E

From the desk of Chairman

April 2019 (E-newsletter) II Issue

At the time when I am writing this message for 2nd issue of newsletter, general

elections are taking place throughout the country in the largest democracy of the

world.

The role of elections in ensuring a vibrant democracy and a progressing nation cannot

be underplayed. It acts like a mirror for everyone. For the incumbent government,

elections present an opportunity to showcase their achievements and also promise a

path of continuity of policies. For the opposition, elections present an opportunity to

highlight the shortcomings of the incumbent government and offer an alternative

narrative towards various policies. As a citizen of India, it’s an ideal platform to raise

a silent but strong voice towards making of the nation. It’s not only an opportunity in

my eye but also a duty towards the nation.

Now coming closer to our profession, during this month of April, We started with free

yoga classes from 1st April, a seminar on IND – AS on 13th April, a study circle

meeting on 15th April, DISA batch, financial help to the martyr’s of family and a full

day GST seminar on the last day of this month. Like I mentioned in my first write up,

it will be our endeavor to maximize this events for the benefit of our profession at

large.

Through “Adhyatan”, we have embarked on an uncharted journey to bring knowledge

to the desks of our fellow professionals but it goes without saying that it will be the

readers of this newsletter which will be our consistent focus, motivation and

inspiration on this journey. Every inch of effort will be made to serve readers of

“Adhyatan” by curating the essence and giving balanced, comprehensive and

dependable technical reading every month. The reader is and always will be at the

heart of “Adhyatan”.

To make “Adhyatan” what it is supposed to be, active support from our professional

colleagues in the form of suggestions and feedback will be a great help. Please feel

free to write me at nalwaya.manish@rediffmail.com.

CA. Manish Nalwaya

Chairman

+91-9214039817

Page 2

Contents in this issue ……...

• VARIOUS BRANCH ACTIVITIES OF APRIL MONTH

CAPTURED

• EDITORIAL

• RECENT DECISION PART-I (GST)

1. Interest Liability to be paid on GROSS GST Liability including the liability set off from the

balance available in Electronic Credit ledge in case of delayed payment

2. E-way bill not required in case of transportation of car for personal use by dealer of one State

to individual buyer of another State, considered as intra-state supply.

3. Merger of proprietary going concern with private limited company does not come within ambit

of term ‘supply’ and thus, not liable to GST. Upon the merger, the transferor can transfer the

balance in its Electronic Credit ledger only to the transferee and not the balance in Electronic

Cash Ledger.

4. When the invoice for sale of goods is issued in one month but the goods are delivered in

subsequent month, the ITC is available to buyer in the month in which he receives physical

delivery of goods. Further, irrespective of date of actual delivery of goods i.e. whether in the

same month in which invoice is issued or subsequent month, the time of supply shall be the date

of issue of invoice by supplier.

• RECENT DECISION PART-II (INCOME TAX)

5. Section 54F – Deposit of the amount of capital gains in a separate savings bank account and

utilization thereof for the purposes specified u/s. 54F is said to be substantial compliance with the

requirements of section 54F.

6. Disallowance cannot be made on the sole reason that the business has been discontinued or the

asset is not in the name of company.

7. Section 22, 24(4) and 56 – Income earned by assessee from letting out space on terrace for

installation of mobile tower/antenna was taxable as 'income from house property' and, therefore,

deduction u/s. 24(a) was available in respect of it.

8. Section 68 – Bank account of an assessee cannot be held to be ‘books’ of the assessee

maintained for any previous year, and therefore, no addition u/s. 68 can be made in respect of a

deposit in the bank account.

9. Bank – Valuation of closing stock – Securities held to maturity – Constitute stock-in-trade –

Valuation at lower of cost or market value – Proper – Classification in accordance with Reserve

Bank of India guidelines – Not relevant for purposes of income chargeable to tax.

Page 3

Contents in this issue ……...

• RECENT DECISION PART- III (SERVICE TAX)

10. In absence of any defined consideration for alleged service, there is no contract of service

at all and hence is not liable for service tax.

11. Arrangement of transportation merely to facilitate delivery of duty paid excisable goods

at buyers’ premises cannot be categorized as “Business Support Service”.

12. Restaurant Services provided from rented premise in Golf Course would not amount to

Outdoor Catering Service.

13. Reverse charge - remuneration paid to directors - even though the TDS was deducted

under the head salaries and the director has shown the income as salary in his income tax

return it would be liable to pay service tax under RCM since the condition of employer

employee relationship is not satisfied.

• RECENT DECISION PART – IV (CUSTOMS)

14. Section 154 of the Customs Act, 1962 does not in any manner restricts the exercise of

power of the officer, when a clerical or arithmetical mistake is pointed out by the importer or

exporter for reasons attributable to the importer or exporter.

• ARTICLE ON BANNING OF UNREGULATED DEPOSIT

SCHEME

Page 4

Glimpses

Page 5

Editorial

Dear Professional Colleagues,

We are pleased to enclose the April 2019 issue of “Adhyatan” E newsletter of Udaipur Branch CIRC

of ICAI. This contains recent case laws and articles pertaining to direct/ indirect taxes and other laws.

There is one eye catching judgment of Hon’ble Telangana High Court which is included in this

newsletter i.e. in the case of M/S. MEGHA ENGINEERING AND INFRASTRUCTURES LTD

2019 (4) TMI 1319 which needs special mention as it has dealt with issue, that can be an immediate

concern for each and every assesse in GST. Hon’ble Telangana High Court on the issue of payment of

interest on 'Gross Tax Liability' or 'Net Tax Liability' under the GST laws held that interest liability

on Input Tax Credit (ITC) portion of the tax liability cannot be found fault with, that is to say, interest for

the delayed payment of output tax liability of GST shall also be required to be paid on the liability paid

by way of ITC.

This judgment will result into number of SCN’s or cases getting opened for demanding interest on “

Gross Tax liability” remaining unpaid for a period in spite of having credit. However, in my opinion

High Court in this writ petition has interpreted the law that exists not the “law that is supposed to be”.

Drawing a reference of 31st GST Council meeting, wherein GST Council has proposed for Amendment

of section 50 of CGST Act to provide that interest should be charged only on the net liability of the

taxpayer, after taking into account the admissible input tax credit, i.e. interest under Section 50(1) of

the CGST Act/ SGST Act would be leviable only on the amount payable through the electronic

cash ledger i.e. after adjusting input tax credit. Here is clear intention of the GST Council that the

taxpayer should not suffer interest even when he has having eligible credit as there is no compensatory

loss resulting to Government in this scenario. The erstwhile Indirect tax laws also clearly laid out that

interest liability will arise only on net liability of the taxpayer and i.e. Liability after adjusting input tax

credit/ Cenvat Credit.

There are landmark judgments which have held that “interest is compensatory in nature”, however

Telangana High Court seems to contradict the landmark principle laid down in number of judicial

pronouncements.. There was a Rule 8(3A) in erstwhile Central Excise Rules, which had provisions of

freezing the credit available with assesse if he failed to make payment of Excise Duty within 30 days of

due date till the time such failure is made good by assesse along-with interest payment and due to this

draconian provision number of SCN’s were issued demanding tax, interest adjusted through freeze

Cenvat. However when the matter reached the High Court Rule 8(3A) was held to be unconstitutional.

Hope in this matter also assesse will get relief from the judiciary in future.

Contribution in the form of articles, useful material and suggestions are welcomed form our professional

colleagues. Any contribution in the form of articles etc. can be mailed to me at

navneetmangal1210@gmail.com. We urge you to provide valuable support in continuing this effort of

managing committee.

CA. Navneet Mangal (Editor)

+91-9462922978

Page 6

RECENT DECISION PART – 1 (GST)

1. Interest Liability to be paid on GROSS GST Liability including the liability set off from

the balance available in Electronic Credit ledger in case of delayed payment

Citation- M/S. Megha Engineering & Infrastructures Ltd. - 2019 (4) TMI 1319 -

TELANGANA AND ANDHRA PRADESH HIGH COURT

FACTS

Department demanded interest on the ITC portion of the tax paid for the months of July, 2017 to

May, 2018, being aggrieved by the department demand petitioner filed a writ petition.

HELD

Sub-Section (1) of Section 50 speaks about the liability to pay interest under one contingency,

viz., the failure to pay tax within the period prescribed, Sub-Section (3) of Section 50 speaks

about the liability to pay interest under a different contingency. Whenever an undue or excess

claim of ITC is made or whenever an undue or excess reduction in out-put tax liability is made,

a liability to pay interest arises under Sub-section (3). The words “on his own” used in Sub-

section (1), are not used in Sub-section (3) of Section 50 - The liability to pay interest under

Section 50 (1) is self-imposed and also automatic, without any determination by any one.

Hence, the stand taken by the department that the liability is compensatory in nature, appears to

be correct.

Sub-section (2) of Section 49 that a credit entry is made in the electronic credit ledger of a

registered person, only when the ITC, as self-assessed, is found in the return of a registered

person. After a credit entry is made in the electronic credit ledger, the same becomes available

for making payment. This is clear from Sub-section (3) of Section 49. If after payment, a

balance is still available in the electronic credit ledger, the same is liable to be refunded in

accordance with Section 54.

Until a return is filed as self-assessed, no entitlement to credit and no actual entry of credit in the

electronic credit ledger takes place. As a consequence, no payment can be made from out of

such a credit entry. It is true that the tax paid on the inputs charged on any supply of goods

and/services, is always available.

Admittedly, the petitioner filed returns belatedly, for whatever reasons. As a consequence, the

payment of the tax liability, partly in cash and partly in the form of claim for ITC was made

beyond the period prescribed. Therefore, the liability to pay interest under Section 50 (1) arose

automatically. The petitioner cannot, therefore, escape from this liability.

The claim made by the respondents for interest on the ITC portion of the tax cannot be found

fault with - the Writ Petition is dismissed.

2, E-way bill not required in case of transportation of car for personal use by dealer of one

State to individual buyer of another State, considered as intra-state supply.

Citation - 2019 [21] G.S.T.L. 3 (Kerala). Kun Motor Co. Pvt. Ltd. vs. Assistant State Tax

Officer, Kerala State GST Department, Thiruvananthapuram. Dated 6th December, 2018.

Page 7

FACTS

First appellant, a resident of Thiruvananthapuram (Kerala) purchased a Mini-Cooper Car from

Second appellant assessee, a motor vehicles dealer, situated in another State at Pondicherry for

his personal use. Instead of driving, the appellant opted for transportation of same to

Thiruvananthapuram. Dealer’s owned transportation and logistics wing registered under GST

was used for the transportation of car, in a specifically equipped carriage by road, without

issuance of E-way Bill. Revenue officials intercepted and seized the car in Pondicherry due to

non-compliance of E-way Bill.

HELD

The Hon’ble High Court held that transfer of property in goods vested with the purchaser at

Pondicherry itself, wherein supply was terminated. Further, it was used for some distance which

indicated that it was “used for personal effect”. Further, subsequent transportation of car to

another State would not make the buyer liable to comply with E-way Bill requirements. Apparent

doubt of the Revenue as to whether a transaction was an inter-state or intra-state sale was absurd

as in case of intra-state there was no ground of detention and for the latter case the applicable

IGST was satisfied, which document was accompanying the transport also. Detention notice and

order quashed as illegal and without jurisdiction. Appeal of Appellant was allowed.

3. Merger of proprietary going concern with private limited company does not come within

ambit of term ‘supply’ and thus, not liable to GST. Upon the merger, the transferor can

transfer the balance in its Electronic Credit ledger only to the transferee and not the

balance in Electronic Cash Ledger.

Citation -[2019] 102 taxmann.com 282 (AAR-Haryana) B. M. Industries. Dated 29th June,

2018

FACTS

Applicant proposed to merge his going concern proprietary business with a private limited

company along with all the assets, liabilities, rights, claims of proprietary business etc. After

merger, applicant would apply for cancellation registration within 30 days as prescribed. The

applicant sought ruling on GST implications on said merger and transfer of balance lying in

Electronic Credit Ledger and Electronic Cash ledger of applicant to the company in which

applicant’s proprietary concern would be merged.

HELD

The Authority observed that in terms of schedule II of CGST Act, 2017, transfer of business as

going concern to another person is not treated as supply under GST. Thus, authority held that

there will not be any GST liability on transfer of assets and liabilities by applicant to another

entity in the course of proposed merger. AS regards transfer of balances lying in Electronic Cash

and Credit Ledger of Applicant, the authority held that in terms of provisions of section 18(3) of

CGST Act, 2017 read with Rule 41 of the CGST Rules, 2017, only the balance lying in

Electronic Credit ledger pertaining to unutilised input tax credit can be transferred to the credit

ledger of the transferee by filing form GST ITC-02. Since the said provision is not applicable to

balance in Electronic Cash Ledger, applicant cannot transfer such balance to the transferee.

Page 8

4. When the invoice for sale of goods is issued in one month but the goods are delivered

in subsequent month, the ITC is available to buyer in the month in which he receives

physical delivery of goods. Further, irrespective of date of actual delivery of goods i.e.

whether in the same month in which invoice is issued or subsequent month, the time of

supply shall be the date of issue of invoice by supplier.

Citation -[2019] 102 taxmann.com 283 (AAR-Haryana) Pasco Motor LLP. Dated

14th August, 2018

FACTS

Applicant purchases goods from vendors which is in transit for five to ten days. The vendor

raised invoices on applicant only after receiving payment in advance. As regards the invoices

issued by vendor in the end of the month, the goods are received in subsequent month and

thus, entry for such purchases is made in its books upon receipt of goods. However, the vendor

reports the invoices in its GST returns for the previous months only i.e. the month in which

such invoices are issued. The applicant sought ruling as to whether the applicant would be

entitled to claim the ITC in the same month in which the vendor has issued the invoices or the

next month in which goods are received. Further, in order meet its monthly sales target, the

applicant raises invoices on its customers without being in actual possession of goods i.e.

before receiving the physical delivery of goods from its suppliers since the goods are in transit

and then, the applicant makes delivery of goods to its customers in next month. The applicant

sought ruling as to whether applicant will be under liability to pay tax in the same month in

which the invoice was raised though he was not in possession of goods to be delivered under

such invoice.

HELD

As regards the first issue, The authority observed that the explanation to section 16(2)(b)

covers only those situations where goods are supplied on “Bill to – Ship to” basis. In present

case, since the applicant himself is the buyer and the seller of the goods, it was held that the

ITC on goods would be available to the applicant only when he has received the goods in the

next month and not in the month in which the seller has raised the invoice.

As regards next question, authority held that the provisions of section 12(2), which deals with

the time of supply in case of liability to pay tax on goods, clearly stipulates that the time of

supply shall be earlier of date of issue of invoice or date of receipt of payment. Thus, in case of

issuance of invoice where the goods are delivered by applicant later on, but the invoice is

raised earlier, the date of issue of invoice will be the time of supply for the purpose of

determining tax period for filing of return and payment of tax.

RECENT DECISIONS PART – II ( INCOME TAX)

5. Section 54F – Deposit of the amount of capital gains in a separate savings bank

account and utilization thereof for the purposes specified u/s. 54F is said to be substantial

compliance with the requirements of section 54F.

Citation -[2019] 102 taxmann.com 50 (Jaipur) Goverdhan Singh Shekhawat vs. ITO ITA

No.: 517/JP/2013 A.Y.: 2009-10 Dated: 11th January, 2019

Page 9

FACTS

The assessee, an individual, received certain compensation on compulsory acquisition of land.

The assessee offered the said receipts as long-term capital gains and claimed exemption u/s. 54F

of the Act by depositing the amount of capital gains in a separate savings bank account. The

assessee contended that the amount of gains was deposited under Capital Gains Accounts

Scheme 1988. The Assessing Officer (AO) observed that the account in which amount was

deposited by the assessee was not a Capital Gains Scheme Account and therefore denied

exemption u/s. 54F of the Act. Aggrieved the assessee preferred an appeal to the CIT(A) who

confirmed the order of the AO. Aggrieved, the assessee preferred an appeal to the Tribunal.

HELD

The Tribunal noted that the undisputed facts viz. that despite having an existing account in

another bank, the assessee opened a new bank account and deposited not only the amount of

consideration but also the TDS refund received by it in this respect. Subsequently, the assessee

utilised the said amount for the construction of house. Thus, the Tribunal noted that since the

assessee had not utilised the amount for the purposes stated u/s. 54F, he had duly deposited the

entire compensation in the bank account at the time of filing of return of income and claimed

exemption u/s. 54F of the Act. The Tribunal held that the assessee was entitled to claim

exemption as the assessee had substantially complied with the provisions of sub-section (4) of

section 54F.

The Tribunal held that the idea of opening capital gains account under the scheme is to delineate

the funds from other funds regularly maintained by the assessee and to ensure that benefit

availed by an assessee by depositing the amount in the said account is ultimately utilised for the

purposes for which the exemption has been claimed i.e., for purchase or construction of a

residential house.

The Tribunal further observed that though savings bank account was not technically a capital

gains account, however the essence and spirit of opening and maintaining a separate capital

gains account was achieved and demonstrated by the assessee. The Tribunal thus held that

merely because the saving bank account is technically not a capital gains account, it cannot be

said that there is violation of the provisions of s/s. (4) of the Act in terms of not opening a

capital gains account scheme.

The Tribunal allowed the appeal filed by the assessee.

6. Disallowance cannot be made on the sole reason that the business has been discontinued

or the asset is not in the name of company. (There were three issues discussed in this case)

Citation – Rajmal Lakhichand Jewelers Pvt. Ltd. Versus Deputy Commissioner income

Tax, Circle – 2, JALGAON.

Issue 1 - The assessee had written off stock of S.K. Berries also called as brinjals valued at Rs.

16,90,477/-. The assessee was selling the aforesaid product in powder form to Pharma

Companies. The aforesaid product had become obsolete as the assessee could not find buyers

for the same. The stock was carried forward in the books year after year. Since, the value of

stock had become Nil the assessee decided to write off the same. AO while passing assessment

order disallowed the written off stock as expense. Aggrieved by the order assessee preferred an

appeal before CIT(A). The CIT(A) confirmed the same.

Page 10

ITAT Held

It is an undisputed fact that the assessee in its books of account has been showing stock of S.K.

Berries, purportedly in powder form over the period of time. Since, the product had become

unsellable the assessee decided to write off the same in the period relevant to the assessment year

under appeal. The fact that the stock of S.K. Berries had become obsolete has not been disputed

by the Department. The Department has never raised any objection qua carrying forward of stock

in the earlier years. We do not find merit in the submissions of Revenue that the assessee cannot

write off the stock which has been carried forward over the period of time even though it had

become obsolete. As per established accounting principle, the stock has to be valued at cost or net

realizable value, whichever is less. Even otherwise it is a trading stock and any trading loss is an

allowable expenditure. We do not find any infirmity in the action of assessee in writing off of

obsolete stock which was earlier carried forward in the books by the assessee. Accordingly,

ground No. 2 raised in the appeal by the assessee is allowed

Issue 2 –

Commissioner of Income Tax (Appeals) in disallowing interest, depreciation and

telephone/electricity expenses in respect of flat at Khar, Mumbai. The ld. AR submitted that

interest expenditure was incurred in respect of loan taken for purchasing the flat. Though, the said

flat was purchased in the name of one of the Directors of the assessee company, but was in fact

used for business purposes. The assessee had claimed depreciation, interest expenditure and

telephone/electricity expenses in respect of said flat in assessment year 2007-08 and the same

was disallowed. The assessee carried the matter in appeal before the Tribunal in ITA No.

891/PN/2013. The Tribunal vide order dated 29-02-2016 allowed the claim of assessee. The

assessee had made similar claim of interest, depreciation and telephone/electricity expenses in

assessment year 2008-09. The Assessing Officer in scrutiny assessment proceedings for the said

assessment year accepted the claim of assessee and made no disallowance

HELD –

There is no dispute to the fact that the flats purchased at Khar has been shown in the asset side of

the balance sheet and the loan obtained from bank in the name of the directors has been shown as

liability in the liability side of the balance sheet. The Board of Directors vide resolution dated 10-

02-2006 have approved for the purchase of the flats in the name of the 2 directors. Depreciation

in the computation statement is as per Form No.3CD enclosed along with return of income. In the

schedule of depreciation enclosed along with Form 3CD we find depreciation has been claimed at

₹ 2,18,73,103/- which includes the depreciation of ₹ 62,39,688/- on building/flats amounting to ₹

5,98,28,719/- (page 35 of the paper book). The submission of the assessee before the CIT(A) that

the assessee’s claim for depreciation has been accepted for the A.Y. 2007-08 is also not disputed

by the CIT(A).From the above it is clearly seen that the assesse’s claim of depreciation which has

accepted by the AO in the original assessment has not been withdrawn. This otherwise implies

that the AO has accepted the flat as business asset used for the purpose of business. We find the

Hon’ble Punjab & Haryana High Court in the case of CIT Vs. Fazilka Dabwali TPT Company

Pvt. Ltd. following the decision of Hon’ble Supreme Court in the case of CIT Vs. Poddar Cement

Pvt. Ltd. and others reported in 226 ITR 625 has allowed the claim of depreciation on buses

purchased in the name of its directors. Although the buses were not registered in the name of the

company it was held that registration of the same in the name of the company is not relevant and

the company is entitled to depreciation in respect of the buses.

Page 11

ISSUE 3 - The assessee has invested sum of Rs. 1,36,40,800/- in the shares of group

companies. These investments have been made in earlier years. No fresh investment has been

made during the period relevant to the assessment year 2009-10. The assessee has not received

any dividend income from any of the group companies. the AO while making assessment

disallowed expenses of ₹ 5,15,368/- made u/s. 14A r.w. Rule 8D of the Act.

ITAT HELD –

It is an undisputed fact that the investment was made by the assessee in group companies in the

past years and no fresh investment was made during year under consideration. During the

period relevant to the assessment year under appeal the assessee has not received any dividend

income. The Honorable Delhi High Court in the case of Cheminvest Limited Vs. Commissioner

of Income Tax (supra) has held that where no dividend income was earned by the assessee from

the amount invested in the shares, no disallowance u/s. 14A is to be made. Recently, Special

Bench of the Tribunal in the case of Assistant Commissioner of Income Tax Vs. Vireet

Investment (P) Ltd. reported as 165 ITD 27 has reiterated the law laid down in the case of

Cheminvest Limited Vs. Commissioner of Income Tax (supra). The Commissioner of Income

Tax (Appeals) has deleted the addition made u/s. 14A r.w. Rule 8D by following various

decisions. There are catena of decisions wherein it has been held that no disallowance u/s. 14A

r.w. Rule 8D is warranted where no exempt income has been earned by the assessee during the

relevant period. We find no reason to take a divergent view. We find no infirmity in the view

taken by Commissioner of Income Tax (Appeals) to delete the addition. Accordingly, ground

No. 2 raised in the appeal by Revenue is dismissed.

7. Section 22, 24(4) and 56 – Income earned by assessee from letting out space on

terrace for installation of mobile tower/antenna was taxable as 'income from house

property' and, therefore, deduction u/s. 24(a) was available in respect of it.

Citation- (2019) 197 TTJ (Mumbai) 966 Kohinoor Industrial Premises Co-operative

Society Ltd. vs. ITO ITA No.: 670/Mum/2018 A. Y.: 2013-14 Dated: 5th October, 2018.

FACTS

The assessee, a co-operative society, had derived income from letting out some space on

terrace for installation of mobile towers/antenna which was offered "as income from house

property". Further, against such income the assessee had claimed deduction u/s. 24(a). The

Assessing Officer observed that, the terrace could not be termed as house property as it was

the common amenity for members. Further, the Assessing Officer observed that the assessee

could not be considered to be owner of the premises since as per the tax audit report,

conveyance was still not executed in favour of the society. He also observed that the annual

letting value of the terrace was not ascertainable. Accordingly, he concluded that the income

received by the assessee from the mobile companies towards installation of mobile

towers/antenna was to be treated as "income from other sources". Aggrieved by the assessment

order, the assessee preferred an appeal to the CIT(A). The CIT(A) confirmed the order of the

Assessing officer on grounds that the income received by the assessee was in the nature of

compensation received for providing facilities and services to cellular operators on the terrace of

the building.

Page 12

HELD

The Tribunal held that the terrace of the building could not be considered as distinct and

separate but certainly was a part of the house property. Therefore, letting-out space on the

terrace of the house property for installation and operation of mobile tower/antenna certainly

amounted to letting-out a part of the house property itself. That being the case, the observation

of the Assessing Officer that the terrace could not be considered as house property was

unacceptable. As regards the observation of the CIT(A) that the rental income received by the

assessee was in the nature of compensation for providing services and facility to cellular

operators, it was relevant to observe, the department had failed to bring on record any material

to demonstrate that in addition to letting-out space on the terrace for installation and operation

of antenna, the assessee had provided any other service or facilities to the cellular operators.

Thus, from the material on record, it was evident that the income received by the assessee

from the cellular operators/mobile companies was on account of letting out space on the

terrace for installation and operation of antennas and nothing else. Therefore, the rental

income received by the assessee from such letting-out had to be treated as income from house

property.

8. Section 68 – Bank account of an assessee cannot be held to be ‘books’ of the assessee

maintained for any previous year, and therefore, no addition u/s. 68 can be made in

respect of a deposit in the bank account.

Citation- [2019] 198 TTJ (Asr) 114 Satish Kumar vs. ITO ITA No.: 105/Asr/2017 A.Y.:

2008-09 Dated: 15th January, 2019

FACTS

The assessee had filed his return of income for A.Y. 2008-09. In the course of the assessment

proceedings the Assessing Officer observed that the assessee had during the previous year

made a cash deposits of Rs.11,47,660 in his saving bank account. In the absence of any

explanation on the part of the assessee as regards the 'nature' and 'source' of the aforesaid cash

deposit in the aforesaid bank account, the Assessing Officer made an addition of the peak

amount of cash deposit of Rs.11,47,660 u/s. 68 of the Act.

Aggrieved by the assessment order, the assessee preferred an appeal to the CIT(A). The

CIT(A) upheld the addition made by the Assessing Officer and dismissed the appeal.

HELD

The Tribunal held that an addition u/s. 68 could only be made where any sum was found

credited in the books of an assessee maintained for any previous year, and the assessee either

offered no explanation about the nature and source as regards the same, or the explanation

offered by him in the opinion of the assessing officer was not found to be satisfactory. A

credit in the 'bank account' of an assessee could not be construed as a credit in the 'books of

the assessee', for the very reason that the bank account could not be held to be the 'books' of

the assessee. Though it remained as a matter of fact that the 'bank account' of an assessee was

the account of the assessee with the bank, or in other words the account of the assessee in the

books of the bank, but the same in no way could be held to be the 'books' of the assessee.

Therefore, an addition made in respect of a cash deposit in the 'bank account' of an assessee,

in the absence of the same found credited in the 'books of the assessee' maintained for the

previous year, could not be brought to tax by invoking the provisions of section 68.

Page 13

9. Bank – Valuation of closing stock – Securities held to maturity – Constitute stock-in-

trade – Valuation at lower of cost or market value – Proper – Classification in accordance

with Reserve Bank of India guidelines – Not relevant for purposes of income chargeable to

tax

Citation- Principal CIT vs. Bank of Maharashtra; 410 ITR 413 (Bom): Date of order:

27th February, 2018 A. Y.: 2005-06

FACTS

The assessee claimed that the held-to-maturity securities constituted stock-in-trade and were to be

valued at cost or market value whichever was less. The Assessing Officer disallowed the claim

on the ground that the assessee had shown the value at cost for earlier assessment years and

therefore it could not change the valuation. The Commissioner upheld the decision of the

Assessing Officer. The Tribunal held that irrespective of the basis adopted for valuation in earlier

years, the assessee had the option to change the method of valuation of its closing stock to the

lower of cost or market value provided the change was bonafide and followed regularly

thereafter, that the held-to-maturity securities were held by the assessee as stock-in-trade and that

the receipts therefrom were business income.

HELD

On appeal by the Revenue, the Bombay High Court upheld the decision of the Tribunal and held

as: “The order of the Tribunal to the effect that the securities held to maturity were stock-in-trade

and the income on sales had been offered to tax as business income, was correct. Merely because

the Reserve Bank of India guidelines directed a particular treatment to be given to a particular

asset that would not necessarily hold good for the purposes of income chargeable to tax.”

RECENT DECISIONS PART -III (SERVICE TAX)

10.In absence of any defined consideration for alleged service, there is no contract of service

at all and hence is not liable for service tax.

Citation- 2019-TIOL-725-CESTAT-DEL] Premium Real Estate Developers vs. CST

Service Tax, Delhi Date of Order: 27th November, 2018

FACTS

The assessee, a partnership firm in the business of real estate trade entered into a Memorandum

of Understanding with Sahara India Limited. On perusal of the MOU, it is obvious that MOU is

not only for providing purely service for acquisition of the land but also involves many other

functions such as verification of title deeds of the persons from whom the lands are to be

acquired, obtaining necessary rights for development of the land from the Competent Authority

etc. The remuneration or payment for providing this activity was not quantified in the MOU. The

MOU provided "the difference, if any, of the amount being actually paid to the owner of the land

and the average rate shall be payable to the second party (appellant).” A show cause notice was

issued demanding service tax under the category of Real Estate Agent.

HELD

The Tribunal noted that no fixed amount was agreed in the MOU, the amount of remuneration for

service, if any is not clear in this case. It was noticed that for levy of service tax, a specific

amount has to be agreed between the service recipient and the service provider. Reliance was

placed on the decision of Mormugao Port Trust vs. CC, CE&ST, Goa [2016-TIOL-2843-

CESTAT-MUM]. Accordingly it was held that since the specific remuneration was not fixed in

Page 14

the land, both the parties have worked more as partners in the deal rather than as an agent and

the principal. Therefore the taxable value itself did not acquire finality. Further it was also held

that the issue relates to interpretation and there is no malafide intention on the part of the

appellant. It was noted that the transaction is duly recorded in the books of accounts. Therefore

there is no suppression of information. Thus extended period is also not invokable.

11. Arrangement of transportation merely to facilitate delivery of duty paid excisable

goods at buyers’ premises cannot be categorised as “Business Support Service”.

Citation- 2019 [20] G.S.T.L. 88 (Tri.- Mumbai.) Pushpak Steel Industries Pvt. Ltd. vs.

Commissioner of Central Excise & Service Tax, Pune-III Date of Order: 7th May, 2018

FACTS

Appellant collected delivery charges separately from the buyers along with assessable value of

goods, statutory dues etc., for delivery of excisable goods to buyers’ premises. No other

agreement existed between the parties for providing any service, over and above the supply of

goods. Delivery charges were collected from the buyers which were incurred for delivery of

goods at buyers’ premises for which appellant paid lump sum amount for transportation of

goods and the balance was shown as “Freight Reimbursement” in the books. Service tax and

penalty was imposed considering the balance amount retained by the appellant as taxable

service under the category of “Business Support Service”.

HELD

The Hon’ble Tribunal held that the appellant did not support the business of his clients in any

manner. The activity of the appellant cannot be held liable for service tax as Business Support

Service as they were outside the ambit of taxable services, thereby allowing the appeal.

12. Restaurant Services provided from rented premise in Golf Course would not amount

to Outdoor Catering Service.

Citation- 2019 [21] G.S.T.L. 33 (Tri. All.) Commissioner of Customs, Central Excise &

Service Tax, Noida vs. Fortune Cookie Date of Order: 26th July, 2018

FACTS

Revenue initiated proceeding against Respondent alleging that activity of providing food in

premises of Noida Golf Course to their members through Noida Golf Course by the respondent

would fall under “outdoor catering service” and not under “restaurant service”. The demand was

confirmed and penalty was imposed vide adjudication order holding the assessee liable to pay

service tax 2007 onwards. The adjudication order was quashed by the Ld. Commissioner

(Appeals).

HELD

It was held that since the place from where service was provided was taken on rent from Noida

Golf Course, the services are considered as provided from premises of respondent assessee only.

Further, relying on the decision in the case of Tamil Nadu Kalyana Mandapam Assn. vs. UOI

2006 (3) STR 206 SC, it was observed that the service of restaurant and outdoor catering are

distinguishable and the service provided by respondent are in nature of “restaurant service”.

Page 15

13. Reverse charge - remuneration paid to directors - even though the TDS was deducted

under the head salaries and the director has shown the income as salary in his income tax

return it would be liable to pay service tax under RCM since the condition of employer

employee relationship is not satisfied

Citation- M/S. BRAHM ALLOY LIMITED VERSUS COMMISSIONER OF CGST &

CENTRAL EXCISE, DURGAPUR 2019 (4) TMI 1537 - CESTAT KOLKATA

FACTS

Directors of the appellant company have been receiving remuneration. As per Department,

Service Tax under Reverse Charge basis is leviable on the services provided or agreed to be

provided by a Director to the said Company. On appeal the Learned Commissioner (Appeals)

modified the adjudication order and confirmed the demand of service tax only on Director’s

remuneration for the Financial Year, 2012-13 and 2013-14 i.e. on ₹ 12 Lakhs. Hence, the present

appeal before the Tribunal.

HELD -

To establish the employer - employee relationship, the clause of hiring and firing are an essential

ingredient without which it cannot be construed whether the individual is the Promoter/Director

or an employee Director. The remuneration cheque has to be paid on a month to month basis

along with the admissible perquisites. There is a deviation in the facts of the present case,

therefore Service tax has to be paid. Appeal dismissed - decided against appellant.

RECENT DECISIONS PART - IV (CUSTOMS)

14. Section 154 of the Customs Act, 1962 does not in any manner restricts the exercise of

power of the officer, when a clerical or arithmetical mistake is pointed out by the importer

or exporter for reasons attributable to the importer or exporter

Citation-The Commissioner Of Customs (Imports) Versus M/S. Symrise Private Limited,

Customs, Excise And Service Tax Appellate Tribunal - 2019 (4) Tmi 496 - Madras High

Court

FACTS:-

The assessee-company filed a bill of entry for clearance of automatic chemicals imported & on

which duty had been paid - This duty was assessed on the amount covered by 9 invoices -

However, the imported goods were covered under eight invoices and the ninth invoice was

covered in a separate bill of entry which was permitted to be cleared on payment of duty - The

assessee claimed that on the same invoice, it paid duty twice and the balance amount is to be

refunded - The assessee approached the jurisdictional Assistant Commissioner of Customs

(Refund), who advised the assessee to get the assessment order pertaining to such bill of entry

reviewed, through appeal to the Commr.(A) - The assessee filed a review application before the

Assessing Officer in this regard - The same was dismissed on grounds that the refund claim was

not maintainable since the assessee did not challenge the assessment order - The assessee

approached the Commr.(A) who held that the error could not be rectified unless it had been

committed by the Department - The Tribunal later held that any clerical error or arithmetical error

could be rectified suo motu under Section 154 of the Act and refund could be allowed to importer

as a consequence of correction of clerical error under Section 154 of the Act, when the importer

had not filed refund claim under Section 27 of the Act - Hence the Revenue's appeal.

Page 16

HELD—

Section 154 of the Act gives an impression that clerical or arithmetical error occurring in orders

passed by the Government Board or any officers of that Department, or errors arising from such

order due to accidental slip or omission alone can be corrected - However, as far as orders passed

under the Customs Act are concerned, the power of correct the same vests only with the

authorities - Section 154 does not restrict the exercise of power when a clerical or arithmetic

mistake is pointed out by the importer or exporter for reasons attributable to such party - Hence

the view taken by the FAA would restrict the powers u/s 154, which is impermissible - Hence in

the instant case, the assesse cannot correct the order - But then as an invoice not forming part of

the bill of entry was inadvertently included and assessed to tax, the same classifies as an error

apparent on face of the order - Hence the simple remedy would have been to verify the bill of

entry, which would have saved all the time spent in the present litigation - Hence the Tribunal's

findings that the assessee is entitled to refund of Excise duty, are quashed - The matter is

remanded to the AO to pass appropriate orders.

ARTICLE ON BANNING OF UNREGULATED DEPOSIT SCHEME

INTRODUCTION

Lok Sabha on 13th February 2019 has passed the “Banning of Unregulated Deposit Scheme Bill

2019” which came into force on 21st February via Ordinance issued by Hon’ble President of

India. Presently, non-banking entities are allowed to raise deposits from the public under the

provisions of various statutes enacted by the Central Government and State Governments.

Fraudulent activities by inducing public to invest in uncertain schemes promising high returns or

other benefits are still operating in the society. This Ordinance provides for a comprehensive ban

on unregulated deposit taking activity and for its effective enforcement.

To prevent such unregulated deposit schemes or arrangements at their inception and at the same

time makes soliciting, inviting or accepting deposits pursuant to an unregulated deposited scheme

as a punishable offence. The said Ordinance also seeks to put in place a mechanism by which the

depositors can be repaid without delay by attaching the assets of the defaulting establishments,

thus seeking to provide a comprehensive solution for banning illicit deposits.

OVERALL INTENTION OF THE ORDINANCE

The overall intention of this ordinance/ act is that deposits schemes which are regulated by 9

regulators in the country shall be allowed and all other shall be unregulated deposit Schemes

subject to exclusion from definition of deposits. Here it makes sense just to sneak in the

definition of unregulated deposit scheme and regulated deposit scheme for gaining the

understanding of the framework of this act

“Unregulated Deposit Scheme” as per section 2(17) of the Ordinance means a scheme

or an arrangement under which deposits are accepted or solicited by any deposit taker by

way of business and which is not a Regulated Deposit Scheme, as specified under

column (3) of the First Schedule.

“Regulated Deposit Scheme” as specified in sec 2(5) means the Scheme specified under

column of the First Schedule of the ordinance.

Schemes that are listed in Schedule-I. Nmely, schemes that are regulated by SEBI, RBI, IRDA,

Page 17

State Government, Union Territory Government, National Housing Bank, Pension Fund

Regulatory and Developmental Authority, EPFO, Multi-State Co-Operative Society, Deposits

accepted or permitted under Chapter-V of the Companies Act and any deposits accepted by a

company declared as a Nidhi or a Mutual Benefit Society under the Companies Act are regulated

deposit schemes. Further, Central Government, has a power to notify any other scheme as a

regulated deposit scheme.

MEANING OF “DEPOSIT”, EXCLUSIONS FROM THE TERM DEPOSIT AND

IMPLICATION OF EXCLUSIOSN

WHAT IS THE MEANING OF DEPOSIT AS PER THE ORDINANCE?

“Deposit” as specified in sec2(4) of the Scheme means as amount of money received by way of

an advance or loan or in any other form by any Deposit Taker with the promise to return the

money after a specified period or otherwise, either in cash or kind or in the form of a specified

service. This may be with or without any benefit in the form of interest, bonus, and profit, or in

any other form.

WHAT IS EXCLUDED FROM THE TERM DEPOSIT IN THE SAID ORDINANCE?

• Loans received from banks as defined under Banking Regulations Act, 1949;

• Loans/ financial assistance from public finance institutions (PFIs) or any registered non-

banking financial companies (NBFCs), regional financial institutions and insurance

companies;

• Amount received from or guaranteed by appropriate an government;

• Amount received from a statutory authority;

• Amounts received from foreign government, foreign banks, and foreign authorities or person

resident outside India as per the provisions of the Foreign Exchange Management Act

(FEMA) 1999;

• Capital contributions by partners of a partnership firm or LLP;

• Loans received by an individual from his relatives;

• Loans received by a firm from relatives of partners;

• Any credit given by a seller to a buyer on the sale of any property (whether movable or

immovable);

• Amounts received by a registered Asset Reconstruction Company (ARC);

• Amounts received under Section 34 or Section 29B of the Representation of the People Act,

1951;

• Any periodic payment made by the members of self-help groups as per the ceiling prescribed

by state/ Union territory government;

• Amount received in the course of, or for the purpose of, business and bearing a genuine

connection to such business for following and which has not become refundable

• Payment, advance or part payment for supply/ hire of goods / services;

• Advance received in connection with and adjusted towards consideration of an immoveable

property under an agreement or arrangement;

• Security deposit;

• Advance under long-term projects for supply of capital goods;

IMPLICATION OF EXCLUSION

The exclusion clearly implies that money arrangements as specified in exclusion will not

come within the purview of “unregulated deposits” hence the same cannot be banned.

Page 18

APPLICABILITY OF THIS ORDINANCE

Section 2(5) of the Ordinance states that a Deposit Taker means (i) an individual or a group of

individuals, (ii) a proprietorship concern, (iii) a partnership firm, (iv) a LLP registered under LLP

Act 2008, (v) a company, (vi) an association of persons, (vii) a trust, (viii) a co-operative society

or (ix) any other arrangement of whatsoever nature.

PRACTICAL ILLUSTRATIONS TO GAIN UNDERSTANDING OF THE ORDINANCE

AS WELL AS DIFFICULTIES THAT MIGHT ARISE

I. An Individual has taken loan from his friend for paying the entrance fee for his son, such

deposit although covered in the definition of deposits as given u/s 2(4) but will not be

classified as Unregistered Deposit Scheme because as per the ordinance only deposit taken

by way of business will be covered. In other words, any deposit taken by a person for the

reasons other than for business of taking deposits will not be covered under the Unregistered

Deposit Scheme.

II. What if in above scenario deposit is taken for business purpose? If such case were to arrive

section 2(4)(l) list out some exclusion if the same is for business purpose and is repayable.

Also it can be interpreted otherwise also so a clarification is awaited in this regard

III. If any Firm or LLP takes a loan for their business for eg. to purchase an asset or for running

business (working capital loan) , then will it be prohibited as per the ordinance. One view

can be “no, The reason for this interpretation is the LLP/ firm is not in the business of

accepting deposits and also it has genuine connection with the business of the deposit taker

and so it will not be covered in the definition given under section 2(4). Also it can be said

that the firm or LLP has not solicited for taking deposits. But there can be an alternate view

as well.

IV. In case a company carrying on manufacturing or trading activity takes a loan from any

NBFC, bank or any other individual etc. will not be treated as deposits as the same will be

governed by the provisions of Companies Act 2013 and as per Rule 2(1) of Companies

(Acceptance of Deposit) Rules, 2014 a company is allowed to take deposits if the conditions

mentioned are fulfilled. Such deposits will not be considered as unregistered deposit

scheme.

V. In case of Partnership firm or LLP any amount brought in by a partner as capital

contribution will not be considered as Deposit u/s 2(4) of the Ordinance. Further in any

other amount apart from capital contribution is brought in by the partner will be in such

manner as may be mutually agreed by them. Further even if the same is considered as a

“Deposit” it will not be considered as “Unregistered Deposit Scheme” if the business of the

firm is not of money lending.

VI. In case of Individual or Partnership firm even if the loan taken is for money lending

business, it will not be considered as deposit u/s 2(4) of the ordinance if the loan is taken

from the relatives of the individual or the relatives of the partner in partnership firm.

VII. If any business (individual, partnership firm, LLP or company) purchases goods on credit of

60 days from its seller, the same will not be considered as deposit as it has been specifically

kept out of the preview of deposit u/s 2(4) of the ordinance.

Page 19

POSER??

Although this ordinance bans any acceptance of Unregulated Deposit Scheme after 21st February

2019, which is directly or indirectly solicited. We are not sure about the as to the applicability of

Ordinance on deposits taken prior to 21st Feb 2019, whether they have to refund the same to the

depositors and If so within what time frame? Or if there will be any clarification on this matter.

COMPETENT AUTHORITY AND DESIGNATED COURTS.

In order to decide the matters relating to this Ordinance Various Competent Authorities will be

appointed u/s 7 of the ordinance and also designated courts are notified in section 8, to whom

appeal against the order of competent authority can be made. These courts will have all powers as

vested in any civil court having its jurisdiction defined.

As per section 15 of the Ordinance Designated Courts shall endeavour to complete the

proceedings within a period of 180 from the date of receipt of the application.

Aggrieved person can file an appeal against the decision of Designated Courts within a period of

60 from such order to High Court.

PENAL PROVISIONS

Penal provisions are iterated in Section 21 to 27 of the Ordinance and rest assured there is clear

strict intention from the government to punish the offence as the picture comes out from reading

of relevant Sections. There are provisions for heavy fines as well as imprisonments (non-bailable

offence) in terms of this Sections.

CONCLUSION

It is a well experienced fact that an effort to resolve issues comes with answers to problems but

not all problems/ issues can be anticipated in advance, hence there will be issues which might

need quick answers from the government for effective implementation of this well intentioned

ordinance.