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F.No.225/231/2017-ITA-II
Taxation and investment regime for Pradhan Mantri Garib Kalyan Yojana 2016 -representations under the Scheme pertaining to challan corrections and conversion etc. - reg.
CASE LAWS
2017-TIOL-2063-HC-MUM-MISC + Story
BHARTI AIRTEL LTD Vs MIRA BHAYANDAR MUNICIPAL CORPORATION: BOMBAY HIGH COURT (Dated: September 26, 2017)
Maharashtra Municipal Corporations Act, 1949 – Writ - Sections 99B, 127(2)(aaa), 152B & 152C
Keywords – E-recharge - Local Body Tax - SIM card - Telecom services provider
The assessee is a provider of telecommunication services. The assessee provides a SIM card, a plastic/paper card encrypted with the unique number which is known as International Mobile Subscriber Identification (IMSI). It is stated that the SIM card enabled the subscriber to access the telecommunication service provided by the assessee. It is contended that the SIM card does not have any utility or intrinsic value by itself. Under newly-inserted Section 127(2)(aaa) of the Act, a provision was made for levy of LBT in lieu of cess or octroi. The State Govt. by a notification dated 25th March 2010 notified the Bombay Provincial Municipal Corporations (Local Body Tax) Rules, 2010. The LBT Rules provide a mechanism for levy and collection of LBT and rates of LBT. In exercise of the power u/s 127(2)(aaa) of the said Act, the State Govt. directed various Municipal Corporations in the State including the respondent corporation to levy LBT on the entry of the goods into the limits of the city for consumption, use or sale in lieu of octroi or cess w.e.f. 1 st April 2010. On 18th February 2011, another notification was issued by the State Govt. in exercise of the powers u/s 99B r/w section 152B and 152C by which the rates of LBT to be levied by the respondent corporation on entry of various categories of goods into the limits of the city for the financial year 2011 were notified.
The assessee claimed that it and its distributors were compelled to register themselves under the LBT Rules, which was done under protest. It was alleged that neither the assessee nor its distributors paid any LBT on SIM cards or recharge coupons or e-recharge. It was also alleged that officers of the respondent visited the premises of various distributors of the assessee and demanded LBT on SIM cards and recharge coupons on the basis of the amount/value of talk time mentioned. By a communication dated 30th October 2010, the assessee informed the respondent that the SIM cards, recharge coupons and e-recharge were not the goods which could be subjected to LBT and in fact, the assessees were paying service tax on providing telecommunication services. On 28th March 2013, the State Govt. issued a notification for fixing the rate of 3.5% on “SIM cards, memory cards, activation/renewal slips whether “recharged it online or otherwise”. The challenge in this petition under Article 226 of the Constitution of India was to the action of the respondent of assessing, levying and recovering LBT on SIM cards, recharge coupons and e-recharge brought into the limits of the first respondent. There was a consequential challenge to the notification dated 28th March 2013 issued by the State Government.
On hearing the petition, the High Court held that,
Whether SIM Cards brought within the limit of a city for consumption or sale attracts the levy of LBT - YES: HC
Whether any attempt to e-recharge such SIM Cards is also liable to attract LBT - NO: HC
++ considering Section 2(31-A) of the Act which defines Local Body Tax (LBT) and Section 2(25) and also Section 127(2)(aaa) which introduced the concept of LBT, and further considering Section 152-P of the Act, which conferred a power on the municipal corporation to levy LBT, and Section 149 which confers rule making power for incorporating the procedure to be followed for levy of taxes such as LBT, thus, a Municipal Corporation under the said Act is empowered to levy LBT on the entry of goods into the limits of city for (a) consumption, (b) use or (c) sale. Thus, when goods are brought into city for consumption or use, LBT can be levied. The definition of the goods is very wide as clause 25 of Section 2 provides for inclusive definition.
++ in the case of Sodexo SVC India Private Limited vs. State of Maharashtra and others, wherein the Apex Court dealt with the applicability of LBT on Sodexo coupons, and it was held that the Sodexo coupons are provided by the employer to the employees to avail of facility of food and non alcoholic beverages. It was held that a perquisite given to the employees by adopting the methodology of vouchers and therefore, cannot be treated as goods.
++ considering the decision of the Apex Court in Bharat Sanchar Nigam Limited, wherein the issue was whether the provision of mobile phone connections was a sale or a service or both, and also the decision in the case of Tata Consultancy Services V. State of A.P. wherein the issue pertained to the levy of sales tax on computer software, and in which the Court also dealt with the right acquired by the subscriber who subscribes mobile telephony service. Moreover, in the case of Idea Mobile Communication Limited, the Court examined the issue as to the value of SIM cards sold by the appellants to their mobile subscribers was to be included in taxable service under section 65 (105) (zzzx) of the Finance Act,1994 which provides for levy of service tax on communication service. Another issue examined was whether the sale of SIM cards was taxable as sale of goods under the Sales Tax Act.
++ the SIM cards are normally made of plastic or paper. The SIM cards are capable of being bought and sold. The SIM cards have utility value. The SIM cards are capable of being transferred, stored and possessed. The concept of Sales Tax and LBT are not the same. LBT can be levied on the goods brought within the limits of a Municipal Corporation even if the same are not sold, but the same are brought either for consumption or use. Going by what is held by the Apex Court in paragraph 11 of its decision in the case of Idea Mobile, SIM cards are capable of being used by putting the same in a mobile phone handset. A SIM card is a portable memory chip used in cellular telephones. It is a tiny encoded circuit board which is fitted into the cell phones at the time of signing on as a subscriber. Even assuming that by itself the SIM cards have no intrinsic sale value, considering the nature of its use, it has a value in terms of money apart from its value as a portable memory chip. Even recharge vouchers which are made of paper or plastic are capable of being bought and sold. The same are capable of being used. The same are capable of being transferred, stored and possessed. The recharge vouchers or cards made up of paper or plastic may have a little value by itself, but the same are capable of being used and that its use has a value as the holder thereof can get a talk time or internet data which has a value in terms of money. SIM cards and recharge vouchers are tangible goods which are capable of being brought into the limits of a city. The same are capable of being used after the same are brought into the limits of a city. Hence, the same will be goods within the meaning of clause 25 of Section 2 of the said Act. In the decision of the Apex Court in the case of Idea Mobile, the High Court had come to the conclusion that the SIM card has no intrinsic sale value and therefore, the sales tax is not payable. But, the Apex Court has not considered the question whether the SIM cards are capable of being used which is a relevant consideration for charging LBT.
++ as far as e-recharge is concerned, by no stretch of imagination, it can be said that erecharge is capable of being brought into limits of a city. In clause 133 quoted above, erecharge is not specifically included. Assuming that it is included, it is nothing but an electronic download by use of internet. Hence, erecharge cannot be subject to levy of LBT. Erecharge is capable of being used. But it cannot be said that by downloading erecharge through internet, erecharge is brought into limits of a Municipal Corporation. Hence, LBT cannot be recovered on erecharge.
++ hence the SIM cards and recharge coupons/cards, as held earlier, would be covered by the definition of goods under subsection 25 of section 2 of the said Act. Charging section for LBT under the said Act is section 152P. LBT is leviable on the entry of goods into the limits of city for consumption, use or sale. Hence, the first respondent was well within its powers to levy LBT on SIM cards and recharge voucher in physical form.
Assessee's writ petition partly allowed
2017-TIOL-2060-HC-DEL-CUS
CC Vs OFFICIAL LIQUIDATOR : DELHI HIGH COURT (Dated: September 27, 2017)
Cus - duty demand with interest & penalty was imposed on the assessee company in liquidation, from the date of the import till the actual payment, for not filing any evidence of it fulfilling its export obligations - Later the Official Liquidator passed an order setting aside such duty demand on grounds that such order was passed by the Customs authorities without informing the Official Liquidator of such proceedings.
Held - Considering the decisions in the cases of Colaba Land & Mills Co. Ltd. V. V.M.Deshpande, Income Tax Officer, Companies Circle I(8), Bombay and Anr. and Sales Tax Officer, Central Circle, New Delhi V. Byford Ltd., which involve similar facts and circumstances, once after inviting the claims of the Customs authorities asking it to file proper documents in proper format, the Official Liquidator should not have rejected it on grounds that it ought to have been given an opportunity to contest the duty & penalty levied - Such duty demand with penalty was imposed after following the established procedure u/s 117 - Hence the order of the Official Liquidator merits being set aside & claim of Customs authorities merits being considered: High Court (Para 1,2,7,8,9)
Appeal allowed
MINK TRADECOM PVT LTD Vs UoI : DELHI HIGH COURT (Dated: September 26, 2017)
Cus - the assessee had imported a consignment of gold coins & filed bills of entry & copies of the Airway bill - The goods were seized and the revenue proposed to confiscate them u/s 111(d) of the Act, since they allegedly were imported in repugnance to Notfn. Nos. 24/2015-20 and 25/2015-20 both dated 25th August, 2017, which placed restrictions on such imports - The revenue also proposed imposing penalty u/s 112 - The assessee claimed that during the examination of the Bills of Entry on 25th August, 2017, even the Customs authorities were unaware of the aforementioned two Notfns., placing the import of gold coins in the 'restricted' category.
Held - It may be noted that both Notfns. were published online on 28th of August 2017 - The decisions in the precedent cases of Harla v. State of Rajasthan and B K Srinivasan v. State of Karnataka wherein it was held that a statutory notification did not become effective until when published in the manner stipulated in the law under which it was issued - Therefore, the Notfns. would be deemed to be effective only on 28th of August, 2017 - Hence the Court was satisfied that the assessee made a prima facie case for grant of provisional release of goods - The balance of convenience was in favor of the assessee, who would face severe hardship should the goods not be released: High Court (Para 2,3,4,5,8,9,10,11)
Writ petition allowed
2017-TIOL-2058-HC-DEL-CUS
MD OVERSEAS LTD Vs UoI : DELHI HIGH COURT (Dated: September 14, 2017)
Cus – Import of gold coins from Seoul, South Korea - Petitioners assert that, as on the date and time of the examination of the B/Es on the evening of 25th August 2017, even the Customs officials were not aware of the aforementioned two impugned notifications 24/2015-20 and 25/2015-20, both dated 25th August, 2017 placing the import of gold coins in the 'restricted' category - In order to demonstrate that the aforementioned two notifications were published in the Offical Gazette electronically only on 28th August 2017, the Petitioners have placed before the Court an electronic copy of the Gazette where at the end of the Notification the following endorsement appears "Rakesh Sukul: Digitally signed by Rakesh Sukul Date 2017.08.28 22:47:05+5'30' " - Petitioners have also placed on record the screen shots of the website of the Ministry of Commerce for 26th August 2017 which does not reflect the said two notifications – Petitioners seeking provisional release of imported consignments of gold coins.
Held: Counsel for the Respondents Revenue were unable to confirm whether electronic publication of the Notifications in the Official Gazette took place at any time earlier than 28th August, 2017 and the identity of Mr. Sukul was not doubted - Court therefore, proceeds on the basis that the two impugned notifications were published in the Gazette electronically in terms of Section 8 of the Information Technology Act read with OM dated 30th September, 2015 issued by the PSP Division, only on 28th August, 2017 i.e. after the dates of the respective imports of the two consignments from Seoul, in South Korea - Court is satisfied that the Petitioners have made out a prima facie case for grant of interim relief as prayed, for the provisional release of the consignments covered by the B/Es presented by the Petitioners to the Customs Authorities in the manner indicated hereafter – Court orders that provisional release of the consignments of gold coins imported by the Petitioners under the B/Es in question will be passed by the appropriate Customs Authorities not later than 48 hours subject to the Petitioners furnishing a Bond for 100% of the value of the consignments - till the next date of hearing, the SCNs issued to the Petitioners shall not be proceeded with by the Respondents – List on 27 November 2017: High Court [para 17 to 20, 22]
Interim order passed, Matter listed
2017-TIOL-2057-HC-KAR-CUS
HINDUSTAN GRANITES
Vs ADDITIONAL DIRECTOR GENERAL : KARNATAKA HIGH COURT (Dated: August 29, 2017)
Cus – Petitioner filing petitions under Article 226 of the Constitution of India aggrieved by the SCN issued by Additional Director General of Revenue Intelligence alleging that Petitioners have not only violated the conditions of import of marble and granite from other countries free from payment of customs duty and then instead of re-exporting the finished products manufactured out of this marble and granite blocks, since it was a 100% Exported Oriented Unit (EOU) and since it diverted the finished goods through its sister concerns into the domestic market and therefore, it is not only liable to pay customs duty for such violations, but also such central excise duty with interest and penalty under the provisions of the Central Excise Act, 1944, as well as Customs Act, 1962.
Held: Writ petitions do not deserve to be entertained and are liable to be dismissed for the following reasons - (i) that all the contentions which are sought to be raised by the petitioners before this Court for assailing the impugned show cause notice can very well be raised before the said Respondent also and the said authority can also very well decide these objections and contentions in accordance with law; (ii) SCN is not tainted with total lack of jurisdiction; (iii) the mixed question of facts and law involved; (iv) It would be premature and undesirable to cut short the said enquiry and adjudication process at this stage; (v) adjudicating authority can also take note of the appellate orders passed for the previous periods in the proceedings now pending before them; (vi) Court would not express any opinion in the merits of contention raised as judicial interference in such cases may result in miscarriage of justice and evasion of duty under both the laws may go un-adjudicated; (vii) While the assessee has a valuable right to defend its case and be heard in the matter in compliance with the principles of natural justice at the same time, the Revenue's interest of collecting due tax and duty in accordance with the provisions of both the Acts also cannot be lost sight of, If the petitioners-assessee have nothing to hide, why should they avoid any such enquiry; (viii) Process of adjudication cannot be cut short at the threshold by putting the block of limitation at the front gate of such investigation at this stage; (ix) Ultimately, it is the quest of truth and truth alone being the guiding star in the process of the judicial dispensation and that should be the touch stone for testing such challenges at the preliminary stages of the proceedings - Court does not find any good ground for interference in the Show Cause Notice - petitions are dismissed: High Court [para 8, 9]
Petitions dismissed
2017-TIOL-2056-HC-MUM-CX
MARUTI TRAVEL AGENCY Vs CCE : BOMBAY HIGH COURT (Dated: September 4, 2017)
CX - duty demand with penalty was imposed on the assessee, who challenged the same before the Tribunal - The assessee filed an application under Rule 10 of the Customs, Excise and Service Tax Appellate Tribunal (Procedure) Rules, 1982, for adding of some grounds in the appeal & seeking permission canvass such grounds in the final hearing - The Tribunal rejected such application.
Held - a perusal of Rules 8(1) and 10 makes it clear that a hearing before the Tribunal need not be confined to the grounds of appeal mentioned in the Memorandum of Appeal - The only condition is that the parties be notified that a particular ground not mentioned in the MoA, would be put forward and heard by the Tribunal on merits - A perusal of the prayer made by the assessee in the Miscellaneous Petition shows that it was a limited prayer, seeking permission to urge the additional grounds set out in the said application, which was essentially made to ensure that the revenue was put to notice that additional grounds would be urged during final hearing - The Tribunal erroneously dismissed the application - The assessee is entitled to raise any ground even after commencement of hearing - Thereby, an application to this effect was normally allowed unless it was mala fide or amounted to abuse of power - Hence the assessee's application merits being restored & Tribunal order dismissing the same set aside: High Court (Para 1,2,6,7,8)
Appeal allowed
2017-TIOL-2055-HC-KERALA-CX
KERALA STATE ROAD TRANSPORT CORPORATION Vs CCE, C & ST : KERALA HIGH COURT (Dated: August 23, 2017)
CX - Appeal filed before the CESTAT was rejected on the ground that in the absence of COD from the High Power Committee, the appellant, a State undertaking, could not have maintained the appeal, however, the appellant was given liberty to seek restoration of the appeal as and when they get the COD from the High Power Committee - Subsequently, the appellant sought restoration of the appeal by filing application in question along with an application for condonation of delay of 2659 days on the ground that the Apex Court by its judgment in Electronics Corporation of India Ltd. = 2011-TIOL-18-SC-CX-CB, recalled the ONGC judgment by which the Committee was ordered to be constituted – Appellant submits that it was unaware of the judgment and it was, therefore, that the delay has occurred - Tribunal declined to condone the delay and dismissed the application for restoration – Appeal before High Court.
Held: It is a fact that the very ONGC judgment, based on which the committee was constituted, was recalled by the judgment of the Apex Court itself rendered in 2011 - Assertion of the appellant that it was unaware of the judgment of the Apex Court has not been found to be untrue - Similarly, Tribunal has also not found untrue the claim of the appellant that the relevant files were misplaced - Such being the facts, considering the huge financial liability that will be fastened on the appellant, High Court feels that the Tribunal should not have dismissed the application for condonation of delay filed by the appellant – Order passed by CESTAT set aside and it is directed that delay will stand condoned – Tribunal to consider restoration application and pass orders in accordance with law – Appeal disposed of: High Court [para 4, 5]
Appeal disposed of
2017-TIOL-1354-ITAT-DEL + Story
DCIT Vs ONGC LTD: DELHI ITAT (Dated: September 26, 2017)
Income Tax - Capital gain - Compensation for loss - Signature bonus - Slump sale - Production sharing contract - Transfer of share in production.
The Assessee-an Indian multinational oil and gas company, had filed its return for the relevant AY. The Assessee-company was granted a mining lease to mine petroleum for 20 years in respect of Basing Offshore Area vide the Joint Secretary, Ministry of Petroleum, in respect of Mukta Field Area. Upon the Joint Secretary's letter, the Assessee intimated the proposal of JV Development in field of Mukta Panna to commence and carried out exploration and drilling activities. The Assessee agreed with the other companies to receive 40% of the share in the production and in addition to the sum of certain amounts depending upon the achievement of certain level of production. For AY 1995-96, the Assessee received a sum of Rs. 219.76 crores as 'Signature bonus' for demitting 60% share in the oil fields. The amount so received by the Assessee was treated as Revenue receipt and was brought it to tax by the AO.
However, on appeal before the CIT(A), it was held that the transfer by the Assessee was a Revenue yielding asset and the transfer of shares did not lead to any capital gain. Therefore, the Assessee's appeal was allowed and thereby, deleted the addition of Rs. 2,19,75,65,000/- made by the AO.
On appeal, the Tribunal held that,
Whether signature bonus received by the assessee as compensation for losing a profit-making apparatus is taxable as capital gains - NO: ITAT
++ it is evident that ONGC transferred 60% of rights in three fields to receive the signature bonus and the commercial activities have already been started at those three fields. As rightly held by the CIT(A) when the Revenue yielding ongoing concern was transferred there will only be capital gain or capital loss and the observation of the AO that since the joint operating agreement was entered into in respect of a business which is already yielding Revenue, the amounts received by the Assessee are Revenue in nature is not correct. Record does not support the observation of the AO that the signature bonus was a payment towards compensation to the Assessee for the profit which it loses, as a consequence of production sharing contract;
++ signature bonus was received by the Assessee in lieu of the transfer of 60% of rights in the oil fields, as such, by no stretch of imagination could it be said that the receipts on that account would be to receive the compensation for loss or profit. Under the joint operation agreement ONGC surrendered 60% of the rights to the other companies agreeing to receive signature bonus. We, therefore, hold that the amount of Rs. 219.76 crores received by ONGC is for transfer of 60% of shares in the Revenue yielding oil fields, as such, is capital in nature;
++ here in this case, the transfer was in the nature of slump sale and as is held by the Apex Court in PNB Finance Ltd. while referring to the decision in B.C. Sriniwas Shetty's case and holding that the ratio of Artex Manufacturing Co.'s case has no application to the facts of the case and prior to 1.4.2000 there was no computation provision that could be brought to tax as capital gains the consideration received in slump sale. The Jurisdictional High Court followed this principle in DLF Ltd.'s case;
++ while respectfully following the same, we are of the considered opinion that the amount of Rs. 219.76 crores received by the Assessee as signature bonus for demitting 60% shares in the three oil fields cannot be brought to tax. Even otherwise, as is held by the CIT(A) in this matter the transaction did not result in any capital gain in as much as by demitting 60% of share in three oil fields the book value of which is Rs. 882.86 crores the Assessee received only a sum of Rs. 219.76 crores. Viewing from any angle the amount received by the Assessee as signature bonus is not liable for tax. We, therefore, dismiss the grounds of appeal of the Revenue.
Revenue's appeal dismissed
2017-TIOL-1353-ITAT-CHD
STATE BANK OF INDIA Vs ITO: CHANDIGARH ITAT (Dated: August 31, 2017)
Income Tax - Sections 201(1A) & 133A
Keywords - Form 15G/15H - TDS - Invalid PAN details.
Whether when the additional ground raised by the assessee pertains to a question of law and also impacts the issue of taxability, the matter deserves to be remanded for reconsideration - YES: ITAT
During a TDS survey u/s 133A of the Act, at the business premises of the assessee-bank, it was found that a few Form 15G/15H which were accepted by the bank were either without PAN or had invalid PAN of the depositors. The AO also noticed that as per the provisions of section 206AA of the Act, the person responsible (PR) of the assessee bank had not deducted tax at source@20% in the cases where the depositors furnished Form 15G/15H with the bank having invalid/wrong/no PAN. A show cause notice by the AO requiring the assessee to explain as to why not the ‘PR’ be treated as ‘person in default’ u/s 201(1)/201(1A) of the Act. The assessee submitted that Pan numbers which were not mentioned in Form 15G/15H in the bank's computer system were due to ignorance by the depositor and sought waiver of tax u/s 206AA and thereby interest u/s 201(1A) of the I.T. Act, 1961 demanded in SCN. However, The AO did not consider the explanation of the assessee and held the ‘PR’ as ‘person in default’ u/s 201(1) of the Act for not deducting the tax at the rate prescribed u/s 206AA of the Act and also charged interest u/s 201(1A) of the Act.
On appeal, CIT (A) had directed the AO to treat the ‘PR’ as ‘assessee in default’ u/s 201(1) of the Act and charging interest u/s 201(1A) of the Act. On further appeal before the tribunal, the assessee made an addition issue as to the SCN issued u/s 201(1)/(1A) by the AO was without assuming proper jurisdiction since the assessee falls within the jurisdiction of ACIT/DCIT instead of ITO.
On appeal, the Tribunal held that,
++ since the additional grounds taken by the assessee regarding the jurisdiction is a question of law and goes to the root of the tax liability, the additional grounds taken by the assessee are admitted. Since the issue of the jurisdiction was not before the CIT(A), it is hereby directed that the case be restored back to the file of the CIT(A) to pass a speaking order on the additional grounds raised by the assessee.
++ after deciding the issue of jurisdiction by the Ld. CIT(A) the case can be taken up for adjudication on merits. In the result, both the appeals of the assessee are allowed for statistical purposes.
Case remanded
2017-TIOL-1352-ITAT-MUM
JET AIRWAYS INDIA LTD Vs DCIT: MUMBAI ITAT (Dated: September 27, 2017)
Income Tax - Section 115JB.
Keywords: Estimated useful life - Principles of consistency - Principles of res judicata & Provisions for obsolescence.
The Assessee-company was engaged in the business of running of aircraft as scheduled air taxi operator and acquired aircraft mainly on hire purchase.For the AYs under consideration the Assessee filed its return. During the assessment proceedings, the AO found that the Assessee had charged a sum of Rs.27.84 crores towards provision for space of obsolescence and claimed the same as operating expenses. After considering submission of the Assessee, the AO held that the provisions were based on estimated useful life of the aircraft and was only made for obsolescence of spares but the Assessee had not actually written off old and obsolete spares during the year under consideration and also the provisions were contingent in nature. AO was of the view that the expenditure incurred on account of current repairs could be allowed, but if any of the park was replaced and old was discarded such expenditure would amount to a capital expenditure. Accordingly, he disallowed the claim made by the Assessee and added the amount in question to the book profit u/s. 115JB of the Act.
On appeal, the CIT(A) held that the issue was decided in favour of the Assessee by the Tribunal in the earlier year in the appeals filed before it and the additions had made perhaps to keep the matter alive in the appeal before the higher judicial forums and accordingly, the additions made was deleted.
On appeal, the Tribunal held that,
Whether though the principles of res judicata are not applicable to the income tax proceedings but the principle of consistency is to be complied with - YES: ITAT
++ the CIT(A) has followed the orders of the Tribunal. Therefore, no fault can be found with his approach. He is bound to follow the orders of the jurisdictional Tribunal and that is what he has done. The AO has to keep the issue alive till the final decision of higher judicial forums is pronounced. But, to make it an arguable case, the Revenue has to bring on record some distinguishable factors, as compared to the orders of the earlier year, to show that same cannot be followed in the subsequent years. The principles of res judicata are not applicable to the income tax proceedings. But at the same time it is also true that principle of consistency is very much applicable to income tax matters.
Assessee's appeal allowed
