TMI Tax Updates - e-Newsletter
October 16, 2015
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:
Accrual of income - Taxability of enhanced award pronounced by the arbitrator - Merely because by virtue of an interim order, with or without conditions, some payment is made for the purpose of Income tax Act, it would not constitute income and therefore there is no liability to pay tax on the day such interim payment is received. - HC
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Income Tax:
Computation of interest under section 201(1A) - what is the connotation of ‘every month or part thereof’ appearing in Section 201(1A)- “A month as per the British calendar” and “a month reckoned (emphasis supplied by me) as per British calendar” are not the same thing and cannot be used interchangeably. - AT
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Income Tax:
MAT computation - the assessee's lease equalisation charges have to be added to its book profits under section 115JA - AT
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Income Tax:
Exemption u/s 11 - teaching courses conducted by the assessee do not result in conferment of any degree or diploma and remains unrecognised - all kinds of knowledge would not fall within the definition of "education", and therefore, cannot be treated as a charitable institution as provided in section 2(15) - AT
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Income Tax:
Addition on account of suppression of the value of stock - assessee company has been consistently following the accounting practice of valuing the rejected railways sleepers as nil and accounted for on realization basis and the department has accepted this method - No addition - AT
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Income Tax:
Deduction u/s 80IB(11A) - processing of paddy cannot be said to be covered by the activities given in Sec 80IB(11A) - maximum profit would accrue to the assessee from the activity of storage itself. - t the assessee should be granted deduction @ 70% of the total profits of the composite unit i.e; profits from the whole business except the profits of power plant. - AT
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Customs:
Classification of Goods – Goods under issue are nutritional powder which is a proprietary food - Correct classification of products imported by Appellant is 19019090 - AT
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Customs:
Declaration of goods - Imported goods are waste paper or not – Used craft paper - just because some of the paper contained in the damaged rolls was found to be of serviceable quality, the consignment cannot be treated as of prime quality kraft paper more so, when the Adjudicating Authority has accepted the declared transaction value of the goods - AT
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Service Tax:
No service tax will be levied on the service provided by an Indian Bank or other entity acting as an agent to the Money Transfer Service Operators (MTSO) in relation to remittance of foreign currency from outside India to India from 1.7.12 to 13.10.14 - Notification
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Service Tax:
Franchisee Service or not - activity of running a pre-preparatory/preparatory school. – No Service Tax is leviable as agreement does not fall in the category of franchise agreement as defined under Section 65(47) ibid prior to 16.6.2005 - AT
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Central Excise:
Process of printing of GI paper - The printing is not merely a value addition but has now been transformed from general wrapping paper to special wrapping paper - Process is in the nature of manufacturing activity - SC
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Central Excise:
Classification of Apple Tree Top, Mango Tree Top, Guava Tree Top and Orange Tree Top - there is no distinction between fruit juice and the fruit juice beverages - products in question manufactured by the appellant are “fruit preparation” within the meaning of Tariff Heading 20.01 - SC
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Central Excise:
Short payment of duty - whether an adjustment is possible against the short payment of duty vis-a-vis excess payment made by the assessee during the relevant period when the assessments were provisional and subsequently finalized - Held Yes - AT
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Central Excise:
CENVAT Credit - manufacture of capital goods in house - fabrication of immovable goods - use of goods falling under sub-heading 7208 and 7216 as inputs/capital goods - assessee is entitled to CENVAT credit availed on the items in question for fabrication of the capital goods in question, further utilised in the factory of production - AT
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Central Excise:
CENVAT Credit - whether the appellant is entitled to take Cenvat credit on repairs and maintenance services provided by the service provider on behalf of the appellant to the buyers during the period of warranty - Held Yes - AT
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2015 (10) TMI 1061
Registration of appellant trust under section 12AA cancelled - appellant trust carrying out activities of trade, commerce or business with a profit motive - Held that:- In view of the provisions of 1922 Act, the matter is required to be remanded to the Tribunal to adjudicate whether the activities of the appellant trust were covered within the meaning of charitable in nature or not even after the insertion of the proviso to Section 2(15) of the Act w.e.f 1.4.2009 i.e. in respect of assessment years 2009-10 onwards. No serious objection was raised by the learned counsel for the revenue to the aforesaid submission. Accordingly, the impugned orders passed by the Tribunal in both the appeals are set aside and the matter is remanded to the Tribunal to decide the same afresh keeping in view the proviso to Section 2(15) of the Act inserted w.e.f April 1, 2009 with reference to the provisions of the 1922 Act after affording an opportunity of hearing to the parties in accordance with law - Decided in favour of assessee for statistical purposes.
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2015 (10) TMI 1060
Entitlement to deduction u/s. 80IB - whether process of galvanizing of H.R. strips/Coils/CR Coils amounts to manufacture/production of article/thing? - Held that:- Revenue appeal dismissed concluding process of galvanizing of H.R. strips/Coils/CR Coils amounts to manufacture/production of article/thing entitling the assessee to deduction u/s. 80IB - See The Commissioner of Income Tax Versus Silvassa Wooden Drums [2012 (4) TMI 593 - BOMBAY HIGH COURT] - Decided in favour of assessee.
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2015 (10) TMI 1059
Addition on account of accommodation bills - activity controlled by an admitted entry provider Sh. S.K. Gupta - CIT(A) deleted the addition - Held that:- None of the statements recorded before the A.O. Sh. S.K. Gupta has stated that his entire business is non genuine and all the bills issued by all his group companies are accommodation entries. He has at the same time not contradicted his categorical statement given before the Investigation Wing regarding the genuineness of the bills issued in the name of Swen Television Ltd. to the appellant company. Thus, from the statement of Sh. S.K. Gupta it cannot be concluded that the bills debited in the name of Swen Television Ltd. by the appellant company are not genuine. Rather his statement affirms that the bills from Swen Television Ltd. are genuine. Just because major concerns controlled by Sh. S.K. Gupta are admittedly issuing non genuine accommodation bills, it cannot be automatically presumed that all the bills issued by all the concerns of Sh. S.K. Gupta are non genuine. This is more so when he had admitted that he is doing some genuine business also in the names of some of the companies. Thus, in the case of appellant, no adverse view from the statement of Sh. S.K. Gupta can be taken to come to the conclusion that the bills from Swen Television Ltd. are non-genuine and accommodation bills - Decided in favour of assessee.
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2015 (10) TMI 1018
Proceedings under Section 153C - Jurisdiction of assessing officer to initiate the proceedings under Section 147 read with Section 148 on the basis of the same material that was discovered during the search operation - whether in case of a valid search under Section 132 the assessment, if any, was only permissible under Section 153A or under Section 153C and that no assessment or reassessment was permissible under Section 147 read with Section 148? - Held that:- There were two sets of incriminating documents seized against the appellant. One set of documents, so seized, were found at the appellant's premises and the other set of documents was found at the premises of Anurag Pandey. The materials found at the premises of Anurag Pandey were used to initiate proceedings under Section 153C of the Act, but, were subsequently dropped. These materials have not been used for initiating proceeding under Section 147 of the Act. The materials so used under Section 147 of the Act are the materials which were found at the assessee premises, pursuant to which proceeding under Section 153A of the Act was initiated, but was subsequently dropped on account of the fact that the warrant of authorisation was issued against a wrong person. The materials, so seized, at the appellant premises could be utilised for the purpose of assessment. In Dr.Sarad B. Sahai and another vs. Commissioner of Income Tax and others [2010 (9) TMI 383 - ALLAHABAD HIGH COURT] held it is a settled principle of law that even if a search is declared illegal the material found at the time of search can be utilized for the purposes of assessment. Therefore, the co-ordinated post-search investigation and meaningful assessment has to take place. It may be that on account of search being declared illegal, the block assessment under s. 158BC of the Act cannot be made but the regular assessment or the reassessment contemplated under the Act can be made In the light of the aforesaid, the contention that once proceeding under Section 153C of the Act was dropped, proceeding under Section 147 could not be initiated, is patently erroneous. We find that proceeding under Section 153C was initiated on different set of documents and on separate satisfactory note recorded whereas the proceedings which were initiated against the assessee-appellant under Section 147 of the Act was based on different set of documents.
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2015 (10) TMI 1017
Addition under Sections 68 and 69 - non establish the claim a sum of US $ 6 lacs received as a gift - Tribunal held that the Assessee had established the source of the gift as well as the creditworthiness of the donor and, accordingly, deleted the addition - whether the assessee had proved the capacity of the donor? - Held that:- Insofar as the issue regarding discrepancy in the statement of the donor is concerned, we find that the same is not material in determining the question of the genuineness of the gifts or the capacity of the donor. Insofar as the failure on the part of the donor to provide his business details, details of his assets, bank accounts and his agreements with his associates and other information is concerned; clearly, a donor could not be expected to share such details, which understandably may be considered as confidential. The Assessee as well as the donor had sworn statements indicating their close relationship going back several years. The certificate dated 26th March, 1997 issued by Blackfin and the statement of account of the donor in the books of Blackfin clearly indicated that the donor had access to the funds necessary for making the gift in question. The rent deed relating to a hotel in Dubai also indicated that the donor was a person of means. The donor himself had affirmed that his annual income was 3-4 million dollars. Plainly, the above material could not be ignored by the AO. The donor himself was under no obligation to subject himself to the inquisition by the AO. The Tribunal had considered the above and had concluded that the Assessee had discharged the burden. The AO on the other hand had not identified any material that was available with the Assessee, or should have been available with the Assessee, and had been withheld by him. In our opinion, the Tribunal rightly considered the issue in its correct perspective while holding that the Assessee had discharged his burden. Insofar as the professional consultancy fee received from Blackfin is concerned, the Assessee had produced a copy of the agreement as well as the letter of termination. The agreement itself was in force for a period of six months and in terms of the agreement, the Assessee was to receive a sum of US$ 1,20,000 against, which the Assessee had received a sum of US$ 1,16,833. Whilst the receipt of the consultation fee indicated that the Assessee had rendered certain services, the Tribunal rejected the conclusion that this could cast a doubt on the nature of the amount received by the Assessee as a gift. The agreement was only for a period of six months and the Assessee had affirmed that except for the said arrangement it had no connection with Blackfin. Further the discrepancy in the amount received by the Assessee as consultancy fees and the amount receivable in terms of the agreement could not possibly be a ground for doubting the amount of gift as consultancy fees.The alleged ledger showing withdrawal of US$ 10,000 as fee would also be considered as insufficient for treating the gift in question as income. The Tribunal had evaluated the material and evidence on record and had concluded that the Assessee had discharged its burden of justifying the receipt in question as gift. On the other hand that the AO had no material or had not collected any evidence to reject the claim made by the Assessee. Apart from doubting and questioning the material produced by the Assessee, the AO had not produced any positive evidence which could lead to the inference that the amount received by the Assessee was not gift.The findings of the Tribunal are based on sufficient material and cannot be stated to be perverse - Decided in favour of assessee.
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2015 (10) TMI 1016
Entitlement to deduction u/s. 80IB - whether process of galvanizing of H.R. strips/Coils/CR Coils amounts to manufacture/production of article/thing? - Held that:- Identical question had been raised by the revenue in respect of the Assessment Year 2004-05 [2015 (10) TMI 1060 - BOMBAY HIGH COURT] wherein revenue appeal dismissed concluding process of galvanizing of H.R. strips/Coils/CR Coils amounts to manufacture/production of article/thing entitling the assessee to deduction u/s. 80IB - Decided in favour of assessee.
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2015 (10) TMI 1015
Reopening of assessment - disallowance u/s. 80IB(10) - Held that:- We find that the reopening notice dated 30th March, 2010 has been issued beyond a period of four years from the end of the relevant Assessment Year i.e. A. Y. 2002-03. A primary condition to be satisfied for reopening of assessment beyond a period of four years is a failure on the part of the assessee to fully and truly disclose all material facts necessary for the Assessment. So far as the benefit under Section 80IB(10) of the Act is concerned the same was not only fully and truly disclosed but also considered in depth by the Assessing Officer while passing its original order dated 31st May, 2005 under Section 143(3) of the Act. Thus, no fault can be found with the order of the CIT(A) as well as of the Tribunal holding that: (i) the entire exercise of issuing a reopening notice and passing of reassessment Order was not justified; and (ii) on merits, the authorities have held that same stands concluded in favour of the Respondent-Assessee by the decision of this Court in Brahma Associates (2011 (2) TMI 373 - BOMBAY HIGH COURT ). - Decided in favour of assessee.
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2015 (10) TMI 1014
Bogus purchases - Tribunal came to the conclusion that the purchases made from the four parties were genuine whereas both the AO and the CIT(A) had come to the conclusion otherwise - Held that:- Tribunal in the impugned order has considered various evidences in the form of Sales Tax Registration Certificate and the PAN number of the parties, copies of the purchase invoices, quantitative utilization of its purchases corresponding to the export made out of these purchases produced before the Assessing Officer. The Assessing Officer in his order of assessment has not examined any of these evidences but has merely proceeded on the basis that in spite of notice as issued, the Respondent had not complied with the same. This has been negatived by the order of the CIT(A) and this finding not been accepted by the Revenue as it has not challenged it before the Tribunal. Besides, the order of the Assessing Officer itself records the fact that the Chartered Accountant of the Respondent did attend the office of the Assessing Officer for a hearing on 12th February, 2009 and the same was adjourned to 26th February, 2009. Thereafter, again attended on 22nd October, 2009. The finding rendered by the Tribunal on the appraisal of the evidence led by the Respondent-Assessee before the authorities, is possible view. This finding has not been shown perverse and/or arbitrary in any manner. Thus, we see no reason to interfere with the impugned order passed by the Tribunal. - Decided against revenue.
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2015 (10) TMI 1013
Entitlement to exemption under Sections 11 and 12 - whether the activities of the Assessee would fall within the scope of 'general public utility' under Section 2 (15)? - ITAT allowed the claim - Held that:- The ITAT has returned a factual finding, after analysing the documents on record, that the activities of the Assessee can in no way be termed as trade and commerce etc. as it is not charging any fee from the beneficiaries who belong to the poor communities. The ITAT also noted that the NGOs like the WHO, UNICEF etc. which have engaged the Assessee are themselves charitable instructions. They ensure that the grants given to the Assessee are utilized for the purpose of charitable activities and not for any business. The consultants' fees were also paid out of such grants. Further, the Revenue was not able to show that any part of the profit or gains has been transferred to any member of the Assessee society. - Decided in favour of assessee.
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2015 (10) TMI 1012
Registration of appellant Trust u/s 12AA denied - Held that:- In view of the provisions of 1922 Act, the matter is required to be remanded to the Tribunal to adjudicate whether the activities of the appellant were covered within the meaning of 'charitable' in nature or not even after the insertion of the proviso to Section 2(15) of the Act w.e.f. 1.4.2009 i.e. in respect of the assessment years 2009-10 onwards. See Improvement Trust through Shri APS Virk s/o Late Shri Kartar Singh Virk, Chairman, Dr. Mela Ram Road, Bathinda, Punjab Versus Commissioner of Income Tax, Aayakar Bhawan, Amritsar [2015 (10) TMI 1061 - PUNJAB AND HARYANA HIGH COURT] In view of the above, the order passed by the Tribunal is set aside and the matter is remanded back to the Tribunal for fresh adjudication keeping in view the proviso to Section 2(15) of the Act inserted w.e.f. April 1, 2009 with reference to the provisions of the 1922 Act after affording an opportunity of hearing to the parties in accordance with law.
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2015 (10) TMI 1011
Loss incurred through forfeiture of share application money - whether pertained to capital account in disregard of the fact that the acquisition of shares, stocks, bonds, debentures and debenture stock is integral part of the assessee’s ordinary business opereation as a non-banking financial company ? - Held that:- As we find that none of the authorities – the Assessing Officer, CIT(A) and the Tribunal had occasion to deal with the provisions contained in the Residuary Non-Banking Companies (Reserve Bank) Directions, 1987 which has been relied on behalf of the appellant, the order under challenge cannot be sustained and is set aside and quashed. Accordingly, the matter is remanded before the Assessing Officer who shall pass necessary order within four months from the date of presentation of a copy of the certified copy of this order after giving an opportunity of hearing to the assessee. At the time of hearing, the assessee is at liberty to rely on the provisions contained in the Residuary Non-Banking Companies (Reserve Bank) Directions, 1987 which shall be dealt with by the Assessing Officer in its order.
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2015 (10) TMI 1010
Accrual of income - Taxability of enhanced award pronounced by the arbitrator - whether is to be taxed during the previous year, relevant to the assessment year in which the finality of the decision of the Hon’ble High Court of Andhra Pradesh, is delivered? - Whether the Appellate Authorities were correct in holding that the interim award of ₹ 80 lakhs received by the assessee pursuant to the order of Hon’ble Andhra Pradesh High Court on 16/11/2001 and 24/12/2001 is not liable to tax during the current assessment year 2002-03 as the same had not accrued and the same will be liable to tax only when the final award is passed by the Andhra Pradesh High Court ? Held that:- As emerges from the judgment of COMMISSIONER OF INCOME TAX , WEST BENGAL – II VS . HINDUSTAN HOUSING AND LAND DEVELOPMENT TRUST LTD [1986 (7) TMI 10 - SUPREME Court] when an assessee receives money, either under an award or by a decree of the court, or under an award passed by the arbitrator, if the amount paid to him is not in dispute, then that amount represents his income. He should offer it to tax in the previous year of the date of payment of the said amount. But if the amount due to him is in dispute and it is subject-matter of a litigation and during the pendency of the litigation, if any interim order is made for payment of the said amount, the said payment is subject to the final result of the said proceedings. In the event the assessee looses the legal battle, the amount received by way of interim payment, has to be repaid. The amount to which he is entitled to, out of the disputed amount, would crystallize only when the litigation ends and payment is made after the finality of the litigation, then that amount is to be offered to tax in the previous year of the date of payment. Merely because by virtue of an interim order, with or without conditions, some payment is made for the purpose of Income tax Act, it would not constitute income and therefore there is no liability to pay tax on the day such interim payment is received. Therefore, in the instant case, the assessee is liable to pay the amount covered under the cheques, only after a final conclusion of the dispute before the Andhra Pradesh High Court, as rightly held by the Appellate Authorities. Substantial question of law is answered in favour of the assessee and against the Revenue.
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2015 (10) TMI 1009
Deduction u/s 10B - exclusion of duty draw back in the form of DEPB benefits - Held that:- As per Section 28, clause (iii-c), any duty of customs or excise repaid or repayable as drawback to a person against exports under Customs and Central Excise Duties Draw Back Rules, 1971 is deemed to be profits and gains of business or profession. The said provision has to be given full effect to and this means and implies that the duty draw back or duty benefits would be deemed to be a part of the business income. Thus, will be treated as profit derived from business of the undertaking. These cannot be excluded. Even otherwise, when we apply Sub-section (4) to Section 10B, the entire amount received by way of duty draw back would not become eligible for deduction/exemption. The amount quantified as per the formula would be eligible and qualify for deduction/exemption. The position is somewhat akin or close to Section 80HHC of the Act, which also prescribes a formula for computation of deduction in respect of exports. See Commissioner of Income Tax, Central Circle versus Motorola India Electronics (P) Ltd.[2014 (1) TMI 1235 - KARNATAKA HIGH COURT ] - Decided in favour of assessee.
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2015 (10) TMI 1008
Transfer pricing adjustment - TPO treating the AMP spend as a separate international transaction, he applied the Cost plus method and proposed the extant adjustment and segregated routine AMP expenses incurred by the assessee for his business from the non-routine AMP expenses by treating such non-routine AMP expenses leading to the creation of marketing intangible for its AE - Held that:- AMP spend is an international transaction, which is required to be processed under Chapter X of the Act by taking into account the AMP functions performed by the assessee and then comparing such functions with those performed by comparable entities, though, firstly in a combined manner with the distribution functions. We find no reference in the order of the TPO of making any comparison of the assessee's AMP functions with those of the comparables. Going by the ratio in the case of Sony Ericsson Mobile Communications India (P.) Ltd.(2015 (3) TMI 580 - DELHI HIGH COURT), it is mandatory to make a comparison of the AMP functions performed by the assessee and comparables and then making an adjustment, if any, due to differences between the two, so that the AMP functions performed by the assessee and comparable are brought to a similar platform No detail of the AMP functions performed by the assessee is available on record. Similarly, there is no reference in the order of the TPO to any AMP functions performed by comparables. In fact, no such analysis or comparison has been undertaken by the TPO because of his applying the bright line test for determining the value of the international transaction of AMP expense and then applying the cost plus method for determining its ALP. The ld. AR also failed to draw our attention towards any material divulging the AMP functions performed by the assessee as well as comparables. As such, we are handicapped to determine the ALP of AMP expenses at our end, either in a combined or a separate approach. Under such circumstances, we set aside the impugned order and send the matter back to the file of the TPO/AO for determining the ALP of the international transaction of AMP spend afresh in accordance with the manner laid down by the Hon'ble High Court in Sony Ericsson Mobile Communications India (P.)Ltd. (2015 (3) TMI 580 - DELHI HIGH COURT). Ex consequenti, the ground raised about the TPO having no jurisdiction to determine the ALP of AMP expenses, is dismissed following the judgment in the case of Sony Ericsson Mobile Communications India (P.)Ltd. (supra). - Decided in favour of assessee for statistical purposes.
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2015 (10) TMI 1007
Revision u/s 263 - non-disallowance of an alleged amount under the provisions of Section 14A - Held that:- Issue of disallowance u/s. 36(1)(iii) and also 14A was examined by the AO in detail in the scrutiny assessment. As briefly stated above, AO disallowed part of the interest claim on the reason that assessee has invested funds in the mutual funds diverting from business purposes. He quantified the disallowance at ₹ 7,85,32,019/- based on the period of investment during the year. Therefore, as far as quantification of interest on diversion of funds for investment in mutual funds are concerned, we cannot subscribe to the Ld. Pr.CIT's opinion of quantifying the amount on a formula under Rule 8D(2)(ii). This issue was already examined and adjudicated by the ITAT in earlier assessment year AY 2009-10 wherein, ITAT was of the opinion (in para 6) that, 'However, for making any disallowance it has to be established on record how much borrowed fund has been invested in the mutual funds and for what period. AO certainly cannot charge interest for the entire year when the investment is made by assessee for a month or few days. Further, the link is required to be established between the actual amount of investment made out of borrowed funds'. In view of the above, the Pr.CIT's action in concluding that amount to be disallowed under Rule 8D(2)(ii) at ₹ 13,40,73,873/- is without any basis. To that extent, the basic presumption for invoking the jurisdiction being wrong, we cannot uphold the action of Pr.CIT in coming to the conclusion that AO's order is erroneous. Apart from the above, it is also to be seen that the very issue of disallowance of interest on borrowed funds, whether u/s. 36(1)(iii) or under Rule 8D(2)(ii) has been examined by the AO and is subject matter of appeal before the CIT(A). Further, CIT(A)'s order deleting the disallowance per se was prior to the proceedings u/s. 263. As stated, Ld.CIT(A) passed the order as early as on 24-10-2014, whereas Pr.CIT initiated the proceedings by the show cause letter dt. 03-03-2015. Thus, the issue having been adjudicated by the CIT(A) both u/s. 36(1)(iii) as well as u/s. 14A r.w. Rule 8D, the Pr.CIT can no longer exercise jurisdiction to consider the same issue u/s. 263 - Decided in favour of assessee.
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2015 (10) TMI 1006
Computation of interest under section 201(1A) - what is the connotation of ‘every month or part thereof’ appearing in Section 201(1A)- does it mean a calendar month or part thereof, or does it mean a ‘period of one month’ or part thereof? - Held that:- What is to be seen is the gap of time between the point of time when tax ought to have been deducted at source vis-ŕ-vis the point of time when the tax was actually deducted, and it is in this context that connotation of expression ‘month’ is to be examined. Now, if one has to compute the months as per the British calendar, the period from 21st October to 3rd November, as taken in the first example, is less than a month because it is only when the same date comes in the next month, the period of one month can be said to have elapsed. Similarly, the period of 21st March to 18th March of the subsequent year, as per the British calendar, is less than 12 months since the period of twelve months has not elapsed in between these two dates. Coming to the case in hand, the period of time gap between 16th November 2010 to 14th December 2012 is less than 25 months because, on 14th December 2012, the period of 25 months has not elapsed from 16th November, 2010. The period which is elapsed between these two dates is 24 months and 28 days. Going by the provisions of the General Clauses Act, therefore, the period of time between 16th November 2010 to 14th December 2012 is less than 25 months, and, accordingly, interest under section 201(1A) could not have been levied for a period of more than 25 months. As a matter of fact, as evident from the discussions the expression ‘month’ refers to “a month reckoned according to the British calendar”. “A month as per the British calendar” and “a month reckoned (emphasis supplied by me) as per British calendar” are not the same thing and cannot be used interchangeably. While former refers to a calendar month by itself, the latter refers to a period of time which qualified to be treated as a ‘month’. The subtle distinction between the scope of these two expressions cannot be ignored. Thus uphold the grievance of the assessee that, on the facts of this case, interest under section 201(1A) could not have been charged for more than 25 months. The Assessing Officer is, accordingly, directed to recompute the interest under section 201(1A) in the light of my observations above. - Decided in favour of assessee
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2015 (10) TMI 1005
Transfer pricing adjustment - determining the arm's length margin/ price using multiple year data - Held that:- Only the contemporaneous year data is to be taken into consideration for the purposes of bench marking purposes as per Rule 10B (4) of the Incometax Rules, 1962 (hereinafter ‘the Rules’). This position is now well settled by the decision of Hon’ble jurisdictional High Court in the case of Chrys Capital Investment Advisors (I) Pvt. Ltd. Vs. DCIT [2015 (4) TMI 949 - DELHI HIGH COURT]. More so, it is admitted by the parties that the current appeal will not fall within the exception provided under the Proviso to Rule 10B (4). International transaction of provision of IT services and ITES SEGMENT - selection of comparable - Held that:- A captive unit of a comparable company which assumed only a limited risk cannot be compared with a giant company in the area of development of software who assumes all types of risks leading to higher profits. The facts of the appellant are akin and the comparative chart of assessee vis –a-vis M/s Infosys clearly depicts the same and therefore, do not warrant any different conclusion. The appellant is also captive service provider to its AE and as such, M/s. Infosys Ltd. is not a valid comparable with the appellant and we direct it’s exclusion from the comparables. M/S. WIPRO TECHNOLOGY SERVICES LIMTIED - We concur with the finding of DRP while repelling the objection regarding extra-ordinary event taking place for this comparable, but for a different reason, i.e. the relevant extra ordinary event took place in the preceding Financial Year i.e. FY 2008-09. However, we concur with the submissions advanced by Ld AR that the Director’s Report and Notes to Account for this comparable are not available in public domain. Ld. DR has not been able to controvert this fact. Since sufficient information for this comparable is not available, we direct exclusion of this company as a comparable. CALIBER POINT BUSINESS SOLUTIONS LTD. & R SYSTEMS INTERNATIONAL LTD. - We direct the TPO to re-examine these comparables by reworking their margins as on 31st March 2010 as aforestated in the order in the case of M/s. Mercer Consulting (India) Pvt. Ltd. [2014 (10) TMI 467 - THE ITAT DELHI] ITES SEGMENT - ACCENTIA TECHNOLOGIES LTD. - In the light of the amalgamation, which is having an impact on the figures disclosed as of 31st March 2010, we find force in the contention of the ld. AR, this company should be excluded from the comparable and we order accordingly. TCS E – SERVE INTERNATIONAL LTD. & TCS E-SERVE LTD. - the principal source of revenue of this comparable is only one i.e. transaction processing and other services of ₹ 1.35 crores credited in the P&L account. The ld. AR has not been able to substantiate that the other services element is having a different nature or class vis-ŕ-vis transaction processing receipt of this comparable. Contrary to this, the audited annual accounts, certify that both, these receipts are rank parri passu and have the same nature and function. Similar is the position with M/s. TCS E-serve International Ltd. so therefore we uphold the inclusion of these two comparables. - Decided in favour of assessee in part.
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2015 (10) TMI 1004
Validity of assessment under Gift Tax act - period of limitation - contention of the counsel that the AO must have made a ‘fresh assessment’ within the time limit prescribed u/s 16A(3) of the GT Act, 1958 and not an ‘assessment or re-assessment’ that is referred to under the provisions of section 16A(4) of the GT Act, 1958 - whether case is time barred u/s 16A(3) of the GT Act, 1958? - Held that:- CGT(A) having received the order on 27-05-1999, ought to have passed the order before 31-03-2004 whereas the order has been passed on 31-03-2006, which is beyond the period of limitation imposed u/s 16A(3) of the GT Act, 1958. The order of CGT(A) is null and void and the assesee’s appeal is allowed.
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2015 (10) TMI 1003
Addition on account of reallocation of expenses relating to raw materials, manufacturing expenses, administrative expenses, selling expenses and financial expenses amongst Unit-I & Unit-II in proportion to the sales in these units - CIT(A) deleted the addition - Held that:- CIT(A) while granting partial relief has noted that similar addition made by the A.O in the preceding year [2015 (9) TMI 1340 - ITAT AHMEDABAD] was not approved by his predecessor in 2007-08 and further A.O has not pointed out any specific defect in the books of accounts which have been audited. He has further given a finding that Assessee has kept separate production record for both the units which indicate the quantitative of raw material consumed and production as per excise law. He therefore held that A.O was not justified in re-allocating the expenses in proportion to the sale in both the units. However, with respect to certain other expenses, he has noted that the procedure followed by Assessee for allocating the expenses were not logical and without any documentary evidence and with respect to those expenses he had directed to the A.O to apportion the expenses in the ratio of turnover. Before us, Revenue has not brought any material on record to controvert the findings of ld. CIT(A) We further find that while dismissing the appeal of Revenue for A.Y. 2007-08 in Assessee’s own case wherein CIT(A) while deleting the addition has noted that no defect or the differences in the product, process, raw materials, end users etc. have been pointed by Revenue and the A.O has proceeded to calculate the income of the 2 units on a wrong assumption. He has further noted that the addition has been made on a hypothetical formula by the A.O - Decided against revenue.
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2015 (10) TMI 1002
Disallowance of 20% of the expenses incurred under the head “Pay Channel Expenses” - CIT(A) deleted the addition admitting the additional evidence - Held that:- On perusal of the agreement dated 18th August, 2008, we observe that the assessee is bound to procure the pay channel expenses by virtue of clause 2.2 of the agreement and has to bear all the pay channel expenses from its own fund. The AO has conveniently omitted to refer to the said agreement of the appellant company with City Cable Network Ltd. which was placed on record during the assessment proceedings. The ld. CIT(A), therefore, admits the TDS certificates and the bank statements under Rule 46A(1)(a) as additional evidence in view of the settled law as laid down in the judicial pronouncements. These documents deserve to be admitted for the purpose of adjudication of the present appeal. In the remand report submitted by the ld. A.O, we find that the AO has acknowledged the receipt of letter dated 15/12/2008 but has denied the receipt of letter dated 24/12/2008. However, in the remand report the ld.A.O has accepted the acknowledgement of the documents. Further, we observe that all the payments made to the channels have been made vide account payee cheques only. We, therefore, do not find any infirmity in the order passed by the ld. CIT(A). We, therefore, uphold the order of the ld. CIT(A) and the grounds of the Department are thereby dismissed. - Decided against revenue.
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2015 (10) TMI 1001
Unexplained investment in stock - CIT(A) deleted the addition - Held that:- The additional evidence admitted by the Ld. CIT(A) in the form of delivery challans issued by the supplier M/s Liberty Hosiery Mills Pvt. Ltd. These evidences and the discrepancies pointed out by the A.R. in the evidences collected by the AO form the supplier, lead him to arrive at a considered view that the goods were supplied by M/s Liberty Hosiery Mills Pvt. Ltd. to the assessee in the month of August, 1998 and not in the month of November, 1998 as claimed by the AO. Therefore, Ld. CIT(A) has rightly held that there remains no ground for an addition to the income of the assessee u/s. 69 of the Act and hence, deleted the said addition - Decided in favour of assessee. Addition on account of alleged profit 220% on sale of stock of ₹ 75 lacs in domestic market - CIT(A) deleted the addition - Held that:- The goods purchased from M/s. Liberty Hosiery Mills Pvt. Ltd. in the month of August, 1998 were exported by the appellant in the same month, there was no stock left with the appellant for further sale after August, 1998. Moreover, the addition has been made on the basis of suspicion, conjectures and surmises, as no evidence has been brought on record by the AO of any domestic sale by the appellant. We find that the AO has only assumed that since the goods worth ₹ 75 lacs were supplied by M/s. Liberty Hosiery Mills Pvt. Ltd. in the month of November, 1998 and not in the month of August, 1998, therefore, the asssessee has not only invested unaccounted money in purchase of goods worth ₹ 75 lacs in August, 1998, which were exported and the goods receive by them from the supplier in the month of November, 1998, must have been sold in the local market, earning a profit @ 20%thereon. This theory of the AO has already been discarded, once it is held that the goods worth ₹ 75 lacs were received by the assessee from the supplier in the month of August, 1998 only and these very goods were exported on 13.08.1998. Therefore, the question of earning any profit on any domestic sale does not arise at all. Hence, Ld. CIT(A) has rightly deleted the said addition. - Decided in favour of assessee. Recalculate the deduction u/s. 80HHC - assessee has challenged the incorrect computation of the deduction admissible u/sw. 80HHC of the Act, which was restricted to ₹ 1.75 crores as against the original claim of the assessee at ₹ 2.48 crores - Held that:- CIT(A) has rightly directed the AO to recomputed the deduction admissible u/s. 80HHC of the Act to the assessee after proper effect to this appellate order. In our considered opinion, the Ld. CIT(A) has passed a well reasoned order - Decided in favour of assessee. Additional evidence of the assessee under Rule 46A of the I.T. Rules rejected - Held that:- We find that the AO stated in the Remand Report that these documents had already been considered at the time of original assessment. In the rejoinder, the AR of the assessee submitted that since all the documents filed along with the application under Rule 46A had been considered at the time of original assessment, the same was also considered by the Ld. CIT(A) after considering the Remand Report and the Rejoinder of the Ld. Counsel of the assessee and rightly allowed the additional evidences filed by the assessee. In our considered opinion, the Ld. CIT(A) has passed a well reasoned order which does not need any interference - Decided in favour of assessee.
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2015 (10) TMI 1000
Disallowance u/s 40(a)(ia) - Held that:- FAA had confirmed the order of the AO as it was found that TDS was not paid by the assessee on due dates,as envisaged by the provisions of the Act,that the assessee contended that payments were made before the due date of filing of return.As far as TDS about interest payment and professional fees are concerned,we find that the assessee has not made any submission before the FAA, however, before us it was stated that payment was made before the due date of filing of return or that amounts had been paid by the assessee before the end of the previous year. We are of the opinion that,in the interest of justice,the matter should be restored back to the file of the AO for verification purposes. He is directed to verify the claims made by the assessee in light of the cases relied upon by the assessee before us with regard to the sub contract payment and interest payments.With regard to payment of TDS on professional fee he would follow the decision of the Special Bench delivered in the case of Merlyn Shipping and Transport (2012 (4) TMI 290 - ITAT VISAKHAPATNAM). - Decided in favour of assessee for statistical purposes.
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2015 (10) TMI 999
Penalty under section 271(1)(c) - AO assessing the LTCG and gift receipts as income - reopening of assessment - Held that:- The tax authorities have not considered the materials and explanations furnished by the assessee. We find that the decision rendered in the case of Madhulika R. Oswal (2013 (7) TMI 921 - ITAT MUMBAI) is in accordance with the ratio of the decision rendered by Hon ble Supreme Court in the case of MAK Data P Ltd (2013 (11) TMI 14 - SUPREME COURT ). Accordingly, consistent with the view taken by the Co-ordinate Bench of the Tribunal in the case of Madhulika R Oswal (supra), we set aside the orders of ld.CIT(A) under consideration and restore all the matters to his file with a direction to re-adjudicate them on merits in accordance with law and after hearing the parties. - Decided in favour of assessee for statistical purposes.
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2015 (10) TMI 998
Transfer price adjustment - upward adjustment of ALP - contention of the Ld. A.R. was that for the purpose of determining the ALP for the transactions related to the assessee company with that of its AEs, internal comparison would be more appropriate than the external comparison - Held that:- Assessee has produced all the relevant materials to arrive at the segmental profitability with the assessee’s AEs. This avowal of the Ld. A.R. had been objected by the Ld. D.R. The Ld. A.R. further submitted that the assessee had produced a certificate from the Chartered Accountant with respect to the segmental financial breakup relating to profitability with AE and non-AE transactions.Considering these facts and circumstances of the case, we are of the considered view that the matter is required to be remitted back to the file of the Ld.TPO to once again verify as to whether the segmental financial break up relating to profitability from AEs and non-AE are available to the satisfaction of the Revenue. If the assessee is able to establish the same, then the Ld. TPO shall pass appropriate order as per law and merits considering the case laws cited by the Ld. AR herein above - Decided in favour of assessee for statistical purposes. Disallowing U/s. 40(a)(ia) - A.R. submitted that the amount was expenses incurred during the assessment year 2008-09 which was already disallowed by the Revenue for non-deduction of tax in that assessment year and Revenue had inadvertently disallowed the same once again - Held that:- D.R agreed before us that the matter may be sent back to the file of Ld. Assessing Officer to verify the contention of the Ld. A.R., and if the same was double disallowance, then the addition made based on such disallowance may be deleted. Considering the submissions of both the Ld. A.R. and the Ld. D.R, in the interest of justice we hereby remit back the matter to the file of Ld. Assessing Officer to verify the contention of the Ld. A.R. and if it is found to be in order then the addition made based on such disallowance for the relevant assessment year shall be deleted. - Decided in favour of assessee for statistical purposes.
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2015 (10) TMI 997
Addition made on interest free loan to M/s Uma Overseas - Held that:- As decided by Tribunal in assessee’s own case for A.Y. 2007-08 [2015 (10) TMI 995 - ITAT AGRA] it is an undisputed position that interest free funds available to the assessee are far in excess of the interest free advances given by the assessee. In the documents filed before us, it is shown that the assessee had a capital of ₹ 176 lakhs and business profit of ₹ 82.45 lakhs, and both these amounts put together are far in excess of the interest free investments made by the assessee. With these undisputed facts in mind, let us take a look at the legal position laid down by Hon’ble Bombay High Court, in the case of CIT Vs Reliance Utilities & Power Ltd (2009 (1) TMI 4 - HIGH COURT BOMBAY), as stated thus, “The principle therefore would be that if there are funds available both interest-free and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interest-free fund generated or available with the company, if the interest-free funds were sufficient to meet the investments”. On the basis of this principle, as has been consistently held by coordinate benches of this Tribunal, as long as interest free funds available to an assessee are in excess of the non business investments or interest free advances, presumption has to be that investments or interest free advances are out of interest free advances, and, accordingly, disallowance in respect of interest paid on borrowings cannot be made on the ground that the borrowed monies have not been used for business purposes. The impugned interest dis allowances are, accordingly, deleted - Decided in favour of assessee.
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2015 (10) TMI 996
MAT computation - Additions towards lease equalisation charges for the purposes of computing book profits under section 115JA - Held that:- after retrospective amendment in the Act by way of the Finance (No. 2) Act, 2009, the assessee's stand is no more sustainable. It is to be seen that the hon'ble High Court in the assessee's case for the assessment year 1997-98 has taken cognizance of the abovestated amendment qua identical lease equalisation charges to observe that this amendment would apply from April 1, 1998. We reiterate that the assessment year involved before us is 1999-2000. Thus, we find that the case law of CIT v. Weizmann Homes Ltd. [2013 (5) TMI 123 - KARNATAKA HIGH COURT] post facto amendment squarely applies in this case. So, we accept the Revenue's grounds and hold that the assessee's lease equalisation charges have to be added to its book profits under section 115JA and leave it open for the Assessing Officer to make necessary computation as per law - Decided in favour of assessee.
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2015 (10) TMI 995
Disallowance of interest free advance - Held that:- It is an undisputed position that interest free funds available to the assessee are far in excess of the interest free advances given by the assessee. In the documents filed before us, it is shown that the assessee had a capital of ₹ 176 lakhs and business profit of ₹ 82.45 lakhs, and both these amounts put together are far in excess of the interest free investments made by the assessee. With these undisputed facts in mind, let us take a look at the legal position laid down by Hon’ble Bombay High Court, in the case of CIT Vs Reliance Utilities & Power Ltd (2009 (1) TMI 4 - HIGH COURT BOMBAY), as stated thus, “The principle therefore would be that if there are funds available both interest-free and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interest-free fund generated or available with the company, if the interest-free funds were sufficient to meet the investments”. On the basis of this principle, as has been consistently held by coordinate benches of this Tribunal, as long as interest free funds available to an assessee are in excess of the non business investments or interest free advances, presumption has to be that investments or interest free advances are out of interest free advances, and, accordingly, disallowance in respect of interest paid on borrowings cannot be made on the ground that the borrowed monies have not been used for business purposes. The impugned interest disallowances are, accordingly, deleted - Decided in favour of assessee. Penalty imposed under section 271(1)(c) - Disallowance of sales tax liability - Held that:- The deduction was made in a transparent manner inasmuch as it was stated in the profit and loss account as “Sales Tax Arrears 81-82” and as such it cannot be said to be a case of furnishing inaccurate particulars of income. It is also an undisputed position that even the tax auditor missed the disallowance in the tax audit report. There is nothing before us to indicate malafide in this action. It is also not a case of double deduction for the same amount, as the relevant previous year was the year in which payment was made. In these circumstances, even if it was an inadmissible claim, by no stretch of logic, this can be a fit case for imposition of penalty under section 271(1)(c) of the Act. Learned Departmental Representative, when confronted with these facts, did not have much to say, beyond placing his dutiful reliance on the orders of the authorities below.In view of the above discussions, and bearing in mind entirety of the case, we deem it fit and proper to delete the impugned penalty - Decided in favour of assessee.
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2015 (10) TMI 994
Application computer software - revenue v/s capital expenditure - Held that:- As could be seen from the observation of the High Court in the case of CIT v. Southern Roadways Ltd. [2006 (10) TMI 82 - MADRAS HIGH COURT] that the expenditure incurred on upgradation of software is revenue expenditure. Respectfully following the said decision, we allow the ground of appeal of the assessee on this issue - Decided in favour of assessee. Disallowance of loss of transaction of foreign currency loan - Held that:- The Assessing Officer though stated in the assessment order that if borrowing is for capital asset, the exchange loss already suffered would require to be capitalised in the context of the present law after the substitution of section 43A with effect from the assessment year 2003-04, he has not dealt with the issue on those lines. The Assessing Officer also did not examine as to whether the assessee has repaid the loan, etc. or it is still outstanding. In the circumstances, we are of the view that this issue has to be examined afresh in accordance with law with reference to the provisions of section 43A of the Act after ascertaining the facts from the assessee as to whether the entire loan was repaid or outstanding or partly repaid or outstanding, as the submission of the assessee was that loan was repaid and the losses incurred by the assessee on foreign exchange fluctuation of FCNR, the loan is not a contingent liability. Therefore, in the light of the submissions of the assessee and also since the lower authorities have not examined this issue, we remit this issue back to the Assessing Officer with a direction to apply provisions of section 43A of Act and decide this issue in accordance with law after providing adequate opportunity to the assessee. - Decided in favour of assessee for statistical purposes. Exclude exchange fluctuation on sales both from export turnover and total turnover for the purpose of computing deduction under section 10AA - Held that:- As the Commissioner of Income-tax (Appeals) by following the decision of the Special Bench in the case of ITO v. Sak Soft Ltd. [2009 (3) TMI 243 - ITAT MADRAS-D ] and directed to exclude foreign exchange fluctuation from both export turnover and total turnover for the purpose of computing deduction under section 10AA of the Act, we do not find any infirmity in the impugned order and uphold the same.- Decided against revenue.
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2015 (10) TMI 993
Validity of reopening of assessment - set off of short term capital gain derived from sale of shares against long term capital loss is not permissible as per section 74(i)(b) and gain derived from sale of house property has to be assessed as STCG and cannot be set off against brought forward business losses as the assessee is engaged in the business of dealing with securities - Held that:- Reopening of assessment in the instant case is not only on a mere change of opinion but also amounts to review of the assessment order passed earlier u/s 143(3) of the Act. That part, there being no failure on the part of the assessee in disclosing truly and fully all material facts reopening of assessment after expiry of four years from the end of the assessment year is clearly against the statutory mandate, hence, is without jurisidiction. In case of Parashuram Pottery Works Co. Ltd. V/s. ITO, Circle-I, Ward A, Rajkot (1976 (11) TMI 1 - SUPREME Court) held that the duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that his duty ends. It is for the ITO to draw the correct inference from the primary facts. It is no responsibility of the assessee to advise the ITO with regard to the inference which he should draw from the primary facts. If an ITO draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening the assessment. In case of CIT Vs. Kelvinator of India [2010 (1) TMI 11 - SUPREME COURT OF INDIA] held that reopening of assessment in absence of fresh tangible material and on consideration of very same material considered in the original assessment will be on a mere change of opinion. Therefore, considering the facts of the present case vis-ŕ-vis the relevant statutory provision as well as in the light of ratio laid down by the Hon’ble Supreme Court referred to above, we do not find any infirmity in the order of the learned CIT(A) in cancelling the impugned assessment order. Accordingly, we uphold the same by dismissing the grounds raised by the department. - Decided in favour of assessee.
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2015 (10) TMI 992
Estimation of net profit rate of 6% by CIT(A) - net profit rate @ 12.5% applied by the A.O - Held that:- It is an admitted position that the assessee is engaged in the business of civil contacts for Government agencies. We have also noted that while assessee did not, at assessment stage, produce any evidences in support, such as bills and vouchers, of the ledger entries. The assessee’s claim before the CIT(A) has been that, “the version of the Assessing Officer is not correct, (the assessee) has maintained complete books, which are audited and complete details including bank account and bills and vouchers were furnished”. If that is the case, and the assessee is indeed in a position to substantiate the claim for expenditure, the expenses incurred by the assessee should be allowed. In this view of the matter, we deem it fit and proper to remit the matter for fresh adjudication by the Assessing Officer in the light of such evidences, in support of expenditure, as he may be in a position to produce. In case, of course, he cannot produce the bills and vouchers partly, the disallowance to that extent will have to be sustained by the Assessing Officer. Let all these aspects be examined afresh, after providing due and fair opportunity of hearing to the assessee, in accordance with the law and by way of a speaking order. We direct so. - Decided in favour of assessee for statistical purposes.
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2015 (10) TMI 991
Penalty u/s 271(1)(c) - addition on the basis of seized papers from the premises of the assessee and on account of cash deposited in the HDFC Bank - CIT(A) deleted the penalty - Held that:- It transpires that if an addition is to be made on the basis of a seized document, then it must be supported by some identification having any nexus with the unaccounted business activity of the assessee. The nature of transaction should reflect some direct or indirect connection with the accounted or unaccounted activity of the assessee. If a document is silent or the ingredients could not be linked, then the said document was considered as "a dumb document". Revenue Department had not made sufficient enquiry so as to establish that in fact the said document had unearthed a concealed business activity of the assessee. In the absence of any such evidence, the addition so made by the AO remained un-corroborated, hence, we hereby reverse the findings and allow this ground. Since the addition in quantum proceedings has been deleted by the Coordinate Bench the penalty does not survive, therefore we do not find any infirmity in the order of the ld.CIT(A), same is hereby upheld - Decided in favour of assessee. Penalty u/s 271(1)(c) - unexplained cash deposits - Held that:- In the present case, the AO has given a clear finding that the assessee is guilty of concealing the particulars of income and furnishing inaccurate particulars of income. Therefore, the decisions relied upon by the ld.counsel for the assessee do not help to the assessee and we do not find any merit in the arguments advanced by the ld.counsel for the assessee. Thus, the ground of Assessee’s appeal is hereby rejected.
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2015 (10) TMI 990
Application for registration u/s 12AA rejected - whether a mere class conducted by the assessee would fall within the definition of "education"? - Held that:- In the case before us, admittedly, the assessee is conducting classes in event management. But the institution run by the assessee is not recognized by the government or any governmental bodies. As a consequence, the teaching courses conducted by the assessee do not result in conferment of any degree or diploma and remains unrecognised. As we have opined earlier, as also held by the Apex Court in Sole Trustee, Loka Shikshana Trust (1975 (8) TMI 1 - SUPREME Court ) all kinds of knowledge would not fall within the definition of "education", and therefore, cannot be treated as a charitable institution as provided in section 2(15) of the Act. This Tribunal is of the opinion that the assessee is not eligible for registration u/s 12AA of the Act. Accordingly, the order of the lower authority is confirmed.- Decided against assessee.
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2015 (10) TMI 989
Disallowance u/s. 40(a)(ia) - TDS liability - wrong classification of expenses as payment to contract whereas payment were made towards rent and reimbursement of expenses - Held that:- It is a fact that during the year, Assessee had entered into agreements with Natraj Synthetics and Arbuda Textiles, whereby the Assessee had taken the machineries and other facilities located at the shed on rent. As per the rent agreement, Assessee had agreed to pay the monthly operating charges towards plant and machinery and infrastructure facilities and towards the use of land and building. It was also agreed that the assessee would bear all expenses in the nature of labour wages staff salaries, manufacturing expenses etc. It was also agreed interalia that at the expiration of the term, the Assessee will hand over vacant possession of the set up. Revenue has not brought any material on record to demonstrate that the agreement entered into by the Assessee was not in existence or an afterthought. In view of the aforesaid facts, we are of the view that the payment made by Assessee consisted of agreed payments towards rent and therefore also reimbursements. Further, with respect to reimbursements, no material has been brought on record by Revenue to doubt its genuineness. Further the submission of ld. A.R. that the payee’s have also paid the taxes has not been doubted by Revenue. In view of the aforesaid facts, we are of the view that no disallowance u/s. 40(a)(ia) can be made in present case. - Decided in favour of assessee.
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2015 (10) TMI 988
Direction to verify the e-TDS return and correction statement filed by the assessee by CIT(A) - Held that:- In the instant case we note that the ld CIT(A) has observed that the appellant had filed correction statement and furnished relevant documents of TDS to prove its claim before him and he also taken note of the fact that the AO has not accepted the said document because the appellant’s correction statement were not accepted by the NSDL. In the light of the discussion above, we are of the opinion that when the ld CIT(A) adjudicates an appeal preferred against an order passed u/s 201 of the Act, he draws his power from sub-section (1)(c) of section 251 of the Act, which entails him to pass any order as he thinks fit and we do not find any restriction in the said power and we cannot read any restrictions which is not there in sub-section (1)(c) of Section 251 and therefore even he has powers to even set-aside the said order impugned before him. However we find that in the instant case before us, the ld CIT(A) has not set aside the AO’s order and the impugned order of the AO which is passed u/s 201/201A of the Act, whereas he has remitted the case back to the file of AO to verify documents produced before him which was filed by the assessee to substantiate its claim and to allow the credit as per law. Therefore, we find no infirmity whatsoever in the direction passed by the ld CIT(A) and therefore we find no merit in the said appeal preferred by the revenue, so we uphold the order of the ld CIT(A) and dismiss the appeal of the revenue.
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2015 (10) TMI 987
Deemed dividend u/s.2(22)(e) - CIT(A) deleted the addition - The written submission filed by the assessee, wherein, assessee contended that Rungta Agencies Pvt Ltd., has given loan or advance in the nature of loan to the assessee i.e. OCP Ltd. - Held that:- The assessee does not hold any share in Rungta Agencies Pvt Ltd., and assessee is not a shareholder or member in Rungta Agencies Pvt Ltd. Therefore, provisions of section 2(22)(e) of the Act is not applicable. We find that the facts of the assessee's case are similar with that of Bhaumik Colours [2008 (11) TMI 273 - ITAT BOMBAY-E]. We find that the CIT(A) has come to the conclusion to delete the addition made under section 2(22)(e) following the decision of Bhaumik Colours (supra). As the assessee is not shareholder of the company, who has advanced money, therefore, we are of the view that the CIT(A) is justified in his action and our interference is not required - Decided in favour of assessee. Addition on account of suppression of the value of concrete sleepers by the assessee - CIT(A) deleted the addition - Held that:- The assessee has shown the value of 2884 numbers at Nil. The assessee admitted that this rejected sleepers occasionally sold to private parties. The company sales the PSC sleepers to Indian Railways and when the sleepers are found to be defected after testing, they are rejected by the railway authorities. The assessee company has been consistently following the accounting practice of valuing the rejected railways sleepers as nil and accounted for on realization basis and the department has accepted this method. Therefore, for the year under consideration, the assessee is following same method and if this valuation is rejected, it will not affect the book results. Therefore, in our opinion, the CIT(A) is justified in his action and our interference is not called for.- Decided in favour of assessee.
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2015 (10) TMI 986
Admission of additional evidence - Held that:- Assessee did not have sufficient time to represent in about 105 assessments in the Central Circle, Chandigarh. When a period of less than two months was available and certain documents were not easily traceable then the same would constitute a reasonable cause for not producing the documents sought to be admitted as additional evidence. This has to be further considered in the light of the fact that the assessee had serious disputes with its auditor, Shri Rajinder Sandal whose services were ultimately terminated. Keeping these two constraints, we are of the opinion that the Ld. CIT(A) should have admitted the additional evidence. This has to be particularly seen in the light of the nature of documents sought to be admitted which we have already produced above. It cannot be said that these documents could have been generated as an after-thought. Therefore in our opinion, these documents should have been admitted. In any case we further find that the Ld. Counsel for the assessee was able to show us the various letters through which it was ascertained that various bills etc. are being enclosed with those letters and no comments have been given by the authorities in their respective orders. These bills etc. wherever found necessary, were produced even before us for our clarification. Therefore this ground is allowed (in fact during the hearing certain bills and other documents were produced before us which we examined to avoid further controversy) - Decided in favour of assessee. Disallowance of deduction u/s 80IB(11A) - Held that:- 100% deduction cannot be allowed to the assessee because we have already held while discussing the activities of the assessee that processing of paddy cannot be said to be covered by the activities given in Sec 80IB(11A). Therefore to find out the quantum of deduction we refer to the assessment order for Assessment year 2010-11 wherein it was observed that milling expenses vary from ₹ 15 to 25 per Qtl depending upon the nature of paddy to be milled. It is also to be noted that some of the bi-products are also obtained in the milling process which also generate some profits. It has to be noted that major profit would accrue to the assessee from storage activity because storing one quintal of basmati costing between ₹ 2500 to 3500 per Qtl which would involve lot of interest element as well as storage charges. This makes it clear that maximum profit would accrue to the assessee from the activity of storage itself. Therefore considering the overall facts and circumstances as well as the observations made in the assessment order for Assessment year 2010-11 we are of the opinion that the assessee should be granted deduction @ 70% of the total profits of the composite unit i.e; profits from the whole business except the profits of power plant. In conclusion it can be said that the assessee is definitely eligible for deduction u/s 80IB(11A) because the assessee started integrated business of handling, storage and transportation of food grains in Financial year 2005-06 i.e. Assessment year 2006-07 on proportionate basis @ 70%. However, the assessee is not entitled to deduction in Assessment year 2008-09 because the return of income was filed late and therefore deduction cannot be allowed in view of the restrictions contained in Sec 80AC. Therefore we confirm the action of Assessing officer and Ld. CIT(A) in denying the deduction because return has been filed late in violation of Section 80AC.- Decided partly in favour of assessee. Disallowance of depreciation on power plant - Held that:- We have already observed that power plant was ready and no further major purchases have been made on account of power plant till August 2008, and the plant was commissioned, therefore, the same is entitled for depreciation. However, during the course of hearing when reference was made to the rules, we find that assessee is not entitled to depreciation @ 100%. The new Appendix X which provides for depreciation under the head plant and machinery under the main Head III allows depreciation under clause 8(ix) which pertain to power plant items is allowable only at the rate 0f 80%. This position was admitted by Ld. Counsel for the assessee also. Therefore, we set aside the order of CIT(A) and direct the Assessing Officer to allow depreciation @ 40% (i.e. 50% of 80%) because plant has been made operational only in the second half only.) - - Decided partly in favour of assessee. Non allowance of the set off of loss from power plant against the business income - Held that:- Yhe provisions of section 80-I(6) and 80B(5). Since section 80B(5) is starting with non-obstante clause, therefore full effect has to be given to the same. In any case, by reducing the loss of power plant from the other business the assessee is rather losing the deduction on the other business instead of getting any benefit. Therefore, in view of the decision of Synco Industries Ltd v Assessing Officer (Income Tax) & Another [2008 (3) TMI 13 - Supreme court ] we decide this issue in favour of the assessee. Additional depreciation on the power plant - Held that:- he plain reading of the above provision shows that in case of the business of generation and distribution of power, the provision for allowance of additional depreciation was inserted by Finance Ac, 2012 w.e.f. 1.4.2013, therefore, the additional depreciation can be considered in case of assessee engaged in the business of generation or distribution of power only form assessment year 2013-14. Therefore, we set aside the order of Ld. CIT(A) and hold that additional deduction @ 20% is not allowable in the case of assessee against power plant. - Decided against assessee. Unsecured investment u/s 69 - CIT(A) deleted the addition - Held that:- The question itself depicts that stock has been valued on approximate basis. Further, the books of account were always taken by the assessee and it has not been denied before us that books were not taken before the Assessing Officer. In any case the bills of bardana have been produced and, therefore, we find nothing wrong with the order of Ld. CIT(A) and confirm his order. - Decided against revenue.
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Customs
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2015 (10) TMI 1023
Suspension of CHA License - CHA failed to verify KYC checks and filed Bill of Entry in the case where the cigarettes were concealed behind the declared cargo by the importer - Held that:- The ratio of this jurisdictional High Court of Madras order is squarely applicable to the present case. In spite of definite time limit of 9 months prescribed by Board circular dt. 8.4.2010 for completion of the proceedings, in the present case, we find that even after 2 = years the proceedings are not completed. - by respectfully following the Hon'ble High Court order (2014 (7) TMI 671 - MADRAS HIGH COURT), the suspension of CHA licence is liable to be set aside and the appellants are allowed to perform their duties as CHA - Decided in favour of appellants.
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2015 (10) TMI 1022
Benefit of Notification No. 12/2012-Cus.– Classification of coal – Sole question is with regards to classification of coal – If it is held to be bituminous coal appellant would not be eligible for benefit of Notification No. 12/2012-Cus., thereby giving rise to demands which have been confirmed by adjudicating authority in all cases – Held that:- clear that inherent moisture and residual moisture are different from each other –Difficult to accept contention of appellants that what has been determined and reported by laboratories is residual moisture even though laboratories specifically mentioned moisture content as inherent moisture – Reports of laboratories are expected to follow international standard and in these cases, appellants are disowning reports on basis of which they have purchased coal – Therefore appellants to deposit 50% of duty demanded with proportionate interest and report compliance – Decided against Assesse.
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2015 (10) TMI 1021
Classification of Goods – Goods under issue are nutritional powder which is a proprietary food - Appellant contends the classification of goods imported under Customs Tariff Heading 1901 and the classification claimed by the appellant is 19019090 - Revenue contends that the said product shall be classified under Customs Tariff Heading 2106 and seeks to classify the same under Chapter Heading 21069099. Held That:- Products having preparations predominantly of milk powder would merit classification under Chapter 1901 and there is no dispute as to the claim of the appellant that the imported goods contain cocoa of 2.5%, hence Chapter Note of Chapter Heading 1901 clearly applies Further, It can be clearly held after reading the HSN Explanatory Notes of Chapter 1901 and Chapter 2106 holistically goods imported by the appellant would merit classification under Chapter 1901 only. - Correct classification of products imported by Appellant is 19019090 – Impugned order is set aside and appeal allowed – Decided in favour of the Appellant.
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2015 (10) TMI 1020
Declaration of goods - Imported goods are waste paper or not – Used craft paper - Valuation of goods imported under Customs – Penalty imposed for wrong declaration of goods – Assesee contends that goods imported are liable for concessional rate under Notification no. 21/2002-CUS - Department contended that 15 to 25 per cent paper was in waste form, remaining appeared to be fresh and serviceable kraft paper thus not eligible for exemption under Notification No. 21/2002-Cus. – Mis-declaration of goods under Section 111(m) of Customs Act, 1962. Held That:- The photographs of the goods which have been placed on record show that the rolls of the paper which had been imported were damaged. Therefore, just because some of the paper contained in the damaged rolls was found to be of serviceable quality, the consignment cannot be treated as of prime quality kraft paper more so, when the Adjudicating Authority has accepted the declared transaction value of the goods. - Department cannot allege mis-declaration of goods and seek confiscation under Section 111(m) - Department cannot allege that no credibility can be attached to the certificate of Assistant Commissioner – Found no merit in the Revenue’s Appeal – Decided in favour of the Assessee.
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Corporate Laws
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2015 (10) TMI 1019
Recovery of debts – Payment of salaries of personnel manning the kiosks – Petitioner asserts that agreement between the parties did not authorise the company to pay the personnel engaged at the kiosks and payment so made cannot be adjusted against the bills raised – Respondent contends that petitioner failed to satisfy the terms and conditions of the contract and emphasised that it would pay the outstanding bills provided the salaries of personnel were paid – Held That:- Respondent has not failed to pay the amount due without justifiable cause but the same needs to be paid within the prescribed time – Decide conditionally in favour of the Respondent.
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Service Tax
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2015 (10) TMI 1056
CENVAT Credit - whether the assessee was entitled to avail credit of service tax on the basis of TR-6 challans prior to 16.06.2005 as TR-6 challan was included as a specified document vide Notification No. 28/2005-CE(NT) dated 07.06.2005 with effect from 16.06.2005 - Held that:- Issue involved in these appeals, is no more res integra in view of the decision rendered by the Tribunal in the case of Commissioner of Central Excise, Goa, vs. Essel Pro-pack Ltd. reported in [2007 (9) TMI 43 - CESTAT, MUMBAI] - decision of the Tribunal was affirmed by a Division Bench of the Bombay High Court in Commissioner of Central Excise v. Essel Propack Ltd., [2015 (5) TMI 529 - BOMBAY HIGH COURT]- first respondent is entitled to avail credit of service tax on the basis of TR-6 Challan. - Decided against Revenue.
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2015 (10) TMI 1055
Penalty under Section 77 – Revenue contends that concessional penalty should not have been granted and penalty under section 77 should have been imposed – Respondent contends that service tax liability with all the penalties imposed was discharged. Held That:- No questionable conduct of Respondent found; Penalty under Section 77 cannot be imposed – Appeal of Revenue dismissed and decided in favour of the Appellant.
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2015 (10) TMI 1054
Liability of service Tax - Services of Laying Long Distance Pipelines under issue – Appellant contends that service tax is not leviable and opportunity of hearing must be given – Revenue contends that Appellant have not produced any evidence in support of their contention. Held That:- Matter should be examined by the adjudicating authority in the interest of justice and proper opportunity of hearing be given – Matter remanded back – Decision made in the case of CCE & Cus., Kerala vs. Larson & Toubro [2015 (8) TMI 749 - SUPREME COURT] followed – Decided in favour of the Appellant.
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2015 (10) TMI 1053
Liability of Service Tax – Franchisee Service or not - activity of running a pre-preparatory/preparatory school. – Appellant contends that definition of franchise under Section 65(47) of the Finance Act, 1994 is not satisfied; Appellant was not under an obligation not to engage in selling or providing similar goods or services or process, identified with any other person thus not liable to pay service tax – Revenue contended that Appellant, under the Franchise Agreement, was under an obligation not to engage in selling or providing similar goods or services or process, identified with any other person thus liable to service tax. Held That:- No Service Tax is leviable as agreement does not fall in the category of franchise agreement as defined under Section 65(47) ibid prior to 16.6.2005 – Decision made in the case of Dewsoft Overseas Pvt. Ltd. Vs. CST, New Delhi [2008 (8) TMI 50 - CESTAT NEW DELHI] followed – Appeal allowed in favour of the Appellant.
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2015 (10) TMI 1052
GTA Service - CENVAT Credit - whether appellant can take credit of duty, paid on reverse charge basis under GTA Services initially from CENVAT credit - Held that:- On being pointed out by the audit the entire amount was paid in cash and appellant took re-credit of duty paid initially from Cenvat Credit Account. Appellant relied upon the case law of M/s Ratnamani Metals and Tubes Ltd. vs Commissioner of Central Excise and Service Tax, Ahmedabad-III [2014 (3) TMI 244 - CESTAT AHMEDABAD] where under similar factual matters it was held that appellant is entitled to take CENVAT credit suo moto - issue has also been decided in favour of the assessee by Honble Gujarat High Court [2014 (3) TMI 316 - GUJARAT HIGH COURT] - Decided in favour of assessee.
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2015 (10) TMI 1051
Disallowance of Cenvat credit - Various services - Held that:- Order of the learned Commissioner (Appeals) does not disclose as to examination of the evidence in respect of each of the services availed by the appellant. He simply endorsed the order passed by the learned Adjudicating authority. This is vividly clear when pages 9 and 10 of the appellate order is examined. Such bald order is not accepted by law to be passed by an appellate authority. Therefore, submission of the appellant which is apparent from the order itself depicted in paras 6 and 9 is required to be referred. The appellant had made categorical submission as to how Car Hiring has relevance to the business. It was also explained how Cleaning Service and Sewage Line Maintenance Charges were necessity for protection of its operations. Similarly, relevancy of Security Services was explained. So also the Foreign Travel Service, which was made was to be connected with the manufacture and sale activity. The appellant further explained the Container Fumigation Service, Pallet Fumigation Service as well as Courier Charges which were relevant for its exporting activity. - Matter remanded back - Decided in favour of assessee.
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Central Excise
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2015 (10) TMI 1058
Denial of exemption claim - Captive consumption - Notification No.67/95-CE, dated 16.03.1995 - SEZ clearances - whether the goods supplies to SEZ Developers without payment of duty are to be treated as exempted goods within the meaning of this term as defined in Rule 2(d) of the Cenvat Credit Rules, 2004 and whether in respect of these supplies, the provision of sub-rule (2) and (3) of Rule 6 ibid would be applicable - Held that:- sub-clause (vi) of the proviso to Notification N0.67/95-CE is an exception clause where a manufacturer of dutiable and exempted goods is eligible if he discharges the obligation prescribed in Rule 6 of Cenvat Credit Rules, 2001. As rightly submitted by both Revenue and the appellants, there is no definition of ‘exempted goods' in Central Excise Act except Rule 2 (d) of Cenvat Credit Rules. The Tribunals decision in the case of Surya Roshni (2013 (1) TMI 500 - CESTAT, NEW DELHI) discussed above clearly answers the above question. When the words exempted goods used in the said notification, it only means ‘final products exempted under the Central Excise Act read with Central Excise Rules or any notification issued there under'. Appellants had duly followed the procedures set out in the above Rules, and executed bond before the excise authorities and cleared the goods without payment of duty. If the goods are fully exempted, the question of following the procedure under ARE-1 and execution of bond does not arise. Accordingly, we hold that the cement cleared to SEZ unit/developers are not exempted goods but cleared without payment of duty by following the procedures and conditions stipulated in both SEZ and Rule 19 of CER Rules and the clinkers used captively for manufacture of cement cleared to SEZ is covered under Notification 67/95 from exemption of excise duty. - Tribunal in the case of Thermo Cable (2012 (12) TMI 942 - CESTAT BANGALORE) on identical issue held the benefit of Notification No.67/95-CE is eligible for the goods captively consumed for manufacture of final products cleared against the international competitive bidding under Notification No.6/2006. Ratio of Tribunal decision squarely applicable to the present case, the appellants are eligible for the benefit of the exemption under Notification No.67/95. As final resort demanding duty on the intermediate product is otherwise also hit by Revenue neutrality, as the appellants are otherwise entitled to avail the Cenvat credit of the duty, if any paid on clinker. Alternatively, if a manufacturer avails exemption on intermediate product under Notification 67/95-CE and chooses to pay duty on the cement when cleared to SEZ unit/developer, the duty paid on final product will be fully available to him as refund/rebate. Thus, on both counts the issue is purely revenue neutral. It is not the intention of the government to demand duty on the intermediate product having considered that the supplies to SEZ are exports. Therefore, the demand of duty on the intermediate product clinker used in manufacture of cement supplied to SEZ units/developers is clearly revenue neutral as the appellants could have claimed refund or availed Cenvat credit. In this regard, as rightly held by the Tribunal in the case of Reliance (2007 (12) TMI 69 - CESTAT, AHMEDABAD) demand of duty on intermediate products will only increase scriptory work with no benefit to the revenue. - appellants are eligible for exemption under Notification 67/95-CE on clinker captively consumed for manufacture of cement cleared to SEZ units/developers without payment of duty for both the periods prior to and after the amendment of SEZ Act. Accordingly, the impugned orders in all the assessees appeals are set aside - decided in favour of assessee.
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2015 (10) TMI 1057
Denial of MODVAT Credit - benefit of exemption under Notification No 214/86-CE dtd 25.3.1986 - Held that:- Adjudicating authority passed the order following the decision of the Tribunal in the case of Bright Steel Mac Fabrics Vs CCE, Ahmedabad - [1993 (9) TMI 218 - CEGAT, NEW DELHI] where it has been held that the job worker cannot be compelled to follow the option under Notification No. 214/86 CE dtd 25.3.1986 and it is for the job worker to return the processed goods on payment of duty. The said decision was upheld by the Hon’ble Supreme Court as reported in [1996 (3) TMI 532 - SUPREME COURT]. We have also noticed that the Tribunal in a recent decision in the case of M/s Thermax Ltd Vs CCE, Vadodara by [2014 (9) TMI 809 - CESTAT AHMEDABAD] allowed the appeal on the identical issue. In that case, the Tribunal followed the earlier decision in the case of M/s Bharat Heavy Electricals Ltd Vs CCE&ST Meerut 1 - [2014(3) TMI 203 - CESTAT, New Delhi]. - Decided against Revenue.
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2015 (10) TMI 1047
Manufacturing activity or not - process of printing of GI paper - classifiable under Chapter heading 4811.90 or not - Held that:- A cursory look into the same may suggest, as held by the Tribunal, that GI paper is meant for wrapping and the use thereof did not undergo any change even after printing as the end use was still the same, namely, wrapping/packaging. However, a little deeper scrutiny into the facts would bring out a significant distinguishing feature; a slender one but which makes all the difference to the outcome of the present case. No doubt, the paper in-question was meant for wrapping and this end use remained the same even after printing. However, whereas blank paper could be used as wrapper for any kind of product, after the printing of logo and name of the specific product of Parle thereupon, the end use was now confined to only that particular and specific product of the said particular company/customer. The printing, therefore, is not merely a value addition but has now been transformed from general wrapping paper to special wrapping paper. In that sense, end use has positively been changed as a result of printing process undertaken by the assessee. Process of particular kind of printing has resulted into a product, i.e., paper with distinct character and use of its own which it did not bear earlier. Thus, the 'test of no commercial user without further process' would be applied as explained in paragraph 20 of Servo-Med Industries (2015 (5) TMI 292 - SUPREME COURT). - there has first to be a transformation in the original article and this transformation should bring out a distinctive or different use in the article, in order to cover the process under the definition of 'manufacture'. These tests are satisfied in the present case. - Decided in favour of Revenue.
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2015 (10) TMI 1046
Classification of the beverages manufactured by the appellant known as Apple Tree Top, Mango Tree Top, Guava Tree Top and Orange Tree Top - Held that:- there is no distinction between fruit juice and the fruit juice beverages - products in question manufactured by the appellant are “fruit preparation” within the meaning of Tariff Heading 20.01 - We have not been shown anything by the learned counsel for the Revenue to arrive at the conclusion that what has been stated above is erroneous. - Decided against Revenue.
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2015 (10) TMI 1045
Classification of goods - Whether persons like the assessees, in these cases, who manufacture 'lifting machinery', which machinery, it is argued, is the essential part which actually brings up and brings down an elevator/lift, is liable to be classified under Chapter sub-heading No. 8428.00 or 8431.00 - Held that:- Note 4 of Chapter 16 would cover their case as individual components manufactured under one contract are intended to contribute together to a clearly defined function covered by sub-heading No. 8428.00, viz., lifting machinery. This being the case, according to them, Note 4 of Chapter 16, if correctly applied, would necessarily lead to the conclusion that the components manufactured by them would fall only under sub-heading No. 8428.00 and not sub-heading No. 8431.00. They also made another submission for the first time before us. They said, in any event, sub-heading No. 8431.00, which refers to parts suitable for use solely or principally with the machinery of sub-heading No. 8428.00, would only refer to parts that were used after a complete lift was already set up and not before. They contrasted the language of sub-heading No. 8431.00 with the language of sub-heading No. 8476.91, which simply states 'parts of machines of sub-Heading No. 8476.11'. The contrast in the language, according to them, makes it clear that the parts spoken of in the latter entry could well be parts of a machine itself, as opposed to sub-heading No. 8431.00, where the parts have to be suitable for use only with the machinery that is already installed. Having regard to the fact that the new pleas raised before us are questions of law which need to be answered on the same set of facts, and no new or additional facts need to be pleaded in order that the assessees make out their case. This being the case, we, therefore, set aside both the Tribunals judgments in the two appeals before us and remand these cases for a fresh hearing before the Tribunal allowing both sides to take up all points which arise on the facts of these appeals. - Appeal disposed of.
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2015 (10) TMI 1044
Benefit of a concessional rate of central excise duty - Notification No. 201/85 dated 2nd September, 1995 and Notification No.78/86 dated 10th February, 1986 - Held that:- Tribunal in an exhaustive judgment dated 9th December, 2005 after setting out the terms of the Notification No. 11/83 dated 1st March, 1983 as amended by the Notification No. 78/86 dated 10th February, 1986 ultimately found that the product of the respondents were correctly classifiable under sub-paragraph 2 of the table in the said Notification, and not sub-paragraph 3 as was wrongly held by the Collector. This was done after the Tribunal went into the standards terms and conditions of the business with the wholesale buyers and after appreciating the witness statements made and particularly retractions made from the said statements in cross-examination - Tribunal found that the case of the Department had not in fact been made out. Apart from this, the Tribunal also relied upon the judgment of this Court in ITC Ltd. vs. Commissioner of Central Excise, New Delhi & Anr.[ 2004 (9) TMI 103 - SUPREME COURT OF INDIA] and found that on a reading of the said judgment, the alternative submission of the respondent was also made out. We do not find any error in the said judgment either on fact or on law. - Decided against Revenue.
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2015 (10) TMI 1043
Valuation of goods - Supreme court dimissed the appeal filed by the Revenue since the decision is covered by the order [2015 (10) TMI 500 - SUPREME COURT]. The appeal was filed against the decision of Tribunal [2005 (3) TMI 218 - CESTAT, NEW DELHI] wherein tribunal held that sale value to the dealers at the time of removal from factory as well as from the Regional Sales Offices is available, therefore, the question of going to Valuation Rules does not arise. In these circumstances, the duty paid by the appellant is correct in law.
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2015 (10) TMI 1042
Compounded levy scheme - manufacture of pan masala / pan masala containing tobacco commonly known as gutkha - Interpretation of Statute - Whether or not Notification No. 42/2008-C.E. superseded the Notification No. 38/2007-C.E. by implication or both the Not ifications were simultaneously operating during the period - Supreme Court after going through the review petition filed against the decision of [2015 (10) TMI 424 - SUPREME COURT] did not found any merit in the petition. The original petition was filed against the decision of Tribunal [2013 (9) TMI 539 - CESTAT NEW DELHI]; wherein Tribunal held that assessee-appellant-respondent were liable to pay differential of excise duty based upon different rates in excise duty on account of enhancement of rate of excise duty; however, Tribunal waived the penalty.
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2015 (10) TMI 1041
Waiver of pre deposit - Section 35F - Supreme Court granted another 4 weeks time to make the pre deposit order by High Court [2013 (1) TMI 73 - BOMBAY HIGH COURT]. High Court in the impugned order so long as it is not set aside and by a final adjudication, the appellate authority would not be justified in ignoring the findings in the order impugned before him and hence ordered that entire exemption of duty was not available.
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2015 (10) TMI 1040
Demand of differential duty - Abatement claim - compounded levy scheme - Demand of interest - Held that:- Appellant had pressed into service Rule 10 of the PMPM Rules requires the duty calculated on a proportional basis to be abated in case the factory does not produce the notified goods during any continuous period of 15 days in a month. Rule 10 further requires the intimation to that effect to be given to the authorities at least three working days prior to the commencement of the period of closure. Rule 9 requires the monthly duty payable to the authorities to be paid by the fifth day of the same month. There is nothing in Rule 9 to suggest that the failure to pay the duty payable on all the machines upfront by the 5th day of a month would disentitle the Assessee to claim pro rata abatement of duty. The requirement under Rule 10 of giving intimation three days prior to the closure has been complied with by the Assessee. Failure to make the payment of duty on fifth day of every month cannot result in depriving the Assessee of the pro rata abatement of duty which he is in any way entitled to since admittedly in the present case there has been a closure of the factory from 14th to 31st August 2012 and an abatement order has also been passed on 28th August 2012. However, the Assessee would be liable to pay the interest for the period of late deposit of duty. - No substantial question of law arises therefrom. - Decided against Revenue.
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2015 (10) TMI 1039
Whether the provisions of Section 38A of the Central Excise Act, 1944 inserted by Section 131 of the Finance Act, 2001 (validation of action taken has been provided for by virtue of Section 132 of the Finance Act, 2001) shall be applicable in respect of obligation & liabilities incurred under Rules 9620, 96ZP & 96ZQ of erstwhile Central Excise Rules 1944 before the same were omitted, notwithstanding the omission of Section 3A w.e.f. 11.05.2001 - Held that:- The proceedings under Section 3A of the Central Excise Act, 1944 read with Rule 96ZQ of the Central Excise Rules, 1944 were initiated by the issuance of a show cause notice dated 13.07.1999. The adjudication order was passed on 22.09.2004. The first appellate authority allowed the assessee's/respondent's appeal by an order dated 07.07.2005. The order of the Tribunal impugned in this appeal was passed on 23.04.2014 - Tribunal dismissed the appeal on the ground that Rule 96ZQ and Section 3A have been omitted on 31.03.2001 and 11.05.2001 and for arriving at this conclusion, theTribunal relied upon the judgment of the Gujarat High Court in the case of Krishna Processors vs. Union of India, [2012 (11) TMI 954 - GUJARAT HIGH COURT]. However, there are several Division Bench judgments of this Court which have taken a contrary view. The first judgment was in the case of Shree Bhagwati Steel Rolling Mills vs. Commissioner of Central Excise, Chandigarh, [2006 (10) TMI 17 - HIGH COURT OF PUNJAB & HARYANA (CHANDIGARH)] - Decided in favour of assessee.
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2015 (10) TMI 1038
Application for exemption from personal appearance - Held that:- A perusal of the impugned order dated 30.09.2014 indicates that the respondent had challenged the jurisdiction of the petitioner to act as an estate officer as it was contended that a notification under Section 3 of the said Act had not been issued. Therefore, the District Judge had called upon the petitioner to appear in person and file an affidavit to explain the position regarding the formal conferment of power as an Estate Officer. A personal appearance of a statutory authority, whose jurisdiction is challenged is, ordinarily, not warranted - impugned order, insofar as it directs the personal appearance of the petitioner, is set aside. - Appeal disposed of.
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2015 (10) TMI 1037
Denial of refund claim - held that:- Similar issue is pending consideration before the Supreme Court in the matter of Commissioner of Central Excise. Chandigarh v. M/s. Drish Shoes Ltd. and. until the Supreme Court considers the matter this Court may not permit refund. Learned counsel for respondent informs that even in case of M/s. Drish Shoes since no stay was granted the department was constrained to sanction refund - since the matter involving identical issue is under consideration of the Supreme Court, the appeals need not be admitted and its consideration be deferred. The request of respondents for issuance of directions to comply with order in respect of refund of amount issued by authorities be considered while dealing with admission of appeal, which can be taken up after the decision of Supreme Court in pending Special Leave Petition. - Decided against Revenue.
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2015 (10) TMI 1036
Validity of Cenvat credit taken on duty paid - whether duty has been paid or not and if duty has been paid by the supplier/assessee, the receiving assessee cannot be found fault with if he takes CENVAT credit of the duty paid so long it is used as input and CENVAT credit is admissible – High Court dismissed the appeal filed by revenue against the decision of Tribunal [2013 (11) TMI 1339 - CESTAT BANGALORE] by following the decision in another case [2005 (1) TMI 125 - HIGH COURT OF JUDICATURE AT MADRAS]. Tribunal in the impugned order held that Assessee is eligible to take CENVAT credit of duty paid which is specified in the First Schedule to the Central Excise Tariff Act - The responsibility of the receiver of the inputs/capital goods is to ensure that duty has been paid and the same has been received by him, accounted for by him and utilized by him properly.
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2015 (10) TMI 1035
Denial of refund claim - Adjustment of excess payment of duty against short payment - Whether duty paid in excess in respect of certain clearances made during a material period is adjustable against short payment of duty in respect of other clearances of that period on finalisation of provisional assessment and resultant excess if any arises upon such adjustment is refundable to the assessee without crossing bar of unjust enrichment being applicable - Held that:- there is no warrant in law to deal with the consequence of each clearance on case to case basis to determine shortage and excess of payment of duty and consequence thereof. The ultimate duty liability of a relevant period is to be determined in final assessment taking into consideration entire clearance of that period in aggregate and if there arises excess payment of duty upon such finalization of making due adjustment, that shall be refundable. - all the appeals on the point of adjustability of excess payment of duty against shortage of duty paid is allowed and excess duty paid is refundable without bar of unjust enrichment applicable. Second claim of the appellant that sales return are not dutiable being goods returned back by buyers is justified. Appellant does not incur liability when cleared goods come back to his custody within the knowledge of excise authority. Revenue has no finding to show that the sales returns were made by the arrangement of the parties to cause prejudice to the interest of Revenue. In commercial parlance, sales return are common where the buyer do not approve quality of goods, objects to the price charged or conditions of purchase order violated varied and similar other reasons. Therefore, directing payment of duty on sales returns shall be contrary to Commercial Parlance theory. - Decided in favour of assessee.
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2015 (10) TMI 1034
Imposition of penalty - Reversal of CENVAT Credit - cenvat credit on the inputs LDO was not received in their factory but diverted to sister unit - Held that:- It is evident that the adjudicating authority has dropped the entire proceedings, it is only on appeal by the Revenue, the Commissioner (Appeals) has restored the demand of ₹ 4,59,611/- for the first time. Therefore, the LAA has rightly held that the respondents are eligible for reduced penalty within 30 days. Therefore, I do not find any infirmity in the order and the above facts are supported by the decision of the Hon'ble High Court of Gujarat in the case of Rita Dyeing & Printing Mills Pvt. Ltd. (2012 (10) TMI 501 - GUJARAT HIGH COURT ). The demand confirmed for the first time by the Commissioner (Appeals). Therefore I do not find any merit Revenue appeal. - Decided against Revenue.
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2015 (10) TMI 1033
Denial of CENVAT Credit - Whether for the month of April 2003, the appellant have taken cenvat credit in respect of the inputs in process, without including the value of the processing chemicals and processing charges - Held that:- Appellant for the calculation of cenvat credit, as per the formula prescribed in notification 35/03-CE NT dated 10.04.2003, have also included the value of the colours, processing chemicals and processing charges while they should have calculated quantum of cenvat credit only on the value of grey fabrics, this allegation is denied by the appellant. So far as the question of admissibility of the cenvat credit on the processing charges is concerned, we are of the view that this issue stands decided against the appellant by the Tribunal's judgment in the case of BB Shah P. Ltd. vs CCE Jaipur-II reported in [2007 (10) TMI 202 - CESTAT, NEW DELHI]. From the order in original passed by the Assistant Commissioner and from the order in appeal, it is not clear as to on what basis the Department has concluded that the cenvat credit has been calculated on the value of the grey fabrics including the value of the processing charges and the value of the colours and chemicals. In view of this, the impugned order is set aside - Matter remanded back - Decided in favour of assessee.
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2015 (10) TMI 1032
Short payment of duty - whether an adjustment is possible against the short payment of duty vis-a-vis excess payment made by the assessee during the relevant period when the assessments were provisional and subsequently finalized - Held that:- Appellant had sought provisional assessment during the material period; on finalization, there is an excess and short payment and the adjudicating authority has ordered for adjustment of the excess payment towards the short payment and also ordered for refund of the amount which is excess. - provisions of Rule 7 of Central Excise Rules, 2002 covers the situation like the one in hand before me. The very same provisions were considered by the Hon'ble High Court of Karnataka in the case of Toyota Kirloskar Auto Parts Pvt. Ltd. (2011 (10) TMI 201 - KARNATAKA HIGH COURT). Though the Lordships were considering as to whether any interest is liable to be paid to the assessee therein for delayed payment, the substantial question of law which was considered by the Lordships and addressed very clearly indicates that there has to be harmonious reading of the provisions of Rule 7 of the Central Excise Rules, 2002. - law as laid down by the Larger Bench of this Tribunal which specifically lays down that excess payment can be adjusted against any dues of an assessee is the ratio which has been correctly followed by the adjudicating authority in the case in hand. Be that as it may, the reliance placed by the learned D.R. on the Larger Bench decision may not carry the revenue's case any further as the decision of the Hon'ble High Court of Karnataka will prevail over the decisions of the Tribunal which is a settled law. - following the ratio as laid down by the Hon'ble High Court of Karnataka in the case of Toyota Kirloskar Auto Parts Pvt. Ltd. (supra) which are applicable in the facts and circumstances of this case, I find that the impugned orders are liable to be set aside - Decided against assessee.
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2015 (10) TMI 1031
Claim of interest under Section 11B read with 11BB of the Central Excise Act for delayed payment of refund - refund of accumulated CENVAT credit - Held that:- The issue is squarely covered by the ruling of the Hon'ble Supreme Court in the case of Ranbaxy Laboratories Limited vs. Union of India - [2011 (10) TMI 16 - Supreme Court of India] delivered vide order dated 21.10.2011 in which it is held that the assessee is entitled to interest on refund from the date on which three months end from the date of application. - The Board reiterated its earlier stand on the applicability of section 11BB of the Act. Significantly, the board has stressed that the provisions of Section 11BB of the Act are attracted automatically on any refund which is sanction beyond a period of three months. - Decided against Revenue.
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2015 (10) TMI 1030
Duty demand - extended period of limitation - Misdeclaration of value - Intention to evade duty - Held that:- Appellants informed the Dept of the revision of the price time to time by various letters. Learned Authorised Representative for the Revenue drew the attention of the Bench to the findings of the Adjudicating Authority. It is observed that there is no consistency in the methods of valuation as claimed by the respondent. The Adjudicating Authority had elaborately discussed the inconsistency of the valuation methods. In our considered view, the inconsistency of the valuation methods cannot be treated as suppression of fact with intent to evade payment of duty. In other words, it is noticed that the appellant informed the Department time to time of variation of price and the Department was well aware of the method of price as declared by the respondent. Thus, there is no suppression of fact with the intent to evade payment of duty. - Decided against Revenue.
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2015 (10) TMI 1029
Duty evasion - CENVAT Credit - Bogus invoices - Parallel invoices - Held that:- Duty demand against the appellant is based on the allegation that in respect of 1467 consignments of automobile parts had been sold to original equipment manufacturers (OEMs) and 409 consignments of automobile parts sold to non OEM customers, in respect of each such sale, the appellant have issued two invoices bearing the same number and same description of the goods but the date of invoices and duty debit particular are different. Out of two invoices, the invoice of earlier date was found to be containing bogus duty debit particulars. - The appellant's explanation that this practice had been adopted to facilitate their priority customers is not convincing, as during the same period in respect of other consignments i.e. in respect of 1318 consignments only one invoice has been issued and there was no such irregularity. In view of this, we hold that the impugned order confirming the duty demand of ₹ 2,05,53,961/- has to be upheld. Initially the goods had been cleared on payment of duty and on being found defective the same were returned by the customers for repair/reconditioning, and no credit of duty paid on the goods was taken by the appellant, in our view, while returning the goods after repair, no duty is required to be paid. Therefore, in these circumstances, even if the appellant cleared the defective goods under cenvatable invoices by showing duty payment particular which were found to bogus, no duty was demandable from them, as no duty is payable by the appellant in respect of defective goods returned by them to the customers after repair under Rule 173H. As regards the duty demand it is in respect of certain loose pre-authenticated invoices duly signed by the representative of the assessee and duly incorporating date and time of removal with PLA debit entry number and date. However, debit entry shown in the loose copies of invoices were found to be different from the duty payment shown in the same invoice number which were available in the records of the central excise authority. Since there is no explanation regarding this discrepancy, we are of the view the duty demand of ₹ 73,821/- has to be upheld. As the provisions of section 11AB had been introduced in Central Excise Act with effect from 28.9.96, the interest would be chargeable in respect of clearance during the period from 28.9.96 to November, 1996, No interest on duty confirmed for the period prior to 28.9.96 has been charged. However, penalty under Rule 173Q (1) (d) is upheld. - impugned order does show as to how the provisions of Rule 209A are attracted in the case of Shri Suresh Garg and Shri K.P.Chitrasenan, as we do not find any evidence of these persons dealing with the excisable goods in any manner in respect of which they had reason to believe that the same are liable for confiscation. Therefore, penalty on Shri Suresh Garg and Shri K.P.Chitrasenan is set aside. However, as regards imposition of penalty on Shri V.K.Mehta, Managing Director under Rule 209 is upheld. - Decided partly in favour of assessee.
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2015 (10) TMI 1028
CENVAT Credit - manufacture of capital goods in house - fabrication of immovable goods - use of goods falling under sub-heading 7208 and 7216 as inputs/capital goods - Exemption under Notification 67/95-CE - Held that:- Certain items of the plant and machinery such as uncoiler, looper, etc. were purchased from the market and embedded to earth and installed to form a part of the tube mill. Components purchased from the market were like motors, coupling, gear boxes, bearing, castings etc. These were assembled and installed on the site to form part of the tube mill which was also covered in the process of welding facility. - The use of explosives, welding electrodes, lubricating oil and crusher for extraction of limestone and crushing in the mines adjacent to the cement factory of the assessee. CENVAT credit was availed on the items being capital goods like limestone crusher, mining equipment, etc. It was held that only the items falling under specified chapters/heading their spare parts /components/accessories or otherwise specified and used in the factory of manufactured of final products are entitled to credit as capital goods. - Goods fabricated in question qualify as capital goods and also as inputs within the meaning of Rule 2(a) read with Rule 2(k) of the CENVAT Credit Rules, 2004. Accordingly, the assessee is entitled to CENVAT credit availed on the items in question for fabrication of the capital goods in question, further utilised in the factory of production. - Decided against Revenue.
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2015 (10) TMI 1027
Denial of refund claim - refund sanctioned after finalization of provisional assessment - Unjust enrichment - held that:- Discounts were given to the ultimate consumers before clearance. In identical issue, the Tribunal in the case of Tata Motors Vs. CCE, Pune (supra) has held that the discounts given before clearance, unjust enrichment clause will not be applicable - Division Bench of this Tribunal in the case of CCE, Andhra Pradesh Paper Mills (2006 (1) TMI 362 - CESTAT, BANGALORE) has also held that question of unjust enrichment does not arise in the case of stock transfer. case law is squarely applicable to the facts of the present case. In the present case, unjust enrichment does not arise as the discounts were pre-determined and already known prior to the removal of goods. By respectfully following the above Tribunal's decisions, I hold that unjust enrichment is not applicable in the present case. Accordingly, the order sanctioning the refund and credited to the Consumer Welfare Fund is set aside - Decided in favour of assessee.
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2015 (10) TMI 1026
Valuation of goods - whether the additional quantity of manufactured lub. Oil cleared in the bonus/promo packs during the relevant period i.e. from 01.4.1998 to 31.3.2008, would attract duty on pro-rata basis of the MRP declared on the packs - Held that:- Levy of excise duty on goods produced or manufactured in India is a Constitutional concept and could be located at entry 84 of List-I to VII Schedule to the Constitution of India. Levy and collection of the Central Excise duty, now known as CENVAT, is administered through Central Excise Act, 1944. The charging section i.e. Section 3 of the Central Excise Act,1944 lays down that there shall be a duty called CENVAT be levied on goods produced and manufactured in India and collected in the manner specified under the Act and Rules made thereunder - lubricating oils are subjected to ad valorem rate of duty. In other wards, it is the value of the goods which is relevant for determination of the quantum of duty applicable to the quantity of goods manufactured and cleared from the factory. - Prior to 01.7. 2000 the value of the goods chargeable to ad valorem rate of duty, was determined on the basis of normal whole sale price at which such goods are sold; however, after 01.7. 2000, transaction value has become the basis to ascertain the assessable value Manufactured lubricating oils has been notified under The Standards of Weights and Measures Act read with relevant Rules, accordingly, the assessable value of the said goods are to be determined as per section 4A of Central Excise Act, 1944. It is not disputed at any stage that the goods manufactured by the appellant are subjected to assessment under section 4A of Central Excise Act, 1944. The only dispute relates to determination of the value of the quantity of lub. Oil contained in the packs and consequently the duty paid by the appellant. There is no dispute about the fixation of MRP on the bonus/promo pack and no objection has been raised by the department about the compliance of the requirement of the provisions of The Standards Weights and Measures Act and the Rules made thereunder. The Appellant is at liberty to ascertain its own MRP of the goods depending on the market conditions and required to affix the same on the packing, subject to the condition that in selecting the MRP for determination of value and payment of duty, in the event more than one MRP is fixed on the pack, as prescribed in section 4A of Central Excise Act, 1944, the duty is to discharged on the highest MRP. In the event the MRP is affixed correctly and satisfies the conditions laid down under Sec.4A, then it is not open to the department to dissect the MRP, and to examine its content and arrive at a different MRP for the purpose of determination of assessable value under Sec.4A by applying the principles of valuation laid down for determination of value under Sec. 4 of CEA,1944. Accepting the contention of the revenue, if the pro rata value attributable to the additional quantity cleared as bonus quantity, in the same pack, is added to the MRP affixed on the said bonus pack, then the declared MRP will increase accordingly, which the appellant had not realized from its customers; also no such allegation has been levelled in the notice nor confirmed in the impugned order that the Appellant has collected any amount in addition to the MRP declared. No merit in the impugned order, consequently, the same is set aside - Decided in favour of assessee.
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2015 (10) TMI 1025
CENVAT Credit - whether the appellant is entitled to take Cenvat credit on repairs and maintenance services provided by the service provider on behalf of the appellant to the buyers during the period of warranty or not - Held that:- appellant has sold alternators under warranty. During the warranty period, appellant is duty bound to provide free services to the buyers of alternator. For that, appellant has appointed services providers. Therefore, services provided by the services provider is a condition of sell and covered by the definition of Rule 2 of the Cenvat Credit Rules, 2004 under any activity relating to the business. Admittedly, if appellant does not provide the services the customers is not able to do the business. Therefore, these services are apparently availed by the appellant as the activity relating to the business. Consequently, I hold that appellant is entitled to take Cenvat credit on repairs and maintenance provided by services provider during the period of warranty on behalf of the appellant. - Decided in favour of assessee.
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2015 (10) TMI 1024
Review petition - Waiver of pre deposit - Commission agent - Held that:- petitioner/appellant claims to be a proprietorship concern engaged in the business of broker/ commission agent and that asserts that he did not acquire the possession of nor had physically dealt with excisable goods; that several show cause notices were issued to several parties on the basis of the records seized from the premises of such parties and the appellant was made a co-noticee in all those cases, for imposition of penalty under Rule 26. - What the petitioner seeks is clearly de novo consideration of the stay application. No grounds for review of the order dated 17.12.2013 are made out in this application. - Review denied.
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CST, VAT & Sales Tax
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2015 (10) TMI 1050
Recovery proceedings - pending extension of stay applications - Held that:- Extension of stay petitions filed by the petitioner were not heard. In the meantime, on 08.09.2015, the 3rd respondent herein issued a notice directing the petitioner to produce stay orders for the years 2008-09 and 2009-10, in the absence of which, recovery action will be initiated. Since the revenue of the department is very much safeguarded by remitting 50% of the disputed tax for all the assessment years as well as furnishing bank guarantee for the remaining 50% of the disputed tax and penalty wherever applicable, which are still in force till February 2016, this Court is of the view that the appeals are to be disposed of within a stipulated time and the recovery proceedings shall be kept in abeyance till the disposal of the appeals. In view of the above, the 2nd respondent/appellate authority is directed to take up the appeals and dispose of the same on merits and in accordance with law, within a period of eight weeks from the date of receipt of a copy of this order and till such time no recovery proceedings need be initiated as against the petitioner. It is made clear that the stay of original assessment orders shall be in force till the disposal of the appeals
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2015 (10) TMI 1049
Classification - Whether in the facts and circumstances of the present case, HDPE/PP Woven Fabric is “Artificial Silk” and, therefore, falls within the ambit of Entry 51 of Schedule B of the Act - Held that:- HDPE woven fabric falls within entry 51 of Schedule B of Haryana VAT Act, 2003 and is exempted from payment of tax - Parties are ad idem that the issue raised in these appeals is no longer res integra and stands concluded by the decision of the Division Bench of this Court in A.R. Plastic Pvt. Ltd., Gurgaon Road, Jhajjar v. State of Haryana and others [2015 (10) TMI 210 - PUNJAB & HARYANA HIGH COURT] - Appeal disposed of.
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2015 (10) TMI 1048
Enhancement of assessable value - Inclusion of turnover as per proceedings under central excise - Held that:- no extrapolation for determination of liability under the 1954 Act can not be made on the basis of determination of liability under the Central Excise Act, 1944 or for that matter any other statute. The 1954 Act is a self contained code for determination of tax liability thereunder. When warranted, its processes are necessarily to be independently resorted to, inquiry held and principles of natural justice complied with before fastening of any liability originally assessed, or relating to escapement of tax. This was not done by the Assessing Officer in his order dated 29-3-2006. In the facts as obtaining, the Tax Board has not committed any illegality in upholding the order dated 15-6-2007 passed by the appellate authority and in dismissing the appeal filed by the department. I do not find any illegality or perversity in the impugned order dated 25-1-2010 passed by the tax Board. - Decided against Revenue.
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