2019-TIOL-NEWS-015 Part 2, Dated: Thursday, January 17, 2019

2019-TIOL-NEWS-015 Part 2| Thursday January 17, 2019

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CASE STORIES


	I-T - CSR expenses incurred prior to April 01, 2015 are eligible for deduction: ITAT CX - Casual approach while seeking appellate remedy - Costs imposed: CESTAT

DIRECT TAX


	2019-TIOL-148-HC-MUM-IT CIT Vs Reliance Industries Ltd Whether, for the purpose of MAT u/s 115JB, the Clause (a) includes income tax paid or payable along with welath tax - NO: HC Whether when the assessee has not claimed any allowance or deduction even then the provisions of Sec 41 will come into force on extinguishment of liabilities - NO: HC Whether the writ court is obliged to delve into factual issues involving payment of commission for purchase of oil & whether or not such payment contravened the Volcker Committee report - NO: HC - Revenue's appeal dismissed: BOMBAY HIGH COURT 2019-TIOL-145-HC-MUM-IT Ramprakash Biswanath Shroff Vs CIT In writ, the High Court noted that the assessee's grievance also stood resolved when he received TDS certificate & Form 16 from his employer. Hence it did not see merit to delve into the matter any further. - Assessee's writ petition disposed off : BOMBAY HIGH COURT 2019-TIOL-144-HC-MUM-IT CIT Vs Star India Pvt Ltd On appeal, the High Court noted that a similar issue had been resolved in favor of the assessee in UTV Entertainment Television. Noting the relevant findings in such case, the court found no question of law to be arising in the present case. - Revenue's appeal dismissed: BOMBAY HIGH COURT 2019-TIOL-139-HC-PATNA-IT ACIT Vs Tirupati Homes Ltd Whether Settlement Commission's order made under Chapter XIXA can be challenged in case of substantial proof of complete income disclosure by the assessee & subsequent consideration of objections raised by the Revenue - NO: HC Whether HC has the power to examine orders passed by Settlement Commission except in cases of statutory violation or perversity - NO: HC - Revenue's writ petition dismissed: PATNA HIGH COURT 2019-TIOL-138-HC-MAD-IT CIT Vs R Jayakumar Whether additions attributed to voluntary disclosure by assessee, which were omitted to be disclosed while filing of original return due to bona-fide reasons, will render assessee liable for any penalty u/s 271(1)(c) - NO: HC - Revenue's appeal dismissed: MADRAS HIGH COURT 2019-TIOL-137-HC-MUM-IT PR CIT Vs Mukesh Kimtani Whether the AO having taken a plausible view after carrying out detailed enquiry, it is not open to the Commissioner to exercise revisional power u/s 263 - YES: HC - Revenue's appeal dismissed: BOMBAY HIGH COURT 2019-TIOL-166-ITAT-MUM Narendra G Pandya Vs ITO Whether when it is proved that assessee had made bogus purchases, then the assessee cannot plead to the Tribunal to direct the Revenue to ignore Hawala parties as non-existent and bogus - YES : ITAT - Assessee's appeal dismissed: MUMBAI ITAT 2019-TIOL-165-ITAT-MUM DCIT Vs Alok Infrastructure Pvt Ltd Whether if AO does not verify the details furnished by the assessee pertaining to loan received and used for providing inter-corporate deposit, then CIT(A) is correct in giving direction to AO to examine the details available before passing order regarding allowability of interest expenditure - YES : ITAT - Revenue's appeal dismissed: MUMBAI ITAT 2019-TIOL-164-ITAT-MAD Computer Age Management Services Pvt Ltd Vs DCIT Whether while applying the formula to compute disallowance u/s 14A r.w.r. 8D, whole investments should be considered including investments in mutual funds and subsidiaries if not held as stock in trade - YES : ITAT - Assessee's appeal partly allowed: CHENNAI ITAT 2019-TIOL-163-ITAT-BANG Velankani Information Systems Ltd Vs DCIT Whether a fact that the revenue has preferred an appeal against the order of Tribunal cannot be the basis not to follow the order of the Tribunal, so long as the decision is not reversed by higher judicial forum - YES : ITAT Whether interest expense on the delayed payment of service tax is allowable deduction as such payment is only compensatory in nature - YES : ITAT - Assessee's appeal partly allowed: BANGALORE ITAT 2019-TIOL-162-ITAT-JAIPUR Mahaveer And Company Vs ITO Whether when the nature of business of the assessee is being a distributor and receiving shares thereby, then the AO cannot disallow the commission received by the assessee treating him as a service provider - YES: ITAT - Assessee's appeal partly allowed; JAIPUR ITAT 2019-TIOL-161-ITAT-JAIPUR Vicky Jethani Vs ITO Whether on failure to produce evidence by the assessee to substantiate source of cash received in the form of Gift, the addition made u/s 68 can be upheld - YES : ITAT - Assessee's appeal dismissed: JAIPUR ITAT

GST CASES


	2019-TIOL-13-HC-KERALA-GST Popular Vehicles And Services Ltd Vs UoI GST - Petitioner seeks a direction to the respondents to accept the petitioner's manual filing of revised FORM GST TRAN-I and the resultant FORM GST TRAN-2 in view of the error in filing the same on account of the technical reasons - respondents submitted that they have no objection in allowing the petitioner's request in view of the fact that it occurred on account of the technical reasons - Petitioner further submits that they would submit FORM GST TRAN-I and FORM GST TRAN-2 before the fourth respondent manually and the fourth respondent may be directed to transmit it into electronic credit ledger of the petitioner. Held: Fourth respondent is directed to accept FORM GST TRAN-I and FORM GST TRAN-2 from the petitioner manually (to be filed within one week) and the fourth respondent shall accept and transmit it into the electronic credit ledger of the petitioner within a further period of one week - Writ petition is disposed of: High Court - Petition disposed of: KERALA HIGH COURT 2019-TIOL-02-NAA-GST Surya Prakash Loonker Vs Excel Rasayan Pvt Ltd GST - Anti-Profiteering - S.171 of the CGST Act - Allegation is that the respondent did not pass on the benefit of reduction in the GST rate applicable to detergents from 28% to 18% w.e.f 15.11.2017 but increased the base prices so that there was no reduction in the prices to the recipients - Respondent submitting that he was availing SSI exemption under Central Excise and charging VAT @12.5% on the base prices; that on introduction of GST, 28% tax was levied and since this disturbed his pricing pattern, he had reduced the base price and absorbed the burden and when the GST rate was reduced from 28% to 18% w.e.f 15.11.2017, though the base prices were increased, they were much less than the base prices in the pre-GST era. Held: Argument of the respondent does not hold good as decision not to increase MRPs when tax rates were increased on account of implementation of GST was a business call taken by him and, therefore, he cannot claim any concession on this ground - benefits arising due to the GST rate reduction cannot be denied to the consumers just because in the earlier scenario MRPs were not changed to extend some extra benefit to consumers - report of DGAP reveals that the base price of the products has been increased irrespective of the fact that there was GST rate reduction from 28% to 18% - Respondent has admittedly not passed on the benefit of tax reduction since the base prices of the products were increased to maintain the same selling prices which were existing before the reduction of rate of tax - respondent is liable to pass on the benefits to the recipients irrespective of the fact whether the base prices are still lower as compared to the pre-GST price or not - since respondent has admittedly accepted the fact that there was no reduction in the prices post 15.11.2017 on any of the products sold by him, they have violated the provisions of section 171 inasmuch as the prices have remained the same inspite of reduction in tax rate - plea that base prices were drastically lowered when GST came into effect cannot absolve him from not passing on the benefit - Profiteering proved - respondent directed to immediately reduce the sale prices of the product commensurate to the reduction in rate of tax - the profiteered amount of Rs.4,64,849.74 as computed by DGAP is ordered to be deposited in the Consumer Welfare Fund along with interest - respondent is liable to penalty under Rule 133 of the CGST Rules, 2017 for the offence commited u/s 122 of the Act - notice to be issued to respondent asking him to explain why penalty should not be imposed: NAA - Application disposed of: NAA

INDIRECT TAX


	SERVICE TAX 2019-TIOL-194-CESTAT-MAD Grand Royale Enterprises Ltd Vs CST ST - Assessee is engaged business of running hotels - The business assets of Hotel Connemara, Madras, Westend Hotel, Bangalore and Savoy Hotel, Ooty owned by Spenser & Co. were transferred at book cost to M/s. Spencer International Hotels Ltd. (SIHL) vide an agreement which also granted long term lease of land of said three hotels to the latter - Hotel Connemara undertaking was transferred to assessee by way of de-merger scheme approved by Madras High Court - In consequence, the IHCL started paying license fee in respect of Connemara Hotel undertaking to assessee from 2009-10 onwards under the same conditions - As the "license fee" received by assessee was based on a certain percentage of the income from operations of hotel business, it appeared to department that assessee has rented out the immovable property for conducting hotel and other related business for furtherance of business or commerce against license fee, hence the assessee is liable for payment of service tax under "Renting of Immovable Property Service" w.e.f. 01.06.2007 - In the present case, however, the agreement between assessee and IHCL is not merely for renting of hotel or land appurtenant thereto but is "license to run, conduct and operate Connemara hotel together with all the related facilities and business appertaining thereto" - It appears to reason that not just the immovable property portion of the hotel, but also, the employees and other staff, goodwill and other paraphernalia are also taken into consideration by the two parties involved while framing the license agreement - There is no "fixed rent" that is payable as would be expected in a normal renting of immovable property transaction - On the other hand, the consideration for license to run, conduct and operate the hotel is a "license fee" equivalent to 15%/20% of the annual sales from the operation of the hotels - This being so, the license fee that would accrue to assessee is only a percentage of turnover - Since the turnover is never static but is dynamic and will go up or down in every succeeding year, the "lease license fees" would also wax or wane in resonance - The license fees are accruing to assessee therefore have an umbilical card relation with the turnover and profits of the hotel business under IHCL - Therefore, the transaction between assessee and IHCL is definitely not one of "renting of immovable property" but a business transaction between the two, where the consideration is not like a regular rent but is dependent on annual performance and profits of the hotel - Verifications had been initiated with SIHL as far back as on 09.11.2005 - However in spite of SIHL having given all the necessary clarification through their letters, including copies of agreement concerned, the department did not issue the SCN till 17.03.2014 - Hence the proceedings are clearly hit by limitation - The impugned order cannot sustain: CESTAT - Appeal allowed: CHENNAI CESTAT 2019-TIOL-193-CESTAT-KOL Indian Institute Of Management Vs CST ST - The assessee periodically conducts Placement Recruitment Programmes in which various business organizations participate and select the candidates for employment in their organizations - Dispute is regarding liability of Institute for payment of service tax under category of "Manpower Recruitment or Supply Agency Service" - With effect from 01.05.2006, the definition of service was amended to cover ‘Any Person' as against the stipulation that it was applicable only to a ‘Commercial Concern' - It is not in dispute that for the services rendered after 01.05.2006, assessee has been discharging service tax - The dispute, however, is with reference to those amounts received by assessee after 01.05.2006, pertaining to the services rendered prior to 01.05.2006 - The CBEC has clarified vide Circular dated 21.08.2003 that levy of service tax on a particular service comes into force on a given date and no tax will be chargeable if the service is rendered before that date - Accordingly, if the service is rendered prior to 01.05.2006, no liability of service tax will fall on the Institute, even if payment is received after this date since it has been clarified by the CBEC in Circular dated 01.11.2006 that IIM cannot be considered as Commercial Concern - After perusing the reply to SCN, for the amounts received after 01.05.2006, which are corelatable to the services rendered by the Institute prior to such date no service tax liability can be fastened on assessee - This view also finds support in decision of Tribunal in Indian Institute of Management - 2011-TIOL-1044-CESTAT-BANG - In the result, impugned order is set aside: CESTAT - Appeal allowed: KOLKATA CESTAT CENTRAL EXCISE 2019-TIOL-197-CESTAT-KOL CCE Vs Kesoram Rayon CX - The assessee is engaged in manufacture of Viscose yarn and Cello Phane - They availed Modvat/Cenvat Credit for capital goods as well as inputs from time to time - The crux of dispute is whether duty is liable to be paid for clearance of Waste & Scrap arising out of old and used capital goods during period 01.02.2000 to 31.12.2004 - To decide the question, it is required to examine whether the processe of generation of scrap of capital goods would amount to manufacture in terms of Section 2 (f) of CEA, 1944 - In impugned order, this has been held to be a process not amounting to manufacture - Revenue has argued that such goods cleared would fall within the description of Waste & Scrap in terms of Note 8 (a) Section XV of Central Excise Tariff - Identical question was considered by Apex Court in case of Grasim Industries - 2011-TIOL-100-SC-CX - The Apex Court decided that the scrap arising during course of repair & maintenance of capital goods in factory cannot be considered to arise through the process of manufacture and hence will not fall within the Note 8 (a) ibid - The dutiability Waste & Scrap arising out of old and used capital goods has also been considered by Tribunal in various decisions and it has been decided that such scrap will be not dutiable - It clearly emerges that Waste & Scrap cleared by assessee is not dutiable - Consequently, no infirmity found in order passed by lower authority: CESTAT - Appeal rejected: KOLKATA CESTAT 2019-TIOL-196-CESTAT-HYD Maa Mahayamaya Industries Ltd Vs CCE CX - The assessee has availed CENVAT credit on various inputs like steel items, profile sheets, electrodes and cement for fabrication and erection of plant and machinery - Lower authorities are of the view that such credit which was availed by assessee is ineligible as steel items, profile sheets, electrodes and cement do not qualify to be inputs or as capital goods - Entire issue is regarding eligibility to avail CENVAT credit of various structural steel items which were used for fabrication of machinery in factory premises - As regards to CENVAT credit allowed by adjudicating authority, the adjudicating authority has factually appreciated the entire issue, then arrived at a conclusion to drop the proceedings in respect of CENVAT credit availed - The Revenue's reliance on the judgment of Tribunal in case of Vandana Global Ltd. - 2010-TIOL-624-CESTAT-DEL-LB will not carry the case any further as the said judgment of Larger Bench has been struck down by High Court of Chattisgarh in various tax appeals - The said judgment of Larger Bench in case of Vandana Global Ltd has been struck down by High Court of Gujarat in case of Mundra Ports & SEZ - 2015-TIOL-1288-HC-AHM-ST - Accordingly, the reliance on the Larger Bench decision to hold that the explanation inserted to the definition of inputs is of clarificatory in nature does not stand scrutiny of law - As regards the CENVAT Credit denied to assessee, the findings recorded by adjudicating authority that these items were used for foundation/civil construction, structures of various industrial equipments and roof of plant and machinery, there is no dispute as to the fact that these inputs were received and consumed in factory premises of assessee - Said ratio of judgment of High Court was followed by this Bench in case of Sree Jayajothi Cements Ltd - 2017-TIOL-3950-CESTAT-HYD as also in case of Penna Cement Industries Ltd - 2018-TIOL-1610-CESTAT-HYD to hold that CENVAT credit availed on various items in the period prior to 07.07.2009 needs to be allowed: CESTAT - Assessee's appeal allowed: HYDERABAD CESTAT 2019-TIOL-195-CESTAT-MAD Tulsyan Nec Ltd Vs CC, CE & ST CX - Assessee is engaged in manufacture and clearance of TMT bars - The factory was functioning in a leased premises belonging to M/s. TSIPL - The officers attached to DGCEI conducted investigation into the transactions of TNL - It appeared to department that assessee have indulged in unaccounted purchase of raw materials as well as unaccounted production and clearance of finished goods - The quantification of demand in SCN has been challenged by assessee contending that the figures given therein if adopted as alleged purchase of raw material and alleged production, the resultant figures therein when considered against the opening stock of raw materials would result in negative balance of stock of raw material - They also furnished a worksheet - It is observed that the assessee have adopted opening balance of raw material from Form-IV register maintained by them - When the unaccounted purchase of raw materials has been brought to light from the data retrieved from pen drive as well as the data recovered from M/s. Hi-tech Industries P. Ltd., and other evidences, the strong inference that can be drawn is that the entries in the statutory register such as, Form-IV register cannot be relied or adopted - It has to be noted that the pen drive was initially opened and printouts taken at the factory premises on the date of inspection in the presence of Shri Vivek Agarwalla, who is the CEO and person using the computer - In order to ascertain the complete information contained in pen drive, data contained in the said pen drive were taken in the presence of Shri Vivek Agarwalla using his laptop in the O/o Deputy Director, DGCEI, Coimbatore - Merely because the department had occasion to take a detailed printout for the second time would not indicate any chance of tampering of evidence especially, when GEQD has not reported any such tampering - The demand of duty and interest thereon as well as equal penalty imposed under section 11AC does not call for interference - However, the penalty imposed on Shri Vivek Agarwalla and Shri Sanjay Agarwalla under Rules 26 of CER, 2002 is on the higher side - The penalty imposed on both is reduced: CESTAT - Appeals partly allowed: CHENNAI CESTAT CUSTOMS NOTIFICATION cnt05_2019 CBIC notifies Customs exchange rates w.e.f January 18, 2019 CASE LAWS 2019-TIOL-192-CESTAT-BANG Shri Manjunatha Shipping Pvt Ltd Vs CC Cus - The assessee is holder of CHA Licence valid up to 16.10.2014 - They filed a bill of Entry in respect of Nitenpyrum, weighing packed in 20 paper drums and another Bill of Entry in respect of Amitraz, weighing packed in 40 paper drums on behalf of the importer M/s. Aashutosh Pharmalabs - The allegation against assessee is that he has declared only the chemical name of goods and not the trade name of goods imported - This allegation does not have any force because the assessee has declared classification as per the direction of importer and if there is a wrong classification as per Department, then they should take it against the importer because on the same classification earlier also, the importer has imported the goods - Further, there is no force in the allegation that assessee has filed wrong address of the importer because the Custom Broker has filed the address which appears in IEC code - There is a violation of principles of natural justice and the impugned order has been passed without giving proper opportunity of hearing to the assessee - It is the importer who solely responsible for classification and not the assessee who has limited role in filing the documents as per advice of importer - The Commissioner has observed that the assessee has not applied for renewal of licence whereas the assessee has submitted that they have made application for renewal of their licence on 09.10.2014 itself by enclosing all the documents for renewal as per CBLR and has also got acknowledgment and therefore finding of Commissioner that the Custom Broker has not applied for renewal is factually incorrect - Forfeiture of security and imposition of penalty on assessee is not sustainable, same are set aside - Since the licence has already expired and as per the assessee, he has already applied for renewal on 09.10.2014 itself, the Commissioner is directed to examine his application for renewal of licence and decide the same in accordance with law: CESTAT - Appeals partly allowed: BANGALORE CESTAT 2019-TIOL-191-CESTAT-BANG Prime Tech General Trading Pvt Ltd Vs CC Cus - The assessee filed refund application as 4% additional duty refund as per Notfn 102/2007 Cus. - The original authority rejected this refund claim of assessee on the ground that the refund claim filed by assessee is time-barred as per Customs Notfn 93/2008 amending Notfn 102/2007 - The Commissioner (A) has relied upon the Single Member decision of Tribunal in case of M.S. Metals - 2017-TIOL-923-CESTAT-KOL and has held that the limitation as prescribed in Notification is applicable - Further, the decision of Delhi High Court in Sony India Pvt. Ltd. - 2014-TIOL-532-HC-DEL-CUS as well as Gulati Sales Corporation - 2017-TIOL-2477-HC-DEL-CUS wherein it has been held that no time limit is prescribed for claiming the refund of SAD - The said decision of Delhi High Court was followed by Tribunal in case of Purab Textile Pvt. Ltd. and has held that limitation as prescribed under Section 27 of Customs Act is not applicable in the case of refund of SAD - Division Bench of this Tribunal also in case of Gulati Sales Corporation relied upon Sony India Pvt. Ltd. and has held that the limitation of one year as prescribed in Section 27 of the Customs Act is not applicable - Since the Division Bench of Tribunal has relied upon the decision of Sony India Pvt. Ltd. as also the Tribunal in the case of Purab Textile Pvt. Ltd. has also relied upon the decision of Sony India Pvt. Ltd. , therefore, the impugned order is not sustainable in law: CESTAT - Appeal allowed: BANGALORE CESTAT

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