TMI Tax Updates - e-Newsletter
February 4, 2017

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax Indian Laws

Highlights / Catch Notes

• Income Tax:

  Once it is found that no expenditure was incurred in earning this income, there would be no further expenditure in relation thereto that falls within the ambit of section 14A - HC
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• Income Tax:

  Condonation of delay in filing the Return of Income - When once an authority has been conferred discretion to condone the delay, application seeking condonation of delay of one day cannot be rejected for such reasons as are assigned by the Board in its order dated 05.05.2014. - HC
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• Income Tax:

  Export commission paid outside India on service rendered outside India was not liable to deduction of tax at source, consequently no disallowance is warranted. - AT
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• Income Tax:

  Even the provision of Section 50C r.w.s. 69 and 69B, i.e. the special provision for full value of consideration in certain cases creates a legal friction for taxing capital gains in the hands of seller and it cannot be extended for taxing difference between apparent consideration and valuation done by stamp valuation authorities as undisclosed investment - AT
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• Income Tax:

  The claim of the assessee to allow expenses from the income earned by way of commission on providing accommodation entries of transportation is rejected. - AT
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• Income Tax:

  Interest receipts earned by the assessee out of FDs kept with Banks by way of margin money made for the purposes of the assessee’s business of import/ export trading in diamonds, constitutes business receipts/income and is therefore eligible for deduction u/s 10AA - AT
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• Income Tax:

  AO cannot make the addition u/s 69C by merely relying on information obtained from the Sales Tax Department, the statements/ affidavits of third parties, without the assessee being afforded any opportunity of cross examination of those persons for non-response to information called for u/s 133(6)- AT
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• Income Tax:

  CIT(A) was justified in estimating the income from the on-money receipts @ 17% for this year also by following the order passed by the Settlement Commission. - AT
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• Service Tax:

  Definition of AOP - immovable property given on rent by 8 joint co-owners (respondents) - whether these 8 co-owners can be said to be AOP, and whether each co-owner has to be denied exemption or not? - Exemption to each individuals allowed - AT
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• Service Tax:

  Levy of tax - advisory services - taxable under the head 'management consultancy service' - neither the original authority nor the first appellate authority have examined the nature of services actually provided to the client - demand set aside - AT
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• Service Tax:

  Interest on delayed payment of tax - There is no whisper in the SCN concerning any ingredient present for invocation of extended period - demand for interest is certainly hit by limitation and will not sustain. - AT
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• Service Tax:

  Classification of service - loading agreement for loading of coal from coal face into tipper trucks - service is not classifiable under mining service - AT
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• Central Excise:

  Re-credit of duty from cenvat account - the duty was paid twice on the same clearances however the duty passed on is only one time duty paid on the clearances, therefore the unjust enrichment does not apply - AT
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• Central Excise:

  Remission of duty u/r 21 of CER - damage of godos due to flood and rains - destruction and disposal of goods without verification/inspection cannot be condoned - AT
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• Central Excise:

  Classification of parts of manufactured motor - stators and rotors - on the date on which the earlier circular was in force, the SCN could not have been issued nor the demand raised - HC
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• Central Excise:

  100% EOU - Refund claim - Rule 5 of CCR, 2004 - rejection of refund claims merely on the ground of nexus with the manufacture of the product is not legally tenable - AT
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• VAT:

  Extended period for exercise of revisional jurisdiction will be applicable only in cases where period prescribed prior to the amendment had not expired and not where the period had earlier expired as the amendment cannot put life to a dead claim. - HC
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TMI Short Notes

• Bill:

  Income from other sources - tax on gifts and receipt of any money or immovable property or specified movable property without or inadequate consideration - Scope of Section 56 expended - all categories of assessees shall be taxable - Budget 2017-18 w.e.f. AY 2018-19

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• Bill:

  Capital Gains - meaning of "adjusted", "cost of improvement" and "cost of acquisition" u/s 55 - reference of 1st day of April, 1981 to be replaced with the 1st day of April, 2001 - Budget 2017-18 w.e.f. AY 2018-19

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• Bill:

  Exemption from Capital Gains tax u/s 54EC on investments in bonds - specified bonds shall include any other bond as notified by the Central Government in this behalf - Budget 2017-18 w.e.f. AY 2018-19

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• Bill:

  New section 50CA - the fair market value of such shares determined in the prescribed manner shall be deemed to be the full value of consideration for transfer of share other than quoted share - Budget 2017-18 w.e.f. AY 2018-19

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• Bill:

  Determination of cost of specified transfers u/s 49 - the transfer of an asset, being the asset held by a trust or an institution in respect of which accreted income 1.6.2016 (Retrospective)

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• Bill:

  Determination of cost of specified transfers u/s 49 - transfer of land or building under a specified agreement (e.f. Joint Development Agreement (JDA)) - Budget 2017-18 w.e.f. AY 2018-19

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• Bill:

  Determination of cost of specified transfers u/s 49 - Transfer in casa of Land Pooling Scheme covered under the Andhra Pradesh Capital City Land Pooling Scheme (Formulation and Implementation) Rules, 2015 - Budget 2017-18 w.e.f. AY 2018-19

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• Bill:

  Determination of cost of specified transfers u/s 49 - in case of any transfer by a unit holder of a capital asset, being a unit or units, held by him in the consolidating plan of a mutual fund scheme - Budget 2017-18 w.e.f. AY 2017-18 (Retrospective)

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• Bill:

  Determination of cost of specified transfers u/s 49 - in case of conversion of preference shares of a company into equity shares of that company - Budget 2017-18 w.e.f. AY 2018-19

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• Bill:

  Determination of cost of specified transfers u/s 49 - any transfer in a demerger, of a capital asset, being a share or shares held in an Indian company – cost of the previous owner to be taken - Budget 2017-18 w.e.f. AY 2018-19

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• Bill:

  Mode of computation Capital Gains u/s 48 - Indexed Cost - Cost Inflation Index - reference of 1st day of April, 1981 to be replaced with the 1st day of April, 2001 - Budget 2017-18 w.e.f. AY 2018-19

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• Bill:

  Mode of computation Capital Gains u/s 48 - full value of consideration - in case of an assessee being a non-resident, any gains arising on account of appreciation of rupee against a foreign currency at the time of redemption of rupee denominated bond of an Indian company held by him - Budget 2017-18 w.e.f. AY 2018-19

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• Bill:

  Capital Gains - conversion of preference shares of a company into equity shares of that company shall also not be regarded as transfer - Budget 2017-18 w.e.f. AY 2018-19

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• Bill:

  Capital Gains - transfer made outside India of a capital asset being rupee denominated bond of Indian company issued outside India, by a non-resident to another non-resident shall not be regarded as transfer - Budget 2017-18 w.e.f. AY 2018-19

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• Bill:

  Capital Gain - date of transfer of land or building under a specified agreement (e.f. Joint Development Agreement (JDA)) - method of valuation in such cases - Budget 2017-18 w.e.f. AY 2018-19

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• Bill:

  Deemed profit u/s 44AD - existing rate of deemed total income of 8% reduced to 6% in case of total turnover or gross receipts which is received through banking channel - Budget 2017-18 w.e.f. AY 2018-19

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• Bill:

  Threshold limit for getting books of accounts audited u/s 44AB - Limit enhanced from 1 Crore Rupees to 2 Crore Rupees in case of a person who declares profits and gains for the previous year u/s 44AD - Budget 2017-18 w.e.f. AY 2017-18 (Retrospective)

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• Bill:

  Threshold limit for maintenance of books of accounts in case of individuals and HUF - Monetary limit enhanced from ₹ 1,20,000 to ₹ 2,50,000 of total income and from ₹ 10,00,0000 to ₹ 25,00,000 of total sales, turnover or gross receipts, respectively - Budget 2017-18 w.e.f. AY 2018-19

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• Bill:

  Interest Income on the bad or doubtful debts not to be taxed on accrual of income basis - co-operative societies brought on at par with Scheduled banks and other financial institutions - Section 43D - Budget 2017-18 w.e.f. AY 2018-19

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• Bill:

  Payment of Interest to Co-operative Banks shall be allowed on actual payment basis as is allowed in case of scheduled bank or public financial institutions etc. u/s 43B - Budget 2017-18 w.e.f. AY 2018-19

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• Bill:

  Change in the Definition of Actual Cost in respect of Capital Assets in respect of which deduction or part of deduction allowed u/s 35AD - New proviso to the Explanation 13 to Section 43(1) - Budget 2017-18 w.e.f. AY 2018-19

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• Bill:

  Capital expenditure - Change in the Definition of Actual Cost u/s 43(1) - Disallowance of depreciation where payment is made in excess of ₹ 10,000 in a day - Budget 2017-18 w.e.f. AY 2018-19

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Articles

• Budget 2017 – Clause 12 -Property held as stock-in-trade - anomalies in proposed amendment with some suggestions.
• BUDGETARY CHANGES IN CENTRAL EXCISE
• BUDGETARY CHANGES IN CUSTOMS
• AUDIT UNDER MODEL ‘GST’ LAW

Notifications

• Income Tax

• 8/2017 - dated 31-1-2017 - IT
  U/s 35(1) (ii) Of IT Act 1961 Central Government approved M/s Christian Medical College Vellore Association, Vellore

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• 7/2017 - dated 31-1-2017 - IT
  U/s 35(1) (ii) of IT Act 1961 Central Government approved M/s Center of Innovative & Applied Bio-processing('CIAB')

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Circulars / Instructions / Orders

• Service Tax - 203/1/2017-Service Tax - dated 2-2-2017
  Mentioning of Minor Head Code for accounting of Refund
• FEMA - 30 - dated 2-2-2017
  Risk Management and Inter-bank Dealings: Permitting Non Resident Indians (NRIs) access to Exchange Traded Currency Derivatives (ETCD) market

News

• Tax Relief under GST

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• Blockbuster listing for BSE; shares end nearly 33% higher

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• Closure of Public Sector Undertakings (PSUs)

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• Total direct tax collections up to 16th January 2017 amount to ₹ 5,76,408 crore; the Budget Estimates fixed for direct taxes are ₹ 9,80,000 crore

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• Cashless Initiatives in Indian Railways

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• 100 per cent FDI in White Labelled ATM operations

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• Revise the tax treaties with partner countries to enable the CBI and ED to use the data for prosecution

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• Tax Relaxation under NPS

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• First Advance Estimates released by the Central Statistics Office (CSO), the economy is estimated to grow at 7.1 per cent in 2016-17, as compared to the growth of 7.9 per cent achieved in 2015-16

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• Credit and debit cards including RuPay Cards issued by the public sector banks

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• Proposal to waive off bank transaction charges and decrease interest rate for credit cards to promote cashless transactions

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• From November 10, 2016 upto December 19, 2016, banks have reported that banknotes worth ₹ 5,92,613 crore have been issued to public

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• Meeting conducted by RBI prior to demonitization

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• BHIM Application launched on 30th December 2016: Salient features include Instant money transfer at all times among others

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• Use of USSD for Cashless Payments

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• Utilisation of Foreign Exchange Reserves

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• Use of Bitcoins

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• Revised 40 tax treaties to use info for other purposes: Govt

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• RBI Reference Rate for US $

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• Sixth Bi-monthly Monetary Policy Statement 2016-17 at 2.30 pm on February 08, 2017

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Case Laws:

• Income Tax

• 2017 (2) TMI 126
  Payment towards Royalty - whether would be 'Revenue expenditure' or 'Capital expenditure' - Held that:- In the present case, a concurrent finding has been recorded by CIT(A) and Tribunal both that on termination of Agreement, which was for a period of five years, Assessee would return all relevant material relating to know-how acquired through Agreement. This is one of the relevant consideration observed in Alembic Chemical works Ltd. Vs. CIT(A) (1989 (3) TMI 5 - SUPREME Court ) to hold that in such a case, payment towards ''Royalty' would be 'Revenue expenditure' and not 'Capital'. The agreement also shows that it was not an exclusive right available to the Assessee, inasmuch in para 13 of Annexure, of foreign collaboration, approval accorded by Government of India provides that in case item of manufacture is one which is patented in India, payment of 'Royalty'/lump sum made by Indian Company to Foreign collaborator, during period of agreement shall constitute full compensation for use of patent right till expiry of life of patent and Indian Company shall be free to manufacture that item even after expiry of the collaboration agreement without making any additional payments. Assessee claimed that royalty payment is part of percentage of selling price of product and not for acquiring technical know-how of manufactured licensed product having enduring benefit. These facts available on record have not been disputed and we have not been shown any authority so as to justify to take a different view than what has been taken by Tribunal. - Decided in favour of Assessee

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• 2017 (2) TMI 125
  Addition made on account of disallowance under section 14A - whether the assessee can be said to have incurred any expenditure at all or any part of the said expenditure in respect of the exempt income viz. dividend and interest that arose out of the securities that constituted the assessee’s stock-in-trade? - whether “return of investment” or “cost recovery” would fall within the expression “expenditure incurred” in section 14A? Held that:- What is disallowed is expenditure incurred to “earn” exempt income. The words “in relation to” in section 14A must be construed accordingly. Thus, the words “in relation to” apply to earning exempt income. The importance of the observation is this. We have held that the securities in question constituted the assessee’s stock-in-trade and the income that arises on account of the purchase and sale of the securities is its business income and is brought to tax as such. That income is not exempt from tax and, therefore, the expenditure incurred in relation thereto does not fall within the ambit of section 14A. Now, the dividend and interest are income. The question then is whether the assessee can be said to have incurred any expenditure at all or any part of the said expenditure in respect of the exempt income viz. dividend and interest that arose out of the securities that constituted the assessee’s stock-in-trade. The answer must be in the negative. The purpose of the purchase of the said securities was not to earn income arising therefrom, namely, dividend and interest, but to earn profits from trading in i.e. purchasing and selling the same. It is axiomatic, therefore, that the entire expenditure including administrative costs was incurred for the purchase and sale of the stock-in-trade and, therefore, towards earning the business income from the trading activity of purchasing and selling the securities. Irrespective of whether the securities yielded any income arising therefrom, such as, dividend or interest, no expenditure was incurred in relation to the same. Once it is found that no expenditure was incurred in earning this income, there would be no further expenditure in relation thereto that falls within the ambit of section 14A. All that the assessee does thereafter i.e. after dividend and interest is received is to protect, preserve and utilize the same. The expenditure incurred in that regard would be to administer and manage the same. In other words, such expenditure cannot be said to be for the purpose of earning the same. An amount once received as income loses its character as income and thereafter forms a part of the assets or wealth of the assessee. There is no concept, such as, once an income always an income. - Decided in favour of assessee

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• 2017 (2) TMI 124
  Reopening of assessment - notice under Section 133 - Held that:- So far as submission on behalf of the Revenue that during the assessment proceedings the learned Assessing Officer did not hold any inquiry and called for the information from the concerned share applicants and/or did not issue any notice to the concerned share applicants under Section 133 of the IT Act is concerned, it is required to be noted that the assessee did furnish all the necessary details with respect to share applicants including the names, address and even the PAN card number. Thereafter, if the Assessing Officer is doubting the same, it is for the Assessing Officer to issue the notices under Section 133 of the IT Act. If the learned Assessing Officer is satisfied that the reply given by the assessee and/or the details furnished by the assessee, the learned Assessing Officer may not even thereafter issue the notice under Section 133 of the IT Act. However, on the aforesaid ground the reopening is not permissible. In view of the above and for the reasons stated above, when it has been found that the reasons / grounds on which the assessment is sought to be reopened were already gone into in detail by the learned Assessing Officer while framing the scrutiny assessment and after raising the specific queries with respect to increase in the share capital, with respect to share application money and the income of the assessee from the trading in fabrics, only thereafter when the learned Assessing Officer framed the assessment, the impugned reassessment proceeding is not permissible.

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• 2017 (2) TMI 123
  Allowable expenditure on account of statutory liability under Section 43B - Held that:- The assessee was accused of misdeclaration and consequential differential liability towards differential duty. If there was no such misdeclaration, the Revenue could not have contended that the amounts duly paid constituted allowable expenditure on account of statutory liability under Section 43B. That the Assessee did not do so but was quite rightly made to do so does not in any manner detract from its basic liability which it always had to satisfy. Therefore, the contentions of the Revenue are entirely misconceived and are rejected. The appeal does not involve any substantial question of law.

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• 2017 (2) TMI 122
  Addition made under Section 14A - application of Rule 8D - Held that:- Rule 8D of the Rules is only applicable from 2008-09 as held by this Court in Godrej & Boyce Mfg. Co. Ltd. (2010 (8) TMI 77 - BOMBAY HIGH COURT ). So far as the said objection is concerned with regard to own funds available with the assessee and the amounts invested in tax free investments, it is very pertinent to note that the Revenue does not dispute the figures as indicated in the balance sheet for year ending 2004 and 2005 and relied upon by the Tribunal. It is also not disputed that the same were a part of the record. Therefore the mere fact that attention was not specifically invited to these figures before the Assessing Officer would not by itself justify the Tribunal ignoring the same while dealing with an appeal under the Act. Substitute the 'full value of consideration' received on sale of shares by its 'fair market value' in the subject Assessment Year - Held that:- In the present facts the Revenue accepts the documents but only substitutes the consideration. Therefore, the issue is whether such substitution of full consideration received by fair market value of the asset is permissible. As held by the Tribunal at the relevant time there was no power vested in the authorities under the Act to substitute a full value of consideration received for sale of shares by fair market value in respect of stocks and shares. The power to substitute full consideration with fair market value in respect of shares came into the statute only on introduction of Section 50D with effect from 1st April, 2013. Moreover, such a power under Section 50D of the Act is only to be exercised if the Assessing Officer comes to a finding that the consideration received is not ascertainable or cannot be determined. Appeal admitted : (iii) Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in deleting the addition of ₹ 13,25,00,000/made under Section 56(1) of the Income Tax Act being the share application money fortified without appreciating the fact that the transactions of forfeiture was clearly manipulated in a way to benefit the assessee company without any incidence of tax? (iv) Whether on the facts and in the circumstances of the case and in law, the Tribunal was correct in deleting the addition of ₹ 4,05,36,593/made under Section 56(1) of the Act being the value of the leasehold right received by the assessee from its associate concern at NIL value, without appreciating the fact that the transactions was manipulated in a way to benefit the assessee company without any incidence of tax?”

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• 2017 (2) TMI 121
  Reopening of assessment - purchases made from the sister concerns - Held that:- In both the cases assessment for AY 2005-2006 is sought to be reopened on the grounds reproduced hereinabove. However, it is required to be noted that the issue/question with respect to the purchases made from the sister concerns and the price paid to these sister concerns were as such gone into in detail by the Assessing Officer during the course of scrutiny assessment proceedings. Specific queries were asked by the Assessing Officer with respect to the transactions with the sister concerns and the purchase price paid to the sister concerns and the said queries were satisfied by the assessee concerned. The assessee also justified the purchases from the sister concern and also justified the purchase price paid to the sister concerns. Therefore, when the aforesaid issue was already gone into in detail by the Assessing Officer, subsequent re-opening on the very ground can be said to be a mere change of opinion by the subsequent Assessing Officer. As held by the Hon'ble Supreme Court in the case of Commissioner of Income-tax v. Kelvinator of India Limited [2010 (1) TMI 11 - SUPREME COURT OF INDIA ] on the mere change of opinion by the subsequent Assessing Officer, reopening of assessment is not permissible. As observed hereinabove, the issue with respect to the purchases made from the sister concerns and the price paid to the sister concern was in fact gone into in detail by the Assessing Officer during the course of scrutiny assessment proceedings. Under the circumstances, the impugned Notices to reopen the assessment for A.Y 2005-2006 in each case on the grounds/ reasons stated by the Assessing Officer cannot be sustained and the same deserve to be quashed and set-aside on the aforesaid ground alone.

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• 2017 (2) TMI 120
  International transaction being reimbursement of advertisement expenses incurred by the Associated Enterprise of the assessee in Dubai, Egypt and Malaysia at arm's length of the basis of the profits earned by the assessee on its entire exports of various products on application of Rule 10B(1)(e) - Held that:- TPO has to examine whether or not the method adopted to determine the ALP is the most appropriate and also whether the comparables selected are appropriate or not. It is not part of the TPO's jurisdiction to consider whether or not the expenditure which has been incurred by the respondent assessee passed the test of Section 37 of the Act and / or genuineness of the expenditure. This exercise has to be done, if at all, by the Assessing Officer in exercise of his jurisdiction to determine the income of the assessee in accordance with the Act. In the present case, the Assessing Officer has not disallowed the expenditure but only adopted the TPO's determination of ALP of the advertisement expenses. Therefore, the issue for examination in this appeal is only the issue of ALP as determined by the TPO in respect of advertisement expenses. The jurisdiction of the TPO is specific and limited i.e. to determine the ALP of an International Transaction in terms of Chapter X of the Act read with Rule 10A to 10E of the Income Tax Rules. The determination of the ALP by the respondent assessee of its advertisement expenses has not been disputed on the parameters set out in Chapter X of the Act and the relevant Rules. In fact, as found both by the CIT(A) as well as the Tribunal that neither the method selected as the most appropriate method to determine the ALP is challenged nor the comparables taken by the respondent assessee is challenged by the TPO. Therefore, the adhoc determination of ALP by the TPO dehors Section 92C of the Act cannot be sustained.

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• 2017 (2) TMI 119
  Validity of notice under Section 147/148 - Held that:- In the present case, it is not an investment, which is sought to be enquired or made basis for reopening of assessment but the source of money since it was not disclosed and did not form part of record on the basis whereof assessment was made, hence a new material, and show that the amount constitute escaped income and that would justify reassessment proceeding and issue of notice under Section 148 of Act, 1961. It is not a change of opinion but there is substantive material available before the Assessing Authority justifying proceedings of reassessment under Section 147, and, therefore, notice issued under Section 148 cannot be said to be illegal or without jurisdiction. The argument advanced otherwise is invalid and rejected. In the facts and circumstances of the case in hand, we do not find any illegality in issuing notice by Assessing Office under Section 147/148 of Act, 1961 and the notice issued is just and valid. - Decided in favour of Revenue and against Assessee.

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• 2017 (2) TMI 118
  Condonation of delay - delay in filing the Return of Income - Held that:- In the instant case, there is no dispute or denial of the fact that the Return of Income filed by the Respondent/Assessee for the Assessment Year 2010-11, has been uploaded sometime past 00.00 hours on 15.10.2010. One can take judicial notice of the fact that uploading of Return requires not only an effort but also consumes sometime. If the Assessee has encountered certain hardship or difficulty in uploading his return, as alleged by him due to a technical snags in the website of the Income Tax Department due to the last hour rush of filing of Returns, the delay deserves to be condoned. When once an authority has been conferred discretion to condone the delay, application seeking condonation of delay of one day cannot be rejected for such reasons as are assigned by the Board in its order dated 05.05.2014. Hence, we are of the opinion that the Board has not exercised its discretion properly in the matter and in keeping with the legal principles relevant for such consideration. Hence, we have no hesitation to come to the conclusion that the learned Single Judge has rightly allowed the writ petition and set aside the order dated 05.05.2014 passed by the Board. The net result is, the delay in filing the Return of Income by the Respondent/Assessee for the assessment year 2010-2011, beyond 15.10.2010 stands condoned

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• 2017 (2) TMI 117
  TPA - computation of ALP - selection of comparable - Held that:- DRP is not correct in holding that the TPO can compute the ALP by considering only the two companies which have been selected by the assessee and accepted by the TPO for computing the ALP. Further, the TPO u/s 92CA of the Act has conducted his own search for comparable companies and has arrived at Acropetal Technologies Ltd and Accuspeed Engineering Ltd and the assessee also has accepted these companies as comparables by not objecting to the same before the DRP. Therefore, in view of the fact that the TNMM is the indirect method, requiring a reasonable set of comparables, to arrive at the correct ALP, we do not agree with the directions of the DRP. Disallowance of the claim of the assessee u/s 10A - Held that:- We find that the assessment in the case of the assessee before us was still open as the assessee has filed its objections before the DRP against the draft assessment order and the final assessment order is passed only pursuant to the directions of the DRP u/s 144C(13) of the Act. Therefore, the decision of the Hon'ble Supreme Court in the case of the CIT vs. Nagpur Hotel Owners [2000 (12) TMI 99 - SUPREME Court ] is not strictly applicable to the facts of the case of the assessee as in the assessee’s case, the assessment order has not yet been passed and the assessee has filed the relevant information before the DRP. Therefore, we deem it fit and proper to remand the issue of the computation of deduction u/s 10A of the Act to the file of the AO with a direction to verify the claim in accordance with law after taking note of Form 56F and other documents filed by the assessee before the DRP. Ground treated allowed for statistical purposes.

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• 2017 (2) TMI 116
  Adjustment on account of ‘Royalty’ Payments in relation to Corn and Sunflower seeds - comparable agreements which are based on different geographical region - Held that:- The geographical location becomes very vital factor in certain cases because one has to take into account the market condition, the laws in force, cost of labour, capital, overall economic level of competition, etc. However, in the present case, it has been brought to our notice that, the Assessing Officer/TPO in earlier years consecutively in three assessment years has specifically dealt and analyse the similar agreements of the assessee’s AEs with third parties in the different geographical regions. Therefore, no exception should be carved out in this year and accordingly, these agreements can be examined or analyzed by the TPO if the geographical location does not have any material effect on the determination of the prices. Thus, we direct the TPO/AO that while carrying out the comparability analysis under CUP method, should also examine these agreements as referred to above by different AE’s with third parties to benchmark the ALP of ‘royalty payment’. In case, the Internal CUP are not available or the comparability analysis is not possible then External CUP can be explored by looking into the ‘Royalty Stat Data’ available for the Indian comparables working under the similar kind of technical agreements and conditions for which royalty is being paid. Thus, with this direction, the issue of royalty is being sent back to the file of the AO/TPO for re-adjudication in line of the direction given herein above. Transfer Pricing Adjustment on account of ‘location savings’ - addition made by the TPO on the reasoning that assessee has not received any compensation from the AE on account of the advantage of location, that is, operating in India has led to a lower cost saving on account of cheap labour, etc. - Held that:- Comparison of the transactions with an uncontrolled transaction is the key factor and primary requirement under our Transfer Pricing Laws before resorting to any kind of adjustment of the ALP. It is also not clear whether the TPO has treated the location saving as an independent international transaction or it is just an adjustment on the determination of profit of the assessee. If it is an independent international transaction, then it needs to be benchmarked with uncontrolled transaction by carrying out comparability analysis under prescribed methods. On the other hand, if it is an adjustment on the profit of the assessee, then the TPO has to demonstrate that firstly, the profit margin of the assessee, under TNMM is incapable of determining the Arm’s Length Prices and in the case of the assessee there are no independent local comparables in India to carry out the comparability analysis for determining of the ALP. Such an arbitrary adhocism for making such huge adjustment in the profit sans any Transfer Pricing analysis under the prescribed provisions cannot be sustained. Hon’ble Delhi High Court in Li and Fung India Pvt. Ltd (supra) too has observed that. “ Tax authorities should base their conclusions on specific facts and not on vague generalities, such as “significant risks”, “functional risks”, “enterprise risk” etc. without any material on record to establish such findings. If such findings are warranted, they should be supported by demonstrable reason, based on objective facts and the relative evaluation of their weight and significance”. Thus, the Transfer Pricing adjustment cannot be on vague generalities. Accordingly, the adjustment made on account of ‘location saving’ for sums amounting to ₹ 54,69,43,636/- is directed to be deleted. Transfer Pricing adjustment on account of green environmental cost savings - Held that:- The working of the environmental cost attributed by the assessee has already been incorporated above, which has not been rebutted by any of the authorities. The TPO and the DRP without referring to any comparable data or carrying any kind of comparability analysis with local Indian comparables operating in similar economic circumstance as the assessee itself, where all the comparable companies in the similar industry carry similar risk has proceeded to make the adjustment on account of environment saving or “green costs” in the ALP which again is against the Transfer Pricing principles as enshrined in our Income-tax provisions. Any such savings if at all is embedded in the margin of the comparables and there cannot be any additional attribution. Such an ad-hoc adjustment in an arbitrary manner sans any sanction or authority under the Income-tax provisions and that to be without there any comparable transactions with the local comparables cannot be sustained. The TPO has not demonstrated as to how and under what comparability analysis he has found that assessee has got the benefit of environmental/green costs savings and it is materially affecting the price under arms length conditions. Our finding and observations given with regard to location saving adjustment in the foregoing paragraphs will also apply here. Accordingly, we do not find any reason and justification for such adjustment and same is directed to be deleted. Setting off the brought forward loss pertaining to Profenofos unit against the profits of the current year while computing deduction under Section 80-IB - Held that:- Each undertaking or unit is to be treated as independent and separate unit and it is those industrial undertaking which have a profit or gain are to be considered for computing the deduction. The loss making industrial undertaking would not come into picture at all. Thus we allow the claim of the assessee. Addition of closing stock on account of un-utilized CENVAT credit - Held that:- Restore the matter to the file of the Assessing Officer for deciding this issue in line with the directions given above that adjustment on account of duty u/s 145A is required to be made at all stages including opening stock purchase and sales which is in the line of the decision of Hon’ble Bombay High Court in the case of Mahalaxmi Glass Works Pvt. Ltd (2009 (4) TMI 182 - BOMBAY HIGH COURT ). Non granting of depreciation on repairs and maintenance of the building treated as capital in nature in the final assessment order of the assessment year 2008-09 as raised vide ground No.9, before us it has been submitted that, similar depreciation has been granted by Assessing Officer for the assessment year 2010-11, however, the same has not been given in this year. Accordingly, we direct the Assessing Officer to grant the depreciation as repair and maintenance to the building has been treated as capital expenditure and also in line with the assessment year 2010-11. Non-granting of TDS credit, we direct the Assessing Officer to look into the matter and grant the credit accordingly. Chargeability of interest under section 234B - Held that:- We accordingly direct the Assessing Officer to compute the interest under section 234B after giving due credit of the TDS amount.

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• 2017 (2) TMI 115
  TDS u/s 195 - disallowance made on account of payment made for export commission on which no TDS was deducted - Held that:- CIT(A) that after relying on the various judicial pronouncements correctly found that export commission paid outside India on service rendered outside India was not liable to deduction of tax at source, consequently no disallowance is warranted. Disallowance on account of mark to market loss - Held that:- As the AO has already verified the loss and treated it as expenditure, the CIT(A) allowed assessee’s ground. We do not find any infirmity in the order of CIT(A) insofar as in the remand report itself the AO has verified assessee’s loss so claimed and found the same to be explained. We do not find any infirmity in the order of CIT(A). Disallowance for professional and technical services without deduction of tax at source - Held that:- We have considered rival contentions and found that out of the sum paid amounting to ₹ 1,06,908/-, ₹ 72,980/- related to reimbursement of expenses in the form of document attestation fees, translation charges etc. and hence, TDS was not required to be made. However, as regards the balance sum of ₹ 34,000/- which were in the nature of professional charges, TDS was required to be made. By considering the nature of payment vis-à-vis reimbursement the CIT(A) confirmed the addition of ₹ 34,000/-, whereas deleted the addition of ₹ 72,970/-, which was towards reimbursement of expenses. We do not find any infirmity in the order of CIT(A) for deleting disallowance of ₹ 72,980/-.

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• 2017 (2) TMI 114
  Validity of reopening of assessment - reasons to believe - bogus entries made - Held that:- The special leave petition is dismissed. HC order confirmed [2016 (12) TMI 739 - DELHI HIGH COURT] there was no full disclosure of material facts. Thus we are of the opinion that the petitioner is disentitled to relief. The impugned notice is valid. - Decided against assessee.

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• 2017 (2) TMI 113
  Addition on unrecorded/undisclosed income u/s 69B - whether the provisions of Section 69 B of the Act as well as Section 56(2) (Vii)(b) r. w. s. 50C of the Act will apply or not? - Held that:- What document or evidence is in the possession of the AO to prove that the assessee has paid the difference of value of agreement and stamp duty value in any other form of consideration to the extent of ₹ 1,08,75,400/- for making addition u/s 69B of the Act. We find from the facts of the case as well as the records of the case and else also the arguments of learned Sr. DR that there is no evidence in the possession of Revenue which proves that the assessee has paid over and above the value of agreement in any other form of consideration. Hon ble Gujarat High Court in the case of Berry Plastics (P) Ltd. (2013 (8) TMI 9 - GUJARAT HIGH COURT) has held that the DVO s report may be useful tool in the hands of the AO, nevertheless it is an estimation and without there being anything more cannot form basis for addition u/s 69 B of the Act. The burden to prove under statement is on the Revenue and in the absence of any evidence addition cannot be made. This view has been held by Hon ble Supreme Court in the case of KP Varghese Vs. ITO (1981 (9) TMI 1 - SUPREME Court ). Secondly, a new provision as introduced by the finance bill 2013 w. e. f. 01-04-2014 of provisions of Section 56 (2) (vii) (b), wherein immovable property purchased/received for inadequate consideration, which is less than stamp value by 50,000 or more, than the difference between the stamp duty value and inadequate consideration shall be taxable in the hands of the individual or HUF as income from other sources. This amendment applies in relation to A.Y. 2014-15 and subsequent assessment years and up to 31-03-2013, addition cannot be made in the hands of the buyer as explained by the explanatory note to finance bill, 2013. There is no dispute as regards to the amount and date of registration that the property was registered only on 19-01-2010, which is much before the amendment in Section 56(2) of the Act. Even the provision of Section 50C r. w. s. 69 and 69B, i.e. the special provision for full value of consideration in certain cases creates a legal friction for taxing capital gains in the hands of seller and it cannot be extended for taxing difference between apparent consideration and valuation done by stamp valuation authorities as undisclosed investment. - Decided against revenue.

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• 2017 (2) TMI 112
  Disallowance u/s.14A - Held that:- It is not in dispute that the assessee earned the Long Term Capital Gain on mutual fund of ₹ 1,11,23,750 and other income from mutual funds of ₹ 31,55,355/-. It is long term investment and the income was directly credited to the assessee’s account by way of bank transfer. Nothing was seen to be incurred to earn the said income from mutual funds. In view of the above mentioned law i.e. Canara Bank Vs. ACIT (2014 (1) TMI 1586 - KARNATAKA HIGH COURT), the said income is not liable to be considered for the purpose to assess the expenditure incurred to earn the exempt income. Accordingly, we set aside the order of CIT(A) in question and direct the Assessing Officer to re-assess the expenditure incurred to earn the exempt income in view of the above mentioned law by giving an opportunity of being heard to the assessee. Accordingly, this issue is decided in favour of the assessee against the revenue for the statistical purpose. Confirmation of the expenditure incurred upon lease hold improvements - Held that:- The expenditure incurred on lease hold premises has been treated by the above said authorities as revenue expenditure, therefore, in view of the said circumstances we are of the view that the finding of the CIT(A) on this issue is wrong against law and facts, therefore is not liable to be sustainable in the eyes of law hence we set aside the finding of the CIT(A) on this issue and direct the Assessing Officer to consider the expenditure as revenue in nature. Accordingly, this issue is decided in favour of the assessee against the revenue.

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• 2017 (2) TMI 111
  Estimating income of the appellant @2% of the value of the sales bills issued by the appellant in respect of supply of building materials as against 0.75% actually received - Held that:- AO would verify whether the cheques received from the parties were deposited in the bank accounts and cash was withdrawn immediately thereafter and handed over to the parties. If the assessee is able to prove the same before the AO, then the assessee’s claim of estimating net commission income on the gross value of the transportation fee at 0.5% + TDS shall be accepted. Also if the assessee is able to prove the above, the AO would accept the net commission income from the gross value of building material supply bills @ 0.75%. Accordingly we set aside the order of the ld. CIT(A) on this issue and restore the same to the file of the AO to follow the direction as given at para 7.2 here-in-above and pass a fresh assessment order as per the provisions of the Act after giving reasonable opportunity of being heard to the assessee. Thus ground number 1,2, 4(i)(ii) ,5 & 8 are allowed for statistical purpose. Allowance of expenses from the income earned by way of commission on providing accommodation entries - Held that:- Keeping the principle laid down in the above decision of the Hon’ble High Court instead of the Tribunal order in M/s Saroj Anil Steel Pvt. Ltd. (2012 (10) TMI 1133 - ITAT MUMBAI) the claim of the assessee to allow expenses from the income earned by way of commission on providing accommodation entries of transportation is rejected.

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• 2017 (2) TMI 110
  Penalty u/s. 271AAA - Held that:- We find that the assessee-company has paid taxes together with interest in respect of the undisclosed income declared in the statement recorded u/s 132(4) of the Act. As narrated in para 6.2 here-in-above, it has provided information regarding the manner in which the undisclosed income was derived. Therefore, the order of the Ld. CIT(A) upholding the penalty imposed by the AO u/s 271AAA is cancelled. - Decided in favour of assessee

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• 2017 (2) TMI 109
  Disallowance of deduction under section 10AA - income earned from trading exports of diamonds - Held that:- The assessee in the case on hand is eligible for deduction of its income earned from trading exports of diamonds under section 10AA of the Act and therefore uphold the finding of the learned CIT(A) on this issue in the impugned order. See Geetanjali Exports Corporation Ltd. & Others [2013 (5) TMI 922 - ITAT MUMBAI]. Treatment of interest on FDs as ‘income from other sources' - Held that:- Following the aforesaid decision of the Coordinate Bench of the Tribunal in the case of Jewel Arts (2017 (2) TMI 39 - ITAT MUMBAI) which is on similar factual/legal matrix as the case on hand, we are of the considered opinion that the said interest receipts earned by the assessee out of FDs kept with Banks by way of margin money made for the purposes of the assessee’s business of import/ export trading in diamonds, constitutes business receipts/income and is therefore eligible for deduction under section 10AA of the Act. Income earned from out of FDs made with Banks for business purposes constitutes business receipts/income and is therefore eligible for deduction under section 10AA

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• 2017 (2) TMI 108
  Addition under section 69C - information obtained from the Sales Department - addition confirmed as parties did not respond to notices issued under section 133(6) - Held that:- AO has not brought on record any material evidence to conclusively prove that the said purchases are bogus. Mere reliance by the AO on information obtained from the Sales Department or on statements/affidavits of the 12 parties before the Sales Tax Department or that these parties did not respond to notices issued under section 133(6) of the Act, would not in itself suffice to treat the purchases as bogus and make the addition under section 69C of the Act. If the AO doubted the genuineness of the said purchases, it was incumbent upon him to cause further inquiries in the matter in order to ascertain the genuineness or otherwise of these transactions. Without causing any further enquiries to be made in respect of the said purchases, the AO cannot make the addition under section 69C of the Act by merely relying on information obtained from the Sales Tax Department, the statements/ affidavits of third parties, without the assessee being afforded any opportunity of cross examination of those persons for non-response to information called for under section 133(6) of the Act. In the factual matrix of the case on hand, where the AO failed to cause any enquiry to be made to establish his suspicions that the said purchases are bogus, the assessee has brought on record documentary evidences to establish the genuineness of the said purchase transactions, the action of the AO in brushing aside these evidences cannot be accepted. - Decided in favour of assessee Deemed dividend under section (2)(22)(e) - Held that:- On identical facts was before the Coordinate Bench of the Tribunal in the assessee’s own case for A.Y. 2009-10, wherein the Coordinate Bench dismissed Revenue’s appeal on this issue holding that the authorities below erred in law in treating the advance given by the company to the assessee by way of compensation to the assessee for keeping his property as mortgage on behalf of the company to reap the benefit of loan as deemed divined within the meaning of section 2(22)(e) of the Act. - Decided in favour of assessee

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• 2017 (2) TMI 107
  Determination of on-money receipts as per the disclosure made by the assessee before the Settlement Commission - Held that:- There is no dispute that the Settlement Commission has agreed with the contentions of the assessee that the entire amount of on-money receipts cannot be considered as income of the assessee. Accordingly the Settlement Commission has estimated the income from on-money receipts @ 17% in AY 2005-06. Since the assessing officer has estimated the on-money receipts as per the disclosure made before Settlement Commission, we are of the view that the Ld CIT(A) was justified in estimating the income from the on-money receipts @ 17% for this year also by following the order passed by the Settlement Commission. Accordingly we confirm the order passed by Ld CIT(A). Accordingly we reject the appeal filed by the revenue. Revision u/s 263 - penalty proceedings u/s 271(1)(c) - Held that:- We notice that the assessee has furnished explanations before the assessing officer during the course of penalty proceedings three times, viz., on 22.12.2011, 24.12.2011 and 15.05.2012. It is not the case of Ld CIT that the assessing officer has dropped the penalty proceedings without considering the explanations of the assessee, meaning thereby, the AO was convinced with the submissions made by the assessee and accordingly dropped the penalty proceedings. It is pertinent to note that the Ld CIT did not discuss anything about the explanations furnished by the assessee before the AO and did not show that the said explanations are not acceptable in law. Under these set of facts, we are of the view that there is merit in the contentions of the assessee that the assessing officer has taken a possible view of the matter and hence the order passed by the AO dropping the penalty proceedings cannot be considered to be prejudicial to the interest of the revenue. In view of the foregoing discussions, we are of the view that there is merit in the contentions of the assessee that the revision order passed by Ld CIT u/s 263 of the Act for AY 2004-05 is not valid - Decided in favour of assessee

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• Customs

• 2017 (2) TMI 89
  Maintainability of petition - prayer for rehear and dispose of the matter once again on merits after affording an opportunity of personal hearing and considering the EODC already furnished by the petitioner - Held that: - when the statute provides for filing an appeal against the order in original, the same cannot be challenged by filing a writ petition, by way of short circuiting the procedures. Needless to say that the appellate authority being a fact finding authority as well, will have to consider all aspects and decide the appeal. Therefore, the petitioner should go only before the appellate authority and raise all the contentions, including the reference to the events which had taken place subsequent to the passing of the impugned order - petition dismissed, being not maintainable.

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• 2017 (2) TMI 88
  Suspension of sentence and bail - Held that: - the trial court has rendered an independent judgment. The evidence and findings are identical as all the three accused including the present appellant were accused of carrying narcotic substance and were intercepted on their way out of India at the airport and it is on the common evidence that was gathered against the appellant separate case was registered against the accused. In view of this Court having acquitted the other accused who stood on the same footing as the present appellant, the present appeal is allowed and disposed off.

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• 2017 (2) TMI 87
  Jurisdiction - whether the Custom Authorities are entitled to impose penalty in terms of Section 112(i) of the Customs Act, 1962 and whether such provisions are attracted to the fact of the present case? - Held that: - no steps shall be taken for realization of the penalty from the petitioner without obtaining the leave of the Court till April 30, 2017 or until further order, whichever is earlier - petition disposed off.

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• 2017 (2) TMI 86
  Refund claim - rejection on the ground of Time bar - natural justice - Held that: - the ends of justice require that the petitioner has an opportunity of meeting the case on merits. The petitioner has already paid the entire duty and seeks a refund thereof. On merits, the petitioner has succeeded right up to the Supreme Court. The only issue is one of limitation - The Deputy Commissioner, Customs is directed to pass a fresh order after granting the petitioner an opportunity of being heard - petition disposed off - matter on remand.

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• 2017 (2) TMI 85
  Revocation of CHA licence - the CHA licence of the appellant is already revoked, in the facts of the case, whether the impugned order is correct? - Held that: - the impugned order is non est order inasmuch, order for revocation of licence connot be in thin air. A CHA licence which is already revoked, cannot be again revoked subject to it being reinstated by higher authorities. In our view, this order of the adjudicating authority is not correct passed without any application of mind and needs to be set aside and we do so. Time period taken to complete the proceedings - inordinate delay - Held that: - The CHA licence of the appellant was suspended on 6.2.2007 and the order-in original which revoked the licence is dated 15.10.2013. The timeline for conclusion of the proceedings from the date of suspension is approximately five years and eight months, a delay detrimental to the entire proceedings - inordinate delay in the case in hand to complete the proceedings against the CHA is detrimental and the impugned order is liable to be set aside on this ground only. The order-in-original is non est as it is revoking an already revoked CHA licence - appeal allowed - decided in favor of appellant.

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• 2017 (2) TMI 84
  Jurisdiction - whether the Commissioner is empowered to reject the request of the petitioner in violation of Rule 5 of the Customs Act, 1962? - whether the appellant, in fact, had to go before the Revisional authority but, by misconception, he went on appeal before the CESTAT and in parallel to that he has filed the writ petition, is correct? - smuggling of gold - principles of natural justice - Held that: - The learned Single Judge has erred in directing the appellant herein to approach the CESTAT when the jurisdiction lies only with the Joint Secretary, who is the revisional authority. However, since there is non-compliance of principles of natural justice and even no roving enquiry was held in the matter, it would be better if the appellant approaches the Joint Secretary by filing a revision, if he is so advised. In such event, the revisional authority shall consider the matter afresh, after affording opportunity to the appellant - matter on remand - appeal disposed off.

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• 2017 (2) TMI 83
  Whether on the facts and in the circumstances of the case the Customs, Excise and Service Tax Appellate Tribunal was justified in holding that Serial No.26 of N/N. 42/96 dated July 23, 1996 is applicable only to the water treatment plant and cannot be applied to the ductile pipes? Held that: - reliance placed in the case of PRATIBHA INDUSTRIES LTD. Versus COMMISSIONER OF C. EX., NHAVA SHEVA [2004 (9) TMI 278 - CESTAT, MUMBAI], where on similar issue, it was held that the appellant shall not be covered by the N/N. 21/2002-Cus., which grants complete exemption from payment of basic excise duty and additional duty falling under Heading 9801 required for drinking water supply project for supply of water for human and animal consumption - appeal dismissed - decided in favor of Revenue-respondent.

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• Corporate Laws

• 2017 (2) TMI 80
  Scheme of Amalgamation - Held that:- Considering the approval accorded by the equity shareholders and creditors of the Petitioner Companies to the proposed scheme; the affidavit filed by the Regional Director, Northern Region and the report filed by the Official Liquidator, not raising any objection to the proposed scheme, there appears to be no impediment to the grant of sanction to the proposed scheme. Consequently, sanction is hereby granted to the proposed scheme. The Petitioner Companies will comply with the statutory requirements in accordance with law. Upon the sanction becoming effective from the Appointed Date of the proposed scheme, i.e. 1st April, 2015, the Transferor Company shall stand dissolved without undergoing the process of winding up. Notwithstanding the above, if there is any deficiency found or, violation committed qua any enactment, statutory rule or regulation, the sanction granted by this Court to the proposed scheme will not come in the way of action being taken, albeit, in accordance with law, against the concerned persons, directors and officials of the Petitioner Companies.

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• 2017 (2) TMI 79
  Scheme of demerger - Held that:- No impediment to the grant of sanction to the proposed scheme. Consequently, sanction is hereby granted to the proposed scheme. The Petitioners will comply with the statutory requirements in accordance with law. Upon the sanction becoming effective from the appointed date of the proposed scheme, the Demerged Undertaking (as defined in the proposed scheme) of the Demerged Company shall stand merged in the Resulting Company. A certified copy of the order, sanctioning the proposed scheme, be filed with the ROC within 30 days from the date of receipt of the same.

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• 2017 (2) TMI 78
  Oppression and mismanagement - Joint Venture Agreement - arbitration petition - Held that:- It is not correct to say that the issues raised in the arbitration petition and present petition are different The CP was filed by alleging oppression and mismanagement on the Part of DDPL and that too with reference to violations arising out of JVA dated 17.10.2002. As stated supra, JVC was in fact creation of JVA dated 17.10.2002. It is not correct to say that JVA was mutually terminated and the fact remains that parties mutually agreed to terminate JVA and thus, initiated process of termination in terms of JVA by invoking arbitration Clause. As stated the Hon'ble Supreme Court has appointed a sole arbitrator to decide all disputes including the disputes raised in arbitration petition. So, the respondent/petitioner can raise all the disputes raised here before the Hon'ble Sole Arbitrator. The respondent/petitioner is also bound the order of the Hon'ble Supreme Court and they cannot maintain separate proceedings in this Tribunal and it leads to multiple proceedings. The objection raised by the respondent/petitioner about the lengthy and costly procedure involved in referring issue to the arbitration is already addressed by the Hon'ble Supreme Court by suggesting that arbitration proceedings should be commenced and concluded as expeditiously as possible. It is to mention here the instant case is not to appoint a fresh arbitrator but it is a case where, whether the sole arbitrator already appointed by the Hon'ble Supreme Court can decide the issues raised in the present company petition as well. As stated supra, the Hon'ble Supreme Court in its order passed in Arbitration Case has already referred all the disputes. So, the present company petition is not maintainable and the same is liable to be rejected for the reasons stated above.

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• Service Tax

• 2017 (2) TMI 106
  Levy of tax - advisory services - taxable under the head 'management consultancy service' - demand of tax alongwith interest - Circular no.B-11/3/98-TRU dated 7th October 1998 - Held that: - What we can confidently assert is that neither the original authority nor the first appellate authority have examined the nature of services actually provided to the client. In the normal course, such a peremptory examination of the activity classification of the activity would warrant remanding the matter for considering the dispute afresh for remedying the lack - demand of tax with interest set aside. Extended period of limitation - Held that: - the appellant had registered as provider of 'credit rating agency service' and there is no reason to infer they deliberately attempted to evade the tax which was to have been passed on to their corporate customers - there is no evidence for invoking the extended period of limitation. Demand set aside - appeal disposed off.

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• 2017 (2) TMI 105
  Definition of AOP - immovable property given on rent by 8 joint co-owners (respondents) - whether these 8 co-owners can be said to be AOP, and whether each co-owner has to be denied exemption or not? - Held that: - I cannot find any ground which establishes that the eight individuals who are respondents can be called “association of persons” through any definition provided by any law, when they have not entered into any agreement to form “association of persons”. Even the definition of “person” in Section 3(42) of the General Clauses Act, 1897 states that “person” shall include any company or association or body of individuals. So, since the definition is inclusive, there has to be an association of individuals to become “person” under said Section 3(42) of the General Clauses Act, 1897 - appeal dismissed - decided against Revenue.

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• 2017 (2) TMI 104
  Interest on delayed payment of tax - the tax liability on GTA service was belatedly paid by the appellant on 5.9.2009. It is also not disputed that they had indicated the fact of the same vide two letters issued on 1.9.2009 and 7.9.2009 - Held that: - although interest liability should have also been discharged by the appellant at that point of time, nonetheless, that is not done. However, neither has the department taken note of the discrepancy immediately and proximate to the payment of such belated tax liability. There is no whisper in the SCN concerning any ingredient present for invocation of extended period - demand for interest is certainly hit by limitation and will not sustain. Reliance was placed in the case of Hindustan Insecticides Ld. Vs CCE, LTU [2013 (8) TMI 225 - DELHI HIGH COURT], where it was held that limitation applicable to claim for principal amount applies to interest claim also. Appeal allowed - decided in favor of appellant.

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• 2017 (2) TMI 103
  Classification of service - loading agreement for loading of coal from coal face into tipper trucks - transportation agreement for movement of coal from coal face to railway siding or dump yard within the mining area - whether the services are classified as mining services or GTA services? - Held that: - similar issue came for decision by the Tribunal with reference to contract with SECFL by other service providers. In Arjuna Carriers Pvt. Limited [2014 (11) TMI 1048 - CESTAT NEW DELHI] the Tribunal held that service is not classifiable under mining service, as held by the Revenue - appeal allowed - decided in favor of appellant.

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• Central Excise

• 2017 (2) TMI 102
  Re-credit of duty from cenvat account - Rule 8 (3A) of Central Excise Rules, 2002 - requirement of payment of duty in cash during default period - the duty was paid twice from cenvat credit and second time from PLA on insistance of the department - Held that: - the appellant have not taken suo moto credit on their own but they made number of request by writing letter to the department regarding re-credit of amount in the cenvat account but the department instead of deciding the re-credit they have issued show cause notice and denied the re-credit which is absolutely illegal and incorrect. Even if it is accepted that refund claim should have been filed, when the appellant have made request in writing for re-credit in the cenvat account, the same can be disposed of considering the refund claim of the appellant but instead of disposing request of re-credit both the lower authority has passed orders for recovery of the re-credit amount which is not legal and proper - re-credit of the amount by the appellant is correct and the same cannot be recovered. Unjust enrichment - Held that: - the duty was paid twice on the same clearances however the duty passed on is only one time duty paid on the clearances, therefore the unjust enrichment does not apply. Moreover, the amount paid from Cenvat account has not been considered by the department as excise duty that is a reason they asked to pay in cash, which was complied by the appellant - no issue of unjust enrichment arises. The appellant has correctly re-credited the cenvat amount, therefore the impugned order is set aside - appeal allowed - decided in favor of appellant.

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• 2017 (2) TMI 101
  Remission of duty u/r 21 of CER - damage of godos due to flood and rains - No remission can be given without ascertaining the actual quantum of damage - reliance was placed in the case of Sun Pharmaceutical Industries Ltd. [2015 (9) TMI 410 - BOMBAY HIGH COURT], by appellant to claim remission, where the remission was allowed. Held that: - the appellant had suffered damage on 26/07/2007 and made up their mind for seeking remission on 03/08/2005. Thereafter they submitted their application for remission on 15/12/2005, almost 41/2 months after they making up their mind. Revenue was in correspondence with the appellant, thereafter seeking the survey report and actual details of the goods, however, the appellant failed to submit the same. The appellant claimed that the goods have been cleared along with scraps. I find that remission cannot be granted without actual ascertainment of the damage and verification to the satisfaction of the Revenue. In the case of Sun Pharmaceutical Industries Ltd., the appellant was reminding the Revenue to take action on remission application. In the instant case, it is apparent that the Revenue was alert and action was taken immediately after submission of remission application. In these circumstances, destruction and disposal of goods without verification/inspection cannot be condoned, and the facts of the case not applicable to the present case. Appeal dismissed - decided against appellant.

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• 2017 (2) TMI 100
  Exemption under N/N. 6/2000 dated 1-3-2000 - whether M.S. Forged Flanges, as parts/spares of the wind mill tower manufactured and supplied by appellant is eligible for exemption N/N. 6/2000 dated 1-3-2000 as non-conventional energy devices/ systems? Held that: - the issue is no longer res integra as in respondent's own case PUSHPAM FORGING Versus COMMISSIONER OF CENTRAL EXCISE, RAIGAD [2005 (7) TMI 242 - CESTAT, MUMBAI], the issue has been decided by this Tribunal and the same was upheld by the Apex Court, where it was held that the flange being part of tower which is Essential Component of Wind Operated Electrical Generator, an unconventional energy service device, would be eligible under Sr. No. 5 if not under 20 as part of Sr. No. 1 to 19. Coverage is also to be available under Sr. No. 13 of list 5. The appellant is entitle for the exemption under N/N. 6/2000-CE in respect of their product namely M.S. Forged Flanges as parts/ spares of the wind mill tower - appeal allowed - decided in favor of appellant-assessee.

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• 2017 (2) TMI 99
  Pre-deposit - section 35F of the Central Excise Act, 1944 - Before amendment an appellant had to deposit the entire duty and penalty. The first proviso to Section 35F provided that in case of undue hardship the tribunal might dispense with the whole or part of the said deposit. In respect of the first assessment order the petitioner had to deposit ₹ 2.5 crores on application of the 50% deposit principle with some variation in it made by this Court and in respect of the other two assessments orders, it had to make deposit of 7.5% of the duty - There cannot be different rates of pre-deposit identical facts and identical findings with regard to it, the applicable law remaining the same. A direction upon the tribunal to reconsider the question of pre-deposit of the impugned assessment order - petition allowed by way of remand.

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• 2017 (2) TMI 98
  Classification of parts of manufactured motor - stators and rotors - classified under sub-heading 8501.00 or under sub-heading 8414.91 - for a period of 25 years stators and motors have been classified and charged to duty as electric motors when cleared together and as parts of electric motors when cleared separately. That long standing practice is sought to be changed and retrospectively although the clarificatory circular prohibits this exercise. Held that: - Once there is a clear instruction that the practice followed in the light of the earlier clarification of the Board may be changed only prospectively, we have no doubt in our minds that on the date on which the earlier circular was in force, the SCN could not have been issued nor the demand raised. The show cause notice and the demand in furtherance thereof cannot be sustained - demand set aside - petition allowed - decided in favor of petitioner.

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• 2017 (2) TMI 97
  100% EOU - Refund claim - Rule 5 of CCR, 2004 - denial on the ground of lack of nexus - Held that: - the impugned orders are not sustainable in law and the rejection of refund claims merely on the ground of nexus with the manufacture of the product is not legally tenable - impugned orders set aside and appeals allowed subject to verification by the adjudicating authority - appeal allowed by way of remand.

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• 2017 (2) TMI 96
  CENVAT credit - whether the Chemical viz. "Sodium Silico Aluminate" which is a "Molecular Sieve" used to extract N-Pharaffin from Kerosene for manufacture of "Linear Alkyl Benzene" (LAB) is an "Input" within the meaning of Rule 57A of the Central Excise Rules, 1944? Held that: - It is clear that during the entire process of manufacture from Kerosene stage to obtaining the Linear Alkyl Benzene (LAB) Sodium Silico Aluminate is indeed used which opts as a major role in the process as catalyst. As contended by the adjudicating authority, by any stretch of imagination it cannot be said this Sodium Silico Aluminate is either any equipment/ appliance/ apparatus of the plant, machinery of the appellant. It is admittedly a chemical and used during the course of manufacture, therefore in our considered view it is an input. Reliance placed in the case of Reliance Industries Ltd. Vs. CCE [2004 (4) TMI 494 - CESTAT, MUMBAI], where the credit on Molecular Sieves is admissible. Extended period of limitation - Held that: - the availment of credit on Molecular Sieves was known to the department, therefore, the demand is hit by limitation also as there is no suppression of fact on the part of the appellant - demand set aside. CENVAT credit allowed - appeal allowed - decided in favor of appellant.

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• 2017 (2) TMI 95
  Mis-declaration - whether the Appellant had given false price declarations to M/s Sonal Prints under his signature as found by the Commissioner and thereby aided the said processor in evading excise duty by undervaluing processed man-made fabrics? Held that: - the Revenue has miserably failed to discharge its burden of proving appellants involvement in the offence of duty evasion - impugned order set aside - appeal allowed - decided in favor of appellant.

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• 2017 (2) TMI 94
  Confiscation of goods with imposition of penalty - whether the goods can be confiscated without issuance of SCN? - Held that: - It is apparent that it is not open to Customs to confiscate any goods without issue of SCN - In the instant case, admittedly no SCN were issued. Under these circumstances, the confiscation of the goods cannot be upheld. Consequently, the penalty under Section 112 also cannot be upheld - appeal allowed - decided in favor of appellant.

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• 2017 (2) TMI 93
  End use verification - respondent had used H-100 EY Grade granules in the production of plastic woven sacks. Whether the company had used such material in their production or not was the main question - Held that: - the court has observed that there was total disconnect as regards the material that could be seized and the investigation that could have been made in respect of an event which had occurred much earlier. Hence, the date on which the investigation was said to have been commenced itself being inconsistent and not reconcilable, the court below on a detailed discussion of the evidence which has again not supported the case of the prosecution having acquitted the accused, cannot be faulted. Appeal rejected.

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• 2017 (2) TMI 92
  Clandestine removal - stable bleaching powder - appellant's claim that because sole selling agent recorded 77,300 kgs., in his record that shall not ipsofacto make the appellant liable to excise duty - Held that: - learned adjudicating authority has made his finding not on the sole consideration of entry available in the books of account of the sole selling agent but he has established the demand in relation to 77,300 kgs. of the goods when he found that there was drawal of cash from Catholic Syrian Bank by the buyer to make payment to the appellant herein on account of unaccounted sale of above goods which remained unrebutted - Added to this, circumstantial evidence show that the appellant has not dealt with goods with any other buyer. Therefore the allegation cannot be said to have been made on vaccume - demand of duty confirmed. Valuation of waste - appellant claim that merely because this figure appeared in the balance sheet, without proving clandestine removal, department cannot make allegation of such removal for levy of duty - Held that: - Appellant did not rebut generation of 83% finished goods from the input used. It was all along been disclosing that there was generation of sludge in the course of manufacture. But when physical verification was conducted, there was no sludge found in the premises of the plant. Therefore such huge value of waste which is valued by appellant shall not go unaccounted, if that has economic value. Basic common sense leads to hold that bleaching powder was sold in the guise of waste and there was clandestine removal of the same causing detriment to the interest of Revenue which resulted in demand of duty of ₹ 3,52,809/- - demand of duty confirmed. Appeal dismissed - decided against appellant.

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• 2017 (2) TMI 91
  Distribution of CENVAT credit - registration of dealer - whether centralized registration can be equated with the ISD registration in terms of Rule 2 (m) of and Rule 7 of CCR 2004 read with Rule 4A (2) of STR, 1944 - Held that: - such non-registration as ISD is only a procedural irregularity, nonetheless, it is a curable defect. Hence availment of distribution of credit cannot be denied based on interpretation of law - credit allowed. CENVAT credit - GTA services - whether outward transportation, upto the place of removal was not eligible for cenvat credit? - Held that: - the matter is being remanded to original authority for de novo consideration to decide the issue in the light of statutory provisions as also as per the ratio of judgement and decisions of higher appellate forums with regard to eligibility of such credits availed on outward transportation - matter on remand. Appeal disposed off - decided partly in favor of appellant and part matter on remand.

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• 2017 (2) TMI 90
  Reversal of CENVAT credit - unaccounted obsolete stock of raw material lying in the factory of the assessee and on the goods consumed captively for manufacture of dutiable goods cleared at nil rate of duty - Held that: - the impugned order has simply ignored the issue on limitation raised by the appellants. It has been claimed that the clearance to SEZ have taken place under CT-3 and AR-3 documents and therefore, were within the knowledge of revenue. It is also claimed that part of the demand is for the period beyond five year. The impugned order does not deal with the issues - appeal is allowed by way of remand for comprehensive examination of issues raised by the appellant.

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• CST, VAT & Sales Tax

• 2017 (2) TMI 82
  Jurisdiction - revisional power - Whether revisional power could be exercised on the basis of judgment of Hon'ble the Supreme Court in K. Raheja Development Corporation v. State of Karnataka, [2005 (5) TMI 7 - Supreme Court], even if the matter had been referred to be considered by a larger Bench by Hon'ble the Supreme Court? - Held that: - judgment of Hon'ble the Supreme Court in K. Raheja Development Corporation's case was a binding precedent declaring the law at that time on the subject to be followed by all courts and authorities below and action could have been taken by the authorities on the basis thereof, if considered appropriate. Whether extended period of limitation for exercise of revisional jurisdiction will apply even in cases where the period provided in the Act prior to the amendment had already expired? - Held that: - a dead claim cannot be revived. Right to revise the order had extinguished, which could not be revived. Further life could be injected only in the cases where limitation for revising an assessment order was still existing - extended period for exercise of revisional jurisdiction will be applicable only in cases where period prescribed prior to the amendment had not expired and not where the period had earlier expired as the amendment cannot put life to a dead claim. Whether a show cause notice issued to exercise revisional jurisdiction is bad as it is lacking in basic facts to invoke exception clause and extended period of limitation? - Held that: - This court is not going into this aspect of the matter for the reason that at this stage, it has lost its significance, in terms of the earlier order passed by this court, the Commissioner has already disposed of the preliminary objections raised by the petitioner regarding assumption of jurisdiction. Once the order has already been passed, this court is examining the validity of the order as such - The issue is not being examined as in pursuance to the SCN, orders have already been passed and those are under consideration before this court. Whether exception clause enabling exercise of revisional jurisdiction beyond the normal period of limitation prescribed in the Act, could be invoked even in cases where the event had taken place during the normal period prescribed in the Act? - Held that: - The question posed deserves to be answered in negative opining that for exercise of power of revision while invoking extended period of limitation as provided for in second proviso to Section 34(1) of the Act, in normal circumstances, the event has to be after the normal period of limitation had already expired. However, there can be some exception where event occurred just before the expiry of period of limitation and the action was taken within reasonable time or the delay is satisfactorily explained. Exception clause is to be invoked only in exceptional circumstances. It is always required to be strictly interpreted even if there is hardship to any of the parties. Whether the circulars issued by the Department are binding on the department and the assessees? - Held that: - Any instructions issued by the Department are binding on the departmental authorities except on the issue where any judgment to the contrary exists. These are not binding on the court. A circular which is contrary to statutory provisions has no existence in law. Whether explanation (i) to Section 2(1)(zg) of the Act is ultra vires? - Held that: - As the vires of the aforesaid provision has already been upheld by this court, we do not find any reason to re-examine the issue. Whether levy of tax on builders can be sustained in the absence of machinery provisions? - Held that: - For the period upto 16.5.2010, there were no Rules or instructions on the subject, to provide for manner of calculation of taxable turnover. In the absence of the machinery provisions specifying the details, though the levy as such cannot be disputed but it has become unenforceable upto 16.5.2010 - From 17.5.2010 onwards, there being Rules in existence, having been amended, we do not find that the levy cannot be sustained. Whether assessment could be framed in the name of a company which stood merged in another company and lost its entity by operation of law? - Held that: - no assessment can be framed against a company, which stood dissolved after its merger with another company. As fairly stated by learned counsel for the State, the assessment order dated 8.3.2016 (Annexure P-8), passed against M/s Sukh Realtors Pvt. Ltd., the company which already stood dissolved after merger with M/s S. S. Group Pvt. Ltd., is set aside. There is no question of grant of specific liberty to the department to pass any fresh order, as if the law permits, it can always take action. Petitions disposed off.

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• 2017 (2) TMI 81
  Enhancement of escaped turnover to the tune of 28 times - Held that: - The authorities have not recorded any finding as to how assessment has been enhanced by almost 28 times. There has to be some reasonable basis or nexus between the escaped transaction noticed and the consequential enhancement made by the authorities. This Court had earlier indicated that unless there exists other material to come to a different conclusion, the authorities could enhance the assessment by twice the amount i.e. ₹ 1,40,000/- - tribunal was not justified in enhancing the turnover above twice the escaped transaction in the facts and circumstances of the present case, and the enhancement to the tune of 28 times is not justified - revision allowed - decided in favor of assessee.

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• Indian Laws

• 2017 (2) TMI 77
  Guilty of misconduct as defined under Clauses 5, 6, 7 and 8 of Para I of the 2nd Schedule to the Chartered Accountants Act, 1949 - false audit report - justification of audit report for the year 2001-02 in which the amount deposited by the complainant with the society was certified to be ₹ 3.88 lacs as against ₹ 6.88 lacs certified in the audit reports for the two previous years - Held that:- Having perused the reply we find not a word uttered in the reply to counter the conclusions and the reasons given by the Disciplinary Committee. In para 15 of the reply it is pleaded that while conducting the audit for the year 2001-02 it was brought to the notice of the respondent that the complainant had actually paid ₹ 3.88 lacs and not ₹ 6.88 lacs. It is pleaded that the respondent made inquiry and on going through the personal ledger of the members maintained by the society noted that the complainant had actually paid ₹ 3.88 lacs and not ₹ 6.88 lacs. It has not been explained in the reply as to under what circumstances for the previous two years the respondent certified that the complainant had made a deposit totalling ₹ 6.88 lacs. Under the circumstances we accept the finding returned by the Disciplinary Committee as approved by the Council. Keeping in view the gravity of the misconduct the proposed penalty is also accepted. The reference is disposed of levying penalty of removal of name of the respondent from the Institute of Chartered Accountants for a period of one year.

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