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TMI Tax Updates - e-Newsletter September 23, 2017 Case Laws in this Newsletter: Income Tax Customs Corporate Laws Insolvency & Bankruptcy Service Tax Central Excise CST, VAT & Sales Tax Indian Laws TMI SMS The doctrine of lifting of veil in tax matters is to be applied to prevent fraud etc. and not in case of genuine or bona-fide losses - HC Government issues new notifications under CGST, IGST and UTGST to grant fresh exemptions in respect of certain supplies Articles SIMPLIFIED E-WAY BILL UNDER GST News Notification Issued For GST Actionable Claim On Branded Food Products GST implementation smoother than expected: Jaitley GST Refund - Blockage of Working Capital of Exporters - earlier also there was a normal blockage of funds for a period of 5-6 months at least Clarification about Transition Credit - ₹ 1.27 lakh crore of credit of Central Excise and Service Tax was lying as closing balance as on 30th June, 2017 - claim of credit of ₹ 65,000 crore is not unexpected Tax Payers Advised To Confirm Identities Of Income Tax Search Authorities RBI Reference Rate for US $ Tax on fuel more important for a dry state like Gujarat Notifications Companies Law F. No. 01/13/2013-CL-V - S.O. 3086(E) - dated 20-9-2017 - Co. Law Central Government appoints the 20th September, 2017 as the date on which proviso to clause (87) of section 2 of the Companies Act 2013, shall come into force - "subsidiary company" or "subsidiary" F. No. 01/13/2013 CL-V (Vol.III) - G.S.R. 1176(E) - dated 20-9-2017 - Co. Law Companies (Restriction on number of layers) Rules, 2017 [F. No. 1/5/2001-CL-V (Part VI) - S.O. 3085(E) - dated 20-9-2017 - Co. Law Amendment in Notification No. S.O. 3118(E), dated the 3rd October, 2016 Customs 89/2017 - dated 21-9-2017 - Cus (NT) All Industry Rates of Duty Drawback Schedule w.e.f. 1.10.2017 88/2017 - dated 21-9-2017 - Cus (NT) The Customs and Central Excise Duties Drawback Rules, 2017 GST 26/2017 - dated 21-9-2017 - CGST Rate Exempts intra state supply of heavy water and nuclear fuels from DAE to NPCIL 25/2017 - dated 21-9-2017 - CGST Rate Seeks to amend notification No. 12/2017-CT(R) to exempt right to admission to the events organised under FIFA U-17 World Cup 2017 24/2017 - dated 21-9-2017 - CGST Rate Seeks to amend notification No. 11/2017-CT(R) to reduce CGST rate on specified supplies of Works Contract Services. 26/2017 - dated 21-9-2017 - IGST Rate Exempts inter-state supply of heavy water and nuclear fuels from DAE to NPCIL 25/2017 - dated 21-9-2017 - IGST Rate Seeks to amend notification No. 09/2017-IT(R) to exempt right to admission to the events organised under FIFA U-17 World Cup 2017 24/2017 - dated 21-9-2017 - IGST Rate Seeks to amend notification No. 08/2017-IT(R) to reduce CGST rate on specified supplies of Works Contract Services 26/2017 - dated 21-9-2017 - UTGST Rate Exempts intra state supply of heavy water and nuclear fuels from DAE to NPCIL 25/2017 - dated 21-9-2017 - UTGST Rate Seeks to amend notification No. 12/2017-UTT(R) to exempt right to admission to the events organised under FIFA U-17 World Cup 2017 24/2017 - dated 21-9-2017 - UTGST Rate Seeks to amend notification No. 11/2017- UTT(R) to reduce CGST rate on specified supplies of Works Contract Services GST - States G.O.Ms. No. 417 - dated 19-9-2017 - Andhra Pradesh SGST The Andhra Pradesh Goods and Services Tax (Sixth Amendment), Rules, 2017 G.O.Ms. No. 411 - dated 18-9-2017 - Andhra Pradesh SGST Corrigendum - G.O.Ms.No.385, Revenue (Commercial Taxes-II) Department, dated 22nd August, 2017 G.O.Ms. No. 410 - dated 18-9-2017 - Andhra Pradesh SGST Appointing of members of Authority for Advance Ruling. G.O.Ms. No. 409 - dated 18-9-2017 - Andhra Pradesh SGST Appointing of members for State Level Screening Committee on Anti-Profiteering 11/2017-GST - dated 16-9-2017 - Assam SGST Seeks to extend the last date for filing the return in FORM GSTR-3B for the months of August to December, 2017. S.O. 195. - dated 22-9-2017 - Bihar SGST The Bihar Goods and Services Tax (Fifth Amendment) Rules, 2017. S.O. 183. - dated 21-9-2017 - Bihar SGST Amendments in the notification No.11/2017- State Tax (Rate), dated the 29th June, 2017 Circulars / Instructions / Orders GST Order No. 03/2017-GST - dated 21-9-2017 Extension of time limit for submitting the declaration in FORM GST TRAN-1 under rule 117 of the Central Goods and Services Tax Rules, 2017 FEMA 05 - dated 22-9-2017 Investment by Foreign Portfolio Investors in Corporate Debt Securities – Review Customs 38/2017 - dated 22-9-2017 The Customs and Central Excise Duties Drawback Rules, 2017 and All Industry Rates (AIRs) of Drawback related changes -reg. Highlights / Catch Notes GST Government issues new notifications under CGST, IGST and UTGST to grant fresh exemptions in respect of certain supplies. Visit to Get Source Income Tax Diversion of income at source - Joint venture agreement - 97% of the receipt transfer to M/s TRG Industries (P) Ltd. - scope of the agreement - it is diversion by overriding title - not taxable in the hands of assessee - HC Visit to Get Source Expenditure on eligible projects or schemes u/s 35AC - After 01.04.2017 the legislature desired to withdraw such deduction. - The Union legislature was competent to introduce such amendment - HC Visit to Get Source Transfer of trading assets at cost price, the profit component also stood transferred to the outgoing Directors, which otherwise belonged to the Company - the fact that AO has made the addition in the hands of the Directors would not make any difference - additions confirmed - HC Visit to Get Source The interest u/s 234B of the Act cannot go beyond the stage of S.245D(I) before the Settlement Commission - HC Visit to Get Source Galvanized iron pipe is a different commercial commodity than a iron pipe, therefore the activity of galvanization in our considered opinion amounts to manufacture - Deduction u/s 80-IB allowed - HC Visit to Get Source Penalty u/s 271C - non deduction of TDS on interest paid to sister concerns in terms of Section 194A - Levy of penalty confirmed - HC Visit to Get Source Disallowance of interest - reference to section 179 - The legislature has also recognised, that the doctrine of lifting of veil in the matter of tax dues is to be applied to prevent fraud etc. and not where the company has suffered despite its normal bona fide function. - HC Visit to Get Source Discount on ESOP to be allowed as business expenditure u/s 37(1), during the years of vesting on the basis of percentage of vesting during such period, subject to upward or downward adjustment at the time of exercise of option. Visit to Get Source Penalty u/s 271(1)(c) - additional income disclosure - surrender of income post survey u/s 133A - he disclosure made by the assessee is voluntary in nature, in the revised return - no penalty Visit to Get Source Reopening of assessment - notice u/s 148 issued on the directions of JCIT / CIT - a perusal of reasons for initiating reassessment proceedings clearly show that they are against the sprit of provisions u/s 147 Visit to Get Source MAT - Adjustment to book profit - computation u/clause (f) of Explanation-1 to section 115JB(2) is to be made without resorting to the computation as contemplated u/s 14A r.w.Rule 8D of I.T. Rules. Visit to Get Source Addition on account of alleged suppression of service value received - the addition made simply believing the Form 26AS will be an arbitrary exercise of power which cannot be sustained Visit to Get Source Customs The Customs and Central Excise Duties Drawback Rules, 2017 and All Industry Rates (AIRs) of Drawback related changes -reg. - Circular Visit to Get Source Central Government notified the All Industry Rates of Duty Drawback Schedule w.e.f. 1.10.2017 - Notification Visit to Get Source Liability to pay duty on import of software - Though no authorization was given by the appellant to DHL, it is an undisputed position that the software has, in fact, been ordered by the appellant and have been delivered to them by DHL - the appellant is to be considered as the importer Visit to Get Source Corporate Law The definition of "subsidiary company" or "subsidiary" u/s 2(87) of the Companies Act, 2013 shall come into force w.e.f. 20-9-2017 Visit to Get Source Acceptance of deposits by companies from its members - conditions relaxed in case of Specified IFSC Public company and a private company - Rule 3 amended Visit to Get Source Central Excise For an ayurvedic medicine to be classified under Chapter 30 has to pass the test whether it is for cure of any disease. If the same is only meant for care, then such product would not fall under medicament. Visit to Get Source Demand of interest - the period of limitation that applies to a claim for the principal amount should also apply to the claim of interest thereon. Visit to Get Source Case Laws: Income Tax 2017 (9) TMI 1239 Diversion of income at source - overriding title - income of assessee - Joint venture agreement - 97% of the receipt transfer to M/s TRG Industries (P) Ltd. - scope of the agreement - Held that:- True test of diversion of income by overriding title is whether the amount sought to be deducted, in truth, never reached the assessee as his income. To apply the doctrine of diversion of income by overriding title, the first and foremost condition to be satisfied is the nature of assessee s obligation, whether by the obligation, the income is diverted before it reaches the assessee, or whether the income is required to be applied to discharge an obligation after such income reaches the assessee. In the instant case, there is diversion of income at the source itself. Therefore, the instant case is diversion of income by overriding title. The receipt of amount of ₹ 12,09,55,137/- could not be treated as income of the assessee and it was the case of diversion of income by overriding title. Accordingly, the first substantial question of law is answered in favour of the appellant. From the perusal of the order passed by the Tribunal, the same cannot be said to be unreasoned, arbitrary or non speaking. From the close scrutiny of the order passed by the Tribunal, it is evident that it has perused the relevant records and has gone through the written submissions which were filed on behalf of the assessee. Therefore, it cannot be said that order passed by the Tribunal is unreasoned, arbitrary or non speaking. Accordingly, the second substantial question of law is answered. Addition invoking Section 40(a)(ia) - Held that:- With insertion of section proviso by Finance Act, 2012 to section 40(a)(ia) of the Act as otherwise also since the taxes have been paid by the joint ventures, the assessee could be held to be an assessee in default so as to disallow the amount attributed by the joint venture to the joint venturers in the ratio of 97:3 so as to invoke Section 40(a)(ia) of the Act. The aforesaid amendment is retrospective and is clarificatory in nature. For yet another reason, Section 40(a)(ia) of the Act is inapplicable to the fact situation of the case as no amount was payable by the assessee at the close of the year and if two views are possible, the one which favours the assessee has to be adopted. See ACIT V. Red Brick Realtors (2015 (7) TMI 437 - ITAT CHENNAI ). Accordingly, the third substantial question of law is also answered in the affirmative and in favour of the assessee. 2017 (9) TMI 1238 Validity of Revision u/s 263 - SCN stated that information had been received from the DDIT that during a search and seizure operation carried out paymen made to the Assessee was detected as non-genuine commission payment - ITAT setting aside the order of the CIT u/s 263 as concluding that Section 263 of the Act is to be invoked not as a jurisdictional corrective or as a review of a subordinate s order in exercise of supervisory power, but is to be invoked and employed only for setting right distortions and prejudices to the Revenue, which is a unique conception which is to be understood in the context of and in the interests of the Revenue. - non-genuine commission payment and no expenditure was incurred by the Assessee to receive the above commission - Held that:- The order of the CIT does not conform to the legal requirements of Section 263 of the Act. It was not enough for the CIT to reproduce the SCN, the reply thereto and give the conclusion. The impugned order of the CIT gives no reasons for the conclusion that the assessment order of the AO was erroneous and prejudicial to the interests of the Revenue. The CIT appears to have proceeded under the misconception that the AO could be directed to provide the details of the facts on the basis of which 263 proceedings have been initiated and then verify the reply of the assessee on the same issue. The exercise under Section 263 of the Act could not have been outsourced by the CIT to the AO. The CIT had himself to undertake a minimal enquiry and give reasons for coming to the conclusion that the assessment order was erroneous and prejudicial to the interest of the Revenue. - Decided in favour of assessee. 2017 (9) TMI 1237 Expenditure on eligible projects or schemes - withdrawal of the deduction u/s 35AC - principle of promissory estoppel - Vires of sub-section (7) of Section 35AC as introduced by the Finance Act 2016 with effect from 01.04.2017 challenged - Held that:- Section 35AC recognizes the deduction in case of expenditure by an assessee by way of payment to the approved institutions carrying out eligible project or the scheme or payment made directly on such eligible project or scheme. As per Explanation clause (b), eligible project or scheme would be a project or scheme for promoting the social and economic welfare or the uplift of public as the Central Government may notify. The deduction was therefore not confined to the healthcare service which the petitioner is dispensing and would cover range of projects and schemes for promoting social and economic welfare or the uplift of the public as may be notified. In plain terms, sub-section (7) of section 35AC provided for a terminal point for granting such benefit. After 01.04.2017 the legislature desired to withdraw such deduction. Any expenditure after such date would no longer be an eligible deduction. The provision applies prospectively. The Union legislature was competent to introduce such amendment. We do not find merits in the petition. 2017 (9) TMI 1236 Additions - whether stocks transferred on cost price can be assessed to tax on a notional price? - fix the price of the stock and transfer the same at a price less than the market value - principles of assessing the value of the stock of a dissolved firm for assessing the mutual adjustment of partner's shares can be applied to a running company? AO observed that the outgoing Directors of the Company were entitled only to an amount of ₹ 40.00 lacs being share held by them and it was observed that amount of goodwill shown in the balance sheet was only to create an impression that no amount was due towards the company and that assets were equal to that of the liabilities. Accordingly, the Assessing Officer came to the conclusion that it was merely a device to evade tax. He applied gross profit @ 9.6 per cent and estimated profit to transfer tradable assets worth R. 70,11,090/- and made an addition of ₹ 6,35,204/- Held that:- The profit so transferred would form part of cost of acquisition of the shares, dealership rights and the goodwill. The transferee was required to incur extra cost for acquisition of these assets. Such cost being capital in nature is not an allowable expenditure. Therefore, component of gross profit on the transfer of trading assets belonging to the assessee at cost price is a profit liable to tax in the hands of the company. In our considered view the Tribunal has rightly applied the ratio laid down in the case of A.L.A Firm (1991 (2) TMI 1 - SUPREME Court ) to the fact situation of the case. Even otherwise, the fact that the Assessing Officer has made the addition in the hands of the Directors would not make any difference in the present case for the reason that such income actually belongs to the assessee and therefore, taxable as such in its hand. - Decided in favour of revenue. 2017 (9) TMI 1235 Excessive interest u/s 234B beyond the date of the order passed by the Settlement Commission u/s 245D - Held that:- This Court finds considerable force in the submission made by the learned counsel for the assessee and the impugned orders passed by the Assessment Authority charging interest under Section 234B of the Act beyond the date of the order passed by the Settlement Commission under Section 245D(I) cannot be sustained. See Brij Lal’s case [2010 (10) TMI 8 - SUPREME COURT] in which it is clearly held that the interest under Section 234B of the Act cannot go beyond the stage of S.245D(I) before the Settlement Commission. - Decided in favour of assessee. 2017 (9) TMI 1234 Entitlement to deduction under Section 80 IB - Whether the activity of galvanization would amount to manufacture? - Held that:- The appellant is admittedly engaged in the manufacture of black pipes as well as galvanized iron pipes. The appellant also undertakes to manufacture all galvanized iron pipes by galvanization of raw pipes of customers on job work basis. The pipe is required to undergo the processes of prickling, rinsing, fluxing, drier, zinc tank and water quenching for the purpose of galvanization of iron pipe. After the completion of the entire processes, the end product which comes into existence is called galvanized iron pipe which is a different commercial commodity than iron pipe. A galvanized iron pipe is sold at a higher price than an iron pipe and a galvanized iron pipe is used for laying water lines, manufacture of different machinery and plants and for other purposes for which iron pipes cannot be used. Thus, galvanized iron pipe is a different commercial commodity than a iron pipe, therefore the activity of galvanization in our considered opinion amounts to manufacture. - Decided in favour of the assessee and against the Revenue. Accepting interest subsidy received by the appellant being reimbursement of the interest paid to the Bank on working capital advances for increasing the production of the industrial undertaking as income derived from such industrial undertaking and is entitled to deduction under Section 80 IB. See Commissioner of Income Tax v. Meghalaya Steel Ltd [2016 (3) TMI 375 - SUPREME COURT]- Decided in favour of assessee. Non allowing the deduction of EPF u/s 43B - EPF was deposited before the date of filing of return under Section 139(1) - Held that:- Substantial question of law is no longer res integra as is covered by the decision of CIT v. Alom Extrusions Ltd [2009 (11) TMI 27 - SUPREME COURT] wherein held that relaxation allowed by 1st proviso to Section 43B of the Act was restricted only to tax, duty, cess and fee, and did not apply to contributions to labour welfare funds. Since the second proviso to Section 43B resulted in implementation problems, it was deleted by Financial Act, 2003, thereby equating tax, duty, cess and fee with contributions to welfare funds. It was further held that the aforesaid amendment operates retrospectively, that is, w.e.f. 01.04.1988, i.e. the date of insertion of the 1st proviso. - Decided in favour of the assessee. 2017 (9) TMI 1233 Penalty u/s 271C - non deduction of TDS on interest paid to sister concerns in terms of Section 194A - Held that:- We are of the opinion that the issue raised has been held in favour of the Revenue in CIT Versus M/s. MUTHOOT BANKERS (ARYASALA) [2016 (6) TMI 739 - KERALA HIGH COURT]. With respect of the contentions raised as regards the finding that contumacious conduct is necessary before a penalty can be imposed, we are of the opinion that the position has been clarified by the Bench decision of the Apex Court in Dharamendra Textile Processors's case (2008 (9) TMI 52 - SUPREME COURT ) wherein as relying on precedents that mens rea is not an essential element for imposing penalty for breach of civil obligations. Considering the nature of penalty under the scheme of the Act, it was held that the penalty leviable in cases of default or failure of statutory obligation or in other words for breach of civil obligation is not a criminal offence and there is no question of proof of intention or mens rea by the assessee for imposing penalty. We are of the opinion that in view of the clear language of Section 271C of the Act, the assessee was liable to pay the penalty unless he could plead and prove that he was prevented from deducting the tax at source with reasonable cause. In the absence of any such pleading of proof, the penalty under Section 271C is liable to be imposed on the assessee. We find that the order of the Tribunal cancelling the penalty imposed on the assessee is unsustainable. The questions of law are answered in favour of the Revenue 2017 (9) TMI 1232 Treating the interest on corpus funds received as corpus donations u/s 11(1)(d) - Whether voluntary contributions received by a trust with specific direction that they shall form part of the corpus includes interest accruing/credited on deposits from above donations? - Held that:- A reading of Section 11 shows that subject to the provisions of Sections 62 and 63, the incomes enumerated therein shall not be included in the total income of the previous year of the person in receipt of the income. The person in receipt of the income, insofar as these cases are concerned, is the respondent assessee. One of the income that is enumerated in clause (d) of sub-Section (1) of the Section is the income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution. The fact that the donors had instructed that the interest earned shall be added to the corpus of the trust is undisputed. If that be so, the interest earned on the contributions already made by the donors would also partake the character of income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust. If that be so, conclusion is irresistible that the Tribunal has rightly held that the interest earned would qualify for exemption under Section 11(1)(d) of the Income Tax Act. No question of law 2017 (9) TMI 1231 Dis-allowance of interest paid to a related concern invoking Section 40A (2) - assessee have availed unsecured loan from the HUF - Held that:- Section 40A(2), makes it clear that where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person referred to in Clause(b) of the Section and the Assessing Officer is of opinion that such expenditure is excessive or unreasonable having regard to the facilities for which payment is made or the legitimate needs of the business or profession of the assessee, it is open to the Assessing Officer to disallow so much of the expenditure as is considered by him to be excessive and unreasonable. Having regard to the factual finding of the Assessing Officer which have been confirmed by the first appellate authority and the Tribunal, we feel that the deduction is perfectly justified in the light of Section 40A(2). We do not find any questions of law arising in this case to be considered by this Court. 2017 (9) TMI 1230 Disallowance of interest / commission paid by Assessee to depositors - interest less charged from Promoters and their relatives and their sister concerns? - invoke the doctrine of piercing the veil - Held that:- Assessee is a Mutual Benefit Company duly declared so by Government of India, Ministry of Finance, under Section 620A of Act, 1956. Objective of Assessee is to receive, deposit and advance loans to its members. A.O. did not find that advancement of loan was not to the members of Assessee Company, but what it has observed, that a corporate body could not have been member of Assessee Company ignoring the fact that this prohibition came into force in 1995, hence was not applicable in A.Y. 1993-94. This Court in Commissioner of Income Tax (Central) vs. Sahara India Mutual Benefit Co. Ltd. [2014 (4) TMI 1015 - ALLAHABAD HIGH COURT] followed observations made in Highways Construction Co. (P.) Ltd. v. CIT (1992 (11) TMI 86 - GAUHATI High Court) that additions made by A.O. on notional interest which was not in existent, is not legal. If Assessee had not bargained for interest, or had not collected interest, we fail to see how Income Tax authorities can fix a notional interest as due, or collected by Assessee. No such provision exist in Act, 1961 empowering Revenue to include in the income, interest which was not due or collected. In the present case, deposits were received from members and loans and advances were given on interest to members which is the business of Assessee Company. Thus all transactions were for the purpose of business. In such a scenario, when interest was actually paid by Assessee or accrued, who followed mercantile system of accounting, on application of this statutory provision, on incurring of such interest, Assessee would be entitled to deduction of full amount in assessment year in which it is paid. We have found, genuineness of business borrowing and further the fact that borrowing was for the purpose of business, has not been found to be illusionary, fictitious or colourable transaction. The factum that entire amount of interest has not been disallowed, shows that genuineness has been accepted even by A.O. That being so, no notion of so called prudent business transaction could have been imported by A.O. and it had to allow deduction. Piercing of Veil - reference to section 179 - Held that:- The legislature thus has also recognised even in the said statute the principle that the doctrine of lifting of veil in the matter of tax dues is to be applied to prevent fraud etc. and not where the company has suffered despite its normal bona fide function. In a case where the corporate personality has been obtained by certain individuals as a cloak or a mask to prevent tax liability or to divert public funds or to defraud public at large or for some illegal purposes etc., to find out as to who are those beneficiaries who have proceeded to prevent such liability or to achieve an impermissible objective by taking recourse to corporate personality, the veil of the corporate personality shall be lifted so that those persons who are so identified are made responsible. However, this doctrine is not to be applied as a matter of course, in a routine manner and as a day to day affair. As submission that here is a case where this Court must pierce veil and find out sophisticated device of tax evasion on the part of Assessee, in our view, is a misconceived proposition inasmuch as without appreciating nature of Assessee Company, and its business etc., actual transactions cannot be doubted. Only a part of rate of interest was questioned, hence this broad proposition of invoking doctrine of lifting of veil is not justified to be raised in this case and we have no hesitation in rejecting the same. - Decided in favour of assessee. 2017 (9) TMI 1229 Reopening of assessment - reasons to believe - non providing reason within reasonable time - Held that:- In the present case the assessee has filed the return of income on 18/04/2013 in response to the notice under section 148 of the income tax act dated 22/03/2013. On the date of filing of the return of income, the assessee requested for the reasons recorded. However, the correct reasons recorded were provided to the assessee only on 20/03/2014 i.e. Just before 10 days of the completion of the assessment. The Hon’ble Supreme Court in case of GKN driveshaft India Ltd versus ITO. [2002 (11) TMI 7 - SUPREME Court] has provided guidelines that reasons must be provided within reasonable time. We are of the opinion that Ld. assessing officer has not provided the reasons to the assessee within reasonable time but only at the fag end of the assessment proceedings. Furthermore, the Hon’ble Supreme Court has further guided that only after disposing of the objections of the assessee with respect to the reopening of the assessment, the assessing officer shall proceed for reassessment. In the present case, the assessment proceedings were already completed before providing the correct reasons to the assessee. In view of this, we do not have any hesitation in holding that reassessment proceedings are invalid. - Decided in favour of assessee. 2017 (9) TMI 1228 Assessability of profits offered by the assessee in its return of income - taxation on who's hands - Held that:- The additional ground of appeal requiring no investigation of facts, is admitted. We have already in assessment year 2008-09 of even date order in the case of M/s. Vascon Hadapsar Ventures held that the said amount is to be taxed in the hands of M/s. Vascon Engineers Ltd. i.e. the assessee before us. Consequently, there is no merit in the additional ground of appeal raised by the assessee Disallowance on account of expenses under section 14A r.w.r. 8D - Held that:- Because of availability of interest free funds with the assessee vis-à-vis total investments made, there is no merit in disallowing any part of interest expenditure debited to the Profit and Loss Account, as attributable to the earning of exempt income. Accordingly, we delete the disallowance made under Rule 8D(2)(ii) of the Rules. Disallowance under Rule 8D(2)(iii) of the Rules of administration expenses being equivalent to one half percent of average of the value of investments - Held that:- Referring to assessee's pleadings that in case the disallowance is to be made, then the value of strategic investments made by the assessee in Special Purpose Vehicles needs to be excluded for computing the aforesaid disallowance, we find merit in the plea of assessee in this regard and accordingly, direct the Assessing Officer to re-compute the disallowance in the hands of assessee. The assessee has suo moto disallowed ₹ 6,01,956/- which may be considered as disallowance under Rule 8D(2)(iii) of the Rules. Accordingly, the ground of appeal No.1 raised by the assessee is partly allowed. Disallowance of Donation payment - Held that:- The assessee is carrying out the activities of upliftment of public at large and by way of making contributions for upgradation of Science lab or providing ambulance to organizations or contributing to the society by purchasing paintings, etc., then such activities of assessee are to create and establish image of assessee company in the eyes of public. The business carried on by the assessee is relatable to public at large, where the tenements built by the assessee were to be picked up by the public. Hence, the expenditure incurred by the assessee in this regard is duly to be allowed as business expenditure in the hands of assessee. Here, it may be pointed out that in some cases, the assessee has receipts of donations under section 80G of the Act. The Assessing Officer is directed to verify the same and allow the claim of such receipts under section 80G of the Act Denial of leave encashment - Held that:- We direct the Assessing Officer to verify the claim of assessee and allow the deduction to the extent of leave encashment actually paid during the year under section 43B of the Act. There is no merit in the alternate plea raised by the assessee that the provisions of section 43B(f) of the Act were struck down Disallowance of ESOPs discount expenses - Held that:- The issue of allowability of ESOP expenses on the date of exercising of option by the assessee was held to be an ascertained liability and not contingent liability by the Special Bench of Bangalore Tribunal in Biocon Ltd. Vs. DCIT (2013 (8) TMI 629 - ITAT BANGALORE). The Special Bench held the said discount on ESOP was to be allowed as deduction under section 37(1) of the Act, during the years of vesting on the basis of percentage of vesting during such period, subject to upward or downward adjustment at the time of exercise of option.Following the same parity of reasoning, we allow the claim of expenditure on account of exercise of ESOP option in the hands of assessee to the extent of 1/3rd as claimed by the assessee at ₹ 41,58,745/-. The ground of appeal raised by the assessee is thus, allowed 2017 (9) TMI 1227 Addition on account of income from alleged sale of land - assessment in who's hand - to be taxed in the hands of partnership firm or successor company - AO did not accept the dissolution of partnership firm - The assessee claims that on dissolution of partnership firm, the land was passed on to M/s. Vascon Engineers Ltd. (the successor company) - Held that:- Departmental Representative for the Revenue has failed to controvert the documents filed by the assessee in this regard and in view of the said facts and circumstances and in view of the fact that certain portion of consideration not being paid to the assessee, it cannot be held that the possession was handed over and hence, the deal was completed in the hands of assessee on 07.05.2007 itself. We reject the claim of learned Departmental Representative for the Revenue in this regard. In any case, the Assessing Officer had not accepted the fact of dissolution of assessee firm and taxed the profits; but the learned Departmental Representative for the Revenue has tried to improve and stated that even if dissolution is there, but possession was handed over on 07.05.2007 and hence, taxable. We find no merit in both the stands As the taxes have been paid on the profits arising on sale of said land by M/s. Vascon Engineers Ltd. in the instant year itself at higher rates and no benefit has arisen to the said concern on this account. There is no merit in disturbing the same. Accordingly, we delete the addition made in the hands of assessee on account of sale of land at Hadapsar. Another aspect which has to be considered is the approach of Revenue Department, wherein the balance land was also developed. In case there is no dissolution of assessee’s firm, then the profit arising on the development of balance land should have been assessed in the hands of assessee. However, they have not been assessed in the hands of assessee. The said profits were declared by M/s. Vascon Engineers Ltd. and Mr. Atul Chordia in their joint venture agreement and have been so assessed. Because of inconsistency, we find no merit in the stand of Revenue and since due taxes have been paid on the transaction, the ratio laid down in CIT Vs. Excel Industries Ltd. and Mafatlal Industries P. Ltd. [2013 (10) TMI 324 - SUPREME COURT] is squarely applicable and we apply the same and delete the addition in the hands of assessee. 2017 (9) TMI 1226 Penalty u/s 271(1)(c) - additional income disclosure - surrender of income post survey u/s 133A - professional receipts disclosure - Held that:- Admittedly, the assessee has disclosed the additional income in its return of income only after the survey was carried out by the revenue authorities The assessee has furnished original return of income on 01/11/2004 and revised return was also filed on 14/01/2005 on which the Ld. assessing officer has accepted the same and acted upon the same. Therefore, facts of the present case also fall on the similar lines on the issue decided by Hon’ble Gujarat High Court in case of CIT versus Girish Devcahnd Rajani[2013 (7) TMI 524 - GUJARAT HIGH COURT]. Therefore, respectfully following the decision of the Hon’ble Gujarat High Court on the above issue we direct the Ld. assessing officer to delete the penalty on this count too. It is apparent that during the year the income of the assessee disclosed by him during the course of survey as beer extrapolation of the records pertaining to earlier year found during the course of survey. The revenue is also not brought on any material on record for the purpose of levy of the penalty that similar situation prevailed the impugned assessment year also which was prevailing in the year 2002. Before us neither the revenue nor the assessee could show us that how the amount of rupees ₹ 12,000 per day regarding the professional fees has been estimated by the assessee and the relevant documents pertaining thereto. In view of this we are of the opinion that amount of disclosure made by the assessee was only on estimate basis based on the documents pertaining to earlier years. Addition has been made on estimated basis and that too without any material pertaining to that year, therefore, the disclosure made by the assessee is voluntary in nature, in the revised return, which is within time and cognizance of which has been taken by AO while framing the assessment order, therefore, the penalty under section 271 (1)(C) cannot be levied on such addition - Decided in favour of assessee. 2017 (9) TMI 1225 Disallowance out of travelling expenses - proof of business purposes - Held that:- The onus is on the assessee to demonstrate through verifiable and credible evidence that the travel expenditure on foreign trips has been incurred for the purposes of the assessee’s business. The matter is accordingly remitted back to the file of the Assessing officer to examine the same afresh as per law after providing appropriate opportunity to the assessee. Sales promotion expenses - AO has disallowed 50% of the total expenses holding that the assessee has not fully justified the incurrence of such expenditure as incidental to business - Held that:- If the AO has any apprehension that the expenditure has not been incurred for the purposes of business, he should specify the particular transaction/expenditure and in case, there are repeat transaction/expenditure of similar nature, the AO has to give a specific finding as to why he feels that the expenditure has not been incurred for business purposes. Similarly, no basis has been given by the AO for disallowance of advertisement expenditure of ₹ 77,000 towards advertisement in souvenir. The matter is accordingly remitted back to the file of the Assessing officer to examine the same afresh as per law and give a specific finding after providing appropriate opportunity to the assessee. The ground are thus allowed for statistical purposes. Addition on account of interest income - accrual of income - Held that:- There is no dispute that the interest income accrues to the assessee during the year under consideration and as per the accrual method of accounting, the same should have been offered to tax in the instant year. Accordingly, we do not see any infirmity in the action of ld. CIT(A) in confirming the action of the AO in bringing the said interest to tax in the instant year. At the same time, given the fact that the said income has already offered to tax in the subsequent year, the assessee shall be at liberty, if so advised, to revise its return of income or make an appropriate application before the Assessing Officer stating that the income has already brought to tax in the instant year and the same cannot be brought to tax in the subsequent year and the AO shall examine the same as per law. The ground of appeal is disposed off accordingly 2017 (9) TMI 1224 Penalty u/s. 271(1)(c) - addition on account of disallowance of capital loss - Held that:- Since, the case of assessee is at parity with sister concern Nath Seeds Ltd. (supra), we find no reason to take contrary view. Accordingly, we direct the cancellation of penalty on disallowance of capital loss as held Assessee discharged the initial or preliminary onus cast him in so far as furnishing of correct particulars. We don't find any inaccuracy in matters of furnishing of details/particulars. Thus, it is not the case of deemed concealment by way of furnishing of particulars. Hence, it is not the fit case of levy of concealment penalty u/s.271(1)(c) - Decided in favour of assessee. 2017 (9) TMI 1223 Reopening of assessment - validity of reasons to believe - independent application of mind by AO and no borrowed reasons - Held that:- As ‘reason to believe’ says that income chargeable to tax has escaped assessment should be of Assessing Officer. It is Assessing Officer’s ‘reason to believe’ that taxable income has escaped assessment that forms bedrock for reopening assessment u/s. 147 of the Act. Directions from JCIT or CIT to issue notice cannot in any manner be construed as Assessing Officer’s ‘reason to believe’ for initiating reassessment proceedings. The provisions of section 147 in unambiguous terms mandates that the ‘reason to believe’ for reopening assessment should be of Assessing Officer. In other words the Assessing Officer should carryout independent exercise to examine fresh material in his possession to come to a conclusion that the assessment warrants reopening on account of escapement of income. In the present case, a perusal of reasons for initiating reassessment proceedings clearly show that they are against the sprit of provisions of section 147 of the Act. The Assessing Officer has issued notice u/s. 148 on the directions of JCIT and CIT. Therefore, in our considered opinion the notice issued u/s. 148 is bad in law and thus, the subsequent proceedings arising there from are vitiated. Appeal of assessee is allowed. 2017 (9) TMI 1222 Disallowances of business expenses - business has actually not commenced - CIT-A allowed claim - Held that:- In the earlier year already finding has been given that business of the assessee has been set up, then consequently in this year it cannot be held that no business has been set up. Thus, the order of the Learned CIT (Appeals) as incorporated above is not only based on correct appreciation of facts but is also in consonance with earlier year’s precedence and therefore, the order of the Learned CIT(Appeals) is confirmed. - Decided against revenue 2017 (9) TMI 1221 Disallowance u/s 14A r.w. Rule 8D2(ii) - Held that:- In respect of interest expenditure - CIT-A allowed claim - Held that:- On perusal of the order of the CIT(A) we find that the interest expenditure was deleted based on the fact that assessee made investments from out of the sale of land and no borrowed funds were utilized for such investments. Thus, the order of the Ld.CIT(A) in deleting the interest under Rule 8D2(ii) is sustained. Whether investments not yielded income during the year should be excluded for the purpose of computing the average investments under Rule 8D2(iii)? - Held that:- This issued stands covered by the recent decision of the Special Bench in the case of ACIT v. Vireet Investments Private Limited [2017 (6) TMI 1124 - ITAT DELHI ] wherein held that only those investments are to be considered for computing the average value of investments which yielded exempt income during the year. Thus, respectfully following the said decision we direct the Assessing Officer to compute the disallowance under Rule 8D2(iii) in accordance with the decision of the Special Bench (supra) Referring the matter to the Valuation Officer u/s 55A(b)(ii) - addition on account understatement of capital gains - value adopted by the assessee is more than the fair market value adopted by the DVO - Held that:- In the case on hand also the case is covered by section 55A(a) since value of the asset claimed by the assessee is on the basis of the estimation made by the Registered Valuer. Therefore, in our opinion the issue is squarely stands covered by the decision in the case of CIT v. Puja Prints [2014 (1) TMI 764 - BOMBAY HIGH COURT]. Thus, respectfully following the said decision we uphold the order of the Ld.CIT(A) in holding that the reference to DVO is bad in law. We sustain the order of the Ld.CIT(A) on this issue. 2017 (9) TMI 1220 Denying the deduction u/s 54 - whether date of final possession given by the builder has to be taken as the date of acquisition of new property for computing the capital gains u/s 54? - Held that:- The date of final occupation of the property should be considered for calculation the period of eligibility for deduction u/s 54 of the Act. If the date of possession i.e. March 2009 is taken as date of purchase of new flat as contended by the assessee in its case the assessee is entitled to deduction u/s 54 of the Act as assessee has sold residential flat on 11.09.2009 and satisfied the requirement to purchase the new residential property within the period of one year before the date of transfer of the asset sold. Thus, we allow the claim of the assessee for deduction u/s 54 of the Act. - Decided in favour of assessee. 2017 (9) TMI 1219 Disallowance u/s 14A r.w. Rule 8D(2)(ii)/(iii) - Held that:- It is the finding of the Ld.CIT(A) that the own funds of the assessee are much more than the investments and in which case no disallowance is required to be made u/s 14A r.w. Rule 8D(2)(ii) in view of the decision of the Hon'ble Jurisdictional High Court in the case of CIT v. Reliance Utilities and Power Ltd. (2009 (1) TMI 4 - BOMBAY HIGH COURT). This finding of the Ld.CIT(A) could not be rebutted with evidences by the Revenue to show that there were no surplus funds for making investments. In the circumstance we uphold the order of the Ld.CIT(A) in deleting disallowance u/s 14A r.w. Rule 8D(2)(ii). Coming to the disallowance under Rule 8D(2)(iii), we find that the Ld.CIT(A) in so far as Assessment Year 2008-09 is considered entire disallowance as made by the Assessing Officer is sustained and in respect of the Assessment Years 2009-10 and 2010-11 he restricted the disallowance to ₹.9,50,000/- and ₹.8,75,000/- respectively. He also noticed that the assessee earned dividend income of ₹.9,62,500/-, ₹.8,75,200/- and ₹.5,50,000/- during these Assessment Years. In the circumstances the restriction of disallowance under Rule 8D(2)(iii) made by the Ld.CIT(A) cannot be disturbed since it is more than the dividend income earned by the assessee. Thus we sustain the order of the Ld.CIT(A) on this issue. Adjustment made to book profit u/s 115JB on account of expenses relatable to exempt income u/s 14A r.w. Rule 8D - Held that:- This issue now stands squarely covered by the decision of the Special Bench Delhi in the case of ACIT v. Vireet Investments Private Limited [2017 (6) TMI 1124 - ITAT DELHI] wherein the Special Bench held that the computation under clause (f) of Explanation-1 to section 115JB(2) is to be made without resorting to the computation as contemplated u/s 14A r.w.Rule 8D of I.T. Rules. Adjustment made to the book profits u/s 115JB on account of provision for warranty expenses - Held that:- In the case of CIT v. Jay Bee Industries [2007 (9) TMI 626 - PUNJAB & HARYANA HIGH COURT] held that provision of warranty for repairs/replacement is an existing liability at time of sale and is allowable as deduction. Mumbai Bench of the Tribunal in the case of Indian Oil Tanking Ltd. v. ITO [2008 (1) TMI 417 - ITAT BOMBAY-E] held that Assessing Officer cannot make addition of provision of performance warranties to net profit of assessee for arriving at its book profit u/s 115JB. Considering all these decisions and the facts of this case the Ld.CIT(A) allowed the claim of the assessee which in our view is right. Therefore, respectfully following the said decision of the Supreme Court in the case of M/S. Rotork Controla India (P) Ltd v. CIT (2009 (5) TMI 16 - SUPREME COURT OF INDIA), we affirm the order of the Ld.CIT(A) in holding that the provision made for warranty is an ascertained liability and no adjustment is warranted while computing book profit. This ground is dismissed. 2017 (9) TMI 1218 Addition on account of bogus purchases - Held that:- The addition was made on the basis of third party information. Under the Income Tax Act, Income Tax Authorities are entitled to tax the real income. Even if the transactions is not verifiable the only taxable amount is the taxable income component therein and not the entire transactions. We are of the view that in order to fulfill the gap of revenue leakage, the disallowance of reasonable percentage of alleged bogus purchase must meet the ends of justice. Considering the facts of the present case, we restrict the addition @12.5% of the alleged bogus purchases (12.5% of 6,13,952/-). The Hon'ble Bombay High Court in the case of CIT vs. Hariram Bhambhani [2015 (2) TMI 907 - BOMBAY HIGH COURT] also held that the Revenue is not entitled to treat the entire sale consideration to tax, but only the profit attributable to the total unrecorded sale consideration alone can be subject to tax. 2017 (9) TMI 1217 Disallowance of net interest paid in the regular course of business and fully allowable u/s 36(1)(iii) - Held that:- Merely because the amount of ₹ 23.22 crore was shown under the head loans and advances it will not be proper to presume it to be a loan and not a contribution towards share capital without properly examining the facts and merely going by the nomenclature given in the financial statement. It is also evident from material placed before that in the past years the assessee has shown considerable interest income against which interest expenditure was set–off. The assessee’s claim has been accepted by the Department even in scrutiny assessments, as evident from the assessment orders passed for assessment years 2012–13 and 2013–14. Therefore, it cannot be held that the assessee has never carried out business in financing and investment. Since, these aspects have not been examined or properly looked into by the Departmental Authorities, we deem it proper to restore the issue back to the file of the Assessing Officer for fresh adjudication after due opportunity being heard to the assessee. Ground no.1 is allowed for statistical purposes. Non giving credit for TDS on interest earned - Held that:- The assessee on 26th February 2014, has made a claim for allowing credit for TDS on the interest earned of ₹ 12,88,776. In this context, he has drawn our attention to the copy of the said letter placed at Page–73 of the paper book. In any case of the matter, due credit for TDS should be given to the assessee. In view of the aforesaid, we direct the Assessing Officer to examine the issue and allow credit for TDS if corresponding income has been shown by the assessee in the impugned assessment year. Ground no.2, is allowed for statistical purposes. 2017 (9) TMI 1216 Addition on account of alleged suppression of service value received - Held that:- Admittedly, the assessee’s books of account are audited and the AO could not find any discrepancy in the same. Merely because the 26AS when compared with the service value as reflected in the P&L Account of the assessee cannot be the ground to make the addition. In such cases, we should take note that the assessee has no control over the Form 26AS which is generated by the department when the payer credits the tax deducted at source electronically by entering the PAN details of the assessee, where mistake during entering the PAN details or figures cannot be ruled out. The assessee maintained its books of account in the regular business which is audited and has received its receipts through banking channel. In such a scenario, in order to disbelieve the assessee’s P&L Account when there is discrepancy with Form 26AS, then it is the bounden duty of the AO to give opportunity to the assessee to confront the payer and to find out the correct figure, without doing so, the addition made simply believing the Form 26AS will be an arbitrary exercise of power which cannot be sustained and, therefore, we direct deletion of the same. This ground of appeal of assessee is allowed. Disallowance of 20% of the site expenses - Held that:- Before the AO, the assessee produced internal vouchers and bills wherever it could get the bills that was produced; and of course the office vouchers were produced before the AO. However, the AO has disallowed 20% holding that expenses may not be bona fide and genuine. We do not subscribe to such action of the authorities below on the facts and circumstances of the case as discussed above. The ad-hoc disallowance of 20% is akin to arbitrariness and based on surmises and conjectures without spelling out the defects in the vouchers and books produced before him. The books of account of the assessee are audited and the AO has not found any default with the books of account. If there was any item-wise defect noticed by the AO, then he should have disallowed the said item-wise disallowance but not ad-hoc disallowance which cannot stand under scrutiny of law and, therefore, we are inclined to allow this ground of appeal of the assessee. 2017 (9) TMI 1215 Bogus purchases - estimating profit - Held that:- We find that the assessee had purchased goods from five parties mentioned in paragraph two, that he had held that suppliers were indulged in issuing bogus bills without supplying the goods, that the AO had not doubted the sales made by the assessee, that he had held that goods were not supplied by the parties that were appearing in the books of accounts of the assessee. Thus, he had not doubted the genuineness of the purchase as such but he had doubt about the parties supplying the goods. In our opinion, in such cases the profit embedded in the transaction could be added to the income of the assessee and the entire purchases cannot be disallowed. We find that the AO had invoked the provisions of section 69C of the Act. But, he has not deliberated upon the issue as to how the provisions of said section were applicable. It is one of the deeming sections and has to be construed strictly. In our opinion, the order of the FAA, estimating the profit at the rate of 12.5% of the total purchases is a better estimate than the estimate made by the AO wherein he had disallowed the hundred percent of the purchases. - Decided against AO. 2017 (9) TMI 1214 Short deduction of tds - “Allocable Capex Cost” which means the cost of seats blocked by each business unit - TDS at 10% u/s 194I OR 2% u/s 194C - Addition u/s 40(a)(ia) - Held that:- Basing on the decisions of Calcutta High Court in CIT vs. S.K. Tekriwal (Calcutta) High Court (2012 (12) TMI 873 - CALCUTTA HIGH COURT) and M/s Solutions Infosystems (P) Ltd. vs. ITO [2013 (12) TMI 1531 - ITAT DELHI] CIT (A) held that Section 40(a)(ia) has no application in respect of short deduction of tax. The finding of the Ld. CIT (A) is based on binding precedents, unassailable and, therefore, we confirm the same. Insofar as the observations of the Ld. CIT (A) as to the deductibility of tax at 10%, the assessee is at liberty to put forth their contentions before the AO (TDS) in appropriate proceedings. With this view of the matter, we dismissed the appeal and cross objection. 2017 (9) TMI 1167 Disallowance of Proportionate Compensation Paid for mining activity - nature of expenditure - revenue or capital - Held that:- We find that the issue under dispute is squarely covered by the decision of this tribunal in assessee’s own case for the Asst Year 2006-07 wherein held the payment of compensation to persons whose rights are infringed by the mining activity is revenue in nature. - Decided in favour of assessee. Disallowance u/s 14A - whether only investments from which exempt income was received should be considered - Held that:- We deem it fit and appropriate to remand this issue to the file of the ld AO with the direction to consider all investments (excluding investments in subsidiary companies) which yielded dividend income to the assessee for computing disallowance u/s 14A of the Act r.w. Rule 8D of the Rules. Accordingly the grounds raised in this regard are partly allowed for statistical purposes. Taxability of Industrial Promotion Assistance - capital v/s revenue receipt - Held that:- It is apparent from the provisions of the 2000 Scheme and the certificate of registration and eligibility certificate that the assistance was to be made available after the commencement of commercial production without any financial cap and was to be adjusted against the sales tax liability of the year of claim. The industrial promotion assistance was clearly not used directly or indirectly to acquire the assets nor any part of the cost of the assets was met directly or indirectly from the industrial promotion assistance. We find that the issue under dispute is squarely covered by the decision of this tribunal in assessee’s own case for Asst Year 2007-08 wherein held IPA received by the assessee would have to be construed as a Capital Receipt and the same need not be reduced from the cost of assets in terms of Explanation 10 to Section 43(1) of the Act. Accordingly, the grounds raised by the revenue are dismissed and grounds raised by the assessee are allowed. Adopting of price for working out the amount eligible for deduction u/s 80IA - Held that:- We find that during the previous year relevant to the Asst Year 2009-10, the assessee infact sold electricity at rates higher than that charged from it by the State Electricity Board. The assessee nevertheless made the computation for the purpose of section 80IA of the Act with reference to the price charged from it by the State Electricity Board. In such circumstances, we hold that, when it was permissible for the assessee to sell electricity to consumers and distribution licensees at rates higher than that paid by it to the State Electricity Board, the price charged by the State Electricity Board would be a very good indication of the market value of electricity and the assessee did not commit any error in adopting such price for working out the amount eligible for deduction u/s 80IA of the Act. We find that the method adopted by the assessee viz. to take the average rate charged by the State Electricity Board for the previous month is quite appropriate and reasonable for determining the market value for the month of supply. The annual weighted average adopted by the ld CITA would result in variations occurring during the year at different times being made applicable uniformly for the whole year. In our considered opinion, the assessee’s method is more appropriate as it factors in variations as and when they take place. Coming to the decision of the ld CIT-A to exclude electricity duty and cess, we find that the same has been addressed by the Hon’ble Gujarat High court in the case of CIT vs Shah Alloys Ltd [2011 (11) TMI 762 - GUJARAT HIGH COURT] held that the price charged by the Electricity Board inclusive of the amount of Electricity Duty represented the market value even though the assessee was not required to charge electricity duty. We direct the ld AO to accordingly modify the earlier years profits also Treatment of Interest Subsidy - Held that:- Respectfully following the said decision of the Hon’ble Supreme Court in Balaji Alloys [2011 (1) TMI 394 - Jammu and Kashmir High Court] we hold that the interest subsidy is to be treated only as a capital receipt and accordingly the grounds raised by the assessee in this regard are allowed. Allowability of Initial Depreciation (balance 50%) on additions made in earlier years - Held that:- As decided in Hindustan Gum & Chemicals Ltd. Versus DCIT [2017 (3) TMI 1173 - ITAT KOLKATA] the assessee is entitled for remaining portion of additional depreciation in the asst years 2008-09 and 2009-10 and accordingly the grounds raised by the assessee in this regard are allowed. Exclusion of unabsorbed depreciation of earlier years before the 1st year of claim of deduction u/s 80IA - Held that:- We find that the CBDT had clearly issued a Circular No. 1/2016 dated 15.2.2016 explaining the meaning of ‘Initial Assessment Year’ in the light of decisions rendered by the Hon’ble Madras High Court in the case of Velayudhaswamy Spinning Mills P Ltd [2010 (3) TMI 860 - Madras High Court]. In view of the aforesaid decisions and CBDT Circular, we hold that the unabsorbed depreciation of earlier years from the eligible unit cannot be set off from the profits of the eligible unit entitled for deduction u/s 80IA of the Act in the years under appeal. We further hold that once the deduction u/s 80IA of the Act is claimed by the assessee from the ‘Initial Assessment Year’ (as chosen by it), then any loss incurred thereon would have to be set off against the profits of the said eligible unit in the subsequent years while claiming deduction u/s 80IA of the Act in subsequent years. Accordingly the additional ground raised by the assessee is allowed. Customs 2017 (9) TMI 1213 Penalty - default in fulfilment of its export obligations - RITES (petitioner) neither surrendered the licence nor completed the export obligations - Held that: - According to RITES, it did not receive the said impugned orders as they were sent to its erstwhile office address at New Delhi and RITES had since shifted to Gurgaon. RITES further claimed that it became aware of the impugned orders on 28.04.2015. Even thereafter, RITES did not take any further steps to assail the impugned orders. On the contrary, RITES paid the penalties and requested for closure of the case by the letters dated 13.07.2015. It is apparent that present petitions are grossly delayed and have been filed to overcome the failure of not availing of the alternate remedies within the time specified - RITES is Government of India Enterprise and not a hapless individual, who can be taken advantage of; it cannot be heard to canvas that it had made payments under duress. Further, even after the cases were closed, RITES did not take immediate steps to challenge the impugned orders and had approached this Court more than a year thereafter. The impugned orders are neither arbitrary nor unreasonable - petition dismissed - decided against petitioner. 2017 (9) TMI 1212 Benefit of N/N. 153/94-Cus dated 13.07.1994 - violation of condition of notification - goods of foreign origin imported for repairs and return - provisional release of the said seized grabs - Held that: - it appears that the appellant though substantially complied with the conditions of the N/N. 153/94-Cus dated 13.07.1994, they have been negligent in not giving a specific declaration at the time of unloading of subject goods that they were for Repairs and Return - Tribunal's decision in the case of Commissioner of Central Excise, Chandigarh vs. JCT Electronics Ltd. [2009 (11) TMI 727 - CESTAT NEW DELHI] and Hon’ble Gujarat High Courts decision in the case of IFFCO Ltd. Vs. UOI [1991 (6) TMI 84 - HIGH COURT OF GUJARAT], where it was held that the subject goods namely two grabs are eligible for benefit of the said N/N. 153/94 - There is no dispute about the identity of the subject goods which have already been re-exported and for which the appellant had given required bond undertaking as specified in the said Notification. There are clear procedural contraventions of the customs law and the rules made thereunder by the appellant in case of the subject goods. Therefore, the appellant is liable for the penalty u/s 112 (a) of the Customs Act, 1962 Considering overall facts including the negligence and consequential contravention of customs law, which is in the nature of contravention a penalty of ₹ 2,45,145/- is imposed u/s 112 (a) of the Customs Act, 1962. Appeal allowed - decided partly in favor of appellant. 2017 (9) TMI 1211 Valuation of imported goods - polyester spun yarn - enhancement in value based on Directorate of Valuation data (DoV data) - Held that: - It is well settled law that transaction value has to be accepted as the assessable value for the purpose of duty, unless the same is proved to be incorrect by production of any evidence. The said legal issue is settled by various decisions of the Tribunal in the case of Venture Impex Pvt. Limited vs. CC (Import & General), New Delhi [2016 (4) TMI 368 - CESTAT NEW DELHI], while setting aside the enhancement of the value on the basis of NIDB data, it was held that for adopting any other method for enhancement of the value of the imported goods, first of all transaction value is required to be rejected as incorrect/false on the basis of some evidences. It is only thereafter that the other method of deciding value has to be adopted. At the time of assessing the bills of entry, no evidence stand given for enhancing the value and the same has been done only on the basis of DoV data, by observing that similar goods stand imported at the higher value. No further details are available as to how the present consignment is similar to the earlier imports - The Revenue has neither alleged nor produced any evidence on record to indicate that the value agreed upon between the buyer and the seller or as reflected in the invoices is not a correct value, thus justifying the enhancement. Appeal allowed - decided in favor of appellant. 2017 (9) TMI 1210 Exemption from CVD - polyester knitted fabrics - Whether the appellants are entitled for benefit of exemption from payment of CVD in terms of N/N. 30/2004-CE dated 09.07.2004 or not? - Held that: - reliance placed in the case of M/s. Artex Textile Pvt. Limited Versus Commissioner of Central Excise & Customs, Delhi (Faridabad) [2017 (9) TMI 1011 - CESTAT CHANDIGARH], where it was held that even if the claim of benefit under a particular notification is not made at the initial stage, the assessee cannot be estopped from claiming such benefit at a later stage - the appellant is entitled for the benefit of payment of CVD in terms of N/N. 30/2004-CE dated 09.07.2004 on polyester knitted fabrics. Valuation - On the basis of DRI alert whether the value of imported goods can be enhanced or not? - Held that: - reliance placed in the appellant own case case Artex Textile Pvt. Ltd. Versus C.C., Delhi-IV [2017 (9) TMI 1166 - CESTAT CHANDIGARH], where it was held that The value of imported goods in question cannot be enhanced on the basis of DRI alert and the basis of assessed bill of entry - the value of imported goods cannot be enhanced on the basis of DRI alert. Appeal allowed - decided in favor of appellant. 2017 (9) TMI 1209 Penalty u/s 117 on CHA license holder - unclaimed consignment - misdeclaration of goods - Held that: - The appellants has failed to discharge his obligations under the Board’s circular No.9/2010 dated 8.4.2010. Thus, the appellant has not discharged his duties to verify the KYC norms. For clearance of the present container, the appellant was not involved. When it is so, then levy of the penalty is looking on the higher side. By keeping in mind the doctrine of equality, justice and good conscious, penalty reduced to ₹ 15,00,000/-. Appeal allowed - decided partly in favor of appellant. 2017 (9) TMI 1208 Confiscation - requirement of import license - Held that: - the imported material is plastic, waste and scrap and would be covered by the above public notice. This has been confirmed by way of test report of CIPET, Bhopal. Hence, the imported goods require an import licence which was not produced by the appellant - confiscation upheld. It is further seen that the appellants have also mis-declared the value of the imported goods resulting in liability for confiscation in terms of Section 111 (m). Waste and scrap of plastics are appropriately classifiable under CTH 3915 and not under 3901 as claimed by the appellant. Goods also will not be entitled to concessional duty under N/N. 12/2012 dated 17.03.2012. Appeal dismissed - decided against appellant. 2017 (9) TMI 1207 Challenge to the levy of anti dumping duty - Interpretation of statute - scope of New Shippers - Rule 22 of Customs Tariff (Identification, Assessment and Collection of AD Duty on Dumped Articles and for Determination of Injury) Rules, 1995 - DA held that the applicants therein cannot be treated as "New Shippers" - eligibility for individual dumping margin - imposition of ADD on the vitrified/porcelain tiles imported from China PR - N/N. 73/2003-Cus ADD dated 1.5.2003 and N/N. 82/2008-Cus AD dated 27.06.2008 - time limitation. Delay in finalizing the NSR - Held that: - Admittedly, Rule 22 itself does not provide for any statutory time limit for completion of review. We also note that there has been delay in completion of the NSR - While we note that there is a delay in the proceedings, which concluded in the final finding now under challenge, what is to be considered is whether in the absence of any statutory limitation, the appellants were put to any disadvantage due to such delay. It is necessary to note that immediately on the application filed by the applicant and initiation of NSR by the DA, order of provisional assessment has been issued by the competent authority so that the interest of the appellant shall be safeguarded. In case finally the authorities hold that the appellants are eligible for individual rate of AD duty or no AD duty, then all the benefits so available cannot be denied to the appellants. Keeping these facts in mind, we hold that delay in issuing the final findings cannot be the sole reason to set aside such final finding. This is more so in the absence of any statutory time limit under Rule 22 of the AD Rules. It is contended by the appellants that in second sunset review, the exports from China, PR have been found to involve no dumping during 2012-13 and accordingly, the request for sunset review was rejected. In view of the above fact, there is no dumping or injury and accordingly, it was pleaded that the NSR should have given a finding to that effect - Held that: - we are dealing with NSR, which is for the period of investigation from 1.5.2012 to 31.10.2012. During the said period, the AD duty was validly levied on the imports of the subject goods and the NSR sought was to have a separate finding for the appellants dealing with subject goods exported to India. We note that the reference of the appellant regarding termination of AD duty is not relevant to the issue at hand. The finding on NSR was based on the analysis and facts as recorded by the DA and the termination of the AD duty in 2013 has no implication for the period when the said duty was validly levied. Scope of “New Shipper” - whether the appellant do not fall within the scope of “New Shipper”? - Held that: - the DA, after following the procedures laid down in the AD Rules, proceeded to analysis the available record, before concluding the NSR. The crucial point is whether or not the appellants were involved in export of subject goods from the subject country during the earlier period. The DA also conducted though, belatedly, on the spot verification after the consent was given by the appellants - Having examined closely the arguments and facts of the case, we find that the DA did examine the data available to him and arrived at a sustainable and reasonable conclusion on NSR. The appellants are trying to take advantage of non-availability of certain specific data or non-disclosure of certain data to DA, to support their case that the DA cannot make a recommendation unless complete and thorough verification of all the facts are made and supported by the documentary evidences. We find such proposition is not tenable keeping in mind the constraints already noted and also the overall scope of the NSR investigation undertaken by the DA. The change of name of some of the appellants and their interconnectivity in business, as explained by the DA, has formed the foundation for further analysis by the DA in NSR. It is necessary to note here that the appellants did not make full and complete disclosures regarding their period of existence and relationship among themselves. In the absence of full and complete disclosure in a true and transparent manner, it is not open to the appellant to contest the final findings against individual dumping margin. The appellants failed to make all supporting disclosures and the DA correctly relied on available evidence with him to reject the claim for NSR. It is to be noted here that the NSR was initiated as per request of the applicants claiming individual dumping margin. It is apparent that the applicants have to establish their status as new shippers. It would appear that, in the present case, the applicants are substantially shifting the burden on the DA to adduce evidence that they are not new shippers. This is not a tenable proposition. Appeal dismissed - decided against appellant. 2017 (9) TMI 1206 Misdeclaration of value imported goods - software - The appellant has claimed that they cannot be considered as the importer, since they have made payment to SAP India in INR for procurement of software which is only a domestic transaction. They have also claimed that they did not file the bill of entry nor did they authorised M/S DHL to file bill of entry - Held that: - It is evident that the software was directly supplied by SAP Germany to the appellant and DHL has filed the bill of entry on behalf of the appellant. Though no authorization was given by the appellant to DHL, it is an undisputed position that the software has, in fact, been ordered by the appellant and have been delivered to them by DHL. These actions clearly establish that the appellant is to be considered as the importer under Customs Act and, therefore, liable to the payment of customs duty. The portion of the license fee, which was paid by the importer of software which was repatriated to the foreign supplier of software, needs to be included in the assessable value of imported goods. Time limitation - Held that: - there is no evidence which implicates the appellants - There were also very much aware that such software was to be supplied by SAP Germany and is an import transaction. But for the detailed investigations carried out by DRI, the evasion of custom duty would have gone unnoticed. Hence, we find no merit in the argument that there was no willful suppression of facts by the appellant. Appeal dismissed - decided against appellant. 2017 (9) TMI 1205 Benefit of N/N. 30/2004-CE dated 9.7.2004 - denial on the ground that the condition provided in the proviso has not been complied, inasmuch as the goods were not produced or manufactured in India - Held that: - in the appellant’s own case, M/s Artex Textile Pvt. Ltd. Versus Commissioner of Customs New Delhi [2016 (11) TMI 1456 - CESTAT NEW DELHI], the Tribunal has extended the benefit of notification dated 9.7.2004 by relying on the judgement of the Hon’ble Supreme Court in the case of SRF Ltd. [2015 (4) TMI 561 - SUPREME COURT], where it was held that appellants were entitled to exemption from payment of CVD in terms of N/N. 6/02 - the benefit of N/N. 30/2004-CE dated 9.7.2004 should be available to the appellants - appeal allowed - decided in favor of appellant. 2017 (9) TMI 1204 Detention of goods - hazardous goods - certain petro-chemical products viz. Pressed Distillate oil (FDO), Rubber Process Oil (RPO), calcium base grease and slack Wax - waste products - the department was of the opinion that the goods stated as Grease and Rubber process oil detained at the premises of M/s. Ess Ess Traders during the search proceedings were not up to the requirement of calcium base grease and rubber process oil as specified in the IS specifications - absolute confiscation - penalty u/s 112 of CA, 1962. Held that: - Commissioner (A) in the impugned order has elaborately discussed the evidence unearthed by DRI as well as nature of the goods and the relevant test report from CRCL. He categorically concluded by giving detailed reasons that the goods in question are of hazardous nature and is in the form of waste - Once it is established that the impugned goods are in the nature of hazardous waste they become prohibited goods and hence have been rightly confiscated absolutely - penalty upheld - appeal dismissed - decided against appellant. 2017 (9) TMI 1203 Mis-declaration of goods - It was mentioned “Calcium Carbonate” in the papers relating to the consignment but inside the consignment, there were “Fire Crackers and Telescopic Channels” - Held that: - it appears that the appellant has not dealt directly with the importer, M/s. Sanco Industries Pvt. Ltd. but through M/s. Sky Park India, a logistic service provider (middle man), which was not desirable but not prohibited - matter remanded to the Adjudicating Authority to decide the issue of levy of any maximum punishment other than revocation of licence but by providing reasonable opportunity of hearing to the appellant - appeal allowed by way of remand. 2017 (9) TMI 1202 Confiscation - redemption fine - penalty - Classification of imported goods - used rails - whether classified under CTH 72 or under CTH 73? - Held that: - the classification of the impugned goods namely 'used rails' was doubtful and the Board has issued a Circular in 2005 holding that the said goods are classifiable under CTH 72 and later Board has changed their view by issuing another Circular in 2006 stating that such goods are classifiable under CTH 73 - the appellant has not acted dishonestly and contumaciously or with the deliberate or distinct object of breaching the law - confiscation of the goods is unjustified - redemption fine and penalty also unjustified - decided partly in favor of appellant. 2017 (9) TMI 1201 Adjudication of confiscations and penalties - violation of the judicial discipline - Held that: - In the present case, the Adjudicating Authority confirmed the earlier order despite the remand order of the Tribunal, is a clear violation of the judicial discipline and total disregard of the Order of the Tribunal and beyond the provisions of law. Therefore, such orders cannot be sustained in the eye of law - It should be kept in mind that the Adjudicating Authority is to act on the allegations of the Show Cause Notice and other materials as available. In the instant case, the Adjudicating Authority had not followed the direction of the Tribunal and therefore, such order is liable to be set aside. The matter is remanded to the Adjudicating Authority to decide afresh - appeal allowed by way of remand. Corporate Laws 2017 (9) TMI 1200 Seeking rectification in Register of Members of 1st Respondent Company - transfer of shares - complaining oppression and mismanagement in the conduct of affairs of 1st Respondent Company - Held that:- In the case on hand, Petitioners together with Mahendrabhai Patel were having only 10% shareholding in the Company, and the Respondents and Vithalbhai Patel were having 90% shares in the Company. The origin of the Company is from a Partnership Firm. It appears that strict procedural law has not been followed. It cannot be said that Petitioners have no knowledge of transfer of shares. Petitioners did not give any reason for not questioning the transfer of shares and not applying for rectification of Register of Members till 2015. The Company is running a Hotel. It is doing business. Three years after the transfer of shares, the shareholders are disputing the transfer of shares on the ground that there is no transfer deed especially when the shares are transferred to a person who is no more. Certainly, there is acquiescence, waiver or estoppel on the part of the Petitioners. The transfer of shares also gives certain rights to the Transferee of shares in these three years in the business of the Company. From the pleadings of the Petitioners and from the Balance Sheet of Hotel Satyaketu Pvt. Ltd., it appears that it has taken a loan from one Hotel Oasis in which the Petitioners are also shareholders. It appears that unsecured loans have also not been paid by the 1st Respondent Company to the Petitioners and therefore that made the Petitioners to raise the dispute regarding the transfer of their shares in favour of Vithalbhai Patel. Therefore, there is also delay and laches on the part of the Petitioners which certainly, in the facts and circumstances of the case, amounts to acquiescence, waiver or estoppel. Thusthe Petitioners are not entitled to the relief for rectification of Register of Members of 1st Respondent Company. Once the Petitioners are not entitled to the relief of rectification of Register of members, they are not entitled to file the Petition alleging oppression or mismanagement. Moreover, a perusal of the Petition shows that no specific allegation of oppression or mismanagement is made except alleging wrong Annual Returns have been filed and wrong Compliance Certificate has been obtained. Insolvency & Bankruptcy 2017 (9) TMI 1199 Eligibility to execute the assignment agreements - Held that:- In this case, MFL has got all the rights as per the assignment agreements commonly dated 24.11.2016. Hence, the allegations/apprehensions made by the applicants herein are baseless and mere apprehensions, and they are deemed to have been executed in accordance with law especially in the absence of any challenge to those documents by a party to those documents. The applicant doesn't have any locus standi to question those documents in the insolvency proceedings initiated under IBC, 2016 on a far fetched argument that they are going to be effected if the rights of SCL and MFL are recognized basing on the Assignment Agreements in question. And the applicant cannot assume jurisdiction to question the documents in question basing on baseless allegations, apprehension etc. Therefore, we hereby summarily rejected the contentions/allegations of the Applicant with regard to documents in question. In the result, we hereby declare that both SCL and MFL are eligible to execute the assignment agreements in question and all rights flow those agreements to MFL. After getting assignment of rights, the MFL is fully competent to participate in CoC in question and it cannot be called a related party as explained. Whether the above documents were executed without making reference to BIFR is valid or not? - Held that:- Admittedly, the applicant herein and the respondent No.3 are assignees of original lenders to SDAL. It is not the case of the Applicant that Assignors have no right to the rights in question to transfer their rights/interest to the assignee. It is the case of the Applicant that the Respondent No. 3 was assigned the rights/interest in question in order to deprive/reduce the interest of the applicant herein in the CoC. As long as the assignment agreement deeds are valid and legally enforceable, the applicant has no locus standi to question its object, modus operandi behind its execution. The contentions of the Applicant that the Respondent No.3 would become an admitted party by virtue of Section 5(24) is not at all tenable. . The Assignment deeds of various Banks/Financial Institutions/ARCs in favour of Respondent No.2 happened way back in the years 2008-2011 and that too from SBI, IDBI, ICICI (ARCIL). Therefore, we cannot find any fault with these assignment deeds. With respect to the allegation of SCL assigning its debt to MFL on 24.11.2016, we find no merit in this argument as well. As commonly known the promulgation of IBC Code, 2016 was widely discussed/debated/publicized in various media and not out of the blue. Therefore, the assignment deeds between the two entities also legal and permissible. At most it can be said to be similar to tax planning rather tax avoiding. Because of this assignment deed, not only the applicant's share in total debt is reduced, but other financial creditors/Assignees share also proportionately reduced and they did not object to the same but only the applicant agitates with oblique motive/reasons best known to it. Therefore, a fraudulent attempt made to reduce the Applicant's share in the total voting rights is not a plausible pleas by the Applicant. In the absence of any documentary proof/evidence to the claim of the Applicant, the same is liable to be rejected. Accordingly, the bench rejects the above allegations/claim of the applicant. Service Tax 2017 (9) TMI 1197 Natural justice - Rejection of Voluntary Compliance Encouragement Scheme (VCES) declaration - whether the impugned rejection of the Declaration filed by the petitioner-Company under VCES, 2013 by the Respondent-Deputy Commissioner of Service Tax, ST-I Commissionerate, Bangalore, without giving an opportunity of hearing to the petitioner-Company is sustainable or not? - Held that: - the non-compliance with the principles of natural justice which was clarified by the concerned Ministry and Central Board of Excise and Customs to be read in the provisions of Section 106(2) of the Finance Act, 2013 were thus admittedly breached by the concerned Designated Authority in this case - the matter deserves to be reconsidered at the end of the said Designated Authority - petition allowed by way of remand. 2017 (9) TMI 1196 Refund of CENVAT credit - services utilized by the respondent for extraction of iron ore and fines and exporting the same - denial on the ground that these services are not used in or in relation to providing of any output services and respondent is not a manufacturer - Held that: - these services are used in or in relation to the extraction of iron ore which are exported by the respondent - reliance placed in the case of COMMISSIONER OF CUSTOMS, BANGALORE Versus ANZ INTERNATIONAL [2008 (6) TMI 155 - KARNATAKA HIGH COURT], where it was held that EOU is entitled to take credit on the duty of the inputs procured indigenously and when they were not in a position to utilize the same, they are entitled for refund - refund allowed - appeal dismissed - decided against Revenue. 2017 (9) TMI 1195 Business Auxiliary Services - use of Computer Reservation System (CRS) of M/s Amadeus India for booking tickets - case of appellant is that there is no marketing done by the appellant for the CRS - Held that: - The CCRS are providing these incentives either for achieving the targeted booking of air tickets or for loyalty for booking of air tickets using their software system. Thus, the service provided by CCRS is to the Airlines and Air Travel Agent is promoting the service provided by CCRS to Airlines - the service provided by the ATAs to CCRS is neither covered in the negative list (Section 66D of the Finance Act, 1994) nor exempt by a notification. Therefore, service tax is leviable on the same - appeal dismissed - decided against appellant. 2017 (9) TMI 1194 Levy of tax - transaction fee on turnover charges - Department sought to tax the fee under 'forward contract service' - Time limitation - Held that: - the issue with regard to levy of Service Tax on transaction fees or transaction charges is highly contentious - it is evident that there were confusion with regard to levy of Service Tax on the transaction and other charges by a stock broker - In the present case, since the proceedings were initiated by the Department beyond the normal period of limitation, the demand confirmed cannot be sustained on the ground of limitation - appeal allowed - decided in favor of appellant. 2017 (9) TMI 1193 Validity of second SCN issued invoking Extended period of limitation - first notice is still pending adjudication with the original authority - Held that: - the appellants are making a claim that they have provided the details and cooperated with the Department in the proceedings. Regarding application of Section 72, we note that the basis of arriving at the taxable value should be clearly recorded. In the present case the claim of the appellant is that they ceased operation in February, 2009 itself. This aspect also requires verification. Considering the serious infirmities in the present impugned order and also considering that the first notice on the same issue is still pending adjudication, we find fit and proper to remand the matter to the original authority to decide the case together - appeal allowed by way of remand. 2017 (9) TMI 1192 Valuation - Construction of Complex Service - supply of goods as well as supply of service - Held that: - As the contract is composite in nature with the supply of goods and provision of service and has been executed prior to 01.06.2007, the same is not liable to Service Tax during the material period - demand set aside - appeal dismissed - decided against Revenue. 2017 (9) TMI 1191 Valuation - construction service - inclusion of free of cost materials supplied - Revenue entertained a view that supply of such free of cost materials should be considered as advance payment for taxable service, with reference to date of supply of such materials - interpretation of Section 67 of the Finance Act, 1994 - Held that: - reliance placed in the case of M/s Bhayana Builders (P) Ltd. & Others Versus CST, Delhi & Others. [2013 (9) TMI 294 - CESTAT NEW DELHI (LB)], where it was held that The value of goods and materials supplied free of cost by a service recipient to the provider of the taxable construction service, being neither monetary or non-monetary consideration paid by or flowing from the service recipient, accruing to the benefit of service provider, would be outside the taxable value or the gross amount charged, within the meaning of the later expression in Section 67 of the Finance Act, 1994. Free supplies by service recipient cannot be included in the gross value charged for taxable service - appeal allowed - decided in favor of appellant. 2017 (9) TMI 1190 Cenvat Credit - various input services - duty paying documents - reversal of CENVAT credit - proper invoices are not available for availing credit due to wrong address mentioned in the invoices, as the address given is that of Head Office, Delhi and not of the registered premises at Noida - Held that: - it is not in dispute that the appellant have received the services and also paid the Service Tax on the invoices properly raised. Only for the sake of address of the Head Office, address of the Delhi office, their Service Tax credit cannot be denied. It has also been so clarified by the CBEC vide circular issued in the year 1996 and also in a catena of decision by this Tribunal - credit allowed. Service tax credit - Horticulture services - input services - Held that: - garden services or Horticulture availed by appellant is an essential input service, more so for renting. Maintaining the commercial centre is essential so as to attract the receivers of taxable output service being provided by the appellant - credit allowed. CENVAT credit - dismantle of old labour huts at the site where the appellant have constructed their business centre/convention centre - input services - Held that: - dismantling of old labour huts/units, post construction is an essential expenditure for providing the output services by the appellant and as such the Service Tax paid/incurred is also eligible for input credit - credit allowed. CENVAT credit - laying cable from Sub Station to the appellants premises - input services - Held that: - the appellant cannot provide its output services without having electricity connection. Accordingly, the said service received is an essential input service as defined under Rule 2(l) of CCR, 2004 - credit allowed. CENVAT credit - renovation of faculty at Logix Techno Park Map - input services - Held that: - there is insufficient evidence regarding this issue on record - matter remanded to the Adjudicating Authority/Commissioner with direction for deciding this issue afresh, after providing opportunity of hearing to the appellant - matter on remand. CENVAT credit - Opening balance of Cenvat Credit as on 1 October, 2007, appearing in the ST-3 return for the period October, 2007 to March, 2008 - denial on the ground that the appellant have been registered only with effect from 26 March, 2008 and hence they could not avail any Cenvat Credit prior that date - Held that: - the fact that the appellant was registered with effect from 10 May, 2007, we allow the said grounds in favour of the appellant and hold that the credit of ₹ 24,92,138/- was rightly taken and reflected in their return - credit allowed. Advertisement abroad being expenditure in Foreign Currency - reverse charge mechanism - demand - Held that: - tax is wrongly demanded because they have paid ₹ 15 lakhs advance to Sterling Generator Pvt. Ltd. in INR. Further, the appellant have also demonstrated that they have paid balance of ₹ 74,50,000/- in order to purchase the generator or the D.G. set, as per the Invoice dated 17 February, 2009 for the balance payment, being the final payment of ₹ 89,50,000/- on 17 February, 2009. Thus, the findings of the learned Commissioner are erroneous and factually wrong. Further, there is no material have been brought on record by the Revenue in support of its allegation of expenditure in Foreign Currency towards advertisement - allegations are erroneous and the conclusions are erroneous as drawn in the impugned order - demand set aside. Appeal allowed in part and part matter on remand. 2017 (9) TMI 1189 Reverse charge mechanism - amount paid to a foreign company towards testing charges and product updation - period in dispute is 2003 to 2004 - whether assessee who is receiving the services of a foreign company is liable to pay service tax on the amounts paid to the foreign company under reverse charge mechanism before insertion of Section 66A in the Finance Act, 1994? - Held that: - the issue is settled by the judgment of the Hon’ble High Court of Bombay in the case of Indian National Shipowners Association Vs. Union of India [2008 (12) TMI 41 - BOMBAY HIGH COURT] wherein it has been held that the recipient in India would be liable to service tax only from 18.4.2006, which is after the enactment of Section 66A in the Finance Act, 1994 - the period of dispute being prior to 18.4.2006, the demand of service tax is unsustainable - appeal dismissed - decided against Revenue. 2017 (9) TMI 1188 Business Auxiliary Service - rent-a-cab service - liability of tax - Held that: - Entire adjudication has been made on the basis of 3rd party evidence which were not confronted to the appellant for rebuttal. This ground alone is enough to order for grant another opportunity to the appellant to plead its defence if any - appellant may get fair opportunity of hearing through the course of re-adjudication - appeal allowed by way of remand. Central Excise 2017 (9) TMI 1187 CENVAT credit - inputs - time limitation - Held that: - the assessee had never raised the contention of unreasonable delay in raising the demand before the adjudicating authority or even before the first appellate authority in precise form. The statute does not envisage any period of limitation - What is reasonable period is always a question of fact to be gathered on the basis of relevant facts and circumstances brought on record. Even the assessee had not brought any relevant facts on record before the adjudicating and appellate authority. A mere contention before the Tribunal at the second appellate stage would not be permitted - appeal dismissed. 2017 (9) TMI 1186 Validity of SCN - Whether the Tribunal has erred in holding that non-invocation of a proviso appended to Notification in the show cause notice issued by the department, which was otherwise covered by Rule 9 and 49 of the Central Excise Rules, 1944 invoked in the show cause notice, can be a ground for dismissal of the said show cause notice? - Held that: - Admittedly, under the trade notice No. 112/94-CE dated 15.12.1994, the duty liability could have been discharged by the assessee at single yarn off spindle stage. However, subsequently by issuance of notification dated 18.05.1995, the aforesaid exemption which was granted to the assessee was withdrawn. In other words, from 18.05.1995 onwards, the assessee was required to discharge the duty liability only after doubling multi-folding of the yarn at the time of clearance - the show cause notices were invalid merely on the ground that in the show cause notices, no specific mention has been made to the proviso added to the notification dated 18.05.1995. It is evident that the aforesaid show cause notice gives the sufficient particulars with regard to the basis on which the demand of duty, penalty and interest was being made by the Revenue. It is pertinent to mention here that the assessee did not raise the issue with regard to vagueness of the show cause notices either before the Adjudicating Authority or before the Appellate Authority. The aforesaid contention has been raised for the first time in the objections which have been filed in this appeal. Therefore, the assessee cannot be allowed to raise a new plea for the first time in this appeal. Appeal allowed - decided in favor of Revenue. 2017 (9) TMI 1185 Clandestine manufacture and removal - no evidentary value - it has been claimed that entire demand is based on mere assumptions and presumptions without a concrete proof to substantiate the same - Held that: - issues raised before CESTAT, Madras have not been properly adverted, as required - reliance placed in the case of H.V.P.N.L. Versus Mahavir [2000 (9) TMI 1063 - SUPREME COURT], where it was held that the appellate forum is bound to refer to the pleadings of the case, submissions of the counsel, necessary points for consideration, discuss the evidence, and then to dispose of the matter by giving valid reasons - matter is remitted to the CESTAT, with a direction to consider the pleadings, grounds of appeal raised and pass orders, in accordance with law - appeal allowed by way of remand. 2017 (9) TMI 1184 Demand - Imposition of penalty - Compounded Levy Scheme - CTD bars, falling under Chapter heading 72 of the Central Excise Tariff Act, 1985 - Held that: - similar issue decided in the case of The Commissioner of Central Excise, Chennai-II, Chennai Versus M/s. Arun Vyapar Udyog Ltd. [2016 (11) TMI 191 - MADRAS HIGH COURT], where it was held that Penalty, as such, cannot be imposed, in the light of the decision of the Hon'ble Supreme Court in Shree Bhagwati Steel Rolling Mills v. Commissioner of Central Excise[2015 (11) TMI 1172 - SUPREME COURT], wherein, the issue, which came up for consideration before the Hon'ble Supreme Court, was to the correctness of the judgments of High Courts, which struck down Rules 96ZO, 96 ZP and 96 ZQ of the Central Excise Rules, 1994, relating to penalty, as ultra vires of a parent Act and violative of Articles 14 and 19(1)(g) of the Constitution of India - appeal dismissed. 2017 (9) TMI 1183 Clearance of Waste and Scrap - Rule 57-S(2)(c) - scrap and waste has arisen out of the cenvatable capital goods - Held that: - The demand stands confirmed by Commissioner (Appeals), in terms of the provisions of Rule 57-S (2) (c), It is noted that such provision was deleted from the statute with effect from 01.04.2000. As such, as rightly contended by the ld. advocate, the demand for the period post 01.04.2000 cannot be confirmed. As, for the period prior to 01.04.2000, by appreciating the nature of the waste and scrap, as detailed in the annexure to the show cause notice, we note that the same is not scrap of capital goods. The provisions of Rule 57S (2)(c) get invoked only when the capital goods themselves are removed as waste and scrap and does not govern the waste and scrap arisen during the course of maintenance, replacement or repair of the capital goods. As such, in our views, the Commissioner (Appeals) has proceeded on wrong footing. Appeal restored to Order-in-Original - matter on remand. 2017 (9) TMI 1182 Clandestine removal - waste - wastage/loss of molasses - Rule 21 Central Excise Rules, 2002 - principles of natural justice - Held that: - the Show Cause Notice have been issued under the misconception i.e. removal of excisable goods without payment of duty, whereas in fact the appellant had marked in the return, as wastage. As the OIO was passed ex-parte, the appellant did not have opportunity to lead evidence in order to satisfy the storage/natural/pilferage loss. The loss as claimed by the appellant is stated to be less than 2% of the total quantity of molasses handled by them during the said sugar season. Taking notice of the facts and the circulars of the CBEC as well as the State Authorities under the relevant state laws, wherein a shortage up to 2% in the case of molasses is considered normal, it is fit and proper to allow this appeal by way of remand to the learned Commissioner to re-examine the matter of loss - Appeal allowed by way of remand. 2017 (9) TMI 1181 Clandestine removal - fake invoices without supplying the goods - Held that: - the proceedings in relation to SCN by DGCEI against M/s Jwala Steel Corporation (JSC) are still pending for adjudication. Since the proceedings against M/s. Jawala Steel Corporation, purported supplier of the goods and issuer of fake invoices, against whom allegations of clandestine removal of goods are pending adjudication, the proceedings cannot be initiated against the appellant who issued Cenvatable invoices on strength of invoices of M/s JSC - matter remanded back to the adjudicating authority to adjudicate the case subsequent to the adjudication in the matter of M/s. Jawala Steel Corporation - appeal allowed by way of remand. 2017 (9) TMI 1180 Clandestine removal - specific plastic compounds known as "fillers" - Revenue entertained a view that non-duty paid "fillers" were supplied by the present appellant M/s. Premium Poly Links and the entries made in the ledger under the name of M/s. Premium Poly Links relates to the present appellant - Held that: - the Revenue's case is solely based upon the ledger recovered from KPI's premises. Admittedly, the appellant is supplying "fillers" to M/s. KPI. However, the said ledger is captioned as "Premium Poly Links", whereas, the appellant's name is "Premium Poly Alloys". Not only that, the entries in the said ledger describes the goods as C40, T10, C Bages or T Bags, whereas, the goods are being described by appellant in various invoices as "Premium Fab 715", "PS 503" etc. It is well settled law that the allegation of clandestine removal are required to BE supported by production of sufficient evidences to establish the clandestine manufacture and clearance. Admittedly, no such evidence stand produced, Further, during the visit of the officers in the appellant's factory neither any unaccounted raw material nor final product was found nor any incriminating documents recovered. No doubt, that Revenue is not expected to prove its case by mathematical precision by establishing and proving each and every link but some evidence indicating such clandestine activities is required to be adduced by them. Demands cannot be confirmed on the basis of entries made in the records of third person. The confirmation of demand of duty on the company cannot be upheld. For the same reasons, penalty imposed upon the appellant as well as upon the General Manager is required to be set aside - Appeal allowed - decided in favor of appellant. 2017 (9) TMI 1179 Clandestine removal - SSI exemption - N/N. 9/2003 dated 01.03.2003 - Held that: - the appellant had followed a modus operandi of issuing double set of invoices for clearing the goods without discharge of duty liability even after reaching the exemption limit of one crore - It is not the case where on account of imposition of duty liability on otherwise exempted product, viz., corrugated boxes, the appellant had been in some confusion with respect to duty liability and for which reason the present differential duty liability has arisen - The aspect of extending cenvat credit benefit was considered and rejected with cogent reasons by the authorities below - appeal dismissed - decided against appellant. 2017 (9) TMI 1178 Valuation - unprocessed cotton fabrics, cleared to sister unit - Rule 8 of Central Excise (Valuation) Rules, 2000 - revenue neutral situation - Held that: - the goods are cleared to the sister unit and the appellant is eligible for credit on the duty paid, the entire exercise is a revenue neutral situation - This being the case, even if the appellant is directed to pay duty, other sister unit would be eligible for the credit. In the case of Jay Yuhshin Ltd. [2000 (7) TMI 105 - CEGAT, COURT NO. I, NEW DELHI], in a similar situation, the Larger Bench of the Tribunal has held that when there is revenue neutrality, the demand of duty is unsustainable. Demand set aside - appeal allowed - decided in favor of appellant. 2017 (9) TMI 1177 Valuation - abatement - Discount to wholesalers for damages suffered during transit - department entertained a view that such discount on account of damages to goods cannot be deducted from the assessable value - Held that: - since the discounts have been disclosed in the price list, they are deemed to be known to the trade/wholesale buyer prior to the removal of goods - Merely because the appellants did not produce any written agreement, it cannot be said that the trade discount is not known to the buyer at the time of removal of goods. Such discounts are usually given under mutual understanding between parties - appellants are eligible for deduction of trade discount for damaged goods - appeal allowed - decided in favor of appellant. 2017 (9) TMI 1176 Classification of goods - Herbal Sheekakai Powder and Herbal Reetha Powder - classified under CTH 3003.39 of CETA, 1985 as an ayurvedic proprietary medicine attracting duty of 10% or under CTH 3305.90 as cosmetic preparations? - Held that: - there is no evidence put forward by the respondent that the impugned products are sold in the market as medicines. Further, it is also seen that the said products are advertised in TV as well as other media as preparations used on the hair and also understood by public as toiletry requisite only - further, the product does not have any property of curing disease. The Supreme Court in the recent judgment in the case of Commissioner of Central Excise, Mumbai Vs. CIENS Laboratories, Mumbai [2013 (8) TMI 467 - SUPREME COURT] has held that for an ayurvedic medicine to be classified under Chapter 30 has to pass the test whether it is for cure of any disease. If the same is only meant for care, then such product would not fall under medicament. Products to fall under CTH 3305.90 - Appeal allowed - decided in favor of Revenue. 2017 (9) TMI 1175 N/N. 89/95-CE dated 16.5.1995 - clearance of scrap without payment of duty - Department entertained a view that the scrap cleared without payment of duty under N/N. 89/95 is not eligible for the respondent for the reason that the said notification grants exemption to the scrap only when such scrap arises during the course of manufacture or exempted goods - Held that: - since the manufactured goods are exempted goods, the benefit of Notification No.89 of 1995 dated 18.5.1995 would be applicable - appeal dismissed - decided against Revenue. 2017 (9) TMI 1174 Valuation - washing machine - includibility - extended warranty service charges - Held that: - the respondents have been able to establish that the three year extended warranty period is only optional service contract with the customer and not a compulsory one. This being so, the same is not includible in the assessable value - the duty demand is less than ₹ 10 lakhs. Therefore, the appeal is not maintainable on monetary limits also - appeal dismissed - decided against Revenue. 2017 (9) TMI 1173 Valuation - whether the assessable value is to be calculated as done by the appellants (unit at Pondicherry) or at the higher rate cleared by the Pallavaram Unit as spares? - Held that: - the show cause notice is issued against Pondicherry unit and not against the Pallavaram unit. Moreover, the alleged sales at Pallavaram is admittedly only 2% of the clearances made from Pondicherry unit and the balance 98% is captively consumed. The case of department is that for this balance 98% also the price of the sale of 2% should be adopted which in our opinion does not make any sense - the submission of the Appellant that the Pallavaram Unit while captively consuming in production 98% of the pumps supplied by the Appellant had sold the impugned items as replacement spares meet certain emergency requirements and had paid duty in respect of such removals on their selling price should have been positively taken into consideration by the Learned Adjudicating Authority, which has not been done - appeal dismissed - decided against Revenue. 2017 (9) TMI 1172 Demand of interest - suo moto payment of differential duty - case of Revenue is that since it was a case of delayed payment of the duty, the interest was payable by the appellant - extended period of limitation - Held that: - the Department has issued a SCN dt. 13.08.2010 for interest on the differential duty paid voluntarily by the appellant on their own. Differential duty was paid on 10.07.2007. The SCN has been issued beyond the period of limitation. However, the extended period has not been invoked in the SCN nor is there any allegation in that regard. In the SCN, penalty has also been proposed but again there is no basis given for imposition of penalty in the SCN. Hon’ble High Court of Delhi in the case of Kwality Ice Cream Company Vs. UOI [2012 (1) TMI 88 - Delhi High Court] that the period of limitation that applies to a claim for the principal amount should also apply to the claim of interest thereon. In this case too, the extended period has not been invoked in the SCN and the entire demand is beyond the period of limitation - demand of interest not sustainable - appeal allowed - decided in favor of appellant. CST, VAT & Sales Tax 2017 (9) TMI 1171 Condonation of delay in filing appeal - delay of 511 days - case of appellant is that there was no lack of bonafide on part of the applicant and the delay was caused due to the reasons beyond the control of the authorities - Revenue took a view that he assessee had filed a writ petition claiming refund arising out of the judgment of the Tribunal, since for a long time after the judgment was delivered, the authorities were not releasing the refund, the decision of the authorities to challenge the judgment of the Tribunal was clearly an afterthought - also the case of Revenue was that the delay is not properly explained. Held that: - after the judgment was delivered by the Tribunal and a copy thereof was available with the department, the procedure was undertaken to challenge the same before the High Court. However, the appeal could not be presented because of various reasons cited in the delay condonation application and further amplified in the additional affidavit. It is also pointed out that the papers were missing in the office of the Government Pleader for some time which also contributed partly to the delay. Since this explanation is forthcoming on oath and when the revenue effect involved in the Tax Appeals is substantial, we would accept the explanation and condone the delay rather than rejecting the Tax Appeals without entering into the merits, of course by awarding cost. A responsible officer of the level of Deputy Commissioner has stated on oath twice that upon receipt of the copy of the judgment of the Tribunal, proposal was moved for challenging the same and once the decision to challenge the same was taken, papers were supplied to the Government pleader for filing appeal. We do not have reason to doubt or dispute such averments made on oath. Merely because, may be due to miscommunication between the departments, the Court in the writ petition was not apprised about such pending proposal, would not mean that there was no such proposal pending. In the case of STATE OF GUJARAT Versus WELSPUN GUJARAT STAHL ROHREN LTD. [2013 (3) TMI 626 - GUJARAT HIGH COURT] in somewhat similar background, the Court had condoned such delay in the process holding that adoption of strict standard of proof sometimes fail to protract public justice, and it would result in public mischief by skilful management of delay in the process of filing an appeal. Dealy condoned - appeal allowed - decided in favor of appellant. 2017 (9) TMI 1170 Validity of assessment order - Wrong claim of input tax credit - Discrepancy in Form WW - Defective certificates issued by buyers of capital goods - Service income - Miscellaneous income - Held that: - as regards, wrong claim of input tax credit is concerned, the petitioner made a specific request for furnishing of statement on monthly basis and also invoice-wise break-up in respect of the suppliers concerned. Therefore, the finding that the petitioner could have sought for details is incorrect, as they have already sought for the details. So far as Form WW, which was produced by the petitioner appended along with the audited financial statement, is concerned, the respondent termed the sale as a suppression on the part of the petitioner and confirmed the proposal. Such a finding is incorrect because the respondent should examine the correctness of the intra unit transfer and if it is really an intra unit transfer, then the question of sale does not arise. Therefore, the observation with regard to Form WW and the audited statement produced by the petitioner is incorrect. With regard to sale of capital goods, the petitioner produced certificates from the buyer. According to the respondent, the certificate is defective, as the commodity code has not been properly mentioned. If there is a defect in the certificate, nothing prevented the respondent from returning the certificate for rectifying the errors, if any. This alone would be a reasonable procedure to be adopted by the Assessing Officer. Therefore, foreclosing the petitioner's right without returning the alleged defective certificate is incorrect. With regard to service income, the petitioner has pointed out that the petitioner has attached the required audited statement in respect of the sale of service - If, according to the respondent, the documents produced by the petitioner are insufficient, then an opportunity ought to have been granted to the petitioner to produce additional documents or explain whatever documents have been placed. Hence, the respondent should not have confirmed the proposal on the said head for the reasons given by him in the impugned assessment orders. With regard to miscellaneous income, the petitioner provided break-up details of miscellaneous income stating that they are from DGFT drawback claim provision and creditors write off and with regard to sale of scrap, they had indicated the amount and shown that they had already paid tax at 5%. However, the respondent confirmed the proposal under the said head by stating that the details furnished by the petitioner are also taxable categories and hence, confirmed the proposal. It is not clear as to how the respondent has brought the drawback claim within the taxable category. This finding is devoid of reasons. The findings rendered by the respondent on the above five issues are incorrect and not tenable - this Court is inclined to interfere with the impugned assessment orders on the above indicated five issues and remit the matters back to the respondent for a fresh consideration - petition allowed by way of remand. 2017 (9) TMI 1169 Maintainability of appeal - appeal passed against rectified order of assessment - Revision of assessment - non submission of C-Forms and dis-allowance of exemption on the aspect of export sale - Held that: - Similar issue was tested by this Court in the case of P.C.W.Castings Private Ltd. vs. The Assistant Commissioner (CT), Nandambakkam Assessment Circle, Chennai and another [2016 (12) TMI 314 - MADRAS HIGH COURT], where the appeal was presented against a rectified order of assessment. This Court has set aside the impugned order thereon and directed the authority to hear the appeal on merits and in accordance with law. The only conclusion that could be arrived at is to hold that the impugned orders rejecting the petitioner's appeals are not sustainable - the second respondent is directed to take on file the appeal petitions, hear the parties and decide the matter on merits and in accordance with law - petition allowed by way of remand. 2017 (9) TMI 1168 Validity of assessment proceedings - petitioner contended that the rate of tax adopted in the assessment orders is erroneous as the notification dated 05.03.1997 read with notification dated 07.04.1998 issued under Section 8(5) and Section 17 of the Tamil Nadu General Sales Tax Act, 1959 were not taken into consideration - Held that: - what was required to be done by the assessing officer is to consider the petition filed by the petitioner under Section 55 of the Act, examining as to whether the notification sought to be relied upon is applicable to the case of the petitioner and whether there is any error apparent on the face of the record. The scope of powers under Section 55 of the TNGST Act is not to review an order passed by it and the requirement being that the error should be apparent on the face of the record to be rectified. The writ petitions are allowed and the impugned orders are set aside and the matters are remanded back to the respondent for fresh consideration - petition allowed by way of remand. Indian Laws 2017 (9) TMI 1198 Dishonor of cheques - Case for an offence under Section 138 of the Negotiable Instruments Act - proof of legally enforceable debt - Held that:- The materials on record would clearly establish that the respondent has raised a probable defence. Once the presumption under Section 139 of Negotiable Instruments is rebutted, it is for the complainant to prove that he has lent ₹ 4,00,000/- on 17.07.2012 as claimed by him. It is true that the respondent has not sent any reply to the legal notice Ex.P5. However, that alone is not sufficient to accept the case of the complainant that he has lent ₹ 4,00,000/- on 17.07.2012 to the respondent. ₹ 4,00,000/- is not a small amount. It is significant to note that no interest was charged and the cheque was only for ₹ 3,50,000/-. It is impossible to believe that the complainant lent ₹ 4,00,000/- without requiring presence of any witness. The Hon'ble Supreme Court in KRISHNA JANARDHAN BHAT vs. DATTATRAYA G. HEGDE [2008 (1) TMI 827 - SUPREME COURT ] has held that Courts have to take notice that ordinarily in terms of Section 269-SS. Income Tax Act, any advance taken by way of loan of more than ₹ 20,000/- had to be made by an account payee cheque only. In the light of the observations of the Hon'ble Supreme Court, it can be safely concluded that the complainant has not proved that the cheque in question was issued for the discharge of legally enforceable debt. The appellant has not proved his case for an offence under Section 138 of the Negotiable Instruments Act. The Trial Court has taken a possible view on the basis of the materials and I do not find any valid reason to differ from the view taken by the Trial Court.
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