TMI Tax Updates - e-Newsletter
January 11, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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Income Tax:
Computation of Slump sale - ITAT had accepted the Assessee’s contention that in case the entire block of assets was sold, the written down value of the block of assets as existing must be taken at the aggregate value of the total assets. We are unable to concur with the said view. - HC
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Income Tax:
TDS u/s 194A - Once an amendment is introduced, for the purpose of removing the anomalous situation or for the purpose of removing the confusions both in the manner in which the provisions stood and the manner in which they were understood, the same could be taken only to have prospective effect. - HC
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Income Tax:
Disallowance of commission paid to the Directors / shareholders - where the directors had given services and in recognition thereof, there was proposal to pay commission to the said directors, then the same could not be questioned merely on the basis of speculation by the Revenue that the same was to avoid payment of dividend tax. - AT
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Income Tax:
Levy of penalty u/s. 271(1)(c) - As the contention of the assessee is far from bona fide and there was a clear-cut strategy to not only evade taxes, but also to file inaccurate particulars of income even after search operation. - Penalty confirmed - AT
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Income Tax:
Addition made u/s 41(1) - genuineness of sundry creditors - Once, the assessee is unable to discharge the primary onus cast upon him, then it is very difficult to reverse the finding of facts recorded by the AO as well as CIT(A) - AT
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Income Tax:
Revision u/s 263 - due and reasonable opportunity of being heard was not afforded to the assessee - nobody should be condemned unheard as per the maxim “Audi Alteram Partem” - AT
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Income Tax:
MAT computation - whether the surcharge and educational cess is leviable only after giving credit for MAT and thereafter the tax computation made by the AO in ITNS-7 attached with the impugned order dated 27.11.2014, is not a correct way of tax calculation? - Held Yes - AT
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Customs:
Valuation of imported goods - The demurrage charges are admittedly incurred after the goods reached at Indian ports and, therefore, it is a post-importation event. Such charges, therefore, cannot form part of the transaction value - SC
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Customs:
Valuation of import of soda ash light - declared price was lower than invoice price since the market price was down drastically - the provisions of sub-section (1) of Section 14 are clearly attracted and there was no necessity of invoking the rules - SC
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Service Tax:
Demand of Interest beyond the scope of Show Cause Notice - appellant is required to pay the interest on the amount demanded in the show cause notice and confirmed by the adjudicating authority only - AT
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Service Tax:
Utilization of Service Tax, paid by one assessee, by the another assessee after merger between the two - the issue herein is only non-observance of procedure of intimation to Range Superintendent etc. and is only a technical violation, if any - Adjustment allowed - AT
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Service Tax:
Cenvat Credit - eligible as Input Service or not - Courier Service used by the appellants used for the movement of finished goods after the place of removal - Credit not allowed - AT
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Central Excise:
Rectification of order - power of the tribunal to re-appreciate the facts and reverse the findings recorded in the Final order - Tribunal was justified in entertaining contention which was raised by the assessee at the outset but not decided by the Tribunal while rendering its judgement on appeal - HC
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VAT:
Reversal of Input Tax credit - t when admittedly the petitioner firm has paid the tax, he cannot be made liable for the failure on the part of the seller to report the same to the respondent - HC
Articles
Notifications
News
Case Laws:
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Income Tax
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2016 (1) TMI 376
Reopening of assessment - period of limitation - invoking the provision of Section 150(1) Held that:- n the instant case, the Tribunal has given a categorical finding that the assessee had disclosed all the material facts necessary for making the assessment and there was no failure on his part. We find that this finding of the Tribunal is perfectly correct and, as we have observed, the Assessing Officer in his original assessment proceedings had considered each and every document and the explanation given by the assessee on the seized documents. Therefore, it was not a case where the assessee failed to disclose fully or truly all material facts necessary for making the assessment. The notice, in our view, issued under Section 148 of the Act was invalid. In so far as the period of limitation is concerned, the present dispute relates to the assessment year 1992-93 and as per the then existing provision of limitation specified under Section 149 of the Act, the period of limitation was 10 years. Accordingly, the reassessment notice could be issued on or before 31.05.2001 whereas in the instant case reassessment notice under Section 148 of the Act was issued on 11.04.2001, which was within the period of limitation. Consequently, we are of the opinion that the notice issued under Section 148 of the Act was issued within the period of limitation. The question of invoking the provision of Section 150(1) of the Act does not arise and it is not necessary for us to dwell on this aspect of the matter. We may however, observe that Section 150 of the Act provides that the power to issue a notice under Section 148 of the Act in consequence of or giving effect to any finding or direction of the Appellate or Revisional Authority or the Court is subject to the provisions contained in Section 150(2) of the Act. Section 150(2) of the Act provides that the direction issued under Section 150(1) of the Act cannot be given by the Appellate or Revisional Authority or by the Court if on the date on which the order in appeal or revision was passed, the reassessment proceeding had become barred by time. Under Section 150(2) of the Act the Appellate or the Revisional Authority or the Court could give direction for reassessment only in respect of that assessment year. In respect of reassessment, proceedings could be initiated on the date of passing of the order in appeal. Since we have held that the notice was issued within the period of limitation, the provision of Section 150(1) of the Act is not applicable in the instant case - Decided in favour of assessee
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2016 (1) TMI 375
Computation of Slump sale - ITAT held that for computing the net worth under Section 50B, Section 43(6)(c)(i)(C) is not applicable in case of slump sale of the undertaking includes the entire block of assets - whether the entire block of assets was sold, the written down value of the block of assets as existing must be taken at the aggregate value of the total assets? - Held that:- The ITAT had accepted the Assessee’s contention that in case the entire block of assets was sold, the written down value of the block of assets as existing must be taken at the aggregate value of the total assets. We are unable to concur with the said view. First and foremost, for the reason that there is no provision which mandates adopting this method of computation, the machinery provisions provided in Section 50B of the Act exhaustively provide for determining the cost of acquisition of the undertaking or division sold by way of a slump sale. If one examines the three clauses of Explanation 2 to Section 50B of the Act, the same exhaust all categories of assets. Insofar as depreciable asset is concerned, clause (a) provides an extensive mechanism to compute its value. The working of clause (a) also does not yield results which are absurd or unreasonable so as to warrant looking for other aids to statutory interpretation for ascertaining the true legislative intent. In the circumstances, the language of clause (a) of explanation 2 to Section 50B must be given its plain and literal meaning. It could hardly be disputed that the plain language of sub-clause (b) of Clause C contemplates reduction from the actual cost of assets of the depreciation “that would have been allowable to the Assessee for any assessment year commencing on or after 1st day of April, 1988 as if the asset was the only asset in the relevant block of assets”. In view of the plain language, there is no scope to read the provisions of sub-clause (b) of Clause C to permit deduction of depreciation actually allowed and not as “would have been allowable”. There is little merit in Mr Singh’s contention as the entire basis of reducing the value of the block of assets in the current assessment year is premised on the basis that depreciation was allowable to the Assessee for the year ended 31st March, 2000. In our view, Mr Vohra is perhaps right that had the Assessee claimed the depreciation on the block of assets for the year ended 31st March, 2000, it could have carried forward the same for setting it off against the short term capital gains arising out of the sale of the business. However, the fact is that the Assessee had not claimed the depreciation for the year ended 31st March, 2000 and as rightly pointed out by Mr Vohra, deduction on allowance of depreciation is available to an Assessee at its option and the Assessee cannot be compelled to claim the same. Since, in the facts of the present case, whether wittingly or unwittingly, the Assessee has not claimed the depreciation for the year ended 31st March, 2000, it is unable to mitigate its tax liability. Whilst, we may sympathise with the Assessee, it is not possible to grant any relief to the Assessee. We are unable to accept the interpretation of Clause (a) of Explanation 2 to Section 50B as canvassed on behalf of the Assessee. - Decided in favour of revenue
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2016 (1) TMI 374
Disallowance made in the "consumable stores" - ITAT deleted the addition - Held that:- we find that there is an express finding given by the Assessing Authority as well as by the Ist Appellate Authority with regard to non-production of bills and vouchers and for not maintaining the stock register. In the absence of non-production of bills and vouchers, the Assessing Officer was justified in disallowing certain expenditure by 10%, which was reduced by the Ist Appellate Authority to 5%. This aspect had not at all been considered by the Tribunal and the same had only been allowed on the ground that the turnover has increased by 5% and the expenditure has reduced. The Tribunal has lost sight of the fact that the expenditure claimed under the head manufacturing expenses, which forms part of the "profit and loss account", showing expenses made by the assessee are required to be proved by production of bills and vouchers. Disallowance of 5% in the facts of the case is justified. - Decided against assessee Expenses attributable on the conveyance and telephone of the Directors of the assessee-company - should be included in the expenses of the assessee-company as held by ITAT - Held that:- nothing has been brought on record by the Department to indicate as to what was the direction given by the authority for the assessment year 2001-02. We are of the view that the expenses made by the assessee on telephone and conveyance running expenses, etc have to be dealt with in the same fashion as have been dealt in the earlier assessment years. The Tribunal has relied upon a decision of the Gujarat High Court holding that the remuneration given to the Directors which includes any expenditure incurred in providing benefit free of charge under the Companies Act cannot be disallowed. As such disallowance for maintenance of vehicle or conveyance and telephone is not justifiable - Decided in favour of assessee
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2016 (1) TMI 373
Bags of Dhania and Chillies lost and damaged by the Railways - ITAT sustaining the valuation of the closing stocks of such goods at the same rate as that of non-damaged goods - Held that:- The Commissioner of Income- tax (Appeals) has rightly held the closing stock is to be valued either at the cost price or the market rate whichever is less and accordingly valued closing stock of Chillies and Dhania on the basis of the cost price. - Decided against assessee Value of unexplained excess stocks of Haldi, big cardimum and Mangraila - Held that:- Where an assessee is found to be in possession of stocks which were not entered in the account books, the assessee has to explain the nature and source of the stocks and if that is not satisfactorily explained, the value of the stocks can always be treated as assessee's income. We do not find any error in the above view. So far as the addition of ₹ 34,675 is concerned which was added towards unexplained investment in respect of the excess stocks of Haldi, big cardimum and Magraila as the source of investment had not been explained by the assessee. - Decided against assessee
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2016 (1) TMI 372
Chargeability of interest by AO under Sections 234A, 234B and 234C - Whether the CIT(A) and the Tribunal were justified in deleting the interest under Sections 234A and 234C of the Act and in restricting the interest charged under Section 234B - Held that:- The matter is no longer res integra. This Court in Principal Commissioner of Income Tax, Faridabad v. Shri Krishan Gopal (HUF) [2015 (12) TMI 1069 - PUNJAB AND HARYANA HIGH COURT] adjudicated both the issues, as noticed above, against the revenue holding that an appeal could be filed against the levy of interest under Sections 234A, 234B and 234C of the Act before the CIT(A) as an appeal was maintainable. Further, under similar circumstances, it was recorded that the CIT(A) and the Tribunal were justified in deleting the interest under Sections 234A and 234C of the Act and in restricting the interest charged under Section 234B of the Act. The appeal of the revenue was dismissed.
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2016 (1) TMI 371
Tds u/s 194C - failure to deduct tds - contract with Haryana Roadways Engineering Corporation Ltd. for fabrication of bodies of buses - demand created by the A.O. u/s 201(1) and 201 (1A) - Held that:- As decided in Commissioner of Income Tax (TDS), Chandigarh v. General Manager, Haryana Roadways, Hisar [2010 (4) TMI 295 - PUNJAB & HARYANA HIGH COURT] from the categorical findings, it is evident that Haryana Roadways did not purchase any bus chassis and, therefore, there was no question of any contract between Haryana Roadways through its Transport Commissioner and Haryana Roadways Engineering Corporation Limited. It is a simple case of supply of buses by the Haryana Roadways Engineering Corporation Limited to the Haryana Roadways. The supply of buses as such has been subjected to charge of Sales Tax and VAT. We may examine Section 194C(1) of the Act, which envisages payment of any sum to any resident for carrying out any work in pursuance of a contract between the contractor and Central or State Government etc. In the present case there is no such contract for carrying out any contract nor the expression 'Contractor' could be imputed to any one of the parties. These appeals are wholly without merit and the same are dismissed - Decided in favour of assessee
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2016 (1) TMI 370
TDS u/s 194A - Whether a co-operative society, carrying on banking business with the approval of the Reserve Bank of India, is liable to deduct tax under Section 194A of the Income Tax Act, 1961 on the interest paid to its members? - distinction between a cooperative bank and a co-operative society carrying on banking business - Held that:- Whether there exists a substantial or marked difference between a co-operative society engaged in carrying on banking business and a co-operative bank and if so, under which category the appellant would fall. The answer is too obvious in view of the foregoing discussion. Except the provisions of sub-clause (b) of clause (i), sub-clause (a) of clause (iii) and sub-clauses (a) and (b) of clause (viia) of sub-section (3) of Section 194A, we do not find anywhere a dichotomy created between a co-operative bank and a co-operative society engaged in carrying on banking businesses. Therefore our answer to the second substantial question of law would be that none of the State or Central enactments such as the Tamil Nadu Co-operative Societies Act, 1983, the Multi- State Co-operative Societies Act, 2002, the Reserve Bank of India Act, 1934, the Banking Regulation Act, 1949 and the National Bank for Agriculture and Rural Development Act, 1981 make any distinction between a co-operative society engaged in carrying on banking business and a co-operative bank. Since there is a reference to the Co-operative Societies Act, 1912 in Section 2(19) of the Act, we have also gone to the Co-operative Societies Act, 1912. It was a central legislation of the colonial past, which also does not define a co-operative bank. It only deals with co-operative societies registered under the Act. Therefore our answer to the second question may not undergo a change even if we make a reference to the Co-operative Societies Act, 1912, which in any case has no application to the societies registered in terms of the State enactments. The very note explaining the clause was specific to the effect that the proposal was to bring forth an amendment with prospective effect from 1.6.2015. There is no dispute now that on and from 1.6.2015 the appellant cannot escape the liability from deduction of tax at source.Once an amendment is introduced, for the purpose of removing the anomalous situation or for the purpose of removing the confusions both in the manner in which the provisions stood and the manner in which they were understood, the same could be taken only to have prospective effect. It must be pointed out that the Parliament did not choose to answer a question. Rather it chose to amend the provisions. It is now well settled that an amendment can only be prospective unless it is made retrospective by express language or necessary implication. Apart from the fact that the express language of Section 194A after amendment does not indicate any retrospectivity, the note explaining the clauses goes one step further in making it clear that it was intended to have prospective effect from 1.6.2015. - Decided in favour of the assessee.
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2016 (1) TMI 369
Eligibility for exemption under Section 80G(5) denied - Commissioner rejected the application is that proper accounts were not maintained by the respondent - assessee - ITAT allowed claim - Held that:- Revenue is right in his submission that the paragraphs dealing with the merits of the case in the impugned order passed by the Tribunal, do not advert to any factual matrices of the case insofar as the figures reflecting income and expenditure which were adverted to by the Commissioner of Income Tax in extenso. The appellate authority has reversed the findings of the Commissioner. However, the impugned order is not supported by reasons and does not suggest that the Tribunal had re-appreciated the facts with reference to the various financial entries found in the order passed by the Commissioner. Whenever an order is passed by a quasi - judicial authorities either upholding or reversing a finding of lower authority, the appellate order must necessarily record cogent reasons with reference to facts and reasons contained in the order assailed before appellate authority. On perusal of the order of the Tribunal, we are of the considered view that the Tribunal has not adverted to the various aspects of factual matrices, which resulted in rejection of application by the Commissioner. Admittedly, the Tribunal is the last fact-finding authority. The Commissioner while rejecting the application has adverted to various aspects of the matter to support his reasoning. They include receipt and expenditure by the Trust and posting of entries in the books of account of Trust. The whole intent and purpose of granting exemption under section 80 to a Trust or an Organisation is to facilitate the donors to get the benefit of tax exemption and at the same time, the Trust or the organisation to get donations. Such a Trust or Organisations which perform their duties to further their aims and objects are duty bound to maintain proper accounts. Admittedly, the applicant was enjoying the benefit of exemption for the previous years. It has taken a definite stand that accounts with regard to the project work is separately maintained. The Commissioner has adverted to various aspects and rejected the application. Therefore, the Tribunal ought to have considered each and every aspect and examined as to whether or not the findings recorded by the Commissioner are in accordance with law. In the circumstances, we feel it appropriate that the matter must be reconsidered by the Tribunal in the light of what is stated hereinabove. Accordingly, we deem it appropriate to remand the matter to the ITAT for re-consideration - Decided in favour of revenue
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2016 (1) TMI 368
Rejection of deduction u/s. 80IC(2) - failure to obtain NOC from the Pollution Control Board - Whether the Ld. CIT(A) has erred in law and on facts in allowing the claim as not to appreciate the fact that ecotourism is the condition precedent, to be complied with for hotels for claiming deduction u/s. 80IC? - Held that:- No interference is called for in the well reasoned order passed by the Ld. CIT(A), because the Ld. CIT(A) has decided the issue in dispute in favor of the assessee by holding after appreciating the evidence filed by the assessee as well as various decisions rendered by the Hon’ble Supreme Court, Hon’ble High Court and the decisions of the ITAT. We further find considerable cogency in the assessee’s counsel submissions that the present issue involved in the Revenue’s Appeals is squarely covered by the ITAT decision in the case of Bidhi Chand Singhal [2010 (11) TMI 957 - ITAT DELHI] for AY 2006-07 and in Anchal Hotels (P) Ltd. vs. ACIT [2012 (10) TMI 639 - ITAT, DELHI] for AY 2005-06 to 2006-07 . Moreover, it is a settled law that, a deduction once granted cannot be re-examined in the succeeding assessment years. However, in the assessee’s own case the claim of deduction by the assessee had been examined in the AY 2006-07 and accepted by the Revenue, therefore, it was incumbent upon the Revenue to allow such claim in the succeeding assessment years. - Decided in favour of assessee Subsidy received from the Government under the Central Capital Investment Subsidy Scheme 2003 - revenue receipt v/s capital receipt - Held that:- We are in agreement with the contention of the Ld. Counsel that the issue is squarely covered by the High Court of J&K in the case of Shri Balaji Alloys vs. CIT reported in [2011 (1) TMI 394 - Jammu and Kashmir High Court ] wherein it was held that “the finding of the Tribunal on the first issue that the Excise Duty Refund, Interest Subsidy and Insurance Subsidy were Production Incentives, hence, revenue Receipt, cannot be sustained, being against the law laid down by Hon’ble Supreme Court of India in Sahney Steel & Press Works Ltd.’s case reported in [1997 (9) TMI 3 - SUPREME Court ] and CIT vs. Ponni Sugars & Chemicals Ltd. reported in [2008 (9) TMI 14 - SUPREME COURT ]. The finding of the Tribunal that the incentives were Revenue Receipt is, accordingly, set aside holding the incentives to be Capital Receipt in the hands of the Assessee. - Decided in favour of assessee. Disallowance of deduction u/s 80IC of the Act in respect of profits derived from sale in the restaurant to non-resident customers - Held that:- we find that the profits derive from sale in the restaurant to non-resident customers are derived from the undertaking and as such profit is eligible for deduction u/s. 80IC of the Act. Our view is supported by the following judgments:- Liberty India and Ors. Vs. CIT [2009 (8) TMI 63 - SUPREME COURT ] and CIT vs. Dharampal Prem Chand Ltd. [2008 (11) TMI 231 - DELHI HIGH COURT] - Decided in favour of assessee.
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2016 (1) TMI 367
Disallowance of late deposition of employee’s PF Contribution - CIT(A) deleted the addition - Held that:- The Hon'ble Delhi High Court in the case CIT Vs. AIMIL Ltd. [2009 (12) TMI 38 - DELHI HIGH COURT ] has held that no disallowance can be made in respect of Employers P.F. Contribution and Employees P.F. Contribution in case such contributions are paid before due date of filing. It is not in dispute before us that the contributions have not been paid before due date of filing of the return. We therefore, hold that the ld. CIT(A) was justified in deleting the Employers P.F. Contribution and Employees P.F. Contribution - Decided in favour of assessee. Disallowance of prior period expenses - CIT(A) deleted the addition - Held that:- It emerges from the record that Govt. organization expenses are booked only after approval of various authorities. Since the approvals are received during this year, the expenses are current year expenses. The Jaipur Bench is also regularly allowing such claims as held in various cases referred by the ld. AR in ld. CIT(A)’s order. Thus we find no infirmity in the order of the ld. CIT(A) which is sustained on this issue - Decided in favour of assessee.
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2016 (1) TMI 366
Disallowance of commission paid to the Directors / shareholders - enhancement of income - assessee had claimed expenditure of ₹ 1 crore on account of commission paid to three main directors - CIT(A) had disallowed the claim of the assessee on the premise that where dividend was to be paid out of the profits of the assessee company, the payment of commission to the directors was hit by the provisions of section 36(1)(ii) of the Act - Held that:- The CIT(A) has not held the payment made to the directors to be excessive in view of the provisions of section 40A(2) of the Act, which is a safeguard for controlling the payment to relatives or connected persons. Under the amended provisions of section 36(1)(ii) of the Act, there is no restriction on the quantum of payment. However, the spirit of section that where the expenditure has been incurred in connection with carrying on of the business, the same is allowed as deduction, the commercial exigency is to be viewed in the light of the requirement of business and the actual services rendered by the persons concerned. Looking at the nature of sub-contract executed by the assessee which is in specialized field, it cannot be held that the same was carried out without the efforts of concerned directors. In any case, the businessman is the best person to decide its affairs and expenditure cannot be disallowed on any surmises. We find merit in the plea of the learned Authorized Representative for the assessee that in case the concerned entity was a partnership concern, under the provisions of section 40(b) of the Act, 60% of the profits of business could be allowed as remuneration to the partners of the said entity. The assessee has furnished the details of directors’ remuneration and commission paid to the directors and the total of the same does not exceeds 60% of the profits. Merely because the assessee is a private limited company and had agreed to pay the commission to the directors by passing Resolution in this regard before the close of year, the same cannot be brushed aside and the said expenditure was disallowed in the hands of assessee on mere surmises. In view thereof, we hold that where the directors had given services and in recognition thereof, there was proposal to pay commission to the said directors, then the same could not be questioned merely on the basis of speculation by the Revenue that the same was to avoid payment of dividend tax. The assessee company had paid the commission to the directors, who in turn had declared the same in their individual return of income, on which taxes have been paid and applying the simili laid down by CIT. Vs. Indo Saudi Services (Travel) Private Limited [2008 (8) TMI 208 - BOMBAY HIGH COURT ] in such circumstances, no disallowance was warranted in the hands of payer as there was no attempt to avoid tax.t the assessee is entitled to the claim of deduction on account of commission paid to the directors for the services rendered by them at ₹ 1 crore. Accordingly, we direct so. - Decided in favour of assessee Disallowance of deduction on account of expenditure incurred on construction of road and RCC chambers - Assessing Officer had re-computed the work in progress of the assessee by including the aforesaid amounts as part of work in progress - CIT(A) deleted the addition - Held that:- As held that the construction of site road is not capital expenditure and the same is allowable as revenue expenditure. The A.O. has held that the site road from Rigaon is to be included in W.I.P. In this regard the appellant has pointed out that the contractee is not required to pay any consideration towards site road and hence the said expenditure cannot form the part of W.I.P. This contention of the appellant is supported by tender document. In view of the above facts, it is of the considered view that the A.O. is not justified in making the addition by holding that the site road is to be included in WIP. The addition is therefore, deleted. As regards the expenditure on RCC chambers, it has been noticed that the appellant has incurred the expenditure and paid the same to the sub-contractor M/s.SMPL, who carried out the said work. As per the standard practice all the irrigation projects are to be approved by Central Design Organization, Nashik i.e. CDO, Nashik. The CDO has reviewed the irrigation projects and recommended latest surge protection devices, which needed to be imported from abroad. As per the recommendation of the,CDO, Nashik the revised Board Conceptual Layout (BCL) was finalized on 10/2/2009 with deletion of delivery chambers and on later date, the appellant was informed about the revised BCL. In support of the above claim the appellant has filed copy of Boards Conceptual Design, with relevant letters and enclosures. In view of the above facts the contention of the appellant that the expenditure incurred by the appellant on RCC Chambers is lost and cannot be included in WIP as at 31/3/2009 is found to be correct and hence accepted. The addition is therefore, deleted. - Decided in favour of assessee
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2016 (1) TMI 365
Penalty u/s.271(1)(c) - undisclosed long term capital gains and expenditure - Held that:- In this case, consequent to search /survey action in the case of M/s. Rajarathinam Constructions P. Ltd, the documents relating to the purchase of property by assessee was found and it came to know that M/s. Rajarathinam Constructions P. Ltd purchased land located at Perumbakkam village for ₹ 6,75,000/- from assessee. However, the assessee had not admitted long term capital gains in respect of sale of property even after issuance of notice u/s.148 of the Act. The assessee made a wrong claim towards dealers commission at ₹ 5,16,650/- and marketing expenses of ₹ 2,98,450/- respectively for which no new evidence was produced. This quantum addition was subject matter of appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) allowed the expenditure at ₹ 7,00,000/-. However, the findings on this addition was confirmed by Commissioner of Income Tax (Appeals) in its entirety. Admittedly, the assessee was not able to substantiate the claim made by her. However, the Assessing Officer while computing the penalty considered entire disallowance of ₹ 8,15,000/- though at this stage addition was sustained was only ₹ 2,15,000/-. To that extent the assessee shall get relief. In other words, in view of the failure on the part of the assessee to substantiate the expenditure of ₹ 2,15,000/- towards dealers commission and marketing expenses penalty to be levied u/s.271(1) (c) of the Act as there is no bonafide explanation from the assessee to this effect and there is furnishing of inaccurate particulars of income. Accordingly, we direct the Assessing Officer to recompute the penalty u/s.271(1)(c) of the Act towards the additions sustained at ₹ 2,15,000/- only. - Decided partly in favour of assessee
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2016 (1) TMI 364
Eligibility for deduction U/s.80IB(4) on freight income not derived from the manufacturing activity - Held that:- The assessee would be eligible for deduction U/s. 80IB(4) of the Act for the income earned from the source of manufacturing activity. The assessee would not be eligible for deduction for any income earned which is attributable to the business of the assessee other than manufacturing activity. Therefore, the Ld. CIT (A) has rightly held that the income earned from freight charges cannot be allowed for deduction U/s.80-IB of the Act and disallowed ₹ 27,66,294/-. However, we are not sure that whether the amount of ₹ 27,66,294/- is the gross receipts of freight charges or the income earned from freight charges. Therefore, we hereby remit back the matter to the file of the Ld. Assessing Officer for making disallowance only to the extent of the net income earned on freight charges while granting the benefit of Section-80-IB(4) of the Act to the assessee and not on the gross freight charges received. It is ordered accordingly. - Decided partly in favour of assessee for statistical purposes
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2016 (1) TMI 363
Levy of penalty u/s. 271(1)(c) - Held that:- In the present case, in fact, the contention of the assessee has been such that certainly calls for levy of penalty. First of all, the assessee found a way as to how, it can hide the information to the Department. Even after search action, the assessee has not come with the proof to show that the assessee has not concealed the particulars of income and at this point of time, the assessee has not come clean so as to explain exact quantum of income earned by the assessee with any supporting evidence. In the return of income filed consequent to the search operations, the assessee does not disclose either its true turnover or the true profit percentage. Even at this stage, additions have to be resorted to and the turnover is ultimately confirmed at the stage of first appellate proceedings. The cases, therefore, clearly call for confirmation of penalties. As the contention of the assessee is far from bona fide and there was a clear-cut strategy to not only evade taxes, but also to file inaccurate particulars of income even after search operation. As such, by placing reliance on the judgment of the Supreme Court in the case of B.A.Balasubramaniam & Bros. Co. v. CIT (1998 (1) TMI 7 - SUPREME Court) , we have no hesitation in confirming the penalty impugned u/s 271(1)(c) of IT Act, 1961. - Decided against assessee.
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2016 (1) TMI 362
Prior period expenses - CIT(A)allowed the claim - Held that:- AO has filed the complete details of the prior period expenses of ₹ 1,96,917/-. Vide letter dated 26.4.2008, vouchers in respect of the same were filed. From the details we note that the approval for payment of these expenditure were given during the year and therefore the liability crystalised during the year in view of these facts and the consistent view of this Bench that the liability crystalised on approval of payment, we find no infirmity in the order of ld.CIT (A) deleting the disallowance - Decided in favour of assessee Disallowance of an unapproved gratuity fund - CIT(A)allowed the claim - Held that:- This issue in assessee's own case for the assessment year 2006-07 in favour of the assessee wherein held there is no dispute as to the fact that assessee has applied for approval of the scheme on 31.03.1981. The A O has not brought any material on record that the approval to the scheme is not allowed. Therefore the scheme cannot be taken as not approved. The assessee can’t be made to suffer for inaction of the department. Considering these facts, this Bench in assessee’s own case of A.Y. 1996-97 & 1997-98 itat allowed the claim of the assessee - Decided in favour of assessee Contribution to State Renewal Fund - CIT(A) treated as allowable expenditure - Held that:- This issue is covered in favour of the assessee as the amount was set apart not for shareholder but it was provided for the benefits of the employees, by following our earlier decisions, we uphold the order of CIT(A) on this issue.- Decided in favour of assessee
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2016 (1) TMI 361
Addition made towards valuation of stock of scrap - Held that:- There is no scope for valuation of stock at market price as worked out by the Learned AO. The valuation of stock at cost or net realizable price whichever is lower is an accepted and established rule of commercial practice as was held by the Hon’ble Supreme Court in the case of Chainrup Sampatram vs CIT reported in (1953 (10) TMI 2 - SUPREME Court). Even otherwise, we find that the Learned AO had taken the last realized selling price of M.S.Scrap whereas the closing stock needs to be valued as ‘realisable’ value or cost whichever is lower. Even on this count, the valuation made by the Learned AO is not appreciated. We find that the main buyer of the assessee M/s Tata Motors Ltd had reduced the rate per MT of M.S. scrap to ₹ 15107.4 per MT with effect from 1.7.2005 is very crucial and is already on records which fact is not disputed by the revenue. Based on the reduction in the rate with effect from 1.7.2005, the net realizable value had automatically come down and the assessee had valued the stocks applying that rate after deducting direct expenses incurred for realizing the sale and hence we find no infirmity in the valuation method adopted by the assessee. We find that the assessee had valued the closing stock by the method that it has regularly and consistently followed for valuation of stock. - Decided against revenue Addition towards commission - non deduction of tds - CIT(A) deleted the addition - Held that:- CIT(A) had categorically given clear findings in respect of this addition as that the TDS was indeed remitted by the successor concern i.e proprietary concern of the assessee on 31.5.2006 which is well within the due date of filing the return of income u/s 139(1) of the Act and hence the disallowance u/s 40(a)(ia) of the Act could not be made on that account and is self explanatory and none of these findings were refuted by the Learned DR during the course of hearing before us . Hence we do not find any reason to interfere with the order of the Learned CIT(A) in this regard. - Decided against revenue
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2016 (1) TMI 360
Addition towards undisclosed sale of two flats - Held that:- There is no case for making any addition towards undisclosed sale of two flats and profits derived thereon on an estimated basis as the contention of the assessee with regard to the gifts given by him to the widow of his younger brother has been accepted as genuine by the Learned AO in Asst Year 2005-06. Hence we find no infirmity in the order of the Learned CITA in this regard. - Decided in favour of assessee Addition made on an estimated basis for sale of car parking spaces - Held that:- There is no case for making any addition towards undisclosed sale of two car parking spaces and profits derived thereon on an estimated basis. - Decided in favour of assessee Addition towards advance received on sale of flat - Held that:- As find from the statement of the Learned AR that the said sum is offered to tax by the assessee in Asst Year 2009-10. Hence we direct the Learned AO to delete the same in Asst Year 2009-10 in order to avoid double taxation of the same amount - Decided in favour of assessee Addition on account of labour charges - non deduction of tds - Held that:- TDS provisions are applicable to the assessee for Asst Year 2006-07 and hence section 40(a)(ia) of the Act has been rightly invoked on the assessee for Asst Year 2006-07. However, we find that the second proviso to section 40(a)(ia) of the Act which is introduced in the statute with effect from 1.4.2013 has been held to be retrospective in operation by the recent decision of Hon’ble Delhi High Court in the case of CIT vs Ansal Land Mark Township P Ltd reported (2015 (9) TMI 79 - DELHI HIGH COURT). Accordingly, we deem it fit and appropriate , in the interest of justice and fair play, to set aside this issue to the file of the Learned AO to examine the issue in the light of the decision rendered by the Hon’ble Delhi High Court as stated supra and decide the issue in accordance with law. The assessee is also directed to provide necessary evidences and documents to prove that the payee had duly disclosed the subject mentioned receipt of labour charges in their respective returns and paid the due taxes thereon. - Decided in favour of revenue for statistical purposes. Addition being the difference between the deposits and withdrawals - Held that:- We find that the entire books of accounts have been produced by the assessee before the Learned AO which fact is also mentioned in the assessment order. It is not the case of the assessing officer that the transactions in the said two bank accounts were not reflected in the books of accounts of the assessee as the Learned AO himself states that the total deposits includes a sum of ₹ 10 lacs received by assessee from Sri K.S.Panja towards advance for flat. We also find that the assessee had carried on his business transactions with the said two bank accounts and accounts have been duly audited u/s 44AB of the Act by an independent chartered accountant and books of accounts were not rejected by the Learned AO. Hence there is no case for making any independent addition in this regard.- Decided in favour of assessee Addition towards interest on bank loan - Held that:- We find from the balance sheet of the assesssee, the break up of loans and advances (asset) as reflected in the balance sheet is not available on records. We also find that assessee is also having some own funds which would definitely explain the interest free advances given by him to various parties. Hence in the facts and circumstances of the case, we deem it fit and appropriate, in the interest of justice and fair play, to set aside this issue to the file of the Learned AO to the limited extent of ascertaining whether the advances given to Sri Amal Chakraborty and M/s Akash Associates were for the purpose of business. We make it very clear that if the advances made to these two parties are less than the own funds available with the assessee, then no disallowance of interest should be made.- Decided in favour of revenue for statistical purposes. Addition on account of various expenditures - Held that:- The assessee had reported transportation income in his return and hence the aforesaid expenditures are allowable even against that income - Decided in favour of assessee
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2016 (1) TMI 359
Disallowance u/s 40A(3) - Held that:- We find that the payments made by cash in violation of section 40A(3) of the Act have been duly acknowledged by the recipient Shri.Amit Dutta who had deposed before the learned AO and confirmed the fact of receipt of monies in cash. Hence the genuinity of payments made by the assessee stands clearly established beyond doubt. Even for the amounts enhanced by Learned CITA in the sum of ₹ 54,01,473/-, the genuineness of the payments and the necessity to incur the said expenditure for the purpose of business of the assessee was never disputed by the Learned CITA. We hold that since the genuinity of the payments made to the parties is not doubted by the revenue, the provisions of section 40A(3) could not be made applicable to the facts of the instant case. It will be pertinent to go into the intention behind introduction of provisions of section 40A(3) of the Act at this juncture. We find that the said provision was inserted by Finance Act 1968 with the object of curbing expenditure in cash and to counter tax evasion. The CBDT Circular No. 6P dated 6.7.1968 reiterates this view that “this provision is designed to counter evasion of a tax through claims for expenditure shown to have been incurred in cash with a view to frustrating proper investigation by the department as to the identity of the payee and reasonableness of the payment.” - Decided in favour of assessee
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2016 (1) TMI 358
Addition made u/s 68 - loan received from father and from mother by the assessee for his business purposes - CIT(A) deleted the addition - Held that:- With regard to the loan received from father we find that all the three ingredients of section 68 namely identity of the creditor, genuineness of the transaction and creditworthiness of the creditor are proved beyond doubt. We find that the bank statement of father was filed before us wherein the loan received from United Bank of India and subsequent lending to assessee is duly reflected and when this was put across to the Learned DR, he fairly conceded to the stand of the assessee. Hence the addition deleted in that regard by Learned CIT-A does not require any interference. With regard to the loan received from mother in cash, it is undisputed that the assessee is a senior teacher in a school run by SAIL at Durgapur in the senior rank as Shift In charge. It is also seen that the assessee had proved the identity of creditor (his mother) and genuineness of the transaction through filing the confirmation from her mother. We also find from the confirmation placed on record that the mother had not mentioned the loan amount advanced by her to the assessee. But however, she had clearly mentioned the fact of advancing the loan and the purpose of the loan in her confirmation together with the source for advancing the loan. The status of the assessee that she is a retired school teacher and had held a senior position as Shift Incharge in a school run by SAIL at Durgapur is not disputed by the revenue. Hence in these facts and circumstances, we hold that the assessee has also proved the creditworthiness of the transaction and hence no addition u/s 68 of the Act could be made in the hands of the assessee. - Decided in favour of assessee Addition towards introduction to capital account by the assessee and addition made towards difference in opening capital balance in the capital account - Held that:- The contention of the assessee that books contain deficiencies and he is not conversant with the maintenance of accounts and the income tax affairs finds lot of force and is proved beyond doubt. Moreover, it is also found from the remand report dated 16.8.2010 submitted by the Learned AO before the Learned CITA, that , this stand has been reiterated by the assessee before the Learned AO. We find that the Learned AO could have as well summoned the concerned CA who signed the accounts for his rebuttal and ascertained the true facts in this regard. We also find from the records that the assesee had chosen to write a letter dated 11.1.2010 i.e after receiving the assessment order dated 31.12.2009, to the previous auditor asking him to explain the reasons for signing the accounts with deficiencies pointed out in the assessment order warranting huge additions. This letter was sent by speed post by the assesee and is part of our records. Admittedly, no reply has been received for the same by the assessee and hence in this scenario, we find that the assessee has been genuinely prevented from reasonable cause to put forth his case before the first appellate authority. Hence we find that the action of the Learned AO in this regard is not proper in the facts and circumstances of the case and no additions are warranted in this regard. - Decided in favour of assessee Addition on account of Debtors - Held that:- The assessee had already disclosed the turnover in respect of these two parties in the earlier years and just because the sundry debtor balance is not shown in the balance sheet of the assessee , it cannot be added as income of the assessee. Moreover, we have already held in the previous grounds that the books of accounts of the assessee contain lot of deficiencies and this was also pointed out by the assessee before the Learned AO. We have already held that the right course of action available with the Learned AO could be to reject the books of accounts and determine the profits on estimated basis u/s 145(3) of the Act which has not been done by the Learned AO in the instant case. Hence, we hold that no addition could be made in respect of balance receivable from sundry debtors in the facts and circumstances of the instant case as the sales in respect of them have already been disclosed by the assessee in the earlier years which fact has not been refuted by the Learned AO in the remand proceedings - Decided in favour of assessee Addition on account of bogus sundry creditors - CIT(A) deleted the addition - Held that:- We find that the Learned CIT(A) had duly called for a remand report from the Learned AO wherein the entire discrepancies with regard to balances in sundry creditors have been duly reconciled and no adverse comments were recorded by the Learned AO. Accordingly, the Learned CIT(A) sought to give relief to the assessee. We also find that the purchases have not been disputed by the Learned AO. Admittedly, these sundry creditors have emanated only out of purchases of the assessee and hence when purchases (ie debit entry) have been accepted as genuine, there is no scope for treating the credit entry (i.e sundry creditors) as bogus. In view of these facts and circumstances, we do not find any reason to interfere with the order of the Learned CIT(A) in this regard. Decided in favour of assessee
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2016 (1) TMI 357
Disallowance deduction u/s.80IB(10) - Held that:- No merit for declining of claim of deduction on the plea of completion certificate having been not obtained within a period of four years, in respect of projects which was approved prior to 1st April, 2005. Accordingly, the AO is directed to allow assessee’s claim for deduction u/s.80IB(10) for both the years under consideration. See case of Happy Homes Enterprises [2014 (9) TMI 707 - BOMBAY HIGH COURT ] - Decided in favour of assessee
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2016 (1) TMI 356
Disallowance of deduction u/s 10B - CIT(A) allowed the claim - Held that:- Automatic route is available to the units, which are having investment less than 100 millions as is the case of the assessee, therefore, the approval by the Director of STPI is sufficient to claim the deduction u/s 10B of the Act. Even, the green card is issued by the designated officer on behalf of the Secretary, Govt. Of India, Ministry of Information Technology and Chairman Inter Ministerial Standing Committee. It is also noted that for A.Y. 2008-09, the claim of the assessee, identically, was allowed and the claimed deduction was granted u/s 10B of the Act. This factual matrix was not controverted by the Revenue. In view of this factual position, unless and until, contrary facts are brought to our notice, the department is not expected to deny the claimed deduction. We further observe that in the absence of rectification from IMSC, no green card can be issued by the designated officer. It is just like a single window system and to avoid constrains to the assessee and further to mitigate the hardship for the development of software, such type of facilities are provided to entrepreneurs, therefore, we find no infirmity in the conclusion drawn in the impugned order. The order of the ld. First Appellate Authority is affirmed, resulting into, dismissal of appeal of the Revenue. - Decided against revenue
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2016 (1) TMI 355
Disallowance of non-genuine Purchases transactions from two parties - Held that:- In this case, the assessee has tried to prove the genuineness of the purchases, firstly, by producing the confirmation of the accounts from the said parties filed earlier at the stage of the assessment proceedings; secondly, all the details of payment made through account payee cheques duly debited from the account of the assessee and credited to the accounts of the suppliers were shown; and lastly, in case of one supplier, the assessee had also filed a copy of its bank statement to show the corresponding credit entries. Thus, under these facts and circumstances the entire purchase amount cannot be added as income from undisclosed sources. However, in such cases, at the most, the gross profit element on such purchases could be added, as contended by the ld. counsel. Accordingly, we direct the AO to apply the gross profit of 21.29% for the purchase aggregating to ₹ 52,36,013/-. After verifying the contention of the assessee that, actual purchase transaction from Gausiya Sea Foods was only ₹ 16,82,212/-. Thus, the addition would be restricted on gross profit on such purchases. - Decided partly in favour of assessee
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2016 (1) TMI 354
Addition made u/s 41(1) - genuineness of sundry creditors - Held that:- Right from the stage of the assessment proceedings, the assessee was required to furnish addresses of the creditors and to file the confirmations which up till the stage of the Tribunal also, no such details or any evidence have been filed. Further, assessee was unable to corroborate or substantiate its explanation that assessee had returned the damaged goods to the creditors and for this reason alone the assessee has not made any payment to such parties. If there was some sort of dispute regarding return of goods and non-payment, then same could have been brought on record, either by way of some kind of correspondence or communications between the parties or by way of ledger accounts of the parties. Once, the assessee is unable to discharge the primary onus cast upon him, then it is very difficult to reverse the finding of facts recorded by the AO as well as CIT(A). Under these facts, we uphold the order of the CIT(A) inasmuch as assessee has been unable to substantiate from the record that the liability in real sense is actually subsisting in this year and there is no cessation of liability. Thus, addition has rightly been made by and confirmed by the revenue authorities - Decided against assessee Addition u/s 69A on account of cash deposit made in the bank account - Held that:- The transactions of deposits and withdrawals pertained to assessee’s business activities. In support, the assessee had also filed certain details of suppliers before the CIT(A). When there are credits and debit entries, then there should have been telescoping of debit entries, which are lesser than credit entries. If overall position of entire credit and debit side is seen, then there is net credit of ₹ 3,34,107/- only. The action of the Department to confirm the entire deposits appears to be very unreasonable and unfair. Therefore, either the Department should apply a gross profit on such credit entries as prima facie it appears that these are relating to some business transaction or work-out some peak credit. Thus, in the interest of justice, we feel this matter should be restored back to the file of the AO to examine the impugned issue in the light of our observation. The assessee will give the entire requisite facts to the AO to make the proper assessment on this issue. - Decided in favour of assessee for statistical purpose.
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2016 (1) TMI 353
Revision u/s 263 - due and reasonable opportunity of being heard was not afforded to the assessee - Held that:- In the present case, it is an admitted fact that the ld. Counsel for the assessee was ill and could not represent the case of the assessee on 25.02.2015 when the ld. CIT asked the assessee to furnish its submission vide letter dated 20.02.2015. It is also noticed that the ld. CIT himself admitted that the original notice of hearing dated 20.02.2015 was served on the assessee on 27.02.2015. Therefore, it is not clear how the ld. CIT fixed the case for hearing on 25.02.2015 when the notice of hearing itself was served on the assessee after two days i.e. on 27.02.2015. It is well settled that nobody should be condemned unheard as per the maxim “Audi Alteram Partem”, we therefore, keeping in view the peculiar facts of the present case, are of the view that a due and reasonable opportunity of being heard was not afforded to the assessee by the ld. CIT. In that view of the matter the impugned order is set aside and the ld. CIT is directed to decide the issue afresh in accordance with law after providing due and reasonable opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes.
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2016 (1) TMI 352
Addition u/s 68 - non considering and appreciating the additional evidences submitted by the assessee under Rule 46A of the Income-tax Rules, 1962 before the Learned CIT(Appeals) - Held that:- After filing the additional evidence and Learned CIT(Appeals) took step provided in sub-rule(3) to Rule 46A of the Income-tax Rules giving an inference that the additional evidence sought to be produced by the assessee was relevant material and the Learned CIT(Appeals) had entertained these additional evidences and only thereafter he had sent it to the Assessing Officer under sub-rule(3) for verification. Thus, after calling of the remand report on merit as contemplated in subrule( 3) to Rule 46A, the Learned CIT(Appeals) is precluded with his discretion for refusing to admit the additional evidence. Since the Assessing Officer in his remand report had accepted the three deposits amounting to ₹ 14,34,271 in total, the Learned CIT(Appeals) was not justified in upholding the same. The same is thus directed to be deleted. So far as the balance deposit of ₹ 3,07,011 is concerned, the explanation of the assessee remained that this amount was coming from last year debtors and it was accepted by the Assessing Officer. We find that in its remand report, the Assessing Officer had not accepted this explanation in absence of filing of address and PAN, details of debtors but the Assessing Officer has not verified the explanation of the assessee that this amount was duly shown in the last year in the balance as on 31.3.2006. We thus set aside this matter to the file of the Assessing Officer to verify as to whether the amount of ₹ 3,07.011 was shown in the balance sheet of the last year and make the assessment accordingly after affording an opportunity of being heard to the assessee regarding the addition of ₹ 3,07,011. - Decided partly in favour of assessee.
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2016 (1) TMI 351
MAT computation - whether the surcharge and educational cess is leviable only after giving credit for MAT and thereafter the tax computation made by the AO in ITNS-7 attached with the impugned order dated 27.11.2014, is not a correct way of tax calculation? - Held that:- CIT(A) has correctly understood the mode of computation of tax and issued correct direction to the AO that while computing the tax, first give credit of MAT and thereafter, charge the surcharge & education cess. Since we do not find any infirmity in the direction of the CIT(A) we confirm this order. - Decided against revenue Additional depreciation u/s 32(1)(iia) - Withdrawal of additional depreciation earlier allowed to the assessee by AO u/s 154 - CIT(A) allowed the claim - Held that:- Additional depreciation cannot be denied to the assessee merely on the ground that electricity is not a article or thing. Since the issue is highly debatable, a view taken by the AO while computing the assessment cannot be revised u/s 154 of the Act. We therefore, find no justification to interfere with the order of Ld. CIT(A) as he has rightly adjudicated the issue. - Decided against revenue
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2016 (1) TMI 350
Assessment u/s 153A - disallowance on account of foreign travel having no nexus with the business of assessee - Held that:- Since assessment has already been completed u/s. 143(3) of the Act on the disputed amount of ₹ 12.77 lakh for foreign travel at the time of search that there was no incriminating material found which requires the AO to disallow the same. So in the absence of any material information quoted during the time of search we are inclined to allow the expenses incurred on foreign tour by assessee. As we have adjudicated the jurisdictional issue in favour of assessee, hence, in respect of other grounds on merit, we are refraining ourselves from adjudicating the same. - Decided in favour of assessee
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2016 (1) TMI 349
TDS u/s 194J - transaction charges paid to Stock Exchanges on which TDS was not deducted - assessee contended that it was under bona-fide belief TDS was not deductible and no disallowance be made u/s 40(1)(ia) - Held that:- no tax on the transaction charges paid/allowed by the assessee to the stock exchange shall require being deducted for tax at source u/s 194J of the Act where the assessee is able to show that tax on the same has been paid by the payee, i.e., has been offered as income subject to tax. The assessee is obliged to bring the relevant facts on record so as to satisfy the Assessing Officer with regard to the satisfaction of the condition, i.e., payment of tax on the impugned sum, subject to which only relief stands allowed to the assessee. - Decided in favour of assessee for statistical purposes.
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2016 (1) TMI 348
Eligibility of deduction u/s. 80IB(10) - CIT(A) deleted the disallowance - Held that:- CIT(A) has examined development agreement and observed that as per Clause 1, the possession of the property has been handed over the assessee. As per Clause 2, all materials required for carrying out development would be brought by the assessee. As per Clause 3, all the expenses would be borne by the assessee. Clause 10 authorizes the first authority to sell bungalow to any person. The revenue has not disputed the fact that the entire amount has been demonstrated by the assessee. The possession of the land was given to the assessee. The assessee incurred all cost and was liable for any risk or consequences. The assessee was also authorized to dispose of the sale of bungalow as per his own risk. The aforementioned observation of ld. CIT(A) is not contradicted by the Revenue by placing any contrary material on record. Hence it can be inferred from the facts placed before us that all risk and consequences were borne by the assessee. Under these facts the Assessing Officer was not justified in treating the assessee as merely a contractor. Law is well settled now by the judgment of Hon'ble Jurisdictional High Court in the case of CIT vs. Radhe Developers [2011 (12) TMI 248 - GUJARAT HIGH COURT]., that even if the developer of a project is not owner of the land but he bears all risk and consequences he cannot be denied deduction u/s.80IB(10) of the Act. The Assessing Officer has not pointed violation of any other condition(s) embodied u/s.80IB(10) of the Act under these facts. Therefore, in our view, the Assessing Officer was not justified in treating the assessee as merely a work contractor. We do not see any reason to interfere in the order of ld. CIT(A). - Decided in favour of assessee
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2016 (1) TMI 328
Deemed dividend u/s 2(22)(e) - Apex Court dismissed the revenue appeal after condoning the delay against the decision of HC [2015 (3) TMI 767 - DELHI HIGH COURT] wherein HC hald that, Loan to the assessee and the loan (in the form of credits in favour of SISICOL) were really one transaction. It is also a matter of record that the firm had over 290 branches or units and collection by it exceeded- on an average ₹ 10 crores per month. Therefore, it could not be legitimately held that amount retained by the firm was for the assessee’s benefit. The amount of ₹ 1,84,19,305 was not deemed dividend in the hands of the assessee under the provisions of Section 2 (22) (e) of the Income Tax Act, 1961.
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2016 (1) TMI 322
Addition on deemed dividend u/s 2(22) - Held that:- In the case of the assessee the provisions of Section 2(22)(e) of the Act will not be applicable because there is a close nexus between the business activity of the assessee-company and its sister concern and the loan received from the assessee’s sister concern is utilized for the very purpose of acquiring the shares of the sister concern itself in order to have a strategical edge over the competing business environment. The benefit of the entire transaction has flowed to the assessee’s sister company also because the assessee had obtained the loan from its sister company in order to purchase the shares of the very same sister company and thus avoid the perils of those shares being held by two entities thus endangering its existence. - Decided in favour of the assessee. Disallowance u/s 14A read with Rule 8D - Held that:- In the case of the assessee the provisions of Section 14A read with Rule 8D will not be applicable in regard to investments made for acquiring the shares of the assessee’s sister concerns. See EIH Associated Hotels Ltd v. DCIT [2013 (9) TMI 604] - Decided in favour of the assessee.
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Customs
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2016 (1) TMI 326
Under-valuation of goods - comparable / identical goods - appellant argued that the products mentioned in Charts A and B could not be the basis for determining the valuation of goods mentioned in Chart D. He relied upon the reasoning of the Commissioner in this behalf and submitted that the order of the Commissioner should not have been opposed by the CESTAT. We do not agree with the aforesaid submission for more than one reason. In the first instance, the CESTAT has categorically taken note of the submission of the Revenue that majority of goods listed in Chart D are identical to goods described in Charts A and B. If that is correct, coupled with the fact that the valuation of goods insofar as Charts A and B is concerned has become final, we do not understand as to how that cannot be the basis for determining the transaction value of those goods listed in Chart D which are identical to the goods described in Charts A and B. Consequently, for this purpose, the matter is remitted back to the Commissioner. - Decided against the assessee.
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2016 (1) TMI 325
Valuation of imported goods - whether ship demurrage charges paid on the import of the goods are to be included in the assessable value of the goods imported for customs duty purposes - during this period the goods could not be cleared - Held that:- it is not even necessary to go into the various nuances of the matter as we are of the opinion that these appeals are bound to fail on one simple ground. The demurrage charges are admittedly incurred after the goods reached at Indian ports and, therefore, it is a post-importation event. Such charges, therefore, cannot form part of the transaction value. Issue in this behalf is settled by this very Bench in the case of Commissioner of Customs, Ahmedabad v. M/s. Essar Steel Ltd., [2015 (4) TMI 486 - SUPREME COURT] - Decided against the revenue.
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2016 (1) TMI 323
Valuation of import of soda ash light - declared price was lower than invoice price since the market price was down drastically - Held that:- It is clear from the above that in the show cause notice itself, the Department had accepted the fact that there was slump in the international market insofar as import of soda ash light is concerned. However, we find that the mistake which was committed by the Commissioner was to straightaway refer to the aforesaid Rules in order to arrive at the transaction value. This could be permissible only if the case had been covered by the provisions under sub-section (1A) of Section 14 of the Customs Act, 1962. Sub-section (1A) makes it clear that resort to the Rules is subject to the provisions of sub-Section (1) of Section 14. As per sub-Section (1) of Section 14, the value of the goods which are imported are to be fixed at the price on which such or like goods are ordinarily sold or offered for sale. Further, the said valuation has to be done at the time of delivery and place of importation or exportation. Thus, we are of the view that in the present case, the provisions of sub-section (1) of Section 14 are clearly attracted and there was no necessity of invoking the rules. The documents clearly show the prevailing market rate of the goods in question in international market at the relevant period. On that basis, if the value of the goods was declared at USD 120 per M.T. by the respondent/importer, this was perfectly justified and in consonance with the provisions of the Section 14(1) of the Act. - Decided in favor of assessee.
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Service Tax
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2016 (1) TMI 347
Levy of penalty u/s 76 and 77 - tribunal deleted the penalty u/s 80 - The question therefore, to be decided in such case is whether the assessee established such reason for failure. - Held that:- When the department found that the assessee had received certain payments against which tax was not paid, the assessee contended that it was under bona fide belief that the amount received prior to insertion of explanation to section 67 would not invite tax. Under the insistence of departmental authority, they nevertheless, paid the entire tax along with interest on 4.1.2006, upon which a show cause notice was issued for imposition of penalty. When the entire issue was debatable, the decision of the Tribunal to delete the penalty was perfectly justified - Decided against the revenue.
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2016 (1) TMI 346
Demand of service tax - principle of natural justice - their commercial operations were brought to a complete standstill, and hence, no liability was subsisting - Held that:- the petitioner should be given an opportunity of hearing, as the same is imperative, since the facts in the present case is to be decided and the question of law that arose for consideration also be properly dealt with. The matters in issue may adversely affect the petitioner with civil consequences and when such being the position, opportunity of personal hearing before passing such an order is a must. - Matter remanded back.
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2016 (1) TMI 345
Demand of Interest beyond the scope of Show Cause Notice - appellant contended that show cause notice issued only for demanding service tax of amount of ₹ 2,40,780/- though the Order-in-original has appropriated an amount of ₹ 5,10,895/-, the interest cannot be demanded beyond the demand proposed in the show cause notice ie. ₹ 2,40,780/- and submits that the order demanding interest travels beyond the show cause notice - Held that:- It is seen that the recovery of interest of the entire service tax amount of ₹ 5,10,895/- was not covered in the SCN issued. The adjudicating authority has travelled beyond the SCN. Since he has appropriated the entire of amount of service tax, recovery of interest on the entire amount of service tax of ₹ 5,10,895/- is not covered under Section 73 (2) of the Finance Act, 1994. Hence, the appellant is required to pay the interest on the amount demanded in the show cause notice and confirmed by the adjudicating authority. Accordingly, the appeal is allowed. - Decided in favor of assessee.
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2016 (1) TMI 344
Utilization of Service Tax, paid by one assessee, by the another assessee after merger between the two - M/s. BPC Projects had merged with M/s. PSP Projects Pvt. Limited on 01.4.2009. Therefore, all the assets and liabilities of M/s. BPC Projects were taken over by M/s. PSP Projects Pvt. Limited. Hence M/s. PSP Projects Pvt. Limited are rightly entitled to avail PLA balance lying with M/s. BPC Projects on 01.4.2009. M/s. PSP Projects Pvt. Limited have paid the service tax liability of M/s. BPC Projects also after 01.4.2009. Learned Consultant contended that they had intimated the department on 26.5.2009 about their intention to utilise the PLA balance lying with M/s. BPC Projects as on 01.4.2009 towards the service tax liability of M/s. PSP Projects Pvt. Limited after 01.4.2009. Held that:- Simply because M/s. BPC Projects had not surrendered the service tax registration, it cannot be said that PLA balance lying unutilised was available with M/s. BPC Projects even after 01.4.2009. M/s. PSP Projects Pvt. Limited was the successor and the only legal entity with effect from 01.4.2009 and hence was legally entitled to utilise the said unutilised PLA balance. Hence, we find that the issue herein is only non-observance of procedure of intimation to Range Superintendent etc. and is only a technical violation, if any. Adjustment of service liability allowed - Decide in favor of assessee on merit as well as on limitation.
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2016 (1) TMI 343
Cenvat Credit - Courier Agency services used to send finished goods eligible as Input Service or not - the words “from the place of removal” were amended to read as “Up to the place of removal” - Held that:- after 01.04.2008, though the appellant would be eligible for CENVAT credit on the Courier Service used for sending/ receiving documents related to the business, or for movement of inputs and finished goods up to the place of removal, they would not be eligible for credit on Courier Services used in relation to movement of finished goods, after the place of removal. The learned Counsel has relied upon the case law of Parle International Pvt. Limited [2012 (11) TMI 195 - CESTAT, AHMEDABAD]. On perusal of the same, it is observed that in that case the Courier Service was used for sending samples to the customers for approval and for communication with their head office to send documents and other correspondences. The Tribunal held that there is clear nexus with manufacture and hence credit is eligible. The Tribunal observed that credit can be denied only when the service has been received after the place of removal. Hence this case law is of no avail to the Appellants Courier Service used by the appellants used for the movement of finished goods after the place of removal - Credit not allowed - Decided against the assessee.
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Central Excise
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2016 (1) TMI 342
Rectification of order - power of the tribunal to re-appreciate the facts and reverse the findings recorded in the Final order - tribunal set aside the demand after re-appreciating the evidence to hold that was no intention on the part of the respondent assessee to evade payment of duty and, therefore, it is not permissible to invoke extended period of limitation to demand. Held that:- It is well settled by series of decisions that a contention though taken but not decided by the Tribunal would give rise to the scope for rectification. Under the circumstances, the Tribunal was justified in entertaining contention which was raised by the assessee at the outset but not decided by the Tribunal while rendering its judgement on appeal. If that be so, the only question which remains to be decided is, whether while entertaining such a contention the Tribunal committed any legal error' Here also, we do not find any force in the contention of the Revenue. As asserted by the assessee and held by the Tribunal, the assessee had made all necessary declarations and, clearances were made with concurrence of the Department. There was no mis-declaration or a willful misstatement with a view to avoiding duty. The invocation of extended period of limitation, therefore, was rightly held not permissible. Tax Appeal is therefore, dismissed. - Decided against the revenue.
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2016 (1) TMI 341
Restoration of appeal - Whether mere attachment of property be equated as pre-deposit - petitioners had pleaded total inability to make good the pre-deposit. The petitioners had urged the Department to sell the attached properties and appropriate sale proceeds towards the pre-deposit requirement. If this was done timely, the petitioners could have pursued the appeals on merit. In any case, by efflux of time, the petitioners could not be denied the opportunity to argue the appeals on merits. Held that:- In case of Kiritkumar Jawaharlal Shah v. Union of India [2014 (9) TMI 244 - Supreme Court of India], the Supreme Court had granted permission to pursue appeal on merits even when it was seen that the requirement of pre-deposit was satisfied after a long delay. Division of this Court, likewise, in Priya Dyers v. Commissioner of Central Excise [2013 (7) TMI 533 - GUJARAT HIGH COURT] observed that, for want of fulfilling the requirement of pre-deposit, the assessee's right of statutory appeal would get destroyed and the decision adverse to him would get confirmed without decision on merits. It was observed that the Court should take a relaxed view of belated compliance of requirement of pre-deposit provided there is any explanation for the delay. In the result, the impugned order of the Tribunal dated 11.06.2015 is set aside. Both the appeals of the petitioners are restored to file and may be heard on merits.
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2016 (1) TMI 340
Valuation of goods - Refund - whether the first appellate authority was correct in coming to a conclusion that the cost of cylinder handling and maintenance charges need not be included in the value of the final product for discharge of Central Excise duty or otherwise - Held that:- No order on merits can be passed. However we find strong force in the submissions made by the learned Counsel for respondent that the demand is blatantly time barred. The issue of inclusion or non-inclusion of the cost of cylinder handling and maintenance charges was the matter which was being agitated before the various judicial forums hence appellant could have entertained a bonefide belief that the said charges need not be included in the assessable value for discharge of Central Excise duty. Accordingly, the revenue's appeals are dismissed on the point of limitation as raised by the learned Counsel. We find that appeal is also filed by revenue against the order-in-appeal which allowed the refund claim filed by assessee respondent, consequent to the order-in-appeal in his favour. We find this appeal of revenue is also devoid of merits as the refund claim arises as a consequence of the order-in-original being set aside - Decided against Revenue.
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2016 (1) TMI 339
Confiscation of the seized goods and currency - Denial of provisional release of Cash - Held that:- the provisional release of the currency is sought by the appellant only to discharge the demanded duty liability along with interest so that their case can be settled by the Settlement Commission. We find that realizing the full admitted duty liability along with interest is in the interest of the Revenue. The appellant vide their letter dated 17.06.2014 and again letter dated 7.4.2014 addressed to the jurisdictional Commissioner sought for appropriation and adjustment of the seized cash towards demand of duty and applicable interest. Even before the Hon'ble High Court, they have pleaded that they required the seized cash to be provisionally released to discharge duty liability with interest in this case so that they can approach again to the Settlement Commission for settling the case. Thus, in fact, release of the amount for payment of duty for settling the case would only safeguard the interest of Revenue. Appellant is eligible for provisional release of the cash seized on similar terms already considered by the Revenue while releasing the seized goods - Appeal disposed of.
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2016 (1) TMI 338
Demand of interest - Misdeclaration of goods - Imposition of penalty - Held that:- The respondent is not in appeal against the impugned order and has discharged the Central Excise duty confirmed by the adjudicating authority. We find merits in the submissions made by the learned departmental representative as to the interest liability arises when the demand is confirmed. We find that the show cause notice seeks to impose interest under provisions of section 11AB of the Central Excise Act 1944 and the adjudicating authority has also imposed the interest under the same section - provisions of Section 11AB came into the statute from 28 September 1996. Any interest liability on the amount of duty for the period prior to 28/09/1996 does not arise, is the law settled by the Apex Court. Respectfully following the same, in the case in hand, any interest liability prior to 28/9/96 is not liable to be imposed - Decided against Revenue.
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2016 (1) TMI 337
Order of the Commissioner (Appeals) beyond the scope of the Directions in the remand order - Availment of CENVAT Credit - claim on the outward freight - Board Circular No. 97/8/2007 dated 23.8.2007 - Held that:- When Tribunal intended that only a limited issue on which remand was made to Commissioner (Appeals) that was only open for consideration in the readjudiction. His scope of examination was to confined to that aspect only. When the Tribunal did not make a total remand of the matter, the point of limitation which was concluded was not to be reopened in remand proceeding. Therefore, the point on which conclusion was drawn by the Commissioner (Appeals) earlier that is not liable to be reviewed by him in remand proceeding because he has no power of review and he was not conferred jurisdiction by order of the Tribunal. Accordingly, Commissioner (Appeals) was expected to deal with the limited aspect which was directed by Tribunal to be re-adjudicated by him. - only on the issue of outward freight availed beyond the period of limitation shall be decided in the re-adjudication proceeding directed by this order and shall pass appropriate order. - Appeal disposed of.
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2016 (1) TMI 336
Extended period of limitation - wrong classification of the product of Diclofenac Potassium Diclofenac Diethyl Ammonium and Diclofenac Free Acid in the classification limit. - Benefit of exemption notification No. 6/94-CE dated 01.03.1994, 8/95-CE dated 09.02.1995 and 8/96-CE dated 02.03.1996 - Confiscation of land building, plant and machinery under Rule 173 Q (2) (a) - Held that:- the Central Excise Officers approved the Declaration dated 01.10.1995 filed under Rule 173 B of the erstwhile Rules. There is no dispute that the appellant declared the product and claimed the benefit of the exemption notification. In our considered view, the claim of exemption notification in their Declaration was approved by the Department, would not amount a suppression of fact with intent to evade payment of duty. We find that on the identical situation in the same product, the Tribunal in the case of M/s. Cipla Ltd., set-aside the demand on the ground of limitation - demand of duty alongwith interest and penalties on the appellant company and other appellants are set-aside on the ground as barred by limitation - Decided in favour of assessee.
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2016 (1) TMI 335
Rejection of rebate claim - Excise duty paid on the export of the goods from their factory - Held that:- amount which has been claimed as rebate is excise duty paid on the goods exported. The impugned order has been passed by the first appellate authority hence the appeal of the appellant does not lie with the Tribunal, as per the first proviso (b) of Section 35B (1) of the Central Excise Act, 1944. The remedy against such an order lies elsewhere - Decided against assessee.
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2016 (1) TMI 334
Duty demand - clandestine removal of goods - whether the appellant number one was engaged in clandestine clearances of the goods without payment of duty or otherwise, and whether appellant number 2 is liable to be penalized under rule 26 of the Central Excise Rules 2002. - Held that:- There are confessional statements of responsible personnel of the appellant number one, which indicate that there was concerted effort of clearing the goods clandestinely. The entire clandestine activity was also supported by the transaction books which were recovered from appellant number one. We find that appellant number one has mainly contested the charges on the ground that there was insufficient evidence and the investigating authorities never visited their factory nor any incriminating documents were recovered from them. It is seen from records that there was a categorical admission of the responsible person of appellant number one that MS bars were manufactured and cleared without payment of duty. We find that the entire evidence on which the revenue has relied upon was acquired from the broker who dealt with the appellant number one, for the sale of goods, clandestinely. We have perused the grounds of appeal taken by the appellant number one who is not contesting any of the findings recorded by the first appellate authority. In view of this, we do not find any merits in the appeal filed by the appellant number one, accordingly, we uphold the order that confirms the demands on them with the consequences of interest and penalty. - We do not find any reason to set aside such a reasoned order for the imposition of penalty. However, the appellant being an individual, we reduce the penalty imposed on the appellant number 2 - Appeal disposed of.
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2016 (1) TMI 333
Denial of SSI Exemption - Use of other's brand name - factory located in rural area - whether the respondent has correctly availed the benefit of Notification No.8/2002-CE dated 01.03.2002 during the financial year 2002-03 - Held that:- Show-cause notice as well as the findings of the first appellate authority clearly record that the benefit of Notification No.8/2002-CE is denied on the ground that the appellant is not eligible to avail the benefit as they are affixing the brand name of "cable craft" which does not belong to them. Be that as it may, the said Notification specifically exempts the goods on which brand name or trade name are affixed if the said goods are manufactured in a factory located in rural area - appellant's factory is situated in MIDC notified by the Government of Maharashtra hence falls under the category of exclusively carved out by a Notification. - there was a certificate issued by the Tehsildar of the Village that the factory of the appellant is located in the rural area and another certificate which has been issued by the Regional Officer, MIDC, Nagpur to the same effect. It is not the case of the Revenue, the Regional Officer, MIDC could not have issued the said certificate indicating that the respondent's factory is located in rural area. As against such a specific findings of the first appellate authority, we find that the Grounds of Appeal does not provide any evidence controverting such a certificate. We also find that the Grounds of Appeal is not contesting the genuinity of such certificate produced by the appellant. - No merit in appeal - Decided against Revenue.
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2016 (1) TMI 332
Waiver of pre-deposit - Benefit of area based exemption Notification No.32/99-CE dated 08.07.1999. - Revenue contended that since the Applicant were undisputedly engaged in the process of re-packing of goods from bulk packs, therefore they are not eligible to the benefit of said Notification w.e.f. 25.04.2007. - Held that:- On a careful analysis of the arguments advanced by both sides, we find the issue involved is substantial question of law and highly technical and debatable; it requires detailed analysis of the provisions of law, precedents and the facts involved in the present case, which would be carried out at the time of disposal of the Appeal. We also find that the Applicant had disputed the maintainability of the demand on the ground of limitation as well as non filing of appeals against the refund Orders by the Revenue. In these circumstances, we are of the opinion that the Applicant could able to make out a prima facie case for total waiver of pre-deposit of dues adjudged. Stay granted.
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2016 (1) TMI 327
Classification of Yarn - textured yarn or not - Proceedings initiated by way of letter set aside by the tribunal - later revenue issued the SCN - classifiable under Heading 5402.31 and 5401.32 or under Heading 5402.31 and 5401.32. - Held that:- In view of the fact that the show cause notice is pending adjudication, we dispose of this appeal with a direction to the Adjudicating Officer to decide the said show cause notice. - it would be open to both the parties to rely upon the respective material which, according to them support their respective case and on that basis the Adjudicating Authority shall decide the matter on merits.
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2016 (1) TMI 324
Refund claim by the buyers of goods of excess duty paid by the manufacturer - unjust enrichment - period of limitation - Earlier the classification dispute ultimately came to be settled in favour of M/s. Fenner (India) Limited who did not claim refund of differential duty on the goods - Held that:- We find that despite National Winder [2003 (3) TMI 116 - SUPREME COURT OF INDIA] has been held to be per incuriam, this Court in Allied Photographics India Ltd. [2004 (3) TMI 63 - SUPREME COURT OF INDIA] has referred the same matter to a larger Bench in the light of the conflicting decisions which it found between two Division Benches of this Court and paragraph 104 of the judgment in Mafatlal Industries Ltd. [1996 (12) TMI 50 - SUPREME COURT OF INDIA] which is a Bench of seven Hon’ble Judges of this Court. We have been informed by counsel for both the parties that the larger Bench has yet to decide this issue. Matter adjourned till the final decision is delivered by the larger bench in this regard.
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CST, VAT & Sales Tax
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2016 (1) TMI 331
Liability under HVAT - whether supplies of food and drinks to its members / non-members involved any element of sale - principle of mutuality - appellant being a member's club fall within the ambit of definition of dealer under the HVAT Act - Dealer - Held that:- Apex Court in Cosmopolitan Club v. State of Tamil Nadu and others (2008 (9) TMI 540 - SUPREME COURT OF INDIA) had set aside the said decision of Madras High Court while considering the identical issue as to whether supplies of food and drinks to its members involved any element of sale. Further, under similar circumstances the Supreme Court had remanded the case for reconsidering finding of fact regarding the relationship between the club and its members in the matter of supplying food and drinks viz., whether the club was acting as an agent of the members or whether the property in the food and drinks passed from the club to its members. - Impugned order is set aside - Matter remanded back.
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2016 (1) TMI 330
Imposition of penalty - Section 27(3) - Violation of principle of natural justice - Held that:- Additional Government Pleader (Taxes) after verifying the concerned file, by producing the same before this Court submitted that no pre-assessment notice was served before passing the impugned orders. The learned Additional Government Pleader (Taxes) also fairly submitted that the respondent may be directed to issue fresh notices and on receipt of the same, the petitioner may be directed to file their objections and on receipt of the same, the respondent may be directed to consider the objections and pass appropriate orders within a time frame. - violation of principles of natural justice is proved, the impugned orders dated 27.02.2015 cannot be sustained - Decided in favour of assessee.
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2016 (1) TMI 329
Reversal of Input Tax credit - levy of penalty under Section 27(3) of the TNVAT Act - Held that:- At the time of purchasing the goods, admittedly, the petitioner has paid the tax to the seller, which is not under dispute. The reason assigned in the impugned order is that the petitioner firm is denied Input Tax Credit just because the dealer/seller has failed to report the same before the respondents. The reason adduced by the respondent is unacceptable for the reason that when admittedly the petitioner firm has paid the tax, he cannot be made liable for the failure on the part of the seller to report the same to the respondent. - Decided in favour of assessee.
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