TMI Tax Updates - e-Newsletter
May 22, 2015
Case Laws in this Newsletter:
Income Tax
Corporate Laws
Service Tax
Central Excise
Indian Laws
TMI SMS
Highlights / Catch Notes
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Income Tax:
Eligibility of deduction u/s 80-IA - infrastructural facility set up and within the precincts of the port, - deduction admissible under sub-section (4) of section 80-IA can be claimed by both the ICDs and CFSs - HC
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Income Tax:
Constitutional validity of the third proviso to Section 254(2A) - Vacation of stay order after 365 days - discrimination - where the delay in disposing of the appeal is not attributable to the assessee, Tribunal has the power to grant extension of stay beyond 365 days in deserving cases - HC
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Income Tax:
Profits eligible for deduction under Section 80IB (4) of the Act though are necessarily to be computed after allowing depreciation under Section 32 of the Act, but the same would apply only from April 1, 2002, when the amendment came into force and will not apply to earlier years - HC
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Income Tax:
Registration under Section 12A cancelled - Donation to another trust - DIT (Exemption) was certainly within her rights to insist on a proper explanation which in the circumstances of the case, the assessee failed to provide - HC
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Income Tax:
Depreciation claim denied - cession of work/suspension of work - This is not a case where the assessee himself is embroiled in a dispute with his labourers and in the process, has decided to declare a lockout expressing its intention not to run the business - depreciation allowed - HC
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Income Tax:
Depreciation - nature of Industrial Investment Promotion Assistance - subsidy receipt should not be reduced from the actual cost of fixed assets for computing depreciation under the provisions of the Act - AT
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Income Tax:
Levy of interest u/s 234B and u/s 234C - MAT - Book Adjustments - Section 115J/115JA - assessee cannot seek to escape the mandatory levy being fastened on it under the plea that it had bona fide belief that it is not liable - AT
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Income Tax:
TP adjustment on account of Travel expenses - when the entire expenditure was incurred for hotel stay and travel of both Mr. Stan Wojicierczk and Mr. Raj Lakhani then reimbursement of 50% of the expenses does not involve any payment to the AE but it was reimbursement of expenses. - AT
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Income Tax:
Reusable artwork expenses - revenue v/s capital expenditure - Considering the average life span of such artwork, which is only less than six months, it cannot be inferred that any capital apparatus has come into existence - AT
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Income Tax:
Disallowance of office expenses - inflation of expenditure cannot be ruled out - Without maintaining any books or record, the assessee is claiming 60 per cent. as expenditure - AO has rightly restricted the expenditure to 40% of the gross receipts - AT
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Income Tax:
Estimation of income - Certain receipts as per TDS certificate were missed to be included (Not disclosed) - income to be estimated in the hands of the assessee by applying NP rate of 20% - AT
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Income Tax:
Non compliance of provisions of section 80AC while claiming the Deduction u/s. 80IB - non filing of return within due date - the relaxation extends only to the deeming of the date of the filing the return and not to its form and, further, does not extend beyond 15 days. - AT
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Service Tax:
Scientific and technical consultancy services - Reverse charge - Even assuming that M/s. Kopran Research Laboratories Ltd. are a science or technology organization wholly owned by the appellant-company and that their R&D activities are financially supported by the appellant-company, we are not inclined to deem the latter to be a science or technology institution or organization. - AT
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Service Tax:
Levy of Penalty and late fee for delayed payment of service tax and delayed filing of return - penalties u/s 76, 77 & 78 waived in view of section 73(3) - Since, there is no provision for waiver of late fee, appellant is required to pay find under Rule 7(c) of the Service Tax Rules, 1944 - AT
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Service Tax:
Refund - Lack of documentary evidence - appellants have not submitted the evidence of payment of service tax on the specified services for which the refunds were sought - refund denied - AT
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Service Tax:
Service to self - activity of the appellant in transporting the gas is a service to self and therefore falls outside the ambit of the taxable service - stay granted - AT
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Central Excise:
CENVAT Credit - cement and steel - jetty was constructed and input credit was claimed on cement and steel - appellant is a taxable service provider on port under the category of port services - credit allowed - HC
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Central Excise:
Demand of duty - Manufacturing activity or not - the activity from conversion of various components of lottery terminal into complete unit of lottery terminal is undoubtedly amounting to manufacture and correctly chargeable to excise duty under chapter heading 84709010 - AT
Articles
Notifications
Circulars / Instructions / Orders
News
Case Laws:
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Income Tax
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2015 (5) TMI 669
Entitlement to deduction under Section 80-IA(4) - Whether the business activity of the respondent-assessee would fall within the ambit of the expression "Infrastructure Facility" as occurred in Section 80-IA of the Income-tax Act, in particular the Explanation appended to sub-Section (4) thereof? - Held that:- the assessee in the present cases though has erected bus-shelters, beautified the road median, erected street lights and footbridge in the specified place as 'per the specifications and erected advertisement hoardings for earning income from the said advertising business, it cannot be treated as infrastructure facility as explained in the Explanation of Section 80-IA of the Act. It was not an engineering or construction company that puts up public infrastructure. The assessee, which, eventually is an advertising company, is interested only to find out the best space at the best locations for advertisements. The assessee does not claim that he has any experience of raising/erecting infrastructure facility as contemplated by the Explanation of Section 80-IA of the Act. Thus the activities indulged by the assessee are part of its normal activities of advertising and publicity rather than one of infrastructure development. The business activities of the assessee do not involve (a) Development (b) Operating; and (c) Maintenance. For the purpose of its business, the assessee has taken up erection/construction of bus-shelter for its advertisement business. The circular issued by the CBDT makes it clear that the income eligible for deduction has to be arisen from the use of facility, for example, collection of toll from the road users. The said income has to be treated as income derived from the infrastructure facility. In the instant case, the assessee derives income only from the advertisement hoardings erected on the bus-shelters, road medians and the street light poles. Hence, the said income cannot be treated as income derived from the "infrastructure facility. The income earned by the assessee do not fall under Section 80-IA(4). We find that the order passed by the Tribunal is contrary to the intendment of the Act. The benefit under Section 80-IA can be extended only to those assessees who have developed infrastructure facility as defined under sub-Section (4) of Section 80-IA. In the instant case, the assessee has not developed road or a toll road, bridge, highway or a rail system. - Decided against assesse.
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2015 (5) TMI 656
Eligibility of deduction u/s 80-IA - activities undertaken by the assessee do not fall within Clause (d) of the Explanation to 80- IA(4) defining the term infrastructure facilities - notice under section 153A challenged - Held that:- In the present case, the notice under section 153A is founded on search. If there is no incriminating material found during the search, then, the Special Bench was right in holding that the power under section 153A being not expected to be exercised routinely, should be exercised if the search reveals any incriminating material. If that is not found, then, in relation to the second phase of three years, there is no warrant for making an order within the meaning of this provision. In any event, the issue stands concluded by a Division Bench judgment of this Court rendered in the case of Commissioner of Income Tax (Central) Nagpur vs. M/s. Murli Agro Products Limited [2010 (10) TMI 1052 - BOMBAY HIGH COURT] . It is, therefore, apparent that the law laid down by this Court is binding on the Revenue. If that is binding then the questions of law and with regard to applicability of section 153A need to be answered against the Revenue and in favour of the assessee. Income from ICDs - whether qualify for the deduction under Section 80IA(4)(i) of the Act read with the Explanation (d)? - Held that:- When the proposal to set up a CFS has been accepted by the Government, there is no requirement of either a specific agreement as contended by Mr. Suresh Kumar. Nor can it be said that by virtue of any certification of the JNPT and its subsequent withdrawal the position undergoes any change. Once the facility is nothing but a infrastructural facility set up and within the precincts of the port, then, considering and even otherwise having considered its proximity to the sea port and its activities that we have no doubt and it can be safely concluded that the deduction admissible under sub-section (4) of section 80-IA can be claimed by both the ICDs and CFSs. We do not think that the view taken by the Tribunal is in any way perverse or runs contrary to the language of sub-section (4) of section 80-IA or the object of the Income Tax Act, 1961, as a whole. Once such a conclusion is reached, then, it is not necessary to refer to any other material, particularly any circulars of the Board or otherwise or the certificates issued by the authorities. Even their contents need not be referred to. We are of the view that the extensive reasoning in the judgment of the Division Bench of the Delhi High Court and which finds approval even of the High Court of Madras and with which we broadly agree that the substantial questions of law on both counts need to be answered in favour of the assessee and against the Revenue.
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2015 (5) TMI 655
Constitutional validity of the third proviso to Section 254(2A) challenged - discrimination, based on an impermissible or invalid classification - grant extension of stay beyond 365 days - Held that:- Assessees who, after having obtained stay orders and by their conduct delay the appeal proceedings, have been treated in the same manner in which assessees, who have not, in any way, delayed the proceedings in the appeal. The two classes of assessees are distinct and cannot be clubbed together. This clubbing together has led to hostile discrimination against the assessees to whom the delay is not attributable. It is for this reason that we find that the insertion of the expression – ‘even if the delay in disposing of the appeal is not attributable to the assessee’– by virtue of the Finance Act, 2008, violates the non-discrimination clause of Article 14 of the Constitution of India. The object that appeals should be heard expeditiously and that assesses should not misuse the stay orders granted in their favour by adopting delaying tactics is not at all achieved by the provision as it stands. On the contrary, the clubbing together of ‘well behaved’ assesses and those who cause delay in the appeal proceedings is itself violative of Article 14 of the Constitution and has no nexus or connection with the object sought to be achieved. The said expression introduced by the Finance Act, 2008 is, therefore, struck down as being violative of Article 14 of the Constitution of India. This would revert us to the position of law as interpreted by the Bombay High Court in Narang Overseas (2007 (7) TMI 5 - BOMBAY HIGH COURT ), with which we are in full agreement. Consequently, we hold that, where the delay in disposing of the appeal is not attributable to the assessee, the Tribunal has the power to grant extension of stay beyond 365 days in deserving cases. The writ petitions are allowed as above. - Decided in favour of assessee.
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2015 (5) TMI 654
Reopening of assessment - restructuring of the petitioner company questioned - reopening challenged on ground of change of opinion and no new material or additional facts had come to the knowledge of the assessing officer - Held that:- Assessing Officer himself in the draft assessment order had noticed the restructuring and had specifically recorded that receipts upto and including July 2007 were being taxed in the hands of the petitioner and for the balance period from August 2007 to March 2008 were to be taxed in the hands of the petitioner’s 100% subsidiary ‘LIG’. The Assessing Officer was, therefore, aware of the entire transaction. Secondly, and, in any event, the DRP in the course of the proceedings before it, made specific queries with regard to the business restructuring of the petitioner and the transaction in question. The petitioner gave a detailed reply and the same has been noted in the observations of the DRP which we have extracted in the earlier part of the judgment. The DRP, after examining the entire business restructuring arrangement and the transaction in question, did not make any addition. The Assessing Officer in his final assessment order also did not make any addition on account of the subject transaction. It must be noted that the DRP procedure is part of the assessment proceedings. Queries raised and answered during the DRP proceedings would stand on the same footing as queries raised and answered in the course of an assessment proceedings before an Assessing Officer where the DRP procedure is not applicable. Therefore, on both counts, it cannot be said that an opinion had not been formed in respect of the transaction in question during the assessment proceedings. The fact that no addition was made in respect of the said transaction, would clearly raise the presumption that after having examined the said transaction, it was opined that it was not exigible to tax. The subsequent view being taken, as indicated in the purported reasons for initiating the proceedings under Section 147 would be nothing but a ‘change of opinion’ which is not permissible in law. We are also in agreement with the learned counsel for the petitioner that no new facts or material had come to the knowledge of the Assessing Officer to enable him to initiate re-assessment proceedings. All the material facts on which the Assessing Officer had based his purported reasons were available on record at the time when the original assessment order was passed. Reading the Explanation with sub-section 144C(8), it is evident that the Dispute Resolution Panel could examine the issues arising out of the assessment proceedings even though such issues were not part of the subject matter of the variations suggested by the Assessing Officer. In this light, it is significant that though the draft order had not proposed any addition with regard to the restructuring and the said transaction, yet, the DRP had asked for details of the restructuring and had examined the matter. After such examination, the DRP did not direct any addition to be made in this regard. It is evident that the DRP formed an opinion that the transaction was not exigible to capital gains tax and, to contend otherwise, in the purported reasons for re-opening of the assessment, would be nothing but a ‘change of opinion’ which is not permissible in law. - Decided in favour of assesse.
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2015 (5) TMI 653
Eligibility for deduction under Section 80IB(4) - Whether the conversion of gram Dal into Besan powder, by a process of mere roasting and grinding, amounts to manufacture? - Held that:- Applying test given in Idandas versus Anant Ram Chandra Phadke (dead) by L.Rs., [1981 (11) TMI 185 - SUPREME COURT] it can conveniently be held that converting gram Dal into Besan will amount to manufacturing process because:i) gram Dal loses its shape and identification as in the case of wheat which is converted into flour;ii) the end product i.e. Besan can be said to be different from that of gram Dal. It is through process of labour and machinery that Besan is produced;iii) Gram Dal and Besan are treated as different commercial products. Indisputably, gram Dal also undergoes same process for being converted into Besan which is undergone by the wheat for manufacturing wheat flour. In view of the aforesaid, it can safely be concluded that conversion of gram Dal into Besan amounts to manufacture and consequently the assessee is entitled to the deduction under Section 80IB(4) of the Income Tax Act. - Decided in favour of assesse. - Decided in favour of the assessee Eligibility for deduction under Section 80IB (4) - whether necessarily to be computed after allowing depreciation under Section 32? - Held that:- Profits eligible for deduction under Section 80IB (4) of the Act though are necessarily to be computed after allowing depreciation under Section 32 of the Act, but the same would apply only from April 1, 2002, when the amendment came into force and will not apply to earlier years. See CIT v. Mahendra Mills [2000 (3) TMI 3 - SUPREME Court] - Decided in favour of the assessee Condition of ten or more workers to be employed in the manufacturing process as specified in section 80IB(2)(iv) - whether could be said to be complied with, especially when ten or more workers were actually engaged on only 73 days during the entire year? - Held that:- Once, it is established that the assessee had not employed 10 or more workers during the substantial part of the year, we are left with no other option but to answer the question in favour of the revenue - Decided against the assessee.
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2015 (5) TMI 652
Registration under Section 12A cancelled - Whether AO could have rendered findings questioning the exemption under Section 12-A enjoyed by the assessee, on the basis of the donation which was made to the Ram Krishna and Sons Charitable Trust? - Held that:- The AO in the present case noticed that after the donation of the institution to the assessee on 26.05.2002 a significant portion of income i.e. fee collection etc., was donated to the RKSCT. Now, when the notice was issued under Section 12A by the Director of Income Tax, the assessee was under a duty to furnish particulars and satisfy the authority as to how and why the amounts made over to Ram Krishan & Sons Charitable Trust from its earnings through its charitable activities were either not a device, or were permissible under its trust. Given the significance of the amounts involved i.e. ₹ 2.74 crore and ₹ 60 lakhs in AY 2004-05 and ₹ 4,43,37,505/- crores in AY 2003-04, the assessee was certainly expected to give an explanation better than the one it argued that the AO’s reasoning was not supported by law as he was not the authority to doubt such expenditure. The obligation required of a charitable trust enjoying the benefit of tax exemption under Section 12A is clearly categorical in that it has applied for registration under Section 80G(5) towards its charitable activities. In these circumstances the DIT (Exemption) was certainly within her rights to insist on a proper explanation which in the circumstances of the case, the assessee failed to provide – perhaps more as a result of its mistake on his mis-apprehension that the entire basis for the revocation proceedings or the AO’s opinion for AY 2003-04 and 2004-05. Once the notice under Section 12A proposing revocation was issued in the independent nature of the proceedings had to be satisfied. The assessee was under an obligation to provide such material to satisfy that the donation fulfilled the objective and were of charitable nature and as such rendered any proposed action for revocation unwarranted.The matter is remitted to the DIT (Exemption) for fresh examination after consideration of such material as the assessee may choose to place on record within the next four weeks.
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2015 (5) TMI 651
Depreciation claim denied - cession of work/suspension of work in the factory premises of the petitioner - Held that:- Applying the decisions of M/s. Norplex Oak India [2011 (3) TMI 620 - CALCUTTA HIGH COURT] to the facts in this case wherein held that as the assessee was ready for doing his business. But for the adverse law and order situation, he could not actually run the factory although all the machineries were ready for use and the valuation of such machinery also depreciated notwithstanding its non-user. Notwithstanding such adverse law and order situation, the assessee did not abandon its business but suffered loss for such a state of affairs prevailing in that State over which he had no control with an expectation of resuming the business. This is not a case where the assessee himself is embroiled in a dispute with his labourers and in the process, has decided to declare a lockout expressing its intention not to run the business. Thus,the Tribunal below rightly granted depreciation in favour of the assessee - the question in the present case too has to be and is answered in the affirmative - Decided against the revenue. Expenditure on filling up the pond, leveling of the low land - revenue v/s capital expenditure - Held that:- In this case the expenditure was made for bringing into existence an advantage for the enduring benefit of the business of the assessee, and therefore, the same was capital in nature. In the circumstances the view taken by the learned Appellate Tribunal is certainly a possible view. We, therefore, answer the second question in the negative - Decided against the assessee
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2015 (5) TMI 650
Allowance of balance 50% additional depreciation u/s 32(1)(ii) - new plant and machinery, purchased and put to use for less than 180 days in the immediately preceding year - Held that:- This issue was considered by the Delhi Bench of this Tribunal in the case of Cosmo Films Ltd. (2012 (9) TMI 281 - ITAT DELHI), wherein considering the provisions of section 32(1)(iia) and second proviso to section 32(1)(ii) of the Act found that when there is no restriction in the Act to deny the benefit of balance 50%, the assessee is entitled for the balance additional depreciation in the subsequent assessment year. Since the issue is squarely covered by the decision of coordinate Bench, cited supra, we are of the considered view that the assessee is entitled for additional depreciation u/s. 32(1)(iia) of the Act in these assessment years also. We direct the AO accordingly. - Decided in favour of assessee. Disallowance u/s.14A - whether CIT(A) erred in not deleting the disallowance treated by ld. Addl. CIT as expenses attributable to earning Dividend income and did not hold that no expenses have been incurred to earn the said income - Held that:- The assessee company is engaged in the business of manufacturing and sale of cables and cable wires. The assessee company has held shares purchased in earlier periods as investment and now the AO has to find out that the shares held by the company has been purchased out of its own fund or out of loans taken by the assessee. In case, the AO wants to disallow the interest he has to establish the nexus that the loan taken on which interest payment is made is invested in purchase of shares, by virtue of which it has earned dividend. In term of the above, this issue in both the years is set aside to the file of AO. - Decided in favour of assessee for statistical purposes. Industrial Investment Promotion Assistance - CIT(Appeals) though holding that Industrial Investment Promotion Assistance allowed by the State Govt. is the nature of capital receipt but directing AO for reduce the same from the cost of Fixed Assets for the purpose of computing depreciation by applying the Explanation 10 of Sec. 43(1) - Held that:- The subsidy was received in terms of Madhya Pradesh Industrial Investment Promotion Assistance Scheme, 2004 in respect of Technological up-gradation - cum - Expansion project for manufacture of XLPE underground power cables using Vertical Continuous Vulcanization Technology in India. The scheme has been framed with an objective to increase employment and establishing new industrial unit by enhancing new capital investment in the state of Madhya Pradesh.As per the Scheme, the amount of assistance which is to be claimed on yearly basis is determined @ 75% of total Commercial tax (MP VAT + CST) deposited (net of Input Tax rebate) in respect of sale of products produced using VCV technology on an yearly basis during the eligibility period. In view of these facts assessee claimed a sum of ₹ 2,61,93,863/- being 75% of the tax deposited (Net of Input tax Rebate) for the year under consideration in respect of sale of XLPE Underground Power Cables using VCV technology as capital receipt for the reason that the overall limit of exemption is linked to the fixed capital investment and is in the nature of subsidy for setting up a new unit / expansion of existing unit. The subsidy received as above, is in the nature of capital receipt and CIT(A) has rightly held so. On this issue we confirm the order of CIT(A). In view of the above facts and circumstances of the case and legal position explained by Hon'ble Supreme Court in the case of P. J. Chemicals Ltd. (1994 (9) TMI 1 - SUPREME Court), we are of the view that subsidy receipt should not be reduced from the actual cost of fixed assets for computing depreciation under the provisions of the Act. - Decided in favour of assessee. Exemption of claim for Entry Tax - CIT(A)not directing the AO to treat it as capital receipt - Held that:- Ld. counsel for the assessee could not establish that how this is equivalent to the Industrial Investment Promotion Assistance, the scheme of Govt. of Madhya Pradesh. We find no infirmity in the order of CIT(A) and the same is confirmed. - Decided against assessee. Disallowance of provision for leave liability in terms of clause (f) of section 43B - Held that:- Remit this issue back to the file of AO to decide afresh in term of the decision of Hon'ble Supreme Court in the case of Exide Industries Ltd. [2008 (9) TMI 921 - SUPREME COURT] - Decided in favour of assessee for statistical purposes.
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2015 (5) TMI 649
Transfer pricing adjustment - wrong selection of comparable - Held that:- Plea of the assessee for exclusion of Infosys Technologies Ltd. cannot be shut out merely because the said concern was initially adopted by the assessee as a comparable in its Transfer Pricing Study. Quite clearly, the turnover of Infosys Technologies Ltd. stands at ₹ 15,051 crores (approx) whereas assessee’s turnover from software development services is to the tune of ₹ 73 crores (approx). It is also clear from the Tabulation above, that the said concern is undertaking diversified activities whereas assessee is providing software services, at minimal risk as 100% activities are to its associated enterprise. In-fact, assessee has rightly relied upon the judgement of the Hon’ble Delhi High Court in the case of Agnity India Technologies Pvt. Ltd. (2013 (7) TMI 696 - DELHI HIGH COURT ) wherein in a somewhat similar situation the action of the Tribunal in excluding Infosys Technologies Ltd., from the list of final comparables was affirmed. Thus M/s. Infosys Technologies Ltd. was liable to be excluded from the final set of comparables. E-Zest Solutions Limited. notably, Symphony Services Pune Pvt. Ltd. (2015 (5) TMI 258 - ITAT PUNE) was also a concern which was engaged in provision of software development and related services to its associated enterprises on cost plus markup basis. The Tribunal vide its order dated 30-04-2014 (Supra) considered the inclusion of E-Zest Solutions Ltd. for the purpose of comparability analysis of the transaction of development services for the very same assessment year, i.e. 2008-09, which is also the year before us. Following the aforesaid discussion which squarely covers the controversy in the present case, we direct that E-Zest Solutions be excluded from the final set of comparables. Kals Information Systems Limited is liable to be excluded from the list of comparables on account of functional dissimilarities for the purposes of benchmarking international transactions of provision of software development services. Bodhtree Consulting Ltd., the revenue recognition model of Bodhtree Consulting Ltd. is quite different from the model being pursued by assessee as the revenue is being recognized based on the cost plus markup basis and such distinction prevailed to exclude Bodhtree Consulting Ltd. from the list of comparables. M/s. FCS Software Solutions Ltd. the operating margins of the said concern do not reflect a consistent trend over the years, and in any case, the current year’s operations in comparison to the earlier years are quite abnormal. Considering the entirety of circumstances, in our view, the financial results declared by the said concern do not reflect a normal business trend and therefore in our view the said concern is liable to be excluded from the final set of comparables - Decided in favour of assessee.
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2015 (5) TMI 648
Transfer pricing adjustment - Computation of Deduction u/s.10A - Held that:- As in Tata Elxsi Ltd. (2011 (8) TMI 782 - KARNATAKA HIGH COURT) held that while computing the deduction under section 10A of the Act, if the export turnover in the numerator is to be arrived at after excluding certain expenditure, then the same expenditure should also be excluded from the total turnover also. Respectfully following the same, we dismiss this ground of revenue and direct the Assessing Officer to exclude the expenditure incurred in foreign currency towards daily allowance, support allowance and travel both from export turnover as well as from total turnover for computing deduction under section 10A of the Act. - Decided against revenue. Related Party Transactions (RPT) - selection of comparable - CIT (Appeals) held that companies having any RPT have to be excluded from the list of comparable companies - Held that:- In the light of the above decision of the co-ordinate bench of this Tribunal in the case of 24/7 Customer.Com Pvt. Ltd. [2013 (1) TMI 45 - ITAT BANGALORE] we find that the decision of the learned CIT (Appeals) in excluding those companies with any RPT is not in keeping with the above decision of the coordinate bench of this Tribunal. Respectfully following the above decision, we hold that the learned CIT (Appeals) was not correct in holding that companies with any RPT have to be excluded from the set of comparable companies, and direct the TPO / A.O. to apply the RPT filter at 15% of total revenues for including / excluding the comparable companies, excluded by the learned CIT (Appeals), in the final set of comparables. - Decided partly in favour of revenue. Companies with Abnormal Profits - CIT (Appeals) excluding companies with profit margin of more than 50% from the final set of comparable companies by holding the profit margin in excess of 50% to be abnormal - Held that:- As find from a perusal of the impugned order that the learned CIT (Appeals) has excluded a number of companies from the list of 12 comparables merely because they have high profits in excess of 50%, without examining whether these companies satisfy the comparability analysis. In this factual matrix, respectfully following the decision of the Special Bench of the ITAT, Mumbai in the case of Maersk Global Centres (India) Pvt. Ltd.(2014 (3) TMI 891 - ITAT MUMBAI), we hold that the learned CIT (Appeals) was wrong in excluding the companies with profit margins of 50% or more merely because of high profit margins and reverse his finding in the matter and restore the matter to the file of the TPO. The TPO is directed to re-examine and decide on the comparability of the companies excluded by the learned CIT (Appeals) on grounds of abnormal profit - Decided in favour of revenue. Standard deduction 5%. - CIT (Appeals) granting standard deduction of 5% under the proviso to section 92C(2) - Held that:- The new section 92C(2A) of the Act mandates that if the Arithmetic Mean Price falls beyond + / - 5 % from the price charged in international transactions, then the assessee does not have any option referred to in section 92C(2)of the Act. Thus, as per this amendment, it is clear that the + / - 5 % variation is allowed only to justify the price charged in the international transactions and not for adjustment / standard deduction purposes. The aforesaid amendment has settled the issue and accordingly the 5% standard deduction is not allowable to the assessee in the case on hand. The various judicial decisions cited pertain to the period prior to the retrospective amendment by way of insertion of section 92C(2A) of the Act by Finance Act, 2012 and are therefore not of any help to the assessee. In this view of the matter, we hold that the learned CIT (Appeals) erred in allowing the assessee the benefit of 5% standard deduction and accordingly reverse this order of this issue in view of the retrospective amendment w.e.f. 1.4.2002 brought about by the insertion of Section 92C(2A) of the Act by Finance Act, 2012. - Decided in favour of revenue. Exclusion of certain comparables - Turnover Filter of ₹ 200 Crores - Held that:- As find that a coordinate bench of this Tribunal in the case of Genisys Integrating Systems (India) Pvt. Ltd. (2011 (8) TMI 952 - ITAT BANGALORE ) has held that turnover is an important filter of comparability which has to be adopted for determination of ALP and has determined the upper limit of the turnover filter to be applied at ₹ 200 Crores in cases where the turnover of the assessee is less than ₹ 200 Crores. In the case on hand, the turnover of the assessee being approx. ₹ 51 Crores only, following the decision of the co-ordinate bench of this Tribunal in the case of Genisys Integrating Systems (India) Pvt. Ltd. (supra), we direct the Assessing Officer to exclude the above 5 companies from the list of comparable companies. RPT Filter - Four Soft Ltd. - Held that:- As in the case of 24/7 Customer.Com P. Ltd. [2013 (1) TMI 45 - ITAT BANGALORE] has held that companies having RPT in excess of 15% are to be excluded from the list of comparable companies. We, therefore, direct the TPO / A.O. to exclude this company, Four Soft Ltd. from the list of comparables if the RPT of this company is in excess of 15% after verification of the assessee's claim that the RPT is 19.89%. Exclusion of companies on grounds of being functionally different from the assessee - Held that:- As find the learned CIT(A) has not considered and adjudicated on the issues raised by the assessee and the submissions made by the assessee in this regard are not examined. We therefore deem it appropriate to remand the issue of the comparability of the aforesaid five companies, challenged by the assessee on grounds of functional difference, for fresh consideration by the TPO. - Decided in favour of assessee for statistical purposes. Multiple Year Data - Held that:- As it is a mandatory requirement of law to utilise data of the current financial year to conduct the comparability analysis at the time of T.P. proceedings, the TPO is not only empowered but is also duty bound to determine the ALP using such contemporaneous data for this purpose even if such data was not available to the assessee in the public data bases at the time of preparation of its report on the T.P. Study. Further, we are also of the view that the TPO rightly rejected the use of earlier year’s data by the assessee, as the assessee failed to establish before the TPO, CIT (Appeals) or before us as to how such earlier years data had an influence on the prices of the current financial year. - Decided against assessee. Data used by the TPO - assessee challenges the action of the TPO in using data available at the time of assessment proceedings, while carrying out the fresh search process for comparable companie - Held that:- The assessee is obliged to maintain the information and documentation as required relating to international transactions as per the specified data so that it can be made available to the TPO or the Assessing Officer or any other authority in any proceeding under the Act. We are, therefore, of the view that there is no infirmity in the action of the TPO in using contemporaneous data at the time of T.P. Audit, though the same may not have been available to the assessee at the time of preparation of the T.P. Study / documentation - Decided against assessee. Risk Adjustment - Held that:- except for raising the claim for risk adjustment, the assessee ;has failed to substantiate the claim with any quantification so that it can be basis for examination by the TPO In a recent decision of the co-ordinate bench in the case of CISCO Systems (India) P. Ltd.,[2014 (11) TMI 849 - ITAT BANGALORE] the bench noted that risk adjustment was not allowed by TPO for the reason of chance of proper basis for quantification. Since such quantification was placed before the Tribunal, the bench directed the TPO to examine and consider the assessee's claim. In the case on hand it is not so. We are, therefore, of the opinion that in the case on hand, the assessee has failed to make its case for being allowed risk adjustment and concur with the order of the TPO in not allowing the assessee risk adjustment in the facts and circumstances of this case. - Decided against assessee. Reimbursement of Expenses considered as part of operating cost - Held that:- It is settled principle that if the reimbursements are mere pass through expenses without any service element, then the same should not be added back to the cost base for the purposes of mark up. We, however, find that both the TPO and the learned CIT (Appeals) have decided the issue without examining the details of the expenses involved. The break-up of the said expenses are not given in detail and the claim that these expenses have been actually incurred by the assessee on behalf of the AEs and vice versa have not been examined. We therefore deem it fit to remit the issue to the file of the Assessing Officer / TPO for detailed verification. - Decided in favour of assessee for statistical purposes. Interest u/s. 234 - Held that:- The charging of interest is mandatory and consequential as has been held by the Hon'ble Apex Court in the case of Anjum Hon'ble Ghaswala & Others (2001 (10) TMI 4 - SUPREME Court ) and we therefore uphold the Assessing Officer’s action in charging the said interest. - Decided against assessee.
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2015 (5) TMI 647
Additional depreciation - Held that:- Respectfully following the judgment of CIT v. Texmo Precision Castings [2009 (10) TMI 140 - MADRAS HIGH COURT] we are of the view that the assessee is entitled for additional depreciation under section 32(1)(iia) on business of generation or generation and distribution of power as captive power plant to be used for the business of the assessee, i.e., manufacturing of polyester fibres and yarns. Accordingly, the assessee is entitled for additional depreciation under section 32(1)(iia) - Decided in favour of assesse. Revision u/s 263 - AO allowed additional depreciation at 7.5 per cent. on the value of general plant and machinery and also the claim of additional depreciation at 7.5 per cent. on the value of energy saving devices - Held that:- Revision u/s 263 need to be quased as assesse is entitled for additional depreciation under section 32(1)(iia) on business of generation or generation and distribution of power as captive power plant to be used for the business of the assessee, i.e., manufacturing of polyester fibres and yarns - Decided in favour of assesse
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2015 (5) TMI 646
Levy of interest u/s 234B and u/s 234C - interest for defaults in payment of advance tax - MAT income determined by the Assessing Officer under Sec.115JB - Held that:- Section 115J/115JA are special provisions. Section 207 envisages that tax shall be payable in advance during any financial year on current income in accordance with the scheme provided in sections 208 to 219 (both inclusive) in respect of the total income of the assessee that would be chargeable to tax for the assessment year immediately following that financial year. Section 215(5) of the Act defined what is “assessed tax”, i.e., tax determined on the basis of regular assessment so far as such tax relates to income subject to advance tax. The evaluation of the current income and the determination of the assessed income had to be made in terms of the statutory scheme comprising section 115J/115JA of the Act. Hence, levying of interest was inescapable. The pre-requisite condition for applicability of section 234B is that the assessee is liable to pay tax under section 208 and the expression “assessed tax” is defined to mean the tax on the total income determined under section 143(1) or under section 143(3) as reduced by the amount of tax deducted or collected at source. Thus, there is no exclusion of section 115J/115JA in the levy of interest under section 234B. When the levy of interest is mandatory and the Hon’ble Apex Court in Saurashtra Kutch Stock Exchange Ltd. [2008 (9) TMI 11 - SUPREME COURT] duly explains the correct law finding the assessee liable, the assessee cannot seek to escape the mandatory levy being fastened on it under the plea that it had bona fide belief that it is not liable. It is not a case of reopening or revision or rectification of mistake that the assessee can take shelter under the plea that the issue was earlier debatable and/or two views were possible. A belief howsoever bona fide cannot exonerate the assessee from the mandatory levy of interest u/s 234B and 234C of the Act on assessment on Book Profit u/s 115JB of the Act. In view of the above said discussion and placing reliance upon the decision of the CIT vs Anjum M.H.Ghaswala and Others (2001 (10) TMI 4 - SUPREME Court) , CIT vs Rolta India Ltd. (2011 (1) TMI 5 - SUPREME COURT OF INDIA ) and CIT vs Saurashtra Kutch Stock Exchange Ltd. (supra) we do not find any infirmity in the orders of the ld. CIT(A). Accordingly we uphold the same. - Decided against assessee.
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2015 (5) TMI 645
Transfer pricing adjustment - allocation of expenses for receipt of technical services from AE - Held that:- Though the TPO/Assessing Officer has the power and jurisdiction to verify the price paid by the assessee at arm’s length, however, instead of examining whether the price paid by the assessee is at arm’s length, the TPO proceeded on the premise that the assessee was not in need of the services and the services was not actually availed by the assessee. When the assessee has produced the sufficient evidence that the said services was an inevitable part of the business activity of the assessee then the action of the TPO is not sustainable. Accordingly, we set aside the orders of authorities below qua this issue. Since the assessee has produced the invoices which is based on the per hour charges actually spent by the engineer for providing the services to the assessee, therefore, the test of cost sharing arrangement between the assessee and AE as contended by Ld. DR are not at all relevant on this point because the assessee was charged specifically for the hours spent by the engineer for providing the services. It is not a case of performing the composite activities of the assessee and AE by the common staff and then sharing the cost . The cost was incurred by the AE exclusively for providing the services to the assessee then the principle and test as contended by the Ld. DR would not be applicable. The assessee has also produced the comparative cost charged by the AE from other group concerns. In the absence of any contrary record brought by the TPO/Assessing Officer to show that the price paid by the assessee is not at arm’s length we allow the claim of the assessee. - Decided in favour of assesse. TP adjustment on account of commission for securing the contract in India - Held that:- On principle, we do agree with the claim of the assessee that he said amount of commission was obligation of the AE (Malaysia) for securing the project and once the project was transferred to the assessee for execution and in turn the assessee has earned a handsome revenue from the said project then the liability of payment of commission was fastened on the assessee being a contractual obligation. Therefore, denial of the claim of the assessee is not justified which in total disregard of the evidence produced by the assessee. The assessee has also produced the evidence of actual payment of amount in question after deduction of TDS. The only question which remains unanswered is whether the amount in question was in turn paid by the Malaysian AE to the agent. The assessee has not produced any evidence in this respect that the amount was finally paid to the third party being LTC technical works. Hence he accept the claim of the assessee subject to the verification of corresponding payment by the Malaysian AE to the agent namely LTC technical works. Accordingly, the Assessing Officer/TPO is directed to verify this fact from the record to be filed by the assessee and then consider the claim in the light of above observation - Decided in favour of assesse for statistical purposes. Disallowance of depreciation on software - Held that:- There is no element of any mark up or profit by the parent company of the assessee. It was a mere reimbursement of the cost of the software in question. So far the need and benefit of the software in question for the assessee’s business activity is concerned, the assessee has brought on record how the software was useful for day to day business of the assessee as not only it is useful but it is inevitable for certain activities to have the access to the drawings provided by the clients which is used as source information by the assessee to start with the project. It is pertinent to note that without knowing the details of the project, the assessee could not even participate in the tender. Therefore, the software which enables the assessee to open the graphics/design and drawings of the projects is very much essential for day to day business activity of the assessee. Thus, we are of the view that the disallowance of depreciation by the DRP is only on the basis of assumptions by disregarding the relevant facts as well as the evidence brought on record by the assessee. Accordingly, we set aside the orders of authorities below on this issue and allow the claim of depreciation. - Decided in favour of assesse. TP adjustment on account of Travel expenses - Held that:- Visit and stay of Mr. Stan Wojicierczk, in India was along with Managing Director of the assessee Mr. Raj Lakhani. The assessee furnished the complete details and vouchers in respect of the expenditure. Further the payment details were also furnished which show that the expenses were initially incurred by Mr. Stan Wojicierczk. Therefore, when the entire expenditure was incurred for hotel stay and travel of both Mr. Stan Wojicierczk and Mr. Raj Lakhani then reimbursement of 50% of the expenses does not involve any payment to the AE but it was reimbursement of expenses. Since the Assessing Officer/TPO has disallowed the claim and treated the ALP at nil for want of details and evidence, therefore, in the facts and circumstances of the case and in the interest of justice, we set aside this issue to the record of Assessing Officer/TPO to consider the evidence furnished by the assessee and then decide the same after giving an opportunity of hearing to the assessee. Decided in favour of assesse by way of remand.
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2015 (5) TMI 644
Transfer pricing adjustment - most appropriate method - Held that:- Pertinently, bifurcation of assessee's financial results into manufacturing and trading segment was done only in the course of proceedings before the TPO and so far as the segment of Trading activity is concerned the TPO accepted the position that it was at arm's length price and no addition has been proposed. The addition in question has been made only with regard to the Manufacturing segment. DRP/AO determining the arm's length price of the international transactions pertaining to the manufacturing segment of the appellant, by comparing with external comparables when functionally similar internal comparables are available to determine the arm's length price under the internal Transactional Net Margin Method which is more reliable - Held that:- The present case internal comparison of the operating margins using internal TNM Method is liable to be upheld in order to compute arm's length for the international transactions of purchase of raw material and components from associated enterprises as well as sales of finished goods effected to the associated enterprises. On the basis of the aforesaid benchmarking, the profitability of international transactions under the associated enterprises segment computed at 3.25% is higher than the profitability of transactions under the Third parties segment computed at 2.80%. Hence, the international transactions entered with the associated enterprises under the Manufacturing segment on account of purchase of raw material and components and also sales are consistent with the arm's length price and no transfer pricing adjustment is thus required to be made. - Decided in favour of assessee. Disallowing the expenditure incurred on lease rentals for use of Vehicles and Computers - Held that:- The dispute for the assessment year 2003-04 as relied to make disallowance was still not final and therefore the matter may be set-aside to the file of the Assessing Officer with the directions to decide the issue in the light of the ultimate decision with regard to such dispute in the assessment year 2003-04. The learned Departmental Representative appearing for the Revenue has not contested the aforesaid factual matrix and has also not opposed the plea of the assessee for remanding the issue back to the file of the Assessing Officer - restore the matter back to the file of the Assessing Officer who shall consider the claim of the assessee in conformity with the ultimate decision on this aspect in the assessment year 2003-04. - Decided in favour of assessee for statistical purposes.
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2015 (5) TMI 643
Reusable artwork expenses - revenue v/s capital expenditure - Held that:- . It is an admitted fact that similar claim of the assessee was allowed in the past by the Revenue without making additions. It is only in this year, based on artificial criteria, this expenditure was considered as capital in nature. The criteria adopted by the Commissioner of Income-tax (Appeals), in our opinion, is not proper and any artwork which has a life of six months or less, by no reasoning, can be considered as capital expenditure. Considering the average life span of such artwork, which is only less than six months, it cannot be inferred that any capital apparatus has come into existence which can be the source of income generation for the assessee. It is not justifiable that the "artworks" fall in the capital field. Accordingly, we direct for deleting the addition as expenses claim under the head artwork is to be allowed as business expenditure. - Decided in favour of assessee. Disallowance of foreign travel expenses - CIT(A) deleted the disallowance which were on account of business conference held in Singapore and Trade Fair in China - Held that:- he business and commercial expediency has to be seen from the businessman's point of view and if proper explanation with supporting evidence has been given, then disallowance cannot be made on some flimsy ground. The entire explanation and evidences have been negated by the CIT (A) on the ground that no concrete evidence has been given. However, what evidences are lacking have not been specified. It appears that CIT(A) has confirmed the expenses mainly on the ground that travel expenses was more than one lakh. Whatever expenditure was less than one lakh has been deleted by him holding it to be so for business purpose and other for non-business purpose, without pointing out any personal uses. Thus, we do not find any reason to affirm such a finding in the conclusion of the learned Commissioner of Income-tax (Appeals) based on such a dichotomy. Accordingly disallowances made on account of foreign travel expenses for sums aggregating ₹ 7,10,160 is deleted. - Decided in favour of assessee. Disallowance of market research expenses - Held that:- Such an expenditure which are regularly to be undertaken for sustaining the market and to push up sales are not in capital field but are essential and are incurred in the ordinary course of business for promoting the existing brands. We also find that in immediately preceding assessment year, that is, in 2007-08, while deciding the Revenue's appeal this issue has been decided in favour of the assessee. Accordingly, consistent with the same precedence on similar facts which are permeating through in this year also, we allow the said expenses - Decided in favour of assessee. Disallowance of "product development expenses" which includes design charges - Held that:- So far as the expenditure incurred on product development and design charges, we delete the disallowance as these are purely revenue expenditure. So far as the finding of the learned Commissioner of Income-tax (Appeals) that certain expenditure has been claimed on the last date of the accounting year, we find that learned senior counsel has pointed out that, the assessee was issuing various product ingredients to its manufacturing unit/factory for testing purpose during the year and same has been accounted for after receiving the details of consumption. Whatever has been consumed, is accounted for in the books of account and claimed as expenditure. Certain advances of products given in the later half of the accounting year has been debited on the last day. So far as the factum of incurring the expenditure, the same has not been doubted.- Decided in favour of assessee. Disallowance of claim of deduction under section 80-IB - there would be no carried forward of losses, hence, will result into positive income and then deduction under section 80-IB has to be allowed as per assessee - Held that:- As decided in assessee's own case in the assessment year 2007-08 on the same line of issue that being a legal plea based on statutory provision, we direct the Assessing Officer that in case, as a result of any order passed by the High Court, resulting into setting aside of the Tribunal order or denying the claim of carried forward of losses, then the Assessing Officer while computing the positive income of the assessee for this year, shall examine the claim of deduction under section 80-IB. - Decided in favour of assessee for statistical purpose.
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2015 (5) TMI 642
Disallowance u/s 14A - Held that:- It is clear that during the year under consideration, the assessee has not made any fresh investment except a sum of ₹ 13 Lakh in the mutual fund scheme. Out of the total investment of ₹ 92.7 crores, the investment of ₹ 90.52 crores is in the subsidiary and further the investment made in the subsidiaries pertains to the foreign subsidiaries of the assessee to the extent of ₹ 90.43 crores. There is a reduction of overall investment during the year under consideration. Up to the A.Y. 2007-08, the Tribunal has given the finding that the assessee’s own fund was sufficient for making the investment and, therefore, no disallowance was called for on account of interest expenditure u/s 14A. There is net reduction in the investment during the year to the extent of ₹ 10 crores despite the fresh investment of ₹ 13 lakhs. Since there is no increase in investment during the year under consideration and even for the A.Y. 2008-09, therefore, in view of the earlier order of this Tribunal for the A.Y. 2006-07 and 2007-08, no disallowance is called for u/s 14A on account of interest expenditure. - Decided in favour of assessee. TP adjustment on guarantee commission - Held that:- Following the earlier order of this Tribunal and also considering the internal CUP being the guarantee commission paid by the assessee to the ICICI Bank for obtaining guarantee, we hold that the arm’s length guarantee commission in respect of all three transactions of guarantee to its AE at Dubai, China and USA shall be taken at 0.5%. Accordingly, the Assessing Officer is directed to compute the adjustment on account of guarantee commission by taking the arm’s length guarantee commission at 0.5%. - Decided partly in favour of assessee. TP adjustment in respect of loan advanced to EKC Dubai and EKC China - Held that:- Following the earlier order of this Tribunal in assessee’s own case, we hold that the arm’s length rate in respect of loan provided to the AE should be LIBOR + 2%. Accordingly, the Assessing Officer is directed to recomputed the arm’s length rate in respect of the loan transaction to each AE of the assessee by clubbing all the loan transactions of each AE and then compare the interest charged by the assessee with arm’s length rate at LIBOR +2%. It appears that as regards the transactions of loan to its AE at China, the said transaction is at arm’s length as the as has charged the interest at 7%, therefore, only with respect to the transaction of loan to AE at Dubai are required to be re-computed for the purpose of TP adjustment. - Decided partly in favour of assessee.
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2015 (5) TMI 641
Disallowance of office expenses - CIT(A) restricting the claim to 40 per cent. of the gross receipts - Held that:- Admittedly, the assessee engaged himself in drafting documents and sale of stamps (both judicial and non-judicial) receiving fees for drafting the documents and also receiving commission on sale of stamps. No doubt, the assessee has to employ some personnel for carrying out his professional duties. However, claiming 60 per cent. of the total receipts as expenditure without furnishing any details may not be correct. This Tribunal is of the considered opinion that the assessee is expected to maintain records for writing the documents and sale of stamp papers. Therefore, the total receipt on document writing and sale of stamp papers could be ascertained only if the assessee is maintaining proper records. Though the commission on sale of stamps can be ascertained from the Government/Governmental agency from whom the assessee bought stamp papers, but the fees for writing documents can only be ascertained from the material/documents are maintained by the assessee. Similarly for the expenditure incurred by the assessee, the assessee has to produce books and vouchers. Without maintaining any books or record, the assessee is claiming 60 per cent. as expenditure. This Tribunal is of the considered opinion that in the absence of any material available on record, inflation of expenditure cannot be ruled out. Therefore, the Assessing Officer has rightly restricted the expenditure to 40 per cent. of the gross receipts. The Commissioner of Income-tax (Appeals) has rightly confirmed the same. - Decided against assesse. Addition with regard to opening cash balance - CIT(A) allowed part relief - Held that:- The assessee claimed ₹ 5 lakhs as opening cash balance in the cash flow statement filed before the Assessing Officer. The assessee himself claims that this includes an amount of ₹ 66,369 in the bank account. Though the assessee claims that a sum of ₹ 2.83 lakhs was from accumulated savings, no material is available on record to suggest that the assessee has no accumulated savings. The assessee being a stamp vendor has to purchase the stamps from the State Government or from the treasury maintained by the State Government. Therefore, he has to naturally maintain books of account. It is unfortunate that the assessee, even though engages in purchase and sale of stamps, did not maintain any proper books of account. In such circumstances, the claim of the assessee regarding the opening cash balance to the extent of ₹ 5 lakhs may not be justified. The Commissioner of Income-tax (Appeals), however, has accepted the plea of the assessee to the extent of ₹ 1 lakhs and confirmed the addition to the extent of ₹ 3,33,631. This Tribunal does not find any infirmity in the order of the lower authority - Decided against assesse. Agricultural income - Held that:- It is not known how the agricultural land was acquired by the assessee's wife. Ifthe assessee purchased the agricultural land by investing his own funds in the name of his wife, then the income earned from such agricultural land can also be claimed as part of his total income. But it is not the case of the assessee that he invested funds for purchasing land in the name of his wife. The case of the assessee is that the land belongs to his wife. Therefore, the agricultural income, if any, may be considered only in the hands of the assessee's wife and not in the hands of the assessee. However, the income of the assessee's wife can also be considered for making investment in the joint name of the assessee and his wife during the respective financial years under consideration. The fact remains that the assessee does not claim that any agricultural land stands in his name. Therefore, the agricultural income said to be claimed cannot be part of his total income and so it cannot be considered for opening cash balance. At the best, as observed earlier, it can be considered for making joint investment in the name of his wife and himself, therefore, this Tribunal does not find any infirmity in the order of the lower authority - Decided against assesse. Disallowance of household expenses - Held that:- No doubt, while examining the assessee admitted that his monthly expenditure is ₹ 10,000 only. It is also a fact that the assessee has paid capitation fee for his son for the engineering admission. The assessee is also continuously paying fees for his son and incurring other expenditure. Taking into consideration all the expenditure incurred by the assessee as admitted in the statement recorded under section 132(4) of the Act, this Tribunal is of the considered opinion that the Assessing Officer has rightly estimated the household expenses at ₹ 2 lakhs per annum. Therefore, this Tribunal does not find any infirmity in the order of the lower authority ; the same is confirmed.- Decided against assesse. By-product ottupal ascertained from the seized records - Held that:- The issue regarding ottupal is not arising out of the orders of the Assessing Officer and the Commissioner of Income-tax (Appeals). The assessee has not raised this ground before the Commissioner of Income-tax (Appeals) also. Since the lower authority has not considered this issue, this Tribunal is of the considered opinion that the assessee cannot raise this issue before this Tribunal for the first time - Decided against assesse. Loan received from Shri Thomas, an non-resident Indian - Held that:- In this case, the genuineness of the transaction to the extent of ₹ 7 lakhs was not proved. Therefore, this Tribunal, is of the considered opinion that the Commissioner of Income-tax (Appeals) has rightly confirmed the addition. Accordingly, this Tribunal do not find any infirmity in the order of the Commissioner of Income-tax (Appeals). - Decided against assesse. Addition of ₹ 2 lakhs as unexplained - held that:- When the assessee claims in the statement under section 132(4) that he received a sum of ₹ 2 lakhs, according to learned senior counsel it has to be treated as such as no contrary evidence is available on record. In this case, there is no contrary material available on record. Therefore, the Commissioner of Income-tax (Appeals) ought to have deleted the entire addition of ₹ 2 lakhs. This Tribunal is of the considered opinion that the addition of ₹ 2 lakhs sustained by the Commissioner of Income-tax (Appeals) is not correct in view of the answer to question No. 28 in the statement recorded under section 132(4) of the Act from the assessee. Accordingly, the order of the Commissioner of Income-tax (Appeals) is modified and the Assessing Officer is directed to delete the entire addition of ₹ 20 lakhs. - Decided in favour of assesse. Unaccounted cash found of ₹ 65,000 in the bank account - Held that:- Noinvestigation was made by the authorities and no material was brought on record to establish that the assessee's son could not have earned that money. In the absence of any material, this Tribunal is of the considered opinion that the assessee could have received ₹ 65,000 from his son. Because of close relationship between father and son no documentary evidence could be expected in view of the smallness of the amount. Therefore, this Tribunal is of the considered opinion that addition of ₹ 65,000 said to have been received from the assessee's son is not justified. Accordingly addition of ₹ 65,000 is deleted. - Decided in favour of assesse. Addition of ₹ 93,167 found in the bank account - Held that:- The Assessing Officer made addition on the ground that no material evidence was produced to support the contention of the assessee that the assessee has received ₹ 93,167 from his son. As we have discussed earlier for the assessment year 2006-07, the assessee's son was an earning member of the family and in view of the close relationship between the father and son no documentary evidence could have been produced. In the absence of any evidence on record to show that the assessee's son was not earning any income, this Tribunal is of the considered opinion that rejection of claim of the assessee that he has received ₹ 93,167 from his son may not be justified. Accordingly, the addition deleted - Decided in favour of assesse. Cash received from his son to the extent of ₹ 2,75,000 - Held that:- During the proceedings before the Commissioner of Income-tax (Appeals), the assessee explained that ₹ 4 lakhs was transferred by cheque on November 13, 2008. An amount of ₹ 90,000 was transferred on April 8, 2008, by way of cheque. The Commissioner of Income-tax (Appeals) by taking into consideration all these transactions by way of cheques restricted the addition to the extent of ₹ 2,75,000. In the absence of any material this Tribunal is of the considered opinion that the Commissioner of Income-tax (Appeals) has rightly restricted the addition to the extent of ₹ 2,75,000.- Decided against assesse. Cash received from the assessee's daughter - Held that:- no material is available on record to suggest that the assessee's daughter was an earning member of the family. Even during the course of statement recorded under section 132(4), the assessee never referred about his daughter. Therefore, the claim of the assessee that he received from his daughter is without any substance. Therefore, this Tribunal is of the considered opinion that the lower authority has rightly made the addition - Decided against assesse Withdrawl from the HSBC bank account for meeting marriage expenses - Held that:- merely because the assessee's son withdrew the money from bank after the marriage, it does not mean that the same would not have been used for meeting the marriage expenses. This Tribunal is of the considered opinion that the amount withdrawn after the marriage might have been used for settling the marriage expenses. Therefore, the addition of ₹ 1,75,000 is not justified. Accordingly, the Assessing Officer is directed to delete the addition - Decided in favour of assesse.
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2015 (5) TMI 640
Disallowance u/s 40(a)(ia) r.w.s. 192C(2) - assessee had debited certain sub-contract payments to different parties and explanation of the assessee was that the payments were made to labourers, who were not possessing Permanent Account Number (PAN) and due to nonavailability of PAN, TDS could not be deducted - Held that:- assessee had booked the expenses under various sub-heads of the job work carried on by it, but that itself does not establish the case of the Revenue that it is a case of sub-contractor. Merely, in order to better manage its affairs vis-à-vis the different work orders received by it and such works being carried out at different places on account of different works, does not establish that the assessee had transferred any part of its responsibilities and obligations to the said persons. Merely because, the services of the labourers through Jamadar were utilized by the assessee does not establish that there was an understanding for transfer of responsibilities through the said persons to carry out any part of the job work, which was the sole responsibility of the assessee contractor. In the absence of the same, there was no sub-contract between the parties and hence, no requirement for deduction of tax at source where the assessee in order to execute its work orders had engaged the services of Labourers through Jamadar, the same cannot part take the nature of sub-contract in the absence of any obligation or responsibility being fastened upon the said Jamadar or Labourers. There is no merit in the orders of authorities below. Accordingly, we hold that the assessee is entitled to the claim of deduction of ₹ 1,03,72,141/-. In view of our holding that the understanding between the assessee was not sub-contract and there being no requirement of deduction of tax at source, the issue of applicability of section 40(a)(ia) of the Act becomes academic and the same is dismissed. - Decided in favour of assessee. Addition made being "gross receipt" - Non dis-closer of receipts - 26AS form e-TDS shows the receipt - Held that:- find merit in the plea of the assessee that in order to execute any work contract, the assessee has to incur certain expenditure in order to earn the said remuneration. In respect of the said contract with M/s. Flagship Infrastructure Pvt. Ltd., the gross receipts for the year under consideration were ₹ 1,55,42,485/- and the entire receipts cannot be income of the assessee. We find no merit in the plea of the authorities below that the total expenditure has been booked by the assessee, in the absence of any details being brought on record to the effect. Accordingly, we are of the view that the expenditure relatable to such receipts is duly allowable in the hands of the assessee and the entire receipts cannot be brought to the tax in the hands of the assessee. In the entirety of the above facts and circumstances, we hold that estimation of income has to be made on account of such receipts by applying NP rate of 20% as against the plea of the assessee that NP rate of 10% be applied. The assessee failed to bring on record the complete evidence in this regard and accordingly, we are constrained to estimate the income in the hands of the assessee by applying NP rate of 20%. - Decided partly in favour of assessee. Interest under s. 234B - Held that:- Tax at source had been deducted out of the receipts arising to the assessee for the year under consideration. However, the said tax at source was not sufficient to take care of tax liability of the assessee and the assessee deposited the balance tax due. Since there was default in the payment of advance tax, the assessee was held to be liable for charging of interest under section 234B of the Act. The Hon'ble Supreme Court in CIT v. Anjum M.H. Ghaswala [2001 (10) TMI 4 - SUPREME Court] has held the charging of interest under section 234B of the Act is consequential in nature and we find no merit in the plea of the assessee in this regard - Decided against assessee.
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2015 (5) TMI 639
Transfer pricing adjustment in respect of corporate guarantee - Held that:- Following the earlier decisions of this Tribunal in assessee’s own case, we direct the AO/TPO to adopt 0.5% as arm’s length guarantee commission charges in respect of the guarantee provided by the assessee for obtaining the loan by the AE. TP adjustment in respect of interest on loan given to AE - Held that:- The rate to be used for undertaking an adjustment should be LlBOR and not the average yield rates considered by the learned TPO. The LlBOR rate for March 2008 was 2.6798%. However the assessee has charged 7% from its AE as per the internal CUP available. Thus, the assessee has charged interest to EKC Dubai and EKC China at the rate higher than existing LlBOR rates. Accordingly, the said transaction of providing loan is at arm's length. Additions made by the AO are accordingly set aside - Decided in favour of assessee. TP adjustment on account of interest on re-characterization of share application money as loan advanced to AE - Held that:- Subject to verification of the share certificate by the AO, the share application money cannot be treated as loan amount merely because there is a delay in issuance of shares by the subsidiary in the name of the assesse, which was duly explained by the assesse. Accordingly, this ground of the assesse’s appeal is allowed in above terms. Expenditure on loan taken for Investment of USD 15.4 Million for the acquisition of Minacs Canada - whether is capital in nature hence not allowable? - Held that:- As it is clear from the additional ground raised by the assesse that the same pertains to subsequent assessment years when the assesse earned some foreign exchange gain, therefore, for the year under consideration, no such gain has arisen to the assesse on account of the said investment and, therefore, no adjudication of this ground is required for the year under consideration. Accordingly, we reject the additional ground raised by the assesse being not arisen from the impugned orders of authorities below for the A.Y. under consideration - Decided against assessee. Allowance of deduction u/s 10A - whether the deduction u/s 10Aof the Act, should be restricted to the profit of the unit eligible for deduction? - CIT(A) has allowed the claim of loss of the assesse - Held that:- As decided in Commissioner of Income-tax Vs. Black & Veatch Consulting (P.) Ltd [2012 (4) TMI 450 - BOMBAY HIGH COURT ] wherein held Section 10A is a provision which is in the nature of a deduction and not an exemption - the deduction under Section 10A has to be given effect to at the stage of computing the profits and gains of business - Section 80B(5) defines for the purposes of Chapter VI-A “gross total income” to mean the total income computed in accordance with the provisions of the Act, before making any deduction under the Chapter – Decided against revenue.
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2015 (5) TMI 638
Non compliance of provisions of section 80AC while claiming the Deduction u/s. 80IB - Held that:- The filing of return before the due date specified under section 139(1) is a mandatory condition for availing the deduction interalia under section 80IB as required under section 80AC of the Act. The requirement of law thus is of filing a physical return, which is not dispensed with, but only relaxed under the condition of an assessee choosing to file an e-return, perhaps with a view to encourage the same. The assessee in such a case can, instead of filing the physical return along with or by the due date specified u/s.139(1), do so within a period of 15 days, and where so done, the same would be deemed to have been filed on the date of filing the e-return. Where not so, the date of filing the return would be the actual date of filing the physical return. Where then is the controversy? A physical return filed within 15 days of an e-filing would, by legal fiction, be deemed to have been filed on the date of the former. The same is only per the scheme itself. Likewise, it being considered as filed on the date of furnishing the physical return is again per the said scheme. That is, the relaxation extends only to the deeming of the date of the filing the return and not to its form and, further, does not extend beyond 15 days. It would thus be only correct to say that the benefit of the scheme extends to the physical filing of the return within an extended period of 15 days. There is, accordingly, no question of any flexibility or extending the scope or ambit of the deeming; it itself contemplating the assessee being not able to file the return within the extended period, the consequences for which are specified. The enlargement in scope, as being sought to be canvassed, is thus uncalled for and inconsistent with the terms of the law, the rules and the scheme, which are observed to be in consistence and harmony. The absence of a digital signature, so that the e-return is not verified, stands already emphasized. The requirement of law, i.e., per section 80AC r/w ss. 139(1) and 139 (1B) are, therefore, not satisfied in the instant case. - Decided against assessee.
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2015 (5) TMI 637
Transfer pricing adjustment - selection of comparable - Held that:- Avani Cimcon Technologies Ltd. - As the profits of the software development portion cannot be ascertained, we hold that it cannot be considered as comparable on entity level. We, therefore, order for the exclusion of this company from the final set of comparables. Celestial Bio Labs Ltd. we direct not to treat this company as comparable as it is mainly engaged in a bio-pharma and biotech manufacturing and customized IT solutions, manufacture of drugs, clinical trials and contract research activities. This company also owns IPRs in respect of biotechnology. No segmental information of this company is available so as to find out the operating profits from the software development segment. Flextronics Software Systems Ltd. directed to be treated as incomparable as the assessee is simply engaged in providing software related services and is not into sale of software products, this company cannot be considered as comparable. Helios and Matheson Information Technology Ltd. direct it to be considered as not comparable by observing that it was into the software development services. Infosys Ltd. & Wipro Ltd.cannot be considered a comparable as Infosys Ltd. is a giant company in terms of risk profile, scale, nature of services, revenue ownership of branded/proprietary products, on site and offshore services, etc. KALS Information Systems Ltd.the revenues of this company under the segment taken by the TPO include not only Software development services, but also Training. Since the assessee is only engaged in rendering software development services without carrying out any specific commercial training activity, we fail to appreciate as to how this company on a segmental level, consisting of revenues from both Software development and Training, can be considered as comparable. Lucid Software Ltd. direct not to treat this company as comparable as this company is valuing the software products developed in-house on the basis of costs directly attributable to the development of software and in respect of each of the products so developed, it is amortizing total expenditure over a period of 36 months from the launch data. This is a different and unique method of amortizing cost over a period of three years, which is not specific to the assessee. Megasoft Ltd. the total revenue under this segment of Megasoft Ltd. comprises 35% from the sale of software products, we fail to comprehend as to how this segment of the company can be considered as comparable with the assessee company, which is not into selling any software products but is a captive software developer. Persistent Systems Ltd. & Sasken Communications Ltd. the very fact of merger or acquisition or demerger etc., being an extraordinary event, makes a company incomparable with the other functionally similar companies. Tata Elxsi Ltd. company offers integrated hardware and packaged software solutions, the same cannot be considered as comparable to the assessee company which is simply providing software related services. Thus set aside the impugned order and send the matter back to the AO/TPO for a fresh computation of ALP of the international transaction undertaken by the assessee in conformity with our above decision - Decided in favour of assessee for statistical purposes. Deduction u/s 10A - assessee’s contention that 20% of use of Telephone and internet should be attributed to the delivery of software, was rejected - Held that:- It is noticed that similar issue came up for consideration before the Tribunal in the assessee’s own case for AY 2006-07. The assessee’s contention on this issue has been rejected by the Tribunal thereby affirming the view of the AO. In the absence of any distinguishing fact relevant to the year in question, respectfully following the precedent, we uphold the impugned order on this issue. This ground fails. - Decided against assessee.
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Corporate Laws
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2015 (5) TMI 658
Default in repayment of Bank's dues - Assignment of claim in favour of Asset Reconstruction Company India Limited - Whether the present suit is suit for land - Matter of High court jurisdiction - Jurisdiction clause in an agreement makes the intention of the parties to an agreement quite clear - Held that:- The suit for land is a suit in which the relief claimed relates to the title or delivery of possession of land or immovable property, [See: Adcon Electronics Pvt. Ltd. [2001 (9) TMI 1123 - SUPREME COURT]. Further it is an established rule that to determine whether it is a suit for land, the Court will look into barely the Plaint and no other evidence, [Indian Mineral & Chemicals Co. and Others [2004 (6) TMI 620 - SUPREME COURT]. If by the averments in the plaint and prayers therein, it appears that the suit is one for land, it shall be so held and if it does not so appear, then the suit shall continue under leave granted under clause 12. It may be noted that the sale certificate sought under the prayer requires the delivery of possession of the suit property. Thus, we find that the prayer for delivery of possession was an implicit one in the present case. The prayer as sought in the plaint could not have been granted without the delivery of possession of the suit property as the sale certificate itself contemplates the delivery of the immovable property. Thus, in view of this we find that the Adcon Electronics [2001 (9) TMI 1123 - SUPREME COURT] would not apply as there was a prayer for delivery of possession in the present case. Therefore, we hold that the present suit was indeed a suit for land. Matter of Jurisdiction - This Court in Swastik Gases P. Ltd. [2013 (7) TMI 642 - SUPREME COURT], has held that “The very existence of a jurisdiction clause in an agreement makes the intention of the parties to an agreement quite clear and it is not advisable to read such a clause in the agreement like a statute. In the present case, only the Courts in Kolkata had jurisdiction to entertain the disputes between the parties.” Therefore, we are of the opinion that the Courts of Mumbai were granted exclusive jurisdiction as per the Agreement and we find no reason to create any exception to the intention of the parties. In view of the above-mentioned two findings that the present suit is a suit for land, and that the parties had granted exclusive jurisdiction to the Court of Mumbai, the jurisdiction of the Court at Calcutta is clearly ousted as per law. Thus, from the above conclusion it appears that the plaint will have to be returned by the Calcutta High Court as it does not have the jurisdiction. Therefore, we are of the view that the question of jurisdiction of the Debt Recovery Tribunal need not be answered. - Decided in favour of appellant.
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Service Tax
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2015 (5) TMI 668
Scientific and technical consultancy services - Reverse charge mechanism - nature of intellectual property services (IPR) rendered by foreign firms - Held that:- The terms of the relevant agreements indicate that these agreements were intended primarily to cover the following transactions, viz., transfer of brand names/trade marks to Cadila against payment of ₹ 70 crores, transfer of know-how for manufacture of bulk drug against payment of ₹ 20 crores and transfer of technical know-how to make tablets (formulations) against payment of ₹ 5 crores. None of these transactions can be conceptually reduced to mere advice, consultancy or scientific/technical assistance. - This rules out the applicability of Andhra Petrochemicals. Moreover, the appellant-company cannot be said to be a science or technology institution or organization. Even medical colleges, hospitals or diagnostic/pathological laboratories have not been recognized by the department as science or technology institutions or organizations vide M.F. (D.R.) Letter dated 9-7-2001 ibid. In the show-cause notice itself, the appellant-company was held out to be manufacturer of excisable goods only. It was not even alleged that it was a science or technology institution or organization. Even assuming that M/s. Kopran Research Laboratories Ltd. are a science or technology organization wholly owned by the appellant-company and that their R&D activities are financially supported by the appellant-company, we are not inclined to deem the latter to be a science or technology institution or organization. The two companies are distinct legal entities and, therefore, the functional character of one cannot be claimed by, nor infused into, the other. Revenue has not alleged and established that the appellant-company provided advice, consultancy or scientific or technical assistance to Cadila in any specific discipline of science or technology. In the result, the argument of the counsel that the service rendered by the appellant-company to Cadila under the relevant agreements cannot constitute "scientific or technical consultancy" as defined under Section 65 of the Finance Act, 1994 merits acceptance. - Further, in yet another case R.M. Dhariwal (HUF) vs. CCE Pune III - [2014 (1) TMI 409 - CESTAT MUMBAI] has laid down the same ratio that transfer of trade name and formulae transferred for a consideration cannot be services which would fall under "Scientific or Technical Consultancy Service". - Decided against Revenue.
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2015 (5) TMI 667
Penalty u/s 76, 77 & 78 - Levy of late fee for delayed filing of return - Delay in payment of service tax - Held that:- Appellant had discharged the service tax liability along with interest thereon much before the issue of show-cause notice and therefore, the provisions of Section 73(3) should have been given effect to, and the matter should have been closed. As the show-cause notice has been issued much after the payment of statutory liabilities, there was no reason to issue the notice except for imposition of penalties. In view of the specific provisions incorporated in Section 73(3) of the Finance Act, 1994, the imposition of penalties is clearly not warranted. Accordingly, I set aside the same and allow the appeal. I make it clear that only penalties under Sections 76, 77 & 78 of the Finance Act, 1994 have been set aside. There is no provision for waiver of late fee required to be paid under Rule 7 (c) of the Service Tax Rules, 1944 and the appellant is liable to discharge the same - Decided partly in favour of assessee.
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2015 (5) TMI 666
Refund - Bar of limitation - Lack of documentary evidence - Held that:- Original adjudicating authority as well as appellate authority have clearly noted that the appellants have not submitted the evidence of payment of service tax on the specified services for which the refunds were sought. - The appellants' contention that they had done so is not borne out by facts in-as-much-as what they had submitted as (what they called) "details of service tax paid on services received/used for export of goods" were nothing more than mere tables containing list of payment cheque numbers and dates, bills/invoice numbers and , bill date, name of service provider, nature of service, pre-tax bill amount, service tax, TDS deducted, net bill export amount and date and Shipping Bill numbers. They did not even submit any of the invoices (incorporating service tax component) relating to the services received in support of the entries in the said tables. The appellants also submitted copies of the account statements issued by banks and as rightly noted by Commissioner (Appeals), those details could not be correlated/corroborated vis-a-vis the details in the said tables. Appellants have not been able to produce the minimum documentary evidence (as required in terms of the said notifications; e.g. para (f) of Notification No.41/2007-ST) to show that the service in respect of which the refunds were sought had actually been received by them and the same were duly service tax paid services covered under the list of (eligible) services contained in the said Notifications - Decided against assessee.
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2015 (5) TMI 665
Waiver of pre deposit - service to self - transport of goods, other than water, through Pipelines or other Conduit Services - The adjudicating authority records inter alia that the appellant charges the marketing margin from its customer for providing transmission service, for transporting its own gas - Held that:- Since the appellant is transporting its own gas and the sale of the gas to its customers occurs at the customer's inlet point in customer's premises, on principle and authority the activity of the appellant in transporting the gas is a service to self and therefore falls outside the ambit of the taxable service. - Stay granted.
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2015 (5) TMI 663
Denial of CENVAT Credit - cement and steel - Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in rejecting the claim of the assessee in light of the provisions of Rule 2(k) of the Cenvat Credit Rules, 2004 - Held that:- jetty was constructed and input credit was claimed on cement and steel. The definition of Rule 2(k) was applicable and Explanation 2 did not provide that cement and steel would not be eligible for input credit. - The appellant is neither having any factory nor he is manufacturer. The appellant is a service provider of port - plain reading of the definition of Rule 2(k) would demonstrate that all the goods used in relation to manufacturer of final product or for any other purpose used by a provider of taxable service for providing an output service are eligible for CENVAT credit. It is not in dispute that the appellant is a taxable service provider on port under the category of port services. Therefore, the appellant was entitled for input credit and the decision of the Division Bench of the Andhra Pradesh High Court [2011 (2) TMI 400 - ANDHRA PRADESH HIGH COURT] squarely applies to the facts of the case - Decided in favour of assessee.
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Central Excise
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2015 (5) TMI 664
Waiver of pre deposit - CENVAT Credit - whether the appellant is entitled for the benefit of cenvat credit on the service tax paid by the appellant - Held that:- Following decision of ABB Limited Vs. CCE [2011 (3) TMI 248 - KARNATAKA HIGH COURT] it is held that Tribunal was not justified in ordering the pre-deposit in the manner stated in its order - Partial stay granted.
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2015 (5) TMI 662
Modification of order - Held that:- CESTAT, by the impugned order, rightly held that by virtue of the order dated 13.03.2013, the appeal stood dismissed. Admittedly, the order dated 13.03.2013 was not complied with by the appellant or by M/s. Puneet Exports Inc. It was a self operative order entailing the dismissal of the appeals in the event of the sum of ₹ 87,44,929/- not being deposited. The order had attained finality. - Even assuming that by the said order, the appellant herein was not directed to deposit the amount, the consequence of non-deposit was the dismissal of the appeal filed by the above appellants as well. The same has not been challenged now for two years. By the impugned order, the Tribunal rightly held that so long as the order dated 13.03.2013 is valid, the consequence of non-deposit is the dismissal of the appeal before the CESTAT. - Modification denied.
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2015 (5) TMI 661
Utilization of CENVAT Credit for payment of duty - Applicability of Rule 8(3A) of Central Excise Rules - Held that:- condition contained in sub-rule (3A) of Rule 8 of the Central Excise Rules, 2002 for payment of duty without utilizing the CENVAT credit till an assessee pays the outstanding amount including interest is unconstitutional and that the subsequent proceedings initiated by the Department for demanding tax were set at naught, which were followed by us in a batch of writ petitions in [2015 (5) TMI 603 - MADRAS HIGH COURT] (M/s Malladi Drugs & Pharmaceuticals Ltd., Ranipet etc., etc., v. Union of India rep. by its Secretary, Ministry of Finance etc.) deciding the issue in favour of the assessees therein for the reasons stated therein, following the same - Decided in favour of assessee.
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2015 (5) TMI 660
Bar under section 32-O(1)(i) of the Central Excise Act, 1944 - incorrect and irregular cenvat credit - Wilful suppression of facts - Held that:- There is no dispute about existence of the order passed by the Settlement Commission on 20th December, 2012 to proceed with the application filed by the Petitioners for settlement in respect of show cause notice dated 19th December, 2012. It transpires that the Revenue/Respondents had no objection for the admission of the application to proceed with the same, as the Petitioners had fulfilled the required norms to be eligible to make such an application pursuant to section 32E - it would not be proper to abandon the proceedings much less without putting the applicant on notice about consideration of section 32-O. - Matter remanded back - Decided in favour of assessee.
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2015 (5) TMI 659
Demand of duty - Manufacturing activity or not - Held that:- Appellant is engaged in the assembly of 114 components alongwith power supply, motherboard, LCD, keyboard which in our view clearly amount to manufacture. It is not that only on the basis that Ld. Commissioner has conceded that if the goods are incomplete or unfinished in terms of note 6 of Section XVI of Central Excise tariff act activity amount to manufacture and else it will not amount to manufacture. The submissions is misleading that in the present case it is not the question whether the goods imported is incomplete or unfinished. Lottery terminal, though it is complete kit but same have been imported in en-numbers of parts. The said CKD parts do not qualify as complete lottery terminal. When all these parts are systematically assembled tested then only it takes form of distinguished product i.e. lottery terminal. CKD parts are not a lottery terminal and same could not perform as lottery terminal. Section 2(f) manufacture includes any process incidental or completion of manufacture product that means even if a product is partly manufactured any activity incidental/ancillary to complete such product shall also be amounting to manufacture. In the present case input are more than 100 parts and even these parts in the form of components and not a manufactured good therefore assembly of all these parts converting to distinguished product which is called as lottery terminal. Therefore the activity from conversion of various components of lottery terminal into complete unit of lottery terminal is undoubtedly amounting to manufacture and correctly chargeable to excise duty under chapter heading 84709010 - Decided against assessee.
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Indian Laws
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2015 (5) TMI 657
Interpretation of Section 21D i.e. Transitional Provisions of the Chartered Accountants Act, 1949 - Pending proceedings in information case - Whether procedure prescribed by the unamended CA Act, 1949, that is section 21, 22 and 22A would be applicable to pending proceedings in information case and not the procedure prescribed after the amendment made by the Chartered Accountants (Amendment) Act, 2006 - The object and purpose, both in an information case and in a complaint case, is to find out and enquire into the allegations of professional or other misconduct. This is the purpose and the primary aim of the proceedings. Held that:- It is observed by the High court that "No doubt section 21, both unamended and post amendment, refers to information and complaint but it would be incorrect to hold that the legislature wanted to make a distinction between complaint or information cases in section 21D of the CA Act, 1949. Such distinction may be relevant and material as in the case of a complaint there is a complainant, a third party, who wishes to prosecute and has an interest, whereas in the case of information the action may be suo motu or information may be provided by the third party who does not want to, for various reasons, file a formal complaint; but the said distinction is not relevant for section 21D of the CA Act, 1949. In view of this difference between a complaint and information case, some specific procedures or requirements have been prescribed for complaint cases. In case of information, there is greater flexibility and latitude. Other than this, there cannot be any distinction between information which is made basis of disciplinary proceedings or enquiry and a complaint case. The object and purpose, both in an information case and in a complaint case, is to find out and enquire into the allegations of professional or other misconduct. This is the purpose and the primary aim of the proceedings. Under Regulation 13 of 1988 Regulations, the procedure prescribed is the same and no distinction in substance is made. If information cases and complaint cases are treated differently for the purpose of section 21D of the CA Act, 1949, an anomalous situation would arise, which can lead to difficulties and even challenge to the amended provisions. In a complaint case the old procedure and the punishment prescribed in First Schedule and the Second Schedule will apply, but in an information case which is still pending before the Council, the new procedure and the new (even harsher/stringent) punishments and the amended Schedules 1 and 2 will apply. It is difficult to fathom any reason and ground why any such distinction should be made or this is legislative intention, as the word 'complaint' is mentioned in Section 21D of the CA Act, 1949. The word 'complaint' as under in section 21D would include all pending matters including information cases on which the Council has applied its mind after they have been brought to the notice of the Council. The word 'complaint' as used in section 21D does not refer to the complaints made by third parties but also information whether made available by a third person or comes to the knowledge and has been considered by the Institute/Council. The word "complaint" in section 21D has to be given a broader and a wider meaning to give full effect to the legislative intent behind section 21D. In common parlance also the word 'complaint' means and refers to a pending matter before the prescribed authority authorised to make enquiry into the allegations. The source of information may not be relevant." We fully agree and subscribe the view taken by the Division Bench of the High Court in the Letters Patent Appeal.Hence, pending proceedings shall, no doubt, be governed under the old procedure prescribed before the Chartered Accountants (Amendment) Act which came into force in 2006. - Decided against the appellant.
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