TMI Tax Updates - e-Newsletter
April 26, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
Indian Laws
TMI SMS
Highlights / Catch Notes
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Income Tax:
Taxability of carbon credit - gains on sale of CERs, though taxable in nature, could only have been taxed at the point of time when these CERs were actually transferred to the foreign entity - cannot be brought to tax by the reason of accrual simplictor. - AT
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Income Tax:
MAT provision - Since Explanation 1 to sec. 115JB(2) of the Act is applicable retrospectively with effect from 1.4.2001, the provision for bad and doubtful debt has to be increased as provided therein - AT
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Income Tax:
Exemption u/s 11 of the Act is to be granted when income is brought to tax u/s 68 - AT
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Income Tax:
Benefit of deduction u/s 80HH & 80IA on the amount of interest received from customers/dealers allowed - AT
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Income Tax:
Depreciation on boiler leased back - ownership of the impugned asset was with the assessee and the same was used for the purpose of business of leasing carried on by the assessee; under these circumstances the assessee was entitled for the benefit of depreciation - AT
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Income Tax:
Income from share trading, brokerage, derivative and interest income on margin money should be considered as income derived from purchase and sale of shares and are therefore to be treated as to profit derived from speculative business as per the provision contained under Explanation to Sec. 73.- AT
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Income Tax:
No separate additions required when assessee has admitted the income in the hands of HUF - AT
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Income Tax:
NSE is not liable for any alleged short-deduction of STT - AT
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Income Tax:
Order passed ex-parte by the AO, was in violation of specific CBDT Instruction F.No.225/26/2006-ITA-II(Pt.) dated 08.09.2010 this the same is not legally sustainable - AT
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Income Tax:
Interest income earned by a credit cooperative society on the FDRs with nationalized bank would qualify for grant of exemption under section 80P(2) - AT
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Income Tax:
Carry forward of unabsorbed depreciation - carried forward unabsorbed depreciation of the earlier year has to be taken as a part of the current year’s depreciation allowance and to be set off, to the extent possible, against income of the current year - AT
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Customs:
When there is mis-declaration of goods, show cause notice can be issued within a period of five years from the date of findng mis-declaration by the investigating authority - AT
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Customs:
Value of goods shall be deemed to be the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation, in the course of international trade where the seller and the buyer have no interest in the business of each other and the price is the sole consideration for sale or offer for sale - AT
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Wealth-tax:
Asset not registered and title of the property had not been passed on to the company, cannot be included in the taxable wealth of a company. - AT
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Service Tax:
Person maintaining an amusement park, are obliged to pay entertainment tax to the State, whether or not there are entrants to the park - Levy is only when the service is availed of, provided by the Union Parliament for a tax on admission to the parks - HC
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Service Tax:
As per Rule 3, the assessee is entitled to take the credit of Service Tax paid when they have initially not paid but paid after being pointed out by Audit team - AT
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Service Tax:
Merely for the reason that Section 150 provides for distribution of the amount of proceed of auction, that will not empower the department to recover service tax on the auction proceeds - AT
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Central Excise:
When the Jeeps get the processing of bulletproofing by job workers outside the factory premises, the cost of bullet proofing is not be added in the transaction value - SC
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Central Excise:
Supplementary invoice issued in respect of supply of wrapper and differential duty paid on the amortization cost of the cylinders used for supply of wrappers are entitled for the Cenvat credit - AT
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Central Excise:
Only provision granting interest on delayed refund is provided u/s 11BB, therefore interest shall be payable as per the rate prescribed thereunder and not as per Supreme Court order in any case - AT
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VAT:
Newly established industrial units having once enjoyed the tax exemption and also remission for seven years under the Meghalaya Industrial Policy of 1997 and the Meghalaya Industries (Tax Exemption) Scheme 2001 cannot claim benefits of tax remission for extended period under the new Scheme namely, the Meghalaya Industries (Tax Remission) Scheme 2006 - HC
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VAT:
Release of vehicle - Detained for evasion of VAT under Section 68 - Under Section 68(5), the Deputy Commissioner has the power to release such goods pending assessment on such conditions of depositing tax and penalty or furnishing security as may be found fit - HC
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2016 (4) TMI 916
Taxability of carbon credit - CIT(A) deleted the addition - Held that:- These carbon credits are of no practical use, in Indian perspective, unless these are transferred by the assessee. The principles of conservatism, which is one of the most fundamental principle in determining of commercial profits, does not permit an anticipated income being accounted for, even though all anticipated losses, as soon as these can be quantified on a reasonable basis, are invariably taken into account in this process. Till the point of time these carbon credits are actually sold, the income embedded in these carbon credits, even when any, does not crystallize and continues to remain, at best, an anticipated income. Whether the CERs are generated under the CDM or for the IEM or even under JI, the taxability of the income from CERs will be taxable only when the right to receive consideration for transfer of these CERs is quantified and crystallized. We may add here that, while the ground of appeal raised by the Assessing Officer refers to “addition of ₹ 5,78,28,058 made on account of sale of carbon credits”, it is not even the case of the Assessing Officer that the sale was made in the relevant previous year. This aspect of the matter is clear from the observations made by the Assessing Officer, which have been reproduced earlier in this order after our paragraph 4, and this is what has been emphatically stated at the bar, in the course of hearing before us, by the learned counsel. Once both the parties are unanimous on the factual aspect that the sale is not effected in the relevant previous year, there cannot be any good reasons to bring the CER value to tax in this assessment year. In view of the above discussions, in our considered view, the gains on sale of CERs, though taxable in nature, could only have been taxed at the point of time when these CERs were actually transferred to the foreign entity. Accordingly, the value of CERs, even though quantifiable, cannot be brought to tax by the reason of accrual simplictor. That is precisely what has been done in this case. It is for this reason that we confirm the relief granted by the CIT(A) and decline to interfere in the matter. - Decided in favour of assessee. Disallowance under section 14A - CIT(A) deleted the addition - Held that:- It is a case, as evident from the reproductions set our in which the Assessing Officer has recorded specific dissatisfaction with the claim of the assessee. As a matter of fact, this precedent supports the case of the revenue. We may now refer to the observations of the CIT(A) to the effect that “It is only presumption of AO that directors of the company might have been involved in decision making relating to liquidation of old investments and investment in new areas. No facts have been brought on record by AO which indicate that there were lot of movements in the investment activity requiring involvement of senior management personnel”. We find that its not even in dispute that a part of expenses attributable to the work in connection with the investment are to be disallowed, as the assessee has on its own offered ₹ 30,000 for disallowance in this regard. The dispute is confined to the quantum of disallowance and the basis on which it is to be quantified. In the absence of any reasonable basis of disallowance offered by the assessee, and in the absence of the assessee even disclosing the basis on which disallowance is made, the Assessing Officer had invoked the rule 8D. We see no infirmity in this action. In view of these discussions, as also bearing in mind entirety of the case, we vacate the relief granted by the CIT(A) and restore the disallowance made by the Assessing Officer. - Decided against assessee.
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2016 (4) TMI 915
Disallowance u/s 14A r.w.s 8D - CIT(A) confirmed the order of the Assessing Officer - Held that:- Sec. 14A of the Act provides for disallowance of expenditure for earning the exempted income when the Assessing Officer is not satisfied that the expenditure was not claimed by the assessee. In the case before us, the assessee claims that surplus funds were used for making investments. The assessee also claims that no borrowed funds were used for making the investments. It is not the case of the assessee that no funds were borrowed for business purposes. When the assessee pays interest which is not attributable to any part of the income or receipt of the assessee, this Tribunal is of the considered opinion that second limb of Rule 8D would come into operation. Even in case no expenditure was incurred, third limb of Rule 8D provides for computation of expenditure. In the case before us, the Assessing Officer has applied the provisions of Rule 8D and computed the disallowance at ₹ 24,61,662/-. There is no dispute about the computation of expenditure as made by the Assessing Officer. Therefore, this Tribunal do not find any reason to interfere with the order of the CIT(A). Accordingly, the same is confirmed. - Decided against assessee Reopening of assessment - no adjustment of bad and doubtful debts to the book profit u/s 115 JB - Held that:- The Assessing Officer found that a sum of ₹ 3.5 crores was not added to the book profit u/s 115 JB of the Act. In those circumstances, this Tribunal is of the considered opinion that the Assessing Officer has rightly reopened the assessment by issuing notice u/s 148 of the Act. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority. Accordingly, the same is confirmed. Explanation 1 to sec. 115JB of the Act was introduced by Finance Act 2008 with retrospective effect from 1.4.2001. Therefore, the book profit computed shall be increased by the provision made for meeting the liabilities. In this case, admittedly, the assessee has made a provision to the extent of ₹ 3,50,72,000/-. Though the assessee added the same in the normal computation, no adjustment was made as provided in Explanation 1 to sec. 115JB(2) of the Act. The only contention of the assessee before this Tribunal is that Explanation 1 to sec. 115JB(2) is not applicable during the year under consideration. No doubt, Explanation 1 to sec. 115JB(2) of the Act was introduced b Finance Act 2008 with retrospective effect from 1.4.2001. Therefore, it is very much applicable for the year under consideration. There may be a reasonable cause on the part of the assessee for not making adjustment on the date of filing the return of income. It does not mean that the provision made for bad and doubtful debt cannot be added back to the book profit as provided in Explanation 1 to sec. 115JB(2) of the Act. This Tribunal is of the considered opinion that since Explanation 1 to sec. 115JB(2) of the Act is applicable retrospectively with effect from 1.4.2001, the provision for bad and doubtful debt has to be increased as provided therein. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority. - Decided against assessee Rectification proceedings u/s 154 - excess loss was set off against the book profit - Held that:- It is not in dispute that the total book loss available to the assessee-company for carry forward and set off for assessment year 2004-05 is only ₹ 3,57,07,000/- and not ₹ 4,31,68,928/-. The Assessing Officer has rectified only this apparent mistake on record. Therefore, this Tribunal do not find any reason to interfere with the order of the CIT(A). Accordingly, the same is confirmed.- Decided against assessee
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2016 (4) TMI 914
Eligibility of exemption u/s 11 and 12 - income deemed to be chargeable to tax u/s 68 - Held that:- A perusal of the statement recorded from Dr.Mahalingam specifically answers to question no.13, 19 in the statement recorded on 21st August,2006 and the question recorded in the subsequent statement dt. 25th August,2006 demonstrate that the disclosure of Dr.Mahalingam is based on the material Annexure A-2 to A-10. This is the very seized material based on which an addition is once again made in the hands of the assessee. We have asked the assessee to file photo copies of this material, he did so by way of a paper book. We have verified the same and found that the contentions of the Ld.Counsel for the assessee is correct. Once the income is relatable to particular material found during the course of survey and when the same is offered to and assessed to tax in the hands of Dr.Mahalingam in his individual capacity, then the same income cannot be brought to tax once again in the hands of the Trust. This would amount to double taxation of the same income. The Ld.D.R. before us could not demonstrate as to how the seized material could be said as evidence of income being earned by the Trust. Even otherwise as observed by the Ld.CIT(A) as the alleged unexplained receipts is aggregating to ₹ 1,70,23,219/- and the alleged unexplained expenditure is much above the same i.e. aggregating to ₹ 2,25,02,116/-. When the income of the assessee is exempt u/s 11, if this income is taxed as income of the Trust, then, as the same is applied, there would be no sum which can be taxed in the hands of the assessee. We also find that the Hon’ble Delhi High Court in the case of DIT(E) vs. Raunaq Education Foundation (2007 (4) TMI 61 - HIGH COURT, DELHI ), held that exemption u/s 11 of the Act is to be granted when income is brought to tax u/s 68 of the Act. Out of the additions u/s 68 and 69C totalling to ₹ 4,22,48,338/-, no amount can be brought to tax, as the deemed application u/s 11(1) would be ₹ 5,44,75,960/- and the application of income in respect of capital expenditure would be ₹ 12,69,84,028/- totalling to ₹ 18,14,59,988/-. This results in a net deficit of ₹ 3,07,03,982/-. Thus looking at the issue from another angle, we have to uphold the order of the First Appellate Authority and dismiss this appeal of the Revenue. - Decided in favour of assessee.
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2016 (4) TMI 913
Depreciation on boiler - boiler purchased from and leased back to Andhra Pradesh State Electricity Board (APSEB) - Held that:- The impugned sale and lease back transactions is a genuine transaction. The transaction has been entered into between two unrelated parties by way of a written agreement and one of them is statutory corporation; the payment was made by banking channels; sales tax and other applicable taxes were paid and the transactions of sale has been accepted as valid by the concerned sales tax authorities. Though in the initial year assessee has claimed depreciation which reduced tax liability but at the same time amount of all these rentals have been included in the taxable income by the assessee in subsequent year during the lease period and thus, over all, there was no loss of revenue to the income tax department. Further the sale and lease back transactions have been recognized by the legislature by insertion of Explanation 4A to Section 43(1). Under these circumstances, there arises no question of evasion of tax and in any case if it is a genuine business transactions, the same should not be categorized as a colorable device merely because its results in reduction of tax liability. Further, it has been established that ownership of the impugned asset was with the assessee and the same was used for the purpose of business of leasing carried on by the assessee; under these circumstances the assessee was entitled for the benefit of depreciation. Therefore, AO is directed to grant the benefit of depreciation. - Decided in favour of assessee Disallowance of deduction u/s 80HH and 80IA on the amount of interest received from customers on delayed payments - Held that:- It is noted by us that this issue has already been decided by the Tribunal in earlier years i.e. Assessment Year 1992-93, 1993-94 and 1995-96. It is further noted by us that Ld. CIT(A) while deciding this issue has followed his own orders of the earlier years. In view of these facts, we find that orders of the Tribunal of earlier orders should be followed for deciding this issue, thus we direct the AO to grant benefit of deduction u/s 80HH & 80IA on the amount of interest received from customers/dealers.- Decided in favour of assessee
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2016 (4) TMI 912
Treatment to speculation loss as income from non-speculation business - Held that:- We find that the assessee had treated the entire activity of purchase and sale of shares which comprised of both delivery based and non-delivery based trading as one composite business before the application of deeming provision contained in Explanation to Sec.73 of the Act and accordingly, claimed set off of the loss incurred in delivery based trading with profit derived from derivative trading. We hold that the transactions done by delivery as well as the transactions of derivatives are not hit by Sec.43(5) of the Act and hence the aggregation of the share trading loss and profit from derivative transactions should be done before application of the Explanation to Sec.73 of the Act. As per the definition of section 43(5) of the Act, trading of shares which is done by taking delivery does not come under the purview of the said section. Similarly, as per clause (d) of section 43(5), derivative transaction in shares is also not speculation transaction as defined in the said section. Therefore, both profit/loss from all share delivery transactions and derivative transactions have the same meaning as far as Section 43(5) of the Act is concerned. It thus follows that both will have the same treatment as far as application of the said section is concerned. Thus we hold that the claim of the assessee for set off of loss from share dealing should be allowed from the profits from F & O in share transactions, the character of the income being the same and also hold that before application of the Explanation to section 73, aggregation of the business profit or loss is to be worked out irrespective of the fact whether it is from share delivery transaction or derivative transactions. Income from share trading, brokerage, derivative and interest income on margin money should be considered as income derived from purchase and sale of shares and are therefore to be treated as to profit derived from speculative business as per the provision contained under Explanation to Sec. 73. - Decided against revenue Disallowance u/s 14A r.w.r 8D - Held that:- AO has invoked the provision of Sec. 14A of the Act read with Rule 8D of the IT Rules without recording the satisfaction that the assessee’s books of account are not showing the correct expenditure incurred in relation to dividend income. We find that it is only if the Assessing Officer is not satisfied with the correctness of the assessee's claim under section 14A that he can assume jurisdiction to arrive at the quantum of disallowance of expenditure in accordance with the method prescribed in rule 8D. It is not open to the Assessing Officer, when he is seized with the aspect of being satisfied with the correctness of the claim of the assessee, to use the method prescribed in rule 8D or any part thereof as a benchmark. It is only if, having regard to the accounts of the assessee, he is not satisfied with the correctness of the assessee's claim, that he will have jurisdiction of taking recourse to the method prescribed under rule 8D - Decided against revenue
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2016 (4) TMI 911
Addition towards additional income declared during the course of search - Held that:- The additional income admitted by the assessee during the course of search is not supported by any material evidences gathered during the course of search. Though assessee admitted additional income of ₹ 18,28,000/- by stating that the income is offered to cover up inconsistencies in the past, the assessee has declared the said income in the hands of the T Ramakrishna(HUF) by declaring short term capital gains and income from other sources. Therefore, we are of the opinion that the A.O. was not correct in making separate additions of ₹ 18,28,000/-, when assessee has admitted the income in the hands of Shri T. Ramakrishna(HUF). The CIT(A) failed to appreciate the fact that the undisclosed income offered during search, was admitted in the hands of T Ramakrishna (HUF). The CIT(A), without appreciating the proper facts, confirmed the additions made by the AO. Therefore, we set aside the order passed by the CIT(A) and direct the A.O. to delete the additions. - Decided in favour of assessee Disallowance of income tax payable - A.O. was of the opinion that income tax is not a allowable deduction under sec. 40(a)(ii) - Held that:- Admittedly, the assessee has estimated the income from construction project on estimation basis. To arrive at the income from the project, the assessee has prepared a P&L account and as per the financial statement prepared by the assessee, the assessee has claimed income tax payable for ₹ 11 lakhs as expenditure in the P&L account. Though profit is estimated, the assessee has claimed income tax payable of ₹ 11 lakhs, as expenditure in the profit & loss account, which cannot be allowed as a deduction u/s 40(a)(ii) of the Act. Therefore, we are of the opinion that the A.O. has rightly made additions of ₹ 11 lakhs towards income tax payable. The CIT(A) has rightly confirmed the additions made by the A.O. We do not see any error or infirmity in the order passed by the CIT(A). - Decided against assessee
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2016 (4) TMI 910
NSE liability for alleged short-deduction of Security Transaction Tax [STT] - transaction of FIIs for which higher rates are applicable being delivery based transaction in respect of both purchases as well as sales - Held that:- The SEBI issued the Circular to the National Stock Exchange for using two client codes, One for sale and Second for purchase transaction for those investors whose transactions are to be settled through delivery only, specifically in the case of FIIs. If the broker or the member have not taken any separate client code, then the assessee cannot held responsible, because the assessee has already intimated / circulated that each and every broker or member should in such cases take two client codes. Any failure cannot be ascribed to the assessee, because, it is an undisputed fact that the client code is not provided by the assessee, but by the member brokers In case where the two separate client codes have not been taken for purchase and sale of shares for the same day and there in only one client code, then transactions are settled in the netted settlement mode, that is, squaring of the transaction and STT is calculated as per the netted settlement mode as prescribed under Rule 3. This netting off mode is not applicable in the case of FIIs in terms of SEBI regulations and Circular. If in some cases, there has been default by the Members brokers for not taking two separate client codes, then so far as assessee is concerned, it has not comitted any default under the provisions of the STT Act r.w. relevant rules, because what assessee is required to see is whether the transactions of purchase and sale has undertaken through particular client codes or not. Here in this case, the assessee has admittedly complied with this statutory requirement hence, we do not find any reason to ascribe any fault to the assessee or hold that be assessee committed and default to collect the correct STT. Thus, it is under the Statute NSE is not liable for any alleged short-deduction of STT. Accordingly, the addition which has been sustained by the CIT(A) to the extent stands deleted. - Decided in favour of assessee
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2016 (4) TMI 909
Applicability of CBDT Instruction F.No.225/26/2006-ITA-II(Pt.) dated 08.09.2010 on A0 - ex-parte order - AO while computing capital gain and denying benefit of section 54 to the assessee, has contravened the said instructions, thereby rendering the assessment order invalid? - Held that:- The proper course for the AO before making the additional enquiries would have been to take approval from the administrative Commissioner to widen the scrutiny. This, however, was not done and therefore, the action of the AO is violative of the CBDT Instruction. Apropos the ld. CIT(A)'s order, obviously the ld. CIT(A) has erred in confirming the assessment order. The ld. CIT(A) had erred in holding that the AO has not violated the CBDT Instruction. The ld. CIT(A) has gone wrong in observing that the AO has limited his enquiries to the source of cash deposits. True, the AO is duty bound to see whether the assessee has correctly declared taxable value of the long term capital gains from the sale of her residential house. However, as noted, in a case like the present one, where it has been picked up for scrutiny on the basis of the AIR information, the CBDT Instruction has to be strictly abided by. Herein, since the AIR information was only with regard to cash deposits of ₹ 25 lakhs and the assessee had duly and adequately explained the source thereof, the AO, it cannot be gainsaid, transgressed his competency in issuing the further query and in asking the assessee to produce Smt. Balbir Kaur and Smt. Kamaljit Kaur, the executants of the other agreement to sell which had nothing to do with the cash deposits. Moreover, it cannot, in view of the above discussion, at all be said that the objections raised by the assessee were merely to divert the attention of the AO to come to a logical conclusion. The objections taken by the assessee are well raised and the AO, at the cost of the repetition, could not have gone beyond the specific CBDT Instruction. It is held that since the assessment order, passed ex-parte by the AO, was in violation of specific CBDT Instruction, the same is not legally sustainable. - Decided in favour of assessee
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2016 (4) TMI 908
Deduction u/s 80P(2) - Held that:- Interest income earned by a credit cooperative society on the FDRs with nationalized bank would qualify for grant of exemption under section 80P(2).
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2016 (4) TMI 907
Carry forward of unabsorbed depreciation - denial of claim on the plea that sections 80 of the Act restrict the same - Held that:- If an assessee has unabsorbed depreciation u/s 32(2) of the Act as well as unabsorbed business loss carried forward u/s 72(1), section 72(2) provided the unabsorbed losses shall have precedence, and be set off first, so far as the sufficiency of income to be set off against permits. It is only after the carried forward business loss is set off, and there yet remains positive income, that the unabsorbed depreciation would come in for a set off. This is beneficial to the assessee in as much as the unabsorbed business losses have a time bar of eight years while the unabsorbed depreciation has no time bar, it integrates with, and is treated as depreciation allowable for the subsequent year itself What section 72(2) contemplates is that if there is some unabsorbed losses carried forward to be set off, and there is also some unabsorbed depreciation allowance carried forwarded to be set off, the former shall get priority. This is so because unabsorbed depreciation retains its own character even in succeeding year(s) as distinguished from current depreciation Under section 32(2) a legal fiction has been created that unabsorbed depreciation of the earlier year shall form part of current year’s disallowance and therefore it shall have to dealt with accordingly subject to the provision of section 72(2) and 72(3) of the Act. Thus, the carried forward unabsorbed depreciation of the earlier year has to be taken as a part of the current year’s depreciation allowance and to be set off, to the extent possible, against income of the current year. The unabsorbed depreciation should be allowed before the unabsorbed investment allowance and that would be the order of priority in claiming the unabsorbed depreciation and unabsorbed investment allowance. - Decided in favour of assessee.
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2016 (4) TMI 906
Disallowance on account of net profit - Held that:- AO has not given any justification for applying 12% net profit on the estimated sale in the hands of licensee. In case of AOP, the case has been scrutinized U/s 143(3) of the Act where income disclosed by the AOP has been accepted by the Assessing Officer. The income result has been accepted by the Assessing Officer. Copy of scrutiny assessment has been placed in the paper book. The findings given by the ld CIT(A) are also not on merit in estimating the income @ 2% as in the hands of AOP, same income has been taxed by holding that Assessing Officer of the AOP namely Royal Wines has not considered the issue of license issued displayed at the shop and TCS made by the excise department. When the Assessing Officer in scrutiny has accepted the assessee’s income as such and no disallowance on account of net profit has been made wherein net profit has been accepted by the Assessing Officer @ 12%. - Decided in favour of assessee. Addition on account of unexplained investment - Held that:- The ld CIT(A) has examined this issue thoroughly, which has not been controverted by the ld DR, thus the Assessing Officer have doubted the cash payment made to the sellers of the house property, which is not prohibited under the IT laws. The source in the hands of AOP had been explained by the assessee, therefore, we uphold the order of the ld CIT(A). - Decided in favour of assessee.
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2016 (4) TMI 905
Disallowance u/s 14A - Held that:- We find that the AO had not mentioned as to how much expenditure was incurred by the assessee for earning tax free income. We are of the opinion that, if the assessee had not incurred any expenditure to earn tax free income, then, the AO cannot invoke the provisions of section 14A r.w. Rule 8D of the Rules. First of all, the AO has to record his satisfaction about invoking the provisions and has to decide the issue after obtaining the explanation of the assessee . We also do not endorse the view of the FAA that investment out of the own funds has no relevance for making the disallowance. We find that in the case of Om Prakash Khaitan (2015 (7) TMI 785 - DELHI HIGH COURT ), the Hon’ble Delhi High Court has held that in order to disallow the expenditure there must be a nexus between the expenditure incurred and the income not forming the part of the total income. Considering the above, we reverse the order of the FAA. - Decided in favour of assessee Addition of the expenditure incurred under ESOP(Employee Stock Option Scheme) - Held that:- We find that stock options of the parent company were offered to the employees of the assessee company, that the assessee had made payment of ₹ 1.07 crores to the parent company, that during the year FBT was paid for sum of ₹ 50.65 lakhs. In our opinion, once a stock option is granted to and exercised by the employee of an assessee the liability in that behalf is ascertained and cost is allowable in the year in which stock options are granted. We find that in the case of Novo Nordisk India Pvt. Ltd.(2013 (11) TMI 218 - ITAT BANGALORE), it has been held that in terms of ESOP if an assessee offers shares of its parent company to its employees, the difference between the FMV of the shares of the parent company on date of issue of shares and the price at which those shares were issued by the assessee to its employees had to be regarded as expenditure incurred for business purposes allowable u/s. 37(1) of the Act. Respectfully following the above decision, we decide Ground in favour of the assessee
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2016 (4) TMI 904
Computation of deduction u/s. 80-IA - Allocation of expenditure - Held that:- There cannot be any segregation of those facilities for a particular unit. Namely, the directors who are looking over all management of the company as a whole, they must have devoted energy to plastic division, textile division and CPP units. Therefore, expenses incurred on their remuneration and salaries ought to be debited in the CPP units also. This was the basic principle for identifying the expenditure which are incurred under the common head, but element of the involvement with CCP units cannot be ruled out. In the past, the Tribunal has recorded independent findings on each item. In these assessment years, as discernible from the finding of the ld.CIT(A), the ld.First Appellate Authority has included the items for allocation on the basis of past practice. Similarly, the first Appellate Authority has upheld the exclusion of certain items as discernible in the table extracted (supra) on the basis of past history. Before us, neither party was able to point out any circumstances which can demonstrate the disparity on the facts or about the nature of expenditure which deserves to be either included for allocation or excluded from allocation. Considering the detailed finding of the CIT(A) in Asstt.Year 2010-11, in the light of the Tribunal order in the Asstt.Years 2004-05 to 2008-09, we are of the view that the issue in dispute is squarely covered. The ld.First Appellate Authority has excluded the items, namely, general charges, misc. expenses, interest and financial charges, directors’ fees, rent and taxes, stationery and printing, charity and donations, salary and wages of corporate division, contribution to PF of corporate division, welfare expenses of cooperative division and rent. We do not find any error in the order of the ld.CIT(A) for exclusion of these items from allocation to the CPP units. Similarly, the ld.First Appellate Authority has upheld the inclusion of items for allocation viz. directors’ remuneration, directors’ travelling expenses, audit fees, computer maintenance expenses, security charges etc. and we do not find any error in the order of the ld.CIT(A) on this issue. Disallowance u/s 14A - Held that:- The investment made by the assessee was not out of interest bearing fund. It has its own surplus fund out of which investment has been made. The assessee has demonstrated that it had own funds of ₹ 1981.55 crores in the Asstt.Year 2009-10 and investment in the mutual fund was only ₹ 144.51 crores. The assessee has also submitted that its investment in earning exempt income has been reduced during the year from 78.45 crores to ₹ 18.09 crores. The assessee has submitted these details in its submissions reproduced by the AO. Similarly, in the Asstt.Year 2010-11, it has reserve fund of ₹ 2319.17 crores and made investment of ₹ 111.09 crores. AO has not given any heed to these submissions or figures submitted by the assessee. The assessee has further made disallowance of ₹ 5.12 lacs in the Asstt.Year 2009-10. This was mainly for management of investment. He simply discussed the background for bringing section 14A as well Rule 8D on the statute book. He has specifically not worked out the amounts even on the basis of Rule 8D. He called for a working from the assessee and made a lumpsum addition in both the years. The ld.AO has not recorded any finding that amounts added back by the assessee are not commensurate with the administrative expenses which might be attributable to earning exempt income. Because, on interest expenses account, there cannot be any disallowance as the assessee has far more interest free fund than investment. We are of the view that the ld.CIT(A) has looked into all these aspects in the Asstt.Year 2009-10 before deleting the disallowance. We do not find any error in the order of the ld.CIT(A) on this issue in Asstt.Year 2009-10. Consequently, we allow the ground of appeal raised by the assessee in the Asstt.Year 2010-11 and delete the disallowance made by the AO. Computation of deduction admissible under section 80IC - Held that:- The case of the assessee is that financial charges cannot be allocated in the ratio of sales, because, the sales have no direct influence on the interest expenditure. The financial charges are relevant to the investment made by an assessee. In other words, suppose an assessee has made investment after borrowing funds due to some reason or market conditions he could not effect the sales, then, if we go by the logic of the AO, there would be a lesser allocation. The assessee has allocated the expenditure on account of financial charges, keeping in view the investment in Bhaddi units. In other words, these are direct expenditure relatable to Bhaddi units. Therefore, the ld.CIT(A) has rightly deleted the allocation of interest/financial charges in the Bhaddi made on the basis of sales ratio. We do not find any infirmity in the order of the ld.CIT(A) on this issue. Expenditure for PMS Services - Held that:- No doubt, the expenses were incurred by the assessee towards consultancy charges for making investment. On sale of investment, capital gain would arise to the assessee, but the expenses incurred by the assessee are not directly linked to the purchase of investment. These are paid for consultancy. If the expenses are not to be capitalized in the investment, then how the assessee will get this set off. Therefore, the ld.CIT(A) has rightly observed that the expenses were not incurred towards purchase of investment, rather, these were incurred towards consultancy charges in order to keep track on the investment. Therefore, we do not see any error in the order of the ld.CIT(A). Addition on foreign exchange gains - Held that:- Though section 43A begins with a non obstante clause, it makes section 43(1) its integral part. This is because section 43A requires the cost to be recomputed in terms of section 43A for the purposes of depreciation [Sections 32 and 43(1)]. A perusal of section 43A makes it clear that insofar as the depreciation is concerned, it has to be allowed on the actual cost of the asset, less depreciation that was actually allowed in respect of earlier years. However, where the cost of the asset subsequently increased on account of devaluation, the written down value of the asset has to be taken on the basis of the increased cost minus the depreciation earlier allowed on the basis of the old cost. One more aspect needs to be highlighted. Under section 43A, as it stood at the relevant time, it was inter alia provided that where an assessee had acquired an asset from a country outside India for the purposes of his business, and in consequence of a change in the rate of exchange at any time after such acquisition, there is an increase or reduction in the liability of the assessee as expressed in Indian currency for making payment towards the whole or part of the cost of the asset or for repayment of the whole or part of the moneys borrowed by him for the purpose of acquiring the asset, the amount by which the liability stood increased or reduced during the previous year shall be added to or deducted from the actual cost of the asset as defined in section 43(1). See ACIT Vs. Elecon Engineering [2010 (2) TMI 23 - SUPREME COURT OF INDIA]
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2016 (4) TMI 903
Sale of shares as “business income” as against “short term capital gains” - Held that:- Investment through Portfolio Management Service, which may deal with the shares of the assessee so as to derive maximum profits cannot be termed as business of the assessee but would only be a case of a more careful and prudent mode of investment, which has been done by the assessee. Funds which lie with the assessee can always be invested (for earning higher returns) in the shares either directly or through professionally managed Portfolio Management Scheme and by doing so, it would not mean that the assessee is carrying on the business of investment in shares. Profits from such investment, either directly or through professionally managed firm, would still remain as profits to be taxed as capital gains as the same will not change the nature of investment, which is in shares, and the law permits it to be taxed as capital gains and not as business income. See CIT vs. Kapur Investments (P.) Ltd. [2015 (5) TMI 616 - KARNATAKA HIGH COURT ] - Decided in favour of assessee.
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2016 (4) TMI 902
Penalty levied u/s 271D - volition of sec 269SS - Held that:- It is an admitted fact that Sh. Tejinder Singh had made the deposits, though in cash. there is no violation of the provisions of sec. 269SS of the Act, in as much as the transactions have duly been recorded in the accounts of the company. There is no dispute that since the company was in urgent need of money, considering the urgency, Sh Tejinder Singh, one of the directors of the company introduced the money with the assessee company. As we have already observed herein above that the object of introducing sec. 269SS is to ensure that a tax payer is not allowed to give false explanation for his unaccounted money, or if he makes any false entry, he shall have no escape by giving false explanation to the same. In the instant case, it is clear that the cash transactions of the assessee were with the director of the company, and due to business expediency. Nobody has doubted the genuineness of the transactions. It is an admitted fact that the money was deposited by Shri Tejinder Singh, one of the directors of the company in the bank account of the assessee company. Rule 2(b)(ix) of the Companies (Acceptance of Deposits) Rules, 1975 exempts any amount received from a person who at the time of receipt of the amount was a director of the company, or any amount received from its shareholders by a private company, or by a private company which has become a public company. In the instant case, the amount was deposited by the director / share holder of the assessee company. Therefore, in view of the provisions of Rule 2(b)(ix) of the Companies (Acceptance of Deposits) Rules, 1975, it cannot be said that the assessee company has violated the provisions of section 269SS of the Act. Thus, the assessee has proved throughout beyond any shadow of doubt that transactions are genuine and there is a reasonable cause within the meaning of section 273B of the Act which provides that no penalty shall be imposed on the person or the assessee, as the case may be, for any failure referred to in section 269SS of the Act, if he / assessee proves that there was a reasonable cause for failure to take a 'loan' or 'deposit' otherwise than by account payee cheque or account payee bank draft then the penalty should not be levied. - Decided in favour of assessee
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2016 (4) TMI 901
Revision u/s 263 - CIT was of the view that nature of income arising from the transaction is not from Long term capital gain but Income from House Property and the AO has erroneously allowed the exemption u/s 54EC - Held that:- The property constitute a bundle of rights and transfer by way of allotment of perpetual tenancy with right of occupancy and enjoyment of property perpetually in favour of tenant is also transfer of one of the right out of the bundle of rights which property carries with it and shall be chargeable to tax u/s 55(2)(a) read with Section 45 of the Act as Income from Capital Gains. No doubt the assessee-HUF has right to evict the tenant but that is only in the situation of tenant in default of monthly rent and that too with a notice of six months to tenant whereby the tenant can always rectify the default and continue enjoying the tenancy perpetually more so the tenant is protected tenant under Maharashtra Rent Control Act, 2000. The AO has made an inquiry before granting exemption under section 54 EC of the Act with respect to the grant of the tenancy right which was replied by the assessee-HUF vide letter dated 07-12-2011 filed with AO on 08-12-2011 and has also enclosed copies of agreements and details along with the said letter, In the instant case , proper and adequate enquiry has been duly made by the AO and after due application of mind has arrived at the instant decision of bringing to tax one time lumpsum payment received by the assessee-HUF on allotment of tenancy rights vide tenancy agreement dated 06-05-2008 as capital receipt chargeable to tax as Income from Capital Gains u/s 45 of the Act. Further, in the case of other co-owner Dushyant P Bobado(HUF), the CIT(A) has accepted this lumpsum payment on allotment of tenancy rights by the tax-payer in favour of the tenants received vide tenancy agreement dated 06-05-2008 as capital receipts chargeable to tax as Income from Capital Gains u/s 45 of the Act. Order passed u/s. 263 of the Act by the CIT is not sustainable under law as in our considered view the AO has made proper and adequate inquiries and has applied his mind and has taken decision after due application of mind and the view of the AO is one of the plausible and possible view and infact a correct view which is duly supported by provisions of the Act being Section 55(2)(a) and Section 45 of the Act and several judicial pronouncements and cannot by any stretch of imagination be categorized as erroneous view whereby in view of the AO one time premium for grant of tenancy is capital receipt and hence in our considered view, this order CIT passed u/s 263 of the Act is not sustainable in law and we hereby set aside - Decided in favour of assessee
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2016 (4) TMI 900
Claim for repair and maintenance expenditure - Held that:- The fact of the matter is that if any asset forming part of block of assets gets discarded, depreciation thereon on its unabsorbed cost continues to be available till the same gets totally charged or realized by way of sale/scrap, etc. In other words, the circumstances adversely impacting the realization of the benefit/advantage envisaged from the capital expenditure, even if unrealized – in whole or in part, would not render it as of revenue nature, and the law provides for a complete absorption of such expenditure, i.e., as that which does not suffer from such an impact. The assessee may well be able to secure its renewal. The same, in any case, i.e., irrespective of extension, is not to be confused with the nature of the expenditure incurred – capital or revenue. In other words, the fallacy in the argument lies in determining the nature of the expenditure based on or with reference to the period of the right of occupancy. The two are independent of each other. In the instant case, it has already been indicated that the entire expenditure is in the nature of a set-up cost of the business. Even assuming, for which there is nothing on record to suggest so, that the business was already set up at the previous location, dislocation is disruptive of its business and would accordingly be required to be set up again. To the extent this entails additional expenditure, the same only implies a higher capital expenditure in-as-much as the capital work or assets discarded (at the old location) cannot be put to use again. Such discarded assets shall, however, continue to be subject to depreciation under law, as explained earlier. In view of the foregoing, the assessee’s claims cannot be acceded to, and the treatment accorded by the Revenue is to be upheld. It may also be clarified that though the assessee has impugned the entire expenditure claimed (Rs.11.34 lacs), the net (of depreciation) disallowance is only for ₹ 91,940/- (1,33,914 – 41,974). An acceptance of the assessee’s claim (at any further appellate stage) would entail withdrawal of depreciation and, as explained earlier, an allowance of the entire expenditure incurred for ₹ 8.39 lacs. - Decided against assessee
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2016 (4) TMI 899
Taxability of the amount received from Diageo Holdings Netherlands BV pursuant to the Indemnity Agreement - Held that:- Revenue has not disputed or controverted the fact that admittedly the assessee has offered this amount of ₹ 62.50 crores, alongwith additional amounts of reimbursements received for payment of liabilities on account of interest, fine and penalty to tax in the immediately following financial year ending 31/3/2012 relevant to the assessment year 2012-13 and the same has been accepted by the Department in the order of assessment for assessment year 2012-13 passed under section. 143(3) of the Act vide order dated 23/3/2015. Having brought to tax the aforesaid amount of ₹ 62.50 crores, as declared by the assessee, in the assessment for assessment year 2012- 13, we are of the view that it is not open to Revenue to tax the same amount once again in the assessment year 2011-12. We are of the considered opinion that the said amount of ₹ 62.50 crores is exigible to tax, as declared by the assessee, only in the financial year relevant to assessment year 2012-13 and not in the period relevant to assessment year 2011-12 as held by the authorities below. We, therefore, reverse the impugned order of the CIT(Appeals) - Decided in favour of assessee
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2016 (4) TMI 898
Disallowance invoking Section 40(a)(ia) - CIT(A) allowed the claim - Held that:- The Revenue contentions have no merit in considering the fact that so many vouchers were impounded in the course of survey, but has not considered them. We are also not inclined to accept the Revenue’s contentions that so much of expenditure was not incurred. Without the expenditure being incurred, the project could not be completed. In AY. 2005-06, the AO disallowed the expenditure as not vouched and also invoking Section 40(a)(ia) so much so on the turnover of 11.24 Crores, the income was determined at ₹ 3.76 Crores, which itself is very high in this line of business. In the given circumstances, the only option is to reject the books of accounts and estimate the income. In contract works, since, assessee has done work away from its area of operation, in Allahabad, estimation of income at 9% is reasonable. Further, if the ground 10 of Revenue in AY. 2006-07 is allowed, there will be reduction of turnover and consequent income. We are not able to understand why Revenue has taken that stand which will reduce the income. Be that as it may, we are of the opinion that Ld. CIT(A) has analysed the issues in detail and has come to correct decision in determining the issues and adjudicating rival contentions. We see no reason to differ from the findings, as Revenue has placed only arguments without any evidence in support. We find no merit in Revenue’s grounds and accordingly, they are rejected. - Decided in favour of assessee
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2016 (4) TMI 897
Disallowance in the nature of amortization of premium paid on Held to Maturity(HTN) government securities - Held that:- There can hardly be any dispute that the assessee has to mandatorily comply with market regular RBI’s circulars issued from time to time including those dealing with the instant issue of investments in securities, their classification and other procedural aspects. There is further no dispute about the assessee having held its HTM securities as per the master circular dated 01-07-2009 on investments by Primary (Urban) Co-operative Banks. We are conscious of the fact that noncompliance thereof entails penal consequences which are nowhere forthcoming or discussed by the lower authorities. The assessee files before us its statement of details of govt. security for the purpose of maintaining service lending ratio right from financial year 2005-06 to 2009-10 along with its relevant Board’s resolution classifying the same to be in permanent category. We have already recorded that it has been allowed the impugned relief throughout without any disallowance being made. Copies of the assessment orders for assessment year 2007-08 to 2009-10 form part of the records. We come to the CIT(A)’s findings under challenge alleging the assessese as not to have filed the relevant details. We are of the opinion that once the above extracted portion comprises a tabulation chart of permanent category security right from financial year 2005-06 to 2009-10, no such case of non-furnishing of relevant details can be stated to have arisen in the impugned assessment year. The CIT(A)’s reasoning is therefore not sustainable. We find that the hon’ble jurisdictional high court in CIT vs. Rajkot Dist. Central Cooperative Bank (2014 (3) TMI 110 - GUJARAT HIGH COURT) takes note of circular no. 17 dated 26-11-2008 wherein the said assessee had purchased govt. securities at a price higher than their face value for holding that the relevant premium paid thereupon has to be amortized for remaining period of maturity. - Decided in favour of assessee
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Customs
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2016 (4) TMI 883
Admission of appeal - Amount involved is less than statutory limit of ₹ 2 lacs as per Second proviso to Section 35B(1) - Appellant submitted that it is a prima facie case in favour of the appellant therefore they may be given opportunity to argue their appeal on merit - Held that:- considering the submissions made by Ld. Consultant is satisfactory, the appeal is admitted. - Appeal admitted
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2016 (4) TMI 882
Misdeclaration - Undervaluation - Import of Hitachi Z-ONE-D Camera System and accessories - Held that:- the value of the goods shall be deemed to be the price at which such or like goods are ordinarily sold, or offered for sale, for delivery at the time and place of importation, in the course of international trade where the seller and the buyer have no interest in the business of each other and the price is the sole consideration for the sale or offer for sale. In the present case the company itself had produced a copy of the quotations received by them from M/s. Shun Hing Technology Ltd., Hongkong in respect of the copiers and other items imported alongwith their application for approval of their phased manufacturing programme. The company itself having produced these quotations, they cannot dispute the correctness of the prices mentioned therein. The company has not only not disputed the correctness of these quotations but has not produced any other material on record to show that the value mentioned in the invoices was the correct market value of the goods imported at the relevant time. The adjudicating authority in these circumstances was perfectly justified in taking the prices mentioned in the quotations as a basis for determining the correct value of the imported goods. Period of limitation - Appellant contended that declaration regarding the intended re-export was made in the first bill of Entry and the Invoice itself at the time of assessment - Held that:- it is a fact that the Bill of Entry contained the endorsement that it was intended for the purpose of display in exhibition and return thereafter. However it was found to be a misdeclaration as the documents recovered did not show any such intent. Furthermore the fact that it was at a special and highly discounted price was not declared. It is not apparent from the declaration that the import is at a discount of over 80% to the list price. The misdeclaration is alleged, not merely on the basis of the misdeclaration that the goods were for exhibition and return thereafter, but on the basis of the fact that a specially discounted price was declared for the said purpose but not disclosed. It is apparent from the documents recovered that the price negotiated and the discounts offered during the tripartite meeting were different from those declared at the time of import. They had not shown the correct price negotiated in the tripartite agreement with the manufacturer and its export agent. - Decided against the appellant
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2016 (4) TMI 881
Refund claim - excess custom duty paid - unjust enrichment - non-production of certificate of non-availment of Cenvat credit - Held that:- the appellant is not registered with Central Excise department for issuance of Cenvatable invoice therefore question of either availment of Cenvat credit or passing of Cenvat credit does not arise. Appellant have submitted sales invoice wherein it was clear that Cenvat credit was not passed on. In this factual position insistence of the Adjudicating authority for producing Cenvat non-availment certificate, in my view not at all required. As regard other test whether the incidence of refund amount was passed on or otherwise, I find that appellant have submitted C.A. certificate as well as they shown amount of refund as “Custom Duty Receivable:” in their balance sheet. From this evidence, it is clear that appellant has been able to prove that the incidence of excess paid duty for which refund is sought for, has not been passed on to any other person. - Matter remanded back
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2016 (4) TMI 880
Period of limitation - Imposition of redemption fine and penalty - Section 114AA of the Customs Act, 1962 - Misdeclaration of goods - Imported Tungsten Carbide Rods and Bits in the name of alloys steel melting scrap of mixed grade, seized and released provisionally - Held that:- it is the case of mis-declaration and therefore the show cause notice can be issued within a period of five years from the date of findng mis-declaration by the investigating authority. Therefore, no reason to interfere with the impugned order which is found to be correct in the eye of law. - Decided against the appellant
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Corporate Laws
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2016 (4) TMI 876
Mismanagement and oppression - Arbitration and Conciliation seeked - Held that:- On a close examination of the provisions of section 397, 398 and 402 of the Act it must be said that Company Law Board has wide power to adopt correctional mechanism when the affairs of the company are being conducted in a manner prejudicial to the interest of general public or to a manner oppressive to any Member and /or shareholders. The Company Law Board is also clothed with wide powers of regulating the affairs of the company in a manner so as to sub-serve the public interest and put an end to oppression of an individual member. It has already been observed that the scheme of sections 397, 398 & 402 constitutes a complete code in itself and no Arbitrator can possibly give relief to an aggrieved party like the petitioner in terms of section 402 and 403 of the Companies Act, The arguments that there are averments which clearly indicate breach of terms of SSSA and claim for damage should have been made before the arbitrator have not impressed me because there are a number of allegations concerning mismanagement and oppression of the petitioner as already set out in this judgment. A perusal of the various sub paras of para xxiii would reveal prima facie wholesome violation of various Articles of the Articles of Association’. In such a situation Hon’ble Bombay High Court in the case of Rakesh Malhotra (2014 (8) TMI 1050 - BOMBAY HIGH COURT) following the view taken by Hon’ble Supreme Court in Sukanya Holdings (P) Ltd.’s (2003 (4) TMI 435 - SUPREME COURT OF INDIA ) has held that bifurcation of a cause of action is impermissible. Therefore in cases filed u/s 397 and 398 of the Companies Act seeking some of the reliefs which invite a judgment in rem and some other which invite judgment in personam would not permit severe one cause of action from the other and disassemble such a petition. Therefore aforesaid arguments fails and is rejected. As a sequel to above discussion application filed u/s 8 of the Arbitration and Conciliation Act 1996 is dismissed. The respondent may file reply to the main petition within a period of four weeks and rejoinder if any be filed within two weeks thereafter.
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Service Tax
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2016 (4) TMI 895
Whether the removal of “admission and access to entertainment event and amusement facilities” from the Negative List of “Services” by an Amendment of 2012 and the consequent imposition of service tax on such activity would result in the Union Parliament trenching upon the exclusive field assigned to the State, under Entry 62 List II of the Seventh Schedule of the Constitution of India. Petitioner submitted that Entry 62 List II having covered 'amusements'' the amusement parks set up by the petitioners cannot at all be taxed by the Parliament, especially under the residuary clause. Held that:- no such contention can be taken, since the Supreme Court has time and again, after the Finance Act, 1994 came into force, upheld the tax levied on “services” as being available to the Union Parliament under the residuary clause. In such circumstances, it cannot at all be said that the field is entirely covered by Entry 62 List II. Amusements are covered by Entry 62 List II and the aspect of “service” involved, when the facilities for amusement is offered for a price cannot be ignored. The Union Parliament's power to levy such tax by an appropriate enactment cannot also be effaced merely for the reason that amusements are covered under Entry 62. This Court, with due respect, is unable to agree with the extracted statement, since the Union Parliament quite aware of their power and the fields available under List I and List II would not have included “amusement” in the Negative List only for the reason that that is a field in which the State has the power to levy tax. This is because even dehors inclusion in the Negative List the Parliament would not be able to trench upon the field specifically set apart for the States under List II. Amusement facility, as defined under Section 65B(9), are facilities wherein exclusively rides, gaming devices, water and theme parks and so on and so forth are made available for fun or recreation. The Negative List also did not refer to “amusement”, but tax on admission on entry of such events quite understanding the power to levy service tax on such facilities offered by one to another for a consideration. The tax now levied on the admissions cannot also detract from the essential nature and character of the tax being one on the services; since it is only a measure and as has been held earlier, it would not determine the object of taxation. The petitioners, maintaining an amusement park, are obliged to pay entertainment tax to the State, whether or not there are entrants to the park. The Union Parliament has provided for a tax on admission to the parks, making it clear that the levy is only when the service is availed of. The “service” provided is the object of taxation and it is imposed on the admission fee which is a permissible measure of tax and the incidence is at the time when a person pays the admission fee to enter the park. It is seen that there is no conflict between the two entries, which are fields of legislation. The two aspects taxed by the respective legislatures are the 'service' and the 'amusement'. The tax,imposed by the Union Parliament, in pith and substance, is also one on the service offered by the petitioners. This Court does not find any trenching of the Union Parliament on the power conferred on the State, in fact or in law, since the respective legislatures tax two different aspects. The incidental overlapping, if at all, is only to be ignored; going by the various precedents of the Hon'ble Supreme Court. - Decided against the petitioner
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2016 (4) TMI 894
Quantum of Service tax liability - Eligibility for cum-tax benefit - Appellant claiming benefit treating the amount realized by them as inclusive of tax - Held that:- the appellant is eligible for cum-tax benefit and therefore service tax liability and interest thereof needs to be recalculated by the lower authority in view of the various decisions of Tribunal. Therefore, for limited purpose of re-quantification of the service tax liability, the matter is remanded to the adjudicating authority. Imposition of penalty - taxability of the sim cards and value to be considered for such tax - Held that:- the appellant could have entertained a bonafide belief as to the sale of sim cards is not a taxable activity. Therefore, in view of the decision of this bench in the case of Bharti Airtel Ltd., the penalties are set aside by invoking the provisions of Section 80 of the Finance Act, 1994. - Appeal disposed of
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2016 (4) TMI 893
Entitlement for abatement - claimed at 67% - Works contract - "transport of goods by Road", "erection, commissioning and installation", and "works contract" service - Held that:- the liability in works contract is clarified by Honourable Supreme Court in the case of Larsen and Toubro. It has been held by the Apex Court that even prior to 1/6/2007, where the material component is involved in execution of erection, commissioning & installation services, the same shall be classified under the works contract and no tax can be levied on works contract prior to 1/6/07 in absence of there being a specific provision in the finance Act tax to tax service element in the composite contract. Therefore, appellant is entitled for abatement. Deposit of tax - Clerical mistake in the challan - nothing on record which shows that the appellant have made reasonable efforts with the relevant bank where the challan was deposited to get the error corrected - Held that:- as there being mistake in the assessee code/registration number of assessee, the matter is remanded back in the interest of Justice to the adjudicating authority, who shall issue the necessary directions to the concerned bank to allow rectification in the challan and credit the same to the Govt. account. Penalties imposed under Section 77 & 76, are set aside. Interest under Section 75 shall be recalculated as the payment shall relate back to the date of representation of the Cheque. - Decided partly in favour of appellant
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2016 (4) TMI 892
Liability of Service tax - Whether proceed of auction of warehoused imported goods, in case of importer abandoned the goods, shall be considered as service charges towards storage or warehouse - Held that:- in the whole transaction, no service recipient is existing, therefore there is no question of providing any service to any person. Merely for the reason that Section 150 provides for distribution of the amount of proceed of auction that will not empowered the department to recover service tax on the auction proceeds. The Ld. Commissioner with proper application of mind given detailed finding not only on the facts but also on the law point of Section 48, 150 of Customs Act, 1962 and also discussed in detail the service tax provision and referred Master Circular dated 23/8/2007 and Board Circular dated 1/8/2002. Therefore, there is absolutely no infirmity in the order of the Ld. Commissioner (Appeals) and the same is sustainable. - Decided against the revenue
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2016 (4) TMI 891
Denial of Cenvat credit - Initially the assessee was not paying the Service Tax under reverse charge mechanism and on being pointed out by the Audit team have paid the Service Tax and taken credit in their PLA account - Held that:- as per Rule 3 of the Cenvat Credit Rules, 2004, the assessee is entitled to take the credit of Service Tax paid. Therefore, the observation of the audit team in subsequent audit is not correct. If that has been taken care of at that time, this allegation was not required. Further, the observations made by the learned Commissioner (Appeals) in the impugned order directing the assessee to reverse the said credit and file refund claim is also not warranted. - Appeal disposed of
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Central Excise
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2016 (4) TMI 890
Classification - Whether “Shahin Masheri” also referred as “Shahin Bhajki Masheri” is to be classified as tooth powder under Chapter Heading 3306.10 as claimed by the assessee or as tobacco product under Chapter Heading 2204.99 as claimed by the Revenue - Held that:- the issue is no more res integra inasmuch as in respect of the same product manufactured by the assessee herein, this very issue arose under the Customs Act wherein this Court held that the product is to be classified as tooth powder falling under Chapter Heading 3306.10. - Decided against the revenue
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2016 (4) TMI 889
Includability - Whether the value addition made to the Jeep, by way of bullet proofing, has to be added while arriving at transaction value for the purpose of excise duty - Held that:- as far as clearance of these Jeeps from the factory of the respondent/assessee is concerned, they were cleared without any bullet proofing. It is only after clearance that the Jeeps were sent to get the processing of bulletproofing carried out by job workers outside the factory premises. The Tribunal has, thus, rightly held that in such circumstances, the cost of bullet proofing could not be added to arrive at the transaction value. The order of the Tribunal does not warrant any interference. - Apex Court dismissed the appeal of revenue
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2016 (4) TMI 888
Justification of respondent Central Excise authorities in calling upon the GIDC not to register any transfer of the subject plot without production of an NOC from the Central Excise authorities - Held that:- On a perusal of the notice dated 11.12.2013 it appears that a huge demand of ₹ 1,87,05,178/- has arisen on 25.2.2008, which is subsequent to the date of transfer of the subject plot in favour of the petitioner. It cannot be gainsaid that when the subject plot stood transferred in favour of the petitioner in August 2007, subsequent dues of M/s. Mahalaxmi Processors cannot be sought to be recovered from the petitioner, more particularly, when none of the requirements of section 11 of the Central Excise Act are satisfied in the present case. Also as rightly submitted by the learned counsel for the petitioner, section 11E of the Act was brought on the statute book long after the subject plot stood vested in the petitioner and hence, would have no applicability to the facts of the present case. Considering the case from any angle, the respondent Central Excise authorities, do not have any authority in law to direct the fourth respondent GIDC not to register the transfer of change of ownership without obtaining an NOC from the Central Excise authorities. Consequently, the impugned letter dated 20.5.2014 issued by the Superintendent of Central Excise, Range III, Division V, Surat -I to Regional Manager, GIDC requesting him not to change the ownership of the said premises, that is, Plot No.821 Road No.8, GIDC Sachin, Surat, in any other name unless "No Objection Certificate" is issued by that office so as to enable that office to recover huge Government dues outstanding against M/s. Mahalaxmi Processors, cannot be sustained. Insofar as the challenge to the notice dated 11.12.2013 is concerned, the same is addressed to M/s. Mahalaxmi Processors and does not in any manner prejudice the case of the petitioner. Under the circumstances, as rightly submitted by the learned counsel for the respondents, the petitioner has no locus standi to challenge the same. In the light of the above discussion, the petition succeeds and is, accordingly, allowed in the following terms as the impugned communication dated 20.5.2014 addressed by the Superintendent of Central Excise, Range III, Division V, Surat -I to Regional Manager, Gujarat Industrial Development Corporation is hereby quashed and set aside. Consequently, the GIDC would no longer be justified in imposing condition No.21 in the communication dated 1.9.2015 and shall, therefore, effect the change in the constitution of the Board of the petitioner company without insisting upon compliance of the condition of obtaining NOC from the Central Excise Department. Rule is made absolute accordingly to the above extent with no order as to costs.
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2016 (4) TMI 887
Seeking direction to cross-examine the Chemical examiner - Violation of principles of natural justice - Held that:- as per submission of respondent that Chemical Examiner's report can be eschewed or ignored by the appellate authority, while deciding the appeal, to be filed by the petitioner, I am of the view that the petitioner is at liberty to file an appeal against the impugned order and also direct the appellate authority to decide the appeal, on merits and in accordance with law, without relying upon the Chemical Examiner's report. - Petition disposed of
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2016 (4) TMI 886
Allowability of Cenvat credit for the period January, 2011 to March, 2011 - Outdoor catering services - appears to be ineligible input services - not used in or in relation to the manufacture of final products and also not covered under the inclusive clause of the definition under Rule 2(l) of CCR, 2004 - Held that:- by following the judgment of the jurisdictional High Court in the case of Dalmia Cements Ltd. Vs. Dy. Commissioner of Central Excise, Trichy [2015 (10) TMI 1301 - MADRAS HIGH COURT], the Outdoor catering services are allowed for the benefit of input service credit. - Decided in favour of appellant
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2016 (4) TMI 885
Claim of interest at the rate of 12% - Delayed sanctioned of refund of pre-deposit - Appellant contended that Hon'ble Supreme Court has allowed the 12% interest as per the judgment of ITC - Held that:- only provision granting interest on delayed refund is provided under Section 11BB of Central excise Act, 1944 therefore interest shall be payable as per the rate prescribed under Section 11BB. Tribunal is creature under the Central Excise Act therefore has limited power to decide the case only as per the statute of Central Excise Act. As regard the 12% interest granted by the Hon'ble Supreme Court, in my view it is under inherent power of the Hon'ble Supreme Court which can not be made precedence and can not be applied in each and every case. Regarding the Circular dated 18/12/2004 the Board has directed to field formation to grant refund of pre-deposit within the three months from the date of order. However, the Board has not prescribed any rate of interest which obviously board can not prescribe the rate which is otherwise provided under Section 11BB and notification issued thereunder. Therefore the order passed by the Ld. Commissioner (Appeals) is proper and legal which does not require any interference hence the same is upheld. However since the Ld Commissioner (Appeals) has already allowed the interest at the rate of 8%/6% depending upon the period, the Adjudicating Authority shall grant interest as ordered by the Commissioner(Appeals). - Decided against the appellant
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2016 (4) TMI 884
Denial of Cenvat credit - Availed in respect of differential duty paid on the amortization cost of the cylinders used for supply of wrappers - Supplementary invoice issued in respect of supply of wrapper - Held that:- supplementary invoice is only for the value and duty difference in respect of the wrappers which were already supplied to the appellant. Therefore it is not correct to say that no goods were supplied under the supplementary invoice. The differential value is in respect of wrappers and not related to any other transaction. Therefore, the supplementary invoice issued and duty paid therein is indeed in respect of goods i.e. wrappers supplied to the appellant. Hence, the appellant is legally entitled for the Cenvat credit on the supplementary invoice. - Decided in favour of appellant
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CST, VAT & Sales Tax
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2016 (4) TMI 879
Seeking release of vehicle - Detained on the allegation of evasion of VAT under section 68 of the VAT Act - Registration of the dealer whose name was found in the documents had been cancelled - Held that:- as the petitioner showed willingness to deposit the entire possible tax amount with maximum possible penalty at the rate of 150% of the basic tax, by imposing condition of petitioner depositing the entire possible tax with maximum possible penalty, the truck and the goods may be released. Under section 68(5) of the Value Added Tax Act, the Deputy Commissioner has the power to release such goods pending assessment on such conditions of depositing tax and penalty or furnishing security as may be found fit. Therefore, subject to final assessment and adjustment of deposited amount towards the duty and penalty liability, the truck and the goods be released. - Petition disposed of
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2016 (4) TMI 878
Whether the newly established petitioner industrial units having once enjoyed the tax exemption and also remission for seven years under the Meghalaya Industrial Policy of 1997 and the Meghalaya Industries (Tax Exemption) Scheme 2001 can claim benefits of tax remission for extended period under the new Scheme namely, the Meghalaya Industries (Tax Remission) Scheme 2006. Held that:- none of the provisions of the Meghalaya Industrial Policy, 1997; the Meghalaya Industries (Tax Exemption) Scheme 2001 or the Meghalaya Industries (Tax Remission) Scheme 2006 provides that a new industrial unit set up under the Meghalaya Industrial Policy 1997 having already enjoyed tax exemption and remission under the Meghalaya Industries (Tax Remission) Scheme 2006 for a period of seven years under the initial Eligibility Certificate, upon undertaking expansion or modernization, can legitimately claim fresh benefits of tax remission under the Meghalaya Industries (Tax Remission) Scheme 2006 on the strength of a fresh Eligibility Certificate beyond the validity period of the First Eligibility Certificate granted upon establishment as new industrial unit. The petitioner units are only entitled to get the benefits by way of alternative benefits in lieu of benefits being enjoyed under the existing Scheme in terms of part one of the definition of eligibility under the Meghalaya Industries (Tax Remission) Scheme 2006 and that too, for the remainder period of First Eligibility Certificate of seven years which they have already enjoyed. Besides, the Directorate of Industries and the Meghalaya Industrial Development Corporation have not been empowered under the Meghalaya Value Added Tax Act to levy and assess the tax liability of any dealer. - Decided against the petitioner
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2016 (4) TMI 877
Demand of tax - Entitlement for benefit of SRO 641/81 - Whether the Tribunal had erred in fact and in law in holding that 'rubber compound' processed by the assessee is not the same as 'compound of rubber' - Held that:- while the State has failed to show that the article manufactured by the assessee is 'compound of rubber' and not a 'rubber compound', the assessee has succeeded in establishing that what it manufactures through its unit in relation to which the impugned assessments were made is a finished product, by whatever name it is called, and such finished rubber product is one that does not fall within the exclusion made by SRO 1516/90 and hence, the assessee is entitled to reduced rate of tax on the purchase of rubber for the manufacture of that product which is manufactured in its unit within the State of Kerala. Having held as aforesaid, on an interpretation of the notifications and by answering the questions formulated and remitted for consideration through the remand order of the Honourable Supreme Court of India, an independent consideration of the grounds raised in the captioned original petitions are not called for. They also stand concluded by the findings herein. Therefore, the petitioner/assessee is entitled to the benefit of SRO 641/81 notwithstanding SRO 1516/90 and is therefore bound to pay tax only at reduced rate on the purchase of rubber for the manufacture of its product through its unit to which the assessments leading to the captioned sales tax revisions relate; be the product called `compound of rubber' or `rubber compound'. - Decided partly in favour of petitioner
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Wealth tax
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2016 (4) TMI 896
Computation of net wealth of the assessee-company - whether the lands, which are undisputedly urban land within the meaning of provisions of 2(e)(a) of the Act, which are subject matter of JDA can be included in the net wealth of the assessee-company ? - Held that:- It is settled principle of law that the finding in income-tax proceedings is not relevant for the purpose of wealth-tax proceedings but the crucial facts to be noticed in this case is that the assessee company was not able to demonstrate before us that the lands were held as stock-in-trade by the assessee-company with any material. Therefore, unless contrary is proved, it is presumed that treatment given in the books of account is correct and therefore, we are unable to agree with the assessee-company that the lands are held as stock-in-trade. In the case of Vysya Bank Ltd. vs. DCWT (2007 (2) TMI 161 - KARNATAKA HIGH COURT), held that an asset, which was not registered and title of the property had not been passed on to the company, cannot be included in the taxable wealth of a company. In light of the abovementioned legal position, we hold that the assessee-company continues to be owner of the lands and is liable to wealth-tax. With regard to the claim of the assessee-company that refundable deposits received from M/s.Classic Enterprises in terms of the development agreement should be allowed as a deduction from the value of the assets computed, it is undisputed fact that refundable deposit was received subsequent to acquisition of the asset. The refundable deposit has no nexus with the acquisition of assets in question. Therefore, the claim of the assessee-company cannot be allowed.
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Indian Laws
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2016 (4) TMI 875
Suppression of material facts - Held that:- In the case on hand, the petitioner has not only suppressed material facts, but he has also made an attempt to mislead the Court, as if the appeal is pending. Even the restoration petition stated to be in SR stage. We are not inclined extend the equitable remedy under Article 226 of the Constitution of India and issue a Mandamus, as prayed for. Accordingly, the Writ Petition is dismissed. However, it is open to the petitioner to approach the Tribunal and seek for appropriate remedy under law.
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