TMI Tax Updates - e-Newsletter
April 19, 2017
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
Indian Laws
Highlights / Catch Notes
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Income Tax:
Delay in filing an appeal before the ITAT - Revenue appeal - to issue notice upon the respondent and thereafter to condone the delay and thereafter to dismiss the Appeal (which as observed above lacs merits) will cause undue harassment to the respondent-Assessee and for no reason the Assessee will have to incur expenditure to appear in the delay condone application - HC
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Income Tax:
Royalty - The source code embedded in the software has not been imparted to them - for all the years the payments received by the assessee from WIPRO/IBM in pursuance to the MSA cannot be treated as “royalty” under Article 12(4) of the India-Netherland DTAA - AT
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Income Tax:
Delay in filing an appeal before the CIT(A) - Condonation of delay - keeping in view the Principle of Natural Justice and to provide the assessee an opportunity of hearing on merit, we deem it appropriate to accept the appeal of assessee. We further order to condone the delay in filing the appeal before the ld. CIT(- AT
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Income Tax:
Long Term Capital Gain - sale consideration u/s 50C - what has been transferred by the assessee is a right of allotment in the property and not the actual property itself and in respect of such rights, the deeming provisions of section 50C are not applicable - AT
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Income Tax:
Amount received under the offshore supply contracts - Section 44BBB is computational provision and hence, it cannot enlarge the scope of total income which is otherwise provided in Section 4,5, & 9 of the Income Tax Act. - AT
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Income Tax:
Validity of notice u/s 143(2) - scrutiny assessment - notice dated 29/09 was given to the postal authority for speed post delivery on 30/09 - the same cannot be presume that served as on 30/09 - assessment u/s 143(3) is not sustainable - was rightly quashed - HC
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Income Tax:
Benefit of accumulation u/s 11(2) - even if the Form 10 is filed during the reassessment proceedings, the benefit of accumulation under Section 11(2) of the Act is available. - HC
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Income Tax:
Unregistered trust u/s 12AA - the voluntary contribution received by the assessee for specific purposes (in the present appeal building fund) cannot be regarded as income u/s. 2(24)(iia) of the Act being capital receipt, being corpus fund and tied up grants for specific purposes - AT
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Income Tax:
Mesne profits - Lease in favour of NTPC Ltd expired. However. NTPC Ltd. did not vacate the premises. - The suit for eviction was decreed. Mesne profits @Rs.40/- per sq. ft. with 24% interest was awarded by the Trial Court - Not taxable as revenue receipt - AT
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Customs:
Penalty - smuggling - Merely, because the other persons had pleaded guilty before the Trial Court and accepted the punishment, that would not have a bearing on the appellant's position, as there is no direct evidence that he had involved in the said activity of smuggling as there was no recovery from the appellant - HC
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Customs:
Mere reference to paragraphs numbers of the Final Findings ex facie does not satisfy the requirements of passing a reasoned order. - HC
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Customs:
Imposition of penalties u/s 114(iii) of the CA, 1962 - If the officers who are respondents herein had not examined the cargo are not associated with the said shipping bills, the adjudicating authority was correct in her conclusion that no penalty can be imposed on them u/s 114(iii) CA, 1962 - AT
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Service Tax:
CENVAT credit - it is apparent that credit for the sewage treatment plant and for the garden maintenance cannot be denied as the same are statutory requirement for operating the Port. - AT
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Central Excise:
Classification of goods - quilts - expended period of limitation - Since the CBEC Circular had issued clarification only on 20.10.2009 that the product manufactured and cleared by the appellant merits classification under 9404, the defence of the respondent herein that they were under a bona fide belief that the products classifiable under Chapter 5811 cannot be faulted with - AT
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Central Excise:
100% EOU - refund claim - rejection on the ground that the concept of cum-duty is not applicable to the DTA clearances made by EOUs - assessee had not collected any duty amount of more than 12.36% from their buyers. In these circumstances, the price charged by the respondent-assessee will surely have to be adopted as a "cum duty price". - AT
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Central Excise:
Waste - Char Fines/Lumps arise as a waste during the manufacture of Sponge Iron are not excisable - AT
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Central Excise:
Manufacture - clearances of the mixed solvent (spent solvents), which is done from the factory premises, is the residue, which gets retained after the manufacturing of final products by repeated use of the solvents during the course of manufacturing of final products - Not excisable - demand set aside - AT
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Central Excise:
Valuation - Royalty paid to copyright owners - apportioned cost of master CD and its contents provided by the principal to the appellant is includible in the assessable value of RCDs manufactured by the appellant - AT
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Central Excise:
Supply of goods to sub-contractor - International Competitive Bidding (ICB) - whether the appellant being supplier of the goods to sub-contractor whose name is appearing in the PAC is eligible to exemption N/N. 6/2006-CE - Held Yes - AT
Articles
Notifications
News
Case Laws:
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Income Tax
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2017 (4) TMI 767
TPA - selection of comparable - MAM - Held that:- It is an admitted fact that the assessee is performing the function of a normal distributor with normal risk and the goods which have been purchased have been resold without any value addition. This fact is undisputed that there is no value addition by the assessee.
RPM is mostly applied in the case of a distributor where reseller purchases tangible property and obtains services from the AE and without making any value addition, resells the same to third parties. Under these circumstances and looking to the fact that functions performed by the assessee is of distributor only, therefore, RPM should be reckoned as the most appropriate method and accordingly, we agree with the learned CIT(A) that on the facts of the present case, RPM should be the adopted as the most appropriate method for benchmarking assessee’s international transactions. So far as the two comparables chosen by the TPO apart from assessee’s comparables are concerned, we find that, T & I Global Limited has rightly been rejected by learned CIT(A), because this company was manufacturing machinery, therefore, same cannot be compared with the assessee which is purely performing the distribution function. Thus, the final list of comparables, i.e., three chosen by the assessee and accepted by the TPO and one as selected by the TPO and upheld by the learned CIT(A), is sustained for comparing the margins under RPM. As a consequence, we hold that the TP adjustment made by the learned TPO has rightly been deleted by Ld CIT(A). Accordingly, the grounds raised by the Revenue are dismissed.
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2017 (4) TMI 777
Legality of the search and seizure operations - Block assessment - Held that:- None of the letters contemporaneously written by Ashok Chawla, in fact alleged such conduct. As a result, this Court holds that these allegations like in the case of mala fides have not been proved. The record also shows that after Chawla lodged a criminal complaint for cheating, the parties reached a settlement, involving payment of amounts by Rakesh Gupta. The credibility of the affidavits relied upon, by Ashok Chawla, in these circumstances is suspect, to put it mildly.
As far as the alleged illegalities in the timing of the search, or that it was improbable that searches took place at two places - argued with certain vehemence by learned senior counsel, this court is of the opinion that nothing much turns on these so called infirmities. For one, the factual nature of these allegations, i.e., as to timing, as to presence of certain pancha or recovery witnesses, renders it somewhat difficult to substantiate. From a broader angle, whether the search occurred at 08:00 AM or an hour later, is left for verification by affidavits signed by the witnesses much after the event. Their signatures on the panchnamas at the time of the search belie the affidavits. These arguments at best could establish some irregularities, for which the Revenue might have had a perfect or plausible explanation, if made in time. However, even if accepted at face value, such facts cannot undermine the search, the recoveries effected or in any case and the validity of the block assessments. The assessee/Ashok Chawla’s submissions in this regard are therefore, rejected.
Did the ITAT fall into error in concluding that there was no infirmity in the framing of the assessment by an officer who was involved in the search and seizure operations? - Held that:- . The assessee has, in addition to relying on the circumstance that the AO was a participant in the raiding party, not placed any other material to substantiate the allegation of bias. No personal bias or malice or past history with the said official was alleged, much less proved. In the circumstances, the ratio in Vipin Kumar Jain (2003 (1) TMI 6 - SUPREME Court ) applies. The argument that the assessment was void on account of bias, therefore, fails and is rejected.
Whether the appellant, Ashok Chawla was given sufficient opportunity during the assessment proceedings ? - Held that:- This court is of opinion that the allegations with respect to denial of opportunity which resulted in depriving proper defense to Ashok Chawla are unfounded. At the earliest point of time when he did approach the court, in 1997 (after the assessment order) there was no ground to this effect. The appellant has not made out a grievance that such a plea was taken but not considered by the ITAT. These aspects apart, the court notices that the assessee was aware as to the nature of the documents seized. If he did want a copy or had been unjustifiably denied inspection, he had the means and resources to approach this court at the earliest opportunity- he clearly did not. All these rule out the possibility of denial of meaningful opportunity. This plea is consequently rejected.
Additions sustained by the ITAT - Held that:- During the course of assessment proceedings, the assessee, Ashok Chawla, in answer to queries, had on 27th August, 1996 and 6th September, 1996 pointedly and clearly stated that the properties that were not in his name were not acquired by him. Yet, on the basis that the assessee must have earned substantial income which was not declared, both the AO and the ITAT embarked upon the venture of revaluation of the properties that did not belong to him and concluded that the difference between the transaction value reflected in the documents and the higher value determined was the sum total of his undisclosed income. This clearly betrays a contradictory approach; worse, in some cases, additions were made and confirmed in the hands of the owner and the assessee, Ashok Chawla, was subjected to protective assessment; in cases of others, such as Asha Jain and Zal Akhtar, the additions were made to his returns. Furthermore, in respect of one property, i.e., the Anand Niketan premises, the documents showed that the assessee Ashok Chawla was only a power of attorney holder and had not paid the entire consideration. Yet, the AO concluded that he must have paid the entire consideration.
However, as far as the addition of ₹ 1.50 crores made in respect of the London property is concerned, stands on a different footing. The search and seizure had yielded documents pertaining to the London flat. The explanation given by the assessee Ashok Chawla cannot be accepted. The position taken by him was that the property was rented. If so, the question of paying maintenance, and the bills found in his possession, remained unexplained. Furthermore, the documents seized also showed that insurance amounts were being paid. As the assessee did not disclose the true value of this property, the adhoc valuation at ₹ 1.5 crores cannot be faulted. The addition sustained by the ITAT (Rs.7,37,30,266/-) has to undergo substantial change. The additions made on account of re-valuation of various properties (aggregating to ₹ 4,58,70,124/-) except ₹ 1,50,00,00/- have to be deleted. Therefore, the ITAT’s order is modified; the assessee is entitled to further relief to the extent of ₹ 3,08,70,124/- which has to be deleted from the sum of ₹ 7,37,30,266/-.
Block assessment appeal by Centaur Helicopter Ltd - Held that:- AO - and later, the ITAT, had carried out an elaborate, year by year analysis of the amounts that the assessee received - reflected in the books and documents seized, but not declared by it, in the returns or even block returns. These documents, which formed the basis of the block assessment, were A-9, A-10, A-11 and A-12. Details for every year were discussed and a comparison made with respect to what was actually declared and what amounts had been received; the differential amount was brought to tax. This court is unpersuaded with the assessee’s arguments on this aspect. The ITAT has considered all the materials and the UK Revenue service’s communications, corroborating that the receipts were in facts GBP £233,991/- more than the sum declared for the given year (1993-94), i.e., GBP £6000/-. This was, according to the currency conversion at that time, ₹ 1,16,05,797/-. There is no infirmity amounting to a substantial error calling for interference by this court.
Addition on protective basis - search u/s 132 - re-valuation of properties - Held that:- Nothing seized during the search under Section 132 which could have led the Revenue authorities to re-value the properties. The entire basis for the fresh exercise was that Ashok Chawla would have earned greater income having regard to the nature of his business transactions, which he must have kept away from the gaze of the taxman. No document, pointing to extra payment of the amounts (that constituted the differential between the transaction value and the finally determined value or some other value) was recovered or seized. In these circumstances, it is held that the assessment order, including these amounts on protective basis cannot be upheld.
Addition to income during the block period, on the basis of a document found and seized during the search - Appeal of Vijaya Rajagopal - Held that:- The document seized and relevant for this purpose is a loose sheet of paper, containing figures. Against “E-6”, the figure “22” is shown. Next to it “N-8” against which the figure “5” has been scribbled. Three other figures too have been shown. Ipso facto these mean nothing. The AO deduced that these reflected the true value of the property and went ahead to refer the matter to the valuation officer. The latter, in his report, after considering the then prevailing prices and looking at a transaction of 1996, felt that the value of the property was ₹ 18.36 lakhs. In the absence of any credible material pointing at undervaluation, the exercise was unwarranted. Worse, after having secured the valuation report, the AO proceeded in an unprincipled manner, and decided that the true value of the property was ₹ 22 lakhs, bringing the balance ₹ 13 lakhs to tax. This court is of the opinion that the material found was sketchy and insufficient to warrant a fresh valuation. In any case, the AO’s order did not even go by the valuation report, but on an entirely different footing- not based on any principle at all. Therefore, the addition has to be set as and is accordingly set aside. The ITAT had remitted the issue of ₹ 3 lakhs added by the AO for fresh consideration.
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2017 (4) TMI 776
Non service of notice u/s 143(2) - Period of limitation - Held that:- The word “served” used in Section 143(2) of the Act is very significant and very clear. However in appropriate case being made out within the four corners of the General Clauses Act, if the notices are issued before reasonable time of the prescribed period of limitation and it has been dispatched /sent for delivery within the reasonable time, in that case, there can be presumption under Section 27 of the General Clauses Act. However, in the facts and circumstances of the case, as the notice dated 29/09/2009 was given to the postal authority for speed post delivery on 30/09/2009, as observed hereinabove, there is no question of any presumption that the same must have been delivered to the assessee on the very day i.e. 30/09/2009.
It cannot be said that the learned tribunal has committed any error in confirming the order passed by the learned CIT(A) quashing and setting aside the assessment order under Section 143(3) of the Act on the ground that the notice under Section 143(2) of the Act was not served upon the assessee and /or was not served upon the assessee within the prescribed period of limitation provided under Section 143(2) of the Act. We are in complete agreement with the view taken by the learned tribunal. - Decided in favour of assessee
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2017 (4) TMI 775
Calculation of the long term capital gain - Adopting / determining market value as on 1/4/1981 - Held that:- We are in complete agreement with the view taken by the learned CIT(A) as well as the learned tribunal while adopting / estimating the value of the land as on 1/4/1981 at ₹ 25/- per sq.mtr. As observed hereinabove, as such, the revenue has accepted the valuation of the land of the same village at ₹ 18/- per sq.mtr. That thereafter, considering the location advantage etc. and by giving cogent reasons when the learned CIT(A) estimated the value of the land as on 1/4/1981 at ₹ 25/- per sq.mtr. it cannot be said that the same is erroneous. The findings recorded by the learned CIT(A) confirmed by the learned tribunal are on appreciation of evidence.
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2017 (4) TMI 774
Fulfillment of condition laid down in Section 80IB(10)(b) - area of the plot of land being minimum one acre - Held that:- Explanation (i) is clarificatory in nature and, therefore, subsequent approvals obtained by Assessee in view of addition of land to its credit, will not make any difference. In view thereof, question answered in favour of Revenue and against Assessee and we hold that Assessee did not satisfy the requirement of area of plot of land being minimum one acre. Since the project approved for the first time on 24.11.01 was in respect of land which measured only 2657 sq. mtrs. and even second approval when granted on 22.6.2003, total area of 2 plots was only 2657 sq. mtrs. and 52.44 sq. mtrs. which was again less than one acre. - Decided in favour of Revenue
Filing of audit report in form 10CCB - If it is not filed alongwith return but filed before assessment, will it amount to non-compliance of Section 80IB (13) read with Section 80IA (7)? - Held that:- We answer question in favour of Assessee and against Revenue, holding that it is not mandatory and only directory and Assessee cannot be made to suffer if it filed audit report in form 10CCB in the course of assessment proceedings and not alongwith return.- Decided against Revenue
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2017 (4) TMI 773
Delay in filing an appeal before the ITAT - Revenue appeal - Condonation of delay - Held that:- the learned Tribunal has rightly dismissed the Appeal on the ground that the tax effect involved in the Appeal is less than the monetary limits prescribed by the CBDT to prefer an Appeal before the learned Tribunal. Under the circumstances, as such there is no merits in the Appeal. Under the circumstances, to issue notice upon the respondent and thereafter to condone the delay and thereafter to dismiss the Appeal (which as observed above lacs merits) will cause undue harassment to the respondent-Assessee and for no reason the Assessee will have to incur expenditure to appear in the delay condone application.
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2017 (4) TMI 772
Benefit of accumulation under Section 11(2) - Form 10 is filed during the reassessment proceedings - Held that:- The decision of the Delhi High Court in Association of Corporation and Apex Societies of Handlooms (2013 (1) TMI 317 - DELHI HIGH COURT) and Trustees of Tulsidas Gopalji Charitable and Chaleshwar Temple Trust (1993 (9) TMI 75 - BOMBAY High Court ) would apply to the present facts. Therefore, Revenue accepts that even if the Form 10 is filed during the reassessment proceedings, the benefit of accumulation under Section 11(2) of the Act is available. So also, the time allowed in Rule 17 of the Rules for furnishing the form before the expiry of time to file the return of income under Section 139(1) of the Act get extended to include the time within which a return of income could be filed under Section 139(4) of the Act. Therefore, filing of Form 10 during reassessment proceedings is filing of the same within the time allowed for furnishing the return of income under Section 139(4) of the Act. Therefore, the Counsel for the Revenue has not been able to point out any reasons why the aforesaid two decisions should not be applied in the facts of the present case to reject the appeal.
Also in in Nagpur Hotel Owners' Association (2000 (12) TMI 99 - SUPREME Court ) observed that for the purposes of excluding an income of the trust from the net of taxation, the intimation in Form 10 has to be filed with the Assessing Officer before he completes the Assessment. In fact, it is the context of the above finding of the Apex Court, that it observed that Form 10 has to be filed before completion of Assessment Proceedings - Decided in favor of assessee
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2017 (4) TMI 771
Disallowance of interest - interpretation of Section 57 (iii) - Held that:- In the facts of this case, it is evident that the purpose for creating the FD was solely to secure the loan that the assessee obtained and not for the purpose of earning interest as is insisted upon under Section 57.
Interest income out of the FDRs made with the bank - Held that:- The Court is of the opinion that the ITAT’s view that since the last transaction, i.e., borrowing to the tune of ₹ 7.2 crores could not be doubted, the addition made was not permissible, is correct.
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2017 (4) TMI 766
Mesne profits - Lease in favour of NTPC Ltd expired. However. NTPC Ltd. did not vacate the premises. - The suit for eviction was decreed. Mesne profits @Rs.40/- per sq. ft. with 24% interest was awarded by the Trial Court. - Held that:- The case is squarely covered by the decision of Special Bench in the case of Narang overseas Pvt. Ltd. (2008 (2) TMI 817 - ITAT MUMBAI) and therefore the mesne profit are not taxable as revenue receipt but has to be treated as capital receipts in view of the arguments and submissions put forth by the ld. counsel reproduced herein above and fully convinced with the said submissions and find no defect in the same.
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2017 (4) TMI 765
Taxability of Corpus donations receipt - scope of total income u/s 2(24)(iia) - unregistered trust u/s 12AA - Applicability of provisions of Section 11 (1)(d) - capital receipt - Held that:- Tribunal in Chandraprabhu Jain Swetamber Mandir Versus Assistant Commissioner of Income-Tax [ 2016 (11) TMI 1041 - ITAT MUMBAI] has made an elaborate discussion with respect to taxability of capital receipt. In the aforesaid case also, the assessee trust was not having registration u/s.12A / 12AA of the Act. In that case also the Assessing Officer held that the provisions of Section 11 & 12 of the Act are not applicable to the assessee and thus the provisions of Section 11 (1)(d) of the Act with respect to voluntary contribution made with specific direction that they should form corpus of the trust shall not be included in the total income and the Assessing Officer added the same as income of the assessee. The Tribunal also considered various judicial pronouncements as contained at page 5 (page 54 of the paper book) of the order. It is also noted that various case laws, relied upon by the assessee, which are discussed at page 7 (page 56 of the paper book) were analysed and thereafter, reached to a particular conclusion. The Tribunal held that the corpus donation, received by the trust, for specific purposes cannot be brought to tax despite the fact that the assessee is not registered u/s. 12A / 12AA of the Act. Identical facts are available in the present appeal before us, thus, following the aforesaid order of the co-ordinate Bench, this ground of the assessee is allowed and the learned Assessing Officer is directed that the voluntary contribution received by the assessee for specific purposes (in the present appeal building fund) cannot be regarded as income u/s.2 (24)(iia) of the Act being capital receipt, being corpus fund and tied up grants for specific purposes. This ground of the assessee is therefore, allowed.
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2017 (4) TMI 764
Accrual of Income - unreconciled AIR / ITS data - income offered in the next year - tax neutral - Held that:- Assessing Officer made addition of ₹ 2,06,73,054/- representing various invoices raised by the assessee on his clients in the month of April 2009. These receipts were accounted for in the relevant previous years of A.Y.2010-11, meaning thereby the income has already accounted for in the subsequent assessment year. The claim of the assessee is that the Revenue is recognized only at a stage where there is certainty of realization of income. It is noted that there is no undue benefit derived by the assessee in accounting for certain invoices in subsequent year. Our view finds support from the decision from Hon'ble Apex Court in CIT vs. Excel Industries Ltd.[2013 (10) TMI 324 - SUPREME COURT] The tax rate in both the years is same, thus, we find no infirmity in the conclusion of the learned CIT(A). Finally, both the appeals of the Revenue are dismissed.
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2017 (4) TMI 763
Payment received for network access and related services - payment for acquisition of copyrighted software OR copyright over such software - Royalty receipt - P.E. in India - business income taxed in India - DTAA - Held that:- The definition of ‘copyright ‘in section 14 is an exhaustive definition and it refers to bundle of rights. In respect of computer programming, which is relevant for the issue under consideration before us, the copyright mainly consists of rights as given in clause (b), that is, to do any of the act specified in clause (a) from (i) to (vii) as reproduced above. Thus, to fall within the realm and ambit of right to use copyright in the computer software programme, the aforesaid rights must be given and if the said rights are not given then, there is no copyright in the computer programme or software. Here in this case, none of the conditions mentioned in section 14 of the ‘Copyright Act’ is applicable as held by the learned CIT(A); and is also is evident from the terms of MSA, because no such rights has been given by the assessee to the IT Service providers.
Further by making use or having access to the computer programs embedded in the software, it cannot be held that either WIPRO/IBM are using the process that has gone into the software or that they have acquired any rights in relation to the process as such. The software continues to be owned by the assessee and what WIPRO/IBM is getting mere access to the software. The source code embedded in the software has not been imparted to them. Hence, there is no use or right to use of any process as held by the learned AO. Hence, the finding of the learned CIT(A) that the payment in question cannot be reckoned as “royalty” is factually and legally correct and the same is upheld.
Thus, we hold that for all the years the payments received by the assessee from WIPRO/IBM in pursuance to the MSA cannot be treated as “royalty” under Article 12(4) of the India-Netherland DTAA. Thus, the matter is decided in favour of the assessee and against the revenue
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2017 (4) TMI 770
Application under Section 245C for settlement - Held that:- Either all the Assessment Years mentioned in the application are to be settled or none at all. It cannot be split so as to settle the dispute for some of the Assessment Years and reject the others. In view of the above, the impugned order of the Commission to the extent it has rejected / not entertained, the petitioner's application for settlement for the Assessment Years 2007-08 to 2013-14 for not disclosing additional income in its application, prima facie appears to be incorrect. In the above view, the Assessing Officer is restrained from issuing notices and initiating proceedings under the normal provisions of the Act for Assessment Years 2007-08 to 2013-14.
The petitioner undertakes to cooperate with the Revenue in proper disposal of the Assessment for all the above assessment years i.e. Assessment Years 2007-08 to 2013-14 in case the occasion arises.
So far as the Assessment Year 2014-15 is concerned, the petitioner had declared in its application for settlement an amount of ₹ 4.99 cores as being the additional income sought to be settled. The amount of tax payable on the assessment of ₹ 4.99 crores has already been paid. The impugned order has enhanced the settlement by further amount of ₹ 1.28 crores. According to the petitioner, the impugned order suffers from non-consideration of the submissions made and, therefore, the decision making process has not been properly followed.
However, as the impugned order has determined a further amount of income of ₹ 1.28 crores, the tax payable thereon according to petitioner, would be approximately an amount of ₹ 38.40 lakhs, as basic tax (without surcharge) which is still payable. This, Mr. Jain, on instructions, states will be paid to the Revenue on or before 31st March, 2017. However, on being asked Mr. Jain mentioned to us that along with surcharge the tax payable would be ₹ 42 lakhs (approximately). We direct the petitioner to pay the amount of ₹ 42 lakhs to the Revenue on or before 31st March, 2017.
This payment would be without prejudice to its rights and contentions in this petition. On the petitioner depositing the amount of ₹ 42 lakhs, there shall be a stay of the impugned order dated 29th July, 2016.
In case, the amount of ₹ 42 lakhs is not deposited on or before 31st March, 2017 with the Revenue, the protection available under this order would come to an end and the Revenue would be free to adopt such proceedings as are available in law in respect of all the Assessment Years i.e. Assessment Years 2007-08 to 2014-15.
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2017 (4) TMI 762
TPA - selection of comparable - criteria - Held that:- Product development company cannot be compared with that of software development company. Companies dissimilar or functionally different from the assessee software development company need to be rejected from final list of comparable.
Turnover is not a relevant criteria for the purpose of deciding the comparability. From a bare perusal of rule 10B(2) of the IT Rules, it is clear that the rule does not specify that turnover is not one of the factors for deciding the comparability.
Computation of deduction u/s 10A - Held that:- CIT(A) directed the AO to recomputed the deduction allowable u/s 10A of the Act after reducing the telecommunication charges and exchange fluctuation loss from total turnover also.
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2017 (4) TMI 769
Promotion on the post of Income Tax Officer - qualification in the examination - number of attempts - Held that:- Upon going through the rules, it is crystal clear that in the calculation maximum number of chances actually availed by the candidate, the chances for which he is allowed to appear in the examination shall be taken into account irrespective of the fact whether the candidate appears in the examination or not. Thus, there cannot be any dispute on this point as the rule position is very clear.
The applicant’s contention on this point, therefore, not considered valid. The learned Tribunal has rightly held in para-6 of the order dated 07.07.2015, “that the case of the applicant has been rejected on merit as well as on legal grounds. The Tribunal’s observation was not a direction to the respondents. The Tribunal merely expressed “hope” that if any sympathetic consideration can be given within the Rules, the authorities will do so. Since the authorities could find no Rule to support his case they have rightly rejected his case. The Tribunal cannot give any direction contrary to the Rules. Accordingly, the OA is dismissed.” In the earlier order of the Tribunal dated 17.11.2014, the Tribunal had observed that, “in his representation, the applicant had admitted that he was fully aware of the fact that filing of application for examination is considered as an attempt for the said examination, whether the candidate appeared or not in the said examination"
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2017 (4) TMI 761
Delay in filing an appeal before the CIT(A) - Condonation of delay - Held that:- there should be pedantic approach and the doctrine that is to be kept in mind that the appeal has to be deal with rational common sense and the cause of substantial justice must be kept in mind. We are also aware that the substantial justice must be preferred over the technical consideration. We may also observed that the appellant/assessee is not going to gain in approaching the court after expiry of period of limitation, rather there is always a chance that his appeal may be dismissed, for not explaining the cause of delay in filing the appeal.
We, instead of making any comment over the reason for condonation of delay and not filing affidavit or not taking any legal action against the representative, who has allegedly neither informed the assessee nor handed over the copy of assessment order. However, keeping in view the Principle of Natural Justice and to provide the assessee an opportunity of hearing on merit, we deem it appropriate to accept the appeal of assessee. We further order to condone the delay in filing the appeal before the ld. CIT(A).
Matter restored before the CIT(A) - Decided in favor of assessee.
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2017 (4) TMI 760
Setting off of losses of non-STPI Unit against the profits of the STPI Unit prior to allowing the deduction under Section 10A - Held that:- By following the latest judgment of the Hon'ble Supreme Court in CIT v. Yokogawa India Ltd. [2016 (12) TMI 881 - SUPREME COURT] based on the substituted/amended provisions of Sec. 10A/10B which are applicable in the case of the assessee as well as the decision of the Tribunal in case of Biocon Ltd. (2014 (12) TMI 838 - ITAT BANGALORE), we decide this issue in favour of the assessee and direct the AO to allow deduction u/s. 10A without setting off the domestic losses.
Allocation of expenses between the STPI Unit and non-STPI Unit on the basis of turnover ratio - Held that:- DRP has not adjudicated this issue therefore we direct the Assessing Officer to verify the claim of the assessee regarding the double deduction of certain expenses against the profits of the STPI Units. Hence this issue is set aside to the record of the Assessing Officer for limited purpose of verification of the facts of double deduction of certain expenses as claimed by the assessee.
Disallowance made under Section 14A - Held that:- It is apparent that as far as the interest expenditure is concerned there is a reduction in the investment during the year under consideration and therefore no interest bearing fund was used for investment during the year under consideration. Even otherwise the Assessing Officer has not given a finding that the assessee has used borrowed fund for the purpose of making investment. Further it is not dear that in which year and how much of investment was made. Therefore having regard to these facts when there is a reduction in the investment during the year under consideration then without giving the specific finding of using the borrowed fund as well as no disallowance in the year of investment on account of interest expenditure, we are of the view that the Assessing Officer is not justified in making the disallowance on account of interest expenditure under Section 14A of the Act.
As regards the disallowance on account of indirect administrative expenditure there is no dispute that there is a substantial movement in the investment portfolio of the assessee which consist of mutual funds, equity shares and inter-corporate deposits. Therefore when the assessee has taken the decision for selling and fresh investment during the year under consideration which involves a high level decision making process then the claim of the that no expenditure has been incurred for earning the dividend income is not acceptable. Accordingly, we uphold the disallowance on account of indirect administrative expenses being 0.5% of the average investment made under Section 14A of the Act.
Disallowance of deduction in respect of Employees Contribution to PF and ESI - Held that:- Identical issue was considered by the Hon'ble jurisdictional High Court in the case of Essae Teraoka (P.) Ltd. [2014 (3) TMI 386 - KARNATAKA HIGH COURT] by itself it is not sufficient to hold that the employer is not entitled for deduction as contemplated under Section 36(1)(va) of the IT Act r/w Section 43-B of the IT Act - The word “contribution” is used not only to mean contribution of the employer but also contribution to be made on behalf of the member employed by the employer directly - the word “contribution” used in Clause(b) of Section 43-B of the IT Act means the contribution of the employer and the employee - That being so, if the contribution is made on or before the due date for furnishing the return of income under sub-section(1) of Section 139 of the IT Act is made, the employer is entitled for deduction – thus, the assessee is entitled for deduction – Decided in favour of Assessee.
Capital financing/advance to the AE - Held that:- Allotting company has no access or right to use the said money till the allotment of shares. !n this case the assessee has remitted this amount during the year under consideration as per the details given at page 707 of the paper book. It is also undisputed fact that no shares were allotted to the assessee till the end of the financial year as on 31.3.2009. thus when this money was available with the AE of the assessee for utilization then it loses the character of share application money and therefore the rule as laid down by the various decisions of this Tribunal relied upon by the learned Authorised Representative will not be applicable in a case where the money is available to the AE and there is an extraordinary delay in allotment of shares. Hence we are of the view that when this money was paid by the assessee to the AE and it was very much available to the assessee for utilization for business purpose of the AE then this transaction of payment of money to the AE against which no shares were allotted till the end of the financial year relevant to the assessment year under consideration will constitute an international transaction as per the provisions of Section 92B of the Act as it has a direct bearing on the profit and loss as well as the assets of the enterprises. Further as per the Explanation to Section 92B(1) of the Act till the date of allotment it will constitute as capital financing/advance to the AE.
We find substance so far as the applicability of LIBOR because the remittance has been made in foreign currency and therefore it is appropriate to apply the LIBOR rate for determining the arm's length interest. Further the computation of the interest has to be from the date of remittance till the end of the financial year. Accordingly, we direct the TPO/A.O. to recompute the arm's length interest in respect of this transaction by taking into consideration LIBOR and the period from the date of remittance till 31.3.2009. As regards allowing the time period of 180 days, since this is not a case of an ordinary time period of allotment and therefore when this money was available with the AE for use then we do not find any merit or substance in this contention of the learned Authorised Representative.
Deduction under section 10A - Held that:- Respectfully following the aforementioned decision of the Hon'ble High Court of Karnataka in the case of Tata Elxsi Ltd. (2011 (8) TMI 782 - KARNATAKA HIGH COURT ), we uphold the order of the DRP in directing the Assessing Officer to reduce the expenditure incurred in foreign currency from both export turnover and total turnover for the purpose of computing the deduction under section 10A of the Act in the case on hand.
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2017 (4) TMI 759
Long Term Capital Gain - sale consideration under section 50C applicability - whether the assessee has sold right to acquire a property or has actually sold the property itself? - Held that:- What has been transferred is a right of allotment in the property which was under construction and possession thereof was not taken by the assessee and hence, there is no question of transfer of the possession of the said property. Further, other than these agreements and MOU, there is nothing in terms of any positive tangible evidence which has been brought on record by the Revenue to support its position that it is the flat which has been transferred by the assessee. After the assessee has submitted to the AO vide its letter dated 12.03.2014 that the property was under consideration at the time of the sale and no sale deed was executed, the AO has not carried out any further investigation with the developer to refute the contentions raised by the assessee. In result, on perusal of the documents available on record, the contention of the assessee remains uncontroverted. It is the right in the property by way of right of allotment which has been assigned by the assessee in favour of the buyer and not the property itself.
On reading of sub section (1) of section 50C, it is clear that the value of land, building or both adopted or assessed or assessable by the Stamp Valuation Authority shall for the purpose of section 48, be deemed to be the full value of consideration received or accruing as a result of such transfer. It is a deeming provision and it extent only to land, building or both. It therefore follows that where a capital asset being land or building or both is transferred and the consideration received or accruing as a result of such transfer is less than the value adopted or assessed or assessable by the Stamp Valuation Authority, the deeming provisions of sub section(1) of section 50C shall be applicable. In the instant case what has been transferred is a right of allotment in office flat and not the office flat itself. It is therefore clear that a deeming provision which is limited to land, building or both cannot be extended beyond the purpose for which it is enacted and is therefore not applicable in the instant case.
Thus what has been transferred by the assessee is a right of allotment in the property and not the actual property itself and in respect of such rights, the deeming provisions of section 50C are not applicable. - Decided in favour of assessee.
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2017 (4) TMI 768
Reopening of assessment - Held that:- In the order rejecting the objections, the Assessing Officer has relied upon Clause (b) under Explanation 2 to Section 147. Clause (b) under Explanation 2 to Section 147 deals with cases where a return of income has been furnished by the assessee but no assessment has been made and the Assessing Officer notices that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return. Admittedly, the cases of none of these petitioners fall under the category of claiming excessive loss or deduction or allowance or relief in the return. The cases of the assessees are attempted by the Assessing Officers to be brought within the category of “understatement of income”, so as to invoke Clause (b) under Explanation 2.
But to come to the conclusion that there was understatement of income, it is not sufficient for the Assessing Officers to just arrive at the percentage of gross receipts that were declared as income, without even referring to other assessees whose admitted income was at a better percentage of the gross receipts than the petitioners. Therefore, the invocation of the jurisdiction under Section 147 on the basis of suspicions and presumptions cannot be sustained. - Decided in favour of assessee.
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2017 (4) TMI 758
Amount received under the offshore supply contracts - Income deemed to accrue or arise in India - applicability of provisions of Section 44BBB - liability to tax in India - Held that:- The meanings given to certain expression which were not otherwise defined / clarified in the Treaty could derive their meaning from domestic law.
An analysis of the above clauses indicates that the overall contract provided for separate/specific terms & conditions for supply of the equipment and also provided for consequences for default of the terms. The same was not dependent upon the service contracts.
Section 44BBB is computational provision and hence, it cannot enlarge the scope of total income which is otherwise provided in Section 4,5, & 9 of the Income Tax Act.
Whether the impugned income from OSC are taxable as per the substantive provisions and DTAA - Held that:- There were separate contracts for supply as well as services and supply contracts were not dependent upon service contracts. This being the factual position, we find that explanation 1(a) comes into play in the instant case. Hence, the income which is deemed to accrue / arise in India shall be only with respect to those business operations that are carried out in India.
After analyzing the various case laws, statutory provisions, DTAA provisions and contractual terms and respectfully following judgment in Ishikawajima-Harima Heavy Industries Limited Vs. DIT (2007 (1) TMI 91 - SUPREME COURT ), we are inclined to hold that Offshore Supply contracts were ‘carried and concluded’ outside India and hence no income there-from deemed to accrue or arise in India as per Section 9(1) and DTAA provisions and accordingly, not chargeable to tax. The receipts thereof do not form part of receipts for the purpose of computational provisions of Section 44BBB. Explanation 4 could not overcome the limitation imposed by Explanation 1(a) to Section 9(1)(i) and hence, the impugned income do not form part of business receipts for computation of income u/s 44BBB of the Act. We held so.
We also observe that impugned payment has been paid by NPCIL to ASE on ‘net’ basis and NPCIL has borne the burden of tax on behalf of the assessee. DRP rightly observed that ‘Grossing up’ of the impugned payment was required to be done as per Section 195A before applying 44BBB of the act. But Section 44 BBB has been applied on ‘net payment basis’ by the assessing officer. Revenue is free to recompute the income of the assessee as per the statutory provisions. With these observations, Ground No.3 of assessee’s appeal is allowed. The payment towards offshore supply contracts being accruing outside India, would not form part of business receipts for the purpose of Section 44BBB.
Charging of interest u/s 234B - Held that:- We find that the assessee has received payment on ‘net basis’ and tax thereupon was borne by the Indian Entity and. In view of jurisdictional Hon’ble Bombay High Court in the case of DIT Vs NGC Asia Network LLC [2009 (1) TMI 174 - BOMBAY HIGH COURT], we are inclined to hold that since the impugned payments were subjected to TDS and the assessee was to receive the income on ‘net payment’ basis and hence interest u/s 234B is not attracted on the facts and circumstances of the case. The Ground of assessee’ appeal succeeds.
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2017 (4) TMI 757
Calculation of deduction u/s 80HHC - AO reduced expenditure incurred on stewardship and transport charges and also transportation charges disallowed from export turnover - Held that:- AO reduced an amount of ₹ 1.65 crore from export turnover on the ground that this expenditure related to freight and insurance attributable to transport of goods beyond customs station whereas it is the contention of the assessee-company is that this expenditure was incurred within the premises of the customs station and therefore, it is not required to be reduced from export turnover. However, assessee-company has not filed any evidence in support of this contention. Learned AR of the assessee has not led any evidence on record in support of the contention that the expenditure was incurred as a clearing and forwarding charges within the customs station. It is a mere bald assertion and therefore, we are not unable to appreciate the submissions made by the assessee-company.- Decided against assessee
Transport charges disallowed u/s 40(a)(ia) - contention of the assessee-company is that since the amount was disallowed under the provisions of section 40(a)(ia), the same should not form part of direct cost - Held that:- This contention of the assessee-company does not hold good for the simple reason that on account of disallowance of transport expenditure, business profits have been inflated to that extent and the same was considered for exemption u/s 80-HHC and in order to maintain parity, the same requires to be reduced from the direct cost. Thus, we do not find any merit in the submission of the assessee-company. - Decided against assessee
Addition on account of valuation of closing stock - Held that:- No evidence was filed substantiating the explanation for discrepancy in valuation of the closing stock. Even before us, altogether different argument was advanced saying that domestic sales were not taken into consideration while valuating closing stock. It is altogether a new submission and does not emanate from the orders of the lower authorities and no evidence was filed even in respect of this argument. Hence, the ground of appeal cannot be accepted and dismissed as such.- Decided against assessee
Eligibility for deduction u/s 10B - proof of manufacturing activities - Held that:- the factual matrix of the process undertaken by the assessee, as narrated by him, even without doubting for a moment the veracity of the factual matrix of the process, as a result of the process undertaken by the assessee, it cannot be said that as a result of such process a new and different commercial product has come into existence which is known to the market. It cannot also be said that the original product i.e. ROM has lost its identity and will serve no purpose. As a result of the process undertaken by the assesseecompany, iron ore remains as iron ore only. Its primary and essential conditions still remain the same as it is continued to be known in the market as iron ore and as sold as iron ore only. There was no transformation taken place in the process. The process undertaken by the assessee is only to make it convenient to use and the end use of the first product i.e. ROM continues to be the same. Therefore, it cannot be said that the assessee-company is engaged in the activity of manufacturing qualify for deduction u/s 10B. - Decided against assessee
Disallowance of transport expenditure - no TDS was made on this expenditure and the payment was made in cash - Held that:- The assessee-company has not been able to prove genuineness of the expenditure incurred. Mere filing of ledger account, copy of expenditure depicting the name and address, truck number, does not absolve the assessee-company of proving the expenditure. It is settled principle of law that mere entry in books of account neither establishes accrual of income nor incurring of expenditure. It has to prove conclusively that the expenditure was actually incurred wholly and exclusively for the purpose of business. The very fact that the entire transport expenditure was incurred in cash and no TDS was deducted also leads one to suspect the genuineness of the expenditure. The assessee-company had made no effort to conclusively prove that this expenditure was incurred wholly and exclusively for business purpose. Entry in the books of account is self-made entry, no credence can be given unless and otherwise corroborated by independent evidence. Mere entry in the books of account alone does not enable assessee to claim deduction - Decided against assessee
Disallowance of transport expenditure - only journal entries were being passed in the books of account without any supporting material - Held that:- It is settled principle of law that no expenditure can be allowed on mere provision in the accounts unless and until it is established that liability has actually incurred wholly and exclusively for purpose of business of the assessee-company. In the present case, except making a provision in the books of account, assessee-company had failed to establish crystallisation of the liability but also actually the liability has been incurred. While making journal entry for alleged expenditure of transport in the name of Kavitha and Sandhya, assessee-company had not furnished details of transport when they incurred it for the purpose of transport of the material etc. A mere entry in the books of account does not enable the assessee-company to claim deduction. It is trite law that onus lies on the assessee to prove that claim is allowable as deduction.- Decided against assessee
Disallowance of depreciation on machinery of crushing plant - no processing or manufacturing or production of material was carried on by the assessee-company and therefore machinery was not put to use - Held that:- An asset is eligible for depreciation even if it is used in business though it is not employed in the course of manufacturing or production of an article within the strict meaning as used in general parlance and moreover keeping in view that depreciation on the same machinery was allowed in earlier years, we set aside the issue to the file of the AO to examine whether the machinery in question was put to use in course of carrying on business of the assessee and if so, allow admissible depreciation in accordance with law. Accordingly, these grounds of appeal are set aside to the file of the AO for de novo assessment.
Validity of assessment u/s 143(3) r.w.s. 153A - Held that:- The contention of the appellant cannot be accepted as it is amply clear that regular assessment proceedings for assessment year 2010-11 are still open before the AO. Therefore, the AO is empowered to make addition based on evidence gathered either as a result of search and seizure or otherwise. The additions need not be confined to the material seized as a result of search and seizure proceedings. Therefore, the contention of the appellant cannot be accepted. The mere fact that the AO mentioned wrong section in the assessment order does not invalidate the order in view of the specific provisions of section 292B - Decided against assessee
Expenditure incurred by the assessee for purchase of iron ore which is used for exporting the same to outside India - Held that:- Payments made for purchase of illegal iron ore cannot be allowed as a deduction as the payments were made in blatant violation of the provisions of MMDR Act and also opposed to public policy. The Explanation to section 37(1) is squarely applicable.- Decided against assessee
Unexplained cash payment outside books of account - Held that:- AO has found material suggesting that appellant made cash payment to various parties as per seized material A/OV/1 outside books of account. This information was put forth to the appellant and the appellant has not discharged the onus of proving that the payments were duly reflected in the books of account nor he could prove that no such payments were made. Failure to do so automatically entails the addition. Thus, even before us, appellant had made no efforts to demonstrate that cash payments, if any, made are duly disclosed in the books of account and made out of known sources of income, nor he could demonstrate that no such payments were made. Thus, we have no hesitation to uphold the addition.- Decided against assessee
Addition on account of valuation of closing stock - Held that:- No doubt it is trite law that stock can be valued at cost or market value whichever is less. While valuing closing stock at nil, appellant had not brought on record any evidence suggesting that realizable value of the closing stock lying at Belekeri Port is nil, nor the assessee-company brought on record any independent valuation from technical experts in the field. Thus, in absence of evidence on record, we are unable to appreciate the contention of the assessee - Decided against assessee
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Customs
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2017 (4) TMI 782
Imposition of penalty on Sri Sanjoy and Shri B.R.B. Roy - smuggling - Red Sanders - confiscation - Held that: - it is evident that Sri Sanjoy was giving instructions to the persons to arrange the containers to smuggle the red sander woods and white powders which were prohibited items - both the appellants were actively involved in the smuggling racket of Sandal Wood and White Powder. Hence, the levy of the penalty is justified - appeal dismissed - decided against appellant.
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2017 (4) TMI 785
Notice of motion - Appeal against Tribunal's order - Revenue seeks a unconditional stay of the Tribunal's order - Rule 41 of the Rules styled as CESTAT Procedural Rules, 1982 - Held that: - We do not see how the Revenue, therefore, is prejudiced. The Revenue cannot argue that it will comply with the order of CESTAT qua one vessel only or qua one drawback application. Once the stand is made clear on affidavit and there is an order of sanction passed on 25th February, 2017, then, all the more we are not inclined to grant the request of stay, as made in the present Notice of Motion - unless and until an indemnity in the format prescribed is furnished by the assessee, the assessee will not get the benefit of the Tribunal's order nor a drawback in terms of the same - notice of motion fails - appeal dismissed.
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2017 (4) TMI 784
Penalty - smuggling - Is the 2nd respondent tribunal right in attaching importance to the alleged confessional statement of the appellant, especially when the same has been retracted at the earliest point of time and such confessional statement have not been corroborated by any independent evidence? - In a case of this nature, where conspiracy was hatched, as without which this kind of smuggling activities could not be executed, it is only on the basis of corroborating evidences as well as circumstantial evidences, either the prosecution or the Adjudicating Authority can build their case. Here in the case on hand, the entire conspiracy since had been proved beyond doubt before the criminal Court as all of them except the appellant had pleaded guilty, it cannot be said that the conspiracy had not been proved.
Held that: - After appreciating the evidences and the failure on the part of the prosecution in proving their case beyond reasonable doubt i.e., proving the link of the appellant with the team to have hatched the conspiracy and executed the smuggling activity, the Trial Appellate Court has given an acquittal to the appellant by stating that the prosecution has failed to prove the case beyond reasonable doubt.
Merely, because the other persons had pleaded guilty before the Trial Court and accepted the punishment, that would not have a bearing on the appellant's position, as there is no direct evidence that he had involved in the said activity of smuggling as there was no recovery from the appellant and also the prosecution, as has been rightly found out by the Trial Appellate Court has not proved the case against the appellant beyond reasonable doubt. Hence, the Tribunal has erred in giving such a conclusion, confirming the order in original.
Appeal allowed - decided in favor of appellant.
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2017 (4) TMI 783
Imposition of ADD - Vitrified/Porcelain Tiles - import from People's Republic of China (PRC) - The petitioner nos. 1 to 4 contend that they made no exports during the earlier period, hence the observations of the DA with respect to either the exports to India or to the related companies were unfounded and irrelevant to the aspect of dumping and injury - Held that: - the Court being mindful of the fact that the CESTAT was set up as a judicial body for hearing the appeals i.e. to deal with an order impugned before it on merits after discussing the details of the case. It is supposed to return a finding on the issues framed or raised before it. The impugned order evidently is shorn of such details or the rationale for arriving at the conclusion it has. Mere reference to paragraphs numbers of the Final Findings ex facie does not satisfy the requirements of passing a reasoned order.
The petitioners’ case warrant a deep analysis and thorough adjudication. However, considering that the order on merits by this Court could well affect the pending appeals of the Domestic Industry, the Court is of the view that the case be remanded back to be heard and disposed off on its merits - appeal allowed by way of remand.
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2017 (4) TMI 781
Imposition of penalties u/s 114(iii) of the CA, 1962 - valuation - T-Shirts and ladies night gowns - Revenue's case is that there was surreptitious clearance for exports and the three individuals, who are respondents in this appeal, were responsible officers of the customs department and they have allowed the consignments to be cleared without conducting proper checking - Held that: - There is nothing in the statements which indicates that these officers were asked questions about various shipping bills No.5227082, 5227084 and 5227085. It is noticed from the SCN dated 10th June 2003 that the said SCN did not seek any reply from these officers nor they were charged for imposition of penalties u/s 114 of the CA, 1962.
If the officers who are respondents herein had not examined the cargo are not associated with the said shipping bills no. 5227082, 5227084 and 5227085, the adjudicating authority was correct in her conclusion that no penalty can be imposed on them u/s 114(iii) CA, 1962 - appeal rejected - decided against Revenue.
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Corporate Laws
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2017 (4) TMI 780
Oppression and mismanagement - striking off the name of company - Held that:- It is quite clear that Civil Court has no jurisdiction to decide the allegation of oppression and mismanagement. The question of oppression and mismanagement of a company can only be decided by this Tribunal and the alleged allegations of oppression and mismanagement against the company K. C. Ghosh & Sons Pvt. Ltd, is not an issue in a Civil Suit, which is pending in Court. Therefore, the respondent's objection in this respect has no force. The respondent's objections are relating to the existence of the company. The respondents claim that the name of the respondent No. 1 company is struck off from the list of the Registrar of Companies maintained by the order of Registrar of Company. Therefore, the petition is not maintainable.
Admittedly, this company petition has been filed on 27th July, 2012 and the name of the company has been struck off from the register of the companies by Registrar of Companies in the year 2012, after filing of the petition. Therefore, it will have no effect on the present petition because on the date of the filing of the petition, company was in existence and it is also pertinent to mention that in the I A, the petitioner has claimed interim relief for rendering the accounts in respect of dealings with the funds and properties of the respondent No. 1 company, from the date of filing of the company petition till striking off. Therefore, the petitioner has not asked any account after the striking off the company. It is also pertinent to mention that directors are also individually responsible. Therefore, the petition is maintainable against directors. It is also necessary to mention that on the date of the filing of the petition, companies name was not struck off and it has been struck off only during the pendency of the petition. The petitioner claims that it is also a proof of alleged act of oppression and mismanagement that companies name has been struck off when the company was under effective management and control of respondent Nos. 2, 3, 4 and 5. In view of the above, it appears that interim application deserves to be allowed.
I.A. is hereby allowed and respondent directors are directed to render the accounts in respect of dealings with the funds and properties of the respondent No. 1 company from the date of filing of the company petition till striking off and it is also being directed to investigate to make a report in respect of dealings of the transactions of the respondent Nos. 2,3,4,5 and 8 in connection with management and affairs of the company by any independent auditor. Parties are directed to give three names of independent auditors within 15 days from today from the date of order. If the parties fail to give names of the independent auditors within 15 days, then the Tribunal itself will appoint the independent Auditor for investigating into the dealings and transactions of the respondent Nos. 2, 3, 4, 5 and 8 in connection with the management and affairs of the company. This is purely an interim order to ensure that the assets of the Company are properly accounted for and protected.
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Service Tax
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2017 (4) TMI 806
Imposition of penalty u/s 76 - appellant have paid Service Tax during the period December, 2006 to September, 2007, after delay of some days from the due date wherein from 01 day to 230 days - Held that: - there is no deliberate default or contumacious conduct on the part of the appellant. Rather the appellant have deposited almost 4 times the actual tax levy with the revenue and such excess amount, remained with the revenue, for substantial time before being adjusted in the subsequent return periods - for some and/or minor failure on the part of the appellant in depositing the tax on or before the due dates, penalty u/s 76 is not exigible - appeal allowed - decided in favor of appellant.
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2017 (4) TMI 805
CENVAT credit - Outdoor Catering Services - Manpower Supply for Garden Maintenance Services - Maintenance and Repair Service of Sewage Treatment Plant - Held that: - the appellants had agreed to reverse the CENVAT Credit in so far as it pertains to the amount collected from the employees in respect of the Outdoor Catering Services - the credit for the period prior to 1.4.2011 is allowed to the extent, the incidence of such services is borne by the appellant not recovered from anybody else - so far as credit pertaining to period after 1.4.2011 is concerned, the appellants are entitled to take credit in so far as it relates to the burden of service borne by the appellant themselves and not recovered from any other party.
Garden Maintenance Service - Maintenance of Sewage Treatment Plant - Held that: - it is apparent that credit for the sewage treatment plant and for the garden maintenance cannot be denied as the same are statutory requirement for operating the Port.
Interest - Held that: - Interest was required to be paid on credit taken or utilized wrongly. Interest liability will accordingly be modified by original adjudicating authority as per the prevailing provisions of law.
Penalty - Held that: - it is a fit case for invocation of Section 80 of the Finance Act, 1994 and, therefore, penalty u/r 15 of the CCR, which in turn is penalty in terms of Section 76 or 78 of the FA, 1994, is set aside.
Appeal allowed - decided partly in favor of appellant.
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2017 (4) TMI 804
Penalty - imposition of simultaneous penalty u/s 76 and 78 of FA - The period involved in this case is from 01.07.2003 to 31.03.2009 - Held that: - Section 78 ibid was amended w.e.f. 10.05.2008 wherein the 5th proviso was appended thereto providing that if the penalty is payable under Section 78, provisions of Section 76 shall not apply. The effect of such amendment is that simultaneous penalty under both section 76 and 78 ibid cannot be imposed - such amendment cannot have the retrospective application in absence of any specific stipulation of that effect.
Penalty levied under both Section 76 & 78 upto 10.05.2008 is sustainable and thereafter from 10.05.2008 to 31.03.2009, penalty u/s 76 is not sustainable. The appellant has already deposited 25% of the penalty u/s 78 ibid. The remaining 75% of penalty shall stand waived - appeal disposed off - decided partly in favor of assessee.
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2017 (4) TMI 803
CENVAT credit - input service - GTA service for transportation of goods from the factory of the appellant to the buyers - whether appellant is liable to pay interest for the intervening period or not and in the facts and circumstances of the case, penalty is imposable on the appellant or not? - Held that: - the Cenvat credit account was lying unutilized and therefore, interest is not payable by the appellant - With regard to penalty, from April, 2010, there was an amendment in the Rules that the appellant was not entitled for Cenvat credit on the outward agency service, the appellant is not entitled to avail Cenvat credit on the transportation charges. In these circumstances, the penalty is imposable on the appellant.
The appellant has paid the amount of Cenvat credit before adjudication, the penalty is reduced to 25% of the duty amount.
Appeal disposed off - decided partly in favor of assessee.
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2017 (4) TMI 802
Works contract - claim of assessee is that The entire work was completed on 4-4-2007. The service tax came into existence on the residential services w.e.f. 1-6-2007, therefore service not taxable - Held that: - when the entire cause of action was completed in the month of April, 2005 then the service tax on the works contract is not leviable which came into existence on 1-6-2007 - The BDA is Government agency so the genuineness of the bills and contract signed by and raised against BDA cannot be doubted - demand not sustainable - appeal dismissed - decided against Revenue.
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2017 (4) TMI 801
Abatement under Tour Operators service - N/N. 1/2006-S.T., dated 1-3-2006 - denial on the ground that condition of the notification regarding non-availment of Cenvat credit has not been fulfilled by the appellant - Penalty - Held that: - in absence of non-fulfilment of the said conditions provided in the notification, the benefit of abatement contained therein should not be available to the appellant.
The amount of service tax along with interest was paid by the appellant before adjudication of the matter and availment of Cenvat credit at the material time was due to bona fide belief that the benefit of abatement, the provisions of Section 80 ibid can be invoked for non-imposition of penalty u/s 76 ibid.
Appeal allowed - decided partly in favor of appellant.
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Central Excise
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2017 (4) TMI 790
100% EOU - refund claim - rejection on the ground that the concept of cum-duty is not applicable to the DTA clearances made by EOUs - Held that: - Assessee made straight forward clearances from the EOU to DTA, though at lower rate of duty discharged thereon than what was applicable. It is not the case of the department that respondent-assessee had removed the goods clandestinely or that they had collected from or reimbursed by, the buyers, the amount of differential duty that was paid by them subsequently on being advised by department. Respondent-assessee has also not collected differential duty which they retained and paid up only on being advised by Department - it is an admitted fact that assessee had not collected any duty amount of more than 12.36% from their buyers. In these circumstances, the price charged by the respondent-assessee will surely have to be adopted as a "cum duty price".
Appeal dismissed - decided in favor of assessee.
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2017 (4) TMI 796
Refund claim - rejection on account of time limitation - clearance of goods to SEZ unit - case of appellant is that the limitation prescribed in Section 11B of CEA, 1944 is not applicable to the refund claim filed under Rule 5 of CCR, 2004 read with N/N. 5/2006 or 27/2012 - Held that: - the judgment in the case of GTN Engineering India (P) Ltd. [2011 (8) TMI 960 - MADRAS HIGH COURT], squarely covers the issue, where it was held that the relevant date must be the date on which the final products are cleared for export - refund claim which is filed beyond the relevant date as prescribed u/s 11B is barred by limitation - appeal dismissed - decided against appellant.
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2017 (4) TMI 800
CENVAT credit - M.S. items under the category of capital goods - Held that: - It is clear from the records that M.S. items were used for supporting structures in the milling section for support of slurry tank etc - the period involved is prior to 07.07.2009 on which date, the explanation in the definition of input was introduced restricting the use of M.S. items - the credit availed on MS items used for supporting structures is eligible for credit.
Extended period of limitation - Held that: - there is no evidence to establish that the appellant has committed suppression of facts with intent to evade payment of duty. It is also seen that the appellant has disclosed the credit availed on MS items in the ER-1 returns filed by them. Such ER-1 return is the basis for issuance of show cause notice - extended period not invoked.
Appeal allowed - decided in favor of appellant.
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2017 (4) TMI 799
Manufacture - purification of the mixed solvents - whether the mixture of solvents, which is sold by the appellant, is excisable products or not for the period prior and post 15.6.2008? - Held that: - the solvents are repeatedly used after purification within the factory premises and they get mixed up with various impurities and at a stage when they cannot be reused, they are cleared by the assessee for a consideration. In short, clearances of the mixed solvent, which is done from the factory premises, is the residue, which gets retained after the manufacturing of final products by repeated use of the solvents during the course of manufacturing of final products - The appellant's claim that these goods are not excisable is supported by the judgment of the Tribunal in the case of CCE, Hyderabad vs. Aurobindo Pharma Ltd. [2009 (3) TMI 455 - CESTAT, BANGALORE].
Appeal allowed - decided in favor of appellant.
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2017 (4) TMI 798
Rectification of mistake - calculation of interest liability for violation of Rule 3(5) of CCR, 2004 - Held that: - Tribunal has considered all the aspects of the case and after analyzing the evidences recorded its finding. Therefore, reconsidering the issues now raised would result into review of the order, a power not conferred on the Tribunal - ROM application dismissed.
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2017 (4) TMI 797
SSI Exemption - value of clearance - crude oil - includibility - whether the value of crude oil can be added to the total value of manufactured exempted goods to determine eligibility under N/N. 08/2003? - Held that: - M/s NIKO Resources is the producer of the crude Oil. Therefore, there is no justification for considering the value of crude oil as reflected in the balance sheet for the year 2003-04, in extending the benefit of N/N. 8/2003-C.E. dated 1.3.03, as amended to the appellant for their manufactured goods for the period April 2004 to December 2004 - appeal dismissed - decided against Revenue.
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2017 (4) TMI 795
CENVAT credit - MS items - denial on the ground that the MS items do not fall within the definition of capital goods - Held that: - it is seen from the certificate that the MS items have been used for fabrication of capital goods their parts/components/accessories thereof and also support structures for erection of the capital goods.
The only ground on which the department has sought to deny the credit is on the basis of the judgment in the case of Vandana Global Ltd. [2010 (4) TMI 133 - CESTAT, NEW DELHI (LB)] wherein it was held that the amendment dated 07.07.2009 which restricted the use of M.S items is applicable retrospectively. It is the contention of department that after fabrication of the support structures including platform when embedded to earth become immovable property and therefore not being excisable goods the MS items are not eligible for credit. The judgment rendered in Vandana Global Limited has been analysed by the Hon’ble High Court of Andhra Pradesh in the case of Mundra Ports and SEZ Ltd, [2015 (5) TMI 663 - GUJARAT HIGH COURT]. The Hon’ble Court observed that the amendment dated 07.07.2009 brought forth to the definition of inputs does not have retrospective application. In the present case the period involved is prior to 07.07.2009 - credit allowed - decided in avor of assessee.
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2017 (4) TMI 794
Valuation - Royalty paid to copyright owners - includibility - case of the Department is that the royalty paid by the music company to the various copyright owners should be included while arriving at the assessable value of the RCDs - Held that: - the royalty paid by the principal for copyright to the producer and artists is not includible in the cost of manufacture of RCDs in the hands of the appellant, however, apportioned cost of master CD and its contents provided by the principal to the appellant is includible in the assessable value of RCDs manufactured by the appellant - reliance placed in the case of M/s. KRCD. (I) Pvt. Ltd. Versus Commissioner Of Central Excise, Mumbai [2015 (4) TMI 856 - SUPREME COURT] - appeal allowed - decided partly in favor of appellant.
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2017 (4) TMI 793
Benefit of N/N. 6/2006-CE dated 1.3.2006 - goods supplied to the sub-contractor - International Competitive Bidding (ICB) - whether the appellant being supplier of the goods to sub-contractor whose name is appearing in the PAC is eligible to exemption N/N. 6/2006-CE? - Held that: - the issue has been clarified in the Union Budget 2014-15 according to which the supplies made to the sub-contractor is also eligible for exemption N/N. 6/2006 - appeal allowed - decided in favor of appellant.
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2017 (4) TMI 792
Classification of goods - quilts - misdeclaration - whether during the material period respondent had intentionally evaded duty on the quilts manufactured and cleared while classifying the same under Heading 58.11 and claiming the benefit of N/N. 30/2004-CE? - Board Circular dated 20.10.2009 - Held that: - there was a general practice in the trade to classify the product under Chapter 5811 while in some other places, it has been classified under Chapter 94 - By the Circular dated 20.10.2009, the Board has clarified that the product merits classification under Chapter 9404 and the benefit of N/N. 30/2004-CE is not available. Since the CBEC Circular had issued clarification only on 20.10.2009 that the product manufactured and cleared by the appellant merits classification under 9404, the defence of the respondent herein before the appellate authority that they were under a bona fide belief that the products classifiable under Chapter 5811 cannot be faulted with - the respondent has made out a case for setting aside the demand of duty only on the ground of limitation as has been held by the first appellate authority - appeal dismissed - decided against Revenue.
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2017 (4) TMI 791
Shortage of stock - clandestine removal - natural justice - Held that: - the adjudicating authority should have extended the cross-examination of the persons whose statements the adjudicating authority is placing reliance hold claim that the main appellant had clandestinely removed goods and the cash which has been recovered from the appellant premises is in respect of sale proceed of the goods removed clandestinely. The reasoning given by the adjudicating authority for denying the cross-examination is not in consonance with the law - adjudicating authority will come to a conclusion after following principles of natural justice - appeal allowed by way of remand.
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2017 (4) TMI 789
N/N. 108/95-CE dated 28.08.1995 - refund - duty paid diesel - construction contract - who is entitled to the exemption, manufacturer, contractor or buyer of the goods? - Held that: - Revenue have failed to read the scheme of the Central Excise Act as a whole and accordingly have reached to erroneous conclusion. The learned Commissioner (Appeals) have rightly held that u/s 11 AB read with explanation clause (e) read with N/N. 108/95-CE read with N/N. 17/2004-CE, the respondent-assessee is rightly eligible for refund of duty paid in the facts and circumstances. Accordingly, there is no merit in the appeal of Revenue - appeal dismissed - decided against Revenue.
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2017 (4) TMI 788
CENVAT credit - Godown Charges - denial on account of nexus - Held that: - the Service Tax paid on ‘Godown Charges’ was in connection with storage imported inputs/raw materials by the appellant in their respective godowns - also, the appellants were not engaged in trading of the imported goods from the said premises but, took dealers’ registration, so as to enable them to issue invoices to their own units for availing Cenvat Credit - credit allowed - appeal allowed - decided in favor of assessee.
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2017 (4) TMI 787
Waste - Char Fines/Lumps - product emerged in manufacturing process as residue - excisability/marketability - Held that: - Commissioner (A) in the appellant’s own case for the subsequent period has dropped the demand raised in respect of the identical product by following the Tribunal’s decision in the case of Haryana Steel & Power Ltd. Vs. CCE Mysore [2015 (11) TMI 771 - CESTAT BANGALORE] - it was held that ‘char fines / lumps’ arise as a waste during the manufacture of Sponge Iron are not excisable and therefore, the confirmation of demand not sustainable - appeal allowed - decided in favor of appellant.
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2017 (4) TMI 786
Reversal of credit - Rule 57CC of CER, 1944 read with Rule 6(2) of CCR 2001/2002 & 2004 - manufacture of Carbon Black - input furnace oil used for generation of steam to run their machinery and to generate electricity and some part of the surplus steam is sold out to the adjoining industrial units - whether appellant required to reverse credit on the units cleared? - validity of SCN - Held that: - the whole SCN is misconceived as it is not the case of Revenue that furnace oil is not fuel, used in the factory of the respondent-assessee - steam is not a final product of the respondent-assessee the rigours of Rule 6(2) of the Cenvat Credit Rules, 2001, 2002 & 2004 are not applicable - appeal dismissed - decided against Revenue.
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Indian Laws
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2017 (4) TMI 778
Cancellation of work contract awarded to the petitioner - Nature of contract - consultancy contract or works contract - TDS on consultancy services provided - whether deduction of TDS 194C of the Income Tax Act, would help to determine the nature of contract - Held that:- The response of the Income Tax Officer indicates that as the assessee filed its return of income for the annual year 2010-11 on 24.09.2010 showing taxable income of ₹ 99,210/- and total tax paid ₹ 30,656/- and no other tax remained payable. Thus, a perusal of the letter reveals that not only was no tax payable to the Income Tax Office in view of the return of income shown by the assessee, as a Contractor, but the Petitioner also failed to substantiate his argument that the full tax liability for the year i.e. for Consultancy services, was made good by him, by filing any document in this regard to fortify his claim. In fact, the Petitioner made a feeble attempt at justifying the above deduction of tax @ of 1% by stating that it had come to his knowledge that the department itself and more particularly BRPD-II, Chungthang, had been deducting Income Tax under Section 194C i.e. @ 2% for consultancy works, similar to the work for which NIT No.01 had been issued and not under Section 194J @ 10%. This statement however is a bald, statement not buttressed by any document and is therefore, not acceptable before any Court of law.
Thus, what transpires from the above is that the consultancy works were awarded to the Petitioner by the Respondents on the basis of the Certificate of M/s Vraj & Vaj Constructions. To gauge whether the Petitioner had indeed provided consultancy works in view of the letter of the ITO informing to the contrary, as no other documents were forthcoming from the Petitioner, the Respondent No.4 had to fall back on the income tax deducted at source. The correspondence discussed hereinabove clarifies that the TDS was for contract works and not for consultancy services.
Apart from the Agreement documents between M/s Vraj and Vaj Constructions and the Certificate issued by the said Company, no other documents have been furnished to establish that the Petitioner offers consultancy services. In such a situation, it has to be stated that obviously tax would be deducted on the basis of the Income and if the income of the Petitioner was only as a contractor then deductions so made would be for contract works and not for consultancy work. Added to this is the fact that although the Petitioner alleges that all balance tax was paid, the letter of the Income Tax reveals no such fact, in as much it has been stated therein that “in this case the assessee filed its return of income for A.Y. 2010-11 on 24.09.2010 showing income of ₹ 99,210/- and total tax paid ₹ 30,656/- and no any (sic) other tax remain payable.” This fortifies that the services provided by the Petitioner to M/s Vraj & Vaj Constructions was in the capacity of contractor and not consultant.
Merely because three weeks time was allowed to file response does not mean that even after response is filed Respondents are obliged to wait further. That apart, consideration is to be taken of the fact that the impugned letter was only issued on 8.12.2016, much after 01.12.2016, hence the allegations that the order of this Court was flouted has no legs to stand, nor can it be said that the Respondents had a predetermined mind to cancel the work awarded to the Petitioner, which to my mind appears to be a baseless unsubstantiated allegation made by the Petitioner. W.P. dismissed.
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2017 (4) TMI 779
Charges under Section 138 r.w.s. 141 of the Negotiable Instruments Act - Held that:- High Court in these criminal revisions, had initially passed the order for suspending the sentence. However, by the impugned order, the said order of suspension of sentence has been withdrawn.
It is a matter of record that the appellants have so far paid ₹ 80 lakhs. In these circumstances, we are of the opinion that the sentence awarded by the Courts below need to be suspended till the decision of the revision petitions. Ordered accordingly. The impugned order dated 16.12.2015 withdrawing the order of suspension of the sentence is hereby set aside and the appeals are allowed in the aforesaid terms.
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