TMI Tax Updates - e-Newsletter
June 19, 2013
Case Laws in this Newsletter:
Income Tax
Customs
Service Tax
Central Excise
CST, VAT & Sales Tax
TMI SMS
Highlights / Catch Notes
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Income Tax:
Expenditure owing to distribution of gifts to members/staff - expenditure allowed - AT
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Income Tax:
Deduction u/s 158BB(C)(1) - search - assessee did not maintain any books of accounts - not entitled to seek deduction - AT
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Income Tax:
Transfer - Building development agreement - The condition laid down u/s. 53A of Transfer of Property Act was not satisfied thus it cannot be said that there was a transfer u/s. 2(47)(v) - AT
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Income Tax:
Reopening of assessment - accommodation entries - nothing concrete was brought on record to substantiate that the assessee received any entry or made payment for accommodation entry - no addition - AT
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Income Tax:
Estimation of income of SJMI - PE - Procedure adopted by AO is not correct as there should be separate proceedings for two separate companies established in different countries. - AT
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Income Tax:
TP - where the lending of money was in foreign currency to its AE the domestic prime lending rate would have no applicability and the interbank rate fixed should be taken as benchmark - AT
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Income Tax:
Scrutiny / regular assessment - Validity of notice u/s.143(2) - year of selection was wrong and the notice served on assessee was issued prior to the actual approval by the JCIT - Notice bad in law - AT
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Customs:
Claim of Duty drawback on goods and packing material perpetually - the petitioners cannot be stated to have exported a composite article. What the petitioners exported was the talcum powder simpliciter, of course in packed condition. - HC
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Indian Laws:
DOMAIN NAME IS ALSO A TRADE MARK - Article
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Service Tax:
Sponsorship of cricket match - T-20 matches under the IPL banner - sports event - The appellant is immune to levy and collection of service tax under Section 65(105)(zzzn) of the Finance Act, 1994. - AT
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Service Tax:
Commercial training or coaching service - ICFAI - demand confirmed in view of Explanation added by the Finance Act, 2010 to Section 65(105)(zzc) of the Finance Act, 1994 with retrospective effect from 01/07/2003. - AT
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Service Tax:
Mining services / activities - composite contract - prima facie liable to service tax only from 1-6-2007 - AT
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Central Excise:
Cenvat Credit - Penalty - Input services received prior to 10.09.2004 - Scope of Rule 15 of CCR - Maximum penalty imposed equal to Rs. 2000/- - AT
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Central Excise:
Excess stock of stock found during search and seizure - redemption fine reduced from Rs.3 lakhs to Rs.1 lakh. - No personal penalty on partners and employees - AT
Articles
Notifications
News
Case Laws:
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Income Tax
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2013 (6) TMI 438
Expenditure owing to distribution of gifts to members/staff - whether be considered as incurred for the purpose of business? - Held that:- If any expenditure is wholly or exclusively incurred by on assessee-businessman with a view to preserving and augmenting his business prospects in future, such expenditure would be an allowable, expenditure as per section 37. The assessee co-operative bank has distributed gifts to the children of its members such distribution of gifts was allowable as business expenditure as decided in Karajan Co-operative Cotton Sales (1992 (1) TMI 39 - GUJARAT High Court). Thus expenditure was allowed. In favour of assessee.
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2013 (6) TMI 437
Deduction u/s. 80IB(10) - proceeds attributable to the sale of unutilized FSI - Held that:- The issue is covered in favour of the assessee as relying on Radhe Developer (2007 (6) TMI 316 - ITAT AHMEDABAD) in respect of unutilized FSI to held that concept of element of unutilized FSI sold is imaginary and based on surmises and conjectures. In favour of assessee.
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2013 (6) TMI 432
Undisclosed income - Held that:- The undisputed fact remains that the books of accounts of M/s Dhanalakshmi Jewellery was written up to 20.10.2000 only on the date of survey, i.e., on 15.11.2000. Further, the assessee also did not record in any of the documents about the receipt of money from the concern belonging to his brother. Thus, assessee could not prove his claim by showing that the said transaction was recorded in any of the documents prior to the date of search. The assessee is placing reliance on the entries recorded in the books of accounts of M/s Dhanalakshmi Jewellery, apparently after the date of search - addition as undisclosed income confirmed - Against assessee. Unexplained investment in gold biscuits - Held that:- As the assessee herein did not maintain any books of account, meaning thereby, the transaction of receipt of Rs.4.70 lakhs was not recorded in any of the documents prior to the date of search. Even the purchase of gold biscuits were not recorded anywhere. AO also found that the assessee did not have any sales tax registration number also. Thus, it is seen that the assessee is trying to link the withdrawal of Rs.3.00 lakhs made by his brother with the claim of receipt of loan of Rs.4.70 lakhs from him. Since the withdrawal was less than Rs.4.70 lakhs, a further claim with regard to the sale of jewellery belonging to the wife of his brother seen to have been made. Thus, it is seen that the assessee is trying to explain the investment of Rs.4.70 lakhs without any credible evidences. Hence CIT(A) was justified in confirming the assessment of Rs.4.70 lakhs in the hands of the assessee. Against assessee. Assessment of excess of expenditure over receipts - assessee has claimed the receipt of agricultural income in the cash flow statement - Held that:- As the present assessment is a block assessment it is a well settled proposition of law that the block assessment proceedings should be made only on the basis of seized material. Thus the tax authorities are justified in rejecting the claim of availability of agricultural income, when the said claim was not substantiated with any evidence. In the absence of agricultural income, the sources for the excess cash outflow could not be proved, hence CIT(A) was justified in confirming the assessment of Rs.6,28,882/- as the undisclosed income of the assessee. Against assessee. Plea for treating the above said amount of Rs.6,28,882/- as "loss from business" and consequently has sought for set off of the same against other income assessed as undisclosed income - additional ground - Held that:- The said claim of the assessee is liable to be rejected as the amount represents expenditure incurred out of undisclosed sources and what was assessed is not the expenditure, but the "quantum of undisclosed sources". The cash outflow from undisclosed sources cannot be considered as a business loss, as claimed by the assessee. Also the undisclosed source was determined on the basis of transactions pertaining to a part of year, i.e, for the period from 03-09-2000 to 14.11.2000. The profit or loss of any business concern accrues only as on the last day of the financial year and accordingly, the excess cash outflow in the form of expenditure cannot be considered as a business loss. Against assessee. Deduction u/s 158BB(C)(1) claimed - Held that:- A careful perusal of the said provision would show that such a deduction is permissible "on the basis of entries as recorded in the books of accounts and other documents maintained in the normal course on or before the date of search". However, in the instant case, both the tax authorities have given a finding that the assessee herein did not maintain any books of accounts. Thus the assessee is not entitled to seek deduction as per the provisions of clause (c) of subsection (1) of sec. 158BB. Against assessee.
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2013 (6) TMI 431
Provision of obsolete stock disallowed - Held that:- The assessee is continuously following the policy of valuation of closing stock on the basis of net realizable value which is in accordance with accounting principle. The fact becomes clear by the tax audit report wherein it at 12(b) the auditors have written that there is no deviation from the method of valuation prescribed under section 145A of the Act. From the Notes to Accounts and Tax Audit report it can be said that valuation of inventories was being done at lower of cost or net realizable value and was in accordance with provisions of section 145A of the Act. The assessee instead of taking the net realizable value for valuation of closing stock took the cost price of obsolete item and created a provision for difference in cost price and market value and debited the same to P&L Account, the effect of which is same. Therefore keeping in view the judicial pronouncements relied upon by the assessee on CIT Versus BECTON DICKINSON INDIA PVT LTD. [2012 (12) TMI 210 - DELHI HIGH COURT] appeal of assessee allowed.
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2013 (6) TMI 430
Disallowance of transactions in excess of job work charges - Payment to related parties - sectin 40A(2) - Held that:- AO has not invoked the provisions of s.40A(2) but has disallowed the expenses only on the ground of being not verifiable and not incidental to the business of the appellant. Such observations of the AO are out of the context when admittedly the amounts were credited on account of payment of excise duty. The payments made on account of excise duty are verifiable from the copy of accounts itself. Hence, the disallowance made by the AO is not sustainable and accordingly deleted. In favour of assessee. Disallowance u/s 40A(ia) - assessees submission that he deducted tax at source and remitted the same to the government on 27.5.2005 i.e. before 31.5.2005 - Held that:- As per the provisions of Rule 30(1)(b)(i)(a) of the Income Tax Rules, 1862, the tax deducted at source in question is required to be paid within two months from the last day of the Accounting year i.e. on or before 31.5.2005. Thus the remittance was within time. Hence dismiss this ground of Revenue. Disallowance of the expenses - Held that:- AO has without asking for details disallowed in an adhoc manner the above said expenses. D.R. could not controvert the factual findings of the CIT(A). In favour of assessee.
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2013 (6) TMI 429
Providing accommodation entries - CIT(A) deleted the addition - Held that:- As per AO the assessee received Rs.26 lacs as bogus entries in the garb of sale proceeds of share. On the other hand, the CIT (A) allowed the appeal of the assessee with an observation that all impugned transactions are reflected in the audited accounts of the assessee, all the amounts related to impugned transactions were received through cheques and no suspicious features are noticed. The CIT (A) has also held that the AO has not raised any doubt against the said purchase and sale of shares in the earlier years. The CIT (A) concluded the assessee company has brought on record overwhelming evidence to prove the genuineness of the transactions and the AO wrongly disbelieved the transactions by erroneously observing that the genuineness of the impugned transactions was not proved without controverting the facts brought on record by the assessee showing genuineness of the transactions. Thus in view of the above, unable to see any infirmity, ambiguity or any other valid reason to interfere with the impugned order. Thus respectfully relying on ITO Vs. M/s Diplomate leasing and Finance Pvt. Ltd.[2013 (6) TMI 349 - ITAT DELHI] if sale consideration was bogus then the AO ought to have given reduction in the sale proceeds reflected in the books of accounts before making any addition in this regard. Against revenue. Reopening of assessment - Held that:- Since the appeal of the Revenue has been dismissed by the earlier part of this order and cross objection of the assessee are only supportive to the impugned order, therefore, no reason to interfere with the findings of the CIT (A) upholding the action of the AO for initiation of proceedings u/s 147 and 148 against the assessee. Accordingly, cross objection of the assessee being devoid of merits is also dismissed. Cross objection of the assessee are dismissed.
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2013 (6) TMI 428
Undervaluation of the sale consideration - whether CIT(A) erred in not adopting the circle rate at the rate of Rs.4500/- per sq. meter of land? - Held that:- There is no involvement or requirement of approaching the Stamp Duty Authority by the persons involved in the transaction as per law in this case. The lease in question has been granted by UP State Industrial Development Corp. Ltd. to the assessee vide lease agreement dated 29th day of October, 2007 for a period of 90 years. These lease hold rights were transferred to M/s. Sara Exports Ltd., Ghaziabad for a total consideration of Rs.3,25,00000/- only. Such transfer requires the approval of UPSIDCO. As relying on Carlton Hotels (P) Ltd. Vs ACIT [2008 (11) TMI 295 - ITAT LUCKNOW-A] & Atul G.Puranik vs. ITO [2011 (5) TMI 576 - ITAT, Mumbai] sec. 50C applies only to a capital asst, being land or building or both, it cannot be made applicable to lease rights in a land - in cases of transfer where agreement or sale deed is not registered and stamp duty is not paid, or capital gain is simply charged by deeming certain transactions as transfer as per other provisions of the act or some transactions of transfer are not registered or are not legally required to be registered under the Registration Act, S.50C cannot be put into operation. Also see Dy CIT vs. Tejender Singh [2012 (3) TMI 47 - ITAT, KOLKATA]. Thus on the issue of valuation, the working given by the CIT(A) could not be disputed by DR as CIT(A) held that the rate of Rs.4500/- per sq. feet is applicable for the standard period of 90 years and as what was transferred was lease rights for 54 years, the proportionate rate works out to Rs.2700/- and whereas the assessee has transferred these rights for an amount of Rs.3181/- and hence there is no undervaluation. Against revenue.
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2013 (6) TMI 427
Prior period expenses disallowed - Held that:- CIT(A) has examined the claim of the assessee in respect of each of the item of expenditure included under the head "Prior period expenditure" and accordingly taken a decision that it cannot be said that expenses got crystallized during the year in which the accounting error was corrected. No material was placed on record by assessee to contradict the clear findings given by CIT(A) - Against assessee. Assessment of "Undistributed Vethapalisa" amount - Held that:- The accounting treatment adopted by the assessee, the status of the settlement of accounts of the concerned subscriber, the terms and conditions regarding payment of Vethapalisa amount to the subscriber, particularly when there is a default in payment of instalment/instalments, any other terms and conditions relating to payment of Vethapalisa etc., were not brought on record. The taxability of Vethapalisa amount can be determined only upon examination of the various factors hence unable to agree with the view taken by CIT(A) that the annual accretion to Vethapalisa account would automatically become income of the assessee - restore the issue to the file of AO with the direction to examine the issue afresh. Disallowance made u/s 40(a)(ia) - delayed remittance of the tax deducted at source - Held that:- Though the CIT(A) did not adjudicate this issue, yet this issue requires fresh examination at the end of the AO in view of the subsequent amendments brought in sec. 40(a)(ia). Levy of interest u/s 234A - as per assessee return of income was filled on 28.11.2006 & as per AO it is 31.12.2006 - Held that:- Since the fact relating to the date of filing of return requires verification at the end of the AO,this issue is also remitted to file of AO for reconsideration.
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2013 (6) TMI 426
Expenditure on interior work - revenue v/s capital - Held that:- It is not in dispute that the assessee took the premises on lease for 15 years with an option to extend the same for further period with an intention to set up a new show room in the lease premises & thereby incurred the expenditure in interior decoration like false ceiling, racks, change of flooring, etc. Though the entire title on the property is not transferred during the course of lease assessee would be in physical possession of the property on payment of the agreed amount as lease rent. Therefore, the expenditure incurred by the assessee resulted in expansion of the capital base of the assessee as it resulted in expansion of the profit making apparatus. Therefore, the expenditure incurred by the assessee for interior decoration and other works on the leased premises for the first time for the purpose of setting up of business is not in the course of profit earning process, but in the course of establishing a new capital asset / profit earning apparatus. Therefore be treated as capital in nature. See Veeraraghavan vs CIT [1965 (7) TMI 55 - KERELA HIGH COURT]. Against assessee. Expenditure towards advertisement including payment made to temples, churches, clubs, educational institutions and trade unions, etc. - revenue v/s capital - Held that:- In the written submission, the assessee claims that the prime motive for contribution is charity. If it is a charity, it has to be claimed u/s 80G if the same is approved by the respective CIT. Here, the assessee is claiming business expenditure. It is not the case of the assessee that the expenditure was incurred in connection with the welfare of the employees. Moreover, the assessee has incurred Rs.7,20,99,724 but the AO has disallowed only Rs.1 lakh. In the absence of claim of the assessee that the expenditure was incurred for business purpose or for welfare of the employees, this Tribunal is of the considered opinion that the contribution made by way of charity cannot be allowed u/s 37 as business expenditure. Against assessee. Interest on loan - revenue v/s capital - Held that:- The assessee claims that the entire borrowed funds to the extent of Rs.76.06 crores was invested in the stock in trade. Even if the deposits of Rs.21.38 crores taken as assessee's investment, the balance amount claimed by the assessee to the extent of Rs.20.74 crores as interest free funds may not be available. Therefore, it is not known how the CIT(A) came to the conclusion that the loan of Rs.12.14 crores was given to the relatives out of the available interest free fund of Rs.20.74 crores. If the assessee demonstrates that sufficient capital funds are available, then there may not be any diversion of funds. However, it is for the assessee to demonstrate that sufficient capital funds were available in the books of account. Therefore, AO has to examine the same with regard to the available funds in capital / current account of the proprietor and the nature of deposit to the extent of Rs.21.38 crores, thus the issue of disallowance of interest on the borrowed fund is remitted back to the file of AO. In favour of revenue for statistical purpose.
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2013 (6) TMI 425
Re opening of assessment - excess carried forward of unabsorbed deprecation was allowed in the assessment order - hypothetical income credited to the profit and loss account while computing book profit u/s 115JB - amount debited to the profit and loss account on account of "Provision for gratuity" which was an unascertained liability hence added back to arrive at the book profit - Held that:- From the reasons for reopening it is observed that the AO. reopened the assessment u/s.147 on the basis of the facts that came to his notice from the examination of the assessment records. That means, the facts on which the A.O. formed his satisfaction that income of the assessee had escaped assessment for the year under appeal, were all available on the assessment records and such satisfaction was not based on any new facts or any change in law. There is no dispute that the assessee had reduced an amount of Rs.2,62,76,653/- on account of adjustment for hypothetical income credited to income, from the figure of Net Profit as per its profit and loss account while computing its Book Profit U/S 115JB of the Act. The AO. had, while completing the assessment uls 143, computed Book Profit u/s 115JB and in such computation had t also reduced the impugned amount of Rs.2,62,76,653/- . Also the assessee had claimed and was allowed in the assessment completed u/s 143, a deduction of Rs.2,06,47,310/- towards "Written- off amount of intangible assets" as had been appropriated from Net profit in the profit & loss account as 'Extraordinary items'. The A.O. himself has noted in the reasons for reopening that he noticed the above facts "on examination of the assessment records", which means that those facts were all available on record of the AO. before the reopening. The reopening was not done on the basis of any new material. Thus it is seen that in the recorded reasons there is not a whisper by the AO that the income chargeable to tax has escaped assessment due to the failure on the part of the assessee to disclose fully and truly all material facts necessary. As decided in E.I.Dupond India Ltd. vs DCIT (2013 (2) TMI 406 - DELHI HIGH COURT) it was incumbent to the AO to demonstrate that there was failure on the part of the assessee to fully and truly disclosed all material facts necessary for its assessment. In favour of assessee.
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2013 (6) TMI 424
Re opening of assessment - Building development agreement with land owner - Transfer u/s. 2(47)(v) r.w.s. 53A of Transfer of Property Act - Whether the transferee can be said to have 'performed or is willing to perform' its obligations under the agreement? - Held that:- In the reassessment order AO has stated that originally the return was processed. He has not referred to any tangible material before him, in terms of the judgment of CIT vs. Kelvinator of India Ltd. (2010 (1) TMI 11 - SUPREME COURT OF INDIA), on the basis of which he entertained the prima facie belief that income chargeable to tax has escaped assessment. As per this development agreement dated 28.2.2006 land owner gets his share of plots on construction and consideration is quantified in terms of money. Also the handing over of possession in the development agreement is missing. Both the developer and the assessee having the landed property. They pooled together the landed property along with some other parties who are owners of some other landed property and all parties together given licence to the builder to enter the premises and construct houses. No sale was effected on the date of agreement. No consideration has been passed between the parties on signing the agreement. Further from the date of signing of development agreement dated 28.2.2006 to 31.3.2006 no progress has taken place in the said landed property which is subject matter of development agreement, nothing has been brought on record. Further, there was no consideration in the form of money passed between the parties. There was no construction, whatsoever, taken place during the period 28.2.2006 to 31.3.2006. Even otherwise there was no General Power of Attorney given by the assessee to the developer. In such a situation, it is only the actual performance of transferees obligation which can give rise to the situation envisaged in section 53A of the TP Act. On these facts, it is not possible to hold that the developer has performed its obligation during the period 28.2.2006 to 31.3.2006 in which the capital is sought to be taxed by the Revenue authorities. The condition laid down u/s. 53A of TP Act was not satisfied during the period from 28.2.2006 to 31.3.2006 thus it cannot be said that there was a transfer u/s. 2(47)(v) so as to levy capital gain tax. The judgement in the case of Chaturbhuj Dwarkadas Kapadia [ 2003 (2) TMI 62 - BOMBAY High Court] undoubtedly lays down a proposition which supports the case of the assessee as "willingness to perform" has been specifically recognised as one of the essential ingredients to cover a transaction by the scope of section 53A of TP Act. In favour of assessee.
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2013 (6) TMI 423
Reopening of assessment - accommodation entries - CIT(A) quashed reassessment - Held that:- It is an admitted fact that AO reopened the assessment of the assessee only on the basis of copy of account of Shri Bhupender Shrimali partner of assessee company in the books of M/s Abhvya Investments Pvt. Ltd., Mumbai associated concern. AO on the basis of the said copy of account suspected that the income of the assessee escaped assessment. However, nothing concrete was brought on record to substantiate that the assessee received any entry or made payment for accommodation entry. Therefore, the basis on which the re-assessment proceedings were initiated against the assessee was totally wrong and therefore, the reassessment proceedings were not sustainable and CIT(A) was fully justified in cancelling the reassessment framed in the hands of the assessee. In favour of assessee.
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2013 (6) TMI 422
Unexplained credit u/s 68 - CIT(A)deleted the addition - Held that:- The order of the CIT (A) is quite elaborate one as it dealt with the statement recorded by the Revenue and Mr. Haresh V. Malani on 24.11.2010, dealt with identity of Mr. Haresh V. Malani, the alleged creditor in this case. Undisputedly, CIT (A) has also addressed how Mr. Haresh V. Malani has liability of Rs 1.08 cr to pay to the assessee, how he has creditworthiness by virtue of huge transactions appearing in his bank account etc. Case of the Revenue that the assessee needs to explain the source of the funds deposited in the bank account of Mr. Haresh V. Malani, who merely repaid the liability with assessee is not sustainable in law. The facts suggest that Sri Haresh Malani merely repaid the alleged sum out of the bank balance. Thus with the confirmation filed giving particulars of the sources of income of the payer of Rs 20 lakhs, the assessee discharged his part of the onus. Mr Haresh Confirmed the payment of the sum of Rs 20 lakhs as part of repayment of Rs 1.08 cr. If necessary, the AO should have initiated proceedings against Sri Haresh V Malani instead - order of CIT (A) is reasonable. Against revenue.
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2013 (6) TMI 421
Estimation of income of SJMI [St. Jude Medical Inc. USA] in assessee's hand - AO treated assessee's liaison office in India as a PE for the SJMI and taxed both the incomes attributable to sales made by SJMH as well as SJMI USA in one assessment order - Held that:- Procedure adopted by AO is not correct as there should be separate proceedings for two separate companies established in different countries. Assessee here is the Hongkong company of which the branch is under consideration. In a situation, what can be considered for taxability is income that accrues directly to the assessee from its operations in India, which may be attributable to the existence of branch in India. As it is legally not possible to consider the profits attributable to SJMI in the hands of assessee, agreeing with the opinion of CIT(A) and direct AO to exclude the profits of St. Jude Medical Inc. USA brought to tax in assessee's hands. Accordingly the additional grounds are considered allowed. Some of the reports impounded by the Revenue are nothing but the correspondence with the Head Office about the sales in India, as a part of liaison office, but not as a sales unit. There are monthly reports also given which indicate the budget, projected targets, achievements, but nowhere this indicate that assessee was involved in direct sales activity except coordinating and liaisoning with the various distributors and the doctors who are to use the products. These documents does not establish at all that assessee was involved in business activity before it became a branch office. Therefore, AO's contention that assessee was involved in business activity cannot be accepted. As in the earlier year also i.e. AY 1998-99 for which also assessee filed the return at Nil were accepted without any addition in that year and also the fact that assessee claimed various expenditures for the three month period from 1st January, 2000 in AY 2000-01 which was allowed by the CIT (A) on which there is no cross appeal, assessee was involved in liaison activities upto 31.3.1999 and not in sales activity as opined by AO. Therefore, there is no question of estimating the profits in AY 1999-2000 when assessee does not have any business connection or business activity though its liaison office. So the attribution of income and estimation of gross profits in AY 1999-2000 does not arise at all. The grounds raised by assessee are allowed. With reference to the AY 2000-01, there is business activity for a period of three months in the year, once assessee established the branch. Therefore, the profits attributable to the branch office for the sales made in the three month period from Jan 2000 to March 2000 are to be confirmed. AO is directed to examine the sales made during that period and arrive at the profits at 10% as determined by the CIT (A) for the period of three months. The expenditure claimed by assessee for the above period, which was allowed by the CIT (A) need to be set off after due verification as directed by CIT(A). Order to that extent was confirmed. Therefore, the addition of business profits of SJMI USA is directed to be deleted in total in both years and profits attributable to the liaison period as determined by AO also gets deleted - assessee's appeals are treated as allowed.
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2013 (6) TMI 420
Deduction u/s 10A disallowed - in respect of Unit No. II and Unit No. III set up in Software Technology Park - reallocation of certain common head office expenses amongst various units - matter was referred to DRP - Held that:- Even ground No. 3b is without prejudice to the claim of deduction under section 10A i.e., the reallocation of expenditure should be done only after adding back the common expenses as originally allocated by the assessee. It appears that the AO has not properly appreciated the issue. Since ground of disallowance u/s 10A is already set aside as mutatis mutandis identical to those of the immediately preceding year, it fair and reasonable to set aside this issue also with a direction to the AO to reconsider the matter in accordance with law. Needless to observe that the assessee shall be given an opportunity of being heard and if the assessee has already allocated the expenditure the same has to be added back to the profits of the units and then only the reallocation process should begin. Adjustments recommended by the TPO and DRP with regard to the interest receipts shown on loan given to AE - as per TPO as per the CUP method if it is benchmarked against LIBOR the interest rate declared by the assessee is higher and hence no adjustment is required - whether it is not in accordance with law - Held that:- The case of the assessee was that LIBOR as on 31.03.2008 was 2.49% against which the assessee has charged interest @ 6% p.a. Interest charged by the assessee is much higher than the corresponding arm's length LIBOR even from an Indian transfer pricing perspective. It is not in dispute that the loan has been denominated in US dollars. Though the D.R., for the first time, raised a contention that the assessee might have taken loan in the earlier year to advance the same to its AE in the earlier year, in fact neither the TPO nor the DRP has considered the aspect from that angle and the assessee consistently prayed before the tax authorities that the assessee has not incurred any interest cost on funds given to the AE as the source of fund is surplus available with the assessee. In the absence of any material to prove to the contrary, merely because some interest has been paid in the immediately preceding year, it cannot be assumed that the assessee borrowed funds in the immediately preceding year was the source for the purpose of advancing loans to its AE. Having regard to the overall circumstances of the case the issue stands squarely covered by the decision of Cotton Naturals (I) P. Ltd. [2013 (6) TMI 174 - ITAT DELHI] wherein observed that the CUP method is the most appropriate method in order to ascertain arm's length price of the international transaction i.e., where the lending of money was in foreign currency to its AE the domestic prime lending rate would have no applicability and the interbank rate fixed should be taken as benchmark rate for international transactions. Therefore, hold that LIBOR rate has to be adopted in the instant case since the interest charged by the assessee from its AE is higher than the LIBOR rate in the year under consideration no transfer pricing adjustment in that regard is warranted - set aside the order of the AO and allow the grounds urged by the assessee. Interest u/s 234B - Held that:- As charging of interest under section 234B is mandatory but it is consequential in nature depending upon the additions/adjustments upheld. The AO is directed to compute the interest. chargeable under section 234B
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2013 (6) TMI 419
Scrutiny / regular assessment - Validity of notice u/s.143(2) - assessee contested that the original notice issued under section 143(2) dated 21.10.2001 issued by the ACIT-24(2) was bad in law as was issued without prior approval of the JCIT and was not accompanied by the notice under section 142(1) - Held that:- CIT (A) decided the issue in relation to contention that a notice u/s 142(1) was not issued along with notice u/s 143(2), the fact that the notice was issued on 21.10.2002 and served on assessee later do indicate that at the time of issuance of notice, there is no valid approval by the JCIT as it came afterwards. Shorn of all complaints and counter arguments, the simple fact is that the notice under section 143(2) was prepared and issued along with the proposal for approval of scrutiny made to the JCIT by AO. As contended by assessee the Assessment Year selected by AO and approved by the JCIT is not AY 2000-01, but AY 2001-02. Even though the Asstt. Commissioner subsequently gave the report to authorities that it is a typographical error, the fact is that the record indicates that the proposal was sent for AY 2001-02 but notice was issued for AY 2000-01. One factor which support the contention of the Revenue authorities that it is typographical error is that the total income stated against that column is the income returned by assessee for AY 2000-01. So there seems to be some mistake on the part of AO which was compounded by the approval letter of the JCIT for the same AY but when assessee is challenging the same in various proceedings including the writ petitions before the Hon'ble High Court, one cannot ignore the fact that the year of the assessment was mentioned as AY 2001-02 and not AY 2000-01. Therefore, two reasons i.e. the year of selection was wrong and the notice served on assessee was issued prior to the actual approval by the JCIT are to be taken into consideration. Even though the names mentioned in the report was also wrongly spelt at various places, it is not material for deciding the issue as the notice was issued to assessee on 21.10.2002 i.e. before getting approval from the JCIT. On this reason alone the issuance of notice has to be held bad in law. Since assessee's contentions on jurisdiction are accepted, there is no need to adjudicate the Revenue appeal on the relief granted by the CIT (A) in the order. Therefore Revenue grounds as dismissed, for the reasons stated above - appeal filed by assessee is allowed.
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Customs
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2013 (6) TMI 435
Claim of Duty drawback on goods and packing material perpetually - recovery of duty drawback grated earlier and denial of subsequent claim - export of talcum powder - held that:- The departmental authorities may have been influenced by paragraph 11 of the notification dated 1-6-2001 while clearing the petitioners’ initial drawback claims. The said paragraph, as noted above, permits the manufacturer/exporter to claim the drawback on individual items upon export of the composite article for which no specific rate has been provided in the Table. We are, of course, of the opinion that in the present case, the petitioners cannot be stated to have exported a composite article. What the petitioners exported was the talcum powder simpliciter, of course in packed condition. Had the petitioners exported only the empty bottles without talcum powder, even the Government authorities agree that they would have been entitled to receive the drawback, and that the petitioners on account of claims being disbursed by the Government authorities, would have arranged their affairs financially accordingly and negotiated the terms and rates with the foreign importer on such basis. Insofar as the drawback claims which were already sanctioned and disbursed previously, direction for recovering the same would be highly inequitable, unjust and therefore, should be quashed. Insofar as the claims which are not yet passed, but show cause notice was issued for withholding such claims, the same parameters cannot be applied since from that point onwards, the petitioners could have availed of the opportunities of having the drawback rates fixed if they desired to take the benefit. Decided partly in favor of assessee.
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2013 (6) TMI 434
Stay - requirement of pre deposit - it was found that the goods exported by the petitioner were not composed of 100% acrylic and so it was liable to pay duty on goods imported without payment of duty. - Held that:- he goods which were for export were provisionally released on the request of the petitioner subject to test report of CRCL, New Delhi. The Tribunal noticed that the CRCL report was against the petitioner and it remained unimpeached from the adjudicating process. It was in such circumstances that the petitioner was required to deposit amount of Rs. 8,08,572/- as a condition precedent for hearing the appeal. - No illegality or perversity could be pointed out in the impugned order warranting interference by this Court. - Decided against the assessee.
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Service Tax
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2013 (6) TMI 447
Sponsorship of cricket match - T-20 matches under the IPL banner - sports event - Held that:- In our considered view the reasons recorded by the adjudicating authority are misconceived and unsustainable. Under the agreement with GMR the appellant had sponsored (for the relevant period) the Delhi Daredevils team which was owned by GMR (under a franchise agreement with BCCI/IPL Delhi Daredevils team was sponsored in the context of the participation of this team in the T-20 league matches. The several rights accruing to the appellant under the sponsorship agreement (adverted to above) clearly indicate that sponsorship was neither of BCCI - IPL; nor GMR, the sponsorship was clearly of the GMR owned Delhi Daredevils team in relation to participation of such team in the IPL T-20 cricket tournament. The enumerated bouquet of benefits accruing to the appellant under the agreement such as printing; player's appearances; motorcycle display; merchandise; motorcycle for promotion; and participative rights in prize presentation; championship tournaments; celebrity events; website/blog entitlement; and marketing plans by GMR, clearly establish that the sponsorship is of the GMR owned Delhi Daredevils team in relation to its participation in the T-20 tournament. The sponsorship agreement is in our considered view a clear commercial transaction, the underlying purpose being the assumption that since BCCI-IPL-T-20 matches generate huge public viewership, either directly at the venues or through audio visual and print media as well, the appellant's association with the T-20 sports event through Delhi Daredevils team would show case the appellant's presence in its core business as a manufacturer of two wheeler motorbikes. The conclusion recorded by the adjudicating authority, is in our considered view based on a fundamental misconception of the purpose of the sponsorship agreement. The conclusion that under the agreement appellant sponsored GMR, by predicating this inference on the singular circumstance that GMR was other party to the agreement, overlooking the terms and conditions of the agreement, constitutes a fatal infirmity of analysis, which invalidates the adjudication order. The appellant is immune to levy and collection of service tax under Section 65(105)(zzzn) of the Finance Act, 1994. - Decided in favor of assessee.
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2013 (6) TMI 446
Commercial training or coaching service - ICFAI - vocational training - whether the assessees can claim exemption from service tax liability under Section 65(105)(zzc) read with the definition of commercial training or coaching under Section 65(26) and the definition of commercial training or coaching centre under Section 65(27) of the Finance Act, 1994 (as this provision stood during the period of dispute) in respect of the fees/charges collected by them from the students who underwent various courses offered by the assessees during the period of dispute. - Explanation added by the Finance Act, 2010 to Section 65(105)(zzc) of the Finance Act, 1994 with retrospective effect from 01/07/2003. Held that:- the assessees were providing to their students training or coaching for a consideration and would ipso facto fall within the ambit of commercial training or coaching centre envisaged in the explanation to Section 65(105)(zzc) of the Finance Act, 1994. As this explanation has retrospective effect from 01/07/2003, the activities undertaken by all the assessees during the periods of dispute would get covered within the meaning of the phrase training or coaching imparted for consideration occurring in the text of the explanation. In other words, the explanation to Section 65(105)(zzc) of the Act has very wide scope to encompass the activities of the assessees and render them exigible to service tax under Section 65(105)(zzc) of the Act. In the result, the assessees have no case on merits. Regarding vocational training - benefit of Notification No.9/2003-ST dt. 20/06/2003 - held that:- This plea was, admittedly, not raised at any stage before, even though the case of the assessees travelled upto the apex court. It is interesting to note that the learned counsel who sought to narrow down the scope of the apex court’s remand orders, nevertheless, wanted us to consider the above plea also. The dichotomy of arguments notwithstanding, we are of the view that the alternative plea can be considered in these proceedings in terms of the remand orders. As it is a virgin plea which has got to be substantiated by the parties concerned, the same will have to be examined by the adjudicating authorities concerned. Regarding extended period of limitation - Held that:- Therefore, we hold that the proviso to Section 73(1) of the Finance Act, 1994 was rightly invoked in these cases. In any case, a major part of the demand on ISB is within the normal period and, in the case of other assessees also, a considerable part of the demand is within the normal period.
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2013 (6) TMI 445
Tour operator service - appellants have claimed that they have operated the vehicles from point to point and that such activities cannot come under the category of tour and that, they cannot be considered as Tour Operators. - Held that:- the claim of the assessee cannot be accepted in the light of the decision of the Tribunal vide in the cases of Ideal Travels & Others [2012 (7) TMI 707 - CESTAT, BANGALORE] - the activity is taxable. Regarding exemption - Held that:- the appellants that the appellants are eligible for the exemption under Notification No. 20/2009. Therefore demand of service tax on this activity is also liable to be set aside.
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2013 (6) TMI 444
Mining services / activities - composite contract - effective date of levy - stay - Held that:- The contract is mostly in relation to mining activities and transportation of goods within the mines or within a factory though it appears that there is some activity relating to loading of coal in railway wagons and unloading of coal from railway wagons at which stage the goods may be considered as “cargo”. But we have not been able to find any separate amounts charged for such loading of cargo in railway wagons unlike the facts in the case of Gajanand Agarwal (2008 (6) TMI 163 - CESTAT KOLKATA). Prima facie it appears to us that the activities were related to mining and transportation of goods within a mine or a factory. - it appears that for transportation activities service tax is also being discharged by the recipient of the service as per legal provisions in this regard. In the case of activities sought to be classified under site formation service our prima facie view is that this activity is classifiable as mining activity and liable to service tax only from 1-6-2007 and such tax is being paid. - Prima facie case in favor of assessee - Stay granted.
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Central Excise
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2013 (6) TMI 443
Duty on bagasse - wastage - held that:- It has been settled by the Division Bench of this Court in Balrampur Chini Mills Ltd. vs. Union of India and others [2013 (1) TMI 525 - ALLAHABAD HIGH COURT] by order dated 18.05.2012 that bagasse is a waste product and no more duty will be imposed over it. - Decided in favor of assessee
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2013 (6) TMI 442
Cenvat Credit - Penalty - Input services received prior to 10.09.2004 - Scope of Rule 15 of CCR - Held that:- strong force in the contentions raised by the appellant that division Bench of the Tribunal in the case of Balrampur Chini Mills Ltd (2012 (12) TMI 532 - CESTAT, NEW DELHI), will also apply in this case. It can be seen that provisions of sub-rule (2) can be brought into picture only where Cenvat credit, of duty on inputs or capital goods is availed on account of fraud, willful misstatement. Provisions of sub-rule (3) can be brought into play for denial of CENVAT credit of input services and penalty can be imposed as indicated therein prior to amendment. It is seen that provisions of Section 11AC of Central Excise Act or Rule 15(2) could not be invoked, as the issue was of credit on input services. At the most, for the violations of availing ineligible credit, the appellant can be penalized under the provisions of Section 15(3) for an amount of Rs. 2000/- only. The provisions of Rule 15(4) cannot be invoked in this case as it is undisputed that the appellant is a manufacturer and not provider of output services. - Maximum penalty imposed equal to Rs. 2000/-.
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2013 (6) TMI 441
Excess stock of stock found during search and seizure - raw material, finished goods and scrap - confiscation - redemption fine - Penalty - Held that:- there being no dispute as to finished goods and scrap being present in the factory premises unaccounted in the statutory records, they are liable for confiscation. The value of the such goods which were confiscated approximately comes to Rs.21 lakhs and imposition of redemption fine of Rs.3 lakhs, in my view seems to be excessive. In order to meet the ends of justice, the redemption fine imposed on the seizure of the finished goods as well as the scrap needs to be reduced which in my view should be Rs.1 lakh as against Rs.3 lakhs imposed by the lower authorities. The impugned order to that extent is modified and the redemption fine is reduced from Rs.3 lakhs to Rs.1 lakh. Regarding penalty - Held that:- the ends of justice would meet when the penalty is reduced from Rs.3 lakhs. Personal penalty on partners and employees - Held that:- the judgment of the Honble High Court of Gujarat in the case of Mohammed Farookh Mohammed Ghani [2010 (7) TMI 378 - GUJARAT HIGH COURT], Mahendra Kumar Kapadia [2010 (9) TMI 308 - GUJARAT HIGH COURT] and Jai Prakash Motwani [2009 (1) TMI 501 - GUJARAT HIGH COURT] will apply - no hesitation in holding the impugned order to the extent it upholds the penalty on the individuals is unsustainable and is liable to be set aside.
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2013 (6) TMI 440
CENVAT Credit - Export - Refund - Service Tax paid on Clearing & Forwarding charges (CHA charges) for export. - place of removal - Held that:- the ground of appeal raised by the Department are incorrect in as much as a series of judgments of the Tribunal has held clearly that the services rendered by CHA for clearance of the goods for export will be eligible for CENVAT Credit for the export of the goods, the place of removal is considered as port of airport. - this Bench has been taking a consistent view that the CENVAT Credit of the Service Tax paid by the CHA will be eligible as CENVAT Credit. - Credit allowed.
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2013 (6) TMI 439
Cenvat / Modvat Credit - denial of credit for non-filing of 57F declaration - Held that:- there is no dispute about submissions of duty paying documents to the Revenue along with the returns filed by the appellants. The Revenue is also unable to find out the said documents inasmuch as the matter is quite old. We also find that in terms of remand order of the Tribunal, such duty paying documents are required to be produced. As such, we are of the view that it would be just and proper to allow the Cenvat credit on the basis of photocopies of the invoice, wherever the appellant is able to produce the same. Where there are no duty paying documents available, either with the appellant or with the Revenue, the credit is to be disallowed.
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2013 (6) TMI 436
Maintainability of appeal - Clandestine removal and undervaluation - appeal by revenue against judgment taken in RADHA MADHAV CORPORATION LTD. Versus COMMISSIONER OF C. EX., DAMAN [2013 (6) TMI 395 - CESTAT, AHMEDABAD] - Held that:- Since the assessee is located in the union territory of Daman reference may be made to Section 36 of the Central Excise Act, 1944 and more particularly clause (b) thereof which defines “High Court” in relation to the Union Territories of Dadra and Nagar Haveli and Goa, Doman and Diu to mean the High Court at Bombay. Therefore, this Court does not have the jurisdiction to entertain these appeals. Appeals dismissed leaving it open for the revenue to carry the matter before the appropriate Court.
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CST, VAT & Sales Tax
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2013 (6) TMI 433
Objection under DVAT Act - Section 74(8) and 74(9) - It was the case of the petitioner that it is not a dealer and is only transporter and the goods were never sold in Delhi, but were meant for transportation to other states. - held that:- the order dated 19.11.2012 does not at all deal with the issue raised by the petitioner with regard to the applicability of Section 74(8) and 74(9) of the said Act in the backdrop of the notice issued by the petitioner on 24.08.2012. For this reason alone, we feel that the impugned order is liable to be set aside. It is ordered accordingly. - matter remanded back.
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