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Showing 421 to 440 of 1407 Records
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2015 (2) TMI 992
Deduction u/s 80HHC - AO restricted the claim after adjusting the trading loss to its manufacturing profits and adding of 90% export incentives - CIT issued a notice u/s 263 to held that the respondent is not entitled to claim deduction under Section 80HHC - whether Commissioner of Income Tax could not have exercised jurisdiction under Section 263 to revise an order of assessment dated 30 January 2004 when the same has been a subject matter of appeal before the Commissioner of Income Tax (Appeals) - Held that:- When the assessment order was passed, absent the amendment of 2005, it was not open to the Assessing Officer to set off losses against export incentives. In terms of the first proviso, only profits could be increased by export incentives and therefore the order of assessment dated 30 January 2004 was erroneous and prejudicial to the interest by the Revenue and powers under Section 263 of the Act could legitimately be exercised by the CIT.
For the purposes of this appeal even if assume (without having examined the same) that the Revenue is correct and set aside the impugned order and restore the matter to Assessing Officer, yet the Assessing Officer will while recomputing the benefit available under Section 80HHC of the Act will have to extend the benefit of the retrospective amendment resulting to the same result as found in the Assessment Order dated 30 January 2004. It is relevant to note that even the Revenue does not dispute the applicability of retrospective amendment. In the above view, we do not deem it necessary to answer the substantial question of law as formulated particularly in view of the retrospective amendment making the challenge academic. - Decided against revenue.
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2015 (2) TMI 991
Disallowance u/s 14A - assessee/appellant had declared tax free dividend income to the tune of ₹ 2,71,83,864/- - Held that:- The statutory disallowance mandated by Section 14A - the procedure to which - has been subsequently spelt out in Rule 8D, has been interpreted in Maxopp [2011 (11) TMI 267 - Delhi High Court] and Taikisha (2014 (12) TMI 482 - DELHI HIGH COURT) in a particular manner, i.e., that the AO would first needs to be satisfied as to the assessees explanation, or its absence [see Section 14A (3)] before coming to the conclusion that some expenditure was in fact incurred or deemed to have been incurred.
Though the grounds of appeal in the CIT (A) proceedings do not expressly spell out this aspect, it cannot be denied that this matter was agitated before the CIT (A) for hearing as well as before the ITAT. At the same time, this Court notices that in both Maxopp and Taikisha, and the ultimate order made by both the Division Benches was to remit the matter for fresh consideration by the AO. Perhaps this was necessitated by the fact that the interpretation of Section 14A - guided by Rule 8D was in the light of the decision in Godrej and Boyce Mfg. Co. Ltd. vs. CIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] and the fact that the Rule 8D was brought in later, i.e., w.e.f. AY 2008-09 - Thus matter is remitted to the Assessing Officer for consideration whether, in fact, there was any necessity for invoking the Section 14A (3) read with relevant part of Rule 8D - Decided in favour of assessee for statistical purposes.
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2015 (2) TMI 990
Deemed dividend - assessee had received unsecured loan of ₹ 1,25,00,000 from M/s Kohli Housing & Development Pvt. Ltd. and the fact that both the assessee company and M/s Kohli Housing & Development Pvt. Ltd. have Sh. Sudershan Kohli and Smt. Kum Kum Kohli as common shareholders having 50% share each in both these companies - CIT(A) deleted the addition - Held that:- Evidently there is no dispute either in regard to the dates on which the loans were advanced and nor on the ownership pattern of the recipient i.e. the assessee company. We have no hesitation in holding that in the facts as they stand which have not been upset by the Revenue the inference drawn by the AO that the affairs of the assessee company were so arranged only to deprive the collection of tax having not been substantiated the finding of the CIT(A) on facts deserving to be upheld. Since the primary condition for attracting the provisions of section 2(22)(e) admittedly stand unfulfilled, the occasion to bring the assessee within the rigorous of the said section cannot be upheld. - Decided in favour of assessee.
Unexplained investment - Addition made u/s 69 - CIT(A) deleted the part addition - Held that:- Revenue has not been able to refer to any argument or evidence available on record to show that the Smt. Dayawati (the owner of the land) and her husband, Sh. Om Prakash (who handled the sale of his wife land) were reliable witnesses. Infact the manner of recording statement reeks of a position where the couple appear to have given statements to explain the expenses incurred on the marriage of their daughter in February 2008. Nothing is available on record qua the education and financial status of the Smt. Dayawati except the fact that she is a PAN holder and blindly accepted her husband's word and nothing is on record to establish the credibility of Sh. Om Prakash who does not identify himself by a PAN and merely as the husband of Smt. Dayawati, his education, his legitimate source of livelihood, financial background etc. are all left unaddressed as would be evident from answers to Question No-1 put by the AO to Sh. Om Prakash on 26.12.2008 as opposed to Question No.-1 put by the AO to his wife on 14.12.2008. we hold that the AO erred in making the addition of ₹ 10 lakh and the CIT(A) erred in conforming the same based on the statement of a tutored witness who as per her own statement had no personal knowledge of the events and relied blindly in good faith on hearsay information given to her by her husband. Since in the facts of the present case nothing has been placed by the department apart from the statement of a tutored witness the action cannot be upheld. Accordingly the remaining additions sustained by the CIT(A) are also ordered to be deleted. - Decided in favour of assessee.
Considering the other sale instances wherein the AO applied a flat rate of ₹ 6,60,000/- per acre and the CIT(A) proceeded to sustain the addition on the basis of value adopted for stamp duty purposes found recorded in the Registered Sale Deeds itself, we find that since the whole action had started on the basis of the fact that Smt. Dayawati has alleged that the figures given in the sale deed were not reliable and the same on facts has not been upheld by us in the circumstances the very edifice on the basis of which the additions have been made having fallen the remaining additions fall. Thus where the very basis justifying interference by the Revenue stands demolished the occasion to interpolate the amounts in the absence of any other cogent evidence does not arise. Since the sale price remains undisturbed the addition on brokerage etc. also does not survive which was made by the AO u/s 69C and partly sustained by the CIT(A). - Decided in favour of assessee.
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2015 (2) TMI 989
Disallowance of deduction under section 80-IC - assessee was not carrying on any manufacturing activity as held by AO - complete procedure was not being carried out in Himachal Pradesh, the assessee was not entitled to the claim of deduction under section 80-IC of the Act - CIT(A) deleted part addition - Held that:- In the totality of the facts and circumstances, we are in conformity with the findings of the Commissioner of Income-tax (Appeals) that the old machinery held by the assessee has been transferred from Ludhiana to Parwanoo which in-turn was used for the manufacturing process undertaken by the assessee and the total value of the said plant and machinery transferred was of ₹ 9,500 only. In the first year of start of business, the assessee had established plant and machinery totalling ₹ 3,94,500 and the value of ₹ 9,500 being less than 20 per cent. cost of machinery, we find no merit in the plea of the Assessing Officer in this regard and upholding the observations of the Commissioner of Income-tax (Appeals), we hold that the assessee was entitled to claim of deduction under section 80-IC of the Act.
The manufacturing activity undertaken by the assessee is excisable and complete details in this regard were maintained by the assessee and no discrepancy has been found by the excise team in the sales declared by the assessee. The assessee had further furnished the sales tax assessment orders for the assessment year 2003-04 and 2004-05. The manufacturing activity carried out by the assessee has been accepted. Accordingly, we find no merit in the observation of the Assessing Officer in this regard that the assessee was not carrying on any manufacturing activity.
During the appellate proceedings, evidence was filed by the assessee that only 5 per cent. of the total manufactured goods were subjected to printing and bleaching process which admittedly was being carried out at Ludhiana. The learned Departmental representative for the Revenue failed to controvert the said findings of the Commissioner of Income-tax and in the absence of the same, we find no merit in the order of the Assessing Officer in holding that the assessee was not entitled to the claim of deduction under section 80-IC of the Act. As during the relevant period, the assessee was engaged in carrying on of manufacturing activity and merely because the unit was closed on a subsequent date, the claim of deduction under section 80-IC of the Act cannot be denied.
In view of the discrepancies in mentioning the numbers of various vehicles and also co-relating the information received from the Commissioner Excise and Taxation, Himachal Pradesh, with the facts of the case, we, accordingly uphold the order of the Commissioner of Income-tax (Appeals) and in view of the fact that the assessee has failed to reconcile the passage of vehicle through the barrier carrying the raw material, certain disallowance of deduction under section 80-IC is merited in the case. The total cost of raw material claimed to be transported through such vehicles was ₹ 45,33,495 and the same corresponds to sales of ₹ 67,66,410. The assessee had declared gross profit rate of 37 per cent. and applying the same to the sales, the profit works out to ₹ 25,03,572.Therefore, we hold that the profits of the eligible business are to be reworked and profits to the extent of ₹ 25,03,572 are not liable for claim of deduction under section 80-IC of the Act. However, deduction under section 80-IC(2)(a)(ii) of the Act is to be allowed to the assessee on the balance sales of ₹ 97,34,564. - Decided against revenue.
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2015 (2) TMI 988
Expenditure on purchase of software disallowed - Held that:- Respectfully following the decisions of the Hon'ble High Court of Karnataka in the case of IBM India Ltd. (2013 (10) TMI 1225 - KARNATAKA HIGH COURT) and the co-ordinate bench of this Tribunal in the assessee's own case for Assessment Year 2001-02 we hold that the expenditure incurred by the assessee for purchase of application software is revenue in nature. - Decided in favour of assessee.
Provision for expenses related to HRD, Retail, Consumer product assets and Retail Deposit Operations - AO disallowed claim as these are provisions and had not crystallized or arisen during the course of the year - Held that:- It is settled principle that if expenditure is crystallized, then even if the payment is due at a later date, it is allowable expenditure. It is seen from the submissions of the assessee in this regard that, though the assessee has categorized these expenses as provisions, the same represents expenditure actually crystallized and the amounts are eligible for being claimed as deduction in view of the fact that the assessee is following the Mercantile System of Accounting.These expenses appear to be more in the nature of write off. Thus we are satisfied that these amounts are allowable expenditure while computing the assessee's total income - Decided in favour of assessee.
Non-applicability of Section 115JB - whether provisions of MAT are not applicable to the assessee since it is a banking company - Held that:- As decided in assessee's own case [2015 (2) TMI 892 - ITAT BANGALORE] for Assessment Year 2002- 03, provisions of section 115JB of the Act are not applicable to the assessee which is a banking company. - Decided in favour of assessee.
Disallowance of provision for expenses u/s. 115JB - Held that:- Once the provisions of section 115JB of the Act are not applicable to the assessee, which is a banking company, consequently, the disallowance of provisions for expenses made by the authorities below while computing the ‘book profits’ under Section 115JB of the Act also fails.- Decided in favour of assessee.
Broken Period Interest - CIT(A) held that the broken period interest accrued but not received should not be brought to tax until the receipt thereof - Held that:- Respectfully following a decision of the Hon'ble Karnataka High Court in the case of Karnataka Bank Ltd. (2014 (11) TMI 221 - KARNATAKA HIGH COURT), we hold that the broken period interest does not constitute income in the year under consideration as it has not become due and payable / receivable as per the provisions of the Act.- Decided in favour of assessee.
Write off of Non-Convertible Debentures - CIT (A) upheld the claim of the assessee that the amount represents write off and allowed the same as deduction - Held that:- Co-ordinate bench of this Tribunal, in the assessee's own case for Assessment Year 2002-03 has held that the loss in question is incidental to the business of the assessee and had to be allowed as a diminution in the value of stock-in-trade. We also find that the learned CIT (Appeals) in the impugned order has only mentioned the alternate submissions of the assessee, that since the said debentures were treated as investments in the ‘available for sale’ category, any diminution in the value of such investment is eligible for deduction. The learned CIT (Appeals) has not rendered any finding that the alternate submissions of the assessee is acceptable or otherwise. - Decided in favour of assessee.
Disallowance of operational losses - CIT(A) held that these amounts are eligible for deduction, holding them to be business losses arising out of technical defaults incurred by the assessee in day-to-day revenue earning activity. - Held that:- these amounts represent operational losses on account of debit balance lying in the accounts where customers accounts were overdrawn and lying in such accounts for a period of more than one year. The discrepancies arose due to delayed posting of offline ATM transactions, reversals for suspect ATM transactions which were subsequently debited back from customers accounts, offline ATM transactions not debited to customers accounts done subsequently and credits given to wrong ATM claims which were debited back, etc. Evidently, these are operational mistakes as admitted by the Assessing Officer. After having held these amounts as having arisen out of operational mistakes, the Assessing Officer was wrong in holding these to be capital in nature. As these amounts have been written off as irrecoverable, we concur with the view of the learned CIT (Appeals) that these are eligible for deduction. - Decided in favour of assessee.
Mark-to-Market Losses - Held that:- In the case on hand a contract has been concluded and a liability has crystallized. In this factual matrix, from the wordings of the Instruction, it follows that the loss arising out of the forward contract is not notional. In such a case, the CBDT Instruction requires the Assessing Officer to examine whether such a loss is on account of a speculative transaction as contemplated in section 43(5) of the Act. As discussed earlier, in the case on hand, there has been an existing contract with a binding obligation accrued against the assessee when it entered into derivative contracts. Hence, transaction in question cannot be called as a speculative transaction. Thus we hold that the assessee's claim in respect of MTM losses is allowable as revenue expenditure. - Decided in favour of assessee.
Diminution in value of investment under AFS / HFT Categories - Held that:- We concur with the decision of the learned CIT (Appeals) in allowing the assessee's claim of diminution in the value of investments under the AFS/HFT categories as relying on assessee's own case for the A.Y. 2007-08 - Decided in favour of assessee.
Insurance Premia for Housing Loan - Held that:- he expenditure incurred on insurance premium on housing loan are revenue in nature and is an allowable deduction. It is not the case of the Assessing Officer that these expenses are not for the purposes of the assessee's business or that they are capital in nature. These expenses are related to the housing products which are very much a part of the assessee's business activities and the payment of insurance premium on the housing products is also not capital in nature. Once the expenditure is accepted to be revenue in nature and incurred for the purposes of business, then it is allowable in the year in which it is incurred. There is no concept of deferred revenue expenditure in the scheme of the Act and unless otherwise expressly provided, the revenue expenditure is to be allowed in full, in the year in which it is incurred. - Decided in favour of assessee.
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2015 (2) TMI 987
Penalty u/s 271D - violation of provisions of section 269SS - CIT(A) deleted penalty levy - Held that:- The CIT(A) has clearly recorded the finding that there was the business transaction between the assessee firm and M/s Rups Craft Inc. and all the transactions with the said party were business transactions only and there was no transaction of loan or deposit. It was also observed that in fact there was no cash payment. On the other hand, the payment of ₹ 15,45,000/- was made by account payee cheque No.57308 to M/s Rups Craft Inc. by Shri Inderpal Singh Wadhawan, partner of the firm and consequently, the entry was passed in the assessee’s books of account. Therefore, there was no cash transaction. Both these findings recorded by the CIT(A) remained uncontroverted before us. We, therefore, find no justification to interfere with the order of learned CIT(A) in this regard. The same is sustained and the appeal of the Revenue is dismissed. - Decided in favour of assessee.
Penalty u/s 271E - violation of provisions of section 269T - CIT(A) deleted penalty as partner and partnership firm is one and the same person in the eyes of law and provision of section 269T are not applicable on the transaction entered by the partner with the firm - Held that:- All the payments were made by M/s Vardaan Fashion, a partnership firm in which assessee is a partner. All the payments were made by account payee cheque and in the assessee’s books of account, there was only a journal entry (book entry), thus, the provisions of Section 269SS/269T cannot be said to have been violated. The factual finding recorded by the CIT(A) that the payment was for share application money has not been controverted by the Revenue before us. Therefore, the same is accepted and we have no hesitation in holding that payment for allotment of shares as share application money cannot be said to be repayment of loan or advance so as to violate provisions of Section 269T. - Decided in favour of assessee.
Penalty u/s 271D - violation of provisions of section 269SS - Held that:- The acceptance of the cash by the husband from his wife cannot be said to be taking of the loan or advance in strict sense of Section 269SS. We, therefore, find no infirmity in the order of learned CIT(A) wherein he cancelled the penalty levied under Section 271D for the acceptance of cash by the assessee from his wife. We, therefore, uphold the order of learned CIT(A) and dismiss the appeal filed by the Revenue. - Decided in favour of assessee.
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2015 (2) TMI 986
Deduction of TAS for purchase of programmes - Demands u/s 201/201(1A) - assessee was either deducting TAS at a lower rate or was not deducting any TAS at all on various payments being made by the assessee - carriage fee /placement fee paid by the assessee to various cable operators/MSO/DTH service providers- whether the service provided was work within the meaning of section 1940 and not technical service u/s 194J? - Held that:- CIT(A) has applied the provisions of the Act, before coming to a conclusion, that u/s 194C "work includes production of programmes". We find that similar issue was contested before the Hon’ble Delhi High Court in the case of CIT vs Prasar Bharti, reported in (2006 (11) TMI 159 - DELHI High Court ) and followed by ACIT(TDS) vs Sahara One Media & Entertainment Ltd. [2014 (4) TMI 113 - ITAT MUMBAI ] wherein it was held that payment to assigned producer for production of programme specifically falls within the ambit of clause (b) to Explanation III to section 194C of the Act, whereas, the provisions of section 194J of the Act are general in nature and therefore, provisions of section 194C would prevail over section 194J. - Decided against revenue.
Deduction of TAS on Event Management Charges - On the payment made to the event manager, the assessee deducted TAS u/s 194C, but according to the AO, the assessee should have deducted TAS u/s 194J - Held that:- Department is heavily relying on the Notification issued by the Board No. 88/2008/F. No. 275/43/2008 dated 21.08.2008, according to which it prescribes that TDS on fee for event management is to be u/s 194J. But this Notification in our opinion shall be prospective and shall not cover the payments made prior to the issue of Notification, as it does not bear any retrospective character. We, therefore, sustain the order of the CIT(A) that the 'event management fees' paid by the appellant to its event managers cannot be held to be in the nature of ….for technical services' in the current year. Since the Appellant has already deducted TDS under section 194C of the Act, the AO is directed not to consider the Appellant to be an assessee in default under Section 201(1) of the Act as there is no short deduction by the Appellant. - Decided in favour of assessee.
TDS on Equipment Hire Charges - Held that:- CIT(A) has applied the provisions of the Act and have delved on the same. We also find that the AO termed the payment made for hire charges as FTS, which the CIT(A) has categorically demolished. We find that similar issue was dealt with by the coordinate Bench at Mumbai in the case of ACIT (TDS) vs Sahara One Media & Entertainment Ltd., [2014 (4) TMI 113 - ITAT MUMBAI] wherein it was held that payment made by assessee under a contract, which is a part of production of programme, TDS is required to be deducted u/s 194C. No mistake in the order of the CIT(A), which we sustain on the issue, thereby rejecting the ground as raised by the department.- Decided in favour of assessee.
TDS on reimbursement of commission expenses - CIT(A) deleted the tax charged on the assessee. - Held that:- In the instant case, the assessee had only made good the payments made by Zee Turner Ltd., which it had paid on behalf of the assessee. Hence there was no profit element involved in those payments, being "reimbursements" made by the assessee to Zee Turner Limited. In the proceedings before the revenue authorities, the assessee was able to demonstrate the different characters of payments made by it. The payments, where Zee Turner Limited paid its taxes, the assessee was under no obligation and/or became defaulter u/s 201(1). We find ourselves benefitted by the decision of Hon’ble Supreme Court in the case of Hindustan Coca Cola Beverages [2007 (8) TMI 12 - SUPREME COURT OF INDIA ], wherein it was held that where the deductee/recipient has already paid taxes on amount received from deductor, the department cannot recover the tax on the same amount, as that would result in double taxation. - Decided in favour of assessee.
short deduction of TAS - Held that:- As the assessee submitted the details and proofs of payment of tax and interest no short deduction proved. CIT(A)correctly deleted the demand as raised by the AO. - Decided in favour of assessee.
Payment of commission to non-executive/independent directors - AO came to the conclusion that these directors were actually employees of the company and were paid salary, which was shown as commission to avoid withholding tax - Held that:- AO went on wrong track and did not consider the provisions/expressions used in the relevant section, i.e. 194J. Since the CIT(A) has applied the right law, we are inclined to sustain the order of the CIT(A)held that these directors did not have any employer - employee relationship and nor did they receive any pecuniary benefits. Payment of commission to them, itself, could not be categorised as salary, consequentially reject the ground as raised by the department. - Decided in favour of assessee.
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2015 (2) TMI 985
Deduction u/s.37(1) - CIT(A) allowed 50% of the claim - Held that:- From the written submission filed before the CIT(A), we find the assessee has stated that the business of the assessee is that of liaisoning, maintaining good relationship with politicians, Govt. authorities and also clients. The assessee has to make payments to mediators for further liaisoning with various authorities and politicians to obtain various permissions and sanctions from Govt. departments. Therefore, he has made substantial payments towards clearance expenses, service charges, commission and brokerage expenses to the mediators. Therefore, the assessee is not expected to know their addresses and such persons are not likely to communicate their correct addresses. The assessee has paid such payments to mediators. We find the Ld. CIT(A) completely ignored the above submissions and allowed 50% of the expenses on the ground that payments have been made by banking channels and disallowance of such expenses will increase the profit percentage from liaisoning work. When the assessee has failed to discharge the onus cast on him by bringing sufficient evidence to prove that such expenditure is incurred wholly and exclusively for business purpose and the very nature of such expenses as stated by the assessee before the Ld. CIT(A) is against public policy, therefore, such expenses in our opinion cannot be allowed. Further, the Assessing Officer had also given a finding that the money has come back to the assessee indirectly. Under these circumstances, we are unable to uphold the order of the CIT(A) and the same is set-aside and the order of the Assessing Officer is restored. - Decided in favour of revenue.
Amount in the form of 'advance' - whether not 'income' of the assessee? - Held that:- From the letter addressed by Nitro Tiles Ltd. to the assessee on 23-01-2007, we find Nitco Tiles Ltd. has given assessee an amount of ₹ 50,00,000/- as advance payment against the purchase of the property at Khandivali. Similarly we find Nitco Tiles Ltd., vide letter dated 01-04-2009 has confirmed the debit balance of the assessee in its books at ₹ 52,97,171/- as on 31-03-2009. All these details were very much available with the AO but he has not considered all these things. Since Nitco Tiles Ltd. has paid an amount of ₹ 50 lakhs as advance to the assessee for proposed purchase of land belonging to one Shri S.S. Patil and since the deal could not be materialised due to certain clearances, therefore, the assessee in our opinion has rightly shown the amount as advance in its books and the Ld.CIT(A) was justified in treating the same as advance and not revenue in nature. - Decided against revenue.
Unaccounted expenditure - AO disallowed an amount of ₹ 8,65,924/- on adhoc basis being 50% of such expenses - .CIT(A) restricted such disallowance to ₹ 11,550/- and deleted the balance amount of ₹ 8,54,379/- - Held that:- No infirmity in the order of the CIT(A). Admittedly, the books of accounts of the assessee are audited and no adverse comments have been reported by the auditors. Since the assessee is engaged in the business of liaisoning and consultancy, expenses such as hotel expenses, travelling expenses, etc. are routine expenses and are required to be incurred. Similarly, the assessee has incurred an amount of ₹ 13,08,300/- as salary which in our opinion is commensurate with the business of the assessee. The assessee has filed sample copies of salary vouchers which were available before the AO. However, he is silent on the same. Similarly, we find from the paper book the details of various expenses filed before the AO. Under these circumstances, we do not find any infirmity in the order of the CIT(A) restricting the disallowance to ₹ 11,550/- being personal in nature as against ₹ 8,65,924/- made by the AO. - Decided against revenue.
Unsecured loan - CIT(A) deleted the addition - Held that:- AO made addition of ₹ 25 lakhs being unsecured loan obtained from S.D. Corporation on the ground that assessee did not file any confirmation letter for such loan. We find the assessee filed such confirmation letter before Ld.CIT(A) and requested him for admission of the same as additional evidence under rule 46A of the I.T. Rules. Although such confirmation letter was forwarded to the AO by the Ld.CIT(A) for his comments in the form of a remand report, we find the AO did not bother to comply with the direction of the Ld.CIT(A). Further, there is no dispute to the fact that the amount has been received by cheque. We find the assessee during the impugned assessment year has received consultancy charges of ₹ 40,15,332/- from S.D. Corporation Pvt. Ltd., and the same has been credited to the P&L account of the assessee. Further, S.D. Corporation Pvt. Ltd. has deducted TDS from such payment. Therefore, when the commission received from S.D. Corporation is treated as genuine by the AO without any further query, therefore, its identity is very much proved. Although the confirmation letter filed by S.D. Corporation Pvt. Ltd. was forwarded to the AO by the Ld.CIT(A), we find the AO remained silent. This otherwise indicates that the AO has no grievance - Decided against revenue.
Unexplained cash credit - CIT(A) deleted the addition - Held that:-Although the assessee has given general statement for explaining the source of such deposits, however, we find the assessee has not given any confirmation from the said parties nor proved their source to extend such huge payments. Under these circumstances, we are unable to accept the order of the CIT(A) on this issue deleting the addition made by the AO. However, considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue back to the file of the AO with a direction to give one more opportunity to the assessee to substantiate with evidence to his satisfaction regarding the source of such deposits and capacity of the payers. We hold and direct accordingly. - Decided in favour of revenue for statistical purposes.
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2015 (2) TMI 984
Addition on account of rental income - addition of ₹ 4,00,285 on account of difference in value of immovable property located at Raj Villa, Kanti Factory Road, Patna and valued at ₹ 5,95,100 by the learned Departmental Valuation Officer against the value of ₹ 1,94,815 as declared by the assessee - Held that:- No incriminating material has been seized with respect to the undisclosed investment in the building, during the course of search and seizure operations. Probably no occasion with the Revenue has arisen to record reasons for referring the matter to the Departmental Valuation Officer. Accordingly, in the facts and circumstances of the case, the addition so made on the basis of Departmental Valuation Officer' report by the Assessing Officer and confirmed by the learned Commissioner of Income-tax (Appeals) is against the law and facts of the present case. Accordingly, the addition so confirmed by the learned Commissioner of Income-tax (Appeals) is bad in law and the Assessing Officer is directed to delete the addition so made. On merit also, the valuation report issued by the Departmental Valuation Officer is not reliable as there are several limitations of plinth area rate method applied. Also the valuation report submitted by the assessee has not been refuted by the Departmental Valuation Officer in spite of many opportunities given to the Departmental Valuation Officer during the course of proceedings under section 263 of the Act. It is also a fact on record that the assessee had submitted year-wise cash flow statement considering the receipts and expenses of the assessee before the Assessing Officer, which are of the accurate amount and the Assessing Officer has not cast upon any doubt in the entries in the cash flow statement and has not pointed out any defect in the same, which in fact, has been considered by the Assessing Officer for making addition to the returned income of the assessee. Thus no addition on this account can be made and so directed to be deleted - Decided in favour of assessee.
Non deletion of addition of ₹ 8,18,998 on account of rental income from house property, located at Raj Villa, Kanti Factory Road, Patna by CIT(A) - Held that:- The learned Commissioner of Income-tax (Appeals) has taken note of annual rent of ₹ 2,76,360 derived from the Punjab National Bank for the ground floor of block A and has taken the same as basis for estimating the floor-wise rent for three floors of block A at a total of ₹ 6.62 lakhs, which is self-contradictory. Though he himself has accepted that except the ground floor of block A, the apartment was still under construction and the property was incapable of being let out prior to its completion. Therefore, there was no basis for adopting estimation of ₹ 6.62 lakhs for the three floors, which is highly excessive. It is also on record that ground floor of block A has been out to Punjab National Bank and is used for commercial purposes whereas other floors are used for residential purposes. The institutions like banks, etc., using properties for commercial purposes, normally paying higher rent than others used for residential purposes. Therefore, the learned Commissioner of Income-tax (Appeals) is not justified in estimating rent on the basis of rent received from Punjab National Bank for all the floors of block A. Also the estimation of ₹ 3,000 per flat in block B is without any basis. The assessee has submitted confirmations from the concerned tenants with regard to the rent paid by them, which is on record. Accordingly, the estimations made by the Assessing Officer and confirmed by the learned Commissioner of Income-tax (Appeals) are without any basis and cannot be approved. here is no evidence with the Revenue to show that the assessee had collected more rent than what has been declared in the returns of income filed regularly with the Income-tax Department. Accordingly, no addition is called for on such account. - Decided in favour of assessee.
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2015 (2) TMI 983
Disallowance u/s 40(a)(i) - non deduction of TDS on payments made to non-resident persons outside India for representation charges - whether the consideration paid by assessee to overseas nonresident agents can be categorized as FTS u/s 9(i)(vii) - Held that:- From the nature of services to be performed by the overseas agents, we are of the view that services rendered by the agents in this case are purely in the nature of advancement of business of the assessee company and cannot be categorized as managerial / technical / consultancy services. Accordingly, the consideration paid by the assessee cannot be classified as fee for technical services (FTS).
Representation charges and commission paid by assessee were not liable to be taxed in India and consequently no tax was required to be deducted and therefore disallowance u/s 40(a)(i) was not warranted. - Decided in favour of assessee.
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2015 (2) TMI 982
Disallowance u/s 40(a)(ia) - Held that:- Following the decision of CIT v/s VIRGIN CREATIONS [ 2011 (11) TMI 348 - CALCUTTA HIGH COURT ] amendment to the provisions of section 40(a)(ia) of the Act, by the Finance Act, 2010 is retrospective from April 1, 2005. Consequently, any payment of tax deducted at source during the previous years relevant to and from the assessment year 2005-06 can be made to the Government on or before the due date for filing return of income under section 139(1) of the Act. If payments are made as aforesaid, then no deduction under section 40(a)(ia) of the Act can be made. Admittedly in the present case, the assessee had deposited the tax deducted at source on or before the due date for filing return of income under section 139(1) of the Act and therefore the impugned disallowance deserves to be deleted - Decided in favour of assessee.
Deduction on account of bad debts written off - CIT(A) allowed the claim - Held that:- In the case of Sabra Impex Ltd. (2011 (3) TMI 1553 - ITAT MUMBAI) a consistent view has been taken that non-realisation of export proceeds from a foreign party can be considered as a bad debt and written off and claimed as a deduction. It was also held that the fact that permission of the Reserve Bank of India has not been obtained for such write off will not be a bar to claim deduction on account of such bad debts written off.As far as the issue of applicability of the Explanation to section 37(1) of the Act is concerned, we are of the view that the aforesaid Explanation will apply only when an expenditure is incurred for any purpose which is an offence or which is prohibited by law. In our view, the sale proceeds to be received from a foreign buyer which already shown as income and which is now written off as irrecoverable, cannot be said to be an expenditure incurred by the assessee for any purpose which is an offence or which is prohibited by law. - Decided against revenue.
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2015 (2) TMI 981
Transfer pricing adjustment - international transactions in the `Back office support services segment’ - selection of comparables - Held that:- Accel Transmatic Ltd. (Seg.) - it can be seen from the Annual report of this company has three divisions, namely, Systems and Services Division, Technologies Division and Animation Division. A bare perusal of the nature of activities done by this company under this segment divulges that it is into software development services and also the sale of software products. On the other hand, the assessee in question is involved into rendering software non-development services, which are far away different from software development services. We, therefore, order for the exclusion of this company from the list of comparables.
Avani Cimcon Technologies Ltd. - from the Annual report of this company, a copy of which is available in the paper book, it can be seen that this company is engaged in providing software development services. In view of the fact that the assessee is not providing any software development services, this company cannot be considered as comparable. We, therefore, order to eliminate this company from the list of comparables.
Celestial Labs Ltd. - it is manifest from the Annual report of this company that the same cannot be considered as comparable on entity level when it has dealt not only with software products, but has also engaged itself into software development and also rendering services. In comparison with that, the assessee company is simply providing software nondevelopment services to its AEs.
Flextronics Software Systems Ltd. (Seg.) - it is a software products company and is also providing software development services, even the segmental results of software development services cannot be equated with the activities undertaken by the assessee for its AEs. We, therefore, order to exclude this company from the list of comparables.
Helios & Matheson Information Technology Ltd. - as find from the Annual accounts of this company it is engaged into similar business activity as is done by the assessee. After going through some pages of the Annual report, giving details about the nature of business activity done by this company, the ld. AR also candidly accepted that functional profile of this company is comparable with the assessee company. We, therefore, uphold the impugned order on the inclusion of this company in the list of comparables.
Infosys Technologies Ltd. - It is an undisputed fact that the assessee rendered services to its AEs as a captive unit without retaining any rights in intellectual property in the work done by it. In contrast to that, Infosys Ltd. is a giant company in terms of risk profile, scale, nature of services, revenue ownership of branded/proprietary products, on site and offshore services, etc. As decided in CIT vs. Agnity India Technologies Pvt. Ltd. [2013 (7) TMI 696 - DELHI HIGH COURT] this company cannot be considered a comparable. Infosys Technologies Ltd., has been held to be not comparable with a company engaged in the business of development of software for its parent company - we direct not to consider this company as a comparable.
KALS Information Systems Ltd. (Seg.) - The company consisting of STPI unit engaged software products and in development of software is also undertaking training activity of software professionals on online projects. Not only the revenues of the segment considered by the TPO also include the revenue from software products, but also from training imparted on commercial basis. When we consider the assessee’s functional profile, the only irresistible conclusion which can be drawn is that it is not a comparable company. Accordingly, this company is ordered to be expunged from the set of comparables.
Lucid Software Ltd. - Considering the assessee’s balance sheet, it turns out that the assessee has also shown a particular amount under the head ‘Software’ in its Schedule of fixed assets, and, thereafter, it also claimed deduction on account of amortization during the year, leaving the balance unamortized amount under the head ‘Software.’ It shows that the assessee is also using its software for rendering the services in the similar manner as is done by Lucid Software Ltd. Apart from that, the ld. AR could not point out any functional difference with Lucid Software Ltd. We, therefore, approve the inclusion of this company in the list of comparables.
Megasoft Ltd. (Seg.) - It is patent that the mergers/demergers largely influence the profitability of a company during the year of happening of such event, which makes it incomparable. As there have been acquisitions by Megasoft Ltd., during the year in question and the financial results of the erstwhile company stand included in the overall profitability of this company, respectfully following the precedents, we hold that this company cannot be considered as a comparable.
Persistent Systems - The acquisition took place in this company during the relevant to the assessment year under consideration. Following the reasons given above while discussing the case of Megasoft Ltd., we order for the exclusion of this company from the list of comparables.
Sasken Communication Technologies Ltd.- we find that the financial results of this company stand distorted due to certain acquisitions made by it during the relevant year. It also transpires from this Annual report that the companies getting merged with the assessee company also provided software services focused on telecom operating systems. Thus, it is abundantly patent that the segmental results taken by the TPO of this company have been influenced by the mergers and acquisitions taken place during the year, thereby making such financial results as incomparable. Following the reason given above, we order for the exclusion of this company from the list of comparables.
Tata Elxsi Ltd. (Seg.) - Since the assessee is engaged in providing software non-development services to its AEs, this segment of Tata Elxsi Ltd., being that of software development services’ cannot be considered as comparable. It is, therefore, directed to be eliminated from the list of comparables.
Wipro Ltd. (Seg.) - As the TPO has himself noticed that this company is engaged in providing software development services as against the assessee’s provision of software non-development services, we hold that this company cannot be considered as comparable.
Non approving the use of multiple year data of comparables - Held that:- Nothing has been placed on record by the ld. AR to demonstrate that the case falls under proviso to rule 10B(4), which provides that the data relating to a period not being more than two years prior to such financial year may also be considered if such data reveals facts which could have an influence on the determination of transfer prices in relation to the transactions being compared. In view of a plethora of decisions including the Special Bench decision in the case of Aztech Software Technologies Ltd. (2007 (7) TMI 50 - ITAT BANGALORE), we approve the view taken by the authorities below in considering only the current year’s data. - Decided against assessee.
Seeking information u/s 133(6) by the TPO from the companies considered as comparable - Held that:- No embargo on the powers of the TPO in seeking the relevant information from the companies. Unless germane information is obtained, we fail to see as to how the TPO can be sure about the comparability or otherwise of a particular company with the assessee. However, the rider is that such information obtained from the companies must be confronted to the assessee before using against it. As the needful has been done by the TPO, we see no reason to disturb the view taken by the TPO in collecting information u/s 133(6) of the Act.- Decided against assessee.
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2015 (2) TMI 980
TDS on freight charges paid to agent of foreign shipping companies - CIT(A) deleted disallowance u/s. 40(a)(ia) - whether the provisions of section 172 are not overriding to provisions of section 194, and therefore, assessee was liable to deduct TDS? - Held that:- As relying on CIT vs. M/s. Orient Goa Pvt. Ltd. [2009 (10) TMI 575 - Bombay High Court]wherein held Section 172 comes under sub-title "H-Profits of non-residents from occasional shipping business". Title of Section 172 is "Shipping business of non-residents." For bringing a case under Chapter XV, H of the Act 1961, one has to establish a case of profits of non-residents from occasional shipping business. "Nonresident" is defined under section 2(30), as a person who is not a "resident" and for the purpose of Sections 92, 93 and 168, includes a person who is not ordinarily resident within the meaning of clause (6) of Section 6. The respondent assessee is a company, incorporated under the provisions of Indian Companies Act, 1956, is fairly an admitted position. The assessee cannot be said to be non-resident. Thus the respondent assessee cannot lay fingers on section 172, since we are not dealing with profits of non-residents. we set aside the order of CIT(A) qua this issue and restore the order of the AO. The disallowance is confirmed. - Decided against assessee.
TDS on transport charges - CIT(A) deleted disallowance u/s. 40(a)(ia) on the ground that the recipients have paid the tax on the transportation charges collected from the assessee and therefore, no TDS was required to be deducted on the same payment - Held that:- There is no dispute that the resident transporters have paid the tax for transportation charges collected from the assessee. Therefore, we do not find any error in the order of CIT(A) in deleting the disallowance by following the judgment of Hon'ble Supreme Court in case of Hindustan Coca-cola Breweries (P) Ltd.(2007 (8) TMI 12 - SUPREME COURT OF INDIA ). It is pertinent to note that as per the 2nd proviso to section 40(a)(ia) no disallowance can be made in case where the payee has paid the tax on the said amount. Though, the said proviso is applicable w.e.f. 01/04/2013 however, in view of the judgment of Hon'ble Supreme Court we find that this amendment is remedial in nature and similar to the amendment under section 43B. The amended provision clearly support view that the expression “said due date” used in clause A of proviso to unamended section refers to time specified in Section 139(1) of the Act. The amended section 40(a)(ia) expands and further liberalises the statue when it stipulates that deductions made in the first eleven months of the previous year but paid before the due date of filing of the return, will constitute sufficient compliance. - Decided in favour of assessee.
TDS on Machinery maintenance charges - CIT(A) deleted disallowance u/s. 40(a)(ia) - Held that:- Out of total expenditure of ₹ 92,700/- ₹ 51,000/- relates to the purchase of machinery parts, therefore, provisions of chapter XVII-B are not applicable so far as the expenditure relates to purchase of machinery parts. The remaining expenditure is comprising of several bills and the amount of one individual bills does not exceed ₹ 20,000/-. Accordingly we do not find any error or illegality in the impugned order of CIT(A). - Decided in favour of assessee.
TDS on clearing and forwarding expenses - disallowance under section 40(a)(ia) - IT(A) deleted the disallowance made by the AO to the extent of reimbursement of expenses amounting to ₹ 4,19,505/- and confirmed the disallowance of the balance amount of ₹ 1,10,964/- Held that:- Plea of having no contract between assessee and C&F agency has been raised by the assessee for the first time before us.the grievance of the assessee before CIT(A) is only in respect of the amount of ₹ 4,19,505/- claimed to be reimbursement of expenses. The CIT(A) has accepted the said contention of the assessee and allowed to the extent of said amount of ₹ 4,19,505/-. Accordingly, the balance amount of ₹ 1,10,964/- was confirmed by CIT(A). As it is manifest from the record, that no such grievance was raised before CIT(A), and further, the fresh plea raised before this Tribunal required the finding of fact, whether any contract between the parties did exist or not. Even otherwise the payment of service charges to C&F agent is based on agreed rate/charges which constitute an agreement between the parties. Accordingly in the facts and circumstances of the case we do not find any merit or substance in the cross objection of the assessee hence, the same is dismissed. - Decided against assessee.
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2015 (2) TMI 979
Deduction under section 80-IA - AO disallowed claim on the reason that the assessee has not complied with the provisions of section 80-IA(4)(iv)(c) also confirmed by CIT(A) - Held that:- the assessee's claim of capitalisation of expenditure incurred on renovation and modernisation in the books of account is a condition precedent for allowing the claim of deduction under section 80IA(4)(iv)(c) of the Act. In the present case, since the plant and machinery used for transmission and distribution of electricity has been acquired from Tata Tea Ltd., it cannot be said that the book value appearing in the books of Tata Tea Ltd. as on April 1, 2004 relates to the assessee-company. Being so, in our opinion the assessee has not complied with the provisions of section 80-IA(4)(iv)(c) of the Income-tax Act. Further, we make it clear that income so increased on disallowance of deduction under section 80-IA(4)(iv) of the Income-tax Act, is to be considered as income from plantation of tea only - Decided against the assessee.
Restriction on allowance u/s 43B - Held that:- In the present case, the contribution to the approved gratuity fund cannot be allowed. Being so, the Commissioner of Income-tax (Appeals) is justified in disallowing the same. The claim of the assessee that for invoking the provisions of section 43B, actual payment is to be allowed. This argument of the assessee is totally misconstrued. Only the expenditure relevant to the assessment year under consideration is to be allowed. Being so, we do not find any infirmity in the order of the Commissioner of Income-tax (Appeals). - Decided against assessee.
Alternative claim that in the event of disallowance, it should be considered as part of the income from tea business - relied on the judgment of Karimtharuvi Tea Estates Ltd. v. State of Kerala [1962 (11) TMI 44 - SUPREME COURT] - Held that:- If the assessee claimed as expenditure relevant to the tea business, then, it should be considered as income of the tea business only.
Disallowance of provision made for dearness allowance - the liability is unascertained and is to be treated as contingent liability - Held that:- If this amount is claimed as relating to tea business as a expenditure on adding back the same to the income of the assessee, then it is to be treated as income from tea business only. With this observation, we dismiss this ground.
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2015 (2) TMI 978
Unaccounted cash credits - unsecured loans - AO noted that assessee has shown new unsecured loans amounting to ₹ 30,56,500 out of which loans amounting to ₹ 19,56,000 were introduced from persons specified under section 40A(2)(b) - CIT(A)deleted part addition - Held that:- If the Assessing Officer has suspicion that commodity profit was not genuine in the hands of various family members, the same could have been added in their assessments by reopening the same but the same cannot be assessed in the hands of the assessee because such persons have confirmed the transactions of loans and has filed the relevant papers. Therefore, in our opinion the view taken in the case of Seva Ram v. ITO (2015 (2) TMI 935 - ITAT CHANDIGARH) is squarely applicable in this case also and we decide the issue in favour of the assessee.
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2015 (2) TMI 977
Disallowance of deduction u/s 80P(2)(a)(i) - whether the Assessee is hit by the provisions of Sec. 80P(4) which was introduced in the statute by the Finance Act, 2006 w.e.f. 1.4.2007.? - whether C.I.T (A) erred in denying deduction u/s 80 (P) (2) (a) (i) of the Act to a co operative society by applying amendment by insertion of section 80P (4) which is applicable to co - operative banks? - Held that:- Where a co-operative society is engaged in carrying on business of banking facilities to its members and to the public or providing credit facilities to its members or to the public, the income which relates to the business of banking facilities to its members or providing credit facilties to its members will only be eligible for deduction u/s 80P(2)(a)(i). There is no prohibition u/s 80P not to allow deduction to such co-operative societies in respect of business relating to its members.
Since the Assessee cannot be regarded to be a primary co-operative bank, therefore, it cannot be a co-operative bank and therefore the provisions of Sec. 80P(4) are not applicable in the case of the Assessee and Assessee shall be entitled for deduction u/s 80P(2)(a)(i). We, therefore, set aside the order of CIT(A) and allow deduction to the Assessee u/s 80P(2)(a)(i). - Decided in favor of assessee.
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2015 (2) TMI 976
CENVAT Credit - Service Tax paid on rent-a-cab services which were used for transporting of officials and guests to and from the factory premises - Cenvat credit is sought to be denied only on the ground that and rent-a-cab services in relation to the business activity and more so if such services are rendered for guest. In my considered view, both the lower authorities have overlooked the judicial pronouncement made by the Hon’ble High Court of Karnataka in the case of Commissioner of Central Excise, Bangalore v. Stanzen Toyotetsu India (P) Ltd. - [2011 (4) TMI 201 - KARNATAKA HIGH COURT]. - those who are visiting the factory premises either be guests or otherwise for the purpose of business activity. In my view, the ratio can be extended and the impugned order to the appellants are unsustainable and liable to set aside the impugned order. - Decided in favour of assessee.
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2015 (2) TMI 975
Disallowance of interest paid - CIT(A) deleting the addition - Held that:- As found from record that interest was paid by assessee in respect of term loan taken for purchase of immovable properties, which was utilized for the purpose of business. We found that the property was used for running of pre-schooling business by the assessee. As per the finding recorded by the CIT(A), the term loan was taken against mortgage of immovable properties which are used by assessee for the purpose of pre-schooling business, assessee was eligible for deduction of interest u/s.36(1)(iii). The findings recorded by CIT(A) have not been controverted. - Decided against revenue.
Disallowance of foreign traveling expenses - CIT(A) deleting the addition - Held that:- Foreign travelling undertaken by assessee to various schools was in connection with pre-schooling business, significant expansion of the assessee’s pre-schooling business, introduction of private equity therein. A categorical finding recorded by CIT(A) to the effect that foreign travelling expenses were incurred wholly and exclusively for the purpose of assessee’s business which has not been controverted by learned DR by bringing any positive material on record. Accordingly, we do not find any infirmity in the order of CIT(A) for deleting the disallowance of travelling expenses. - Decided against revenue.
Share transactions - Capital gain or business transaction - CIT(A) in respect of delivery based transactions of shares which were held as investment held that the gains so arose on sale of shares was liable to be taxed as capital gain tax - CIT(A) has also confirmed AO’s action with regard to loss of ₹ 59,64,109/- and treated the same as business loss instead of capital loss - Held that:- After analyzing the entire set of transactions the CIT(A) recorded detailed finding and reached to the conclusion that out of ₹ 1,01,89,029/- the assessee’s profit of ₹ 80,51,168/- was liable to be taxed as capital gain and balance as business income. The short term capital loss of ₹ 1,22,76,554/- was not accepted by the CIT(A) and he confirmed the action of the AO for treating the same as business loss. The CIT(A) has also directed the proportionate effect of interest pertaining to earning of short term capital gain as claimed in the profit and loss account is to be disallowed while working out the business income. After analyzing the series of transaction, the CIT(A) held that business income of ₹ 1,12,79,891/- from derivative transactions and ₹ 80,10,911/- shall be separately assessed in addition to the business income from delivery based share transaction. Thus, the CIT(A) has directed the AO to rework sale of shares held as investment by the assessee under the head short term capital gain and balance was directed to be assessed as business income. The detailed findings recorded by the CIT(A) are as per materials on record, has not been controverted by department by bringing any positive material on record. Accordingly, we do not find any reason to interfere in the order of CIT(A). - Decided against revenue.
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2015 (2) TMI 974
Classification of services - supply of tangible goods for use of service or transport of passengers by air service - Extended period of limitation - Levy of penalty - Held that:- From the preamble of the contract entered into by the appellant with M/s. ONGC, it is seen that ONGC was interested in charter hiring of helicopters for offshore operations being carried out by them and the appellant agreed to provide the required services against the corporation's order in this regard. - t the services rendered by the appellant in charter hire of helicopters to various corporate for offshore operations is classifiable under "supply of tangible goods for use" service. - Demand of service tax confirmed.
The appellant has raised a point that the consideration received should be treated as cum tax and the amount so received shall be apportioned between the taxable value and the service tax. There is merit in this argument. If the appellant has not charged service tax separately and the amounts received included all taxes, the appellant would be definitely eligible for cum tax benefits. However, this benefit will not accrue where the appellant has collected service tax from the customers separately.
Once the demand for service tax is confirmed, interest liability is automatic and consequential. Accordingly, we confirm the liability to pay interest on the delayed payment of service tax by the appellant under the provisions of section 75 of the Finance Act, 1994.
Cenvat Credit - Held that:- There is a denial of Cenvat credit to the extent of ₹ 2,33,09,951/- which was taken by the appellant but not utilized. The credit has been denied on account of non-production of duty paying documents for the credit availed during 16/05/2008 to 31/03/2009. Rule 9(9) of Cenvat Credit Rules also envisages that the provider of output services availing Cenvat credit shall submit half yearly returns in the form specified and the appellant has failed to comply with the requirements. Therefore, the availment of credit without the duty paying documents and without filing the prescribed return is not in accordance with the law and accordingly, the appellants are not eligible for the credit. Therefore, denial of credit is justified. The appellant is also liable to pay interest on the credit taken though not availed, in view of the decision of the Hon'ble Apex Court in the case of Ind-Swift Laboratories Ltd. [2011 (2) TMI 6 - Supreme Court].
Extended period of limitation - Imposition of penalty - Difference of opinion - Majority order - Whether the appellant is liable to penalty under the provisions of Sections 76 & 78 of the Finance Act, 1994 - Held that:- Immediately after the introduction of service tax under the category of ‘supply of tangible goods', the appellant had taken the registration on 2nd July 2008. Thus the facts that they were under the said business was not only informed to the department but they also took registration for the same. Under the circumstances, it cannot be said that there was any suppression of facts. In view of the fact that the appellant has taken the registration as early as on 2 nd July 2008, the appellant has also billed to their customers for the service tax element and on being raising dispute about the levy by few customers, the appellant took the legal opinion on 22nd October 2008 and also the fact that when the Revenue started investigation, they started paying the service tax and the first payment was made on 22nd January 2009, in my view, the ingredients to impose penalty under Section 78 for the period 16 th May 2006 to March 2009 are missing. Under the circumstances, in my view, penalty under Section 78 imposed in the first show cause notice is not sustainable.
I also note that initially the show cause notice proposed penalties both under Sections 76 and 78, but in the impugned order, penalty under Section 76 has not been imposed in view of the fact that the penalty was imposed under Section 78 and the Revenue has not come in appeal against the said order. Therefore, non-imposition of penalty under Section 76 has reached finality as far as the first show cause notice is concerned.
While there can be arguments or reasons for the period upto March 2009 for failure to pay the duty, there does not seem to be any valid ground for non-payment of duty after April 2009. In view of the said position, in my considered view, penalty for the period April 2009 to March 2011 cannot be waived under Section 80 of the Finance Act.
Imposition of penalties on the appellant under Section 76 & 77 of the Finance Act, 1994 for the default in payment of service tax and for non-compliance of statutory provisions relating to the service tax is upheld. However, we set aside the penalties imposed under Section 78 of the Finance Act, 1994. The penalty of ₹ 2,000/- imposed under Rule 15(3) of the Cenvat Credit Rules, 2004 is also upheld. - Decided partly in favour of assessee.
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2015 (2) TMI 973
Waiver of pre deposit - Classification of service - Telecommunication service or Business Support Service - appellant is engaged in the provision of audio-conferencing services and web-conferencing services to its customers located both in India and abroad - Held that:- Appellant was engaged in gathering the messages from senders and transmitted through cellular agencies. Therefore the issue before the Tribunal was not the services rendered by a Telecommunication service provider but a sms service provider who used the service of Telecommunication service to send the messages. - just because the foreign service provider has not been licensed by Indian Telegraph Authority and therefore he is not providing Telecommunication Service at all. The correct way of interpretation is to say that he is providing Telecommunication service but the Indian definition of Telecommunication service does not include services provided by services providers who are not licensed by Indian Telegraph Authority. We are unable to accept the theory that the service itself comes under a different category in such a situation. When the definition of Telecommunication service under Section 65(109a) clearly covers the activities undertaken by the appellants and clearly covered by the Telecommunication services, to take a stand that it has to be classified under Business Support Service which does not cover these activities is not correct. In any case a more specific heading which covers the issue is always to be preferred to the one which is general in nature. That being the position, the argument that the service is classifiable under Business Support Service is not acceptable. - appellant has made out a case for complete waiver. Accordingly the requirement of pre-deposit is waived and stay against recovery is granted during the pendency of appeal.- Stay granted.
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