Recovery of late fee - penalty u/s 77 of FA, 1994 - late filing of ST-3 returns as per Rules 7 & 7C of the STR, 1994, read with Section 70 of the FA, 1994 - Held that: - No provision has been relied upon by the appellant under which such late fee can be waived - demand of late fee upheld.
Imposition of penalty - Held that: - a post office, being Govt. of India department, cannot be considered to have any mala fide in discharge of duty liability and late filing of returns, if late fee provided in the Statute and the Rules made therein, is complied and also when the entire Service tax liability was reflected in the returns - penalty waived.
Appeal disposed off - decided partly in favor of appellant.
Penalty levied under section 271(1)(c) - TPA adjustment - Held that:- The determination of reasonable arm’s length price is a matter of estimate. Merely because it is possible to arrive at two different estimates of arm’s length price, it cannot be held that the lower of the two estimates is based on inaccurate particulars, while higher one is accurate. We also find that with regards to penalty under section 271(1)(c) of the Act in respect of transfer pricing additions, only Explanation -7 to the section has to be considered.
A perusal of the said Explanation shows that no penalty can be levied where the pricing is done in good faith and with due diligence. In the present case, the transfer pricing of the assessee is based on a study conducted by an independent expert, M/s.Price Waterhouse Coopers, Chartered Accountants. The assessee has obtained a transfer pricing study from an outside expert, and this transfer pricing study, objectivity of which is neither called into question or seems to be, upon perusal of this transfer pricing study, questionable to us anyway, approves TNMM method for determination of arm’s length price - a proposition which has not been specifically rejected by the Revenue authorities. On these facts, lack of due diligence in determining the arm’s length price is neither indicted nor can be inferred. In such a situation, it cannot be said that the assessee has not determined the arm’s length price in accordance with the scheme of section 92C in good faith and with due diligence. The conditions precedent for invoking Explanation-7 to section 271(1)(c) did not exist on the facts of this case. - Decided in favour of assessee.
Validity of reopening of assessment - Held that:- Reopening of assessment by an AO based on the information received from the Director of Investigation without making any effort to discuss the materials on the basis on which he formed a prima facie opinion that income had escaped assessment. The basic requirement of Section 147 of the Act that AO should apply an mind in order to form reasons to believe that income had escaped assessment had not been fulfilled.The ITAT was, in the circumstances, justified in holding the initiation of the reassessment proceedings was invalid. - Decided in favour of assessee
Penalty u/s 271(1)(c) - Concealment of income - validity of notice - Held that:- Tribunal has correctly allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under Section 274 read with Section 271(1)( c) to be bad in law as it did not specify which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of COMMISSIONER OF INCOME TAX - VS - MANJUNATHA COTTON AND GINNING FACTORY (2013 (7) TMI 620 - KARNATAKA HIGH COURT ) . Thus since the matter is covered by judgment of the Division Bench of this Court, we are of the opinion no substantial question of law arises - Decided in favour of assessee.
Addition on account of fees for technical services - TPA - ALP determination - lowering of bench marking - Held that:- It is an undisputed position before us that the assessee is a wholly owned subsidiary of its parent company which is registered in Switzerland. The respondent pays to its parent company Royalty for use of its Trademark/brand name. Therefore, admittedly the present case is covered by Clause IV and not Clause III of the Press Note 9(2000 series). The aforesaid clause IV of the Press Note 9 (2000 series) allows payment of Royalty upto 8% on export sales by wholly owned subsidiaries to its offshore parent companies.
On the last occasion that is on 23 September 2015 Revenue sought time to take instructions on whether Clause IV as reproduced hereinabove is applicable in the case of respondent assessee. Today Mr. Tejveer Singh, on instructions, states that the respondent assessee is covered by clause IV of the Press Note 9 (2000 series) dated 8 September 2000. Therefore, the bench marking of the Royalty paid at 3% by the respondent to arrive at the ALP is much below the Royalty for trade mark / brand name which is allowed to be paid by wholly owned subsidiary to its offshore parent company.
The grievance of the Revenue that the Tribunal ought to have lowered the bench marking on application of Clause III of the Press Note 9 (2000 series) dated 8 September 2000 does not survive. Accordingly, question as proposed does not give rise to any substantial question of law. Thus not entertained. - Decided against revenue
Levy of penalty under section 271AAA - surrender of income during the course of search and seizure operation - Held that:- As held in the case of Pramod Kumar Jain v. Dy. CIT [2012 (12) TMI 629 - ITAT CUTTACK] that the disclosure of income under section 132(4) during the search having been made and the assessee having surrendered certain income for the relevant assessment years in the statements during the course of search and filed returns declaring the same pursuant to notice under section 153A and which returns have been accepted by the AO, levy of penalty under section 271 AAA was not justified on the ground that the assessee has though made disclosure but failed to specify the manner in which such income had been derived. Hon'ble Tribunal further held that no definition could be given to the "specified manner" and there is no prescribed method given in the statute to indicate the manner in which income was generated.
The assessee has specified and substantiated the manner of earning the income and has not violated any of the conditions specified u/s 271AAA(2), for granting immunity from penalty.
We therefore hold that no penalty u/s 271AAA could be levied in the present case. Accordingly we uphold the order of the Ld. CIT(A) deleting the penalty. - Decided in favour of assessee
Denial of CENVAT credit - construction of a drain in an around the factory, so that water may not enter into the factory premises - denial of credit on the ground that construction of such Drain (Nallah) was for the sake of preventing water from entering the factory premises, and thus, the same has no nexus with the manufacture or sale of final product.
Held that: - The maintenance and cleanliness of the factory is a statutory requirement, and a manufacturer is under the obligation to comply with the statutory provisions contained in the Factories Act. It is contended that the expenses incurred by the appellant for the input service has been taken as a component of cost for determination of the cost of production for levy of Central Excise duty. The period involved is from July to October 2009, when the un-amended provisions of the input service definition was in vogue, which provides activities relating to business is a constituent for entitling consideration as input service.
The Tribunal in the case of Mawana Sugars Ltd. [2014 (12) TMI 1139 - CESTAT NEW DELHI] allowed the appeal on the identical situation.
Appeal allowed - credit allowed - decided in favor of assessee.
Denial of CENVAT credit - service tax paid to consultant - manufacture of Lead and Zinc Ores - denial on the ground that said services cannot be considered as input service, since there is no nexus between the services and the goods manufactured by the appellants - Held that: - In the inclusive part of definition of input service, it has been provided that “activities relating to business” should also be qualified as a service for the purpose of availment of cenvat credit. In interpreting the expression “activities in relation to business”, the Hon’ble Bombay High Court in the case of Ultratech Cement [2010 (10) TMI 13 - BOMBAY HIGH COURT] have held that definition of input service postulate activities which are integrally connected with the business of the assessee; that if the activity is not integrally connected with the business of the manufacture of final products, the service should not qualify to be an input service under Rule 2 (l) of the Cenvat Credit Rules, 2004 - In the present case, it is an admitted fact that laying of railway lines between the factory and the nearest railway siding is a necessity of the business of the appellants. Without laying the railway lines/track material, the goods cannot smoothly be transported to their Smelter Division. Further, the expenditure incurred for both the category of consultancy services have been taken into consideration as part of the manufacturing cost of the finished goods for the purpose of determination of the assessable value. Therefore, in view of the principle decided by the Hon’ble Bombay High Court in the case of Ultratech Cement, I am of the view that the service tax paid on the Consultancy services shall be eligible for cenvat benefit to the appellants.
Appeal allowed - credit allowed - decided in favor of appellant-assessee.
Demand u/r 8(3A) of the Central Excise Rules, 2002 read with Section 11A of the Central Excise Act, 1944 - due payment of duty - Held that: - I find that the embargo created in Rule 8(3A) ibid has the application, in the eventuality, where the assessee defaults in payment of duty within prescribed period and the same is discharged beyond the period of 30 days from the due date of payment. In the present case, since the duty liability for the month of September 2011 was deposited on 18.10.2011 with the designated bank and the interest for 13 days was also paid by the appellant subsequently, in my opinion, the situation is governed under sub-rule (3) and not under sub-rule (3A) of Rule 8 ibid. It is not in dispute that the bank account of the appellant has been credited with ₹ 7,21,000/- on 18.10.2011. Transferring the amount from the bank account to the Current Account at a later date due to ignorance on the part of the dealing assistant cannot be a defensible ground for confirmation of the demand under sub-rule (3A) ibid, especially in view of the fact that the appellant had paid the interest amount for delayed payment of duty - appeal allowed - decided in favor of appellant.
Demand - clandestine removal - Held that: - I find that the Revenue failed to place any evidence on record against the findings of Commissioner (Appeals). Hence, I do not find any reason to interfere with the order of the Commissioner (Appeals). Accordingly, the appeal filed by the Revenue is dismissed.
Demand of credit with interest and penalty - MODVAT credit - depreciation - whether simultaneously CENVAT credit and depreciation availed? - Held that: - The lower appellate authority observed that the appellant had claimed the depreciation on the value of the capital goods, which represent the modvat credit. I find that the Chartered Accountant’s Certificate would clearly show that the appellant is not claiming depreciation in respect of Central Excise Duty or countervailing duty paid on the capital goods. The Department has not refuted the Chartered Accountant’s Certificate by any material. Hence, I am of the view that there is no reason to deny the modvat/cenvat benefit - appeal allowed - decided in favor of assessee-appellant.
Capital gains tax under Section 45 - sale of assets disallowed on the basis of projected figures and not on the basis of actual figures - Held that:- When the proposal was submitted by the petitioner to the respondents in 2008, the same was based on projections for the subsequent years. The order was ultimately passed in 2012 when the actuals were available. The actuals had been called for by the respondents and had been supplied by the petitioner. Yet, only the projections were taken into account and the actuals were ignored. The grievance of the petitioner is that the relief relating to capital gains tax ought to have been construed on the basis of actuals and not projections.
The learned counsel for the respondents submits that these proposals are always considered on the basis of projections and if there is any difference between the projections and the actuals to the detriment of the proposer, the same would have been absorbed by the latter. The learned counsel for the respondents shall produce some materials/documents to substantiate this plea of his.
Deemed dividend addition u/s 2(22)(e) - Held that:- On the basis of the available particulars, categorically came to the conclusion that the assessee company is only a intermediary between the two subsidiary companies and no beneficial interest has been accrued to the assessee company by the advances between the subsidiary companies and sub subsidiary companies. Consequently, the ingredients of Section 2(22)(e) of the Income Tax Act is not attracted. - Decided in favour of assessee
Entitlement to every landowner of the family of one Dev Raj for a separate unit - Held that:- High Court has completely departed from the plain language used in Section 4 of the said Act. The High Court has committed serious error of law in holding that if a wife holds land separately in her own right, she is entitled to be treated as an individual person for the purpose of determining the permissible area available to her. We are of the definite opinion that the Full Bench has not rightly interpreted the provisions of the Act.
The submission made by learned counsel appearing for the respondents that the impugned judgment needs no interference on the principle of stare decisis cannot be accepted.
Reopening of assessment - taxability of membership fees received - Held that:- The return for assessment year 2003-04 was accepted u/s 143(1) of the Act in a routine manner and no opinion was formed. Nothing was brought in to the notice that on which ground the notice u/s 148 is bad in law. Assessing Officer had a reason to believe that there was an escaped assessment. The Assessing Officer was of the view that an amount of entrance fees to the extent of 80% was to be taxable in view of the judgement of Hon’ble Bombay High Court. Therefore, we found no ground to interfere with the finding of the learned CIT(A) upholding the reopening u/s. 148 of the Act in his order in question dated 14.10.2011.
CIT(A) merely followed his processed order who reliance upon the judgement of Hon’ble Bombay High Court for the A.Y.1964-65(1979 (1) TMI 5 - BOMBAY High Court). Requirement of splitting up of the entrance fee collected from life members in the ratio 20:80 is not the ratio of the cited judgement. To that extent, the decision of the learned CIT(A) is in order. Considering the above learned DR has not brought anything on record to show how the impugned order of learned CIT(A) decided on the strength of Bombay High Court judgement is not fair. We find the order of learned CIT(A) does not call for any interference. Thus, the ground raised by the revenue is dismissed.
Validity of reopening of assessment - formation of opinion - Held that:- A.O. at the time of issuing notice u/s 148 of the Act is not necessarily to establish the fact that there is an escapement of income. But what is necessary is that there must be some relevant material on which the formation of opinion is arrived at by the assessing officer. In the instant case, the A.O. formed his opinion based on the information received from the investigation wing of the department and which is the valid basis for issuing notice u/s 148 of the Act. It is not necessary for the A.O. to conduct independent enquiry and gather material to form his opinion. Material may come from within the assessment records or from outside the assessment record. But what is important is that there should be some cogent material, which suggests that there is an escapement of income chargeable to tax. Therefore, the A.O. has rightly formed his opinion based on the information received from the investigation wing of the department. The CIT(A) has elaborately discussed on the issue and rejected the assesse arguments. Therefore, we upheld the reopening of the assessment and reject the ground raised by the assessee. - Decided against assessee
Addition towards alleged on money received by the assessee based on third party statement relied upon by the assessing officer - Held that:- A.O. is not correct in coming to the conclusion that the on money is exchanged between the parties based on a loose sheet found in the premises of a third person and also admission by a third person. To sustain the addition, the A.O. should have conducted an independent enquiry about the value of the property and ascertain whether any under valuation is done, if so what is the correct value of the property. Further, the A.O. did not brought on record any evidence to support his contention to say that there is on money exchanged between the parties. In the absence of proper enquiry and sufficient evidences, we find no reason to confirm the addition made by the A.O. Therefore, we reverse the CIT(A) order and direct the Assessing Officer to delete the addition. - Decided in favour of assessee
Disallowance of higher rate of depreciation on windmills - allowability of similar depreciation rate as applicable to windmills, also to the ‘foundation & civil work’ and ‘erection & commissioning work’ executed for these windmills - Held that:- . Since the civil work and erection & commissioning expenses incurred are in relation to installation of windmill, depreciation on the same should be provided at the rate applicable to windmill. We find that the aforesaid assertions made on behalf of the assessee before the Revenue remains uncontroverted.
The expenses incurred on erection & commissioning, civil work, etc. being necessary adjunct to the windmill and is not meant for any other purposes other than for operational functioning of wind turbine and therefore cannot be treated differently. Therefore, impugned capital expenditure towards civil work & commissioning etc. also will qualify for the same rate of depreciation as applicable to wind turbine itself.
The issue is no longer res-integra and is covered by in the case of Poonawala Finvest & Agro (P.) Ltd. vs. ACIT, (2008 (6) TMI 586 - ITAT PUNE ) wherein it has been clearly held that the capital expenditure incidental to the windmill has to be tested on the touchstone of the functional test and the assessee will be entitled to higher rate of depreciation on such incidental expenditure, if it has no other use except for power generation done by the windmill. - Decided in favour of assessee
Pre-deposit - relief sought by way of waiver of pre-deposit - Held that: - It is clear from the documents and balance-sheet available on record that the financial condition of the petitioner is precarious and the petitioner, as indicated herein above, does not have the financial capacity to deposit 10% of ₹ 15,01,747/-, i.e. the penalty amount. That being so and considering the financial condition of the petitioner, as indicated herein above, interest of justice requires that an opportunity of hearing of the appeal on merit should be granted to the petitioner and to ventilate the grievance before the appellate authority and for non-deposit of pre-deposit of amount the appeal should not be dismissed as it would frustrate the right of the petitioner to prosecute the appeal before the appellate authority and may cause great injustice to the petitioner - That being so, we allow this petition and grant exemption in the matter of deposit of 10% of the penalty amount. The appellate authority is directed to proceed and decide the appeal in accordance to law without insisting upon deposit of 10% of the penalty amount. Till the appeal is not decided, no coercive steps for recovery of penalty amount shall be initiated by the authority. With the aforesaid, the writ petition stands disposed of.
Jurisdiction of appellate authority - Held that: - the assessment order has been passed by the Assessing Officer after giving opportunity to the petitioner and putting him to notice in that behalf. The petitioner has also resorted to remedy of appeal. The question as to whether the procedure adopted by the Assessing Officer is permissible or otherwise can certainly be considered in the said appeal proceedings. The appellate Authority has jurisdiction to decide that contention as well. Hence, we decline to entertain this writ petition.
Counsel for the petitioner, however, submits that the petitioner may not be compelled to pay 10% of the penalty amount. Presumably, that is the purpose for filing of this writ petition. Petitioner is free to pursue even that prayer before the appellate Authority,which may consider the same in accordance with law and proceed with the appeal accordingly.
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