TMI Tax Updates - e-Newsletter
May 7, 2016
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
CST, VAT & Sales Tax
TMI SMS
Highlights / Catch Notes
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Income Tax:
Condonation of delay denied - Ignorance of law is no excuse - HC
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Income Tax:
Income from Other Sources - Bonus shares can never be considered as received without consideration or for inadequate consideration calling for application of subclause (c) of clause (vii) of Section 56(2) of the Act - AT
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Income Tax:
Addition on gifts received - the gift being transferred “in kind” hence not to be taxed for the year under consideration - AT
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Income Tax:
Penalty u/s.271BA - no affidavit from the Director or by Chartered Accountant to show that report in Form No.3CEB was obtained before the due date of filing of the return or the said Audit report was made available to the AO either before processing the return u/s.143(1) or completion of assessment order u/s.143(3) of the Act - penalty confirmed - AT
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Income Tax:
TDS liability - period of limitation - proceedings u/s 201 can be initiated by the TDS office within the period of 2 years from the end of the financial year in which statement referred to in sec.200 is filed or in cases where no statement is filed, within the period of 6 years from the end of the relevant financial year - AT
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Income Tax:
Eligibility for re-registration after cancellation of registration u/s 12AA cancelled - assessee cannot apply for re-registration, once the registration granted was cancelled validly, having found that that the trust is not genuine and has not been carrying out its activities in accordance with the objects of the trust - AT
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Income Tax:
Levy of interest under section 115P - It is not in dispute that dividend tax, under section 115P of the Act, was paid by the assessee well within 14 days of declaration of dividend by the shareholders in the annual general meeting, hence no levy of interest - HC
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Income Tax:
Amounts realised to meet the contingent sales tax liability of the assessee has since been refunded to the persons from whom the same was collected and also a finding has been reached that the agreement enhancing the lease rent was not a sham document - SC
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Income Tax:
Disallowance under the Explanation under sub-section (4A) of section 80HHC - assessee is exporting directly to the buyers and also through export houses - submission of revenue that the premium earned by the respondent assessee is totally unrelated to export is fallacious - SC
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Income Tax:
Disallowance of provisions of interest as the provisions amounted to unascertained liability - there is no estoppel against the Statute and the Act enables and entitles the assessee to claim the entire expenditure in the manner it is claimed. Thus the assessee would be entitled to deduction of the entire expenditure respectively in the year in which the amount was actually paid - SC
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Income Tax:
Revision u/s 263 - assessee failed to demonstrate as to how the notice under section 263 was under the influence of auditors’ objection. The ld.Commissioner has recorded his individual satisfaction before taking action against the assessee - AT
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Income Tax:
Deduction u/s 10A - what is required to be excluded in the export turnover are only freight, telecommunication charges or insurance attributable to the delivery of computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India which cannot be confused with the services rendered for the development of computer software, an integral part of export turnover of computer software - HC
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Income Tax:
Disallowance of speculative loss invoking the provisions of section 73 - if the gross total income of the assessee comprises of any or all the heads of income, then the assessee will fall within the exception carved out in the explanation to section 73 and it could not be deemed to be carrying on a speculative business for the purposes of section 73 (1) - assessee shall not be deemed to be carrying on with the speculative business - AT
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Customs:
As the appellant has paid an amount on account of rent in favour of Commissioner of Customs (Preventive), NCH, New Delhi under protest, the said amount is refundable to the appellant as the appellant has no liability to pay rent - AT
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Customs:
Provisions of Section 117 gets attracted only to a person who has contravened the provisions of the Act or abets any such contravention or fails to comply with any provisions of the Act which is his duty to comply and where there was no express penalty provided - AT
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Service Tax:
Waiver of penalty u/s 80 - service tax - There is no absolute discretion to waive the penalty - SC
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Service Tax:
In the absence of any express or implied provision for retrospective applicability, an amending Notification No.33/2008-ST where the said proviso (e) was deleted would only has prospective effect - AT
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Service Tax:
If the inspection of the seafood and analysis thereof as to adherence to the quality as prescribed, would fall under the category of “Technical Testing & Analysis Services”, eligible for exemption granted for the same on “human beings or animals” as there cannot be any doubt that seafood are nothing but a kind of animals - AT
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Service Tax:
Sale of tickets for IPL Cricket Tournament - Levy of service tax as well as entertainment tax - the only interim order that can be passed at this stage, is to direct that the Service Tax as collected and deposited by the petitioner during the pendency of the present writ petition will be subject to the final outcome of the petition - HC
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VAT:
The “Nutralite” would fall under the Entry 31 of the Schedule III of the KVAT Act, ‘Edible Oil’ and would attract the rate of tax prescribed in respect of edible oils. - HC
Articles
Notifications
Central Excise-
22/2016 - dated
5-5-2016
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CE
Seeks to further amend notification No.12/2012-Central Excise dated 17.03.2012 - Effective rate of duty - Modification in respect to items i.e (a) Populated printed circuit board" (b)Parts, testing equipment, tools and tool-kits for maintenance, repair, and overhauling (MRO) and (c) etc.
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21/2016 - dated
5-5-2016
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CE
Seeks to further amend notification No.2/2011-Central Excise dated 1.03.2011 - Wireless data modem cards with PCMCIA or USB or PCI express ports removed
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20/2016 - dated
5-5-2016
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CE
Seeks to further amend notification No.1/2011-Central Excise dated 1.03.2011 -
Wireless data modem cards with PCMCIA or USB or PCI express ports removed i.e. not eligible for benefit of 2% of duty.
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26/2016 - dated
5-5-2016
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CE (NT)
Duty includes Infrastructure Cess leviable where the Export are allowed without payment of duty or procurement of goods without payment of duty for use in manufacture of export goods - Seeks to further amend notification No. 42/2001-CE(NT) dated 26.6.2001, No. 43/2001-CE(NT) dated 26.6.2001, No. 19/2004-CE(NT) dated 6.9.2004 and No. 21/2004-CE(NT) dated 6.9.2004
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25/2016 - dated
5-5-2016
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CE (NT)
Routers falling under tariff item 8517 69 30 shall be subject to MRP based duty on 80% of MRP - Seeks to further amend notification No.49/2008-Central Excise (N.T.) dated 24.12.2008
Customs-
32/2016 - dated
5-5-2016
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Cus
Seeks to further amend notification No.24/2005-Customs dated 1.03.2005 - Restriction on benefit of exemption with regard to the items "charger or adapter, battery, wired headsets and speakers of mobile handsets including cellular phones" withdrawn.
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31/2016 - dated
5-5-2016
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Cus
Seeks to further amend notification No.21/2012-Customs dated 17.03.2012 - Import of Charger or adapter, battery, wired headsets for use in manufacture of mobile handsets including cellular phones shall be exempted subject to conditions.
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30/2016 - dated
5-5-2016
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Cus
Seeks to further amend notification No.12/2012-Customs dated 17.03.2012 - Effective rate of duty on import of goods - Amendments with regard to various items.
SEZ-
S.O. 1625 (E) - dated
5-4-2016
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SEZ
De-notification of certain areas - Multi-Product Special Economic Zone at Nellore, Andhra Pradesh
VAT - Delhi-
No. F3(619)/Policy/VAT/2016/183-196 - dated
6-5-2016
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DVAT
Modification to the notification number F3(619)/Policy/VAT/2016/1291-1304 dated 12th January, 2016 - details of purchases where the total amount of an invoice does not exceed ₹ 1000/-(one thousand rupees) shall not be mandatorily required to be furnished in Form GE-II
News
Case Laws:
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Income Tax
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2016 (5) TMI 219
Disallowance of speculative loss invoking the provisions of section 73 - Held that:- In case of a company whose gross total income consists mainly of income from interest on securities, income from house property, capital gains and income from other sources, the loss from purchase and sale of shares of other companies, shall not be deemed to be carrying on a speculation business. In other words if the gross total income of the assessee comprises of any or all the heads of income, then the assessee will fall within the exception carved out in the explanation to section 73 and it could not be deemed to be carrying on a speculative business for the purposes of section 73 (1) of the act. It is an admitted fact that the assessee is having income from interest, dividend income and income from capital gains from sale of long-term investment. Applying the law to the facts of the present case before us, the assessee’s case falls within the purview of exception carved out in the explanation to section 73 of the act and consequently the assessee shall not be deemed to be carrying on with the speculative business for the purposes of section 73 (1) of the act. - Decided in favour of assessee
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2016 (5) TMI 218
Eligibility for re-registration after cancellation of registration u/s 12AA cancelled - Held that:- There cannot be any second innings by way of registration of the same trust with the same objects. When there is no specific right provided in the Act for re-registration of the trust, assessee cannot seek such registration. It may be different scenario/case if assessee has modified its objects, or changed its committee who were governing the trust or handed over the ‘property of the trust’ to another trust for its proper maintenance, then, fresh registration of the new trust could be examined by the DIT/CIT as per the law. At present there is no provision either in Sec.12A or in Sec. 12AA allowing the assessee registration for the second time. Ld. Counsel relied on certain cases in support of contentions The issue in appeal in those cited cases arose from the refusal of the CIT to condone the delay in filing the application or refusal to revise his own order granting registration. There was no cancellation of registration nor a finding that the activities of the assessee were not genuine or not in accordance with the objects. Therefore, these decisions cannot be considered as precedent in the present appeal. Ld CIT-DR rightly distinguished the cases with which we agree. In the given facts, we are of the opinion that assessee cannot apply for re-registration, once the registration granted was cancelled validly, having found that that the trust is not genuine and has not been carrying out its activities in accordance with the objects of the trust. We are of the opinion that the CIT was correct in refusing to entertain the application. - Decided against assessee.
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2016 (5) TMI 217
Addition held to be gift of shares - Held that:- AO has connected the impugned gift with the sale of Gotri land and that issue is yet to be decided in AY 2009-10, therefore the ld.CIT(A) has rightly held that the gift being transferred “in kind” hence not to be taxed for the year under consideration CIT(A) has rightly deleted the addition of ₹ 46,80,540/- as the gift which was part of the total gift received by family members at 4.70 crores formed part of the undisclosed sale consideration of Gotri land which took place during Asst. Year 2009-10 and, therefore, no addition was called for during Asst. Year 2008-09. Accordingly no interference is called for with the order of ld. CIT(A). - Decided in favour of assessee
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2016 (5) TMI 216
Income from Other Sources - addition made by the AO, considering the fair market value of the bonus shares received by the assessee from one M/s. Manipal Education & Medical Group (India) P. Ltd - Held that:- An assessee who received bonus shares could never be considered as receiving something without consideration or for a consideration less than the fair market value of the property. When bonus shares are received, it is not something which has been received free or for a lesser fair market value. A consideration has flown out from the holder of the shares, may be unknown to him, which is reflected in the depression in the intrinsic value of the original shares held by him. Thus in our view, Section 56(2)(v), (vi) and (vii) brought in to the Act for addressing the vacuum caused due to withdrawal of the Gift-tax Act cannot be used for the purpose of taxing the value of bonus shares received by an assessee. Valuation of unquoted shares set out in Rule 11 UA(B) will have applicability only on receipt of shares as gift or for inadequate consideration. Bonus shares can never be considered as received without consideration or for inadequate consideration calling for application of subclause (c) of clause (vii) of Section 56(2) of the Act. We have no hesitation to uphold the order of CIT (A) deleting the addition made by the AO. - Decided in favour of assessee
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2016 (5) TMI 215
TDS u/s 194H - whether the proceedings initiated by the DCIT(TDS) are barred by limitation or not? - Held that:- the statute prescribes that the proceedings u/s 201 can be initiated by the TDS office within the period of 2 years from the end of the financial year in which statement referred to in sec.200 is filed or in cases where no statement is filed, within the period of 6 years from the end of the relevant financial year. In this case, the financial year involved is 2002-03 and no statements u/s 200 were filed. Therefore, the order u/s 201 should have been passed on or before 31/3/2009. In this case, order u/s 201(1) was passed on 28/5/2009. Thus the proceedings are barred by limitation. It is trite law that orders passed after the period of limitation cannot be sustained in the eyes of law. Accordingly, we hold that the order passed by the DCIT(TDS) is barred by limitation and cannot be sustained in the eyes of law. - Decided in favour of assessee
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2016 (5) TMI 214
Penalty u/s.271BA - failure of furnish a report from Accountant as required by Sec.92E at ₹ 1 lakh for each assessment years - Held that:- In the present case, there is no affidavit from the Director or by Chartered Accountant to show that report in Form No.3CEB was obtained before the due date of filing of the return or the said Audit report was made available to the AO either before processing the return u/s.143(1) or completion of assessment order u/s.143(3) of the Act. The order of the Tribunal in the case of M/s. Nectar Lifesciences Ltd.(supra) and the order of Hyderabad Bench of the Tribunal in the case of M/s.GI Systems Org. (India) (P) Ltd. V. ITO [2011 (3) TMI 120 - ITAT, HYDERABAD ] is squarely applicable to the facts of the case. Accordingly, we confirm the levy of penalty u/s.271B of the Act. - Decided against assessee
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2016 (5) TMI 213
Revision u/s 263 - whether revision was under influence of auditors’ objection? - Held that:- If the ld.Commissioner initiated the proceedings under influence of audit objection and took such objection as gospel truth, then, probably, the ld.counsel for the assessee may be justified to raise this plea that on the basis of auditors’ objection proceeding under section 263 ought not to be initiated, but in case where, the role of auditors’ objection is only assumption of a information, which has been evaluated by the ld.Commissioner, and after such evaluation, he was satisfied to initiate the action under section 263 of the Act, then, law does not prohibit the ld.Commissioner to initiate proceeding. His opinion ought not to be influenced by any objection. The role of objection is only as a source of information to decide whether any action under section 263 requires to be taken or not. In the present case, ld.counsel for the assessee failed to demonstrate as to how the notice under section 263 was under the influence of auditors’ objection. The ld.Commissioner has recorded his individual satisfaction before taking action against the assessee. Therefore, we do not find any error in the order of the ld.Commissioner. - Decided against assessee
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2016 (5) TMI 212
Levy of interest under section 115P - Tribunal held that dividend was declared for the assessment year 2003-04 on September 24, 2003, and tax was paid on October 3, 2003 which was within the time limit prescribed under section 115-P, hence no levy of interest - Held that:- The power of the Board of Directors of Company is only to declare interim dividend, whereas final dividend is to be declared only by the company in its general meeting. It is evident, therefore, that the power of the board of directors is only to 6 recommend dividend; and it is for the shareholders of the company, in the general meeting, to declare the dividend. It is not in dispute that dividend tax, under section 115P of the Act, was paid by the assessee well within 14 days of declaration of dividend by the shareholders in the annual general meeting. The contention of the Revenue that a provision for payment of dividend, in the balance-sheet of the assessee, would itself amount to declaration of dividend does not merit acceptance, as provision for payment of dividend does not automatically result in payment of dividend. It is only after the board of directors decide to recommend dividend, and the shareholders in the general meeting approve the recommendation of the board of directors, can dividend be held to have been declared. We find no error in the orders of the Tribunal, much less a substantial question of law, necessitating interference under section 260A of the Act. - Decided against revenue
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2016 (5) TMI 211
Deduction u/s 10A - ITAT treating expenses incurred in foreign currency to be taken along with total turnover of the assessee - Held that:- We have noticed that on appeal by the Revenue before the Appellate Tribunal, the Tribunal following the judgment of an identical case, wrongly mentioned as assessee's case as submitted by both the parties, confirmed the order of the Appellate Commissioner treating expenses incurred in foreign currency to be taken along with total turnover of the assessee. We find that the Tribunal's finding is not based on any examination of available and relevant material to come to a conclusion as to whether the activity related to the computer software as defined under Explanation 2 to section 10A or involving technical services which has to be excluded from the export turnover as per Explanation 4 to section 10A, more particularly, when the assessee had reduced the said expenditure incurred in foreign currency from the export turnover and total turnover at the time of filing the returns and thereafter has shifted to a different stance before the appellate authority, that the said services were integral part of development of computer software. Even in the order of the Appellate Commissioner, we do not see the details of remand reports said to have been submitted by the Assessing Officer and any discussion regarding any material or any agreement copies to establish the factual situation and the activities of the assessee. The Tribunal without examining any commensurate material, placing reliance on the judgment of the Tribunal dated May 30, 2008, allowed the relief claimed by the assessee. Given the circumstances, the said finding of the Tribunal is not based on any relevant material. We are therefore of the opinion that it would be proper to remand the matter to the Tribunal to examine the material on record and to record a finding as to the nature of the activity, keeping in view the settled legal position as per the judgment of this court in Motor Industries Company Limited's case (2015 (7) TMI 876 - KARNATAKA HIGH COURT) and Mphasis Limited's case (2014 (8) TMI 690 - ANDHRA PRADESH HIGH COURT). It is also made clear that what is required to be excluded in the export turnover are only freight, telecommunication charges or insurance attributable to the delivery of computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India which cannot be confused with the services rendered for the development of computer software, an integral part of export turnover of computer software.
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2016 (5) TMI 210
Refund of amounts realised to meet the contingent sales tax liability - Held that:- The amounts realised to meet the contingent sales tax liability of the assessee has since been refunded to the persons from whom the same was collected and also a finding has been reached that the agreement enhancing the lease rent was not a sham document, we find no ground to continue to entertain the present special leave petition.
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2016 (5) TMI 209
Disallowance under the Explanation under sub-section (4A) of section 80HHC - amount received from the Export House in brokerage or commission or charges or any other receipt - Held that:- In view of the decision rendered by this court in CIT v. Baby Marine Exports [2007 (3) TMI 206 - SUPREME Court ] we allow this appeal and set aside the order of the High Court [2006 (1) TMI 116 - MADRAS High Court] and held that as the assessee is exporting directly to the buyers and also through export houses submission of revenue that the premium earned by the respondent assessee is totally unrelated to export is fallacious - Decided against revenue
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2016 (5) TMI 208
Ascertained liability – whether provisions of interest can be disallowed as the provisions amounted to unascertained liability - Held that:- Matter is covered against the Revenue by the judgment of this court in Taparia Tools Limited v. Joint CIT [2015 (3) TMI 853 - SUPREME COURT] wherein held that there is no estoppel against the Statute and the Act enables and entitles the assessee to claim the entire expenditure in the manner it is claimed. Thus the assessee would be entitled to deduction of the entire expenditure respectively in the year in which the amount was actually paid. - Decided in favour of assessee.
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2016 (5) TMI 207
Determination of "profits of business" in terms of Explanation (baa) to Section 80HHC - 90% of the net commission or gross commission receipts to be deducted while such determination – Held that:- These cases are covered by the decision of this court in ACG Associated Capsules Private Ltd. (Formerly Associated Capsules Private Ltd. v. CIT [2012 (2) TMI 101 - SUPREME COURT OF INDIA] wherein held that Ninety per cent of not the gross interest/rent but only the net interest/rent, which has been included in the profits of the business of the assessee as computed under the heads ‘PGBP’ is to be deducted under clause (1) of Explanation (baa) to Section 80HHC for determining the profits of the business. Decided in favour of the assessee.
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2016 (5) TMI 206
TDS u/s 194A - as confirmed by HC [2009 (10) TMI 921 - KARNATAKA HIGH COURT] interest payable for belated payment of compensation for the land acquired is exigible to tax and the Land acquisition Officer was justified in deducting the tax under section 194-A for the said payment also - Held that:- In the impugned order, no reasons have been given by the High Court. Hence, matters need to be sent back. This is prima facie opinion In view of the said position reflected in the aforesaid order, learned counsel for the respondent was confronted therewith. He submitted that he has no objection if the matters are remitted to the High Court for fresh consideration.
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2016 (5) TMI 205
Reopening of assessment - purchase of shares - Held that:- The transaction dated 31st March, 2010 relating to transfer of investments in the three companies aggregating to ₹ 41,15,79,320/- was a subject matter of enquiry by the AO. The AO having enquired into the transaction of sale and purchase, and having examined the values at which the transactions had taken place had not raised any further issue with regard to the transactions in question. It plainly follows from the above that AO had satisfied himself as to the entire transaction of purchase of shares including the consideration thereof which was duly reflected in the statement furnished by the Assessee. Although the working relating to the books value of the shares - assuming that that is relevant - is not available, it must be presumed that the AO had satisfied himself as to the value of the transaction and also that the same were held as investments by the Assessee. This is so because the transaction itself had been enquired into and the value at which the shares are transferred as well as the nature of those assets in the hands of the Assessee – whether held as investments or as stock in trade - were plainly the most important aspects of the transaction. Thus, it must be accepted that the AO, after application of mind, had accepted that the shares in question were acquired by Assessee from M/s Unitech Limited at their cost price and were held as investments by the Assessee. It has been held in a number of decisions that once it is shown that the AO had enquired into the transactions, it must be assumed that he had examined the relevant aspects even though the same have not been expressly referred to in the assessment order. In this view, we are unable to accept that AO had not formed an opinion as to various aspects of the transaction in question, including its value insofar as it is relevant for assessing the Assessee's income. Consequently, we must accept the contention that the impugned notices have been occasioned by a change of opinion. It is trite that a mere change of opinion cannot constitute a reason for re-opening the assessment. Reopening quashed - Decided in favour of assessee
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2016 (5) TMI 204
Disallowance u/s 40A(3) - Held that:- Where disallowance is made under section 40A(3) of the Act in respect of entries made in regular books of account, which have no relation with the undisclosed income, or the entries not recorded in the books of account or documents unearthed during the search, such allowance cannot be treated as part of the undisclosed income. However, if such expenditure relates to undisclosed income found during the search, the disallowance under section 40A(3) of the Act, would be justified. The Tribunal had held that while computing the undisclosed income of the block period, the provisions of section 40A(3) of the Act would be applicable in respect of payments made for the purchase of gold, exceeding the amount of ₹ 20,000, as such expenditure was found recorded in the loose sheets discovered during the course of search and seizure operations. Relying on the decision of this court, in M. G. Pictures (Madras) Limited v. Asst. CIT [2002 (4) TMI 16 - MADRAS High Court] the Appellate Tribunal had dismissed the appeal filed by the assessee. Having considered the reasons given by the Appellate Tribunal, we are fully convinced that there is no error in the impugned order passed by the Appellate Tribunal, dated June 16, 2006. In the given facts and circumstances of the case, it is clear that the provisions of section 40A(3) of the Act would be applicable. As per the provisions of the said section, no deduction could be allowed for purchases exceeding ₹ 20,000, as provided therein. However, the case of the assessee is not found to be falling in the exceptions provided in the proviso to the said section. As such the purchases of gold jewellery had exceeded ₹ 20,000, as found from the loose sheets discovered during the search and seizure operations. The disallowance of deduction by the Assessing Officer is correct in law. As such, we find no cause or reason to interfere with the order passed by the Appellate Tribunal, dated June 16, 2006. - Decided in favour of the Revenue and against the assessee
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2016 (5) TMI 203
Transfer pricing adjustment - international transactions relating to the purchases made and the royalty paid by the assessee to Keihin Corporation, Japan (hereafter "KC") - Held that:- The amounts paid were not in accordance with the agreement between the assessee and the KC is concerned, we find that no such contention had been urged by the Revenue either before the Commissioner of Income-tax (Appeals) or before the Tribunal. Therefore, in our view, no such plea can be permitted to be taken for the first time in these proceedings. The contention that the adjustment on account of expenses as determined by the Transfer Pricing Officer must be attributed entirely to the international transaction is bereft of any merits. During the financial year 2003-04 relating to the assessment year 2004-05, the assessee had reported an operating income of ₹ 72,24,22,000. The total expenses for the said period amounted to ₹ 68,00,88,000. Admittedly, the international transactions in question amounted to ₹ 15,90,66,935 which were only 23.38 per cent. in value of the total expenses. The Transfer Pricing Officer had determined the profit level indicator (operating profit over total cost) of comparable cases at 8.29 per cent. against 6.22 per cent. as declared by the assessee. Applying the profit level indicator of comparable cases, the adjusted total expenses were computed at ₹ 66,71,17,924, thus, indicating an adjustment of ₹ 1,29,70,076. As is apparent from the above, the said adjustment related to the entire expenses and not just the international transactions alone. Since the international transactions only constituted 23.38 per cent., a transfer pricing adjustment proportionate to that extent could be made in respect of such international transactions. Thus, only an adjustment of ₹ 30,33,593 could be attributed to the international transactions in question. The same was accepted by the Commissioner of Income-tax (Appeals) as well as the Tribunal. We also find no infirmity with the view of the Commissioner of Income- tax (Appeals) and the Tribunal that the assessee had acted like any other original equipment manufacturer (OEM) and could not be treated as a job worker or a contractor. - Decided against revenue
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2016 (5) TMI 202
Reopening of assessment - correctness of the computation of section 80IB deduction - Both the lower authorities hold that the assessee has not provided for interest on partners capital as well as their remuneration despite specific clauses in its partnership - Held that:- Taking into the account the fact that assessee-firm interest on partners’ capital and remuneration clauses comprise of mutual agreement provisions as well as the fact that it has not paid or provided for any amount in the books to conclude that the assessee’s partners had decided not to charge any interest or remuneration since the relevant clauses hereinabove are not of mandatory nature. We accept assessee’s arguments. The Revenue’s submissions justifying action of the lower authorities on this fundamental construction of assessee’s partnership deed clauses stand rejected. We delete the impugned disallowance of interest on partners’ capital and remuneration in question. Since we have decided this first fundamental issue of partnership deed’s interpretation against the Revenue, other arguments narrated in preceding paragraphs are rendered academic. - Decided in favour of assessee
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2016 (5) TMI 201
Eligibility to exemption exemption u/s.80P and 10(23C) - Held that:- Despite the expiry of more than 18 months, AO did not respond to the remand order of the CIT (A) and therefore the CIT (A) was left with no option but to decide the appeal of the assessee without having the benefit of the remand report of the AO. We find that there is no justification or explanation by the Department as to why the AO has not submitted the remand report or other report of not submitting the remand report. Therefore it is clear that the AO was not having any explanation or reason for not filing the remand report. Even otherwise, it is not the case of the Revenue that the assessee is not entitled for the relief u/s.80P as well as u/s.10(23C) of the Act. Therefore when the entire income of ₹ 2,52,18,534/- was eligible for exemption, then allowing the claim of the assessee by the CIT (A) is proper and justified In the case on hand, when the CIT (A) has already issued a remand order giving full opportunity to the AO for examination of the claim, then in the absence of any claim of the Revenue that assessee is not entitled for the exemption u/s.80P and 10(23C) of he Act, we do not find any error or reason to interfere with the impugned order of the CIT (A). - Decided against revenue
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2016 (5) TMI 200
Transaction in shares - income under the head business or income from capital gains - Held that:- Investment through Portfolio Management Service, which may deal with the shares of the assessee so as to derive maximum profits cannot be termed as business of the assessee but would only be a case of a more careful and prudent mode of investment, which has been done by the assessee. Funds which lie with the assessee can always be invested (for earning higher returns) in the shares either directly or through professionally managed Portfolio Management Scheme and by doing so, it would not mean that the assessee is carrying on the business of investment in shares. Profits from such investment, either directly or through professionally managed firm, would still remain as profits to be taxed as capital gains as the same will not change the nature of investment, which is in shares, and the law permits it to be taxed as capital gains and not as business income. See Commissioner of Income Tax, Deputy Commissioner of Income Tax Versus M/s Kapur Investments (P) Ltd. [2015 (5) TMI 616 - KARNATAKA HIGH COURT] - Decided against revenue
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2016 (5) TMI 199
Exemption u/s. 11 - Held that:- In order to deny the benefit of exemption the activity must be advancement of any other object of general public utility and the above two conditions i.e., (a) and (b) exist. As far as the first condition is concerned it is not in trading and it is a decided fact before various appellate authorities that the activities of the organization are charitable and hence the said proviso is not applicable. As far as the second condition is concerned ie. any activity of rendering of any service in relation to any trade commerce or business, for a fee or cess or any other consideration irrespective of the nature of use or application of the income from such activity, or the retention of such income by the concerned entity, it is essential that one should render any service in relation to any trade, commerce or business for a fee or cess or any other consideration and since assessee is neither a service organization nor rendering any services, this part of amendment is also totally not applicable to the case. - Decided in favour of assessee
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2016 (5) TMI 198
Non granting of working capital adjustment - Held that:- We are not inclined to accept the view canvassed by the authorities that the working capital adjustment cannot be allowed as the assessee is in service industry. Such an adjustment is restricted to inventory, trade receivables and trade payables. If a company carries high trade receivables, it would mean that it is allowing its customers relatively longer period to pay their dues, which will result into higher interest cost and the resultant low net profit. Similarly, by carrying high trade payables, a company benefits from a relatively longer period available to it for paying back the dues to its suppliers, which reduces the interest cost and increases profits. In order to neutralize the differences on account of carrying high or low inventory, trade payables and trade receivables, as the case may be, it becomes eminent to allow working capital adjustment so as to bring the case of the assessee at par with the other functionally comparable entities. We, therefore, agree in principle with the grant of working capital adjustment. To sum up, we set aside the impugned order on the issue of addition towards transfer pricing adjustment and remit the matter to the file of AO/TPO for fresh determination of the ALP of the international transaction of rendering of software services in consonance with our above directions. Needless to say, the assessee will be allowed a reasonable opportunity of being heard in such fresh proceedings. Grant of deduction u/s 10AA denied - Held that:- As discussed in detail about the international transaction of rendering of Software services to its AE, on which transfer pricing adjustment was made. Under such circumstances, the point of view of the AO that the services were rendered by the assessee to its holding company, is wholly incorrect. As regards the other point considered by the AO for denial of deduction about the assessee rendering services to its head office alone, thereby leading to transaction with self, in our considered opinion, is again devoid of merits. Once the law requires an Indian branch of a foreign enterprise to be considered independent of its head office for taxation purpose, the AO cannot make out a case that there is no difference between head office and branch office in India and, hence, no deduction, which is otherwise available, should be given. If the principle of mutuality as invoked by the AO for denial of deduction u/s 10AA is taken to its logical conclusion, then, it would also mean that the assessee did not earn any income at all from its head office again on the principle of mutuality. Obviously, this position is not sustainable. Be that as it may, we are confronted with a situation in which the assessee has rendered software services to its AE and not head office. The other reason of the AO for denial of deduction u/s 10AA is that the assessee did not receive any income at all in foreign currency and what was received was simply the cost incurred plus a certain mark up and the same cannot be considered as sale proceeds of the software sold by the assessee. Again, we are unable to countenance this view of the AO because the assessee brought in India sale proceeds from rendering of services to its AE. The remuneration model has been decided by the parties inter se with a cost plus mark-up, which in the instant case, is 15% of costs. What the assessee has realized in India is nothing, but, sale proceeds of software service provided by it to its foreign AE, which include not only the costs incurred by it in providing software services but also such mark-up. This, in our considered opinion, satisfies the requirement of receipt of foreign currency in India. Since the assessee has satisfied all the requisite conditions for availing of the benefit of deduction u/s 10AA, we are of the considered opinion that the authorities below erred in refusing to grant such deduction. We, therefore, overturn the impugned order on this issue and direct the grant of deduction u/s 10AA of the Act. - Decided in favour of assessee
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2016 (5) TMI 196
Estimation of Net profit - Tribunal had estimated the rate of profit at 9% - Held that:- It is true that the discretion to determine a net profit rate must necessarily be exercised on the basis of relevant factors. In the present case, it has been categorically recorded by the Tribunal that the assessee did not produce any supporting vouchers for expenses exceeding ₹ 25,000/-. It did not file copies of the bank accounts of the partners and thus the Assessing Officer could not have verified the various payments received by the appellant from bankers or payments taken directly from the customers by the partners. The assessee did not file the details of purchases in the format given by the Assessing Officer. Regarding sundry debtors, no confirmation was filed and even in the balance sheet, the names of the sundry debtors to the extent of ₹ 1,66,00,000/- were not shown. No details of opening and closing stock were filed. In view of these facts, the Assessing officer could not verify various details and in this way he could not rely upon the book version of the assessee. The assessee even did not file return unless the same was detected during the search. Keeping all the factors in view, the Assessing Officer adopted net rate of 10% on the gross receipts on estimate basis which was reduced by the Tribunal to 9% to meet the ends of justice The estimation of gross profit rate at 9% could not be held to be arbitrary or unreasonable warranting interference by this Court in the facts and circumstances of the case.
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2016 (5) TMI 191
Condonation of delay - Held that:- Ignorance of law is no excuse. See Swadeshi Cotton Mills Co. Ltd. vs. Government of UP (1972 (11) TMI 78 - SUPREME COURT OF INDIA) The appellant has not made out any ground for condonation of delay of 997 days before the Tribunal. We see no error in the order passed by the Tribunal. Accordingly, the appeal fails and stands dismissed.
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Customs
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2016 (5) TMI 189
Waiver of penalty - Appellant, a G Card Holder involved in the customs clearance of consignment - Mis-declaration of imported goods with respect to description, quantity and value of goods - Settlement Commission reduced the penalty from ₹ 5lakhs to ₹ 10,000/- - Held that:- it is clear that the appellant was aware of the actual importer and knowingly he has handled the documents of IEC holder who was not the actual importer. Therefore even though he may or may not aware of the content of the consignment he was involved in the illegal import of the goods. As regard the submission of appellant based on the reliance of S.K. Colombowala Vs. Commissioner of Customs judgment of Tribunal [2007 (7) TMI 514 - CESTAT, MUMBAI], the essence of the judgment is that the treatment is given to the other parties by the Settlement Commission should be extended to the present appellant. Since, in the case of other party i.e Shri Farid Abbajunma and M/s. Saibaba Traders the penalties of ₹ 50,000/- and ₹ 10,000/- respectively were imposed. Even applying to the same ratio, the Ld. Commissioner (Appeals) has rightly reduced the penalty substantially from ₹ 5 lakhs to ₹ 10,000/-. The Ld. Commissioner (Appeals) has followed the settlement order in its entirety which does not require any interference, therefore the impugned order is upheld. - Decided against the appellant
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2016 (5) TMI 188
Determination of assessable value of goods imported - Agent agreement between the respondent and its associates - Adjudicating authority held that the value of the goods which are imported by the respondent needs to be loaded by an amount paid as commission to them. Revenue submitted that identical goods from the same supplier was charged higher price and relied upon Rule 9 of Customs Valuation Rules. Also there cannot be two different prices/value for identical goods which are imported at or about the same time. Held that:- it is seen that Revenue is not able to dislodge the factual finding of the first appellate authority. Also it is recorded that the first appellate authority has considered the entire facts of the case and also considered the case laws relied upon by the respondent-assessee and came to a conclusion that loading of the value is not sustainable. Therefore, the grounds of appeal do not contradict by evidence against the findings of the first appellate authority and the impugned order is upheld as correct and legal. - Decided against the revenue
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2016 (5) TMI 187
Denial of refund claim - Rent paid on behalf of the Revenue to CWC warehouse - Seizure of some indigenous goods - Appellant paid duty, redemption fine and penalties and sought release of the goods as per adjudication order but while releasing the goods, the appellant was asked to pay an amount on account of rent to Commissioner of Customs (Preventive), NCH, New Delhi which was paid by the appellant under protest. Held that:- in adjudication order, the appellant is asked to pay redemption fine, penalties and the duty applicable on the goods in question. The appellant has paid the same, therefore, the goods were required to be released to the appellant on payment of the amounts confirmed as per adjudication order. The adjudicating authority has not passed any order for payment of rent by the appellant for the period of seizure of goods. In these circumstances, the appellant is not liable to pay rent. As the appellant has paid an amount on account of rent in favour of Commissioner of Customs (Preventive), NCH, New Delhi under protest, the said amount is refundable to the appellant as the appellant has no liability to pay rent. Therefore, the impugned order is not sustainable in the eyes of law and accordingly set aside. - Decided in favour of appellant with consequential relief
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2016 (5) TMI 186
Imposition of penalty on Courier - Section 117 of the Customs Act, 1962 - Incorrectly advising their client and for non-compliance of the provisions of the Act which was his duty to do so - Held that:- both the lower authorities erred in imposing penalty on the appellant under Section 117 of the Customs Act, 1962 for more than one reason. Firstly, the appellant is a courier and has filed courier bill of entry as per the declaration and authorization given to him by the importer. Appellant had filed courier bill of entry based upon the proforma invoice provided to him by the importer and in my view, has not contravened any of the provisions of the Customs Act, 1962 to attract penalty. It was his duty to inform the importer to file the bill of entry and discharge duty liability, in response to which he was authorised to file the bill of entry with the value as being shown in the proforma invoice and cannot be considered as a dereliction of duty. Secondly, provisions of Section 117 gets attracted only to a person who has contravened the provisions of the Act or abets any such contravention or fails to comply with any provisions of the Act which is his duty to comply and where there was no express penalty provided is not at all present in this case. Therefore, if the Revenue had strong case against the appellant they could have issued a show cause notice by invoking the various other provisions of the Act for imposition of penalties. Having not done so, the penalty under the provisions of Section 117 cannot be invoked against the appellant. - Decided in favour of appellant with consequential relief
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2016 (5) TMI 185
Eligibility - Benefit of exemption Notification No. 20/99 dated 28.02.1999 - Whether Vitamin E-50 is classifiable under Chapter 2309.00 of the Customs Tariff Act, 1975, as “Prawn Feed” and therefore eligible for exemption - Description of exempted goods in the notification is “Prawn Feed” - Held that:- on the strength of the judgment of larger Bench in the case of Sun Export Corporation, Bombay vs. Collector of Customs, Bombay and Another [1997 (7) TMI 117 - SUPREME COURT OF INDIA], it has been contended on behalf of the assessee that “prawn feed” covered by the exemption notification No.20/99 must be understood to include 'prawn feed supplements' which is what the Vitamin E-50 involved in the present case is. In paragraph 13 of the Order of this Court in Sun's case, views have been expressed with regard to the interpretation of an exemption notification to support the conclusion reached. The same may require a reconsideration. That apart, in the referral order it has been noticed that Sun's case has been distinguished in 'Collector of Central Excise, Guntur vs. Surendra Cotton Oil Mills & Fert. Co. [2000 (12) TMI 103 - SUPREME COURT OF INDIA]. The basis on which the said distinction has been drawn needs to be further pursued. Therefore, the opinion expressed in Sun's case may require a reconsideration.
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2016 (5) TMI 184
Recovery of amount of Drawback under Rule 16A of 1995 Rules - Sale proceeds of export not realised - Appellant appealed before th CESTAT for various issues viz., recovery of amount of Drawback under Rule 16A of 1995 Rules, Confiscation of goods, Period of limitation and imposition of penalty where the CESTAT decided in favour of appellant reported in [2015 (1) TMI 1266 - CESTAT NEW DELHI] - Revenue now stated that it intends to withdraw these Civil Appeals and wants to question the impugned order before the High Court within a month’s time from today - Apex Court disposed of the appeals as withdrawn with liberty to file appropriate petition(s) before the High Court within a month’s time from today.
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Service Tax
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2016 (5) TMI 197
Violation of principles of natural justice - Adjournment sought by the Petitioner on reasonable and valid grounds not granted - Deprived of an effective opportunity of participating in the adjudication proceedings and presenting its version - Evasion of Service tax - Demand of service tax, interest and penalty as proposed in the SCN confirmed.Adjudication pending for more than six years. Held that:- with only one effective hearing having taken place, it would have not caused any serious prejudice to the Department if the request for adjournment made by the Petitioner, on account of the indisposition of its CA, supported by medical certificate, had been accommodated. After all, the SCN was pending adjudication for more than six years. It appears to the Court that the only reason why the Principal Commissioner, Central Excise as AA was in a hurry to conclude the proceedings was that he was retiring on the very date he passed the impugned order. He was perhaps anxious that the SCN should not be shown as pending for over six years. It is these extraordinary circumstances, that persuades the Court to exercise its powers under Article 226 of the Constitution.Therefore, the adjudication order is sets aside. Also it is directed that the adjudication proceedings arising out of the SCN issued against the petitioner will now resume before an AA, as may be designated by the Central Board of Excise and Customs (CBEC), from the stage it was prior to the passing of the impugned adjudication order. - Petition disposed of
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2016 (5) TMI 195
Classification of seafood inspection services - Whether it would fall under Technical Inspection and Certification Services or Technical Testing & Analysis Services of the goods for the period 2007-08 - Held that:- from the agreement it is found that the activity of the appellant is not only inspection of the facility and certification of the factory, but also include the result analysis of the seafood which were sampled by the appellant and send for testing. The report submitted by the appellant on the Audit conducted by them also shows that the testing on the various seafoods. In our view, if the inspection of the seafood and analysis thereof as to adherence to the quality as prescribed by M/s JMRI, would fall under the category of “Technical Testing & Analysis Services”, eligible for exemption granted for “Technical Testing & Analysis Services” on “human beings or animals” as there cannot be any doubt that seafood are nothing but a kind of animals. The first appellate authority as well as adjudicating authority miss-construed the purpose of agreement, the said agreement entered by the appellant requires as per complete inspection of the facility including quality of the seafood. Therefore, the impugned order is to the extent it holds that the services rendered by the appellant would fall under the category of “Technical Inspection and Certification Services” is incorrect and liable to be set aside. Refund claim - Confirmation of demand raised on the erroneously sanctioned refund - Held that:- the confirmation of the demand raised of erroneous sanctioned ₹ 1,53,875/- which is in contest in this appeal needs to be set aside and we do so. Further, the contention of the appellant that they are eligible to refund claim of ₹ 1,77,956/- is rejected as it is very clear that the refund claim is beyond the limitation period as provided under Section 11B of Central Excise Act, 1994. It is found that in the case in hand looking at the issue from another angle, the Service Tax liability on the appellant is refundable to him as the goods which are inspection services as provided by the appellant is to a person situated abroad. This ratio is settled by the Hon'ble High Court of Bombay in the case of Commissioner of Service Tax, Mumbai-III Versus M/s. SGS India Pvt. Ltd. [2014 (5) TMI 105 - BOMBAY HIGH COURT]. The appellant is entitled to refund of the amount which is falls within limitation period. - Refund allowed.
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2016 (5) TMI 194
Admissibility of refund claim - Notification No.41/2007-ST - CHA services - Period involved is January, 2008 to March, 2008 - Revenue pointed out that during the relevant period CHA service was not specified under Notification - Held that:- during the relevant period, CHA service was not specified under the said Notification and therefore, the refund in respect thereof is clearly inadmissible. Admissibility of refund claim - Notification No.41/2007-ST - terminal handling charges, documentation charges and on goods transport by road service - Held that:- there is force in the contention of the appellant that the judgment of CESTAT in the case of SRF Ltd. Vs. Commissioner of Central Excise, Jaipur-I [2015 (9) TMI 1281 - CESTAT NEW DELHI], Commissioner of Central Excise vs. AIA Engineering Pvt. Ltd. [2015 (1) TMI 1044 - GUJARAT HIGH COURT] and M/s. Ramdev Food Products Pvt. Ltd. Vs. CCE, Ahmedabad [2011 (3) TMI 1256 - CESTAT, AHMEDABAD] would cover the issue in the appellant's favour with regard to the remaining services. The exports were made claiming drawback under All Industry rates. While fixing these rates, Govt. takes into account the inputs and input services used in relation to export goods. As the place of removal in respect of export goods is port of shipment, the services mentioned above would qualify to be input services. Consequently the impugned refund is hit by the said proviso. The said proviso was deleted vide Notification No.33/08-ST dated 07.12.2008. Thus, during the relevant period this proviso was very much applicable. We are unable to agree with the contention of ld. Advocate that Notification No.33/2008-ST dated 07.12.2008 in terms of which inter alia the said proviso (e) was deleted should be given retrospective effect, for the simple reason that it is trite that in the absence of any express or implied provision for retrospective applicability, an amending notification only has prospective effect. - Decided against the appellant
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2016 (5) TMI 193
Inclusion of PF contribution and bonus for man power supplied to the client in the taxable value for discharging service tax - Man power supply service - Held that:- by referring to the decision of Tribunal in the case of M/s Neelav Jaiswal & Brothers Vs. Commr. of Central Excise, Allahabad [2013 (8) TMI 147 - CESTAT NEW DELHI] and also taking the note of the decision of Hon’ble Delhi High Court in the case of Intercontinenntal Consultants and Technocrats Pvt. Ltd. [2012 (12) TMI-150 (Delhi-HC)] which was again referred by the Hon'ble High Court in the case of H. M. Singh & Co. Vs. Commr. of Customs, Central Excise & Service Tax [2014 (9) TMI 218 - ALLAHABAD HIGH COURT], the bonus amount paid as incentive to the personnel deployed by the appellant is also rightly includable in the total consideration for service tax purposes. These are additional remunerations though not as per prefixed periodicity and quantum. - Decided against the appellant
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2016 (5) TMI 192
Seeking grant of ad-interim ex parte relief - Levy of Service Tax - Sale of tickets for the Indian Premium League (IPL) Cricket Tournament - Petitioner contended that it is in any event paying tax on entertainment, within the exclusive domain of the State as per List II of the 7th Schedule to the Constitution so, in respect of the same taxable event viz., there cannot be a levy of service tax by the Union on the sale of tickets and a levy of entertainment tax by the State. Also in terms of the Agreement entered into between the petitioner and the BCCI there is an obligation on the petitioner to provide BCCI 20% free tickets in every category so it should not be made liable to pay Service Tax on such ‘free tickets’. Held that:- as far as the second submission is concerned, it will require examination of the Agreement between the petitioner and the BCCI in some detail. It is found that for the current IPL season, the petitioner has already collected the Service Tax on the tickets sold. Having collected the Service Tax in terms of the amendments in the Finance Act, 1994, there is an obligation on the petitioner to deposit such Service Tax with the Central Government. Therefore, the only interim order that can be passed at this stage, while reserving the rights and contentions of both the parties at the final hearing of the writ petition, is to direct that the Service Tax as collected and deposited by the petitioner during the pendency of the present writ petition will be subject to the final outcome of the petition. - application is disposed of.
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2016 (5) TMI 190
Waiver of penalty u/s 80 - service tax - Whether Section 80 of the Finance Act, 1994 envisages only a complete waiver of penalty once reasonable cause of failure is established by the assessee or whether the provision can also be applied to a level below the minimum penalties specified under Section 76 and 78 of the Finance Act, 1994. Held that:- by following the judgment of this court in the case of Union of India and Others v. Dharamendra Textile Processors and Others [2008 (9) TMI 52 - SUPREME COURT], the appeal is allowed and the impugned order of the High Court [2007 (8) TMI 197 - HIGH COURT, BOMBAY] is set aside. - Decided in favour of revenue
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CST, VAT & Sales Tax
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2016 (5) TMI 183
Classification and rate of tax - Nutralite - Appellant contended that Nutralite is made by emulsification of edible oil with water and comp rises of 70% edible oil whereas Commissioner of Commercial Taxes has reached the conclusion that Nutralite would be classified as “unscheduled goods” - Held that:- in the present case the classification only contemplates edible oil and since the Nutralite was different from edible oil the conclusion having been arrived at, may not be fair to the petitioner. The ingredients of the product are clearly shown to be consisting of 70% of edible oil and 26% of water. The other contents amounts to only 4%. Therefore, it is clearly a question of considering whether the product Nutralite which is also Margarine a generic term would describe the very product as edible oil or not. There is no reason to hold that the product shall not fall under the Entry “Edible Oil” and under the “Un-Scheduled Goods”. Therefore, the Commissioner’s reasoning and conclusion are clearly erroneous. Therefore, the “Nutralite” would fall under the Entry 31 of the Schedule III of the KVAT Act, ‘Edible Oil’ and would attract the rate of tax prescribed in respect of edible oils. - Decided in favour of appellant
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2016 (5) TMI 182
Settlement application - Taxability and imposition of penalty - Section 3B and 12(3)(b) of the Act - Full service maintenance agreement charges - Held that:- the application of the assessee for settlement was accepted in terms of one of the Clauses of Section 7 of the Tamil Nadu Sales Tax (Settlement of Arrears) Act, 2010. It was done only after the assessee paid the entire arrears of tax together with 25% of the interest computed on the entire arrears at the rate of 6% per annum. Once a certificate is issued in terms of Section 8 of the Act, the assessee stands discharged of any further obligations by virtue of Sub-Section (1) of Section 8. Unfortunately, the Tribunal thought that the application for settlement was only in respect of the arrears of tax and that it was not in respect of penalty. That is a misconception. Therefore, the order of Tribunal is set aside. - Revision petition allowed
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2016 (5) TMI 181
Seeking directions for the respondent to verify the books of accounts of the petitioner and consider the objections with an independent mind, without being influenced by the VSI proposals/directions of the third respondent or any of his higher officers - Held that:- on reading of impugned order, it is clear that the first respondent had passed the order without applying his mind and erroneously held that as though the petitioner had admitted before the Inspecting Officer. When the petitioner had raised objections in the reply, the first respondent should not have passed such an order. Therefore, the order is set aside and the matter is remitted to the first respondent for fresh consideration. - Petition disposed of
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