TMI Tax Updates - e-Newsletter
March 27, 2015
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
TMI SMS
Highlights / Catch Notes
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Income Tax:
Disallowance u/s 40(a)(i) - fee for technical services - u/s 9(1)(vii) - once the assessee had made all these payments, finalized accounts well before insertion of the explanation, it is not supposed to take the clock back and deduct TDS. - AT
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Income Tax:
Validity of the retrospective amendment to Section 143(1A) - Section 143 (1A) can only be invoked where it is found on facts that the lesser amount stated in the return filed by the assessee is a result of an attempt to evade tax lawfully payable by the assessee - validity upheld - SC
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Income Tax:
Interest upfront to the debenture holder - AO treated it as the 'deferred revenue expenditure' - whether is allowable as a deduction in the first year itself or it is to be spread over a period of five years, being the life of the debentures? - entire expenditure allowed in the first year - SC
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Income Tax:
Deduction of the losses - Having once accepted the decision of the ITAT, in the same fact situation, - in fact in the same common order, the revenue cannot legitimately agitate a position contrary to the one it accepted in Nalwa - HC
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Income Tax:
Proceedings initiated u/s 158BC - there was no warrant authorization on the name of the assessee and hence, the Tribunal has found the assessment as ab initio void, which, in our view, calls for no interference - HC
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Income Tax:
The expenditure made for construction/acquisition of new facility subsequently abandoned at the work-inprogress stage was allowable as incurred wholly or exclusively for the purpose of assessee’s business - HC
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Income Tax:
Expenditure on replacement of plant and machinery - ITAT allowed depreciation at 100% on the specified items - claim which was not reflected in the Annual Report given to shareholders and Company Law Board is clearly an afterthought with an intention to avail greater benefit - HC
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Income Tax:
Capital gain arising on sale of agricultural land - Some of the lands sold by the assessee have been categorized as “residential land” by the Sub-registrar Office for the purpose of collection of Stamp duty and hence such classification would not determine the character of land - AT
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Income Tax:
Penalty u/s 271(1)(a) - Unexplained bank deposit / credits - Procedural defects and irregularities which are curable should not be allowed to defeat substantive rights or to cause injustice. Procedure, a hand maiden to justice, should never be made a tool to deny justice or perpetuate injustice by any oppressive or punitive use - no penalty - AT
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Customs:
The assessee has paid provisional duty which gets reduced on final assessment. - For refund on this account, no application is required to be filed u/s 27 of the Act and therefore, sub-Section (2) relating to unjust enrichment is not applicable. - HC
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Central Excise:
CENVAT Credit - Cenvat Credit is available only to the person, to whom the goods have been sold by the manufacturer and not to any other person - receipt of goods not disputed - no scope to use the documents by the overseas company. So, the denial of cenvat Credit is not justified. - AT
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Central Excise:
Clandestine removal of goods - the non-recording of the correct quantity of goods in the statutory record, viz., RG.1 register maintained by the assessee establishes the case for demand of duty, more so in a case of statement accepting Central Excise violation - HC
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Central Excise:
Appointment of ex-departmental officers are Authorised Representatives before the CESTAT - Group 'A' officers on retirement or resignation from the department when appointed as special counsel to appear as authorized representative of the department, per se, cannot be said to be in real danger of bias, but characterized as only a probability or even a preponderance of probability of such a bias, hardly affecting the decision, muchless , adversely - HC
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Central Excise:
Denial of rebate claim - Simply ticking a wrong declaration in ARE-1 form cannot be a basis for rejecting the substantial benefit of rebate claim. Under such circumstances, the rebate claims cannot be rejected for procedural lapses of wrong ticking. - CGOVT
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VAT:
Manufacture - conversion of wet blue leather into finished leather - Wet blue leather loses its identity as wet blue leather and becomes a different commodity with a distinct identity in the market and in the industry concerned. Activity amounts to a manufacturing activity - HC
Articles
Notifications
Customs-
33/2015 - dated
25-3-2015
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Cus (NT)
Rate of exchange of conversion of each of the foreign currency with effect from 26th March, 2015
FEMA-
339/2015-RB - dated
2-3-2015
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FEMA
Foreign Exchange Management (International Financial Services Centre) Regulations, 2015
Income Tax-
15/2015 - dated
6-1-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On – The Purkal Youth Development Society, Uttarakhand
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14/2015 - dated
6-1-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On – Sahara Health & Education Society, Kolkata
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13/2015 - dated
6-1-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On –Shri V.R Deshpande Memorial Trust, Karnataka
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12/2015 - dated
6-1-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On –Sri Ramakrishna Sevashrama, Karnataka
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11/2015 - dated
6-1-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On – Banjara Development Society, Andhra Pradesh
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10/2015 - dated
6-1-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On – Gayatri Urban and Rural Development Society, Karnataka
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09/2015 - dated
6-1-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On –Dardionu Rahat Fund, Ahmedabad
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08/2015 - dated
6-1-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On – Truth of Universe Society, New Delhi
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07/2015 - dated
6-1-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On – Gramin Vikas Trust, New Delhi
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06/2015 - dated
6-1-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On –Vishwa Pratishthan, Maharashtra
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05/2015 - dated
6-1-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On – Anand Isher Educational Charitable Trust, Punjab
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04/2015 - dated
6-1-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On – - Anandashram Seva Trust, Karnataka
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03/2015 - dated
6-1-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On – Mahavir International, New Delhi
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02/2015 - dated
6-1-2015
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IT
U/s. 35AC, IT ACT, 1961 - Eligible Projects Or Schemes, Expenditure On – Rawal Mallinathji Foundation, Rajasthan
News
Case Laws:
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Income Tax
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2015 (3) TMI 876
Disallowance u/s 40(a)(i) - CIT(A) deleted disallowance - reopening of assessment - assessee had not deducted TDS u/s 195 as paid a sum as service charges rendered in Qatar for its Nigerian projects - Held that:- The CIT(A) has held that the payments in question are ‘fee for technical services’ and they are covered by exclusion u/s 9(1)(vii) of the Act with reference to the case law of Ajapa Integrated Project Management Consultant Pvt. Ltd.(2012 (6) TMI 404 - ITAT CHENNAI ). The Revenue’s plea that its appeal is pending u/s 260A of the Act does not point any distinction on facts. So, there is no ground to adopt a different approach in the present case. The Revenue also pleads that the assessee’s headquarter is in India. So, this exclusion clause does not apply. We notice that in case law Lufthansa Cargo India (P) Ltd vs DCIT [2004 (6) TMI 273 - ITAT DELHI-B], head office or place of control of business have been held to be immaterial factors for this exclusion principle u/s 9(1)(vii)(b) of the Act. The Revenue does not dispute applicability of this decision in its grounds. The Revenue further contention that in view of explanation inserted by the Finance Act, 2010 with retrospective effect from 1.6.1976, it is immaterial as to whether the services have been rendered outside India or the payee does not have a permanent establishment in India, in our view, cannot be any issue about the insertion of this explanation. However, the assessment year before us is 2003-04 and this explanation came only in the year 2010. In these circumstances only, we hold that once the assessee had made all these payments, finalized accounts well before insertion of the explanation, it is not supposed to take the clock back and deduct TDS. We disagree with the Revenue’s ground on this reasoning. So far as the case law quoted by the Revenue of ACIT vs Evolv Clothing Co. (P) Ltd (2013 (9) TMI 232 - ITAT CHENNAI) is concerned, there was no specific issue as to whether the retrospective explanation mandated TDS deduction or not. So, this decision stands distinguished - Decided against revenue.
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2015 (3) TMI 854
Validity of the retrospective amendment to Section 143(1A) - whether the retrospective effect given to the amendment would be arbitrary and unreasonable inasmuch as the provision, being a penal provision, would operate harshly on assessees who have made a loss instead of a profit, the difference between the loss showed in the return filed by the assessee and the loss assessed to income tax having to bear an additional income tax at the rate of 20%? - Held that:- Object of Section 143(1A) is the prevention of evasion of tax. By the introduction of this provision, persons who have filed returns in which they have sought to evade the tax properly payable by them is meant to have a deterrent effect and a hefty amount of 20% as additional income tax is payable on the difference between what is declared in the return and what is assessed to tax. In the present case as well, all assessees were put on notice in 1989 itself that the expression "income" contained in Section 143 (1A) would be wide enough to include losses also. That being the case, on facts here there is in fact no retrospective imposition of additional tax - such tax was imposable on losses as well from 1989 itself. Even on a reading of Section 143 1(a) which is referred to in Section 143 (1A), a loss is envisaged as being declared in a return made under Section 139. It is clear, therefore, that the retrospective amendment made in 1993 would only be clarificatory of the position that existed in 1989 itself. Taking a cue from the Varghese case [1981 (9) TMI 1 - SUPREME Court], we therefore, hold that Section 143 (1A) can only be invoked where it is found on facts that the lesser amount stated in the return filed by the assessee is a result of an attempt to evade tax lawfully payable by the assessee. The burden of proving that the assessee has so attempted to evade tax is on the revenue which may be discharged by the revenue by establishing facts and circumstances from which a reasonable inference can be drawn that the assessee has, in fact, attempted to evade tax lawfully payable by it. Subject to the aforesaid construction of Section 143 (1A), we uphold the retrospective clarificatory amendment of the said Section and allow the appeals. The judgments of the Division Bench of the Gauhati High Court, to held that the retrospective effect given to the amendment would be arbitrary and unreasonable inasmuch as the provision, being a penal provision, would operate harshly on assessee are set aside.
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2015 (3) TMI 853
Interest upfront to the debenture holder - AO treated it as the 'deferred revenue expenditure',whether is allowable as a deduction in the first year itself or it is to be spread over a period of five years, being the life of the debentures? - assessee follows mercantile system of accounting - Held that:- In the instant case, as noticed above, the assessee did not want spread over of this expenditure over a period of five years as in the return filed by it, it had claimed the entire interest paid upfront as deductible expenditure in the same year. In such a situation, when this course of action was permissible in law to the assessee as it was in consonance with the provisions of the Act which permit the assessee to claim the expenditure in the year in which it was incurred, merely because a different treatment was given in the books of accounts cannot be a factor which would deprive the assessee from claiming the entire expenditure as a deduction. has been held repeatedly by this Court that entries in the books of accounts are not determinative or conclusive and the matter is to be examined on the touchstone of provisions contained in the Act. See Kedarnath Jute Manufacturing Co. Ltd. v. Commissioner of Income Tax (Central), Calcutta [1971 (8) TMI 10 - SUPREME Court] At the most, an inference can be drawn that by showing this expenditure in a spread over manner in the books of accounts, the assessee had initially intended to make such an option. However, it abandoned the same before reaching the crucial stage, inasmuch as, in the income tax return filed by the assessee, it chose to claim the entire expenditure in the year in which it was spent/paid by invoking the provisions of Section 36(1)(iii) of the Act. Once a return in that manner was filed, the AO was bound to carry out the assessment by applying the provisions of that Act and not to go beyond the said return. There is no estoppel against the Statute and the Act enables and entitles the assessee to claim the entire expenditure in the manner it is claimed. Thus the assessee would be entitled to deduction of the entire expenditure of 2,72,25,000 and 55,00,000 respectively in the year in which the amount was actually paid. - Decided in favour of assessee.
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2015 (3) TMI 852
Deduction of the losses - Tribunal directing AO to allow deduction of the losses at ₹ 111/- per NCD as a business loss - JISCO made certain arrangements with UTI in July 1994 according to which the allottees of NCDs could surrender all the NCDs to UTI after the application was made and UTI agreed to pay the balance allotment money (Rs.389/- per NCD) to JISCO and secure the NCD registered in its name - Held that:- The findings of the AO and CIT regarding the NCD funding not being at arms’ length are unsustainable, because UTI on redemption, was entitled to full redemption money @ ₹ 500 each debenture on redemption though actually they had paid @ ₹ 389 only. The ITAT’s discussion reveals that material was led to establish that UTI earned a substantial annual gain of about 25% on the transaction. Furthermore it was held that on the other hand, the assessees too benefitted because after losing the initial application money on each debentures they were entitled to one dividend warrant which enabled them to an equity share of ₹ 200/- (in the case of JISCO NCDs) and based on a pre-determined formula in the second instance (Medicare) though the market price of the shares on those dates was higher. A chart indicating the gains by the assessees too was furnished by the learned counsel. When JISCO came out with the NCDs right issue several other companies i.e., Apolo Tyres, Usha Ispat Ltd, Dhunseri Tea Industries Ltd., Sri Ram Industrial Enterprises etc. had floated similar right issues with almost identical terms and conditions. In the case of Apolo Tyres the buyback was done by Om Financial and Investment Consultancy Services Ltd. whereas in the case of Usha Ispat, Dhunseri Tea and Sriram Industrial Enterprises the buyback was done by UTI, DSP Financial Consultancies Ltd. and Sri Ram Financial Services Ltd. respectively. In the case of the assessee the buyback was done by UTI, a Central Government undertaking. Having once accepted the decision of the ITAT, in the same fact situation, - in fact in the same common order, the revenue cannot legitimately agitate a position contrary to the one it accepted in Nalwa - especially because Nalwa Investments is one of the share-holder companies of JISCO, which had sought and was allotted NCDs at ₹ 111/- per NCD and later transferred the allotments to UTI, which paid the balance amount. Its initial claim for capital loss was changed to business loss, and finally accepted by the ITAT. Another good reason for this Court to reject the revenue’s contention is that in all the cases (Abhinandan, JELCS and Medicare) the assessees are investment companies, whose business includes share acquisition and transfer. The balance sheet and share inventories of Abhinandan and JELCs clearly reflected - as on 31.03.1994 and as on 31.03.1995, the value of shares of JISCO and several other companies. Having treated those and other shares as distinct from assets, but rather as part of the share inventory, it could not be said that the NCDs and the resultant DWs were to be treated otherwise. Here, the court is conscious that the assessees did claim initially to have incurred capital loss; however, they later corrected their stand and claimed business loss. We are of the opinion that the earlier stand of the assessees could not have shackled them to that position, preventing them from asserting the true character of the amount. Nor is the revenue bound to treat the position of the assessee as the gospel truth, or pin it to one or the other stand. In view of the above discussion, we hold that the assessee companies suffered business loss on their sale and such loss was business loss that constituted allowable deduction. - Decided in favour of the assessee.
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2015 (3) TMI 851
Proceedings initiated u/s 158BC - Tribunal accepting the additional grounds of the assessee which were raised after a lapse of 5 years of filing of second round of appeal and 14 years after the search to hold proceedings initiated u/s 158BC against assessee are void initio as the name of these assessees are not appearing in the authorization/requisition - Held that:- If a strict view is taken, one may say that the revenue could not agitate such question on the aspects of availability of the additional ground before the Tribunal, which was so permitted vide order dated 17.8.2010. But, as this Court vide order dated 13.6.2013 did make the abovereferred observations and even if lenient view is taken, at the most, it would mean that opportunity would be available to the revenue to meet with the additional ground, but such opportunity has already been availed by the revenue. The Tribunal has considered the Panchnama prepared by the revenue. It was for the revenue to controvert the said material by any contemporaneous record or otherwise. But, it appears that even as per the revenue, the contents of the Panchnama including that of non-appearance of the name in the authorization/requisition of the assessee, remained undisputed. Therefore, it cannot be said that the Tribunal did not give any opportunity to the revenue to meet with the additional ground. We do not find that a participation by the assessee in the earlier round of litigation either before the AO or before the Tribunal or consequently before the AO can operate as a bar to the assessee to challenge the jurisdictional authority of the AO under Section 158BC of the Act. If the condition precedent for block assessment under Section 158BC is not satisfied, such would go to the root of the matter and the jurisdiction, which has not been expressly conferred by the statute, cannot be invested with the AO for the block assessment. On facts, as recorded herein above, admittedly, there was no warrant authorization on the name of the assessee and hence, the Tribunal has found the assessment as ab initio void, which, in our view, calls for no interference, on facts and on law. No substantial questions of law would arise for consideration - Decided in favour of assessee.
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2015 (3) TMI 850
Amount paid to M/s AT & T and MCI Telecommunication towards down linking charge - whether an allowable deduction even when no TDS under Section 195 of the Act has been made and provisions of Section 40(a)(i) of the Income Tax Act has not been complied with? - Held that:- The assessee was not in default for non-deduction of tax as the said payment cannot be treated as a royalty, the authorities were not justified in disallowing the expenditure. Therefore, no fault to be found with the order passed by the tribunal. - Decided against revenue. Subscription charges - whether is an allowable deduction despite the assessee failing to deduct the tax at source under Section 195 of the Act and contrary to Section 40(a)(i) of the Act? - Held that:- Assessee is liable to deduct tax. Substantial question of law is answered in favour of the revenue. Expenditure due to exchange rate variation arising in foreign currency and exchange variation EEFC - whether is not deductable either from export turnover or total turnover without computing deduction under Section 80HHE of the Act? - Held that:- Issue is already covered by a Judgment of this Court in Infosys Technologies Ltd. [2011 (11) TMI 443 - KARNATAKA HIGH COURT ] in favour of the assessee and against the Revenue arrived at by the authorities is justified as the fluctuation in the valuation of currency which has to be converted to foreign currency has direct nexus to the export of software and can never be included as income from other sources. Wherefore, the said finding does not suffer from any error or illegality as to call for interference in this appeal Accordingly, we answer the fourth' . - Decided in favour of assessee. Expenditure towards travel expenses, professional charges, maintenance allowance and other expenses in foreign currency - whether is not deductible either from export turnover or total turnover when computing deduction under Section 80HHE of the Act? - Held that:- In the assessee's own case [2013 (6) TMI 193 - KARNATAKA HIGH COURT], this Court decided that the assessing officer has to examine the material relevant for the period of assessment to be produced by the assessee and to record a finding as to the nature of the activity keeping in view the legal position discussed in the aforesaid judgment and answered the question related to exclusion of expenses strictly keeping in view the kind of amounts sought to be excluded in the case of export turnover being attributable to the export of computer software,in which event, the exclusion being only freight telecommunication charges or insurance attributable to the delivery of the computer software outside India and if it is the case of providing technical services outside India in connection with development of computer software, then the actual expenditure, if any, incurred in foreign exchange in providing technical services outside India should be excluded and therefore, the matter was remanded back to the assessing authority. - Decided in favour of assessee for statistical purposes. Payments paid to M/s AT&T and MCI Telecommunications towards down linking charges - whether cannot be excluded from export turnover as well as total turnover for the purpose of computation of deduction u/s.10A of the Act? - Held that:- A perusal of the order passed by the assessing officer which deals with computation of deduction under Section 10A, the assessing officer has deducted a sum of ₹ 10,39,88,322/- towards M/s AT&T and MCI Telecommunication expenses both from export turnover and total turnover and therefore, there is no merit in the said question of law as the assessee has already been granted the benefit. - Decided against assessee. Computation of total turnover - whether the business profits of the entire business of the assessee need not be taken but only that of 80HHE of the Act units should be taken for the purpose of computation of deduction u/s.80HHE of the Act? - Held that:- This question arose for consideration before this Court in The Commissioner of Income-Tax vs. Sasken Communication Technologies Limited [2014 (1) TMI 1538 - KARNATAKA HIGH COURT] where it has been held that the total turnover of the business referred to under Sub-Section (3) of Section 80HHE cannot be construed as the total turnover of the business carried on by the assessee.The total turnover refers only to the business carried on under Section 80HHE viz., the business of software. Therefore, if the assessee is carrying on business of computer software and is exporting such computer software and is also supplying it to the domestic market, then the total turnover of the business includes the total turnover of export and the total turnover in the domestic market. But, merely because the assessee is owning two more units which fall under section 10A, which is also engaged in computer business and is in the export business neither the profit earned by 10A units nor the total turnover of the said 10A units is liable to be included in the total turnover. Therefore, in computing the profits of the said units, the turnover of 10A units could be added to find out the profit from export of computer software under section 80HHE and ... therefore, the said question was held against the revenue and in favour of the assessee. Provision for post sales customers support service - whether is an allowable deduction when the particulars of the same was not furnished nor method of arriving at it was not disclosed and consequently recorded a perverse finding as the same had not accrued? - Held that:- This question arose for consideration in the assessee's case itself [2011 (12) TMI 330 - KARNATAKA HIGH COURT] wherein held he benefit of the decision of the hon'ble Supreme Court in Rotork Controls India P. Ltd.'s case [2009 (5) TMI 16 - SUPREME COURT OF INDIA] was not available to the Tribunal - In the said decision, the hon'ble Supreme Court has laid down the conditions which are required to be satisfied for making claim in respect of post-sale customer service and has laid down the principles pertaining to the same - SC has stated that in each case all the conditions to be satisfied are to be considered - Appeal disposed of accordingly in the light of the principles laid down in Rotork Controls India P. Ltd.'s case and the matter is remanded to the Tribunal to pass fresh orders in accordance with law on the said question. - Decided in favour of assessee for statistical purposes. Club membership fee - whether is an allowable business expenditure ? - Held that:- acquisition of membership of the club would be revenue expenditure and not capital expenditure and decision of this Court relied upon by the learned counsel appearing for the assessee in CIT v. Wipro Systems [2009 (11) TMI 402 - KARNATAKA HIGH COURT] would also show that the amount spent towards the membership acquired by the assessee should be treated as revenue expenditure. - Decided in favour of assessee. Sum received on sale of "Onscan International Notification System" to M/s Onscan INC., California - whether the aforesaid consideration received by the assessee is to be treated as a capital gain or a business profit? - Held that:- In view of the judgment Commissioner of Income-tax Versus Infosys Technologies Ltd. [2011 (11) TMI 455 - KARNATAKA HIGH COURT ] , the said consideration amount is to be treated as a business profit and rightly the Tribunal held that the assessee is entitled to deduction under Section 10-A of the Act treating it as a business profit - Decided in favour of the assessee. Expenses in foreign currency - whether should be allowed from export turn over for the benefit of computation for deduction under Section 10-A of the Act - Held that:- Both the Appellate Authorities have not applied their mind to the difference that exist between Section 80HHE and Section 10-A of the Act. They have followed the judgment rendered in connection with Sections 80HHE and 80HHC. Therefore, the impugned finding cannot be sustained. It is necessary for the authorities to determine on the basis of the material produced by the assessee as to whether the technical services rendered is post-sales services or pre-sales services and then decide in the light of two statutory provisions and the various decisions on the point whether assessee is entitled to exclusion of the expenditure incurred towards technical services. Therefore, as none other authorities have applied their mind in this regard, it is appropriate to set aside the judgment and remand the matter back to the assessing authority to make the aforesaid computation. The Assessing Authority also shall decide whether the said amount has to be deducted when it is deducted from export turnover whether it has to be deducted from total turn over also in the light of various decisions. - Decided in favour of assessee.
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2015 (3) TMI 849
Expenditure incurred for preparation of the feasibility study report and capital-work-in-progress disallowed - disallowing the expenditure by ITAT in the earlier years, but written off during the previous year corresponding to the assessment year 2002-03 since the proposed project was abandoned - Held that:- The expenditure made for construction/acquisition of new facility subsequently abandoned at the work-inprogress stage was allowable as incurred wholly or exclusively for the purpose of assessee’s business as covered by the decision in Graphite India Ltd. (1996 (6) TMI 73 - CALCUTTA High Court). Our conclusion is fortified by the view expressed by the Supreme Court in CIT Vs. Indian Mica Supply Co. P. Ltd. [1970 (4) TMI 6 - SUPREME Court] wherein held that it was only as a result of the compromise that the respondent became entitled to remain in possession of the demised land. Its liability also became ascertained only at that point of time. It cannot be disputed that the respondent in incurring the expenditure had acted in the interest of and for the purpose of its business. The expenditure was not laid out for any purpose other than that of carrying on the business. The deduction was properly admissible under section 10 (2)(xv) of the Act. Section 10 (2) (xv) of the old Act corresponds to section 37 (1) of the present Act. For the aforesaid reasons the question is answered in the affirmative - decided in favour of the assessee.
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2015 (3) TMI 848
Expenditure on replacement of plant and machinery - Capital v/s revenue expenditure - Tribunal allowing depreciation at 100% on the specified items - Held that:- Depreciation claim on energy saving/Air/Water pollution control equipments was not made while filing return of income, nor while filing details. Suddenly, the assessee company comes in March and claims that this equipments is also eligible for 100% depreciation. The assessee has no convincing support to sustain its claim. Many of the items are entitled to normal depreciation only, which was claimed and allowed. Hence, this claim which was not reflected in the Annual Report given to shareholders and Company Law Board is clearly an afterthought with an intention to avail greater benefit. Moreover, the names of purchase invoices differ from what the assessee claims to have entitled for 100% depreciation. So, the same is rejected. Tribunal on the issue of depreciation, after going through the orders of the lower authorities was of the view that the view taken by the CIT (Appeals) is correct on facts. On the issue, as regards item No.4 (1), the lower authorities have given a finding that machinery installed by the assessee are not covered under Item III (3)(B) of the table of depreciation rates. Similarly, as regards the rest of the items, a finding has been given that they are not covered under item III (3)(E) of the said table. Such being the factual scenario, in the absence of any specific material on the legal issue, disputing the manner in which the issue of depreciation was considered, we are not inclined to go into issues on facts as projected by the appellant/assessee. Accordingly, substantial question of law is answered in favour of the Revenue and against the assessee. Capital v/s revenue expenditure - Issue should be remanded back to the CIT (Appeals) to consider whether replacement of plant and machinery would be a case of revenue expenditure or capital expenditure. Similar issue, it appears, has been considered by this Court in the case of Super Spinning Mills Ltd. - Vs Asst. Commissioner of Income Tax (2013 (9) TMI 88 - MADRAS HIGH COURT), wherein, this Court, following the decision of CIT Vs Sri Mangayarkarasi Mills (2009 (7) TMI 17 - SUPREME COURT ), remanded the matter back to the CIT (Appeals) for consideration and pass detailed orders. - Decided in favour of assessee for statistical purposes.
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2015 (3) TMI 847
Income recognition - accountancy practices of the assessee for the relevant year - AO recomputed the income by treating advances against properties which had NIL outstanding balances, as sales and consequently the income of the assessee as felt that the appropriate method of accounting for revenue recognition was AS-7 supported by the Institute of Chartered Accountant - Held that:- As in CIT vs. Manish Build Well Pvt. Ltd. [2011 (11) TMI 35 - DELHI HIGH COURT] differentiating between the project completion method and the percentage completion method, and commented that both can achieve the same result. The above ruling clearly establishes that the project completion method was appropriate in the circumstances of the case and the rationale for not adopting it in respect of the 22 transactions by the AO was illogical. The Court notices that in M/s. Excel Industries, [2013 (10) TMI 324 - SUPREME COURT]the Supreme Court had indicated three tests to deduce whether income accrued to the assessee is real or hypothetical i.e. if there is a corresponding liability of the other party to pass on the benefits even without the transaction; probability or improbability of realization of benefits by the assessee etc. In these circumstances, the AO’s decision was based on hypothetical income given that for the previous years AS-7 had been permitted. Furthermore, applying the decision in M/s. Excel Industries Ltd. (supra), we are of the opinion that the rule of consistency ought not to have been departed from in this case. No substantial question of law arises. - Decided against revenue.
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2015 (3) TMI 846
Entitlement to additional depreciation as per Section 32(1)(iia) - generation of electricity by wind mill amounts - ITAT allowed depreciation - Held that:- In the present case, the core business of the assessee is manufacturing and export of textile goods. During the assessment year 2006-07, the assessee had entered into the business of generation of power and installed one wind mill. The assessee maintained separate books of accounts for export division and the wind mill division. Since the assessee has treated the windmill division as separate business, the claim of additional depreciation has to be seen in the context of generation of power through windmill only and the production of textiles and its export has nothing to do with the generation of power for the purpose of considering additional depreciation. Further as rightly held by the Tribunal, the Revenue has not brought in any new or contra material to differ from the view of this Court in the decision of COMMISSIONER OF INCOME-TAX v. HI TECH ARAI LTD.(2009 (9) TMI 60 - MADRAS HIGH COURT) as it cannot be said that setting up of a wind mill will not fall within the expression setting up of a new machinery or plant - Decided in favour of assessee.
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2015 (3) TMI 845
Unexplained investments - ITAT deleted the addition u/s 69 - Held that:- The CIT(A) appears to have taken into account the remand report. The assessee, in turn, appears to have relied upon letters written by the associate companies, each one of which had mentioned that the sums were paid directly to the asseseee’s vendor during the concerned period in the assessment year in question. The assessee’s case was that neither it nor the associate companies reflected these transactions in the books of accounts and consequently in the return, the investments were reflected in the stock inventory. This aspect has particularly been noticed by the CIT(A) whose order was made on 07.11.2012. We also notice that the appeal before the CIT(A) itself was instituted on 21.01.2010. In these circumstances, the CIT(A) was certainly within its right, before rendering its findings, to have additionally called for the returns for the subsequent years (when these entries were in fact reflected by the assessee in its returns) as well as the returns of the associate concerns. This, in our opinion, would have reflected the complete picture and either supported or falsified assessee’s contentions with respect to the inadvertence in omitting to make a mention of this investment at the relevant time in AY 2007-08. - Matter is remitted to the CIT(A) for specific finding on this question. It goes without saying that in the event of the CIT(A) being satisfied that these amounts were duly reflected as claimed by the assessee, applicability of Section 69 would be doubtful.- Decided in favour of revenue for statistical purposes.
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2015 (3) TMI 844
Interest free loans advance to sister concern - whether were for business purpose or commercial expediency was not proved by the assessee - Held that:- In the present facts, we find that the CIT(A) has in the impugned order rendered a finding of fact that there was trade transaction between the Respondent Assessee and its group concern - M/s. Suraj Diamonds Consultancy Pvt. Ltd. during the subject Assessment Year i.e. A. Y. 2007-08. Once the fact of business relationship between the Respondent Assessee and the group concern is established and accepted, then the amount advanced by the Respondent Assessee to its group concern would result in allowing of interest expenditure incurred by the Respondent-Assessee on the amount of loan borrowed by him As decided in S.A. Builders case [2006 (12) TMI 82 - SUPREME COURT ] once it is established that there was nexus between the expenditure and the purpose of the business (which need not necessarily be the business of the assesee itself), the Revenue cannot justifiably claim to put itself in the armchair of the businessman or in the position of the board of directors and assume the role of decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximize his profit.we have to see the transfer of the borrowed funds to a sister concern from the point of view of commercial expediency and not from the point of view whether the amount was advanced for earning profits - Decided in favour of assessee.
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2015 (3) TMI 843
Deduction u/s 80HHC on counter sales - whether ITAT as well as the CIT(A) was justified in allowing the deduction u/s 80 HHC when there is no finding to the effect that the goods were cleared at any of the custom station? - Held that:- Apex Court in CIT vs. Silver & Arts Palace [2002 (12) TMI 12 - SUPREME Court] has held that the counter sale to the foreign tourists against convertible foreign exchange in India, is eligible for deduction under section 80HHC of the Income Tax Act. The Apex Court has also approved the decision of the Allahabad High Court in the case of Ram Babu & sons vs. Union of India [1996 (5) TMI 61 - ALLAHABAD High Court]. In the present case the assessee had produced the Sale To Foreign Tourists Voucher, which not only recorded the name and address of the customer (tourist), but also his/her passport number and the declaration given by him that the goods will not be gifted or sold in India. The goods sold at counter at the shop/emporium were sold to be taken out of the country, which necessarily involved clearance of baggage, by the customs authorites. There was no further proof, nor any document in proof of clearance of the goods at the Customs Station by the assessee is required. The declaration in the form of Sale To Foreign Tourist Voucher, for sale made against the convertible foreign exchange with the undertaking that the goods will not be gifted or sold in India, was sufficient proof for export out of India. Unless anything contrary was alleged and proved by the department, it was not necessary for the assessee to have produced the documents of clearance of goods sold by him to the foreign tourists at any Customs Station. The Explanation (aa) is not a rule of evidence, nor raises any presumption. It also does not require any proof of clearance at any Customs Station. The explanation is couched in double negative. It is a rule of exclusion and excludes only those transactions, which do not involve clearance at any Customs Station. It cannot be read in a manner, as suggested by learned counsel appearing for the department that a proof of customs clearance of baggage must be provided to establish the export of goods out of India for the purpose of deduction of profits on such sales under section 80HHC of the Income Tax Act. - Decided in favour of assessee.
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2015 (3) TMI 842
Deduction u/s 80HHC on counter sales - whether ITAT as well as the CIT(A) was justified in allowing the deduction u/s 80 HHC when there is no finding to the effect that the goods were cleared at any of the custom station? - Held that:- Apex Court in CIT vs. Silver & Arts Palace [2002 (12) TMI 12 - SUPREME Court] has held that the counter sale to the foreign tourists against convertible foreign exchange in India, is eligible for deduction under section 80HHC of the Income Tax Act. The Apex Court has also approved the decision of the Allahabad High Court in the case of Ram Babu & sons vs. Union of India [1996 (5) TMI 61 - ALLAHABAD High Court]. In the present case the assessee had produced the Sale To Foreign Tourists Voucher, which not only recorded the name and address of the customer (tourist), but also his/her passport number and the declaration given by him that the goods will not be gifted or sold in India. The goods sold at counter at the shop/emporium were sold to be taken out of the country, which necessarily involved clearance of baggage, by the customs authorites. There was no further proof, nor any document in proof of clearance of the goods at the Customs Station by the assessee is required. The declaration in the form of Sale To Foreign Tourist Voucher, for sale made against the convertible foreign exchange with the undertaking that the goods will not be gifted or sold in India, was sufficient proof for export out of India. Unless anything contrary was alleged and proved by the department, it was not necessary for the assessee to have produced the documents of clearance of goods sold by him to the foreign tourists at any Customs Station. The Explanation (aa) is not a rule of evidence, nor raises any presumption. It also does not require any proof of clearance at any Customs Station. The explanation is couched in double negative. It is a rule of exclusion and excludes only those transactions, which do not involve clearance at any Customs Station. It cannot be read in a manner, as suggested by learned counsel appearing for the department that a proof of customs clearance of baggage must be provided to establish the export of goods out of India for the purpose of deduction of profits on such sales under section 80HHC of the Income Tax Act. - Decided in favour of assessee.
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2015 (3) TMI 841
Unaccounted cash - sale of shops - Held that:- the findings of fact recorded by the Commissioner and the Tribunal do not raise any substantial question of law. If the actual area purchased by the Assessee is 454.50 square feet and the Assessing Officer accepts this transaction, then, consideration in respect thereof ought to have been accepted and the sum paid by way of cheque is the only component in the transaction. The cash payment of 52,26,000/- is not relatable to the sale in favour of the Assessee nor to any specific shop. Going by the cross examination of Kantilal Patel and the specific answer to a question by him it is evident that it is not established that the Assessee actually paid ₹ 52,26,000/- over and above the purchase consideration paid by cheque. In the circumstances, we do not think that the Appeal raises any substantial question of law. Appeal dismissed.
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2015 (3) TMI 840
N.P. estimation - ITAT instead of estimation of income at 8% on the basis of Section 44AD, as done by AO directed application of 2.5% as the net profit margin - Held that:- The ITAT apparently took note of the profit rate for other previous years and had, on an average exercise, concluded that the NP rate ought to be 2.5%. In the circumstances, it cannot be said that the reasoning is unsustainable or so erroneous as to call for interference under Section 260A of the Income Tax Act, 1961. No substantial question of law, therefore, arises - Decided against revenue.
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2015 (3) TMI 839
Transfer pricing adjustment - selection of comparable - Held that:- Accentia Technologies Ltd.- there is no segment wise result available in case of medical transcription and billing and coding. It is not known by how much the margin is affected by trading in software. Therefore in our view this company could not be considered as a good comparable. We therefore hold that this company has to be excluded. Apex Knowledge Solutions Ltd.- annual report of the company for the relevant year shows that entire revenue has been generated from export of software and related information technology enabled services activities. There is no segment wise result available for information tech nology enabled services activity. This company had also been excluded by the Tribunal in the case of Willis Processing Services (I) P. Ltd. v. Deputy CIT [2013 (3) TMI 415 - ITAT MUMBAI]. We therefore, hold that this company is not a good comparable and has to be excluded. Apollo Helathcare Ltd - 81 per cent. of the transactions in case of the company are with related parties. With such high RPT, this comparable could not be considered as a good comparable. Asit C. Mehta (Nucleus Net Soft).- almost the entire revenue, i.e., ₹ 6.09 crores is from information tech nology enabled services and only a sum of ₹ 23.26 lakhs is from portfolio management service which is insignificant and in our view will not have much impact on the margins. Content development is a high end service but as held earlier on this ground alone it cannot be excluded. As there is no material to show that in case of high end services in information technology enabled services industry margins are higher than those in the low segment. Caliber Point Business Solutions Ltd. - the entire revenue for the purpose of comparison which in our view will not be appropriate. We therefore, direct that the results of only BPO segment have to be considered for the purpose of comparability and subject to the above, the inclusion of this comparable is upheld. Argument based on high segment as held earlier has to be rejected. Cosmic Global Ltd. - the main revenue, i.e., ₹ 4.05 crores is from translation business where as revenue from medical transcription is only ₹ 9.72 lakhs and from BPO at ₹ 12.41 lakhs. The translation business is not comparable to the case of the asses see. Therefore, in our view, this company has to be excluded from the list of comparables. We accordingly direct the Assessing Officer to exclude this comparable. Datamatics Financial Services Ltd. (Seg). - about 50 per cent. of the revenue is from printing services. The segment wise result from information technology enabled services is not available. Therefore in our view, this company could not be considered as a good comparable and accordingly we direct the Assessing Officer to exclude this company from the list of comparables. Eclerx Services Ltd. - no doubt goodwill is an asset which can bring more customers and can increase turnover but as we have discussed in the subsequent part of this order there is no linear relationship between margin and turnover and that the concept of economy of scale is not relevant in case of service companies. The argument thus, has no merit and has to be rejected. Therefore, in our view, this comparable has to be included and accordingly we uphold its selection. Genesys International Corporation Ltd. - is an information technology enabled service. The entire revenue of the company as per the annual report placed on record is from GIS activities. Only on the ground of high end or low end segment, comparable could not be excluded or included. We therefore uphold the inclusion of this company. HCL Comnet Systems and Services Ltd. - related party transaction affect the comparability and in case of high RPT the company could not be really considered as independent unrelated party. In the case of Willis Processing Services India P. Ltd. [supra] the Tribunal held that related party transaction can be accepted only up to 15 per cent. We therefore accept the plea of the assessee to exclude this comparable. Informed Technologies India Ltd. - he annual report of the company to point out that revenue is derived from BPO activities and there is no reference to KPO activities in the annual accounts. We also find from perusal of accounts that BPO is only reportable segment and the entire revenue is from BPO activities. Therefore, we uphold the selection of this company as a comparable. I Services India P. Ltd. - It is clear from the rules that for the purpose of comparability, data of current year and upto past two years in certain circumstances can only be considered and not the data of the subsequent year. It has not been shown before us that profit this year was exceptionally high compared to the last year due to some extraordinary factor, which affected the comparability. The argument raised is therefore rejected. With these observations we direct the Transfer Pricing Officer/Assessing Officer to verify the actual activities of the company from the annual account of the relevant year and include the same if it is found to be engaged in information technology enabled services activities. Mold Tek Technology Ltd. - the company is a good comparable subject to the verification of merger aspect and its impact on functional comparability. R Systems International Ltd. (Seg.) - the assessee has also a BPO division for which segmental results are available. The Transfer Pricing Officer has also taken only BPO segment for the purpose of comparability. We have already held that the company could not be excluded only on the ground of high end services. We hold that this company has to be included as a good comparable Vishal Information Technologies Ltd. - The Tribunal in case of Willis Processing Services (I) P. Ltd [supra] had considered the argument of the learned Departmental representative that the company had seating capac ity of 75 out of which 60 had been utilised by the company and, therefore, it was pointed out that the argument that the company was outsourcing work was not correct. The Tribunal further noted the argument of the learned authorised representative that the said information which had been obtained by the learned Departmental representative under section 133(6) was not addressed to the Transfer Pricing Officer. The Tribunal, therefore, restored the issue of outsourcing to the Assessing Officer/the Transfer Pricing Officer for fresh examination of relevant facts. The facts in the present case are identical. We, therefore, restore the issue of outsourcing to the Assessing Officer/the Transfer Pricing Officer for fresh examination and order after hearing the assessee. Optimus Global Services Ltd. - we are convinced that this company which has persistent losses for the last three years has to be excluded. Bodhtree Consulting Ltd. (Seg.) - Commissioner of Income-tax (Departmental representative) has placed some fresh materials before us, which has been collected by the Revenue under section 133(6) which shows that the assessee in addition to developing software, is also engaged in data cleansing services, the segmental results for which are available which is an information technology enabled services activity. The learned authorised representative for the assessee pointed out that there is some element of software develop ment also involved in providing such services. We find that this issue had come up for consideration by the Tribunal in the case of Willis Processing Services (I) P. Ltd. v. Deputy CIT [supra] in which the Tribunal restored the issue to the file of the Assessing Officer/the Transfer Pricing Officer for examination of material collected under section 133(6) of the Income-tax Act. Therefore, following the decision of the Tribunal, we restore this issue to the file of the Assessing Officer/the Trans fer Pricing Officer for fresh decision after considering the fresh material and after hearing the assessee. ICRA Techno Analytics Ltd. (Seg.) - exclusion of this comparable by the Commissioner of Income- tax (Appeals) is held valid as any company having related party transactions more than 15 per cent. has to be excluded as comparable. Infosys BPO Ltd. - reject the argument advanced based on high marketing expenses and branding and as regards the quality of employees for exclusion of Infosys BPO Ltd. and accordingly hold that this has to be accepted as a good comparable. Wipro Ltd. (Seg.) - uphold the inclusion of this comparable by the Assessing Officer/the Transfer Pricing Officer for the same reasons given in case of Infosys BPO Ltd. .Maple E Solutions - there is also no material to show that this company had merged with Triton Corp. Ltd. in the relevant year. We accordingly, reject the argument raised based on merger. We are therefore, unable to accept the order of the Commissioner of Income-tax (Appeals) excluding this comparable and therefore the order is set aside and this company is included as a comparable Triton Corp. Ltd. - The revenue from trading in IT peripherals is small at about 11 per cent. which in our view will not have much impact on the margin. It is also clear from the fact that the margin in case of Triton Corp. Ltd. is 34.93 per cent. which is almost similar to the margin in case of Maple E Solutions Ltd. which is wholly in call centre business, which shows that trading in IT peripherals has not impacted the margin. No details of merger/amalgamation as mentioned by the Commissioner of Income-tax (Appeals) has been placed before us to show that it has impacted the comparability. We, therefore, do not agree with the Commissioner of Income-tax (Appeals) for excluding this comparable. Accordingly, we set aside the order of the Commissioner of Income-tax (Appeals) on this point and include this case in the list of comparables. Method of computation of margin for the purpose of comparability - Held that:- The OECD as well as United Nations Practical Manual provide that ROCA/ROA are suitable for manufacturing and other capital or asset intensive industries. The assessee is in the service sector which is not capital asset intensive. No doubt in every sector there is some use of equipments and other assets but the same cannot be said to be as capital intensive as in case of manufacturing concerns. Moreover, in case of service companies, main asset is employees which is not reflected in the balance-sheet and, therefore, ROCA/ROA in our view will not be an appropriate method for the purpose of computation of margin. We accordingly, do not see any infirmity in the order of the Commissioner of Income-tax (Appeals) rejecting ROCA/ROA as profit level indicator. The order of the Commissioner of Income-tax (Appeals) is accordingly held on this point. Working capital adjustment and adjustment on account of other costs - Held that:- Under the provisions of rule 10B(2)(d) the comparability has to be judged with respect to various factors such as marketing conditions, geographical locations, cost of labour and capital in the market, accounts receivable/payable affect the cost of working capital. The more accounts receivable would mean more capital blocked with debtors which may also mean higher sale prices. Therefore, in our view it will be appropriate to make working capital adjustment to improve the comparability. Further we agree with the submissions of the learned Commissioner of Income-tax (Departmental representative) that while making the working capital adjustment guidelines framed by OECD must be followed. We therefore, do not uphold the order of the Commissioner of Income-tax (Appeals) rejecting the working capital adjustment. The issue therefore, is restored to the file of the Assessing Officer/the Transfer Pricing Officer for working out the working capital adjustment as per OECD guidelines and after allowing the opportunity of hearing to the assessee. Adjustment claim by the assessee on account of linked cost and other cost incurred by the associated enterprise on behalf of the assessee - Held that:- We agree with the submission of the learned Commissioner of Income-tax (Departmental representative) that adjustment on account of linked cost and other cost incurred by the associated enterprise on behalf of the assessee is not justified as the margins are unaffected in case these costs were incurred by the assessee. The claim is rejected and the order of the Commissioner of Income-tax (Appeals) on this point is upheld. Benefit of +/-5 % deviation in the computation of margin - Held that:- In this case proceedings were pending before the Assessing Officer/the Transfer Pricing Officer as on October 1, 2009. Therefore, the assessee is not entitled to the benefit of ± 5 per cent. as the arm's length price determined has exceeded the transfer price by more than 5 per cent. We therefore see no infirmity in the order of the Commissioner of Income-tax (Appeals) in rejecting the claim and the same is therefore upheld. - Decided partly in favour of assessee.
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2015 (3) TMI 838
Addition on account of extra ordinary item i.e. flood, cyclone fire etc - CIT(A) deleted the addition - Asstt.Year 2006-07 - Held that:- The assessee has not furnished any details and explanation about the expenditure of ₹ 3,53,90,000/- being loss due to flood, cyclone, fire. The assessee could not justify its claim on the basis of material evidences with respect to the particular assets and its extent. It also could not justify and did not make any submission as to why these expenses have been claimed under the head "extraordinary items". In view of the above, the asseessee's claim of ₹ 3,53,90,000/- under the head extra ordinary items cannot be allowed to it. Accordingly the same is disallowed and added back to its total income.Without prejudice to the above, such claim in absence of details furnished, may be for the revival of assets damaged / destroyed during the natural calamities therefore, such claim is of capital nature. Therefore also the claim is not allowable. - Decided against assessee. Disallowance of deduction for repairing of assets damaged due to floods - CIT(A) vacated the disallowance on the ground that the assessee had received financial assistance of ₹ 929 lakhs for repairing of its assets damaged due to flood and the assessee has claimed deduction of ₹ 353.90 lakhs on account of expenses incurred on repairs of flood damaged assets and the balance amount was shown as income in the year under consideration - Held that:- The fact that the assessee suffered loss has not been disputed by the AO, and therefore, the AO was not justified in disallowing the entire amount of loss claimed by the assessee, and thereby inferring that no actual loss was suffered by the assessee.However, we also find that the details of the expenditure incurred or loss suffered due to flood as well as Misc. write off of ₹ 82.93 lakhs was not filed before the CIT(A) or before us also by the assessee. The CIT(A) deleted the disallowance on the ground that the accounts of the assessee was audited by the C&AG and without verifying the details of loss and write off by the assessee. Thus, in our considered view orders of both the authorities below cannot be sustained. We, therefore, in the interest of justice remit the matter back to the file of the AO for adjudication of the issue afresh after allowing the assessee reasonable opportunity of producing the details of expenses incurred or loss suffered as well as details of amount write off and after verification of details so furnished and if the assessee fails to furnish the details, by estimating the reasonable amount of loss which was suffered by the assessee on account of flood and write off of the amount. - Decided in favour of revenue for statistical purposes. Disallowance of claim of deduction for guarantee fee - CIT(A) deleted the addition - Held that:- In the instant case, the assessee did not acquire any right to exploit a commercial technology or process, and neither was the benefit "enduring", since the payment of guarantee commission was an annual charge. The benefit derived from payment of such commission thus lasted for exactly one year only. Such short lived benefit could not be categorized as “enduring”. Hence, inclined to the view that the payment of guarantee commission was revenue expenditure. Quite apart from the other sound reasons for treating the expenditure as revenue, it would be unrealistic to say that the appellant company could derive any undue advantage or collateral benefit by making such payment to the GOG. In view of the totality of the circumstances, the AO was not justified in treating the payment of guarantee commission as capital in nature - Decided against revenue. Disallowance of restructuring of loans - CIT(A) has allowed the claim of the assessee on the ground that benefits derived from the payment of commission lasted for one year only - Held that:- It is not in dispute that the amount was paid by the assessee as guarantee commission for unsecured loans. Therefore, respectfully following the decision of the Hon’ble Gujarat High Court in the case of Mihir Textile Ltd. (2000 (8) TMI 20 - GUJARAT High Court), we confirm the order of the CIT(A) and dismiss this ground of the Revenue for both the years under consideration. - Decided against revenue. Guarantee fees and Premium on debt restructuring - CIT(A) deleted the disallowance on the ground that it does not confer any enduring benefit and merely facilitate the assessee’s business in more efficient manner - Held that:- assessee relied of the decision of the Hon’ble Gujarat High Court in the case of DCIT Vs. Gujarat Narmada Valley Fertilizers Ltd.,(2013 (8) TMI 300 - GUJARAT HIGH COURT ) wherein it was held that the expenditure incurred by the assessee on restructuring of loan was revenue expenditure. No contrary decision was cited by the learned DR. Therefore, respectfully following the decision we confirm the order of the CIT(A) and dismiss the ground of appeal of the assessee. - Decided against revenue. Addition on account of Employee’s PF contribution - employees contribution to PF paid beyond the due date - CIT(A) deleted addition - Held that:- AR of the assessee submitted that the AO has disallowed the deduction simply because the payments were not made to the credit of PF authorities within the due date prescribed under the PF Act. He submitted that under the PF Act, the payments can be made within 15 days from the deduction of PF contribution from the employees’ salary plus 5 grace days. The AO has not verified the payments made to the PF authorities according to this provision of the PF Act. He, therefore, submitted that the matter should be remitted back to the file of the AO for verification, and thereafter making the disallowance of payments, which are made beyond 15 days from the payment of salary to the employees plus 5 days’ grace period allowed under the PF Act.Thus set aside the orders of the lower authorities and remand the matter back to the file of the AO for adjudication of the issue afresh in the light of the discussion made hereinabove after providing reasonable opportunity to the assessee - Decided in favour of revenue for statistical purposes. Treatment of the provision for gratuity as unascertained liability and in enhancing the book profit by this amount - Held that:- DR could cite any contrary decision. He could not controvert the findings of the CIT(A) that the provision for gratuity in the instant case was made by the assessee on actuarial valuation. Therefore, following the decision o the Hon’ble Gujarat High Court in the case of DCIT Vs. Inox Leisure [2013 (2) TMI 353 - GUJARAT HIGH COURT] wherein it was held that the provision of gratuity on the basis of acturial calculation was not to be added back under clause (c) to Explanation-1 below section 115JB of the I.T.Act, 1961. - Decided against revenue. Exclude the amount withdrawn from reserve in the computation of book profit u/s.115B -CIT(A) allowed the appeal of the assessee by observing that the profit carried to the balance sheet in the reserve account were those profit, which were arrived at after deducting tax and that under the proviso it was not necessary that the amount withdrawn from the reserve should be credited to the profit & loss account of the same year - Held that:- as per Explanation-1 below section 115JB(2) clause (i) the profit as shown in the profit & loss account for the relevant previous year has to be reduced by the amount withdrawn from any reserve or provision, if any amount is credited to the profit & loss account. We find that a reading of the assessment order shows that the AO disallowed deduction claimed for amount withdrawn from reserves on the ground that the same was not credited in the profit & loss account of the year under consideration, and therefore, not included in the net profit as per the profit & loss account of the year. The CIT(A) deleted the addition without recording any finding whether the amount was included in the net profit of the year or not. Before us, copy of the audited profit and loss account was not filed by either of the party. In the absence of the same, we are not in a position to adjudicate the issue completely. We, therefore, in the interest of justice restore this issue back to the file of AO for adjudicating the same afresh - Decided in favour of revenue for statistical purposes. Re computation of the book profit for MAT by not reducing the claim for depreciation - Held that:- is not in dispute that the assessee has claimed only that depreciation which was debited in its audited profit & loss account which was laid before the AGM. In our considered view, following the decision of the Hon’ble Supreme Court in the case of Apollo Tyres Ltd. ( 2002 (5) TMI 5 - SUPREME Court) only those adjustments from net profit disclosed by such audited accounts can be made which are specified in Explanation to section 115JB. The depreciation not being a specified item in Explanation to section 115JB at the relevant time, we do not find any error in the order of the CIT(A) in directing the AO to recomputed the book profit for MAT by not reducing the claim for depreciation of ₹ 1.75 crores. - Decided against revenue. Disallowance under Section 14A read with rule 8D - Held that:- It was mandatory for the AO to apply Rule 8D while computing the disallowance under section 14A of the Act. Therefore, CIT(A) correctly restored the matter to the file of the AO to verify the correct figure of interest and recalculate the disallowance, if necessary. - Decided against assessee.
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2015 (3) TMI 837
Validity of assessment framed u/s 153C - recording of satisfaction by the Assessing Officer of searched person - assessee submitted that the information furnished by the Revenue under the Right to Information Act, reveals that the AO of the searched party has not recorded any satisfaction. - Held that:- In the absence of a satisfaction recorded by the Assessing Officer of the searched persons, the Assessment framed u/s 153C of the Act by the Assessing Officer cannot be sustained, as such same is bad in law. See Pepsi Foods Pvt. Ltd. Versus. Assistant Commissioner of Income Tax [2014 (8) TMI 425 - DELHI HIGH COURT] It is observed that the Revenue has not placed any material on record in respect of evidence qua the present assessee collected during the search operation. Moreover, the satisfaction as envisaged under Section 153C is also not placed on record. Therefore, we have no option but to accept the contention of Ld. Counsel for the assessee that no satisfaction was recorded by the Assessing Officer of the searched party, this contention is supported by the reply of Revenue furnished under Right to Information Act. It is expected that the Assessing Officer should be careful in complying with the mandate of law to avoid loss to exchequer. Accordingly the ground raised by the assessee in cross objection, that the proceedings initiated under Section 153C is bad in law is allowed. The assessment framed u/s 153C read with section 143(3) pertaining to the Assessment Year 2003-04 is quashed. Since we have quashed the assessment on the legal issues. We are not adjudicating the other grounds raised in cross objection - Decided in favour of assessee.
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2015 (3) TMI 836
Capital gain arising on sale of agricultural land - transfer of Power of attorney (POA) - treatment of sale of agricultural land as business income of the assessee - sale of land as such or plotted land - Held that:- Power of attorney is coupled with interest makes the assessee is owner u/s 2(47) of the Act. Further there is no dispute with regard to the ownership and enjoyment of property. Sec. 2(47) of the Income tax Act provides for taxation of Power of attorney transactions. Right to exploit is a Capital asset as held by Hon’ble Madras High Court in the case of A.R.Krishnamurthy and A.R. Rajagopalan Vs. CIT (1980 (12) TMI 33 - MADRAS High Court).The assessee is entitled to maintain two different portfolios, one for “Stock in Trade” and another one for “Investment” as per the decisions of various High Courts. The intention of the assessee was to hold these agricultural lands as Investment only. The assessee has declared agricultural income in the returns of income filed by him. Further, the assessee has also filed certificates obtained from Village administrative officer to prove the fact of use as agricultural lands. Some of the lands sold by the assessee have been categorized as “residential land” by the Sub-registrar Office for the purpose of collection of Stamp duty and hence such classification would not determine the character of land. The fact remains that the assessee has cultivated the lands and has declared agricultural income, which is also supported by the certificate of the Village Administrative Officer.The assessee did not develop these lands by forming roads etc., but has sold as agricultural lands only in cents and acres and not in ‘square feet’, which is the normal case in case of housing plots. Lands have been sold in continuous stretches without creating any road for access. Future potential is not relevant and the Character of land as on the date of sale is more relevant as held by the Hyderabad bench of ITAT in the case of DCIT Vs. M. Kalyan Chakravarthy [2014 (11) TMI 338 - ITAT HYDERABAD]. In the case of Mrs. Sakunthala Vedachalam and Mrs. Vanitha Manickavasagam (2014 (9) TMI 3 - MADRAS HIGH COURT), the Hon’ble jurisdictional High Court has held that the manner in which the adjacent lands are used by the owner therein is not a ground to come to a conclusion that the assessees’ lands are not agricultural lands. The principle that the assessee can hold assets either as “Stock in trade” or as “Investment” is now recognized.Accordingly, we set aside the order of Ld CIT(A) on this issue and direct the AO to delete assessment of gain arising on sale of agricultural land. - Decided in favour of assessee. Disallowance of development expenses - CIT(A) deleted disallowance - Held that:- The fact remains that the assessee has developed the land, i.e., he has laid roads, divided the land into various plots after leveling etc. It is in the common knowledge of everybody that the assessee should have incurred huge expenditure, without which he could not have sold the plots.we are of the view that the ld CIT(A) was not correct in deleting the entire amount of disallowance by simply following the decision in the case of M/s Jubilee Plot and Housing Pvt. Ltd., assessee’s sister concern. Since there is failure on the part of the assessee also, we are of the view some disallowance is called for in order to cover up the deficiencies, if any and also to put this issue at rest. Accordingly, we are of the view this issue would meet the ends of justice, if the disallowance is restricted to a lump sum of ₹ 50.00 lakhs in order to cover up the deficiencies, if any. We order accordingly. - Decided partly in favour of revenue.
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2015 (3) TMI 835
Penalty levied under section 271(1)(a) - Unexplained bank deposit / credits, Unexplained LIC premium payments u/s 69, benefit of telescoping of additions of deposits in bank and payment of LIC premium denied, agricultural income of ₹ 9,85,000/- declared by appellant is not substantiated, estimated addition of house hold expenses of ₹ 3,00,000/- Revenue submitted that the details were not submitted before the Assessing Officer though sufficient opportunity was granted to the assessee. - Held that:- Addition has been made by the Assessing Officer on account of unexplained cash credit in the bank account, LIC premium payments, household expenses and agriculture income. We find that the assessee submitted the details before the ld. CIT(A) which is also placed on record at page Nos. 39 and 40 of the paper-book. From the details, it is seen that the assessee has furnished explanation and also the relevant page numbers of the evidences in support of his explanation. We find that the aforesaid submissions were not considered by ld. CIT(A) and it was considered as additional evidences to be not admissible. Procedural defects and irregularities which are curable should not be allowed to defeat substantive rights or to cause injustice. Procedure, a hand maiden to justice, should never be made a tool to deny justice or perpetuate injustice by any oppressive or punitive use. Considering the totality of the facts and relying of the aforesaid decision of CIT vs. Scientific Chemicals, (2005 (6) TMI 27 - GUJARAT High Court ), after applying the ratio of Tin Box Co. Vs. CIT, (2001 (2) TMI 13 - SUPREME Court) - Decided in favour of assessee for statistical purposes.
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Customs
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2015 (3) TMI 861
Denial of refund claim - Section 27 - Whether claim of refund arising out of final assessment to be made vide an application u/s 27 or the same has to be refunded immediately u/s 18 not requiring assessee to move an application – bill of entries of import were provisionally assessed on 24.08.98 & 02.02.99 and duty was paid – refund arised on final assessment on 21.06.99, 15.06.99 – whether clause of unjust enrichment u/s 27(2) would be applicable - Held that:- The assessee has paid provisional duty which gets reduced on final assessment. The assessee, therefore, becomes entitled to refund which is payable in terms of Rule 9B of the Excise Act, 1944 or Section 18 of the Act. For refund on this account, no application is required to be filed u/s 27 of the Act and therefore, sub-Section (2) relating to unjust enrichment is not applicable. Further, insertions vide sub-sections (3), (4) and (5) to Section 18 are effective from 13.07.06 and obviously are not applicable to the case in hand as they do not have retrospective effect. - Following decision of COMMISSIONER OF CUSTOMS Versus INDIAN OIL CORPORATION [2012 (1) TMI 31 - DELHI HIGH COURT] - Decided in favor of assessee.
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2015 (3) TMI 860
Waiver of pre deposit - Tribunal granted extension of the time to make the pre-deposit ordered in the stay petition - Held that:- It is seen from the order of the Tribunal that even though the assessee pleaded financial hardship before the Tribunal, the assessee did not produce any documents to prove the same. Before us also, learned counsel appearing for the appellant pleaded financial hardship but no details or documents have been furnished in support of such a plea. We find no good reason to accept such a mere statement of financial hardship as a cause to modify the order of pre-deposit. The order of the Tribunal seems to be justified in the facts and circumstances of the case. In the absence of any materials placed before this Court, we see no reason to interfere with the order passed by the Tribunal. - However, time period to make pre deposit is extended - Decided partly in favour of assessee.
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2015 (3) TMI 859
Power of deputy Commissioner - Power to condone delay - Duty drawback claim - Held that:- The delay in filing drawback claim in both the cases was less than 3 months - As per provision of Rule 5 of Re-export of Imported Goods (Drawback of Customs Duties) Rules, 1995 as amended, the AC/DC of Customs is empowered to extend the initial period of 3 months by a period of the three months. - department has not challenged the genuinity of drawback claim but questioned the competency of AC/DC to condone the delay on the ground that condonation application was filed after six months. In this regard, Government observes that the delay involved in filing drawback claim is calculated from the date of Let Export Order to the date of filing drawback claim. In this case, as discussed above, the delay is less than 3 months and AC/DC of Customs has rightly condoned the delay - No infirmity in impugned order - Decided against Revenue.
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Corporate Laws
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2015 (3) TMI 857
Challenge to the acquittal of the respondent - offence punishable under Section 138 of the Negotiable Instruments Act - Held that:- The complaint was filed in personal capacity by Kuldip Singh Deol and Kewal Kaur and as per complainants, they gave friendly loan to the accused, whereas the cheques were issued in favour of the firm of the complainants as per the complaint. Therefore, there is also contradiction whether the friendly loan was given in personal capacity of the complainants or by the complainants' firm. Even as per income tax provisions, such a huge amount cannot be given in cash. There is also nothing on record to show that this amount has been given on interest or not. No pronote or any document was got executed while giving the loan. If the cheques were given in the name of the firm, then it will be treated as that loan was given by the firm. There must be some account of the firm showing payment of this amount to the accused but no such account of the firm has been shown by the complainants. Therefore, the presumption under Section 139 of the Negotiable Instruments Act has been rebutted from the complaint as well as the cross-examination of the complainants. Court after discussing the evidence on record, has correctly held that the accused has rebutted the presumption under Section 139 of the Act. The complainants failed to prove that loan was given to the accused as friendly loan as stated by him. Therefore, the cheques issued in the name of the firm, were not issued in discharge any legal liability. - the impugned judgment dated 13.11.2013 passed by learned JMIC, Jalandhar is correct and as per law and does not require any interference from this Court - Decided against appellant.
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Service Tax
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2015 (3) TMI 875
Mainatinability of appeal - Availability of alternate remedy - Held that- authorities of the Central Excise Department have been repeatedly issuing notices despite the matter having been settled by the Tribunal without even challenging the order of the Tribunal before the higher forum. - decision of the Tribunal would be binding upon the authorities so far as any point of law is settled therein subject to the right to challenge such decision before the higher forum. - However, considering the other fact that the petitioners have approached this Court against the notices issued by the service tax authorities, we consider it appropriate that the issue of fact and law may be raised more appropriately by the petitioners before the authorities by filing their show-cause/reply to the notice. - Decided against assessee.
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2015 (3) TMI 874
Demand of service tax - manpower supply or recruitment service - M/s. Raje Vijay Singh Dafale SSK Ltd. (RVDSSK Ltd.), Sangli was a sugar factory and due to default in payment of loans, the said factory was taken over by M/s. Maharashtra State Co-operative Bank Ltd. who leased out the factory to M/s. Rajaram Bapu Patil SSK Ltd - Held that:- The lessor is the bank and the lessee is M/s. Rajaram Bapu Patil SSK Ltd. The appellant is the borrower. As per the agreement, the lessor being a secured creditor had taken over the factory of the borrower under Section 13(2) of the SARFAESI Act, 2002 to recover its dues and has leased out the factory of the borrower to the lessee. As part of the agreement, the lessee has undertaken to continue the services of the persons who were on the muster rolls of the borrower as permanent employees and the lessee was required to pay salaries/wages to the employees directly. Therefore, it cannot be said that the appellant has provided any service by way of manpower supply to the lessee. In any case, the salaries/wages were paid directly to the employees/workers and the appellant has not received any consideration for any services rendered. Therefore, the question of demanding any service tax in the absence of a consideration will not arise at all. - Impugned order is set aside - Decided in favour of assessee.
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2015 (3) TMI 873
Failure to pay service tax on the expenses recovered from the service-recipient - reimbursement of expenses - appellant had incurred travel expenses while providing output service and the said travel expenses were recovered from the service-recipient - contravention of the provisions of Section 68(1) read with Section 66 of the FINANCE Act - Held that:- A perusal of the sample invoice produced by the learned counsel, it indicates separately the inspection and service charges as also the to-and -fro actual charges for travelling. We find that there is no dispute as to the fact that the appellant discharged appropriate service tax liability on the service charges billed by them for rendering services to the client. The amount which has been collected by the appellant seems to be travelling expenses incurred by the appellant's engineers to visit the site of the client. We find force in the contention of the learned counsel that the issue is covered by the order of the coordinate bench of the Tribunal in the case of Reliance Industries Ltd. (2008 (6) TMI 78 - CESTAT AHMEDABAD). - impugned order is unsustainable in law and is liable to be set aside - Decided in favour of assessee.
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Central Excise
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2015 (3) TMI 868
Denial of CENVAT Credit - Cenvat Credit is available only to the person, to whom the goods have been sold by the manufacturer and not to any other person - Held that:- Rule 9 of Rules 2004 provides that cenvat credit shall be taken by the manufacturer or the provider of output service or input service distributor, as the case may be, on the basis of an invoice issued by a manufacturer of inputs or capital goods from his factory or depot or from the premises of the consignment agent of the said manufacturer or from any other premises from where the goods are sold by or on behalf of the said manufacturer. Rule 3 of the said Rules 2004 provides a manufacturer shall be allowed to take credit the specified duty as mentioned therein, on any input received in the factory of manufacturer. In the present case, the appellant availed credit on the basis of invoice issued under Rule 9 of the said Rules. There is no dispute that the input received in the factory of the appellant. In any event, the manufacturer of input supplied the goods in DTA. Thus, there is no scope to use the documents by the overseas company. So, the denial of cenvat Credit is not justified. Appellants name was mentioned in the invoices and the goods were delivered at the appellant s factory and the cenvat credit was availed on the basis of invoices as mentioned under Rule 9 of Rules 2004 and the input utilized in the manufacture of final product. There is no dispute that the entire consignment was received by the appellant. So, there is no reason to deny the cenvat credit to the appellant. Accordingly, the impugned order is set aside. - Decided in favour of assessee.
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2015 (3) TMI 867
Clandestine removal of goods - Shortage of goods found - Charges framed on the basis of statement of appellant no. 2 - Held that:- appellant No.1 had taken stand that Shri Hakim Thanawala is not concerned with the appellant firm. It seen from the show cause notice that Central Excise officers visited the appellant s premises on the basis of intelligence and thereafter how they accepted Shri Hakim Thanawala as Director of the Company when the appellant firm is registered with the Central Excise authorities as partnership firm. It is strange that the Central Excise officers visited the premises of the assessee and conducted stock verification and recorded the statement without verifying the identity of a person. There is no material available on record to establish that Shri Hakim Thanawala has any connection with the appellant firm. - it is the responsibility of the Revenue to identify the person while recording the statement. It is seen that no statement of any employee of the appellant firm was recorded. The Central Excise officers visited the premises of the appellant firm on 06.3.2007 and show cause notice was issued on 02.6.2009 and no verification was conducted or otherwise. Thus, the demand of duty on the basis of the stock statement and statement of a person, who has no relation with the Appellant firm, can not be sustained. - However, reduced penalty on the 2nd appellant is sustained. - Decided partly in favour of appellants.
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2015 (3) TMI 866
Clandestine removal of goods - non-recording of the lorry being put to use for weighment - Held that:- Tribunal on the statement drawn in the mahazar and other records on which we did not want to dwell further to come to a different conclusion. Nevertheless, before this Court, the appellant while seeking to consider the first question of law, has failed to bring to our attention the plea of the Department in the appeal filed before the Tribunal that non-production of the mahazar witness was not fatal to the case, by producing the memorandum of appeal filed by the Department before the Tribunal. - In the absence of any such material, there is no possibility for this Court to consider this issue at all. The next question is whether stock taking conducted on eye estimation is fatal to the case of the Department. We find that the order of the Tribunal is not on the basis of visual inspection, but based on mahazar records recording the shortage of goods, which has been done in the presence of the independent witnesses and such shortage was supported by the unretracted statement of Mr.Balaji, Manager of the assessee company. In this view of the matter, the non-recording of the correct quantity of goods in the statutory record, viz., RG.1 register maintained by the assessee establishes the case for demand of duty, more so in a case of statement accepting Central Excise violation. - Decided against assessee.
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2015 (3) TMI 865
Condonation of delay - Delay of 38/39 days in filing appeal - Held that:- Court is not inclined to agree with the finding of the Tribunal refusing to condone the delay of 38/39 days in filing the appeal. The reason for the delay has been explained by the appellant - From the explanation offered by the appellant, it is clear that a decision was taken by a Committee of Commissioners and, therefore, there is no scope for the concerned Commissioner to interdict and seek for earlier review by the Committee. The delay was not within the hands of the concerned Commissioner. The decisions of the Supreme Court in Collector, Land Acquisition Anantnag & Anr. - Vs MST Katiji & Ors. (1987 (2) TMI 61 - SUPREME Court) and State of Nagaland Vs LIPOK AO (2005 (4) TMI 321 - SUPREME COURT OF INDIA) relied on by the counsel for the appellant is squarely applicable to the facts of the present case as sufficient cause has been shown for condoning the delay. In the circumstances, without going into the questions of law raised, this Court is of the considered view that the order passed by the Tribunal is liable to be set aside. - Order of Tribunal is set aside - Decidedin favour of Revenue.
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2015 (3) TMI 864
Appointment of ex-departmental officers are Authorised Representatives before the CESTAT - Petition seeking to declare that Rule 9 of Customs (Appeals) Rules, 1982 is ultra vires Customs Act, 1962 and Rule 12 of Central Excise (Appeals) Rules, 2001 is ultra vires the Central Excise Act, 1944 - Held that:- submission of that under Section 33 of the Advocates' Act, 1961, it is only an advocate enrolled therein, unless permitted by any other law, is entitled to practice before any Court or authority and since neither Customs Act, 1962 nor the Central Excise Act, 1944 relaxes this requirement, Rule 9 of the Customs (Appeals) Rules, 1982 and Rule 12 of the Central Excise (Appeals) Rules, 2001 are ultra vires the two enactments, is but a specious plea. So also, the second submission that a person enrolled as an advocate is entitled to practice before any authority or Court, unless there is a law to the contrary, and therefore a person possessing a degree in law alone is entitled to appear as "Authorized Representative", is yet another specious plea. The aforesaid provision of both the statutes permit legal practitioners to appear before officers and Appellate Tribunal as "Authorized Representative" and therefore, petitioner cannot have any grievance. A person enrolled as an advocate under the Advocates' Act, 1961 is not ipso facto entitled to a right of audience in all Courts unless Section 30 of that Act is first brought into force. A right of an advocate brought on the roles to practice is, therefore, just what is conferred on him by Section 14(1 )( a) and (c) of the Bar Council's Act, 1926. We may notice that apart from Article 22(1) of the Constitution, no litigant has a fundamental right to be represented by a lawyer in any Court, since such a right is envisaged in an accused who is arrested and detained in custody. Reference may be made to the observations of three Judge Bench decision of the Apex Court in Lingappa Pochanna Appelwar & others v.s . State of Maharashtra & another [1984 (12) TMI 321 - SUPREME COURT], as also Paradip Port Trust, Pradip vs. Their Workmen [1976 (9) TMI 174 - SUPREME COURT]. Group 'A' on retirement or resignation after having served for not less than three years in any capacity, from appearing as an authorized representative, in any proceeding before a Central Excise Officer for a period of two years from the date retirement or resignation.. Thirdly, the possibility of bias or likelihood of bias must be shown to be present, while, what is canvassed is a mere suspicion of bias which could hardly be a foundation for further examination of the action. In the circumstances, Group 'A' officers on retirement or resignation from the department when appointed as special counsel to appear as authorized representative of the department, per se, cannot be said to be in real danger of bias, but characterized as only a probability or even a preponderance of probability of such a bias, hardly affecting the decision, muchless , adversely. Fourthly, in the absence of a challenge to the Rules over legislative competence, the Rules in question primarily based upon public perception and normal behaviour of an ordinary human being cannot be said to be ultra vires the provisions of both the Acts. There can be no stress on appeals beings heard only on "Substantial Questions of Law", so as to draw a parallel to a proceeding before the National Tax Tribunal and deny persons set out in both the Rules in question, to represent as "Authorized Representatives" for the department. - there is always a presumption in favour of constitutionality of an enactment and the burden is upon him who attacks it to show that there has been a clear transgression of the constitutional principles; it must be presumed that the legislature understands correctly, appreciates the need of its own people, that its laws are directed to problems made manifest by experience and that its discriminations are based on adequate grounds; and that the legislature is free to recognized degrees of harm and may confine its restrictions to those cases where the need is deemed to be clearest - Decided against Appellant.
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2015 (3) TMI 863
Denial of rebate claim - Denial on ground that amount paid on part of ARE-1 value over and above the FOB value is not the duty of Central Excise but is to be treated as "excess payment" - rebate in terms of Rule 18 of the Central Excise Rules, 2002, is the rebate of Central Excise Duty paid on the exported goods - Held that:- As per section 35 EE of Central Excise Act, 1944 Central Government on the application of any person aggrieved by any order passed under section 35 A where order is of the nature referred to in the first proviso to section 35B(1) annul or modify such order provided that Central Government in its discretion refuse to admit an application in respect of an order where amount of duty or fine or penalty determined by such order does not exceed five thousand rupees. In this case disputed rebate claim amount is only ₹ 3,624/- and therefore in view of provisions of first proviso to section 35EE(1), Government is not inclined to accept said revision application and rejects the same. - Decided against assessee.
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2015 (3) TMI 862
Denial of rebate claim - applicant a merchant-exporter has declared in impugned ARE-1 that they are availing benefit of 21/2004-C.E. (N.T.), dated 6-9-2004 and Notification 43/2001-C.E. (N.T.), dated 26-6-2001, however they failed to follow the mandatory provisions as required under Notification No. 21/2004-C.E. (N.T.), dated 6-9-2004 and Notification 43/2001-C.E. (N.T.), dated 26-6-2001 - Held that:- applicant prepared the ARE-1 under claim of rebate and paid applicable duty at the time of removal of goods. The original authority in rebate sanctioning orders have categorically held that applicants have exported the goods under claim of rebate under Rule 18 of the Central Excise Rules, 2002 read with Notification No. 19/2004-C.E. (N.T.), dated 6-9-2004 and also that range Superintendent confirmed the verification of duty payment. As such, the exported goods are duty paid goods. Once, it has been certified that exported goods have suffered duty at the time of removal, it can be logically implied that provisions of Notification No. 21/2004-C.E. (N.T.), dated 6-9-2004 and Notification 43/2001-C.E. (N.T.), dated 26-6-2001 cannot be applied in such cases. There is no independent evidences on record to show that the applicant have exported the goods without payment of duty under ARE-2 or under Bond. Simply ticking a wrong declaration in ARE-1 form cannot be a basis for rejecting the substantial benefit of rebate claim. Under such circumstances, the rebate claims cannot be rejected for procedural lapses of wrong ticking. In catena of judgments, the Government of India has held that benefit of rebate claim cannot be denied for minor procedural infraction when substantial compliance of provisions of notification and rules is made by claimant. - Government finds that once the merits of rebate claims, found to be in favour of applicants, the sanction of same cannot be treated as erroneous and hence, no recovery is warranted. - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2015 (3) TMI 872
Rejection of assessee's tender - tender of the petitioner has been rejected for the reason that the petitioner has not produced the TIN number and has also collected the demand draft of amount of earnest money - Held that:- It is the terms and conditions of each department as to whether the registration under the Act is required or not. In fact, the terms and conditions, as attached with the petition, does not make any of the condition as directory. It appears that the tenderers are required to respond to each of the conditions - The purpose of registration under the Act is for deduction of tax at source from the works contract for which tenders were invited. Not only the petitioner is not registered under the Act but the petitioner has also taken his earnest money back. In view thereof, the petitioner ceases to be a willing tenderer in response to the tender for construction of pre-fab shelter. - inadvertent mistake in the communication will not confer any right as TIN number is a requirement of the Act whereas the Permanent Account Number is the requirement of the Income Tax Act,1961. - No merit in appeal - Decided against assessee.
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2015 (3) TMI 871
Jurisdiction of High Court - Held that:- Admittedly, in this case, the sales had been done to the tune of ₹ 47,00,000/=. In view of section 3(4)(a)(ii) extracted supra, the respondent has no jurisdiction to assess the tax based on the purchase value. According to the petitioner, the respondent had taken the purchase value as yardstick without considering the provisions of the Act. The statute speaks about the Sales Tax turnover alone for the purpose of liability under section 3(4) of the Tamil Nadu Value Added Tax Act, 2006. - The respondent has filed counter contending that the petitioner has got alternative remedy of filing appeal under section 51 of the Act and this court need not exercise its extra-ordinary jurisdiction to interfere with the order passed. - Hence, the impugned order is set aside - Decided in favour of assessee.
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2015 (3) TMI 870
Validity of Tribunal's order - Whether, in the facts and under the circumstances of the case, the Gujarat Value Added Tax Tribunal was right in law and on facts in deciding the appeal on merits when the Deputy Commissioner (Appeals) had not decided the appeal on merits but dismissing it only for non payment of predeposit - Held that:- Following decision of JYOTI TRADERS Versus STATE OF GUJARAT [2015 (2) TMI 592 - GUJARAT HIGH COURT] - There are no distinguishing facts and circumstances on the question of predeposit. Hence, the question is required to be answered in negative, in favour of the assessee and against the revenue. When the condition of predeposit ordered by the Tribunal was satisfied and as the First Appellate Authority had not examined the Appeal on merits, it was required for the Tribunal to remand the matter to the First Appellate Authority for examining the Appeal on merits but the Tribunal, instead of remanding the matter to the First Appellate Authority, decided to examine the merits of the Appeal and has passed the impugned order. Considering the facts and circumstances and more particularly in view of the aforesaid decision of this Court, we find that such an approach on the part of the Tribunal for not remanding the matter to the First Appellate Authority for examination on merits and proceeding to decide the merits of the Appeal, is exfacie erroneous. However, as the condition of predeposit has been complied with in the Appeal before the Tribunal, we find that instead of sending the matter to the Tribunal it would be just and proper to send back the matter to the First Appellate Authority for examination of the merits of the Appeal. - Matter remanded back - Decided in favour of appellant.
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2015 (3) TMI 869
Manufacture - conversion of wet blue leather into finished leather - whether process by which the wet blue leather is turned into finished leather amounts to 'manufacture'? Held that - conversion of wet blue leather into finished leather through several process such as splitting, shaving, neutralizing, bleaching, dyeing, fat-liquoring, stuffing, setting out, samming, drying, staking, and finishing. Wet blue leather loses its identity as wet blue leather and becomes a different commodity with a distinct identity in the market and in the industry concerned. Activity amounts to a manufacturing activity. - Following decision of GOLDEN LEATHERS Versus SECY., TAMILNADU SALES TAX APPELLATE TRIBUNAL [2010 (4) TMI 535 - MADRAS HIGH COURT] - Decided in favour of assessee.
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Indian Laws
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2015 (3) TMI 858
Matter remanded back by high court for de novo trial - Summary Trial - Criminal proceedings under Section 138 of the Negotiable Instruments Act, 1881 - Section 143 of Negotiable Instrument Act, 1881 - De novo trial should be exercised as a last resort. Held that:- On scrutiny of record available in SLP(Crl) No. 5623 of 2012, we found that there has been in total 82 hearings spread over five years. Out of 82 hearings, 67 hearings were done by Jt. C.J. (J.D.) and J.M.F.C., Veraval. The Magistrate was transferred on 24.02.2005 and was replaced by J.M.F.C., Veraval who heard the case for 14 more times and delivered judgment on 15th hearing i.e. on 12.09.2005. Thus by any stretch of imagination, the trial which extended over five years and was decided in over 82 hearings with elaborate cross examination, deposition and all trappings of regular trial cannot simply be termed as summary trial . Be that as it may, to satisfy ourselves we have carefully gone through the records of the Trial Court as well as the High Court in each matter before us. There is no doubt, as per the record, learned Magistrate has not specifically mentioned that the trial was conducted as summons case or summary case. Though in the record of SLP(Crl) No. 734 of 2013, at some places the word 'summary' was mentioned as regards to the nature of proceedings of the case, having given our anxious and thorough consideration, we found that the word 'summary' used therein was with reference to Chapter XXII of Cr.P.C., 1882 and it does not relate to the 'summary trial' envisaged under Section 143, of the N.I. Act. Pertinently, before the Trial Court the Suit No. 4457 of 2001 has been referred at some places as 'Summary Suit' and at some other places it has been referred as 'Civil Suit'. Similarly, the case number 5294 of 1998 has been shown at some places as Summary Case and at some other places it was shown as Criminal Case. After a careful examination of the record, we came to the conclusion that the word 'summary' used at some places was with reference to summary trials prescribed under Cr.P.C. Needless to say that the summary trial as preferred mode of trial in the matters related to negotiable instruments was inserted by the Amendment Act, 2002 only w.e.f. 6th February, 2003. A case under section 138 of the N.I. Act, which requires to be tried in a summary way as contemplated under section 143 of the Act, when in fact, was tried as regular summons case it would not come within the purview of section 326 (3) of the Code. In other words, if the case in substance was not tried in a summary way, though was triable summarily, and was tried as a summons case, it need not be heard de novo and the succeeding Magistrate can follow the procedure contemplated under section 326 (1) of the Code. But where even in a case that can be tried summarily, the Court records the evidence elaborately and in verbatim and defence was given full scope to cross-examine, such procedure adopted is indicative that it was not summary procedure and therefore, succeeding Magistrate can rely upon the evidence on record and de novo enquiry need not be conducted. The High Court in the present cases remanded the matters for de novo trial on the basis of flawed application of Nitinbhai's Saevatilal Shah case [2011 (9) TMI 918 - SUPREME COURT] in spite of the fact that these cases are pending for over a decade. It went unnoticed by the High Court that the appellants have raised the plea of mode of trial due to change of Magistrate for the first time before the High Court. The same has not been raised when the change of Magistrate took place in the Court below during the course of trial. This clearly shows that only for the purpose of protracting the litigation, the plea has been taken for the first time. Had it been their case that because of the procedure adopted by the Court substantial miscarriage has taken place, they would have raised this plea at a much early stage of the proceedings. In the present cases on hand, without strong, cogent, unimpeachable evidence on record that cases were tried 'summarily' but not as regular trial, the Court below gravely erred in remanding them to the Trial Court for a de novo trial. In the light of the discussion made above, we are of the considered opinion that the High Court failed to appreciate the evidence on record in its true perspective. The High Court erred in arriving at a conclusion that the mode of trial in all these matters was summary trial whereas the record of the trial Court adequately shows that regular trial was undertaken in these matters. Hence, in our considered opinion, the matters are required to be remanded back to the High Court for consideration on merits. We make it clear, that we have not expressed any opinion on the merits of the cases. The High Court should, by conducting an independent inquiry and by reasoned order, dispose of the cases on their own merits as expeditiously as possible, preferably within a period of three months due to the fact that these cases are languishing for almost 14 years. - Decided in favour of appellant.
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2015 (3) TMI 856
Article 13 of the Uniform Customs and Practice of Documentary Credits (UCP) 500 - Letter of Credit - Standard for examination of documents - Held that:- In trans-border or international transactions, trade depends almost entirely on the faith reposed in banking institutions to secure the price of the exported goods, commodities etc. The Exporter can legally and reliably expect that the Bankers will watch its interests by ensuring that the exported consignment shall be released to the buyer only on the transmission of the price of the shipment as secured through the Letter of Credit - Heavy and fiduciary responsibility, therefore, rests on the Opening Bank which furnishes the Letter of Credit to ensure that payment is secured unless the documentation is defective and/or the invocation of the Letter of Credit is discrepant. In every legal system spanning our globe, jural opinion is unanimous to the effect that the Opening Bank cannot disregard, delay or dilute its responsibility to make payment strictly and promptly as obligated by the terms of the Letter of Credit. This Bank owes a duty to all concerned to ensure that any action taken by it would not enable or conduce the frustration of the obligations contained in a Letter of Credit, as recognised by International Banking norms or extant Uniform Customs and Practice for Documentary Credits (UCP) 500. Appellant before us, should not have certified the documentation, reasonably anticipating or being aware of the possibility that this certification could be abused. Law assures the Exporter and its Bank to repose in the expectation, nay, certainty, that the consignment, which is the subject-matter of the Letter of Credit, is not usurped by the Importer/Consignee or its agents, without remitting payment to the consignor’s Bank. This is a strict liability cast on the bank which opens the Letter of Credit, since otherwise International trade and commerce will virtually and indubitably come to a standstill. LC has the effect of creating a bargain between the banker and the vendor of goods, a deemed nexus between the Seller and the Issuing Bank, rendering the latter liable to the Seller to pay the purchase price or to accept a Bill of Exchange upon tender of the documents envisaged and stipulated in the LC (See Tarapore and Co. vs. V.O. Tractors Export, [1968 (11) TMI 97 - SUPREME COURT] where Halsbury’s Law of England have been relied upon). These observations have been repeated in United Commercial Bank vs. Bank of India [1981 (3) TMI 249 - SUPREME COURT], U.P. Coop. Federation Ltd. vs. Singh Consultants & Engineers (P)Ltd. [1987 (11) TMI 375 - SUPREME COURT], Federal Bank Ltd. vs. V.M. Jog Engineering Ltd. [2000 (9) TMI 1039 - SUPREME COURT], Himadri Chemicals Industries Ltd. vs. Coal Tar Refining Co. [2007 (8) TMI 704 - SUPREME COURT]. The Opening Bank must only look to assure itself that the invocation is in terms of the LC, and the completion of this exercise has consistently been circumscribed to a short period, which in the case in hand is one week as per Article 13 B of UCP 500. Written Statement filed by the Appellant in the Dhaka litigation discloses that its position was that it was “under obligation to reimburse the payments to the supplier’s corresponding bank i.e., Defendant No.3” (Bank of America Ltd. therein). This admission of fact is clear, and in consonance with the law pertaining to legal obligations concerning Letters of Credit, obliges it to remit payments contemplated therein. Assuming that the Appellant did not take any mala fide action so as to enable the Importer to have the consignment released without authority, it was in clear violation of its fiduciary responsibility as the Opener of a Letter of Credit. Therefore, insofar as the factual matrix is concerned, the Appellant had correctly made the statement pertaining to its liability in the Dhaka Suit, which can legitimately be taken as an admission in the Calcutta Suit. interim Order, it may be recalled, did not restrain or interdict the operation of the impugned Judgment and has in actuality, rendered the Appeal infructuous, since the LC amounts have left the Appellant’s coffers. In view of the admission of fact made by the Appellant, we think the Court was correct in concluding in the impugned Judgment that a money decree for the sum secured by the subject Letter of Credit (for USD 352,250) should be passed. - Decided against appellant.
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2015 (3) TMI 855
Proper authority to investigate cases of corruption - Special Judge for CBI cases, Madurai allowed the G.A. Suriya Kumar, Sub-Inspector of Police to investigate the case - whether the order passed by the Magistrate permitting the Sub-Inspector, CBI, Chennai to investigate the matter can be sustained in law. - Held that:- As noticed, on the basis of the permission accorded by the Magistrate, the Sub-Inspector, CBI proceeded with the investigation and finally submitted charge-sheet. It was only after that, said order of Magistrate was questioned by the Respondent by filing a criminal petition in the High Court. The learned Single Judge, appreciating the submission made by the learned counsel, held that since the special court without assigning any reason permitted Sub-Inspector of Police to investigate the matter, the order is not in accordance with law and disposed of the petition giving liberty to the prosecution to file a fresh petition before the court seeking permission to get the matter investigated by a competent officer. - High Court erred in overlooking the gist of order of Special Judge permitting the Sub-Inspector to investigate. Further, having regard to the fact that no case of prejudice or miscarriage of justice by reason of investigation by the Sub-Inspector of Police is made out, the order of the High Court cannot be sustained in law. - Decided in favour of appellant.
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