NOTIFICATIONS
ctariff17_074
Centre permits import of 3 LMT of raw sugar at 25% duty
cnt85_2017
Customs officers for the purpose of audit - Jurisdiction defined
cuscvd17_001
Definitive Countervailing duty imposed on Certain Hot Rolled and Cold Rolled Stainless Steel Flat Products imported from PR China.
VIGILANCE
Advisory for following the prescribed provisions of law and Board's Instructions in the matter of collection of Duty - reg
CASE LAWS
2017-TIOL-335-SC-IT
CIT Vs SV GOPALA RAO: SUPREME COURT OF INDIA (Dated: July 13, 2017)
Income tax - Section 118 & Rule 68B
Keywords - power of CBDT - amendment of legislative provision
The Revenue preferred the present appeal challenging the judgment, whereby the High Court had quashed the Circular issued by CBDT u/s 119 of Income tax Act for amendment of Rule 68B, holding it to be ultra vires to the Constitution of India.
On appeal, the HC held that,
Whether legislative provisions can be amended by CBDT in exercise of its power u/s 119 of the Income tax Act - NO: SC
++ it is seen that the CBDT had amended the provisions contained in Rule 68B of the IInd Schedule to the Income Tax Act, by issuing a Circular to that effect, which otherwise have statutory force. Such legislative provisions cannot be amended by CBDT in exercise of its power u/s 119 of the Act. The High Court has, therefore, rightly held the circular ultra virus and quashed the same.
Revenue's appeal dismissed
2017-TIOL-334-SC-ST
CCE & ST Vs BMD PVT LTD: SUPREME COURT OF INDIA (Dated: September 4, 2017)
ST - Commissioner took the view that the activities undertaken by the service provider abroad would fall under the category of Management or Business Consultant Services and appellant is liable to pay ST on reverse charge basis – Tribunal concluding that the report titled "Market Research" clearly indicated that the consultant had undertaken research in different parts of Europe with reference to the technical textile business; that Revenue had not come up with any other documentary evidence to suggest that the appellant had received from the foreign consultant any services other than the market research report which is on record; that Rule 3 (ii) of Taxation of Services (Provided from outside India and received in India) Rules, 2006 mandates that Market Research services will be liable for payment of service tax on reverse charge basis only if such services are performed in India; that since Consultant had carried out such market research activity in Europe, no service tax was liable to be paid on reverse charge basis – Revenue in appeal Held: Order of the High Court is on the basis of the activity actually undertaken and the materials in support thereto which unmistakenly point that such activity is research activity and not consultancy service – no interference called for - If any part of the agreement pertaining to consultancy service is to be implemented, it will be open for the Revenue to take necessary steps in accordance with law – Appeal disposed of: Supreme Court [para 3, 4]
Appeal disposed of
2017-TIOL-1815-HC-MUM-IT
BALLARPUR INDUSTRIES LTD Vs CIT: BOMBAY HIGH COURT (Dated: September 7, 2017)
Income Tax - Sections 32, 43(6) & 72A - SICA - Sections 15 & 19.
Keywords : Amalgamation -Amalgamating company - BIFR - Revival of amalgamating company - Unabsorbed depreciation - Unabsorbed loss & Written down value.
One sick company (Modern Stramit I Ltd ) was closed down and was referred to the BIFR u/s 15 of the SICA. A scheme for rehabilitation was prepared u/s 19 of SICA and a proposal for its amalgamation in the Assessee-company (BILT) was accepted and accordingly, the amalgamation took place with effect from 1-4-1991. In its return the Assessee claimed written down value of Rs.1,20,03,557/- of the assets of the amalgamating company and the consequent claim was for depreciation of Rs.27,09,294/- for the AY 1992-93. The AO allowed the claim of depreciation to the extent of Rs.3,52,290/- and rest of the claim for depreciation was rejected on ground that maximum benefit as far as tax is concerned was specified by BIFR to the extent of Rs.75 lakhs and Assessee could not go beyond the purview and claim additional depreciation .
On appeal the CIT (A) upheld the decision of AO. On further appeal the Tribunal also confirmed the decision and held that it was permissible for the Assessee to have absorbed the entire unabsorbed depreciation of amalgamating company amounting to Rs.1,23,55,847/- by giving preference to it over unabsorbed business loss. However, it chose to exhaust the business loss first, which resulted in a portion of the unabsorbed depreciation on the value of Rs.1,20,03,557/- remaining inadmissible.
On appeal, the High Court held that,
Whether the sole idea of amalgamation is revival of the amalgamating company, and if the intension was only to take benefit of the carry forward losses and unabsorbed depreciation, benefit of section 72A will not be available - YES : HC
++ the contention raised was that the unabsorbed depreciation of Rs.21,42,815/- of the amalgamating company be treated and/or allowed as the depreciation of the current year, as the amalgamating company became non-existent, and the depreciation of these assets was allowable in the hands of the assessee. The Tribunal did not accept the claim of the assessee and it was held that the written down value of the assets taken over by the assessee-company from amalgamating company, was the actual cost of assets to amalgamating company as reduced not only by the depreciation actually allowed but also the depreciation determined but not given effect to;
++ the legal position about the unabsorbed depreciation is that it is not carried forward as such and is added to the depreciation for the following previous year and deemed to be part of that allowance. However, it is implicit in the scheme of Section 32(2) that such a thing would happen only if the assessee continues to carry on its business in the following year or years. This Court has held that for the Assessment Year 1975-76, the unabsorbed depreciation could not, under Section 32(2), be treated and/or allowed as the depreciation of the current year of the nonexistent amalgamating company, and that is why the depreciation on these assets is claimed by and is allowable in the hands of the assessee only;
++ the requirements of Section 32(2) read with Section 43(6) of the Income Tax Act, which permit the amalgamating Company to claim its unabsorbed depreciation, get eclipsed by the provision of Section 72(A)(1)(c) of the said Act, which has been given overriding effect and the power to put such restrictions is conferred upon BIFR under Section 32(2) of SICA. In the present case, this power has been exercised by BIFR, putting a cap of Rs.75,00,000/- with an object not only to see that there is a revival of sick industry but also to provide capital incentive to amalgamated company to claim unabsorbed loss of the amalgamating company;
++ the undisputed position is that in the absence of the provisions of Section 72A of the Income Tax Act, the assessee would be entitled to written down value of Rs.1,23,55,847/of the assets of the amalgamating company for the Assessment Year 1992-93 and consequently to claim the depreciation of Rs.27,09,294/-. In the absence of the provision of Section 72A of the Income Tax Act, the assessee would not be entitled to claim unabsorbed loss of Rs.1,41,40,464/- of the amalgamating company for the Assessment Year 1992-93. The assessee exercised the discretion of exhausting the business loss first, as a result of which, the claim for depreciation of Rs.3,52,290/- only remained admissible.
Assessee's appeal dismissed
2017-TIOL-1814-HC-DEL-IT
PR CIT Vs DELHI AIRPORT METRO EXPRESS PVT LTD: DELHI HIGH COURT (Dated: September 5, 2017)
Income tax - Sections 32 & 263 - CBDT Circular No. 9 of 2014
Keywords - assets under BOT scheme - claim of depreciation - revisional jurisdiction
The Assessee is a Concessionaire of the Airport Metro Express Project of the Delhi Metro Rail Corporation Ltd under a Build-Operate-Transfer Scheme. The Assessee had accepted the concession for a period of 30 years. During the AY in question, the Assessee claimed depreciation of Rs. 112,29,74,447/- on fixed assets of Rs. 1560,48,17,189/- at 50% of the eligible depreciation rates since, during the AY in question, the assets were used for less than 180 days. The case of the Revenue was that the assets were developed under the BOT scheme and the Assessee was not eligible to claim depreciation as it was not the owner of the assets. The Revenue contended that the land for the project was handed over by the DMRC to the Assessee as Concessionaire without actual transfer of ownership. The case of the Assessee, on the other hand, was that since such assets were used for the purposes of Assessee's business, it was entitled to claim depreciation u/s 32. Finally, after considering Assessee's response, the AO allowed the depreciation as claimed.
Subseuently, the PCIT, in exercise of powers u/s 263, issued a show cause notice to Assessee pointing out that if the value of these fixed assets were to be amortized evenly over a period of 30 years, the amount to be amortized would only be Rs. 52,01,60,572/- for each year. Therefore, the depreciation allowed to the Assessee was in excess by Rs. 60,28,13,875/- and, to that extent, the order passed by AO was prejudicial to the interest of Revenue.
On appeal, the HC held that,
Whether depreciation granted to the Concessionaire of a Metro Project of State Statutory Corporation under BOT Scheme, can be regarded as erroneous in toto, warranting exercise of jurisdiction u/s 263, in absence of any inquiry as to what extent the assets were utilised under the BOT scheme - NO: HC
++ it is seen that one of the factors that weighed with the PCIT in exercising revisional jurisdiction was CBDT Circular No. 9 of 2014 dated 23rd April 2014, which stated that "under the BOT arrangement an assessee would only be allowed amortization in respect of expenditure incurred in creation of the infrastructure facility over the period of BOT arrangement and no depreciation would be allowed on such infrastructure under provisions of the Act". It is further seen that the PCIT has proceeded by setting out the contents of the SCN and the contents of the reply given by the Assessee. It appears that no inquiry, as such, was undertaken by the PCIT to come to the conclusion that the original assessment order was erroneous and prejudicial to the interests of the Revenue;
++ for the purposes of exercising jurisdiction u/s 263, the conclusion that the order of AO is erroneous and prejudicial to the interests of Revenue has to be preceded by some minimal inquiry. In fact, if the PCIT is of the view that the AO did not undertake any inquiry, it becomes incumbent on the PCIT to conduct such inquiry. All that PCIT has done in the impugned order is to refer to the Circular of the CBDT and conclude that "in the case of Assessee company, the AO was duty bound to calculate and allow depreciation on the BOT in conformity of the CBDT Circular 9/2014 but the AO failed to do so. Therefore, the order of the AO is erroneous insofar as prejudicial to the interest of revenue";
++ in the considered view of the Court, this can hardly constitute the reasons required to be given by the PCIT to justify the exercise of jurisdiction u/s 263. In the context of the present case if, as urged by the Revenue, the Assessee has wrongly claimed depreciation on assets like land and building, it was incumbent upon the PCIT to undertake an inquiry as regards which of the assets were purchased and installed by Assessee out of its own funds during the AY in question and, which were those assets that were handed over to it by the DMRC. That basic exercise of determining to what extent the depreciation was claimed in excess has not been undertaken by the PCIT. Therefore, the Court is of the view that the ITAT was not in error in setting aside the impugned order of the PCIT u/s 263 of the Act.
Revenue's appeal dismissed
2017-TIOL-1813-HC-DEL-IT
PR CIT Vs INDEX SECURITIES PVT LTD: DELHI HIGH COURT (Dated: September 4, 2017)
Income Tax - Sections 143(3) & 153C.
Keywords: Assumption of jurisdiction - Jurisdictional requirement - Seized documents - Satisfaction Note & Substantial question of law.
There are two Assessees, one being Index Securities Private Limited (ISPRL) and the other is Vidhya Shankar Investment Private Limited (VSIPL). A search and seizure operation was conducted by the Investigation Wing on the Jagat Group and its Directors, other individuals and connected associates at their business and residential premises. During the search, a number of documents i.e., Trial Balance and Balance Sheet were seized from the searched person and not from the Assessee. The AO had prepared a satisfaction note stating that the documents which were seized from the premises of the searched person, belongs to ISPRL and VSIPL and hence, warrants action u/s 153C. A notice u/s 153C was issued to ISRPL seeking to reopen the assessment for the AYs 2005-06 to 2010-11 and VSIPL seeking to reopen the assessments for AYs 2007- 08, 2008-09 and 2009-10. The objection by the Assessee to the reopening of the assessments was rejected and an assessment order u/s 143(3) r.w.s 153C was passed separately for each of the AYs.
For ISPRL, the AO made an addition of Rs. 48,51,87,000 representing the share application money received from 16 investors and for the AY 2008-09, an addition of Rs. 55 crores representing share application money received from two investors and Rs. 3,24,95,000 representing unsecured loan received from one lender was also added by the AO. The AO had also made an addition of Rs. 50 crores representing share application money received from one investor for the AY 2010- 11. On the other hand, for VSIPL, the AO made an addition of Rs. 4,78,39,800/- representing share application money received from 32 investors; for AY 2008-09, the AO made an addition of Rs. 7,75,50,000/-representing share application money received from 29 investors and for AY 2009-10, the AO made an addition of Rs. 9,73,37,500/- representing share application money received from 26 investors.
The CIT(A) came to the conclusion that the assumption of jurisdiction by the AO was bad in law since the AO had failed to prove that the documents seized belonged to the Assessee or that they constituted incriminating documents qua each of the AYs in question. Accordingly, Section 68 could not be applied in the present case. The Tribunal concurred with the CIT(A) for the same reasons that the assumption of jurisdiction by the AO u/s 153 C was bad in law.
On appeal, the High Court held that,
Whether the AO can reopen an assessment proceeding when the seized documents are not from the respective Assessees but from the searched person - NO: HC
++ the Supreme Court in the case of Commissioner of Income Tax-III, Pune v. Sinhgad Technical Education Society agreed that (i) the ITAT that the documents seized had to relate to the AYs whose assessments were reopened and that this was an essential jurisdictional fact and (ii) the decision of the ITAT to permit the additional ground to be raised before it for the first time;
++ the Supreme Court also agreed with the decision of the Gujarat High Court in Kamleshbhai Dharamshibhai Patel to the extent it held that "it is an essential condition precedent that any money, bullion or jewellery or other valuable articles or thing or books of accounts or documents seized or requisitioned should belong to a person other than the person referred to in Section 153A of the Act." The Supreme Court observed: "This proposition of law laid down by the High Court is correct, which is stated by the Bombay High Court in the impugned judgment as well";
++ in the present case, the documents seized were the trial balance and balance sheets of the two Assessees for the period 1st April to 13th September 2010 (for ISRPL) and 1st April to 4th September 2010 (for VSIPL). Both sets of documents were seized not from the respective Assessees but from the searched person i.e. Jagat Agro Commodities (P) Ltd. In other words, although the said documents might 'pertain' to the Assessees, they did not belong to them. Therefore, one essential jurisdictional requirement to justify the assumption of jurisdiction u/s 153C was not met in the case of the two Assessees;
Whether reopening of the assessment proceeding is sustainable when the seized documents referred to in the Satisfaction Note issued by the AO does not relate to the AYs for which the assessments were reopened - NO: HC
++ as regards the second jurisdictional requirement viz., that the seized documents must be incriminating and must relate to the AYs whose assessments are sought to be reopened, the decision of the Supreme Court in Commissioner of Income Tax-III, Pune v. Sinhgad Technical Education Society settles the issue and holds this to be an essential requirement. The decisions of this Court in CIT-7 v. RRJ Securities and ARN Infrastructure India Limited v. ACIT also hold that in order to justify the assumption of jurisdiction u/s 153C the documents seized must be incriminating and must relate to each of the AYs whose assessments are sought to be reopened. Since the satisfaction note forms the basis for initiating the proceedings u/s 153C, it is futile for Mr Manchanda to contend that this requirement need not be met for initiation of the proceedings but only during the subsequent assessment;
++ in the present case, the two seized documents referred to in the Satisfaction Note in the case of each Assessee are the trial balance and balance sheet for a period of five months in 2010. In the first place, they do not relate to the AYs for which the assessments were reopened in the case of both assessees. Secondly, they cannot be said to be incriminating. Even for the AY to which they related, i.e. AY 2011-12, the AO finalised the assessment at the returned income qua each Assessee without making any additions on the basis of those documents. Consequently even the second essential requirement for assumption of jurisdiction u/s 153C was not met in the case of the two Assessees;
++ this Court does not consider it necessary to examine the merits of the case as far as the deletions by the CIT(A) of the additions made by the AO u/s 153C are concerned. In any event, a detailed analysis has been undertaken by the CIT(A) of the materials produced by the Assessee which justified the deletion of such additions. Even on this score, no interference is warranted with the impugned order of the CIT(A). For the aforesaid reasons, the Court finds that no substantial question of law arises from the impugned orders of the ITAT.
Revenue's appeals dismissed
2017-TIOL-1812-HC-MAD-VAT
ALL INDIA MARATHON SPORTS Vs ACTO: MADRAS HIGH COURT (Dated: July 27, 2017)
Puducherry Value Added Tax Act & Tamil Nadu General Sales Tax Act - Writ Petition - Sections 30(2), 77 & (3) & (4); 28A, 28A(1) &49A
Keywords - Clarification from Advance Ruling Authority - Pre-assessment notice - Revision of assessment
The petitioner-assessee is a dealer registered under the Puducherry Value Added Tax Act, 2007 (PVAT) and Central Sales Tax Act (CST). The assessee challenges the pre-assessment notices issued under the CST Act for the AYs 2008-09, 2009-10 and 2010-11, for being barred by limitation u/s 30(2) of the PVAT Act.
After hearing the matter, the High Court held that,
Whether the revenue authorities could issue notices for revision of assessment already completed, based upon a Clarification given by the Advance Ruling Authority, at the instance of third-party dealers - NO : HC
++ upon examining the provisions of Sections 30(2) and 77 (3) & (4) of the PVAT Act, and taking note of the legal principle as to what would be effect of a Clarification and Advance Ruling issued by the concerned authorities, in the decision in Amul Ploycure Industries Ltd., Vs. Tamil Nadu Taxation Special Tribunal and others it was held that while dismissing a writ petition filed by the dealer challenging a Clarification held that Clarification can be assailed in the appeal as well as before the assessing officer on the basis of proper evidence, if the assessee so feels. No compulsion and binding nature on the assessing authority is found in the provisions of Section 28A(3) of the Tamil Nadu General Sales Tax Act, 1959. The Assessing Authority would certainly be bound only by the appellate order. It is not necessary for the Court to go into the question of correctness of the clarification issued and that would depend on the evidence which would be lead by the assessee before the concerned authorities.
++ admittedly, the revenue has already assessed the assessee to tax in respect of the three AYs and what the AO seeks to do by issuing impugned notices is to revise the assessment, that too, based upon a Clarification given by the Advance Ruling authority at the instance of third party dealers. Therefore, the revenue cannot be given the advantage of reopening the assessment under the guise that the Advance Ruling authority has given a clarification, which will bind the goods dealt with by the assessee. If the interpretation given by the revenue is to be accepted once again, this will run counter to the finality attached to an order of assessment as mentioned in Section 30(2) of the PVAT Act. This obviously cannot be done as Section 30(2) of the PVAT Act, clearly bars re-assessment beyond a period of 5 years from the expiry of the year to which return under the Act relates. Therefore, there is no room for reckoning the date on which the clarification was issued by the Advance Ruling authority into Section 30(2), where the relevant date will be the year to which the return under the Act relates. Therefore, the impugned notices are clearly barred by limitation and the revenue is not entitled to reopen the assessment beyond the expiry of 5 years in respect of each of the AYs, namely, 2008-09, 2009-10 and 2010-11, which came to an end on 31.03.2014, 31.03.2014 and 31.03.2016 respectively. The impugned pre-assessment notices merit being quashed.
Assessee's writ petition allowed
2017-TIOL-1811-HC-MAD-VAT
SCHNEIDER ELECTRIC INDIA PVT LTD Vs ACCT: MADRAS HIGH COURT (Dated: July 03, 2017)
Tamil Nadu Value Added Tax Act & Central Sales Tax Act - Writ Petition - Section 27; Section 5(1)
Keywords - Exemption - Export of goods
The petitioner-assessee company is a dealer, who during AY 2012-13 sought exemption under section 5(1) of the CST Act, on grounds that goods worth Rs.1,46,86,92,249/- had been exported by it. The assessee submitted documents in support of the claim, such as copies of sales invoices, shipping bills for export and bank realization statements. The AO held the assessee eligible for exemption u/s 5(1) of the CST Act. With regard to some other issues, the assessee had filed their objections. Meanwhile, the erstwhile AO was replaced by a new AO, who issued a revised notice holding that the assessees had not filed copies of invoices, purchase orders, packing list, Bills of entry, etc., for the said turnover. Thereby, the new AO disallowed the exemption and proposed to tax the assessee at a higher rate of 14.5%. Upon considering the assessee's submissions, the new AO passed the impugned order of assessment, wherein in respect of the exemption claim on direct export sales to the tune of Rs.1,46,86,92,249/-, the respondent has given the benefit of exemption on direct export sale covering the turnover of Rs.30,28,42,120/- alone and rejected the claim for the remaining turnover of Rs.1,16,58,50,129/- on the ground that they are not covered by any supporting documents relating to direct exports sales. The assessee challenged such assessment order on grounds that a personal hearing, mandated u/s 27 of the Tamil Nadu Value Added Tax (TNVAT) Act, was not granted.
After hearing the matter, the Tribunal held that,
Whether an assessment order could be passed by a new AO, denying exemption in case of export of goods involving a large turnover, without granting the assessee a personal hearing, considering that the exemption had earlier been granted by the previous AO - NO : HC
++ considering the complexity of the transaction and the large turnover involved, the AO should have afforded an opportunity of personal hearing, especially when the present assessment order is pursuant to the revised notice issued. When the fact remains that the earlier officer while issuing his notice in no uncertain terms stated that the records filed by the assessee are sufficient to hold that the goods have been actually exported outside the country and granted exemption claim on direct export sales for the entire amount claimed by the assessee. Therefore the matter requires to be remanded for fresh consideration on this aspect, as well as w.r.t. the defective C Forms, which according to the revenue were unacceptable. Thus, the revenue should return the defective C Forms so as to enable the assessee to rectify the defects and re-submit them.
Assessee's writ petition partly allowed
