TMI Tax Updates - e-Newsletter
May 22, 2017

Case Laws in this Newsletter:

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

Highlights / Catch Notes

• GST:

  Goods and services Tax - Rates of Tax for goods and Services - Schedule wise and item wise
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• Income Tax:

  Transfer - capital gains - In the absence of registration of JDA the agreement does not fall under Section 53A of 1882 Act and consequently Section 2(47)(v) of the Act does not apply. - AT
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• Income Tax:

  Setting off of indirect income against the operational income / trading loss - claiming deduction u.s 80IB - section 71 of the Income Tax Act allows set off of loss from one head against income from another head - AT
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• Income Tax:

  Short term capital loss on sale of shares - revenue has failed to establish that transactions are sham and merely book entries and further the explanation to section 73 does not apply to the facts of the case thereby directing the ld AO to allow the short term capital loss to be carried forward. - AT
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• Income Tax:

  Capitalization of license fee and royalty expenditure - The license fee and the royalty fee to the Government of India is on a year to year basis and this fact was never disputed by the Revenue at any point of time and thus the same has to be held as revenue in nature - AT
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• Income Tax:

  Non deduction of TDS u/s 195 - if payee had taken into account the interest paid by the assessee while computing their taxable income and had filed their return, then assessee cannot be visited with rigours of Sec. 40(a)(ia) - AT
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• Income Tax:

  Addition u/s. 68 - proof of creditworthiness or genuineness - Mere payment by account payee cheque is not sacrosanct nor can it make a non-genuine transaction genuine - accounts were used only for the purpose of providing accommodation entries - additions confirmed - AT
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• Income Tax:

  Penalty u/s 271(1)(c) - validity of notice u/s 274 - Quite clearly, non-striking-off of the irrelevant limb in the said notice does not convey to the assessee as to which of the two charges it has to respond. The aforesaid infirmity in the notice has been sought to be demonstrated as a reflection of non-application of mind by the Assessing Officer - AT
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• Income Tax:

  Charging of tax on the interest received from the temporary fixed deposits from the escrow account out of the barrowed funds committed for project implementation - such interest has to be separately treated as income from other sources and cannot be taken as part of the capital structure - AT
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• Customs:

  100% EOU - import of second hand machinery - even though the goods have not been cleared for home consumption, the same have not been accounted for to the satisfaction of the proper officer inasmuch as the condition under which such warehousing was permitted was not satisfied - the Customs authorities have rightly demanded the Customs duty on the goods which have been found uninstalled and unused - AT
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• Customs:

  There is no provision in the Customs Act to initiate fresh proceedings, after the final adjudication has taken place and that too, when the order stand merged with the order of the Higher appellate authority - Law of Estoppel, and law of Merger would apply in such case and repeated adjudication cannot take place each time on a new ground - AT
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• Customs:

  Duty on re-export of goods - the goods have been re-exported after six months but before one year, the clauses of the notification are very clear and the appellant is required to discharge additional fifteen percent of the duty along with interest - AT
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• Service Tax:

  Penalty u/s 78 - VCES scheme - appellants while availing VCES gave a false declaration as they have not declared the correct dues. Therefore, their case cannot be settled under the VCES - AT
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• Service Tax:

  Business Auxiliary Services - service as a financial broker by providing arrangement - The commission is received by them in the financial transaction where they acted as middle man/facilitator - demand confirmed - AT
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• Service Tax:

  Consultancy engg. service - supply of engineering design, drawing and documents - the supply of imported and indigenously procured drawing and designs, treating them as goods, cannot form part of tax liability under “Consultancy Engineer Service” - AT
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• Central Excise:

  Deemed Manufacture - The master box was opened and cartons containing vials/bottles were taken out and sticker bearing the details of import Licence no. price and the marks that the product was meant for ‘Animal treatment only’ and ‘not for human use’ was pasted on the vial/bottle - whether the process amounts to manufacture? - Held NO - AT
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Articles

• Rate fitments on Day 1 of 14th GST Council Meeting
• MAINTAINABILITY OF APPEAL WHEN DOCUMENTS ANNEXUED ARE NOT LEGIBLE

Notifications

• Income Tax

• 39/2017 - dated 16-5-2017 - IT
  Section 120(1) and (2) of the Income-tax Act, 1961 – CBDT authorises the Director General of Income-tax (Investigation)

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News

• Exporters to get tax refund under GST within 7 days: Nirmala

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• GST: Fin Min warns industry against hiking prices arbitrarily

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• GST Council Decisions - GST on goods and services - Rates, Exemptions, Reverse Charge, Procedural aspects etc.

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• Service Tax Exemptions to be continued in GST as decided by GST Council

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• SCHEDULE OF GST RATES FOR SERVICES AS APPROVED BY GST COUNCIL

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• Classification Scheme for Services under GST

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• SERVICES UNDER REVERSE CHARGE AS APPROVED BY GST COUNCIL

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Case Laws:

• Income Tax

• 2017 (5) TMI 923
  G.P. estimation - CIT-A applying the gross profit @ 4% as against the rate of 30% applied by the AO - Held that:- As far as the issue of rejection of books of accounts is concerned, the finding has to be upheld as in the absence of Stock Register etc. which we note has been maintained in the subsequent year, the correctness of the assessee's account, can not be said to be verifiable. The income of the assessee under consideration has to be estimated, the issue is restored back to the file of the A.O. While so directing, it may not be out of place to direct that the estimate has to be based on acceptable judicial standards and the best comparable standard can be assessee's own history. However, since the request for remand is accepted, the issue is left open to the A.O. to estimate the same taking assessee's history and/or by making a comparison with similarly placed persons in the year under consideration as the estimate made without applying judicially acceptable criteria is open to the challenge of being perverse. Thus, in order to avoid the taint of arbitrariness, the ld. AO is directed to pass a just and fair order in accordance with law. Accordingly, the impugned order is set aside back to the file of A.O. in the light of the above directions to estimate gross profit rate.

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• 2017 (5) TMI 922
  Capital Gain - Transfer - exigible to tax by reference to Section 2(47)(v) read with Section 53-A of the Transfer of Property Act, 1882 - JDA entered by assessee - Whether there was grant and assignment of various rights in the property by the appellant alongwith handing over physical and vacant possession, the same tantamount to “transfer”? - Held that:- The facts of the case of assessee are admittedly identical as have been decided in the case of Shri C.S. Atwal Vs CIT, Ludhiana [2015 (7) TMI 878 - PUNJAB & HARYANA HIGH COURT] issue of exigibility to capital gain in favour of the assessee and against the revenue wherein held as no possession had been given by the transferor to the transferee of the entire land in part performance of JDA so as to fall within the domain of Section 53A of 1882 Act. The possession delivered, if at all, was as a licencee for the development of the property and not in the capacity of a transferee. Further Section 53A of 1882 Act, by incorporation, stood embodied in section 2(47)(v) of the Act and all the essential ingredients of Section 53A of 1882 Act were required to be fulfilled. In the absence of registration of JDA the agreement does not fall under Section 53A of 1882 Act and consequently Section 2(47)(v) of the Act does not apply. In view of cancellation of JDA no further amount has been received and no action thereon has been taken. The issue of exigibility to capital gains tax having been decided in favour of the assessee, the question of exemption under Section 54F of the Act would not survive any longer and has been rendered academic- Decided in favour of assessee.

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• 2017 (5) TMI 921
  Setting off of indirect income against the operational income / trading loss - claiming deduction u.s 80IB - Held that:- CIT (A) has discussed this issue in his order wherein he has held that if other income of ₹ 3,55,40,053/- is not considered as derived from industrial undertaking, the industrial undertaking would incur a loss of ₹ 3,04,71,195/- and such loss has to be adjusted against the other income which was in the nature of interest income, insurance claim etc. We find that this finding of Ld. CIT(A) is correct and is in accordance with the law as section 71 of the Income Tax Act allows set off of loss from one head against income from another head. In view of the above provisions of section 71 we do not find any infirmity in the order of Ld. CIT(A), therefore, ground no. 1 of revenue appeal is dismissed. Receipt of subsidy on account of excise duty refund is a capital receipt. See Balaji Alloys Ltd. case [2011 (11) TMI 712 - SUPREME COURT OF INDIA] Penalty u/s 271(1)(c) - Held that:- CIT(A) has correctly deleted the penalty relying on the decision of Delhi High Court in the case of Nalwa Sons Investment Ltd.[2010 (8) TMI 40 - DELHI HIGH COURT] and furthermore on CBDT circular no. 25/2015 of 2014 wherein the Department has issued directions to the authorities directing them not to file appeal where the income tax payable on the total income as computed under the normal provision of the Act is less than the tax payable on the book profits u/s 115JB of the Act. - Decided against revenue

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• 2017 (5) TMI 920
  Levy of fees under section 234E - intimation issued under section 200A in respect of processing of TDS - Held that:- We find that the issue in all these appeals is now squarely covered in favour of the assessee by the decision of ITAT Amritsar Bench in the case of Sibia Healthcare Private Limited vs. DCIT [2015 (6) TMI 437 - ITAT AMRITSAR] adjustment in respect of levy of fees under section 234E was indeed beyond the scope of permissible adjustments contemplated under section 200A. The impugned levy of fees under section 234E is unsustainable in law. We, therefore, delete the impugned levy of fee under section 234E of the Act. - Decided in favour of assessee.

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• 2017 (5) TMI 919
  Section 68 addition of unexplained cash credits - assessee has not been able to prove source alongwith genuineness and creditworthiness of entity - Held that:- The assessee has filed all relevant details alongwith assessment records of the said entity explaining source of the loans to the above entity’s balance sheet indicating sufficient reserves, surplus and share premium as followed by repayment in succeeding assessment year. Learned Departmental Representative fails to rebut CIT(A)’s conclusion that the assessee has been having regular loan transactions with the said entity. We notice in this backdrop that hon’ble jurisdictional high court’s decision in DCIT vs. Rohini Builders (2001 (3) TMI 9 - GUJARAT High Court) upholding tribunal’s conclusion deleting Section 68 addition in view of identical details; squarely applies here. We take into account all these facts and judicial precedents to affirm CIT(A)’s findings under challenge deleting the impugned addition. - Decided in favour of assessee. Disallowance of additional depreciation - assessee had claimed the same @20% on machinery used for crimping of yarn - Held that:- Hon’ble Bombay high court’s decision in CIT vs. Emptee Poly-Yarn (P) Ltd. (2008 (2) TMI 313 - BOMBAY HIGH COURT) takes note of CBDT Circular dated 22.11.1985 clarifying that crimping of yarn also amount to a manufacturing activity. He thus deletes the impugned disallowance. Learned Departmental Representative fails to dispute the true purport of the abovestated circular as well as hon’ble Bombay high court’s decision quoted hereinabove. We accordingly affirm CIT(A)’s finding under challenge qua this latter issue as well. - Decided in favour of assessee.

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• 2017 (5) TMI 918
  Unexplained cash deposits addition - Held that:- It is evident from the case file that the assessee has not been able explain source of her deposit in question as well as cogent material in support of the latter plea (supra). We thus find no reason to interfere with the CIT(A)’s conclusion - Decided against assessee.

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• 2017 (5) TMI 917
  Short term capital loss on sale of shares - disallowance of claim as sham transaction - speculation loss - Held that:- The transaction of purchases and sales of shares entered in to by the assessee cannot be held to be sham. We have also perused the orders of the ld CIT (A) where in the transaction is held to be speculative in nature and therefore it has been held that these transactions are not sham. Hence, we reject the reasons assigned by the ld AO. In the present, case it is not held that assessee has purchased the shares as a dealer and subsequently the shares were sold as the plans for which shares have been purchased could not be fulfilled. There is no intention imputed for speculation. Assessee being a company can invest in the shares as it has already made huge capital gains both short term and long term which are not disturbed so far the head of the taxability s concerned. Actual delivery is taken and given. We are not in a position to hold that to the impugned transactions provision of explanation to section 73 applies. Therefore, we also cannot uphold the order of the ld CIT (A). In the result we allow ground no 2 of the appeal of the assessee accordingly holding that revenue has failed to establish that transactions are sham and merely book entries and further the explanation to section 73 does not apply to the facts of the case thereby directing the ld AO to allow the short term capital loss to be carried forward.

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• 2017 (5) TMI 916
  TDS u/s 195 - payment made to M/s. Minitab Inc., USA for acquisition of software by treating the same as ‘royalty’ - DTAA between India and USA. - whether purchase of computer software does not amount to business receipts? - Held that:- There is a direct Hon’ble Delhi High Court decision in the case of DIT vs Ericsson [2011 (12) TMI 91 - Delhi High Court ] which is in favour of the assessee. From the above case laws it is amply clear that it has been held that the software sold by M/s. Minitab Inc USA to the assessee fell into the category of “copyrighted article” against acquisition of “copyright” which qualified as royalty payment. Furthermore Hon’ble Delhi High Court had held that even if the item was regarded as royalty payment as defined in explanation to Section 9(1)(vi) nevertheless the DTAA would prevail where royalty is dependent upon the use of the copyrights and not a lump sum as was in the present case. That once the payment in question was not royalty which would, within the mischief of clause (vi) the explanation to section 9 (1) would have no application. As against this there are decisions of Hon’ble Karnataka High Court which are in favour of revenue. In this regard we note that Hon’ble Apex Court in the case of vegetable products [1973 (1) TMI 1 - SUPREME Court] had held that if two constructions are possible one in favour of the assessee should be adopted. Accordingly respectfully following the precedent we follow the Hon’ble Delhi High Court decision. Accordingly we set aside the order of authority below. We hold that the transfer / sale of software in this case is not taxable as royalty. Hence the assessee was not liable to deduct tax at source u/s 195 of the Income-tax Act, before remitting the money to the US supplier. - Decided in favour of assessee.

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• 2017 (5) TMI 915
  Estimation of possible profit out of purchase made through non-genuine parties - Held that:- We found that in the instant case stock and sales and the quantity-wise stock and purchases / sales were tallied to the last KG therefore, we directed to take the A.O. 12% of the sales as gross profit accordingly re-compute the business of the assessee. We find that CIT(A) has directed to take the G.P. @ 10% of the sales but to cover up all the decisions of the books of accounts. We modify the order of the CIT(A). We direct him to take the 12.5% sales gross profit accordingly the Departmental appeal is partly allowed. Outstanding Sundry Creditors - addition u/s 41 - Held that:- We find that the A.O. observed that the assessee ask to fail the confirmation in respect of outstanding Sundry Creditors but the assessee failed to file the confirmation letter the non-filing confirmation as the supplier were from abroad and the Assessing Officer was of a view non-filing of confirmation attracts provision of Section 41(1). We find that in the case of ITAT Mumbai in case of Maharashtra State Co-operative Consumer Federation [2011 (8) TMI 258 - ITAT MUMBAI] wherein it is held that in absence of contrary material placed by the Revenue for no such liability exist in the books of account or the assessee has obtain any benefit by case or any other manner merely because said liability was more than 5 years old it cannot be said that there was cessation of liability. Therefore, we are of the view that CIT(A) is justified in deleting the same. - Decided in favour of assessee.

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• 2017 (5) TMI 914
  Addition of long term capital gains - sale of shares - can full value consideration on sale of shares be substituted by the fair market value of the shares as on date of sale? - Held that:- In the instant case, the Assessing Officer has not been able to point out whether the assessee received any amount more than the consideration shown in the return of income or any amount accrued more than such consideration shown in the return of income. In such circumstances we hold that the full value consideration received by the assessee and shown in the return of income for computing the capital gain, cannot be replaced by the fair market value of shares computed by the Assessing Officer. As a result, we set aside the order of the Ld. CIT-A on the issue in dispute and direct the Assessing Officer to re-compute the capital gain on the basis of sale consideration declared by the assessee in the return of income. The ground of appeal is accordingly allowed in favour of assessee Disallowance of @20% of repairs, telephone expenses and depreciation on car etc. - addition on the ground that personal expenditure could not be ruled out - Held that:- Before the Ld. CIT-A the assessee failed to substantiate its claim that expenses incurred were wholly and exclusively for the purpose of business. The Ld. CIT-A observed that the assessee had not claimed to have maintained details of phone calls made and log book of the cars and in view of those facts personal use could not be ruled out. In our opinion, the finding of the Ld. CIT-A on the issue in dispute is well reasoned and no interference on our part is required. Accordingly we uphold the finding of the Ld. CIT-A on the issue in dispute. - Decided against assessee.

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• 2017 (5) TMI 913
  Levy of fees under section 234E in intimation issued under section 200A(1) - scope of amendment to section 200A(1) - Held that:- Prior to 1.6.2015 late fee u/s 234E cannot be charged while processing quarterly return u/s 200A of the Act. See Asian Pipes & Profiles Pvt. Ltd. Vs. Assessing Officer, TDS [2017 (3) TMI 1482 - ITAT MUMBAI ] We delete the late fee levied u/s 234E of the Act while passing intimation u/s 200A of the Act for the 4th quarter of the financial year 2012-13 where admittedly the intimation was passed on 24.12.2013 which is prior to 1.6.2015 in these cases. - Decided in favour of assessee.

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• 2017 (5) TMI 912
  Addition u/s 69C - payment made to American Express Banking Corporation [AEBC] - Held that:- Perusing the confirmatory letter issued by AEBC, we find strength in the argument of Ld. AR that the actual amount paid by the assessee was ₹ 13,95,903/- and the balance difference arose only due to erroneous reporting by AEBC as this fact is clearly mentioned by AEBC in the confirmatory letter dated 26/12/2011. Therefore, since the assessee has discharge its part of obligation, the balance addition of ₹ 6,95,199/- is not justified and therefore, the same is deleted. This ground of assessee’s appeal succeeds. Addition u/s 69A - difference in interest income reflected by the assessee in his accounts vis-à-vis interest amount reported by the payer Bank - Held that:- AR made a short submission that the balance interest amount has been offered to tax in the succeeding AY and therefore, no addition on that account was warranted for and the difference arose only due to time lag. We are of the opinion that if the assessee has offered the same in succeeding AY, the addition thereof in impugned AY is not warranted for. Therefore, this issue is restored to Ld. AO for limited purpose of verification of the fact that whether the assessee has offered additional interest in the next AY. Disallowance of foreign travel expenditure being 50% of business related foreign travel - Held that:- Since FBT has been paid on these expenses, disallowance thereof u/s 37(1) was not warranted for. Therefore, we are inclined to delete the said additions subject to verification of payment of FBT on these expenses by Ld. AO. Therefore, the matter is restored back to the file of Ld. AO for limited purpose of verifying the fact that the FBT has been paid on these expenses. Treatment of project advisory services fees paid to an entity - capital v/s revenue - Held that:- We find that the said expenditure were in the nature of upfront consultancy fees to identify the projects which may be taken up by the assessee in future. A perusal of financial statements of the assessee reveals that as at the beginning of the year, the assessee had reserves of more than ₹ 20 Crores. The quantum of the amount or payment thereof has not been doubted by the revenue. The assessee has reflected income from House Property. Therefore, we find strength in the arguments of Ld. AR that the said expenditure was nothing but in the nature of revenue expenses being paid to explore the new business opportunities so as to deploy the excess resources more profitably and efficiently and payable irrespective of the fact whether the project materialized or not. Further by incurring the same, the assessee has not obtained any benefit of enduring in nature and therefore, the same were allowable as revenue expenditure. - Decided in favour of assessee Treatment of software expenditure - capital v/s revenue - Held that:- A perusal of impugned expenses shows that the same were in the nature of obtaining license, implementation, set-up fees, AMC Charges etc. Therefore, we accept the stand of Ld. AR that the impugned expenses were incurred to ensure smooth conduct of the business and improve operational efficiency and therefore, being revenue in nature, were allowable to full extent. - Decided in favour of assessee Disallowance of service charges - AR contended that the said service charges were paid by the assessee to four parties against invoices and all the payment were through banking channels after deduction of TDS thereupon - Held that:- We find that the issue requires re-examination at the level of Ld. AO as ledger extracts reveals that the said expenditure has been incurred towards installation of some machineries and hence prima facie, capital in nature. Therefore, this matter is restored back to the file of AO for reexamination in the light of documents placed by the Ld. AR in the paperbook. The assessee is directed to substantiate his claim forthwith before AO and submit necessary information / documents called for by Ld. AO . Depreciation on UPS - @25% OR 60% - Held that:- UPS being integral part of computer system being installed to regulate the flow of the power to avoid any kind of damage to the computer network due to fluctuation in power supply which could lead to loss of valuable data and hence, entitled for same rate of depreciation as applicable to computer system. CIT Versus M/s. Saraswat Infotech Ltd. [2013 (1) TMI 861 - BOMBAY HIGH COURT]

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• 2017 (5) TMI 911
  Reopening the assessment u/s.147 - apportioning the expenses @75.705% instead of 67.58% - whether no income was attributable to assessee in India and there is also no PE? - Held that:- As relying on assessee's own case giving effect to the ITAT order [2016 (8) TMI 504 - ITAT MUMBAI] no income is attributable to the assessee in India, losses would not been available for set off and therefore, total income was computed as Nil. As the AO himself has accepted that no income is attributable to assessee in India, the appeal filed by Revenue has no legs to stand. We further found that finding recorded by CIT(A) for setting off the reopening as well as for deleting the addition made by the AO was not controverted by learned DR by bringing any positive material on record. Accordingly, we do not find any reason to interfere in the order of CIT(A). - Decided against revenue

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• 2017 (5) TMI 910
  Capitalization of license fee and royalty expenditure - Held that:- Identical issue having similar facts was involved in the assessment year 2007-08 [2015 (9) TMI 898 - ITAT DELHI] which has been decided against the revenue wherein held that what is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the assessee’s trading operations or enabling the management and conduct of the assessee’s business to be carried on more effectively or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. The license fee and the royalty fee to the Government of India is on a year to year basis and this fact was never disputed by the Revenue at any point of time and thus the same has to be held as revenue in nature - Decided in favour of assessee. Addition on capitalization of brand development expenditure - Held that:- Similar facts was a subject matter of the departmental appeal for the preceding year i.e. assessment year 2009-10 [2015 (9) TMI 898 - ITAT DELHI] wherein held it is not possible to agree with the appellant-Revenue that the advertisement expenses incurred by the respondent-assessee at the time of installation of additional machinery in the existing line of business resulted in any enduring benefit, so as to be treated as capital in nature. Advertisement expenses incurred by the assessee to create brand image is allowable as revenue expenditure - Decided in favour of assessee.

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• 2017 (5) TMI 909
  TDS u/s 195 - disallowance for want of non deduction of tax at source on interest payments to M/s. Reliance Capital Limited - Held that:- assessee has filed a certificate dated 09.01.2017 from Chartered Accountants as prescribed in first proviso to Sec. 201(1) of the Act. This certificate says that M/s. Reliance Capital Limited had taken into account interest paid by the assessee for computing their taxable income. In my opinion first proviso to Sec. 201(1) of the Act did not prescribe therein any specific time limit for furnishing such a certificate. It may be true that assessee had not produced this certificate before lower authorities. However, if payee had taken into account the interest paid by the assessee while computing their taxable income and had filed their return, then in my opinion assessee cannot be visited with rigours of Sec. 40(a)(ia) of the Act, by virtue of first proviso therein. Accordingly question regarding liability of the assessee to deduct tax on the interest payments made to M/s. Reliance Capital Ltd, requires a revisit by ld. Assessing Officer. - Decided in favour of assessee for statistical purpose. Non TDS on commission payment to the non-resident marketeer - addition u/s.40(a)(i) - Held that:- Assessee was not obliged to deduct tax at source on the commission paid by it to the non-resident marketeer. Question of getting a certificate from the Assessing Officer under Section 195(2) of the Act will be applicable only where the assessee considers only a part of the payment as liable for deduction of tax at source and not the whole. Disallowance of A10,35,967/- made u/s.40(a)(i) of the Act stands deleted. See CIT Versus M/s. Farida Leather Company [2016 (2) TMI 798 - MADRAS HIGH COURT] - Decided in favour of assessee.

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• 2017 (5) TMI 908
  Disallowance on account of share and application money - statement used against the assessee without giving the opportunity as per the procedure of law - Held that:- CBDT has emphasized to its officers to focus on gathering evidences during search/survey operations and strictly directed to avoid obtaining admission of undisclosed income under coercion/ undue influence. Keeping in view the guidelines issued by the CBDT from time to time regarding the statements obtained during search and survey operation, it is undisputedly clear that the lower authorities have not collected any other evidence to prove the impugned transaction as bogus other than the statement. Therefore under such facts & circumstances we are inclined to reverse the order of authorities below in this regard direct the AO to delete the addition. - Decided in favour of assessee.

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• 2017 (5) TMI 907
  Revision u/s 263 - Addition invoking the provisions of section 40(a)(ia) - Held that:- Since the assessee did not furnish any details with regard to interest paid to the creditors, the Assessing Officer was directed to obtain the details and to examine “afresh” at the time of giving effect to this order and “disallow proportionate interest which is attributable to the acquisition of capital assets”. As rightly pointed out by the assessee wherever the Revisional Authority thought fit to set aside the matter in toto or with a specific direction to examine the applicability of section 40(a)(ia) such direction was given in the very same order whereas, with regard to interest paid to the creditors, there is a specific direction to disallow proportionate interest which is attributable to the acquisition of capital assets. In other words, the Assessing Officer’s duty ends the moment analysis is made with regard to attribution of interest as to whether it is for acquisition of capital asset or a revenue expenditure. While giving effect to the order, the Assessing Officer however, did not consider the issue as to whether it was capital or revenue expenditure. Since the specific direction of the ld. Commissioner was not followed by the Assessing Officer, the order of the ld. CIT(A) as well as Assessing Officer deserves to be set aside on this limited issue with a direction to the Assessing Officer to examine the nature of the expenditure and to disallow proportionate capital expenditure, in line with the direction given by the Revisional Authority. - Appeal filed by the assessee is partly allowed.

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• 2017 (5) TMI 906
  Addition u/s. 68 - proof of creditworthiness or genuineness - Held that:- CIT(A) utterly failed to consider the crucial fact that once the assessee could obtain such documentary evidences from the payee companies, why he failed to assign any reason for his inability to produce any of the parties or their principal officers for examination before the AO. The summons issued to them stood returned unserved with the remark that no such person was found existing at the address given. No other address was pointed out by assessee otherwise than that on which the summons were issued. As far as the documentary evidence filed by the assessee before the authorities below, we find that in the present scenario, such documentary evidence cannot be relied upon which did not render any help to cross verify the impugned transactions and are against the result of ground level enquiry. In our opinion the peripheral documents in the shape of PAN, so called acknowledgement of returns do not go to prove the identity and creditworthiness of the investors companies, particularly when the entities in question were not found to be existing on the given addresses and that none of the parties were produced nor was there any material on record to rebut the objections of the AO regarding capacity of the alleged investors to make the investment. Mere payment by account payee cheque is not sacrosanct nor can it make a non-genuine transaction genuine. The bank accounts of various entities show uniform pattern of transactions and that invariably, the issue of cheques is immediately preceded by the deposits of equivalent amounts in the account either in cash or through cheque/transfer entries. Unless the transactions represented by the entries in the bank accounts are correlated with the business activities and the books of account of the said entities, no justification to disregard the finding of the AO that the above pattern and the frequency of deposits and withdrawals at short intervals would render the accounts, having been used only for the purpose of providing accommodation entries and therefore, it cannot be said that the assessee has explained the source of credits or the transactions to be genuine. - Decided against assessee.

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• 2017 (5) TMI 905
  Registration under Section 12AA - charitable purposes - Held that:- Out of 40 objects of the Trust only one object No. 4 and its sub-clauses, as mentioned by the ld. CIT, no doubt throw light on the benefit of Christian Community, but the ld. CIT has failed to give any comment on the other prime objects of the assessee trust, which are undisputedly for the purpose of charity for public at large. The ld. CIT has considered and resorted to the provisions of section 13(1)(b) of the Act, but he has not considered the fact that the provision of section enacts a bar to the availability of exemption under section 11 in respect of various incomes enumerated therein, meaning thereby that the provisions of section 11 are not applicable when the provisions of section 13 are attracted in a particular case. This section, however, does not lay any bar on granting of registration if it is found that the objects of the trust are charitable or religious. To be more clear, the provisions of this section is applicable while considering the exemption claimed by the assessee trust u/s. 11 of the Act at the assessment stage and not at the stage of granting registration u/s. 12AA. We are not inclined to support the order of the ld. CIT and we hold that the assessee-trust is eligible for registration u/s. 12AA of the Act. The ld. CIT is, therefore, directed to grant registration to the assessee trust. Appeal of the assessee is allowed

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• 2017 (5) TMI 904
  Penalty u/s 271(1)(c) - validity of notice u/s 274 - non application of mind - reasons to believe - due application of mind by the Assessing Officer - Held that:- A copy of the said notice has been placed on record and the learned representative canvassed that the same has been issued by the Assessing Officer in a standard proforma, without striking out the irrelevant clause. The notice refers to both the limbs of Sec. 271(1)(c) of the Act, namely concealment of the particulars of income as well as furnishing of inaccurate particulars of income. Quite clearly, non-striking-off of the irrelevant limb in the said notice does not convey to the assessee as to which of the two charges it has to respond. The aforesaid infirmity in the notice has been sought to be demonstrated as a reflection of non-application of mind by the Assessing Officer The notice issued by the Assessing Officer u/s 274 r.w.s. 271(1)(c) of the Act dated 10.12.2010 is untenable as it suffers from the vice of non-application of mind having regard to the ratio of the judgment of the Hon'ble Supreme Court in the case of Dilip N. Shroff (2007 (5) TMI 198 - SUPREME Court ) as well as the judgment of the Hon'ble Bombay High Court in the case of Shri Samson Perinchery (2013 (11) TMI 369 - ITAT MUMBAI ). Thus, on this count itself the penalty imposed u/s 271(1)(c) of the Act is liable to be deleted. - Decided in favour of assessee.

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• 2017 (5) TMI 903
  Charging of tax on the interest received from the temporary fixed deposits from the escrow account out of the barrowed funds committed for project implementation - whether the assessee business has been set up or commenced? - Held that:- The preoperative expenditure was to be capitalized to the assets and Assessee was eligible for depreciation on the value of assets. Therefore in the given facts of the case, we hold that Assessee has only setup the business but has not commenced the business, therefore, the claim of revenue expenditure is not allowable as the provisions of Sec. 28 of the IT Act does not apply. The Hon'ble jurisdictional High Court in the case of CIT Vs. Rasi Cement Ltd.[1998 (4) TMI 132 - ANDHRA PRADESH High Court] has answered similar questions involved in favour of the Revenue as held that such interest has to be separately treated as income from other sources and cannot be taken as part of the capital structure following the decision of the Hon'ble Supreme Court in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd., Vs. CIT [1997 (7) TMI 4 - SUPREME Court]. It was categorically held that interest earned on surplus funds deposited in banks during installation of company, prior to commencement of business, has to be brought to tax as ‘income from other sources’ u/s. 57. Respectfully following the jurisdictional High Court decision also, the contentions of assessee that this amount has to be adjusted towards capital account cannot be accepted. - Decided against assessee.

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• 2017 (5) TMI 902
  G.P. determination - rejection of books of account - Held that:- The valuation of opening stock, closing stock is done on estimate by the assessee, which cannot be subjected to verification. In absence of production register, input output ratio can also not be worked out. The Assessing Officer has also noted that the assessee has not produced job work like printing, dyeing, washing, embroidery etc. The details of wastage were also not shown and was also not maintained and in view of these defects, the ld. CIT(A) had sustained the rejection of books of account. Therefore, agree with the findings of CIT(A) in respect of rejection of books of account. As far as estimation of the gross profit rate is concerned, the ld. CIT(A) has reduced it from 14% to 12% and the gross turnover of the assessee was accepted. It is pertinent to note that the comparative G.P. for the year under consideration was better than the earlier year. However, to cover the leakage of revenue on account of various defects noted in the books of account, hold that estimating lump sum addition of ₹ 80,000/- shall be reasonable and sufficient. Addition u/s 41(1) - cessation of liability in form of sundry creditors - Held that:- The assessee has not written of the amount in its books of account. The assessee has also not denied the payment of these amounts to these creditors. The genuineness of these creditors were not in doubt. Notices issued U/s 133(6) of the Act were not served on some creditors and some of them did not respond. Only four person responded negatively. The assessee requested the Assessing Officer to issue the summons U/s 131 of the Act, which he has not done. Heavy onus is on the revenue to establish that the liability shown in the books of account has been extinguished. The sickness of the assessee as well as dispute regarding the quality variation is also not in doubt. Therefore, direct to delete the balance of the amount as the revenue has failed to establish the liability in respect of these creditors. Disallowance of interest - Held that:- Assessee is having sufficient capital balance of ₹ 57,63,821.14/- to give loan of ₹ 3,06,000/-. The assessee’s own non-interest bearing funds were far in excess of the interest free advances given. Deduction claimed U/s 36(1)(iii) in respect of interest on its borrowings could not be declined. The Hon’ble Bombay High Court in the case of CIT Vs. Reliance Utilities & Power Ltd.(2009 (1) TMI 4 - BOMBAY HIGH COURT) has held that the presumption would arise that investment would be at of the interest free funds generated or available with assessee. Thus direct the Assessing Officer to delete the addition. This ground of the assessee’s appeal is allowed. Confirming the restricted disallowance @ 10% on depreciation - Held that:- Once the books of account have been rejected then no such ad hoc disallowance is called for. Further the Assessing Officer had not given any finding of personal use of conveyance, therefore, the personal use is not established. In view thereof, the ad hoc addition @ 10% sustain by the ld. CIT(A) is hereby deleted and this ground of appeal is allowed.

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• 2017 (5) TMI 901
  Bogus purchases - Estimation of possible profit out of purchases made through non-genuine parties - Held that:- Since purchases were not bogus but were made from parties other than those mentioned in the books of account, only profit element embedded in such purchases could be added to assessee’s income. See CIT vs. Simit P. Seth [2013 (10) TMI 1028 - GUJARAT HIGH COURT ] In view of the above, the order of the learned CIT(A) directing the AO to estimate 12.5% of the bogus purchases of ₹ 25,67,420/- and tax only the profit embedded therein of ₹ 3,20,927/- is upheld. - Decided against assessee.

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• 2017 (5) TMI 900
  Advancing interest bearing funds to partnership firm on no interest - Reasonable nexus of business expediency - Held that:- The factual position has not been disputed inasmuch as it is not disputed that the funds were invested in the capital of partnership firm and, therefore, the primary intention of assessee was to earn profits from the firm. The contention of assessee that since the profits from firm were exempt u/s 80-IC, therefore, it cannot be said that the investment was not made for the purposes of earning taxable income from firm is not correct because the main issue to be considered in the present scenario is as to how the receipts from firm would be taxable in the hands of assessee. Admittedly, the share of the profits derived from firm is exempt u/s 10(2A) in the hands of assessee and, therefore, to this extent proportionate disallowance can be made. However, interest and remuneration from firm would be taxable as business income in the hands of assessee and, therefore, interest paid on borrowed funds in this regard cannot be disallowed. The taxability of income in the hands of firm is not relevant while considering the nature of receipt in the hands of assessee. Therefore, the assessee’s claim that it had not invested the money to earn any exempt income is not correct. The nature of profits in the hands of firm cannot be the decisive factor for considering the nature of profits in the hands of assessee. In view of above discussion, the Assessing Officer is directed to re-compute the disallowance. - Appeal of the assessee allowed for statistical purposes.

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• 2017 (5) TMI 899
  Disallowance of Job work charges paid - Held that:- It is not in dispute that bills from respective firms who have done the work are available on record. The payments have been made to them and TDS deducted. There is no law that a person cannot do business in four different business concerns. Regarding the scope of work, adverse inference cannot be drawn that the same is not registered. There is no law which requires that unless there is a registered scope of work, the payment made there-under will not be allowed. Another adverse inference that the proprietor and one of his concern were in the list of suspicious dealers cannot be a reason to disallow expenditure incurred unless a finding has been given that the bills submitted in the present case are suspicious. Again adverse inference has been drawn that notices u/s 133(6) have returned unserved. This again cannot be a reason to reject the assessee’s claim without further verification. The inference drawn by the AO and the learned CIT(Appeals) is merely based upon suspicion and surmises. It is settled law that any addition based on suspicion and surmises is not sustainable - Decided in favour of assessee. Addition being 10% of administrative expenses - addition has been made solely on the ground that the expenses are paid in cash and self made vouchers were produced - Held that:- No specific details of the expenditure which were to be disallowed on account of these facts have been brought on record. While the AO has mentioned that the expenditure were supported by self made vouchers, learned CIT(Appeals) observed that even the same were not maintained. We find that this action of a disallowance is based on surmises and conjecture without bringing on record cogent reasons for disallowance. Hence we set aside the orders of authorities below and delete the addition.- Decided in favour of assessee.

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• Customs

• 2017 (5) TMI 938
  100% EOU - import of second hand machinery for installation and use at Nagpur unit - benefit of N/N. 53/97 dated 3.6.97 - Subsequently, the appellant obtained permission from the Assistant Commissioner, Nagpur to transfer the machinery to their Raipur unit - denial of benefit of notification on the ground that the goods were not installed by the appellant and is transferred to another unit - the claim of appellant is that the goods were not cleared for home consumption and is merely transferred from one warehouse to another - Held that: - goods have been removed from one warehouse to another. However, even though the goods have not been cleared for home consumption, the same have not been accounted for to the satisfaction of the proper officer inasmuch as the condition under which such warehousing was permitted was not satisfied - the Customs authorities have rightly demanded the Customs duty on the goods which have been found uninstalled and unused - benefit denied - appeal dismissed - decided against appellant.

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• 2017 (5) TMI 937
  Refund claim - rejection on the ground that the appellant filed two claims in one month - The main defence of the appellant is that it is a principle of law that substantial benefit given by the Statute cannot be denied on procedural grounds. When the fact of payment of VAT by the appellant is not in dispute they are entitled to refund of Additional Duty of Customs - Held that: - when Section 27 of the Customs Act has not put any specific bar on number of claims to be filed, the refund procedure prescribed by the Revenue restricting the claim to one in a month for the present facts appears to be only a procedural impediment which cannot come in a way to grant the refund to the appellant - refund allowed - decided in favor of appellant.

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• 2017 (5) TMI 936
  Valuation - rough marble blocks imported from Turkey - Revenue took up the matter for adjudication on the ground that the value declared by the appellant was less as also on the ground that the condition of the import license stand violated - Held that: - it is well settled law that NIDB data cannot be considered as the reliable source for the purpose of enhancement. We find that the issue is no more res integra and has been settled by umpteen number of decisions of the Tribunal - an identical dispute was the subject matter of the Tribunal’s decision in the case of R K Marble Pvt Ltd. Vs. CCE Jaipur [2009 (1) TMI 648 - CESTAT, NEW DELHI], and the enhancement of the value based upon the weekly average price was held as bad in law. Contravention of the licenses - Held that: - As per the licenses given to the appellant, the imports should be at the floor price of USD 275 per MT - the Ld. Advocate appearing for the appellant has accepted the violation of the condition of the policy - we uphold the confiscation and imposition of penalty - he redemption fine is reduced from ₹ 5.40 lakhs to 1 lakh and the penalty from ₹ 1 lakh to ₹ 50000. Appeal allowed - decided partly in favor of appellant.

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• 2017 (5) TMI 935
  Revocation of CHA licence - forfeiture of security deposit - inordinate delay in completion of the process of revocation of the license contrary to the time-frame prescribed in the Regulations - Held that: - compliance with the time-frame stipulated in the Regulations is an essential pre-requisite for the proceedings to be accorded legality and sanctity - the inordinate delay in completing the inquiry proceedings has vitiated the detriment visited upon the appellant - the revocation of the license and forfeiture of the security deposit is held to be violative of the Regulations and is set aside - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 934
  Law of Estoppel - Law of Merger - Jurisdiction of commissioner - fresh proceedings initiated after final adjudication - import of one Hummer H2 right hand drive each from Dollar Auto Works, Dubai, UAE - undervaluation - Held that: - initiation of fresh proceedings against the same importer by way of fresh show cause notice alleging under valuation of the car can neither be appreciated nor be upheld. If the Revenue was of the view that there was undervaluation of the car, the same should have been taken up by the Revenue in the first set of adjudication itself - There is no provision in the Customs Act to initiate fresh proceedings, after the final adjudication has taken place and that too, when the order stand merged with the order of the Higher appellate authority - Law of Estoppel, and law of Merger would apply in such case and repeated adjudication cannot take place each time on a new ground - the present adjudication is beyond the jurisdiction of the Commissioner and the impugned order is not sustainable - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 933
  Forfeiture of CHA Licence - violation of time limit - non-imposition of revocation on M/s. Entire Logistics - Since the Customs offence was the same, Revenue has argued that M/s. Entire Logistics should also be penalized with forfeiture of CHA Licence - Held that: - four CHAs were involved in commission of customs offence. Disciplinary proceedings were taken up by the ld. Commissioner against all the four CHAs. Even though there is a common enquiry report against all the four CHAs, however, the alleged contraventions which are the basis for disciplinary action against each CHA, are distinct and separate. These charges have been confirmed against each CHA keeping in view the role played by them in commission of the alleged customs offence. Further, since the CHA licence for each CHA is distinct and separate, we do not see any infirmity in deciding the appeal filed by M/s. Entire Logistics without reference to the appeals, if any, filed by the other CHAs. There has been significant delay beyond the permissible limits between the dates of receipt of offence report and date of issue of show cause notice. Likewise, there has been inordinate delay in preparation and submission of enquiry report. From the records, it is seen that delay is on account of change of enquiry officer more than once and thereby, the time limit prescribed under CHA Regulations have been badly violated - the order of the lower authority forfeiting the security deposit is set-aside and the appeal is allowed - appeal allowed - decided in favor of assessee.

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• 2017 (5) TMI 932
  Applicability of concessional rate of duty to imported items in terms of N/N. 24/2005 dated 1.3.2005 - manufacture of optical fiber cables - denial on the ground that imported goods have shifted the classification - denial on the ground that appellants have manufactured their goods without the use of individually sheathed optical fibre in which case their product would be classifiable under heading 9001 10 and the concessional rate of duty would not be available to them - Held that: - Both sides have agreed that if test report is accepted, that the final product i.e. optical fibre cable would shift its classification from heading 8544 70 to heading 9001 10, thus not making the notification applicable. As such, we are of the view that the appellants have wrongly availed the benefit of notification No. 24/2005-Cus. Time limitation - Held that: - the declaration made by the appellant with the department that they would be using their imported material only for manufacture of cables falling under 8544 70 has been proved to be mis-declared, as is evident from the test report. If that be so, it has to be held that there was a malafide mind of the assessee to avail undue benefit in the guise of following the procedure - the longer period of limitation would admittedly be available to the Revenue. Wherever the cable have been found containing individually sheathed fibre, the benefit of notification would be available to the assessee. However, neither side has been able to make it clear that the demand confirmed by the lower authorities is only in respect of those cables which have not been found to be containing individually sheathed fibre - the matter needs to be remanded to the original adjudicating authority for examination of the said aspect - appeal allowed by way of remand.

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• 2017 (5) TMI 931
  Valuation - Credit Insurance Charges - includibility - rate of insurance to be included - Held that: - Rule 10 of the Customs Valuation Rules read with Section 14 of the Customs Act 1962 provides for addition of an amount at the rate of 1.125% of the free on board value of the goods plus the cost of transport in cases where cost of insurance is not ascertainable. However such loading is required to be done only in respect of the transaction value of the goods for import. The “Credit Insurance Charges” have been paid by the appellant to its principal to cover the insurance in respect of payments to be received by the appellant for supply of goods made to customers in India - It is also evident that such goods are those which are manufactured by the appellant in India - there is absolutely no justification to add amounts towards the “Credit Insurance Charges” to the value of goods imported by the appellant from its principal. To arrive at the correct nature of the credit insurance charges, it will be necessary to verify the terms of the insurance policy entered into by the principal with insurance company M/s. Euler Herms - appeal allowed by way of remand for such verification.

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• 2017 (5) TMI 930
  Benefit of N/N. 27/2002-Cus - benefit of concessional rate of duty at 15% on export of machinery - the case against the appellant was that they exported machinery beyond six months as required by notification and hence they are not entitled to concessional rate of duty - the case of appellant is that they sought time extension from Department for export of machinery - recovery of 85% of duty alongwith interest and penalty - Held that: - the extension of time sought for 10 days for re-export of the machinery which was rejected by the department - the notification clearly states that the imported goods are required to discharge fifteen percent if importer undertakes to re-export the goods within six months from the date of import and in a case not able to do so, he has to pay further fifteen percent of the duty after six months but before the expiry of one year after the import of the goods - In any case the goods have been re-exported after six months but before one year, the clauses of the notification are very clear and the appellant is required to discharge additional fifteen percent of the duty along with interest - To that extent, the adjudicating authority was correct in confirming the demands raised for additional fifteen percent of the duty and the interest thereof. Confiscation of goods - Held that: - Since the imported goods are re-exported within one year of imported goods being cleared there is no violation of the condition of notification 27/2002-Cus. Hence the confiscation ordered by the adjudicating authority is not correct and illegal and needs to be set aside - penalties also set aside. The demand of the differential customs duty and the interest thereof is upheld and the confiscation ordered and penalties imposed by the adjudicating authority are set aside - decided partly in favor of appellant.

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• 2017 (5) TMI 929
  Valuation of confiscated goods - 4247.56 carats of rough diamonds - The exporter had declared a value of ₹ 28,57,000 in the shipping bill which was re-assessed at ₹ 72,76,799 and subject to proceedings u/s 113 and 114 of CA, 1962 - case of appellant is that the adoption of the value recommended by the ‘trade panel’ would, therefore, not be in consonance with the directions of the Tribunal - whether invocation of section 113 (i) of Customs Act, 1962 was appropriate? - Held that: - It is admitted that there is no revenue involvement in the dispute and that no duties are liable to be collected on the declared or enhanced value. In these circumstances, the initiation of proceedings to reassess the value is, itself, questionable - It is quite clear from the findings of the original authority that an enhancement of value by customs authorities in the shipping bill or bill of entry does not carry with it the concomitant obligation to repatriate or remit the differential value from, or to, the buyer, or supplier, respectively. In the circumstances, the disallowance of exports even after imposition of redemption fine is not justified by law. There is no justifiable reason for the adjudicating authority to accept the value recommended by trade panel and there is also no finding to sustain the invoking of section 113 (i) of CA, 1962 - appeal allowed - decided in favor of appellant.

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• Corporate Laws

• 2017 (5) TMI 924
  Scheme of Amalgamation - Held that:- Considering all the relevant facts, the procedural requirements contemplated under Sections 391 to 394 of the Act, the relevant Rules and on due consideration of the reports of the Regional Director, Northern Region, Ministry of Corporate Affairs, New Delhi and the Official Liquidator and the separate reply(s) thereto by way of affidavits of the Authorised Signatory of the Petitioner-Companies, the Scheme of Amalgamation is hereby sanctioned and as a result thereof, the assets and liabilities relating to the Transferor Company/Petitioner Company-I shall stand vested in the Transferee Company/Petitioner Company-II and the Transferor Company/Petitioner Company-I shall be dissolved without being wound up. The Petitioner-Companies shall comply with all the applicable Accounting Standards upon sanctioning of the Scheme or any other undertaking made by the Petitioner-Companies. The Scheme shall be binding on the Petitioner-Transferor and Transferee Companies, their respective shareholders, creditors and all concerned. Let formal order of sanction of the Scheme be drawn in accordance with law and its certified copy be filed with the Registrar of Companies within 30 days from the date of receipt of the same. A notice of the order be published in the newspapers, namely, “Indian Express” (English), “Jansatta” (Hindi) both Delhi/NCR Edition and in the Official Gazette of Government of Haryana.

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• Service Tax

• 2017 (5) TMI 963
  Reverse charge - banking and other financial services - maintenance and repair services - services received from foreign entities - Held that: - the provision of the service, the nature of the relationship between the overseas entity that purportedly received the service and the entity in India, and the manner in which the payment for service has, in effect, moved from the Indian entity be examined in detail as a prelude to crystallising the tax liability. A mere linking of the various segments of section 66A of FA, 1994 and the payment made by a remotely connected overseas entity which has entered into a distinct agreement with other overseas entities would not suffice to justify the levy of tax on reverse charge - In order to ascertain the liability to tax, pertaining to ‘banking or financial service’, it would be in the interest of justice the remand the matter back to the adjudicating authority to determine the tax liability after considering the various aspects - we exclude that portion of the demand pertaining to ‘maintenance or repair service’ which we have held to be without authority of law - appeal allowed by way of remand.

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• 2017 (5) TMI 962
  Penalty u/s 78 - VCES scheme - false delaration made by assessee - differential tax with interest was paid by assessee on being pointed out by Revenue regarding false declaration - Held that: - Since there is a false declaration, the appellants cannot be absolved from the penalty as malafide intention is clearly proved - penalty upheld. There is no dispute on the fact that appellants while availing VCES gave a false declaration as they have not declared the correct dues. Therefore, their case cannot be settled under the VCES. Appeal dismissed - decided against assessee.

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• 2017 (5) TMI 961
  Sub-contract - service tax liability - Held that: - the Circular dated 23/08/2007 issued by the Board clarified the decision regarding the service tax liability of the sub-contractors. However, for the periods prior to that the situation as clarified by the Ministry and followed in various decisions of the Tribunal as well as High Courts that when the full service tax liability on the whole contract has been discharged by the main contractor there is no liability on the sub-contractor who executed part of said main contract. This position remained valid till the introduction of Cenvat Credit Scheme and issue of Master Circular dated 23/08/2007 - the matter is remanded back to the Original Authority for re-verification of the service tax payments made by the main contractor and in case the service tax liability has been clearly discharged by the main contractor for the whole contract and the appellant’s liability as a sub-contractor is part and parcel of that main contract then the service tax liability again cannot be put on the appellant - appeal allowed by way of remand.

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• 2017 (5) TMI 960
  Business Auxiliary Services - service as a financial broker by providing arrangement - receipt of commission for providing the platform for loan transaction between the lender and the borrower - taxability - Held that: - promotion or marketing of service provided by client and procurement of service for the client are mentioned as category of activities taxable under BAS - the borrower pays a certain portion of money borrowed, as commission - The commission is received by them in the financial transaction where they acted as middle man/facilitator. - demand upheld - appeal dismissed - decided against assessee.

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• 2017 (5) TMI 959
  Extended period of limitation - penalties - Held that: - the services rendered by the appellant under various categories may liable to be taxed as undisputedly, appellant had received consideration for rendering these services - demand for normal period valid - however, Aurangabad Municipal Corporation being a statutory body, allegation of suppression of facts with intention to evade tax are not sustainable in law - the extended period cannot be invoked against the appellant for demanding service tax liability on the findings that there was suppression of facts with intention to evade service tax liability. Penalty - Held that: - the appellant being statutory body, the intention to evade service tax cannot be upheld - invoking the provisions of Section 80 of the FA, 1994, the penalties imposed on the appellant is set aside. The service tax liability needs to be recomputed by the adjudicating authority that falls within the period of limitation and interest liability thereon also needs to be discharged by appellant - appeal allowed - decided in favor of assessee.

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• 2017 (5) TMI 958
  Site Formation & Clearance services - Supply of Tangible Goods for Use - short payment of service tax - Held that: - on a specific query from bench, non-production of duty paying documents was affirmed nor the same are produced before us to come to any conclusion. The adjudicating authority was correct in denying the CENVAT credit - penalty rightly imposed under the provisions of Section 78 of the FA, 1994 as appellant is not able to convince us that there a bonafide belief in non/short payment of government dues - demand upheld - appeal dismissed - decided against assessee.

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• 2017 (5) TMI 957
  Consultancy engg. service - supply of engineering design, drawing and documents given by GAMI and imported by the appellants - Held that: - we are dealing with the same value of engineering design and drawing - the importation had been done by the appellants and not by GAMI, who provided Engineering Consultancy Service to the appellants in terms of the contract. Whatever fee is charged by GAMI for providing engineering consultancy in India has been subjected to service tax - the Original Authority admitted that the engineering drawing and designs are to be treated as goods and were processed through customs. In similar set of facts, the Tribunal in the case of Mitsui & Co. Ltd. [2013 (3) TMI 228 - CESTAT, KOLKATA] has held that the supply of imported and indigenously procured drawing and designs, treating them as goods, cannot form part of tax liability under “Consultancy Engineer Service”. Appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 956
  Sub-contract - The appellants are engaged in providing erection, commissioning or installation service to main contractor M/s ABB Ltd. - case of appellant is that the demand pertains to the period September 2005 to October 2006. The SCN was issued on 10/03/2010, well beyond the normal period of limitation - Held that: - during the material time, the clarification issued by the Board on 07/10/1998 regarding the non-liability of the sub-contractor rendering same type of service as the main contractor, is prevailing and followed by the field formations. It is only in the master circular issued on 23/08/2007, the position was clarified with a contrary view - without going into the merits of the case, it is apparent that in such situation of interpretation of the statutory provision, there could be no basis for invoking suppression, fraudulent intend etc. on the part of the appellant - demand hit by limitation - penalties also set aside - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 955
  Erection, commissioning or installation - the appellant had undertaken various types of works including supply and installation/testing and commissioning of various electrical equipments/street lightings, poles etc. and all these types of work were covered by single work order - demand of tax with interest - Held that: - It is clear that the said contracts fall under purview of taxable service of “works contract”. Since, the period involved in this case is prior to 01/06/2007 i.e. introduction of levy of service tax under “works contract service”, the activities undertaken by the appellant will not fall under such purview of taxable service for the purpose of levy of service tax - service tax demand for the period from 2005-2006 to 2006-2007 set aside holding that service tax was not leviable under the works contract service during such period - demand for subsequent period upheld. Since service tax on advances received for providing taxable services is required to be paid, which has not been paid within the stipulated time, interest on such delayed payment of tax is liable to be paid by the appellant - demand of interest upheld. Appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 954
  Penalty u/s 76 - It was the case of the appellant that this construction of houses were undertaken by them for Maharashtra Housing Development Board (MHADA) and hence not taxable as they are doing the job for Maharashtra Government - appellant paid tax with interest and penalty u/s 78 - Held that: - appellant could have entertained a bona fide belief that having constructed houses for MHADA they need not discharge any tax liability as MHADA being a Government of Maharashtra undertaking - appellant was an unemployed engineer and has claimed it so to get the tender for construction of such houses - by invoking the provisions of Section 80 of the FA, 1994, as it was during the relevant period, we set aside the penalties imposed u/s 76 by the lower authorities - appeal allowed - decided in favor of appellant.

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• Central Excise

• 2017 (5) TMI 953
  Imposition of personal penalty u/r 26 - The Revenue contested the impugned order on the ground that the facility of closure of proceedings as contemplated in Section 11A (2) is not applicable for the proceedings for confiscation of finished goods/raw material u/r 25 and also for imposition of penalty u/r 26 - Held that: - Admittedly, the case against the respondent is with reference to the duty demand and improper accounting. There is a single notice for both the parties (manufacturing unit and the Director). The proceedings are common and the matter is same. The interpretation of Revenue that the proceedings under Rule 25 and Rule 26 will continue to hold good, even after payment of full duty liability alongwith interest and 25% of penalty, is against the provisions of Section 11A (2). In Raman Gandhi vs. CCE, Delhi [2015 (3) TMI 1110 - CESTAT NEW DELHI], the Tribunal concluded that if against a show cause notice the main party paid duty, interest and 25% duty as penalty, then the proceedings initiated through the show cause notice comes to an end. Appeal dismissed - decided against Revenue.

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• 2017 (5) TMI 952
  Captive consumption - clearance of goods to captive power plant - Pitch Creosote Mixture (PCM) - demand on the ground that the power generating unit is a separate legal entity - Held that: - goods used as fuel or for generation of electricity, used for manufacture of final products or for any other purpose, within the factory of production is eligible to be called as input. Further, PCM is used within the factory premises of the appellant is also an admitted fact. The said PCM is used in the generation of electricity which in turn used in the manufacture of final products by the appellant - the legal identity of the manufacturer of electricity cannot be a reason for denial of the concession available to the appellant, for the product used within the factory premises in the generation of electricity, which is captively used in the manufacture of final product - appeal allowed - decided in favor of assessee.

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• 2017 (5) TMI 951
  Clandestine removal - Ferro Alloys such as Silico Manganese chips - Held that: - inferences without any collaborative evidence will not assist the cause of Revenue, to establish the case of clandestine removal - the Revenue has not brought out any point to interfere with the finding recorded in the impugned order - appeal dismissed - decided against Revenue.

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• 2017 (5) TMI 950
  Clandestine clearances - parallel invoices - apart from invoice books which are in the form of statutory documents, two books of parallel invoices bearing the same serial numbers as that of genuine invoices were recovered indicating clandestine removal of finished goods - the details of clearances of goods given in these GRs do not match with the details found in corresponding excise invoices which showed that finished goods were removed clandestinely against these GRs without being entered in statutory records with intent to evade payment of duty - shortage of stock - wrongful availment of credit - Held that: - as regards shortage, the stock taking has been duly recorded in the relevant panchnama and it is on record that the stock taking was conducted in the presence of responsible persons representing the assessee. Both the persons representing the assessee have agreed to the result of the stock verification. Shri Umesh Khutenta, one of the witnesses of the stock verification, has been cross-examined before the adjudicating authority and he has stated the procedure adopted for stock taking - This procedure, to our minds, appears entirely reasonable and cannot be faulted with at this stage specially since there has been no murmur of protest against such procedure any time before. It is also seen from record that Sh. Sanjay Mandal, authorised person of the assessee who witnessed the stock taking, Sh. Nagendra Dutt Sharma, Excise Clerk, Sh. Mahendra Kumar Kabra, Director have also, in separate statements, have concurred with the stock taking. Sh. Srivats Rathi, Director have also agreed to such shortages. In view of the above, we find no reason to interfere with such demands. Parallel invoices - Held that: - various persons on the side of assessee have admitted that goods covered by all these documents were cleared without accounting the same in the statutory records and without payment of Central Excise duty. It is further on record that none of the statements have ever been rectracted. In view of the fact that the factum of clandestine clearance has been admitted by all concerned including Sh. Srivats Rathi, Director, we find no reason to interfere with the demand of Central Excise duty based on these records - It is well established that what stands admitted need not be proved by revenue. Alleged fraudulent availment of cenvat credit of ₹ 50 lakhs - Held that: - the credit of ₹ 50 lakhs on 27.10.2007 was taken fraudulently without any supporting invoices for receipt of inputs/ capital goods. The fraud has been compounded by the attempt to fabricate a debit entry for a like amount. The fraud also stands admitted by Sh. Nagendra Dutt Sharma, Excise Clerk. Sh. Mahendra Kumar Kabra, Director as also Sh. Srivats Rathi, Director. Consequently, we find no reason to interfere with the impugned order on this point also. Appeal rejected - decided against appellant-assessee.

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• 2017 (5) TMI 949
  Clandestine removal of goods - Held that: - No corroborative evidence has been produced by the Revenue to substantiate their charge - the evidences revealed by the Revenue are in the shape of entries in diaries of Sh. Apreash Ghosh and transporters register. These documents were never controverter with the respondents and these entries were never supported by any positive evidence, therefore, the Ld. Commissioner (Appeals) has rightly observed that these documents were not sufficient evidence to establish the charge of clandestine removal of goods - demand set aside - appeal dismissed - decided against Revenue.

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• 2017 (5) TMI 948
  Clandestine manufacture and removal - It has been alleged in the said show cause notice that the appellant cleared 8178 MT of ingots by clandestinely manufacturing and clandestinely removing without maintenance of record, evaded Central Excise Duty of ₹ 1,36,05,002/- as mentioned in loose slips - Held that: - there are no evidence about the excess raw material procured, instances of actual removal of unaccounted finish goods, discovery of such finished goods outside the factory, the parties identified to whom such sale has been made, any evidence of receipt of sale proceeds, nor statement of any buyers - the requirements to establish clandestine manufacture and clearance have not been satisfied by the revenue to confirm the demand in the present case. The officers of revenue conveniently presumed that Raj Ratan stated in loose slips, to be appellant. Under such mistake of understanding of the word Raj Ratan stated on the loose slips to be the appellant without establishing that Raj Ratan stated on the slips was appellant and contrary to the statement of Shri Pawan Agarwal dated 25.02.2004 wherein Shri Pawan Agarwal did not state that he used to do broking for appellant, revenue has framed charges. Therefore, the said SCN is not sustainable. Demand set aside - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 947
  Goods lost during storage of petroleum products on account of natural evaporation - demand on the ground that storage is exceeding the limit as prescribed by CBEC - Held that: - The Appellant is a Govt. of India Undertaking. There are no malafides involved and there is no clandestine removal of the goods. The goods have been lost in the natural course because of their volatile nature - the matter is squarely covered by the Tribunal’s decision in the case of The Commissioner C & C.E, Hyderabad Versus M/s Bharat Petroleum Corpn. Ltd. [2016 (6) TMI 1020 - CESTAT HYDERABAD], where it was held that The fact that loss in storage is bound to take place for petroleum products is well accepted, and demand was set aside as the losses are due to natural causes - the subject storage loss is well accepted fact - demand set aside - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 946
  Penalty u/s 11AC - storage of goods outside the factory u/r 4(4) of CER, 2002 - penalty imposed on the ground that appellant have admittedly cleared the accessories alongwith compressor without payment of duty for storage outside the factory therefore they have contravened the provisions - Held that: - it is only due to inadvertence that the appellant could not mention storage of accessories alongwith compressor in their first application. However after filing letter dated 4-5-2007 the fact regarding the removal of accessories has been disclosed to the department. The demand is also within normal period of one year and therefore same is not covered under proviso to Section 11A(1) - penalty not imposable u/s 11AC and is set aside - appeal allowed - decided in favor of appellant.

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• 2017 (5) TMI 945
  Refund claim - amount of duty paid on inputs used in the manufacture of goods i.e. yarn exported under a letter of undertaking - rejection on the ground that goods exported are not related to the quarter or the month of the refund claim filed by the appellant - Held that: - date of export of goods is relevant for calculating the limitation of one year for filing the refund claims as provided u/s 11B of CEA and not the ‘conditions of quarter or months’ given in N/N. 5/2006 - reliance placed in the case of M/s. Reliance Chemotex Industries Ltd. Versus C.C.E. Jaipur-II [2015 (6) TMI 1015 - CESTAT NEW DELHI], where it was held that refund cannot be rejected on the ground that goods exported are not related to the quarter or the month of the refund claim filed by the appellant - refund allowed - decided in favor of assessee.

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• 2017 (5) TMI 944
  Deemed Manufacture - medicaments - The master box was opened and cartons containing vials/bottles were taken out and sticker bearing the details of import Licence no. price and the marks that the product was meant for ‘Animal treatment only’ and ‘not for human use’ was pasted on the vial/bottle - whether the process amounts to manufacture? - Held that: - the activity of the respondent is confined to only relabeling of retail pack after taking out from master pack and thereafter sold such labeled boxes which is already in the packed form. This activity does not fall under the term ‘repacking from bulk pack to retail pack’ for the reason that retail pack was already intact while importing the goods and said retail pack was only labeled’ therefore activity of repacking from bulk pack to retail pack does not exist - Since activity of repacking from bulk pack to retail pack does not exist the activity carried out does not amount to manufacture - appeal dismissed`- decided against Revenue.

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• 2017 (5) TMI 943
  CENVAT credit - duty paying invoices - finished goods returned back from the market - whether appellant is eligible to avail CENVAT credit of the amount of Central Excise duty on the goods returned back from C & F agent that also on the basis of photo copy of the triplicate copy of the invoices? - Held that: - the appellant is not able to correlate actual quantity despatched and received back by them from C & F agent based upon the documents available - the ratio of the judgement of the Hon'ble High Court of Gujarat in the case of Gujarat Setco Clutch Ltd. [2008 (9) TMI 623 - GUJARAT HIGH COURT] is applicable in the case in hand - credit disallowed - appeal dismissed - decided against assessee.

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• 2017 (5) TMI 942
  100% EOU - refund claims - denial on account of non-availability of details as to the quantum of inputs used for manufacture of inputs during the month - Held that: - the first appellate authority has ventured into hair splitting the reports given by the Superintendent on verification of the refund claims by recording that the Superintendent has not reported the verification report about the quantum of inputs used for manufacture of exported goods remain unutilized in the hand of manufacturer - this hair splitting may not serve the purpose of stated policy of Central Government of India i.e. to encourage the exports by Indian manufacturers - refund allowed - decided in favor of assessee.

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• 2017 (5) TMI 941
  CENVAT credit - welding electrode - It is the case of the appellant that welding electrodes were used by them for fabrication/installation of various machineries in the factory premises - CENVAT credit is sought to be denied by recording that welding electrodes were used for repairing and maintenance of plant and machinery - Held that: - welding electrodes were used only for installation of capital goods and were not used for repair and maintenance of plant and machinery is also not supported by any evidence - the claim of the appellant that the welding electrodes are used for fabrication of supporting structure and capital goods being not contraverted, the ratio of the decision of Sree Rayalaseema Hi-Strength Hypo Ltd [2012 (11) TMI 255 - ANDHRA PRADESH HIGH COURT], covers the issue of assessee, where it was held that unless the welding electrodes used in the manufacture of capital goods, which are thereafter used in the factory do not qualify as inputs, CENVAT credit cannot be claimed - credit allowed - appeal allowed - decided in favor of assessee.

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• 2017 (5) TMI 940
  Clandestine removal - demand - Held that: - the first appellate authority has failed to consider the fact that the respondent has not paid the amount of duty calculated on the basis of electricity consumption as per report of Prof Batra, IIT, Kanpur and the first appellate authority has not come to a definite conclusion on the basis of evidence produced by the appellant with the case of meritable proceedings - demand needs to be set aside - appeal rejected - decided against Revenue.

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• 2017 (5) TMI 939
  CENVAT credit - Banking & Other Financial Services - scope of input services - advisory and placement charges relating to private placement of equity shares - denial on the ground that the services rendered is not fall under the category of input services and they were not in relation to the manufacturing of the final products - Held that: - when the amounts raised by M/s PL Advisory Service Pvt. Ltd. were undisputedly used by appellant for the manufacturing activity i.e. for the business during the relevant period is itself an indicator that the said services rendered by M/s PL Advisory Service Pvt. Ltd. has intrinsic relation to the manufacture of business activity of the appellant. The decision of the Tribunal in the case of Hinduja Global Solution [2016 (3) TMI 401 - CESTAT BANGALORE] would directly apply in the case in hand wherein the Tribunal has held that activities relating to business which is in the second portion of the definition includes the activity of financing which would mean that if an assessee pays service tax for the various services received by them for raising the finance, CENVAT credit can be availed. Credit allowed - decided in favor of appellant.

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• CST, VAT & Sales Tax

• 2017 (5) TMI 928
  Validity of reassessment proceedings - change of opinion - material relied upon both for assessment and reassessment had remained the same, and therefore, subsequent view taken in reassessment proceedings was nothing but change of opinion, and was thus not permissible - Held that: - the material forming the basis for assessment and also for reassessment are one and the same. It is further apparent that on the basis of such materials, the assessing authority had accepted the claim put forth by the assessee. The reassessment proceedings are also on the basis of same set of materials. In such circumstances, the basis for reassessment could at best be either change of opinion or non-application of mind, both of which would not validate an order of reassessment. Tribunal's view that based upon the same material an order of reassessment would be impermissible being in the realm of 'change of opinion', does not suffer from an error of law and is maintained - revision rejected - decided against Revenue.

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• 2017 (5) TMI 927
  Interpretation of statute - applicability of principle of estoppel - whether the Sales of leather goods are admissible for deduction as resales u/s 8(2) of the Bombay Sales Tax Act, 1959, even though corresponding purchases of these goods were covered by Entry 39(a) of Schedule A of the Act and when necessary certification was availed of by the appellant's vendors? - Held that: - Held that: - the Tribunal found that the Notification which was issued, referred to entry 39 of Schedule A appended to the Bombay Act w.e.f. 11th August, 1988. The Government of Maharashtra notified the products of the village industries to be the notified products for the purpose of entry 39. This Notification itself is reproduced at page 119 of the paper book. There are as many as 23 kinds of products of the industries which are found in the Notification. The Tribunal concluded from the same that these products are taxable in nature. To our mind, the Tribunal rightly understood the controversy before it. To our mind, and further, the Tribunal rightly noted that there are conditions specified in Schedule A­39 and which, upon fulfillment, would make the sale and purchase of these products free from tax. The Tribunal also rightly referred to the object, namely, to promote the products of village industries as are defined by KVIC Act. - There are specific conditions when such products, as referred above, are sold by a dealer who is certified by the Commissioner. Such dealer should not be holding a trade mark or a patent. Now, a trade mark is referable to the goods sold and patent is referable to the method or process of manufacturing of the goods sold. Thus understood, we have no hesitation in concluding that the products, if sold by such dealers, would be tax free. The appellant before it is entitled to resales in respect of its purchases effected from the KVIC dealers for the goods which are leather goods falling in entries C­II­42 and C­II­81, both at the time of purchase and sale. They are Schedule C goods when purchased and sold, and therefore, entitled to resale. We do not see how such conclusion can raise a question of law. When the Tribunal decided this matter and as elaborately as it did, how does any question of an interpretation of the provisions of law has not been clarified to us. The question as framed for our consideration and opinion is that, whether the sales of leather goods are admissible for deduction as resales under Section 8(ii) of the Bombay Sales Tax Act, 1959 even though corresponding purchases of these goods were covered by entry 39(a) of Schedule A of the Act and when necessary certification was availed of by the appellant's vendors - Once we have referred to the Schedule entry ourselves, and independent of the Tribunal's conclusions analyzed it, we do not think that it was incorrectly interpreted or misconstrued or misinterpreted at all. Therefore, there was no occasion for the Tribunal to refer these questions. Making distinction between leviability and nonleviability, the Tribunal had come to the conclusion that even after addition of explanation to Section 8, that has not made any difference. We think that the insertion of the Explanation has led to the reference to this court. On facts, we find that all conditions of deduction for resale have been fulfilled. However, the Explanation added later is the focal point. The Explanation that was introduced to Section 8 came to be inserted by Maharashtra Act No. XVII of 1999 and the argument before the Tribunal on the Reference Application was that it shall be deemed to have always been inserted. Reference Application was decided unmindful of the fact that mere insertion of the Explanation does not render the conclusions recorded earlier perverse or vitiated in law. The second round on the same material was, therefore, unnecessary. Principle of estoppel - Held that: - There is no question of any estoppel in the sense we are construing and interpreting a statutory provision and Schedule entry as forming part of the statute itself. In such circumstances, we do not see how a question about applicability of the principle of estoppel, as invoked by the Revenue in the peculiar facts and circumstances, would arise at all. Appeal dismissed - decided in favor of dealer.

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• 2017 (5) TMI 926
  Validity of assessment order - furnishing of bank guarantee for balance of tax - Held that: - This Court has already considered similar request made by other Assessees and permitted them to furnish personal bond instead of bank guarantee by considering the fact that they have complied with the other condition of paying the tax liability. Therefore the petitioner in this case is also entitled to similar relief - petition allowed - decided partly in favor of petitioner.

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• 2017 (5) TMI 925
  Levy of purchase tax - purchase of unbranded snacks - Held that: - the petitioner produced purchase bills and that it was verified and found in order in respect of proposal of Tax at S.Nos.3 to 7 of the items, out of which S.No.7 admittedly is in respect of purchase tax under Section 7(A) of unbranded (re-sale) at 4%. Therefore, it is evident that the petitioner had produced purchase details in respect of these snacks unbranded item and the same were verified and found in order by the Assessing Authority. A perusal of the notice dated 27.07.2007 would show that the respondent himself has admitted that the original order of assessment was made under Section 3D(1) of the TNGST Act, 1959, instead of levying under Item 29 of Part C of the First schedule to the said Act. It is clearly stated by the authority in the said notice that the assessment made under Section 3D(1) of the TNGST Act, was not in order. The impugned order cannot be sustained on the ground of limitation as well - petition allowed - decided in favor of petitioner.

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