GSTN, DGFT & 14 States join hands for sharing of forex realisation data
New scheme for farmers to start cold chain transport ventures
CASE LAWS
2016-TIOL-2648-HC-DEL-IT
WOODWARD GOVERNOR INDIA LTD Vs ACIT : DELHI HIGH COURT (Dated: October 5, 2016)
Income tax - Sections 80IA, 147 & 148
Keywords - escaped assessment - gains from industrial undertaking - reasons for reopening & tangible material
Whether reopening of an assessment is justified, if the reasons furnished by the Revenue have no allusion to tangible material in the form of objective documents, information etc outside of the concluded assessment and the documents pertaining to it - NO: HC
Whether the statutory reassessment orders containing reasons are to be judged on the basis of what is apparent in its reasons and not what is explained later in the form of counter affidavit or submissions - YES: HC
Whether an assessee's claim which is not in accordance with Supreme Court's decisions could have been the basis of a valid revision u/s 264 but cannot be subject to re-opening u/s 147, if there is no tangible material surfaced by department - YES: HC
The assessee company had claimed deduction u/s 801A on 30% of taxable income of Rs. 1,66,26,841/-, which included income from services, income from sale commission and interest on fixed deposits with bank apart from trading income, which was to be quantified. The AO however was of the view that deduction u/s 801A was only allowable on profits and gains 'derived from' the industrial undertaking setup. He further observed that income from sales commission, income from services, trading income, bank interest could not be said to be profits 'derived from' the industrial undertaking. He therefore had reason to believe that income in excess of Rs. 4,70,532/- had escaped and accordingly issued notice u/s 148 seeking to reopen concluded assessment for A.Y 1997-98.
Having heard the parties, the High Court held that,
++ it is evident from a plain reading of the reasons furnished by the revenue that there is no allusion to tangible material in the form of objective documents, information etc outside of the concluded assessment and the documents pertaining to it. According to the binding ruling of the Supreme Court in Commissioner of Income Tax vs. Kelvinator Ltd., sans such documents, evidence or tangible material, there cannot be valid opinion leading to proper re-assessment proceedings. The rationale furnished by the revenue in its counter affidavit and reiterated in the court during the hearing was that a component of income which was otherwise inadmissible but escaped the notice of the AO, because of the ratio in Liberty India and Pandian, is unpersuasive. Besides, the lack of any reference to objective material, cannot in any way improve the case of the revenue, much less its reference to otherwise binding judgments that could have been the basis of a valid revision by the revenue u/s 264. It goes without saying that statutory orders containing reasons are to be judged on the basis of what is apparent and not what is explained later, as the validity of those orders does not improve with time or on account of better explanations furnished in the course of legal proceedings. For the foregoing reasons, the reassessment notice are hereby quashed.
Assessee's petition allowed
2016-TIOL-2647-HC-AHM-VAT
STATE OF GUJARAT Vs RELIANCE INDUSTRIES LTD : GUJARAT HIGH COURT (Dated: October 19, 2016)
Gujarat Value Added Tax Act, 2003 - Section 5(2) - Central sale Tax Act, 1956 - Section 8(1).
Keywords: sale of LPG - exemption notification - inter state sale - bulk purchase - domestic use - rate of taxation - consumers of state - local tax - declared goods & specific entry
Whether if certain contentions recorded in a Court judgment have not been decided as the same do not find place in the discussions, in that case the judgment may be termed sub silentio on that particular issue, a different view is possible on the same by the similar authority subsequently - YES: HC
Whether entry 69 pertaining to sales of Liquified Petroleum Gas for domestic use would apply to intraState sales as mentioned under entry 55, and in turn the exemption from payment of whole of VAT would therefore, enure to a dealer in case of such sale or purchase of goods, as specific entry would prevail over general entry - YES: HC
Whether if by providing conditional exemption, it was in practice to exempt levy of local tax on the goods but continue to levy CST on the interState sales, any addition made by way of an amendment in the said entry could alter the leviability of CST on such interstate sales - NO: HC
Whether the expression "rate applicable to the sale or purchase of such goods" used in sub-section (1) of section 8 can be interpreted in the manner that the prescribed rate would be levied for the purpose of levying tax on LPG - NO: HC
The assessee Reliance Industries Limited, is registered under the Gujarat Value Added Tax Act and under the Central Sales Tax Act and is engaged in refining and sale of petroleum products. During the period under consideration, assessee had sold Liquified Petroleum Gas for domestic use to LPG Infrastructure Pvt. Ltd. the purchasing dealer. According to the assessee, since the whole of the tax on such sale was exempt under entry 69 issued under the notification by the Government of Gujarat in exercise of powers section 5(2) of the VAT Act, the appellant had not collected tax on such sale in respect of its interState sales, relying on provisions of section 8(1) of the CST Act. State VAT authorities were of the opinion that with the addition of words "by the consumers of the State" in the said entry, the intrastate sales of LPG would continue to be exempt but not its interState sales. On such basis, the assessing authority and the appellate authority demanded CST from the assessee on its interState sales of LPG which were effected after 3.10.2008. The issue was carried before the Tribunal by the assessee. On behalf of the assessee, it was argued that under entry 69, the sale of LPG within the State was exempt from tax. By virtue of section 8(1) of the CST Act, interState sales also would invite no tax. On behalf of the Government, however, much emphasis was placed on the introduction of the words "by the consumers of the State" in the said entry 69 with effect from 3.10.2008. It was argued that there would be no exemption on sale of LPG outside the State which was available under entry 69 before 3.10.2008. The Tribunal by the impugned judgement held that the State Government has no authority to levy tax on interState sales. By virtue of addition of the said words "by the consumers of the State", the State cannot seek to impose any such tax. The Tribunal also referred to the amendment made in section 8 of the CST Act with effect from 1.4.2007 and observed that prior to such amendment, it was possible for the State Government to restrict its exemption only to local sales by providing for a conditional exemption in which case CST would be leviable at normal rate. However, with effect from 1.4.2007, the State Government cannot make any distinction between the interState and intrastate sales. Interalia on such basis, the Tribunal allowed the assessee's appeal and held that the orders passed by the State Tax authorities holding that interState sales of LPG for domestic use subsequent to 3.10.2008 is liable to tax under the CST Act, is incorrect. The interState sales of LPG for domestic use would invite nil rate of tax under section 8(1) of the CST Act read with entry 69, even after the amendment made in the said entry with effect from dated 3.10.2008.
On appeal, the HC held that,
++ in the case of ONGC Ltd., question was raised whether the Tribunal was right in law in holding that, the interState sales of LPG, effected by the ONGC from the State of Gujarat to other States qualify for total exemption from payment of tax on the ground that intraState sales of LPG for domestic use by the consumers of the State was exempt from payment of whole of the tax as per entry 69 of the schedule to the exemption notification dated 31.03.2006. It was pointed out that amendment in section 8 was made by the Finance Bill of 2002 to provide that central sales tax does not become greater than local sales tax in case of sale of goods to the Government and registered dealer and to provide for exemption from CST in case where goods are exempt from local sales tax. Of many questions which the Court was answering in the said judgement, one of them was whether ONGC's claim of exemption in respect of sales of LPG to various OMCs even within the State was justified. In this context, the Court held that by virtue of amendment in entry 69 with effect from 3.10.2008, the words "for domestic use" have been added. Till such amendment, ONGC would be entitled to exemption from payment of VAT on its sale to the OMCs within the State. However, post 3.10.2008 on account of introduction of words "for domestic use", such sales would not qualify for such exemption. In context of these findings, the Court then proceeded to examine whether the interState sales of ONGC would qualify for exemption. As noted, this judgement is in appeal before the Supreme Court and the judgement has been stayed. As pointed out by the counsel for the assessee, stay order by SC would suspend the effect of this judgment. Whether only on account of such stay, we are entitled to take a view, completely independent of the decision of the coordinate Bench, need not be thrashed out. This is so since, in our opinion, the effect of amendments in section 8(1) of the CST Act have not been considered in the said judgment. We would not term the decision per incuriam since as noted, these aspects were argued before the Court and therefore, it cannot be stated that the Court was not aware about these provisions. However, these contentions recorded in the judgment have not been decided, do not find place in the discussion portion and in that view of the matter, the judgement may be termed sub silentio on the issue. If therefore, we are persuaded to take a different view on the interpretation of section 8(1) of the CST Act, in our understanding, we would be free to do so irrespective of the decision of HC in case of Oil and Natural Gas Corporation Limited;
++ section 15 of the CST Act provides is for the maximum rate of tax on the declared product beyond which it would not be open for the State legislature to prescribe the tax on sale or purchase of such goods. Entry 55 thus provides for a maximum rate of tax and not minimum. In this context, if one peruses entry 69, it pertains to sales of Liquified Petroleum Gas and exempts the whole of tax in connection with domestic sales. The first contention of Advocate General that entry 55 would prevail over entry 69 cannot be accepted. Quite apart from the principle that specific entry would prevail over a general entry, in plain terms, we do not find that entry 55 had any effect of increasing the rate of tax on any declared goods which was otherwise lower than 5%. In our opinion, therefore, entry 69 pertaining to sales of Liquified Petroleum Gas for domestic use would apply to intraState sales and in turn the exemption from payment of whole of VAT would therefore, enure to a dealer in case of such sale or purchase of goods. If certain goods are exempt unconditionally from the payment of local tax, sub-section (2A) of section 8, as it stood at the relevant time, would ensure that no CST would be payable on interState sale of such goods. In different forms, this mechanism continued from time to time. Under the Finance Act, 2002, this distinction was brought in the form of clause (c) to sub-section (2) which provided that in the case of goods, the sale or, as the case may be, the purchase of which under the Sales Tax Law of the State is exempt from tax generally, the rate of central sales tax would be nil. By the Amending Act 16 of 2007, section 8 was once again materially altered. sub-sections( 1) and (2) which stood till then, were replaced and, as noted, in the present form, under sub-section (1), the provisions have been made to ensure that interState sales of particular goods would invite sales tax liability of 2% or lower, if the same is taxed at a lower rate by the State in the course of intrastate sales. Thus the vital distinction of the goods being exempt from payment of tax either generally or otherwise, which existed prior to this amendment, came to be obliterated. Till this amendment, it was possible for the State legislature to provide for a regime under which a particular class of goods would though be exempt from payment of local tax, such exemption may not result in exemption from payment of central sales tax. In other words, by providing exemption not generally but conditionally, in terms of section 8, as it stood prior to 1.4.2007, it was possible to exempt levy of local tax on the goods but continue to levy central sales tax on the interState sales of the said goods. In view of this discussion, in our opinion, amendment in entry 69 with effect from 3.10.2008 would make no difference. Addition of the words "by the consumers of the State" in the said entry would not alter the leviability of the central sales tax in terms of section 8(1) of the Act. The contention of the Advocate General that by virtue of addition of the words "by the consumers of the State" in entry 69, central sales tax becomes leviable, cannot be accepted. Entry 69 relates to exemption from payment of local tax on sale or purchase of LPG. The added words can therefore have effect only on payment of VAT on local sales. Section 8(1) of CST Act after 1.4.2007 does not recognise distinction between a conditional or unconditional exemption under the VAT Act. If the interpretation canvassed by Advocate General is accepted, entry 69 will materially alter section 8(1) of the CST Act. State VAT law would ensure that central sales tax would be payable though section 8(1) of the CST Act provides otherwise. Even learned Advocate General argued that State legislature cannot prescribe charging of central sales tax;
++ it is wellknown that to overcome the difficulty arising out of the judgement in case of Yaddalam Lakshminarasimhiah Setty and sons, sub-section (1A) of section 6 was inserted by the Amending Act 28 of 1969 but with retrospective effect 5.1.1957. Thus this provision had a specific purpose namely, to neutralise the ratio of the judgment of SC in case of Yaddalam Lakshminarasimhiah Setty and sons where, in essence, it was held that if a certain sale within the State not being the first sale is exempt from payment of local tax, the interState sale thereof also would be exempt from payment of tax. This provision therefore, would not, nor was intended to, nullify or neutralise the provisions contained in sub-section (1) of section 8 of the CST Act. This was precisely what was held by the Supreme Court in case of International Cotton Corpn. (P) Ltd. The Supreme Court in the said decision considered the interplay between sub-section (1A) of section 6 and section 8(2A), as it stood at the relevant time. Sub-section (2) does not provide for the lower of the two tax rates, 2% as prescribed for interState sales generally or the rate that may be prescribed by the local Sales Tax law. It prescribes only one rate of tax namely, that which is applicable to the sale or purchase of goods in question within the State on the local sales. There is therefore, no warrant to interpret the expression "rate applicable to the sale or purchase of such goods" used in sub-section (1) of section 8 as to mean the prescribed rate and not the rate which may be applicable taking into account the exemption totally or partially that may have been granted by the State Government. In somewhat different manner, this is precisely what we have held namely, the expression "within the State of Gujarat" does not aim to collect tax on interState sale. In fact, Advocate General also stated that this could not be and is not even the intention of the State legislation. In view of the above discussion, we answer the questions in the negative, that is against the Revenue and in favour of the assessee and dismiss the appeals. In view of such decision, we do not find that the amended entry 69 is in any way unconstitutional or outside the legislative competence of the State delegated legislation. Our interpretation and the order of dismissing the appeal would take care of other prayers of assessee in the Special Civil Application. Same is disposed of accordingly. At this stage, Ms.Vishen for the Government requested that this judgment may be stayed. The State Government is in appeal against the judgment of the Tribunal. We have upheld the judgment of the Tribunal. During the course of the Tax Appeal, no stay was granted. The question of granting the stay once we dismissed the appeal would not arise. Request is rejected.
Revenue's appeal dismissed
2016-TIOL-2646-HC-ALL-CX
CCE Vs AKANSHA STEELS PVT LTD : ALLAHABAD HIGH COURT (Dated: October 24, 2016)
CX - A penalty can only be levied by authority of statutory law, and Section 37 of the CEA, 1944 does not expressly authorize the Government to levy penalty higher than Rs. 5,000/- - imposition of a mandatory penalty equal to the amount of duty not being by statute would itself make Rules 96ZO, 96 ZP and 96 ZQ of CER, 1944 without authority of law - Rules 96ZO, 96 ZP and 96 ZQ insofar as they impose a mandatory penalty equivalent to the amount of duty struck down on the ground that these provisions are violative of Article 14, 19(1)(g) and are ultra vires the Central Excise Act - Question of law answered against the department and in favour of the assessee - Revenue appeal dismissed: High Court [para 3, 5]
Appeal dismissed
2016-TIOL-1843-ITAT-PUNE
NAV MAHARASHTRA VIDYALAYA Vs Addl.CIT: PUNE ITAT (Dated: October 7, 2016)
Income Tax - Sections 192, 198, 199, 200, 200(1), 200(3), 272A(2)(k), 273B & rule 31A.
Keywords: levy of penalty - defaults in order - non furnishing of information - TDS returns - non compliance - e - filing - e TDS - salary - grant of refund & reasonable cause.
Whether if e-TDS was made compulsory for the instant AY, e- filing software was not user-friendly and required amendments at the end of the Government itself from time to time, the assessee can be considered as a defaulter for non filing e return, even if such assessee has duly filed his paper returns before time always - NO: ITAT
Whether when a person establishes its case of reasonable cause for not complying with the provisions of the section 273B, such an assessee can be held liable to the penalty imposable for the said failure u/s 272A(2) - NO: ITAT
Whether in case of overlapping default, penalty should be restricted to quarter No.1 and no penalty should be levied for the subsequent quarters u/s 272A(2)(k) - YES: ITAT
The assessee was a primary and secondary school functioning in the remote village of Satara district and the main reason for delay in filing the tax deduction at source returns was non-availability of expert staff who were aware of the intricacies of e-return filing and also because of no proper consultancy available with the school regarding the matter. It was explained by the assessee before the CIT(A) that it was operating in remote area of Satara district and for this particular year, there was strict requirement of e-filing statement and filing of e-TDS returns. Where the tax was deducted at source from the employees' salary and was paid in time to the Government account, however, since the assessee did not have trained staff for doing the work and also in nearby vicinity, no such staff was available and where the school was running only on the grant received from the State Government, non-compliance was for the reasons beyond the control of the school. The assessee pleaded its case of reasonable cause and application of provisions of section 273B.
AO noted that the assessee has failed to explain the delay and no cogent reasons have been offered by the individual assessee. Since the deductees do not get the credit of TDS till the time the TDS statements are uploaded by the deductors, the AO was of the view that the assessee should have complied with the time limit prescribed under Rule 31A. As there was failure on behalf of the person to deliver the statement within time limits specified, then the individual assessee were held to be liable to pay penalty u/s 272A(2)(k), 274 r.w.s. 200(3). The penalty was to be levied @ 100/- per day for the period of delay. In the case of M/s. Nav Maharashtra Vidyalaya in ITA No.832/PN/2016, AO held the assessee liable for levy of penalty under section 272A(2)(k) at Rs.40,200/- for nonfurnishing of Form No.24Q, where the due date was 15.05.2011 but the same was filed on 20.06.2012 i.e. after the delay of 402 days. In some of the cases, AO held the respective assessee to have defaulted in depositing the TDS statements late for each of the quarters and consolidated order has been passed for defaults in respect of Form No.24Q/26Q for the quarters falling within the FY 2010-11 relating to AY 2011-12 and has raised the consolidated demand in this regard, against which the assessee has filed an appeal before the CIT(A).
On appeal, CIT(A) noted the provisions of quarterly submissions of TDS statements within stipulated time provided under the Act and noted the fact that the delayed submissions of TDS returns by the deductor would eventually delay the processing of returns of deductees and issue of refunds, if any, to such deductees. CIT(A) observed that purpose and intention of penalty under section 272A(2)(k) was to penalize the decutor so as to avoid further hardship to numerous deductees, whose claim of refunds, etc. would depend on the timely furnishing of statements by the dedectors. He further observed that though the assessee had enumerated several reasons behind the impugned delay and he also noted that the same were genuine, however, the CIT(A) held that "the said reasons may not help on simple ground that the benefit of reasonable cause as envisaged u/s 273B has not been extended to the defaulted deductors". He further referred to the provisions of section 273B, under which it is provided that no penalty would be imposable on a person or assessee as the case may be, for any failure referred to in the said provisions, where such person proves that he had reasonable cause for the said failure. Various sections which are subject to the concession on account of reasonable cause for the failure u/s 273B have been referred to by the CIT(A) at page 5 of the appellate order. He was of the view that where the section envisaged a non-obstacle clause as against section enumerated in the impugned section, it was permissible for the assessee to substantiate reasonable cause for his failure to comply with the provisions on the basis whereof the penalty sought to be imposed upon him. He further observed that however, for penalty imposed u/s 272A(2)(k), the override effect of section 273B does not apply as the said section does not find a place in section 273B. He thus, held that the assessee was not entitled to get the benefit of section 273B. CIT(A) thus, upheld the levy of penalty u/s 272A(2)(k) as admittedly, there was failure on the part of assessee to furnish the statement for tax deducted at source within time. The case laws relied upon by the assessee were held to be not applicable and the order of AO in this regard was upheld.
Having heard the matter, the Tribunal held that,
++ there was default in furnishing e- TDS statements late for the respective quarters by different assessee, but all relating to AY 2011-12. The question which arises for adjudication before us is whether in such cases where e-TDS was made compulsory for the instant AY and where the software was not user-friendly and required amendments at the end of the Government itself from time to time and the compliance being a complex procedure introduced for the first time and where originally the deductors were not default in depositing the paper TDS returns, does the assessee deductor have reasonable cause for not furnishing the said e-TDS returns in time. In this regard, reference is to be made to the provisions of section 273B, where it has been provided that in case a person establishes or proves that he had reasonable cause for the failure to comply with the provisions of various sections provided in section 273B, then no penalty shall be imposable on such person for the said failure. Reading of section 273B shows that under it, the Section refers to along with many other sections clause (c) or clause (d) of sub-section (1) or sub-section (2) of section 272A. What is relevant for adjudication before us is section 272A(2), since penalty has been levied for default in furnishing e-TDS returns under section 272A(2)(k). Since section 273B covers the cases of levy of penalty u/s 272A(2), then in line with the provisions of said section in case a person establishes its case of reasonable cause for not complying with the provisions of said section, then the section provides that such a person shall not be liable to the penalty imposable for the said failure i.e. u/s 272A(2). The CIT(A) in the case of several assessee before us has wrongly come to the conclusion that the provisions of section 273B do not cover the defaults u/s 272A(2)(k). We reverse the finding of CIT(A) in this regard;
++ case put up by the assessee was that where tax was deducted at source and merely because e-TDS statements / returns were not filed in time does not result in any loss of revenue and hence, no merit in levy of penalty u/s 272A(2)(k). The claim of TDS, its payment to the Treasury to the Government and thereafter, the credit to be allowed to the deductee of tax deducted from his account, all work on the principle that the tax is collected and deposited in the account of the Government as income is earned. In other words, the said provisions of tax deducted are advance payments of tax as you earn the income. Taxes are deducted by the deductor out of payments due to the deductee and such tax deducted is the income of deductee. The credit for tax deduction at source would be allowed to the deductee only after the tax deducted at source is deposited in the credit of the Government and the deductor files the compliance report in this regard by way of e-TDS returns. Thus, it is obligatory upon the person deducting tax to deposit the tax deducted at source and also to furnish statement declaring tax deduction made from the account of various deductees. Earlier provisions were to be complied with manually by filing the TDS returns in paper form. However, as per IT (Sixth) Amendment Rules, 2010 with retrospective effect from 01.04.2010, the deductor was asked to file e-TDS statements for which infrastructure was provided and it was required that the assessee complies to the said filing of e-TDS returns. However, since AY 2011 -12 was the first year of introduction of such facilities of e-TDS returns, there were certain hindrances which were taken care of by the authorities by way of various amendments introduced in this behalf. The case of the assessee on the other hand, is that they were small tax payers and in the absence of technical guidance provided and because of technical hitches, the TDS returns could not be filed in time. Most of the assessee before us have paid the tax deducted at source to the Treasury within time frame but have defaulted in filing e-TDS statements. In some of the cases, there is default in payment of tax deducted at source and consequently, delay in filing the e-TDS returns. The question which arises is whether in the above said scenario, can the provisions of section 273B of the Act be applied in order to decide the issue of levy of penalty under section 272A(2)(k);
++ various Benches of Tribunal have time and again held that where there was case of reasonableness, there was no merit in levying the penalty u/s 272A(2)(k). Thus, in order to adjudicate the issue before us, we accept the case of reasonable cause as relevant to section 273B put up by the assessee in the respective cases in the appeals before us, which admittedly relate to differplacedent quarters of AY 2011-12. Where for the first time, there was requirement of e-TDS furnishing of TDS statement and since there were certain complications in e-filing of TDS returns because of system failure, which admittedly, was amended 18 times by the Department, the delay in furnishing the said returns late could not be attributed to the assessee. The onus was upon the authorities to provide platform for easy compliance to newly introduced provisions of the Act. Where such facilities could not be provided by the authorities and the technical support not being available to small assessees, who are in appeal before us, then the delay in furnishing the e-TDS returns late should be liberally construed. Hence, there was practical difficulty on the part of assessee to comply with newly introduced requirement of e-TDS filing of TDS statements, being technical delay and not venial in nature, merits to be considered as reasonable cause for non levy of penalty as per the requirements of section 273B. We hold so. In this bunch of appeals, there are cases where the assessee has defaulted in not depositing tax deducted at source in time, in such cases, the returns were delayed because of default on behalf of the deductor. In such cases, penalty u/s 272A(2)(k) is leviable. However, the same is to be restricted from the date of payment of TDS to the date of filing e-TDS statements since e-TDS statements cannot be filed without payment of TDS to the credit of Central Government. Similar ratio has been laid down by the Chandigarh Bench of Tribunal in M/s. Ashirwad Complex Vs. JCIT (TDS). Accordingly, we hold so;
++ another issue raised in some of the appeals is that where all quarterly returns relating to AY 2011-12 were filed on one date i.e. there was default in furnishing the returns for each of the quarters late, the case of the assessee was that because of overlapping default, penalty at best should be restricted to quarter No.1 and no penalty should be levied for the subsequent quarters. We find merit in the above plea of the assessee and accordingly, we direct the AO to restrict the penalty leviable to first quarter which is in default and for the overlapping default, no penalty is to be levied u/s 272A(2)(k). We direct the AO to verify the claim of assessee in this regard and work out the penalty accordingly. The issue arising in other appeals before us is identical and following our directions in the paras hereinabove, the AO in the case of individual assessee has to verify the claim of assessee and work out penalty, if any, leviable accordingly after affording reasonable opportunity of hearing to the assessee. In the result, all the appeals of assessee are allowed as indicated above.
Assessee's appeal allowed
