TMI Tax Updates - e-Newsletter
May 21, 2015
Case Laws in this Newsletter:
Income Tax
Corporate Laws
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Highlights / Catch Notes
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Income Tax:
Restriction on deduction on Interest u/s 43B - Funding of the interest amount by way of a term loan - whether amounts to actual payment as contemplated by Section 43B? - Held No - HC
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Income Tax:
Validity of assessment u/s 158BC - assessee was served with a notice u/s 131 to appear for recording his deposition. Time to do so was extended on four occasions. The assessee by his letter dated 28-1-2002 evinced his intention not to appear. In those circumstances the assessment was completed on 31-1-2002 which otherwise might have been completed on or before 31-12-2001 - order is valid - HC
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Income Tax:
Reopening of assessment u/s 148 r.w.s 147 - when material facts relevant to the assessment year were disclosed and were on record, then, one fails to understand as to why this notice has been issued- HC
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Income Tax:
Allowability of Interest amount which was not paid - conversion of interest amount into loan would not be deemed to be regarded as actually paid amount within the meaning of Section 43B of the Act - HC
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Income Tax:
TDS - a harmonious construction of the word 'payable' leads to inevitable conclusion that the said word also includes the 'paid' amount. It is evident that the emphasis is on liability to pay and not on actual payment. If we accept the contention of assessee, then Section 40(a)(ia) would become otiose and the section will not be attracted where payment is made though without deducting tax at source. - HC
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Income Tax:
Validity of notice issued u/s 153C/143(3) - amalgamated company - According to the AO, M/s Micra India Pvt. Ltd. was still in existence. Clearly, this was a case where the assessment was contrary to law, as having being completed against a non-existent company - HC
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Income Tax:
Disallowance of interest as non allowable expenditure - As long as the payment of advance was not for acquisition of fixed assets but only for acquiring stock-in-trade, assessee was entitled for deduction under Section 36(1)[iii] of the Act. - HC
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Income Tax:
TDS on making payments to various agencies on revenue sharing basis - The mode of payment is nothing but a payment for contract of work and is squarely covered by explanation III to section 194C which says ‘work’ shall include programmes for such broadcasting or telecasting - AT
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Income Tax:
TDS liability u/s 194J - newspapers employ reporters who have been trained to have interrogative ability, presence of mind and have specialised in a way for doing their work and hence they are rendering work in their professional capacity - AT
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Income Tax:
Existence of Permanent Establishment (PE) in India or not - India UK DTAA -All the requisite conditions for attracting the mandate of Article 5(2)(k) are satisfied - service PE of the assessee is established in India - AT
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Service Tax:
Receipt of commission for disbursement of govt. teacher's salary on direction of Zillha Parishad can never be an activity covered under the definition of Business Auxiliary Service - AT
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Service Tax:
Erection, Commissioning or Installation service - Vivisection of Composite Works Contract - it has to be examined whether the whole parking system can be termed as a structure or it should be considered as having two components namely a civil structure and the hydraulic/lift system. - AT
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Service Tax:
Denial of CENVAT Credit - appellants have discharged service tax liability on the services rendered by the branches to the customers - prima facie, appellant cannot be denied Cenvat Credit of the service provider to the branches of the appellant - AT
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Central Excise:
Valuation - If there was no such amount demanded in the show cause notice, the direction of the Tribunal to the jurisdictional officer to determine and recover the duty from the appellant shall have to go - SC
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Central Excise:
Captive consumption - use of the pallets is for carrying out the material from one machine to the other - cannot be said that these goods are used in relation to the manufacture in or in relation to the manufacture of the final products. - Benefit of Notification No.67 /95 not allowed - SC
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Central Excise:
Valuation - Captive consumption - VIT cleared for captive consumption of the appellant's own unit at Nasik - Applying the principle of comparable price, order modified partly - SC
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Central Excise:
Exemption notification was earlier withdrawn but reintroduced after some time - compounded rubber - to be treated as only corrective and clarificatory in nature - benefit of exemption allowed retrospectively for the period 1.3.94 to 27.3.94 - SC
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2015 (5) TMI 623
Restriction on deduction on Interest u/s 43B - Funding of the interest amount by way of a term loan - whether amounts to actual payment as contemplated by Section 43B? - Held that:- From the AO's order, it is evident that the loans, in respect of which the assessee claims deduction of interest under Section 43B, were taken from ICICI, IDBI and IFCI. These entities are included within the definition of "public financial institution" set out in Section 4A of the Companies Act, 1956 (applicable for the purposes of the instant case as it relates to AY 1996-97). Consequently, by virtue of Explanation 4(a) to Section 43B, these entities would also constitute public financial institutions for the purposes of Section 43B and the interest on loan taken by the assessee from these entities would fall within the purview of Section 43B(d) of the Act. In light of the introduction of Explanation 3C, this Court does not consider it necessary to discuss the precedents relied upon by the assessee delivered prior to the enactment of Finance Act, 2006. As regards the decision in Shakti Spring Industries (2013 (1) TMI 398 - JHARKHAND HIGH COURT ), the interest due in that case was offset against a subsidy which the assessee was entitled to, and it did not involve an instance where it was “converted into a loan or borrowing” within the meaning of Explanation 3C. It is perhaps for this reason that Explanation 3C was not discussed. For the above reasons, the question of law framed is answered in the negative, in favour of the revenue.
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2015 (5) TMI 622
Validity of assessment under Section 158BC - whether barred by limitation and is therefore illegal, invalid and without jurisdiction? - Held that:- The period of limitation for the purposes of Income Tax Act under Section 158BE is dependent on the conclusion of search and not on the conclusion of the investigation. Investigation includes examination of witnesses which can be done under Section 131 of the Income Tax Act. The Assessing Officer wanted to examine the assessee but he did not turn up after the conclusion of the search as would appear from the assessment order quoted above. Another pertinent question in accordance with Section 465(2) of CRPC shall be "whether by keeping the search pending till 31st January 2000 any failure of justice was occasioned?" Neither in the case of Katyal nor before us any such point was canvassed. The second pertinent question shall be "was the point of limitation raised at the earliest stage before the assessing officer? The assessee by his letter dated 28th January, 2002 addressed to the assessing officer contended that due to his preoccupation he was unable to appear before the latter to record his deposition. When the case of the assessee is that the time prescribed for assessment had expired on 31st December, 2001, he should have raised the point in his letter dated 28th January, 2002 which he did not do. Therefore prolongation of the search did not cause any prejudice to the assessee not to talk of occasioning any failure of justice. It appears from the assessment order that the assessee was served with a notice u/s 131 to appear for recording his deposition. Time to do so was extended on four occasions. The assessee by his letter dated 28th January, 2002 evinced his intention not to appear. In those circumstances the assessment was completed on 31st January, 2002 which otherwise might have been completed on or before 31st December, 2001. For the aforesaid reasons, we are of the opinion that the period of limitation has to be reckoned from 31st January, 2000. Decided in favour of the Revenue.
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2015 (5) TMI 621
Deduction under Section 80HHC - inclusion of Hire of barges - Held that:- The receipts received on such hire would be in the nature of rent or similar to rent and therefore, would fall in the items specified in clause baa (1) of Explanation to Section 80HHC of the Act. Even if one accepts the submission of the appellant that the these barges continue to be in control of the appellant and they only ferry goods of others for a charge, the receipts would certainly be classified as charges or of a nature similar to it and therefore, would fall under clause baa (1) of Explanation to Section 80 HHC of the Act. The appellant has not shown that the aforesaid activity has any nexus with its export activity. Consequently, following the decision of the Supreme Court in Ravindranathan Nair (2007 (11) TMI 10 - Supreme Court of India), the aforesaid charges constitute independent income and is a receipt as rent/charges or at the very least similar in nature to it. Therefore, the impugned order of the Tribunal has correctly held these receipts are covered by clause (baa) (1) of Explanation to Section 80 HHC of the Act - Decided in favour of the Revenue Proceeds of Services and Repairs of Vessels - Held that:- in view of the decision of the Apex Court in Ravindrathanan Nair (supra), the receipts of the same cannot be reduced to the extent of 90% as provided under clause baa (i) of the Explanation to Section 80HHC. In fact, the receipts having a nexus to exports would not be an independent income to be hit/covered by clause baa of Explanation to Section 80HHC of the Act. In view of the above, we find that after the impugned order has come to a finding that the aforesaid two receipts on account of proceeds of services and repairs of vessels are incidental to export activities, then the impugned order ought to have held that the proceeds of services and repairs of vessels are not covered by clause baa of the Explanation to Section 80HHC of the Act - Decided in favour of the assessee Receipts on account of sales of pig iron, vessels, engineering products, materials and coke breeze - Held that:- The Tribunal by the impugned order correctly held that the aforesaid sales do not have any link with the export activities of the appellant. Thus, being independent income, the same would be hit by by clause (baa) of the Explanation to Section 80 HHC of the Act. - Decided in favour of the Revenue Extraction charges - Held that:- We hold that the extraction charges per se are includable in the total turnover, However, while giving effect to this order the authorities under the Act would consider the appellant’s submission that there has been inclusion of extraction charges in effect twice in the total turnover and if so, would ensure that the same is included only once. However, so far as extraction charges are concerned, the impugned order has correctly held them to be includable in total turnover as defined in clause baa of the Explanation to Section 80 HHC of the Act. - Decided in favour of the Revenue
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2015 (5) TMI 620
Reopening of assessment - claim of deduction under section 10A disallowed - Held that:- We fail to understand as to how the Respondents justify the issuance of the notice under section 148 of the IT Act and by referring to such details including of the claim of deduction under section 10A of the IT Act. If these details and pertaining to deduction in question were not furnished and were not available with the Assessing Officer, then, one fails to understand as to from where the data and the computation has been taken and for reference by the Respondents themselves. In the reasons recorded, it is clear that the Assessing Officer is aware that the Petitioner Assessee is engaged in the business of development and export of software. The Assessing Officer was aware of the Units set up by the Assessee/Petitioner before us. He has derived the figures of profits and losses from the relevant records and the information, some of which was supplied and furnished by the Petitioner itself. In these circumstances and when material facts relevant to the assessment year were disclosed and were on record, then, one fails to understand as to why this notice has been issued. From the reasons itself, it is apparent that it is issued to revisit this claim of deduction under section 10A of the IT Act and as put forward by the Petitioner/Assessee. From the affidavit in reply, we have taken specific paragraphs, where the Petitioner's version before the Assessing Officer in the original assessment though accepted by the Assessing Officer, he is faulted for not having taken into consideration certain aspects of this deduction. If the Petitioner allegedly did not give information regarding the losses of the Unit IV and did not adjust the losses of Unit IV with the profits of other units and therefore the order in that behalf is termed as erroneous, then, this is a clear case of revisiting this claim. Now, a different opinion is held by the Respondents and for which they want to reopen the assessment. Such a course is clearly impermissible. - Decided in favour of assessee.
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2015 (5) TMI 618
Allowability of Interest amount which was not paid - whether amounts to actual payment as contemplated by Section 43B? - Held that:- From the AO's order, it is evident that the loans, in respect of which the assessee claims deduction of interest under Section 43B, were taken from ICICI, IDBI and IFCI. These entities are included within the definition of "public financial institution" set out in Section 4A of the Companies Act, 1956 . As from reading of Explanation 3C, in our opinion, the question as raised in the present appeals stands answered without further discussion. This provision was inserted for removal of doubts and it was declared that deduction of any sum, being interest payable under clause (d) of Section 43B of the Act, shall be allowed if such interest has been actually paid and any interest referred to in that clause, which has been converted into a loan or borrowing, shall not be deemed to have been actually paid. Thus, the doubt stands removed in view of Explanation 3C. Thus in view of the Explanation 3C appended to Section 43B with retrospective effect from 01.04.1989, conversion of interest amount into loan would not be deemed to be regarded as actually paid amount within the meaning of Section 43B of the Act. - Decided in favor of revenue.
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2015 (5) TMI 617
Disallowance contemplated by Section 40(a)(ia) - Whether can be applied when payments in respect of which tax is deductible at source has already been made by the assessee to the payee at the time of computing the income chargeable under the head "profits and gains of business or profession" i.e. at the close of the year? - Held that:- When we examine Section 40(a)(ia) in the backdrop of these sections, we find that it refers to the amount 'payable' 'on which tax was deductible at source under Chapter XVII-B'. Applying the principles of eujesdem generis, it can easily be inferred that term 'payable' in section 40(a)(ia) has to be interpreted in the light of sum referred to in various sections contained in Chapter XVII-B noted above, on which tax was deductible and, therefore, the term 'payable' in Section 40(a)(ia) refers to entire amount on which tax was required to be deducted. Keeping in view the principles of harmonious construction, the term 'payable' in Section 40(a)(ia) cannot be read separately from the provisions relating to TDS as pleaded on behalf of assessee. In our opinion, ld. CIT (Appeals) has rightly observed that taking the spirit of TDS provision into account and Section 40(a)(ia) being directly related to such TDS provision, a harmonious construction of the word 'payable' leads to inevitable conclusion that the said word also includes the 'paid' amount. It is evident that the emphasis is on liability to pay and not on actual payment. If we accept the contention of assessee, then Section 40(a)(ia) would become otiose and the section will not be attracted where payment is made though without deducting tax at source. The provisions of section 40(a)(ia) of the Income Tax Act, 1961, are applicable not only to the amount which is shown as payable on the date of balance-sheet, but it is applicable to such expenditure, which become payable at any time during the relevant previous year and was actually paid within the previous year. In the result the question is decided in favour of revenue
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2015 (5) TMI 616
Sale of shares - capital gains or business income - Held that:- Investment through Portfolio Management Service, which may deal with the shares of the assessee so as to derive maximum profits cannot be termed as business of the assessee but would only be a case of a more careful and prudent mode of investment, which has been done by the assessee. Funds which lie with the assessee can always be invested (for earning higher returns) in the shares either directly or through professionally managed Portfolio Management Scheme and by doing so, it would not mean that the assessee is carrying on the business of investment in shares. Profits from such investment, either directly or through professionally managed firm, would still remain as profits to be taxed as capital gains as the same will not change the nature of investment, which is in shares, and the law permits it to be taxed as capital gains and not as business income. - Decided in favour of assesse. Generation of profits by purchase and sale of shares after availing loan - Held that:- The assessee having taken loan and having invested borrowed funds in purchase of shares, we are of the view that the Income Tax Act does not prohibit the assessee from making investments in capital assets after using borrowed funds. The Tribunal has also considered this aspect of the matter and decided in favour of the assesssee and we see no reason to differ with such opinion of the Tribunal. We have also gone through the Circular of the CBDT dated 15.06.2007 and are of the opinion that the findings arrived at by the Tribunal are in conformity with the guidelines issued by the said Circular - Decided against revenue.
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2015 (5) TMI 615
Revision u/s 263 - whether Tribunal was right in coming to the conclusion that the basis of intervention by the Commissioner should be part of the records in the assessment proceedings of the assessee and the statements in the search operations regarding the son of the assessee could not be considered as forming part of assessment of the assessee and thus the action was invalid? - Held that:- As regards the reasoning which appealed to the Tribunal, the word "therein" is not necessarily capable of the interpretation which appealed to the Tribunal. When the Commissioner examines the record of search and seizure operations in respect of any person, say the respondent assessees' son as in the instant case, and finds that such person had attributed some undisclosed income to the assessee, it is open to the Commissioner to call for the record in the assessee's case. The exercise of power by the Commissioner under Section 263(1) is obviously in respect of the assessee's case but for the purpose of exercising that power, the examination by the Commissioner is not required to be confined to the record of that assessee's case as such record could be any record relating to any proceeding under the Income-tax Act. There is nothing in the provisions of Section 263(1) to take such a narrow view of the powers of the Commissioner. Any doubt which could arise has been removed by the legislature by inserting through the Finance Act, 1988 an explanation and further amending it by Finance Act, 1989. The interpretation of the provisions of Section 263(1) read with explanation thereto by the Apex Court in light of the legislative intent leaves no room for doubt. Once there is a pronouncement of the highest Court of the land, the same is binding on all Courts, Tribunals and all authorities in view of Article 141 of the Constitution and it is not open to distinguish the same by referring to certain words of those provisions which were very much before the Supreme Court merely on the ground that some other arguments could have been urged which were not considered by the Supreme Court. - Decided in favour of the revenue.
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2015 (5) TMI 614
Proceeding against a non-existing company - Held that:- The proceedings had been initiated against a non-existing company/SSS Limited even after the amalgamation of the said company with M/s Intel Technology India Pvt. Ltd.. We do not see any good ground to differ with the said judgment of the Delhi High Court in Spice Infotainment Ltd. v. CIT [2011 (8) TMI 544 - DELHI HIGH COURT] wherein held that the framing of assessment against the non-existing entity/person goes to the root of the matter which is not a procedural irregularity, but, a jurisdictional defect and as there cannot be any assessment against the dead person.- Decided in favour of the assessee.
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2015 (5) TMI 613
Validity of notice issued under Section 153C/143(3) - since the assessee had amalgamated with the transferee company, notice ought to have been sent to the latter, and since such notice had not been issued to the transferee company, the entire proceedings were a nullity - notice issued under Section 153C/143(3) to M/s Micra India Pvt. Ltd. was binding and could have been proceeded with further as held by ITAT - Held that:- Section 176 of the Act, which enacts provisions relating to discontinuation of business, does not apply to a case of amalgamation/dissolution. It was further held that Section 159 of the Act, which provides for tax liability to be attached to the legal representatives of a deceased person, is also inapplicable. The language of Section 159 ex-facie applies to natural persons, and cannot be extended, through a legal fiction, to the dissolution of companies. In the present case, no doubt there was participation during the course of assessment; however, the AO, despite being told that the original company was no longer in existence, did not take remedial measures and did not transpose the transferee as the company which had to be assessed. Instead, he resorted to a peculiar procedure of describing the original assessee as the one in existence; the order also mentioned the transferee's name below that of M/s Micra India Pvt. Ltd. Now, that did not lead to the assessment being completed in the name of the transferee company. According to the AO, M/s Micra India Pvt. Ltd. was still in existence. Clearly, this was a case where the assessment was contrary to law, as having being completed against a non-existent company. The ITAT's decision is, in the circumstances, justified and warranted. - Decided against revenue.
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2015 (5) TMI 612
Disallowance u/s 14A - ITAT allowed the claim - Held that:- There is substantial strength in the argument of assessee that out of the total investment of ₹ 109,32,88,180/-, major part was of shares in M/s. Magma Shrachi Finance Ltd. It is not disputed by the Revenue that these shares came to the assessee by virtue of a merger of one M/s. Stratus Developers (P) Ltd. with assessee. Such shares were thus not a direct acquisition done by assessee. Therefore, for making such investment and for holding such shares, it cannot be said that assessee would have incurred substantial expenditure. Assessee had not purchased or sold any of the shares of M/s. Magma Shrachi Finance Ltd. during the relevant previous year. We also find that Assessing Officer had not made any disallownace for interest. While applying Rule 8D(2) Assessing Officer had only made a disallowance under Clause [iii] thereof. Thus, he has accepted that no loan funds were used by assessee for the purpose of making the investments. Investments made by assessee during the relevant previous year was ₹ 1,96,69,793/- only. When viewed from this angle, we cannot say that the suo motu disallowance of ₹ 88,390/- made by assessee was incorrect or unbelievable - Decided in favour of assessee Disallowance of interest as non allowable expenditure - ITAT deleted the addition - Held that:- claim of interest on capital borrowed for the purpose of business can be disallowed only where the borrowing is for acquisition of an asset intended for extension of an existing business. In the case of the assessee here, we cannot say that the loan raised by assessee from ICICI Bank, which was utilized for paying advances for acquiring built up spaces, was in relation to extension of an existing business. Business of assessee was real estate and the assessee’s intention was to trade in constructed spaces. It never contemplated to use such constructed spaces for its own use. As long as the payment of advance was not for acquisition of fixed assets but only for acquiring stock-in-trade, assessee was entitled for deduction under Section 36(1)[iii] of the Act. - Decided in favour of assessee Disallowance of processing fees for loan - ITAT deleted the addition - Held that:- . Since loan raised from State Bank of India was used by the assessee for financing its stock, we are of the opinion that processing charges incurred for raising such loan was an allowable expenditure - Decided in favour of assessee
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2015 (5) TMI 611
Disallowance of commission expenses - non-deposit of tax deducted at source (TDS) within the stipulated time period u/s. 40(a)(ia) - Held that:- Amendment by Finance Act, 2010 (w.e.f 01.04.2010), providing time for deposit of TDS up to the due date of filing of the return of income, which in the instant case is 30.09.2009, lest the expense be allowed in computing the income for the year of payment of TDS, as retrospective, so that it would apply for the current year as well. We are however unable to find any infirmity on that score in-as-much as the tribunal per its decision in Bharati Shipyard Ltd. vs. Dy. CIT [2011 (9) TMI 258 - ITAT MUMBAI] relied upon by the Assessing Officer (A.O.), held the amendment as not retrospective. So, however, the decisions by the in the case of CIT vs. Virgin Creations (2011 (11) TMI 348 - CALCUTTA HIGH COURT) and CIT vs. Naresh Kumar [2013 (9) TMI 275 - DELHI HIGH COURT] have since been delivered, holding the amendment to section 40(a)(ia) by Finance Act, 2010 as retrospective. Accordingly, the assessee succeeds. As a corollary, we may though add, where the assessee has claimed or otherwise been allowed, as the Revenue was obliged to, deduction in respect of the impugned sum for A.Y. 2010-11, i.e., following the Revenue's stand of the amendment afore-stated being not retrospective, a modification to the assessment for that year shall, in consequence, follow - Decided in favour of assesse. Disallowance u/s.14A - Held that:- Assessee has before us raised a plea, relying on the decision by the tribunal in the case of AFL P. Ltd. vs. Asst. CIT [2013] 28 ITR (Trib) 263 (Mum), stating that where the entire borrowing by way of cash credit (account) stands absorbed in the relevant class of assets, i.e., those intended to be financed thereby, no disallowance u/s. 14A shall ensue. We find merit in the said argument. Where the borrowing under the cash credit account is within the drawing power (i.e., the amount that the assessee-borrower could validly draw or avail in terms of the relevant loan agreement), the presumption, both on facts and in law, would only be of the entire sum as having been utilized toward the intended business purpose/s, financing of inventory of stock-in-trade for example. The term loans are, in any case, towards specific/defined capital assets, so that, where purchased, the borrowings can only be considered as having been applied toward the same. The matter is, accordingly, restored back for necessary verification, and toward which the assessee shall extend all assistance and cooperation, only for its own benefit. The A.O. shall adjudicate, issuing definite findings of fact, so that where the borrowings are shown to have been utilized in terms of the agreement, as indicated above, the assessee could only be said to have complied with the terms of section 14A(2). - Decided in favour of assesse by way of remand. Treatment of Advance received from Customers as unexplained Advance - Held that:- amount/s under reference may have been brought to tax for the following (another) year/s. However, it is only the assessee who is responsible for the same, i.e., by disclosing it as its income for that year/s. It is only where the assessee concedes to the income being subject to tax for the current year that the Revenue could be faulted for, despite the assessee having returned it as so, i.e., for the following year/s, assessing it as income for that year/s, and which is not the case. Be that as it may, there is no denying that the same cannot be subject to tax, and neither could it accrue to the assessee, i.e., as income, twice, so that the second/subsequent accrual, on which there is no finding though; the Revenue having merely accepted the assessee's return for that year/s, is invalid both on facts and in law.We, accordingly, direct the A.O. to verify the assessee's claim/s for the said income as having been offered as income and, consequently, as having been subject to tax for the following year/s and, where so, delete the same. The A.O. shall undertake the examination, and toward which the assessee shall extend all necessary and reasonable cooperation, while passing appeal effect giving order - Decided in favour of assesse by way of remand. Disallowance of bank interest - interest on cash credit account with it's bank, Bank of India - Held that:- It is only where the bank balance exceeds the DP of ₹ 750/-, that the excess can be construed as an application by the assessee for other than inventories, or as a liability toward unpaid charges. The payment or otherwise of bank interest shall, therefore, have to be reckoned with reference to drawing power as at the year-end drawn as per the terms of the borrowing agreement. This is precisely why, and also explains reference thereto, in section 43B(e). Further still, as the payment, to qualify for allowance, could be validly made by the date of furnishing the return of income u/s.139(1), the drawing power for the future dates may also be relevant in this regard. Surely, the DP should be on the basis of normative balances and not contrived, i.e., which is brought down only to exhibit a below par balance for a brief period, before assuming its' normal, higher balance. The matter is, accordingly, restored to the file of the A.O. for necessary verification and toward which the assessee shall extend cooperation to enable proper determination of the matter by the former, i.e., in accordance with the law, keeping in view its foregoing elucidation - Decided in favour of assesse by way of remand.
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2015 (5) TMI 610
Interest on Non Performing Assets u/s.43D - CIT(A) deleted the addition - whether assessee being a non scheduled bank could not take the benefit of section 43D? - Held that:- In view of the ratio laid down in ACIT Vs. Osmanabad Janta Sah. Bank Ltd. (2015 (3) TMI 886 - ITAT PUNE) and in ACIT vs. The Omerga Janta Sahakari Bank Ltd. (2014 (12) TMI 355 - ITAT PUNE ) we uphold the order of CIT(A) in holding that the interest on NPAs is not taxable in the hands of the assessee for the captioned assessment year. - Decided in favour of assesse.
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2015 (5) TMI 609
TDS liability under S.194J in respect of payments made to news service agencies - Held that:- Issue is covered by the decision of the Tribunal in assessee’s own case for assessment years 2004-05 to 2006-07 [2012 (7) TMI 120 - ITAT HYDERABAD] against the assessee wherein held as unable to appreciate that no professional services are rendered by the reporters in collecting the data for publication of news. The work carried out by news paper agents requires professional qualifications and skills. Though, the data collected by such reporters has tobe reviewed glossed up and made fit to be published/presented. Nevertheless, procurement of the basic data cannot be done without qualified reporters who utilise their professional skills for collection of the same. Further, the newspapers employ reporters who have been trained to have interrogative ability, presence of mind and have specialised in a way for doing their work and hence they are rendering work in their professional capacity. - Decided against assesse. TDS liability - payments made on account of software expenses - Held that:- Issue is covered by the decision of the Tribunal in assessee’s own case for assessment years 2004-05 to 2006-07 [2012 (7) TMI 120 - ITAT HYDERABAD] against the assesse wherein held that the assessee is making payments to various agencies on revenue sharing basis from the income generated through advertisements by way of telecasting the serials or programmes produced by the agencies. The mode of payment is nothing but a payment for contract of work and is squarely covered by explanation III to section 194C which says ‘work’ shall include programmes for such broadcasting or telecasting. In view of the same, we hold that the nature of payments fall within the purview of section 194C - Decided against assesse. Non deduction of tax at source - discounts on advertisements - Held that:- Issue is covered by the decision of the Tribunal in assessee’s own case for assessment years 2004-05 to 2006-07 in favour of assesse wherein held the assessee is not liable to deduct tax u/s 194H as relying on M/s TV Today Network Ltd [2011 (7) TMI 1095 - ITAT DELHI] - Decided in favour of assesse. Non-deduction of tax at source - payment of band width charges - Held that:- Issue is covered by the decision of the Tribunal in assessee’s own case for assessment years 2004-05 to 2006-07 in favour of assesse wherein held the assessee is not liable to deduct tax u/s 194H as relying on Pacific Internet (India) P Ltd. Vs. ITO [2008 (12) TMI 429 - ITAT MUMBAI ] wherein it has been held that payment made for using bandwidth and network operation are not technical services and tax needed not be deducted from such payments u/s 194J - Decided in favour of assesse Non-deduction of tax at source - payment of internet charges - Held that:- Issue is covered by the decision of the Tribunal in assessee’s own case for assessment years 2004-05 to 2006-07 in favour of assesse wherein held the assessee is not liable to deduct tax as relying on Skycell Communications Ltd. Vs. DCIT [2001 (2) TMI 57 - MADRAS High Court] - Decided in favour of assesseE - Decided in favour of assesse. Non-deduction of tax at source - payment of transponder rent - Held that:- Issue is covered by the decision of the Tribunal in assessee’s own case for assessment years 2004-05 to 2006-07 in favour of assesse wherein held in the case of ISRO satellite centre [2008 (10) TMI 15 - AUTHORITY FOR ADVANCE RULINGS] the assessee was to make payment for taking on lease Space Segment Capacity consisting of L-1 and L-5 transponder Centered on an Inmarsat 4th Generation Satellite whose capacity is utilised through data commands sent from a ground station set up by applicant. The assessee paid a fixed annual charge regardless of actual use of transponder capacity. The AAR held that when by earmarking a space segment capacity of transponder for its use assessee does not get possession or control of equipment of IGL and the agency that received the payment charges paid by assessee cannot be regarded as payment for use of IGL’s equipment. The AAR held that income arising to IGL out of payments received from applicant is neither in nature of ‘royalty’ under Act nor is fee for technical service - Decided in favour of assesse.
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2015 (5) TMI 608
Additions on account of Gross Receipts - A.O. making addition by alleging that the same has been accrued to the Appellant from M/s. Standard Chartered STCI Capital Markets Ltd. - Held that:- We agree with the revenue authorities that since the amount became due and/or accrued to the assessee, the income has emerged and therefore had to be taken as income of the assessee. The case cited by the AR has different facts, and till then it would remain contingent. But in the case in hand, the work was completed and it was the assessee who failed to have a proper collection from her clients to be paid to SC-STCI, on this default by the assessee, the amount though due was not paid to her, therefore, it was her income and the revenue authorities have correctly brought the same tax. As a result, we sustain the orders of the revenue authorities. - Decided against assesse. Irrecoverable amount of R21,20,714/- retained by M/s. Standard Chartered-STCI Capital Markets - whether the same may be allowed as bad debt? - Held that:- The assessee actually suffered loss, not only from the clients, who did not honour their commitments, but from her principal, i.e. SC-STCI, as well who did not pay her in line of their receipts from business and as per clause 6.15. We, therefore, hold that it was a business loss for the year under consideration. We, therefore, direct the revenue authorities to allow ₹ 21,20,714/- as business loss and consequential benefits attached to it. - Decided in favour of assesse. Payment of commission by the assessee to its constituents - non-deduction of TAS - Held that:- Since the revenue authorities have disallowed the payments of ₹ 4,08,872/- and ₹ 13,08,872/-, for non-deduction of TAS, the issue has created a major block to come to a logical conclusion.In these circumstances, we are of the opinion that these issues need to be adjudicated afresh in line with legal provisions of section 40(a)(ia). Thus direct the AO to examine the deduction of TAS and if the contentions of the assessee are correct, allow the expense. - Decided in favour of assesse for statistical purposes. Unexplained cash credit u/s 68 & Unexplained expenditure u/s 69C - Held that:- We have not been able to find out as to how the two figures were derived by the AO. In such a circumstance, most appropriate view would be that the orders of the revenue authorities be set aside with the directions to the AO to re-adjudicate the issues, if required. - Decided in favour of assesse for statistical purposes.
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2015 (5) TMI 607
Existence of Permanent Establishment (PE) in India or not - India UK DTAA - Held that:- All the requisite conditions for attracting the mandate of Article 5(2)(k) are satisfied inasmuch as (i) there is furnishing of services including managerial services; (ii) such services are other than those taxable under Article 13 (royalties and fees for technical services); (iii) such services are rendered out of India; (iv) such services are rendered by ‘other personnel’; and (v) such activities continued for a period of more than 90 days within 12 months’ period. It is thus held that the service PE of the assessee is established in India. Respectfully following the order above in assessee’s own case for the assessment year 2008- 09, the issue agitated is decided against the assessee by holding that the services PE of the assessee is established in India. - Decided against assessee. Royalty earned - whether effectively connected with the service PE of the assessee in India? - Held that:- As decided in assessee's own case [2014 (7) TMI 260 - ITAT DELHI] Tribunal in the earlier year has held that the total amount consisting Lumpsum Licence/Know-how Fees and also royalty was consideration for the transfer of IP rights simplicitor and also the service rendered by the employees of the second category - in so far as the question of royalty representing consideration for the transfer of IP rights simplicitor was concerned, the service PE representing the deputationists had no role to play either in creating or making it available to JCB India - That is how the Tribunal came to hold that the same was not effectively connected with the service PE of the assessee in India - the consideration for rendering of services by the employees of first category was chargeable to tax under Article 7 of the DTAA – thus, the matter is remitted back to the AO for determination of the amount of income in terms of Article 7 – So, respectfully following the aforesaid referred to order these issues are set aside and remitted back to the file of the AO for determining the income inconsonance with the direction given for the earlier years - Decided in favour of Assessee by way of remand. Liability of interest u/s 234B did not arise as the assessee had included the amount of royalty and fees for technical services in its total income - Decided in favour of assessee.
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2015 (5) TMI 606
Mark to market loss - revlauation of forward contract agreements on the closing date of accounting year - not a notional loss therefore allowable as per CIT(A) - Held that:- The Hon’ble Supreme Court in the case of ONGC Vs. CIT, [2010 (3) TMI 81 - SUPREME COURT], has reiterated the principles laid down in the case of Woodward Governor India Pvt (2007 (4) TMI 118 - HIGH COURT , DELHI) and observed that when the assessee maintained their accounts on mercantile system of accounting and there was no finding by the AO on the correctness or completeness of the account and that the assessee had complied with the accounting standards, laid down by the Central Government, can the “loss” suffered by it on account of fluctuation in the rate of reign exchange as on the date of balance sheet be allowed as expenditure under section 37(1) of the Act notwithstanding the fact that the liability had not been actually discharged in the year in which the fluctuation in the rate of foreign exchange had occurred and finally decided that the loss incurred on account of restatement of the liabilities in foreign exchange is allowable deduction. The detailed finding recorded by CIT(A) to the effect that loss on account of revaluation of pending forward contracts was revenue in nature, as per para 5 & 6, has not been controverted. Accordingly, we do not find any reason to interfere in the order of CIT(A) deleting the disallowance of loss on account of revaluation of pending forward contract. - Decided in favour of assessee.
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2015 (5) TMI 605
G.P. addition - rejection of books of accounts - Held that:- Here in this case when existence of Consortium is not doubted the only issue remains if letting out the entire job to one of the party of the Consortium was a fact or not in the case and consequent payments made were excessive or not. For the same the appellant has placed heavy reliance upon the decision in the case of CIT vs. M/s.Ray Bel Consortium given by Hon'ble Bombay High Court [2012 (7) TMI 372 - BOMBAY HIGH COURT]. As gone through the same which deals with sec.40A(2) and supports the case of the appellant and hence of the considered opinion that books of account were not liable for rejection and there was no requirement for estimating profit when the same has been reflected on the actual basis. - Decided in favour of assessee. Disallowance of water charges and sewerage charges - AO disallowed water and sewerage charges treating that loss as reimbursement of expenses to sub-contractor. The AO also made addition of receivable on account of work contract tax refund - CIT(A) deleted the addition made by the AO by estimating profit at 10 of the gross receipts by observing that assessee is only special purpose vehicle in the form of joint venture - Held that:- Respectfully following the decision of the jurisdictional High Court in case of M/s Ray Bel Consortium (supra), we do not find any infirmity in the order of CIT(A) for deleting the addition made on account of profit estimation as well as disallowance of amount deducted by municipal corporation on account of water and sewerage charges. Further the CIT(A) has upheld the addition on account of tax refund which was deducted by Municipal Corporation of Brihan Mumbai. As per our considered view, the amount of income tax refund is not in the nature of income but was on account of refund of tax deducted by municipal corporation as no income accrued in respect of these contracts in assessee’s hand. This refund is also required to be passed on by the assessee to the two members of AOP. Accordingly, we direct the AO to verify the same and decide the issue afresh. - Decided in favour of assessee for statistical purposes.
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2015 (5) TMI 604
Reduction of amount of profits eligible for deduction u/s 80HHC from the book profits u/s 115JB - Minimum Alternate Tax (MAT) - After reading the cited decisions viz. Ajanta Pharma Ltd. (2010 (9) TMI 8 - SUPREME COURT ) and Bhari Information Tech.Sys.P.Ltd. (2011 (10) TMI 19 - Supreme Court of India) in the background of the facts of this case we are of the view that the decision of Syncome Formulations (I) Ltd. [2007 (3) TMI 288 - ITAT BOMBAY-H] has been approved by the Hon'ble Supreme Court in the case of Bhari Information Tech.Sys.P.Ltd.(supra) wherein held that the deduction u/s.80HHE in the case of Export of Computer Software has got to be worked out on the basis of adjusted book profits u/s.115JA of the Act and not on the basis computed under the regular provisions of law applicable to the computation of profits and gains of business. Further, an observation was made by the Hon'ble Court that once the law itself declares that the adjusted book profit is amenable for further deductions on specified grounds in a case where section 80HHC/80HHE of the Act is operations, it becomes clear that computation for the deduction under those sections need to be worked out on the basis of adjusted book profit. In the case of Syncome Formulations (I) Ltd. (supra) came to the conclusion that deduction claimed by the assessee u/s.80HHC has to be worked out on the basis of adjusted book profit u/s.115JA and not on the basis of profits computed under regular provisions of law applicable to computation of profits and gains of business. The view taken by the Special Bench was accordingly affirmed and the Special Leave Petition filed by the Revenue Department was dismissed. If the dichotomy between "eligibility" of profit and "deductibility" of profit is not kept in mind then s. 115JB will cease to be a self-contained code. In s. 115JB, as in s. 115JA, it has been clearly stated that the relief will be computed under s. 80HHC(3)/(3A), subject to the conditions under sub-cls. (4) and (4A) of that section. The conditions are only that the relief should be certified by the chartered accountant. Such condition is not a qualifying condition but it is a compliance condition. Therefore, one cannot rely upon the last sentence in cl. (iv) of Explanation to s. 115JB [subject to the conditions specified in sub-cls. (4) and (4A) of that section] to obliterate the difference between "eligibility" and "deductibility" of profits as contended on behalf of the Department. Thus set aside the impugned judgment of the High Court and restore the judgment of the Tribunal. Accordingly, the civil appeal of the assessee is allowed with no order as to costs. - Thus AO is required to re-compute the taxable profit for the purpose of computation of book profit u/s.115JA of the Act in the light of the guide lines laid down by the Hon Courts as cited above - Decided in favour of assessee. Addition of expenses to the book profits calculated u/s.115JB - Held that:- Revenue Authorities were first of all required to ascertain the nature of expenditure and thereupon decide whether required to be added back in the calculation of book profit u/s.115JB or not. Although, it is a settled position of law that for the purpose of the calculation of book profit the same is required to be increased by certain amounts as prescribed under Explanation (1) of Section 115JB. But side by side the "book profit" is required to be calculated as per the accounting policies and accounting standards described under Companies Act, 1956. The law has clearly prescribed that the "book profit" means the net profit as shown in the P&L Account which is to be computed as per the accounting policies and the accounting standards prescribed under the Act. Therefore, the calculation of the "book profit" depends upon the net profit as per P&L Account norms laid down in the accounting standards. Since, the AO has not examined this aspect on these lines we deem it proper to restore this ground back to the file of the AO to be decided denovo - Decided in favour of assessee for statistical purposes. Deduction u/s.115JB(2)(iii) - brought forward business loss of unabsorbed depreciation of Pradeep Drug Company Limited - Held that:- due to the substantial reserves available at the time of merger it was decided by the amalgamating company and the amalgamated company not to set off such losses or depreciation. Further, the position is that as per Explanation 1(iii) of Section 115JB the "book profit" is to be reduced by the amount of loss brought forward or unabsorbed depreciation but the provision of this clause shall not apply if the amount of loss brought forward or unabsorbed depreciation as "Nil". The Assessee has not controverted this fact as noted by the AO that after the amalgamation there was "Nil" amount of brought forward loss and unabsorbed depreciation. Due to this reason, we are of the view that the Assessee has made a wrong claim which was rightly rejected by the AO. Resultantly, we find no force in this ground of the Assessee, hence dismissed. - Decided against assessee. Inclusion of Exchange Rate Fluctuation in total amount for the purpose of deduction u/s.80HHC - Held that:- This issue is directly covered in favour of the assessee by an order of CIT vs, Alps Chemicals Pvt Ltd [2014 (10) TMI 251 - GUJARAT HIGH COURT ] wherein discussed decisions namely Sterling Foods (1999 (4) TMI 1 - SUPREME Court ) wherein the legal proposition was that the source of the income was the export and earned the said income merely on account of fluctuation in foreign exchange. Also cited a decision of Shah Originals (2010 (4) TMI 216 - BOMBAY HIGH COURT ) wherein as well held that an exporter had an option to keep certain percentage of export receipts in EEFC a/c. The assessee received higher amount in Indian rupees on such amount due to fluctuation in the foreign exchange rate. Conscious of the fact that the assessee had received the proceeds of the export transaction and gained due to fluctuation the court held that such gain cannot only be said to have been 'derived' from export business but the fluctuation gain arose subsequent to receiving the sale consideration hence part of the export sales. The gain was not due to delayed realization of export proceeds - Decided in favour of assessee. Inclusion of Sale of scrap in total turnover for the purpose of deduction u/s 80HHC - Held that:- Intention behind enactment of section 80HHC of the Act is to encourage export to earn Foreign Exchange. It was finally concluded that the proceeds generated from the sale of scrap would not be included in the "total turnover". See Punjab Stainless Ltd. (2014 (5) TMI 238 - SUPREME COURT)- Decided in favour of assessee. Reduction of unrealised export proceeds from export turnover for the purpose of deduction u/s 80HHC - Held that:- There should not be controversy in respect of allowability of the claim. At the most the controversy could be in respect of the year in which the remittance has been realized and remitted in India. As rightly mentioned by the Assessee in one of the reply to the AO that the provision of Section 115(13) are introduced in the statue with the intention to grant relief to all those exporters who have genuinely applied for the extension of time to the competent authority, i.e., RBI. This provision of IT Act thus prescribes that the claim of deduction is admissible in the year in which the convertible foreign exchange has been brought in and accounted in the books of accounts. We, therefore, direct the AO to apply the provisions of Section 155(13) of IT Act and after examining the record pertaining to the year in which the convertible foreign exchange was remitted the deduction should be allowed. - Decided in favour of assessee for statistical purposes. Disallowance of deduction u/s.80IB in respect of sale of DEPB - Held that:- Respectfully following the decision of Liberty India (2009 (8) TMI 63 - SUPREME COURT), wherein it was held that Duty Drawback receipts and DEPB benefits do not form part of the net profits of eligible industrial undertaking for the purpose of deduction U/s 80I / 80IA / 80IB. It was commented by S.C. that Sec. 80IB provides for the allowing of deduction in respect of profits and gains derived from the eligible business we hereby dismiss this ground of the assessee - Decided against assessee. Reduction of Exchange rate difference in computing the profits of the new industrial undertaking u/s.80IB - Held that:- As informed that the learned CIT(A) has mistakenly not adjudicated this ground pertaining to exchange rate itself. In a situation when the First Appellate Authority has not given an opinion on this issue it is not possible for us to decide that issue because the order in Appeal before us is the order of First Appellate Authority. Therefore in the interest of natural justice, we hereby restore this ground back to him to be decided as per law, needless to say, after providing an adequate opportunity of hearing to both the sides - Decided in favour of assessee for statistical purposes. Disallowance of expenses for increase in share capital - Held that:- Sec 35D would apply only in respect of expenditure which is otherwise not allowable under the law being a capital expenditure. This section subscribed or listed certain types of capital expenditure which can be amortised. But if those are not capital expenditure then the view is that after examining the nature and genuineness of the expenditure the same can be considered as Revenue Expenditure. So the outcome of the above discussion is that the provision of amortisation is not intended to supersede any other provision of the income tax act under which such expenditure is otherwise admissible as a deduction. Under the fitness of circumstances it is therefore required to restore this issue back to A.O. to examine both the aspects i.e. Revenue Expenditure or Capital Expenditure and then decide the question of disallowance. - Decided in favour for statistical purposes. Set Off of Brought Forward MAT Credit u/s.115JAA after levy of surcharge - Calculation of Interest u/s.234B. - Held that:- As relying on order of CIT Vs. Tulsyan Nec Ltd, [2010 (12) TMI 23 - Supreme Court of India] wherein it was held that MAT credit is admissible in terms of Section 115 JAA to be set off against the assessed tax before calculation interest u/s.234 etc. Since, the law laid down has no controversy hence following the decision of Hon'ble Supreme Court the AO is hereby directed to grant relief as per law.- Decided in favour for statistical purposes. Disallowance of interest to Dadhas - CIT(A) deleted the addition - Held that:- Since in the past a consistent view had been taken that once the Revenue had accepted the business decision of appointment of the said firms then in the same breath could not question the assessee's other decision taken in the ordinary course of business. We therefore follow the view already taken by the respected coordinate benches and affirm the decision of CIT(A), hence this ground of the Revenue is dismissed. - Decided against revenue. Unaccounted sale of solvents - CIT(A) deleted the addition - Held that:- Since the year under consideration is also the post search period and in the financial year under consideration the Assessing Officer has simply presumed that the assessee might have sold the spent solvents; therefore, following the past history of the case, we hereby hold that the addition merely based upon the presumption; hence, rightly deleted by ld. CIT(A). - Decided against revenue. Compulsory allowance of depreciation - CIT(A) deleted the addition - Held that:- Depreciation not claimed by the assessee could not be deducted despite the introduction of the blockassets concept. We hereby hold that for the year under consideration, which is before the amendment took place, the depreciation cannot be foisted upon the assessee. Therefore, this ground of the Revenue is hereby dismissed - Decided against revenue. Inclusion of sales tax and excise duty in the total turnover for the purpose of deduction under section 80HHC - Held that:- As relying on an order of Laxmi Machine Works [2007 (4) TMI 202 - SUPREME Court] for the legal proposition that Excise Duty & Sales Tax are indirect taxes so do not involve any element of 'Turnover'. Respectfully following this precedent we hereby affirm the findings of CIT(A) and dismiss this ground of the Revenue. - Decided against revenue. Include scrap sales in the total turnover for the purpose of deduction under section 80HHC - Held that:- In the past where the Assessee was in Appeal we have taken a view following Punjab Stainless Steel, (2014 (5) TMI 238 - SUPREME COURT) that the profit generated from the sale of scrap would not be included in the "total turnover". On the same lines, we hereby uphold the view taken by learned CIT(A) and reject this ground of the Revenue. - Decided against revenue. Gross interest for computing 'Profit of the Business' for the purpose of deduction under section 80HHC - Held that:- ACG Associated Capsules Pvt. Ltd., reported in (2012 (2) TMI 101 - SUPREME COURT OF INDIA ) and Topman Exports, reported in (2012 (2) TMI 100 - SUPREME COURT OF INDIA) and thereupon arrived at the conclusion that 90% of the net interest which had been included in the profits of the business was required to be deducted as per Explanation (baa) of section 80HHC. On the same line, we hereby direct to compute the 80HHC deduction - Decided against revenue. Sale of DEPB license is in favour the Revenue following Liberty India, [2009 (8) TMI 63 - SUPREME COURT] hence the issue raised by the Revenue is decided against the Assessee.
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Corporate Laws
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2015 (5) TMI 624
Application for revival of company - Claim of State Bank of India's satisfied - Dues of the company in liquidation towards the Corporation stands satisfied as per one time settlement reached - Held that:- In view of the changed circumstances, the Company is brought out of liquidation and is revived. It would now be free to resume its business. However, the Official Liquidator would handover the vacant possession of the premises, i.e., land, building and factory including the plant and machinery lying therein to the Ex-Director Sh.Rajiv Jain after removing any encroachments. In case, the property has been encroached by anyone regarding which an FIR No.31 dated 4.3.2014 in PS Kasola, District Rewari has been registered, the SSP, Rewari is directed to assist the Official Liquidator in removing the encroachments forthwith with 7 days notice to those found in unauthorised possession. Since the company stands revived, the title deeds which were deposited by the petitioner to secure a loan by equitable mortgage, shall be returned to the petitioner company and the mortgage will stand discharged. The Registrar of Companies to make necessary corrections. The petitioner to take steps to inform the Registrar of Companies within 30 days of receipt of this order of the revival of the petitioner company. Henceforth, the company will be treated as having come out of liquidation. Consequently, the winding up order is recalled. If any sundry bills or expenses remain due, the Official Liquidator would be free to send a notice to the petitioner company together with a calculation sheet including the fees of the Chartered Accountant, if any pending payment. The Official Liquidator at the time of handing over the possession would initiate demarcation process through the revenue authorities in Rewari. - Application for revival of company accepted.
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Service Tax
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2015 (5) TMI 636
Admissibility of CENVAT credit - Penalty u/s 78 - non inclusion of value of steel, cement and other materials received free of cost by respondent from their customers while arriving at the value of construction service for payment of service tax on the construction services provided by them - Held that:- Issue of inclusion of free material provided to the service provider by the customer and computation of value thereof for the purpose of payment of service tax by the service provider is decided by the Larger Bench of this Tribunal in the case of Bhayana Builders (P) Ltd. & others vs. CST, Delhi [2013 (9) TMI 294 - CESTAT NEW DELHI (LB)] in favour of the assessee. As a matter of judicial discipline we follow the above decision and reject the appeal of the Revenue on this matter The amount of ₹ 2,75,255/- is 25% of the penalty of ₹ 11,01,017/- which was set aside by Commissioner (Appeals). - Therefore penalty is not imposable under Section 78 because show-cause notice was not required to be issued under Section 73(3) as no mens rea for wilfull suppression of facts has been established. Therefore, refund of ₹ 2,75,255/- should be granted. As regards the interest of ₹ 1,94,084/- on the service tax demand of ₹ 9,42,920/-, we have already set aside the demand. Therefore the interest of ₹ 1,94,084/- paid by appellant merits refund - Decided against Revenue.
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2015 (5) TMI 635
Receipt of commission for disbursement of govt. teacher's salary - Business Auxiliary Services - Penalty u/s 78 - Held that:- lower authorities were error in holding that appellant would fall under the category of commission agent and the amount received by them from the Government of Maharashtra through Zilha Parishad as service charges for disbursement of salaries of Govt. teachers cannot be considered as commission received though it may be entered in the records of the appellant as commission received. - an amount received as a consideration for disbursement of salaries to the Govt. teachers on direction of Zillha Parishad can never be an activity covered under the definition of Business Auxiliary Service and more so it cannot be termed as an amount received by the appellant as commission agent. In view of the facts and circumstances of this case, we hold that the impugned order is unsustainable and liable to be set aside - Decided in favour of assessee.
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2015 (5) TMI 634
Rejection of the refund claim - Erection, Commissioning or Installation service - benefit of Notification No. 19/03 - claim of rebate / abatement of 67% - Held that:- Vivisection of Works Contract was permissible before the introduction of service tax on Works Contract service. If the service component of an activity was covered under any other category of service under the Finance Act 1994, it would be leviable to service tax. - what has been erected by them is basically a structure. At the same time, on a query from the bench, it was revealed that the multi-parking car system also includes hydraulic systems/ lifts. - it has to be examined whether the whole parking system can be termed as a structure or it should be considered as having two components namely a civil structure and the hydraulic/lift system. We find these factual details have not been examined by the adjudicating authority or the appellate authority with reference to the definition of erection, commissioning or installationas it underwent amendments from 2003 to 2006. The matter, therefore, needs to be remanded back to the adjudicating authority for a careful analysis of facts vis-a-vis the statute prevailing at the relevant time. - Matter remanded back - Decided in favour of assessee.
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2015 (5) TMI 633
Waiver of pre deposit - Denial of CENVAT Credit - Held that:- Appellant is having service tax registration at their Bombay office and it is undisputed fact that for the services rendered by the appellant from various branches, the appellant discharges service tax liability in Bombay. It is also undisputed that the Cenvat Credit availed by the appellant on the various documents of service providers are provided to the branch office of the appellant. - prima facie, appellant cannot be denied Cenvat Credit of the service provider to the branches of the appellant. The appellant has claimed and is a undisputed fact that they have discharged service tax liability on the services rendered by the branches to the customers. - Stay granted.
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Central Excise
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2015 (5) TMI 631
Valuation - whether the value of bought out items should be added to the assessable value of the boilers - assessee had removed boilers in unassembled form at the factory site according to the excise authorities - Held that:- If there was no such amount demanded in the show cause notice, the direction contained in para 10 and 11(b) of the impugned order of the Tribunal to the jurisdictional officer to determine and recover the duty from the appellant shall have to go. However, it is only if the Officer is satisfied that no demand was made in respect of aforesaid items while computing the demand - Decided against assessee.
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2015 (5) TMI 630
Classification of goods - Held that:- goods in question, viz., manufacturing yarn out of synthetic waste, rags, silk waste and wool waste are subject to levy of excise duty under entry 5509.90 - Tribunal has reduced the amount of demand of ₹ 26,35,780/- as contained in the order of the Commissioner to ₹ 7,28,540/- on the ground that the period prior to 26.5.1995 could not be taken into consideration. The Tribunal has given valid reasons for this conclusion - Decided against Revenue.
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2015 (5) TMI 629
Classification of hand trolley or fork lift etc. manufactured for captive consumption for use in manufacturing of Parts of motor vehicle - These trolleys and fork lift are placed on iron/steel or aluminum known as "3 FAG Pallets" - Classification under heading No.84.27 or under Heading 84.31 - Held that:- Fork-lift truck is operational without pallets and as such pallets are not parts of the same. If the contention of the Respondent is accepted, motor sprit will be part of a motor car as the same cannot be used without it. Once it is held that pallets are not parts of fork-lift truck, Note 2 to Section XVI is not attracted as it only provides guidance for the classification of parts and not all goods which are used or to be used with the machineries falling in Section XVI of the Tariff. - the impugned pallets, being not part of fork-lift trucks, are not classifiable under Heading 84.31 of the Tariff. - Decided against the assessee. Benefit of Notification No.67 /95-CE dated 16.3.1995 - Whether the appellant, in respect of the pallets, can claim benefit of Notification No.67 /95-CE dated 16.3.1995, as amended and prevalent on the date when the dispute arose, namely, in the year 1999 - Held that:- It is an admitted position, as explained by the appellant itself, that these pallets which are manufactured/assembled in the factory of the appellant are in the nature of material handling equipment, to keep and carry work in progress goods from one machine to the other. Thus, the use of the pallets is for carrying out the material from one machine to the other. It cannot, therefore, be said that these goods are used in relation to the manufacture in or in relation to the manufacture of the final products. We are, therefore, of the opinion that column (2) of Notification shall also not be attracted. - Decided against assessee.
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2015 (5) TMI 628
Validity of order of settlement of commission - MODVAT Credit - use of inputs for manufacturing activity or not - respondent made an admission to the extent that it had received the float glass in packaged form and on the opening of the wooden boxes, certain float lasses were found to be broken and they were not used as inputs while undertaking the manufacturing process - Held that:- High Court has not interfered with the facts which were recorded by the Settlement Commission. On the contrary, the facts noted above remained undisputed. On those facts the High Court has simply stated the correct legal position where the Settlement Commission had gone wrong in law. Thus, the High Court has simply applied the correct principle of law on the admitted facts. - Such remand of the High Court has been held permissible in Jyotendrasinghji vs. S.I. Tripathi and Others (1993 (4) TMI 1 - SUPREME Court) which was also concerning the powers of the Settlement Commission, albeit under Section 245(D)(4) of the Income Tax Act. The principle of law remains the same and can be applied in case of orders passed by the Settlement Commission under the Central Excise Act as well - appeal is bereft of any merit - Decided against Revenue.
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2015 (5) TMI 627
Valuation - Captive consumption - price shown for various models of VIT cleared for captive consumption of the appellant's own unit at Nasik is much lesser than the price at which the appellant had been selling such products to the other parties - Held that:- In the chart the quantity which was cleared by the appellant for its Nasik unit for the year 1997 is shown in tabulated form in respect of second and fourth model. Insofar as VIT model WL-34599 C-I is concerned, we find that the goods which were cleared by the appellant for its Nasik unit show the value between ₹ 10,700/- to ₹ 13,000/- at different periods. However, the Assessing Authority has fixed the value at ₹ 22,650/- only on the ground that one party, viz., M/s. Ovac Switchgear this very product was supplied at that rate - it was only one unit which was supplied to the said period. In comparison there are sales made to another party, viz., Beicco Lawrie and the price charged from the said party is ₹ 12,500/- during 1997-1998, 1998-1999, 1999-2000 and ₹ 11,400/- for the year 2000-2001. This is almost comparable price at which the goods were cleared for its Nasik unit. Therefore, in respect of this model the goods which were cleared by the appellant for its Nasik unit should have been accepted and the price could not have been fixed at ₹ 22,650/-. - Decided partly in favour of assessee.
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2015 (5) TMI 625
Imposition of penalty - Whether the Appellate Tribunal was right in imposing penalty on the appeal under Rule 57U[6] in the facts of this case - Held that:- If the provision for imposing penalty was not in existence in December, 1994 when the contravention took place, then, there was no question of imposition of any penalty on the basis of the subsequent rule which was not in existence at the relevant time. The Apex Court in Commissioner of Central Excise, Mumbai-I v. Lal Mining Engg.Works, reported in [2007 (7) TMI 306 - SUPREME COURT OF INDIA] has held in para-3 that the penalty cannot be invoked in a case which was before the Apex Court as the same would amount to giving retrospective operation thereto which is impermissible in law. - Decided in favour of assessee.
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CST, VAT & Sales Tax
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2015 (5) TMI 632
Detention of goods - first respondent erroneously treated the transfer as inter state sale without even conducting any enquiry or appreciating the contents of the documents produced to substantiate their claim - Levy of compounding fees - Held that:- Court is of the view that the petitioner cannot be left without any remedy, as the petitioner states that the goods are not liable for detention or for levy of any compounding fee. The petitioner would state that there are sufficient documents to show that the transaction is not in violation of the provisions of the TNVAT Act, more particularly, when the consignor and the consignee have furnished the TIN numbers and the goods were also accompanied by proper records. - Court is of the view that the petitioner should be granted an opportunity to contest the matter on merits. However, in order to safeguard the interest of the Revenue, the petitioner should be directed to remit the tax demanded. - writ petition is disposed of by directing the petitioner to pay the tax of ₹ 75,222/- within a period of three weeks from the date of receipt of a copy of this order and on such payment, the respondents are directed to release the goods. Insofar as levy of compounding fee is concerned, it is open to the petitioner to file revision under Section 54 of the Act within a period of three weeks after the goods are released - Decided conditionally in favour of assessee.
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