TMI Tax Updates - e-Newsletter
December 28, 2017
Case Laws in this Newsletter:
Income Tax
Corporate Laws
Insolvency & Bankruptcy
Service Tax
Central Excise
CST, VAT & Sales Tax
Highlights / Catch Notes
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Income Tax:
Interest income on Bank deposits - accrual of income - whether a hypothetical income and that the assessee is entitled to get the interest excluded from assessment? - It is not an hypothetical income - demand of tax confirmed - HC
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Income Tax:
The assessee as per the development agreement got some flats from the developer and rented (let out) them to earn the rental income and the same rental income is being offered by the assessee for taxation. Since the assessee offered the rental income for taxation, therefore, the AO cannot bring the said land into the ambit of taxation by applying the provision of section 45(2) - AT
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Income Tax:
Exemption u/s 11 - when the assessee-trust instead of keeping medical equipments idle, leased out the same and utilised the lease amount for charitable activity, it cannot be said that the assessee was carrying on business activity. - AT
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VAT:
Since there is no change in the composition of Rice Bran and De-Oiled Rice Bran, both the products are same and that De-Oiled Rice Bran is Rice Bran and nothing else. - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2017 (12) TMI 1353
Set off the interest income against the preoperative expenses in its books of accounts - Held that:- In Bokaro Steel Ltd. [1998 (12) TMI 4 - SUPREME Court) where the assessee had earned interest on advance paid to contractors during pre-commencement period was found to be 'inextricably linked' to the setting up of the plant of the assessee and hence was held to be a capital receipt which was permitted to be set off against pre-operative expenses.
The very purpose of constitution of the Assessee was to act as a Special Purpose Vehicle (SPV) created by the Govt of India and Govt. of West Bengal in the form of Joint Venture with equal equity participation for implementation of rapid transport infrastructure in Kolkata. Both the Central and the State Governments are to provide requisite finances for implementation of the said project. The funds from the Central and State Governments flow directly to the Assessee company as equity and Subordinate Debt/Loans. The objective is to create and maintain a fund for the development of infrastructural assets on a continuing basis and, therefore, the Assessee is a SPV formed by the Government of India and Government of West Bengal as per the guidelines; there is no profit motive as the entire fund entrusted and the interest accrued therefrom on deposits in bank though in the name of the Assessee has to be applied only for the purpose of welfare of the State as provided in the guidelines.
Therefore, considering the factual position discussed above, we are of the view that the Assessee has rightly set off the interest income against the preoperative expenses in its books of accounts and therefore we confirm the order passed by the ld CIT(A). - Decided against revenue
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2017 (12) TMI 1352
Trading addition - applying the higher gross profit rate - Held that:- Referring to the variation in the gross Assessment years : 2009-2010 2010-2011 profit rate as declared by the assessee, we are of the view that the gross profit rate of 7.32% of the last year as applied by the Assessing Officer is excessive and unreasonable and it would be fair and reasonable in the facts and circumstances of the case to apply the average gross profit rate of the relevant five years as worked out by the assessee at 4.42% in the submissions made before the ld. CIT(Appeals). We accordingly modify the impugned order of the ld. CIT(Appeals) on this issue and direct the Assessing Officer to re-compute the trading addition to be made to the total income of the assessee by applying the gross profit rate of 4.42% instead of 7.32%. The appeal of the Revenue for A.Y. 2009-10 is thus partly allowed.
Addition of cash deposits found to be made in the undisclosed Bank account with ING Vysya Bank - Held that:- Matter is restored to the file of the Assessing Officer for deciding the same afresh after verifying the claim of the assessee on the basis of material found during the course of search. The appeal of the assessee for A.Y. 2009-10 is accordingly treated as allowed.
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2017 (12) TMI 1351
Penalty u/s 271(1)(c) - defective notice - Held that:- Initiation of penalty proceedings is invalid as irrelevant portion of a notice not having been struck off by the Assessing Officer. The show cause notice issued in the present case u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. See Jeetmal Choraria –vs.- ACIT [2017 (12) TMI 883 - ITAT, KOLKATA] - Decided in favour of assessee
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2017 (12) TMI 1350
Penalty u/s 271(1)(c) - defective notice - Held that:- Initiation of penalty proceedings is invalid as irrelevant portion of a notice not having been struck off by the Assessing Officer. The show cause notice issued in the present case u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. See Jeetmal Choraria –vs.- ACIT
[2017 (12) TMI 883 - ITAT, KOLKATA] - Decided in favour of assessee
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2017 (12) TMI 1349
Revision u/s 263 - proof of AO's order to be erroneous or prejudicial - Held that:- Notice under section 263 was issued by the ld. Principal CIT pointing out the error in the order of the Assessing Officer in treating the derivative loss as non speculation loss and in a reply filed by the assessee to the said notice, a detailed submission was made by the assessee to show as to how its claim for derivative loss as non-speculation loss was rightly accepted by the Assessing Officer on merits.
CIT however passed the impugned order under section 263 without giving any finding or conclusion as to how the order of the Assessing Officer was erroneous on merits in respect of the issue raised in the notice issued under section 263 and set aside the same on the ground of lack of enquiry by the Assessing Officer without even putting the assessee on notice. In our opinion, the ratio of the decision rendered by the Coordinate Bench of this Tribunal in the case of Infinite Infotech Park Ltd. (2017 (6) TMI 294 - ITAT KOLKATA) thus is squarely applicable in the present case and applying the same, we hold that the impugned order passed by the ld. Principal CIT under section 263 is liable to be quashed - Decided in favour of assessee.
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2017 (12) TMI 1348
Unexplained cash credits u/s 68 - Ingenuity of claim - onus to prove the claim - Held that:- In the present case the issue involved is relating to the genuineness of the loans received by the assessee which is required to be explained by the assessee in terms of section 68. The onus, in this regard, is on the assessee to establish the identity as well as the capacity of the concerned creditors and genuineness of the relevant loan transactions.
Keeping in view the voluminous documentary evidence placed on record by the assessee in the form of income tax returns and final accounts of the concerned creditors, these loan confirmations and bank statements, thus the onus is satisfactory discharged by the assessee and the authorities below are not justified in treating the loans in question as unexplained on some flimsy grounds and by applying the test of human probabilities which, in my opinion, is not relevant in the facts of the case. Therefore, delete the addition made by the A.O. and confirmed by the Ld. CIT(A) under section 68 on account of loans taken by the assessee from the concerned four creditors by treating the same as unexplained and allow this appeal of the assessee
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2017 (12) TMI 1346
Addition on account of advances from the customers - CIT-A allowed claim - Held that:- In case of three credits, the Assessing Officer himself has recorded that advances are fully verified. We do not find any justified reasons for agitating the additions, where the Assessing Officer himself has accepted as no addition is warranted. Further, in case of few credits, the assessee has already furnished affidavits from the customers and in the statement recorded by the Inspector, the relevant customers have already shown the registered sale deed and owned the fact of payment made, no addition is called for in the case of the assessee against such advances appearing in the balance sheet for relevant year ending. In few cases, the advances have been received in earlier years and thus, no addition could have been made in the year under consideration. Wherever, the credits have not been explained, the Ld. CIT-(A) has already sustained the addition. In our view, order of the Ld. CIT-(A) on the issue in dispute is well reasoned and we do not find any infirmity - Decided against revenue.
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2017 (12) TMI 1347
Revision u/s 263 - assessment against non existent company - Held that:- In the case on hand the assessment was completed on the non-existent company which ceased to exist w.e.f. 17.4.2013 upon approval of scheme of amalgamation by the Jurisdictional High Court of Bombay with RCL. Thus, the assessment framed in the case of EMML is null and void and hence revisionary proceedings u/s 263 of the Act by the PCIT and consequent the order passed u/s 263 of the Act is also invalid
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2017 (12) TMI 1345
Disallowance of commission expenses - Held that:- We find that the assessee has filed detailed submission alongwith evidences for justification of the commission expenses, and thus, Ld. CIT(A) was not justified in not considering all those evidences. Addition has been sustained without providing sufficient opportunity to the assessee and without considering submission of the assessee as well as without following the procedure under Rule 46A of Income-tax Rules, hence we feel it appropriate to restore the issue to the file of the learned CIT(A) for deciding afresh after considering the evidences filed by the assessee and after carrying out necessary enquiries required in the matter. Both the parties shall be afforded adequate opportunity of being heard. Accordingly, the ground of the appeal is allowed for statistical purposes.
Disallowance on account of Diwali expenses - Held that:- CIT(A) has not given any reasons for upholding the finding of the Assessing Officer and not considered the submission of the assessee. As the order of the learned CIT(A) on the issue in dispute is non-reasoned, we feel it appropriate to restore the issue-in-dispute to the file of the learned CIT(A) for passing a speaking and reasoned order after considering the submission of the assessee.Accordingly, the Ground No. 2 of the appeal is allowed for statistical purposes.
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2017 (12) TMI 1344
Unexplained expenditure based on seized document - Held that:- The assessee was required to produce complete books of accounts and vouchers of M/s Rashiwa International Ltd., so that the Revenue Authorities could reconcile the name of the parties and amount appearing in page No. 6 of Annexure A-1 with the amount outstanding from the relevant parties as on 05/12/1998 in the books of accounts of M/s. Rashiwa International Ltd. Since this exercise of reconciling the amounts appearing in seized documents with the books of accounts of M/s Rashiwa International Ltd. has not been carried out by the lower authorities due to failure on account of the assessee and now before us the learned counsel has assured that all relevant documents shall be produced before the Assessing Officer, if matter is restored to the file of the Assessing Officer. In the circumstances, we are of the view that true facts should come on record for deciding issue-in-dispute judiciously. Thus the fact, whether the amounts appearing in page No. 6 of Annexure A-1 are outstanding debtors of M/s Rashiwa International Ltd., need to be examined thoroughly.
Accordingly, we restore the issue-in-dispute to the file of the Assessing Officer for deciding afresh, with the direction to the assessee to produce all the necessary document/evidence in support of its claim. The Assessing Officer may also examine/verify the books of accounts of the parties appearing in page No. 6 of Annexure A-1 of seized documents for cross-verification of the claim of the assessee. Accordingly, the ground No.1 is allowed for statistical purposes.
Addition of undisclosed intercorporate deposits (ICDs) - Held that:- Assessee itself has admitted that amount in question are in lakhs, which shows that the assessee is aware of the transactions recorded in the paper and it cannot shift its responsibility onto the Revenue. We also note that the Assessing Officer has not recorded in the impugned assessment order , as which are those seized documents having handwriting similar to the paper in question. In view of the above circumstances, we feel it appropriate to restore the issue in dispute to the file of the Assessing Officer for deciding afresh, with the direction to the assessee to file all documentary evidences in support of its claim that the paper does not belong to the assessee or to whom it belongs, for discharging its onus of rebutting the presumption against the assessee under section 132(4A)
Unexplained source of repayment of loan on the basis of Annexure A-40 of seized document - Held that:- to ascertain the facts whether any loans or deposits were taken by the assessee from those parties and subsequently, re- payment thereof if any, inquiry from those parties is essential. In view of the facts and circumstances, we feel it appropriate to restore the matter to the file for Assessing Officer for deciding afresh, with the direction to the assessee to produce intermediary/agent and parties mentioned in the Annexure A-40 before the Assessing Officer. The assessee shall be afforded adequate opportunity of being heard. Accordingly, ground no. 3 of the appeal is allowed for statistical purposes.
Disallowance of interest corresponding to the loan utilized for illegal purposes - Held that:- intercorporate deposits of ₹ 1.5 crore has been made out of the packing credit availed by the assessee company for export business. The Ld. counsel of the assessee has not produced any documentary evidence to support its contention that sufficient interest free funds were available with the company for extending intercorporate deposits of ₹ 1.5 crore to the companies of Sri Keshav Bangur. The Ld. counsel also failed to establish that the intercorporate deposit made was a business transaction in regular course. In such circumstances we agree with the finding of the Ld. CIT(A) that the deposit of ₹ 1.5 crore was for non-business purposes and the corresponding interest claimed as expenditure on packing credit limits by the assessee company was not allowable.
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2017 (12) TMI 1364
Interest income on Bank deposits - accrual of income - whether a hypothetical income and that the assessee is entitled to get the interest excluded from assessment? - Held that:- The interest that accrued in the relevant year is for the amounts that already remained in deposit with the Bank and on the depositors asking, it is payable. As was observed the period of deposit being the option of the depositor the receipt stood deferred at the behest of the assessee. As a corollary there cannot be a claim made of hypothetical income or there being no corresponding liability to pay. If the assessee chose to close the deposit prematurely on any date, then the Bank is liable to pay whatever interest that is accrued till that date. Interest for the period, in which the amounts stood in deposit, accrues on the close of the previous year and if it so accrues, it becomes the income of that particular assessment year, liable to be taxed in that year.
Yet another argument of the respondent that under Section 194A it is the obligation of the banker to pay tax on the interest due and failure on their part has now resulted in action against the assessee, the assessee had exercised the option to let the interest accummulate to the deposit and thereby earned compound interest by the end of the deposit term, it would not mulct any liability on the bank to pay tax on periodical accrual of interest to the income tax authorities. The Bank's liability to deduct tax at source arises only when it pays the interest. The amount that is to be recieved as interest, is known to the assessee and was accounted, as income accrued by way of interest in the account books of the assessee following the mercantile system. The interest income that accrued cannot, by any stretch of imagination, be termed as hypothetical income.
The deposits in Bank for definite periods at definite interest rates generate interest at the agreed rates. In fact, income tax was also paid on the interest income, which was received subsequently, but not during the subject assessment year, when it accrued.
Hence, we do not agree with the findings of the Income Tax Appellate Tribunal that the interest income on Bank deposits is hypothetical income and that the assessee is entitled to get the interest excluded from assessment. The question raised is thus answered in favour of the Revenue and against the assessee.
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2017 (12) TMI 1343
Validity of the reopening u/s 147 r.w.s. 148 - non application of independent mind by AO - Held that:- AO simply acted upon the information received from the Investigation Wing and did not apply his own mind. Therefore, the reopening u/s 147 by issuing the notice u/s 148 of the Act, only on the basis of information received from the Investigation Wing was not valid. Accordingly, the reassessment framed by the AO is quashed. - Decided in favour of assessee.
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2017 (12) TMI 1342
Validity of issue of service of notice u/s.143(2)/148 - Reopening of assessment - Held that:- In the case on hand we see that the notice u/s. 143(2) itself is dated 19.01.2015 which is beyond the date prescribed for issue of notice i.e. 30.09.2012. In such circumstances the Assessing Officer could not have issued any notice prior to 30.09.2012. Therefore, admittedly in this case as the notice u/s. 143(2) was issued beyond 30.09.2012 and in view of the decision of the Hon'ble Allahabad High Court in the case of CIT v. M/s. Salarpur Cold Storage (Pvt.) Ltd. [2014 (8) TMI 732 - ALLAHABAD HIGH COURT] the Assessing Officer could not have assumed jurisdiction in the absence of valid issue of notice u/s. 143(2) of the Act. Thus, respectfully following the said decision, we hold that there is no valid issue of notice u/s. 143(2) of the Act in this case and consequently the Assessment Order passed u/s. 143(3) is a nullity.- Decided in favour of assessee.
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2017 (12) TMI 1341
Penalty levied u/s.271(1)(c) - assessee made a wrong claim by showing the speculation loss as business loss of the assessee - Held that:- On similar circumstance the Hon'ble Delhi High Court in the case of CIT v. Auric Investment and Securities Ltd (2007 (7) TMI 276 - DELHI HIGH COURT) held that there was nothing on record to show that on furnishing its return of income, the assessee had either concealed its income or had furnished any inaccurate particulars of income. The mere treatment of business loss as speculation loss by the Assessing Officer did not automatically warrant the inference of concealment of income. - Decided in favour of assessee.
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2017 (12) TMI 1340
Assessment against non-existent entity - which entity has presented the appeal before the Tribunal? - Held that:- Factually speaking, it could not be said that the appeal has been presented by a non-existent assessee, as it has been signed for and on behalf of the new entity, i.e. M/s. Shell India Markets Pvt. Ltd. Of course, the cause title has not been correctly worded as it refers to the old concern and it is only in the brackets that it is mentioned that the same stands merged into the new entity, i.e. M/s. Shell India Markets Pvt. Ltd.
In our considered opinion, the said omission is only a technical defect and it cannot be construed that the appeal has been presented by a non-existent concern.
The fact-situation in the case before the Chennai Bench of the Tribunal was different inasmuch as the appeal was filed by a non-existent concern, and for that reason, the Chennai Bench held that the appeal was not capable of survival. The facts in the instant case clearly show that a valid appeal has been presented by the correct assessee, and for that reason, the wrong mentioning in the cause title of the Appeal Memo is to be construed only as a mistake. In any case, such mistake has also been rectified by the assessee by filing a revised Form no. 36B, which is on record. In fact, the rectification done by the appellant is not a case of substitution of a new appellant by another, as was the case found by the Chennai Bench of the Tribunal. The instant is a case where the original appeal has been presented by the correct appellant, but with a defective nomenclature in the title which also stands subsequently rectified.
As a consequence of our aforesaid discussion, even for the Assessment Year 2007-08, we hold that the assessment order dated 07.10.2011 (supra) passed in the name of M/s. Shell Technology India Pvt. Ltd. is a nullity inasmuch as it has been passed in the name of a non-existent concern as it stood merged with M/s. Shell India Markets Pvt. Ltd. w.e.f. 01.04.2008 following the scheme of merger having been approved by the Hon'ble High Courts of Karnataka and Madras vide orders dated 22.02.2010 (supra) and 24.02.2010 (supra) respectively. Accordingly, the assessment order dated 07.10.2011 (supra) is hereby quashed.
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2017 (12) TMI 1339
Revision u/s 263 - order prejudicial or erroneous to the interest of revenue - Held that:- Except stating that the assessee has not furnished any details before the Assessing Officer, the Assessing Officer without conducting proper investigation and without proper application of mind accepted the claims of the assessee and therefore order is erroneous and prejudicial to the interest of the Revenue, the Ld.PCIT could not demonstrate or give proper reasons as to how the Assessment Order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue.
PCIT has failed to show that the impugned Assessment Order passed by the Assessing Officer was not only erroneous but also prejudicial to the interest of the Revenue. It is an established proposition of law that both the conditions i.e. erroneous and prejudicial to the interest of the Revenue are required to be satisfied for invoking the provisions of section 263 of the Act. In the instant case we are of the view that the Ld.PCIT has failed to show that both the conditions exist. In the circumstances we find merit in the contentions of the assessee that the revision order passed by the Ld.PCIT for the year under consideration is beyond the scope of section 263 and hence not valid. In the circumstances we set-aside the order of the Ld.PCIT and allow the grounds of the assessee.
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2017 (12) TMI 1326
Nature of sale of flats - business income or capital gains - renting of unsold flats - sale of undivided shares of land to various flat buyers - Conversion of land into stock in trade by applying the provisions of section 45(2) - source of income of the assessee - Held that:- The assessee has been offering the rental income for taxation. We also note that some of the flats, were sold by the assessee in subsequent years and the assessee offered the capital gain tax thereon. Therefore, reconvergence of stock in trade to capital assets as has been alleged by the Commissioner of Income Tax does not sustain in the eye of law, hence no enhancement is possible.
We note that the main source of income of the assessee is from rental income (letting of flats), capital gains and income from other sources. In assessment year 2011-12, the assessee sold some flats and offered capital gain in the year of sale. Based on the above discussion it can be safely concluded that the assessee has not converted the land into stock in trade and the department has not adduced any evidence to prove that the land has converted into stock in trade and the Ld. CIT(A) has not adduced any evidence to prove for re-convergence of flats into stock in trade for capital assets, hence no enhancement is possible. The assessee as per the development agreement got some flats from the developer and rented (let out) them to earn the rental income and the same rental income is being offered by the assessee for taxation. Since the assessee offered the rental income for taxation, therefore, the Assessing Officer cannot bring the said land into the ambit of taxation by applying the provision of section 45(2) of the Act.
Applicability of the provisions of Section 28(iv) in respect of the flats retained by the assessee in subsequent Assessment Years - Held that:- Since we have already adjudicated the solitary grievance of the assessee, stating that provisions of section 45(2) of the Act does not apply to the assessee, hence this ground becomes infructuous and does not require adjudication.
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2017 (12) TMI 1325
Ascertaining annual rentals of the North Beach Road property - multiplication factor can be adopted wherever a property is located - Held that:- It is true that assessee had returned rental income from its property at Cathedral Road at ₹ 33,15,006/- against which Municipal Tax claimed was ₹ 1,51,522/-. It is also true that Municipal Tax as a percentage of the rental income came to 4.57% and this gave a multiplication factor 21.88. But the question before me is whether the same multiplication factor can be adopted wherever a property is located. Ld. Assessing Officer had adopted the multiplication factor of 21.88 on the Municipal Tax, for the property situated in North Beach Road.
The method in which annual value is to be determined is clearly set out on the above section. No doubt, Multiplication valuation can be a pointer as to the reasonable rental that can be fetched for a given property. However, in my opinion, a multiplication factor derived from one set of data for a given property, cannot be applied blindly to another property located at a different place, even though, both are in the same city. The methodology followed by the lower authorities was in my opinion entirely unscientific. Ld. Commissioner of Income Tax (Appeals) though he gave partial relief to the assessee did not change or apply the correct method for ascertaining the rental value of the North Beach Road property. In opinion, ascertainment of annual value of the North Beach Road property requires a fresh look by the ld. Assessing Officer.
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2017 (12) TMI 1324
Rejecting approval u/s. 10(23C) - aims and objectives - Held that:- The fourth object is only identical and ancillary to the primary object of education. It may be true that assessee does not run a school to consider this objective, but the objects of the trust are incorporated for future use only. If there is no object, the trust would be prevented in opening/running a school. Therefore, having an object should not prevent the assessee in claiming exemption of income u/s. 10(23C)(vi). Moreover, the reading of object (badly drafted indeed, giving different meaning) indicates that the main intention is to make efforts to pick up children from various villages, engaged to worth with reference to Child Labour Act and giving them admission in school. The intention is to educate the children, who are exploited in villages with reference to Child Labour Act. This object in our view is ancilliary to the main object of education. Therefore, we are of the view that the objection of Ld.CIT(E) is not maintainable.
Considering the above, we set aside the order of Ld.CIT(E) and restore the issue to the file of Ld.CIT(E) to grant exemption, if other conditions are satisfied. Ld.CIT(E) can also place a condition that if the funds are utilised for any other purpose other than for education, the exemption can be withdrawn at any time, so as to protect the interest of Revenue.
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2017 (12) TMI 1363
Assessments under Section 158BC - additions made on account of payments attributable to the assessee through his wife for an acquisition - Held that:- This Court is of the opinion that the chequered history of the litigation shows unanimity of one aspect: that the assessee’s wife was separately assessed to income. She had declared the acquisition of the property. She was the registered owner. No attempt was made on the part of the revenue to add that income in her hands. Likewise in the case of the other additions, findings are concurrent and rendered after examination and analysis of the material evidence. Having regard to these factual conclusions, the Court is of the opinion that no question of law arises; the appeal is, therefore, dismissed.
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2017 (12) TMI 1338
Levy of penalty u/s 271(1)(c) - Held that:- Penalty under section 271(1)(c) could be levied on both the limbs of said section. We find no merit in the plea of learned Departmental Representative for the Revenue in this regard, wherein the returned income was finally accepted by the CIT(A) / Tribunal and the protective addition made in the hands of assessee was deleted. Accordingly, we hold that penalty order passed in the case suffers from infirmity and the same is invalid in law. Accordingly, we direct the Assessing Officer to delete said penalty under section 271(1)(c) of the Act at ₹ 11,74,601/-.
We have in the paras hereinabove have already held that levy of penalty by the Assessing Officer holding the assessee to have concealed income and furnished inaccurate particulars of income was invalid and bad in law and the penalty order passed by the Assessing Officer has been cancelled. Consequently, the enhancement made on such order passed by the Assessing Officer, which is held to be invalid, does not stand. Since the CIT(A) has based his calculation on the order of Assessing Officer holding that the penalty is to be calculated with regard to concealed income of ₹ 1.24 crores and not the additional income of ₹ 32,09,950/-, the CIT(A) observed that the Assessing Officer had mistakenly calculated the same with respect to income of ₹ 32,09,950/-. Accordingly, we delete the penalty levied by the CIT(A) at ₹ 45,43,069/-. The additional ground of appeal is thus, allowed.
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2017 (12) TMI 1337
Non-constitution of Permanent Establishment ('PE') of the Appellant in India - receipts taxable u/s 115A or under Indo-German Treaty - Held that:- We hold that there is no merit in invoking provisions of section 115A of the Act in respect of interest and 115A r.w.s. 44DA of the Act in respect of support / royalty services, the receipts are to be taxed in the hands of assessee under Indo-German Treaty @ 10%. The Revenue except for stressing that appeal is pending before the Hon’ble Bombay High Court, has not brought on record any change in facts. The grounds of appeal raised by the Revenue are thus, dismissed and the grounds of appeal raised by the assessee in both the appeals are allowed.
Stay of recovery of outstanding demand - Held that:- As pointed out that the assessee had filed Bank Guarantee of ₹ 25 lakhs against outstanding demand before the Assessing Officer on 08.12.2017. In view of our deciding the appeals in favour of assessee and allowing the grounds of appeal raised in assessment years 2012-13 and 2013-14, the Assessing Officer is directed to release the Bank Guarantee of ₹ 25 lakhs with immediate effect.
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2017 (12) TMI 1336
Denying deduction u/s.80IB(10) - admission of additional evidences - non issue of completion certificate by the local authority - non adherence to relevant provisions to get legitimate claim - Held that:- In the instant case, the direction of the District Collector vide item No.17 (supra) to the assessee includes the Assistant Director, Town Planning, Pune shall issue the requisite completion certificate. This direction is not in tune with the said provisions of the Act.
Neither the village Gram Panchayat (local authority) nor the Assistant Director, Town Planning, Pune, nor the Collector of the District responded positively to the request letters of the assessee. This being the bureaucratic response to the legitimate demand of the assessee for the issue of completion certificate, it needs to be reconsidered if the AO is justified in denying deduction u/s.80IB(10) of the Act in respect of the otherwise, eligible profits of the housing project of the assessee. It is relevant to mention that the project was completed in all respect. Neither the local government nor the flat owners nor the District Collector-cum-Asst. Director, Town Planning have any complaints on the issue of date of completion of the Housing Project. The flat buyers have already occupied the flats (copies of possession letters are placed in the paper book) without having any illegalities associated with the project qua the construction of the project are on records of the local authority or the District Collector.
In these circumstances, we are of the opinion that these papers/additional evidences filed by the assessee before us are required to be admitted as the same are obtained by the assessee in the period subsequent in time under the Right to Information Act, 2005. Therefore, considering the principles of natural justice, we are of the opinion that these papers should be remanded to the file of the AO for considering the same and decide the issue based on the facts relating to the issue of completion certificate. AO shall grant reasonable opportunity of being heard to the assessee in accordance with set principles of natural justice
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2017 (12) TMI 1335
Proportionate disallowance of interest u/s.36(1)(iii) - business nexus and use of the said diverted funds for business purposes of the assessee - diversion of funds when excess interest free funds are available in the common kitty of the assessee firm - Held that:- The funds diverted by the assessee are obviously lesser than the said amount of partners’ capital. It is clarified adequately that said amount of partners’ capital is not an interest bearing loans from the firms. Assessee never paid interest to the partners for all the years including the year under consideration. Therefore, it cannot be said that the partners’ capital is not an interest free funds of the assessee. Considering this fact, we are of the view that availability of interest free funds is much higher than the funds diverted by the assessee.
There is no requirement for the assessee to establish utility of the said diverted funds for business purposes when said diverted funds are from the interest free funds in the kitty of the assessee firm. Accordingly, Ground No.1 raised by the assessee is allowed.
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2017 (12) TMI 1362
Validity of assessment u/s 153C - Held that:- As decided in on similar issue in Amrapali Grand case [2016 (10) TMI 626 - DELHI HIGH COURT] Two documents stated to have been recovered during the search which did not belong to the Assessee and, therefore, could not form the basis for initiating proceedings against the Assessee under Section 153 C of the Act.
Even in the satisfaction note recorded by the AO, the said documents were stated to “pertain” to the Assessee and not belong to it. The amendment to Section 153C which replaced the words “belong or belongs to” with the words “pertain or pertains to” was made only with effect from 1st June, 2015 whereas the search in the present case took place on 9th September 2010 and the notice under Section 153C was issued on 12th April, 2012.Consequently, the ITAT cannot be said to have erred in holding the assessment to be unsustainable in law. - Decided in favour of assessee
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2017 (12) TMI 1361
Contract receipt/commission income - TDS under Section 194C/194H - payment received by assessee from M/s Vodafone Essar Digilink Limited under contractual obligation after deduction of TDS under Section 194C/194H is a contract receipt/commission income in the hands of assessee OR reimbursement of expenses to the sub dealers/retailers - Held that:- It was rightly concluded by the CIT(A) that there was no justification for adding the said amount as suppressed receipts and, therefore, deleted the same. It was further recorded that the incentive by M/s Vodafone had been made directly to the retailers. Since the said amount was neither due nor received by the assessee, the question of adding the same as suppressed receipts did not arise and, therefore, the same was deleted.
As the amount of ₹ 48,77,440/- did not form part of the receipts of the assessee, credit for corresponding TDS of ₹ 1,10,767/- could not be given to the assessee and the Assessing Officer was directed not to give credit for this TDS amount. The addition of ₹ 13,09,267/- on account of receipt of discount was deleted by holding it to be on account of reimbursement of amount paid to Assistant Distributors. Thus, the addition made by the Assessing Officer of ₹ 72,52,052/- was deleted.
With regard to the charging of interest under Section 234B of the Act, the appeal of the assessee was dismissed. Aggrieved by the order passed by the CIT(A), the department went in appeal before the Tribunal. After examining the entire matter in detail, the Tribunal concurred with the findings recorded by the CIT(A). The issue was decided in favour of assessee by the Tribunal relying upon the decision of the coordinate Bench in Sh. Basant Kumar’s case (2015 (11) TMI 1127 - ITAT DELHI) for the assessment year 2009-10. Learned counsel for the revenue has candidly admitted that no appeal has been filed against the said order and has been accepted by the revenue though the tax effect was more than the limit prescribed by the CBDT circular.
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2017 (12) TMI 1360
Deduction under section 10B computation - disallowance on the ground that expenditure in nature of Director’s remuneration, bank charges, audit fees and the internal audit fees should be based on turnover and not on actual basis - Held that:- Having regard to the facts as emerging from the record, it is clear that the assessee had claimed deduction under section 10B of the Act on actual basis, whereas the Assessing Officer and the Commissioner (Appeals) have held that the same is required to be claimed on the basis of turnover. Considering the fact that separate accounts have been maintained by the assessee in respect of eligible and non-eligible units and a uniform practice has been followed by the assessee over a period of time for the purpose of claiming deduction under section 10B of the Act, no infirmity can be found in the impugned order passed by the Tribunal in holding that there was no warrant for computing deduction on the basis of turnover, instead of on actual basis
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2017 (12) TMI 1359
Section 10B(1) eligibility - Held that:- The exemption is made available to a 100% export-oriented undertaking and the same is available for ten years, beginning with the assessment year relevant to the previous year in which manufacturing is commenced. In the present case it cannot be said that the assessee, a 100% export-oriented unit is eligible from the year in which they commenced manufacture, since in that relevant year the assessee was not a 100% export-oriented unit. The benefit being conferred only on a 100% export-oriented unit, the exemption could commence only from its certification, as such a unit and if there is no manufacture at the time of certification, from the time of commencement of manufacture. The benefit conferred is for the activity of export and if it is not related to the time from commencement of manufacture then a registered export-oriented unit, if for any reason commences manufacture later, then it could lead to the benefit being reduced since the income derived will only be on manufacture and for the period in which there is no business, it would be illusory.
As has been found in Annexure-D judgment, there is no requirement that the export-oriented unit be newly established. The benefits have to be, hence, applied from the date of commencement of the export-oriented undertaking, which in the present case coincides with the manufacturing too. On the above reasoning, we answer the question in favour of the assessee
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2017 (12) TMI 1358
Nature of land - agricultural or capital asset - disallowance of the claim of the assessee for exemption from ‘capital assets’- Held that:- As observed by the Tribunal that the assessee is not an agriculturist and is the Proprietor of a Management Institute, and there is no evidence to indicate that the land has been put to any agricultural use. In the decision reported in Sarifabibi Mohmed Ibrahim and others v. Commissioner of Income Tax, [1993 (9) TMI 10 - SUPREME Court], it is held that the question whether a particular piece of land is agricultural or not is essentially a question of fact, to be decided after a consideration of circumstances appearing for and against the assessee
Certificate of the Village Officer showing the land as “Nilam” (paddy land) alone may not be sufficient for the crucial question is whether the land was actually used for agricultural purposes during the two years prior to the date of transfer. The mere categorisation of the land as ‘Nilam’ in the revenue records would not hence, suffice to raise a valid claim of exemption. In the instant case, the Tribunal has concluded that the subject land has to be treated as capital asset within the meaning of Section 2(14) of the Act. Ordinarily, the question whether a land is an agricultural land or not is a question of fact and the finding on the question of fact recorded by the Tribunal is final. We are not inclined to upset the decision of the Tribunal.- Decided against assessee.
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2017 (12) TMI 1334
Addition of FD seized from bank premises - Held that:- In view of the factum of FDRs being encashed and the amount being deposited on assessee’s behalf in the personal deposit account of the Commissioner of Income Tax on 05.11.2002, we find no merit in the stand of learned Authorized Representative for the assessee. The assessee had admitted that the said FDRs belonged to him and thereafter on maturity, the same were encashed and were deposited in Personal Deposit (PD) account on the request of assessee. In view thereof, we find no merit in the plea of assessee in this regard and uphold the addition of ₹ 2 lakhs being the amount of FDRs held in different names and the addition of interest thereon of ₹ 29,760/-.
Addition made on account of FDRs in fictitious names in the bank register which was earmarked allegedly in the name of assessee - Held that:- This is a case of block assessment under section 158BC of the Act, wherein the said letter was found in the possession of the Co-operative Bank, in which, undoubtedly, the assessee was Director; but the documents cannot be passed on and the entries in the said documents be the basis for making addition in the hands of assessee from whose possession, no such document was found. Accordingly, we hold so. The learned Authorized Representative for the assessee had repeatedly stated that he was looking after Raviwar Peth branch and he was the Director of said branch and not of Yerwada branch, cannot be accepted as basis for deleting addition in the hands of assessee, since the assessee is Director of Co-operative Bank. However, in the absence of any physical FDRs being found from the possession of assessee or even from the bank which indicates that the same relate to the assessee, there is no merit in making the aforesaid addition in the hands of assessee and the same is directed to be deleted. Even in respect of the notings in FDR register, the statement recorded has not been provided to assessee nor cross-examination allowed. The Assessing Officer shall accordingly delete the addition.
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2017 (12) TMI 1333
Unexplained cash deposits in the bank accounts of assessee - Held that:- Where the lenders had admitted to have given the advances and where the assessee had given complete information to prove the availability of sources of cash in the respective hands, the same cannot be brushed aside on some presumptions and conjunctures. After going through the evidences filed by the assessee, we find no merit in the orders of authorities below in holding that the assessee has failed to furnish complete data to explain the source of cash deposited in Loknete Dattaji Patil Sah. Bank account. Thus we find no merit in the stand of Assessing Officer and the same is reversed. Accordingly, accepting the explanation of assessee in this regard, we delete the addition of ₹ 10,05,200/-. The grounds of appeal No.1 to 5 are thus, allowed.
Disallowance made under section 40(a)(ia) claiming the said interest has been paid to the father of assessee - Held that:- The provisions of section 40(a)(ia) of the Act have been brought in force to control evasion of tax by claiming various expenditure under the garb of carrying on the business. However, where the assessee has paid the said interest to the related party, the said amount cannot be disallowed on the ground of non deduction of tax at source. We are allowing the plea of assessee on this limited issue and this decision of ours shall not be used as precedent. The ground of appeal No.6 raised by the assessee is thus, allowed.
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2017 (12) TMI 1332
Disallowance of deduction u/s 54 - multiple property purchased - Held that:- The assessee in the present case before us has purchased one flat in Padma Vilas building and another at Hadapsar, Pune which are at two different places and are not commonly placed. Secondly, there is finding of fact that widow of assessee is staying alone in the house at Padma Vilas building and it is not clear whether the other house is occupied by her or on rent. Under the provisions of the Act, it is not the requirement to occupy the premises for itself.
However, we have to keep in mind the observations of the Hon’ble High Court of Karnataka in CIT Vs. Khoobchand M. Makhija (2013 (12) TMI 1525 - KARNATAKA HIGH COURT), wherein after allowing the claim of deduction under section 54 of the Act in respect of second consecutive flat, the Hon’ble High Court held that while interpreting the word ‘a residential house’, the Court or the Tribunal or the authorities have to keep in mind the facts of particular case. The Hon’ble High Court has clearly held that “a” cannot be read as singular, it also cannot be read as multiples and so as to avoid paying tax under section 45 of the Act. Applying the said principle to the facts of the present case, we hold that the assessee is entitled to claim the deduction under section 54 of the Act only in respect of flat in Padma Vilas building. We uphold the order of CIT(A) in denying the deduction under section 54 of the Act in respect of flat at Hadapsar.
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2017 (12) TMI 1331
Validity of reopening of assessment - non issue of notice - Held that:- In reassessment proceedings u/s 147/148 of the Act, to issue notice u/s 143(2) of the Act prior to finalisation of reassessment order cannot be condoned on the strength of Sec. 292BB of the Act
Assessing Officer had failed to issue notice u/s 143(2) of the Act before finalising the reassessment proceedings, the impugned assessment is illegal and unsustainable and is hereby directed to be quashed. Since we have held the assessment order itself to be illegal and unsustainable, the other Grounds raised by the assessee in the Memo of appeal reproduced above, are rendered academic and are not being adjudicated for the present.- Decided in favour of assessee.
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2017 (12) TMI 1330
Disallowance of exemption u/s 10A - claim for the year - Held that:- Identical issue has also come up before the coordinate Bench of the Tribunal in case cited as Sandvik Asia Pvt. Ltd. vs. JCIT [2015 (12) TMI 1742 - ITAT PUNE] wherein it is held that, “the assessee is at liberty to claim deduction u/s 10B of the Act from end of the year of his choice.”
When the assessee company itself has not claimed exemption for AY 2000-01, incubatory period, cannot be considered as production period merely on the basis of token invoice issued for trial verification of its cost. Even otherwise, the letter issued by the assessee company dated 30.04.2000 to Assistant Director, STPI, Noida intimating date of commencement for production of sale in global market as 30.04.2000 has not been disputed by the Revenue rather entire assessment has been made on the basis of token invoice dated 31.03.2000 issued for trial verification by the assessee company.
Furthermore, section 10B of the Act is categoric enough to provide liberty to the assessee company to choose the claim of deduction u/s 10A in respect of newly established 100% export oriented unit. So, we are of the considered view that when the assessee company has only issued the first token invoice of US $ 1050 as cost for trial verification and has opted to avail of the exemption u/s 10A in AY 2001-02 when production for global market was commenced on 30.04.2000, the year under assessment i.e. AY 2010-11 is the 10th year of exemption available to the assessee company.
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2017 (12) TMI 1329
Disallowance u/s 40A(3) - assessee made payments exceeding ₹ 20,000/- on three occasions - Held that:- We find that these payments had been made to the truck drivers who generally insist on cash payments. The Assessing Officer has not doubted the genuineness of these payments and has disallowed the amount holding that assessee was bound to make the payments through Banking Channels. However, we find that where the genuineness of payments is not doubted the disallowance u/s 40A(3) should not be made. The Central Board of Direct Taxes vide Circular No. 220 dated 31.05.1977 has clarified that no disallowance u/s 40A(3) of the I. T. Act shall be made where the assessee satisfies the ITO that the payment could not be made by way of a crossed cheques drawn on a bank or by a crossed bank draft due to certain exceptional circumstances. Keeping in view the exceptional circumstances and in view of the amount involved, we delete the disallowances u/s 40A(3) sustained by Ld. CIT(A).
Valuation of the stock at the time of survey - Held that:- We find that the break up of stock found included an amount of ₹ 12750/- which is on account of empty drums and which the assessee had claimed at the time of survey itself that these do not belong to it and these are to be returned. This fact is verifiable from P.B. page 34 where the details of drums mentioned as returnable is placed, therefore the addition of ₹ 12750/- is not justified as this item of stock did not belong to the assessee. As regards the addition on account of consumable stock amount to ₹ 111740/- as per the details as P.B. 35, we find that the amount of consumable stores were actually lying at the premises and which the assessee had not declared in the stock statement. Therefore the addition is justified as the assessee was bound to pass entry in the profit and loss account relating to expenses of consumable stores after reducing the closing stock left over on account of consumable stores and therefore this grievance is not justified and we uphold the action of Ld. CIT(A) as regards addition on account of valuation of consumable stores.
As regards the difference in valuation of finished goods The assessee vide this letter had explained the total difference in respect of various sizes and the authorities below should have considered the same. We further find that the closing stock found at the time of survey included damaged/cut pieces and obsolete stock. This fact is verifiable from the inventory of stock itself placed at P.B. page 25 where the obsolete stocks/damaged stocks falling in the category of 4mm/3mm, 12mm/9mm and 18mm has been mentioned by adding separately on lump sum basis the quantity of 2000 sq. ft., 500 sq. ft., 1000 sq. ft. and 500 sq. ft. under various categories. The assessee had explained these facts vide letter addressed to Assessing Officer placed at P.B. page 1 to 3. The Assessing Officer in his order has noted down these contentions. The Assessing Officer has also noted down the contentions of assessee that there was difference in valuation of stock as the same has to be valued on cost price basis but still he did not verify the claim of assessee and made the additions. - Decided in favour of assessee.
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2017 (12) TMI 1328
Addition u/s 14A - Held that:- Section 14A clearly lays down that the AO has to record objective satisfaction in respect of the disallowance offered by the assessee having regard to its books of accounts. We note that the assessee had furnished separate audited books of accounts of each division. lt is noted that due explanation in support of their disallowance of ₹ 7,74,703/- was also furnished by the assessee. The AO however seemed to have mechanically ignored the explanation stating that the submissions was untenable in law and unacceptable. There is a lack of recording of objective satisfaction on the part of the AO before making further disallowance u/s 14A of the Act. The jurisdictional Calcutta High Court in the case of CIT Vs REI Agro Limited (2013 (12) TMI 1517 - CALCUTTA HIGH COURT) stating that in absence of any proper and objective satisfaction being recorded by the AO in the assessment order, the AO's action of making disallowance under Section 14A by applying Rule 8D is bad in law.
Disallowance under rule 8D(2)(ii) and 8D(2)(iii) in respect of exempted agricultural income - Held that:- The assessee engaged in cultivation of agriculture for which it maintains separate set of books of accounts.The said books are duly audited by Chartered Accountants. The gross receipts from agriculture was ₹ 4,09,95,906/-. The expenses incurred in this division was ₹ 3,19,13,917/- and depreciation was ₹ 2,41,902/-. Accordingly thenet agricultural income was computed at ₹ 88,40,897/- by the assessee which was claimed as exempt under the Act. It is therefore evidently clear that the assessee has already disallowed the expenses incurred in relation to earning of agricultural income. That is, all expenses, interest and depreciation pertaining to the agricultural income were already disallowed by the assessee and only the "net" amount was claimed as exempt under the Act, therefore, considering the factual position explained above, no further disallowance is required. We note that the AO has not rejected the books of accounts, he has also not pointed out any infirmity or defect in the separate divisional accounts maintained by the assessee. The separate divisional accounts were duly audited by a firm of Chartered Accountants.
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2017 (12) TMI 1357
Cain on sale of shares - capital gain or business income - period of holding - Held that:- As referring to only 42 transactions out of 86, in respect of rest of the 44 transactions, without any examination of details and factual aspects, the Appellate Tribunal rejected the claim that it was STGC. There was no reason to treat other 44 transactions on par with 42 transactions in respect of which holding was only for 7 days. The Appellate Tribunal has noted that in the other transactions, the holding was upto 244 days. The entire data of each transaction was before the Appellate Tribunal as is clear from the chart incorporated in paragraph 5. Nothing prevented the Appellate Tribunal from looking into all the transactions and recording findings of fact. But the Appellate Tribunal has not done its duty and therefore, the finding recorded by the Appellate Tribunal in relation to the Assessment Year 2007-08 will have to be held as perverse.
Now, coming to the assessee's appeal in relation to the Assessment Year 2008-09, after accepting that the formula of 30 days adopted by the CIT(A) was erroneous, the Appellate Tribunal ought to have considered the appeal on merits. The learned counsel appearing for the respondent Revenue tried to contend that the details of the sale and purchase transactions for the Assessment Year 2008-09 were not furnished to the Assessing Officer. The said submission appears to be factually incorrect as can be seen from the order of the Assessing Officer. Paragraph 4.1 of his order clearly shows that all the details were furnished as regards the transactions of share during the relevant year.
Therefore, to reiterate, we find that the entire approach of the Appellate Tribunal while dealing with the cases for both the years is completely erroneous. The Appellate Tribunal has failed to perform its duty and therefore, the impugned judgment and order of the Appellate Tribunal cannot be sustained at all
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2017 (12) TMI 1320
Exemption u/s 10B - Held that:- Application for change in the cause title is allowed. Having gone through the impugned judgment of the High Court [2011 (10) TMI 423], we find no infirmity in the same.
Mr. K. Radhakrishnan, learned Senior Counsel, appearing for the petitioner(s), has appealed to us that para 10 of the impugned judgment is extremely unfair to the Department and the imposition of costs of ₹ 1 lakh was wholly uncalled for. - Para 10 expunged.
De-tag and list after two weeks.
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2017 (12) TMI 1327
Claim of deduction under section 54EC - Held that:- The amendment by the Finance (No.2) Act, 2014 w.e.f. 01.04.2015 by which proviso has been inserted after the proviso to section 54EC(1) of the Act is to be applied prospectively from assessment year 2015-16 onwards. Accordingly, the year under appeal being assessment year 2012-13, the assessee is entitled to claim the deduction under section 54EC of the Act at ₹ 1 crore i.e. on account of investment made in the financial year in which the asset was sold at ₹ 50 lakhs and further deduction of ₹ 50 lakhs which was made in the subsequent financial year, though within period of six months from the date of sale of asset. Accordingly, we allow the claim of assessee and direct the Assessing Officer to allow the deduction under section 54EC of the Act at ₹ 1 crore. The ground of appeal raised by the assessee is thus, allowed.
Clubbing of income - Computation of income in the hands of minor children on sale of beneficial shares, wherein the children had purchased REC Bonds and claimed the deduction under section 54EC - - Held that:- While computing the income of minor child, first the income has to be computed in the hands of said child i.e. income less deduction allowable under the Act and the balance is to be then, added to the income of father. In the present case, the minor child against its income from long term capital gains had claimed the deduction under section 54EC of the Act on account of investments in specified assets, which has to be allowed in the hands of said minor child and the balance income is to be added in the hands of parent.
There is no merit in the stand of Revenue authorities that where the parent has already claimed the deduction under section 54EC of the Act at ₹ 50 lakhs, then the minor child is not entitled to any deduction under section 54EC of the Act. The said deduction which is claimed by the minor child is on footing of the minor child being an individual in whose hands the income has to be computed first i.e. after allowing deduction permissible under the Act and the balance only is to be added in the hands of parent under section 64(1) of the Act. Accordingly, we hold so. The ground of appeal No.2 raised by the assessee is thus, allowed.
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2017 (12) TMI 1321
Exemption u/s 11 - claim of depreciation in respect of asset which is used in charitable activity - Held that:- The assessee is not eligible for depreciation when the cost of asset was allowed as application of income.
Income from leasing of medical equipments - exemption under Section 11 denied - Held that:- The assessee-trust is admittedly registered as charitable institution under Section 12AA of the Act. The assessee-trust is providing medical relief to the poor. In order to carry out its object of providing medical relief to the poor, the assessee-trust procured certain medical equipments. After using the same for 2-3 years, the unused equipments, which are kept idle, were leased out to another hospital in which the trustee is a Director. The question now arises for consideration is when the assessee-trust leased out the medical equipments, which were kept idle, and received lease rentals, whether the activity of the assessee would amount to advancement of object of general public utility? This Tribunal is of the considered opinion that when the assessee-trust instead of keeping medical equipments idle, leased out the same and utilised the lease amount for charitable activity, it cannot be said that the assessee was carrying on business activity. Therefore, it cannot be said that the activity of the assessee amounts to advancement of any other object of public utility.
In this case, the lease amount was again applied back for providing medical relief to the poor. Therefore, this Tribunal is of the considered opinion that leasing of medical equipments in the course of carrying on charitable activity is incidental to the main activity of providing medical relief to the poor. Hence, this Tribunal is unable to uphold the orders of the authorities below. Accordingly, the orders of the authorities below are set aside and the Assessing Officer is directed to allow exemption under Section 11 of the Act of the income which is applied for charitable activity.
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2017 (12) TMI 1323
Denying deduction u/s 80-IA - ‘initial year’ for the purpose of Section 80-IA - whether loss and depreciation of earlier years in respect of the eligible wind mills had to be notionally brought forward and set off against profits of eligible business while computing deduction u/s 80IA? - Held that:- As in case of CIT Vs. Anil H.Lad [2014 (3) TMI 808 - KARNATAKA HIGH COURT] held that where depreciation and losses of earlier assessment years have already been set off in those years and subsequently deduction u/s 80-IA is claimed by the assessee, there is no need to notionally carry forward the same and set off from the income of the current year. Same view has been taken in other judicial pronouncements. Respectfully following the same, we hold that there was no need to notionally carry forward the earlier year’s losses / depreciation to impugned AY before deduction could be granted to the assessee. Resultantly, the first ground of assessee’s appeal stands allowed.
Excluding the interest income and Foreign Exchange Gains for the purpose of computing deduction u/s 80-IA - Held that:- The impugned forex gains earned by the assessee were assessable as Business Income and the same were not eligible for deduction u/s 80-IA. Resultantly, Ground No. 2 of assessee’s appeal stands partly allowed. The Ld. AO is directed to re-compute assessed income of the assessee under normal provisions as well as under Section 115JB, being consequential in nature, in terms of our above order.
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2017 (12) TMI 1322
Disallowance of rental expenses - non deduction of tds - Held that:- The impugned amount of ₹ 68,890/- was well below the threshold limit of ₹ 1,20,000/- as prescribed u/s 194-I during impugned AY so as to trigger the stated TDS provisions. Moreover, the annexure to certificate u/s 197 issued by concerned TDS officer quantifies the ‘Estimated Total Billing for F.Y.2009-10’ u/s 194-I’ which lead us to conclude that the same was applicable for the whole financial year. Resultantly, this addition stands deleted and this ground of assessee’s appeal succeeds.
Addition against incentive expenses crystallization - Held that:- The only basis on which the same has been disallowed by Ld. AO is that the same has been credited to the accounts of the respective parties in succeeding assessment years. However, in our opinion, if the liability had already been quantified and crystallized and provision thereof was made in the books of accounts, the same was allowable to the assessee irrespective of actual credit to the respective parties since the assessee, following mercantile system of accounting, was eligible to claim the same. The Ld. AR has placed elaborate documents in the paper book to demonstrate that the liability had actually crystallized during impugned AY. Therefore, without much deliberation, we restore the matter back to the file of Ld. AO to reappreciate the documentary evidences submitted by the assessee and decide as per law. The assessee, in turn, is directed to demonstrate the crystallization thereof in the impugned AY. Resultantly, this ground of assessee’s appeal stands allowed for statistical purposes.
Disallowance of depreciation which is estimated @10% of amalgamation reserve accruing to the assessee - Held that:- Lower authorities has erred in concluding that the amalgamation reserve represent lower payment made by the assessee to acquire depreciable assets of higher value whereas we have noted that the same represent difference of net assets taken over by the assessee and share capital issued to transferor company upon amalgamation. Further, all the assets & liabilities have been taken over at the book values only as evident from the Annual Report of the Company and moreover, this fact is never been controverted by the revenue.
Prima facie, the transaction is in the nature of demerger as defined in Section 2(19AA), the written down value of which is governed by Explanation 2A and 2B to Section 43(6). Since, the assessee is resulting company, Explanation 2B is applicable which says that where in a previous year, any asset forming part of a block of assets is transferred by a demerged company to the resulting company, then, notwithstanding anything contained in clause (1), the written down value of the block of assets in the case of the resulting company shall be the written down value of the transferred assets of the demerged company immediately before the demerger.
Therefore, while deleting the impugned additions, we deem it proper to restore the matter back to the file of Ld. AO as directed to verify that the depreciation allowable to the demerged entity, in case demerger had not taken place and the actual depreciation claimed by the assessee under Income Tax Act remains the same. Resultantly, this ground of assessee’s appeal stands allowed for statistical purposes.
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2017 (12) TMI 1356
Addition u/s 68 - Held that:- In these cases the court was concerned with the orders of the Income Tax officers making additions of the share application money received by the assessee companies. In those cases, considering the fact that the assessee would not have any knowledge about source of the respective applicant or even their identity and the assessee having produced the share application form, the share certificates, the PAN card of the applicants was taken to have discharged their burden under Section 68 of the Income tax Act. According to us, such a factual situation is totally incomparable with the case of the assessee who has borrowed money from few known lenders whose creditworthiness and genuineness of the transaction were matters for the assessee to prove.
The assessee having failed to discharge the burden of proof, the assessing officer, the 1st appellate authority and the Tribunal were fully justified in making the additions and confirming the same. - Decided against assessee.
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2017 (12) TMI 1355
Addition of commission - statement of the assessee was recorded under Section 132(4) - Held that:- First of all, in view of the provisions contained in Section 132 (4), the Revenue was entitled to complete assessment based on the assertions made by the assessee. In this case, in answer to question No.16 the assessee himself had stated that he was receiving commission at the rate of ₹ 1000/- to 2000/- per lakh. Thereafter in answer to question No.28 the assessee again stated that he was receiving approximately ₹ 1500/- per lakh. It was on the basis of the statement made by the assessee under Section 132(4) that the First Appellate Authority reduced the rate of commission to ₹ 1500/- per lakh. Such a fixation of commission cannot be said to be vitiated for any reason.
Secondly, the Tribunal was also factually wrong in stating that the assessee himself had claimed in response to question No.16 that the commission he was getting was ₹ 1000/- per lakh. On the other hand, the answer given by the assessee himself would show that what he has stated was that he was getting commission at the rate of ₹ 1000/- to 2000/- per lakh. Therefore, the conclusion of the Tribunal is untenable and we therefore set aside the finding with respect to the rate of commission and restore the finding of the First Appellate Authority.
Unexplained cash credit - Held that:- The facts found by the Tribunal itself show that the creditor of the assessee was one Aboobacker, Poothayil, a non-resident, who had a deposit in the Dhanalaxmi Bank, Muvattupuzha, against which he had availed a loan of ₹ 11 lakhs which was eventually transferred to the assessee. The facts being so, the assessee cannot be found to have failed in proving either the source of cash credit, the creditworthiness of the creditor or the genuineness of transactions. It was taking into account these three factors that the Tribunal has decided this issue in favour of the assessee. We have no reason to interfere with this finding of the Tribunal.
Undisclosed investment in the construction of a building - rejections of books of accounts - Held that:- Thought the Revenue contended that having considered the provisions contained in Section 142A, inserted by the Finance Act, 2004, it was not necessary for the assessing officer to have rejected the books of account to obtain report of the Valuation Officer. However, we cannot accept the said contention for the reason that Section 142A was inserted with retrospective effect from 15.11.1972. Despite the insertion of such provision, the above judgments were rendered by the Apex Court and other High Courts holding that rejection of the books of accounts was necessary for obtaining the report. In that view of the matter, the Tribunal's finding on these issues also cannot be interfered with. Therefore, this appeal is disposed of answering the first question of law in favour of the Revenue
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2017 (12) TMI 1354
Exemption under Section 10(23C)(vi) - exemption was denied holding that the assessee did not satisfy the condition contained in Section 10(23C)(vi) of the Act to the effect that it was existing solely for educational purposes and not for purposes of profit - Held that:- The only requirement for granting registration under this Section is the satisfaction of the prescribed authority with regard to the genuineness of the activities of the assessee.
It has been categorically recorded by the Tribunal that the assessee is a Trust registered under Section 12AA of the Act which makes it quite clear that the assessee is pursuing the charitable activities. It was further observed that the provisions of the Right to Children to Free and Compulsory Education Act, 2009, are not applicable to the assessee being an unaided Society. Since the Pr. CCIT had not doubted the genuineness of the activities of the Society, the Tribunal correctly directed the Pr. CCIT to grant registration under Section 10(23C) of the Act. - Decided against revenue
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Corporate Laws
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2017 (12) TMI 1319
Official Liquidator liability to refund an amount along with interest @ 4% p.a. to the applicant as was directed vide order dated 08.02.2016 - Held that:- This Court has already taken a decision on 08.02.2016 as to how much amount is to be paid to the applicant. No appeal has been filed against the said order hence the issue qua the amount to be refunded to Awas Samiti has attained finality. However per OLR No.255/2017 dated 11.10.2017 only an amount of ₹ 4,20,69,163/- is lying as on 30.09.2017 in the corpus fund of company in liquidation. Thus taking into consideration the overall circumstances; the plight of other creditors who are also waiting their turn to get payments and though not placing the applicant in queue with them, I direct the official liquidator to initially release an amount of ₹ 2.5 Crores to the applicant within four weeks from today. As the order dated 17/10/2012 notes the company has various properties at Ghaziabad, Dharudhera, Rewari and Faridabad, the learned Official Liquidator should file a report confirming status of such properties of TIDCO and its subsidiaries and to disclose what steps it had taken till date to dispose those of and/or as to how it proposes to deal with the same viz., sale and/ or realise proceeds thereof to clear of claims of the company in liquidation at the earliest.
Since there is no clarity till date as to what happened to the money received by three companies viz., (a) RMS Club & Resorts Ltd.; (b) Chahhat Garments Pvt. Ltd. and (c) Rewari Developer (P) Ltd. – which allegedly were the paper companies of Mr.Madhur Mittal and Mr.Sumit Mittal and since its erstwhile management has conveniently allege they have no objection if money is paid by Official Liquidator to Awas Samiti, without even disclosing the end use of the money received by their three companies aforesaid, it would be appropriate to issue notices to said three companies viz (1)RMS Club and Resorts Private Limited; (2)M/s Chahat Garments Private Limited; and (3) M/s Rewari Developer Private Limited asking them to disclose the bid amount received and if such amount on cancellation of bid was remitted to the Official Liquidator and if not then to return such amount(s) so received. Admittedly, on cancellation of bid, these companies cannot be allowed to enrich themselves in an unjust manner. On realization of funds from the companies above and on sale of land etc, further payments be made to the applicant.
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2017 (12) TMI 1317
Oppression and mismanagement - Held that:- The contradictions in the documents being relied on by Respondents are glaring as can be seen from the above. The act of Respondent No. 2 amounts to oppression of the Appellants and mismanagement of the affairs of the Company Respondent No. 1. She has tried to shut out the Appellants to bring in her family members Respondents No. 3 to 6. There is no substance in the arguments for the Learned Counsel for the Respondents expressing doubts on the original share Certificates held by the Appellants by claiming that they bore signatures of one or the other of the Appellants. The Respondents, and more particularly Respondent No. 2, has not come forward to show her shares in order to demonstrate as to signatures of whom it was bearing. Similarly, the arguments that NCLT cannot investigate into the title of shares also has no substance because the present matter is being considered not to decide the title of the shares but the question for consideration has been whether the Respondent No. 2 with the support of the other Respondents is unlawfully keeping the Appellants away from the Company claiming that they have transferred their shares leaving them high and dry although they are showing the original shares in hand for their claims. Such acts of oppression cannot be permitted.
We find substance in the submissions of the learned counsel for the Appellants that their signatures were taken by Respondent No. 2 for the purpose of negotiating with the bank to arrive at one-time settlement of the company accounts and the same have been misused. Documents relied on by the respondents to claim that appellants resigned from the Board of Directors and transferred their shares are suspicious documents and unreliable. We find that there is no substance in the arguments being raised by the learned counsel for the respondents, in the facts and circumstances of this matter.It is declared that there has been no transfer of shares from the appellants to the Respondents Nos. 2 to 6 as is being claimed by these respondents.
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2017 (12) TMI 1316
Oppression and Mismanagement - Held that:- Tribunal is empowered to decide the issue in consonance with new Companies Act, 2013 though the Company petition is initially filed under the Provisions of Companies Act, 1956. And the 2nd respondent is raising several frivolous litigations by misusing process of law by committing several acts of Oppression and Mismanagement as enumerated by the petitioner, and filing several frivolous cases and committing several corporate offences as detailed by the Registrar of Companies, various orders passed by the Special Judge for Economic Offences. Therefore, the Company petition is very well maintainable in accordance with law, and facts and circumstances as detailed supra, would justify to order to wind up R1 Company but such winding up would prejudice the interest of the petitioners as well as the other parties, in addition to R1 Company and public interest in general. Therefore, it would be just, proper and equitable to pass appropriate orders by the Tribunal to put an end to the oppressive actions and mismanagement of second respondent being committed through R1 Company 1 Company by exercising powers U/ss. 397, 398, 402 & 403 of the Companies Act, 1956/Read with Section 241/242 of Companies Act, 2013.
The Tribunal, however, cannot interfere in the day to day affairs of the Company. Since words of acts of Oppression and Mismanagement are not defined in the Act, they are to be inferred basing on facts of each case. Ultimately, it is for the management of a Company to manage its affairs, in accordance with its Memorandum and Articles of Association, however, subject to complying with extant provisions of Companies Act, 1956/2013. Therefore, the Tribunal is leaving all sundry issues to the Company to be decided by them, by directing the Company to conduct meetings of the Company to sort out their issues. Therefore, it is necessary to order the R1 Company to convene EGM at an early date so as to sort out their issues suitably.
Hereby directed the respondents to restore the shareholding of the petitioners group and the second respondent Group in the ratio of 50:50 total shareholding of R-1 Company, in consonance with the Board’s resolution dated 27th February, 2007 and Agreement for Transfer of shares dated 8th April, 2010;
Hereby declared that all actions/decisions taken contrary to the interim orders dated 18.05.2011 and 27.09.2012 passed by the CLB are non-est in the eye of law, and these interim orders shall be in force till the next EGM, which is to be conducted by virtue of this order;
Hereby directed Respondents No. 1 & 2 to convene an EGM within a period of two months from the date of receipt of copy of this order, by duly following all the provisions of the Companies Act, 2013 as well as the Articles of Association of R1 Company and Principles of Natural Justice, in order to sort out their disputes and to conduct normal business of the R1 Company. The parties are at liberty to raise their respective disputes before EGM to be conducted and resolve their issues therein;
The parties are at liberty to approach this Tribunal by way of filing a fresh CP, in case, they are aggrieved by the actions taken during the said EGM to be conducted;
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Insolvency & Bankruptcy
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2017 (12) TMI 1318
Corporate insolvency procedure - Application under Section 9 of the I & B Code was filed with regard to default pursuant to different agreements - Held that:- Clause for arbitration exists in both the agreements. However, such disputed question of facts cannot be determined in this appeal particularly the Appellant or the Respondents having not taken such plea before the Adjudicating Authority.
While we are not inclined to interfere with the impugned order dated 19th July, 2017 passed by the Adjudicating Authority in view of the proper appreciation of law i.e. Section 21 of the Arbitration and Conciliation Act, 1996, as per which the Arbitration proceeding commence on the date request for the dispute to be referred to arbitration is received by the Respondent, we give liberty to the Appellant to move before appropriate forum, in respect to any agreement if there is no clause of agreement and arbitration proceeding has not commenced. With the aforesaid observation the appeal stands disposed of.
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Service Tax
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2017 (12) TMI 1315
Levy of service tax - Airport services - passenger service fee - Held that: - identical issue decided in the case of M/s Royal Jordanian Airlines, M/s China Eastern Airlines, M/s China Airlines, M/s KLM Royal Dutch Airlines Versus CST, Delhi [2017 (11) TMI 1407 - CESTAT NEW DELHI], where reliance placed in the case of M/s Continental Airlines Inc. Versus Commissioner of Service Tax, New Delhi [2015 (7) TMI 1079 - CESTAT NEW DELHI], where the Tribunal held against the inclusion of these charges in the taxable value for air travel service by the appellants - service tax not levied.
Penalty on demand of service tax which was paid during the course of investigation - Held that: - issue came up before the Tribunal in the case of American Airlines vs. CST, Delhi [2016 (7) TMI 92 - CESTAT NEW DELHI], where it was held that Mere omission to give correct information is not suppression of facts unless it was deliberate and that an incorrect statement cannot always be equated with wilful mis-statement - penalty set aside.
Appeal dismissed - decided against Revenue.
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2017 (12) TMI 1314
CENVAT credit - distribution of credit - place of removal - scope of SCN - Held that: - Since, the Commissioner (Appeal) has addressed the basic issue raised in the SCN, he should have concluded his findings only to that extent as alleged in the SCN. Since he has decided the issues, which were not the part of allegation in the SCN, it is evident that he has travelled beyond the scope of the SCN, which will not stand for judicial scrutiny - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 1313
Composite contracts - commercial or industrial construction service - Held that: - the status, nature and use of civil construction is relevant to decide the tax liability under commercial or industrial construction service. The status of recipient of service is of no relevance. If the building or civil structure is used for commercial purpose, tax liability may arise subject to fulfillment of other conditions. There should be clear finding in respect of claims made by the appellant with reference to certain civil structures as being non-commercial in use - The contracts with reference to construction of residential complex has also to be examined to determine whether the number of residential units are above 12 and the other requirements of the tax entry are fulfilled.
There are multiple contracts subjected to service tax. It is necessary that each of the contracts is to be examined and finding recorded - matter is remanded back to the Original Authority for fresh decision after giving due opportunity to the appellant - appeal allowed by way of remand.
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2017 (12) TMI 1312
Refund of service tax - time limitation - Section 11 B of the CEA, 1944 - the service tax was deposited with the jurisdictional service tax authorities at Delhi and that explaining the situation and circumstances of the case, the appellant had requested the Chief Commissioner of Delhi to transfer/ adjust the excess amount paid by it into the Chandigarh Registration Account many times, failing which, the refund application filed - Held that: - The Department never responded to the letters of the appellant and also never advised the appellant for filing the proper refund application within the stipulated time frame provided under the statue. Thus, for the lapses on the part of the Department, the appellant should not be held responsible and should not be deprived of its legitimate right to claim refund of service tax as provided under the statue.
The initial letter dated 30.03.2014 filed before the Chief Commissioner of Central Excise and Service Tax, requesting for transfer/ adjustment of excess paid amount into the Chandigarh Account, should be considered as the application for refund in terms of Section 11 B of the Act. Since the said application was filed within one year from the relevant date i.e. payment of Service Tax, the claim of the appellant, is not barred by limitation of time.
Rejection of refund on the ground of time limitation not justified - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 1311
Works contract - Erection, Commissioning and Installation services - composite work order for constructing petrol pumps, road work, pump installations, piping, soil work, etc. - Non-payment of service tax - Held that: - the impugned order split up the single contract only based on the bill rates and the detailed invoices raised. Such bifurcation is not sustainable. The appellant carried out the composite work order though the bills are raised based on the completion of the work category-wise giving different account codes to various types of works. This by itself cannot be considered as different services provided to the clients. As such, the appellants shall be liable to service tax only under works contract service w.e.f. 1.6.2007.
Abatement - Held that: - the same requires verification with supporting data to be submitted by the appellant - matter on remand.
The appellants shall be liable to service tax under works contract service w.e.f. 1.6.2007. The quantification of their liability shall be determined by the Original Authority after examining the supporting documents - appeal allowed in part by way of remand.
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2017 (12) TMI 1310
Extended period of limitation - reversal of CENVAT credit - common input services for providing taxable service as well as exempted service (Trading of goods) - non-maintenance of separate records - Rule 6 (2) and Rules 6(3) of the CCR, 2004 - Held that: - Whether the activity of trading should fall under the category of exempted service, was highly contentious. The activity of trading was brought into the preview of exempted service in Section 66 D of the Finance Act, 1994 as amended by Finance Act, 2012. Thus, in such eventuality, allegation of suppression, mis-statement etc. cannot be leveled against the appellant for invocation of the extended period of limitation for issuance of the SCN - the appellant is a registered assessee under the Service Tax statute and had complied with the statutory provisions, including filing returns. Thus, it cannot be said that the appellant had contravened any of the provisions of the statute.
SCN issued in this case by invoking the extended period of limitation is clearly barred by limitation of time - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 1309
Security agency service provided by Police department - levy of service tax - Held that: - the appellant have rendered statutory function, as providing security is a sovereign function - the service provided by appellant, are not taxable, as clarified by Circular No.96/7/2007-ST. - appeal allowed - decided in favor of appellant.
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Central Excise
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2017 (12) TMI 1308
CENVAT credit - denial on the premise that the appellant is a job worker and working under N/N. 214/86-CE dated 25/03/1986 as they are not required to pay duty on the goods manufactured by them on job work basis, therefore, in terms of Rule 6 (1) of CCR, 2004, credit not allowed - Held that: - It is admitted fact that the goods manufactured by the appellant are not exempted goods, but being a job worker, the appellant is not required to pay duty therefore it cannot be said the goods manufactured by the appellant are exempted goods - Cenvat credit cannot be denied to the appellant in terms of Rule 6 (1) of CCR, 2004 - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 1307
Remission of duty - Rule 21 of the CER, 2002 - defective PSC sleepers - Held that: - It is not the case of the Revenue that the appellants had removed the defective PSC sleepers in as it is condition out of the factory, without payment of Central Excise duty - since the appellants entered the entire manufacturing particulars in the RG-1 register, the demand cannot be fastened on the sole ground that the procedures laid down in Rule 21 of the Rules have not been followed by the appellants.
Since, the defective PSC sleepers, in question, were not removed from the factory, and were sold as waste scrap on payment of appropriate duty, the duty demand confirmed in the impugned orders cannot be sustained for recovery.
Appeal allowed - decided in favor of appellant.
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2017 (12) TMI 1306
CENVAT credit - locomotive - denial on the ground that locomotive is not falling under the definition of capital goods - Held that: - Since locomotive in this case is considered as an input for the purpose of availment of Cenvat benefit, the Department cannot deny such benefit on the ground that locomotive is not defined as capital goods under the cenvat statue - Since the Department has not disputed the duty paid character of the subject goods i.e. locomotive and its receipt and utilization within the factory premises of the appellant, Cenvat credit cannot be denied on the procedural ground that taking of such credit under capital goods is not proper and justified - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 1305
SSI exemption - works contract service - The fixtures assembled at the site were considered by the department as the manufactured goods and accordingly, the value of such fixtures were added to the assessable value of the furniture sold from the factory and the benefit of SSI Notification dated 01/03/2003 was denied to the appellant company - Held that: - the fixtures erected at the customer’s site cannot be considered as loose furniture, for the purpose of levy of Central Excise duty. Thus, the value of such fixtures cannot be included in the assessable value of loose furniture for the purpose of computation of the SSI threshold limit - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 1304
Benefit of reduced penalty u/s 11AC - denial on the ground that the appellant did not pay the interest amount under Section 11AB of the Central Excise Act, 1944 attributable to the late payment of the duty amount - SSI exemption - Held that: - Since, the period covered under the dispute relates to the period prior to the substitution of new Section 11AB of the Act, the provisions of such amended rule will not be applicable in the case of the appellant herein. Therefore, the appellant should get the benefit of payment of reduced amount of penalty of 25% in terms of Section 11AC ibid - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 1303
Clandestine removal - principles of natural justice - Held that: - Since, the department has not specified as to the particular entry or particular page or entry in such movement register, which relates to the transaction particulars of the appellant, it can be concluded that the appellant was not in a position to effectively present its case.
The goods were removed from the factory of the appellant at Bhiwadi to its depot at Delhi under the cover of ST-39 forms prescribed under the Sales Tax Laws. Such documents have also not been verified by the department for confirming the adjudged demand against the appellant - the impugned order has been passed in gross violation of the principles of natural justice - matter remanded back to the original authority for passing a detailed speaking/reasoned order with regard to the issues involved in this case - appeal allowed by way of remand.
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2017 (12) TMI 1302
CENVAT credit - removal of inputs as such - Bitumen - price variation clause - whether the appellant has removed inputs as such and thus failed to reverse the cenvat credit taken as required under the scheme of the Act & under Rules? - Held that: - If the allegation in the SCN are taken on their face value, the appellant will never incur a profit, rather always put to loss on selling their inputs - there is price variation clause, which mentions that the rates of bitumen emulsion are based on the rate of bitumen as on 1st January, 2012 for supplies in bulk (exclusive of Excise Duty and Sales Tax). The price taken for the purpose of working out the price variation will consist of basic price of bitumen only, prevailing on the rate 15 days prior to the date on which the said lot was offered for inspection, as indicated in the Inspection Note. The basic rates quoted in the quotation list are subject to the price variation clause.
The appellant was removing Bitumen emulsion and not bitumen as such - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 1301
Rate of duty - fertilizers - extended period of limitation - Held that: - Demand of extended period cannot be avoided as the ignorance of law is not a excuse. The appellant is duty bound to know about their statutory liability. Accordingly, there is suppression of fact on the part of the appellant, therefore demand not only for normal period, but for extended period also clearly payable by the appellant.
Penalty - Held that: - penalty imposed u/s 11AC is set aside - however, it is fact on record that the appellant even after issuance of SCN of first SCN did not obtain registration, therefore there is clear contravention of the provisions on the part of the appellant. Therefore they are liable to penalty u/r 25.
Appeal allowed in part.
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2017 (12) TMI 1300
CENVAT credit - outdoor catering service - stock transfer - presumptive levy of 8% on exempt goods - Held that: - allegation of mala fide on the part of the assessee in availing CENVAT credit to warrant invoking the ingredients of section 11AC is not tenable - imposition of penalty u/r 15(2) of CCR, 2004 is not appropriate - penalty set aside - appeal allowed in part.
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2017 (12) TMI 1299
Benefit of N/N. 4/2006-CE dated 1st March 2006 - allegation against the noticee was that it had wrongly claimed the benefit of this notification which was patently limited to sales which the transaction of the assessee is not as it was provided to itself - whether self-consumption of manufactured goods would be tantamount to captive consumption, and consequently, whether a separate treatment is warranted for such transaction? - Held that: - On a perusal of the exemption notification the benefit of which was availed by the appellant, it would appear that the disputed rate of duty applies to goods other than those cleared in ‘packaged form’. The goods cleared in ‘packaged form’ are covered by sl. no. 1A of the said notification - benefit cannot be denied - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 1298
CENVAT credit - trading activity - input services that were allegedly utilised in common for both producing excisable goods and rendering exempted service by the appellant - Held that: - for the period prior to April 2011, trading was outside the coverage of CCR, 2004 and hence could not be described as ‘exempted goods’ within the meaning of section 2(e) of CCR, 2002 - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 1297
CENVAT credit - Capital goods - N/N. 30/2004 dated 09.07.2004 - what is the relevant date for deciding the Cenvat credit eligibility–whether date of receipt of capital goods or the date of its utilization? - Held that: - the issue is no more res-integra and reliance placed in the case of M/s. Ankit Roofings Pvt. Ltd. Versus The Commissioner Central Excise & Customs [2016 (8) TMI 937 - CESTAT NEW DELHI], where it was held that there is no doubt that at the time of receipt of capital goods, the final products of the appellant were chargeable to nil rate of duty and therefore these capital goods fall within the purview of sub rule 4 of rule 6 and hence not entitled to Cenvat credit - appeal dismissed - decided against appellant.
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2017 (12) TMI 1296
Demand of duty - defective components - Held that: - it is not in dispute that the defective / damaged components have not been manufactured in the appellants factory - similar issue came for consideration before the Tribunal in the case of Panasonic Energy India Co. Ltd. vs. CCE, Indore, [2016 (11) TMI 1283 - CESTAT-New Delhi], where it was held that These scrap/waste/paring also cannot be considered as intermediate product or by product during the course of manufacture of any excisable goods, scrap of paper cannot be considered as a product different from the paper and Mere mentioning in the tariff is not sufficient to attract excise levy - demand not sustained - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 1295
Intermediate goods - Ceramic Tiles used captively for manufacture of final product i.e. bends/pipes etc which were exempted from duty uptill clearance of value of Rs. One Crore - Held that: - we find that no verification of the fact whether Ceramic Tiles manufactured by the appellant was carried out and demand was against confirmed only on the ground that no documentary evidence was produced - As per above notification, the goods manufactured and captively used which is other than Ceramic Tiles are exempted even for captive use as per the entry Sr. No. (2) of the table of the N/N. 8/03-CE - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 1294
Whether the goods mainly anchor ring, load spreading plates cleared by the appellant to M/s.Suzion Gujarat Wind Park Ltd., is eligible for exemption N/N. 06/2006-CE dated 01/03/2006 as amended and/or under N/N. 12/2012-CE dated 17/03/2012?
Held that: - similar issue decided in appellant own case Rakhoh Enterprises Versus Commissioner of Central Excise, Pune [2016 (11) TMI 1207 - CESTAT MUMBAI], where it was held that the anchor rings and load spreading plates are parts of tower specially designed for wind operated electricity generators and are eligible for exemption under N/N. 6/2006, dated 1-3-2006.
Appeal allowed - decided in favor of appellant.
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2017 (12) TMI 1291
Clandestine removal - 340.790 MTs of sponge iron - Held that: - the duty demand confirmed against other parties namely, Raipur Forging Pvt. Ltd. and Shubh Labh Ispat Pvt. Ltd. were dropped by the Tribunal, holding that the department has not brought out any evidence in support of clandestine removal of goods by those manufacturers - contrary stand cannot be taken at this juncture, especially in view of the fact that the department has not properly investigated into the matter for confirmation of the adjudged demand against the present appellant - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 1290
Extended period of limitation - extended period of limitation - Held that: - the fact regarding wrong availment of cenvat credit by the appellant was within the knowledge of the department way back in March, 2000 itself, and in such eventuality, the department was required to issue the SCN within the normal period of one year as prescribed under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A of the CEA, 1944 - the SCN having being issued beyond the period of one year from the relevant date, the same is barred by limitation of time - appeal allowed - decided in favor of appellant.
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2017 (12) TMI 1289
CENVAT credit - Bill of Entry for warehouse, on which since no duty is paid - Held that: - credit was taken on the Bill of Entry for warehouse, obviously there cannot be intention to evade wrong credit for the reason that bill of entry for warehouse apparently is not meant for allowing credit therefore it is clear case of inadvertent availment of credit - case is squarely covered by Section 11A(2B) whereunder appellant was not suppose to be issued SCN and the case could have been concluded on the payment of Cenvat credit alongwith interest before issuance of SCN - penalty set aside - demand with interest upheld - appeal allowed in part.
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2017 (12) TMI 1288
Demand of excise duty - demand on the ground that description of the goods, quantity as mentioned in ARE 1 are not tallying with the shipping bills. Accordingly, proof of export submitted by the appellant was not accepted - Held that: - shipping bill was prepared for entire machine namely Dry Mix Mortar Plant therefore it is obvious that the description of the complete machine will not tally with the description of the goods appearing in ARE-1 - Once it was certified on ARE-1 itself by the custom officer regarding physically exports of all the goods from the port, no further documents required as proof of exports. ARE 1 duly certified by the customs officers is sufficient proof of exports - Appeal allowed - decided in favor of appellant.
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2017 (12) TMI 1287
Rectification of mistake - Revenue submits that at the time of hearing of appeal, the appellants have not submitted any evidence that the Revenue’s appeal is pending and was heard, therefore, the material which was not placed during the hearing - Held that: - It appears that the Ld. Counsel has misguided the applicant for her gross negligency. It clearly appears that the Counsel was not even aware of the other appeals filed by the appellant at the time of hearing of the Appeal No.E/222/2006 of the Revenue - it is a fact on record that the order in Appeal No.E/222/2006 was on the issue of imposition of penalty under Section 11AC whereas the demand of duty and penalty has been set aside by this Tribunal vide order dated 02/01/2007 in Appeal No.E/4172/2005. Therefore, there was no question of imposition of any penalty. This is a strong reason for rectification of the order dated 28/02/2017 in Appeal No.E/222/2006 - ROM application allowed.
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2017 (12) TMI 1293
100% EOU - refund claim - time limitation - section 11B of CEA, 1944 - scope of SCN - Held that: - It would appear that the two lower authorities have not borne in mind the allegations made in the show cause notice, as well as the submissions of the appellant that they had furnished the necessary documents along with the claim for refund - the matter remanded back to the original authority to determine such of the refund claims which has been disallowed by the first appellate authority on the ground of non-segregation of utilization between the domestic tariff area unit and to the export oriented unit.
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2017 (12) TMI 1292
Distribution of CENVAT credit - whether the appellant company have rightly distributed the Cenvat credit availed by the head office with respect to input services like Banking Services, Business Auxiliary Services, CHA, Courier Services, etc.? - Held that: - availment of Cenvat credit in absence of the head office being registered as ISD, there was no illegality in taking the Cenvat credit - as there is only one manufacturing unit, there is no illegality in distributing the credit and/or in availing of credit by the manufacturing unit of the appellant under the facts and circumstances.
When there is only one manufacturing unit, the head office exists only for the purpose and support of the manufacturing unit and they are rather one and the same and accordingly all services received at their office are in fact equivalent to services received at the sole manufacturing unit.
Appeal allowed - decided in favor of appellant.
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CST, VAT & Sales Tax
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2017 (12) TMI 1286
Exemption from tax - De-Oiled Rice Bran under Entry 3 of the First Schedule - case of Revenue is that De-Oiled Rice Bran is very much covered under Entry-34 of Part-A of the Second Schedule and hence, it is taxable @ 4% - whether Rice Bran and De-Oiled Rice Bran are one and the same or different products? - Held that: - A conjoint reading of Entry-3 of the First Schedule and Entry-34 of the Second Schedule makes it clear that Rice Bran is excluded from the list of exempted goods and has been included in the list of goods taxable - Rice Bran and De-Oiled Rice Bran are one and same product - Calcutta High Court in Sethia Oils Limited vs. Assistant Commissioner, Commercial Taxes, Postabazar Charge, [2003 (8) TMI 494 - CALCUTTA HIGH COURT] has even held that since there is no change in the composition of Rice Bran and De-Oiled Rice Bran, both the products are same and that De-Oiled Rice Bran is Rice Bran and nothing else.
Revision dismissed with cost.
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2017 (12) TMI 1285
Payment of tax under the Kerala Tax on Paper Lotteries Act, 2005 - whether the respondent-assessee is a promoter within the meaning of Section 2(l) of the Act so as to make it exigible to payment of tax under Section 6 and amenable to the other provisions of the Act? - Held that: - The respondent who was appointed as an agent by M/s. MSIL was expressly barred by the terms of appointment from dealing with lottery tickets in the electronic form and for sale in the physical form outside the territories of the State of Karntaka. If that is so, we do not see how the respondent can be understood to be capable of being included in the definition of 'promoter'. The respondent certainly is not 'any person' appointed by the State of Karnataka to sell lottery tickets in the State of Kerala on behalf of the State of Karnataka - If the respondent is not a 'promoter' within the meaning of Section 2(l) of the Act, the charging Section i.e. Section 6 will have no application to make the respondent liable to payment of tax under the Act nor would be the respondent be liable for registration under Section 7 of the Act. In fact, the present appears to be a situation where the activities of the respondent including the terms of appointment as an agent of M/s. MSIL does not make it exigible to any of the provisions of the Act.
Appeal dismissed - decided against Revenue.
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