2018-TIOL-NEWS-237 Part 2, Dated: Wednesday, October 10, 2018

2018-TIOL-NEWS-237 Part 2 | Wednesday October 10, 2018

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CASE STORIES


	I-T - Succession to estate of ex-ruler is to be governed by general law of succession and thus, to be assessed as 'HUF': HC ST - Club or Association Service - Interest on instalment is only a financial arrangement for deferred payment and is not a taxable entity as it cannot partake character of consideration for services provided: CESTAT I-T - Depreciation u/s 32 can be claimed on BOT Rights: ITAT

DIRECT TAX


	2018-TIOL-2126-HC-DEL-IT PR CIT Vs Basti Sugar Mills Company Ltd Whether the expenditure voluntarily incurred on the test of commercial expediency is to be allowed as deduction, and it is immaterial if a third party also benefits by the said expenditure - YES: HC Whether once it is established that there is nexus between expenditure and purpose of business, which need not be the business of concerned taxpayer, deduction u/s 36(1)(iii) deserves allowance - YES: HC Whether the test of "commercial expediency" authorises the Revenue Officers to procure reasonableness of incurring expenditure for purposes of taxpayer's business - NO: HC - Revenue's appeal dismissed: DELHI HIGH COURT 2018-TIOL-2122-HC-DEL-IT + Case Story CIT Vs Bhawani Singhji Whether in absence of any material and pre-existent custom to suggest that Kachwaha clans of Jaipur was was governed by the rule of lineal primogeniture i.e Jyeshthaadhikaar, succession to the estate of the ex-ruler would be governed by general law of succession and thus, to be assessed as 'HUF' - YES: HC Whether even though the assessee, who was ex-ruler of the Jaipur State, was filing his return in the individual capacity, his legal representatives can claim the correct legal status of being HUF after his death - YES: HC - Revenue's appeals dismissed: DELHI HIGH COURT 2018-TIOL-2121-HC-ALL-IT Divya Jan Kalyan Trust Vs ACIT Whether violation of provisions of Section 13 by a charitable trust registered u/s 12A, renders it ineligible for Section 11 benefits - YES: HC - Assessee's appeal dismissed: ALLAHABAD HIGH COURT 2018-TIOL-2114-HC-MAD-IT CIT Vs Shasun Chemicals And Drugs Ltd Whether deduction u/s 80HHC is allowable on basis of book profits u/s 115JA, no matter the eligible profits u/s 80HHC is Nil as per normal computation - YES: ITAT Whether once it has been recorded to the satisfaction of Final fact finding Authority that certain expenses were amortized legitimately, then it has to complete the entire period of ten years, and such deduction cannot be denied in the subsequent years - YES: HC - Revenue's appeal dismissed: MADRAS HIGH COURT 2018-TIOL-1789-ITAT-HYD Terra Infra Development Ltd Vs ITO Whether since provisions for levy of fee in certain cases was brought under the purview of section 200A only w.e.f. June 1, 2015, interest u/s 234E cannot be levied in respect of TDS returns filed prior to such date - YES: ITAT - Assessee's appeals allowed: HYDERABAD ITAT 2018-TIOL-1778-ITAT-VIZAG Vijaya Kiran Biotech Vs Addl.CIT Whether insufficient balance in bank account, after the issue of cheque to creditor is a pressing business need to accept the loan otherwise than by crossed cheque in bank account, so as to meet the dues payable and is situation covered u/s 273B of Act - YES : ITAT Whether repayment of loan in cash so that recipient can meet the medical emergency expenses is a sufficient and reasonable cause covered u/s 273B of the Act for not levying penalty u/s 271E the Act - YES : ITAT - Assessee's appeal allowed: VISAKHAPATNAM ITAT 2018-TIOL-1777-ITAT-DEL Times Internet Ltd Vs DCIT Whether defective penalty notice with no specific charges for such levy, makes the entire penalty proceedings invalid - YES : ITAT - Assessee's appeal allowed: DELHI ITAT 2018-TIOL-1776-ITAT-AMRITSAR Kashmir Steel Rolling Mills Vs ACIT Whether when prima facie satisfaction, for the initiation of penalty proceedings is clearly apparent, proceedings u/s 271(1)(c) are valid, even if, satisfaction is not specifically recorded for each item by AO - YES: ITAT Whether plea of defective notice u/s 274 can only be considered when copy of such notice is placed by assessee before Tribunal and not otherwise - YES : ITAT - Assessee's appeal partly allowed: AMRITSAR ITAT 2018-TIOL-1775-ITAT-CHD Metalman Auto Pvt Ltd Vs Addl.CIT Whether existence of sufficient own interest free funds coupled with fact that Revenue fails to establish a nexus of interest bearing funds with such investment in capital work-in-progress and advance for purchase of machinery, suggest that no disallowance of interest can be made u/s 36(1)(iii) of the Act - YES : ITAT Whether since sufficient own funds are available to make investments in mutual funds and assessee has voluntarily disallowed certain sum u/s 14A, no further disallowance on account of interest is warranted - YES : ITAT - Assessee's appeal allowed: CHANDIGARH ITAT 2018-TIOL-1774-ITAT-VIZAG Dr Chs Srinivas Vs ITO Whether additions can be made to an assessee's income merely on statements taken u/s 132(4) & without there being any supporting evidence - NO: ITAT - Assessee's appeal allowed: VISAKHAPATNAM ITAT

INDIRECT TAX

SERVICE TAX

2018-TIOL-3070-CESTAT-DEL

CE CGST Vs National Informatics Centre Service INC

ST - The assessee was established by the Government with the objective of providing IT solutions & strengthen delivery of government services - It is registered with the Service Tax Department for providing 'Consulting Engineer services' - The Revenue issued an SCN during the relevant period by invoking extended limitation on grounds that the activities of the assessee had incorrectly been classified under 'Consulting Engineer services' - It claimed that the turnkey services involving supply & installation of software, hardware with testing and commissioning and on site separate services were taxable under ECIS - Alleging short payment, the Department raised duty demand after adjusting some amount already paid - The assessee's taxable turnover calculated by adding the advance receipts pertaining to the project(s) involving exclusive services with advance receipt pertaining to the projects involving supply and service both - The Revenue also alleged that tax was not paid on advances at time of receipts, which is in contravention of Rule 6 of STR 1994 r/w Rule 3 of POTR 2011 - Prior to issue of SCN the assessee deposited part of the amount with applicable interest - However, the adjudicating authority later dropped the entire duty demand.

Held: The assessee provided only 'Consulting Engineer Services' on which they paid service tax - The work order issued by the Govt department is a cost plus contract wherein the assessee is appointed as implementing agency on behalf of the govt & the money is received as a trustee - It is also liable to account for every rupee spent on behalf of the government & cannot appropriate any amount above the stipulated 7% as agency/administrative charges - Its activities are in the nature of pure agent - Thus no service tax can be levied on the advance received or on the amount spent out of such advance for implementing the project - The assessee itself did not do any erection, commissioning or installation activity & such work is done by vendors appointed by it - It only gives advice & assists sponsoring agency in selecting vendors - The assessee's personnel are mostly computer engineers - There is no condition for invoking extended limitation - Hence the Revenue's appeal is dismissed: CESTAT (Para 3-6,22,23)

- Appeal dismissed: DELHI CESTAT

2018-TIOL-3069-CESTAT-MAD

Electrical Manufacturing Company Ltd Vs CCE & ST

ST - The assessee was engaged in erection and commissioning of electrical towers for M/s.Power Grid Corporation of India - A show cause notice was issued to the assessee for the period from April 2007 to March 2008, inter alia proposing demand of service tax liability on Erection and GTA Services - On adjudication, original authority dropped the proposal in respect of GTA services, however confirmed the demand in respect of erection services with interest thereon and also imposed penalty under Section 76 of FA, 1994 - In a number of cases involving identical disputes, Tribunal has consistently reiterated that all taxable services relating to assessment and distribution of electricity upto the periods indicated in Notfn 45/2010-ST will not be taxable - The decisions in Sri Rajyalakshmi Cement Products and Hyderabad Power Installations (P) Ltd. 2016-TIOL-1897-CESTAT-HYD have also followed the same ratio - Said ratio is applicable on all fours, to the facts of the appeal at hand - Impugned order cannot sustain and is therefore set aside: CESTAT

- Appeal allowed: CHENNAI CESTAT

CENTRAL EXCISE

2018-TIOL-3073-CESTAT-MAD

Leo Oils and Lubricants Vs Commissioner of GST & Central Excise

CX - The assessee company is engaged in manufacturing lubricating oils on job work basis to M/s. IBP Ltd. - It was availing benefit of MODVAT & applied for transitional credit - The same was denied by the Department - Later, the Tribunal found the assessee eligible for cash refund - Thereafter, the adjudicating authority only sanctioned part of the amount - Such findings were upheld by the Commr.(A).

Held - The Tribunal found the assessee eligible for cash refund - The adjudicating authority has to comply with such orders & is obliged to sanction the refund & cannot enter into issues which have already been settled by the Tribunal - Besides, the adjudicating authority rendered such findings without issuing an SCN - Both the adjudicating authority and the Commr.(A) flouted the findings of the Tribunal - Such partial refund runs contrary to the Tribunal's order & is unsustainable - Hence orders passed by both authorities are set aside: CESTAT (Para 1,5,6)

- Appeal allowed: CHENNAI CESTAT

2018-TIOL-3072-CESTAT-ALL

Dharampal Satyapal Ltd Vs Pr.CCE

CX - Assessee is engaged in manufacturing of various kind of Pan masala, Gutkha and Mouth Fresheners in their two units at Noida and 9 units at Guwahati in Assam - Demand has been raised on the ground that the assessee received alleged excess quantity of catechu from their suppliers and utilised the same in manufacture of suppressed production of their final products, which were cleared clandestinely without payment of duty - The Commissioner in impugned order has not taken into consideration explanations given by assessee in respect of discrepancies in the quantity of catechu presumed to have been procured and used by them and various short supplies, wrong postings of figures and processing losses to arrived at actual quantity of catechu used by assessee for manufacture of their final product - Assessee had submitted that various other raw materials were required for manufacture of final products such as pan masala, pan masala containing tobacco, mouth freshener and meethy mazza for which no evidence was produced by revenue in SCN nor the original authority has given any reasonable finding for such absence of evidence - High Court of Allahabad in case of M/s Continental Cement Company 2014-TIOL-1527-HC-ALL-CX has held that clandestine removal is a serious charge against the manufacture and the same is required to be discharged by revenue by production of sufficient and tangible evidence - In the whole proceedings, there is no evidence produced by revenue in respect of procurement of other raw materials which were required for manufacture of alleged quantity of final products in addition to one single raw material i.e. catechu discussed throughout the proceeding - During the material period catechu was not notified to be principle raw material for manufacture of pan masala, pan masala containing tobacco, mouth freshener and meethy mazza - Therefore, the conclusion drawn by original authority that alleged quantity of final products were manufactured on the basis of calculation of one single raw material i.e. catechu, is not sustainable: CESTAT

- Appeal allowed: ALLAHABAD CESTAT

CUSTOMS

2018-TIOL-3071-CESTAT-ALL

CC Vs Ess Aar Automotive Pvt Ltd

Cus - The assessee had filed eight shipping bills at CMA-CGM Port, Dadri for export of Agricultural and Horticultural machinery to M/s City State Bank, Omaha NE USA by declaring combined FOB value under the claim of drawback - On being objected by Revenue about the value declared, assessee requested to amend the said shipping bills from drawback shipping bills to free shipping bill and also reduced the combined FOB value from the above stated FOB value under provisions of Section 149 of Customs Act, 1962 - The assessee was allowed to amend the said shipping bill in aforesaid manner - Commissioner (A) has given categorical finding that the goods were allowed to be exported after allowing the amendment to the documents presented and the assessee has already received the total foreign inward remittance and, therefore, there was no case of confiscation of said goods and imposition of fine and penalty - The charge of overvaluation is presumptive in nature and such charge could have been proved only if goods could be exported with declared value and export proceeds could not have been realized to the extent of such value - The report of Chartered Engineer also did not prove to be correct in view of the fact that the export proceeds equal to amended FOB value were realized - Further Revenue did not appeal against the order passed by Original Authority under Section 149 of Customs Act, 1962, allowing the amendment to the shipping bills - Therefore, no merit found in the appeal filed by Revenue: CESTAT

- Appeal rejected: ALLAHABAD CESTAT

2018-TIOL-3068-CESTAT-MAD

CC Vs Chemfab Alkalis Ltd

Cus - Assessee is a manufacturer of 'Caustic Soda' and 'Liquid Chlorine' using Monopolar/Bipolar Electrolyser-Cell Membrane Technology - The assessee filed a Bill of Entry for import of New 150 MT/day as NaOH 100% Evaporation Plant for concentration of Caustic Soda from 31.5% to 48% Wt. and a New 50 MT/day as NaOH 100% Caustic Soda Concentration and Flaking Unit for concentration of Caustic Soda from 31.5% to 98.5% Wt. which are classified under CTH 84198990 - The assessee claimed concessional rate of BCD @ 5% under Notfn 12/2012-Cus. as per sub-Clause 1(i) of Sl. No. 417 - The scope of Notfn 12/2012 is not only for modernization by using Membrane Cell Technology of an existing Caustic Soda unit, it could also be for capacity expansion of an existing Caustic Soda unit - From the documentary evidences placed on record wherein the production process has been explained along with the procedural techniques involved which are placed in the paper book of the assessee, the evaporation and flaking are integral processes involved in production of Caustic Soda which requires evaporation to increase its concentration by adopting Membrane Cell Technology - The Commissioner is correct in his analysis that Notfn 12/2012 contains three limbs namely; Modernization by using Membrane Cell Technology, Capacity expansion and Setting up of a new unit - However, the adjudicating authority has only concentrated on the first limb of the Notification, namely, modernization by using Membrane Cell Technology and he has ignored the second limb, namely, capacity expansion while he accepts that there was only capacity expansion which, according to him, is not sufficient to satisfy Notfn 12/2012 - In consequence, no merit is found in the appeal filed by the Revenue, hence, it is dismissed: CESTAT

- Appeal dismissed: CHENNAI CESTAT

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