TMI Tax Updates - e-Newsletter
March 3, 2017
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:
Estimation of value of assets by the Valuation Officer - if the petitioner has any objection to the Valuation Report, he can again raise an objection to the Valuation Report before the Assessing Officer u/s 142A(7) - HC
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Income Tax:
Addition towards payment made to credit card company - since the assessee had not claimed any expenditure, the question of proving whether it was for the purpose of business do not arise - AT
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Income Tax:
Allowability of business expenditure u/s 37(1) - Old business wisdom states that even at the cost of lakhs credit/ reputation/goodwill should be preserved(Jaaye laakh, rahe Saakh). In short, expenditure incurred by the assessee even voluntary and without any legal obligation has to be allowed as it was incurred for preserving the reputation of its business - AT
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Income Tax:
TDS at higher rate of 20% in the absence of PAN - the assessee cannot be held liable to deduct tax at higher of the rates prescribed in section 206AA in case of payments made to non-resident persons having taxable income in India in spite of their failure to furnish the Permanent Account Numbers - AT
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Income Tax:
Addition u/s 68 - genuineness of the creditors - the burden cannot be shifted to the revenue to find out from the creditors about their identity and credit worthiness after receiving the names and addresses of the creditors - AT
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Income Tax:
Transfer pricing adjustment (TPA) - ALP determination - the contract termination fee also partakes the character of the contract receipt and is to be treated as operating revenue of the international transactions more particularly since the expenses incurred by the assessee on such contract has been taken as operating cost. - AT
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Income Tax:
Merely because some of the donors have stated that they have given donation for admission, which have been retracted later on, the same in our opinion will not dis-entitle the assessee trust from getting exemption which is existing solely for educational purposes - There cannot be wholesale denial of exemption u/s.11 for violations of provisions of section 13(1)(c) - AT
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Service Tax:
Interest on delayed refund - Section 11B of the CEA, 1944 - the argument of the revenue that neither the adjudicating authority granted interest nor did petitioner seek it at any stage is of no avail - interest allowed - HC
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Service Tax:
Refund claim - export of services - The BAS provided from Gurgaon unit is not disclosed in the monthly SOFTEX filed with the STPI as the Gurgaon unit is not registered with Software Technology Park. Therefore, only on this ground the refund is wrongly rejected - AT
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Service Tax:
Rent-a-car service - abatements - the notification was not mentioned in the ST 3 return - linkage for the consideration to the services rendered previously - apart from ST 3 returns giving details, the appellants provided the invoices along with supporting certificate of such receipt post 1.4.2006 - Demand set aside - AT
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Service Tax:
Refund claim - export of service from an unregistered premises - rejection on the ground of jurisdiction - N/N. 27/2012-CE(NT) - Notification being part of legislation, is to be strictly construed for grant of the fiscal benefit - refund not allowed - AT
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Service Tax:
Recovery of short paid service tax from legal heir, on death of assessee - there is no charge on the dead person - the demand of tax is not legal and proper - AT
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Central Excise:
Demand of differential duty - parties are related or not - loan licencee arrangement - the petitioners are not concerned whether M/s. Boots makes a loss or profit in the onward sale of Betonin. They are not holding and subsidiary company - The foundation being totally weak and unsustainable in law - HC
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Central Excise:
Clandestine Removal - in the absence of evidence in the form of to Manufacture of such huge quantity, the consumption of electricity, additional packing material payment for purchase of additional packing material, payment received for clandestine removal of goods, how the goods were transported, the charge of clandestine removal cannot sustain - AT
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Central Excise:
Clandestine removal - tobacco pouches - While the presence of machines is an admitted fact, the manufacture and clearance has not been evidenced with any corroborative evidence established during investigation - demand set aside - AT
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Central Excise:
CENVAT credit - site formation services - captive coalmines - Since there is no dispute that such services have been used, it is concluded that service tax paid is available as CENVAT credit - AT
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Central Excise:
Failure to make an entry in RG-1 (DSA) register - manufacturing of Gutkha - confiscation of goods manufactured in the factory and not cleared from the factory - Confiscation of raw material - the seizure and confiscation of goods manufactured in the factory and not cleared is not sustainable in law - AT
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Central Excise:
Who is liable to pay duty - Export Goods allegedly diverted in the local market in the guise of export - Bond executed by the non-existent merchant exporter - Manufacturer is liable to pay the duty with interest and penalty - AT
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VAT:
Valuation - inclusion of freight in the sales turnover - the entry in the books of account appropriating the amount of freight towards expenses and not including it in the purchase price is found to be wrong, and on that basis, the liability of tax imposed would be justified - tribunal was justified in rejecting books of accounts. - HC
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VAT:
Reversal of Input Tax Credit (ITC) - whatever be the effect of retrospective cancellation upon the selling dealer, it can have no effect upon any person, who has acted upon the strength of a registration certificate, when such certificate was alive - HC
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VAT:
Classification of goods - KVAT - Whether the Tribunal is right in law in holding that the Arecanut peeling/de- husking machine is classifiable under Agricultural implements not operated manually or not driven by animals falling - Held Yes - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2017 (3) TMI 94
Claim of deduction u/s 80IB could not have been denied to the assessee merely for the reason that the audit report was not furnished with the return of income. If deductions under sub-section (3) of Section 40A of the Act is not allowed then the same would have adjusted to the profits of the undertaking as a result of which it will be entitled to seek deductions under Section 80IB of the Act. HC order confirmed - 2016 (5) TMI 947 - ALLAHABAD HIGH COURT
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2017 (3) TMI 93
Unexplained credits - Held that:- Though the assessee had claimed that the said credit balance was from its Nepal company, despite various requests and opportunities provided, the assessee did not produce copies of audited accounts of the Nepal company for each of the years falling in the block period. Despite that, both the first appellate authority and the Tribunal erroneously proceeded on the basis that the assessee had produced audited accounts of Nepal company. Insofar as this case is concerned, a reading of the order passed by the Tribunal itself would show not only that the Tribunal and the first appellate authority had not even examined whether the assessee has established these three essential conditions, on the other hand, a reading of the order passed by the Tribunal would show that the Tribunal has given undue importance to its erroneous assumption that the assessee has produced audited accounts. Further, the Tribunal has also swayed by the fact that the mode of transaction of funds was transparent, ignoring the fact that even if the money came by way of bank cheques and was paid through the process of banking transaction that by itself is of no consequence. - Decided against assessee Additions towards service charges from sister concern at Nepal and the service charges from students - Held that:- As is evident from the orders impugned before us, it is the mercantile system which has been following by the Nepal company whereas the assessee was following cash system. The justification assigned by the Tribunal for upholding the cash system of accounting adopted by the assessee is the uncertainty involved in realisation of the amounts due. According to us, even if it is later realised by the assessee that some of the receivables as per mercantile system were not actually realised, the remedy available to the assessee, is to seek rectification. This has been recognised in judgment in C.I.T. v. United Provinces Electric Supply Co. [2000 (4) TMI 5 - SUPREME Court ]. For these reasons, we are unable to sustain this finding of the Tribunal as well. - Decided in favour of the revenue
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2017 (3) TMI 92
Valuation of opening and closing stock of the raw material (Tendu leaves) - method of valuation - whether the 'average price principle' could not have been applied? - Held that:- We do not find any force in the submissions made on behalf of the Revenue for referring the questions of law as stated in the application, under Section 256 (2) of the Act for a decision. The assessee is engaged in the manufacturing and sale of Bidis. It is not disputed that the assessee has branches and sub-branches at several places and the raw material, that is Tendu leaves is stored by the assessee in godowns in the places where the branches and the sub-branches of assessee are located. Tribunal found that during the last years where the said method of accounting had affected the assessee, the assessee did not change the method of valuation and even the Revenue did not point out the said fact to the assessee. The Tribunal rightly held that merely because the change of the method would help the Revenue in a particular year, the Assessing Officer is not at liberty to change the method of valuation that was followed by the assessee for a considerably long period. In the instant case, the assessee has not claimed that he was adopting the method of 'last in and first out' and the assessee had stated that it was possible for some time, in view of the practical difficulty that the Tendu leaves purchased subsequently could be utilized first and vice versa. The finding of facts recorded by the Tribunal do not give rise to any substantial question of law. - Decided against revenue
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2017 (3) TMI 91
Estimation of value of assets by the Valuation Officer - whether the opportunity, statutory in nature as contemplated under sub-section (4), was granted to the petitioner? - Held that:- On a perusal of the objection filed by the petitioner, we find that it is a four page objection bearing the signature of the petitioner and it is not known as to how and in what manner, and to whom it was submitted. In the first page in the left hand corner, the name in Hindi alongwith date 4.1.2017 is mentioned. However, there is no stamp of the Income Tax Department nor is there any proof of service of this letter on the Assistant Valuation Officer. We find that under sub-section (7) of Section 142A, when the Assessing Officer receives the Report, the Assessing Officer before taking cognizance of the report and acting on it, is again required to give an opportunity of hearing to the assessee and, therefore, if the petitioner has any objection to the Valuation Report, he can again raise an objection to the Valuation Report before the Assessing Officer under the provisions of sub-section (7) of Section 142A and, therefore, when such a statutory remedy is available to the petitioner to raise objections to the Valuation Report, in the facts and circumstances of the case when there is serious dispute as to whether opportunity was granted to the petitioner or not, we see no reason to make any indulgence in the matter. Petitioner may raise the objections before the Assessing Officer, when the Assessing Officer proceeds with the assessment proceedings after taking note of the Valuation Report.
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2017 (3) TMI 90
N.P. determination - Tribunal determining the net profit at 5% - Held that:- Considering the material on record, more particularly Annexure-A-7 and the order passed by the Settlement Commission, Central Excise, by which, on appreciation and/or considering the Annexure-A-7, the learned Settlement Commission has determined and/or arrived at net profit at 5% with respect to A.Ys. 2000-2001 and 2003-2004 and thereafter with respect to A.Ys. 2001-2002, 2002-2003 and 2004-2005, when the learned tribunal has determined the net profit at 5%, it cannot be said that the learned tribunal has committed any error which calls for interference of this Court. It is required to be noted that on the basis of the material on record, the learned tribunal has estimated net profit at 5%. - Decided against revenue
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2017 (3) TMI 89
Assessment u/s 153C - non recording of satisfaction - Held that:- It is not disputed that the search was carried out at the premises and in the case of one another person, Shri Vikas R. Patel. There was no satisfaction recorded by the Assessing Officer in the case of the searched person, Shri Vikas R. Patel before initiating Section 153 proceedings, and therefore, the mandatory requirement, before initiating the proceedings under Section 153C of the Act in the case of the assessee (other than the searched person) has not bee followed. It was the case on behalf of the revenue that separate satisfaction note was recorded by the Assessing Officer. However, as per catena of decisions of the Hon’ble Supreme Court as well as this Court, same is not sufficient to initiate the proceedings under Section 153C of the Act in the case of the assessee (other than the searched person). CBDT has also issued Circular No.24/2015 dated 31/12/2015 in which it is observed that recording of satisfaction note is prerequisite and the satisfaction note must be prepared by the AO before he transmits the record to the other AO who has jurisdiction over such other person. - Decided in favour of assessee
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2017 (3) TMI 88
Addition of unaccounted local sales of gold - Tribunal held that the artisans did not use the same quantity of gold as sent to them for manufacturing of gold ornaments, and therefore, the difference was to be added as unaccounted local sales within the country - ITAT relied on issue as concluded in the case of very assessee in AY 1989-90 - whether any new evidence was produced by assessee in the present matter, which was not there in Asst. Year 1989-99? Held that:- Assessing Officer noticed the gold content in the final product as per the Books of Accounts and as per the appraisal of customs authority. Therefore, the Assessing Officer worked out the excess consumption of gold which according to him had been actually sold in the local market. The Assessing Officer also noticed that similar modus operandi was done in the year 1989-90 also and there was no change in the modus operandi in the subsequent years under consideration. At this stage it appears that the assessee produced some further evidence which we have perused from the paper book produced and according to the assessee by producing such new evidences the case differs from 1989-90, as according to the assessee by using new evidences which were not there in the year 1989-90, they have been able to produce the evidence with respect to the actual consumption of gold in final product of ornaments which were exported. Considering the evidences from the paper book produced, which according to the assessee are new evidences, we are of the opinion that as rightly observed by the learned ITAT none of the evidences can be said to be contemporaneous and/or the evidences to suggest the actual consumption of gold. Most of the evidences and the material produced can be said to be the correspondences and/or general requirement of use of gold. None of the documents / materials show the actual consumption of gold. Under the circumstances, the learned Tribunal has rightly observed and held that the evidences (new evidences) are not contemporaneous and/or the evidences to suggest actual consumption of gold. - Decided against assessee
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2017 (3) TMI 87
Revision u/s 263 - receipts corresponding to TDS were not fully disclosed by the assessee in the return of income - Held that:- The issue with respect to the claim of TDS made by the assessee was as such debatable and the view taken by the Assessing Officer can be said to be plausible view. Under the circumstances, considering the decision of the Hon’ble Supreme Court in the case of Max India Ltd.(2007 (11) TMI 12 - Supreme Court of India), the learned tribunal is justified in quashing and setting the order passed by the learned CIT. Charging of interest under Section 220(2) - Held that:- As observed by the learned tribunal, there was nothing on record to demonstrate that at the time of passing the order there was any tax that was payable by the assessee pursuant to the notice under Section 156 of the Act and there was failure on the part of the assessee to pay the tax. Under the circumstances, on the aforesaid ground, the revisional authority was not justified in resorting to the revisionary proceedings. The learned tribunal has rightly interfered with the order passed by the learned CIT. - Decided against the revenue.
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2017 (3) TMI 86
Transfer pricing adjustment - ALP determination - contract termination fee inclusion - Held that:- assessee has entered into a contract for rendering software development services to its group companies and one of the group company has terminated the contract and has paid the contract termination fee as per the agreement. The nature of the said contract termination fee is, in our opinion, operating revenue. On execution of a contract, the assessee is receiving the consideration on a cost plus margin basis. The contract termination fee is also being paid on similar lines but proportionately. It is only that the contract is being terminated prematurely. Had the contract been executed completely, the assessee would have received the full consideration at cost plus method for the entire period of the contract and it would form part of operating income. The contract termination fee is in effect compensating the assessee for the expenses incurred by it for executing the contract partially. Therefore, we are of the opinion that the contract termination fee also partakes the character of the contract receipt and is to be treated as operating revenue of the international transactions more particularly since the expenses incurred by the assessee on such contract has been taken as operating cost. In view of the same, we direct the AO/TPO to consider the contract termination fee also as a part of the operational income for computing the ALP of the international transactions.
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2017 (3) TMI 85
Payment to various clients in Valsad region on account of is regularities committed by one of its sub brokers - allowable business expenditure - Held that:- We find that the assessee had claimed that the payment was made to the clients for preserving its goodwill and reputation. It is a fact that expenditure in question was not incurred for fostering the business of another person. It was also not gratuitous or for some improper or oblique purpose outside the course of the business. Preserving business reputation by an assessee is allowable expenditure under the head commercial expediency. Old business wisdom states that even at the cost of lakhs credit/ reputation/goodwill should be preserved(Jaaye laakh, rahe Saakh). In short, expenditure incurred by the assessee even voluntary and without any legal obligation has to be allowed as it was incurred for preserving the reputation of its business. Alternatively, it is allowable as business loss also. Considering the peculiar facts and circumstances of the case, we are unable to endorse the order of the FAA. We decide ground of appeal in favour of the assessee.
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2017 (3) TMI 84
Treatment to loss -‘business loss’ OR ‘capital loss’ - mutual fund transactions - Held that:- The assessee has been showing the transactions from the aforesaid activities as business transaction which were accepted by the Revenue in earlier assessment years. On examination of the order of lower authorities, we find that there was no change in the factual position of the assessee. The assessee has also been showing such transactions as business transactions in its books of accounts. In view of above, we find that the assessee has been showing its mutual fund transactions under the head “business and profession”. There was no change in the stand of the assessee with that of the earlier years. Therefore, we find that the assessee has shown the impugned loss from the source of the business correctly. The ld DR has also not brought anything contrary to the finding of ld CIT(A). In view of above, we are inclined not to interfere in the order of ld CIT(A). Hence this ground of appeal of the Revenue is dismissed.
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2017 (3) TMI 83
Addition u/s 68 in respect of cash credit on account of receipt of deposits by the assessee and consequent disallowance of interest on such cash credit - Held that:- This is a settled position of law by now that for the purpose of section 68, the burden is on the assessee to establish identity of the cash credit or and his credit worthiness and genuineness of the transactions. In the present case, the assessee has failed to carry out his obligations and hence, the burden cannot be shifted to the revenue to find out from the creditors about their identity and credit worthiness after receiving the names and addresses of the creditors. Hence, in the facts of the present case, find no infirmity in the orders of the authorities below on this issue. Claim of the assessee for deduction under section 36(1)(vii) in respect of write off of bad debts - Held that:- As find that for this deduction, the assessee has to establish that the bad debts in question were actually written off by the assessee as irrecoverable in the accounts of the assessee for the relevant previous year. In the present case, it is seen that the books of accounts of the assessee were impounded in the month of September 2003 and therefore, the entries could be made in all the 4 years which are in dispute before me because the books of accounts were very much available with the assessee during relevant time and it is not shown by the assessee that the assessee has written off the bad debts in the books of accounts. Hence, after amendments in the provision of section 36(1)(vii) w.e.f. 1.40.1989, the claim of the assessee is not allowable in the absence of actual write off in the books of accounts. Judgment in the case of Vithaldas Dhanjibhari v. Commissioner of Income Tax (1980 (8) TMI 40 - GUJARAT High Court ) on which reliance has been placed by the learned AR of the assessee is not applicable in the present case because this judgment is for a period prior to the amendment in section 36(1)(vii).
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2017 (3) TMI 82
Penalty u/s 271 (1)(C) - proof of concealment of income - Held that:- There is no specific charge by the Assessing Officer. Further, it is noted that the Assessing Officer in penalty order has proceeded on the basis of the assumption that the assessee is satisfied with the assessment order. Therefore, it appears that the assessee has nothing to say and has no objection regarding the imposing of the penalty under section 271(1)(c) of the Act. In our considered view, the assessing officer was not justified in imposing the penalty on this basis, the action of the assessing officer is contrary to the provision of law. The ld. CIT (A) without considering the binding precedents proceeded to hold that the penalty order can not be invalidated on account of any mistake or affect or omission if anywhere in view of the provision of section 292B of the Act. This finding of the Ld. CIT (A) is contrary to the judgment of the Hon’ble Karnataka High Court rendered in the case of CIT and Another Vs. Manjunatha Cotton and Ginning Factory,(2013 (7) TMI 620 - KARNATAKA HIGH COURT ) As the initiation of penalty under section 271(1)(c) vide notice 274 of the Act is not inconformity with the requirement of the law. Thus, the Penalty order can not be sustained in the eyes of the law. Same deserves to be quashed. We find merit into the contention of the ld. Counsel for the assessee that out of two additions one addition of ₹ 61,09,482/- was wrongly made and the assessee has furnished all material facts before the Assessing Officer under these facts the assessing officer ought not to have levied the penalty. We find force into the contention of Ld. Counsel for the assessee that in the penalty proceeding the AO should consider the facts in right perspective. He should come to a specific finding with regard to concealment of income. In the considered view, the explanation as given by the assessee ought to have been considered by the AO, The AO should not to have passed penalty order in a mechanical way merely on the assumption that the assessee has accepted the charge of concealment of income. - Decided in favour of assessee
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2017 (3) TMI 81
Withholding of tax at higher of the rates prescribed under section 206AA - determination of rate at which tax at source is deductible by the assessee from the payments made to non-residents in the nature of fees for technical services - non obtaining and furnishing of the permanent Account Numbers by non-residents having income exceeding the taxable limit - DTAA - non-obstante clause - Held that:- No merit in the arguments raised by the ld. CIT(D.R.) that the relevant treaties do not provide for deduction of tax at source at the rate which is lower than the rate applied by the Assessing Officer by invoking the provisions of section 206AA and that there is no question of abrogation of the relevant provisions of treaty in this regard. We also do not find the arguments raised by the ld. CIT(D.R.) that the role of the assessee as a payer of the sum is limited to deducting tax at source as per law and he has nothing to do with the determination of tax liability eventually in the hands of the payee, which is within the complete domain of the Assessing Officer to be relevant in this context as the tax at source was deducted by the assessee from the sums paid to the non-residents as per the provisions of section 195(1) read with section 2(37A) of the Act. As, the non-resident payees in the present case were having taxable income in India, the facts remain to be seen is that they were not obliged to obtain the Permanent Account Numbers in view of section 139A(8) read with Rule 114C. There is thus a clear contradiction between section 206AA and section 139A(8) read with Rule 114C, as was prevailed in the case of Kaushallaya Bai & Others (2012 (6) TMI 451 - KARNATAKA HIGH COURT) and by applying the analogy of the said decision, we find merit in the contention raised on behalf of the assessee that the provisions of section 206AA are required to be read down so as to make it inapplicable in the cases of concerned nonresidents payees who were not under an obligation to obtain the permanent Account Numbers. As explained by CBDT while inserting the provision of section 206AA vide Circular No. 5 of 2010, the intention of the said provision is mainly to strengthen PAN mechanism and keeping in view this limited function and purpose, we are of the view that non-obstante clause contained in the machinery provision of section 206AA is required to be assigned a restrict ive meaning and the same cannot be read so as to override even the relevant beneficial provisions of the Treaties, which override even the charging provisions of the Income Tax Act by virtue of section 90(2). In our opinion, it, therefore, cannot be said that the provisions of section 206AA, despite the non-obstante clause contained therein, would override the provisions of DTAA to the extent they are more beneficial to the assessee and it is the beneficial provision of treaty that will override the machinery provisions of section 206AA. In view of the above discussion, we are of the view that the provisions of section 206AA of the Act will not have a overriding effect for all other provisions of the Act and the provisions of the Treaty to the extent they are beneficial to the assessee will override sect ion 206AA by virtue of section 90(2). In our opinion, the assessee therefore cannot be held liable to deduct tax at higher of the rates prescribed in section 206AA in case of payments made to non-resident persons having taxable income in India in spite of their failure to furnish the Permanent Account Numbers. We, accordingly, answer the question referred to this Special Bench in the negative and in favour of the assessee
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2017 (3) TMI 80
Computation of capital gain - Applicability of provisions of section 50C - Held that:- The provisions of section 50C provides that where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed [or assessable] by any authority of a State Government (hereafter in this section referred to as the "stamp valuation authority") for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed [or assessable] shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer. In view of this, the circle rates applicable on the date of the sale of property, shall be applied for working out of capital gain. Therefore we set aside the impugned orders of the lower authorities back to the file of the Ld. assessing officer to determine whether on the date of sale of the property, circle rates were in existence or not. If the circle rates are existing on that particular date, then the assessing officer must refer the matter to the valuation officer for valuation of the property at fair market value in terms of the provisions of section 50 C in terms of subsection (2) and then work out capital gain in accordance with that provision. That assessee may be given adequate opportunity of hearing and placing evidences before him before deciding the issue. In the result, ground No. 1, 2 and 3 of the appeal of the assessee are allowed with above direction.
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2017 (3) TMI 79
Denial of exemption u/s.11 - Held that:- There is no dispute to the fact that the assessee is a charitable trust running various educational institutions. It is the allegation of the revenue that the trust is collecting capitation fee in the garb of donation and was therefore running with a profit motive. However, we find neither the Assessing Officer nor any of the persons who have stated before the department that they have given donation for getting admission has complained to the Government or appropriate authority for any such violation under the Maharashtra Educational Institutions (Prohibition of Capitation Fee) Act, 1987. Nothing has been brought on record that any student has been denied admission for not giving donation. Therefore, merely because some of the donors have stated that they have given donation for admission, which have been retracted later on, the same in our opinion will not dis-entitle the assessee trust from getting exemption which is existing solely for educational purposes. There cannot be wholesale denial of exemption u/s.11 for violations of provisions of section 13(1)(c) and income which is subject matter of violation only can be brought to tax. Now having held so, we have to see the extent of violation yearwise. Expenditure on account of vehicle maintenance - Held that:- We find from the details furnished by the assessee that the Assessing Officer has disallowed expenditure of ₹ 21,850/- for A.Y. 2001-02, ₹ 1,43,893/- for A.Y. 2002-03, ₹ 2,24,077/- for A.Y. 2003-04 and ₹ 2,45,991/- for A.Y. 2004-05. It is an undisputed fact that Shri B.E. Avhad is a lawyer and is also attending to the various works of the trust. Apart from using his own car he has also used the vehicle of the trust. Therefore, disallowance of the entire expenditure on account of vehicle maintenance under the facts and circumstances of the case is not justified. Considering the totality of the facts of the case, we hold that 50% of the vehicle maintenance expenses can be held as for the objects of the trust and the balance 50% is to be disallowed and brought to tax. Depreciation on motor car is concerned an amount of ₹ 1,71,388/- for A.Y. 2002-03, ₹ 1,37,111/- for A.Y. 2003-04 and ₹ 4,37,589/- for A.Y. 2004-05 have been disallowed. Since the motor car is owned by the trust, therefore, disallowance of depreciation in our opinion is uncalled for. Accordingly, it is held that such depreciation is for the objects of the trust and cannot be disallowed as a facility given to Shri B.E. Avhad. Expenditure on foreign tour - Held that:- The visit to Katmandu by Shri Rahul V. Karad, in absence of full details given before the Assessing Officer and in absence of furnishing of the passport despite being asked to do so by the Assessing Officer, the expenditure is held to be not for the objects of the trust. So far as visit to Australia by Shri Rahul V. Karad and Shri V.D. Karad during A.Y. 2001-02 is concerned the Assessing Officer has made addition of ₹ 1,52,930/-. Although the assessee has produced the plane tickets, however, there were purchases of personal articles like, sun glasses, perfumes, shirt etc. The assessee could not explain the source. It is also a fact that the daughter of Shri V.D. Karad was staying in Australia. Therefore, although the assessee has claimed that such expenditure is on account of attending the World Peace Tour, however, we do not find any merit in the argument of the Ld. Counsel for the assressee and the expenditure of ₹ 1,52,930/- for A.Y. 2001-02 is held as not for the objects of the trust. Similarly, the foreign tour expenses of ₹ 24,700/- for A.Y. 2002-03, ₹ 2,66,154/- for A.Y. 2003-04 and ₹ 3,75,442/- for A.Y. 2004-05 are held to be not for the objects of the trust and accordingly the same has to be brought to tax. Fee concession u/s.13(6) in case of an educational institution - Held that:- We find from the details given by the assessee that it is the policy of the trust to give concession in fee to the children of the employees. We also find merit in the argument of the Ld. Counsel for the assessee that provisions of section 13(1)(c) are not applicable to any concession in fee given to the relatives of the employees. However, the same in our opinion is not applicable to the relatives of the trustees as defined in explanation 1 to section 13. The Assessing Officer is accordingly directed to bring to tax the concession in fees given to the relatives of the trustees only. So far as interest free loan of ₹ 18 lakhs given Mr. Rahul Karad is concerned, we find such interest does not relate to any of the years under appeal since nothing has been brought on record by the revenue that any such interest relate to any of the years under appeal. Even otherwise also, as held earlier there cannot be wholesale denial of exemption u/s.11. Expenditure incurred on account of credit card expenses of Shri B.E. Avhad - Held that:- We find the Assessing Officer disallowed the same on the ground that the credit card was used for meeting expenses of hotel bills at Mumbai and New Delhi and air tickets to Mumbai and Delhi etc. It is also his allegation that the assessee being a Senior Advocate is regularly appearing before the Bombay High Court and Supreme Court and therefore his personal expenses has been met through such credit card. It is an undisputed fact that the matter of the assessee has also gone before the Hon’ble Bombay High Court and Hon’ble Supreme Court. Therefore, it cannot be said that Shri B.E. Avhad had travelled to Bombay or Delhi only for his clients and not for the trust. However, in absence of full particulars given by the trust on account of each and every expenses we hold that 50% of such expenditure is for the objects of the trust and the balance 50% is towards his personal expenditure which has to be disallowed and brought to tax. We hold and direct accordingly. Local tour by trustees and their family members to places where trust does not have activity is concerned, we find the assessee has incurred an amount of ₹ 47,697/- for A.Y. 2004-05. We find the assessee has given details at Page 884 of the paper book No.4. A perusal of the same shows that the tours are only by the trustees and in particular mainly by the President and the Managing trustee. We further find from the details filed that the visits are to Nagar Pathardi near Shirdi where trust has started a school during 1999-2000. The visit to Gondavale, Cochin, Mumbai, Madurai and Trivendrum are for administrative matters. The visit to Udaipur is also to attend the conference at Mount Abu and the visit to Solapur and Akkalkot was in connection with purchase of land to start educational complex at Solapur. Therefore, the local tours by the trustees in our opinion is for the objects of the trust and cannot be held as not for the objects of the trust. In view of the above discussion the Assessing Officer is directed to compute the amount of disallowance that has to be brought to tax and there cannot be wholesale denial of exemption. The grounds of appeal No.5, 6, 8 and 11 are decided accordingly. Disallowance u/s.43B, 40A(3) and 40A(7) etc - Held that:- Since in the instant case the Tribunal has restored the registration u/s.12A to the assessee trust, therefore, the income in our opinion has to be computed u/s.11. It has been held in various decisions that the income u/s.11 has to be computed in a commercial manner and not as per the provisions of I.T. Act. The various heads of income u/s.11 are not relevant in case of a charitable trust and therefore we find merit in the argument of the Ld. Counsel for the assessee that while computing the income u/s.11 the various disallowances/additions u/s.40A(3), 40A(7) and 43B etc. cannot be made u/s.28 to 43. 162. We find the Hon’ble Madras High Court in the case of CIT Vs. Rao Bahadur Calavala Cunnan Chetty Charities [1979 (8) TMI 17 - MADRAS High Court] has held that income for purposes of section 11(1)(a) has to be computed on normal commercial basis without reference to provisions attracted by section 14. The ground raised by the assessee on this issue for the respective assessment years under appeal are accordingly allowed. Addition on account of treating certain expenses as capital expenses - Held that:- We find although the assessee has raised the ground before the CIT(A) as per ground of appeal No.14, however, he has not given any decision on this issue. Further, treating the expenses as capital or revenue will not be material since the income in the case of a charitable trust has to be computed in a commercial manner as held by us in the preceding paragraph. Accordingly, the capital expenditure will also be considered as application of income. Accordingly, this ground by the assessee is allowed. However, the Assessing Officer is directed to make necessary verification and if there is double disallowance, make necessary correction. This ground is accordingly allowed for statistical purposes. Disallowance on account of income tax debited - Assessing Officer disallowed the above amounts on account of income tax debited in the books of MIMER college and DBSR hospital, Talegaon which is one of the constituent units of the assessee trust - Held that:- We find merit in the above submission of the Ld. Counsel for the assessee. Since we have already held that the assessee trust is eligible for claiming exemption u/s.11, therefore, the income of the assessee trust has to be computed in commercial manner and such expenditure which is on account of TDS arrears of earlier year will be considered as application of income. Even otherwise also according to Ld. Counsel for the assessee, after disallowance of the same, application of income of the assessee trust for both the years will be higher than the income/receipts and therefore after granting exemption u/s.11 there will be no taxable income in the hands of the assessee. However, this needs verification at the level of the Assessing Officer. We therefore direct the Assessing Officer to make necessary verification and if the application is more than the income, there will be no taxable income. Accordingly, ground of appeal No.9 for A.Yrs. 2002-03 and 2003-04 are allowed for statistical purposes. Disallowance of excess provision for refund of fees - Held that:- We find the assessee has made a provision of ₹ 50 lakhs for refund of fees in A.Y.2002-03 in respect of MIT SFS which is one of its constituent unit. The unit was closed during A.Y. 2003-04. Certain amount was repaid out of the provision of ₹ 50 lakhs and an amount of ₹ 30,96,750/- remained outstanding during A.Y. 2003-04 which remained unpaid even upto 31-03-2006. The Assessing Officer accordingly added back the excess provision in the year of closure of the unit, i.e. A.Y. 2003-04. It is the submission of the Ld. Counsel for the assessee that even if the amount is added as income for A.Y. 2003-04 the application of income in this year is still higher than the income/receipts and therefore after exemption u/s.11 there is no taxable income in the hands of the assessee. Since we have already held that the assessee is entitled to exemption u/s.11, therefore, we restore this issue to the file of the Assessing Officer to find out as to whether after disallowance of the same the application of income is more than the receipt and if there is no taxable income in the hands of the assessee. The Assessing Officer will pass appropriate order. The ground is accordingly allowed for statistical purpose. Incorrect addition by adopting wrong surplus - Held that:- After hearing both the sides, we find the Assessing Officer of the assessment order for A.Y. 2004-05 has stated that the auditor has recasted the income and expenditure account of the assessee and arrived at surplus of ₹ 7,23,46,742/- for the year. According to the Ld. Counsel for the assessee this figure is incorrect since the auditor has recasted the surplus of ₹ 2,61,02,700/- in the recasted income and expenditure account for A.Y. 2004-05. According to him this typographical error needs to be corrected. In view of the above, we restore this issue to the file of the Assessing Officer with a direction to verify the records and if the contention of the assessee is correct then adopt the correct surplus of ₹ 2,61,05,700/- and not ₹ 7,23,46,742/-. This ground by the assessee is accordingly allowed for statistical purposes.
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2017 (3) TMI 78
Disallowance u/s section 14A read with rule 8D - Held that:- A.R. has brought our attention to the order of the Tribunal in the own case of the assessee for A.Y. 2006-07 wherein the Tribunal has restricted the disallowance under section 14A in similar circumstances to the extent of 5% of the exempt income earned by the assessee for that assessment year under consideration. Following the same yardstick, we restrict the disallowance under section 14A to the extent of 5% of the exempt income for this year also. The appeal of the assessee is therefore treated as partly allowed. Disallowance of expenditure - Held that:- Hon’ble Bombay High Court in the case of CIT vs. Srishti Securities (P.) Ltd. (2009 (1) TMI 408 - BOMBAY HIGH COURT ) while relying upon various case laws, has held that if the capital has been borrowed for the purpose of business or profession of the assessee company then the interest paid on the borrowed funds is an allowable expenditure. It has been further held that in case of an investment company, the amount borrowed may be utilised for the purpose of acquisition of stock in trade or for the purpose of acquisition of capital assets. The ratio of the above decision of the Hon’ble Bombay High Court squarely applies in the case of the assessee. Even otherwise as observed above, we have already directed for disallowance under section 14A at the rate of 5% of the dividend income earned. The said disallowance made under section 14A will also take care of the interest expenditure incurred by the assessee on investments relatable to earning of exempt income. Under the circumstances, no further disallowance is attracted in this case. Allowable expenditure u/s 36 - Held that:- The interest expenditure incurred by the assessee for the purpose of strategic investment as the investment being the business of the assessee is an allowable expenditure under section 36(1)(iii) of the Income Tax Act. Computation of disallowance under section 14A - Held that:- Direct the AO to exclude the strategic investments made in group/associate companies for the purpose of computation of disallowance under section 14A read with Rule 8D.
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2017 (3) TMI 77
Eligibility for deduction claimed u/s 10A - assessee being a converted STPI unit from domestic unit - Held that:- This issue has already been dealt in assessee’s own case for AY 2002-03 wherein the issue has been answered in favour of the assessee that even if, the unit of the assessee has held to be converted from existing domestic unit to a STPI unit, it will still be eligible to claim deduction u/s 10A of the Act from the date of conversion for an unexpired period of 10 years starting from AY 1996-97. So, the first ground taken by the ld. AO/CIT (A) to disallow the claim of the assessee u/s 10A for the assessment year under consideration that the assessee being a converted STPI unit from domestic unit is not eligible for deduction u/s 10A, is not sustainable in the eyes of law. So far as the question of disallowing the claim of the assessee u/s 10A by taking shelter of section 10A(9) of the Act is concerned, this issue has already been dealt with by the Hon’ble Karnataka High Court in case of CIT vs. GE Thermometrics India Pvt. Ltd. [2015 (1) TMI 10 - KARNATAKA HIGH COURT] as held that once any provision is omitted from the statute book, the result is that it had never been passed and be considered as a law that never exists and as such, the assessee is entitled for benefit of section 10A of the Act and section 10A(9) is not attracted in its case. Thus since the year under assessment falls in the unexpired period of 10 years, the assessee is entitled for exemption u/s 10A of the Act having been wrongly disallowed by the AO - Decided in favour of assessee.
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2017 (3) TMI 76
Penalty levied u/s 271(1)(c) - Held that:- For arguments sake, even if it is assumed that assessee has concealed the income by claiming wrong deduction, it does not attract the provisions contained u/s 271(1)(c) in any manner whatsoever because when the assessment of the assessee is completed u/s 143(3), it is for the Revenue to assess the claim made by the assessee in accordance with the law and merely claiming wrong deductions and disallowance thereof by the AO does not amount to concealment of income. In other words, the Revenue has failed to prove that the assessee has concealed particulars of income or has furnished inaccurate particulars of such income so as to attract the provisions contained u/s 271(1)(c). When the assessee has claimed any deduction by not concealing anything and in case the deduction has been disallowed by the AO and assessment order has been confirmed by the CIT (A) it does not amount to concealment of income or furnishing of inaccurate particulars. - Decided in favour of assessee
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2017 (3) TMI 75
Addition u/s 68 - Held that:- The assessee has raised loan of ₹ 2 lacs from Sh. Sachin Aggarwal and ₹ 3 lacs from Smt. Lata Aggarwal and during the examination by the Ld. CIT(A) Sh. Sachin Aggarwal has admitted to have given a sum of ₹ 2 lacs to the assessee during the AY 2011-12. I further find that Sh. Sachin Aggarwal and Smt. Lata Aggarwal even though have declared the same in their balance sheet, books of accounts and they are assessed to tax, which itself proves the identity, creditworthiness and genuineness of the transactions and hence, the addition in dispute is not sustainable in the eyes of law, therefore, the same is deleted. - Decided in favour of assessee.
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2017 (3) TMI 74
Reopening of assessment - addition made under section 68 - Held that:- In respect of the share application money received from Bhagwan Krishan Investment & Trading Co Pvt Ltd, assessee had furnished details such as copy of share application form, certified copy of memorandum & articles of association, certified copy of board resolution, certified copy of the auditors' report and balance sheet as on 31st March, 2005 and so on, in support of the genuineness of the transaction of share application money. AO made addition merely on the basis of statement of Pradeep Kumar. which are not correct for the reason that the assessee has received share application money by cheque and no cash was given to Bhagwan Krishan Investment & Trading Co Pvt Ltd. The fact that no amount of cash was ever given to the company which is proved by the fact that the bank account of the investor-company Punjab National Bank, Azadpur Branch, (which was also furnished to the Assessing Officer - shows that there is no such cash deposit in the bank account of the said company and that the amount of share application money is received out of sale consideration of old investments. Even after asking by the assessee the Assessing Officer has not issued any summons under section 131 or notice under section 133(6) to the Directors of Bhagwan Krishan Investment & Trading Co Pvt Ltd. and has concluded only on the basis of the statement of Mr Pradeep Kumar. We also found that Pradeep Kumar on whose statement AO has relied was not a director of M/s Bhagwan Krishan Investment from whom assessee company received share application money. AO in the assessment order has merely relied upon the statement of a third party to hold that cash was given in order to issue cheque DD of the equivalent amount for subscribing to the share application of the assessee company without proving that cash was actually given to the investor-Company by either proving from their bank statement or otherwise, even though the assessee has proved from the bank statement of M/s.Bhagwan Krishan Investment and Trading Co Pvt Ltd that there was no such cash deposit made by the investor-company and the cheque was issued from the balance available in their bank account. AO has also not allowed cross examination of Mr Pradeep Kumar, inspite of specific request by assessee and hence, his statement on oath has no evidentiary value and hence required to be ignored.We found that Assessee Company has received application for allotment of preference shares, which have been allotted by the assessee company and identity of share applicant has also been proved by the assessee and hence, the share application money could not be added as income in the hands of the assessee company. Thus no merit in the action of AO making addition - Decided in favour of assessee
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2017 (3) TMI 73
Rectification of mistake - Upfront premium on Zero Coupon Non-Convertibility debenture - method of accounting followed - selection of assessment year - Held that:- No merit in this appeal by the revenue. Firstly the question whether the upfront premium on Zero coupon Non-convertible debentures to the extent of ₹ 72,53,359/- which was pertaining to the period from October, 2005 to March, 2006 can be regarded as revenue expenditure or not or was in the nature of interest or was advance payment of future interest liability which cannot be allowed under the mercantile system of accounting are matters which the AO ought to have considered while concluding the assessment u/s.143(3) of the Act. Recourse to the provisions of Sec.154 cannot and ought not to be made for such highly debatable issues which might require detailed examination of facts. Secondly the upfront premium paid was in the nature of interest on loan on borrowing, as admittedly the loans in questions were non-convertible debentures. Such expenditure was in the nature of interest expenses and had to be allowed as deduction. Further the AO has erroneously considered the sum of ₹ 72,53,359/- as not pertaining to the relevant previous year and was a payment of interest in advance. The sum claimed as deduction was in relation to the period from October, 2005 to March, 2006 and therefore rightly claimed as deduction in A.Y.2006- 07 by the assessee. Thus the order of CIT(A) which is in conformity with the legal position as explained above does not call for any interference. Accordingly the same is upheld and the appeal by the revenue is dismissed.
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2017 (3) TMI 72
Unexplained Investments - Held that:- Before the AO assessee could not file any documentary evidence to prove the source of funds. Accordingly, original assessment was framed u/s.144 since inspite of giving so many opportunities, assessee did not produce any documentary evidence in support of source of the funds and investments so made in the property. However, before the CIT(A), assessee has filed documents but without appreciating the same, in the remand report, AO again reached to the conclusion that genuineness of transaction was not established. As per paper book placed on record it appears that before CIT(A) the assessee had filed bank statement confirmation and cash flow statement to justify the source of payment. It appears that both the lower authorities had not properly appreciated these documents which goes to the root of issue. Merely on the ground of suspicion the CIT(A) has declined the source of funds explained by the assessee in so far as both the concern who advanced the loan to assessee was group concern of assessee. Thus we set aside both the orders of the lower authorities and the matter is restored back to the file of the AO for deciding afresh after considering all the documents in support of its source of the funds - Decided in favour of assessee for statistical purposes. Addition towards payment made to credit card company - Held that:- Assessee is the Director of M/s. Konark Realtors Pvt. Ltd., and therefore the said payments were made by M/s. Konark Realtors Pvt. Ld.. Hence there could have been no addition u/s.69 in the hands of the assessee and since the assessee had not claimed any expenditure, the question of proving whether it was for the purpose of business do not arise in the case of the assessee. Further on perusal of the Ledger Account in the books of M/s.Konark Realtors Pvt. Ltd., we found that the said amounts were also finally debited to the Assessee’s personal account whereby even the company has not claimed any expenditure. Thus no merit making addition on account of credit card expenditure.- Decided in favour of assessee
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2017 (3) TMI 48
Eligibility to registration granted u/s 12AA - revocation/ cancellation of the registration as the Respondent-Institutions do not satisfy the meaning of charitable purpose as given in Section 2(15) - ITAT allowed claim - Held that:- Nothing has been shown to us as to how the impugned order of the Tribunal is not in accordance with law. The exercise of power under Section 12AA(3) of the Act can only be done, if atleast one of the two conditions specified therein, are found to be satisfied by the Commissioner of Income Tax. This satisfaction of any of the two conditions, Revenue is not been able to show. On plain reading of Section 12AA(3) of the Act, it is self evident that the power can only be exercised to cancel the registration only for the two breaches which are mentioned therein. This is not so in the present facts. Thus, no fault can be found with the impugned order setting aside the order of the Commissioner of Income Tax, cancelling the registration granted to the Respondent-Assessee. - Decided in favour of assessee
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Customs
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2017 (3) TMI 56
Refund claim - petitioner sought for processing of refund claim expeditiously - excess payment of CVD on import of mobile handsets, spare parts, etc. u/s 3(1) of the Act - Held that: - reliance was placed in the case of [2016 (12) TMI 472 - DELHI HIGH COURT], where it was held that direction is issued to the respondent to process the refund claims and pass appropriate orders, having regard to the fact that the petitioner has filed supporting certificates in the form of Chartered Accountant’s Certificate and other documents, claiming that the benefit was not passed on to the consumer - the petitioner’s claim for refund is to be processed - petition allowed.
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2017 (3) TMI 55
Valuation - misdeclaration of value - quantity - appellant claim that neither there was any contemporaneous import nor any material on record to show that there was mis-declaration of the value - Held that: - When it was found that imported goods were undervalued in comparison to immediate past imports made by same appellant in two different names, its conscious knowledge to mis-declare value of import was established - The mis-declaration of value was willful in addition to mis-declaration of quantity - mis-declaration of quantity and value is established. Considering that the goods were not branded goods, it is considered proper that imposition of redemption fine of ₹ 2,00,000/- may not be unjustified - in cases of mis-declaration, confiscation being warranted, quantum of penalty justified. Appeal disposed off - decided partly in favor of appellant.
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Corporate Laws
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2017 (3) TMI 50
Scheme of arrangement - Held that:- In this present scenario, the Court has to cautiously examine the scheme of arrangement and this Court considers the tenability of the objection with regard to transfer of business relating to Telugu States to one company and non- Telugu States in another company exposing the business in Telugu States to greater risk. This Court has no expertise to evaluate the risk. It is also noticed that Asmitha Microfin Limited is not a member of Micro Finance Institutions Network, whereas SHARE is a member. There is reduction in the equity, conversion of OCCRPS into ordinary equity shares involved in the present scheme of arrangement. In the absence of any expertise, this Court cannot give any conclusive finding except placing before the CDR EG for a decision on the scheme of arrangement, though legal requirements are met substantially, as the CDR EG itself deferred its decision in view of the pendency of the present Company Petitions before this Court. The Corporate Debt Restructuring Mechanism was evolved by the Reserve Bank of India to ensure timely and transparent mechanism for restructuring of corporate debts of viable entities facing problems, for the benefit of all concerned. It is also intended to minimize the losses to the creditors and other stock holders through an orderly and coordinated restructuring programme. It is a voluntary non-statutory system based on Debtor-Creditor Agreement and Inter-Creditor Agreement and the principle of approvals by super majority of 75% creditors which makes it binding on the remaining 25% to fall in line with the majority decision. It consists of three tiers, namely, CDR Standing Forum, CDR Empowered Group and CDR Cell. In view of the petitioner company having an Inter- Creditor Agreement, which is binding on the Companies, any order passed by this Court approving the scheme of arrangement would have an impact on such agreement. Though, the banks or creditors to the Companies are part of CDR mechanism, the scheme was not evaluated by the CDR mechanism as such. Some banks attended the creditors meeting and some banks did not. The HDFC Bank raised objections. In the circumstances, the scheme of arrangement is tentatively sanctioned subject to approval by the CDR EG and if the CDR EG approves the scheme by evaluating the financial implications, the present order along with the decision of the CDR EG shall be delivered to the Registrar of Companies, A.P., Hyderabad within thirty (30) days from the date of receipt of decision of CDR EG and he shall take all necessary consequential action in accordance with law. In case the CDR EG does not approve the scheme and suggest any modifications, the same shall be taken into account and the modified scheme of arrangement shall be placed before this Court for its sanction.
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Service Tax
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2017 (3) TMI 71
Validity of Recovery Notice - the petitioner has deposited 69% of liability, and is aggrieved by the fact that pending disposal of the applications for restoration, the impugned recovery notice has been issued - Held that: - Having regard to the fact that money equivalent to 69% of the tax demand has already been deposited, the petitioner should get a hearing in other words, a look-in with regard to the applications filed before the Tribunal, concerning the restoration of the appeals, which were dismissed by the Tribunal - stay of recovery granted - appeal allowed - decided in favor of petitioner.
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2017 (3) TMI 70
Interest on delayed refund - Section 11B of the CEA, 1944 - Held that: - the clear reference to “date of receipt of such application” in Section 11 BB which mandates payment of interest, precludes the Revenue from arguing the matter which it does today - respondent’s argument that neither the adjudicating authority granted interest nor did petitioner seek it at any stage is of no avail - interest allowed - petition allowed - decided in favor of petitioner.
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2017 (3) TMI 69
Refund claim - denial on account of nexus and that no export has taken place from the Gurgaon unit (branch office), as such, no refund was allowed on input services availed at Gurgaon unit - Held that: - the appellant has been raising the export invoices only at Bangalore unit as it has a centralized accounting and billing system in force and the same is permissible u/r 4 of the Service Tax Rules, 1994 - Further in the SOFTEX return, only export of software services is disclosed, as the Bangalore unit is registered as a software technology park of India. The BAS provided from Gurgaon unit is not disclosed in the monthly SOFTEX filed with the STPI as the Gurgaon unit is not registered with Software Technology Park. Therefore, only on this ground the refund is wrongly rejected. As far as lack of nexus with regard to the input service viz., parking and cafeteria rent; building maintenance and housekeeping; book keeping; financial services; internet and telephone services, all these services are necessary for running of the business and are held to be input services - these input services fall in the definition of input service and the appellants are entitled to refund of the same. Appeal remanded with a direction to the original authority to consider all the documents which may be produced by the appellant in proof of export of service from their Gurgaon unit - appeal allowed by way of remand.
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2017 (3) TMI 68
Rent-a-car service - abatements - the notification was not mentioned in the ST 3 return - linkage for the consideration to the services rendered previously - payment of Service Tax at the abated rate during the period post 1.4.2006 - appellant claim that these are relatable to services rendered prior to 1.4.2006 - Held that: - the consideration for services rendered prior to 1.4.2006 were also received after 1.4.2006 and applicability of abated rate for the said receipts cannot be questioned - the proceedings were initiated only based on ST 3 return filed which contain details of consideration received and tax paid. ST 3 return was later revised twice for correction of figures, not relating to present dispute - appeal allowed - decided in favor of appellants.
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2017 (3) TMI 67
Tax liability on reverse charge basis - Held that: - the provider of service from foreign country should be identified. In the present case, there is no indication of the identity of person who provided the BSS service - appellant could not submit the details and evidences due to various reasons - appeal allowed by way of remand.
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2017 (3) TMI 66
Refund claim - N/N. 27/2012-CE(NT), dated 18.06.2012 - rejection on the ground of jurisdiction - export of service from an unregistered premises - Held that: - One of the condition of the notification is that to get refund application is to be made to the jurisdictional authority in whose jurisdiction registered premise of the service provider exists. It follows that in absence of registration, identity of the jurisdictional authority is not ascertainable - Notification being part of legislation, is to be strictly construed for grant of the fiscal benefit and burden to prove that grant is permissible lies on the claimant. The admitted case of the respondent being non-registration of the premises from which exportable services was provided, appellant failed to discharge its burden of proof and also did not fulfill the conditions of the notification - appeal allowed - decided in favor of Revenue.
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2017 (3) TMI 65
Recovery of short paid tax from legal heir, on death of assessee - Held that: - reliance was placed in the case of Shabina Abraham v. Commissioner of Central Excise & Customs [2015 (7) TMI 1036 - SUPREME COURT], where an individual proprietor has died through natural causes and it is nobody’s case that he has maneuvered his own death in order to evade excise duty - the High Court went into morality and said that the moral principle of unlawful enrichment would also apply and since the law will not permit this, the Act needs to be interpreted accordingly - the demand of duty and penal action are not legal and proper - appeal allowed - decided in favor of appellant.
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Central Excise
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2017 (3) TMI 64
Demand of differential duty - parties are related or not - loan licencee arrangement - The issue at hand is whether the petitioners, the seller and M/s. Boots, the purchaser/buyer are related persons - Medicinal and Toilet Preparations (Excise Duties) Act, 1955 - Held that: - M/s. Boots, which was earlier manufacturer of Betonin has now become a so called wholesaler and Borachem, who was earlier paid job work charges has now entered into manufacturing by floating a new company, namely, Biostar - e referred to the definition of the term “related person”, the binding judgments interpreting it only to emphasise that the foundation or basis of the Commissioner's conclusion is ex-facie contrary thereto. It is wholly unsustainable in law - It is significant that when M/s. Boots surrendered its licence and Biostar obtained it for manufacture of Betonin, four directors were common in Biostar and Borachem Industries Ltd. the licence was possessed by M/s. Boots and when it surrendered the same to Biostar, beyond the relationship of manufacturer and distributor, nothing has been placed on record, which would fulfill the ingredients of clause (c) of sub-section (4) of section 4 of the Central Excise and Salt Act, 1944 - M/s. Boots is not concerned as to whether the Petitioners make a loss or profit in the business and similarly, the petitioners are not concerned whether M/s. Boots makes a loss or profit in the onward sale of Betonin. They are not holding and subsidiary company - The foundation being totally weak and unsustainable in law, we cannot uphold the impugned order - Petition disposed of.
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2017 (3) TMI 63
Clandestine Removal - Held that: - the investigation was conducted in the case of the appellants as well as in the case of M/s Davinder Sandhu Impex Ltd. [2016 (1) TMI 104 - CESTAT NEW DELHI] and the case was booked only on the basis of statement of Sh. Baldev Singh. As on identical investigation and on basis of identical evidence, this Tribunal has already held that on the basis of statement of Sh. Baldev Singh, Managing Director of the appellant and in the absence of evidence in the form of to Manufacture of such huge quantity, the consumption of electricity, additional packing material payment for purchase of additional packing material, payment received for clandestine removal of goods, how the goods were transported has been brought on record by the Adjudicating Authority or the inspecting team, the charge of clandestine removal is not sustainable - in the absence of corroborative evidence to the statement of Sh. Baldev Singh, the charge of clandestine removal is not sustainable against the appellants - appeal allowed - decided in favor of appellants.
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2017 (3) TMI 62
Failure to make an entry in RG-1 (DSA) register - manufacturing of Gutkha - confiscation of goods manufactured in the factory and not cleared from the factory - Confiscation of raw material - Penalty - Held that: - The duty is to be paid only when the goods are cleared from the factory and only such goods are liable for confiscation which are removed without payment of duty. Therefore, the seizure and confiscation of goods manufactured in the factory and not cleared is not sustainable in law - related penalties are also not sustainable in law - Further there is no provision in Central Excise Act for seizure of raw materials and confiscation of raw materials - appeal allowed - decided in favor of appellant.
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2017 (3) TMI 61
Who is liable to pay duty - Goods allegedly diverted in the local market in the guise of export - Bond executed by the non-existent merchant exporter - Penalty - During the course of investigation undertaken by DGCEI, it has emerged that the consignment of Cigarettes cleared for exports were never exported - Held that: - during the course of investigation it has emerged that merchant exporters were found to be non-existent, at the addresses submitted by them to the department. In such circumstances, it has to be presumed that no such merchant exporters existed at their declared addresses and the bonds executed by such merchant exporters have ceased legality to be a valid document. In the absence of valid bond from the merchant exporters, the liability for payment of excise duty reverses back to the original manufacturer who manufactured the goods i.e. the respondent in the present case. Manufacturer is required to pay Demand of duty with interest and penalty.
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2017 (3) TMI 60
CENVAT credit - denial on account of nexus - credit availed on the basis of duty paying invoices issued by Input Service Distributor for various insurances services - Held that: - the issue is squarely covered by the ratio of judgment in assessee-Appellants' own case M/s HINDUSTAN ZINC LTD Versus COMMISSIONER OF CENTRAL EXCISE, JAIPUR [2014 (7) TMI 485 - CESTAT NEW DELHI], where it was held that Insurance of plant and machinery, goods in transit, cash in transit and insurance of vehicles and laptop, is an integral part of manufacturing business, as no manufacturer would carry on manufacturing operations without insurance of plant & machinery, cash in transit, goods in transit, vehicles & computers, etc. against any loss due to accident, natural calamities, etc - appeal allowed - decided in favor of appellant-assessee.
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2017 (3) TMI 59
CENVAT credit - site formation services - respondent outsourced, mining activities from their captive coalmines to various private parties - Held that: - prior to mining service being included as a separate service for payment of Service Tax, the activities carried out by the contractors, such as excavation, drilling and removal of the overburdens, coal cutting etc. are covered under the category of site formation and clearance services - Service tax has been paid by the contractors under the category of site formation and clearance services. Since there is no dispute that such services have been used, it is concluded that service tax paid is available as CENVAT credit - appeal dismissed - decided against Revenue.
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2017 (3) TMI 58
SSI exemption - clubbing of clearances - creation of dummy entity - Held that: - the actual business entity is M/s Coach Classic and its proprietor has formed a dummy company in the name and style of M/s Shearling Skins Pvt. Ltd. by showing its manufacturing unit just to have SSI Exemption. In the premises of this Company, no manufacturing activity was undertaken - Hence, the clearances are correctly liable to be clubbed for both the business entities as per para (vi) and (vii) of the SSI Exemption N/N. 8/2003-CE dated 01.03.2003. Appeal dismissed - decided against appellant.
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2017 (3) TMI 57
Clandestine removal - tobacco pouches - Chewing Tobacco and Unmanufactured Tobacco, Packing Machine (Capacity Determination and Collection of Duty) Rules, 2010 - appellant claim that the whole demand is confirmed on the presumption that the mere availability of some machines is sufficient and it is not required for the Department to prove the working condition or usage of such machines. Held that: - the actual condition of the machine at the time of detention of the said machines has become crucial - wherever the packing machines were lying, in any premises, including the premises of the manufacturer or seller of such machines, then the duty can be demanded from them in terms of the Compounded Levy Scheme. Apparently no such situation is covered by the Scheme. Presumptive duty liability as envisaged in the Compounded Levy Scheme of 2010 Rules cannot be extended to a level that automatic duty liability will arise in all cases, where some packing machines are found in a premises. While the presence of machines is an admitted fact, the manufacture and clearance has not been evidenced with any corroborative evidence established during investigation. The statements were relied upon as corroborative evidences and the cross examination of witnesses who made such statements was denied without valid ground. There is no other corroboration evidencing operation of these machines even for a single day during the impugned period - These evidences, the admissibility of which itself is legally not sustainable, cannot be the basis for confirmation of duty on the goods allegedly manufactured and cleared by the appellant. The impugned order has fallen short in appreciating the factual position, evidence gathered and applicable legal provisions in arriving at the findings of non-payment of duty - appeal allowed - decided in favor of appellants.
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CST, VAT & Sales Tax
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2017 (3) TMI 54
Valuation - whether the Tribunal was justified in holding that transportation expenses borne by the revisionist for procuring the lubricant oil from IOC formed a part of its purchase price u/s 2(y) of the Act? - Section 2(y) of the Act - Held that: - the total amount of consideration for the purchase of goods would include the price strictly so called and also other amounts which are payable by the purchaser or which represents the expenses required for completing the sale, as the seller would ordinarily include all of them in the price at which he would sell his goods - Tribunal was justified in treating the expenses incurred towards transportation as constituting purchase price payable, and thus forming part of turnover of purchase. Whether the Tribunal has misconstrued Section 2(ad) read with Explanation VI of the Act, and thereby illegally added incentive amount received by IOC to the sale price? - Held that: - sale price includes the amount payable to dealer as consideration for the sale of any goods less any sum allowed as cash discount, but inclusive of any sum charged for anything done by the dealer in respect of goods at that time or before the delivery of such goods, other than cost of outward freight or delivery, in the case where such cost is separately charged. The amount of incentive is not an amount payable to a dealer as consideration for the sale of any goods. This amount is received by the dealer from IOC, and therefore, it cannot be treated to be a part of sale price - Tribunal was not justified in adding the incentive of ₹ 64,85,695/- received from IOC towards the sale price/turnover of sale. Whether the Tribunal was justified in rejecting books of account of the applicant, without any adverse material available on record to justify it? - Held that: - the physical stock available with the dealer on the date of survey tallied with books of account, the same was not liable to be discarded. However, the entry in the books of account appropriating the amount of freight towards expenses and not including it in the purchase price is found to be wrong, and on that basis, the liability of tax imposed would be justified - tribunal was justified in rejecting books of accounts. Revision disposed off - decided partly in favor of assessee.
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2017 (3) TMI 53
Classification of goods - bearings - whether goods are covered by Entry C-II-146 of the Bombay Sales Tax Act, 1959 and not by Entry C-II102(2) as auto parts and C-II- 135 as tractor parts read with Entry A-35 of the Notification issued under Section 41 of the Bombay Sales Tax Act, 1959? Held that: - As far as the bearings are concerned, there is special Entry which deals with bearings of all types including Ball or Roller bearings. This Entry is Schedule Entry C-II-146. There being a specific / special Entry for bearings (Entry C-II-146), it is not correct to hold that the bearings sold by the applicant would fall either under Entry C-II-102(2) [as a components, parts of a motor vehicle] or under Entry C-II-135 read with the Notification Entry A-35 [as a components and/or parts of tractors specifically designed for agricultural use] - When there is a specific Entry in the schedule to a Taxing Statute, the same would override a general Entry. The Schedule Entry C-II-135 categorically states “but excluding machinery and components, parts and accessories thereof specified in any other entry in this Schedule”. This would clearly go to show that the Schedule Entry C-II-135 read with Notification Entry A-35, as far as bearings are concerned would be the general Entry and C-II-146 would be the specific Entry - the authorities below have correctly classified the bearings sold by the applicant under Schedule Entry C-II-146. Notification Entry A-35 talks about sale or purchases by a registered dealer of tractors specifically designed for agricultural use and components, parts and accessories thereof covered by Entry C-II-135. From a plain reading of the said Notification Entry, it is clear that it applies to sales or purchases only by a registered dealer of tractors specifically designed for agricultural use and the components, parts and accessories thereof. The bearings sold by the applicant would fall under Schedule Entry C-II-146 - application disposed off - decided against applicant-assessee.
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2017 (3) TMI 52
Reversal of Input Tax Credit - denial on the ground that the registration certificate of the dealers were cancelled with retrospective effect - Held that: - on the date of purchase, the two dealers i.e., Jayram Dheva People Solutions and Sri Ganesh Enterprises had valid registration certificate - the decision in the case of The Assistant Commissioner (CT) Versus M/s. Bhairav Trading Company [2016 (9) TMI 1114 - MADRAS HIGH COURT] relied upon, where it was held that whatever be the effect of retrospective cancellation upon the selling dealer, it can have no effect upon any person, who has acted upon the strength of a registration certificate, when such certificate was alive - liberty is given to the respondent to redo the assessment - petition allowed - decided in favor of petitioner.
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2017 (3) TMI 51
Classification of goods - Whether the Tribunal is right in law in holding that the Arecanut peeling/de- husking machine is classifiable under Agricultural implements not operated manually or not driven by animals falling under Entry No.1 of III Schedule to the KVAT Act? - Held that: - in view the composition of the product and its exclusive use for agricultural purpose, it can be said as an ‘Agricultural Implement’. The peeling/de-husking of arecanut berries is an aspect which is directly attributable to the agricultural activity after the crop of berries are harvested, before taken to the market - the view taken by the Tribunal cannot be said to be erroneous - petition dismissed - decided in favor of assessee.
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Indian Laws
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2017 (3) TMI 49
Grant of liberty - whether the dismissal as withdrawn of the SLP, even in the absence of the words “with liberty sought” is to be read as grant of liberty? - Held that:- The review petitioners obviously were of the opinion that without the aforesaid words, they did not have liberty to approach this Court by way of review and claim to have made an application to the Supreme Court in this regard but which application is stated to have been refused to be listed. In our opinion, it is not for us to venture into, whether the order, notwithstanding having not provided that the review petitioners had been granted liberty, grants liberty or not. It cannot be lost sight of that it is not as if the counsel for the review petitioners, when the SLP came up before the Court, stated that the filing of SLP was misconceived and withdrew the same. The order records that it was “after some arguments” that the counsel for the review petitioners sought permission to withdraw the SLP. It is also not as if the Supreme Court is not known to, while dismissing the SLP as withdrawn, grant such liberty. The order thus has to be read as it is i.e., of dismissal of SLP as withdrawn. Rule 9 of Order XV titled “Petitions Generally” of the Supreme Court Rules, 2013 provides for withdrawal of the petition. Once a proceeding / petition is permitted to be withdrawn, the effect of such withdrawal is as if, it had not been preferred. It is a different matter that the Rules may prohibit the petitioner who so withdraws his petition from re-filing the same or even in the absence of such Rules, such re-filing may be treated as an abuse of the process or by way of re-litigation. But in law a dismissal of the petition as withdrawn cannot be at par with the dismissal of the petition. Neither counsel has however addressed us on this aspect and has proceeded on the premise as if dismissal as withdrawn is the same as dismissal of the petition. We are therefore unable to find any merit in the objection of the counsel for the respondent UOI to the maintainability of the review petition.
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