TMI Tax Updates - e-Newsletter
May 2, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
Wealth tax
TMI SMS
Highlights / Catch Notes
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Income Tax:
Satisfaction for initiation of penalty proceedings u/s.271(1)(c) is not discernible from the order of assessment. - The show cause notice u/s. 274 is also defective - No Penalty - AT
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Income Tax:
Disallowance of staff welfare expenditure - Assessee being a corporate body so question of expenditure being personal in nature does not arise - 100% claim of expenditure allowed - AT
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Income Tax:
Period of limitation for passing the block assessment order - benefit of exclusion of the period during which there was a stay order against the order of special audit, is available to Revenue - SC
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Income Tax:
Assessment against non-existing companies to be held as void ab initio - AT
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Income Tax:
Interest under section 244A of the Act on MAT credits - assessee is entitled to be allowed interest under section 244A of the Act on refundable taxes after giving credit of brought forward MAT credit - AT
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Income Tax:
Exclusion of bad debts as sundry balances written off from the operating expenses on the ground that the same relates to domestic sales - AT
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Income Tax:
Interest on finance cost is not to be excluded while calculating PLI of the assessee company being non-operating expenses - AT
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Income Tax:
Period of limitation for passing the block assessment order - limitation period is to be counted from the last date of search when the search operation completed - SC
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Income Tax:
Capital gain u/s 50B - transferee has taken over all fixed assets, specified current assets and not taken over all the loan and liabilities - sale of the fixed and current assets is out of the purview of slump sale - AT
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Income Tax:
Disallowance of interest paid to the bank as well as to the other parties - Revenue authorities have failed to bring on record any cogent evidence and material to show that the borrowed funds have been utilized for the purposes of investment and were not used for the business purposes - claim allowed - AT
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Income Tax:
Joint development agreement - Valuation of the capital gain should be appropriate to adopt the FMV/asset as deemed consideration, but not cost of the construction - AT
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Income Tax:
TDS u/s 194H - assessee paid the incentive to the dealers for the purpose of promotion in selling its goods beyond a targeted quantum. - No TDS liability - AT
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Income Tax:
TDS liability - Factoring/discounting charges cannot be treated as interest for the purpose of 194A - HC
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Customs:
It was not open to the DRI to have proceeded to issue a Corrigendum/Addendum to the SCN without adopting the due course, since in terms of Section 127F(2) of the Act, the exclusive jurisdiction to deal with the matter vested with the CCESC - HC
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Wealth-tax:
Determination of value of assets for wealth tax - assessee was never the owner of the land and thus the valuation in respect of Wealth Tax was incorrectly done by the Assessing Officer.- AT
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Central Excise:
Cenvat credit on inputs namely, fabrics lying in stock or in process - Grey fabrics directly purchased by processor from manufacturer, that would be undisputedly are input with the processor and merely because a dealer is introduced in between manufacturer and the processor, nature of product as input cannot undergo any change - entitled to avail credit - AT
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Central Excise:
Refund claim in respect of excess paid duty - proceeding of rebate and proceeding of refund are two different proceedings - appellant have rightly claimed the refund of 4% excess paid duty - AT
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Central Excise:
Exemption from duty - footwear made by the appellant being essentially of plastic material, and giving the normal meaning of plastic footwear, the exemption is rightly available to the appellant - AT
Articles
Notifications
News
Case Laws:
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Income Tax
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2016 (4) TMI 1133
Period of limitation for passing the block assessment order - Whether on the facts and circumstances of the case, the interim order dated 24th August, 2000 staying the direction for special audit contained in order dated 29th June, 2000, could be construed as amounting to stay of assessment proceedings? - Held that:- In the estimation of the assessing officer special audit was essential for passing proper assessment order. If the court, while undertaking judicial review of such an order of the assessing officer directing special audit ultimately holds that such an order is wrong (for whatever reason) that event happens at a later date and would not mean that the benefit of exclusion of the period during which there was a stay order is not to be given to the Revenue. Explanation 1 which permits exclusion of such a time is not dependent upon the final outcome of the proceedings in which interim stay was granted. - Decided in favour of revenue As noticed the revenue authorities visited and searched the premises of the appellants for the first time on 22nd June, 1998. In the panchnama drawn on that date, it was remarked 'temporarily concluded', meaning thereby, according to the revenue authorities, search had not been concluded. For this reason, the respondent authorities visited many times on subsequent occasions and every time panchnama was drawn with the same remarks, i.e. 'temporarily concluded'. It is only on 5th August, 1998 when the premises were searched last, the panchnama drawn on that date recorded the remarks that the search was 'finally concluded'. Thus, according to the respondents, the search had finally been completed only on 5th August, 1998 and panchnama was duly drawn on the said date as well. The appellants, in the writ petition filed, had no where challenged the validity of searches on the subsequent dates raising a plea that the same was illegal in the absence of any fresh and valid authorisation. On the contrary, the appellants proceeded on the basis that search was conduced from 22nd June, 1998 and finally concluded on 5th August, 1998. On the aforesaid facts and in the absence of any challenge laid by the appellants to the subsequent searches, we cannot countenance the arguments of the appellants that limitation period is not to be counted from the last date of search when the search operation completed, i.e. 5th August, 1998. Therefore, this issue is also decided in favour of the respondents.
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2016 (4) TMI 1132
TDS u/s 194A - Non deduction of tds - factoring/discounting charges - disallowance under Section 40(a) (ia) - Held that:- No factual basis for the AO to have disbelieved the Assessee's explanation and simply treat the entire amount as interest. The question of disallowing the entire amount under Section 40(a) (ia) on the ground that the TDS was not deducted in terms of Section 194A of the Act did not arise. The Court is unable to find any legal infirmity in the view expressed by the ITAT that the factoring/discounting charges in the present case cannot be treated as interest for the purpose of 194A. - Decided in favour of assessee
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2016 (4) TMI 1131
Capital gain u/s 50B - whether transfer of the division as slum sale in terms of the provisions of Sec. 2(42)(C) - Held that:- From the definition of slump sale and undertaking”, it is clear that the provision of Sec/ 50B of the Act will be attracted when an undertaking is transferred for lump sum consideration without values being assigned to the individual assets and liabilities in such sales. In the instant case the transferee has taken over all fixed assets, specified current assets and not taken over all the loan and liabilities. Therefore in our considered view the transaction of sale of the fixed and current assets is out of the purview of slump sale as specified under section 50B of the Act. - Decided in favour of assessee Disallowance of compensation on account of machine not performing at an agreed level - Held that:- The compensation was awarded for not meeting the performance parameters. The compensation was not computed with the reference to the cost of the said machines. The compensation paid was neither in form of discount nor against the price nor it was in the nature of subsidy nor it was in the nature of the reimbursement. We further find that it was not even compensation for the recouping the damage caused to the plant and machinery. None of the conditions specified in Sec. 143(1) of the Act for deducting the actual cost from value of the machines were applicable to the compensation. Therefore we are inclined not to reduce the actual cost of the plant and machinery by the amount of compensation - Decided in favour of assessee Allowance of claim of assessee’s bad debt - Held that:- As find from the order of learned CIT(A) we find that the bad debts claimed by the assessee in the year under consideration were recovered in the subsequent AY 2006-07 and offered for taxation. The ld. DR could not bring anything on record contrary to the finding of the learned CIT(A). Therefore, in our opinion, that the debtors shown by the assessee were the genuine. - Decided in favour of assessee Disallowance u/s 43B for delay in deposit of PF and ESI contributions - Held that:- As from the assessment order we find that all the payment of employees contribution were made before the due date of filing of Income Tax Return as specified u/s.139(1) of the Act. Now, this issue stands covered in favour of assessee and against the Revenue by the decision of Hon’ble jurisdictional High Court in the case of CIT v. M/s Vijay Shree Limited [2011 (9) TMI 30 - CALCUTTA HIGH COURT ] - Decided in favour of assessee
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2016 (4) TMI 1130
Validity of assessment against non-existing companies - Held that:- First two companies (OB&RPL and OSPL) are without reference to the name of the amalgamated company-OCL. Therefore, the assessments made are obviously on the amalgamating companies. Regarding the third one, there is a reference to the cited company-OCL as shown in the brackets below the OB&RPL. But, the PAN mentioned against PAN / GIR No. relates to the amalgamating company-OB&RPL. Therefore, we infer that the identity of the assessee, on which assessments were made, relates to the name of the amalgamating company. In all three cases, the statutory notices were issued in the name of the amalgamating company. Considering the above, we are of the opinion that the assessments completed in the names of the non-existing companies and therefore, they have to be held as void ab initio - Decided in favour of assessee
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2016 (4) TMI 1129
Valuation of the capital gain - joint development agreement - adoption of FMV/asset as deemed consideration or cost of the construction - Held that:- Because at the time of signing JDA the capital gain has to be computed only on the guidance value of the land. Even otherwise, if any capital gains to be accrued in future in favour of assessee after receiving the possession of the property. Certainly that would also be subject to capital gains. Therefore, in our final conclusion valuation of the capital gain should be appropriate to adopt the FMV/asset as deemed consideration, but not cost of the construction. - Decided against revenue
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2016 (4) TMI 1128
TDS u/s 194H - non deduction of tds - payment of incentive to the dealers for the purpose of promotion in selling its goods beyond a targeted quantum - Held that:- In the present case, the ld. CIT(A) examined the copies of agreements of dealers and he found that dealers are the receipts of the amount given by the assessee as incentive. The dealers are buying the goods from the assessee on their own risk. The assessee paid the incentive to the dealers for the purpose of promotion in selling its goods beyond a targeted quantum. Therefore, we see no relation of principal and agent as agitated by the ld. DR. If that be the case, the applicability of section 194H and invocation of section 40(a)(ia) of the Act for violation of section 194H is bad under law. Thus, it is clear that the liability to deduct TDS under section 194H of the Act arises only when a person acts on behalf of another. The incentives received by the distributors/dealers is neither contractual transaction nor payment commission or brokerage under the relation of principal and agent and which are a strict requirement of section 194H of the Act to deduct the TDS. Therefore we hold that the payments paid to the distributors/ dealers by way of incentives would not come under the purview of section 194H and invocation thereon under section 40(a)(ia) is bad and hence no interference is required with the order of the CIT(A), therefore, it is confirmed. - Decided against revenue.
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2016 (4) TMI 1127
Disallowance of interest paid by the appellant to the bank as well as to the other parties - Held that:- The assessee was able to establish that he had incurred the expenditure wholly and exclusively for the purpose of business and therefore there is no justification for the revenue to disallowance the interest component. The revenue cannot claim to put itself in the armchair of the businessman and decide how much is reasonable expenditure. The revenue is required to examine the issue from the perspective of the prudent businessmen rather from its own angle. Revenue authorities have failed to bring on record any cogent evidence and material to show that the borrowed funds have been utilized for the purposes of investment and were not used for the business purposes - Decided in favour of assessee
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2016 (4) TMI 1126
Interest under section 244A of the Act on MAT credits - Held that:- Respectfully following the aforesaid decision of the Hon'ble Bombay High Court in the case of APAR Industries Ltd. (2010 (4) TMI 151 - BOMBAY HIGH COURT ), we hold and direct that assessee is entitled to be allowed interest under section 244A of the Act on refundable taxes after giving credit of brought forward MAT credit. Credit for brought forward for allowance of MAT - Held that:- Credit for brought forward MAT is to be given from gross demand before interest is charged under section 234B. See APAR Industries Ltd. (2010 (4) TMI 151 - BOMBAY HIGH COURT )
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2016 (4) TMI 1125
Non exclusion of non-operating expenses i.e. interest and finance cost while calculating the profit level indicator (“PLI”) i.e. Operating Margin to Operating Expenses of the Appellant - Held that:- The TPO noted that the Dispute Resolution Panel (DRP), Pune vide order passed under section 144C(5) of the Act relating to assessment year 2007-08, dated 20.05.2011 had directed to exclude the import licence fees of ₹ 4.54 crores from the segmental profit and proportionate unallocated expenses shown for working out PLI of comparables. However, the figure of segmental revenue of ₹ 86.97 crores was taken from Annual Report of ADF Foods Ltd., which did not include the income from import of licence. After looking at the figures of M/s. ADF Foods Ltd., the TPO observed that the income from import of licence was not at all taken into account for working out the PLI and as such the assessee’s request to calculate PLI was found to be not accepted. Further, the claim of the assessee to exclude derivative losses from operating losses was also held to be not correct because the same was part of business and hence, could not be excluded from the expenses. Even in the case of comparable companies i.e. M/s. ADF Foods Ltd., there was derivative loss of ₹ 18.28 lakhs and the same was considered as part of operating expenses, while working out the PLI on segmental profit. Exclusion of bad debts as sundry balances written off from the operating expenses on the ground that the same relates to domestic sales was also refused as the assessee had not furnished complete details in support of its claim. Direction to Assessing Officer / TPO to exclude derivative losses from the operating expenses of tested party i.e. the assessee before us and also from the operating expenses of comparable M/s. ADF Foods Ltd. while working out the PLI of both the concerns. Computation of PLI - Held that:- While computing the PLI of concern of costs, which are relatable to carrying on of the business are to be considered as part of operating margins / operating expenses. Only such items which are not relatable to carrying on of business are to be excluded while computing the operating margins / operating expenses of the assessee, in turn, working out the PLI of the company. The assessee before us has claimed that the non-operating expenses of interest on finance cost needs to be excluded while calculating PLI of the assessee company. The perusal of Profit & Loss Account of the assessee company shows that the major revenue is from business carried on by the assessee and some part of the income is shown as other income. We find no merit in the claim of the assessee that the interest on finance cost is to be excluded while calculating PLI of the assessee company being non-operating expenses. The assessee has failed to furnish the complete details in this regard and in the absence of the same, we reject the claim of the assessee.
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2016 (4) TMI 1124
Penalty u/s.271(1)( c ) - Held that:- In the present case satisfaction for initiation of penalty proceedings u/s.271(1)( c) of the Act is not discernible from the order of assessment. The show cause notice u/s.274 of the Act is also defective. The same is also enclosed as Annexure A to this order. Following the decision referred to above, we hold that the penalty imposed on the Assessee u/s.271(1)( c) of the Act cannot be sustained and the same is directed to be cancelled. Accordingly, the additional ground raised by the assessee in all the four appeals are allowed. The other ground raised by the revenue and assessee are dismissed as infructuous. - Decided in favour of assessee.
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2016 (4) TMI 1123
Revision u/s 263 - non entitled to deduction u/s. 80P - Held that:- CIT has not discussed as to how the assessee society would fall under the definition of a co-operative bank. The order of the ld. CIT is a non-speaking order. He, without assigning any cogent and convincing reason, has set aside the order of the AO. Thus order of the AO cannot be said to be erroneous or prejudicial to the interest of the Revenue. The order of ld. CIT passed u/s. 263 of the Act is thus not sustainable in the eyes of law and same is set aside. - Decided in favour of assessee
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2016 (4) TMI 1122
Rejection of books of accounts - variations with respect to month-wise consumption of raw material vis-à-vis finished products - provision of section 145(3) invoked - Held that:- On identical issue in A.Y.2008-09, an elaborate discussion has been made by the Tribunal and after considering the factual matrix, it was concluded that for invoking the provision of section 145(3) of the act to reject the books of accounts, by the Assessing Officer, it can be done only when, the Assessing Officer is not satisfied with respect to the correctness of completeness of the accounts maintained by the assessee. We find that the assessee duly explained the alleged variations with respect to month-wise consumption of raw material vis-à-vis finished products and the same were disbelieved by the Assessing Officer without finding any fault therein. The rejection of books of accounts by the Assessing Officer is inconsistent with the requirement of section 145(3) of the Act, thereby, we affirm the stand of the ld. Commissioner of Income Tax (Appeals) in deleting the impugned addition - Decided in favour of assessee
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2016 (4) TMI 1121
Transfer pricing adjustment - Held that:- CIT(A) is not bound by the TP study undertaken by the Assessing Officer for T P adjustment, we are of the considered view that the contentions raised by the Ld. D.R. are not sustainable and no ground is made out to interfere into the findings returned by Ld. CIT(A) for the following reasons: i) that when the Assessing Officer has lost sight of the fact that trading activities have been carried out by the assessee company for a period of five months only during the year under consideration and in such a short period it is not feasible for expenses of Indian Branch Offices to be set off by income generated out of trading activities because during the initial years of operation, expense of a company ought to be at higher side; ii) that the Assessing Officer has merely taken GP rate @ 16.57% of assessee’s group companies by rejecting TP study adopted by the assessee company as against GP rate claimed by the assessee @ 14.44% by comparing it with the group as a whole without discussing the total number of functions being carried out by the Altria group; iii) that the Assessing Officer has also lost sight of the fact that assessee company having branch offices in India, is a distributor having responsibility for its business operation in India including market risk, price risk etc. So, keeping in view the facts, Ld. CIT(A) has rightly applied the resale price method (RPM) for benchmarking, which is the most appropriate method in this case;; iv) that gross margin of the assessee company cannot be compared with the group company as the assessee company is an importer and distributor of cigarettes in India without any value addition; v) that when the assessee company is not maintaining any warehouse nor it has any R&D activities and trade mark is also owned by the group company, manufacturing is also done by the group company and as such FAR of the assessee is not comparable with the FAR of its group company; vi) that Ld. CIT(A) after considering all these facts, TP study undertaken by the assessee company initially on the basis of two comparables showing GP @ 6.81% as against GP rate of assessee company @ 14.44% and during the appellate proceedings, the appellant filed fresh search on the basis of three comparables showing average GP @ 18.31% has rightly held the international transaction at arms length; vii) that Ld. CIT(A) has also rightly considered the detailed comparison of assessee’s distribution agreement with another company namely God fray Phillips India showing GP rate of 4.42% and this comparison is showing distribution segment of the appellant at Arm’s Length Principle; viii) that Arm’s Length nature of distribution segment of assessee company has otherwise not been disputed by TPO during Assessment Year 2005-06; ix) that a bare perusal of the distribution agreement dated 01.09.2013 entered into between the assessee company with Fillet Morris Products SA shows that assessee company was appointed as non exclusive distributor of the product manufactured by the assessee in the territory of India making it ineligible to compare with its group company; x) that it is further agreed in the agreement (supra) that the assessee company shall sell the products of its parent company at prices agreed by the parties from time to time and in these circumstances, it was not feasible to acquire the operating profit rates of the group arbitrarily for benchmarking without considering the assessee’s duly audited account; xi) that Ld. CIT has rightly came to the conclusion on the basis of TP study adopted by the assessee company during appellate proceedings vide which three comparable companies have been taken showing GP rate of three new comparables @ 18.31% as against GP rate of assessee company shown @ 14.44% and by applying the safe harbour rule having benefit of + 5%, the TP study adopted by the assessee company is at arm’s length; xii) that fresh search brought out on record by the assessee company for TP study goes to prove that the assessee company has brought out on record detailed comparison of its distribution agreement with the comparable company namely God fray Phillips India showing GP rate of 4.42% which is much lower than the assessee company; xiii) that the contention of Ld. D.R. that fresh TP study adopted by the assessee during appellate proceedings, cannot be relied upon without providing opportunity of being heard to the A.O. /TPO, is not tenable because the fresh TP study adopted by the assessee apparently goes in favour of the Revenue showings distribution segment of the assessee at arm’s length principle; xv) that the A.O. has also arbitrarily disallowed various expenses claimed by the assessee without specifying how and which of the expenses are not allowable.
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2016 (4) TMI 1120
Disallowance of staff welfare expenditure - Held that:- As find from the order of the AO, the detail of the expenditure reflects that there is no material to show that the said expenditures were not incurred. We have also gone through the contents of Sec.37 of IT Act, where there are certain bars for allowing the expenditures described in Section 31-36 of the IT Act. The wordings of Sec.37 reflects that if the expenditure not being Capital or personal expenditure but incurred wholly and exclusively for the purpose of business or profession, it shall be allowed to be excluded in computing the income eligible under the head “profits and gains of business or profession”. In our considered view, both the authorities below have acted on presumption and on their notions as seen from the AO’s Order, he also considers the expenditure as personal in nature . Assessee being a corporate body so question of expenditure being personal in nature does not arise. It is clear that the said staff welfare expenses were incurred directly and exclusively for the purpose of business, because the staff welfare is the paramount in social arena for the growth and development of business therefore, we are the considered view to allow 100% expenditure qua staff welfare expenditure claim of the Assessee. Deduction under the head bad debt - Held that:- After 1st April, 1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. Respectfully following judgment of Apex Court in M/s TRF Limited Vs CIT (2010 (2) TMI 211 - SUPREME COURT ), we are inclined to allow deduction under the head of bad debt. Disallowance under the head ‘commission’ - Held that:- As the AO allowed more than 75% of the claimed amount under the head “commission”, but disallowed to the tune of ₹ 5.00 lakhs only on the presumption that what was the necessity of paying the commission to unknown persons and it was also not clear as to what are the nature of services rendered by the recipients to the companies. When the major portion of the amount of commission has been allowed by the AO, there is no material/evidence to prove contrary to the claim of the assessee therefore, we feel it appropriate to allow 100% under the head ‘commission’. Ad hoc disallowance on motor vehicle hiring expenses - Held that:- AO added ₹ 5.00 lakhs out of ₹ 80,69,000/- just on the assumption and on wrong presumption that the element of personal use cannot be totally denied. Even otherwise, learned CIT(A) also failed to give any special reason while confirming the disallowance. Therefore, we feel it appropriate to allow the claimed amount of ₹ 80,69,000/- under the head motor vehicle hiring expenses as deduction in its entirety . Computation of deduction u/s 10A - whether the export turnover should not be reduced from the figure of export turnover - Held that:- AO was pleased to reduce the aforesaid amount from the export turnover for the reason that the same has not been brought into India, till the date of order passed u/s 143(3) of the IT Act, or even during the appellate proceedings, the assessee failed to bring on record any evidence to substantiate the above amount that has been received in or brought into India. Hence we are inclined to dismiss the instant ground raised by the Assessee. Telecommunication expenses - Held that:- AO felt that major amount would have been incurred in respect of export than for other purpose, therefore he had taken the value of telecommunication at ₹ 2,00,00,000/- as adopted. The Ld CIT (A)n failed to adjudicate this head. We feel that the ld AO adopted value at the higher rate only on the assumption but not on any basis relevant to, hence we restrict the amount under head of telecommunication to ₹ 73,73,107/- only and the same can be excluded but not otherwise. Expenses Incurred Towards Overseas Travelling - Held that:- As it is evident from the operative part of order that the Ld AO only on assumption held that the Assessee is providing technical services and coming to this conclusion, failed to point out any material in support of the conclusion. The ld. AO also taken expenses incurred towards overseas travelling of ₹ 10.00 Crores and an amount of ₹ 15 lakhs being expenditure incurred on payment of commission to one Mr. Les Lawrence, a foreign national only on estimate basis. We feel it appropriate that because the Ld AO failed to bring any material on record qua providing of technical service by the Assessee and even otherwise , the amount worked out also to be on estimate basis which seems to be on assumptions therefore the said amount of ₹ 10 Crores and 15.00 Crores under the head of expenses incurred towards overseas travelling and expenditure incurred towards commission, respectively are not to be excluded, hence, exclusions made by the ld. AO are set aside. Consideration received for services rendered to overseas clients outside India - Held that:- As it reflects from the relevant part of the order passed by the learned AO that he adopted the figure under the aforesaid head at the rate of 20% of the above receipts and worked out to ₹ 2,94,75,502/-. We have also considered the Clarificatory circular no.1/2013 dated 17-01-2013 issued by CBDT to address various contentious issues leading to tax dispute in cases of entities engaged in export of computer software which are availing tax benefit under section 10A, 10AA and 10B of the IT Act, 1961. Hence, we are of the view that the said amount cannot be excluded from export turnover, hence exclusions made by the ld. AO under the instant head is set aside.
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2016 (4) TMI 1119
Registration u/s 12AA denied - Held that:- Undisputedly, the assessee has taken receipt of donation as part of its income and the same was applied for charitable purposes and these facts are borne out from the consolidated balance sheet of the assessee available at page 8 of the compilation of the assessee. The Revenue has not made out a case that the donation received by the assessee was not taken as part of income and was applied for non-charitable purposes. The allegation of the Revenue is only that the donation was received by the assessee on making payment in cash to M/s Herbicure Health Care Bio Herbal Research Foundation, but to substantiate this claim, no evidence was brought on record by the Revenue. It was simply an oral assertion and moreover the assessee was not afforded any opportunity to cross-examine the witness, whose statement was relied on by the ld. Commissioner of Income Tax (Exemptions) for cancellation of registration under section 12AA of the Act earlier granted to the assessee. Even assuming, for the sake of argument, that if the assessee has received donation on making payment in cash and it may be his own money which was introduced in the trust through circuitous means, but it was applied for charitable purposes, therefore, it cannot be added under section 68 of the Act. Thus, even on merit, we do not find any force in the allegations raised by the Revenue. The ld. Commissioner of Income Tax (Exemptions) has cancelled the registration under section 12AA of the Act on the basis of conjunctures and surmises, as he has observed in his order that the assessee might have been charging capitation fee from the parents of the students, but in this regard no evidence was brought on record. It is also obvious from the record that the ld. Commissioner of Income Tax (Exemptions) has passed an order on the same day when the assessee has furnished detailed explanation in writing and even without verifying the same. - Decided in favour of assessee.
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2016 (4) TMI 1118
Method adopted for working out the profit - Held that:- The assessee is engaged in the two similar business activities. There were certain common expenditures such as employment cost, administrative cost and depreciation cost which the AO apportioned 100% to the activity i.e. growing and manufacturing of tea leaves of the assessee on the ground that these cost have to be necessarily incurred by the assessee irrespective of any other the business activity. Therefore the allocation of these expenses is not required between the above sources is not required. However the ld. CIT(A) deleted the addition made by the AO. We understand that for any activity of the business several expenses are required to be incurred. The addition has been made by the AO on the surmise that these expenses are fixed in nature. The ld. DR also failed to bring anything on record contrary to the finding of the ld. CIT(A). Hence, we have no hesitation in upholding the order of Ld. CIT(A) and this ground of Revenue’s appeal is dismissed. - Decided in favour of assessee Deduction u/s 80IB - Held that:- The assessee did not submit the relevant details at the time return filing for the deduction under section 80IB of the Act on the presumption that the return of income was filed declaring loss. So there was no point to claim the deduction under section 80IB of the Act. However when the AO framed the assessment under section 143(3) of the Act at positive income then the assessee raised the issue of said deduction. However the same was disallowed by the AO in the absence of sufficient documents in support of the claim under section 80IB of the Act. In the instant case the order of the AO was reversed by the ld. CIT(A) and we upheld the order of the ld. CIT(A). So as a result the loss claimed by the assessee has been restored. Therefore in the event of the loss return filed by the assessee, the question for claiming the deduction under section 80IB of the Act does not arise. Accordingly in our considered view the issue of 80IB of the Act becomes irrelevant for the year under consideration. Therefore we are not adjudicating the same in the light of the provisions of the Act. Hence, we decide this effective ground against Revenue.
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2016 (4) TMI 1117
Taxability of management charges - fee for technical services(FTS)under Article-13(2)(a)(ii) of the India-UK DTAA r.w.s.9(1)(vii) - Held that:- The assessee had received ₹ 14, 78, 35, 401/-as royalty and ₹ 4.65 crores as MS, that it had claimed that managerial-charges, received by it, were not taxable in India, that the AO was of the view that notwithstanding two agreements entire management charges were taxable as FTS, that the FAA had held that half of the MS charges were to be taxed in India, that while deciding the appeal, he had not given any reason as to why 50% of the receipts should be treated as MS, that the asessee as an alternate plea had stated that if any addition was to be made it should have been restricted to 10-15% of the payment. We further find that the FAA had discussed a few services and has stated that same could be treated as MS. But, he has not analysed the bills that would given him a clear and fair idea as to which services were actually rendered by the asessee for the year under consideration and that which could be treated MS or otherwise. Without establishing the primary facts, he should not have decided the issue. We do not find any basis for holding that 50% of the managerial charges should be taxed. In our, opinion, matter needs further investigation and verification, as his order lacks reasoning. Therefore, in the interest of justice, we are restoring back the issue to the file of the FAA for fresh adjudication who will decide the issue afresh after affording a reasonable opportunity of hearing to the assessee. Disallowance of business loss to be set off against long-term capital gain and income from other sources - Held that:- FAA was not justified in denying the setting off of losses arising out of bad dates and leave-encashment and that assessee could avail the benefit of provisions of the Act over the provisions of the DTAA for setting off of losses.
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2016 (4) TMI 1116
Allocation of Head Office expenses to units eligible for deduction u/s 80IB and 10B - only reasoning given by the Ld. Counsel of the assessee is that the head office has its own stream of income and therefore, only 50% of the expenses should be allocated - Held that:- It is an accepted factual position that head office has its own stream of income. Thus, under these circumstances, it cannot be said that the entire expenses incurred by the Head Office/Corporate Office were incurred as common expenses. Therefore, under these circumstances the total expenses of the head office cannot be said to be available for allocation in other units. The Ld. Counsel has tried to justify that 50% of the total expenses of Head Office/Corporate Office, on an ad-hoc basis, should be taken as the expenses pertaining to the income earned by the head office, and balance 50% can be made available for allocation to all the units. But we find that Ld. Counsel has not given any transparent, scientific or concrete basis of bifurcation, nor has he given any reasoning as to why these expenses should be bifurcated on fifty-fifty basis. It is also noted by us that even lower authorities had not examined this aspect from this angle. This issue is likely to have far reaching implications and may create history in assessee’s hands in other years as well. Therefore, principally accepting the stand of the assessee that total expenses incurred by HO/CO are not available for allocation, but for determining that how much portion of these expenses is available for allocation to all the units, we send this issue back to the AO for reexamining this issue and finding out some fair, rational, transparent and scientific basis of bifurcation of these expenses and their allocation among all the units. The AO shall decided this issue afresh after considering all the facts and submissions and evidences as may be brought on record by the assessee in support of its contentions for which the AO shall give adequate opportunity of hearing. The assessee is free to raise all the legal and factual issues in this regard. Thus, with these directions we send this issue back to the file of the AO. - Decided in favour of assessee for statistical purposes.
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2016 (4) TMI 1115
Long term capital gain - apportionment of WDV - Held that:- Assessing Officer had made this addition on protective basis however, since this addition was not made in Asst. Year 2010-11, therefore, the addition was treated as substantive in the year under consideration. The facts in this regard are that the assessee had declared sale of land and building at ₹ 1.20 croes. The Assessing Officer held that since building was a depreciable asset, therefore, sale value is to be reduced from block of assets and land being a non depreciable asset. The long term capital gain is to be computed on sale of such land. The Assessing Officer while computing the long term capital gain apportioned the sale consideration of ₹ 1.20 crores between the land and building wherein he took the estimated value of building at ₹ 20 lac and assigned value of ₹ 1 Crore to land. The Assessing Officer held that since cost of acquisition of property was taken by assessee towards building on which depreciation was claimed in earlier years, therefore, the cost of acquisition of land was taken as Nil and thereby he calculated long term capital gain to the tune of ₹ 1 Crore. The learned CIT(A), on the other hand, apportioned the written down value of land and building as on 31.3.2008 between land and building on the same ratio on which Assessing Officer had apportioned the sale consideration between land and building and therefore, cost of acquisition of land was calculated and after applying indexed of cost of acquisition long term capital gain was calculated. We find that learned CIT(A) has taken a reasoned view and has rightly apportioned the WDV as on 31.03.2008 between land and building and we do not find any infirmity in the same.
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Customs
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2016 (4) TMI 1106
Whether in the light of the statutory power of CCESC to exclusively exercise the jurisdiction of the officer of Customs, the impugned Corrigendum could have been issued on a date subsequent to the CCESC deciding to proceed with the applications filed before it - Respondent submitted that the order passed by the CCESC deciding to proceed with the application under Section 127C of the Act was passed without hearing the DRI. Held that:- the Court notices that there was sufficient opportunity for the DRI, if aggrieved by the order passed by the CCESC, to have challenged that order in accordance with law. However, without adopting that course, it was not open to the DRI to have proceeded to issue a Corrigendum/Addendum to the SCN, since in terms of Section 127F(2) of the Act, the exclusive jurisdiction to deal with the matter vested with the CCESC. Hence, the DRI had, on the date it issued the Corrigendum, no jurisdiction to issue Corrigendum/Addendum which made a very significant change to the SCN whereby the classification of the imported goods was changed and the duty demand correspondingly increased. Therefore, the impugned Corrigendum/Addendum is plainly unsustainable in law as it contrary to Section 127F(2) of the Act. Validity of the Corrigendum/Addendum before the CCESC itself - Held that:- this submission appears to be misconceived since no such Corrigendum/Addendum could have been issued in the first place when the CCESC was seized of the matter. So, the question of the CCESC deciding the validity of such Corrigendum does not arise. Also the Court does not wish to comment on the submission except by noting that it is over two years since the CCESC passed the above order. If the DRI decides to challenge the said order, such petition will be decided on its merits by the appropriate forum. Therefore, the Court quashes the Corrigendum/Addendum to the SCN and the petitioner is permitted to revive its application before the CCESC in terms of the order passed by the CCESC in the matter. - Decided in favour of petitioner
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2016 (4) TMI 1105
Seeking release of goods apprehended from the vehicles - Demand of 40% of value of goods - Deposited the tax demanded by Commercial Tax Tribunal for release of goods - Appellant submitted that truck contained some goods of Indian origin and some goods of foreign origin and, therefore, the goods of Indian origin could not have been the subject matter of proceedings before the Customs Department so, the goods of Indian origin have to be released pursuant to the order passed by the Tribunal and the goods of foreign origin can also be released subject to payment of fine under the provisions of section 125 of the Customs Act. Held that:- it will be appropriate that the petitioners may file a representation before the Superintendent (Prevention), Customs Department, Lucknow Division, Lucknow raising all grievances. The petitioners can also apprise the officer that the goods of Indian origin are outside his jurisdiction and that even the goods of foreign origin can be released subject to payment of fine. If such a representation is filed, we have no reason to doubt that the Superintendent (Prevention), above shall take a decision expeditiously. - Petition disposed of
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2016 (4) TMI 1104
Demand of a sum equivalent to the bank guarantee amount as Customs Duty/Additional Duty of Customs together with interest - Failure to fulfil the export obligations - Licenses permitted the petitioner to import raw materials at 'Nil' rate of Customs duty and NIL rate of Additional Duty of Customs subject to the petitioner fulfilling its export obligations and producing Export Obligation Discharge Certificate (EODC). Held that:- considering that this Court, under similar circumstances, in the case of Jonson Rubber Industries Ltd. Versus Union of India & Others [2016 (4) TMI 1022 - DELHI HIGH COURT] required the Adjudicating Authority to examine the matter afresh in the light of the EODC obtained by the Petitioner therein subsequently, the Court in the present case sets aside the Orders-in-Original dated 31st March, 2014 passed by the Adjudicating Authority in respect of two advance authorization licenses dated 19th April, 2007 and 13th June, 2008 and directs the Adjudicating Authority to consider the matter afresh in light of the Petitioner having obtained the EODC from the DGFT. As regards Advance Authorization Licence dated 30th March, 2006 it is pointed out that the DGFT is yet to issue the EODC to the Petitioner. However, the Petitioner is confident that the DGFT will now issue the EODC without unnecessary delay and if the matter is remanded to the Adjudicating Authority, the Petitioner will be able to produce the EODC. On the strength of the above statement made on behalf of the Petitioner, the Court set asides the order dated 31st March, 2014 passed by the Adjudicating Authority in respect of the Advance Authorization Licence dated 30th March, 2006 and remits the matter to the Adjudicating Authority for decision afresh subject to the Petitioner producing the EODC in respect of such licence. As regards the Advance Authorization Licence dated 25th October 2006, it is stated by the Petitioner that the Petitioner did not avail of the said licence at all and surrendered it by a letter dated 10th June, 2014. It is further pointed out that the DGFT wrote a letter dated 14th March, 2014 to the Commissioner of Customs in this regard and Deputy Commissioner of Customs in fact confirmed the said fact by letter dated 7th May, 2014. The Court is of the view that the Adjudicating Authority requires to take these facts into account and decide the issue afresh. Consequently, the order dated 31st March, 2014 passed by the Adjudicating Authority in respect of the Advance Licence dated 25th October, 2006 is set aside and the matter is remanded to the Adjudicating Authority for a decision afresh in the light of the above facts. - Petition disposed of
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Corporate Laws
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2016 (4) TMI 1101
Restoration of names in the register of the members of the company - Held that:- CLB has considered the matter in detail with regard to the relief sought by the appellants herein insofar as restoration of their names in the register of the members of the company is concerned as per shareholding pattern as on 31/3/2005. As already noted, the appellants have no grievance with regard to that aspect of the matter. But in the latter portion of the impugned order, we find that the CLB has contradicted itself on the one hand by observing that the appellants appearing before the CLB had no locus standi to seek other reliefs while on the other hand by holding that they had not made out a prima facie case to seek the other reliefs. In our view, that is incorrect as once their names were restored in the shareholding pattern as also on restoration of their names in the register of the members of the company, they also had locus standi to seek other reliefs. So far as other reliefs are concerned, we find from the impugned order of the CLB that it has simply observed that the appellants have not made out any prima facie case, particularly with regard to the oppressive acts purported to have been committed by the respondents, which were prejudicial to the interest of the company. The observations of the CLB while disposing the matter, are, to say the least, without going into the pleadings and also the material brought on record by the parties in that regard. The impugned order is cryptic and unsatisfactory without reference to the said material on record. In the circumstances, we are of the view that the matter has to be remanded to the CLB for reconsideration of the case insofar as the other reliefs sought by the appellants herein before the CLB are concerned. As far as the relief granted by the CLB with regard to restoration of the shareholding pattern as on 31/3/2005 and the consequential reports issued are concerned, they are not interfered with in the appeal.
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Service Tax
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2016 (4) TMI 1113
Validity of order passed ex-parte - Violation of principles of natural justice - Demand of Service tax - Invokation of extended period of limitation - Appellant provided services of protection, pipe laying using trenching/trenchless, reinstatement of trench, OFC cable blowing including other associated works to its clients - Appellant contended that it had carried out substantial part of work prior to levy of service tax and thus, there was no question of levy of tax on services rendered prior to date of levy of tax. Held that:- appeal against the order of Commissioner (Appeals) was filed by the revenue before the Tribunal on 15.1.2009 but due to pendency before the Tribunal, it came up for hearing on 23.7.2014. No fresh notice of the date of hearing was received by the appellant. Thus, there was non appearance on the part of the appellant. The Tribunal after hearing the representative of the department allowed the appeal ex parte. Therefore, sufficient opportunity to represent its case was not afforded to the appellant before passing the impugned orders. Thus, there was violation of the principles of natural justice. - Appeal disposed of by remanding the matter back
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Central Excise
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2016 (4) TMI 1112
Levy of Special Additional Duty (SAD) as per Circular dated 27th June, 2002 - on goods chargeable to duty under Additional Duties of Excise (Goods of Special Importance) Act, 1957 - Appellant submitted that the Supreme Court in one case had said that if there were circulars issued by the Central Board of Excise and Customs which place a different interpretation upon the said phrase interpreted in the judgment, such interpretation would be binding upon the revenue. Also in the alternative the petitioner was willing to prefer appeal before the statutory authority. Revenue submitted that the circular was upheld by the judgment in one case and there not having been any appeal therefrom, such judgment had achieved finality. The petitioner was aware of the judgment and at best the different interpretation claimed could be made applicable on and from 17th July, 2015 the date on which the proviso was substituted. Also the importation of the goods in question assessed pursuant to interim order dated 18th June, 2003 were prior and up to the year 2003. Held that:- the writ petition is disposed of with liberty to the petitioner to prefer a statutory appeal within a fortnight, if permissible in law. Since alternative efficacious remedy is to be availed of, this Court refrained from going into the merits of the matter. - Petition disposed of
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2016 (4) TMI 1111
Appellant submitted that by inadvertence, the matter could not be contested properly before the Tribunal - Held that:- whether it was inadvertence or not is itself a question of fact requiring inquiry and fixation of responsibility. It would have been appropriate for the Appellant to have first fixed responsibility for those who did not act in the best interest of the Revenue, taken administrative action against them and then have filed this appeal. The appeal has remained pending since 15.6.2015 and has been adjourned on several occasions. The Revenue has had more than sufficient time to do its home work and soul searching for fixation of responsibility but none appears to have been done. Therefore we decline to take up the appeal for consideration on merits at this stage and require the appellant to first display their bona fides by holding an inquiry, fixation of responsibility by way of appropriate punishment to the concerned in accordance with law only whereafter we shall take up the present appeal. - Adjourned for 2 months
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2016 (4) TMI 1110
Waiver of pre-deposit - Financial hardship - Appellant stopped the business since 2009 and is living on support of the State - Held that:- the Tribunal found a prima facie case in favour of the appellant. As there is no material placed before the Tribunal with respect to the financial hardship, but taking into consideration the oral pleading made on behalf of the appellant, the Tribunal directed 50% to be deposited. The order of the Tribunal cannot be found fault with. However, considering the fact that a voluminous material has been placed before us which, for some reason or the other, the appellant could not place before the Tribunal, it is appropriate to remit the matter on the aspect of predeposit for fresh consideration by the Tribunal, on the condition of the appellant depositing 10% of the disputed tax within eight weeks. On such deposit being made, the Tribunal shall either consider the application for waiver of the pre-deposit or take up the appeal itself and pass appropriate orders. - Appeal disposed of by remanding the matter
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2016 (4) TMI 1109
Cenvat credit on inputs namely, fabrics lying in stock or in process or on inputs contained in finished goods lying in stock as specified in the Table - appellant Company is a registered "Dealer" of grey fabric under the Central Excise Rules - Notification No. 35/2003-CE (NT) dated 10.04.2003 - Held that:- Grey fabrics directly purchased by processor from manufacturer, that would be undisputedly are input with the processor and merely because a dealer is introduced in between manufacturer and the processor, nature of product as input cannot undergo any change. So, the dealer is entitled to avail credit with Serial No. 1(c) of the Table as input. See COMMR. OF C. EX. & CUS., AHMEDABAD-I Versus RAJKAMAL TEXTILE TRADERS [2009 (2) TMI 476 - GUJARAT HIGH COURT] - Decided in favour of assessee
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2016 (4) TMI 1108
Refund claim in respect of excess paid duty - rejection of refund claim in respect of excess paid duty on the ground that the appellant have not challenged the order whereby the rebate was disallowed - Held that:- We do not agree with the finding for rejection of claim for the reason that the rebate against the export is granted under Rule 18 of CER, 2002 and notification issued there under, whereas in case of any duty which is paid in excess can be refunded under the general provisions of refund under Section 11B. Since the appellant had paid excess duty at the rate of 14% instead of correct duty payable at the rate of 10% the 4% though excess paid cannot be sanctioned as rebate, therefore the same was disallowed. However the adjudicating authority while disallowing the rebate also mentioned in the order that “for allowing a 4% of the duty paid in excess the claimant is required to follow the procedure as per Central Excise Law". Therefore the proceeding of rebate and proceeding of refund are two different proceedings. The appellant have rightly claimed the refund of 4% excess paid duty the same should have been disposed of on its own merit without getting influenced by the order dt. 20.4.2009 by which the rebate was disallowed. - Decided in favour of assessee
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2016 (4) TMI 1107
Exemption from duty claimed - footwear made exclusively of plastic material in terms of notification no. 18/2001-CE dated 26.04.2001 - exemption available to footwear made exclusively of plastic materials was sought to be denied to the appellant on the ground that certain non-plastic materials like fabric, PVC sole are used in the shoes made by the appellant - Held that:- Explanation-I inserted vide notification no.30/2001-CE was merely to remove doubts to the effect that if materials other than of plastic like buckles, tabs, eyelet stays or in-soles are used, the footwear still shall be deemed to be made exclusively of plastic materials. This scope of terms "exclusively of plastic materials" was further explained in the Board's Circular dated 30.05.2001. The Board clarified that the expression "footwear made of plastic materials" should be given its normal meaning. It was also clarified that explanation inserted is applicable for the past clearances also. We find that in these sets of facts, the denial of exemption to the appellant is not sustainable. There is no allegation that the footwear made by the appellants were not of plastic materials. The question is only on exclusive use of plastic material only. Keeping in view the clarificatory Explanation-I and Board's Clarification dated 30.05.2001, we find the footwear made by the appellant being essentially of plastic material, and giving the normal meaning of plastic footwear, the exemption is rightly available to the appellant. - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2016 (4) TMI 1103
Validity of impugned order - Violation of principles of natural justice - No opportunity of personal hearing provided before passing the order - Held that:- the petitioner was not given an opportunity of personal hearing by the 2nd respondent, which is violative of principles of natural justice, the impugned orders dated 27.01.2016 passed by the 2nd respondent are liable to be set aside and accordingly the same are set aside. The matters are remitted back to the 2nd respondent for fresh consideration. The 2nd respondent is directed to decide the appeals on merits and in accordance with law, after affording due opportunity of personal hearing to the petitioner. Demand of Tax - Engaged in business of providing service of passive telecommunication infrastructure to telecommunication companies - Held that:- in view of the above, the demand notice issued by the 1st respondent is liable to be set aside and accordingly, the same is set aside. - Appeal disposed of
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2016 (4) TMI 1102
Leviability of tax - as per Entry 69 of the Part C of the First Schedule to the TNVAT Act 2006 - Petitioner's claim of exemption as per the Entry 17A of the Fourth Schedule was rejected by the first respondent, by stating that it is not applicable for industrial preservative, sold under the name "Nipacides" - Held that:- in the interest of justice, the petitioner can be given an opportunity to putforth their case by producing necessary documents before the respondents, however, on payment of 75% of the tax calculated at the rate of 5%. - Petition disposed of
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Wealth tax
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2016 (4) TMI 1114
Basis of valuation - determination of value of assets - Held that:- In this case, the assessee has produced all the records including the agreement between the API & that the assessee company, the confirmation as well as the affidavit categorically stated that the land was only acquired by the assessee company and the same will be given only to API & for that ₹ 20,000/- per acre will be given to the assessee company by API. This fact was never denied or tested by the Assessing Officer. The assessee was never the owner of the land and thus the valuation in respect of Wealth Tax was incorrectly done by the Assessing Officer. The CIT (A) has taken into account all these aspects and passed proper order. Therefore, the appeals of the Revenue do not survive. - Decided in favour of assessee
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