TMI Tax Updates - e-Newsletter
January 19, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
CST, VAT & Sales Tax
Highlights / Catch Notes
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Income Tax:
Disallowance on account of bogus purchases - Merely because notices u/s 133(6) could not be served on the suppliers, assessee- buyer cannot be put to an inconvenience of disallowance when he has provided the correct address of those parties - AT
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Income Tax:
Disallowance made towards brokerage charges paid on purchase of land - There is no basis for arbitrarily restricting the same based on suspicions to the extent of 2% as opposed to the claim of 2.8% - claim allowed - AT
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Income Tax:
TDS u/s 194B - failure to deduct tax from stake money prizes paid to horse owners - The term 'any other similar game' found in Explanation (ii) to section 2(24)(ix) has to be held as inclusive definition and has to be read ejusdem generis and as such, activity of owning and maintaining horses cannot by any stretch of imagination fall in the definition of 'card game or other game of any sort' found in section 194B - AT
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Income Tax:
Addition towards adjustment of Arm’s Length Price - The seven sets of international transactions undertaken by the assessee cannot be considered as ‘closely linked’. - AT
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Income Tax:
TDS u/s 194A - Disallowance u/s 40(a)(ia) - interest paid on delayed payment of purchases is not interest within the definition of section 2(28A) of the Act and therefore disallowance is not warranted - AT
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Income Tax:
Loss set off against the interest income - continuity of business activity after sale of business - the assessee has retained portion of employees and infrastructure i.e. fixed assets like computers, electrical equipments, furniture etc. - set off allowed - AT
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Income Tax:
Deduction u/s.80P - collective disposal of labour of its members - The assessee Cooperative society has got some work order from Praj Industries Ltd. which it had outsourced to some other concern on the condition of earning 1% commission. There is no involvement of the members of the cooperative society at all in executing the work. - Deduction not allowed - AT
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Income Tax:
Estimation of business income - books of account have not been produced - tax audit report filed before him for the first time is marred with serious discrepancy like; securing of loan and deposit in cash are in question contravention of provisions of section 269SS and 269T of the Act - Estimation @8% would serve the purpose - AT
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Customs:
Revocation of CHA licence - unauthorized usage of the CHA licence - Save and except venial breach on part of CHA under Regulation 13(n) of the CHALR, no other Articles of Charges are proved against the appellant CHA - AT
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Customs:
Classification of import of RBD Palmolein Mixture from Sri Lanka - Country of Origin -
Appellant satisfied the requirement of Country of Origin as stipulated in the DOO Rules, 2000 and therefore, was entitled to the benefit of Notification No.26/2000-Cus - AT
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Service Tax:
Classification of taxable service - Job work - activity of re-rubberisation of old, worn out rubberized rollers - inasmuch as the Business Auxiliary Service came into existence before the Management, Maintenance or Repair Service, the same has to be adopted. - AT
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Service Tax:
Refund - service tax was mistakenly paid - amount paid by the appellant under Manpower Recruitment Agency Services is required to be refunded because no tax can be collected without the authority of law - AT
News
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Centralized Processing Centre (CPC) Bengaluru awarded “ISO 9001:2008 standard for Quality Management System” Certificate by British Standards Institution (BSI) on 11 January 2016
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RBI Reference Rate for US $
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India’s Foreign Trade (Merchandise): December, 2015
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Change in Tariff Value of Crude Palm Oil, RBD Palm Oil, Others – Palm Oil, Crude Palmolein, RBD Palmolein, Others – Palmolein, Crude Soyabean Oil, Brass Scrap (All Grades), Poppy Seeds, Areca Nuts, Gold and Silver Notified
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GUIDANCE NOTE ON MEETINGS OF THE BOARD OF DIRECTORS- SS-1.
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GUIDANCE NOTE ON GENERAL MEETINGS- SS-2.
Case Laws:
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Income Tax
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2016 (1) TMI 648
Revision u/s 263 - claim of the assessee under section 10B wrongly allowed by AO - Held that:- In the absence of approval letter for 100% export oriented undertaking from the Board appointed on this behalf by Central Government in exercise of powers conferred by section 14 of Industries (Development and Regulation) Act, 1951 as specified under explanation (i) to section 10B of the Act, we are of the opinion that the ld. PCIT has rightly invoked provisions of section 263 of the Act and held that the assessee is not entitled to claim deduction under section 10B of the Act since the assessee has not fulfilled the requirement under section 10B of the Act. - Decided against assessee Eligibility to claim deduction under section 10A - Held that:- since the assessee company derives its income from export of software and received income in convertibles foreign exchange, the assessee is eligible to claim deduction under section 10A of the Act. The ld. PCIT has accepted the claim of the assessee and directed the Assessing Officer to consider the claim of the assessee for deduction under section 10A in the light of evidences as may be filed by the assessee. In view of the above findings of the ld. PCIT, the assessee is required to file the evidences to claim deduction under section 10A of the Act before Assessing Officer for verification and to decide the issue in accordance with law. - Decided in favour of assessee for statistical purposes. Addition under the head of "exchange fluctuations (net)" with respect to forward exchange contracts - Held that:- The assessee is engaged in typesetting services for Scientific, Technical and Medical (STM Publishers) who has entered into forex forward contracts through its bankers with a view to effectively hedge its foreign currency risk. Therefore, these forex forward contracts have a close proximity or rather incidental to the export business of the assessee, which cannot be considered as speculative. Section-43(5) of the Act is applicable to transactions in commodity or stocks and shares. If currency is treated as commodity, then according to section 43(5)(a) of the Act, such transaction shall not be deemed to be speculative transaction. Further, the currency cannot be treated as stock or shares because inherently they have different characteristic. Further, in the case of the assessee, the foreign exchange exposure for the relevant period specified by RBI regulations is quiet substantial in order to justify the forex transactions made by the assessee through Government recognized channel, otherwise the RBI would not have entertained these transactions and would have restrained the banks from entering into such transaction with its clients. Thus, considering the totality of the facts and circumstance of the case, we are of the opinion that the Assessing Officer has to consider the foreign exchange derivative in proportion to export turnover as regular business transaction of the assessee. If the derivative transaction undertaken by the assessee is in excess of export turnover then that loss suffered in respect of that portion of excess transaction has to be considered as speculative loss only and that excess derivative transaction has no proximity with export turnover and the Assessing Officer is directed to compute accordingly. Further, the Assessing Officer has to see whether there is any premature cancellation of forward contract of foreign exchange and that transaction should be taken out for the purpose of considering the business loss and only the transactions which are completed to be considered for the purpose of determining the business loss from the foreign exchange forward contract. With this observation, we remand this issue to the file of the Assessing Officer for fresh consideration.
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2016 (1) TMI 647
Disallowance u/s 14A - Held that:- In the present case, the assessee has earned exempt dividend income of ₹ 2,715/-. The assessee has not admitted any expenses to earn the above dividend income. The Assessing Officer disallowed the expenses to the tune of ₹ 2,33,324/- by invoking section 14A r.w.r. 8D. By taking into consideration of the facts and circumstances of the present case and keeping in view of thedecision of n the case of Joint Investments Pvt. Ltd. v. CIT [2015 (3) TMI 155 - DELHI HIGH COURT] we are of the opinion that the Assessing Officer is not justified in making excessive disallowance. Therefore, we restrict the disallowance made by the Assessing Officer to the extent of exempt income earned by the assessee and accordingly, the ground raised by the assessee is allowed. - Decided in favour of assessee Disallowance under section 36(1)(va) - employees contribution of PF has not been remitted within the due dates under the PF Act - CIT(A) deleted the disallowance - Held that:- It is not disputed by the Revenue that the assessee has not paid the employees contribution received by it before the due date of filing of the return. The Hon'ble Jurisdictional High Court in the case of CIT v. Nexus Computer (P) Ltd. [2008 (8) TMI 304 - MADRAS HIGH COURT ] has held that the PF and ESI contribution paid belatedly, but prior to due date of filing of return could not be disallowed under section 43B of the Act. Therefore, we direct the Assessing Officer to delete the addition made on this issue. Accordingly, the ground raised by the Revenue is dismissed. - Decided in favour of assessee Disallowance of expenditure claimed as revenue in nature under section 37 - Held that:- Assessee has not constructed any annexe to the existing building. Further, the Revenue could not prove that there is an addition to the rooms/restaurant of the existing building or created any annexe to the building as contended by the ld. DR. Under the above facts and circumstances, we find that the ld. CIT(A) has rightly followed the decision of the Hon'ble Jurisdictional High Court in the case of CIT v. Ooty Dasaprakash (1998 (2) TMI 77 - MADRAS High Court), wherein observed that "the expenditure incurred by the assessee for the relevant assessment years in repairing and modernising the hotel and replacing the existing components of a portion of the building, furniture and fittings could not at all be stated to be of enduring in nature, in the nature of being a capital expenditure; but, definitely such an expenditure would fall under the category of 'revenue expenditure' in nature to be allowed" . No infirmity in the order passed by the ld. CIT(A) and accordingly, the ground raised by the Revenue is dismissed. - Decided in favour of assessee
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2016 (1) TMI 646
Reopening of assessment - Held that:- The reassessment proceedings were validly initiated. The AO noticing that interest on loan was claimed as deduction against the insurance commission can definitely form a belief regarding escapement on income. The return filed by the assessee was not the subject matter on regular assessment u/s 143(3) and only an intimation u/s 141 has been issued. There is no merit in the ground raised by the assessee - Decided against assessee Brokerage paid on Commission disallowed - Held that:- In the appellate proceedings, the assessee had claimed that being a lady she cannot freely move around to procure insurance agency business and, therefore, she had engaged certain people on a commission basis. This claim of the assessee was not substantiated. The assessee did not give any details of the expenses and was not able to prove the expenses out of the LIC commission received. The CIT(A) therefore confirmed the addition made by the AO. Even before us, the Assessee could not substantiate the claim made in this regard by filing the required evidence. In these circumstances, the addition is sustained. - Decided against assessee Consultancy charges disallowed - Held that:- Though the assessee has made submission regarding disallowance of consultancy charges in the written submission filed before CIT(A), the assessee did not make take any specific grounds of appeal before the CIT(A). Hence no decision was given by the CIT(A) on this issue. Even before me no specific evidence in this regard was brought to our notice. In these circumstances, we sustain the addition made. - Decided against assessee Interest disallowed - Held that:- The assessee claimed that she has taken loan from her family members which stands at ₹ 24,40,839/- as at 31.03.2005 and she had not paid any interest on the same. The assessee also claimed that she had given interest free loan to the family members which stands at ₹ 11,62,255/- as at 31.03.2005. The assessee contended that she had also borrowed from HSBC Bank: a sum of ₹ 12,13,896/- and this amount was invested in the activity of purchases and sales of Shares & Mutual Funds and the assessee claims a set off of this interest against her incomes. In the Computation of Income, the assessee had claimed the deduction of interest paid on O.D. account at Rs.l,29,649/- against the LIC Commision received but in the appellate proceeding she has changed her stance. However this new claim of the assessee was made only before CIT(A) and was not supported with evidence and facts. The nexus between the borrowed funds and investments in shares and mutual fund could not be proved or explained. In the absence of any direct evidence, the CIT(A) held that the deduction of interest was correctly disallowed by the A.O. and in any case this deduct' on could not have- been claimed against the commission income of LIC. Even before us no evidence in this regard was forthcoming. In the circumstances, we uphold the order of the CIT(A) in this regard. - Decided against assessee Demat Charges disallowed - Held that:- The assessee has claimed that she had wrongly disallowed the demat charges of ₹ 1l6/-. The assessee claimed dividend on shares of ₹ 3,15,593/- and it was taken as exempt income. The demat charges are directly related to this non taxable income and therefore this claim was also rejected by the CIT(A). No ground to interfere with the order of the CIT(A). - Decided against assessee LIC premium - rebate u/s.88 denied - Held that:- in the light of the legal provisions of Sec.88 rebate when total income exceeds ₹ 5 lacs cannot be allowed. Therefore the decision of the A.O/CIT(A) is as per law and no interference is called for. - Decided against assessee
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2016 (1) TMI 645
Disallowance on account of bogus purchases - CIT(A) deleted the addition - Held that:- Assessee has given the details of the address, which are available with it at the time of purchases and sales tax assessment records of that assessee which proves that assessee has not provided incorrect address. Further Purchase bills shows all the requisite details of the suppliers in the bills, in our view it is a contemporaneous confirmation in itself by suppliers. Ld. AO is of the view that as both the suppliers have PAN however both of them are not assessed to Income tax. On this aspect no fault can be found with the assessee. Further disproportionate increase in packing material machinery expenditure compared to sales is the first point, which should provoke AO to make further investigation , which has not been done. In absence of further investigation such as with sales tax authorities, bankers who have received the cheque on behalf of suppliers etc. additions/ disallowance made on basis of disproportionate increase become a mere statistical exercise , which cannot be sustained. Merely because notices u/s 133(6) could not be served on the suppliers, assessee- buyer cannot be put to an inconvenience of disallowance when he has provided the correct address of those parties. In view of this we confirm the order of CIT (A) in deleting the disallowance on account of bogus purchases - Decided against revenue.
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2016 (1) TMI 644
Disallowance u/s 14A - Held that:- Rule 8D of Income Tax Rules, 1962 is applicable only prospectively i.e. from assessment year 2008-09, hence, disallowance u/s 14A of the Act for the years prior to assessment year 2008-09 has to be made on reasonable basis once the AO having regards to the accounts of the assessee is not satisfied with the correctness of the claim of the assesssee company. We, therefore, restore this issue to the file of the A.O. with a direction to re-compute the disallowance to be made u/s 14A of the Act of reasonable amount as per directions of Hon’ble Bombay High Court in Godrej and Boyce Manufacturing Company Limited(supra). As pointed out by the assessee company, the assessee company has already made disallowance of its own of an amount of ₹ 4,65,332/- being disallowance @2% of dividend income of ₹ 2,32,66,616/- received by the assessee company which basis of disallowance has been accepted by the Revenue in the preceding assessment years. The A.O. is accordingly directed to consider this aspect also - Decided partly in favour of assessee Disallowance of expenditure on purchase of monitors and batteries - revenue v/s capital expenditure - Held that:- The assessee company has not been able to bring on record any further evidence/documents or explanation before us to substantiate its contentions that these expenditure w.r.t. purchase of monitors and batteriesare revenue in nature to controvert the findings of the CIT(A). In our opinion, these expenditure are capital expenditure incurred by the assessee company and has rightly been disallowed by the A.O and sustained by the CIT(A) - Decided against assessee Adhoc disallowance of 5% out of provision for expenses - Held that:- The AO shall consider the claim of the assessee company for both the years i.e. assessment year 2005-06 and 2006-07 with respect to the assessment records and books of accounts maintained by the assessee company to ensure that no prejudice is caused to the assessee company due to double addition of the same amount leading to double taxation and at the same time the AO shall also protect the interest of revenue after verifying the claim of ₹ 4,64,58,410/- towards provision for expenses debited to the Profit and Loss Account during the assessment year 2005-06 and claimed as revenue expenditure vis-à-vis the actual expenditure incurred by the assessee company against this provision for expenses of ₹ 4,64,58,410/-. The assessee company shall be given opportunity of hearing in accordance with the principles of natural justice and the assessee company shall be allowed to produce relevant evidence in its defense to justify and substantiate its claim of provision for expenses of ₹ 4,64,58,410/- debited to the Profit and Loss Account and claimed as revenue expenditure in the return of income filed with Revenue. - Decided in favour of assessee for statistical purposes. Long term capital gain on transfer of land and short term capital gain on transfer of building and accessories - Held that:- The working adopted by the AO to bifurcate the values of land and building cannot be accepted in view the peculiar facts and circumstances of the case and the working adopted by the assessee company based on the valuation report submitted by the government approved registered valuer using land residual technique and which is also supported by the comparable sales in the vicinity and also ready reckoner rates announced by the Government is to be preferred keeping in view peculiar facts and circumstances of the case more so when the said report of the registered valuer has not been demolished by the AO with cogent evidences . The CIT(A) has allowed the appeal of the assessee company based on well reasoned order which we uphold as we have not find any infirmities in the said order whereby the CIT(A) directed the AO to adopt the values assigned to land and building by the assessee company based on the valuation report of government approved registered valuer by following land residual technique method. Hence, we direct that the values as assigned by the assessee company in valuing land and building separately both on the date of sale as also on 01/04/1981 based on the valuation report(s) dated 11.11.2004 of government approved registered valuer using land residual technique method be accepted in this particular case keeping in view facts and circumstances of the case. - Decided in favour of assessee
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2016 (1) TMI 643
Sale of shares - long-term-capital-gains or profit and gains of the business - Held that:- The assessee’s intention for purchasing the shares was purely for investment and to earn gain on a long term investment. Not only this, in earlier years also the assessee’s investment in shares have been held to be assessed under the head “capital gain”, because consistently assessee has been showing investment in shares in his personal Balance sheet purchased out of his own surplus fund. As pointed out by Ld. Counsel, the Ld. AO has misled himself by taking the Balance sheet of the Proprietary concern wherein the assessee had shown certain loan, whereas the investment have been made through personal account which is reflected in the personal Balance sheet, wherein there are sufficient own fund for making the investment. Thus, on these facts and circumstances, we hold that the shares which have been held as “investment” in the Balance sheet are to be treated as assessable under the head “capital gain” and not as ‘business income’.- Decided in favour of assessee. Disallowance of depreciation - AO has made the disallowance as there was no business activity carried out by the assessee in his proprietary concern ‘Cherry International’ - Held that:- We find that assessee had shown loss from proprietary concern, M/s Cherry International. After including depreciation, the loss has increased to ₹ 2,83,490/-. Even if there was a temporary lull in the business that does not mean depreciation on the assets appearing in the Balance sheet have to be disallowed especially when it has been brought on record that in the subsequent years the assessee’s business has again taken-up at a very high scale from where the assessee had shown huge profits. Thus, it cannot be held that simply there was temporarily lull in the business activity in this year the depreciation claimed on the assets is to be disallowed. Accordingly, depreciation claimed by the assessee is allowed. - Decided in favour of assessee.
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2016 (1) TMI 642
Disallowance made towards brokerage charges paid on purchase of land - CIT(A) deleted the disallowance - Held that:- Ld. SR.DR having gone through the facts on record still did not make any prayer seeking time for rebutting the facts and evidences on record. The reasons for the conclusion have already been brought out in the earlier part of this order as the facts would show that the genuineness of the transaction; the existence of the party etc. stood accepted by the AO himself as brokerage to the extract of 2% has been allowed. However the basis for arbitrarily restricting the same based on suspicions to the extent of 2% as opposed to the claim of 2.8% duly supported by unrebutted evidences and facts on record is absent on record. In the absence of any material justifying the restriction to 2% in the facts of the case and considering the legal position thereon, I am of the view that the finding arrived at by the First Appellate Authority deserves to be upheld. The said order was pronounced on the date of hearing itself in the open Court. - Decided against revenue
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2016 (1) TMI 641
Disallowance of ESOP expenses - Held that:- Perused orders of lower authorities and the decisions relied on. L & T Ltd. which is a group concern of the assessee wherein held that absence of a written contract by itself might not be fatal to the claim of an expenditure especially when such expenditure is based on an understanding between a holding company and a subsidiary company,but nevertheless, it is the duty of the assessee to show that what has been reimbursed as amortised ESOP cost by its holding company were actually charged by such holding company in its P & L account as expenditure and the reimbursements made by the assessee were shown as a part of its income. Assessee has to demonstrate that the services received by it from such employees were commensurate with the payment. We are, therefore, of the opinion that the claim of the assessee requires a fresh look by the AO. We , therefore, set aside the orders of the lower authorities on this issue and remit it back to the AO for fresh consideration. Assessee will be free to produce fresh evidence to justify the incurrence of such expenditure and also show that the expenditure was not claimed twice, i.e., both by the assessee as well as by its holding company. Disallowance of portion of salary paid to deputed employees - assessee explained that cost of all the employees which were deputed to serve the assessee were either booked under "8036" or under "Voith" and that debit notes raised by the assessee combined the expenses towards employees having either of the two codes- Held that:- We find considerable force in the submissions of the assessee. In fact, the Commissioner of Income Tax (Appeals) initially agreed to the extent where the payments made to the deputed employees where the cost centre is shown as "voith" is to be allowed. The question now is whether cost centre "voith" and "8036" are one and the same or not. For this limited purpose of examining as to whether "voith" and "8036" are one and the same, we remit this issue to the file of the Assessing Officer to find out whether these two cost centres are one and the same and if they are one and the same, no disallowance towards reimbursement by the company to the parent company on account of deputed employees shall be made. The Assessing Officer may call for details and decide the issue accordingly after providing adequate opportunity of being heard to the assessee. Disallowance u/s sec 14A - Held that:- As held by the Hon'ble Supreme Court in the case of M/s. Walfort Share & Stock Brokers P.Ltd. (2010 (7) TMI 15 - SUPREME COURT ) for attracting section 14A there should be a proximate cause for disallowance with relation to its tax exempt income. The Punjab & Haryana High Court in the case of Hero Cycles Ltd. (2009 (11) TMI 33 - PUNJAB AND HARYANA HIGH COURT ) held that disallowance under section 14A requires finding of incurring of expenditure where it is found that for earning exempted income no expenditure has been incurred disallowance under section 14A cannot be made. The Delhi High Court in the case of Maxopp Investment Ltd. (2011 (11) TMI 267 - Delhi High Court ) held that while rejecting the claim of the assessee with regard to no expenditure was incurred in relation to exempt income, the Assessing Officer should indicate cogent reasons for the same. The satisfaction of the Assessing Officer should be arrived on an objective basis. It is only when the Assessing Officer is not satisfied with the claim of the assessee, he can invoke the provisions of section 14A of the Act. In this case, the Assessing Officer has mechanically applied the provisions of section 14A read with Rule 8D without recording any satisfaction, which is not permissible in view of the above decisions. Respectfully following the decisions cited above, we direct the Assessing Officer to delete the addition made under section 14A of the Act. - Decided in favour of assessee.
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2016 (1) TMI 640
Validity of assessment u/s 153C - Held that:- No satisfaction in terms of section 153C of the Act were recorded by the Assessing Officer of the searched person u/s 132 of the Act to reach to a conclusion that the contents in the seized documents belongs to the assesses (i.e a person other than the searched person) and accordingly, we hold that the search assessments framed u/s 153C read with section 143(3) of the Act on the assesses herein are declared illegal and void abinitio. Since the appeals of the assessee are allowed on assumption of jurisdiction , we refrain to give our findings on the merits of the issue. - Decided in favour of assessee.
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2016 (1) TMI 639
Addition on LTCG on which the STT was not paid - penalty u/s 271(1)(c) - whether by claiming an amount representing long term capital gain, on which STT was not paid, as exempt u/s 10(38) the assessee is furnishing inaccurate particulars of his income within the meaning of the provisions of section 271(1)(c) as held by the Authorities below? - Held that:- The Hon'ble Jurisdictional High Court, in "CIT vs. The Shahabad Co-op. Sugar Mills" (2009 (10) TMI 154 - PUNJAB & HARYANA HIGH COURT), has held that making of wrong claim is not at par with concealment or giving of inaccurate information, which may call for levy of penalty u/s 271(1)(c) of the Act. For the above discussion, finding force in the grievance sought to be raised by the assessee, the same is accepted. The levy of penalty, as confirmed by the ld. CIT(A) is, hence, set aside and cancelled. - Decided in favour of assessee
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2016 (1) TMI 638
TDS u/s 194B - failure to deduct tax from stake money prizes paid to horse owners - Held that:- The lower authorities has applied the provisions of section 194B to the payments made to horse owners as “stake money” on the ground that by insertion of words ‘or card game and other game of any sort’ w.e.f. 1.6.2001, the horse racing income comes under the ambit of ‘other game of any sort’, we find that this issue had arisen in the case of Bangalore Turf Club Ltd. Vs. Union of India and others (2014 (12) TMI 843 - KARNATAKA HIGH COURT) wherein held that the amended provision of section 194B do not apply to horse racing. The term 'any other similar game' found in Explanation (ii) to section 2(24)(ix) has to be held as inclusive definition and has to be read ejusdem generis and as such, activity of owning and maintaining horses cannot by any stretch of imagination fall in the definition of 'card game or other game of any sort' found in section 194B. - Decided in favour of assessee
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2016 (1) TMI 637
Addition towards adjustment of Arm’s Length Price - as per AR arithmetical mean in respect of seven shipments should be arrived at determining the ALP and if it is variation is below 5%, there could not be any TP adjustment in view of sec.92(C) - Held that:- The seven sets of international transactions undertaken by the assessee cannot be considered as ‘closely linked’. We, therefore, refuse to accept the contention of the assessee’s counsel. Being so, we find that the judgment relied on by the ld. DR in the case of Development Consultants (P) Ltd. v. DCIT (2008 (4) TMI 340 - ITAT CALCUTTA-A) wherein it was held that the ALP should be determined on a transaction-by-transaction basis and not on an aggregate basis as argued by the assessee’s counsel. The same view was taken by the Tribunal in the case of ACIT v. UE Trade Corporation (India) (P.) Ltd.(2010 (12) TMI 224 - ITAT, NEWDELHI ) wherein it was held that the Assessing Officer was within his jurisdiction for the purpose of determining of ALP by examining each transaction separately. Further, in this case, price variation is more than 5%, Assessing Officer is justified in making adjustment of ALP determined by the tax payer and the proviso to sec.92C provides that where more than one price may be determined by the most appropriate method, the ALP shall be taken to be the arithmetical mean of such prices. In the instant case only one price has been determined under most appropriate method, the question of application of the proviso does not arise. Accordingly, the assessee is not entitled for concession as prescribed in the proviso to sec.92C(2) of the Act. - Decided in favour of revenue
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2016 (1) TMI 636
Disallowance made under section 14A read with Rule 8D - Held that:- In the case of the assessee, the Assessing Officer disallowed under section 14A read with Rule 8D, whereas the actual dividend income received by the assessee and claimed as exempt income under section 10(34). Following the decision of in the case of M/s. Daga Global Chemicals Pvt.Ltd. [2015 (1) TMI 1204 - ITAT MUMBAI ] we are of the view that disallowance under section 14A read with Rule 8D should not exceed the exempt income claimed by the assessee. The Mumbai Bench in its order sustained the disallowance on applicability of provisions of section 14A read with Rule 8D. However, the alternative claim of the assessee was that disallowance it at all should be made, it should be restricted to exempt income earned and not beyond that. Thus, we direct the Assessing Officer to restrict the disallowance to the exempt income. The alternative ground of appeal of the assessee is allowed. - Decided partly in favour of assessee in part.
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2016 (1) TMI 635
TDS u/s 194A - Disallowance u/s 40(a)(ia) - non-deduction of tax on delayed payment of dues on purchase of tractors - CIT(A) deleted the addition - Held that:- Hyderabad Bench of the Tribunal in the case of Sri Venkatesh Paper Industries P.Ltd. (2012 (9) TMI 249 - ITAT HYDERABAD) considered a similar situation, wherein it was held that interest paid on delayed payment of purchases is not interest within the definition of section 2(28A) of the Act and therefore disallowance is not warranted. - Decided in favour of assessee.
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2016 (1) TMI 634
Loss set off against the interest income - continuity of business activity after sale of business - whether entire undertaking is not sold as stock-lock barrel and there is no slump sale? - Held that:- As the assessee has not transferred the entire undertakings but only portion of it was transferred by way of business transfer agreement and the assessee has carried on the business of job work of outsourcing of ATMs business in the financial years 2005-06 and 2006-07 and earned income of ₹ 12.81 crores with the very same M/s. eFunds International P.Ltd. to whom part of the business was already sold. It was also the finding of the Commissioner of Income Tax (Appeals) that the assessee has retained portion of employees and infrastructure i.e. fixed assets like computers, electrical equipments, furniture etc. These employees and infrastructures are capable of running the business either in the same line or in any other business. It is the finding of the Commissioner of Income Tax (Appeals) that during the financial year 2007-08 relevant to the assessment year under consideration, the assessee utilizing the said employees, manpower and infrastructural facilities carried out a new contract work for M/s. Cash Link Global Systems (P)Ltd. and earned business income of ₹ 7,00,000/-, therefore he concluded that assessee in fact carried on the business even after the business transfer agreement in the year 2005. On going through the above order of the Commissioner of Income Tax (Appeals), we do not find any infirmity in the findings holding that assessee engaged in the business during the assessment year 2008- 09 and therefore loss is to be allowed. Thus, we sustain the order of the Commissioner of Income Tax (Appeals) and reject the grounds raised by the Revenue - Decided in favour of assessee.
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2016 (1) TMI 633
Penalty orders passed under section 271D and 271E - in genuine transactions - Held that:- It is not the case of the Revenue that assessee has introduced unaccounted money in the books of account as the very purpose of bringing in the provisions of section 269SS and 269T of the Act to curb the practice of introducing block money into books of account. The assessee has no intention to evade tax and did not make any attempt to make any liability. The transactions are between the HUF and individual. The individuals have accepted loans from HUF for purchase of property in their individual names and have reasonable cause for accepting such loans. - Thus as transactions were genuine and identity of the lender was established, there was no intention on the part of the assessee to evade tax, the cancellation of penalty was justified - Decided in favour of assessee
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2016 (1) TMI 632
Deduction u/s.80P denied - Held that:- As per the provisions of section 80P(2)(a)(vi) the income from the collective disposal of labour of its members shall be deducted from the gross total of income. Therefore, the eligibility to earn deduction u/s.80P(2)(a)(vi) is in respect of the amount of profits and gains of a business which is attributable to the labour of the members of the cooperative society. It is only when collective disposal of labour of its members is made either manually or mechanically then the cooperative society will be entitled to get the deduction of such income. In the instant case, the facts are different. The assessee Cooperative society has got some work order from Praj Industries Ltd. which it had outsourced to some other concern on the condition of earning 1% commission. There is no involvement of the members of the cooperative society at all in executing the work. Therefore, we find no infirmity in the order of the CIT(A) in rejecting the claim of the assessee. - Decided against assessee
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2016 (1) TMI 631
Estimation of business income - books of account have not been produced - tax audit report filed before him for the first time is marred with serious discrepancy like; securing of loan and deposit in cash are in question contravention of provisions of section 269SS and 269T of the Act - CIT(A) CIT(A) estimated the income @ 5.3% - Held that:- From the audit report, it is not known whether the assessee had maintained any daily stock register for raw material and WIP and even if the same is maintained whether the valuation of the stock was done in accordance with accepted accounting standard and practices is not known. In the backdrop of error of such magnitude as observed by the CIT(A), we hardly find any justification to scale down the estimation made by the Assessing Officer. The statutory provision as per section 44AD of the Act entitles the assessee of relatively smaller size engaged in the eligible business including the impugned business to compute profits and gains of business of presumptive being equal to 8% of the total turnover or gross receipts. This is a provision of beneficial nature which seeks to reduce hardships and tax hassles. It overrides the normal provisions of section 28 to section 43C of the Act to unable the assessee to avail this alternative route for computation of taxable business income. The statutory percentage estimated at 8% of the total turnover or gross receipts though made available to the assessee of the smaller size i.e. having a turnover of ₹ 40,00,000/- is presumed to be based on empirical studies and analysis of sample of statistical datas to arrive at the fair estimate. The percentage prescribed cannot be deemed to be arbitrary or without any rational basis. Therefore, adopting a rate of 8% of the contract receipts, in our view, is in harmony with the statutory percentage which acts as a fair benchmark. There is no justification to adopt the profit percentage declared by the assessee himself in the preceding year in preference to the statutory percentage. - Decided in favour of revenue.
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2016 (1) TMI 630
Penalty under section 271(1)(c) - unaccounted transaction of shares - dilution of quantum penalty seeked by assessee - Held that:- We find the sequence of transactions as very disconcerting and integruing. The purchase transactions is not routed through stock exchange. It is ‘off market’ transaction where shares have been acquired against payment of ‘cash’. The impugned transaction is the only transaction with the Mumbai Brokers. Again, the shares were received in the Demat Account of the assessee on 05.09.2002 after a gap of nearly 1 ½ years from its purchase on 13.04.2001. The shares were sold on 17.08.2002 whereas the shares were received in Demat Account on 05.09.2002 towards purchases, these were transferred against sale on 17.09.2002. The probe by the Investigation Wing of Income Tax Department, revealed by the purchased transactions regarding the shares of Database Finance Ltd., was not genuine. Couple with this, the fundamentals of the company were found to be negative and the company had not income of more than couple of lakhs. However, there is a huge price rise. From the above facts, it is crystal clear that the purchase transactions have been concocted and manipulated to declare wrongful long term capital gains. The transactions have been executed through Demat Account and transfer has taken place against the sale. The sale part of the transactions has not been disputed per-se. In view of the above mitigating circumstance, we feel that the assessee deserves benefit of doubt. Accordingly, we concur with the alternative plea taken by the assessee that the quantum of penalty should be reduced to 100% of the tax evaded. In our view, dilution of quantum penalty is justified. - Decided partly in favour of assessee Undisclosed LTCG - Held that:- assessee has made cheque payments against purchase for which delivery has been received. Likewise, delivery has been duly given against sale and the payment thereof has been received by cheque. The CIT(A) has accepted the purchase and sale transaction albeit holding the same as short term capital gain instead of long term capital gain. In the circumstances, it is difficult to say that the transactions do not exist per se. In the totality of circumstances, we feel that while the quantum addition has been sustained on a different footing than what was proposed by the Assessing Officer, imposition of penalty would not be justified on the basis of unproved facts. We, accordingly, set-aside the order of the CIT(A) and cancel the penalty imposed.- Decided in favour of assessee
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2016 (1) TMI 629
Excessive and unreasonable payments made by the assessee to the persons specified under section 40A(2)(b) - CIT(A) deleted the addition - Held that:- The recipient i.e. Doshi Group has earned only 2% margin towards expertise and vast existence for purchasing the tea from various customers on cost plus basis method which appears to be quite reasonable and is in accordance with the past practices. Similarly, interest @ 8% is much lower than interest on bank borrowings @ 14.5% stated to have been paid by the assessee to the bankers, interest @ 6% were paid only to specific suppliers towards small amount of security credit of ₹ 66 lakhs only as against impugned credit of ₹ 30 crores @ 8%. Therefore, the token amount credit available @ 6% does not give proper foundation for comparison. In the light of aforesaid facts and circumstances, we are in complete agreement with the findings of the CIT(A) and therefore decline to interfere. Accordingly, we hold that disallowance under section 40A(2)(b) of the Act is not called for in the facts and circumstances of the case and rightly deleted by the CIT(A). - Decided against revenue Disallowance under section 36(1)(va) - Employees Contribution to PF & ESIC paid beyond due date - CIT(A) deleted the addition - Held that:- As submitted on behalf of the assessee that only delay is for the month of January, 2005 of ₹ 28,444/- which has been deposited on 17.02.2005, the payment though delayed has been made within grace period available under Employees Provident Fund Regulations. Similarly, for ESIC contribution, the payment is stated to have been made before due date of filing of return. The CIT(A) reversed the action of the Assessing Officer and allowed the expenses incurred by the assessee for impugned payment of PF and ESIC following the decision of CIT vs. P.M. Electronics, (2008 (11) TMI 3 - DELHI HIGH COURT). We find no error committed by the CIT(A) in coming to the aforesaid conclusion. - Decided against revenue Disallowance of TDS payment under section 40(a)(ia) - TDS payment made by the assessee beyond due dates - Held that:- the relevant provisions of section 40(a)(ia) of the Act would be applicable are as per amendment carried out by the Finance Act, 2008 w.r.e.f. 01.04.2005. As per these provisions, where the tax was deducted in the month of March, 2005 but paid before due date of filing of return, deduction of corresponding expenses would be allowed. In cases, where the tax was deducted in other month of the previous year but paid before the last date of the previous year i.e. 31.03.2005, corresponding expenses is to be allowed. He accordingly, directed the Assessing Officer to allow expenses in question as per aforesaid criteria. We find no error in the conclusion of the CIT(A) and hence, we decline to interfere with his findings.- Decided against revenue Addition under section 68 - CIT(A) deleted the addition - Held that:- We find that the documents filed by the assessee have not been purportedly examined. It is not clear whether all the documents filed before the CIT(A) were present before the Assessing Officer or not. We find that the confirmation letter has been filed for subsequent year which indicates the opening balance of the earlier year. We consider it necessary that proper enquiry is conducted by the Assessing Officer to find out the bona-fides of the impugned cash credit. We observe that the Assessing Officer has failed to discharge his obligation to conduct a proper enquiry qua the lender to take the matter to logical conclusion. The CIT(A) has also accepted the version of the assessee without any enquiry from vendee. In our considered view, the proper enquiry is necessary in the circumstances existing in the case. Accordingly, We set-aside the issue to the file of the Assessing Officer with a direction to re-examine the issue - Decided in favour of revenue for statistical purposes.
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Customs
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2016 (1) TMI 626
Levy of redemption fine and penalty - Import of gold for industrial use - concessional rate of 8% of duty - Notification No. 12/2002-Cus - supplier had informed them vide letter dated 21.07.2014 that he has wrongly shipped a Gold Dore Bar of 3.347 Kg under invoice No. 20/2014 dated 8.7.2014 against requirement of 5 kg as per condition of the notification. - Held that:- It is an admitted position that there was a genuine mistake of inadvertent nature. It is a fact that the goods have been imported in contravention of the license issued by DGFT, however, since the bona fide of the appellants are not in doubt and there do not appear to be any pecuniary gain to the appellant on account of such imports, it is felt that the redemption fine needs to be revised from ₹ 7 lakhs to ₹ 2 lakhs. Personal penalty is also reduced from ₹ 3.5 lakhs to ₹ 50.000/- (rupees fifty thousand only). - Decided partly in favor of appellant.
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2016 (1) TMI 625
Revocation of CHA licence - unauthorized usage of the CHA licence - contravention of the provisions of Regulations of the CHALR, 2004 - Held that:- In charge-sheet dated 8-6-2009, no name of witnesses have been given or cited. Further, the statements of the persons which have been relied upon by the learned Commissioner, accepting the same as confessional in nature, but the said persons were neither examined nor cross-examined in the proceedings before the Commissioner and as such, have got no evidentiary value in terms of the provisions of Section 138B of the Customs Act. There is no evidence on record that the CHA license of the appellant have been allowed to be used by unauthorized person for monitory benefit. The observations of the learned Commissioner that in view of the fact that authorizations have been obtained by the appellant through the intermediary, the same are not valid. This finding is not tenable and the same is fit to be set aside. It is further pointed out that by way of footnote on the BCHAA Pass, it is mentioned - “not valid for Customs’ work”. Save and except venial breach on part of CHA under Regulation 13(n) of the CHALR, no other Articles of Charges are proved against the appellant CHA. - Consequently, the license of the CHA is restored forthwith and the balance amount of security deposit forfeited by the impugned order shall be re-credited to the CHA’s account. Thus, the appeal is allowed in part in the above terms. - Decided partly in favor of appellant.
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2016 (1) TMI 624
Classification of import of RBD Palmolein Mixture from Sri Lanka - Country of Origin - edible mixture or not - classifiable under CTH 15.17 or under 15.18 - benefit of exemption Notification No.26/2000-Cus - Held that:- there is no doubt that the goods (palmolein oil CTH 1511) imported into Sri Lanka had undergone a change at four digit level vis-a-vis the goods exported to India classifiable under 15.17. Further, in the wake of test report of FDA, the Commissioner's observation that the goods did not conform to the standards laid down under Item A-17.15 of Appendix B of PFA Rules, is without any basis. Incidentally, even if the classification is taken as CTH 15.18 even then the Country of Origin requirements remain satisfied and therefore for the purpose of assessment of duty this controversy/contention regarding classification of the impugned goods is not of any consequence though in the light of the analysis above, we are of the view that the appellant has been able to demonstrate that the classification CTH 15.18 (instead of 15.17) shown by the exporter in the invoice was pure oversight. Ld. Adjudicating authority has acknowledged that certificate of country of origin has been issued by competent Sri Lankan authority certifying that the value of non-originating material is 54.23% which is less than the 65% of FOB value of the goods which conforms to the requirement of Rule 7(b) of DOO Rules, 2000. From the foregoing discussion it is also evident that as per the requirement under Rule 7(b) of DOO Rules, 2000, non-originating materials were sufficiently processed so as to result in a different classification at the 4 digit level of the Harmonized Commodity Description and Coding System. Appellant satisfied the requirement of Country of Origin as stipulated in the DOO Rules, 2000 and therefore, was entitled to the benefit of Notification No.26/2000-Cus. - Decided in favor of assessee.
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Corporate Laws
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2016 (1) TMI 622
Sanction of Scheme of merger - Scheme of merger is hereby sanctioned with the direction to follow all the procedural formalities.
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Service Tax
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2016 (1) TMI 651
Classification of taxable service - Job work - activity of re-rubberisation of old, worn out rubberized rollers - Business Auxiliary Service or Management, Maintenance or Repair Services liable to pay service tax - Held that:- Tribunal in the case of Zenith Rollers Ltd. Vs. CCE, Noida [2013 (12) TMI 620 - CESTAT NEW DELHI]. It was observed in the said decision that the activity is equally classifiable under Business Auxiliary Service as also on Management, Maintenance or Repair Services. However inasmuch as the Business Auxiliary Service came into existence before the Management, Maintenance or Repair Service, the same has to be adopted. If that be so the same would be entitled to the benefit of exemption notification. - exempted from payment of service tax in terms of Notification No. 14/2004 - Demand set aside - Decided in favor of assessee.
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2016 (1) TMI 650
Taxability of sub-consultancy services provided to the main consultant - The appellant during adjudication took a categorical stand that the main consultant has discharged the service tax liability on the entire value of the contract and as such there is no legal liability on the assessee who is only a sub-consultant, to pay the service tax. - Held that:- As such we find that the dispute revolves around the evidence required to be produced by the assessee to show that the main consultant had paid the service tax on the full value. As per the appellant the said evidence was produced before the original adjudicating authority, who has not adverted to the same. Ordinarily in the case of dismissal for non-compliance we would have remanded the matter to Commissioner (Appeals) but as in the present case documentary evidences are required to be examined and verified, we deem it fit to remand the matter to the original adjudicating authority. - Matter remanded back.
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2016 (1) TMI 649
Credit on services not qualified as input services - Denial of credit on Professional Services, Medical Insurance and Car Insurance - credit on service tax paid on Professional Services have been denied for the reason that the invoices issued by the service provider are to the appellants office at Delhi, whereas the factory of the appellant is located at Faridabad - Held that:- There is no dispute about the service availed or the tax paid. Merely because the invoices did not contain the address of factory at Faridabad, which is purely technical, the appellants cannot be denied the benefit provided under law. The issue has been decided in favour of the assessee in Bloom Dekor Ltd. v. CCE, Ahmedabad [2013 (2) TMI 301 - CESTAT, AHMEDABAD] and National Engineering Industries Ltd. v. CCE, Jaipur (2013 (6) TMI 590 - CESTAT NEW DELHI ) in which cases, the facts are similar to the instant case. Applying the ratio of the above judgments appellants are entitled to credit of the tax on Professional Services. The credit on car Insurance and Medical Insurance were denied for the reason that they have no nexus with the activity of manufacture. During the relevant period the definition of input services had a very wide ambit covering all activities related to the business of manufacture. Therefore do not find any reason to disallow the above. - Decided in favour of assessee
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2016 (1) TMI 628
Refund - service tax was mistakenly paid - Adjudicating Authority rejected a refund claim filed by the appellant on the grounds that appellant has voluntarily paid service tax under Manpower Recruitment Agency Services - Held that:- , there is strength in the argument of the appellant that the amount of service tax paid under the head Manpower Recruitment Agency Services was not correct and the refund of the same should be sanctioned to the appellant. It is also observed from the case records that nowhere in these proceedings it has been held by the Adjudicating Authority or the First Appellate Authority that services provided by the appellant fall under the category of Manpower Recruitment Agency Services. In the absence of any such findings, an amount paid by the appellant under Manpower Recruitment Agency Services is required to be refunded because no tax can be collected without the authority of law. - Decided in favor of assessee.
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2016 (1) TMI 627
Mandatory pre-deposit (under Section 35F of the Central Excise Act, 1944, as amended with effect from 6-8-2014) - appellant had already remitted about 73% of the assessed demand as against the requirement of 7.5% - supply of tangible goods for use service - Held that:- The deposit by the assessee is however admittedly not for rendition of supply of tangible goods for use service but for Transportation of Passengers by Air Service. Compulsory pre-deposit under Section 35F imposed with effect from 6-8-2014 invites a mere administrative process, of ascertaining whether pre-deposit as stipulated was made at the time of filing the appeal or whether remittance of any Service Tax/penalty even prior to the institution of the appeal is for the same service category as is assessed and therefore counts towards compliance with the clear mandate of the amended Section 35F. On the aforesaid analysis, the plea in the present application is mis-conceived as is the application. Misc. Application is rejected. The appellant shall deposit 7.5% of the assessed demand within two weeks from today, in default, the appeal shall stand rejected for failure of the mandatory pre-deposit.
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CST, VAT & Sales Tax
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2016 (1) TMI 623
Detention of consignments - not obtaining a transit pass under TNVAT - goods which are imported from a foreign country and bound to be transported SEZ unit outside the State - The raw materials which are purchased on high seas and cleared through Chennai harbour are used in the manufacture of transformer tank, power and energy sector equipments and exported - Held that:- At this juncture, the learned counsel for the petitioner would submit that the petitioner is willing to pay the actual tax to be paid for the purpose of release of goods and on such payment, the goods detained may be directed to be released. The petitioner is willing to pay one time tax and in order to give a quietus to the issue, for the purpose of release of goods, without prejudice to their right to agitate the issue with respect to tax as well as compounding fee before the assessing authority or the revisional authority in the manner known to law, on payment of one time tax viz., ₹ 5,70,000/-by the petitioner, the respondents, shall release the consignments in question forthwith. - Petition disposed of.
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