NON TARIFF NOTIFICATION

cnt80_2017

E-payment of Customs duty made mandatory w.e.f 01.09.2017 for importers registered under AEO Programme and importers paying Customs duty of ten thousand rupees or more per bill of entry

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CASE LAWS

2017-TIOL-1586-HC-DEL-IT

CIT Vs Tara Sinha : DELHI HIGH COURT (Dated: August 11, 2017)

Income Tax - non-compete fee – revenue expenditure - capital receipt

The Assessee was working as the President of M/s TSME, an advertising agency. She also held 51% shares of the said company, and MEW held 40% of the shares of TSME. The remaining 9% shares were held by Associated Corporate Consultants Pvt. Ltd. The Assessee filed her return for the AY 1995-96 declaring income. Assessee resigned from TSME. Upon her retirement, she received payments of terminal benefit in the form of gratuity, Rs.35,13,150/- for the sale of her 51% shareholding in TSME to M/s. G and Rs.3,15,31,750/- towards entering into a Non-Compete Agreement with MEW. AO issued a show cause notice to the Assessee as to why the amounts received by her from MEW should not be treated as a revenue receipt. AO made an addition of Rs.3,15,31,750/- to the returned income of the Assessee. CIT(A) deleted the addition made by the AO and held that the payment of compensation in lieu of the non-compete agreement by the assessee was a capital receipt and not chargeable to income tax. ITAT held that the amount received was a capital receipt not liable to tax.

On appeal, the HC held that,

Whether non-compete fee received by assessee is taxable, if the money paid to her as a non-compete fee was not directly related to the remuneration she was receiving – NO: HC

++ the AO was clearly wrong in holding that the agreement was structured in a manner so as to give the Assessee "adequate loopholes" to bypass the restrictions with the "consent of MEW". He termed the agreement as being non-serious. The AO also appears to have wrongly construed the fact that the payment was received prior to the signing of the agreement and hence it is nothing but a terminal benefit. In the statement of the Assessee, she had explained to the AO that it was due to her personal efforts that the business of the company had grown and expanded from one office in Delhi to offices in several cities including Mumbai, Bangalore, Calcutta, Chennai and Kathmandu. She has explained the reason to leave TSME, as MEW wanted to drop her name from TSME in order to have a competitive advantage in India. She further explained that the money being paid to her as a non-compete fee was not directly related to the remuneration she was receiving from TSME;

++ the TSME was a brain child of the Assessee. From a reading of Clause 1, it is clear that MEW was apprehensive about her retirement and the effect it could have on their business and hence insisted on the obligations contained. This clause is a clear acknowledgement that she did have the potential and stature to take away a substantial number, if not all, of the clients and the employees of TSME. The non-compete fee paid to her cannot, therefore, be termed as a camouflage or a well- orchestrated plan to avoid payment of tax. The CIT (A) and ITAT have rightly held that the non-compete fee is not a taxable income. In lieu of these covenants and undertakings, she was paid an amount of US dollars 996,500 i.e. Rs.3,15,31,750/- at the prevalent exchange rates. The Assessee was a lady who enjoyed a stature in the advertising industry and the Non-Competition Agreement, by which she agreed not to compete in India with MEW, was clearly not a sham. She is now 82 years of age and considering that the Revenue's appeal challenges concurrent findings of the CIT (A) and ITAT, court does not find any cause to interfere. The Non-Competition Agreement is genuine and the payment made thereunder is indeed a non-compete fee.

Revenue's appeal dismissed

2017-TIOL-1585-HC-DEL-IT

FIBERFILL ENGINEERS Vs DCIT : DELHI HIGH COURT (Dated: August 10, 2017)

Income Tax – Sections 80IC, 148

Keywords - reopening of assessment – escapement of income – belated return

The Assessee is a partnership firm engaged in the business of execution of works contracts and manufacture of various kinds of signages/sign boards/panels and their components, various kinds of MS/SS/Sheet Metal fabricated structures and frames, Aluminium structures, Canopy/Building fascia and cladding components and panels etc. It has a manufacturing unit, the profits from which were eligible for 100% deduction under Section 80IC of the Act from AY 2010-11. For the AY in question, the return was filed with a delay of 46 days. No intimation under Section 143 (1) about filing of the above return was received by it from the Income Tax Department within the prescribed time period. However, a notice was issued to the Assessee under Section 221 (1) asking it to show cause why a penalty should not be levied on it for failure to pay a demand of Rs.81,32,850 plus interest. Later a notice was issued to the Assessee under Section 148 by the AO stating that there were reasons to believe that the Assessee's income chargeable to tax for AY 2011-12 had escaped assessment within the meaning of Section 147. AO was of the view that assessee had claimed deduction u/s 80IC, however, this claim of the assessee was not correct, because assessee had filed his return of income on 16-11-2011 after due date (30.09.2011) of filing the return. It is well settled principle that if the assessee wants to avail deduction u/s. 80IC he has to necessarily furnish his return of income containing such claim before the due date specified in section 139(1). Hence, the claim of deduction u/s. 80IC on the income of the assessee is not allowable. A further notice under Section 142 (1) was issued calling for information. This was followed by a show cause notice issued by the AO seeking to levy a penalty under Section 271 (1) (b). Assessee was also handed over the intimation under Section 143 (1) showing that it was liable to pay further tax of Rs.81,32,850. Assessee filed an application before the AO under Section 154 seeking rectification of what the Assessee considered to be a mistake in the intimation under Section 143 (1). According to the Assessee, the deduction of the sum of Rs.2,62,49,792 under Section 80IC of the Act ought to have been allowed. Meanwhile, the Assessee filed its objections to the assumption of jurisdiction under Section 148 which were rejected by the AO. Assessee filed its first writ petition challenging the notice issued under Section 148 of the Act and the order rejecting the objections filed by the Assessee. However, this writ petition was not numbered as it was lying in defect and, therefore, was not immediately listed before the Court. Even before the above writ petition was numbered, the AO proceeded with the re-assessment proceedings and passed the order adding to the returned income the sum claimed as deduction under Section 80 IC. Hence, this petition.

On appeal, the HC held that,

Whether Assessee's claim for deduction u/s 80IC can be defeated on ground of delay in filing of return, if on merits the assessee was entitled to deduction u/s 80IC – NO: HC

Whether notice issued by AO u/s 148 is sustainable, if assessment was sought to be reopened merely on the ground that assessee was not entitled to deduction u/s 80IC – NO: HC

++ the CBDT has declined to condone the delay of 46 days in the Assessee filing its income tax return for AY 2011-12. One reason noted by the CBDT in the said order are that the Assessee did not make an effort to file the return in time although, the audit report, the profit and Loss (P&L) Account, the balance sheet and computation of income were ready by 28th September, 2011 i.e. much before the due date of filing of return and even the TDS certificates were all dated much earlier than September, 2011. Further, the TDS mismatch amount was only Rs.14,067 whereas the refund claimed in the return was Rs.14,82,945. Thirdly, the specific details regarding the Assessee not having received the confirmation from the parties about the TDS deducted, were not mentioned and, therefore, could not be verified. The CBDT noted in the said order that even for AY 2010-11 the Assessee had failed to file its return by the due date and had rather filed it after a delay of 116 days citing similar reasons;

++ the Department has even for AY 2010-11 accepted that on merits the Assessee's claim for deduction under Section 80 IC was justified. With there being no change in the circumstances, the Assessee's claim for deduction under Section 80 IC on merits for the next year i.e. AY 2011-12 cannot possibly be denied. The application made by the Assessee before the CBDT pursuant to the order passed by this Court was a detailed one. The Assessee pointed out that in all the subsequent years, i.e., AY 2012-13 up to 2016-17, there was no delay whatsoever in the filing of the returns. It also pointed out that since the Assessee was an eligible undertaking it could not be denied the deduction under Section 80IC of the Act. The above factors do not appear to have been taken into account by the CBDT. Since the entitlement of the Assessee to the deduction under Section 80 IC even for AY 2010-11 has not been questioned by the Department on merits, there is no justification for not viewing the delay of 46 days in filing the return to be bona fide. It is not one of those cases where the delay is so extraordinary so as to not be condoned;

++ the Court sets aside the order passed by the CBDT under Section 119 (2) (b). The result is that the claim of the Assessee for deduction under Section 80IC of the Act cannot be defeated on the ground of delay in filing the return. Since this was the principal reason for reopening of the assessment, the notice issued by the AO under Section 148 and the order passed by the AO rejecting the Assessee's objections to the reopening of the assessment are set aside. The consequential impugned assessment order passed by the AO under Section 147 is also therefore set aside.

2017-TIOL-1581-HC-DEL-IT + Story

UNITECH WIRELESS (TAMIL NADU) PVT LTD Vs PR CIT: DELHI HIGH COURT (Dated: August 11, 2017)

Income Tax - Writ - Sections 143(2), 245C, 245C (1) & 245D (1).

Keywords - Assets Retirement Obligation - Guarantee Fees - slump sale & Unearned revenue.

Whether the jurisdiction of the ITSC gets attracted only when the assessee necessarily makes an extra disclosure of income than the one filed before the AO - NO: HC

Whether if the assessee withdraws its claim to certain deductions and that results in extra income being offered for settlement, the requirements of Section 245C(1) stand fulfilled - YES: HC

The Assessee - a step-down subsidiary of the Norway based Telenor Group, was engaged in the business of both GSM as well as national and international long distance services (ILD/NLD business). It was transferred to Telenor India as a going concern on a 'Slump Sale' basis on the completion date as mentioned in the Business Transfer agreement (BTA). The Assessee filed return which was picked up for scrutiny and a notice u/s 143(2) was issued. A reference was made to the TPO who passed an order proposing a transfer pricing adjustment on account of Guarantee Fees. The Assessee went before the DRP. The Assessee's returns for AYs 2013-14 to 2016-17 were also pending. During the pendency, the Assessee filed a settlement application before the ITSC u/s 245C (1). The ITSC held that the Assessee had failed to fulfil the requirement of Section 245C before the AO.

In a writ, the High Court held that,

++ the ITSC was of the view that since what was being offered by the Assessee to tax before it were the amounts which were earlier claimed in the returns filed before the AO as deductions but were now sought to be withdrawn, 'there are no fresh issues or incomes being offered for tax which have not been declared before the AO'. In the considered view of the Court, the approach of the ITSC appears to be erroneous;

++ no doubt, Section 245C (1) requires the applicant to make a full and true disclosure of the income which has not been disclosed before the AO and the manner in which said income has been earned but this, by no means, requires the applicant to demonstrate that there is a fresh source of income which was not earlier disclosed by the Assessee. It can happen that an income which was not earlier offered to tax, like an excessive claim for depreciation, is now withdrawn and, as a result, income is offered to tax before the ITSC. This will satisfy the requirement of Section 245C (1) that what was not earlier disclosed before the AO is now offered to tax.

Assessee's writ allowed

2017-TIOL-1580-HC-MAD-CUS

DR LOGISTICS PVT LTD Vs UOI: MADRAS HIGH COURT (Dated: July 17, 2017)

Cus - Cost Recovery Charges/establishment charges incurred for the petitioner's cargo freight service station on the basis of cargo handled by the petitioner - Unless and until exemption is granted, the petitioner has to pay the said amount without prejudice to their rights to seek for exemption from the CBEC - What is important to note is that though the petitioner's application for exemption was not considered and no orders were passed, the petitioner on their own volition stopped remitting the charges from the period of January, 2009 and which conduct of the petitioner is not appreciable - Considering the fact that the writ petition has been pending since 2012 and the order of interim stay was in operation against the department from recovery charges and the department took no steps to move a petition for vacating the interim order, excepting by filing a counter affidavit after more than 4 years, Court is of the view that some conditions can be imposed on the petitioner while issuing further directions to the CBEC, where the petitioner's application seeking exemption is pending consideration - Writ Petition disposed of: High Court [para 9 to 11]

Petition disposed of

2017-TIOL-1579-HC-DEL-CUS

PR CC (Preventive) Vs SUREN INTERNATIONAL LTD: DELHI HIGH COURT (Dated: August 2, 2017)

Cus - the respondent/assessee imported 40 containers of Aluminium/Copper scrap - On examination of the goods, the department alleged erroneous declaration of weight and description of the goods by the respondent - The imported goods were seized - Subsequent search & seizure operations conducted by the DRI, led to further seizure of goods - The Customs authorities later confiscated them, with the option of redemption upon payment of fine with penalty - During pendency of appeal before Tribunal, the respondent sought release of the goods upon payment of fine & penalty - The respondent also paid warehousing dues of the warehouse where the goods were kept, albeit under protest - The respondent's applications for refund of the warehousing charges were dismissed by the Commr. of Customs & the Commr.(A) - On further appeal, the Tribunal set aside the two orders.

Held - where refund of warehousing charges is sought by an importer, the authority to whom the application was made would have to examine under what provision of the law such a request was made and whether such a request could be entertained - Presently, while dismissing the respondent's application, the Commr.(A) noted that the respondent omitted to mention the legal provision under which it was seeking such refund - Considering the provisions of the Customs Act, there appears to be no specific provision in the Act or the rules, which contemplates refund of warehousing charges - The respondent did not show any regulation or circular permitting an application to made to an adjudicating authority of the Customs department, to entertain and grant refund of warehousing charges - The Tribunal too omitted to refer to the Act and ascertain whether any such provision existed - The Respondent’s liability to pay the warehousing charges was independent of its liability to pay the customs duty, interest, fine and penalty - This is made explicit u/s 73 of the Act - Hence there is no provision in the Act or any other law that enabled the Tribunal to grant such a relief - Tribunal order granting refund of warehousing charges set aside: High Court (Para 4-9, 12,13,15,19,20,21)

Appeal allowed

2017-TIOL-1578-HC-DEL-VAT

BATHLA TELETECH PVT LTD VS CTT: DELHI HIGH COURT (Dated: August 10, 2017)

Delhi Value Added Tax Act, 2004 - Sections 2(1)(h), 26, 32, 33, 59, 60 & 66.

Keywords - Interest - Quashing of notices - Penalty.

The assessee company is engaged in the business of sale-purchase of cellular phones, accessories etc. It changed its place of business to Gujrawala Town Delhi and notified the same to the authorities. This changed premises of the assessee was surveyed by a team of officers from the VAT department. The premises was sealed and upon deposit of Rs. 70 lakhs the premises was de-sealed by the department.Thus, the address of the assessee at Gujrawala Town was well within the knowledge of the VAT authorities. Assessee claimed to have been complying with all the statutory obligations and had been regularly filing its returns under DVAT Act. On 31st March, 2016, default notices of tax, penalty and interest were issued by the AVATO in respect of the 3rd quarter of 2015-16. The Assessee had challenged the said default notices before High Court filing writ petition.

Ad-interim order was granted against the Revenue barring it from taking any coercive steps against the assessee. Thereafter said writ petition was disposed of and assessee was directed to file its objections to the impugned notices dated 31st March, 2016, within a period of 3 weeks and thereafter the concerned VATO was asked to assess the assessee for the 1st and 2nd quarters of 2015-16. The Objection Hearing Authority ('OHA') was also directed to await the assessment orders for the 1st and 2nd quarters before ruling on the objections. The assessee complied with the order and filed the objections within three weeks before the OHA against the default notices of the tax, interest and penalty, passed by the AVATO Ward-72 for the 3rd quarter of 2015-16. The AVATO Ward-72 issued a notice under Section 59 (2) of the DVAT Act. This time assessee wrote a letter to the AVATO Ward-72 and raised its objections relating to the jurisdiction of the said AVATO Ward-72. The assessee stated that the issuance of the notices by the said AVATO of Ward-72, would be without jurisdiction and requested that until the issue of jurisdiction was decided, the matter be kept in abeyance. The AVATO Ward-72 took the position that the issue of its jurisdiction ought to be deemed to have been accepted by the High Court in writ petition when the direction for adjudication to be done by the concerned VATO was passed by Court. Thus, the AVATO Ward-72, presuming that this Court had confirmed his jurisdiction, proceeded to issue default notices of tax, interest and penalty, for the 1st and 2nd quarters of 2015-16.The AVATO Ward-72 also issued order for the 3rd quarter of 2015-16 in which the demand was reduced to NIL. The assessee had impugned the default notices of the tax, interest and penalty issued by the AVATO Ward-72 for the 1st and 2nd quarters of 2015-16.

After hearing both the parties, the High Court held that,

Whether notices of default assessment of tax and interest are valid even if they are issued by an officer not having jurisdiction - NO : HC

Whether mere direction of the Court that OHA shall decide the objections of the assessee does give rise to presumption that Court has accepted jurisdiction of concerned AVATO - NO : HC

++ u/s 66 the powers of the Commissioner have been delegated to the Special Commissioner, VATO and to such other person, as the Government thinks necessary. Thus, the notice under Section 32 of the Act can only be issued by the VATO who exercises jurisdiction on a party on the concerned date.

++ in the present case, the submission of the Revenue that this Court earlier had, agreed with its stand as contained in the counter affidavit, was bereft of merit, inasmuch as, in the said order, there was no discussion as to whether the AVATO Ward-72 has jurisdiction or not. The Court merely directed that the OHA shall decide the objections of the assessee after "the concerned VATO" has passed the order in respect of the 1st and 2nd quarters of 2015-16 within a period of two months from 15th March, 2017. The presumption by the Revenue that this direction should be deemed to be considered as acceptance by Court that the AVATO Ward-72 had jurisdiction, was not borne out from the order. In any event, the question of jurisdiction goes to the root of the matter specifically when the imposition of tax and penalty thereupon are concerned, and hence the issue of jurisdiction ought to have been decided by the Revenue before proceeding further.

++ for the Respondent not to consider the objection to the jurisdiction of the AVATO Ward-72, and to pass the impugned order, by simply assuming that its stand of jurisdiction already stands confirmed by this Court, was completely unacceptable. Ward No.69 being the correct Ward from where the assessee carries on its business, and this fact already being well within the knowledge of the authorities since 22nd January, 2016, the AVATO Ward-72 clearly lacked the jurisdiction to pass the impugned orders.The present writ petition was allowed. Revenue can issue fresh notices by the 'concerned VATO' who exercises jurisdiction over the assessee.

Assessee's writ petition allowed

2017-TIOL-2991-CESTAT-CHD

2017-TIOL-2990-CESTAT-DEL

IRIS COMPUTERS LTD Vs CST: DELHI CESTAT (Dated: August 4, 2017)

2017-TIOL-2989-CESTAT-DEL

LLOYD ELECTRIC AND ENGINEERING LTD Vs CCE: DELHI CESTAT (Dated: August 1, 2017)