2019-TIOL-NEWS-004 Part 2, Dated: Friday, January 04, 2019

2019-TIOL-NEWS-004 Part 2 | Friday January 04, 2019

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CASE STORIES


	I-T - Banks extending financial services, are eligible for amortisation of preliminary expenses in connection with issuance of shares for public subscription: HC ST - Tribunal has not properly considered its observations made in Stay order while passing final order - apparent mistake needs rectification: CESTAT

DIRECT TAX


	2019-TIOL-48-HC-MUM-IT Firstsource Solutions Ltd Vs DCIT Whether AO is permitted to reopen the assessment beyond the period of four years from the end of relevant A.Y, without there being any element of lack of true & full disclosure on the part of assessee - NO: HC 2019-TIOL-42-HC-MUM-IT Marico Ltd Vs ACIT Whether when reasons recorded for reopening of assessment do not show that the AO had reasonable belief about the escaped income, then it cannot be culled out that there was failure on the part of assessee to disclose truly & fully all the material facts - YES: HC Whether AO can justify issuing the notice of reopening issued beyond the period of four years from end of relevant A.Y, if his belief of escaped income was formed on the basis of material already on record - NO: HC -Assessee's petition allowed : BOMBAY HIGH COURT 2019-TIOL-41-HC-MUM-IT Amarjeet Thapar Vs ITO Whether when the execution of sale deed by virtue of the Writ Court judgment would relate back to the original agreement to sale, then the transferror of the property will be entitled to claim the benefit of cost indexation from the said date - YES: HC Whether when entire basis of the Department in its reasons recored in order to dispute assessee's computation is rendered invalid, then reopening notice issued under such circumstances merits anullment - YES: HC -Assessee's petition allowed : BOMBAY HIGH COURT 2019-TIOL-40-HC-RAJ-IT Bhatia Colonizers Pvt Ltd Vs DCIT Whether, when substantial interest has to be determined, then the assessee-company statutorily cannot club the shares of the Directors to meet the capping of 20% shares, as individual director must hold more than 20% shares - YES: HC -Assessee's Writ petition dismissed : RAJASTHAN HIGH COURT 2019-TIOL-42-ITAT-DEL DCIT Vs Xerox India Ltd Whether performance-based bonus given to employees is allowable as deduction u/s 43B of Act - YES : ITAT Whether payment of retrenchment compensation for those workers of contractors who wholly and exclusively worked for the assessee company is to be allowed, if made to avoid any kind of future litigation and to safeguard the interest of the company - YES : ITAT - Revenue's appeal dismissed: DELHI ITAT 2019-TIOL-41-ITAT-DEL Aamantaran Travel Company Pvt Ltd Vs DCIT Whether additional evidence merits fresh consideration where the CIT(A)'s order is based upon an incorrect interpretation of such material - YES: ITAT - Case Remanded: DELHI ITAT 2019-TIOL-40-ITAT-MUM Amar Timber and Plywood Vs ITO Whether full disallowance for bogus purchases can be made when there is no ground for challenging the veracity of sales - NO: ITAT - Assessee's appeal partly allowed: MUMBAI ITAT 2019-TIOL-39-ITAT-AHM ACIT Vs Natraj Construction Co Whether the genuineness of the loan transaction can be challenged without proper examination of the same - NO: ITAT - Revenue's appeal dismissed: AHMEDABAD ITAT 2019-TIOL-38-ITAT-KOL ACIT Vs Asian Housing and Infrastructure Pvt Ltd Whether when AO's action of taxing the derivation income of previous AY but not taking the loss of the present AY cannot be countenanced and does merit deleting the addition made on this count - YES: ITAT Whether when the AO has given broker's statement being adverse against the assessee such statement can be relied upon by the AO for drawing adverse inference against the assessee - NO: ITAT - Revenue's appeal dismissed: KOLKATA ITAT 2019-TIOL-37-ITAT-CHD World Leaders Organization Vs CIT Whether the matter warrants remand if supporting evidence given by CIT (E), is not being considered as an effective evidence - YES: ITAT - Case remanded: CHANDIGARH ITAT

INDIRECT TAX


	SERVICE TAX 2019-TIOL-48-CESTAT-MAD AMS Enterprises Vs CCST ST - The assessee, a partnership concern engaged in business of Man-power Supply Service to various corporate customers - On verification of records, it was noticed that the assessee collected service tax on Man-power Supply Service but failed to remit the same to Government account - Assessee has contested only on the ground of limitation and the penalties imposed - They had relied upon the letter dated 15.09.2006 issued by them to DGCEI - On perusal of said letter, it is very much clear that assessee have informed the department the nature of activity carried out by them - Thus, it is very much clear from this letter that the department has come to know about the details of the services rendered by assessee - The extended period has been invoked alleging suppression of facts with intent to evade payment of service tax - When the department has come to know about the contract agreement between the assessee and their clients, showing details of services rendered by them under Man-power Supply service, the invocation of extended period after 15.09.2006 cannot sustain - In identical set of facts, Jurisdictional High Court in case of M/s. V.N.K. Menon & Co. - 2015-TIOL-1859-HC-MAD-CX has upheld the decision of Tribunal which set aside the demand after the date when department came to know about the details - The demand for the period 15.09.2006 to 31.03.2008 cannot sustain - The appeal partly succeeds on the ground of limitation - However, the ingredients of suppression are very much present prior to 15.09.2006 - Only pursuant to the investigation conducted not only with assessee but also with many of their clients did the fact of collection of service tax and the evasion come to light - Discernibly, these facts were suppressed from the Department till the investigation - This being so, not only is the extended period invocable up to 15.09.2006 and demand in Annexure-A of the notice sustainable with interest up to that date but the penalty equal to the amount of such revised tax liability is also imposable - No interference is also called for in respect of penalty imposed under Section 77 ibid: CESTAT - Appeal partly allowed: CHENNAI CESTAT 2019-TIOL-46-CESTAT-DEL Bainada Construction Company Vs CCE ST - Assessee is registered with Service Tax Department under category of service in respect of commercial or industrial construction service as well as erection commissioning and installation services - A SCN came to be issued to assessee alleging that they had undertaken work of erection, commissioning and installation its various petrol pumps of Hindustan Petroleum Corporation Limited (HPCL) - Whether the services provided by assessee can be classified under category of erection, commissioning and installation services as provided under Section 65 (94) of FA, 1994 - It is noticed that assessee have been regularly paying their service tax liability under commercial or industrial construction service - The services provided by assessee are more appropriately classifiable under commercial or industrial construction service rather than erection, commissioning and installation agency service - The work orders as reproduced in preceding paras indicate that work given to assessee by M/s HPCL is inclusive of material and labour charges and therefore they are more in the nature of Work-Contract service rather than erection, commissioning or installation service - As Supreme Court in case of Larsen & Toubro Ltd. - 2015-TIOL-187-SC-ST , the kind of activity undertaken by assessee is rightly classifiable under work contract service - Since, the work contract service has come to be enacted with effect from 01.06.2007 and therefore the demand prior to 01.06.2007 is not sustainable on this very ground - For the period beyond 01.06.2007 the activity is purely classifiable as work contract service - The services undertaken by assessee are by no stretch of imagination be classified under erection, commissioning and installation service and therefore Adjudicating Authority has not examined the issue in hand properly as required and therefore the provisions of law have not been interpreted in proper perspective - Demand beyond the period of normal period is barred by limitation and hence not sustainable: CESTAT - Appeal allowed: DELHI CESTAT CENTRAL EXCISE 2019-TIOL-47-CESTAT-ALL Polymer Papers Ltd Vs CCE CX - Whether the SCN which was issued and subsequently modified by way of amendment vide Corrigendum, thereby increasing the proposed demand from Rs.41-50 Lakhs, what shall be the period of limitation and consequently the situation being wholly revenue neutral, whether the SCN is tenable for change of opinion - The assessee company, located in Muzaffarnagar (U. P.), is engaged in manufacture of Base Filter Paper - 95% of this filter paper is transferred to their sister unit in Faridabad for captive consumption in manufacture of different sizes of filter - The remaining 5% is sold to independent buyers at the factory gate - The case of Department is that the assessee was paying duty on filter paper transferred to their sister unit, on cost construction basis under Rule 8 of CEVR, 2000, but while doing so they adopted lower values to determine the cost of production which resulted in payment of less duty - The assessee is clearing 95% of its production to their Faridabad unit which manufactures, further taxable goods which are cleared on payment of appropriate duty - Thus, whatever Excise duty is paid by Muzaffarnagar unit, the same shall be available as Cenvat Credit at the Faridabad unit - Thus, making the situation wholly revenue neutral - Further, the effective SCN will be the date of corrigendum dated 23/01/2007 as the proposed demand in SCN is increased substantially above 25% - Thus, the show cause and the corrigendum is for the sake of change of opinion only, based on the cost of production taken by Revenue - Accordingly, SCN is not sustainable for invoking extended period of limitation, only for the sake of change of opinion and the situation being wholly revenue neutral: CESTAT - Appeals allowed: ALLAHABAD CESTAT CUSTOMS NOTIFICATION ctariffadd19_001 Seeks to impose anti-dumping duty on imports of 'Methylene Chloride' originating in or exported from European Union and United States of America dgft17cir015 Clarification in respect of 'not permitting' the import of the capital goods required for 'distribution of electrical energy (power)' under the EPCG Scheme Trade Notice 41 Rationalization of procedures in handling EODC requests under Advance/EPCG Authorizations CASE LAW 2019-TIOL-45-CESTAT-KOL Subir Roy Vs CC Cus - Assessee was in the business of export of Cow Hides & Skin and other leather items - They exported various consignments of leather through Petrapole Land Customs Station - The shipping bills indicated the description as "Cow Split Wet Blue Leather" and "Cow Pickle Leather" - The dispute is regarding the payment of export duty on leather items exported by assessee - They have exported several consignments described as "Cow Split Wet Blue Leather" and "Cow Pickle Leather", by claiming the benefit of 'nil' export duty as per Sl.No.3 of Notfn 133/2000 - The said Notfn grants full exemption to "Finished Leather of Goat, Sheep and Bovine Animals and their young ones" - The question therefore is whether the exported goods were finished or were unfinished or partially finished leather - In the bills of export benefit of exemption notification has been claimed and the same has been allowed - Before denial of such benefit at the stage of adjudication, the onus is on Revenue to establish that exported goods had not satisfied the conditions of notfn - Revenue has failed to discharge such burden - Consequently, the demand and penal proceedings against assessee as well as its proprietor are set aside - Penalty has been imposed on M/s. Indo Foreign (Agents) Pvt. Ltd. under Section 117 of Customs Act, 1962 - It is submitted on behalf of the M/s. Indo Foreign (Agents) Pvt. Ltd. that they had filed the bills of entry on the bonafide belief that the goods do not attract export duty - Such documentation was filed on the basis of export documents handed over to them by the exporter - As such, CHA cannot be held liable for any penalty - The demand for export duty is not sustainable and have been set aside - No justification found for the penalty imposed on three CHAs, which are also set aside: CESTAT - Appeals allowed: KOLKATA CESTAT