TMI Tax Updates - e-Newsletter
September 28, 2019

Case Laws in this Newsletter:

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

TMI SMS

• Where the SCN is issued by the competent authority even if the investigation was conducted by some other authority, the same is valid in law

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• HC uphold the Constitutional validity of Law on Corporate social responsibility (CSR) - Both the tests of equality have been satisfied

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• CENVAT credit - Credit of EOU unit availed by its DTA unit - transfer of credit allowed under Rule 12A(4)

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Articles

1. CLARIFICATION ABOUT SHARES HELD IN UNLISTED COMPANEIS APPEARS TO BE WRONG AND WILL CREATE DIFFERENCES CAUSING LITIGATION.

   By: DEVKUMAR KOTHARI

2. ELIGIBILITY OF INPUT TAX CREDIT ON LEASE RENT PAID FOR CONSTRUCTION OF ECO-RESORT

   By: Dr. Sanjiv Agarwal

News

1. CCI approves the acquisition of 70% shareholding in Saudi Basic Industries Corporation (SABIC) by Saudi Arabian Oil Company (Saudi Aramco), under Section 31(1) of the Competition Act, 2002, today.

2. FM Reviews Capex With Secretaries & Financial Advisors of All Major Ministries

3. Quarterly Report on Public Debt Management Q1 FY20 (April to June 2019)

Notifications

DGFT

1. 20/2015-2020 - dated 26-9-2019 - FTP

Amendment in import policy electronic cigarettes

GST - States

2. F-10-36/2019/CT/V(79) - 38/2019-State Tax - dated 31-8-2019 - Chhattisgarh SGST

Notifies the registered persons required to furnish  the details of challans in FORM ITC-04 job worker or not supplied from the place of business of the job worker as on the 31st March, 2019.

3. Order No. 2/2018-State Tax - dated 12-9-2019 - Delhi SGST

THE DELHI GOODS AND SERVICES TAX (REMOVAL OF DIFFICULTIES) ORDER, 2018.

4. 27/2018-State Tax (Rate) - dated 12-9-2019 - Delhi SGST

Amendments in the notification No.11/2017- State Tax (Rate), dated the 30th June, 2017, no. F.3(15)/Fin(Rev-I)/2017-18/DS-VI/ 381, dated the 30th June, 2017.

Circulars / Instructions / Orders

SEBI

1. SEBI/HO/MRD/CIR/P/2019/103 - dated 26-9-2019

Position Limits in Interest Rate Derivatives (IRD)

Income Tax

2. 27/2019 - dated 26-9-2019

Conduct of assessment proceedings through 'E-Proceeding' facility during financial year 2019-20

3. 26/2019 - dated 26-9-2019

Clarifications in respect of filling-up of return forms for the Assessment Year 2019-20

GST - States

4. Bikri-kar/Vividh-28/2018-2354 - dated 13-8-2019

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

5. Bikri-kar/Vividh-28/2018-2353 - dated 13-8-2019

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

6. Bikri-kar/Vividh-28/2018-2352 - dated 13-8-2019

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

DGFT

7. 37/2015-2020 - dated 27-9-2019

Extension of validity of pre shipment Inspection Agencies

8. 36/2015-20 - dated 27-9-2019

Amendment in Paragraph 2.79C in the Handbook of Procedures of the Foreign Trade Policy (FTP) 2015-20 to notify the procedure for repair/replacement of SCOMET items

9. Policy Circular No. 28/2019-2020 - dated 27-9-2019

Value Addition Norms for availing duty exemption in Gem and Jewellery.

10. 35/(2015-2020) - dated 26-9-2019

Issue of Advance Authorisations where export item is Gold medallions and coins or any Jewellery/Articles manufactured by fully mechanised process

Customs

11. PUBLIC NOTICE NO. 83/2019 - dated 24-9-2019

Procedure for a Pilot on Transhipment of Export Cargo from Bangladesh to third countries through Land Customs Stations (LCSs) to Nhava Sheva Port, in containers or closed bodied trucks

12. PUBLIC NOTICE NO. 80/2019 - dated 22-9-2019

Implementation of Advanced Queue Management System

13. PUBLIC NOTICE No. 41/2019 - dated 20-9-2019

Clarification regarding duty drawback allowed in cases of short realisation Of export proceeds due to bank charges deducted by foreign banks

14. PUBLIC NOTICE NO. 26/2019 - dated 19-9-2019

Cadre restructuring and re-organization of Customs Commissionerate Kandla - Amendment in Public Notice No.05/2018 dated 1.2.2018

15. Public Notice 81/2019 - dated 17-9-2019

Discharge & Back to town of Export Containers shipped to Pakistan from Nhava Sheva

16. PUBLIC NOTICE NO. 74/2019 - dated 17-9-2019

Revised Norms for Execution of Bank Guarantee under Advance Authorisation, DFIA and EPCG Schemes

17. PUBLIC NOTICE No. 39/2019 - dated 17-9-2019

Revised Norms for Execution of Bank Guarantee under Advance Authorisation, DFIA and EPCG Schemes

18. TRADE NOTICE NO. 16/2019 - dated 16-9-2019

Amendment in import policy of Iron & Steel and incorporation of policy condition in Chapter 72, 73 and 86 of ITC (HS), 2017, Schedule-I (Import Policy)

19. PUBLIC NOTICE NO. 79/2019 - dated 12-9-2019

Declaration of MEK/2 Butanone content as part of description in the Bill of Entry in respect of goods falling under CTH 3215, 3402 and 3814

20. PUBLIC NOTICE NO. 72/2019 - dated 9-9-2019

ECM not filed and EGM Error Clearing Mela - 09.09.2019 to 18.09.2019

21. PUBLIC NOTICE No. 38/2019 - dated 6-9-2019

Eligibility Criteria for availing of DPD Scheme by Importers

22. Public Notice No.15/2019 - dated 3-9-2019

IGST Export Refunds- Extension in SB005 alternate mechanism up to 31.07.2019 and revised process in certain cases having mis- match between GSTR-I and GSTR-3B

23. PUBLIC NOTICE NO. 65/2019 - dated 29-8-2019

IGST Export Refunds - extension in SB005 alternate mechanism and revised processing in certain cases including disbursal of compensation Cess

24. PUBLIC NOTICE NO. 13/2019 - dated 28-8-2019

IGST Export Refunds- extension in SB005 alternate mechanism and revised processing in certain cases including disbursal of compensation cess

25. PUBLIC NOTICE NO. 14/2019 - dated 28-8-2019

IGST refunds-mechanism to verify the IGST payments for goods exported out of India in certain cases

26. Public Notice No.13/2019 - dated 16-7-2019

Implementation of Hon’ble High Court of Gujarat’s Order dated 24.04.2019 in Special Civil Application (SCA) No. 7760 of 2019 filed by M/s. VR Persulfates Pvt. Ltd. Vs. Union of Indio & Ors- Clearance of Goods

Highlights / Catch Notes

GST

• Detention of Goods and Truck Invalidated Due to Lack of Reasoning in E-Way Bill Order by Authority.

  Case-Laws - HC : Detention of goods alongwith the truck - E-way bills of three parties not generated - the impugned order is totally bereft of any reasons, in the absence of which the order stands vitiated due to non-application of mind on the part of the maker of the order. - HC
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• Court Rules Against Extending Time for Filing GST Returns, Upholds Best Judgment Assessment Orders Per Section 62.

  Case-Laws - HC : Best Judgement Assessment under GST - failure to file returns within time - This Court may not be justified in granting an extension of the period contemplated u/s 62(2), so as to enable the assessee to file a return beyond the said period for the purposes of getting the benefit of withdrawal of an assessment order passed on best judgment basis u/s 62(1) - HC
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• High Court Stays Attachment of Bank Account in GST Case; Properties Not Found at Searched Premises.

  Case-Laws - HC : Attachment of property - Bank accounts and immovable property - The properties in respect of which the prohibition order has been passed were not found at the premises which came to be searched - Attachment of bank account stayed - HC
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Income Tax

• Guidance on Completing Income Tax Returns for AY 2019-20: Simplify Filing, Reduce Errors, and Understand Regulations.

  Circulars : Clarifications in respect of filling-up of return forms for the Assessment Year 2019-20
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• Appellant Misses Leave Encashment Claim; Tribunal Unable to Act Without Timely Filing by Appellant.

  Case-Laws - HC : Leave encashment expenditure - the appellant did not raise any such plea before the Tribunal. In any event, even if such a plea were to be raised, there is little that the Tribunal could have done about it since it was for the appellant to claim the said allowance in the years in which actually the leave encashment amounts were paid to the employees - HC
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• High Court Rules Section 54 Tax Benefits Apply to Overseas Property Reinvestment, Including London, as Amendment is Prospective.

  Case-Laws - HC : Eligibility of benefit u/s 54 - re-investment in residential property outside India, i.e. in London in this particular case - the said amendment is prospective and would not apply in the facts of the present case - HC
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• Sales Tax Refund Addition Disputed: Firm's Income Not to Be Treated as Private Limited Company's Income During Assessment Year.

  Case-Laws - AT : Assessee firm converted into Private Limited Company - Addition on account of Sales Tax refund - Since the assessee firm exist in assessment year under appeal and also declared business income in assessment year under appeal, there was no reason to show the impugned amount as income of Private Limited Company.
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• Search Additions Invalid Without Direct Link to Assessee and Corroborating Evidence; Statements Alone Insufficient.

  Case-Laws - AT : Additions based on declaration made during the course of search - Surrender for various group concerns and not specifically for the assessee - Additions cannot be sustained merely on the basis of statement given during the course of search without correlating the addition with the incriminating seized material. - AT
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• Non-excisable products from ship dismantling not considered 'scrap' u/s 206C for TCS purposes.

  Case-Laws - AT : TCS u/s 206C - sale of 'scrap' of arising on dismantling of ships - the non-excisable products are obtained from the ships and sold as it is without undergoing any manufacturing process thereon and the same therefore cannot partake the character of scrap within the meaning of section 206C. - AT
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• Assessee Faces Penalty for Misrepresenting Capital Loss as Revenue Loss Under Income Tax Act Section 271(1)(c.

  Case-Laws - AT : Penalty u/s 271(1)(c) - assessee was very well aware that it was deliberately showing capital account transaction loss as loss on revenue account. Hence by no stretch of imagination it can be said that there was any inadvertent error. - AT
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• BMW Depreciation, Interest, and Maintenance Claims Denied Due to Lack of Ownership Proof and Business Use Evidence.

  Case-Laws - AT : Claim of depreciation, interest and maintenance expenses for the BMW car - Assessee has not established that it is owner of the impugned Car and the car was used wholly and exclusively for the purposes of its business - additions confirmed - AT
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• No Penalty for Cash Loan: Reasonable Cause Accepted u/s 273B for Section 271D Violation.

  Case-Laws - AT : Penalty u/s. 271D - Cash borrowing to make this urgent cash payments appears to be reasonable. -there was reasonable cause for accepting this loan in cash and hence, in view of section 273B, no penalty - AT
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• Tax Write-Off Denied Due to Missing TDS Certificates: Impact on Assessee's Income and Tax Liabilities Section 36(1)(vii.

  Case-Laws - AT : Disallowance of write off of tax deducted at source (TDS) - non–allowance of TDS credit to the assessee due to non–receipt of TDS certificates amounts to loss of income - non–furnishing of TDS certificate amounts to a debt due to deductee which can be allowed under section 36(1)(vii) - AT
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• Tax Provision Disallowed: Consistent Accounting Method Accepted, Additions Deleted After Reversal and Taxation.

  Case-Laws - AT : Disallowance of provision for expenditure - assessee consistently following this accounting method from past years - the assessee has reversed the provision in the subsequent year and offered to tax. - Additions deleted - AT
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• No Depreciation Allowed for Compensatory Afforestation Costs u/s 32 of Income Tax Act for Mining Rights.

  Case-Laws - AT : Disallowance of depreciation u/s 32 - the issue is not regarding discount on debentures but the cost of Compensatory Afforestation of 134 ha. of forest land for which the assessee has got mining right for 20 years and therefore, in our considered opinion, no intangible asset has been acquired by the assessee on which depreciation can be allowed - AT
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• Court Finds Assessee's Claims on Sundry Creditors Unsubstantiated Due to Lack of Documentary Evidence u/s 41(1.

  Case-Laws - HC : Addition u/s 41(1) - proof of seizure of Sundry Creditors - except making the averments to the effect that these Sundry Creditors were paid, no documentary proof thereof has been produced by the assessee - the said averments of the assessee could not be believed on their face value. - HC
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• Court Rules Focus Marketing Scheme Subsidy as Capital Receipt, Not Taxable Export Incentive.

  Case-Laws - HC : Characterization of income - subsidy received - Focus Marketing Scheme - the amount was not an export incentive, but rather capital receipt and therefore, not taxable. - HC
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Customs

• Court Discusses Provisional Release of Export Goods; Ensures Revenue Protection While Awaiting Adjudication Decision.

  Case-Laws - HC : Provisional release of export goods - modification of conditions stipulated in respect of execution of bank guarantee - It is the duty of this Court to safeguard the interest of the Revenue as well, since the matter is still to be adjudicated upon, especially when the interest of the exporter is already care of by the revenue in ordering provisional release. - HC
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• Court Rules Licensing Authority Must Give Specific Reasons for Suspension of Importer Exporter Registration.

  Case-Laws - HC : Suspension of Importer Exporter Registration granted to the petitioner (IEC) - Licensing Authority, if intends to suspend or cancel the license, should state specific details and particulars as to the reasons which made him to take such action. In the absence of any such finding or reason, such order cannot be sustained. - HC
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• Show Cause Notice Validity Unaffected by Different Investigating Authority, Jurisdiction Intact if Issued Competently.

  Case-Laws - HC : Validity of Show cause notice - Merely because that the investigation before issuing the SCN was conducted by some other authority, the same cannot be a ground to question the jurisdiction of the authority, who issued the present SCN, when admittedly, the same is issued by the competent authority - HC
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• High Court Denies Petition for Interest on 2008 Deposit, Confirms Payment from 2003 CESTAT Order Date.

  Case-Laws - HC : Claim of Interest on amount deposited during investigation - amount was deposited voluntary or under coercion - amount was deposited in 2008 in installments on different dates - interest was grated from the expiry of 3 months of CESTAT order in 2003 - There are no reason to entertain this writ petition for grant of interest from March/May, 1998 - HC
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• Adjudicating Authority Misses Deadline in Seizure Case; Section 110(ii) Time Limits Ignored Despite SCN Waiver.

  Case-Laws - AT : Seizure of goods - Confiscation - Even though the appellant have waived SCN, atleast adjudicating authority should have adhered to time limit as prescribed in section 110(ii) and proceeding should have been concluded within 6 months or 1 year if it is extended.
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Corporate Law

• Entities Following Legal Requirements Should Not Face Aggressive Penalties During Conversion to LLPs and Offense Compounding.

  Case-Laws - AT : Conversion of the companies into LLPs - compounding of offence - Adopting a blood thirsty approach and that too against compliant entities is unwarranted moreso when such entities complied with the legal requirements and made compliances in accordance with the then prevailing system.
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• High Court Upholds Constitutional Validity of CSR Mandate in Section 135 of Companies Act 2013.

  Case-Laws - HC : Constitutional validity of Corporate social responsibility (CSR) - Both the tests of equality have been satisfied - Section 135 of the Companies Act, 2013 is not violative of any of the provisions of the Constitution of India - HC
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IBC

• Corporate Debtor's CIRP initiated as NPA; management remains with Promoter due to no Section 13(4)(b) order.

  Case-Laws - AT : Initiation of CIRP - Corporate Debtor unable to repay the amount - Non Performing Asset - Right of the Bank - In absence of any specific order of taking over the Management in terms of Section 13(4)(b) of the SARAFAESI Act, which includes the right to transfer by way of lease, assignment or sale for realizing of the secured asset, we hold that the Management of the ‘Corporate Debtor’ continued with the Promoter. Therefore, if there is any default on the part of the ‘Corporate Debtor’ to pay the debt amount, the Appellant cannot pass the blame on the Bank.
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Service Tax

• Offshore Upfront Fee Classified as Interest, Not Subject to Service Tax.

  Case-Laws - AT : Whether the Offshore Upfront Fee paid by the respondent is an interest or a fee? - - the said amount on which the service tax is being demanded and Upfront Fee is nothing but an interest and on interest, no service tax is payable.
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• Free Materials Supplied by Service Recipient Not Part of "Gross Amount Charged" as They Aren't "Consideration" for Services.

  Case-Laws - AT : Valuation - The value of material which is supplied free by the service recipient cannot be treated as “gross amount charged” as that is not a “consideration” for rendering the service - AT
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• Debate on Classifying Franchise Services as Input Services Under CENVAT Credit Mechanism for Management Consultancy.

  Case-Laws - AT : Cenvat credit - to state that, the franchise service could not be termed as an input service, for management consultancy is against the spirit of the CENVAT Credit mechanism - AT
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Central Excise

• CENVAT Credit Transfer Allowed Between Manufacturing Premises, Subject to Service Provision Status u/r 12A, Sub Rule 4.

  Case-Laws - AT : CENVAT credit - Credit of EOU availed by its DTA unit - Cursory reading of Sub Rule 4 of Rule 12 A would indicate that Cenvat Credit available with one of registered manufactured premises can be used by other such registered manufactured premises and if the transfer is done from the premises providing taxable service, the other registered premises should also be providing taxable service and not vice versa.
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• Penalty Imposed on Assessee Despite Revenue-Neutral Situation and Pre-SCN Payment, Upheld by High Court u/s 11-AC.

  Case-Laws - HC : Imposition of penalty - revenue neutral situation - assessee paid the tax demand along with interest prior to the issuance of SCN itself - The penalty is imposable u/s 11-AC is a finding of fact arrived at by all the Authorities - penalty confirmed. - HC
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Case Laws:

• GST

• 2019 (9) TMI 1185
  Detention of goods alongwith the truck - E-way bills of three parties not generated - petitioner agreed to pay tax and penalty as stipulated under section 129 of the GST Act - Confiscation of goods - HELD THAT:- mainly due to the fact that 14 invoices are not properly signed, the authorities have exercised powers under section 130 of the CGST Act and calculated tax, penalty and fine thereunder. If that be so, since none of the 14 invoices relate to the parties whose goods are confiscated, under the circumstances, the goods belonging to them could not have been confiscated by the respondent authorities. It is an admitted position that in this case no detention order under section 129 of the CGST Act/GGST Act has been made in this case and the respondents have directly resorted to the provisions of confiscation under section 130 of the said Acts. On reading the impugned order of confiscation in its entirety, it is manifest that the third respondent has not assigned any reason whatsoever as to why the goods and conveyance were required to be confiscated. Despite the fact that the petitioner and Anjani Synthetics Limited had submitted explanations in respect of the discrepancies noticed by the third respondent, there is no reference to the same in the impugned order. Thus, the third respondent without applying his mind to the facts of the case appears to have mechanically passed the impugned order without assigning any reasons worth the name for confiscating the goods and conveyance. The impugned order has been passed without any application of mind and without considering the explanation submitted by the petitioner and Anjani Synthetics Limited and in undue haste. Moreover, despite the fact that out of 61 consignments, the third respondent has noticed deficiencies only in respect of three consignments, the conveyance of the petitioner is also sought to be confiscated, that too without assigning any reasons as to how the petitioner has sought to evade payment of tax - it was incumbent upon the third respondent to give reasons in support of his conclusion that the goods in question and the conveyance are required to be confiscated. However, the impugned order is totally bereft of any reasons, in the absence of which the order stands vitiated due to non-application of mind on the part of the maker of the order. The impugned order dated 28.5.2019, therefore, cannot be sustained. Petition allowed.

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• 2019 (9) TMI 1184
  Assessment order u/s 62 of the GST Act - failure to file returns within time - Extension of time for filing returns - HELD THAT:- The statutory prescription of 30 days from the date of receipt of the assessment order passed under sub section (1) of Section 62 has to be strictly construed against an assessee and in favour of the revenue, since this is a provision in a taxing statute that enables an assessee to get an order passed against him on best judgment basis set aside. The provision must be interpreted in the same manner as an exemption provision in a taxing statute. This Court may not be justified in granting an extension of the period contemplated under sub section (2) of Section 62, so as to enable the assessee to file a return beyond the said period for the purposes of getting the benefit of withdrawal of an assessment order passed on best judgment basis under Section 62(1) of the GST Act. Petition dismissed.

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• 2019 (9) TMI 1183
  Attachment of property - Bank accounts and immovable property - Prohibition Order - scope of sub-section (2) of section 67 of the GGST Act, 2017 - HELD THAT:- The properties in respect of which the prohibition order has been passed were not found at the premises which came to be searched - Under the circumstances, the attachment of such property appears to be beyond the scope of the powers of the concerned Officer under subsection (2) of section 67 of the Act. Issue rule, returnable on 10.10.2019.

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• 2019 (9) TMI 1160
  Permission to make copies of documents seized - subsection (5) of section 67 of the CGST Act, 2017 - HELD THAT:- Issue Notice , returnable on 3rd October 2019. - In the meanwhile, the respondents are directed to furnish the copies of the relevant documents to the petitioner as envisaged under sub-section (5) of section 67 of the CGST Act, on or before 28th September 2019.

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• 2019 (9) TMI 1159
  Seizure of petitioner s car - sub-section (2) of section 67 of the CGST Act - HELD THAT:- Issue Notice returnable on 27th September, 2019.

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• 2019 (9) TMI 1158
  Confiscation of Conveyance - Invocation of second proviso to sub-section (2) of section 130 as well as sub-section (3) of section 130 of the Act - HELD THAT:- Issue Notice returnable on 10th October, 2019.

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• Income Tax

• 2019 (9) TMI 1182
  TDS u/s 194A - non-deduction of tax at source on interest payable to Prasar Bharti by the appellant assessee - HELD THAT:- Admit for consideration of the common questions framed. Disallowance towards leave encashment expenditure - HELD THAT:-As the decision of the Hon ble Calcutta High Court EXIDE INDUSTRIES LIMITED [ 2007 (6) TMI 175 - CALCUTTA HIGH COURT ] based on which the assessee has claimed deduction of the leave encashment expenditure has been stayed by the Hon ble Supreme Court. As the provisions of section 43B (f) of the income tax act is very clear. Therefore, we upheld the disallowances of leave encashment expenditure under section 43B of the income tax act. no question of law arises in respect of the said disallowance. So far as the plea of the appellant that the Tribunal has not considered the fact that the appellant has not claimed the said allowance even in the assessment years when the leave encashment amounts were actually paid i.e. during the years 2012-13 to 2018-19, we find that the appellant did not raise any such plea before the Tribunal. In any event, even if such a plea were to be raised, there is little that the Tribunal could have done about it since it was for the appellant to claim the said allowance in the years in which actually the leave encashment amounts were paid to the employees - no question of law arises in relation to the plea founded upon Section 43B(f).

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• 2019 (9) TMI 1181
  Eligibility of benefit u/s 54 - re-investment in residential property outside India, i.e. in London in this particular case - assessee is a Non-Resident Indian - HELD THAT:- The authority arrived at its conclusion with regard to the respondent being entitled to exemption under Section 54 of the Act by placing reliance on the decision of Leena JugalKishor Shah Vs. Assistant Commissioner of Income- Tax, [ 2016 (12) TMI 351 - GUJARAT HIGH COURT] . The authority has noted that the Revenue has not assailed the said decision before the Supreme Court. Reference has also been made to the Circular No. 01/2015 containing explanatory notes to the provisions of the Finance (No. 2) Act, 2014 whereby Section 54 of the Act was amended to specifically include the word in India in respect of the residential house acquired out of the long term capital gain earned by the assessee. The said explanatory note in terms provides that the said amendment would take effect from 01.04.2015 and would, accordingly, apply for the assessment year 2015-16 and subsequent assessment years. Thus, the said amendment is prospective and would not apply in the facts of the present case since the respondent sold the residential property in India and earned long term capital gain in the assessment year 2012-13 and invested the said gain in the same year for purchase of the property, as aforesaid, in London. - Decided against revenue

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• 2019 (9) TMI 1180
  Addition u/s 68 on account of alleged bogus premium - addition on the basis of the statement made by the director - HELD THAT:- The entire action of the authorities below speaks total non-application of mind, lack of inquiry and colourable exercise of power, excessive highhandedness as also close mindedness resulting into addition merely on the basis of the statement made by the director of Ankush Finstock Ltd which was neither allowed to be cross examined; such addition, therefore is nullity , totally unjust, unfair and without due process of law having no legal basis and thus liable to be deleted. Hence with the above observations we delete the impugned addition to the tune of Rs. 4 crores made on the ground of bogus premium. This ground of appeal, is thus, allowed in favour of the assessee. Unaccounted investment in purchase of land of the project Ratnakar -IV of the assessee company - as revealed from the survey enquiry that the assessee had purchased land from three individuals for the construction of its residential project as Ratnakar IV - HELD THAT:- As find from the submissions made by the revenue that they have prayed for setting aside the issue to the learned AOfor re examination of the matter which, according to us is not permissible at this stage. If the prayer is granted by us, then this will be nothing but a premium on the inaction made by the authorities below on this aspect when they failed to avail the chances to do so at the relevant time. Both the Learned AO or by the Learned CIT(A) failed to do it. Opportunity of cross verification from the vendors, in our considered view should not be given in the hands of the Revenue once again which will be opening a further avenue for multiple innings which has been deprecated by the Hon ble Jurisdictional High Court in the matter of Rajesh Babubhai Damania-vs-CIT [ 2000 (6) TMI 5 - GUJARAT HIGH COURT] particularly when the alleged unaccounted investment made by the assessee in respect of the property in question has not been established by the Revenue before us. Thus, the addition made on the basis of the dumb document is unjustified, unwarranted and bad in law which is liable to be set aside. Hence, with the aforesaid observation, we delete the addition towards alleged unaccounted investment in purchase of land of the project Ratnakar -IV - Decided in favour of assessee. Addition on account of on money - HELD THAT:- As relying on own case [ 2017 (3) TMI 1048 - ITAT AHMEDABAD] we find that the issue has already been settled in favour of the assessee

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• 2019 (9) TMI 1179
  Revision u/s 263 - Exemption u/s 11 - Charitable purpose - educational institution - NRI Quota in admissions - assessment order being: (a) erroneous; and (b) prejudicial to the interests of Revenue or not - allegation that, assessee had siphoned money from trust by booking bogus expenditure - diversion of money to the family members - violation of MCI Guidelines in admission of students - HELD THAT:- We find that complete details pertaining to NRI quota were filed before the Assessing Officer and ld. PCIT which consists of FIRC, affidavit of parents, students and norms of MCI. We find the Assessing Officer has issued show cause notice dated 06.10.2016 pertinent to this issue. The assessee has replied vide letter dated 04.11.2016. AO has duly examined the issue and there is nothing on record regarding receipt of any unaccounted monies, and as per the MCI guidelines which allow the wards of the NRIs to be admitted under the NRI quota and keeping in view the fact, that anything prejudicial to the interest of Revenue has been brought by the ld. PCIT, we hereby hold that no action u/s 263 of the Act is called for on this ground. Payments for vehicles - two cars with the same registration No. HR09F0006 - as alleged that Sh. Tarsem Garg is maintaining three cars and questions its utility and also related the use of cars with the absence of driving license to Sh. Tarsem Garg - HELD THAT:- We find that the imputation of the ld. PCIT is devoid of merit and sans any reason. It was matter on record that the vehicle was purchased by Sh. Tarsem Garg by obtaining loan in his personal name and the installments paid by Sh. Tarsem Garg are being reimbursed by the assessee trust at regular intervals. The ledger copy of ICICI Innova loan in the books of MMU have been produced before us wherein it can be observed, the cheques have been issued at regular intervals, the vehicle is taken in the block of fixed assets of the trust and depreciation is also charged. Having or not having driving licence and purchase of vehicle cannot be matter of revenue concern as long as no unaccounted income is determined or tax evasion is pointed out, which is absent in the order of the ld. PCIT. Hence, it cannot be said that Sh. Tarsem Garg in any way benefited by the trust in purchase of the vehicle in his own name. We hereby hold that the order u/s 263 of the Act cannot be upheld on this ground. Salary to Teachers - Perusal of the statement of the persons given before Investigation Wing and affidavits of other faculties now submitted for your perusal and verification, it is quite evident salary to the doctors are paid for their actual working with trust. It is surprised to note that the Doctors working in Mullana (Ambala) and Solan (H.P.) are declared as ghost faculty by PMC and Department only on the basis of fact that they are registered with Punjab Medical Council. It is also relevant to mention that both Medical College Mullana and Soan are subject to regular inspections by Medical Council of India, State Governments and Ministry of Health PCIT s directions were mainly based on the belief that the Doctors registered in one State cannot work in other State which is not a valid ground. On the records, we find that some Doctors have been employed and their subjects start from fourth year onwards and these Doctors pertained the duties of wards and regular hospital rounds. Hence, as per the statement recorded, though they have not taken classes indeed they have been attaining regular hospital work at Kumarhatti. The statement of the Doctors recorded cannot be read partially but has to be read fully and wholly so as to come to a conclusion which the ld. PCIT seems to have misdirected himself. The issues flagged by the ld. PCIT have already been examined by the Assessing Officer at length before conclusion of the assessment proceedings Assessee has replied to Assessing Officer about high deduction from gross salary to employees which pertains to the TDS deducted from salary. The doctors registered with the chapter of Punjab Medical Council are not barred from working in Haryana, Himachal Pradesh Hospitals maintained by the assessee trust. The genuineness of the doctors have been established, the complete details like PAN, Form 16, qualifications of the doctors, attendance of the doctors and their declaration the amounts received from the assessee trust by the doctors in their ITRs have all been submitted before the Revenue authorities. Considering all the facts, we hold that no case of the assessment order being erroneous so far as it is prejudicial the Revenue can be made on this ground. Other Benefits to trustees - On a concurrent reading of the questionnaire issued the Assessing Officer dated 06.10.2016 (page no. 159), reply of the assessee dated 05.12.2016 (page no. 239), statements of the driver, security guard and watchman, we find that the provisions of Section 263 of the Act and Explanation 2 of Section 263 of the Act are not applicable to this ground. Construction payment made to Sh. Tarsem Garg - PCIT held that the contractual payment made to Sh. Tarsem Garg cannot be allowed as the payments received from the trust have been withdrawn immediately and also for the reason that Sh. Tarsem Garg is not a regular contractor but Chancellor of the MM University - HELD THAT:- Sh. Tarsem Garg has been registered Government contractor for about 20 years and the said contract was given by the assessee to Sh. Tarsem Garg for RR Masundry Work, Excavation work and Boulder Packing work. The work order has been perused and the profits earned thereof have been determined u/s 44AD of the Act. - no action u/s 263 of the Act is called for on this ground. Rent paid to trustees - The value of the perquisite was also added to the salary of Sh. RP Bajpayee and Form 16 reflects such addition. It was also a matter of record that the premises was led to ICICI Bank, later on, at a monthly rent of Rs. 69,000/-, hence, the arguments of the ld. DR that the rent paid was in excess of market rate cannot be held to be valid. Further, the rental premises leased from Ms. Santosh Garg were used as urban slum centres at Vikas Vihar, Ambala to MM Medical College. Under these circumstances, its futile to say that that the Assessing Officer has not inquired into the issue and hence the provisions of Explanation 2 to Section 263 of the Act are not applicable. Since, the premises found to have been let out as office cum guest house, residence of the Director General and urban slum centres, keeping in view, the fact that the rental income have been taxed duly, the perquisite value have been added to income of the occupant and also keeping in view that fact that District Immunization Officer has allotted Urban Slum Centre for the Vikas Vihar premises, we hereby hold that the order of the Assessing Officer is not erroneous so far as it is prejudicial to the interest of the Revenue on this ground. Interest paid to trustees - a sum of 40.68 crores was spend on the project under consideration out of which Rs. 18.98 crores were disbursal for the bank loan and the remaining as unsecured loans. Interest @ 18 to 24% is being charged if the loans are received from non-trustees. The rate of interest of 15% on a private loan cannot be said to be excessive compared to the bank term loan interest rate of 12.20% to 12.75%. The unsecured loans received from private individuals would certainly carry one or two per cent more than the bank rates - the interest received by the individuals has been duly offered to taxation. It has been also shown that the loans received have been used for the purpose of assessee trust for repayment of outstanding loan, adjustment against OD account, payment of outstanding dues, repayment of SBI term loan installment etc. Thus, it is proved that the loans have been taken from the trustees for meeting immediate purposes of the trust and meet up the impending financial requirements - PCIT observation that depositors have not furnished their personal balance sheet in their assessment is also not correct, since, is source of deposit in bank account of these individuals stands examined by the Assessing Officer during the assessment proceedings. Hence, the ld. PCIT conclusion that the trustees have been benefited by way of receipt of higher interest cannot hold good. Hence, no action u/s 263 of the Act is called for on this ground. Salary paid to Trustees - Sh. Tarsem Garg has been paid huge salaries which has given any undue advantage as he is a trustee of the assessee. Hence, keeping in view the facts and circumstances of the issue, we hold that no action u/s 263 of the Act on this ground Sum received by Santosh Hostel from the assessee trust - PCIT observation that completion certificate for the hostel building is a passive query which really do not effect the provisions of taxation and especially when the ld. PCIT himself has formed that the profits earned by the hostel are more than the market averages and the receipt on account of rent received from the students have duly offered to tax. As to the query regarding the increase of students from year to year it has been explained that owing to completion of more rooms, more number of students have been admitted to hostel and the rents received from them have duly offered to tax and hence, it cannot be held that the order of the Assessing Officer is erroneous or prejudicial to the interest of the Revenue. We also find that the conclusion of the ld. PCIT regarding the maintenance of account is not on correct fact as no amount was received by Santosh Hostel from the assessee trust, rather the fee was corrected directly by the Santosh Hostel from the students. The Santosh Hostel is found to be maintaining all the records and shown the rental receipts in their books of accounts and offered to tax. No discrepancy was found by the revenue with regard to the receipt of rent. Keeping in view, the entire factum of the events, we hold that no action u/s 263 of the Act is called for on this ground. Bogus Expenditure Mess Charges - Assessing Officer has well appreciated the evidence on record properly and also the ld. PCIT has not brought anything on record to prove siphoning of money from the trust by booking bogus expenditure in the form of mess charges and payments to contractors. Hence, no action u/s 263 of the Act is called for on this ground. Pledging of FDRs - benefit to Inderpal Garg - In the instant case, we find that the trustees have given personal guarantee for raising loans from the banks and also have mortgaged their residential property for the purpose. The loan received of Rs. 350,00,000/- against the pledging of FDRs has been repaid on 01.03.2016 and the OD account has been closed on 13.07.2016. The interest accrued on the FDRs of Rs. 82.96 lakhs has been duly received by the assessee trust itself and duly shown as income. Thus, no benefit was accrued to the trustee nor any loss was incurred by the assessee trust. The trustee could be deemed to have been benefited if any loss of interest to the trust in the rate of FDRs or any forfeiture of FDRs in default of the loan has taken place. None of these events has happened in this transaction. Hence, keeping in view, the provisions of Section 13(1)(c) and 13(1)(d) of the Act and read with Section 13(2)(b), 13(2)(c), we do not find any loss of revenue in this transaction. the enquiries conducted by the Assessing Officer from the banks which shows full application of mind on the part of the Assessing Officer , the allegation of the ld. PCIT, the reply of the AR and the arguments of the ld. DR, provisions of the Act in the judgments quoted above, we hereby hold that in the absence of any loss to the trust or benefit to the trustee or loss of revenue, the order of the ld. PCIT cannot be upheld on this ground. Taxing profits u/s 44AD - PCIT has not disputed the factum that the work has been executed. At the same time, the ld. PCIT has held that the Assessing Officer did not carry out any inquiry are raised any query in respect of construction receipts. The ld. PCIT observation was based on the suspicion that the assessee has not undertaken any contractual work it is against the facts on record. The ld. PCIT has not given any finding regarding what is the error in the order of the Assessing Officer and not even approximately quantified or mention any possible loss of revenue by conducting independent enquires. The judgments quoted by the ld. PCIT are perused and found to be not applicable to the facts of this case. PCIT s reliance on the judgment of CIT Vs Infosys Technologies Ltd. [ 2012 (1) TMI 76 - KARNATAKA HIGH COURT] as held that provisions u/s 263 of the Act is intended to plug leakages to the revenue by the erroneous order passed by the lower authorities cannot be applicable and in the instant case as the ld. PCIT has not determined, proved any leakage to revenue on this issue of taxing profits u/s 44AD of the Act. The action of the ld. PCIT directing the Assessing Officer to call for the details and make necessary enquiries in respect of the alleged contractual receipts cannot be held to be legally valid, as the details regarding the contractual receipts and profit thereon stood examined in the assessment proceedings and also keeping in view the fact that the ld. PCIT has not brought anything on record about the erroneous nature of the assessment order or loss of revenue by the order of the Assessing Officer. Addition u/s 69A - Professional Receipts - PCIT observations that the assessee does not possess any professional qualification or specialization to receive the consultancy amount do not stand the test of appeal as the record shows that the assessee has acted as an intermediary, liaison person for obtaining funds to Nexgen and booking of flats for Ajanara Group. In all fairness, we hold that no specialized professional qualification is required for such an activity. The allegation of the ld. PCIT that the assessee has taken entries for creating fictitious source of income cannot hold good as the company paid the amount by paying 12.6% service tax, TDS as per the provision, the recipient assessee has paid tax at the maximum margin rate, has not claimed any deduction (except Rs. 917,872) in any assessment year. In the absence of any minor evidence brought in by the ld. PCIT/Revenue to prove that the payee companies are not in existence or of no financial capability or involved in providing of any accommodation entry or any investigation leading to credence that these companies are aiding in fictitious capitalization, and keeping in view, the entire gamut of activities and evidences mentioned in the preceding paras, we hereby decline to hold that the ld. PCIT is legally correct in holding that the order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of Revenue and hence, the order u/s 263 of the Act is not sustainable. Assessment of rental receipts - PCIT observation that the house is not a commercial premises and hence cannot be used for commercial purposes is also found to be incorrect as it was stated that the house was used as a liaison office by the tenant, Harish Gupta of Trishala group for promotion of sales. This fact can be gauged from the statement of Sh. Harish Gupta mentioned in the order u/s 263 of the Act. Any kind of loss of Revenue or non examination of the issue by the Assessing Officer before allowing the claims has not been brought out by the ld. PCIT which was discussed above. Hence, we hereby hold that the order u/s 263 of the Act cannot be upheld on this ground. PCIT in the order ultimately held that Annual Letting Value (ALV) of the property amounting to Rs. 880,000/- was required to be taxed under head income from other sources while holding that the rental income of Rs. 880,000/- shown in respect of the property let out to Trishala was found to be bogus does not stand on any legal principles for the simple reason as the provisions of Sections 22, 23 24 of the Act which cover the scheme of taxation under head house property. As the property in question is not a self occupied property as such the provision of Section 23(4) of the Act will apply to this property. As per the summarized provisions of Sections 22-23, Income of such property is chargeable to tax which is higher value of rent received or expected rent. Assuming, but not conceding that the property in question is not let out, even in such case its annual letting value will be subjected to tax under Sections 22-24. Such annual value being undisputedly Rs. 8,80,000/-, full deduction u/s 24(a) of the Act of Rs. 2,64,000/- and Section 24(b) of Rs. 42,25,000/- will be allowable and the resulting loss under head house property of Rs. 36,09,000/- will be fully eligible for set off from other heads of income. Thus, the action of ld. PCIT would be a revenue in neutral exercise. Assessment order cannot be said to be erroneous or prejudicial to the interest of the Revenue. Receipt on sale of share in property - HELD THAT:- learned AR has been able to show that there was sufficient material produced on record during assessment proceedings which was adequate for the AO to have arrived at the conclusion that no additions were warranted on the said grounds. Therefore, clearly it was not the case where there was a lack of enquiry or examination by the AO. - Decided in favour of assessee

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• 2019 (9) TMI 1178
  Revision u/s 263 - undisclosed income in the garb of bogus long term capital gains - HELD THAT:- The opportunity was specifically sought but denied. The breach of sacrosanct opportunity expressly enjoined by the legislature in Section 263 is fundamental and goes to the root of the issue. It is not open to proceed to frame the revisional order by overriding express intent of law. Such flaw is fatal which seeks to ensue civil consequences and effects the rights of the assessee in a completed matter. The provisions of Section 263 of the Act expressly enjoin providing opportunity. The assessee had on its part has exercised its right to seek background information to enable it to file an informed defense. The dissuasion of such categorical request renders the action of the Revisional Commissioner incompetent in law. The total absence of opportunity alone renders the revisional order null and void. Also peep into another line of defense on behalf of the assessee. The assessee has admittedly filed the primary evidence in the course of the assessment. PCIT however seeks to rely upon certain additional information which appears to transcend the bonafides of the transactions. It was thus incumbent upon the PCIT to undertake a minimal inquiry himself with regard to the claim of bonafides before remanding the matter back to the AO. Most significantly, in the instant case, as noted above, the matter has been remanded to actually carry out the conclusions already drawn by the PCIT unilaterally which conclusions gives the infallible impression of it being absolute and rigid. PCIT has thus actually foreclosed the matter without opportunity. Therefore, the whole exercise of remanding the matter back to the AO is only a pretense and an empty formality. Such act of the PCIT thus cannot be endorsed when seen in entirety. The contentions of the assessee on palpable illegality in the order passed u/s 263 of the Act merits acceptance. Revisional action under Section 263 of the Act in unsustainable in law on two counts; (i) A revisional action which began with a nondescript notice and culminated in revisional order without any effective opportunity despite specific request is an order passed in blatant transgression of natural justice (ii) The Revisional CIT made an unflinching and adverse conclusion in the league of finality (without granting any opportunity) and closed the door for the assessee before the AO while setting aside the order of AO. The enquiry or investigation set in motion in the proceedings before the AO in pursuance to the revisional order is clearly a pretense and an empty formality. The AO was effectively asked to obdurately adhere to the pre-conceived observations made in the revisional order of ex parte nature. Such directions are clearly unsustainable. Fatal error committed towards lack of effective opportunity and conclusive averments made in the revisional order, consequential action of setting aside the assessment order is a nullity. Such revisional order thus deserves to merge in void and disappear. Hence, we thus do not consider it necessary to dwell upon other aspects of the maintainability of revisional order. We may however hasten to add at this juncture that our observations are limited to the correctness of process of framing revisional order u/s 263 of the Act and should not in any manner be read as our expressions on merits. - Decided in favour of assessee.

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• 2019 (9) TMI 1177
  Revision u/s 263 - guienity of long terms capital gains - HELD THAT:- It has come on record that the Assessing Officer had issued sec. 133(6) letter / notice to the M/s SHCL during the course of scrutiny which stood adequately replied in assessee s favour. Coupled with this, all the relevant factual details in support of the assessee s share purchase document, contract notes, bank statement, (supra) already in the case records. CIT-DR fails to rebut the clinching fact that although the PCIT s detailed discussion extracted in the preceding paragraphs has sought to make out a case of artificial price rigging between the assessee, promoters entry operators of the entity in light of Ministry of Finance s letter dated 24.07.2015 figures, there is not even an iota of material quoted against the assessee to have been engaged in all the foregoing artificial price rigging. We are observing in view of all these facts that the Assessing Officer had rightly accepted the assessee s LTCG keeping in making the overwhelming evidence forming part of records. In case of CIT vs. Lakshmargarh Estate Trading Co. Ltd. [ 2013 (2) TMI 825 - CALCUTTA HIGH COURT] and CIT vs. Bhagwati Prasad Agarwal [ 2009 (4) TMI 138 - CALCUTTA HIGH COURT] have accepted genuineness of similar LTCG. Since the issue is covered by all the foregoing decisions of hon ble jurisdictional high court, we observe that the Assessing Officer had rightly treated the assessee s foregoing LTCG derived from sale of shares to be genuine - We therefore reverse the PCIT s order under challenge and restore the impugned assessment framed by the Assessing Officer - decided in favour of assessee.

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• 2019 (9) TMI 1176
  Claim of accumulation u/s 11(2) - manually submission of Form No.10 - mandation to file Form No.10 electronically - Assessee s failure to spend 85% of the Total Income and the failure to comply with section 11(2) read with rule 17 of the Income Tax Rules, 1962 - Whether CIT(A) is erroneous for having considered the manually submitted Form No.10 filed before the due date of filing the Return of income for Assessment Year 2014-15 and thereby allowing the assessee accumulation claimed by it under section 11(2) of the Act.? HELD THAT:- On a careful perusal of the Income Tax Rules, 1962 (in short the Rules ), we find that as rightly pointed out by the CIT(A), the requirement to mandatorily file Form No.10 electronically before the due date for filing the return under section 139(1) of the Act has come into effect by substitution of Rule 17 of the Rules by IT (First Amendment) Rules, 2016, w.e.f. 01.04.2016 i.e., it is applicable from Assessment Year 2016-17 onwards. Therefore, it is amply clear that the said requirement of the assessee having to mandatorily file Form 10 electronically was not applicable to those Assessment Years prior to Assessment Year 2016-17. The present appeal pertains to Assessment Year 2014-15 which is prior to the amendment, and therefore, in our view, the CIT(A) was correct in holding that in this year, the requirement to file Form No.10 electronically was not mandatory to the assessee in the case on hand CIT(A) has also rendered the factual finding that assessee has filed requisite Forms and the return of income within the due date for filing the return of income i.e., 30.09.2014 and therefore the assessee is eligible for accumulation under section 11(2) of the Act. In the circumstances, as narrated above, we find no reason for interference in the impugned order of the CIT(A) on this issue and therefore uphold his finding in the matter. - decided in favour of assessee.

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• 2019 (9) TMI 1175
  Exemption u/s. 11 denied - registration granted u/s. 12AA withdrawn - HELD THAT:- Now this order of ld. CIT(E) u/s. 12AA(3) of the IT Act cancelling the registration earlier granted u/s. 12AA is already set aside by the tribunal and such Tribunal order is upheld by Hon ble Karnataka High Court and therefore, we feel it proper to restore the matter back to the file of AO to decide the issue on merit regarding the eligibility of assessee for exemption u/s. 11 of the IT Act. We order accordingly. We want to make it clear that the AO should pass necessary order as per law after providing adequate opportunity of being heard to assessee. We do not make any comment regarding the allowability of exemption to the assessee u/s. 11 of the IT Act.

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• 2019 (9) TMI 1174
  Revision u/s 263 - Bogus purchases - estimating profit on the non genuine purchases - HELD THAT:- Addition applying the gross profit rate is in consonance with various judicial precedents available on the issue. Therefore, it cannot be considered to be an erroneous view as it is a possible view. Moreover, the allegation of learned Principal Commissioner that the Assessing Officer has overlooked the material on record and has not made any enquiry which ought to have been made, appears to be on wrong assumption of facts, hence, not tenable. We hold that in the given facts and circumstances of the case, the assessment order passed cannot be held as erroneous and prejudicial to the interests of Revenue.That being the case, exercise of power under section 263 of the Act to revise the assessment order is neither justified nor valid. Accordingly, we are inclined to quash the impugned order passed by learned Principal Commissioner under section 263 of the Act. Ground raised by the assessee is allowed.

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• 2019 (9) TMI 1173
  Assessee firm converted into Private Limited Company - Addition on account of Sales Tax refund - Status of the assessee is Firm - HELD THAT:- Assessee, admitted during the course of arguments that in assessment year under appeal in which sales tax refund have been received by the assessee firm, assessee firm continued its activities and exist. This fact is also corroborated by the fact that assessee firm has filed the return of income for assessment year under appeal on 20.09.2011 declaring income at Rs. 26,04,046/-. It would mean assessee firm exist in assessment year in appeal. It is not in dispute that the contract had been awarded to the assessee firm on which sales tax had been deducted by the deductee at the time of payment of contract receipts to the assessee. Therefore, refund of sales tax shall have to be taxed in the hands of the assessee firm only. Since the assessee firm exist in assessment year under appeal and also declared business income in assessment year under appeal, there was no reason to show the impugned amount as income of Private Limited Company. It is well settled Law that income is to be taxed in the hands of person liable for taxation. Income is to be assessed in the hands of right person, even if wrong person paid tax. We rely on Judgment of Hon ble Supreme Court in the case of Ch. Atchaiah s case [ 1995 (12) TMI 1 - SUPREME COURT] - Decided against assessee.

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• 2019 (9) TMI 1172
  Additions based on declaration made during the course of search - undisclosed income surrendered during the course of search by the partner of the assessee firm - HELD THAT:- Section 4 of Section 132 of the Act starts with reference to authorised officer , which means that the Officer who is authorised to conduct search on the assessee. In the instant case it is stated before us that the authorised officer of the assessee and that of the other concerns of Signature Group are different. After the word the authorised officer it reads during the course of search or seizure, examination of both the person . During the course of search is a period during which the search is initiated and concluded. In the instant case the search was initiated on 29.1.2014 and concluded on 31.1.2014 by a authorised officer for the assessee which is verifiable from the Panchanama framed by the search team. The statement of Mr. Vipin Chouhan was taken on 02.02.2014 by another authorised officer and this date is after the conclusion of the search in the case of the assessee on 30.01.2014. There may have been some force in the contention of the revenue authorities if the statement u/s 132(4) of the Act was taken during the course of search at the assessee s premises or during the continuation of search, the statement may have been recorded on other places but the fact is that so far as the assessee M/s. Ultimate Builders is concerned the search concluded on 31.01.2014 and before the conclusion of the search no surrender of undisclosed income was made in the statement recorded u/s 132(4) of the Act by the persons available at the assessee s business premises. Surrender for various group concerns and not specifically for the assessee M/s. Ultimate Builders. Reference was also given to other business concerns namely M/s. Virasha Infrastructure, Signature Infrastructure, Signature Builders and Signature Builders and Colonisers. Certainly the search in the case of concerns other than the Ultimate Builders did not conclude on 02.02.2014 but at that point of time on 02.02.2014 the search in the case of Ultimate Builders stood concluded two days before on 31.1.2014. Alleged statement given by Mr. Vipin Chouhan on 02.02.2014 may be construed as the Section 132(4) of the Act for all the other concerns named above except for the assessee i.e. M/s. Ultimate Builders. Addition made by the Ld. A.O on the basis of the statement but no reference been given to the incriminating material, we find that in the assessment order Ld. A.O has referred to various seized documents but none of them is directly related to the assessee. These seized documents are of the Signature Group and Ld. A.O has only mentioned the details of the seized document without uttering a word about their nexus with the business transaction carried out by the assessee or by pointing out assessee s connection with the seized document in name or otherwise. Thus it can be safely concluded that the addition made by the Ld. A.O was not on the basis on the incriminating material found during the course of search but only on the basis of statement of Mr. Vipin Chouhan given on 02.02.2014. Additions cannot be sustained merely on the basis of statement given during the course of search without correlating the addition with the incriminating seized material. Therefore the decision relied by Ld. Departmental Representative laying down the ratio that addition can be made even on the basis of statement given during the course of search u/s 132(4) of the Act irrespective of the fact whether any incriminating material is found or not, will not support Revenue in the instant case. - Decided in favour of assessee.

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• 2019 (9) TMI 1171
  Claim of expenditure u/s 37(1) - Disallowance of withheld fine being in the nature of penalty / fine for violation / offence - Additions towards amount deposited with as unaccounted with certain organisations as income for the reason that these deposits did not reflect in the balance sheet - Additions towards excess consumption of raw material - AO disallowed 14% of such expenses as an excess claim . - the absence of production of primary supporting material, the Assessing Officer held that about 30% of the gross receipts could be the normal expenditure in the line of business and therefore he restricted the labour charges claim to 30% of the contract receipts - HELD THAT:- Assessee has not made any attempt to produce any document / voucher / primary material either before the Assessing Officer or before the Ld.CIT(A) or before this Tribunal in support of its contention. When there are no documents placed before us to create even a doubt on the impugned issues, the assessee s claim that the impugned issues should be remitted back to the Assessing Officer is not justified and hence it is not permitted. Since the assessee has not placed any primary material, it is not possible for us to appreciate as to whether the facts and circumstance dealt in the case laws are applicable to the assessee s case and hence the assessee s appeal is dismissed.

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• 2019 (9) TMI 1170
  Addition u/s 68 - treating the share capital and share premium received by the assessee during the year under consideration as unexplained cash credit - whether the transactions in question of issue of share capital with premium by the assessee-company involved any cash or not? - HELD THAT:- Section 68 is not applicable when the relevant transactions do not involve any cash and there is no credit to the Cash Account. We, therefore, hold that section 68 has no application to the transactions which does not involve cash and where there is no credit to cash account. Even though the ld. CIT(Appeals) in his impugned order has recorded a finding of fact that no money was received through banking channel by the assessee and there was no cash transaction in the case of the assessee as the shares were issued against the shares of another companies, there was no such finding recorded by the Assessing Officer in the assessment order. As rightly pointed out by the ld. D.R., no such case, in fact, was specifically made out by the assessee before the Assessing Officer challenging the applicability of section 68 on the ground that the relevant transactions of the issue of shares did not involve cash and it was not a case of receipt of any money through banking channel against the issue of shares. Neither the Directors of the assessee-company nor the Directors of the investor companies appeared before the AO for examination in response to summons issued under section 131 and the relevant details and documents were furnished by the Assessing Officer in an attempt to explain the relevant transactions as if section 68 was applicable. CIT(Appeals), however, overlooked this vital fact and allowed the relief to the assessee by deleting the addition made by the Assessing Officer under section 68 by relying on a new stand taken by the assessee in the light of additional evidence without giving any opportunity to the Assessing Officer to verify the same. Restore this issue to the file of the Assessing Officer for the limited purpose of verifying the claim of the assessee that the transactions in question of issue of shares did not involve any cash and there was no credit to the cash account and to decide the same accordingly in the light of the decision of the Hon ble Jurisdictional High Court in the case of Jatia Investment Co.[ 1992 (8) TMI 16 - CALCUTTA HIGH COURT ] - Decided in favour of revenue for statistical purposes.

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• 2019 (9) TMI 1154
  Characterization of income - subsidy received - revenue or capital receipt - HELD THAT:- This Court notices that the Punjab and Haryana High Court took into account the previous binding ruling of the Supreme Court in Commissioner of Income Tax vs. Ponni Sugars Chemicals Ltd. Ors. [ 2008 (9) TMI 14 - SUPREME COURT] and Sahney Steel Press Works Ltd. Ors. vs. Commissioner of Income Tax [ 1997 (9) TMI 3 - SUPREME COURT] . In these circumstances, the Court is of the opinion that the amount was received as capital stream and therefore, not taxable. Focus Marketing Scheme - apparently the Central Government gave the subsidy to enhance indian export potential in the international market. It was not granted to meet the cost of expenditure to meet the competition of the Indian textile market. ITAT took note of judgment in Ponni Sugars Chemicals Ltd.(supra) and held that the amount was not an export incentive, but rather capital receipt and therefore, not taxable. This Court is of the opinion that there is no infirmity with the reason. As far as the electricity subsidy is concerned, the third ground i.e. electricity subsidy under the Rajasthan Investment Promotion Scheme was held to be a capital receipt by the CIT(A). It was held that this was granted in larger public interest and it was linked to capital interest, a similar scheme was that the amounts received in the similar scheme have to be capital receipt by a Division Bench of this Court in Commissioner of Income Tax, Ajmer vs. Shree Cement [ 2017 (8) TMI 1336 - RAJASTHAN HIGH COURT] . This Court notices that the ratio of the rulings in Ponni Sugars Chemicals Ltd.(supra) and Sahney Steel Press Works Ltd. Ors. (supra), applied. Consequently, we find no infirmity with the approach of the ITAT on this aspect as well.

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• 2019 (9) TMI 1149
  Addition u/s 41(1) - proof of seizure of Sundry Creditors - HELD THAT:- Assessing Authority had made due inquiry from the Sundry Creditors whose addresses and details were supplied by the assessee during the course of assessment proceedings and the communications thereon from the assessee. Assessee failed to rebut the adverse material with regard to the Creditors viz., Hari Traders and another M/s.Sunil, who had apparently confirmed that they did not make any claim of the amount of the unpaid amount due to them. It was thus for the assessee to rebut that material by either producing the relevant documentary evidence or the Sundry Creditors to show that the liability had not ceased in the eye of law so as to attract Section 41 (1) of the Act. Now, on the fact finding exercise undertaken by Appellate Authority also, except making the averments to the effect that these Sundry Creditors were paid, no documentary proof thereof has been produced by the assessee and, therefore, the learned Tribunal, in our opinion, has rightly held that the said averments of the assessee could not be believed on their face value. However, we feel that the matter requires further investigation and inquiry at the hands of the Assessing Authority and, the learned Tribunal, instead of reversing the order of the learned CIT (A), ought to have remanded the matter back to the Assessing Authority in such facts and circumstances of the case to ascertain whether the trade liability towards the Sundry Creditors shown in the Balance Sheet had ceased in the eye of law or whether such trade liability genuinely continued or not. Dispose of this appeal with the remand of the case to the Assessing Authority without answering the Substantial Question of law, framed above.

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• 2019 (9) TMI 1148
  Appeal before High Court - Availability of an alternative efficacious remedy of appeal before the Commissioner [Appeals] - HELD THAT:- The present one is not a case where this Court may feel persuaded to exercise its own extraordinary writ-jurisdiction bypassing the statutory remedy of appeal available to the writ-applicant. All the contentions raised before this Court can very well be examined by the Commissioner [Appeals] exercising its appellate jurisdiction. We are not satisfied that the facts and circumstances of the case did not warrant exercise of writ-jurisdiction of this Court allowing the writ-applicant liberty of bypassing the statutory remedy of appeal. The writ-petition is rejected on the ground of availability of an alternative efficacious remedy of appeal before the Commissioner [Appeals]. The appeal has already been preferred and the same is pending. In such circumstances, the writ-applicant should pursue further with the appeal, which has been preferred before the Commissioner [Appeals] u/s 246A. It is clarified that we have otherwise not expressed any opinion on the merits of the case. The Commissioner [Appeals] shall look into all the relevant aspects of the matter and decide the appeal in accordance with law on its own merit - Writ-application fails and is hereby rejected

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• 2019 (9) TMI 1138
  Denial of exemption u/s.54F - procurement of new residential flats - assessee had paid sum to Builders and that money is still lying with the said developer as sworn in by the affidavit filed in record by the assessee and that once the project is completed, the assessee will go ahead and procure the new residential house by paying the balance amount - HELD THAT:- In the present case, we have already examined the bona-fide nature of the assessee and genuineness of the transactions for procurement of new residential flats and that genuineness remain uncontroverted. We further find even in the following decisions wherein it has been held that if the amount has been utilized before the due date of filing of return, the exemption u/s.54F of the Act cannot be denied on the ground that the assessee has not taken the possession of the flat within the stipulated period Deemed dividend u/s.2(22)(e) - HELD THAT:- In the balance sheet of the company i.e. Kumar Urban Development Ltd, the amount is not shown as loan to the assessee. The words in Section 2(22)(e) of the Act clearly states any advance or loan given to a person . In this case, there is no loan or advance given from the company to the assessee. When no loan or advance has been given to the assessee, then Section 2(22)(e) of the Act is not triggered. We, therefore, set aside the order of the Ld. CIT(Appeals) and direct the Assessing Officer to delete the addition on account of deemed dividend u/s.2(22)(e) of the Act. The Assessing Officer is directed to provide appeal effect accordingly. Thus, ground No.3 raised in appeal by the assessee is allowed. Addition on the basis of ITS data - HELD THAT:- In view of the submissions made by the parties herein, we set aside the order of the CIT(Appeals) on this issue and restore the matter to the file of Assessing Officer for necessary verification and adjudication wherein the assessee is directed to file the reconciled details. AO is directed to adjudicate the issue after considering the reconciled details in compliance with the principles of natural justice. Thus, ground No.4 raised in appeal by the assessee is allowed for statistical purposes.

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• 2019 (9) TMI 1135
  Addition towards unsecured loan - unexplained cash credit u/s 68 - AO not making basic verification with the lenders by using the statutory powers vested in him u/s 133(6) or u/s 131 - HELD THAT:- When the assessee had submitted his bank statements even for the subsequent year to prove that the said loans were duly repaid by him to the concerned lenders. It is not in dispute that these loan creditors are duly assessed to income tax and their income tax assessment particulars together with their addresses were on record. AO without making even the basic verification with the lenders by using the statutory powers vested in him u/s 133(6) or u/s 131 of the Act , cannot simply make an addition towards the unsecured loans as unexplained cash credit merely on surmise and conjecture. Hence we direct the ld AO to delete the addition made in respect of loans received from Arabian Sea Food and Shatrunjaya Estate Pvt Ltd Loans received from Smt Nikita Mahesh Sagar and Smt Usha Chauhan, we find that apart from primary documents , the assessee had also furnished the bank statements of the lenders and an affidavit from them confirming the entire loan transactions with the assessee. We find that the ld AO had merely disregarded this affidavit by stating that the same lacks verification. Even in this case, no verification was carried out by the AO either u/s 133(6) or u/s 131 of the Act to clear the doubts that were in mind of the ld AO with regard to the veracity of the loan creditors. It is not in dispute that these loan creditors are duly assessed to income tax and their income tax assessment particulars together with their addresses were on record. We find that both these parties had duly affirmed in their affidavit that they were engaged in respective businesses for the past 15 and 30 years respectively. Hence the availability of source in their hands stands proved beyond doubt - Decided in favour of assessee Net income under the head Income from Business - gross receipts minus direct expenditure - HELD THAT:- We find that the CIT-A in Asst Year 2013-14 had accepted the fact that the assessee was engaged in the actual business of consultancy to SRA projects of Kamla Mills group, wherein he has to negotiate with the slum dwellers / squatters and get them agree/vacated with compensation/ incentive or an alternate accommodation in the constructed SRA tower. For this he used to get the money from the builders which he used to deposit in the bank account. CIT-A in that order categorically observed that assessee was doing similar business in earlier years and nature of business was mentioned as service sector in the audit report. Hence it is proved beyond doubt that assessee was deriving business income during the year under consideration. Hence we direct the ld AO to treat the net income of Rs. 2,20,20,125/- as income from business i.e gross business receipts of Rs. 2,57,79,500/- minus business expenditure of Rs. 37,59,375/-

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• 2019 (9) TMI 1134
  Disallowance of provision for expenditure - assessee consistently following this accounting method from past years - HELD THAT:- Additionally, AS-1 provides for creating provision for expenditure on estimate basis keeping in view business prudence and information available. Commissioner (Appeals) also not only recognizes the necessity of making provision for unbilled expenditure but has also allowed provision for expenditure not exceeding 10% of the actual expenditure - there is no such thumb rule either in Accounting Standards or elsewhere to restrict the provision to within the range of 10% of the actual expenditure. It is worth mentioning; the assessee has reversed the provision in the subsequent year and offered to tax. This fact has not been disputed by the Department. Therefore, the ratio laid down in case of CIT V/s Excel Industries Ltd. [ 2013 (10) TMI 324 - SUPREME COURT] would apply. More so, when the assessee is consistently following this accounting method from past years. In view of the aforesaid, we hold that the part disallowance sustained by learned Commissioner (Appeals) also deserves to be deleted. Therefore, learned Commissioner (Appeals) direction to grant consequential relief in subsequent assessment year becomes infructuous. Disallowance of renovation expenditure - expenditure in respect of the leased premises - HELD THAT:- The nature of expenditure incurred by the assessee in respect of the leased premises and more particularly the premises at Hyderabad and Bangalore are not of the nature of constructing new structure, extension or improvement of building. Therefore, Explanation 1 to section 32(1) of the Act would not be applicable to the facts of the present case. Though, there cannot be any quarrel with regard to the proposition laid down in the decisions cited before us, however, the nature of expenditure incurred by the assessee with reference to facts of each case would decide whether it is capital or revenue in nature. In the facts of the present case, after examining the details of expenditure incurred by the assessee, we are of the view that it is of revenue nature, hence, has to be allowed. Disallowance of write off of security deposit in respect of lease hold premises - HELD THAT:- Due to non refund of the security deposits the assessee has not only kept the premises under its possession but has also taken legal steps for recovery of the security deposit by filing a lawsuit. Thus, the contention of the assessee that it was not hopeful of recovery of the security deposit appears to be farfetched, more so, when he is having possession of a far more valuable asset than the security deposit. Further, when the assessee has filed a lawsuit for recovery of security deposit, it cannot be said that he has lost all its hope of recovery of the security deposit. Contention of the assessee that he was not hopeful of recovering the security deposit is not true. Rather, by occupying the premises under his possession, the assessee was in a more advantageous position to recover the security deposit. At the same time, assessee s contention that the security deposit was offered to tax in assessment year 2016 17 cannot also be ignored. However, considering the fact that these are completely new facts brought to the notice of the Tribunal in course of hearing, we are inclined to restore the issue to Assessing Officer to verify the relevant facts and allow consequential benefit to the assessee. This ground is allowed for statistical purposes. Disallowance of write off of tax deducted at source (TDS) - HELD THAT:- As could be seen from the facts emanating from record, though, tax was deducted at source in earlier assessment years, however, the assessee could not get credit of such TDS amount due to non furnishing of TDS certificate by deductors. Undisputedly, the TDS amount is nothing but a part of income accruing to the assessee. It is also a fact that the assessee has offered the gross income including TDS in the respective assessment years. Therefore, to that extent, non allowance of TDS credit to the assessee due to non receipt of TDS certificates amounts to loss of income - non furnishing of TDS certificate amounts to a debt due to deductee which can be allowed under section 36(1)(vii) - Commissioner (Appeals) has also accepted the aforesaid legal position. The grounds on which he has rejected assessee s claim are, firstly, it is not within the time prescribed under section 155(14) of the Act and secondly, the assessee has not claimed such deduction in the computation of income. In our view, the aforesaid reasoning of learned Commissioner (Appeals) is not sustainable. Once it is held that assessee s claim of write off is allowable under section 36(1)(vii) of the Act, then the provisions of section 155(14) of the Act would not apply - We direct the Assessing Officer to allow assessee s claim of write off of TDS. Ground is allowed. Addition made to its income on account of change in revenue recognition policy - HELD THAT:- Issue requires further examination by the Assessing Officer as the assessee needs to establish with cogent material and evidence that the change in revenue recognition policy is for bona fide reasons and necessary for carrying on its business activities in a more efficient manner - assessee has to establish that the change in revenue recognition policy is in conformity with the provisions contained under section 145(1) and (2). With the aforesaid observations, we are inclined to restore the issue to the Assessing Officer for de novo adjudication after due and sufficient opportunity of being heard to the assessee. If the assessee can establish that the change in revenue recognition policy is for bonafide and valid reasons, occasion for any addition on this count would not arise. The Ground raised is allowed for statistical purposes.

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• 2019 (9) TMI 1133
  Penalty u/s. 271D - receipt of loan and advances in cash - as per 2 agreements amount paid by the two buyers to the present assessee in cash - HELD THAT:- Whole allegation is on the basis of two agreements in question. This is true that in both these agreements, it is stated that an amount of Rs. 6 Lakhs and Rs. 2 Lakhs respectively was paid by the two buyers to the present assessee in cash but this is also true that these two agreements are although signed by the Director of the assessee company, these are not signed by the buyers. The department is asking the assessee to establish that the agreements were not executed which is the claim of the assessee. Merely because a proposed agreement was kept ready after typing and signature of the Director of the assessee company, it cannot be said that the agreement was executed and all the contents of such agreement were actually done when the agreements in question were admittedly not signed by the respective buyers. The complete name and address of both these buyers are available in those agreements to sale and if the AO wanted to establish that the agreements were in fact executed and the amount was paid by the respective buyers to assessee in cash, he could have examined these buyers but this is not done by the AO. In fact, even no effort was made by the AO to do so. we are of the considered opinion that the addition made by the AO on the basis of the two draft agreements is not justified in the facts of present case Penalty u/s u/s. 271D - whether there was reasonable cause which prompted the assessee to accept the loan in cash ? - HELD THAT:- As per the copy of cash book available on page no. 1 of the paper book, it is seen that opening balance is Rs. 40,423/- and this payment of Rs. 9 Lakhs was paid out of the money provided by the Director Shri Dinesh Ranka. Hence, this is the fact that no cash was available with the assessee company as per the cash book to make this cash payment and hence. Cash borrowing to make this urgent cash payments appears to be reasonable. Under these facts, we are satisfied that the assessee has been able to establish that there was reasonable cause for accepting this loan in cash and hence, in view of section 273B of the IT Act, we delete the penalty- Decided in favour of assessee.

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• 2019 (9) TMI 1130
  Deduction u/s.80IA - interest accrued on the electricity deposit AND deposit with SBI - HELD THAT:- During the year, admittedly, the assessee derived income only from the SEZ project at Pallavaram. Since the interest accrued on the electricity deposit is incidental to the SEZ, Pallavaram unit from which the assessee admitted income and claimed deduction U/s.80IA of the Act, the assessee s claim is allowable in accordance with ratio of the Jurisdictional High Court decision in the case of Arul Mariammal Textiles Ltd. [ 2018 (8) TMI 1729 - MADRAS HIGH COURT ] . However, since the deposit with SBI is not connected with the project of SEZ zone at Pallavaram but it is connected with the Phase II project of Thoraipakkam unit, a work which is in progress and from which no income was admitted during the period, the interest earned from bank deposits of SBI and SME branch is not eligible for the deduction U/s.80IA - Assessee s claim is partly allowed.

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• 2019 (9) TMI 1128
  Claim of depreciation, interest and maintenance expenses for the BMW car - car in the name of director - allowable business expenditure - HELD THAT:- Assessee has not established that it is owner of the impugned Car and the car was used wholly and exclusively for the purposes of its business. Therefore, on the above facts and circumstances, we hold that the disallowances of depreciation, interest on the car loan and maintenance expenses of the BMW car, made for the assessment years 2013-14 2014-15 are justified and hence dismiss the corresponding grounds of appeal of the assessee. Proportionate disallowance of interest on the related party loans - We find that the facts and the figures associated with the issue have not been properly examined by the lower authorities - this issue is remitted back to the AO for a fresh examination. The assessee shall place all the material in support of its contention before the AO and shall comply with his requirements in accordance with the law. The AO shall after affording due opportunity to the assessee shall pass an appropriate order. The corresponding grounds of appeal are treated as allowed for statistical purpose.

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• 2019 (9) TMI 1127
  Penalty u/s. 271(1)(c) - penalty has been levied on the assessee for furnishing inaccurate particulars of income. - HELD THAT:- As perused the copies of return for assessment year 2009-10 filed before us in the paper book wherein all the details of loss carried forward has been reflected by the assessee to the tune of Rs. 33,69,239/-. Non filing of revised return is hypothetical assumption by the Department that the assessee intends to conceal the income which is however not demonstrated by any evidence on record. Hence, this cannot be accepted. Once penalty has been imposed for furnishing inaccurate particulars of income in the case of the assessee as facts demonstrated there is no lapse by the assessee on this count. As relying on RELIANCE PETROPRODUCTS PVT. LTD. [ 2010 (3) TMI 80 - SUPREME COURT] and PRICE WATERHOUSE COOPERS (P.) LTD.[ 2012 (9) TMI 775 - SUPREME COURT] we set aside the order of the Ld. CIT(Appeals) and direct the Assessing Officer to delete the penalty from the hands of assessee. - Decided in favour of assessee.

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• 2019 (9) TMI 1126
  Penalty u/s 271(1)(c) - defective notice - inappropriate limb in the notice in the penalty was not struck off - HELD THAT:- CIT-A has duly noted the assessee s submission in his order. However while adjudicating the issue he has omitted to adjudicate this ground raised before him. Hence in our considered opinion the interest of justice requires that this issue should be remitted to the file of learned CIT-A. CIT-A is directed to consider the issue afresh after giving the assessee proper opportunity of being heard. CIT-A should also take into account the various case laws on the subject as available and as canvassed by the assessee as aforesaid. The learned CIT-A should also take into account the decision of honourable of apex court in the case of CIT Vs. S.V. Angidi Chettiar [1962 (1) TMI 10 - SUPREME COURT ] . Accordingly this issue raised is remitted to the file of learned CIT-A with directions as above. Satisfaction not recorded by AO at the time of initiation of penalty - Assessee doesn t deserve to succeed on this ground. The assessing officer has after disallowance of the impugned amount duly noted in the assessment order that penalty proceedings u/s. 271(1)(c) of the Act is initiated . Consequent to amendment in section 271 by insertion of section 271(1B) duly applicable in the extant assessment year, this is sufficient satisfaction and the penalty cannot be annulled on the ground of lack of satisfaction by the assessing officer. Penalty may not be levied on bonafide and inadvertent error of the assessee - In our considered opinion showing a huge amount of foreign currency translation loss on capital account by a multinational company as revenue loss can by no stretch of imagination be considered to be a bonafide - assessee was very well aware that it was deliberately showing capital account transaction loss as loss on revenue account. Hence by no stretch of imagination it can be said that there was any inadvertent error. It was fully considered decision of the assessee to show the capital loss as revenue loss. Hence this limb of the argument is dismissed and inadvertent error. Assessee voluntarily disclosed during the course of assessment proceedings - by no stretch of imagination it can be said that there was any involuntary disclosure by the assessee. The assessing officer has duly detected the huge amount of capital transaction loss. He had asked the assessee the detail thereof in these circumstances assessee had no option but to disclose the same. By no stretch of imagination it can be said to be voluntarily disclosure. The decision of the apex court in the case of K.P.Madhusudanan fully applies on the facts of the case. Hence this ground raised by the assessee stands dismissed. As relied upon the tax auditor s report - We find that the tax audit is conducted on the basis of information and explanation of the assessee. The assessee, a multinational company cannot put the blame on tax auditor, when the tax auditor is not present to defend. It is not the case that there is acceptance on record by the tax auditor that he is guilty of any mistake. Hence, this plea of the assessee is not acceptable. Asessee s appeal is partly allowed for statistical purposes

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• 2019 (9) TMI 1125
  TCS u/s 206C - Failure to to collect TCS at the time of sale of scrap of arising on dismantling of ships on certain items - Tax imposed u/s 206C(1) r.w.s. 206C(6), 206C(6A) and interest thereon u/s 206C(7) - HELD THAT:- There is no violation of the provisions of section 206C of the Act in view of either the sale of specified products being that of non-excisable, non-scrap products (to the extent of Rs. 16,98,13,542/-), or the same being against receipt of declarations in prescribed form number 27C (to the extent of Rs. 9,39,36,107/-). As already been held, while dealing with the first ground of appeal, that the non-excisable products are obtained from the ships and sold as it is without undergoing any manufacturing process thereon and the same therefore cannot partake the character of scrap within the meaning of section 206C. The appellant therefore cannot be burdened with the liability of TCS in connection with sale of such products. Insofar as the sale towards various non-excisable products was concerned, the appellant could not have been treated as assessee in default. However, the AO has written in his remand report that out of amount of Rs. 16,98,13,542/- which includes non-excisable, old and used plates etc, the items on which no relief is available as per judgment discussed above are clearly liable for TCS. But the AO has not given any working whether this amount includes such items on which relief is not available. At the time of assessment also the AO has not pointed out any discrepancy in the chart of sale provided by the assessee which shows a sale of Rs. 16,98,13,542/- in part B which contains used plates, machinery and machinery part, fuel and oil, fire wood and wooden items and articles of iron steel anchor. These are the items obtained by the assessee in the course of ship breaking activity and these are usable as such on which as per court decision in the case of Priya Blue [2015 (11) TMI 1216 - GUJARAT HIGH COURT] no TCS is to be collected, and therefore, do not fall within the definition of scrap . Hence, the items shown in Part B of the chart given by the assessee to the AO at the time of assessment amounting to Rs. 16,98,13,542/- are not under the purview of the provision of TCS. The AO is directed to treat the appellant not liable to collect TCS on the sales. Sale of certain items arising from ship breaking activity grouped by assessee - It is the case on behalf of the assessee that non-residuary items are outside the purview of Explanation (b) to Section 206C of the Act where the waste and scrap arising from ship breaking is usable as such without modification. Sale of such items capable of being used as such is outside the ambit of Section 206C of the Act. We find merit in the plea raised on behalf of the assessee in the light of decision of Hon ble Gujarat High Court in the case of Priya Blue Industries (P.) Ltd. (supra). Thus, on first principles, the items sold which are capable of being used as such are discharged from the obligations fastened under s. 206C of the Act. CIT(A) in our view has looked into the controversy objectively after taking cognizance of remand report and replies of the assessee and in the light of evidence placed before it. - Decided against revenue

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• Customs

• 2019 (9) TMI 1169
  Provisional release of export goods - modification of conditions stipulated in respect of execution of bank guarantee - demurrage/detention charges - Valuation of goods in dispute - bogus bills - illegitimate higher claim of GST refunds - HELD THAT:- The goods detained for investigation, are sought to be provisionally released for export, the exporter is bound to execute a bond of an amount equivalent to the value of the goods apart from furnishing an appropriate security in order to cover the redemption fine and penalty. There is no dispute to the fact that the goods were intercepted on specific intelligence and detained based on the allegation of misdeclaration, overvaluation and also on the reasonable apprehension that the exporter would claim higher rate of IGST refund - In such circumstances, even before completing the adjudication process, if the exporter seeks for release of the goods for export, certainly it is for them to comply with the conditions imposed in the impugned order. In this case, in fact, the customs has not refused to release the goods. On the other hand, provisional release is ordered subject to the execution of bond and furnishing of bank guarantee. It is the duty of this Court to safeguard the interest of the Revenue as well, since the matter is still to be adjudicated upon, especially when the interest of the exporter is already care of by the revenue in ordering provisional release. Therefore, the order impugned in this writ petition does not require any interference - However, if the petitioner finds it difficult to mobilize the bank guarantee for the said sum of Rs. 25 lakhs as required by the first respondent, alternatively it is open to the petitioner to furnish immovable property security to the value of the said sum, to the satisfaction of the first respondent. Petition disposed off.

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• 2019 (9) TMI 1168
  Suspension of Importer Exporter Registration granted to the petitioner (IEC) - Section 8(1)(a)(b) of the Foreign Trade (Development and Regulation) Act, 1992 read with Foreign Trade (Development and Regulation) Amendment Act, 2010 - HELD THAT:- There is no dispute to the fact that the petitioner was issued with a Certificate of Importer Exporter Code bearing No.0402001630 dated 16.04.2002. Section 8 of the Foreign Trade (Development and Regulation) Act, 1992 makes it clear that such suspension or cancellation of IEC can be made, after giving a notice to that person in writing, informing him of the grounds, on which it is proposed to cancel or suspend IEC Code Number and after giving a reasonable opportunity of making a representation in writing within such reasonable time - Thus, it is evident that the suspension or cancellation of the IEC cannot be done without putting the concerned person on notice and providing him an opportunity of hearing. No doubt, the first respondent has stated that he ordered the suspension in view of the report submitted by the CBI and on going investigations thereof.The above statement of the first respondent in the impugned order lacks any material details and particulars to support the order of suspension. Needless to say that the Licensing Authority, if intends to suspend or cancel the license, should state specific details and particulars as to the reasons which made him to take such action. In the absence of any such finding or reason, such order cannot be sustained. This Court is inclined to interfere with the impugned order only on the reason that it does not disclose, reflect or finding for suspending the IEC of the petitioner - Therefore, the matter needs to go back to the first respondent once again for passing a speaking order - petition allowed by way of remand.

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• 2019 (9) TMI 1167
  Maintainability of petition - Validity of SCN issued u/s 28(4) of the Customs Act, 1962 - HELD THAT:- Though the learned counsel for the petitioners sought to raise the jurisdictional issue, I find that such issue, cannot be put against the Officer, who issued the show cause notices, when such authority is admittedly, having competency and jurisdiction to issue the same. Merely because, it is contended by the learned counsel for the petitioners that the investigation before issuing the show cause notices was conducted by some other authority, even assuming such contention is factually and legally correct, still that cannot be a ground to question the jurisdiction of the authority, who issued the present show cause notices, when admittedly, the same is issued by the competent authority. These Writ Petitions are dismissed as not maintainable only on the reason that the petitioners are not entitled to maintain the writ petitions as against the show cause notices.

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• 2019 (9) TMI 1166
  Claim of Interest on amount deposited during investigation - amount was deposited voluntary or under coercion - amount was deposited in 2008 in installments on different dates - interest was grated from the expiry of 3 months of CESTAT order in 2003 - HELD THAT:- As the amount at Rs. 28,76,578/- was not paid on 21.02.2003 by the respondents, the payment of interest starts till the actual date of payment. The amount was refunded by the respondents on 14.05.2004. Hence, at the highest, the petitioner is entitled to get interest at a reasonable rate of interest for the period running from 21.02.2003 to 13.05.2004. In fact, the petitioner is in search of payment of interest from March/May, 1998 which cannot be granted because there is no provision for the payment of interest nor the aforesaid amount was deposited under any coercion or compulsion. Moreover, the aforesaid amount was deposited by the petitioner voluntarily and, that too, prior to the issuance of the show cause notice dated 04.04.2001. There are no reason to entertain this writ petition for grant of interest from March/May, 1998 upon an amount at Rs. 28,76,578/- - petition dismissed.

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• 2019 (9) TMI 1165
  Valuation of imported goods - related party - allowability of discount - quantum of discount - Whether the ICIN list followed by the Foreign supplier in respect of import by the appellant can be allowed for the purpose of assessment of value of imported goods? - whether the relation between the Foreign supplier and importer/appellant has influenced the pricing mechanism? HELD THAT:- Effectively the difference between the list price and ICIN price works out to a average discount of 32%, which is lesser than the previously accepted discount of 45%; commercial consideration appear to have laid role in determination of sale price of the supplier with no regard to relationship and from the annual Financial Statement, it could be seen that they appellants have not made any other payment other than the purchase consideration and the royalties to the associated companies towards the supply of goods. The original authority all along to the discussion and findings as accepted the contentions of the appellants and has given categorical findings as above. However, in the order portion he comes to the conclusion that the declared invoice values wherever they are less than 55% of global price list. We find that, no reasoning what so ever as been given as to how he has arrived at such a conclusion. The original authority has not given any findings as to why the declare value should be rejected and the value should be re-determined following the valuation Rules. The learned appellant authority also has not gone into the details of the fact of the case and has given cursory findings without delving into the crux of the issue. The appellant authority simply affirms the findings of the lower authority. No reasons what so ever have been given as to why the declared prices have to be rejected and as to how the relationship has influenced, if any, the prices declared in the ICIN. Both, the lower authority and the appellant authority appear to have proceeded with a preconceived notion that the discounts over and above that have been allowed in previous SVB orders should not be allowed - Thus, neither the lower authority nor the appellant authority have rendered justice to the issue. Under these circumstances, we find that, the only way left for us is to set aside the impugned order and to remand the matter for reconsideration to the original authority. Appeal allowed by way of remand.

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• 2019 (9) TMI 1164
  Seizure of goods - Confiscation - Section 110 (ii) of CA - SCN was waived by the appellant - adjudication order without issuing any SCN was passed on 10.01.2011 i.e. almost after 17 months - appellant submits that as per Section 110 (ii), in case of seizer of goods, the department is under obligation to issue SCN within 6 months and further period of 6 months as may be extended by the competent authority - HELD THAT:- Though the appellant vide letter dated 11.11.2009 waived the SCN, as per statutory provision under section 110(ii), the Revenue was supposed to issue SCN within 6 months and further period of 6 months as may be extended by competent authority. Even though the appellant have waived SCN, atleast adjudicating authority should have adhered to time limit as prescribed in section 110(ii) and proceeding should have been concluded within 6 months or 1 year if it is extended. However, the adjudication order was passed after almost 17 months. Appeal allowed.

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• 2019 (9) TMI 1163
  Import of Urea by declaring agriculture grade - Diversion of such Urea to industrial user - Benefit of N/N. 12/2012-CE dated 17.03.2012 withdrawn - fulfillment of the condition of use of Urea for agriculture purpose - HELD THAT:- The issue of cross examination in the case of Vijay Chandrakant Mulchandani will have bearing on the overall case as the department has relied upon the statements in case of Vijay Chandrakant Mulchandani also. Moreover, in case of other parties, the Ld. Counsels raised issue that the cross examinations of the witnesses were not allowed by the adjudicating authority. The cross examination of witnesses is primary requirement for fair adjudication as per the statutory provision of Section 9D of Central Excise Act and pari-materia provision in the Customs Act. The entire matter needs to be reconsidered by the adjudicating authority after allowing the cross examination of various witnesses as requested by the appellant - appeal allowed by way of remand.

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• Corporate Laws

• 2019 (9) TMI 1162
  Condonation of delay in filing an appeal against the order of Tribunal - Period of limitation - Jurisdiction of Tribunal to register or give effect to conversion of the companies into LLPs - approach to Central Government only for compounding of offence - Section 56 of Limited Liability Partnership Act, 2008 - whether the appeal has been preferred within the prescribed period of limitation and in the event of delay whether the Appellant has carved out a case for Condonation of delay? - HELD THAT:- The appeal is hopelessly time barred. Even if, the period of limitation is computed from 15th October, 2018 i.e. the date on which free certified copy was made available to the Appellant, the appeal has been preferred beyond prescribed 45 days and in absence of even the slightest whisper in the Condonation of delay application about a reasonable cause/ sufficient ground justifying Condonation of delay, there would be no justification to condone the delay. The appeal on this count is held to be not maintainable. It is manifestly clear that no delinquency can be attributed to Respondents for non-compliance or breach. While switching over to a computerized system the Appellant as also other concerned authorities were supposed to notify the affected persons and allow them to file the Rectified/ Revised Forms as mandated without slapping any penalty on them. Adopting a blood thirsty approach and that too against compliant entities is unwarranted moreso when such entities complied with the legal requirements and made compliances in accordance with the then prevailing system. This is apart from the reason that the concerned authorities accepted Form-8 and 11 from 2012 to 2016 without demur. No flaw can be found in the impugned order which does not suffer from any legal infirmity apart from being justice oriented and conforming to the spirit of law - appeal deserves to be dismissed on both grounds i.e. limitation as well as merits.

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• 2019 (9) TMI 1161
  Constitutional validity of Corporate social responsibility (CSR) - Vires of Section 135 of the Companies Act, 2013 - Rules 2 and 3(2) of the Companies (Corporate Social Responsibility Policy) Rules, 2013 - whether CSR is analogous to the imposition of tax - various type of definitions of the term profit - validity of circular dated 18.6.18 and its effect as retrospective or prospective - petitioner had also submitted that other Partnership Firms, Sole Proprietorship, Trusts etc. are not brought under the purview of Section 135 of the Companies Act and only the companies are covered, hence the said Section 135 is discriminatory in nature. HELD THAT:- It appears from the provisions of the Companies Act, especially Section 135 thereof and also looking to Entries No.43 and 44 of List-I to the 7th Schedule to the Constitution of India, the respondents are vested with power, jurisdiction and authority to enact Section 135 of the Companies Act. Much has been argued by the counsel for the petitioner about the term net profit . - Even if any error is committed by the respondents in the calculation of the net profit and in calculation of the corporate social responsibility, the amount to be spent by the company covered under Section 135, that does not mean that Section 135 deserves to be quashed and set aside. Such errors can be corrected either by the authorities under the Companies Act or by the competent Court. There is vast difference between a Sole Proprietorship and a company. There is vast difference between a Trust and a Company. Trusts, Sole Proprietorship, Partnership Firms etc. cannot be compared to a Company. There is a difference in the liability also. For instance, in Sole Proprietorship, the person who is a sole proprietor, is not a separate legal entity, whereas, in case of companies, they are separate legal entity which can be sued and can sue. - Both the tests of equality have been satisfied and hence there is no distinction at all. Hence, the provision of Section 135 of the Companies Act is not violative of Article 14 of the Constitution of India. Regarding applicability of circular of 2018 - Only for the calculation of the average net profit, the earlier years are to be looked into otherwise, the corporate social responsibility starts with effect from 1st April, 2014. There is no substance in the writ petition and Section 135 of the Companies Act, 2013 is not violative of any of the provisions of the Constitution of India - Similarly, the provisions of Rule 2 and 3(2) of the CSR Rules are not violative either of any of the provisions of the Constitution of India or of any of the provisions of the Companies Act, 2013 - Moreover, the Circular No.21/2014, especially para (v) thereof, is also legally valid and deserves not to be quashed and set aside. Petition dismissed.

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• 2019 (9) TMI 1140
  Whether the Tribunal could direct the Transferor Company to make payment of alleged tax despite an express undertaking by the Transferee Company to make such payment on behalf of Transferor Company if found due and payable after adjudication? HELD THAT:- It is well settled by a catena of Rulings that while sanctioning a scheme of arrangement the right of Tax Authorities remains intact to initiate appropriate proceedings regarding recovery of any tax. The Tax Authorities concern is in regard to recovery of the outstanding tax dues and in the event of a scheme of arrangement/merger/amalgamation the Tax Authorities right to recover the outstanding tax dues must remain intact. Once a scheme has been sanctioned by a Tribunal in accordance with law, as admittedly in the instant case it is and the same goes unassailed, nothing precludes the Tax Authorities from recovering its legitimate and recoverable outstanding tax dues from the Transferor or the Transferee Company, as provided in the scheme. Where in a given case the liability has arisen or would arise or the demand would be raised against the Transferor Company for the relevant period after due scrutiny, assessment, review or determination through a due judicial process and the Transferee Company undertakes to make payment of all outstanding tax dues as determined in the aforesaid manner, the scheme cannot be refused and has to be allowed. The Scheme having been approved and sanctioned and the same being in consonance with law, no fault can be found with the Transferee s undertaking to satisfy all demands raised by the tax authorities as finally determined by due process. The Appellants are justified in maintaining that the tax liabilities would be satisfied by the Transferee as determined by the competent forum seised of the matter in accordance with the approved Scheme which admittedly does not come in conflict with any express provision of the Companies Act, 2013. The legitimate interests of the concerned Tax Authorities have been lawfully protected and their right to recover the tax dues as determined by ITAT or any other competent forum as the case may be, remains intact. While the Scheme of Arrangement approved by the Tribunal remains intact, condition 10(b) cannot be sustained and the same requires modification - Appeal allowed subject to modifications.

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• Insolvency & Bankruptcy

• 2019 (9) TMI 1144
  Admissibility of petition - Initiation of CIRP - Corporate Debtor unable to repay the amount - Non Performing Asset - whether the application under Section 7 of the I B Code was barred by limitation and, if not, whether the claim of the Banks was barred by limitation to hold that there is no debt payable in the eyes of law? - HELD THAT:- The right to apply under Section 7 of the I B Code, accrued to the Bank only since 1st December, 2016, i.e., when I B Code came into force. From the aforesaid provision, it is found that the application under Section 7 is not barred by limitation. Apart from the fact that the Bank had taken action under Section 13(4) of the SARAFAESI Act and the matter is pending before the DRT since 2015-16, there being 12 years of limitation prescribed for enforcement of payment of money secured by a mortgage, we hold that the claim of the none of the Consortium Banks are barred by limitation and, therefore, the Corporate Debtor cannot claim that the debt is not payable in the eyes of law. In absence of any specific order of taking over the Management in terms of Section 13(4)(b) of the SARAFAESI Act, which includes the right to transfer by way of lease, assignment or sale for realizing of the secured asset, we hold that the Management of the Corporate Debtor continued with the Promoter. Therefore, if there is any default on the part of the Corporate Debtor to pay the debt amount, the Appellant cannot pass the blame on the Bank. Appeal dismissed.

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• 2019 (9) TMI 1129
  Maintainability of application - initiation of CIRP - Corporate Debtor - existence of dispute or not - Section 9 of the Insolvency and Bankruptcy Code, 2016 - HELD THAT:- It is a settled law that if any dispute is raised prior to the issuance of the invoices or Demand Notice u/s 8(1) of the I B Code with regard to quality of service or goods or pendency of the suit or arbitration, in such case one may take the plea that there is an existence of dispute but if any dispute is raised after issuance of Demand Notice u/s 8(1) that cannot be termed to be a pre-existing dispute . The Adjudicating Authority has failed to notice the aforesaid issue and observed that debt in question is not only serious dispute but also barred by limitation and laches and not discussed under which provision the Master Service Agreement with Sri Gowtham Academy of General and Technical Education was consequentially issued on 8th February, 2016 and the reply to the Demand Notice was issued on 8th August, 2017. Case remitted to the Adjudicating Authority (National Company Law Tribunal), Bengaluru Bench for admitting the application u/s 9 of the I B Code after notice to the Corporate Debtor .

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• 2019 (9) TMI 1124
  Admissibility of application - initiation of CIRP - Corporate Debtor - Amount outstanding against the Corporate Debtor which the Corporate Debtor failed to pay - HELD THAT:- The Operational Creditor has fulfilled all the requirements of law for admission of the Application. This Authority is satisfied that the Corporate Debtor has committed default in making payment of the outstanding debt claimed by the Operational Creditor. Therefore, Application is admitted and the commencement of the Corporate Insolvency Resolution Process is ordered, which ordinarily shall get completed within 180 days, reckoning from the day this order is passed. Petition admitted - moratorium declared.

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• 2019 (9) TMI 1122
  Maintainability of petition - Initiation of CIRP - Corporate debtor - default in repayment of debt - HELD THAT:- Since the Operational Creditor having furnished the proof to establish that debt and default are in existence, for there being no dispute from the Corporate Debtor side against the claim made by the Operational Creditor, this Bench, having satisfied with the proof filed by the Operational Creditor in compliance of provisions of Sections 8 and 9 of the Insolvency and Bankruptcy Code, admits the instant Company Petition. Petition admitted - moratorium declared.

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• Service Tax

• 2019 (9) TMI 1152
  Maintainability of appeal - monetary amount involved in the appeal - Levy of service tax - imposition of penalty - cleaning of railway wagons, cleaning of railway buildings and premises, cleaning and housekeeping of railway running rooms, water tightening of wagons in monsoon seasons etc. etc. - HELD THAT:- Having regard to the amount which is over all amount of Rs. 72,51,533/-, and the fact that even that amount has been directed to be bifurcated, this Court is of the opinion that the appeal falls within the mandatory limit prescribed by the circular dated 22/08/2019. Appeal dismissed.

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• 2019 (9) TMI 1147
  Jurisdiction of SCN - Power of Commissioner Service Tax-II Commissionerate, Kendriya Utpad Shulka Bhawan to hear SCN - whether the show cause notice dated 19th April, 2016 was without jurisdiction? HELD THAT:- The stipulation in paragraph 4 of the said show cause notice that it could be adjudicated by the Commissioner Service Tax-II Commissionerate was in order - Therefore, the objection of the appellant as to jurisdiction has no substance at all in our opinion. The case needs to be adjudicated on merits. However, we find from the records that in the absence of an interim order, the Service Tax Audit Commissionerate, Kolkata has on 17th March, 2017 adjudicated upon the show cause by passing an order. The appellants did not participate in it, because of the pendency of the appeal. To do complete justice between the parties, we direct that the show cause notice is to be adjudicated on merits afresh. The adjudication made on 17th March, 2017 is set aside - Appeal disposed off.

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• 2019 (9) TMI 1145
  Imposition of penalty u/s 77 and 78 of FA - tax liability not discharged within the due dates specified - failure to file ST-3 returns - suppression of relevant facts - HELD THAT:- Even the statute gives a cushion of thirty days time after the Show Cause Notice as sufficient compliance to escape the rigours of Section 78 by pegging the penalty at 15 per cent. It is the case of the appellant that the entire tax (excess, in fact) and interest was paid by 31.03.2011 whereas the Show Cause Notice was issued on 22.02.2011 and the Order-in-Original has appropriated a sum of Rs. 9,00,846/- as against the demand of Rs. 11,36,600/- and clearly, there is no discussion on why the other payments were not considered and nor do we see any justifiable reasons for doing so. There are no doubts with regard to the conduct of the appellant entertained by the Adjudicating Authority except a bald allegation of suppressed the facts which is not sufficient - So also, mere non-filing of ST-3 return is insufficient to bring home the guilt under Section 78 since that default is dealt with separately by a different provision. Penalties set aside - appeal allowed.

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• 2019 (9) TMI 1143
  Refund of service tax - service tax paid on composite contracts in respect of the construction activities including construction of residential complex service - Circular No. 108/02/2009 dated 29.1.2009 - time limitation. Scope of Circular No. 108/02/2009 dated 29.1.2009 - HELD THAT:- Para 3 of Circular No. 108/02/2009 dated 29.1.2009 clarifies that if the purchaser enters into an agreement for construction of residential complex with the builder and the builder provides the services for construction and after such construction, the purchaser received such property for his personal use, then such activity would not be subjected to service tax because the exclusion provided in the definition of residential complex would apply to such a situation. Thus, it is very much clear that the exclusion clarified in the circular applies to the appellants - the service tax paid by them is under mistake of law. Time Limitation - HELD THAT:- Section 11B prescribes a period of one year for filing the refund claim. However, the Hon ble jurisdictional High Court in the case of M/S. 3E INFOTECH VERSUS CUSTOMS, EXCISE SERVICE TAX APPELLATE TRIBUNAL, COMMISSIONER OF CENTRAL EXCISE (APPEALS-I) [ 2018 (7) TMI 276 - MADRAS HIGH COURT] had occasion to analyse the issue of levy when service tax is paid under mistake of law. The rejection of refund claim is unjustified - Appeal allowed.

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• 2019 (9) TMI 1141
  Non/short payment of service tax - Franchisee Service - Management Consultancy Service - Non-payment of service tax on advertisement expenses incurred by the local franchisees - Short payment of service tax due to wrong utilisation of cenvat credit - Non-payment of service tax on management consultancy services by wrongly claiming the same as export service - Interest on late payment of service tax on franchisee fees to McDonald s USA. Non-Payment of Service Tax on Advertisement Expenses Incurred By Franchisees - SCN alleges that since the franchisee has to expend during each calendar year an amount which is not less than 5 per cent of the gross sale for advertising and promotion of the restaurant system owned by Mcdonald s Corporation through the contractual obligation, the franchisor gets an extra consideration towards the advertisement from the franchisee for promotion of its own brand, instead of the franchisee, which amount will form part of the value of taxable service of the franchisor - Section 67 of the Act read with Rule 5 of the 2006 Rules - HELD THAT:- The franchisee had to expend not less than 5% of the gross sales in a particular year towards the advertisement of its Restaurant. The amount was not required to be deposited in any fund of the franchisor for advertisement or promotion of the franchisor - What further transpires from the agreement is that there is no obligation cast upon the franchisee to incur any expenditure on advertising the brand name, service marks and trademarks of the franchisor. Any indirect result, because of advertisement cannot, therefore, be called an extra consideration in terms of section 67 of the Act. Unless an amount is charged by the service provider to the service recipient, it does not enter into an equation for determining the value on which Service Tax is payable. The order has grossly erred in interpreting the franchise agreement, thereby, including the cost of advertisement in the franchise fee received by the Appellant. The amount incurred by the franchisees towards advertisement expenses, cannot, therefore, be said to be consideration paid by the franchisee to the Appellant, as it is the franchisee themselves who are benefitting out of such expenses and not the Appellant. The value of material which is supplied free by the service recipient cannot be treated as gross amount charged as that is not a consideration for rendering the service - Decided against Revenue. Short payment of Service Tax due to wrong utilisation of cenvat credit - HELD THAT:- The franchisee services received by the Appellant and the Management Consultant services rendered by the Appellant, are so inextricably linked, that, one cannot be rendered/received in the absence of the other. Where, on the other hand, the Appellant is receiving franchisee services from McDonald s USA to set up the franchise business in India, at the same time, the Appellant is also providing consultancy to McDonald s USA, in order to effectively carry out and supervise the franchise business. Accordingly, to state that, the franchise service could not be termed as an input service, for management consultancy is against the spirit of the CENVAT Credit mechanism - Decided against Revenue. Non-payment of Service Tax on Management Consultancy services by wrongly claiming the same as export service - HELD THAT:- Rule 3(2) of the Export of Service Rules 2005 states that provision of any taxable service to qualify as export has to satisfy the condition that payment for such services is received in convertible foreign exchange - In the first instance, there is no time limit in Rule 3(2) of the Export Service Rules, 2005. Thus, any time limit prescribed by the Reserve Bank of India would not debar exporter from receiving remittances for the services even after one year. What has, therefore, to be examined is whether the Appellant received any remittances thereafter. This has not been examined in the impugned order - The matter, therefore, needs to be remitted to the Principal Commissioner for examining this issue and thereafter recording a finding. Interest on late payment of Service Tax on franchisee fees to McDonald s USA - HELD THAT:- In the instant case, the date of entry and payment to overseas entity are on the same day. There is, therefore, no delay and the reasoning given by the Principal Commissioner to the effect that since the payment of franchisee fee from the local entities is on monthly basis, the same should be the basis with respect to the remittances to the overseas associated enterprises is not correct - the forward charge and reverse charge cannot be equated for the charge of interest as these are governed by different set of Rules - Demand of interest do not sustain. Extended period of limitation - HELD THAT:- The demand made in Issue No. 1, 2 and 4 has been set aside - With regard to Issue no. 3, the matter has been remitted to the Principal Commissioner to decide it afresh - Thus, it is not necessary to examine the issue relating to limitation, at this stage. Appeal allowed in part in favor of Assessee and part matter on remand.

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• 2019 (9) TMI 1123
  Whether the Offshore Upfront Fee paid by the respondent is an interest or a fee? - HELD THAT:- We find that if it is an interest then service tax is not payable by the appellant in terms of the Circular No. F.No. B2/8/2004-TRU dt. 10.09.2004 wherein interest on loan is not the part of taxable value - We have gone through the facts of the case and the respondent has produced a letter from the Standard Chartered Bank dated 15.12.2014 to show that the Offshore Upfront Fee is nothing but an interest on buyer credit transaction as stipulated by the RBI Guidelines. On going through the said letter, we hold that the said amount on which the service tax is being demanded and Upfront Fee is nothing but an interest and on interest, no service tax is payable by the respondent, therefore, the respondent is not liable to pay service tax on the said amount. Decided in favor of assessee.

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• Central Excise

• 2019 (9) TMI 1157
  Imposition of penalty - Section 11-AC of Central Excise Act, 1944 - revenue neutral situation - assessee paid the tax demand along with interest prior to the issuance of SCN itself - Whether, on the facts and in circumstances of the case and in law, the Tribunal was correct in upholding penalty on the Appellant under Section 11-AC of the Act, 1944 since the confirmation of demand results in a Revenue neutral situation? - HELD THAT:- This issue was not urged before the Tribunal as there were no facts on record to support the submission. Therefore, in the absence of any facts being on record to support the above legal submission, we are called upon to decide the issue in vaccum - this issue was not urged before the Tribunal. same does not gives rise to any substantial question of law - question not entertained. Whether, on the facts and in circumstances of the case and in law, the Tribunal was correct in upholding penalty on the Appellant under Section 11-AC of the Act, where the assessee paid the tax demand along with interest prior to the issuance of show cause notice itself? - HELD THAT:- The penalty is imposable under Section 11-AC of the Act is a finding of fact arrived at by all the Authorities under the Act. This concurrent finding of fact is not shown to be perverse in any manner - the question does not give rise to any substantial question of law - question not entertained. Appeal dismissed.

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• 2019 (9) TMI 1156
  Levy of Central Excise Duty - transformer structural materials, otherwise known as tower parts and structure part which consists of clamps, different types of channel cross arms, stay set and transformer structure special clamps cleared as non excisable during the period of 2009 to 2013 - HELD THAT:- The Department had accepted the petitioner s stand till the year 2008 that there was no manufacturing activity and in the present impugned order in original, a contrary stand has been taken that the activities of the petitioner is a manufacturing activity and is a taxable commodity. When the CESTAT has already held that the petitioner s activities involved in the present Writ Petition to be a non manufacturing activity and such a ratio has already been upheld by the Hon ble Apex Court, the present impugned order, passed on the basis that the petitioner s activity is a manufacturing activity, cannot be sustained. Petition allowed.

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• 2019 (9) TMI 1150
  Clandestine removal - case against the Appellant was that the Appellant had cleared certain goods without accounting for them in SAP-ERP software system and without payment of duty - Revenue neutrality - period of demand was from April 2003 to November 2005 - HELD THAT:- The Tribunal has not dealt with the specific contention raised by the Appellant on revenue neutrality. Therefore, as far as this ground is concerned, the order of the Tribunal is non-speaking. The Tribunal ought to have, after referring this specific contention of the Appellant, dealt with the same on merits - Since the Tribunal has not considered the ground raised by the Appellant on revenue neutrality, the appeal will have to be remanded to the Tribunal for consideration of the issue recorded in respect of the contention raised in paragraph-3.2(i) of the impugned order regarding the transaction between Unit No.1 and Unit No.2 being revenue neutral. The appeal on remand will be considered only in respect of the aspect of revenue neutrality as urged by the Appellant in respect of unfinished goods between Unit No.1 and Unit No.2. The question be decided on merits. The appeal of the Appellant is restored before the Tribunal to be considered.

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• 2019 (9) TMI 1142
  Undervaluation - extended period of limitation - Section 11A(4) of the Central Excise Act, 1944 - period of dispute is from 27.05.1996 to 04.03.2001 - HELD THAT:- The Hon ble Apex Court, in one of its very recent judgements in the case of M/S D.J. MALPANI VERSUS COMMISSIONER OF CENTRAL EXCISE, NASHIK [ 2019 (4) TMI 587 - SUPREME COURT] has considered the amended provisions of transaction value in the context of determining transaction value including an additional amount paid voluntarily by a customer towards donation, which is called as Dharmada and the includibility of the same in the transaction value. The duty can only be on the transaction value. In the case on hand, the transaction value cannot be anything other than the valuation arrived at by a qualified Cost Accountant in his CAS-4 certificate. The other peculiar fact of the case is that the audit party has acknowledged the furnishing of such CAS-4 certificate and the Assistant Commissioner of the Revenue has acknowledged that the appellant had in fact furnished all the required documents and hence, no deficiency notice was issued. The valuation as per CAS-4 certificate which has gone on records of the Revenue is required to be accepted - the Adjudicating Authority is directed to go by the valuation as per the CAS-4 certificate alone. Extended period of limitation - HELD THAT:- The Revenue authorities were aware of the method of valuation adopted by the appellant which was based on the CAS-4 certificate which in fact underwent proper scrutiny by the audit party of the Revenue as early as in 2016-17 and hence, there cannot be any scope to allege suppression, fraud, etc.; therefore, invoking the extended period of limitation in the Show Cause Notice dated 26.04.2018 is not just and proper. Appeal allowed - decided in favor of assessee.

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• 2019 (9) TMI 1139
  CENV AT credit - input services - Catering Services attributable to EOU by the appellant DTA - proportionate reversal of Cenvat Credits on recovery made from the employees towards such Canteen/Catering Services - HELD THAT:- It is the settled principle of law that service tax paid on catering and house-keeping services are eligible input credits before negative list came into force, for which both in order-in-appeal and order-in-original, the credits were held to be admissible. Cursory reading of Sub Rule 4 of Rule 12 A would indicate that Cenvat Credit available with one of registered manufactured premises can be used by other such registered manufactured premises and if the transfer is done from the premises providing taxable service, the other registered premises should also be providing taxable service and not vice versa, which is applied by the authorities below and argued by Learned Authorised Representative - thus there is no hesitation to say that the credit attributable to the EOU could be taken and utilised by the appellant DTA. CENVAT Credit - recovery made from employees towards canteen service - HELD THAT:- Such availment of credit is not admissible - issue decided in the case of CCE, NAGPUR VERSUS ULTRATECH CEMENT LTD., [ 2010 (10) TMI 13 - BOMBAY HIGH COURT] . Extended period of limitation - Penalty - HELD THAT:- Considering the unsettled position of law on the issue of admissibility and inadmissibility of credits on catering and house-keeping services, extended period cannot be invoked but since the 2nd show cause notice is confined to the normal period and even show cause notice does not indicate malafide intention on the part of the appellant to avail ineligible credit, confirmation of penalty u/s 78 by the Commissioner (Appeals) cannot be said to be in accordance with the provisions of the Rule. Appeal allowed in part.

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• 2019 (9) TMI 1137
  CENVAT credit - Input services - Mandap Keeper Service - Hotel Accommodation Service - HELD THAT:- There is no dispute, that the Hotel Accommodation Service was used by the appellant for hotel stay of staff of the appellants who travelled outside for business purpose - As regard Mandap Keeper service, the same is used for arranging the business conference which is a necessity for running the business. Therefore, both the services are directly used for conducting the business of the appellant. The expenditure expenses of these services are borne by appellant and booked in their books of account - Credit allowed - appeal allowed - decided in favor of appellant.

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• 2019 (9) TMI 1132
  CENVAT credit - input services - renting of crates used for carrying of final products to the buyer s premises - place of removal - HELD THAT:- As per the definition of input services , the restriction to avail credit upto the place of removal is applicable only for outward transportation of goods. In the present case, the input services availed by the appellant is renting of crates and not for transportation of goods - The renting of crates has nothing to do with GTA Services and merely because the crates have been used for supply of the goods to the buyer s premises, it cannot be said that the renting of crates is not eligible for credit. Credit allowed - appeal allowed - decided in favor of appellant.

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• 2019 (9) TMI 1131
  CENVAT Credit - input services - warranty services - denial on account of nexus with manufacturing activity - period Jan. 16 to Jun. 17 - HELD THAT:- From the said exclusion clause of input services, it is seen that credit will be eligible if the said services are used by a manufacturer of motor vehicle. In the present case, the appellant is a manufacture of parts and accessories. They supplied the parts and accessories to vehicle manufacturers. The vehicle manufacturers are having an obligation to the customers to provide the Warranty Services. The vehicle manufacturers as well as the appellant, who supply the parts and accessories have included the warranty charges in the assessable value, while discharging the excise duty - Thus, the appellant being a person, who supplies the parts and components to the original vehicle manufactures does not fall within the exclusion clause. Credit allowed - appeal allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2019 (9) TMI 1155
  Validity of assessment order - assessment year 2015- 2016 - Section 22(2) of the TNVAT Act, 2006 - Imposition of penalty - HELD THAT:- It is not in dispute that the petitioner has filed their reply on 27.07.2016. However, the Assessing Officer proceeded to confirm the proposal for penalty without expressing his view as to whether not accounting two sale invoices was willful or deliberate, especially, when it is claimed by the petitioner that one of such invoices pertains to interstate transaction. This Court, at this stage, is not expressing any view on the merits of such claim made by the petitioner, as it is for the Assessing Officer to consider and decide the same. When penalty is sought to be imposed, the Assessing Officer has to specifically give finding that the sale suppression was willful and deliberate - Since I find that no such finding is given in this case, I am inclined to remit the matter back to the Assessing Officer to reconsider the issue with regard to penalty and pass orders after hearing the petitioner. The matter is remitted back to the Assessing Officer to reconsider the said issue - petition allowed by way of remand.

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• 2019 (9) TMI 1153
  Maintainability of petition - Alternate remedy of successive appeals - escaped assessment - reopening of assessment - change of opinion - HELD THAT:- Undeniably, there are hierarchy of appeals and revision provided under the Act of 2003 in which the order of reassessment passed with reference to Section 25 and 26 can be assailed by the assessee. What has to be however examined is whether the writ petitioners in these matters should be directly entertained by this court treating them under exceptional category so as to deviate from the normal rule of relegating the parties to avail the alternate remedy. It certainly cannot be said to be a case of inherent lack of jurisdiction. Aside of the fact whether or not the re-assessment order could have been legally passed, the appellants cannot be allowed to contend that such orders have been passed dehors the principles of natural justice. Admittedly, show cause notices were served on each of the appellants prior to passing of the impugned reassessment orders. The case of the appellants cannot also said to be fall in any category of exceptions including about breach of any fundamental right where the remedy available in the Act of 2003 under the scheme of the Statute cannot be considered as effective and efficacious, particularly in the face of the fact that similarly situated assessees in many such identical cases, including some of the petitioners, have already approached the appellate authority and first appellate authority and thereafter the Tax Board and almost in all of them, penalty has been waived and number of sales tax revisions, as referred to above, then have been filed by the assessee before this Court, which are still pending. Appeal dismissed.

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• 2019 (9) TMI 1151
  Refund claim - extended period of limitation - respondents are directed to release the refund amount within the next four weeks - petitioner states that, in the present case, there is no justification for extension of limitation for passing the order - HELD THAT:- We are not concerned with that aspect of the matter and, in case, an order adverse to the petitioner s interest is passed, it shall be open to the petitioner to raise all its pleas before the appropriate forum. However, the respondents should pass the fresh order, if any, pertaining to the fourth quarter of 2013-14 in accordance with law within eight weeks from today, failing which the petitioner would be entitled to refund of the amount of Rs. 82,227/- relating to the fourth quarter of 2013- 14 as well. Petition disposed off.

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• 2019 (9) TMI 1146
  Imposition of penalty - petitioner has accepted the tax liability and remitted the same at the time of inspection itself - Deemed assessment - Section 22(2) of the TNVAT Act, 2006 - HELD THAT:- It is not in dispute that the petitioner has filed their reply on 27.07.2016. However, the Assessing Officer proceeded to confirm the proposal for penalty without expressing his view as to whether not accounting two sale invoices was willful or deliberate, especially, when it is claimed by the petitioner that one of such invoices pertains to interstate transaction. This Court, at this stage, is not expressing any view on the merits of such claim made by the petitioner, as it is for the Assessing Officer to consider and decide the same. When penalty is sought to be imposed, the Assessing Officer has to specifically give finding that the sale suppression was willful and deliberate - Since I find that no such finding is given in this case, I am inclined to remit the matter back to the Assessing Officer to reconsider the issue with regard to penalty and pass orders after hearing the petitioner. Petition allowed by way of remand.

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