2019-TIOL-39-HC-AHM-GST

PERFECT BORING PVT LTD Vs UoI : GUJARAT HIGH COURT (Dated: Dated: February 08, 2019 )

GST - Petitioner has challenged the order of provisional attachment passed by the respondent in exercise of powers under section 83 of the CGST Act, 2017 whereby the bank account with Bank of India, Ahmedabad Main and eight other bank accounts of the petitioner have been attached.

Held: Object of the provision is to protect the interest of the Government revenue - In the facts of the present case, attachment of the bank accounts of the petitioner has resulted into various hardships to the petitioner which would adversely affect its business and which may result in loss of revenue to the Government – Instead, if the petitioner provides for some security towards its outstanding dues, the interest of the petitioner as well as the revenue can be protected - Court is of the view that the interest of justice would be served if the petitioner is permitted to pay the amount of Rs.55,00,000/- outstanding towards excise dues by way of equal monthly installments within a period of eight months, subject to the petitioner furnishing a bank guarantee for an equal amount towards security of such amount within a period of one month - respondents are directed to forthwith release the attachment over the eight bank accounts subject to compliance with the conditions ordered - petition partly succeeds: High Court [para 6 to 8]

Petition partly allowed

2019-TIOL-470-CESTAT-MUM + Case Story

M/s EATON INDUSTRIAL SYSTEM PVT LTD Vs CCE & ST : MUMBAI CESTAT (Dated: January 25, 2019)

ST - Input Service - Rule 2(l) of CCR, 2004 - Warehouse abroad is a 'place of removal' - Tax paid by appellant on reverse charge basis under the head Business Support Services in respect of warehousing and allied services provided in Spain to them by M/s Espack is an 'Input Service' and entitled as CENVAT credit - Order of lower authorities set aside and appeals allowed: CESTAT [para 6, 7]

Appeals allowed

2019-TIOL-342-HC-MUM-CX

MOHTAMAAN INDUSTRIES Vs CCE : BOMBAY HIGH COURT (Dated: January 31, 2019)

CX - Assessee is in business of machining forged parts in CNC machines for M/s. Magnum Forge Private Limited and other entities - It has been paying service tax on such job work charges till June 2007, but stopped discharging liability even though assessee continued to bill the principals for service tax - The notice of recovery was issued and the sole defence was that assessee is in financial difficulty - It found from the records that assessee applied for registration as a provider of BAS - Rendering of job work is one of the activities within its ambit and at no stage it ever contended that there was an issue of classification to be decided by authority - Instead, assessee continued to bill its customers / principals by including the service tax component - If the answer to that is that the assessee is in financial difficulty and such a reason or ground can never be a justification for not remitting or depositing the collected tax in Government Treasury, then, the reasons to sustain penalty is neither perverse nor vitiated by any error of law apparent on the face of record - Consequently, none of the questions proposed are substantial questions of law - The appeal is devoid of merits and is dismissed: HC

Appeal dismissed

2019-TIOL-341-HC-MUM-CUS

CC Vs LAXMI INTERNATIONAL : BOMBAY HIGH COURT(Dated: January 31, 2019)

Cus - Revenue would submit that this is a substantial question of law because Tribunal failed to appreciate that Revenue in SCN has specifically alleged that there was a suppression of fact / fraud and, therefore, the extended period can be invoked - The Tribunal found that the issue raised in this appeal of assessee is identical to that raised and dealt with by this Court in case of USMS Saffron Co. Inc. 2016-TIOL-3180-HC-MUM-CUS - Once the Revenue was unable to substantiate its pleas and arguments before this Court on merits, then, the Tribunal was not required to render any finding on the point of limitation strictly - The Tribunal has found that issue is squarely covered against the Revenue and in favour of assessee by the judgment in case of USMS Saffron Co. Inc. - It is on merits the SCN and the order confirming it cannot be sustained - That is a finding of fact rendered by Tribunal in backdrop of circumstances brought before it - Once the finding inconsistent with relevant materials placed on record, then, this appeal gives rise to no substantial question of law - By an indirect process, Revenue cannot re-open a concluded aspect on merits - or the reasons afore noted, this appeal fails - It is dismissed but without any order as to costs: HC

Appeal disposed of

2019-TIOL-340-HC-AHM-CUS

NAYARA ENERGY LTD Vs UoI : GUJARAT HIGH COURT (Dated: January 22, 2019)

Cus - Issue relates to implementation of order passed by Commissioner (A), whereby Commissioner (A) has accepted the contentions of petitioners-original appellants for permitting drawback also on the National Calamity Contingent Duty of Customs and not treating it to be different than the duty amenable for Section 75 of Customs Act, 1962 for drawback purpose - When this petition is confined only qua the prayers for issuing appropriate direction for deciding the applications and appeals pending without awaiting the final outcome of tax appeal in accordance with law - Respondent nos. 3 and 4 shall decide the applications and appeals respectively pending before them on the issue filed by petitioners without any further undue delay or on account of pendency of Tax Appeal and in accordance with law and the same be disposed of preferably within a period of 90 days from the date of receipt of this order - Accordingly, the petition stands disposed of - The Court has not opined on substantial questions of law which are pending before the authority: HC

Petition disposed of

2019-TIOL-339-HC-MAD-CUS

UNIQUE SPICES Vs CC : MADRAS HIGH COURT (Dated: January 29, 2019)

Cus –Petitioner is an importer and trader of Areca/Betel Nuts and had imported Sri Lankan areca nuts – Petitioner claims that the said imported cargo is exempted from levy of customs duty as per the provisions of the Indo-Sri Lanka Free Trade agreement  and, they have, therefore, filed these writ petitions for directing the respondents Commissioner, Customs House, Tuticorin to allow the clearance.

Held: Customs Authorities are not to insist on verification in each and every case - The grounds provided for verification have been clearly laid down in Paragraph No.2 of the instruction No.31 of 2016-Customs dated 12.09.2016 - Apart from undertaking verification on random basis, only in cases of doubt regarding genuineness of the documents received, the respondents may resort to a verification exercise - respondents have not indicated in their affidavit whether they entertained any doubt in the first instance regarding the genuineness of the certificates of origin submitted by the writ petitioner - No administrative authority can act in a mechanical manner - If in the case of each import from Srilanka in terms of ISFTA agreement such a verification exercise is to be undertaken, the very purpose of ISFTA agreement is lost - Even according to the respondents, the writ petitioner is a well known importer who is in the trade for a number of years - If in the guise of carrying out verification the goods are detained unreasonably, that would certainly frustrate business - More than 84 days have elapsed between the date when the consignment landed in India - Even assuming that the verification exercise is to be undertaken, in the very nature of things, it should be concluded at the earliest - Since there is unreasonable delay in this case, the petitioner is entitled to relief – Petitions allowed - respondents are directed to conclude all the formalities and release the goods forthwith - if it turns out that the documents submitted by the writ petitioner are not genuine, the respondents are always at liberty to take action as per law : High Court [para 9, 10, 12, 14, 15]

Petitions allowed

2019-TIOL-338-HC-MAD-VAT

TNVAT - Writ - inadvertant ommission - recording of purchase - rate of applicable tax

During the course of assessment in the case of present dealer, the ACCT came to know that there had been a major purchase omission on the part of the dealer while filing their returns. Therefore, after issuing the pre-revision notices, he passed the first assessment order. Though the same was questioned by the assessee by filing writ, the matter was ultimately remanded. Thereafter, the ACCT passed an order. Questioning the same, the assessee filed an appeal before the Dy CCT(A), which also came to be dismissed.

On Writ, the HC held that,

Whether inadvertant omission made by dealer in recording purchases while filing its return, is no basis to levy higher rate, if tax deposited by him is more than the admitted tax amount - YES: HC

++ it is not in dispute that there has been an omission on the part of assessee to disclose the purchase made by them. It is also not in dispute that the Dy CCT(A) is posted with all the purchase details. When the Dy CCT(A) is having the relevant invoices and is also aware or the applicable rate of tax, the Dy CCT(A) ought to have levied only at the applicable rate of taxes. But in this case, the Dy CCT(A) has chosen to levy tax at an uniform rate of 14.5%. This is clearly unreasonable and vitiates the proceedings;

++ however, this Court cannot fail to take note of the assessee's conduct. When a question was posed as to whether the assessee had remitted atleast the demanded tax as per their own calculation, its counsel submitted that the assessee dealer had already paid more than Rs.44 Lakhs which is more than the admitted tax amount. Taking note of this aspect in the matter, the order stands set aside. The amount already paid by the assessee would remain with the Dy CCT(A) and they will have to abide by the final outcome of the proceedings.

Assessee's petition allowed

2019-TIOL-337-HC-DEL-IT

Pr.CIT Vs WADHAWAN DESIGNS: DELHI HIGH COURT ( Dated: February 01, 2019)

Income Tax - Section 68.

Keywords - Bogus claim - Commercial transaction - Genuineness of transaction.

THE assessee-company filed its return. During the scrutiny assessment, the AO noticed that an amount was shown in the assessee's books as amounts spent towards purchases made on account of raw materials procured to manufacture garments. Accordingly, after the enquiry, the AO was of the opinion that the amounts claimed towards purchase of the raw materials were bogus. Thus, the AO disallowed the entire claim of the assessee and brought to tax u/s 68. On appeal, the CIT(A) upheld AO's order. Further, on appeal the Tribunal allowed assessee's appeal.

After hearing the parties, the High Court held that,

Whether when assessee fails to prove the genuineness of suppliers of raw materials, it calls for additions u/s 68 - YES: HC

++ the burden in the first instance to prove that the amounts were duly paid, in the course of regular commercial transaction, by establishing the identity of the recipients, genuineness of the transaction and the creditworthiness of the party concerned lies with the assessee. However, in the present case the attempts made by the assessee to disclose the identity were not fruitful as none of the suppliers could be traced and the notices returned unserved. Hence, the genuineness of the transaction could not be established. Thus, the revenue can treat the claim towards purchase of raw materials as bogus and unexplained credit taxable u/s 68.

Revenue's appeal allowed

2019-TIOL-336-HC-PATNA-IT

DCIT Vs RAMAJEE CHOUDHARY : PATNA HIGH COURT (Dated: January 08, 2019)

Income tax - Writ - Section 245D(4)

Keywords - refund claim - concluded assessment - settlement application - writ interference

The Revenue Department preferred the present petition questioning the order of Settlement Commission passed in purported exercise of powers vested in them u/s 245D(4) of Income Tax Act, whereby the computation of tax liability in respect of Dr. Ramajee Chowhdhary and Smt Sushila Yadav, had been made by the Settlement Commission. The counsel for Revenue had questioned the order amongst others also on maintainability of the settlement application as according to Department, the assessment for the period 2006-07 to 2012-13 had already been completed and a final order had passed on Feb 03, 2014. According to the counsel in such circumstances, the remedy under Chapter XIX(A) of Income Tax Act was not available to the assessee because it was only in circumstance, where assessment proceedings were pending that such remedy would be available and since the final order had already been passed, the application could not have been filed on 05.02.2014.

On Writ, the HC held that,

Whether Writ Courts should examine an order of Settlement Comission or sit on appeal over the opinion so recorded on inter party contest, unless such order is found wanting on statutory obligations or reflects perversity - NO: HC

++ while the reasons assigned by the Settlement Commission on the objection as to the maintainability of settlement application is sufficient to overrule the objection especially in view of the Board's Circular No. 03 of 2008, which is a point specific on the issue and holds the assessment pending until the order reaches the assessee, insofar as the merits of the order is concerned, this Court has gone through the exhaustive order passed by the Commission which not only records the objection present in the report of the Commissioner on the merits of the claim but also the defence taken by the assessee on such objections;

++ this Court is of the firm opinion that unless an order of the Settlement Commission is found wanting on statutory obligations or reflects perversity, this Court is not required to examine the order or sit on appeal over the opinion so recorded on inter party contest. Since there is nothing on record of the proceeding, which questions the order of the Settlement Commission on either statutory violation or of ignoring the relevant facts present in the report of the Commissioner, this Court is not persuaded to interfere with the order of the Settlement Commission.

Revenue's petition dismissed

2019-TIOL-335-HC-ALL-IT

APAR MUKHYA ADHIKARI Vs ITO : ALLAHABAD HIGH COURT (Dated: January 31, 2019)

Income tax - Sections 133B & 206(7)

Keywords - toll fee - transfer of right through auction - Tehbazari

The assessee is Apar Mukhya Adhikari, Zila Panchayat, constituted under the Uttar Pradesh Kshettra Panchayats and Zila Panchayats Adhiniyam, 1961. In order to regulate its functioning a policy was announced whereby Tehbazari, Tahbazari-Vahan stand and Balu Morang, Gitti Bolder- Vahan Shulk was auctioned and authority letter is issued to the highest bidder. The AO therefore, on the basis of the survey conducted u/s 133-B of Income Tax Act, opined that the amount collected by Zila Panchayat falls under and within the scope of tax collected at source. The AO worked out the amount of short collection and amount of interest u/s 206(7), and was of the further view that grant of licence or transfer its right through auction to contractors/agents to collect fee was nothing but toll and imposed tax accordingly. On appeal, the order of AO was affirmed.

On appeal, the HC held that,

Whether collection of Tahbazari by a licencee is to be construed as collection of Toll so as to attract provisions of TCS u/s 206C(1C), if Tahbazari is not provided under such section - NO: HC

++ it was argued by the assessee's counsel that the issue involved in the present appeal is squarely covered by the judgment and order passed in Income Tax Appeal No. 10 of 2016 - 2018-TIOL-1666-HC-ALL-IT inter parties. It was further argued that this Court was pleased to hold that the toll plaza does not include Tehbazari inasmuch as there is no toll set up for collecting the Tahbazari when licence for collecting the Tahbazari issued. The Tahbazari has different connotation and it is not a toll as held by the Tribunal. The said view taken by this Court could not be disputed by the counsel appearing for the Revenue. On perusal of the order of this Court passed in Income Tax Appeal No. 10 of 2016 - 2018-TIOL-1666-HC-ALL-IT inter parties the issued involved in the present appeal is squarely covered.

Assessee's appeal allowed

2019-TIOL-334-HC-KERALA-IT

CIT Vs OEN INDIA LTD: KERALA HIGH COURT (Dated: February 1, 2019)

Income tax - Sections 36(1)(vii) & 37

Keywords - business expidiency - money lending business - payment to subsidiary - writting off bad debt

The assessee, with respect to the transaction with its subsidiary company i.e., "O/E/N Micro Systems Ltd.", had claimed a deduction of Rs.57,95,975/-. Out of this, an amount of Rs.40,58,927/- related to transactions on a principal to principal basis for supply of materials and the balance Rs.17,37,048/- were stated to be amounts advanced by the assessee for job works entrusted to the subsidiary. During the course of assessment, the AO found that there was no business expediency in declaring the debt to be bad debt. It was also found that the assessee had merely attempted financial support by writing off the bad debts, which could not be permitted. It was also found that the assessee having continuous relationship with the subsidiary company; there could not be any bad debt between themselves.

The next denial of the claim u/s 37 with respect to Rs.17,37,048/- was on the ground that the assessee was not carrying on money lending business and there was no ground for any advance. The FAA affirmed both the dis-allowances, on appeal. However, the Tribunal reversed such disallowance.

On appeal, the HC held that,

Whether amounts given to subsidiary if written off as irrecoverable in books by the holder company, will be eligible for deduction u/s 36(1)(vii), in case it is not made merely for absolving the tax liability - YES: HC

Whether advances made to subsidiary company for execution of job works, is permissible deduction u/s 37 - YES: HC

++ it is seen that the Tribunal had considered the issue of the allowance u/s 36(1)(vii) especially with reference to the amendments made by Finance Act with effect from April 01, 1989. As the words existing prior to April 01, 1989, there was an obligation on the assessee to establish the bad debt claimed for the previous year, whereas by the amendment any bad debt or part thereof, which is written off as irrecoverable in the accounts of the assessee for the previous year is eligible for deduction. Hence, the legislature has cautiously left it to the prudence of assessee to determine whether the debt is bad or not. Further, the subsidiary company was in absolute financial stringency and there was no possibility of any recovery from that company. The Tribunal also found that the claim of bad debts cannot be said to be one which is made merely for absolving the tax liability;

++ this Court also denied with the AO's finding that the advance amounts was in pursuance of a financial transaction. The assessee had made the advance to the subsidiary company for execution of job works, which is permissible u/s 37. In the light of such findings, this Court refuses to interfere with the orders of the Tribunal.

Revenue's appeal dismissed

2019-TIOL-333-HC-MUM-IT

Pr.CIT Vs KILLICK NIXON LTD : BOMBAY HIGH COURT (Dated: February 4, 2019)

Income tax - business loss - corporate guarantees

The assessee company filed its return for the relevant assessment year. During the course of its assessment, the AO noted a claim of business loss arising out of the assessee's activity of providing corporate guarantee. The Revenue's contention was that the loss was not suffered in the course of assessee's ordinary business activity and therefore, could not be claimed as a business loss. After one round of remand, the Tribunal examined the material on record and in particular MoA as well as AoA of the assessee company to come to the conclusion that the assessee company was permitted to engage in activity of providing corporate guarantees in favour of other persons and entities.

On appeal, the HC held that,

Whether corporate guarantee provided by an entity in normal course of his business and in compliance of the Articles of Association, is an allowable business loss - YES: HC

++ it was pursuant to the Articles of Association that the assessee had engaged itself in such activity, providing corporate guarantee for credit facilities sanctioned by Vysya Bank to one Geekay Exim (India) Pvt. Ltd. & Ors. In the process, the assessee had incurred loss. The assessee had also taken reasonable steps for making recoveries by filing civil suits. Thus, on facts, the Tribunal hold in favour of the assessee on both counts namely; that the loss was genuine and that it arose out of the assessee's normal business activities. Therefore, there is no error in view taken by the Tribunal.

Revenue's appeal dismissed

2019-TIOL-329-HC-MUM-IT

PR CIT Vs HSBC INVEST DIRECT INDIA LTD: BOMBAY HIGH COURT (Dated: February 4, 2019)

Income tax - Section 14A & Rule 8D

Keywords - exempt income - investment expenditure - voluntary disallowance

THE assessee company filed its return for the relevant year and the question of making disallowance to the expenditure claimed by it in terms of Section 14A r/w Rule 8D, came up for consideration. During the assessment in the appellate proceedings, the assessee offered restricted disallowance of Rs.1.30 crores. The Tribunal however raised two contentions, firstly that the statutory auditors in the report had made disallowance of Rs.2.53 crores and secondly that in view of the assessee's income which was exempt, the disallowance had to be made in terms of Rule 8D. Finally, placing reliance on the decision of Delhi High Court in case of Cheminvest Ltd. Vs. Commissioner of Income Tax - 2015-TIOL-2070-HC-DEL-IT, the Tribunal set aside the disallowance.

On appeal, the HC held that,

Whether disallowance u/s 14A r/w Rule 8D can exceed the exempt income so earned by taxpayer during the year under consideration - YES: HC

++ in the present case, the counsel for Revenue points out that this is not a case where the assessee had earned no income which was exempt from tax. However, the ratio of the decisions in the cases of Cheminvest Ltd and Holcim India (P) Ltd. would include a facet where the assessee's income exempt from tax is not NIL but has earned exempt income which is larger than the expenditure incurred by the assessee in order to earn such income. In such a situation, that disallowance cannot exceed the exempt income so earned by the assessee during the year under consideration. Further, the assessee had offered voluntary disallowance of expenditure of Rs.1.30 crores, which is not been disturbed by the Tribunal.

Revenue's appeal dismissed

2019-TIOL-328-HC-MUM-IT

PR CIT Vs TRENDSETTER CONSTRUCTION PVT LTD: BOMBAY HIGH COURT (Dated: February 4, 2019)

Income Tax - Section 194J.

Keywords - Consultant - Professional fees.

THE assessee-company engaged as a consultant in development of housing project, filed its return. During the assessment proceedings, AO was of the opinion that the income was assessee's business income. On appeal, the CIT(A), reversed AO's order and the Tribunal confirmed it. Hence, the present appeal by the Revenue.

On appeal, the High court held that,

Whether income from consulting activities without any inference that the income was relatable to any business, is taxable as business income - NO: HC

++ the CIT(A) and the Tribunal on the basis of evidence on record came to the conclusion that the assessee had not engaged in the business of developing real estate. The assessee had merely engaged itself, as a consultant out of which activity, the assessee earned commission at pre-decided rate. Therefore, the amounts received by the assessee before completion of the project were in the nature of deposits to be adjusted towards alternate payment to be made upon completion of the project. Hence, there was no error in the decision of the Tribunal that, payment received by the assessee was not in the form of professional fees, and the assessee was acting as a consultant for which fees was received.

Revenue's appeal dismissed

2019-TIOL-327-HC-KERALA-IT

CIT Vs SOUTH INDIA CORPORATION LTD: KERALA HIGH COURT (Dated: January 25, 2019)

Income tax - abandoning of project - business expenditure - cancellation of tender - new line of business

THE assessee company during the relevant year, had a Transport Division at Chennai which showed a sundry expenses of Rs.41,54,531/-. On calling for a break up, it was revealed that Rs.16,26,731/- was captioned as Vaizag Berth consultation. The explanation with respect to such expense was that Government of India had called for tenders for construction, equipping, operation and maintenance of two multi purpose berths on BOT basis for the Vaizag Port. The asssessee had obtained bid documents and engaged a consultant for preparation of the tender and finalisation of the technical and price bids. The Company also submitted the tender incurring an expenditure of Rs.16,26,731/-. However, Ministry of Surface Transport, Government of India, abandoned the project for reason of modifications made to the project itself. The tender was then cancelled and hence, the assessee claimed the said amounts as business expenditure.

During the course of assessment, the AO was of the opinion, after perusal of the various activities undertaken by the assessee, that this was a new line of business, which the assessee had entered into. The mere fact that a consultant was engaged for submission of tender, was also found to be a pointer to the fact of the assessee venturing into a new line of business. Finding that the tender submission for the BOT project was not, in any manner, connected with the other existing businesses of assessee, the AO found that the expenditure could only be capital.

On appeal, the HC held that,

Whether expenditure incurred by a construction company in bidding for the project, can be claimed as revenue expenditure, upon cancellation of tender - YES: HC

++ it is seen from the order of the Tribunal that it had found that the assessee had been engaged in the activity of construction of building, berths etc. for Chennai Container Private Limited in the Madras Port Trust. The assessee was carrying on the business of clearing and forwarding, handling port services, cargo handling, steamer agents etc. and had also made constructions. The Tribunal found that the assessee had already entered the line of business of constructions in the Ports and hence, submission of a tender for the Vaizag Port was not in the nature of venturing into a new line of business;

++ the Tribunal further noted that the assessee was engaged in Port related activities and had also carried out constructions in Ports and the submission of tender for a BOT project for the Vaizag Port was a related activity. The project did not take off and as held by the Supreme Court in the case of Alembic Chemical, there was no enduring benefit obtained by the assessee. It broke down when the Government of India cancelled the tender. There is no question of law arising, since the facts have been gone into by the Tribunal and held in favour of the assessee.

Revenue's appeal dismissed