TMI Tax Updates - e-Newsletter
March 31, 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:
Deduction u/s 80IB - exploration, development and production of "mineral oil" - Explanation added to Section 80-IB(9) by amendment is substantive law and could not apply retrospectively. - The Explanation added to Section 80-IB(9) breaches the rule of law and is arbitrary being violative of Article 14 of the Constitution of India is struck down - HC
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Income Tax:
Revised return incorporating the merger - since there is a limitation provided under section 139(5) which cannot be ignored, we have to hold that the second revised return filed was beyond the time-limit prescribed. We cannot direct the Assessing Officer or the Dispute Resolution Panel to consider the same, when the law itself does not permit the same - AT
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Income Tax:
MAT - Addition regarding wealth tax liability under the provisions of section 115JB treating the provision for wealth tax as unascertained liability - wealth tax liability provision is not covered under Expln- 1(a) to Sec.115JB(2) - AT
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Income Tax:
Addition to book profit by adding the expenditure u/s 14A to the book profit - There is no basis for the argument u/s. 115JB of the Act, it is only direct expenses that are contemplated as capable of being added to the profits as per P&L account under clause (f) to Expln.1 below Sec.115JB(2) - AT
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Income Tax:
Deduction u/s. 80IB(10) on profits arising from commercial building - it is clear that the commercial building is a separate project and is not included as an integral part of the Housing project - deduction towards commercial construction disallowed - AT
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Income Tax:
Exemption u/s 10(23C)(iiiad) denied - gross receipts of the society exceeds ₹ 1 crore - the receipts of both institutions should have been clubbed and the society, which is the educational society, was required to file its return by clubbing the receipts of both institutes - AT
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Customs:
Withdrawal of Levy of anti dumping duty on imports of Pentaerythritol, originating in or exported from Sweden to India - The existence of possibility does not necessarily mean the existence of likelihood - AT
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Customs:
Levy of anti dumping duty - Decorative Ink Printed MDF Board imported from Thailand - Goods imported by the respondent being non laminated are covered under Notification No. 116/2009-Cus and leviable to anti-dumping duty - AT
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Corporate Law:
Amounts received before 1st April, 2014 shall not be treated as deposits subject to discloser in the notes to its financial statement in case of Pvt. Ltd. Companies - Companies Act, 2013
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Service Tax:
Extension of e-payment deadline and of banking hours - agency banks to remain open on 30th and 31st March for full day - Circular
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Central Excise:
Procedure for use of digital signature on records and invoices-reg - Draft Notification and Circular
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VAT:
The Railway directed to accept the blank Form-C issued to the petitioner and duly filled up subsequently without being uploaded on TINXSYS software and thereafter the respondent authorities of the Commercial Taxes Department shall accept such manually issued Form-C not uploaded on TINXSYS software but filled up in accordance with the Act and Rules - HC
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VAT:
Reversal of input tax credit - Shortage of material - Whether the input tax credit availed can be adjusted towards output in respect of goods which are not sold - held No - HC
TMI Short Notes
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2015 (3) TMI 1010
Transfer pricing adjustment - inclusion and exclusion of certain cases in the final list of comparables for benchmarking the assessee's international transactions of imports and exports - Held that:- Dai-Ichi Karkaria Ltd.(DIKL) - AR has fairly admitted that two cases chosen by the TPO, namely, Atul Ltd and IG Petrochemicals Ltd. are, in fact, comparable. When such comparable cases are available, then there is no need to attempt the inclusion of some other cases which are not at all or negligibly comparable. We, therefore, uphold the impugned order on the exclusion of DIKL from the eventual list of comparables. Sunshield Chemicals Ltd (SCL) - if the other case being largely different in the functional profile, but comparable part is minimal, such case can not be considered as comparable, we find no difficulty in upholding the impugned order in rightly excluding the case of SCL from the final list of comparables drawn by the TPO. Micro Ink Ltd. (MIL)- As no segmental data of MIL dealing with the manufacture of specialty chemicals, more specifically which are manufactured by the assessee, is available, such a case cannot be included in the list of comparables. We, therefore, set aside the impugned order on this issue and order for the exclusion of this case from the list of comparables. Pidilite Industries Ltd. (PIL) - an admitted fact that there is acquisition and de-merger in the case of PIL during the year under consideration, and a company cannot be considered as a comparable because of exceptional final results due to mergers/de-mergers. This case is directed to be excluded from the eventual list of comparables. The cases of DIKL and SCL were rightly excluded by the TPO and the cases of MIL and PIL were erroneously included in the list of comparables. The impugned order is, therefore, set aside and it is directed to determine the arm's length margin afresh on the basis of the remaining two cases, namely, Atul Ltd. and IG Petrochemicals Ltd. It is further held that the scope of the transfer pricing adjustment should be restricted to the international transactions, which means, transaction between AEs alone and not non-AEs. The AO/TPO is further directed to give effect to the provisions of section 92C by making of + 5% adjustment, if permissible, in the fresh exercise to be done in compliance with our above direction Disallowance of management service charges paid to the AEs - Held that:- There can be no dispute that ALP of an international transaction in the nature of expense claimed can be computed at Nil, if the assessee fails to prove the factum of having availed any services from the AE. Even if the services are availed, the consideration paid has to be proved at ALP, failing which adjustment is inevitable. Adverting to the facts of the instant case, we find that the assessee claims to have availed such services in the past as well for which deduction was not denied. At the same time, it is equally essential on the part of the assessee to prove in the first instance that it, in fact, availed the services provided by its AEs in the current year and also that the payment is at ALP. As the assessee failed to substantiate its claim for deduction in this regard before the AO/TPO and it is further claimed that adequate opportunity was not provided by the concerned authorities, we are of the considered opinion that it will be in the fitness of the things if the impugned order on this issue is set aside and the matter is restored to the file of AO/TPO for deciding this issue afresh as per law after allowing a reasonable opportunity of being heard to the assessee - Decided in favour of assessee for statistical purposes. Addition under section 145A in connection with the value of closing stock - Held that:- Section 145A came to be inserted by the Finance (No.2) Act, 1995 w.e.f. 1.4.1999 providing for the valuation of purchase and sale of goods and inventory in accordance with the method of accounting regularly employed by the assessee and further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation. Pursuant to insertion of section 145A it has now become mandatory to value inventory on 'inclusive' and not 'exclusive' method which was followed by the assessee. Under the section, not only purchase and sale of goods but also the inventory is required to be valued as inclusive of the amount of tax, duty or fee etc. Further, such duty is to be included not only in the value of closing stock but also the opening stock. The Hon'ble jurisdictional High Court in the case of CIT v. Mahalaxmi Glass Works (P.) Ltd. [2009 (4) TMI 182 - BOMBAY HIGH COURT] has held that where unutilized Modvat credit is adjusted in the closing stock, similar adjustment should also be made to the opening stock as well. The Hon'ble Delhi High Court in the case of CIT v. Mahavir Alluminium Ltd. [2007 (11) TMI 41 - HIGH COURT OF DELHI] has also canvassed similar view. Respectfully following the above precedents, we set aside the impugned order on this issue and direct the AO to decide it as per law.- Decided in favour of assessee for statistical purposes.
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2015 (3) TMI 986
Deduction u/s 80IB - Petitioner is a foreign company based in Canada entered into what is known as Production Sharing Contract (for short the PSC) with the Government of India for exploration, development and production of mineral oil Constitutional - validity of the amendment to sub-Section (9) of Section 80-IB and Explanation added to it under the Act by the Finance (No.2) Act, 2009 challenged - exploration, development and production of mineral oil - Whether the term mineral oil would include Gas? - Petitioner has treated each well/cluster of wells as an undertaking for the purpose of claiming deductions under Section 80-IB(9) - Consequent upon the introduction of the Explanation to Section 80-IB(9) by the Finance (No.2) Act, 2009, defining the term undertaking to mean all blocks licensed under single contract with retrospective effect from 1.4.2000, by an Order dated 7th September 2009, the claim of the Petitioner for the Assessment Year 2006-07 under Section 80-IB(9) was disallowed by the Assessing Officer. Held that:- In the absence of specific wordings in the Statute, to draw a conclusion that only undertakings engaged in the commercial production of 'mineral oil other than natural gas will be entitled to deductions of profits and gains under the above mentioned sub-section, is wholly incorrect. For the aforesaid reasons, we hold that the insertion of sub clause (iv) to Section 80-IB(9) of the Act by the Finance (No.2) Act, 2009 cannot be interpreted to mean that the term mineral oil as used in Section 80-IB does not include natural gas and cannot result in denial of the benefit of deduction under Section 80-IB(9) to undertakings engaged in commercial production of natural gas under contracts entered into prior to VIIIth round of bidding. In view of the decision of the Constitutional Bench of the Apex Court, the term mineral oil includes and has always included natural gas . The benefits of deductions under Section 80-IA were expressly made available with effect from 1.4.1999 by amending the then existing Section 80-IA. Later on Section 80-IB(9) was introduced to provide for such benefits. At all times the benefit had been available to an undertaking . Neither Section 80-IA, Section 80-IB nor the provisions of PSC provided that the undertaking would be construed as a whole Block. The Apex Court in Gold Coin Health Food Pvt. Ltd. (2008 (8) TMI 5 - SUPREME COURT ), held that even if the statute does contain a statement to the effect that the amendment is clarificatory or declaratory, that is not the end of the matter. The Court has to analyse the nature of the amendment to come to a conclusion whether it is in reality a clarificatory or declaratory provision. Therefore, the date from which the amendment is made operative does not conclusively decide the question. The Court has to examine the scheme of the statute prior to the amendment and subsequent to the amendment to determine whether amendment is clarificatory or substantive. Same principle would apply where the legislature had made a statement in the statute that it would apply retrospectively. We have examined the history of enactment for mineral oil, the old and the amended provisions. We are satisfied that the Explanation added to Section 80-IB(9) has levied income tax on all wells/cluster of wells and all undertakings, except the first one which commences commercial production for which still seven years tax holiday is available. The legislature or the Parliament had by inserting the Explanation had widened the main Section 80-IB(9) and imposed an altogether new tax by widening the tax net which would be applicable for different periods depending upon the date of starting commercial production would be substantive change in the law with different tax liability. Such substantive provision could only be construed prospective in operation. For the reasons given above, we are of the considered opinion that the amendment made in Section 80-IB(9) by adding an Explanation was not clarificatory, declaratory, curative or made small repair in the Act, but on the contrary takes away the accrued and vested right of the Petitioner which had matured after the judgments of ITAT, therefore, the Explanation added by Finance (No.2) 2009 was a substantive law. We have no hesitation to hold that the Explanation added to Section 80-IB(9) by Finance Act (No.2) of 2009 is clearly unconstitutional, violative of Article 14 of the Constitution of India and is liable to be struck down. Therefore, for the reasons given above, we are of the considered opinion that the Explanation added to Section 80-IB(9) by amendment is substantive law and could not apply retrospectively. The Explanation added to Section 80-IB(9) breaches the rule of law and is arbitrary being violative of Article 14 of the Constitution of India is struck down. In the result, both the writ petitions succeed and are allowed. The Explanation to Section 80-IB(9) of the Act is held to be ultra vires to Article 14 of the Constitution of India. Rule is made absolute. - Decided in favour of assessee.
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2015 (3) TMI 985
Reopening of assessment - whether Tribunal erred in quashing the proceedings u/s 147 ignoring the fact that the reassessment was made by the Assessing Officer under Section 150 where a reassessment is required to be made in pursuance of a direction by the CIT(A)? - Held that:- The reasons as recorded in support of the reopening notice dated 10 February 2003 merely states that loans were taken by some companies but that does not indicate in what manner those loans would be hit by the provisions of deemed dividend. The reasons must indicate live link between the material and the belief. (see ITO Vs. Lakhmani Mewal Das [1976 (3) TMI 1 - SUPREME Court] and CIT Vs. Kelvinator India Ltd. [2010 (1) TMI 11 - SUPREME COURT OF INDIA ]). The material here is that the respondent assessee has received a loan from three private limited companies but that by itself does not make it deemed dividend leading to reason to believe that income chargeable to tax has escaped assessment. Moreover, we also notice that the Assessing Officer in issuing the notice dated 7 March 2000 has acted at the directions of the CIT(A). This seems to be an admitted position. This is more than evident from Question 1 as formulated by the revenue hereinabove which states that the assessing officer was required to carryout the reassessment in view of the Section 150 of the Act i.e. in pursuance of the direction by the CIT(A). This itself an indication of the assessing officer acting as per the direction of the CIT(A) in issuing the impugned notice. Whether the Tribunal was justified in quashing the proceedings u/s 147 without considering that the return had been merely processed u/s 143(1)(a) ? - Held that:- It is a settled position in law that even though the assessment has been processed under Section 143 (1)(a) of the Act for the purposes of reopening of assessment, the condition stipulated for invoking jurisdiction under Section 147/148 of the Act has to be satisfied. In view of the above, we see no reason to entertain the present appeal as the Tribunal by the impugned order has correctly held that the notice for reopening dated 10 February 2003 was without jurisdiction. No reason to entertain the present appeal as the Tribunal by the impugned order has correctly held that the notice for reopening dated 10 February 2003 was without jurisdiction. - Decided against revenue.
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2015 (3) TMI 984
Waiver to interest, fine and penalty rejected - petition to condone delay rejected - tax on investment towards purchase of property in Mannargudi out of sale proceeds of gold brought under NRI scheme - petitioner is a non-resident Indian working in Singapore - Held that:- Though there is some force in the contention of the learned counsel for the respondent, that sufficient opportunity has been given to the petitioner to pay interest, fine and penalty apart from the tax amount, which is due from 1994 1995. But, the petitioner failed to avail the opportunity given by the authority, in the interest of justice, there will be no harm in giving one more opportunity to the petitioner. Admittedly, the petitioner failed to take effective steps to avail the opportunity given to him. Therefore, remit the matter to the authority for fresh consideration provided the petitioner deposits entire tax amount demanded by the authority.
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2015 (3) TMI 983
Revised return incorporating the merger - assessee's contention that the second revised return should be considered as a valid revised return cannot be accepted - Held that:- the assessee has an option to furnish the revised return at any time before the expiry of one year from the end of the relevant assessment year or before completion of the assessment, whichever is earlier. The assessee's contention that the second revised return was filed before completion of the assessment may be technically correct, but that has to be filed before expiry of one year from the end of the relevant assessment year. In this case, as already stated earlier, the assessee had filed original return of income on November 29, 2006 and another revised return on October 29, 2007. In case, the assessee has to file another revised return the same could have been filed on or before March 31, 2008, as per the provisions of section 139(5). The words "whichever is earlier" puts limitation on filing of revised return beyond one year from the end of assessment year. Thus, the second revised return filed on December 24, 2009, was beyond the time-limit prescribed under the Act. Therefore, since there is a limitation provided under section 139(5) which cannot be ignored, we have to hold that the second revised return filed was beyond the time-limit prescribed. We cannot direct the Assessing Officer or the Dispute Resolution Panel to consider the same, when the law itself does not permit the same. - Decided against assessee. Capital gain on the sale of Goa unit of the assessee - short-term capital gain V/S long-term capital gain - Held that:- the assessee can be considered as setting up the business only from the time it got allotment of the land, if not ready to commence manufacturing activity, and not before. In this case, even though actual manufacturing activity started much later, the setting up of the business can be considered only when the assessee is in position to occupy land to start the unit in Goa, Goa Industrial Development Corporation, as considered by authorities. The principles discussed above in fact consider the setting up much later. But the authorities even gave a benefit in considering the date of taking possession of land while deciding the date of set-up. Therefore, we are of the considered opinion that date of setting up of the business activity, as accepted by the Assessing Officer and the Dispute Resolution Panel as on April 10, 2003, does not require any modification, even though lease deed was entered into subsequently and unit was set up much later. In view of this, the gain can only be considered as short-term capital gain, as decided by authorities. - Decided against assessee. Expenditure incurred towards payment of interest to Department of Chemicals and Petrochemicals (DCP) disallowed - Held that:- Considering the fact that the Assessing Officer allowed principal amount as deduction under section 37(1), we see no reason to disallow the interest as penal in nature. This interest arises not as penalty but as compensatory amount. Therefore, we hold that interest is allowable - Decided in favour of assessee. Disallowance expenditure incurred by the assessee towards honouring of bank guarantee in respect of bank loan taken by Pathnet - Held that:- We are unable to decide the issue as facts are not completely brought on record. The loss on sale of investment in Pathnet was contested in ground No. 14. But what was not on record was whether the bank guarantee was given at the time of investment in Pathnet or subsequently in the course of business by that concern. This fact has a bearing on the decision. In case the assessee extended the guarantee at the time of investment itself the same can be considered as capital in nature as part of investment decision, the loss thereon will be capital loss to be considered under the head "Capital gains". In case, the guarantee was extended later after the investment as part of business under taken by subsidiary, the principles of commercial expediency are to be considered. The Assessing Officer relied on the decision in the assessment year 2003-04 by the Commissioner of Income-tax (Appeals) which was confirmed by the Income-tax Appellate Tribunal in that year. But the facts in that case were that assessee advanced a loan directly to the subsidiary whereas in this case it was not a direct loan but a guarantee given to bank. So the facts are different. However, in the interest of justice, we restore the matter to the file of the Assessing Officer to examine the above aspect and decide afresh, keeping in mind the principle laid down in the above cases relied on by assessee and order of the Income-tax Appellate Tribunal in the assessment year 2003-04. - Decided in favour of assessee for statistical purposes. ESOP allotment claim disallowed - Held that:- As decided in Biocon Ltd. v. Deputy CIT [2013 (8) TMI 629 - ITAT BANGALORE] employee stock option plan discount (difference between market price and issue price) is a deductible expenditure at the time of vesting of the option. An adjustment has to be made if the market price is different at the time of exercise of the option. In that case also the assessee framed an Employee Stock Option Plan (ESOP) pursuant to which it granted options to its employees to subscribe for shares at the face value of ₹ 10. As the market price of each share was ₹ 919, the assessee claimed that it had given a discount of ₹ 909 which was allowable as a deduction as employee compensation. Though the options vested equally over four years, the assessee claimed a larger amount in the first year than was available under the Securities and Exchange Board of India guidelines, thus on facts, the assessee's method of claiming a larger deduction in the first year defies logic. As the options vest equally over a period of four years, the deduction ought to be claimed in four equal instalments on a straight line basis. - Thus in the present case also AO Is directed to work out the deduction keeping in mind the principle laid down by the Special Bench in the above referred case, after giving an opportunity to the assessee. - Decided in favour of assessee for statistical purposes. Disallowance of payment of sales commission and legal and professional charges made to the non-resident under section 40(a)(ia) - assessee has failed to make an application before the Assessing Officer under section 195(2) - Held that:- the order for the assessment year 1997-98 applies to the facts squarely. The Assessing Officer has not established that the amounts paid are taxable under the Income tax Act 1961. Prima facie, the payments were made for services rendered abroad and as seen from the Assessing Officer's order the assessee has deducted tax on the payments made in India/for services rendered in India. Further, as submitted the conversion charges paid to a Mexican entity also cannot be taxed in India as that amount was a business income and that entity does not have any permanent establishment in India. Moreover, there seems to be no proceedings initiated under section 201 for recovery of taxes, even though the assessee applied for a certificate under section 195. Considering the above facts and order of the co-ordinate Bench extracted above, we hold that the amount cannot be disallowed in section 40(a)(i) as was done by the Assessing Officer without establishing that the amounts are taxable in India. The Assessing Officer is directed to allow the amounts. - Decided in favour of assessee. Disallowance of local doctors meet expenditure - Held that:- It was submitted that expenditure was incurred on doctors for provision of various gifts in individual capacity including gifts, tickets, sponsorship, etc. It was contended that this was for business promotional expenses which are to be allowed as revenue expenditure. In the assessment year 2003-04, this issue was set aside to the file of the Assessing Officer for fresh consideration with the direction to the assessee to substantiate the business expediency to incur this expenditure. Respectfully following the above, in this year also, we modify the order of the Assessing Officer/Dispute Resolution Panel to that effect and direct the Assessing Officer to examine the nature of expenditure and whether the same can be allowed as incurred for the purpose of business. - Decided in favour of assessee for statistical purposes. For Individual doctors services ince the issue was set aside by the Commissioner of Income-tax (Appeals) to the file of the Assessing Officer to verify the nature of expenditure and disallow only that expenditure which is not incurred for the purpose of business, we also modify the order of the Assessing Officer/Dispute Resolution Panel and direct the Assessing Officer to examine the nature of expenditure and consider disallowance of expenditure which is not incurred for the purpose of business. The issue is restored to the file of the Assessing Officer. - Decided in favour of assessee for statistical purposes. Allocation of part of the head office expenditure against the profits of the units eligible for deduction under section 10B - whether Dispute Resolution Panel has erred in allocating a part of the head office expenditure against the profits of the units eligible for deduction under section 80-IB thereby reducing the deduction available to the assessee? - Held that:- As decided in assessee's own case in assessment year 2003-04 wherein it was held that the assessee is rightly having allocated indirect expenses to the two units according to the wages and other expenses on the basis of sales for arriving respective profits of its two units. The Assessing Officer is directed to accept the assessee's working in relation to deduction under section 80-IA. In view of the above judgment, in our opinion, in the absence of identifying the expenditure of the export division, there is no basis other than allocating the total indirect cost on the basis of turnover. Accordingly, we direct the Assesing Officer to apportion the expenditure on the basis of turnover of various units. The issue is set aside to the file of the Assessing Officer for fresh consideration - Decided in favour of assessee for statistical purposes. Payment made to get the existing customers contracts of Falcon assigned in favour of the assessee - capital expenditure or revenue expenditure - Held that:- he agreement is for purchase and sale of a business. Preamble states the M/s. Roach manages the business of Falcon and this business consist of number of third party agreements for supply of naproxen and steroids manufactured under the Falcon business, termed as "transferred business" in the agreement and the assessee acquired the transferred business. Clause 2.1 clearly states that the agreement was for purchase and sale of assets which are listed in (a) to (c). Terms also include that seller has to renegotiate contracts with the third parties to the extent of transferred business. The assessee also treated the same as purchase of intangible assets in the books. All these indicate that what the assessee purchased are intangible assets of transferred business and the Assessing Officer and the Dispute Resolution Panel were correct in treating it as capital expenditure and allowing depreciation under section 32 of the Act. - Decided against assessee. Disallowance of contribution towards the projects of ILS as revenue expenditure under section 37(1) - Held that:- the Assessing Officer and the Dispute Resolution Panel considered the claim only under section 35AC. Since the same was not admissible, to that extent the order of the Assessing Officer and the Dispute Resolution Panel is sustained. The alternate claim under section 37(1) was not made before the Revenue authorities. Therefore in the interest of justice we restore the claim under section 37(1) to the file of the Assessing Officer to examine the same afresh, keeping in mind the order of the Income-tax Appellate Tribunal in the assessment year 2003-04 and other cases relied on by the assessee - Decided in favour of assessee for statistical purposes. Disallowance of loss incurred on transfer of investment in Pathnet, joint venture by treating the same as capital loss - Held that:- The authorities are justified in disallowing the same as capital loss and not as revenue loss to be set off under the head "Business". However, they are not correct in disallowing the same without considering the same under the head "Capital gains or loss". The assessee no doubt treated the same as investments and sale of investments resulted in loss. This should be considered as long-term/short-term capital loss as the case may be and allowed set off or carried forward to be set off later as per the provisions of Act. This was not done by the authorities. Therefore, we allow the alternate claim of assessee and direct the Assessing Officer to compute the same and allow benefit of set off as per the provisions of Act - Decided partly in favour of assessee. Disallowance of the loss incurred in write off of investment in Aurantis - Held that:- This claim is similar to the claim made with reference to investment in Pathnet discussed in Ground No. 14 above. For the reasons stated above, this should be considered as long-term/short-term capital loss as the case may be and allowed set off or carried forward to be set off later as per the provisions of Act. This was not done by the authorities. Therefore, we allow the alternate claim of the assessee and direct the Assessing Officer to compute the same and allow benefit of set off as per the provisions of Act. - Decided partly in favour of assessee. Transfer pricing adjustment - Held that:- Following the findings in the assessment year 2004- 05 in the assessee's own case, we direct the Assessing Officer to modify the arm's length price adjustment on the basis of rate of interest received on deposits made with banks and public companies, for which the assessee also has no objection - Decided partly in favour of assessee.
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2015 (3) TMI 982
Rectification order U/s 154 - Commissioner of Income Tax passed a rectification order U/s 154 allowing R & D expenditure U/s 35(2AB) on the net expenditure after reducing sales realized - Whether CIT(A) erred in not following the substance of DSIR guidelines which indicates that the sales realization arising out of assets sold should be reduced while claiming the deduction but the he erred in reducing the sale of products out of R & D expenditure? - Held that:- DSIR guidelines no. vii has specifically provided that assets acquired if any out of R & D work shall be disposed with approval of DSIR. The assessee has been submitting yearly audit reports & accounts of approved R & D sanction to DSIR. The R & D accounts have been separately maintained and separate P & L Account prepared and the dossier sales have been credited to P & L Account of R & D because these sales are part of normal sales. It is clear from the sample copy of the license and supply agreement filed before us that the product development charges received by the assessee will not be covered under clause 5(vii) of the DSIR guidelines. As we have already seen, these receipts are credited to profit & loss account are part of normal sales. They are, therefore, not to be reduced from the expenditure incurred by the assessee on carrying out scientific research on which deduction u/s. 35(2AB) has to be allowed. We are, therefore, of the view that there is no merit in ground raised by the revenue and that the order passed by the CIT(A) u/s. 154 of the Act cannot be sustained and the same is hereby reversed. - Decided in favour of assessee. Addition to book profit by adding the expenditure u/s 14A to the book profit - CIT(A) deleted the addition - Held that:- Identical issue came up for consideration before this Tribunal in DCIT v. Sobha Developers [2015 (2) TMI 940 - ITAT BANGALORE] wherein held that there is no difference between the expression “expenditure relatable” and the expression “expenditure incurred by the Assessee in relation to”. Both the expressions mean that whatever expenditure are incurred to earn income which does not form part of the total income under the Act, both direct and indirect expenditure, have to be disallowed. There is no basis for the argument u/s. 115JB of the Act, it is only direct expenses that are contemplated as capable of being added to the profits as per P&L account under clause (f) to Expln.1 below Sec.115JB(2) of the Act. Also the quantum of expenditure disallowed by the AO by invoking the provisions of Sec.14A of the Act while computing total income under the normal provisions of the Act has not been challenged by the Assessee and the said disallowance has been accepted by the Assessee. In such circumstances, we do not see any reason why the same disallowance cannot be adopted while arriving at the book profits u/s.115JB (2) of the Act read with Explanation 1(f) thereto. - aforesaid decision will apply to the facts of the present case also, however, with the modification that the quantum of deduction u/s. 14A of the Act which is determined while computing the total income of assessee under normal provisions of the Act and which is ultimately sustained by the Tribunal will be substituted with the sum disallowed by the AO. - Decided in favour of revenue. Disallowance u/s. 14A read with rule 8D - appellant has not produced the evidentiary support in relation to dispersal of loan and utilization of loan - Held that:- From the copy of the availability of funds and investments made, it is clear from the said statement that the availability of profit, share capital and reserves & surplus was much more than investments made by the assessee which could yield tax free income. The Hon’ble Bombay High Court in Reliance Utilities & Power Ltd. (2009 (1) TMI 4 - HIGH COURT BOMBAY) has held that where the interest free funds far exceed the value of investments, it should be considered that investments have been made out of interest free funds and no disallowance u/s. 14A towards any interest expenditure can be made. Also when investments are made out of common pool of funds and non-interest bearing funds were more than the investments in tax free securities, no disallowance of interest expenditure u/s. 14A can be made. Thus disallowance of interest expenses in the present case of ₹ 49,42,473 made under Rule 8D(2)(ii) of the I.T. Rules should be deleted. - Decided in favour of assessee Disallowance made by the AO under Rule 8D(2)(iii) of the Rules i.e., other expenses are concerned, we find that the assessee had made a claim before the AO that ‘other expenses’ to be considered for disallowance under Rule 8D(2)(iii) is only ₹ 3,22,426. The assessee had also given a break-up of ‘other expenses’ also. Without rejecting the claim of assessee, the AO proceeded to make a disallowance invoking Rule 8D of the Rules. In the decision of Hon’ble Bombay High Court in the case of Godrej & Boyce Mfg. Co., (2010 (8) TMI 77 - BOMBAY HIGH COURT), it was held that Rule 8D can be resorted to by the AO only when he rejects the claim made by the assessee regarding expenditure incurred in earning income which does not form part of total income. In the present case, the AO has not done so. We therefore deem it fit and proper to restore this issue of disallowance under Rule 8D(2)(iii) to the AO for fresh consideration - Decided in favour of assessee for statistical purposes. Addition regarding wealth tax liability under the provisions of section 115JB treating the provision for wealth tax as unascertained liability - Held that:- We agree with the submission of the learned counsel for the Assessee that wealth tax liability provision is not covered under Expln- 1(a) to Sec.115JB(2) of the Act. Regarding applicability of Expln-1(c ) to Sec.115JB(2) of the Act is concerned, we are of the view that it would be just and proper to remand this issue for fresh consideration to verify the claim of assessee to the extent that the provision for wealth-tax is based on the actual wealth-tax returns filed by the assessee (and if so), then the same cannot be considered as unascertained liability - Decided in favour of assessee for statistical purposes.
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2015 (3) TMI 981
Rectification in the order of the Tribunal sought - Disallowance u/s 40(a)(ia) - Tribunal has not followed the judgment of CIT vs. Vector Shipping Services (P) Ltd. [2013 (7) TMI 622 - ALLAHABAD HIGH COURT] and has taken a contrary view while rejecting the claim of the assessee - Held that:- The view expressed or the ratio laid down by the Special Bench of the Tribunal in the case of Merilyn Shipping & Transports [2012 (4) TMI 290 - ITAT VISAKHAPATNAM] has been overruled. Therefore, it cannot be said that since the Hon'ble Jurisdictional High Court has approved the view taken by the Special Bench of the Tribunal in the case of Merilyn Shipping & Transports , the same has to be followed by the Tribunal situated within the jurisdiction of Hon'ble Allahabad High Court. Had the impugned issue been examined and adjudicated by the Jurisdictional High Court, it would have been respectfully followed by the Tribunal irrespective of the fact that contrary view have been expressed by the different High Courts. The Hon'ble Jurisdictional High Court has not examined the impugned issue at all and simple passing reference was made with regard to the order of the Special Bench of the Tribunal in the case of Merilyn Shipping & Transports and the relief was granted to the assessee on merit. Therefore, the ratio laid down in the case of Merilyn Shipping & Transports , which has been suspended by Hon'ble Andhra Pradesh High Court has not been approved by the Hon'ble Allahabad High Court. Therefore, subordinate judicial forum are not required to follow the ratio order laid down in the case of Merilyn Shipping & Transports (supra), as it was overruled by the other High Court. The scope of section 254(2) of the Act has been explained through various judicial pronouncements and it has been repeatedly held that the order of the Tribunal under section 254(2) of the Act can only be rectified when there is an error apparent on the record. If the order is passed having examined all the aspects, the same cannot be reviewed under the garb of rectification. When we speak of amendment or rectifying the mistake the earlier order can never be recalled by the Tribunal. The earlier order must hold the field and the mistake can be rectified or amended can be made to the order. The Tribunal cannot, in law and facts, recall and destroy its final order as a whole with a view to rectify the same order under section 254(2) of the Act. The action of the Tribunal actually amounts to review of its earlier order and that power to review is not available to the Tribunal. See CIT Vs. Prahlad Rai Todi [2001 (7) TMI 111 - GAUHATI High Court]. Thus we are of the considered view that the Tribunal has given a specific finding on the impugned issue after taking into account various judicial pronouncements. Therefore, no error is crept in the order of the Tribunal and accordingly we reject the Miscellaneous Application. - Decided against assessee.
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2015 (3) TMI 980
Eligibility for deduction u/s. 80IB(10) on profits arising from commercial building - Held that:- The claim of the assessee qua decision in the case of Brahma Associates [2011 (2) TMI 373 - BOMBAY HIGH COURT] is totally misplaced because in the case what the Hon’ble High Court held that clause (d) was inserted to Sec. 80IB(10) w.e.f. 1.4.2005 and is prospective and not retrospective and hence could not be applied for the period prior to 1.4.2005 which means that the amendment is not applicable to the projects approved before 1.4.2005. Further it has been mentioned that since the expression Housing Project is not defined in the Act nor defined under regulation framed by the Local authorities from whether the project would qualify as a housing project has to be gathered from the rules/regulation framed by the local authority. Since the local authorities could approve a project to be a housing project with or without the commercial user, it is evident that the legislature intended to allow Sec. 80IB(10) deduction to all housing projects approved by local authority without all with commercial user to the extent permitted under the rules. This is further verified by clause (d) of Sec. 80IB(10) inserted with effect from 1.4.2005. It provides that even though shops and commercial establishments are included in the housing project, deduction u/s. 80IB(10) w.e.f. 1.4.2005 would be allowable where such commercial user does not exceed 5% of the aggregate built up area of the housing project or 2000 Sq.ft whichever is lower. By the Finance Act, 2010, clause (d) was amended to the effect that the commercial user should not exceed 3% of the aggregate built up area of the housing project or 5000 sq.ft whichever is higher. The expression “included” in clause (d) makes it amply clear that commercial user is an integral part of a housing project. Applying the above ratio of the Hon’ble High Court to the facts of the present case, the assessee itself vide letter dt. 18.12.2007 has admitted that four buildings are approved as purely residential buildings and one is approved as commercial and the assessee has kept separate project-wise accounts in respect of Rehab Component i.e. 17 Rehab buildings, 4 Residential buildings and one free sale commercial premises. Thus in assessee’s own submission, it is clear that the commercial building is a separate project and is not included as an integral part of the Housing project. Once again the assessee in its letter dt. 27.12.2007 have itself mentioned that as far as the Commercial Project is concerned, it is totally independent project and not integrated to any of the residential project or Rehab Projects. The detailed layout plan submitted to your kind selves fully supports the factual position. The assessee in the same reply have further mentioned that the said project is a housing project and not residential cum commercial project. Thus the claim of the assessee for deduction u/s. 80IB(10) on the sale of the commercial user is declined. - Decided against assessee.
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2015 (3) TMI 979
Revision u/s 263 - gains arising out of the sale of property was required to be offered for tax as per special provisions of section 50A of the Act and not as long-term capital gain as offered by the assessee - deduction of ₹ 31.05 crores wrongly claimed in the computation was also required to be disallowed - Held that:- A perusal of the assessment order clearly shows that the assessee is offering income under the head "income from house property". The assessee is claiming depreciation only on 1/6th portion which was used by it as its office and the remaining 5/6th portion lease rental income is offered under the head "income from house property". The assessment order clearly shows that the Assessing Officer has thoroughly examined this fact and has also made an addition of ₹ 4,31,298 under the head "income from house property". Now, coming to the claim of deduction as cost of improvement, the hon'ble jurisdictional High Court in CIT v. Shakuntala Kantilal [1991 (3) TMI 123 - BOMBAY High Court] has held that the expenditure incurred in removing encumbrances to transfer is deductible under section 48 of the Act. The court has observed that in so far as clause (i) of section 48 is concerned, the expression used by the Legislature in its wisdom is "the expenditure incurred wholly and exclusively in connection with such transfer". The expression "in connection with such transfer" is wider than the expression, "for the transfer". The High Court further observed that any amount the payment of which is absolutely necessary to effect the transfer will be an expenditure covered by this clause. Thus, the allowability of the claim of deduction is also supported by the judicial decision. Thus view of the learned Commissioner is also not correct because the Tribunal, Mumbai Bench, in Chemosyn Ltd. v. Asst. CIT [2012 (9) TMI 804 - ITAT MUMBAI] has allowed the expenditure incurred by the company towards purchase of its own shares at premium from minority group as per the directions of the Company Law Board as business expenditure because the order passed by the Company Law Board is always considered to be in the interest of company and not in the interest of shareholder/family members same as in the present case wherein Company Law Board directed that the petitioner should be given an option to go out of the company on return of her investment in the shares of the company, if she desires company/respondent should purchase the shares on valuation to be made by an independent valuer based on the balance-sheet of the respondent-company as on March 31, 1982 in case the petitioner is willing to go out of the company, then on an application made by her, a valuer will be appointed by this Board in consultation with both parties. Thus the observations of the learned Commissioner that the expenditure incurred for payment to shareholders are not deductible in any other manner is also incorrect in the light of the above decision of the Tribunal. Thus set aside the impugned order passed by the learned Commissioner under section 263 and restore that of the Assessing Officer passed under section 143(3) of the Act. - Decided in favour of assessee.
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2015 (3) TMI 978
Penalty under section 271(1)(c) - AO arrived at a conclusion that the actual profit of the assessee is worked at ₹ 4,21,71,890 instead of its group of companies and, accordingly, treated the difference of ₹ 1,64,98,954 (Rs. 42,12,71,890 - ₹ 2,56,72,936 (as admitted by the assessee in its return of income)) as inflated expenditure - Held that:- The Assessing Officer, while framing the assessment order, as pointed out earlier, assumed wrongly that the rough working of the tax payable in respect of each group companies instead of group of companies which attributed the initiation of penalty proceedings and subsequent levy of penalty of ₹ 49.49 lakhs under section 271(1)(c) of the Act. Taking the facts and circumstances of the issue we are of the view that the Assessing Officer was not justified in levy of penalty of ₹ 49.49 lakhs under section 271(1)(c) of the Act based on the wrong assumption that the tax payable was in respect of the assessee alone. In substance, the penalty imposed under section 271(1)(c) of the Act is cancelled. - Decided in favour of assessee.
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2015 (3) TMI 977
Computation of the long-term capital gains on sale of the asset - Assessing Officer completing the assessment adopted the cost inflation index of the financial year 1994- 95 being year of conversion of the asset into stock-in-trade instead of year of sale as per assessee - Held that:- Market value as on the date of conversion into stock-in-trade of the financial year 1994-95 and applying cost inflation index of the financial year 2006-07 is found to lack lucidity. By applying the cost inflation index of the financial year 2006-07, it is perceived that the conversion also happens in the financial year 2006-07. The hon'ble Madras High Court in the case of M. Nachiappan v. CIT [1996 (11) TMI 27 - MADRAS High Court] had held that the condition which must be satisfied in order to attract the charge to tax under section 45 is a property converted must be a capital asset as on the date of conversion. In the instant case, during the financial year 2006-07 the asset was held as stock-in-trade. Only during the financial year 1994-95 the asset was a capital asset. Therefore, the market value and the cost inflation index applicable for the financial year 1994-95 should be applied together and not disparagingly like the one claimed by the assessee, in adopting the cost inflation index of year in which the asset was converted into stock-in-trade in computing long-term capital gains, the reasoning of the Assessing Officer appears to be correct and logical. In the circumstances, we are in agreement with the view of the Assessing Officer that the cost inflation index as stood in the year of conversion only has to be applied not the cost inflation index as stood in the year of taxation of capital gains of the asset - Decided against assessee. Set off of unabsorbed depreciation prior to the assessment year 1997-98 denied -Enhancement proposal of the Assessing Officer accepted by CIT(A) - Held that:- This issue is squarely covered in favour of the assessee by the decision of the hon'ble Gujarat High Court in the case of General Motors India P. Ltd. v. Deputy CIT [2012 (8) TMI 714 - GUJARAT HIGH COURT] wherein held that unabsorbed depreciation from 1997-98 up to assessment year 2001-02 got carried forward to the assessment year 2002-03 and became part thereof and was available for carry forward and set off against profits and gains of subsequent years without any limit whatsoever.any unabsorbed depreciation available to an assessee on the 1st day of April 2002 (assessment year 2002-03) will be dealt with in accordance with the provisions of section 32(2) as amended by the Finance Act, 2001. And once the Circular No. 14 of 2001 clarified that the restriction of 8 years for carry forward and set off of unabsorbed depreciation had been dispensed with, the unabsorbed depreciation from the assessment year 1997-98 up to the assessment year 2001-02 got carried forward to the assessment year 2002-03 and became part thereof, it came to be governed by the provisions of section 32(2) as amended by the Finance Act, 2001 and were available for carry forward and set off against the profits and gains of subsequent years, without any limit whatsoever - Decided in favour of assessee.
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2015 (3) TMI 976
Exemption u/s 10(23C)(iiiad) denied - whether the income of any university or educational institution existing solely for educational purposes being exempt from tax, if its gross receipts does not exceeds ₹ 1 crore, and in such case the institution is not required to file return of income under section 139 - FAA allowed the claim - Held that:- The findings of the learned first appellate authority is contrary to law and facts on the file and the same deserves to be cancelled on the ground that the learned first appellate authority is not justified in deleting the addition made by the Assessing Officer in spite of the fact that the gross receipts of the society exceeds ₹ 1 crore as admitted in the aforesaid paragraphs at the time of issuing notice under section 148 of the Act which was not verified by the assessee till date. Secondly, the learned first appellate authority is also not justified under the law that the assessee-society is entitled for exemption under section 10(23C)(iiiad) of the Act only because the assessee is an educational institution ignoring the fact that as and when the gross receipts of the society exceeds ₹ 1 crore, the assessee-society requires approval from the prescribed authority for exemption of its income under section 10(23C)(iv) of the Act which neither the assessee nor his authorised representative has produced before any Revenue authority nor before us till the closing of hearing.Stand of the assessee is not tenable in the eye of law, because the gross receipts of the assessee-society is exceeded ₹ 1 crore which requires approval from the competent authority. Both institutions,namely, Vivekananda College of Education and Vivekananda Institute of Education Training and Research are under the society and its head office is at Kachi Chawni, Jammu, we are of the view that the Assessing Officer has completed the assessment under the law and rightly made the total taxable income of ₹ 69,27,948 and rightly held that the receipts of both institutions should have been clubbed and the society, which is the educational society, was required to file its return by clubbing the receipts of both institutes and to claim exemption of income over expenditure, the society must have obtained exemption certificate under section 10(23C)(iv) of the Act from the prescribed authority under the Income-tax Act. As regards to the documentary evidence filed by learned counsel for the assessee in the shape of paper book, we have thoroughly gone through the same and found that he did not file even a single document or case law supporting the facts of the assessee's case where gross receipts of the assessee is exceeding ₹ 1 crore and no exemption under section 10(23C)(iiiad) of the Act from the prescribed authority are required. Therefore, the case law relied upon by learned counsel for the assessee are not helpful in the case of the assessee. In view of the foregoing discussion, we are of the view that the learned first appellate authority has passed the impugned order contrary to the law and on facts the file which is not sustainable in the eye of law. Accordingly, we cancel the impugned order dated April 26, 2010 passed by the learned Commissioner of Income-tax (Appeals), Bathinda, and upheld the assessment order dated December 31, 2008 passed by the Assessing Officer under section 143(3) of the Act by accepting the appeal filed by the Revenue. - Decided in favour of revenue.
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2015 (3) TMI 975
Penalty under section 271(1)(c) - additions made on account Offshore supply of equipment - CIT(A) deleted the levy - Held that:- So far as the penalty levied on the addition made on account of offshore supply of equipment is concern, the addition has been finally deleted by the Tribunal vide order [2010 (9) TMI 624 - ITAT, DELHI] Similarly the Tribunal has also deleted the addition made on account of income from foreign exchange fluctuation gain. Thus there is no question of levy of penalty under section 271(1)(c) of the Act on these additions - Decided against revenue. Penalty levied on the addition made on account of onshore supply of equipment is concerned, the assessee had offered the income from onshore supply and other contract receipts to tax on the basis of the audited books of account as maintained by them. The Assessing Officer was of the opinion that there was various discrepancies in the books of account maintained by the assessee and accordingly the books were rejected under section 145 of the Act and the income from the above activity was estimated by the Assessing Officer by applying 8 per cent. profit rate on the gross receipts from this activity. Since the assessee had claimed loss which it was not able to justify, therefore, the Assessing Officer held that the assessee had furnished inaccurate particulars of income and has levied penalty. The Assessing Officer has not given reason for applying 8 per cent. rate. Of course, there is no finding beyond doubt by the Assessing Officer that any false claim was made by the assessee and there is no dispute that income from onshore supply and other contract receipts has been estimated by the Assessing Officer after rejection of books of account under section 145 of the Act. The estimation of income in this regard has also been made on the basis of the disclosure made by the assessee. It is now a well-established proposition of law that penalty under section 271(1)(c) of the Act cannot be levied on an estimated income. See CIT v. K. L. Mangal Sain [1974 (5) TMI 6 - ALLAHABAD High Court] - CIT(A) correctly deleted penalty.- Decided against revenue. Penalty levied on addition made on account of income from fee for design and engineering under section 115A is concerned there is no reason to doubt the submission of the assessee that the assessee had a bona fide basis and reasoning regarding the manner of taxability of income on account of design and engineering fees on net income basis nor is there any dispute regarding this material fact that all the facts necessary for the computation of income were duly disclosed by the assessee. We thus find that the dispute is limited to the manner of computing taxability of such income only about which the assessee was having a bona fide belief as discussed above. Considering these facts in totality we are of the view, that the learned Commissioner of Income-tax (Appeals) has rightly deleted the penalty levied on the addition made on account of income from fee for design and engineering under section 115A of the Act. - CIT(A) correctly deleted penalty - Decided against revenue.
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2015 (3) TMI 974
Estimation of income - applying 20% net profit rate - whether bank account No. 12505 and 7968 do not belong to the assessee company? - assessment year 2004-05 - Held that:- When Dr. A. K. Shah, M.D. of the assessee company has admitted in the statement recorded during search that the bank accounts are belonging to the assessee company, simply because the accounts are in two different names, it cannot be accepted that the transactions in these bank accounts do not belong to the assessee company. These findings of the learned CIT (A) could not be controverted by the learned AR of the assessee. Hence, on this aspect, we do not find any reason to interfere in the order of CIT(A). - Decided against assessee. Estimation of income by estimating gross receipts at ₹ 40 lacs - we find that it is noted by CIT(A) that the receipts as per books of account are at ₹ 26,29,965/- and there is total credits in bank account Nos. 12050 & 7968 to the extent of ₹ 12,44,000/-. Total of these two amounts has been arrived at ₹ 38,73,965/- and under these facts, the turnover was estimated at ₹ 40 lacs. In our considered opinion, in the facts of the present case, when these two bank accounts are belonging to the assessee company and receipts as per these two bank accounts were not accounted for in regular books, the receipts as per these two bank accounts and as per books of account have to be added to estimate the gross receipt of the assessee company and therefore, estimation of gross receipts at ₹ 40 lacs is proper and reasonable. Applying net profit rate of 20% on the said estimated gross receipts of ₹ 40 lacs, we find that against receipt in the books of account of ₹ 26.30 lacs, the assessee has declared profit before depreciation of ₹ 2.53 lac, which worked out to 9.62%. Hence, we find force in the submission of Learned A.R. of the assessee that applying net profit rate @20% is excessive in the facts of the present case. We, therefore, hold that applying net profit rate of 10% will meet the ends of justice and hence, we direct the Assessing Officer to apply net profit rate of 10% on estimated gross receipt of ₹ 40 lac and in this manner, the assessee gets part relief of ₹ 4 lac. These grounds are partly allowed. - Decided partly in favour of assessee. Estimation of income - applying net profit @25% - assessment year 2005-06 - Held that:- It is noted by CIT(A) that receipts as per books of account was ₹ 32.57 lacs and total credits in bank account Nos. 12050 & 7968 was to the extent of ₹ 21.10 lac. Total of these were worked out at ₹ 53.67 lacs against which the receipts were estimated at ₹ 55 lacs and considering these facts, we are of the considered opinion that on this aspect, no interference is called for in the order of CIT(A) in this year also. In this year, as per profit & loss account of the assessee company, net profit rate declared by the assessee before depreciation was 16.09%. Hence, in this year, we feel that applying net profit rate of 17% will meet the ends of justice as against 25% applied by CIT (A). We direct the Assessing Officer accordingly. The assessee gets relief of ₹ 4.40 lac being 8% of ₹ 55 lac. - Decided partly in favour of assessee. Addition on account of undisclosed income - CIT(A) deleted the addition - whether the total unaccounted receipts as per total credits in two bank accounts should be added in full or only net profit rate should be applied on these receipts - assessment year 2005-06 - Held that:- when the receipts in question is unaccounted business receipts, the entire receipts cannot be assessed as income and only net profit out of such receipts should be brought to tax. Hence, on this aspect, we do not find any infirmity in the order of CIT(A). Regarding the rate of net profit, we have already decided while deciding the appeal of the assessee that instead of 25% rate of net profit, it should be applied at 17%. Apart from this, we do not find any reason to interfere in the order of CIT(A) on this aspect. - Decided against revenue. Bifurcation of total surrender made by the assessee of ₹ 40 lac - whether CIT(A) was justified in holding that such surrender should be bifurcated in two years i.e. ₹ 8,96,686/- in the present year and balance amount of ₹ 31,03,314/- in assessment year 2006-07 whereas it was held by Assessing Officer that such surrender should be divided in these two years equally i.e. ₹ 20 lac in each year? - Held that:- As per the material found in course of search, there were two bank accounts belonging to the assessee company, receipts of which were not included in the receipts as per books of account. We have already held that on such unaccounted receipts, profit @17% of gross receipts has to be taxed in the present year. The income was worked out by CIT(A) at ₹ 10,51,176/- as against the income declared by the assessee in the return of income at ₹ 1,54,956/-. In this manner, CIT(A) has confirmed an addition of ₹ 8,96,686/-. While deciding the appeal of the assessee, we have reduced this addition by ₹ 4.40 lac because we have directed the Assessing Officer to adopt net profit of 17% as against 25%. Hence, the additional income to be taxed in the present year remains only ₹ 4,56,686/- and therefore, the amount to be considered in assessment year 2006-07 should be ₹ 35,43,314/- being difference of ₹ 40 lac and ₹ 4,56,686/-. Except this modification, we decline to interfere in the order of CIT(A). - Decided partly in favour of assessee. Addition made on account of deposits in the benami account - CIT(A) deleted the addition - Held that:- stand of the Revenue is that total deposit in Benami account should be considered as income of the assessee company. Since admittedly, such receipts being Benami bank account were business transactions of the assessee company, only net profit out of such unaccounted receipt should be taxed and not the gross receipt. The amount being taxed out of such gross receipts of ₹ 64.69 lac is more than normal income out of such gross receipt and therefore, there is no merit in this ground of the Revenue. - Decided against revenue. Addition being credit balances found in the bank account Nos. 12050 and 7968 also - CIT(A) deleted addition - Held that:- we do not find any merit because when the assessee is surrendering extra income in the present year, such extra income is the source of credit balance found in these two bank accounts and therefore, no double addition can be made. Decided against revenue. Addition on account of surrender not disclosed in the return - CIT(A) deleted addition - Held that:- Income disclosed by the assessee is more than the surrender made by the assessee of ₹ 40 lac being composite surrender for assessment year 2005-06 and 2006-07 and therefore, there is no merit. - Decided against revenue.
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2015 (3) TMI 973
Provision for warranty expenses - disallowance on the ground that the same is unascertained liability - CIT(A) deleting the disallowance - Held that:- Unable to see any valid reason to interfere with the conclusion of the ld. CIT(A) for AY 2007-08 when the same claim of expenditure has been allowed by the AO in the preceding assessment year 2005- 06 and 2006-07 in the order passed u/s 143(3) of the Act. We also note that the same claim of the assessee in AY 2008-09 was also allowed by the ld. CIT(A) VI vide his order dated 15.3.2012 which has been upheld by the ITAT Delhi “B” Bench by the order reported in [2013 (5) TMI 275 - ITAT DELHI] . Hence, we hold that the issue is squarely covered in favour of the assessee by earlier and subsequent orders, therefore, same claim of warranty expenses was rightly allowed by the ld. CIT(A) for the year under consideration - Decided against revenue. Disallowance of Software Services Charges - CIT(A) deleting the disallowance - Held that:- We are in agreement with the conclusion of the ld. CIT(A) that it cannot be presumed that the expenses were not incurred by the assessee company in absence of any adverse material or evidence. At the same time, we are of the considered opinion that there was no good cause for the AO for making 50% ad hoc disallowance of the Software Services Charges claimed by the assessee as if, the AO was of the opinion that payment were not genuine that the entire expenses should have been disallowed. We are unable to see any valid reason or ground for making 50% disallowance by the AO. We cannot ignore that the ld. CIT(A) for AY 2005-06 has also allowed similar claim of the assessee and on specific query from the Bench the ld. DR was unable to guide us whether the Department further agitated the issue before the Tribunal and hence, we may safely presumed that the order of the ld. CIT(A) for AY 2005-06 has been accepted by the Department. On the rule of consistency it is a well accepted proposition that although the principle of res judicata does not apply to the taxation matter but the rule of consistency has to be followed by the Revenue Authorities and flip flop approach on the similar issue is not permissible unless and until any substantial change in the facts and circumstances of the case is brought out. - Decided against revenue. Disallowance of depreciation on computer peripherals/accessories - 15% v/s 60% - CIT(A) deleting the disallowance - Held that:- Issue is squarely covered in favour of the assessee by the decision of CIT vs. BSES Rajdhani Powers Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT] we are of the considered view that the ld. CIT(A) has rightly granted relief for the assessee on this issue as entitled to depreciation at the higher rate of 60%. - Decided against revenue. Disallowance u/s 14A - CIT(A) deleted disallowance - Held that:- Respectfully following the decision of Maxopp Investment Ltd. vs. CIT [2011 (11) TMI 267 - Delhi High Court]wherein their lordship has held that even if for the pre rule 8D period the procedure for making disallowance u/s 14A of the Act has been given and the Tribunal for AY 2008-09 we hold that the similar issue in the similar set of facts and circumstances of the present case also deserve to be restored to the file of AO for fresh adjudication- Decided in favour of revenue for statistical purposes.
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2015 (3) TMI 972
Keyman insurance premium - Disallowance u/s 37 - Genuineness of an expense - Held that:- The assessee's case fails on the basis of an inability to discharge the onus to exhibit that the impugned expenditure stood incurred wholly and exclusively for the purposes of his business, which constitutes the primary condition for deduction under section 37(1), i.e., on facts. On the contrary, for the various reasons cited, its genuineness is in serious doubt. We, accordingly, in view of the foregoing, find no merit in the assessee's case, and dismiss its relevant grounds. - Decided against assessee.
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2015 (3) TMI 971
Addition u/s. 40A(2)(b) - interest to its sister concern - CIT(A) deleted addition in view of the provisions of section 37(1) of the I.T. Act, 1961 - Held that:- The undisputed fact is that the assessee has paid interest to its sister concern @ 12% per annum. It is also an undisputed fact that the assessee has not paid any interest on other borrowings/advances. However, the reasons given by the AO for disallowing the interest are not tenable in law. Further, the assessee has been paying interest since 1999-2000 by making TDS as per provisions of law. The said interest has been allowed in all the preceding assessment year. The recipient M/s. Gazebo Industries Ltd. is declaring the interest income in its return of income. The Ld. CIT(A) has very rightly declined to invoke Explanation to Sec. 37(1) of the Act in respect of this payment of interest. Considering all these facts in totality, no interference is called for with the findings of the Ld. CIT(A). - Decided against revenue. Addition u/s. 40(a)(ia) - TDS on labour charges - CIT(A) deleted addition - Held that:- It is not in dispute that the labour charges have been incurred by M/s. Dev Construction. The Ld. CIT(A) has given a categorical finding that TDS has been made by Dev Construction on such labour payments. It is an undisputed fact that the assessee has simply reimbursed the expenditure incurred by M/s. Dev Construction. On such reimbursement of expenditure, there is no liability for TDS. The Ld. CIT(A) has rightly deleted the addition. No interference is called for. - Decided against revenue. Deemed dividend - CIT(A) allowed part relief out of addition u/s 2(22)(e) - Held that:- The Ld. Counsel for the assessee for the first time stated that provisions of Sec. 2(22)(e) of the Act was not applicable on the facts of the case because the assessee is neither a share holder of M/s. Gazebo Industries Ltd. nor the assessee is a member or a partner or a share holder in any concern in which M/s. Gazebo Industries Ltd. has a substantial interest nor the assessee has any substantial interest in M/s. Gazebo Industries Ltd. We find that this aspect has not been looked into by the lower authorities. Therefore, for verifying the fact for this limited purpose, we restore this issue to the files of the AO. - Decided in favour of revenue for statistical purpose.
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2015 (3) TMI 970
Bogus purchases - Invocation of s. 145(3) - Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee - Held that:- The assessee's account books are as kept and maintained in the regular course of its business, while the enquiry by the Revenue was only much later, in, as it appears, February, 2009, followed by notice u/s.133(6) on 05.03.2009. The transaction/s with MA, as per the assessee's books of account, occurred during the period 15.07.2006 to 04.09.2006, prior to the demise of its main person, i.e., Shri P. B. Maniar, on 16.09.2006. The plea of the successor being not, therefore, aware of the transactions, which are generally not recorded in accounts is not without merit. The assessee may have, as stated in the assessment order not reflected the name of MA in the details of sales made in excess of ₹ 1 lac each during the year, as furnished in the assessment proceedings. However, that could not hold against the assessee or lead to the inference of the purchases being bogus. If so, the sales thereto, also appearing in the same account (of MA), must equally be regarded as bogus. In fact, the objection is to no moment, as the assessee's books, including stock records, are matched, showing the purchase from and sale of goods to MA, so that notwithstanding the said non-reflection, the said transactions stood duly recorded in its accounts. The assessee does not gain in any manner from the said non-reflection; its accounts clearly showing the goods 'purchased' from as having been subsequently 'sold' to, MA, i.e., in the same quantity and at the same rate. In other words, the recording of the said transactions exhibits the authenticity of the said account, as it could have otherwise kept the same off its books, as did MA. The aspect of 'sales' to MA, an integral part of the assessee's explanation in support of its accounts, has been completely ignored by the Revenue. It, in our view, in acting in the manner it has, acted parochially and with a prejudiced state of mind.there is nothing to doubt the genuineness of the impugned entries of purchase. Accordingly, we set aside the invocation of s. 145(3) qua the assessee's accounts as also direct the deletion of the disallowance effected. - Decided in favour of assessee
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2015 (3) TMI 969
Addition u/s 68 - explained unsecured loans - CIT(A) deleted the addition - Held that:- in the remand proceedings the A.O. himself has accepted that “loans taken by Praveen Kumar (i.e. assessee) ……. appears to be genuine”. Thus, the A.O. himself has given a clean chit to the assessee and yet when the ld. CIT(A) deletes the addition in respect of the same, the A.O. is in appeal before us. It is not possible to reconcile these two conflicting stand taken by the A.O. As find that the ld. CIT(A) in a very detailed and analytical order, deleted the impugned addition for good and sufficient reasons. The loans were given from the overdraft bank accounts and no cash deposits were made before issuance of cheques. Identity of the creditors stands proved and the credit worthiness of the creditors is also reasonably established. In view of the fact that the genuineness of the borrowing/credit itself is established, there cannot be any good reason to dispute the same with respect to payment of interest either. As the ld. CIT(A) has rightly observed, genuineness of the unsecured loans under consideration does not remain undisputed in the light of the remand report submitted by the A.O. himself. We uphold the order of ld. CIT(A) and decline to interfere in the same. - Decided in fvaour of assessee.
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2015 (3) TMI 968
Service PE - whether assessee's assistance to M/s Lucent Technologies India Ltd. in connection with services of installation, commissioning, testing, etc. of the hardware and software constitutes only 'Service PE' ? - assessee is a company incorporated in USA - Held that:- Tribunal held LTIL to be the service PE of the assessee in India. The contention of the Department through the instant appeal that LTIL should be considered as PE on the basis of fixed place, installation and dependent agent as well, does not merit acceptance. If the Revenue was aggrieved against the order passed by the Tribunal holding LTIL to be the service PE of the assessee in India, it ought to have challenged the same before the Hon'ble High Court or have got it modified through miscellaneous application. Having neither filed any MA nor raised this issue before the Hon'ble High Court, notwithstanding the fact that it filed appeal against the tribunal order, the natural consequence which follows is that the finding given by the Tribunal as to LTIL constituting service PE of the assessee stood accepted by the Revenue. As such, it has become too late in the day to agitate in the present proceedings that the view taken by the tribunal in the first round should be altered, which, in fact, has attained finality. We, therefore, hold that the ld. CIT(A) was justified in coming to the conclusion that LTIL constituted only service PE of the assessee in India. - Decided against revenue. Attribution of income - profits attributable to the Indian PE of the assessee at the rate of 2.5% of the total turnover for the relevant year - Held that:- The AO, after holding that there was not only service PE, but also fixed place PE etc. in India, finalized the assessment by attributing income to the PE in India at the rate of 2.5% of the sales made by the overseas entities in India. Such attribution of income was accepted by the assessee as well without filing any further appeals on this score. Now, we are confronted with a situation in which there is a profit attribution by the Revenue itself to the PE in India at the rate of 2.5% of the sales made by the overseas entities in India on one hand, and on the other hand, the Revenue has brought no material on record to demonstrate any mechanism for attributing income to the assessee's PE in India. In our considered opinion, the view taken by the Revenue itself in subsequent years for attributing 2.5% of the sales made by the overseas entities in India as attributable to the PE, constitutes a good basis for adoption. As the ld. CIT(A) has followed the same, we see no reason to interfere with the impugned order on this issue - Decided against revenue.
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Customs
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2015 (3) TMI 993
Extension of stay order - Held that:- issue of competency of the Tribunal to extend the stay beyond the period of 365 days was considered by the Larger Bench of this Tribunal in the case of Haldiram India Pvt. Ltd. [2014 (10) TMI 724 - CESTAT NEW DELHI (LB)] and the Larger Bench held that, in case the pendency of the appeal is not due to any omission or commission on the part of the appellant, stay can be extended even beyond the period of 365 days. - pendency of the appeals before this Tribunal, is not due to any omission or commission on the part of the appellants and is due to the huge pendency of appeals pending disposal before this Tribunal. In view of the above, we extend the stay till the disposal of the appeals, - Stay extended.
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2015 (3) TMI 992
Withdrawal of Levy of anti dumping duty on imports of Pentaerythritol, originating in or exported from Sweden to India - whereas levy was continued for import from china - It is contended that the authority was incorrect in drawing an inference of no likelihood of injury, based on the fact that there were negligible imports from Sweden - Held that:- After the imposition of duties on Sweden, there has been almost a cessation of exports from Sweden. It has been argued that the exporter needs to dump to sell substantial volumes in India. Attention was invited to the international practice, where the decline in import volumes or cessation of exports after the imposition of duties is considered to be highly probative of the likelihood of continuation of recurrence of dumping. We find that while the exports from Sweden have declined to negligible levels, the exports from Germany have increased. However, the Authority also notes that the exports from Sweden to other countries are also negligible, and therefore, cessation of exports to India is not indicative of likelihood of dumping and injury if antidumping duty was removed. Indeed, in such a situation, it can not be said, notwithstanding the contention of the appellant, that exports to India dropped to negligible level due to anti-dumping duty when exports from Sweden to other countries too were negligible. The existence of possibility does not necessarily mean the existence of likelihood . Thus, the DA was in no way contracting himself when he found the possibility but not likelihood of dumping. As has been reiterated in the recent judgment of the Delhi High Court in the case of M.P. Goenka vs. CC, (Preventive) [2015 (2) TMI 263 - DELHI HIGH COURT], it is not the task of the Court exercising appellate power to review or second guess (or even third guess, at times) the factual findings based on evidence considered by the lower authorities but only to correct an order if it is based on irrelevant or manifestly incorrect construction of the facts or if based on mis-appreciation of law or non-appreciation of mind. - No sufficient merit/ basis to warrant any appellate intervention vis-`-vis the DA s findings/ conclusion and the consequent discontinuation of antidumping duty in respect of imports of subject goods from Sweden - Decided against assessee.
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2015 (3) TMI 991
Levy of anti dumping duty - Whether the goods imported namely Decorative Ink Printed MDF Board imported from Thailand are to be subjected to anti dumping duty under this notification - Confiscation of goods - Imposition of redemption fine and penalty - Held that:- The respondent claims that since these Boards are ink printed on one side, they cannot be called Plain MDF Board. It would be useful to refer to the finding of the DGAD on the anti-dumping investigations on imports of MDF Board into India. The preliminary finding of the DGAD dt. 2.2.2009 as brought out in Revenue's appeal stated that “ MDF Board is produced in two forms plain & laminated. Lamination is additional processing, which is done after production of plain board, Laminated board is beyond the scope of the product under consideration.” - It is apparent from the findings of DGAD that only ‘laminated' and ‘other than laminated' Boards were considered for investigation. No distinction was made between Plain and Ink Printed Boards. It would appear that the words used in the notification namely Plain MDF Board only reflect to the planeness of the Board. In other words, only laminated board would be outside the purview of the anti dumping notification. Even in common parlance, if an item such as a table is called a Plain Table, it would not mean that tables which are polished or coloured would not be considered as plain table. - Goods imported by the respondent being non laminated are covered under Notification No. 116/2009-Cus and leviable to anti-dumping duty. - Decided against the assessee. Levy of penalty and redemption fine - Held that:- The matter could be subject to interpretation in the minds of some people, in view of the wording of the notification. - The importer cannot be blamed for betraying the trust put on him by allowing self-assessment, as observed by the adjudicating authority. No case is made of deliberate intention to avoid payment of anti dumping duty. Therefore, we set aside the confiscation, consequent redemption fine and penalty under Section 112(a) of the Customs Act. - Decided partly in favour of Revenue.
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Corporate Laws
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2015 (3) TMI 990
Sanction of the Scheme of Amalgamation - Concern of the Regional Director regarding compliance of provisions of sec.17 of the Companies Act, 1956, in respect of alternation in the Memorandum and Articles of Association has been duly addressed - Held that:- In view of the approval accorded by the Shareholders, Secured Creditors and the Unsecured Creditors of the Petitioner Companies; representation/reports filed by the Regional Director, Northern Region and the Official Liquidator, attached with this Court, to the proposed Scheme of Amalgamation, there appears to be no impediment to the grant of sanction to the Scheme of Amalgamation. Consequently, sanction is hereby granted to the Scheme of Amalgamation under Sections 391 and 394 of the Act, 1956. The Petitioner Companies will comply with the statutory requirements in accordance with law. It is, however, clarified that this order will not be construed as an order granting exemption from payment of stamp duty, taxes or any other charges, if payable in accordance with law; or permission/compliance with any other requirement which may be specifically required under any law. - Scheme of Amalgamation approved.
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2015 (3) TMI 989
Application for Scheme of Arrangement under section 391 to 394 of the Companies Act, 1956 - Observations of Regional Director regarding compliance of provisions of satisfaction and creation of charges , Appointment date before incorporation date of resulting company , Compliance of Section 2(19AA) of the Income Tax Act , Non disclosure of related party transactions , Non filing of balance sheet , Non filing of list of shareholders along with the Annual Return and Non appearance of certain assets/ shares transferred, in books of accounts are duly complied with. Held that:- In view of the approval accorded by the Shareholders and Creditors of the Petitioner Companies; representation filed by the Regional Director, Northern Region the proposed Scheme of Arrangement, there appears to be no impediment to the grant of sanction to the Scheme of Arrangement. Consequently, sanction is hereby granted to the Scheme of Arrangement under Sections 391 and 394 of the Companies Act, 1956. - Scheme of Arrangement approved.
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Service Tax
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2015 (3) TMI 1011
Waiver of pre deposit - Outdoor Catering Service - supply of coffee and tea in their customer’s premises - whether in the nature of service - appellant has paid VAT on the same - Held that:- it is clearly evident that the service of supply of coffee to the employees of the Company at their premises is predominant element. - In the case Sayaji Hotels Ltd. (2011 (1) TMI 650 - CESTAT, NEW DELHI ) the issue was decided in favour of Revenue and has considered the Hon’ble Delhi High Court’s decision [2010 (7) TMI 174 - HIGH COURT OF DELHI] - applicant failed to make out a prima facie case for waiver of pre-deposit of the entire dues - Partial stay granted.
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2015 (3) TMI 1007
Waiver of pre deposit - Benefit of Notification No.45/2010 - exemption in respect of services provided to transmission and distribution companies - Held that:- Appellant was engaged in providing the activity of maintenance or repair of distribution transformers. He submits that appellant is eligible for the benefit of Notification No.45/2010 which provides exemption in respect of services provided to transmission and distribution companies - appellant may be eligible for the benefit of this Notification. However, the amount payable after extending cum-tax benefit is ₹ 1,76,012/- after 1.7.2010 and even appellant is not disputing the same. In our opinion, this amount is required to be deposited. - Partial Stay granted.
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2015 (3) TMI 1006
Penalty u/s 78 - Whole disputed liability paid before issuance of SCN - Held that:- It is an admitted fact that the entire service tax liability attributable to the taxable services provided by the appellant has been paid along with interest before issuance of show-cause notice. Sub-section (3) of Section 73 mandates that on payment of the amount of service tax on the basis of own ascertainment by the service provider or on the basis of tax payable as ascertained by the Central Excise officer, no show-cause notice shall be served on the service provider in respect of the amounts so paid. We find that the authorities below have accepted the fact regarding payment of tax along with interest by the appellant and over and above such payment nothing further is payable, representing the service tax or interest thereon. We find that no iota of evidence has been brought on record to prove that the appellant had the intention to evade payment of service tax. There-fore, we are of the considered view that the adjudication proceedings initiated for imposition of penalty alone is not in conformity with the provisions of Section 73(3) of the Finance Act, 1994. Further, in absence of any specific findings in the impugned order as regards the involvement of the appellant in fraudulent activities in defrauding the Government revenue, we are of the considered view that a good ground is made out for waiving the penalty amount under Section 80 of the Finance Act, 1994. - Decided in favour of assessee.
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Central Excise
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2015 (3) TMI 1000
Denial of refund claim - Adjustment of excess tax paid - Held that:- Commissioner (Appeals) having decided these issues directed the Assistant Commissioner to re-quantify the duty demand for the period of dispute. The duty demand for the period of dispute is covered by 8 separate show cause notices by which duty amounted to ₹ 1,55,11,932/- has been demanded. In pursuance of the Commissioner (Appeals)'s order, the Assistant Commissioner vide order-in-original dated 29/3/05 confirmed the demand of only ₹ 11,58,767/- and the operative portion of the order is totally silent about any refund. However, that order does mention that after the Commissioner (Appeals)'s order dated 24/7/98, the respondent had filed a refund claim for an amount of ₹ 1,23,82,872/- and as conceded by Shri B.L Narasimhan, the learned Counsel for the respondent, this refund claim includes the amount of ₹ 86,54,690/- mentioned in the impugned order of the Commissioner (Appeals). Thus the issue of refund of ₹ 1,23,82,872/- which includes the amount of ₹ 86,54,690/-became final vide order-in-appeal dated 28/11/03. For this reason only, the Assistant Commissioner in his order dated 29/3/05 has demanded the duty of only ₹ 11,58,767/- and has not ordered the adjustment of the amount of demand against any amount becoming refundable, as the refund claim had already been rejected. In view of this factual background, the impugned order-in-appeal dated 10/11/05 permitting the adjustment of the duty demand of ₹ 11,58,767/- against the excess payment of duty of ₹ 86,54,690/- is totally wrong and as such there was no authority for the same. We, therefore, hold that the impugned order is not correct. The same is set aside and the order-in- original dated 29/3/05 passed by the Assistant Commissioner is restored and as such the Assessee's plea for adjustment of the duty demand of ₹ 11,58,767/- against the claimed excess payment of ₹ 86,54,690/- cannot be accepted. - Decided in favour of Revenue.
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2015 (3) TMI 999
Waiver of pre deposit - Denial of exemption claim - parts of air conditioning machines of Heading 84.15 - Notification no.6/2000-CE - Held that:- appellant have manufactured and supplied only the compressors, blowers and condensers. As held by the Tribunal in the case of Behr India (2006 (8) TMI 427 - CESTAT, MUMBAI) and Keihin Panalfa Ltd. (2002 (12) TMI 268 - CEGAT, NEW DELHI) for the purpose of Notification no.6/2000-CE dated 1.3.2000 (Sl.No.212-A) as amended and its successor notifications, it is the parts manufactured and supplied by a manufacturer which have to be taken into account and not the parts which were not manufactured and supplied as trading activity. Thus, the Appellant cannot be treated as having supplied complete airconditioning machines to M/s Daewoo Motors. Similarly in respect of the supply to M/s General Motors, the appellant have manufactured and supplied all the parts except the compressors and blowers which were imported and supplied separately from the trading premises. Therefore, in respect of the supplies to M/s General Motors also, it cannot be said that the appellant have supplied complete air conditioner machines in CKD condition. It is also seen that the appellant have placed on record invoices under which the traded items were supplied and from the perusal of these invoices, it is seen that these invoices were issued as registered dealer and the trading premises were at a place different from the location of the factor. - prima-facie view that the impugned order denying the benefit of the exemption notification no.6/2000-CE dated 1.3.2000 as amended and its successor notification is not correct and the appellant have strong prima facie case in their favour. Therefore, the requirement of pre-deposit of duty demand, and interest is waived for hearing of the appeal and recovery thereof is stayed - Stay granted.
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2015 (3) TMI 998
Denial of rebate claim - Bar of limitation - failure to export the goods directly from the factory of manufacturer as prescribed in Board's Circular No.294/10/97-Cx dated 30.01.1997 - Held that:- On perusal of sample excise documents ARE-1, and Excise Invoices, it is noticed that in ARE-1 the destination is mentioned as name of vessel and there is a mention of relevant invoices. Further, in relevant invoices, there is mention of Vessel name, to whom the goods were supplied. They have also submitted copies of, lorry receipts [as evident from impugned Order-in-Original] to show that the goods were directly supplied from factory of manufacturer to port of export. Once, the goods found to exported directly from factory of manufacturer to port of export, the provisions of Board's Circular No. 294/10/97-Cx dated 30.01.1997, which is applicable to case where that goods exported otherwise than directly from a factory or warehouse, is not applicable to this case. Commissioner (Appeals) has examined all the relevant document and rightly held that goods were directed exported from factory. There is no dispute that duty was not paid on said exported goods. The customs endorsement on the original and duplicate copy of ARE-1 confirming export of said goods is not challenged by department. The applicant department has not bothered to send any reply till date even after lapse of a period more than one month. In this case, the respondent has contended that fuel tank capacities of Vessels MT Neverland and MT Maersk Progress were 2938 MT and 3475 Mt whereas quantities of FO supplied were only 370.08 MTs and 390.01 MTs: respectively. There is no reason to doubt the reasonableness of this quantity of fuel supplied to vessels. As such there is no merit in this objection of department. Regarding payment of interest for delayed payment of rebate claim Government notes that respondent though filed claim within one year but the complete claim alongwith requisite document as pointed out in deficiency memo were filed only on 18.4.11. So the interest is admissible only after a period of 3 months1rom the said date of 18.4.11. As per section 11BB the interest liability will arise only when the rebate claim complete in all respect is not decided within 3 months - Decided against Revenue.
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2015 (3) TMI 997
Claim of Interest on delayed sanction of rebate - Held that:- The applicant filed appeal before Commissioner(Appeals) on the ground that the said claim was sanctioned without applicable interest to them inspite of their eligibility of interest in terms of Section 11BB of the Central Excise Act, 1944. Commissioner(Appeals) rejected the appeal filed by the applicant. - on delayed payment of refund/rebate claim interest is payable after the expiry of three months of the date of receipt of application for rebate in the Divisional office in terms of Section 11BB of Central Excise Act, 1944. Once, the rebate claim is held admissible, interest becomes payable after expiry of 3 months from the date of receipt of rebate claims in the office of rebate sanctioning authority. Government notes that the lower authorities have not considered the above precedent judgements while passing the impugned orders disallowing interest claim. - matter remanded back - Decided in favour of assessee.
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2015 (3) TMI 996
Denial of rebate claim - Rule 18 of Central Excise Rules, 2002 r/w Notification No. 21/2004-C.E. (N.T.), dated 6-4-2004 - no manufacturing activity was carried out by the applicant on goods purchased to qualify for rebate benefit in terms of Notification No. 21/2004-C.E. (N.T.), dated 6-4-2004 - held that:- rebate under Notification No. 21/2004-C.E. (N.T.), dated 6-4-2004 is admissible on the duty paid on excisable goods used in manufacture or processing of export goods. In the instant case, the applicant paid the duty on final product which was supplied to the SEZ and not on inputs used in manufacture of such final product. Since, no manufacturing activity has been carried out by the applicants, they cannot claim the benefit of input stage rebate under Rule 18 r/w Notification No. 21/2004-C.E. (N.T.), dated 6-4-2004. Government finds that since the applicant paid the duty on final product, they were required to file rebate claim under Rule 18 r/w Notification No. 19/2004-C.E. (N.T.). But the applicant wrongly chose to file their rebate claim under Rule 18 r/w Notification No. 21/2004-C.E. (N.T.), dated 6-4-2004. Procedure laid down in the said C.B.E. & C. Circular No. 294/10/97-CX., dated 30-1-1997 has not been followed, neither the goods were examined by the concerned Superintendent, Central Excise nor there are any identifiable marks/numbers on the goods to correlate them with the goods cleared from factory of manufacture on payment of duty. Applicant himself has stated the said requirement of C.B.E. & C. Circular but failed to give any explanation about compliance of same. Therefore the essential condition of export of duty paid goods for claiming rebate of duty under Rule 18 of Central Excise Rules, 2002 is not fulfilled. As such said rebate claim was rightly held inadmissible. - Decided against assessee.
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2015 (3) TMI 995
Denial of rebate claim - Education Cess and SHE Cess paid from the Cenvat Credit of Basic Central Excise duty is not permissible under proviso to Rule 3(7) of Cenvat Credit Rules, 2004 read with Rule 3(4) - Held that:- as per Rule 3(4) of Cenvat Credit Rules, 2004, Cenvat credit may be utilized for payment of any duty of excise on any final product. As such Cenvat credit of BED paid on inputs can be utilized for payment of any duty of excise on any final product. Section 93(1) of Finance Act, 2004 and Section 138(1) of Finance Act, 2007 under which Education Cess and SHE Cess are leviable specifically refer to these cesses as duty of excise. The Rule 3(7)(b) of Cenvat Credit Rules, 2004 put restriction in regard to utilization of Cenvat credit availed in respect of Education Cess and SHE Cess paid on inputs. The provisions relating to utilization of basic excise duty credit contained in Rule 3(4) of said rules does not put any restriction on utilization of said credit for payment of Education Cess/SHE Cess leviable as per provisions of relevant Finance Acts. This point is further clarified in para 2.4.2 of Chapter 5 of C.B.E. & C. Excise Manual on Supplementary Instructions which clearly stipulate that there is no restriction on utilization of credit of duties other than the restriction as envisaged in Rule 3(7)(b) of Cenvat Credit Rules, 2004. Plain reading of statute as clarified and elaborated vide the C.B.E. & C. Manual and circulars are mandatorily binding on the departmental authorities. Thus in the event of there being no specific bar anywhere to the utilization of accumulated Cenvat credit of BED towards payment of Education Cess and SHE Cess, the objection and ground of revision application of the department are not legally sustainable. As such Commissioner (Appeals) has rightly hold that there is no restriction on utilization of Cenvat credit of BED for payment of Education Cess & SHE Cess. - No infirmity in impugned orders - Decided against Revenue.
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2015 (3) TMI 994
Denial of partial rebate claim - applicant exporter was sanctioned rebate claims by the original authority to the extent of duty payable on F.O.B. value as shown in respective shipping bills, which has been taken as “transaction value in terms of provisions of Section 4(3)(c)(iii) of the Central Excise Act, 1944 - Held that:- original authority has found the FOB value declared in Shipping Bills as the transaction value in terms of Section 4 of Central Excise Act, 1944. He has given detailed findings which are upheld by Commissioner (Appeals) also. - As such the CIF value cannot be the value in terms of Section 4 of Central Excise Act, 1944. - The provisions contained in said Para 3(b)(ii) clearly stipulate that Assistant Commissioner of Central Excise/Deputy Commissioner of Central Excise having jurisdiction over factory of manufacture or the Maritime Commissioner of Central Excise if satisfied after scrutinizing the rebate claim that said claim is in order, he shall sanction the rebate either in whole or in part. The sanctioning of rebate claim in whole or in part will depend on admissibility of claim as per laid down parameters. So the provisions of Notification authorizes the Maritime Commissioner of Central Excise to sanction the rebate claim only to the extent it is admissible. The C.B.E. & C. Circular, dated 3-2-2000 was issued prior to the said Notification No. 19/2004-C.E. (N.T.), dated 6-9-2004. So the provision of Notification will prevail. Original rebate sanctioning authority has already examined the rebate claims in the manner elaborated above. Further the Commissioner (Appeals) herein has also after due consideration of the same has upheld the sanction of said rebate claims upto the limit of duty payable on FOB value which was transaction value of goods in this case. Government finds itself in conformity with the findings in said orders. Government therefore upholds the impugned Order-in-Appeal being perfectly legal and proper. - Decided against assessee.
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CST, VAT & Sales Tax
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2015 (3) TMI 1005
Request for a direction to the respondents to issue challan on the basis of declaration in Form-C to enable the petitioner to deposit the balance sale value to complete the transaction of sale and for further direction to accept the physical copy of declaration in Form-C for allowing the issuance of challan as inter state sale transaction and not as a local sale in Bihar in view of the nature of sale and for restraining the respondents from denying the issuance of challan on receipt of physical copy of declaration in Form-C. - Held that:- It is evident from a consideration of the Rule 12 (1),(2), (6), (7) and (8) of the Central Sales Tax (Registration And Turnover) Rules, 1957 that the Rules themselves do not provide for uploading of the Form on TINXSYS or any other software system. They also provide for the issuance of manual Form Cs to the dealers. It is true that the TINXSYS software has been evolved as a national measure to verify the validity of the Form Cs that are being issued, as such forms when issued are uploaded by the Department of different States on TINXSYS software leading to instant verification of the same regarding valid issuance by different States. However, as informed by Commercial Taxes Department of U.P. that they have also been issuing Form-Cs manually which are not being uploaded on TINXSYS software. The Rules do not provide that all such forms have to be mandatorily uploaded on TINXSYS software. In such a situation, it is beyond the jurisdiction and power of the Secretary, Commercial Taxes Department, Bihar to issue such circular letter dated 5.12.2013 which is not in accord with the provisions of the Central Sales Tax (Regulation and Turnover) Rules, 1957. Circular Letter No. 4354 dated 5.12.2013 issued by the Commissioner-cum-Principal Secretary, Commercial Taxes Department, Bihar is quashed and the respondents are directed to accept blank Form-C issued to the petitioner by the authorities of Commercial Taxes Department of U.P. forthwith, subject of course to process of manual verification as was being followed earlier in case of such forms. The respondent Railway is directed to accept the blank Form-C issued to the petitioner and duly filled up subsequently without being uploaded on TINXSYS software and thereafter the respondent authorities of the Commercial Taxes Department shall accept such manually issued Form-C not uploaded on TINXSYS software but filled up in accordance with the Act and Rules. - Decided in favour of assessee.
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2015 (3) TMI 1004
Reversal of input tax credit - Shortage of material - Whether the input tax credit availed can be adjusted towards output in respect of goods which are not sold - Held that:- There is no dispute that the petitioner is a dealer. Therefore, Section 19(9)(ii) of the TNVAT Act will not be applicable to the case of the petitioner and it is Section 19(9)(i) of the TNVAT Act that will be applicable. We are not inclined to accept the technical plea of the petitioner that a wrong provision, namely, Section 19(9)(ii) of the TNVAT Act, has been quoted instead of Section 19(9)(i) of the TNVAT Act, as the facts clearly establish that it is a case which falls under Section 19(9)(i) of the TNVAT Act, which the Original Authority has failed to properly apply its mind. - A reading of the Section 19(9)(i) of the TNVAT Act makes it evident that no input tax credit shall be availed by a registered dealer for purchase of goods, if such goods are not sold because of any theft, loss or destruction, for any reason, including natural calamity, and if the dealer has already availed input tax credit against purchase of such goods, there shall be reversal of tax credit. This reversal of input tax credit has been done by the Original Authority based on the surprise inspection conducted by the Enforcement Wing on verification of the records and on coming to know that the goods on which input tax credit has been availed have not been sold for reason that there is a shortage, for whatever reason. Section 19(9)(i) of the TNVAT Act clearly provides that if the goods are not sold for any reason contained therein, there shall be reversal of tax credit. It is clear that the reversal of credit is only in respect of the goods not sold and, therefore, we find that the proceedings initiated by the Department, culminating in the order of the Tribunal, which is under challenge in these revisions, does not suffer from any infirmity. - No question of law arises - Decided against assessee.
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2015 (3) TMI 1003
Seizure of goods - Conditional release of goods on deposit of 30% cash duty - Held that:- It is not disputed that seized commodities viz. Pan Masala and Zarda were branded items from the manufacturer M/s Shimla Special Flavour. These goods attract 30% tax on the point of sale by the manufacturer in view of notification no.896 dated 30.8.2012, with no further tax on re-sale. The applicant firm has produced purchase vouchers from M/s Shimla Special Flavour evidencing payment of 30% tax. The stock books maintained in ordinary course of business and dispatch challans evidencing shifting of stock from registered godown to the new one, were also produced alongwith explanation to the show cause notice. The documents have been discarded on the sole ground that there has been delay of three days in producing the documents since the date of seizure of the goods. It is not in dispute that at the time of inspection, no records were produced. The documents produced on 15.9.2014 were discarded on the ground of delay in filing the same. The applicant admits that its head office is located only at a distance of one kilometer from the place of seizure. In these circumstances, the view of the authorities seizing the goods, for discarding the documents, cannot be said to be illegal or irrational to warrant interference by this Court. Since, at the time of inspection, the applicant firm failed to produce relevant records and as such, the officer making inspection, was justified in exercising the power vested in it under Section 48 (1) (ii) of the Act. In the penalty proceedings, the applicant will get full opportunity to establish its bonafides and to correlate the seized goods with those mentioned in the purchase vouchers and dispatch challans. Thus, question no. (1) stands answered against the applicant and in favour of the Revenue. The case of the applicant that whether the goods seized are from the stocks maintained at the registered head office and the godown and are referable to purchase invoices, is still to be gone into in the penalty proceedings, as findings in the seizure order are only of prima facie nature. In case, the explanation of the applicant is ultimately accepted in penalty proceedings, the goods seized would not attract any further tax. The explanation of the applicant regarding delay in getting new godown registered viz. coming into force of new procedure of online registration with which the applicant was not conversant, cannot be disbelieved altogether. It has not been disputed that prior to inspection on 11.9.2014, the applicant had already applied for password on 6.8.2014, which application, according to the Revenue, was disposed of on 12.8.2014, while, according to the applicant, it remained pending as the password was communicated to it in the evening of 10.9.2014. Even if the version of the Revenue, in this regard, is accepted, being a finding of fact, but still it is evident therefrom that the applicant had already taken steps for getting the new godown registered. There appears to be some force in the argument of the revisionist that there was no mensrea on part of the applicant and the delay caused in getting the new godown registered, was for reasons beyond its control. However, these questions are still to be examined in the penalty proceedings and as such, no final opinion is expressed at this stage, lest it may prejudice the parties. However, I am of the firm opinion that it is a fit case warranting exercise of power under the first proviso to sub-section (7) of Section 48 of the Act. Applicant should deposit 50% of the amount required to be deposited by order of the Tribunal in cash and the remaining half in the form of security other than bank guarantee. Counsel for the applicant Sri Kunal Srivastava agreed to the proposal and Sri Sanjeev Sankhdhar appearing on behalf of the Revenue stated at the Bar that he has no objection to such condition being imposed on the revisionist for release of the goods. - Decided partly in favour of assessee.
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2015 (3) TMI 1002
Taxability of molasses - ex-parte order - it was submitted that entire proceedings against the assessee were held ex-parte and that no notices had been served upon the assessee, since the Unit had been taken over by the Receiver under the orders of the Court dated 18.9.2009 and the possession thereof has also been handed over to the Bank on 3.11.2012 - Further submission that interest on the amount of admitted tax had already been deposited by the assessee inspite of financial hardship being faced by the Unit and therefore in view of the bonafide conduct of the assessee no penalty should have been imposed under section 54(1) and its sub sections of the Act, 2008. Held that:- Orders cannot be said to be ex-parte as from the record it is established that the notices were adequately served upon the Unit. However, what is not clear is whether the notices were served upon the assessee or whether they were served upon the Receiver and what would be the effect, once the Unit had been taken over by the Receiver on 18.9.2009. These questions have not been decided by the Tribunal while justifying the imposition of penalty upon the assessee. The Tribunal has also not taken into consideration the question as to whether molasses would be taxable or not in view of the judgment of the Court in the case of SAF Yeast Company Pvt. Ltd. (2008 (10) TMI 583 - ALLAHABAD HIGH COURT) as well as in the case of D.S. M. Group of Industries (2002 (2) TMI 1310 - ALLAHABAD HIGH COURT). - Order of Tribunal is not sustainable - Matter remanded back - Decided in favour of assessee.
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2015 (3) TMI 1001
Stay application - Held that:- Primary consideration regarding existence of prima facie case has not at all been taken into consideration. Absolutely, no finding has been recorded either by the first appellate authority or by the Tribunal. All that the first appellate authority has mentioned in the impugned order is that the applicant stated about its financial hardship, which contention was objected to by the Revenue. It is not discernable as on what consideration, it directed stay of 60% of the amount. Similarly, the Tribunal held that there appears to be some force in the contention of the applicant and, therefore, some relief is to be granted to it. The order of the first appellate authority was modified and the stay was granted to the extent of 85% of the disputed tax liability. Again, there is no consideration of prima facie case and the other relevant factors. - Impugned order is set aside - Matter remanded back - Decided in favour of assessee.
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Indian Laws
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2015 (3) TMI 988
Application for anticipatory bail - commission of offence punishable under Section 34(2) of the Chhattisgarh Excise Act,1915 - Held that:- A plain perusal of Section 59A( i) of the Act, 1915 would show that no application for an anticipatory bail shall be entertained by any Court in respect of a person accused of an offence not holding a licence under the Act, or rules made thereunder who is accused of an offence covered by clause (a) or clause (b) of subsection (1) of Section 34 with quantity of liquor found at the time or in the course of detection of such offence exceeding five bulk litres. - Bearing in mind the statutory provisions contained in Section 59A( i) of the Act, 1915 and the principles of law laid down in cases of Naresh Kumar [2003 (9) TMI 762 - MADHYA PRADESH HIGH COURT] and Rajamani (2015 (3) TMI 834 - SUPREME COURT) if the facts of present case are examined, it is apparent that offence has been registered against the present applicant under Section 34(1)(a) of the Act, 1915 as allegation of prosecution is that present applicant along with co-accused Suraj were transporting 17.28 bulk liters of country made liquor without licence and the applicant is the owner of said motorcycle which was seized in connection with crime in question and notice has been sent for initiating confiscation proceeding of the said vehicle. The applicant is also named in the FIR and investigation is at the initial stage and the applicant is not cooperating with the investigation, and as such, it cannot be held that ingredients of offence under Section 34(1)(a) is completely missing, entitling him to release on anticipatory bail and as such the bar encrafted by section 59A( i) of the Act to entertain application for anticipatory bail is squarely attracted. - Application of anticipatory bail is not entertainable for excise offence in view of Section 59A( i) of the Chhattisgarh Excise Act, 1915. - Decided against appellant.
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2015 (3) TMI 987
Denial of information which was earlier directed to be supplied to the petitioner under the provisions of the Right to Information Act, 2005 - CIC would have the power to enquire into any complaint in respect of matters relating to access of information under the RTI Act. However, it is apparent, in the present, case that respondent no.1 has acted without authority of law in nullifying orders passed under the RTI Act; thus, interference with the impugned order is warranted in these proceedings. - by virtue of Section 4(1)(b)(xvi) of the RTI Act, the public authority is required to publish the name, designation and particulars of public information officers. Admittedly, the name and designation of respondent no.2 and no other, was published as the CPIO in relation to the Principal Bench of the Income Tax Settlement Commission. In the circumstances, the petitioner has alleged that, in fact, respondent no.2 and respondent no.4 were the respective CPIO and the First Appellate Authority of the concerned public authority. - Although the allegations made by the petitioner may warrant an enquiry, I am not inclined to examine the same in these proceedings and it would be open for the petitioner to approach the CIC under Section 18 of the RTI Act in respect of these allegations. The CIC has the necessary power to initiate an enquiry in respect of such complaints by virtue of Section 18(2) of the RTI Act. - Matter remanded back - Decided in favour of appellant.
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