TMI Tax Updates - e-Newsletter
March 14, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Highlights / Catch Notes
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Income Tax:
U/s 199 of Income Tax Act 1961 - Recovery Of Demand Against Deductee Assessee - Circular
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Income Tax:
If cash assistance received or receivable against exports schemes are included as being income under the head "profits and gains of business or profession", it is obvious that subsidies which go to reimbursement of cost in the production of goods of a particular business would also have to be included under the head "profits and gains of business or profession", and not under the head "income from other sources". - SC
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Income Tax:
Whether liquidated damages were entitled to the exemption under Section 10(23G) of the Act inter alia as such liquidated damages fell within the definition of “interest” in Section 2(28A) of the Act? - Held Yes - HC
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Income Tax:
Obviously, the undistributed share of profit reflected in the books of P.E. cannot be said to partake the character of income under the provisions of the Income-tax Act. It is settled position that accounting entries are not determinative of taxability under the Income-tax Act and further only the real income can be brought to the charge of tax. - AT
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Income Tax:
Business connection in India - Existence of Fixed PE In India and service PE In India - s even if assumed that there is a PE in India of the assessee no profit can be attributed to it as FAR (Functions performed, Assets deployed and Risk Assumed) such PE has already been compensated at arm's length price and therefore nothing more should be attributed to it. - AT
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Income Tax:
Disallowance of the capital work in progress written off - the loss in respect of discarded project had written off by the assessee during the previous year is not allowable expenditure as business deduction and it cannot be allowed - AT
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Income Tax:
Merely because there was an error in the annual report this will not have any impact on the profit of the assessee. When the assessee has recorded the entire purchases and sales of the bullion in the books of account, estimating profit after rejecting the books of account is not justified - AT
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Income Tax:
Addition made on account of short term capital gain - it is evident that the gross total income o the company consisted mainly of income which is chargeable under the heads “Capital Gains” and “Income from other sources”. Such a Company is exempted from Explanation to Section 73. In view of above we find that the explanation to section 73 of the Act does not apply to assessee - AT
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Income Tax:
TDS u/s 194C - works contract - existence of contract - We do not agree with the contention of the assessee that there is no written contract or oral contract with the said persons/firms which make the payment amenable for deduction of TDS u/s 194C - TDS liable to be deducted - AT
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Income Tax:
Transfer pricing adjustment - whether the foreign exchange gain/income from service provided to AE will be part of the operating revenue/income? - while taking the margins of the comparables, the effect of foreign exchange in the margins of the comparables should also be taken into account - AT
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Customs:
Clarification with regard to classification of ‘Wireless microphone sets/systems consisting of one or more wireless microphones and a wireless receiver - Circular
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Customs:
Maintainability - CHALR license - Since the appellant's application for New Custom Broker Licence has been rejected because the appellant has not attained the status of Custom Broker, therefore appellant is not eligible to file appeal before this Tribunal under Section 129A. - AT
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Customs:
Validity of Tribunal's order - Refuse to condone delay of 546 days on the ground of not properly explained - From the mere endorsement "unclaimed", it cannot be concluded whether the intimation was delivered or not. Unless both endorsements go together, the presumption of service cannot be made. - HC
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Customs:
Eligibility for exemption under Notification 21/2002 - Import of Pop corn maize - As the declaration did not declare the existence of the Agreement, the goods are liable to be confiscated under Section 111(m) of the Customs Act and penalty under Section 114A and 114AA are to be imposed - AT
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Customs:
Eligibility of Refund claim - Unjust Enrichment - the certificate of C.A. which is supported by other corroborative evidence like balance-sheet and calculation of amount etc. cannot be brushed aside and looks to be fair and reasonable. - AT
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Customs:
Imposition of penalty - the role of the appellant is not restricted to introduction of the parties but have actively assisted M/s. FIL and its directors in diversion of the goods in the local market which were supposed were processed and the exported - levy of penalty (though reduced) confirmed - AT
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Service Tax:
Taxability of services - Classification - naturally bundled services or not - place of provision of services (POP Rules) - intermediary service or not - GoDaddy US have used said services provided by the applicant as per the draft Service Agreement. Further, applicant would charge a fee equal to the operating costs incurred by the applicant plus a mark-up of 13% on such costs, which would be received by the applicant from GoDaddy US in US Dollars. The benefit of services provided by applicant accrues to GoDaddy US outside India. - Activity is not liable to service tax - AAR
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Service Tax:
When cash management services stood excluded from the purview of service tax at the hands of the Bank until 31.05.2007, the authorities cannot levy service tax on an activity which is essentially cash management service, by taking aid of other general charging heads, such as business auxiliary service - SC
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Service Tax:
Refund of cenvat credit without obtaining registration - The learned Counsel for Revenue has not been able to show any provision even under Rule 5 of Cenvat Credit Rules, which provides for condition precedent for registration of the service provider. - Refund cannot be denied - HC
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Service Tax:
Failure to deposit 50% under the Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES) - Since admittedly 50% of the declared tax dues were not paid by 31st December, 2013, the writ petitioners were not entitled to the benefits under the VCES. - HC
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Central Excise:
Valuation of imported Set top boxes under Section 4 of the Central Excise Act, 1944 - Circular
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Central Excise:
100% EOU - sale of goods in Domestic Tariff Area (DTA) without following the guidelines - it is not case of Revenue that the appellant have used any imported material for growing or packaging of cut flowers. - demand of duty on the Cut Flowers grown/produced in India and cleared in DTA is not chargeable - AT
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Central Excise:
Classification - Ayurvedic medicines like Neem, Boswellia, Serrata, Ashwagandha, Gymnema, etc. - assessee are right in classifying these products under Tariff Heading 3003.31 and claimed exemption available to Ayurvedic medicaments - The mention of the house name/ brand-name “Shivananda”/ “Om” cannot lead to the conclusion that these products are not sold in the name specified in Ayurvedic text. - AT
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Central Excise:
Classification - Fibre Glass Reinforced Plastic namely Missile Container, Logistic Container - the pre-dominant input is plastic as compared to Glass fiber therefore the product Missile Container merit classification under Chapter 39 and not under Chapter 70 - AT
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Central Excise:
Intermediate goods - captive consumption - The impugned goods are admittedly "capital goods" falling under Chapter 84 of CETA. The provisions of exemption Notification NO.67/95-CE dated 16.03.1995 is clearly applicable - Rule 6(4) of Cenvat Credit Rules, 2004, has no application to decide the eligibility of above said exemption. - AT
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Central Excise:
Eligibility for refund of the unutilized CENVAT Credit - Section 51 of the SEZ Act provides that this Act shall have over riding effect any other law for the time being in force, which would mean that the provisions of SEZ Act needs to be referred to as to whether clearance of amount to export. - AT
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Central Excise:
Duty liability - Having no mandate in the law in that regard and in absence of legislation that the buyer shall be jointly and severally liable in the event of no discharge of duty by the seller, the respondent should not be penalized under law. - AT
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VAT:
The order in Form DVAT-50 issued by the Special Commissioner on 15th October 2014 did not permit the enforcement officer to carry out any assessment and therefore, orders of default assessment of tax, interest and penalty passed by the AVATO Enf-I under Sections 32 and 33 of the DVAT Act were without the authority of law. - HC
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2016 (3) TMI 375
Deduction under Section 80-IB and 80-IC on profits and gains of business of the respondent’s industrial undertaking - Held that:- The judgment in Sterling Foods [1999 (4) TMI 1 - SUPREME Court ] lays down a very important test in order to determine whether profits and gains are derived from business or an industrial undertaking. This Court has stated that there should be a direct nexus between such profits and gains and the industrial undertaking or business. Such nexus cannot be only incidental. It therefore found, on the facts before it, that by reason of an export promotion scheme, an assessee was entitled to import entitlements which it could thereafter sell. Obviously, the sale consideration therefrom could not be said to be directly from profits and gains by the industrial undertaking but only attributable to such industrial undertaking inasmuch as such import entitlements did not relate to manufacture or sale of the products of the undertaking, but related only to an event which was post manufacture namely, export. On an application of the aforesaid test to the facts of the present case, it can be said that as all the four subsidies in the present case are revenue receipts which are reimbursed to the assessee for elements of cost relating to manufacture or sale of their products, there can certainly be said to be a direct nexus between profits and gains of the industrial undertaking or business, and reimbursement of such subsidies. However, Shri Radhakrishnan stressed the fact that the immediate source of the subsidies was the fact that the Government gave them and that, therefore, the immediate source not being from the business of the assessee, the element of directness is missing. We are afraid we cannot agree. What is to be seen for the applicability of Sections 80-IB and 80-IC is whether the profits and gains are derived from the business. So long as profits and gains emanate directly from the business itself, the fact that the immediate source of the subsidies is the Government would make no difference, as it cannot be disputed that the said subsidies are only in order to reimburse, wholly or partially, costs actually incurred by the assessee in the manufacturing and selling of its products. The "profits and gains" spoken of by Sections 80-IB and 80-IC have reference to net profit. And net profit can only be calculated by deducting from the sale price of an article all elements of cost which go into manufacturing or selling it. Thus understood, it is clear that profits and gains are derived from the business of the assessee, namely profits arrived at after deducting manufacturing cost and selling costs reimbursed to the assessee by the Government concerned. A Delhi High Court judgment was also cited before us being CIT v. Dharampal Premchand Ltd., [2008 (11) TMI 231 - DELHI HIGH COURT ] from which an SLP preferred in the Supreme Court was dismissed. This judgment also concerned itself with Section 80-IB of the Act, in which it was held that refund of excise duty should not be excluded in arriving at the profit derived from business for the purpose of claiming deduction under Section 80-IB of the Act. It only remains to consider one further argument by Shri Radhakrishnan. He has argued that as the subsidies that are received by the respondent, would be income from other sources referable to Section 56 of the Income Tax Act, any deduction that is to be made, can only be made from income from other sources and not from profits and gains of business, which is a separate and distinct head as recognised by Section 14 of the Income Tax Act. Shri Radhakrishnan is not correct in his submission that assistance by way of subsidies which are reimbursed on the incurring of costs relatable to a business, are under the head "income from other sources", which is a residuary head of income that can be availed only if income does not fall under any of the other four heads of income. Section 28(iii)(b) specifically states that income from cash assistance, by whatever name called, received or receivable by any person against exports under any scheme of the Government of India, will be income chargeable to income tax under the head "profits and gains of business or profession". If cash assistance received or receivable against exports schemes are included as being income under the head "profits and gains of business or profession", it is obvious that subsidies which go to reimbursement of cost in the production of goods of a particular business would also have to be included under the head "profits and gains of business or profession", and not under the head "income from other sources". For the reasons given by us, we are of the view that the Gauhati, Calcutta and Delhi High Courts have correctly construed Sections 80-IB and 80-IC.
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2016 (3) TMI 374
Netting in interest for computing deduction under Section 80HHC - whether ITAT was correct in law in directing the Assessing Officer to allow netting in interest for computing deduction under Section 80HHC - Held that:- As in the present appeal by the Assessee we are only concerned with the correctness of the opinion of the High Court on the question framed by it, we answer the same in favour of the Assessee following the decision of this Court in ACG Associated Capsules (P) Ltd. (2012 (2) TMI 101 - SUPREME COURT OF INDIA ) wherein held Ninety per cent of not the gross interest/rent but only the net interest/rent, which has been included in the profits of the business of the assessee as computed under the heads ‘PGBP’ is to be deducted under clause (1) of Explanation (baa) to Section 80HHC for determining the profits of the business.
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2016 (3) TMI 373
Disallowance made under Section 14A read with Rule 8D - Tribunal setting aside the appellate order and directing the Assessing Officer to redo the disallowance - Held that:- The appeal does not involve any substantial questions of law. In the order of remand, the Tribunal did not record any categorical finding on the question of disallowance under Section 14A. The Tribunal merely remanded the matter for the purpose of finding out as to how much of the funds were interest free funds or not. It is not a question of law that could arise for our consideration under Section 260A. - Decided against revenue
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2016 (3) TMI 372
Entitlement to the exemption under Section 10(23G) in respect of liquidated damages - Whether the Income Tax Appellate Tribunal ought to have held that liquidated damages were entitled to the exemption under Section 10(23G) of the Act inter alia as such liquidated damages fell within the definition of “interest” in Section 2(28A) of the Act? - Held that:- An additional obligation is cast upon a borrower to pay interest on interest or penal interest, in the event of borrower committing a default upto a particular level. In some finance agreements, the finance companies also stipulate the payment of liquidated damages, if the default exceeds a particular tolerance limit. Irrespective of what the finance company itself may choose to term it, such liquidated damages cannot be excluded from the definition of the expression “interest” under Section 2(28A), as the definition is so exhaustive. The definition is so exhaustive as to include even any service fee or other charge that is levied in respect of the monies that remain unutilised. In certain cases, the lenders impose an obligation on the borrowers to pay the commitment charges, if after the sanction of the loan, the borrower could not make use of the funds upto a particular point of time. The definition of the word “interest” under Section 2(28A) includes even such commitment charges. Therefore we are of the considered view that all the three authorities committed a mistake in understanding the scope of the expression “liquidated damages” and in coming to a conclusion that the same would not come within the purview of the word “interest” under Section 2(28A) - Decided in favour of assessee Debt Syndication - AO held that the debt syndication fee is a fee charged by the assessee from the borrower, when the assessee funded the project not only from out of their own monies, but also by arranging finance from others - Held that:- While dealing with the interpretation to be given to the expression “interest” under Section 2(28A), we have indicated as to how the definition is very exhaustive. The definition is not merely an inclusive definition. The expression “interest” is not only defined to include something, but also defined to mean something and also to include something else. If the second part of the definition in Section 2(28A) is carefully looked into, it could be seen that what is included therein is “any service fee”. By itself, Section 2(28A) does not make a distinction between a service fee charged in respect of the loans advanced by the assessee and those in respect of the loans organised from other financial institutions. In the absence of any indication either in Section 2(28A) or in 10(23G), we do not think that the distinction made out by the respondent could be approved. - Decided in favour of assessee Debenture Trusteeship Fees - whether debenture trusteeship fees charged by the assessee/appellant would come within the meaning of the expression “interest” under Section 2(28A) or not? - Held that:- The debenture trusteeship fee is something that a financial institution is entitled to charge, when such a company is registered with the SEBI as a Debenture Trustee under Chapter X of the Guidelines for the issue of Debt Instrument under SEBI (Disclosure & Investor Protection) Guidelines, 2000. Under these Guidelines, a borrower is required to appoint a Debenture Trustee for issue of Debt Instruments. A fee is paid by the borrower for the debt borrowed. The assessing officer as well as the CIT(Appeals) did not go into the prescription contained in the aforesaid Guidelines of SEBI. Interestingly, in respect of the assessment year 2000-01, the CIT(Appeals) held that the debenture trusteeship fee is eligible for exemption under Section 10(23G). The order of the CIT(Appeals) in relation to the assessment year 2000-01 has attained finality and the department has not taken it on appeal to the Tribunal. In paragraph-3.3 of his order dated 5.9.2003, the CIT(Appeals) specifically dealt with this aspect in relation to the assessment year 2000-01. Therefore to hold that for the assessment year 2000-01 debenture trusteeship fee would come within the purview of Section 10(23G) but it would not come within the purview of the section in relation to the next assessment year, may not be proper - Decided in favour of assessee Whether the deduction should first be allowed in terms of Section 36(1)(viii) for the application of the deduction under Section 36(1)(viia)(c)? - Held that:- If each of the clauses under sub-section (1) of Section 36 is independent in its operation and if each one of them does not depend upon the other clause for the extension of the benefit, then the interpretation given by the respondent cannot be accepted. Yet another distinction brought forth by the learned counsel for the appellant, also deserves consideration. While the benefit of deduction under clause (viia)(c) is available to any public financial institution or State financial corporation or State industrial investment corporation, in respect of a provision for bad and doubtful debts, the benefit of the deduction under clause (viii) is available only for the financial corporations engaged in providing long-term finance for industrial or agricultural development or development of infrastructure facility in India. Therefore, if the interpretation as given by the authorities are accepted, the benefit that will accrue to a finance corporation incorporated in India and providing long-term finance for infrastructure development would be lesser than what is received by the foreign banks and foreign financial institutions. This could not have been the purport of the amendment brought forth under the Finance Bill, 1995.- Decided in favour of assessee
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2016 (3) TMI 371
Revision u/s 263 - Held that:- Having regard to the legal position emerging from various cases including Hon'ble Jurisdictional High Court case, we are of the view that lack of opportunity on some of the issues in the show cause notice, vitiates the proceedings u/ s.263 and consequently the order u/s. 263 passed by the learned PCIT is also rendered bad in law. Further, we find that the same very issue on which the show cause notice was issued by the learned PCIT was not only thoroughly examined during the course of scrutiny assessment proceedings in respect of the assessment year under appeal, but the same was consistently examined during the preceding assessment years starting from the assessment year 2006-07. As a matter of fact, in the assessment order passed u/s. 143(3) for the A.Y. 2006-07, there is a detailed discussion on this point and after proper and thorough application of mind the Assessing Officer allowed credit for deemed dividend tax. The same view was adopted upto the assessment year 2009-10. Thus, the view adopted by the Assessing Officer during the assessment year under appeal is in consonance with the consistent view adopted by the Department itself in the preceding assessment years. Further, the Assessing Officer has not blindly followed the view adopted in the preceding assessment years but has also independently examined this issue by raising detailed inquiries and after considering the replies filed by the assessee-society. Thus, the view adopted by the Assessing Officer is a possible and plausible view and the Assessing Officer has adopted this view having regard to the well established principles of consistency of approach and also after considering the merits of the claim. In view of the legal position which emerges from the various cases cited above, it is an undisputed legal position that the learned PCIT cannot substitute his view for the view of the Assessing Officer by invoking jurisdiction u/s.263 of the I.T. Act. Therefore, for these reasons also the order passed by the learned PCIT u/s. 263 totally fails to meet the jurisdictional requirements of section 263 of the I.T. Act - Decided in favour of assessee Allowing credit for deemed dividend tax which would have been payable in Oman - whether the dividend income was granted exemption in Oman with the purpose of promoting economic development - Held that:- As find from the factual position discussed, it is seen that the annual accounts of the PE are prepared in accordance with the International Financial Reporting Standards (IFRS). As per IFRS-28 the share of PE in the profit / loss in OMIFCO at 25% has to be accounted as income in the Profit and Loss account of the PE even though such income received is only to the extent of dividend declared and distributed. Out of the total distributable profit, OMIFCO is required to transfer a specified amount to reserves under the Omani law and only the remaining profits are distributed to the shareholders. Therefore, even under the Omani Tax Laws, the PE offers for taxation only the dividend income actually received and not the total share of the PE in the profits of OMIFCO. On the other hand, books of account of the assessee in India are required to be prepared in consonance with the Indian Accounting Standards. Obviously, the undistributed share of profit reflected in the books of P.E. cannot be said to partake the character of income under the provisions of the Income-tax Act. It is settled position that accounting entries are not determinative of taxability under the Income-tax Act and further only the real income can be brought to the charge of tax. In the present case even the undistributed profits reflected in the books of the P.E. are not brought to the charge of tax under the Omani Tax Laws. In our view having regard to the above mentioned facts the said income by assuming undistributed profit cannot be taxed under the I.T. Act. Therefore, on merits also the directions issued by the learned PCIT on this issue are not justified and the same are hereby vacated. Thus we hold that the impugned order passed by the learned PCIT u/s.263 of the I.T. Act is without jurisdiction and not sustainable in law. - Decided in favour of assessee
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2016 (3) TMI 370
Business connection in India - Existence of Fixed PE In India and service PE In India - Whether assessee has a dependent agent PE is India? - Held that:- In this case assessee company secures orders on behalf of the Indian company and outsources the job to Indian company. There is a continuous relationship between the assessee company and its affiliates and subsidiary company in India. The contract entered by the assessee company and its affiliates outside India are carried out in India. The responsibility of the assessee company vis a vis its customer is concluded in India. The responsibility of the assessee company cannot be segregated and will not complete unless the Indian company provides services to the customers. Based on these facts Ld CIT (A) has held that appellant has continuous revenue generating business activities with Vertex India and there is real and intimate relationship between activities of non-resident outside India and those inside India. In view of this we are of the view that the assesse has a business connection in India u/s 9 (1) (i) of the Act.On this score we confirm the order of CIT (A). In view of the decision of Honourable supreme court in case of DIT V Morgan Stanely inc CO (2007 (7) TMI 201 - SUPREME Court ) we do not have any difficulty in holding that there is no Fixed Place PE in India of the assessee. In view of this even if assumed that there is a PE in India of the assessee no profit can be attributed to it as FAR (Functions performed, Assets deployed and Risk Assumed) such PE has already been compensated at arm's length price and therefore nothing more should be attributed to it. Furthermore when in the case of Assessee for AY 2006-07 Ld AO has made no addition and assessment is made at returned income it is apparent that the contention the assessee is accepted by the AO in subsequent year. In view of this we confirm the order of CIT (A) on this count that if there is a PE in India of the assessee, when PE is remunerated at arm‟s length no further attribution of profit can be made. Reimbursement of Royalty as per Indo UK DTAA - whether chargeable to tax despite there being no income element? - Held that:- As on the basis of assets employed and salary and wages paid, the service fee payable to the Indian company comes out to be 78151587- and service fee actually paid was 7170443/-. Therefore if the reimbursement of expenses is reduced from the services fee actually received by the Indian company, then profit from Indian operation will enhance from the same value i.e. the reimbursement of expenses paid by Indian company to other. In the same logic the royalty and fee for technical services received by the assessee company and its affiliates will have effect of reducing the fee actually paid to Indian company. Therefore without prejudice to the assessee's disclosure, the receipt as royalty and fee for technical services, the same is taxable as business profit. Therefore the profit margin of assessee company and its affiliate for Indian operations will further enhance by reimbursement of expenses and royalty and FTS paid by Indian co. The payment in respect of access circuit , networks, bandwidth and call charges amounting to ₹ 24511059/- is taxable as royalty as per Article 13.3(b) of the Indo UK DTAA.
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2016 (3) TMI 369
Entitlement to deduction u/s. 80IB(7)(a) - Held that:- Section 80IB(7)(a) states that 50% of the profits and gains derived from the business of such Hotel. In this context also, it can be stated that the term 'profits and gains derived from the business of such hotel' has wider meaning than the term 'profits and gains derived from an undertaking'. We have mentioned in the earlier paragraphs with reference to the ICAI audit guidelines that these are receipts directly on account of running of the Hotel business and it is not incidental/ancillary income and, therefore, these receipts though termed as "other income" is entitled to the benefit of deduction u/s. 80IB of the Act. Hence, the grounds of the assessee are allowed for the assessment year 2007-08. Similarly, in respect of 'other income' for AY's 2008-09 and 2010-11, except for interest income and interest on refund, the 'other income' enumerated above is entitled to the benefit of deduction u/s. 80IB(7)(a). Therefore, our findings and conclusions for the assessment year 2007-08 will hold good for the assessment year 2008-09 and 2010-11. - Decided in favour of assessee
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2016 (3) TMI 368
Disallowance of royalty payments on account of the same being treated as capital expenditure - Held that:- Royalty payment is based on the percentage of quantum sales and it is an annual charge to be considered as business expenditure in respect of assessment year 2007-08 as held by Co-ordinate Bench in the case of India Nippon Electricals Ltd., [2016 (3) TMI 237 - ITAT CHENNAI]. It is a lump sum payment towards royalty and as such in that circumstance it was held that it is an capital expenditure and depreciation was granted. - Decided in favour of assessee Disallowance of the capital work in progress written off - Held that:- In this case, assessee incurred an expenditure towards setting up a factory at Singur in West Bengal. Due to unrest and protest by the local people, assessee had abandoned the said project , and claimed it as a revenue expenditure as a business expenditure. A perusal of Sec.30 to Sec.38 of the Act shows that neither sections will apply to this case and the assessee will not be able to claim the benefit u/s.28 of the Act. The expenditure incurred by the assessee is not for the purpose of carrying on its business, but on the other hand it is incurred for the purpose of setting up of new business which is in capital filed. Had the expenditure incurred for carrying on business which is an outgoing and assessee could claim as deduction from the profit of the business. The law has evolved considerably as a result of acceptance of the crucial principle that the distinction between capital and revenue expenditure should be determined from the practical and business view point and in accordance with sound accountancy principles, eschewing the legalistic approach. The expenditure incurred to set up a project at Singur in West Bengal is not an expenditure wholly and exclusively incurred for the purpose of carrying on business of the assessee or incidental o the carrying on the business of the assessee and it is an expenditure incurred in the capital field and it also cannot be allowed u/s.37 of the Act. Thus the loss in respect of discarded project had written off by the assessee during the previous year is not allowable expenditure as business deduction and it cannot be allowed. Being so, we are of the opinion that lower authorities are justified in rejecting the claim of the assessee. - Decided against assessee
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2016 (3) TMI 367
Addition on account of sale of carbon credit - capital receipt or Revenue receipt - Held that:- As decided in case of CIT Vs. My Home Power Ltd. [2014 (6) TMI 82 - ANDHRA PRADESH HIGH COURT] carbon credit is not an offshoot of business but an offshoot of environmental concerns and no assets is generated in the course of business but it is generated due to environmental concerns and therefore, it was held that the Tribunal has correctly held that this is a capital receipt and it cannot be business receipt of income Addition on account of low value of bagasse claimed and sold the same in open market - Held that:- ince the assessee has shown some sales at ₹ 150 per qtl., some at ₹ 130 per qtl. and some at ₹ 120 per qtl. also, it cannot be said that lesser sales proceed of bagasse has been shown by the assessee without bringing some evidence on record, suggesting such reduction in sales proceeds accounted for by the assessee by showing lesser amount of sale proceeds as against actual realization of higher sales proceeds because if the assessee is doing so, then there is no need to show such high sale price of ₹ 120 to ₹ 150 per quintal for about 51,500 Quintals out of total sale of 615,631 Quintals. This has been deleted by the Ld. CIT(A) on this basis that there is no evidence in the possession of the Assessing Officer which goes to prove that the assessee had actually sold the declared bagasse at ₹ 80 per qtl. or at a higher rate then what has been declared by the assessee and in the absence of such information or evidence, no addition can be made in the hands of the assessee MAT computation - inclusion or exclusion of receipt of carbon credits - Held that:- The receipt on account of transfer of carbon credit which is held to be a capital receipt needs to be excluded from profit as per P&L account for the present year while computing the book profit u/s 115JB of the Act.
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2016 (3) TMI 366
Penalty u/s 271(1)(c) - time limit to levy penalty - Held that:- The penalty order under section 271(1)(c) of the Act ought to be passed before the expiry of the financial year in which the proceedings, in the course of which, action for imposition of penalty has been initiated are completed, or six months from the end of the month in which order of the CIT(A) or the Tribunal is received by the Chief Commissioner or the CIT. In other words, in the present case, the proceedings given rise to the penalty were completed on 15.7.1997 when the CIT(A) has passed the order. This order has been given effect on 29.9.1999. Meaning thereby, the order must have been received by the authorities. The time limit to pass the penalty order in this case was before 31.3.2000, because the date of 29.9.1999 falls within the financial year started from 1.4.1999 and ends on 31.3.2000. Other time limit could be six months from the date of receipt of the order, that has also expired. Even for abundant precaution, we observe that in case on re-verification at the end of the A|O it emerges out that the penalty is within the limitation and there is some communication gap between mentioning of these dates, then, the Revenue will be at liberty to approach the Tribunal to recall this order. Such an application should be filed within the time limit available under the Income Tax Act. With the above remarks, the appeal of the assessee is allowed and penalty is deleted. - Decided in favour of assessee
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2016 (3) TMI 365
Disallowance of interest - nexus between the expenditure and the purpose of business - Held that:- As the assessee company made the contribution in the partnership firm M/s Abhitex International wherein it was having 12% share. The amount was invested keeping in view the business expediency as the group to which the assessee belonged acquire the entire share holdings of RMZ Corporation Holdings Pvt. Ltd., so it was not a case of divertion of borrowed fund, rather it was investment as a capital in the firm M/s Abhitex International for the business purposes and in the light of commercial expediency. Thus , we are of the view that the disallowance of interest made by the AO and sustained by the ld. CIT(A) was not justified. In that view of the matter the impugned disallowance is deleted. - Decided in favour of assessee
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2016 (3) TMI 364
Estimation of profits - rejection of books of accounts - Held that:- When there was no error or mistake pointed out by the Assessing Officer in respect of other businesses, rejection of the entire books of account is not justified. Even with regard to trading in bullion, the assessee-company purchased gold bullion to the extent of ₹ 1,85,34,411/- from M/s Gajaanand Jewellery Mart Pvt. Ltd, Coimbatore. The ledger account appearing in the books of account of the assessee shows sale of ₹ 2,23,39,087/-. The Assessing Officer has not considered the opening balance of the bullion for the year under consideration. The Assessing Officer has not considered the profit on sale of the bullion. When the assessee purchased bullion to the extent of ₹ 1,85,34,411/-, the sale consideration on sale of bullion would be more than ₹ 1,85,34,411/-. If there is a stock of gold bullion in the earlier assessment year which was taken as opening balance for the year under consideration, then naturally the sale of such bullion has to be reflected in the ledger account of the assessee-company. In those circumstances, by considering the profit ratio of the assessee, this Tribunal is of the considered opinion that rejection of books of account is not justified. Merely because there was an error in the annual report, as rightly submitted by the ld. Counsel for the assessee, this will not have any impact on the profit of the assessee. When the assessee has recorded the entire purchases and sales of the bullion in the books of account, this Tribunal is of the considered opinion that estimating profit after rejecting the books of account is not justified. Accordingly, the orders of the lower authorities are set aside and the addition made by the Assessing Officer is deleted. - Decided in favour of assessee
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2016 (3) TMI 363
Addition made on account of short term capital gain - treatment to speculation loss as per explanation to section 73 as loss from capital gain - Held that:- AO has wrongly held the losses from capital gain as speculation by misinterpreting the provisions of explanation to section 73 of the Act. The first conditions used the words ‘mainly’ relevant to the income from the specified four heads of income which has to be understood in true legal terms. The dictionary meaning of the word ‘mainly’ is chiefly, principally, much etc. This is very clear that the aggregate income from the specified four heads should be the main portion of the gross total income of the company. The plain meaning of the word ‘mainly’ is more than half. It means any element which has the presence of more than half in the total shall be termed as main element. So, if the aggregate income of the four specified heads is more than 50% of the gross total income of a company, it can be said that the company has the main income from the four specified heads. So, if the aggregate income of the four specified heads is 51% and above of the gross total income of a company, it should be said the company has the income mainly from the four specified heads. From the figures put narrated by the Ld AO as reproduced above, it is evident that the gross total income of the company consisted mainly of income which is chargeable under the heads “Capital Gains” and “Income from other sources”. Such a Company is exempted from Explanation to Section 73. In view of above we find that the explanation to section 73 of the Act does not apply to assessee - Decided against revenue Disallowance u/s 14A - Held that:- Rule 8D r.w.s. 14A(2) can be invoked only if the Assessing Officer “having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of expenditure incurred” in relation to tax-free income. The burden Ion the Assessing Officer to establish nexus of expenses incurred with the earning of exempt income, before making any disallowance under section 14A. There cannot be any presumption that the assessee must have incurred expenditure to earn tax free income. The AO cannot proceed to determine the amount of expenditure incurred in relation to exempt income without recording a finding that he is not satisfied with the correctness of the claim of the assessee. This is a condition precedent. While rejecting the claim of the assessee with regard to the expenditure or no expenditure in relation to exempt income, the AO will have to indicate cogent reasons for the same Rule 8D of the IT Rules, comes into play only when the AO records a finding that he is not satisfied with the assessee’s method. - Decided against revenue Addition u/s. 68 - Held that:- AO has made the addition of the share application money because all the nine companies were having the common address and the notice sent under section 133(6) was received by the single person. Accordingly the AO opined that the assessee has used its unaccounted money in the share application transactions. However we find that all the money received in the form of share capital is duly supported with the requisite document as discussed above. To our mind the basis on which the addition was made by the AO is not tenable. The ld. DR also could not brought anything on record to controvert the findings of the ld. CIT(A). In view of above we find no reason to interfere in the order of the ld. CIT(A). - Decided against revenue
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2016 (3) TMI 362
Capital assets as per Section 2(14)(iii) - measuring the distance from municipal limit - Held that:- For measuring the distance from municipal limit to the land is by road, not straight line method or crow flight method. Therefore, the impugned land is not capital assets as per Section 2(14)(iii) of the Act. Accordingly, we uphold the order of the ld CIT(A). Addition on account of unexplained cash deposit in the bank - Held that:- CIT(A) has fairly considered the business income of ₹ 85,420/- and allowed the credit of it. It is a fact that no books of account had been maintained by the assessee and sales and purchases were made in cash. The cash flow statement submitted before the Assessing Officer has thoroughly examined by the lower authority. The assessee had self generated evidence for selling the goods in cash and same cannot be verified from the third person. Therefore, we uphold the order of the ld CIT(A).
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2016 (3) TMI 361
Addition on account of capital gains - estimation of fair market value - application of fair market value on the basis of DLC as per Section 50C - Held that:- It is undisputed fact that these properties were not got registered under the Registration of Stamp Act. It is also a fact that there was a transfer of assets from assessee to brother of the assessee namely Shri Shoukat Ali. The assessee himself admitted that this transfer as on 01/4/2006. The Assessing Officer has given deduction @ 10% on the basis of computing fair market value as on 01/4/2006. However, this matter is technical, therefore, both the properties i.e. plot No. 33, 33A, Jagdish Colony, Amer Road, Jaipur and agricultural land at Amer are required to be referred for the DVO U/s 55A of the Act. However, property at office premises has been referred to the DVO, the Assessing Officer had given deduction on account of fair market value as on 01/4/2006 from the DVO’s report as DVO had calculated the fair market value as on 31/3/2007. Therefore, the capital gain calculated by the Assessing Officer on their property i.e. office premises is justified. However, the objection raised by the AR against the valuation of the DVO is required to be considered, therefore, we feel necessary to allow further deduction @ 10%, in total 20% including Assessing Officer’s deduction from the fair market value estimated by the DVO. It is further noticed by the Bench that when book value as on 01/4/2006 has been taken for computing of the capital gain at ₹ 10,21,694/- whereas in assessment order it has been shown as on 31/3/2006 at ₹ 3,96,260/-, which is opening balance as on 01/4/2006. - Decided in favour of revenue
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2016 (3) TMI 360
Disallowance by contravention of provisions of Section 43B - service tax due had not been deposited - Held that:- The assessee has not debited service tax in P&L account, which has been shown in service tax account separately. The Hon’ble Delhi High Court in the case of CIT Vs. Noble Hewitt (I) (P) Ltd. (2007 (9) TMI 238 - DELHI HIGH COURT ) has held that the assessee followed mercantile system of accounting and collected service tax. The amount of service tax has not been debited in the P&L account as also not claimed as deduction, therefore, amount could not be disallowed. Further in the case of CIT Vs. M/s Calibre Personnel Services Pvt. Ltd. (2015 (2) TMI 587 - BOMBAY HIGH COURT ) by considering the Hon’ble Delhi High Court decision in the case of CIT Vs. Noble Hewitt (I) (P) Ltd. (supra) wherein both the issues i.e. Section 43B and issue of mercantile system of accounting had also been considered and held that in case of assessee, Section 43B no disallowance can be made. The Hon'ble Supreme Court has also dismissed the SLP filed by the department in the case of CIT Vs. M/s Calibre Personnel Services Pvt. Ltd. (supra). By respectfully following the decision of both the Hon’ble Courts, we delete the addition confirmed by the ld CIT(A). - Decided in favour of assessee
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2016 (3) TMI 359
Penalty u/s 271(1)(c) - calculation of sale consideration - assessee is the sole owner of the property and has received the full consideration of the property, and therefore liable to be taxed as capital gain under section 50C - Held that:- As gone through the judgments in the matter of Renu Hingorani vs. ACIT [2010 (12) TMI 795 - ITAT MUMBAI ] and CIT vs. Madan Theatres Ltd.[2013 (6) TMI 96 - CALCUTTA HIGH COURT ]. On perusal of the case law mentioned in the order of ld. CIT (A), it is clear that the income has been calculated on the basis of deeming provision by the authorities below. However, the said income as calculated on the basis of stamp duty valuation is subjected to debate/correction in case the assessee disputes the valuation made by the stamp duty authority. Since the matter is pending adjudication before the Tax Tribunal whereby the valuation calculated by the stamp valuer is under challenge. Therefore, there is no reason to impose the penalty as there is no concealment of income or inaccurate particulars of income furnished in the return. - Decided in favour of assessee
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2016 (3) TMI 358
Deduction of TDS under section 194C - contract for carrying out the specific work - Held that:- From the details given, the AO and the ld. CIT (A) has worked out the average cutting and sawing charges of more than ₹ 2155/- per day paid to the said M/s. Garvit Stonex, M/s. Chanda Marbles & M/s. Nidhi Granites. In our view, the said firms/companies are doing the edge cutting and sawing on regular basis and are also having business relationship with the assessee. The regular bills were being raised by the said concerned persons on the assessee and the assessee had been making the payment to the said persons. We do not agree with the contention of the assessee that there is no written contract or oral contract with the said persons/firms which make the payment amenable for deduction of TDS under section 194C of the IT Act. We do not find force in the submissions, as per our understanding, under the contract at every promise and every set of promises are formed. The consideration for each other is an agreement and an agreement enforceable by law is a contract. In the present case, the contract stands concluded when the assessee asked M/s. Garvit Stonex and others to do the edge cutting and sawing of granite blocks and convert them into marble tiles for it for a consideration. The moment the said contractors/persons doing the sawing and edge cutting of the marble blocks, the said persons are entitled for the amount required to be paid as per the bills raise by them. In fact, in the present case after doing the edge cutting and sawing, the charges were even paid by the assessee, in our understanding, a contract has come into existence between the assessee and M/s. Garvit Stonex and others. In our view, the assessee is responsible for paying the amount to such persons i.e. contractor for carrying out the specific work. Therefore, the assessee is liable to deduct the tax on such payments. Since the assessee has failed to deduct the tax on the amount paid by it to such persons/contractor, the assessee is duty bound to deduct the tax, and non deduction of tax by the assessee, attracts the provisions of section 40(a)(ia). We will be failing in our duty if we do not discuss the amendment brought in by the Finance (No. 2) Act 2014 with effect from 1.4.2015 by virtue of which proviso to section 40(a)(ia) has been inserted, which provides that if any such sum taxed has been deducted in any subsequent year or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of previous year, and further, section 40(a)(ia) has been substituted wherein the 30% of any sum payable to a resident has been substituted. In the present case, the authorities below has added the entire sum of ₹ 7,51,322/- by disallowing the whole of the amount. Though the substitution in section 40 has been made effective with effective from 1.4.2015, in our view the benefit of the amendment should be given to the assessee either by directing the AO to confirm from the contractors, namely, M/s. Garvit Stonex, M/s. Chanda Marbles and M/s. Nidhi Granites as to whether the said parties have deposited the tax or not and further or restrict the addition to 30% of ₹ 7,51,322/-. In our view, it will be tied of justice if the disallowance is only restricted to 30% of ₹ 7,51,322/- - Decided partly in favour of assessee
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2016 (3) TMI 357
Addition on account of DCS development expenses - Held that:- As decided in assessee's own case one of the objectives of the respondent - assessee is to carry out such activities as may be conducive for the promotion of the dairy industry and improvement and protection of milk animals and in pursuance of the said objective, it has to run technical administrative, financial and other necessary sport to the societies. The respondent - assessee collects milk from its member unions i.e. primary dairy cooperative society (DCS) and sells the milk and milk products to the consumer under its brand name ‘SARAS’ . For increasing the procurement of milk and protecting the dairy farmers, it has to launch various schemes for inducing more and more milk produces to join the primary dairy cooperative society and for this purpose, it has incurred expenditure and thus, in our view, these expenses are directly related to the business of the respondent - assessee and incurred for commercial expediency. It is also a finding of fact that the respondent - assessee has also charged ‘Cess’ @ 1% of the sale value from milk unions for which receipts of ₹ 9,12,27,490/- have been offered as income of the assessee and when income has been offered by the respondent - assessee then the said expenditure is certainly allowable as business expenditure. - Decided in favour of assessee
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2016 (3) TMI 356
Transfer pricing adjustment - whether the foreign exchange gain/income from service provided to AE will be part of the operating revenue/income? - Held that:- In view of the coordinate bench of the Tribunal in the case of Rusabh Diamonds (2013 (11) TMI 520 - ITAT MUMBAI ), we hold that the foreign exchange gain/income from service provided to AE will be part of the operating revenue/income of the assessee and consequently it will be part of the operating profit of the assessee for the purpose of determining the ALP in respect of the international transaction. However, the related aspect on this issue is also to be kept in mind that while taking the margins of the comparables, the effect of foreign exchange in the margins of the comparables should also be taken into account. Therefore, we direct the AO/TPO to re-compute the margin of the assessee by including foreign exchange gain but exclude other incomes on account of interest etc and further to consider the operating margin of the comparable after giving effect to foreign exchange gain or loss in their respective margins to arrive at the mean margin. Accordingly, this issue of the assessee is partly allowed. Selection of comparable - Held that:- Accentia Technologies Ltd is engaged in diversified activity of medical transcription, medical coding, billing, receivable management. Thus it is clear that the said company is engaged in the healthcare activity and providing BPO service in the healthcare sector, that too by providing specific services of medical transcription, medical coding, medical billing etc. We note that these activities are quite different from the service of contact centre provided by the assessee to its AE which is purely in the nature of call centre. Therefore, we are of the view that the company Accentia Technologies Ltd cannot be considered as a functionally comparable company with the services provided by the assessee to its AE Eclerx Services Ltd. company is not comparable with BPO company which are engaged only in low end services of data processing. Accordingly, we direct the AO/TPO to exclude Eclerx Services Ltd. from the list of comparables for the purposes of determining ALP. Infosys BPO Ltd. - revenue earned by this company is from the activity inclusive of operation primarily relates to providing business process management services to other organization engaged in outsourcing business process. This company is not engaged in direct activity of BPO but it provides service to BPOs and that too management service to BPO. Therefore, in our considered view, this company is engaged in a different nature of activity to that of the assessee provided to its AE. Accordingly, we direct the AO/TPO to exclude this company from the list of comparables. Cosmic Global Ltd. be excluded as the segmental revenue of BPO segment of Cosmic Global Limited is still on much lower side. Reducing travel expenses incurred in foreign currency from the export turnover while computing deduction u/s 10A - Held that:- This issue is now covered by the judgment of the Hon'ble jurisdictional High Court in the case of Tata Elxsi (2011 (8) TMI 782 - KARNATAKA HIGH COURT ) wherein held . When the statute prescribes a formula and in the said formula, ‘export turnover’ is defined, and when the ‘total turnover’ includes export turnover, the very same meaning given to the export turnover by the legislature is to be adopted while understanding the meaning of the total turnover, when the total turnover includes export turnover. If what is excluded in computing the export turnover is included while arriving at the total turnover, when the export turnover is a ‘component of total turnover, such an interpretation would run counter to the legislative intent and impermissible. If that were the intention of the legislature, they would have expressly stated so. If they have not chosen to expressly define what the total turnover means then, when the total turnover includes export turnover, the meaning assigned by the legislature to the export turnover is to be respected and given effect to, while interpreting the total turnover which is inclusive of the export turnover
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Customs
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2016 (3) TMI 379
Maintainability - CHALR license - Rejection of application for New Custom Broker Licence - Held that:- the working of Custom House Agent/Customs Broker is regulated under self contained regulation i.e. Customs House Agent Licensing Regulation, 2004 and from 2013, Customs Broker Licensing Regulations, 2013. Section 146 in particular clause (g) of sub-section (2), it is provided that the regulation which is made by the Board may provide for the appeals if any against order of suspension or revocation of licence but in this case, order is neither for suspension nor revocation of license, therefore under this provision of Section 146 there is no provision for appeal against rejection of application for New Custom House Broker. Since the appellant's application for New Custom Broker Licence has been rejected because the appellant has not attained the status of Custom Broker, therefore appellant is not eligible to file appeal before this Tribunal under Section 129A. - Decided against the appellant
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2016 (3) TMI 341
Validity of Tribunal's order - Refuse to condone delay of 546 days on the ground of not properly explained - Held that:- it is seen that the Tribunal's order was based entirely upon the letter of the Speed Post Centre. Unfortunately, the Department did not have the returned cover itself. Therefore, the question as to whether there was another endorsement to the effect "intimation delivered" or not is not known. From the mere endorsement "unclaimed", it cannot be concluded whether the intimation was delivered or not. Unless both endorsements go together, the presumption of service cannot be made. Moreover, in a communication dated 21.12.2011, the Additional Commissioner admitted that the Order in Original was not made known to the appellant in any other manner. This is despite the fact that under Section 153(b) of the Act, there is a provision for affixure of the Order on the Notice Board of the Customs House. It is not a case of the Department that there was affixure. Therefore, as the Tribunal did not take into account the above aspects, the order is set aside. - Decided in favour of appellant
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2016 (3) TMI 340
Seeking waiver of pre-deposit of duty - Section 129E of the Customs Act - Appellant was ordered to make pre-deposit of duty but it unable to do so results in refusal to grant further extension - Held that:- as the goods worth for more than the said amount of pre-deposit i.e. ₹ 5 Lacs is in the custody of the Department, no further condition of pre-deposit can be imposed under Section 129E of the Customs Act. Therefore, by taking into account the appellant's plea of financial hardship the condition of pre-deposit is deleted. - Decided in favour of appellant
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2016 (3) TMI 339
Validity of order - No opportunity of hearing provided at the time of passing order - Held that:- all the adjudication orders are set aside, since the Petitioner prays for a fresh opportunity, we direct that the Petitioners either by themselves or through their authorised representative will appear before the Joint Director of Foreign Trade. - Decided in favour of petitioner
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2016 (3) TMI 338
Eligibility for exemption under Notification 21/2002 - Import of Pop corn maize cleared under Tariff Rate Quota scheme at concessional rate of Custom duty in terms of Notification No. 21/2002, dated 1-3-2002. Exemption denied on violation of Actual User Condition - Held that:- by relying on the case of Sriven Marketing v. Union of India [2012 (1) TMI 204 - ANDHRA PRADESH HIGH COURT], the processes undertaken by the appellant as refrigeration, gradation, packing, fumigation, etc. in case of vending popcorn amounts to manufacture. Therefore, the Actual User condition is satisfied and the appellant are eligible for the benefit of concessional rate of duty under Notification No. 21/2002 and the demand of duty on this amount is not sustainable. Inclusion of Royalty paid - In terms of Rule 10(i)(c) of the Customs Valuation Rules - Whether the royalty paid by the appellant to their licensor is liable to be included in the assessable value for determining the Customs duty - Held that: the royalty payments are made as percentage of the net proceeds of sale of products sold in India and abroad. It is quite obvious that maize product being an agricultural product, the price of the imported goods i.e. maize corn is included in the net proceeds of sale of finished goods which are essentially corn only and the royalty is paid on corn. Therefore, royalty paid by the appellant is includible in the value of the imported goods for purpose of assessment of Customs duty. Confiscation and Penalty - Vending Corn - The department contended that appellant had not used imported goods for manufacturing vending corn but sold the same in the market in the same condition as it was imported and therefore the vending corn is liable to confiscation and confiscated the same under Section 111(d), 111(m) and 111(o) of the Customs Act - Held that: Section 111(m) speaks of confiscation in respect of goods which do not correspond in respect of any particulars with the entry made under Customs Act. Here the entry referred to is the Bill of entry and the declaration thereto. As the declaration did not declare the existence of the Agreement, the goods are liable to be confiscated under Section 111(m) of the Customs Act and penalty under Section 114A and 114AA are to be imposed . Also the import of the goods is not prohibited nor is there violation of post importation condition, therefore, goods can not be confiscated under Section 111(d) and 111(o). - Decided partly in favour of appellant
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2016 (3) TMI 337
Eligibility of Refund claim - Unjust Enrichment on the basis of Balance-sheet & C.A. certificate - Held that:- the amount has been shown as reimbursible in the balance-sheet which is certified by the C.A. Also it is demonstrable that as per the calculation given in C.A certificate, wherein from the sale consideration, the appellant have cut the amount of excess duty recovered, after recovery of cost as per the original declaration filed and duty after reducing the normal trade profit. Also the refund claim has been reduced by the above amount. So, the certificate of C.A. which is supported by other corroborative evidence like balance-sheet and calculation of amount etc. cannot be brushed aside and looks to be fair and reasonable. Therefore, the appellant is eligible for refund amount with interest. - Decided in favour of appellant
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2016 (3) TMI 336
Imposition of penalty - Under Section 112(a) of the Customs Act, 1962 - Appellant on request introduced one CHA to M/s FIL and acted as coordinator for forwarding the documents received from importer i.e. M/s FIL to such CHA which results in involving him in aiding and abetting in diversion of the imported garlic into the local market which was supposed to be re-exported after processing - Held that:- the role of the appellant is not restricted to introduction of the parties but have actively assisted M/s. FIL and its directors in diversion of the goods in the local market which were supposed were processed and the exported. But in view of absence of any finding as to consideration received by the appellant for assisting the main accused and also in absence of any finding as to any role of appellant in export of the clay powder in the guise of garlic powder, the penalty is being reduced from ₹ 5000/- to ₹ 2000/-. - Decided partly in favour of appellant
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Corporate Laws
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2016 (3) TMI 335
Winding-up petition - appointment of Official Liquidator - Held that:- This Court has granted more than sufficient time to the respondent-Company in order to make the payment of the outstanding dues of the petitioner, not disputed by the respondent-Company. The Undertaking given by the respondent-Company before this Court has not been honoured by it and all the Cheques handed over to the petitioner pursuant to the said Undertaking have been dishonoured despite a specific statement that all the Cheques would be honoured. The entire sequence of events, as disclosed hereinabove, does not inspire sufficient confidence in the Court so as to show more leniency to the respondent-Company by granting time. From the material on record, including the affidavit-in-reply filed by the respondent-Company and the consistent failure of the respondent-Company to make good the admitted dues of the petitioner, it is amply evident that the respondent-Company has lost its financial substratum and is unable to pay its debts. M/s. Sparta Cements and Infra Limited”, the respondent-Company, is hereby ordered to be woundup. The Official Liquidator attached to this Court is appointed as the Official Liquidator of the respondent-Company and is directed to take over the possession of the entire assets of the respondent-Company, that is, movables, immovables as well as Bank Accounts etc. The Official Liquidator is further directed to take all measures for the winding-up of the respondent-Company as provided under the Companies Act.
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2016 (3) TMI 334
Composite Scheme of Arrangement - Held that:- The observations made by the Regional Director having been addressed and the Official Liquidator having opined that the affairs of the Petitioner Transferor Companies have not been conducted in a manner prejudicial to the interest of its members or to the public interest, in the opinion of this Court, there does not appear to be any impediment to the grant of sanction to the Composite Scheme of Arrangement. From the material on record and on a perusal of the Scheme, the Scheme appears to be fair and reasonable and is not violative of any provisions of law, nor is it contrary to public policy. The Arrangement under the proposed Scheme appears to be in the interest of the companies and their members and creditors and, therefore, deserves to be sanctioned. Accordingly, the Scheme as proposed by the petitioner companies along with the newlyproposed clause 9.1 A, is hereby sanctioned. It is however, clarified that the sanctioning of this Scheme would not absolve anyone, who is otherwise liable for any responsibility or liability, only on account of this sanctioning.
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Service Tax
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2016 (3) TMI 355
Taxability of services - Classification - naturally bundled services or not - place of provision of services (POP Rules) - intermediary service or not - GoDaddy India Web Services Private Limited to provide support services in an integrated manner to assist GoDaddy US develop its brand in India, carry on its operations efficiently and serve customers in India - Held that:- the various support services proposed to be provided by the Applicant to GoDaddy US are a "bundle of Services" being naturally bundled in the ordinary course of business and accordingly is a single service, being business support service, in terms of Section 66F of the Finance Act. Applicability of POP Rules - proposed service to be provided by the applicant to GoDaddy US is business support service and not intermediary service in terms of Rule 2 (f) of POPS. - It is observed that said proposed service does not fall under any of the Rules of POPS but for Rule 3. Rule 3 of POPS inter-alia envisages that the place of provision of a service shall be the location of the recipient of service. The place of provision of business support service provided by the applicant, is outside India in terms of Rule 3 of the Place of Provision of Service Rules, 2012. - the services to be provided by the applicant to GoDaddy US would fall to be classified under Rule 3 of the Place of Provision of Services Rules, 2012 qualify as export of taxable services in terms of Rule 6A of the Service Tax Rules, 1994 (inserted vide Notification No. 36/2012-S.T. dated 20.6.2012) and therefore remain non-taxable for purpose of payment of service tax under the Finance Act. Further, applicant is not concerned in respect of services provided by GoDaddy US to Indian Customers, which relates to domain name registration, transfer services, web hosting services, designing services etc., In case, applicant was providing service to Indian Customers, he would have received "consideration" from Indian Customers. Fact is that no remuneration/consideration is received by the applicant from Indian Customers. Applicant is to only receive from GoDaddy US, a fee equal to the operating cost incurred by the applicant plus mark up of 13% on such costs. It is noticed that applicant is to receive said fees from GoDaddy US, even in respect of Indian Customers, who directly remit service charges to GoDaddy US through International Credit Card, wherein applicant is not in the picture. This fact further shows that the applicant is not providing any service to Indian Customs. GoDaddy US have used said services provided by the applicant as per the draft Service Agreement. Further, applicant would charge a fee equal to the operating costs incurred by the applicant plus a mark-up of 13% on such costs, which would be received by the applicant from GoDaddy US in US Dollars. The benefit of services provided by applicant accrues to GoDaddy US outside India. Activity is not liable to service tax - Decided in favor of applicant.
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2016 (3) TMI 354
Business auxiliary service - services provided by the Banks for collection of telephone bills, collection of insurance premium on behalf of the client companies - Held that:- Clause (12) of Section 65 covers all charging services rendered by the Banks. - when cash management services stood excluded from the purview of service tax at the hands of the Bank until 31.05.2007, the authorities cannot levy service tax on an activity which is essentially cash management service, by taking aid of other general charging heads, such as business auxiliary service. Further, Section 65A of the Act, while dealing with classification of taxable services, has clarified in sub-section (2) that “when for any reason, a taxable service is, prima facie, classifiable under two or more sub-clauses of clause (105) of Section 65, classification shall be effected in the prescribed manner - No demand can be made - Decided against the revenue.
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2016 (3) TMI 353
Refund of cenvat credit without obtaining registration - tribunal allowed the refund - Held that:- if the Tribunal has followed the decision of this Court in case of M/s. mPortal India Wireless Solutions Private Limited [2011 (9) TMI 450 - KARNATAKA HIGH COURT ], it cannot be said that any substantial question of law would arise for consideration. The learned Counsel for the appellant has not been able to show that there was any liability on the part of the respondent-assessee to pay service tax which was required to be paid and which was required to be adjusted against cenvat credit or that the respondent-assessee was not entitled to the refund. The learned Counsel has not been able to show any provision even under Rule 5 of Cenvat Credit Rules, which provides for condition precedent for registration of the service provider. - Refund cannot be denied - Decided against the revenue.
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2016 (3) TMI 352
Waiver of pre-deposit - whether the amount of ₹ 2,35,00,000/- as directed by the Tribunal was reasonable and justified - import of services towards handling the goods including inspection, sorting etc. - reverse charge - Held that:- After hearing learned counsel for the parties and keeping in view the totality of the facts and circumstances of the case, a sum of ₹ 50 lacs shall be deposited by the appellant within a period of four weeks - It was pointed out that vide order dated 16.7.2015 passed by the Tribunal, the appeal was dismissed for non-compliance of stay order dated 12.5.2015 - Accordingly, the order dated 12.5.2015 is modified whereas the order 16.7.2015 passed by the Tribunal dismissing the appeal of the appellant for non-compliance of the pre-deposit order dated 12.5.2015 is set aside. On deposit of ₹ 50 lacs, the Tribunal shall proceed to adjudicate the appeal on merits expeditiously in accordance with law. - Decided in favor of assessee.
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2016 (3) TMI 351
Failure to deposit 50% under the Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES) - Admittedly, the respondent nos. 1 and 2 made a declaration in VCES Form I declaring that a sum of ₹ 11,49,32,357/- was due as service tax and intended to make payment of 50% of the dues under VCES. However, by letter dated 24th December, 2014, the writ petitioners had indicated the manner in which the tax dues were to be paid and also prayed for adjustment with the income tax refund which, as evident from the letter dated 26th December, 2013, was rejected by the service tax authorities. The question is, whether the respondent nos. 1 and 2 were entitled under VCES to seek adjustment of service tax dues against the income tax refund. Held that:- Since admittedly 50% of the declared tax dues were not paid by 31st December, 2013, the writ petitioners were not entitled to the benefits under the VCES. Since VCES is a statutory scheme having a fixed time frame, we are of the view that Court by its observations cannot enlarge the time frame as has been done in the instant case. Rather non-payment of 50% of the declared tax dues or other dues under section 107(3) empowers the service tax authority to proceed under section 87 and also under section 89 of the Act, which in the instant case has been initiated. - Decided in favor of revenue.
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Central Excise
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2016 (3) TMI 380
100% EOU - sale of goods in Domestic Tariff Area (DTA) without following the guidelines - Customs duty is chargeable on fresh cut flowers grown and cleared by the appellant in DTA in terms of Notification No. 126/94-Cus., dated 3-6-1994 % or otherwise - Held that:- As per this provisions a clear distinction between excisable goods and non-excisable goods were made. When excisable goods are manufactured then the excise duty in terms of Section 3 of Central Excises and Salt Act, 1944 are required to be paid which is otherwise equal to the Customs duty leviable on such article. In case of non-excisable goods, no excise duty or Customs duty on such non-excisable goods are required to be paid. Only customs duty equal to amount leviable on imported goods used for production, manufacture or packaging of such article are required to be paid. In the present case the final product is Cut Flowers which is sold in DTA market. The said Cut Flowers are not excisable, firstly there is no question of any payment of excise duty or customs duty on Cut Flowers. If at all any duty liability is there it should be on the imported goods which is used for production, manufacture or packaging of cut flowers. In the instant case, it is not case of Revenue that the appellant have used any imported material for growing or packaging of cut flowers. Therefore there is no question of any demand of customs duty. In any case, the demand was confirmed by the original adjudicating authority in terms of Notification No. 126/94-Cus. on the cut flowers as discussed above. Cut flower being non-excisable goods, neither any excise duty nor any customs duty is required to be paid. We are of the considered view that demand of duty on the Cut Flowers grown/produced in India and cleared in DTA is not chargeable, therefore the impugned order is sustained as cut flowers cleared by 100% EOU in DTA does not attract any duty. - Decided in favour of assessee
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2016 (3) TMI 350
Classification - Ayurvedic medicines like Neem, Boswellia, Serrata, Ashwagandha, Gymnema, etc. - Tariff Heading 3003.31 or 3003.39. - Held thatThere is no dispute that the impugned goods are manufactured in accordance with the formulae of the authoritative text and name as mentioned in the text are mentioned in the packing of the product. We have also perused copies of labels used for marketing these medicaments. The mention of the house name/ brand-name “Shivananda”/ “Om” cannot lead to the conclusion that these products are not sold in the name specified in Ayurvedic text. In Zandu Pharmaceuticals (2004 (8) TMI 133 - CESTAT, MUMBAI ) the Tribunal held that the word “Zandu” appearing on the label of Ayurvedic medicines will not disentitle the assessee from claiming the exemption available to Ayurvedic medicaments. Reliance was placed on C.B.E.C. clarification dated 29.03.1994. The Board clarified that Chavanprash prepared as per Ayurvedic Text Books and sold as Chavanaprash but the manufacturer's name or mark, logo, symbol etc. is also prominently displayed, in such situation also full exemption as available to Ayurvedic medicines is to be extended. We also notice that the Honble Supreme Court in Astra Pharmaceuticals Pvt. Ltd. (1994 (12) TMI 77 - SUPREME COURT OF INDIA ) held that there is distinction between house mark and product mark. A monograph which only identifies the manufacturer would not make the medicine patent or proprietary. Considering the above analysis, we find that the appellant / assessee are right in classifying these products under Tariff Heading 3003.31 and claimed exemption available to Ayurvedic medicaments. - Decided in favour of assessee
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2016 (3) TMI 349
CENVAT Credit pertaining to duty paid on inputs used for the manufacture of non-notified goods - Compounded Levy Scheme - Held that:- No separate accounts were maintained with regard to the raw material meant for the notified goods and the non-notified goods. Obviously, therefore it is not possible for the appellant to establish as to how much of the impugned CENVAT Credit would pertain to the inputs which were used in or in relation to manufacture of non-notified goods. It is trite to say that the onus to show as to how much of the impugned CENVAT Credit pertained to inputs used in or in relation to the manufacture of non-notified goods and as the appellant is admittedly not in a position to discharge the said onus, the Commissioner rightly disallowed the impugned credit
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2016 (3) TMI 348
Classification - Fibre Glass Reinforced Plastic namely Missile Container, Logistic Container - Held that:- In the present case the pre-dominant input is plastic as compared to Glass fiber therefore the product Missile Container merit classification under Chapter 39 and not under Chapter 70. The submission of the appellant that classification should be based on the end use is not correct for the reason that there is no specific tariff entry for missile container in the Central Excise Tariff Act. The very same issue has been decided by the larger bench and upheld by the Hon'ble Supreme court in case of Kemrock Industries & Export Ltd Vs. CCE [2007 (3) TMI 260 - SUPREME COURT OF INDIA ] as held Fiber Glass Reinforced Plastic Articles, it was held that the Rule 3(b) of Rules for Interpretation of Tariff requires that composite goods, mixtures and goods put up in sets to be classified on the basis of materiel or component which gives the product its essential character. Following the said judgment, in the present case also the plastic being predominant in the product, Missile Container, it merits classification under Chapter 39, in view of above discussion and settled legal position of law, the order passed by the Ld. Commissioner (Appeals) is just and proper which needs no interference
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2016 (3) TMI 347
Entitlement to interest on refunds - duty was deposited when no production was made - Rule 9 of Pan Masala Packing Machines (Capacity Determination and Collection of Duty) Rules, 2008 - Held that:- As is evident from the chart relating to all four appeals, there were no machines installed at the beginning of the month and operations commenced only in the middle of the month and therefore as per Rule 9 of the said Rules no duty would be payable by 5th of the month when no machines were operational and as a consequence the case would fall under the 4th proviso of Rule 9 of the said Rules. The impugned interest was not recoverable from the appellant and therefore the appellants are entitled to refund of the interest so recovered from them
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2016 (3) TMI 346
Eligibility for cenvat credit - conveyor system, thickener and filtration system, electrical equipments - Held that:- The Hon'ble Supreme Court in case of CCE, Jaipur Vs. Rajasthan Spinning & Weaving Mills Ltd. [2010 (7) TMI 12 - SUPREME COURT OF INDIA ] applied "user test" to find out whether or not particular goods could be said to be capital goods which would depend on use for which it was put into as such. The classification of item purchased by the appellant by itself will not determine the eligibility of cenvat credit. The use to which these items were put to by the appellant will decide the eligibility. Applying such user test, it is clear that in the present case, the disputed items were forming part and parcel of overall capital goods of various descriptions and use. M.S. Plants, angles, channels, etc. used in the plant for fabrication of structure like ducting for bag filter, venting and exhaust dust collector chutes, coal crusher, conveyor system coal hopper etc. are eligible for cenvat credit. tHUS structural items such as angles, channels, rods, etc. required to make the machines functioning without any vibration or movement eligible for cenvat credit. - Decided in favour of assessee
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2016 (3) TMI 345
Disallowance of CENVAT credit - appellant is engaged in the manufacture of Textile Articles, classifiable under Chapter 58 and 60 of the Schedule to the Central Excise Tariff Act, 1985 - whether the appellant has rightly taken CENVAT credit on the inputs received from 100% EOU, during the period 2006-07 to 2009 (i.e. August 2009) - Held that:- Denial of Cenvat Credit is related to calculation error, which the appellant has already paid alongwith interest and imposition of penalty is not justifiable. - Decided in favour of assessee
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2016 (3) TMI 344
Intermediate goods - captive consumption - Valuation adopted in terms of Rules and CAS-4 standards - eligibility for exemption under Notification NO.67/95-CE dated 16.03.1995 - capital goods - Held that:- Hard copy shim is an excisable product manufactured and fully put to captive use by the appellant. For arriving at the value for Central Excise purpose, the appellant followed provisions of Rule 8 and general principles of costings as per CAS-4 standards. This is also in terms of Board's Circular dated 13.02.2003. Now, we find that the value adopted by the appellant was sought to be rejected by the Revenue without any valid legal grounds. Revenue adopted highly arbitrary and imaginative methodology to arrive at the value of these impugned goods. The value of shim is arrived at from the value of final product - hologram - by deductive method. This is not supported by any provisions of law or approved standards of accounting/costing. The best judgement under Rule 11 of Valuation Rules does not permit such arbitrariness and imaginative valuation. The impugned goods are admittedly "capital goods" falling under Chapter 84 of CETA. The provisions of exemption Notification NO.67/95-CE dated 16.03.1995 is clearly applicable to the impugned goods as they are used captively within the factory of production. The exclusion provided in the proviso of the said notification shall apply only to inputs not capital goods. We find the reasoning given by the original authority to deny the said exemption as totally misconceived. Rule 6 (4) of Cenvat Credit Rules, 2004, has no application to decide the eligibility of above said exemption. The said Rule is for non-eligibility of credit on capital goods used exclusively in the manufacture of exempted goods. In the present case, the appellant is not claiming any credit on capital goods. In fact, the appellant is manufacturing the capital goods and is claiming exemption under Notification NO.67/95-CE dated 16.03.1995. Here, we find that the ld.Commissioner's finding is absolutely without basis and is erroneous. This we hold that the appellant will succeed on both the grounds viz.: valuation adopted in terms of Rules and CAS-4 standards and eligibility for exemption under Notification NO.67/95-CE dated 16.03.1995. - Decided in favour of assessee
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2016 (3) TMI 343
Eligibility for refund of the unutilized CENVAT Credit - Credit lying in balance as they had cleared the goods under CT-3 to a unit situated in SEZ or otherwise under Rule 5 of the Cenvat Credit Rules,2004, read with Notification No. 5/2006-CE(NT) dated 14.03.2006 as amended - Held that:- Undisputed facts are the appellant is eligible to avail CENVAT credit of the inputs which are used for manufacturing of cables and wires, discharges appropriate duty on the final products and also clear the final product to a unit situated in SEZ. It is also undisputed that the appellant has, during the material period in these appeals, was unable to utilise the CENVAT Credit lying in balance as there were no home clearances and all the clearances were made to unit in SEZ without payment of duty but under bond. In our considered view, the first appellate authority as well as the adjudicating authority were in error in rejecting the refund claims and confirmation of demands initiated by show-cause notices for erroneous refund sanction for more than one reason as there is no dispute as to the fact that the finished goods were cleared to an unit situated in SEZ which would amount to export as per the provisions of SEZ Act, more specifically Section 2(m) of the SEZ Act which states that any supply of goods or provisions of services from DTA to SEZ unit or SEZ developer has been defined to be as an export; Section 51 of the SEZ Act provides that this Act shall have over riding effect any other law for the time being in force, which would mean that the provisions of SEZ Act needs to be referred to as to whether clearance of amount to export. If that be so on plain reading any clearances made by appellant to an SEZ unit during the material period in this appeal have to be considered as "export". - Decided in favour of assessee
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2016 (3) TMI 342
Duty liability - whether the Respondent has any control over the IOCL in discharge of duty liability by the latter - Held that:- Certainly, the answer shall be negative when assessee does not have any control over that concern. Respondent acted in good faith and paid duty on the basis of invoice and claimed MODVAT credit of the duty so paid. When the seller of the goods is liable to discharge the duty, his lapse shall not constitute an offence for the buyer of the goods. Having no mandate in the law in that regard and in absence of legislation that the buyer shall be jointly and severally liable in the event of no discharge of duty by the seller, the respondent should not be penalized under law. Therefore, following the ratio laid down by the Hon'ble Supreme Court in the case of CCE, Jalandhar Vs. Kay Kay Industries (2013 (8) TMI 772 - SUPREME COURT ), Revenue appeal is dismissed.
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CST, VAT & Sales Tax
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2016 (3) TMI 378
Powers of survey, search, seizure and assessment under Delhi Value Added Tax (DVAT) - writ petition for restraining the Respondents from taking any coercive steps - validity of default assessment orders of tax, interest and penalty - power to reverse the ITC claimed during an earlier period - Held that:- The survey operation undertaken in each of the petitions was without authority of law inasmuch as the Officer who undertook such operation acted without jurisdiction and contrary to the order issued by the CVAT on 12th November 2013 under Section 68 (2) of the DVAT Act. The order in Form DVAT-50 issued by the Special Commissioner on 15th October 2014 did not permit the enforcement officer to carry out any assessment and therefore, orders of default assessment of tax, interest and penalty passed by the AVATO Enf-I under Sections 32 and 33 of the DVAT Act were without the authority of law. The Joint Commissioner who issued the deployment orders authorising the AVATO Enf-I to undertake the search and seizure was not specifically authorized to do so in terms of the order dated 12th November 2013 issued by the Commissioner under Section 68 (2) of the DVAT Act. This therefore, vitiates the entire survey, search and seizure operation undertaken by the teams of the DT&T so deployed. There could not be a revision or reassessment of the tax computed for the periods of 2013-14 for which returns were filed, by reversal of the ITC claimed for that period without following the due process as envisaged under the DVAT Act. It was not open to the AVATO Enf-I who was not authorized to make any assessment, to adjust the ITC reversal pertaining to an earlier period ending on 31st March 2014 in the returns filed for the different quarters of 2014-15. The penalty orders under Section 86 (10) read with Section 33 of the DVAT Act were bad in law. Section 87 (6) of the DVAT Act does not enable the officers who undertake the search and seizure operation under Section 60 of DVAT Act to collect tax dues on the spot from the dealer whose premises is searched. The VAT Authorities have in these cases proceeded on a basic misconception of the scope of their powers and authority. Interdiction by the Court, in the exercise of its powers under Article 226 of the Constitution, of the continued exercise by the VAT Authorities of powers that they do not possess becomes an imperative. Decided in favor of appellants.
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2016 (3) TMI 377
Stay of demand - Power of commissioner to grant interim injunction/protection - Denial of input tax credit (ITC) - ferrous and non-ferrous metals and metal scrap - Held that:- the issue involved in this appeal stands concluded by the decision of this Court in Punjab State Power Corporation Limited v. The State of Punjab and others [2016 (2) TMI 245 - PUNJAB AND HARYANA HIGH COURT] - the power to grant interim protection/injunction by the first appellate authority in appropriate cases in case of undue hardship is legal and valid. - Matter remanded back.
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2016 (3) TMI 376
Detention of goods under Punjab VAT - Levy of penalty - Section 51(7)(c) - obligation of the detaining officer is under legal obligation to allow 72 hours to the owner of the goods to prove the genuineness of the transaction before him in his office - Held that:- Concurrent findings have been recorded against the asssessee by the authorities below - the assessee had been transporting the goods without the genuine documents and the driver tried to escape from the ICC barrier, Banur but he was apprehended and the goods were detained. If the driver had lost the documents in transit, as alleged, he could have informed the assessee and stopped the vehicle which he did not. Nothing could be shown by the learned counsel for the appellant-assessee except to urge that opportunity of hearing was not provided to it. The said contention was negated by the fact that in response to the notice issued to the assessee, two Advocates Mr. Varinder Gupta and Mr. Dharam Singh appeared on behalf of the assessee before the authorities and explained that the goods were purchased from Delhi but the documents of purchases and GR were lost in transit at Delhi. They also failed to produce the account books. Further, the documents were produced later on by the counsel for the assessee after 20 hours of detention. - Appeal dismissed - Decided against the assessee.
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Indian Laws
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2016 (3) TMI 333
Maintainability of appeal - whether against the order dated 22.9.2009 passed by the Recovery Officer an appeal under Section 30 of the RDDB Act was maintainable before the DRT? - Recovery of Debts Due to Banks and Financial Institution - Held that:- Undoubtedly the order passed by the Recovery Officer on 22.9.2009 has vital bearing on the rights of the petitioners. As long as the order that Recovery Officer may pass in exercise of powers under Sections 25 to 28 of the RDDB Act and which acts prejudicially or is injurious to a person, such person would be a person aggrieved. An appeal at the hands of such person would be maintainable under Section 30 of the Act. As noticed earlier, DRT had dismissed the appeal after taking into account the objections of the petitioners also. Since it is pointed out that the bank is attempting to recover the dues of the defaulters since long without success, we would instead of relegating the proceedings to the DRT, place it before the DRAT for decision on the appeal of the petitioners on merits. We would request the DRAT to give priority consideration to such appeal and dispose of the same preferably before 31.8.2016. The interim formula granted by this Court earlier shall inure till 31.8.2016. If thereafter the appeal is not disposed of, it would be open to the petitioners to apply before the DRAT for further relief.
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