TMI Tax Updates - e-Newsletter
February 15, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Indian Laws
TMI SMS
Highlights / Catch Notes
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Income Tax:
Royalty u/s 9(1)(vi) read with DTAA - It is fallacious to assume that any change made to domestic law to rectify a situation of mistaken interpretation can spontaneously further their case in an international treaty. Therefore, mere amendment to Section 9(1)(vi) cannot result in a change - HC
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Income Tax:
TDS - challenge to the notices / summonses issued u/s 201 - no order u/s 201(i) can be passed for which limitation had already expired prior to amended section 201(3) as amended by Finance Act No.2 of 2014 - The impugned notices / summonses held to be invalid, quashed and set aside - HC
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Income Tax:
Non-compete fees - whether classifiable u/s 17 of the Act as profits in lieu of salary? - AO observed that payment for noncompete fees with Grasim is only a camouflage - Additions confirmed - HC
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Income Tax:
TDS u/s 194A - non deduction of tds - interest being not paid to the payees [suppliers] being reversed in the books of accounts, we are of the considered opinion that there would be no liability to deduct tax as no income accrued to the payees [suppliers]. - HC
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Income Tax:
Addition on protective basis on account of coal business carried out by the assessee through the syndicate of Bhutoria Group - addition made on protective basis cannot survive - HC
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Income Tax:
Validity of order u/s 201 - Failure to deduct tax at source - when the proceeding initiated on 15.11.2010 and order passed on 30.03.2011 u/s 201(1)/201(1A) for AY 2002-03 i.e. after approximately 9 years has to be held as time barred - AT
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Income Tax:
Expenditure incurred on the issue of Foreign Currency Convertible Bonds (“FCCB”) - expenditure incurred by the assessee on issue of FCCB is revenue expenditure allowable under section 37(1) of the I.T. Act. - AT
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Income Tax:
Without pointing out any defect in the books of accounts just because there are certain inflated nature of purchases on account of cash payment cannot be the basis for rejection of books of accounts u/s 145 - AT
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Income Tax:
Addition on account of interest - capital expenditure or revenue expenditure - assessee has "parked its investible funds in the equity shares of a closely associated concern" - there was no basis for treating the interest expenditure claimed by the assessee as capital expenditure - AT
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Income Tax:
Revision u/s 263 - commission paid to the MD to be disallowed - Even though it has not claimed 100% of the quantum of the value of assets due to the fact that the assets were acquired and utilized less than 180 days, it was eligible for only 50% of the rate of depreciation. Again, it cannot claim the additional depreciation u/s 32(1)(iia) - AT
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Customs:
Refund of SAD - payment of 4% SAD has not been made by cash, but has been paid using the Reward Scrip i.e. Focus Product Scheme. - there is no condition in Notification No. 102/07 that SAD should initially be paid through cash - refund allowed - AT
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Customs:
Valuation - import of cranes - evasion of customs duty - The adjudicating authority has neither followed the principles of natural justice nor has he followed the correct legal principles to arrive at the transaction value - matter remanded back - AT
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Customs:
Demand of duty - Import of fake / forged DEPB licences - Appellant purchased the DEPB licneces from the market - Appellants filing F.I.R after the fraud was detected by the Department is of no consequence and it is only an afterthought to save their lapses - demand confirmed - AT
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DGFT:
Instruction on applications for IEC / modification in IEC - Trade Notice
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Service Tax:
Cenvat Credit - Scope of input services utilised to provide Renting of Immovable Property as Output Services - payment of service tax on construction of premises which he intended to put to use as commercial complex and rented out the premises to various entities - credit allowed - AT
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Central Excise:
Notification under Section 11C of the Central Excise Act on Di-Calcium Phosphate (animal feed grade) of rock phosphate origin falling under heading 2835 - Notification
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2016 (2) TMI 415
Receipts from providing data transmission services - ITAT upset Assessment Orders that ruled that the income derived by the assessees through data transmission services was taxable as royalty under Section 9(1)(vi) of the Act as well as Article 12 of the relevant Double Tax Avoidance Agreements - whether fall within the term royalty? - whether the assessees would be eligible for the benefit under the relevant Double Tax Avoidance Agreements? - Held that:- India’s change in position to the OECD Commentary cannot be a fact that influences the interpretation of the words defining royalty as they stand today. The only manner in which such change in position can be relevant is if such change is incorporated into the agreement itself and not otherwise. A change in executive position cannot bring about a unilateral legislative amendment into a treaty concluded between two sovereign states. It is fallacious to assume that any change made to domestic law to rectify a situation of mistaken interpretation can spontaneously further their case in an international treaty. Therefore, mere amendment to Section 9(1)(vi) cannot result in a change. It is imperative that such amendment is brought about in the agreement as well. Any attempt short of this, even if it is evidence of the State’s discomfort at letting data broadcast revenues slip by, will be insufficient to persuade this Court to hold that such amendments are applicable to the DTAAs. Consequently, since we have held that the Finance Act, 2012 will not affect Article 12 of the DTAAs, it would follow that the first determinative interpretation given to the word “royalty” in Asia Satellite supra note 1, when the definitions were in fact pari materia (in the absence of any contouring explanations), will continue to hold the field for the purpose of assessment years preceding the Finance Act, 2012 and in all cases which involve a Double Tax Avoidance Agreement, unless the said DTAAs are amended jointly by both parties to incorporate income from data transmission services as partaking of the nature of royalty, or amend the definition in a manner so that such income automatically becomes royalty. It is reiterated that the Court has not returned a finding on whether the amendment is in fact retrospective and applicable to cases preceding the Finance Act of 2012 where there exists no Double Tax Avoidance Agreement. For the above reasons, it is held that the interpretation advanced by the Revenue cannot be accepted. The question of law framed is accordingly answered against the Revenue
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2016 (2) TMI 414
Non deduction of tds - challenge to the notices / summonses issued u/s 201 - period of limitation for passing an order u/s 201 - whether section 201(3) of the Income Tax Act as amended on 1/10/2014 by Finance Act of 2014 would be applicable retrospectively or prospectively - TDS on Tele-Communication Interconnection Usage Charges - Held that:- While amending section 201 by Finance Act, 2014, it has been specifically mentioned that the same shall be applicable w.e.f. 1/10/2014 and even considering the fact that proceedings for F.Y. 2007-08 and 2008-09 had become time barred and/or for the aforesaid financial years, limitation under section 201(3)(i) of the Act had already expired on 31/3/2011 and 31/3/2012, respectively, much prior to the amendment in section 201 as amended by Finance Act, 2014 and therefore, as such a right has been accrued in favour of the assessee and considering the fact that wherever legislature wanted to give retrospective effect so specifically provided while amending section 201(3) (ii) of the Act as was amended by Finance Act, 2012 with retrospective effect from 1/4/2010, it is to be held that section 201(3), as amended by Finance Act No.2 of 2014 shall not be applicable retrospectively and therefore, no order under section 201(i) of the Act can be passed for which limitation had already expired prior to amended section 201(3) as amended by Finance Act No.2 of 2014. Under the circumstances, the impugned notices / summonses cannot be sustained and the same deserve to be quashed and set aside and writ of prohibition, as prayed for, deserves to be granted. In view of the above and for the reasons stated above, all these petitions succeed. The impugned notices / summonses are held to be invalid and the same are hereby quashed and set aside and the respondents herein are hereby restrained by writ of prohibition from proceedings with the impugned notices / summonses which are, as such, hereby quashed and set aside. Rule is made absolute accordingly in each of the petitions. - Decided in favour of assessee
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2016 (2) TMI 413
Non-compete fees - whether classifiable under Section 17 of the Act as profits in lieu of salary? - AO observed that payment for noncompete fees with Grasim is only a camouflage - Held that:- In the present facts, the Assessing Officer in his order has after negativing the Appellant's claim is a non-compete fee held that the same is classifiable as profit in lieu of salary under Section 17 of the Act. This determination by the Assessing Officer was not a subject matter of challenge by the Appellant before any of the appellate authorities. Thus, it is not an issue which even arises from the impugned order of the Tribunal. - Decided in favour of the Revenue and against the Appellant.
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2016 (2) TMI 412
TDS u/s 194A - non deduction of tds - provisions of Sections 201 and 201[1] attracted - whether no income accrued to the payees? - Held that:- Section 194A of the Act mandates the tax deductor to deduct 'income tax' on 'any income by way of interest other than income by way of interest on securities'. The phrase 'any income' and 'income tax thereon' if read harmoniously, it would indicate that the interest which finally partakes the character of income, alone is liable for deduction of the income tax on that income by way of interest. If the said interest is not finally considered to be an income of the deductee, as per reversal entries of the provision in the present case, Section 194A[1] of the Act would not be made applicable. In view of the admitted fact that interest being not paid to the payees [suppliers] being reversed in the books of accounts, we are of the considered opinion that there would be no liability to deduct tax as no income accrued to the payees [suppliers]. The provision of law existing on the relevant date of passing of the order by the TDS Officer would establish that Sections 201 and 201[1A] of the Act were not applicable to the appellant's case. In the circumstances, the Assessee falls outside the scope of Section 194A read with Section 200 of the Act during the relevant assessment years. Thus, the consequential provisions of Section 201(1) and Section 201(1A) are not attracted. - Decided in favour of assessee
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2016 (2) TMI 411
Compensation for loss suffered by CPT due to occupation of land in excess of what was demised - whether the aforesaid expenditure is an amount expended fully and exclusively for business purposes within the meaning of Section 37(1)? - Held that:- The payment was made to compensate the loss suffered by CPT due to occupation of land in excess of what was demised to the assessee. Therefore, the payment did not partake the character of penalty. The payment could not partake the character of a capital expenditure because contention of the CPT was that the prayer for lease of the land unauthorisedly occupied could not be examined before payment of the compensation. Therefore, the payment was altogether compensatory for the benefit already received by the assessee by user of the land which had or could have nothing to do with a grant of lease in future.- Decided in favour of the assessee
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2016 (2) TMI 410
Addition made on account of suppression of profit - denial of exemption u/s.10B - ITAT deleted the addition - Held that:- The assessee was engaged in manufacturing activity and had two units at Ahmedabad, one of them being export oriented unit, entitled for 100% deduction under section 10B of the Income Tax Act. As the assessee strenuously pointed out that the manufacturing activity of both units was entirely different. The process was vastly different. CIT(Appeals) considered the evidence on record and in a detail discussion in the order came to a conclusion that there was no basis for making additions as done by the Assessing Officer rightly confimed by ITAT - Decided against revenue
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2016 (2) TMI 409
Addition on account of coffee income and pepper income - Held that:- It is clear that the assessee owns 84.12 acres of coffee in Belagodu area of Sakaleshpur Taluk, Hassan District. The Assessing Officer taking into consideration the climatic conditions and the season coupled with the average yield of the previous three seasons in an area of 84.12 acres in a zone known for high coffee yield, determined the income from coffee. It is also noticed by the Assessing Officer that the assessee actually received the coffee income of ₹ 13,53,275/- relating to the season 2006-07 during the period under assessment. Neither cash book nor other subsidiary registers and documents are produced to cross verify the payment particulars. Accordingly, the income declared could not be cross verified with the expenditure incurred. Rejecting EB-2 register, income of coffee was assessed at ₹ 47,70,525/- as against ₹ 32,79,536/- declared by the assessee. This best judgment assessment made by the Assessing Officer is confirmed by the First Appellate Authority and the Tribunal after extensively considering the arguments of the assessee in the light of the Judgments relied on by the assessee. As regards the estimate of income from Pepper, it has come to the notice of the Assessing Officer only during his visit to the estate of the appellant on 19.11.2008. Though subsequent to the crop year, presence of the yielding Pepper Vines numbering 2000, is not disputed by the assessee. The only argument advanced by the learned counsel on this issue is that the Pepper Vines were not ripe for yielding during the relevant assessment year, the Assessing Officer visiting the estate in the subsequent year, cannot be a basis to assess the income of Pepper unless there is adequate material to establish that the Pepper Vines were yielding during the relevant assessment year, which is not forth coming in the orders passed by the authorities. It is pertinent to note that the Assessing Officer was assisted by the Managing Partner of the assessees at the time of his visit to the estate and gathered information regarding the yielding Pepper Vines and it is only thereafter, determined that 20% of the Pepper Vines would be given allowance as being affected by yellow disease and arrived at ₹ 5,60,000/- estimating 5 kgs to each vine and valued the same at ₹ 70/- per kg i.e., 1600 Pepper Vines out of 2000. The said assessment in our opinion is reasonable, based on the information given by the Managing Partner of the assessee. It would be significant to notice that Rule 9-A of the Rules specifies the method of account to be followed by the assessee. The assessee has admitted that he has not furnished any accounts other than EB-2 register. EB-2 register is not the relevant account required to be maintained as per the Rules. Even the contents of the EB-2 register maintained by the assessee would fulfill the requirement of Sub-clause (IV) of Rule 9-A, that itself would not be suffice to accept the claim of the assessee regarding the yield of coffee unless the corresponding expenditure towards the labour and other expenses are shown in the account books to substantiate the yield declared. Decision rendered on the factual matrix by the fact finding authorities cannot be disturbed at this stage. - Decided against assessee
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2016 (2) TMI 408
Addition on protective basis on account of coal business carried out by the assessee through the syndicate of Bhutoria Group - Held that:- On perusal of the records, statement recorded during the course of search at Kolkata and also the impugned seized computer sheets, it is seen that the said transactions as embodied in these seized document, actually represent the trading transactions of the “syndicate working as a unit and, therefore, the assessment of such income can be done only in the hands of the said “syndicate”. So addition made on protective basis cannot survive. See Commissioner Of Income-Tax Versus Smt. Saraswati Devi [1994 (7) TMI 46 - RAJASTHAN High Court] - Decided in favour of assessee
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2016 (2) TMI 407
Depreciation on intangible asset by way of 'Goodwill' - amalgamation of a company duly approved - Held that:- Depreciation on Goodwill paid upon amalgamation is a permissible deduction in terms of Section 32. See Commissioner of Income Tax, Kolkata Versus Smifs Securities Ltd. [2012 (8) TMI 713 - SUPREME COURT]
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2016 (2) TMI 406
Transfer pricing adjustment - Arm’s Length Price on its international transactions by adopting Cost Plus Method undertaken as the said transaction fulfils the requisite conditions as enumerated under Section 12A - Held that:- The submission of the appellant that the adjustment of TPO towards Account of Management charges is arbitrary has been dealt by the First as well as the Second Appellate Authority and a concurrent finding of fact has been recorded that the TPO in principle accepted the remuneration model of 25% revenue sharing and the same has been substantiated and justified by the documents so submitted before the authorities below. Further, the genuineness of the documents which were relied on by the authorities have not been doubted by the Department. Thus, in view of the above, we do not find any illegality and infirmity in the orders and further we are of the opinion that a concurrent finding of fact on the basis of the documents on records was recorded by the First Appellate Authority as well as the Second Appellate Authority. Accordingly, no question of law arises out of the judgment rendered by the authorities below.
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2016 (2) TMI 405
Validity of order u/s 201 - Failure to deduct tax at source - barred by limitation - Held that:- Impugned order of the AO passed on 31.3.2011 in pursuance to the notice dated 15.11.2010 after considering the reply of the assessee dated 23.11.2010 is clearly barred by limitation. It is pertaining to mention that since proceedings for AY 2002-03 has been also initiated after search on 16.11.2009 when the amended provision did not come into existence on the said date, and the law applicable on the said date was pronounced in the case of Hatchison Essan Telecom Ltd. (2010 (4) TMI 45 - DELHI HIGH COURT) and CIT vs. NHK Japan (2008 (4) TMI 182 - DELHI HIGH COURT). As per dicta laid down by Hon’ble Jurisdictional High Court of Delhi and in the light of the same we are inclined to uphold the conclusion of the Ld. CIT(A) as in these judgments the Hon’ble High Court explicitly held that in absence of any time frame in the statue a reasonable time limit was to be read into, which was four year for the end of relevant financial year. In the present case, the relevant financial year 2001-02 was ended on 31.03.2002 and when the proceeding initiated on 15.11.2010 and order passed on 30.03.2011 u/s 201(1)/201(1A) for AY 2002-03 i.e. after approximately 9 years has to be held as time barred and thus we are of the opinion that the conclusion of the CIT(A) deserves to be confirmed and hence we uphold the same - Decided in favour of assessee
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2016 (2) TMI 404
Expenditure incurred on the issue of Foreign Currency Convertible Bonds (“FCCB”) - capital expenditure OR revenue expenditure - Held that:- A’ Bench of this Tribunal at Bangalore in the case of M/s. Crane Software International Ltd., Bangalore vs. DCIT, Circle-11(2) (2011 (2) TMI 1414 - ITAT BANGALORE), has considered whether FCCB issue expenses are in the nature of capital or revenue and has held the same to be revenue in nature. Similar view has been expressed in the cases of CIT vs. Havells India Ltd., (2012 (5) TMI 449 - DELHI HIGH COURT ) and also DCIT vs. UAG Builders (P.) Ltd., Delhi (2012 (9) TMI 764 - ITAT DELHI ). We, therefore, find that this issue is fairly covered by the above cited decisions. Hence, we hold that the expenditure incurred by the assessee on issue of FCCB is revenue expenditure allowable under section 37(1) of the I.T. Act. - Decided in favour of assessee
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2016 (2) TMI 403
Levy of fees under section 234E - intimation issued under section 200A in respect of processing of TDS - Held that:- We find that the issue in all these appeals is now squarely covered in favour of the assessee by the decision of ITAT Amritsar Bench in the case of Sibia Healthcare Private Limited vs. DCIT [2015 (6) TMI 437 - ITAT AMRITSAR] adjustment in respect of levy of fees under section 234E was indeed beyond the scope of permissible adjustments contemplated under section 200A. As intimation under section 200A, raising a demand or directing a refund to the tax deductor, can only be passed within one year from the end of the financial year within which the related TDS statement is filed, and as the related TDS statement was filed on 19th February 2014, such a levy could only have been made at best within 31st March 2015. That time has already elapsed and the defect is thus not curable even at this stage. In view of these discussions, as also bearing in mind entirety of the case, the impugned levy of fees under section 234E is unsustainable in law. We, therefore, delete the impugned levy of fee under section 234E of the Act. - Decided in favour of assessee.
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2016 (2) TMI 402
Revision u/s 263 - as per CIT(A) AO has not examined the GP result of the assessee - Held that:- As find that in earlier years, the books of account of the assessee were accepted by the AO and so were the trading results. We find in the year under consideration, the assessee has shown GP rate of 7.04% whereas in the previous assessment year it was 6.42%, which has been accepted by the Department. We also find that pursuant to the impugned CIT order, the AO has passed the assessment order in pursuance to the 263 order of the CIT wherein the first direction in respect to verification of four major creditors were carried out and no addition was made by the AO while giving effect to the impugned order of the CIT. The only issue remaining in front of us is whether the rejection of books of account by the CIT can be done by exercising the revisional jurisdiction and make addition of ₹ 7,98,553/-. We find that as earlier stated that the audited books and balance sheet has been already test checked by the AO and found to be in order. Therefore, it cannot be called as a lack of enquiry by the AO. In the previous year’s also, the department has been accepting books of accounts of the assessee, therefore, without pointing out any defect in the books of accounts just because there are certain inflated nature of purchases on account of cash payment cannot be the basis for rejection of books of accounts u/s 145 of the Act and moreover GP rate was more than the previous year. So, we do find merit in the appeal of the assessee and accordingly, the impugned order passed by the ld. CIT is set aside and the assessment order framed by the AO is restored. - Decided in favour of assessee
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2016 (2) TMI 401
Addition on account of interest - capital expenditure or revenue expenditure - Held that:- We are in agreement with the ld. CIT (A) that the expenditure is to be treated as revenue in nature because the assessee is an investment company. We take note that assessee-company is a joint venture entity between AXA India Holdings and Bharti Enterprises (Holdings) Pvt. Ltd. and the business of the assessee company is to make strategic investments in the business entities. We find that during the year under consideration, the assessee has invested a sum of ₹ 57,80,03,400/- for subscribing the equity shares of Bharti AXA Life and this fact was duly reported in the Audited Financial Statement of the assessee company at Schedule-S in the balance sheet. By doing this activity, it has commenced its business activities and has made investments during the period, therefore, the findings of the Assessing Officer that assessee has not commenced its business activities is erroneous and not based on proper appreciation of facts as held by ld. CIT (A). We further find that the amount of interest claimed by the assessee is in respect of capital borrowed for the purpose of business or profession carried out by the assessee company during the year, therefore, the interest paid on the capital borrowed for business purposes has to be an allowable business expenditure and the same cannot be denied. We also find that it is very specifically mentioned in the objects of the MOU that assessee company is to make strategic investment in the business entities and accordingly, it has made strategic investment in Bharti AXA Insurance Co. Ltd. Therefore, we find that the interest expenditure incurred by the assessee is for business purposes. And also, this fact is acknowledged by the AO himself in the assessment order wherein he has stated that assessee has "parked its investible funds in the equity shares of a closely associated concern". Hence, we find that there was no basis for treating the interest expenditure claimed by the assessee as capital expenditure. - Decided against revenue
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2016 (2) TMI 400
Addition u/s 68 - CIT(A) deleted the addition - information on accommodations entries received from the Directorate of Income Tax (Investigation) - Held that:- AO in his remand report has admitted that he has heavily relied on the inputs of investigation wing which piece of evidence was not admittedly given to the assessee during the time of the assessment proceedings which amounts to violation of natural justice. If the AO was heavily relying on the Investigation Wing Report then he was duty-bound to have provided a copy of the same to the assessee so that he can rebut or bring evidences to prove his case. When out of 23 shareholders 19 shareholders’ identity, creditworthiness and genuineness were proved with the same set of documents, taking out 4 parties to make an addition of ₹ 70 lakhs out of ₹ 4.20 crores has been made u/s 68 of the Act cannot be sustained. The CIT (A) has also rightly taken note that no adverse comments were made by the AO on the merit of the case and did not cast any finding that whether the documents furnished by the assessee to prove identity, creditworthiness and genuineness of the 4 shareholders were bogus or fabricated. In the light of the above, we find that the ld. CIT (A) has rightly discussed a number of judicial precedents to delete the addition made by the AO. So, therefore, we do not find any infirmity in the order passed by the ld. CIT (A) - Decided against revenue
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2016 (2) TMI 399
Carry forward of the deficit being the excess application of income to be set off against the income from property - whether the excess application of income during the year for charitable purposes can be carries forward and allowed to be set off in future years? - Held that:- AO directed to allow the carry forward of the amount of excess income applied during the year to the future year for set off against the income. - Decided in favour assessee.
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2016 (2) TMI 398
Extension stay beyond a period of 365 days - Held that:- As rightly submitted by the learned counsel for the Assessee, the existence of all conditions for grant of stay has already been considered by this Tribunal and at this stage, new conditions cannot be imposed. As rightly submitted by the learned counsel for the Assessee, the non-existence of financial hardship cannot be conclusive in the matter. In any event these parameters have already been tested by the Tribunal when it originally granted an order of stay subject to certain conditions. For the reasons given above, we direct that there shall be an order of stay of recovery of outstanding demand for a period of 180 days from this day or till disposal of the appeal of the Assessee by the tribunal, whichever is earlier.
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2016 (2) TMI 397
Disallowance u/s 40A - Held that:- The official proclamation that sub-section (3) of section 40A is being substituted to nullify the loophole created by the judicial decisions, the legal position remains the same even after the said substitution. The newly substituted subsection (3) contains the phrase "a payment or aggregate of payments made to a person in a day." .This expression is analogous to the phrase "in a sum" used in erstwhile Sec.40A(3) of the Act. The new provision contains "in a day". Therefore, the judicial interpretation of the expression "in a sum", i.e., a single sum, would equally apply in interpreting the expression "in a day" to mean a single day. Therefore the new sub-section (3) of the Act also will not apply when a payment to one person on a single day in the aggregate does not exceeding twenty thousand rupees. In other words, in each day, an assessee can make cash payment upto twenty thousand rupees, without any statutory bar. The CIT(A) in our view has therefore rightly given directions to the AO to verify if payment to one person on a single day exceeds ₹ 20,000/-. We do not find any infirmity in the order of the CIT(A). Unexplained cash credits u/s. 68 - Held that:- Once the firm has satisfactorily explained that the credit entries in the name of its partners represent the amount invested by them the burden of proof stood discharged and the amount cannot be treated as income of the firm under s. 68. In the light of the legal position stated above and in the light fact that the Assessee has satisfactorily shown receipt of cash from the partners the cash credit in question should be considered as satisfactorily explained. For the reasons given above, we do not find any grounds with the order of the CIT(A) in deleting the addition. Addition made u/s.40(a)(ia) - non deduction of tds - Held that:- Following the decision of the Hon’ble Supreme Court in the case of Vegetable Products Ltd. (1973 (1) TMI 1 - SUPREME Court), we hold that where two views are possible on an issue, the view in favour of the assessee has to be preferred. Disallowance of trick hire charges - Held that:- We are of the view that the disallowance is reasonable considering the quantum of expenditure for which there were no proper vouchers. The Assessee has not demonstrated that the quantum of expenditure on truck hire charges and receipts from plying trucks on hire in the present AY compares favourably with the expenditure on truck hire charges and receipts from plying of truck on hire in the past AYs. We therefore uphold the order of the CIT(A) on this issue.
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2016 (2) TMI 396
Entitlement to registration u/s 12AA - Held that:- The assessee neither or nor involved directly rendering any service relating to trade, commerce or business. The activity undertaken by the authority comes within the object of the general public utility but, it cannot be concluded that it involves the carrying on of any activity in the nature of trade, commerce or business. Unless the activity undertaken by the assessee comes within the ambit of trade, commerce or business, the proviso to section 2(15) of the Act would not get attracted. The assessee is created by the sovereign authority i.e. State of Andhra Pradesh for the purpose of development, orderly growth of industries and environmental upgradation by controlling through the assessee various aspects such as utilization of land, water and pollution relating to Petroleum, Chemical and Petrochemical Industry. Therefore, in our opinion, the assessee is entitled for registration u/s 12AA of the Act. - Decided in favour of assessee.
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2016 (2) TMI 395
Registration u/s 12AA denied - Held that:- At the time of granting registration, the Commissioner has to see that whether the assessee is established for the charitable purpose or not and whether the funds collected are being utilized for that purpose. Once the assessee has satisfied the conditions that it is existed for the purpose of charitable nature and the funds received also are being utilized to achieve the objects of the trust, the Commissioner has to grant the registration u/s 12AA of the Act. If at all doubts are there in respect of activities of the trust, there are other safeguards already provided by the Act. It can be considered at the time of the assessment and decided accordingly. In the present case, we find that the Ld. Commissioner rejected the registration u/s 12AA of the Act without there being any justified reasons. After careful consideration of the entire facts and circumstances of the case and also keeping in view of the judgement of Hon’ble Karnataka High Court, we are of the opinion that assessee deserve to be granted registration u/s 12AA of the Act. Thus, we quash the order passed by the Ld. Commissioner and grant registration u/s 12AA of the Act to the assessee - Decided in favour of assessee
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2016 (2) TMI 394
Valuation of closing stock on the basis of average rate of the purchase for the entire year - CIT(A) calculated the value of closing stock on the basis of FIFO Method (First In First Out) - Held that:- CIT(A) considered the value on material of last 3 months and accordingly assessed the value of closing stock. The assessee company is engaged in the business of manufacturing and export of textile and fabrics. No doubt the assessee company has to purchase raw materials for the manufacturing of export fabrics. He has to purchase raw material initially from the beginning time of assessment year and up to the end of the assessment year. The assessment of the value of closing stock on the basis of average cost of material of the whole year does not seem justifiable. The value of the closing stock is required to be assessed upon the value of the material purchased and cost of the last 3 months. On seeing the method of calculating the value of closing stock the method adopted by the learned CIT(A) is quite justifiable specifically in the circumstances when there is lot of fluctuating in the rates during the year. It is only a manner how to deal with the value of closing stock in the assessment. The learned Departmental Representative nowhere highlighted any ground which requires to be interfere with the findings of the learned CIT(A) under appeal. Therefore, finding no plausible and convincing reasons to interfere with the order passed by learned CIT(A). We are of the view that learned CIT(A) has passed the order on the specific issue judiciously and correctly which does not need to interfere at this stage accordingly this issue is decide in favour of the assessee and against the revenue. Addition made by estimating the Gross Profit @ 20% on sales per meter of finished cloth - Held that:- The assessee has shown the Gross Profit @ 5.93%. The Assessing Officer worked out the Gross Profit from the average per meter rate @ 24.33% for finished goods and @ 8.7% for grey. On seeing the book result and closing stock assessed, the Assessing Officer arrived at this conclusion that the book result is not correct therefore estimated Gross Profit rate should be @ 20% by considering rate of similar industry “The Ruby Mills Ltd.’ wherein Gross Profit has been shown @ 33% for A.Y. 2007-08 on turnover of ₹ 108,68,01,077/-. Accordingly, the Assessing Officer assessed the value of cloths. When the matter came before the First Appellate Authority then the First Appellate Authority arrived at this conclusion that the Assessing Officer compared the Gross Profit rate with the ‘Ruby Mills Ltd.’ which was manufacturing of the ladies dress material whereas the appellant was in manufacturing of suiting and shirting material. Learned CIT(A) also held that both the cases are not comparable. Therefore, the learned CIT(A) has deleted the said contentions. Even before us nothing was argued that any kind of material was purchased to which it can be estimated that the estimation of Gross Profit @ 20% was quite justifiable. No example of comparable industry of any kind was given before us to justify the estimated Gross Profit @ 20% per meter on finished cloths. Therefore in the said circumstances finding no material on record to interfere with the finding of the learned CIT(A). Hence issue in favour of the assessee and against the revenue.
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2016 (2) TMI 393
Revision u/s 263 - commission paid to the MD to be disallowed - Held that:- The terms of employment was already prescribed in the above resolution, which was for a period of five years with effect from Sept'01, 2007. Hence, the reappointment of the MD was with effect from 01/09/2007. The company can adopt the revised commission of 3% with effect from 01/09/2007 and not from the period 01/04/06 to 31/03/07. We find that the CIT's contention was right partially as the AO had not considered these points while completing the assessment. The assessee is allowed to claim the commission for this period only @ 1% not 3%. Considering the above observations, we dismiss the ground of appeal of the assessee. AO is, therefore, directed to allow the commission paid to the MD @ 1% of the net profit. Claim of depreciation on electrical installations @ 15% - Held that:- The definition of electrical fittings given are electrical wiring, switches, sockets, fans etc. These are electrical fittings which are independent in nature and it does not form part of any assets. Whereas in the present case the electrical installations which are different to electrical fittings as defined in the depreciation schedule in the IT Rules. These include line metering equipment, switch yard, HT motors and auto losses, cable work, lighting equipment etc. are installed as part of the plant & machinery. It cannot be separated from the plant & machinery. Hence, it has to be treated in line with the plant & machinery and the rate of depreciation of plant & machinery alone has to be adopted not of the rate of 'Furnitures and Fittings'. Considering the above discussion, we allow the grounds of the assessee. - Decided in favour of assessee Additional depreciation claimed on Air Pollution Equipment u/s 32(1)(iia) - Held that:- In the present case, the assessee had categorized the Air pollution equipment as special category assets and claimed accordingly. Since, it is categorized as special category and claimed 100% rate of depreciation, the assessee applied the special provision of claiming depreciation, as per the section 32(1)(iia)(D), it cannot again claim the additional depreciation. Even though it has not claimed 100% of the quantum of the value of assets due to the fact that the assets were acquired and utilized less than 180 days, it was eligible for only 50% of the rate of depreciation. Again, it cannot claim the additional depreciation u/s 32(1)(iia). Assessee also relied on the case of Cosmo Films Ltd. (2012 (9) TMI 281 - ITAT DELHI ). Reliance placed by the assessee on the said case is on the subject whether the assessee can claim the whole additional depreciation which is as incentive to the assessee, who are in the manufacturing sector and made investment on the plant & machinery. The same was restricted for the usage, which was installed and utilized for less than 180 days in the year of installation. Can the assessee claim the balance depreciation in the following year. It was decided affirmative. But in the present case, the facts are different, hence, the said case cannot be applicable to assessee. - Decided against assessee Disallowance of outstanding liability of leave encashment - Held that:- Following the consistent view taken by the Tribunal in assessee's own cases for earlier years, we find no justification to disallow the claim concluding the provisions made on account of leave encashment should be allowed although the liability may have to be quantified and discharged at a future date - Decided in favour of assessee
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Customs
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2016 (2) TMI 391
Refund of SAD - period of limitation - whether the claims were filed beyond the time limit prescribed - Notification No. 102/07-Cus - Held that:- where the goods are released on provisional assessment followed by the final assessment, the application seeking refund can be made within the period of one year or six months, as the case may be, of the final assessment as stipulated by Explanation II to Section 27 of the Act or within the enlarged period of one year from the date of provisional release as stipulated by the notification dated 1st August, 2008 read with Circular No. 23/2010-Customs, dated 29th July, 2010. The case is remanded to the adjudicating authority to sanction the refund as per the Hon'ble High Court's Order [2013 (9) TMI 705 - DELHI HIGH COURT] - Decided in favor of assessee.
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2016 (2) TMI 390
Refund of SAD - Notification No. 102/07-Cus dated 14.9.2007 - Validity of Circular No. 18/2013-Cus dated 29.4.2013 - The said refund claims were rejected by the Assistant Commissioner on the grounds that payment of 4% SAD has not been made by cash, but has been paid using the Reward Scrip i.e. Focus Product Scheme. The entire grounds of appeal are based on Circular issued by Board and at no stage they rely or even cited the provisions of any Notification or Rules. The Tribunal in case of M.B. Enterprise [2015 (12) TMI 578 - CESTAT AHMEDABAD] has rightly observed that there is no condition in Notification No. 102/07 that SAD should initially be paid through cash. The Tribunal has further observed that a right given under any Notification cannot be taken away by issue of Circular. - Decided against the revenue.
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2016 (2) TMI 389
Valuation - import of cranes - evasion of customs duty by: (i) working out the assessable value of cranes at ₹ 20/- per kg. to ₹ 40/- per kg., (ii) suppressing freight charges paid to the shipping line, (iii) preparing invoices on CIF basis whereas the purchase is mostly on FOB basis, (iv) getting bills of lading prepared to show fraudulently that the freight is pre-paid. - Held that:- whole case of undervaluation is essentially based on statements of certain people and the confessional statement of Shri Karim Jaria. However, the statements do not corroborate with each other. - cross-examination of persons whose evidence was relied upon was not allowed. The use of the word “documentary evidence” in para 24.7 of the order leaves us guessing as to what is the real documentary evidence on which undervaluation has been established by the Commissioner. Rather we find no evidence except a statement. Then there is no evidence to show that the Chartered Accountant’s Certificates produced by the appellant indicating the value of machinery as well as the invoices presented at the time of import are manipulated. It is not on record that any query was made regarding the genuineness of these documents. The adjudicating authority has neither followed the principles of natural justice as indicated in the paragraphs above nor has he followed the correct legal principles to arrive at the transaction value. Therefore the case needs to be remanded for fresh adjudication. - Matter remanded back - Decided partly in favor of appellants.
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2016 (2) TMI 388
Detention of live consignment - request for extension of inquiry - Mis-declaration of import of processed/polished pearls as raw pearls - Claim of exemption against Replenishment License issued - Held that:- As the investigation requires time to verify records of past imports in the office of the PCCCC, I hold that there is no specific reason for extension of time with respect to live consignment dated 8-4-2014. The live consignment cannot be kept under further detention for making the inquiry into past imports as the goods are neither restricted nor prohibited. It has further come on record that the Revenue has issued show cause notice dated 25-5-2015 to the appellant herein, with respect to the live Bill of Entry dated 8-4-2014 on the ground of misdeclaration and/or undervaluation. I find that there is no facts and/or details about the past imports and/or inquiry made in the matter for which time has been sought for, extension under the provisions of Section 110(2). The show cause notice dated 25-5-2015 only requires the appellant to show cause as to why benefit under Notification No. 60/2002 should not be denied and further disputing the description and valuation of the pearls under the live consignment. The learned Commissioner is in error in holding that there is sufficient cause for extension of time for issue of show cause notice under the provisions of Section 110(2). - The Revenue directed to return the pearls seized after retaining samples - Decided in favor of assessee.
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2016 (2) TMI 387
Demand of duty - Import of fake / forged DEPB licences - Appellant purchased the DEPB licneces from the market - Levy of interest and penalty - Held that:- The Hon'ble Apex court has clearly laid down and discussed the issue what is "Fraud" and "Caveat Emptor" and clearly held that buyer has no remedy against the seller and takes all risks of defect and clearly held that appellant, buyer of the licence has to establish that he made enquiry and took requisite precautions to find out the genuineness of the licence which he purchased and the apex court said that if he has not done so, the consequences had to follow. Appellants filing F.I.R after the fraud was detected by the Department is of no consequence and it is only an afterthought to save their lapses. Therefore the apex court's decision in Aafloat Textiles case [2009 (2) TMI 75 - SUPREME COURT] is clearly applicable to the present case and the appellant's contention that above Supreme Court judgement is per incurium is not acceptable. The goods were cleared by the appellant by forged/fake DEPB licences and forged TRAs - Demand of duty confirmed - though penalty waived - Decided against the appellant.
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Corporate Laws
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2016 (2) TMI 386
Winding up petition - Held that:- It is prima facie evident that the respondent company has neglected to pay its due debt to the petitioner Bank despite its obligation and notice, and therefore per se is deemed to be insolvent. The petition is accordingly, admitted. The citation of the winding up petition being admitted be published by the petitioner in two news papers i.e. The Times of India (English) and Dainik Bhaskar (Hindi) Jaipur Edition in terms of Rule 24 of the Companies (Courts) Rules, 1959. The Citation be also published in Official Gazette.
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Service Tax
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2016 (2) TMI 417
Cenvat Credit - Scope of input services utilised to provide Renting of Immovable Property as Output Services - payment of service tax on construction of premises which he intended to put to use as commercial complex and rented out the premises to various entities - Held that:- tax liability on renting of immovable property will not arise unless the immovable property comes into an existence, such immovable property will be in the nature of constructed building/warehouse. - unless the commercial complex is constructed and completed in all respects, the same could not be rented out by the appellant is a common sense - credit allowed - Decided in favor of assessee.
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2016 (2) TMI 392
Valuation - inclusion of handling charges @ of 1% of the price of spares used in the repairing motor vehicles - Held that:- s the Commissioner (Appeals) finding that the handling charges were in relation to sale of goods and not in relation to provision of service is sustainable; there was no service involved in sale of such spares across the counter. - such handling charges were held to be not liable to service tax. - No demand - Decided in favor of assessee.
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Indian Laws
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2016 (2) TMI 416
Anticipatory bail granted to the appellant by the Additional Sessions Judge, Court No.16 of Ahmedabad City Sessions Court challenged - Held that:- As no purpose would be served in compelling the appellant to go behind bars, as an undertrial, by refusing the anticipatory bail in respect of alleged incident which is 17 years old and for which the charge is framed only in the year 2014. The investigation is complete and there is no allegation that the appellant may flee the course of justice. The FIR was registered and the trial commenced in the year 2001; albeit with the charge framed under Section 506(2) IPC, and during all these periods, the appellant has participated in the proceedings. There is no allegation that during this period he had tried to influence the witnesses. In the aforesaid circumstances, even when there is a serious charge levelled against the appellant, that by itself should not be the reason to deny anticipatory bail when the matter is examined keeping in view other factors enumerated above. The prosecutrix has moved an application in these proceedings for perusing new evidence on the basis of which she claims that the appellant has committed breach of conditions of anticipatory bail and regular bail. It is not necessary for us to go into the allegations made in this application. She would be at liberty to make such an application before the trial court for cancellation of bail. We may clarify that we have not gone through the merits of this application, and as and when such an application is made, the trial court would be free to examine the same and pass the order as the trial court deems fit in accordance with law. Before we part, in order to balance the equities, we are of the view that the trial in this case may be expeditiously conducted and the trial court should endeavour to complete the same within one year.As a result, we set aside the impugned judgment and restore the order of the learned Additional Sessions Judge granting anticipatory bail to the appellant on the conditions mentioned in the said order. Appeals are allowed in the aforesaid terms.
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