2017-TIOL-1845-HC-AHM-VAT

INDUS TOWERS LTD Vs STATE OF GUJARAT: GUJARAT HIGH COURT (Dated: August 4, 2017)

GVAT Act - Writ - Sections 2(23)(d) & 52 - Companies Act - Sections 391 & 392 - Constitution of India - Articles 226, 246, 252 & Entry 4, 43 of List-I of Seventh Schedule

Keywords: Scheme of Amalgamation - State Legislations - Sale - Tax liability & Union legislation.

The Assessee-Company had filed its returns. It was observed that three schemes of Amalgamations were approved by the Delhi High in case of Passive Infrastructure Assets of Bharti Infratel Ventures Limited (BIVL), the Passive Infrastructure Assets of Idea Cellular Tower Infrastructure Limited (ICTIL) and Gujarat High Court for the Passive Infrastructure Assets of Vodafone Infrastructure Limited (VIL) transferring to Vodafone Essar Infrastructure Limited. Subsequently, another Scheme of Arrangement was approved by the Delhi High Court where the BIVL, VIL and ICTIL merged with Indus Towers. All the tangible or intangible assets of the BIVL, VIL and ICTIL, including actionable claims, sundry debtors, receivables, bills credits, loans and advances, stood transferred to and vested in the Assessee from the appointed date. The Merging Entities ceased to exist w.e.f 1.4.2009, having merged with Indus Towers and the inter se transactions between Indus and the Merging Entities stood cancelled. Thereafter, three SCNs were issued by Assistant Commissioner, Commercial Tax to the Merging entities but were served and addressed upon the Assessee. The Value Added Tax was levied by the Assistant Commissioner, Commercial Tax on the consideration received by the Merging Entities with respect to the transactions under the Indefeasible Right to Use Agreements with the Assessee. The BIVL, VIL and ICTIL had, by way of an indefeasible right to use agreement provided to the Assessee, an indefeasible right to use the Passive Infrastructure in lieu of consideration. After receiving all the three SCNs, the Assessee filed a letter before the Assistant Commissioner and informed that the Merging Entities, to whom the said SCNs were issued had ceased to exist from 1st April 2009 by virtue of High Court orders, hence, the SCNs were invalid in nature. In reply to Assessee letter, the Assistant Commissioner stated that the SCNs were issued to the Assessee as the Merging Entities had amalgamated with them as per the Order dated 18th April 2013 of the Delhi High Court w.e.f. 1st April 2009 and the assets and liabilities of the Merging Entities had accordingly merged with the Assesseed on 'On-Going Business'.

In Writ, the High Court held that,

Whether the provisions of Section 52 of the GVAT Act and the provisions of Ss 391 or 392 of the Companies Act operate in two different domains of law - YES: HC

Whether the provisions of Sec 52 were enacted only for the purpose of fixing tax liability in case of amalgamation of companies - YES: HC

++ so far as challenge to the constitutional validity of Section 52 of the GVAT Act, 2003 is concerned, it is the case on behalf of the Assessees that Section 52 is ultra vires Articles 246 & 252 of the Constitution of India in asmuch as, the State Government while enacting the said Section, encroached upon the field exclusively covered by the Parliament in regard to Entry 43 of List-I of Seventh Schedule to the Constitution of India, whereby the State Legislature has provided the statutory fiction to deem the Merging Companies as alive as distinct companies, even though the same have become extinct after their amalgamation in the Assessee w.e.f 1st April 2009 vide amalgamation order sanctioned by the High Court on 18th April 2013. It is the case on behalf of the Assessee that by enacting Section 52, it has encroached upon the Central Legislation; more particularly with respect to the Companies Act, 1956 by which the Parliament alone would have exclusive authority under Entry 4 of List I of the Seventh Schedule;

++ on the other hand, it is the case on behalf of the State that both Section 52 of GVAT Act and Sections 391 & 392 of the Companies Act would operate in different field, and the object and purpose of the same would be different. It is the case on behalf of the State that while considering legality and constitutional validity of Section 52 of the GVAT Act, the pith and substance of Section 52 of the GVAT Act and the purpose and object for which it is enacted is required to be considered;

++ as per definition of 'sale' contained in clause (d) of sub-section [23] of Section 2 of the GVAT Act, 'the 'sale' means a sale of goods made within the State for cash or deferred payment, or other valuable consideration and includes .. .. .. [d] transfer of the right to use any goods for any purpose [whether or not for a specified period] for cash, deferred payment or other valuable consideration...' Therefore, as such, transaction between Merging Companies and the Assessee can be said to be 'sale' within the definition of Section 2 [23] (d) of the GVAT Act by which the value added tax is leviable;

++ however, to avoid such eventuality like it has arisen in the present case, on sanctioning the Scheme of Amalgamation between the Merging Companies and the Assessee company, amalgamating Operating Companies with the Assessee company retrospectively ie., the appointed day and only with a view to see that there may not be any zero tax liability either of the Operating Companies and Assessee Company, Section 52 of the Act has been enacted by which for the purpose of GVAT Act, two or more Companies [Transferor Company & Transferee Company] shall be treated as distinct companies for all the purpose upto the date of amalgamation/merger. Therefore, the aforesaid provision can be said to be only for the purpose of tax liability under the GVAT Act and it cannot be said to be in any way affecting the provisions of Sections 391 or 392 of the Companies Act and/or the same cannot be said to be encroaching upon the powers of the Parliament to enact the Law under Entry 43 or 44 of List I of the Seventh Schedule. By enacting Section 52 of the GVAT Act, it cannot be said that the State Legislature has encroached upon any of the powers of the Parliament under List I of Seventh Schedule of the Constitution of India.

Assessee's Writ petition demissed

2017-TIOL-1833-HC-DEL-IT + Story

CIT Vs M/s INDIAN SOCIETY OF THE CHURCH OF JESUS CHRIST OF LATTER DAY SAINTS : DELHI HIGH COURT (Dated: September 7, 2017)

Income Tax - Sections 11 & 12A(a).

Whether where a trust or society has both religious and charitable objects and such religious-charitable activity serves across the communities and for society at large rather than exclusively meant for a particular religious community, the exemptions available u/d 11 cannot be denied - YES: HC

The Assessee-society is registered under Section 12A (a) of the Act and main object of the Assessee is to undertake the dissemination of useful religious knowledge in conformity with the purposes of the Church of Jesus Christ of Latter-Day Saints, to assist in promulgation of worship in the Indian Union, to establish places of worship in the Indian Union, to promote, sustain and carry out programmes and activities of the Church, which are, educational, charitable, religious, social and cultural etc. In assessment order the AO held that Assessee is a charitable society established 'for the benefit of any particular religious community or caste and had not pursued any activity in the true nature of charity for the general public directly thereby in violation of Section 13 (1) (b) and accordingly denied it exemption under Section 11 of the Act.

On appeal, the CIT (A) upheld the view taken by AO. On further appeal, the Tribunal however, disagreed with such conclusions and held that the programmes conducted by the Society "are open for public at large without any distinction of caste, creed or religion and the benefits of these programmes held at the meeting house are available to the general public at large and accordingly set aside the order of the AO.

On appeal, the High Court held that,

++ the factual determination by the ITAT that (i) the programmes conducted by the Society "are open for public at large without any distinction of caste, creed or religion and the benefits of these programmes held at the meeting house are available to the general public at large and (ii) priests are not managing the affairs of the society, have not been shown by the Revenue to be perverse. It is not the percentage of expenditure on persons not belonging to the religious community that mattered. What was significant was that there were donations made by the Society for the general public utility. This showed that it was not exclusively for the benefit of one particular religious community;

++ the CIT (A) had proceeded on the basis that although the Assessee Society was for both religious and charitable purposes, since it was for the benefit of only one religious community the provision of Section 13 (1) (b) would apply to deny it exemption under Section 11 of the Act. The above conclusion was legally flawed. It was contrary to the decision of the Supreme Court in Dawoodi Bohra Jamat which held that even where the trust or society has both religious and charitable objects, " it needs to be examined whether such religious-charitable activity carried on by the trust only benefits a certain particular religious community or class or serves across the communities and for society at large ". In that case it was factually found that " the activities of the trust though both charitable and religious are not exclusively meant for a particular religious community " and, therefore Section 13 (1) (b) was not attracted. In the present case too, the factual finding of the ITAT is likewise. It has been found that the activities of the Assessee Society, though both religious and charitable, were not exclusively meant for one particular religious community. It was, therefore, rightly not denied exemption under Section 11 of the Act.

Revenue's appeal dismissed

2017-TIOL-1832-HC-DEL-IT

CIT Vs RENU CONSTRUCTIONS PVT LTD: DELHI HIGH COURT (Dated: September 6, 2017)

Income Tax – Section 153C.

Keywords: Additional ground for rejection - Belongingness - Belonged to - Other persons – Seized document & Satisfaction note.

There are two Assessees, one being Ankur Gupta and other Renu Constructions Pvt limited. The Assessees had filed their retruns. A search and seizure operation took place in the BM Gupta group whereby certain documents were found which led to notices being issued to the Assessees u/s 153C of in their capacity as 'other persons'. The AO made additions in the subsequent assessments.

The Assessees preferred an appeal before the CIT(A). The CIT(A) held that the assumption of jurisdiction u/s 153C was erroneous. The Revenue went in appeal before the Tribunal. The Tribunal concurred with the findings of the CIT(A).

On appeal, the High Court held that,

Whether the seized document 'pertained to' the other person is sufficient enough to prove that the seized material ‘belonged to' the other person even if the AO failed to record about those seized documents in the satisfaction note - NO: HC

Whether the High Court has a right to reject an appeal if it finds an additional ground for doing so – YES: HC

++ the recent decision of the Supreme Court in  Commissioner of Income Tax, Pune v. Sinhgad Technical Education Society settles the legal position in favour of the Assessees. The Supreme Court, while affirming the judgment of the Bombay High Court, approved the decision of the Gujarat High Court in  Kamleshbhai Dharamshibhai Patel v. Commissioner of Income Tax-III, that a document seized 'should belong to a person other than the person referred to in Section 153A'. It has been categorically observed by the Supreme Court that the above position of law laid down by the Gujarat High Court is correct;

++ this Court rejects the contention of the counsel for the Revenue that even prior to 1st June 2015 at the stage of initiation of proceedings u/s 153C, it is sufficient if the seized document 'pertained to' the other person and it is not necessary to show that the seized material 'belonged to' the other person. This legal position has been explained by this Court in its recent decision dated 10 th July 2017 in the case of Canyon Financial Services Ltd. v. Income Tax Officer ;

++ as far as ITA No. 499/2011 is concerned, the Court finds that there is an additional ground to reject the appeal of the Revenue. The satisfaction note recorded by the AO in that case does not even refer to the seized documents. For the aforementioned reasons, Question No. 2 framed by the Court is answered in the negative, i.e. in favour of the Assessees and against the Revenue;

++ question No. 1 in ITA Nos. 499 of 2011 and ITA Nos. 32 and 35 of 2012 is answered in the affirmative, i.e. in favour of the Assessees and against the Revenue;

++ in so far as the Revenue has been unable to show that the impugned order of the ITAT is perverse, Question No. 3 is answered in the negative, i.e. in favour of the Assessee and against the Revenue. The solitary question framed in ITA Nos. 41 and 1265 of 2017 is answered in the affirmative i.e. in favour of the Assessee and against the Revenue.

Revenue's appeal dismissed

2017-TIOL-1831-HC-AHM-CX

CCE & C Vs NIRAYU PVT LTD: GUJARAT HIGH COURT (Dated: August 24, 2017)

CX - the respondent-assessee was engaged in manufacturing goods - The revenue sought reversal of Cenvat credit availed between December 1997 to August 2001 clearance of inputs, semi finished goods and finished goods - Duty demand with interest and equal penalty u/s 11AC was imposed - Such demands were upheld by the Tribunal, although the units which received the goods from the assessee were allowed to utilise the credit on such duty - The Tribunal also reduced the penalty, noting that the demand confirmed related to clearance of duty paid input without payment of duty or reversal of credit, thereby, the demand of duty has to be sizable - Thus the question arose as to whether the Tribunal could reduce or waive off penalty imposed u/s 11AC, which was mandatory in nature.

Held - the issue at hand is covered by the Apex Court in its decision in Union of India v. Dharamendra Textile Processors reported in - 2008-TIOL-192-SC-CX-LB wherein Section 11AC was examined & it was held that the section provided for a mandatory penalty, leaving no discretion for imposing lesser penalty - In the present case, the Tribunal did not hold that the conditions for applicability for applying Section 11AC of the Act did not arise - In fact, the Tribunal sustained penalty but reduced the quantum, clearly indicating that the grounds for imposition of penalty under section 11AC did exist - Therefore, in light of the aforementioned precedent, it was not open for the Tribunal to exercise discretionary powers to reduce the penalty - Issue at hand answered in favor of revenue: High Court (Para 2,3,4,8,9)

Revenue appeal allowed

2017-TIOL-1830-HC-AHM-CX

ROLEX INDUSTRIES Vs CCE & C : GUJARAT HIGH COURT (Dated: August 24, 2017)

CX - the assessee manufactured forgings of iron and steel, for its own and also on job work basis - Since the assessee exceeded the limit mentioned in the exemption Notfn., duty demand with equal penalty was imposed - The assessee challenged such demand alleging wrong classification of goods - Subsequently, after remand by the Tribunal, the revenue accepted the classification favored by the assessee - The assessee sought benefit of Notfn. 208/83 & 214/86, which was denied by the Commr. for not following correct procedure for availing benefit - The Tribunal too dismissed the assessee's appeal, citing that proceedings had been remanded for ascertaining the correct classification of the goods, and so the assessee could not have sought benefit of notifications.

Held - although the remand was for a particular purpose, the Tribunal could not restrict the rights of the assessee to claim benefit of Notfns. if otherwise available - Nonetheless, the Commr. with application of mind to the Notfns. had rejected the assessee's claim for failing to establish that the procedure required to be followed for availing the benefit of Notfns. was actually followed - No merit in appeal: High Court (Para 2,3)

Assessee's appeal dismissed

2017-TIOL-1829-HC-AHM-CX

CCE & C Vs SURESH SYNTHETICS: GUJARAT HIGH COURT (Dated: August 24, 2017)

CX - the respondent-assessee is a 100% EOU - Under the EXIM policy, the assessee could clear goods subject to certain limit in DTA area, and also sell such goods in the domestic area against foreign exchange remittance in terms of para. 9.10(b) of the same - The department opined that on such clearances, the assessee was required to pay excise duty equivalent to customs duty payable on the like goods when imported - Duty demand with penalty was imposed - The Tribunal set aside such demands.

Held - Considering the submissions & documents on record, the Tribunal relied upon decisions in Maruti Cottex Limited 2004-TIOL-1184-CESTAT-BANG and Jumbo Bag Ltd. - In the former decision, the Tribunal held that the clearances to DFRC holders & also to supplies against forex, could not be treated in par with clearances permitted by the department for sale to DTA - Moreover, sale in DTA against forex would be covered under para. 9.10(b) and would count against Net Foreign Exchange Target required under the policy - Such decision was later upheld by the Apex Court - The decision in Jumbo Bag Ltd. ran on similar lines, and was upheld by the Apex Court - In light of the same, the issue answered in favor of assessee: High Court (Para 2,4,5,6)

Revenue appeal dismissed

2017-TIOL-1245-ITAT-KOL

ITC LTD Vs DCIT: KOLKATA ITAT (Dated: September 8, 2017)

Income Tax - Sections 80IA & 254(2).

Keywords: Interim order - Non-incorporation of argument - Original appellate proceedings & Previous order.

The Assessee is an Indian conglomerate and its diversified business includes FMCG, Hotels, Paperboards & Packaging, Agri Business & Information Technology. The Assessee had claimed deduction u/s 80IA in respect of its captive power plant which was directed to be granted as per the decision of Calcutta High Court in its own case. The very same issue had travelled to the Supreme Court by way of a special leave petition and leave was granted thereon. During the original appellate proceedings before the Tribunal, the Assessee argued to remand the same issue to the file of the AO to decide on the valuation of the power for captive consumption of electricity. The Tribunal remanded the issue to the file of the AO but Assessee's arguments were not reflected in the order.

On appeal, the Tribunal held that,

Whether merely because the assessee has appealed against the HC order on a particular issue, the decision of the Tribunal, based on the jurisdictional HC's order, suffers from an error falling u/s 254(2) and the same warrants rectification - NO: ITAT

++ this Tribunal had passed an order on the aspect of determination of market value of power for captive consumption of electricity to be decided based on the decision of the Jurisdictional High Court in assessee’s own case for the AY 2002-03. Merely because, the said order has been appealed by the Assessee to the Supreme Court, passing of an order by this Tribunal following the Jurisdictional High Court order could not be termed as an error, much less an error falling within the meaning of provision of Section 254(2) warranting any rectification thereon.

++ in the case law relied upon by the AR on the Co-ordinate Bench of this Tribunal in the case of Hindustan Gums & Chemicals Ltd., this was an issue on the allowability of provision for leave encashment vis-a-vis Section 43B(f). The very same issue had travelled to Supreme Court which had initially stayed the order of Calcutta High Court in the case of Exide Industries Ltd and later during Leave Proceedings in Civil Appeal No. CC 22889 of 2008 dated 08.05.2009, had passed an Interim Order stating that the assessee has to pay the tax on provision for leave encashment as if the provision of Section 43B(f) is present in the Statute Book and claim the same as deduction in the return of income. Hence, in view of this interim order, this Tribunal in various cases had passed orders remanding the issue of allowability towards provision for leave encashment to the file of the AO to decide the same based on the final outcome of Supreme Court in the case of Exide Industries Ltd.;

++ but in the instant case, no such interim order of Supreme Court has been brought to our notice by the AR for the assessee. Hence, the decision relied thereon by the AR would not come to the rescue of the assessee.

Whether mere non-incorporation of Assessee's argument at the time of original appellate proceedings before the Tribunal will make the previous order erroneous warranting its recall or rectified u/s 254(2) - NO: ITAT

Whether the Tribunal can recall its previous order in an attempt to re-write, in absence of any manifest errors which are obvious, clear and self-evident, having bearing on the final decision of the grounds raised - YES: ITAT

++ with regard to another decision of Karnataka High Court relied upon by the AR in the case of CIT vs. I.T.C. Hotels, we find that in the said case, the Revenue had no objection to remand this matter to the file of the AO to decide the allowability of deduction u/s 80HHD based on the final outcome of the decision of the Supreme Court. This was a concession given by the revenue before the High Court. It is well settled that when a concession has been given by the Revenue at the time of hearing, the same would not act as a binding precedent. Hence, this decision also would not come to the rescue of the assessee in the instant case;

++ this Tribunal had passed an order by placing proper reliance on the decision of the Jurisdictional High Court on the issue of allowability of deduction u/s 80IA and determination of quantum thereon with regard to captive consumption of electricity. We do not find any error in the said order passed by this Tribunal warranting any rectification in terms of Section 254(2);

++ we admit the argument of the AR that he had indeed made this argument at the time of original appellate proceedings before us that assessee had preferred an appeal before the Supreme Court and Leave was granted thereon. But mere non-incorporation of the said argument alone would not change the decision of this Tribunal and would not make the previous order erroneous warranting its recall. Even otherwise, it would only tantamount to exercise of judicial discretion by this Tribunal;

++ we hold that unless there are manifest errors which are obvious, clear and self-evident, having bearing on the final decision of the grounds raised, the Tribunal cannot recall its previous order in an attempt to re-write the same. It has been held by the Co-ordinate Bench of Mumbai Tribunal in J.C.I.T. vs. Grasim Industries Ltd., that failure of the Tribunal to consider the argument advanced by either party for arriving at a conclusion is not an error apparent on the record, although it may be an error of judgment. It has been further held that the Tribunal cannot in exercise of its power of rectification look into some other circumstances which would support or not support its conclusion;

++ the grievance of the assessee is otherwise taken care by the statute itself as rightly pointed out by the DR , that in case the assessee succeeds before the Supreme Court, the AO would any way pass a giving effect order for the same, granting necessary relief to the assessee based on the order of the Supreme Court. Hence the apprehensions of the AR would any way get addressed at that point of time. Hence we are not inclined to accept the arguments of the AR;

++ we are of the view that the present application of the assessee u/s 254(2) is devoid of merits and deserves to be dismissed and is accordingly dismissed. In the result, the Miscellaneous application of the assessee is dismissed.

Assessee's appeal dismissed