TMI Tax Updates - e-Newsletter
May 12, 2015

Case Laws in this Newsletter:

Income Tax Customs Corporate Laws Service Tax Central Excise CST, VAT & Sales Tax Wealth tax Indian Laws

TMI SMS

• Deduction u/s 10B - 100% EOU - Incidental income derived from the sale of scrap in DTA has nexus with export, eligible for exemption - HC

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Highlights / Catch Notes

• Income Tax:

  Maintainability of appeal - in order to bring harmony with the National Litigation Policy, we are of the opinion that the Instruction No.3 of 2011 would also apply to pending appeals in various Courts or Tribunals unless it is pointed out by the department that the appeal would have a cascading effect in other assessment years of the assessee or that it is within the exception provided in the instructions - HC
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• Income Tax:

  Deduction u/s 10B - 100% EOU - Incidental income derived from the sale of scrap - The section does not require that the profits and gains derived should be from the articles or things which are exported only - benefit of exemption allowed - HC
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• Income Tax:

  Depreciation on toll road - The assessee is entitled to the claim of depreciation on the road to collect toll being an intangible asset falling within the purview of section 32(1) (ii) of the Act. - AT
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• Income Tax:

  Once the objective of the expenditure being improvement in business prospects is accepted, then it has to follow that such an enduring benefit is in the revenue field. If the benefit, though long term is in the revenue field, then the corresponding expenditure which has resulted in such benefit is liable to be considered revenue in nature - AT
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• Income Tax:

  Depreciation u/s 32 - ownership - The individual Directors have acquired the property in their names and the transfer of the property into the account books of the assessee company is merely by way of a book entry supported by the resolution of the Board of Directors - no depreciation - AT
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• Customs:

  Doctrine of merger - Earlier Supreme Court dismissed appeal as non maintainable - Once leave to appeal has been granted and appellate jurisdiction of Supreme Court has been invoked the order passed in appeal would attract the doctrine of merger; the order may be of reversal, modification or merely affirmation - AT
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• Customs:

  Penalty u/s 114(iii) - loading of goods on the vessel before the "Let Export Order" - The shipping agent has been duly penalized and there is no warrant for imposition of penalty on the exporter who is in no way responsible for the contravention by the Shipping agent. - AT
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• Wealth-tax:

  Wealth Tax Act, 1957 - Hospital property - it was intended to exclude only such of those buildings which are specifically mentioned as excluded in clause (vi) which are used for industrial purposes and not for all business purposes - SC
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• Service Tax:

  Refund claim - Unjust enrichment - period of limitation - the letter written to Asstt. Commissioner clearly shows that service tax paid by the appellant is under protest. For deposits made under protest, the provision of section 11B of the Central Excise 1994 are not applicable - AT
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• Central Excise:

  Undervaluation of goods - Mutuality of interest - interconnected undertaking - Burden of proof - Mere allegation that there was mutuality of interest remained unproved when burden of proof was on Revenue in this regard - AT
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Articles

• New Rate of Service Tax @14% not effected from 01.03.2015-Clarification

News

• Officers of CBDT Dealing with International Taxes have been Advised Not to Take any Coercive Action Against FIIs for Recovery of Demand Already Raised by Invoking Provisions of MAT

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• Ravi Shankar Prasad inaugurates E-Commerce Centre at Safdarjang

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• Karnataka HC acquits Jayalalithaa in corruption case

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Case Laws:

• Income Tax

• 2015 (5) TMI 320
  Maintainability of appeal - National Litigation Policy introduced by the Central Government - whether under the Instructions No.3 of 2011, the monetary limit for filing an appeal by the Department was ₹ 10 lacs, whereas the tax effect in the instant appeal is less than ₹ 10 lacs and, therefore, the appeal should be dismissed as not maintainable? - Held that:- Considering the object and intention and the surrounding circumstances of the National Litigation Policy, it is necessary for the Court to iron out the creases bearing in mind the principles of interpretation as discussed above and the legal proposition that flows from such interpretation. We find that there is a defect in the instructions issued by the CBDT. The only measure taken in reducing the litigation was to raise the monetary limit. No effort was made to review the pending cases. Accordingly, we are of the opinion that the literal rule of interpretation cannot be applied in the instant case. Since the instructions is a beneficial piece of legislation, the pendulum is tilted more in favour of the assessee and impels the Court to interpret the provisions harmoniously by adopting the purposive method of construction. We must not shut our eyes to the object for which the instructions were issued and if the instructions had been made applicable to pending cases as laid down by the National Litigation Policy, the object of the policy would have been fulfilled. We are not here to legislate but to expound and in such a situation, we at best could be called reformers or polishers of legislation as to fill up the gaps left in the legislation. Para 11 of Instruction No.3 of 2011 makes it apparently clear that it applies to appeals that would be filed on or after 9th February, 2011. However, Section 268(4) of the Act allows the Court to consider the circumstances under which such appeal was filed while hearing the appeal. By reading para 11 harmoniously with sub-clause (4) of Section 268 one can remove the mischief or the defect in Instruction No.3 of 2011. By our orders, we had directed the CBDT and the income tax department to take a concious decision and review pending cases, which they failed to do so. On the other hand, the department insisted in hearing the appeal on merits. We find that the exception carved out under of the instructions are not existing and that the appeal was only filed because the tax effect was above the monetary limit. We also find that there is nothing to indicate that the issue involved in the instant appeal has a cascading effect which would affect the same issue in subsequent assessment years. In the light of the aforesaid, we find that since the CBDT while issuing Instruction No.3 of 2011 had not kept in mind the object and intention sought to be achieved by the National Litigation Policy and, in order to bring harmony with the National Litigation Policy, we are of the opinion that the Instruction No.3 of 2011 would also apply to pending appeals in various Courts or Tribunals unless it is pointed out by the department that the appeal would have a cascading effect in other assessment years of the assessee or that it is within the exception provided in the instructions that was issued at the time when the appeal was presented. In view of the aforesaid, the appeal is dismissed on the ground of monetary limit without expressing any opinion on the merits of the claim making it clear that it would be open to the department to proceed against the assessee in any other assessment year on the same issue if it is above the monetary limit prescribed.

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• 2015 (5) TMI 319
  Addition u/s 68 - ITAT deleted addition - Held that:- In this case the assessee was given fullest opportunity to prove his case. The view that the source of income of the creditors and their creditworthiness was required to be gone into militates against the view taken by the Tribunal. The learned Tribunal, it is obvious, did not examine the correctness of the views expressed by the assessing officer and the CIT (Appeals). No reasons have been disclosed as to why the views expressed by the CIT (Appeals) and the assessing officer are wrong.The learned Tribunal proceeded to set aside the order without any examination whatsoever of the views expressed as would appear from the paragraph quoted above. It is now well settled that creditworthiness of the alleged creditors and the source of the source are relevant enquiries. Thus the view taken by the learned Tribunal is not sustainable. - Decided in favour of revenue.

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• 2015 (5) TMI 318
  Disallowance of writing off of the irrecoverable advances and other debit balances claimed u/s 36(1)(vii) - ITAT allowed claim - Held that:- Tribunal has deleted the addition made by the AO and not allowing the deduction in relation to the aforesaid amount as bad debts and/or it become irrecoverable. It is not in dispute that as such the assessee written off the said debt in the balance sheet. In the case of T.R.F. Ltd. (2010 (2) TMI 211 - SUPREME COURT ), the Hon'ble Supreme Court has observed and held that for claiming deduction in relation to bad debts, the assessee is only required to establish that the debt has been written off and it is necessary to establish that the debt has infact become irrecoverable. In view of the aforesaid decision of the Hon'ble Supreme Court, it cannot be said that the learned Tribunal has committed any error in deleting the addition made by the AO of which the deduction was claimed as written off and as irrecoverable in the accounts of the assessee. - Decided in favour of assessee.

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• 2015 (5) TMI 317
  Penalty u/s 271(1)(c) - search under section 132 wherein the assessee made voluntary disclosure under section 132(4) disclosing a sum of ₹ 6 crores even though no incriminating document suggesting any such undisclosed income was found - ITAT deleted penalty levy - Held that:- The Tribunal, as such, fell into an error in proceeding on the basis that the assessee is entitled to get the benefit/immunity under clause (b) quoted above. In the case before us there was, in fact, a search and seizure on February 3, 2009. During the search and seizure, the disclosure was made on February 3, 2009. During the search and seizure, the assessee made a statement which was recorded by the officers of the Revenue. Stress was laid by the Tribunal on the expression "voluntary" but the Tribunal failed to understand that the meaning of the expression "voluntary" in the context is that the statement made by him was not extorted from him by applying force. It is in that sense a voluntary disclosure which has been clarified by the assessee by stating in answer to question No. 23 that he had not given any statement under pressure and he did not want to rectify or modify the statement made by him. Thus the order of the Tribunal is unsustainable in law and, therefore, is set aside - Decided in favour of revenue.

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• 2015 (5) TMI 316
  Expenditure incurred for the development of the land - capital expenditure or revenue expenditure - Held that:- Main objects of the assessee-appellant company as emerging from the memorandum of association reveals that the appellant company has been set up by the Punjab Government to undertake work of land development, seed multiplication, processing and its distribution and sale. Further, the appellant is empowered to under take, assist and promote operations pertaining to agriculture, horti culture, fisheries, poultry, piggery, sheep and dairy and other related activities. The appellant company is also empowered to process, sale, purchase, import export, etc., and otherwise deal in all kinds of produce of agriculture, horticulture, etc. In sum and substance, the main objectives of the appellant company are to undertake, assist and also carry out operations pertaining to agriculture. Notably, the objectives of the appellant also relate to seed multiplication and diversification of crop pattern in the State to go towards high value and less water intensive crops. Evidently, the Punjab Government has provided the land in question to the appellant on lease to carry out seed multi plication programme. In fact, the annual report and accounts of the appellant company pertaining to the previous year relevant to the assessment year under consideration contain a proclamation of the progress in the diversification through contract farming carried out. It illustrates the new crops promoted and also the increase in the acre age of the crop so grown. By referring to the aforesaid, we are only trying to point out that the objective of the assessee in putting to use the land in question was for the furtherance of its objects of business. Thus the expenditure was revenue in nature. See Empire Jute Co. [1980 (5) TMI 1 - SUPREME Court ] and Alembic Chemical Works Co. Ltd.'s [1989 (3) TMI 5 - SUPREME Court ] cases - Decided in favour of assessee.

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• 2015 (5) TMI 315
  Net profit computation - Tribunal held that the rate of 5 per cent. is reasonable and since in the present year though the net profit rate of 5.38 per cent. had been shown but still sustained an ad hoc addition of ₹ 5 lakhs as against ₹ 10 lakhs made by the CIT (Appeals) & deletion of an addition of about ₹ 1.12 crores - Held that:- No substantial question of law can be said to arise out of the impugned order as it is essentially a finding of fact by the two appellate authorities. It is admitted fact that the provisions of section 145(3) of the Act have rightly been invoked by the Assessing Officer so also upheld by the appellate authorities but in a case where the provisions of section 145(3) are invoked, one has to consider either the past history of the assessee or history of similarly situated other businessmen/traders. However, on a perusal of the assessment order, we notice that the Assessing Officer is absolutely silent as to justifying the net profit rate to the extent of 13.7 per cent, whether the addition/disallowance made by the Assessing Officer can be said to be appropriate. The assessment order is totally silent about similarly situated other traders/businessmen showing the net profit over and above what the assessee had shown and compared by the Assessing Officer and no evidence has been brought on record as to how the Assessing Officer was justified in applying the net profit rate at 13.7 per cent. In our view, while comparing with the past history, if the results are fair and reasonable then invariably no addition need to be made. It would be appropriate to reproduce the trading results of the assessee for the year under appeal including the last five years On a perusal of the above, it is apparent that out of the past five assessment years in three of the assessment years, i.e., 2004-05, 2005-06, 2006- 07, the matter travelled up to the stage of the Tribunal where the Tribunal applied the rate of 5 per cent. Compared with the said fact, in the present assessment year though the contract receipts have sharply increased from ₹ 10.60 crores to ₹ 12.32 crores in the immediate past assessment year at the same time the net profit has increased from 5.02 per cent. to 5.38 per cent. or now as per the order of the Tribunal it can be said to be raised at 5.78 per cent. with the addition of ₹ 5 lakhs sustained. In the face of the said facts, if it is for the Assessing Officer to bring on record some concrete material/evidence to make a proper addition. We have already noticed hereinabove that the Assessing Officer has merely disallowed 20 per cent. or 10 per cent., as the case may be, out of the various expenses, which, in our view, is not proper and he had to bring on record justifiable basis for making of an addition and bring on record some evidence for making of addition. Assessing Officer has failed to bring on record any comparable case so as to justify any estimation/addition, the addition has been deleted by the Commissioner of Income-tax (Appeals) as well as upheld by the Income-tax Appellate Tribunal. - Decided against revenue.

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• 2015 (5) TMI 314
  Suppressed production - consumption of electricity for purposes other than production - ITAT confirmed CIT(A) order directing AO to apply the gross profit at 23 per cent. on the total turnover of ₹ 93,26,096 for the purpose of determining income from manufacturing against the gross profit shown by the assessee at 8.78 per cent. and confirmed the addition of ₹ 13,25,728.- Held that:- The findings recorded by the Commissioner of Income-tax (Appeals) and the Tribunal were not shown to be erroneous or perverse in any manner by the learned counsel for the Revenue. Further, in the judgment of the apex court in Melton India's case (1997 (1) TMI 471 - SUPREME COURT OF INDIA ), it was held that consumption of electricity can be one of the factors for drawing an inference that the assessee's intention to avoid tax was there. However, in the light of the findings noticed hereinabove, the addition on the basis of the gross profit rate of 23 per cent. on the total turnover of ₹ 93,26,096 in the facts and circumstances of the present case could not be faulted. No substantial question of law arises - Decided against revenue.

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• 2015 (5) TMI 313
  Refund set off against the Income-tax demand - Held that:- If an amount of refund of ₹ 42,96,720 has been set off against the above Income-tax demand, by the Income-tax authorities without notice to the writ petitioners they have acted contrary to this Division Bench judgment of CIT v. J. K. Industries Ltd.[2000 (3) TMI 29 - CALCUTTA High Court] wherein observed that the Income tax Department could not unilaterally adjust the amount due on refund against a tax demand without giving a notice to the assessee If that is the case, the Department will immediately remit that amount to the account of the writ petitioners with the Bank of Baroda. It will be open to the Income-tax Department to take steps with regard to the same in recovery proceedings. Such transmission of the above amount to the bank account of the writ petitioners has to be made within four weeks of communication of this order. Direct the Commissioner (Appeals) to dispose of the appeal and stay application pending before him within six weeks of communication of this order.

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• 2015 (5) TMI 312
  Slump sale of a going concern - whether slump price cannot be brought to tax under section 50 as held by AO especially when the assessee continued to own some of com pany assets ? - Held that:- Two appellate courts on consideration of the entire material on record have concurrently held that the sale is a slump sale and while coming to the said conclusion, they have relied on the orders passed by the Tribunal in connection with the sister concern of the assessee. They have also followed the judgment of in the cases of CIT v. Mugneeram Bangur and Co. (Land Department) [1965 (3) TMI 22 - SUPREME Court] and also the decision of Syndicate Bank Ltd. v. Addl. CIT [1985 (3) TMI 48 - KARNATAKA High Court]. Under these circumstances, we do not see any merit in these appeals. - Decided in favour of the assessee. The assessee has also preferred cross-objections to the appeals. This court in the case of Smt. Jyoti Kumari v. Asst. CIT [2010 (2) TMI 942 - Karnataka High Court] has held that an appeal being a creature of a statute, a cross-objection in terms of rule 22 being barred with an appeal, until and unless there is express provision on settling the legal provisions one cannot hold that the implication or a right of cross-objection should be read into either the provisions of Order 42 read with sections 100 and 108 of the Code of Civil Procedure or under the provisions of sub-section (7) of section 260A of the Income-tax Act. Therefore, it is held that the cross-objection is not maintainable under section 260A of the Income-tax Act - Decided in favour of assessee.

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• 2015 (5) TMI 311
  Treatment to rental income - Business income or House property - assessee himself in his wealth-tax return has treated the self-same house property, from which the rental income has been derived, as stock-in-trade and on that basis contended that he is not liable to pay wealth-tax - Held that:- As regards the first contention of revenue that the assessee cannot be permitted to blow hot and cold by taking one stand before the Income-tax authority and another before the wealth-tax authority, it can straightaway be pointed out that this question can be raised in the wealth- tax proceedings and may be decided in accordance with law. But, in so far as the Income-tax is concerned, that can only be levied in accordance with the provision of the Act. Submission of revenue that main object of the company appears to be dealing in property and, therefore, the object is business and, therefore, that should be treated as business income cannot be accepted because the object is both to earn money by selling the property as also by letting them out. It cannot be said that the company is not authorised by the memorandum to earn profit by letting out. Therefore, this submission of Mr. Saraf is not of any significance. The point raised in this appeal is covered by a judgment of this court in the case of the assessee itself [2011 (9) TMI 729 - Calcutta High Court] wherein held that the income on account of rent from the unsold flats should be treated as an income from house property. - Decided in favour of assessee.

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• 2015 (5) TMI 310
  Deduction u/s 10B - 100% EOU - Tribunal was justified in not considering the profit on export of spare parts while allowing the exemption under section 10B - If the court were to hold that the assessee is not entitled to the benefit of section 10B of the Act for the export of spare parts where the cost of importing or purchase of spare parts were to be excluded while computing the export profit eligible for exemption under section 10B of the Act ? - Held that:- When the assessee imports spare parts and exports them in the same condition, may be along with the articles produced and the spare parts exported are not involved in any manufacturing activity or in production activity, section 10B is not attracted. Therefore, all the three authorities have rightly held that the assessee is not entitled to the benefit of section 10B. In the facts and circumstances, we do not see any infirmity in the said orders. Therefore, the substantial questions of law Nos. 1 and 2 are answered in favour of the Revenue and against the assessee. However, when the income derived from the sale of spare parts is held to be ineligible for the benefit under section 10B, the entire amount representing the value of spare parts is to be excluded and the profits and gains derived from sale of such spare parts alone is liable for tax. That is the exercise to be undertaken by the assessing authority and the said amount is to be excluded. - Decided against revenue. Incidental income derived by the assessee from the sale of scrap - whether would be entitled to exemption under section 10B of the Act despite the same having been not derived from the export of articles or things - Held that:- Keeping in mind principle laid down in CIT v. Sterling Foods [1999 (4) TMI 1 - SUPREME Court] no doubt the assessee is not in the business of export of scrap but is in the business of export of X-ray equipment, high voltage tanks and detectors used in CT scanners and after manufacturing these products, they are exported. In the process of manufacturing, the unutilised raw materials forms part of scrap and that scrap also has value. But it is not exported and, hence, they are eligible for the benefit under section 10B of the Act. The assessee should have earned profits and gains from such export of articles or things. The said articles or things should have been manufactured or produced by the assessee. The section does not require that the profits and gains derived should be from the articles or things which are exported only. It is the profits and gains derived by an 100 per cent. export oriented undertaking from the export of articles. Therefore, when the assessee undertakes manufacturing activity or production activity and in the process it results in any scrap, the said scrap attracts the nexus between the profits and gains derived from the assessee from export business. Therefore, it satisfies the requirements of section 10B and the Tribunal has rightly held that the assessee is entitled to the benefit of section 10B even in respect of the profits earned out of sale of scrap materials within the country. In that view of the matter, we do not see any infirmity in the order passed by the Tribunal. - Decided in favour of assessee.

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• 2015 (5) TMI 309
  Remand for re decision - disallowance u/s 40(a)(ia)Special Bench decision of the Tribunal in Merilyn Shipping & Transports [2012 (4) TMI 290 - ITAT VISAKHAPATNAM] on the issue though the appeal against the same is pending adjudication before the hon'ble court - Held that:- Until and unless the decision of the Special Bench is upset by this court, it binds smaller Bench and co-ordinate Bench of the Tribunal. Under the circumstances, it is not open to the Tribunal, as rightly contended by Mr. Narasimha Sarma, learned counsel, to remand on the ground of pendency on the same issue before this court, overlooking and overruling, by necessary implication, the decision of the Special Bench. We simply say that it is not permissible under quasi-judicial discipline. Under the circumstances, we set aside the impugned judgment and order, and restore the matter to the file of the Tribunal which will decide the issue in accordance with law and it would be open to the Tribunal either to follow the Special Bench decision or not to follow. If the Special Bench decision is not followed, obviously remedy lies elsewhere. - Decided in favour of assessee for statistical purposes.

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• 2015 (5) TMI 307
  Transfer Pricing Adjustment on AMP Expenses - Whether the Income Tax Appellate Tribunal was right in distinguishing and directing that selling expenses in the nature of trade/volume discounts, rebates and commission paid to retailers/dealers etc. cannot be included in the AMP Expenses? - Whether the additions suggested by the Transfer Pricing Officer on account of Advertising/Marketing and Promotion Expenses (‘AMP Expenses’ for short) was beyond jurisdiction and bad in law as no specific reference was made by the Assessing Officer, having regard to retrospective amendment to Section 92CA of the Income Tax Act, 1961 by Finance Act, 2012? - Held that:- The substantial question of law is answered in favour of the Revenue and against the assessee. Whether AMP Expenses incurred by the assessee in India can be treated and categorized as an international transaction under Section 92B? - Held that:- The majority decision of the Tribunal in L.G. Electronics India Pvt Ltd. [2013 (6) TMI 217 - ITAT DELHI] accepted and applied by the Tribunal is erroneous and unacceptable - For reasons set out above, we have passed an order of remand to the Tribunal to examine and ascertain facts and apply the ratio enunciated in this decision. For the purpose of clarity, we would like to enlist our findings:- In case of a distributor and marketing AE, the first step in transfer pricing is to ascertain and conduct detailed functional analysis, which would include AMP function/expenses. The second step mandates ascertainment of comparables or comparable analysis. This would have reference to the method adopted which matches the functions and obligations performed by the tested party including AMP expenses. A comparable is acceptable, if based upon comparison of conditions a controlled transaction is similar with the conditions in the transactions between independent enterprises. In other words, the economically relevant characteristics of the two transactions being compared must be sufficiently comparable. The assessed, i.e. the domestic AE must be compensated for the AMP expenses by the foreign AE. Such compensation may be included or subsumed in low purchase price or by not charging or charging lower royalty. Direct compensation can also be paid. The method selected and comparability analysis should be appropriated and reliable so as to include the AMP functions and costs. Where the Assessing Officer/TPO accepts the comparables adopted by the assessed, with or without making adjustments, as a bundled transaction, it would be illogical and improper to treat AMP expenses as a separate international transaction, for the simple reason that if the functions performed by the tested parties and the comparables match, with or without adjustments, AMP expenses are duly accounted for. It would be incongruous to accept the comparables and determine or accept the transfer price and still segregate AMP expenses as an international transaction. The Assessing Officer/TPO can reject a method selected by the assessed for several reasons including want of reliability in the factual matrix or lack / non-availability of comparables. (see Section 92C(3) of the Act).When the Assessing Officer/TPO rejects the method adopted by the assessed, he is entitled to select the most appropriate method, and undertake comparability analysis. Selection of the method and comparables should be as per the command and directive of the Act and Rules and justified by giving reasons. Distribution and marketing are inter-connected and intertwined functions. Bunching of inter-connected and continuous transactions is permissible, provided the said transactions can be evaluated and adequately compared on aggregate basis. This would depend on the method adopted and comparability analysis and the most reliable means of determining arm‘s length price. To assert and profess that brand building as equivalent or substantial attribute of advertisement and sale promotion would be largely incorrect. It represents a coordinated synergetic impact created by assortment largely representing reputation and quality. “Brand” has reference to a name, trademark or trade name and like ‘goodwill‘ is a value of attraction to customers arising from name and a reputation for skill, integrity, efficient business management or efficient service. Brand creation and value, therefore, depends upon a great number of facts relevant for a particular business. It reflects the reputation which the proprietor of the brand has gathered over a passage or period of time in the form of widespread popularity and universal approval and acceptance in the eyes of the customer. Brand value depends upon the nature and quality of goods and services sold or dealt with. Quality control being the most important element, which can mar or enhance the value. Parameters specified of the order dated 23rd January, 2013 in the case of L.G. Electronics India Pvt Ltd (supra) are not binding on the assessed or the Revenue. The ‘bright line test‘ has no statutory mandate and a broad-brush approach is not mandated or prescribed. We disagree with the Revenue and do not accept the overbearing and orotund submission that the exercise to separate ‘routine‘ and ‘non-routine‘ AMP or brand building exercise by applying ‘bright line test‘ of non-comparables should be sanctioned and in all cases, costs or compensation paid for AMP expenses would be ‘NIL‘, or at best would mean the amount or compensation expressly paid for AMP expenses. It would be conspicuously wrong and incorrect to treat the segregated transactional value as ‘NIL‘ when in fact the two AEs had treated the international transactions as a package or a single one and contribution is attributed to the aggregate package. Unhesitatingly, we add that in a specific case this criteria and even zero attribution could be possible, but facts should so reveal and require. To this extent, we would disagree with the majority decision in L.G. Electronics India Pvt. Ltd. (supra). This would be necessary when the arm‘s length price of the controlled transaction cannot be adequately or reliably determined without segmentation of AMP expenses. The Assessing Officer/TPO for good and sufficient reasons can de-bundle interconnected transactions, i.e. segregate distribution, marketing or AMP transactions. This may be necessary when bundled transactions cannot be adequately compared on aggregate basis.When segmentation or segregation of a bundled transaction is required, the question of set off and apportionment must be examined realistically and with a pragmatic approach. Transfer pricing is an income allocating exercise to prevent artificial shifting of net incomes of controlled taxpayers and to place them on parity with uncontrolled, unrelated taxpayers. The exercise undertaken should not result in over or double taxation. Thus, the Assessing Officer/TPO can segregate AMP expenses as an independent international transaction, but only after elucidating grounds and reasons for not accepting the bunching adopted by the assessed, and examining and giving benefit of set off. Section 92(3) does not bar or prohibit set off. CP Method is a recognised and accepted method under Indian transfer pricing regulation. It can be applied by the Assessing Officer/TPO in case AMP expenses are treated as a separate international transaction, provided CP Method is the most appropriate and reliable method. Adoption of CP Method and computation of cost and gross profit margin comparable must be justified.The object and purpose of Transfer Pricing adjustment is to ensure that the controlled taxpayers are given tax parity with uncontrolled taxpayers by determining their true taxable income. Costs or expenses incurred for services provided or in respect of property transferred, when made subject matter of arm‘s length price by applying CP Method, cannot be again factored or included as a part of inter-connected international transaction and subjected to arm‘s length pricing. Transfer pricing adjustment made on account of payment of royalty - Held that:- The finding of the Tribunal that the question of payment of Royalty cannot be determined on the basis of profitability or earnings was upheld as once it is accepted that knowhow was provided the same cannot be questioned. Suitable profits relatable it was not held to relevant by approving the finding of the Tribunal. The justification given by the assessee for explaining lower profits claimed to be on account of bad debt, high rent, increase in legal costs etc. accepted by the Tribunal was also not interfered by the Hon’ble High Court. The said issue in para 197 has been answered against the Revenue. Accordingly we find that the stand of the Revenue that the issue can be decided at this stage cannot be accepted when examined from any angle as the facts will need to be considered afresh at length by the TPO on the basis of agreements and facts and evidences on the record in the light of the direction of the Hon’ble High Court. It is unfortunate that none of these facts were addressed by the Revenue. Even the opportunity so provided after the inappropriate behaviour of a duly appoint standing counsel who obdurately abdicated his onerous responsibility was followed by ill prepared representation by the Revenue as addressed in para 7 above where the entire responsibility to address the Court meaningfully was evidently shirked by the Revenue. Serious note of the casual manner of representation by the Revenue needs to be taken note of and addressed. Courts functioning cannot be allowed to be curtailed at whims and fancies of the officers reluctant to assist the Court. Accountability for the unseemly and inappropriate representation may need to be fixed. Legal and professional expenses disallowed - Held that:- It can be seen from the detail of the expenditure extracted herein above from the DRP’s order that the said expenditure cannot be considered to be legal and professional charges and the argument that it is related to the business of the assessee appears to be correct as per the narrations extracted in the order. However the claim cannot be decided in terms of the narrations given by the assessee and since the primary vouchers in support of the narrations given are claimed to be available and infact were made available in the assessment proceedings the issue is restored back to the file to the TPO who may consider the allowability of the same in accordance with law after giving the assessee a reasonable opportunity of being heard. - Decided in favour of assessee for statistical purposes.

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• 2015 (5) TMI 306
  Disallowance of interest on application money for tax free bonds - Held that:- As decided in assessee own case in respect of the immediate preceding year [2014 (6) TMI 146 - ITAT MUMBAI] wherein following the case of CIT vs. Bharat Heavy Electricals Ltd.[2012 (9) TMI 515 - DELHI HIGH COURT] held interest for the brief period between the date of application and allotment of bonds could not be taxed – Revenue could not bring any contrary fact or case law – Decided in favour of Assessee. Deduction u/s. 32AB - amount deposited by the assessee in Industrial Development Bank of India (IDBI) - this amount was disallowed by the AO on the ground that all receipts were deposited in the cash credit account with the bank from which overdraft was taken by the assessee from time to time for the purpose of business - CIT(A) allowed claim - Held that:- The assessee is having cash profit of ₹ 51.65 crores and only for the reason that deposit of IDBI is made from cash credit account, which was showing overdraft is not sufficient to disallow the allowability of deduction u/s. 32AB, particularly in view of the fact that the assessee is having cash profit of ₹ 51.65 crores, which is not contradicted by the revenue. So far as it relates to allowability or otherwise of deduction u/s. 32AB on the income of earlier years, town income and rental income from employees, learned CIT(A) has allowed the claim of the assessee for the reason that these form part of the business income. It is observed from the order passed by the learned CIT(A) that he has not given reasons for the same. Similarly, according to the assessee the dividend and interest income also could not be excluded as per the decisions relied upon by the learned AR. While deciding this issue also the learned CIT(A) has not considered any of the judicial pronouncements. Therefore, keeping in view the interest of justice, we are of the opinion that the issue requires to be restored back to the file of the CIT(A) with a direction to readjudicate the same in the light of the decisions relied upon by the AR after bringing all the facts on record. - Decided in favour of revenue for statistical purposes. Disallowance of convertible bonds/debentures - Held that:- Decided in favour of the assessee in assessee’s own case for A.Y. 1992-93. Disallowance of Bhanwad Prospecting and survey expenses - Held that:- Tribunal in the assessee’s own case for A.Y. 1987-88 [2014 (6) TMI 146 - ITAT MUMBAI] while dealing with the issue in question in para 14 of the said decision has observed that since the assessee had been allowed deduction under section 35(E) of the Income Tax Act (hereinafter referred to as the Act), hence the grievance of the assessee became otiose and the Tribunal therefore dismissed the ground of appeal relating to this issue. Disallowance of foreign exchange fluctuation loss as expenditure - Held that:- The Tribunal in the assessee’s own case for A.Y. 1987-88 [2014 (6) TMI 146 - ITAT MUMBAI] has given its finding and has followed the decision of the Tribunal in assessee's own case for A.Y. 1984-85 and directed the AO to allow the investment allowance on exchange loss treated as capital expenditure. Facts being identical, respectfully following the decision of the Tribunal (supra), we accordingly direct the AO to allow the investment exchange loss treated as capital expenditure .Thus this issue is restored to the AO to decide the same in view of the above observations of the Tribunal for this year also. Disallowance being addition of interest on account of interest free advances to Senegal Investment & Trading Co. Ltd. - Held that:- The Tribunal in the assessee’s own case for A.Y. 1987-88 [2014 (6) TMI 146 - ITAT MUMBAI] the Tribunal, while dealing with the issue, has allowed this ground following the decision of the Jurisdictional High Court in the case of ‘Reliance Utilities’ [2009 (1) TMI 4 - HIGH COURT BOMBAY ]. The facts for this year being identical in nature, the AO is directed to decide this issue in the light of the earlier year’s decisions in the own case of the assessee Disallowance of foreign travel expenses - Held that:- Restore this issue to the file of the AO with a direction to verify the contentions of the assessee. If the foreign travel expenses are incurred in respect of already existing business, the same should be allowed. For the rest of the disallowance amounting to ₹ 3,16,976 the order of the CIT(A) is upheld as the same is not being pressed. - Decided partly in favour of assessee. Family planning expenses - Held that:- Disallowance of similar expense in the assessee’s own case for A Y 1987-88 was restricted to 50%. Thus we direct the AO to restrict the disallowance to 50% of the expenditure incurred. Disallowance of expenses on fist and prawn culture - Held that:- Tribunal in assessee's own case for A.Y. 1985-86 followed the decision of the Tribunal in assesee’s own cae for A.Yrs. 1981-82 and allowed the claim. - Decided in favour of assessee. Disallowance under section 43B - royalty of limestone - Held that:- Royalty on limestone is restored to the file of the AO for verification of the payments as per the provisions of Sec. 43B and if it is found correct, then AO is directed to allow the deduction - Decided in favour of assessee for statistical purposes. Disallowance of expense incurred on new projects - This is for survey and market study of LAB a chemical agent used to be mixed with soda ash for making detergent powder/washing powder - assessee contented for balance amount of ₹ 24,000 which is incurred in respect of existing business - Held that:- Restore the issue to the file of the AO with a direction to verify the contention of the assessee that it was incurred for the existing business. On verification, if it is found that these expenses are incurred for existing business then the same should be allowed. - Decided partly in favour of assessee for statistical purposes.

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• 2015 (5) TMI 305
  Interest income - “Income from other sources” or “Business income” - Held that:- From the above submissions of the assessee, it is apparent on the record that the interest income has been earned by the assessee on the security deposits with the bank as per the Common Loan Agreement. The said interest income had been earned by the assessee out of business compulsions of deposits in the ‘Debit Service Reserve Account’, hence the said interest income is linked to the business activities of the assessee. The issue is covered with the decisions of the Tribunal in the own case of the assessee for earlier assessment years. Hence, the interest income of the assessee is ordered to be assessed as Business Income. - Decided against revenue. Depreciation on toll road - Held that:- Factually speaking, it is wrong to say that impugned right acquired by the assessee was without incurrence of any cost. In fact, it is quite evident that assessee got the right to collect toll for the specified period only after incurring expenditure through its own resources on development, construction and maintenance of the infrastructure facility. Secondly, section 32(1)(i1) permits allowance of depreciation on assets specified therein being 'intangible assets' which are wholly or partly owned by the assessee and used for the purposes of its business. The aforesaid condition is fully satisfied by the assessee and therefore considered in the aforesaid perspective we find no justification for the plea raised by the Revenue before us. The assessee is entitled to the claim of depreciation on the road to collect toll being an intangible asset falling within the purview of section 32(1) (ii) of the Act. - So far as the other alternative contention of the assessee that the project be treated as plant & machinery and the depreciation be accordingly allowed to it, we do not find that the said license of right to collect toll in any way falls in the definition of plant & machinery. Even the assessee is not the owner of the toll road. The assessee has been given only the right to develop, maintain and operate the toll road and further to collect the toll for the specified period. This right as discussed above is an intangible asset falling under section 32(1)(ii) of the Act. - Decided in favour of assessee. Disallowance of claim of expenses incurred in relation to increase in authorized share capital - Held that:- There is no dispute on the point that the authorized share capital was raised by the assessee in connection with the extension of the undertaking. The nature of the expenses indicates that the same were in the shape of stamp duty and registration charges. The cumulative reading of the entire provisions of section 35D would reveal that the nature of expenses in this case is such that it would fall within the purview of residuary clause (d) of section 35D(2). In the case in hand, admittedly, the assessee had incurred the expenditure for raising of share capital for the purpose of expansion of business. In view of the decision of the co-ordinate bench of the Tribunal in the case of “M/s. Chiranjeevi Wind Energy vs. ACIT” (2013 (12) TMI 905 - ITAT CHENNAI ) and also in view of our observations made above, we hold that the assessee is entitled to the amortization of the said expenses. - Decided in favour of assessee.

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• 2015 (5) TMI 304
  Depreciation u/s 32 - ownership - building in question named, “Shubhalaxmi” consists of 14 apartments which have been acquired by the two Directors of the assessee company in their individual names - whether arrangement entitles the assessee to be understood as an ‘owner’ of the property qua the provisions of section 32(1)? - Held that:- In the present case, the formal deed of title of the property is not executed and registered in the name of assessee company. The moot question is as to whether assessee can be said to have acquired possession over the property in its own right and is using it for the purposes of business and is entitled to hold the property to the exclusion of all others. We say so for the reason that in the present case, the assessee cannot be said to have acquired possession of the property in his own right or exercising such dominion over it as would enable others being excluded therefrom. Admittedly, the only mechanism in terms of which assessee is using the property is the arrangement with the individual Directors, which is supported by the resolutions of the Board of Directors. The individual Directors have acquired the property in their names and the transfer of the property into the account books of the assessee company is merely by way of a book entry supported by the resolution of the Board of Directors. Such arrangement ostensibly does not invest the assessee with the dominion over the property to the exclusion of all others. Therefore, in the light of the legal position laid down by the Hon’ble Supreme Court in the case of Mysore Minerals Ltd. (1999 (9) TMI 1 - SUPREME Court ) and the fact-position in the present case, in our view, the lower authorities rightly held the assessee not entitled for depreciation u/s 32(1) of the Act with respect of the property in question. - Decided against assessee. Disallowance of various expenses - repairs & maintenance, interest on loan and electricity charges incurred in relation to the property ‘Shubhalaxmi’ - Held that:- The appellant company has been consistently asserting before the Assessing Officer as well as before the CIT(A) that the premises are being used for the business of the assessee and even before us various functions have been enumerated to justify the usage of the property for the business of the assessee. Though, there is no clinching evidence in favour of the assertions of the assessee but at the same time the Assessing Officer has also not lead any material to prove any falsity in the assertions of the assessee; therefore, in our view, it would meet the ends of justice if it is to be understood that 50% of the expenses relating to repair, maintenance, electricity bills, municipal taxes and water expenses incurred on property are relatable to the carrying on of the hospital business of the assessee. Thus, we set-aside the order of the CIT(A) and direct the Assessing Officer to allow only 50% of the expenses on electricity bills, repair & maintenance, municipal taxes and water expenses, and disallow the balance - Decided partly in favour of assessee. Benefit of exemption u/s 35(1)(iv) denied - assessee contended that the impugned sums of capital nature were expended on scientific research related to the business carried on by it - Held that:- The Hon’ble Gujarat High Court in DCIT vs. Mastek Ltd. [2012 (9) TMI 264 - GUJARAT HIGH COURT ] noted that in the absence of the Assessing Officer having obtained any adverse decision from the prescribed authority, there was no justification in rejecting assessee’s claim for deduction of expenditure incurred for scientific research. As a consequence of the aforesaid discussion, in our view, the CIT(A) was justified in setting-aside the action of the Assessing Officer disallowing the claim of deduction u/s 35(1)(iv) of the Act relating to the capital expenditure income on scientific research. Thus, on this aspect, we hereby affirm the order of the CIT(A) - Decided in favour of assessee. Validity of assessment u/s 153A - Held that:- No justification on the plea of the assessee challenging the validity of assessment u/s 153A r.w.s. 143(3) of the Act on the ground that additions to the income made by the Assessing Officer were not on the basis of any incriminating document. - Decided against assessee. Owner of property at Shubhalaxmi - Held that:- The income-tax authorities were justified in holding that the property ‘Shubhalaxmi’ belongs to assessee Dr. Avinash Ramchandra Phadnis and partly to Dr. (Mrs.) Amita Avinash Phadnis and not to M/s Phadnis Clinic Pvt. Ltd., as contended by the assessee. - Decided against assessee. Proportional use of property - part of the property is used by the assessee, Dr. Avinash Phadnis and Or Mrs Amita Phadnis for their profession and part for their residence and hence as deduction allowed by the (earned CIT(A) to Dr. Avinash Phadnis for his self-occupied area, therefore deduction of balance interest calculated on the basis of proportionate area used by him for his profession be allowed at 100% - Held that:- 50% of the building can be said to have been used for the purposes of the business of the company itself. As a consequence Assessing Officer is directed to re-visit the aforesaid pleas of the assessee afresh and allow appropriate relief as per law. - Decided in favour of assessee for statistical purposes. Expenditure for securing the right to practice at Jahangir Hospital - whether the expenditure was incurred wholly and exclusively for the furtherance/continuation of the business and did not create any capital asset and should be consequently allowable as business expenditure u/s 37? - Held that:- The ownership of the asset represented by the impugned expenditure in the shape of IVF machinery and the renovation/restructuring of the IVF setup of the Jahangir Hospital vests with the Jahangir Hospital. On this aspect, there is no dispute. The Assessing Officer has also accepted the position that assessee incurred such expenditure with the expectation that his own business would improve in the long run because of the association with Jahangir Hospital.Once the objective of the expenditure being improvement in business prospects is accepted, then it has to follow that such an enduring benefit is in the revenue field. If the benefit, though long term is in the revenue field, then the corresponding expenditure which has resulted in such benefit is liable to be considered revenue in nature following the parity of reasoning laid down by the Hon’ble Supreme Court in the case of Empire Jute Company Ltd. vs. CIT, [1980 (5) TMI 1 - SUPREME Court ]. Therefore, on this aspect of the matter, we accept the plea of the assessee that the expenditure of ₹ 32,74,564/- in question is liable to be treated as a revenue expenditure. - Decided in favour of assessee.

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• 2015 (5) TMI 303
  Transfer pricing adjustment - segment relating to the Provision of software services - wrong selection of comparable - Held that:- The point made out by the assessee for exclusion of KALS Information Systems Ltd. (Application Software Segment) is on a sound footing inasmuch as the said concern is functionally distinct from the activities of Provision of software services rendered by the assessee. Transworld Infotech Ltd. (earlier known as Sterling International Enterprises Ltd.) the data to be used in analyzing the comparability of an uncontrolled transaction with the international transaction shall be the data relating to the financial year in which the international transaction has been entered into. Ostensibly, in the present situation, the financial data adopted of Transworld Infotech Ltd. does not relate to the financial year in which the international transactions in question have been carried out by the assessee. We, therefore, are in agreement with the submissions of the assessee that the said concern is excludible from the final set of comparables CSA (India) Ltd. (ESS Segment) functionally different as pointed out by the assessee vis-à-vis the R&D services segment of the said concern are germane and relevant to decide about the inclusion of the said concern for the comparability analysis. Therefore, we direct the lower authorities to exclude the margins relatable to the R&D services segment of the said concern and consider only the margin relatable to the IT services segment alone to benchmark assessee’s activity of Provision of software services to its associated enterprises. Determination of arm's length price with regard to the international transactions of Provision of back office support services - Held that:- the present case that the activities undertaken by Infosys BPO Ltd. cannot be qualitatively compared with the activities being carried out by the assessee in its back office support services segment. Undoubtedly, Infosys BPO Ltd. owns significant intangibles and eminent brand value whereas in the case of the assessee before us there is no such situation. The turnover achieved by Infosys BPO Ltd. is many times higher in comparison to the assessee; the said concern is a giant in comparison to the assessee. In our view, the presence of the aforesaid factors justify assessee’s assertion that the said concern be excluded from the list of comparables. Cosmic Global Ltd. is liable to the excluded from the final set of comparables having regard to the difference in the business model brought out by the assessee. M/s Omega Healthcare Management Services Pvt. Ltd. in the absence of any adverse finding that the activities of the said concern are not comparable to assessee’s activity of rendering back office support services to its associated enterprises, we deem it fit and proper to direct the lower authorities to include the said concern in the final set of comparables as was contended by the assessee in the course of the Transfer Pricing proceedings. M/s In House Productions Ltd. (Healthcare Division) he only reason advanced by the TPO to reject the said concern was his perception that the financial data of the said concern was not reliable. The perception of the TPO is based on the fact that a fire destroyed major portion of the account books of the concern. The point made out by the assessee is that the audited financial statements have not been adversely commented by the statutory auditors of the said concern with regard to the reliability of the data. The said stand of the assessee cannot be brushed aside lightly. On the other hand, the TPO has not advanced any credible basis which could demonstrate unreliability of the financial data. In our considered opinion, it would meet the ends of justice if the TPO is called upon to re-visit the controversy with regard to its inclusion. Galaxy Commercial Ltd. (BPO Segment) in the immediately preceding assessment year the said concern had a positive margin. Nevertheless, in order to examine as to whether it is a consistent loss-making or not, a trend over more than one year is required to be evaluated. For the said purpose, we deem it fit and proper to restore the matter back to the file of the TPO, who shall examine the financial results of the said concern for two years prior and subsequent to the assessment year under consideration so as to formulate a belief as to whether or not it is a consistently loss-making concern - Appeal of the assessee is partly allowed.

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• 2015 (5) TMI 302
  Transfer pricing adjustment - addition of ₹ 29,70,31,153/- made to the returned income on account of determination of the arm's length price of the international transactions entered into by the assessee with its associated enterprises - TPO reject the external CUP data based on the price quotes of MMSPL - In the present case, the international transactions in question relate to transaction of import of oils by the assessee from its associated enterprises - plea of the assessee has been that the tested transaction of import of oil from associated enterprises has also been undertaken with third parties - Held that:- Assessee has purchased Soyabean and sunflower oils from its associated enterprises as well as from third parties. Apart therefrom, it is also a peculiar fact in the present case that the product being transacted is a commodity which is recognized for trading in Commodities Exchanges. For instance, the Chicago Board of Trade (CBOT), which is an internationally recognized and accepted commodity exchange based in Chicago in USA facilitates trading in commodities, inter-alia, vegetable oils also. Therefore, the quotations appearing on such exchanges would reflect the prices at which the commodities are being traded in the market place. The price publication of Oil World, which was also pressed into service by the assessee, would be reflective of the prices prevailing in the market at a particular point of time. Undoubtedly, the rate quotations of CBOT and Oil World can be said to be a data published by independent organizations, which reflect the prevailing market rates. These prices have been adopted by the assessee as comparable uncontrolled transaction prices and the tested transactions have been benchmarked vis-à-vis such prices. The stand of the TPO in rejecting the aforesaid data as being mere quotations and not actual transactions, in our view, is not justified. It is evident that the Hon’ble High Court of Gujarat in Commissioner of Income Tax Versus Adani Wilmar Limited [2014 (4) TMI 563 - GUJARAT HIGH COURT ] held that the price publications are also relevant material for the purposes of carrying out the comparability analysis in the course of application of CUP method; so however, such price publications ought to be authentic and reliable. It is also noteworthy that the Hon’ble High Court of Gujarat was considering an objection of the Transfer Pricing Officer, which is similar to that being raised before us, which is to the effect that the price publication of Oil World only reflect quotations and not actual transactions. The said argument did not find favour with the Hon’ble High Court of Gujarat and it noted that the reliability and authenticity of the material stood established. Infact, the decision of the Pune Bench of the Tribunal in the case of ACIT Vs. MSS India (P) Ltd. (2009 (5) TMI 600 - ITAT PUNE-A ) relied upon by the Ld.CIT-DR does not help the Revenue on this aspect, and in any case the said decision is not an authority for the proposition that price contained in the Broker Note, based on a commodity exchange, is not a valid CUP data. Thus the rejection by the TPO of the price publication of Oil World and the prices quoted by MMSPL, which are based on the rates quoted on CBOT, Chicago, is not justified. No reason for the income tax authorities to have rejected the plea of the assessee that the stated values of the purchase of Soyabean and sunflower oils from the associated enterprises are at their arm's length price. Thus, we hereby direct the Assessing Officer to accept the stated value of the international transactions of import of oils from associated enterprises to be at an arm's length price. Thus, the addition of ₹ 29,70,31,153/- is directed to be deleted. - Decided in favour of assessee.

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• 2015 (5) TMI 301
  Transfer pricing adjustment - selection of comparable - Held that:- Coral Hub (Vishal Information Technologies Ltd.) this company cannot be included in the list of comparables, though it might be carrying on the similar functions which asesssee was carrying on. The functional profile no doubt is one of the major criteria but not the sole criteria for deciding whether the said company can be included in the list of comparables or not. The assets and risk profile also has to be taken into consideration. This company was selected by TPO and, therefore, the submissions of ld. Standing Counsel on the ground of functional profile cannot be accepted. Moreover, we note that ld. Counsel has pointed out that data entry charges were 84.5% of total expenditure and, therefore, this cannot be compared to assessee, which was primarily imparting high end services. We, accordingly, direct for exclusion of this company from the list of comparables. Eclerx Service Ltd. In the present case all the functions are carried out by assessee for its AEs and, there is no doubt it was a captive service provider. However, the important aspect which is to be considered is as to what functions were being performed by assessee. If assessee was merely providing data to its AE without any analysis and performing its functions only in a mechanical manner, then no doubt it would be comparable to BPO but when the results provided to AE are after detailed analysis after employing skills of highest standards, then it would come within the ambit of BPO. Therefore, merely on the ground that assessee is a captive service provider, it cannot be said that this company was functionally not comparable. Ld. counsel has pointed out that extraordinary events of acquisition had occurred. However, in this year no such extraordinary events took place. We, therefore, are not inclined to accept the assessee’s contention on this count and uphold the findings of DRP on this count. Infosys BPO and Wipro BPO keeping in view the huge turnover, economies of scale, brand value and other factors pointed out by ld. counsel in his submissions and also keeping in view the decision of Aginity India Technologies Pvt. Ltd. [2010 (11) TMI 852 - ITAT DELHI] & (2013 (7) TMI 696 - DELHI HIGH COURT) these two companies cannot be included in the list of comparables because the assessee’s turn over was only ₹ 11 crores. Working capital adjustment denied - Held that:- Since, the authorities below have denied working capital adjustment to the assessee on flimsy ground, we vacate their action and hold in principle that the grant of working capital adjustment, if otherwise available, cannot be jeopardized. However, as regards the quantum of working capital adjustment, we direct the AO/TPO to vet the correctness of the amount of working capital adjustment claimed by the assessee and then decide its allowability as per law. We are in respectful agreement with the above observations. We direct the ld. TPO to allow working capital adjustment while determining the profit margins of comparables. - Decided partly in favour of assessee.

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• Customs

• 2015 (5) TMI 328
  Doctrine of merger - Earlier Supreme Court dismissed appeal as non maintainable - Whether Tribunal has jurisdiction to decided appeal on merit - Held that:- Inview of Apex Court decision in Kunhayammed and Others Vs. State of Kerala and Another [2000 (7) TMI 67 - SUPREME Court], Once leave to appeal has been granted and appellate jurisdiction of Supreme Court has been invoked the order passed in appeal would attract the doctrine of merger; the order may be of reversal, modification or merely affirmation - In view of the above ruling of the apex Court, the jurisdiction of this Tribunal to entertain the review application on its merits is eclipsed in view of merger - Decided against assessee.

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• 2015 (5) TMI 327
  Levy of Anti dumping duty - import of Photopolymer of chloride Monomer (PVC) Suspension Grade - initially the name of the manufacturer was not appearing the Notification No.11/2008-Cus dated 23.1.2009 - Difference of opinion - matter referred to larger bench with following questions of law:- Whether as per opinion of learned Member (Judicial), amending notification no. 38/2008-Cus dated 24.3.2008 making amendment in SI. No. 19 of the Notification No. 11/2008-Cus dated 23.01.2008 shall have retrospective effect being curative in nature for the purpose of determination of anti-dumping duty. Or Whether as per opinion of Member (Technical), amending notification no. 38/2008-Cus dated 24.3.2008 making amendment in SI No. 19 of the Notification No. 11/2008-Cus will be prospective in nature.

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• 2015 (5) TMI 326
  Penalty u/s 114(iii) - goods exported by the Appellant were loaded on the vessel by the Shipping line on 9-10-2008, before the "Let Export Order" was passed by the proper officer of customs on 10-10-2008 - Held that:- There is no allegation nor any evidence in the Notice that the Appellant-exporter was aware of the goods having been loaded on to the vessel on 9-10-2008, before the passing of the "Let export order" on 10-10-2008. The Notice itself in para 6 states that the person in charge of the conveyance without confirming from the exporter or Custom House Agent whether customs formalities had been completed and without collecting the Shipping Bill had permitted loading of the goods. Under Section 40 of the Customs Act, 1962 the responsibility has been cast on the person in charge of the conveyance to ensure that the goods are not loaded on the vessel unless shipping bill duly passed by the proper officer has been handed over to him by the exporter. Further under Section 34 of the Customs Act, 1962 the loading of the goods is done under the supervision of the proper officer of customs. The Appellant who is the exporter has no control over the goods or their loading once the goods are carted into the port and the responsibility to ensure that that the goods are not loaded on the vessel before the Shipping Bill is passed is squarely cast on the person in charge of the conveyance under Section 40 of the Customs Act, 1962. The shipping agent has been duly penalized and there is no warrant for imposition of penalty on the exporter who is in no way responsible for the contravention by the Shipping agent. This view is squarely supported by the decision of the Hon'ble Bombay High Court in the case of Commissioner v. Kusters Calico Machinery Ltd. - [2010 (3) TMI 474 - BOMBAY HIGH COURT]. Accordingly the impugned order to the extent it imposes penalty on the present Appellant exporter is liable to be set aside. - Decided in favour of assessee.

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• Corporate Laws

• 2015 (5) TMI 325
  Review application - Matter becomes functus officio as soon as the judgment is delivered and order is passed - Execution application is time barred as the Article 136 of the Limitation Act 1963 provided for a period of 12 years - Limitation period for payment of dividend is three years under Article 113 of the Limitation Act - It is settled law that executing Court cannot go behind the decree - Non payment of dividend - Held that:- We have heard the rival contentions of the parties. We have carefully scrutinized the records and we find that there are some substance in the argument of Mr. Hoon. We also find that in the Judgment dated 21st May, 1981 the Hon’ble Division Bench observed that “Whether an application is barred by Act 137 of the Limitation Act” and also some passage of the said Division Bench order where it is stated “…. In our view, if the same state of affairs of the Company continuous or in other words if any wrong committed before three years of the presentation of the application continuous to be in operation, there will be no question of limitation. We do not accept the broad proposition that the events which had taken place three years before the presentation of application are barred by Article 137 of the Limitation Act”. We find Section 47 of the Code of Civil Procedure empowered the executing Court to interpret a decree and hold that it was a decree for payment of money. From the conduct of the ‘TML’ it creates a doubt in our mind that it was the intention of ‘TML’ not to transfer the unpaid dividend in favour of the ‘Hungerford’. Therefore, they prepared purported resolution dated 27th January, 1975 with the intention that in the balance sheet signed on 3rd November, 1975 with resolution dated 21st January, 1975, the Directors would not disclose the same in the balance sheet though in the auditor’s report for the said year did not reflect such resolution. Therefore, from the conduct of the ‘‘TML’’ we have no hesitation to hold that the purported resolution dated 27th January, 1975 was fraudulently fabricated to deprive the ‘Hungerford’ from its legitimate unpaid dividend. Non-payment of dividends was a continuous offence so long the payment is not made. Therefore, there is no question of limitation. Hence the theory of limitation would not be applicable in the present case as has been argued by Mr. Bose. We find that the Division Bench undoubtedly adjudicated on the issue regarding non-payment of dividend to the ‘Hungerford’ by the ‘TML’. Therefore, the order passed by the Division Bench is a decree within the meaning of Section 2 of the Code of Civil Procedure. Therefore, unless and untill full satisfaction of the decree is discharged by the ‘‘TML’’ liability of the Division Bench order dated 21st May, 1981remains and the present execution application is nothing but a tool to execute the order which was filed within the period for 12 years and there is no bar of limitation. The decisions referred by Mr. Utpal Bose, the learned senior Counsel on the ratio that executing Court cannot go beyond the decree have no manner of application considering the aforesaid discussions that non-payment of money to the ‘Hungerford’ by the ‘TML’ towards the unpaid dividends clearly indicates that the appellant was directed by the said Division Bench order to make payment towards the unpaid dividend in respect of the specific period. Therefore, to realize the same the ‘Hungerford’ has no alternative/option but to put the decree in execution which in the present case has been rightly done by the ‘Hungerford’. With this aforesaid discussions we hold that the impugned judgment and order passed by the Learned Trial Court is a well reasoned one and there is no infirmity, illegality which would deserve any interference. Therefore we have no hesitation to hold that the Appeal No.289 of 1994 preferred by ‘TML’ has no merit and the same should be dismissed. Regarding the review application of the order dated 22nd August, 2008 we find that the grounds taken in the said application have failed to satisfy the essential ingredients of the Order 47 of Code of Civil Procedure. We find that there is no merit in the said review application. Therefore, the review application is hereby dismissed. But that will not preclude the applicant to take appropriate steps before the appropriate forum if so advised. - Decided against the appellant.

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• 2015 (5) TMI 324
  Application for the Scheme of Arrangement under Sections 391 to 394 read with Section 100 of the Companies Act, 1956 - Observations of Regional directors duly addressed - Held that:- Pursuant to the notices issued, the Official Liquidator sought information from the petitioner companies. Based on the information received, the Official Liquidator has filed a report dated 30th August, 2014 wherein he has stated that he has not received any complaint against the proposed Scheme of Arrangement from any person/party interested in the Scheme in any manner and that the affairs of the transferor company do not appear to have been conducted in a manner prejudicial to the interest of its members, creditors or public interest, as per second proviso of Section 394(1) of the Companies Act, 1956. The Regional Director in Para 5 of his report has, however, submitted that para 3.2 of Part-3 of the Scheme provides that demerger shall be in accordance with Section 2(19AA) of the Income Tax Act, 1961, which stipulates several conditions to comply. He, therefore, prays that petitioner/demerged company may be directed to submit an undertaking to comply with those conditions. In para 6 of his report, he submitted that a perusal of the shareholding pattern of the transferor company shows that its 69.50% shares are held by the Non Resident Indian. He, therefore, prays that the transferor company may be directed to give an undertaking for all compliances from Reserve Bank of India as required under FEMA for above transactions involving foreign banks/entities. In reply to the first observation, the petitioner companies in their reply have submitted that the compliance of Section 2(19AA) of the Income Tax Act, 1961 is necessary to enable the petitioners to avail the benefit of Income Tax Act. So far as the second observation of the Regional Director is concerned, the petitioners have submitted that as per RBI’s circular for allotting shares to the NRI shareholders, in case of amalgamation, RBI’s permission is not required. However, the petitioners have undertaken to comply with the requirements of Section 2(19AA) of the Income Tax Act, 1961 and also to comply with the provisions of FEMA in allotting shares to the Non Resident Indian, if required. In view of the undertakings given by the petitioners, the observations raised by the Regional Director do not subsist. No objection has been received to the Scheme of Arrangement from any other party. Considering the approval accorded by the equity shareholders and unsecured creditors of the petitioner companies to the proposed Scheme of Arrangement; the affidavit filed by the Official Liquidator not raising any objection to the proposed Scheme of Arrangement, and there being no surviving objection to the same by the Regional Director, Northern Region, there appears to be no impediment to the grant of sanction to the Amended Scheme of Arrangement. Consequently, sanction is hereby granted to the Amended Scheme of Arrangement under Sections 391 and 394 of the Companies Act, 1956. - Application for schemer of arrangement approved.

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• 2015 (5) TMI 323
  Application for reduction of Paid-up share capital under Section 100(1) of the Companies Act, 1956 read with Rules 46 and 47 of the Companies (Court) Rules, 1959 - Minimum paid-up equity share capital not infused by the subscribers to the Memorandum of Association - Change in business plan - Held that:- It was submitted by petitioner that the proposed reduction in capital neither involves in any financial outlay/outgo on the part of the petitioner company nor does it directly or indirectly involve in any outflow of the petitioner company’s asset to its shareholders. Further, the petitioner company has not carried on any business since the date of its incorporation and it does not have any creditors or any other stakeholders whose rights would be prejudice by the proposed reduction. By order dated 5th February, 2015, notice of this petition was directed to be issued to the Regional Director, Northern Region. Since the petitioner company has not commenced its business operations and it does not have any creditor or stakeholders, therefore, the requirement to follow the procedure laid down under Section 101(2) of the Companies Act, 1956 is dispensed with.In response to the notice issued, Mr. A. K. Chaturvedi, Regional Director, Northern Region, has filed his report dated 17th March, 2015 raising no objection to the proposed reduction of share capital of the petitioner company. In view of the averments made in the petition and there being no creditor, the petition is hereby allowed. The resolution passed by the petitioner company in its Extra Ordinary General Meeting held on 8th December, 2014 for reduction of its share capital is approved. The 'Form of Minutes' proposed to be registered under Section 103(1)(b) and annexed to the petition as Annexure ‘G’, is also approved. - Application for reduction in paid up share capital approved.

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• Service Tax

• 2015 (5) TMI 343
  Waiver of pre deposit - Renting of Immovable Property - Held that:- There is no dispute regarding liability to service tax on the monthly rental income received except on the issue of admissibility of "SSI" benefit with regard thereto. However, if the income received from 30 year-lease of property is considered to be taxable, the question of eligibility for the SSI benefit would not arise. We find that the appellants did not own the piece of land on which the commercial building was constructed in-as-much-as it was only leased to them for 30 years by Municipal Corporation, Raipur and therefore the commercial building which they constructed thereon could not have been sold by them because they cannot sell what they do not own. - having regard to the appellants' plea that the advances received had been subsequently adjusted in the rental/lease income shown on which service tax has been demanded and that they should be extended the cum-tax benefit, we order pre-deposit of ₹ 75 lakhs within 8 weeks - Partial stay granted.

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• 2015 (5) TMI 342
  Consulting engineer's service - reverse charge mechanism on JDE and on DEC - Held that:- The demand of service tax on JDE is on reverse charge mechanism while on DEC is on the ground that they have rendered the services. Demand of service tax liability does not survive in view of the law as settled by the hon'ble High Court of Bombay in the case of Indian National Ship Owner's Association vs. Union of India [2008 (12) TMI 41 - BOMBAY HIGH COURT] which has been upheld by the hon'ble apex Court [2009 (12) TMI 850 - SUPREME COURT OF INDIA]. We note that, in the case of JDE, the service tax demand has been confirmed by invoking the provisions of Rule 2(1)(d)(iv) of the Service Tax Rules which has been extensively dealt with by the hon'ble High Court of Bombay in the case of Indian National Shipowners Association (supra). As per the law settled, demand of service under reverse charge mechanism can only be w.e.f. 18/04/2006. - impugned order confirming demand on JDE is not sustainable and is liable to be set aside and we do so. - Decided in favour of assessee.

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• 2015 (5) TMI 341
  Refund claim - Unjust enrichment - period of limitation - whether the activity of construction of residential flats which are ultimately sold to the buyers is a transaction of sale of goods or rendering the services - Held that:- appellant has written the letter to CBEC on 7.6.2006 before the period of dispute for clarification whether they are liable to pay service tax on their activity or not and also clearly mentioned that department is pressurizing them to pay the service tax on their activity. I further find that letter to concerned Asstt . Commissioner on 7.6.2006 have clearly mentioned that appellant is depositing Service Tax under the pressure of department. As there is no prescribed form to raise protest for payment of service tax under the provisions of Finance Act, 1994, the letter written to Asstt . Commissioner placed before me by the appellant, clearly shows that service tax paid by the appellant is under protest. For deposits made under protest, the provision of section 11B of the Central Excise 1994 are not applicable. Appellant has written letters to the intended buyers of the flat that the dispute is going on between the appellant and CBEC about whether service tax is payable or not and in these letters it is clearly mentioned that the price agreed by the buyers is not inclusive of service tax and appellant is paying service tax from their own pocket if later on liability of service tax arises, the same will be paid by the intended buyers of the flat along with the agreed price of the flat. Further this fact has been certified by the Certificate issued by the Chartered Accountant and amount recoverable as service tax as reflected in their balance sheet . Therefore, I hold that appellant has discharged their burden of unjust enrichment. In these circumstances, the appellant is entitled to refund claim - Decided in favour of assessee.

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• Central Excise

• 2015 (5) TMI 336
  Duty demand u/s 11D - sale of petroleum products - Revenue is of the view that as the price at which goods are sold from the depot are higher than the goods cleared from the refineries and goods are duty paid. Therefore, excess duty collected by the appellant at depots is required to be paid to the department under Central Excise Act, 1944 Held that:- As held by larger bench of this Tribunal in the case of Hindustan Petroleum Corporation Ltd. (2012 (6) TMI 246 - CESTAT, MUMBAI), duty is payable by manufacturer or producer of the goods and being appellant before is not a manufacturer or producer of the goods, therefore not liable to pay duty under section 11(D) of the Act. Same has been affirmed by the Hon'ble High Court of Madhya Pradesh in appellant's own case. In these circumstances, we hold that appellant is not required to pay duty under section 11(D) of the Act. - Decided in faovour of assessee.

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• 2015 (5) TMI 335
  Waiver of pre deposit - Valuation of goods - Duty liability in respect of pan masala retail pouches - pouch packing machine - Held that:- First proviso to Rule 8 becomes applicable when on an existing packing machine, the manufacturer commences manufacture of the "goods of the a new RSP" during that month and in such a situation, this has to be treated as an addition in the number of operating packing machines for the month or in other words, that machine would have to be treated as two machines. - new retail sale price would mean the retail sale price which had not been declared in respect of that machine in the Form-I declaration. For example, when in terms of the Form-I declaration, a manufacturer is to manufacture the Gutkha/panmasala pouches of ₹ 3 per pouch during a particular month, and sometime during this month, he starts manufacture of Panmasala pouches of ₹ 4 per pouch which had not been declared in the Form-I declaration, it would be treated as a new RSP. However, if in the Form-I declaration, he had declared that machine to be used for manufacture of both the RSPs of ₹ 3 as well as ₹ 4, in our Prima-facie view, it cannot be treated as the case of commencing manufacture of goods of new RSP so as to attract the first proviso to Rule 8. In fact, if the intension of the Government had been to treat a particular machine being used during particular month for manufacture of the retail pouches of two or more RSPs as that many machines, the first proviso would have been worded differently. It is well settled law when the statute is clear and unambiguous; it has to be given effect to without adding any words to it or subtracting any words from it. Prima-facie view that the Department's stand in this case is not correct and as such, the appellant have strong prima-facie case in their favour. The requirement of pre-deposit of the duty demand, interest and penalty is, therefore, waived for hearing of the appeal and recovery thereof stayed. - Stay granted.

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• 2015 (5) TMI 334
  Imposition of penalty - Value which was charged by them was lower than the value which is charged by them for the same grade and quality of final products to other customers on the basis of validation of advance licence in their favour - Held that:- Show-cause notice dated 13.04.2007 invoking extended period seems to be erroneous, in as much as the invoices and the documents which are produced before us indicate that the appellant was indicating on the invoices that the clearances made by them were in fulfilment of export obligations on invalidating the licence in their favour. Appellant's records were audited by the departmental officers and the valuation of the finished goods was accepted by them as there is no adverse audit report. Appellant had been availing the benefit of ratio laid down by the Tribunal in the case of IFGL Refractories Ltd. which indicated that such reduction of the price to the customers who invalidated the licence cannot be called as additional consideration. Show-cause notice which invokes the extended period and the order-in-original that conforms the demand on the ground that there was a suppression and mis-statement of the facts is unsustainable, as there is nothing on record to indicate that there was suppression or willful mis-statement on the part of the appellant with intention to evade duty. Appellant was taking the benefit of the ratio laid down by the Tribunal in the case of IFGL Refractories Ltd. [2001 (5) TMI 56 - HIGH COURT AT CALCUTTA], should have on his own paid the duty liability for the period from 09.08.2005 to December 2005, when the Hon'ble Apex Court upturned the order of the Tribunal. To that extent we are of the view that the appellant is required to pay the Central Excise duty and interest thereof. - the penalty imposed by the adjudicating authority is unwarranted, therefore, the penalty is set aside. - Decided in favour of assessee.

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• 2015 (5) TMI 333
  Confiscation of goods - Imposition of redemption fine - Clearance of goods without payment of duty - Misdeclaration of goods - Held that:- Statement of truck driver is crucial who has stated that they were carrying out the goods from Sambhal and going to Rampur. This statement has not been verified / controverted by the Revenue with any evidence. Moreover, the Form 21 of UP state sales tax also supports the case of appellants that they have procured the goods from farmers. In these circumstance's Revenue has made the case only on the basis of test report of Shriram Institute to say that as goods are having 26% of Mentha Oil therefore are not Mentha Oil but of DMO. In fact, DMO carries more than accumulated solo impurities which fact is ignored,. Moreover the statement of truck driver and Form 21 supports the case of the appellant, as no statement of farmers has been recorded i.e. also support the case of the appellant. In these circumstances, goods are not required to be seized at all. Therefore, as the goods are not required to be seized, goods are not liable for confiscation consequently redemption fine is set aside as redemption fine is not imposable and penalty on Shri Surrender Kumar Gupta is not imposable. In these circumstances, impugned order is set aside. - Decided in favour of assessee.

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• 2015 (5) TMI 332
  Undervaluation of goods - Mutuality of interest - interconnected undertaking - Burden of proof - Held that:- It is established fact on record that partners of the appellant are the directors of the buyer company i.e. NGA Steels Pvt. Ltd. But to prove mutuality of interest, causing prejudice to the interest of revenue, the essential ingredient of influence over price of the appellant is absent. Show-cause notice does not speak about the mode of transport resulting in undervaluation. Mere allegation that there was mutuality of interest remained unproved when burden of proof was on Revenue in this regard. - Invoking of Rule 10 of the Valuation Rules on the allegation of interconnected undertaking would have been appreciated had there been material brought on record to show that such an interconnection caused prejudice to Revenue by undervaluation made by the appellant. But, that is also not the case. - Decided in favour of assessee.

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• 2015 (5) TMI 331
  Waiver of pre deposit - manufacturers of Pan Masala and Gutkha - interpretation of the first proviso to Rule 8 of the PMPM Rules - Held that:- Rule becomes applicable when during a per month, a manufacturer of Gutkha/ Pan Masala commences the manufacture of pouches of a "new RSP" on an existing machine by which he was earlier manufacturing pouches of a different RSP. The point of dispute is as to what is the "new RSP" and whether a RSP different from the existing RSP, but of the same RSP slab of the different RSP slabs mentioned in Rule 5, can be treated as a "new RSP". - new RSP referred in first proviso to Rule 8 would be the RSP of a different slab, and not the RSP of the same slab. We are, therefore, of the prima facie view that the impugned order which treats the RSP same slab i.e. ₹ 50 Paisa per pouch and ₹ 1 per pouch as different RSPs is not correct. We find that the same view has been taken by the Tribunal in the cases of Phoolchand sales corporation vs. CCE Lucknow (2012 (11) TMI 476 - CESTAT, NEW DELHI) and M/s Kanti Chemicals vs CCE Kanpur (2015 (4) TMI 534 - CESTAT NEW DELHI). In view of this the requirement of pre-deposit of the duty demand interest there on and penalty is waived for hearing of the appeal and recovery thereof is stayed - Stay granted.

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• 2015 (5) TMI 330
  Duty demand - Held that:- Legislature has thoughtfully enacted that when common input is used in manufacture of excisable and non-excisable goods and no evidence of allocation of input is led, the levy @ 10% by law is warranted. Therefore plea of appellant that 10% levy is unwarranted is not entertainable when no evidence is on record to show that allocation is verifiable. - Verification ordered - Decided conditionally in favour of assessee.

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• 2015 (5) TMI 329
  Waiver of pre deposit - Denial of CENVAT Credit - Capital goods - Held that:- Applicant M/s Tata Steel Ltd has availed cenvat credit on the capital goods sold/ supplied by M/s L & T, which were later installed and used in or in relation to the manufacture of finished goods in their premises, a fact not in dispute. At this stage, it is not clear as to how and under what provision, the cenvat credit on the capital goods could be held inadmissible, as undisputedly, the said capital goods are installed in their factory and continued to be in their possession and used in the manufacture of finished goods. Also, prima facie it is not understandable as how payment of service tax by M/s L&T Ltd. treating the project as works contract, would deprive M/s Tata Steel Ltd to avail credit on the duty paid capital goods sold/supplied. Thus, we are of the opinion, that the Applicants could able to make out a prima-facie case for total waiver of pre-deposit of dues adjudged. Consequently, pre-deposit of dues adjudged against all the Applicants are waived and its recovery is stayed during pendency of appeals - Stay granted.

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• CST, VAT & Sales Tax

• 2015 (5) TMI 340
  Validity of order of Tribunal - Whether the Hon’ble Tribunal has erred in deciding the appeal on merits despite the fact that the first appellate authority dismissed the appeal for failure to deposit the pre-deposit - Held that:- In view of the catena of decisions of this Court and the subsequent recent decision of the Division Bench of this Court in the case of City Tiles Limited (2015 (2) TMI 838 - GUJARAT HIGH COURT), it was impermissible for the learned Tribunal to decide the appeals on merits when the appeals before the learned Tribunal were against the orders passed by the first Appellate Authority dismissing the appeals on the ground of non-deposit of the amount of pre-deposit. - Matter remanded back - Decided in favour of Reveue.

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• 2015 (5) TMI 339
  Imposition of penalty under S.72(2) of the KVAT Act - Understatement of tax liability - Held that:- Imposition of penalty under S.72(2) of the KVAT Act was not warranted in the present case - Once a revised return has been filed and accepted by the Department, the original return gets obliterated and the only return which remains for consideration would be the revised return, as there cannot be two live returns pending consideration of the Department. In the present case, as a matter of fact, not only the revised return had been filed by the petitioner, but the same was also accepted by the respondents, and the validity of the revised return is not in question or in dispute. Once the revised return has been accepted and acted upon by the parties, then it is only the revised return which has to be taken as the sole return for the purpose of sub-section (2) of S.72. For the prescribed tax period, the return to be considered was the revised return filed on 16.3.2009 and not the original return filed on 20.02.2009, which had been nullified or obliterated after the filing and acceptance of the revised return. Then, it cannot be said that there was any understatement of the tax liability by the petitioner to any extent in its revised return (which was the only return to be considered), as in terms of the said revised return, the entire tax along with interest, had been paid. In such view of the matter, we are of the opinion that in the facts of the present case, the provision of sub-section (2) of S.72 of the KVAT Act would not be attracted. Imposition of penalty is not being automatic unless the intention to evade tax is made out or any malafide act is made out, the penalty cannot be imposed." Although the reasons for arriving at such conclusion in the aforesaid case were different, but in the said judgment also it has been held that imposition of penalty in the facts similar to the facts of the present case, could not be justified under S.72(2) - Decided in favour of assessee.

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• 2015 (5) TMI 338
  Whether the Tribunal has erred in not appreciating that the assessment order passed under Section 41 (7) of the Sales Tax Act would not be governed by the time limit prescribed under Section 42 (1) of the Act - Held that:- For applying the time limit as provided under Section 42(2) of the Act, the condition precedent is issuance of notice under subsection 6 of the 41 of the Act, and only, thereafter the question of applying time limit of eight years or four years may arise. But not in a case where no notice under Section 41(6) of the Act has been issued. Therefore, all assessment barring the assessment made after issuance of the notice under Section 41(6) of the Act, would stand covered by the provisions of Section 42(1) of the Act for the time limit within which the assessment has to be completed. The second reason is that subsection 6 of Section 41 of the Act does not include the contingency of non filing of the return, but rather the basic requirement is that the registration is not obtained or the person who has failed to apply the registration within the time prescribed. In any event as observed by us herein above, Section 41(7) is no independent mode of assessment but rather a step in furtherance to the assessment which is applicable to both type of assessment, either under Section 41(3), 41(4) and also 41(5) of the Act as well as for Section 41(6) of the Act. It cannot be said that merely because a mode was undertaken under Section 41(7) of the Act, the limitation provided under Section 42(1) of the Act for completing the assessment, would not be applicable. It is hardly required to be stated that even in case where the assessment is to be made, the examination of books of accounts or the consideration of books of accounts will be one of the aspects, to be considered before finalising the assessment. If the appropriate books of accounts are maintained, the details of return can be verified, but if not maintained, and the conditions are satisfied, subsection 7 of Section 41 of the Act may be invoked. But thereby, it cannot be said that such is an independent mode of assessment. Further, Section 42 of the Act recognizes only two type of assessment, one in a case where the notice under subsection 6 of the Section 41 has been issued and the another assessment would be under Section 41(3) or 41(4) with 41(5) of the Act. - Tribunal has not committed error in holding that the assessment was barred by Section 42(1) of the Act - Decided against Revenue.

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• 2015 (5) TMI 337
  Determination of total taxable sales value - respondent has placed reliance upon some material which are not made available to assessee by the second respondent - violation of principles of natural justice - Held that:- Perusal of the impugned proceedings would disclose that primary reliance was placed on the website entries relating to M/s.S.K.S. Industries, Coimbatore having TIN No.33732124475 and the assessment notice came to be passed on the basis of the said information. In the considered opinion of the Court, non-furnishing of information, result in prejudice to the petitioner to put forth his defence in proper and effective manner. - Decided in favour of assessee.

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• Wealth tax

• 2015 (5) TMI 321
  Scope and ambit of section 40(3)(vi) of the Finance Act, 1983 - Whether the Hospital property would be subjected to wealth tax under the Wealth Tax Act, 1957 - the contention of the appellant is that the Hospital building should be treated as “office” which is used for the purposes of its business. - Held that:- For the exclusion the 'hospital' must be one held by an industrial unit for the welfare of its employees. Thus the intention of the legislature as can be understood from this internal aids is that the legislature did not intend to exclude all the buildings which are used for the purpose of its business and that it was intended to exclude only such of those buildings which are specifically mentioned as excluded in clause (vi) which are used for industrial purposes and not for all business purposes - Decision of High Court in the case of High Court [2003 (3) TMI 36 - KERALA High Court] sustained - Decided against assessee.

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• Indian Laws

• 2015 (5) TMI 322
  Non hearing of appellant's petition - Non adjudication of request for determination of stamp duty - Held that:- When the application dated 22.05.2012 was made, to respondent nos. 2 and 3, for adjudication, that application was preferred under Section 31 of the Act. Secondly, there was no order of adjudication passed, which is why, the petitioner approached this court by way of a writ petition. The direction issued by this court led to passing of the order on petitioner’s several applications for adjudication, made in that behalf. Lastly, the impugned order dated 11.02.2013 has, however, been passed by respondent no.3 by taking recourse to Section 47A of the Act. - respondents will have to survive or fall by what is adverted to in the impugned order. The counter-affidavit filed on behalf of the respondents cannot portray a stand different from that which is reflected in the impugned order. The validity and/or the legal tenability of an order passed by the statutory authority has to be gauged from the reasons supplied in the order. The order of the statutory authority cannot be sustained or supplemented by fresh reasons supplied, in the shape of an affidavit. Impugned order dated 11.02.2013, is set aside. The respondent no.3 will accord full opportunity to the petitioner to present her case, and in that behalf, will follow scrupulously the mandate of Section 47A of the Act and the provisions of 2007 Rules. Respondent no.3, will also make, the relevant inquiry, if found necessary, as provided under Section 47A of the Act. Needless to say, the relevant exercise in this behalf will be completed as expeditiously as possible, though not later than twelve (12) weeks - Decided in favour of appellant.

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