TMI Tax Updates - e-Newsletter
January 23, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Highlights / Catch Notes
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Income Tax:
SEZ unit - The accounting entries cannot form the basis for denying the exemptions on account of warehousing charges to the assessee under section 10AA - AT
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Income Tax:
Addition u/s 68 - Each investment has not been examined separately. No material has been gathered by the A.O. to contradict the evidence filed by the assessee. The A.O. merely rejected the evidences without proper reason - no addition - AT
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Income Tax:
Levy of interest & Penalty - If the petitioner-Corporation was of the view that the provisions of Section 206C of the Income Tax Act were not applicable to the petitioner-Corporation, the Corporation should not have collected the tax at source at 5% - Demand sustained - HC
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Income Tax:
Approval granted to reopen the assessment u/s 147/148 - In the present case, the exercise appears to have been ritualistic and formal rather than meaningful, which is the rationale for the safeguard of an approval by a higher ranking officer - ITAT rightly held that there was no proper application of mind by the concerned sanctioning authority u/s 151 - HC
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Income Tax:
Addition u/s 68 - unexplained money in the guise of share transactions - blue chip companies - rates at which purchases and sales had been made could not be shown to be manipulated - The department was unable to discharge the burden that was on it to prove that the transactions were in any manner bogus or fictitious. - HC
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Income Tax:
Additions towards receipt of excise duty - non-crediting of 'Excise Duty Receivable' to the P & L Account - avoiding the provisions of Section 43B - the excise duty, recovered by it, would not constitute any income to the assessee itself in order to invite the imposition of any tax - HC
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Service Tax:
Exemption under N/N. 12/03-ST dated 20.01.2003 - retreading the tyres - The first Appellate Authority reversed to the decision (of original authority who has allowed the exemption) in his ex parte proceedings wrongly - Demand set aside - AT
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Service Tax:
Refund claim - having discharged the entire liability, whether the petitioner was entitled for refund of the amount remitted by Airport Authority of India to the 3rd respondent? - Refund allowed - HC
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VAT:
Levy of tax / VAT on brand franchisee fees - The manufacturers do not get effective control of the brand name for full commercial exploitation. As such, it cannot be considered as 'sale' of intangible goods by the assessee, which would be subject to Sales Tax - HC
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VAT:
Luxury Tax - the finding of taxability of renting of “lawn” by the assessee is correct - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2017 (1) TMI 1057
Disallowance u/s. 14A - Held that:- The Co-ordinate Bench of the Tribunal in the case of holding company of M/s. Hari Infrastructure (P) Ltd. has already decided the issue with respect to disallowance u/s. 14A has accepted the contentions of the assessee in respect of disallowance u/s. 14A on both the grounds. Thus, in view of the facts of the case, the order of Coordinate Bench and the CBDT Circular, we direct the Assessing Officer to delete the disallowance made u/s. 14A of the Act Deemed dividend addition u/s 2(22) - Held that:- The Commissioner of Income Tax (Appeals) has exceeded his jurisdiction in making addition u/s. 2(22)(e) of the Act as there is no reference of such income either in the return of income or in the assessment proceedings. Thus, the addition made u/s. 2(22)(e) by Commissioner of Income Tax (Appeals) is not sustainable and is therefore set aside being void ab-initio.
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2017 (1) TMI 1056
Exemption u/s 11 - denial of claim on non-registration under section 12AA - Held that:- Nothing has been brought on record to suggest that besides non-registration under section 12AA, the assessee has failed to fulfill any other conditions as envisaged u/s 11, 12 and 13 of the Act by virtue of which it shall be denied the exemption under section 11 & 12 of the Act. In fact, on perusal of assessment order, it is noted that the Assessing officer has noted in context of grant of ₹ 2,50,00,000 to Amber Development Authority and of ₹ 3,82,10,322 to Jaipur Metro Rail Corporation Limited that “these expenses would be admissible as application of income if it was to be considered exempted under section 11, 12 and 13 and as the benefit of section 11 is not admissible, the sum paid to these two institutions as grant would not be admissible” and hence added back to assessee’s income. Similar is the position in respect of other disallowances except for an amount of ₹ 1,57,56,523 which has been allowed in the earlier years and disallowance thereof confirmed by the ld CIT(A). It is thus clear that the Revenue has not disputed any of these expenses as application of income (except ₹ 1,57,56,523 which was already allowed in earlier years) for want of fulfilment of any of the conditions specified under section 11, 12 and 13 of the Act. Regarding applicability of section 13(8), we have already held above that in view of proviso to section 2(15) not applicable in the case of the assessee, provisions of section 13(8) would not be applicable. Rejection of books of accounts u/s 145(3) - on account of change in the accounting policy - Held that:- Coordinate Bench has already examined this matter in the year of change of accounting policy ie. AY 2009-10 and has held that “the appellant had changed method of accounting during the year under consideration but the same has been found more accurate and scientific to determine the assessee’s income. Therefore, change of accounting is bonafide and same cannot be rejected on the ground that the assessee had claimed more expenses during the year under consideration.” On the issue of depreciation and double deduction, the matter has again been examined by the Coordinate Bench earlier and decided in favour of the assessee. Nothing has been brought to our notice which controvert the said findings of the Coordinate Bench and we accordingly, do not see any infirmity in ld CIT(A) following the said decision of the Coordinate Bench. - Decided against revenue
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2017 (1) TMI 1055
Disallowance of deduction claimed u/s 10AA in respect of trading, warehousing and consultancy income - Whether the provisions of Income Tax Act 1961 will prevail over the provisions of The Special Economic Zones Act, 2005? - Held that:- Service includes trading activity if it related to the import of the goods for the purpose of the export. The provisions as specified under The Special Economic Zones Act, 2005 would have overriding effect on the Income Tax Act. Denial of exemption in respect of warehousing and consultancy services - Held that:- The assessee has raised the bill for the warehousing charges and the payment was also received for the same. The FIRC is also placed in support of the payment. Indeed the assessee has recorded the transaction as purchase and purchase return along with quantitative details of the goods in the books of accounts. Now the question arises whether the accounting entries can change the substance of the transaction. Indeed the assessee has raised the invoice for the warehousing and handling charges as evident from the invoice placed on page 29 of the paper book. The lower authorities have not brought any defect in the bill, payment of the bill and the FIRC in support of the payment. Hence in our considered view the accounting entries cannot form the basis for denying the exemptions on account of warehousing charges to the assessee under section 10AA of the Act. Similarly the exemption was denied on the consultancy charges due to non-production of the necessary details. However the assessee has produced the bills along with FIRC before the ld. CIT(A) on which remand report was also called for which are placed on the record and no defect has been reported by the learned DR regarding this. In view of above we’re inclined to reverse the order of lower authorities. Hence this ground of appeal of the assessee is allowed.
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2017 (1) TMI 1054
Claim of development expenditure and claim of deduction u/s. 54B - Held that:- What is required to be considered is the ‘capital asset being land’ in the immediately two preceding years has been used for agricultural purposes. If assessee has transferred an agricultural land as such, there is no need of computation of capital gain as the same was exempt from taxation. Therefore, the provisions of Section 54B are applicable on a land which was used for agricultural purposes earlier but sold subsequently and became a capital asset, as per the provisions. In this case what assessee transferred is a land, even though converted to plots but was used for agricultural purposes on which there was no dispute. Therefore, the deduction u/s. 54B is allowable to assessee. However, the conditions for deduction U/s. 54B has to be examined, so we direct the AO to examine whether sale proceeds are invested in the agricultural land so purchased from the funds of assessee. In view of that, while accepting the legal claim, allowance of the same is directed to be verified. In the result, ground is considered allowed for statistical purposes. Reference to claim of development expenditure in this year - Held that:- We are of the opinion that the action of the AO in restricting the amount to 25% of the claim is excessive, therefore, we restrict the amount to 10% of the claim. However, there seems to be lot of confusion with reference to the amount claimed. Assessee in the grounds claimed developmental expenditure to the tune of ₹ 23,04,435/-. AO, however, in the assessment order has stated that the expenditure was ₹ 14,39,135/- and restricted to ₹ 11,28,839/-. Ld.CIT(A) confirmed the above amount but has noted in para 6 that assessee claimed ₹ 22,90,808/- against the sale proceeds of ₹ 37,10,250/-. Since there is no uniformity in the amount of expenditure, we direct the AO to verify the assessment records and restrict the amount on correct amount of claim made and work out the capital gains. With these directions, the ground is considered partly allowed, accordingly this appeal is partly allowed.
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2017 (1) TMI 1053
Applicability of Section 40(a)(ia) - non deduction of tds ‘professional charges’ - AO disallowed the amount on the reason that the services rendered by the said person are technical services and as per the provisions of Section 9(1)(vii)(b), the payment was liable for TDS - India-USA DTAA - period of stay in India - Held that:- CIT(A) made a mistake in calculating days by including day of arrival and day of departure also for the period of stay. One of the days is to be excluded to consider the period of stay. If that is taken into consideration, for the seven trips made by Mr. Joe Mitchell, the period of stay will come to eighty six days i.e., less than ninety days. Looking at either way, as the amount is not taxable in India applying the provisions of DTAA, question of disallowance u/s. 40(a)(ia) does not arise. Moreover, from the record, no steps were taken by the AO u/s. 201 / 201(1A) under the provisions of TDS. Keeping the amendment brought to Section 40(a)(ia) on this issue also, we have to hold that the amount is not disallowable u/s. 40(a)(ia). Accordingly, assessee’s grounds are allowed. AO is directed to exclude the amount and allow the same as deduction. - Decided n favour of assessee.
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2017 (1) TMI 1052
Rectification of mistake - case law referred to in paperbook not considered - Held that:- It is settled position in law that statement of fact recorded in the order of the Court/Tribunal has to be accepted as correct and conclusive. It cannot be contradicted by affidavit or otherwise In this case, the Tribunal has categorically recorded in the impugned order, that the decision of Manilal Tarachand (2001 (9) TMI 57 - GUJARAT High Court) was not one of the decisions referred to during the course of hearing of 9th September, 2015 as it states cases referred to have been dealt with. Thus, the aforesaid case laws would not apply to the facts of the present case. In the present facts, as pointed out hereinabove, the Tribunal has categorically recorded that all the decisions which were referred to and relied upon by the petitioner on the date of hearing on 9th September, 2015 have been dealt with.
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2017 (1) TMI 1051
Addition u/s 68 - Held that:- Perusal of the chart given shows that the companies do have creditworthiness. Some of these investing companies are NBFCs and registered with the RBI. Such companies cannot be treated as paper companies without the A.O. gathering any evidence in support of such a finding. The assessee has furnished letters of confirmations from the investors, their full address, income tax Permanent Account numbers, copies of investors bank statements, acknowledgments of these companies of filing returns of income, balance sheets, P & L A/c etc., which does demonstrate the identity of the investing companies. The creditworthiness is proved by the substantial funds that these companies have. A perusal of the report of the Inspector of Income Tax shows that, nothing adverse has been recorded consequent to inspection and investigation. Each of the investment has not been individually examined by the A.O. It is well settled that for making an addition u/s 68 of the Act each credit has to be separately investigated and conclusions arrived at. In this case a general view has been taken by the revenue authorities. Each investment has not been examined separately. No material has been gathered by the A.O. to contradict the evidence filed by the assessee. The A.O. merely rejected the evidences without proper reason. Under these circumstances, we are of the considered opinion that the addition made under section 68 cannot be sustained. - Decided in favour of assessee
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2017 (1) TMI 1050
Transfer pricing adjustment - most appropriate method for determining ALP of business activity carried on by assessee with its AE - Held that:- the incurring of high advertisement and marketing expenses by the assessee. does not in any manner affect the determination of ALP under the RPM. It is but natural that only those expenses can have bearing on the gross profits that are debited to the Trading account. As the amount of advertisement and marketing expenses finds its place in the Profit and loss account, the higher or lower spend on it cannot affect the amount of gross profit and the resultant ALP under the RPM. As observed from the order passed by the Ld. TPO for assessment year 2005 - 2006 and 2006 -2007 that the Ld. TPO has accepted RPM as the most appropriate method and gross profit/sales as the relevant profit level indicator for benchmarking international transactions of the assessee . on similar facts. For the year under consideration Ld. TPO appears to have made the transfer pricing adjustment only on account of losses incurred in the year under consideration. In such circumstances we hold assessee to be a Distributor and hold that RPM prima facie appears to be the most appropriate method in the facts and circumstances of the instant case.
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2017 (1) TMI 1049
Claim of deduction u/s 80IA(5) denied - selection of initial or first assessment year - Held that:- The assessee who is eligible to claim deduction under S.80IA has been given an option to choose initial/first year from which it may desire to claim the deduction for ten consecutive years out of the slab of 15 or 20 years as prescribed under the above sub-section. The term 'initial assessment year' has been held to mean the first year opted to by the assessee for claiming deduction under S.80IA of the Act. Thus, it is clear that the initial assessment year is not the year of operation or commencement of business, as interpreted by the Assessing Officer, but it is the first year in which the assessee has opted to claim the deduction under S.80IA. In view of this clarification of the Board, which clinches the issue in favour of the assessee, and is binding on the Revenue authorities, we accept the contentions of the assessee in this behalf, and direct the Assessing Officer to allow the claim of the assessee, after verifying the records as to the initial assessment year in which the assessee for the first time has claimed the deduction under S.80IA and consider the income of the assessee from the eligible unit from that year alone on a stand alone basis. Assessee's grounds on this issue are accordingly allowed . See M/s Hyderabad Chemical Products Pvt. Ltd., Vs. ACIT [2016 (7) TMI 253 - ITAT HYDERABAD ] Disallowance u/s 14A - assessee is aggrieved because CIT(A) has sustained the disallowance u/r 8D(2)(iii) - whether the investment which has not generated income should also be considered to calculate the quantum of disallowance or the whole investment as per balance sheet should be applied to disallowance as per rule 8D? - Held that:- In applying the formula prescribed under rule 8D(2)(iii) of the Rules, the AO has included all investments, whether it yielded any tax free income or not. It is only the investments which yield tax free income that has to be considered for applying the formula prescribed under rule 8D(2)(iii). Considering this view, we direct the AO to consider only the investments, which yielded the exempt income in the formula under rule 8D(2)(iii) and accordingly, disallow the expenses relating to exempt income.
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2017 (1) TMI 1048
Penalty under section 271(1)(c) - defective notice - 'inappropriate words’ and ‘paragraphs’ in the standard proforma of the notice issued under section 274 r.w.s. 271 of the Act not excluded - Held that:- Apex Court in the case of Dilip N. Shroff (2007 (5) TMI 198 - SUPREME Court) in respect of holding that ‘inappropriate words’ and ‘paragraphs’ in the standard proforma of the notice issued under section 274 r.w.s. 271 of the Act as used by the AO were required to be deleted and the same not having been done, the impugned notice issued on 11.03.2015 for assessment year 2012-13; then the fact the impugned notice/order suffers from non-application of mind, still holds good and is intact. The assessee should succeed on this legal issue. We, therefore, while taking into consideration the facts and circumstances of the case on hand and applying the ratio and deriving support from the aforesaid decisions of the Hon'ble Apex Court (discussed supra), hold that the notice dated 11.03.2015 issued for initiation of penalty proceedings under section 274 r.w.s. 271 of the Act for levy of penalty under section 271(1)(c) of the Act for A.Y. 2012-13 is defective and issued without application of mind and is therefore invalid and consequently the orders levying penalty under section 271(1)(c) of the Act for A.Y. 2012-13 is also invalid and liable to be cancelled. In this view of the matter, the additional ground raised by the assessee for A.Y. 2012-13 is allowed. - Decided in favour of assessee
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2017 (1) TMI 1047
Disallowance of Sale Promotion expenses and Travelling expenses @10% of the total expenditure - Held that:- It is quite clear from the manner in which the disallowance was initially made by the Assessing Officer and, thereafter partly confirmed by the CIT(A), that the same is based on mere surmises without bringing out any specific instances of expenditure having been incurred for non-business purposes, inspite of the fact that the complete details were made available by the assessee in the course of the proceedings. In this view of the matter, we deem it fit and proper to set-aside the action of the CIT(A) and direct the Assessing Officer to delete the entire disallowance since the decision of the CIT(A) is based on some conjectures and surmises - Decided in favour of assessee Disallowance u/s 14A - Held that:- As noticing that the interest-free funds available with the assessee in the shape of Share capital and Free Reserves being more than investments in question, a presumption can be drawn that such investments have been made out of such interest free funds, and accordingly no disallowance under section 14A of the Act is merited out of the interest expenditure. As a consequence, the disallowance made under section 14A by applying Rule 8D(2)(ii) of the Rules is hereby deleted. - Decided in favour of assessee Disallowance on account of expenses computed the same in terms of Rule 8D(2)(iii) - Held that:- The disallowance computed by the Assessing Officer is quite excessive inasmuch as the exempt income is merely to the extent of ₹ 4,86,505/-, whereas the disallowance out of expenses has been made to the tune of ₹ 6,30,407/-. Considering the entirety of facts and circumstances, we deem it fit and proper to retain the disallowance to the extent of the exempt income and balance of the disallowance is directed to be deleted. TDS u/s 195 - disallowing remuneration paid to consultants by invoking section 40(a)(i)on non deduction of tds - DTAA - period of stay - Held that:- No reason to disagree with the stand of the assessee that the payments in question are liable to be taxed under the respective Articles of Indo-Japan & Indo-Italy DTAA governing Independent Personal services. Once it is held that the payments fall under the Article governing Independent Personnel services, the same can be taxed in India only, if the two individuals have stayed in India for more than 183 days during the previous year relevant to the assessment year under consideration. In so far as the duration of stay is concerned, there is no dispute that the two individuals have stayed in India for a period of less than 183 days during the previous year relevant to the assessment year under consideration. Thus, such payments are not liable to be taxed in India and there is no fault on the part of the assessee in not deducting tax at source on such payments. Therefore, the lower authorities were not justified in invoking section 40(a)(i) of the Act to disallow the impugned expenditure - Decided in favour of assessee Disallowance of interest u/s. 36(1)(iii) - no loan was taken by the assessee during the year - Held that:- It is relevant to note here that before the CIT(A) it has been specifically pleaded by the assessee that ‘there is no extension of business during the year and even if the loan is taken for acquiring the purpose of acquiring capital assets unless they are used for expansion of existing business, interest expenses should be allowed’. The aforesaid stand of the assessee is supported by the phraseology of section 36(1)(iii) of the Act, as it stood for the assessment year under consideration and in the absence of any factual repudiation to the same, we find no reason to interfere with the ultimate conclusion of the CIT(A) in deleting the addition.- Decided in favour of assessee Disallowance of prior period expenses - Held that:- Such expenses were in-fact relatable to the previous year relevant to the assessment year under consideration and in the details submitted to the Assessing Officer it was erroneously typed as 21/08/2008, whereas the relevant date was 21/3/2009, corresponding to the assessment year under consideration. Also ctually no deduction was claimed, as such expenses were duly capitalized. The CIT(A) correctly noted the submissions and deleted the addition on the ground that no deduction was claimed to the P&L Account as the expenses were capitalized.- Decided in favour of assessee Addition of the repair and maintenance expenses - Held that:- There is no material to controvert the finding of the CIT(A) that an amount of ₹ 18,24,489/- already stands capitalized by the assessee. Therefore, the CIT(A) justifiably deleted the said addition as otherwise it would have amounted to double disallowance. So far as the balance addition of ₹ 43,17,791/- is concerned, the finding of the CIT(A) is that the same has been incurred on repairs. Even the details of the repairs to buildings reveal that the same have been incurred on repairs and maintenance of existing assets, for instance replacement of fencing, repair of tile work in the administrative block, whitewash and partition, dismantling of old damaged wall, etc. None of the items of expenses have been shown to result in acquisition of any new asset. Considered in the light of the material on record, we find that the CIT(A) made no mistake in holding that the expenses are in the nature of routine repairs and not in the nature of capital - Decided in favour of assessee Rework the adjustment u/s. 145A - Held that:- The assessee could not have foreseen at the time of filing of the return of income the impact of the adjustment under section 145A of the Act, because the same was made by the assessing authorities in the assessment for assessment years 2005-06, 2006- 07 and 2008-09. It is only after the appellate authorities upheld the stand of the Assessing Officer for the said assessment years that the consequential claim of the assessee would spring up. Therefore, under these circumstances, it was quite germane for the assessee to have raised such a plea before the CIT(A), who justifiably admitted the same. In our considered opinion, the CIT(A) has made no mistake in directing the Assessing Officer to consider the plea of the assessee and rework the adjustment under section 145A as per law.- Decided in favour of assessee
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2017 (1) TMI 1046
Gain from sale of shares - assessed as a business income or short term capital gain/long term capital gain - Held that:- In this case, transactions were more than 150 and in that case it was observed that if delivery based transactions are available, then, profit received from such transaction is to be treated as short term capital gain or long term capital gain. Thus, taking into consideration overall facts, we are of the view that the ld.Revenue authorities below are not justified in treating the assessee as trader in the shares, therefore, we allow the first fold of grievance and set aside assessment as a business income. We direct the AO to accept the claim of the assessee, and assess this amount as a short term capital gain. Weighted deduction under section 35(2AB) - Held that:- CIT(A) has failed to adhere to conditions contemplated in section 35(2AB) of the Income Tax Act and Rule 6(7A) of the Income Tax Rules. The finding of the ld.CIT(A) that the assessee was not maintaining separate accounts is factually incorrect. As duly pleaded before the ld.CIT(A) that it has been maintaining separate ledger accounts, which was duly certified. This was for the DSIR to consider before grant of approval. DSIR has not disputed it, and therefore, granted approval. Whether after satisfying itself for grant of approval, DSIR can grant approval for specific period on the strength of some policy formulated by it? - Held that:- The Act nowhere authorizes DSIR to grant approval for specific period. The job of DSIR was not find out whether R&D activity was carried out by the assessee or not, and the expenditure were incurred or not. Respectfully following the decision in the case of Claris Life Sciences Ltd [2008 (8) TMI 579 - Gujarat High Court ], we allow this ground of appeal and direct the ld.AO to grant weighted deduction under section 35(2AB) of the Income Tax Act, 1961.
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2017 (1) TMI 1045
Allowability of legal expenses - allowable business expenditure - Held that:- The fee/legal expenses paid by the assessee is an allowable deduction, more specifically when the same was paid through banking channel and the Assessing Officer has neither contradicted the genuineness of payment and has also not brought any contrary material on record, evidencing that no such payment was made by the assessee, therefore, this ground of the assessee is allowed. Computing the income from share transaction - “business and profession” OR “Capital Gain” - Held that:- When the assessee treated the transactions as investments in the books of accounts, which includes both long term and short term, the intention of the assessee for acquiring the shares, source of acquisition are out of own funds/family funds, the assessee valued the shares under investment portfolio at cost and never valued them at market price or realization value, it has to be treated as short term capital gain. During hearing, the ld. counsel for the assessee claimed that in earlier years, such transaction of the assessee were assessed as short term capital gain/long term capital gain. This factual matrix was not controverted by the Revenue, consequently we are of the that unless and until contrary material is brought on record no U-turn is expected from the Department. Considering the totality of facts, we are of the view, the assessee transacted the shares as investor, therefore, it cannot be treated as business income. This ground of the assessee is, therefore, allowed.
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2017 (1) TMI 1044
Charging of fees under section 234E - intimation issued by the Assessing Officer under section 200A - Held that:- Amendment to section 200A(1) of the Act is procedural in nature, then the Assessing Officer while processing the TDS statements / returns in the present set of appeals for the period prior to 01.06.2015, was not empowered to charge fees under section 234E of the Act. Accordingly, intimation issued by the Assessing Officer under section 200A of the Act in all the appeals does not stand and the demand raised by charging the fees under section 234E of the Act is not valid and the same is deleted. - Decided in favour of assessee.
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2017 (1) TMI 1043
Addition as investment in Emmar Hills and Townships - non accepting the assessee’s submission that these payments were made from the income in the hands of the company, advances given for the property out of said income as there was no other income for the assessee - Held that:- There was no cash at the time of survey and it has been accepted that cash has been received and utilized by the Directors at the time of survey operations. When the same reply was furnished before the CIT(A), he accepted the same and deleted the addition made by the AO by holding that the amount was already offered as additional income in the hands of company and the company has passed the necessary entries showing as advance given to the assessee and hence the sources for the investment was explained as expenditure. Therefore, considering the facts of the case, we do not find any infirmity in the order of the CIT(A) in deleting the addition made by the AO and the same is here by upheld dismissing the grounds raised by the revenue on this issue. - Decided in favour of assessee
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2017 (1) TMI 1042
Assessment u/s 153C - Held that:- Inspite of requests by the assessee, Ld AO has not furnished copy of the satisfaction note to the assessee. The same is also evident from the reply furnished by the AO in response to the CIT(A) vide remand report No merit for the assessment framed u/s.153C / addition made without recording satisfaction by the AO of searched person and / or without finding incriminating material. Since we have already decided the legal issues in favour of the assessee, we are not going into merit of the addition so made. - Decided in favour of assessee
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2017 (1) TMI 1041
Reopening of assessment - reopening initiated by AO on the basis of material provided by the Principal Director of Income Tax (Investigation) - assessee engaged in bogus share applications - Held that:- Genuineness of the various companies who made share applications are doubted. The assessee is alleged to have been engaged in bogus share applications from various bogus concerns operated by Shri Pravinkumar Jain. The assessee is the beneficiary of the said transactions of share application by those bogus concerns. In the wake of information received by the Assessing Officer, when Assessing Officer formed a belief that the investment made from the funding of such companies which are bogus, the Assessing Officer has rightly assumed the jurisdiction of initiating the reassessment proceedings. Assessing Officer, on the basis of information subsequently having come to his knowledge, recognized untruthfulness of the facts furnished earlier. In the present case, since both the necessary conditions to reopen the assessment have been duly fulfilled, sufficiency of the reasons is not to be gone into by this Court. Information furnished at the time of original assessment, when by subsequent information received from the Principal Director of Income Tax (Investigation), Ahmedabad, itself found to be controverted, the objection to the notice of reassessment under section 147 of the Act must fail. Thus it cannot be said that impugned notice issued under Section 148 of the Act is without jurisdiction and/ or contrary to Section 147 of the Act. - Decided against assessee
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2017 (1) TMI 1040
Reopening of assessment - Held that:- In the present case on receipt of information that, a suspicious transaction of ₹ 2.20 crores had happened in respect of the account of the assessee for the relevant financial year, the assessing officer had undertaken the exercise of issuance of notice under Section 148 of the Act of 1961. It appears from the material made available on record that, the assessing officer had applied his mind to the materials placed before him before issuance of the notice under Section 148. He was informed of a suspicious transaction which had resulted in a sum of ₹ 2.20 crores approximately coming into the account of the assessee by way of diverse transactions. On basis of such information, he had applied his mind and formed an opinion that he should undertake an exercise under Section 148. He has explained his stand after the objections were raised on behalf of the assessee. In the order dated August 5, 2016 while disposing of the objections the assessing officer has stated that, during the verification of a report of suspicious transaction, it was found that, huge unaccounted cash deposit made in the bank account of individual person of a concerned bank and the deposited cash of such bank account was finally transferred by issued cheque routed through various companies to the assessee and other beneficiaries during relevant financial year. In such circumstances, he finds that, the assessee had received a fund of ₹ 2.20 crores from sources which were not found to be disclosed. The assessing officer has given reasons for the invocation of Section 148. He has disclosed the foundational basis for doing so. The basis cannot be wished away as mere surmise. He is not required to have conclusive proof at the stage of Section 148.
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2017 (1) TMI 1039
Seeking recovery of the tax, interest and penalty under the provisions of Section 206C - Held that:- A finding of fact is recorded by the Commissioner of Income Tax, that the tribals are engaged only as labourers to collect the forest produce that is secured by the Corporation. In any case, since a tribal individual cannot be included within the meaning of the term “seller”, the case of the petitioner that the tribal individual was the first seller and the petitioner-Corporation is the second seller and was, therefore, not liable to collect the tax at source is liable to be rejected. If the petitioner-Corporation was of the view that the provisions of Section 206C of the Income Tax Act were not applicable to the petitioner-Corporation, the Corporation should not have collected the tax at source at 5%. Admittedly, the petitioner-Corporation had collected the tax at source from the buyers at the auction but the same was collected at a lesser percentage than that is specified in the entry in column (3) of the table. Though the petitioner-Corporation was liable to collect tax at source at 15%, the petitioner-Corporation had collected the same at 5% only and that resulted in the imposition of interest and penalty on the petitioner-Corporation. We do not find any illegality in the action on the part of the Assistant Commissioner of Income Tax in directing the petitioner-Corporation to pay the interest and penalty on the short fall in the collection of tax at source.
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2017 (1) TMI 1038
Reopening of assessment - reasons to believe - non-failure on the part of the assessee to disclose truly and fully the transaction - Held that:- It is required to be noted that the assessee was required to furnish the full particulars with respect to the payment of full sale consideration of ₹ 43 lakh. He could not have produced the similar material like return of income, books of account, ledger account, bank statement of his wife. In the objections the petitioner had not stated that the sale consideration was required to be paid by both of them i.e. 50% 50%. From the sale deed it appears that out of ₹ 43 lakh towards sale consideration, ₹ 23 lakh are alleged to have been paid by cash. It is required to be noted that it is the case on behalf of the petitioner that in earlier year he sold the property worth ₹ 67 lakh (approximately) and therefore, he was having the cash. However, it is required to be noted that in the objections the assessee has not come out with the said case. It is required to be noted that sale consideration with respect to the aforesaid transaction is more than ₹ 30 lakh, as per the relevant Rules, in the return of income itself the same was required to be disclosed, which even considering the manual return filed by the assessee it appears that the petitioner assessee has not disclosed sale transaction. Shri Soparkar, learned advocate appearing on behalf of the assessee has submitted that so far as the assessee is concerned, the sale consideration qua him will be ₹ 21,50,000/which is less than ₹ 30 lakh and therefore, the said Rule shall not be applicable. The aforesaid cannot be accepted. What is required to be considered is the total consideration of the transaction which admittedly is about ₹ 43 lakh. Therefore, it is the case of non-failure on the part of the assessee to disclose truly and fully the aforesaid transaction. Therefore, all the requirement under Section 147 of the IT Act to reopen the assessment have been satisfied. - Decided against assessee.
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2017 (1) TMI 1037
Transfer pricing adjustment - selection of comparable - SEL and VTI companies - Held that:- Revenue has itself accepted SEL and VTI as comparables for the earlier assessment years. Therefore, if the Revenue were of the view that only because of the losses in the subject assessment year the two companies are not comparable, then further examination / enquiry ought to have been done by the Revenue to find out that whether the loss was a symptom of the reference points in Rule 10B(2) of the Rules making it noncomparable. This is more so as the Revenue before us does not dispute that otherwise the two companies are comparable to the respondent assessee even on the parameters laid down in Rule 10B(2) of the Rules. Therefore, if in the present facts, the Revenue seeks to discard the two companies SEL and VTI from the comparables for the subject assessment year, the onus would be upon the Revenue to justify the same. The issue with regard to the exclusion of the DEPB benefit stands concluded by virtue of order of this Court for earlier assessment years against the Revenue and in favour of the respondent assessee. So far as depreciation is concerned, we find that the analysis done by the Tribunal to include DEPB benefit to hold it to be an operating revenue to determine operating profit, would be equally applicable in case of depreciation for the purposes of holding it to be an operating expenses to determine operating costs. It must be borne in mind that the depreciation which is incurred by the comparables are not being excluded before arriving at the total cost while applying the TNMM method for the purposes of determining the ALP price of the respondent assessee's export to its Associated Enterprise. The comparison to determine the ALP has to the extent possible has to be done between like to like and similar to similar One sided exclusion would lead to distortion in comparison.
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2017 (1) TMI 1036
Approval granted to reopen the assessment under Section 147/148 - Held that:- Section 151 of the Act clearly stipulates that the CIT (A), who is the competent authority to authorize the reassessment notice, has to apply his mind and form an opinion. The mere appending of the expression ‘approved’ says nothing. It is not as if the CIT (A) has to record elaborate reasons for agreeing with the noting put up. At the same time, satisfaction has to be recorded of the given case which can be reflected in the briefest possible manner. In the present case, the exercise appears to have been ritualistic and formal rather than meaningful, which is the rationale for the safeguard of an approval by a higher ranking officer. For these reasons, the Court is satisfied that the findings by the ITAT cannot be disturbed. - Decided in favour of the assessee.
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2017 (1) TMI 1035
Disallowance u/s.40(a)(ia) - retropectivity - Held that:- High Court in the case of CIT Vs. Ansal Land Mark Township (I) Pvt.Ltd. [2015 (9) TMI 79 - DELHI HIGH COURT] has taken the view that the insertion of the second proviso to Sec.40(a)(ia) of the Act is retrospective and will apply from 1.4.2005. Once it is held that the Assessee is entitled to the benefit of 2nd proviso to Sec.40(a)(ia) of the Act, the CIT(A) ought to have directed the AO to verify whether the recipients have included the receipts paid by the assessee in their respective returns of income and also paid taxes on the same. To the extent the recipients from the Assessee have so included the sum in their returns of income and filed the same, no disallowance u/s.40(a)(ia) of the Act ought to have been sustained by the CIT(A). CIT(A) ought to have also directed the AO that in case the recipient parties are not cooperating in providing details, the AO should call for the information u/s. 133(6) or 131 of the Act, for verification of the same. In this regard we also find that the Assessee has furnished all the details of assessment particulars of the recipients of payment from the Assessee. The AO therefore should not have any difficulty in making the required verification. We therefore set aside the order of the CIT(A) to the extent to which he had sustained the order of the AO on the disallowance u/s.40(a)(ia) of the Act and remand the issue to the AO to verify whether the recipients have included the receipts paid by the assessee in their respective returns of income and also paid taxes on the same. To the extent the recipients from the Assessee have so included the sum in their returns of income and filed the same, no disallowance u/s.40(a)(ia) of the Act should be made by the AO. In case the recipient parties are not cooperating in providing details, the AO should be directed to call for the information u/s. 133(6) or 131 of the Act, for verification of the same. - Decided in favour of assessee for statistical purpose
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2017 (1) TMI 1034
Levy of penalty u/s. 271(1)(c) - invalid notice - Held that:- In view of the fact that the notice issued for levy of penalty u/s. 271(1)(c) is ambiguous and vague and does not specify the charge for levy of penalty, the same is held to be bad in law and hence the subsequent proceedings arising there from are vitiated. The impugned order is set aside and the appeal of the assessee is allowed.
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2017 (1) TMI 1033
Bringing the income to tax in the hands of HUF - Held that:- We have noticed that the CIT(A) has given direction according to the facts of the case and in consequence of CIT(A)’s order there is no liability or case pending against the assessee. As such there can be no grievance to the assessee. It is premature to adjudicate in the case of ‘HUF’. In the case of HUF, the issues that may arise are that the return of income was filed by the individual instead of ‘HUF’ due to ignorance of law by the assessee and whether the reopening in the case of ‘HUF’ was within the time limit. All these are the issues that may arise in the case of HUF before the AO and there cannot be any grievance to the assessee before us in these proceedings. Therefore, the present appeal is not maintainable. Accordingly, it is dismissed as not maintainable.
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2017 (1) TMI 1032
Validity of reopening of assessment - objections not been dealt with on merits by the Assessing Officer - Held that:- It is not in dispute that even against the reasons recorded by the present Assessing Officer namely Shri M. Anand Kumar the petitioner assessee did submit the objections vide communications dated 06.09.2016 and 18.10.2016. However the same has not been dealt with on merits by the Assessing Officer who has issued the impugned notice under Section 148 of the Act on the ground that the same are submitted belatedly. However, it is not in dispute that till 06.09.2016 and 18.10.2016 the Assessing Officer had not finalized the reassessment proceeding. Therefore, the Assessing Officer ought to have considered and disposed of the objection on merits, which the Assessing Officer is bound to dispose of. Under the circumstances, present petition is disposed of at this stage by directing the Assessing Officer to consider the objections submitted by the petitioner submitted vide communications dated 06.09.2016 and 18.10.2016 and dispose of the same on merits and pass a speaking order, before finalizing and / or passing any order on reassessment - Decided in favour of assessee
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2017 (1) TMI 1031
Dividend Stripping Transaction - Transaction Transactions entered into with the Mutual Fund - whether represented business transactions - Loss arising in the course of Dividend Stripping - Held that:- This very issue has been dealt by Hon'ble Apex Court in the case of Commissioner of Income-Tax v. Walfort Share and Stock Brokers P. Ltd. reported in (2010 (7) TMI 15 - SUPREME COURT ) held that losses over and above the amount received as dividends still be allowed in a case where it was established that there was a sale and the assessee had received the dividend and the dividend was tax free. This question is, therefore, decided in favour of the assessee and against the department. Addition u/s 68 - unexplained money in the guise of share transactions - Held that:- This question answered in favour of the assessee as the Tribunal has recorded detailed findings of fact confirming the earlier findings of the CIT stating that the transactions of shares that was made by the assessee in respect of blue chip companies and the rates at which purchases and sales had been made could not be shown to be manipulated. The department was unable to discharge the burden that was on it to prove that the transactions were in any manner bogus or fictitious.
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2017 (1) TMI 1030
TDS u/s 194I or 194C - whether the Tribunal was justified in holding that the assessee rightly deducted tax under Section 194C? - Held that:- We find that both CIT(A) as well as the Tribunal have recorded a finding of fact that the specialized job which is outsourced to other studios is carried out by the personnel of those studios. The respondent-assessee or her team is not allowed to work with the machine/equipments in the other studios for the specialized activity. This itself would establish that the respondent-assessee has no access to the machinery/equipments for the specialized jobs. Therefore it cannot be said to have hired or taken on rent the machines/equipments for Section 194I of the Act to apply. In the above view, the concurrent findings of fact rendered by the CIT(A) and the Tribunal, no substantial question of law arises as it is not shown to be perverse in any manner. Thus not entertained. Whether the Tribunal was justified in holding that the short deduction of tax does not attract disallowance under Section 40(a)(ia)? - Held that:- The view of the Tribunal that the payments made by the respondent-assessee to other studios (outsourced studios) for doing a specialized job is in the nature of a contract and falls under Section 194C of the Act for the purposes of tax deduction at source. In the above view, there is no short deduction of tax thus there is no occasion to examine and consider the question of the consequence of short deduction of tax, if any. Thus not entertained.
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2017 (1) TMI 1029
Additions towards receipt of excise duty - non-crediting of 'Excise Duty Receivable' to the P & L Account - avoiding the provisions of Section 43B - Held that:- The Tribunal has considered the matter at length and has clearly come to the conclusion that the excise duty, which was received by the assessee, was passed on by the assessee to the Government Department and, therefore, the excise duty, recovered by it, would not constitute any income to the assessee itself in order to invite the imposition of any tax. This Court in the case of Commissioner of Income Tax Vs. M/S United Engineering (P) Ltd. [2013 (12) TMI 1315 - ALLAHABAD HIGH COURT], wherein also this Court came to the conclusion that the excise duty, which was received by the assessee, was passed on to the Government Department and, therefore, ultimately resulted in non-accrual of any income to the assessee and no addition could be made on that behalf. - Decided in favour of the assessee and against the Department.
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Customs
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2017 (1) TMI 1018
Restoration of appeal - appeal was dismissed by an unreasoned order, on the premise that writ petitions filed by other parties, challenging the order against which the petitioner was aggrieved as an appellant, were pending - It was urged that existence of an alternative remedy is a ground for refusal for exercising writ jurisdiction; pendency of a writ petition cannot be ever a ground to deny appellate remedy, which is created specifically by the statute and exists as of right. Held that: - Parliamentary intent in the creation of an appellate forum in respect of findings by the designated authority was to provide meaningful redress by a competent appellate body. The order impugned is not only cryptic but mistaken in its assumption that the pending writ petitions (of others) can provide adequate redress to the petitioner-an entirely erroneous assumption, because those writ petitions are merely pending and depend upon exercise of discretion. The availability of an appellate remedy in this case, is conferment of a right to approach the higher forum for correction, on facts and law, whereas exercise of judicial review is within a restricted canvas. The CESTAT has in essence, treated an appellate remedy (otherwise a compulsive jurisdiction) to be alternative and discretionary, robbing it of substantial content. A direction is issued to the CESTAT whose President shall constitute a Bench as expediently as possible and issue notice of hearing to the parties within six weeks - appeal restored - petition allowed - decided in favor of petitioner.
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2017 (1) TMI 1017
Unjust enrichment - Refund claim - SAD paid at the time of clearance of consignment through debit of DEPB licence - Held that: - Tribunal in appellant’s own case Standard Conduits Pvt. Ltd. And Standard Galva Steels Pvt. Ltd. Versus Commissioner of Customs (EP) Mumbai [2016 (3) TMI 773 - CESTAT MUMBAI] has granted relief where the refund claim is allowed by applying the judgment of Hon'ble High Court of Madras in the case of CCE Chennai vs. Sarlee Household & Bodycare India Pvt. Ltd. [2007 (6) TMI 55 - HIGH COURT, MADRAS] - refund allowed - appeal allowed - decided in favor of appellant.
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2017 (1) TMI 1016
Denial of DEPB credit - the condition for entitlement of credit on export of fish and fish products, was subject to observation of prescribed standard input output norms in the usage of preservatives and chemicals in exported goods - appellant had used less quantity of preservative in the exported goods not adhering to the standard, input output norms hence DEPB credit claim seems to be incorrect. Held that: - the statement of General Manager who is handing day today activities of the processing of the fish products need to be considered in its correct perspective which indicates that HIPL had used chemicals and preservatives fish and fish products which are exported, though not to the quantity as indicated in standard input output norms - The statement very clearly indicates that there was usage of preservatives and chemicals, but not to the quantum as indicated in the standard input output norms. There was a requirement for giving only declaration of usage of chemicals and preservatives on the shipping bills has been withdrawn with effect from 01.04.2002 under DEPB scheme, it is decided that exporter shall be allowed to avail 04% DEPB benefit if he is otherwise eligible for such benefit. In the absence of contrary evidence to show that HIPL has not used any preservatives in processing of fish and fish products which are exported, we have to hold that the impugned order is correct and legal - DEPB credit allowed - appeal dismissed - decided against Revenue.
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Corporate Laws
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2017 (1) TMI 1013
Scheme of Amalgamation - requirement of convening meeting - Held that:- The requirement of convening meeting of the equity shareholders of the Transferee Company to consider and, if thought fit, approve, with or without modification the proposed scheme is dispensed with. The Transferee Company has 09 unsecured creditors. All the unsecured creditors have given their written consents/NOC’s to the proposed scheme and the same have been placed on record. The said written consents/NOC’s have been examined and found in order. In view of the foregoing, the requirement of convening meeting of the unsecured creditors of the Transferee Company to consider and, if thought fit, approve, with or without modification the proposed scheme is dispensed with. Since the Transferor Company No.2 does not has any unsecured creditor, therefore the question of convening a meeting thereof does not arise. Further, since the Applicant Companies do not have any secured creditors, therefore the question of convening meetings thereof does not arise. Further, a prayer has been sought in the present application for dispensing with the requirement of issuance and publication of notices of the meetings of equity shareholders, secured and unsecured creditors of the Applicant Companies, in the newspapers. In view of the circumstance that the requirement of convening meetings of equity shareholders, secured and unsecured creditors of the Applicant Companies, is dispensed with; the requirement of issuance and publication of notices of the meetings in newspapers, is also dispensed with.
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2017 (1) TMI 1012
Winding up petition - prayed for appointment of the Official Liquidator of all the assets, business, affairs, property, books of accounts etc. with all powers under the Companies Act, 1956 - Held that:- Since the respondent has failed to pay the admitted dues, the petitioner has made out a case for grant of interim relief in terms of prayer clause (d). However, it is made clear that the respondent shall be permitted to deal with or dispose of the assets in ordinary course of business. The respondent shall maintain accounts and shall furnish a copy of such account every six months from today to the petitioner. Pass the following order :- a). The company petition accordingly is admitted and shall be advertised in two local newspapers, namely (i) Free Press Journal (in English) and Navshakti (in Marathi) as also in the Maharashtra Government Gazette. Any delay in publication of the advertisement in the Maharashtra Government Gazette, and any resultant inadequacy of notice shall not invalidate such advertisement or notice and shall not constitute non-compliance with this direction or with the Companies (Court) Rules, 1959. b). The company petition is made returnable after eight weeks. The petitioner shall deposit ₹ 10,000/- towards publication charges with the Prothonotary & Senior Master, under intimation to the Company Registrar, within two weeks from the date of admission, failing which the petition shall stand dismissed for the non-prosecution without further reference to the Court. After the advertisements are issued, the balance, if any, shall be refunded to the petitioner. c). Learned counsel for the respondent waives service of notice under Rule 28 of the Companies (Court) Rules, 1959.
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Service Tax
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2017 (1) TMI 1028
Exemption under N/N. 12/03-ST dated 20.01.2003 - the appellant is engaged in retreading the tyres. For this, tread rubber, red cement and other chemicals are used - denial on the ground that the sale is not evidenced as per the documents perused - Held that: - the Original Authority had examined the documents submitted by the appellant and categorically recorded that the material cost shown in the invoice as verified by him is to be excluded from the taxable value in terms of the N/N.12/03-ST. The first Appellate Authority reversed to the decision (of original authority who has allowed the exemption) in his ex parte proceedings - the Original Authority has correctly arrived at the assessee's liability and the present impugned order is not sustainable - appeal allowed - decided in favor of appellant.
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2017 (1) TMI 1027
Condonation of delay in filing an appeal before Commissioner (appeals) - 100% EOU - refund claim of CENVAT credit availed on input services used for providing the output services exported - Held that: - as per Section 85(3A), the appeal before the Commissioner (A) has to be filed within 60 days from the date of communication of the order and in this case admittedly order was received on 20.10.2015 - Order-in-Original were filed by the appellant only on 9.3.2016 i.e., almost after 140 days. Reliance placed in the case of Singh Enterprises vs. CCE, Jamshedpur [2007 (12) TMI 11 - SUPREME COURT OF INDIA], where it was held that the proviso to sub-section(1) of Section 35 ibid makes the position crystal clear that the appellate authority has no power to allow the appeal to be presented beyond the period of 30 days. Refund rightly rejected - Appeal dismissed - decided against appellant.
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2017 (1) TMI 1026
CENVAT credit - services received from the foreign company - whether the appellant are entitled to the credit of the duty paid by them? - Held that: - in such Revenue neutral situation there cannot be any intention to evade duty. Further Revenue neutrality is to be established on the basis of a fact of data. It is possible that there may be some exemption available to the appellant on account of which some part of the duty paid may not be available as credit. I find no such data has been submitted to establish it was a revenue neutral situation. However, looking at the facts of the case, I am inclined to invoke Section 80 and waive the penalty imposed under Section 78 of the Finance Act - appeal disposed off - decided partly in favor of appellant.
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2017 (1) TMI 1025
Refund claim - having discharged the entire liability, whether the petitioner was entitled for refund of the amount remitted by Airport Authority of India to the 3rd respondent? - Held that: - There is no dispute about the fact that the petitioner had satisfied the service tax liability in respect of the service done by him as evident from Ext.P14 order itself. It is with reference to the very same service that the petitioner had undertaken, the Airport Authority of India had adjusted his security deposit, recovered the amount from his bills and remitted the same to the 4th respondent. In other words, it is a double payment of service tax which cannot be disputed under the facts. There is no reason why such an amount should be retained by the 3rd respondent - refund allowed - petition allowed - decided in favor of petitioner.
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Central Excise
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2017 (1) TMI 1024
Refund claim - time bar - rejection on the ground that the appellant had not followed the procedure of payment of duty provided under Rule 233B of the Central Excise Rules, 1944, the letter dated 02.08.2000 is not the sufficient compliance of procedure under Rule 233B for payment of duty under protest, regarding RG 23A Part-II it was contented that in the register which is a carbon copy duty paid under protest was made by ball point pen. It is clear that mention ‘under protest’ made later on - reliance placed in the case of M/s. HINDUSTAN PETROLEUM CORPORATION LTD Versus COMMISSIONER OF CENTRAL EXCISE, MUMBAI-II [2014 (5) TMI 767 - CESTAT MUMBAI]. Held that: - the assessee in such case has not complied the provision of Rule 233B, whereas in the present case the appellant has admittedly submitted a letter dated 02.08.2000 showing the reversal of MODVAT credit under protest. Therefore the ratio of the judgment of Hindustan Petroleum Corporation Ltd. it is not applicable in the present case. The total refund claim of ₹ 39,14,616/- pertaining to the period August, 1999 to February, 2002. The letter of protest first time was submitted by the appellant on 02.08.2000 therefore reversal made on or after 02.08.2000 till February, 2002 is covered made under protest. Whereas the reversal for the period August, 99 to 01.08.2002 cannot be treated under protest, therefore the reversal for the period August 1999 to 01.08.2000 is clearly time barred as no protest was lodged by the appellant. The reversal made from 02.08.2002 to February, 2002 is under protest and cannot be rejected on time bar, therefore the refund to the extent of reversal for the period 02.08.2000 to 2002, is allowed. Refund partly allowed, matter on remand for correct quantification - appeal disposed off.
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2017 (1) TMI 1023
Classification of goods - complete kit of Colour Television Sets in SKD condition cleared to job workers of OEMs in kit form - whether classifiable under Sub-heading No. 8529.00 of Schedule to the Central Excise Tariff Act, 1985 or not? - the matter was decided in the light of declaration of law by Hon’ble Supreme Court in the case of Salora International Ltd. Versus Commissioner of Central Excise, New Delhi [2012 (9) TMI 276 - SUPREME COURT] - it is appellant's claim that the ratio of Supreme Court ruling in the case of Salora International Ltd. is not applicable in their case and their case is covered by another ruling i.e. Commissioner of Customs, New Delhi Versus Sony India Ltd. [2008 (9) TMI 19 - SUPREME COURT]. Held that: - the said case law in the case of Sony India Ltd. was considered and distinguished by the Hon’ble Supreme Court through their ruling the case of Salora International Ltd., we also find that this Tribunal had directed the Original Authority to proceed for De-novo Adjudication in appellant’s case with reference to the law laid down by Hon’ble Supreme Court in the case of Salora International Ltd. We do not find any ground advanced by the appellant indicating that the Original Authority has deviated from the direction given by this Tribunal to him for De-novo Adjudication. Therefore, we do not find any reason to interfere with the impugned order. The case of Sony India Ltd. held that classification shall be done according to headings & relevant sector or chapter Notes - invocation of Rule 2(a) of the Interpretative Rules, are prohibited for certain categories of goods covered in Section XVI like the goods of CTVs. The case of Salora International Ltd. states that resort must first be had only to the particular tariff entries, along with the relevant Section and Chapter Notes, to see whether a clear picture emerges. It is only in the absence of such a picture emerging, that recourse can be made to the Rules for Interpretation. Appeal dismissed - decided against appellant.
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2017 (1) TMI 1022
Manufacture of calcined alumina by heating process - only in the year 1995, appellant obtained power connection from the Tamil Nadu Electricity Board and then only, it was possible for them to manufacture calcined alumina of green bars and prior to that, they do not have any such facility. However, the Original Authority went on presumption that the respondent/assessee would have used alternative sources of power to produce the calcined alumina of green bars and the said findings are only surmises and conjunctions - Held that: - unfortunately, no materials made available to the Original Authority to reach such conclusion. Freight charges - Held that: - the freight charges were paid only on the basis of number of boxes and not on the basis of weighment and the freight bill would also evidence the said fact and as such, the Revenue cannot draw a presumption as to the unit rate of freight. The Tribunal further found that the yellow bars are used first for rubbing the polishing and then, the green bars are used and it was in the ratio of 5:1 (5 yellow bars and 1 green bar) and the statements of the dealers recorded during the cross-examination would also substantiate the said fact. The tribunal has rightly reached the conclusion that the material aspect have not been properly appreciated by the Original Authority and rightly remanded the matter once again to the Original Authority for fresh adjudication. As rightly contended by the learned Counsel for the respondent / assessee, but for the entertainment of this appeal, the Original Authority would have passed the order long back, after remand, but the fact remains that on account of the pendency of this matter for nearly 11 years, it could not be done so. Therefore, the substantial questions of law raised by the appellant / revenue are answered in negative - appeal dismissed.
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2017 (1) TMI 1021
Whether assessee is not liable to pay duty, penalty and interest under the provisions of Rule 96ZQ 5 (i) and 96ZQ (ii) of the Central Excise Rules, 1944 read with Section 3-A of the Central Excise Act, 1944, in the light of the fact that the said Rules 96ZO, 96ZP and 96ZQ were omitted w.e.f 01.03.2001 and the said Section 3A was omitted w.e.f 11.05.2001, although the duty, penalty and interest are pertaining to the period prior to the dates of omission of the said Rules and the Section 3A of the Central Excise Act? Held that: - the issue is concluded against the Revenue by the Hon'ble Supreme Court in the decision rendered in the case of Shree Bhagwati Steel Rolling Mills v. Commissioner of Central Excise & Anr. [2015 (11) TMI 1172 - SUPREME COURT], where it was held that When Section 6 speaks of the repeal of any enactment, it refers not merely to the enactment as a whole but also to any provision contained in any Act. Thus, it is clear that if a part of a statute is deleted, Section 6 would nonetheless apply. Appeal dismissed - decided against Revenue.
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2017 (1) TMI 1020
CENVAT Credit - Welding Electrode - whether the welding electrodes would fall under the category of capital goods? - Held that: - 'capital goods' as defined under Rule 2(b) of Rules, 2002 and 2(a) of Rules 2004, in substance, are pari-materia with the 'capital goods' specified in Rule 57-Q of Rules, 1944 and there is no substantial difference therein - reliance placed in the case of M/S Upper Ganges Sugar & Industries Ltd. Vs. Commissioner Customs & Central Excise [2015 (5) TMI 569 - ALLAHABAD HIGH COURT], where it was held that it cannot be said that "Welding Electrodes" satisfy the requirement so as to constitute 'component' of items mentioned in column nos. 1 to 4 of table in Rule 57Q(1) of Rules, 1944 - decided against assessee. Appeal allowed - decided partly in favor of assessee and partly in favor of Revenue
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2017 (1) TMI 1019
CENVAT Credit - Welding Electrode - whether the welding electrodes would fall under the category of capital goods? - Held that: - 'capital goods' as defined under Rule 2(b) of Rules, 2002 and 2(a) of Rules 2004, in substance, are pari-materia with the 'capital goods' specified in Rule 57-Q of Rules, 1944 and there is no substantial difference therein - reliance placed in the case of M/S Upper Ganges Sugar & Industries Ltd. Vs. Commissioner Customs & Central Excise [2015 (5) TMI 569 - ALLAHABAD HIGH COURT], where it was held that it cannot be said that "Welding Electrodes" satisfy the requirement so as to constitute 'component' of items mentioned in column nos. 1 to 4 of table in Rule 57Q(1) of Rules, 1944 - decided against assessee. Appeal allowed - decided partly in favor of assessee and partly in favor of Revenue
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CST, VAT & Sales Tax
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2017 (1) TMI 1015
Whether Sales Tax is leviable on the assessee on the amount received by the assessee as “brand franchisee fees” from CBUs (Contract Bottling Units) in case of manufacture of beer? Held that: - no sales tax would be leviable on the assessee on the amount received by the assessee as “brand franchisee fees” from the CBU in case of manufacture of beer - reliance placed in the case of M/s.United Breweries Limited vs. State of Karnataka [2015 (11) TMI 754 - KARNATAKA HIGH COURT], where it was held that The manufacturers (CBUs) do not get effective control of the brand name for full commercial exploitation. As such, it cannot be considered as 'sale' of intangible goods by the assessee, which would be subject to Sales Tax under the KST Act. Appeal dismissed - decided in favor of assessee.
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2017 (1) TMI 1014
Assessment u/s 17(10), 21(5) and 20 of the Luxury Tax Act - Under assessment of tax - renting of “lawn” - escapement of tax on lawn on account of non-disclosure - assessee contended that no tax is leviable for renting of the lawn because the lawn is separate, it has separate access and merely because there is one profit and loss account or a separate receipt has been issued of renting of the lawn, there is no reason to levy luxury tax when renting of lawn is not a luxury taking into consideration the definition under the Act. Held that: - it does not make any difference whether there is a separate entrance/access or there is no interference of the hotel vis a vis the lawn as long as it is within the same boundary wall in the ownership of the respondent. Admittedly, the assets, namely Hotel and Lawn are owned and possessed by the assessee. On perusal of the definition of “hotel” as given in subclause (g) supra, a hotel includes residential accommodation along with “lawns”, therefore, once a lawn having been prescribed as a part of the hotel, the assessee was certainly liable to pay Luxury Tax on giving lawns on hire to the various persons for marriage and for diverse other purposes. The definitions of “business”, “luxuries provided in the hotel” and “turnover”, even prior to the amending Act of 2007 which is under consideration, in my view envisages and make it amply clear that lawns are included in the Explanation (ii) of sec.2(1)(i) for the purposes of levy of Luxury Tax in a hotel, therefore, lawn being part of hotel or even rooms, it should mean to cover up such lawns as well. The definition of “business” is also wide enough as observed earlier, that it includes “in connection with or ancillary to” should cover the renting / giving on hire of the lawn. The “lawn” having been prescribed in sub-clause (g), (i), has certainly got a definite meaning for the purposes of levy of tax under the Act, and in my view, the Tax Board is unjustified in holding that receipts by way of renting of “lawn” could not be covered prior to 9.3.2007. The Tax Board has not even adverted to the various sub-clauses of sec. 2 as referred to hereinbefore, and without adverting to the plain and simple meaning, has held that the liability of assessee is only after 9.3.2007, which in my view is wholly perverse. The amendment which has been brought into force from 9.3.2007 as given hereinabove, only covers such owners or other entities other than even hotels who have developed lawns and is renting / giving on hire such lawns for organising parties, wedding ceremonies or functions and the definition of “business” has been enlarged, so also definition of “hotel” has also been enlarged to cover “or any place where residential accommodation or a space for the purposes of organising parties/ceremonies or functions” has been added, which makes it clear that insofar as luxury hotels like the assessee, is concerned, it is unaffected by the luxury as admittedly the room rent is exceeding ₹ 1000/- or more even prior to 9.3.2007. Thus, in my view, the finding of taxability of renting of “lawn” by the assessee is found in order. Consequently, levy of interest is also upheld, being automatic and goes with the levy of tax. Imposition of penalty - Held that: - it is not a case of imposition of penalty as material was available before the AO even during the course of the return originally having been submitted. The assessee had a reasonable apprehension and bona fide belief that insofar as renting of lawns is concerned, it will affect only on and from 9.3.2007 and this being a debatable issue, at-least penalty in my view is not leviable - penalty withheld. Decided partly in favor of assessee as regards setting aside of penalty - tax and interest upheld.
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