TMI Tax Updates - e-Newsletter
January 24, 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:
Disallowance of overriding commission paid to Associated Enterprise pursuant to the order of the TPO - no comparable case have been brought on record which could justify that the payment of 3% + 1% overriding commission is not at arm’s length - Claim allowed - AT
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Income Tax:
Disallowance of interest paid to banks & others - When interest free funds and interest bearing funds are mixed together, they loose their respective identity and hence the presumption should be that the assessee has used interest free funds to give interest free advances to persons covered by sec. 40A(2)(b) - AT
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Income Tax:
Constitutional validity of Section 234E - late filing of the TDS returns - Period from 2012 to 2015 and post 2015 - provision is not onerous even in the absence of a right of appeal as it is always open for the aggrieved person to approach the High Court under Article 226 of the Constitution of India - HC
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Income Tax:
TDS u/s 194J - Royalty - buying and selling software - provisions of section 9[1][vi] dealing with and defining 'Royalty' cannot be made applicable to a situation of outright purchase and sale of a product - HC
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Income Tax:
Grant of registration u/s 12AA - The application of section 13(1)(b) would only arrive at a stage when an application for exemption is made. At the time of registration of the trust all that is required to be seen is whether the object and purpose of the formation of the trust, is for a charitable purpose - HC
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Income Tax:
Functioning of Liaison Office (LO) - Permanent Establishment(PE) in India - Nothing is on record that can prove that the LO was functioning as an independent profit center for the year under consideration - AT
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Income Tax:
Penalty u/s 271(1)(c) - trust denied exemption u/s 11 on the ground that income from running of newspaper had not been applied for charitable purposes - it cannot be said that the assessee had concealed the particulars of its income or had furnished inaccurate particulars of such income - no penalty - AT
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Income Tax:
Capital gains - Nature of receipt - assessee was not the owner of the property but had the control over property - assessee has received a portion of the sale consideration from this transaction - Even though assessee’s name in the sale agreements is not shown as an owner, consideration is taxable as capital gains - AT
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Income Tax:
The term ‘Provision” is something which cannot be ascertained as per the information available at the year end. But in this case, assessee has proper information and ascertained the loss at the year end, which is different from ‘provision’ - assessee is eligible to claim the loss on stock options - AT
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Income Tax:
Hedging loss - Since the transaction is relating to acquisition of fixed assets and the profit or loss to be treated in capital field and it cannot be in Revenue in nature - AT
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Income Tax:
Exemption u/s 11 - assessee is eligible for exemption u/s 11 - Only the advancement of loan to the related persons need to be brought under the purview of tax - AO directed to disallow interest at the market rate on the sums advanced to the above persons - AT
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Income Tax:
TDS u/s 195 - commission paid to export commission agents - payments are for subscription fees for specialized database containing copyright material - when the receipt in the hands of non-residents is not taxable at all, assessee need not to approach the AO for order u/s 195 nor no deduction or deduction at lower rate - AT
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Income Tax:
We are extremely unhappy with the delay of 3381 days in refiling the special leave petition but make no other comment. The concerned authorities need to wake up. - SC
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Income Tax:
TDS on interest on late payment of bills - interest was paid for the delayed payment of the bills which is outside the purview of the provisions of section 194A - AT
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Customs:
Amendment of IGM - material description from "Aluminium Scrap Tread 22.096 MT" to "Aluminium scrap Tread 7.552 MT & Copper Berry/Clove.14.544 MT" - there cannot be a mistake and/or same mistake in a series of documents in the course of import/export trade - it is a case of mis-declaration with intention to evade Customs duty - AT
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Customs:
Demand of duty - period of limitation - the “service of notice to CHA” cannot be equated to the “service of notice to the appellant” - AT
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Service Tax:
Valuation u/s 67 - works contract for retreading of tyres - assessee is liable to pay service tax only on the service component which has been quantified at 30% - Decision of larger bench of CESTAT set aside - SC
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Service Tax:
CENVAT credit on prefabricated shelters while providing telephone services - the appellant has bona fide reasons to believe that he is entitled to the CENVAT credit and he has disclosed the same in his ST-3 returns - entire demand is time barred - AT
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Service Tax:
Rejection of refund claim - export of information technology software services - input services - The company only insures risk and lives of employees and his health, which falls in the definition of input service - refund allowed - AT
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Central Excise:
Validity of SCN - Extended period of limitation - the SCN was issued after more than 19 months after the date of conduct of audit - the SCN in the instant case issued by invocation of proviso to Section 11A ibid is not sustainable in law - AT
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Central Excise:
Manufacture - In relation to the Pipes & Tubes of Heading 7304, 7305 and 7306 the process of coating with cement or polyethylene or other plastic materials shall amount to manufacture - AT
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VAT:
Clandestine removal - fraudulent transportation of goods and colourable devices used to give impression of transportation of goods from outside the State of U.P. to outside the State of U.P. shall fall u/s 52 - section 52 cannot be interpreted and understood in a manner so as to encourage tax evaders and to discourage those who abide by law - HC
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VAT:
Relief of remission of tax - In case State's action is allowed to stand, it would mean that an honest tax payer would be discriminated since those who have not paid tax have already been granted relief of remission - the authorities were not justified in refusing to grant relief of remission merely on the ground that an enabling provision does not exist in the circular. - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2017 (1) TMI 1108
Reopening of assessment - Held that:- We notice that the averments made by the assessee that the learned CIT(A) erred in confirming the action of the AO in reopening the assessment for A.Y. 2009-10 in the case on hand by issuing notice under section 148 of the Act dated 12.03.2013, without recording valid and proper reasons to show that any income chargeable to tax had escaped assessment; is patently and factually false and do not emanate from any finding rendered by the learned CIT(A) in the impugned order. In the factual circumstances of the matter, as discussed above, we dismiss the ground raised by the assessee.
Estimation of Profit @ 12.5% on bogus purchases - Held that:- On an appreciation of the facts on record and the findings rendered by the learned CIT(A) in the impugned order we find that apart from raising these grounds the assessee has failed to place on record any material evidence to controvert the findings of the learned CIT(A). In this view of the matter, we uphold the order of the learned CIT(A) on this issue of bringing to tax in the assessee’s hands the profits embedded in the bogus purchase @ 12% of the purchase cost i.e. ₹ 5,15,377/-, since the direct one to one relationship/nexus between the said purchases and sales have not been established by the assessee. - Decided against assessee
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2017 (1) TMI 1096
Waiver of principal amount of loan - taxable in this year either u/s 28(iv) or u/s 41(1) - Held that:- If the loan amount have taken for the purpose of acquisition of capital asset, then it remains in the capital field even at the time of remission and such a capital receipt cannot be taxed wither u/s 28(iv) or u/s 41(1). Accordingly, the order of the ld. CIT(A) is reversed and the grounds raised by the assessee are allowed.
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2017 (1) TMI 1095
Disallowance U/S 40A(3) - whether persons to whom payments were made were made at places where your assessee had no bank account and in the course of transport business, the provision of section 40A(3) disallowance is not warranted? - Held that:- The assessee had incurred the expenditure during transportation and logistics, in that process the drivers and staff incurred these expenses en-route to the destination like diesel, repairs, toll charges etc. One has to verify each payment and sub-payment, whether it crosses the limit of ₹ 20,000 in individual case. The accounts of the assessee are subject to audit in the earlier three years and the disallowances were 0.13%, 0.11% and 0.26% of the Turn Over. We cannot apply the law of percentage in the case of disallowances. It has to be actual. Hence, in our view, the details of expenditure could be verified and the payment of above ₹ 20,000/- should be verified. In case, it is found that the payment of above ₹ 20,000/- to any one person on a day, only these payments alone should be disallowed. We find it appropriate to remit the issue back to the file of the AO to determine the payment above ₹ 20,000/- to any person as per section 40A(3) of the Act and make the disallowance accordingly. Ground Nos. 1 & 2 are treated as allowed for statistical purposes.
Addition being notional interest - AO has charged notional interest @ 14% on the advances given to group companies, directors and relatives considering the fact that IGF had invested money in the business - Held that:- We observe from the Balance Sheet that the term loans, working capital loans and vehicle loans ere existing loans (balance carried from previous year). There is no fresh loan taken this year, which the assessee would have diverted during this year. We also observe that the assessee has considerable reserves in the company and is in good financial position, it is the discretion of the assessee to finance the group concerns on commercial expediency. With regard to advances to directors/relatives, we do not have details for which purpose they were given. Still, we do not see any reason to charge notional interest on the advances, when there is no cost to the company, in case the advances were paid utilizing the IGF investments. Thus we are inclined to treat the advances given to group concerns, is on commercial expediency and loan to directors as allowable as the company has enough reserves in the business to finance the same - Decided in favour of assessee
Disallowance of expenditure - Held that:- CIT(A) has classified the expenses of ₹ 227.96 cores, out of which, the assessee had paid TDS for ₹ 109.15 crores and balance expenses were incurred through cheque and cash payments. Since, the accounts were not audited, we can infer that the assessee would have made the payment by cheque only for those which have proper bills etc. Cash expenses need to be verified. But, considering the complications involved and volume of the transactions, we agree with the CIT(A) that 7% of the expenses may be disallowed. The CIT(A) has considered the total expenditure (cheque & cash), in our considered view, we restrict the disallowance to cash expenses alone. Hence, AO is directed to disallow the cash expenses to the extent of 7%. Thus, Ground Nos. 7 & 8 are partly allowed.
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2017 (1) TMI 1094
Penalty u/s 271(1)(c) - proof of concealment of any fact - trust denied exemption u/s 11 on the ground that income from running of newspaper had not been applied for charitable purposes - Held that:- The issue of claim of exemption in the case of the assessee has been a debatable one, as far as its appellate history goes. Relying on the decision of the Hon'ble Supreme Court in the case of ACIT vs Thanthi Trust (2001 (1) TMI 80 - SUPREME Court ) held that the claim of the assessee is debatable. He also noted that as far as the facts and figures of income and expenditure statements are concerned, there is not dispute that the assessee had not concealed any such facts and figures. But the assessee had presumed that in its opinion, it had made a bonafide claim of exemption u/s 11 of the Act, which has been denied to it by the AO and the appellate authorities in the years under consideration. Therefore, it cannot be said that the assessee had concealed the particulars of its income or had furnished inaccurate particulars of such income.
ITAT in the case of the assessee for the A.Y. 1989-90, 1992-93, 1995-96, 1996-97, 1998- 99 and 2003-04 has explicitly recorded a finding of fact and held that the objects of trust, as a whole, are for charitable purpose falling within the meaning of section 2(15) of the Act. For the A.Y. 1998-99, 2000-01, 2003-04, 2007-08 and 2008-09, the decision has been reversed by the ITAT. Once, this proposition is accepted, the issue of grant of exemption in the case of the assessee can at best be described as a debatable issue. The learned CIT(A) relied on the judgement of the Hon'ble Supreme Court in the case of CIT vs. Reliance Petroproducts (P.) Ltd [2010 (3) TMI 80 - SUPREME COURT ] wherein it has been held that penalty cannot be levied merely because the AO and the assessee hold a divergent view on allowablity of a claim for deduction. - Decided in favour of assessee
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2017 (1) TMI 1093
Capital gains - Nature of receipt - assessee was not the owner of the property but had the control over property - legal owners - allowing the cost indexation towards the value of acquisition cost - as per DR assessee is not a owner of the piece of land which he sold to M/s NCCl - assessee has stated that he has safeguarded the property from unlawful encroachment and he is in the absolute control over the property since 1986 and that he is aware of legal disputes on the property and he has spent lot of money on representing legal disputes on the property
Held that:- The assessee is not the owner of the property since the assessee has not purchased the property by proper deed, but, undisputedly has paid consideration of ₹ 15 lakhs to Shri Ali Asghar Ceizure and was having absolute control over the disputed property in his possession all these years, it shows that the assessee had absolute control over the property by which he is also a part of owner and also assessee had played the role of a owner in the agreement of sale between the disputed parties and M/s NCCL. Even though assessee’s name in the sale agreements is not shown as an owner, but, it is shown as one of the consenting parties. Moreover, assessee has received a portion of the sale consideration from this transaction i.e. ₹ 85.05 lakhs out of ₹ 166.8 lakhs (about 51%) of the total consideration. It shows that assessee is one among the parties, who sold the property to M/s NCCL. In case, the assessee is not the main person in the deal, there is no way the assessee would have received more than 50% of the sale consideration. In our considered view, the assessee is one of the selling parties in the deal and the assessee is eligible to treat this transaction as income from capital gains. Accordingly, the grounds raised by the revenue in this regard are dismissed.
Assessee eligibility to claim ₹ 30 lakhs as cost of purchase in stead of ₹ 15.3 lakhs as allowed by the CIT(A) - Held that:- As per the agreement of sale submitted by the assessee, assessee has confirmed the payment of ₹ 15 lakhs to Shri Ali Asghar Ceizure, which was also confirmed by Shri Ali Asghar Ceizure in the same agreement, but, the assessee is supposed to pay ₹ 15 lakhs at the time of registration of sale deed. There is no proof or evidence placed on record to show that the agreement of sale is, in fact, completed. In the absence of any evidence to show that sale is complete by paying ₹ 15 lakhs to Shri Ali Asghar Ceizure, we are not in a position to grant any relief to the assessee with regard to the second installment of ₹ 15 lakhs. In our considered view, the assessee can claim ₹ 15 lakhs as cost of purchase with indexation benefit, not to the extent of ₹ 15.3 lakhs as allowed by CIT(A). Accordingly, this objection is rejected.
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2017 (1) TMI 1092
Non granting registration u/s 12AA - Held that:- What the learned Commissioner of Income Tax has found objectionable is that the applicant society, being liable to claim exemption under section 10(23C)(iiiab), since it is wholly financed by the State Government has not done so. Clearly, this is not a reflection on the genuineness of the activities being carried on by the applicant society. In fact, it is affirmation of the same since even as per the aforestated observation of the learned Commissioner of Income Tax, the applicant society is eligible to claim exemption under section 10(23C)(iiiab) of the Act which grants exemption to institutions existing solely for the purpose of imparting education.
Other adverse finding of the learned Commissioner of Income Tax is vis-à-vis the fact that the applicant society has wrongly claimed exemption under section 10(23C)(iiiad) of the Act since aggregating the income of the society, college and school run by it, the same exceeds ₹ 1 crore which is the limit set under the Statute for claiming exemption under section 10(23C)(iiiab) of the Act. Again we find that this has no reflection on the genuineness of the activities carried out by the applicant society, but is an affirmation of the genuineness of the activities since it calls into question the claim of exemption under section 10(23C)(iiiad) of the Act, which grants exemption from tax of incomes of institutions existing solely for the purpose of education and whose receipts during a financial year do not exceed a specified limit, on account of the income exceeding a particular limit but does not doubt the genuineness of the activities carried out by the assessee. Further the observation of the Ld.CIT that the institutions of the applicant society are being run on commercial lines ,we find has no basis. Ld.CIT has merely made a general comment on the above lines which is not supported by any facts or figures and hence in our view requires no consideration.
Since the genuineness of both the object and activities of the assessee society having not been doubted, we are of the considered opinion that the order of the Ld.CIT cannot be sustained. Consequently we set aside the order passed by the CIT and direct that registration applied for by the applicant society u/s 12A of the Act be granted. - Decided in favour of assessee
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2017 (1) TMI 1089
Addition of unsecured loan as income of assessee - Held that:- The amount of loan is reflecting in the bank statement of the assessee which is placed on page 10 of the paper book. On perusal of the records we find that the lower authorities have taken only into consideration the opening and closing balance of the assessee ignoring the transactions took place in the banks of both the parties in intervening period. We find that the loan transactions were through banking Channel. The ld AR in support of his claim has submitted the identity proof, confirmation, bank details, cash flow statements of both the parties. The lower authorities have not brought any defect in the submission made by the assessee. - Decided in favour of assessee
Non-deduction of TDS u/s. 40(a)(ia) - disallowance of interest paid - Held that:- In the present case, the interest was paid for the delayed payment of the bills which in our considered view is outside the purview of the provisions of section 194A of the Act. Accordingly, the provisions of TDS will not be attracted to the payment of interest in the aforesaid cases. In view of above, we are inclined to reverse the order of authorities below. Hence the ground of appeal of the assessee is allowed.
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2017 (1) TMI 1088
Sale of shares - short term capital gain OR income from business - Held that:- As the issue under consideration is materially identical to that of AY 2008-09, respectfully following the same, we direct the AO to assess the profit on sale of the shares as short term capital gains and not as income from business. Accordingly, this issue is decided in favour of the assessee.
Disallowance for loss on equity stock option - AO disallowed the same by observing that the assessee company had debited to P&L A/c a provision for loss on equity stock option/index option, the assessee ought to have added back the same to the income returned which the assessee failed to do so - Held that:- As per the accounting policy, which is followed consistently over the years and accepted by the department, the assessee is recognizing the mark to market loss, which is the actual loss on carrying amount of investment. As per prudent norms, it is recognized as loss. Since, assessee is following the accounting method, it amounts to actual loss and cannot be termed as ‘provision’. The term ‘Provision” is something which cannot be ascertained as per the information available at the year end. But in this case, assessee has proper information and ascertained the loss at the year end, which is different from ‘provision’. As per the facts of the case, assessee is eligible to claim the loss on stock options and accordingly, ground raised by the assessee is allowed.
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2017 (1) TMI 1087
Exemption u/s 54F - Held that:- AR has submitted a letter confirming the construction of residence and submitted the proof of construction as below:
a) Permission from Municipal Corporation, b) NOC for building plan issued by Jubilee Hills Cooperative Society, c) Water connection permission, d) Property assessment receipt and e) Electricity bill
The above details were forwarded to the ld. DR, who had verified the details and confirmed the same. Considering the above details, we are inclined to treat the above new assets as part of residential property and accordingly, in our view, the assessee is eligible to get the benefit u/s 54F of the Act. - Decided in favour of assessee.
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2017 (1) TMI 1103
Inclusion of excise duty in the closing stocks of finished goods - Held that:- The assessee had paid excise duty on the raw material and, therefore, the price of that was to be included in the closing stock.
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2017 (1) TMI 1099
Grant of registration under section 12AA - main objects as well as the activities of the trust were construction and maintenance of temple - Held that:- We have no difficulty in answering the questions in favour of the assessee. The assessee had filed an application for registration under Section 12AA of the Act. The question of granting of exemption under Sections 11 and 12 to a trust would only arise when a claim was made by the assessee for the same. The stage in the present case had not yet arrived. No finding has been recorded at any stage of the proceeding that the assessee had made any claim for exemptions. It had simply applied for registration under the provisions of Section 12AA of the Act.
The application of section 13(1)(b) would only arrive at a stage when an application for exemption is made. At the time of registration of the trust all that is required to be seen is whether the object and purpose of the formation of the trust, is for a charitable purpose.
In view of the above, we are of the opinion that the tribunal rightly came to the conclusion that at the stage of grant of the registration under Sections 12A and 12AA, the provisions of Section 13(1)(b) would not apply. The questions are, therefore, answered in favour of the assessee and against the department.
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2017 (1) TMI 1091
Entitlement to reduce interest paid from the interest received while calculating deduction under section 80HHC(4A) - Held that:- In view of the decision of this Court in ACG Associated Capsules (P) Ltd. v. Commissioner of Income Tax (Central-IV), Mumbai [2012 (2) TMI 101 - SUPREME COURT OF INDIA] wherein held Ninety per cent of not the gross interest/rent but only the net interest/rent, which has been included in the profits of the business of the assessee as computed under the heads ‘PGBP’ is to be deducted under clause (1) of Explanation (baa) to Section 80HHC for determining the profits of the business. This petition be dismissed on merits.
Also we are extremely unhappy with the delay of 3381 days in refiling the special leave petition but make no other comment. The concerned authorities need to wake up.
The special leave petition is dismissed both on the ground of delay as also on merits.
HC ref case - 2007 (3) TMI 748 - DELHI HIGH COURT
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2017 (1) TMI 1090
Addition on account of alleged bogus purchases at 25% of the total purchases - Additions in respect of purchases from M/s. Somnath Industries from M/s.Krishna Marketing in assessment which has been framed u/s.158BC - SLP dismissed against the decision of HC [2016 (6) TMI 1139 - GUJARAT HIGH COURT]
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2017 (1) TMI 1098
Functioning of Liaison Office (LO) - Permanent Establishment(PE) in India - provisions of India-Japan Tax Treaty (Treaty)applicability - whether the business premise of the assessee proved that its activities were not confined to Liaison Work(LW)only, that it was having a PE in India, that it had not restricted its activities to LO? - Held that:- From the discussion it is clear that any activity being subsidiary or in aid or support of main activity has to be treated auxiliary or preparatory activity. Perusal of the impounded documents, relevant for the year under appeal, have not led us to the conclusion that the LO was offering services that were not auxiliary.
We have not come across any statement of any of the employees or the officials / executives of the LO, recorded during the survey proceedings or after the action u/s. 133A of the Act was over. Generally, during the such operations statements are recorded and questions are asked about relevant and important impounded documents. There is no doubt that two of the employees GS and Vinod Balgi were employer of the LO for the year under consideration. But, that does not lead to any final conclusion. No question was ever asked to them about the duties assigned to them or about the responsibilities shared by them. There appointment letters would have given some clues about their job profile. Nothing is on record that can prove that the LO was functioning as an independent profit center for the year under consideration. We want to make it clear that our observation are for the AY. 1998-99 and they are in no way binding for any other AY. We have analysed the papers that are relevant for the year under consideration only and our decision is also based solely on those documents.
FAA or the DR has not mentioned anything about the correspondence entered into with the RBI. We are aware that decision of RBI may not be very relevant for determining the tax liability of an assessee. But, if the RBI has, after receiving a communication from the AO, not initiated any proceedings against the assessee for violating the terms and conditions of the permission letter issued to it by the Bank for operating the LO, then it will strengthen the case of the assessee. By not taking any action against the assessee, the RBI has accepted the plea that the LO was performing the activities that were allowed by the Bank.
Considering the above, we are of the opinion that there is no evidence that the LO was functioning as PE of the assessee in India for the year under appeal. First effective ground is decided in favour of the assessee.
Estimation of sale figures - Held that:- After going through these documents we are of the opinion that the FAA were justified in rejecting the method adopted by the AO i. e. estimating the turnover instead of accepting the turnover is certified by the professionals. We have taken note of the fact that assessee is a public company in Japan and the statements drawn were from its public accounts. Because of a genuine mistake in one of the certificates (not all the certified documents), the AO should not have estimated the turnover. In our opinion, before taking such a drastic step in case of a public limited company he should have commented upon the reconciliation statement filed by the assessee. Considering the above, we are of the opinion that the order of the FAA does not need any interference from our side. So, confirming his order, we decide the first ground of appeal against the AO.
Levy of interest under section 234B - Held that:- Madras High Court, in the case of CIT v. Madras Fertilisers Ltd. reported in [1983 (9) TMI 74 - MADRAS High Court] where in took the view that the amount of tax deductible at source is to be taken into consideration to determine the liability to pay the interest under section 215. In that case, the assessee had not paid advance tax on the interest income. The payer of interest had not deducted the tax. The learned Bench of the Madras High Court was of the view that levy of interest under section 215 on the assessee was not justified.
We are in respectful agreement with the view taken in the case of CIT v. Sedco Forex International Drilling Co. Ltd. [2003 (10) TMI 40 - UTTARANCHAL High Court]. We are clearly of the opinion that when a duty is cast on the payer to pay the tax at source, on failure, no interest can be imposed on the payee-assessee.
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2017 (1) TMI 1083
Transfer pricing adjustment - ALP determination - whether the reporting of the AMP in regard to the outbound business constitutes an international transaction for which ALP determination was necessary? - Held that:- The I.T.A.T. in our opinion, should have first decided whether in the circumstances of this case, the nature of the AMP reported, could lead to the conclusion that there was an international transaction. When doing so, it should have remitted the matter back for examination to the A.O. in this case. Accordingly, following the decision of Sony Ericsson Mobile Communications India Pvt. Ltd.(2015 (3) TMI 580 - DELHI HIGH COURT) and a subsequent decision in Daikin Airconditioning India Pvt. Limited v. Assistant Commissioner of Income Tax [2017 (1) TMI 957 - DELHI HIGH COURT] this Court hereby remits the matter for a comprehensive decision by the I.T.A.T. In other words, the I.T.A.T. will decide whether the reporting of the AMP in regard to the outbound business constitutes an international transaction for which ALP determination was necessary and if so, the effect thereof.
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2017 (1) TMI 1097
Revision u/s 263 - proof of genuineness of the gifts - Held that:- In this case, during the assessment proceedings for both the Assessment Years, the Assessing Officer issued a query memo to the assessee, calling upon him to justify the genuineness of the gifts. The Respondent-Assessee responded to the same by giving evidence of the communications received from his father and his sister i.e. the donors of the gifts along with the statement of their Bank accounts. On perusal, the Assessing Officer was satisfied about the creditworthiness/capacity of the donors, the source from where these funds have come and also the creditworthiness/capacity of the donor. Once the Assessing Officer was satisfied with regard to the same, there was no further requirement on the part of the Assessing Officer to disclose his satisfaction in the Assessment Order passed thereon. Thus, this objection on the part of the Revenue cannot be accepted.
Assessment Order is neither erroneous nor prejudicial to the interest of the revenue. We, therefore, set aside the impugned order passed by the ld. Commissioner u/s. 263 and restore that of the Assessing Officer passed u/s. 143(3) of the Act. - Decided in favour of assessee
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2017 (1) TMI 1085
Exemption under section 11 denied - A.O. invoked the provision of section 13(1)(c) - assessee trust has given loans to its managing committee members Shri Dushyant Chaturvedi and Pallavi Chaturvedi in violation of provisions of section 13(1)(c) - Held that:- Assessee in this case does not deserve denial of exemptions under section 11. Only the amount which has not been utilised for the objects of the trust but has been advanced to the rated related persons should be subjected to denial of exemption and taxation thereof.
Accordingly we are of the opinion that the assessee is eligible for exemption under section 11 of Income Tax Act. Only the advancement of loan to the above related persons need to be brought under the purview of tax. The Assessing Officer is directed to disallow interest at the market rate on the sums advanced to the above persons.
Since we have already held that the trust deserves to be allowed exemption under section 11 of the Income Tax Act, adjudication on the other limb of assessee's contention will only be of academic interest.
Disallowance under section 40 (a)(ia) - Held that:- The assessee submitted that payee has furnished its return of income under section 139 (1) on 30/10/2008. That the payee has taken into account such interest for computing income. The payee has paid the tax due on the income declared. That certificate from the accountant under form 26A has been furnished. In this regard Learned counsel of the assessee has relied upon the decision of Honourable Delhi High Court in the case of CIT vs Ansal Land Marktownship [2015 (9) TMI 79 - DELHI HIGH COURT] for the proposition that second proviso to section 40(a)(ia) of the Income Tax Act is declaratory and curative in nature and has retrospective effect from 1/4/2005.We find that the above submission of the Learned counsel of the assessee is cogent. However the issue requires factual verification of the submissions made.
Disallowance towards provision for salary and DA - Held that:- Upon careful consideration we find that the issue needs verification on the part of the Assessing Officer. Hence in the interest of justice we remit this issue to the file of the Assessing Officer. The Assessing Officer shall examine the issue afresh after giving assessee an opportunity of being heard.
In this regard it is another contention of the Learned counsel of the assessee that if the above some is excluded for the purpose of application of computing income under section 11 of the Income Tax Act, the application is more than 85% of the income of charitable institution. Hence rendering decision on this ground may become academic nature. We find that the aspect again needs examination of the computation and hence we leave the suspect of computation for the Assessing Officer.
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2017 (1) TMI 1100
Entitlement to claim deduction u/s 80P(2)(d) - amount of income was earned by the assessee in the form of interest from deposits in the Co- operative Banks - Held that:- Co-Operative Society can be of different nature, and can be involved in different activities; the Co-operative Society Bank is merely a variety of the Co-operative Societies. Thus the Co - operative Bank which is a species of the genus would necessarily be covered by the word “Co-operative Society”.
Furthermore, even according to Section 56(i)(ccv) of the Banking Regulations Act, 1949, defines a primary Co-Operative Society bank as the meaning of Co- Operative Society. Therefore, a Co-operative Society Bank would be included in the words ‘Co-operative Society’.
Admittedly, the interest which the assessee respondent had earned was from a Co-operative Society Bank. Therefore, according to Sec. 80P(2)(d) of the I.T. Act, the said amount of interest earned from a Co-operative Society Bank would be deductable from the gross income of the Co-operative Society in order to assess its total income. Therefore, the Assessing Officer was not justified in denying the said deduction to the assessee respondent. - Decided in favour of assessee.
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2017 (1) TMI 1102
TDS u/s 194J - Royalty - applicability of provisions of section 9[1][vi] - Tribunal held that the provisions of Tax Deducted at Source will not be applicable in the asessee case - Held that:- It is an admitted fact that the assessee in the present case is a dealer engaged in buying and selling software in the open market. The transaction in question is thus one of purchase and sale of a product and nothing more. We are of the view that the provisions of section 9[1][vi] dealing with and defining 'Royalty' cannot be made applicable to a situation of outright purchase and sale of a product.
Courts have consistently noted the difference between a transaction of sale of a 'copyrighted article' and one of 'copyright' itself.
The provisions of section 9(1)(vi) as a whole, would stand attracted in the case of the latter and not the former. Explanations 4 and 7 relied by the authorities would thus have to be read and understood only in that context and cannot be expanded to bring within its fold transaction beyond the realm of the provision. The Tribunal has relied on the decision of the Division Bench of the Delhi High Court in the case of The Principal Commissioner of Income Tax-6 V. M.Tech India Pvt Ltd [2016 (1) TMI 812 - DELHI HIGH COURT ], which supports our view as above. It is brought to our notice that the decision of the Delhi High Court has not been accepted by the Department and an SLP is pending. Be that as it may, in view of the facts and circumstances as observed above, we have no hesitation in dismissing the Departmental Appeal answering the questions of law in favour of the assessee
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2017 (1) TMI 1101
Validity of reopening of assessment - period of limitation - Held that:- So far as the petitioner’s claim with respect to the notice being time barred are concerned, there is really no answer. The notice was indefensible when looked at from any angle. The notice was indefensible when looked at from any angle. The period of limitation prescribed by Section 147 (1) in respect of the time within which notice can be issued is absolute and does not call for any exception. Having regard to this incurable nature of the provision, the notice for assessment years 1994-95 and 1995-96 both dated 27.11.2002 have to be quashed.
So far as the other two years are concerned, it is a fact that the assessment was completed in respect of assessment years 1996-97 on 24.03.1999, i.e., before the block assessment was completed. For the other years, i.e., assessment years 1997-98 it was completed on 22.03.2000 which is after the completion of the block assessment. However, in both cases, the regular assessments were completed after the search and seizure proceedings took place on 07.08.1997. If in fact the search and seizure proceedings alerted the Revenue as to the possibility of the assessee having practiced deceit as is being alleged now, there was nothing which prevented it from carrying out proper investigation and enquiry during the regular assessments which were completed but after the search. Having failed to do so, it cannot now merely at the instance of the ITAT through stray and casual observations seek to revisit the same issues as it were. There is no dispute that apart from the ITAT’s observations there was in fact no tangible or objective material within the meaning as understood for the purposes of Section 147/148 of the Act which could have validly triggered the reassessment notices for these years. Consequently, the reassessment notices for assessment years 1996-97 and 1997-98 too are invalid. - Decided in favour of assessee
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2017 (1) TMI 1084
TDS u/s 195 - default under section 201(1) & 201(1A) of the Act for not deducting tax while making remittance to non-residents - withholding of tax - PE in India - commission paid to export commission agents - Held that:- Commission payments made to the non resident agents did not have any taxability in India, even under the provisions of the domestic law i.e. Section 9. Once we come to the conclusion that the income embedded in these payments did not have any tax implications in India, no fault can be found in not deducting tax at source from these payments or, for that purpose, even not approaching the Assessing Officer for order under section 195.
In our considered view, the assessee, for the detailed reasons set our above, did not have tax withholding liability from these payments. As held by Hon’ble Supreme Court in the case of GE India Technology Centre Pvt Ltd Vs CIT [2010 (9) TMI 7 - SUPREME COURT OF INDIA] payer is bound to withhold tax from the foreign remittance only if the sum paid is assessable to tax in India. The assessee cannot, therefore, be faulted for not approaching the Assessing Officer under section 195 either. As regards the withdrawal of the CBDT circular holding that the commission payments to non resident agents are not taxable in India, nothing really turns on the circular, as de hors the aforesaid circular, we have adjudicated upon the taxability of the commission agent’s income in India in terms of the provisions of the Income Tax Act as also the relevant tax treaty provisions.
TDS on payments are for subscription fees for specialized database containing copyright material - Held that:- We find that as the treaty provision unambiguously requires, it is only when the use is of the copyright that the taxability can be triggered in the source country. In the present case, the payment is for the use of copyrighted material rather than for the use of copyright. The distinction between the copyright and copyrighted article has been very well pointed out by the decisions of Hon’ble Delhi High Court in the case of DIT Vs Nokia Networks OY [2012 (9) TMI 409 - DELHI HIGH COURT ]. In this case all that the assessee gets right is to access the copyrighted material and there is no dispute about. Even during the course of hearing before us, learned Departmental Representative could not demonstrate as to how there was use of copyright. In our considered view, it was simply a case of copyrighted material and therefore the impugned payments cannot be treated as royalty payments. - Decided in favour of the assessee.
Supervision charges paid to Buck Subish Millan Company Limited (Trinidad) as Fees for Technical Services both under section 9(1)(vii) of the Act as well as Article 12(3)(b) of DTAA between India and Trinidad - Held that:- Learned counsel has a very limited argument on this issue as he fairly submits that the issue is covered by decision of a coordinate bench of this Tribunal, in the case of DCIIT Vs Virola International [2014 (2) TMI 653 - ITAT AGRA] to the extent that so far as remittances before 8th May 2010 are concerned, the assessee cannot be expected to deduct tax at source from these payments inasmuch as the amendment under section 9(1)(vii) was effected on that day and the assessee could not be expected to give effect to the law, while discharging his tax withholding obligations, prior to that date. Learned Departmental Representative also fairly accepts this legal position even as he relies upon the stand of the authorities below.
Thus we remit the matter to the file of the Assessing Officer for exclusion of the cases, if any, of remittances having been made before 8th May 2010 which shall remain uninfluenced by the amendment in section 9(1)(vii) with effect from this date.
Grossing up the amount of remittances made for the purpose of section 195A of the Act by applying the rates mentioned in section 206AA - Held that:- We find that so far as the treaty provisions are concerned, the grossing up does not come into play. There is no dispute or controversy about this position, nor, in a treaty situation, the provisions of the domestic law, unfavourable to the assessee, can be pressed into service- as is the unambiguous legal position under section 90(2) of the Act. The provisions of Section 206AA cannot also be, for the same reasons, pressed into service either. - Decided in favour of the assessee.
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2017 (1) TMI 1106
Reopening of assessment - claim under Section 80IA unseen - Held that:- It is required to be noted that the assessee companies running two business (1) Electronic Appliances Division and (2) Power Generation Division. It appears that during year under consideration, the assessee claimed benefit under Section 80IA of the Act of ₹ 56,22,625/in respect of power generation income from Windmill Division at Bhogat. However, submitting return and claiming deduction under Section 80IA of the Act, the assessee did not debit any financial charges and administrative expenses to the Windmill Division.
Also appears that in the profit and loss account, the assessee had not debited any administrative expenses and financial charges while computing profits from Windmill Division. It has been noticed by the Assessing Officer that the assessee ought to have apportioned the administrative expenses and financial charges of ₹ 10,83,692/on its windmill unit at “Bhogat, on which, it claimed the deduction under Section 80IA of the Act. Under the circumstances, it cannot be said that the assessee disclose true and correct facts necessary for assessment, more particularly with respect to deduction under Section 80IA of the Act, more particularly, with respect to windmill unit at Bhogat.
Thus it cannot be said that the impugned notice under Section 148 to reopen the assessment for AY 200910 can be said to be without jurisdiction and / or contrary to the provision of Section 147 of the Act. Under the circumstances, present petition challenging the impugned notice under Section 148 of the Act deserve to be dismissed - Decided against assessee.
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2017 (1) TMI 1105
Constitutional validity of Section 234E - late filing of the TDS returns - Period from 2012 to 2015 and post 2015 - The main argument of the petitioner is that being a fee, there is no quid pro quo for the levy - Held that:- The main contention of the petitioner is based on the memorandum explaining amendment moved in the Finance Bill, 2012, wherein it is indicated that the provision had been incorporated as a deterrence to the deductors who delays in furnishing TDS statement in time. While considering the validity of a statute, we do not think that the exact words of the Explanatory Note can have any relevance. It has to be verified whether the fee that is being charged is in the form of a penalty so that an opportunity should be given to the deductor to explain the reasons for delay before imposing such fee/penalty.
As already held in Rashmikant Kundalia (2015 (2) TMI 412 - BOMBAY HIGH COURT ), "undoubtedly, delay in furnishing of TDS return/statements has a cascading effect. Under the Income Tax Act, there is an obligation on the Income Tax Department to process the income tax returns within the specified period from the date of filing. The Department cannot accurately process the return on whose behalf tax has been deducted (the deductee) until information of such deductions is furnished by the deductor within the prescribed time." The Bombay High Court has thereafter elaborated the consequences of delay in filing the statement. It is on account of the additional work burden which has fallen upon the department due to the fault of the deductor that a fee has been levied. We do not think that a different view can be taken in the matter.
It is also held that the provision is not onerous even in the absence of a right of appeal as it is always open for the aggrieved person to approach the High Court under Article 226 of the Constitution of India.
Section 200A was amended by the Finance Act 2015 incorporating clause (c) and an order passed under Section 200A is made appealable under Section 246A. This benefit of appeal is available only after the commencement of Finance Act 2015. In the judgment of the Rajasthan High Court in M/s.Dundlod Shikshan Sansthan & another v. Union of India and others (2015 (9) TMI 807 - RAJASTHAN HIGH COURT ), reference is also made to the amendment to Section 200A that there was no provision for appeal earlier against collection of fee under Section 234E. But as per the amendment made to the Finance Act 2015, with effect from 01.06.2015, a provision for appeal has been inserted under Section 246A against an order under sub-section (1) of Section 200A. Since the appellate remedy has already been provided, the petitioner cannot contend that the impugned provision of the Act is unreasonable and arbitrary.
In the light of the aforesaid discussion, we do not think that the petitioners have succeeded in challenging the vires of Section 234E. Writ petitions are therefore dismissed reserving the right of the petitioners to take appropriate action in accordance with law.
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2017 (1) TMI 1086
Transfer Pricing (TP) adjustment on payment of corporate fee observing it as an international transaction - Held that:- The corporate guarantee fee provided by the assessee in respect of loan taken from IFC and extended LOC for working capital facility from SBI, Indonesia to the AE. It cannot fall under the purview of international transactions in terms of sec.92B of the Act so as to make the adjustment. The similar view was taken by Delhi Bench of Tribunal in the case of Bharti Airtel Ltd. Vs. ACIT reported [2014 (3) TMI 495 - ITAT DELHI]. In view of this decision, we are inclined to decide the issue in favour of the assessee and accordingly this ground taken by the assessee is allowed.
TP adjustment - brand promotion expenses incurred by the assessee in promoting the market as the international transactions - Held that:- The legal and economic ownership of the brand of TVS in Indonesia was exploited by AE, PT TVS Indonesia and risk associated with marketing distribution was to be borne by PT TVS Indonesia. The AMP expenditure to be borne by PT TVS Indonesia only and the TVSM India is not connected with the sales of the AE, PT TVS Indonesia. All the risks associated with the sales of AEs is to be borne by AE only. In such circumstances, assessee is not required to incur any expenditure towards AMP. More so, when there is no stipulation by way of any agreement between the assessee and the A.E, it is borne in mind the assessee has sold similar goods to other non-AE, assessee would not have incurred such expenditure The benefit derived from impugned expenditure is not at all for the assessee and it goes directly to the AE only. In our opinion, AMP expenditure incurred in Indonesia, the benefit accrued to only AE and assessee cannot claim any such expenditure and the AE is in different tax jurisdiction constituted distinct and independent entity subject to the law of the Indonesia and TVSM is a parent company cannot be claimed the benefit of the A.E’s business or may claim beneficial ownership treating the A.E as virtual non entities. - Decided against assessee
Disallowance u/s.14A r.w.Rule 8D - Held that:- AO has to consider the assessee’s own fund i.e. capital and reserves as available on the date of investment which yields exempted income and thereafter he shall apply the Formula in Rule 8D and also exclude investments in subsidiaries.With this observation, we remit the issue to the file of AO for fresh consideration. Hence, this ground is allowed for statistical purposes.
Charging of notional royalty to tax - Held that:- In this case, assessee following the mercantile system of accounting, there is no question of deferment of receipt of income since the assessee was in a position to create the document as the transaction with AE which cannot be appreciated. It is only afterthought so as to postpone the liability of taxation. Accordingly, we are of the opinion that lower authorities were justified treating the accrued royalty as income of assessee. Thus, this ground is rejected.
Disallowance of export agency commission paid to non-residents u/s.40(a)(i) - Held that:- As decided n assessee's own case for assessment year 2008-09 what was the nature of technical service that the nonresident agents had provided abroad to the assessee was not clear from the order of the Assessing Officer. The opening of letters of credit for the purpose of completing the export obligation was an incident of export and, therefore, the non-resident agent was under an obligation to render such services to the assessee, for which commission was paid. The non-resident agent did not provide technical services for the purposes of running of the business of the assessee in India. Therefore, the commission paid to the nonresident agents would not fall within the definition of “fees for technical services” and the assessee was not liable to deduct tax at source on payment of commission.
Hedging loss - whether is allowable only on the basis of actual realization as termination of the contracts before 31.03.2011? - Held that:- Since the transaction is relating to acquisition of fixed assets and the profit or loss to be treated in capital field and it cannot be in Revenue in nature as held by Special Bench in the case of Oil & Nature Gas Corporation Ltd. Vs. DCIT (2002 (8) TMI 802 - ITAT DELHI). Hence, this ground of the appeal is rejected.
Actual loss on exchange difference in repayment of ECB loan relating to non-imported assets - treated as “capital” in nature and allowed only depreciation on such loss - Held that:- In the absence of applicability of section 43A of the Act to the facts of the case and in the absence of any other provision of the Income Tax Act dealing with the issue, claim of exchange fluctuation loss in revenue account by the Assessee in accordance with generally accepted accounting practices and mandatory accounting standards notified by the ICAI and also in conformity with CBDT notification cannot be faulted. No inconsistency with any provision of Act or with any accounting practices has been brought to our notice. Otherwise also, in the light of fact that the conversion in foreign currency loans which led to impugned loss, were dictated by revenue considerations towards saving interest costs etc. we have no hesitation in coming to the conclusion that loss being on revenue account is an allowable expenditure under S. 37(1) of the Act. - Decided in favour of assessee
Additional depreciation - remainder of depreciation from the earlier year on which only 50% of the eligible depreciation was claimed by the assessee - Held that:- Admittedly, similar issue came up for consideration in the case of ACIT Vs. M/s.Rittal IndiaPvt Ltd. [2016 (1) TMI 81 - KARNATAKA HIGH COURT] held nothing would not restrain the assessee from claiming the balance of the benefit in the subsequent assessment year. The Tribunal, in our view, has rightly held that additional depreciation allowed under Section 32(i) (iia) of the Act is a onetime benefit to encourage industrialization, and the provisions related to it have to be construed reasonably, liberally and purposively, to make the provision meaningful while granting additional allowance. - Decided in favour of assessee
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2017 (1) TMI 1104
Admission of the appeal as per the provisions of Section 249(4) - the assessee had not paid the admitted tax - Held that:- The said question is squarely covered against the Revenue in view of the decision of the Hon’ble Supreme Court in the case of Commissioner of InocmeTax vs. Pawan Kumar Laddha (2010 (4) TMI 14 - SUPREME COURT ). The aforesaid is not disputed by the learned Counsel appearing on behalf of the Revenue. Under the circumstances, question No.(A) is answered in favour of the assessee and against the Revenue.
Undisclosed income - whether the addition has wrongly been made, as peak of bank account has been considered as undisclosed income covered by the period of Settlement Commission Order - Held that:- It is not in dispute that the order passed by the Settlement Commission has attained the finality. Therefore, considering Section 245F of the IT Act, when the order passed by the Settlement Commission has attained finality, the Assessing Officer was not justified in making the addition which has rightly been set aside by the learned Tribunal. After considering the observations made by the Settlement Commission which has been reproduced by the learned Tribunal in para 16, we are in complete agreement with the view taken by the learned Tribunal. No error has been committed by the learned Tribunal in holding so and in deleting the addition treating it as undisclosed income. Under the circumstances, the aforesaid question No.B is answered against the Revenue and in favour of the assessee
Unaccounted cash payment made by the assessee in respect of booking of the plot in Radhe Acre Scheme - Held that:- Department is not in a position to point out from the order passed by the Assessing Officer that the addition was made by the Assessing Officer on the allegation of any onmoney received from the assessee. Therefore, the learned Tribunal has rightly deleted the addition of ₹ 1 Crore and ₹ 38,98,600/for AY 199596 and AY 199697 respectively by passing a reasoned order. Considering the reasons assigned by the learned Tribunal while making the above addition, we are in complete agreement with the view taken by the learned Tribunal. When the Assessing Officer made the addition solely on the basis of statements of Shri Ashish Patel dated 25.04.1996 and 01.05.1996, which were subsequently retracted and there being no other material whatsoever on the basis of which the aforesaid addition could have been made in respect of unaccounted cash payment alleged to have been made by the assessee, we confirm the order passed by the learned Tribunal deleting the same. - Decided in favour of the assessee
Unaccounted investment in unexplained bank account peak balance - Held that:- Tribunal considered 60 days’ rotation period. While considering period of 60 days for rotation of funds, for working the peak, the learned Tribunal considered the observations made by the Settlement Commission. It is required to be noted that as such according to the assessee the period of 45 days for rotation of the funds was required to be considered for working the peak, however the learned Tribunal has not accepted the same and has considered the period of 60 days for rotation of funds for working the peak. While holding so the learned Tribunal has considered 32 undisclosed bank accounts also. When by cogent reasons the learned Tribunal has considered the period of 60 days for rotation of funds, the same is not required to be interfered with by this Court. We are in complete agreement with the view taken by the learned Tribunal.- Decided in favour of the assessee
Unaccounted cash receipt on premium of transfer of booking of Plot No.181 in Radhe AcreII - whether the learned Tribunal is right in law and on facts in deleting the same by giving benefit of telescoping - Held that:- The deletion of addition of ₹ 4,51,500/for AY 199697 in respect of unaccounted cash receipt of premium on transfer of booking of Plot No.181 in Radhe AcreII and the deletion of addition of ₹ 10 lakh and ₹ 14,36,000/for AY 199495 and 199596 respectively are hereby quashed and set aside and both the aforesaid issues / questions are remitted back to the learned Tribunal to consider the same afresh.
Telescoping in respect made in respect of unexplained cash payment to Shri Girish Ruparel in lieu of entry from Reliable Finstock Services Ltd - Held that:- The amount deposited in 32 unaccounted bank accounts earlier came to be considered by making the addition on undisclosed income by taking the peak. It has come on record that the amount of ₹ 61,54,735/paid by cash to Shri Girish Ruparel were in lieu of the cheques issued by the Reliable Finstock Services Ltd. which were deposited in 32 unaccounted bank accounts. Once that is so and once a peak is considered, there cannot be any double taxation as rightly held by the learned Tribunal. We are in complete agreement with the view taken by the learned Tribunal. Under the circumstances, question No.G is also answered against the Revenue and in favour of the assessee.
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2017 (1) TMI 1107
Unexplained Cash Credits - there was a difference between the amounts shown as received in the books of account of the assessee and the confirmation letter - Held that:- There should not be any dispute that the assessing officer has made the addition by comparing two different years, which is not correct. Further, the assessee has pointed out that he has filed confirmation letter for the years ending 31.12.1984, 31.12.1985 and 31.12.1987. He has expressed its inability to obtain confirmation letter for the current year, since the creditor has migrated to USA and also due to passage of long time. In our view, the difficulty of the assessee should be appreciated. Further, the assessee has also submitted that, out of the total credit of ₹ 1,12,500/- a sum of ₹ 91,000/- related to the share trading transactions. Hence, on a conspectus of the matter, we are of the view that there is no reason to suspect the credit obtained - Decided in favour of assessee
Cash credit available in the name of Ronak Patel the sources to the extent of ₹ 12,000/- can be considered to have been explained in view of the payment of interest, referred above. Accordingly we modify the order passed by Ld CIT(A) on this issue and direct the AO to sustain the addition in respect of this cash credit to the extent of ₹ 28,000/-.
Cash credit received from Shri Saurin Patel the assessee has paid interest of ₹ 12,600/- in Feb & Aug, 1986. The fresh credit of ₹ 12,000/- was obtained on 3-12-1986. Hence, we are of the view that the interest payment of ₹ 12,600/- is sufficient to explain the sources for the fresh credit of ₹ 12,000/-. Accordingly we are of the view that this cash credit may be treated as explained
Cash credit received from Shri Vikram U Patel assessee has received a sum of ₹ 60,000/- on 06.05.1986. We notice that the AO has given credit for principal portion of ₹ 50,000/- repaid by the assessee and accordingly made the addition of ₹ 10,000/-. However, he has not given credit for the interest amount of ₹ 7,057/- referred above. Considering the opening balance of ₹ 1,00,000/- available in this account and the interest payment made to this creditor, we do not find any reason to sustain the addition of ₹ 10,000/-. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this addition.
Disallowance of interest paid on purchase of securities - Held that:- It can be visualised that a person who purchases a security from the assessee will not bother to ascertain the “cum-interest” received by the assessee from the person from whom the assessee had purchased the security. The purchaser will only ensure that the he makes payment towards cum-interest from the last coupon date to the date of purchase. Hence the question of nexus, in our view, may not arise in these type of transactions. AO has not given proper reasoning or any credible material to make this addition and the same is not warranted in the facts and circumstances of the case, when one considers the trade practice, method of accounting etc. Hence the same is liable to be deleted. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the addition relating to Interest on securities.
Addition on account of Negative balance of securities - Held that:- One cannot come to the conclusion that the assessee has sold shares which were not available with him, i.e, negative stock. Hence we hold that the inference drawn by the assessing officer on the basis of above said figures is wrong and hence the impugned addition of ₹ 3,22,72,000/- is not justified. We notice that the Ld CIT(A) has also confirmed the addition with the observation that the assessee has failed to furnish any explanation with regard to the negative stock. Since the question of negative stock does not arise in this case and since the Ld CIT(A) has also not examined the figures furnished by the AO properly, we are unable to sustain the order passed by Ld CIT(A) on this issue. In any case, the proper interpretation of figures would only show that the assessee has incurred loss in the transaction of purchase and sale of units of UTI. However this loss also could not be recognised, since the assessee is disputing the stock summary worked out by the assessing officer. Thus we are of the view that there is no merit in the addition relating to negative stock. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this addition.
Bogus loss claim - Held that:- Assessing officer should not have come to such a conclusion without examining relevant contract notes issued by the third party brokers. Accordingly we are of the view that the tax authorities have not given proper justification in presuming that the loss shown by the assessee is bogus one and constitutes negative brokerage. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this addition.
Undisclosed investment in Stock - Held that:- Since the assessee has held fully convertible debentures of Reliance G series, he became entitled to apply for shares on a prescribed rate upon conversion. As per the market mechanism, the assessee is entitled to sell his rights in favour of another person, instead of applying for the shares. According to the assessee, he has sold the rights, which has accrued from the debentures, which are already held by him, i.e., he has not purchased such rights, but the right has accrued to him from the debentures held by him. Hence the “right to apply” for shares, in our view, cannot be taken as undisclosed item of asset. We notice that though the assessee has submitted these explanations and accordingly contended that the assessing officer was wrong in considering the ‘sale of rights’ as ‘sale of shares’, yet the AO did not address the same. Hence in the absence of anything to contradict the submissions made by the assessee, his explanations should be accepted. Accordingly, we hold that the ‘sale of rights’ cannot be considered to be the sale of shares and accordingly, we direct the AO to delete the addition relating to undisclosed stock of shares of Reliance Industries Ltd. The order of Ld CIT(A) stands set aside accordingly.
Addition of credit balance standing in the name of M/s Champaklal Devidas - Held that:- AO has made this addition on general observations, surmises and conjectures without bringing any material to substantiate his views. The observations made by the AO about the repayments made in March 1992 and transfer of funds to group concerns are also, in our opinion, would not justify the addition under the Income tax Act. Accordingly, we are of the view that the AO was not justified in considering the closing balance available in the account of M/s Champaklal Devidas as nongenuine. Accordingly he was not justified in assessing the outstanding balance as income of the assessee. In any case, the opening balance shown in the account cannot be assessed in this year. Thus direct the AO to delete this addition relating to M/s Champaklal Devidas.
Disallowance of interest paid to banks & others - as per AO assessee has given interest free funds to persons covered by sec. 40A(2)(b) - Held that:- As discussed the method of usage of bank overdraft facility, i.e., it was mainly used for purchase and sale of securities. Thus, the possibility of diverting funds from bank overdraft facility is minimal. We notice that the assessing officer has compared the figures available in Balance sheet and has taken adverse view of the matter. According to the assessee, he was having huge interest free sundry creditors balance with him and the AO has failed to recognize the same. In our view, there is merit in the said submissions of the assessee. When interest free funds and interest bearing funds are mixed together, they loose their respective identity and hence the presumption should be that the assessee has used interest free funds to give interest free advances. For this proposition, we get support from the decision rendered by in the case of Reliance Utilities and Power Ltd (2009 (1) TMI 4 - BOMBAY HIGH COURT ). Accordingly we are of the view that there is no justification in disallowing interest claim, when the assessee is possessing huge interest free funds.
Disallowance of loss on securities transactions - Held that:- Before Ld CIT(A), the assessee has furnished relevant vouchers and also made a reference to the bank accounts, but the Ld CIT(A) has proceeded to uphold the disallowance by putting up the responsibility on the assessee. In our view, the assessee has been asked by the tax authorities to prove the loss, but according to the assessee the same can be examined from the details available in the books of account only, i.e., by examining the corresponding purchase and sale. Hence, in our view, the tax authorities have disallowed this claim by drawing inferences without actually carrying out examination, which is not justified. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this disallowance.
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2017 (1) TMI 1109
Disallowance of overriding commission paid to Associated Enterprise pursuant to the order of the Transfer Pricing Officer - Held that:- As decided n assessee's own case for assessment years 2002-03, 2003-04 & 2004-05 as held that none of the revenue authorities below have brought any comparable case on record to show that the payment of commission by the assessee is not at arm’s length. On the contrary, we find that the A.O. has disallowed merely because he was of the opinion that no services have been rendered. This finding is beyond the provisions of Chapter 10 of the Act in as much as under chapter 10, the TPO/A.O. has to see whether the international transaction entered by the assessee is at arm’s length or not. There are other provisions in the act wherein the A.O. can test the genuineness of the transaction but in any case not under Chapter 10 of the Act. As mentioned elsewhere, no comparable case have been brought on record which could justify that the payment of 3% + 1% overriding commission is not at arm’s length, we set aside the findings of the ld. CIT(A) and direct the A.O. to delete the entire transfer pricing adjustment made by it. -Ths we direct the A.O to delete the entire Transfer Pricing adjustment made by it - Decided in favour of assessee
Disallowance of deduction u/s. 10B of the Act in respect of Ahmednagar Unit - Held that:- As during the year under consideration, both the lower authorities have adjudicated the issue; therefore, there is no reason why the matter should be sent back for fresh adjudication. However, we find the LOP has been cancelled vide order dated 25.07.2006 which pertains to F.Y. 2007-08. Therefore, we do not find any reason why the exemption should be denied for the year under consideration. Since in earlier years, the exemption was allowed. Therefore, we direct the A.O to allow the claim of deduction u/s. 10B of the Act for the year under consideration.- Decided in favour of assessee
Disallowance of trade mark registration and overseas product registration charges u/s. 35(2AB) - Held that:- Tribunal in earlier years while deciding the issue in favour of the assessee has followed the decision of the Co-ordinate Bench, Mumbai in the case of USV Ltd. [2012 (9) TMI 43 - ITAT MUMBAI] allowed the claim of the assessee in respect of expenditure incurred in respect of patent application.
Exclusion of interest on loans to employees for deduction u/s. 80IB - Held that:- The assessee brought to the notice the decision of the Tribunal given in earlier assessment years and pointed out that the Tribunal has restored this issue to the files of the A.O with a direction to decide the issue afresh in the light of the ratio laid down by the Hon’ble Supreme Court in the Liberty India [ 2009 (8) TMI 63 - SUPREME COURT ] . Respectfully following the decision of the Tribunal (supra), we direct the A.O accordingly. Ground no. 5 is treated as allowed statistical purpose.
Reallocation of R & D expenses @ 12.5% for computing deduction u/s. 80IB - Held that:- As decided in assessee's own case in ealier AYs the assessee vehemently submitted that the question related to the raw materials and not to all the items of expenditure and, therefore, the revenue authorities have erred in generalizing the statement of the Senior Vice President. We have given a thoughtful consideration to the findings of the lower authorities. We have also considered the statement of Dr. T. Rajamannar. Undisputedly, the question related to the raw materials and not to all the items of expenditure under this head. In our considered opinion one cannot carry out the allocation on the basis of pick and choose method. We accordingly direct the A.O to restrict the re-allocation only to the raw material, assessee gets partial relief.
Non admitting and adjudicating grievance relating to the treatment of foreign exchange fluctuation gain - Held that:- We find force in the contention of the ld. counsel unless the issue is decided in earlier years; the same cannot be decided in subsequent years. We, therefore, direct the A.O to decide these issues afresh. After deciding these issues in earlier assessment years and after giving a reasonable opportunity of being heard to the assessee.
Addition of sales made to Sun Pharmaceuticals Industries - Held that:- Tribunal in earlier assessment years held that we agree with the contention of the ld. counsel that no specific section has been mentioned in the assessment order for making the impugned additions. A perusal of the assessment order show that the additions have been made by treating the transactions u/s. 40A(2) of the Act. In that case, we have to state that provisions of section 40A(2) are applicable only in respect of payments made to related parties mentioned therein. But the transaction before us is of credit in nature i.e. sales so provisions of section 40A(2) are not at all applicable.
Disallowance of expenses incurred on behalf of Sun Pharmaceutical Industries - Held that:- As per the agreement between the assessee company and the partnership firm, the assessee had assisted the partnership firm in carrying on its business by using its network for marketing the pharmaceuticals products successively. Thus, it cannot be said that the expenditure incurred by the assessee are not for the purposes of its business. Since the assessee is holding 95% in the partnership firm it becomes the duty of the assessee to promote the business of the partnership firm, in the capacity of the majority stake holder. Incidentally, the revenue authorities have not brought anything on record which could suggest that the expenditures have not been incurred for the purposes of business. Be it assessee’s business or the business of the partnership firm where the assessee is a majority stake holder. Therefore, in our considered opinion, the expenditures incurred by the assessee company deserves to be allowed
Inclusion of interest on overdue bills in gross sales while computing deduction u/s. 80IB - Held that:- CIT(A) was correctly convinced with the claim in the light of the decision of the Hon’ble Jurisdictional High Court in the case of Nirma Industries Ltd.[2006 (2) TMI 92 - GUJARAT High Court ] and accordingly directed the A.O to include the interest on overdue bills while computing deduction u/s. 80IB.
Direction to exclude income of Panoli Unit for calculation of Book Profit - Held that:- Since the ld. CIT(A) correctly allowed the claim of deduction in respect of Panoli Unit, therefore, directed the A.O to exclude the income working of the book profit u/s. 115JB of the Act.
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Customs
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2017 (1) TMI 1062
Release of goods lying in godown - by the interim order the goods have been ordered to be released to the petitioner, after he executed the necessary bond - This Court has dismissed the writ petition in W.P.No.19150 of 2003 on 04.01.2017 upholding the show cause notice issued by the DRI and directing the authorities to proceed further against the petitioner, withholding the release of goods - writ petition, which is based on the said show cause notice, becomes infructuous and accordingly, the same stands dismissed - decided against petitioner.
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2017 (1) TMI 1064
Absolute confiscation - applicability of Section 113(d) and (h) of the Customs Act, 1962 - penalty - baggage rules - attempt of illegal export - Indian currency of ₹ 47 lakhs - assorted foreign currency equivalent to Indian currency ₹ 21 lakhs - confiscation on the ground that there was an intention to hand over the currency to a foreign going passenger - whether the Indian and foreign currency totalling to approx. 68.65 lakhs is liable for confiscation under Section 113(b) and (h) of Customs Act, 1962 read with FEMA and rules thereof and whether Sanjay Agarwal appellant the appellant herein is to be penalised under provisions of 114(i) by the Customs Act, 1962.
Held that: - u/s 113(d) and (h), the goods are liable for confiscation if attempted to be improperly exported or if they are attempted to be exported or brought within the limits of any customs area for the purpose of being exported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force; is not applicable in the case hand as it is undisputed that Abdullah employee of Sanjay Agarwal, appellant herein was travelling in flight Al 806 which was flying between Mumbai and Hyderabad as a domestic sector flight. If it is so, then the goods i.e. foreign currency and Indian currency was never sought to be exported.
Another fault in investigation is that Abdullah from whom the foreign currency and Indian currency was recovered was to hand it over to M.S. Kumar for carrying it to Singapore. It is found from the entire records that M.S. Kumar was never apprehended nor his statement recorded; despite that it was the case to hand foreign currency and Indian currency through M.S. Kumar for taking out of country. In the absence of any statement M.S. Kumar to corroborate the theory of the revenue we find the case of confiscation of the foreign currency and Indian currency falls down.
Confiscation and penalty set aside - appeal allowed - decided in favor of appellant.
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2017 (1) TMI 1065
Time limitation - whether the service of notice to CHA can be considered as service of notice in terms of Section 28 of the Customs Act? - Held that: - reliance placed in the case of COLLECTOR OF CUSTOMS, COCHIN Versus TRIVANDRUM RUBBER WORKS LTD. [1998 (11) TMI 127 - SUPREME COURT OF INDIA], where it was held that the service of notice to CHA cannot be considered as service of notice in terms of Section 28 of the Customs Act - the “service of notice to CHA” cannot be equated to the “service of notice to the appellant”. Hence we are of the view that no notice has been served on the appellant - demand hit by limitation clause - appeal allowed - decided in favor of appellant.
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2017 (1) TMI 1066
Whether the provisions of Sections 154 to 157 and 173(2) of the Code of Criminal Procedure would apply in respect of the proceedings under the Customs Act, in view of Section 4(2) of the Cr.P.C.?
Whether in respect of offences under Sections 133 to 135 of the Customs Act registration of FIR is compulsory before the person concerned is arrested and produced before the Magistrate?
Held that: - registration of FIR is not necessary before arresting a person under Section 104 of the Customs Act. Sections 154 to 157 and Section 173(2) of the Code of Criminal Procedure do not apply to a case under the Customs Act, 1962.
Reliance placed in the case of Bhavin Impex Pvt. Ltd. v. State of Gujarat [2009 (10) TMI 564 - GUJARAT HIGH COURT] and Sunil Gupta v. Union of India [1999 (4) TMI 92 - HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH] - it was held in the case of Bhavin Impex Pvt. Ltd. that under Section 13 of the Central Excise Act empowers the Central Excise Officers to arrest a person whom he has reason to believe to be liable to punishment under the Act without issuance of warrant and without registration of an FIR or a complaint before the Magistrate - further in the case of SUNIL GUPTA, it was held that arrest can be made without a warrant.
Petition dismissed - decided against petitioner.
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2017 (1) TMI 1067
Amendment of IGM - misdeclaration - whether pursuant to filing of IGM on 12.11.2015 stating description of Cargo as STC Aluminium scrap Tread as ISRI packing loose/Briquetted net weight 22.096 MT with Ankit Metals as consignee under bill of lading dated 10.11.2015, whether subsequent request by the Trans Asian Shipping Services Pvt. Ltd. dated 28.12.2015 for amendment in the IGM in respect of material description from "Aluminium Scrap Tread 22.096 MT" to "Aluminium scrap Tread 7.552 MT & Copper Berry/Clove.14.544 MT" on the basis of NOC letter dated 10.12.2015 of M/s Ankit Metals was rightly turned down by the Assistant Commissioner Customs, ICD Loni vide letter dated 12.01.2016 on the ground that there was some alert against the aforementioned IGM?
Held that: - I am satisfied that there cannot be a mistake and/or same mistake in a series of documents in the course of import/export trade. Further, it is evident from the facts and circumstances that the shipping line first issues a draft set of bill of lading which is sent to shipper for approval and only after the approval, the shipping line issues the final bill of lading. Thus, under the facts and circumstances, I find that it is a case of mis-declaration, made out on the part of the appellant-assessee with intention to evade Customs duty.
Confiscation - Imposition of redemption fine and penalty - Held that: - I find that the differential duty involved is only ₹ 1,02,353/- as compared to the bill of entry filed by the appellant. In this view of the matter, the penalty imposed is reduced to ₹ 1,02,353/- under Section 112(a) and the penalty under Section 114AA is reduced ₹ 2 Iacs. Further, redemption fine is reduced ₹ 2 lacs - confiscated goods allowed to be released on payment of fine and penalty.
Appeal disposed off - decided partly in favor of appellant.
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2017 (1) TMI 1063
Jurisdiction of first appellate authority - Scope of SCN - expunging sought of the observation of the first appellate authority only on the ground that the said observation have traversed beyond show-cause notice and the question of mis-declaration was not alleged as the Bills of Entries were provisionally assessed - Held that: - first appellate authority has relied upon the certificate issued by the supplier of the goods to come to a conclusion that the charge of mis-declaration as confirmed by adjudicating authority does not arise - the first appellate authority was within his jurisdiction to pass an order on the allegations regarding mis-declaration by suppressing the facts and willful mis-statement. No merits found in the appeal filed by Revenue as they have not contraverted the findings of the first appellate authority by any evidence but only are seeking to expunge these observations on the ground that they were travelling beyond show-cause notice - appeal dismissed - decided against Revenue.
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Corporate Laws
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2017 (1) TMI 1058
Winding up petition - Held that:- A perusal of Clause 9.1 along with Clause 9.1.1 would show that the petitioner would have recourse qua all receivables emanating from the Approved Debtor, except those which were created by Debtor's Insolvency. Admittedly, the Approved Debtor i.e., BCPMS had become insolvent and the knowledge with respect to the same was available with the petitioner. This fact is laid bare on perusal of letter dated 30.01.2009, issued by KPMG, the Administrators of BCPMS.
Furthermore, if there was any doubt with regard to aforesaid it is set to rest upon a perusal of the petitioner's own letter dated 25.08.2009, wherein, it makes a reference to the Administrators of BCPMS. The said letter is a clear pointer to the fact that the petitioner was in touch with the Administrators of BCPMS and, it had, dispatched the said communication, when, the Administrators informed the petitioner that no outstandings were owed by BCPMS to the petitioner.
It is, in this context, that the petitioner, by very same letter, indicated to the respondent that, since, it had not protected its title qua the receivables, it was seeking from the respondent the payment of the amounts involved. In support of its stand, the petitioner alluded to Clauses 7 and 9 of GARMA in the said communication.
Importantly to lend clarity to the submissions advanced as indicated to the counsel for the petitioner during the course of hearing to advert to the specific sub-clause (8) in Clauses 7 and 9, based on which, it was sought to be asserted that even in a situation where the Approved Debtor had turned insolvent, the petitioner could take recourse to the respondent.
We must record that the counsel for the petitioner was not able to point to any provision, which would run counter to the provisions of Clause 9.1.1 of GARMA. As a matter of fact, as indicated in my narration, the 12th Metropolitan Magistrate, Mumbai, in coming to the conclusion that the respondent along with its Directors/guarantors was not guilty of the offence with which they were charged, had based his reasoning on Clause 9.1.1 of GARMA. My view, in the matter, is no different.
This apart, the issue raised, in defence, to the present Company Petition by the respondent is alive and pending adjudication in the suit filed by the Directors/Guarantors of the respondent. The defence raised by the respondent is not only bona fide, but is also one of substance, and therefore, it would not be appropriate to allow the petitioner to press ahead, with the instant Company Petition. In this behalf, the argument advanced that the Suit is not filed by the respondent but by its Directors/Guarantor is without merit, as not only is the respondent party to the suit, albeit, as a pro-forma defendant but its liability in law is coextensive with that of its Directors/Guarantors. The issue, if decided, one way, or other would attain finality as amongst the parties to the Suit.
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Service Tax
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2017 (1) TMI 1110
Valuation - works contract - whether in a contract for retreading of tyres, service tax is leviable on the total amount charged for retreading including the value of the materials/goods that have been used and sold in the execution of the contract?
Held that: - Section 67 of the aforesaid Act deals with valuation of taxable services and specifically mentions that the same does not include the cost of parts or other material, if any, sold to the customer during the course of providing maintenance or repair service.
On the very face of the language used in Section 67 of the Finance Act, 1994 we cannot subscribe to the view held by the Majority in the appellate Tribunal that in a contract of the kind under consideration there is no sale or deemed sale of the parts or other materials used in the execution of the contract of repairs and maintenance. The finding of the appellate Tribunal that it is the entire of the gross value of the service rendered that is liable to service tax, in our considered view, does not lay down the correct proposition of law which, according to us, is that an assessee is liable to pay tax only on the service component which under the State Act has been quantified at 30%.
Acceptance of 70% of the amount as cost of material - Held that:- It is now stated before us that the aforesaid figures have been furnished by the assessee himself and, therefore, must be understood not to be authentic. This, indeed, is strange. No dispute has been raised with regard to the correctness of the said figures furnished by the assessee in the show cause notice issued to justify the stand now taken before this Court; at no point of time such a plea had been advanced. - Revenue cannot challenge an issue first time here.
Appeal allowed - decided in favor of appellant-assessee.
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2017 (1) TMI 1082
CENVAT credit - prefabricated shelters - appellants are provider of telephone services - denial on the ground that appellants have wrongly availed credit - Time Bar - Held that: - the department has failed to prove suppression of facts invoking extended period of limitation. Appellants have been filing the returns regularly and from the documents submitted by the appellant only the show-cause notice has been issued. It is a fact that the instant issue has been subject matter of various litigation before various judicial forum and till today the matter is pending before the Hon'ble apex court for final determination - the appellant has bona fide reasons to believe that he is entitled to the CENVAT credit and he has disclosed the same in his ST-3 returns - entire demand is time barred - appeal allowed - decided in favor of assessee.
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2017 (1) TMI 1081
Rejection of refund claim - export of information technology software services - input services - insurance auxiliary service - N/N. 5/2006 dated 14.3.2006 - denial on account of lack of nexus between the input/output services - Held that: - insurance services are connected with the business and in the absence of such insurance, companies properties would be at risk from natural event which are beyond the control of the respondent-assessee. The company only insures risk and lives of employees and his health, which falls in the definition of input service - refund allowed - appeal dismissed - decided in favor of assessee.
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2017 (1) TMI 1078
Business Auxiliary services - a proprietor firm owned by an individual lady, who was engaged in purchasing and selling of goods - commission agent service - demand of tax with interest and penalty - invocation of extended period of limitation - Held that: - similar issue was the subject matter of Tribunal decisions in the case of Pratap Singh Jyala vs. CCE Merut II [2015 (12) TMI 819 - CESTAT NEW DELHI] wherein it was observed that whether individual concern are to be treated as commercial concern, was the matter of interpretation, in which extended period of limitation would not apply. Also, when the balance sheet contents mention all the consideration received, no suppression or malafide can be attributable to the assessee so as to invoke the longer period of limitation.
The fact that the appellant was a proprietorship unit and there was lot of confusion about their tax / obligation read with the fact that all the activities were reflected in the balance sheet, we are of the view that the demand raised beyond the normal period of limitation is time barred - demand set aside - appeal allowed - decided in favor of appellant.
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2017 (1) TMI 1080
Imposition of penalty u/s 76 and 78 of FA, 1994 - appellants did not discharge Service Tax - minimum guarantee TEU charges - Buffer yard charges - Miscellaneous charges - invocation of section 80 - Held that: - the provisions contained in Section 80 provides for waiver of penalty if the assessee proves that there was a reasonable cause for failure to pay service tax. The original authority did not record any reasoning for imposition of penalty u/s 78 or any reference to section 80 for waiver of penalty u/s 78. The inference by impugned order that discretion u/s 80 has been raised is not correct. There is no partial discretion provided for u/s 80 - penalty set aside.
Time Bar - Held that: - The appellants who are discharging service tax should have maintained separate accounts, if they wanted to claim exemption for these disputed service which are relatable to export cargo. Having failed to do so, it is not open to them now to challenge the demand on the ground of time bar.
Tax demand confirmed - penalty set aside - appeal disposed off - decided in favor of assessee.
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2017 (1) TMI 1079
Works contract service - Benefit of abatement under N/N. 15/2004-ST dated 10.09.2004 and N/N. 01/2006-ST dated 01.03.2006 - denial on the ground that upon initiation of enquiry proceedings, since the appellant had discharged the service tax liability on the value of free supply material, the case of the appellant falls outside the scope and purview of the above notifications for claiming such abatement - Held that: - The Hon’ble Supreme Court in the case of Larson and Turbo Ltd. [2015 (8) TMI 749 - SUPREME COURT] have held that such contracts are liable to service tax only w.e.f. 01.06.2007 when a new tax entry under the category of “works contract service” was introduced for the first time in the Finance Act, 1944 - the service tax liability confirmed by the Department against the appellant for the period 01.06.2007 is not legally sustainable.
Extended period of limitation - the period of dispute involved in this case is from 16.06.2005 to 30.09.2007 and the SCN was issued by the Department on 02.09.2009, which is beyond the period of one year from the relevant date - Held that: - The issue regarding service tax liability on composite works contract was highly contentious and there were divergent views by different judicial forums - In such circumstances, invoking extended period of limitation for alleging fraud, suppression etc. is not legally sustainable. Therefore, the service tax demand is not sustainable even after the period 01.06.2007.
Demand set aside - appeal allowed - decided in favor of appellant.
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Central Excise
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2017 (1) TMI 1072
Natural justice - Valuation - discounts claimed by the Appellant had not been entirely passed on to the customers - deductions claimed wrongly - whether the Appellants are eligible to cash discount, and deductions on account of special packing charges and freight charges from the sale price, during the relevant period, in the determination of assessable value and discharge of duty?
Held that: - appellants have placed certain letters issued by the customers acknowledging the receipt of their business policy circulars where the percentage and nature of cash discount had been disclosed. Also, they have procured letters/ communication from various customers accepting knowledge about the percentage and nature of cash discount through business policy circular; these evidences need to be scrutinized by the learned Adjudicating Authority. Hence, for verification of these evidences, the issue needs to be remanded to the Adjudicating Authority.
With regard to the deduction of expenditure on account of special packing charges, we could not find the said explanation as sufficient to arrive at the conclusion that the goods were cleared in special packing condition at the instance of the buyers so as to allow the expenditure as deduction from the price. In the result, the learned Commissioner's finding on special secondary packing is upheld.
On the issue of deduction of freight charges, We find from the statements furnished for each of the Financial year in calculating the discounts availed and consequently the differential duty paid by the Appellant, the element of freight was shown on actual basis; also in their reply to the Show Cause Notice the same figures of actual freight charges incurred had been mentioned. However, its admissibility has to be considered on the basis of evidences even though in principle it is admissible in view of the judgment of Hon ble Supreme Court in the case of CCE&C, Nagpur Vs Ispat Ltd [2015 (10) TMI 613 - SUPREME COURT]. Accordingly, this issue also requires to be remanded to the Adjudicating Authority for reconsideration.
Appeal disposed off - matter on remand.
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2017 (1) TMI 1070
Manufacture - activity of coating pipes/tubes - duty paid in excess erroneously - Refund claim - Held that: - the subject activity of coating of pipes/tubes amounts to manufacture and there is no erroneous payment of central excise duty in excess in the present case - the Commissioner (Appeals) held In relation to the Pipes & Tubes of Heading 7304, 7305 and 7306 the process of coating with cement or polyethylene or other plastic materials shall amount to manufacture - refund claim rightly rejected - appeal rejected - decided against assessee.
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2017 (1) TMI 1068
Condonation of delay of 676 days - the delay in filing the appeals was unintentional and attributable to the wrong legal advice of the applicant's counsel - Held that: - during the relevant period, on similar issues the applicant has been pursing cases before the Tribunal, the details of which has been filed by the learned AR. I also find letters dated 4.4.2014 and 29.5.2014 written by the department to the applicant for recovery of arrears but the applicant instead of filing appeals thereafter immediately simply deposited the interest and asked the department to close the matter. Further, I also find that the applicant chose to file the appeals only when the recovery was sought to be effected - there is a gross negligence on the part of the applicant and I do not find it a fit case to condone the inordinate delay of 676 days - delay not condoned - appeal dismissed - decided against appellant.
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2017 (1) TMI 1073
CENVAT credit - outward freight - denial on the ground that the appellant has availed CENVAT credit on GTA services utilized for transportation of their finished goods beyond their factory gate which is their place of clearance during the period of dispute - Held that: - the appellant can prove by way of documentary evidences which he claims in his position to prove that the deliveries were on FOR basis, I set aside the impugned order and remand the case back to the original authority to pass a reasoned order after complying with the principles of natural justice - appeal allowed by way of remand.
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2017 (1) TMI 1069
Cement and clinker - CENVAT credit - GTA services - denial on the ground that the sale has happened at the factory gate and the credit of tax paid on GTA cannot be allowed - Held that: - reliance placed by Revenue in the case of LAFARGE INDIA LTD Versus COMMISSIONER OF CENTRAL EXCISE, RAIPUR [2014 (10) TMI 297 - CHHATTISGARH HIGH COURT], where it was held that in case of sale at the place of destination, the assessee is only entitled to claim credit of service tax on GTA, provided the amount paid was integral part of price of the goods - In the present case, the transportation cost has been included in the assessable value and as such the facts of the case is different from the one referred to by the Revenue. In the said case, it was clearly recorded that the freight charges were not integral part of the price of the goods.
In case of transportation of Cement from the respondent's unit to customers’ premises on FOR destination basis, the credit was admissible as the sale has taken place when the customer takes delivery of the goods. The cost of transportation has been included in the assessable value and as such, the impugned order permitted the credit as legally eligible.
Credit allowed - appeal dismissed - decided against Revenue.
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2017 (1) TMI 1075
Validity of SCN - the SCN was issued after more than 19 months after the date of conduct of audit - proviso to Section 11A of Central Excise Act, 1944 - Held that: - ruling of the Hon'ble High Court at Allahabad in the said case of C.C.E. & S.T. vs. Triveni Engineering Industries Ltd. [2015 (1) TMI 760 - ALLAHABAD HIGH COURT], is squarely applicable in the present case where it was held that without their being any intention to evade payment of tax omission cannot be a ground to invoke proviso to said Section 11A especially when the evasion came to the notice of the department when the audit was conducted 22 months before the date of issue of SCN - the SCN in the instant case issued by invocation of proviso to Section 11A ibid is not sustainable in law - appeal allowed - decided in favor of appellant.
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2017 (1) TMI 1071
Clandestine removal - excisable goods i.e. printed laminated plastic packaging film in pouch or in roll, which appeared to have been removed by M/s. Poysha without payment of Excise duty - penalty u/r 26 - Held that: - on perusal of Rule 26 of Central Excise Rules, 2002, it is clear that a person who is dealing in any manner with goods liable for confiscation is liable to be penalized under the said rule 26. It is admitted fact on record that both the appellants have procured the goods on which Excise duty was evaded. Therefore, I do not find any strength in the argument putforth by the learned counsel for the appellant - appeal dismissed - decided against appellant.
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2017 (1) TMI 1077
CENVAT credit - MS Plates, Angles, Bars, HR Plates, etc - manufacture of Sponge Iron - Held that: - The credit availed is limited only on the MS items used for fabricating capital goods and the supporting structures of the capital goods. From the photographs it is clear that without the supporting structures, the Kiln, Conveyor, Pollution Control equipments cannot be erected and cannot be put into function - reliance placed in the case of Commissioner of Central Excise, Jaipur Vs. Rajasthan Spinning & Weaving Mills Ltd. [2010 (7) TMI 12 - SUPREME COURT OF INDIA], where it was held that credit on MS items used for fabricating support structure of machinery and equipment is eligible - the denial of credit is unjustified - appeal allowed - decided in favor of appellant.
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2017 (1) TMI 1074
Cash refund of CENVAT credit availed - inputs used for manufacture of exported goods - denial on the ground that the product exported was exempted from duty and also the conditions laid down under the Notification issued under Rule 5 of the Cenvat Credit Rules,2004 was not fulfilled by producing sufficient evidences alongwith the refund claims.
Held that: - I find that the Ld. Commissioner (Appeals) while considering the issues recorded his observation on the first aspect only and concluded that they are not eligible to the cash refund of the CENVAT Credit as the exported was exempted from duty. However, he did not consider the eligibility of cash refund on merit on scrutiny of evidence.
To ascertain the eligibility of cash refund of the credit on merit, I am of the view that the matter needs to remanded to the Ld. Commissioner (Appeals) - appeal allowed by way of remand.
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2017 (1) TMI 1076
CENVAT credit - common input services attributable to the exempted goods - whether the reversal of proportionate credit on the input services used in the manufacture of exempted goods would be sufficient compliance as per the retrospective amendment to Rule 6 of CCR, 2004 by Section 73 of the Finance Act?
Held that: - after the amendment to Section 73 of Finance Act, 2010 by which Rule 6 was amended retrospectively and as per the amended Rule, if an assessee reverses the proportionate credit in respect of input services used in relation to the manufacture of exempted goods, then it would be a full compliance of the said provision - the impugned order is not sustainable in law as the appellant has reversed the CENVAT credit by following the procedure as prescribed in Rule 6 of CCR - demand set aside - appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2017 (1) TMI 1061
De-sealing of the premises - sealing order passed u/s 60 of the Delhi Value Added Tax Act, 2004 - the petitioner submits that the petitioner is willing to make available some space in the same Complex where the goods of the respondent No.2 can be shifted so that the premises of the petitioner can be de-sealed - Held that: - the petitioner is directed to make an appropriate arrangement of space in the same complex for shifting the goods of respondent No.2 lying in the premises bearing No.S-21&22 on the Second Floor, Select City Walk, District Centre Saket, New Delhi - After the process of shifting is completed the said premises i.e. premises bearing No.S-21&22 on the Second Floor, Select City Walk, District Centre Saket, New Delhi shall not be sealed and the possession of the premises shall be handed over to the Petitioner - petition allowed - decided in favor of petitioner.
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2017 (1) TMI 1060
Clandestine removal - TIN numbers mentioned in each invoices were found to be fictitious. Consignors were found non-existent - invoices were found to be fake and bogus - In the paper sheet (manifest) of the respondent, the transportation of goods is shown from U.P.B. to Chhapra or Siwan. Respondent could not prove from who they received goods and to whom they shall deliver.
Whether under the facts and circumstances of the case, seizure of goods and demand of cash security for its release under Section 48 of the U.P. VAT Act, 2008 is valid? - Held that: - the goods in question originated for transportation from Ghaziabad, were being carried by the respondent in a fraudulent manner under the cover of bogus invoices with fictitious TIN numbers printed thereon. Respondents downloaded TDF-1 by submitting false information, suppressing material information, identity and particulars of real owners of the goods, so as to give it colour of transportation of the goods from outside the State of Uttar Pradesh to outside the State of Uttar Pradesh under Section 52 of the Act, with intent to evade tax under the Act. Under the circumstances, seizure of the goods under Section 48 of the Act and demand of cash security by the Mobil Squad Authority for release of the goods, does not suffer from any illegality.
Whether Delhi - U.P. Border area of District Ghaziabad is "no-man's land"? - Held that: - the circular dated 31.01.1987 is non-existent. That apart, it has no relevance in view of the facts found and the constitutional provisions mentioned. Delhi - U.P. Border area of District Ghaziabad is not "no man's land" rather it is part of District Ghaziabad (U.P.).
Whether transporters are strangers to the transaction of sale and purchase and totally ignorant about the consignors and consignees? - Held that: - it cannot be said that transporters are strangers to the transaction of purchases and sales and totally ignorant about the consignors and consignees. In cases like the present case where transactions have been fictitiously carried on in false names and addresses, bogus invoices with fictitious TIN numbers printed therein and TDF-1 is downloaded on the basis of false particulars and forged papers by a transporter then he makes himself party to the episode of fictitious transaction with sole purpose of evasion of tax by undisclosed non-bonafide dealers. By seizure of goods in such cases transporter is not affected if he is really a transporter. Therefore, instead of being torch bearer of dishonest persons, he should allow the real consignors or consignees to come forward and assign reasons for concealing their real identity. The action of the departmental authorities in such cases to unearth evasion of tax is one of their fundamental duties under the Act.
Whether fraudulent transportation of goods and colourable devices used to give impression of transportation of goods from outside the State of U.P. to outside the State of U.P. shall fall under Section 52 or would be a case falling under Section 48 of the U.P. VAT Act, 2008? - Held that: - Once a transportation of goods under the cover of Section 52 of the Act is shown to be fraudulent, sham, bogus, circuitous or a device designed to evade tax under the Act, the statutory authorities under the Act and the court can always examine the substance of the transaction because the legislature never intends to guard fraud. No authority or court may recognise such transportation or transaction on the basis of the provisions of Section 52 of the Act. Law is manifestation of principles of justice, equity and good conscience. Hence section 52 of the Act cannot be interpreted and understood in a manner so as to encourage tax evaders and to discourage those who abide by law.
Revision application allowed - decided in favor of applicants.
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2017 (1) TMI 1059
Sale of Diesel Engine Pump Sets of less than 10 horse power - demand of tax for the period from October to December, 2008 - tax paid duly and claimed refund - circular dated 5.9.2012 - circular states that realization of tax above 4% together with interest was granted remission provided such amount has not been realized by the seller from its consumers - whether assessee has not realized the tax from its consumers before it can claim any benefit of circular? - Held that: - this is a question of fact, which ought to be gone into by the authorities based upon the evidence led by the revisionists. In the absence of any finding returned by the authorities on this count, it would be appropriate to remit the matter to the assessing authority.
Whether the relief of remission of tax could be denied to the revisionist merely because the circular contains no provision of refund? - Held that: - reliance placed in the case of Anand Gramodyog Samiti Versus Commissioner of Trade Tax [2005 (5) TMI 613 - ALLAHABAD HIGH COURT], where it was held that mere absence of enabling provision would not be a ground to deny refund of tax, in case tax is not otherwise liable to be realized from the assessee. In case State's action is allowed to stand, it would mean that an honest tax payer would be discriminated since those who have not paid tax have already been granted relief of remission - the authorities were not justified in refusing to grant relief of remission merely on the ground that an enabling provision does not exist in the circular.
Revision partly allowed - Matter is remitted to the Assessing Authority for a fresh consideration on the question as to whether revisionist has realized tax over and above 4% from its consumers or not - revision disposed off.
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