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TMI Tax Updates - e-Newsletter
September 16, 2019
Case Laws in this Newsletter:
GST
Income Tax
Customs
Securities / SEBI
Insolvency & Bankruptcy
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Articles
News
Notifications
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Provisional attachment of property - Just because, some proceedings are initiated under Section 67 by itself would not be sufficient to arrive at the satisfaction that it is necessary to provisionally attach the property for the purpose of protecting the interest of the government revenue. - HC
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Provisional attachment of property - In the absence of any cogent or credible material, if the subjective satisfaction is arrived at by the authority concerned for the purpose of passing an order of provisional attachment under Section 83 of the Act, then such action amounts to malice in law. - HC
Income Tax
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High Pitched Scrutiny Assessment - the rejection of the petitioner's complaint by the Local Committee will not prejudice the rights of the petitioner to pursue the appeal already pending before the Appellate Authority by raising all the grounds and that all the appeals pending before the Appellate Authority can be disposed of on merits - HC
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Where the assessee had received the alleged subvention amount or the subsidy as referred to by the Assessing Officer / TPO / DRP, the amount received by assessee from its parent company Nalco, USA was a capital receipt in the hands of assessee and hence, was not taxable in its hands. - AT
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Levy of penalty u/s 271AAB - surrender of additional income during search - assessee had himself admitted to the fact that there were discrepancies and unrecorded entries in his books of account and also certain rough notings and estimates. Having himself admitted to all these facts and at no point of time having ever retracted this admission, the same constitutes incriminating material against the assessee - Levy of penalty confirmed - AT
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Additional depreciation - Once the activity of the assessee is converting the large stone blocks into aggregate which is after undergoing the process of crushing then the said activity is production/ manufacturing of a new article or thing which is different/distinct from input - claim of additional depreciation on the purchase and use of new plant and machinery allowed - AT
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Reopening of assessment u/s 147 - information received from the Investigation Wing of the Revenue is on the basis of material seized during search proceedings u/s. 132 - statutory presumption u/s. 292C is as to the truth of its’ contents - Assessee failed to raise the objection till the completion of assessment - argument of the assessee rejected - AT
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Addition u/s 68 - Loans taken from non-resident Indians - the Revenue has taken the contradictory stand in two different assessment years. - No allegation of the Revenue that the assessee has provided funds from his unaccounted fund to the lenders to get its unaccounted fund in the accounting form - Addisons deleted - AT
Customs
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Import of one used motor cycle under Transfer of residence (TR) facility - non-fulfillment of condition for availing the relaxation from import conditions - under-valuation - Department has not brought any material on record to show that the documents produced by them are not genuine document and that there was some transfer of illegal considerations - the said vehicle directed to be released on payment of appropriate duty - AT
Indian Laws
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Demand of Interest on account of delay in payment of the penalty - The interest on such penalty being a statutory levy is required to be paid - the petitioner is required to pay interest on the delayed payment of penalty - HC
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Grant of Bail - commission of fraud punishable u/s 447 of the Companies Act, 2013 - siphoning off of funds - The High Court has failed to apply its mind to all the circumstances that were required to be considered while granting bail, particularly in relation to economic offences - SC
Service Tax
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Classification of services - Business Auxiliary Services or not - amounts received by the Appellants from the vehicle manufacturer/ dealer and accounted by them in their book of accounts as subvention income - the prepayment charges can never be considered to be in the nature of interest - AT
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Refund claim - time limitation - relevant date - the time limit for consideration of refund claims under Rule 5 of the CCR may be taken as the end of the quarter in which the FIRC is received, in cases where the refund claims are filed on a quarterly basis. - AT
Central Excise
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Refund claim - CENVAT Credit reversed in excess of what was required to be reversed - in the present case, the final adjustment happens on 30.11.2017 and that is the relevant date for the purpose of reckoning the period of limitation as provided in Section 11B - AT
VAT
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Set off of tax paid on purchase of raw materials used in the manufacture of tubular poles - Claim rejected on the reasoning that the assessee had not raised any such claim in its return and, therefore, it was not permissible to grant the same at the stage of assessment - revision application of the assessee dismissed - HC
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Illegal detention of goods along with vehicle - No doubt, the department may have good case on merits in respect of certain illegal activities alleged to have been committed - But, they have no power to make such transmission of goods from one section to another section. - HC
Case Laws:
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GST
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2019 (9) TMI 621
Maintainability of appeal - appeal dismissed on the ground that certified copy of order in original has not been appended, whereas factually original order had been appended - HELD THAT:- The learned State counsel on instructions from Shri Vijay Kumar Singh, Addl. Excise and Taxation Commissioner, Panchkula submits that Revisional Authority exercising the powers under Section 108 of Haryana Goods and Services Tax Act, 2017 has annulled impugned order while remanding back to Appellate Authority for adjudication of appeal on merits. Writ is disposed of as infructuous.
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2019 (9) TMI 620
Maintainability of appeal - appeal dismissed on the ground that certified copy of order in original has not been appended, whereas factually original order had been appended - HELD THAT:- The learned State counsel on instructions from Shri Vijay Kumar Singh, Addl. Excise and Taxation Commissioner, Panchkula submits that Revisional Authority exercising the powers under Section 108 of Haryana Goods and Services Tax Act, 2017 has annulled impugned order while remanding back to Appellate Authority for adjudication of appeal on merits. Writ is disposed of as infructuous.
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2019 (9) TMI 619
Release of conveyance alongwith the goods - Part payment already made - Section 129 of the GST Act - HELD THAT:- The writ applicant is entitled to some interim relief in the matter. An amount of ₹ 1,64,934 has been paid by the writ applicant towards tax and penalty as determined by the authority under Section 129 of the GST Act. The payment receipt is placed on record. The conveyance and the goods are ordered to be released forthwith, subject to the final outcome of this writ application. Rule returnable on 24th October, 2019 .
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2019 (9) TMI 618
Provisional attachment of property - Section 83 of the GST Act, 2017 - blockage of input tax credit - whether the State Tax Officer 1, Unit 44, Vadodara could have exercised powers under Section 83 of the GST Act, 2017 for the purpose of provisional attachment of the property owned by the writ applicant? Power of Officers u/s 5 of GST Act, 2017 - Delegation of power - HELD THAT:- Delegation is the act of making or commissioning a delegate. It generally means parting of powers by the person who grants the delegation and conferring of an authority to do things which otherwise that person would have to do himself. Delegation is defined in Black s Law Dictionary as the act of entrusting another with authority by the empowering another to act as an agent or representative . Section 83 makes it abundantly clear that it is the Commissioner's opinion which is relevant. The Legislature has thought fit to confer this power upon the Commissioner. Whether such power conferred upon the Commissioner by the legislature could have been delegated to the three subordinate officers referred to above by virtue of the order dated 15th January 2018 passed in exercise of power under subsection (3) of Section 5 read with clause 19 of Section 2 of the Act and the rules framed thereunder. In our opinion, the answer has to be in the negative. Although there is no specific challenge to the order dated 15th January 2015 passed by the Commissioner of State Tax delegating his power under Section 83 to the subordinate officers, yet, we are of the view that by virtue of such order, such impugned order of provisional attachment cannot be defended. In the absence of any cogent or credible material, if the subjective satisfaction is arrived at by the authority concerned for the purpose of passing an order of provisional attachment under Section 83 of the Act, then such action amounts to malice in law. Malice in its legal sense means such malice as may be assumed from the doing of a wrongful act intentionally but also without just cause or excuse or for want of reasonable or probably cause. Any use of discretionary power exercised for an unauthorized purpose amounts to malice in law. It is immaterial whether the authority acted in good faith or bad faith. It would be a big mistake on the part of the respondents to understand that the reasons to believe necessary for the purpose of carrying out inspection, search and seizure under Section 67 of the Act, 2017 would be sufficient enough for the purpose of formation of the opinion that it is necessary to provisionally attach the goods or other articles for the purpose of protecting the interest of the government revenue. In our opinion, Section 83 of the Act stands altogether on a different footing. The considerations also are quite different for the purpose of exercising the power of provisional attachment under Section 83 of the Act. Just because, some proceedings are initiated under Section 67 by itself would not be sufficient to arrive at the satisfaction that it is necessary to provisionally attach the property for the purpose of protecting the interest of the government revenue. The power has been specifically conferred upon the Commissioner to form such an opinion. It appears from the materials on record that without issue of any show cause notice, the tax liability came to be determined under Section 74 of the Act. Section 74 makes it abundantly clear that the defaulter should be called upon to show cause as to why he should not be paid the amount specified in the notice along with the interest payable thereon. There could not have been any assessment under Section 74 of the Act without giving any opportunity of hearing to the writ applicant - although the provisions of Section 281B of the Income Tax Act is pari materia to Section 83 of the State GST Act, yet one pertinent feature of Section 281B of the Income Tax Act is that it gives guidelines for making the provisional attachment. Such guidelines are missing so far as Section 83 of the State GST Act is concerned. The assessment order dated 17th June 2019 passed by the respondent No.4 Commercial Tax Officer at Vadodara demanding total amount of ₹ 1,60,79,302/- towards tax, penalty and interest is hereby quashed and set aside - Application allowed.
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2019 (9) TMI 617
Grant of Bail - irregular availment of input tax credit - alleged offence u/s 132(1)(b) and 132(1)(c) of CGST Act - requirement of custodial interrogation - HELD THAT:- Section 132(1)(b) provides that whoever issues any invoice or bill without supply of goods or services in violation of the provisions of the Act leading to wrongful availement or utilisation of Input Tax Credit or refund of tax shall be punished - section 132(I)(c) provides that whoever avails Input Tax Credit by using such invoices or bills referred to in clause (b) shall be punished. In the case in hand, as per the reply filed by the department, neither any invoice or bill has been issued by the applicant/accused nor any Input Tax Credit was availed by the applicant/accused himself or by any firm in which he is a proprietor or partner. The entire case put forth by the department against the applicant/accused is that he is the person who conspired with co-accused persons for wrongful availement of refund of IGST. It is pertinent to mention that the evidence collected so far against the applicant/accused is the statement of the applicant/accused recorded u/s 70 of CGST Act which has already been retracted by the applicant/accused when he was produced before the Court after his arrest. Considering the totality of facts and circumstances, period of custody already undergone by the applicant/accused and the nature of evidence available against the applicant/accused, applicant/accused Ramesh Wadhera is entitled to bail in this case at this stage. Hence, applicant/accused Ramesh Wadhera is hereby admitted to bail on furnishing personal bond in the sum of ₹ 1 lac with one surety. Bail application stands disposed of.
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Income Tax
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2019 (9) TMI 616
Unexplained cash credit - Assessing Authority creating tax liability was failure on the part of the assessee to produce evidence with regard to some of the investors which was by way of a Bank statement - No question of law as such arises for consideration in the tax appeal, especially when there are concurrent finding of facts by the Income-tax Commissioner (Appeal) as well as the Income-tax Appellate Tribunal - HELD THAT:- SLP dismissed.
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2019 (9) TMI 615
Scaling down of the demand of the Income Tax Department - The widow of the original respondent no.1 Aarti Abhay Narottam had also expired. His sole surviving legal heir is respondent no.1(a) who has since been brought on record. The Custodian filed Report no. 03 dated 7th March, 2007 seeking directions from this Court for distribution of asset - Attachment of properties - HELD THAT:- Erroneous and questionable standards were adopted. On one hand the Special Court appointed Auditors report has been relied upon for some facts yet the conclusion of the auditor that the amounts reflected in the accounts pertain to liability has not been accepted /dealt with. The tax department was unable to accept the conclusion of the auditors, that the amount in the account of Abhay Narottam were only liabilities. There is no explanation forthcoming from the department nor has it has been urged by the revenue as to why the conclusion of the auditor is incorrect. The fact remains that the bank had advanced monies to the notified party and that money had not been repaid. These monies were therefore outstanding and repayable by the notified party. Even assuming that the assessment is not on the basis of best judgment, there is no explanation why the department has chosen to reject the conclusions drawn by the auditors classifying the amounts as a liability. Indeed nothing prevented Assessing Officer or the Appellate authority from taking its analysis of the auditors report to its logical conclusion. Thus to my mind there can be no doubt that what we are faced with is an assessment on best judgment basis. The first of these criteria are therefore clearly satisfied. Facts of the case justifies intervention to scale down the demand since the decision of the tax authorities is clearly on a discretionary assessment. In the case at hand we are concerned with arriving at a suitable formula for scaling down the demand of the income tax department based on best judgment assessment and as against decrees passed by this Court and in my view it would not be appropriate that the extent of scaling down should take into consideration the demand of the revenue and the distinct payments made by the Custodian. The applicants have analysed scaling down on the basis of their computation based on the affidavit in reply dated 11th September, 2008 and levying a tax rate @ 40% and surcharge @ 12% in respect of each of the items. Scaling down has to be done on a proportional basis. In my view scaling down should be on the following basis : The dues of the tax authorities are said to be ₹ 199,38,96,650/- for assessment year 1992-93 and ₹ 11,69,24,483/- for assessment year 1993-94. In that view of the matter I find that the total amount claimed towards tax for the assessment year 1992-93 and 1993-94 is ₹ 211,08,21,133/-. As against this the decretal amount is ₹ 374,35,18,354/- On the basis of the 36:64 ratio between the two amounts scaling down should be restricted to 64% of the amount that has been paid over to the Income Tax department pursuant to various orders on various dates commencing from 18th June, 1996 till 26th March, 2013. There is no dispute of the fact that the total amount paid over 77,15,19,52,217/- and in my view the applicant would be entitled to receive 64% of the said amount viz, ₹ 49,37,72,492/-. Upon rounding of it is computed at ₹ 49,38,00,000/-. The income tax department by virtue of their various undertakings including those of Ms.Vineeta Rai, Secy Government of India dated 31st January 2004 (₹ 29.42 lakhs), Mr. Jaswant Singh CIT Central II dated 7th May 2008 (₹ 75 Crores) and Mr. Kiran Oberoi Vasudev, Chief CIT dated 5th May 2008 (₹ 1.5. Crores) is bound to pay over to the Custodian such amounts as may be ordered by this court along with interest at such rate that this court specifies within four weeks of such direction. For all the above reasons pass the following order : (i) The Income tax department shall pay over a sum of ₹ 49,38,00,000/(Rupees Forty nine crores thirty eight lakhs only) to the Custodian towards amount payable upon scaling down of the tax demands and which shall be paid to the Custodian along with interest @ 6% per annum from 11th June, 2008 when the bulk of the amount of ₹ 75,00,00,000/- (Rupees Seventy five crores) was paid over to the tax department. Revenue to comply within a period of twelve weeks from today. (ii) Liberty reserved to the Applicants to apply after the tax department deposits the amount specified in (i) above. (iii) Mr. Daruwalla on behalf of the Custodian states that in view of this order he is not pressing Custodian Report no. 18 of 2016. Accordingly, Custodian Report no. 18 of 2016 is disposed. Liberty to apply.
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2019 (9) TMI 614
High Pitched Scrutiny Assessment - challenging the proceedings of the fourth respondent with consequential direction to the fourth respondent to pass speaking order - disallowing a portion of restricted project grants received from Compassion international - Petitioner is a Charitable Society registered under Section 12AA - HELD THAT:- Local Committee, after considering the complaint filed by the petitioner, formed an opinion that the assessments for the subject matter Assessment Years cannot be termed as high pitched. As rightly pointed out by the learned Senior Standing Counsel for the respondents, the mechanism provided to approach the Local Committee is not in lieu of the appellate remedy and therefore, the rights and contentions of the assessee before the Appellate Authority in their appeal can very well be considered and decided by such Authorities notwithstanding the fact that the complaint filed by the petitioner before the Local Committee has resulted in passing the impugned communication. This Court is of the view that the rejection of the petitioner's complaint by the Local Committee will not prejudice the rights of the petitioner to pursue the appeal already pending before the Appellate Authority by raising all the grounds and that all the appeals pending before the Appellate Authority can be disposed of on merits and in accordance with law, after giving due opportunity of hearing to the petitioner. Writ petition is disposed of, by directing the fifth respondent/Appellate Authority to take up the appeals filed in respect of the Assessment Years 2010-11 to 2015-2016 and pass orders on the same on merits and in accordance with law, after giving due opportunity of hearing to the petitioner, uninfluenced by the report, if any sent by the said Local Committee.
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2019 (9) TMI 613
Commission on the accommodation entries provided by assessee - ITAT reduced the percentage from 2.25 % to 0.5% in second round of litigation - HELD THAT:- The impugned order of the ITAT shows that this is a second round of litigation. ITAT has explained how the fixing of the percentage at 2.25% by the AO was based on noting of some loose sheets which were seized during a search operation. The reliability of these notings are themselves in dispute. ITAT has on a consideration of the entire facts and circumstances and considering that different rates are charged in different transactions formed the view that 0.5% should be taken as a reasonable rate of profit/commissioner in such activities. This Court fails to appreciate how the said order of the ITAT gives rise to any substantial question of law. Moreover, this is the second round of litigation and it has to end at some point. The Court sees no reason to interfere with the impugned order of the ITAT.
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2019 (9) TMI 612
Refund of TDS along with interest withheld - Petitioner company opened a virtual bank account - HELD THAT:- Petitioner would submit that the status in the portal shows that the refund is processed but withheld. For procedural infractions, the petitioner company is facing harassment to avail the refund of TDS. On instructions Revenue submits that alternative arrangements are made to remit the refund either through RTGS/NEFT or by issuing a Cheque/Demand Draft to the petitioner-company. Writ petition stands disposed of directing the respondents to refund the amount of ₹ 1,33,30,196/-(Rupees One Crore Thirty Three Lakhs Thirty Thousand One Hundred and Ninety Six Only) to the petitioner along with interest to which it is entitled to, in an expedite manner.
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2019 (9) TMI 611
Penalty u/s 271(1)(c) - unexplained deposits - HELD THAT:- The co ordinate bench has given the benefit of doubt to the assessee and treated the cash deposits to the extent of 50% as explained in [ 2017 (9) TMI 1848 - ITAT AHMEDABAD]. The reliance placed on behalf of the assessee on the decision of the co-ordinate bench in Shri Anil Yashpal Khosla [ 2018 (3) TMI 1806 - ITAT AHMEDABAD] is totally misplaced. The explanation in respect of cash deposited in that case was found to be reasonable in view of certain affidavits of third party filed which remained unverified by the AO. No such facts have been shown to exist in the present case. In the peculiar facts of the case, the nature of concealment was clear to the assessee and no prejudice has been caused to the assessee per se by such alleged technical defect. The CIT(A) in our view has rightly adjudicated the issue with which interference is called for. - decided against assessee Penalty on peak amount of cash deposits - HELD THAT:- As pointed out on behalf of the assessee that the CIT(A) has passed the order confirming the penalty on the full amount as the benefit of the decision of the ITAT was not available to the CIT(A) while passing the appellate order in respect of penalty proceedings. We thus find merit in the plea of the assessee for reduction in the quantum or penalty in tune with the reduction in the quantum additions based on the order of the ITAT. The AO is accordingly directed to re-work the penalty based on the amount of additions quantified by the ITAT in quantum proceedings.
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2019 (9) TMI 610
Loss from Future and Options and Loss from Equity share Trading - loss incurred in eligible transactions viz. derivative transactions - business loss OR speculation loss - HELD THAT:- As decided in own case [ 2018 (11) TMI 551 - ITAT AHMEDABAD] once it is deemed to be a normal business loss on the basis of proviso appended to Section 43(5) of the Act, a question of applying Section 73 or the Explanation thereto for the purposes of refusing loss to be set off against business income is wholly incorrect. Thus the claim of the assessee towards ordinary business loss is allowed in so far as the loss from derivative transactions is concerned. Eligibility of set off of trading loss from purchase sale of shares in cash segment - whether loss arising from delivery based trading in shares is covered by certain exceptions provided in Explanation to sec. 73 or not and consequentially, whether the loss from share trading is to be regarded as non-speculative business loss for the purposes of set off under sec. 72 and sec. 73? - HELD THAT:- the business loss clearly exceeds the aggregate of income/loss arising under non-business heads. In the case of Eastern Aviation and Industries Ltd. vs. CIT [ 1993 (7) TMI 41 - CALCUTTA HIGH COURT] has held that the expression income or profits and gains should be understood as including loss also so that in one sense profits and gains represent positive income whereas losses represent negative income. While judging the relative composition of GTI, one has to consider the absolute quantum of loss as against the other positive income. As per the decision, what one needs to consider and compare are the relative figures of loss and income. The ratio when applied, the chargeable amount under the head business income far exceeds the chargeable amount aggregated under non-business head. Thus, the shelter in the form of first exception is not available to the assessee. ' Scope of amendment - Alternative contention that the business of the assessee being mainly trading in shares and thus covered under third exception in view of the clarificatory amendment by Finance (No. 2) Act 2014 is also apparently bereft of any merits. The interpretation given by the Co-ordinate Bench in Fiduciary Shares and Stocks and Pvt. Ltd. [ 2016 (5) TMI 814 - ITAT MUMBAI] is no longer a good law in view of the recent decision rendered by Hon ble Supreme Court in the case Snowtex Investment Ltd. vs. PCIT judgment [ 2019 (5) TMI 1165 - SUPREME COURT] as held that amendment to Explanation sec. 73 by Finance (No. 2) Act 2014 w.e.f. 01.04.2015 is not clarificatory or retrospective. The view expressed by the Co-ordinate Bench is thus overturned. Consequently, loss occurred to the assessee as a result of its activity of trading in shares is a loss arising from business of speculation and is not capable of being set off against the profits which it had earned from non-speculative business. No infirmity in the order of the CIT(A) to the extent it has concluded that loss amounting to ₹ 22,89,758/- arising from transactions of purchase and sale of shares as speculation loss for the purposes of sec. 73 of the Act. The case made out by the assessee that such loss should be treated as non speculative business loss as per its claim is thus without any force. We decline to interfere with the order of the CIT(A) to this extent.
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2019 (9) TMI 609
Subvention/ subsidy money receipt from its parent company Nalco, USA - revenue receipt exigible to tax or not? - Assessing Officer / TPO, pursuant to directions of DRP treated the said subvention amount received from its associated enterprises as non-operating income - HELD THAT:- The issue vis- -vis its taxability i.e. receipt of subvention from parent company now stands settled by recent decision of Hon'ble Supreme Court in Siemens Public Communication Network (P.) Ltd. Vs. CIT [ 2016 (12) TMI 507 - SUPREME COURT] had held that voluntary payments made by parent company to its loss making Indian company can also be understood to be payments made in order to protect the capital investment of assessee company. It was further held that if that is so, then the payment in question could not be held to be revenue receipts, hence they were capital receipts in the hands of assessee. Applying the said proposition to the facts of present case, where the assessee had received the alleged subvention amount or the subsidy as referred to by the Assessing Officer / TPO / DRP, the amount received by assessee from its parent company Nalco, USA was a capital receipt in the hands of assessee and hence, was not taxable in its hands. Treatment of said amount while determining the PLI of assessee - assessee claims that the amount is to be taken as operating income since the said receipt was to make good losses incurred by assessee in earlier years and also current year - HELD THAT:- Once the subsidy of ₹ 65.19 crores was credited, there was profit of ₹ 2.03 crores. In other words, profit during the year was attributable to subvention amount of ₹ 65.19 crores and hence, it cannot be held that the amount was not operational in nature. The item of receipt was undoubtedly, an exceptional item of income but was not an extraordinary item of income. The assessee was also compensated for additional revenue expenses incurred by it for transferring its establishment from Kolkata to Pune and then running the same at Pune. Such onetime payment received by assessee is thus, operating in nature. The learned Authorized Representative for the assessee had pointed out that the subvention amount related to two years. We hold that amount relatable to the year, need to be considered for computing PLI of the assessee. We direct the Assessing Officer to carry out the said exercise. We in the final analysis hold that subvention income is capital receipt in the hands of assessee, hence not taxable. Further, we hold that the said subvention amount is operating in nature and has to be included as operating income while computing PLI in the hands of assessee restricted to the amount relatable to the instant assessment year. Thus, ground of appeal No.2 raised by assessee against taxability of subvention income is allowed and ground of appeal No.11 also stands allowed in favour of assessee. Depreciation on assets installed at the customers premises - HELD THAT:- Decided in favour of assessee as relying on own case [ 2017 (4) TMI 446 - ITAT KOLKATA] Transfer pricing adjustment to the value of management charges paid to associated enterprises - case of assessee before us is that it had provided substantive documentary evidences before the TPO and also submitted additional evidences before the DRP demonstrating the need, actual receipt of services and benefit thereon - adjustment made on account of charges for intra-group services paid by assessee to its associated enterprises - HELD THAT:- In the facts and circumstances of the present case before us, which are similar to the facts and circumstances in the case of Emerson Climate Technologies (India) P. Ltd. Vs. DCIT [ 2018 (6) TMI 1565 - ITAT PUNE] and Eaton Fluid Power Ltd. Vs. ACIT , [ 2018 (6) TMI 1266 - ITAT PUNE] we hold that there is no merit in the observations of TPO in holding that the assessee had not availed any services, hence the arm's length price of transactions was to be adopted at Nil. We reverse the findings of authorities below in this regard. Intra-group fees paid by assessee to Nalco US for providing services such as information technology, engineering support services, business development services, supply chain services - HELD THAT:- Services were availed, payment for which was made at cost without any markup and such cost was attributed to the assessee on the basis of particular methodology adopted by US company for recovering the expenditure from all entities under Nalco group and the same cannot be disturbed in the hands of assessee. The payment made by assessee was thus, at arm's length price and no adjustment needs to be made on this account. Further, in any case, where when in the hands of Nalco US the services have been taxed as fees for included services, then corollary which follows is that the arm's length price of payment made for such services cannot be determined at Nil. Accordingly, we reverse the order of Assessing Officer/TPO/DRP and the grounds of appeal are thus, allowed Adjustment made vis- -vis international transactions pertaining to royalty - whether CUP method was the most appropriate method to benchmark the aforesaid transaction of payment of royalty? - HELD THAT:- Applying the rule of consistency which has been applied by the TPO himself in earlier years and also where the rate of payment of royalty at 6% had been approved by RBI for the earlier years and also for the part of year, then the same should not have been disturbed. The second aspect of issue is whether the rate of payment of royalty which has been approved by the Government of India i.e. RBI would constitute CUP data and the same could be applied for holding the transactions to be at arm's length. This proposition has been applied by the Hon ble Bombay High Court in CIT Vs. SGS India (P.) Ltd. [ 2015 (11) TMI 1619 - BOMBAY HIGH COURT] . In case the said dictate is applied, then we hold that the payment of royalty by assessee to its associated enterprise @ 6% / 4% is to be considered at arm's length rate and no adjustment is warranted in the hands of assessee. Where the royalty rates were approved by RBI, CUP method was the most appropriate method to be applied to determine arm's length price of royalty payments made during the year. Accordingly, we reverse the order of Assessing Officer in holding that royalty payment is to be benchmarked with that of payment of raw material and other goods bought. The said transaction of royalty payment is to be benchmarked independently by applying CUP method and since the rates of commission paid to other concerns is at arm's length, no adjustment on this account is warranted in the hands of assessee. Accordingly, the TPO is directed to re-calculate the PLI of assessee by excluding the payment of royalty out of PLI determined for the segment of payment for raw materials and other goods bought - Decided in favour of assessee Benchmarking analysis applied by authorities below while using TNMM method for benchmarking the international transactions pertaining to manufacturing segment - assessee is also aggrieved by the set of comparables which are finally selected by the Assessing Officer / TPO - HELD THAT:- It is only after the PLI / margins of assessee are re-worked in line with our decision in respect of various issues raised which affect the operating margins of assessee, the need would come to look at the margins of comparables. Our decision on the inclusion / exclusion of comparables at this stage would be an academic exercise. In such facts and circumstances of the case, we first direct the Assessing Officer to re-work the operating margins of assessee and thereafter to look into the objections raised by assessee vis- -vis the comparables finally selected and also the comparables which have not been finally selected. The assessee shall furnish complete details in this regard and the Assessing Officer shall decide the issue of final selection of comparables after taking into consideration the settled position on the issues after appreciating the facts relating to each of the comparables and in accordance with law. Hence, the ground of appeal raised by assessee is allowed for statistical purposes. Transfer pricing adjustment vis- -vis in proportion with the value of international transactions - HELD THAT:- Issue now stands settled in CIT Vs. Hindustan Unilever Ltd. [ 2018 (10) TMI 1611 - SC ORDER] and CIT Vs. Firestone International P. Ltd. [ 2015 (6) TMI 1123 - BOMBAY HIGH COURT] . The benchmarking on account of transfer pricing adjustment, if any, has to be done for associated enterprises transactions only and not the entire turnover. Accordingly, we direct the Assessing Officer to carry out the said exercise after verifying the computation of proportionate adjustment filed by assessee before us and also after calculating the margins of assessee in line with our directions in the paras above. Use of multiple year data stands decided against the assessee, hence the same is dismissed. Non-granting of benefit of +/- 5% range - decided against the assessee and hence, the same is dismissed. Charging of interest under section 234B of the Act, which is consequential, hence the same is also dismissed.
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2019 (9) TMI 608
Revision u/s 263 - According to the CIT services rendered by the appellant society did not qualify as charitable purpose within the meaning of Section 2(15) - objective with which such activities is conducted by the assessee/appellant society - activity of the appellant society which involved working as an interface for arranging employment/placement for the ex-service men in the form of security personnel / guards / labour - HELD THAT:- The assessee society helps ex-servicemen who are financially educationally weak to obtain fruitful employment. In this case, neither huge capital investment is required nor any profits and gains are expected to be earned. When the assessee society act as an interface and obtains employment/placement for exservice men in form of security guards, house-keepers etc. in an organized manner, the underlying intention is to ensure that ex-servicemen are gainfully employed by reputed organizations and they are not deprived of making a decent living post retirement. As a result of the activities conducted by the assessee society, the ex-servicemen earn a decent livelihood by engaging themselves in such jobs without middlemen and exploitation, through the guidance of the assessee society. Activities in the above nature cannot be treated as activities in the nature of trade, commerce or business as contemplated in proviso to section 2(15). CIT(E) has characterized the activities of the assessee trust as commercial in nature without going into the circumstances in which the activities are carried on by the assessee society. See SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION (AND OTHER REFERENCES) [ 1979 (11) TMI 1 - SUPREME COURT] Factual matrix of the assessee s case in the year under consideration was same as in the past. If the same set of activities were considered by the Revenue to be charitable in nature then there was no reason for the AO to depart from the view regularly followed in the past. At the time when the AO passed the order u/s 143(3) allowing the assessee benefit of exemption u/s 11 of the Act, it cannot be said that the view followed by him was unsustainable in law so as to constitute the order u/s 143(3) to be erroneous and prejudicial to the interests of the Revenue for the purposes of Section 263 Activity of the appellant society which involved working as an interface for arranging employment/placement for the ex-service men in the form of security personnel / guards / labour in different organizations was in consonance with its aims objectives. - Decided in favour of assessee
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2019 (9) TMI 607
Late fees payable u/s. 234 - Intimation issued u/s. 200A - late filing of TDS returns - scope of amendment - HELD THAT:- A perusal of the Memorandum explaining the insertion of provision relating to insertion of clause (c) to sec. 200A clarifies the intention of the legislature in inserting the said provision. The Finance Bill further clearly provides that the amendment took effect from 01.06.2015, so there is no indication whatsoever that clause (c) of section 200A is retrospective or clarificatory in nature. AO is not empowered to levy late fees u/s. 234E before 01.06.2015. Therefore, in the light of the aforesaid discussion and the ratio laid by the Pune Bench in Maharastra Cricket Association Ors. ( 2016 (10) TMI 104 - ITAT PUNE ) we hold that the amendment [clause (c)] was inserted u/s. 200A which has been given effect from 01.06.2015 is prospective in nature, and no computation of late fee for the demand or the intimation for the late fee u/s. 234E could be made for the TDS deducted for the respective assessment years prior to 01.06.2015. The intimation u/s. 200A by the AO, TDS for payment of late fee u/s. 234E of the Act for the respective assessment years prior to 01.06.2015 is without any authority of law. We set aside the order of the CIT(A) and remand the matter back to the file of AO with a direction to AO that the late fee levied for the period of delay of filing return prior to 01.06.2015 need to be deleted. - Decided in favour of assessee.
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2019 (9) TMI 606
Additional depreciation - production/manufacturing of new and marketable article.whether assessee is a civil contractor and therefore does not qualify for the addition depreciation? - AO has denied the claim of additional depreciation on the ground that the assessee is not engaged in the production or manufacture of articles or things but the assessee is doing contractual civil work - CIT-A allowed the claim - HELD THAT:- The assessee is not carried out any activity of construction or development of projects but the assessee is in the activity of converting the stone blocks into aggregate which is used in the construction unit. Therefore, the assessee is not a civil contractor but supplying the construction material to other companies engaged in the construction/infrastructure activity. Once the activity of the assessee is converting the large stone blocks into aggregate which is after undergoing the process of crushing then the said activity is production/ manufacturing of a new article or thing which is different/distinct from input. The outcome of the process carried out by the assessee is a new marketable product/ article or thing and therefore, the assessee is adding the value to the raw material used and converting the same into a marketable article. No error or illegality in the order of the ld. CIT(A) allowing the claim of additional depreciation on the new plant and machinery purchase and used by the assessee for the purpose of production and manufacturing. - Decided against revenue.
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2019 (9) TMI 605
Levy of penalty u/s 271 AAB - surrender of additional income during search - HELD THAT:- Specific unretracted admission of the assessee of earlier undisclosed income and discrepancies in the books of account, we hold, is without any doubt the best piece of evidence against the assessee and is incriminating material enough representing undisclosed income for the purpose of levy of penalty under section 271AAB of the Act. The assessee had himself admitted to the fact of having not disclosed the income on account of brokerage and commission earned and had himself admitted to the fact that there were discrepancies and unrecorded entries in his books of account and also certain rough notings and estimates. Having himself admitted to all these facts and at no point of time having ever retracted this admission, the same constitutes incriminating material against the assessee None of the case laws are of any assistance to the assessee since in the impugned case the assessee has made specific admission of having undisclosed income relating to commission/brokerage and discrepancies in the books of accounts which has remained unretracted. We concur with the findings of the CIT(A) that the specific admission of the assessee to the undisclosed income and discrepancies in its accounts constituted incriminating material representing undisclosed income of the assessee for the purposes of levy of penalty under section 271AAB of the Act. We, therefore, uphold the order of the Ld. CIT(A) confirming the levy of penalty.- Decided against assessee.
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2019 (9) TMI 604
Assessment passed u/s 153A - receipt of share application money/share capital - proof of incriminating material relating to these assessment years - HELD THAT:- We find that it is an admitted fact that the original assessment completed u/s 143(3) vide order dated 31.12.2008 which had attained finality at the time of search. It is also undisputed that additions made by the AO is not based on incriminating material found during the course of search, albeit is based on perusal of balance sheet which was part of the assessment record and duly scrutinise during the course of original assessment proceedings. In such a situation, additions made are beyond the scope of 153A proceedings. This proposition of law has been well settled and reiterated by the Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] and has been reiterated in the case of Pr. CIT vs. Meeta Gutgutia [ 2017 (5) TMI 1224 - DELHI HIGH COURT] Hence there is no incriminating material qua each of the assessment year roped in under section 153A, then, no addition can be made while framing the assessment under section 153A. As admittedly no incriminating material relating to these assessment years or as a matter of fact for any of the assessment years were found during the course of search and accordingly, the originally assessed income. Accordingly the addition is directed to be deleted being beyond the scope of assessment u/s 153A - Decided in favour of assessee.
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2019 (9) TMI 603
Addition u/s. 68 - unsecured loans - assessee has obtained accommodation entries for increase in share capital along with premium - disallowance of commission expenses relating to said unsecured loans - HELD THAT:- Assessee has discharged its initial onus of proving the identity, genuineness and creditworthiness of the creditors by providing all necessary details and thus the assessee has discharged identity, genuineness and creditworthiness of the parties. AO has not controverted the evidences furnished by the assessee. No further enquiries have been made by the Assessing Officer except relying on the statements of PKJ and the investigation report. Even the statements were not provided to the assessee for its rebuttal. Addition made u/s. 68 which is purely based on the statements recorded from PKJ and without any enquiry is liable to be deleted. Further, since the statement of PKJ on which much reliance was placed to treat the loan transaction as non-genuine was not provided to the assessee for rebuttal, it is in violation of principles of natural justice and further we observe that no sort of enquiries were made by the AO to disprove the evidences furnished by the assessee. Addition made u/s. 68 cannot be sustained. We direct the AO to delete the addition made u/s. 68 of the Act. - Decided in favour of assessee.
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2019 (9) TMI 602
Penalty u/s 271(1)(b) - violation of notice u/s 142(1) - invalid proceedings under section 143(3) r.w.s. 153C - HELD THAT:- If the document itself does not indicate which bank it pertains to, then where is the question of assessee signing any consent letter form for any bank account with HSBC Geneva? The information of one foreign account maintained by the assessee, i.e., HSBC London has been duly provided for which she has already signed consent letter form. - Thus, what is transpired from the assessment order, it cannot be emphatically said that assessee has failed to comply either with the terms of notice or has failed to file any documents required in the said notice. Here, nowhere from the assessment order it is discernable that any incriminating document pertaining to alleged bank account or anything indirectly linking the said bank account of the assessee has been found. - So once there is no document found during the course of search nor there is any specific information that assessee has bank account with HSBC Geneva, then it is very difficult to rope in the assessee for hold guilty of any kind of non-compliance. In this case we are quite persuaded by the plea that penalty in the case of the assessee should not be levied as assessee had a reasonable and bonafide belief in terms of section 273B, that there had been no violation of notice u/s 142(1) for non-compliance, as assessee kept on reiterating before the authorities below that the document does not contain her signature nor mentions any name of the bank, and for this reason, she was legally advised that she is not competent to sign the consent letter. We are in tandem with such a contention that if any person is acting upon a legal advice, then he/she believes in such advice that there is no violation of law. Such an act definitely falls in the realm of reasonable and bona fide belief, as any prudent or reasonable person gets persuaded by the legal advice, in a judicial or quasi judicial proceedings or any action which may have any civil consequence. If assessee had not signed the consent waiver form, based on legal advice then she did had a bonafide belief. Since, this aspect has not been seen by the Assessing Officer, therefore, we are of the opinion that, Assessing Officer may verify, whether assessee during the course of any proceedings has taken this plea or else assessee may point out to Assessing Officer that such a belief was also based on legal advice. To allay any doubts arising from the contents of query asked by the Assessing Officer vide notice u/s 142(1), that the assessee was having the bank account in HSBC Geneva, we are of the opinion that Assessing Officer may verify from the assessment records as to; firstly, whether there was any specific information based on documents available to him where name of bank account mentioned was of HSBC Bank Geneva for which consent waiver form was insisted to be signed by the assessee; and secondly, whether any such specific document was confronted to the assessee at any stage, before requiring the assessee to sign the consent waiver form. AO will then decide accordingly. Appeals of the assessee are treated allowed for statistical purposes.
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2019 (9) TMI 601
Reopening of assessment u/s 147 - information received from the Investigation Wing of the Revenue is on the basis of material seized during search proceedings u/s. 132 - statutory presumption u/s. 292C is as to the truth of its contents. - disallowance of the assessee s claim u/s. 54 - HELD THAT:- the assessee can object to the reasons recorded after filing the return of income in response to the notice u/s. 148, and where so, the AO is bound to dispose the said objections per a speaking order prior to proceeding further in the matter. The assesseee in the present case has not raised any objection to the reason/s for issuing the notice u/s. 148 even till the date of the assessment. Deduction U/S 54 - in the original return assessee did not show the capital gain and claimed exemption u/s 54 - whether the property through which capital gain arisen, was belonging to the assessee or not - held that:- It has already been clarified that neither AD nor her husband, RL, was the owner of the subject property at any time, as well as the circumstances in which the name of RL came to be entered qua the said plot in the records of JDA. And, further, that her ownership in December, 2001, when RL was alive, only would validate the ATS dated 25/12/2001, on the basis of which the assessee makes a claim of transfer. Why, the house was admittedly constructed, and not purchased, by the assessee, disproving the said ATS, which is for the purchase of a built house property. The assessee s case, i.e., on the merits of the denial of claim u/s. 54, whichever way one may look at it, is completely unproved; in fact, disproved. The assessee has abysmally failed to exhibit the satisfaction of the conditions for claim of s. 54. Nothing has been brought on record to rebut the clear findings by the Revenue authorities which, being consistent with the material on record, have been endorsed - no case for allowing a deduction u/s. 54, claimed at ₹ 27.10 lacs, in respect of purchase of a residential house in December, 2001 by the assessee, is made out. The assessee is apparently the owner of the subject property, having constructed it, but that by itself would not entitle him for a claim u/s. 54, the ingredients of which remain to be satisfied, and the case as made out, completely unproved, if not disproved. I, therefore, decline interference, and uphold the impugned disallowance - Assessee s appeal is dismissed.
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2019 (9) TMI 600
Disallowance u/s 40(a) (ia) - scope of amendment brought in Section 40(a)(ia) - HELD THAT:- As assessee submitted that 30% of the disallowance may be sustained in view of the amendment brought in by the Finance Act No. 2, w.e.f. 01/04/2015 to Section 40(a)(ia) of the Act, which is held to be curative and hence retrospective, by the case of DCIT vs. Punjab Infrastructure Development Board Chandigarh [ 2015 (9) TMI 1663 - ITAT CHANDIGARH] D/R, had no objections with the same. We reverse the order of the CIT(A) and restore the disallowance made by the Assessing Officer u/s 40(a) (ia) of the Act, to the extent of 30% of the total amount. The balance disallowance is hereby deleted.
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2019 (9) TMI 599
Addition u/s 68 - Loans taken from non-resident Indians - HELD THAT:- Assessee has discharged his duties imposed u/s 68 of the Act by establishing the identity of the lenders, the genuineness of the transactions and creditworthiness of the lenders. Assessee has taken a loan in the assessment year 2005- 06 from Shri Shushibhai Patel which was not doubted by the Revenue in the assessment proceedings framed under section 143(3) of the Act. Thus it is clear that the Revenue doubted the loan taken by the assessee in the year under consideration whereas the Revenue did not doubt the loan taken by the assessee from the same party in the subsequent year. Thus it is clear that the Revenue has taken the contradictory stand in two different assessment years. Lenders are non-resident Indians and the loan was given to the assessee out of the NRE accounts. This fact has not been doubted by the authorities below. It is an established the fact that the income in an NRE account can be deposited only from the foreign countries. The fund cannot be deposited in NRE accounts from India. No allegation of the Revenue that the assessee has provided funds from his unaccounted fund to the lenders to get its unaccounted fund in the accounting form. In the absence of any adverse remarks by the Revenue on this issue lenders have provided funds to the assessee out of their sources generated by them. Loan taken by the assessee in the instant case as discussed above cannot be treated as unexplained cash credit under section 68 - Decided in favour of assessee Addition in respect of bad debts written-off - no ambiguity that any advance given by the assessee in the course of the business can be written off in the books of accounts and the assessee is entitled to the deduction either under section 37(1) or section 28 - claim of the assessee was denied due to non-furnishing of supporting evidence by the assessee - HELD THAT:- From the preceding discussion, we find a contradiction in the submission of the assessee before the Ld. CIT(A) vis a vis the finding of the Ld. CIT(A). We also find that the Ld. Counsel for the assessee had not furnished the copies of the ledgers of the parties in the paper book filed before us to whom the assessee provided the trade advances. The facts of the dispute are not clear as discussed above from the order of authorities below. But we note that the onus lies on the assessee to justify its claim by the documentary pieces of evidence that these advances were in the course of the business. However, the assessee failed to do so. Accordingly, we are inclined to hold that there is no infirmity in the order of authorities below. Hence the ground of appeal of the assessee is dismissed. Ad-hoc disallowances for sales promotion expenses - HELD THAT:- Expenses incurred by the assessee under the head sales promotion cannot not be disallowed on an estimated basis. Hence we reverse the order of authorities below. Thus we set aside the order of CIT(A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. Ad-hoc disallowance for vehicle and telephone expenses - HELD THAT:-The basis adopted by the assessee for the purpose of the disallowance was not disputed by the authorities below. In our considered view the authorities below before making any further disallowance of the expenses described above on account of personal use of the assessee should have rejected the disallowance made by the assessee at its own with cogent reasons. As such we note that no defect was pointed out by the authorities below in the disallowance made by the assessee. We conclude that the expenses incurred by the assessee as discussed above cannot be disallowed on an estimated basis. Hence we reverse the order of authorities below. Thus we set aside the order of Ld. CIT(A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. Ad-hoc disallowance for traveling and conveyance expenses - HELD THAT:- Onus lie on the assessee to prove that the expenses were incurred wholly and exclusively for the purpose of the business. But the assessee in the case before us failed to do so. Therefore we justify the disallowances made by the authority below. Hence the ground of appeal of the assessee is dismissed. Nature of expenses - treating the trademark expenses as capital expenditure - HELD THAT:- It is an undisputed fact that the trademark represents the intangible assets of the company and duly covered within the definition of assets as provided under section 32 of the Act. Therefore we are of the view that the expenditure incurred on the registration of the trademark cannot be treated as revenue in nature. See L T DEMAG PLASTICS MACHINERY (P) LIMITED. VERSUS INCOME TAX OFFICER. [ 2009 (1) TMI 299 - ITAT BOMBAY-J] - thus we hold that the expenditure incurred in connection with the registration of trademark represents the intangible assets. - decided against assessee. Disallowance of interest expenses u/s.36(1)(iii) - assessee claimed that the advances were given during the normal business transaction, out of internal accruals and it was for a very short period, therefore no interest was charged on such advances - HELD THAT:- The assessee has not produced any documentary of evidence suggesting that these advances made to the parties are representing the business transactions. Therefore in the absence of any documentary evidence, we concur with the finding of the lower authorities and justify the disallowance. There was not sufficient own fund available with the assessee to make such interest-free advance. Thus it is clear that interest-bearing fund has been diverted by the assessee for interest-free advances. Therefore in our considered view the interest claimed as a deduction to the extent of the funds diverted for interest-free advances will be disallowed under the provisions of section 36(1)(iii) of the Act. - Decided against assessee Ad-hoc disallowance for factory and welfare expenses - HELD THAT:- AO in his assessment order has noticed that these expenditures were incurred on lunch, biscuits, snacks, tea, etc. The nature of the expenses suggest that the assessee incurred these for the staff welfare and to keep the conducive working environment in the company - even if the staff or the partners obtain some personal advantage, then also it will be in nature of maintaining good relations with officers and in nature of staff welfare expenses. These expenses were incurred to keep the staff happy and active so that there should be better performance of the staff. However, the assessee must maintain supporting evidence to justify that these expenses do not fall in the category of personal expenses. Assessee has claimed almost similar expenses in the immediately preceding and succeeding assessment year. There can be negligible difference in the quantum of the expenses comparing to the turnover of the business of the assessee in all the years. There was no specific instance referred by the authorities below suggesting that the impugned expenses were in the nature of personal expenditure. Therefore we are not inclined to uphold the finding of the authorities below. Accordingly, we reverse the same. - Decided in favour of assessee.
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Customs
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2019 (9) TMI 598
Prayer of petitioner to be interrogated in the presence of an Advocate - service of notice u/s 108 of CA - HELD THAT:- The Supreme Court in the case of VIJAY SAJNANI ANR. VERSUS UNION OF INDIA ANR. [ 2012 (4) TMI 706 - SUPREME COURT] has directed that during interrogation of the petitioner(s), his/their counsel would be allowed to be present within visible distance, but beyond hearing range. The petitioner would be interrogated in presence of an advocate at a visible, but not audible distance in relation to the interrogation by the Officers of the DRI in accordance with the directions given by the Hon'ble Supreme Court in Vijay Sajnani - it is also directed that the proceedings be video-graphed. Petition disposed off.
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2019 (9) TMI 597
Permission to petitioner to have an advocate at visible but not audible distance during his interrogation by the Officers of the Directorate of Revenue Intelligence (DRI) - HELD THAT:- The Supreme Court in the case of VIJAY SAJNANI ANR. VERSUS UNION OF INDIA ANR. [ 2012 (4) TMI 706 - SUPREME COURT] has directed that during interrogation of the petitioner(s), his/their counsel would be allowed to be present within visible distance, but beyond hearing range. The petitioner would be interrogated in presence of an advocate at a visible, but not audible distance in relation to the interrogation - the proceedings directed to be video-graphed - petition disposed off.
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2019 (9) TMI 596
Import of one used motor cycle under Transfer of residence (TR) facility - non-fulfillment of condition for availing the relaxation from import conditions - under-valuation - second adjudication proceedings initiated vide impugned order related to house hold items brought by appellant - HELD THAT:- In the case of house hold items they were subject to adjudication and released on payment of fine and penalty then the second adjudication proceedings initiated by the impugned order related to house hold items are not sustainable in law. Further, the appellant has proved on record that he is entitled to claim the benefit of TR because as per the Import Policy, the appellant is entitled to bring vehicle after staying abroad for the minimum period of 2 years - In the present case, the appellant has proved that he is staying abroad for the last many years. Further, the finding of the adjudicating authority that the appellant also brought one motor vehicle in 2009 and therefore he is not entitled to bring one more motor vehicle in 2018 is correct as per the Import Policy. Further, the vehicle is manufactured by Honda and it is freely importable and the price is available on internet also and the appellant has also produced Customs Data wherein the import price of the same GL 1800 bike in 2012 was 19,000 USD only and if we give the benefit of depreciation, the assessable value in 2018 will ₹ 5,99,127/- which is very close to the declared value ₹ 4,79,408/- whereas the Customs had adopted an imaginary value of ₹ 19, 67,895/- based on some insurance documents filed in abroad by mistake by the appellant. Under-valuation - HELD THAT:- The charge of under valuation must be established through proper method under the law and the burden cannot be shifted to the importer whereas in the present case, the Department has failed to prove the charge of under valuation whereas the appellant by producing documents on record has proved that he has purchased the said vehicle in 2017 and that sale letter is also on record and as per the sale letter, the appellant has rightly declared the value of the bike as AED 24,500/- - Further, the Department has not brought any material on record to show that the documents produced by them are not genuine document and that there was some transfer of illegal considerations from the appellant to the seller in Dubai. The Customs authority is directed to release the said vehicle on payment of Customs duty as per the declared value of the bike - appeal allowed - decided in favor of appellant.
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2019 (9) TMI 595
Rebate - Whether the petitioner is entitled to rebate of duty under Rule 18 of the CER, having availed of the benefit of N/N. 93/2004-Cus dated 10th September, 2004 issued u/s 25 (1) of the CA, 1962? - It was held in the case that Once an export transaction has been used for seeking discharge of Advance Authorizations issued under the CA, the same export transaction cannot be used for seeking rebate of duty under CER, as the rebate, in this case, is subject to the conditions and limitations, as specified in Notification No.93, which clearly requires that the facility under Rule 18 or Sub-rule (2) of 19 of CER, 2002 ought not to have been availed. HELD THAT:- No case is made out to interfere with the impugned order(s) passed by the High Court - SLP dismissed.
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Securities / SEBI
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2019 (9) TMI 593
Transaction on the exchange - whether petitioner s transactions were not through the exchange? - alternative remedy before the Securities Appellate Tribunal - HELD THAT:- Shares were transferred from the applicant s account to broker account, which the broker did not return. It is further pointed out that there was no trade executed on the exchange. The transaction is therefore, construed as a loan transaction and therefore, not recommended for payment. This recommendation of the Committee was accepted by Respondent No.3 and the claim of the petitioner was accordingly rejected. We do not find that the Respondent No.3 has committed any error. It may be that the previous Circulars issued by the SEBI from time to time, do not specifcally include a clause that in case of transaction not executed through the platform of BSE, the claim would not be entertained by the Respondent No.3. Nevertheless, there is no instance cited before us by the petitioner that any such claim in the past was entertained and allowed. The case of the petitioner was considered and disposed of after the Circular dated 23rd February, 2017 was issued. The Circular was therefore, correctly applied. In any case, Clause (b) of paragraph 2 of the said Circular can be seen as clarifcatory in nature and explicitly declares the policy of the SEBI to entertain only those claims of investors which arise out of the transaction carried out through the platform of BSE and not outside.
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2019 (9) TMI 592
Legality and veracity of the order passed by the Whole Time Member ( WTM ) of SEBI under Sections 11 and 11B of the Securities and Exchange Board of India Act, 1992 which empowers SEBI to issue directions in the nature of remedies in the interest of the securities market and investors in securities - whether SEBI as a market regulator could be said to have jurisdiction to pass any of the directions as contained in the SCN? HELD THAT:- The show cause notice was issued on February 14, 2009 and August 26, 2009. The impugned order was passed on January 10, 2018. It took SEBI nine long years to complete the proceedings and the fault lay entirely on SEBI. The request of the appellants to cross examine certain individuals whose statements were relied upon by SEBI was rejected. This Tribunal on June 1, 2011 allowed the appeal and directed SEBI to allow cross examination. SEBI did not do so and took the matter to the Supreme Court and kept it pending for six years. The Supreme Court on January, 2017 held that the stand of SEBI was incorrect and directed that cross examination and inspection should be allowed to the appellants. During the pendency of the proceedings, the appellants were carrying on their business and auditing listed companies to the satisfaction of the shareholders and / or of the investors without any blemish. Over the last decade, the appellants have adopted extensive remedial measures as per SEC / PCAOB settlement orders. The independent monitors appointed by SEC / PCAOB have certified that remedial measures have been successfully implemented, meaning thereby that the audit quality met with the requisite standards. Thus looking from this angle also, the order of debarment was not the appropriate choice. Considering the aforesaid we are of the view that the order of WTM debarring the PW firms to audit listed company on the ground of PW network or projecting it as a PW brand cannot be sustained. There is no doubt that there has been a professional lapse on the part of the auditors in conducting the audit especially their failure to seek direct confirmation from the Bank relating to Bank Balances and fixed deposits. These lapses amounted to negligence. Action has already been taken by ICAI against the auditors. Negligence is the breach of duty caused by omission to do something which a reasonable man is guided by these considerations to do something which a prudent and reasonable man would not do so. Negligence becomes actionable on account of a lapse or omission amounting to negligence. In the concept of negligence amounting to an offence, the element of mens rea must be shown to exist, but under Torts, negligence becomes actionable on account of lapse or omission. Once you breach your duty, negligence becomes actionable as there has been a failure to attain that standard of care. A professional such as an auditor comes under a category of persons professing some special skill. Any task which is required to be performed with a special skill would generally be undertaken to be performed only if the person possesses the requisite skill for performing that task. The only assurance which such professional can give is, that he is possessed of the requisite skill in that branch of profession which he is practicing and that he would be exercising his skill with reasonable competence. This is what a person / Company approaching the professional can expect. A professional may be held negligent if he is not possessed of the requisite skill which he professed to have possessed or he did not exercise with reasonable competence. The standard to be applied for judging whether the person charged has been negligent or not, would be that of an ordinary competent person exercising ordinary skill in that profession. It is not necessary for that person to possess the highest level of expertise in that branch which he practices. WTM found that for this negligence, the auditors and the firms benefitted by way of charging a fee. WTM was of the opinion that this wrongful gain was liable to be disgorged. We find that for this professional lapse, there has been a breach of duty and failure to maintain that standard of care. For this lapse / negligence, we are of the opinion that the appellants were not justified to retain this amount. In our opinion, the WTM was justified in disgorging the said amount along with interest. The power was rightly exercised under Section 11 and 11-B of the SEBI Act to persons who in some way was associated with the securities market as well as under the Companies Act. Order of the WTM of SEBI debarring the PW firms as well as the two auditors from auditing listed Companies cannot be sustained and is quashed. Directions to listed Companies not to engage any audit firm forming part of PW network is also quashed
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2019 (9) TMI 591
Annulment of a trade - whether the respondent-NSE Clearing Ltd. being a recognized clearing corporation is akin to a recognized stock exchange or not? - application for redressal of their grievances before SEBI - HELD THAT:- An order of the recognized stock exchange is appealable under Section 23L of the Act. Some of the duties and functions of a recognized stock exchange has been transferred to a clearing corporation namely, NSE Clearing Ltd. This clearing corporation has been recognized under Section 4 read with Section 8-A(4) which provision is to recognize a stock exchange. Thus if an order of a recognized stock exchange is appealable under Section 23L, the functions and duties of a recognized stock exchange which have been transferred to a clearing corporation would also be appealable under Section 23L. A clearing corporation cannot stand on a better footing or cannot stand outside the provisions of the SCRA Act especially when a superior body, namely, the recognized stock exchange s orders are appealable under Section 23L. In the light of the aforesaid, we hold that the appeal filed by the ISSL is appealable under Section 23L against a decision of the NCL. The objection raised by SEBI is, thus, rejected. ISSL has questioned the legality and validity of the order of NCL dated 24th June, 2019 whereby their application for annulment of the trade was rejected. NCL was of the opinion that since parallel investigation in relation to fraud is being conducted by SEBI and EOW, the said corporation was not willing to start a parallel investigation. We find that the issue as to whether the trades have to be annulled on account of fraud has not as yet been decided by the clearing corporation on merits. A fraud, if any, should be crystalized and decided and should not percolate the entire securities market. Whether there has been a fraudulent transfer of mutual funds units by Allied to ISSL is a question which is required to be decided by some authority. Whether fraud has been perpetuated or whether a trade should be cancelled on a preponderance of probability that a fraud has been perpetuated, is again a question which is required to be decided by an authority. It is not appropriate for this Appellate Tribunal to go into the question at this stage. Such matter is required to be decided by an authority. Since NCL has refused to decide the application for annulment of trade on the ground that parallel investigation is being conducted by SEBI, we dispose of all the aforesaid appeals with the following directions:- (i) All the appellants will file an appropriate application for redressal of their grievances before SEBI by 8th July, 2019 annexing their earlier applications / complaints / emails and praying for specific relief / reliefs. (ii) Counter-parties like Citi Bank and similarly connected entities may appear before SEBI and place their objections, if they so desire. (iii) SEBI will consider all the complaints and applications and provide an opportunity of hearing to the appellants, to all interested parties and take a conscious decision by reasoned and speaking order; (iv) All the parties will appear before SEBI on 10th July, 2019 at 3 p.m. on which date SEBI will hear and decide the matter, and if for some reason, the hearing is not concluded on that day, SEBI will hear the same on a day to day basis till it is concluded. SEBI would thereafter pass an order on or before 17th July, 2019. (v) Since an interim direction had been granted by the Supreme Court of India by its order dated 26.6.2019, we direct that the Nifty Option Contract on the F O Segment of NSE which was to expire on 27th June, 2019 will remain in abeyance till 22nd July, 2019.
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Insolvency & Bankruptcy
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2019 (9) TMI 594
Admissibility of application - Initiation of CIRP - Section 9 of the Insolvency and Bankruptcy Code, 2016 - Corporate Debtor - existence of dispute or not - HELD THAT:- The Appellant has wrongly taken plea that there is difference between the amount as shown in the Demand Notice under Section 8(1) and the application under Section 9 (Form-5). From the Demand Notice, we find that unpaid amount has been shown as ₹ 20,58,704.00/-. Part-IV of Form 5 also shows that same amount i.e. ₹ 20,58,704.00/- as principal amount and ₹ 11,11,700/- towards interest @ 18% per annum i.e. total ₹ 31,70,404/-. There was no existence of dispute and there being a debt and default, the Adjudicating Authority rightly admitted the application under Section 9 of the I B Code - appeal dismissed.
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2019 (9) TMI 590
Liquidation order - Financial Creditor - section 5(7) read with Section 5(8) of the I B Code - HELD THAT:- Similar issue fell for consideration before this Appellate Tribunal in Y. SHIVRAM PRASAD AND ASSET RECONSTRUCTION COMPANY (INDIA) LTD. VERSUS S. DHANAPAL ORS. AND SERVALAKSHMI PAPER LTD. ORS[2019 (5) TMI 386 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, NEW DELHI] where it was held that The liquidator is required to act in terms of the aforesaid directions of the Appellate Tribunal and take steps under Section 230 of the Companies Act. If the members or the Corporate Debtor or the creditors or a class of creditors like Financial Creditor or Operational Creditor approach the company through the liquidator for compromise or arrangement by making proposal of payment to all the creditor(s), the Liquidator on behalf of the company will move an application under Section 230 of the Companies Act, 2013 before the Adjudicating Authority i.e. National Company Law Tribunal, Chennai Bench. We direct the Liquidator to follow the provisions of Sections 35,37,38, 39 and 40 of the I B Code and decide the claim. Thereafter, it will ensure that instead of liquidating the assets of the Corporate Debtor steps are taken for Arrangement / Scheme to frame u/s 230 of the Companies Act, 2013. If Promoters / Members of the Corporate Debtors including the Appellant give any proposal for entering into an Agreement or Scheme in terms of Section 230 of the Companies Act, 2013 or any other Creditors, the liquidator is required to act in accordance with the directions of this Appellate Tribunal in Y. Shivram Prasad Vs. S. Dhanapal Ors. The Liquidator in the meantime will also ensure that the Corporate Debtor remains a going concern and the work do not suffer. It will make payment of salary and wages to the officers, employees and workmen of the Corporate Debtor and also to the suppliers of goods, services, electricity charges, water charges etc. Appeal disposed off.
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2019 (9) TMI 589
Maintainability of application - Initiation of CIRP - Section 9 of the Insolvency and Bankruptcy Code, 2016 read with Rule 6 of the Insolvency Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - corporate debtor not in a position to pay the said outstanding - HELD THAT:- On perusal of the material available on record it is also found that, the respondent has not raised any dispute against the claim and has admitted claim of the operational creditor by way of affidavit. This adjudicating authority is of the considered view that operational debt is due to the Applicant. That, service is complete and no dispute has been raised by the respondent. That, Applicant is an Operational Creditor within the meaning of sub-section (5) of Section 20 of the Code. From the aforesaid material on record, petitioner is able to establish that there exists debt as well as occurrence of default. The Application filed by the Applicant is complete in all respects. It is a fit case to initiate Insolvency Resolution Process by admitting the Application under Section 9(5)(1) of the Code - Application admitted - moratorium declared.
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2019 (9) TMI 588
Maintainability of application - Initiation of CIRP - Appellant submits that the Adjudicating Authority declared the Corporate Debtor as Non-performing Asset (NPA) is under challenge - HELD THAT:- As held in the case of M/S. INNOVENTIVE INDUSTRIES LTD. VERSUS ICICI BANK ANR. [ 2017 (9) TMI 58 - SUPREME COURT] , if there is a debt payable by the Corporate Debtor and default is committed and default is of more than Rupees One Lakh, it is open to the Adjudicating Authority to admit the application u/s 7 based on the records. Learned counsel for the Appellant submitted that the matter should be remanded to the Adjudicating Authority to find out whether the debt is payable or not. However, such prayer cannot be accepted as no plea was taken up by the Corporate Debtor that no debt is payable in the eyes of law or in fact. On the other hand, the debt is payable to the Corporate Debtor and the default has been committed. Appeal dismissed.
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2019 (9) TMI 587
Contempt petition - removal of the Resolution Professional / Liquidator - It was alleged that despite directions by the Adjudicating Authority from time to time, the Ex-Directors of the Corporate Debtors were willfully dis-obeying to co-operate - HELD THAT:- In the present case, as we find that the Appellant has not co-operated with the Resolution Professional / Liquidator and is still not co-operating and the Adjudicating Authority has already initiated the contempt proceedings under Section 425 of the Companies Act and intends to order for penal action under Section 70 and 72 of the I B Code, we allow the Appellant to raise all the issues before the Adjudicating Authority - If any issue the Appellant intends to raise, he and other Directors should appear in person and may file reply and the Adjudicating Authority thereafter will decide whether the Appellant and the other Directors are liable for punishment in terms of Section 425 of the Companies Act or their case is to be referred to the Special Court for action under Section 70 r/w Section 72 of the I B Code. Appeal dismissed.
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2019 (9) TMI 586
Issuance of notice to IBBI - grievance of the applicant is directed at the IBBI for not taking any action against the RP/Liquidator, Mr. Abhishek Anand pursuant to a complaint filed by him on 19.02.2019, under Section 217 of the IBC - HELD THAT:- This Bench is of the opinion that the IBBI, which is the Regulatory Authority is competent to conduct its own work and it would not come within the purview of the Adjudicating Authority to question them on every complaint made by an Ex-Director of a Corporate Debtor. We are not inclined to issue notice on the CA till we are convinced of any misconduct and direct them to take action against an Insolvency Professional.
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PMLA
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2019 (9) TMI 585
Offence under PMLA - attachment made by the Provisional Attachment Order (PAO) - HELD THAT:- It is evident that the PAO, the Original Complaint and the Impugned Order have simply copy pasted the contents of the CBI Chargesheet. In the present, very serious issues are involved, those have to be decided legally. We have examined the chart filed alongwith rejoinder as Annexure-A, which highlights the similarities between the Chargesheet, the PAO, the Original Complaint and the Impugned Order. Shockingly, the contents of these documents are almost identical and which evidences that the Respondent No.1 i.e. the author of the PAO and Original Complaint and the AA i.e. the author of the Impugned Order, has not applied his mind. He who passed the order was not the Judicial Member. The order was passed in very casual manner. In serious and complicated issues cut paste of pleadings and documents is not acceptable. It is the approach of claimed that PMLA is an independent proceeding and it has own mechanism to decide the matter on merit. The reply, appellant has put its case in details issue-wise. No doubt, the contents of the reply was re-produced but the said legal issues have not been decided. The impugned order is set-aside on the reason that the impugned order has without assigning any reasons, and much less any legally cogent reasons, independent mind has not been applied. We allow the appeal and the matter is remanded back to Adjudicating Authority for fresh adjudication after considering the reply filed by the appellant to the notice under Section 8 (1) of Act. The Adjudicating Authority shall hear the matter on all the issues and shall consider all the issue raised in the reply. Adjudicating Authority is granted six months time from 21.10.2019 to decide the matter by the Member (Law) after hearing both side.
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Service Tax
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2019 (9) TMI 584
Validity of Recovery certificate - Rectification of error - error on the face of record or not - Section 74 of the Finance Act, 1994 - HELD THAT:- The petitioner failed to produce the relevant documents and to appear in the adjudication proceedings to make out a case and otherwise the Tribunal did not find mistake apparent on the face of record to rectify it. Rectification can be done when there is a defect apparent on the face of the record and to be rectified - there is no defect of nature which could have been rectified by entertaining the application under Section 74 of the Act of 1994. The application under Section 74 of the Act of 1994 is dismissed - petition dismissed.
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2019 (9) TMI 583
Classification of services - Business Auxiliary Services or not - amounts received by the Appellants from the vehicle manufacturer/ dealer and accounted by them in their book of accounts as subvention income - Case of appellant is that since the subvention income is nothing but interest against the advances the same should not be subjected to service tax - recovery of amount not/short paid. Whether the amounts received by the Appellants from the vehicle manufacturer/ dealer and accounted by them in their book of accounts as subvention income should be subjected to service tax under the category of Business Auxiliary Services as defined by Section 65 (19) of Finance Act, 1994? HELD THAT:- We are not in agreement with the submissions made by the appellants. Once we hold that the amounts received by the appellants as subvention charges are consideration for providing the business auxiliary services, the manner in which they are determined are irrelevant. They may be equivalent to difference of their interest earning on loan extended in normal course and under the special scheme or can be more or less than that is immaterial for treating it is as consideration for providing the service. Similar issue decided in the case of M/S HOUSING DEVELOPMENT CORPORATION LTD (HUDCO) VERSUS CST, AHMEDABAD [ 2011 (11) TMI 95 - CESTAT, AHMEDABAD ] where it was held that Interest is nothing but the time-compensation for somebody s money being retained by somebody else. The longer the period of retention, the higher will be the interest amount. In this background, the prepayment charges can never be considered to be in the nature of interest as prepayment only means payment before time. This should ideally result in refund of interest and not the demand for more interest because the borrowed money is being paid back before time. Thus we are not in position to agree with the argument of the appellants by which they contend that these subvention charges are nothing but interest on advances and hence exempt from payment of service tax.- demand of service tax in under the category of Business Auxiliary Services on the amounts received as subvention income by the Appellants is upheld. Time limitation - HELD THAT:- Appellant have not shown any reason for entertaining the so called bonafide belief that service tax was not payable in respect of the subvention income. On the contrary the fact is that they were availing the CENVAT credit in respect of input services received for providing these services. Appellants have and could not have denied the fact that they had availed CENVAT Credit in respect of the advertisements jointly issued by them along with the vehicle manufacturers/ dealers for the purpose of special schemes, offering interest at nil/ lower rate - appellant have deliberately withheld the information in respect of the subvention income recovered by them, from the department with the intention to evade payment of service tax. Hence the extended period is rightly invoked for demanding service tax from the appellant. Penalty u/s 78 - HELD THAT:- Since we uphold that the demand by invoking extended period of limitation, the penalty under Section 78 of Finance Act, 1994 to is sustained - Penalty upheld. Penalty u/s 77 of FA - HELD THAT:- Penalty under Section 77 are civil in nature and are imposed for infractions noticed since by not making proper declarations in ST-3 returns appellants have contravened the provisions of Section 70 of Finance Act, 1994 read with rule 7 of Service Tax Rules, 1994 penalties as imposed by the Commissioner under Section 77(2) too are justified - penalty upheld. Interest u/s 75 on amount short paid - HELD THAT:- The interest as provided by the statue is for the delay in the payment of tax from the due date. Since the demand has been upheld, demand for interest too is upheld - Demand of interest upheld. Appeal dismissed - decided against appellant.
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2019 (9) TMI 582
Rejection of Refund claim - time limitation - relevant date - Rule 5 of the CCR, 2004 - HELD THAT:- The relevant date for the purposes of deciding the time-limit for consideration of refund claims under Rule 5 of the CCR has been held to be the end of the quarter in which the FIRC is received in cases where the refund claims are filed on a quarterly basis and this finding is required to be applied to these cases as well since no contrary decision or order is placed on record. Reliance placed in the case of C.C.E., Cus. S.T., Bengaluru Vs. M/s. Span Infotech (India) Pvt. Ltd. [2018 (2) TMI 946 - CESTAT BANGALORE] where it was held that in respect of export of services, the relevant date for purposes of deciding the time limit for consideration of refund claims under Rule 5 of the CCR may be taken as the end of the quarter in which the FIRC is received, in cases where the refund claims are filed on a quarterly basis. Refund allowed - appeal allowed - decided in favor of appellant.
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2019 (9) TMI 581
Renting of immovable property service - Demand of Service Tax - CBEC vide DoF No. 334/01/2007-TRU dated 28.02.2007 - HELD THAT:- There is substantial merit in the argument of the appellant that the entire scheme was devised and executed much before the levy of service tax was introduced under the head of renting of immovable property service and therefore, the allegation that the appellant disguised the receipt of rent as non-refundable contribution is totally misplaced. A perusal of the SCN shows that there is no evidence whatsoever to support the allegation that what was collected was in fact rent and not non-refundable contribution. It is also seen that the entire scheme was devised under the supervision of Ministry of Textiles and it s representatives. In these circumstances the allegation appears to totally baseless - demand is set aside. Time Limitation - HELD THAT:- It is seen that when the scheme was devised, there was no levy of service tax on renting of immovable property and thus they could not have any intention to evade or to manipulate records to receive rent as non refundable contribution. Thus, the demand on such count is also not sustainable on the ground of limitation as well. Reversal of CENVAT Credit - input services - construction of compound wall and laying of new pipelines - HELD THAT:- The services in respect of laying of pipelines were availed during the year 2011-2012 the Commissioner observes that the service of construction of new compound wall and laying of pipeline of taxable park received by the appellant were not used by the appellant for providing output service nor were used in relation to setting up, modernization, renovation or repairs or premises of provider of output service - During the period 2006-2011, the unit was being set up and laying of pipeline and building wall is certainly part of renovation of premises and thus covered under the definition of input services - demand set aside. Business Auxiliary Services - amounts recovered under the head of finger analysis fee demanded under the head of technical testing and analysis service and tender and plant evaluation fee - Demand of service tax - HELD THAT:- It is seen that the appellant had filed a VCES declaration in respect of service tax on technical testing and analysis services in respect of amount received under the head of finger analysis fee, however, the said VCES declaration was rejected - The appellants are not statutory body and no evidence in support of the claim that the activity undertaken by them is statutory in nature has been submitted - demand and penalty upheld. Demand of Service Tax - certain amounts under the head of tender and plant evaluation fee which relates to the amount charged from the members for verification of factory building, plant, FSI, parking, etc. - HELD THAT:- The appellant has claimed that these are statutory requirements, there is no merit in the said arguments and as the appellant are not statutory body and no evidence in respect of statutory in nature of the activity is submitted - demand alongwith penalty upheld. Appeal allowed in part.
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2019 (9) TMI 580
Classification of services - Cargo Handling Service or port service - appellant has been providing the service of stevedoring service at Karwar Port and discharging the goods from the vessel to the wharf - HELD THAT:- The services rendered by the appellant does not fall in the category of Cargo Handling Service prior to 1.7.2003. Further, during the impugned period, the services rendered by the appellant fall in the category of Port Service and not Cargo Handling Service as held by the apex court in the case of DCCE vs. Sushil Co. [ 2016 (4) TMI 987 - SUPREME COURT ] and also clarified by the Board Circular dated 1.8.2002 - demand of service tax on Cargo Handling Service for the period 16.8.2002 to 30.6.2003 is not sustainable in law. Time Limitation - HELD THAT:- The entire demand is also barred by limitation because the show-cause notice was issued on 18.7.2009 proposing to demand service tax for the period from 16.8.2002 to 30.6.2003 and in the show-cause notice, there is no allegation of fraud, collusion, willful misstatement or suppression of fact with intent to evade payment of tax. Appeal allowed on merits as well as on limitation.
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Central Excise
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2019 (9) TMI 579
Permission for withdrawal of appeal - monetary amount involved in the appeal - HELD THAT:- The appellant admits that in view of instructions dated 22.8.2019 issued by Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes and Customs (Judicial Cell) the instant appeal would not be maintainable before this Court, as demand amount i.e. ₹ 52,84,424/- is to be recovered, which is below the monetary limit of ₹ 1 Crore. Appeal dismissed as withdrawn.
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2019 (9) TMI 578
Refund claim - relevant date - CENVAT Credit reversed in excess of what was required to be reversed - common inputs used for both dutiable and exempted goods - Rule 6(3A) of CCR, 2004 - HELD THAT:- Rule 6(3A), Clause (f) which is applicable in the present case, there is no time limit provided for claiming the credit. Further, the relevant date as provided in Section 11B of the Central Excise Act is also to be counted from the date of adjustment of duty after the final assessment which is specially provided in Clause (eb) of Section 11B. Further, in the present case, the final adjustment happens on 30.11.2017 and that is the relevant date for the purpose of reckoning the period of limitation as provided in Section 11B and if that date i.e., 30.11.2017 is taken, then the refund claim filed on 4.7.2018 is within the period of limitation. Both the authorities have wrongly interpreted the relevant date as provided in Section 11B as well as Rule 6(3A)(f) - Appeal allowed - decided in favor of appellant.
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2019 (9) TMI 577
Refund of the excess duty paid - provisional assessment - doctrine of unjust enrichment - Section 11B read with Section 12B of the Central Excise Act, 1944 - HELD THAT:- The appellant s own case M/S TVS MOTOR COMPANY LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX MYSORE [ 2017 (6) TMI 163 - CESTAT BANGALORE ] , this Tribunal has held that any appeal against the sanctioning of refund order, the Revenue cannot recover erroneously sanctioned refund by parallel proceedings by issue of SCN. The Division Bench of this Tribunal in the case of C.C.,C.E. S. T- MYSORE VERSUS JK TYRE INDUSTRIES LTD., VIKRANT TYRES LTD. [2018 (6) TMI 174 - CESTAT BANGALORE] has held that the test of unjust enrichment does not apply to the cases of provisional assessment. Refund allowed - appeal allowed - decided in favor of Appellant.
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2019 (9) TMI 576
Clandestine removal - clearance of goods to 100% EOU - allegation of clearance of Polyester Yarn by the Appellants in the market has been made on the ground that the partners of M/s Sunshine Overseas in their statements stated that they did not receive any Polyester Fabrics - Demand mainly based on statements of various persons - cross-examination of statements not provided - HELD THAT:- During investigation the Appellant factory was also searched and no incriminating documents or evidences were found, which shows that the Appellant did not clear Polyester fabric to M/s Sunshine Overseas and instead cleared Polyster yarn in local market. Stock of raw material and finished goods etc. were found to be in order. Even, the statutory records were found to have been correctly maintained by the appellant firm and the same has nowhere disputed. It is observed that except placing reliance on the statement of the partners of M/s Sunshine and Chief Executive Officer of the Appellant firm and two tempo owners, no other evidence on record has been brought to show that the appellant has not cleared Polyester Fabrics to M/s Sunshine Overseas. The statements of Shri Sanjay Aggarwal CEO of the Appellant firm are contradictory. Whereas in his statement dt 25.6.2003 he stated about removal of manufactured goods i.e Polyester Grey Fabrics but after 2 years he changed his version in statement dated 12.3.2005 that the raw material was cleared by the Appellant. Similarly statement dt 12.7.2003 of Tempo Driver Shri Saiyad and statement dtd 19.8.2003 of Shri Akbar Sahid Umar, tempo owner, they did not say anything about transportation of raw material. Opportunity of cross-examination of statements not provided - HELD THAT:- Once the statements has been made basis for alleging clandestine clearance, the adjudicating should have granted cross examination. The Appellant during the adjudication proceedings, had sought cross examination of the persons, whose statements were relied upon in the show cause notice. The same was necessary in terms of Section 9D of the Central Excise Act which was not allowed - when the demands and the allegation of removal of Polyester Yarn was based upon the statements of the persons in that case, it was mandatory for the adjudicating authority to grant the cross examination of such persons whose statements are sole evidence to make allegations against the Appellant. In absence of same the statements cannot form basis for alleging contravention of law by the Appellant. Further, there is no evidence of transportation of any raw material or sale of such goods to any buyer or unaccounted receipt of any cash amount from any person on account of such sale of raw material. Once the goods were certified to be warehoused by the consignee, the consigner, i.e. the appellant, cannot be held responsible for contravention of law. In such case, no demand can be made against the Appellant. The demand against the Appellant Unit and penalty against all the Appellants are not sustainable - Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2019 (9) TMI 575
Set off of tax paid on purchase of raw materials used in the manufacture of tubular poles - Claim rejected on the reasoning that the assessee had not raised any such claim in its return and, therefore, it was not permissible to grant the same at the stage of assessment - forfeiting the amount of the tax under Section 29-A(2) of the Act - HELD THAT:- To take the benefit of Section 4-BB of the Act, plainly, the assessee was required to make that deduction, at that stage, and not later. Then, looking at the notification no. 2339 dated 22.10.1996, read with notification no. 1223 dated 22.5.1998, under the conditions for grant of benefit of set off, it was clearly stipulated by way of condition no. 3 that it was permissible to the manufacture (of notified goods) to claim such deduction, by way of an option to the payment of full tax on sale of such goods. It was not compulsary for that manufacturer to necessarily avail set off. The reasoning given by the Tribunal apart, it does not appear possible to contemplate a situation where a claim of set off may have been raised by the assessee after it had failed to make a deduction of tax payable on the sale of tubular poles and it had charged full tax @ 4% on sale of tubular poles. Thus, notwithstanding full compliance made by the assessee, in payment of tax on purchase of raw material and charge of tax on sale of tubular pipes, it lost the right to claim the set off under Section 4-BB of the Act upon opting to charge full tax on sale of tubular pipes, instead of deducting the tax paid on purchase of raw material from the tax payable on the sale of tubular pipes. The subsequent events of the timing of the claim raised during assessment proceedings remained inconsequential as the scheme of set off was optional and the assessee must be held to have necessarily opted out of it by choosing to charge full tax on sale of tubular pipes. Revision dismissed.
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2019 (9) TMI 574
Assessment of Sales Tax - estimation of Turnover - interstate sale - HELD THAT:- Merely because at the later stage, in appeal, the assessee sought certain information and also sought cross examination of the purchaser, it would not introduce any defect in the reasoning adopted by the first appeal authority. However, with respect to the quantification of the amount of undisclosed turnover, it does appear that the first appeal authority had taken note of the disclosed turnover as also the undisclosed turnover pertaining to Bill No.113 and estimated the total turnover almost twice of that value being ₹ 20,00,000/-. This being a case of central sales, in absence of any material and in absence of any reason being offered by the Tribunal, it appears, the Tribunal has clearly erred in enhancing the estimation made to ₹ 30,00,000/-. The order of the Tribunal dated 24.01.2008 is set aside and the order passed by the first appeal authority is restored - Revision allowed in part.
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2019 (9) TMI 573
Amendment of Eligibility Certificate - Section 4-A(3) of U.P. Trade Tax Act, 1948 - whether the exemption granted to the assessee by the Divisional Level Committee under the Eligibility Certificate No.4324 dated 26.11.1998, as amended by Eligibility Certificate No.1596 dated 4.12.2003, could have been denied by the Commissioner in exercise of its power under Section 4-A(3) of the Act, when there was no allegation of any misuse of that Eligibility Certificate? HELD THAT:- In the instant case, it is wholly debatable whether the assessee was entitled to exemption on the investment made on dyes and moulds, merely because such dyes and moulds had been given out to job workers who used the same to manufacture the components that came to be used in the manufacture of the end product by the assessee, namely colour television sets. It appears to be debatable as the revenue could not point out any specific provision, either in the Act or under the exemption notification, as may dis-entitle a new unit from exemption on the value of such dyes and moulds used by job workers to manufacture component parts for the new unit. Section 4-A of the Act continuing to exist and similar nature and purpose of the notified schemes of exemption, it appears to be prima-facie permissible in law for a 'new unit' to be entitled to avail exemption, though some part of the manufacturing activity may have been got done on a job work basis. In absence of any disabling clause, the investment made to obtain manufacture of components on job work basis may remain entitled to exemption. On the date of issuance of the eligibility certificate, the value of the machinery had clearly not been written off. That is not even the allegation of the revenue. The only conclusion that is being drawn in the present proceedings is that there was no rectifiable mistake, either factual or legal, with respect to the exemption granted to the assessee. The Divisional Level Committee having examined the facts and having granted the eligibility certificate, the same could not be overcome and/or defeated by the Commissioner by assuming power and jurisdiction under section 4-A(3) of the Act - Revision allowed - decided in favour of the assessee and against the revenue.
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2019 (9) TMI 572
Validity of assessment order - A/Y 2012-13 to 2016-17 - petitioner was not given time to file their objections in response to the notices of proposals - Principles of Natural Justice - HELD THAT:- Admittedly, the Assessee has sought for time to file their objection through their letter dated 15.03.2019. Such communication was also received by the Assessing Officer, as found in the impugned order itself. If that be the case, the Assessing Officer is not justified in proceeding to pass the assessment orders without informing the assessee as to whether their request for time to submit their reply has been accepted or rejected. In both events, the Assessing Officer is bound to send a communication to the Assessee and inform the result of the request made by the Assessee. Admittedly, the orders of assessment were passed simply by confirming the proposals in the absence of any objection from the petitioner. Therefore, this Court is of the view that the matter needs to go back to the Assessing Officer to redo the assessment once again on merits and in accordance with law after getting objection from the petitioner. Petition allowed by way of remand.
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2019 (9) TMI 571
Illegal detention of goods along with vehicle - Section 53 of Karnataka VAT Act, 2003 - HELD THAT:- No doubt, the department may have good case on merits in respect of certain illegal activities alleged to have been committed by M/s.Siva Impex and the petitioner. Respondents/Commercial department shall have to resort for appropriate action/proceedings and they have no power to make such transmission of goods from one section to another section. Annexure-D dated 15.6.2017 is set aside reserving liberty to the Commercial Department to proceed in accordance with law against the petitioners as well as M/s.Siva Impex, if it is warranted - Petition allowed.
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Indian Laws
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2019 (9) TMI 570
Grant of Bail - commission of fraud punishable under Section 447 of the Companies Act, 2013 - siphoning off of funds - fraudulent availment of CENVAT Credit - FY 2009-10 to FY 2016-17 - HELD THAT:- It must be noted that even as per Section 212(7) of the Companies Act, the limitation under Section 212(6) with respect to grant of bail is in addition to those already provided in the Cr.P.C. Thus, it is necessary to advert to the principles governing the grant of bail under Section 439 of the Cr.P.C. Specifically, heed must be paid to the stringent view taken by this Court towards grant of bail with respect of economic offences. The High Court in the impugned order has failed to apply even these general principles. The High Court, after referring to certain portions of the complaint to ascertain the alleged role of Respondent No. 1, came to the conclusion that the role attributed to him was merely that of colluding with the co-accused promoters in the commission of the offence in question - this vague observation demonstrates non-application of mind on the part of the Court even under Section 439 of the Cr.P.C., even if we keep aside the question of satisfaction of the mandatory requirements under Section 212(6)(ii) of the Companies Act. The High Court has failed to apply its mind to all the circumstances that were required to be considered while granting bail, particularly in relation to economic offences - Matter remanded to High Court with a request to the High Court to decide the bail application afresh at an early date, in accordance with law.
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2019 (9) TMI 569
Stay on execution of order passed under Section 14 of SARFAESI Act, 2002 - possession of the property/secured asset - failure to make due repayment of credit facilities - NPA - HELD THAT:- The interplay between the SARFAESI Act and the right of the tenant was first examined by this Court in Harshad Govardhan Case [ 2015 (11) TMI 1315 - SUPREME COURT ]. It may be noted that the present appellant was a party to the aforesaid proceedings. This Court was confronted with the question as to whether the provisions of the SARFAESI Act affect the right of a lessee to remain in possession of the secured asset during the period of the lease. After noticing the scheme of the Act, this Court held that if the lawful possession of the secured asset is not with the borrower, but with a lessee under a valid lease, the secured creditor cannot take possession of the secured asset until the lawful possession of the lessee gets determined and the lease will not get determined if the secured creditor chooses to take any of the measures specified in Section 13 of the SARFAESI Act - Accordingly, this Court concluded that the Chief Metropolitan Magistrate /District Magistrate can pass an order for delivery of possession of secured asset in favour of secured creditor only when he finds that the lease has been determined in accordance with Section 111 of the T.P. Act. This Court also recognised the inconsistency between Section 13(13) of the SARFAESI Act and Section 65A of the Transfer of Property Act. While Section 13(13) of SARFAESI prohibits a borrower from leasing out any of the secured assets after receipt of a notice under Section 13(2) without the prior written consent of the secured creditor, Section 65A of the T.P. Act enables the borrower/mortgagor to lease out the property. This inconsistency was resolved by holding that the SARFAESI Act will override the provisions of the T.P. Act. Considering the counterfactual pleaded by the Appellant-tenant himself, that he was a tenant who had entered into an oral agreement, such tenancy impliedly does not carry any covenant for renewal, as provided under Section 65A of T.P. Act. Therefore, in any case, Section 13 (13) SARFAESI Act bars entering into such tenancy beyond January, 2012. As the notice under Section 13 (2) SARFAESI Act was issued on 30.04.2011, subsequent reckoning of the tenancy is barred. Such person occupying the premises, when the tenancy has been determined, can only be treated as a tenant in sufferance . We should note that such tenants do not have any legal rights and are akin to trespassers - he operation of the Rent Act cannot be extended to a tenant in sufferance visavis the SARFAESI Act, due to the operation of Section 13(2) read with Section 13(13) of the SARFAESI Act. A contrary interpretation would violate the intention of the legislature to provide for Section 13(13), which has a valuable role in making the SARFAESI Act a self executory instrument for debt recovery. Moreover, such an interpretation would also violate the mandate of Section 35, SARFAESI Act which is couched in broad terms. This case, does not mandate the additional protection to be provided under the Rent Act, to the appellant-tenant herein. The lower Courts are correct in ordering delivery of possession to the respondent no. 1bank as the tenancy stands determined - In the present case, as we are in the year 2019, which is 7 years beyond the deadline of 2012, it is ordered that the appellant-tenant shall hand over the possession of the secured asset within 12 weeks of this order to the Assistant Registrar at Bandra Centre of Courts, Mumbai, who in turn shall deliver the same to the respondent no.1 bank - Appeal dismissed.
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2019 (9) TMI 568
Prohibition on anti-competitive agreements - Anti-competitive restrictions - abuse of dominant position - HELD THAT:- Regulations 18 (1) and 20 (4) of the CCI Regulations, require the DG to investigate the matter i.e. the allegations made in information or reference, as the case may be , together with all evidence, documents, statements or analysis collected during investigation. The investigation has to be a comprehensive one. The DG may not, in fact, be able to anticipate what information may emerge during such investigation. Merely because the information that emerges does not pertain to the specific subject matter which the DG has been asked to investigate, would not constrain the DG from examining such information as well if it points to violation of some other provisions of the Act. Indeed, the directions given by the CCI to the DG under Section 26 (1) of the Act is only to trigger investigation. In the present case, the Court finds that while the information with the CCI did pertain to the alleged violation by GIL and others under Section 3(3) (a) and (b) of the Act, the direction given to the DG was to investigate the matter , and this enabled the DG to examine violations not only of under Section 3 of the Act, but any other violation that may have come to his notice while undertaking the investigation. An order of the CCI under Section 26 (1) of the Act triggers investigation by the DG, and that the powers of the DG are not necessarily circumscribed to examine only such matters that formed the subject matter of the original complaint. No doubt, the language of the order passed by the CCI issuing directions to the DG will also have a bearing on the scope of such investigation by the DG. In the present case, however, the language of the order passed by the CCI on 26th February, 2011, is broad enough to cover an investigation by the DG into what appeared to be prima facie violation of Section 4 of the Act by GIL. The scope of the powers and functions of the CCI, when it is considering the report of the DG, is a quasi judicial function. It undertakes that exercise after furnishing to the party a copy of the report and then permits the party to make its submissions in relation thereto. This is followed by a full-fledged hearing. At that stage the CCI can in its discretion permit the affected party to lead evidence. Therefore, the scope and extent of participation of GIL in the present case would obviously be different at the stage of investigation before the DG and at the subsequent stage of consideration of the DG s report by the CCI. This Court sets aside the impugned judgment of the learned Single Judge and restores the order dated 30th May, 2013 passed by the CCI. The matter before the CCI will now proceed from the stage where it was when the above order was passed, in accordance with law - Appeal allowed.
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2019 (9) TMI 567
Demand of Interest on account of delay in payment of the penalty - violation of provisions of Section 3 of the Competition Act, 2002 - whether the petitioner is liable to pay interest to the CCI on account of delay in payment of penalty as levied upon it? - HELD THAT:- It is clear from the plain reading of Regulation 5 of the Recovery Regulations, that simple interest at the rate of one and one half per cent for every month, or part of the month, commencing from the date immediately after expiry of the period mentioned in the demand notice, is payable. The contention that since the order passed by CCI had been stayed, there was no delay in making the penalties, is unsustainable. The said issue is no longer res integra - In the STATE OF RAJASTHAN ANR. VERSUS J.K. SYNTHETICS LTD. ANR. [ 2011 (7) TMI 1300 - SUPREME COURT] , the Supreme Court had examined several other decisions and had authoritatively reiterated the position that wherever an interim order or stay is granted, the beneficiary of the interim order is bound to pay interest on the amount withheld or not paid by virtue of the interim order unless the final order indicates otherwise. It is material to note that the CCI had found the petitioner to be falling foul of Section 3 of the Act. This finding was not disturbed by COMPAT. The COMPAT had merely reduced the penalty and had modified CCI s order dated 10.07.2015 to that extent. Such modification would, obviously, relate back to CCI s order, that is, the order dated 10.07.2015. The contention that the order of CCI had merged with the order passed by COMPAT is correct. However, the COMPAT order reaffirmed CCI s decision to levy penalty and that decision, having been sustained, cannot be considered as inoperative or non-existent for the period during which it was suspended on account of the stay order. The interest on such penalty being a statutory levy is required to be paid - the petitioner is required to pay interest on the delayed payment - Petition dismissed - decided against petitioner.
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2019 (9) TMI 566
Smuggling - recovery of contraband - Section 42 of the NDPS Act - appellant has vehemently argued that the prosecution has failed to prove the case against the appellant - corroboration of statements - HELD THAT:- There is violation of mandatory provisions of Section 42 of the NDPS Act. Section 42 of the NDPS Act requires recording of reasons of belief and for taking down of information received in writing and the same is to be sent to the superior officers. There is no evidence that information was reduced into writing and superior officer was informed. Their Lordships of the Hon'ble Supreme Court in Sukhdev Singh vs. State of Haryana, [2012 (12) TMI 982 - SUPREME COURT] have underlined the objects and purpose of ensuring strict compliance of Section 42. Their Lordships have held that Section 42 is mandatory which ought to be construed and complied with strictly. The compliance of furnishing information to the superior officer should be forthwith or within a very short time thereafter and preferably prior to recovery. PW-1 SI Sohan Lal had given the options to the accused to be searched by him or Gazetted Officer or Magistrate. Similarly, PW-5 DSP Navjot Singh had also given option to the accused that he had legal right to be searched from him (DSP) or any other Gazetted Officer or Magistrate. In his crossexamination, he categorically admitted that he never apprised the accused that he was a Gazetted Officer. He was also never apprised the nature of search or meaning of Gazetted Officer of various departments of Magistrate. Investigating Officer was required to give only two options to the appellant whether he wanted to get his personal search conducted before a Magistrate or a gazetted officer. He could not ask for third option to be searched by him. Section 50 of the NDPS Act is mandatory. According to PW-1 SI Sohan Lal, he was carrying computerized weighing scale. However, PW-5 DSP Navjot Singh deposed that he was carrying traditional weighing scale. There are material contradictions in the statements of official witnesses. The appellant is acquitted. The appellant is in custody. He be released forthwith if not wanted in any other case - Appeal allowed.
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