2018-TIOL-142-SC-IT
ACIT Vs ASHISH PRAFULBHAI PATEL: SUPREME COURT OF INDIA (Dated: April 16, 2018)
Income Tax - SLP - Sections 245C, 245D(2A), 245D(2D) & 245HA
Keywords - Chapter XIXA of Finance Act 2007 - Settlement Commission
THE assessee, an individual, had assessment for several AYs pending at original or appellate stages. He filed application before the Settlement Commission, to avail benefit of a scheme offering settlement of pending cases. Meanwhile, vide the Finance Act 2007, certain changes were made to the provisions in Chapter XIXA of the Act, pertaining to settlement of cases. Prior to such amendments, an assessee who applied for settlement of cases was required to pay tax with interest on admitted income. Thus through the amendment, the legislature now required that payment of admitted tax with interest should accompany the application for settlement and for the pending cases, the applicants were given time upto 31.1.2007 to pay their taxes, failing which, the application for settlement of cases would abate. Pursuantly, the assessee paid a sum covering the payment for the relevant AYs. However, the assessee was required to pay a further sum as additional tax with interest for two AYs and which was not made till 31.7.2017. The assessee contended that due to financial difficulties he was unable to make full payment of additional tax and interest to cover all assessment cases. He requested that some additional time be granted to enable him to make the remaining payment. The assessee also claimed to have paid the additional tax with interest for five out of seven AY's for which he had applied for settlement. He also sought that abatement of application for settlement should be confined to those assessment years for which the assessee was unable to make payment of additional tax with interest.
However the Commission rejected both the assessee's contentions and observed that by virtue of amended provisions of Chapter XIXA of the Act making payment of additional tax with interest before 31.7.2007 was mandatory and Commission had no power to extend the time limit or grant installments. The Commission also rejected the assessee's request to limit the rejection of the application for those assessment years for which he could not make the payment. In this regard, the Commission noted that application for settlement could not be split in parts and be allowed to proceed further with respect to some of the assessment years and rejected for some. Subsequently, the High Court held that when the assessee filed settlement applications for several AYs but only partly paid additional tax with interest, only those proceedings before the Commission would abate for which no payment of tax was made before June 1, 2007 rather than all of the proceedings. Hence the Revenue's SLP.
On hearing the SLP, the Apex Court was of the view that,
++ Delay condoned. SLP dismissed.
Revenue's SLP Dismissed
2018-TIOL-141-SC-IT
PR CIT Vs RELIANCE CAPITAL ASSET MANAGEMENT LTD: SUPREME COURT OF INDIA (Dated: April 16, 2018)
Income Tax - SLP - Section 14A & Rule 8D.
Keywords: Advisory fees - Exempt dividend - Surplus fund - Exempt capital gains & Interest expenditure.
The assessee, an asset Manager of Reliance Mutual Fund received dividends on two occasions and said dividends were directly credited to the bank account. In its return, the assessee disclosed dividend income of Rs.8,33,46,239/- and long term capital gains of Rs.68,88,582/- and claimed both the income as exempt. However, the AO observed that the disallowance u/s 14A should be worked out as per the provisions of Rule 8D. The AO had accepted that there was no requirement of making any disallowance out of interest expenditure. However, the AO disallowed part of indirect expenses calculated at 0.5% of the average value of investments, which worked out to Rs.1,46,78,090/-. This was in terms of Rule 8D and accordingly, the AO enhanced the disallowance made by the assessee. On appeal, the CIT(A) confirmed the addition made by the AO.
When the matter reached before the Tribunal, it restricted the disallowance u/s 14A to Rs.3,50,000/- as against Rs.1,46,78,090/- made by the AO u/s 14A r/w Rule 8D. On further appeal, the High Court held that when the AO was satisfied with the correctness of the assessee's claim in respect of expenditure which was incurred and in terms of Sec. 14A, he could not proceed to work out the disallowance u/s 14A as per Rule 8D and accordingly Revenue's appeal was dismissed.
After hearing the parties, the Apex Court condoned the delay and directed to issue the notice.
Notice issued
2018-TIOL-140-SC-IT
PR CIT Vs JAYA BALAJEE REAL MEDIA PVT LTD: SUPREME COURT OF INDIA (Dated: April 13, 2018)
Income Tax - SLP - Sections 199C, 199D, 199E, 199F & 199M.
Keywords - Adjustment of liability - Cash deposit - Current account - Demonetisation - Excess cash seized & PMGKY scheme.
The assessee company carried on the business of producing films in Telugu and Tamil languages. According to the assessee, it deposited a sum aggregating to Rs 40 Crores during the period from 23-12-2016 to 27-12-2016 into their current account with Canara Bank, after the GoI notified the demonetisation of certain currencies. Thereafter, searches were conducted at various places in Chennai and Hyderabad and a sworn statement was recorded from the Director of assessee company. Thereafter, a sum of Rs.22.99 Crores was ordered to be seized followed by an order for seizure of another amount of Rs.13.98 Crores, both of which were lying in the current account of the assessee.
After more than 50 days of the seizure of the said amounts, the assessee gave a sworn statement expressing willingness to disclose an amount of Rs.20 Crores under the scheme known as PMGKY Scheme. The said scheme was introduced under the Taxation Laws (Second Amendment) Act, 2016 mandating two conditions to be satisfied before a declaration in Form-I could be accepted from a person willing to come under the scheme. Those conditions were (i) payment of 30% of the income disclosed under the Act towards tax, payment of 10% of the undisclosed income as penalty and payment of 33% of the tax towards surcharge and (ii) the deposit of 25% of the declared income in RBI Bonds. But, since the entire amount available to the credit of the assessee in their current account, totalling to Rs.36.97 Crores were seized by the Revenue and also taken away by them, the assessee was left with no funds to make payment u/s 199D, 199E and 199F.
When the matter reached before the High Court, it was held that when the entire sum deposited in assessee's current account was seized and nothing left in the hand of the assessee to pay the Revenue under the PMGKY Scheme, the surplus fund can be released to the assessee after keeping the RBI bonds with it and its interest would not be harmed.
After hearing the matter, the Apex Court held that,
Whether pre-deposit mandated under PMGKY Scheme is not a discretionary one, hence, funds seized under such scheme should not be released without obtaining security deposit from the taxpayer - YES: SC
++ it has been brought to notice that the RBI bonds which are seized are the subject matter in Writ Petition No. 9262/2017 filed before the High Court, wherein the Assessee has challenged CBDT Circular dated Jan 18, 2017. He contends that if that writ petition fails, all the bonds will be forfeited in entirety and this aspect has not been looked into by the High Court while allowing immediate release of Rs.5 crores. Therefore, the High Court should have imposed some condition directing the assessee to furnish security against release of Rs.5 crores. Therefore, though no interference is made with High Court's order, but at the same time, the Revenue Department is permitted to approach the High Court by means of appropriate application so that suitable conditions are stipulated.
Revenue's SLP disposed of
2018-TIOL-721-HC-MUM-IT + Story
CIT Vs GO AIRLINES (INDIA) LTD: BOMBAY HIGH COURT (Dated: April 11, 2018)
Income Tax - Section 194-I.
Keywords - Passenger service fees - TDS.
The Revenue has preferred the appeal challenging the action of Tribunal in holding that the payments made to Airport Authority of India and other airport operators by the assessee airlines for Passenger Service Fees, were not covered by section 194-I.
On appeal, the High Court held that,
Whether the passenger security fees paid for providing security services and facilities to embarking passengers of airline, attracts no TDS provision of Section 194-I - YES: HC
++ the counsel for Revenue fairly admits that the appeal filed by the Department from the order of the Tribunal in Jet Airways case being Income Tax Appeal No. 1181 of 2014 relating to AY 2010-11 in case of CIT, TDS, Mumbai V/s. Jet Airways, has been dismissed. Therefore, the question as proposed does not give rise to any substantial question of law.
Revenue's appeal dismissed
2018-TIOL-720-HC-MUM-CT + Story
LEIGHTON INDIA CONTRACTORS PVT LTD Vs STATE OF MAHARASHTRA: BOMBAY HIGH COURT (Dated: April 4, 2018)
Central Sales Tax & Maharashtra Value Added Tax - Writ - Sections 4(1), 4(2) & 5(1) ; 2(12), 2(24), 8 & 23
Keywords - Export - Offshore base - Pipelines - Territorial waters - Works contract
THE assessee is a leading company engaged as a contractor and developer of projects. It is engaged in off-shore oil & gas exploration, commercial & industrial construction and related activities. During the relevant AY, the assessee was awarded a works contract by the ONGC for replacement of pipelines. This contract includes laying and completing 39 pipeline segments, which includes conducting project management surveys, design engineering, procurement, fabrication, anti-corrosion and weight coating. Considering the terms & conditions of the contract, the activities were to be carried out at offshore platforms located beyond territorial waters. To execute the contract, the assessee imported most of the goods & material used, and sent the same directly to the offshore platform from the port of landing. The assessee claimed that the goods & material used never crossed the Customs frontiers of India, and were never brought into Maharashtra.
When the assessee filed returns, assessment was initiated u/s 23 of the Maharashtra Value Added Tax Act, 2002 (MVAT). Thereupon, an assesment order was passed, raising duty demand for VAT of Rs 4,26,94,89,037/-, including tax, interest and penalty. The Department also passed a separate order rejecting the assessee's claim for deduction. This order also sought to tax the entire turnover declared by the assessee. The Department rejected the assessee's claim that the sale in the works contract was of the nature of export u/s 5(1) of the Central Sales Tax Act, 1956. It went on to treat the entire activity as a local sale and thus, taxable. Further, in a separate assessment order passed for a different period, identical findings were recorded and duty demand of Rs 2,28,50,15,227/- was raised. Later, the Appellate Commissioner rejected the assessee's appeals. Subsequently, the assessee filed four separate appeals before the Tribunal, accompanied with applications seeking stay on recovery of the duty demand during the pendency of the appeals. However, the Tribunal directed the assessee to pre-deposit a sums of Rs 8 crores & Rs 4 crores for both the periods, conditional upon which the recovery of dues would be stayed. Hence the present writ.
On hearing the writ, the High Court held that,
Whether or not supply of goods to an offshore base beyond Indian territorial waters would constitute an export, is a legal issue rather than a factual issue - YES: HC
Whether in such circumstances, instead of examining the legal issue, can the Tribunal treat the matter as involving factual issues and direct the assessee to pre-deposit part of duty demand raised - NO: HC
++ here, the contract is for pipelines replacement & laying project between the ONGC and consortium of companies. The agreement is that a tender was floated and the assessee and others represented that they have expertise and technical knowhow in respect of the said work and which is of laying and completion of 39 pipeline segments, including all the steps as per the agreement and for a lump sum price. The scope of the work is laying and completion of 39 pipeline project, which includes project management, survey, design, engineering, procurement & fabrication. The dates of commencement and completion of the work are stipulated. Then, there is an access provided to installation site. Then, there are conditions for procurement & selection of makes and vendors. The contractor has to select the equipment and material from the vendor list and thereafter, there is an approval, which has to be given also for subcontracting arrangement and procurement of plant, equipment & materials. That is only when the compliance by the contractor of the conditions stipulated in paras 5.2.2 and 5.2.3 of the contract is made. The miscellaneous and the certification following the same would result in the performance of contract & discharge certificate being issued.
++ the assessee in this case raised specific grounds to challenge the assessment order and the order of the first appellate authority. The assessee pointed out that it is responsible for the goods imported and procured until their use for executing the contract and during the course of which, an approval has to be granted by the ONGC. It is submitted that the goods supplied under the contract with ONGC for carrying out turnkey project on offshore sites is beyond 12 nautical miles. The entire finding in the order of assessment and the order of the first appellate authority is termed as vague because the matter has been approached in general terms. It is specifically alleged that the materials and equipments supplied are in the course of export and hence, not liable to VAT in Maharashtra. The assessee specifically urged that the goods supplied to ONGC offshore site need to be transported to such sites by a sea vessel. The ultimate risk of the goods supplied to ONGC offshore site lies with the assessee until the ONGC representative provides with final acceptance certificate to the assessee for the work done. These facts were ignored and the goods were held to be supplied to the ONGC because they are assigned for ONGC supply base at Nhava Sheva and handed over to ONGC. The argument is that the property in such goods has not been transferred within the State of Maharashtra. That is how the judgment and having a nexus theory is inapplicable. It is only because the goods are despatched to the supply base, but subject to acceptance by the ONGC that this matter is distinct from the other cases and dealt with by the Tribunal.
++ therefore, this was a highly debatable issue. If the Tribunal was required to refer to not only the legal principles, but whether they are applicable will have to be eventually determined on the basis of the terms and conditions of the contract, then, in the given facts and circumstances of the case, there was no reason to impose any condition of part payment. The legal issues and raised either way ought to be answered on the basis of the nexus theory involved in the judgment of the Supreme Court and this court, whether that can be applied to the given facts and circumstances and to a works contract, unmindful of its peculiarity, demands an unconditional stay of recovery. This was not a case where the Tribunal was confronted with purely factual matters and it was not required to consider anything further, but apply a settled principles to the facts and an attempt is made by the dealer to get out of this settled legal position. The legal position, as is emerging from the judgments rendered in two distinct cases, namely a sale and by applying a nexus theory to it or a sale in the course of execution of a works contract would, therefore, need a deeper consideration. That justifies an unconditional stay of recovery pending disposal of the appeal. This is a case where the Tribunal could have decided the legal issues and finally instead of insisting on part payment. This is an exception, which enables the High Court to interfere in the Tribunal's order.
++ the writ petition succeeds. The Tribunal's order is quashed and set aside and it shall now decide the matter finally within a period of four months from the date of communication of this order. No final opinion expressed on the rival contentions. Beyond highlighting the nature of the controversy, this Court has not done anything, which should either influence the final conclusion of the Tribunal or guide the same.
Assessee's Writ Petition Allowed
2018-TIOL-719-HC-MAD-CT
STERLING HOLIDAY FINANCIAL SERVICES LTD Vs ACIT: MADRAS HIGH COURT (Dated: April 3, 2018)
Income Tax - Break ups of expenses - Bonafide transaction - Capital expenditure - Pollution control equipment.
The assessee has filed the appeal challenging the order passed by the Tribunal wherein the expenditure incurred in connection with the share issue by the assessee was disallowed and restricted the claim depreciation and also did not allowed the full amount of depreciation as claimed by the assessee.
On appeal, the High Court held that,
Whether an expenditure related to issue of share will retain the character of capital expenditure even if, it is to help in business and profit-making of the company - YES: HC
Whether when the assessee fails to prove the bonafides of the transaction pertaining to a machinery, the same calls for fresh adjudication - YES: HC
++ the Tribunal has rightly applied the decision of Brooke Bond India Ltd., Vs. CIT and held that the expenditure incurred in respect of the issue of share is "capital expenditure". Unfortunately, neither before the AO nor before the CIT(A) nor before the Tribunal nor before us, the break up details of such expenditures were furnished by the assessee. Therefore, we find that the finding rendered by the Tribunal on the said issue is perfectly valid;
++ the Tribunal found that the transaction done by the assessee lacks bonafide. This is, on account of the dates and events, which had occurred in the transaction, pertaining to a machinery being a pollution control equipment. There is absolutely no material to dislodge the factual findings recorded by the Tribunal, confirming the findings of the CIT(A) as well as the AO and the transaction clearly would go to show that there is serious doubts regarding its bonafides;
++ however, the Tribunal has granted a partial relief and remanded the matter back to the AO for re-verification to ascertain whether the machinery was used by the SRHSHL between 22.7.94 and 22.9.95 and if there was such a use, then the depreciation can be allowed only on Rs.16,95,338/-. We find that the Tribunal rightly took note of the factual matrix and arrived at the said conclusion;
++ the said decision could have no application to facts of the case on hand, since the authorities as well as the Tribunal found that the SRHSHL had fabricated the machinery by 22.7.94 and sold the machinery to Veera Enterprises on 22.9.95 and Veera Enterprises sold the machinery to the assessee on 25.9.95, which in turn is stated to have leased the machinery back to the vendor, SRHSHL. While the sale was effected in favour of Veera Enterprises, the Tribunal noted the sale consideration at Rs.16,86,904/- including the sales tax. However, when the machinery was sold to the assessee, it was for Rs.73 lakhs. Thus, on facts, the Tribunal rightly suspected the bonafides of the transaction and remanded the matter back only for a limited purpose. Thus, we find that there is no error in the order passed by the Tribunal.
Assessee's appeal dismissed
2018-TIOL-05-AAR-GST
SWITCHING AVO ELECTRO POWER LTD: AAR (Dated: March 21, 2018)
GST - Applicant, stated to be a supplier of power solutions, including UPS, servo stabiliser, batteries etc. wants a ruling on the classification of the supply when it supplies UPS along with the battery - More specifically, they want a ruling on whether such supplies can be treated as Composite Supply within the meaning of Section 2(30) of the CGST Act, 2017. Held: A standalone UPS and a battery can be separately supplied in retail set up - A person can purchase a standalone UPS and a battery from different vendors - applicant himself admits that he supplies the battery and UPS as separate machines as well as UPS with battery - It is obvious that the UPS and the battery have separate commercial values as goods and should be taxed under the respective tariff heads when supplied separately - If a combination of goods that does not amount to a composite supply is being offered at a single price, such supplies are to be treated as mixed supplies - Supply of UPS and Battery is to be considered as Mixed Supply within the meaning of Section 2(74) of the GST Act, as they are supplied under a single contract at a combined single price: AAR [para 10, 13]
Application disposed of
2018-TIOL-1235-CESTAT-MUM + Story
MAHINDRA AND MAHINDRA Vs CST: MUMBAI CESTAT (Dated: March 21, 2018)
ST - Input Service Distributor registration is only for the purpose of distribution of credit and the ISD can be held accountable only in case of improper distribution of credit - Rule 14 of CCR can be made applicable only on the person who avails the CENVAT credit wrongly or utilizes the credit and it is not invokable against the Input Service Distributor – Following the precedent decision in appellant's own case reported as 2017-TIOL-2364-CESTAT-MUM Appeal allowed with consequential relief: CESTAT [para 4, 5]
Appeal allowed
