TMI Tax Updates - e-Newsletter
March 25, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Highlights / Catch Notes
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Income Tax:
Dividend income received from a foreign country - exemption from taxation - DTAA between Government of India and Government of the foreign country - Not Taxable - SC
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Income Tax:
Penalty non leviable u/s 271(1)(c) if the income disclosed in the Return and the income assessed is nil - even after addition there is no positive income - penalty is to be set aside - SC
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Income Tax:
Revaluation of closing stock routed through profit and loss account - revaluation of Fixed Assets does not lead to any taxable income of an Assessee - HC
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Income Tax:
The land which was within the municipal limits, could not have been treated to be ''agricultural land' on the basis of revenue record prepared under U.P. Z.A. & L.R. Act. A.O. also did not examine when Assessee admitted circle rate, applicable to ''urban land' for the purpose of fair market value, for stamp duty, then, why for determination of market value by D.V.O., land should be taken as an agricultural land. - HC
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Income Tax:
Clarifications on Income Computation and Disclosure Standards (ICDS) notified u/s 145(2) of the Income-tax Act, 1961 - ICDS applicable w.e.f. FY 2016-17
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Income Tax:
TPA - Adjustment of customs duty - Since, the assessee himself claimed that selected comparables and worked out the gross profit margin was more than at arm’s length, we do not find any reason to make adjustment towards the customs duty. - AT
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Income Tax:
Assessee in the instant case had written off the TDS portion due to non-availability of the same and hence it becomes a trading loss u/s 28 of the Act as to that extent, it had neither received the money nor the TDS certificate - AT
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Customs:
100% EOU - remission of duty - the fire department has certified that there is no foul play and that the fire has due to reasons beyond the control of the appellants. This establishes the fact that the fire was nothing but an unfortunate accident - his is a fit case for grant of remission under both Central Excise as well as Custom provisions. - AT
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Customs:
Benefit of exemption N/N. 25/2005-Cus - the benefit of notification cannot be denied merely on the ground that the importer does not possess the facility to manufacture or that there is some apprehension that the importer may not be able to comply with the conditions laid down in the Rules - AT
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Customs:
Detention of gold with vehicle - seizure of gold during movement - whether smuggled / imported gold or locally procured - gold was being transported by the appellant from the Delhi branch to their Agra Branch - Section 123 of the CA requires to explain the licit source of acquisition and not source of source - AT
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Customs:
Duty exemption entitlement scheme - respondent was neither the manufacturer nor the exporter - violation of condition of licence would not be within their knowledge - demand set aside - AT
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Corporate Law:
Mppression and mismanagement - Maintainability of petition - members / petitioners holding less than l/10th of the Issued - it cannot be read that a 'class of members' themselves have to be treated separately attaining qualification u/s 244. It is only an additional relief that a member qualified u/s 244 can ask for relief. - Tri
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Corporate Law:
Lifting of corporate veil - The decision in lifting the corporate veil, to discern the real involvement of individuals who set up a network of corporate entities to evade their liabilities and also to dupe the innocent public, cannot be faulted. - HC
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Service Tax:
Bill printing service to telecom companies - whether business auxiliary service or not? - the appellant/assessee is nowhere connected with promotion of service or provision of service on behalf of the telecom companies - Demand of service tax set aside - AT
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Service Tax:
Taxability of excess amount collected in the name of reimbursement - “over and above” amount - post period to 18.4.2006, the appellant is liable to pay the service tax on the “over and above” amount collected from the clients but not deposited to the Govt. exchequer - AT
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Service Tax:
GTA service - reverse charge mechanism - transporting companies have only raised invoices for transportation of cement clinkers as per the contract which did not satisfy the requirement of the consignment note and the responsibility cast for issuing the consignment note is not met - demand of service tax set aside - AT
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Service Tax:
Classification of services - BAS or C&F - sale of cement by working under the cover of purchase invoices - when the principal has taken a responsibility for safe custody, transportation, damage, demurrage, rent and theft of the cement then certainly, the substantial ownership lies with the principal - taxable as C&F services - AT
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Central Excise:
Payment of excess duty wrongly - Adjustment of the accounts from Head of Account BED to Head of account SED - It would be too harsh to not allow the prayer of the appellants merely on the ground that there are two duty heads of accounts for procedural purposes - adjustment to be allowed - AT
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Central Excise:
Valuation - supply of bought out items as parts of weigh bridge - erection and commissioning at the site of the buyer. - appellants are not liable to pay duty on complete weigh bridge - AT
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Central Excise:
Method of Valuation - transaction value u/s 4 or MRP based value u/s 4A - toothpastes in tubes branded as ‘Calcium Prudent’ - destined for distribution by the Canteen Stores Department (CSD) - Held as supply to institutional consumer not liable to value u/s 4A of central excise act, 1944 - AT
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Central Excise:
CENVAT credit - GTA service - outward transportation of cement - as goods have been supplied by the appellant on FOR basis to the buyers place and included the value of transportation in the assessable value of the goods - appellant is entitled to avail Cenvat Credit on outward goods transportation agency services - AT
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Central Excise:
Unutilized Cenvat Credit - refund in cash - it is neither the case of "otherwise due" of the refund nor the case of exported goods. Similarly, absence of express grant in statute does not imply ipso facto entitlement to refund - refund not allowed - AT
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Central Excise:
Personal Penalty - scope of rule 15 of CCR, 2004 - penal provisions need strict interpretation and a person could only be able to defend his case only when the particular provision under which he is proposed to be penalized, is mentioned in the notice itself - penalty set aside - AT
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Central Excise:
Education Cess - Bidi cess is leviable u/s 3 of the “Beedi Workers Welfare Cess Act, 1976” - whether education and higher education cess can be computed on Bidi cess - Held No - AT
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Central Excise:
Method of Valuation - transaction value u/s 4 or MRP based value u/s 4A - fuse base /fuse links - As the goods cleared by the appellant to the wholesaler are in bulk, therefore we hold that the appellants are clearing the goods in wholesale packages - Section 4A of CEA is not applicable - AT
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Central Excise:
CENVAT credit - fabrication of support structures - Boiler Parts, Silo System, Boiler Radiation Hopper, Turbine Air Unit, EOT Crane, Hook Conveyor, Materials Handling System, Platform for kiln, coal drier, Stack Structure, cooling tower, Girth Gear, Kiln Gear Box, etc. - these items are essential for functioning of machines and its alignment - credit allowed - AT
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Central Excise:
Benefit of N/N. 6/2006-CE - manufacturing/replicating of CD ROM were not of Educational nature or not - In the absence of any evidence on record that non-educational CD-ROMs containing journal, periodicals (magazines) or news paper are CD-ROMs of ‘Video Games’, the benefit of doubt goes to the assessee - AT
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Central Excise:
Imposition of penalty u/r 26 of CER, 2002 on transporter - contraband items - transporter can not be expected to be the expert of Central Excise laws to find out before transporting the goods as to whether the manufacturer has correctly discharged the duty burden or not - penalty set aside - AT
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Central Excise:
SSI exemption - CENVAT credit - stock of inputs lying as such and contained in process and in final products - the appellant had nil balance in their Cenvat credit account no amount was required to be reversed - AT
Articles
Notifications
Central Excise-
7/2017 - dated
23-3-2017
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CE (NT)
CBEC specifies the jurisdiction of (i) Chief Commissioner of Central Excise, (ii) Commissioner of Central Excise (iii) Commissioner of Central Excise (Appeals)
Customs-
9/2017 - dated
23-3-2017
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Cus
Amendment to Notification No.12/2012-Customs, so as to reduce the basic customs duty from 30% to 10% on sunflower seeds falling under tariff item 1206 00 90 [i.e. other than of seed quality] for the purposes extraction and refining of oil subject to actual user condition, for the period from 1st April, 2017 to 30th September, 2017
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8/2017 - dated
23-3-2017
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Cus
Amendment in various Notifications
Income Tax-
16/2017 - dated
22-3-2017
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IT
Amendment in Notification No. S.O.2483(E), dated the 30th September, 2009
Service Tax-
11/2017 - dated
23-3-2017
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ST
CBEC specifies the jurisdiction of (i) Chief Commissioner of Central Excise, (ii) Commissioner of Central Excise (iii) Commissioner of Central Excise (Appeals)
SEZ-
S.O. 917(E) - dated
17-3-2017
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SEZ
Central Government de-notifies an area of 15.779 hectares, thereby making resultant area as 24.69 hectares, at Village Kanjehara & Mastemau, Chack Gujaria Farms, Sultanpur Road, Lucknow in the State of Uttar Pradesh
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2017 (3) TMI 1180
Addition u/s 14A - Held that:- The assessee company had share capital and reserves of ₹ 10.31 crores as against investment of ₹ 20,00,000/- at the year end. The CIT(A) has held that if the assessee’s capital, reserves, surplus and current account deposits are higher than cost of tax free investments, it has be presumed that the said investment is made by the assessee out of interest free funds. The CIT further held that if the funds are available both interest free and interest bearing then a presumption would arise that the investments made out of interest free funds generated or available with the company and if the interest free funds are sufficient to meet the investment then there is no need of disallowing any interest. We find that before A.O. and CIT(A), the Assessing Officer has not given any working of expenditure in relation to earning of such exempt income with any supporting evidences. Therefore, the A.O. has applied of Rule 8D of the Income Tax Act and worked out the expenditure for earning the exempt income i.e. ₹ 23,685/-. We find that CIT(A) has restricted disallowance upto ₹ 10,669/-. In the result, the appeal of the assessee is dismissed. Addition on account of bogus purchase - GP addition - Held that:- Considering the decision of the Hon’ble Mumbai Bench of ITAT in the case of Madukant B. Gandhi (2010 (2) TMI 1211 - ITAT MUMBAI ) and the approx. average GP of 5% declared by the appellant, it is held that the net addition sustained in this case would be 12.5% [as per Simit Sheth (2013 (10) TMI 1028 - GUJARAT HIGH COURT) – 5% - 7.5%.
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2017 (3) TMI 1179
Levy of penalty under section 271(1)(c) - development of the property could not be completed and consequently the same could not be transferred, merely because the assessee had offered the cash component as income in his hands in the year under appeal - Held that:- Where the assessee had entered into a development agreement but the same could not be completed because of the dispute between the parties, though the capital gains on the amounts received in assessment year 2006-07 has been offered to tax, but the possession and the retention of the property by the assessee establishes the case of assessee that there is no transfer and the transaction has not been completed till date. The Talati vide order dated 19-04-2010 has also acknowledged that the properties owned by the assessee and the co-owners is under attachment to the Commissioner of Income Tax. In such circumstances, we find no merit in levying penalty and holding the assessee to have concealed the income under section 271(1)(c) of the Act. The operation of Explanation 5 to section 271(1)(c) of the Act was limited to any money, bullion, jewellery or other valuable articles or thing, found during the course of search and where the assessee claims that It was acquired by him by utilizing his income, then conditions are provided therein, to hold, whether the assessee is liable to levy of penalty for concealment or not. The Explanation 5 to section 271(1)(c) of the Act is silent about the working of income on the basis of any books of account or other documents found during the course of search which represent the income of the person searched for any previous years. In the absence of same and where the sole basis for the addition in the hands of assessee is the document found during the course of search and admittedly no cash being found, then Explanation 5 to section 271(1)(c) of the Act is not attracted. We hold so and delete the penalty levied under section 271(1)(c) of the Act on this alternate plea also. - Decided in favour of assessee
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2017 (3) TMI 1177
Penalty u/s 271(1)(c) - additional income offered on account of shortage of stock - Held that:- The assessee had included the said income in his hands and had claimed set off of brought forward losses, however, the same was denied to the assessee. Merely because the set off has been denied to the assessee does not justify the levy of penalty under section 271(1)(c) of the Act. Upholding the order of CIT(A) in this regard we dismiss the ground of appeal raised by the revenue. Restricting the addition added in the hands of the assessee on account of unexplained investment in furniture and office building - Held that:- The assessee during the course of assessment proceedings agreed to the addition of sum of ₹ 50 lakhs as part of his computation of income and its non adjustment against the current business loss. The offer made by the assessee was in the spirit of reaching quietus and to end the litigation which had arisen in the instant case. The assessee had infact claimed the set off of that income against the business loss arisen for the year under consideration and merely because the same has not been set off, it cannot be said to be concealment of income. The view of the assessee have not been accepted by the Assessing Officer, but the same does not justify levy of penalty under section 271(1)(c) of the Act. Accordingly, we direct the Assessing Officer to delete the same. The Grounds of appeal raised by the assessee are thus allowed.
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2017 (3) TMI 1176
Reopening of assessment - assessee had made commission payment to a non-resident Indian but no tax was deducted at source on this commission payment - Held that:- There is no dispute with regard to the fact that reopening was made after four years. The assessing officer has not brought any material available on record, that the assessee was guilty of not disclosing fully and truly all materials facts necessary for the assessment. We find that the Assessing Officer during the original assessment had made a specific query with regard to payment of commission and the assessee replied the same. Therefore, it cannot be inferred that the materials facts related to the payments of commission was not before Assessing Officer during the original assessment proceedings. The basis for reopening is admittedly the circular dated 22/10/2009 which was not having retrospective effects as held by the Hon’ble Jurisdictional High Court in the case of CIT Vs. Modern Insulators (2014 (10) TMI 748 - RAJASTHAN HIGH COURT ) wherein it has been held that the circular no. 7 dated 22/10/2009 cannot be considered retrospectively to make it applicable to make payment before that date - Decided in favour of assessee
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2017 (3) TMI 1181
Disallowance claim for exemption under section 10(10C) - Held that:- Assessee has placed on record the copies of Form No. 16 issued by the employer for A.Ys. 2009-10 and 2010-11, which clearly show that the amount on voluntary retirement was not only paid by the employer to the assessee in the previous year relevant to A.Y. 2010-11, but the same was also included in his total income and tax was also deducted in A.Y. 2010-11. The assessee, in my opinion, thus was entitled to claim the exempt ion under section 10(10C) for A.Y. 2010-11 as claimed and not in A.Y. 2009-10 as held by the authorities below. Moreover, a mere fact that the exemption under section 10(10C) was not shown by the employer in Form No. 16 issued for A.Y. 2010-11, in my opinion, cannot be the basis for disallowing the claim of the assessee and that too while processing his return of income under section 143(1). Therefore, set aside the impugned order of the ld. CIT(Appeals) on this issue and direct the Assessing Officer to allow the claim of the assessee for exemption under section 10(10C). - Decided in favour of assessee
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2017 (3) TMI 1168
Transaction of entering into development agreement as transfer within the meaning of section 2(47)(v) - Capital gain - Held that:- We find merit in the argument of the ld.AR that no sale transaction has taken place with the signing of the development agreement as the sale is governed by the provisions of section 54 of the Transfer of Property Act, 1882 wherein the prime determining factor is receipt of monitory consideration. There is no monitory consideration whatsoever in the development agreement entered in to by the assessee and therefore cannot be construed as sale. We also find merit in the argument of the ld. AR that entering development agreement with the Developer, the assessee has not relinquished any interest in the said property as the right in the property continue to belong to the owner. Subsection 3(v)of section 2(47) of the Act is not relevant to the case under consideration and the development agreement nowhere falls under ambit the transaction of allowing possession of immovable property to be taken or part performance of contract of the nature referred to in section 53A of the TPA, 1882 because the development agreement is not an agreement for sale because the assessee executed a contract with the developer and not with the intended purchaser. The development agreement is some sort of business agreement and it basically postulates coming together of two parties only i.e.the developer and the owner of the land. The developer does not have land to develop the land and the assessee did not have sufficient finance to develop the land and therefore they come together i.e. land and finance for the development of project is necessarily business agreement whereby the owner of land allows the developer to enter and exploit the land for the limited purposes of developing the said land. Looking into the provisions of TPA,1882 which clearly shows that allowing the possession to be taken and retained in part performance of the contract could be considered as transfer and not permissible possession or any other kind of possession. We are of the considered view that the order of FAA upholding partly the order of AO levying tax on the LTCG on the basis of development agreement was wrong and cannot be sustained. Accordingly, we set aside the order of the FAA and direct the AO to delete the total addition in the current year. We further hold that the application of provisions of section 50C is also bad in the present scenario as there was no transfer of land or building has taken place. - Decided in favour of assessee.
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2017 (3) TMI 1185
Disallowing adjustment of tax deducted at source against the tax payable on the undisclosed income declared by it under the Voluntary Disclosure of Income Scheme under the Finance Act, 1997 - Held that:- Undisclosed income declared under the Voluntary Disclosure of Income Scheme under the Finance Act, the payment of the tax under the Scheme of 1997 Act was in terms of the declaration made by the petitioner on 31st December, 1997. In its declaration, no claim for the Tax Deducted at Source under the 1961 Act being treated as tax paid under the Scheme was made by the petitioner. Further, it is pertinent to note that the letter dated 31st March, 1998 has been filed by the petitioner with the Commissioner of Income Tax, not along with the proof of payment of tax under the Scheme but separately and only after the proof of payment had been submitted to the Revenue. Further, the communication does not in terms states that the petitioner reserves its rights to claim refund nor does it state that the right to refund is subject to the result of the petition. The payment could not have been made under protest as the payment had already been made prior to addressing the above letter dated 31st March, 1998. The Petitioners' who seek an equitable relief in Writ, should have been more forthright in its communication to the Revenue. This conduct on the part of the Petitioner is an attempt on the part of the Petitioner to secure the benefit of the Scheme i.e. Protection (insulation) from prosecution and penalty under the 1961 Act, and at the same time challenge the payment made under the Scheme of 1997 Act. Thus, we find no reason to allow the petition also on the above ground. In the above view, on the basic issue of law, we hold that the payment of tax under the Scheme of 1997 Act is not payment of tax under the 1961 Act. Thus, adjustment as sought of the tax paid as TDS under the 1961 Act to reduce the tax payable under the Scheme of 1997 Act is not permissible. Therefore, we have not examined the secondary issue raised viz: appropriate interpretation of the Scheme of 1997 Act, proceeding on the premise that it is the same tax under both the Acts.
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2017 (3) TMI 1169
Share application money treated as income from undisclosed sources u/s 68 - whether the assessee has discharged its onus in terms of requirements of section 68 in respect of each of the persons, who have alleged to have paid money to the assessee company - Held that:- On perusal of the documents and observations mentioned above in respect of the 29 persons, we find that in support of the identity of these persons, the assessee has submitted copy of either ration card or voter identity card or driving licence etc and out of 29 persons, 19 persons were produced before the Assessing Officer also, thus, the identity of those persons cannot be doubted. However, in support of creditworthiness, the assessee has submitted copy of proof of agriculture land holding in case of only six persons, namely, Shree Vijay Veer Singh, Sh Yograj Singh, Sh Mahipal Singh, Sh Harpal Singh, Sh Ram Prasad Singh, and Sh. Khoob Singh. Only one person, Sh Krisna Kumar filed copy of PAN card. Though in the statements, it is claimed by Sh. Vijay Veer Singh, Sh Karmapal Singh, Sh Krishnapal Gehlot, Sh Karma Veer Singh etc. that money was invested out of sale of crops, but no evidence in support of sale of crops was filed before either the lower authorities or before us. In case of Sh. Nanu Singh, the copy of ration card available on page 16 of the paper book, shows annual income of the family at ₹ 2000 only and which in our opinion is not sufficient to explain the investment of ₹ 30,000/-by him. Similarly, Sh Harpal Singh has shown investment of ₹ 35000/- in share application money, whereas in the Ration card of Sh. Harpal Singh, annul income of ₹ 9500 has been shown, which is not sufficient to explain his investment . Sh. Deepak Kumar made investment of ₹ 2.5 lakh in the share application money and stated that said investment was out of reward of ₹ 3 lakh from custom and Central excise Department. In support of the creditworthiness of Sh. Deepak Kumar, the assessee has submitted a certificate from office of the customs and Central excise, which is available on page 110 of the assesses paper book. On perusal of the certificate we find that name of Sh Deepak Kumar, is not appearing in the said certificate. No other evidence like copy of return of income etc was filed supporting the receipt of such income in the hand of Sh. Deepak Kumar. The facts and circumstances of the case, we conclude that the impugned transactions accepting share application money by the company do not appear to be genuine transactions. Mere filing of copy of share certificates in the name of persons, cannot lead to genuineness of the transaction - Decided against assessee
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2017 (3) TMI 1163
Treatment of re-imbursement of certain expenses as fees for technical services - Held that:- So far as the fact of the case as well as the terms and conditions of the expartiate agreement is concerned, we do not find any material variations in the terms and conditions of the secondment in the case of the assessee as well as in the cases which were considered by the Tribunal while giving the finding. The learned Authorised Representative has referred to the communication with the assignees by the assessee and submitted that the assignees would not get any right of a continuous employment with the assessee after termination or on expiry of the present assignment. In our view even if there is a restriction of the right to continue in the employment with the assessee the same would not prove that the relationship between the BIAL and the assignees is employer and employee. The terms and conditions of the employment of the assignees with the assessee cannot determine the relationship between the assignees and the BIAL. Further even if the assignment tenure is relatively longer that would not amount to cessation of the existing employment of the assignees with the assessee. Authorised Representative has given much stress to a particular word that the provision of services as per the definition under the DTAA has to be rendered by technical and other personnel as against the definition under Section 9(1)(vii), it is the provision and service of technical or other personnel. Thus he has emphasized that there is a difference in the language used in the DTAA. We find that the definition of Fees for Technical Services as per the first limb as provided under Section 9(1)(vii) of the IT Act as well as Article 12(4) of DTAA means payment to any kind in consideration for rendering of any managerial, technical or consultancy services and to that extent, the definition of Fees for Technical Services under IT Act as well as DTAA is identical. In this case, when the payment is considered for managerial service then it becomes irrelevant to go into second aspect of provision of service by technical or other personnel as used in Article 12(4) of the DTAA. In view of the above discussion as well as in the facts and circumstances of the case, we do not find any distinguishing facts or circumstances in the case of the assessee to take a different view as taken by this Tribunal in the earlier decision. Hence, by following the earlier decisions of this Tribunal, we decide this issue against the assessee. Jurisdiction of the DRP for enhancing the total income - treatment of reimbursement of expenses received by the assesse as FTS liable to be taxed in India - Held that:- DRP issued a show cause notice to the assesse. The assessee duly contested this issue before the DRP. Thus it is clear from the record that this issue of treating the reimbursement of expenses as FTS was a subject matter of adjudication before the DRP and therefore while deciding the issue which was a subject matter before DRP, the question of jurisdiction cannot be raised even if the outcome of the adjudication of the subject matter may result enhancement of total income as held by the Hon’ble Supreme Court in the case of Hukumchand Millls Ltd. Vs. CIT [1966 (9) TMI 38 - SUPREME Court] as well Ahmedabad Electricity Co. Ltd. Vs. CIT [1992 (4) TMI 29 - BOMBAY High Court]. The full bench of Hon’ble Bombay High Court while deciding the issue of the powers and jurisdiction of the Tribunal to enhance the tax liability has held that the Tribunal while dealing with an appeal enhance the tax liability of the assesse if it accept the contention of the Department. Thus it is clear that while deciding an issue before the authority even if no express power of enhancement is provided under the Act it has inherent power to decide the issue which may result enhancement of tax liability. In view of the above facts, we do not find any substance in the objections raised by the assessee.
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2017 (3) TMI 1161
Disallowance u/s 14A read with Rule 8D - Held that:- We find that in the case of Dhanuka & Sons (2011 (4) TMI 861 - CALCUTTA HIGH COURT) had categorically held that even though the investments were made in the earlier years, the onus is on the assessee to prove that in those respective years, the investments were made out of own funds and no borrowed funds were utilized for the same. Hence we set aside this aspect of the issue to the file of the ld AO with a direction to the ld AO to produce the earlier year records to prove that the investments in earlier years were indeed made out of own funds. If the same is found to be correct, then no disallowance under Rule 8D(2)(ii) of the Rules towards proportionate interest would operate. We direct the ld AO accordingly. In respect of disallowance made towards administrative expenses under Rule 8D(2)(iii) of the Rules, we hold that the co-ordinate bench of this tribunal in the case of REI Agro Ltd supra had held that only dividend bearing investments should be taken into account for the purpose of working out the disallowance under Rule 8D(2)(iii) of the Rules. We direct the ld AO accordingly. Hence the Grounds raised by the assessee in this regard are partly allowed for statistical purposes. Repairs and maintenance - Allowable of business expenditure - Held that:- The expenditure incurred towards repairs and maintenance supra would be squarely allowable as revenue expenditure and the ld AO is hereby directed to delete the disallowance. Legal and professional charges disallowance - Held that:- We find that the lower authorities had disallowed the said expenses of legal and professional charges incurred on these three parties on the basis that the assessee had not been able to produce any corroborative evidences to prove that the assessee had availed professional services from the said parties for the purpose of the business. We find that the aforesaid additional evidences would be very crucial to adjudicate the issue under dispute and accordingly we admit these additional evidences and since the same was not available before the lower authorities, we deem it fit and appropriate to set aside this issue to the file of the ld AO to decide the same afresh in the light of the additional evidences filed herein and in accordance with law TDS u/s 192 - Held that:- Since there existed an employer-employee relationship, the same is liable for deduction of tax u/s 192 of the Act and assessee also produced copy of employment letter and Form 16 issued to those employees. The ld CIT(A) observed that these persons were employed as Service Engineer and Design Manager on a contractual basis for the period of 2 years and they have been issued Form 16 by the assessee treating them as salaried employee. Hence TDS u/s 192 of the Act alone is attracted and hence no disallowance u/s 40(a)(ia) of the Act could be attracted in the instant case Disallowance of additional depreciation on windmill - Held that:- Hon’ble Madras High Court in the case of CIT vs Texmo Precision Castings (2009 (10) TMI 140 - MADRAS HIGH COURT ) and CIT vs Hi Tech Arai Ltd (2009 (9) TMI 60 - MADRAS HIGH COURT ) wherein it was held that as far as application of section 32(1)(iia) of the act is concerned, what is required to be satisfied in order to claim the additional depreciation is that a new machinery or plant should have been acquired and installed after 31st March 2002 by an assessee, who was already engaged in the business of manufacture or production of any article or thing. The said provision does not state that the setting up of new machinery or plant, which was acquired or installed after 31st March 2002 should have any operational connectivity to the article or thing that was already being manufactured by the assessee. Accordingly the court held that the contention that the setting up of windmills has nothing to do with industry of manufacturing of oil seed is totally not germane to the specific provisions contained in section 32(1)(iia) of the Act. The ld CIT(A) appreciated these submissions of the assessee and respectfully following the decisions supra, correctly deleted the disallowance of additional depreciation on windmill. Deduction in respect of TDS recoverable written off and advance to suppliers written off - Held that:- We find that the assessee had filed the list of parties to whom advances were given in the ordinary course of its business i.e. advance paid to suppliers , in the form of additional evidences which, in our considered opinion, would have to be admitted for better appreciation of the facts. However, we find that the same had not been examined by the lower authorities. Hence in the interest of justice and fair play, we deem it fit and appropriate, to set aside this aspect of the issue to the file of the ld AO to examine those additional evidences and if it is found that the said advances were given in the normal course of business of the assessee, then the same would have to be allowed as a trading loss u/s 28 of the Act as admittedly the same were written off in the books by the assessee. The assessee has to prove the fact of irrecoverability of the said advances to the ld AO. With regard to allowability of TDS recoverable written off since the recoverability arose only in the form of collection of TDS certificates, it goes beyond doubt that the assessee had offered the same as income in the earlier years as admittedly the TDS would be relatable to income only. Moreover, we hold that there is no requirement to satisfy the test of offering of income in the earlier years in terms of section 36(2) of the Act as the subject mentioned issue is not towards bad debts but only bad advances written off. Hence, the allowability of the same would be governed by the provisions of section 28 of the Act. The assessee in the instant case had written off the TDS portion due to non-availability of the same and hence it becomes a trading loss u.s 28 of the Act as to that extent, it had neither received the money nor the TDS certificate. Hence it becomes a trading loss allowable u/s 28 of the Act.
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2017 (3) TMI 1187
Dividend income received from a foreign country - exemption from taxation - DTAA between Government of India and Government of the foreign country - Held that:- Issue has been decided against the Revenue by this Court in Civil Appeal No.4485 of 2007 in the case of Dy. Commr. Of Income Tax, Ujjain vs. M/s. Torqouise Investment & Finance Ltd. [ 2008 (2) TMI 426 - SUPREME Court ] wherein held dividend income derived by the assessee from a company in Malaysia is not liable to be taxed in the hands of the assessee in India under any of the provisions of the Act. - Decided in favour of assessee.
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2017 (3) TMI 1186
Penalty non leviable u/s 271(1)(c) if the income disclosed in the Return and the income assessed is nil - Held that:- This question is covered against the Revenue by decision of this Court in the case of Virtual Soft Systems Ltd. vs. Commissioner of Income Tax Delhi [2007 (2) TMI 147 - SUPREME COURT OF INDIA] wherein held that even after addition there is no positive income - penalty is to be set aside. HC order upheld [2006 (7) TMI 696 - GUJARAT HIGH COURT] - Decided in favour of assessee
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2017 (3) TMI 1184
Revaluation of closing stock routed through profit and loss account - Held that:- Process of revaluation of stock by itself can not bring in any real profit as held in C.I.T. versus K.A.R.K. Firm (1933 (7) TMI 11 - RANGOON HIGH COURT) C.I.T. and Tribunal have examined the matter and accepted explanation of Assessee that it wanted to construct an office building on the said plot, hence transferred it from Current Assets Account to Fixed Assets Account by passing general entries. Further, as market value of plot is not much more in books while transferring plot to Fixed Assets, it was enhanced to ₹ 1,00,00,000/- and a cross entry was passed in the consequence. This contrary entry has been passed by debiting Quinton Road plot account and crediting Revaluation Reserve Account. There was some error which was rectified and it was shown to be part of Fixed Schedule and not part of entries. The view taken by C.I.T.(A) that revaluation of Fixed Assets does not lead to any taxable income of an Assessee could not be shown incorrect. The said value has also been accepted by Tribunal. This is findings of facts. - Decided in favour of Assessee.
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2017 (3) TMI 1183
Deduction under Section 37 - legal fee and expenses incurred towards Professional Indemnity Insurance - legal fee paid was more than the compensation received - Held that:- The test to be employed for examining as to whether or not a particular expenditure incurred by an Assessee, be allowed, is that, which is, provided in Section 37 itself. Therefore, what is required to be ascertained is, whether or not, the expenditure in issue is laid out or incurred wholly and exclusively for the purpose of business, and that, it is not an expenditure, which is described under Sections 30 to 36 of the Act, or an expenditure in the nature of capital expenditure or, if, an Assessee is an individual, it involves defrayment of personal expenses. In ascertaining as to whether the expenditure has been laid out or expended wholly and exclusively for the purpose of business, what is to be borne in mind, is that, it is incurred on account of commercial expediency of the Assessee. The fact that the expenditure incurred by an Assesseee is not propelled on account of any legal obligation, or that, it benefits a third party, would not come in the way of it being allowed, as long as it is incurred due to commercial expediency. As to what is commercial expediency is to be looked at by Income Tax Authorities by placing themselves in the shoes of a prudent business person. Further, the fact that a particular expense does result in a profit for the Assessee in the immediate proximity cannot form the basis of its disallowance. In incurring an expense, a business person could have a short and a long term perspective. The fact that in the short term the expense incurred does lead to a profit, cannot rule out the possibility of accretions of profits to the Assessee in the long run. These are business decisions best left to the wisdom of those who run and manage the business. Therefore, as long an expense is incurred, wholly and exclusively for the purpose of the business carried on by the Assessee, it ought to be, ordinarily, allowed under Section 37 of the Act. (See Sassoon J. David & Co. (P) Ltd., V. CIT, (1979 (5) TMI 3 - SUPREME Court)). Thus, if, the aforesaid principles are applied, it is clear that notwithstanding the fact that the legal fee paid was more than the compensation received by the Assessee, the same, was amenable for deduction under Section 37 of the Act. Likewise, in so far as the expense incurred towards Provisional Indemnity Insurance was concerned, it could not have been disallowed, merely, by reason of the fact that Hammonds, U.K., was required to take out the insurance. - Decided in favour of assessee.
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2017 (3) TMI 1182
Revision u/s 263 - determination of market value by D.V.O - adoption of value - Held that:- It is true that A.O. made reference to D.V.O. for valuation of land in dispute under Section 50C(2) of the Act, 1961, but D.V.O. examined the matter erroneously by taking nature of land as agricultural, ignoring that in the sale deed itself it was also mentioned that land was within limits of Nagar Nigam and that being so, its value ought to have been examined as an urban land and not agricultural land. A.O. treated estimation of D.V.O. as final and proceeded accordingly. In our view, order of assessment passed by A.O. was clearly erroneous and also prejudicial to the interest of Revenue. Tribunal has dealt in detail, various inquires made by A.O. with regard to valuation of property but the basic fact regarding nature of land which was relevant for determination of fair market value was erroneous and has not been examined at all. The Assessee himself knew that the land was within the municipal limits of Nagar Nigam, therefore, fair market value mentioned in the sale deed was not taken by it, which was applicable to an agricultural land but Assessee admittedly applied the circle rate applicable to urban land. The land which was within the municipal limits, could not have been treated to be ''agricultural land' on the basis of revenue record prepared under U.P. Z.A. & L.R. Act. A.O. also did not examine when Assessee admitted circle rate, applicable to ''urban land' for the purpose of fair market value, for stamp duty, then, why for determination of market value by D.V.O., land should be taken as an agricultural land. C.I.T., therefore, rightly exercised power under Section 263 of Act, 1961, and Tribunal, in our view, has erred in law in taking otherwise cognizance and setting aside order of C.I.T. - Decided against assessee.
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2017 (3) TMI 1173
Disallowance made on account of provision for leave encashment - Held that:- We find that though the Hon’ble Calcutta High Court in the case of Exide Industries Ltd vs Union of India (2007 (6) TMI 175 - CALCUTTA High Court) had struck down the provisions of section 43B(f) of the Act as unconstitutional, the revenue had carried the matter further to the Hon’ble Supreme Court [2008 (9) TMI 921 - SUPREME COURT ].Hence from the aforesaid Supreme Court judgement, it could be inferred that the Hon’ble Supreme Court had not stayed the judgement of the Calcutta High Court during Leave proceedings. But the Hon’ble Supreme Court had only passed an interim order on the impugned issue. Hence we deem it fit and appropriate , in the interest of justice and fair play, to set aside this issue to the file of the Learned AO to pass orders based on the outcome of the main appeal on merits by the Hon’ble Supreme Court as stated supra. - Decided in favour of assessee for statistical purposes. Disallowance u/s 14A - Held that:- No disallowance under Rule 8D(2)(ii) of the Rules towards proportionate interest is warranted in the instant case.In respect of disallowance made towards administrative expenses under Rule 8D(2)(iii) of the Rules, we hold that the co-ordinate bench of this tribunal in the case of REI Agro Ltd [2013 (9) TMI 156 - ITAT KOLKATA] had held that only dividend bearing investments should be taken into account for the purpose of working out the disallowance under Rule 8D(2)(iii) of the Rules. We direct the ld AO accordingly. Hence the Ground raised by the assessee partly allowed for statistical purposes. Disallowing the expenditure invoking Explanation to Section 37(1) - Held that:- We find that the issue under dispute had emanated from the sales tax assessment. The appeal against the levy of penalty had been preferred by the assessee dealer before the appellate authority under Sales tax act and the same is pending disposal. Hence, in these circumstances, we deem it fit and appropriate, to set aside this issue to the file of the ld AO, to decide the disallowance of expenditure, based on the outcome of the appeal by the first appellate authority under Sales Tax Act. The assessee is directed to expedite the sales tax appeal at the earliest and inform the outcome of the same to the ld AO for his expeditious disposal of this set aside proceeding. Accordingly, the cross objection of the assessee is allowed for statistical purposes. Allowing exemption u/s 10B - Held that:- The details of other income to the tune of ₹ 18,20,101/- as detailed hereinabove pertains to 100% EOU as could be evident from the segmental profit and loss account of 100% EOU furnished by the assessee before the lower authorities. Hence the entire other income becomes the profits of the business of the undertaking (i.e 100% EOU) . Then automatically the assessee is entitled for deduction as per the computation mechanism provided in section 10B(4) of the Act. Disallowance of additional depreciation - asset put to use for less than 180 days - Held that:- Additional depreciation allowed under Section 32(i)(iia) of the Act is a one time benefit to encourage industrialization, and the provisions related to it have to be construed reasonably, liberally and purposively, to make the provision meaningful while granting additional allowance. See The Commissioner of Income-Tax, LTU, The Asst. Commissioner of Income-Tax (LTU) Versus M/s Rittal India Pvt. Ltd. (No. 1) [2016 (1) TMI 81 - KARNATAKA HIGH COURT] Disallowance for provision made for mark to market loss - Held that:- We find that the ld AO had placed heavy reliance on Instruction No. 3/2010 dated 23.3.2010. From the perusal of the said Instruction, we find that the same was issued in respect of loss on account of trading in foreign exchange derivatives. The assessee had entered into forward contracts in order to hedge its exchange risk in respect of export proceeds receivable by it in foreign exchange. The assessee’s forward contracts were not by way of trading as such in foreign exchange derivatives. Hence, Instruction No. 3/2010 cannot be made applicable to the facts of the instant case. Addition of provision on account of VAT - Held that:- The provision made by the appellant for the previous year relevant to the assessment year 2008-09 was an ascertained liability. According to the notification issued on February 25, 2008, Guar Gum was exempt from VAT with effect from April 1, 2006. Accordingly, no VAT was payable on the said commodity with effect from April 1, 2006. The VAT paid by the appellant as part of the purchase price of the commodity and deposited by the seller with the Government did not have the character of tax since no tax was in fact leviable. In such circumstances, the appellant was not entitled to refund on account of VAT paid on raw materials. The appellant had to return the sum to the Government and made a provision for the same treating it as an ascertained liability. The refund which the appellant was obliged to return cannot be treated as any sum payable by the appellant by way of tax within the meaning of clause (a) of section 43B of the Act. In opinion, the appellant has correctly reversed the provision in the next year consequent to issue of notification dated August 29, 2008 and offered the amount for taxation in the assessment year 2009-10.
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2017 (3) TMI 1165
Addition u/s 14A - Held that:- Hon’ble Jurisdictional High Court in the case of CIT vs R.R.Sen & Brothers (P) Ltd [2013 (7) TMI 260 - Calcutta High Court] wherein it was held that 1% of exempted income should have to be disallowed u/s 14A of the Act for asst years prior to Asst Year 2008-09. Respectfully following the said decision, we hold that only 1% of exempted income is to be disallowed u/s 14A of the Act. We find that the ld CIT(A) in the instant case had rightly directed the ld AO to disallow 1% of exempted income. Hence we hold that the order of the ld CIT(A) in this regard does not call for any interference Addition u/s 41 - Held that:- We find that the Bangalore property comprising only land was sold to Advanta India Ltd which is totally independent of sale of Rubber Chemicals Business Undertaking. Similarly Belvedere Estate was also independently sold by the assessee which comprises of both land and building for ₹ 70,00,000/- and values have been distributed by the assessee towards land and building separately. Hence we hold that the ld AO had wrongly included the sale consideration of ₹ 98,35,830/- in respect of sale of Bangalore Land and ₹ 70,00,000/- towards Belvedere Estate while computing the business income u/s 41(2) of the Act. In respect of addition made towards Bangalore Land, the ld AO had accepted the contentions of the assessee in the remand report by stating that the contentions of the assessee may be considered as the ld AO had not adduced any reason in his assessment order for treating the same as business income u/s 41(2) of the Act. In view of this, we hold that the sale consideration of Bangalore Land to the tune of ₹ 98,35,830/- and towards Belvedere Estate at ₹ 70,00,000/- should not be treated as part and parcel of slump sale of Rubber Chemicals Business Undertaking and the gains arising from sale of Belvedere Estate and Bangalore Land should be assessed only as Capital Gains as reported by the assessee. Arguments advanced by the assessee before the ld CIT(A) and findings given thereon in respect of sale of Rubber Chemicals Business Undertaking on slump sale basis has not been refuted by the ld DR before us. We find that the decision relied upon by the ld AR on the Hon’ble Jurisdictional High Court in the case of East India Electric Supply and Traction Co Ltd (2003 (5) TMI 46 - CALCUTTA High Court ) is well founded on the non-applicability of provisions of section 41(2) of the Act. Disallowance on account of depreciation claimed by the assessee on the WDV of the Block of Assets , the ld CIT(A) observed that the details filed by the assessee were sent to ld AO for remand who had agreed to the contentions of the assessee in the remand proceedings that the issue is covered in favour of the assessee by the order of this tribunal for Asst Years 1997-98 and 2004-05. Accordingly, the ld CIT(A) granted relief to the assessee in this regard. Hence we do not find any infirmity in the order of the ld CIT(A) in this regard. Disallowance of interest expenditure - Held that:- Based on these categorical findings of the ld AO, the ld CIT(A) deleted the disallowance of interest made on adhoc basis for the Asst Year 2006-07. Against this order, the revenue had not challenged the issue before us though they had preferred an appeal against other issues for the Asst Year 2006-07. It is pertinent to note that the order of the ld CIT(A) for Asst Year 2006-07 was passed on 11.3.2013 and the very same ld CIT(A) had disposed off the appeal for the Asst Year 2007-08 on 12.3.2013. While this is so, we do not find any justifiable reason for the ld CIT(A) to shift his stand for the Asst Year 2007-08 alone when there is no change in the facts and circumstances of the case. We find lot of force in the argument of the ld AR that no disallowance could be made on an adhoc basis on mere guess work.We are also convinced that in respect of loans to employee directors at concessional rate of interest, the difference in rate thereon as compared with Rule 3 of the Rules has been duly considered as perquisite in the hands of the said employee directors and tax is deducted in terms of section 192 of the Act. This fact has not been refuted by the ld DR before us. We hereby direct the ld AO to delete the disallowance towards proportionate interest Addition towards profit of UNIQEMA business - Held that:- Detailed note attached in the Audited financial statements of the assessee clearly nullifies the various allegations made by the ld AO in his assessment order. We also find that this aspect was brought to the notice of the ld AO by the assessee by filing the tax audit report in Form 3CD wherein the tax auditor in reply to Clause 8(a) and 8(b) thereon had reported about this aspect. We find that the ld AO had not examined the aspect as to whether the subject mentioned profits of ₹ 10.84 crores have been reported in the total profits of Croda (CCIPL) in its books. Hence as fairly conceded by the ld AR in this regard, we deem it fit and appropriate, to set aside this issue to the file of the ld AO, with a limited direction to verify the books of CCIPL in order to know whether ₹ 10.84 crores of profits have been reported by them in their books, and if the same is found to be true, then the said addition made in the hands of the assessee company is to be deleted. Disallowance of bad debts - Held that:- From the details of bad debts placed on record, we find that the assessee had duly complied with the provisions of section 36(2) of the Act by offering the income in respect of such debts in earlier years. We find that the decision of the Hon’ble Supreme Court in the case of Goetze India Ltd reported supra does not apply to appellate authorities wherein it has been opined that although it is not open for the ld AO to entertain the claim of the assessee unless the same has been made by a return / revised return , the appellate authorities have the powers to entertain the same. We also place reliance on the decision in the case of T.R.F Ltd vs CIT [2010 (2) TMI 211 - SUPREME COURT] wherein it has been opined that it is not necessary for the assessee to establish that the debt, in fact , has become irrecoverable. It is enough if the bad debt has been written off as irrecoverable in the books of accounts of the assessee. Hence respectfully following the said decisions, we direct the ld AO to delete the disallowance of bad debts made in this regard.
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2017 (3) TMI 1178
Computation of T.P adjustments - Held that:- According to ld.A.R, Lubrizol is procuring raw materials at lower cost as Lubrizol is a JV promoted by M/s.Indian Oil Corporation ( IOCL)., and M/s.Chevron Oronite Company LLC USA. IOCL has given better discount in Lube Oil price/MT to Lubrizol, which is not available to the assessee. In our opinion, if it is reflected in the financial statement of Lubrizol, it is appropriate to give credit to the same and computation of T.P adjustments thereafter while determining the ALP. Accordingly we remit the issue to the file of AO for reconsideration and give proper adjustments on account of raw materials cost of Lubrizol and mineral oil. This issue is remitted to the file of AO for fresh consideration. Regarding Tolling fee for ZINC, it was submitted that Lubrizol toll had their own Zinc and on other hand, the assessee entered into sub contract agreement with UPL Ltd. in Gujarat for making Zinc. Therefore the cost of Zinc in the case of assessee is higher compared to the cost incurred by the Lubrizol towards the Zinc. In our opinion, if the details of cost of procurement of Zinc by tolling, the same by Lubrizol is available and if the AO finds that the cost price of the Zinc incurred by the Lubrizol is lesser as compared to the assessee’s case, then the suitable adjustments to be made while determining the ALP. Accordingly, this issue is also remitted to the file of AO for fresh consideration. It is needless to say that opportunity of hearing to be given to assessee by AO/TPO before deciding the above issues. Regarding transportation cost, it is submitted that the assessee incurred additional cost for transportation from Gujarat to Chennai whereas the cost of transportation in case of Lubrizol is less. However, we find that the assessee has not able to establish that the cost of transportation in case of Lubrizol is lesser than the assessee and Lubrizol is selling its goods only in local and thus arguments of assessee cannot be upheld. This ground is rejected.
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2017 (3) TMI 1172
Revision u/s 263 - Exemption under Section 54F - Held that:- The claim of assessee regarding the consideration received on sale of shares was accepted by the AO. The AO neither enquired nor applied his mind to the notification applicability on sale of shares of resident to nonresident. The guidelines contained in notification issued by the RBI was not at all seen to say whether it is applicable or not. As per the notification, shares of an Indian companies are not listed on a recognized stock exchange in India, the transfer of shares shall be at a price not less than the fair value to be determined by a SEBI registered category-1- Merchant Banker or a Chartered Accountant as epr the discounted free cash flow method. Further, the claim of assessee regarding granting of exemption u/s.54F also and was also not examined by the AO. It is also to be noted that applicability of provisions regarding S.54F, no enquiry as to whether this amount was properly deposited in capital gains scheme or not, whether the condition laid down in Sec.54F was complied with or not seen by the AO. In view of this, the CIT by invoking the provisions of the section 263 of the Act, directed the AO to examine the issue raised by him in his order afresh and decide in accordance with law. In this finding of the CIT, we do not find any infirmity and he action of Ld. CIT is confirmed. Hence, the AO would examine the issue raised by the Ld. CIT in his order u/s.263 and decide the issue in accordance with law. - Decided against assessee
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2017 (3) TMI 1171
Penalty u/s 271(1)(c) - disallowance of interest u/s 36(1)(iii) - Held that:- We notice that the disallowance of interest made u/s 36(1)(iii) on account of finance provided by way of share application/loan to its subsidiaries/sister concerns out of commercial expediency has been deleted stating the money was advanced by the assessee holding company to its subsidiaries for “business expediency”, which has to be judged by the business man itself. The facts brought before us are that the assessee has pleaded before the lower authorities that the amount invested has been used by the subsidiaries for the purpose of business. The assessee has significant interest in the business of subsidiaries, as these subsidiaries are in same business as that of assessee. It is further noted that major portion of the amounts were invested in the earlier years. No disallowance has been made in assessment year 2007-08 or earlier. Thus, keeping in view, the legal position as discussed above and facts of this case, it can be said that amount invested in the subsidiaries company was arising out of commercial expediency and was thus for the purpose of business of the assessee. Therefore, we reverse the decision of the ld. Commissioner of Income Tax (Appeals) and allow the appeal of the assessee Since, the addition on the basis of which the penalty was levied has been deleted by the co-ordinate Bench of the Tribunal, the impugned order confirming the penalty levied by the AO does not survive. - Decided in favour of assessee.
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2017 (3) TMI 1170
Long term capital loss u/s 45(1A) - compensation received from the insurance company by adopting indexation cost of acquisition on account of assets destroyed in a fire accident in January, 2001 - Held that:- We have carefully considered the order passed by the Assessing Officer and find that the Assessing Officer has not discussed anything about the provisions of section 45(1A) of the Act or section 50 of the Act. The Assessing Officer simply accepted the return filed by the assessee, allowed capital loss claimed by the assessee. The Assessing Officer not asked any query in respect of capital loss claimed by the assessee. Insofar as the submissions of the learned counsel for the assessee that in paper book at page No. 21 letter submitted to the Assessing Officer which is undated, it cannot be given much weight for the simple reason that when it is filed before the Assessing Officer is not clear. Therefore, under these facts and circumstances of the case, we are of the view that the order passed by the Assessing Officer is without application of mind and also not considering the facts of the case. It is clearly erroneous order, therefore, deserves to be quashed. When the assessee has made a claim under section 45(1A), the Commissioner of Income Tax without considering the provisions, simply observed that once the asset is put to use, it means, it amounts to a depreciable asset and it attains the character of a short term capital asset, which is not entitled for indexation of its cost and also it cannot be claimed as a long term capital asset. Insofar as the above observation is concerned, we find that the Commissioner of Income Tax has not given any basis not only that, he simply directed the Assessing Officer to follow his observations. We find that the findings given by the Commissioner of Income Tax is baseless and therefore, it deserves to be set aside. In view of the above, we find that the order of the Commissioner of Income Tax has to be modified. Accordingly we set aside the order passed by the Commissioner of Income Tax and direct the Assessing Officer to re-do the assessment in accordance with law without influencing the observations of the Commissioner of Income Tax after being given reasonable opportunity of hearing to the assessee.
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2017 (3) TMI 1167
Expenditure incurred on construction of road on BOT basis - Capital or Revenue expenditure - claim of depreciation on the asset created by investing an amount in construction of Pune Hyderabad section of National Highway no.9, on build, operate and transfer (BOT) basis - Held that:- In the case of Techno Shares and Stocks Ltd. v/s CIT, [2010 (9) TMI 6 - SUPREME COURT OF INDIA] the Hon'ble Supreme Court while examining the assessee’s claim of depreciation on BSE Membership Card, after interpreting the provisions of section 32(1)(ii), held that as the membership card allows a member to participate in a trading session on the floor of the exchange, such membership is a business or commercial right, hence, similar to license or franchise, therefore, an intangible asset. In the present case, undisputedly by virtue of C.A. the assessee has acquired the right to operate the toll road / bridge and collect toll charges in lieu of investment made by it in implementing the project. Therefore, the right to operate the toll road / bridge and collect toll charges is a business or commercial right as envisaged under section 32(1)(ii) r/w Explanation 3(b) of the said provisions. Therefore, in our considered opinion, the assessee is eligible to claim depreciation on WDV as an intangible asset. Thus, we answer the question framed by the Special Bench as under:– The expenditure incurred by the assessee for construction of road under BOT contract by the Government of India has given rise to an intangible asset as defined under Explanation 3(b) r/w section 32(1)(ii) of the Act. Hence, assessee is eligible to claim depreciation on such asset at the specified rate. Amortization of the expenses incurred for construction of BOT road in terms of CBDT Circular no.9 of 2014 dated 23rd April 2014 - Held that:- As already discussed in the earlier part of the order the nature of expenses whether capital or revenue is not the subject matter of dispute in the present appeal, as the expenditure incurred has already been considered as capital expenditure in the preceding assessment years and assessee’s claim of depreciation have been allowed. Therefore, in the impugned assessment year, the claim is limited to depreciation on the WDV on block of assets only. The issue whether the expenditure incurred is a deferred revenue expenses or not was not the subject matter of consideration either by the Assessing Officer or by the learned Commissioner (Appeals). Taking into consideration the aforesaid fact, the Tribunal had re–framed the question by limiting the issue only to the determination of nature of asset, whether tangible or intangible. In fact, the learned Departmental Representative has also accepted the aforesaid factual position. In any case of the matter, the assessee neither in the preceding assessment years nor in the impugned assessment year has claimed it as deferred revenue expenditure, hence, there is no scope to examine whether the expenditure could have been amortized over the concession period in terms of CBDT circular no.9 Addition made under section 14A - Held that:- The fact that in the relevant previous year, assessee has not earned any exempt income has not been controverted by the Department. Therefore, in the absence of any exempt income earned by the assessee no disallowance under section 14A can be made
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2017 (3) TMI 1162
TPA - AMP expenses addition - Held that:- TP Regulations would be applicable to any transaction which is held to be an international transaction. In the instant case, the AO has referred the international transaction in the case of purchase of raw materials, finished goods, purchase of goods, purchase of software management consultancy reimbursement for TP Study and to determine the ALP. During the TP proceedings, the TPO found that there was a huge AMP spent and brought it under the purview of international transaction. The AMP spent was not obligated by AE. The expenditure was incurred by the assessee as sales promotion expenses for the purpose of it’s own cause. According to the assessee, there was no binding agreement to promote the brand of Nippon India by the assessee. The Revenue could not demonstrate that there was an agreement or arrangement or action of concert formal or informal to promote the brand of Nippon in India and to spend towards AMP. The Revenue has not proved that the benefits of AMP expenses are for improving the Nippon brand in India who is the economic owner of Nippon Japan. Therefore, we hold that the AO/TPO/DRP is not correct in making upward adjustment of brand promotion expenses and the mark-up on brand promotion.AMP spent of the assessee is not an international transaction and the addition is deleted - Decided in favour of assessee TNMM is most appropriate method need to be confirmed. Exclusion of Asian Paints Ld. as comparables - Held that:- It is seen from the TP study of the assessee that the assessee has selected the Asian Paints Ltd as comparable and worked out the gross margin. The TPO has retained the comparable selected by the assessee. The assessee has not brought on record any other factor which has material effect and can influence the margin such as functions and Risks except the turnover. Hence we do not find any reason or merit in the assessee’s contention for exclusion of Asian Paints Ltd., as comparable. The case law relied upon by the assessee is distinguishable on the set of facts discussed above. Therefore, we do not find any reason to exclude the Asian Paints Ld., as comparables and this ground of appeal is dismissed. Idle capacity adjustment - Held that:- The assessee has utilized the capacity to the extent of 28% against the average utilization by the comparable companies @71%. Idle capacity is one of the factor which can influence the margins substantially. The reasons for non-utilization of capacity required to be verified with respect to the resources available and the functions performed by the comparable companies. The assessee is in manufacturing and trading and the comparable companies are engaged in manufacturing activity. Therefore we direct the AO to make necessary adjustments for idle capacity taking in to consideration of all the factors. Accordingly, the issue is remitted back to the file of A.O to consider the submissions of the assessee and to allow the idle capacity adjustment. Adjustment of customs duty - Held that:- The assessee has not furnished the pricing model of the products. Assessee has not furnished the basis of working its price and comparability cost of forming part of the cost basis. Prima facie, margins at gross levels are shown that assessee is able to absorb as part of its selling price, the raw material cost, which includes the BCD element. Only the down line expenses are not able to be absorbed by gross profit leaving an arm’s length return to assessee which is comparable to profit margin of peers industry. In the case of the assessee, the assessee himself has selected the comparables and stated in the TP document that the gross margin is more than the comparable companies. Since, the assessee himself claimed that selected comparables and worked out the gross profit margin was more than at arm’s length, we do not find any reason to make adjustment towards the customs duty. This ground of the assessee is dismissed. Addition under the head business promotion expenses - Held that:- The expenses were disallowed for non production of bills and vouchers by the AO. Before us also the A.R did not produce any evidence. Therefore, the addition made by the AO is confirmed.
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2017 (3) TMI 1174
TPA - selection of comparable - Held that:- Companies functionally incomparable as that of assessee which is engaged in the business of providing Sub-investment advisory services, Market research and Statistical data to its holding company need to be excluded from final list of comparable.
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2017 (3) TMI 1164
Deduction u/s 80IA of the Act on the entire business profits arrived at - Held that:- The assessee is not merely a contractor but an entity which has taken not only enterprise risk but also business risk considering the fact that it has invested huge funds in the project, which demonstrates that it has taken enterprise as well as business risk. It shows that the assessee has owned the project till it is handed over to the govt., it has taken all the risk till the project is complete. In our considered view, we adjudicate that the assessee is a developer as enumerated in section 80IA(4) and eligible to claim deduction u/s 80IA. Accordingly, we set aside the order of the CIT(A) and direct the AO to allow the assessee’s claim of deduction u/s 80IA of the Act. - Decided in favour of assessee
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2017 (3) TMI 1175
Claim of deduction under Section 54F denied - property was registered in the name of the Karta of HUF - Held that:- As regards the investment made in the individual capacity, even though HUF is an independent assessable unit under Income Tax Act, under the common law, HUF cannot be considered to be a legal entity. The HUF has to be represented through any one of the coparceners. Therefore, when the assessee HUF invested the funds in the name of any one of the coparcener, it has to be construed that the investment was made in the name of HUF. When the nucleus of the HUF fund was used for purchase of a property in the name of any one of the coparcener, the property belongs to the HUF, even though the property was registered in the individual name of one of the coparcener. The property belongs to all the coparceners in equal shares as members of HUF. Therefore, the Assessing Officer is not justified in rejecting the claim of the assessee especially, when the investment was made in the name of Karta of HUF. Only the borrowed funds are used for purchase of new asset - Held that:- Provisions of Section 54F of the Act, requires the assessee to purchase a property one year before the date of the sale or two years after the date of the sale of asset. If the assessee could not invest within the time frame provided in the Act, the same has to be deposited in any one of the capital gain account within the due date provided for filing the return of income under Section 139(1) of the Act. No one could expect the assessee to utilize the sale proceeds of the capital asset or the capital gain arising from such sale before the date of the sale of the capital asset. The assessee cannot have any sale proceeds before the date of the sale. Therefore, when the assessee borrowed the funds and utilized in purchasing the capital asset and thereafter uses the sale proceeds or capital gain for repaying the loan borrowed, that would amount to sufficient compliance of the requirement of Section 54F of the Act. Therefore, merely because the borrowed funds were used when the property was purchased before the date of the sale of asset, this Tribunal is of the considered opinion, this cannot be a reason for disallowing the claim of the assessee. No construction was made, admittedly, the assessee has purchased a land and building - Held that:- when the assessee has purchased a building and made some investment for making it fit for human habitation, the same has to be treated as part of the investment from out of the capital gain and the Assessing Officer is not justified in rejecting the claim of the assessee on the ground that the assessee has not filed any proof / plan from the Corporation of Chennai. For the purpose of renovation and maintenance, the Corporation may not give any approval or planning permission. The assessee has to necessarily obtain the planning permission and building approval in case there was new construction or an additional construction over and above the existing building. In the case before us, it is not the case of the assessee that there was additional construction or new construction. The admitted case of the assessee that the existing building was made it fit for human habitation. Therefore Assessing Officer is not justified in disallowing the claim of the assessee. - Assessee appeal allowed.
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2017 (3) TMI 1160
Disallowance of interest on borrowed - Held that:- Addition on account of interest upto the date of search was deleted by CIT(A) on the ground that no interest bearing funds were utilised for making any interest free loans/advances to various parties and hence, no interest should be disallowed in the year in question, but A.A. has discarded aforesaid deletion made by CIT (A) only on the ground that department has not accepted decision of CIT (A). So long as CIT (A)'s order is not upset, it was not open to A.A. to ignore the same. Therefore, addition made by him was apparently illegal. - Decided in favour of assessee.
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2017 (3) TMI 1166
Disallowance of entire amount of loss - Held that:- Disallowance of entire amount of loss declared by the assessee may not be appropriate under the facts discussed above, i.e., we are of the view that a portion of the loss may be disallowed to take care of deficiencies, if any, in the claim so made. Hence, on a conspectus of the matter, we are of the view that a disallowance of 20% of the exceptional loss claimed on sale of securities may be reasonable. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to restrict the disallowance of 20% of the amount disallowed by him. Disallowance relating to Difference of Rate (DOR) - Held that:- We have noticed that the assessee was in the habit of entering into the buying and selling the securities by taking risks. In such kind of business transactions, the possibility of making exceptional losses/profits could not be ruled out. Hence we find merit in the submissions that the exceptional losses, per se, would not turn the same to be a bogus or artificially hiked loss. The tax authorities should have probed the matter further by making enquiries from the concerned seller & buyer, about prevailing market rates etc., and then they should have come to a conclusion. It is pertinent to note that the Special auditors have only reported the same as Exceptional cases, but they have not branded the same as bogus. Hence, in our view, this claim has been disallowed by the tax authorities only on surmises and not based upon any credible evidence. Accordingly we do not find any justification in disallowing this claim. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this addition. Disallowance of loss arising with purchase and sale of securities - Held that:- In the first round of proceedings, the assessee had also claimed that the transactions noted in Sl.No.11 have also been entered on different dates, but the said claim was not made in the second round proceedings. Hence we restore the issue relating to transactions noted in Sr. No. 11 to the file of the AO with the direction to delete the addition, if the transactions have been entered on two different dates. With regard to the loss of ₹ 33,15,000/- in relation to the transactions entered with M.J. Patel, we are of the view that a partial disallowance out of the above said loss would settle this dispute, since there are deficiencies on both sides. Accordingly, we direct the AO to restrict the disallowance of the above said item to 20% of ₹ 33,15,000/- to take care of deficiencies, if any, and in our view the same would meet the ends of justice. Disallowance of net loss incurred in ready forward transactions - Held that:- The assessee has offered general explanations with regard to these transactions. In that case, the tax authorities could have examined the net loss vis-ŕ-vis normal interest expenditure. These kind of examination has not been carried out by the tax authorities in order to find out as to whether the loss vis-ŕ-vis is excessive or unreasonable. We further notice that the assessing officer has not conducted any enquiry with the concerned parties.We also notice that the rate of interest given in the last column ranges from 8.03% to 14.95%. In our view, the same appears to be reasonable rates also. Hence, we are of the view that there is no reason to reject the explanation of the assessee that the same actually represents funding transactions. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this addition. Disallowance of loss arising from security transaction entered with Maruti Udyog Ltd. - Held that:- the interest calculated at 12% p.a. on the above said transaction may be accepted and the same would meet the ends of justice also. Accordingly, the interest computed at 12% p.a. for a period of 13 days on the amount of ₹ 15.30 crores works out to ₹ 6,63,300/-. Accordingly, we are of the above that the above said amount of ₹ 6,63,300/- may be allowed in the place of ₹ 16,95,247/- claimed by the assessee. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to allow the amount of ₹ 6,63,300/- against the claim of ₹ 16,95,427/- made by the assessee. We also notice that the above said loss claimed by the assessee also forms part of disallowance of ₹ 1,08,41,926/- relating to Ready forward transactions. Hence the disallowance of ₹ 16,95,427/- results in double disallowance. Since we have deleted the above said disallowance of ₹ 1,08,41,926/-, there was a need to adjudicate the disallowance of ₹ 16,95,427/- separately. Addition of Negative balance of securities - Held that:- We notice that the assessee has offered explanations in respect of the items that were pointed out by the AO. In respect of remaining items, no details were furnished to the assessee, since the workings were not given by the AO and hence there was no occasion for the assessee to furnish any explanation. We have noticed earlier that the tax authorities have not examined these explanations and proved the same to be false. In the absence of any contradiction, we are of the view that the explanations offered by the assessee should be accepted. We have also noticed that the assessee also makes short sales and it is submitted that this is also a prevalent commercial practice. Hence, what is required to be seen is that the short sale was ultimately covered up or not. In our view, the claim of short sale could very well be examined by the AO during the course of assessment proceedings, which he has failed to do so. Disallowance of loss arising in the security transactions entered with Oswal Agro Ltd. - Held that:- Out of the aggregate amount of about ₹ 90 crores, the assessee submits that he has received about ₹ 72 crores by way of securities, wherein there is no question of diversion. In respect of remaining funds also, the same has been received through the bank account of the assessee and, in the absence of specific finding about diversion, it would get mixed up with the business funds and accordingly it should be presumed that the same has been used for the purposes of business of the assessee. In that view of the matter, the excess payment of ₹ 12,56,943/- would partake the character of interest only, which the assessee is entitled to claim. The assessee has also pointed out that he has made a profit of ₹ 12,56,943/- in respect of securities transactions entered with M/s Oswal Agro. In view of the above, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this disallowance. Disallowance of loss arising in the security transaction entered with Ganesh Book Binding Works - Held that:- Admittedly, the assessee could not prove the genuineness of the transactions entered with Ganesh Book Binding Works. Since the assessee has asked for cross examination of the witness after expiry of 14 years, it may not be feasible for the assessing officer to provide the same after expiry of such a long period. However, the fact remains that the assessee could not substantiate the transactions entered with Ganesh Book binding works. On the contrary, the AO has proved that the said transactions are not genuine. Hence we are of the view that the Ld CIT(A) was justified in confirming this addition. Claim of loss in trading in shares, which was debited to the Brokerage Account - Held that:- When the AO is accepting the profit making transactions, there is no reason to isolate the loss making transactions and disallow the same. With regard to the loss of ₹ 1,13,231/- pointed out by the auditors are concerned, we have noticed in AY 1988-89 that the Patawat sheets contain transactions entered throughout the month and hence it was not correct to presume that the purchase and sale has taken place on the last day of month. Further the contention of the assessee is that these transactions have been routed through bank account. Hence there is no reason to make such kind of presumption and hence the disallowance of ₹ 1,13,231/- is not justified. Accordingly, we set aside the order passed by Ld CIT(A) on the above said issues and direct the AO to delete the disallowances. Disallowance on ground that the same has resulted in reduction of brokerage - Held that:- We notice that the auditors have only given the list of reduction in brokerage account. The assessee has explained that the same represents loss incurred in the share trading. We notice that the AO has rejected the explanation without even examining the same. The contention of the assessee is that both profit and loss arising in share trading were also accounted in brokerage account only. Since there is no material to contradict explanations given by the assessee, we are of the view that there is no justification in rejecting the same. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this disallowance. Disallowance of loss booked in BCD Share trading Account - Held that:- We have noticed earlier while disposing the appeals of the assessee for earlier years that the Patawat Sheets is only summary of transactions entered during the month and the same were prepared at the end of the month. Hence, even though the transactions appear to have been entered on the last day of month, the fact remains that they would have been entered on different days in that month. Further, it was not shown by AO that these transactions are not regular business transactions, i.e., it was extra ordinary one. Accordingly we are of the view that there is no justification in making addition of remaining amount of loss Addition of difference in closing stock - Held that:- The fact that the second stock statement is “not dated” has been accepted by the AO. He has given importance to the same only for the reason that some of the shares mentioned therein tallied with the original stock statement. However, no step was taken by the AO to ascertain as to whether the extra shares noted in the second list were, in fact, purchased by the assessee. The AO could have ascertained the same from the Securities register available with him. Since the second statement was not dated, the AO has presumed the same to be of 31.3.1990 without any basis. Accordingly the impugned addition has also been made on surmises and conjectures. Accordingly, we find no merit in this addition Disallowance of loss on sale of shares to CIFCO Ltd. - Held that:- The possibility of stage managing the loss by the transactions entered with the sister concern cannot be ruled out. Though the assessee claims that these transactions have been entered in the normal course of business, yet the fact that the assessee was incurring loss on every occasion is not understandable. The assessment of profits in the hands of sister concern, in our view, will not take away the responsibility of the assessee to prove the genuineness of these transactions. In the absence of anything to prove their genuineness, we are of the view that the Ld CIT(A) was justified in confirming the addition made by the AO by disallowing the loss incurred on security transactions entered with CIFCO Ltd. Unexplained Cash deposit - Held that:- It is not clear as to whether the assessee has spent away all the withdrawals. In respect of deposit of ₹ 50,000/- made on 11.07.1989, there was no prior withdrawals and hence the same should be considered as unexplained deposit. With regard to the withdrawals aggregating to ₹ 5,00,000/- made between 15.11.1989 to 14.12.1989, we are of the view that the assessee may be given credit of 50% of the same, since the claims of both the parties are not supported by the any evidence. Accordingly, we are of the view that the assessee may be given further relief of ₹ 2,50,000/-. Accordingly, we modify the order passed by Ld CIT(A) and direct the AO to confirm the addition on this issue to the extent of ₹ 2,50,000/-. Disallowance of loss incurred in the security transaction entered with Milan Mahindra - Held that:- The transactions entered with unrelated parties and also through banking channels may not be doubted with, unless due enquiries were carried out to ascertain the non-genuineness of transactions. Undoubtedly, no such enquiry or investigation was carried out by the AO either in the original assessment proceedings or in the set aside proceedings. Accordingly we do not find any merit in this addition also. Disallowance of loss incurred in share transactions - Held that:- In any case, the transactions have been entered through banking channels and both these parties are not related parties. We further notice that the explanations of the assessee that the same were funding transactions have been rejected by the tax authorities without examining the corresponding parties or the gamut of whole transactions. Hence, we are of the view that there is no reason to suspect these transactions, merely on the reasoning that the assessee has incurred loss in these transactions. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this addition.
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Customs
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2017 (3) TMI 1121
100% EOU - remission of duty - denial on the ground that the appellant has failed to take steps to safeguard the capital goods, and materials procured without payment of duty for use in the 100% EOU - demand of duty on inputs, finished goods and capital goods destroyed - Held that: - the District Fire Officer, Pithampur, has certified, vide his certificate dated 13.03.2010 that adequate firefighting equipment and provisions of sufficient water was available with the appellant and sufficient efforts were made to put off the fire by the company. Accordingly, the fire department has certified that there is no foul play and that the fire has due to reasons beyond the control of the appellants. This establishes the fact that the fire was nothing but an unfortunate accident - reliance was placed in the case of Sumit Chemicals Pvt. Ltd. Vs. Commissioner of C. Ex., Kanpur [2015 (12) TMI 1594 - CESTAT ALLAHABAD] - this is a fit case for grant of remission under both Central Excise as well as Custom provisions. Once remission is granted for Excise and Customs duties in respect of goods destroyed in the fire accident, there will be no justification for the demands made in the impugned order. Appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1119
Benefit of exemption N/N. 25/2005-Cus dated 1st March 2005 - denial on the ground that the importer did not have the facility for conversion of the copper cathode to wires - the imports are subject to the condition that the procedure laid down in the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Goods) Rules 1996 is complied with. The contention of the Learned Counsel is that the rules do not restrict the entire activity to the importer’s factory and that there is no bar on use of other premises for manufacture of the goods which ultimately gets used in the production of export goods - Held that: - the benefit of notification cannot be denied merely on the ground that the importer does not possess the facility to manufacture or that there is some apprehension that the importer may not be able to comply with the conditions laid down in the Rules. That is not contemplated in law and the denial of benefit is without merit - reliance was placed in the case of TAMIL TRADING CORPORATION Versus COMMISSIONER OF C. EX., TUTICORIN [2005 (12) TMI 163 - CESTAT, CHENNAI] - benefit allowed - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1118
Imposition of penalty u/s 112(b) of the CA, 1962 - alleged involvement in enabling the unit to file bill of entry through an agent at Mumbai in the absence of their own licence which appear to have been cancelled - whether the penalty rightly imposed u/s 112 in view of the facts and circumstances of the case? - Held that: - There is no evidence that the goods which have been confiscated were from either of these consignments and, that too, connected remotely with the appellant - In the absence of evidence of direct knowledge of misuse of the goods after importation, the invoking of section 112 of the CA, 1962, which is applicable only to such goods as are held liable to confiscation, is questionable - appeal allowed - decided in favor of appellant-CHA.
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2017 (3) TMI 1117
Rejection of refund claim - primary ground of rejection was circular no. 24/2004-Cus dated 18th March 2004 of the Central Board of Excise & Customs which directed refund sanctioning authorities to entertain claims only if assessments had been challenged and order obtained from an appellate authority in favour of assessee - Held that: - it is required to be ascertained if the appellant had claimed the benefit of the exemption notification and that was denied with conscious deliberation or if such excess duty was collected by system error - Again, it requires to be ascertained if the exemption was conditional or unconditional and, if the former, whether the denial was a consequence of non-compliance with such condition. It is the bounden obligation of the state to extend the benefit of an unconditional exemption to arrive at the effective rate of duty and failure to do so is a systemic error that has naught to do with assessment. The interests of justice is best served by restoring the claim to the original authority who will give all these aspects due consideration and come to a reasoned finding - appeal allowed by way of remand.
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2017 (3) TMI 1116
Benefit of N/N. 21/2002-Cus - import of wires of nickel alloy - partial exemption - denial on the ground that the said serial No.438 covered articles of nickel while the wires imported by the appellant were articles of nickel alloy - Held that: - it is undisputed that the appellant had imported a consignment of wires made of nickel alloy. We find from the tariff that Chapter Heading 7505 talks about nickel bars, rods, profiles and wire and Chapter Heading 7505 2200 talks about wires of nickel alloys. Undisputedly, the nickel alloy is an item arising out of nickel and other metals which would mean that presence of nickel is not disputed - In the absence of any other evidence to show that wires of nickel alloys are not made out of nickel, the benefit of notification cannot be denied - appeal allowed - decided in favor of appellant-assessee.
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2017 (3) TMI 1115
Valuation - enhancement of value - related party transaction - Held that: - first appellate authority has made a finding that there is no payment on account of royalty/technical knowhow fees. The appellants are involved in manufacture of final products using the imported items. The pricing of the same is taken on the basis of cost of production/purchase plus 10% markup. The same appears to be reasonable - Revenue is not contesting the factual findings recorded by the first appellate authority. In the absence of any serious contest to the factual findings as recorded by the first appellate authority, we do not find any merits in the appeal filed by the Revenue - appeal rejected - decided against Revenue.
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2017 (3) TMI 1114
Valutaion - licence fee - inclusion of licence fee in assessable value - confiscation - redemption fine - penalty - quantum of redemption fine and penalty proper or not? Held that: - the impugned order has imposed a redemption fine of approximately 20% and penalty of 15% of the re-determined assessable value - The redemption fine imposed is correct - the penalty imposed seems to be excessive. In the interest of justice, the penalty reduced from ₹ 4 lakhs to ₹ 1 lakh - appeal disposed off - decided partly in favor of appellant.
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2017 (3) TMI 1113
Detention of gold with vehicle - seizure of gold during movement - whether smuggled / imported gold or locally procured - gold was being transported by the appellant from the Delhi branch to their Agra Branch - Held that: - law requires such person as in this case, the appellant to discharge the onus as regards the licit purchase and acquisition of the specified item or gold u/s 123 of CA - It is admitted fact that the appellant have produced tax invoice in support of purchase of the gold in question from another dealer who is also duly registered with the trade tax and other authorities, and it is also further fact on record that payment for the purchase was made through the banking channel RTGS. It is further evident from the records that the said gold was being transported by the appellant from the Delhi branch to their Agra Branch and proper Challan had been issued, as well as road permits/waybill which was pre-authenticated by the Sales Tax Department and the appellant is required to maintain proper records of usage of such road permits and account for the same before the Trade Tax authorities. I hold under the facts and circumstances, the appellant have discharged their onus as required u/s 123 (1) and (2) of the CA. I further hold that Section 123 of the CA requires to explain the licit source of acquisition and not source of source. Accordingly, I find that the impugned order is untenable being erroneous. Gold to be returned - confiscation with penalty set aside - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1112
Duty exemption entitlement scheme - violation of condition of licence - demand of duty and penalty - Held that: - respondent had procured the advance licence after the export obligation had been fulfilled by the original holder and utilised it for import of goods free of duty. It would appear that the original holder exported goods using domestically procured inputs and transferred the unutilised portion to respondent - respondent was neither the manufacturer nor the exporter, the manner in which export obligation was fulfilled, and more particularly, the compliance with conditions thereof, would, in the normal course be not within their knowledge. It would appear that review order has been finalized based on surmises and assumptions that such credit had been availed on the inputs without any evidence of it being placed before the reviewing authority - demand set aside - appeal dismissed - decided against Appellant-Revenue.
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Corporate Laws
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2017 (3) TMI 1109
Lifting of corporate veil - Held that:- The court is of opinion that the learned Single Judge, in lifting the corporate veil, to discern the real involvement of individuals who set up a network of corporate entities to evade their liabilities and also to dupe the innocent public, cannot be faulted. In the present case, the lifting of ARD and Yusuf’s corporate veil was justified and warranted. Given that V.K. Sharma and Anita Sharma had shareholding in Yusuf to the extent of 97% (and Anita Sharma also had corporatized ARD after the liabilities arose) the SFIO’s report was correctly appreciated in the impugned order. As far as D.K. Warehouse goes, it is significant to note that the application filed by Yusuf did not mention about an agreement to sell with it at all. Furthermore, the agreement is unregistered. It was entered into after the auction sale. There is nothing mentioned in the application to say that DK Warehousing had not inspected the properties, which had been attached, or that it had no notice of the court auction. In these circumstances, the court is of opinion that the learned Single Judge’s conclusion that its claim to have purchased the property in a bona fide manner, after the auction sale, is without foundation.
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2017 (3) TMI 1108
Mppression and mismanagement - Maintainability of petition - members / petitioners holding less than l/10th of the Issued - Held that:- As no change or new concept was brought in Section 244 of the 2013 Act. Indeed, the old Section of law is in toto bodily lifted from Section 399 to Section 244, change is there to the extent of sub-section (4) in Section 399 to a proviso to sub-section (1) of Section 244, as to the phrase 'issued share capital' or as to its rigors no change has come, indeed, the word 'namely' has been introduced. For further confirmation that qualification is limited to the 'members' mentioned in the Section, not to others, thereby the ratio decided in Northern Projects (2008 (4) TMI 505 - HIGH COURT OF BOMBAY ) is still relevant and makes it not open to the Petitioners to say that 'issued share capital' means 'issued equity share capital'. That the phrase 'class of members' mentioned in the mismanagement clause in Section 241 cannot be said as percentage of shareholding for qualification is to be counted within the 'class of members', over this aspect, we have elaborately discussed and said that the member complaining can as well fight for the cause of 'class of members' if mismanagement is qua against a 'class of members'. But, it cannot be read that a 'class of members' themselves have to be treated separately attaining qualification u/s 244. It is only an additional relief that a member qualified u/s 244 can ask for relief. We already said that the addition of 'class of members' is inconsequential to the qualification mentioned u/s 244. When the legislature has taken every care in creating rights on class basis, had the legislature intended to introduce class concept, they would have introduced the same in Section 244 as well. But that has not been done. Therefore, there is no point in the argument of Petitioners saying that 'members' mentioned in Section 244 has to be read as 'class of members'. That we do not find any merit in the argument of the Petitioners' Counsel saying that since the redeemable preference shareholding be shown as debt in the Accounting Treatment, preference shareholding cannot be equated with the equity shareholding to invoke Section 244, because showing in Accounting Treatment for the convenience of Accounting Treatment will neither change the concepts of Company Law nor have any bearing on the mandate of the Statute. That we do not find any merit in the argument of the Petitioners' Counsel saying that by introduction of waiver clause, Section 244(1)(a) has become directory, because by making waiver clause as an exception to 244(1)(a), the qualification clause has become further strong for two reasons - one, by introduction of word 'namely', it has become a third reiteration in respect to qualification and (2) by introduction of waiver clause as proviso, that unconditional authorisation available the old Act to the Central Government has been made as a discretionary relief u/s 241(1)(a). There is neither a context in Section 244 in respect to 'class of members' nor in complaint/application/cause of action Section 241, it is only inclusion of class of members giving a window to the complainant to canvass for the grievance of class of members as well, not more than that. Therefore, the meaning of the definitions enumerated in Section-2 will remain applicable; the meanings cannot be taken otherwise unless an explicit or implicit context comes into play saying that particular word's meaning is very much different from the meaning given in the definition. Therefore, we do not find any merit in the argument of R11's Counsel. Petitioners' side has failed to satisfy this Bench that this Petition is maintainable.
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PMLA
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2017 (3) TMI 1107
Money laundering - order of provisional attachment - Held that:- Provisional order of attachment has also been made absolute and it is the submission of the learned Senior Counsel appearing for the petitioner that the immovable property has also been mortgaged with M/s.Vijaya Bank, Mount Road, Chennai. The learned Senior Counsel appearing for the petitioner, on instructions, would submit that the petitioner will not further encumber or alienate or create any third party right in respect of the immovable property, which is the subject matter of attachment and the said submission, on instructions, is placed on record. In the light of the fact that petition for stay has been posted on 18.04.2017 by the first respondent and taking into consideration the averment made by the petitioner in para 11 of the affidavit that he is suffering from paralysis and coronary artery disease and living with stunt in the heart and is still under treatment to cure his paralysis and that he along with his family are residing in the premises in question, this Court is of the view that till 18.04.2017 further proceedings in pursuant to the impugned notice of eviction dated 28.02.2017 in F.No.ECIR/09/CEZO/2012 passed by the third respondent is to be deferred. Though the petitioner prays for larger relief, this Court, in the light of the above facts and circumstances and without going into the merits of the claim projected by the petitioner, directs the third respondent to defer further proceedings in pursuant to the impugned notice of eviction dated 28.02.2017 in F.No.ECIR/09/CEZO/2012 till 18.04.2017 i.e., till the date of hearing of the stay petition before the first respondent/Appellate Tribunal.
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Service Tax
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2017 (3) TMI 1159
Bill printing service to telecom companies - whether business auxiliary service or not? - Held that: - The appellant/assessee in the present case is not involved in any calculation of quantification of the bill amount, details to be presented in the bill and regarding correctness of the said details in the bill. In other words, the appellant/assessee is not responsible for any details in the bill or authenticity of the same. They are simply printings in a preformatted design the telephone bills based on the data provided by the telecom company and give the printed bills in envelops, after bunching in convenient groups, for further follow up by the telecom companies - such activity cannot be considered as business auxiliary service One more point to note is, that sub-clause (vii) talks about incidental or auxiliary service to any one of the activity in sub-clauses (i) to (vi). These sub-clauses talk about promotion or marketing of service provided by the client or customer care service provided on behalf of the client, provision of service on behalf of the client - the appellant/assessee is nowhere connected with promotion of service or provision of service on behalf of the telecom companies. Appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1158
Imposition of penalty u/s 76, 77 and 78 of the Act - invocation of section 80 - Bonafide belief in non-payment of tax - Held that: - non-payment of service tax in time cannot be construed as on account of willful default, but it was advised by their Chartered Accountant, after analyzing the law that service tax may not be applicable to the appellant as they were neither a corporate entity nor in the list of Register of Architects maintained u/s 23 of the Architects Act, 1972 - later being directed by the Department, in September 2002 the appellants discharged the entire service tax along with interest - there was a bona fide belief harboured by the appellant in not discharging the service tax during the relevant period - fit case for invocation of Section 80 of the FA, 1994 - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1157
Demand of service tax - The department was of the view that the respondent is liable to pay service tax on account of four contracts - Held that: - it appears that the respondent was regularly filing ST-3 returns and wherever the tax was collected, the same was deposited honestly - The classification of a taxable service is determined, based on the nature of service provided and that too the predominant part of the service if it comprises of multiple activities that could individually be discerned of having a taxable nature - appeal dismissed - decided against Revenue.
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2017 (3) TMI 1156
Taxability of excess amount collected in the name of reimbursement - “over and above” amount - Rule 5(2) of the Service Tax (Determination of Value Rules), 2006 - whether the amount collected from the client other than the commission and brokerage is taxable or not? - Held that: - the amendment came in the Service Tax Determination of Valuation Rules, 2006 w.e.f. 18.4.2006. Prior to it, the appellant is entitled for the benefit but the same was not provided by the lower authority. However, post period to 18.4.2006, the appellant is liable to pay the service tax on the “over and above” amount collected from the clients but not deposited to the Govt. exchequer - for the period prior to 18.4.2006, the lower authority has not given the credit to the appellant for which the appellant is entitled. Hence, we modify the impugned order and allow the benefit prior to the period 18.4.2006. For the post period, we confirm the order of the lower authority - appeal disposed off - decided partly in favor of appellant.
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2017 (3) TMI 1155
GTA service - reverse charge mechanism - whether the appellant, being a limited company, is required to discharge service tax liability for the period 01.01.2005 to 31.12.2009 in respect of amounts paid by them to two transport companies for movement of material i.e. clinker from their own jetty to the cement manufacturing premises? - Held that: - consignment note should have specific particulars, the provisions of Section 65(50b) talks about the issuance of the consignment note - consignment note is misplaced as in this case the transporting companies have only raised invoices for transportation of cement clinkers as per the contract which did not satisfy the requirement of the consignment note and the responsibility cast for issuing the consignment note is not met to hold that Goods Transport Agency Services are rendered - demand set aside - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1154
Cargo handling services - unloading of trucks/trailers, stacking them in godown and loading of trucks against delivery challans, maintaining all the records/ registers, formats and submission of daily/ periodical reports in respect of dumps of M/s Binani Cement Limited - whether the services rendered are to be treated as C&F agent service or cargo handling service? - Held that: - the issue is covered in favor of the appellant as per the ratio laid-down in the case of Narottam & Company vs. CCE, Jaipur [2013 (8) TMI 291 - CESTAT NEW DELHI] where it was observed that the appellant only providing the labour for loading of cement at the rail heads, loading into the trucks for transportation to the storage godown of M/s Binani Cement and thereafter unloading at the godown and its stacking and thereafter arranging the dispatch of the cement as per the directions of M/s Binani Cement, that they also maintained a record of the receipt and dispatch, that the activity of the appellant is only of forwarding and not clearing and forwarding and, hence, the same is not taxable - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1153
Classification of services - BAS or C&F - sale of cement by working under the cover of purchase invoices - classified under Business Auxiliary Service - demand raised by Revenue by classifying the service under clearing and forwarding agent service u/s 73(1) of the FA, 1994 - Held that: - Whatever distribution is made by the appellant for that the collective responsibility lies with the appellant. But facts remains that when the principal has taken a responsibility for safe custody, transportation, damage, demurrage, rent and theft of the cement then certainly, the substantial ownership lies with the principal. When it is so then we find no reason to interfere with the impugned order where the demand is rightly raised u/s 73(1) of the FA, 1994 - appeal dismissed - decided against appellant.
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Central Excise
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2017 (3) TMI 1152
MODVAT credit - rectified spirit - quantification of credit - Held that: - the respondent assessee is entitled to claim Modvat credit on the levy molasses only upto the extent of 8% of the value of rectified spirit being cleared for manufacture - credit allowed - appeal dismissed - decided against Revenue.
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2017 (3) TMI 1151
Unutilized Cenvat Credit - refund in cash - denial on the ground that refund cannot be allowed in cash even in a situation where at the time of grant of refund the unit is either totally closed or it is not in a position to utilize the CENVAT credit for any reason - whether the Appellants are entitled for refund amount in cash instead of credit in their CENVAT account, as directed by the learned Commissioner (Appeals)? - Held that: - the issue has been considered at length by the Larger Bench in the case of Steel Strips Versus Commissioner of Central Excise, Ludhiana [2011 (5) TMI 111 - CESTAT, NEW DELHI], where it was held that Law has only recognized the event of export of goods for refund of Modvat credit, as has been rightly pleaded by revenue and present reference is neither the case of "otherwise due" of the refund nor the case of exported goods. Similarly, absence of express grant in statute does not imply ipso facto entitlement to refund - From the aforesaid observation of the Larger Bench, it is very much clear that the refund cannot be allowed in cash - impugned order upheld - refund rightly rejected - appeal dismissed - decided against appellant.
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2017 (3) TMI 1150
Valuation - freight charges - demand was confirmed only on the ground that the sales depot of the appellant is the place of removal - Held that: - From the combined reading of definition of place of removal and Rule 5 of Central Excise Valuation Rules, 2000, it is clear that in the transaction value in terms of Section 4 (1) (a), the transportation from the place of removal upto the place of delivery of such excisable goods is excludable from the transaction value - At the relevant time, the place of removal was only factory gate or warehouse or any other place or premises wherein the excisable goods have been permitted to be deposited without payment of duty from where such goods were removed. As per the said definition the depot or branch of assessee was not place of removal. Therefore, the factory gate is only the place of removal in the present case. If this is so, then transportation charges collected from the customers for transportation of goods from the factory gate upto the place of customer is not includable in the assessable value - demand set aside - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1149
Clandestine removal - excesses and shortages of stock - demand - Held that: - the lower authorities have gone by the sole fact of detection by the sales tax officers. There is no independent investigation by the Central Excise officers leading to the fact of clandestine manufacture and the removal of the final product - Their being no independent evidence produced by the Revenue worthy of reliance, I find no merits in the Revenues findings of clandestine manufacture. CENVAT credit - duty paying documents - Held that: - denial of credit on the basis of certain discrepancies in the invoices especially when the Revenue is not disputing the receipt of inputs and their duty paid character, cannot be upheld - In any case the appellant have also got the defects removed and have rectified the defects in which case the procedural lapse if any, have also been smoothened. Appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1148
Imposition of penalty u/r 26 of CER, 2002 on transporter - contraband items - appellants claim that they have neither transported the goods nor dealt with the same nor had any knowledge or reasons to believe that the goods which were in sealed packages were contraband goods - Held that: - the Revenue failed to produce evidence on record to show that the appellant was aware of the contents of the bags recovered from their premises or non-duty paid character of the same - in the case of Vijay Transport Co. Ltd. vs. CCE Daman [2008 (5) TMI 530 - CESTAT, AHMEDABAD], Tribunal has observed that transporter can not be expected to be the expert of Central Excise laws to find out before transporting the goods as to whether the manufacturer has correctly discharged the duty burden or not - penalty set aside - appeal allowed - decided in favor of assessee.
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2017 (3) TMI 1147
Abatement of duty - manufacture of Gutkha - closure of the production activity - denial on the ground that on the ground that the Revenue authorities has not sealed each packing machine - Held that: - Holistic reading of both the rules i.e. 6(5) & 10 of the Rules does not indicate that each and every machine has to be sealed by the authorities. The total mandate of the said rules is that abatement from the payment of duty should be granted to an assessee, only if there is non-production of gutka/ pan masala in the factory for a specified period - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1146
Refund claim - utilisation of the exempted goods in the manufacture of the final products which have been exported - denial on the ground that since the goods were exempted as on 1-3-2002 refund claim is not maintainable - Whether the appellant is liable to reverse/pay Cenvat Credit on the inputs already used in the manufacture of final product when it was dutiable but lying in stock as on 1-3-2002 when final product became exempted? - Held that: - issue has been settled in the larger judgment in case of Ashok Iron [2002 (1) TMI 91 - CEGAT, NEW DELHI] that Cenvat credit in respect of input contained in the final product lying in stock as on date when final product became exempted, no Cenvat credit is required to be reversed on the ground that at the time of taking credit the input used in the manufacture of final product which was dutiable. Whether the appellant is required to reverse the Cenvat credit on the input lying in stock as on 1-3-2002 but subsequently used in the manufacture of final product which was cleared for export under bond/undertaking? - Held that: - the credit on such input is admissible to the appellant in terms of Rule 6 of CCR, 2004 - reliance was placed in the case of Godrej Food Vs. CCE [2016 (10) TMI 759 - CESTAT MUMBAI] - appellant is not required to reverse/pay the Cenvat amount attributed to the input contained in finished goods lying in stock as on 1-3-2002 as well as on the input lying in stock as on 1-3-2002 but used in the manufacture and clearances of export goods. Appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1145
Personal Penalty - scope of rule 15 of CCR, 2004 - whether personal penalty on the appellants who were at the relevant time employees of company, is sustainable u/r 15 of CCR, 2004? - Held that: - A plain reading of the Rule 15 of CCR, 2004, reveals that it consists of five sub-rules for different situations and none of these sub-rules directs imposition of personal penalty on the employees of an erring assessee under the said rule - It is a settle principles of law that penal provisions need strict interpretation and a person could only be able to defend his case only when the particular provision under which he is proposed to be penalized, is mentioned in the notice itself - penalty set aside - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1144
EOU unit - clearance of processed goods i.e Marble slabs in Domestic Tariff Area - undervaluation - demand - Held that: - the demand has been raised mainly on the basis of DGFT circular fixing the minimum import price of the imported Marble Blocks. However, there is no evidence of any manipulation in transaction value changed by the Appellant to their buyers. The sale has been made to the independent buyers and the price is the sole consideration of sale - There is no investigation/ findings that the importer has paid the amount equal to minimum import price to the seller of the Marble blocks. The application of Rule 8 of the Valuation rules by reckoning the Minimum Import Price as the base price is not an approved method under the Customs law and the valuation arrived at by this method is not correct - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1143
Govt. of India undertaking - job-work - The case of the department is that as per the Rule 12B in CER, 2002 w.e.f 1-4-2003 the appellant being raw material supplier is required to pay duty on the goods manufactured on job work basis by independent job worker on behalf of the appellant - Held that: - as regard the goods falling under Chapter 62 there was statutory provisions u/r 4 of CER, 2001 that in case of job work principle raw material supplier is required to pay the duty. This provision was effected from 1-3-2001, Accordingly demand pertains to the period October, 2002 to March, 2003 on the goods of chapter 62 is correct and recoverable - as regard the penalty, the appellant being government of India undertaking and issue involved being interpretation of the law in respect of special provisions only in respect of textile articles, we do not find any malafide on the part of the appellant, we therefore set aside penalty imposed u/s 11AC corresponding to the demand of ₹ 67,616/- As regard the demand in respect of goods of Chapter 63 for the period October, 1999 to March, 2003, the lower authority was of the view that appellant had control over the job worker, hence the demand is recoverable from the appellant - is demand justified? - Held that: - arrangement of job work is always the same as when the job worker carry out the job work the principle supplier of raw material is always concern about brand name, quality of the goods and timely supply but this facts are not sufficient to show that the appellant is controlling the job worker. Therefore reason for demanding the duty from the appellant given by the lower authorities is absolutely incorrect and without authority of law. - demand set aside. Appeal allowed - decided partly in favor of appellant.
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2017 (3) TMI 1142
CENVAT credit - duty paying documents - Held that: - the said CENVAT credit availed on the invoices of M/s Reliance Communications cannot be denied to appellant only on the ground that the said invoices do not indicate the name of the appellant herein - The lower authorities have not denied the fact that the invoices are in the name of head office of the appellant. If that be so, CENVAT credit cannot be denied on the said invoices. As regards the invoices of M/s Inter-Arch Builders, the bill is for differential amount without indicating anything as to the service tax registration number, invoice number, etc. and is without any proper details as to what for the differential amount has been paid. In the absence of any such details, the CENVAT credit of ₹ 48,072/- is correctly denied to the appellant - Same findings are applicable to the other amount on which CENVAT credit of ₹ 14,688/- has been denied - interest upheld - penalty set aside. Appeal disposed off - decided partly in favor of appellant.
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2017 (3) TMI 1141
Clandestine removal - natural justice - Held that: - It appears that Revenue has made out a case based on statements and circumstances that appellant-assessee routed clearances through another unit to evade duty - The appellant is aggrieved that a number of documents furnished to substantiate their defence have been peremptorily discarded in the proceedings before the lower authorities. Further, the key issue here is the defence of the appellant-assessee that they did manufacture compact fluorescent lamps for M/s Bajaj Electricals Ltd. No effort appears to have been made to ascertain the terms of the agreement of supply with M/s Bajaj Electricals Ltd which would conclusively establish whether the manufacturing took place at premises of M/s Solar Copier Pvt Ltd. This is required to be undertaken - appeal allowed by way of remand.
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2017 (3) TMI 1140
Education Cess - Bidi cess is leviable u/s 3 of the “Beedi Workers Welfare Cess Act, 1976” - whether education and higher education cess can be computed on Bidi cess - Held that: - Education cess (EC) and Secondary Higher Education Cess (SHEC) cannot be computed on the Cesses, which are levied under the Acts administered by the Departments/Ministries other than the Ministry of Finance (Department of Revenue), though the same are collected by the Department of Revenue as per provisions of those Acts - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1139
CENVAT credit - Outdoor Catering Service (Canteen Service) - services for shifting of the machineries at Chennai - interest - penalty - extended period of limitation - Held that: - credit on service tax paid on services for shifting of the machineries at Chennai, is rightly denied and accordingly its recovery with interest and penalty confirmed by the authorities below is upheld - they are eligible to avail the benefit of discharging 25% of the penalty. With regard to the liability to the CENVAT credit on Outdoor Catering Service (Canteen Service), the principle is well settled by the Hon’ble Bombay High Court in the case of CCE, Nagpur vs. Ultratech Cements Ltd. [2010 (10) TMI 13 - BOMBAY HIGH COURT], where it was held that all services used in relation to the business of manufacturing the final product are covered under the definition of `input service' and in the present case, the outdoor catering services being integrally connected with the business of the manufacture of cement, credit of service tax paid out on catering services has been rightly allowed - to ascertain the amount recovered in providing the said service from the employees and reversal of the proportionate credit, the matter is remanded to the Adjudicating Authority. Appeal allowed by way of remand.
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2017 (3) TMI 1138
Method of Valuation - transaction value u/s 4 or MRP based value u/s 4A - fuse base /fuse links - whether the fuse base /fuse links manufactured and cleared by the appellant without individual packing in bulk in cardboard cartons are covered by section 4A of the Central Excise Act, 1944 read with notification issued thereunder or not? - it is the contention of the appellant that the goods manufactured were packed in cardboard cartons solely to protect the same from the damage during transit and goods were made available to the buyers for inspection - validity of SCN. Held that: - the SCN has been issued to the appellant is factually on wrong facts. In the SCN, it is alleged that fuse base or fuse links are individually packed but on production of sample, we find that these are not individually packed at all but these are packed in bulk in a carton of 3, 6 or 10 fuse bases or 3, 10 or 15 pieces for the purpose of transportation. The goods are in wholesale packs as is evident from the samples placed on record and before us that the goods are not individually packed and the goods are to be sold by manufacturer to wholesaler in bulk enabling the wholesaler to sell /distribute or deliver such goods to the consumer in smaller quantity - As the goods cleared by the appellant to the wholesaler are in bulk, therefore we hold that the appellants are clearing the goods in wholesale packages - the provisions of section 4A of CEA are not applicable to the facts of the case in hand - the appellant has correctly valued their goods and paid the duty under section 4 of CEA, 1944 on transaction value. Appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1137
CENVAT credit - parallel flange beam/column used in the manufacture of crane, discharge, chute, crane, gantry, crane column etc - trailer truck - interest - Held that: - the appellant M/s Jindal Steel & Power Ltd. is entitled to Cenvat credit on the subject inputs as the same have been used for manufacturing of capital goods which in turn have been used for manufacture of final product (sponge iron and hot re-rolled products) by the appellant company. The subject inputs are covered by the definition of input as laid down in Rule 2 (k) of CCR, 2004 - credit allowed. Interest - Held that: - The appellant has taken Cenvat credit wrongly/ inadvertently or on account of clerical errors / short receipt of material etc. though the same was reversed later - considering the Hon’ble Supreme Court’s decision in the case of Ind-Swift Laboratories [2011 (2) TMI 6 - Supreme Court], the interest on the Cenvat credit amount for the period, when it was lying in the account of the assessee, is liable to be paid - the matter is remanded to the original adjudicating authority who shall decide the issue of amount of interest. Appeal allowed - part matter on remand for quantification - decided in favor of assessee.
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2017 (3) TMI 1136
CENVAT credit - capital goods shifted and relocated in another floor of same premises - whether the appellant are eligible to the cenvat Credit on Capital Goods installed during 2001 to 2009 in their factory premises? - Held that: - the appellant could be able to show and establish that all the capital goods were installed and used in the manufacture of finished goods. Merely because they could not produce the revised ground plan at the time of visit by the audit cannot lead to an inference that these capital goods were removed from the factory and not available - credit allowed - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1123
SSI exemption - CENVAT credit - whether the appellant opting for availment of SSI Exemption on 1ST April, 2006 is liable to reverse any cenvat credit under the admitted fact that there was nil credit or balance in the Cenvat credit account? - Held that: - Rule 11 (2) of CCR, 2004, requires reversal of only unutilized amount of credit lying, if any on the date of opting for SSI Exemption Scheme. The Rule provides for calculation of such amount of Cenvat credit in respect of inputs lying in stock on the date when such option is exercised and after deducting the said amount, the balance, if any, lying in his credit still shall lapse and shall not be allowed to be utilized - the appellant had nil balance in their Cenvat credit account no amount was required to be reversed - appeal allowed - decided in favor of assessee.
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2017 (3) TMI 1135
Confiscation - penalty - Allegation in the impugned order was that the imports had not been accompanied by a valid pre-shipment inspection certificate issued by the agencies - Held that: - The practical impossibility of obtaining a pre-shipment inspection certificate owing to the absence of the specific agency in the country of export would render this requirement lex non-cogit ad impossibilia. If such was the intention of the government, a ban would have been imposed on imports from all countries for which specified agency is not enumerated. That does not appear to be so. Considering this factual matrix the confiscation of the goods and the imposition of fine thereon would appear to be unjustified so to insofar as the penalties are concerned - appeal allowed - decided in favor of appellant-importer.
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2017 (3) TMI 1134
CENVAT credit - fabrication of support structures - Boiler Parts, Silo System, Boiler Radiation Hopper, Turbine Air Unit, EOT Crane, Hook Conveyor, Materials Handling System, Platform for kiln, coal drier, Stack Structure, cooling tower, Girth Gear, Kiln Gear Box, etc - denial on the ground that these items are neither inputs nor capital goods - Held that: - these items are essential for functioning of machines and its alignment - As the use of the items has been explained by the appellant, which shows that these items were used for fabrication of machinery parts. We find that the issue is covered by the decision of the Tribunal in the case of Singhal Enterprises Pvt. Limited vs. CCE, Raipur [2016 (9) TMI 682 - CESTAT NEW DELHI], where it was held that applying the “User Test” to the facts in hand, we have no hesitation in holding that the structural items used in the fabrication of support structures would fall within the ambit of ‘Capital Goods’ as contemplated under Rule 2(a) of the CCR, hence will be entitled to the Cenvat Credit - credit allowed - appeal allowed - decided in favor of assessee.
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2017 (3) TMI 1133
Benefit of N/N. 6/2006-CE dated 01.03.2006 - denial on the ground that manufacturing/replicating of CD ROM were not of Educational nature - Held that: - The Revenue has presumed that no-educational nature means ‘Video Games’ and consequently held that they are not covered by the N/N. 06/2006-CE dated 01.03.2006 - In the absence of any evidence on record that non-educational CD-ROMs containing journal, periodicals (magazines) or news paper are CD-ROMs of ‘Video Games’, the benefit of doubt goes to the assessee - benefit of notification allowed - demand set aside - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1132
Payment of excess duty wrongly - Adjustment of the accounts from Head of Account BED to Head of account SED - appellant claim that due to certain unintentional clerical errors in the preparation of TR6 challans there was excess payment of ₹ 12,07,516/- under the Head of account of BED on MS and short payment to the extent of ₹ 11,80,645/- under the Head of account of SED on MS and excess payment ₹ 17,643/- under the Head of account of AED on MS - Held that: - Both the duties are collected under Section 3 of the Central Excise Act. Different heads of account are but only administrative mechanisms for the purpose of proper accounting. It would be too harsh to not allow the prayer of the appellants merely on the ground that there are two duty heads of accounts for procedural purposes - the concerned authorities are directed to allow the adjustment prayed for by appellant after verification of the challans concerned - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1131
Valuation - supply of bought out items as parts of weigh bridge - The Revenue was of the view that inasmuch as all the parts and components of weigh bridge are being cleared by the appellant under the cover of one invoice, the same amounts to clearance of complete weigh bridge in SKD or CKD condition - Held that: - the appellants are paying duty on the parts cleared by them and are doing erection and commissioning at the site of the buyer. Therefore, appellants are not liable to pay duty on complete weigh bridge - Further, we find that the issue whether the appellant is liable to pay duty on complete weigh bridge or parts thereof was in dispute and it was held in favour of the appellant for the earlier period. Therefore, for the subsequent period, in that circumstances, extended period of limitation is not invokable - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1130
CENVAT credit - steel items namely angle, channel, beam, plate, flat, joists, HR steel etc. - denial on the ground that on the ground that the goods have been used for erection of plant fixed to earth, which cannot be considered as ‘goods’ - Held that: - Since, the disputed goods were used for manufacture/erection of the capital goods within the factory, the same should be considered as input for the purpose of taking Cenvat credit and immovability of the goods should not be a criteria for denial of Cenvat credit - credit allowed - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1129
Method of Valuation - transaction value u/s 4 or MRP based value u/s 4A - toothpastes in tubes branded as ‘Calcium Prudent’ - destined for distribution by the Canteen Stores Department (CSD) - institutional consumer or not - it was contended that goods not required to adhere to Standards of Weights & Measures (Packaged Commodity Rules), 1977, have the ‘retail selling price’ affixed on the packing - Held that: - The Canteen Stores Department (CSD) is wing of the Ministry of Defence. It is a presidential artifice which is assigned to that Ministry in The Government of India (Allocation of Business) Rules, 1961. The organization service officers and staff of the armed forces of the Union and the canteens are locations of storage and display from which the officers and staff procure articles that they require. Though it may have the looks of a shop, it is more of a store. Being an in-house procurement agency, it would not admit to enforcement under the statute relating to legal metrology. A ‘maximum retail price’ is affixed on the impugned package does not, of itself, render the goods liable to comply with the provisions of the law relating to ‘maximum retail price’ - whether that of legal metrology or of levy of excise duty. It is the requirement of compliance with the Standard of Weights & Measures (Packaged Commodity) Rules, 1977 that does. With the exclusion of institutional buyer from the ambit of the Rules, the affixing of retail sale price is not mandated on the impugned goods when cleared - The intent of the appellant is thus, unambiguously, clear, i.e., it is not for retail sale. Consequently, it is the value determined under section 4 of CEA, 1944 that will determine the basis for computation of duty liability - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1128
Benefit of N/N. 6/2002-CE dated 1st March 2002 - clearances of ‘seamless steel tubes’, ‘hot finished seamless pipes’ and ‘tubes of steel’ to M/s Balrampur Chini Mills Ltd which are utilised by the latter for manufacture of ‘non-conventional energy devices’ - Held that: - the duty liability was exempt, on the basis of certificate of eligibility as end user, to concessional rate of duty for the goods cleared by the appellant to M/s Balrampur Chini Mills Ltd. It was on the strength of the certification issued to user that the goods were removed without payment of duty - the person entitled to the exemption is permitted availment of the exemption while the manufacturer is held liable for duty. It is only by disallowance of the entitlement that the appellant can be held liable to duty on the goods cleared by them - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1127
Valuation - Glass Fibre Reinforced Plastic (GRP) Pipes and fittings - composite contract - inclusion of freight in assessable value - adoption of deductive value - clearance to own site - Held that: - in case of Composite contract where the Appellant arrived at the assessable value in terms of Rule 8 of Central Excise Valuation Rules, the freight element is not includible in assessable value and the demands are not sustainable - Further in case of composite contracts where the assessable value of the goods was arrived at in terms of deduction method, the freight element shall be included in the assessable value. However in this case since the goods were cleared to own site of the Appellants, if the assessable value so arrived is more than the value arrived at in terms of Rule 8 of Valuation Rules, the excess demand shall not be made. Where the goods were cleared to independent buyers but were subjected to the inspection at the Appellant's factory premises - Held that: - the value of the goods was fixed and the freight amount was also agreed between the Appellant and the buyers. Also the sales were complete in terms of sales Tax provisions. In such case when the sale took place at the factory gate and the freight was separately charged as agreed between both the parties, the freight charges would not form part of the assessable value - Further in case where the goods were sold to independent buyers and the freight charges were separately recovered as agreed, the freight element shall not be included in the assessable value and no duty demand can be made from the Appellant. Extended period of limitation - Held that: - there has been no contumacious conduct on the part of the Appellant or no suppression of facts. The issue involved is of interpretation of Rule 8 of Central Excise Valuation Rules and Section 4 of the Central Excise act, also the issue involved has been subject matter of many litigations, the demands made by invoking extended periods are not sustainable. Penalty - Held that: - On the same analogy, as mentioned above, the Appellant is also not liable for penalty under Section 11AC - As regard personal penalty of ₹ 5 Lakhs on Mr. S.W. Parnerkar, employee of the Appellant company we find that he is merely an employee of the Appellant company. Obviously, when the mala fide is not proved against the appellant company, there is no reason to penalize the employee of the company. Appeal allowed by way of remand for re-quantification of demands, if any arise.
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2017 (3) TMI 1126
CENVAT credit - GTA service - outward transportation of cement from the factory to the customer’s premises - denial on the ground that the appellant’s sales are not on FOR destination basis and that it is the factory gate which is the place of removal - Held that: - In the light of the decision of the Hon’ble High Court of Punjab and Haryana in the case of Ambuja Cements Ltd. Vs. UOI [2009 (2) TMI 50 - PUNJAB & HARYANA HIGH COURT], the appellant is entitled to avail Cenvat Credit on outward goods transportation agency services - as goods have been supplied by the appellant on FOR basis to the buyers place and included the value of transportation in the assessable value of the goods. Therefore, appellant is entitled to avail Cenvat Credit on outward goods transportation agency services - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 1125
CENVAT credit - legality of credit availed on crossing of exemption limit - whether the appellant, as on the date, after exceeding the total exemption limit of 150 lakhs under SSI Exemption N/N. 8/2003-CE dated 01.03.2008, correctly availed CENVAT credit on the inputs lying in stock in accordance with the provisions of Rule 3(2) of CCR, 2004? - Held that: - No contrary evidence has been placed by the Revenue to show that these inputs were not in stock as on 03.12.2009 - in the absence of any contrary evidence led down by the department in support the allegation that the inputs on which credit taken by the appellant as on 03.12.2009 were not available in stock, the claim of the appellant, supported by evidence carries weight and acceptable - credit allowed - appeal allowed - decided in favor of assessee.
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2017 (3) TMI 1124
Waste and scrap - clearance of waste and scrap without payment of duty/reversal of credit - demand - Held that: - relating to the demand on waste and scrap of packing material is concerned, reliance is placed in the case of COMMISSIONER OF CENTRAL EXCISE Versus WEST COAST INDUSTRIAL GASES LTD. [2003 (4) TMI 110 - SUPREME COURT OF INDIA] wherein it has been pointed out that there is no specific provision under the Rules considering such barrels/drums as a waste arising out of manufacturing process The appellant had already reversed the credit of ₹ 52,736/- on MS Scrap and willing to reverse credit of ₹ 7,206/- on the MS Turning Scrap & Waste Cuttings as they could not able to trace the origin of the said scrap. On the demand relating to waste and scrap of capital goods, the chartered accountant’s certificate is laud and clear as most of these items were procured before 01.04.1994, and no contrary evidnce is produced by the Revenue. Therefore, waste and scrap of the capital goods cannot be subjected to duty. The demand on the scrap of motor cycle cannot be sustained as no credit is availed on the same. Appeal disposed off - decided partly in favor of assessee.
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2017 (3) TMI 1122
Reduction in the quantum pf penalty - whether the option for payment of reduced amount of penalty should be made available to assessee or not? - Held that: - the Hon’ble Delhi High Court in the Case of K. P. Pouches [2008 (1) TMI 296 - DELHI HIGH COURT] have held that adjudicating authority under the Act should explicitly state the option available to the assessee u/s 11AC - The CBEC vide Circular dated 22.05.2008 has clarified that the Adjudicating Authority should specifically state in the order the option to pay reduced amount of penalty - option given by the Commissioner (Appeals) vide impugned dated 12.10.2009 for payment of reduced amount of penalty under Section 11AC ibid is in conformity with the statutory provisions - appeal disposed off - decided in favor of assessee.
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CST, VAT & Sales Tax
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2017 (3) TMI 1111
Validity of assessment order - Natural justice - The main grievance of the petitioner in these writ petitions is that the respondent has passed the impugned orders of assessment without considering the material supplied by the petitioner along with their reply to the notice - Held that: - the respondent has not intimated the petitioner about the date of personal hearing in pursuant to the objections filed by them. When such being the factual position, the only conclusion that can be arrived is that the respondent though stated that an opportunity of personal hearing would be given to the petitioner, has, infact, not afforded such opportunity to the petitioner by not informing the date of such hearing. Therefore, it is evident that the petitioner was not given such personal hearing and consequently, as rightly argued by the learned counsel for the petitioner, the impugned orders of assessment suffers on the ground of violation of natural justice - impugned order set aside - matter is remitted back to the respondent for passing fresh orders of assessment - appeal allowed by way of remand.
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2017 (3) TMI 1110
Principles of natural justice - the petitioner was not at all informed on what date they should appear for personal hearing - circular dated 20.04.2001 - Held that: - when the assessee asks for personal hearing, the same should be given by the assessing authority - In this case, the assessing authority himself though has offered such opportunity, as could be seen from the notice dated 29.12.2016 itself, unfortunately, has not subsequently communicated the date of such personal hearing, especially when the petitioner has specifically made such request through their communications dated 31.12.2016 and 11.01.2017. - the assessing authority, even after receipt of communications, has not given such opportunity of personal hearing to the petitioner and on the other hand, passed the impugned order of the assessment based on the reply submitted by the petitioner already. Such course of action adopted by the assessing authority is not in strict compliance of the principles of natural justice - matter remitted back to the assessing authority to pass fresh assessment order - appeal allowed by way of remand.
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