TMI Tax Updates - e-Newsletter
September 27, 2018

Case Laws in this Newsletter:

GST Income Tax Customs Insolvency & Bankruptcy Service Tax Central Excise Indian Laws

Articles

1. LOGO OF INCOME TAX DEPARTMENT SHOULD NOT APPEAR ON TAX AUDIT REPORT UPLOADED ON LINE

   By: DEVKUMAR KOTHARI

News

1. Cabinet approves increasing of Government ownership in Goods and Services Tax Network and change in the existing structure with transitional plan

2. Commerce Ministers of India and Bangladesh hold Bilateral Meeting in Dhaka

3. Cabinet apprised of the MoU between India and South Korea for enhancing cooperation in Applied Science and Industrial Technology

4. Cabinet approves MoU between the Institute of Chartered Accountants of India (ICAI) and the Institute of Certified Public Accountants of Kenya (ICPAK)

5. Cabinet approves comprehensive policy to deal with excess sugar production in the country

6. Bangladesh a model for other countries to emulate: Suresh Prabhu

7. Finance Ministry Launches Mobile Application “ Jan Dhan Darshak” as A Part of Financial Inclusion

8. The Union Minister of Finance and Corporate Affairs, Shri Arun Jaitley launches the Financial Inclusion Index in New Delhi; The Single Composite Index to give a snap shot of level of financial inclusion that would guide Macro Policy perspective; Can be used directly as a composite measure in development indicators

9. The Union Minister of Finance and Corporate Affairs, Shri Arun Jaitley reviews the Annual Performance of the Public Sector Banks (PSBs) in New Delhi

10. The Union Minister of Finance and Corporate Affairs, Shri Arun Jaitley launched here a web portal www.psbloansin59minutes.com , a transformative initiative in MSME credit space, which will enable in principle approval for MSME loans up to ₹ 1 crore within 59 minutes from SIDBI and 5 Public Sector Banks (PSBs)

Notifications

Customs

1. 49/2018 - dated 25-9-2018 - ADD

Seeks to amend Notification No. 12/2017-Customs (ADD) dated 11th April, 2017

2. 48/2018 - dated 25-9-2018 - ADD

Seeks to amend Notification No. 28/2018-Customs (ADD) dated 25th May, 2018

3. 66/2018 - dated 26-9-2018 - Cus

Seeks to extend the exemption from Integrated Tax and Compensation Cess upto 31.03.2019 on goods imported against AA/EPCG authorizations

DGFT

4. 34/2015-2020 - dated 25-9-2018 - FTP

Amendment in Export Policy of Chemicals under Appendix 3 (SCOMET items) to Schedule -2 of ITC(HS) Classification of Export and Import Items, 2018

GST - States

5. F-10-49/2018/CT/V (88) - 51/2018-State Tax - dated 13-9-2018 - Chhattisgarh SGST

Seeks to bring section 52 of the SGST Act (provisions related to TCS) into force w.e.f 01.10.2018

6. F-10-49/2018/CT/V (87) - 50/2018-State Tax - dated 13-9-2018 - Chhattisgarh SGST

Seeks to bring section 51 of the SGST Act (provisions related to TDS) into force w.e.f 01.10.2018

7. F-10-49/2018/CT/V (86) - 49/2018-State Tax - dated 13-9-2018 - Chhattisgarh SGST

Chhattisgarh Goods and Services Tax (Tenth Amendment) Rules, 2018

8. EXN-F(10)-28/2018 - 52/2018 – State Tax - dated 22-9-2018 - Himachal Pradesh SGST

Seeks to notify the rate of tax collection at source (TCS) to be collected by every electronic commerce operator for intra-State taxable supplies

9. EXN-F(10)-24/2018 - 23/2018 – State Tax (Rate) - dated 20-9-2018 - Himachal Pradesh SGST

Seeks to insert explanation in an entry in Notification No.12/2017- State Tax (Rate), dated 30th June, 2017

10. EXN-F(10)-24/2018 - dated 20-9-2018 - Himachal Pradesh SGST

CORRIGENDUM - Notification No. 10/2017-State Tax, dated the 30th June, 2017

11. SRO 430 - dated 25-9-2018 - Jammu & Kashmir SGST

Seeks to waive the late fee paid for specified classes of taxpayers for FORM GSTR-3B, FORM GSTR-4 and FORM GSTR-6

12. PA/ETC/2018/175 - dated 13-9-2018 - Punjab SGST

Notify that, no e-way bill shall be required to be generated for the intra-State movement in the State of Punjab,for a period of one year

13. G.O. Ms. No. 125 - dated 20-9-2018 - Tamil Nadu SGST

GST - Tamil Nadu Goods and Services Tax Act, 2017 - Rate of tax collection at source (TDS) - Notification - Issued.

14. G.O. Ms. No. 124 - dated 20-9-2018 - Tamil Nadu SGST

GST - Tamil Nadu Goods and Services Tax Act, 2017 - Services exempt from state tax - Insertion of Explanation against serial number 41 - Notification - Issued.

15. F.1-11(91)-TAX/GST/2018(Part-II) - dated 25-9-2018 - Tripura SGST

Notification regarding the rate of tax collection at source (TCS) to be collected by every electronic commerce operator for intra-State taxable supplies

16. F.1-11(91)-TAX/GST/2018(Part-I) - 23/2018-State Tax (Rate) - dated 19-9-2018 - Tripura SGST

Notification seeks to insert explanation in an entry in notification No. 12/2017-State Tax (Rate) by exercising powers conferred under section 11(3) of TSGST Act, 2017

Circulars / Instructions / Orders

GST - States

1. F.IV-3(15)-TAX/2017/8632-45 - dated 25-9-2018

Order regarding Designation of proper officers under various sections of TSGST Act, 2017

Highlights / Catch Notes

GST

• Solar Power Systems: 5% GST Rate for Inverters, Controllers, Batteries, and Panels per Notification No. 01/2017, Schedule-I.

  Case-Laws - AAR : Supply of solar inverter, controller, battery and panels would covered under “Solar Power Generating System” as a whole in terms of serial no. 234 of Schedule-I of the Notification No. 01/2017 -Central Tax (Rate) - applicable rate of GST on such supply will be 5% IGST [2.5% CGST + 2.5% SGST]
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Income Tax

• No Penalty for Highway Depreciation Claim: Bona Fide Conduct u/s 271(1)(c) Saves Assessee from Penalty.

  Case-Laws - HC : Penalty u/s 271(1)(c) - claim of depreciation on the NH-6 constructed by them on built, operate and transfer basis @ 10% - The conduct of the respondent-assessee or examination of facts has been found and held to be bonafide - No penalty.
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• Section 11: Trusts Can Offset Past Expenses Against Future Income for Tax-Exempt Status Under Income Tax Law.

  Case-Laws - AT : Exemption u/s 11 - Claim of set off of carry forward of losses - if commercial principles are applied then adjustment of expenses incurred by the trust for charitable and religious purposes in the earlier years against the income earned by the trust in the subsequent year will have to be regarded as application of income of the trust for charitable and religious purposes in the subsequent year
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• Taxpayer Damages to Microsoft for Unauthorized Software Use Allowed as Business Expense u/s 37(1) of Income Tax Act.

  Case-Laws - AT : Claim of expenditure - Damages paid by the assessee to Microsoft Corporation USA for unauthorized use of software / operating system - the payment of such damages is allowable business expenditure u/s. 37(1)
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• Embezzlement Loss Considered Incidental to Employment; Included in Business Income Calculation for the Year.

  Case-Laws - AT : The loss caused by embezzlement by the employee was incidental to the employment and entrustment of duty and should be allowed in computing the business income of the year under consideration.
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• Court Disallows Non-Compete Fees as Capital Expenditure; Appellant Argues for Revenue Classification for Business Efficiency.

  Case-Laws - AT : Disallowing the non-compete fees paid by the assessee to its holding company by holding it to be ‘capital expenditure’ - the payment made by the appellant is revenue expenditure as without the said payment the appellant could not have carried on its business more efficiently and profitably.
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• Section 195 TDS Not Applicable: Non-Resident Income Not Linked to Indian Business or Capital Asset Transfer.

  Case-Laws - AT : TDS u/s 195 - since the impugned income in the hands of the non-resident did not accrue or arise directly or indirectly, through or from any business connection in India or through the transfer of capital asset situated in India, the provisions of section 9(1) were not applicable on the facts of the case.
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• Section 50C Limits: Stamp Duty Valuation Applies Only to Sellers, Not Purchasers, u/s 69A Interpretation.

  Case-Laws - AT : Addition u/s 50C r/w section 69A - legal fiction u/s 50C cannot be extended any further so as to take within its ambit the case of a purchaser where it is alleged that the purchaser had paid a price less than the value as adopted for the stamp duty purposes.
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• Jurisdictional Conflict Arises Over Section 143(2) Notice in Income Tax Scrutiny Assessment Case in Bhubaneswar.

  Case-Laws - AT : Scrutiny assessment - validity of notice issued u/s.143(2) - jurisdiction of AO - Transfer of case - the ACIT(OSD), Range-2, Bhubaneswar could not have jurisdiction to pass the assessment order in case of the assessee as the ACIT, Circle-2(1), Bhubaneswar had already exercised the jurisdiction by issuing notice u/s. 143(2) of the Act when admittedly no order u/s.127 of the Act was passed by the competent authority under that section.
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• Assessment Reopening Invalid: Show Cause Notice Lacks Basis u/s 147, Making Section 148 Notice and Assessment Void.

  Case-Laws - AT : Reopening of assessment on the basis of show cause notice issued by the Excise Authorities - once the very foundation on which the action u/s 147 had been initiated had cease to exist; both logically and legally what emerges is that notice u/s 148 of the Act was invalid and the assessment framed u/s 147/143(3) was also vitiated.
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• Court Rules 30% Income Addition Unjustified for Bogus Purchases with Accepted Sales and Reasonable Gross Profit Shown.

  Case-Laws - AT : Bogus purchases - Since the corresponding sales have been accepted and the assessee had shown reasonable gross profit on sale, therefore, confirming the addition to the extent of 30% is not justified.
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Customs

• Exemption on Integrated Tax and Compensation Cess for imports under AA and EPCG schemes extended until March 31, 2019.

  Notifications : Exemption from Integrated Tax and Compensation Cess extended upto 31.03.2019 on goods imported against AA/EPCG authorizations
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DGFT

• DGFT Amends Export Policy for Chemicals in Appendix 3, Schedule-2 to Enhance Compliance and National Security.

  Notifications : Amendment in Export Policy of Chemicals under Appendix 3 (SCOMET items) to Schedule -2 of ITC(HS) Classification of Export and Import Items, 2018
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Service Tax

• Assessee not liable for service tax on Sponsorship Service; Reverse Charge Mechanism shifts responsibility to recipient.

  Case-Laws - AT : The assessee were not liable to pay any service tax for rendering Sponsorship Service which was otherwise to be paid by the recipient under the Reverse Charge Mechanism - The liability qua Sponsorship Service was not sustainable
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• Foreign Firm's Service Tax Demand Overturned Due to No Evasion Intent; Extended Limitation Period Unfounded.

  Case-Laws - AT : Legal Consultancy Service - services received from foreign based Legal Firm M/s Hill Dickinson LLP - Extended period of Limitation - There was no intention on the part of the appellant to evade payment of Service Tax - entire demand was beyond the normal period of limitation and is set aside.
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• Unscheduled Inter-change Charges: Not a Taxable Service Under Sub-Section (e) of Section 66E of Finance Act, 1994.

  Case-Laws - AT : Declared service or not? - Unscheduled Inter-change charges (UI) - Sub-Section (e) of Section 66E of the Finance Act, 1994 - The charges being part of this activity which finds place in the negative list in services, it cannot be said that it amounts to any kind of service.
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• Adjudicating authority's order lacked detail on service tax and Cenvat Credit issues; case remanded for fresh review.

  Case-Laws - AT : Demand of service tax - Reversal of Cenvat Credit - Scope of SCN - the adjudicating authority has not given any speaking order based on the allegations and charges proposed in the notice / statement of demand - Matter remanded back for fresh adjudication.
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• Court Deems Service Tax Show Cause Notice Invalid Due to Unexamined Financial Records and Incorrect Taxable Assumptions.

  Case-Laws - AT : Maintainability of SCN - Short paid Service Tax - the book of accounts are not rejected and without rejecting the assumption of the gross receipt as taxable service, is untenable, and grossly wrong.
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• Service Tax Refund Granted for Export of Services: Appellant Not an Intermediary, Eligible for Tax Benefits.

  Case-Laws - AT : Refund of service tax - export of services - Place of provision of service - main contention put forward by the department is that the appellant is an intermediary and therefore the place of provision of service is within India - input services - The appellant is not intermediary - Benefit of export of services allowed.
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• Coercive Recovery Actions u/s 87 Invalid Without Adjudication; Notice Set Aside, Retained Funds Unaffected.

  Case-Laws - HC : Attachment of Bank Account - recovery of amount pending adjudication - Without adjudication, no steps for coercive recovery under Section 87 of the Act can be taken by the authorities. - Notice issued u/s 87 set aside - However, the amount which have already been received by the Revenue, would be continued to be retained by the Respondent
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• Refund Claim for Services Qualifies as Export Under Export of Service Rules, 2005 for Payments in Foreign Exchange.

  Case-Laws - HC : Refund claim - services of procuring orders and passing it to its overseas principal/parties and receiving payments for the same in foreign exchange, is an activity of export of services covered by the Export of Service Rules, 2005.
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• Service Tax on Royalty u/r 64D Challenged; Interim Relief Granted as Royalty Argued to be a Tax.

  Case-Laws - HC : Levy of service tax on Royalty - rule 64D of the Mineral Concession Rules - It was submitted that the issue regarding royalty being a tax and therefore, not being amenable to service tax - Interim relief granted.
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Central Excise

• Clandestine Removal Demand Overturned Due to Lack of Corroborative Evidence in Central Excise Case.

  Case-Laws - AT : Clandestine removal - Demand is based on copy of some documents received by the Central Excise Department from the Income Tax Department which had earlier conduced search and seizer operation in the premises of the appellant - in the absence of any corroborative evidence, demand set aside.
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• CENVAT Credit Available for Repair and Renovation Services in Existing Factories, New Construction Excluded Under Works Contract.

  Case-Laws - AT : CENVAT Credit - input services - The intention of the legislation is very clear that only new construction under Works Contract service is excluded but the Repair, Renovation and Modernisation of existing factory still covered under the definition of Input Service
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Case Laws:

• GST

• 2018 (9) TMI 1526
  Supply of goods - Rate of GST - Classification of goods - Composite/mixed supply - supply of solar inverter (8504), controller (8504), battery (8507) and panels (8541) under Solar Power Generating System (8543) as a whole whether the such supply be called as composite supply or mix supply - whether supply of solar inverter solar panels together will fall under the definition of Solar Power Generating System or it will be a mix supply and the applicability of GST rate on supply of solar inverter solar panels together - applicability of advance ruling clarification - Whether manufacturer or trader will have any significance on the clarification? Whether the supply of solar inverter, controller, battery and panels are covered under Solar Power Generating System as a whole and can be called as composite supply or mix supply what will be the rate of GST on such supply? - Held that:- Solar Power Generating System has not been defined in GST law - In erstwhile Central Excise regime, though exemption to said Solar Power Generating System was granted vide serial ho. 332 of Notification No. 12/12-CE dated 17.03.2012 but the same has also not been defined in the said regime. Supply of solar inverter, controller, battery and panels would be covered under Solar Power Generating System as a whole when the said goods are supply for the said specified purpose and accordingly as per serial no. 234 of Schedule-I of the Notification No. 01/2017-CentraI Tax (Rate) dated 28.06.2017, the applicable rate of GST on such supply will be 5% as on today [2.5% CGST + 2.5% SGST] - in the present case, the supply of the said items are intended for Solar Power Generating System , hence the entire supply would fall under composite supply in as much as Solar Power Generating System , is predominant element in composite supply and it takes the character of the principal supply therefore all the goods should be taxable @ 5% as Solar Power Generating System . Reliance placed in the CESTAT judgment Rajasthan Electronics Instruments Ltd. Vs CCE [2004 (7) TMI 259 - CESTAT, NEW DELHI], where it was held that Solar Photovoltaic Module is a Solar Power Generating System. Other parts are only panel housing consisting of controllers and switches. Hence the whole system is a Solar Power Generating System and is entitled for the benefit of notification. Therefore, the denial of benefit of notification by the adjudicating authority is not sustainable. The items which are used in connection with generation of power from sunlight are covered under the definition of Solar Power Generating System . Accordingly solar inverter solar panel used for specified purpose i.e. generation of power from sunlight, will be covered under serial no. 234 of Schedule-I of the Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017, the applicable rate of GST on such supply will be 5% [2.5% CGST + 2.5% SGST]. In this context also, the supply will be treated as composite supply . Ruling:- Supply of solar inverter, controller, battery and panels would covered under Solar Power Generating System as a whole in terms of serial no. 234 of Schedule-I of the Notification No. 01/2017 -Central Tax (Rate) dated 28.06.2017 when supplied for said purpose and the applicable rate of GST on such supply will be 5% as on today [2.5% CGST + 2.5% SGST] and such supply will be treated as composite supply . Supply of solar inverter solar panels together will fall under the definition of Solar Power Generating System (if the same are used for said specified purpose) in terms of serial no. 234 of Schedule-I of the Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 and the applicable rate of GST on such supply will be 5% as on today [2.5% CGST + 2.5% SGST] and such supply will be treated as composite supply . The aforesaid findings are applicable for both manufactures and traders engaged in said supply.

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• Income Tax

• 2018 (9) TMI 1565
  Denial of depreciation on plant and machinery - asset was to be used for trial production business of manufacture of 'Clinker' - period of time asset being used - Held that:- The Special Leave Petition is dismissed leaving the question of law open. Pending applications, if any, stand disposed of.

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• 2018 (9) TMI 1564
  Allowable business expenditure - kickback payment or commission payment - kickbacks demanded by Iraq Government and under this method certain levies were imposed - Held that:- The Special Leave Petition is dismissed both on the ground of delay and merits.

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• 2018 (9) TMI 1563
  Rejection of book of accounts - addition on account of suppressed sale by using the material collected by the Excise Department - Held that:- As decided in THE PRINCIPAL COMMISSIONER OF INCOME TAX RAJKOT-3 VERSUS VRUNDAVAN CERAMICS PVT. LTD. [2018 (5) TMI 1274 - GUJARAT HIGH COURT] AO cannot be expected to defer completion of assessment awaiting final order of adjudication in excise proceedings at the risk of his assessment getting time barred. Even otherwise, in a given case, the material that may be brought on record in excise proceedings may be different from that which may form part of the assessment proceedings though the both may, to some extent, be common. In addition to confronting the assessee with the contents of the show-cause notice issued by the Excise department, the Assessing Officer has done little else. By merely producing the copies of the statements of the witnesses accompanying the show-cause notices, such statements and the veracity thereof does not get automatically established. AO merely cosmetically gave an opportunity to the assessee to meet with such allegations, virtually, shifting the burden of proving the evasion of duty that had taken place on the assessee. We have perused the entire order of assessment. There is no independent material brought on record by the Assessing Officer other than those which were already collected by the Excise department and which, as noted earlier, are yet to be verified. - Decided against revenue

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• 2018 (9) TMI 1562
  Addition made on account of bogus opening stock - assessee had manipulated the stock and bogus opening stock was reported in the books of account and in ROI - ITAT deleted the addition - Held that:- As decided in PRINCIPAL COMMISSIONER OF INCOME TAX, SURAT 1 VERSUS JUGAL KISHORE MAHENDRA BIYANI [2018 (9) TMI 717 - GUJARAT HIGH COURT] the assessee had shown sale of such stock after May 2003, and the sale proceeds were also received during the year under consideration. The Tribunal noted that in the declaration before the Excise Authorities, the assessee had shown the stock of the same value pertaining to different kinds of gray fabric admeasuring 17,57,165 meters. The Tribunal also noted that such stock was cleared in subsequent period, for which, monthly declarations were filed. It can thus be seen that the entire issue is based on appreciation of record. Commissioner of Income Tax (Appeals) and the Tribunal concurrently held on facts that the assessee's declaration was genuine. No question of law arises. Addition made on account of bogus credit - ITAT deleted the addition - Held that:- Tribunal while confirming the view of the Commissioner of Income Tax (Appeals), noted that there was sufficient evidence of the genuineness of the creditors. Further, such addition of the purchases would give distorted gross profit rate as compared to gross profit rate disclosed in similar type of business, interalia, on such grounds, the Tribunal dismissed the Revenue's appeal - these issues are entirely based on appreciation of record. Commissioner of Income Tax (Appeals) and the Tribunal concurrently held in favour of the assessee. No question of law arises.

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• 2018 (9) TMI 1561
  Rectification of mistake - violation of principles of natural justice - Held that:- Appellant had no opportunity to put forward its case or version on merits, we are of the considered view that in the facts and circumstances peculiar to this case, the order under appeal deserves to be quashed and set aside. That is quashed and set aside only on the short ground that the impugned order violates the principles of natural justice. Once the representative for the assessee withdrew his power of attorney, a notice was issued to the parties to appear, but without ascertaining whether that notice was duly served on the assessee, there is a proof of such service and the assessee has avoided intentionally and deliberately to attend the case or hearing, the Tribunal should not have proceeded further. Such an approach results in miscarriage of justice as well.

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• 2018 (9) TMI 1560
  Penalty under Section 271AAA - surrender of income made by one of the directors - Held that:- Plea and contention of the Revenue in the present appeal is to the effect that the statement made under Section 132(4) did not indicate and state the manner in which the undisclosed income was derived is different from the ground and reason given by the Assessing Officer to impose penalty of Rs. 3 crores under Section 271AAA of the Act, which was that the respondent-assessee had not been able to substantiate the manner in which the undisclosed income of Rs. 30 crores had been derived. The two aspects are different as is clear from clauses (i) and (ii) to sub-section (2) to Section 271AAA. AO had not relied upon or claimed that there was violation of clause (i) to sub-section (2) to Section 271AAA, but had imposed penalty on account of the fact that there was violation and non-compliance of clause (ii) to sub-section (2) to Section 271AAA of the Act, i.e., assessee was not able to substantiate the manner in which the undisclosed income was derived. - Decided against revenue

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• 2018 (9) TMI 1559
  Penalty u/s 271(1)(c) - claim of depreciation on the NH-6 constructed by them on built, operate and transfer basis @ 10% - bonafide claim - Held that:- There is a difference between assessment proceedings and penalty proceedings and applies explanation (1) to Section 271 (1) (c). It refers to divergence of legal opinion on the question whether an assessee, who has constructed an infrastructure project such as roads or highways on build, operate and transfer basis could claim depreciation or was entitled to treat the entire cost as amortized expenditure, an expression not used in the Act. These were highly debateable and contentious issues. Noticeably, the Assessing officer had allowed the claim for depreciation on roads @ 10% under Section 32 of the Act in the original assessment proceedings. In the present case, assessee had already filed return for the year in question claiming deprecation, which had been allowed by the Assessing Officer. The respondent-assessee did not consider it appropriate to modify the claim that had been allowed and accepted in the regular assessment in the return filed pursuant to notice under Section 153A of the Act. The conduct of the respondent-assessee or examination of facts has been found and held to be bonafide. Facts of the case cannot and would not justify levy of penalty under Section 271(1)(c). Findings of the CIT (Appeals) and the Tribunal deleting penalty are reasonable and justified and primarily predicated on facts - Decided against revenue

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• 2018 (9) TMI 1558
  Exemption u/s.11 & 12 disallowed - assessee has violated the provisions of section 13(1)(c) on account of payment to Adhikar Micro Finance Ltd., and Adhikar Grameen Products Pvt Ltd. and violation of the provisions of section 13(1)(d) by making payment of remuneration to the Secretary and President of the assessee society - Held that:- No material has been brought on record before us by the department to show that according to the provisions referred to in section 13(1)(c) of the Act, the trustee has substantial interest either singly or jointly in M/s. Adhikar Micro Finance Pvt Ltd and M/s. Adhikar Grameen Products ltd. The allegation of the department of violation of provisions of section 13(1)(c) is not sustainable . On a bare perusal of provisions of section 13(1)(d) of the Act show that to attract these provisions, it is not enough that remuneration has been paid to trustees but it has to be also shown that the remuneration paid is excessive or unreasonable as compared to the services rendered by those persons. In the instant case, nowhere the Assessing Officer has even alleged that the remuneration paid to four persons stated above were excessive or unreasonable. AO proceeded on the assumption that section 13(1)(d) of the Act is attracted merely on making of payment of remuneration to the trustees whereas the legal position is not such. In absence of any material brought before us by the revenue to show that the remuneration paid to the four persons in question were excessive or unreasonable having regard to the services rendered by them, the allegation of the Assessing Officer that there was violation of provisions of section 13(1)(d) is also unsustainable. We, therefore, set aside the orders of lower authorities and direct the Assessing Officer to allow exemption u/s.11 & 12 of the Act to the assessee as per law. - Decided in favour of assessee

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• 2018 (9) TMI 1557
  Deduction u/s 80P(2)(a)(i) - interest income received by the assessee on investments made with Sub-Treasuries, Banks etc. - whether interest income received by the assessee on investments with sub-treasuries and banks was liable to be assessed under the head “income from other sources” or “income from business”? - Held that:- Hon’ble Telangana & Andhra Pradesh High Court in the case of Vaveru Co-operative Rural Bank Ltd. v CIT [2017 (4) TMI 663 - ANDHRA PRADESH HIGH COURT] had also decided on identical issue in favour of the assessee. The Hon’ble High Court had held that co-operative societies engaged in providing credit facilities to its members had in course of business made investments with treasury, bank etc. and earned interest income, such income was eligible for deduction u/s 80P(2)(a)(i) of the I.T.Act. In the instant case the assessee had made investments with sub-treasuries and banks in the course of its business of banking / providing credit facilities to its members. Therefore, it was entitled to deduction u/s 80P(2)(a)(i) of the I.T.Act in respect of interest income that was received on such investments. - Decided in favour of assessee

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• 2018 (9) TMI 1556
  Entitled to deduction u/s. 80P(2)(a)(i)- denial of claim as the assessee was primarily engaged in the business of banking - assessee is a primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969 - Held that:- Admittedly, the assessee is primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969. The Hon'ble High Court of Kerala in the case of Chirakkal Service Co-op Bank Ltd. [2016 (4) TMI 826 - KERALA HIGH COURT] had held that a primary agricultural credit society, registered under the Kerala Cooperative Societies Act, 1969 is entitled to the benefit of deduction u/s. 80P(2). - Decided in favour of assessee

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• 2018 (9) TMI 1555
  Entitled to deduction u/s. 80P(2)(a)(i)- denial of claim as the assessee was primarily engaged in the business of banking - assessee is a primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969 - Held that:- Admittedly, the assessee is primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969. The Hon'ble High Court of Kerala in the case of Chirakkal Service Co-op Bank Ltd. [2016 (4) TMI 826 - KERALA HIGH COURT] had held that a primary agricultural credit society, registered under the Kerala Cooperative Societies Act, 1969 is entitled to the benefit of deduction u/s. 80P(2). - Decided in favour of assessee

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• 2018 (9) TMI 1554
  Exemption u/s 11 - Depreciation claim of assessee trust - Held that:- As decided in COMMISSIONER OF INCOME TAX -III, PUNE VERSUS RAJASTHAN AND GUJARATI CHARITABLE FOUNDATION POONA [2017 (12) TMI 1067 - SUPREME COURT] income of a Charitable Trust derived form building, plant and machinery and furniture was liable to be computed in normal commercial manner although the Trust may not be carrying on any business and the assets in respect whereof depreciation is claimed may not be business assets. In all such cases, section 32 of the Income Tax Act providing for depreciation for computation of income derived from business or profession is not applicable. However, the income of the Trust is required to be computed under section 11 on commercial principles after providing for allowance for normal depreciation and deduction thereof from gross income of the Trust. - Decided in favour of assessee Claim of set off of carry forward of losses - Held that:- Income derived from the trust property has also got to be computed on commercial principles and if commercial principles are applied then adjustment of expenses incurred by the trust for charitable and religious purposes in the earlier years against the income earned by the trust in the subsequent year will have to be regarded as application of income of the trust for charitable and religious purposes in the subsequent year in which adjustment has been made having regard to the benevolent provisions contained in the section 11 of the Act and that such adjustment will have to be excluded from the income of the trust under section 11(1)(a) of the Act. Our view is also supported by the judgment of the Gujarat High Court in the case of CIT v. Shri Plot Swetamber Murti Pujak Jain Mandal [1993 (11) TMI 17 - GUJARAT HIGH COURT]. - Decided against revenue

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• 2018 (9) TMI 1553
  Rectification of mistake - Restricting the deduction u/s 80HHC by applying section 80AB - Held that:- Non-adjudication of the issues raised before the appellate authority in itself is a mistake apparent from record, which deserves rectification u/s 154/155 of the Act. The action of the Assessing Officer in restricting the deduction u/s 80HHC by applying section 80AB of the Act for excluding the dividend income from business income is erroneous in law. As carefully perused the order of the first appellate authority dated 26.04.2001. We find force in the contention of the assessee. The issues mentioned hereinabove have not been addressed by the first appellate authority while adjudicating Ground No. 1 of the appeal. It is settled position of law that non-adjudication of issues is a mistake apparent from record and the first appellate authority ought to have considered the rectification application in true spirit and decided the issue afresh - remit the matter to the file of the CIT(A) with the direction to decide all the issues afresh after giving reasonable and sufficient opportunity of being heard to the assessee.

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• 2018 (9) TMI 1552
  Addition u/s 68 - Held that:- Respondent had acted only as broker and, as such, the amount in question could not be termed as income of the respondent. AO, should have verified the facts from all the concern persons and should have examined Smt. Saroj Sharma and others and witness to the MOU before arriving at the finding of fact in the matter. The assessee further explained that report of the Inspector was not confronted to him, therefore, such evidence cannot be read in evidence against the assessee. No efforts have been made by the AO to verify the facts from the AO of M/s Meghatech Realtors P. Ltd. AO also ignored balance sheet of this company filed with ROC to verify the amount of advance shown of Rs. 10 crores. It appears to us that AO has not conducted proper investigation on this issue and merely made addition for non production of Director of Company. Matter requires reconsideration and the level of the AO. We, accordingly, set aside the orders of the authorities below and restore this issue to the file of AO with direction to re-decide this issue in accordance with law and as per observations in the order by giving reasonable opportunity of being heard to the assessee. The AO shall made all efforts to enquire from all concern parties about the facts of execution of MOU for M/s Meghatech Realtors P. Ltd. and shall pass the reasoned order. Deemed dividend addition u/s 2(22)(e) - Held that:- CIT(A) following his order dated 31.03.2017 for AY 2013-14 and 2014-15 accepted the plea of the assessee and directed the AO to make addition u/s 2(22)(e) i.e. addition made are restricted to the extent of accumulated profits. Ld. Counsel for the assessee referred to the remand report filed by the AO before Ld. CIT(A), PB 250 i.e. on 31.03.2012, the accumulated profit in case of M/s Dream Green Land Realtors P. Ltd. and M/s Rosemary Properties P. Ltd. were Rs. 4,26,330/- and Rs. 2,41,280/-. As further submitted that the order of Ld. CIT(A) need to be modified as accumulated profit taxed as deemed dividend in earlier year need to be excluded i.e. in the case of Dream Green Land Realtors P. Ltd. for AY 2008-09 was Rs. 2,871/- and in case of M/s Rosemary Properties Ltd. in AY 2009- 10 it was Rs. 86,111/-. We, accordingly, direct the AO to take into consideration the above facts and submission of the assessee while passing the appeal effect order in the matter. With these modifications this ground of appeal of the assessee is partly allowed for statistical purposes.

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• 2018 (9) TMI 1551
  Revision u/s 263 - jurisdictional of the Administrative CIT in passing the order u/s 263 - additional ground admission - Held that:- We are of the view that the CIT(A) has erred in not adjudicating the issue raised before him on merits. The ITAT while confirming the jurisdictional of the Administrative CIT in passing the order u/s 263 of the I.T.Act, had clarified that the issue raised on merits was left open and the Assessing Officer shall decide the same de hors the observations made by the administrative Commissioner in revisionary order passed u/s 263 of the I.T.Act There was no specific direction by the Administrative CIT while passing his order u/s 263 of the I.T.Act. Therefore, the issue on merits ought to have been adjudicated by the A.O. as well as CIT(A) de hors the observation of the Administrative CIT. Thus additional ground is admitted and taken on record - matter needs to be examined by the CIT(A) afresh.

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• 2018 (9) TMI 1550
  Benefit of deduction u/s 80P(2)(a)(i) in respect of interest income received on investments made with sub-treasuries and Bank - whether interest income received by the assessee on investments with sub-treasuries and banks was liable to be assessed under the head “income from other sources” or “income from business”? - Held that:- We noticed that an identical issue was considered by the Cochin Bench of the Tribunal in the case of The Azhikode Service Co-operative Bank Ltd. & Others [2017 (7) TMI 1138 - ITAT COCHIN] wherein in view of judgment of the Hon’ble Karnataka High Court in the case of TUMKUR MERCHANTS SOUHARDA CREDIT COOPERATIVE LIMITED VERSUS THE INCOME TAX OFFICER, WARD-1, TUMKUR [2015 (2) TMI 995 - KARNATAKA HIGH COURT] it is held that the amount which was invested in banks to earn interest was not an amount due to any members - thus interest on deposits with sub treasury is entitled to the benefit of deduction u/s 80P(2). In the instant case the assessees had made investments with sub-treasuries and banks in the course of its business of banking / providing credit facilities to its members. Therefore, it was entitled to deduction u/s 80P(2)(a)(i) of the I.T.Act in respect of interest income that was received on such investments - Decided in favour of assessee.

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• 2018 (9) TMI 1549
  Reopening of assessment - Addition u/s 69 - documents being found from the premises of third party where neither the name of the assessee was mentioned nor any document was found - Held that:- On the basis of report of the Investigation Wing of the Department that assessee has paid on money of Rs. 10,95,000/- towards purchase of flat bearing Flat No.1001 in Glendale Building through Cresenco Associates, a concern of Hiranandani group, the Assessing Officer reopened the assessment u/s 148 and thereafter made addition of the said amount to the total income of the assessee which has been upheld by the ld. CIT(A). The basis of addition made by AO is the contents of a pen drive which contained date-wise entry of receiving cash on various flats mentioning flats/shop-wise number. Neither the name of the buyers nor the amount of cash over and above the registered value of the flats paid by individual buyers are mentioned in the data contained in the pen drive. In the instant case the Assessing Officer has not given any opportunity to the assessee to cross-examine the witnesses on the basis of whose statements addition has been made. Under identical circumstances the Mumbai Bench of the Tribunal in the case of Shri Nikhil Vinod Aggarwal (2017 (10) TMI 1374 - ITAT MUMBAI)has deleted the addition wherein on the basis of the same pen drive the addition was made by the Assessing Officer which was deleted by the CIT(A) and on appeal by the Revenue, the Tribunal dismissed the ground raised by the Revenue - Decided in favour of assessee.

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• 2018 (9) TMI 1548
  Disallowance of expenditure incurred by the assessee towards making of enrollment cards under Rashtriya Swasthya Bima Yojana (RSBY Scheme) - deferred revenue expenditure - Held that:- In similar set of facts the Tribunal deleted the addition in assessment year 2010-11 as well. In the assessment year under appeal the ld. DR has failed to point out any distinguishing factor. Since, the nature of expenditure is same, following the order of Tribunal in assessee’s own case in preceding assessment years, we hold that Rs. 19,82,32,378/- incurred by the assessee towards making of enrollment cards under RSBY Scheme is an allowable expenditure. Accordingly, ground Nos. 1 to 5 raised in the appeal by the assessee are allowed. Damages paid by the assessee to Microsoft Corporation USA for unauthorized use of software / operating system - Allowable business expenditure - Held that:- We find that under similar set of facts in the case of Harbinger Systems (P.) Ltd. Vs. Deputy Commissioner of Income Tax [2016 (12) TMI 1398 - ITAT PUNE] the Tribunal held that the payment of such damages is allowable business expenditure u/s. 37(1) of the Act. - Decided in favour of assessee.

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• 2018 (9) TMI 1547
  Advance received by the assessee from the customers to allot plots in future - capital receipt or revenue receipt - expenses collected in connection with receiving advances has to be treated as revenue receipts - Held that:- The revenue receipts admitted from other sources during the year relevant to Assessment Year 2009-10 was Rs. 48,11,812/-. The expenditure incurred towards earning of the above receipts could be reasonably estimated at 30% which would be Rs. 14,43,543/-. Thus, the income from other sources to be subjected to tax would be of Rs. 33,68,269/-. We find that the CIT(A) by considering all the facts and relevant material, he came to a conclusion that the amount collected by the assessee for allotment of the plots in future, though not allotted, has to be treated as a capital receipt because the assessee has collected the deposits from various customers to acquire the capital asset and therefore, the amount received by the assessee has to be treated as a capital receipt. So far as expenditure incurred by the assessee in relation to acquire of the capital asset, it cannot be considered as a revenue receipt. We find that ld. CIT(A) has correctly directed the Assessing Officer to delete the addition and also directed corresponding expenditure would not be allowed as revenue expenditure. Disallowance under section 40(a)(ia) - as submitted before the ld. CIT(A) that TDS was effected and remitted to government account - CIT(A) directed the Assessing Officer to verify the claim and if it is found that TDS was effected and remitted to government account within the time prescribed, then the impugned addition may be deleted - no infirmity in the order passed by the ld. CIT(A). Thus, this ground of appeal raised by the revenue is dismissed. Allowable revenue expenditure incurred towards collection of deposits - Held that:- Assessing Officer treated the plot advance received by the assessee from the customers is a revenue receipt and taxed accordingly. The assessee only received advance and not allotted any plot to the customers and the assessee also not started any developmental activity. Therefore, it has to be considered that assessee not started its activities for which the advance received from the customers. The ld. CIT(A) has rightly held that the advances received by the assessee from the customers is only a capital receipt. So far as expenditure claimed by the assessee is concerned, we find that these expenditure claimed by the assessee in connection with the plot advance received by the assessee. Therefore, the plots advance has already treated as a capital receipt, therefore, this cannot be considered as a revenue receipt. The ld. CIT(A) rightly held that the expenditure incurred towards collection of these deposits would not take the character of revenue expenditure and accordingly, directed the Assessing Officer to estimate the income. We find no infirmity in the order passed by the ld. CIT(A). Unverifiable expenses - CIT(A) has observed that the above expenses are apparently found to be incurred towards collection of deposits and are not to be allowed as a revenue expenditure, the addition made towards disallowance of expenditure is not warranted, hence, directed the Assessing Officer to delete the same. No infirmity in the order passed by the ld. CIT(A). - Appeal of revenue dismissed.

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• 2018 (9) TMI 1546
  Sale of shares - LTCG OR STCG - Period of holding - Disallowance u/s 10(38) - Held that:- The dates of purchase and sale of shares are not in dispute. In fact, the assessee purchased 750 shares of M/s Ganesar Ginning Mills Ltd. on 23.09.2005 which falls in the financial year 2005-06 and the same were sold by the assessee on 29.11.2006 which falls in financial year 2006-07. Therefore, it is clear that the assessee was holding the shares for more than 12 months. Hence, it has to be treated only as long term capital gains. Validity of reopening of assessment - Non-service of notice under Section 143(2)- Held that:- Even though the case was reopened and reason for reopening was supplied, the Assessing Officer was expected to serve the notice under Section 143(2) of the Act within a period of six months. As held by the Apex Court, if the notice under Section 143(2) was not issued within the prescribed time, then there will be presumption that the Assessing Officer accepted the return filed by the assessee. In this case, the assessee requested the Assessing Officer to treat the return already filed as one filed in response to the notice under Section 148 of the Act. Therefore, there is a presumption that the Assessing Officer accepted the return already filed since the notice under Section 143(2) of the Act was not served within a period of six months. Therefore, this Tribunal is unable to uphold the orders of the lower authorities. Exemption claimed in respect of sale of agricultural land - Held that:- As decided in assessee's own case [2016 (10) TMI 1231 - ITAT CHENNAI] found that the assessee is not in the business of real estate. Accordingly, orders of both the authorities below are set aside by holding that the land in question is agricultural land and the profit on such sale of land is not liable for taxation by virtue of Section 2(14)(iii) of the Act. Therefore, the addition made by the Assessing Officer is deleted. - Decided in favour of assessee

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• 2018 (9) TMI 1545
  TPA - guarantee commission benchmarking - assessee-company provided corporate guarantee on behalf of its associated enterprise - Held that:- Looking to the fact that the Tribunal in various cases has accepted guarantee commission chargeable between 0.5% to 1%, we hold that guarantee commission of 1% should be chargeable. Here in this case, assessee itself has agreed to charge guarantee commission @ 0.38%% of the outstanding guaranteed amount, accordingly, we also hold that a guarantee commission should be benchmark by taking the rate of 1% of the outstanding guaranteed amount in line with the consistent views taken by the coordinate Benches, from its AE and adjustments should be made accordingly. Thus, this ground raised by the Revenue is treated as partly allowed. Loss on embezzlement by the employee and the employment of the employee - Held that:- Hon’ble Supreme Court has considered the matter and laid down the law in this regard in two decisions in BadridasDaga vs CIT [1958 (4) TMI 2 - SUPREME COURT] and Associated Banking Corporation of India Ltd, v. CIT [1964 (10) TMI 7 - SUPREME COURT] wherein it was held that the loss resulting from embezzlement by an employee or agent of a business is admissible as a deduction under section 10(1) of the 1922 Act [corresponding to section 28 of the 1961 Act], if it arises out of the carrying on of the business and is incidental to it, and loss must be deemed to have arisen only when the employer comes to know about it and realizes that the amounts embezzled cannot be recovered. Since the loss caused by the embezzlement by the employee and the employment of the employee is incidental to the carrying on of business, then the losses which are incidental to such employment are also incidental to the carrying on of the business. The loss caused by embezzlement by the employee was incidental to the employment and entrustment of duty and should be allowed in computing the business income of the year under consideration, that being so we decline to interfere in the order passed by CIT(A), his order on this issue is hereby upheld and grounds of appeal raised by the revenue is dismissed.

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• 2018 (9) TMI 1544
  Computation of segmental margin - Validity of order u/s 144C(13) - Held that:- The directions passed by DRP u/s 144C (5), as it can be seen in the present case, are not speaking about what objections were raised by the assessee and how they have been found to be not acceptable. The DRP has simply observed that the TPO has given reasons for rejecting the comparables and by the Assessing Officer in the draft order. The order passed by the DRP is a non-speaking order on the issues raised by the assessee, not stating the objections raised by the assessee and the reasons have also not been given as simply the order of TPO and Assessing Officer are referred. We find that similar issue was considered by the Hon'ble Delhi High Court in the aforementioned case of Vodafone Essar Ltd. [2011 (12) TMI 22 - DELHI HIGH COURT] against the order passed by the DRP. We find that it is a fit case where this issue should be restored back to the file of DRP to pass a detailed order stating all the objections of the assessee and disposing them by giving a cogent and germane reason for adjudication of the objections of the assessee. We direct accordingly. After receiving the order from DRP, the Assessing Officer will again pass order u/s 144C(13) and the present assessment passed by the Assessing Officer is set aside as the DRP is directed to readjudicate the objections raised by the assessee as per directions give above. We direct accordingly. This ground of appeal of the assessee is allowed for statistical purposes. Disallowance of working capital adjustments - Held that:- We are inclined to direct the Assessing Officer to consider working capital adjustment while determining the ALP of international transactions of the assessee with its AEs in this case also. Hence this ground of appeal of the assessee is partly allowed. Disallowance made u/s. 14A - Held that:- We are inclined to direct the Assessing Officer to exclude interest and bank charges which are not related to exempt income yielding investments. Hence, this ground of appeal of the assessee is partly allowed for statistical purposes.

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• 2018 (9) TMI 1543
  Disallowing the non-compete fees paid by the assessee to its holding company by holding it to be ‘capital expenditure’ - Held that:- This non-compete fees received by M/s. Kapil Chit Funds Private Limited was admitted as its income. The payments are to be made on yearly basis on the turnover of the appellant. Hence, total income was contended that the amount represents revenue item of expenditure. The view of the appellant was supported by the decision of the Hon’ble ITAT in the appellant’s own case for the Asst. Year 2012-13 which has been referred to supra. The Hon’ble ITAT, Hyderabad while deciding the appellant’s own case had stated that the payment made by the appellant to M/s. Kapil Chit Funds Private Limited was revenue expenditure as without the said payment the appellant could not have carried on its business more efficiently and profitably. Hence, the Hon’ble ITAT had held that the payment was revenue expenditure and allowable as a deduction u/s 37(1) of the Income Tax Act. Respectfully following the decision of the Hon’ble ITAT, Hyderabad in the appellant’s own case for the same issue of non-compete fee. - Decided against revenue.

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• 2018 (9) TMI 1542
  TDS u/s 195 - violation of provisions of section 9(1)(vii) r/w section 195(1) - non-deduction of tax at source on commission paid to two foreign entities namely Ancare Trade Consultants and M/s Whynot Buying House Services & Others - Held that:- Commissioner of Income Tax (A) has stated in the impugned order that the assessee has brought on record details pertaining to the commission paid, rebate and discount, copy of bills, FIRCs issued by the banks, agreement with the foreign agent as evidence in support of submissions etc. Commissioner of Income Tax (A) has deleted the addition in this respect by observing that the Assessing Officer was not justified in disallowing the commission expenses by holding the expenses as not genuine. CIT (A) has also observed that tax is not liable to be deducted with respect to payments which is paid to non-residents particularly when the services were rendered outside India, used outside India and the payments were made outside India in the absence of a Permanent Establishment in India. CIT(A) went on to hold that since the impugned income in the hands of the non-resident did not accrue or arise directly or indirectly, through or from any business connection in India or through the transfer of capital asset situated in India, the provisions of section 9(1) were not applicable on the facts of the case. Although the relevant details in respect of the impugned addition were not filed before the Assessing Officer, the CIT (A) has admitted the details submitted before him in terms of the copy of bills, FIRCs issued by the bank, agreement with the foreign agents etc. Although not been specifically mentioned in the impugned order that the same were being admitted as additional evidence by the CIT(A), it is apparent that these documents/details were not field by the assessee before the Assessing Officer and CIT(A) admitted these evidences during the course of first appellate proceedings before him without calling for a remand report from the Assessing Officer in this regard. Without going into the merits of the deletion of addition by the Ld. Commissioner of Income Tax (A), on the basis of factual matrix as appearing from the orders of both the lower authorities, it is apparent that the Ld. Commissioner of Income Tax (A) did not resort to the provisions of Rule 46A of the Income Tax Rules, 1962 while admitting these additional evidences which were placed for the first time before him and we are in agreement with the Ld. Sr. DR to this extent that the Assessing Officer should have been given an opportunity to examine the documents which were submitted at the first appellate stage. Addition u/s 50C r/w section 69A - Held that:- It is a settled law that section 50C applies to cases where a property has been sold. In case of acquisition of immoveable property at a value less than the value adopted for the purpose of stamp duty, the difference between stamp duty value and the transaction value can at best be taxed under provisions of section 56(2)(vii) of the Act which, any way is not attracted in the case of the assessee as the assessee is a partnership firm. Section 50C creates a legal fiction whereby apparent consideration is substituted by valuation done by stamp valuation authorities and capital gains are calculated accordingly. But legal fiction cannot be extended any further so as to take within its ambit the case of a purchaser where it is alleged that the purchaser had paid a price less than the value as adopted for the stamp duty purposes. A perusal of the assessment order also shows that the Assessing Officer has not disputed the price paid by the assessee and has not made any observations that the consideration as reflected in the books of accounts was less than what was actually paid by the assessee or what was recorded in the sale deed. ITAT Ahmedabad Bench had an occasion to consider an identical issue in the case of ITO vs. Harley Street Pharmaceuticals Ltd. [2010 (3) TMI 886 - ITAT AHMEDABAD] - Appeal of the department stands partly allowed for statistical purposes.

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• 2018 (9) TMI 1541
  Revision u/s 263 - assessment involved in this matter is under section 153A - Held that:- Section 263 of the Act confers power on the Principal Commissioner of Income Tax to examine an assessment order so as to ascertain whether it is erroneous insofar as prejudicial to the interests of the Revenue, but it shall not be construed to have conferred jurisdiction upon him to substitute his opinion for the opinion of the Assessing Officer when the AO, being satisfied with the record, passes the assessment order and more particularly in the circumstances when it cannot be stated that there is either lack of enquiry or inadequate enquiry. It is pertinent to note that as is held by the Hon’ble Apex Court in CIT vs. Max India Ltd. [2007 (11) TMI 12 - SUPREME COURT OF INDIA] where two views are possible and one of the possible views have been taken by the Ld. Assessing Officer while passing the assessment order, then the provisions of Section 263 of the Act cannot be invoked. In this case, the peculiarity is that the sales are accepted creating a situation where, if we accept the view taken by the CIT(A), it would show the gross profit of the assessee at 93.73% for the AY 2008-09 which in itself is quite an improbable on its face. So by estimating the gross profit of the assessee at 9% after disallowing the bogus purchasers the Ld. Assessing Officer had taken a pragmatic view which renders the issue not amenable to the Ld. CIT(A) to the jurisdiction u/s 263 of the Act. We are of the considered opinion that the exercise of jurisdiction under section 263 of the Act by the Ld. Principal Commissioner of Income Tax is not warranted, that such an order cannot be sustained and is liable to be quashed. - Decided in favour of assessee.

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• 2018 (9) TMI 1540
  Addition u/s 68 - treating the loan received as non-genuine - Held that:- When the loan amount can be verified from the independent document and evidence and the creditors have already lodged FIR against the assessee, then to that extent the assessee has produced the cheque details of receipt of loans and repayment of the said loans, the source of the said amount stand duly explained and the addition made by the AO to the extent of Rs. 50 lacs which is part of the FIR is not justified. Hence we delete the addition of Rs. 50 lacs pertaining to the first 4 creditors as per the above details. As against the balance amount of Rs. 50 lacs comprising of Rs. 25 lacs each of M/s. Trimurti Enterprises and M/s. Johari Jewellers Pvt Ltd., though the assessee filed the confirmations but despite various opportunities and the matter was remanded twice to the record of the authorities below, the assessee failed to produce the creditors for confirmation of the details filed by the assessee. Even the FIR filed by the Johari Group mentioned about the loan of Rs. 50 lacs only. When the FIR is accepted as explanation of the transactions then the remaining amount of Rs. 50 lacs which is not found mentioned in the FIR is required to be established by producing the independent evidence. In the absence of the confirmations from the parties despite various opportunities granted to the assessee, we find that the assessee has failed to discharge his onus in respect of the balance amount of Rs. 50 lacs. Since a considerable time has lapsed and the assessee has already availed three opportunities, therefore, no reason to interfere with the orders of the authorities below regarding the addition of Rs. 50 lacs pertaining to the creditor Trimurti Enterprises and Johari Jewellers Pvt. Ltd. In the result, a part addition is deleted amounting to Rs. 14,25,000/- being already suffered tax in the block assessment and Rs. 50 lacs as it was part of the FIR and the details in the FIR and creditors in the books of accounts are matching. Unexplained loan creditors under section 68 - Held that:- We find that this amount of Rs. 8,00,000/- in the name of M/s. Sheetal Suitings Pvt. Ltd. was part of the addition of Rs. 119.73 lacs made by the AO in the block assessment which was confirmed by this Tribunal. Accordingly, when this amount was already subjected to tax being part of the addition made by the AO then the same cannot be added in the reopened assessment. Accordingly, we delete this amount of Rs. 8,00,000/- in respect of M/s. Sheetal Suitings Pvt. Ltd. The other loan creditors did not respond to the summons issued under section 131 by the AO Since the AO has not given the benefit of repayment of the amount to the assessee but the fact remains that the assessee has repaid some of the creditors appearing in the books for the assessment year 1994-95 during the assessment year 1995-96, therefore, to the extent of repayment as per the record and bank account of the assessee which is prior to the introduction of new creditors during the assessment year 1995-96, the assessee would get the benefit of the said amount. Thus to the extent of no change in the peak cash credit in the cash book of the assessee, the repayment would be considered as re-introduction of the fresh cash credit during the year. Hence, we allow part relief to the extent of repayment in above terms. The AO is directed to verify the details of the repayment and the peak cash credit in the cash book of the assessee and then allow the benefit of availability of the cash which was claimed to have been repaid for introduction of fresh cash credit during the year. Disallowance of interest expenses - Held that:- AO to re-compute the amount of interest disallowance on the amount which has been sustained by us for the assessment year 1994-95. Any interest disallowance on the cash credit introduced during the current year, the same is also consequential to the issue of addition finally stand sustained as per our order on this issue and accordingly the AO is directed to recompute the disallowance of interest. CIT (A) has already restricted the disallowance of interest in the second round of appeal, then the said disallowance on account of interest cannot be enhanced in the 3rd round of litigation by confirming the original disallowance made by the AO. Hence, to the extent of disallowance which is more than Rs. 15,51,706/-, the same is deleted as based on the presumption of incorrect facts.

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• 2018 (9) TMI 1539
  Disallowance u/s 40(a)(ia) - Non-deduction of tax on royalty paid on the ground that the recipients of royalty have returned the royalty received as income in respective years - scope of amended provision - Held that:- As in the case of CIT v. Calcutta Export Co. (2018 (5) TMI 356 - SUPREME COURT) held that amended provisions of section 40(a)(ia) of the I.T.Act should be interpreted liberally and equitably and should be applied retrospectively from the date when section 40(a)(ia) of the I.T.Act was inserted, so that the assessee could not suffer intended and deleterious consequences beyond what the object and purpose of provision mandates. However, in the present case the CIT(A) not at all verified whether the recipients of the royalty have declared the same in their respective returns of income and paid tax thereon before deleting the addition made by the Assessing Officer by invoking the provisions of section 40(a)(ia) of the I.T.Act. Therefore, we remit the disputed issue to the file of the CIT(A) to call for remand report from the A.O. to verify whether the recipients have declared the royalty in their respective returns and paid tax thereon, and decide the same accordingly. Assessee's appeal allowed for statistical purposes.

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• 2018 (9) TMI 1538
  Scrutiny assessment - validity of notice issued u/s.143(2) - Jurisdiction of AO to pass order - Transfer of case u/s 127 - whether the Additional Commissioner of Income Tax is empowered to transfer the cases to any other the Assessing Officers? - Held that:- Principal Director General or Director General or Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, can transfer any case from one or more Assessing Officers subordinate to him. In the instant case the Additional Commissioner of Income Tax vide order dated 25th November, 2008 has passed an order and reassigned the case of the assessee to the ACIT(OSD) and forwarded the copies to the Chief Commissioner of Income Tax and Commissioner of Income Tax accordingly. In this case, although the office of the Chief Commissioner of Income Tax, vide order No.50/2008-09, dated 19th November, 2008 has transferred/posted the Assistant Commissioner of Income Tax (A.K.Bandopadhyay, who is the Assessing Officer in the present appeal) to the office of the Commissioner of Income Tax, Bhubaneswar, copy of which is placed on record by the Department along with written submission filed on 15.06.2017), however, the office of the Additional Commissioner of Income Tax, has assigned the cases to the ACIT(OSD) vide order dated 25.11.2008. Before us, ld. DR could not place any authorization or order issued under sub-section (1) or sub-section (2) of section 120 or any other provision of this Act by the Commissioner authorizing an Additional Commissioner of Income Tax to assign or reassign the cases to the Assessing Officers, neither any CBDT Circular supports the Additional Commissioner of Income Tax on record to transfer or reassign the cases to any other Assessing Officer. In view of the decision Valvoline Cumins Limited Vs. Deputy Commissioner of Income-Tax and others [2008 (5) TMI 20 - HIGH COURT OF DELHI], the ACIT(OSD), Range-2, Bhubaneswar could not have jurisdiction to pass the assessment order in case of the assessee as the ACIT, Circle-2(1), Bhubaneswar had already exercised the jurisdiction by issuing notice u/s.143(2) of the Act when admittedly no order u/s.127 of the Act was passed by the competent authority under that section. The order passed by the Additional Commissioner of Income Tax, dated 25th November, 2008 re-assigning the cases to the ACIT(OSD), who is the Assessing Officer in the present case, is not maintainable and consequently, the orders passed by the AO and confirmed by the CIT(A) in the case of present assessee are hereby quashed. - Decided in favour of assessee.

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• 2018 (9) TMI 1537
  Reopening of assessment - Reopening on the basis of show cause notice issued by the Excise Authorities - addition on account of suppression of value of sale of aluminium dross - Held that:- In the instant case it is undisputed fact that action u/s 148 of the Act was proceeded on the basis of show cause notice issued by the Excise Authorities which formed the basis of adjudication order by the Commissioner of Central Excise which had been set aside by an order dated 4.12.2015 of the Customs, Excise Service Tax Appellate Tribunal. Thus once the very foundation on which the action u/s 147 had been initiated had cease to exist; both logically and legally what emerges is that notice u/s 148 of the Act was invalid and the assessment framed u/s 147/143(3) was also vitiated. Addition on suppression of value of sale of alumninium dross - Held that:- AO has made a chain of presumptions while making addition in the hands of the appellant. Firstly, it was presumed that the quantity of dross mentioned in the excel sheet for the month of April, 2007 has been sold by the appellant in the guise of ash and residue as the same was matching with the invoiced quantity of ash and residue for that month. Secondly, it was presumed that even if the data for the other months was not matching, then took the appellant must have sold dross in the guise of ash and residue in all months. And thirdly, in the period after the date of search i.e. June, 2008 to March, 2009, for which there was no data on the excel sheet, the appellant must have also sold dross in the guise of ash and residue. There is no evidence whatsoever brought on record to support these presumptions. Even, for the period after the date of search, when the investigation was already initiated against the appellant, the AO has filed to bring out any evidence to show as to how the appellant was able to all the aluminum dross without issuing any invoice or by issuing invoice of ash and residue. Therefore, AO was not justified in making the presumption that the appellant has sold aluminium doss in the guise of ash and residue. Appellant has not sold dross in the year under consideration as there is no concrete evidence available on record to show that the appellate has underreported its sale. Further, the AO has not doubted the books of accounts and the operating results shown by the appellant. - Decided in favour of assessee

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• 2018 (9) TMI 1536
  Reopening of assessment - nondisclosure of busniss income - Held that:- Reopening of the assessment is valid for simple reason that Assessee has not disclosed the entire business of M/s G.P Infotainment in the return of income as admitted before Ld. CIT(A). Since there is a failure on the part of Assessee in showing the transactions pertaining to the advertisement business, I am of the opinion that A.O has satisfied the conditions prescribed under Sec. 147 of the IT Act, particularly, the proviso to Sec. 147 - contentions on reopening of assessment by assessee and the grounds pertaining to this are rejected. TDS claimed not disclosed in return filed - contention that Assessee has received an amount towards advertisement and has paid the same to Zee News Ltd. - Held that:- As in support, Assessee has filed the Profit and Loss account in the name of the M/s G.P Infotainment supported by various ledger copies, bank statements and invoices from Zee News Ltd., This information even though has been furnished before the CIT(A), the same were not subjected to verification by the A.O - entire receipt and expenditure as claimed by Assessee require proper verification by A.O. A.O is directed to examine the receipts and payments to Zee News and correlate the payments with the business activity and, if so found correct, allow the expenditure to the extent of the receipt, as the loss if any cannot be allowed in reopened assessment as the same was not claimed.

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• 2018 (9) TMI 1535
  Nature of land sold - CIT(A) treating the land in question as agricultural land - AO has established that the land was situated within 8 km of Municipal limit as per letter of Municipal Corporation, Dehradun - Held that:- As carefully considered the documentary evidences brought on record if these documents are properly examined, then the factual position will be clear whether the impugned land was agricultural land or not. Moreover, we find that there is a certificate which certifies that the distance from the end of the municipal limit to the impugned land is around 8.85 km – 9.5 km. We are of the opinion that this needs further verification by the AO. In the interest of justice and fair play, we set aside the matter to the file of the AO. The AO is directed to examine the documents furnished by the assessee. The AO is further directed to verify the distance of the impugned land from the end of the municipal limits as on the date of notification i.e. 6.1.1994. The AO must give reasonable opportunity of being heard to the assessee and then decide the issue afresh. - Appeal of revenue allowed for statistical purposes.

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• 2018 (9) TMI 1534
  Bogus purchases - CIT(A) restricted the addition to the extent of 30% of the total purchase - Held that:- The assessee has explained corresponding sales with respect to the entire purchases. The sales have not been disregarded. Before the AO assessee has also filed party-wise purchase along with address and total invoiced amount of each party. Merely because the assessee had not provided the VAT number of these parties the AO has added the amount. Since the corresponding sales have been accepted and the assessee had shown reasonable gross profit on sale, therefore, confirming the addition to the extent of 30% is not justified. Keeping view the totality of the facts and circumstances we direct the AO to restrict the addition to the extent 12.5% of such bogus purchases.

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• Customs

• 2018 (9) TMI 1525
  Recovery of Government dues - issue is pending adjudication - Benefit of N/N. 24 of 2015 Cus - duty free scrips under the Merchandise Exports from India Scheme (MEIS) - Held that:- The respondents will not adopt any coercive proceedings for recovery till the passing of the adjudication order on the show-cause notice to be issued. However, this will not restrain the respondents from accepting any payments made by the petitioner in discharge of the likely demand - Petition disposed off.

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• 2018 (9) TMI 1524
  Demand of Countervailing Duty - assessment of Bill of Entry objected - Held that:- This is an admitted and acknowledged fact that the issue involved herein is identical to the said case which is still pending adjudication before the Hon’ble Supreme Court, on account of an appeal filed against the order of Hon’ble Court at Chennai in the case of Prashray Oversas Pvt Ltd. [2017 (9) TMI 953 - SUPREME COURT] - Since the matter is pending consideration before the Hon’ble Apex Court, the present appeal shall not be decided on merits - appeal dismissed.

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• Insolvency & Bankruptcy

• 2018 (9) TMI 1533
  Corporate insolvency process - invoking Insolvency and Bankruptcy Code, 2016 in respect of an operational debt where an Arbitral Award has been passed against the operational debtor, which has not yet been finally adjudicated upon - Held that:- Under our Code, insofar as an operational debt is concerned, all that has to be seen is whether the said debt can be said to be disputed, and we have no doubt in stating that the filing of a Section 34 petition against an Arbitral Award shows that a pre-existing dispute which culminates at the first stage of the proceedings in an Award, continues even after the Award, at least till the final adjudicatory process under Sections 34 37 has taken place. We may hasten to add that there may be cases where a Section 34 petition challenging an Arbitral Award may clearly and unequivocally be barred by limitation, in that it can be demonstrated to the Court that the period of 90 days plus the discretionary period of 30 days has clearly expired, after which either no petition under Section 34 has been filed or a belated petition under Section 34 has been filed. It is only in such clear cases that the insolvency process may then be put into operation. There may also be other cases where a Section 34 petition may have been instituted in the wrong court, as a result of which the petitioner may claim the application of Section 14 of the Limitation Act to get over the bar of limitation laid down in Section 34(3) of the Arbitration Act. In such cases also, it is obvious that the insolvency process cannot be put into operation without an adjudication on the applicability of Section 14 of the Limitation Act. With regard to the submission of learned counsel for the respondent, that the amount of Rs. 1.71 Crores stood admitted by Mr. Banerji s client, as was recorded in the Arbitral Award, suffice it to say that cross-claims of sums much above this amount has been turned down by the Arbitral Tribunal, which are pending in a Section 34 petition challenging the said Award. The very fact that there is a possibility that Mr. Banerji s client may succeed on these cross-claims is sufficient to state that the operational debt, in the present case, cannot be said to be an undisputed debt. Appellate Tribunal was in error in referring to Section 238 of the Code. Section 238 of the Code would apply in case there is an inconsistency between the Code and the Arbitration Act in the present case. We see no such inconsistency. On the contrary, the Award passed under the Arbitration Act together with the steps taken for its challenge would only make it clear that the operational debt, in the present case, happens to be a disputed one. Appellate Tribunal, when it relied upon Form V Part 5 of the 2016 Rules to state that the operational debt would, therefore, be said to have been proved, missed the vital sub-clause (iii) in para 34 of Mobilox Innovations (2017 (9) TMI 1270 - SUPREME COURT OF INDIA). Even if it be clear that there be a record of an operational debt, it is important that the said debt be not disputed. If disputed within the parameters laid down in Mobilox Innovations (supra), an insolvency petition cannot be proceeded with further. The judgment of the Appellate Tribunal needs to be set aside and is therefore reversed.

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• 2018 (9) TMI 1532
  Corporate insolvency process - attachment of movable and immovable properties of the Corporate Debtor - priority of claims - whether the dues payable towards the provident fund of the workmen of the company is to be considered as claim falling within the ambit of Liquidation Estate? - Held that:- Since liquidation process should not get obliterated by the attachment taken against the assets of the Corporate Debtor, the only viable answer to this situation is, the liquidator shall pay the dues that are payable under the head of Provident Fund/Pension Fund/Gratuity Fund earmarking it as asset of the workmen and pay off the same to the respondents in priority to the waterfall mechanism made under section 53 of the Code. In view of the law in force, we hereby hold that by virtue of EPF Act and section 34(4)(a)(iii) of the Code, the charge will remain in force against the assets of the corporate debtor until it has been paid off before making any payment to any entity falling under waterfall mechanism devised under section 53 of the Code. Since the Liquidator filed another MA stating that further attachments have been slapped on the assets of the corporate debtor even after initiation of the Corporate Insolvency Resolution Process (CIRP), it makes no difference whether attachments have been made prior to or subsequent to admission of Company Petition under IB Code, the statutory first charge having remained in force against the assets of the corporate debtor company, we have not seen any merit to differentiate in respect to attachments made prior to filing of the Company Petition and during CIRP period. For the reasons stated above, the Petitioner is directed to pay the Provident Fund dues from the liquidation estate before distributing the liquidation estate of the Corporate Debtor to the claimants, to which, since the Liquidator has to sell the asset of the Corporate Debtor, the respondents are directed to allow this Liquidator to sell the assets of the Corporate Debtor and pay off the Provident Fund dues in priority to all other claims payable by the Corporate Debtor in liquidation. Since the liquidator has not disputed the quantum of Provident Fund dues payable to workmen, the liquidator shall pay the Provident Fund dues along with interest accrued, after selling any of the assets of the Corporate Debtor earlier in point of time. With this direction, the attachments made against the assets of the Corporate Debtor are hereby vacated with a direction against the Liquidator as mentioned above.

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• 2018 (9) TMI 1531
  Corporate Insolvency Resolution Process - submission of application in manner prescribed - Held that:- Form and manner of the application has to be the one as prescribed. It is evident from the record that the application has been filed on the proforma prescribed under Rule 4 (2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Section 7 of IBC. We are satisfied that a default has occurred and the application under sub-section 2 of Section 7 is complete; and no disciplinary proceedings are pending against the proposed Interim Resolution Professional. Thus, the application warrants admission. As a sequel to the above discussion, this petition is admitted and Mr. Akhil Goel, F-224-A, Laxmi Nagar, New Delhi-110092, Registration No. IBBI/IPA-001/IP-P00666/2017-18/11134 is appointed as an Interim Resolution Professional.

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• 2018 (9) TMI 1530
  Corporate Insolvency Resolution Process - applicants satisfy that they come within the definition of “Financial Creditor” - existence of financial debt - Held that:- The procedure in relation to the Initiation of Corporate Insolvency Resolution Process by the “Financial Creditor” is delineated under Section 7 of the Code, wherein only “Financial Creditor”/”Financial Creditors” can file an application. As per Section 7(1) of the Code an application could be maintained by a Financial Creditor either by itself or jointly with other Financial Creditors. Section 7 of the Code thus mandates that only the applicant “Financial Creditor” has to prove the default. Even if there is a clear default, the application under Section 7 of the Code is not maintainable in case the applicant is not a financial creditor. Therefore, in order to maintain the present application filed under Section 7 of the Code for initiation of Corporate Insolvency Resolution Process in respect of respondent corporate debtor, the present applicants have to satisfy that they come within the definition of “Financial Creditor”. There is no document to show that the respondent company either accepted or undertook to repay the loan with interest. The applicant has failed to justify how without any provision of interest the debt can be termed as a financial debt. Once the claim made in the application does not pertain to ‘disbursement against consideration for time value of money’, the present claim will not come within the purview of ‘Financial Debt’ and consequently the applicants cannot be termed as ‘Financial Creditor’ in respect of the present claim in question. The onus to prove lies on the applicants to establish that ‘interest’ is payable on the loan amount as claimed in the present application. The burden of proof becomes more onerous particularly when the claim is disputed. It is reiterated that neither any document has been placed on record pertaining to the loan nor there is any supporting evidence to establish applicable rate of interest to be paid on the said loan. Therefore, the applicants miserably failed to substantiate that the amount was disbursed against the consideration for time value of money with supporting documentary evidence nor could satisfactorily repudiate the contention of the respondent. Mere pleading of the applicants in the absence supporting documentary evidence will not suffice to prove that the disbursements were made for time value of money. Therefore, neither the present claim can be termed to be a ‘financial debt’ nor does the applicants come within the meaning of ‘financial creditors'. Once the applicants do not come within the meaning of ‘financial creditors’, they become ineligible to file the application under Section 7 of the Code. Petition dismissed as not maintainable.

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• 2018 (9) TMI 1529
  Corporate Insolvency Resolution Process - applicant as to come under the purview of “person” as defined under Section 3(23) of the Code - default in payment of the financial debt - whether applicant, not being a ‘person’, cannot be a financial creditor and hence cannot file the present application under Section 7 of the Code? - Held that:- In the present case the respondent corporate debtor has availed the credit facility on the strength of the Corporate Card Account Agreement duly executed between the parties. Respondent company had accepted the terms and conditions of Corporate Card Account Agreement. Applicant has placed on record copy of the agreement duly executed and signed by the director of the respondent company with company seal. Applicant has also placed on record the Board resolution of the respondent company dated 18.09.2015 wherein it was resolved to authorise Gaurav Vasudeva, Director to sign and avail banking facilities in the name of and on behalf of the company from American Express Banking Corp. He was further authorised to operate the banking facilities on behalf of the company. There is no dispute that the respondent company has availed the card facilities. However except part payment of Rs. 1 lac, no other repayment was made by the respondent. Consequently, respondent company was liable to pay interest and other card charges as per binding card agreement. The amount was disbursed against time value of money and for commercial purpose. The debt claimed in the application includes outstanding principal, interest and other card charges as per mutual agreement and therefore comes within the purview of ‘financial debt’. The applicant accordingly comes within the definition of ‘financial creditor’ in respect of ‘financial debt’ in question and has a clear right to file application under Section 7 of the Code. The material on record clearly goes to show that respondent had availed the loan facilities and has committed default in repayment of the loan amount. Moreover, the application of the financial creditor is complete and there is no disciplinary proceeding pending against the proposed IRP. We are satisfied that the present application is complete and the applicant financial creditor is entitled to claim its outstanding financial debt from, the corporate debtor and that there has been a default in payment of the financial debt. Thus in terms of Section 7(5)(a) of the Code, the present application is admitted.

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• 2018 (9) TMI 1528
  Corporate Insolvency Resolution Process - Initiation of corporate insolvency resolution process by financial creditor - completion of application - Held that:- From the form and manner of the application has to be the one as prescribed. It is evident from the record that the application has been filed on the proforma prescribed under Rule 4(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Section 7 of IBC. We are satisfied that a default has occurred and the application under sub-section 2 of Section 7 is complete; and no disciplinary proceedings are pending against the proposed Interim Resolution Professional. Even Punjab National Bank appears to be supporting the cause of the ‘Financial Creditor’. Thus, the application warrant admission. This petition is admitted and Mr. Manoj Sehgal, Flat No. 304, Tower 5, Ansal Valley View Estate, Gwal Pahadi, Gurgaon, Haryana-122003, Registration No. IBBI/IPA-002/IP-N00108/2017-18/10256 is appointed as an Interim Resolution Professional.

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• 2018 (9) TMI 1527
  Corporate Insolvency Resolution Process - default due to be paid - Outstanding dues - Held that:- As seen from the statement of account and loan documents that the loan was sanctioned, loan agreements were executed, charge and securities were created to secure the loan. Respondent company utilised and enjoyed the loan facility and due to non-payment and non-refund of the outstanding dues, the account of the corporate debtor was declared NPA. The applicant bank has also placed CRILC report in order to show that accounts of corporate debtor was reported as loss and doubtful account. Additionally, the applicant has also furnished a copy of the Balance sheet and Financial statements for the financial year 2016-2017 of the corporate debtor, which inter alia reveals that the company has defaulted in repayment of the loan to the applicant and that huge debts are outstanding as reflected in the statement of accounts of the company. Thus seen that the applicant 'financial creditor' has placed on record voluminous and overwhelming evidence in support of the claim as well as to prove the default. Moreover, the application of the financial creditor is complete and there is no disciplinary proceeding pending against the proposed IRP. We are satisfied that the present application is complete and the applicant financial creditor is entitled to claim its outstanding financial debt from the corporate debtor and that there has been a default in payment of the financial debt. As a sequel to the above discussion and in terms of Section 7(5)(a) of the Code, the present application is admitted.

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• 2018 (9) TMI 1478
  Attachment under PMLA act - Release the attachment of the assets of the Corporate Debtor - Liquidator under section 35(1)(n) of the Insolvency & Bankruptcy Code, 2016 seeking orders against the Directorate of Enforcement, New Delhi to described in the list attached to this petition - Held that:- The Court established under PMLA Act being a criminal Court can only decide whether the properties attached during investigation from possession of the Corporate Debtor could be said to be the properties acquired by them using proceeds of crime. It is for this Tribunal to decide as to how the properties and assets of the Corporate Debtor under liquidation can be appropriated. The Liquidator must get possession of those properties attached by the Enforcement Director, New Delhi. ORDER:- The Enforcement Directorate, Delhi Zonal Office-II, New Delhi to hand over the possession of attached properties of the Corporate Debtor under liquidation to the Liquidator, which he has attached by Order no.04/2018 dated 21.02.2018 along with the title deeds.

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• Service Tax

• 2018 (9) TMI 1522
  Levy of service tax on Royalty - rule 64D of the Mineral Concession Rules - It was submitted that the issue regarding royalty being a tax and therefore, not being amenable to service tax as well as other issues raised in the present petition have not been raised before the Rajasthan High Court and hence, the same have not been considered in the case of Udaipur Chambers of Commerce and Industry v. Union of India [2017 (10) TMI 975 - RAJASTHAN HIGH COURT]. Held that:- This court is of the view that at this stage it is not necessary to enter into the merits of the submissions advanced by the learned counsel for the petitioner on issues which were not raised before the Rajasthan High Court in the above referred decision. In the light of the fact that the Supreme Court in the appeal preferred against the decision of the Rajasthan High Court has been pleased to protect the appellants therein, at this stage the interests of both the sides can be duly protected if similar relief as granted by the Supreme Court is granted subject to the members of the petitioner associations filing undertakings to the effect that if ultimately they do not succeed in the petitions they shall pay the service tax on the royalty. Issue RULE.

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• 2018 (9) TMI 1521
  Refund claim - Business Auxiliary Services - commission received from foreign based principals for promotion of sale of its products/ goods in India. Held that:- An identical nature of services as rendered by the Respondent to its foreign clients, had come up for consideration before this Court in Commissioner of Service Tax, Mumbai v/s. ATE Enterprises (P) Ltd., [2017 (8) TMI 1233 - BOMBAY HIGH COURT], where it was held that services of procuring orders and passing it to its overseas principal/parties and receiving payments for the same in foreign exchange, is an activity of export of services covered by the Export of Service Rules, 2005. Appeal dismissed - decided against Revenue.

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• 2018 (9) TMI 1520
  Attachment of Bank Account - recovery of amount pending adjudication - case of appellant is that this is without Jurisdiction as the impugned notice dated 30th August, 2018, has been issued when there is no amount adjudicated as payable under the Act after issuing a show cause notice under Section 73 of the Act - Section 87 (b)(i) of the Finance Act, 1994. Held that:- At the stage of adjudication, the Petitioner would have an opportunity to explain the meaning and significance of the alleged admission. Therefore, till such time, as the show cause notice is adjudicated, it cannot be conclusively stated that any amount of service tax was paid by the Petitioner on the basis of forged/ fabricated/bogus challans. This would necessarily have to await adjudication order passed after following the principle of natural justice. Thus, the invocation of Section 87 of the Act, at this stage, would in these facts, be premature. Our Court has in Quality Fabricators & Erectors [2015 (12) TMI 494 - BOMBAY HIGH COURT], has held that Section 87 of the Act, can only be invoked for adopting coercive proceedings for recovery after the authorities determined the amount payable by an assesee on an adjudication order. Without adjudication, no steps for coercive recovery under Section 87 of the Act can be taken by the authorities. The impugned notice dated 30th August, 2018 is quashed and set aside. However, the amount which have already been received by the Revenue consequent to the notice dated 30th August, 2018, would be continued to be retained by the Respondent till the passing of on adjudication order on the show cause notice dated 8th September, 2018 - petition allowed.

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• 2018 (9) TMI 1519
  Refund of service tax - export of services - Place of provision of service - main contention put forward by the department is that the appellant is an intermediary and therefore the place of provision of service is within India - input services - Held that:- The appellants was engaged by M/s.H&H, China. So also, it is admitted that appellants have provided services to H & H, China. The invoices were raised on H & H, China by the appellant. The only conclusion therefore possible is that H & H, China is the intermediary if at all, and not the appellant - The recipient of logistic services being situated outside India, and the consideration having received in convertible foreign currency, the transaction has to be treated as export of service - thus appellant has facilitated the re-export of the goods. Input services - allegation is that major part of the input services were availed for import of goods and not export of services - Held that:- The goods were to be carried back to China. For this re-export/return of goods, various legal formalities and procedures are required to be complied. The goods had to be kept in CFS, under proper storage facility had to be presented for examination/verification of Customs department etc. The inputs services availed for doing such return of goods to China are services availed for exports of goods only - appellant is eligible for refund of cenvat credit availed on input services used for export of logistic services. Refund allowed - appeal allowed - decided in favor of appellant.

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• 2018 (9) TMI 1518
  Classification of services - construction of the residential apartments - appellant s claim is that the activity undertaken will fall under the category of construction of complex service under Section 65 (105) (zzzh) readwith Section 65 (30a) - whether classified under Works contract service or under construction of complex service? Held that:- The key to the decision is in the fact that the construction activity has been carried out by the appellant on the land which is acquired and owned by the appellant. The appellant has carried out design, planning, development of their own land and carried out the construction and transferred the completed flats to the buyers. To our minds, the activities undertaken do not merit classification under works contract services. The activity will be covered under works contract service only when the contract is entered into by the appellant only for construction of residential complex on land owned by someone else. The CBEC Circular dated 29/01/2009 bring out the position clearly that in the activity undertaken by the appellant in building a residential complex, there will be no liability to pay service tax under the category of construction of complex service. The position changed only w.e.f. 01/07/2010 when an explanation was added to sub-Section (zzzh), making such activity to be a deemed service - Thus the activity of the appellant, covered by the construction of complex service is liable to be set aside for the period upto 01/07/2010. Period from 01/07/2010 to March 2011 - Held that:- The Adjudicating Authority has upheld the payment of service tax under the category of works contract services, but as discussed above, the activity is liable for payment of service tax only under the category of construction of complex service. The appellant has also submitted during the course of argument that they have discharged the service tax for the period w.e.f. 01/07/2010 after availing applicable abatements. The Adjudicating Authority is directed to verify such claim. Subject to such verification, the demand for service tax under works contract service raised in the show cause notice is set aside for the period 01/07/2010 to March 2011 - matter on remand. The issue of time bar need not be discussed since the appeal itself is being allowed on merit. Appeal allowed in part and part matter on remand.

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• 2018 (9) TMI 1517
  Maintainability of SCN - Short paid Service Tax - Whether the show cause notice is maintainable for raising a demand of service tax as short paid? Held that:- Revenue have not found any fault and/or error in the books of accounts and the financial statements which have been duly audited by a Chartered Accountant as required under the other Taxation Acts etc. - Ruling of Coordinate Bench of this Tribunal in the case of Commissioner of Service Tax, Delhi vs. Convergys India, [2018 (1) TMI 1174 - CESTAT CHANDIGARH], wherein under similar circumstances show cause notice demanded differential duty for the apparent difference in the receipts as per balance sheet as compared to the ST-3 returns this Tribunal held that the receipt declared in the balance sheet is for accounting purposes or for the purpose of Income Tax and the same cannot be considered as Revenue for levy of service tax. We also note that the book of accounts are not rejected and without rejecting the assumption of the gross receipt as taxable service, is untenable, and grossly wrong. The SCN is misconceived and vague, and also erroneous - Appeal allowed - decided in favor of appellant.

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• 2018 (9) TMI 1516
  CENVAT Credit - time limit for taking credit - whether the Cenvat Credit of Rs. 1,84,47,149/- has been rightly disallowed under Rule 14 of CCR, 2004 and further the tax of Rs. 61,997/- have been erroneously demanded which has been a clerical error in the presentation of the amounts by the appellant? - whether the penalties imposed under Sections 70, 77 and 78 of the Finance Act and Rule 15(3) of CCR have been rightly imposed? Held that:- There was no time limit prescribed in the Cenvat Credit Rules for taking credit. The time limit of 6 months was introduced w.e.f. 01.09.2014 which has got perspective effect as held by Hon ble Allahabad High Court in CCE vs. Ram Swarup Electricals Ltd. [2007 (5) TMI 116 - HIGH COURT , ALLAHABAD]. It cannot be applied to the period prior to 01.09.2014 - disallowance of Cenvat Credit is set aside. Demand of differential tax of Rs. 61,997/- - for the financial year 2011-12 the gross receipt is computed as Rs. 5,51,73,149/- which comprises of signal fee Rs. 3,77,39,469/- but in the SCN it has been erroneously taken at 3,83,39,469/- thus there has been a difference of Rs. 6 lacs - Held that:- Te said clerical mistake in final account was noticed by appellants subsequently. Appreciating the mistake as same is evident from the record and books of account maintained on ordinary course of business, demand of difference amount is set aside. Penalty u/s 77 - Held that:- There is no deliberate defiance of the provision of law nor there is any act of suppression on the part of the appellant and the transaction was recorded in the books of accounts ordinarily maintained in the course of business, penalties under Sections 77(1)(b), 77(1)(c)(i), 77(1)(c)(iii), 77(2) and Rule 15(3) of CCR, 2004 is set aside. Penalty u/s 70 - Held that:- Penalty of Rs. 1,80,000/- under Section 70 is retained however it reduced to Rs. 14,400/- in terms of Section 70 and Rule 7C of Finance Act, 1994. Appeal allowed in part.

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• 2018 (9) TMI 1515
  Demand of service tax - Reversal of Cenvat Credit - Scope of SCN - Non-speaking order - main grievance of the department is that the impugned order is a non-speaking order without giving detailed findings either to support or counter the arguments of the noticee but has simply confirmed demands proposed in the notice and the statement of demand - principles of natural justice - Held that:- The SCN had alleged in para 5.1 that “value of goods (sold during taxable service) is to be included in the gross value of taxable service under section 67 of the Finance Act, 1994”. The same paragraph also alleges that “assessees are liable to pay an amount of 5% of gross value of exempted service as per explanation 1(a) to rule 6(3) and 6(3A) of CENVAT Credit Rules, 2004 - These are the only two alleged infractions raised in the show cause notice. There is no other allegation or infraction that has been brought out in the show cause notice dated 11.6.2013 are for that matter in the statement of demand dated 23.4.2014. Non-fulfillment of Notification No. 12/2003-ST was not an allegation or charge raised in the show cause notice. True, para 4.4 of the notice dated 11.6.2013 did reproduce a portion of the Notification 12/2003-ST, however, without making any reference or connection to the facts of the case or making any allegation that the conditions of the notification have been violated by the department - further, in para 19, the adjudicating authority has made a reference to Circular No.96/7/2007-ST dated 23.8.2008 which had inter alia clarified that where spare parts are used by a service station for servicing of vehicles, service tax should be levied on the entire bill including the value of the spare parts. That however service provider is entitled to take input credit of excise duty paid on such parts or any goods used in providing service wherein value of such goods has been included in the bill. We are unable to fathom why the adjudicating authority has chosen to apply the facts of the case to the said circular dated 23.8.2008, particularly, when the said circular pertains to a period prior to the amendment introduced under Rule 2(e) of CENVAT Credit Rules, 2004 amplifying the definition of exempted service to include “trading”. It is evident that the order of the adjudicating authority has not addressed the allegations and concerns raised in the show cause notice but has instead veered off into other areas which have not been alleged in the notice or in the statement of demand - Thus, the adjudicating authority has not given any speaking order based on the allegations and charges proposed in the notice / statement of demand. The impugned order not having addressed the allegations in the show cause notice but having only confirmed the proposed demands on other grounds cannot be sustained - case remanded for fresh adjudication based on the allegations and charges made out in the show cause notice - Appeal allowed by way of remand.

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• 2018 (9) TMI 1514
  Declared service or not? - Unscheduled Inter-change charges (UI) - Sub-Section (e) of Section 66E of the Finance Act, 1994 - whether Service Tax liability arises on the UI Charges received by the appellant? - Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act. Held that:- This Declared Service covers those cases where service provider has agreed to take on himself an obligation to refrain from an Act. The UI Charges have been received by the appellant only in those cases where the buyer has drawn more electricity than what was scheduled for him - such an act cannot be considered as agreeing to an obligation to refrain from supply of electricity. The receipt of UI Charges has arisen in connection with transmission of electricity, which has been undertaken by the appellant. It cannot be lost sight of that all components of billing undertaken are in connection with the electricity transmitted and supplied by the appellant. The charges being part of this activity which finds place in the negative list in services, it cannot be said that it amounts to any kind of service. Appeal allowed - decided in favor of appellant.

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• 2018 (9) TMI 1513
  Extended period of limitation - wilful suppression of facts - prevalent confusion - evasion of duty or not - liability of service tax - incentive against the segment books by the appellants. Held that:- It is an apparent admission of the appellant that the service incentives as have been received from the various above mentioned companies have not been shown in their returns irrespective those have been filed regularly and also in time. It is also an apparent admission of the appellant that they are paying service tax on the said activity now. The perusal of the said notification shows that the impugned confusion was brought to the notice of Ministry of Finance only in the year 2012 - the impressing upon confusion w.e.f. 2012 onwards cannot be allowed to extend any benefit to the appellant. In the era of self-assessment, the onus heavily lies upon by the appellant to declare the income received and to discharge the respective liability. Apparently and admittedly the same is missing in the present case. For these reasons, the authorities relied upon by the appellant are not opined applicable to the present case. The reliance upon the Notification of 2016 is opined to be clearly an afterthought and an attempt to improve upon the case despite the facts that liability of the appellant has been confirmed even by the Hon’ble Supreme Court - these facts clearly amounts to willfully suppressing the material facts in addition also amount to contravention of the provision of the act. The department has rightly invoked the extended period of limitation - appeal dismissed - decided against appellant.

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• 2018 (9) TMI 1512
  Application for withdrawal of appeal - amount involved in the present appeal is Rs. 12,03,145/- which is less than 20.00 Lakhs - Held that:- As per C.B.I.T.C. Instructions F. No.390/MISC./116/2017-JC, dated 11-7-2018, the appeal is not maintainable due to the monetary limit - no substantial question of law is to be adjudicated, the request for withdrawal is hereby allowed - appeal dismissed as withdrawn.

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• 2018 (9) TMI 1511
  Classification of services - activities carried out by them in transporting/shifting the excavated coal from pit-head to dump yard - whether classified under the head mining services or under the head GTA Services? - Held that:- Hon’ble Supreme Court in C.C.E. & S.T., Raipur Vs. Singh Transporters [2017 (7) TMI 494 - SUPREME COURT] has categorically held that such services rendered within the mining area cannot be taxed under the category of mining services. The activity of the appellant for transporting coal from the pit area to the place of stock yard as the activity of GTA. It is also on record that the said tax liability has already been discharged by Western Coal Fields under Reverse Charge Mechanism - question of double taxation also do not arise. Appeal allowed - decided in favor of appellant.

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• 2018 (9) TMI 1510
  Classification of services - supply of explosives to the service recipient and also supervise the use of the same - Mining of Mineral Oil and Gas Services or not? - Held that:- Mere supply of explosives and accessories was held as not involving any service element so as to attract service tax. However, in the present case apart from supply of explosives the appellant was also supervising the use of the same in the mines. The entire facts have to be adjudged from the terms of the contract and agreement - matter remanded to the original adjudicating authority for examining the entire aspect afresh - appeal allowed by way of remand.

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• 2018 (9) TMI 1509
  Courier Service - demand raised on the basis of difference between the value declared in ST-3 Returns and Bank Statements with imposing equal penalty - Case of appellant is that out of confirmed demand of Rs. 1,79,799/- the appellant had paid service tax of Rs. 1,03,987/- along with interest due thereon - Held that:- There was no need for issue of show cause notice in respect of service tax of Rs. 1,03,987. Therefore, the penalty equivalent to the said amount is not sustainable. Further the demand of Rs. 75,812/- is set aside and matter is remanded to Original Authority with direction to verify the Invoices which the appellant is claiming for admissibility of Cenvat credit and on verification of said documents and any additional evidences decide the matter related to demand of Rs. 75,812/- afresh. The appeal is partially allowed and partially remanded.

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• 2018 (9) TMI 1508
  Service of Order - case of appellant is that the Order-In-Original No.199/ADC/ST/LKO/2015-16 dated 29.03.2016 was never passed in respect of them and was never served upon them - Held that:- It was a clerical mistake at some stage where same order has been assigned two numbers 199 and 202. The Order-In-Original assigned No. 199/ADC/ST/LKO/2015-16 dated 29.03.2016 was marked to the department and Order-In-Original assigned No.202 was addressed to the appellant and because of such clerical mistake the whole confusion has arisen - Since the matter arising out of said show cause notice dated 20.10.2014 has reached finality through Order-In-Appeal dated 31.07.2017, the impugned Order-In-Appeal is infructuous - the impugned Order-In-Appeal is set aside - appeal allowed.

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• 2018 (9) TMI 1507
  Liability of Service Tax - Club or Association Services - Held that:- The Club Services have been held to be ultra vires and not liable to service tax by various decisions of the High Courts - The Hon’ble Calcutta High Court in the case of Dalhousie Institute vs. Assistant Commissioner reported at 2006 (003) STR 311 (Calcutta) and in the case of Saturday Club Ltd. vs. Assistant Commissioner [2004 (6) TMI 11 - HIGH COURT CALCUTTA] has held that no service tax is attracted in respect of services rendered to the members of the club - demand set aside. CENVAT Credit - duty paying invoices - non-original documents - Held that:- Inasmuch as there is no dispute about the receipt of input services as also by taking note of the fact that there was no liability of appellant to pay the service tax, there is no justification for confirmation of the said demand. Appeal allowed - decided in favor of appellant.

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• 2018 (9) TMI 1506
  Legal Consultancy Service - services received from foreign based Legal Firm M/s Hill Dickinson LLP - intent to evade not present - Extended period of Limitation - Held that:- There was no intention on the part of the appellant to evade payment of Service Tax. Therefore, the extended period was not invocable - entire demand was beyond the normal period of limitation and is set aside - appeal allowed - decided in favor of appellant.

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• 2018 (9) TMI 1505
  Penalty - tax with interest paid before issuance of SCN - Section 73(3) of the Finance Act, 1994 - Held that:- Explanation to Section 73(3) of the Finance Act, 1994 becomes relevant which clarifies that no penalty shall be payable under any provisions of Finance Act, 1994 or the Rules made there under - In view of this provision, it becomes abundantly clear that where the tax has been paid by the assesse before the issuance of Show Cause Notice, the very ground of issue of notice is ultra vires to the Act which calls for the penalty, if any imposed, to be vacated - Penalty set aside. Sponsorship Service - Reverse Charge Mechanism - N/N. 15/2006-ST dated 24.04.2006 - Held that:- The appellants were not liable to pay any service tax for rendering Sponsorship Service which was otherwise to be paid by the recipient under the Reverse Charge Mechanism - The liability qua Sponsorship Service was not sustainable. Appeal allowed - decided in favor of appellant.

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• 2018 (9) TMI 1504
  Management and Maintenance and Repair Services - benefit of abatement in terms of N/N. 1/2006 - Held that:- Appellant submits that the services provided by the appellant were correctly classifiable under the ‘Works Contract Service’ and as such the rate applicable to the said services should had been adopted by the Authorities below, for confirmation of demand - However, he fairly agrees that neither the said plea was raised before the Authorities below nor the relied upon decision of Hon’ble Supreme Court in COMMISSIONER, CENTRAL EXCISE & CUSTOMS VERSUS M/S LARSEN & TOUBRO LTD. AND OTHERS [2015 (8) TMI 749 - SUPREME COURT] was available at the time of adjudication proceedings. As such the matter requires reconsideration. Matter remanded to the Original Adjudicating Authority for fresh decision - appeal allowed by way of remand.

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• 2018 (9) TMI 1503
  Liability of Service Tax - Sub-contract - appellant has provided services of fabrication of Iron and Steel items to their principal contractor - who is liable to pay tax, principal contractor or the appellant, sub-contractor? Held that:- In the case of M/s R.S. and Brothers [2018 (6) TMI 1530 - CESTAT ALLAHABAD] has held that where the principal contractor, for whom the sub-contractor was working, has already discharged full tax liability on the full value of the contract, no further liability would be fastened against the sub-contractor - However, we find that the plea that principal contractor has discharged the full tax liability, was not raised before the Original Adjudicating Authority and as such was not verified - matter requires reconsideration - appeal allowed by way of remand.

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• 2018 (9) TMI 1502
  Liability of Service Tax - Revenue has entertained a view that the appellant is required to pay service tax on Reverse Charge Basis as the said services were provided in India - whether the respondents are under an obligation to pay service tax in respect of services provided to their foreign principals for enhancing their business in India? Held that:- The issue is no more res-integra and stands settled by the Majority Decision of the Tribunal in the case of M/s Microsoft Corporation (I) (P) Ltd. Vs Commissioner of Service Tax, New Delhi [2014 (10) TMI 200 - CESTAT NEW DELHI (LB)], where it was held that services provided by the agents and some agencies being delivery of money to the intended beneficiary of the customer of the western units abroad, which may be located in India and the services provided being business auxiliary services is also to the western unit who is recipient of services and consumers of services, it has to be held that services were being exported in terms of Export of Services Rule 2005 and not liable to Service Tax. Appeal dismissed - decided against Revenue.

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• 2018 (9) TMI 1501
  Manpower Supply Services - entire case of revenue is based upon the comparison of bank account figures with the ST-3 returns - Held that:- There is no requirement under the law to maintain separate bank account for the services to be provided by the assessee. As such in the absence of any evidence against the appellant, there is no merits in the revenue’s stand - appeal allowed - decided in favor of appellant.

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• 2018 (9) TMI 1500
  Classification of services - activity involved supply of soil, excavation of soil, installation and operation of bores for dewatering, hiring of dewatering pumps with complete installation, commissioning and maintenance at different projects, providing dewatering etc. for various construction companies - whether classifiable under Commercial Construction Services or under Site Formation, Clearance and other services? - demand raised invoking extended period of limitation. Held that:- There is no dispute that the appellants were duly registered and were filing ST-3 return, there is no suppression or misstatement on the part of the appellant with an intention to evade payment of duty, can be alleged so as to justifiably invoke the longer period of limitation. It seems to be a change of opinion of the revenue as regards the classification of the services and there is actually no evidence to reflect that the tax was being paid under the construction services with any malafide intention. All the facts were in knowledge of the revenue - the extended period is not available to the revenue. As the appeal is allowed on limitation, merits of case have not gone through - appeal allowed - decided in favor of appellant.

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• 2018 (9) TMI 1499
  Classification of services - Execution of the work for Railways - Erection, Commissioning and Installation or Works Contract Services - Held that:- The applicability of the Hon’ble Supreme Court’s decision on ‘Works Contract’ in the case of COMMISSIONER, CENTRAL EXCISE & CUSTOMS VERSUS M/S LARSEN & TOUBRO LTD. AND OTHERS [2015 (8) TMI 749 - SUPREME COURT], is required to be examined by referring to the terms and conditions of the various contracts. Such verification can be done only at the level of the Original Adjudicating Authority - appeal allowed by way of remand.

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• 2018 (9) TMI 1498
  Outdoor Catering Services - case of appellant is that they are not involved or engaged in serving of the food which is an important element in the case of catering service - Held that:- Service tax has been charged on the entire amount received by the appellant from their customers including the amount for supply of tiffin boxes or supply of food from base kitchen which would not be covered by the definition of catering service. However, the appellant are also engaged in cooking the food at the customer’s premises and also booking orders for tent, decoration, serving of food etc. The question as to whether there is evidence indicating that the appellant were also engaged in serving of food at the customer’s premises where they were cooking the food, can be examined only at the level of Original Adjudicating Authority, for which purpose matter is remanded to Original Adjudicating Authority - appeal allowed by way of remand.

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• 2018 (9) TMI 1497
  Manpower Supply Service/Security Agency Service - Reverse charge mechanism - CENVAT credit on the services - revenue neutral situation - Held that:- Admittedly tax cannot be demanded or collected without any authority of law - When an appellant pleads that there is no loss to the Revenue, there can also be no case for suppression or fraud since admittedly the appellant has paid the duty along with interest on being pointed out which fact becomes evident from the fact that the adjudicating authority has appropriated the duty and interest paid by the assessee - demand set aside - appeal allowed.

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• Central Excise

• 2018 (9) TMI 1496
  Refund claim - duty paid under protest - case of the appellant is that no SCN has been issued to them for the amount paid under protest and for recovery of interest from the appellant - Held that:- It is admitted in this case that no SCN has been issued for appropriation of the amount reversed by the appellant or appropriated. Admittedly, no refund claim has been filed by the appellant for refund of amount of Rs. 36,57,968/-, therefore, the amount of Rs. 36,57,968/- is not subject matter for consideration by this Tribunal at this stage - Refund not entertained. Deduction of interest of Rs. 23,33,133/- - Held that:- Admittedly, in this case, no show cause notice has been issued to the appellant for appropriation of the amount paid under protest or to demand interest for delay reversal of credit, in that circumstance, the amount of interest cannot be recovered from the appellant - appropriation of amount of Rs. 23,33,133/- is against the law. Appeal disposed off.

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• 2018 (9) TMI 1495
  CENVAT Credit - input services - Works Contract Services - whether the appellant is entitled for the Cenvat credit in respect of Works Contract Service which was rendered for Repair, Renovation and Modernization of the factory? Held that:- Both the lower authorities have never disputed the nature of the services i.e. Repair, Renovation and Modernisation of existing building. The invoices enclosed in the appeal memo also clearly shows that the services are of Repair or Modification - Though the Works Contract services was excluded from the definition of Input service with effect from 01.04.2011 but the services of Repair, Renovation or modernization of the existing factory still exists in the inclusion clause of definition of Input Service given in Rule 2(l) of Cenvat Credit Rules, 2004. The intention of the legislation is very clear that only new construction under Works Contract service is excluded but the Repair, Renovation and Modernisation of existing factory still covered under the definition of Input Service - the services of Repair, Renovation of the factory is admissible Input service and credit is allowed. Appeal allowed - decided in favor of appellant.

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• 2018 (9) TMI 1494
  CENVAT Credit - fake invoices - denial of credit of Unit-I on the ground that they have taken credit on the basis invoices without receiving PTY (Polyester (Filament) Texturised Yarn) - Held that:- It cannot be said that the Unit-I has received invoices and not the goods, when it is a fact on record that PTY was sent by Unit-I to the job worker for fabrication of cloth/garments - Another allegation made by the Revenue for the duty on PTY paid less and therefore Unit-II cleared PY in the guise of PTY. Due to variation in the value of goods, the duty was worked out on which credit has been availed less than the duty paid on PTY, therefore this allegation is not sustainable - demand do not sustain. Clandestine removal - it was alleged that Unit-II has clandestine cleared the goods without payment of duty - Held that:- The duty on account of clandestine clearance of PTY of 4015.25 Kg of Rs. 3,11,785/- is payable by the appellant-assessee to the tune of Rs. 25,442/- as the appellant has failed to produce any invoice on record - demand confirmed. Appeal allowed in part.

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• 2018 (9) TMI 1493
  SSI Exemption - packing and fixing of Brand names of others - Department took the view that packing of goods and fixing the brand names which did not belong to them, makes the process into one of the manufacture, but the two appellants will not be entitled to the benefit of the Small Scale Exemption in force at the relevant time. Held that:- The activity of undertaking packing and affixing the brand name is an activity of manufacture incurring the liability for payment of duty. The goods in question are automobile parts which are specified in the 3rd Schedule of the Central Excise Act - In their respective statements, both the proprietors of the appellant firms have also admitted to the fact of packing as well as affixing the brand names - the liability for the payment of Central Excise stands established against both the appellants. The brand name ‘VIKING’ is owned by the following three persons viz. Shri Vinod Kumar Dhawan, Shri Vijay Kumar Dhawan (Proprietor of M/s Vee Kay) and Shri Jugal Kishore Kohli - M/s Vee Kay will be entitled to the benefit of SSI Exemption in respect of the goods cleared with the brand name ‘VIKING’, but not for goods with ‘VIZA’ brand. The brand name ‘VIZA’ is claimed to be owned by Shri Vineet Dhawan, proprietor of M/s Clutch Engineers. This fact does not appear to be in dispute. Hence the goods cleared with the brand name of ‘VIZA’ by M/s Clutch Engineering will be entitled to the benefit of SSI Exemption, but not goods with ‘VIKING’ brand. The demand for Central Excise duty needs to be reworked and Adjudicating Authority is directed to requantify the demand - The order for confiscation and redemption fine and penalties also needs to be proportionately modified - appeal allowed by way of remand.

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• 2018 (9) TMI 1492
  Clandestine removal - Demand is based on copy of some documents received by the Central Excise Department from the Income Tax Department which had earlier conduced search and seizer operation in the premises of the appellant - Held that:- The main demand against the appellant-company is based on the private document i.e. Monthly Dispatch Summary Details (MDSD) recovered from the factory premises of the appellant. The said private documents i.e. MDSD has been alleged to have prepared by Shri Ramu Yadav and Shri R.K. Singh on the direction of the directors of the appellant-company for which department have relied upon the statement of Shri Ramu Yadav & Shri R.K. Singh. Cross-examination of witnesses - reliance to be placed on the statements of witnesses - Held that:- Request of cross-examination of Shri Ramu Yadav & Shri R.K. Singh was allowed by the learned Commissioner, but the Department was unable to produce their witness - It is well settled law that if the Department is not able to produce their witness for cross-examination, then the statement of that witness cannot be relied upon. Demand based on MDSD - Held that:- The said MDSD is not a genuine document as there is no corroborative or positive evidence available on record, showing clandestine removal of the goods. Therefore, demand on the basis of the said record-MDSD, is set aside. Demand on the basis of parallel invoices issued by appellant-company and resumed from the premises of Shri Mukul Jain, Commission Agent of fabric - Held that:- The department is mainly relying upon the statements of Shri Mukul Jain, to establish that the goods have been cleared on parallel invoices. The Department has not been able to produce Shri Mukul Jain for cross-examination during the adjudicating proceedings - there is no other concrete evidence available on record to prove that the appellant company has removed goods on the parallel invoices - demand set aside. Hon’ble High Court of Allahabad in the case of Continental Cement Company Vs Union of India [2014 (9) TMI 243 - ALLAHABAD HIGH COURT] have held that the Department has to bring on record corroborative evidence in the form of procurement of raw material, transportation, sale proceeds, buyers of such goods, capacity to manufacture, etc. - In the present case, there is no such positive or tangible evidence available. Since duty demand is set aside, penalties are liable to be set aside. The whole demand of revenue is based on the assumptions and presumptions, there being no corroborative evidence to support the allegation of suppression of production and/or clandestine removal - Appeal allowed - decided in favor of appellant.

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• 2018 (9) TMI 1491
  Demand of Interest - demand raised by invoking extended period of limitation - manufacture of job work activities to various clients - Held that:- It is a fact on record that during the course of investigation when it was pointed out that the appellant paid duty - In the light of the decision of the Hon’ble Punjab & Haryana High Court in the case of VAE VKN Industries Pvt. Ltd. [2013 (10) TMI 30 - PUNJAB & HARYANA HIGH COURT] the show cause notice issued to demand of interest from the appellant is barred by limitation - demand of interest set aside - appeal allowed - decided in favor of appellant.

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• 2018 (9) TMI 1490
  Penalty - demand of differential Central Excise duty by including the VAT subsidy amounts received by the appellants from the Rajasthan Government - Held that:- The Tribunal in GREENLAM INDUSTRIES LTD [2018 (4) TMI 1552 - CESTAT NEW DELHI] have set aside the demand for such differential duty, where it was held that There is no justification for inclusion in the assessable value, the VAT amounts paid by the assessee using VAT 37B Challans. The cases of both the appellants in the present appeals, stand decided in favour of the appellants - Once the demands for differential duty have been set aside, there is no justification for penalties which are also to be set aside - appeal allowed - decided in favor of appellant.

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• 2018 (9) TMI 1489
  Rectification of Mistake - Held that:- In para 7, the first sentence is mentioned as “We find that the Department has made out a Strong case in their favour”, which should be read as “We find that the Department has not made out a strong case in their favour” - ROM Application allowed.

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• 2018 (9) TMI 1488
  Condonation of delay of 376 days and 499 days in filing the present appeals - Satisfactory explanation for delay not given - the only ground given by the applicant for seeking COD of 376 days and 499 days is that the security person on whom the impugned order was served misplaced the same and did not give to Accounts Department - Held that:- This reason given for such a long delay does not inspire confidence. Further, the two appeals have been filed by the appellant (one by the company and other by the Managing Director) against the same impugned order, but the delay caused in both the appeals is different i.e. in one appeal 376 days and in other appeal filed by the Managing Director is 499 days, which clearly proves that appellant has been negligent in pursuing their cases - delay cannot be condoned - COD Application dismissed.

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• 2018 (9) TMI 1487
  Time Limitation - the matter had come to the notice of Revenue on 25/09/2008 and that the show cause notice was issued on 04/05/2011 - CENVAT credit - inputs which were procured during the period when the appellant was claiming exemption under small scale N/N. 08/2003-CE dated 01/03/2003 - Held that:- The Departmental Officers visited the factory on 25/09/2008 and made endorsement on various registers and the issue was related to the period from August to September, 2008 and therefore the Department was having only normal period of limitation for issuance of show cause notice since the Departmental Officers visited the factory - There was no willful suppression on the part of the appellant - the demand is hit by limitation.

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• 2018 (9) TMI 1486
  Valuation - manufacture of Pan Masala and Jarda Scented Tobacco - Notification issued under Section 3A of Central Excise Act, 1944 - Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 - Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 - Held that:- If manufacturers intimates its intention not to operate the packing machine and the same is sealed by authorized officers, such machines are deemed to have been uninstalled in terms of Sub-rule 6 of said Rules and under such circumstances 3rd proviso to Rule 9 become operational and therefore, the date of payment of duty gets shifted to 5th of the following month - Appeal allowed.

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• 2018 (9) TMI 1485
  CENVAT Credit - input services - services received from Non-Whole Time Director - Contention of Revenue was that the said services provided by non-whole time director were not admissible as input services - Held that:- It is deemed by law that such Directors have provided services to the company and therefore, it cannot be held that such service is not input service - Credit allowed - appeal allowed - decided in favor of appellant.

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• 2018 (9) TMI 1484
  Clandestine removal - demand based on consumption of electricity - entire case of the Revenue is based upon the records recovered from M/s Monu Steels and based upon the statement of the representative of M/s Monu Steels - Held that:- The law i.e. as to whether the third party records can be adopted as an evidence for arriving at the findings of clandestine removal, in the absence of any corroborative evidence, is well established - the findings of clandestine removal cannot be upheld based upon the third party documents, unless there is clinching evidence of clandestine manufacture and removal of the goods. Penalty on M/s Kailash Traders in terms of Rule 26 of Central Excise Rules, 2002 - it was alleged that he has supplied the unaccounted raw material to the appellant, which has been further used by them for manufacture of their final product cleared clandestinely - Held that:- The allegation was based upon the entries made in his record, without there being any corroborative evidence - there is virtually no evidence to show that such entries relate to the actual transportation and supply of the raw material to the present appellant - penalty not warranted and is set aside. Appeal allowed - decided in favor of appellant.

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• 2018 (9) TMI 1483
  Valuation - inclusion of VAT amounts paid by the assessee using VAT 37B Challans in assessable value - whether subsidy amounts are required to be included in the assessable value of the goods manufactured by the appellants, in terms of Section 4 of the Central Excise Act? Held that:- For the initial period the assessees are required to remit the VAT recovered by them at the time of sale of the goods manufactured. A part of such VAT is given back to them in the form of subsidy in Challan 37 B. Such Challans are as good as cash but can be used only for payment of VAT in the subsequent period. In terms of the scheme of the Government of Rajasthan payment of VAT using such Challan are considered legal payments of tax - Revenue is not correct in taking the view that VAT liability discharged by utilizing such subsidy challans cannot be taken as VAT actually paid. There is no justification for inclusion in the assessable value, the VAT amounts paid by the assessee using VAT 37B Challans. Appeal allowed - decided in favor of appellant.

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• 2018 (9) TMI 1482
  Valuation - inclusion of VAT amounts paid by the assessee using VAT 37B Challans in assessable value - whether subsidy amounts are required to be included in the assessable value of the goods manufactured by the appellants, in terms of Section 4 of the Central Excise Act? Held that:- For the initial period the assessees are required to remit the VAT recovered by them at the time of sale of the goods manufactured. A part of such VAT is given back to them in the form of subsidy in Challan 37 B. Such Challans are as good as cash but can be used only for payment of VAT in the subsequent period. In terms of the scheme of the Government of Rajasthan payment of VAT using such Challan are considered legal payments of tax - Revenue is not correct in taking the view that VAT liability discharged by utilizing such subsidy challans cannot be taken as VAT actually paid. There is no justification for inclusion in the assessable value, the VAT amounts paid by the assessee using VAT 37B Challans. Appeal allowed - decided in favor of appellant.

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• 2018 (9) TMI 1481
  CENVAT credit - input used in manufacture of exempt as well as dutiable goods - exempted goods is a by-product - hydrol - reversal of proportionate credit - Rule 6(2) of CCR, 2003/2004 - case of appellant is that whether the exempted goods are by-products or final product will not make any difference in applicability of Rule 6 ibid as long as these goods are excisable goods and are exempted from payment of whole of duty of excise. Held that:- The issue is decided in the case of UNION OF INDIA & OTHERS VERSUS M/S. HINDUSTAN ZINC LTD. [2014 (5) TMI 253 - SUPREME COURT], where it was held that the rigor of Rule 6 is applicable in case of two joint final products and not in case of a final product and waste product or byproduct. The learned Commissioner (Appeals) has erred in not following the rulings of Hon’ble Supreme Court and in trying to distinguish the same, thus is guilty of not following the Articles 141 of the Constitution of India which provides – ‘the law declared by the Supreme Court shall be binding on all courts within the territory of India’. Appeal allowed - decided in favor of appellant.

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• 2018 (9) TMI 1480
  Refund claim - refund was claimed for the non-operative period of the machine during the month that was found 3rd May, 2016 to 31st May, 2016 - refund rejected on the ground that N/N. 17/2007-CE does not have any provision with regard to reduction in the amount of the duty to be deposited even if a particular machine become inoperative during the period of any month - Compounded Levy Scheme. Held that:- The matter is no longer res-integra as it has already been decided in the case of Jupiter Industries vs. CCE, Jaipur [2006 (4) TMI 164 - HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR], where it was held that The direction of the Tribunal to refund excess amount received in respect of machine which had ceased to function during the month of July to August also does not call for any interference. Since in this case one machine being inoperative for the month of after payment of central excise duty; has not produced any goods and therefore same cannot be charged to compounded levy of central excise duty. Appeal allowed - decided in favor of appellant.

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• 2018 (9) TMI 1479
  CENVAT credit - inputs/capital goods - HD Steel, Steel Cogs/TIS Cogs, TMT Rod & Bar, MS Plate, MS Pipes, MS nut, Telescopic Steel Props, Steel Sleepers, etc. - Held that:- The impugned goods have been duly used in or in relation to the manufacture/production of HD Steel, Steel Cogs/TIS Cogs, TMT Rod & Bar, MS Plate, MS Pipes, MS nut, Telescopic Steel Props, Steel Sleepers, etc., without which it would not be possible to undertake mining activities. Since the disputed goods are not falling under the excluded category of goods specified in the definition of inputs, Cenvat credit can be extended to those goods as per the broad definition of “inputs” contained in Rule 2(k) of the Cenvat Credit Rules, 2004 - credit allowed. CENVAT Credit - duty paying documents - credit denied on the documents issued by appellant’s other unit, namely, M/s. SECL, Central Store, CWS-CS Korba on the ground that the said unit was not registered with Central Excise Department - Held that:- It is an admitted fact on record that the receipt of goods in the appellant’s unit and the duty paid character of those goods have not been disputed either in the Original or in the Appellate Order. Thus, denial of Cenvat credit for mere technical lapse of non-obtaining the registration certificate at the time of issuance of invoice, cannot be a ground to deny the Cenvat credit - credit allowed. Appeal allowed - decided in favor of appellant.

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• Indian Laws

• 2018 (9) TMI 1523
  Dishonor of Cheque - recovery of loan - Section 139 of the Negotiable Instruments Act, 1881 - decree was passed in favor of the respondent / plaintiff on the basis of presumption of the cheque having been given in discharge of antecedent liability - It is argued that on the basis of the said presumption alone, the suit of the respondent / plaintiff against the appellant / defendant for recovery of money on the basis of a cheque for the suit amount, could not have been decreed. Held that:- If there is even little evidence on the basis of which the last Court of Facts has decided, the Second Appellate Court cannot, by labelling the judgment of the First Appellate Court as perverse, seize jurisdiction over matters of fact. Om Prakash, when summoned as a witness by the appellant / defendant, thus could not be expected to incriminate himself by admitting operating a ‘committee’ or by admitting that the respondent / plaintiff had at the contemporaneous time of loan received money from the ‘committee’. The evidence of Om Prakash thus does not rebut the presumption, even if the test of proportionality is applied. This Second Appeal does not entail any substantial question of law and has no merit to be heard further - appeal dismissed.

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