TMI Tax Updates - e-Newsletter
January 7, 2016
Case Laws in this Newsletter:
Income Tax
Customs
FEMA
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
TMI SMS
Highlights / Catch Notes
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Income Tax:
Reopening of assessment - non disposing of the objections - AO, by not disposing of the objections, would deprive the petitioner of an opportunity to challenge the validity of the notice itself and, in the meantime, if the assessment is framed, serious prejudice would be caused to the petitioner - HC
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Income Tax:
Depreciation - only 10% area was let out by the assessee to its associated concerns for administrative work whereas the remaining area was being used by it. Thus, depreciation only to the extent of 1/10th was disallowed - HC
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Income Tax:
Interest paid to ICICI and IDBI band on funds utilized to make the impugned FDRs is an allowable deduction under section 57(iii) against the interest income on such FDRs - HC
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Income Tax:
Whether the interest earned by the assessee on the fixed deposits kept for managing bank guarantees during pre-operative period would reduce the cost of the capital assets? - Held Yes - HC
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Income Tax:
Bad debts - the assessee has not placed on record before the lower authorities to show that it debtors were not in a position to pay the debts or have refused for payment. It is an unilateral act on the part of the assessee to write off all these amount without bring any material on record to show that amount are not recoverable - additions confirmed - AT
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Income Tax:
Addition under sec.41(1) on account of cessation of liability - assessee has no explanation to prove that the creditors in its books of account are genuine - additions confirmed - AT
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Income Tax:
TDS on interest - section 194A shall also apply to individuals, where total sales, gross receipts or turnover from business or profession exceed the monetary limit specified u/s 44AB - AT
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Income Tax:
Exemption u/s. 11 denied - Education can be imparted, even through affiliated schools also. A perusal of the activities listed above demonstrates the same. The acitivty of the assessee-society in my view is educational acitvity. - AT
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Customs:
Smuggling of Gold into India - Proceeding under COFEPOSA Act - A step taken to secure the presence of the person against whom an order of detention is issued cannot be the basis for challenging the order of detention at its pre-execution stage. - HC
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FEMA:
Importers who had acquired foreign exchange from their authorized dealers for the purpose of imports of specified goods - there is no contravention of Section 8(3) or 8(4) of FERA, 1973 as only proof of import of goods has to be filed and Bill of Entry of WH is a valid and convincing proof of the arrival of goods in India. - AT
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Wealth-tax:
Reduction of debt for working out the net wealth of assessee - CIT has misunderstood from the balance-sheet filed by assessee that there is no loan liability on the said land & building of assessee. - AT
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Service Tax:
Management Consultant Service - appellant submits that their activities are confined to supply the manpower and supervision thereof - the service provided by the appellant falls under the definition of “Management Consultant Service”, therefore it is indeed taxable. - AT
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Service Tax:
CENVAT Credit - the employees had purchased food coupons from M/s. Accor Radhakrishna Corporate Services Limited. It cannot be said that the said Company had provided service to the appellant Company - credit denied - AT
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Central Excise:
Cenvat Credit - input services - when the cost of any service is included to determine the valuation of the final product, CENVAT credit cannot be denied of such tax paid on the services. - AT
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Central Excise:
SSI Exemption - valuation - clandestine removal of goods - merely because the invoices issued did not follow their sequential number it is not sufficient to hold that these are parallel invoices. - AT
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Central Excise:
Remission of duty - Loss due to auto combustion - Even if the insurance company did not consider the quantity which had oozed out, there is no denying the fact that the same had occurred due to a natural phenomena. Therefore, no case is made out for denial of remission - AT
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VAT:
Levy of entry tax on Coolants - whether or not it is a petroleum by product - Liberty is reserved to the 2nd respondent-clarifying authority to have the ‘coolant’ manufactured by the petitioner, tested, and examined in a manner known to law over the genuineness of the claim of the petitioner relating to its contents/ingredients - HC
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VAT:
Cancellation of exemption certificate of 100EOU - PGST / PVAT - assessment years 2000-01 and 2001-02, the appellant exported nothing outside India. In the assessment year 2001-02, the appellant exported only 1.68% of its products in the markets outside India. - exemption was rightly denied - HC
Notifications
Circulars / Instructions / Orders
- Income Tax - Press Release - dated
6-1-2016
Declarations and payments made under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015
- FEMA - 16/2015-16 - dated
1-1-2016
Master Direction – Export of Goods and Services (Updated as on November 22, 2022)
- FEMA - 14/2015-16 - dated
1-1-2016
Master Direction - Deposits and Accounts (Updated as on January 09, 2020)
- FEMA - 13/2015-16 - dated
1-1-2016
Master Direction - Remittance of assets (Updated as on April 28, 2016)
- FEMA - 12/2015-16 - dated
1-1-2016
Master Direction – Acquisition and Transfer of Immovable Property under Foreign Exchange Management Act, 1999 (Updated as on September 01, 2022)
- FEMA - 10/2015-16 - dated
1-1-2016
Master Direction - Establishment of Branch Office (BO)/ Liaison Office (LO)/ Project Office (PO) or any other place of business in India by foreign entities (Updated as on May 18, 2021)
- FEMA - 9/2015-16 - dated
1-1-2016
Master Direction - Insurance (Updated as on December 07, 2021)
- FEMA - 8/2015-16 - dated
1-1-2016
Master Direction - Other Remittance Facilities (Updated as on April 03, 2024)
- FEMA - 7/2015-16 - dated
1-1-2016
Master Direction - Liberalised Remittance Scheme (LRS)(Updated as on December 22, 2023)
- FEMA - 6/2015-16 - dated
1-1-2016
Master Direction – Borrowing and Lending transactions in Indian Rupee between Persons Resident in India and Non-Resident Indians/ Persons of Indian Origin
- FEMA - 4/2015-16 - dated
1-1-2016
Master Direction- Compounding of Contraventions under FEMA, 1999 (Updated as on May 24, 2022)
- DGFT - 53/2015-2020 - dated
5-1-2016
Introduction of Para 2.14(A) in the Handbook of Procedure (2015-20)
- DGFT - 54/2015-2020 - dated
5-1-2016
Enlistment under Appendix 2E - Agencies Authorized to issue Certificate of Origin - (Non-Preferential)
News
Case Laws:
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Income Tax
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2016 (1) TMI 236
Eligibility for registration under Section 12AA - exemption claimed by the respondent society in respect of receipts for the Assessment Year 2010-2011 and 2011-2012 from the institution established and run by it - Held that:- In the instant case, there is nothing on record to indicate that the assessing officer proceeded to examine the status of the society and its annual receipts or income as a legal entity in itself. The assessing officer on the basis of the return filed has treated the income received from the two sections of the institution to be a receipt in the hands of the society without examining the legal status of either the Junior High School or the Intermediate College which stand recognized under different Acts. Consequently, for all the reasons given hereinabove, we are of the considered opinion that the substantial questions of law as raised do arise for consideration on the facts and the legal issues raised in the present case. Admit on the following substantial questions of law:- 1. Whether the ITAT is justified in law under the facts and circumstances of the case, as the phrase 'Separate institute' for the purpose of availing exemption u/s 10 is nowhere defined in the Act. The assessee cited judgement in case of CIT Vs. Children Education Society (2013 (7) TMI 519 - KARNATAKA HIGH COURT ) where the assessee society was running as much as 22 educational institutes separately which were miles away from the fact of this case where assessee is running a single school on single location, in single and distinct building with single playground and other facilities claiming to be two Separate educational institute. 2. Whether the ITAT is justified in law and on facts without appreciating the fact that, as the Assessing Officer in his order recorded that 'taking recognition of Junior and Senior Section in normal administrative process it never connotes that there are two schools.' Further at page 3 of the Ld. CIT (Appeals)'s order, the assessee, in support of his claim of being two schools quoted the use of prefix 'COMBINED' on books of account of Society not Junior/Senior School in different books of accounts of the assessee which clearly indicates that these are merely two sections of a single School which were maintained for administrative ease and better monitoring. 3. Whether the ITAT is justified in law and on facts without appreciating the fact that as the assessee for the first time moved request for approval u/s 10(23C)(vi) in the Assessment Year 2013-14 whereas for the year under consideration the Assessee was neither registered u/s 12A nor got approval u/s 10(23C)(vi) of the I.T. Act, in spite of the fact that in A.Y. 2009-10, 2010-11 and 2011-12 total receipt of Society exceeded Rs. One Crore. The A.O. in his order noted that all the arguments made by the assessee seems an effort to cover up its carelessness and inaction in following statutory provisions, and rightly denied the exemptions and treated the surplus of income over Expenditure as business income. Findings of the AO were based on material available on records and not on presumption. The two school theory of the assessee is bogus claim as there never existed two schools and merely only two sections which is also evident from the copy of balance sheet and other Annexures thereof which clearly indicated that there existed only two separate sections. 4. Whether Hon'ble ITAT is justified in law and on facts that he has wrongly accepted the breakup of receipt of Junior High School and Senior Secondary School in the impression that it was done by A.O., contrary to the fact that it was mere submission by the assessee Society. Further plain reading of Rule 2BC(1) which is as under:- "2BC(1) for the purpose of sub-clause (iiiad) of clause (23C) of Section 10, the amount of annual receipts on or after the 1st day 1998, of any university or other educational institution, existing solely for educational purposes and not for purposes of profit, shall be one crore rupees." 5. Whether the ITAT is justified in law and on facts by allowing segregation of income to the assessee society however it is evident that the rule clearly guides for annual receipts and about aggregate receipts which includes income from all the sources, hence the AO was justified in taxing the surplus of the income over expenditure.
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2016 (1) TMI 235
Reopening of assessment - non disposing of the objections - Held that:- . In view of the decision of the Supreme Court in case of GKN Driveshafts (India) Ltd. vs. Income Tax Officer and ors. Reported in [2002 (11) TMI 7 - SUPREME Court ], upon issuance of notice for reopening, the assessee would have to raise objections upon the reasons being supplied. The Division Bench of this Court in case of Sahkari Khand Udhyog Mandal Ltd. vs. Assistant Commissioner of Income Tax reported in (2014 (6) TMI 149 - GUJARAT HIGH COURT ) has also laid down a time frame within which, the Assessing Officer is expected to dispose of representation, if raised promptly by the assessee. The Assessing Officer, by not disposing of the objections, would deprive the petitioner of an opportunity to challenge the validity of the notice itself and, in the meantime, if the assessment is framed, serious prejudice would be caused to the petitioner. Under the circumstances, the Assessing Officer is directed to dispose of the objections of the petitioner dated 15.01.2015 latest by 31.01.2016. Till then, final order of assessment shall not be passed. - Decided in favour of assessee
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2016 (1) TMI 234
Reopening of assessment - reopening of the assessment is under the directives of the audit party - Held that:- Bare perusal of the correspondence reveals that the assessment was completed and, upon scrutiny, the internal audit party found certain errors. These errors were highlighted and pointed out to the Assessing Officer for his consideration. The Assessing Officer in his letter dated 03.12.2013 in no uncertain terms wrote back to the audit party stating that he did not agree to most of the objections of the audit party. He agreed to a limited extent of the excess claim of depreciation which the assessee had pointed out was a mistaken claim and agreed for rectification. The Assessing Officer, therefore, believed that this was the only ground which merited consideration and that too by way of exercising the power of rectification. This was abundantly clear and quite undisputably emerges from his letter dated 03.12.2013. Despite the clear stand of the Assessing Officer, the audit party persisted with the issues. On 14.02.2014, the audit party did not accept the view of the Assessing Officer and, as noted above, directed the Assessing Officer to take appropriate action and submit an action taken report on finalization of the proceedings, with supporting evidences through proper channel. This was a clear directive to the Assessing Officer not only to initiate action but also to finalize the same and report finalization with supporting evidences. As if this much was not enough to hold that the Assessing Officer was being controlled by the audit party, his letter dated 20.02.2014 to the audit party left no possibility of any doubt. In such letter, he recorded the objection of the audit party at length and finally meekly stated that, in view of the above, the internal audit party has not accepted the reply on the said issues and ultimately proceeded to record that the most suitable remedial action in such case would be to reopen the assessment under section 147 of the Act which is contrary to his earlier view where on a limited ground of depreciation he had advocated measures of rectification.- Decided in favour of assessee
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2016 (1) TMI 233
Entitlement to 50% of the depreciation only on the plant and machinery in the Picture Tube Division at Pitampur (MP) - CIT(A) allowed 100% claim - Held that:- In the present appeal, admittedly the machinery has been purchased in an earlier assessment year but during the previous year under consideration, it has been used for a period less than 180 days. As the language of the third proviso is explicit and unambiguous, the only interpretation is that if the asset was acquired in the previous year 1991-92 and was used for less than 180 days in that previous year, then only the depreciation admissible could be curtailed. As in this case, the assets were acquired in the previous year i.e. 1990-91, learned Assessing Officer was not justified in curtailing the depreciation to 50%. - Decided in favour of assessee Deduction under section 80HH and 80I without adjusting the losses of other loss making industrial undertakings of the same assessee with the profit of eligible profit making units - Held that:- As decided in Bajaj Motors P.Limited vs. Commissioner of Income Tax [2011 (3) TMI 475 - PUNJAB AND HARYANA HIGH COURT] in computing the quantum of deduction under section 80I of the Act, out of the profits and gains of unit No.1, the loss incurred in another independent unit No.2 should be set off against the profits of unit No.1. - Decided in favour of revenue
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2016 (1) TMI 232
Addition made on account of late deposit of employees' contribution to PF - ITAT deleted the addition - Held that:- Issue covered against the revenue by judgment of the Apex Court in Commissioner of Income Tax vs. Alom Extrusions Limited, (2009 (11) TMI 27 - SUPREME COURT) - Decided on favour of assessee. Disallowance of depreciation by taking the whole of the building as let out and income was assessed under the head “income from house property" - CIT(A) and ITAT held that as 10% area was let out and thereby depreciation to this extent was disallowed - Held that:- Tribunal while affirming the findings arrived at by the CIT(A) that only 10% area was let out by the assessee to its associated concerns for administrative work whereas the remaining area was being used by it. Thus, depreciation only to the extent of 1/10th was disallowed. No error was pointed out by the learned counsel for the revenue in the findings recorded by the CIT(A) as well as the Tribunal. - Decided on favour of assessee in part.
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2016 (1) TMI 231
Addition made on account of late deposit of employees' contribution to PF - ITAT deleted the addition - Held that:- Issue covered against the revenue by judgment of the Apex Court in Commissioner of Income Tax vs. Alom Extrusions Limited, (2009 (11) TMI 27 - SUPREME COURT) - Decided on favour of assessee. Disallowance of depreciation by taking the whole of the building as let out and income was assessed under the head “income from house property" - CIT(A) and ITAT held that as 10% area was let out and thereby depreciation to this extent was disallowed - Held that:- Tribunal while affirming the findings arrived at by the CIT(A) that only 10% area was let out by the assessee to its associated concerns for administrative work whereas the remaining area was being used by it. Thus, depreciation only to the extent of 1/10th was disallowed. No error was pointed out by the learned counsel for the revenue in the findings recorded by the CIT(A) as well as the Tribunal. - Decided on favour of assessee in part.
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2016 (1) TMI 230
Benami transaction - there was no evidence of any type whether Shri Nalnish Aggarwal was a genuine party to the agreement and the payments were actually made by him as per AO - ITAT deleted the addition - Held that:- We find that the CIT(A) as well as the Tribunal had not adverted to the reasons given by the Assessing Officer while holding that the transaction on behalf of the Nalnish Aggarwal was not benami. The reasons recorded by CIT(A) and the Tribunal are neither cogent nor convincing on the basis of which the findings of the Assessing Officer could be validly set aside. Accordingly, the orders are set aside and the matter is remanded to the CIT(A) to decide it afresh after hearing learned counsel for the parties in accordance with law. Needless to say, the CIT(A) shall deal with all the objections on the basis of which the Assessing Officer had held Shri Nalnish Aggarwal to be benami of the assessee. However, it shall be open for the respondent-assessee to produce any evidence in terms of Rule 46A of the Income Tax Rules, 1962 to substantiate that the transaction was genuine and Shri Nalnish Aggarwal was not benami of the assessee - Decided in favour of revenue for statistical purposes.
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2016 (1) TMI 229
Disallowance of debt recoverable - CIT(A) confirmed the addition observing that it was not a debt recoverable but was in fact an advance made to the party for the purchase of material - Tribuna deleted the addition - Held that:- The Tribunal had held the amount as business expenditure as the same was in the course of the business of the assessee. Learned counsel for the appellant was unable to show any illegality or perversity in the findings recorded by the Tribunal warranting interference by this Court. - Decided against revenue
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2016 (1) TMI 228
Entitlement for the deduction u/s 24(1)(vi) - as per revenue the borrowed capital was not utilized for acquisition, renewal, repair, construction or reconstruction of the property which had been let out but had utilized for acquiring entire equity share holding of the company, so as to transfer the control and management of the company - ITAT allowed the claim - Held that:- The Assessing Officer as well as the CIT(A) had wrongly adjudicated that since the assessee had not borrowed the amount for acquiring the property, it was not entitled to deduction under Section 24 (1)(vi) of the Act. Once it is held that the assessee had borrowed the amount for acquiring the property, as a necessary corollary, it is held that the assessee had rightly been allowed deduction of ₹ 10,00,000/- by the Tribunal as interest paid thereon under Section 24(1)(vi) of the Act. The judgment in Sunil Kumar Sharma's case (2002 (2) TMI 91 - PUNJAB AND HARYANA High Court ), supported the case of the assessee wherein it was held that the interest portion of the installment of the purchase price of let out property was allowable as deduction under Section 24(1)(vi) of the Act. - Decided against the revenue
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2016 (1) TMI 227
Interest on FDRs - Whether Tribunal has failed to adjudicate the issue in treating the interest on FDRs income under the head income from other sources and allowed the corresponding deduction of interest expenses under section 36(1)(iii) instead under section 57(iii) - Held that:- The FDRs were kept in the bank as margin money of obtaining loans. In support of the connection of the interest paid on loan with the FDRs in question, the assessee has enclosed the relevant account statements, details of interest paid etc. before the Assessing Officer and the Assessing Officer has not negated the connection between the interest paid on loan and FDRs. The only difficulty made out by the Assessing Officer to deny deduction claimed under section 57(iii) was that in view of the voluminous details, interest paid to ICICI and IDBI for the funds utilized for the FDRs, cannot be exactly determined. Therefore, considered in this light and especially in view of the fact situation, that there was no material has been referred to by the CIT(Appeals) to hold that the interest expenditure has not been expended for the impugned FDR, we do not find any weight in the aforesaid conclusion by the CIT(Appeals). As a consequence, it has to be held that the interest paid to ICICI and IDBI band on funds utilized to make the impugned FDRs is an allowable deduction under section 57(iii) against the interest income on such FDRs. Thus, the claim of the assessee under section 57(iii) of the Act on account of interest expenditure amounting to ₹ 11,56, 764/- being more than the amount of interest assessable under the had 'income from other sources', there remains a loss of ₹ 1,44,240/- assessable under the head 'income from other sources'. - Decided against revenue
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2016 (1) TMI 226
Allowance of set off of interest income earned on the fixed deposits kept for arranging bank guarantees, towards the cost of capital assets - whether the interest earned by the assessee on the fixed deposits kept for managing bank guarantees during pre-operative period would reduce the cost of the capital assets? - ITAT allowed the claim - Held that:- The substantial question of law is answered against the revenue and in favour of the assessee as as in the present case, the assessee had earned interest income on the fixed deposits kept for arranging bank guarantees in the formative period and not that the surplus funds were utilized for earning additional interest income - Decided against revenue
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2016 (1) TMI 225
Business expenditure on account of foreign travel - professionally qualified son and daughter-in-law of only male partner of the appellant firm, both son and daughter-in-law being legal heirs of the partner also and having shown growth in firms business as a consequence of their foreign travel - Tribunal disallowing the entire foreign travel expense on the only premise that it was not incurred by a competent person - Held that:- The findings have been recorded by the Assessing Officer and the Tribunal that the foreign travel expenses of Shri Deepak Aggarwal and Smt. Shilpa Aggarwal (son and daughter-in-law of the partners of the assessee firm) was on account of personal tours and not expended wholly and exclusively for business purposes and was, thus, inadmissible under Section 37(1) of the Act. It would primarily be a question of fact whether in a given facts and circumstances, the expense is wholly and exclusively for business purposes or not. The view taken by the Assessing Officer and the Tribunal is a plausible view and, therefore, does not call for any interference by this Court. - Decided against assessee.
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2016 (1) TMI 224
Entitlement to deduction under Section 80HHC - late filing of audit report - Held that:- The issue stands concluded against the revenue by the decision of this Court in Punjab Financial Corporation's case (2001 (12) TMI 50 - PUNJAB AND HARYANA High Court ) holding that the requirement of filing the duly audited report alongwith the return cannot be treated as mandatory and the assessee cannot be deprived of the benefit of deduction if the same is filed before the finalization of the assessment. It was further observed that sub section (5) of Section 32AB of the Act is not mandatory and the Assessing Officer has discretion to entertain the audit report even though it has not been filed with the return and give benefit of the deduction to the assessee in terms of section 32AB(1) of the Act. In view of the above, the Tribunal was justified in deciding the said issue in favour of the assessee. Expenditure incurred for employees - expenditure on food or beverages provided by the assessee to its employees in office, factory or other place of their work - whether is business expenditure and is an allowable deduction and not covered under the head entertainment expenses as held by ITAT - Held that:- Perusal of the order passed by the Tribunal shows that in the earlier years, it had allowed deduction to the extent of 50% only in respect of such expenses as the assessee had not maintained separate details of the expenditure. Herein the assessee had maintained separate details of such expenses and thus total deduction of the same had been rightly allowed in respect of such expenditure. We do not find any error in the approach of the Tribunal warranting interference. Consequently, this question is also answered against the revenue.
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2016 (1) TMI 223
Tuition fee refunded by cash disallowed being not verifiable - assessee is running an institute providing coaching for IIT entrance examination - Held that:- Admittedly even the AO is satisfied about majority of the payments which has not been doubted and on random basis the AO found that out of 175 payments, eleven payments were doubted but he chose to add entire amount in assessment year 2005-06 and @ 20% in the assessment year 2008-09. On further additional evidence having been led before the CIT(A) both the appellate authorities further analysed the evidence and came to the conclusion that addition if required, could be only to the extent of ₹ 60,200/- (ITAT). Both the appellate authorities have considered confirmations/certificates/receipts and other material and once the entire material had been considered, we see no reason to interfere. Even the AO found fault in few cases only and was satisfied in majority of cases. For the assessment year 2008-09, on the same facts and circumstances though the AO in this year disallowed ad hoc amount @ 20% of the amount paid in cash at ₹ 18,19,487/- which was on ad hoc basis, but CIT(A) after analysing the material available and placed on record by the assessee, came to the conclusion that the disallowance is required to be made only to the extent of ₹ 2,50,000/-. This was also upheld by the Tribunal on a further appeal by both the sides. Therefore, when both the appellate authorities have upheld ad hoc addition, therefore, in our view, when estimate has been made even by the AO, it was partly modified by the first appellate authority and upheld by the Tribunal, is also based on appreciation of evidence and is thus a finding of fact and no substantial question of law can be said to arise in this year as well. - Decided against revenue Disallowance of interest - ITAT deleted the addition - Held that:- when there was no agreement to charge interest from the persons, to whom the assessee advanced short term loan/advance, the AO could not disallow part of the interest. It is also an admitted fact, as observed by the Tribunal, that the AO .vas not able to pin pointedly come to a definite conclusion that how interest bearing loans had been diverted towards interest free advances and since the AO was not able to prove nexus between interest bearing loans vis-a-vis interest free loans/advances, therefore, in our view as well, once the AO was not able to come to a definite conclusion as to nexus having been established about interest bearing loans having been diverted towards interest free loans/advances, and such being a finding of fact based on appreciation of evidence, in our view no substantial question of law arise on this question as well. - Decided against revenue
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2016 (1) TMI 222
Penalty u/ss 271D and 271E - whether penalty orders alleging that the same are barred by limitation as prescribed u/s 275(1)(c)? - Held that:- The limitation as prescribed u/s 271(1)(c) has to be reckoned from the date of first notice issued by the AO, though not competent to impose penalty on 31.12.2009 and thus penalty order has to be passed on or before 30.6.2010 and penalty order passed after more than six months on 4.1.2011 u/s 271D and 271E of the Act are clearly hit by the limitation period as prescribed u/s 275(1)(c) of the Act and both the penalty orders cannot be held as sustainable being passed beyond the prescribed limitation by the provisions of the Act and hence we demolish and quash the same. - Decided in favour of assessee.
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2016 (1) TMI 221
Disallowance recoverable written off in the Profit and Loss Account - Held that:- The assessee has been following the system of Accounting methodology which is accepted. Bad Debts occurred in the normal course of business and write off can be made after considering the recovery of Debtors becoming doubtful and the assessee has not squared off the debtors account. Under amended provisions of section 36(i)(vii) of the act effective from 1st April, 1989, in order to obtain a deduction in relation to bad debts, it is not necessary for the assessee to establish that the debt, in fact has become irrecoverable, it is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. Further, the assessee has not placed on record before the lower authorities to show that it debtors were not in a position to pay the debts or have refused for payment. It is an unilateral act on the part of the assessee to write off all these amount without bring any material on record to show that amount are not recoverable. We after considering the accounting methodology of assessee company and provisions of law on bad debts in the order of the Commissioner of Income Tax (Appeals) on this ground and same is upheld.- Decided against assessee. Contribution made towards the approved Employees Group Gratuity Fund Trust - Held that:- The Revenue has disputed this issue after post De-merger, even though there is no such change in objects. But the ld.CIT(A) erred in upholding the order of the Assessing Officer without realizing that gratuity fund is for welfare measures of the employees, and has been approved from 1990 onwards. Since there is a apprehension by the Revenue that approval has to be obtained for the name change, we remit the issue in dispute to the file of the Assessing Officer to re-examine the gratuity fund objective and contributions and assessee shall obtain necessary approvals from the Income Tax Department if required. It is nevertheless to say that opportunity of being heard be granted to the assessee and decide the issue on merits. Disallowance of foreign travel expenses - Held that:- The assessee company is having global business operations and definitely such subsidiary companies are to be managed in accordance with standard accounting principle and Indian laws. The expenditure percentage compared to turnover is very small amount. The expenditure incurred for the business wholly and exclusively in carrying out the operations and there is nexus between expenditure and income of parent and subsidiary company. If such expenditure is disallowed the subsidiary company has to claim deduction in respective countries accounts. But practically it will be a difficult task considering double taxation agreements between countries. Therefore, it is apparent from the facts of the case that the expenditure has been incurred wholly and exclusively for the purpose of business and falls within the provisions of Sec.37(1) of the Act. Hence, we direct the Assessing Officer to delete the addition. - Decided in favour of assessee. Non deduction of TDS on commission payment made to foreign agencies - Held that:- The services rendered by the said parties related to clearing, warehousing and freight charges, outside India. The logistics service rendered was essentially warehousing facility. In our opinion, this cannot be equated with managerial, technical or consultancy services. Even if it is considered as technical service, the fee was payable only for services utilized by the assessee in the business or profession carried on by the said nonresidents outside India. Such business or profession of the non-residents, earned them income outside India. Thus, it would fall within the exception given under sub-clause (b) of Section 9(1) of the Act. In any case, under Section 195 of the Act, assessee is liable to deduct tax only where the payment made to non-residents is chargeable to tax under the provisions of the Act. In the circumstances mentioned above, assessee was justified in having a bonafide belief that the payments did not warrant application of Section 195 of the Act. In such circumstances, we are of the opinion that it could not have been saddled with the consequences mentioned under Section 40(a)(i) of the Act. Disallowances were rightly deleted by the ld. CIT(Appeals) - Decided in favour of assessee Additional deduction u/s.54EC - Held that:- The assessee has invested in long term capital gains within six months from the date of transfer u/s.54EC of the Act in National Highway Authority of India capital gain bond and complied with the provisions and there is no dispute about the investment. The Assessing Officer tried to make a distinction of provisions for restricting investment of ₹ 50,00,000/- only in one financial year. The assessee company has invested in two installments falling in two financial years and availed tax exemption. The ld.CIT(A) had examined the facts and dealt with Finance Act, 2014 on this issue and also relied on Jurisdictional High Court decision of C. Jaichander and Coromandel Industries Ltd (2014 (11) TMI 54 - MADRAS HIGH COURT ). We after considering the apparent facts and jurisdictional High Court decision are not inclined to interfere with the order of the Commissioner of Income Tax (Appeals) and accordingly, dismiss the Revenue ground.- Decided in favour of assessee
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2016 (1) TMI 220
Addition under sec.41(1) on account of cessation of liability - Held that:- As rightly highlighted by the lower authorities, in the present case, the assessee has drawn balance sheet based on its books of accounts in which the above amounts were being claimed as liabilities due to the various parties as at the end of the accounting year under dispute. However, the assessee failed to establish the genuineness of these liabilities by citing credible evidence. Simply the liabilities being reflected against certain names in its books of accounts would not establish the genuineness of such liabilities. The assessee chose not to reconcile the balance in the assessee’s books of accounts with the parties’ accounts and agreed to offer the above amount as income under section 41(1) of the I.T. Act. The assessee’s authorized representative accepted before the AO, the addition u/s. 41(1) of the Act. This shows that the assessee has no explanation to prove that the creditors in its books of account are genuine. To put it differently, the assessee has failed to discharge its onus cast on it to substantiate its claim. Being so, the lower authorities are justified in holding that such liabilities did not exist at the end of the accounting year under dispute and rightly added the said liabilities which had ceased to exist. Accordingly, the addition sustained by the CIT(A) is confirmed. - Decided against assessee
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2016 (1) TMI 219
Exclusion of overseas travel and communication expenditure incurred in foreign currency from the total turnover for the purpose of deduction u/s 10B - Held that:- This issue is squarely covered by the order of the Chennai Special Bench in the case of ITO vs Sak Soft Ltd, [2009 (3) TMI 243 - ITAT MADRAS-D] wherein it was held that when any such amount is deducted from the export turnover from the numerator, the same shall also be deducted from the total turnover in the denominator while applying the formula (Profit X Export turnover ÷ Total turnover) as provided under the Act. Addition of disallowance under section 14A r.w. Rule 8D made by the Assessing Officer while computing the book profit u/s 115JB - Held that:- We direct the Assessing Officer to adopt the book profits as per the Profit & Loss Account and do not make addition on account of disallowance worked out under section 14A of the Act, as such disallowance is computed under the normal provision of the Act, which are not applicable for determining book profits under section 115JB of the Act.
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2016 (1) TMI 218
Disallowance under section 14A in respect of dividend income - Held that:- The satisfaction of the Assessing Officer in this regard must be arrived at on an objective basis. The Assessing Officer cannot straight away proceed to apply rule 8D, without examining the merits of the assessee’s claim, in respect of the expenditure disallowed by it under section 14A of the Act. For rejecting the correctness of the claim of the assessee, the Assessing Officer is required to give a reasoned finding that the expenditure or no expenditure disallowed by the assessee, is incorrect. We observe that in the present case the required exercise has not been done by the Assessing Officer before making disallowance by invoking the provisions of section 14A r.w. Rule 8D. The assessee has further contended that the assessee is having both interest bearing funds as well as own funds. However, the investment has been made from own funds. In case assessee’s own funds are in excess of the investment made, then it has to be presumed that the investments have come from the interest-free funds available with the assessee. This view is supported by the decision rendered by the Hon’ble Bombay High Court, in the case of CIT Vs HDFC Bank Ltd. (2014 (8) TMI 119 - BOMBAY HIGH COURT). In the instant case, the Assessing Officer has mechanically applied the provisions of section 14A read with Rule 8D without recording satisfaction or rejecting the claim of the assessee by giving any cogent reason. The Assessing Officer has failed to ascertain from records the source of investment made in the mutual funds by the assessee. - Decided in favour of assessee
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2016 (1) TMI 217
Income from sale of shares - treated as Capital Gain OR Income from Business or Profession' Held that:- the assessee is engaged in trading of Bhusar and Rajma from which he is having turnover of more than ₹ 1.68 Crores during the period relevant to assessment year under appeal. The turnover from sale of shares is ₹ 19.86 Lacs, which is less than 12% of the total business turnover of the assessee. Thus, it is apparent that the main business of the assesse is trading in Bhusar and Rajma and not trading in shares. Thus we hold that in the present case the income from sale of shares is capital receipt. - Decided in favour of assessee. TDS u/s 194A - Disallowance u/s. 40(a)(ia) - deduction of tax at source on payment of interest - Held that:- The provisions relating to deduction of tax at source on interest payment are contained in section 194A of the Act. The provisions of section 194C relate to TDS on payments to the contractors, thus the same are not applicable in the present case. Therefore, the case law Dy. CIT vs. Sri Surve Shriram Krishnaji (2012 (5) TMI 620 - ITAT PUNE) on which the ld. Counsel has placed reliance has no relevance in the facts of the present case. A perusal of first proviso to section 194A of the Act makes it clear that section 194A shall also apply to individuals, where total sales, gross receipts or turnover from business or profession exceed the monetary limit specified u/s 44AB of the Act. The proviso has been inserted by the Finance Act, 2002 w.e.f. 1-6-2002. We find no merit in the submissions of the ld. Counsel for the assessee on the second issue - Decided against assessee.
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2016 (1) TMI 216
Payment of advance made for acquisition of existing windmill power project - expenditure in the nature of capital expenditure or to be regarded as revenue expenditure - Held that:- The assessee had generated revenue from the said windmills pending completion of the payment terms and also incurred expenses which resulted in a net income of ₹ 2.54 lakhs. Further, it is also evident that the assessee had sought to foray into a new business line by proposing to acquire the impugned windmill project. We find on these facts that the payment of impugned advance of ₹ 90 lakhs is in the nature of capital advance or capital investment and not a revenue expenditure as claimed. The test is to consider for what purpose the amount is laid for. If the amount is laid for purchase of goods in which the assessee dealt with and which were ultimately to be sold as profit then the expenditure would ordinarily be revenue expenditure. On the other hand, in the present case, the capital was provided by the assessee to the seller for acquisition of capital asset. The MOU clearly shows that the assessee was venturing on a new business and the amount was put as the capital expenditure to acquire capital asset. It is therefore clear that the loss arose from the investment and not given in the course of business being carried on by the assessee. Thus, it is capital loss and not a loss incidental to the business. Deprivation from benefit as a result of such capital expenditure is of no consequence and cannot impact the character of expenditure. The decisions cited by the assessee are distinguishable on facts. In all the decision relied upon, the advance were given in the course of carrying on of the regular business like purchase of raw material or other business expenses, etc. where the loss incurred due to termination of contract. The expenses were incurred in the revenue field. In the present case, the amount was paid with a view to bringing into existence an asset and therefore clearly is in a capital field. Our aforesaid view is supported by the decision of the Hon’ble Delhi High Court in the case of Narang Industries Ltd. vs. CIT (1967 (8) TMI 1 - DELHI High Court ) - Decided against the assessee.
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2016 (1) TMI 215
Validity of assessment u/s 153A - accounted nature of the transactions in respect of the disputed gift - Held that:- It is noted that the additions were made not on account of "gifts" but on account of "source of funds for repayment of loans". In this regard, we find the said loans are repaid through journal entries. Therefore, Revenue Authorities are not supposed to make such additions in the assessment. Considering the factual matrix of the case as well considering the above settled legal position of the issue that in the absence of any incriminating material found during search, additions made on the assessed income are unsustainable in law, we are of the considered opinion that the additions made in the instant case are not sustainable and accordingly, we delete the same. - Decided in favour of assessee Disallowance u/s 40(a)(ia) - non deduction of tds - amount paid by the assessee to his landlord in respect of the legal expenses - Held that:- Considering the facts of the present case, to decide whether the said amount paid by the assessee to his landlord in respect of the legal expenses, is subject to deduction of TDS or not, the following points need to be ascertained viz., (i) what is the relationship between the assessee and the actually payer of the legal fees ie "principal to principal" relationship or "principal to an agent relationship"; (ii) whether it is a case of reimbursement or not; (iii) whether the co-owner effected the TDS when he made payment and (iv) whether the actual respondent assessed to tax and made the payment. Therefore, in our considered opinion, the matter should be remanded to the file of the AO to adjudicate the issue afresh and pass a speaking order on the above mentioned points. It is need less to mention that the assessee should be provided a reasonable opportunity of being heard as per the principles of natural justice - Decided in favour of assessee for statistical purposes.
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2016 (1) TMI 214
Peak credit of additions - whether AO as well as CIT (A) has erred in not appreciating the peak working as submitted by the appellant, without giving any reasons for the same - Held that:- It is obvious that no separate direction is uncalled for as the normal steams of income has to be taxed separately. Further, in our opinion, the income receipts credited to P & L Account or bank account earned out of business are outside the exercise of peak credit analysis and they are separately taxed ie in addition to the peak credits in any year. The income credited to the books of account of the assessee or the bank should be considered exclusive of the peak credit of additions in the assessment. Therefore, we approve the views of the CIT (A). Considering the same, the decision of the CIT (A) vide paras 5 to 5.8 of his order is an order. Thus, the order of the CIT (A) on these issues is fair and reasonable and it does not call for any interference. - Decided against assessee. Penalty u/s 271(1)(c) - Held that:- We agree with the view taken by the CIT (A) while upholding the penalty orders passed by the AO u/s 271(1)(c) of the Act in respect of all the assessment years under consideration. Accordingly, the decision taken by CIT (A) vide paras 5.6 and 5.7 of his order is fair and reasonable. However, as contended by the Ld Counsel for the assessee the penalty levied by the AO @ 200% of the tax to be evaded by reason of concealment of income is on higher side and therefore, considering the factual matrix of the present case, we direct the AO to restrict the penalty to 100% of the tax to be evaded instead of 200% levied by him, which in our considered opinion would meet the ends of justice. - Decided in favour of assessee partly
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2016 (1) TMI 213
TDS u/s 194C or u/s 194J - payment in question was made by the assessee to the cable operators/ MSOs for placing the TV channels in the prime band in order to enhance the viewership and better advertisement revenue - Held that:- When two provisions are simultaneously introduced in the Act, one is specific and another is more general in terms then the resort must be to the specific provision. Therefore, when the work of broadcasting and telecasting of the programmes specifically falls under the ambit of provisions of section 194C, then in view of the decision of CIT Vs. Prasar Bharati (Broadcasting Corporation of India) (2006 (11) TMI 159 - DELHI High Court ), the provisions of section 194J cannot be applied on such payments. The CBDT Circular No. 720 dated 30.08.1995, also supports this view - Decided in favour of assessee.
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2016 (1) TMI 212
Exemption u/s. 11 denied - whether mere grant of registration u/s. 12A does not entitle the Assessee for exemption u/s. 11 and that the real activity of the society has to be looked into? - whether these activities of the Society would fall within the term of “Education” for the purpose of Section 2(15)? - Held that:- The activities carried out by the assessee fall within the term ‘Education’. The Revenue was wrong coming to the conclusion that, only when Assessee runs schools directly, it can be held to impart education. In my view, the Education can be imparted, even through affiliated schools also. A perusal of the activities listed above demonstrates the same. The acitivty of the assessee-society in my view is educational acitvity. The exemption cannot be denied to the Assessee u/s. 11 of the I.T. Act, 1961. The assessee is not engaged in any commercial acitvity. It does not carry on any business, trade or commerce. The fee charged cannot be called a business receipt or fee taken for business activity or for service in relation to any trade, commerce or business. There is no profit motive in the case of the assesseen, hence, the Proviso in question is not attracted in the case of the assessee. Hence, direct the Assessing Officer to grant exemption u/s. 11 of the I.T. Act. - Decided in favour of assessee.
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2016 (1) TMI 211
Disallowance of provisions for replacement & warranty charge u/s.37 - CIT(A) deleted the addition - Held that:- As decided in assessee's own case on similar issue [2015 (12) TMI 822 - ITAT AHMEDABAD ]hile deleting the addition ld.CIT(A) has accepted the contention of the Assessee that it was having present obligation as a result of past events resulting in a outflow of resources. Ld.CIT(A) has further given a finding that the method of accounting followed by the Assessee in respect of warranty provisions is consistent and is based on definite scientific method and that the provision of warranty made by the Assessee was not a contingent liability. Before us, Revenue could not controvert the finding of ld.CIT(A) and we therefore find no reason to interfere with the order of ld.CIT(A) - Decided against revenue
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Customs
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2016 (1) TMI 192
Smuggling of Gold into India - Proceeding under COFEPOSA Act - detention order - The Writ Petition has been filed challenging the order of detention at its pre-execution stage, after having withdrawn the Writ Petition filed by him before the Delhi High Court for the same relief. - Held that:- Learned counsel for the petitioner submitted that steps under Section 7 of the COFEPOSA Act were illegally taken and there was no ground at all for initiating such proceedings. It is submitted that on that ground also, the petitioner is entitled to challenge the order of detention at its pre-execution stage. Even if the steps taken under Section 7 of the COFEPOSA Act is not legal and proper, it is not a ground at all for challenging an order under Section 3(1) of the COFEPOSA Act at its pre-execution stage. Proceedings under Section 7 would be initiated if the person sought to be detained is absconding. That is to secure the presence of the person concerned. A step taken to secure the presence of the person against whom an order of detention is issued cannot be the basis for challenging the order of detention at its pre-execution stage. We reject the contention raised by the petitioner. - Decided against the petitioner.
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2016 (1) TMI 191
Valuation of goods - Rejection of loading in value of Cloves imported, said to be of Brazil Origin, from US$ 1475 PMT to US$3100 PMT - Held that:- As per A.O., a Certificate of Origin has been produced which is signed by the Singapore India Chamber of Commerce. Although, this certificate is not available with either side, we find from the records that the authenticity of the certificate has not been verified or challenged by the department. Therefore, we find no reason to doubt this certificate. We also see that although the adjudicating authority appears to doubt the certificate, at the same time he says that import of identical and similar goods of Brazil Origin were not noticed. In such circumstances the obvious logical step to take is to see the prices of contemporaneous imports from Madagaskar/Sri Lankan Origin whose prices are published in the Public Ledger . Instead, he straightaway proceeds to Rule 8 of the Customs Valuation Rules. In our view, he has not proceeded through the Rules sequentially and properly as per law. The Commissioner has stated that evidence of importation available in the Directorate of Valuation show a much lower price. In the grounds of appeal, this fact has not been challenged by the department. The department should have first discarded evidence of contemporaneous imports. - no enquiries were made as to the origin of the goods. It is a fact that the prices of agricultural produce can vary significantly due to various factors such as quality, size and country of origin. Such factors have not been considered by the adjudicating authority. In our view, the adjudicating authority has not been able to establish undervaluation in the present case. - Decided against Revenue.
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2016 (1) TMI 190
Levy of anti dumping duty - Delay in conducting search - Held that:- It is apparent that they mis-declared the tiles as Ceramic tiles which could have resulted in huge loss of anti dumping duty, therefore the goods are liable to confiscation under Section 111(d) and 111(m) of the Customs Act. Ld. Counsel prayed for reduction in fine. He has not been able to inform the Bench as what is margin of profit to enable us to determine appropriate amount of fine and penalty. At the same time, we do find that invoices accompanying the tiles described the same as Ceramic Tiles. - Delay in search conducted by the Custom is difficult to comprehend. This may have given chance to importer to write to the supplier but nevertheless as recorded by the Ld. Commissioner, letter was recovered during the search which is not established that the latter was afterthought. Another letter dated 22/9/2003 is also referred to in the adjudication order which is letter from the supplier for which he expressed his willingness to take back the goods supplied to the importer. - Since duty paid before issuance of SCN - Redemption fine and penalty is reduced - Decided partly in favour of assessee.
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2016 (1) TMI 184
Import of Sports goods - Classification of goods - benefit of notification 146/94 - whether in terms of above notification, All India Tennis Association can be considered as importer - Held that:- Tribunal in its order in the case of All India Tennis Association Vs. Commissioner[2003 (1) TMI 595 - CEGAT, NEW DELHI] allowed the benefit to raw material for synthetic track by considering it as a sport requisite and consequently admissible for exemption under notification. The Tribunal while arriving at its decision considered Board Circular No. 70/02 dated 25/10/2002. Therefore, we hold that the Dy. Commissioner classified goods wrongly. Invoices as well as Bill of Entry clearly state that the goods are imported on the account of All India Tennis Association. A certificate has issued by the apex Sports body in the country i.e. Sport Authority of India also certifying that import is being made by the All India Tennis Association. The LC which is opened also indicates that importer is the Tennis Association. There is no doubt that the All India Tennis Association has used the goods/ material for their tennis court to be used in national /international competition. The definition of importer in Section 2(26) of the Customs Act reads as (26) importer, in relation to any goods at any time between their importation and the time when they are cleared for home consumption, includes any owner or any person holding himself out to be the importer;. In the present case facts reveals that the All India Tennis Association is held to be the importer both by the appellant as well as the Association. Therefore the conditions of the Notification are met. The conditions of the notification being fulfilled, we held that benefit of notification 146/94 dated 31/7/1994 is admissible. - Decided in favour of assessee.
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FEMA
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2016 (1) TMI 183
Importers who had acquired foreign exchange from their authorized dealers for the purpose of imports of specified goods but had failed to submit the Exchange Control copy of Bill of Entry in respect of the relevant imports to their authorized dealers - It has been contended on behalf of the appellant that an amount of ₹ 410,550 US $ was remitted by IDBI by opening L/C (Letter of Credit). The goods were shipped by the foreign seller and arrived in India passed through the Customs authorities. Copy of the Bill of Entry for Warehousing filed is a proof of the arrival of the goods in India and is a conclusive proof and proceedings ought to have been dropped in this perspective. Held that:- it is not in dispute that the entire foreign exchange acquired by the appellant has been remitted to the foreign seller and it is also undisputed that the imported goods were stored in a warehouse and as the customs duty and warehousing charges could not be paid by the appellant, the goods were sold. In our considered view, there is no contravention of Section 8(3) or 8(4) of FERA, 1973 as only proof of import of goods has to be filed and Bill of Entry of WH is a valid and convincing proof of the arrival of goods in India. As we have stated earlier, there is no allegation that the foreign exchange was used otherwise for the purpose for which it was issued or the appellant has failed to comply with any of the conditions required by him to be fulfilled, therefore, in our views contravention of the Section 8(3) and 8(4) are not made out. - Appeals allowed - Decided in favor of appellants.
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Service Tax
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2016 (1) TMI 209
Levy of penalty u/s 76 & 78 - Security Agency Services - appellant is not contesting demand of service tax and interest thereupon, which was already paid by the Appellants - Held that:- various High Courts and this Tribunal consistently held that once the penalty under Sec 78 has been imposed, no penalty under Sec 76 can be imposed - the penalty imposed under Sec 76 is set aside, the penalty imposed under Sec 78 is reduced to 25% of ₹ 6,25,118/- subject to its deposit within 30 days from the receipt of this order. The demand of service tax and interest thereupon, which has already been paid and a penalty of ₹ 500/- imposed under Section 75A is upheld. - Decided partly in favor of assessee.
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2016 (1) TMI 208
Management Consultant Service - appellant submits that their activities are confined to supply the manpower and supervision thereof, hence the same is not covered under the definition of “Management Consultant Service” - It was contended that there services are not taxable during the relevant period i.e. 2002-03 and 2003-04 - Held that:- In the present case, first manpower is recruited, thereafter supervision of the said manpower is carried out by the appellant. Therefore, the services of the appellant that is requirement of staff and continuous supervision, thereof, in our view falls under “Management Consultant Service”. Further from the bills issued by the appellant to their client the description of services is “Supervision Charges of Manpower”. This fact also shows that the appellant is providing services of supervision of manpower and supervision of manpower does not fall under supply of manpower. - the service provided by the appellant falls under the definition of “Management Consultant Service”, therefore it is indeed taxable. Demand of service tax confirmed with interest - penalty reduced - Decided partly in favor of assessee.
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2016 (1) TMI 207
Consulting Engineer services - Works contract / turnkey project - erection, procurement and construction of a 220 MW Barge Mounted Power Plant (BMPP) at Thanirbavi - Held that:- Considering the decision of CESTAT, New Delhi in the case of Rolls Royce [2004 (6) TMI 3 - CESTAT, NEW DELHI] and CESTAT Mumbai’s decision in the case of Suzlon Windfarm and the CBEC’s further clarification dated 13.5.2004 [2014 (3) TMI 267 - CESTAT MUMBAI] and the discussion made above, it is clear that the impugned services are not covered under the category of consulting engineer's services and therefore are not taxable during the relevant period. Consequently, the appeal filed by the Revenue is not sustainable and is hereby rejected in above terms. - Decided against the revenue.
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2016 (1) TMI 206
Waiver of pre-deposit - Cenvat Credit - input services used for providing output taxable services and trading activity - Explanation 2 to Rule 2(e) of CENVAT Credit Rules was added w.e.f. 01/04/2011 - Held that:- As is clear from the above Explanation, the same stands included in the definition of exempted services inasmuch as there were doubts in the field. The opening sentence of the said Explanation itself refers to the fact that the same is being added for removal of doubts. In such a scenario, the findings of the Commissioner that the provisions of law were clear and unambiguous cannot be, prima facie, sustained. Apart from that, we also note that the appellants have been filing regular returns indicating taxable services along with total credit so availed by them. As such at this prima facie stage, we are of the view that the appellant has a good prima facie case on limitation. - stay granted.
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2016 (1) TMI 205
Advertising services or not - Appellant herein is undertaking an advertising business as well as creating infrastructure like stand for display of advertisements at various places for the clients. - Held that:- Appellant produced copies of agreement entered with the owners of the property taken on rent by the appellant and it is undisputed that appellant is paying rent of the space to the parties. On the infrastructure so created, appellant displays the advertisement in form of billboards and collects rent for such display. Both the lower authorities have overlooked the fact that appellant is not engaged in any services connected with making, preparation, display or exhibition of advertisement while renting out the infrastructure. Appellant has made out a case in his favour and the appeal needs to be accepted. - Decision in the case of Star India (P) Ltd - [2006 (2) TMI 50 - CESTAT, MUMBAI] followed. - Decided in favor of assessee.
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2016 (1) TMI 197
CENVAT Credit - credit of service tax on input service erroneously taken Canteen/Food Coupon - Invocation of extended period of limitation - Held that:- It appears that the employees had purchased food coupons from M/s. Accor Radhakrishna Corporate Services Limited. It cannot be said that the said Company had provided service to the appellant Company. - Credit cannot be allowed. The Commissioner (Appeals) observed that the appellant have not disclosed service in their returns - impugned order is modified to the extent the demand of service tax alongwith interest for the extended period of limitation is set-aside. The demand of service tax along with interest for the normal period of limitation is upheld - However, penalty is set aside - Decided partly in favour of assessee.
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Central Excise
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2016 (1) TMI 204
Classification of chemicals - assessee was classifying under CSH 2942 or 2943 - department was of the view that the said products are classifiable under CSH 3402, 3904 or 3906 and liable to duty - manufacturer of water treatment chemicals, boiler water treatment chemicals, fuel additives, fire side chemicals, resins etc. - extended period of limitation - Held that:- during the period from April 1993 to June 1995 classification lists being approved by the Revenue authorities, it cannot be said that the appellant had mis-stated or suppressed information with intention to evade duty. For the period from June 1995 onwards, we find that approval of classification list by the revenue authorities was done-away, but during the period in question i.e. from June 1995 to December 1997, there was a system of filing declaration of the products manufactured with cross reference of approved classification list. This system was introduced in order to check that none of the products are removed without appropriate classification and the knowledge of the Revenue. If that be so, we find strong force in the arguments put forth by the learned Counsel that the demands are hit by limitation. Since the issue involved in this case is of classification dispute, to our mind no penalty needs to be imposed on any of the appellants as the classification lists were approved by the department and there was no dispute during the material time. Accordingly, penalties imposed are set aside. Demand confirmed only for the normal period of limitation - Decided partly in favor of assessee.
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2016 (1) TMI 203
Cenvat Credit - Export of exempted goods - Manufacture and Export of grey fabrics without payment of duty - Appellant did not execute any bond for export of the grey fabrics as required on an understanding that the clearances were exempted from payment of duty - appellant was issued a show-cause notice for demand of 5% or 10% of the value of goods cleared for export, which were exempted since no separate accounts were maintained - Held that:- refund of input credit is admissible when exempted goods are exported without execution of bond. - The ratio of the judgement of this Tribunal in the case of Well Known Polyesters Ltd. v. CCE - [2011 (1) TMI 664 - CESTAT, AHMEDABAD] would cover the issue in hand. - Decided in favor of assessee.
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2016 (1) TMI 202
Cenvat Credit - input services - service tax paid on the services of insurance for their plant and machinery, inputs, finished goods, equipments, vehicles, insurance of residential building of factory/township etc. - Nexus with manufacturing activity - Held that:- The factual findings of the adjudicating authority that the cost of the insurance as indicated in the valuation of the final products remain undisputed. We find that this Bench in the respondent-assessee’s own case by order dated 15.10.2015 [2015 (11) TMI 100 - CESTAT MUMBAI] has relied upon various judgements of the Hon'ble High Court of Bombay, and held that when the cost of any service is included to determine the valuation of the final product, CENVAT credit cannot be denied of such tax paid on the services. We do not find any reason to deviate from such a view already taken. - Credit allowed - Decided in favor of assessee.
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2016 (1) TMI 201
SSI Exemption - valuation - clandestine removal of goods - allegation on the basis that appellant issued parallel invoices for bought out items and did not include the value of bought out items in the value of manufactured goods. - manufacture of beer/IMFL machinery and storage tanks for storing/processing beer - The appellants defended the notice contending that each tank is made as per requirement of the buyer and cannot be used by another buyer. Held that:- Apparently the invoices are not issued from same book. The learned counsel has explained this stating that in the cases where bought out items were supplied the invoices in one book was issued and then when manufactured tanks were cleared without bought out items invoices from another book was being issued by the accountant. On checking the description of goods in these invoices we have to say that this explanation is satisfactory. Further, merely because the invoices issued did not follow their sequential number it is not sufficient to hold that these are parallel invoices. The figures in these invoices tally with accounts. Further the department has investigated with the transporters M/s. Doors Transport Ltd. No discrepancy was detected. The allegation that appellant suppressed facts by issuing parallel invoices is factually wrong. Inclusion of value of bought out items in the Gross Value - Held that:- The bought out items are used for erection/installation of the tank in the buyers premises and to connect the tank/machinery to other parts of brewery plant. The bought out items are also as per specifications of each tank. The tank and bought out items along with other machinery goes to form the brewery plant. The photograph of the plant with tanks was placed before us. On the look of these photographs, we have to say that the brewery plant is a massive structure and if once structured and fixed to the ground, it cannot be dismantled and transported without damaging it. Therefore, the case of the department that appellants manufactured complete plant and the bought out items are part of the complete plant manufactured by the appellant is untenable. - the plea of the appellant that bought out items are not part of the excisable goods is acceptable. - Decided in favor of assessee.
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2016 (1) TMI 200
Clearance of yarn without payment of duty to job workers - permission was granted during the relevant period - Held that:- apart from third parties, one’s own unit located outside can also be a job worker. - the letter was duly acknowledged by the Superintendent of Central Excise, Kovilpatti Division dated 05.10.2011 and the department never disputed its grant of permission The permission dated 29.03.2001 and the appellant’s letter dated 05.10.2011 were placed before this Tribunal. Thus, the contention of the department that there existed no permission for the movement of yarn is incorrect. The assesse is entitled to remove processed yarn without payment of duty to its own factory at Cuddalore during the period of dispute in terms of Rule 13 of the Central Excise Rules 2001 read with Notification No.47/2004 dated 22.09.2004. Accordingly all the three assesse’s appeals are allowed.
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2016 (1) TMI 199
Classification of goods - whether the product manufactured by respondent is “rough forging, and merits classification under 73.26 as claimed by the respondent or 72 07.10 as confirmed by the first appellate authority - Held that:- The classification which has been arrived at by the first appellate authority in his impugned order is under Chapter Heading No. 7207. In our view the impugned order cannot travel beyond the show-cause notice and classifying the product under Chapter Heading No. 7207 seems to be incorrect. At the same time the findings of the adjudicating authority are contested before the first appellate authority. Hence in the interest of justice we find that the matter needs reconsideration by the first appellate authority. Without expressing any opinion on merits of the case, keeping all issues open, we set aside the impugned order and remand the matter back to the first appellate authority to reconsider the issue afresh following the principles of natural justice. - Matter remanded back - Decided in favour of Revenue.
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2016 (1) TMI 198
Valuation - appellant had discharged the Central Excise duty on the physician samples cleared by them on the assessable value arrived at by the provisions of Section 4 of Central Excise Act, 1944 - Held that:- Issue is now settled against the appellants and the appellant has to discharge the duty liability on the physician samples by taking a value proportionate to the MRP of the sale pack of the medicaments. We are of the considered view that the contention raised by the learned representative of the appellant regarding no interest liability arises is not correct and the appellant has to discharge the interest liability on the amount of duty which is confirmed by the lower authorities and upheld by to that extent, the appeal filed by the appellant is rejected. Appellants cleared the physician samples on payment of duty by ascertaining the assessable value under Section 4 of the Central Excise Act, 1944 and they filed monthly returns with the lower authorities for the relevant period in question. We find that the invocation of Rule 25 of the Central Excise Rule is incorrect as the said Rule mandate penalty can be imposed only if there is a violation of the provisions of Rule which is not the case in here as the discharge of duty on the physician samples on an assessable value proportionate to MRP of the park was in dispute and decided by the Hon'ble High Court of Bombay in the case of Indian Drug Manufactures Association on 28/09/2006. If that be so, the appellants may have entertained a bonafide belief that the assessable value for discharging duty liability on the physician samples was correctly arrived at by them as per Section 4 of the Central Excise Act, 1944. Confirmation of demand with interest is upheld and penalty imposed on the appellant is set aside - Decided partly in favor of assessee.
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2016 (1) TMI 196
Valuation - clearance of pan masala with weights 4 gms, 2 gms and 2 gms in pouches - Clearance of excess quantity of pouches - In terms of this Section, duty is payable on the basis of MRP less the amount of abatement in terms of Section 4(2) - Held that:- The charge of clandestine removal does not even sustain for the reason that there is no evidence to show that any amount was received by the appellant over and above the declared MRP. The adjudicating authority has completely overlooked the fact of payment of duty under Section 4A for reasons which are not forthcoming from the records. The Commissioner (Appeals) although referred to appellant's plea of payment of duty in terms of Section 4A, however, proceeds on a different track by referring to Notifications 27/1997 and 16/1998 which fixes tariff value for pan masala. The Commissioner (Appeals) does not explain why the assessment should not be done in terms of Section 4A - In these circumstances, the benefit must go to the appellant. - Decided in favour of assessee.
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2016 (1) TMI 195
Remission of duty - Loss due to auto combustion - Held that:- Oozing out is a natural phenomenon and, therefore, the case is well covered under Rule 21. The learned AR's contention that the respondent did not take sufficient precaution is not acceptable in the light of reports of Sector Officer and Range Officer as discussed above. The learned AR has not been able to show from any technical document that the respondent should have stored 10% less of the total capacity of the tank. Even assuming that this was a technical necessity, it cannot be denied that the oozing out was caused due to natural phenomena of excessive heating in the summer months. It is not the case of the Revenue that the quantity which oozed out, was used later. Neither is the case of the Revenue that the quantity in the tank which was 131472.30 quintals as verified by UP Excise authorities, did not reflect the correct quantity stored in tank No. 3. Revenue has not even verified either the quantity stored in the tank or the quantity oozed out. Revenue's appeal is simply based on the survey report of the insurance company which excluded 10% of the quantity stored while sanctioning the insured value. Even if the insurance company did not consider the quantity which had oozed out, there is no denying the fact that the same had occurred due to a natural phenomena. Therefore, no case is made out for denial of remission. - Decided against Revenue.
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2016 (1) TMI 194
Duty demand - Duty on the basis of annual capacity of production - Compounded Levy Scheme - benefit of duty on the basis of capacity of production was available only to those independent processors who do not have proprietory interest in any factory primarily and substantially engaged in the spinning of yarn or weaving or knitting of fabrics, in terms of Explanation-1 under Rule 96ZNA - Revenue contends that appellant did not qualify for the benefit available to an independent processor as they were having proprietory interest in other manufacturing facilities of weaving/knitting - Held that:- Documents did not reveal that the assets of the partners became the property of the appellant by bringing them into its stock. It does not seem to be established that the partnership firm had proprietory interest in another firm when a legal distinct deed of partnership firm is separate from its partner as an arguable point under Central Excise. Without going into the merits of the case, we find that the department for a long period had not communicated any objection to the information provided by the appellant in June, 2001. There does not appear to be any fact which could not have been verified by the department from the information given by the appellant in June, 01. The information supplied to the Defence Deptt. was for purposes of facilitating overall assessment and registration based on facility/services of vendors. Merely because it was informed to Defence Deptt. that they had weaving and knitting facilities owned by partners does not necessarily lead to the conclusion that they had, under Central Excise Law, proprietory interest in them. - it was open to department to verify all the assets of the partners and the facilities the partnership firm intended to use. Thus, a show-cause notice issued under extended time period is unsustainable. There is no evidence that inquiries were made from the appellants which were not replied to. Whatever information was sought by the department, the same was given by the appellant. Still the show-cause notice was issued after 4 years. In these circumstances, it cannot be held that there was a deliberate fraud or mis-statement on the part of the appellant. The conclusion that the appellant had proprietary interest in some other concern has been arrived at on the basis of legal interpretation of various aspects of the terms such as letter of partnership, proprietary interest, connected undertakings etc. There is no justification for invoking the extended period merely on the grounds of such interpretation - impugned order is set aside - Decided in favour of assessee.
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2016 (1) TMI 193
Valuation - appellants short paid the Central Excise duty as they have not taken 115% of cost of production in respect of goods sold to related persons - Held that:- Original authority neither discussed the various grounds of defense taken by the appellants nor categorically arrived at the conclusion as to which provisions of law have been applied to the facts of the present case to arrive at the conclusion that there is a related party transaction. The original order is totally devoid of any discussion of findings to this effect. Certain facts as declared by the appellant to the income tax authorities and in the balance sheet of M/s. Oswal Woolens Mills ltd. has been taken and the conclusion has been simply drawn by the original authority - both the lower authorities have not applied their minds in deciding the case. There has been no discussion on the facts relevant to the issue and the legal provisions applicable to such facts. The various grounds on which the appellants defended the case have not been discussed at all by the lower authorities. - Matter remanded back.
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CST, VAT & Sales Tax
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2016 (1) TMI 189
Levy of entry tax on Coolants - whether or not it is a petroleum by product - Karnataka Tax on Entry of Goods Act 1979 - various petroleum products including lubricating oil to be taxable under the KTEG Act at the rate of 5% - Held that:- The notices Annexures-D Series are quashed. Liberty is reserved to the 2nd respondent-clarifying authority to have the ‘coolant’ manufactured by the petitioner, tested, and examined in a manner known to law over the genuineness of the claim of the petitioner relating to its contents/ingredients, and if necessary to issue clarification of the ‘coolant’ manufactured by the petitioner, contains petroleum by product, after extending a reasonable opportunity of hearing to the petitioner, to pass orders in accordance with law. In the event, it is established, by way of test or other examination, that the ‘coolant’ manufactured by the petitioner contains demineralised water and Ethylene Glycol and nothing more, the two clarifications Annexures-B and C will have no application to the case of the petitioner.
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2016 (1) TMI 188
Levy of tax - Discrepancy in stock - Held that:- There was a surprise inspection conducted on 29.03.2010 by the Enforcement Wing Authorities, during which various records were recovered. On 12.04.2014, after four years, a notice came to be issued proposing levy of tax and penalty with a further direction to submit explanation apart from directing the petitioner to produce photo copies of certain documents in order to get the seized documents. Accordingly, on 26.05.2014, the petitioner by enclosing the documents required by the respondent requested them to furnish copies of the recovered records for the purpose of filing necessary objections, followed by a letter dated 21.07.2014 requesting necessary alteration to be made in the certificate of registration pursuant to the shifting of place of business. Thereafter, without affording any opportunity, on 31.07.2015, the impugned order came to be passed. It is the specific case of the petitioner that despite the receipt of copies of documents as required by the respondent, without returning the seized documents, even after the receipt of the objections filed by the petitioner, the impugned order came to be passed, as if the petitioner did not respond to the notice - Additional Government Pleader (Taxes) for the respondent, after verification of the assessment records fairly submitted that the respondent, inadvertently, failed to consider the documents produced by the petitioner. - Matter remanded back.
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2016 (1) TMI 187
Cancellation of exemption certificate - PGST / PVAT - violation of Rule 2(xia) of the Exemption Rules - appellant submitted that the authorities below misconstrued the definition of 'Export Oriented Unit' given under Rule 2 clause (xi-a) of the Rules, which nowhere provides that the appellant was legally bound to export 25% of its production to claim exemption under Rule 8(1)(vi) of the Rules. - collection of amount in as sales tax / CST from the customer but failure to deposit the same with the Government. Held that:- It has been categorically recorded by the assessing authority that in the assessment years 2000-01 and 2001-02, the appellant exported nothing outside India. In the assessment year 2001-02, the appellant exported only 1.68% of its products in the markets outside India. Assessing Authority also found that the appellant had neither charged or recovered any handling charges from the customers nor mentioned the same in the sale vouchers. Only in some bills "forwarding and postage" was charged which were posted accordingly. These entries of sale prices including the sale tax element were then posted in the accounts of each customer and, thus, the full amount of goods including the sale tax was collected from the customers. However, sale tax collected from the customers was not deposited by the appellant into Government Treasury in violation of the provisions of Sections 10(4) and 30-A of the PGST Act Appellant was also disbelieved, because of not mentioning of charging of "handling charges" on the sale invoice/bills or in the sale books. Even otherwise the appellant had admitted before the Assessing Authority that the amount received from the customers included sales tax. Thus, it was rightly held by the Assessing Authority that the appellant had violated the provisions of the rules and accordingly, was not entitled to any exemption under Rule 8(2) of the Rules. - appellant has not been able to show any illegality or perversity in the findings recorded by the authorities below warranting interference by this Court - Decided against assessee.
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2016 (1) TMI 186
Validity of impugned order - Levy of penalty under Section 27(3)(c) of the TNVAT Act - Availment of input tax credit - Held that:- Without considering his objection and revised return filed on 14.05.2015, the respondents had passed an order of assessment - By directing the petitioner to pay 15% of the Tax amount, the matter may be remitted back to the respondent, to pass a fresh order, by considering the petitioner's objection and revised return filed on 14.05.2015, by affording an opportunity of hearing to the petitioner. - Accordingly, the impugned order passed by the respondent in TIN: 33654123301/2013-14 dated 15.06.2015, is set aside and the matter is remitted back to the respondent - Decided in favour of assessee.
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2016 (1) TMI 185
Duty demand - Best Judgment assessment - Determination of taxable turnover - Held that:- It will be seen from a perusal of Rule 38 that the procedure to be followed by an assessing authority, who deems it necessary to verify the books of accounts of an assessee prior to proceeding with the process of best judgment assessment, is to fist serve a notice in Form No.17 calling upon the assessee to produce the books of accounts or other records as evidenced to prove his turnover and tax liability as also the correctness of the stock statement, goods or turnover reported or the input tax credit or refund claim. Thereafter, either after going through the records produced by the assessee in response to the notice or in the event of the assessee not producing any records, the assessing authority is expected to take a decision as regards whether or not to proceed with the best judgment assessment in relation to the assessee. It is thereafter that, he is to issue the notice intimating the assessee of the proposal to complete the assessment on best judgment basis in terms of Section 25(1) of the KVAT Act. - Matter remanded back.
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Wealth tax
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2016 (1) TMI 210
Reduction of debt for working out the net wealth of assessee - AO framed the wealth tax assessment at Rs. nil value after taking into consideration of loan taken for the said land & building of assessee. However, Ld. CIT opined that the loan is not reflected in the balance-sheet of assessee. So the order of AO is erroneous and prejudicial to the interest of Revenue - Held that:- we find force from the submission made before us including the audited balance-sheet of company by the assessee, where the loan declared by assessee has been duly reflected in its balance-sheet. Hence, there is no ambiguity from the financial statement of assessee regarding the loan value of ₹ 71 lacs. The Ld. CIT has misunderstood from the balance-sheet filed by assessee that there is no loan liability on the said land & building of assessee. In view of above, we reverse the order of Ld. CIT and issue raised by assessee in this appeal is allowed accordingly. - Decided in favor of assessee.
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