TMI Tax Updates - e-Newsletter
March 18, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
Indian Laws
TMI SMS
Highlights / Catch Notes
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Income Tax:
Addition u/s 56(2)(viia) - deemed gift - Since the transaction of sale and purchase of shares is between related parties and both the companies are companies in which the public are not substantially interested, AO was justified in examining the applicability of the provisions of section 56(2)(viia) to the transaction of transfer of shares. - AT
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Income Tax:
Exemption u/s. 11 - helping aspiring members/members in preparing for CISA and CISM certification conducted by the parent body, ISACA, USA - assessee cannot be considered to be an “educational trust” within the meaning of section 2(15) - it is not entitled for exemption u/s. 11 and this income of the assessee is to be assessed as business income under the head AOP - AT
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Income Tax:
Challenge to the authority of ITO to issue notices u/s 148 - the petitioning assessee was precluded by Section 124(3)(b) from questioning the authority of the assessing officer who had issued the notices u/s 148 - HC
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Income Tax:
Eligibility of deduction under section 80IB - unreasonable profits earned. - For making a comparative analysis, apples are to be compared with apples and not with oranges. - AT
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Income Tax:
Deduction u/s 80IC - the counsel for the assessee was of the bonafide belief that along with the claim of 80IC and 80I deduction, the Form 10CCB was not required since the accounts of the assessee are audited as per the statute. The assessee cannot be penalized for the bonafide mistake of the counsel - AT
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Customs:
Levy of anti-dumping duty - Software downloaded electronically - Absence of mechanism to levy and collect duty - no duty can be levied and collected on software downloaded electronically - AT
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Customs:
Proper authority for issuing show cause notice - Whether DRI is or not - comparison with the price of such imports cannot cause any prejudice to the appellant because it can be nobody's case that the price would be higher for imports of larger quantities of such goods. - AT
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Customs:
Classification - the classification has been determined on the basis of the length of the flock fibres being between 0.45 limited to 0.5 mm which was never contested and on the basis of the HSN Explanatory Notes on classification which are standard and internationally accepted for the purpose of determining the classification of goods. Thus, Revenue has discharged its burden of proof while determining the classification. - AT
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Customs:
Valuation - inclusion of royalty - Legality of Commissioner (Appeals) order - There was no discussions either on facts or on legal issues in his impugned order and also it had not examined in detail the agreements and amendment agreements but merely endorses the respondent's view without any discussion - AT
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Customs:
Rejection of declared price - when the price of similar or identical goods are same price and it was accepted by the Customs in all major Custom Houses, there is no justification for taking recourse to Rule (8) of CVR and to adopt the price of Country of Exportation. - AT
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Customs:
Refund claim in terms of Section 27 of the Customs Act - Rejected being time barred - Anti-dumping duty paid on PVC film - limitation prescribed under Section 27 would not be applicable to the refund of excess anti-dumping duty paid in terms of the provisional notifications, which attained finality subsequently. - AT
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Service Tax:
Cenvat credit - Internet service, web-hosting service and content service is wholly attributable to the activity of rendering taxable output service. Thus, the demand attributable to these input services is set aside. - AT
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Central Excise:
Liability to pay duty on clearance of structural scrap - duty demand alleging suppression of facts - When there is no clearance of inputs or capital goods as such, question of reversal of CENVAT credit availed on such items does not arise - AT
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Central Excise:
100% EOU - whether the benefit of Central Excise (Removal of goods at concessional rate of duty for manufacture of Excisable goods) Rules, 2001 is available to 100% EOU - Held Yes - AT
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Central Excise:
Ineligibility for the SSI benefit - determination of turnover - the amount which has been deducted from their account by the buyers for its delay in execution in contracts is not correct and the proposition needs to be rejected - AT
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2016 (3) TMI 549
Addition under section 56(2)(viia) - addition to the appellant's income as deemed gift - whether as the FMV of shares on transaction date was negative and hence, question of any addition u/s. 56(2)(viia) of the Act does not arise? - Held that:- The property i.e., shares which are transferred are the shares of a company in which the public are not substantially interested. Since the transaction of sale and purchase of shares is between related parties and both the companies are companies in which the public are not substantially interested, we are of the opinion that the AO was justified in examining the applicability of the provisions of section 56(2)(viia) of the Act to the transaction of transfer of shares. Fair market value of the shares computation - AO has recorded that the assessee has furnished the valuation of the shares based on the working given under rule 11UA(c )(b) of the IT Rules, according to which, the fair market value of the shares is Rs.-64.48/- (i.e., the value of Optival share is at a negative figure) whereas the assessee has paid at ₹ 1 per share - Held that:- If AO was not satisfied with the working given by the assessee, he ought to have computed the FMV himself in the method prescribed under the rules but ought not to have adopted higher of the prices paid by the assessee for purchase of some of the shares of M/s Optival as even when the transactions are between the related parties, the provisions of section 56(2)(viia) can be applied only in accordance with the prescribed method and the difference between the price at which the assessee has purchased the shares and aggregate of the fair market value of the shares as computed can be brought to tax as deemed income in the hands of the assessee. For the above reasons, we are satisfied that the provisions of section 56(2)(viia) are not properly and correctly applied in the assessee’s case. In view of the same, the assessment order as well as the order of the Ld. CIT(A) are set aside and these issues including the issue raised in the additional ground of appeal are remitted to the file of the AO for reconsideration of the issue in accordance with law. - Decided in favour of assessee for statistical purposes
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2016 (3) TMI 548
Revision u/s 263 - taxability of alleged long term capital gain on sale of shares - DTTA between India and the Sri Lanka. - Held that:- Gains from alienation of the shares of capital stock of the company the property of which consists directly or indirectly principally of immovable property situated in a contracting State may be taxed in that State. The situs of the shares was in Sri Lanka. The Royale Exports Ltd. is a resident of Sri Lanka, and therefore, the transfer of shares of that company held by the assessee company in India would be taxable in Sri Lanka and if gain is to be taxed in Sri Lanka, then that will not be taxed in India as per the DTAA. Thus, even after setting aside the issue to the AO, the result will be same i.e. gain will not be taxed in India. The Hon’ble Karnataka High Court in the case of D.G. Gopala Gowda (2013 (5) TMI 46 - KARNATAKA HIGH COURT) had an occasion to examine similar aspect, i.e. if after exercise of power u/s.263, no taxable income is unearthed in the hands of the assessee, then, action u/s.263 should not be upheld. In view of the above discussion, we allow the appeal of the assessee and quash the order passed by the ld. Commissioner under section 263 of the Income Tax. Revision u/s 263 - operation of weighbridge and income therefrom wrongly mentioned as per CIT(A) - as per CIT(A) expenditure is in higher side as compared to income from the operation of weigh-bridge - Held that:- The assessee has placed on record computation of income, details of expenditure and all other details called for by the AO. The assessee has an income of ₹ 906/- under the head “Business Income”. This income was earned by the assessee from renting of weigh-bridge. In our opinion, the ld.Commissioner was of the view that against an income of ₹ 906/- from the operation of weigh-bridge, the expenditure of ₹ 2,98,212/- towards salary and ₹ 1,16,067/- towards depreciation of weigh-bridge are prima facie on the higher side and this aspect has been accepted by the AO without verification. In our opinion, the assessee has placed on record the details. If the logic of the ld.Commissioner is accepted that against a miniscule income, expenses of more than ₹ 4,16,000/- has been claimed by the assessee, then no assessee would ever suffer loss. Certain expenditure are to be given to the assessee, even if in a particular year no business activity was carried out. The assessee has shown operation of weighbridge and income therefrom. Therefore, the ld.Commissioner is not justified in taking action under section 263 of the Income Tax Act. We allow this appeal of the assessee also and quash the order passed by the ld. Commissoner. - Decided in favour of assessee
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2016 (3) TMI 547
Disallowance of incentives to Dock Labour Board Workers - CIT(A) directed the Assessing Officer to restrict the disallowance to 15% only - Held that:- Expenditure is incurred as a regular practice in the business of forwarding and clearing agencies at Dock and Ports for loading and unloading of goods and claimed as General and Miscellaneous expenses necessarily for the purpose of conducting business. The Revenue has accepted 15% disallowance in the earlier years and has attained finality. The ld. Commissioner of Income Tax (Appeals) has examined the findings of the Assessing Officer and submissions of the assessee and relied on the Jurisdictional High Court decisions which are acceptable. Therefore, we are not inclined to interfere with the order of Commissioner of Income Tax (Appeals) on this ground and accordinlgy ground of the Department is dismissed. - Decided against revenue Disallowance of Business Promotion Expenses - CIT(A) treated expenditure as business expenses and deleted the addition - Held that:- We are of the opinion that the magnitude of business is high and to develop business relations, it is common to incur expenditure on foreign visitors. Therefore, we do not interfere with the order of Commissioner of Income Tax (Appeals) on this ground and uphold the same. - Decided against revenue Disallowance of subscription to associations - CIT(A) deleted the addition - Held that:- We after hearing the rival submissions and perusal of subscriptions details paid to the Associations for improving business prospects in domestic and international markets and also participation fees paid to various seminars and conference and we confirm the order of Commissioner of Income Tax (Appeals) in deleting the addition - Decided against revenue Disallowance of motor car expenses - Held that:- We are of the opinion that the assessee firm maintaining large fleet of cars to the hierarchy of management and assessee disallowed expenditure on two cars which is not disputed but on remaining cars the assessee fails to maintain log book and not produced evidence in assessment proceedings and there is a scope for element of personal usage considering the luxury sedans. Therefore we set aside the order of Commissioner of Income Tax (Appeals) on this ground and confirm the order of the Assessing Officer in making disallowance - Decided against assessee Disallowance of foreign travel expenses - Held that:- We remit the issue to the file of the Assessing Officer to verify the genuiness of documents and pass the order.- Decided in favour of revenue for statistical purpose. Disallowance of interest - Held that:- We after hearing the submissions, found that assessee could not submit these details in the assessment proceedings and also not demonstrated with fund flow statement to prove that there are adequate funds available with the firm. Therefore, we set aside the disputed issue to the file of the Assessing Officer who shall verify fund flow statement based on the capital account and balance sheet of the firm and allow deduction after examination - Decided in favour of revenue for statistical purpose. Addition on account of difference in receipts as per clients account - Held that:- We are of the opinion considering the submissions and material produced and the circumstances and the type of clients and the nature of expenditure and accounting treatment which the Assessing Officer was denied the opportunity of verification in the assessment proceedings. Therefore, we remit this issue to the file of the Assessing Officer for verification and examination. The Assessing Officer shall pass the order on merits after providing opportunity of being heard and in accordance with law - Decided in favour of revenue for statistical purpose. Addition of amount payable to Madras Port Trust - Held that:- the fact that the assessee has collected storage charges as per the directions and due to High Court stay in Writ Petition the amount could not be refunded and the outcome of the Writ Petition is pending and there is a liability falling on the assessee firm to discharge. We are of the opinion on the current circumstances, the assessee shall be allowed deduction on payments based on the outcome of the High Court decision and so far as this assessment year is concerned, we do not interfere with the Commissioner of Income Tax (Appeals) findings on this ground, and accordingly uphold the order of the Commissioner of Income Tax (Appeals). - Decided in favour of assessee Disallowance 15% of receipts representing the expenditure reimbursed by the clients - Held that:- The matter needs to be examined and reimbursement does not take the character of income. Therefore, we set aside the order and direct the Assessing Officer to consider the issue in dispute after reconciliation and pass orders and allow the appeal of the assessee for statistical purpose.
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2016 (3) TMI 546
Denial of benefit of exemption u/s 11(2) - Held that:- It was not a case of A.O. that there was no form at all. If at all, any defects in the form, they are procedural defects and which can be rectified. There is no specific bar prohibiting the assessee from modifying the figures of accumulation as held by the Hon’ble High Court of Punjab & Haryana in the case of CIT vs. Simla Chandigarh Diocese Society (2009 (8) TMI 103 - PUNJAB AND HARYANA HIGH COURT) . In any case period of accumulation cannot be more than five years. In the absence of specific period, it can be always presumed that the period of accumulation is five years. Therefore, we are of the opinion that the CIT(A) should have allowed the assessee to file the revised form no.10 rectifying the defects pointed out by the A.O., which was not done. Therefore, we deem it appropriate to remit the issue back to the file of the A.O. and direct the A.O. to allow the assessee to file revised form no.10 and consider the exemption claimed u/s 11 of the Act. Depreciation claim - Held that:- Depreciation on assets, the cost of which was allowed has application of income in earlier year is to be allowed while computing the income available for application for charitable purpose. The CIT(A) rightly directed the A.O. to allow the depreciation. We do not see any error or infirmity in the order passed by the CIT(A). Application of income towards release of funds to Horticulture department - Held that:- The assessee being a State Govt. organization, constituted under sec. 15 Andhra Pradesh (Agricultural Produce and Livestock) Market Act, 1966 is authorized to spend funds specified by the Government through general or special orders. Therefore, when the Government is directed to spend amount for particular purpose as per the said Act, the assessee is bound to follow the instructions of the Government. The amount is paid to farmers in the form of horticulture subsidy for establishment of cold storage facility, which is coming under one of the objects of the assessee. Therefore, we are of the opinion that the amount spent for the welfare of farmers and paid through horticulture department as directed by the Govt. is application of income for charitable purpose. The CIT(A) has rightly deleted the addition subject to verification by the A.O. We do not see any error or infirmity in the order passed by CIT(A). Hence, we inclined to upheld the order of CIT(A) and set aside the issue to the A.O. for the limited purpose of verification and direct the A.O. to allow the claim subject to verification of directions of the Director of horticulture or Govt., after giving due opportunity to the assessee.
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2016 (3) TMI 545
Entitlement to claim exemption u/s. 11 - examination for the course of certified information system auditor and also collected as seminar fees from the participants - Held that:- The course conducted by the assessee may be a source of acquisition of some knowledge by the respective students/persons. But such a course or acquisition of knowledge by the students at the class conducted by the assessee for conducting review and courses for helping aspiring members/members in preparing for CISA and CISM certification conducted by the parent body, ISACA, USA and also conducting monthly professional education meetings wherein professionals address the participants for sharing knowledge and experience on methodologies, emerging concepts, skills updation etc., cannot be considered to be “education” within the meaning of section 2(15) of the Act. We are of the opinion that the assessee cannot be considered to be an “educational trust” within the meaning of section 2(15) of the Act. Therefore, it is not entitled for exemption u/s.11 of the Act and this income of the assessee is to be assessed as business income under the head ‘AOP’ and it is to be assessed after giving all deduction available o the assessee under the head ‘'Business income”. However, we make it clear that if the cost of fixed assets has been claimed as application of income while claiming exemption u/s.11 of the Act under Chapter-III of the Act in earlier assessment years, the assessee cannot claim depreciation on the same asset u/s.32 of the Act as the cost of fixed asset was already allowed as application of income and its cost has already become ‘Nil’. - Decided against assessee
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2016 (3) TMI 544
Disallowance of pre-operating expense for a “Mawa project” a new project - expenditure admissible u/s 37 - expenditure incurred for expansion of the existing business of the assessee or a new business unconnected with the existing business - Held that:- As decided in assessee's own case A.Y.2009-2010 the ice-cream and the Mawa fall in the genus of the dairy/milk products and they are covered by the nature of declared business of the assessee. As such, the impugned expenditure claimed by the assessee does not include any expenditure of capital nature. The 'control and management, accounts, CEOs for both the dairy/milk products is one and the same. AD has not made out the absence of interlacing of the above. Under the factual matrix of the case, we find the claim of the assessee is allowable - Decided in favour of assessee
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2016 (3) TMI 543
Challenge to the authority of ITO to issue notices under Section 148 - Held that:- An additional twist is sought to be given by the department in suggesting that the ITO, Ward-46(1) may not have been the person entitled to receive the returns from the petitioning assessee, but that such officer exercised the authority of an assessing officer over the petitioning assessee in view of the petitioning assessee having filed the original returns with such officer. According to the department, the appropriate assessing officer of the petitioning assessee ought to have been the assessing officer whose duties have now been assigned to the ITO, Ward-46(1) under the notification of October 22, 2014 which became effective on November 15, 2014. However, such aspect of the matter is not gone into since such reason is not expressly or otherwise indicated in the impugned letter of August 17, 2015. If the reasons indicated in a relevant order suffice for such purpose, it would be wholly unnecessary to supplement the order with additional reasons which did not occur to the authority rendering the decision in the first place. Since it is evident that the petitioning assessee was precluded by Section 124(3)(b) of the Act from questioning the authority of the assessing officer who had issued the notices under Section 148 of the Act dated March 27, 2015 to the petitioning assessee on April 29, 2015, the contents of the letters dated April 29, 2015 and the objection as to jurisdiction contained therein had been rightly disregarded by the ITO, Ward-46(1), Kolkata.
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2016 (3) TMI 542
Addition on account of cessation of liability u/s 41(l) - CIT(A) deleted the addition - Held that:- Assessee has himself agreed for the addition vide note sheet dated 22.12.2009 in the file of ld. Assessing Officer but the same has not been given any cognizance by the ld. CIT(A) in his appellate order. When the assessee himself is agreeing to the addition in the given circumstances, when the sundry creditors of ₹ 62,62,863/- were outstanding for some three years or more then this aspect should have been examined in depth by the ld. CIT(A) by way of passing a speaking order on this ground. We, therefore, are of the view that in the facts and circumstances of the case including the acceptance of assessee for agreeing to the proposed addition, matter needs to be relooked by the ld. CIT(A) by way of passing a speaking order in light of our findings and we accordingly set aside the issue to the file of ld. CIT(A) - Decided in favour of revenue for statistical purposes. Disallowance of labour charges - non deduction of tds u/s 194C - CIT(A) deleted the addition - Held that:- As during the course of assessment proceedings proper information and evidences were not supplied before the Assessing Officer for examining the applicability of provisions of section 194C of the Act on the labour contract charges of ₹ 17,79,855/- as to whether the complete amount of ₹ 17,79,855/- is liable for tax deduction at source u/s 194C of the Act or there was any bifurcation of the amount on which there was no liability for TDS u/s 194C of the Act or TDS of 1 % or 2% was applicable and also to the issue about the value of goods separately shown in the bills shown under the head labour contract charges. We are, therefore, of the view that this needs to be set aside to the file of ld. Assessing Officer before whom assessee will provide complete details with bifurcation of labour contract charges of ₹ 17,79,855/- and also classify the respective heads i.e. TDS not required to be deducted/ TDS to be deducted @ 1%/TDS deducted @ 2%/value of goods sold wrongly mentioned under the head labour contract charges.- Decided in favour of revenue for statistical purposes.
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2016 (3) TMI 541
Penalty u/s 271E r.w.s 274 - undisclosed source of cash payment - Held that:- We find that the fact that Sh. Harish Bindal and Smt. Sunita Bindal had a violent acrimonious relationship is evidence on record which has not been disputed by the Revenue. The reference to the incidents set out in the police complaint made by Smt. Sunita Bindal read out by the Ld. AR citing instances of mental and physical harassment necessitating seeking police protection and intervention has not been rebutted by the Revenue. The correctness of the same has not been assailed. In these peculiar facts and circumstances in the face of the turmoil in the family can constitute a reasonable cause. The source of cash payment on facts has been explained by the assessee and is not disputed. In these peculiar facts in the absence of any rebuttal or the evidences relied upon, we are of the view that in terms of provisions of section 273B of the Act, the assessee has successfully demonstrated the existence of a reasonable cause as envisaged by the said section. Thus accepting the explanation the penalty is directed to be quashed.- Decided in favour of assessee.
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2016 (3) TMI 540
Treating 'Business receipts' towards sale of software as 'Royalty' - Held that:- Para 6 of Article 13, to the extent applicable, states that the provisions of paragraphs 1 and 2 of this Article shall not apply if the beneficial owner of the royalties or fees for technical services, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties or fees for technical services arise through a permanent establishment situated therein. In simple terms, this means that the amount falling under para 3 of Article 13 cannot be taxed as Royalties under paras 1 and 2, if the beneficial owner of the royalties, being a resident of a Contracting State (UK), carries on business in the other Contracting State (India) in which the royalties arises through a permanent establishment situated therein (India). Once these conditions are satisfied, then the later part of para 6 comes into play, as per which the provision of Article 7 (Business profits) of this Convention shall apply. On the fulfillment of the conditions in the first part of para 6, the amount shall not be considered as 'royalties' under paras 1 and 2 of Article 13, but shall fall for consideration under Article 7 of the DTAA, being, 'Business profits'. There is no dispute on the fact that the assessee is a UK company having its branch office in India (which is its permanent establishment) and the transactions in question are sale of computer software made by such permanent establishment to certain parties in India. This shows that all the requisite conditions for the applicability of first part of para 6 of Article 13 are fully satisfied. On such fulfillment, the amount of 'royalties' is liable to be considered under Article 7 (Business profits). As the assessee has declared such receipts under Article 7, the view taken by the authorities in this regard, shifting such amount from Article 7 (business profits) to Article 13 (royalties), being contrary to the mandate of the DTAA, is liable to be and is hereby set aside. Thus we approve the assessee's stand on the sale of computer software as business profits, by jettisoning the Revenue's viewpoint of royalty. - Decided in favour of assessee. Receipt towards Annual maintenance contract - Held that:- AO finally treated receipts from annual maintenance contract as part of Royalty covered under section 9(1)(vi) of Article 13(3), as having the same character as that of the original software. While discussing receipts from sale of software amounting to ₹ 1.04 crore, we have held that the same is in the nature of business receipts covered under Article 7 and not Article 13 of the DTAA. Going by the AO's own version of receipts from annual maintenance contract having the same character as that of software sales, we consequently hold such receipts also falling under Article 7 of 'Business profits'. Before parting with this issue, we want to clarify that we have not independently examined the character of receipt from annual maintenance contract as `Royalties' or 'Fees for technical services'. It is so because of the AO himself finally holding it to be of the same character as the sale of software, and thus royalty covered under Article 13(3) read with section 9(1)(vi) and not Fees for technical services covered under Article 13(4) read with section 9(1)(vii).- Decided in favour of assessee. Receipts from training fees as 'Fees for technical services' covered under Article 13(4) of the DTAA - Held that:- Article 13(4) defines the term "fees for technical services" to mean payments, inter alia, for rendering of any technical or consultancy services that are ancillary and subsidiary to the application or enjoyment of the right, property or information described in paragraph 3(a) of this Article, para 5 provides that `fees for technical services' in paragraph 4 shall not include amounts paid, inter alia, for services that are ancillary and subsidiary, as well as inextricably and essentially linked, to the sale of property, other than property described in paragraph 3(a) of this Article. This shows that in so far as consideration for services that are ancillary, subsidiary, and inextricably linked to the sale of property described in paragraph 3(a) of the Article 13 is concerned, the provisions of para 4 apply. If however, consideration is for services that are ancillary, subsidiary, and inextricably linked to the sale of property other than that described in paragraph 3(a) of the Article 13, then it falls in para 5 and thus cease to be `fee for technical services' as per para 4 of Article 13. While discussing the nature of receipts from sale of software above, we have held in principle that such consideration does not fall within the definition of royalties given in para 3(a) of Article 13. Since the training of personnel of end users for which this consideration has been received is ancillary and subsidiary to the sale of software, the same, being covered under para 5, cannot be treated as 'Fees for technical services' as per para 4 of Article 13 of the DTAA. Ex consequenti, we allow this ground by approving the assessee's stand of including such receipts under Article 7 of the DTAA.- Decided in favour of assessee. Estimation of income from business at the rate of 18% on Consultancy receipts and Miscellaneous income - Held that:- We find that the AO has estimated income at the rate of 18% on Consultancy receipts and Miscellaneous income without pointing out any mistake in or rejecting books of account maintained by the assessee. It is trite law that unless the books are rejected after pointing out certain deficiencies, the declared profit of the assessee cannot be disturbed. In the absence of an iota of evidence justifying rejection of books of account, we overturn the impugned order on this issue and order for the deletion of addition. It is accordingly held these two amounts be included in the income of the assessee as originally declared. - Decided in favour of assessee
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2016 (3) TMI 539
TDS U/S 194J - initiation of proceedings u/s 201(1)/(1A) - Held that:- We hold that payment made to M/s Glow Show Stage Events requires deduction of tax u/s 194J of the Act. There will be no liability of the payer u/s 201(1) to the extent of the payee including the amount received in its total income and paying tax thereon. However, liability towards interest u/s 201(1A) will still be there from the date on which such tax was deductible to the date of furnishing of return of income by M/s Glow Show Stage Events even if the assessee is not treated as in default u/s 201(1). Non deduction of tds u/s 192 - TDS ON TIPS TO EMPLOYEES - assessee found to have paid Tips to its employees during the two years under consideration on which no deduction of tax at source was made as AO treated such tips to employees as part of 'Salaries’ - initiation of proceedings u/s 201(1)/(1A) - Held that:- As decided in ITC Ltd. [2011 (5) TMI 310 - DELHI HIGH COURT] such tips have been held to be chargeable to tax in the hands of employees. However, as regards the obligation of the employer to deduct tax at source and the consequential liability u/s 201(1), the Hon’ble Court held that the benefit of bonafide belief be given to the assessee. However, the obligation for interest u/s 201(1A) still remains as has been clarified by the Hon’ble Delhi High Court in the aforestated case of the assessee with the caption of ITC Ltd. (supra). The action of the ld. CIT(A) in also erasing the liability u/s 201(1A) is, therefore, set aside. We, therefore, hold that the assessee is liable for interest u/s 201(1A) in respect of non-deduction of tax at source from tips given to its staff.
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2016 (3) TMI 538
Charging of Interest u/s. 234C - default to pay advance tax under section 208 - Held that:- Respectfully, following the decision of Shakti Insulated Wires (P) Ltd. for assessment year 2005-06 (2014 (2) TMI 1246 - ITAT MUMBAI), which ruling, in our view, is squarely applicable to the case on hand, confirm the impugned order of the Ld. CIT(A) in holding that the assessee in the case on hand cannot be charged interest under section 234C of the Act as it had no liability to pay advance tax under section 208 of the Act on any of the due dates for payment of advance tax in the period under consideration and became liable to pay tax by virtue of a retrospective amendment made after the close of the relevant financial year. In these circumstances, the assessee could not be branded as a defaulter and be charged interest under section 234C of the Act - Decided in favour of assessee
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2016 (3) TMI 537
Penalty u/s 271(1)(c) - non communication of charge - Held that:- On perusal of the said notice we have observed that the said notice did not contain any specific charge as to whether the penalty proceeding was initiated for concealment of particulars of income or for furnishing of such income and even in the body of the assessment order, what has been stated is, “penalty proceedings u/s 271(1)(c) r.w. Explanation thereto are initiated separately”. In these situation it is clear that by not specifying the specific charge in the show cause notice, the assessee has infact been denied is reasonable and sufficient opportunity of being heard as the assessee was not even knowing what was the fault for which it was to explain innocence. It is settled law that when a particular penal provision like clause-C of sub-section1 of section 271 of I.T. Act, 1961, deals with more than one situation for attracting penalty provisions, the AO is duty bound to communicate the charge “Specifically” so that assessee can explain his reasons and superior authority can test the application of mind. In this regard we found support from the judgment rendered by Hon’ble Bombay High Court in case of CIT vs. Kaushalaya [ 1995 (1) TMI 25 - BOMBAY High Court ]. - Decided in favour of assessee Disallowance made consequent to change of heads of income - Held that:- While passing of the penalty order there is no recording of the fact that the Explanation offered by assessee was found false and unless falsity of the Explanation is established, no penalty can be imposed. We are of the considered view that the penalty under the aforementioned grounds has been levied merely on the basis of additions by disallowing certain claim/expenses and there is no material or evidence has been brought on record to show constructive concealment on the part of assessee. We found our support from the decision rendered in the case of CIT vs. Reliance Petroproducts Ltd. [2010 (3) TMI 80 - SUPREME COURT ] wherein it has been categorically mentioned that in order to expose the assessee to the penalty, the case should be strictly covered by the provisions and the penalty provisions cannot be invoked in the routine manner. A mere making of a claim which is not sustainable in law by itself will not amount to furnish inaccurate particulars regarding the income of the assessee and as such claim made in the return cannot amount to the inaccurate particulars, therefore, considering the entire case as well as factual position, we allow the abovesaid grounds.- Decided in favour of assessee
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2016 (3) TMI 536
Revision u/s 263 - claim of bad debts or loss arising on theft of jewellery stock allowed by AO - CIT took the view that the assessing officer has failed to examine the claim in a proper perspective by duly considering the reasons for rejection of the insurance claim - Held that:- A perusal of the assessment order relating to AY 2006-07 would show that the assessing officer has examined the claim of the assessee in that year and has taken the view that the same is not allowable in that year. He has expressed the view specifically that the said claim is allowable either in AY 2000-01 or 2001-02 or in AY 2007-08, meaning thereby, the assessing officer was satisfied with the claim made by the assessee and he was only expressing a doubt about the year in which the same is allowable. We further notice that the assessee has filed a revised statement of total income by making the above said claim, subsequent to filing of return of income u/s 139(1) of the Act. We also notice from the assessment order relating to AY 2007-08 that the assessing officer has proceeded to compute the total income by considering the total income as disclosed by the assessee in the revised computation of income, which shows that the assessing officer has duly recognized and accepted the revised computation of total income. There is no dispute that the revised computation of income was filed by the assessee only to make the claim of bad debts or loss arising on theft of jewellery stock. Thus, we notice that the assessing officer was very much aware of the claim put forth by the assessee, which shows that he has duly applied his mind on this issue. We further notice that the assessee has again furnished relevant details relating to the impugned claim in the assessment proceedings relating to AY 2007-08 through a letter dated 10-10-2009 filed before the AO. All these discussions would show that the assessing officer was seized of the matter relating to the claim and has allowed the same by applying his mind on due examination of the relevant details. It is well settled principle that the assessment order would not be rendered erroneous merely because the assessing officer has taken one of the possible views. We are of the considered view that the decision of the AO to allow the claim of the assessee is one of the possible views. Further, the Ld CIT would get jurisdiction to revised the assessment order only if both the conditions prescribed in sec. 263 of the Act, viz., (a) the order should be erroneous and (b) it should be prejudicial to the interests of the revenue. In the instant case, the assessment order cannot be considered to be erroneous for the reasons discussed above, in which case, we are of the view that the Ld CIT should not have exercised his revisional jurisdiction u/s 263 of the Act. - Decided in favour of assessee
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2016 (3) TMI 535
Eligibility of deduction under section 80IB - unreasonable profits earned - Held that:- Assessing Officer during the assessment proceedings, though, painfully analyzed the product margins of the assessee and also the FAR analysis as well as the analysis of comparables. However, we see that all this lengthy exercise has been done by the Assessing Officer in a haste. To comply with the provisions of section 80IA(10) of the Act, firstly the Assessing Officer should have brought on record how the two entities, viz the assessee and GCPL are 'closely linked' and how their affairs are arranged so as to produce more profit by the assessee. Then only he can proceed to quantify the unreasonable profits earned. Whatever basis he has taken are found either factually incorrect or are too vague. The Assessing Officer, in fact, on the basis of large profits earned by the assessee, has pre-supposed that there is some arrangement to this effect. This approach is not as per law. At this stage, we agree with the finding recorded by the learned CIT (Appeals), that this is a case of putting cart before the horse. The Assessing Officer, with a preconceived mind, had analyzed the profit margins of the assessee company. The Assessing Officer has failed to bring on record any material to show the existence of any arrangement for business transacted between the two concerns. In such circumstances, we do not see any need for the Assessing Officer to carry out any exercise to compute the reasonable profits expected to be earned by the assessee. Therefore, we hold that in the present case, there was no need for the Assessing Officer to invoke the provisions of section 80IA(10) of the Act. - Decided against revenue Selection of comparables - Held that:- we are in agreement with the findings given by the learned CIT (Appeals) that the Assessing Officer has taken Procter & Gamble Home Products, Anchor Daewoo India Ltd., Jyothy Laboratories etc. comparables, which are not the proper comparables. The turnover of these companies are in the range of ₹ 100 crores, while the turnover of the assessee-company is only 3.84 crores. The assessee is a contract manufacturer, while these companies themselves are manufacturers. For making a comparative analysis, apples are to be compared with apples and not with oranges. Further, there are companies like Bio Veda Action Research Pvt. Ltd. & Security Products, where the net profit rate of 43.60% and 71.54% respectively has been accepted by the department, in the scrutiny proceedings for the same assessment year. In view of this, even 10% net profit margin computed by the Assessing Officer is not correct. - Decided against revenue
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2016 (3) TMI 534
Penalty levied under section 271(1)(c) - assessee paid income tax under section 115JB - Held that:- Since the CBDT vide circular No.25/2015 dated 31.12.2015 has taken a conscious decision not to pursue penalty appeals in respect of the cases, wherein the income was assessed u/s 115JB by following the decision of Hon'ble Delhi High Court Nalwa Sons Investments Ltd [2010 (8) TMI 40 - DELHI HIGH COURT ] we find merit in the contentions of the assessee. Total income is a negative figure under normal provisions of the Act. Hence the income declared by the assessee u/s 115JB of the Act shall remain total income of the assessee. In view of the circular referred above, the penalty u/s 271(1)(c) is not leviable in respect of the additions made while computing the income under the normal provisions of Act. In view of the above, we set aside the order of ld. CIT(A) and direct the AO to delete the penalty levied under section 271(1)(c) for the year under consideration. - Decided in favour of assessee
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2016 (3) TMI 533
Penalty u/s 271(1)(c) - Disallowance u/s 14A - Held that:- It is pertinent to note that the assessee submitted audited balance sheet, P & L account, audit report and Form 3CD were duly filed during the assessment proceedings. There was no defect or deficiency was found or pointed out by the Assessing Officer in the books of account or in other documents, details or record filed by the assessee. During the course of penalty proceedings, the assessee voluntarily offered the amount of ₹ 17,09,920/- for disallowance under Rule 8D read with Section 14A of the Act out of the expenses actually incurred by the assessee. Thus, the assessee has not furnished any inaccurate particulars or claimed any bogus expenditure. The Assessing Officer as well as the CIT(A) was incorrect in holding that there was inaccurate particulars furnished by the assessee. - Decided in favour of assessee
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2016 (3) TMI 532
Revision u/s 263 - CIT(A) held that limitation of 8 years for carry forward and set off would no longer apply to the unabsorbed depreciation that arose during A.Y. 1997-98 to 2001-02 - Held that:- As decided in assessee's own case relating to assessment year 2007-08 the AO has simply followed the order of his predecessor giving effect to the quantum of brought forward loss to be set off from the income of the current year. Therefore, the order for the impugned assessment year cannot be said to be erroneous although it may be prejudicial to the interest of the revenue. It has been held in various judicial decisions that for assuming jurisdiction u/s.263 by the Ld.CIT, the twin conditions, i.e. (a) order is erroneous and (b) order is prejudicial to the interest of the Revenue must be satisfied. In the instant case, since the unabsorbed business loss and unabsorbed depreciation loss which has to be carried forward for subsequent years has been quantified in the order passed u/s.143(3) dated 31-12-2008 for A.Y. 2006-07 and since the AO has simply followed that order while giving set off of unabsorbed depreciation loss for the A.Y. 2007-08, therefore, the order in our opinion cannot be said to be erroneous. Therefore, the twin conditions are not satisfied. Under these circumstances, we are of the considered opinion that it is not a fit case for assuming jurisdiction u/s.263 of the I.T. Act. We accordingly cancel the order passed u/s.263. - Decided in favour of assessee
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2016 (3) TMI 531
Addition to income of the assessee of the firm Messrs Madhu and Others duly assessed as PF AOP - Held that:- In view of decision of Honourable Supreme court in Rangila Ram And Others [2000 (8) TMI 11 - SUPREME Court] we confirm the action of AO in taxing the income of "M/s Madhu & Other" partnership firm as income of the assessee Mrs. Madhu – Individual. Additions made in the hands of ‘M/s Madhu & Ors’ which is a partnership firm - addition made on protective basis - Held that:- On the basis of additions made in the M/s Madhu & Others on protective basis Ld. AO has made the addition of ₹ 27,92,190/- on substantive basis in the hands of the assessee. As the income of M/s Madhu & Others has been assessed in the hands of assessee wherein disallowance u/s 40A(3) of ₹ 16,99,558/- and addition u/s 68 of ₹ 8,50,000/- has been made, it is apparent that no opportunity is given by assessing officer to the assessee. Reason for the same is that both the orders u/s 143(3) read with section 148 in the hands of the assessee as well as M/s Madhu & Others are passed on 20th March, 2006 and therefore we set aside ground no. 2 and 3 of the appeal of the assessee contesting the addition u/s 68 as well as u/s 40A(3) of the Act back to the file that assessing officer with direction to deal with both the issues on merit after giving proper opportunity of hearing to the assessee. Disallowance of the salary to the partners in the hands of M/s Madhu & Others - Held that:- We dismiss this ground as M/s Madhu & Others is not treated by assessing officer as a "Firm" but "AOP" and therefore deduction of salary to partner cannot be granted as deduction to AOP. As the income of AOP is taxed in the hands of assessee on substantive basis the income of AOP would be computed without granting deduction of salary to the AOP.
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2016 (3) TMI 530
Deduction u/s 80IC - Held that:- We find that the ld. CIT (A) has not admitted the additional evidence and has without deliberating on the merits of the matter has simply stated a line "that for non production of 10CCB and on merits also, he is disallowing the claim of the Baddi unit u/s 80IC." It is a trite law that the onus is on the person claiming expenditure/exemption / deduction under the Act. Since it is the first year of claim of 80IC deduction of the Baddi unit, the burden is on the assessee to qualify the eligibility criteria to claim 80IC deduction. Once the assessee has discharged its burden then the onus shifts to the AO to prove why the claim shall not be granted fully or partly to the assessee. We find that the counsel for the assessee was of the bonafide belief that along with the claim of 80IC and 80I deduction, the Form 10CCB was not required since the accounts of the assessee are audited as per the statute. The assessee cannot be penalized for the bonafide mistake of the counsel, so in the interest of justice, we admit Form 10CCB and we set aside the order of the authorities below and remand the matter back to the file of the AO to adjudicate the claim of the assessee for 80IC for Baddi unit and 80I for Gurgaon unit and direct him to admit Form 10CCB and de novo adjudicate both the claims. Disallowance of interest - Held that:- Interest on working capital and term loan, which is only ₹ 9,90,825/- and ₹ 3,71,187/- respectively. Further, interest of ₹ 9,90,825/- is for availing facilities of packing credit, bills purchases, OCC and not for any diversion of funds for non-business purposes. Further, it is neither been established such interest on term loan was for capital work-in-progress. Moreover, identical interest has been allowed in the preceding year (AY 2005-06). Having regard to the above, disallowance made is deleted. - Decided in favour of assessee Disallowance of depreciation on factory building - Held that:- We find that the CIT (A) has not considered the depreciation chart furnished by the assessee. We further notice that even the AO has held that whether the asset was put to use or not could not be ascertained. Having regard to the above, it is apparent that the disallowance has been made, without proper investigation and consideration of the facts. We, therefore, restore the matter back to the file of AO, for de novo consideration this issue. Disallowance on account of subscription and membership fee - Held that:- We find that no evidence was led by the AR to dislodge the finding that expenditure was incurred wholly and exclusively for the purposes of business of the assessee company. The claim that though the accommodation was in the name of director but was used by the customers/employees is entirely unsubstantiated. We, therefore, do not find any merit in the claim, so the same is dismissed. Deduction claimed by the assessee u/s 80I on the duty drawback and job work charges - Held that:- Having already held that the claim of 80IC needs to be de novo adjudicated and since this issue is interlinked with that issue, in the fitness of things, we are inclined to remit this issue also to the file of the AO. Disallowance of of traveling expenses - Held that:- There is no dispute that there is no basis for making the ad hoc disallowance of ₹ 5 lakhs. That being the case, we uphold the conclusion of the ld. CIT (A) and dismiss this ground of the revenue.
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Customs
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2016 (3) TMI 515
Misdeclaration of value and misdescription of goods - Suppression of the brand name/length of the goods - Imported goods were wiretek brand cables and connectors but declared as cables and connectors - Held that: as a voluntary statement was made by the proprietor accepting the non declaration of actual specification with a view to pay lesser amount of duty and it was only under his instructions that the supplier has not given any specifications in the import documents, it proves that there is a misdeclaration of value and misdescription of goods. - Decided in favour of the revenue
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2016 (3) TMI 514
Rule 5 of the Anti-Dumping Rules - Initiation of investigations - Investigation started by designated authority on the application of Tejas (Domestic industry) - Appellants contended initiation of investigation as bad in law since the authority took no steps for verification of the information / data furnished before it, prior to such initiation - Held that:- the information contained in trade magazine should normally not form the basis of final determination as regards dumping, injury etc. and such should be made on the basis of the best available information in the record of the Authority including the data provided by the foreign exporters or producers in their responses. At the stage of initiation, only the applicant domestic industry is before the Designated Authority and requiring the domestic industry to produce the exact facts and figures relating to exporters in a foreign country would be unreasonable at the stage more so because such details are normally in the exclusive knowledge of the foreign parties. The applicant can only be asked to bring before the Authority, evidence which is reasonably available to it for the purpose of initiation of investigation during the course of which other parties would bring all relevant facts before the Authority for making the final determinations. Here for the purposes of initiation, the journal has been used only for prima facie satisfaction. As DA has determined for the purposes of initiation the major factors that, the products of the applicants constitute a major proportion in Indian production, support of other domestic producers on account of more than 50% of production of the like products produced and application has been made by or on behalf of the domestic industry, it has satisfied itself as to the criteria of standing in terms of Rule 5 of the Rules. Therefore, initial investigations can be initiated by the designated authority on the application of Tejas. Rules 2(b) of the Anti-Dumping Rules - Eligibility of Tejas as domestic industry - Held that:- as per the definition of domestic industry under Rule 2 ibid, the word producer has connotation wider than a mere manufacturer and includes even those engaged in any connected activity. Here, the Tejas are performing substantial activities which covers within the scope pf producer. Therefore relying on the decision of Madras High Court in the case of Nirma Ltd. Vs. Saint Gobain Glass India Ltd. [2012 (10) TMI 832 - MADRAS HIGH COURT], Tejas are eligible as domestic industry in terms of Rule 2(b) ibid. Definition of Product Under Consideration with regard to statute - Whether STM1, STM4, STM16, STM64, and STM256 to be treated as single products od distinct products - Held that:- the various STMs, are all having SDH technology and are upgradations of the models having lower numerical value. They are different types of SDH Equipment, which is the product under consideration. Thus, the determination of product scope by Designated Authority is sustainable. Regarding the contention that the scope of PUC has been altered during the course of investigations, Designated Authority is required to come to a final determination only after consideration of the contentions of all interested parties and in the process, the scope of PUC may get altered but that would not vitiate the proceedings so long as the principles of natural justice are complied with in respect of the interested parties which has been done in this case. As STM64 has not offered by the domestic industry, it should be excluded from the scope of PUC. As long as the product is imported, duty can be imposed on all types of such product provided such type is in commercial competition with the like article made in India and can cause injury on its import. STM 256 is a higher version of STM 64. STM256 if offered at a lower price can substitute for STM64 and cause injury to Tejas qua its market for STM64 in India. Therefore, STM256 is not a distinct or separate product, but one type of SDH equipment, that is PUC. Levy of Anti-dumping duty and Valuation of goods- Import of SDH Transmission Equipment from China PR and Israel - Notification No.125/2010-Cus, dated 16.12.2010 - Held that: provision of Sections 12/14 of the Customs Act, 1962 are applicable only with reference to goods imported and therefore, the levy of anti-dumping duty would fail on PUC when imported as a part embedded in the goods imported for want of availability of the machinery provisions. Section 12 of Customs Act, 1962 has no applicability or relevance to the levy of the anti-dumping duty which is levied in terms of Section 9A of the Customs Tariff Act, 1975. As regards the valuation of goods/items which are imported as parts/components embedded in some other goods, it is pertinent to mention that the provisions of Customs Valuation Rules framed under Section 14 of the Customs Act, 1962 are clearly capable of valuing even such imported goods which are found lying unclaimed in the middle of nowhere even embedded in other goods, separate transaction value thereof, (i.e. of the PUC) will not be available but non-availability of transaction value does not in the least lead to failure of assessment of value because Customs Valuation Rules are clearly capable of dealing with such situations. The exporter can declare the transaction value for the SDH Equipment separately. If such declaration is not found to be true or the transaction value is simply not available, the Customs Authorities would resort to the Customs Valuation Rules for the item subject to levy of anti-dumping duty. Therefore, the contention of appellant do not sustain. Inclusion of software and SDH Equipment fitted with cellular equipment - Incorrect on the ground of circumvention as the Rules concerning circumvention were brought into force only in 2012 - Held that:- Rules 25 to 28 of the Rules, which came into effect from 19.01.2012 deal with circumvention of anti-dumping duty. However, nothing can be read in these Rules to mean that Designated Authority should not levy the duty in a manner so as to ensure that it is not circumvented. After all, when duty is levied by Central Govt., it has to ensure that the same is effective in counteracting the injurious effects of dumping which implies that Designated Authority should ensure that the levy of duty is not amenable to unintended circumvention. The above said Rules 25 to 28 regarding circumvention only deal with situations where circumvention is found to be taking place and provide mechanism to identify, investigate and determine circumvention and review thereof and do not imply that the Designated Authority is debarred from so recommending the levy as to avoid circumvention as far as possible plugging the possible/obvious loopholes which can lead to circumvention. Liability of notification - Whether to be set aside on ground of vagueness - Held that:- expression “for SDH application only” is quite comprehensible and there is nothing too esoteric about it. Also, there is nothing so vague or incomprehensible about expressions like “for SDH application only” as to make it impossible or impractical to implement the anti-dumping notification. Levy of anti-dumping duty - Software downloaded electronically - Absence of mechanism to levy and collect duty - Held that:- no duty can be levied and collected on software downloaded electronically as has been held by CESTAT in the case of Oracle India Pvt. Ltd. & Others Vs. C.C.(Export), New Delhi [2015 (9) TMI 317 - CESTAT NEW DELHI. Therefore, the appellants can have no grievance on that count. - Decided partly in favour of appellant
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2016 (3) TMI 513
Proper authority for issuing show cause notice - Whether DRI is or not - Held that:- as per CESTAT order in the case of Bhagwati Components Manufacturing Co. vs. Commissioner of Customs [2016 (1) TMI 875 - CESTAT NEW DELHI], the show cause notice issued by DRI is valid. Tenability of comparison of the value of contemporaneous import - Done without regard to the quality and quantity - Also the invoices used for comparing the value were of the period 2005 to 2006 whereas its imports were during the period 2003 to 2006 and the goods imported by it were out of stock lot - Held that:- None of the goods imported by the appellant or by other importers had any brand names/ trade names. There is nothing to show that the goods imported by other importers with which the comparison of value of the impugned goods has been made had any higher reputation or were any superior quality or that the goods imported by the appellant were out of the so-called stock lot. Also, the goods imported by others were at a much higher commercial level as has been mentioned by the appellant itself in its appeal. Therefore comparison with the price of such imports cannot cause any prejudice to the appellant because it can be nobody's case that the price would be higher for imports of larger quantities of such goods. Imposition of redemption fine - Goods not available - Held that:- the goods which had been cleared without any bond and were not available for confiscation, no redemption fine can be imposed. Only goods which were seized can be confiscated and redemption fine can be imposed thereon. Therefore, the goods which are seized here are liable for imposing redemption fine. - Decided partly in favour of appellant
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2016 (3) TMI 512
Admissibility of refund claim of SAD - Under Notification No.102/2007-CUS, when VAT stand exempted in the state of Uttar Pradesh - Held that:- by relying on the case of M/s.Gazal Overseas, and Others vs. Commissioner of Customs, New Delhi [2015 (12) TMI 427 - CESTAT NEW DELHI], SAD refund has been held to be admissible where VAT paid is nil. Therefore, the respondents are liable to claim refund of SAD paid at the time of importation. - Decided against the revenue
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2016 (3) TMI 511
Validity of opinion - No opportunity for cross examination - Appellant contended that experts opinions should not be relied upon as their cross-examination was not permitted - Held that:- there may be situations where it is felt that fair hearing would make no difference-meaning that a hearing would not change the ultimate conclusion reached by the decision-maker in such situations, fair procedures appear to serve no purpose since the right result can be secured without according hearing/cross-examination. It may not be necessary to strike down the action and refer the matter back to the authorities to take fresh decision after complying with the procedural requirement in those cases where non-grant of hearing has not caused any prejudice to the person against whom the action is taken. Therefore, every violation of a facet of natural justice may not lead to the conclusion that the order passed is always null and void. The validity of the order has to be decided on the touchstone of prejudice. There is no doubt that there can be a situation whether denial of cross-examination of expert may not cause any prejudice and in such case not allowing cross-examination would not vitiate the proceedings. However, in the present case it is eminently arguable that not allowing cross examination of the experts has caused prejudice to the appellant as their opinion was relied upon to negate the appellant's plea/contention and therefore the least that follows is that as the cross examination of the experts who gave their opinions was not permitted/held, their opinion is to be ignored for the purpose of deciding the issue at hand. Applicability of test reports for classification of goods - Samples in respect of some bills of entry were tested and applied to other bills of entry - Held that:- the authorised representative of the appellant in his statement categorically stated that the appellant had imported artificial fur lining of the same quality, character and technical specifications (except colour) under all the bills of entry. Further the examination of samples drawn from a number of consignments imported under various bills of entry supported the said statement of the authorised representative. Therefore there is no requirement of drawing the samples from each and every consignment imported under each and every bill of entry. Classification - Whether HSN Explanatory Notes for Chapter 56 of Customs Tariff can be used - Held that:- fabrics produced in a similar manner with textile fibres of length 5 mm and above are excluded from CTH 59.07 if they have the character of artificial fur of heading 43.04. The clear implication of this is that fabrics covered with textile flock of less than 5 mm length are not excluded out of the purview of 59.07 even if they have the character of artificial fur. The appellant have nowhere claimed that the impugned goods looked like fur of any particular animal. That however is not of any consequence because even if the impugned goods looked liked some fur, by virtue of the HSN notes cited earlier and the analysis, because of the fact that nylon flocks had the length between 0.45 mm to 0.5 mm, the impugned goods do not get excluded from the scope of chapter heading 59.07. Therefore, to exclude the goods from the scope of 59.07 the flocks have to be of length 5 mm or longer and the goods should have the character of artificial fur.
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2016 (3) TMI 510
Valuation - Related party transaction value - inclusion of royalty - whether royalty paid is for condition of sale or not - Legality of Commissioner (Appeals) order - Held that:- the Lower Appellate Authority has not discussed the issue as to how the revenue's contentions are not acceptable nor it has considered the intricacies of the agreements and the subsequent amendment agreements, billing and pricing patterns, instead, merely relied on this Tribunal's decision of ABB Ltd. It was pertinent to see that the Tribunal in the above judgement relied on Hon'ble Supreme Court's decision of Ferodo India Pvt. Ltd. and the Apex Court held that if on examination of the pricing agreement in juxtaposition in EAA and if the department proves that the importers/buyer has misled the department by adjusting the price of the imported item in the guise of increased royalty/licence, then the adjudicating authority would be right in including the cost of royalty/licence fees paid in the price of the imported goods but This ruling of the Apex Court has been overlooked by the lower authorities. There was no discussions either on facts or on legal issues in his impugned order and also it had not examined in detail the agreements and amendment agreements but merely endorses the respondent's view without any discussion. Therefore, the Commissioner (Appeals) order is set aside. - Matter remanded back to decide on merits
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2016 (3) TMI 509
Rejection of declared price - Determination of value under Rule (8) of Customs Valuation Rules, 2007 - Imported apples from U.S.A. and undervalued to evade duty - Held that:- in view of the decision of the Hon'ble Apex Court in the case of Commissioner of Customs, Calcutta Versus South India Television (P) Ltd. [2007 (7) TMI 9 - SUPREME COURT OF INDIA] the value of imported goods shall be the value at the time of importation to India i.e. when the goods reaches Customs barriers, so, before rejection of transaction value the department has to rule out whether there are any similar or identical goods imported at higher price. Therefore, when the price of similar or identical goods are same price and it was accepted by the Customs in all major Custom Houses, there is no justification for taking recourse to Rule (8) of CVR and to adopt the price of Country of Exportation. Demand of differential duty - Section 28 (1) of Customs Act, 1962 - Declared transaction value rejected - Held that:- in the absence of any authentic evidence from suppliers end i.e. either in the form of letter or a statement from them explaining the reason for maintenance of two sets of invoices in their system and also confirming receipt of flow back of excess amount, the department's reliance on unsigned computer generated invoices cannot be relied on, as sole evidence of undervaluation. Mere authentication of a document by U.S. Agent or officers of OCGI, USA does not automatically become a valid evidence to reject the declared price in the customs invoice and to redetermine value under Rule 8. Therefore, as the declared value is not rejected, there is no question of demand of differential duty is raised. Confiscation and penalty - Section 111(m), 114A and 112(a) of Customs Act, 1962 respectively - Held that:- the goods are not liable to be confiscated under Section 111(m) ibid nor penalty is leviable under Section 114A ibid. Since the main demand is set aside against the main appellants, the personal penalties is also not leviable under section 112(a) ibid. - Decided in favour of appellant with consequential relief
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2016 (3) TMI 508
Refund claim in terms of Section 27 of the Customs Act - Rejected being time barred - Anti-dumping duty paid on PVC film - Exempted vide Notification No. 354/108/2010-TRU dated 24/01/2011 - Held that:- limitation prescribed under Section 27 would not be applicable to the refund of excess anti-dumping duty paid in terms of the provisional notifications, which attained finality subsequently. Also the refund is within the period of one year from the date of the final corrigendum issued to the provisionally assessed duty. Therefore the refund is granted. - Decided in favour of appellant with consequential relief
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Service Tax
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2016 (3) TMI 529
Imposition of penalty - Section 77 (1)(a) of Finance Act, 1994 - Lapse in making amendment in registration certificate - Held that:- the assessee was already registered with the Service Tax department for other categories of services, though they did not amend the registration by making addition of services namely “supply of tangible goods services.” It is clear that there has been lapse in making amendment i.e. of non-addition or non-amendment to the existing registration. This lapse therefore is not strictly covered under the provisions of Section 77(1)(a) as they had been registered for other services. The department has not invoked any other provisions of service tax law/rules for punishing the default in getting the addition/modification/amendment to their existing registration. Therefore, penalty imposed is set aside. - Decided in favour of assessee
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2016 (3) TMI 528
Liability of Service tax - Amount paid to foreign entities for the services rendered by them prior to 18.04.2006 - Held that:- the provisions of Section 66A of the Finance Act 1994 came into Statute with effect from 18.04.2006 and for the period prior to 18.04.2006, the service tax liability does not arise on the appellant under reverse charge mechanism. This law is now settled by the Hon'ble High Court of Bombay in the case of Indian National Ship Owners Association. The judgement of the Hon'ble Bombay High Court was carried in SLP by the Revenue in Apex Court and the Apex Court has dismissed the SLP in view of the fact that the amount of service tax liability confirmed under this Head are prior to 18.04.2006. therefore, by following the same, appellant is not liable to pay Service tax. Liability of Service tax - Various amounts received for marketing of the services of the parent concern - Held that:- the issue is settled by a majority order of the Tribunal in the case of Microsoft Corporation (I) (Pvt) Ltd Vs CST Delhi [2014 (10) TMI 200 - CESTAT NEW DELHI (LB)] and many more in the favour of appellant. Therefore, the Service tax liability is not sustained. Demand of Service tax for the period July 2003 to 19.11.2003 - Denial of benefit of Notification No. 6/1999 granting exemption from payment of duty if the service which are provided are paid in convertible foreign exchange due to withdrawal - Held that:- the issue is no more res integra. It is the avowed principle of Govt of India that only services have to be exported and not the tax. If that be so, in this case, when there is no dispute as to the services being exported and the amount received in foreign exchange tax, liability arises on the appellant which is for the reason that Notification No. 6/1999 was withdrawn. By following the decision of Tribunal in the case of SGS (I) Pvt Ltd Vs CESTAT Mumbai [2011 (2) TMI 54 - CESTAT MUMBAI], the benefit of Notification is not denied and the demand of service tax not raised. - Decided in favour of appellant with consequential relief
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2016 (3) TMI 527
Cenvat credit availed on common input services for rendering taxable output services - Held that:- Internet service, web-hosting service and content service is wholly attributable to the activity of rendering taxable output service. Thus, the demand attributable to these input services is set aside. So far renting of premises is concerned, it is evident that the space provided on 2nd Floor of the same building is for the exempt activity of publishing of books and CDs, have been provided without rent in consideration of the rent paid ₹ 40/- per Square fit vide the separate agreement for 2083 Square/ft. Therefore, the this issue is remanded back. Imposition of penalty - Rule 15 (3) of CC Rules, 2004 - Held that:- the appellants have co-operated with the revenue by providing the information, requisitioned from time to time. So, the issue is of interpretation of the statutes and no case is made out of deliberate default or contumacious conduct on the part of the appellant. Therefore, by taking a lenient view, the penalty is reduced under Rule 15 (3) of the Cenvat Credit Rules. - Decided partly in favour of appellant
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2016 (3) TMI 526
Stay application - Appeal rejected against primary adjudication authority - Period of limitation - Orders claimed to have been sent by speed post were not received and when received the copies thereof, filed the appeals within the prescribed period - Held that:- as appeals were filed within the stipulated period after the appellants obtained copies of the primary adjudication orders, the requirement of pre-deposit is waived off the appeals are allowed. - Stay granted
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2016 (3) TMI 525
Disallowance of refund claim - Input services received at unregistered premises with respect to services received from travel agent, guest house expenses, invoices not produced, service received from vendor not registered under proper category and the name of the appellant was not mentioned on the invoice - Held that:- travel agent service have been wrongly disallowed and is allowable, guest house expenses is also allowable as the guest house is used for business purposes and have got indirect nexus with the business of the appellant. With regard to invoice not produced, the Cenvat credit is allowed to the extent being the amount of the invoices produced now before this Tribunal during the course of hearing and so far as the disallowance is concerned on the ground that the provider of service is not registred under proper category, the disallowance is bad in law and the same is held allowable. With respect to manpower recruitment service, issue is remanded to the adjudicating authority. - Decided partly in favour of appellant
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2016 (3) TMI 524
Liability of Service tax and exclusion - Provider of 'commercial training or coaching service' taxable under section 65 (105) (zzc) - Held that:- this issue has been made amply clear in Great Lakes Institute of Management Ltd & oths Versus CST, Chennai & Oths [2013 (10) TMI 433 - CESTAT NEW DELHI - LB]. The contention of the appellant that they are the providers of education and not a commercial coaching or training institution is not correct - The appellant does not have a claim to be included in the exclusionary provision therefore, they are liable to service tax. - Decided against the appellant
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2016 (3) TMI 521
Invocation of extended period - Period of limitation - cenvat credit on tower components - duty demand - Held that:- On perusal of the documents, it is seen that there is no categorical evidence for due service of notice issued on 6.12.2010. In the absence of a clear evidence to that effect it is to be concluded that the notice dated 6.12.2010 was not evidenced to have been served prior to 12.01.2012. Admittedly, the issue involved here is the eligibility of various tower components, which were classifiable under Chapter 72/73 of the Central Excise Tariff Schedule, which has been a matter of dispute before the various judicial forums. Neither the original order nor the impugned order specifically elaborates the grounds on which the element of suppression, fraud, collusion or willfully mis-statement can be alleged and sustained against the appellant. The only ground mentioned is that under Self-assessment Scheme, the appellant/assessee should have been taken credit only on eligible items. Failure to do so will result in invocation of extended period. Find that such reasoning is not sustainable either in law or on fact. Considering the issue involved has been the subject matter of interpretation before the various authorities including courts, the invocation of extended period in the present set of facts cannot be sustained. Accordingly, the impugned order, in so far as it relates to the cenvat credit on tower components, is not sustainable on the ground of time bar and hence, is set aside - Decided in favour of assessee
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Central Excise
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2016 (3) TMI 550
Claim of refund / rebate simultaneously while claiming benefit of duty drawback - export of yarn - Duty was paid utilizing the credit of duty paid on the capital goods - Entitlement to claim rebates under Notification No. 19/2014-CE (NT), dated 06.09.2004 - Held that:- the benefits claimed by the petitioners are covered under two different statutes, one under Customs, Central Excise Duties and Service Tax Drawback Rules 1995 under Section 75 of the Customs Act, 1962 and the other under Rule 18 of the Central Excise Rules, 2002. As per the proviso to Rule 3 of the Central Excise Duties and Service Tax Drawback Rules 1995, the petitioner is not entitled to claim both the rebates. - Decided against the appellant
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2016 (3) TMI 523
Value for the excisable goods partly cleared to the sister unit/partnership firm - whether to be determined as per Rule 8 or as per transaction value under Section 4(1) (a) of CER? - Held that:- Provisions of Rule 8 will not apply where the goods were partly cleared to independent buyer and also held that rule 4 is to be preferred over rule 8. This Tribunal in the case of Gangotri Electrocastings Ltd. Vs CCE & ST Patna (2012 (7) TMI 321 - CESTAT, KOLKATA ) has held that clearances to related person, value should be on the basis of sales of same goods cleared to independent customers as per rule 4. The ratio of Tribunal's LB in Ispat Industries (2007 (2) TMI 5 - CESTAT, MUMBAI ) and the above Tribunal decision in Gangotri Electrocastings (supra) is squarely applicable to the facts of this case. Further, we find that the Adjudicating Authority in his order No.200/2013 dt.28.11.13 has allowed the appeal of assessee for the subsequent period for 2003 to 7.7.2004, and held that Rule 8 is not applicable.
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2016 (3) TMI 522
CENVAT credit disallowed - steel items used for the supporting structures - Held that:- As find that the Supdt. Central Excise vide letter dated 20.12.2014 has taken note of the intimation of the appellant that it had not availed Cenvat credit on 255.300 MT of steel items used for the supporting structures as it purchased the same under non-cenvatable documents. The Supdt., Central Excise has not disputed this fact. The adjudicating authority has stated that in the absence of any supporting documents it cannot be ascertained whether the appellant had availed Cenvat credit on 255.300 steel or not. I do not find the said reasoning sufficient to "disallow" credit in relation to 255.300 MTs of steel particularly when the appellant categorically stated that the said steel was obtained under non-cenvatable documents and the same has at no stage been controverted by Revenue. The Supdt., Central Excise in its letter dated 20.12.2014 has noted the appellant's submission in this regard and has not disputed the same. In addition Chartered Engineer's certificate given also certifies that Cenvat credit on 255.300 MTs of steel was not taken. Therefore the demand relating to this quantum of steel which works out to ₹ 8,01,724/- is not sustainable. Regarding 131.930 MTs of steel items eg. beams, joists, channels, angles, flat etc. used for supporting structures, the appellant is only claiming the benefit on the ground of time bar and not on merit. There is no confusion or ambiguity that steel used for supporting structures would neither fall under the category of "capital goods" nor inputs as defined under Cenvat Credit Rules and therefore the credit thereon is not admissible, because the definition of capital goods or inputs by any stretch of imagination could not be understood to include steel used supporting structures within their ambit. Bona fide belief is a belief of reasonable person operating in an appropriate environment. Thus the contention of the appellant regarding bonafide belief that credit on 131.930 MT was admissible is untenable. The appellant has conceded inadmissibility of Cenvat credit of ₹ 48,000/- As regards the welding electrodes it has been held by CESTAT in the case of Vikram Cement Vs. CCE, Indore (2009 (7) TMI 217 - CESTAT, NEW DELHI ) that credit on welding electrodes is not available when used for repair. The appellant has only stated that some of these electrodes may have been used for manufacturing capital goods but has conceded that it has no evidence thereof. Therefore the demand relating to welding electrodes is also sustainable - Decided partly in favour of assessee
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2016 (3) TMI 520
Liability to pay duty on clearance of structural scrap - duty demand alleging suppression of facts - Held that:- Scrap arising out of working on the structural/steel procured by the appellant assessee for construction/fabrication of refinery. The said scrap cannot be considered as arising during the course of manufacturing activity within the factory premises of the appellant. Appellant was not engaged in the manufacturing of iron and steel, in order to hold that the scrap generated would be liable to duty. This view is fortified by the judgement of the Tribunal in the case of Zuari Cement Ltd (2006 (10) TMI 342 - CESTAT, BANGALORE ), Apollo Tyres Ltd (2004 (9) TMI 548 - CESTAT, NEW DELHI ) and Hindalco Industries Ltd (2001 (12) TMI 120 - CEGAT, NEW DELHI ). There is no dispute as to the fact that the said waste and scrap which is generated, as indicated herein above is generated during the fabrication of the refinery in the factory premises of the appellant. In our considered view this kind of waste and scrap as indicated hereinabove cannot be dutiable in the hands of appellant as waste and scrap arising out of the manufacturing activity.- Decided in favour of assessee Clearance of waste and scrap of inputs and capital goods, rejected/damaged inputs and capital goods - reversal of CENVAT credit - Held that:- As seen from the reproduced specimen list that the said items which are cleared by the appellant are scraps arising during the course of manufacturing, replacement, repair or reconditioning of the various machineries, pipes, fittings etc. in the refinery. The finding recorded by the adjudicating authority is that the said items are inputs as such, seems to be mis-construed inasmuch as the description itself indicates that the said items are nothing but scrap or damaged goods which cannot by any stretch of imagination be considered as clearance of inputs or capital goods as such. When there is no clearance of inputs or capital goods as such, question of reversal of CENVAT credit availed on such items does not arise. See Grasim Industries Ltd. (2011 (10) TMI 2 - SUPREME COURT OF INDIA ) - Decided in favour of assessee Clearance of the inputs as such - Held that:- As seen from the records that the appellant had cleared various inputs without payment of duty. He has admitted and deposited partly some amount for the clearance of inputs as such. In view of the foregoing we are of the considered view that appellant has not made out any case in respect of the allegation at this Pointand demand of the duty on the said point is liable to be upheld along with interest. - Decided against assessee Invoking extended period of limitation - Held that:- We do agree with the learned counsel for the appellant assessee that the appellant being a Public Sector Undertaking could not have had any malafide intention for non-payment of duty liability if any, on various scrap generated in their factory premises, more so when all the removals have been recorded in the books maintained by them - Decided in favour of assessee
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2016 (3) TMI 519
100% EOU - whether the benefit of Central Excise (Removal of goods at concessional rate of duty for manufacture of Excisable goods) Rules, 2001 is available to 100% EOU - Held that:- Appellant have cleared the goods under statutory provisions of Notification No. 43/2001 CE (NT) dated 26/6/2001 read with the provisions of Central Excise (Removal of goods at concessional rate of duty for manufacture of excisable goods) Rules, 2001. We agree with the Ld. Counsel that no restriction or prohibition is provided in the law for application of such provisions to 100% EOU. Under the above said provisions clearances are allowed without payment of duty only for the reason that the buyer undertakes to use the said duty free goods for manufacture of goods which would be exported. The contention of the show cause notice, objections of the Adjudicating authority that the restrictions provided under Section 5A, we are of the view that the appellant have not cleared the goods under any notification which was issued under Section 5A. The Notification No. 43/2001-CE (NT) and the provisions of Central Excise (Removal of goods at concessional rate of duty for manufacture of excisable goods) Rules, 2001 prescribed the procedure for clearance of the goods without payment of duty and the said notification was not under Section 5A, therefore contention of the Adjudicating authority is misleading. We are of the considered view that the demand confirmed by the Adjudicating authority is not sustainable.
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2016 (3) TMI 518
Clandestine manufacture of goods and cleared without payment of duty - duty demand - Held that:- In the present case, the Revenue proceeded on the basis of theoretical calculation of the input-output ratio and alleged the clandestine removal of the goods. The appellant particularly furnished the documents of gas consumption. No attempt was made to verify the physical stocks and the said documents. On perusal of the impugned order, it is seen that the adjudicating authority observed that he has found enough reason to presume manufacture and clearance of final products from the raw material. Thus, the demand of duty was confirmed on the basis of presumption and assumption, without any evidence. Hence, the demand of duty alongwith interest and penalty on the appellants cannot be sustained. - Decided in favour of assessee
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2016 (3) TMI 517
Clandestine removal of manufactured goods viz. Nickel Alloy, Tin Alloy and Lead Alloy - duty demand along with penalty - Held that:- The appellant is entitled to avail cenvat credit on inputs used in clandestine manufactured and cleared goods viz. Nickel, Tin and Lead Alloys for the period 1989-90 on production of relevant documents. The appellant is entitled to avail benefit of SSI exemption under notification no. 173/86-CE dated 1.3.86 for the period 1989-90. No interest is payable by the appellant on the demand confirmed by way of this order. After giving the benefit of input credit and SSI exemption, duty is payable by the appellant for the period 1989-90 on clandestine clearance of Nickel, Lead and Tin Alloys (if any) alongwith the demand of duty already confirmed for the period 1988-89. The appellant has to pay 25% of the duty confirmed as penalty, as discussed.
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2016 (3) TMI 516
Ineligibility for the SSI benefit - whether the appellant has exceeded the turn-over of ₹ 2 crore in the year 1989-90 so as to become ineligible for the SSI benefit for the period 1990-91 - Held that:- As regards the penalty we find that the said penalty is in respect of delayed execution of contract with the buyers. In our considered view, during the period in question 1989-90, the provisions of Section 4 of the Central Excise Act, 1944 contemplated the assessable value to be the normal price at which the goods are sold. In the case in hand, the normal price of the goods is the price at which the goods were sold at the factory gate when the clearances took place under the Central Excise gate passes. The penalty amount which has been paid by the appellant during the relevant period was not claimed as deductions from the price-lists filed by the appellant nor was it mentioned to the lower authorities in any form. Accordingly, we find that the appellant's claim that the amount which has been deducted from their account by the buyers for its delay in execution in contracts is not correct and the proposition needs to be rejected. In the case in hand, the period being prior to the concept of transaction value, normal price needs to be arrived based upon the declarations made by the assessee. In this case, there was no such declaration as to claim the deduction of an amount deducted to their account as penalty by the buyers for the delayed execution of contracts. As regards freight and insurance, we find that the adjudicating authority has correctly come to the conclusion that the actual amount of freight paid by the appellant has been considered and that majority of amount has been allowed as deduction. The claim of the learned counsel that freight and insurance amount has been wrongly calculated has no merit as we find that the actual freight amount incurred has been considered. Thus we find that the conclusion reached by the adjudicating authority is correct. Invoking extended period of limitation - We find that the declarations made by the appellant did not indicate how they have worked out the clearance value of ₹ 1.99 crore. The entire value of ₹ 2 crore was worked out based upon their own documents which was checked by the authority during the visit to their factory. Hence there has been mis-declaration of the value and accordingly the claim of the appellant that the issue is time-barred also has no force. As regards the penalty imposed, we find that the penalty has been imposed under Rule 173Q of the Central Excise Rules, 1944. We find that there is no serious contravention of Rules, as such in the case in hand, as there could be a mis-conception of the issue in respect of the addition and deletion of the sales turn-over that needs to be considered for being eligible for the benefit of small scale exemption Notification 175/86. In our considered view, we find that the issue being a calculation error, attributable to human error and accordingly it is held penalty imposed on the appellant is unwarranted. The penalty as imposed is set aside. In sum, the demand of Central Excise duty along with interest is upheld and the penalty imposed by the adjudicating authority is set aside.
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Indian Laws
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2016 (3) TMI 507
Repayment of maturity proceeds of the commercial papers as well as on dishonoured cheques - decree in the sum of ₹ 25 crores along with interest at the rate of 18% per annum - claims arise from written contracts contained in what are known as “Series 1 Commercial Papers” and also in a letter dated 10 July 2012 issued by the Defendant in favour of Plaintiff No.1 - Held that:- n appeal under Section 25 is a continuation of the inquiry under Section 16. It will be preposterous to suggest that whereas at the trial stage the suspension provision of Section 22 would require an inquiry under Section 16(1) to be pending, that is to day, a registration under Section 15(1) as having been accomplished, but that at the appellate stage, a registration under Section 15(1) need not be accomplished and no inquiry under Section 16 need to be pending, but that pendency of an appeal even if it be at the preregistration stage entails a consequence under Section 22, namely, suspension of legal proceedings, contracts, etc. in respect of the company under reference. Section 22 clearly indicates that at the trial stage, namely, at the level of BIFR, an inquiry ought to have commenced before Section 22 comes into play. That is the earliest stage in the reference at which Section 22 is triggered. As I have indicated above, that is not the stage at which we are in the present case. Be it at the level of BIFR or at the level of AAIFR, we are still effectively at the preregistration stage. There is no question, in the circumstances, of application of Section 22 to the facts of the present case. The suits are, thus, not required to be stayed. There is no dispute between the parties that the trades were so reported. The RBI has assigned FIMMDA the task of prescribing operational guidelines for smooth functioning of the commercial paper market in line with international best practices. Operational guidelines issued by FIMMDA effective from June 31, 2001 make detailed provisions regarding trading in commercial papers and the process of redemption upon maturity of the commercial papers. These guidelines lay down a procedure for secondary market transactions in a commercial paper. Nothing could be pointed out by learned Counsel for the Defendant to show that there is any breach in the present case of either the Master Circular issued by RBI or the operational guidelines issued by FIMMDA so as to question either the transfer of the commercial paper from the original holder, namely, IDFC to Plaintiff No.2 or from Plaintiff No.2 to Plaintiff No.1. In fact, the correspondence between the parties, which is uncontested, clearly indicates that the Defendant had not only acknowledged the transfer of the commercial papers in favour of Plaintiff No.1, but had addressed an unequivocal and irrevocable confirmation and acknowledgement of its liability and indebtedness to Plaintiff No.1 for the sums of ₹ 25 crores each towards the payment of maturity proceeds of the subject commercial papers. The Defendant irrevocably confirmed and bound itself to repay the amounts of both commercial papers to Plaintiff No.1 and also interest on delayed payment at the rate of 18% per annum on an annual compounding basis. In these facts, there is no defence on merits as far as the suit claims are concerned. The rationale of this is that the letter contains a promise to pay; and every promise is a proposal by which the proposer signifies his willingness to do or abstain to do anything, in this case to pay. The proposal becomes a promise only when it is accepted, though to create such promise it is not necessary that there should be an acceptance in writing. The promissee may simply accept the promise before the action. The communication, thus, of the promise to the promissee is complete only when the promissee receives such communication at which place alone he can be said to have signified his acceptance of the promise (at least where there is no other evidence of such acceptance). The debt confirmation letter is clearly addressed by the Defendant to Plaintiff No.1 at its office in Worli, Mumbai and is communicated at that place. A part of the cause of action can certainly be said to have arisen at Mumbai. Upon leave being granted under clause 12 of the Letters Patent, this court clearly has jurisdiction to entertain and try the present suits. The following order is passed : (i) The Defendant is granted leave to defend the suits subject to and on payment, respectively, of a sum of ₹ 27,37,94,521/- in Suit No.280 of 2013 and a sum of ₹ 25,69,04,110/- in Suit No.804 of 2013 within a period of twelve weeks from today; (ii) Upon the payments being made, the suits be transferred to the list of commercial causes; (iii) Written statements to be filed within a period of six weeks from the date of deposit of the amounts in terms of clause (i) above; (iv) The Prothonotary & Senior Master to invest the amounts deposited by the Defendant, if any, in fixed deposit/s of Nationalised Bank initially for a period of one year, thereafter to be renewed from time to time, so as to abide by the final orders that may be passed in the suits; (v) The Summonses for Judgment are disposed of accordingly.
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