22-7-2019

Clarification regarding determination of place of supply in certain cases

13. 1769/GST-2 - dated 22-7-2019

Clarification regarding applicability of GST on additional / penal interest

DGFT

14. Trade Notice 29/2019-20 - dated 8-8-2019

Online filing of applications for claiming assistance under ‘Transport and Marketing Assistance (TMA) for Specified Agriculture Products’ Scheme

Customs

15. 24/2019 - dated 8-8-2019

Clarification regarding applicability of All Industry Rates of duty drawback while fixing Brand Rate of duty drawback in post GST era

Highlights / Catch Notes

GST

• Submersible Pump Sets Supply Classified as Composite Supply; Not a Works Contract; GST Rate Applies to Pump Sets.

  Case-Laws - AAR : Classification of supply - supply, install, electrify & energise the submersible pump sets and thereby makes the pump sets functional - The recipient prepares the bore wells on their own account - supplies are in the nature of supply of movable property and does not qualify to be a “Works Contract” - It is a composite supply wherein the principal supply is submersible pumps - GST rate will be rate applicable on submersible pump sets
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• Construction Work Under JDA Considered Barter Supply, Receives Development Rights as Consideration per CGST Act 2017.

  Case-Laws - AAR : Work executed under JDA - construction service - the supply is in the form of barter and the consideration is in the form of developement rights and is in the course of furtherance of business - the activity falls squarely falls under 'supply' under CGST Act, 2017.
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• Bank Account Attachment Under GST Invalid Without Show Cause Notice and Commissioner's Order.

  Case-Laws - HC : Provisional attachment under GST - no SCN in for violation has been issued till date - the Parliament has provided that such provisional attachment can only be done consequent to an order of the Commissioner which ensures due application of mind by a senior officer to the facts of the case before an attachment of a bank account is ordered - since no such order is available on file, attachment is without authority of law
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Income Tax

• Guidance on Completing Income Tax Return Forms for Assessment Year 2019-20 to Ensure Accurate Submissions.

  Circulars : Clarification in respect of filling-up of the ITR forms for the Assessment Year 2019-20
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• Amendment to Circular 3 of 2018: Raising Monetary Limits for Tax Appeals to Streamline Litigation and Focus on Major Disputes.

  Circulars : Further Enhancement of Monetary limits for filing of appeals by the Department before Income Tax Appellate Tribunal, High Courts and SLPs/appeals before Supreme Court — Amendment to Circular 3 of 2018 - Measures for reducing litigation
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• No Additional Disallowance for Fees Increasing Share Capital in Amalgamation u/s 35DD of Income Tax Act.

  Case-Laws - AT : Disallowance u/s 35DD - fees for increase in authorized share capital - because of amalgamation proceedings, there was need to increase in authorized share capital and therefore, such expenses cannot be segregated from the main amalgamation proceedings and therefore, these expenses are part of amalgamation expenses - No additions
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• Depreciation Allowed for ETP Plant; Bogus Bill Insufficient for Disallowance When Other Evidence Supports Legitimacy.

  Case-Laws - AT : Disallowance of depreciation ETP plant - Merely because a bill submitted by the assessee was bogus or fabricated cannot negate the other evidences such as the inspection carried out after repair of the ETP plant by the officials of the MPCB, carriage of the various parts of the plant through transporters from Delhi to Aurangabad, payments made through banking Channel etc. - depreciation allowable
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• Section 150(2) bars remedial action u/s 148 for expired limitation period; 2015-16 assessment year direction invalid.

  Case-Laws - AT : Direction of CIT(A) u/s 150 to take remedial action u/s 148 - Section 150(2) provides that direction shall not apply to an assessment year which was the subject matter of the appeal and limiting was already expired - as per section 149(1)(b), notice u/s 148 could have issued by the end of assessment year 2015-16 which had already elapsed - non est direction
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• Court Upholds Reopening of Tax Assessment u/s 147, Citing "Live Link" Between Report and Escaped Income.

  Case-Laws - HC : Reopening of assessment u/s 147 - upon reading the reasons to believe as a whole the ‘live link’ between the material in the form of the investigation report and the formation of belief that income that has escaped assessment is prima facie discernable - the Court hastens to add that this is a prima facie view which is all that is necessary at this stage - reassessment upheld
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• Taxpayer Avoids Penalty Due to Financial Hardship; No Willful Default u/s 221(1) of Income Tax Act.

  Case-Laws - AT : Penalty u/s 221 - non payment of admitted tax - financial stringency is considered to be good and sufficient cause for sufficiency of reason for not levying penalty u/s 221(1) - when AO has not controvert the assessee’s reasons regarding paucity of funds then assessee could not be considered as willful defaulter - no penalty
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• Section 68: No Addition Allowed Without Evidence of Company Paying Money Resulting in Share Premium Investment.

  Case-Laws - AT : Addition u/s 68 - no material is available on record to suggest that either the assessee-company paid money to investor or to any individual, which was invested in the form of share premium in the assessee - in the absence of any material evidence there cannot be any addition on presumption and assumption u/s 68
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• Tax Not Deducted at Source for 'Stake Money' to Horse Owners; Not Considered Winnings u/s 194BB.

  Case-Laws - AT : TDS on the ‘stake money’ paid to the horse owners on winning of races - Circular No. 240 dated 17.05.1978, clarified that tax was not required to be deducted u/s 194BB with respect to income by way of ‘stake money’ as the same is not regarded as winning from horse races - neither liable to TDS u/s 194B nor u/s 194BB and thus, assessee should not be treated as an ‘assessee in default’ u/s 201(1)
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• Educational Cess on Income Tax Allowed as Expenditure, Not a Tax u/s 40(a)(ii) of the Income Tax Act.

  Case-Laws - AT : Allowability educational cess paid on income tax as expenses - since education Cess is not tax this is an allowable expenditure as per provision of section 40(a)(ii)
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• Dismantling and Reinstalling Machinery Costs Classified as Revenue Expenditure, Not Capital, Due to Lack of Enduring Benefit.

  Case-Laws - AT : Disallowance of expenditure on account of shifting of machines - capital or revenue expenditure - plant and machineries had to be dismantled and transported and again installed at other plant - such expenditure do not given enduring benefit to the assessee on the contrary such expenditure are incurred to facilitate the business of the assessee and have to be allowed as revenue expenditure
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• ITAT Rules AO Notice Invalid u/s 271(1)(c) for Lack of Clarity on Penalty Grounds.

  Case-Laws - HC : Penalty u/s 271(1)(c) - Defective notice - ITAT observed that the notice issued by the AO would be bad in law if it did not specify which limb of Section 271(1) (c) the penalty proceedings had been initiated under i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income - no error having been committed by the ITAT
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• Income Tax Reassessment Annulled u/s 147 Due to Lack of Evidence; Revenue's Challenge Barred.

  Case-Laws - HC : Reassessment u/s 147 - precluding the Revenue from urging the merits of the issue only because it had not challenged the order of the CIT (A) annulling the re-assessment proceedings is not a mere ‘technical approach’ - there was no basis for the re-opening of the assessment except the presumptive observation of the Revenue audit which itself was not based on any tangible material - no substantial question of law arises
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Customs

• Clarification on All Industry Rates' Role in Brand Rate Calculation for Duty Drawback Post-GST: Ensuring Compliance and Accuracy.

  Circulars : Clarification regarding applicability of All Industry Rates of duty drawback while fixing Brand Rate of duty drawback in post GST era
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• Show Cause Notices Quashed Due to Unjustified Delays of Over Nine and Five Years Without Prescribed Limitation Period.

  Case-Laws - HC : Validity of SCN issued after undue delay - there is no prescribed period of limitation for completing an assessment, it does not mean that the power can be exercised at any time, it had to be exercised within a reasonable period - the delay of over nine years or over five years in issuing the SCNs have not been satisfactorily explained - SCN quashed
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DGFT

• Online Applications Now Open for Transport and Marketing Assistance Scheme for Agriculture Exporters via DGFT Circular.

  Circulars : Online filing of applications for claiming assistance under ‘Transport and Marketing Assistance (TMA) for Specified Agriculture Products’ Scheme
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Corporate Law

• Lifting the corporate veil isn't universal; it protects directors and shareholders from personal liability in routine transactions.

  Case-Laws - HC : Lifting of corporate veil - The doctrine of the lifting the corporate veil is not available in every case of a liability alleged against a company. To so hold would lead to the consequence that every commercial transaction involving a company will require to be defended by the directors, shareholders or other officers of the company in their personal capacity. This is anathema to the very concept of corporate legal personality.
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• Ex-Parte Award Unenforceable Against Company Under Liquidation; Liquidator Supervised by Madras High Court Prevents Execution.

  Case-Laws - HC : Validity of Ex-parte award after appointing official liquidator for winding up the company - official liquidator was still in seisin of the affairs of the judgment debtor company, albeit, under the supervision of the Madras High Court - The instant ex-parte award cannot be enforced against the judgment debtor.
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Indian Laws

• Court Rules Sentence Reduction for Cheque Dishonor Unsustainable; Calls for Justified Sentencing Under Indian Law.

  Case-Laws - HC : Dishonor of cheque - cheques returned uncashed - insufficiency of funds - the reduction of sentence without assigning any reason is not sustainable and deserved to be reconsidered.
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Service Tax

• Court Upholds Service Tax Audits Post-GST; Savings Clause Validates Proceedings Despite Finance Act Repeal, Section 173 CGST Act.

  Case-Laws - HC : Power to conduct Audit by the service tax department - post GST - since provision of Chapter V of Finance Act, 1994 repealed - If a statute stood omitted with a savings clause, the savings clause would not render it impermissible for the proceedings initiated/to be initiated under Chapter V of the Finance Act of 1994, which stood omitted by Section 173 of the CGST Act of 2017 to be continued - Petition dismissed.
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• Dehydrated Onions Excluded from Agricultural Produce Exemption, Commission Benefits Denied for Non-Qualifying Products.

  Case-Laws - AT : Payment of commission in relation to agriculture product - Dehydrate onion cannot be called as agricultural produce - Benefit of exemption cannot be allowed.
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• Refund Claim Denied for Late Submission Beyond One-Year Limit for Service Tax Not Required to Be Paid.

  Case-Laws - AT : Refund of service tax which was not required to be paid - Since, the refund application was not filed within the stipulated time frame of one year from the relevant date, the original authority had correctly rejected such claim application.
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• CENVAT Credit Misuse: Rectification Must Follow Excise Act Section 11A & 11AA, Finance Act Sections 73 & 75 Guidelines.

  Case-Laws - AT : Excess availment of CENVAT Credit - Cenvat Credit after being utilised wrongly can only be recovered as per provision of section 11A, 11AA of the Excise Act and Section 73 and 75 of the Finance Act since the word “and” is bridged between “taken and utilised”.
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• Appellant Not Classified as Intermediary Provider with Verizon US; Billing Structure Shows Cost Plus 11% Markup.

  Case-Laws - AT : Classification of services - intermediary services or not - The appellant has not been acting as intermediary between another service provider and Verizon US. This fact is also supported from the fact that the appellant has raised their bills for the services provided on the basis of cost plus 11% mark-up.
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Central Excise

• Exemption for 'wafer biscuits' does not cover 'coated wafers,' tribunal rules; specific language must be followed.

  Case-Laws - AT : Benefit of exemption - nobody in the chain of trade from the manufacturer to the ultimate consumer know the products as ‘wafer biscuits’ but know them only called as coated wafers - It is not for this Tribunal to enlarge the scope of an exemption notification meant for ‘wafer biscuits’ to cover ‘coated wafers’ as well.
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Case Laws:

• GST

• 2019 (8) TMI 412
  Classification of goods - Rate of GST - submersible pump sets and accessories - Works contract or not - classifiable under SAC 9954 or otherwise? - Composite supply/principal supply - the supply of submersible pump sets and accessories done with installation, electrification and energisation under Ganga Kalyana scheme to Social Welfare departments of Government of Karnataka meant for various beneficiaries farmers) as notified by the departments and they also provide guarantee and maintenance of installed submersible pump sets till 2 years which is used for irrigational purposes. HELD THAT:- In the instant case, the Applicant s supply involves goods i.e. submersible pump sets and the installation etc, of the same as service. Therefore, the Applicant supplies goods as well as services which are taxable supplies. The contractual agreement between the applicant and the said Corporation requires the applicant to supply the pumps and also install and energise the same. The applicant is, therefore, engaged in two taxable supplies, that of goods and also the service of installation. The service of installation is possible only when the goods (submersible pump sets) are supplied and hence the pre-dominant supply is that of Submersible Pump Sets and hence the principal supply in this case is supply of goods i.e. Submersible Pump Sets - Therefore the instant supply squarely falls under the definition of Composite Supply . Works Contract or not - HELD THAT:- The recipient (Corporation) prepares the bore wells on their own account. The applicant is not concerned with the same. Bore well is a hole dug in the ground, which enables the underground water to be brought to the surface by means of a pump, The applicant has obligation to supply, install, electrify energise the submersible pump sets and thereby makes the pump sets functional. The obligation on the applicant is in relation to the effective installation and functioning of the goods supplied by them. The contract governing their supplies does not relate to building, construction, fabrication etc of any immovable property, as envisaged in the definition of works contract. Their supplies (the submersible pumps) are in the nature of movable property. Hence the said activity is not related to the immovable property at any point of the time and hence the said activity does not qualify to be a Works Contract . Composite supply - HELD THAT:- In the instant case though the supply is a composite one, it is not a works contract as the said supply is not related to the immovable property. This shows that the first requirement of the Notification is not satisfied. The supplies undertaken by the applicant do not qualify to be considered as works contract. As a result the provisions of the Notification No.11/2017 -Central Tax (Rate) dated 28-06-2017, as amended, are not applicable. Since the first condition/ requirement is not fulfilled compliance with the second condition/ requirement becomes infructuous. The supplies made by the applicant qualify to be treated as a composite supply. The tax liability on a composite supply is governed by Section 8 of the CGST Act 2017. Accordingly the composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply and the applicable GST rate on the composite supply would be the rate of GST applicable to the principal supply. The Applicant s supply does not qualify as Works Contract . It is a composite supply wherein the principal supply is that of the supply of goods i.e submersible pumps. The applicable GST rate to the applicant s supply would be the rate applicable on the Principal supply i.e. submersible pump sets.

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• 2019 (8) TMI 411
  Provisional attachment under GST - no SCN in respect of any alleged violation of the Act has been issued till date - non compliance of provisions of Section 83 of GST Act - HELD THAT:- Given the drastic nature of this power, the Parliament has provided that such provisional attachment can only be done consequent to an order of the Commissioner. This ensures due application of mind by a senior officer to the facts of the case before an attachment of a bank account is ordered. Mr. Jetly, learned Counsel appearing for the Respondent, very fairly states that no order is available on file. This would indicate that there was no application of mind by the Commissioner before the Petitioner s bank accounts in Axis Bank, Tardeo Branch and Indusind Bank, Miraroad Branch were frozen/attached. The impugned action of attaching the Petitioner s bank accounts is without authority of law. Thus set aside - petition allowed.

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• 2019 (8) TMI 395
  Levy of GST - work executed under JDA on land owner s portion where work commenced during pre- GST and continued under GST Law - Valuation for payment of tax for such supply - time of supply - HELD THAT:- The supply of construction service provided by the applicant to the land owner is in the nature of Barter - the applicant received the consideratin in the form of developement rights which is other than money and qualifies to be Consideration. therefore in the instant case the supply is in the form of barter and the consideration is in the form of developement rights and is in the course of furtherance of business - the activity falls squarely falls under supply under CGST Act, 2017. Value of supply - HELD THAT:- The value for levy of tax is to be determined in terms of para 2 of N/N. 11/2017-CT (Rate) dated 28-06-2017. Time of supply - HELD THAT:- The construction commenced during pre-GST regime and continued thereafter. Further the applicant has not furnished any information as to whether the applicant has transferred the possession of the land owner s share of flats or not. Hence it is inferred that the possession of the land owners share of flats has not been given to the land owner. Therefore the aid possession obviously would happen during GST regime and hence would attract applicable GST - In terms of N/N. 4/2018-CT(Rate) dated 25-1-2018 the time of supply would fall under the purview of GST law. The Applicant is liable to pay GST towards work executed under Joint Development Agreement on Land owner s portion, on the value to be arrived at in terms of para 2 of the Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 at the time of transfer Of possession of the land owners portion of the fiats.

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• Income Tax

• 2019 (8) TMI 410
  Reopening of assessment u/s 147 - live link between the material in the form of the investigation report and the formation of belief that income that has escaped assessment - HELD THAT:- On a perusal of the report of the investigation which was produced before this Court, it appears prima facie that there was sufficient material to justify the reopening of the assessment in both sets of cases. Further, upon reading the reasons to believe as a whole the live link between the material in the form of the investigation report and the formation of belief that income that has escaped assessment is prima facie discernable. Where a similar challenge is made to the reopening of assessments by issuing notice u/s 148 of the Act, where the Court invariably directs as an interim measure that the re-assessment proceedings may go on but no final order should be passed during the pendency of the petition, in the present case the Court ordered a total stay of further proceedings pursuant to the impugned notices dated 31st March 2015. This in effect meant that the re-assessment proceedings before the AO did not progress. With the Court disinclined to interfere at this stage for the reasons explained above, it would be open to the two Petitioners to advance all the arguments made by them in these petitions, except the point that the reopening constitutes a change of opinion, before the AO. This would include the point urged by Mr. Chetan Sabharwal that the reopening is bad in law because the reasons do not expressly state that there was a failure on his part to disclose fully and truly all material facts in relation to his assessment. Consequently, this Court would not like to further dwell on the other points urged before this Court on behalf of the Petitioners or express a view one way or the other on them except to hold that at this stage the Court, prima facie, finds no merit in the contention that there is no live nexus between the material relied upon and the reasons to believe that income has escaped assessment in both sets of cases.

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• 2019 (8) TMI 409
  Reopening of assessment u/s 147 - based on Revenue audit objection - CIT(A) quashed reassessment, can revenue will be permitted to argue on merit without challenging reassessment? - HELD THAT:- ITAT has in the impugned order noted that for AY 2004-2005 there was no material in possession of the AO other than the observation of the Revenue audit to proceed against the Assessee u/s 147 - CIT (A) noted that the case fell squarely within the realm of change of opinion which was impermissible as a basis for re-opening of assessments after a lapse of four years. The CIT (A) expressly annulled the re-assessment proceedings ITAT noted that this was not challenged by the Revenue. It only challenged the deletion of the addition on merits. In the absence of any challenge to the quashing of the re-assessment proceedings by the Revenue, the ITAT found no ground to interfere. Revenue sought to contend that the ITAT adopted the technical view in precluding the Revenue from urging the merits of the issue only because it had not challenged the order of the CIT (A) annulling the re-assessment proceedings. In the considered view of the Court, this is not a mere technical approach . The fact of the matter is that there was no basis for the re-opening of the assessment except the presumptive observation of the Revenue audit which itself was not based on any tangible material. Revised computation of income u/s 44 r.w. First Schedule to the Act - whether it could have been permitted at the stage of the appeal before the CIT (A)? - computation of Profit and Gains from life insurance business - HELD THAT:- As rightly observed by the ITAT, it is not in dispute that the Respondent carried on the business of life insurance. It is obliged to maintain its books of accounts and prepare its financial statements under the Insurance Act, 1938. Section 44 of the Act read with First Schedule thereof deals exclusively with the computation of Profit and Gains from life insurance business. These provisions, which begin with non-obstante clauses, override other provisions of the Act. There was no option but to compute income for insurance business in terms thereof. Therefore, the Respondent was justified in filing the revised computation u/s 44 and claiming this as an additional ground before the CIT (A). In the circumstances, the direction given by the CIT (A) to the AO to compute income in terms of Section 44 was justified. The Court is unable to find any error having been committed in the ITAT in this regard. No substantial question of law arises on this issue as well. Penalty u/s 271(1) (c) - Defective notice - ITAT followed the decision of CIT v. Manjunatha Cotton Ginning Factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] and observed that the notice issued by the AO would be bad in law if it did not specify which limb of Section 271(1) (c) the penalty proceedings had been initiated under i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. The Karnataka High Court had followed the above judgment in the subsequent order in Commissioner of Income Tax v. SSA s Emerald Meadows [ 2015 (11) TMI 1620 - KARNATAKA HIGH COURT] the appeal against which was dismissed by the Supreme Court of India [ 2016 (8) TMI 1145 - SC ORDER] - No substantial question of law arises.

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• 2019 (8) TMI 408
  Revision u/s 263 - assessment orders passed by AO stated to be erroneous or prejudicial to the interest of revenue - AO not considered entitlement for deduction under Section 80IB on the duty drawback receipts - HELD THAT:- There is no indication in the assessment order that the Assessing Officer considered the assessee s entitlement for deduction under Section 80IB of the Act on the duty drawback receipts and that he had taken note of the decision in India Gelatin and Chemicals Ltd., P.S. Apparels, Eltek SGS (P) Ltd., Metro Tyres, etc. and granted the benefit. As mentioned earlier, AO had not dealt with this issue while completing the assessment. Therefore, at this juncture, the assessee is precluded from raising a contention that the Assessing Officer adopted one of the two views that were available at the relevant time. Be that as it may, it has to be seen as to whether the CIT(A) was justified in its reasoning while passing an order under Section 263 of the Act and directing the Assessing Officer to withdraw the deduction allowed under Section 80IB of the Act. At the relevant point of time, the decision in Jameel Leathers and Uppers held the field. This decision was clearly against the assessee. It is not the case of the assessee that they distinguished this decision before the Assessing Officer, he had considered the grounds raised by them and then granted the benefit of deduction under Section 80IB of the Act. Therefore, before us the assessee cannot contend that the Assessing Officer took note of the fact that the decision in Jameel Leathers and Uppers was distinguished by the Tribunal in the case of P.S.Apparels. In the absence of any finding to the said effect in the assessment order, we cannot be called upon to infer that the Assessing Officer did so. Major claim for deduction under Section 80IB was relating to the duty drawback receipts. Therefore, the Assessing Officer having not applied his mind to the said issue, it would be too late for the assessee to now contend that the Assessing Officer had adopted the decisions which were in favour of the assessee at the relevant time. In the case of M/s.Sakthi Footwear, this Court held that the mandate of law in Section 80IB of the Act is that unless the source of the profit is the undertaking, the assessee is not eligible to claim deduction and mere commercial connection between the income and the industrial undertaking would not be sufficient. - Decided against assessee.

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• 2019 (8) TMI 407
  Exemption u/s 54 - Rs. 75 lacs has been paid by the appellant though jointly held with his wife, who is separately assessed to tax and had made separate deposit of Rs. 50 lacs in Capital Gain Account Scheme - multiple flats constructed have to be construed as one house - HELD THAT:- Assessee has submitted computation of income of the assessee as well as wife of the assessee before the Assessing Officer as well as before the CIT(A). From the perusal of the same it can be seen that the assessee duly deposited Rs. 75,00,000/- which is his share in Capital Gain Accounts before 31.03.2011. The assessee demolished the existing residential property which was jointly owned by him and constructed four new flats but has claimed only as per his own share excluding the wife s share as well. All the criteria of Section 54 was fulfilled by the assessee. In fact assessee s wife got the relief for her share as claimed by her from the Revenue in respect of Capital Gains Scheme. Thus, the Assessing Officer should have not rejected assessee s claim on the different footing which was rightly claimed by the assessee. Therefore, Assessing Officer as well as CIT(A) was not right in making the addition on this account.

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• 2019 (8) TMI 406
  Addition u/s 41(1) for write back of provision and sundry balances - made by earlier by National Delhi Development Board(NDDB) was exempt from income tax - HELD THAT:- Referring to Section 41 (1) the amount is added to the income of the assessee only when an allowance or deduction has been made in the assessment for any year. As mentioned elsewhere the income of NDDB was not liable to tax as income tax Act was not applicable to NDDB. In our considered opinion when no allowance or deduction has been allowed to the predecessor there is no question of adding the same when the amounts are written back by the assessee. Addition of income tax borne on interest on supply credit from foreign suppliers - allowable business expenses - HELD THAT:- There is no dispute that the assessee has paid tax on behalf of its foreign suppliers being an income tax liability. By any stretch of imagination the same cannot be allowed as expenditure u/s. 37. The reliance was placed on the decision of DASHMESH TRANSPORT COMPANY PVT. LIMITED VERSUS CIT [ 1973 (10) TMI 1 - PUNJAB AND HARYANA HIGH COURT] is misplaced in as much as in that case the assessee company took over the assets and liabilities of another company and while discharging the liabilities of that company certain expenditure were incurred which were claimed as legitimate business expenditure.Facts of the case in hand are totally different, therefore, the addition of Rs. 114834/- is sustained. Disallowance u/s.14A - HELD THAT:- There is no dispute that during the year the assessee has earned an exempt income on account of interest on tax free bonds. It is also not in dispute that all the investments are coming from NDDB. The only expenditure which has been incurred by the assessee is towards the board meeting fees. In our considered opinion 100% of such board meeting fee expense need to be disallowed. We accordingly direct the AO to disallow the entire expenditure incurred on board meeting fees towards earning of exempt income. In addition further disallowances of Rs. 1,00,000/- towards the administrative expenses should meet the ends of justice. We direct accordingly. Nature of expenditure - purchase of software - revenue or capital expenditure - HELD THAT:- Looking to the nature of software we are of the considered opinion that these are routine software which need up gradation year after year and, therefore, it can be safely concluded that no enduring benefit is derived by the assessee. The Hon ble High Court of Delhi in the case of Amway India [ 2011 (11) TMI 4 - DELHI HIGH COURT] has held that the issue with regard to the expenditure on software application was to be held in favour of the assessee. Disallowance of expenditure on account of shifting of machines - capital or revenue expenditure - HELD THAT:- There is no dispute that plant and machinery at OPS Chalthan were shifted to OPS Palanpur. These plant and machineries had to be dismantled and transported and again installed at Palanpur. In our considered opinion such expenditure do not given enduring benefit to the assessee on the contrary such expenditure are incurred to facilitate the business of the assessee and have to be allowed as revenue expenditure. We accordingly direct the AO to delete the disallowance and withdraw the depreciation allowed. Ground No.6 is allowed. Addition on account of lease rent - HELD THAT:- A perusal of the assessment order show that the AO himself has followed the assessment order for A. Y.2002-03 and since in that year the Tribunal has deleted the additions. We do not find any reason to interfere with the finding of the CIT(A). Ground No.2 is dismissed. Club membership fee on behalf of its employees of BOHO Club, Anand - HELD THAT:- We find that the AO is disallowed the expenditure on the ground that such expenditure is not connected at all and nothing to do with the business of assessee company. In our considered view such observations of the AO do not have any force. The expenditure has been incurred as several employees of the assessee who are members of the BOHO Club which has been established for the re-creation and welfare of the employees. In our considered view such expenditure is eligible for deduction u/s. 37(1). For this proposition of law we draw support the decision of the Hon ble High Court of Gujarat in the case of Gujarat State Export Corporation [ 1993 (9) TMI 52 - GUJARAT HIGH COURT] . We decline to interfere with the findings of the CIT(A). Disallowing research and development expenses - HELD THAT:- As decided in own case 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 [ 2012 (7) TMI 593 - GUJARAT HIGH COURT]

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• 2019 (8) TMI 405
  Addition on account of interest expense capitalized in real estate under development - interest free advance given to subsidiary - CIT(A) has deleted this addition on the basis of SA Builders Ltd. [ 2006 (12) TMI 82 - SUPREME COURT] - HELD THAT:- CIT(A) has rightly allowed this issue with a detailed finding as well as by discussing the case laws referred by the Assessing Officer - views of the AO appear to be reverted and distorted. The appellant company and its parent company are into different businesses like appellant company doing real estate work and parent company is India Bulls Real Estate Ltd., a real estate company. Both the interest of the company are to earn profits but within the framework of corporate law and other allied laws. Therefore, do not support the view of AO and advice AO to always apply fresh case laws of recent years as appearing in last 5 to 10 years by different High Courts and Supreme Court. With the change of time and advancement of science and technology and development of the country, the situation in which company run their business also differs. Therefore as officers of the department, we should be more practical and pragmatic while making assessment of the companies. Having concluded that the interest paid by the assessee is duly allowable under Income Tax Act as the loan to the subsidiaries has been given for the purpose of its business, it is also directed that the disallowance of the interest cost - Decided against revenue Addition of all expenditure debited to profit and loss account - alleged non commencement of business - payment of brokerage and commission for booking of flats - HELD THAT:- AO ignored the crucial fact that there is payment of brokerage and commission for booking of flats to different brokers and in the next AY 2011-12, the assessee had shown total income of Rs. 209.92 crs. on which paid taxes of Rs. 75.41 crs. Thus, we are in the 4th year of business of the assessee company but the Assessing Officer wrongly mentioned that the assessee did not started its business on AY 2010-11 (4th year of filing return).Thus, the CIT(A) has rightly deleted this addition - Decided against revenue

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• 2019 (8) TMI 404
  Disallowance of depreciation - AO alleged claim as bogus for the reason suppler denied supply of ETP plant to the assessee - cost of asset described as Effluent treatment Plant System purchased from other party who has provided bill of different party - HELD THAT:- CIT(A) has carefully considered the Inspection Report of Maharashtra Pollution Control Board dated 05.10.2007 who visited the factory of the assessee company at Aurangabad from time to time and their reports which are related to inspection of Effluent Treatment Plant which confirms the operation of ETP(Plant), and other observation made about ETP plant. This confirms the repairs carried out by the assessee in its ETP plant. It is also not out of place, to mention here that on 21.05.2007 when the plant was inspected by the officials of the Maharashtra Pollution Control Board they found leakages in pipe lines carrying effluent from ETP to disposal site. They have specifically mentioned in their report that all resulted pipes are required to be changed and to meet the other adverse observations mentioned and assessee company was directed to remove the same with in a period of 30 days. This all confirmed that assessee was to get repaired its Effluent Treatment Plant as per directions of the Maharashtra Pollution Control Board. Merely because a bill submitted by the assessee was bogus or fabricated cannot negate the other evidences such as the inspection carried out after repair of the ETP plant by the officials of the Maharashtra Pollution Control Board, carriage of the various parts of the plant through transporters from Delhi to Aurangabad, payments made by the assessee through banking Channel to M/s Mahindra Engineering Corporation etc. CIT(A) has rightly observed that repairs were carried out in the ETP plant by the assessee and the same deserves to be allowed. Hence, the AO was rightly directed to allow the depreciation as claimed by the assessee by the CIT(A), which does not need any interference on our part, therefore, we uphold the action of the CIT(A) on the issue in dispute and reject the ground no. 1 raised by the Revenue.

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• 2019 (8) TMI 403
  TP Adjustment - comparable selection criteria - TPO has excluded the loss making companies - HELD THAT:- TPO has excluded the loss making companies we find he has not excluded the high profit making companies from the comparables. We find merit in the submission of the Ld. Counsel for the assessee that the Annexure given by the TPO during the assessment proceedings is incomplete and some fresh sets were given according to which the average ALP margin comes to 6.02% as against 10% on cost shown by the assessee. It is only after this incomplete list showing lesser profit than the profit declared by the assessee was brought to the notice of the TPO that he excluded the 47 loss making companies to determine the mean average profit at 20.42%. We, therefore, find merit in the submission of assessee that there is no basis for only excluding the loss making companies and not excluding the high profit making companies or companies which are not at all comparable considering their size, volume of turnover and other factors. In our opinion, the whole exercise of selecting the comparables by the TPO is not proper and is in a haphazard manner. In this view of the matter and in view of the detailed discussion by the Ld. CIT(A) on this issue, we do not find any infirmity in his order and accordingly upheld the same. See FROST SULLIVAN (I) (P.) LTD. [ 2012 (4) TMI 120 - ITAT MUMBAI] - Decided against revenue.

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• 2019 (8) TMI 402
  TDS u/s 194B - TDS on the stake money paid by the assessee to the horse owners on winning of races organized by the assessee - assessee in default in terms of Section 201(1) - Section 194B provide TDS on Winning from lottery or crossword puzzle - impact of inserted the words card game or other game of any sort in Section 194B by FA 2001 - HELD THAT:- It is a well settled principle of interpretation that the heading of a section should also be assigned meaning while interpreting the section. From the heading of the Section 194B it is amply clear that there is no whisper that Section 194B was intended to cover within its purview winnings from horse races. Now coming to the heading of Section 194BB, which reads as Winning from horse race . Going by the heading of the two sections, it can be seen that Section 194BB of the Act is a specific section dealing with TDS on the winnings from horse races. Though the CBDT has specifically excluded stake money from the ambit of section 194BB by way of Circular No. 240 dated 19.05.1978, but it cannot be disputed that Section 194BB is the specific section which deals with TDS on Winning from horse races . Impact of inserted the words card game or other game of any sort in Section 194B by FA 2001 - Coming to the argument raised by the AO that the Finance Act, 2001 has inserted the words card game or other game of any sort in Section 194B which will even cover the stake money which is otherwise not covered by Section 194BB. At the time when the amendment was brought in Section 194B, Section 194BB, which specifically dealt with TDS on winning from horse races, was already on the statute and the Legislature in its wisdom could have made the amendment in Section 194BB itself to include stake money within its ambit; that would have obviated any need to make amendment in Section 194B, which is a general provision for TDS, in order to cover stake money in its ambit. The learned representative has rightly pointed out to the Budget speech of the Finance Minister wherein it was stated that television game shows are very popular these days and I propose that income tax at 30 % will be deducted at source from the winnings of these and all similar game shows. Impact of CBDT has specifically excluded stake money from the ambit of section 194BB - Another way of bringing to tax the stake money was by way of withdrawal of Circular No. 240 dated 17.05.1978, which clarified that tax was not required to be deducted u/s 194BB with respect to income by way of stake money as the same is not regarded as winning from horse races. However, said Circular is still in existence and the DR has not disputed this fact. The entire gamut of the legal position leads to an irresistible conclusion that position of TDS on stake money has not changed even after amendment in Section 194B by Finance Act, 2001 and the position prior to amendment continues to prevail, i.e. the stake money is not liable to TDS either u/s 194BB or u/s 194B. It is a well settled proposition of law that the CBDT Circulars are binding on the Department as it clarifies the understating of the provisions of the Act by the Revenue which cannot be disregarded by the income-tax authorities while construing the provisions of the Act. DR was not able to point out why the interpretation given in the CBDT Circular relied upon by the assessee should not prevail. We find that the Department has tried to indirectly tax what cannot be taxed by virtue of Circular issued by the CBDT, a situation which is impermissible in law. Thus, on this aspect also, we hold that stake money is not liable to TDS u/s 194B. Assessee in default - horse owners have duly reported the income received from the assessee - HELD THAT:- As per ratio laid down by the Hon ble Supreme Court in the case of Hindustan Coca Cola [ 2007 (8) TMI 12 - SUPREME COURT] and the proviso of Section 201(1), which provides that if the recipient of the income has paid taxes on the income received from the assessee and has filed the return of income, assessee should not be treated as an assessee in default . We find enough substance in the said stand of the appellant. Thus, respectfully following the decision of the Hon ble Supreme Court in the case of Hindustan Coca Cola (supra), we hold that where the assessee has produced the confirmation from the parties that they have duly reported the income received from the assessee in their respective returns of income, the assessee should not be treated as an assessee in default in terms of Section 201(1). We hold that the stake money received by the horse owners is not liable to TDS u/s 194B or u/s 194BB and thus, assessee should not be treated as an assessee in default u/s 201(1). We further hold that if the assessee furnishes confirmation from all horse owners to the effect that they have included the incomes received from assessee in their respective returns of income, irrespective of our earlier decision, assessee ought to be allowed benefit of decision of the Hon ble Supreme Court in the case of Hindustan Coca Cola (supra) and should not be treated as an assessee in default . Therefore, we set-aside the order of CIT(A) and direct AO to delete the demand - Appeal of the assessee is allowed, as above.

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• 2019 (8) TMI 401
  Direction of CIT(A) u/s 150 to take remedial action u/s 148 for same assessment year which is under appeal - deduction u/s 80P - time of six years have elapsed - earlier reassessment was quashed by CIT(A) and disposing that appeal direction was issued - HELD THAT:- According to section 150(1), a notice u/s 148 may be issued at any time for the purpose of making an assessment in consequence of or to give effect to any finding or direction contained in an order passed on appeal. Section 150(2), however, provides that the provisions of section 150(1) shall not apply in any case where any such assessment, made in consequence of an appellate order relates to an assessment year in respect of which an assessment could not have been made at the time the order, which was the subject matter of the appeal, was made, by reason of any other provision limiting the time within which any action for assessment may be taken. Section 149 of the Act lays down the time limit for issuance of notice u/s 148. In accordance with section 149(1)(b), if four years, but not more than six years have elapsed from the end of the relevant assessment year, and if the income chargeable to tax which has escaped assessment amounts to one lakh rupees or more for that year, notice u/s 148 for the relevant assessment year shall be issued. In such a case, a notice u/s 148 can be issued upto a maximum period of six years from the end of the relevant assessment year. In the present case, the impugned order was passed on 2/5/2019. The assessment year involved is assessment year 2008-09. In accordance with the provisions of section 149(1)(b) of the Act, notice u/s 148 of the Act could have issued by the end of assessment year 2015-16. This period had already elapsed when the impugned order came to be passed. Therefore, the law not permitting initiation of proceedings u/s 147 when the order under appeal was passed, the direction of the ld. CIT(A) is not in accordance with law. It is a non est direction. An appellate authority cannot confer jurisdiction which the A.O does not have, e.g., as in the case of an assessment being barred by limitation. This has been held by the Hon ble Gauhati High Court in the case of Bengal Tea And Fabrics Ltd. vs. ACIT [ 1996 (9) TMI 110 - GAUHATI HIGH COURT] The Hon ble Allahabad High Court held that the AAC was not justified in directing the ITO to proceed in accordance with law. In CIT vs. Estate Of Late Sri N. Veeraswamy Chettiar [ 1962 (8) TMI 98 - MADRAS HIGH COURT] has held that conferment of jurisdiction on the ITO, which he is not lawfully seized of, is not within the scope of the appellate powers of the AAC. Finding the grievance of the assessee to be justified, the same is accepted. The direction in question, i.e., the direction issued by the ld. CIT(A) vide para 5.5 of the impugned order, as reproduced in para 7 of this order, is hereby ordered to be expunged.

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• 2019 (8) TMI 400
  Addition u/s 68 and u/s 56(2)(viib) - assessee received share application money / share premium from its Managing Director - as alleged assessee-company paid money to M/s Kothari Credit India Pvt. Ltd. or to Shri Mahendra Sethia, which was invested in the form of share premium in the assessee-company - HELD THAT:- No material is available on record to suggest that either the assessee-company paid money to M/s Kothari Credit India Pvt. Ltd. or to Shri Mahendra Sethia, which was invested in the form of share premium in the assessee-company. In the absence of any material evidence, this Tribunal is of the considered opinion that there cannot be any addition on presumption and assumption under Section 68. Moreover, as rightly submitted by the Ld.counsel for the assessee, the AO made addition u/s 56(2)(viib) in respect of the so-called excess amount. In other words, the AO has admittedly treated the transaction as genuine and also admitted the capacity of the person for making investment in the shares of the assessee-company. Therefore, the addition made u/s 68 cannot stand in the eye of law. Judicial satisfaction means the Assessing Officer has to take into consideration the well established method of valuation of shares including the assets as explained in Explanation 2 to Section 56(2)(viib). It cannot be arbitrary. The AO has to take note of the judicial and established principles in arriving at his satisfaction. In this case, the AO has not found any specific fault in rejecting or not satisfying with the valuation made by the assessee. When the AO has not found any defect or error in the valuation of shares by the assessee-company, it may not be necessary to apply the method of valuation prescribed under Rule 11UA of the I.T.Rules. Therefore, this Tribunal is unable to uphold the valuation made by the AO under Rule 11UA of the Income-tax Rules, 1962. Orders of both the authorities below are set aside and the addition made both under Section 68 of the Act and under Section 56(2)(viib) of the Act is deleted. Disallowance u/s 40A(2)(b) - Assessee-company paid lease rent to its Managing Director - HELD THAT:- The assessee admittedly paid Rs. 15 Crores to its Managing Director Shri M. Kiran Kumar for taking the property on lease at 124, Usman Road, T. Nagar, Chennai. The monthly lease rent was Rs. 15,00,000/-. The assessee admittedly paid lease advance of Rs. 15 Crores. As per Tamil Nadu Buildings (Lease and Rent Control) Act, 1960, the rental premium shall be equivalent to 3 months monthly rent. Moreover, Section 30 of the said Act exempts certain type of buildings as enumerated therein. Therefore, the AO shall reconsider the matter in the light of the provisions of Tamil Nadu Buildings (Lease and Rent Control) Act, 1960. Accordingly, the orders of both the authorities below are set aside and the matter is remitted back to the file of the Assessing Officer. The AO shall re-examine the matter and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee. Similarly, in respect of the property taken on lease at No.122, Usman Road, T. Nagar, Chennai also needs to be reconsidered as above. Accordingly, orders of both the authorities below are set aside and the matter is remitted back to the file of the Assessing Officer. Disallowance u/s 36(1)(va) - delay in the payment of employees contribution of PF/ESI to the respective account - HELD THAT:- As in CIT v. Industrial Security and Intelligence India (P.) Ltd. [ 2015 (7) TMI 1063 - MADRAS HIGH COURT] found that if both the employees and employer s contributions were paid to the respective account within the due date provided for filing the return of income, it has to be allowed. Therefore, orders of both the authorities below are set aside and the entire issue is remitted back to the file of the AO. The AO shall re-examine the matter and bring on record the actual date of payment made by the assessee to the Government account and thereafter decide the issue afresh. - Appeals filed by the assessee are allowed for statistical purposes.

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• 2019 (8) TMI 399
  Penalty u/s 221 - non payment of self assessment tax till the date of filling of return of income - sufficient and reasonable cause for not paying the admitted tax liability either at the time of filing of return of income or before the issue of notice u/s 221(1) - HELD THAT:- Assessee could not pay the self assessment tax liability of Rs. 8,06,90,485/- at the time of return of income, however the same has been paid subsequently on installment over a period of time as per the details incorporated above. Assessee had given very elaborate reasons before the authorities below that due to huge financial crunch and hardships, assessee did not had any liquidity to pay the self assessment tax liability. All these facts and explanation have been duly incorporated before the CIT(A) as discussed above. There are umpteen number of judgments, wherein it has been held that financial stringency is considered to be good and sufficient cause for sufficiency of reason for not levying penalty u/s 221(1). AO has also not given any reasoning to controvert the assessee s reasons regarding paucity of funds and if Assessee Company had sufficient reasons for not paying the self assessment tax at time, then assessee could not be considered as willful defaulter on which no penalty should be levied. Apart from that, Ld. Counsel has pointed out that on the same reasons, the department has given the payment plan to the assessee for making the payments. CIT VI vide order dated 28.12.2012 on stay of collection of demand has given the direction for payment of installments though in some other matter. Now the entire self assessment tax has been paid and the entire liability has been discharged. Thus, order of the CIT(A) deleting the penalty is upheld. Consequently, the grounds raised by the revenue is dismissed.

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• 2019 (8) TMI 398
  Disallowance of deduction u/s 80-IC (2) (b) - profit derived by the assessee on sale of black tea manufactured from green leaf purchased - HELD THAT:- Until and unless the assessee engages with both the conditions of processing and raising of the plantation of tea, the assessee cannot be allowed, the deduction under section 80-IC(2)(b). That is, the assessee is not entitled to take the deduction u/s 80-IC (2) (b) in respect of green tea-leaf purchased from outside market. No merit in assessee s appeal, as the assessee is not eligible to claim deduction under section 80-IC(2) (b) of the Act, in respect of green tea-leaf purchased from outside market. Hence, we find no reason to interfere in the said order of the CIT(A) and the same is hereby upheld. Therefore, ground of appeal of Assessee is dismissed.

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• 2019 (8) TMI 374
  Purchase of property in auction conducted by the Income Tax Department - Auction / sale was challenged on the ground that no leave was obtained from the High Court of Calcutta - restraint from proceeding with any advertisement for sale of suit property - bar of filing suit in any civil court against the revenue/income tax authority - HELD THAT:- It reveals that the effect of Section 293 of the Income Tax Act has been mistakenly omitted under the judgment in review and that apart, the consequential effect of the order of the High Court on an application filed by the Union of India in Civil Suit No. 1451 of 1957 dated 8th September, 1965 was open to be examined in the writ proceedings and it was the defence of the Income Tax Department in the reply to the review application and also before this Court in their counter affidavit that in the auction sale which was held in the month of August, 1964, the permission from the Court was not obtained and after the order came to be passed on their application by the Single Judge of the High Court in Suit No. 1451 of 1957 dated 8th September, 1965, it will certainly affect the auction sale held by the Income Tax Department in reference to the subject property in question and it was their stand throughout in the proceedings. We are not inclined to dilate the issues on merits raised in the Writ Petition No. 18500(w) of 1985 filed at the instance of the respondents before the High Court of Calcutta, but if the civil suit was not maintainable as alleged in view of Section 293 of the Income Tax Act and this was the purported defence of the respondents and of the Income Tax Department and consequential effect to the Order dated 8th September, 1965 of which a reference has been made by us, no party could be left remediless and whatever the grievance the party has raised before the Court of law, has to be examined on its own merits. Appeal dismissed.

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• 2019 (8) TMI 370
  Disallowance u/s 14A - case of Insurance companies like assessee where provisions of Section 44 of the Act apply - HELD THAT:- It is the case of the assessee, where computation of income was done u/s.44 of the Act relating to Insurance business , the provision of section 14A cannot be invoked for making disallowance. Stating that this is covered issue, assessee submitted that the CIT(Appeal) granted relief to the assessee on this issue as per discussion given in Para 6 stating the Tribunal has decided this issue in favour of the assessee relying on the earlier order of Tribunal in assessee s own case for assessment year 2003-04. CIT(Appeals) granted relief to the assessee relying on the various decisions of the Tribunal as well as the Hon ble Delhi High Court in the case of Dy. CIT Vs. Oriental General Insurance Co. Ltd. [ 2004 (9) TMI 323 - ITAT DELHI-C] Allowability educational cess paid on income tax as expenses - HELD THAT:- Education Cess, which is not disallowable item, on its payment, the cess is an allowable expenditure as per provision of section 40(a)(ii) of the Act. Considering the settled nature of the issue as per the ratio laid down in the above referred case by CHAMBAL FERTILISERS AND CHEMICALS LTD., PR. COMMISSIONER OF INCOME TAX, KOTA. [ 2018 (10) TMI 589 - RAJASTHAN HIGH COURT]

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• 2019 (8) TMI 369
  Disallowance u/s 35DD - fees for increase in authorized share capital - amalgamation proceedings conceived - HELD THAT:- This ground is covered by the decision of Co-ordinate Bench of the Tribunal, Pune in assessee s own case in [ 2019 (7) TMI 949 - ITAT PUNE] and [ 2019 (7) TMI 1082 - ITAT PUNE] Assessing Officer and the CIT(Appeals) has not denied the facts that there were amalgamation proceedings with respect to the assessee, however they have not brought out any reasons, specially in the order of the Ld. CIT(Appeals) that when entire expenses are in connection with amalgamation proceedings and the Revenue Authorities have allowed stamp duty expenses as deduction u/s.35DD of the Act then what is the reason for not allowing the expenses incurred regarding fees for increase in authorized share capital which is also part of the same amalgamation proceedings. We are also inclined to agree with the submission of the Ld. AR after perusing facts of the case in the decision of the Hon ble Delhi High Court (supra.) that it relates to fees for registration of company and essentially dealing with provision of section 35D(2)(c)(iii) of the Act. There is substantial difference between registration of a company and action taken for increase in authorized share capital. In the case of the assessee because of amalgamation proceedings, there was need to increase in authorized share capital and therefore, such expenses cannot be segregated from the main amalgamation proceedings and therefore, these expenses are part of amalgamation expenses. Additions deleted - Decided in favour of assessee. Nature of expenses - software development expenses - revenue or capital expenditure - HELD THAT:- One of the parties could submit through evidence regarding endurability of these software, whether it is in the category of general purpose of software or specialized software which can be utilized directly for manufacturing or production. Therefore, this issue needs detailed verification. Hon ble Bombay High Court in the case of CIT Vs. Geoffrey Manners Co. Ltd. 2014 (6) TMI 958 - BOMBAY HIGH COURT] wherein the decision of the Tribunal has been upheld by observing that in the changing trend development of technology for research is essential and there is small degree of endurability attached to it. Thus, the expenditures in that case was held to be revenue in nature. Similar position the assessee had witnessed for assessment year 2001-02 wherein the Ld. CIT(Appeals) himself has given relief to the assessee. But in the relevant assessment given, the specialized software used by the assessee, the degree of endurability of these software are to be ascertained. If they are of such expenditure that they can be used directly for manufacturing and production and for longer degree of endurability then there cannot be any iota of doubt that they are capital in nature. However, if the degree of endurability is small then following the decision of the Hon ble Bombay High Court (supra.) this expenditure should be treated as revenue expenditure and hence, allowable. In view of the matter, we set aside the order of the Ld. CIT(Appeals) on this issue and restore it to the file of Assessing Officer for detailed verification - Decided in favour of assessee for statistical purposes. Expenditure on premises - nature of expenditure - HELD THAT:- Assessee company during the year had purchased a second hand bungalow for MD. Thereafter, all these repairs works had taken place. The case laws relied on the by the Ld. AR are on the facts and situation that renovation/repairs were taken place where already the property was in use. But in this case during the year property was purchased and suitable repairs/renovation were made and then it was put to use. So substantially facts are different as compared to the case of the assessee. AO had directed 80% to be capitalized which was reduced to 40% by the Ld. CIT(Appeals) considering that some of the repairs were in nature of current repair. We find this reasoning to be judicious so as that it had maintained the principles of equality with regard to the parties herein in the given facts and circumstances. We do not find any infirmity with the findings of the Ld. CIT(Appeals) which is thereby upheld. Thus, ground No.3 raised in appeal by the assessee is dismissed. Deduction towards provision for warranty - HELD THAT:- From the material on record, it can only be gathered that the assessee credited a sum of Rs. 77,53,766/- to provision account. It is not clearly emanating as to whether Rs. 77,53,766/- was, in fact, offered for taxation in this assessment year. If the assessee really offered the amount of Rs. 77,53,766/- for taxation, then the view taken by the Ld. CIT(Appeals) in deleting the addition has to be upheld. On the other hand, if it is found that the amount of Rs. 77,53,766/- was credited to Provision for warranty account, but was not offered for taxation, in that case, provision will have to be restricted @ 0.40% of total sales, which is Rs. 1.17 crore as against the claim of deduction for provision at Rs. 1,76,75,590/-. Excess amount of provision in that case will have to be disallowed. We therefore, set aside the impugned order on this score and remit the matter to the file of Assessing Officer for deciding the issue afresh in accordance with the above directions. Needless to say, the assessee will be allowed a reasonable opportunity of hearing. Thus, ground No.6 raised in appeal by the Revenue is allowed for statistical purposes. Disallowance of miscellaneous expenses - CIT-A restricted this disallowance to 20% - HELD THAT:- As seen that a sum of Rs. 41,33,283/- has been included under this head, which is on account of Software development account. We have separately dealt with this issue and allowed the assessee s claim for statistical purposes. This amount is, therefore, directed to be excluded from the total of Miscellaneous expenses. A sum of Rs. 25,83,042/- included under this head is on account of actual expenditure on warranty repairs during that period. Similar issue has been decided by the Tribunal in the immediately preceding year against the assessee. We, therefore, direct to disallow the amount of Rs. 25,83,042/-. In the preceding year, we have also disallowed expenditure incurred by the assessee on Gifts and Donations, in entirety. The Assessing Officer is directed to verify the details of such Miscellaneous expenses and disallow the amount relating to Gifts and Donation, if included, under this head. For the preceding year, we have allowed full deduction towards fees for share handling. The Assessing Officer is directed to allow deduction for the full amount towards fees for share handling, after excluding it from this head, if already included. In so far as the remaining amount is concerned, following the view taken in the preceding year, we direct the Assessing Officer to restrict the disallowance to 15% of such remaining expenses. Computation of deduction u/s.80HHC - confirmation of inclusion of commission income - confirmation of exclusion of 90% of Service charges and Miscellaneous income from profits of business for deduction u/s.80HHC - HELD THAT:- similar issue came up for consideration before the Tribunal in assessee s own case for the immediately preceding assessment year. Following the view taken by the Tribunal in assessee s own case for still another year, the matter has been remitted to the AO for a fresh decision. Both the sides are in agreement that the facts and circumstances of the extant ground are similar to those for the A.Y. 2002-03 [2019 (7) TMI 949 - ITAT PUNE] . Following the view taken for the immediately preceding assessment year, we set aside the impugned order and remit the matter to the file of AO for deciding this issue in conformity with the directions given by the Tribunal in its earlier orders TP adjustment on account of royalty payment made to AE - HELD THAT:- As decided in own case [ 2019 (7) TMI 1082 - ITAT PUNE] and [ 2019 (7) TMI 949 - ITAT PUNE] TPO is required to determine the ALP of an international transaction under one of the methods mandated under rule 10B of the Income-tax Rules, 1962. Nothing of the sort has been done in the instant case. The TPO got influenced with extraneous reasons, which have no bearing on the determination of the ALP of an international transaction. It is further observed that similar issue came up for consideration before the Tribunal in assessee s own case for the immediately preceding assessment year. The transfer pricing addition made in similar circumstances has been deleted. Relevant discussion has been made on page 39 onwards of the order. Considering the entire conspectus of the case, including the fact that the payment of Royalty to AEs was as per RBI norms, we are satisfied that the view taken by the ld. CIT(A) is unassailable. This ground, therefore, fails

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• Customs

• 2019 (8) TMI 397
  Validity of SCN issued after undue delay - time limitation - whether the impugned SCN issued to the two Petitioners ought not to be quashed on the ground of delay? - HELD THAT:- The Court finds that the decision of the STATE OF PUNJAB VERSUS BHATINDA DISTRICT CO-OP. MILK P. UNION LTD. [ 2007 (10) TMI 300 - SUPREME COURT ] supports the case of the Petitioners. It holds that even where there is no prescribed period of limitation for completing an assessment, it does not mean that the power can be exercised at any time. It had to be exercised within a reasonable period and what is reasonable would depend on the nature of the statute, the rights and liabilities thereunder and other relevant factors. In the present case, the delay of over nine years and over five years in issuing the SCNs have not been satisfactorily explained by the Respondents. SCN quashed - petition allowed.

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• 2019 (8) TMI 394
  Penalty on company and its directors - failure to fulfill the export obligation arising out of the authorization for import of goods without payment of custom duty - HELD THAT:- The observations and conclusion of the Appellate Authority are factual in nature, wherein the facts found that the Petitioner was thus, Managing Director of the Company, when permission to import goods without payment of duty was granted on the condition of fulfilling of such export obligation. The Company admittedly failed to discharge such obligation. The Petitioner had therefore, exposed himself for the liability arising out such authorization for import of goods. The learned Counsel for the Petitioner stated that the Petitioner does not dispute the order of Appellate Authority on merits, but only disputes the liability of the Petitioner as the Director of the said Company. Petition dismissed.

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• 2019 (8) TMI 393
  Renewal of LOA issued to the petitioner - two star export house certificate - failure to start operation from the allotted of land and office - principles of natural justice - HELD THAT:- Without expressing any opinion on the merits of the matter and having regard to the facts, we find that the order of the appellant court is not a reasoned order. Accordingly, we set aside the order of the appellate court. The appellate court will grant one opportunity of hearing to the petitioner. The petitioner would be entitled to produce such documents which they deem appropriate. Petition allowed by way of remand.

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• 2019 (8) TMI 392
  Valuation of imported goods - 100% polyester knitted fabric (Rolls of Assorted Colour and Weight) - rejection of declared value - enhancement of transaction value based on contemporaneous import price of similar goods - HELD THAT:- If there is any doubt about the transaction value declared by the assessee, then if at all the value of contemporaneous import needs to be applied, the value of identical goods or similar goods should be applied. However, in the present case though the Bills of entry of contemporaneous import were relied upon, the adjudication authority failed to ascertain that whether the goods of contemporaneous imports is identical or similar to the goods of the assessee in the present case. No effort was made by the adjudicating authority to ascertain quality, quantity, characteristics of the goods of contemporaneous import. In the present import without carrying out any test to the fact that goods of contemporaneous import and the goods in question in present case are identical or similar, enhancement of the value is not legal and correct. It is also observed that other than Bills of entry of contemporaneous import, there is no other evidence to show that the assessee have suppressed the value - Therefore, it is incumbent on the adjudicating authority to first ascertain the parameters of quality, quantity, characteristics of both the imports, i.e. contemporaneous imports and goods imported in the present case. Accordingly, the entire matter needs to be relooked. The matter remanded to the adjudicating authority for passing a fresh order - appeal allowed by way of remand.

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• 2019 (8) TMI 391
  Import of prime quality SS CR coils - exemption denied on the ground that the goods are not of prime quality - Benefit of N/N. 12/2012-Cus dated 17.03.2012 (Sr. No. 330) - Revenue s allegation is largely based on the fact that width of the material is less than 600 MM, weight of each coil is less than 3 MT and the fact that MTC given is not coil wise, a general MTC - HELD THAT:- It is seen that the objections raised by the Revenue are not supported by the Standing Order. In the instant case, the MTC has been produced. There is no requirement in the Standing Order that the MTC should be coil wise. The Standing Order clearly recognize the prime goods can be shipped in varying quality, thickness, width and length. It recognize that goods of same size of same thickness are of same homogeneous dimension cannot be regarded as Stock Lot/Ex-stock . It clearly states that the main criteria for identifying the goods has been that consignment should be presented in mixed variety, size and thickness, that too in small quantity supported by manufacturer, Invoice or Mill Test Certificate. Revenue has also relied on the Ministry of Steel Guidelines. The guidelines of Ministry of Steel prescribe that in respect of coil roll (coated, non-coated, electrical) sheet/ strip/ coil, CR Sheets, including electrical sheet and all qualities of coated sheet (galvanized and electro galvanized, aluminized, tin plated, chrome-plated, pre-painted and lead-coated) in mixed non-homogeneous bundles with a unit weight of less than three tonnes, or in coils or less than three tonnes prescribe following as product of non-standard dimensions - We find that the above guidelines are at variance with the standing order. While the SO recognizes mixed lot at prime quality. These guidelines describe them as Non Standard product. Even these guidelines do not describe these as Seconds and defective . Appeal allowed.

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• Corporate Laws

• 2019 (8) TMI 390
  Scheme of amalgamation - Convention of meeting of Equity shareholders - non-filing of the Consent Letters given by the shareholders by way of affidavit before the Tribunal - HELD THAT:- Further from the perusal of the Consent Letters of the Transferee Company, the shareholders have given their no objection and consent for merger of the Transferor Companies with the Transferee Company - From the Consent Letters, it is un-equivocal that the equity shareholders of the Transferor and the Transferee Companies do not have any objection to the Scheme of Arrangement by way amalgamation of the Transferor Companies with the Transferee Company. The Tribunal had already dispensed with convening and holding meeting of secured and unsecured creditors taking into consideration the Consent Affidavits filed by them expressing their no objection for amalgamation of Transferor Companies with the Transferee Company. The Appellant (Transferor and Transferee) Companies have complied with the requirements to consider and approve the Scheme of amalgamation and having satisfied with the documents filed by the Appellants, we dispense with the convening of meetings of the equity shareholders of the Transferor and Transferee Companies as directed by the Tribunal in the impugned order dated 07.06.2019. The impugned order of the Tribunal dated 07.06.2019 whereby it directed to the Transferor and Transferee Companies to convene and hold meeting of the equity shareholders is hereby set aside - appeal allowed.

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• 2019 (8) TMI 372
  Lifting of corporate veil - Dishonour of cheque - transactions by the directors in personal capacity or not - The averment of the plaintiff/respondent is that that, with a view to evade payment of their liability to her, the defendants/petitioners are selling their factory located in Himachal Pradesh - Deletion of names from the array of parties in the suit - suit for recovery, wherein four parties were arrayed as defendants - HELD THAT:- The order of the Trial Court is entirely unsustainable. The allegations contained in the plaint do not speak of any transaction with the defendant nos. 2 to 4 in their personal capacity. The business dealings, although claimed to be with the defendants , the bills and invoices enclosed with the plaint were all issued on the defendant no. 1 company. Similarly, the cheques mentioned in the plaint were drawn on the account of the defendant no. 1 company, although they were signed by the defendant no. 2, as a director of the company. The factory which is alleged to be sold in order to evade a decree is also admittedly in the name of the company - The Trial Court has correctly noticed that a company has a distinct legal personality and its directors and shareholders cannot ordinarily be held liable for its dues. However, the cryptic observation of the Trial Court that the circumstances of the present case attract the principle of lifting the corporate veil is not supported by the pleadings before it or the reasoning in the impugned order. The doctrine of the lifting the corporate veil is not available in every case of a liability alleged against a company. To so hold would lead to the consequence that every commercial transaction involving a company will require to be defended by the directors, shareholders or other officers of the company in their personal capacity. This is anathema to the very concept of corporate legal personality. The defendant nos. 2 to 4 are deleted from the array of parties in the suit - petition allowed.

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• 2019 (8) TMI 371
  Validity of Ex-parte award after appointing official liquidator for winding up the company - principal objection taken on behalf of the judgment debtor i.e. Mercantile Ventures Ltd. is that the arbitration proceedings were continued against it while winding up proceedings were ensuing without obtaining leave of the court, as was required under Section 446 of the Companies Act, 1956 - HELD THAT:- What cannot be disputed, to my mind, by Mr. Sachdeva, is the fact that after the Madras High Court had appointed a liquidator qua the judgment debtor company, the arbitration could have only proceeded further with the permission of the concerned company court. In sum the liquidator had to be in seisin of the proceedings. The arbitration proceedings initiated by the decree holder commenced only on 14.03.2007 after this court appointed an arbitrator. The award which, as indicated above, was an ex-parte award, was passed on 23.05.2012 when the official liquidator, attached to the Madras High Court was still in seisin of the affairs of the judgment debtor company, albeit, under the supervision of the Madras High Court. The instant ex-parte award dated 23.05.2012 cannot be enforced against the judgment debtor. Accordingly, execution proceedings are closed

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• Insolvency & Bankruptcy

• 2019 (8) TMI 389
  Maintainability of application - defence of the Respondent is that as per assignment policy of the Respondent, the employees are eligible for basic and Provident Fund as Indian salary in Indian currency - HELD THAT:- It is apparent that disputes had arisen, before the Appellant could serve Notices on the Respondent. The defence of Respondent is based on documents prior in time. It is not a case of admitted or apparent debt and the Adjudicating Authority is not expected to enter into the disputed questions of facts. In the present matter, the documents being relied on by Respondent show prior existing disputes with regard to the Service of Appellant. The Respondent had raised issue with the Appellant with regard to the services, he was rendering and the dispute was pre-existing and thus, we find that the Adjudicating Authority rightly rejected the three Applications filed by the Appellant under Section 9 of I B Code. Appeal dismissed.

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• Service Tax

• 2019 (8) TMI 396
  Power to audit by the service tax department - Rule 5A(2) - power of officers post GST since provision of Chapter V of Finance Act, 1994 repealed - scope of saving clause - petitioner s contention is that the internal audit is nowhere defined under the Finance Act, 1994 and he is not having any authority to conduct the audit and to demand the documents - Section 173 and 174 of the Central Goods and Services Act, 2017 as well as Section 72-A of the Finance Act, 1994 - principles of natural justice - HELD THAT:- As the provisions of Section 174(2) also is clearly applicable in respect of an omission of the enactment under Section 173, therefore, any such investigation, enquiry, etc., that was instituted, continued or enforced under Chapter V of the Finance Act of 1994, continues to remain in place inspite of such omission of Chapter V of the Finance Act. In other words, Section 174(2)(e) is a savings clause in respect of any investigation, enquiry etc., that was/to be instituted under Chapter V of the Finance Act of 1994. A conjoint reading of Section 173 and 174(2)(e) would show that while bringing an omission to the provision of Chapter V of the Finance Act of 1994, a savings clause for continuing with the proceedings initiated/to be initiated was also duly provided. If a statute stood omitted with a savings clause, the savings clause would not render it impermissible for the proceedings initiated/to be initiated under Chapter V of the Finance Act of 1994, which stood omitted by Section 173 of the CGST Act of 2017 to be continued. This Court is of the considered opinion that no case for interference is made out in the matter specially when, the show-cause notice has been issued - petition dismissed.

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• 2019 (8) TMI 388
  Demand of service tax - commission paid to sales agent located abroad - reverse charge mechanism - benefit of N/N. 13/2003-ST - penalty - Invocation of extended period of limitation in the second SCN - HELD THAT:- It has been already held by Hon ble Bombay High Court in the case of INDIAN NATIONAL SHIPOWNERS ASSOCIATION VERSUS UNION OF INDIA [ 2008 (12) TMI 41 - BOMBAY HIGH COURT] that no demand can be sustained prior to 19.04.2006 as per Section 66A. Therefore the said demand for the period prior to 19.04.2006 is set-aside. Payment of commission in relation to agriculture product - Benefit of N/N. 13/2003-ST- HELD THAT:- It is seen that Dehydrate onion is not covered by the said definition and Dehydrate onion cannot be called as agricultural produce. Dehydrate onion cannot be called as agricultural produce in terms of Notification No. 13/2003-ST. Notification No. 14/2004-ST dated 10.09.2004 is also not applicable in the instant situation as the service provided are not covered by any clause of the said notification. Invocation of extended period of limitation in the second SCN - HELD THAT:- The appellant had resisted supplying documents and data. The facts are not disputed by the appellant and in these circumstances, there was suppression of facts and consequently, extended period has been rightly invoked, in the subsequent notice also. The entire demand for the period after 18.04.2006 is upheld - Penalty imposed under Section 78 is also revised as equal to the demand confirmed in the order - appeal allowed in part.

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• 2019 (8) TMI 387
  Refund of service tax which was not required to be paid - time limitation - Section 11B of the Central Excise Act, 1944 - Banking and Other Financial Services - illegal levy - service tax was not liable to be paid - HELD THAT:- The respondent was not liable for payment of service tax during the period from 01.01.2004 to 18.04.2006 under reverse charge mechanism on foreign remittances made by it in respect of services rendered by foreign entities. However, since the respondent had deposited the service tax along with interest for the services received during the said period, it is no doubt a fact that such amount should be considered for the benefit of refund, subject to fulfillment of the relevant statutory provisions. In the present case, the disputed amount of service tax was paid by the respondent for the period from 01.01.2004 to 18.04.2006 under Rule 2(1)(d)(iv) of Service Tax Rules, 1994. The Hon ble Bombay High Court in the case of Indian National Shipowners Association INDIAN NATIONAL SHIPOWNERS ASSOCIATION VERSUS UNION OF INDIA [ 2008 (12) TMI 41 - BOMBAY HIGH COURT] have held that recipient of service in India is not liable to pay service tax under reverse charge mechanism before 18.04.2006. The refund claim of erroneous payment of service tax will not fall outside the purview of the central excise statute. Since, the disputed amount of service tax was paid by the respondent and collected by the authorities under the Act by placing wrong interpretation of the statutory provisions, such collection or levy will be termed as illegal levy - In such case, the refund claim arises under the provisions of the Central Excise Act, 1944 made applicable to service tax matters inasmuch as such situation in contemplated by and provided in the said Act. Thus, the provisions of Section 11B ibid squarely apply to the case in hand for necessary compliance by the respondent. Since, the refund application was not filed within the stipulated time frame of one year from the relevant date, the original authority had correctly rejected such claim application. Appeal allowed - decided in favor of appellant-Revenue.

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• 2019 (8) TMI 386
  Renting of immovable property service or not - long term lease over 30 years - ownership remains with the government - transaction of grant of right in leasehold property - service or not - non-payment of service tax - period 1.06.2007 to 31.03.2012 and period 01.04.2012 to 31.03.2013 - Agreement to Lease - Cum Tax benefit - extended period of limitation - difference of opinion. HELD THAT:- Both Member (Technical) and Member (Judicial) recorded different opinion on the issue

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• 2019 (8) TMI 385
  Excess availment of CENVAT Credit - credit availed in excess of what was available in the Centvat Credit Register for the period October, 2013 to March 2014 - demand alongwith interest and penalty - HELD THAT:- Allegation against the appellant is that it had availed Cenvat Crdit in excess of its availability to the appellant for which Rule 14 is violated, though no such wording is available in Rule 14 called availed . On the other hand, it uses terms like Cenvt Credit taken , utilised wrongly , erroneously refunded . Availment by its Dictionary meaning would mean to make use of something but the record reveals that the amount was taken in the books of accounts in excess of what was available to the appellant. A bare reading of Rule 14 would clearly lead to a conclusion that Cenvat Credit after being utilised wrongly can only be recovered as per provision of section 11A, 11AA of the Excise Act and Section 73 and 75 of the Finance Act since the word and is bridged between taken and utilised . In the instance case credit is only shown in ST-3 return to have been taken but not utilised though it was wrong a credit taken as amount has been entered twice, which SCN also admits to be a mistake committed by the appellant. Appeal allowed.

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• 2019 (8) TMI 384
  Classification of services - intermediary services or not - export of services - Refund claim - scope of the Service Agreement - Business Support services - rendering Business Services including sales support, marketing, advertising, billing, etc. - services on principal to principal basis, or as an intermediary ? - rejection of refund claim on export of service, as it appeared to Revenue that the appellant is providing the services to their principal located outside India as an intermediary - POPOS Rules - Rule 5 of the Cenvat Credit Rules 2004 read with Notification No.27/2012-CE (NT). Period April, 2012 to June, 2012 - HELD THAT:- The same is for the Positive List Regime (prior to 30.06.2012) - demand do not sustain - decided in favor of appellant. Location of service provider/appellant - Rule 9 of POPS - case of Revenue is that the location of service provider/appellant is in India and further in terms of Rule 9 of POPS, the service provided, being intermediary services, the location of the service provider under Rule 9 of POPS, shall be the place of provision of services, provided to Verizon US - HELD THAT:- The said stand of Revenue is wholly mis-construed and erroneous. Firstly, no demand notice was issued on the appellant refusing or questioning the status of the export of service to Verizon US, as declared in their ST-3 Returns -. Further, admitted facts are that the appellants have provided output services and raised invoices on principal to principal basis. The appellant has not been acting as intermediary between another service provider and Verizon US. This fact is also supported from the fact that the appellant has raised their bills for the services provided on the basis of cost plus 11% mark-up. As the services have been provided by the appellant under contract with Verizon US, who are located outside India and have raised their invoices, for such services and have received the remittance in convertible foreign exchange, the appellant satisfies all the conditions, as specified under Rule 6 A of Service Tax Rules, 1994, inserted w.e.f 1.7.2012. It is evident that the services of the appellant to Verizon US do not merit classification under the category of intermediary services - the appellants have rendered services to Verizon US as principal service provider and not as an intermediary. The appellants are entitled to refund under Rule 5 of the Cenvat Credit Rules, 2004 read with the notification - appeal allowed - decided in favor of appellant.

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• Central Excise

• 2019 (8) TMI 383
  Condonation of delay of 583 days in taking out this application - appeal dismissed for non-removal of the office objections on or before 2nd March, 2017 - HELD THAT:- On facts we find, there is no explanation offered for delay in the affidavit for the period from 2nd March, 2017 to 30th June, 2017 when the GST was implemented. Thereafter also, there is no explanation offered as to when and how the Revenue realized that the office objection had remained to be removed in this appeal. The affidavits are casual. The explanation offered for the delay is movement of files amongst various officers. Moreover no particulars in case of this appeal are indicated - It is clear from the affidavits that the applicants have been negligent. In these facts, we see no reason to condone the delay. Notice of motion dismissed.

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• 2019 (8) TMI 382
  Job-work - manufacture of Cadbury Perk with Glucose Energy on behalf of M/s Mondelez - benefit of N/N. 03/2006 (Sl. No. 19) - Inclusion of dealer s margin, RD markup and post manufacturing expenses claimed by the appellant in assessable value - extended period of limitation - demand of differential duty alongwith interest - imposition of penalties. Whether the assessees are eligible for exemption notification No. 3/2006 (S.No. 19) issued under Section 5A claimed by them which is sought to be denied by the Revenue? - HELD THAT:- A plain reading of the exemption notification does not show that it is intended to cover all products covered by the tariff heading 1905 3290 or wafers (coated or uncoated) falling under tariff heading. It specifically includes only wafer biscuits falling under tariff heading. If the intention of the notification was to exempt wafers also, it would have said so. The assessees products are not described as wafer biscuits by the assessee themselves either to the department or in any of the documents or to the ultimate consumers on their wrappers. Thus, we find nobody in the chain of trade from the manufacturer to the ultimate consumer know the products as wafer biscuits but know them only called as coated wafers - It is not for this Tribunal to enlarge the scope of an exemption notification meant for wafer biscuits to cover coated wafers as well - Even if it is held that wafers could possibly be broadly considered as wafer biscuits, the matter is definitely not free from doubt/ambiguity - the assessee is not entitled to the benefit of exemption notification No. 03/2006. What value should be adopted for reckoning the Central Excise duty? - inclusion of Dealer s margin, RD Markup and Post Manufacturing expenses in assessable value - HELD THAT:- It is not in dispute that the assessee is manufacturing the goods on job work basis and are therefore covered by Rule 10A of Central Excise Valuation (Determination of price of Excisable Goods) Rules, 2000 - As far as the dealer s margin is concerned, in a commodity which costs Rs. 2/- per piece, it is inconceivable that M/s Mondelez was selling these goods directly to individual retailers across the country. Therefore, there is no room for disallowing dealer s margin as a deduction - As far as the RD Mark up is concerned, the Ld. Commissioner considered this to be an R D cost and Ld. Counsel for the appellant clarifies that this is a margin given to the re-distributors. There is no evidence on record to show that this actually pertains to R D expenses. Therefore, inclusion of R D mark up in the assessable value is not sustainable and it deserves to be set aside - As far as the PME (post manufacturing expenses) is concerned, inclusion of these expenses depends upon the nature of the post manufacturing expenses. In case where these are expenses incurred upto the place of removal, the same have to be included in the assessable value. However, if these represent other expenses such as cheque discounting charges as has been asserted by the Ld. Counsel before us, they cannot be included in the assessable value. Whether extended period of limitation under Section 11A can be invoked for raising the demand? - HELD THAT:- Once all facts were noted in the department and the department has come to some tentative conclusion regarding the classification and valuation under section 4A of the Central Excise Act and thereafter after a period of one year based on the same facts issued a different show cause notice, coming to a different set of conclusion, all that can be said, it was a question of interpretation which the department itself was not sure about it. Therefore, the demand of extended period of limitation cannot be sustained. Whether penalties are imposable upon the appellants? - HELD THAT:- Penalties under section 11AC can be imposed where there is fraud, collusion, wilful misstatement, suppression of facts or contravention of any provisions of the Act or the rules made there under with an intent to evade payment of duty - In the present case, we have already held with respect to the invocation of the extended period on limitation that these factors have not been established. Clearly, this is only a question of interpretation regarding the exemption notification and value - the penalties imposed under Section 11AC need to be set aside. Penalty under Rule 26 upon Mondelez - HELD THAT:- The elements of fraud, collusion, wilful misstatement, suppression of facts or violation of act of Rules with an intent to evade payment of duty, have not been established - penalty do not sustain. Appeal filed by Little Star are partly allowed as above by way of remand for the limited purpose of verification of nature of post manufacturing expenses and re-determining the duty and interest excluding any demand for extended period of limitation.

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• 2019 (8) TMI 381
  Time limitation - SSI Exemption - use of brand name - abatement of notification issued under section 4A of Central Excise Act, 1944 - HELD THAT:- The appellant-manufacturer, admittedly, produces goods which are sold to M/s TVC Sky Shop Ltd who, in turn, markets the products to their customers. It is also not in dispute that the brand name does not belong to the appellant-manufacturer and that it is the appellant-manufacturer who affixed the maximum retail price on the package. The claim that such manufacture contracted with a single client is excluded from the purview of assessment under section 4A of Central Excise Act, 1944 does not stand the test of reason. It is in the nature of scheme of alternative assessment under section 4A of Central Excise Act, 1944 that the manufacturer, literally wears his intent on his sleeve and the marking of the maximum retail price on the product is the surest indicator of the goods being intended for the retail customer. This clear manifestation of intent on the part of the appellant must inevitably lead to duty liability in accordance with section 4B of Central Excise Act, 1944. Naturally such a resort is contingent upon non-eligibility for the exemption available to small scale unit under notification no. 8/2003- CE dated 1st March 2003. The appellant is a manufacturer and the brand/logo is not theirs. There is no evidence on record that contract purchaser, the supplier of brand name/logo, is entitled to the same exemption. In the absence of such a claim, the eligibility to exemption becomes questionable. The duty liability, the confiscation of goods along with imposition of penalty, fine thereon for redemption as well as penalty under section 11AC of Central Excise Act, 1944 is upheld - penalty reduced subject to fulfillment of condition - appeal allowed in part.

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• 2019 (8) TMI 380
  CENVAT Credit - job-work - input services - courier services - place of removal - April 2005 and September 2009 - HELD THAT:- Courier service was undisputedly, utilised for shipment of samples. Admittedly, the samples themselves are not the finished product and the availment of courier service, even if for dispatch of samples is an expenditure that goes into the value of the final product. Though courier services are utilised for despatch of samples, transportation is an entirely different taxable entry, and the transportation that is referred to in the said definition pertain to tax on transportation of goods by road. There is also no doubt that the disputed CENVAT credit is related to manufacture of the finished goods. On a plain reading of the provisions of rule 2(l) of CENVAT Credit Rules, 2004 and the facts and circumstances of the present dispute, along with superfluity, of one to one correlation between input services and output, it would appear that the availment is not incorrect in law - The denial of CENVAT credit on availment of services of courier is not in accordance with law and must be set aside. However, in relation to the activity on which tax was discharged by the supplier of business auxiliary service, we find that the coverage of business auxiliary service cannot be held to extend to such activity for the purpose of availment of CENVAT credit. Time limitation - HELD THAT:- The fact that there had been regular audits does not anywhere hide the suppression of relevant information which could have been laid to crystallisation of tax liability. Audit can only unearth which is declared and which is on record - plea of limitation does not merit acceptance. Appeal allowed - decided in favor of appellant.

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• 2019 (8) TMI 379
  Clandestine removal - alleged clearance of automotive paints/coats under the brand name SUNLAC , manufactured by the appellant which was being sold under the invoices of M/s Spraylac - records of production for the period of dispute are not available and that the charges of clandestine clearance have been inferred from lateral evidence - cross-examination of witnesses - principles of natural justice - HELD THAT:- The lack of any evidence pertaining to procurement of excessive raw material, or of shipment of finished goods, to the trading unit is not in dispute. It would appear that the statement of various individuals, that have been relied upon to substantiate the indirect evidence introduced in the form of submission to another statutory authority in a different context, viz., to secure of brand name, the discharge of liability of sales tax and the plea before the Settlement Commission by successor entity would necessarily have to be subject to the test of validity and reliability. It is seen from the records that the findings of the adjudicating authority, taking note of the circumstances of non-availability of records, appear to have placed excessive reliance on uncorroborated evidence. The confirmation of demand of duty rests, therefore, upon the shakiest of foundation. The adjudicating authority was required to consider the request for cross-examination of the witnesses - matter remanded back to the original authority to decide the matter afresh - appeal allowed by way of remand.

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• 2019 (8) TMI 378
  CENVAT Credit - waste/scrap - the waste and scrap generated during repair and maintenance of the plant and machinery, which is out of capital goods, on which Cenvat credit has been taken - Rule 3(5A)(b) of Cenvat Credit Rules, 2004 - HELD THAT:- This Tribunal has already considered this issue in the appellant s own case M/S SAHAKARI KHAND UDYOG MANDLI LTD. VERSUS C.C.E. S.T. DAMAN [2017 (11) TMI 760 - CESTAT AHMEDABAD ] whereby the matter was remanded to the Adjudicating Authority for verification. In the present appeal also though the appellant has submitted invoices of the capital goods, other steel material purchased by them from which the scrap was generated, on which no Cenvat credit was taken. However, the Adjudicating Authority have not carried out any verification and confirmed the demand - the matter should be reconsidered by the Adjudicating Authority by verifying the fact that appellant have not availed Cenvat credit on the capital goods and other steel materials from which the waste and scrap is generated. Appeal allowed by way of remand.

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• 2019 (8) TMI 377
  Condonation of delay of 5 days in filing appeal - CENVAT credit - input services - outward GTA Service - HELD THAT:- The Ld. Commissioner (Appeals) is empowered to condone the delay of 30 days after normal period of 60 days. The condonation of delay was sought by the appellant on the ground that concern staff was not well and to that effect the medical certificate was submitted. In my considered view on the basis of medical ground, the Ld. Commissioner (Appeals) should have condoned the delay. CENVAT Credit - input services - outward GTA Service - HELD THAT:- Once he rejects the appeal on limitation, he has no jurisdiction to entertain the appeal on merit - the denial of cenvat credit was on the basis of Hon ble Supreme Court judgment in COMMISSIONER OF CENTRAL EXCISE SERVICE TAX VERSUS ULTRA TECH CEMENT LTD. [ 2018 (2) TMI 117 - SUPREME COURT] case, subsequently, this Tribunal has passed judgment after considering Hon ble Supreme Court judgment in M/S SANGHI INDUSTRIES LTD. VERSUS C.C.E. KUTCH (GANDHIDHAM) [ 2019 (2) TMI 1488 - CESTAT AHMEDABAD] therefore, in the light of subsequent development, the matter needs to be re-considered on merit. Appeal allowed by way of remand.

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• CST, VAT & Sales Tax

• 2019 (8) TMI 376
  Works contract - Benefit of Sections 3, 4 and 5 of the Central Sales Tax Act, 1956 - purchase of cement and bitumen for the purposes of execution of works contract awarded to the assessee by National Highways Authority of India - Section 3-F(2)(b) of the U.P. Trade Tax Act, 1948 - HELD THAT:- Under Section 3-F(2)(b)(i) read with Section 3-F(1)(b) of the U.P. Act, it is the statutory mandate that the amount representing the sales value of goods covered by Sections 3, 4 and 5 of the Central Act have to be necessarily excluded from the value of the works contract for the purposes of subjecting the same to assessment under the U.P. Act - the benefit that was being claimed by the assessee was not by way of exemption but a claim depending on the jurisdictional issue i.e. the state legislature did not have the legislative competence to impose tax on goods being imported to the State solely for the purpose of execution of the works contract. Once it is established by whatever evidence, that the movement of goods was occasioned from outside the State solely for the purposes of execution of the works contract, the provision of Section 3-F(2)(b)(i) of the U.P. Act would come into play on it s own. No further condition as contemplated by the Tribunal exists and, therefore, the assessee could not be required to establish from the terms of the works contract that the individual goods had been specified therein. The plea does not appear to have been considered by the Tribunal to any extent and the Tribunal appears to have rejected the claim on over simplistic and erroneous reasoning that the assessee had not informed NHAI about the goods that were applied to the execution of the works contract - In absence of specific findings being recorded as to whether the movement of goods from outside the State had been occasioned by the pre-existing works contract executed by the assessee, the question law (as framed above) has to be left unanswered at this stage. The matter is remitted to the assessing authority, as suggested by learned counsel for the applicant-assessee, to pass appropriate orders - appeal allowed by way of remand.

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• 2019 (8) TMI 375
  Scope of undisputed tax and disputed tax - Circular No.40T of 2019 dated 20 July 2019 - Section 19(1) of Maharashtra Settlement of Arrears of Tax, Interest, Penalty or Late Fee Act, 2019 - HELD THAT:- In view of the statement made on behalf of the Respondent by Mr.Sonpal that the Trade Circular would be considered by Respondent No.2 Commissioner of Sales Tax, the challenge to the Trade Circular for the present does not survive. However, all contentions are kept open. Needless to add, that as the application is made by the Petitioner under the Amnesty Scheme before 31 July 2019, it would be payment made under the Phase-I of the scheme. In the present facts, the Petitioner s application would be considered as an application under the first phase as provided under Section 4 of the Act, even if further differential payment is made consequent to the order on representation by Respondent No.2 Commissioner. However, the further payment, if any, required to be made by the order on representation would be done within one week of receipt of the above order. Petition disposed off.

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• Indian Laws

• 2019 (8) TMI 373
  Dishonor of cheque - cheques returned uncashed - insufficiency of funds - offence punishable under Section 138 of the N.I. Act - HELD THAT:- This Court finds that respondents No. 1 and 2 in spite of the orders of the learned trial Court, Appellate Court as well as by this Court and also by the Hon ble Supreme Court, have not paid the cheques amount and flouted the order by putting the technical procedure hurdles and not obeying the order. This conduct shows that the respondents issued the cheques merely as device to fraud the complainant and this dishonored of the cheques caused incredible loss, injuries and inconvenience to the complainant and also reflected the credibility of the business transaction. This Court is of the view that the learned trial Court without assigning any reason reduced the sentence of imprisonment into the lowest one till rising of the Court, which does not seem to be warranted in this situation - the reduction of sentence without assigning any reason is not sustainable and deserved to be reconsidered. This Court is not found fit to reconsider the sentence at this stage, therefore, this case should be remitted back to the Appellate Court for reconsidering the sentence. Conviction under Section 138 of the N.I. Act is hereby affirmed and the order of sentence passed by the Appellate Court is hereby set aside - Learned Appellate Court is directed to restore the appeal to its original number and by assigning the cogent reasons reconsidered the appeal on the point of sentence - revision partly allowed.

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